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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 30, 1995
[ ] 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 1-9467
DAVIS WATER & WASTE INDUSTRIES, Inc.
(Exact name of Registrant as specified in its charter)
Georgia 58-0959907
(State of incorporation) (I.R.S. Employer
Identification Number)
1820 Metcalf Avenue, Thomasville, Georgia 31792
(Address of principal executive offices, including zip code)
(912) 226-5733
(Registrant's telephone number, including area code)
_____________________________
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $0.01 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
________________________
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
The aggregate market value of the Registrant's outstanding Common Stock
held by non-affiliates of the Registrant on July 21, 1995 was $43,449,945.
There were 3,248,594 shares of Common Stock outstanding as of July 21,
1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1995 Annual Report are incorporated by
reference in Part I and Part II hereof. Portions of the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on September 8,
1995 are incorporated by reference in Part III hereof.
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DAVIS WATER & WASTE INDUSTRIES, Inc.
Annual Report on Form 10-K
For the Fiscal Year Ended April 30, 1995
<TABLE>
<CAPTION>
Table of Contents
Item Page
Number Number
------ PART I ------
<S> <C> <C>
1. Business...................................... 3
2. Properties.................................... 12
3. Legal Proceedings............................. 13
4. Submission of Matters to a Vote of Security
Holders....................................... 13
4(A) Executive Officers of the Company............. 13
PART II
5. Market for the Company's Common Stock and Related
Stockholder Matters................... 14
6. Selected Financial Data........................ 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.. 14
8. Financial Statements and Supplementary Data..... 14
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............. 15
PART III
10. Directors and Executive Officers of the Company....... 15
11. Executive Compensation................................ 15
12. Security Ownership of Certain Beneficial Owners and
Management............................................ 15
13. Certain Relationships and Related Transactions 15
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K................................................. 16
SIGNATURES 20
INDEX OF FINANCIAL STATEMENT SCHEDULES 23
INDEX OF EXHIBITS 26
</TABLE>
2
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PART I
ITEM 1. BUSINESS
General
Davis Water & Waste Industries, Inc. (the "Company" or the
"Registrant") manufactures and markets products relating to the
distribution of water and the treatment of water and wastewater. The
Company markets a broad line of water distribution equipment and supplies,
including underground pipe, pipe fittings, valves, fire hydrants, water
meters and related equipment. The Company believes that it is the largest
distributor of water distribution equipment and supplies in the Southeast
based on annual revenues from sales of such products. The Company also
designs, engineers, manufactures, sells and installs water and wastewater
treatment and pumping equipment, and distributes certain process materials
used to treat water and wastewater to comply with applicable health and
water quality standards. The Company's products are sold from 33
distribution and sales facilities to more than 25,000 independent
contractors, developers, industrial customers, municipalities and other
government agencies, and private utilities located principally in the
Southeastern, Southwestern, Midwestern and Western areas of the United
States.
The Company was organized as a Georgia corporation in 1956 as the
successor to a business which had operated since 1938. The Company has one
wholly owned subsidiary, The Taulman Company ("Taulman"), which it acquired
in August 1990. The Company discontinued substantially all of Taulman's
operations in fiscal 1994. See "Discontinuation of Taulman Operations"
below. As used herein, the term "Company" refers to Davis Water & Waste
Industries, Inc., its divisions and its wholly-owned subsidiary, Taulman,
unless otherwise indicated.
Business Growth Strategy
During the past ten years, the Company's operations have grown
significantly through the acquisition of existing water distribution
businesses and the opening of new water distribution warehouse locations in
new geographic areas, through increased sales efforts in existing markets
and through the introduction of new products. Since 1986, the Company has
increased its total locations from 22 in eight states to 33 in twelve
states and has increased its employee sales force from 75 to 91, an
increase of 21%.
In 1986, the Company initiated a strategy of growth through selective
acquisitions of compatible businesses in the same or related industries.
Between 1986 and 1989, the Company acquired five water distribution
businesses in the Western, Southwestern and Southeastern United States.
These acquisitions enabled the Company to expand its water distribution
operations in the California and Rocky Mountain markets and to strengthen
its position in the Southeastern and Texas markets. All of these acquired
companies were consolidated within the Davis Distribution Group division of
the Company.
Management believes that these strategies have been successful for
the Company and intends to continue to utilize these strategies when
conditions in the Company's industry and in the general economy support
such expansion. While the Company continuously analyzes opportunities for
the acquisition of other businesses in the Company's industry or related
industries, the Company currently has no agreements or understandings
regarding any other acquisitions.
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Discontinuation of Taulman Operations
In August 1990, the Company, through a wholly owned subsidiary,
purchased certain assets and assumed certain liabilities of The Taulman
Company, a privately held pollution control business headquartered in
Atlanta, Georgia. Through May 1994, Taulman, through its Turbitrol
Instrumentation and Controls division ("Turbitrol"), was engaged primarily
in the design, manufacture and sale of process equipment and control
systems used in municipal water and wastewater treatment facilities
nationwide. Through its Taulman Composting Systems division, Taulman also
marketed composting systems manufactured by others. In fiscal 1994,
Turbitrol accounted for substantially all of Taulman's net sales, and the
Taulman Composting Systems division was an immaterial component of
Taulman's operation.
In fiscal 1994, the Company terminated the operations of Turbitrol
due to continuing significant declines in sales and relatively high levels
of selling, general and administrative expenses required to fulfill
contractual obligations. Turbitrol ceased bidding on new contracts,
terminated its sales force and will continue operations only for the next
two years as necessary to complete its obligations under current contracts.
In fiscal 1994 and 1993, Taulman's net sales were $15,871,000 and
$24,739,000, respectively, which equalled 7.8%, and 13.0%, respectively, of
the Company's net sales in such fiscal years. Taulman's pre-tax operating
(losses) income for such fiscal years were ($2,903,000) and $18,000,
respectively. The Taulman Composting Systems division began operating
within the Company's Davis Process division in June 1994. See Note 2 of
Notes to Consolidated Financial Statements contained in the Company's 1995
Annual Report, which Note is incorporated herein by reference. The 1995
Annual Report is filed as Exhibit 13 to this report.
Principal Products
The Company markets a broad line of water distribution equipment and
supplies purchased from independent manufacturers and suppliers, including
underground pipe, pipe fittings, valves, fire hydrants, water meters and
related equipment. The Company also designs, engineers, manufactures,
sells and installs water and wastewater treatment and pumping equipment and
related control systems, and distributes certain process materials used to
treat water and wastewater to comply with applicable health and water
quality standards. The following table sets forth the amount and
percentage of net sales attributable to each of the Company's principal
product classes for the periods indicated:
<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------------------
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
-------------------------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Water distribution equipment
and supplies:
Pipes and fittings....... $ 92,862 43% $ 76,197 38% $ 67,317 35%
Valves, hydrants, water
meters and accessories.. 73,960 34% 68,231 34% 58,930 31%
-------- ------ -------- ------ -------- ------
166,822 77% 144,428 72% 126,247 66%
-------- ------ -------- ------ -------- ------
Water and wastewater
equipment:
Treatment equipment..... 20,721 10% 33,013 16% 42,836 22%
Pumping equipment....... 6,234 3% 6,678 3% 6,391 4%
Process materials and
services............... 21,872 10% 18,502 9% 15,516 8%
-------- ------ -------- ------ -------- ------
48,827 23% 58,193 28% 64,743 34%
-------- ------ -------- ------ -------- ------
Total $215,649 100% $202,621 100% $190,990 100%
======== ====== ======== ====== ======== ======
</TABLE>
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Water Distribution Equipment and Supplies. Through the Distribution
Group division, which operates under the Davis Meter & Supply, Taylor-Jett
Co., Waterworks Equipment Company and McAllen Pipe & Supply Co. names, the
Company markets water distribution equipment and supplies, including
underground and fabricated pipe, pipe fittings, valves, fire hydrants,
water meters, systems for storm drainage and wastewater collection, and
related equipment used in the supply of water. The Company believes that
it is the largest distributor of water distribution equipment and supplies
in the Southeast based on annual revenues from sales of such products. The
Company purchases more than 20,000 products from approximately 3,000
manufacturers and suppliers located principally in the Southern United
States and markets and distributes these products through a network of 23
service center warehouses located in Arizona, California, Florida, Georgia,
Nevada, North Carolina, Tennessee, Texas and Utah. Each service center
warehouse services an area with a radius of from 50 miles to 150 miles
depending on population density in the area. Purchasers of the Company's
water distribution equipment and supplies consist principally of
independent contractors, industrial customers, municipalities and other
government agencies, and private utilities.
At each service center warehouse, the Company maintains an inventory
of most of the water distribution equipment and supplies which it sells.
The Company is able to fill and ship most orders from service center
warehouse stock on the date the customer places an order. Equipment and
supplies are transported to customers by Company owned or leased delivery
vehicles or by common carriers. Frequently, however, orders are large
enough for the Company to arrange shipment directly from the manufacturer
or vendor in truckload quantities to the customer. Equipment and supplies
which are not available at a particular service center warehouse may be
ordered and shipped to a customer from another of the Company's service
center warehouses. In addition, two large, centrally located service center
warehouses function as support facilities for the surrounding service
center warehouses, providing consolidated purchasing power, a large variety
of normal inventory items and a complete inventory of special fittings and
long lead-time inventory items.
Each service center warehouse is under the direction of a district
manager who is responsible for the purchasing, warehousing, selling and
shipping of inventory items, the supervision of all service center
warehouse and sales personnel, and the overall profitability of the service
center warehouse. However, the Company operates a central, computerized
inventory and customer billing system. A Company Executive Vice President
is responsible for the overall management of the Distribution Group
division. Major decisions affecting division policy, facilities or capital
outlays are reviewed by the Company's executive officers.
Water and Wastewater Treatment and Pumping Equipment and Control
Systems. The Company's Davco division engineers, designs, manufactures,
sells and installs water and wastewater treatment and pumping equipment
used in the processing and handling of domestic and industrial water and
wastewater. This equipment is used to process water and wastewater to
comply with applicable health and water quality standards.
The water and wastewater treatment equipment manufactured by the
Davco division is composed primarily of fabricated and coated steel
treatment plants. This equipment is sold principally to commercial and
residential land developers, industrial plants and municipalities. Most of
such equipment is delivered to the job site, ready for erection. The fully
prefabricated wastewater treatment systems are designed to process from
10,000 to 125,000 gallons of wastewater per day, thereby serving from 100
to 1,250 persons. The larger wastewater treatment plants process up to
10,000,000 gallons of wastewater per day and serve communities of up to
100,000 persons. The Davco division manufactures a variety of products for
inclusion in these treatment plants, including denitrification filters,
travelling bridge filters, solids contact clarifiers, clarifiers aeration
systems and selector processes.
5
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The Davco\EMU division's water and wastewater pumping equipment
consists of submersible pumps used in municipal, industrial and privately
owned systems for pumping wastewater. These units are designed and built by
the German company EMU Unterwasserpumpen GmbH both for underground and
above ground installation and are used to pump wastewater to centrally
located treatment or collection points or to maintain desired pressure in
water distribution systems. The equipment is sold principally to general
contractors for incorporation in utility systems being constructed for
municipalities, industries, governmental agencies and private utilities.
Taking advantage of its expertise in steel fabrication and erection,
the Davco division provides specialty steel fabrication and on-site
construction erection services to major contractors and industrial
customers. These services relate principally to the fabrication and
installation of steel components used in water and air pollution control
equipment.
Through May 1994, the Turbitrol division of Taulman was engaged
primarily in the design, manufacture, sale and servicing of
instrumentation, control and telemetry systems primarily for municipal
water and wastewater treatment facilities. These systems provided for the
monitoring and storage of performance data and the computation of
sophisticated control strategies required for water and wastewater
treatment facilities. Turbitrol also manufactured a broad line of remote
telemetry units used in the monitoring and control of potable water
distribution systems and wastewater collection systems. In fiscal 1994,
the Company terminated the operations of Turbitrol except to the extent
necessary to complete its obligations under current contracts. Turbitrol
has ceased bidding on new contracts and has terminated its sales force.
See " Discontinuation of Taulman Operations" above and Note 2 of Notes to
Consolidated Financial Statements.
The Company's Davis process division designs the control systems for,
subcontracts the manufacture of and markets composting systems. These
systems consist of a completely enclosed in-vessel process for the
biological decomposition and stabilization of the organic sludge residue
from wastewater treatment facilities. The sludge is converted to a stable,
pathogen free and usable humus compost product. These composting systems
are sold to municipal and industrial customers and are capable of
processing compost in volumes ranging from less than one to several hundred
dry tons per day.
The process embodied in these systems is a patented technology for
which Taulman had the exclusive license to market in North America, and
these systems were marketed by the Taulman Composting Systems division
through May 1994. In the fourth quarter of fiscal 1994, the Company, in
response to changing marketplace demands and the development by others of
more economical methods for waste composting, elected to forego the
exclusive North American marketing rights to the technology and to write-
off the licensing agreement. See Note 2 of Notes to Consolidated Financial
Statements and "Discontinuation of Taulman Operations" above. Beginning in
June 1994, the operations of the Taulman Composting Systems division were
assumed by the Company's Davis Process division.
The Company's water and wastewater treatment equipment and special
fabrications are produced at the Company's manufacturing facilities. These
products generally are designed, engineered and custom manufactured for a
specific customer application. The process usually involves a consulting
engineer who specifies the product for use in conjunction with a project, a
contractor who purchases the product from the Company for installation on
the project and an owner who is the end user of the product. The owner may
be either a governmental body (such as a municipality, sewer district or
state or federal agency) or a private entity (such as a developer,
industrial manufacturer or motel or campground owner).
In connection with the water and wastewater treatment products
manufactured by the Company, a time interval of 12 weeks generally is
6
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experienced between the time of acceptance of the Company's bid and final
approval of design and engineering specifications by customers, their
engineers and any regulatory agencies. After such approval is granted,
there is typically a further time interval of approximately 25 weeks,
depending on the complexity and size of the units in question, between
approval for construction and shipment and the installation of the
completed products. The Company's water and waste water control systems
and composting systems generally experience a time interval of between six
months and two years from the time of bid acceptance to contract
completion. In recognition of the substantial time interval between the
submission of a bid by the Company and completion of the contract, the
Company protects itself through contract clauses allowing for the
renegotiation of the selling price or cancellation of the contract if
specified time limits are not met.
The Company's specialty metal products and on-site erection services
normally are sold to major contractors responsible for the entire
construction or modification of the facility, and normally the construction
period extends over a period of up to three years. As a result, the Company
has contract provisions which provide for price escalations based on
changes in published indices for material and labor and for progress
payments for the equipment manufactured.
Operations and management of the Davco division are the
responsibility of a Company Vice President/Division General Manager, while
operations and management of Turbitrol are the responsibility of the
President of Turbitrol. Major decisions affecting Davco or Turbitrol
policy, facilities or capital outlays are reviewed by the Company's
executive officers.
Process Materials and Services. The Company's Davis Process division
supplies a product line of material used to control hydrogen sulfide,
malodorous and toxic gas in wastewater collection systems, to treat water
and wastewater to comply with applicable health and water quality standards
and to condition sludge for disposal. The products also are used in certain
areas to remove phosphorous from discharged waste. The raw material for
this product line is shipped to the Company in solid or granular form and
stored in the Company's facilities in California, Delaware, Florida,
Georgia, Illinois, South Carolina and Texas. At these locations, other
minor component materials are added and the resulting mixture is shipped to
customers, which consist primarily of municipalities and private water and
wastewater treatment facilities.
The Davis Process division has developed and patented a multistage
air scrubber designed for the treatment and removal of odors. Davis Process
sells, manufactures and installs these multistage air scrubbers. Services
provided by Davis Process includes air scrubber maintenance, sludge
management, odor surveys and analytical laboratory services specializing in
water analysis.
Operations and management of the Davis Process division are under the
direction of a Vice President/Division General Manager who is responsible
for purchasing, warehousing, processing, marketing, distributing and
selling the product lines. Major decisions affecting division policy,
facilities or capital outlays are reviewed by the Company's executive
officers.
7
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Marketing
The Company's water distribution equipment and supplies are marketed
by approximately 67 Company-employed salesmen, each of whom operates from
one of the 23 service center warehouses and reports to the service center
district manager. Salesmen call directly on customers within their assigned
territories and work with architects, engineers and government agencies to
assist customers in determining their product needs. Salesmen are
compensated by a base salary plus a commission based on a percentage of
gross profits from their sales.
The Davco division's water and wastewater treatment and pumping
equipment is marketed through a network of approximately 58 manufacturers'
representative organizations and 5 Company-employed salesmen. The
manufacturers' representatives are independent businessmen who are paid on
a commission basis and have the exclusive right to sell the Company's
products in a specified geographical area. The Company-employed salesmen
are compensated by salary and incentives based on the volume and
profitability of their sales. The manufacturers' representatives and
Company-employed salesmen call on and work with consulting engineers and
owners in an effort to have them specify the Company's products for use in
a project. They also work with regulatory agencies to assure approval of
the Company's products for the uses specified. They then attempt to make
the sale through a negotiated price or a competitive bidding process. A
general sales manager and a regional sales staff are responsible for the
activities of the manufacturers' representatives, and the Company's home
office sales support staff provides technical assistance and pricing
information for the manufacturers' representatives and Company-employed
salesmen.
Composting systems are marketed by 14 Company-employed salesmen, each
of whom operates from one of the 7 Davis Process locations and reports to
the sales manager of the Davis Process division. Salesmen are compensated
by a base salary plus a percentage of gross profits from their sales.
These systems are sold principally to commercial and residential land
developers, industrial plants and municipalities in a manner similar to
sales of water and wastewater treatment and pumping equipment as described
above.
