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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 July 31, 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
September 12, 2001: 65,649,662
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BRACKNELL CORPORATION
FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at July 31, 2001 and
October 31, 2000..................................................... 1
Consolidated Statements of Earnings for the Three and
Nine Months Ended July 31, 2001 and 2000............................. 2
Consolidated Statements of Cash Flows for the Three and
Nine Months Ended July 31, 2001 and 2000............................. 3
Notes to Consolidated Financial Statements............................. 4
Report of Independent Public Accountants............................... 12
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 13
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk....... 20
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................ 20
ITEM 2. Changes in Securities and Use of Proceeds........................ 21
ITEM 3. Defaults Upon Senior Securities.................................. 22
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 22
ITEM 5. Other Information................................................ 22
ITEM 6. Exhibits and Reports on Form 8-K................................. 22
Signature ................................................................. 25
Bracknell Corporation
Consolidated Balance Sheets July 31, October 31,
(U.S. GAAP in millions of U.S. dollars) 2001 2000
================================================================================================
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 5.9 $ 4.5
Contract and accounts receivables, net 300.2 210.0
Costs and estimated earnings in excess of contract billings 137.2 82.0
Other 19.9 18.5
------------------------------------------------------------------------------------------------
Total current assets 463.2 315.0
Property and equipment, net 26.3 18.0
Networks under construction 116.7 --
Goodwill, net 188.2 189.1
Other 42.5 10.3
------------------------------------------------------------------------------------------------
Total assets $ 836.9 $ 532.4
================================================================================================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Borrowings under revolving credit facilities $ 108.1 $ 45.3
Current portion of long-term debt 71.2 40.5
Accounts payable and accrued liabilities 265.6 130.5
Contract billings in excess of costs and estimated earnings 76.6 40.2
Other 7.6 8.5
------------------------------------------------------------------------------------------------
Total current liabilities 529.1 265.0
------------------------------------------------------------------------------------------------
Long-term debt, net of current portion 171.0 123.8
Long-term deferred revenues 69.3 --
Other long-term liabilities 30.0 1.5
------------------------------------------------------------------------------------------------
Total liabilities 799.4 390.3
------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
Mandatorily redeemable convertible preferred stock 40.0 --
Stockholders' Equity (Deficit)
Common stock 208.3 91.9
Contributed surplus 4.7 0.2
Accumulated equity (deficit) (210.7) 54.5
Accumulated other comprehensive loss (4.8) (4.5)
------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) (2.5) 142.1
------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity (deficit) $ 836.9 $ 532.4
================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
1
Bracknell Corporation For the three months For the nine months
Consolidated Statements of Earnings (Loss) ended July 31, ended July 31,
(U.S. GAAP in millions of U.S. dollars, -------------------------- --------------------------
except per share amounts) 2001 2000 2001 2000
======================================================================================================================
(Unaudited) (Unaudited)
Revenues $ 306.4 $ 242.9 $ 883.5 $ 579.5
Cost of services 258.5 201.9 744.1 486.7
----------------------------------------------------------------------------------------------------------------------
Gross margin 47.9 41.0 139.4 92.8
Selling, general and administrative expenses 27.0 22.2 76.9 52.9
Restructuring charges 5.6 -- 5.6 --
Write-down of goodwill 276.0 -- 276.0 --
Depreciation and amortization 6.8 3.8 18.4 8.7
----------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations (267.5) 15.0 (237.5) 31.2
Interest expense, net 5.1 6.2 17.9 12.1
Other expense (income) 0.6 (0.3) 1.3 (0.7)
----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before provision for income taxes (273.2) 9.1 (256.7) 19.8
Provision for income taxes 1.1 3.6 7.2 7.4
----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before extraordinary item and discontinued
operations (274.3) 5.5 (263.9) 12.4
Extraordinary loss, net of taxes of $0.6 and $1.2 -- -- 1.3 2.0
----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before discontinued operations (274.3) 5.5 (265.2) 10.4
Earnings from discontinued operations, net of taxes -- 2.2 -- 1.8
----------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (274.3) $ 7.7 $ (265.2) $ 12.2
======================================================================================================================
Earnings per share
Earnings (loss) before extraordinary loss and discontinued
operations
Basic $ (4.24) $ 0.14 $ (4.39) $ 0.34
Diluted (4.24) 0.13 (4.39) 0.33
Impact of extraordinary loss on earnings per share
Basic $ -- $ -- $ 0.02 $ 0.06
Diluted -- -- 0.02 0.05
Earnings (loss) before discontinued operations
Basic $ (4.24) $ 0.14 $ (4.41) $ 0.29
Diluted (4.24) 0.13 (4.41) 0.28
Net earnings (loss)
Basic $ (4.24) $ 0.19 $ (4.41) $ 0.34
Diluted (4.24) 0.19 (4.41) 0.32
Weighted average common shares outstanding
Basic 64.7 40.5 60.1 36.2
Diluted 64.7 41.4 60.1 37.7
The accompanying notes are an integral part of these consolidated financial
statements.
