-----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, KkOkq3Ei3JvQIMoLS87Bys1PMGXP4aPZyT4w1ngY7XJdCrMgcn0kRI6vF6wkzsSf qHKD+THWKUJiyrew6q2rDA== 0000950147-98-000644.txt : 19980817 0000950147-98-000644.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950147-98-000644 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL FIBERCOM INC CENTRAL INDEX KEY: 0000924632 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 860271282 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-13278 FILM NUMBER: 98690883 BUSINESS ADDRESS: STREET 1: 3615 S 28TH ST STREET 2: SUITE 180 CITY: PHOENIX STATE: AZ ZIP: 85040 BUSINESS PHONE: 6029411900 MAIL ADDRESS: STREET 1: 3615 S 28TH STREET CITY: PHOENIX STATE: AZ ZIP: 85040 10QSB 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION ---------------------------------- Washington, D.C. 20549 ---------------------- Form 10-QSB ----------- QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF --------------------------------------------- THE SECURITIES EXCHANGE ACT OF 1934 ----------------------------------- For the quarter ended June 30, 1998 Commission File No 1-9690 INTERNATIONAL FIBERCOM, INC. Incorporated in the State of Arizona IRS No. 86-0271282 3615 S. 28th Street Phoenix, AZ 85040 (602) 941-1900 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 report, and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) CommonStock without par value 21,239,684 shares issued and 21,033,994 outstanding at June 30, 1998 PART I - FINANCIAL INFORMATION ITEM 1. The financial statements are included herewith commencing on page F-1. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General International FiberCom, Inc., (the "Company") offers diversified telecommunications services and products to the telecommunications, cable television ("CATV") and other industries through its five wholly-owned subsidiaries. The Company provides a wide range of engineering, consulting and broadband network systems design, installation of structured cable and fiber-optic networks, complete telecommunications systems integration services, and sells and distributes new and secondary market telecommunications equipment to leading telecommunications companies, Regional Bell Operating Companies ("RBOCS"), telecommunications hardware resellers and other Fortune 500 companies. The Company derives a substantial portion of its revenue from contracts that are accounted for under the percentage of completion method of accounting. Under this method, revenues are recorded as work progresses on a contract. Overall gross margin percentages can increase or decrease based upon changes in the estimated gross margin percentages over the lives of the individual contracts. Business. In the second quarter of 1998, the Company continued to follow its strategy of becoming a one-stop solution for the telecommunications marketplace, offering a wide range of engineering, consulting and maintenance service for broadband, fiber-optic networks with local area network ("LAN") and wide area network ("WAN"). In 1997 and 1998, the Company has implemented this strategy through acquisitions of businesses that have complemented and enhanced its services, products and customer base. Effective April 1998 the Company purchased the assets of Riley Underground Communications, Inc. ("Riley") for cash and restricted shares of Common Stock and bought General Communications, Inc., ("General") for 17,857 shares of Common Stock effective June 1, 1998. Riley, which is based in California, builds and maintains broad based fiber-optic and other networks for major cable, telephone and other telecommunications companies. The Company has announced its intention to acquire two additional telecommunications companies with revenues of $18,000,000 and $12,600,000 respectively subject to completion of due diligence inspections, negotiations and definitive agreements. There can be no assurance that the Company will complete the aforementioned acquisitions. Results of Operations The comparability of the results of operations for the second quarter of 1998 with the same period in 1997 was significantly impacted by the acquisition of Southern Communications Products, Inc., ("Southern") and Riley as shown in the Unaudited Pro Forma Consolidated Statement of Operations information contained in this Report. Therefore, Management's Discussion and Analysis of Financial Condition and Results of Operations for these periods discusses the operations in 1998 compared with actual operations in 1997 and the operations in 1998 compared with 1997 pro forma figures as if the Company had owned Southern and Riley since January 1997, which it has not. Both comparisons include the operations of Compass Communications, Inc. ("Compass") for 1997 and 1998, which was accounted for as a pooling of interests completed effective October 1997. 