UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] For the fiscal year ended December 31, 1995
OR
[ ] For the transition period from to
Commission file number 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 Dr. Suite 201, 33442
Deerfield Beach, FL (Zip Code)
(Address of principal executive offices)
(954) 429-1500
(Registrant's telephone number, including area code)
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 March 25, 1996, the number of shares of the registrant's
Common Stock outstanding was 4,464,510. The aggregate market value
of the Common Stock held by nonaffiliates of the registrant as of
March 25, 1996 was approximately $17,624,162, based on a closing
price of $9.13 for the Common Stock as reported on the NASDAQ
National Market System on such date. For purposes of the foregoing
computation, all executive officers, directors and 5 percent
beneficial owners of the registrant are deemed to be affiliates.
Such determination should not be deemed to be an admission that
such executive officers, directors or 5 percent beneficial owners
are, in fact, affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10, 11, 12 and 13) is
incorporated by reference from the registrant's definitive proxy
statement (to be filed pursuant to Regulation 14A).
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 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 ]
PART I
Item 1. Business.
General
Devcon International Corp. (the "Company") is the largest producer
and distributor of ready-mix concrete and quarry products in the
United States Virgin Islands, Antigua and Barbuda, West Indies
("Antigua"), St. Maarten, Netherlands Antilles ("St. Maarten"), St.
Martin, French West Indies ("St. Martin") Saba, Netherlands
Antilles ("Saba"), Dominica, West Indies ("Dominica") and Tortola,
British Virgin Islands ("Tortola") and is a land development
contractor in the Caribbean.
In the Caribbean, the Company produces and distributes ready-mix
concrete, crushed stone, concrete block and asphalt and distributes
bulk and bagged cement. The Company's facilities have enabled the
Company to establish a significant market share in most of the
locations in which it operates and afford the Company resources,
production capacity, a local presence and a cost structure that the
Company believes would be difficult for competitors to duplicate.
As a result, the Company has less competition and, therefore,
produces a substantial percentage of the concrete and related
products used in these islands.
The Company currently performs earthmoving, excavating and filling
operations and builds golf courses, roads, utility infrastructures,
dredges waterways and constructs deep water piers and marinas in
the Caribbean. The Company has historically provided land devel-
opment contracting services to both private enterprises and govern-
ments in Florida and the Caribbean. Since early 1993, the Company
has not been seeking new contracts in the United States. The Com-
pany's project managers have substantial experience working in the
land development contracting business, and the Company has equip-
ment that is well-suited for the Caribbean markets. The Company
has equipment and personnel in the Caribbean that the Company
believes, in some instances, allow the Company to start work more
quickly and less expensively than other contractors and, therefore,
to bid competitively for and complete cost-effectively land
development contracts. The Company believes its relationships with
customers in the Caribbean give it a significant competitive advan-
tage.
The Company also owns and operates a marina in the United States
Virgin Islands and has a majority interest in a partnership that
manufactures and sells specialty ceiling tiles. The ceiling tile
business was discontinued for financial statement purposes as of
December 31, 1995.
The following table sets forth certain financial information
concerning the Company's concrete and related products, land
development contracting and other businesses:
1995 1994 1993
(in thousands)
Revenues*:
Concrete and related products $37,716 $39,342 $38,300
Contracting 16,068 22,942 16,926
Other 2,367 2,965 638
Total $56,151 $65,249 $55,864
Operating income (loss)*:
Concrete and related products 1,252 2,841 (321)
Contracting (569) 1,747 (6,943)
Other 409 321 128
Unallocated corporate overhead (818) (424) (1,019)
Total $ 274 $ 4,485 $(8,155)
* Information is presented net of intersegment sales. See Note
12 of Notes to Consolidated Financial Statements for addi-
tional financial information with respect to the Company's
business segments. See Summary of Significant Accounting
Policies in Notes to Consolidated Financial Statements.
The Company's principal executive offices are located at 1350 East
Newport Center Drive, Suite 201, Deerfield Beach, Florida 33442 and
its telephone number is (954)429-1500. Unless the context
otherwise requires, the terms the "Company" and "Devcon" as used
herein refer to Devcon International Corp. and its subsidiaries.
Business Development
The Company expanded its operations in the Caribbean by acquiring
a company in St. Martin in August 1995 which sells and distributes
ready mix concrete and operates a quarry. The Company opened ready-
mix concrete plants on the islands of Saba and St. Kitts during the
second quarter of 1993 and in 1992 completed the installation of a
bulk cement facility and cement bagging plant in Dominica. In
1991, the Company opened a ready mix concrete plant on the island
of Dominica and in October 1990 acquired the assets of a company
engaged in the ready mix concrete and quarry business on the island
of Tortola. The Company acquired an affiliated group of companies
operating a ready mix concrete operation, block plant, cement plant
and quarry in St. Maarten in April 1990. The Company is planning
to open a quarry in Puerto Rico in early 1996 and is presently
investigating the possibility of expanding its operations to other
areas of the Caribbean where the Company does not presently do
business. Such expansion can take place in the form of joint
ventures, acquisitions or other business arrangements. The Company
periodically reviews its strategic alternatives and is in the
process of such review now, with the assistance of a financial
advisor. The Company does not have any definitive agreements
regarding any particular strategic alternative, joint venture,
acquisition or business arrangement at this time and there can be
no assurance that the Company will be able to consummate any such
transactions on satisfactory terms.
Risks of Foreign Operations
Various portions of the Company's operations are conducted in
foreign areas, primarily Antigua, St. Maarten, St. Martin,
Dominica, Saba, St. Kitts and Tortola, all of which are in the
Caribbean. In 1995, 53.1 percent of the Company's revenues were
derived from foreign operations. Overseas contract work performed
by the parent company (a United States corporation) is not
considered foreign source revenue for purposes of the foregoing
calculation. The majority of contract work is performed by the
parent company. For a summary of the Company's revenues and
earnings from foreign operations, see Note 10 of Notes to
Consolidated Financial Statements. The potential risks of doing
business in foreign areas include potential adverse changes in the
diplomatic relations of foreign countries with the United States,
changes in the relative purchasing power of the United States
dollar, hostility from local populations, adverse effects of
exchange controls, restrictions on the withdrawal of foreign
investment and earnings, government policies against businesses
owned by non-nationals, expropriations of property, the instability
of foreign governments and the risk of insurrection that could
result in losses against which the Company is not insured. The
Company was not subject to these risks in Florida and is not
subject to them in the United States Virgin Islands (a United
States territory that uses the United States dollar as its
currency). The Company also is subject under certain circumstances
to United States Federal income tax upon the distribution of
certain offshore earnings. See Note 8 of Notes to Consolidated
Financial Statements. Although the Company has not encountered
significant difficulties in its foreign operations in the past,
there can be no assurance that the Company will not encounter
difficulties in the future.
Concrete and Related Products
General The Company manufactures and distributes ready-mix
concrete and crushed aggregate (both coarse and fine) on St. Thomas
and St. Croix, United States Virgin Islands, Antigua, St. Maarten,
St. Martin, Dominica, Saba, St. Kitts and Tortola (although crushed
aggregate is not manufactured on Dominica, St. Kitts and St.
Maarten). The Company's customers on St. Kitts are limited, at
this time, to those organizations or individuals engaged in duty
free contracting or development activities. The Company also
distributes bulk and bagged cement to customers on each of the
foregoing islands. In addition, the Company manufactures concrete
block on St. Thomas, Antigua and St. Maarten.
The Company's concrete and related products business employs assets
such as quarries, rock crushing plants, bulk cement terminals,
concrete block plants, concrete batch plants, a fleet of concrete
mixer trucks, cement bagging facilities and asphalt plants, in
various locations in the United States Virgin Islands, Antigua, St.
Maarten, St. Martin, Dominica, St. Kitts, Saba and Tortola. The
Company also has an oceangoing bulk cement ship that affords the
Company ready access to reliable and more economical sources of
cement. As a result, the Company has become the largest supplier
of concrete and related products in the United States Virgin
Islands, Antigua, St. Maarten, St. Martin, Dominica, Saba and
Tortola. The Company is presently investigating the possibility of
expanding its cement distribution and concrete and aggregate busi-
ness to other areas in the Caribbean. See "Business - Business
Development."
Ready-Mix Concrete and Concrete Block The Company's concrete batch
plants mix cement, sand, crushed stone, water and certain chemical
additives to produce ready-mix concrete for use in local construc-
tion. The Company's fleet of concrete mixer trucks deliver the
concrete to the customer's job site. At the Company's concrete
block plants, a low moisture concrete mixture is machine formed,
then dried and stored for later sale. The Company's ready-mix
concrete operations are significantly larger than those of any
other competitor on St. Croix, Antigua, St. Maarten, St. Martin,
Dominica, Tortola, Saba and St. Thomas. The Company has the only
concrete block plant on St. Thomas, and in Antigua and St. Maarten,
the Company's block plant is the area's largest.
Quarry Operations and Crushed Stone The Company owns or leases
quarry sites on which it blasts rock from exposed mineral forma-
tions. At the quarries, this rock is crushed and screened to
varying sizes of aggregate from 3 1/2-inch stones down to manufac-
tured sand, and the aggregate is then sorted, cleaned and stored.
The resulting aggregate is sold to customers and used in the
Company's operations to make concrete products. The Company's
quarries are the largest on St. Thomas, St. Croix, Antigua, St.
Martin, Saba and Tortola. It is significantly less expensive to
manufacture crushed rock at the Company's quarries than to import
aggregate from off-island sources.
Bulk and Bagged Cement The Company has an oceangoing bulk cement
ship with a 6,000 metric ton capacity. The ship delivers cement in
bulk to the Company's cement terminals on St. Thomas, St. Croix,
Antigua, Dominica and St. Maarten. From silos at these terminals,
the cement is transferred for use in the Company's concrete batch
plants, sold in bulk or bagged and then sold. Bulk cement is
readily available from a number of manufacturers located throughout
the Caribbean basin. As a result of the Company's bulk cement
ship, the Company is able to assure itself of reliable and
relatively economical sources of cement. See "Business -
Equipment."
Supplies The Company presently obtains all of the crushed rock and
a majority of the sand necessary for the production of ready-mix
concrete in the United States Virgin Islands, Antigua, St. Martin,
St. Maarten, Saba and Tortola by quarrying its own rock and
crushing it at its own locations. The Company's ability to produce
its own sand gives it a competitive advantage because of the
substantial investment required to produce sand, the difficulty in
obtaining the necessary environmental permits to establish quarries
and the moratorium on mining beach sand imposed by most Caribbean
countries. The sand the Company produces is blended with sand
obtained from various offshore sources unaffiliated with the
Company and, occasionally, from Company construction or dredging
sites. The Company's oceangoing bulk cement ship described above
allows it to satisfy its bulk cement requirements.
Customers The Company's primary customers are building
contractors, governments, asphalt pavers and individual homeowners.
Customers generally pick up quarry products, concrete block and
bagged cement at the Company's facilities, and the Company gen-
erally delivers ready-mix concrete and bulk cement to the
customer's job sites.
Competition The Company has few competitors in the concrete and
related products business in the locations where it conducts
business. The Company encounters competition from the producers of
asphalt, which is an alternative material to concrete for road
construction. The Company's concrete and related products facil-
ities and the Company's oceangoing bulk cement ship have enabled
the Company to establish a significant market share in the United
States Virgin Islands, Antigua, St. Maarten, St. Martin, Dominica,
Saba and Tortola and afford the Company resources, a production
capacity, a local presence and a cost structure that the Company
believes would be difficult for competitors to duplicate. As a
result, the Company believes that it presently has a competitive
advantage in the United States Virgin Islands, Antigua, St.