2
For the three months For the nine months
Bracknell Corporation ended July 31, ended July 31,
Consolidated Statements of Cash Flows ------------------------ -------------------------
(U.S. GAAP in millions of U.S. dollars) 2001 2000 2001 2000
====================================================================================================================
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings (loss) from continuing operations $ (274.3) $ 5.5 $ (265.2) $ 10.4
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 6.8 3.8 18.4 8.7
Restructuring charges not paid 1.9 -- 1.9 --
Provision for deferred income taxes (1.7) -- (1.7) --
Write-off of deferred financing fees -- -- 2.0 3.3
Write-down of goodwill 276.0 -- 276.0 --
Other 0.2 0.5 0.3 1.2
Change in current liabilities held for sale -- -- (20.0) --
Change in operating assets and liabilities, excluding assets
acquired and liabilities assumed in acquisitions (43.0) (15.2) (87.8) (66.7)
--------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (34.1) (5.4) (76.1) (43.1)
--------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (0.5) (2.0) (4.0) (4.1)
Networks under construction net of long-term deferred
revenues (13.2) -- (41.3) --
Long-term investments and acquisitions (2.9) -- (20.4) (95.2)
Proceeds from the sale of discontinued operations 8.5 11.7 8.5 11.7
Other -- (0.4) (0.5) (1.7)
--------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (8.1) 9.3 (57.7) (89.3)
--------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under revolving credit facilities, net 47.6 1.1 62.8 38.4
Borrowings under term facilities -- -- 105.1 104.6
Repayment of Sunbelt Notes -- -- (19.9) (29.0)
Repayment of term facilities -- -- (12.5) --
Repayment of other long-term debt -- -- (36.2) (0.3)
Exercise of options 1.2 -- 2.2 --
Issuance of preferred stock -- -- 40.0 --
Issuance of common stock -- -- -- 29.1
Financing costs -- (0.6) (2.1) (4.0)
Other -- (0.1) (2.3) (0.3)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 48.8 0.4 137.1 138.5
--------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (0.8) -- (1.9) --
Increase in cash and cash equivalents 5.8 4.3 1.4 6.1
Cash and cash equivalents, beginning of period 0.1 2.5 4.5 0.7
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5.9 $ 6.8 $ 5.9 $ 6.8
====================================================================================================================
Supplemental Disclosure:
Cash paid for interest $ 6.1 $ 4.7 $ 18.8 $ 9.1
Cash paid for income taxes 2.2 3.5 8.1 13.8
Notes issued in lieu of cash for Sunbelt acquisition -- -- -- 50.0
Common stock and equivalents 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)
July 31, 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 and certain
impairment charges, see Note 4 "Goodwill Impairment and Restructuring Charge")
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 of Bracknell 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 liabilities of Able had a value of
approximately $130.2 million, as revised. The excess of the cost over the fair
market value of the net liabilities acquired, primarily goodwill, was revised to
$276.0 million in the third quarter of 2001 from $129.4 million at the end of
the second quarter due to the refinement of purchase price. See Note 4 "Goodwill
Impairment and Restructuring Charge" for further discussion of purchase price
allocation. The fair value of the net liabilities acquired was based on
preliminary estimates and may be further revised at a later date. Concurrent
with the closing of the transaction, Bracknell amended its credit facilities in
order to provide working capital financing to Able. See Note 7 "Bank Credit
Facility and Liquidity." 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 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 Nine Months Ended
July 31, July 31,
------------------- --------------------
2001 2000 2001 2000
-------- ------- --------- --------
Revenues $ 306.4 $326.6 $ 908.2 $941.3
Earnings (loss) before extraordinary item (274.3) 7.0 (270.7) 14.9
Net earnings (loss) (274.3) 7.0 (272.0) 12.7
Earnings (loss) before extraordinary item per share - diluted $ (4.24) $ 0.10 $ (3.81) $ 0.21
Net earnings (loss) per share - diluted $ (4.24) $ 0.10 $ (3.81) $ 0.18
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 July 31, 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 a long haul
route from Denver west along Interstate Highway 70 to the Utah border ("I-70
West"). As of July 31, 2001, the Company has suspended construction of the I-70
West network pending securing additional user agreements. 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") Interpretation 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 and interest costs, are
capitalized. As of July 31, 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.
Since the acquisition of Able on December 22, 2000, the Company has used net
cash of approximately $41.3 million in construction of network assets. Cash
requirements to fund the completion of networks under construction as of July
31, 2001 are expected to be approximately $17.0 million. Upon completion, $22.0
million would be due from currently executed contracts with customers. Failure
of the Company to execute sufficient user agreements for the networks under
construction could have a material adverse effect on the carrying value of $47.4
million (net of deferred revenues) at July 31, 2001, and recoverability of the
Company's network assets.
5
4. Goodwill Impairment and Restructuring Charge
As a result of a significant downturn in the telecommunications industry and the
decision to pursue strategic alternatives with respect to its Adesta
Communications subsidiary, the Company analyzed projected undiscounted cashflows
and determined that goodwill associated with the purchase of Able was impaired.
Accordingly, the Company completed a preliminary allocation of purchase price
with the resulting entire amount of goodwill of approximately $276.0 million
charged to earnings in the third quarter of 2001. The write-off of the goodwill
was based on an analysis of projected discounted cash flows, which were no
longer deemed adequate to support the value of goodwill associated with the
business. After this preliminary allocation of purchase price, the Company has a
net investment in networks under construction of approximately $47.4 million
(net of deferred revenues) as of July 31, 2001. The Company is awaiting
finalization of such purchase price allocation pending an outside appraisal of
such networks under construction. Failure of the Company to execute sufficient
user agreements and complete construction of the networks under construction
could have a material adverse effect on the carrying value and recoverability of
the Company's networks under construction.
The restructuring charge incurred during the third quarter of 2001 of
approximately $5.6 million resulted from the Company's announcement of a plan
for elimination of approximately 100 positions company-wide with 60% severed as
of July 31, 2001. As of July 31, 2001, amounts paid and charged to the reserve
amounted to $3.7 million. The Company anticipates the remaining restructuring
costs will be paid and charged to the reserve during the fourth quarter of
fiscal 2001.
5. Comprehensive Income (Loss)
For Bracknell, comprehensive income (loss) represents net earnings (loss)
adjusted for foreign currency translation adjustments. Comprehensive income
(loss) for all the periods ended July 31, 2001 and 2000 was as follows:
Three Months Nine Months
Ended Ended
July 31, July 31,
--------------- ----------------
2001 2000 2001 2000
------- ----- ------- -----
Net earnings (loss) $(274.3) $ 7.7 $(265.2) $12.2
Foreign currency translation adjustments 1.0 (0.5) (0.3) (1.1)
------- ----- ------- -----
Comprehensive income (loss) $(273.3) $ 7.2 $(265.5) $11.1
======= ===== ======= =====
6. Earnings (Loss) Per Share
Basic earnings (loss) per common share was calculated by dividing net earnings
(loss) by the weighted average number of common shares outstanding during the
period. Diluted earnings (loss) per share was calculated by dividing net
earnings (loss) 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 (loss) per share
calculations for the periods ended July 31, 2001 and 2000:
Three Months Nine Months
Ended Ended
July 31, July 31,
----------- -----------
2001 2000 2001 2000
---- ---- ---- ----
Weighted average common shares outstanding - basic 64.7 40.5 60.1 36.2
Effect of dilutive securities - options/warrants -- 0.9 -- 1.0
Effect of convertible preferred securities -- -- -- 0.6
Weighted average common shares outstanding - diluted 64.7 41.4 60.1 37.7
Potential common shares of 15.0 million for the three-month period ended July
31, 2001 (2000 - 0.4 million) and 13.1 million for the nine-month period ended
July 31, 2001 (2000 - 0.2 million) related to the Company's outstanding stock
options and warrants were excluded from the computation of diluted earnings
(loss) per share under the treasury method as inclusion of these shares would
have been antidilutive.
