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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 April 30, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 000-30966
BRACKNELL CORPORATION
(Exact name of registrant as specified in its charter)
Ontario, Canada Not Applicable
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
121 South Eighth Street
Suite 1100 55402
Minneapolis, Minnesota (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 604-0101
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Number of shares of registrant's common stock outstanding as of June 1,
2001: 64,804,426
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BRACKNELL CORPORATION
FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at April 30, 2001 and October 31, 2000................................. 1
Consolidated Statements of Earnings for the Three and Six Months Ended April 30, 2001 and 2000..... 2
Consolidated Statements of Cash Flows for the Three and Six Months Ended April 30, 2001 and 2000... 3
Notes to Consolidated Financial Statements......................................................... 4
Report of Independent Public Accountants........................................................... 10
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 11
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk................................... 15
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings............................................................................ 16
ITEM 2. Changes in Securities and Use of Proceeds.................................................... 17
ITEM 3. Defaults Upon Senior Securities.............................................................. 17
ITEM 4. Submission of Matters to a Vote of Security Holders.......................................... 17
ITEM 5. Other Information............................................................................ 18
ITEM 6. Exhibits and Reports on Form 8-K............................................................. 18
Signature............................................................................................. 19
Bracknell Corporation
Consolidated Balance Sheets April 30, October 31,
(U.S. GAAP in millions of U.S. dollars) 2001 2000
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 0.1 $ 4.5
Contract and accounts receivable, net 274.9 210.0
Costs and estimated earnings in excess of billings on
uncompleted contracts 127.2 82.0
Other 32.0 18.5
Current assets held for sale 9.5 -
- ----------------------------------------------------------------------------------------------------------------
Total current assets 443.7 315.0
Property and equipment, net 27.3 18.0
Networks under construction 162.2 -
Intangible assets, net 45.0 -
Goodwill, net 316.8 189.1
Other 49.0 10.3
- ----------------------------------------------------------------------------------------------------------------
Total assets $1,044.0 $ 532.4
================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under revolving credit facilities $ 60.5 $ 45.3
Current portion of long-term debt 50.4 40.5
Accounts payable and accrued liabilities 237.8 130.5
Billings in excess of costs and estimated earnings on
uncompleted contracts 101.7 40.2
Other 5.8 8.5
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 456.2 265.0
Long-term debt, net of current portion 191.1 123.8
Long-term deferred revenues 65.2 -
Other long-term liabilities 19.9 1.5
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 732.4 390.3
================================================================================================================
Commitments and contingencies (Note 9)
Mandatorily redeemable convertible preferred stock 40.0 -
Stockholders' Equity
Common stock 207.1 91.9
Contributed surplus 4.7 0.2
Retained earnings 63.6 54.5
Accumulated other comprehensive loss (3.8) (4.5)
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 271.6 142.1
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,044.0 $ 532.4
================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
1
Bracknell Corporation For the three months For the six months
Consolidated Statements of Earnings ended April 30, ended April 30,
----------------------- ---------------------------
(U.S. GAAP in millions of U.S. dollars, except per share amounts) 2001 2000 2001 2000
==============================================================================================================================
(Unaudited) (Unaudited)
Revenues $ 311.0 $ 190.5 $ 577.1 $ 336.6
Cost of services 261.6 159.8 485.6 284.8
- ------------------------------------------------------------------------------------------------------------------------------
Gross margin 49.4 30.7 91.5 51.8
Selling, general and administrative expenses 27.0 17.9 49.9 30.7
Depreciation and amortization 6.4 3.0 11.6 4.9
- ------------------------------------------------------------------------------------------------------------------------------
Earnings from operations 16.0 9.8 30.0 16.2
Interest expense, net 5.8 4.0 12.8 5.9
Other income (expense) 0.2 0.3 (0.7) 0.4
- ------------------------------------------------------------------------------------------------------------------------------
Earnings before provision for income taxes 10.4 6.1 16.5 10.7
Provision for income taxes 3.9 2.0 6.1 3.8
- ------------------------------------------------------------------------------------------------------------------------------
Earnings before extraordinary loss and discontinued operations 6.5 4.1 10.4 6.9
Extraordinary loss, net of taxes of $1.2, $0.6 and $1.2 - 2.0 1.3 2.0
- ------------------------------------------------------------------------------------------------------------------------------
Earnings before discontinued operations 6.5 2.1 9.1 4.9
Loss from discontinued operations, net of taxes - 0.4 - 0.4
- ------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 6.5 $ 1.7 $ 9.1 $ 4.5
==============================================================================================================================
Earnings per share
Earnings before extraordinary loss and discontinued operations
Basic $ 0.10 $ 0.12 $ 0.18 $ 0.20
Diluted 0.09 0.11 0.17 0.19
Impact of extraordinary loss on earnings per share
Basic $ - $ 0.06 $ 0.02 $ 0.06
Diluted - 0.05 0.02 0.06
Earnings before discontinued operations
Basic $ 0.10 $ 0.06 $ 0.16 $ 0.14
Diluted 0.09 0.06 0.15 0.14
Net earnings
Basic $ 0.10 $ 0.05 $ 0.16 $ 0.13
Diluted 0.09 0.04 0.15 0.13
Weighted average common shares outstanding
Basic 64.4 35.6 57.7 34.4
Diluted 69.9 38.1 62.6 35.6
The accompanying notes are an integral part of these consolidated financial
statements.
