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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number
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FWT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Texas 75-1040743
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1901 East Loop 820 South
Fort Worth, Texas 76112-7899
(Address, Including Zip Code, of Registrant's Principal Executive Offices)
(817) 457-3060
(Telephone number, including area code, of
Registrant's Principal Executive Offices)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 [ ] No [X]
Indicated below is the number of shares outstanding of each class of
the registrant's common stock as of April 27, 1998.
Title of Each Class of Common Stock Number Outstanding
Not Applicable Not Applicable
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PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Index to Financial Statements
Page
Balance Sheets as of January 31, 1998 and April 30, 1997 3
Statements of Income for the Three and Nine Month Periods Ending
January 31, 1998 and 1997 4
Statement of Shareholders' Equity (Deficit) for the Nine Month
Period Ending January 31, 1998 5
Statements of Cash Flows for the Three and Nine Month Periods
Ending January 31, 1998 and 1997 6
Notes to Financial Statements 7
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FWT, INC.
BALANCE SHEETS
AS OF JANUARY 31, 1998 AND APRIL 30, 1997
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
January 31, April 30,
1998 1997
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 6,988 $ 4,483
Accounts receivable, less allowance for doubtful
accounts of $175 and $75, respectively 6,900 17,560
Inventories 11,290 8,357
Prepaid expenses 2,549 984
Other assets 632 519
--------- ---------
Total current assets 28,359 31,903
Property, Plant, And Equipment :
Land and land improvements 780 867
Buildings and building improvements 4,548 4,467
Machinery and equipment 6,187 5,463
--------- ---------
11,515 10,797
Less accumulated depreciation (3,103) (2,497)
--------- ---------
Net property, plant, and equipment 8,412 8,300
Deferred tax asset 20,000 --
Other noncurrent assets 5,537 --
--------- ---------
Total assets $ 62,308 $ 40,203
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term debt $ -- $ 188
Accounts payable 5,684 10,195
Accrued interest 2,187 --
Other accrued expenses and liabilities 1,976 2,543
Notes payable 1,976 468
--------- ---------
Total current liabilities 11,823 13,394
Long-term debt, less current portion 105,000 1,512
--------- ---------
Total liabilities 116,823 14,906
Commitments and Contingencies
Shareholders' Equity (Deficit):
Common stock, $10 par value; 1,000 shares
authorized, 372 shares issued, 136.14 and
372 shares outstanding, respectively 4 4
Additional paid-in capital 29,676 1
Treasury stock, at cost, 235.86 shares as of
January 31, 1998 (83,054) --
Retained earnings (deficit) (1,141) 25,292
--------- ---------
Total shareholders' equity (deficit) (54,515) 25,297
--------- ---------
Total liabilities and shareholders' equity (deficit) $ 62,308 $ 40,203
========= =========
The accompanying notes are an integral part of these financial statements.
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FWT, INC.
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDING JANUARY 31, 1998 AND 1997
UNAUDITED
(IN THOUSANDS)
Three Month Period Ending Nine Month Period Ending
January 31, January 31,
------------------------- ------------------------
1998 1997 1998 1997
--------- -------- --------- ---------
Sales $ 20,691 $ 22,169 $ 58,041 $ 49,301
Cost of sales 14,692 15,337 41,344 34,108
-------- -------- -------- --------
Gross profit 5,999 6,832 16,697 15,193
Selling, administrative and general expenses 2,874 3,237 8,263 6,179
-------- -------- -------- --------
Operating income 3,125 3,595 8,434 9,014
Interest income 65 75 311 191
Interest expense (2,601) (30) (3,004) (44)
Other income (expense), net 105 79 386 120
-------- -------- -------- --------
Income before tax provision 694 3,719 6,127 9,281
Income tax provision 255 99 368 224
-------- -------- -------- --------
Net income before extraordinary item 439 3,620 5,759 9,057
Extraordinary item, net of tax benefit of $863 (1,517) -- (1,517) --
-------- -------- -------- --------
Net income (loss) $ (1,078) $ 3,620 $ 4,242 $ 9,057
======== ======== ======== ========
Pro Forma Financial Information:
Pro Forma adjustment for federal tax
provision 1,230 2,038 3,079
-------- -------- --------
Pro Forma net income $ 2,390 $ 2,204 $ 5,978
======== ======== ========
The accompanying notes are an integral part of these financial statements.
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FWT, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTH PERIOD ENDING JANUARY 31, 1998
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Total
Common Stock Additional Retained Treasury Stock Shareholders'
----------------- Paid-in Earnings ----------------- Equity
Shares Amount Capital (Deficit) Shares Amount (Deficit)
------ ------ ------- --------- ------ ------ ---------
Balance, April 30, 1997 372 $ 4 $ 1 $ 25,292 -- $ -- $ 25,297
Distributions to shareholders -- -- -- (21,000) -- -- (21,000)
Net income, May 1, 1997 to November 11, 1997 -- -- -- 5,383 -- -- 5,383
Reclassification of undistributed Subchapter
S corporation earnings -- -- 9,675 (9,675) -- -- --
Recapitalization of the Company -- -- 20,000 -- 235.86 (83,054) (63,054)
Net loss, November 12, 1997 to
January 31, 1998 -- -- -- (1,141) -- -- (1,141)
------ ------ ------- --------- -------- -------- --------
Balance, January 31, 1998 372 $ 4 $29,676 $ (1,141) 235.86 $(83,054) $(54,515)
====== ====== ======= ========= ======== ======== ========
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FWT, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTH PERIODS ENDING JANUARY 31, 1998 AND 1997
UNAUDITED
(IN THOUSANDS)
Three Month Period Ending Nine Month Period Ending
January 31, January 31,
------------------------- ------------------------
1998 1997 1998 1997
--------- ---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income before extraordinary item $ 439 $ 3,620 $ 5,759 $ 9,057
Adjustments to reconcile net income before
extraordinary item to net cash provided by
operating activities :
Depreciation 264 127 674 379
Amortization 142 -- 142 --
Net gain on dispositions of property and
equipment (45) (12) (187) (15)
Adjustments to working capital accounts :
Accounts receivable 533 (2,831) 10,660 (3,932)
Inventories 137 (720) (2,933) (4,543)
Prepaid expenses (208) 85 (1,565) (966)
Other assets 610 3 272 148
Accounts payable 500 793 (4,511) 2,342
Accrued expenses and other liabilities 192 (362) 1,620 232
--------- --------- --------- ---------
Net cash provided by operating activities 2,564 703 9,931 2,702
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property and equipment (316) (1,266) (985) (2,346)
Proceeds from sales of property and equipment 34 12 239 10
--------- --------- --------- ---------
Net cash used in investing activities (282) (1,254) (746) (2,336)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable, net of financing costs 97,141 -- 117,141 555
Payments of notes payable (120,468) (880) (120,468) --
Proceeds from long-term debt, net of issuance costs 99,830 1,435 99,830 555
Payments of long-term debt (1,598) -- (1,700) (50)
Payments for acquisition of treasury stock (80,483) -- (80,483) --
Distributions paid to shareholders -- (98) (21,000) (98)
--------- --------- --------- ---------
Net cash used in financing activities (5,578) 457 (6,680) 962
--------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents (3,296) (94) 2,505 1,328
Cash and cash equivalents, beginning of period 10,284 5,470 4,483 4,048
--------- --------- --------- ---------
Cash and cash equivalents, end of period $ 6,988 $ 5,376 $ 6,988 $ 5,376
========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION :
Cash paid during the period for :
Interest $ 540 $ 28 $ 819 $ 42
Taxes -- 23 22 23
Non Cash Investing and Financing Activities:
Additional paid-in capital resulting from
deferred tax asset 20,000 -- 20,000 --
Additional paid-in capital resulting from
undistributed S corporation earnings 9,675 -- 9,675 --
Subordinated promissory notes payable issued
in connection with Recapitalization 1,946 -- 1,946 --
Distribution of assets in connection with
Recapitalization $ 625 $ -- $ 625 $ --
The accompanying notes are an integral part of these financial statements.