The Company's specialty metal products and on-site erection services
are marketed by a sales staff under the direction of a general sales
manager. Sales staff personnel are compensated on a fixed salary plus an
incentive based on the profitability of the sales of the product or by
commissions. The sales staff calls on owners, contractors and engineers in
an effort to have them specify and approve the Company's products for use
in a project. They then attempt to make the sale either through a
negotiated price or a competitive bidding process. A home office sales
support staff provides technical assistance and pricing information for the
field sales staff and in some instances quotes the price of the job
directly to the customer.
Sales of the Company's process materials and services are made by 13
Company-employed salesmen who directly service California, Colorado,
Delaware, Florida, Georgia, Kentucky, Massachusetts, Missouri, South
Carolina, Texas, and Washington. Salesmen call directly on customers and
consulting engineers, they are compensated with a base salary plus a
percentage of gross profits from their sales.
The Company presently serves more than 25,000 customers. No customer
accounts for more than 5% of sales annually. Information regarding the
amount of net sales, operating income (loss) and assets attributable to
each of the Company's principal geographic areas for each of the past three
fiscal years, together with information regarding export sales for each of
such years, is incorporated herein by reference to the tabular information
set forth under the caption "Review of Operations" on page 4 of the
Company's 1995 Annual Report.
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Market Factors
The Company's sales of water distribution equipment and supplies are
greatly affected by the amount of capital spending by the land development
and housing construction industries, the amount of federal funding
available for construction grants and the overall health of the economy,
especially as these factors relate to interest rates and housing starts.
Sales of the Company's water and wastewater treatment and pumping products,
composting systems, specialty metal products and on-site erection services
are dependent to a large extent upon the amount of capital spending by
industry and governmental bodies. Sales of process materials products and
services are dependent on operating expenditures of municipal and
industrial water and wastewater treatment customers.
In addition, the enactment and enforcement of federal and state laws
relating to water quality standards also may materially influence the level
of sales of all of the Company's products. The Company's business
therefore is linked to some extent to certain water quality control
standards imposed by the Environmental Protection Agency ("EPA") under the
Clean Water Act. The Clean Water Act and related EPA regulations establish
comprehensive and, in some cases, stringent guidelines for the control of
toxic pollutants. In addition, the government's financial commitment to
assist with water pollution control and the civil and criminal enforcement
penalties for violating water quality control standards also create a need
for the Company's products. At the same time, other regulatory
initiatives, combined with actual and potential cutbacks in legal
requirements and funding for EPA, have the potential to reduce the future
market for municipal and industrial water and wastewater treatment
equipment. The net effect of these competing factors cannot be predicted.
Sources and Availability of Supplies
Purchases of products for resale, raw materials and components are
made from various unaffiliated manufacturers and vendors. In fiscal 1995,
purchases from the Company's three largest suppliers accounted for
approximately 10.9%, 5.3% and 4.5%, respectively, of total purchases made
by the Company. The Company has not experienced, and does not anticipate,
any shortages or other difficulties in obtaining any required materials.
Backlog of Orders
Backlogs for water treatment and pumping products result from the
interval between the date of receipt by the Company of the purchase
contract and the shipment, completion or on-site erection of the equipment.
The backlog of firm orders for the Company's water and wastewater treatment
and pumping products and control systems as of April 30, 1995 was
approximately $17,000,000 as compared to approximately $25,000,000 at the
same date in 1994. The Company anticipates that approximately $15,000,000
of its backlog as of April 30, 1995 will be shipped within twelve months
thereafter. See "Principal Products - Water and Wastewater Treatment and
Pumping Equipment and Control Systems" above. The decrease in the
Company's backlog in fiscal 1995 when compared to fiscal 1994 was primarily
due to the Company decision to terminate the operations of Turbitrol during
fiscal 1994. See " Discontinuation of Taulman Operations" above and Note 2
of Notes to Consolidated Financial Statements.
There is no material backlog for water distribution equipment and
supplies since these orders normally are shipped within one to ten days
following receipt of an order. Process materials and services frequently
are provided over a defined contract period as required by each contract.
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Competitive Conditions
In connection with the marketing of water distribution equipment and
supplies, the Company competes with a large number of independent
wholesalers, other distribution chains similar to the Company and
manufacturers who sell directly to customers. The principal methods of
competition include product knowledge by the sales force, prompt delivery
following receipt of an order, service and price. Due to the various
sources and methods of competition and types of products sold by the
Company, the Company knows of no reliable statistics upon which there might
be based an estimate of the Company's relative competitive position in this
market. However, the Company believes that it is the largest distributor of
water distribution equipment and supplies in the Southeast based on annual
revenues from sales of such products.
The Company encounters substantial competition in its markets for
water and wastewater treatment and pumping equipment and control systems
from several competitors which operate in the Company's major marketing
areas. In addition, the Company competes with a substantial number of
companies with regard to its specialty metal and process materials and
services. The Company knows of no reliable statistics which might be used
to estimate the Company's relative competitive position in these markets.
No one competitor is considered dominant. The principal methods of
competition in the markets for water and wastewater treatment and pumping
equipment and control systems are price, timely product delivery, service
and product knowledge.
The Company believes that in its markets, its capabilities meet or
exceed the capabilities of its competitors.
Seasonality
The Company typically experiences a seasonal downturn in the third
fiscal quarter of each year. Harsh weather during the third fiscal quarter
usually restricts construction activities in the Company's more northern
and mountainous sales markets, thereby reducing the demand for the
Company's products in these areas. This seasonality is normally reflected
in reduced sales and earnings of the Company in the third quarter of the
fiscal year. Certain portions of the Company's sales markets, notably
South Georgia, Florida, Texas, Arizona, Nevada and Southern California, are
not significantly affected by the seasonal change. See Note 10 of Notes to
Consolidated Financial Statements contained in the Company's 1995 Annual
Report, which Note is incorporated herein by reference.
Product Warranties and Insurance
The Company warrants the water and wastewater treatment and pumping
equipment, control and composting systems and specialty metal equipment
manufactured by it normally for a period of one year against defects in
materials and workmanship. The Company does not warrant products purchased
from other manufacturers beyond the warranty expressly provided by such
manufacturer nor does the Company warrant its process materials.
The Company maintains product liability insurance with total coverage
of $20,000,000 for any single occurrence relating to injury or damage to
property. The Company, however, distributes and transports a process
material which is classified by the Company's insurance carrier as a
pollutant and therefore is excluded from insurance coverage. In addition,
such material is designated by the EPA as a hazardous material. If released
into drinking water sources in sufficient quantities, this product could be
toxic. The product also may corrode metal products with which it comes into
contact. The Company self-insures the risks associated with this product.
The Company has distributed and transported this product for over twelve
years, and no claims have been filed or governmental inquiries or actions
commenced against the Company with respect to the product. Management
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believes the Company's insurance coverage is adequate for the other types
of business which it conducts. No assurance can be given, however, that
events will not occur which result in damage claims against the Company in
excess of policy limits or outside the coverage maintained by the Company
or which result in governmental actions or penalties against the Company.
Such claims, actions or penalties could have a material adverse effect on
the Company.
Product Development
The Company maintains a product development and enhancement program
to modify and develop product lines and processes to meet the rapidly
changing opportunities in its markets. Products developed by the Davis
Process division include ALKA-PRO, a patented biological process control
system for the effective and efficient control of biological treatment
processes. Products developed by the Company's Davco division include a
sequencing batch reactor for industrial wastes, the Gravisand traveling
bridge filter for concrete tankage, the Denitrifilt denitrification filter
for biological removal of total nitrogen and mechanical suspended solids
removal, an oxidation ditch for municipalities, and the XtrakTor for
aluminum sludge removal in water plants.
The Company spent approximately $230,600, $762,900 and $1,021,800 on
its product development program in fiscal 1995, 1994 and 1993,
respectively. The Company must incur a certain amount of product
development costs to meet the rapidly changing advancements in technology.
The Company has recently reduced the amount spent on product development
due to management's increased effort to control cost.
Management believes that the goodwill associated with the tradenames
of the Company's various divisions is of significant value to the Company
but does not consider any of the Company's patents, trademarks, licenses,
franchises or concessions to be of material importance to its business.
Employees
On June 30, 1995, the Company employed 669 persons, of which 36 were
in executive and administrative positions, 91 were sales personnel, 36 were
in engineering positions, 123 were office personnel and 383 were in
production, warehousing and trucking positions. None of the Company's
employees is subject to collective bargaining agreements. The Company
believes that its relations with its employees are good.
Environmental Compliance Matters
The Company does not anticipate that compliance by it with present
provisions of federal, state and local statutes and regulations which
regulate the protection of the environment will have any material effect
upon the Company's capital expenditures, earnings or competitive position
in the foreseeable future. The Company is not aware of any pending or
anticipated governmental inquiry or action against the Company for
noncompliance with environmental laws and regulations.
11
<PAGE>
ITEM 2. PROPERTIES
The principal executive offices of the Company are located in an
18,500 square-foot Company-owned building. The Company also owns a water
and wastewater treatment manufacturing facility totaling 67,600 square feet
adjacent to the Company's executive offices. All of these facilities are
located on 28 acres of land in Thomasville, Georgia. The Company also owns
or leases 23 water distribution and supplies warehouses, 1 submersible pump
distribution warehouse and 7 process material warehouses in 12 states.
Additionally, Taulman leases an executive and administrative office in the
Atlanta, Georgia area which contain a total of 80,100 square feet of space.
The Company believes that its facilities and equipment are in good
condition and sufficient to meet the Company's present needs. The following
table sets forth information with regard to the facilities operated by the
Company and Taulman as of June 30, 1995.
<TABLE>
<CAPTION>
Total
Square
Type of Total Footage
State Facility Facilities (incl. land) Owned Leased
------------- -------------------------------------------------------- ---------- ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Arizona Water distribution and supplies service center warehouse 1 46,857 1
California Water distribution and supplies service center warehouse 1 127,197 1
Process material warehouse 1 991 1
Delaware Process material warehouse 1 48,200 1
Florida Water distribution and supplies service center warehouse 8 434,370 3 5
Process material warehouse 1 354,313 1
Process laboratory 1 2,000 1
Georgia Water distribution and supplies service center warehouse 2 156,606 1 1
Submersible pump warehouse 1 3,500 1
Water and wastewater treatment manufacturing facilities 1 737,910 1
Process material warehouse 1 10,000 1
Principal executive and administrative office 1 100,150 1
Taulman executive and administrative offices 1 80,100 1
Illinois Process material warehouse 1 86,528 1
Nevada Water distribution and supplies service center warehouse 1 68,340 1
North Carolina Water distribution and supplies service center warehouse 3 132,200 1 2
South Carolina Process material warehouse 1 10,500 1
Tennessee Water distribution and supplies service center warehouse 2 81,850 2
Texas Water distribution and supplies service center warehouse 4 849,078 4
Process material warehouse 1 13,500 1
Utah Water distribution and supplies service center warehouse 1 25,879 1
--- ---------- --- ---
Total 35 3,370,069 9 26
=== ========== === ===
SUMMARY
-------
Water distribution and supplies service center warehouse 23 1,922,377 5 18
Submersible pump warehouses 1 3,500 1
Process material warehouses 7 524,032 1 6
Water and wastewater treatment manufacturing facilities 1 737,910 1
Taulman executive and administrative office 1 80,100 1
Process laboratory 1 2,000 1
Executive and administrative offices 1 100,150 1
--- --------- --- ---
Total 35 3,370,069 9 26
=== ========= === ===
</TABLE>
The Company also owns or leases 36 transport tractors and 72 transport
trailers used in the sale and distribution of its products.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or
of which any of its property is the subject other than routine litigation
incidental to business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted by the Company to a vote of its stockholders
during the fiscal quarter ended April 30, 1995.
ITEM 4(A). EXECUTIVE OFFICERS OF THE COMPANY
Set forth below, in accordance with General Instruction G(3) of Form
10-K and Instruction 3 to Item 401(b) of Regulation S-K, is certain
information regarding the executive officers of the Company, including
their ages as of April 30, 1995, their principal occupations (which have
continued for at least the past five years unless otherwise noted), the
calendar year in which each was elected and directorships held by them in
certain other companies.
R. DOYLE WHITE, age 64, has served as President of the Company since
1982, as Chief Executive Officer of the Company since 1986 and as Chairman
of the Board of the Company since 1993. He also served from 1982 until
June 1994 as Chief Operating Officer of the Company, and from 1978 until
1982, he served as Senior Vice President and a General Manager of the
Company. Mr. White has served as a director of the Company since 1981.
STAN WHITE, age 53, has served as Secretary/Treasurer of the Company
since 1974.
LARRY MAY, age 56, has served as Executive Vice President and Chief
Operating Officer of the Company since June 1994. From 1992 until June
1994, he served as Senior Vice President of the Company. From 1988 until
1992, he served as Vice President of the Company's Distribution Group
division.
ROBERT H. PLESS, JR., age 55, has served as Vice President and
General Manager of the Company's Davco division since 1985. From 1982 until
1985, he served as General Manager of the Davco division.
ROBERT D. TATUM, age 39, has served as Vice President of the
Company's Davis Process division since September 1993 and as General
Manager of the Davis Process division since 1987.
Robert D. Tatum is a nephew of H. Forbes Davis, Jasper C. Davis III
and R.R. Davis, all of whom are directors of the Company. R. Doyle White
and Stan White are not related.
Generally, the Company's executive officers are elected annually by
the Board of Directors for a term of one year or until their successors are
elected and qualified.
13
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Information relating to the market for the Company's Common Stock and
other matters relating to the holders thereof is set forth under the
caption "Stockholder Information" and in Notes 4 and 10 of Notes to
Consolidated Financial Statements in the Company's 1995 Annual Report.
Such information is incorporated herein by reference. The 1995 Annual
Report is filed as Exhibit 13 to this report.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the Company for each year of the ten-year
period ended April 30, 1995 is set forth under the caption "Selected
Consolidated Financial Data" in the Company's 1995 Annual Report. Such
selected consolidated financial data are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A discussion of the Company's results of operations and financial
condition for the periods and at the dates covered by the consolidated
financial statements set forth in the Company's 1995 Annual Report is set
forth under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1995 Annual Report.
Such discussion is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and its
subsidiary and the related management letter and report of independent
accountants, which are set forth on pages 14 through 29 of the Company's
1995 Annual Report, are incorporated herein by reference:
Consolidated Statement of Operations for each of the three years in the
period ended April 30, 1995
Consolidated Balance Sheet at April 30, 1995 and April 30, 1994
Consolidated Statement of Changes in Stockholders' Equity for each of the
three years in the period ended April 30, 1995
Consolidated Statement of Cash Flows for each of the three years in the
period ended April 30, 1995
Notes to Consolidated Financial Statements
The supplementary financial information required by Item 302 of
Regulation S-K is set forth in Note 10 of Notes to Consolidated Financial
Statements in the Company's 1995 Annual Report. Such information is
incorporated herein by reference.
14
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No independent certified public accountant of the Company has resigned,
indicated any intent to resign or been dismissed as the independent
certified public accountant of the Company during the two fiscal years
ended April 30, 1995 or subsequent thereto.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information relating to the directors (including management's nominees
for director) of the Company is set forth under the captions "Proposal 1 -
Election of Directors - Nominees" and "Proposal 1 - Election of Directors -
Information Regarding Nominees and Incumbent Directors" in the Company's
Proxy Statement for its Annual Meeting of Stockholders to be held on
September 8, 1995. Such information is incorporated herein by reference.
Information relating to the executive officers of the Company is, pursuant
to Instruction 3 of Item 401(b) of Regulation S-K and General Instruction
G(3) of Form 10-K, set forth at Part I, Item 4(A) of this report under the
caption "Executive Officers of the Company." Information regarding
compliance by directors and executive officers of the Company and owners of
more than ten percent of the Company's Common Stock with the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended, is set forth under the caption "Proposal 1 - Election of Directors
- Compliance with Section 16(a) of the Securities Exchange Act of 1934" in
the above-referenced Proxy Statement. Such information is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to management compensation is set forth under the
captions "Proposal 1 - Election of Directors - Director Compensation" and
"Proposal 1 - Election of Directors - Executive Compensation" in the
Company's Proxy Statement referred to in Item 10 above. Such information
is incorporated herein by reference, except for the information set forth
in the subsections entitled "Proposal 1-Election of Directors - Executive
Compensation - Compensation Committee Report" and "Proposal 1 - Election of
Directors - Stock Performance Graph" which specifically is not so
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of the Company's $0.01 par value Common
Stock by certain persons is set forth under the captions "Voting -
Principal Stockholders" and "Proposal 1 - Election of Directors -
Information Regarding Nominees and Incumbent Directors" in the Company's
Proxy Statement referred to in Item 10 above. Such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain agreements and arrangements between the
Company and certain of its directors is set forth under the caption
"Proposal 1 - Election of Directors - Director Compensation" in the
Company's Proxy Statement referred to in Item 10 above. Such information
is incorporated herein by reference.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of This Report.
1. Financial Statements
The following consolidated financial statements and the related report
of independent accountants and management responsibility letter, which
are set forth on pages 14 through 29 of the Company's 1995 Annual
Report, are incorporated by reference in Part II, Item 8 hereof:
Consolidated Statement of Operations for each of the three years in
the period ended April 30, 1995
Consolidated Balance Sheet at April 30, 1995 and April 30, 1994
Consolidated Statement of Changes in Stockholders' Equity for each of
the three years in the period ended April 30, 1995
Consolidated Statement of Cash Flows for each of the three years in
the period ended April 30, 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following financial statement schedule and the report of
independent accountants thereon is included in this report. All other
schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because such schedules are not required under the related instructions
or are inapplicable or because the information required is included in
the consolidated financial statements or notes thereto. See the Index
to Financial Statement Schedules on page 26 hereof.
