===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)*
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1994 for the quarterly period ended June 30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to _________.
Commission File No. 0-7152
DEVCON INTERNATIONAL CORP.
(Exact name of Registrant as specified in its charter)
FLORIDA 59-0671992
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1350 E. NEWPORT CENTER DRIVE, SUITE 201, DEERFIELD BEACH, FL 33442
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(954) 429-1500
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
YES [X] NO [ ]
As of August 14, 1996, the number of shares outstanding of the Registrant's
Common Stock was 4,498,935.
===============================================================================
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
INDEX
PAGE NUMBER
-----------
Part I. Financial Information:
Consolidated Balance Sheets - June 30, 1996
and December 31, 1995............................. 3-4
Consolidated Statements of Operations and
Retained Earnings - Three and Six Months
Ended June 30, 1996 and 1995...................... 5
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995........... 6-7
Notes to Consolidated Financial Statements........ 8
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations........................................ 8-13
Part II. Other Information................................. 14
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------------------------------------
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS
Current assets:
Cash $ 342,550 $ 438,682
Cash equivalents 1,001,507 977,456
Receivables, net 14,982,586 12,043,706
Costs in excess of billings
and estimated earnings 3,034,114 3,461,984
Inventories 6,855,450 6,392,278
Other 1,603,081 936,446
Net assets of discontinued
operation 695,214 749,114
------------ ------------
Total current assets 28,514,502 24,999,666
Property, plant and equipment
Land 5,667,867 5,667,867
Buildings 4,137,119 4,248,816
Leasehold interests 12,084,218 12,590,763
Equipment 72,414,406 72,319,224
Furniture and fixtures 553,442 1,057,850
Construction in process 939,510 1,396,187
------------ ------------
95,796,562 97,280,707
Less accumulated depreciation (43,215,505) (45,898,662)
------------ ------------
52,581,057 51,382,045
Investments in unconsolidated
joint ventures and affiliates 208,780 208,780
Advances to unconsolidated joint
ventures and affiliates 1,032,954 1,047,663
Receivables, net 17,035,392 17,585,097
Intangible assets, net of
accumulated amortization 1,160,285 1,086,801
Other assets 914,241 1,002,588
------------ ------------
$101,447,211 $ 97,312,640
============ ============
See accompanying notes to consolidated financial statements.
3
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade and other $ 8,429,286 $ 6,501,977
Accrued expenses and other liabilities 1,545,911 1,451,429
Notes payable to banks 875,430 3,467,310
Current installments of long-term debt 5,531,976 7,274,506
Billings in excess of costs and
estimated earnings 19,947 766,399
Income taxes 911,396 689,650
------------ ------------
Total current liabilities 17,313,946 20,151,271
Long-term debt, excluding current
installments 21,240,396 15,547,908
Minority interest in consolidated
subsidiaries 701,355 675,853
Deferred income taxes 651,979 651,979
Other liabilities 882,169 1,127,043
------------ ------------
Total liabilities 40,789,845 38,154,054
------------ ------------
Stockholders' Equity:
Common stock 449,894 446,451
Additional paid-in capital 12,064,133 11,987,365
Retained earnings 48,143,339 46,724,770
------------ ------------
Total stockholders' equity 60,657,366 59,158,586
------------ ------------
$101,447,211 $ 97,312,640
============ ============
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
Three and Six Months Ended June 30, 1996 and 1995
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Concrete and related
products revenues $14,153,505 $10,256,447 $26,770,712 $19,758,995
Contracting revenues 4,819,763 3,623,585 9,559,607 7,861,612
Other revenues 564,402 545,561 1,428,718 1,410,510
----------- ----------- ----------- -----------
Total revenues 19,537,670 14,425,593 37,759,037 29,031,117
Cost of concrete and
related products revenues 9,960,154 7,280,033 19,201,011 14,579,830
Cost of contracting revenues 4,339,651 3,294,288 8,272,638 6,597,131
Cost of other revenues 502,587 442,429 1,242,804 1,074,060
----------- ----------- ----------- -----------
Gross profit 4,735,278 3,408,843 9,042,584 6,780,096
Selling, general and
administrative expenses 3,295,018 2,686,410 6,287,131 5,240,856