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FWT, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Background
FWT, Inc., formerly Fort Worth Tower Company, Inc. ("FWT" or the "Company"), a
Texas corporation, manufactures, sells and installs transmitting towers, poles,
PowerMounts(TM) and related accessories used principally to support
communications and broadcasting antennae for the telecommunications industry.
This includes cellular telephone, personal communications systems (PCS),
commercial and amateur broadcasting, private microwave and television. Operating
results are strongly influenced by growth in demand for telecommunications
infrastructures services. The Company also produces shelters and cabinets used
to house electronic communications and broadcasting equipment. The Company
conducts its business principally through its two plants located near Fort
Worth, Texas.
Basis of Presentation
These financial statements reflect all normal and recurring adjustments that
are, in the opinion of management, necessary to present a fair statement of
FWT's financial position as of January 31, 1998 and the results of its
operations for the three and nine month periods ending January 31, 1998 and
1997. These financial statements include estimates and assumptions made by
management that affect the reported amounts of assets and liabilities, the
reported amounts of revenues and expenses, and provisions for and the disclosure
of contingent assets and liabilities. Actual results could differ from such
estimates. Results of operations for interim periods are not necessarily
indicative of results to be obtained for the full fiscal year.
Recapitalization and Stock Purchase
On November 12, 1997, the Company, FWT Acquisition, Inc. (a wholly-owned
subsidiary of Baker Communication Fund, L.P.), T.W. Moore, Betty Moore, Roy J.
Moore, Thomas F. Moore and Carl R. Moore (each of the natural persons, the
"Existing Shareholders") entered into and consummated the transactions set forth
in a Stock Purchase and Redemption Agreement and related agreements. Such
agreements contemplated two primary transactions. The first transaction
included (i) the incurrence by the Company of $100 million senior secured
indebtedness (the "Senior Credit Facility"), (ii) redemption by the Company of
an aggregate of 235.86 shares of the Company's common stock from the Existing
Shareholders for consideration totaling approximately $83.1 million, (iii) the
repayment of outstanding indebtedness of the Company totaling approximately
$22.1 million, and (iv) the distribution of an immaterial amount of selected
assets to certain Existing Shareholders (such transactions are collectively
referred to as the "Recapitalization"). The second transaction included the
purchase by FWT Acquisition, Inc. of an aggregate of 108.91 shares of the
Company's common stock from Existing Shareholders for consideration totaling
approximately $36 million (the "Stock Purchase", and together with the
Recapitalization, the "Transactions"). As a result of the Stock Purchase, FWT
Acquisition, Inc. holds 80% of FWT's outstanding common stock and three of the
Existing Shareholders hold 20% of FWT's outstanding common stock. For financial
reporting purposes, the Recapitalization was accounted for by the Company as an
acquisition of treasury stock.
Note 2 - Cash Equivalents
The Company considers all highly liquid short-term investments purchased with
original maturities of three months or less to be cash equivalents. As of
January 31, 1998, short-term investments totaling $6,700,000 are included in
cash equivalents. The cost of such short-term investments approximated fair
value.
Note 3 - Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventory costs include material,
labor and factory overhead. Total inventories as of January 31, 1998 and April
30, 1997 included the following (amounts in thousands) :
January 31, April 30,
1998 1997
-------------- ------------
Finished goods $ 6,291 $ 6,408
Work-in process and raw materials 4,999 1,949
-------------- ------------
Total Inventories $ 11,290 $ 8,357
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Note 4 - Revenue Recognition
Revenue from sales is recognized when the earnings process is complete, which
is generally at the time of product shipment. In circumstances where shipments
are delayed at the customer's request, revenue is recognized upon completion of
the product and payment is received from the customer. Management believes
that payment represents acknowledgment by the customer that all contractual
terms are binding, the product has been manufactured according to customer
specifications and engineering design, the product is available for delivery
according to the schedule fixed by the customer, and the Company is not
responsible for delivery or installation. Accordingly, management believes
that the risk of ownership has passed and the earnings process is complete.
Note 5 - Federal and State Income Taxes
Effective November 12, 1997, the Company elected to be taxed as a Subchapter C
corporation and, accordingly, has recorded a provision for federal income taxes
since such date in the accompanying statements of income for the three and nine
month periods ended January 31, 1998. Prior to November 12, 1997, the Company
was a Subchapter S corporation. Accordingly, no provision for federal income
taxes is reflected in the accompanying statements of income for the three and
nine month periods ended January 31, 1997, as well as for the period from May
1, 1997 through November 11, 1997 included in the accompanying statements of
income for the three and nine month periods ended January 31, 1998.
During the time that the Company was a Subchapter S corporation, it had made an
election under Section 444 of the Internal Revenue Code to retain a fiscal year
of April 30. As a result of such election, the Company was required to pay an
amount held by the IRS to offset timing differences in the payment of estimated
taxes by the Company's shareholders. As of January 31, 1998, the Company had
made payments pursuant to this requirement of $1,960,702 that are included in
prepaid expenses in the accompanying balance sheet as of January 31, 1998. As a
result of the Company electing to be taxed as a Subchapter C corporation, the
Company has filed for a refund of such payments from the IRS.
The income tax provisions included in the accompanying statements of income
include provisions for state income taxes. For the periods from May 1, 1996 to
November 11, 1997, such provisions include amounts for various states in which
the Company was subject to income taxes because those states did not recognize
Subchapter S corporations.
In connection with the transactions discussed in Note 1, the parties to the
transactions elected jointly to treat the Recapitalization and Stock Purchase as
an asset acquisition under Section 338(h)(10) of the Internal Revenue Code of
1986, as amended. As a result, the Company recorded a deferred tax asset of
approximately $20.0 million (net of a valuation allowance of approximately $20.0
million) that is included in the accompanying balance sheet as of January 31,
1998, with a corresponding credit to additional paid-in capital. The deferred
tax asset relates to future tax deductions for the net excess of the tax bases
of the assets and liabilities over the financial statement carrying amounts.