Report of Independent Accountants
on Financial Statement Schedules
Schedule II Valuation and Qualifying
Accounts for the Three
Years Ended April 30, 1995
3. Exhibits
The following exhibits are filed with or incorporated by reference in
this report. Where such filing is made by incorporation by reference
to previously filed registration statement or report, such
registration statement or report is identified in parentheses. The
Company will furnish any exhibit upon request to Stan White,
Secretary-Treasurer, Davis Water & Waste Industries, Inc., 1820
Metcalf Avenue, Thomasville, Georgia 31792; telephone (912) 226-5733.
There is a charge of $.50 per page to cover expenses for copying and
mailing.
<TABLE>
<CAPTION>
<S> <C>
3(a) Restated Articles of Incorporation of the Company
(Exhibit 3(a) to the Company's Registration
Statement on Form S-1, No. 2-42887)
3(b) Articles of Amendment to Restatement Articles of
Incorporation of the Company (Exhibit 3(b) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1987)
16
<PAGE>
3(c) Articles of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 3(c) to the
Company's Annual Report on Form 10-K for the year
ended April 30, 1988)
3(d) Articles of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 3(d) to the
Company's Annual Report on Form 10-K for the year
ended April 30, 1989)
3(e) Articles of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1990)
3(f) By-Laws of the Company, as amended through August
24, 1990 (Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended July 31,
1990)
4 Rights Agreement dated as of December 31, 1992 by
and between the Company and Wachovia Bank of North
Carolina, N.A., as the Right Agent (Exhibit 4 to
the Company's Annual Report on Form 10-k for the
year ended April 30, 1993)
10(a) Employment Agreement dated May 1, 1981 between R.
Doyle White and the Company (Exhibit 10(a) to the
Company's Annual Report on Form 10-K for the year
ended April 30,1982)
10(b) Agreement for Consulting Services dated September
1, 1990 between Jasper C. Davis III and the Company
(Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the year ended April 30, 1991)
10(c) Agreement for Consulting Services dated October 1,
1991 between R. R. Davis and the Company (Exhibit
10(c) to the Company's Annual Report on Form 10-K
for the year ended April 30, 1992)
10(d) Agreement for Consulting Services dated January 5,
1994 between H.F.D. Consultants, Inc. (a
corporation wholly owned by H. Forbes Davis) and
the Company (Exhibit 10(u) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
January 31, 1994)
10(e) Form of Compensation and Benefits Agreement dated
May 1,1990 between the Company and certain
executive officers of the Company (Exhibit 10(c)
to the Company's Annual Report on Form 10-K for the
year ended April 30, 1991)
10(f) Compensation and Benefits Agreement dated June 5,
1990 between the Company and R. Doyle White
(Exhibit 10(d) to the Company's Annual Report on
Form 10-K for the year ended April 30, 1991)
10(g) Amendment dated December 10, 1993 to the
Compensation and Benefits Agreement between the
Company and R. Doyle White (Exhibit 10(a)(i) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1994)
10(h) 1988 Employee Stock Purchase Plan, as amended by
First 1991 Amendment (Exhibit 10(f) to the
17
<PAGE>
Company's Annual Report on Form 10-K for the year
ended April 30, 1992)
10(i) Amended and Restated Employee Retirement Plan of
the Company (Exhibit 3 to the Company's Annual
Report on Form 10-K for the year ended April 30,
1978)
10(j) Davis Water & Waste Industries, Inc. Employee
Benefits Trust Agreement (Exhibit A to the
Company's Annual Report on Form 10-K for the year
ended April 30, 1985)
10(k) Supplemental Retirement Plan for Certain Officers
Plan No. 1 (Exhibit 10(h) to the Company's Annual
Report on Form 10-K for the year ended April 30,
1991)
10(l) Amendment to the Supplemental Retirement Plan for
Certain Officers Plan No. 1 (Exhibit 10(i)(i) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1994)
10(m) Supplemental Retirement Plan for Certain Officers
Plan No. 2 (Exhibit 10(i) to the Company's Annual
Report on Form 10-K for the year ended April 30,
1991)
10(n) Medical Reimbursement Plan - (Exhibit 10(j) to the
Company's Annual Report on Form 10-K for the year
ended April 30, 1991)
10(o) Salary Administration Plan for Monthly Salaried
Employees, including the Incentive Compensation
Plan Certain for Salaried Employees (Exhibit B to the
Company's Annual Report on Form 10-K for the year
ended April 30, 1985)
10(p) Long Term Incentive Plan dated May 1, 1992 (Exhibit
10(p) to the Company's Annual Report on Form 10-K
for the year ended April 30, 1993)
10(q) Agency Agreement dated November 21, 1978 between
the Company and EMU-Unterwasserpumpen GmbH (Exhibit
10(o) to the Company's Registration Statement on
Form S-1, No. 33-13340)
10(r) Purchase Agreement dated August 31, 1990 by and
among, The Taulman Company, TTC acquisition
Corporation, certain stockholders of The Taulman
Company and the Company (Exhibit 2.1 to the
Company's Current Report on Form 8-K dated August
31, 1990)
10(s) Amendment dated August 31, 1990 to the Asset
Purchase Agreement dated August 3, 1990 by and
among TTC Acquisition Corporation, The Taulman
Company, certain stockholders of The Taulman
Company and the Company (Exhibit 2.2 to the
Company's Current Report on Form 8-K dated August
31, 1990)
10(t) Loan Agreement dated as of October 13, 1992 between
the Company and Sun Bank, N.A. (Exhibit 10(t) to
the Company's Annual Report on Form 10-K for the
year ended April 30, 1993)
18
<PAGE>
10(u) Commitment letter dated as of June 15, 1995 between
the Company and Sun Bank, N.A. - filed herewith
10(v) 1994 Employees Stock Option Plan (Exhibit 10(v) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1995)
10(w) 1994 Directors Stock Option Plan (Exhibit 10(w) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1995)
13 1995 Annual Report - filed herewith*
21 Subsidiaries (Exhibit 22 to the Company's Annual
Report on Form 10-K for the year ended April 30,
1992)
23 Consent of Price Waterhouse to incorporation of
accountant's reports into the Company's
Registration Statement on Form S-8, No. 33-43032 -
filed herewith
24 Powers of Attorney - filed herewith
27 Financial Data Schedule (SEC use only)
</TABLE>
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fiscal quarter
ended April 30, 1995.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
* All or portions of page 4, pages 6 through 29 and page 31 of the
Company's 1995 Annual Report, as indicated in this report, are
incorporated herein by reference. Other than as noted herein, the
Company's 1995 Annual Report is furnished to the Commission solely for
its information and is not deemed to be "filed" with the Commission or
subject to the liabilities of Section 18 of the Securities Exchange Act
of 1934.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on
July 27, 1995.
DAVIS WATER & WASTE INDUSTRIES, Inc.
(Registrant)
By:/s/ R. Doyle White
R. Doyle White
Chairman of the Board, President and
Chief Executive Officer
20
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on July 27, 1995.
Signature Title
/s/ R. Doyle White Chairman of the Board,
R. Doyle White President and Chief Executive
Officer
/s/ Stan White Secretary/Treasurer, Principal
Stan White Financial Officer and Principal
Accounting Officer
21
<PAGE>
/s/ Joe E. Beverly* Director
Joe E. Beverly
/s/ O. Larry Comer* Director
0. Larry Comer
/s/ Robert P. Crozer* Director
Robert P. Crozer
/s/ H. Forbes Davis* Director
H. Forbes Davis
/s/ Jasper C. Davis* Director
Jasper C. Davis
/s/ R. R. Davis* Vice Chairman of the Board
R. R. Davis
/s/ Thomas R. Pledger* Director
Thomas R. Pledger
*By: /s/ Stan White
Stan White
Attorney in Fact
22
<PAGE>
DAVIS WATER & WASTE INDUSTRIES, Inc.
INDEX OF FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Schedule No. Schedule Page
<S> <C> <C>
Report of Independent
Accountants on Financial
Statement Schedules 24
II Valuation and Qualifying
Accounts for the Three
Years Ended April 30, 1995 25
</TABLE>
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Davis Water & Waste Industries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated June 16, 1995 included in the 1995 Annual Report to
Stockholders of Davis Water & Waste Industries, Inc. (which report and
consolidated financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedules listed in Item 14(a) of this Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Atlanta, Georgia
June 16, 1995
24
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
DAVIS WATER & WASTE INDUSTRIES, Inc.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED APRIL 30, 1995
----------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Balance at Additions
beginning of charged to Deductions from Balance at
Description period cost & expense reserves (A) end of period
-------------------------- ------------ --------------- ------------ -------------
Doubtful accounts receivable
for the year ended:
<S> <C> <C> <C> <C>
April 30, 1995 $1,338,000 $ 472,000 $ 675,000 $1,135,000
April 30, 1994 $1,543,000 $ 665,000 $ 870,000 $1,338,000
April 30, 1993 $1,419,000 $1,731,000 $1,607,000 $1,543,000
Inventory reserves for the
year ended:
April 30, 1995 $ 52,000 $ 956,000 $ 658,000 $ 350,000
April 30, 1994 $ 192,000 $ 0 $ 140,000 $ 52,000
April 30, 1993 $ 164,000 $ 28,000 $ 0 $ 192,000
</TABLE>
(A) Uncollectible accounts written off, net of recoveries.
25
<PAGE>
DAVIS WATER & WASTE INDUSTRIES. Inc.
INDEX OF EXHIBITS
The following exhibits are filed as part of or incorporated by reference in
this report. Where such filing is made by incorporation by reference to a
previously filed registration statement or report, such registration
statement or report is identified in parentheses.
<TABLE>
<CAPTION>
Exhibit No. Description Page
----------- ----------- ----
<S> <C> <C>
3(a) Restated Articles of Incorporation of the
Company (Exhibit 3(a) to the Company's
Registration Statement on Form S-1, No.
2-42887)
3(b) Articles of Amendment to Restatement Articles
of Incorporation of the Company (Exhibit 3(b)
to the Company's Quarterly Report on Form
10-Q for the quarter ended January 31, 1987)
3(c) Articles of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 3(c) to
the Company's Annual Report on Form 10-K for
the year ended April 30, 1988)
3(d) Articles of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 3(d) to
the Company's Annual Report on Form 10-K for
the year ended April 30, 1989)
3(e) Articles of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1990)
3(f) By-Laws of the Company, as amended through
August 24, 1990 (Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended July 31, 1990)
4 Rights Agreement dated as of December 31,
1992 by and between the Company and Wachovia
Bank of North Carolina, N.A., as the Right
Agent (Exhibit 4 to the Company's Annual
Report on Form 10-K for the year ended April
30, 1993)
10(a) Employment Agreement dated May 1, 1981
between R. Doyle White and the Company
(Exhibit 10(a) to the Company's Annual Report
on Form 10-K for the year ended April
30,1982)
10(b) Agreement for Consulting Services dated
September 1, 1990 between Jasper C. Davis III
and the Company (Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the
year ended April 30, 1991)
10(c) Agreement for Consulting Services dated
October 1, 1991 between R. R. Davis and the
Company (Exhibit 10(c) to the Company's
Annual Report on Form 10-K for the year ended
April 30, 1992)
26
<PAGE>
Exhibit No. Description Page
----------- ----------- ----
10(d) Agreement for Consulting Services dated
January 5, 1994 between H.F.D. Consultants,
Inc. (a corporation wholly owned by H. Forbes
Davis) and the Company (Exhibit 10(u) to the
Company's Quarterly Report on Form 10-Q for
the quarter ended January 31, 1994)
10(e) Form of Compensation and Benefits Agreement
dated May 1,1990 between the Company and
certain executive officers of the Company
(Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the year ended April 30,
1991)
10(f) Compensation and Benefits Agreement dated
June 5, 1990 between the Company and R. Doyle
White (Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the year ended April
30, 1991)
10(g) Amendment dated December 10, 1993 to the
Compensation and Benefits Agreement between
the Company and R. Doyle White (Exhibit
10(a)(i) to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 31,
1994)
10(h) 1988 Employee Stock Purchase Plan, as amended
by First 1991 Amendment (Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the
year ended April 30, 1992)
10(i) Amended and Restated Employee Retirement Plan
of the Company (Exhibit 3 to the Company's
Annual Report on Form 10-K for the year ended
April 30, 1978)
10(j) Davis Water & Waste Industries, Inc. Employee
Benefits Trust Agreement (Exhibit A to the
Company's Annual Report on Form 10-K for the
year ended April 30, 1985)
10(k) Supplemental Retirement Plan for Certain
Officers Plan No. 1 (Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the
year ended April 30, 1991)
10(l) Amendment to the Supplemental Retirement Plan
for Certain Officers Plan No. 1 (Exhibit
10(i)(i) to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 31,
1994)
10(m) Supplemental Retirement Plan for Certain
Officers Plan No. 2 (Exhibit 10(i) to the
Company's Annual Report on Form 10-K for the
year ended April 30, 1991)
10(n) Medical Reimbursement Plan - (Exhibit 10(j)
to the Company's Annual Report on Form 10-K
for the year ended April 30, 1991)
10(o) Salary Administration Plan for Monthly
Salaried Employees, including the Incentive
Compensation Plan for Certain Salaried
Employees (Exhibit B to the Company's Annual
Report on Form 10-K for the year ended April
30, 1985)
27
<PAGE>
Exhibit No. Description Page
----------- ----------- ----
10(p) Long Term Incentive Plan dated May 1, 1992
(Exhibit 10(p) to the Company's Annual Report
on Form 10-K for the year ended April 30,
1993)
10(q) Agency Agreement dated November 21, 1978
between the Company and EMU-Unterwasserpumpen
GmbH (Exhibit 10(o) to the Company's
Registration Statement on Form S-1, No.
33-13340)
10(r) Purchase Agreement dated August 31, 1990 by
and among, The Taulman Company, TTC
acquisition Corporation, certain stockholders
of The Taulman Company and the Company
(Exhibit 2.1 to the Company's Current Report
on Form 8-K dated August 31, 1990)
10(s) Amendment dated August 31, 1990 to the Asset
Purchase Agreement dated August 3, 1990 by
and among TTC Acquisition Corporation, The
Taulman Company, certain stockholders of The
Taulman Company and the Company (Exhibit 2.2
to the Company's Current Report on Form 8-K
dated August 31, 1990)
10(t) Loan Agreement dated as of October 13, 1992
between the Company and Sun Bank, N.A.
(Exhibit 10(t) to the Company's Annual Report
on Form 10-K for the year ended April 30,
1993)
10(u) Commitment letter dated as of June 15, 1995
between the Company and Sun Bank, N.A. -
filed herewith 29
10(v) 1994 Employees Stock Option Plan (Exhibit
10(v) to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 31,
1995)
10(w) 1994 Directors Stock Option Plan (Exhibit
10(w) to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 31,
1995)
13 1995 Annual Report - filed herewith* 36
21 Subsidiaries (Exhibit 22 to the Company's
Annual Report on Form 10-K for the year ended
April 30, 1992)
23 Consent of Price Waterhouse to incorporation
of accountant's reports into the Company's
Registration Statement on Form S-8, No.
33-43032 - filed herewith 70
24 Powers of Attorney - filed herewith 72
27 Financial Data Schedule (SEC use only)
</TABLE>
* All or portions of page 4, pages 6 through 29 and page 31 of the
Company's 1995 Annual Report, as indicated in this report, are incorporated
herein by reference. Other than as noted herein, the Company's 1995 Annual
Report is furnished to the Commission solely for its information and is not
deemed to be "filed" with the Commission or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934.
28
<PAGE>
Exhibit 10(u)
Commitment Letter
29
<PAGE>
May 4, 1995
DAVIS WATER & WASTE INDUSTRIES, INC.
Post Office Box 1419
Thomasville, Georgia 31799-1419
Attention: Mr. Stan White,
Treasurer and Secretary
Dear Stan:
I am pleased to inform DAVIS WATER & WASTE INDUSTRIES, INC. (the
"Borrower") that SUN BANK, NATIONAL ASSOCIATION (the "Bank") has approved
(i) the renewal, modification and extension of the revolving line of credit
loan (the "Loan") currently extended by the Bank to the Borrower pursuant
to the terms of that certain Amended and Restated Loan Agreement by and
between the Borrower and the Bank dated October 13, 1992 (the "Loan
Agreement"; capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Loan Agreement unless the context requires
otherwise) and (ii) the reduction of the maximum principal amount available
for borrowing thereunder to $30,000,000.00, based upon and subject to the
following terms and conditions:
BORROWER: DAVIS WATER & WASTE INDUSTRIES, INC.
LOAN AMOUNT:$30,000,000.00
PURPOSE: To support short term working capital needs of the Borrower,
including the purchase of inventory.
GUARANTOR: None.
TERMS: Revolving line of credit loan, expiring on the Maturity Date.
Accrued interest only at the Interest Rate shall be payable (a)
in the case of Prime Rate Based Advances, monthly, in arrears,
and (b) in the case of LIBOR Rate Based Advances, at the
expiration of the applicable interest period, but in no event
less often than quarterly. The entire unpaid principal
balance, together with accrued and unpaid interest, shall be
due and payable in full on the Maturity Date. At no time shall
the aggregate principal amount of advances outstanding in
respect of the Loan exceed the lesser of (a) $30,000,000.00, or
(b) the sum of (i) eighty percent (80%) of the value Inventory,
valued at the lower of cost or market value.
MATURITY
DATE: The earlier of (a) April 30, 1997 (subject to annual review),
(b) the occurrence of an Event of Default; or (c) such later
date as the Bank, in its absolute discretion, may agree to in
writing.
EXTENSION
OPTION: At the written request of the Borrower, which request shall be
made not less than sixty (60) days prior to the first
anniversary date, the Bank may, in its sole and absolute
discretion, elect to extend the Loan for an additional twelve
(12) month period.