Maarten, St. Martin, Dominica, Saba and Tortola.
Land Development Contracting
General The Company has completed a wide variety of land
development construction projects since its inception, including
interstate highways, airport sites and runways, deep-water piers
and marinas, hydraulic dredging projects, golf courses, industrial
site development and residential and commercial site development.
The Company generally attempts to pursue the most profitable types
of land development contracting work available, rather than
attempting to maintain a high level of volume. In prior years, the
Company has been engaged in residential and commercial site
development (including golf courses) for real estate developers in
Florida and the Caribbean, and marine construction (dredging of
deep-water harbors and construction of deep-water piers and
marinas) in the Caribbean. Since early 1993, the Company has not
been seeking new contracts in the United States.
The nature of the work performed by the Company's land development
contracting division is such that the work is accomplished and
revenue generated on a contract-by-contract basis. The majority of
the Company's land development contracts are less than one year in
duration, although it does obtain multi-year contracts from time to
time. A majority of the Company's contracts are fixed-price
contracts. These contracts are bid or negotiated at an established
price that does not vary except for changes in the scope of the
work requested by the owner during the term of the contract. The
majority of the Company's work is performed using its own labor and
equipment and is not subcontracted. The Company also enters into
unit-price contracts pursuant to which the Company's fee is based
upon the quantity of work performed. The Company historically has
contracted to provide land development contracting services to both
private enterprises and governments. The Company believes that, on
occasion, it is able to obtain more desirable margins on some
private and public contracts in the United States Virgin Islands
and Antigua because the Company has equipment and personnel in
those markets that, in some instances, allow the Company to start
work more quickly and less expensively than other contractors. As
a result, the Company believes that it is able to bid competitively
for and complete cost-effectively land development contracts in the
Company's Caribbean markets.
Operations The Company's first step in any project is deciding
whether to submit a bid on, or to negotiate to undertake, a
particular project. The Company obtains leads for new projects
from a variety of sources, including past or existing customers of
the Company, referrals from past or existing customers and
referrals from engineering firms with which the Company has estab-
lished business relationships. At the appropriate time, a proposal
is submitted that the Company believes will best meet a customer's
objectives. In some instances in the past, the Company has
provided long-term or short-term financing to facilitate early com-
mencement or efficient continuation of a project. The Company
believes that providing such financing enhances its ability to
obtain more profitable construction contracts. The continuation of
such financing is contingent upon the financial position and
operating results of the Company. All project proposals and bids
are reviewed by the Company's Vice President of Construction
Operations and/or the Company's President, depending upon the size
of the contract. After a proposal has been accepted, a formal
contract is negotiated with the customer. The Company is normally
the prime contractor on any work it undertakes. The Company
assigns a project manager and a field superintendent to maintain
close contact with the customer and its engineers, to supervise
personnel and the relocation, purchase, lease and maintenance of
equipment and to schedule and monitor the Company's operations.
The Company currently employs 5 job superintendents.
Backlog The Company's backlog of unfilled portions of land
development contracts at December 31, 1995 was $11.4 million
involving 25 projects, as compared to $6.8 million involving 23
projects at December 31, 1994. Since December 31, 1995 the Company
has entered into new land development contracts in the Caribbean
amounting to $432,000. As a result of the Company's current
backlog, new contracts must be obtained as 1996 progresses, in
order to achieve the contract revenue levels obtained in 1995. The
Company reasonably expects that all of the backlog, including the
1996 contracts, will be completed during the year ending December
31, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Revenues."
Bonding In order to bid on some private construction contracts and
substantially all government contracts, the Company must obtain a
bond for the performance of the contract. The Company's bonding
capacity is sufficient to enable the Company to perform some
government and major private contracts.
Competition The land development contracting business is extremely
competitive, regardless of the general level of activity within the
construction industry. The Company believes that the primary fac-
tors of competition are price, prior experience and relationships,
the amount of machinery and heavy equipment available to complete
a given job, the speed with which a company can complete a specific
contract, the availability of an engineering staff to assist an
owner in planning its projects so as to minimize costs, the ability
to innovate and, where applicable, the ability to obtain bonding
for large contracts in order to guarantee completion. Management
believes that the Company competes effectively on the basis of the
foregoing factors and that the Company's relative competitive
position in its Caribbean markets is favorable.
Other Operations
Marina Two subsidiaries of the Company own a Virgin Islands
general partnership formed in 1988 to construct and operate a
marina on a 4.92 acre parcel of land leased by the partnership from
the United States Virgin Islands government. The lease is for a
term of 20 years commencing in 1991 and contains a renewal option
for an additional 10 years. The Company originally owned fifty
percent of the marina partnership. It acquired management control
of the marina in 1991 and acquired its partners fifty percent
interest in 1992. The marina facility contains retail and office
space, a fuel farm and 96 slips for boats ranging in size from 15
to 200 feet in length.
Discontinued Operations
In September 1989, a subsidiary of the Company obtained a minority
interest in a partnership engaged in the manufacture, sale and
distribution of acoustical ceiling tiles. The subsidiary invested
approximately $1.2 million in the partnership for a 29 percent
interest and two of the Company's directors obtained an 11 percent
interest for which they paid $450,000. In January 1994 an Antiguan
subsidiary of the Company became the new general partner and the
Company's ownership interest in the partnership was increased to
57.98 percent. The directors' ownership interest was reduced to
6.47 percent. In November 1995 the Company elected to dispose of
this operation because of its poor operating results and uncertain
prospects for improvement. Accordingly, at December 31, 1995, the
intended disposal has been accounted for as a discontinued
operation. The financial statements for all prior periods
presented have been restated to reflect the ceiling tile
partnership as a discontinued operation. The Company's investment
in the partnership was written down $800,000, to its estimated net
realizable value of approximately $749,000, which consists of
property, equipment and inventory with a net book value of
approximately $1.4 million, along with debt of approximately
$621,000. The Company provided no reserve for anticipated losses
during the phaseout period and expects to recognize no income tax
benefit on the loss from discontinued operations. The Company is
currently negotiating the sale of a major portion of the
partnership's net assets, however, no definitive sales agreement
has been concluded at this time.
In 1991 the marina, discussed in "Other Operations", was classified
as a discontinued operation for financial statement presentation
purposes. The marina assets were written down $2.2 million dollars,
to their estimated net realizable value, and a reserve of $1.3
million dollars was established for marina losses for the period
from January 1, 1992 to the expected disposal date. The Company
elected to reconsolidate the marina operation into its financial
statements as of September 30, 1993, primarily because the Company
believed it would take a significant amount of time to dispose of
the marina in the current real estate market. Approximately
$600,000 of the original $1.3 million reserve was reflected as a
gain on discontinued operations subsequently retained.
Tax Exemptions and Benefits
The Company for a number of years has benefitted from having a
substantial part of the earnings of its offshore operations taxed
at rates lower than United States statutory Federal income tax
rates due to tax exemptions and lower prevailing tax rates
offshore. The United States Virgin Islands Industrial Development
Commission ("IDC") and the Government of Antigua have granted the
Company certain tax exemptions that exempt a larger portion of the
earnings of the Company's offshore operations from tax in the
United States Virgin Islands and Antigua through 2003 and 1996, as
more fully described below.
In April 1988, the IDC granted a subsidiary of the Company a 10-
year tax exemption expiring in 1998, pursuant to which, and subject
to certain conditions and exceptions, the Company's (i) production
and sale of ready-mix concrete; (ii) production and sale of
concrete block on St. Thomas and St. Johns and outside of the
Virgin Islands; (iii) production and sale of sand and aggregate;
and (iv) bagging of cement from imported bulk cement, are 100
percent exempt from all United States Virgin Islands real property,
gross receipts (currently set at 4 percent) and excise taxes, 90
percent exempt from United States Virgin Islands income taxes, and
approximately 83 percent exempt from United States Virgin Islands
custom duties. The IDC granted the Company the tax exemption in
return for the Company's commitment to (i) make capital expendi-
tures of at least $4.6 million for new or replacement equipment
over a 10-year period, which the Company has satisfied; (ii) employ
a minimum of 142 United States Virgin Islands residents as full-
time personnel; (iii) spend at least $75,000 annually for a youth
training program; (iv) not increase the price of its concrete and
related products except as the result of certain direct cost
increases incurred by the Company over which it has no control; and
(v) make an annual scholarship fund contribution of $150,000.
In January 1994, the Company received a five year extension,
through April 2003, of its previously granted benefits. This
extension was granted in return for the Company agreeing to (i)
continue to employ a minimum of 160 United States Virgin Islands
residents as full time personnel, (ii) make additional capital
expenditures of $1.7 million and (iii) continue to make a combined
youth training/scholarship contribution of $225,000 per annum
during the extension period.
In partial consideration for the Company's work on a major
contract, the Government of Antigua granted two subsidiaries of the
Company a 10-year tax holiday effective January 1, 1987 and
expiring on December 31, 1996 from all taxes due (i) in connection
with the Company's construction contract with Antigua to, among
other things, dredge St. John's harbor, (ii) as a result of the
Company's participation in a joint venture to develop 230 acres of
vacant land as well as 20,000 square feet of commercial property in
Antigua; and (iii) in connection with the Company's sale of
concrete and related products in Antigua. The tax holiday also
exempted the Company from certain accrued tax liabilities. In
1989, in connection with and in consideration for additional work
done by the Company with respect to the foregoing contract, the
Government of Antigua granted an additional tax exemption to the
Company. The tax exemption exempts the Company from taxes that
would otherwise result from the Company's income relating to a
construction contract in Jolly Harbor, Antigua.
Furthermore, as a result of certain United States tax laws,
earnings from the Company's offshore operations are not taxable for
United States Federal income tax purposes and most post-April 1988
concrete and related product earnings in the United States Virgin
Islands can be distributed to the Company in the United States free
of statutory United States Federal income tax. However, the
distribution to the Company's United States operations of (i) earn-
ings from the Company's United States Virgin Islands operations
accumulated prior to April 1, 1988 or (ii) earnings from the
Company's Antigua, St. Martin, St. Maarten, Dominica, Saba, St.
Kitts and Tortola operations, would in each case subject the
Company to United States Federal income tax on any amounts so
distributed, less applicable tax credits for taxes previously paid
in such jurisdictions. At December 31, 1995, $41.0 million of such
accumulated earnings from the Company's United States Virgin
Islands, Antigua, St. Martin, St. Maarten, Dominica, Saba, St.
Kitts and Tortola operations had not been distributed to the
Company's United States operations. The Company has not provided
for Federal income tax on the undistributed earnings of foreign
subsidiaries because the Company intends to permanently reinvest
those earnings in regions offshore of the United States.
The aforementioned tax exemptions, along with the Company's ability
to receive most of the current earnings from its United States
Virgin Islands operations without being subjected to United States
Federal income taxes thereon, result in a significant reduction in
the tax expense (including Federal income taxes) incurred by the
Company with respect to its earnings from Caribbean operations.
For further information on both tax exemptions and income taxes in
general, see Note 8 of Notes to Consolidated Financial Statements.
Equipment
The concrete and related products and the land development
contracting businesses require the Company to purchase and maintain
many items of equipment. As of December 31, 1995, the Company's
equipment included an ocean going bulk cement vessel, draglines,
cranes, bulldozers, road graders, rollers, backhoes, earthmovers,
hydraulic dredges, barges, traxcavators, rock crushers for use at
the Company's rock crushing plants, equipment at the Company's bulk
cement terminals and concrete block and batch plants, concrete
mixer trucks, asphalt processing and paving equipment and other
miscellaneous items. A portion of this equipment is encumbered by
chattel mortgages. See Notes 7 and 11 of Notes to Consolidated
Financial Statements.