6
7. Bank Credit Facility and Liquidity
As of July 31, 2001, Bracknell had in place $356.7 million in bank credit
facilities from a syndicate of banks. As of July 31, 2001 the bank credit
facilities were made up of $236.7 million in term commitments and $120.0 million
in operating commitments. The operating facilities are 364-day facilities
renewable on December 22nd of each year and the term facilities mature on
October 31, 2004. The bank 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
July 31, 2001, approximately $344.8 million of the facilities were utilized for
borrowings, including $236.7 million under U.S. and Canadian term facilities.
The Company has also utilized letters of credit amounting to approximately $2.1
million under the facilities. Available borrowings at July 31, 2001 under the
operating facilities were $9.8 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. As set out below, the repayments due July 31, 2001 and October
31, 2001 were deferred.
Borrowings under these facilities are in the form of advances, accommodations,
banker's acceptances, or letters of credit and as of July 31, 2001 bore interest
at the London Interbank Offered Rate ("LIBOR") plus 2.75% or prime rate plus
1.75%. Interest can now vary between 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.
The bank 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, the entering into of 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.
Effective for the quarter ended July 31, 2001, the Company and its bank group
agreed to amend financial covenants under the bank credit facilities related to
debt to capitalization, net debt to consolidated EBITDA, senior debt to
consolidated EBITDA and debt service coverage, and to defer certain scheduled
principal payments. A scheduled principal payment of $12.5 million was deferred
to October 31, 2001, and a required principal payment of $8.4 million resulting
from the receipt of proceeds from the sale of the former construction division
of Able was deferred to the earlier of receipt of auto shutdown receivables or
October 31, 2001. As of July 31, 2001, the Company was in compliance with its
amended financial covenants.
Due principally to the slower than expected monetization of networks under
construction, the Company experienced high utilization under its bank credit
facilities and deferral of payment on trade accounts payable in the third
quarter of 2001. In September 2001, the Company reached agreement with its
existing bank group to increase their commitment by $20.0 million, further defer
principal payments totaling $25.0 million to December 21, 2001 and to further
amend certain financial covenants related to debt to capitalization, net debt to
consolidated EBITDA, senior debt to consolidated EBITDA and debt service
coverage. Further, the Company entered into a definitive agreement with Ontario
Teachers' Pension Plan Board (Ontario Teachers') to purchase $40.0 million of
new common shares and provide a standby purchase commitment for a planned $80.0
million rights offering to shareholders. Ontario Teachers' commitment to
purhase and take up all Common Shares offered but not taken up under the rights
offering is subject to the restriction that Ontario Teachers' will not acquire
in aggregate more than 30% of the outstanding shares of the Company. These
offerings will be priced at $2.00 per share, provided that the price will be
adjusted to equal the exercise price on the rights offering, if different. The
Company expects to file a preliminary prospectus in Canada and register the
rights offering under U.S. securities laws by early October 2001. Proceeds of
these offerings will be used to reduce outstanding payables, repay bank credit
facilities indebtedness and general corporate purposes.
The amendments to the bank facilities are subject to a number of conditions,
including completion of documentation that is expected to be finalized by
September 21, 2001. It is also a condition of the amendments that the Company's
Adesta Communications subsidiary be self-funding and the Company immediately
pursue strategic alternatives for Adesta. The Ontario Teachers' commitment is
subject to a number of conditions, including registration of the shares,
regulatory and other approvals, no material adverse change, acceptable further
amendments to the bank credit facilities pertaining to rescheduling of principal
debt payments and the conversion by the holder of the Company's Series D
Convertible Preferred Shares into Common Shares of Bracknell and certain
7
other agreements with the holder. While no assurances can be given as to
successful completion, the Company is currently in discussion with the holder
regarding this conversion and disputes associated with obligations under a
Master Services Agreement and a Commitment Agreement entered into in conjunction
with the Able acquisition. No assurances can be given that we will successfully
complete either the financing transactions described above or the amendments of
the bank facilities. In the event such amendments are not consummated all
amounts outstanding under the bank credit facilities would become current.
If the Company successfully implements the amendments to the bank credit
facilities and consummates the equity financings, in each case, when and as
described above, then management believes its cash flows from operations
(together with the increased availability under the bank credit facilities and
the net proceeds of such financings) will be sufficient to finance working
capital and anticipated capital spending requirements (excluding Adesta) for at
least one year. The Company believes Adesta will require additional financing of
the successful monetization of its network assets in order to have sufficient
funds to finance its working capital and anticipated capital spending
requirements. Bracknell does not intend to further fund the operations of
Adesta, and is considering a number of strategic alternatives with respect to
that subsidiary, including sales of its network and other assets, as well as
other alternatives.
If the Company is unable to successfully implement the foregoing amendments to
the bank credit facilities and consummate the equity financings, each of which
is subject to significant conditions, then the Company would be unable to make
the principal payments to its senior lenders scheduled for December 21, 2001 and
the Company would not be in compliance with applicable financial covenants
contained in the Company's bank credit facilities. As a result, the Company's
lenders could require full payment of the outstanding borrowings under those
facilities. In such circumstances, the Company would need to secure alternative
and immediate sources of liquidity to meet those obligations and fund the
continued operation of its business (the prospects for which are uncertain and
speculative) and may be forced to pursue strategic alternatives for its
business. In addition, if the Company is unable to make the required payments to
its lenders, they could initiate creditor proceedings with respect to the
Company and the assets of the Company securing those loans, which would
significantly impair the Company's ability to continue its operations as
currently conducted.
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 bank credit
facilities in the amount of $2.1 million are being amortized over the remainder
of the four-year period of the facilities.
8. Interest Expense, Net
Interest expense, net, consisted of the following:
Three Months Nine Months
Ended Ended
July 31, July 31,
-------------- --------------
2001 2000 2001 2000
----- ----- ----- -----
Interest expense $ 6.7 $ 6.3 $22.0 $12.2
Interest income (0.1) (0.1) (0.5) (0.1)
----- ----- ----- -----
6.6 6.2 21.5 12.1
Capitalized interest (1.5) -- (3.6) --
----- ----- ----- -----
$ 5.1 $ 6.2 $17.9 $12.1
===== ===== ===== =====
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
9. 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 that the Company redeem
the $10.0 million subject to obtaining the required lender approval, which has
not been received. 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 into 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.
10. Business Combinations, Goodwill and Intangible Assets
On June 29, 2001, the Financial Accounting Standards Board ("FASB") approved for
issuance, Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Intangible Assets."