INTEREST
RATE: Interest on any Advance made by the Bank in respect of the Loan
shall be chosen by the Borrower from the following available
options and shall fluctuate based upon the Borrowers' EBIT
Ratio ("EBIT") and Total Liability to Tangible Net Worth Ratio
("TL/TNW"), determined by the Bank quarterly, as follows:
Option A (Prime Rate Based): Prime Rate plus or minus the
indicated number of basis points
30
<PAGE>
Option B (LIBOR Rate Based): LIBOR plus the indicated number
of basis points
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
E T L/T N W
B >2.5:1 2.5:1 TO <2.0:1
2.0:1
I >3.5:1 L+225 L+200 L+150
P+25 P+0 P-50
T <3.5:1 L+250 L+225 L+175
P+50 P+25 P-25
</TABLE>
Notwithstanding the foregoing, however, until June 30, 1995, so
long as no default has occurred in respect of the Loan, the
interest rate on LIBOR Rate Based Advances shall be LIBOR plus
200 basis points (2.00%).
LIBOR shall be available in 1 day, 1 month or 3 month options
based on a 360 day year. Any interest due on the Loan shall be
calculated on the basis of a year containing 360 days and shall
be calculated for the actual number of days elapsed. The
Borrower's EBIT Ratio and Total Liability to Tangible Net Worth
Ratio shall be calculated by the Bank quarterly, on a rolling
four (4) quarter basis based upon the Borrowers' quarterly
financial statements, beginning with the Borrowers' statement
for the period ending June 30, 1995, with any change in the
applicable Interest Rate to be effective as of the first day of
the second quarter following the date of the financial
statements reflecting such change in the Borrowers' EBIT Ratio
or Total Liability to Tangible Net Worth Ratio, as the case may
be.
Prime Rate shall be defined as the interest rate announced from
time to time by Sun Banks, Inc. as the Prime Rate (which rate
is only a benchmark, is purely discretionary, and is not
necessarily the best or lowest rate charged borrowing customers
of any subsidiary of Sun Banks, Inc.), adjusted daily with each
change in the Prime Rate.
LIBOR shall be defined as the interest rate per annum announced
from time to time by Sun Banks, Inc. as its LIBOR rate for
comparable interest periods, in effect on the Interest Rate
Determination Date.
Regardless of the above, the Interest Rate shall never exceed
the maximum rate allowed, from time to time, by law.
COLLATERAL: Perfected first priority security interest in (a) all of the
Borrower's now or hereafter existing or acquired Accounts and
Inventory, (b) all property of the Borrower now or at any time
hereafter in the possession of the Bank in any capacity
whatsoever, including, but not limited to, any deposit
balances, accounts, items, certificates of deposit or monies,
and (c) Proceeds of the foregoing.
The Bank will release its lien on the Borrower's Accounts and
Inventory when (a) the Borrower's Total Liability to Tangible
Net Worth Ratio is less than 1.9:1 and (b) the Borrower's EBIT
Ratio exceeds 3.5:1, as reflected in Borrower's audited fiscal
year end financial statements for any fiscal year. At such
time as the Bank releases its lien on such collateral, (a) the
Borrower shall grant a "negative pledge" as to such collateral
31
<PAGE>
to the Bank and shall promptly execute any documents requested
by the Bank to evidence such negative pledge and (b) the
maximum Total Liability to Tangible Net Worth Ratio requirement
shall be changed to 2.0:1.
LOAN FEES: The Borrower shall pay to the Bank a non-usage fee in the
amount of one-fourth of one percent (.25%) per annum, based on
a 360 day year, on the average unfunded portion of the Loan,
which fee shall be billed and payable quarterly in arrears.
Such non-usage fee shall accrue until the Bank's obligation to
fund Advances under the Loan is terminated and shall be
calculated by determining the daily average of the unused
portion of the Loan with respect to each calendar quarter,
multiplied by the product derived from the following formula:
one-fourth of one percent (0.25%)
of the average derived above divided
by 360 and multiplied by the number
of days in the applicable calendar quarter.
CROSS-DEFAULT/
CROSS-
COLLATERAL: The Loan and the documentation executed in connection
therewith shall be cross-defaulted and cross-
collateralized with all other obligations of the Borrower
to the Bank.
BANK'S
COUNSEL: Charles T. Brumback, Jr., Esq.
Akerman, Senterfitt & Eidson, P.A.
P. O. Box 231
255 South Orange Avenue
17th Floor, Citrus Center
Orlando, Florida 32802
(407) 843-7860
The Loan shall continue to be governed by and subject to the Loan
Agreement, which shall be amended by an amendment thereto corresponding
with and containing the terms and understandings of this commitment letter.
Our proposal to renew, modify and extend the Loan is contingent upon the
satisfaction of the following conditions, which may be waived by the Bank
in its sole discretion.
1. Approval of Documents. The Borrower shall duly execute and/or deliver
such instruments, documents, certificates, opinions of the Borrower's
counsel and assurances, and do such other acts and things as the Bank
may reasonably request, to effect the purpose of the transactions
described in this commitment letter. All proceedings, agreements,
instruments, documents, and other matters relating to the renewal,
modification and extension of the Loan, and all other transactions
herein contemplated, shall be satisfactory to the Bank and the Bank's
Counsel and shall be drafted by the Bank's Counsel.
2. Financial Statements, etc. During the term of the Loan, the Borrower
shall submit such audited financial statements, internally prepared
financial statements, 10-K and 10-Q reports and other financial
information as currently required pursuant to the Loan Agreement. In
addition, the Borrower shall submit (a) a monthly borrowing base
certificate, in form and content satisfactory to the Bank, and
certified to the Bank by an authorized financial officer of the
Borrower, (b) quarterly, within forty-five (45) days after the end of
each quarter, an accounts receivable aging report in reasonable detail
and in form and substance satisfactory to the Bank and certified to the
Bank by an authorized financial officer of the Borrower and (c) with
reasonable promptness, such other financial information as the Bank may
request. The Borrower shall permit the Bank or its agents to visit its
places of business to review and inspect its books and records and to
make extracts therefrom, and to discuss the affairs, finances and
32
<PAGE>
accounts of the Borrower with its officers at all reasonable times as
may be requested. In addition, the Borrower will permit
representatives of the Bank's asset based lending group to audit and
inspect the Accounts of the Borrower on a periodic basis, no less
frequently than quarterly and the cost of such audits shall be paid by
the Borrower.
3. Financial Covenants. The Borrower will, during the term of the Loan,
comply with the following financial covenants and ratios currently
provided for in the Loan Agreement, which shall be amended as follows:
(a) Total Liability to Tangible Net Worth Ratio.
During the term of the Loan Agreement, the Borrowers' Total
Liabilities to Tangible Net Worth Ratio shall not exceed (i) 2.5:1
until such time as the Bank releases its lien on the Accounts and
Inventory of Borrower, and (ii) 2.0:1 thereafter, tested annually.
(b) Minimum Tangible Net Worth. During the term of the Loan
Agreement, the Borrowers' Tangible Net Worth shall be at least
$24,500,000.00 through April 30, 1995, tested annually, which
minimum requirement shall increase by thirty-three percent (33%)
of the Borrower's net profit as at the conclusion of the
Borrower's fiscal year-end each year thereafter during the term of
the Loan.
(d) Current Ratio. During the term of the Loan Agreement, the
Borrowers' Current Ratio shall be equal to or greater than 1.15:1,
tested quarterly.
(e) EBIT Ratio. During the term of the Loan Agreement, the Borrowers'
EBIT Ratio shall be at least 2.5:1, tested quarterly.
The Working Capital Ratio requirement and the Cash Flow Ratio requirement
currently provided for in the Loan Agreement shall be deleted from the Loan
Agreement.
4. Other Liens; Security Interests; Indebtedness. Except as otherwise
explicitly permitted by the terms of the Loan Agreement, the Borrower
will not, during the term of the Loan, incur, create, assume or permit
to exist any further indebtedness, including, without limitation,
capitalized lease obligations, or create any other lien or security
interest against any of its assets now in existence or hereafter
existing or acquired, without the prior written consent of the Bank.
5. Restriction on Capital Expenditures. Except as specifically permitted
in the Loan Agreement, during the term of the Loan, the Borrower and/or
its Subsidiaries on a consolidated basis shall not, without the prior
consent of Bank, make capital expenditures for fixed assets or stock
acquired in an acquisition in excess of $2,500,000.00 in the aggregate.
6. Insurance. The Borrower shall maintain such policies of liability
insurance, hazard insurance (with fire, extended coverage, vandalism
and mischief protection) and flood insurance as the Bank may request,
issued by a company or companies licensed to do business in the State
of Georgia and in such other location where the Borrower's assets are
located or operated.
7. Fees and Expenses. By acceptance of this commitment, the Borrower
agrees to pay any out-of-pocket expenses incurred by the Bank in
connection with the underwriting of or incidental to the Loan,
including any and all applicable documentary stamp and intangible
taxes, recording fees, lien and title search fees, and all fees and
expenses of the Bank's Counsel, and in each instance whether or not the
renewal, modification and extension of the Loan is closed or any
proceeds disbursed thereunder.
8. Financial Condition. There shall have been no adverse change in
financial condition of the Borrower as reflected in their most recent
respective audited fiscal year end statements at the time of closing.
33
<PAGE>
Unless extended by the Bank in writing, this commitment shall expire at
the close of business on June ___, 1995. This commitment is not
assignable. If the terms and conditions set forth herein are acceptable to
you, please so indicate by having the enclosed duplicate copy executed and
returned to me by June ___, 1995. Otherwise, this commitment shall become
null and void.
It is with great pleasure that Sun Bank agrees to renew and extend the
Loan. On behalf of Sun Bank's management, I would like to express our
appreciation of the confidence which the Borrower and you have placed in
Sun Bank. We look forward to the continuation of the mutually rewarding
relationship established with the Borrower. If you have any questions,
please do not hesitate to call me at (407) 237-6788 or (800)432-4760
extension 6788.
I look forward to working with you on this matter.
Best regards,
H. Robert Neinken
Service Vice President
cc: Charles T. Brumback, Jr., Esq.
34
<PAGE>
Accepted and Agreed to this 15th day of June, 1995:
BORROWER:
DAVIS WATER & WASTE INDUSTRIES, INC.
By:_______________________________
Name: Stan White
Title: Secretary/Treasure
(CORPORATE SEAL)
35
<PAGE>
Exhibit 13
1995 Annual Report
36
<PAGE>
ABOUT OUR COMPANY
Davis Water & Waste Industries, Inc. manufactures and markets products
relating to the distribution of water and the treatment of water and
wastewater. The Company markets a broad line of water distribution
equipment and supplies, including underground pipe, pipe fittings, valves,
fire hydrants, water meters and related equipment, and believes that it is
the largest distributor of water distribution equipment and supplies in the
Southeast, based on annual sales of such products. The Company also
designs, engineers, manufactures, sells and installs water and wastewater
treatment and pumping equipment. From humble beginnings, Davis has grown
from a small regional company to become a New York Stock Exchange listed
company with over 670 employees nationwide. Its mission is to meet the
growing demand for clean water into the 21st Century.
Financial Highlights
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------
(In thousands, except share data,
percentages and ratios)
FOR THE YEAR 1995 1994 1993
-------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Net sales................................ $215,649 $202,621 $190,990
Net income (loss) before the cumulative
effect of the change in the method of
accounting for income taxes............. $ 3,448 ($ 5,340) $ 194
Cumulative effect of the change in the
method of accounting for income taxes... $ 0 $ 0 $ 459
Net income (loss)........................ $ 3,448 ($ 5,340) $ 653
Net income (loss) per share before the
cumulative effect of the change in the
method of accounting for income taxes... $ 1.06 ($ 1.64) $ 0.06
Cumulative effect per share of the change
in the method of accounting for income
taxes................................... $ 0.00 $ 0.00 $ 0.14
Net income (loss) per share.............. $ 1.06 ($ 1.64) $ 0.20
Cash dividends per share................. $ 0.08 $ 0.00 $ 0.00
Net income (loss) as a percentage of
beginning stockholders' equity.......... 15.5% (19.3%) 2.4%
AT YEAR-END
----------------------------------------
Total assets............................. $ 81,536 $ 82,085 $ 79,341
Working capital.......................... $ 30,594 $ 31,731 $ 33,782
Stockholders' equity..................... $ 25,332 $ 22,309 $ 27,635
Stockholders' equity per share........... $ 7.77 $ 6.83 $ 8.50
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
About Our Company......................................... 1
Financial Highlights...................................... 1
Letter to Stockholders.................................... 2
Review of Operations...................................... 3
Selected Consolidated Financial Data...................... 6
Management's Discussion and Analysis Financial Condition
and Results of Operations................................ 8
Consolidated Financial Statements......................... 15
Directors and Executive Officers.......................... 30
Stockholder Information................................... 31
List of Locations......................................... 32
</TABLE>
37
<PAGE>
TO OUR STOCKHOLDERS:
Fiscal 1995 was a record year in both sales and net profit. Sales for
fiscal 1995 were $215,649,362, up 6.4% from fiscal 1994. Net income was
$3,448,227 as compared to a net loss of $5,340,258 for fiscal 1994. On a
per share basis, net income was $1.06 as compared to net loss of $1.64 in
fiscal 1994.
The Distribution Group's net sales for fiscal 1995 increased by
$22,393,842, or 15.5% over fiscal 1994. The increased sales of the
Distribution Group are attributed to the improvement in the economy and its
positive effects on commercial and residential land development. The
Distribution Group is currently in the process of opening two new
locations, one in Florida and the other in the Atlanta area to capitalize
on the improvement in the economy and the increased demand for the
Company's products. Sales of the Water Treatment Group were down for
fiscal 1995 compared to fiscal 1994 as a result of the shutdown of the
Turbitrol Company, a division of The Taulman Company. However, the
remaining operations in the Water Treatment Group recorded an increase in
net sales for fiscal 1995 of $4,585,158, or 10.8%. The Water Treatment
Group's backlog for fiscal 1995 has declined compared to fiscal 1994 levels
due to the shutdown of Turbitrol, but increased bookings for the first two
and a half months of fiscal 1996 indicate that the Water Treatment Group's
backlog should return to a strong level by mid year.
As a result of the Company's improved performance during the first two
quarters of fiscal 1995, the Board of Directors approved a semi-annual cash
dividend of eight cents ($0.08) per share which was paid during the third
quarter of fiscal 1995. Also, as a result of subsequent improvements in
the Company's financial position, the Board of Directors approved a second
semi-annual cash dividend in the amount of fourteen cents ($0.14) per
share, which was paid on July 3, 1995 to shareholders of record on June 26,
1995. The payment of the two semi-annual cash dividends reflects our
continuing strong operating results, our confidence in the future, and the
Company's dedication to enhancing shareholder value.
All of us at Davis Water & Waste are proud of our record year in fiscal
1995 and excited about the new year. Management is optimistic that fiscal
1996 will be even better than fiscal 1995, and all current indications tend
to confirm this. Housing starts are much improved and interest rates are
not expected to increase, as indicated by the June 6, 1995 reduction
announced by the Federal Reserve.
Management of your Company is dedicated to maximizing the return on
stockholders' equity through outstanding service to our customers,
efficient control of costs and margins, internal growth, and sensible
acquisitions. Management extends sincere appreciation to our customers,
our dedicated employees and our loyal stockholders for their support and
contribution to the Company's success. We look forward with you to the
continuing improvement in the Company's performance and financial results
during fiscal 1996.
R. Doyle White
Chairman of the Board,
President and Chief Executive Officer
38
<PAGE>
REVIEW OF OPERATIONS
The Davis name has been associated with water for more than half a
century. A family-owned Georgia business founded in 1938 to supply
hardware for community waterworks was incorporated as Davis Water & Waste
Industries, Inc. (the "Company" or "Davis") in 1956. The Company has
subsequently expanded beyond its Southeast regional market to become a
nationally-recognized supplier of water distribution products and water and
wastewater treatment and pumping equipment. The Davis name was highlighted
in 1987 when the Company listed its common stock on the New York Stock
Exchange.
Although the Company encountered a mild downturn in its net sales during
fiscal 1992 and 1993, the Company has grown substantially since the early
1980's and reported record sales in fiscal 1995. This growth is
attributable primarily to the implementation of an acquisition and
expansion strategy during the mid - 1980's, which led to expansion into new
markets and increased market share, and to the introduction of new water
treatment products. The Company is cautiously optimistic that its
performance in fiscal 1996 will reflect continued financial growth in
conjunction with the continued improvements in the national economy.
The Company generates the major portion of its revenues from its tradi-
tional business of marketing water distribution equipment and supplies,
including underground pipe, pipe fittings, valves, fire hydrants and water
meters. These products are purchased from numerous manufacturers for
distribution through a network of 23 service center warehouses in 9
Southern and Western states. These products are sold principally to
independent contractors, industrial customers, municipalities and other
government agencies, and private utilities. The Company believes that it
is the largest distributor of water distribution equipment and supplies in
the Southeast, based on annual sales of such products.
Davis also offers comprehensive, turnkey solutions to the growing public
concern about water quality and wastewater treatment. The Company custom
designs, manufactures and installs water and wastewater treatment equipment
custom tailored for municipal and industrial use and distributes related
materials that enable municipalities and industry to meet applicable health
and water quality standards. Water treatment plants and wastewater systems
that process up to five million gallons of water per day are among the
large systems built by Davis at its Thomasville, Georgia facilities and
sold throughout the United States by the Company's sales force and
manufacturer's representatives. The Company also offers process materials
that are used to control odor in municipal wastewater collection and
treatment systems and other process materials that treat water and
condition sludge for disposal. These products are distributed by the
Company through its own sales force and manufacturer's representatives
primarily to municipal and industrial customers.
39
<PAGE>
The following table illustrates the contributions to the Company's annual
sales, operating income (loss), and assets attributable to regions of the
United States served by the Company. Export sales are included in "Other."