----------- ----------- ----------- -----------
Operating income 1,440,260 722,433 2,775,453 1,539,240
Other income (deductions)
Interest expense (654,245) (640,296) (1,297,586) (1,292,110)
Gain (loss) on sale
of equipment (301) 151,173 10,359 153,221
Interest and other income 84,533 99,979 175,845 248,141
Minority interest (20,000) (8,372) (25,502) (15,363)
----------- ----------- ----------- -----------
(590,013) (397,516) (1,136,884) (906,111)
----------- ----------- ----------- -----------
Income from
continuing operations
before income taxes 850,247 324,917 1,618,569 633,129
Income taxes 100,000 - 200,000 -
----------- ----------- ----------- -----------
Income from
continuing operations 750,247 324,917 1,418,569 633,129
Loss from discontinued
operation - (836) - (7,792)
----------- ----------- ----------- -----------
Net earnings 750,247 324,081 1,418,569 625,337
Retained earnings, beginning
of period 47,393,092 49,772,529 46,724,770 49,471,273
----------- ----------- ----------- -----------
Retained earnings, end
of period $48,143,339 $50,096,610 $48,143,339 $50,096,610
=========== =========== =========== ===========
Earnings per share:
From continuing operations $ .16 $ .07 $ .30 $ .14
From discontinued operation - - - -
----------- ----------- ----------- -----------
$ .16 $ .07 $ .30 $ .14
=========== =========== ============ ===========
Weighted average number of
shares outstanding 4,659,019 4,558,072 4,736,239 4,561,886
=========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,418,569 $ 625,337
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 2,512,408 2,377,671
Provision for doubtful accounts
and notes 150,000 150,000
Gain on sale of equipment (10,359) (153,221)
Minority interest expense 25,502 15,363
Changes in operating assets and liabilities:
Decrease (Increase) in receivables, net (2,307,554) 571,715
Decrease (Increase) in costs in excess
of billings and estimated earnings 427,870 (77,709)
Decrease (Increase) in inventories (409,272) 540,234
Increase in other current assets (666,634) (282,948)
Decrease (Increase) in other assets 103,056 (74,677)
Increase (Decrease) in accounts payable,
trade and other 1,108,728 (2,287,773)
Increase (Decrease) in billings in excess
of cost and estimated earnings (746,452) 453,484
Increase (Decrease) in income
taxes payable 221,746 (7,428)
Decrease in other liabilities (244,874) (107,822)
----------- -----------
Net cash provided by
operating activities 1,582,734 1,742,226
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment (5,018,349) (2,162,888)
Proceeds from disposition of property,
plant and equipment 1,387,553 339,208
Issuance of notes (288,457) (200,993)
Payments received on notes 137,046 2,119,433
Advances from affiliates -- 181,690
----------- -----------
Net cash provided by (used in)
investing activities $(3,782,207) $ 276,450
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from debt $ 5,976,733 $ 3,777,068
Principal payments on debt (4,618,655) (5,794,636)
Net borrowings from bank overdrafts 769,314 242,763
----------- -----------
Net cash provided by (used in)
financing activities 2,127,392 (1,774,805)
----------- -----------
Net increase (decrease) in
cash and cash equivalents (72,081) 243,871
Cash and cash equivalents,
beginning of period 1,416,138 942,050
----------- -----------
Cash and cash equivalents,
end of period $ 1,344,057 $ 1,185,921
=========== ===========
Supplemental disclosures of
cash flow information
Cash paid for
Interest $ 1,405,197 $ 1,375,166
=========== ===========
Income taxes $ -- $ 26,213
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries.
The accounting policies followed by the Company are set forth in Note (l) to the
Company's financial statements included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of June 30, 1996 and the results of its operations and
cash flows for the three and six months ended June 30, 1996 and 1995.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All dollar amounts of $1.0 million or more are rounded to the nearest one tenth
of a million; all other dollar amounts are rounded to the nearest one thousand
and all percentages are stated to the nearest one tenth of one percent.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 VS THREE MONTHS ENDED JUNE 30,
1995
REVENUES
The Company's revenues during the second quarter of 1996 were $19.5 million, as
compared to $14.4 million during the same period in 1995. This increase was
primarily due to increases in the Company's concrete and related products
revenues and to a lesser extent, land development contracting division revenues.