2
Bracknell Corporation For the three months For the six months
Consolidated Statements of Cash Flows ended April 30, ended April 30,
-------------------------- ---------------------------
(U.S. GAAP in millions of U.S. dollars) 2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings from continuing operations $ 6.5 $ 2.1 $ 9.1 $ 4.9
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 6.4 3.0 11.6 4.9
Provision for deferred income taxes (0 .6) - - -
Extraordinary loss - 3.3 2.0 3.3
Other 0.2 0.2 0.1 0.7
Change in current liabilities held for sale (14.0) - (20.0) -
Change in operating assets and liabilities, excluding assets
acquired and liabilities assumed in acquisitions 23.4 (36.6) (44.8) (51.5)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 21.9 (28.0) (42.0) (37.7)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (2.5) (1.1) (3.5) (2.1)
Networks under construction net of long-term deferred
revenues (19.0) - (28.1) -
Acquisitions, net of cash acquired (2.3) (95.2) (17.5) (95.2)
Other (0.3) (0.7) (0.5) (1.3)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (24.1) (97.0) (49.6) (98.6)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under revolving credit facilities, net 23.5 23.7 15.2 37.3
Repayment of Sunbelt Notes (10.0) (29.0) (19.9) (29.0)
Repayment of term facilities (12.5) - (12.5) -
Repayment of other long-term debt (0.8) - (36.2) (0.3)
Borrowings under term facilities - 104.6 105.1 104.6
Exercise of options 0.6 - 1.0 -
Issuance of preferred stock - - 40.0 -
Issuance of common stock - 29.1 - 29.1
Payment of financing costs - (2.2) (2.1) (3.4)
Other (1.6) - (2.3) (0.2)
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (0.8) 126.2 88.3 138.1
- --------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (0.7) - (1.1) -
(Decrease) increase in cash and cash equivalents (3.7) 1.2 (4.4) 1.8
Cash and cash equivalents, beginning of period 3.8 1.3 4.5 0.7
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 0.1 $ 2.5 $ 0.1 $ 2.5
==========================================================================================================================
Supplemental Disclosure:
Cash paid for interest $ 8.3 $ 3.5 $ 12.7 $ 4.4
Cash paid for income taxes 3.2 7.4 5.9 10.3
Notes issued in lieu of cash for Sunbelt acquisition - 50.0 - 50.0
Common stock, options and warrants issued for acquisitions - - 118.7 -
==========================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
3
FORM 10-Q - PART I
ITEM 1. Financial Statements (continued)
Bracknell Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
April 30, 2001
(tabular dollar amounts in millions of U.S. dollars, except per share data)
1. Basis of Presentation and Nature of Business
The accompanying unaudited consolidated financial statements of Bracknell
Corporation, an Ontario corporation, and its subsidiaries (collectively, the
"Company" or "Bracknell") are presented in accordance with the disclosure
requirements for Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management of the
Company, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements have been included
therein. The unaudited consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
Bracknell's Annual Report on Form 10-K for the fiscal year ended October 31,
2000.
All currency amounts are expressed in United States dollars, unless otherwise
indicated. Financial information is presented in accordance with accounting
principles generally accepted in the United States.
The consolidated financial statements have been restated to reflect the
operations of PROFAC Facilities Management Services, Inc. as a discontinued
operation. Unless indicated otherwise, all financial information in the notes
to the consolidated financial statements excludes discontinued operations.
Bracknell provides a full range of infrastructure services for networks,
systems, production facilities and equipment of companies across North America.
Bracknell's capabilities include the design and engineering, project management,
installation, maintenance and service of increasingly complex and critical
infrastructure. Critical infrastructure includes those systems whose incapacity
or failure could have a devastating impact on a business. Bracknell provides
its services on systems related to voice, data and video wireless and wireline
communications, electrical power, lighting, automated controls, heating,
ventilation, air conditioning, refrigeration, plumbing and process piping, and
low voltage systems, such as fire alarms, security and surveillance.
Certain prior year amounts have been reclassified in the accompanying unaudited
condensed consolidated financial statements for consistent presentation to
current year amounts.
2. Acquisitions
On December 22, 2000, Bracknell completed the acquisition of Able Telcom Holding
Corp. ("Able"), a telecommunications network services company. The acquisition
was accounted for under the purchase method of accounting. The acquisition and
Able's working capital requirements were financed with the issuance of
approximately 24 million common shares valued at $114.2 million, options and
warrants valued at $4.5 million, approximately $85.0 million from the Company's
expanded credit facilities and the issuance of $40.0 million in convertible
preferred stock. The net assets of Able had a fair value of approximately $8.8
million, including intangible network assets of approximately $45.0 million (net
of taxes of $18.0 million) and net tangible network assets of approximately
$74.1 million. The excess of the cost over the fair market value of the net
assets acquired, primarily goodwill, was approximately $128.0 million and is
being amortized over 20 years using a straight line method. The fair value of
the net assets acquired was based on preliminary estimates and may be revised at
a later date. Concurrent with the closing of the transaction, Bracknell amended
its credit facility in order to provide working capital financing to Able. See
Note 6 "Credit Facility." As part of the acquisition Bracknell issued 1.2
million options to purchase shares at prices ranging from $4.02 to $16.60 per
share and 3.4 million warrants at prices ranging from $4.02 to $22.08 per share.
4
The Company has disposed of or intends to dispose of Able's operations that were
involved in transportation services, construction and international
communications development. As of April 30, 2001, the estimated fair value of
the assets and liabilities of these operations were included as current and were
treated as held for sale.
The following unaudited pro forma information presents certain income statement
data of Bracknell on a pro forma basis as if the acquisition of Able had been
completed as of the beginning of each respective period.
Three Months Ended Six Months Ended
April 30, April 30,
------------------------------- ---------------------------------
2001 2000 2001 2000
------------- --------------- --------------- ---------------
Revenues $311.0 $298.3 $620.4 $614.6
Earnings before extraordinary item 6.5 2.8 9.3 7.9
Net earnings 6.5 0.6 8.0 5.7
Earnings before extraordinary item per share - diluted $ 0.09 $ 0.04 $ 0.13 $ 0.11
Net earnings per share - diluted 0.09 0.01 0.11 0.08
The unaudited pro forma consolidated financial information does not purport to
represent what the Company's financial position or results of operations would
actually have been if these transactions had occurred at such dates or project
the Company's future results of operations.
3. Networks under Construction
Networks under construction at April 30, 2001 consisted primarily of
telecommunication infrastructure projects on rights-of-way leased for 20 years
with renewal rights. The largest of these projects was with the Colorado
Department of Transportation ("CDOT"). There are four primary segments of the
CDOT network the largest of which are a loop around Denver and from Denver west
along interstate highway 70 to the Utah border ("I-70 West"). The duct capacity
varies along the CDOT network and is being constructed, marketed and sold or
leased by Bracknell under long-term user (irrevocable rights of use) agreements.