Management anticipates future taxable income after debt service sufficient to
realize the net deferred tax asset. Any future change in the valuation
allowance will be reflected as a component of the Company's income tax
provision.
Note 6 - Notes Payable and Long-Term Debt
Notes payable and long-term debt of the Company as of January 31, 1998 and
April 30, 1997, consisted of the following :
January 31, April 30,
1998 1997
----------- ----------
Unsecured note payable to a bank, maximum
borrowing of $1,500,000, bearing interest at
adjusted LIBOR (as defined), principal due at
original maturity of 1/1/98, paid in full during
November 1997 $ -0- $ 468,000
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Note payable to a bank, bearing interest at 6%,
payable in quarterly installments of $25,000,
original maturity of 12/31/2000, secured by all
receivables of the Company, paid in full during
November 1997 -0- 375,000
Unsecured note payable to a bank, bearing
interest at Adjusted LIBOR (as defined), payable
in monthly installments of $7,361, original maturity
date of 4/1/2000, paid in full during November 1997 -0- 1,325,000
Subordinated promissory notes payable, interest at
prime (8.5% at 1/31/98), principal and accrued
interest due 4/10/98 1,582,500 -0-
Subordinated promissory notes payable, interest at
prime (8.5% at 1/31/98), payable in monthly installments
of principal and accrued interest through November 15,
1998 363,348 -0-
Note payable under revolving line of credit, interest
at prime plus 1% (9.5% at 1/31/98), due 11/30/00,
collateralized by substantially all assets 30,208 -0-
Senior subordinated notes, bearing interest at 9 7/8% and
payable semiannually on 5/15 and 11/15, principal due
at maturity on 11/15/07. 105,000,000 -0-
------------ ----------
Total notes payable and long-term debt 106,976,056 2,168,000
Less - notes payable and current portion of long-term debt (1,976,056) (656,332)
------------ ----------
Long-term debt, less current portion $105,000,000 $1,511,668
============ ==========
In connection with the Transactions discussed in Note 1, the Company issued
subordinated promissory notes to each of the Existing Shareholders totaling
$911,853 (the "Purchase Price Adjustment Notes") and $1,582,500 (the "Tax
Notes"). The Purchase Price Adjustment Notes bear interest at prime and were
originally payable (subject to adjustment based upon the audited working capital
of the Company as of November 10, 1997), in monthly installments of principal of
$75,987, plus accrued interest, through October 15, 1998, with a final principal
installment of $75,994, plus accrued interest, on November 15, 1998. Based
upon the audited working capital of FWT as of November 10, 1997, the principal
amount of the Purchase Price Adjustment Notes were subsequently reduced by
$548,505, with a corresponding reduction in the cost of the treasury stock
acquired pursuant to the Recapitalization. The Tax Notes bear interest at prime
and were payable on April 10, 1998, plus accrued interest. Each of the Purchase
Price Adjustment Notes and Tax Notes are unsecured obligations of the Company.
In November, 1997, the Company entered into a revolving credit facility that
allows the Company to borrow up to $25,000,000, subject to borrowing base
limitations and the satisfaction of customary borrowing conditions. The
revolving credit facility contains certain financial covenants that require the
Company to maintain , based upon the latest twelve months of operations, minimum
ratios of consolidated EBITDA (as defined) to consolidated interest expense,
minimum ratios of consolidated total debt to consolidated EBITDA, and minimum
levels of consolidated EBITDA. The revolving credit facility also limits, among
other items, the Company's annual capital expenditures and the Company's
ability to incur additional
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indebtedness. Borrowing under the revolving credit facility were approximately
$30,000 as of January 31, 1998. Availability under the revolving credit
facility, based upon the Company's borrowing base, was approximately $12.1
million as of January 31, 1998. As of January 31, 1998, the Company was in
compliance with all financial covenants and similar limitations set forth in the
agreement.
Subsequent to the completion of the Transactions discussed in Note 1, the
Company issued $105,000,000 aggregate principal amount of 9 7/8% Senior
Subordinated Notes (the "Notes"), the net proceeds from which were used to repay
borrowings incurred by the Company under the Senior Credit Facility in
connection with the Recapitalization. Interest on the Notes is payable
semiannually on May 15 and November 15 of each year, commencing on May 15, 1998.
The Notes mature on November 15, 2007. The Notes are unsecured senior
subordinated obligations of the Company and are subordinated in right of payment
to all existing and future Senior Indebtedness (as defined) of the Company. The
Notes are redeemable, in whole or in part, at the option of the Company on or
after November 15, 2002. In addition, at any time on or prior to November 15,
2000, the Company may, at its option, redeem up to 35% of the aggregate
principal amount of the Notes from the proceeds of one or more public equity
offerings, at a redemption price equal to 109.875% plus accrued and unpaid
interest. Upon a change of Control (as defined), each holder of the Notes will
have the right to require that the Company make an offer to purchase all
outstanding Notes at a price equal to 101% plus accrued interest. The Indenture
contains certain covenants that limit the ability of the Company to, among other
things, incur additional indebtedness, pay dividends or make investments and
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur liens, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. In addition, the Company
will be obligated to offer to repurchase the Notes at 100% plus accrued and
unpaid interest in the event of certain Asset Sales (as defined). The Notes
also contain certain registration rights.
As a result of the repayment of borrowings under the Senior Credit Facility,
during the quarterly period ending January 31, 1998 the Company recorded a
charge to operations of approximately $2.4 million representing the writeoff of
deferred financing costs. This charge, net of a tax benefit of approximately
$863 thousand, is reflected as an extraordinary item in the accompanying
statements of income for the three and nine month periods ended January 31,
1998.
Note 7 - Events Subsequent to January 31, 1998
During March 1998, the Company, pursuant to a filing with the Securities and
Exchange Commission, initiated an Exchange Offer to redeem the Notes for senior
subordinated notes having the same principal amount and interest rate, and
substantially the same terms and conditions. The Exchange Offer was completed
in April 1998 and resulted in the redemption of all of the outstanding Notes.
On February 27, 1998, an executive officer and shareholder of the Company
entered into a Voluntary Retirement Agreement with the Company. In connection
with the agreement, he agreed to resign from office as an executive officer and
voluntarily retire. As part of the agreement, the Company agreed to pay this
former executive officer and shareholder $237,500 annually through December 31,
2000 and one-half of any bonus that otherwise would have been payable to him
under his employment agreement with the Company had his employment with the
Company continued through December 31, 2000.
On March 30, 1998, a shareholder and former executive officer of the Company
terminated his employment with the Company. Pursuant to the terms of his
employment agreement with the Company, this shareholder and former executive
officer will be entitled to receive his annual salary of $200,000, an annual
bonus based upon the earnings and performance of the Company, and various other
benefits through December 31, 2000.
