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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1994
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 0-3797
BURNUP & SIMS INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 59-1259279
_____________________________________________ ________________
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
One North University Drive, Ft. Lauderdale, FL 33324
______________________________________________ _________
(Address of principal executive offices) (Zip Code)
(305) 587-4512
____________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
____________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such report), and (2) has been subject to such filing requirements
for the past 90 days.
X
Yes _______ No _______
Indicate the number of share outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class of Common Stock Outstanding as of January 31, 1994
_____________________ __________________________________
$ .10 par value 8,768,339
Page 1 of 20
BURNUP & SIMS INC.
Form 10-Q
January 31, 1994
Index
Page
PART I FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Statements
of Income for the Three and Nine Month
Periods Ended January 31, 1994 and 1993. . . . 3
Unaudited Condensed Consolidated Balance
Sheets as of January 31, 1994 and
April 30, 1993 . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements
of Cash Flows for the Nine Month Periods
Ended January 31, 1994 and 1993 . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements (Unaudited). . . . . . . . 7
Item 2 - Management's Discussion and Analysis
of Results of Operations and
Financial Condition. . . . . . . . . . . . . . 14
PART II OTHER INFORMATION
Item 1 - Legal Proceedings. . . . . . . . . . . . . . . 18
Item 4 - Results of Votes of Security Holders . . . . . 18
Item 5 - Other Information. . . . . . . . . . . . . . . 19
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . 19
Signature Page. . . . . . . . . . . . . . . . . . . . . 20
Page 2 of 20
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
1994 1993 1994 1993
-------- -------- -------- --------
(Unaudited)
Revenues $ 31,352 $ 32,776 $ 103,355 $ 106,610
-------- -------- -------- --------
Costs and Expenses
Costs of Revenues (exclusive of 27,387 30,579 90,747 92,685
depreciation and amortization
shown separately below)
General and Administrative 3,833 3,736 11,970 11,880
Depreciation and Amortization 1,156 1,487 3,682 4,676
Interest Expense 939 1,116 2,982 3,518
Interest and Dividend Income (973) (974) (2,930) (3,024)
Other (151) 289 (3,450) (442)
-------- -------- -------- --------
Total Costs and Expenses 32,191 36,233 103,001 109,293
-------- -------- -------- --------
Income (Loss) Before Income Taxes (839) (3,457) 354 (2,683)
Provision (Credit) for Income Taxes (254) (1,279) 30 (993)
-------- -------- -------- --------
NET INCOME (LOSS) $ (585) $ (2,178) $ 324 $ (1,690)
======== ======== ======== ========
Average Shares Outstanding 8,768 8,768 8,815 8,768
Earnings (Loss) Per Share $ (0.07) $ (0.25) $ 0.04 $ (0.19)
See Notes to Condensed Consolidated Financial Statements
Page 3 of 20
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
JANUARY 31, APRIL 30,
1994 1993
---------- ---------
(Unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents $ 6,605 $ 9,612
Accounts Receivable-Net and Unbilled Revenues 18,369 22,886
Inventories 3,706 4,246
Deferred and Refundable Income Taxes 5,468 4,310
Notes Receivable-NBC - Current Portion 2,805 305
Other 2,521 1,261
---------- ---------
Total Current Assets 39,474 42,620
---------- ---------
Preferred Stock and
Long-Term Notes Receivable-NBC 28,495 31,184
---------- ---------
Property-At Cost 73,262 74,854
Accumulated Depreciation (56,387) (56,818)
---------- ---------
Property-Net 16,875 18,036
---------- ---------
Excess of Costs Over Equity of Businesses Acquired 3,174 3,279
---------- ---------
Real Estate Investments and Other Assets 13,780 13,798
---------- ---------
TOTAL ASSETS $ 101,798 $ 108,917
========== =========
See Notes to Condensed Consolidated Financial Statements
Page 4 of 20
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
JANUARY 31, APRIL 30,
1994 1993