<TABLE>
<CAPTION>
Operating
(Dollars in thousands) Net Sales Income (Loss) Assets
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1995:
Southeastern $131,569 61% $4,236 73% $65,787 81%
Midwestern 33,777 16% 1,018 18% 7,911 10%
Western 12,717 6% (860) (15%) 1,819 2%
Rocky Mountain 24,689 11% 1,056 18% 5,316 6%
Other 12,897 6% 357 6% 703 1%
-------- ---- ------ ----- ------- ----
$215,649 100% $5,807 100% $81,536 100%
======== ==== ====== ===== ======= ====
Fiscal 1994:
Southeastern $123,452 61% ($3,449) 41% $62,398 76%
Midwestern 32,236 16% (1,602) 19% 7,914 10%
Western 17,130 8% (361) 4% 5,822 7%
Rocky Mountain 16,624 8% 491 (6%) 5,248 6%
Other 13,179 7% (3,474) 42% 703 1%
-------- ---- ------- ----- ------- ----
$202,621 100% ($8,395) 100% $82,085 100%
======== ==== ======= ===== ======= ====
Fiscal 1993:
Southeastern $115,354 60% $1,272 326% $62,521 79%
Midwestern 29,746 16% 116 30% 6,760 8%
Western 16,400 9% (842) (216%) 5,295 7%
Rocky Mountain 13,503 7% (197) (51%) 3,873 5%
Other 15,987 8% 41 11% 892 1%
-------- ---- ------ ----- ------- ----
$190,990 100% $ 390 100% $79,341 100%
======== ==== ====== ===== ======= ====
</TABLE>
The Company's export sales in fiscal 1995, 1994 and 1993 totaled
$1,120,000, $1,776,000, and $5,003,000, respectively. Export sales
consisted principally of water and wastewater treatment equipment and were
made primarily in Canada, Mexico, and Puerto Rico.
Various divisions of the Company offer a wide variety of specialized
products and services that contribute to the overall performance of the
Company. A few examples of the specialized products and services provided
by these divisions are noted below.
Water Distribution Equipment and Supplies
The Distribution Group distributes a broad line of water distribution
equipment and supplies. These products include underground pipe, pipe
fittings, valves, fire hydrants, water meters and related products. The
Distribution Group operates 23 Service Centers and handles more than
20,000 products from over 3,000 vendors. The Company's estimated 20,000
customers consist of municipal and other government agencies, private
utilities, industrial companies, and independent contractors. The
products are used by customers in their water distribution infrastructure
systems for maintenance and repair, upgrading, and construction of new
facilities.
To assist its customers' response to the increasing need to lower costs,
the Distribution Group has instituted several technology initiatives,
including:
An integrated management information system
A part number interchange program
An on-line order information system
A job materials management system
40
<PAGE>
These systems consist of microcomputers containing the Distribution
Group's proprietary software installed at the customer's location. Using
dial up capabilities to the nearest Distribution Group location, the
customer is then connected by high speed telecommunication lines to the
appropriate Distribution Group database. The customer has immediate
access to information which assists the customer in reducing procurement
costs.
The increased application of technology, along with a focused effort to
better identify customer needs and provide solutions to reduce customers'
total cost, is designed to increase the Company's value to the customer
and thereby increase the Company's market share.
The Company believes that it is the only national distribution company
focused entirely on water related infrastructure equipment and supplies.
Water and Wastewater Treatment and Pumping Equipment
The Davis Industrial Waste Systems Group within the DAVCO division
provides its industrial customers with a turnkey treatment system to
assist in complying with the EPA requirement that contaminants be reduced
in wastewater to approximately the strength of typical domestic sewage
before it reaches a municipal treatment facility. Davis IWS also
provides advanced and secondary treatment systems for direct and indirect
discharges. In addition, construction management services, plant
operations and maintenance, and treatability/pilot studies are offered by
Davis IWS.
The DAVCO division builds advanced wastewater treatment systems on site
which are able to meet the most stringent environmental requirements,
including biological nutrient removal systems. DAVCO also builds a
tertiary wastewater treatment system, the discharge from which can be
used in such applications as golf course irrigation, thereby reducing the
demand for potable water.
The Davis-EMU Group within the DAVCO division sells submersible pumps,
mixers and aerators designed and built by the German company EMU
Unterwasserpumpen. This equipment is used to pump, mix and aerate
wastewater. Davis-EMU is a major supplier of submersibles for large
municipal projects in the United States.
The Davis Process division manufactures, distributes and supplies a
variety of technology based products, equipment and services used in the
treatment and processing of water and wastewater. The products include
ODOPHOS, a solution used for nutrient and hydrogen sulfide removal in
wastewater treatment systems; BIOXIDE, a patented biochemical process for
the treatment and prevention of hydrogen sulfide in wastewater collection
systems; POLYSTAGE scrubbers, a patented line of multistage scrubbers and
biofilter systems used primarily for the treatment of contaminated air
and vapors generated in collection and treatment systems; and ALKA-PRO, a
patented biological process control system for the effective and
efficient control of biological treatment processes. Additionally, the
Davis Process division provides full service environmental and potable
water laboratory analysis, product storage and feed systems, maintenance
services and odor surveys.
The Davis Composting and Residuals Management Group designs, manufactures
and markets equipment, processes and service for the treatment and
beneficial reuse of water and wastewater residuals. The demand for these
products and services has increased significantly in recent years in
response to new Environmental Protection Agency regulations related to
the processing and beneficial reuse of wastewater residuals. Davis has
the largest installed base of residuals compost systems in North America.
In addition to residuals compost systems, this group also supplies lime
stabilization systems, residuals driers and residuals management
services. This complete line of products and services enables Davis to
provide our customers with the most efficient and effective solutions to
their residual processing needs.
41
<PAGE>
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------------------------------------------------------
(In thousands, except share
data, percentages and ratios)
FOR THE YEAR 1995 1994 1993 1992 1991
--------------------------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales................. $215,649 $202,621 $190,990 $186,719 $203,983
Income (loss) before
income taxes and the
cumulative effect of the
change in the method of
accounting for income
taxes................... $ 5,807 ($ 8,395) $ 390 ($ 1,250) ($ 1,401)
Net income (loss) before
the cumulative effect of
the change in the method
of accounting for income
taxes.................... $ 3,448 ($ 5,340) $ 194 ($ 844) ($ 1,239)
Cumulative effect of the
change in the method of
accounting for income
taxes.................... $ 0 $ 0 $ 459 $ 0 $ 0
Net income (loss)......... $ 3,448 ($ 5,340) $ 653 ($ 844) ($ 1,239)
Net income (loss) per
share before the
cumulative effect of the
change in the method of
accounting for income
taxes................... $ 1.06 ($ 1.64) $ 0.06 ($ 0.26) ($ 0.38)
Cumulative effect per
share of the change in
the method of accounting
for income taxes......... $ 0.00 $ 0.00 $ 0.14 $ 0.00 $ 0.00
Net income (loss) per
share.................... $ 1.06 ($ 1.64) $ 0.20 ($ 0.26) ($ 0.38)
Cash dividends per share $ 0.08 $ 0.00 $ 0.00 $ 0.10 $ 0.29
Average shares outstanding 3,261 3,261 3,265 3,266 3,270
Gross margin as a
percentage of net
sales.................... 14.8% 14.8% 16.5% 15.5% 15.5%
Net income (loss) as a
percentage of net
sales.................... 1.6% (2.6%) 0.3% (0.5%) (0.6%)
Net income (loss) as a
percentage of beginning
stockholders' equity..... 15.5% (19.3%) 2.4% (3.0%) (4.1%)
AT YEAR-END
--------------------------
Total assets.............. $ 81,536 $ 82,085 $ 79,341 $ 82,402 $ 88,632
Working capital........... $ 30,593 $ 31,731 $ 33,782 $ 41,891 $ 43,767
Current ratio............. 1.78 1.84 2.19 2.98 2.71
Long-term debt, less
current portion.......... $ 14,787 $ 19,425 $ 20,719 $ 30,051 $ 29,868
Stockholders' equity...... $ 25,332 $ 22,309 $ 27,635 $ 27,089 $ 28,314
Ratio of stockholders'
equity to total
liabilities.............. .45 .37 .53 .49 .47
Stockholders' equity per
share.................... $ 7.77 $ 6.83 $ 8.50 $ 8.30 $ 8.68
</TABLE>
42
<PAGE>
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------------------------------------------------------
(In thousands, except share
data, percentages and ratios)
FOR THE YEAR 1990 1989 1988 1987 1986
--------------------------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales................. $193,280 $196,638 $165,182 $124,895 $101,354
Income (loss) before
income taxes and the
cumulative effect of the
change in the method of
accounting for income
taxes................... $ 1,761 $ 5,699 $ 5,465 $ 4,806 $ 3,389
Net income (loss) before
the cumulative effect of
the change in the method
of accounting for income
taxes.................... $ 1,035 $ 3,433 $ 3,352 $ 2,525 $ 1,716
Cumulative effect of the
change in the method of
accounting for income
taxes.................... $ 0 $ 0 $ 0 $ 0 $ 0
Net income (loss)......... $ 1,035 $ 3,433 3,352 $ 2,525 $ 1,716
Net income (loss) per
share before the
cumulative effect of the
change in the method of
accounting for income
taxes................... $ 0.32 $ 1.05 $ 1.03 $ 0.87 $ 0.60
Cumulative effect per
share of the change in
the method of accounting
for income taxes......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income (loss) per
share.................... $ 0.32 $ 1.05 $ 1.03 $ 0.87 $ 0.60
Cash dividends per share.. $ 0.28 $ 0.28 $ 0.17 $ 0.12 $ 0.09
Average shares outstanding 3,279 3,272 3,245 2,888 2,873
Gross margin as a
percentage of net sales.. 14.1% 14.6% 13.7% 15.6% 13.8%
Net income (loss) as a
percentage of net sales.. 0.5% 1.7% 2.0% 2.0% 1.7%
Net income (loss) as a
percentage of beginning
stockholders' equity..... 3.4% 12.5% 17.7% 15.0% 11.2%
AT YEAR-END
--------------------------
Total assets.............. $ 70,295 $ 62,890 $ 60,031 $ 44,296 $ 39,288
Working capital........... $ 41,133 $ 36,622 $ 30,429 $ 19,318 $ 18,672
Current ratio............. 3.31 3.30 2.52 2.11 2.30
Long-term debt, less
current portion.......... $ 18,152 $ 14,103 $ 10,548 $ 5,694 $ 5,889
Stockholders' equity...... $ 30,430 $ 30,015 $ 27,401 $ 18,936 $ 16,868
Ratio of stockholders'
equity to total
liabilities.............. 0.76 0.91 0.84 0.75 0.75
Stockholders' equity per
share.................... $ 9.37 $ 9.29 $ 8.51 $ 6.61 $ 5.87
</TABLE>
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
During fiscal 1995, the Company reported a record year in both net sales
and net income. The Company recorded net income of $3,448,000 or $1.06 per
share for fiscal 1995 compared to a net loss of $5,340,000 or $1.64 per
share for fiscal 1994 and net income of $653,000 or $ .20 per share for
fiscal 1993. The Company's net sales for fiscal 1995 were $215,649,000, an
increase of $13,028,000, or 6.4%, compared to fiscal 1994 net sales of
$202,621,000. Fiscal 1994 net sales reflected a 6.1% improvement over
fiscal 1993 net sales of $190,990,000. The improved results for fiscal
1995 compared to fiscal 1994 are due to improved performance by the
Company's water distribution business, which reflects the improvement in
the economy nationwide, and the shutdown of The Turbitrol Instrumentation
and Controls of The Taulman Company ("Taulman") late in fiscal 1994. The
results for fiscal 1994 compared to fiscal 1993 reflect the writedown of
the Company's investment in Taulman to its realizable value and the
establishment of a reserve for the shutdown of the Turbitrol division of
Taulman. The adjustment for the write down and reserve resulted in an
$8,895,000 pre-tax charge in fiscal 1994. Excluding the writedown and
shutdown adjustment, the results for fiscal 1994 would have reflected net
income of $499,000 before taxes.
44
<PAGE>
Net sales
Net sales for fiscal 1995 increased 6.4% as compared to fiscal 1994,
while fiscal 1994 net sales increased 6.1% as compared to fiscal 1993. Set
forth below is sales information for the past three fiscal years regarding
the Company's principal product classes:
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------------------------------------------------------
1995 1994 1993
---------------------------------------------------------------------------------------------
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
-------------------------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Water distribution equipment
and supplies:
Pipes and fittings....... $ 92,862 43% $ 76,197 38% $ 67,317 35%
Valves, hydrants, water
meters and accessories.. 73,960 34% 68,231 34% 58,930 31%
-------- ------ -------- ------ -------- ------
166,822 77% 144,428 72% 126,247 66%
-------- ------ -------- ------ -------- ------
Water and wastewater
equipment:
Treatment equipment..... 20,721 10% 33,013 16% 42,836 22%
Pumping equipment....... 6,234 3% 6,678 3% 6,391 4%
Process materials and
services............... 21,872 10% 18,502 9% 15,516 8%
-------- ------ -------- ------ -------- ------
48,827 23% 58,193 28% 64,743 34%
-------- ------ -------- ------ -------- ------
Total $215,649 100% $202,621 100% $190,990 100%
======== ====== ======== ====== ======== ======
</TABLE>
Net sales by the Company's water distribution business increased by 15.5%
in fiscal 1995 as compared to fiscal 1994 and increased by 14.4% in fiscal
1994 when compared to fiscal 1993. The increase in net sales in each period
is attributed to increased activity in the commercial and residential land
development and construction markets as a result of the improvement in the
national economy and the increased efforts by the Company's sales force to
increase sales. This increased activity led to an increased demand for the
Company's water distribution products, which resulted in both increased
sales volume and generally higher per unit prices.
Net sales by the Company's water and wastewater treatment business
decreased by 16.1% in fiscal 1995 as compared to fiscal 1994 and decreased
by 10.1% in fiscal 1994 as compared to fiscal 1993. The decrease in water
and wastewater treatment sales for fiscal 1995 is a direct result of the
Taulman shutdown in the fourth quarter of fiscal 1994. Operating results
for fiscal 1995 exclude the operations of the Turbitrol division of
Taulman. (See Note 2 of Notes to Consolidated Financial Statements.)
Excluding the effects of the Taulman shutdown, net sales by the remainder
of the water and wastewater treatment business increased by 10.8% in fiscal
1995 as compared to fiscal 1994. The increase in net sales was due to the
improvement in the economy, which increased the volume of products sold.
The decrease in water and wastewater treatment sales for fiscal 1994 as
compared to fiscal 1993 is a direct result of reduced sales by Taulman in
fiscal 1994.
Management is cautiously optimistic that sales of distribution products
will increase in fiscal 1996 due to anticipated continued improvement in
the economy, the land development and construction markets in particular,
from lower long-term interest rates.
45
<PAGE>
Cost of products sold
The gross profit margin (the difference between net sales and cost of
products sold expressed as a percentage of net sales) was 14.8% for both
fiscal 1995 and fiscal 1994 and was 16.5% for fiscal 1993. The gross
profit margin for fiscal 1995 as compared to fiscal 1994 remained
unchanged, although the gross profit margin for fiscal 1995 excluded the
operating results of the Turbitrol division of Taulman.
The overall decrease in the margin for fiscal 1994 as compared to fiscal
1993 was attributable primarily to a decrease in Taulman's gross profit
margin to 8.9% in fiscal 1994 from 24.9% in fiscal 1993. During fiscal
1993, the gross profit margin included the settlement of a claim by the
Company against the former stockholders of Taulman which resulted in a
$495,000 reduction in cost of products sold during fiscal 1993. This
served to reimburse the Company for cost overruns on long-term contracts
which the Company had previously recognized during fiscal 1991 and fiscal
1992. (See Note 8 of Notes to Consolidated Financial Statements.)
Selling, general and administrative expenses
When measured as a percentage of net sales, selling, general and adminis-
trative expenses were 11.4%, 14.0%, and 15.7% for fiscal 1995, 1994 and
1993, respectively. The decrease in selling, general and administrative
expense as a percentage of net sales for fiscal 1995 as compared to fiscal
1994 is attributed to the 6.4% increase in sales and a $3,978,000 decrease
in expenses. The decrease in expenses is primarily due to the exclusion of
the operating results of Taulman from the fiscal 1995 operating results and
management's continuing efforts to reduce costs where possible.
The decreased selling, general and administrative expenses as a
percentage of net sales for fiscal 1994 as compared to fiscal 1993 is due
primarily to the high cost associated with relocating the Company's
distribution centers to more profitable markets during fiscal 1993.
Interest expense
Interest expense increased by 6.6% in fiscal 1995 as compared to fiscal
1994 and decreased by 11.5% in fiscal 1994 as compared to fiscal 1993. The
increase from fiscal 1994 to fiscal 1995 was due primarily to an increase
in the average borrowing rate, despite a decline in the average amount of
long-term and short-term debt. During fiscal 1995, the Company's average
borrowing rate increased 160 basis points, or 25.4%, while average
borrowings declined by $3,482,000, or 16.5%, when compared to fiscal 1994.
The increase in the average borrowing rate was due to higher rates which
were established in connection with a renegotiation of the Sun Bank
revolving loan agreement during fiscal 1994. (See Note 4 of Notes to
Consolidated Financial Statements). The decrease in average borrowings
from fiscal 1995 to fiscal 1994 was a result of management's continued
efforts to control inventories and improvements in average days to collect
accounts receivable.
The 11.5% decrease in interest expense from fiscal 1993 to fiscal 1994
was due to a $5,372,000, or 20.2%, decline in average borrowings, despite
an increase of 80 basis points, or 14.5%, in the Company's average
borrowing rate. The reasons for the decline in average borrowings in
fiscal 1994 were the same as in fiscal 1995.
Management believes that the Company's fiscal 1996 interest expense will
decrease slightly from 1995 levels based on a reduction in the Company's
average borrowing rate as a result of an amendment in June 1995 to the
Company's revolving loan agreement with Sun Bank. (See Note 4 of Notes to
46
<PAGE>
Consolidated Financial Statements.)