On April 3, 1998, an executive officer and shareholder of the Company
terminated his employment with the Company. Pursuant to the terms of his
employment agreement with the Company, this shareholder and former executive
officer will be entitled to receive his annual salary of $200,000, an annual
bonus based upon the earnings and performance of the Company, and various other
benefits through December 31, 2000.
As a result of the above terminations of employment, the Company expects to
record a charge to operations during the quarterly period ending April 30, 1998
reflecting the estimated amounts payable to the above individuals through
December 31, 2000.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OVERVIEW
On November 12, 1997, the Company, FWT Acquisition, Inc.( a
wholly-owned subsidiary of Baker Communication Fund, L.P. ), T.W. Moore, Betty
Moore, Roy J. Moore, Thomas F. Moore and Carl R. Moore (each of the natural
persons, the "Existing Shareholders") entered into and consummated the
transactions set forth in a Stock Purchase and Redemption Agreement and related
agreements. Such agreements contemplated two primary transactions. The first
transaction included (i) the incurrence by the Company of $100 million senior
secured indebtedness (the "Senior Credit Facility"), (ii) redemption by the
Company of an aggregate of 235.86 shares of the Company's common stock from the
Existing Shareholders for consideration totaling approximately $83.1 million,
(iii) the repayment of outstanding indebtedness of the Company totaling
approximately $22.1 million, and (iv) the distribution of an immaterial amount
of selected assets to certain Existing Shareholders (such transactions are
collectively referred to as the "Recapitalization"). The second transaction
included the purchase by FWT Acquisition, Inc. of an aggregate of 108.91 shares
of the Company's common stock from Existing Shareholders for consideration
totaling approximately $36 million (the "Stock Purchase"). As a result of the
above transactions, FWT Acquisition, Inc. holds 80% of the issued and
outstanding Common Stock, and three of the Existing Shareholders hold 20% of the
issued and outstanding Common Stock. For financial reporting purposes, the
Recapitalization was accounted for as an acquisition of treasury stock.
The borrowings under the Senior Credit Facility, cash from the Company
of approximately $5.0 million, subordinated promissory notes payable of
approximately $1.9 million to the Existing Shareholders, and distribution of
selected assets to certain Existing shareholders, were used to consummate the
Recapitalization. In order to repay the Senior Credit Facility, the Company
issued $105.0 million aggregate principal amount of 9 7/8% Senior Subordinated
Notes (the "Notes"). The Notes were subsequently redeemed pursuant to an
Exchange Offer that expired on April 12,1998. All outstanding Notes were
redeemed in the Exchange Offer for 9 7/8% senior subordinated notes having
substantially the same terms and conditions.
RESULTS OF OPERATIONS
Sales. Sales for the three-month period ended January 31, 1998 were $20.7
million as compared to sales of $22.2 million for the same period in 1997. The
decrease in sales of $1.5 million or 6.7% for the three- months ended January
31,1998 compared to the same period in 1997, is primarily attributed to a
decrease in demand for monopole and related products. The Company believes the
decrease in demand for these products reflects a shift in demand toward heavier
structures, such as towers, which are used in co-location and corridor sites.
The Company experienced an increase in the sale of towers during the
three-month period ended January 31,1998 as compared to the same period in
1997, partially offsetting the decline in sales attributable to monopole
products. In addition, the Company's customer base of primary
telecommunication service providers has, in some instances, postponed the
capital expenditure process for the construction of cell site locations due to
the recent entry into the market of "build-to-suit" providers, who are also
part of the Company's customer base. As a result of the entry of build-to-suit
providers into the market, the Company believes the demand for the Company's
products has been pushed to future periods.
Sales for the nine month period ended January 31,1998 were $58.0
million as compared to sales of $49.3 million for the same period in 1997. The
increase in sales of $8.7 million or 17.7% for the nine months ended January
31,1998 compared to the same period in 1997 is primarily attributable to an
increase in demand of towers and related products. The Company believes the
increase in demand for these products is due to the focus by the primary
telecommunication service providers in the construction of co-location and
corridor sites.
Gross Profit. Gross profit for the three-month period ended January 31,1998
decreased by $833 thousand as compared to the same period in 1997. As a
percent of sales, gross profit decreased to 28.99% from 30.82% for the
three-month period ended January 31,1998 as compared to the same period in
1997. The decrease is due to under-absorption of direct labor and
manufacturing overhead during the three-months
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ended January 31,1998. The Company reduced its labor force by approximately 100
employees in mid-January to mitigate the effect of cost increases associated
with its manufacturing operations in future periods. Due to the short tenure of
those employees that were terminated, the Company was not required to incur
additional costs associated with the reduction in its workforce. In addition,
the Company experienced some pricing pressure on its monopole products due to
excess capacity levels in the market.
Gross profit for the nine-month period ended January 31,1998 increased
by $1.5 million as compared to the same period in 1997. As a percent of sales,
gross profit decreased to 28.77% from 30.82% for the nine-month period ended
January 31,1998 as compared to the same period in 1997. The decrease in gross
profit as a percent of sales is due to under-absorption of direct labor and
manufacturing overhead during the nine-month period, and the excess capacity
levels of monopole manufacturing resulting in some pricing pressure on sales of
these products.
Selling, Administrative and General Expenses. Operating expenses decreased by
$363 thousand for the three-month period ended January 31,1998 as compared to
the same period in 1997. As a percent of sales, operating expenses decreased
to 13.89% from 14.60% for the three-month period ended January 31,1998 as
compared to the same period in 1997. The decrease is due to bonuses paid to
the former executives of the Company during the three-month period ended
January 31,1997. No bonuses were paid to executives in the same period of
1998.
Operating expenses increased by $2.1 million for the nine-month period
ended January 31,1998 as compared to the same period in 1997. As a percent of
sales, operating expenses increased to 14.24% from 12.53% for the nine-month
period ended January 31,1998 as compared to the same period in 1997. The
dollar increase for the nine-month period ended January 31,1998 was primarily
attributed to the following:
(i) An increase in personnel cost due to an increase in the number of
personnel and the resultant increase in personnel related costs.
(ii) An increase in systems related expenses as the Company began to
depreciate a job tracking information system that was placed in
service during fiscal year 1998 and improved the capability of its
engineering information systems.
(iii) An increase in selling related expenses such as sales travel, show
expenses, and commission expense.
Operating Income. Operating income for the three-month period ended January
31,1998 decreased by $470 thousand as compared to the same period in 1997. The
decrease in operating income was due to a decrease in sales for the period, and
the decrease in the gross profit. The decreases were partially offset in the
period by a decrease in operating expenses.
Operating income for the nine-month period ended January 31,1998
decreased by $580 thousand as compared to the same period in 1997. The decrease
in operating income was due to an increase in operating expenses for the period
ended January 31,1998 as compared to the same period in 1997. The decrease in
operating income was partially offset by the increase in sales and the resultant
increase in volume related gross profit.
Interest Expense. Interest expense increased for the three-month period ended
January 31,1998 by $2.6 million as compared to the same period in 1997. The
increase in interest expense is due to the additional interest incurred as a
result of the Recapitalization of the Company and issuance of the related debt.