---------- ---------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Maturities of Debt $ 3,930 $ 3,873
Accounts Payable 6,722 9,821
Accrued Insurance 3,237 2,839
Accrued Compensation 1,088 1,970
Accrued Interest 768 1,499
Accrued and Deferred Income Taxes 0 57
Other 6,421 6,362
---------- ---------
Total Current Liabilities 22,166 26,421
---------- ---------
Other Liabilities 13,616 12,076
---------- ---------
Long-Term Debt 10,153 12,256
---------- ---------
Convertible Subordinated Debentures 21,875 24,500
---------- ---------
Shareholders' Equity
Common Stock 1,602 1,602
Capital Surplus 72,860 72,860
Retained Earnings 33,666 33,342
Treasury Stock (74,140) (74,140)
---------- ---------
Total 33,988 33,664
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 101,798 $ 108,917
========== =========
See Notes to Condensed Consolidated Financial Statements
Page 5 of 20
BURNUP & SIMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
NINE MONTHS ENDED
JANUARY 31,
1994 1993
-------- --------
(Unaudited)
Cash Flows from Operating Activities:
Net Income $ 324 $ (1,690)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 3,682 4,676
Gain on Sale of Assets (2,820) (503)
Gain on Repurchase of Debentures (295) (291)
Changes in Working Capital:
Accounts Receivable-Net and Unbilled Revenues 4,517 3,023
Inventories and Other Current Assets (721) (1,415)
Accounts Payable and Accrued Expenses (3,584) (2,988)
Interest and Income Taxes (1,946) (1,209)
Other Current Liabilities 60 (2,504)
Other-Net 1,757 619
-------- --------
Net Cash Provided (Used) by Operating Activities 974 (2,282)
-------- --------
Cash Flows from Investing Activities:
Capital Expenditures (1,333) (3,526)
Proceeds from Sale of Assets 3,971 795
-------- --------
Net Cash Provided (Used) by Investing Activities 2,638 (2,731)
-------- --------
Cash Flows from Financing Activities:
Debt Borrowings 0 5,240
Debt Repayments (6,619) (8,319)
-------- --------
Net Cash Provided (Used) by Financing Activities (6,619) (3,079)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (3,007) (8,092)
Cash and Cash Equivalents - Beginning of Period 9,612 13,335
-------- --------
Cash and Cash Equivalents - End of Period $ 6,605 $ 5,243
======== ========
Cash Paid (Refunded) During the Period:
Interest $ 3,828 $ 4,284
Income Taxes 384 48
See Notes to Condensed Consolidated Financial Statements
Page 6 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1994 (Unaudited)
1. CONSOLIDATION AND PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Burnup & Sims Inc. (the "Company" or "Burnup &
Sims") have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and notes
required by generally accepted accounting principles for
complete financial statements. The information furnished
reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for
the periods presented. The results of operations are not
necessarily indicative of results which might be expected for
the entire fiscal year. The condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the
Company's Annual Report on Form 10-K, as amended, for the year
ended April 30, 1993. Certain prior year amounts have been
reclassified to conform to the current presentation.
2. PREFERRED STOCK AND NOTES RECEIVABLE - NBC
Preferred Stock and Notes Receivable - NBC is comprised of the
following:
Jan. 31, April 30,
(Dollars in Thousands) 1994 1993
_________________________________________________________________
Series C 7% Preferred Stock
150,000 shares $12,700 $12,700
14% Subordinated Debenture
due 1994 through 2000,
net of discount 17,304 17,265
Promissory Note due
April 30, 1998 1,296 1,524
_________________________________________________________________
Total 31,300 31,489
Less: Current Portion (2,805) (305)
_________________________________________________________________
Preferred Stock and Long-Term
Notes Receivable - NBC $28,495 $31,184
_________________________________________________________________
National Beverage Corp. ("NBC") owns approximately 36% of the
Company's outstanding common stock (the "Common Stock"). Nick A.
Caporella, Chairman of the Board, President and Chief Executive
Officer of the Company and NBC, beneficially owns approximately 76%
of the common stock of NBC. (See Note 10 for certain information.)