The Company's concrete and related products division revenues increased to $14.2
million during the second quarter of 1996 from $10.3 million during the same
period in 1995. The Company believes the increased sales are a result of
rebuilding required to repair homes and other buildings damaged during
Hurricanes Luis and Marilyn, which struck the Caribbean in September 1995. The
Company believes that demand for concrete and related products for the balance
of 1996 will continue at high levels in Antigua, St. Maarten, St. Martin and St.
Thomas, as the owners of storm damaged homes and businesses begin and continue
repair and rebuilding work.
Revenues from the Company's land development contracting division increased to
$4.8 million during the second quarter of 1996 from $3.6 million for the same
period in 1995. This increase was primarily attributable to the Company
obtaining several hurricane related repair and reconstruction contracts in late
1995. The Company's backlog of unfilled portions of land development contracts
at June 30, 1996 was $5.2 million, involving 17 projects. The Company expects
that all of the backlog outstanding at June 30, 1996 will be completed by the
end of 1996. As its current backlog is expected to be completed by the end of
the year, the Company needs to obtain new contracts over the remainder of 1996
in order to achieve comparable contract revenue levels in 1997.
8
<PAGE>
COST OF CONCRETE AND RELATED PRODUCTS
Cost of concrete and related products as a percentage of concrete and related
products revenues decreased to 70.5 percent during the second quarter of 1996
from 71.0 percent for the same period in 1995. This decrease was primarily
attributable to the increase in revenues recognized. The Company's margins will
also fluctuate depending on the mix of products sold and the locations in which
sales were made during the quarter.
COST OF CONTRACTING
Cost of contracting as a percentage of land development contracting revenues
decreased to 90.0 percent during the second quarter of 1996 from 90.9 percent
during the same period in 1995. This decrease is primarily attributable to the
increase in revenues recognized, offset by costs incurred as a result of owning
and operating heavy construction equipment. In addition, the Company's gross
margins are affected by the varying profitability levels of individual contracts
and the stage of completion of such contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense ("SG&A expense") was $3.3 million
during the second quarter of 1996 and $2.7 million for the same period in 1995.
This increase was primarily attributable to SG&A expense related to the
Company's new operation on St. Martin and higher than expected operating
expenses, offset by a reduction in expense attributable to personnel reductions.
As a percentage of revenue, SG&A expense decreased to 17.5 percent for the
second quarter of 1996 from 20.1 percent for the same period in 1995. This
percentage decrease was primarily attributable to the increase in revenues
actually recognized, offset by the increase in SG&A expense actually incurred.
DIVISIONAL OPERATING INCOME
The Company had operating income of $1.4 million for the second quarter of 1996
as compared to $722,000 for the same period in 1995. The Company's concrete and
related products division operating income increased to $1.9 million during the
second quarter of 1996 from $1.0 million during the same period in 1995. This
increase is primarily attributable to increases in revenues and gross profits by
this division, offset by increases in SG&A expense.
The Company's land development contracting division operating loss decreased to
$268,000 for the second quarter of 1996 from a loss of $289,000 during the same
period in 1995. This decrease is primarily attributable to the increases in
gross profits, offset by some increases in SG&A expense.
NET EARNINGS
The Company had net earnings of $750,000 during the second quarter of 1996 as
compared to net earnings of $324,000 during the same period in 1995. This
increase is primarily attributable to increases in concrete and related products
revenues and operating profits.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 VS SIX MONTHS ENDED JUNE 30, 1995
REVENUES
The Company's revenues during the first six months of 1996 were $37.8 million,
as compared to $29.0 million during the same period in 1995. This increase was
primarily due to increases in the Company's concrete and related products
revenues and to a lesser extent, land development contracting division revenues.
9
<PAGE>
The Company's concrete and related products division revenues increased to $26.8
million during the first six months of 1996 from $19.8 million during the same
period in 1995. The Company believes the increased sales are a result of
rebuilding required to repair homes and other buildings damaged during
Hurricanes Luis and Marilyn, which struck the Caribbean in September 1995. The
Company believes that demand for concrete and related products for the balance
of 1996 will continue at high levels in Antigua, St. Maarten, St. Martin and St.
