Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MBND > SEC Filings for MBND > Form 10-K/A on 19-Oct-2012All Recent SEC Filings

Show all filings for MULTIBAND CORP | Request a Trial to NEW EDGAR Online Pro

Form 10-K/A for MULTIBAND CORP


19-Oct-2012

Annual Report


Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operation

The following discussion of the financial condition and results of operations of Multiband should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere in this report.

The recently acquired Energy, Engineering & Construction (EE&C) business activity, with its emphasis on design and construction, is materially different from the Company's previous lines of business, leading to a change in our segment reporting. As part of this change, the Company added the EE&C segment and realigned the FS segment to be all types of installation services. As part of this realignment certain construction activities in the MDU segment were moved to the newly-created EE&C segment. Amounts reported in prior years have been reclassified into this format.

Years Ended December 31, 2011 and December 31, 2010



Results of Operations (in thousands, except for percentages)



The following table sets forth certain items.



                                                                2011           2010
Revenues:
FS                                                                90.60 %        91.34 %
MDU                                                                7.00 %         8.16 %
EE&C                                                               2.40 %         0.50 %
MBCorp                                                                - %            - %
Total Revenues                                                   100.00 %       100.00 %

Cost of Products and Services (exclusive of depreciation
and amortization):
FS                                                                65.05 %        64.62 %
MDU                                                                4.58 %         5.11 %
EE&C                                                               1.84 %         0.41 %
MBCorp                                                                - %            - %
Total Cost of Products and Services (exclusive of
depreciation and amortization)                                    71.47 %        70.14 %

Selling, General and Administrative Expenses                      21.30 %        21.53 %
Depreciation and Amortization                                      2.25 %         3.12 %
Income from Operations                                             4.89 %         5.15 %
Net Income                                                         2.35 %         5.53 %

Revenues

Total revenues increased 13.0% from $265,594 in 2010 to $300,186 in 2011. FS segment revenues were $271,984 in 2011 and $242,592 in 2010, an increase of 12.1%. This increase was primarily due to an increase in DIRECTV work order volume of 4.8%, an increase in earned incentive revenue of $9,994 and amounts received from DIRECTV under a fuel subsidy program implemented in the second quarter of 2011 of $2,330. In 2012, the Company expects FS segment revenues to increase based on a consistent amount of revenue from its DIRECTV installation business together with increased revenues resulting from the Company's new installation contracts with certain broadband cable and internet service providers. The MDU segment had revenues of $21,007 in 2011 and $21,663 in 2010, a decrease of 3.0%. This decrease was a result of a decrease in system operator revenues. The Company expects MDU revenues to increase in 2012 due to the planned increase in the number of owned subscribers, increases fueled by the acquisition of new rights of entry agreements or by acquiring subscribers from other operators. The EE&C segment revenues increased 437.3% from $1,339 in 2010 to $7,195 in 2011. The Company's acquisition of SE and MW in September 2011, accounted for $3,894 of this increase with the remainder the result of increased MDU construction revenue from DIRECTV of $1,962. The Company expects revenues in this segment to increase in 2012 as it will include a full year of operations from SE and MW.

Costs of Products and Services (exclusive of depreciation and amortization)

Total costs of products and services were $214,559 in 2011 compared to $186,294 in 2010, an increase of 15.2%. For the FS segment, costs of products and services totaled $195,276 for the year ended December 31, 2011, compared to $171,625 for the year ended December 31, 2010, a 13.8% increase. As a percentage of FS revenue, costs of products and services for the FS segment were 71.8% and 70.7% for the years ended December 31, 2011 and 2010, respectively. During 2012, the Company expects FS segment costs of products and services to remain relatively constant in relation to FS segment revenue. For the MDU segment, costs of products and services were $13,753 for the year ended December 31, 2011, compared to $13,572 in the prior year, a 1.3% increase. As a percentage of MDU revenue, costs of products and services for the MDU segment were 65.5% and 62.7% for the years ended December 31, 2011 and 2010, respectively. In 2012, the Company expects MDU costs of products and services to remain relatively constant in relation to MDU segment revenue. For the EE&C segment, cost of products and services were $5,530 for the year ended December 31, 2011, compared to $1,097 in the prior year, a 404.1% increase. As a percentage of revenue, costs of products and services for the EE&C segment were 76.9% and 81.9% for the years ended December 31, 2011 and 2010, respectively. The Company's acquisition of SE and MW in September 2011, accounted for $2,940 of this increase with the remainder the result of increased MDU construction costs from DIRECTV of $1,492. In 2012, the Company expects EE&C segment costs of products and services to remain relatively consistent in relation to EE&C segment revenue.