Page 7 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1994 (Unaudited)
3. OTHER LIABILITIES
Other Liabilities are summarized as follows:
Jan. 31, April 30,
(Dollars in Thousands) 1994 1993
__________________________________________________________________
Deferred Income Taxes $ 4,390 $ 3,612
Accrued Interest - Non-Current 2,072 2,187
Accrued Insurance 7,154 6,277
__________________________________________________________________
$13,616 $12,076
__________________________________________________________________
4. DEBT
Debt is summarized as follows:
Jan. 31, April 30,
(Dollars in Thousands) 1994 1993
__________________________________________________________________
Term Loan payable to Bank,
at Prime plus 1/2% (6 1/2% at Jan. 31, $ 9,263 $12,849
1994)
Capital Leases and Other, at Interest
Rates from 9% to 13% due in Installments
through 2000 2,195 655
12% Convertible Subordinated Debentures
due 2000 24,500 27,125
__________________________________________________________________
Total Debt 35,958 40,629
Less Current Maturities 3,930 3,873
__________________________________________________________________
Non-Current Debt $32,028 $36,756
__________________________________________________________________
The indenture under which the 12% convertible subordinated
debentures (the "Debentures") are issued requires an annual
payment to a sinking fund, which commenced November 15, 1990,
calculated to retire 75% of the issue prior to maturity. The
Company has the option to redeem all or part of the Debentures
prior to the due date by paying the principal amount at face
value. Other income includes gains of approximately $295,000
and $291,000 for the nine month periods ended January 31, 1994
and 1993, respectively, from the repurchase of $2,625,000 face
amount of Debentures acquired to meet sinking fund requirements.
The Debentures are convertible into Common Stock at a conversion
price of $16.79 per share. At January 31, 1994, approximately
1,459,000 shares were reserved for conversion.
In accordance with the Company's term loan agreement (the "Term
Loan"), during the quarter ended July 31, 1993, net proceeds of
approximately $2.9 million from the sale of theatre property
which had been pledged as collateral for the Term Loan was
Page 8 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1994 (Unaudited)
applied to the final installments due under the Term Loan.
Debt agreements contain, among other things, restrictions on the
payment of dividends and require the maintenance of certain
financial covenants. Pursuant to its loan agreements, the
Company is currently prohibited from declaring or paying dividends.
In connection with the Acquisition and Redemption (hereafter defined),
the Term Loan was modified on March 11, 1994 (See Note 10).
During the nine months ended January 31, 1994, the Company
acquired approximately $2,049,000 of assets under capital leases.
5. EARNINGS PER SHARE AND CAPITAL STOCK
Earnings per share is based on the weighted average number of
common shares outstanding. Fully diluted earnings per share
(assuming conversion of the Debentures with corresponding
adjustments for interest expense, net of tax) is not presented
as the effect is anti-dilutive or not material.
At January 31, 1994 and April 30, 1993, the Company had
25,000,000 shares of $.10 par value common stock (the "Common
Stock") authorized and 8,768,339 shares outstanding.
Additionally, at January 31, 1994 and April 30, 1993, the Company
had 5,000,000 shares of authorized but unissued preferred stock
and 7,253,375 shares of Common Stock held in treasury.
6. STOCK OPTION PLANS
The Company has two non-qualified stock option plans (the "1976
Plan" and the "1978 Plan") which provide for the granting of
options to purchase Common Stock to key employees at prices equal
to the fair market value on the date of grant. The 1976 Plan
expires in August, 1994 and the 1978 Plan expired in November 1993.
The 1976 Plan generally provides that options may be exercised in
four increments beginning eighteen months subsequent to the date
of grant. Upon exercise of the option, the Company will reduce
the optionee's purchase price by an amount equal to the increase
in the fair market value of such shares on the date the option
was granted. The purchase price, however, cannot exceed 85% of
the fair market value of such shares on the exercise date, and in
no event can the exercise price be less than $.10 per share. The
holder of the option has the alternative right to cancel such
option and instead to exercise a stock appreciation right
entitling the holder to receive cash under certain circumstances,
subject to certain maximum limitations.