Major provisions of these Statements are as follows:
o All business combinations initiated after June 30, 2001 must
use the purchase method of accounting
o The pooling of interest method of accounting is prohibited
except for transactions initiated before July 1, 2001;
o Intangible assets acquired in a business combination must be
recorded separately from goodwill if they arise from
contractual or other legal rights or are separable from the
acquired entity and can be sold, transferred, licensed, rented
or exchanged, either individually or as part of a related
contract, asset or liability;
o Goodwill and intangible assets with indefinite lives are not
amortized, but tested for impairment annually, except in
certain circumstances, and whenever there is an impairment
indicator;
o All acquired goodwill must be assigned to reporting units for
purposes of impairment testing and segment reporting;
o Effective November 1, 2001, goodwill will no longer be subject
to amortization.
Management is currently reviewing the provisions of these Statements and their
impact on Bracknell's results of operations.
11. Commitments and Contingencies
One of the Company's subsidiaries is currently involved in a dispute involving a
claim for wrongful termination of a contract with 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.
One of the Company's subsidiaries has a contract related to the construction of
a new mid-field terminal at the Detroit Airport. The project, which is scheduled
for completion by the end of the calendar year, has incurred cost overruns
resulting from significant delays and scope changes. As a result, the Company
has incurred, and continues to incur, significant costs in excess of the fixed
contract price. As of July 31, 2001, total costs in excess of billings were
$21.1 million. The Company has notified the general contractor of its claim for
cost overruns related to this
9
contract and believes, based on the advice of outside legal counsel, that it has
a reasonable basis for a claim to recover cost overruns.
The Company, through its Adesta Communications subsidiary, has a license from
the Colorado and Utah departments of transportation to develop a fiber optic
network along Interstate 70 from Denver to Salt Lake City ("I-70 West"). On
September 15, 1999, Adesta Communications entered into an agreement with
360networks for 360networks to acquire a portion of the network and fund 50% of
the costs to market and construct this route. During the third quarter of 2001,
360networks filed for protection under Chapter 11 of the U.S. bankruptcy code in
the U.S. District Court Southern District of New York. As of July 31, 2001, the
Company had approximately $24.4 million of receivables and costs in excess of
billings due from 360networks for reimbursement of costs associated with the
construction of this network and various management and handling fees associated
with the construction of this network and certain other services. The Company
also had amounts due to 360networks of $17.2 million for its portion of cost
related to certain expenditures made by 360networks. The Company has initiated
legal action and is actively pursuing recovery of the amounts owed by
360networks and held fiber cable contributed to the project. The Company
believes that its claim has merit and that there are substantive defenses to any
potential counterclaims, however, the ultimate realizability of such receivables
and costs in excess of billing are uncertain. As of April 30, 2001, the Company
had suspended construction of the I-70 West network pending securing additional
user agreements.
As of July 31, 2001, Adesta is owed $8.3 million by Metromedia Fiber Networks
with $1.4 million being over 90 days past due. Metromedia has been seeking
additional financing to remain solvent and has recently announced that it will
seek protection under bankruptcy laws if it cannot complete its proposed
financings. Adesta is currently in negotiations with Metromedia to settle the
outstanding amount. The Company currently believes this amount is realizable,
however, the ultimate recoverability remains uncertain.
In September 2001, WorldCom alleged certain defaults on the part of the
Company's subsidiaries under the Amended and Restated Master Services Agreement,
dated August 24, 2000, between Able and a subsidiary of WorldCom (the "MSA").
WorldCom also gave notice that it has significantly reduced the scope of work
previously provided to the Company's subsidiaries under the MSA. The Company
believes that the reduction in work is inconsistent with the guaranteed minimum
levels of work to be provided under the MSA. Also, in September 2001, WorldCom
alleged that the Company was in default of certain obligations under the Amended
and Restated Commitment Agreement, dated December 21, 2000, between Bracknell
and WorldCom. WorldCom has stated it regards the Commitment Agreement as
terminated. The Commitment Agreement principally provides for the funding by
WorldCom of cash flow requirements for Able's transportation division in excess
of $20 million and indemnification by WorldCom in respect of liability arising
from certain events prior to Bracknell's acquisition of Able. The Company
believes that WorldCom's claims are without merit and that the Commitment
Agreement does not allow for unilateral termination by WorldCom. While no
assurances can be given as to successful completion, the Company is currently
engaged in discussions with WorldCom to resolve these matters. WorldCom was the
Company's largest customer for the nine months ended July 31, 2001 representing
revenues of approximately $94 million.
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.
12. 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
10
operating decisions and assessing performance. The following table presents
information regarding revenues from the customer groupings noted above.
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ ------------------
2001 2000 2001 2000
------- ------ ------ ------
Commercial $ 87.1 $ 67.3 $242.0 $167.0
Industrial 86.2 102.0 246.7 246.1
Special technologies 44.6 34.7 126.9 73.1
Telecommunications 88.5 38.9 267.9 93.3
------- ------ ------ -------
$306.4 $242.9 $883.5 $579.5
======= ====== ====== ======
The Company had revenues from and assets in the United States, Canada and other
jurisdictions as follows:
Revenues: Three Months Ended Nine Months Ended
July 31, July 31,
------------------- ------------------
2001 2000 2001 2000
------ ------ ------ ------
U.S. $255.2 $181.9 $732.5 $427.1
Canada 48.7 60.2 146.8 150.4
Other 2.5 0.8 4.2 2.0
------ ------ ------ ------
$306.4 $242.9 $883.5 $579.5
====== ====== ====== ======
Assets: July 31, October 31,
2001 2000
-------- -----------
U.S. $749.4 $418.4
Canada 86.1 114.0
Other 1.4 0.0
------ ------
$836.9 $532.4
====== ======
11
Report of independent public accountants
To Bracknell Corporation:
We have reviewed the accompanying consolidated balance sheet of Bracknell
Corporation (an Ontario corporation) as of July 31, 2001, and the related
consolidated statements of earnings for the three-month and nine-month periods
ended July 31, 2001 and 2000 and the consolidated statements of cash flows for
the three-month and nine-month periods ended July 31, 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,
September 19, 2001
12
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. All currency amounts are expressed in
U.S. dollars, unless otherwise indicated.