Selling, General and Administrative Expense

Selling, general and administrative expenses increased 11.8% to $63,939 in 2011, from $57,173 in 2010. Selling, general and administrative expenses were, as a percentage of revenues, 21.3% and 21.5% for 2011 and 2010, respectively. The Company anticipates that during 2012, selling, general and administrative expenses will remain consistent as a percentage of total revenues.

Depreciation and Amortization

Depreciation and amortization expense decreased 18.6% to $6,757 for the year ended December 31, 2011, as compared to $8,298 for the year ended December 31, 2010. Effective May 1, 2011, the Company signed a new HSP contract with DIRECTV (see Note 16). Due to the new contract, the amortization period of the DIRECTV contract-related intangibles was extended an additional seven months to April 30, 2016, bringing the amortization period to 88 months. During 2012, depreciation and amortization expense is expected to decrease due to the extension of the aforementioned amortization period.

Income from Operations

In 2011, the Company earned income from operations of $14,685, compared to $13,669 during 2010, an increase of 7.4%. For the year ended December 31, 2011, the FS segment had an income from operations of $23,230, compared to $20,707 for the year ended December 31, 2010, an increase of 12.2%. The FS segment is expected to maintain its profitability in 2012. The MDU segment incurred a loss from operations of $2,827 in 2011 compared to a loss from operations of $2,550 in 2010, an increase of 10.9%. The increased loss from 2010 to 2011 is the result of decreased system operator revenues which were partially offset by increases in owned subscriber and call center revenues. The Company plans to reduce its loss in the MDU segment in future periods by adding subscribers in concentrated, targeted geographic markets in order to service them more efficiently. The EE&C segment earned an income from operations of $701 in 2011, which represents an increase of 189.7% over the income from operations of $242 in 2010. In 2012, the Company expects income from operations in the EE&C segment to increase because the year will include a full year of operations from SE and MW. The MBCorp segment, which has no revenues, showed a loss from operations of $6,419 in 2011, compared to a loss of $4,730 for the same period last year, an increase of 35.7%. In 2012, the MBCorp segment loss is expected to remain consistent as a percentage of consolidated revenue.

Interest Expense

Total interest expense was $3,838 in 2011, compared to $4,202 in 2010, a decrease of 8.7%, primarily reflecting a decrease in the interest expense associated with a note payable related to a legal settlement that was paid in full in December 2010.

Proceeds from Life Insurance

Proceeds from life insurance, due to the death of the Company's former chairman of the board during the first quarter of 2011, was $409 for the year ended December 31, 2011.

Gain on Bargain Purchase

For the year ended December 31, 2011, the Company recorded a gain on bargain purchase of $166 related to its acquisition of Multiband Engineering & Wireless, Southeast, Inc. (see Note 2).

Other-than-Temporary Impairment Loss

For the year ended December 31, 2011, the Company recorded an other-than-temporary impairment loss of $1,078 due to the decline in the fair value of the shares it holds in WPCS International, Inc. (see Note 1).

Other Income

Other income was $276 in 2011, compared to $103 in 2010, an increase of 168%.

Provision for (Benefit from) Income Taxes

We have recorded an income tax provision of $3,611 for the year ended December 31, 2011 compared to an income tax benefit of $5,116 for the year ended December 31, 2010. The Company regularly assesses the likelihood that our deferred tax assets will be recovered from future taxable income. The Company considers future taxable income and ongoing tax planning strategies then records a valuation allowance to reduce the carrying value of the net deferred tax assets for amounts that are expected to be unable to be realized. In 2011, the Company determined it was able to release a previously established valuation allowance against the deferred tax asset related to non-cash compensation in the amount of $900. In 2010, based on management's assessment of all available evidence, including previous years' income, estimates of future profitability and the overall prospects of our business, the Company determined that the Company would be able to realize a portion of our deferred tax assets in the future, and as a result recorded a $5,116 income tax benefit for the year ended December 31, 2010 which included a $12,400 release of the valuation allowance. Based on existing contracts, the Company used a discounted projection of revenue and expenses, over a five year period, which approximated the remaining life of our HSP contract with DIRECTV including the one year renewal term, to determine the level of existing net operating loss carryforward we would be able to offset against taxable income during that period. The Company will continue to assess the potential realization of our deferred tax assets on an annual basis, or on an interim basis if circumstances warrant. If the Company's actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to increase or decrease the valuation allowance against our gross deferred tax assets. The Company would adjust its valuation allowance in the period the determination was made. At December 31, 2011 and 2010, the valuation allowance was $13,981 and $14,401, respectively.