The 1978 Plan provides that options may be exercised in four
increments beginning one year subsequent to the date of grant.
There is no subsequent adjustment of the purchase price.
Page 9 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1994 (Unaudited)
During the quarter ended July 31, 1993, options to purchase
approximately 238,000 shares which were outstanding under the
1976 Plan with an average exercise price of $5.93 were canceled
and replaced with options to purchase 114,000 shares granted at
an exercise price of $2.00. Such replacement options were 50%
exercisable at the date of grant and the remainder became
exercisable at December 2, 1993. Additionally, during the
quarter ended July 31, 1993, options to purchase 138,000 shares
were granted under both plans at a grant price of $2.00. At
January 31, 1994, options to purchase approximately 252,000
shares at a grant price of $2.00 per share were outstanding under
both the 1976 and 1978 plans, of which approximately 114,000
shares were exercisable (See Note 10).
7. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," effective May 1,
1993. This Statement superseded SFAS No. 96, "Accounting for
Income Taxes," which was adopted by the Company in the fiscal
year ended April 30, 1988. The adoption of SFAS No. 109 did not
impact the Company's statement of income or the components of
income tax expense for the periods ended January 31, 1994.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes, and (b) operating loss and tax credit
carryforwards. The tax effects of significant items comprising
the Company's net deferred tax liability as of May 1, 1993 are as
follows (in thousands of dollars):
Deferred tax liabilities:
_________________________________________________________________
Differences between book and tax basis of property $5,968
Other 2,505
_________________________________________________________________
8,473
_________________________________________________________________
Deferred tax assets:
_________________________________________________________________
Reserves not currently deductible (4,652)
Operating loss carryforwards (490)
Tax credit carryforwards (112)
_________________________________________________________________
(5,254)
_________________________________________________________________
Valuation allowance 309
_________________________________________________________________
Net deferred tax liability $3,528
_________________________________________________________________
Page 10 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1994 (Unaudited)
There was no change in the valuation allowance for the periods
ended January 31, 1994.
8. SALE OF PROPERTY
Net income for the nine months ended January 31, 1994 includes a
gain from the sale of theatre property of approximately $1.6
million, net of tax, or $.19 per share.
9. LITIGATION
Albert H. Kahn v. Nick A. Caporella, et al., Civil Action No.
11890 was filed on December 1990 by a stockholder of the Company
in the Court of Chancery of the State of Delaware in and for New
Castle County against the Company, the members of the Board of
Directors, and against NBC, as a purported class action and
derivative lawsuit. In May 1993, plaintiff amended its class
action and shareholder derivative complaint (the "Amended
Complaint"). The class action claims allege, among other things,
that the Board of Directors, and NBC as its largest stockholder,
breached their respective fiduciary duties in approving (i) the
distribution to the Company's stockholders of all of the common
stock of NBC owned by it (the "Distribution") and (ii) the
exchange by NBC of 3,846,153 shares of Common Stock for certain
indebtedness of NBC held by the Company (the "Exchange") (the
Distribution and the Exchange are hereinafter referred to as the
"1991 Transaction"), in allegedly placing the interests of NBC
ahead of the interests of the other stockholders of the Company.
The derivative action claims allege, among other things, that the
Board of Directors has breached its fiduciary duties by approving
executive officer compensation arrangements, by financing NBC's
operations on a current basis, and by permitting the interests of
the Company to be subordinated to those of NBC. In the lawsuit,
plaintiff seeks to rescind the 1991 Transaction and to recover
damages in an unspecified amount.
The Amended Complaint alleges that the Special Transaction
Committee that approved the 1991 Transaction was not independent
and that, therefore, the 1991 Transaction was not protected by
the business judgment rule or in accordance with a settlement
agreement (the "1990 Settlement") entered into in 1990 pertaining
to certain prior litigation. The Amended Complaint also makes
other allegations which involve (i) further violations of the
1990 Settlement by the Company's engaging in certain transactions
not approved by the Special Transaction Committee; (ii) the sale
of a subsidiary of the Company to a former officer of the
Company, (iii) the timing of the 1991 Transaction and (iv) the
treatment of executive stock options in the 1991 Transaction.