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 during fiscal
2000 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 Nine Months
Ended July 31, Ended July 31,
----------------------- -----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues $ 306.4 $ 242.9 $ 883.5 $ 579.5
Cost of services 258.5 201.9 744.1 486.7
Selling, general and administrative expenses 27.0 22.2 76.9 52.9
--------- --------- --------- ---------
EBITDA (a) 20.9 18.8 62.5 39.9
Write-down of goodwill 276.0 -- 276.0 --
Restructuring charge 5.6 -- 5.6 --
Depreciation and amortization 6.8 3.8 18.4 8.7
--------- --------- --------- ---------
Earnings (loss) from operations $ (267.5) $ 15.0 $ (237.5) $ 31.2
========= ========= ========= =========
Operating earnings (loss) per share -- diluted (b) $ 0.12 $ 0.13 $ 0.29 $ 0.33
========= ========= ========= =========
(a) EBITDA represents earnings (loss) 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 earnings (loss), 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 (loss) 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 (loss) per share (as determined in accordance with
13
accounting principles generally accepted in the United States) as a
measure of performance, but we believe that it does provide an
important additional perspective on our operating results.
Revenues
Revenues increased to $306.4 million for the quarter ended July 31, 2001 (2000 -
$242.9 million) and to $883.5 million for the first nine months of 2001 (2000 -
$579.5 million). Companies acquired during fiscal 2000 increased revenues by
$109.6 million in the first nine months of 2001, including organic growth.
Adesta Communications, Inc. ("Adesta"), which was acquired on December 22, 2000
as part of the acquisition of Able Telcom Holding Corp. ("Able"), added $59.1
million in revenue in the third quarter and $160.5 million in the first nine
months of 2001. Pro forma revenues decreased 5% in existing and acquired
business from the third quarter of 2000 to the third quarter of 2001 and less
than 1% for the first nine months of 2001 compared to the first nine months of
2000 principally due to weaker telecommunications and auto markets. Cost of
sales also increased in the third quarter and first nine months of 2001 versus
the same periods of 2000 principally due to acquisitions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $27.0 million (2000 -
$22.2 million) for the third quarter of 2001 and $76.9 million (2000 - $52.9
million) for the first nine months of fiscal 2001. The increase in selling,
general and administrative expenses was primarily due to acquired companies.
However, selling, general and administrative costs as a percent of revenues of
8.8% (2000 - 9.1%) for the third quarter of 2001 and 8.7% (2000 - 9.1%) for the
first nine 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.
As a result of a significant downturn in the telecommunications industry and a
decision to pursue strategic alternatives with respect to our Adesta
Communications subsidiary, we analyzed projected undiscounted cash flows and
determined that goodwill associated with the purchase of Able was impaired.
Accordingly, we completed a preliminary allocation of purchase price with the
resulting entire amount of goodwill of approximately $276.0 million charged to
earnings in the third quarter of 2001. The write-off of the goodwill was based
on an analysis of projected discounted cash flows, which were no longer deemed
adequate to support the value of goodwill associated with the business. After
this preliminary allocation of purchase price, we have a net investment in
networks under construction of approximately $47.4 million (net of deferred
revenues) as of July 31, 2001. Failure to execute sufficient user agreements for
the networks under construction could have a material adverse effect on the
carrying value and recoverability of our networks under construction.
In the third quarter of 2001, we undertook a restructuring initiative that will
eliminate approximately 100 positions company-wide for an estimated annual
recurring pre-tax benefit of $5.0 million. The restructuring resulted in a
pre-tax charge to earnings of estimated $5.6 million. As of July 31, 2001,
amounts paid and charged to the reserve amounted to $3.7 million. We believe the
remaining restructuring costs will be paid and charged to the reserve during the
fourth quarter of fiscal 2001. 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 $20.9 million (2000 - $18.8 million) for the quarter ended July 31,
2001 and $62.5 million (2000 - $39.9 million) for the first nine months of 2001.
Companies acquired during fiscal 2000 increased EBITDA by $12.5 million for the
first nine months of 2001, including organic growth. Adesta added $7.4 million
in EBITDA for the third quarter and $17.3 million for the first nine months of
2001. For the third quarter of 2001, pro forma EBITDA in existing and acquired
businesses decreased by less than 1% over the third quarter of 2000. For the
first nine months of 2001 compared to the first nine months of 2000, EBTIDA grew
by 6%.
EBITDA margins as a percent of revenues were 6.8% (2000 - 7.7%) in the third
quarter of 2001 and increased to 7.1% for the first nine months of 2001 (2000 -
6.9%). EBITDA margins decreased in the third quarter of 2001 in part due to a
$3.8 million charge to reverse previously recorded margin related to the
construction of a mid-field
14
terminal at the Detroit airport. Approximately $3.1 million of the Detroit
airport margin was recorded in fiscal 2000. The project, which is scheduled for
completion by the end of the year, has been plagued by cost overruns resulting
from significant delays and scope changes and we believe we and our legal
counsel have a reasonable basis for a claim to recover cost overruns, which
totaled $21.1 million, excluding potential margin as of July 31, 2001.
Excluding the impact of the Detroit airport, EBITDA margins were 8.5% for the
third quarter of 2001. EBITDA margins were improved for the first nine months of
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. In the third quarter of 2001, the Atlanta and Chicago
commercial markets and telecommunication markets were weaker versus the prior
year while work in Native American gaming buoyed our special technology group.
EBITDA for industrial customers, including auto, rebounded in the third quarter
from a weaker first half and was flat with the year-ago period. We continued to
experience softness in our telecommunication business. Refer to Note (a) under
Results of Operations table.
Depreciation and Amortization
Depreciation and amortization increased to $6.8 million (2000 - $3.8 million) in
the third quarter of 2001 and $18.4 million (2000 - $8.7 million) for the first
nine months of 2001. Goodwill amortization increased to $4.2 million (2000 -
$2.5 million) for the third quarter of 2001 and increased to $11.6 million (2000
- $5.5 million) for the first nine months of 2001. Depreciation and amortization
increased for the first three and nine months of 2001 due to acquisitions.
The U.S. Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 141, Business Combinations and No. 142, Goodwill and
Other Intangible Assets eliminating the amortization of goodwill in favor of an
approach that evaluates the impairment of goodwill assets. Bracknell will adopt
this standard for its fiscal 2002 year.
Interest Expense
Interest expense increased for the quarter and nine months ended July 31, 2001
as compared to the same periods in 2000 principally due to higher levels of debt
incurred to finance acquisitions and completion of network right-of-way
development. Capitalized interest was $1.5 million for the third quarter and
$3.6 million for first nine months of 2001 (2000 - nil) and was principally
related to network development assets.
Extraordinary Item
Non-cash extraordinary costs of $1.3 million, net of taxes of $0.6 million, for
the first nine months of 2001 and $2.0 million, net of taxes of $1.2 million,
for the first nine months 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 to finance
acquisitions triggered the charges.