2 Contract Revenues. Contract revenues for the second quarter of 1998 increased to $18,052,395 from $8,110,394 for the same period in 1997, an increase of 123%. This increase in revenues is primarily attributable to the addition of Southern's and Riley's revenues in the second quarter of 1998. On a pro forma basis, for the second quarter of 1998, contract revenues increased 46% from $12,354,364 in 1997 to $18,052,395. This increase is due primarily to higher levels of revenue generated by Concepts, principally from national customers such as Gambro Healthcare and Nike, Inc., increased sales by Southern, and increased contract activity by Riley. Gross Profit. The Company's gross profit increased to $6,204,361 for the second quarter of 1998 compared with $2,169,791 for the same period in 1997 due to the addition of gross profits from the operation of Southern and Riley and a marked increase in the gross profit margin of Concepts. The Company's gross profit margin increased from 27% of contract revenues in the second quarter of 1997 to 34% of contract revenues in the second quarter of 1998, primarily due to the gross profit margins of Southern and Concepts. On a pro forma basis, the Company's gross profit for the second quarter of 1998 was $6,204,361 compared with $4,177,145 for the same period in 1997. The improved gross profits of Concepts and the increase of Southern's gross profits overcame a weak quarter for both Kleven and Compass. Kleven's revenues and gross profits declined from the second quarter of 1997 because of a decline in work from Cox Communications during the second quarter of 1998. The Company's gross margin was 34% for both quarters. General and Administrative Costs. The Company's general and administrative expenses were $3,159,266 for the second quarter of 1998 compared with $1,559,406 for the same period in 1997, an increase of 102%. This increase is chiefly due to the addition of the general and administrative expenses of Southern and Riley, a significant portion of which relates to the amortization of intangibles resulting from the acquisition of Southern. On a pro forma basis, general and administrative expenses for the second quarter of 1998 were $3,159,266, or 18% of revenues, compared with $2,267,218, or 18% of revenues, for the same period in 1997. The Company has and will continue to consolidate duplicative administrative functions relating to its acquired companies to the extent possible. The administrative expenses of the Company increased because of significant amounts for amortization of intangibles resulting from the acquisitions of Concepts and Southern. Other Income (Expense). The Company's net expense in this category was $78,213 for the second quarter of 1998 compared with net expense of $95,223 for the same period in 1997. On a pro forma basis, other expense was $78,213 in the second quarter of 1998 as compared with a net expense of $183,001 for the same period in 1997. The difference is due primarily to a decrease in interest expenses of Kleven because of debt reduction and reduction of interest expense of the Company due to convertible debt conversion. Provision for Income Tax Benefit (Expense). The Company accrued income tax expense of $1,034,766 in the second quarter of 1998. No income tax expense was accrued in 1997 because of net operating loss carryovers of the Company and Kleven from 1996 and prior years. On a pro forma basis the provision for income taxes increased from $621,991 in the second quarter of 1997 to $1,034,766 in the same period of 1998 due to the higher net income before taxes of the Company. 3 Net Income. The Company generated a net income of $1,932,116, or approximately 11% of revenues, for the second quarter of 1998 compared with net income of $515,322, or 6% of revenues for the same period in 1997. This is primarily a result of increased profit margins at Concepts and the addition of Southern and Riley. On a pro forma basis, the Company's net income increased to $1,932,116 in the second quarter of 1998 compared with a net income of $1,104,935 for the same period in 1997. Such increase was primarily due to the strong performance of both Concepts and Southern. Preferred Stock Dividend. The Company paid dividend of $10,000 on its Series C Convertible Preferred Stock for the second quarter of 1998 through the issuance of 1,124 shares of its Common Stock. Backlog. The Company had a backlog of approximately $6,050,000 on a work in process basis as of June 30, 1998. The Company expects such work orders to be completed by September 1998. Further, the Company has work orders, which were not started at June 30, 1998, for Cox Communications, Inc., the State of Tennessee, City of Phoenix, Nike, Inc., Neilsen Dillingham, TCG, Intregration Technologies, TCI, Cablevision, Inc., and Adelphia Communications. These work orders total in excess of $30,800,000. The Company expects to commence such work during the third quarter of 1998 and substantially complete the same by December 1998. Liquidity and Capital