In November 1993, plaintiff filed a class action and
derivative complaint, Civil Action 13248, (the "1993 Complaint")
against the Company, the members of the Board of Directors,
Page 11 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1994 (unaudited)
CT, CTF, Jorge Mas Canosa, Jorge Mas and Juan Carlos Mas
(CT, CTF, Jorge Mas Canosa, Jorge Mas and Juan Carlos Mas are
referred to as the "CT Defendants"). In December 1993, plaintiffs
amended the 1993 Complaint ("1993 Amended Complaint"). The 1993
Amended Complaint alleges, among other things, that (i) the Board
of Directors and NBC, as the Company's largest stockholder, breached
their respective fiduciary duties by approving the Acquisition
Agreement and the Redemption which, according to the allegations of
the 1993 Complaint, benefits Mr. Caporella at the expense of the
Company's stockholders, (ii) the CT Defendants had knowledge of the
fiduciary duties owed by NBC and the Board of Directors and
knowingly and substantially participated in their breaches thereof,
and (iii) the Special Transaction Committee of the Board of
Directors which approved the Acquisition Agreement and Redemption
was not independent and, as such, was not in accordance with the
1990 Settlement, (iv) the Board of Directors breached its fiduciary
duties by failing to take an active and direct role in the sale of the
Company and failing to ensure the maximization of stockholder value in
the sale of control of the company; and (v) the Board of Directors and
NBC, as the Company's largest stockholder, breached their respective
fiduciary duties by failing to disclose completely all material
information regarding the Acquisition Agreement and the Redemption.
The 1993 Complaint also claims derivatively that each member of the
Board of Directors engaged in mismanagement, waste and breach of their
fiduciary duties in managing the Company's affairs. On November 29,
1993, plaintiff filed a motion for an order preliminarily and
permanently enjoining the Acquisition and the Redemption. On March 7,
1994, the court heard arguments with respect to plaintiff's motion to
enjoin the Acquisition and Redemption and on March 10, 1994, the court
denied plaintiff's request for injunctive relief.
The Company believes that the allegations in the complaint, the
Amended Complaint and the 1993 Complaint and the 1993 Amended Complaint
are without merit, and intends to vigorously defend this action.
William C. Deviney, Jr. v. Burnup & Sims Inc., et al. Civil
Action No. 152350 was filed in the Chancery Court of the First
Judicial District of Hines County, Mississippi on May 3, 1993.
The plaintiff in this action filed suit seeking specific
performance of alleged obligations of the Company pursuant to a
stock purchase agreement and related agreements entered into in
1988. Pursuant to the agreements, the Company sold to plaintiff
a minority interest in a Telephone Services subsidiary and
granted to plaintiff an option to purchase the remaining stock if
certain conditions were satisfied. Alternatively, plaintiff
seeks unspecified damages for breach of contract and for alleged
breaches of fiduciary duties, and seeks an award of punitive
damages and attorneys' fees for alleged bad faith conduct in
connection with the stock purchase agreement and related matters.
The Company believes that the allegations in the complaint are
without merit and is vigorously defending this action.
Additionally, the Company has filed counterclaims which, among
other things, seek a declaratory judgment that the plaintiff's
failure to satisfy certain material conditions terminated his
rights under the stock purchase agreement. The evidentiary
portion of the trial proceedings relative to these actions
concluded on November 19, 1993 and the Court has not yet
rendered a verdict.
Page 12 of 20
BURNUP & SIMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
JANUARY 31, 1994 (Unaudited)
10. SUBSEQUENT EVENTS.
Pursuant to an agreement dated October 15, 1993 (the "Acquisition
Agreement"), as amended, by and among the Company and the
stockholders of Church & Tower, Inc. ("CT") and Church & Tower of
Florida, Inc. ("CTF"), on March 11, 1994, the Company acquired
("the Acquisition") all of the issued and outstanding capital
stock of CT and CTF in exchange for 10,250,000 shares of Common
Stock representing approximately 65% of the outstanding Common
Stock following consummation of the Acquisition and the
Redemption discussed below. These transactions were approved by
shareholders and consummated on March 11, 1994.