In addition to long-term user agreements, the Company may execute fiber
installation and long-term maintenance contracts with the CDOT network users.
The assets and related rights-of-way were acquired by the Company in the
acquisition of Able.
The Company accounts for these network assets and related activity in accordance
with Financial Accounting Standards Board ("FASB") Intepretation No. 43, "Real
Estate Sales, an interpretation of FASB Statement No. 66" ("FIN 43") which
limits the applicability of sales-type lease accounting and requires revenue
from capacity sales to be deferred and recorded over the life of the contract
(currently up to 20 years) where sales-type lease accounting is not permitted.
In accordance with the provisions of FIN 43, user fees received by the Company
in advance of network completion are presented as deferred revenues on the
accompanying consolidated balance sheets. Generally, the Company expects to
recognize revenue from the user agreements ratably over the lives of the
agreements, while the cost of the underlying network, will be depreciated over
the expected useful life of the network. Costs associated directly with the
networks under construction, including employee related costs, are capitalized.
As of April 30, 2001, the Company has not begun amortizing the costs associated
with the network assets. Amortization of these assets will commence when the
networks are ready for their intended use.
As of April 30, 2001, the Company has suspended construction of the I-70 West
network pending securing additional user agreements. As of April 30, 2001, the
carrying value of this asset is deemed to be recoverable. The Company expects to
incur significant additional amounts to complete the construction of the
networks currently under construction. Failure of the Company to execute
sufficient user agreements for the networks under construction could have a
material adverse effect on the carrying value and recoverability of the
Company's network asset and right-of-way investments.
5
4. Comprehensive Income
The following table presents the calculation of comprehensive income as required
by Statement of Financial Accounting Standards No. 130. For Bracknell,
comprehensive income represents net earnings adjusted for foreign currency
translation adjustments. Comprehensive income for all the periods was as
follows:
Three Months Ended Six Months Ended
April 30, April 30,
-------------------------------------------------------------------
2001 2000 2001 2000
Net earnings $ 6.5 $ 1.7 $ 9.1 $ 4.5
Foreign currency translation adjustments (0.5) (1.2) 0.7 (0.7)
-------------- -------------- -------------- --------------
Comprehensive income $ 6.0 $ 0.5 $ 9.8 $ 3.8
============== ============== ============== ==============
5. Earnings Per Share
Basic earnings per common share was calculated by dividing net earnings by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share was calculated by dividing net earnings by the sum of the
weighted average number of common shares outstanding plus all additional common
shares that would have been outstanding if potentially dilutive common shares
had been issued pursuant to outstanding options, warrants and other convertible
securities. The following table reconciles the number of shares utilized in the
earnings per share calculations for the periods ended April 30, 2001 and 2000:
Three Months Ended Six Months Ended
April 30, April 30,
-------------------------------------------------------------
2001 2000 2001 2000
----------------- ----------- ----------------- ------------
Weighted average common shares outstanding - basic 64.4 35.6 57.7 34.4
Effect of dilutive securities - options/warrants 0.9 2.0 1.6 0.8
Effect of convertible preferred securities 4.6 0.5 3.3 0.4
Weighted average common shares outstanding - diluted 69.9 38.1 62.6 35.6
Potential common shares of 9.5 million for the three-month period ended April
30, 2001 (2000 - 2.4 million) and 7.3 million for the six-month period ended
April 30, 2001 (2000 - 3.3 million) related to the Company's outstanding stock
options and warrants were excluded from the computation of diluted earnings per
share under the treasury method.
6. Credit Facility
As of April 30, 2001, Bracknell had in place $357.5 million in credit facilities
from a syndicate of banks. The credit facilities are made up of $237.5 million
in term commitments and $120.0 million in operating commitments. The operating
facilities are 364-day facilities renewable on December 22 of each year and the
term facilities mature on October 31, 2004. The credit facilities were increased
on December 22, 2000 to the current amount from $212.5 million to provide for
the acquisition of Able (See Note 2 "Acquisitions") and the repayment of the
notes issued in connection with the acquisition of Sunbelt Integrated Trade
Services in March 2000. As of April 30, 2001, approximately $300.4 million of
the facilities was utilized for borrowings, including $237.5 million under U.S.
and Canadian term facilities, and $2.5 million was utilized for letters of
credit. Available borrowings at April 30, 2001 under the operating facilities
were $57.1 million. The term facilities require repayments of 5% per quarter for
the 11 quarters that began April 30, 2001, increasing to 10% for the following
three quarters beginning January 31, 2004 and 15% for the final quarter.
Borrowings under these facilities are in the form of advances, accommodations,
bankers acceptances, or letters of credit and as of April 30, 2001 bore interest
at the London Interbank Offered Rate ("LIBOR'') plus 2.75% or prime rate plus
1.75%. Interest can vary between 1.75% to 4.25% over LIBOR or 0.75% to 3.25%
over the prime rate based on the Company's ratio of total net debt to
consolidated earnings before interest, tax, depreciation and amortization.
6
The credit facilities have general and financial covenants that place certain
restrictions on the Company, including the making of payments (dividends and
distributions), incurrence of certain liens, the sale of assets under certain
circumstances, certain transactions with affiliates, certain consolidations,
mergers and transfers and the use of loan proceeds. In addition, the credit
facilities limit the aggregate amount of additional borrowings that can be
incurred by the Company. The operating commitments may be utilized for general
corporate purposes only. As a matter of practice and under the terms of the
credit agreement, the Company is required to provide the lenders with periodic
budgets, financial statements and public reports and filings, and the Company
must meet specified thresholds with respect to profitability and debt to net
worth ratios. As of April 30, 2001, the Company was in compliance with these
financial covenants.
An extraordinary loss of $1.3 million, net of taxes of $0.6 million, was
recorded in the first quarter of 2001 due to the write-off of previously
deferred financing costs that were incurred related to the bank credit
facilities. Fees associated with the December 22, 2000 amended credit facilities
in the amount of $2.1 million are being amortized over the remainder of the
four-year period of the facilities.