Resources Operations. The Company has historically financed its operations through operating cash flow, lines of credit and debt and equity offerings. The Company's liquidity is impacted, to a large degree, by the nature of billing provisions under its installation and service contracts. Generally, in the early periods of contracts, cash expenditures and accrued profits are greater than allowed billings, while contract completion results in billing previously unbilled costs and profits. In the year to date for 1998, the Company used approximately $283,000 of net cash from operations. Cash generated from operations of $8,376,000, which includes net income of approximately $3,122,000, depreciation and amortization of $1,622,000, increase in accounts payable and accrued expense of $2,410,000, increase in taxes payable of $911,000 and the net increase in billings in excess of costs of $311,000, were used primarily for an increase in trade receivables of $4,260,000, an increase in inventory of $3,793,000 due to the higher sales activity of Concepts and Southern, decrease in accrued offering costs of $431,000, and an increase in other current assets of $175,000. The net cash used of $283,000 from operations in the year to date 1998 compares to a negative cash flow from operations of approximately $1,971,000 in the same period 1997. Investing Activities. For the year to date of 1998 the Company in part used approximately $3,896,000 in investing activities. These were comprised of the Company's purchase of fixed assets of approximately $2,986,000, an increase in intangible assets and other assets of $717,000, and an increase in deferred acquisitions cost of $193,000. Financing Activities. In the second quarter of 1998, the Company's financing activities generated approximately $2,539,000 consisting in part of an increase in loans and other liabilities payable of approximately $1,151,000, proceeds from warrant and stock option exercises of $1,550,000 and offset by treasury stock purchases of $162,000 made under the Company's stock repurchase program, which was terminated during the second quarter. The Company has called for redemption its 1,302,480 public Common Stock purchase warrants. Such warrants are exerciseable at $5.50 per share through August 18, 1998, after such date the Company will redeem any unexercised warrants at $.10 per warrant. 4 As of June 30, 1998, the Company had three revolving lines of credit totaling approximately $2,600,000, with an available balance of approximately $1,100,000. The Company believes that with its current working capital, funds generated through its operations and available credit balances on its lines of credit it will have sufficient working capital to address the anticipated growth of demand and markets for its products and services for the next 12 to 18 months. The Company may, however, seek to obtain additional capital through an expanded working capital line of credit at a financial institution or through additional debt or equity offerings during this time period. The raising of additional capital in public markets will primarily be dependent upon prevailing market conditions and the demand for the Company's products and services. Inflation. The Company does not believe that it is significantly impacted by inflation. Seasonality. The Company's operations are not seasonal in nature. Year 2000 issues. Like many companies, the Company is currently in the process of evaluating its computer software, databases and hardware to determine whether or not modifications will be required to prevent problems related to the year 2000. These problems, which have been widely reported in the media, could cause malfunctions in certain software, databases and embedded circuitry with respect to dates on or after January 1, 2000, unless corrected. At this time, the Company has not yet determined the cost of evaluating its computer software or databases or of making any modifications required to correct any "Year 2000" problems. Forward-looking Information and Risks of the Business. This Report contains certain forward-looking statements and information within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The cautionary statements made in this Report should be read as being applicable to all related forward-looking statements wherever they appear in this report. Forward-looking statements, by their very nature, include risks and uncertainties. Accordingly, the Company's actual results could differ materially from those discussed herein. A wide variety of factors could cause or contribute to such differences and could be adversely impact on revenues, profitability, cash flows and capital needs. Such factors, many of which are beyond the control of the Company, include the following: the Company's success in obtaining new contracts; the volume and type of work orders that are received under such contracts; the accuracy of the cost estimates for the