Immediately after the consummation of the Acquisition, the Company
exchanged all of the Common Stock of the Company owned by NBC for the
14% subordinated debenture in the principal amount of $17,500,000
(book value of $17,304,000) and $593,000 of indebtedness under a
promissory note due April 30, 1998 owed by NBC (the "Redemption").
Immediately following the closing of the Acquisition and the
Redemption, the board of directors of the Company was expanded
from five to seven members, four designees of CT and CTF (including
Mr. Jorge L. Mas Canosa) were appointed to the Board and Messrs.
Nick A. Caporella, and Leo J. Hussey resigned from the Board of
Directors in accordance with the terms of the Acquisition Agreement.
In addition, Mr. Cecil D. Conlee resigned from the board. Also, the
name of the Company was approved to be changed to MasTec, Inc. and
Jorge Mas, President of CT was elected President and Chief Executive
Officer of the Company.
The Acquisition Agreement also provided, among other things, that
upon termination of employment with the Company under certain
circumstances, the vesting period for all options held by the
terminated employees shall be accelerated. In accordance with
this provision, 163,000 options to purchase shares of Common
Stock issued under the 1976 and 1978 Plans were exercised and
stock appreciation rights with respect to 55,965 shares were
exercised. In addition, on March 11,1994, shareholders approved
the Company's 1994 Stock Option Plan for Non Employee Directors
and the 1994 Stock Incentive Plan. An amendment to the Company's
certificate of incorporation increasing the total number of shares
of Common Stock which the Company is authorized to issue from
25,000,000 to 50,000,000 was also approved.
Additionally, on March 11, 1994, the Company's bank lender
delivered a written consent to the Acquisition and Redemption,
and certain modifications of the Term Loan became effective,
including the change in maturity date from August 2, 1997 to June
1, 1995, and the elimination of substantially all financial
covenants other than the requirement to maintain certain minimum
working capital and tangible equity.
Page 13 of 20
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
JANUARY 31, 1994
RESULTS OF OPERATIONS
Three Months Ended January 31, 1994 (Third Quarter of the Fiscal
Year Ending April 30, 1994) vs. Three Months Ended January 31,
1993 (Third Quarter of the Fiscal ended April 30, 1993)
_________________________________________________________________
Revenues for the third quarter of the current year decreased
approximately $1.4 million or 4% primarily as a result of the
closing of certain telephone services areas of operation during
the latter half of the prior fiscal year. Certain telephone
services contracts which commenced in the third quarter of 1993
as well as increased sales generated by the Company's theatre and
printing operations mitigated the decline. Costs of revenues
approximated 87% and 93% of revenues for the third quarter of
fiscal 1994 and 1993, respectively. Last year's margins were
impacted by reduced economies of scale caused by the loss of
certain telephone services contracts due to competitive pressures
and costs associated with starting new telephone services contracts
during the third quarter of 1993.
The increase in general and administrative expenses primarily
results from stock option compensation expense of approximately
$488,000 which was accrued by the Company during the third
quarter of 1994 based upon the increase in the market value of
the Common Stock as of January 31, 1994.
Reduced depreciation and amortization (3.7% of revenues for the
current year vs. 4.5% of revenues last year) results from the
write-off of certain goodwill in the fourth quarter of fiscal
1993, the effect of asset disposals and reduced levels of capital
expenditure spending by the Company in certain prior periods.
Interest expense decreased for the quarter due to reduced levels
of outstanding debt. Additionally, other costs and expenses for
the third quarter resulted in income of $151,000 for the third
quarter of 1994 versus an expense of $289,000 in 1993 due to the
inclusion in last year's results of costs related to the
expiration of a certain option and payments made to settle
certain legal proceedings.
The credit for income taxes approximates 30% and 37% of pretax
income for the three months ended January 31, 1994 and 1993,
respectively, due primarily to the effect on taxable income of
certain state income taxes and preferred stock dividends.