Provision (benefit) for income taxes
The effective income tax provision (benefit) rates for fiscal 1995, 1994
and 1993 were 40.6%, (36.4%) and 50.3%, respectively. The effective tax
rate for fiscal 1995 was higher than the federal statutory rate due to the
impact of state income taxes and an increase in the nondeductible portion
of meals and entertainment expenses. The Omnibus Budget Reconciliation Act
of 1993 ("OBRA"), which was enacted on August 10, 1993, raised the
statutory corporate income rate from 34% on taxable income in excess of
$10,000,000 and limited deductibility of meals and entertainment expenses.
Based upon OBRA's enactment date, OBRA did not impact fiscal 1994 results
of operations, but by limiting the deduction of meals and entertainment
costs, OBRA increased income tax expense during fiscal 1995 by
approximately $89,000, or $.03 per share.
The effective tax rate (benefit) for fiscal 1994 was higher than the
federal statutory rate due to the additional state income tax benefit,
which was somewhat offset by the nondeductible portion of meals and
entertainment expenses. The effective rate for fiscal 1993 was higher than
the federal statutory rate due to the nondeductible portion of meals and
entertainment expenses.
In the second quarter of fiscal 1994, the Company agreed to a settlement
with the Internal Revenue Service ("IRS") in connection with its
examination of the Company's federal income tax returns for the four years
ended April 30, 1992. The IRS adjustments related principally to the
timing of recognition of certain expense items for tax purposes. The
aggregate amount allocated to various identifiable intangible assets and
their weighted average lives were not significantly changed. The effects
of these adjustments did not materially impact the Company's results of
operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for the Company are funds generated
internally from operations and bank borrowings. Set forth below for the
past three years is information regarding the sources and amounts of
internally generated funds:
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------
(In thousands) 1995 1994 1993
------------------------------------ ----------------------------------
<S> <C> <C> <C>
Net income (loss).................. $3,448 ($5,340) $ 653
Depreciation and amortization...... 2,110 2,689 3,188
Deferred taxes..................... (430) (4,536) (844)
Taulman reserve.................... (1,480) 8,895 0
------ ------ ------
$3,648 $1,708 $2,997
====== ====== ======
</TABLE>
When internally generated funds have been insufficient to support
operations, capital expenditures and acquisitions, the Company has been
able to borrow funds to meet its needs.
At April 30, 1995, the Company had $18,890,000 of available borrowing
capacity under its revolving loan agreement with Sun Bank. These available
funds, together with a cash balance of approximately $3,746,000, placed the
47
<PAGE>
Company's potential cash availability at $22,636,000 as of April 30, 1995.
As of June 15, 1995, the Company's available borrowing capacity under its
Revolving Loan Agreement was reduced by $2,000,000. ( See Note 4 of Notes
to Consolidated Financial Statements.) Management believes that the
Company's internally generated funds and the amount available under the
revolving term loan agreement are sufficient to support its activities for
the foreseeable future. At the present time, the Company has no commitments
for significant capital expenditures or acquisitions of other businesses.
The Company's working capital decreased in fiscal 1995 by $1,138,000 when
compared to fiscal 1994. The decrease in working capital was due primarily
to an increase in accounts payable of $2,921,000 offset by a decrease in
inventories of $1,748,000. The Company's working capital decreased in
fiscal 1994 by $2,051,000 when compared to fiscal 1993. This decrease in
working capital was due primarily to an increase in accounts payable and
other accrued liabilities totaling $9,231,000. The major component of the
increase in other accrued liabilities was the $5,987,000 reserve
established for the shutdown of the Turbitrol Division of Taulman. (See
Note 2 of Notes to Consolidated Financial Statements). Set forth below is
the Company's working capital position and certain liquidity comparisons at
the dates indicated:
<TABLE>
<CAPTION>
April 30,
------------------------------------
(In thousands) 1995 1994 1993
------------------------------ ------------------------------------
<S> <C> <C> <C>
Working capital............... $30,593 $31,731 $33,782
------- ------- -------
Cash.......................... 3,746 2,100 1,352
Accounts receivable, net...... 39,795 39,158 38,100
Inventories................... 18,778 20,526 18,076
------- ------- -------
62,319 61,784 57,528
Accounts payable.............. (24,158) (21,237) (17,715)
Notes payable and current
portion of long-term debt... (249) (216) (294)
------- ------- -------
$37,912 $40,331 $39,519
======= ======= =======
</TABLE>
The two most significant tangible assets of the Company are accounts
receivable and inventory. The Company measures the effectiveness of its
accounts receivable management program by a calculation which estimates the
number of days which it takes the Company to collect accounts receivable.
For fiscal 1995, the Company's average number of days to collect its
accounts receivable decreased 4.6 days as compared to fiscal 1994. The
decrease in days outstanding in fiscal 1995 when compared to fiscal 1994
reflected in an increase in accounts receivable of only $637,000, or 1.6%,
despite an increase in net sales of 6.4%. For fiscal 1994, the Company's
average number of days to collect its accounts receivable decreased by 2.5
days as compared to fiscal 1993. The decrease in average days outstanding
in fiscal 1994 when compared to fiscal 1993 is attributable to the
$11,631,000 increase in sales with only a $1,058,000 increase in accounts
receivable.
The Company measures the effectiveness of its inventory management
program by a calculation which uses average quarterly inventory amounts to
estimate the number of times inventory turns on an annual basis. For
fiscal 1995, the Company's inventory turns increased by half a complete
turn when compared to fiscal 1994 and by over one complete turn when
compared to fiscal 1993. The increase is due to management's efforts to
maintain a lower level of inventory while continuing to ensure adequate
product availability.
48
<PAGE>
<TABLE>
<CAPTION>
Year Ended April 30,
-------------------------------
1995 1994 1993
------------------------------ -------------------------------
<S> <C> <C> <C>
Average days to collect
accounts receivable.......... 61.0 65.6 68.1
Inventory turns............... 9.2 8.7 7.9
</TABLE>
Average long-term and short-term borrowings decreased by $3,482,000, or
16.5%, during fiscal 1995 when compared to fiscal 1994. This decrease is
due to the profitability of the Company, management's efforts to improve
collection of accounts receivable and the Company's computerized inventory
program which enables the Company to better manage its inventory levels and
its purchasing program. The Company's average borrowing rate increased 160
basis points during fiscal 1995 when compared to fiscal 1994 due to higher
rates under the Sun Bank revolving loan agreement. (See Note 4 of Notes to
Consolidated Financial Statements.) The table below sets forth average
borrowing balances and the average interest rate over the past three fiscal
years.
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------------
(Dollars in thousands) 1995 1994 1993
------------------------------ ------------------------------------------------------
<S> <C> <C> <C>
Average long-term debt........ $17,146 $20,653 $26,513
Weighted average interest rate 7.9% 6.3% 5.5%
Average short-term borrowings. $529 $504 $16
Weighted average interest rate 6.7% 4.4% 5.2%
</TABLE>
The payment of cash dividends is approved by the Board of Directors and
depends, among other factors, on earnings, capital requirements, and the
operating and financial condition of the Company. Additionally, under the
terms of the Company's line of credit with Sun Bank, any cash dividend
payment must be approved by Sun Bank. During the third quarter of fiscal
1992, as a result of losses sustained by the Company, the Board of
Directors elected to forego the payment of cash dividends. Due to improved
operating results during fiscal 1995, the Board of Directors, with the
approval of Sun Bank, elected to pay a cash dividend of $0.08 per share
during the third quarter of fiscal 1995 and, with the approval of Sun Bank,
paid a second cash dividend of $0.14 per share in the first quarter of
fiscal 1996.
SEASONALITY
The Company typically experiences a seasonal downturn in the third fiscal
quarter of each year. Harsh weather during the third fiscal quarter
usually restricts construction activities in the Company's more northern
and mountainous sales markets, thereby reducing the demand for the
Company's products in these areas. This seasonality is normally reflected
in reduced sales and earnings of the Company in the third quarter. Certain
portions of the Company's sales markets, notably South Georgia, Florida,
Texas, Arizona, Nevada and Southern California, are not significantly
affected by the seasonal change. (See Note 10 of Notes to Consolidated
Financial Statements.)
49
<PAGE>
IMPACT OF INFLATION
Inflationary pressures were moderate over most of the past three years.
To date, the Company has been able to offset most cost increases through
periodic price increases, labor efficiencies and higher productivity.
50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of DAVIS WATER & WASTE INDUSTRIES, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of DAVIS WATER & WASTE INDUSTRIES, Inc. and its
subsidiary at April 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended April
30, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993.
Price Waterhouse LLP
Atlanta, Georgia
June 16, 1995
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated financial statements included in this report were
prepared by the Company in conformity with generally accepted accounting
principles. Management's best estimates and judgments were used where
appropriate. Management is responsible for the integrity of the financial
statements and for other financial information included in this report.
The financial statements have been audited by the Company's independent
accountants, Price Waterhouse LLP. As set forth in their report, their
audit was conducted in accordance with generally accepted auditing
standards and formed the basis for their opinion on the accompanying
financial statements. They evaluated the system of internal accounting
controls and performed such tests and other procedures as they deemed
necessary to reach and express an opinion on the fairness of the financial
statements.
The Company maintains a system of internal accounting controls which is
designed to provide a reasonable assurance that assets are safeguarded and
that the financial records reflect the authorized transactions of the
Company. As a part of this process, the Company has an internal auditor
who evaluates the adequacy and effectiveness of internal accounting
controls.
The Audit Committee of the Board of Directors is composed of Directors
who are neither officers nor employees of the Company. The Committee meets
periodically with management, the internal auditor and the independent
accountants to discuss auditing, internal accounting control and financial
reporting matters. The internal auditor and the independent accountants
have full and free access to meet with the Audit Committee, with and
without management being present.
R. Doyle White Stan White
Chairman of the Board, Secretary/Treasurer
President and Chief and Chief Financial Officer
Executive Officer
51
<PAGE>
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------------------
(In thousands, except share data) 1995 1994 1993
----------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C>
Net sales................................ $215,649 $202,621 $190,990
Cost of products sold (Notes 3 and 8).... 183,654 172,654 159,431
-------- -------- --------
Gross profit margin...................... 31,995 29,967 31,559
Selling, general and administrative 24,483 28,461 30,000
Interest expense......................... 1,335 1,252 1,415
Other income, net........................ 308 246 246
Provision for Taulman shutdown and
related intangible assets (Note 2)...... 678 8,895 0
-------- -------- --------
Income (loss) before income taxes and the
cumulative effect of the change in the
method of accounting for income taxes... 5,807 (8,395) 390
Provision (benefit) for income taxes..... 2,359 (3,055) 196
-------- -------- --------
Net income (loss) before the cumulative
effect of the change in the method of
accounting for income tax............... 3,448 (5,340) 194
Cumulative effect of the change in the
method of accounting for income taxes
(Note 1)................................ 0 0 459
-------- -------- --------
Net income (loss) $ 3,448 $ (5,340) $ 653
======== ======== ========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Net income per share before the
cumulative effect of the change in the
method of accounting for income taxes.. $1.06 ($1.64) $0.06
Cumulative effect of the change in the
method of accounting for income taxes
(Note 1)............................... 0.00 0.00 0.14
----- ----- -----
Net income (loss) per share............. $1.06 ($1.64) $0.20
===== ===== =====
Weighted average shares outstanding..... 3,261,351 3,260,608 3,264,830
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
52
<PAGE>
Consolidated Balance Sheet
<TABLE>
<CAPTION>
April 30,
-----------------------------------------
(In thousands, except share data) 1995 1994
---------------------------------------------------------- -----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,746 $ 2,100
Accounts receivable, less allowance for doubtful accounts
($1,135 at April 30, 1995 and $1,338 at April 30, 1994). 39,795 39,158
Inventories (Notes 1 and 3).............................. 18,778 20,526
Prepaid expenses......................................... 631 666
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 1,097 972
Prepaid income taxes..................................... 0 68
Deferred income taxes (Note 6)........................... 5,634 5,837
-------- --------
Total current assets................................... 69,681 69,327
Property, plant and equipment: (Notes 1 and 4)
Land..................................................... 1,040 1,211
Buildings and improvements............................... 5,667 6,482
Manufacturing equipment.................................. 5,633 5,340
Transportation and office equipment...................... 8,066 8,172
Construction in progress................................. 295 32
-------- --------
20,701 21,237
Less-accumulated depreciation............................. (14,407) (13,674)
-------- --------
6,294 7,563
-------- --------
Other assets............................................. 5,561 5,195
-------- --------
$ 81,536 $ 82,085
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 4).................... $ 249 $ 216
Accounts payable.............................................. 24,158 21,237
Accrued salaries and commissions.............................. 3,735 3,275
Other accrued liabilities (Notes 2 and 5)..................... 8,883 9,889
Billings in excess of costs and estimated earnings on
uncompleted contracts........................................ 1,449 2,201
Customer deposits............................................. 614 778
-------- --------
Total current liabilities.................................... 39,088 37,596
-------- --------
Long-term debt, less current portion (Note 4)................. 14,787 19,425
-------- --------
Deferred income taxes (Note 6)................................ 265 898
-------- --------
Other accrued liabilities (Note 5)........................... 2,064 1,857
-------- --------
Commitments and contingent liabilities (Note 8)...............
Stockholders' equity (Note 7)
Common stock, $0.01 par value: 50,000,000 shares authorized;
3,265,308 shares issued...................................... 33 33
Capital in excess of par value............................... 9,788 9,788
Retained earnings............................................ 15,705 12,539
-------- --------
25,526 22,360
Treasury stock at cost-19,379 shares at April 30, 1995 and
6,344 shares at April 30, 1994............................... (194) (51)
-------- --------
25,332 22,309
-------- --------
$ 81,536 $ 82,085
======== ========
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
53
<PAGE>
Consolidated Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Capital
in excess Total
(In thousands, Common of par Retained Treasury stockholders'
except share data) stock value earnings stock equity
--------------------------- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1992 $33 $9,788 $17,316 ($48) $27,089
Issuance of common stock
in connection with
employee benefit plans.. (47) 188 141
Purchase of treasury
stock................... (248) (248)
Net income............... 653 653
--- ------ ------- ----- -------
Balance at April 30, 1993 33 9,788 17,922 (108) 27,635
Issuance of common stock
in connection with
employee benefit plans.. (43) 181 138
Purchase of treasury
stock................... (124) (124)
Net (loss)............... (5,340) (5,340)
--- ------ ------- ----- -------
Balance at April 30, 1994 33 9,788 12,539 (51) 22,309
Issuance of common stock
in connection with
employee benefit plans.. (21) 122 101
Purchase of treasury
stock................... (265) (265)
Dividends paid, $0.08 per
share................... (261) (261)
Net income............... 3,448 3,448
--- ------ ------- ----- -------
Balance at April 30, 1995 $33 $9,788 $15,705 ($194) $25,332
=== ====== ======= ===== =======
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
54
<PAGE>
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------
(In thousands) 1995 1994 1993
----------------------------------------- --------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss)........................ $ 3,448 ($ 5,340) $ 653
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization.......... 2,110 2,689 3,188
Provision for Taulman shutdown and
write off intangible assets........... (1,480) 8,895 0
Provision for doubtful accounts........ 472 665 1,731
Loss (gain) on sale of assets.......... 0 86 (335)
Deferred income taxes.................. (430) (4,536) (385)
Cumulative effect of the change in the
method of accounting for income taxes 0 0 (459)
(Increase) decrease in accounts
receivable............................ (1,109) (1,723) (6,200)
Decrease (increase) in inventories..... 1,748 (2,450) 3,898
(Increase) decrease in cost and
estimated earnings in excess of
billings.............................. (125) 280 1,283
(Increase) in other assets............. (393) (15) (50)
(Decrease) increase in billings in
excess of cost and estimated earnings. (752) 32 785
Increase in accounts payable and
accrued expenses...................... 3,898 4,290 7,168
-------- -------- --------
Net cash provided by operating
activities.......................... 7,387 2,873 11,277
-------- -------- --------
INVESTING ACTIVITIES
Purchase of property, plant and
equipment............................... (1,566) (837) (883)
Proceeds from sale of property, plant and
equipment............................... 855 70 489
-------- -------- --------
Net cash (used in) investing activities (711) (767) (394)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from revolving and long-term
debt.................................... 56,292 54,549 56,380
Principal payments made on debt.......... (60,897) (55,921) (67,734)
Proceeds from sale of stock.............. 100 138 141
Purchase of treasury stock............... (265) (124) (248)
Dividends paid........................... (261) 0 0
-------- -------- --------
Net cash (used in) financing activities (5,030) (1,358) (11,461)
-------- -------- --------
CASH
Increase in cash during period........... 1,646 748 (578)
Cash and cash equivalents at beginning of
year.................................... 2,100 1,352 1,930
-------- -------- --------
Cash and cash equivalents at end of year $ 3,746 $ 2,100 $ 1,352
======== ======== ========
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - APRIL 30, 1995, 1994, and 1993
Note 1 - Description of Business and Summary of Significant Accounting
Policies:
DESCRIPTION OF BUSINESS
The Company manufactures and markets products relating to the distribution
and treatment of water.
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiary, The Taulman Company. All significant
intercompany balances and transactions have been eliminated in consolidation.
Certain amounts in the prior year statements have been reclassified to conform
to the current year presentation.
ACCOUNTS RECEIVABLE
Accounts receivable at April 30, 1995 and 1994 include amounts under long-
term contracts of approximately $4,060,000 and $8,503,000, respectively.
Balances billed but not paid by customers pursuant to retainage provisions in
long-term contracts will be due upon completion of the contracts and
acceptance by the owner and aggregated approximately $2,216,000 and $2,735,000
at April 30, 1995 and 1994, respectively. Approximately $788,000 of these
retention balances are expected to be collected during fiscal 1996, with the
remainder to be collected during the following year.