Employees
At December 31, 1995, the Company employed 99 persons in the land
development contracting business in the Caribbean, of whom 31
United States Virgin Islands and Antigua employees are members of
a union. The Company employed 403 persons in its concrete and
related products division, of whom 128 employees in the Caribbean
are members of a union. The Company will also utilize personnel in
one division or another as its needs warrant. In addition, the
Company employs 40 managerial, supervisory and administrative
personnel in the overall administration and management of all divi-
sions of the Company. Employee relations in the Company are
considered satisfactory and the Company has never been subjected to
a work stoppage.
Miscellaneous Investments and Joint Ventures
The Company has invested or participated in several joint ventures
in connection with the activities of its land development
contracting division and concrete and related products division,
which are more particularly described below.
In connection with a land development contract with the Government
of Antigua and as partial consideration therefor, the Company
obtained a 75 percent interest in a corporation formed to own and
develop approximately 230 acres of real property
in Antigua (the "Corbkinnon Property"), and a 1 percent interest in
another corporation (the "Newport Project") formed to develop
approximately 20,000 square feet of commercial property located in
downtown St. Johns, Antigua. In 1990, the Company sold a portion
of its 75 percent interest in the Corbkinnon Property for $500,000
and the buyer's commitment to provide 50 percent of the financing
required to develop the project. The Company agreed to provide the
first $500,000 of financing and provide a guarantee for 50 percent
of all additional financing required. As a result of the
transaction, the Company's remaining interest in the Corbkinnon
Property is 34 percent. The Company did not record earnings or
losses for the Newport Project in 1995 because the amounts are not
material. The Company wrote down its investment in the Corbkinnon
Property by $200,000 in 1993. For additional information, see Notes
4 and 10 of Notes to Consolidated Financial Statements.
The Company is a 43 percent shareholder in a Tortolan corporation
formed to construct condominium housing units in Antigua. The
Company has advanced $200,000 in capital contributions to the
Tortolan corporation. In 1995, the Company recorded no earnings or
loss related to its investment in this corporation, which
investment is being accounted for under the equity method. For
additional information, see Note 4 of Notes to Consolidated
Financial Statements.
Item 2. Property
General
Substantially all of the real property that the Company owns or
leases is utilized by its concrete and related products division.
The Company has quarries, rock crushing plants and concrete batch
plants on St. Thomas, St. Croix, Antigua, St. Martin, Saba and
Tortola, concrete batch plants on Dominica, St. Maarten and St.
Kitts, and bulk cement terminals and cement bagging facilities on
St. Croix, St. Thomas, St. Maarten, Dominica and Antigua. In
addition, the Company has asphalt plants on St. Croix and Antigua
and concrete block plants on St. Thomas, Antigua and St. Maarten.
Other Property
The Company also has a 34 percent interest in 230 acres of real
property and a 1 percent interest in a commercial property
development, both in Antigua (see "Business - Miscellaneous
Investments and Joint Ventures"), and the Company owns undeveloped
parcels of land in Collier County, Florida, and St. Johns, United
States Virgin Islands. The Company has no current plans to develop
or sell the parcels located in the United States and United States
Virgin Islands.
The following table sets forth certain information concerning the
property and facilities that are owned or leased by the Company for
use in its operations.
[CAPTION]
<TABLE>
<S> <C> <C>
Lease Expira-
tion with all
Description Location Options
Principal executive
offices Deerfield Beach 5/07
Maintenance shop
for heavy equip-
ment Deerfield Beach Month to Month
Concrete block plant and St. Thomas 6/04
equipment maintenance
facility
Quarry and office building St. Thomas -
Quarry and concrete
batch plant St. Thomas 2/98
Barge terminal St. Thomas 7/97
Bulk cement terminal
and bagging facility St. Thomas 5/12
Marina and adjoining
commercial property St. Thomas 6/21
Quarry St. Thomas 8/96
Bulk cement terminal,
bagging facility St. Croix -
Concrete batch plant
and office St. Croix -
Quarry, rock crushing
plant and St. Croix -
maintenance shop St. Croix 7/10
St. Croix 5/03
Concrete batch plant,
concrete block Antigua 9/16
plant, rock crushing
plant, asphalt plant,
quarry and office
Bulk cement terminal and
bagging facility Antigua -
Concrete batch plant,
cement bagging Dominica 6/12
plant, undeveloped
land, silo and office Dominica -
Concrete batch plant
and block plant St. Maarten 5/12
Equipment maintenance
facility and office
building St. Maarten 6/48
Cement terminal and
barge unloading
facility St. Maarten 6/05
Bagging facility St. Maarten 4/01
Undeveloped land - future
site of concrete St. Maarten 3/51
batch plant, concrete
block plant, equipment
maintenance facility and
office building
Quarry, rock crushing
plant, concrete Tortola -
batch plant, equipment
maintenance facility
and office building
Quarry, rock crushing
plant and Saba 12/02
concrete batch plant
Concrete batch plant St. Kitts Month to Month
Quarry, rock crushing
plant, concrete St. Martin 7/10
batch plant and
office building
Ceiling tile manu-
facturing plant and
office Matamoros -
(continued)
<S> <C>
Description Leased Area
Principal executive
offices 8,410 sq.ft.(1)
Maintenance shop
for heavy equip-
ment 4.40 acres(1)(2)
Concrete block plant and 11.00 acres(1)
equipment maintenance facility
Quarry and office building 8.50 acres
Quarry and concrete batch plant 44.00 acres(1)
Barge terminal 1.50 acres(1)
Bulk cement terminal and bagging facility .50 acres(1)
Marina and adjoining commercial property 4.92 acres(1)
Quarry 7.49 acres (1)
Bulk cement terminal, bagging facility 7.00 acres
Concrete batch plant and office 3.20 acres
Quarry, rock crushing plant and 61.34 acres
maintenance shop 6.00 acres (1)
10.78 acres (1)
Concrete batch plant, concrete 22.61 acres (1)
block plant, rock crushing plant,
asphalt plant, quarry and office
Bulk cement terminal and bagging facility 8.00 acres
Concrete batch plant, cement bagging 1.14 acres (1)
plant, undeveloped land, silo and office .77 acres
Concrete batch plant and block plant 7.77 acres(1)
Equipment maintenance facility
and office building 5.38 acres (1)
Cement terminal and barge unloading
facility .30 acres (1)
Bagging facility .30 acres (1)
Undeveloped land - future site of concrete 3.00 acres(1)
batch plant, concrete block plant,
equipment maintenance facility and
office building
Quarry, rock crushing plant, concrete 30.00 acres
batch plant, equipment maintenance
facility and office building
Quarry, rock crushing plant and 6.00 acres(1)(3)
concrete batch plant
Concrete batch plant 1.00 acre(1)(3)
Quarry, rock crushing plant, concrete 123.5 acres (1)
batch plant and office building
Ceiling tile manufacturing plant and office 2.47 acres
</TABLE>
(1) Underlying land is leased, however, any equipment or machinery
on the land is owned by the Company.
(2) Leased from Donald L. Smith, Jr., the Company's Chairman,
President, and Chief Executive Officer. See "Certain
Relationships and Related Transactions."
(3) Acreage is estimated.
Item 3. Legal Proceedings
The Company is from time to time involved in routine litigation
arising in the ordinary course of its business, primarily related
to its contracting activities. No litigation in which the Company
is presently involved is material to its financial position or
results of operations.
The Company is subject to certain Federal, state and local en-
vironmental laws and regulations. Management believes that the
Company is in compliance with all such laws and regulations.
Compliance with environmental protection laws has not had a
material adverse impact on the Company's financial condition or
results of operations in the past and is not expected to have a
material adverse impact in the foreseeable future.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stock-
holder Matters.
MARKET INFORMATION
The Company's Common Stock is traded in the over-the-counter market
and quoted in the NASDAQ National Market System under the symbol
DEVC. The following table sets forth the high and low sales prices
for the Company's Common Stock for each quarter for the last two
fiscal years as quoted in the NASDAQ National Market System.
1995 High Low
First Quarter $8.75 $8.00
Second Quarter 8.38 6.75
Third Quarter 9.88 5.50
Fourth Quarter 8.88 6.87
1994 High Low
First Quarter $7.50 $6.37
Second Quarter 9.50 6.75
Third Quarter 9.75 7.75
Fourth Quarter 8.75 7.75
As of March 25, 1996, there were 247 holders of record of the
4,464,510 outstanding shares of Common Stock. The closing sales
price for the Common Stock on March 25, 1996 was $9.13. The
Company paid no dividends in 1995 or 1994. The payment of cash
dividends will depend upon the earnings, financial position and
cash requirements of the Company, its compliance with loan
agreements and other relevant factors existing from time to time.
The Company does not presently intend to pay dividends.
Item 6. Selected Financial Data
The following selected financial data of the Company and its
consolidated subsidiaries are qualified in their entirety by, and
should be read in conjunction with, the Consolidated Financial
Statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The
data for each of the 5 years in the period ended December 31, 1995,
are derived from the Consolidated Financial Statements of the
Company audited by KPMG Peat Marwick LLP, independent certified
public accountants. The Consolidated Financial Statements of the
Company as of December 31, 1995 and 1994 and for each of the years
in the three year period ended December 31, 1995, and the report
thereon appear elsewhere herein.
[CAPTION]
<TABLE>
<S> <C>
Year Ended December 31,
1995 1994 1993
Earnings Statement Data: (In thousands, except per
share amounts)
Concrete and related
products revenues $ 37,716 $ 39,342 $ 38,300
Contracting revenues 16,068 22,942 16,926
Other revenues 2,367 2,965 638
Total revenues 56,151 65,249 55,864
Cost of concrete and
related products 29,069 29,200 31,820
Cost of contracting 14,103 19,250 19,700
Cost of other 1,721 2,388 529
Gross profit 11,258 14,411 3,815
Selling, general and
administrative
expenses 10,984 9,926 11,970
Operating income
(loss) 274 4,485 (8,155)
Other deductions (1,961) (1,854) (3,338)
Income (loss) from
continuing
operations before
income taxes (1,687) 2,631 (11,493)
Income taxes 145 50 108
Income (loss) from
continuing
operations (1,832) 2,581 (11,601)
Income (loss) from
discontinued
operations, net (915) (470) 2,027
Cumulative effect of
change in accounting
principle - - 500
Net earnings (loss) $ (2,747) $ 2,111 $ (9,074)
Earnings (loss)per share:
From continuing
operations $ (.40) $ .57 $ (2.55)
From discontinued
operations (.20) (.11) .44
From change in
accounting
principle - - .11
$ (.60) $ .46 $ (2.00)
Weighted average number
of shares outstanding 4,567 4,560 4,541
Balance Sheet Data:
Working capital $ 4,848 $ 10,845 $ 3,312
Total assets 97,313 99,541 101,518
Long-term debt,
excluding current
installments 15,548 17,454 16,776
Total stockholders' 59,159 61,655 59,544
equity
(continued)
<S> <C>
Year Ended December 31,
1992 1991
Earnings Statement Data: (In thousands, except per
share amounts)
Concrete and related
products revenues $ 43,042 $ 47,747
Contracting revenues 32,248 41,929
Other revenues - -
Total revenues 75,290 89,676
Cost of concrete and
related products 31,972 30,909
Cost of contracting 31,245 39,843
Cost of other - -
Gross profit 12,073 18,924
Selling, general and
administrative
expenses 11,435 15,437
Operating income
(loss) 638 3,487
Other deductions (1,801) (640)
Income (loss) from
continuing
operations before
income taxes (1,163) 2,847
Income taxes 195 60
Income (loss) from
continuing
operations (1,358) 2,787
Income (loss) from
discontinued
operations, net (87) (4,468)
Cumulative effect of
change in accounting
principle - -
Net earnings (loss) $ (1,445) $ (1,681)
Earnings(loss)per share:
From continuing
operations $ (.30) .62
From discontinued
operations (.02) (.99)
From change in
accounting
principle - -
$ (.32) $ (.37)
Weighted average number
of shares outstanding 4,515 4,536
Balance Sheet Data:
Working capital $ 8,524 $ 13,119
Total assets 105,755 107,653
Long-term debt,
excluding current
installments 10,127 11,314
Total stockholders' 68,118 70,064
equity
</TABLE>
Item 7. 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
General
The following tables set forth, for the periods indicated, certain
financial information.