Income Taxes
Our effective income tax rate, before asset impairment charges, was 37% during
the first nine months of 2001. The income tax provision for the third quarter
and the first nine months 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 non-deductible
goodwill in the same periods of 2000.
15
Operating Earnings per Share
We recorded a net loss of $4.24 per diluted share for the three months ended
July 31, 2001 (2000 - net earning of $0.19) and a net loss of $4.41 per diluted
share for the nine months ended July 31, 2001 (2000 - net earnings of $0.32).
Diluted operating earnings per share were $0.12 for the quarter ended July 31,
2001 compared to $0.13 for the same period of 2000. Operating earnings are net
earnings (loss) excluding the after-tax effect of non-recurring and
non-operating revenues and expenses, discontinued operations and extraordinary
items. Refer to Note (b) under "Results of Operations" above. Items excluded in
the calculation of operating earnings per share for the first nine months of
2001 were an extraordinary loss, a charge related to the Detroit airport
project, restructuring charges, write-down of goodwill and an item reported as
other expense related to a foreign exchange translation loss. These items
combined to reduce net earnings by $6.3 million on an after-tax basis for the
third quarter of 2001 and $8.3 million for the first nine months of 2001. In the
third quarter and first nine 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 July 31, 2001, including maintenance and
service contracts of $110.4 million, was approximately $1.0 billion (April 30,
2001 - $1.0 billion), including $238.3 million related to WorldCom under a
Master Services Agreement. See "Liquidity and Capital Resources." 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. Accordingly, these estimates are based on historical relationships
with customers and experience with similar contracts.
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 bank capital facilities and cash flows from operations.
As of July 31, 2001, Bracknell had in place $356.7 million in credit facilities
from a syndicate of banks. As of July 31, 2001 the bank credit facilities were
made up of $236.7 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"
to the Consolidated Financial Statements) and the repayment of notes issued in
connection with the acquisition of Sunbelt Integrated Trade Services in March
2000. As of July 31, 2001, approximately $344.8 million of the facility was
utilized for borrowings, including $236.7 million under U.S. and Canadian term
facilities, and $2.1 million was utilized for letters of credit. Available
borrowings at July 31, 2001 under the operating facilities were $9.8 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 bank credit facilities are in the form of advances,
accommodations, bankers acceptances, or letters of credit and as of July 31,
2001 bore interest at the London Interbank Offered Rate ("LIBOR") plus 2.75% or
prime rate plus 1.75%. Interest can now vary between 0.75% to 3.25% over the
prime rate based on Bracknell's ratio of total net debt to consolidated earnings
(loss) before interest, tax, depreciation and amortization.
The bank 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, the entering into of certain transactions with
affiliates, certain consolidations, mergers and transfers and the use of loan
proceeds. In addition, the bank 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
16
budgets, financial statements and public reports and filings, and we must meet
specified thresholds with respect to profitability and debt to net worth ratios.
Effective for the quarter ended July 31, 2001, we and our bank group agreed to
amend certain financial covenants under the bank credit facilities related to
debt to capitalization, net debt to consolidated EBITDA, senior debt to
consolidated EBITDA and debt service coverage, and to defer certain scheduled
principal payments. A scheduled principal payment of $12.5 million and a
required principal payment of $8.4 million resulting from the receipt of
proceeds from the sale of the former construction division of Able was deferred
to the earlier of receipt of auto shutdown receivables or October 31, 2001. Due
principally to the slower than expected monetization of networks under
construction, we experienced high utilization under our bank credit facilities
and deferral of payment on trade accounts payable in the third quarter of 2001.
In September 2001, we reached agreement with our existing bank group to increase
their commitment by $20.0 million, further defer principal payments totaling
$25.0 million to December 21, 2001 and to further amend certain financial
covenants related to debt to capitalization, net debt to consolidated EBITDA,
senior debt to consolidated EBITDA and debt service coverage. Further, we have
entered into a definitive agreement with Ontario Teachers' Pension Plan Board
(Ontario Teachers') to purchase $40.0 million of new common shares and provide a
standby purchase commitment for a planned $80.0 million rights offering to
shareholders. Ontario Teachers' commitment to purchase and take up all Common
Shares offered but not taken up under the rights offering is subject to the
restriction that Ontario Teachers' will not acquire in aggregate more than 30%
of the outstanding shares of the Company. These offerings will be priced at
$2.00 per share, provided that the price will be adjusted to equal the exercise
price on the rights offering, if different. We expect to file a preliminary
prospectus in Canada and register the rights offering under U.S. securities
laws. Proceeds of these offerings will be used to reduce outstanding payables,
repay bank credit facilities indebtedness and for general corporate purposes.
The amendments to the bank credit facilities are subject to a number of
conditions, including completion of documentation that is expected to be
completed by September 30, 2001. It is also a condition of the amendments that
our Adesta Communications subsidiary be self-funding and we immediately pursue
strategic alternatives for Adesta. The Ontario Teachers' commitment is subject
to a number of conditions, including registration of the shares, regulatory and
other approvals, no material adverse changes, acceptable further amendments to
the bank credit facilities pertaining to rescheduling of principal debt payments
and the conversion by the holder of our Series D Convertible Preferred Shares
into Common Shares of Bracknell and certain other agreements with the holder.
While no assurances can be given as to successful completion, we are currently
in discussion with the holder regarding this conversion and disputes associated
with obligations under a Master Services Agreement and a Commitment Agreement
entered into in conjunction with the Able acquisition. No assurance can be given
that we will successfully complete either the financing transactions described
above or the amendments of the bank credit facilities.
Cash flows provided by operating activities before changes in operating assets
and liabilities were $31.7 million for the nine months ended July 31, 2001 as
compared to cash flows of $23.6 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 $107.8 million in the first nine months of
2001 versus $66.7 million in the same period of 2000. The additional cash
invested in the first nine months of the current year was primarily due to an
investment in Adesta's working capital following the Able acquisition ($50.2
million), funding of Able's former transportation division ($20.0 million) and
an increase in unbilled costs on a project at the Detroit airport ($24.5
million). Operating working capital at July 31, 2001 improved to 32 days of
revenue at the end of the third 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. As of July 31, 2001, we had three outstanding projects included in
costs and estimated earnings in excess of billings totaling $52.1 million that
are subject to current or future claims that increased operating working capital
by nearly 15 days.