CONCENTRATION OF CREDIT RISK
The Company grants credit to its customers, who are primarily involved in
the construction and real estate industries, including independent
contractors, developers, municipalities and industrial customers. To secure
its interest in trade accounts receivable, the Company obtains bonds or liens
where considered prudent. The majority of the Company's sales are made to
customers located in the Southeast. Other important markets include Texas,
California and the Rocky Mountain states.
INVENTORIES
Inventories are carried at the lower of cost (first-in, first-out) or market
value.
PROPERTY, PLANT AND EQUIPMENT
Fixed assets are stated at cost. Depreciation is calculated using
principally the straight-line method over the estimated useful lives of the
assets. Expenditures for additions and improvements are charged to property
accounts; maintenance and repairs are charged to expense. Upon retirement or
sale, the cost of the asset and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in income.
The approximate annual rates of depreciation are 4% to 14% for buildings and
improvements, 14% to 20% for manufacturing equipment and 14% to 33 1/3% for
transportation and office equipment.
INTANGIBLE ASSETS
Intangible assets resulting from the acquisition of certain assets and
liabilities of Taulman were being amortized on a straight line basis over
their estimated useful lives ranging from one to 40 years. As a result of the
shutdown or reorganization of Taulman, these intangibles were written off (see
56
<PAGE>
Note 2).
TREASURY STOCK
Treasury stock is carried at cost determined using the first-in, first-out
method. Any excess of cost over proceeds from re-issuance of treasury stock
is charged to retained earnings; any excess of proceeds over cost is credited
to retained earnings to the extent of any prior charges and thereafter
credited to capital in excess of par.
REVENUE
Income from short-term contracts for the manufacture or installation of
water and wastewater treatment and pumping equipment is recognized at time of
shipment or when installation is completed, respectively. Income from long-
term contracts for the manufacture of process equipment and control systems
used in water and wastewater treatment facilities was recognized on the
percentage-of-completion basis; however, revenues are no longer recognized in
the Company's operations for these types of contracts due to the shutdown of
Taulman. Income is recognized from the sale of water distribution equipment
and supplies and process materials and supplies at the time of shipment.
Commission income from the sale of products manufactured by others is
recognized when the customer's order is shipped by the third party
manufacturer.
INCOME TAXES
Effective May 1, 1992, the Company elected early adoption of SFAS No. 109,
"Accounting for Income Taxes" (FAS 109). The adoption of FAS 109 changes the
Company's method of accounting for income taxes from the deferred method (APB
11) to an asset and liability approach. Previously the Company deferred the
past effects of timing differences between financial reporting and taxable
income. The asset and liability approach requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of other
assets and liabilities. The cumulative effect of this change in accounting
principle was a $459,000 reduction in the Company's deferred tax liability.
This reduction primarily represented the impact of adjusting deferred taxes to
reflect the current federal tax rate of 34% as opposed to the higher tax rates
that were in effect when the deferred taxes originated. The effect of the
change on net income for fiscal 1993, exclusive of the cumulative effect of
the change as of May 1, 1992, was immaterial.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing net income (loss) by
the average number of common shares outstanding, increased by common
equivalent shares determined using the treasury stock method.
STATEMENT OF CASH FLOWS
Cash equivalents are considered to be short term, highly liquid investments
with original maturities of three months or less.
Supplemental disclosure of cash flows follows:
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------
(In thousands) 1995 1994 1993
---------------------------- --------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest...... .................. $1,429 $1,276 $1,488
Income taxes..................... 2,423 1,272 15
------ ------ ------
$3,852 $2,548 $1,503
====== ====== ======
</TABLE>
57
<PAGE>
Note 2 - Provision for Taulman Shutdown and Related Intangible Assets:
During the fourth quarter of fiscal 1994, the Company adopted a plan to
shutdown or reorganize the operations of Taulman. Substantially all of
Taulman's operations are contained within its Turbitrol Instrumentation and
Control division; these operations are in the process of being shut down.
Taulman Composting Systems, an immaterial component of Taulman, was combined
with the Company's Process division. The pre-tax loss provision for these
actions recorded in fiscal 1994 includes the write-off of intangible assets
totalling $2,908,000 associated with Taulman and the accrual of $5,987,000 to
provide for anticipated losses during the shutdown period. Accordingly, the
results of operations of Taulman during fiscal 1995 were excluded from the
results of operations of the Company.
Taulman is engaged in the environmental pollution control business,
primarily through the design, manufacture and sale of process equipment and
control systems used in water and wastewater treatment facilities. Revenues
and expenses on its long- term contracts are recognized on the percentage-of -
completion basis. Taulman has ceased bidding on new contracts, has terminated
its sales force and is working to complete its current obligations on long-
term contracts during the next two years. The provision for losses during the
shutdown period reflects declining revenues and relatively high levels of
general and administrative costs necessary to complete the shutdown of these
operations.
During fiscal 1995, activity within the reserve for anticipated losses
during the shutdown period is summarized as follows:
<TABLE>
<CAPTION>
Year Ended
(In thousands) April 30, 1995
--------------------------- --------------
<S> <C>
Balance, beginning of year $5,987
Operating loss of Taulman (2,158)
Adjustment to reserve 678
------
Balance, end of year $4,507
======
</TABLE>
The adjustment to the reserve represents an increase in the reserve
resulting from a revised estimate of the anticipated losses during the
shutdown period. There have been no changes to the plan for shutting down
Taulman since the adoption of the plan in the fourth quarter of fiscal 1994.
The Taulman shutdown represents the discontinuation of a product line.
Therefore, Taulman's results of operations through the fourth quarter of
fiscal 1994 have been included as components of continuing operations in the
statement of operations for fiscal 1994 and fiscal 1993. Taulman's results of
operations during fiscal 1995 and in future periods have been or will be
charged against the reserve for anticipated losses during the shutdown period.
Certain income, expense, asset and liability information with respect to
Taulman for the three most recent fiscal years is as follows:
<TABLE>
<CAPTION>
As of or for As of or for As of or for
the year ended the year ended the year ended
(In thousands) April 30, 1995 April 30, 1994 April 30, 1993
------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C>
Net sales............................ $11,252 $15,871 $24,739
Cost of products sold................ 9,791 14,465 18,583
Selling, general and administrative
expense............................. 3,445 4,302 5,862
Assets............................... 5,252 12,523 20,431
Liabilities.......................... 2,614 10,111 13,925
</TABLE>
58
<PAGE>
Assets and liabilities at April 30, 1995 1994 and 1993 consisted
primarily of accounts receivable, inventory, accounts payable, accrued
expenses and intercompany debt.
Intangible assets written off as a part of the shutdown included a
technology licensing agreement of $1,321,000, noncompete agreements of
$1,155,000 and goodwill of $432,000. The technology licensing agreement was
written off because the Company, in response to changing marketplace demands,
elected to forego its exclusive North American rights to this waste composting
technology during the fourth quarter of fiscal 1994. Recently developed
methods for waste composting are much more economical and substantially
reduced the demand for the Company's licensed technology. The noncompete
agreements and goodwill were written off because their value will not be
recovered as a result of the shutdown.
Note 3 - Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
April 30,
-------------------------------
(In thousands) 1995 1994
------------------------------------- -------------------------------
<S> <C> <C>
Finished goods and products purchased
for resale.......................... $16,137 $17,689
Work-in-process...................... 2,073 2,667
Raw materials and purchased
components.......................... 568 170
------- -------
$18,778 $20,526
======= =======
</TABLE>
Note 4 - Notes Payable and Long-Term Debt:
The Company's line of credit with Sun Bank, National Association ("SBNA")
provided a $32,000,000 revolving term loan as well as an annual $3,000,000
overline facility as of April 30, 1995. The loan agreement required the
Company to maintain specified working capital, equity and earnings ratios in
addition to minimum levels of tangible net worth. The loan agreement
effectively curtailed the payment of cash dividends by specifying certain
minimum levels of tangible net worth. Furthermore, the agreement required the
Company to obtain SBNA's approval prior to payment of any cash dividends. The
Company's accounts receivable and inventory served as collateral under the
agreement. The Company was not in compliance with the working capital
requirement as of April 30, 1995. On June 15, 1995, the Company and SBNA
signed a commitment letter that extends the loan maturity through April 30,
1997, provides specific guidelines that the Company must meet to eliminate the
security interest that SBNA has on the Company's accounts receivable and
inventory, eliminates the working capital requirement with which the Company
was not in compliance at April 30, 1995 and limits the amount that the Company
may spend in connection with acquisitions to $2,500,000 per year during the
term of the loan agreement without the prior consent of SBNA.
As of April 30, 1995, the interest on balances outstanding under the SBNA
revolving term note was payable at SBNA's prime commercial rate. The Company
pays a commitment fee equal to one-fourth of one percent per annum on the
average daily unused portion of the revolving term note. The June 15, 1995
commitment letter allows the Company the option to change between the then
current prime rate or the then current LIBOR rate plus two percent for
advances under the revolving term loan.
59
<PAGE>
Notes payable and long-term debt consist of:
<TABLE>
<CAPTION>
April 30,
--------------------------
(In thousands) 1995 1994
--------------------------------------------------------------------------------- --------------------------
<S> <C> <C>
Revolving term loan due March 1996 with interest at prime; maturity was extended
to April 30, 1997 by a signed commitment between SBNA and the Company dated June
15, 1995 ...................................................................... $13,110 $17,790
Promissory note with interest at prime with monthly installment payments through
December 1996 secured by an airplane with a net book value approximating $442
and $665 at April 30, 1995 and 1994, respectively............................. 242 373
Capitalized lease with interest at 7.70% with monthly installment payments
through April 1998............................................................. 75 0
Capitalized lease with interest at 8.61% with monthly installment payments
through December 1994.......................................................... 0 83
Capitalized lease with interest at 4.90% with monthly installment payments
through February 1998.......................................................... 248 0
Loans payable to insurance companies with interest at varying rates secured by
cash surrender value of life insurance policies approximating $1,818 and $1,673
at April 30, 1995 and 1994, respectively....................................... 1,361 1,395
------- -------
15,036 19,641
Amounts due within one year 249 216
------- -------
Amounts due after one year $14,787 $19,425
======= =======
</TABLE>
Annual maturities of long-term debt in each of the succeeding five years
from April 30, 1995 are approximately $249; $13,323; $103; $0; and $0
respectively. Loans payable to insurance companies secured by cash surrender
value in the amount of $1,361 do not have a stated maturity date.
Note 5 - Pension Plan:
The Company has a defined benefit pension plan covering substantially all
of its employees. The benefits are based on years of service and the
employee's highest average compensation earned during any consecutive five-
year period within the last ten years of employment, reduced by payments from
Social Security. Pension cost is funded at amounts determined by management
but not less than the minimum funding required by the Employee Retirement
Income Security Act of 1974 (ERISA). At April 30, 1995, the assets of this
Plan included cash equivalents and equity and fixed income mutual funds.
Participants of certain acquired companies received service credit for vesting
in the Plan upon date of acquisition or termination of any former benefit
plans. The cost of these benefits will be amortized over 18 years, which is
the average remaining service period of the participants.
The Company also has a supplemental defined benefit pension plan (the
Supplemental Plan) covering all Company officers. The Supplemental Plan
provides for annual disability benefits in amounts of 50% - 80% of base pay at
the time of the disabling injury, to be paid to participants who become
permanently disabled. This benefit will terminate at age 65. Additionally,
the Supplemental Plan provides for retirement benefits to participants
representing approximately 50% - 80% of base pay at the date of retirement,
reduced by payments from Social Security. These retirement benefits will be
paid over the expected lifetime of the participant. The Company has not
funded the Supplemental Plan. This plan is not subject to ERISA funding
requirements. The Company intends to fund the Supplemental Plan as benefits
are paid.
60
<PAGE)
Net periodic pension cost of these plans for fiscal 1995, 1994 and 1993
included the following components:
<TABLE>
<CAPTION>
Year Ended April 30, 1995 Year Ended April 30, 1994 Year Ended April 30, 1993
--------------------------- ----------------------------- ------------------------------
Assets Accumulated Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed Accumulated Exceed
(In thousands) Benefits Assets Benefits Assets Benefits Assets
------------------ --------------------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost
benefit earned
during the
period........... $350 $ 40 $362 $ 37 $360 $ 41
Interest cost on
projected benefit
obligation....... 613 112 623 114 635 111
Actual return on
plan assets...... (900) (809) (642)
Net amortization
and deferral..... 37 73 25 71 (3) 73
----- ----- ----- ----- ----- -----
Net periodic
pension cost..... $100 $225 $201 $222 $350 $225
===== ===== ===== ===== ===== =====
</TABLE>
Assumptions used to determine net periodic pension cost for these plans
for fiscal 1995, 1994 and 1993 were:
<TABLE>
<CAPTION>
As of April 30,
------------------------------
1995 1994 1993
------------------------------
<S> <C> <C> <C>
Discount rates........................................................ 7.5% 7.5% 8.5%
Rates of increase in compensation levels............................... 4.5% 4.5% 5.0%
Expected long-term rate of return on assets............................ 9.0% 9.0% 9.0%
</TABLE>
The following table sets forth these plans' funded status and amounts
recognized on the Company's consolidated balance sheet at April 30, 1995 and
April 30, 1994.
<TABLE>
<CAPTION>
April 30, 1995 April 30, 1994
------------------------------ ---------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(In thousands) Benefits Assets Benefits Assets
--------------------------------- ------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation
Vested........................ $6,982 $1,602 $6,405 $1,560
Nonvested..................... 298 311
------ ------- ------ -------
$7,280 $1,602 $6,716 $1,560
====== ======= ====== =======
Plan assets at fair value........ $9,180 $8,571
Projected benefit obligation..... 9,007 $1,602 8,240 $1,560
------ ------- ------ -------
Projected benefit obligation less
than (in excess of) plan assets. 173 (1,602) 331 (1,560)
Unrecognized prior service costs. (149) 367 (116) 444
Unrecognized net loss (gain)..... 410 (74) 409 (49)
Additional liability............. (274) (372)
Unrecognized net asset at May 1,
1995 being amortized over 19
years and 15 years,
respectively.................... (812) (19) (902) (23)
------ ------- ------ -------
Pension (liability) recognized in
the balance sheet............... ($378) ($1,602) ($278) ($1,560)
====== ======= ====== =======
</TABLE>
61
<PAGE>
Note 6 - Income Taxes:
The components of the provision for income tax expense (benefit) are as
follows:
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------
1995 1994 1993
--------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
Federal.............. $2,297 $1,237 $498
State................ 492 244 94
Deferred tax (benefit)
Federal.............. (362) (3,820) (354)
State................ (68) (716) (42)
------ ------- -----
$2,359 ($3,055) $196
====== ======= =====
</TABLE>
Deferred tax liabilities (assets) recorded under FAS 109 are comprised of
the following at April 30, 1995 and 1994 :
<TABLE>
<CAPTION>
April 30,
--------------------------------
(In thousands) 1995 1994
-------------------------------------------------------- --------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation............................................ $ 211 $ 386
Change in the method of inventory accounting for income
tax purposes........................................... 393 673
------- -------
Gross deferred tax liabilities.......................... 604 1,059
------- -------
Deferred tax assets:
Pension................................................ (725) (610)
Vacation............................................... (365) (356)
Other employee benefit plans........................... (413) (146)
Warranty reserves...................................... (177) (125)
Inventory.............................................. (639) (570)
Allowance for doubtful accounts........................ (431) (508)
Noncompete agreements.................................. (187) (280)
Shutdown reserve for Taulman........................... (2,488) (3,072)
Other.................................................. (548) (331)
------- -------
Gross deferred tax assets............................. (5,973) (5,998)
------- -------
($5,369) ($4,939)
======= =======
</TABLE>
A reconciliation between the actual income tax expense (benefit) and the
amount computed by applying the federal income tax rate (34.0%) in 1995, 1994
and in 1993 to pre- tax income from continuing operations follows:
<TABLE>
<CAPTION>
Year Ended April 30,
-------------------------------------
(In thousands) 1995 1994 1993
------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C>
Computed amount based on federal statutory rate..................... $1,974 ($2,854) $ 132
Increases (reductions) in taxes:
State income taxes, net of federal income tax
benefit............................................................. 232 (332) 16
Tax on meals and entertainment expense disallowed................... 132 54 55
Other............................................................... 21 77 (7)
------ ------- ------
Provision (benefit)................................................. $2,359 ($3,055) $ 196
====== ======= ======
</TABLE>
62
<PAGE>
Note 7 - Stockholders' Equity:
During the third quarter of fiscal 1995, the Board of Directors approved
the Davis Water & Waste Industries, Inc. 1994 Employee Stock Option Plan
(the " Employees Plan") and the Davis Water & Waste Industries, Inc. Directors
Stock Option Plan (the "Directors Plan"). Both Plans are subject to approval
by the stockholders of the Company at the 1995 Annual Meeting of Stockholders
on September 8, 1995.
Under the Employees Plan and the Directors Plan (the "Plans"), options to
acquire up to 250,000 and 75,000 shares of the Company's common stock,
respectively, may be granted to employees and outside directors of the
Company, respectively, by a committee of the Board of Directors. No options
may be granted after ten years from the date of approval of the Plans by the
Board. Options granted under the Plans vest evenly over five years and are
exercisable for a period not exceeding ten years after the date of grant at a
price equal to the quoted market value of the common stock as of the date of
grant. Optionees may exercise the options by paying cash, exchanging Company
stock having a quoted market value equal to or less than the exercise price,
by instructing the Company to retain shares of stock upon the exercise of the
option with a quoted market value equal to the exercise price as payment, or
exchanging property or services as may be acceptable to the committee of the
Board. The options are not transferrable except to the optionee's
beneficiaries. The Plans may be amended or terminated at the discretion of
the Board. Compensation expense is accrued for the Plans for options as
earned by the optionees as the difference between the quoted market price at
the period end and the option price multiplied by the number of options.