[CAPTION]
<TABLE>
<S> <C>
Year Ended December 31,
1995 vs. 1994 1994 vs. 1993
Percentage Increase
(Decrease) in
Revenues*:
Concrete and related
products (4.1)% 2.7%
Contracting (30.0) 35.5
Other (20.2) N/A
</TABLE>
[CAPTION]
<TABLE>
<S> <C>
Year Ended December 31,
1995 1994 1993
Percentage of Concrete
and Related
Products Revenues*:
Concrete and related
products gross profit 22.9% 25.8% 16.9%
Concrete and related
products operating income 3.3 7.2 (.8)
Percentage of Contracting
Revenues*:
Contracting gross profit 12.2% 16.1% (16.4)%
Contracting operating
income (3.5) 7.6 (41.1)
Percentage of Total
Revenues*:
Selling, general and
administrative expense 19.6% 15.2% 21.4%
Operating income .5 6.9 (14.6)
</TABLE>
* Information is presented net of intersegment sales and before
discontinued operations. See Note 12 of Notes to Consolidated
Financial Statements. See Summary of Significant Accounting
Policies in Notes to Consolidated Financial Statements.
Comparison of Year Ended December 31, 1995 with Year Ended
December 31, 1994
Revenues
The Company's revenues in 1995 were $56.2 million as compared to
$65.2 million in 1994. This 13.9 percent decrease was primarily
due to decreases in the Company's land development contracting
revenues, and to a lesser extent decreases in concrete and related
products division revenues.
The Company's concrete and related products division revenues
decreased 4.1 percent to $37.7 million in 1995 from $39.3 million
in 1994. This decrease was primarily due to decreased demand for
this division's products on two Caribbean Islands, offset by
increased demand on certain other islands. Hurricanes Luis and
Marilyn, which struck the Caribbean in September 1995, disrupted
business operations significantly in the short term, however, sales
volumes in all locations except two have returned to or exceeded
pre-storm levels.
Revenues from the Company's land development contracting division
decreased by 30.0 percent to $16.1 million in 1995 from $22.9
million in 1994. This decrease was primarily attributable to the
recognition of revenues in 1994 on several construction contracts
obtained during the latter part of 1993. The Company's contracting
operations were not significantly affected by the hurricanes,
although it did acquire a number of hurricane-related repair and
rebuilding projects. The Company needs to obtain additional new
contracts throughout 1996 in order to maintain the revenue levels
obtained in 1995.
Revenues from the Company's other operation (a marina in the U. S.
Virgin Islands) were $2.4 million in 1995 and $3.0 million in 1994.
This decline is primarily due to a decline in revenues resulting
from the disruption in business caused by the hurricane which
struck St. Thomas.
Cost of Concrete and Related Products
Cost of concrete and related products as a percentage of concrete
and related products revenues increased to 77.1 percent in 1995
from 74.2 percent in 1994. This increase was primarily
attributable to changes in the mix of products sold and the decline
in revenues actually recognized.
Cost of Contracting
Cost of contracting as a percentage of land development contracting
revenues increased to 87.8 percent in 1995 from 83.9 percent in
1994. This increase is attributable to the decline in revenues
actually recognized, contract losses recognized on several
contracts and the significant levels of cost involved in owning and
operating heavy construction equipment, some of which, because of
the Company's current level of construction volume, is not heavily
used. In addition, the Company's gross margins are also affected
by the varying profitability levels of individual contracts and the
stage of completion of such contracts.
Cost of Other
Cost of other as a percentage of other revenues decreased to 72.7
percent in 1995 from 80.5 percent in 1994. This was due primarily
to the decrease in revenues recognized, offset by decreases in
costs actually incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A expense")
increased by 10.7 percent to $11.0 million in 1995 from $9.9
million in 1994. This increase was primarily attributable to the
opening of a new operation on St. Martin in 1995, and increases in
insurance and other operating costs, offset by decreases in cost
resulting from various personnel reductions. SG&A expense as a
percentage of revenue increased to 19.6 percent in 1995 from 15.2
percent in 1994. This percentage increase was primarily
attributable to the decrease in revenues recognized and the
increase in expenses actually incurred.
Divisional Operating Income
Operating income decreased to $274,000 in 1995 from $4.5 million in
1994. The Company's concrete and related products division
operating income decreased to $1.3 million in 1995 from $2.8
million in 1994. This decrease is primarily attributable to
decreases in sales revenues and increases in cost of sales.
The Company's land development contracting division operating
income decreased to a loss of $569,000 in 1995 from income of $1.7
million in 1994. This decrease is primarily attributable to
declines in contract revenues recognized and losses taken on
certain contracts.
The Company's other division operating income increased to $409,000
in 1995 from $321,000 in 1994. The increase was due to lower than
expected costs and insurance recoveries.
Income Taxes
Income taxes increased to $145,000 in 1995 from $50,000 in 1994.
The Company's tax rate varies depending on the level of the
Company's earnings in the various tax jurisdictions in which it
operates and the level of operating loss carryforwards and tax
exemptions available to the Company.
Net Earnings (Loss)
The Company's net loss was $2.7 million in 1995 as compared to
income of $2.1 million in 1994. This net loss was primarily
attributable to losses recognized in the Company's land development
contracting division, declines in the concrete and related products
division profits and the writedown of the Company's investment in
its ceiling tile business.
Comparison of Year Ended December 31, 1994 with Year Ended
December 31, 1993
Revenues
The Company's revenues in 1994 were $65.2 million as compared to
$55.9 million in 1993. This 16.8 percent increase was primarily
due to increases in the Company's land development contracting
revenues, other division revenues and, to a lesser extent,
increases in concrete and related products division revenues.
The Company's concrete and related products division revenues
increased 2.7 percent to $39.3 million in 1994 from $38.3 million
in 1993. This increase was primarily due to increased demand for
this division's products on certain Caribbean Islands, which was
generated by a modest increase in the overall level of construction
activity in certain locations in which the Company operates its
business, offset by a decrease on one island.
Revenues from the Company's land development contracting division
increased by 35.5 percent to $22.9 million in 1994 from $16.9
million in 1993. This increase was primarily attributable to the
recognition of revenues in 1994 on several construction contracts
obtained during the latter part of 1993. The Company is currently
seeking new contract work in the Caribbean only.
Revenues from the Company's other operation (a marina in the U. S.
Virgin Islands) were $3.0 million in 1994 and $638,000 in 1993.
The marina operation was only consolidated for the fourth quarter
of 1993.
Cost of Concrete and Related Products
Cost of concrete and related products as a percentage of concrete
and related products revenues decreased to 74.2 percent in 1994
from 83.1 percent in 1993. This decrease was primarily
attributable to the mix of products sold, the locations in which
sales were made during the year and the slight increase in
revenues. During 1993, the Company also reduced, by $1.5 million,
the valuations of sand and parts inventories located at two island
operations and recorded additional depreciation expense on assets
which had been earlier removed from service and subsequently
returned to the fixed asset accounts.
Cost of Contracting
Cost of contracting as a percentage of land development contracting
revenues decreased to 83.9 percent in 1994 from 116.4 percent in
1993. This decrease is attributable to the higher profit margins
obtained on several contracts, partially offset by the significant
levels of cost involved in owning and operating heavy construction
equipment, some of which, because of the Company's current level of
construction volume, is not heavily used. In addition, the
Company's gross margins are also affected by the varying
profitability levels of individual contracts and the stage of
completion of such contracts. The Company believes it is entitled
to additional compensation on a Florida construction project and
will continue to pursue a claim of approximately $3.2 million
against the owner of the property. While the Company believes it
has a meritorious claim, there is no assurance that the claim will
be settled on a basis favorable to the Company.
Cost of Other
Cost of other as a percentage of other revenues decreased to 80.5
percent in 1994 from 82.9 percent in 1993. This was due primarily
to the increase in revenues recognized, offset to some extent by
the increase in costs actually incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A expense")
decreased by 17.1 percent to $9.9 million in 1994 from $12.0
million in 1993. This decrease was primarily attributable to
reductions in insurance, professional fees and personnel costs
resulting from the phaseout of the United States construction
operations, offset by additional SG&A costs of the marina, which,
except for the fourth quarter, was not consolidated into the
Company's financial statements in 1993. SG&A expense as a
percentage of revenue decreased to 15.2 percent in 1994 from 21.4
percent in 1993. This percentage decrease was primarily
attributable to the increase in revenues recognized and the
decrease in expenses actually incurred.
Divisional Operating Income
Operating income increased to income of $4.5 million in 1994 from
a loss of $8.2 million in 1993. The Company's concrete and related
products division operating income increased to $2.8 million in
1994 from a loss of $321,000 in 1993. This increase is primarily
attributable to decreases in cost of sales and a slight increase in
revenues for this division.
The Company's land development contracting division operating
income increased to income of $1.7 million in 1994 from a loss of
$6.9 million in 1993. This increase is primarily attributable to
profits recognized on new Caribbean construction contracts, the
losses taken in 1993 on two United States construction projects and
the elimination of a significant portion of the United States
contracting overhead.
Interest Expense
Interest expense increased to $2.7 million in 1994 from $2.2
million in 1993. This increase was primarily due to the
reconsolidation into the financial statements of the marina
operation and its related debt, along with increases in interest
rate levels during 1994.
Income Taxes
Income taxes decreased to $50,000 in 1994 from $108,000 in 1993.
The Company's tax rate varies depending on the level of the
Company's earnings in the various tax jurisdictions in which it
operates, the level of operating loss carryforwards and tax
exemptions available to the Company.
Net Earnings (Loss)
The Company's net earnings increased to income of $2.1 million in
1994 from a net loss of $9.1 million in 1993. This increase in net
earnings was primarily attributable to profits recognized in the
Company's land development contracting division, improvements in
the concrete and related products division profits and reductions
of selling, general and administrative expenses.
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. 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 $4.8 million at
December 31, 1995) and funds available from lines of credit will be
adequate to meet the Company's anticipated needs for operations
during the next twelve months.
At December 31, 1995, 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, $517,000 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 expires in
May 1996, the $1.0 million line expires in June 1996 and the two
$400,000 lines have no expiration date. The interest rates on all
such indebtedness outstanding at December 31, 1995 was 9.3 percent.
The Company has a $500,000 unsecured overdraft facility from a
commercial bank in the Caribbean. The facility expires on
September 30, 1996 and bears interest at 14.0 percent per annum.
At December 31, 1995 the Company had borrowings of $512,000
outstanding under this line.
The Company 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 December 31, 1995, the Company had borrowings of
$170,000 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 December
31, 1995 ranged from 9.0 percent to 10.3 percent and the Company
had $5.0 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 December 31 1995 was 9.5 percent and
the Company has $2.0 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
June 30, 1996. The loan is secured by the Company's notes
receivable from the Government of Antigua and Barbuda.
The Company has borrowed $4.7 million from a Company officer. One
note has an outstanding balance of $4.5 million, is unsecured,
bears interest at the prime interest rate and is due in full on
January 1, 1997. The other note has a balance of $140,000, is
secured by equipment, bears interest at 8.0 percent per annum and
is due in monthly principal installments of $10,000, plus interest,
through February 1997.
