Well Bill, judging from the effects from the last quarterly report, where they missed estimates of .16 and only made .03 and buried this announcement in the SEC report only and never issued a public statement since (we are talking no public announcements since May 15), it really shouldn't matter what they report in the future. First Call is still waiting to be updated and only has estimated e.p.s. of .16 to date.
And I thought internet stocks were crazy. The forward P/E on SCTR is roughly 100. And that's if they meet future estimates. This is way out of line with the competition.
sec.yahoo.com
May 15, 1998
SPECIALTY TELECONSTRUCTORS INC (SCTR)
Quarterly Report (SEC form 10QSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
Statements contained herein that are not historical facts are forward-looking statements ("forward-looking statements") within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those sections. In addition, such forward-looking statements may be contained in filings made by the Company with the Securities and Exchange Commission, or press releases or oral statements made from time to time by or with the approval of an authorized executive officer of the Company. Such forward-looking statements are necessarily estimates reflecting the best judgment of the Company's management based upon current information and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, those set forth in the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997 under the caption "ITEM 6, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statements" and elsewhere therein and appearing from time to time in filings made by the Company with the Securities and Exchange Commission. These risks, uncertainties and other factors should not be construed as exhaustive and the Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
Plan of Operations
Management believes that wireless carriers, which have traditionally owned and operated their own transmission tower assets, have been evaluating the new opportunities of outsourcing the ownership and operation of their wireless infrastructure. Many carriers are considering the benefits of entering into "build-to-suit" arrangements, in which an independent tower company builds a
group of tower sites for a wireless carrier. The third-party provider owns, leases and operates the wireless infrastructure, often with multiple carriers as tenants on a given tower. The build-to-suit program offers an end-to-end solution to wireless carriers and is designed to reduce carriers' capital expenditures and overhead associated with the traditional methods of acquiring and owning their wireless networks. Strategically, management has sought to capitalize on carrier build-to-suit demand, due primarily to the lower cost advantages anticipated, as the Company can use internal labor and components in fulfilling build-to-suit agreements. Thus late in the second fiscal quarter, certain senior management personnel began focusing on opportunities to provide build-to-suit services to wireless carriers. As of March 31, 1998, approximately 16 sites were under written/oral commitments from five wireless carriers. As of May 14, 1998, an additional 42 were under written/oral commitment status. The Company currently intends to continue its businesses of constructing transmission towers for third parties and the fabrication of tower components. There can be no assurance that the Company will successfully enter into significant build-to-suit agreements with any wireless carrier or group of carriers or that it will be able to reach definitive agreements with the owners of sites not currently under written contract or develop the sites in a cost-effective manner. As the Company focuses its resources on tower ownership, revenues from its construction operations are likely to decline. Management believes that the decline in revenues from its construction operations will be mitigated over time by the recurrent revenue stream expected from tower ownership, including revenues from the transmission towers acquired in the OmniAmerica Holdings Merger on April 23, 1998, as discussed in "Note 3. Subsequent Events" to the Company's Consolidated Financial Statements set forth above.
Results of Operations
For the Three-Month Periods Ended March 31, 1998 and 1997:
Revenues. The Company's revenues for the three-month period ended March 31, 1998 decreased approximately 14% to $15,451,474 from $18,021,774 for the same three-month period in the prior year. Management believes the decrease in revenues is principally attributable to a slower rollout of the wireless infrastructure building and implementation activity in the U.S. compared to the same period in 1997, as the wireless carrier industry evaluated the new opportunities for build-to-suit services noted above, and the Company's focus on obtaining and developing sites for ownership.
Gross Profit. Gross profit as a percentage of revenues decreased from approximately 20% for the three-month period ended March 31, 1997 to approximately 9% for the period ended March 31, 1998. Gross profit for the three-month period ended March 31, 1998 decreased approximately 63% to $1,333,500 from $3,641,083 for the same three-month period in the prior year. The decrease resulted from a conscious decision by management to retain the current workforce in anticipation of the rollout expected for build-to-suit programs. Field personnel were mobilized throughout the nation to meet regional workloads, despite the additional costs to be incurred. In addition, management directed the efforts of certain senior management personnel to focus on the development of sites for the Company's own account, incurring substantial costs and change in focus, thus impacting current operations. These actions resulted in less efficient labor utilization and costs.
Selling, General and Administrative Expenses ("SG&A"). SG&A expenses as a percentage of revenue was maintained at 5% for both the three-month period ended March 31, 1998 and 1997. SG&A for the three-month period ended March 31, 1998 decreased approximately 13% to $819,404 compared to $938,048 for the same three-month period in the prior year, principally due to increased administrative efficiencies resulting from the continued integration of the Company's acquisitions effected since the last half of fiscal year 1997.