7. Interest Expense, Net
Interest expense, net, consisted of the following:
Three Months Ended Six Months Ended
April 30, April 30,
-----------------------------------------------------------------
2001 2000 2001 2000
-------------- ---------------- -------------- ----------------
Interest expense $ 8.0 $ 4.0 $15.2 $ 5.9
Interest income (0.1) -- (0.3) --
-------------- ---------------- -------------- ----------------
7.9 4.0 14.9 5.9
Capitalized interest (2.1) -- (2.1) --
-------------- ---------------- -------------- ----------------
$ 5.8 $ 4.0 $12.8 $ 5.9
============== ================ ============== ================
As required by U.S. generally accepted accounting principles the Company
capitalizes the interest cost associated with constructing network assets based
on the effective interest rate incurred by the Company on aggregate borrowings
during the network assets' construction period. Capitalization of interest
ceases when the assets are substantially complete and ready for their intended
use, or when the construction of network assets is canceled or suspended.
8. Mandatorily Redeemable Convertible Preferred Stock
On January 5, 2001, the Company sold 8,000 shares of Series D Preferred Stock
for $40.0 million to WorldCom, Inc. ("WorldCom"). Proceeds from the sale of the
Series D Preferred Stock were used to fund working capital requirements related
to the Able acquisition. The preferred shares are not entitled to a dividend and
are non-voting until January 5, 2007. Subject to certain provisions, the shares
are redeemable by the Company at the issue price per share at any time in whole
or in part. Subject to the reasonable approval of the Company's lenders and
starting July 5, 2001, the holder may require the Company to redeem $10.0
million of the preferred shares. WorldCom has requested the Company redeem the
$10.0 million subject to obtaining the required lender approval. The instrument
creating the shares contains other restrictions on the Company as to the payment
of dividends on any junior shares or the redemption or repurchase of other
shares of the Company. At any time after January 5, 2002, at the election of the
holder, the preferred shares are convertible to Bracknell common shares at $8.75
per common share, subject to adjustment as provided by the terms of the
agreement. The preferred shares are mandatorily redeemable at the earlier of
January 5, 2007, subject to the reasonable approval of the Company's lenders, or
at the election of WorldCom, on or after the date on which the Company receives
proceeds from a public debt or equity financing, but only up to the amount of
any proceeds remaining after all other indebtedness which the Company is
obligated to pay from such proceeds is repaid.
7
9. Commitments and Contingencies
The Company is currently involved in a dispute involving a claim for wrongful
termination of a contract at one of the Company's subsidiaries by NKK Steel
Engineering, Inc. that has resulted in litigation. The original value of the
contract was $30.9 million. At the time of termination, $14.9 million had been
paid under the contract with undisputed receivables outstanding on the project
of $9.1 million. Unbilled change orders are not expected to exceed 30% of the
original contract value. The reason for the termination has not been
particularized and therefore the ultimate outcome of this matter cannot be
predicted with certainty. The Company believes there is merit to its claim for
wrongful termination of the agreement and that it has substantive defenses to
NKK Steel's claim against it.
The Company is involved in other claims and litigation primarily arising from
the normal course of business for the reimbursement of costs of additional work
and of additional costs incurred due to changed conditions. Any settlements or
awards will be recognized when the outcome and amounts are reasonably
estimatable and determinable. Management believes that the ultimate outcome of
these other matters will not have a material effect on the Company's
consolidated results of operations or financial position.
10. Segment Information
The Company operates in one reportable segment as a facilities infrastructure
services provider. The Company designs, installs and maintains the networks,
systems and facilities supporting the operations of commercial, industrial,
special technologies and telecommunications customers. Each of these services
is provided by several of the Company's subsidiaries and discrete financial
information is not provided to management at the customer level. The segment
information presented designates the internal organization that is used by
management for making operating decisions and assessing performance. The
following table presents information regarding revenues from the customer
groupings noted above.
Three Months Ended Six Months Ended
April 30, April 30,
----------------------------- ------------------------
2001 2000 2001 2000
------------- ------------- ------------ ---------
Commercial $ 85.7 $ 52.8 $ 154.9 $ 99.7
Industrial 75.3 80.0 160.5 144.1
Special technologies 42.4 27.2 82.3 38.3
Telecommunications 107.6 30.5 179.4 54.5
--------- -------- -------- ---------
$ 311.0 $ 190.5 $ 577.1 $ 336.6
========= ======== ======== =========
The Company had revenues from and assets in the United States, Canada and other
jurisdictions as follows:
Revenues: Three Months Ended Six Months Ended
April 30, April 30,
----------------------------- ------------------------
2001 2000 2001 2000
------------- ------------ ------------ ---------
U.S. $ 264.1 $ 147.8 $ 477.3 $ 245.1
Canada 46.0 41.6 98.1 90.3
Other 0.9 1.1 1.7 1.2
--------- -------- -------- ---------
$ 311.0 $ 190.5 $ 577.1 $ 336.6
========= ======== ======== =========
Assets: April 30, October 31,
2001 2000
------------- -----------
U.S. $ 966.7 $ 418.4
Canada 76.3 114.0
Other 1.0 0.0
--------- --------
$ 1,044.0 $ 532.4
========= ========
8
11. Subsequent Event
Subsequent to April 30, 2001, the Company announced a restructuring initiative
that is expected to eliminate approximately 100 positions company-wide. This
initiative is expected to result in a pre-tax charge to earnings in the third
quarter ended July 31, 2001 of an estimated $5.5 million.
9
Report of independent public accountants
To Bracknell Corporation:
We have reviewed the accompanying consolidated balance sheet of Bracknell
Corporation (an Ontario corporation) as of April 30, 2001, and the related
consolidated statements of earnings for the three-month and six-month periods
ended April 30, 2001 and 2000 and the consolidated statements of cash flows for
the three-month and six-month periods ended April 30, 2001 and 2000. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Bracknell
Corporation as of October 31, 2000 (not presented herein), and, in our report
dated December 22, 2000, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of October 31, 2000, is fairly stated, in all material
respects, in relation to the balance sheet from which it has been derived.