The Company is seeking a commitment from a bank in the Caribbean
for a new $8.2 million credit facility which would be structured as
a seven year term loan of $7.2 million with a $1.0 million
revolving line of credit tied to the same facility. The bank
reacted favorably to the Company's proposal although there is no
assurance that the loan will be granted on terms acceptable to the
Company or even granted at all. The loan proceeds of $7.2 million
would be used to repay and retire a $2.0 million revolving line of
credit which expires in May 1996, two term loans totalling $1.3
million, an equipment loan with a balance of $375,000, a term loan
with a balance of $2.0 million which is due in June 1996, a line of
credit with a balance of $517,000 which expires in June 1996,
another line of credit with a balance of $400,000 which expires in
May 1996 and various other notes amounting to approximately
$318,000. The balance of $300,000 would be used to provide
additional working capital for the Company. The loan would be
collateralized by various parcels of real property located in the
United States Virgin Islands. If the new credit facility is not
obtained, the Company will seek alternative financing or extensions
of its existing facilities expiring in 1996.
The Company purchases equipment from time to time as needed for its
ongoing business operations. At present, management believes that
the Company's inventory of equipment is adequate for its current
contractual commitments and operating activities, 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. During 1995, the Company sold equipment
with an original cost basis of approximately $2.4 million and net
book value of $534,000.
Accordingly, except for the circumstances previously discussed, and
normal equipment replacements and additions, management does not
anticipate having to make a substantial investment in new equipment
during the current year. The Company believes it has available or
can obtain sufficient financing for all of its contemplated
equipment replacements and additions. Historically, the Company
has used a number of lenders to finance machinery and equipment
purchases, including its ocean going bulk cement vessel, on an
individual asset basis. At December 31, 1995 amounts outstanding
to these lenders totalled $7.1 million. These loans are typically
repaid over a three to six year term in monthly principal and
interest installments.
The Company is in violation of certain loan covenants in several of
its loan agreements with two lenders. One of its lenders has
provided the Company a waiver of the violations and the Company
believes it can obtain a waiver from the other lender.
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. As part of the 1995
acquisition of Societe des Carrieres de Grand Case (SCGC), a French
company operating a ready-mix concrete plant and quarry in St.
Martin, the Company agreed to pay the quarry owners (who were also
the owners of SCGC), a royalty payment of $550,000 per year through
August 2000, which at the Company's option, may be renewed for two
successive five year periods and requires annual payments of
$550,000 per year. At the end of the fifteen year royalty period,
the Company has the option to purchase a fifty hectare parcel of
property for $4,400,000. In connection with the 1990 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 December 31, 1995 include
$16.2 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, $2.5 million of which is
classified as a current receivable. Scheduled payments call for
both quarterly and monthly principal and interest payments until
maturity in 1997. The Government of Antigua has routinely made the
required quarterly payments aggregating $2.0 million per year but
has made only some of the required monthly payments. The Company
does not presently anticipate material increases in or
accelerations of payments by the Government of Antigua. The
Company expects that the notes will not be satisfied at maturity
but the Antiguan government has advised the Company that the
current payment stream will continue until the obligation is
satisfied. A portion of the payment received from Antigua is
derived from the lease proceeds the Antiguan government receives
from the United States Department of Defense for the rental of two
military bases. In January 1995, the Antiguan government was
notified by the United States government that one of the bases
would be closed in late 1995. The Antiguan government has advised
the Company that it will make up any shortfall in the payments to
the Company from the military base rents from its general treasury.
Item 8. Financial Statements and Supplementary Data
The financial information and the supplementary data required in
response to this Item are as follows:
[CAPTION]
<TABLE>
<S> <C>
Page Number(s)
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets
December 31, 1995 and 1994
Consolidated Statements of Operations
For Each of the Years in the Three Year
Period Ended December 31, 1995
Consolidated Statements of Stockholders'
Equity Each of the Years in the Three
Year Period Ended December 31, 1995
Consolidated Statements of Cash Flows
For Each of the Years in the Three Year
Period Ended December 31, 1995
Notes to Consolidated Financial
Statements
Schedule II - Valuation and
Qualifying Accounts
</TABLE>
Independent Auditors' Report
The Board of Directors and Stockholders
Devcon International Corp.:
We have audited the consolidated financial statements of Devcon
International Corp. and subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedules
as listed in the accompanying index. These consolidated financial
statements and this financial statement schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
and this financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Devcon International Corp. and subsidiaries at December
31, 1995 and 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1995 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in note 1(j) to the consolidated financial statements,
the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," in 1993.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 27, 1996
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
[CAPTION]
<TABLE>
<S> <C> <C>
Assets 1995 1994
Current assets:
Cash (note 8) $ 438,682 $ 21,106
Cash equivalents
(notes 7 and 8) 977,456 920,944
Receivables, net
(notes 2 and 7) 12,043,706 14,461,672
Costs in excess of
billings and estimated
earnings (note 16) 3,461,984 2,611,494
Inventories (note 3) 6,392,278 7,614,635
Other 936,446 953,845
Net assets of discontinued
operation (note 9) 749,114 1,535,825
Total current assets 24,999,666 28,119,521
Property, plant and equipment
(note 7):
Land 5,667,867 5,394,676
Buildings 4,248,816 4,087,282
Leasehold interests 12,590,763 12,454,758
Equipment 72,319,224 68,107,860
Furniture and fixtures 1,057,850 956,613
Construction in process 1,396,187 2,184,367
97,280,707 93,185,556
Less accumulated
depreciation (45,898,662) (43,203,809)
51,382,045 49,981,747
Investments in unconsolidated
joint ventures and
affiliates (note 4) 208,780 230,280
Advances to unconsolidated
joint ventures and
affiliates (note 4) 1,047,663 1,351,454
Receivables, net
(notes 2 and 7) 17,585,097 18,420,072
Intangible assets, net of
accumulated amortization
(note 5) 1,086,801 500,582
Other assets 1,002,588 937,339
$ 97,312,640 $ 99,540,995
1995 1994
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable, trade and
other $ 6,501,977 $ 6,486,401
Accrued expenses and other
liabilities 1,451,429 1,248,121
Notes payable to banks (note 7) 3,467,310 2,667,500
Current installments of
long-term debt (note 7) 7,274,506 6,768,174
Billings in excess of costs
and estimated earnings
(note 16) 766,399 56,278
Income taxes (note 8) 689,650 48,275
Total current liabilities 20,151,271 17,274,749
Long-term debt, excluding current
installments and notes payable
to banks (note 7) 15,547,908 17,453,937
Minority interest in consolidated
subsidiaries 675,853 644,160
Deferred income taxes (note 8) 651,979 1,429,000
Other liabilities 1,127,043 1,084,058
Total liabilities 38,154,054 37,885,904
Stockholders' equity (note 14):
Common stock, $0.10 par value.
Authorized 15,000,000 shares,
issued and outstanding,
4,464,510 shares in 1995 and
4,431,177 shares in 1994 446,451 443,118
Additional paid-in capital 11,987,365 11,740,700
Retained earnings (note 8) 46,724,770 49,471,273
Total stockholders'
equity 59,158,586 61,655,091
Commitments and contingencies
(notes 8, 11 and 17) $97,312,640 $99,540,995
</TABLE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
For Each of the Years in the Three Year Period Ended December 31,
1995
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Concrete and related products
revenues $37,716,253 $39,342,107 $38,300,065
Contracting revenues
(note 13) 16,068,283 22,941,915 16,926,065
Other revenues 2,366,926 2,965,081 638,196
Total revenues 56,151,462 65,249,103 55,864,326
Cost of concrete and related
products 29,069,207 29,200,324 31,819,998
Cost of contracting 14,102,977 19,249,741 19,700,120
Cost of other 1,720,911 2,387,592 528,781
Gross profit 11,258,367 14,411,446 3,815,427
Operating expenses:
Selling, general and
administrative 10,682,423 9,626,374 11,280,103
Provision for doubtful
accounts and notes 301,510 300,000 690,642
Operating income
(loss) 274,434 4,485,072 (8,155,318)
Other income (deductions):
Equity in earnings of
unconsolidated joint
ventures and affiliates
(note 4) - - 447,117
Gain (loss) on sale of
equipment 164,116 34,895 (317,717)
Interest expense (2,555,848) (2,704,105) (2,238,703)
Interest and other
income 462,840 854,024 1,227,959
Writedown of assets to net
realizable value - - (250,000)
Minority interest (31,693) (38,344) (7,103)
Impairment loss on
discontinued operations
subsequently retained
(note 9) - - (2,200,000)
(1,960,585) (1,853,530) (3,338,447)
Income (loss) from
continuing operations
before income
taxes (1,686,151) 2,631,542 (11,493,765)
Income taxes (note 8) 145,352 50,000 107,486
Income (loss) from
continuing
operations (1,831,503) 2,581,542 (11,601,251)
See accompanying notes to consolidated financial statements.
</TABLE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations (Continued)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Discontinued operations
(note 9):
Impairment gain
(loss) $ (800,000) $ - $ 2,200,000
Loss from discontinued
operations (115,000) (470,076) (173,256)
Income (loss) from
discontinued
operations (915,000) (470,076) 2,026,744
Income (loss) from
continuing and
discontinued
operations
before cumulative
effect of
change in
accounting prin-
ciple (2,746,503) 2,111,466 (9,574,507)
Cumulative effect of
change in
accounting prin-
ciple - - 500,000
Net earnings
(loss) $(2,746,503) $2,111,466 $(9,074,507)
Earnings (loss) per share:
From continuing
operations $ (.40) $ .57 $ (2.55)
From discontinued
operations (.20) (.11) .44
From change in
accounting
principle - - .11
Net earnings
(loss) $ (.60) $ .46 $ (2.00)
Weighted average
number of shares 4,566,671 4,560,397 4,540,804
See accompanying notes to consolidated financial statements.
</TABLE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For Each of the Years in the Three Year Period Ended December 31,
1995
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Additional
Common Paid-in Retained
Stock Capital Earnings
Balances at
December 31, 1992 $436,867 $11,246,950 $56,434,314
Proceeds from sale of
restricted stock 6,251 493,750 -
Net loss - - (9,074,507)
Balances at December
31, 1993 443,118 11,740,700 47,359,807
Net earnings - - 2,111,466
Balances at December
31, 1994 443,118 11,740,700 49,471,273
Stock issued in
connection with
acquisition of
additional
partnership
interest 3,333 246,665 -
Net loss - - (2,746,503)
Balances at December
31, 1995 $446,451 $11,987,365 $46,724,770
(continued)
<S> <C>
Total
Balances at December 31, 1992 $68,118,131
Proceeds from sale of restricted
stock 500,001
Net loss (9,074,507)
Balances at December 31, 1993 59,543,625
Net income 2,111,466
Balances at December 31, 1994 61,655,091
Stock issued in connection with
acquisition of additional
partnership interest 249,998
Net loss (2,746,503)
Balances at December 31, 1995 $59,158,586
See accompanying notes to consolidated financial statements.