Net Income

The Company earned a net income of $7,044 in 2011 and a net income of $14,694 in 2010, a decrease of 52.1%.

Total Assets



The following table sets forth certain items.



Total Assets     2011          2010
FS             $ 102,150     $  82,244
MDU                8,844        11,118
EE&C               3,165             -
MBCorp            27,443        18,338
Total Assets   $ 141,602     $ 111,700

Years Ended December 31, 2010 and December 31, 2009



Results of Operations (in thousands, except for percentages)



The following table sets forth certain items.



                                                                2010           2009
Revenues:
FS                                                                91.34 %        90.88 %
MDU                                                                8.16 %         8.76 %
EE&C                                                               0.50 %         0.36 %
MBCorp                                                                - %            - %
Total Revenues                                                   100.00 %       100.00 %

Cost of Products and Services (exclusive of depreciation
and amortization):
FS                                                                64.62 %        71.11 %
MDU                                                                5.11 %         5.78 %
EE&C                                                               0.41 %         0.26 %
MBCorp                                                                - %            - %
Total Cost of Products and Services (exclusive of
depreciation and amortization)                                    70.14 %        77.15 %

Selling, General and Administrative Expenses                      21.53 %        21.48 %
Depreciation and Amortization                                      3.12 %         4.06 %
Income (Loss) from Operations                                      5.15 %        (2.69 )%
Net Income (Loss)                                                  5.53 %        (4.23 )%

Revenues

Total revenues decreased 1.3% from $268,994 in 2009 to $265,594 in 2010. FS segment had revenues of $242,592 in 2010 and $244,482 in 2009, a decrease of 0.8%. This decrease is due to a reduction in DIRECTV work order volume of approximately 8.9% partially offset by an increase in earned incentive revenue of approximately $6,000. The MDU segment had revenues of $21,663 in 2010 and $23,555 in 2009, at a decrease of 8.0%. This decrease is primarily due to reduced DTV upgrade subsidies of approximately $1,950 and reduced DTV MDU subscriber activations as a result of more stringent DTV credit standards. The EE&C segment had revenues of $1,339 in 2010, and $957 in 2009. The increase of 39.8% represents construction of MDU head-end systems for third parties.

Costs of Products and Services (exclusive of depreciation and amortization)

Total costs of products and services were $186,294 in 2010 compared to $207,533 in 2009, a decrease of 10.2%. In the FS segment, costs of products and services was $171,625 for the year ended December 31, 2010, compared to $191,279 for the year ended December 31, 2009, a 10.3% decrease. This decrease is the result of reduced costs due to the decrease in work order volume and improvements in inventory controls. For the MDU segment, costs of products and services for the year ended December 31, 2010 were $13,572, compared to $15,555 in the prior year, a 12.7% decrease. The decrease is a result of fewer upgrade subsidy payments to dealers and fewer subscriber activations. EE&C segment costs of products and services were $1,097 for the year ended December 31, 2010 and were $699 for the year ended December 31, 2009.

Selling, General and Administrative Expense

Selling, general and administrative expenses decreased 1.0% to $57,173 in 2010, compared to $57,778 in 2009. Selling, general and administrative expenses were, as a percentage of revenues, 21.5% for both 2010 and 2009. Selling, general and administrative expenses as a percentage of revenue is comparable primarily due to decreased insurance and telephone expense of approximately $3,400 offsetting increases in salaries and wages and legal expense. In 2010, the Company renegotiated several contracts with telephone providers as well as changed its mobile phone policies. It also changed its workers' compensation policy. The Company is self-insured for workers' compensation claims up to $250 plus administrative expenses, for each occurrence involving workers' compensation claims since the beginning of 2010.

Depreciation and Amortization

Depreciation and amortization expense decreased 23.9% to $8,298 for the year ended December 31, 2010, as compared to $10,906 for the year ended December 31, 2009. Effective October 1, 2010, the Company signed a new HSP contract with DIRECTV (see Note 16). Due to the new contract, the amortization period of the DIRECTV contract-related intangibles was extended an additional 17 months to September 30, 2015, bringing the amortization period to 81 months.