Arthur Andersen LLP
Minneapolis, Minnesota,
June 4, 2001
10
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis relates to Bracknell's consolidated
financial condition and interim results of operations. You should read the
following in conjunction with our unaudited consolidated financial statements
and the related notes contained herein.
Overview
We provide a full range of infrastructure services for networks, systems,
production facilities and equipment of companies across North America. Our
capabilities include the design and engineering, project management,
installation, maintenance and service of increasingly complex and critical
infrastructure. Critical infrastructure includes those systems whose incapacity
or failure could have a devastating impact on a business. We provide services on
systems related to voice, data and video wireless and wireline communications,
electrical power, lighting, automated controls, heating, ventilation, air
conditioning, refrigeration, plumbing and process piping, and low voltage
systems, such as fire alarms, security and surveillance. We help customers
accelerate their time to market, reduce costs, realize efficiencies and increase
focus on their core business with our end-to-end, life-cycle approach to
supporting infrastructure needs. Certain of our operating units have been
competing in the facilities infrastructure services industry for as many as 80
years.
Our historical financial results include the results of the companies acquired
in fiscal 2000 and 2001 from the date those acquisitions were completed. We have
significantly increased the scale and scope of our operations through the
acquisition and integration of several companies. Accordingly, historical
financial results are not indicative of our financial position or results of
operations in the future. We also disposed of certain operations that are
disclosed as discontinued operations.
Results of Operations
The following table sets forth certain historical financial data for the periods
indicated (U.S. dollars in millions, except per share amounts).
Three Months Ended Six Months Ended
April 30, April 30,
----------------------- ---------------------
2001 2000 2001 2000
--------- -------- -------- --------
Revenues $ 311.0 $ 190.5 $ 577.1 $ 336.6
Cost of services 261.6 159.8 485.6 284.8
Selling, general and administrative expenses 27.0 17.9 49.9 30.7
--------- --------- --------- --------
Earnings before interest, taxes, depreciation and amortization (a) 22.4 12.8 41.6 21.1
Depreciation and amortization 6.4 3.0 11.6 4.9
--------- --------- --------- --------
Earnings from operations $ 16.0 $ 9.8 $ 30.0 $ 16.2
========= ========= ========= ========
Operating earnings per share - diluted (b) $ 0.09 $ 0.10 $ 0.18 $ 0.19
(a) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to cash flow
from operating activities, as a measure of liquidity, as an alternative to
net income, as an indicator of operating performance, or as an alternative
to any other measure of performance in accordance with the accounting
principles generally accepted in the United States. We believe that it does
provide an important additional perspective on our operating results and our
ability to service long-term debt and to fund growth.
(b) Operating earnings are net earnings excluding the after-tax effect of non-
recurring and non-operating revenues and expenses, discontinued operations
and extraordinary items. Such earnings per share disclosure is not intended
to represent an alternative to net earnings per share (as determined in
accordance with generally accepted accounting principles) as a measure of
performance, but we believe that it does provide an important additional
perspective on our operating results.
11
Revenues
Revenues increased to $311.0 million for the quarter ended April 30, 2001 (2000
- - $190.5 million) and to $577.1 million for the first six months of 2001 (2000 -
$336.6 million). Companies acquired during the past twelve months increased
revenues by $108.1 million in the second quarter and $201.7 million in the first
six months of 2001. Adesta Communications, Inc. ("Adesta"), which was acquired
on December 22, 2000 as part of the acquisition of Able Telcom Holding Corp.
("Able"), added $74.5 million in revenue in the second quarter and $101.4
million in the first six months of 2001. Able's other operations were
classified as assets held for sale. Revenue growth in existing and acquired
business was 4% from the second quarter of 2000 to the second quarter of 2001
and 1% for the first six months of 2001 compared to the first six months of
2000. Cost of sales also increased in the first three and six months of 2001
versus the same periods of 2000 principally due to acquisitions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $27.0 million (2000 - $17.9
million) in the second quarter of 2001 and $49.9 million (2000 - $30.7 million)
in the first half of fiscal 2001. The increase in selling, general and
administrative expenses was also primarily due to acquired companies. However,
costs as a percent of revenues of 8.7% (2000 - 9.4%) in the second quarter of
2001 and 8.6% (2000 - 9.1%) for the first six months of 2001 were lower than the
year-ago periods. Selling, general and administrative expenses also increased
in fiscal 2001 due to approximately $0.4 million in costs associated with the
consolidation of our executive offices.
We expect a third quarter of 2001 restructuring initiative will eliminate over
an estimated 100 positions company-wide for an estimated annual recurring pre-
tax benefit of U.S. $5.0 million. The restructuring is expected to result in a
pre-tax charge to earnings in the third quarter of 2001 of an estimated U.S.
$5.5 million. We believe these organizational changes will better position us
to continue to deliver value to our customers and shareholders.
EBITDA
Earnings before interest, taxes, depreciation and amortization, or EBITDA,
improved to $22.4 million (2000 - $12.8 million) for the quarter ended April 30,
2001 and $41.6 million (2000 - $21.1 million) for the first six months of 2001.
Companies acquired during the past year increased EBITDA by $9.7 million in the
second quarter and $22.9 million in the first half of 2001. Adesta added $6.2
million in EBITDA in the second quarter and $9.9 million in the first six months
of 2001. For the second quarter of 2001, EBITDA in existing and acquired
businesses grew by 28% over the second quarter of 2000. For the first six
months of 2001 compared to the first six months of 2000, EBTIDA grew by 13%.
The benefit of the shift to a higher margin business mix and strength from
certain sectors of the commercial and industrial markets more than offset a
reduction in activity from telecommunications and technology customers.