Operations of the Company are somewhat seasonal and this has
historically resulted in reduced revenues during the third
quarter (November, December and January) relative to other
quarters.
Page 14 of 20
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
JANUARY 31, 1994
During winter months, inclement weather in certain areas reduces
the volume and efficiencies of outside service activities.
Additionally, certain utility customers may reduce expenditures
for plant construction and maintenance during the latter part of
their budgetary year, which typically ends in December.
Nine Months Ended January 31, 1994 vs. Nine Months
Ended January 31, 1994
_________________________________________________________________
Revenues for the nine months ended January 31, 1994 decreased
approximately $3.3 million or 3% when compared to the nine months
ended January 31, 1993. The decline is principally the result of
the closing of certain telephone services areas of operation
during the latter half of the prior fiscal year. Costs of
revenues approximates 88% of sales for the nine month period of
1994 and reflects operating inefficiencies and losses incurred on
a telephone services contract which commenced in the latter
portion of fiscal year 1993, mobilization expenses related to
changes in geographical areas of operation, and start-up costs
caused by the diversification of commercial printing services
offered by the Company. Costs of revenues approximates 87% of
sales for the nine month period of 1993; an improvement in
margins during the first six months of 1993 was offset by higher
costs incurred during the third quarter of 1993 (as explained
above).
General and administrative expense for the nine months ended
January 31, 1994 includes stock option compensation expense of
approximately $950,000 which was accrued by the Company during
the current year based upon an increase in the market value of
the Common Stock as of January 31, 1994. The decreases in
depreciation and amortization and interest expense are due
primarily to the reasons cited in the third quarter discussion.
The nine months ended January 31, 1994 includes a gain from the
sale of theatre property of approximately $2.4 million (included
in other income) net of income taxes of approximately $800,000.
Additionally, other income includes gains of approximately
$295,000 and $291,000 for the nine months ended January 31, 1994
and 1993, respectively, from the Company's repurchase of its
Debentures (See Note 4 to the Condensed Consolidated Financial
Statements.)
The Company's effective tax rate decreased as a percentage of
pretax income due to the effect on taxable income of certain
state income taxes and reduced permanent differences resulting
from the fiscal 1993 goodwill write-off.
Page 15 of 20
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
JANUARY 31, 1994
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
January 31, 1994 vs. April 30, 1993
_________________________________________________________________
The Company's cash position decreased to $6.6 million at January
31, 1994 from $9.6 million at April 30, 1993. Cash of $974,000
was provided by operating activities due primarily to changes in
various components of working capital and other liabilities
during the year. Cash of $2.6 million was provided by investing
activities resulting from sales of assets offset by capital
expenditures; cash used by financing activities approximated
$6.6 million resulting from debt repayments.
Debt agreements contain, among other things, restrictions on the
payment of dividends and require the maintenance of certain
financial covenants. Pursuant to such covenants, the Company is
currently prohibited from declaring or paying dividends. In
connection with the Acquisition and the Redemption, the Term Loan
was modified on March 11, 1994 (See Note 10 to the Condensed
Consolidated Financial Statements).
Long-term debt decreased during the year since, in accordance
with the Company's term loan agreement, net proceeds of
approximately $2.9 million from the sale of certain theatre
property which had been pledged as collateral for the Term Loan
was applied to the final installments due under the Term Loan.
Additionally, the Company repurchased $2.6 million face amount of
debentures during the second quarter. (See Note 4 to the
Condensed Consolidated Financial Statements.)
The Company adopted Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes" effective May
1, 1993. The adoption had no impact on income for the nine months
ended January 31, 1994. Prior year's financial statements have
not been restated to apply the provisions of SFAS No. 109. The
January 31, 1994 balance sheet includes increases in other
current assets and other liabilities of $555,000 and $778,000,
respectively, and a decrease in accrued and deferred income taxes
of $223,000 resulting from the implementation of SFAS 109.