Through our Adesta Communications subsidiary, we have a license from the
Colorado and Utah departments of transportation to develop a fiber optic network
along Interstate 70 from Denver to Salt Lake City ("I-70 West"). On September
15, 1999, Adesta Communications entered into an agreement with 360networks for
360networks to acquire a portion of the network and fund 50% of the costs to
market and construct this route. During the third quarter of 2001, 360networks
filed for protection under Chapter 11 of the U.S. bankruptcy code in the U.S.
District Court Southern District of New York. As of July 31, 2001, we had
approximately $24.4 million of receivables and costs in excess of billings due
from 360networks for reimbursement of costs associated with the construction of
this network and various management and handling fees associated with the
construction of this network and certain
17
other services. We also had amounts due to 360networks of $17.2 million for
their portion of cost related to certain expenditures made by 360networks. We
have initiated legal action and are actively pursuing recovery of the amounts
owed by 360networks and held fiber cable contributed to the project. We believe
that our claim has merit and that there are substantive defenses to any
potential counterclaims. However, the ultimate realizability of such receivables
and costs in excess of billings is uncertain. As of April 30, 2001, we have
suspended construction of the I-70 West network pending securing additional user
agreements.
As of July 31, 2001, Adesta is owed $8.3 million by Metromedia Fiber Networks
with $1.4 million being over 90 days past due. Metromedia has been seeking
additional financing to remain solvent and has recently announced that it will
seek protection under bankruptcy laws if it cannot complete its proposed
financings. Adesta is currently in negotiations with Metromedia to settle the
outstanding amount. We currently believe this amount is realizable, however, the
ultimate recoverability remains uncertain.
In September 2001, WorldCom alleged certain defaults on the part of our
subsidiaries under the Amended and Restated Master Services Agreement, dated
August 24, 2000, between Able and a subsidiary of WorldCom (the "MSA"). WorldCom
also gave notice that it has significantly reduced the scope of work previously
provided to our subsidiaries under the MSA. We believe that the reduction in
work is inconsistent with the guaranteed minimum levels of work to be provided
to us under the MSA. Also in September 2001, WorldCom alleged that we were in
default of certain obligations under the Amended and Restated Commitment
Agreement, dated December 21, 2000, between Bracknell and WorldCom. WorldCom has
stated it regards the Commitment Agreement as terminated. The Commitment
Agreement principally provides for the funding by WorldCom of cash flow
requirements for Able's transportation division in excess of $20 million and
indemnification by WorldCom in respect of liability for certain events prior
Bracknell's acquisition of Able. We believe that WorldCom's claims are without
merit and that the Commitment Agreement does not allow for unilateral
termination by WorldCom. While we are currently engaged in discussions with
WorldCom to resolve these matters, no assurance can be given that such matters
will be resolved in a manner satisfactory to Bracknell. WorldCom was our largest
customer for the nine months ended July 31, 2001 representing revenues of
approximately $94 million.
Cash flows used in investing activities decreased to $57.7 million in the first
nine months of 2001 from $89.3 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, while the current year reflected 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 of Bracknell common stock valued at $114.2 million, options and warrants
valued at $4.5 million, approximately $85.0 million from our expanded bank
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.
Our Adesta Communications subsidiary has invested over $110.0 million through
July 31, 2001 for the development of certain network right of way developments.
These partially completed right of way developments were acquired as part of the
acquisition of Able Telcom in December 2000. Earlier this year, Adesta postponed
development of a long haul route along I-70 from Denver to Salt Lake City due to
lack of prospective sales. It has continued to complete metropolitan loops in
Denver and a route from San Francisco to Santa Clara. Adesta has invested
approximately $41.3 million since the acquisition to complete these networks.
Adesta expects it would require another $17.0 million to complete most of them
by this fall. Upon completion, $22.0 million would be due from currently
executed contracts with customers. Failure of the Company to execute sufficient
user agreements for the networks under construction could have a material
adverse effect on the carrying value of $47.4 million at July 31, 2001 and
recoverability of the Company's network assets.
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
July 31, 2001, the maximum potential payment under these agreements was
approximately $82.0 million. In the
18
third quarter of 2001, $3.1 million related to finalization of the earn-out for
Sylvan Industrial Services was charged to earnings as part of the restructuring
initiative.
Our cash flows from financing activities decreased to $137.1 million for the
first nine months of 2001 from $138.5 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 nine months of 2001, we repaid in full the notes
incurred to finance the Sunbelt acquisition ($19.9 million), made principal
payments under our term bank credit facility ($12.5 million), and repaid Able's
bank credit facility ($35.5 million).
If we successfully implement the amendments to the credit facilities and
consummate the equity financings, in each case, when and as described above,
then we believe our cash flows from operations (together with the increased
availability under our bank credit facilities and the net proceeds of such
financings) will be sufficient to finance our working capital and anticipated
capital spending requirements (excluding Adesta) for at least one year. We
believe Adesta will require additional financing or the successful monetization
of its network assets in order to have sufficient funds to finance its working
capital and anticipated capital spending requirements. Bracknell does not intend
to further fund the operations of Adesta, and is considering a number of
strategic alternatives with respect to that subsidiary, including sales of its
network and other assets, as well as other alternatives.
If we are unable to successfully implement the foregoing amendments to the
credit facilities and consummate the equity financings, each of which is subject
to significant conditions, then we would be unable to make the principal
payments to our senior lenders scheduled for December 21, 2001 and we would not
be in compliance with applicable financial covenants contained in our bank
credit facilities. As a result, our lenders could require full payment of the
outstanding borrowings under those facilities. In such circumstances, we would
need to secure alternative and immediate sources of liquidity to meet those
obligations and fund the continued operation of our business (the prospects for
which are uncertain and speculative) and may be forced to pursue strategic
alternatives for our business. In addition, if we are unable to make the
required payments to our lenders, they could initiate creditor proceedings with
respect to the Company and the assets of the Company securing those loans, which
would significantly impair our ability to continue our operations as currently
conducted.
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:
o Risks associated with the ability to implement cost savings
and operational strategy;
o Trends and conditions in our and our customers' industries,
including future consolidations;
o Risks associated with the ability to compete in local markets;
o Inability to further identify, develop and achieve commercial
success for new services;
o Increased competition and its effects on pricing, spending,
third-party relationships, the customer base and revenues;
o Inability to reduce operating working capital;
o Risks associated with the ability to integrate acquired
businesses;
o The importance of acquisitions for growth;
o Risks of new and changing regulation in the U.S. and
internationally;
o General, regional or telecommunications or other customer
business economic conditions;
o Access to capital by us or our customers;
o Risks of securing financing and funding working capital;
19
o Risks of maintaining adequate liquidity;
o Sufficient supply of skilled workers;
o Inability to monetize network assets; and
o Successful implementation of strategic alternatives.