Interest expense increased for the nine-month ended January 31,1998 by
$2.9 million as compared to the same period in 1997. The increase in interest
expense was due to the additional interest incurred as a result of the
Recapitalization, the financing of distributions made to certain Existing
Shareholders and the issuance of the related debt.
Other Income and Expense, Net. Other income and expense, net increased for the
three-month period ended January 31,1998 by $16 thousand as compared to the same
period in 1997. The increase was due to the sale of capital assets no longer
required by the Company.
Other income and expense, net increased for the nine-month period
ended January 31,1998 by $386 thousand as compared to the same period in 1997.
The increase was due to the sale of capital assets no longer required
12
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by the Company, an increase in interest income as the Company invested its cash
in overnight investments, and management improvements and controls related to
the sale of scrap.
Income Tax Provision. The provision for income taxes increased for the
three-month period ended January 31,1998 by $156 thousand as compared to the
same period in 1997. The Company's effective tax rate increased to 36.7% from
2.7% for the three-month period ended January 31,1998 as compared to the same
period in 1997. The increase in the tax rate is the result of the Company's
election to be taxed as a Subchapter C corporation instead of a Subchapter S
Corporation.
The provision for income taxes increased for the nine-month period
ended January 31,1998 by $144 thousand as compared to the same period in 1997.
The Company's effective tax rate increased to 6.0% from 2.4% for the nine-month
period January 31,1998 as compared to the same period in 1997. The increase in
the effective tax rate is the result of the Company's election to be taxed as a
Subchapter C corporation instead of a Subchapter S Corporation.
Extraordinary Item, Net of Tax Benefit. Extraordinary items increased for the
three-month and nine-month periods ended January 31,1998 by $1.5 million (net of
tax benefit of $863 thousand) as compared to the same periods in 1997. The
extraordinary item represents the write-off of deferred financing costs
associated with repayment of the Senior Credit Facility used as initial
financing for the Recapitalization.
Net Income ( Loss ). Net income (loss) decreased for the three-month period
and nine-month period ended January 31,1998 by $4.7 million and $4.8 million,
respectively, as compared to the same period in 1997. The decrease in net
income was due primarily to : ( i ) an increase in operating expenses, ( ii )
higher interest expense associated with the Recapitalization of the Company,
and ( iii ) the write-off of deferred financing costs associated with the
initial financing of the Recapitalization of the Company. The decrease in net
income (loss) was partially offset by the increase in sales and the resultant
increase in gross profit for the period ended January 31,1998.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations through
internally generated funds and existing cash reserves. The Company produced
a net cash flow (deficit) of $(3.3) million and $2.5 million for the three month
and nine month periods ending January 31, 1998, respectively.
The net cash flow provided by operating activities for the three and
nine month periods ending January 31, 1998 was $2.6 million and $9.9 million,
respectively. The primary changes in working capital accounts for the three
month period ending January 31, 1998 were as follows:
(i) accounts receivable decreased by approximately $533 thousand as a
result of an intensified collection effort by management;
(ii) other assets increased by approximately $610 thousand due to
the net tax benefit resulting from the writeoff of deferred
financing costs associated with repayment of the Senior Credit
Facility in connection with the Recapitalization; and
(iii) accounts payable increased by approximately $500 thousand due to
a higher volume of purchasing activities during the period.
The primary changes in working capital accounts for the nine month period
ending January 31, 1998 were as follows:
(i) accounts receivable decreased by approximately $10.6 million as
a result of an intensified collection effort by management;
(ii) inventories increased by approximately $2.9 million primarily as
a result of delays in shipments to customers at the customer's
request;
(iii) prepaid expenses increased by approximately $1.6 million
primarily as a result of payments made to the IRS pursuant to
Section 444 of the Internal Revenue Code relating to the
Company's Subchapter S status prior to November 12, 1997 and its
fiscal year election of April 30;
(iv) accounts payable decreased by approximately $4.5 million due to
the lower volume of purchasing activities as compared to the
same nine month period of fiscal year 1997; and
(v) accrued expenses increased by approximately $1.6 million
primarily as a result of interest accrued relating to the senior
subordinated notes issued subsequent to the Recapitalization.
The cash flow used by investing activities was $282 thousand and $746
thousand for the three and nine month periods ending January 31, 1998,
respectively, reflecting the Company's capital equipment requirements during
such periods.
The cash flow used by financing activities was ($5.6) million and
($6.7) million for the three and nine month periods ending January 31, 1998,
respectively. The net cash flow from notes payable issued in the
Recapitalization was approximately $97.1 million. The proceeds were used to
repay approximately $22.1 million in notes payable and long-term debt, and to
purchase treasury shares from the Existing Shareholders. The cash flow from
the issuance of the long-term debt was approximately $100 million and was used
to repay the notes payable from the Recapitalization. Approximately $21.0
million was distributed to certain of the Existing Shareholders prior to, and
in anticipation of, the Recapitalization and was financed by a note payable.
The note payable was a portion of the $22.1 million repaid as part of the
Recapitalization.
The Company determines its short-term liquidity needs based upon its
cash requirements over the next twelve months, and its long-term liquidity
needs based upon its cash requirements for periods in excess of twelve months.
The Company entered into a Revolving Credit Facility that, subject to
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borrowing base limitations and the satisfaction of customary borrowing
conditions and financial covenants, allows the Company to borrow up to $25.0
million. The Company's principal sources of short-term and long-term liquidity
are cash flow generated from operations and borrowings under the Revolving
Credit Facility. The principal uses of liquidity are to meet debt service
requirements, finance the Company's capital expenditures, and provide working
capital needs. As of January 31, 1998, the Company would have had approximately
$12.1 million of availability under the terms of the Revolving Credit Facility.
The Company had approximately $30 thousand drawn against the Revolving Credit
Facility as of January 31, 1998.
The Company has a capital expenditure budget of approximately $4.5
million for the calendar year 1998, of which an estimated $1.5 million is
expected to be spent in Fiscal Year 1998, depending on the timing of certain
projects. The Company has budgets of $1.9 million for the build-out of
additional production facilities, and $1.8 million for additional manufacturing
equipment. The additional capital expenditures are to be spent on site
development and miscellaneous office equipment. The Company has undertaken a
search for new information systems and is currently reviewing several proposals
from information systems providers. The selection of the new information systems
will be made and implementation will begin in early fiscal year 1999. Management
believes the estimated cost of the system change, depending on the software
selected, to be between $2.5 and $3.5 million. Depending on financing
opportunities currently being considered, the cash outlays may occur over a
three or four year period. In addition, the Company has leased additional office
space in Arlington, Texas for its administrative staff. The Company plans to
consolidate its current manufacturing operations in the Fort Worth, Texas
location into the Kennedale, Texas location and either sell or lease the Fort
Worth, Texas facility. The current schedule for the consolidation of the
manufacturing and administrative operations has been delayed until early fiscal
year 1999. The Company expects annual capital expenditures on an annual going
forward basis of approximately $3.0 million.