projects; the Company's ability to complete its projects on time and within budget; levels of, and ability to collect amounts receivable; availability of trained personnel and utilization of the Company's capacity to complete work; competition and competitive pressures on pricing; and economic conditions in the United States and in the region served by the Company. Part II - Other Information Item 1. Legal Proceedings. The Company has no on-going or pending litigation at this time. Items 2, and 3, are omitted because these Items are inapplicable to this Report. Item 4. Submission of Matters to a Vote of Security Holders. The Company held its 1998 Annual Meeting of Shareholders on July 10, 1998. The following Directors were elected for terms which will expire at the 1999 Annual Meeting of Shareholders: Joseph P. Kealy, Jerry A. Kleven, John F. Kealy, Richard J. Seminoff, and V. Thompson Brown, Jr. The shareholders approved the adoption of an amendment to the 1997 Stock Option Plan to increase the number of shares reserved for issuance under the Plan from 1,200,000 to 3,200,000 shares with 14,232,986 shares voting for, 738,470 shares voting against and 85,226 shares abstaining. 5 The shareholders also approved the adoption of the Employee Stock Purchase Plan, under which 2,000,000 shares of Common Stock are reserved for issuance to eligible employees who purchase stock under the Plan. Shareholders approved the adoption of this Plan with 14,500,911 shares voting for, 518,151 shares voting against and 37,620 shares abstaining. Finally, the shareholders ratified the selection of BDO Seidman as the independent public accountants for the Company's fiscal year ended December 31, 1998, with 14,965,955 shares voting for, 58,535 shares voting against and 32,192 shares abstaining. Item 5. Other Information. In April, 1998 the Company granted options to purchase 113,000 shares to its employees under the 1997 Stock Option Plan exerciseable at a price of $5.00 per share through April 2003. The Company also granted options to purchase 180,000 shares at the same price and on the same terms to the directors and officers under the Plan. The foregoing grants became effective upon the approval of the amendment to the Plan at the 1998 Annual Meeting of the Shareholders. In addition, the Company granted 44,000 non-qualified options to a third party with an exercise price of $1.74 per share with a two-year term in connection with an acquisition. 6 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
ASSETS (Unaudited) June 30, December 31, 1998 1997 ----------- ----------- Current Assets: Cash and cash equivalent $ 1,349,672 $ 2,990,575 Accounts receivable - trade, net of allowance 12,102,335 7,988,380 - unbilled receivables 288,007 180,545 - other 66,362 27,586 Inventory 6,356,602 2,563,509 Prepaid expenses 125,809 119,620 Loan receivable related parties 101,820 0 Deferred tax asset 189,606 258,606 Costs and estimated earnings in excess of billings 2,709,375 2,540,278 ----------- ----------- Total Current Assets 23,289,588 16,669,099 Property and Equipment, net 7,452,907 5,573,568 Other Assets: Loans receivable related party 240,268 238,806 Goodwill, net 22,543,351 20,083,941 Covenant not to compete net 351,770 341,689 Other assets 331,816 347,142 Deferred acquisition costs 192,624 0 Debt issue costs, net 110,199 241,192 ----------- ----------- 23,770,028 21,252,770 ----------- ----------- Total Assets $54,512,523 $43,495,437 =========== ===========
F-1 INTERNATIONAL FIBERCOM, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited) June 30, December 31, 1998 1997 ------------ ------------ Current Liabilities: Notes payable - current portion $ 2,740,333 $ 1,493,945 Notes payable - related party 137,000 1,754,674 Obligations under capital lease 506,806 192,429 Income taxes payable 985,435 123,669 Accounts payable - trade 4,478,142 2,598,707 - related parties 24,207 19,610 Accrued offering costs -- 741,139 Accrued expense 1,572,464 1,093,686 Billings in excess of cost estimated earnings 529,971 218,585 ------------ ------------ Total Current Liabilities 10,974,358 8,236,444 Long-Term Liabilities: Notes payable-long term 3,973,335 798,698 Notes payable-related party 243,000 3,051,326 Obligations under capital lease - long term 633,363 392,135 Deferred income tax payable 143,862 163,862 ------------ ------------ Total Long-Term Liabilities 4,993,560 4,406,021 ------------ ------------ Total Liabilities 15,967,918 12,642,465 Stockholders' Equity: Series B 4% convertible preferred stock, no par value; 4,400 authorized; 1518 issued and outstanding at December 1997, none issued and outstanding at June 1998 -- 1,126,837 Series C 4% convertible preferred stock, no par value; 1,000 authorized, issued and outstanding 766,662 766,662 Common Stock, no par, 100,000,000 shares authorized; 21,239,684 shares issued, 21,033,994 outstanding 40,518,836 32,389,218 Common stock warrants 99,082 99,082 Additional paid-in capital 2,862,027 2,862,027 Accumulated deficit (2,638,889) (5,722,837) ------------ ------------ 41,607,718 31,520,989 Less: treasury stock 205,690 shares, at cost (3,063,113) (668,017) ------------ ------------ Total Stockholders' Equity 38,544,605 30,852,972 ------------ ------------ Total Liabilities and Stockholders' Equity $ 54,512,523 $ 43,495,437 ============ ============