EBITDA margins improved to 7.2% (2000 - 6.7%) in the second quarter of 2001 and
to 7.2% for the first six months of 2001 (2000 - 6.3%). Margins improved in
fiscal 2001 principally due to our being more selective in the types of projects
and customers we pursue. We are also improving productivity with purchasing
initiatives, better planning and execution of our work and our management
processes. The first half of our fiscal year is typically seasonally weaker due
to reduced winter activity, customer spending cycles and the normal timing of
certain work, especially in the auto industry. With seasonally lower sales and
relatively constant selling, general and administrative expenses, our margin
percentages are typically reduced. Refer to Note (a) under Results of
Operations table.
Depreciation and Amortization
Depreciation and amortization increased to $6.4 million (2000 - $3.0 million) in
the second quarter of 2001 and $11.6 million (2000 - $4.9 million) in the first
half of 2001. Goodwill amortization increased to $4.2 million (2000 - $1.9
million) in the second quarter of 2001 and increased to $7.2 million (2000 -
$3.0 million) in the first half of 2001. Depreciation and amortization
increased in the first three and six months of 2001 due to acquisitions.
12
Interest Expense
Interest expense increased in the quarter and six months ended April 30, 2001 as
compared to the same periods in 2000 principally due to higher levels of debt
incurred to finance acquisitions. Capitalized interest was $2.1 million in the
second quarter and first six months of 2001 (2000 - nil) and was principally
related to network development assets.
Extraordinary Item
Non-cash extraordinary losses of $1.3 million, net of taxes of $0.6 million, in
the first half of 2001 and $2.0 million, net of taxes of $1.2 million, in the
second quarter and first half of 2000 were recorded due to the write-off of
previously deferred financing fees that were incurred related to the bank credit
facilities. The expansion of the credit facilities in each period related to
acquisitions triggered the charges.
Income Taxes
Our effective income tax rate was 38.0% during the first six months of 2001.
The income tax provision in the second quarter and first half of 2001 included
an approximate 10% benefit for tax efficient financing that was substantially
offset by non-deductible goodwill and other items. The tax benefit was also
substantially offset by an amount for non-deductible goodwill in the same
periods of 2000.
Operating Earnings per Share
Diluted operating earnings per share were $0.09 in the quarter ended April 30,
2001 compared to $0.10 in the same period of 2000. Operating earnings are net
earnings excluding the after-tax effect of non-recurring and non-operating
revenues and expenses, discontinued operations and extraordinary items. Refer
to Note (b) above. Items excluded in the calculation of operating earnings per
share in the first six months of 2001 were an extraordinary loss and an item
reported as Other expense related to a foreign exchange translation loss. These
two items combined to reduce net earnings by $2.0 million on an after-tax basis.
In the second quarter and first six months of 2000 an extraordinary loss and
loss from discontinued operations were the principal items excluded in
calculating operating earnings per share.
Outlook
Our estimated project backlog as of April 30, 2001, including maintenance and
service contracts, was approximately $1.0 billion (January 31, 2001 - $1.1
billion). We expect to complete approximately 70% of the backlog in the next
twelve months. Many of the service contracts with customers do not specify the
volume of services to be committed, but instead commit the customer to obtain
these services from Bracknell. As such, these estimates are based on historical
relationships with customers and experience with similar contracts.
We provide services to a diversified mix of telecommunications, technology,
commercial and industrial companies. While our backlog increased over the past
year, our business is influenced by overall economic conditions. In the first
half of 2001, we experienced weaker market conditions with some of our auto,
telecommunication and technology customers. However, we witnessed strength in
other areas of our business, such as commercial, pharmaceutical and power
customers. We currently expect fiscal 2001 revenues will be approximately $1.4
billion.
Liquidity and Capital Resources
We operate a primarily service-based business and therefore our capital
requirements are generally for operating working capital, acquisitions and
development of network assets. Liquidity needs are largely met through
borrowings under working capital facilities and cash flows from operations. As
of April 30, 2001, Bracknell had in place $357.5 million in credit facilities
from a syndicate of banks. The credit facilities are made up of $237.5 million
in term commitments and $120.0 million in operating commitments. The operating
facilities are 364-day facilities renewable on December 22 of each year and the
term facilities mature on October 31, 2004. The credit facilities were
increased on December 22, 2000 to the current amount from $212.5 million to
provide for the
13
acquisition of Able (See Note 2 "Acquisitions" to the Consolidated Financial
Statements) and the repayment of the notes issued in connection with the
acquisition of Sunbelt Integrated Trade Services in March 2000. As of April 30,
2001, approximately $300.4 million of the facility was utilized for borrowings,
including $237.5 million under U.S. and Canadian term facilities, and $2.5
million was utilized for letters of credit. Available borrowings at April 30,
2001 under the operating facilities were $57.1 million. The term facilities
require repayments of 5% per quarter for the 11 quarters that began April 30,
2001, increasing to 10% for the following three quarters beginning January 31,
2004 and 15% for the final quarter.
Borrowings under these facilities are in the form of advances, accommodations,
bankers acceptances, or letters of credit and as of April 30, 2001 bore interest
at the London Interbank Offered Rate ("LIBOR'') plus 2.75% or prime rate plus
1.75%. Interest can vary between 1.75% to 4.25% over LIBOR or 0.75% to 3.25%
over the prime rate based on Bracknell's ratio of total net debt to consolidated
earnings before interest, tax, depreciation and amortization. Changes in LIBOR,
which are affected by changes in interest rates in general, will affect the
interest rate applicable on our credit facilities.
The credit facilities have general and financial covenants that place certain
restrictions on Bracknell, including the making of payments (dividends and
distributions), incurrence of certain liens, the sale of assets under certain
circumstances, certain transactions with affiliates, certain consolidations,
mergers and transfers and the use of loan proceeds. In addition, the credit
facilities limit the aggregate amount of additional borrowings that we can
incur. The operating commitments may be utilized for general corporate purposes
only. As a matter of practice and under the terms of the credit agreement, we
are required to provide the lenders with periodic budgets, financial statements
and public reports and filings, and we must meet specified thresholds with
respect to profitability and debt to net worth ratios. As of April 30, 2001 we
were in compliance with these financial covenants.