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 July 31, 2001, we have not used derivative instruments
or engaged in hedging activities.
Interest Rates
As of July 31, 2001 the fair value of our total debt outstanding was estimated
to be $350.3 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 $2.6 million at
July 31, 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 July 31, 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 is
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.
20
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 11 "Commitments and Contingencies"
to the Consolidated Financial Statements.
The Company, through its Adesta Communications subsidiary, has a license from
the Colorado and Utah departments of transportation to develop a fiber optic
network along Interstate 70 from Denver to Salt Lake City ("I-70 West"). On
September 15, 1999, Adesta Communications entered into an agreement with
360networks for 360networks to acquire a portion of the network and fund 50% of
the costs to market and construct this route. During the third quarter of 2001,
360networks filed for protection under Chapter 11 of the U.S. bankruptcy code in
the U.S. District Court Southern District of New York. As of July 31, 2001, the
Company had approximately $24.4 million of receivables and costs in excess of
billings due from 360networks for reimbursement of costs associated with the
construction of this network and various management and handling fees associated
with the construction of this network and certain other services. The Company
also had amounts due to 360networks of $17.2 million for its portion of cost
related to certain expenditures made by 360networks. The Company has initiated
legal action and is actively pursuing recovery of the amounts owed by
360networks and held fiber cable contributed to the project. The Company
believes that its claim has merit and that there are substantive defenses to any
potential counterclaims, however, the ultimate realizability of such receivables
and costs in excess of billing is uncertain As of April 30, 2001, the Company
had suspended construction of the I-70 West network pending securing additional
user agreements.
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.
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
this 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 restrictions, 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, which has not been received to date. 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 into Bracknell common shares at
$8.75 per common
21
share, subject to adjustment as provided by the terms of the agreement. The
preferred shares are mandatorily redeemable at the earlier of:
o January 5, 2007, subject to the reasonable approval of our
lenders, or
o 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
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index of Exhibits included herein
(b) Reports on Form 8-K
None
22
INDEX OF EXHIBITS
Exhibit
Number
-------
2.1 Amended and Restated Agreement and Plan of Merger dated as of November
14, 2000 among Bracknell Corporation ("Bracknell"), Bracknell
Acquisition Corporation and Able Telcom Holdings Corp. Pursuant to Reg.
S-K, Item 601(b)(2), Bracknell agrees to furnish a copy of the
Disclosure Schedules to such Agreement to the Commission upon request
(Incorporated by reference to Amendment No. 2 to Registration Statement
on Form F-4 (Registration No. 333-47608))
3.1 Articles of Amalgamation of Bracknell, as amended to date (Incorporated
by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 2000 (Commission File No. 000-30966))
3.2 By-Laws of Bracknell (Incorporated by reference to the Company's
Registration Statement on Form F-4 (Registration No. 333-47608))
10.1.1 Second Amended and Restated Credit Agreement dated as of July 21, 2000
among Bracknell Corporation, Nationwide Electric, Inc. and The State
Group Limited, as borrowers, the lenders party thereto and the Royal
Bank of Canada. (Incorporated by reference to the Company's
Registration Statement on Form F-4 (Registration No. 333-47608))
10.1.2 Third Amended and Restated Credit Agreement, dated as of December 22,
2000 among Bracknell Corporation, Nationwide Electric, Inc. and The
State Group Limited, as borrowers, the lenders party thereto and Royal
Bank of Canada (Incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 2000
(Commission File No. 000-30966))
10.2.1 Credit Agreement dated as of July 21, 2000 among Bracknell Limited
Partnership, as borrower, the lenders party thereto and the Royal Bank
of Canada. (Incorporated by reference to the Company's Registration
Statement on Form F-4 (Registration No. 333-47608))
10.2.2 Amended and Restated Credit Agreement dated as of December 22, 2000
among Bracknell Limited Partnership, as borrower, the lenders party
thereto and the Royal Bank of Canada (Incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended October
31, 2000 (Commission File No. 000-30966))
10.2.3 Amending Agreement dated as of July 30, 2001, among Bracknell
Corporation, Bracknell Corporation (USA), Inc. (formerly Nationwide
Electric, Inc.) and The State Group Limited, Royal Bank of Canada, as
Administrative Agent and the financial institutions listed as Lenders
in the Third Amended and Restated Credit Agreement.
10.2.4 Amending Agreement dated as of July 30, 2001, among Bracknell Limited
Partnership, Royal Bank of Canada, as Administrative Agent and the
financial institutions listed as Lenders in the Third Amended and
Restated Credit Agreement
10.2.5 Second Amending Agreement dated as of September 19, 2001, among
Bracknell Corporation, Bracknell Corporation (USA), Inc. (formerly
Nationwide Electric Inc.) and The State Group Limited, Royal Bank of
Canada, as Administrative Agent and the financial institutions listed
as Lenders in the Third Amended and Restated Credit Agreement.
10.2.6 Second Amending Agreement dated as of September 19, 2001, among
Bracknell Limited Partnership, Royal Bank of Canada, as Administrative
Agent and the financial institutions listed as Lenders in the Third
Amended and Restated Credit Agreement.
10.3.1 Bracknell Corporation Employee Share Purchase Plan (U.S.) (Incorporated
by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 2000 (Commission File No. 000-30966))
10.3.2 Bracknell Corporation Employee Share Purchase Plan (Canada)
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 2000 (Commission File No.
000-30966))
10.4 Bracknell Corporation Retirement Savings Plan for U.S. Employees
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 2000 (Commission File No.
000-30966))
10.5 Bracknell Corporation Stock Option Plan (Incorporated by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 2000 (Commission File No. 000-30966)
10.6.1 Employment Agreement of Paul D. Melnuk (Incorporated by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 2000 (Commission File No. 000-30966))
10.6.2 Form of Employment Agreement (Incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended October
31, 2000 (Commission File No. 000-30966))
10.7 Bracknell Corporation Employee Share Purchase Plan (U.S.) (Incorporated
by reference to Registration Statement on Form S-8 dated April 27,
2001)
15.0 Letter re unaudited interim financial information
21.1 Subsidiaries of Bracknell (Incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 2000
(Commission File No. 000-30966))
All other schedules and exhibits are omitted because they are either not
applicable or not required in this filing.
23
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)
September 24, 2001
24