F-2 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 1998 1997* 1998 1997* ------------ ------------ ------------ ------------ Contract Revenues $ 18,052,395 $ 8,110,394 $ 30,928,477 $ 16,495,951 Direct Cost of Contract Revenues 11,848,034 5,940,603 20,370,446 12,613,550 ------------ ------------ ------------ ------------ Gross Profit 6,204,361 2,169,791 10,558,031 3,882,401 General and Administrative Expenses 3,159,266 1,559,406 5,605,144 2,790,551 ------------ ------------ ------------ ------------ Profit from operations 3,045,095 610,385 4,952,887 1,091,850 Other Income (Expense): Interest income 34,752 22,742 58,367 22,747 Interest expense (139,299) (128,233) (263,260) (221,939) Other income 24,194 552 29,425 2,955 Gain on disposal of assets 2,140 9,716 11,208 174,378 ------------ ------------ ------------ ------------ (78,213) (95,223) (164,260) (21,859) ------------ ------------ ------------ ------------ Net income before income taxes 2,966,882 515,162 4,788,627 1,069,991 ------------ ------------ ------------ ------------ Provision for tax benefit (expense) (1,034,766) 160 (1,666,394) 160 ------------ ------------ ------------ ------------ Net income $ 1,932,116 $ 515,322 $ 3,122,233 $ 1,070,151 ============ ============ ============ ============ Preferred stock dividend (15,375) (67,837) (38,285) (113,063) ------------ ------------ ------------ ------------ Net income attributable to common stockholders $ 1,916,741 $ 447,485 $ 3,083,948 $ 957,088 ============ ============ ============ ============ Earnings per Share: Basic earnings per share $ 0.10 $ 0.06 $ 0.17 $ 0.14 ============ ============ ============ ============ Diluted earnings per share (Note 4) $ 0.09 $ 0.04 $ 0.14 $ 0.07 ============ ============ ============ ============ Basic weighted average shares outstanding 19,131,382 6,934,053 18,102,201 6,899,220 ------------ ------------ ------------ ------------ Diluted weighted average shares outstanding 23,567,998 14,621,799 23,124,075 14,521,004 ------------ ------------ ------------ ------------
*Includes operations of Compass Communications, Inc. due to a pooling of interests acquisition. F-3 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For The Period Ended March 31, 1998 and June 30, 1998 (Unaudited)
Preferred Stock Common Stock ------------------------ ------------------------ Series B Series C Shares Amount Warrants ----------- ----------- ---------- ----------- --------- Stockholders' Equity December 31, 1997 $1,126,837 $ 766,662 16,632,849 $32,389,218 $ 99,082 Dividend paid on Series B Preferred Stock 2,486 12,910 Dividend paid on Series C Preferred Stock 1,925 10,000 Conversion of Series B Preferred Stock (168,502) 134,563 168,502 Interest on Debenture paid in Common Stock 7,744 46,918 Warrant Exercises 295,000 645,000 Conversion of 8% Debentures 480,000 600,000 Stock Option Exercises 86,466 91,002 Treasury Stock Repurchase (25,000) Earnings for the Quarter ----------- ----------- ---------- ----------- --------- Stockholders' Equity March 31, 1998 958,335 766,662 17,616,033 33,963,550 99,082 Dividend paid on Series B Preferred Stock 813 5,375 Dividend paid on Series C Preferred Stock 1,124 10,000 Riley Acquisition 28,236 150,000 General Acquisition 17,857 125,000 Conversion of Series B Preferred Stock (958,335) 657,483 958,335 Warrant Exercises 471,453 709,378 Shares Purchased Under ESPP 92,707 383,894 Issuance of additional Shares under 1997 Private Placement 300,000 1,948,959 Stock Option Exercises 2,055,978 2,264,345 Treasury Stock Repurchase (2,000) Earnings for the Quarter ----------- ----------- ---------- ----------- --------- Stockholders' Equity June 30, 1998 -- $ 766,662 21,239,684 $40,518,836 $ 99,082 =========== =========== ========== =========== =========
Additional Accumulated Paid-In Treasury Deficit Capital Stock Totals ----------- ----------- ----------- ---------- Stockholders' Equity December 31, 1997 $(5,722.837) $ 2,862,027 $ (668,017) $30,852,972 Dividend paid on Series B Preferred Stock (12,910) Dividend paid on Series C Preferred Stock (10,000) Conversion of Series B Preferred Stock Interest on Debenture paid in Common Stock 46,918 Warrant Exercises 645,000 Conversion of 8% Debentures 600,000 Stock Option Exercises (23,989) 67,013 Treasury Stock Repurchase (150,000) (150,000) Earnings for the Quarter 1,190,117 1,190,117 ----------- ----------- ----------- ---------- Stockholders' Equity March 31, 1998 (4,555,630) 2,862,027 (842,006) 33,252,020 Dividend paid on Series B Preferred Stock (5,375) Dividend paid on Series C Preferred Stock (10,000) Riley Acquisition 150,000 General Acquisition 125,000 Conversion of Series B Preferred Stock Warrant Exercises 709,378 Shares Purchased Under ESPP 383,894 Issuance of additional Shares under 1997 Private Placement 1,948,959 Stock Option Exercises (2,209,037) 55,308 Treasury Stock Repurchase (12,070) (12,070) Earnings for the Quarter 1,932,116 1,932,116 ----------- ----------- ----------- ----------- Stockholders' Equity June 30, 1998 $(2,638,889) $ 2,862,027 $(3,063,113) $38,544,605 =========== =========== =========== ===========