Thomas, as the owners of storm damaged homes and businesses begin and continue
repair and rebuilding work.
Revenues from the Company's land development contracting division increased to
$9.6 million during the first six months of 1996 from $7.9 million for the same
period in 1995. This increase was primarily attributable to the Company
obtaining several hurricane related repair and reconstruction contracts in late
1995. The Company's backlog of unfilled portions of land development contracts
at June 30, 1996 was $5.2 million, involving 17 projects. The Company expects
that all of the backlog outstanding at June 30, 1996 will be completed by the
end of 1996. As its current backlog is expected to be completed by the end of
the year, the Company needs to obtain new contracts over the remainder of 1996
in order to achieve comparable contract revenue levels in 1997.
COST OF CONCRETE AND RELATED PRODUCTS
Cost of concrete and related products as a percentage of concrete and related
products revenues decreased to 71.7 percent during the first six months of 1996
from 73.8 percent for the same period in 1995. This increase was primarily
attributable to the increase in revenues recognized. The Company's margins will
also fluctuate depending on the mix of products sold and the locations in which
sales are made during the quarter.
COST OF CONTRACTING
Cost of contracting as a percentage of land development contracting revenues
increased to 86.5 percent during the first six months of 1996 from 83.9 percent
during the same period in 1995. This increase is primarily attributable to the
costs incurred as a result of owning and operating heavy construction equipment,
offset to some extent by the increase in revenues actually recognized. In
addition, the Company's gross margins are affected by the varying profitability
levels of individual contracts and the stage of completion of such contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense ("SG&A expense") was $6.3 million
during the first six months of 1996 and $5.2 million for the same period in
1995. This increase was primarily attributable to SG&A expense related to the
Company's new operation on St. Martin and higher than expected operating
expenses, offset by a reduction in expense attributable to personnel reductions.
As a percentage of revenue, SG&A expense decreased to 16.7 percent for the first
six months of 1996 from 18.1 percent for the same period in 1995. This
percentage decrease was primarily attributable to the increase in revenues
actually recognized, offset by the increase in SG&A expense actually incurred.
DIVISIONAL OPERATING INCOME
The Company had operating income of $2.8 million for the first six months of
1996 as compared to $1.5 million for the same period in 1995. The Company's
concrete and related products division operating income increased to $3.2
million during the first six months of 1996 from $1.7 million during the same
period in 1995. This increase is primarily attributable to increases in revenues
and gross profits by this division, offset by increases in SG&A expense.
10
<PAGE>
The Company's land development contracting division operating income decreased
to a loss of $75,000 for the first six months of 1996 from income of $58,000
during the same period in 1995. This decrease is primarily attributable to the
reduction in gross profit margins achieved on contract work and increases in
SG&A expense.
NET EARNINGS
The Company had net earnings of $1.4 million during the first six months of 1996
as compared to net earnings of $625,000 during the same period in 1995. This
increase is primarily attributable to increases in concrete and related products
revenues and gross profits.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally funds its working capital needs from operations and bank
borrowings. In the land development contracting business, the Company must
expend considerable amounts of funds for equipment, labor and supplies to meet
the needs of particular projects. The Company's capital needs are greatest at
the start of any new contract, since the Company generally must complete 45 to
60 days of work before receiving the first progress payment. In addition, as a
project continues, a portion of the progress billing is usually withheld as
retainage until all work is complete, further increasing the need for capital.
On occasion the Company has provided long-term financing to certain customers
who have utilized its land development contracting services. The Company has
also provided financing for other business ventures from time to time. With
respect to the Company's concrete and related products division, accounts
receivable are typically outstanding for a minimum of 60 days and in some cases
much longer. The nature of the Company's business requires a continuing
investment in plant and equipment, along with the related maintenance and upkeep
costs of such equipment.
The Company has funded many of these expenditures out of its current working
capital. The increases in sales achieved during the second quarter of 1996,
along with related increases in accounts receivable, inventories and plant and
equipment, have had a short term negative impact on the Company's cash reserves.