Net Earnings. Net earnings for the three-month period ended March 31, 1998 decreased to $244,057, compared to pro forma net earnings of $1,571,894 for the same three-month period in 1997, adjusted to give effect to income taxes on the earnings of Microwave Tower Service, Inc., which, prior to its acquisition by the Company, had been an S Corporation tax payer. As a
percentage of revenue, net earnings decreased to 2% from 9% (pro forma) in the prior year. The decrease is principally the result of management's conscious decision to retain the current workforce in anticipation of the rollout expected with the build-to-suit programs implemented by the Company in the third fiscal quarter and the extra costs incurred to mobilize field personnel to meet regional workloads and senior management to develop the build-to-suit opportunities.
For the Nine-Month Periods Ended March 31, 1998 and 1997:
Revenues. The Company's revenues for the nine-month period ended March 31, 1998 decreased approximately 12% to $45,026,754 from $51,184,691 for the same nine-month period in the prior year. Management believes the decrease in revenues is principally attributable to a slower rollout of the wireless infrastructure building and implementation activity in the U.S. compared to the same period in 1997, as the wireless carrier industry evaluated the new opportunities for build-to-suit services noted above, and the Company's focus on obtaining and developing sites for its own account.
Gross Profit. Gross profit as a percentage of revenues decreased to 16% for the nine-month period ended March 31, 1998 compared to 20% for the same period in the prior year. Gross profit for the nine-month period ended March 31, 1998 decreased approximately 27% to $7,381,447 from $10,153,091 for the same nine-month period in the prior year. The decrease resulted from a conscious effort by management to retain the current workforce in anticipation of the rollout expected for build-to-suit programs. Field personnel were mobilized throughout the nation to meet regional workloads, despite the additional costs to be incurred. In addition, management directed certain senior management personnel to focus on the development of sites for the Company's own account, incurring substantial costs and change in focus, thus impacting current operations. These actions resulted in less efficient labor utilization and costs.
SG&A Expenses. SG&A expenses as a percentage of revenue were maintained at 7% for both the nine-month periods ended March 31, 1998 and 1997. SG&A for the nine-month period ended March 31, 1998 decreased to $2,978,303 compared to $3,680,383 for the same nine-month period in the prior year. The decrease is principally due to increased administrative efficiencies resulting from the continued integration of the Company's acquisitions effected since the last half of fiscal year 1997, offset by one-time expenses of additional audit and legal fees incurred for the acquisitions of Novak & Lackey Construction Company, Inc., Ellis Tower Company, Inc. and Microwave Tower Service, Inc. Such one time expenses totaled approximately $140,000 along with the administrative fees to transition these entities in the Company.
Net Earnings. Net earnings for the nine-month period ended March 31, 1998 decreased to $2,612,861, compared to pro forma net earnings of $3,807,492 for the nine-month period ended March 31, 1997, adjusted to give effect to income taxes on the earnings of Microwave Tower Service, Inc., which, prior to its acquisition by the Company, had been an S Corporation tax payer. As a percentage of revenue, net earnings decreased to 6% for the nine-month period ended March 31, 1998 from 7% (pro forma) for the same nine-month period in the prior year. The decrease is principally the result of management's conscious decision to retain the current workforce in anticipation of the rollout expected with the build-to-suit programs implemented by the Company in the third quarter and the extra costs incurred to mobilize field personnel to meet regional workloads and senior management to develop the build-to-suit opportunities.
Earnings Per Share ("EPS") Disclosures:
The following is the reconciliation of the numerators and denominators of the basic and diluted EPS computations for net income and other related disclosures required by Statement of Financial Accounting Standards No. 128, Earnings Per Share.
For the Nine-Month
Period Ended March 31, 1998
----------------------------------
Per-
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to common stockholders... $2,612,861 7,939,998 $0.33
Effect of Dilutive Shares
Options .................................. -- 121,837
Dilutive EPS Income available to common stockholders
plus assumed conversions ............... $2,612,861 8,061,835 $0.32
========== ========= =====
For the Three-Month Period
Ended March 31, 1998
----------------------------------
Per-
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to common stockholders .. $ 244,057 8,008,454 $0.03
Effect of Dilutive Shares
Options .................................. -- 154,906
Dilutive EPS Income available to common stockholders
plus assumed conversions ............... $ 244,057 8,163,360 $0.03
========== ========= =====
For the Nine-Month
Period Ended March 31, 1997
----------------------------------
Per-
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to common stockholders .. $5,519,492 6,927,149 $0.80
Effect of Dilutive Shares
Warrants ................................. -- 153,179
Options .................................. -- 75,232
Dilutive EPS Income available to common stockholders
plus assumed conversions ............... $5,519,492 7,155,560 $0.77
========== ========= =====
Pro forma earnings per share: Basic .................................... $0.55 Dilutive ................................. $0.53
For the Three-Month Period
Ended March 31, 1997
----------------------------------
Per-
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic Earnings Per Share
Income available to common stockholders .. $2,412,894 6,975,969 $0.35
Effect of Dilutive Shares
Warrants ................................. -- 247,475
Options .................................. -- 94,153
Dilutive Earnings Per Share Income available to common stockholders
plus assumed conversions ............... $2,412,894 7,317,587 $0.33
========== ========= =====
Pro forma earnings per share: Basic .................................... $0.23 Dilutive ................................. $0.21
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