F-4 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SIX MONTHS ENDED JUNE 30, 1998 AND 1997
1998 1997 ----------- ----------- Cash flows from operating activities: Net income $ 3,122,233 $ 957,088 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 1,622,020 583,681 Increase in contracts receivable (4,260,193) (2,578,220) Increase in inventory (3,793,093) (514,590) Increase in costs and estimated earnings in excess of billings on uncompleted contracts (169,097) (1,933,445) Increase in prepaid expenses (6,189) (129,473) Increase in accounts payable 1,884,032 841,395 Increase in accrued expenses 525,696 166,485 Increase in billings in excess of cost and estimated earnings on uncompleted contracts 311,386 218,118 Increase in income taxes payable 910,766 -- (Decrease) increase in accrued offering costs (430,816) 418,000 ----------- ----------- Net cash used by operating activities (283,255) (1,970,961) Cash flows from investing activities: Purchase of property and equipment (2,986,485) (1,003,971) (Increase) decrease in deposits and other assets 43,037 (27,705) (Increase) decrease in intangible assets (760,406) (1,586,487) (Increase) decrease in deferred acquisition costs (192,624) 120,959 ----------- ----------- Net cash provided (uses) by investing activities (3,896,478) (2,497,204) Cash flows from financing activities: Increase of loans, lease obligations and other long-term liabilities 1,150,630 188,444 Proceeds from warrant and stock option exercises 1,550,270 -- Treasury stock repurchase (162,070) -- Proceeds from private offering, net -- 4,605,360 ----------- ----------- Net cash provided by financing activities 2,538,830 4,793,804 ----------- ----------- Net (decrease) increase in cash (1,640,903) 325,639 Cash, beginning of period 2,990,575 3,972 ----------- ----------- Cash, end of period $ 1,349,672 $ 329,611 =========== ===========
F-5 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING, AND FINANCING ACTIVITIES (Unaudited) SIX MONTHS ENDED JUNE 30, 1998 AND 1997
1998 1997 ---------- ---------- Accrued interest paid in Common Stock $ 46,918 $ -- Accrued offering costs paid in Common Stock 310,323 -- Common Stock issued relating to Business Acquisitions 275,000 -- Convertible debt converted to Common Stock 600,000 -- Issuance of additional shares relating to the 1997 private placement 1,948,959 -- Series B Preferred Stock converted to Common Stock 1,126,837 -- Dividends on Series C Preferred Stock paid in Common Stock 38,285 113,063
F-6 INTERNATIONAL FIBERCOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Significant accounting policies: Basis of presentation: In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1998 and the results of its operations for the three months ended June 30, 1998. Although management believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities Exchange Commission. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the full year ending December 31, 1998. The accompanying consolidated financial statements should be read in conjunction with the more detailed financial statements, and the related footnotes thereto, filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997 and the Form SB-2 as filed on February 12, 1998. Effective April 1998 the Company purchased the assets of Riley Underground Communications, Inc. ("Riley") for cash and restricted shares of Common Stock and bought General Communications, Inc., ("General") for 17,857 shares of Common Stock effective June 1, 1998. Riley, which is based in California, builds and maintains broad based fiber-optic and other networks for major cable, telephone and other telecommunications companies. The Company has announced its intention to acquire two additional telecommunications companies with revenues of $18,000,000 and $12,600,000 respectively subject to completion of due diligence inspections, negotiations and definitive agreements. There can be no assurance that the Company will complete the aforementioned acquisitions. Principles of consolidation: The consolidated financial statements include the financial position, results of operations and cash flows of International FiberCom, Inc., and its wholly-owned subsidiaries, Kleven Communications, Inc., Compass Communications, Inc., Riley Underground Communications, Inc., Southern Communications Products, Inc. and Concepts In Communications, Inc. All material intercompany transactions, accounts and balances have been eliminated. F-7 INTERNATIONAL FIBERCOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Inventory: Inventory consists of the following at June 30, 1998: Cabling and equipment $ 978,907 New and secondary market telephone equipment 6,933,697 Less: allowance for obsolete inventory (1,556,002) ------------- $ 6,356,602 ============= 3. Stockholders' Equity:
Diluted Earnings Per Share: Three Months Ended Six Months Ended June 30, June 30, --------------------------- ----------------------------- 1998 1997 1998 1997 ------------- ------------ ------------- ------------- Income available to common stockholders used in basic EPS $ 1,916,741 $ 447,485 $ 3,083,948 $ 957,088 Preferred stock dividends 15,375 67,837 38,285 113,063 Interest and financial expense on convertible debentures 103,577 19,500 103,577 - ------------- ------------ ------------- ------------- Income available to common stockholders after assumed conversions of diluted securities $ 2,035,693 $ 534,822 $ 3,225,810 $ 1,070,151 ============= ============ ============= ============= Diluted weighted average shares outstanding 23,567,998 14,621,799 23,124,075 14,521,004 Diluted earnings per share $ 0.09 $ 0.04 $ 0.14 $ 0.07 ============= ============ ============= =============
F-8 INTERNATIONAL FIBERCOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. Segment Information The Company's operations are classified into four principal reportable segments that provided different products or services. Separate management of each segment is required because each business unit is subject to different marketing, production and technology strategies. Segmented information is reported in a different manner from the 1997 annual report to better describe how management currently analyzes its financial information and to consolidate by division how the Company is marketed to the general public and its clients. June 30, 1997 (Three Month Period Ending)
Construction Equipment Services Engineering Sales Other Total -------- ----------- ----- ----- ----- Revenues $ 6,578,503 $ 1,531,891 - - $ 8,110,394 Interest Expense 88,929 9,257 - $ 30,047 128,233 Depreciation and Amortization 207,557 66,335 - - 273,892 Operating Income (Loss) 515,273 76,352 - 18,760 610,385 Assets 12,116,356 2,121,745 - 1,902,249 16,140,350
June 30, 1997 (Six Month Period Ending)
Construction Equipment Services Engineering Sales Other Total -------- ----------- ----- ----- ----- Revenues $ 13,096,638 $ 3,399,313 - - $ 16,495,951 Interest Expense 162,028 17,897 - $ 42,014 221,939 Depreciation and Amortization 417,122 130,335 - - 547,457 Operating Income (Loss) 914,834 209,753 - (32,737) 1,091,850
F-9 INTERNATIONAL FIBERCOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1998 (Three Month Period Ending)
Construction Equipment Services Engineering Sales Other Total -------- ----------- ----- ----- ----- Revenues $ 11,145,110 $ 1,745,020 $ 5,162,265 - $ 18,052,395 Interest Expense 61,842 4,908 55,468 $ 17,081 139,299 Depreciation and Amortization 448,421 113,200 251,793 181,037 994,451 Operating Income (Loss) 639,086 (434,563) 3,325,628 (485,056) 3,045,095 Assets 17,919,648 3,348,478 29,867,799 3,376,598 54,512,523
June 30, 1998 (Six Month Period Ending)
Construction Equipment Services Engineering Sales Other Total -------- ----------- ----- ----- ----- Revenues $ 19,558,300 $ 3,314,776 $ 8,055,401 - $ 30,928,477 Interest Expense 114,420 16,038 97,581 $ 35,221 263,260 Depreciation and Amortization 674,307 244,300 494,876 208,537 1,622,020 Operating Income (Loss) 1,143,777 (524,677) 4,911,574 (577,787) 4,952,887
F-10 INTERNATIONAL FIBERCOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. Unaudited Pro Forma Condensed Consolidated Financial Statements: The accompanying consolidated statements of operations include the results of operations of Southern Communications Products, Inc. ("Southern") which the Company acquired effective October 1997 and Riley Underground Communications, Inc. ("Riley") which the Company acquired in April 1998. The following unaudited pro forma condensed consolidated financial statements for the quarter ended June 30,1997 give effect to the acquisition of Southern and Riley by the Company pursuant to the Agreements between the parties, and are based on the estimates and assumptions set forth herein and in the notes to such statements. This pro forma information has been prepared utilizing the historical financial statements and notes thereto, which are incorporated by reference herein. The pro forma financial data does not purport to be indicative of the results which actually would have been obtained had the purchase been effected on the dates indicated or of the results of which may be obtained in the future. The pro forma financial information is based on the purchase method of accounting for the acquisition of Southern and Riley. The pro forma entries are described in the accompanying footnotes to the unaudited pro forma condensed consolidated statements. The pro forma unaudited condensed consolidated statements of operations assume that the acquisition took place on the first day of the period presented. F-11 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) FOR THE THREE MONTHS ENDED JUNE 30,1997