However, notwithstanding the foregoing and after factoring in the Company's
obligations as set forth below, management believes that the Company's cash flow
from operations, existing working capital (approximately $11.2 million at June
30, 1996) and funds available from existing and anticipated lines of credit and
extensions thereof (assuming that they are obtained) will be adequate to meet
the Company's anticipated needs for operations during the next twelve months.
At June 30, 1996, the Company had a revolving secured line of credit in the
amount of $2.0 million and three secured lines of credit in the amount of $1.0
million, $400,000 and $400,000 from commercial banks in South Florida and the
Caribbean. The Company had $2.0 million of borrowings outstanding under the $2.0
million line of credit, $567,000 of borrowings outstanding under the $1.0
million line of credit and $800,000 of borrowings outstanding under the two
$400,000 lines of credit. The $2.0 million line and one $400,000 line expired in
May 1996, the $1.0 million line expires in September 1996 and the other $400,000
line has no expiration date. The interest rates on all such indebtedness
outstanding at June 30, 1996 ranged from 8.5 to 8.8 percent.
The Company has a $500,000 unsecured overdraft facility from a commercial bank
in the Caribbean. The facility expired on September 30, 1995 and is being
continued on a month to month basis until reapproved. The facility bears
interest at 14.0 percent per annum. At June 30, 1996 the Company had borrowings
of $500,000 outstanding under this line.
11
<PAGE>
The Company also has a $500,000 secured line of credit from a commercial bank in
the United States. The line expires in October 1996 and bears interest at the
prime interest rate plus one half of one percent. At June 30, 1996, the Company
had borrowings of $475,000 outstanding under this line.
The Company has entered into three term loans with a Caribbean bank, repayable
in varying monthly installments through December 2001. The interest rate on
indebtedness outstanding at June 30, 1996 ranged from 8.5 percent to 9.8 percent
and the Company had $4.5 million of borrowings outstanding. The loans are
secured by individual leasehold mortgages on a block manufacturing plant, a
cement distribution facility and a marina in the U.S. Virgin Islands.
In September 1993, the Company entered into a $4.0 million secured term loan.
Borrowings outstanding bear interest at the prime interest rate plus three
fourths of one percent. The interest rate on indebtedness outstanding at June
30, 1996 was 9.0 percent and the Company has $1.5 million of borrowings
outstanding. This loan is being repaid in quarterly installments which commenced
in November 1993 and all remaining unpaid amounts are due in full on September
30, 1996. The loan is secured by the Company's notes receivable from the
Government of Antigua and Barbuda.
The Company has borrowed $5.2 million from a Company officer. One note has an
outstanding balance of $5.1 million, is unsecured, bears interest at the prime
interest rate and is due in full on January 1, 1998. The other note has a
balance of $80,000, is secured by equipment, bears interest at 8.0 percent per
annum and is due in monthly principal installments through February 1997 of
$10,000, plus interest.
The Company has received a commitment from a bank in the Caribbean for a six
year term loan of $6.0 million and a $1.0 million revolving line of credit. The
term loan proceeds would be used to repay and retire a revolving line of credit
that was due in May 1996 with a $2.0 million balance, two term loans totalling
$605,000, an equipment loan with a balance of $242,000, a term loan due in
September 1996 with a balance of $1.5 million, a line of credit due in September
1996 with a balance of $567,000, another line of credit that was due in May 1996
with a balance of $400,000 and various other notes amounting to approximately
$400,000. The balance of $286,000 be used to provide additional working capital
for the Company. The loan would be collateralized by various assets, primarily
land and equipment, located in the Caribbean.
The Company purchases equipment from time to time as needed for its ongoing
business operations. The Company is currently upgrading and replacing various
equipment used by the concrete and related products division, principally
concrete delivery trucks and quarry equipment. This upgrading and replacement
program will continue throughout 1996. At present, management believes that the
Company's inventory of construction equipment is adequate for its current
contractual commitments, however, the acquisition of significant new
construction contracts, depending on the nature of the contract, the job
location and job duration, may require the Company to make significant
investments in heavy construction equipment. Since the beginning of the year and
through June 30, 1996, the Company has sold, for a small gain, equipment with an
original cost basis of approximately $6.5 million and net book value of $1.4
million. Additional sales are expected over the remainder of 1996. The Company
believes it has available or can obtain sufficient financing for most of its
contemplated equipment replacements and additions. Historically, the Company has
used a number of lenders to finance a portion of its machinery and equipment
purchases, including its ocean going bulk cement vessel, on an individual asset
basis. At June 30, 1996 amounts outstanding to these lenders totalled $7.6
million. These loans are typically repaid over a three to six year term in
monthly principal and interest installments.