As the Company's business grows, its equipment and working capital
requirements will also continue to increase. The Company believes that the
combination of cash from operations and funds drawn under the Revolving Credit
Facility will be adequate to meet short-term liquidity needs and to finance
working capital and capital expenditures for the next twelve months. However,
there can be no assurance that such resources will be sufficient to meet the
Company's anticipated requirements or that the Company will not require
additional debt or equity financing within this time frame.
INFLATION
Certain of the Company's expenses, such as compensation benefits, raw
materials and equipment repair and replacement, are subject to normal
inflationary pressures. While the Company to date has been able to offset
inflationary cost increases through increased operating efficiencies and price
increases to its
14
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customers, there can be no assurance that the Company will be able to offset
any future inflationary cost increases through these or similar means.
CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS OR FUTURE OPERATING
RESULTS
This report contains various forward-looking statements and information that
are based on Management's beliefs as well as assumptions made by and
information currently available to Management. When used in this report, the
words "anticipate", "estimate", "expect", "predict", "project", and similar
expressions are intended to identify forward- looking statements. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, expected or projected. Among the key factors that may have a
direct bearing on the Company's results are set forth below.
Future trends for revenue and profitability remain difficult to predict. The
Company continually faces risks and uncertainties including, among others,
general and specific market economic conditions, dependence on certain key
customers and the wireless communications industry in general, risk of
nonpayment of accounts receivable, competitive factors, supplier related
issues, manufacturing capacity constraints and the ability to service a high
level of indebtedness.
General economic conditions in the United States could affect the pricing on
raw materials such as steel and zinc used in many of the Company's products.
Because steel and zinc constitute a substantial portion of the Company's cost
of goods sold, any increase in the price of such materials could have a
material effect on future profitability. There can be no assurance that the
Company will be successful in passing along any cost increases to its
customers.
A substantial portion of the Company's revenues are generated from a few key
customers. As customers seek to establish close relationships with their
suppliers, the Company expects that its customer base will continue to become
more concentrated. Loss of key customers, or significant declines in revenues
from key customers, could have a material adverse effect on the Company's
business, financial condition and profitability.
The Company's business depends upon the capital expenditures of wireless service
providers that, in turn, depend upon current and anticipated market demand for
wireless communications. The future success of the Company depends to a
considerable extent upon the continued growth and increased availability of
cellular and other wireless communications services. The wireless
communications industry may experience downturns that may result in a decrease
in demand for the Company's products. There can be no assurance that the
wireless communications industry will not experience severe and prolonged
downturns in the future or that the industry will expand as rapidly as
forecasted. Any significant decreases in the level of capital expenditures by
the wireless service providers could have a material adverse effect on the
Company's business, financial condition and profitability.
Management continues to closely monitor customer orders and the
creditworthiness of its customers. The Company has not experienced abnormal
increases in losses associated with accounts receivable. The Company has
provided allowances that it believes to be adequate to reflect the risk
associated with collection of accounts receivable. Unforeseen market
conditions may, however, compel the Company to increase such allowances.
The telecommunications infrastructure industry is highly competitive. The
Company faces substantial competition in each of its markets from established
competitors, some of which have greater financial, engineering, manufacturing
and marketing resources than the Company. The Company's competitors can be
expected to continue to improve the design of their products, to introduce new
products with competitive prices and to improve customer satisfaction. Although
the Company has not historically been forced to reduce its prices significantly,
there can be no assurance that competitive pressures will not necessitate
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future price reductions that would adversely affect operating results.
Although the Company believes it has certain advantages over its competitors, a
continued high level of investment in sales, marketing and other services will
be required in order to maintain these advantages. There can be no assurance
that the Company will have sufficient resources to make such investments or
that the Company will be able to maintain its current competitive advantages.
Certain components used in the Company's products are obtained from a single
source or a limited number of suppliers. Reliance on these suppliers involves
certain risks, including a potential inability to obtain an adequate supply of
required components in a timely manner and on terms favorable to the Company,
as well as maintenance of the Company's quality standards. The Company
continually seeks to reduce its dependence on its sole or limited source
suppliers; however, the loss of certain of these suppliers could have at least
a temporary material adverse effect on the Company. Further, significant price
increases in one or more of these components could materially adversely affect
future profitability.
The Company's future success will, in part, depend upon its ability to increase
its production volume on a timely basis while maintaining product quality and
per unit production costs. The Company has, in the past, experienced delays in
its ability to fulfill customer orders on a timely basis due to limits on its
production capacity. Any significant delays in fulfilling customer orders for
an extended period could damage customer relations that could materially
adversely affect the Company's business, financial condition and profitability.
Production schedules for each of the Company's products are based upon orders
for such products and the Company has limited ability to modify short-term
production schedules. A significant increase in demand for any of the
Company's products could result in the Company's inability, on a short-term
basis, to fully satisfy demand. Failure by the Company to forecast its
production requirements accurately could result in inventory surpluses or
shortages that could have a material adverse impact on the Company's financial
condition and profitability.
The Company maintains a high level of indebtedness. As a result, a significant
portion of the Company's cash flow is dedicated to the payment of interest on,
and the repayment of, such indebtedness. The Company's ability to satisfy its
obligations will depend upon its future operating performance. Although the
Company anticipates that it will have adequate operating cash flow, there can
be no assurance that operating cash flow will be sufficient to meet operating
expenses and satisfy debt service requirements.
IMPACT OF THE YEAR 2000
The Year 2000 Issue is the result of computer programs written using two digits
rather than four digits to define "date" fields. Information systems have time
sensitive operations that, as a result of this data field limitation, could
disrupt activities in the normal business cycle. The Company has undertaken a
search for new information systems and will select and begin implementation in
early fiscal year 1999. The new information systems will replace existing
systems that should mitigate the Year 2000 Issue with respect to the Company's
information systems.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, the Company is involved in various pending
legal proceedings and claims. In the opinion of management, after consultation
with counsel, the ultimate resolution of such matters will not have a material
impact on the financial condition or the future results of operations of the
Company.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 5. Other Information.
On April 21, 1998, a Special Meeting of Shareholders of the Company was held at
which the shareholders elected Douglas A. Standley to the Board of Directors
and approved the Restated Articles of the Company (the "Restated Articles").
Mr. Standley is the President and Chief Executive Officer of the Company. The
Restated Articles, among other things, limit the liability of directors of the
Company, provide for indemnification of directors, officers, or employees of
the Company, allow interested director transactions (subject to certain
restrictions), and provide for shareholder action without unanimous written
consent.
On April 24, 1998, the Board of Directors of the Company approved executive
employment agreements between the Company and Douglas A. Standley, William R.
Estill, and Jerry Sharkey, respectively. Pursuant to their respective
employment agreements, Mr. Standley will serve as President and Chief Executive
Officer for five years at a base salary of $250,000, Mr. Estill will serve as
Vice President of Finance for three years at a base salary of $150,000, and Mr.