Cash flows provided by operating activities before changes in operating assets
and liabilities were $22.8 million for the six months ended April 30, 2001 as
compared to cash flows of $13.8 million in the same period of 2000. The
improvement in 2001 as compared to the prior year was principally due to
improved cash earnings from operations discussed above. Cash flows invested in
operating assets and liabilities were $44.8 million in the first six months of
2001 versus $51.5 million in the same period of 2000. The additional cash
invested in the first six months of the current year was primarily due to the
planned reduction of Adesta's accounts payable following the Able acquisition.
Cash flows of $23.4 million were generated from operating assets in the second
quarter of 2001 compared with an investment of $36.6 million in the prior year
period. Funding of Able's former transportation division reduced cash by $14.0
million in the second quarter and $20.0 million in the first six months of 2001.
As of April 30, 2001, obligations related to the transportation division were
fully funded. Operating working capital at April 30, 2001 improved to 26 days
of revenue at the end of the second quarter of 2001 from 44 days at October 31,
2000. The acquisition of Adesta and aggressive management of all of the
components of working capital, billing, collections and suppliers contributed to
the improvements. Maintaining this level will continue to be challenging,
particularly in a more difficult economic and capital constrained business
environment. We continue to implement programs to maintain operating working
capital at our longer-term goal of 25 days of revenue.
Cash flows used in investing activities decreased to $49.6 million in the first
six months of 2001 from $98.6 million for the same period in 2000. The higher
level of investing activities last year was primarily due to the acquisition of
Sunbelt Integrated Trade Services, Sylvan Industrial Piping and The Highlight
Group in the second quarter of 2000, partially offset by increased investment in
networks under construction in 2001.
On December 22, 2000 we completed the acquisition of Able, including Adesta, a
telecommunications network services company. The acquisition was accounted for
under the purchase method. The acquisition and Able's working capital
requirements were financed with the issuance of approximately 24 million common
shares valued at $114.2 million, options and warrants valued at $4.5 million,
approximately $85.0 million from our expanded credit facility and the issuance
of $40.0 million in convertible preferred stock. As part of the acquisition we
issued 1.2 million options to purchase shares at prices ranging from $4.02 to
$16.60 per share and 3.4 million warrants at prices ranging from $4.02 to $22.08
per share. See Note 2 "Acquisitions" to the Consolidated Financial Statements.
Certain of our agreements related to acquisitions that were completed over the
past two years included contingent earn-out provisions that may be triggered
based on these acquired companies achieving certain financial targets. As of
April 30, 2001, the maximum potential payment under these agreements was
approximately $82.0 million. In the
14
third quarter of 2001 $2.9 million related to finalization of the earn-out for
Sylvan Industrial Services will be charged to earnings as part of the
restructuring initiative.
Our cash flows from financing activities decreased to $88.3 million for the
first six months of 2001 from $138.1 million in same period of 2000. The net
decrease in cash flows from financing activities in 2001 was principally due to
lower proceeds from borrowings associated with acquisitions compared to the
prior year. During the first six months of 2001 we repaid in full the notes
incurred to finance the Sunbelt acquisition ($19.9 million), made principal
payments under our term credit facility ($12.5 million) and repaid Able's credit
facility ($35.5 million).
We believe that our anticipated cash flows from operating activities, together
with availability under our credit facilities and proceeds from monetization of
networks under construction, will be sufficient to finance working capital
requirements and anticipated capital spending requirements for the next year. At
April 30, 2001, the net carrying value of networks under construction that we
intend to monetize totaled approximately $142.0 million. If we are unable to
monetize these assets due to industry conditions, or otherwise, we may have to
seek other sources of liquidity. We plan to finance our growth, including
potential acquisitions, with cash flow generated from operations and by
accessing the public and private debt and equity capital markets.
Forward-Looking Statements
In various places in Management's Discussion and Analysis of Financial Condition
and Results of Operations and other sections of this document, we discuss our
expectations regarding our future performance. These "forward-looking"
statements are based on currently available competitive, financial and economic
data, and operating plans, but are subject to risks and uncertainties. Forward-
looking statements include the information concerning our possible or assumed
future results of operations, as well as statements preceded by, followed by or
that include the words "plans," "believes," "expects," "anticipates,"
"estimates," "projects," "intends" or similar expressions. You should
understand that important factors, in addition to those discussed in this
document, could affect our future results and could cause those results to
differ materially from those expressed in any forward-looking statements. These
factors include, among others:
. Trends and conditions in our and our customers' industries, including
future consolidations;
. Risks associated with the ability to compete in local markets;
. Inability to further identify, develop and achieve commercial success
for new services;
. Increased competition and its effects on pricing, spending, third-
party relationships, the customer base and revenues;
. Inability to reduce operating working capital;
. Risks associated with the ability to integrate acquired businesses;
. The importance of acquisitions for growth;
. Risks associated with the ability to implement cost savings and
operational strategy;
. Risks of new and changing regulation in the U.S. and internationally;
. General, regional or telecommunications or other customer business
economic conditions;
. Access to capital by us or our customers; and
. Sufficient supply of skilled workers.
There can be no assurances that any anticipated future results will be achieved.
As a result of the factors identified above and other factors, our actual
results or financial or other condition could vary significantly from the
performance or financial or other condition set forth in any forward-looking
statements.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks from changes in interest and foreign exchange
rates that may impact our financial position. Our credit facilities make
interest rate and foreign exchange rate hedging activities available to us.
Historically, and as of April 30, 2001, we have not used derivative instruments
or engaged in hedging activities.
15
Interest Rates
As of April 30, 2001 the fair value of our total debt outstanding was estimated
to be $302.0 million, which approximated carrying value due its market-based
interest rates. Market risk is estimated as the potential change in fair value
resulting from a change in interest rates of 1% and amounted to $2.8 million at
April 30, 2001.
Interest rates on our variable rate debt are subject to fluctuations based on
changes in the LIBOR and prime lending rates. Based on these April 30, 2001
debt levels, a hypothetical 1% adverse change in interest rates would have
reduced net earnings and cash flows by an estimated $0.5 million for the
quarter.