Income (Loss) from Operations

The Company, in 2010, earned an income from operations for its combined operating business segments of $13,669 compared to incurring a loss from operations of $7,223 in 2009. The FS segment for the year ended December 31, 2010 had an income from operations of $20,707, compared to a loss from operations of $2,241 for the year ended December 31, 2009. This improvement was primarily due to increased incentive revenue, improved inventory control and reduced technician training expense. The MDU segment incurred a loss from operations of $2,550 in 2010 compared to a loss from operations of $1,452 in 2009 primarily due to reduced DTV subsidies and reduced DTV MDU subscriber activations due to more stringent DIRECTV credit standards. The EE&C segment earned an income from operations of $242 for the year ended December 31, 2010 and $258 for the year ended December 31, 2009. The MBCorp segment, which has no revenues, showed a loss from operations of $4,730 in 2010 compared to a loss of $3,788 for the same period last year.

Interest Expense

Interest expense was $4,202 for 2010 versus $4,104 for 2009. Imputed interest discount was $0 and $35 for the years ended December 31, 2010 and 2009, respectively.

Noncontrolling Interest

The noncontrolling interest in subsidiaries on December 31, 2010 and 2009, was $0, respectively, after the Company purchased the remaining 20% of the issued and outstanding shares of common stock of all of the DTHC operating subsidiaries (DirecTECH) and reclassified $5,996 of noncontrolling interest to Multiband's controlling interest on December 17, 2009. The net loss attributable to the noncontrolling interest in subsidiaries for the years ended December 31, 2010 and 2009 was $0 and $1,727, respectively.

Provision for (Benefit from) Income Taxes

We recorded an income tax benefit of $5,116 for the year ended December 31, 2010 compared to an income tax provision of $406 for the year ended December 31, 2009. The Company regularly assesses the likelihood that our deferred tax assets will be recovered from future taxable income. The Company considers future taxable income and ongoing tax planning strategies then records a valuation allowance to reduce the carrying value of the net deferred tax assets for amounts that are unable to be realized. Based on management's assessment of all available evidence, including previous years' income, estimates of future profitability and the overall prospects of our business, the Company determined that the Company would be able to realize a portion of our deferred tax assets in the future, and as a result recorded a $5,116 income tax benefit for the year ended December 31, 2010 which included a $12,400 release of the valuation allowance. Based on existing contracts, the Company used a discounted projection of revenue and expenses, over a five year period, which approximated the remaining life of our HSP contract with DIRECTV including the one year renewal term, to determine the level of existing net operating loss carryforward we will be able to offset against taxable income in that period. The Company will continue to assess the potential realization of our deferred tax assets on an annual basis, or on an interim basis if circumstances warrant. If the Company's actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to increase or decrease the valuation allowance against our gross deferred tax assets. The Company would adjust its valuation allowance in the period the determination was made.

Net Income (Loss)

The Company earned net income of $14,694 in 2010, compared to a net loss of $11,377 in 2009.

Total Assets



The following table sets forth certain items.



Total Assets     2010          2009
FS             $  82,244     $ 84,474
MDU               11,118       12,547
EE&C                   -            -
MBCorp            18,338        2,510
Total Assets   $ 111,700     $ 99,531

Unaudited Quarterly Results

The following table sets forth certain unaudited quarterly operating information for each of the eight quarters in the two-year period ended December 31, 2011. This data includes, in the opinion of management, all normal recurring adjustments necessary for the fair presentation of the information for the periods presented when read in conjunction with the Company's consolidated financial statements and related notes thereto. Results for any previous fiscal quarter are not necessarily indicative of results for the full year or for any future quarter (in thousands, except per share amounts).