Sharkey will serve as Vice President - Manufacturing at a base salary of
$140,000. Each of the foregoing employment agreements also provides for the
potential payment of a bonus equal to 100% of base salary, and contain
provisions for the payment of all base salary throughout the term of the
agreement if the employee is terminated without cause, a three-year
noncompetition provision, and a provision regarding non-disclosure of trade
secrets.
The Board of Directors also approved employment agreements between the Company
and Mark Silva and Charles Hammond, respectively. Pursuant to their respective
employment agreements, Mr. Silva will serve as Director of Information Systems
for three years at a base salary of $90,000, and Mr. Hammond will serve as
Manufacturing Manager for three years at a base salary of $120,000. Each of
these employment agreements also provides for the potential payment of a bonus
equal to 50% of base salary. Both Mr. Silva and Mr. Hammond are entitled to 30
days base salary if they are terminated without cause.
Moreover, the Board of Directors approved the stock appreciation rights
agreements of Mr. Standley, Mr. Sharkey and William R. Estill. These agreements
provide stock appreciation rights equivalent to 2.7228, 1.3614, and 1.3614
shares of Common Stock, respectively. These agreements contain a provision
allowing each of the named executive's legal representative to exercise the
stock appreciation right should the executive die and the stock appreciation
right become exercisable at the time of, or at any time after, such executive's
death.
On April 24, 1998, the Board of Directors also amended the Bylaws of the
Company to provide for, among other things, shareholder action by majority
written consent, the appointment of one or more committees consisting of one or
more directors to, from time to time, review certain matters and make
recommendations to the Board for final action, and the procedure by which the
Company may indemnify directors, officers, or employees.
The Board of Directors also terminated the Company's Profit Sharing Plan as of
April 30, 1998.
Item 6. Exhibits and Reports on Form 8-K.
6 (a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1.1 - Purchase Agreement dated November 12, 1997, by and among the Company, BT Alex. Brown
Incorporated, SBC Warburg Dillon Read Inc. and Smith Barney Inc.*
3.1 - Restated Articles of Incorporation of the Company.
3.2 - Bylaws of the Company (as amended effective as of April 24, 1998).
4.1 - Indenture dated as of November 15, 1997, by and between the
Company, as Issuer, the guarantors identified therein, and Norwest
Bank Minnesota, N.A., as Trustee.*
4.2 - Registration Rights Agreement dated November 15, 1997, by and among the Company, BT Alex.
Brown Incorporated, SBC Warburg Dillon Read Inc. and Smith Barney Inc.*
4.3 - Registration Rights Agreement dated November 12, 1997, by and among FWT, Inc., Roy J. Moore,
Thomas F. "Fred" Moore, Carl R. Moore and FWT Acquisition, Inc.*
4.4 - Form of Exchange Note (included in Exhibit 4.1).*
5.1 - Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.*
10.1 - Stock Purchase and Redemption Agreement dated November 12, 1997, by and among the Company, FWT
Acquisition, Inc. and T.W. Moore, Betty Moore, Carl Moore, Fred Moore and Roy J. Moore. *
10.2 - General Supply Agreement, dated as of September 1, 1997, between the Company and AT&T Wireless
Services, Inc.*
10.3 - Cooperative Production Agreement dated March 10, 1997 between the Company and Delta Steel,
Inc.*
10.4 - Transportation Contract dated March 26, 1997 between the Company and Delta Steel, Inc.*
17
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10.5 - Lease Agreement dated February 18, 1997 between the Company and Delta Steel, Inc. covering
property located at 9217 South Freeway, Fort Worth, Texas.*
10.6 - Employment Agreement dated November 14, 1997 between the Company and Douglas A. Standley.*
Exhibit A to the Employment Agreement has been filed previously as Exhibit 10.16. *
10.7 - Employment Agreement dated November 12, 1997 between the Company and Roy J. Moore.* Exhibit A
to the Employment Agreement has been filed previously as Exhibit 10.12. *
10.8 - Employment Agreement dated November 12, 1997 between the Company and Thomas F. Moore.*
10.9 - Employment Agreement dated November 12, 1997 between the Company and Carl R. Moore.*
10.10 - Shareholders' Agreement dated November 12, 1997 by and among the Company, Carl R. Moore, Thomas
F. Moore, Roy J. Moore, and for certain limited purposes, Baker Communications Fund, L.P.*
10.11 - Credit Agreement dated November 12, 1997 by and among the Company, Bankers Trust Company and BT
Commercial Corporation.*
10.12 - Stock Appreciation Rights Agreement dated November 12, 1997 between FWT, Inc. and Roy J.
Moore.*
10.13 - Financial Advisory Agreement dated November 12, 1997 between the Company and Baker Capital
Corp.*
10.14 - First Amendment to Credit Agreement dated February 11, 1998 by and among the Company, Bankers
Trust Company and BT Commercial Corporation.*
10.15 - Voluntary Retirement Agreement dated February 27, 1998 between the Company and Thomas F.
Moore.*
10.16 - Stock Appreciation Rights Agreement dated November 14, 1997 between FWT, Inc. and Douglas A.
Standley.*
10.17 - Collateral Account Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
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19
10.18 - Blocked Account Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
10.19 - Non-offset Agreement dated November 10, 1997 by and between the Company and BT Commercial
Corporation. *
10.20 - Lockbox Agreement dated as of November 12, 1997 by and among the Company, BT Commercial
Corporation and Bank One Texas, N.A. *
10.21 - Company Security Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
10.22 - Company Pledge Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
10.23 - Company Trademark Collateral Security Agreement dated as of November 12, 1997 by and between
the Company and BT Commercial Corporation. *
10.24 - Company Patent Collateral Assignment and Security Agreement dated as of November 12, 1997 by
and between the Company and BT Commercial Corporation. *
10.25 - Intercreditor and Collateral Agency Agreement dated as of November 10, 1997 by and among the
Company, BT Commercial Corporation and Bankers Trust Company. *
12.1 - Computation of Ratio of Earnings to Fixed Charges. *
23.1 - Consent of Arthur Andersen LLP, independent public accountants. *
23.2 - Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in Exhibit 5.1).*
24.1 - Powers of Attorney.*
25.1 - Statement of Eligibility of Trustee on Form T-1 of Norwest Bank Minnesota, National
Association. *
27.1 - Financial Data Schedule.
99.1 - Letter of Transmittal. *
99.1 - Press Release, dated March 19, 1998. **
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6(b) Reports on form 8-K:
The following is the date and description of the events reported on Form 8-K
filed during the quarterly period ended January 31, 1998 and the Forms 8-K
filed subsequently:
DATE OF EARLIEST EVENT
- ----------------------
REPORTED ON FORM 8-K DESCRIPTION
- -------------------- -----------
March 19, 1998 On March 19, 1998, the Company announced that, for the nine months
ended January 31, 1998, it had recorded net income of $4.2 million
on sales of $58 million, as compared with net income of $9 million
on sales of $49.3 million for the comparable nine month 1997 period.
