That damn tower co.
sec.yahoo.com
Revenues. Revenues for the fiscal year ended June 30, 1998 decreased $2,827,729, or approximately 4%, from $65,626,800 in the fiscal year ended June 30, 1997 to $62,799,071 for fiscal 1998. Management believes the decrease in revenues was attributable to (i) the utilization of staff during the last quarter of the fiscal year for build-to-suit sites to be owned by the Company instead of building for third parties (resulting in the Company incurring approximately $2.1 million in capitalized costs through June 30, 1998 with respect to which no revenues were generated in fiscal 1998) and (ii) the slower rollout of wireless infrastructure building and implementation activity in the U.S. compared to fiscal year 1997 as carriers evaluated outsourcing and build-to-suit options. The decrease in revenues was offset in part by $1,258,936 in revenues from the Company's leasing operations for the 67 day period subsequent to the April Merger.
Gross Profit. Gross profit for fiscal year ended June 30, 1998 decreased $1,349,943, or approximately 11%, from $12,215,250 in fiscal 1997 to $10,865,307 in fiscal 1998. In addition to the decrease in revenues, this decrease was attributable to management's decision in the third fiscal quarter of 1998 to retain its existing workforce, despite the slowdown in building and implementation activity, to implement the rollout of the Company's build-to-suit programs in the fourth quarter of fiscal year 1998. Build-to-suit costs incurred in the fourth quarter (approximately $2.1 million through June 30, 1998) have not yet resulted in the generation of revenue, resulting in a negative impact on gross profit. In preparation for the build-to-suit program, 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.
Selling, General and Administrative ("SG&A") Expenses. SG&A for fiscal year ended June 30, 1998 increased $2,317,682, or approximately 39%, from $5,915,808 in fiscal year 1997 to $8,233,490 in fiscal 1998. The increase was primarily the result of the following: approximately $582,000 in goodwill charges in connection with fiscal 1998 acquisitions; approximately $230,000 in legal expenses related to acquisitions and other issues not encountered in fiscal year 1997; a $225,000 increase in the Company's allowance for doubtful accounts; transitional costs incurred in connection with the integration of the operations and administration of OmniAmerica Holdings' tower ownership business; and a general increase in personnel as a result of fiscal 1998 acquisitions and to meet the needs of the Company's build-to-suit programs. The Company does not expect to incur significant additional expenses in the future as a result of the continuing integration of the operations of OmniAmerica Holdings and its subsidiaries with the Company.
Income Taxes. Income taxes were provided at a 46% effective rate in fiscal 1998 as compared to a 39% effective rate in fiscal 1997. The increased rate was primarily the result of non-deductible goodwill and other non-deductible expenses.
Net Earnings. Net earnings decreased $4,710,630 ($2,570,130 on a pro forma basis after adjustment for tax differences resulting from MTS's prior status as an S-Corporation), or approximately 83% (73% on a pro forma basis), to $977,112 in the fiscal year ended June 30, 1998 from $5,687,742 ($3,547,242 on a pro forma basis) in the fiscal year ended June 30, 1997. The decrease was primarily the result of lower revenues and associated gross profit that were a consequence of the slowdown in wireless infrastructure building and implementation activity compared to fiscal year 1997 and the implementation of the Company's build-to-suit program described above. Net earnings were also directly affected by build-to-suit costs incurred in the fourth quarter (approximately $2.1 million through June 30, 1998) which have not yet resulted in the generation of revenues. The remainder was due to the increased SG&A costs noted above and to a one-time, non-cash compensation expense of approximately $719,000 for the cashless exercise of stock options granted primarily to a former director of the Company.
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