Foreign Currency Risks
On November 1, 1999, we adopted the practice of reporting in United States
dollars to reflect the fact that a greater portion of our business operations
would be conducted in the United States. Our foreign currency exposures give
rise to market risk associated with exchange rate movements against the Canadian
dollar, the functional currency for our operations in Canada. As a result,
fluctuations in foreign currencies may have an impact on our reported business
and financial results and the value of our foreign assets, which in turn may
adversely affect reported earnings and the comparability of period-to-period
results of operations. Changes in currency exchange rates may affect the
relative prices at which we and foreign competitors sell products in the same
market. In addition, changes in the value of relevant currencies may affect the
cost of items required in our operations. We expect less than 20% of fiscal
2001 revenues will be invoiced in Canadian dollars.
We endeavor to minimize the impact of such currency fluctuations through our
ongoing commercial practices. In attempting to manage this foreign exchange
risk, we generally source particular materials and labor of a particular
contract in the same currency in which we receive the revenues for that
contract.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
On September 24, 1999 we entered into an agreement with NKK Steel Engineering,
Inc. related to the installation of electrical and mechanical systems for the
construction of a continuous galvanizing process facility located at the site of
National Steel Corporation Great Lakes Division in Ecorse, Michigan. On
February 6, 2000 NKK Steel terminated this agreement. On April 6, 2000 we filed
a claim of lien against NKK Steel Engineering, Inc. for approximately $25
million representing amounts due to us and various subcontractors. Legal
actions were commenced in May 2000 by Bracknell and NKK Steel in respect of the
termination of the agreement. In the actions continued as NKK Steel
Engineering, Inc. v. The State Group International Limited in the United States
District Court, Eastern District of Michigan, no monetary amounts have been
specified by either party. In NKK Steel's claim, NKK Steel alleges, among other
things, that we breached the agreement. In our proceedings, we claimed, among
other things, breach by NKK Steel of the agreement, unjust enrichment,
misrepresentation and violations under the Michigan Building Contract Fund Act.
We believe there is merit to our claim for wrongful termination of the agreement
and that we have substantive defenses to NKK Steel's claim against us. Based on
the advice of counsel and our investigations, we believe that the results of
these proceedings will not have a material adverse effect on us. See also Note
8 "Commitments and Contingencies" to the Consolidated Financial Statements.
We are involved in other claims and litigation primarily arising from the normal
course of business for the reimbursement of costs of additional work and of
additional costs incurred due to changed conditions. Any settlements or awards
will be recognized when the outcome and amounts are reasonably estimatable and
determinable. Management believes that the ultimate outcome of these other
matters will not have a material effect on our consolidated results of
operations or financial position.
16
ITEM 2. Changes in Securities and Use of Proceeds
On January 5, 2001, we sold 8,000 shares of Series D Preferred Stock to
WorldCom, Inc. ("WorldCom") for $40.0 million. WorldCom committed to purchase
the mandatorily redeemable convertible preferred stock on December 22, 2000 as
part of the Able acquisition. Proceeds from the sale of the Series D Preferred
Stock were used to fund working capital requirements related to the Able
acquisition. The preferred shares are not entitled to a dividend and are non-
voting until January 5, 2007. Subject to certain provisions, the shares are
redeemable by us at the issue price per share at any time in whole or in part.
Subject to the reasonable approval of our lenders and starting July 5, 2001,
WorldCom may require us to redeem $10.0 million of the preferred shares.
WorldCom has requested us to redeem the $10.0 million subject to obtaining the
required approval of our lenders. The instrument creating the shares contains
other restrictions on us as to the payment of dividends on any junior shares or
the redemption or repurchase of other Bracknell shares. At any time after
January 5, 2002, at the election of WorldCom, the preferred shares are
convertible to Bracknell common shares at $8.75 per common share, subject to
adjustment as provided by the terms of the agreement. The preferred shares are
mandatorily redeemable at the earlier of:
. January 5, 2007, subject to the reasonable approval of our lenders, or
. at the election of WorldCom, on or after the date on which we receive
proceeds from a public debt or equity financing, but only up to the
amount of any proceeds remaining after all other indebtedness which we
are obligated to pay from such proceeds is repaid.
The Series D Preferred Stock was issued pursuant to an exemption from
registration under Rule 506 of Regulation D under the Securities Act of 1933, as
amended. This transaction was privately negotiated and the purchaser was an
accredited investor. No public offering or public solicitation was used by us
in the placement of these securities.
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
An Annual and Special Meeting of Shareholders was held on March 26, 2001. At
the Annual and Special Meeting, the following proposals were adopted by the
margins indicated:
1. Election of Gilbert S. Bennett, Jean-Rene Halde, Michael D. Hanna,
Wade C. Lau, Paul D. Melnuk, James W. Moir, Jr., Thomas P. Muir,
Gregory J. Orman and Allan R. Twa to serve as Directors of the
Company.
Broker
For Withheld Non-Votes
---------- -------- ---------
Gilbert S. Bennett 43,422,303 84,478 0
Jean-Rene Halde 43,421,753 85,028 0
Michael D. Hanna 43,419,202 87,579 0
Wade C. Lau 43,421,753 85,028 0
Paul D. Melnuk 43,422,303 84,478 0
James W. Moir, Jr. 43,422,103 84,678 0
Thomas P. Muir 43,422,003 84,778 0
Gregory J. Orman 43,419,202 87,579 0
Allan R. Twa 43,422,053 84,728 0
17
2. Appointment of Arthur Andersen LLP as independent auditors for the
2001 fiscal year and authorization of directors to fix the
compensation of the auditors.
For 42,603,212
Against 197,410
Abstain 706,159
Broker Non-Votes 0
3. Approval of amendments to the Bracknell Corporation Performance Stock
Option Plan
For 27,347,221
Against 10,367,361
Abstain 0
Broker Non-Votes 0
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 15.0 - Letter re unaudited interim financial information
(b) Reports on Form 8-K
None
18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Bracknell Corporation
(Registrant)
/s/ John A. Witham
--------------------------------------------
John A. Witham
Executive Vice President and Chief Financial
Officer (Principal Financial Officer and
Duly Authorized Officer)
June 14, 2001
19