</TABLE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For Each of the Years in the Three Year Period Ended December 31,
1995
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Cash flows from operating
activities:
Net earnings (loss) $(2,746,503) $2,111,466 $(9,074,507)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Depreciation and
amortization 4,714,254 6,459,492 6,733,618
Deferred income
tax benefit (777,021) - -
Cumulative effect of
change in accounting
principle - - (500,000)
Equity in (earnings)
loss of unconsolidated
joint ventures and
affiliates - - (447,117)
Provision for doubtful
accounts and notes 301,510 300,000 690,642
Writedown of assets to
net realizable value 800,000 - 250,000
(Gain) loss on sale of
equipment (164,116) (34,896) 317,717
Loss from discontinued
operations 115,000 - 173,256
Increase (decrease) in
minority interest in
unconsolidated
subsidiaries 31,693 38,345 7,103
Changes in operating assets
and liabilities:
(Increase) decrease in
receivables 347,378 (523,019) 1,898,431
Decrease (increase) in
costs in excess of
billings and estimated
earnings (850,490) (1,534,007) 2,714,172
(Increase) decrease in
inventories 1,222,357 (78,381) 565,932
Decrease (increase) in
other current assets 17,399 (150,394) (37,433)
Decrease (increase) in
other assets (65,249) (33,887) (119,589)
(Decrease) increase in
accounts payable and
accrued expenses 692,284 (616,160) (1,421,665)
Decrease in billings in
excess of costs and
estimated earnings 710,121 (375,372) (880,429)
Decrease in income taxes
payable (641,375) (72,992) (12,368)
Increase in other non
current liabilities 42,985 (288,224) -
Net cash provided by
operating activi-
ties $5,032,977 $5,201,971 $ 857,763
Cash flows from investing activities:
Purchase of property, plant
and equipment $(6,249,083) $(3,319,741) $(6,493,675)
Proceeds from disposition of
property, plant and
equipment 697,887 665,945 2,420,459
Payment to acquire
subsidiary company (1,000,000) - (338,115)
Issuance of notes (227,233) (2,697,116) (1,293,666)
Payments on notes 2,831,286 3,137,015 1,111,361
Advances to affiliates (36,209) (59,130) (91,636)
Advances from affiliates 340,000 100,000 746,184
Net cash used in investing
activities (3,643,352) (2,173,027) (3,939,088)
Cash flows from financing activities:
Proceeds from debt 9,540,913 7,301,564 20,074,559
Principal payments on
debt (10,140,800) (11,350,542) (16,598,568)
Net borrowings
(repayments)
from bank overdrafts (315,650) 698,257 (841,174)
Net cash provided by
(used in) financing
activities (915,537) (3,350,721) 2,634,817
Net decrease in cash and
cash equivalents 474,088 (321,777) (446,508)
Cash and cash equivalents at
beginning of year 942,050 1,263,827 1,710,335
Cash and cash equivalents at
end of year $ 1,416,138 $ 942,050 $ 1,263,827
Supplemental disclosures of
cash flow information:
Cash paid for:
Interest $ 2,579,748 $ 3,017,610 $ 2,188,965
Income taxes $ 87,888 $ 147,938 $ 119,854
</TABLE>
Supplemental non-cash items:
During 1995, the Company issued 33,333 shares of common stock to
acquire an additional partnership interest in a Mexican
manufacturing partnership.
During 1993 the Company reclassified approximately $3,900,000 from
assets held for sale to property, plant and equipment.
During 1993, the Company reduced by $1.5 million the valuations of
sand and parts inventory at two island operations.
During 1993, the company wrote down a concrete block manufacturing
facility by $250,000. This operation was sold in 1993.
During 1993, a $628,000 note receivable from the sale of the block
operation was offset against existing debt owed to the same party.
During 1993, the Company recorded a writedown of $200,000 on the
investment in Corbkinnons and recognized a loss of $775,000 on the
Mexican manufacturing company.
During 1993, the Company issued 62,500 shares of stock to the
former owner of a purchased subsidiary as partial payment for
amounts due related to the purchase of the subsidiary by the
Company.
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1995, 1994 and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the
accounts of Devcon International Corp. and its majority
owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in
consolidation.
The Company's investments in unconsolidated joint
ventures and affiliates are accounted for by the equity
method. Under the equity method, original investments
are recorded at cost and adjusted by the Company's share
of undistributed earnings or losses of these companies.
(b) REVENUE RECOGNITION
CONCRETE AND RELATED PRODUCTS
Revenue is recognized when the products are delivered.
CONTRACTING
The Company uses the percentage of completion method of
accounting for financial statement preparation and tax
reporting purposes. Revenues earned and related costs
are recorded based on the Company's estimates of the
percentage of completion of each project using the cost
to cost method. Anticipated losses on contracts are
charged to earnings when probable and estimable. Changes
in estimated profits on contracts are recorded in the
period of change. Selling, general and administrative
expenses are not allocated to contract costs. Monthly
billings are based on the percentage of work completed in
accordance with a specific contract. Contracts are
generally completed within one year of the commencement
date, although the Company has had contracts that
extended past one year.
OTHER
Other revenue consists of revenue from a marina owned by
the Company. Revenue is recognized when products or
services are delivered.
(c) CASH AND CASH EQUIVALENTS
The Company considers certificates of deposits,
commercial paper and repurchase agreements with an
original maturity or restriction of three months or less
at time of purchase to be cash equivalents.
(d) INVENTORIES
The cost of sand, stone, cement and concrete block
inventories is determined using average costs
approximating the first-in, first-out (FIFO) method and
is not in excess of market. All other inventories are
stated at the lower of average cost or market.
(e) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
Depreciation on property, plant and equipment is
calculated on the straight-line method over the estimated
useful lives of the assets. Property, plant and
equipment held under capital leases and leasehold
improvements are amortized using the straight-line method
over the shorter of the lease term or the estimated
useful life of the asset.
Useful lives and/or lease terms for each asset type are
summarized below:
Buildings 15 - 40 years
Leasehold interests 3 - 55 years
Equipment 3 - 20 years
Furniture and fixtures 3 - 10 years
During 1995, the Company changed the estimated useful
lives of certain equipment of assets used by the concrete
and related products and land development contracting
divisions in order to more closely match the useful lives
to the actual service life of the assets. This change in
useful lives was made prospectively and reduced annual
depreciation expense by approximately $900,000.
(f) FOREIGN CURRENCY TRANSLATION
The Company owns subsidiaries whose functional currency
is the Eastern Caribbean Dollar. The assets and
liabilities of these subsidiaries have been translated
into U.S. dollars at year end exchange rates. Income
statement accounts are translated into U.S. dollars at
average exchange rates during the period. Resulting
translation adjustments were not significant.
(g) INTANGIBLE ASSETS
The excess of cost over the fair value of net assets of
subsidiaries acquired is amortized over five to ten year
periods on a straight-line basis. The Company
periodically reevaluates the recoverability of its
intangible assets as well as their amortization periods
to determine whether an adjustment to the carrying value
or a revision to the estimated useful lives is
appropriate. The primary indicators of recoverability
are the current and forecasted operating cash flows,
which pertain to that particular asset. An entity that
has a deficit in its cash flow from operations for a full
fiscal year, in light of the surrounding economic
environment, is viewed by the Company as a situation
which could indicate an impairment of value. Taking into
account the above factors, the Company determines that an
impairment loss has been triggered when the future
projected undiscounted cash flows associated with the
intangible asset does not exceed its current carrying
amount and the amount of the impairment loss to be
recorded is the difference between the current carrying
amount and the future projected undiscounted cash flows.
Based on the Company's policy, management believes that
there is no impairment of value related to the intangible
assets as of December 31, 1995.
Accumulated amortization on intangible assets amounted to
$206,582 in 1995 and $109,120 in 1994.
(h) EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is computed by dividing
the weighted average number of shares outstanding during
each year, increased by common equivalent shares (stock
options) using the treasury stock method. Fully diluted
earnings per share did not differ significantly from
primary earnings per share in any of the years presented.
(i) FOREIGN OPERATIONS
Significant portions of the Company's operations are
conducted in foreign areas, primarily Antigua, St.
Maarten, St. Martin, Dominica, Saba, St. Kitts and
Tortola, all of which are in the Caribbean. Operations
are also conducted in Mexico.
(j) INCOME TAXES
The Company and certain of its domestic subsidiaries file
consolidated Federal and state income tax returns.
Subsidiaries located in U.S. possessions and foreign
countries file individual income tax returns. Deferred
income taxes are recognized for income and expense items
that are reported in different years of financial
reporting and income tax purposes.
U.S. income taxes are not provided on undistributed
earnings which are expected to be permanently reinvested
by the foreign subsidiaries located in Antigua, the
Netherlands Antilles, the French West Indies, the British
Virgin Islands, Dominica, Grand Cayman, the Bahamas and
certain subsidiaries located in U.S. possessions.
The Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Under the asset
and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the estimated
future tax consequence attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered
or settled. Under Statement 109, the effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income for the period that includes the
enactment date.
Effective January 1, 1993, the Company adopted Statement
109 and has reported the cumulative effect of that change
in the method of accounting for income taxes in the 1993
consolidated statement of earnings.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these consolidated financial
statements in conformity with generally accepted
accounting principles.
(l) RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 consolidated
financial statements have been reclassified to conform
with the 1995 presentation.
(m) NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long Lived Assets to be
Disposed Of." The statement requires that long-lived
assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The
impairment of value is based on estimated future cash-
flows expected to result from the use of the asset and
its eventual disposition. The provisions of this
statement must be adopted for fiscal years beginning
after December 15, 1995. The Company has not determined
the effect of the adoption of this pronouncement.
In October 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based
Compensation." The statement permits a company to choose
either a new fair value based method or the current APB
Opinion 25 intrinsic value based method of accounting for
its stock-based employee compensation plans in which an
employer grants shares of its stock or other equity
instruments to employees. The statement requires pro
forma disclosures of net income and earnings per share
computed as if the fair value based method had been
applied in financial statements of companies that elect
to follow current practice in accounting for such
arrangements under Opinion 25. The Company has not
determined the effect of the adoption of this
pronouncement.
(2) RECEIVABLES
Receivables consist of the following:
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
Concrete and related products
division trade accounts
receivable $7,734,882 $7,965,570
Land development contracting
division trade accounts
receivable, including
retainages 3,367,229 2,830,908
Other division trade
accounts receivable 73,180 64,391
Accrued interest and
other receivables 706,750 562,288
Notes and other receivables
due from the Government of
Antigua and Barbuda
(note 10) 17,274,649 19,111,166
Trade notes receivable
- other 2,853,674 4,861,494
Due from employees and
officers 74,841 155,013
32,085,205 35,550,830
Allowance for doubtful
accounts and notes (2,456,402) (2,669,086)
$29,628,803 $32,881,744
</TABLE>
Receivables are classified in the consolidated balance sheets as
follows:
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
Current assets $12,043,706 $14,461,672
Noncurrent assets 17,585,097 18,420,072
$29,628,803 $32,881,744
</TABLE>
Retainage will be due upon completion of construction contracts
and acceptance by the customer. The Company expects retainage
will be collected during 1996.
Included in notes and other receivables are unsecured notes due
from the Government of Antigua and Barbuda amounting to
$16,218,549 and $18,055,066 in 1995 and 1994, respectively, and
having maturity dates through 1997. See note 10. The Company
believes payments of approximately $2,500,000 will be received
in 1996. The current payment schedule calls for both quarterly
and monthly payments until note maturity. The Government of
Antigua has routinely made the required quarterly payments
totalling $2.0 million per year but has only made some of the
required monthly payments. The Company does not presently
anticipate material increases or decreases in the level of
payments by the Government of Antigua. The Company expects that
the notes will not be satisfied at maturity but the Antigua
government has advised the Company that the current payment
stream will continue until the obligation is satisfied. A
portion of the payment received from Antigua is derived from the
lease proceeds the Antiguan government receives from the United
States Department of Defense for the rental of two military
bases. In January 1995, the Antiguan government was notified by
the United States government that one of the bases would be
closed in late 1995. The Antiguan government has advised the
Company that it will make up any shortfall in payments to the
Company from the military base rents from its general treasury.