The Company also reported a net loss of $1.1 million for the three
months ended January 31, 1998, on sales of $20.7 million. For the
comparable 1997 period, net income was $3.6 million on sales of
$22.2 million. The Company also announced that Roy J. Moore had
been named Vice Chairman and Douglas A. Standley had been named
President and Chief Executive Officer of the Company. Previously,
Mr. Moore had served as President and Chief Executive Officer and
Mr. Standley had served as Chief Operations Officer and President,
Ft. Worth Division, of the Company.
March 30, 1998 On March 30, 1998, Roy J. Moore terminated his employment with
Company. Mr. Moore had previously served as President and Chief
Executive Officer of the Company and, since March 19, 1998, had
served as Vice Chairman of the Company. Under the terms of his
Employment Agreement with FWT, Mr. Moore will be entitled to receive
an annual salary of $200,000, an annual bonus based on the earnings
and performance of the Company, and various other benefits with an
estimated annual value of $25,000 through December 31, 2000.
Mr. Moore continues to serve as a member of the Board of Directors
of the Company. In addition, on April 3, 1998, Carl R. Moore
terminated his employment with FWT. Under the terms of his
Employment Agreement with the Company, Mr. Moore, who had previously
served as Vice President of FWT, will be entitled to receive an
annual salary of $200,000, an annual bonus based on the earnings and
performance of the Company, and various other benefits with an
estimated annual value of $25,000 through December 31, 2000.
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- ------------------
* Incorporated by reference. Previously filed as an Exhibit to the
Company's Registration Statement on Form S-4 (Registration No. 333-44273).
** Incorporated by reference. Previously filed as an Exhibit to the
Company's Current Report on Form 8-K, dated March 23, 1998.
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SIGNATURES
Pursuant to the requirements 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.
FWT, INC.
April 27, 1998 By: /s/ William R. Estill
------------------------------
William R. Estill
Vice President of Finance
(signing in the capacity of
principal financial officer and
principal accounting officer)
23
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1.1 - Purchase Agreement dated November 12, 1997, by and among the Company, BT Alex. Brown
Incorporated, SBC Warburg Dillon Read Inc. and Smith Barney Inc.*
3.1 - Restated Articles of Incorporation of the Company.
3.2 - Bylaws of the Company (as amended effective as of April 24, 1998).
4.1 - Indenture dated as of November 15, 1997, by and between the
Company, as Issuer, the guarantors identified therein, and Norwest
Bank Minnesota, N.A., as Trustee.*
4.2 - Registration Rights Agreement dated November 15, 1997, by and among the Company, BT Alex.
Brown Incorporated, SBC Warburg Dillon Read Inc. and Smith Barney Inc.*
4.3 - Registration Rights Agreement dated November 12, 1997, by and among FWT, Inc., Roy J. Moore,
Thomas F. "Fred" Moore, Carl R. Moore and FWT Acquisition, Inc.*
4.4 - Form of Exchange Note (included in Exhibit 4.1).*
5.1 - Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.*
10.1 - Stock Purchase and Redemption Agreement dated November 12, 1997, by and among the Company, FWT
Acquisition, Inc. and T.W. Moore, Betty Moore, Carl Moore, Fred Moore and Roy J. Moore. *
10.2 - General Supply Agreement, dated as of September 1, 1997, between the Company and AT&T Wireless
Services, Inc.*
10.3 - Cooperative Production Agreement dated March 10, 1997 between the Company and Delta Steel,
Inc.*
10.4 - Transportation Contract dated March 26, 1997 between the Company and Delta Steel, Inc.*
24
10.5 - Lease Agreement dated February 18, 1997 between the Company and Delta Steel, Inc. covering
property located at 9217 South Freeway, Fort Worth, Texas.*
10.6 - Employment Agreement dated November 14, 1997 between the Company and Douglas A. Standley.*
Exhibit A to the Employment Agreement has been filed previously as Exhibit 10.16. *
10.7 - Employment Agreement dated November 12, 1997 between the Company and Roy J. Moore.* Exhibit A
to the Employment Agreement has been filed previously as Exhibit 10.12. *
10.8 - Employment Agreement dated November 12, 1997 between the Company and Thomas F. Moore.*
10.9 - Employment Agreement dated November 12, 1997 between the Company and Carl R. Moore.*
10.10 - Shareholders' Agreement dated November 12, 1997 by and among the Company, Carl R. Moore, Thomas
F. Moore, Roy J. Moore, and for certain limited purposes, Baker Communications Fund, L.P.*
10.11 - Credit Agreement dated November 12, 1997 by and among the Company, Bankers Trust Company and BT
Commercial Corporation.*
10.12 - Stock Appreciation Rights Agreement dated November 12, 1997 between FWT, Inc. and Roy J.
Moore.*
10.13 - Financial Advisory Agreement dated November 12, 1997 between the Company and Baker Capital
Corp.*
10.14 - First Amendment to Credit Agreement dated February 11, 1998 by and among the Company, Bankers
Trust Company and BT Commercial Corporation.*
10.15 - Voluntary Retirement Agreement dated February 27, 1998 between the Company and Thomas F.
Moore.*
10.16 - Stock Appreciation Rights Agreement dated November 14, 1997 between FWT, Inc. and Douglas A.
Standley.*
10.17 - Collateral Account Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
25
10.18 - Blocked Account Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
10.19 - Non-offset Agreement dated November 10, 1997 by and between the Company and BT Commercial
Corporation. *
10.20 - Lockbox Agreement dated as of November 12, 1997 by and among the Company, BT Commercial
Corporation and Bank One Texas, N.A. *
10.21 - Company Security Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
10.22 - Company Pledge Agreement dated as of November 12, 1997 by and between the Company and BT
Commercial Corporation. *
10.23 - Company Trademark Collateral Security Agreement dated as of November 12, 1997 by and between
the Company and BT Commercial Corporation. *
10.24 - Company Patent Collateral Assignment and Security Agreement dated as of November 12, 1997 by
and between the Company and BT Commercial Corporation. *
10.25 - Intercreditor and Collateral Agency Agreement dated as of November 10, 1997 by and among the
Company, BT Commercial Corporation and Bankers Trust Company. *
12.1 - Computation of Ratio of Earnings to Fixed Charges. *
23.1 - Consent of Arthur Andersen LLP, independent public accountants. *
23.2 - Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in Exhibit 5.1).*
24.1 - Powers of Attorney.*
25.1 - Statement of Eligibility of Trustee on Form T-1 of Norwest Bank Minnesota, National
Association. *
27.1 - Financial Data Schedule.
99.1 - Letter of Transmittal. *
99.1 - Press Release, dated March 19, 1998. **
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* Incorporated by reference. Previously filed as an Exhibit to the
Company's Registration Statement on Form S-4 (Registration No. 333-44273).
** Incorporated by reference. Previously filed as an Exhibit to the
Company's Current Report on Form 8-K, dated March 23, 1998.