                                               Dec. 31,       Sept. 30,      June 30,       March 31,      Dec. 31,       Sept. 30,      June 30,       March 31,
                                                 2011           2011           2011           2011           2010           2010           2010           2010
Revenues:
FS                                             $  68,849     $    78,659     $  65,543     $    58,933     $  63,991     $    64,200     $  59,504     $    54,897
MDU                                            $   5,202     $     5,742     $   5,315     $     4,748     $   5,736     $     5,488     $   5,384     $     5,055
EE&C                                           $   3,512     $     1,965     $     924     $       794     $     856     $       187     $       -     $       296
MBCorp                                         $       -     $         -     $       -     $         -     $       -     $         -     $       -     $         -
Total revenues                                 $  77,563     $    86,366     $  71,782     $    64,475     $  70,583     $    69,875     $  64,888     $    60,248
Cost of products and services (exclusive of
depreciation and amortization shown
separately below)                              $  54,358     $    60,332     $  52,110     $    47,759     $  49,102     $    49,425     $  43,814     $    43,953
Selling, general and administrative expense    $  18,807     $    17,014     $  13,481     $    14,637     $  15,476     $    14,680     $  13,500     $    13,517
Depreciation and amortization                  $   1,771     $     1,566     $   1,705     $     1,715     $   1,689     $     2,027     $   2,146     $     2,436
Impairment of assets                           $     246     $         -     $       -     $         -     $     160     $         -     $       -     $         -
Income from operations                         $   2,381     $     7,454     $   4,486     $       364     $   4,156     $     3,743     $   5,428     $       342
Interest expense                               $    (850 )   $    (1,038 )   $    (964 )   $      (986 )   $    (987 )   $    (1,026 )   $  (1,066 )   $    (1,123 )
Other income (expenses)                        $    (867 )   $       132     $      62     $       481     $      54     $        24     $      16     $        17
Income (loss) before income taxes and
noncontrolling interest In subsidiaries        $     664     $     6,548     $   3,584     $      (141 )   $   3,223     $     2,741     $   4,378     $      (764 )
Provision for (benefit from) income taxes      $    (758 )   $     2,869     $   1,549     $       (49 )   $  (8,872 )   $     1,573     $   1,983     $       200
Net Income (loss) attributable to Multiband
Corporation and Subsidiaries                   $   1,422     $     3,679     $   2,035     $       (92 )   $  12,095     $     1,168     $   2,395     $      (964 )
Income (loss) attributable to common
stockholders                                   $   1,364     $     3,609     $   1,757     $      (473 )   $  11,747     $       760     $   2,044     $    (1,345 )
Income (loss) per common share attributable
to common stockholders - basic                 $    0.06     $      0.17     $    0.12     $     (0.05 )   $    1.14     $      0.08     $    0.21     $     (0.14 )
Income (loss) per common share attributable
to common stockholders - diluted               $    0.06     $      0.16     $    0.10     $     (0.05 )   $    0.73     $      0.06     $    0.15     $     (0.14 )
Weighted average shares outstanding - basic       21,600          21,595        14,210          10,449        10,275          10,084         9,912           9,791
Weighted average shares outstanding -
diluted                                           23,100          23,047        19,313          10,449        16,539          15,227        15,040           9,791

Liquidity and Capital Resources (in thousands, except shares and per share amounts)

Year Ended December 31, 2011

During the years ended December 31, 2011 and 2010, the Company recorded a net income of $7,044 and $14,694, respectively. Net cash provided by operations in 2011 was $21,077 as compared to $11,745 in 2010. Principal payments on current long-term debt, short-term debt, short-term debt to a related party and capital lease obligations over the next 12 months are expected to total $5,717.

Cash and cash equivalents totaled $18,169 at December 31, 2011 versus $1,204 at December 31, 2010. Working capital at December 31, 2011 was $7,463 as compared to a deficit $10,374 at December 31, 2010. The Company's cash balance and working capital position has been bolstered by the cash flow provided by operations as well as the net proceeds received by the Company from the common stock public offering on June 1, 2011 of $16,176.

Net cash used by investing activities totaled $6,773 for the year ended December 31, 2011, compared to $1,341 for the year ended December 31, 2010, related to property and equipment acquisitions, the acquisition of subsidiaries and the purchase of available for sale securities.

Net cash from financing activities totaled $2,661 for the year ended December 31, 2011, compared to net cash used by financing activities of $11,440 for the year ended December 31, 2010. In June 2011, the Company completed a public offering of 12,880,000 shares of its common stock, in which the Company sold 5,974,932 shares and DTHC sold 6,905,068 shares at a price of $3.00 per share. The Company received net proceeds of approximately $16,176 after deducting offering expenses, underwriting discounts and commissions. The Company did not receive any proceeds from the sale of shares by DTHC. The net proceeds received were used in part to redeem the shares of Series E preferred stock of $1,950 and to repay $10,037 of short-term debt.

In 2012, the Company intends to focus on maintaining profitability in its FS business segment. With regards to its MDU business segment, the Company believes it can aggressively grow owned subscriber revenues by acquiring new rights of entry agreements, increasing marketing and customer penetrations of previously built out properties and by acquiring existing subscribers from other operators. In addition, the Company believes it can increase managed subscriber revenues by selling its support center services to its network of system operators and by providing ancillary programs for voice and data services to that same network. In the EE&C segment, the Company expects to see improvements in operating results as: (i) a concentrated focus on the selling process results in increased bid activity which should result in increased revenues; (ii) governmental grants for alternate energy projects are extended to promote growth in wind projects; and (iii) 3G to 4G tower conversions increase based on the demand for higher capacity mobile infrastructure.

Management anticipates that the impact of the actions listed below will generate sufficient cash flows to pay current liabilities, long-term debt and capital and . . .

  Add MBND to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MBND - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.