Notes receivable, from an Antiguan government agency, amounting
to $855,803 in 1995 and 1994 are included in the total due from
the government of Antigua, along with Antigua-Barbuda Government
Development Bonds 1994-1997 series amounting to $200,297 in 1995
and 1994.
The Company also has trade receivables from various Antiguan
government agencies of $717,554 and $112,020 in 1995 and 1994,
respectively. Several of the Company's customers perform
services for the Antiguan government and depend on payments from
the government to satisfy their obligations to the Company.
Trade notes receivable - other consist of the following:
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
8 percent note receivable due
in weekly installments from
April 1994 through April 1997,
secured by first and second
mortgages on two parcels of
land $ 536,431 $ 599,773
Unsecured promissory notes
receivable with varying terms
and maturity dates 262,711 2,010,490
Secured promissory notes
receivable with varying terms
and maturity dates 921,485 889,878
8 percent note receivable,
due on demand, secured by first
mortgage on real property 812,763 1,040,034
10 percent note receivable,
due in installments commencing
May 1, 1994 continuing through
May 1, 1999, secured by real
property in the United States
Virgin Islands 320,284 321,319
$2,853,674 $4,861,494
</TABLE>
(3) INVENTORIES
Inventories consist of the following:
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
Sand, stone, cement and
concrete block $4,744,067 $5,859,320
Maintenance parts 1,318,037 1,283,372
Other 330,174 471,943
$6,392,278 $7,614,635
</TABLE>
(4) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
AND AFFILIATES
At December 31, 1995, the Company has equity interests in two
real estate ventures, a 43 percent equity interest in a foreign
construction company and a 1 percent equity interest in a
commercial property development in Antigua. One real estate
joint venture was formed primarily to acquire and develop land
for sale in Antigua, West Indies. The other real estate venture
was formed to develop property in Florida and has insignificant
assets and operations. No income or loss was recognized in 1995
and 1994 on any of these ventures because the amounts were not
material.
[CAPTION]
<TABLE>
<S> <C>
December 31, 1995
Unconsolidated joint
ventures and affiliates
Advances Investments
To In
Commercial property $ 11,323 $ -
Real estate 960,130 8,780
Construction 76,210 200,000
$1,047,663 $ 208,780
(continued)
<S> <C>
December 31, 1994
Unconsolidated joint
ventures and affiliates
Advances
To In
Commercial property $ 11,323 $ -
Real estate 1,300,131 30,280
Construction 40,000 200,000
$1,351,454 $ 230,280
</TABLE>
(5) ACQUISITIONS
On August 16, 1995, the Company acquired for $1,000,000 cash,
the stock of Societe des Carrieres de Grand Case (SCGC), a
French company engaged in the ready mix concrete and quarry
business on the French island of St. Martin. The transaction
was accounted for as a purchase. As a result of the
transaction, the Company recorded costs in excess of the fair
value of the net assets purchased in the amount of $615,000.
(6) Fair Value of Financial Instruments
The carrying amount of financial instruments including cash,
cash equivalents, receivables, net, other current assets,
accounts payable trade and other, accrued expenses and other
liabilities, notes payable to banks, and current installments
of long-term debt approximated fair value at December 31,
1995 because of the short maturity of these instruments. The
carrying value of debt and notes receivable approximated fair
value at December 31, 1995 based upon the present value of
estimated future cash flows.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
Installment notes payable in monthly
installments through 1999 bearing
interest at a weighted average
rate of 9.45 percent and secured by
equipment with a carrying value
of approximately $9,071,000 $ 5,255,811 $ 4,425,692
Notes and mortgages payable in
installments through 2003, bearing
interest at 9.5 percent to 10
percent and secured by equipment
and real property with a carrying
value of approximately
$10,021,000 6,174,188 7,201,714
Obligation arising from an
acquisition, payable in $350,000
monthly installments through 1998,
discounted at 10 percent 621,520 1,211,945
Unsecured notes payable due
through 1998 bearing interest at
a weighted average rate of 8.0
percent 2,269,445 1,690,924
Unsecured note payable to a
Company officer, due January 1,
1997, bearing interest at the
prime interest rate 4,572,561 3,152,561
8 percent installment note
payable in monthly installments
to a Company officer
secured by equipment with a
net carrying value of
approximately $454,000 140,000 260,000
Note payable to bank under a
$400,000 line of credit, expiring
in May 1996, secured by a
certificate of deposit and
bearing interest at the prime
interest rate plus one-half of
one percent per annum 400,000 400,000
Note payable to bank under a
$2.0 million line of credit,
expiring in May 1996,
secured by an assignment of
specific accounts receivable
and bearing interest
at the prime interest rate
plus one-quarter
of one percent per annum 1,980,000 1,680,000
Note payable to bank under a
$400,000 line of credit,
expiring in June 1996, secured
by a certificate of deposit
and bearing interest at the
prime interest rate 400,000 400,000
Note payable to bank under a
$500,000 line of credit, expiring
in October 1996, secured by
a second mortgage on equipment
and bearing interest at the prime
interest rate plus one-half of one
percent 170,310 -
</TABLE>
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
Note payable to bank on $1.0
million line of credit bearing
interest at the prime interest
rate plus 1/2 of 1 percent,
secured by real property and
certificate of deposit
with a value of $532,000 due in
full on June 30, 1996 517,000 187,500
Note payable to bank under a
$4,000,000 term loan due in
quarterly installments
from November 1993 through
May 1996 with a balloon payment
of $1,500,000 due June 30, 1996.
Interest accrues at 3/4 of 1
percent over the prime interest
rate. Note secured by notes
receivable from the government
of Antigua with a net carrying
value of approximately
$9,133,000 2,000,000 3,000,000
Note payable to bank, due in
monthly installments of
$38,889 through 1999, plus
interest at 1-5/8 of 1 percent
over the LIBOR rate, secured by
equipment with a carrying
value of approximately
$4,088,000 1,788,889 2,255,556
Installment and bank notes
payable repaid or refinanced during 1995 - 1,023,719
Total debt outstanding $26,289,724 $26,889,611
</TABLE>
Shown in the consolidated balance sheet under the following
captions:
[CAPTION]
<TABLE>
<S> <C> <C>
Current installments of
long term debt $ 7,274,506 $ 6,768,174
Notes payable to banks 3,467,310 2,667,500
Long-term debt 15,547,908 17,453,937
$26,289,724 $26,889,611
</TABLE>
The total maturities of long-term debt subsequent to December 31,
1995 are as follows:
[CAPTION]
<TABLE>
<S> <C>
1996 $10,741,816
1997 8,025,389
1998 2,520,879
1999 1,653,087
2000 2,523,052
Thereafter 825,501
$26,289,724
</TABLE>
At December 31, 1995 the Company is in violation of various
financial covenants contained in certain loan agreements it has
with two banks. One bank has granted a waiver of the violations
and the Company believes it can obtain a waiver from the other
lender. The amounts due from the bank which did not grant a
waiver are classified as current liabilities.
The Company is currently seeking a new credit facility to
replace several of the loans which mature in 1996. The Company
believes that it can obtain a new credit facility or obtain
extensions of the maturing loans.
(8) INCOME TAXES
Income tax expense (benefit) consists of:
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Current Deferred Total
1995:
Federal $ 5,000 $ - $ 5,000
State - - -
Foreign 917,373 (777,021) 140,352
$922,373 $(777,021) $145,352
1994:
Federal $ - $ - $ -
State - - -
Foreign 50,000 $ - 50,000
$ 50,000 $ - $ 50,000
1993:
Federal $ - $ - $ -
State - - -
Foreign 107,486 - 107,486
$107,486 $ - $107,486
</TABLE>
The significant components of deferred income tax benefit
attributable to loss from continuing operations for the year
ended December 31, 1995 are as follows:
Deferred tax expense
(exclusive of component listed below) $2,342,000
Decrease in valuation allowance for
deferred tax assets
(3,119,021)
$
(777,021)
The actual expense differs from the "expected" tax expense
computed by applying the U.S. Federal corporate income tax rate
to earnings before income taxes as follows:
[CAPTION]
<TABLE>
<S> <C> <C>
1995 1994
Computed "expected"
tax expense (benefit) $(934,000) $718,000
Increase (reduction) in
income taxes resulting
from:
Tax incentives granted
to a subsidiary in U.S.
possession - -
Tax incentives granted to
foreign
subsidiaries (1,208,000) (1,307,000)
Net operating loss not
utilized 2,294,000 598,000
Foreign surcharge tax - -
Other (6,648) 41,000
$ 145,352 $ 50,000
(continued)
<S> <C>
1993
Computed "expected"
tax expense $(4,119,000)
Increase (reduction) in
income taxes resulting
from:
Tax incentives granted
to a subsidiary in U.S.
possession (1,101,000)
Tax incentives granted to
foreign
subsidiaries -
Net operating loss not
utilized 5,216,000
Foreign surcharge tax 111,000
Other 486
$ 107,486
</TABLE>
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes, and (b) net operating loss
carryforwards.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1995 are presented below:
[CAPTION]
<TABLE>
<S> <C> <C>
December 31
1995 1994
Deferred tax assets:
Net operating loss carryforwards $5,841,000 $7,402,000
Other 182,000 412,000
Total gross deferred tax assets 4,023,000 7,814,000
Less valuation allowances (4,134,979) (7,254,000)
Net deferred tax assets 1,888,021 560,000
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation and
capitalized interest (1,693,000) (1,523,000)
Investments in joint ventures,
principally due to differences in
recording the investment between
book and tax (847,000) (440,000)
Other - (26,000)
Total gross deferred tax
liabilities (2,540,000) (1,989,000)
Net deferred tax liability $ (651,979) $(1,429,000)
</TABLE>
The valuation allowance for deferred tax assets as of December
31, 1995 was $4,134,979. The valuation allowance was
established at approximately 69 percent of the potential
deferred tax benefit as the Company believes it can utilize net
operating losses via partial repatriation of foreign subsidiary
earnings.
In April 1988, the Virgin Islands Industrial Development
Commission (IDC) granted a subsidiary of the Company a 10-year
tax exemption expiring in 1998, pursuant to which, and subject
to certain conditions and exceptions, the Company's (i)
production and sale of ready-mix concrete; (ii) production and
sale of concrete block on St. Thomas and St. Johns and outside
of the Virgin Islands; (iii) production and sale of sand and
aggregate; and (iv) bagging of cement from imported bulk cement,
are 100 percent exempt from all United States Virgin Islands
real property, gross receipts (currently set at 4 percent) and
excise taxes, 90 percent exempt from United States Virgin
Islands income taxes, and approximately 83 percent exempt from
United States Virgin Islands custom duties. The IDC granted the
Company the tax exemption in return for the Company's commitment
to (i) make capital expenditures of at least $4.6 million for
new or replacement equipment over a 10-year period, which the
Company has satisfied (ii) employ a minimum of 142 United
States Virgin Islands residents as full-time personnel; (iii)
spend at least $75,000 annually for a youth training program;
(iv) not increase the price of its concrete and related products
except as the result of certain direct cost increases incurred
by the Company over which it has no control; and (v) make an
annual scholarship fund contribution of $150,000.
In January 1994, the Company received a five year extension,
through April 2003, of its previously granted benefits. This
extension was granted in return for the Company agreeing to (i)
continue to employ a minimum of 160 United States Virgin Islands
residents as full time personnel; (ii) make additional capital
expenditures of $1.7 million and (iii) continue to make a
combined job training/scholarship contribution of $225,000 per
annum during the extension period.
The Company believes it is in compliance with all of the
requirements of this program.
The Company has received exemptions relating to income and
excise taxes and customers duties for operations of certain
foreign subsidiaries and unconsolidated joint ventures See note
10.