Accrued compensation expense is adjusted for the changes in the quoted market
value of the stock from period to period. At April 30, 1995, total
compensation expense accrued for the Plans aggregated approximately $74,000.
Under the Employees Plan, the Board granted options to acquire 162,660
shares to certain Company officers at an option price of $7.75 per share,
which was equal to the quoted market price for the shares of the Company's
common stock at the date of grant. All such options were outstanding at April
30, 1995. No options were exercised, cancelled or expired during fiscal year
1995. At April 30, 1995, options for the purchase of 87,340 shares of common
stock were available to be granted under the Employees Plan.
Under the Directors Plan, options to acquire 32,000 shares of common stock
were granted to the outside directors of the Company at an option price of
$7.75 per share, which was equal to the quoted market price for the shares of
the Company's common stock at the date of grant. All such options were
outstanding at April 30, 1995. No options were exercised, cancelled or
expired during fiscal 1995. At April 30, 1995, options for the purchase of
43,000 shares of common stock were available to be granted under the Directors
Plan.
During fiscal 1989, the stockholders of the Company approved a qualified
employee stock purchase plan (the"1988 ESP Plan"). During fiscal 1992, the
stockholders of the Company approved an amendment to the 1988 ESP Plan
increasing the shares of common stock reserved for issuance under this plan
from 80,000 to 160,000 shares. Under the terms of the 1988 ESP Plan, all
regular full time employees and officers of the Company may purchase common
stock of the Company quarterly at 85% of the lower of market value on the
offering date or the termination date of the offering period. The 1988 ESP
Plan will terminate at such time as all shares made available under the plan
have been issued. During fiscal 1995, 1994, and 1993, 13,616, 24,225 and
28,485 shares, respectively, were issued under the plan, and at April 30,
1995, 24,497 shares of common stock were reserved and available for issuance.
During August 1988, a Long-Term Incentive Plan (the "Incentive Plan") was
approved by the Company's stockholders. The Board of Directors had previously
approved the Incentive Plan whereby certain key officers (the participants)
would become eligible to receive performance shares provided the Company
63
<PAGE>
achieves specified financial goals over four year periods. Performance shares
represent rights to receive common stock or, at the election of the
participant, a combination of cash and common stock. Under this plan,
participants were granted 55,642 performance shares during fiscal 1993.
During fiscal 1995, 349 shares of common stock were distributed and payments
of $2,967 were made to participants under the 1991-1994 Incentive Plan.
During fiscal 1994 and fiscal 1995, the Board of Directors determined not to
approve a Long-Term Incentive Plan for key officers but instead proposed the
adoption of a stock option plan for the key employees of the Company (as
discussed above).
The cost of the Incentive Plan is limited to twice the grant price at the
grant date of the maximum number of performance shares issuable. The grant
price is determined by the higher of the book value per share or the average
of the closing price of the Company's common stock for a period prior to and
following the public release of the preceding year's annual earnings. The
grant price of the performance shares granted during fiscal 1993 was $8.30.
The estimated costs of the Incentive Plan are charged to income over the
applicable four year periods. During the fiscal years ended April 30, 1995,
April 30, 1994 and April 30, 1993, no income or expense was recognized.
The Company purchases shares of its common stock to be held as treasury
stock until needed for issuance through the Company's employee stock plans and
directors and employees stock option plans discussed above.
On December 15, 1989, the Board of Directors of the Company adopted a
Share Rights Plan and, in connection therewith, declared a dividend
distribution of one Right for each outstanding share of the Company's common
stock to stockholders of record at the close of business on January 8, 1990.
The Company had 3,248,621 shares of its common stock outstanding at such
date. The Share Rights Plan generally provides that 20 days following a
public announcement that a person or a group of affiliated or associated
persons have become owners of 10% or more of the Company's common stock (and
have thus become an "Acquiring Person"), each Right will entitle the
registered holder to purchase from the Company common stock at a purchase
price per share equal to 20% of current market value. Any Rights beneficially
owned by an Acquiring Person or any of the Acquiring Person's affiliates or
associates are not exercisable. The number of shares that each holder of a
Right will be entitled to receive upon exercise is equal to one share of
common stock multiplied by a fraction, the numerator of which is the number of
shares of common stock outstanding on the date of the first public
announcement that a person has become an Acquiring Person (the "Stock
Acquisition Date") and the denominator of which is the number of Rights
outstanding on the Stock Acquisition Date that are not beneficially owned by
the Acquiring Person or its affiliates or associates. Until such time as the
Rights become exercisable, (a) the Rights will be evidenced by the common
stock certificates and will be transferred with and only with such common
stock certificates, (b) new common stock certificates issued after January 8,
1990 will contain a notation incorporating the Rights Agreement by reference
and (c) the surrender for transfer of any certificates for common stock will
also constitute the transfer of the Rights associated with the common stock
represented by such certificate.
On June 16, 1995, the Board of Directors approved a cash dividend of
fourteen cents ($0.14) per share, totalling $454,000, to all stockholders of
record at the close of business on June 26, 1995. This dividend was paid on
July 3, 1995.
Note 8 - Commitments and Contingent Liabilities:
The Company leases certain warehouse facilities and equipment, principally
trucking equipment, under operating leases. Certain leases provide for
additional rental based on actual usage and many leases have renewal options.
Under some leases the Company agrees to pay insurance costs and increases in
property taxes. Total rent expense amounted to approximately $3,009,000 in
64
<PAGE>
1995, $3,141,000 in 1994, and $3,458,000 in 1993, of which $251,000, $250,000
and $254,000 was for truck rental based on mileage. The Company leases
certain computer equipment and a front end loader under noncancelable capital
lease agreements (see Note 4). The original capitalized cost of leases
included in property and equipment was $318,000. As of April 30, 1995 the net
book value of leased equipment totaled $304,808. Minimum lease and rental
commitments under non-cancelable capital and operating leases in effect at
April 30, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ending
April 30 Capital Operating Total
(In thousands) Leases Leases Commitments
------------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C>
1996............................................ $123 $2,091 $2,214
1997............................................ 121 1,597 1,718
1998............................................ 104 1,127 1,231
1999............................................ 834 834
2000............................................ 313 313
2001-2003.......................................... 53 53
----- ------ ------
Total minimum lease payments.......................... $348 $6,015 $6,363
Less-Amount representing interest..................... (25) ====== ======
-----
Present value of minimum lease payments............... $323
=====
</TABLE>
During fiscal 1993, the Company filed a claim against the former
stockholders of Taulman. Through the claim, the Company, pursuant to certain
indemnification provisions in the acquisition agreement, sought to be reim-
bursed for losses incurred in connection with certain long-term contracts in
existence at the date of acquisition. The claim was resolved during the second
quarter of fiscal 1993 when the Company received $1,100,000 in cash in full
settlement of such claim. Approximately $605,000 of the settlement was applied
to establish the necessary reserves for the long-term contracts. The remaining
$495,000 was recorded as a reduction of cost of products sold during the
second quarter of fiscal 1993 because the Company had previously recognized
the cost to complete these long-term contracts in earlier reporting periods.
The nature of the Company's business results in a certain amount of
litigation. Accordingly, the Company is a party (as plaintiff and defendant)
to a number of lawsuits incidental to its business, and in certain of such
matters, claims have been asserted against the Company in substantial amounts.
Management believes that the Company has meritorious defenses to these claims,
and the Company, together with its insurance carriers, is vigorously defending
these claims.
Note 9 - Fair Value Of Financial Instruments
Cash, Cash Equivalents and Long-term Notes Receivable
The carrying amount reflected in the consolidated balance sheet
approximates the fair value of cash, cash equivalents and long-term notes
receivable.
Notes Payable and Long-term Debt
Substantially all of the balance of notes payable and long-term debt is
represented by a variable rate revolving term loan. Because this variable
rate approximates a market rate of interest at year end, the carrying amount
of notes payable and long-term debt approximates fair value.
65
<PAGE>
Note 10 - Quarterly Financial Data (unaudited)
Summarized unaudited quarterly consolidated financial data is as follows:
<TABLE>
<CAPTION>
(In thousands, Net Income Dividends
except per share Net Gross Income (Loss) Paid
amounts) Sales Profit (Loss) Per Share Per Share
---------------- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 Fiscal
Quarter
First $ 50,914 $ 7,250 $ 518 $0.16 $0.00
Second 56,056 8,754 1,299 0.40 0.00
Third 52,730 7,868 776 0.23 0.08
Fourth 55,949 8,123 855 0.27 0.00
-------- ------- ------ ----- -----
$215,649 $31,995 $3,448 $1.06 $0.08
======== ======= ====== ===== =====
1994 Fiscal
Quarter
First $ 46,101 $ 7,435 $ 71 $0.02 $0.00
Second 51,212 7,650 60 0.02 0.00
Third 49,992 7,230 87 0.03 0.00
Fourth 55,316 7,652 (5,558) (1.71) 0.00
-------- ------- ------- ------ -----
$202,621 $29,967 ($5,340) ($1.64) $0.00
======== ======= ======= ====== =====
</TABLE>
The net income for the fourth quarter of fiscal 1995 includes an additional
provision of $678,000 for management's revised estimate of the Taulman
shutdown reserve. The net loss for the fourth quarter of fiscal 1994 was a
result of a $2,908,000 write-down in the investment in Taulman to its
realizable value and the establishment of a $5,987,000 shutdown reserve for
Taulman. See Note 2.
66
<PAGE>
BOARD OF
DIRECTORS
Joe E. Beverly
Vice Chairman of the Board of Synovus
Financial Corp. of Columbus, Georgia
O. Larry Comer
Senior Partner of Comer Associates, an
investment partnership, and Chairman of the Board of
Caravelle Boats, Inc., a boat manufacturer
Robert P. Crozer
Vice Chairman of the Board of Flowers Industries,
Inc., a diversified food products company
H. Forbes Davis
Retired executive officer of the Company
Jasper C. Davis III
Retired executive officer of the Company
R. R. Davis
Vice Chairman of the Board of the Company
Thomas R. Pledger
Chairman of the Board and Chief Executive Officer of Dycom
Industries, Inc., a telecommunications and electrical
services corporation
R. Doyle White
Chairman of the Board, President and Chief Executive Officer of
the Company
OFFICERS
R. Doyle White
Chairman of the Board, President and Chief Executive Officer of
the Company
Larry May
Executive Vice President and Chief Operating Officer of the
Company
Robert H. Pless
Vice President and General Manager - Davco Division
Robert D. Tatum
Vice President and General Manager - Process Division
Stan White
Secretary-Treasurer and Chief Financial Officer
67
<PAGE>
STOCKHOLDER INFORMATION
Corporate Headquarters General Counsel
Davis Water & Waste Industries, Inc. Alexander & Vann
1820 Metcalf Avenue 218 East Jackson Street
Thomasville, Georgia 31792 Thomasville, Georgia 31792
(912) 226-5733
Financial Public Relations Independent Accountants
Porter, LeVay & Rose, Inc. Price Waterhouse LLP
225 West 34th Street 50 Hurt Plaza Suite 1700
New York, New York 10001 Atlanta, Georgia 30303
Stock Prices and Cash Dividends Special Counsel
The Company's Common Stock is listed Long, Aldridge & Norman
on the New York Stock Exchange under One Peachtree Center,
the symbol "DWW." The table below Suite 5300
sets forth the high and low closing 303 Peachtree Street
sales prices of the Common Stock and Atlanta, Georgia 30308
the cash dividends paid per share
for each quarter during fiscal 1995
and fiscal 1994.
<TABLE>
<CAPTION>
1995 1994
-------------------------------------- ---------------------------------------
Dividends Dividends
paid per paid per
High Low share High Low share
--------------- -------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 8.875 $7.500 .00 $7.125 $5.875 .00
Second Quarter 9.250 7.875 .00 7.000 5.750 .00
Third Quarter 10.000 7.625 .08 8.000 5.750 .00
Fourth Quarter 10.000 8.500 .00 8.625 6.750 .00
</TABLE>
As of July 21, 1995, there were approximately 690 record holders of the
Company's Common Stock. The total amount of dividends paid by the Company
during each of the past ten fiscal years is set forth in Selected Consolidated
Financial Data on page 6 and 7 of this report. Restrictions on the amount of
dividends the Company may pay are described in Note 4 of Notes to Consolidated
Financial Statements. Dividends are disbursed by Wachovia Bank of North
Carolina, P.O. Box 3001, Winston-Salem, North Carolina 27102.
Transfer Agent and Registrar
Wachovia Bank of North Carolina
Winston-Salem, North Carolina 27102
(800) 633-4236
Changes of address, questions regarding lost certificates, requests for
changes in registration and other general correspondence concerning
stockholders' accounts should be directed to the Transfer Agent.
Annual Meeting
The 1995 Annual Meeting of Stockholders of Davis Water & Waste Industries,
Inc. will be held on Friday, September 8, 1995 at the Garden Center located at
1002 South Broad Street, Thomasville, Georgia 31792 at 11:00 A.M. Proxy
materials and a notice of the meeting addressed to stockholders of record on
July 21, 1995 are included in the mailing of this report. Stockholders are
cordially invited to attend.
Form 10-K
A copy of the Company's Annual Report on Form 10-K for fiscal 1995 (without
exhibits), as filed with the Securities and Exchange Commission, will be sent
without charge to any stockholder who submits a written request to:
Mr. Stan White
Secretary-Treasurer
Davis Water & Waste Industries, Inc.
1820 Metcalf Avenue
Thomasville, Georgia 31792
68
<PAGE>
DAVIS WATER & WASTE INDUSTRIES, Inc.
List of Locations
DAVIS METER & SUPPLY DAVIS PROCESS
Sales Office/Service Center Sales Office/Warehouse
Cape Coral, FL Laguna Nigel, CA
Jacksonville, FL Wilmington, DE
Ocala, FL Tallevast, FL
Orlando, FL Canton, GA
Pensacola, FL Granite City, IL
Tallahassee, FL Florence, SC
Tampa, FL Seguin, TX
West Palm Beach, FL
Kennesaw, GA DAVCO
Savannah, GA Sales Office/Manufacturing
Asheville, NC Thomasville, GA
Charlotte, NC
Raleigh, NC EMU-SUBMERSIBLE PUMPS
Knoxville, TN Sales Office/Warehouse
Nashville, TN Thomasville, GA
TAYLOR-JETT COMPANY
Sales Office/Service Center
South El Monte, CA
WATERWORKS EQUIPMENT COMPANY
Sales Office/Service Center
Bullhead City, AZ
Las Vegas, NV
Ogden, UT
McALLEN PIPE & SUPPLY COMPANY
Sales Office/Service Center
Corpus Christi, TX
Laredo, TX
McAllen, TX
San Antonio, TX
ABOUT THE LOGO ...
The Davis Water & Waste Industries, Inc. logo is the Theta sign. This Greek
letter is identified as the universal symbol for ecology and has been adopted
to signify our goal to meet the growing demand for clean water.
69
<PAGE>
Exhibit 23
Consent of Price Waterhouse to incorporation of accountant's
reports into the Company's Registration Statement on Form S-8,
No. 33-43032
70
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-43032) of Davis Water & Waste Industries, Inc.
of our report dated June 16, 1995 included in the Annual Report to
Stockholders which is incorporated by reference of our report on the Financial
Statement Schedules, included in this Form 10-K.
PRICE WATERHOUSE LLP
Atlanta, Georgia
July 21, 1995
71
<PAGE>
Exhibit 24
Powers of Attorney
72
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the New York Stock
Exchange, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This 27th day of July, 1995.
/s/ Thomas R. Pledger
Thomas R. Pledger
73
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and the New York Stock Exchange,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
This 28th day of July, 1995.
/s/ Robert P. Crozer
Robert P. Crozer
74
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the New York Stock
Exchange, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
This 28th day of July, 1995.
/s/ O. Larry Comer
O. Larry Comer
75
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the New York Stock
Exchange, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This 28th day of July, 1995.
/s/ Joe E. Beverly
Joe E. Beverly
76
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and the New York Stock Exchange,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
This 27th day of July, 1995.
/s/ H. Forbes Davis
H. Forbes Davis
77
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and the New York Stock Exchange,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
This 27th day of July, 1995.
/s/ Jasper C. Davis
Jasper C. Davis
78
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints R. Doyle White and Stan White and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K of Davis Water & Waste Industries, Inc. for the fiscal
year ended April 30, 1995, and any and all amendments thereto, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and the New York Stock Exchange,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
This 26th day of July, 1995.
/s/ R. R. Davis
R. R. Davis
80
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027326
<NAME> DAVIS WATER & WASTE INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> APR-30-1995 APR-30-1994
<PERIOD-END> APR-30-1995 APR-30-1994
<CASH> 3,746 2,100
<SECURITIES> 0 0
<RECEIVABLES> 40,930 40,496
<ALLOWANCES> 1,135 1,338
<INVENTORY> 18,778 20,526
<CURRENT-ASSETS> 69,681 69,327
<PP&E> 20,701 21,237
<DEPRECIATION> 14,407 13,674
<TOTAL-ASSETS> 81,536 82,085
<CURRENT-LIABILITIES> 39,088 37,596
<BONDS> 0 0
<COMMON> 33 33
0 0
0 0
<OTHER-SE> 25,299 22,276
<TOTAL-LIABILITY-AND-EQUITY> 81,536 82,085
<SALES> 215,649 202,621
<TOTAL-REVENUES> 215,649 202,621
<CGS> 183,654 172,654
<TOTAL-COSTS> 183,654 172,654
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,335 1,252
<INCOME-PRETAX> 5,807 (8,395)
<INCOME-TAX> 2,359 (3,055)
<INCOME-CONTINUING> 3,448 (5,340)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,448 (5,340)
<EPS-PRIMARY> 1.06 (1.64)
<EPS-DILUTED> 1.06 (1.64)
</TABLE>