The Company currently anticipates that operating cash requirements,
capital expenditures and debt service will substantially be funded
from cash flow generated by operations and dividend income. The
Company has no material commitments for capital expenditures.
Page 16 of 20
BURNUP & SIMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
JANUARY 31, 1994
On March 11, 1994, the shareholders of the Company approved an
agreement to acquire Church & Tower, Inc. and Church & Tower of
Florida, Inc. and, as a condition to the Acquisition, the
redemption of shares of Common Stock owned by NBC. (See Note 10
to the Condensed Consolidated Financial Statements.)
Page 17 of 20
BURNUP & SIMS INC.
PART II - OTHER INFORMATION
JANUARY 31, 1994
Item 1. Legal Proceedings
See Note 9 to the Condensed Consolidated Financial
Statements.
Item 4. Results of Votes of Security Holders.
The 1993 Annual and Special Meeting of Stockholders of Burnup &
Sims Inc. (the "Meeting") was held on Friday, March 11, 1994 for
the purpose of (1) electing one director, (2) approving the
Acquisition and Redemption (see note 10 to the Condensed
Consolidated Financial Statements), (3) approving an amendment to
the Company's certificate of incorporation (the "Certificate")
changing the name of the Company to MasTec, Inc. (4) approving an
amendment to the Certificate increasing the total number of
shares of Common Stock which the Company is authorized to issue
from 25,000,000 to 50,000,000, (5) approving an amendment to the
Certificate to eliminate all designations, powers, preferences,
rights and qualifications, limitations and restrictions prescribed
in the Certificate relating to the 5,000,000 authorized shares of
preferred stock, (6) approving an amendment to the Certificate to
adopt the provisions of Section 102(b)(7) relating to the
liability of directors, (7) approving an amendment to the
Certificate to broaden the corporate powers of the Company to the
maximum extent permitted by the Delaware general corporation law
and make certain other clarifications to the Certificate, (8)
approving the Company's 1994 stock option plan for non-employee
Directors, and (9) approving the Company's 1994 Stock Incentive
Plan.
The following summarizes the results of the vote for each issue
listed above:
Number of Shares Voted
_________________________________________
Against or
Issue For Withheld Abstaining
_________ ________ __________
1 8,040,149 295,627 0
2 6,445,375 90,278 45,149
3 8,152,157 104,398 59,421
4 7,824,602 465,643 45,731
5 6,011,994 500,283 81,606
6 7,890,166 349,013 96,797
7 7,564,843 349,235 64,740
8 5,964,410 549,872 79,601
9 5,986,055 515,131 79,616
At the meeting, Mr. Samuel C. Hathorn, Jr. was elected a Class II
director. Mr. William A. Morse remains a Class I director until
his term expires at the annual meeting of stockholders in 1995.
Page 18 of 20
BURNUP & SIMS INC.
PART II - OTHER INFORMATION
JANUARY 31, 1994
At a meeting of the Board of Directors held subsequent to the Meeting,
Messrs. Nick A. Caporella and Leo J. Hussey resigned as directors in
accordance with the terms of the Acquisition Agreement. In addition,
Mr. Cecil D. Conlee resigned from the Board. Messrs. Jorge L. Mas Canosa,
Jorge Mas, Elliot C. Abbott, and Arthur B. Laffer were then appointed to
the Board.
Item 5. Other Information
The Company entered into an Agreement to acquire Church &
Tower, Inc. and Church and Tower of Florida, Inc. (See Note 10 to
the Condensed Consolidated Financial Statements.) A definitive
proxy statement dated February 10, 1994 describing the
transactions relative to the Acquisition was sent to stockholders
of record as of January 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Not applicable.
(b) Reports on Form 8-K.
Not applicable.
Page 19 of 20
BURNUP & SIMS INC.
SIGNATURES
FORM 10-Q
Pursuant to the requirement 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.
BURNUP & SIMS INC.
Registrant
Date: March 16, 1994 /s/ Carlos Valdes
________________________
Carlos Valdes
Sr. Vice-President - Finance
(Principal Financial Officer)
and
Authorized Officer of the
Registrant
Page 20 of 20