IFC, Inc. Southern Riley Pro Forma and Communications Underground Pro Forma Consolidated Subsidiaries Products, Inc. Comm., Inc. Adjustments Amounts ------------ -------------- ----------- ----------- -------------- Contract Revenues $ 8,110,394 $ 3,255,082 $ 988,888 $ 12,354,364 Cost of Contract Revenues 5,940,603 1,352,195 884,421 8,177,219 ------------ ------------- ------------- -------------- Gross Profit 2,169,791 1,902,887 104,467 4,177,145 General and Administrative Expenses 1,559,406 360,512 116,860 $ 230,440(1) 2,267,218 ------------ ------------- ------------- -------------- Profits from Operations 610,385 1,542,375 (12,393) 1,909,927 Other Income (Expense): Interest Income 22,742 13,002 - 35,744 Interest expense (128,233) - (32,780) (229,013) Other Income 552 - - 552 Gain on disposal of assets 9,716 - - 9,716 ------------ ------------- ------------- -------------- (95,223) 13,002 (32,780) (68,000)(2) (183,001) ------------ ------------- ------------- -------------- Net income before income taxes 515,162 1,555,377 (45,173) 1,726,926 ============ ============= ============= ============== Provision for tax benefit (expense) 160 - - (622,151)(3) (621,991) ------------ ------------- ------------- ============== Net income $ 515,322 $ 1,555,377 $ (45,173) $ 1,104,935 ============ ============= ============= ============== Preferred stock dividend (67,837) - - (67,837) ------------ ------------- ------------- -------------- Net income attributable to common stockholders $ 447,485 $ 1,555,377 $ (45,173) $ 1,037,098 ============ ============= ============= ============== Basic earnings per share $ 0.06 $ 0.09 ============ ============== Fully diluted earnings per share 0.03 0.05 ============ ============== Basic average shares outstanding 6,934,053 12,033,950 Diluted weighted average shares Outstanding 14,621,799 19,721,696
(1.) Amortize goodwill (2.) Interest expense (3.) Income tax proration F-12 INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30,1997
IFC, Inc. Southern Riley Pro Forma and Communications Underground Pro Forma Consolidated Subsidiaries Products, Inc. Comm., Inc. Adjustments Amounts ------------ -------------- ----------- ----------- ------------ Contract Revenues $ 16,495,951 $ 6,504,942 $ 1,977,776 $ 24,978,669 Cost of Contract Revenues 12,613,550 2,414,300 1,768,842 16,796,692 ------------ ------------- ------------- -------------- Gross Profit 3,882,401 4,090,642 208,934 8,181,977 General and Administrative Expenses 2,790,551 707,110 233,719 $ 460,879(1) 4,192,259 ------------ ------------- ------------- -------------- Profits from Operations 1,091,850 3,383,532 (24,785) 3,989,718 Other Income (Expense): Interest Income 22,747 36,156 - 58,903 Interest expense (221,939) - (65,560) (136,000)(2) (423,499) Other Income 2,955 - - 2,955 Gain on disposal of assets 174,378 (1,175) - 173,203 ------------- -------------- ------------- -------------- (21,859) 34,981 (65,560) (188,438) ------------- -------------- ------------- -------------- Net income before income taxes 1,069,991 3,418,513 (90,345) 3,801,280 ============= ============== ============= ============== Provision for tax benefit (expense) 160 - - (1,367,405)(3) (1,367,245) ------------- -------------- ------------- -------------- Net income 1,070,151 3.418,513 (90,345) 2,434,035 ============= ============== ============= ============== Preferred stock dividend (113,063) - - (113,063) ------------- -------------- ------------- -------------- Net income attributable to common stockholders $ 957,088 $ 3,418,513 $ (90,345) $ 2,320,972 ============= ============== ============= ============== Basic earnings per share $ 0.14 $ 0.19 ============= ============== Fully diluted earnings per share 0.07 0.12 ============= ============== Basic average shares outstanding 6,899,220 11,999,117 Diluted weighted average shares Outstanding 14,521,004 19,620,901
(1.) Amortize goodwill (2.) Interest expense (3.) Income tax proration F-13 ITEM 6. The Company filed no Reports on Form 8-K during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. INTERNATIONAL FIBERCOM, INC. By /s/ Terry Beiriger ---------------------------- Terry Beiriger, Chief Financial Officer DATED: August 14, 1998 19 EX-27 2 FDS --
5 1 U.S. Dollars 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 1,349,672 0 12,456,704 0 0 23,289,588 11,831,478 (4,378,571) 54,512,523 10,974,358 0 0 766,662 40,518,836 (2,740,893) 54,512,523 30,928,477 31,027,477 20,370,446 25,975,590 0 0 263,260 4,788,627 1,666,394 3,122,233 0 0 (38,285) 3,083,948 .17 .14
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