12
<PAGE>
A significant portion of the Company's outstanding debt bears interest at
variable rates. The Company could be negatively impacted by a substantial
increase in interest rates.
The Company has contingent obligations and has made certain guarantees in
connection with acquisitions, its participation in certain joint ventures,
certain employee and construction bonding matters and its receipt of a tax
exemption. In connection with the St. Maarten acquisition, the Company agreed to
pay the seller annually an amount per unit of certain concrete and stone
products sold by the Company in St. Maarten from April 1, 1990 to March 31,
1998, but in no event less than $500,000 per year. The Company has certain
offsets available against this payment which has reduced the minimum annual
payment to $350,000 per year.
Notes receivable and accrued interest at June 30, 1996 include $15.4 million,
net due the Company pursuant to certain promissory notes delivered to the
Company in connection with two construction contracts with the Government of
Antigua, $2.0 million of which is classified as a current receivable. The notes
call for both quarterly and monthly principal and interest payments until
maturity in 1997. The Government of Antigua has made required quarterly payments
aggregating $2.0 million per year but has made only some of the required monthly
payments. A portion of the payment received from Antigua has been derived from
the lease proceeds the Antiguan government has received from the United States
Department of Defense for the rental of two military bases. One of the bases was
closed at the end of 1995, resulting in a shortfall of $700,000 per year in the
required quarterly payments. The Antiguan government has advised the Company
that it will make up the shortfall in the military base proceeds from its
general treasury, although it has not yet done so. The Company expects that the
notes will not be satisfied at maturity but the Antiguan government has advised
the Company that payments will continue until the obligation is satisfied. The
Company does not presently anticipate material increases in or accelerations of
payments by the Government of Antigua.
13
<PAGE>
II. OTHER INFORMATION
- ------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
None reportable
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Shareholders Meeting on June 21, 1996. The issues
submitted to a vote of the security holders and the results of the voting are as
follows:
1) Election of five directors
FOR WITHHELD ABSTAIN
--- -------- -------
Richard L. Hornsby 3,263,200 30 -
Robert L. Kester 3,263,200 30 -
W. Douglas Pitts 3,263,200 30 -
Donald L. Smith, Jr. 3,263,200 30 -
Robert A. Steele 3,263,200 30 -
The Board consists of five directors. All nominees were elected to
serve for a one year term.
2) Proposal to ratify the appointment of KPMG Peat Marwick as the
Company's auditor for 1996.
FOR WITHHELD ABSTAIN
--- -------- -------
3,263,230 - -
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company
during the first six months of fiscal 1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: AUGUST 14, 1996 By: /S/ DONALD L. SMITH, JR.
--------------- -------------------------
Donald L. Smith, Jr.
President and Chief
Executive Officer
Date: AUGUST 14, 1996 By: /S/ WALTER B. BARRETT
--------------- ----------------------
Walter B. Barrett
Vice President, Finance and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 342,550
<SECURITIES> 0
<RECEIVABLES> 17,157,365
<ALLOWANCES> 2,174,779
<INVENTORY> 6,855,450
<CURRENT-ASSETS> 28,514,502
<PP&E> 95,796,563
<DEPRECIATION> (43,215,505)
<TOTAL-ASSETS> 101,447,211
<CURRENT-LIABILITIES> 17,313,946
<BONDS> 0
0
0
<COMMON> 449,894
<OTHER-SE> 12,064,133
<TOTAL-LIABILITY-AND-EQUITY> 101,447,211
<SALES> 37,759,037
<TOTAL-REVENUES> 37,759,037
<CGS> 28,716,453
<TOTAL-COSTS> 28,716,453
<OTHER-EXPENSES> 6,126,429
<LOSS-PROVISION> 150,000
<INTEREST-EXPENSE> 1,297,586
<INCOME-PRETAX> 1,618,569
<INCOME-TAX> 200,000
<INCOME-CONTINUING> 1,418,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,418,569
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