At December 31, 1995, approximately $34.2 million of foreign
subsidiaries earnings have not been distributed and no U.S.
income taxes have been provided thereon as these earnings are
considered permanently reinvested in the subsidiaries'
operations and in the year earned, were not of the nature which
would require current income tax recognition under United States
income tax laws. Current assets include approximately $619,000
of cash and cash equivalents that the Company currently intends
to use only to fund foreign operations and U.S. possession
operations, respectively, due to U.S. income tax restrictions.
Should the foreign subsidiaries distribute these earnings to the
parent company or provide the parent company access to these
earnings through other means, taxes at the U.S. Federal tax rate
net of foreign tax credits may be incurred.
At December 31, 1995, the Company had accumulated net operating
loss carryforwards available to offset future taxable income in
their Caribbean and United States operations of approximately
$17.1 million which expire in varying periods through the year
ended December 31, 2004.
(9) DISCONTINUED OPERATIONS
In September 1989, a subsidiary of the Company obtained a
minority interest in a partnership engaged in the manufacture,
sale and distribution of acoustical ceiling tiles. The
subsidiary invested approximately $1.2 million in the
partnership for a 29 percent interest and two of the Company's
directors obtained an 11 percent interest for which they paid
$450,000. In January 1994 an Antiguan subsidiary of the Company
became the new general partner and the Company's ownership
interest in the partnership was increased to 57.98 percent. The
directors' ownership interest was reduced to 6.47 percent. In
November 1995, the Company elected to dispose of this operation
because of its poor operating results and uncertain prospects
for improvement. Accordingly, at December 31, 1995, the intended
disposal has been accounted for as a discontinued operation.
The financial statements for all prior periods presented have
been restated to reflect the ceiling tile partnership as a
discontinued operation. The Company's investment in the
partnership was written down $800,000 to its estimated net
realizable value of approximately $749,000, which consists
principally of property, equipment and inventory with a net book
value of approximately $1.4 million, along with debt of
approximately $621,000. The Company provided no reserve for
anticipated losses during the phaseout period and expects to
recognize no income tax benefit on the loss from discontinued
operations. These represent management's best estimates of the
amounts expected to be realized on the sale of its ceiling tile
business. The amounts the Company will ultimately realize could
differ materially in the near term from the amounts assumed in
arriving at a the loss on disposal of the discontinued
operations. The Company is currently negotiating the sale of a
major portion of the partnership's assets, however, no
definitive sales agreement has been concluded at this time.
Two subsidiaries of the Company own a 100 percent interest in a
Virgin Islands general partnership formed in 1988 to construct
and operate a marina on a 4.92 acre parcel of land leased by the
joint venture from the United States Virgin Islands government.
In 1991 the marina operation was classified as a discontinued
operation for financial statement presentation purposes. The
marina assets were written down $2.2 million dollars, to their
estimated net realizable value, and a reserve of $1.3 million
dollars was established for marina losses for the period from
January 1, 1992 to the expected disposal date. The Company
elected to reconsolidate the marina operation into its financial
statements as of September 30, 1993, primarily because the
Company believed it would take a significant amount of time to
dispose of the marina in the current real estate market.
Approximately $600,000 of the original $1.3 million reserve was
reflected as a gain on discontinued operations subsequently
retained.
(10) FOREIGN SUBSIDIARIES
Summary combined financial information for the Company's foreign
subsidiaries, located in the Caribbean, except for those located
in the U.S. Virgin Islands, follows:
[CAPTION]
<TABLE>
<S> <C>
December 31,
1995 1994
Current assets $11,903,636 $13,313,287
Advances to the Company 1,533,672 3,960,184
Property, plant and equipment,
net 25,103,665 24,267,246
Investment in joint ventures
and affiliates 1,180,234 1,520,235
Notes receivable 17,004,414 18,090,798
Other assets 803,252 191,019
Total assets $57,528,873 $61,342,769
Current liabilities 6,037,488 5,937,980
Long-term debt 5,937,412 7,227,851
Equity 45,553,973 48,176,938
Total liabilities
and equity $57,528,873 $61,342,769
1995 1994 1993
Revenue $29,858,843 $30,186,482 $24,482,562
Expenses 27,955,868 26,284,718 27,235,596
Net earnings
(loss) $ 1,902,975 $ 3,901,764 $(2,753,034)
</TABLE>
The expenses for 1993 included a writedown of $250,000 related
to an operation the Company disposed of during 1993. The above
foreign subsidiaries are included in the consolidated financial
statements.
In 1987, the Company entered into a construction contract with
the government of Antigua and Barbuda (Antigua). The original
contract provided for payment of $13,479,600 in cash and notes
bearing interest at 10 percent, a ten year income tax exemption
for the project and the Company's concrete and related products
subsidiary in Antigua commencing January 1, 1987 and an
ownership interest in Corbkinnons Limited (Corbkinnons), a
corporation formed with Antigua to own and develop 230 acres of
real property in Antigua. Corbkinnons and its shareholders
received an exemption from income and excise taxes and custom
duties for a minimum of 12 years with respect to the earnings
and operations of Corbkinnons. Since 1987, amendments to the
original contract totaling $20,864,867 have been executed. One
amendment provides for a tax exemption on a project accounted
for by one of the Company's Antigua contracting subsidiaries.
(11) LEASE COMMITMENTS
The Company leases real property, buildings and equipment under
operating leases that expire over one to fifty-five years.
Future minimum lease payments under noncancellable operating
leases as of December 31, 1995 are as follows:
[CAPTION]
<TABLE>
<S> <C>
Operating
Leases
Years ending December 31,
1996 $ 1,330,881
1997 1,241,111
1998 1,097,989
1999 1,065,667
2000 1,053,496
Thereafter 14,834,483
Total minimum lease payments $20,623,627
</TABLE>
Total rent expense for operating leases was $1,147,041 in 1995,
$950,908 in 1994 and $961,175 in 1993. Some operating leases
have provisions for contingent rentals or royalties based on
related sales and production; and such contingent expense
amounted to $63,575 in 1995, $131,041 in 1994 and $109,289 in
1993.
(12) LINES OF BUSINESS
The Company operates primarily in two principal lines of
business. Information about the Company's operations in these
different industries are as follows:
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Concrete and
related
products
revenues $37,716,253 $39,342,107 $38,300,065
Contracting
revenues 16,068,283 22,941,915 16,926,065
Other 2,366,926 2,965,081 638,196
Total
revenues $56,151,462 $65,249,103 $55,864,326
Operating income
(loss):
Concrete and
related
products $ 1,252,537 $ 2,841,153$ (321,396)
Contracting (569,224) 1,746,494 (6,942,950)
Other 409,550 321,425 128,028
Unallocated
corporate
overhead (818,000) (424,000) (1,019,000)
Total $ 274,434 $ 4,485,072 $(8,155,318)
Identifiable assets:
Concrete and
related
products $54,885,292 $53,009,725 $56,742,053
Contracting 37,346,656 40,691,336 40,048,607
Other 5,080,692 5,839,934 4,726,935
Total $97,312,640 $99,540,995 $101,517,595
Depreciation and amortization:
Concrete and
related
products $ 3,187,278 $ 4,256,729 $ 4,364,038
Contracting 1,257,950 1,939,495 2,304,878
Other 269,026 263,265 64,702
Total $ 4,714,254 $ 6,459,492 $ 6,733,618
Capital expenditures:
Concrete and
related
products $ 3,869,749 $ 2,063,196 $ 2,928,877
Contracting 2,764,334 1,232,690 3,555,580
Other - 23,855 9,218
Total $ 6,634,083 $ 3,319,741 $ 6,493,675
</TABLE>
Revenues by line of business include only sales to unaffiliated
customers, as reported in the Company's consolidated statement
of operations.
Operating income (loss) is revenues less operating expenses. In
computing operating income (loss), the following items have not
been added or deducted: interest expense, income tax expense,
equity in earnings from unconsolidated joint ventures and
affiliates, interest and other income, minority interest and
gain or loss on sales of equipment.
(13) RELATED PARTY TRANSACTIONS
A director and shareholder of the Company has a 2 percent
interest in an ocean going bulk cement ship in which the Company
has a 98 percent interest.
The Company leases a 4.4 acre parcel of real property from the
Company's President, pursuant to which he received $46,512 in
annual rent in 1995.
The Company has borrowed approximately $4.7 million from a
Company officer. One note has an outstanding balance of
approximately $4.5 million, is unsecured, bears interest at the
prime interest rate and is due in full on January 1, 1997. The
other note has a balance of $140,000 is secured by equipment,
bears interest at 8 percent per annum and is due in monthly
principal installments of $10,000, plus interest, through
February 1997. See note 7.
Contract losses totalling $147,341 were recognized during 1993
on contracts with related parties.
A subsidiary of the Company paid approximately $12,800 per year
in rent to a company in which a director was a principal.
(14) STOCK OPTION PLANS
(a) 1986 Stock Option Plan
The Company adopted a stock option plan in 1986 (the "1986
Plan"), which terminates in 1996. Until 1996, options to
acquire up to 300,000 shares of common stock may be granted
to officers and employees of the Company at no less than
the fair market value on the date of grant.
The exercise terms and conditions for each option granted
are established by the Compensation Committee of the Board
of Directors.
At December 31, 1995 the Company had the following options
granted under the 1986 Plan outstanding:
[CAPTION]
<TABLE>
<S> <C> <C>
Year Granted Options Price
1986 182,725 $2.33
1987 20,655 7.00
</TABLE>
(b) 1992 STOCK OPTION PLAN
The Company adopted a stock option plan in 1992 (the "1992
Plan"), which terminates in 2002. Until 2002, options to
acquire up to 350,000 shares of common stock may be granted
to officers and employees at no less than the fair market
value on the date of grant.
The exercise terms and conditions for each option granted
are established by the Compensation Committee of the Board
of Directors.
At December 31, 1995, the Company had the following options
granted under the 1992 Plan outstanding:
[CAPTION]
<TABLE>
<S> <C> <C>
Year Granted Options Price
1992 40,000 $9.63
1995 210,000 6.75
</TABLE>
(c) 1992 DIRECTORS STOCK OPTION PLAN
The Company adopted a stock option plan in 1992 (the "1992
Directors Plan") which terminates in 2002. Until 2002,
options to acquire up to 50,000 shares of common stock may
be granted to nonemployee Directors at no less than the
fair market value on the date of grant. The 1992 Directors
Plan provides that each Director shall receive an initial
grant of 8,000 shares and be granted an additional 1,000
shares annually immediately subsequent to their reelection
as a director of the Company.
At December 31, 1995, the Company had the following options
granted under the 1992 Directors Plan outstanding:
[CAPTION]
<TABLE>
<S> <C> <C>
Year Granted Options Price
1992 24,000 $14.00
1993 3,000 6.25
1994 3,000 8.75
1995 3,000 7.75
</TABLE>
(15) EMPLOYEE BENEFIT PLANS
The Company sponsors a 401K plan for all employees over the
age of 21 with 1,000 hours of service in the previous 12
months of employment. Employee contributions are matched
by the Company up to 3 percent of an employee's salary.
The Company's contributions totaled $129,518 in 1995,
$134,146 in 1994 and $147,879 in 1993.
(16) COSTS AND ESTIMATED EARNINGS ON CONTRACTS
[CAPTION]
<TABLE>
<S> <C> <C>
1995 1994
Costs incurred on uncompleted
contracts $ 39,745,046 $ 44,299,812
Costs incurred on completed
contracts 43,155,784 49,274,457
Estimated earnings 18,181,493 14,415,120
101,082,323 107,989,389
Less: Billings to date (98,386,738) (105,434,173)
$ 2,695,585 $ 2,555,216
</TABLE>
Included in the accompanying balance sheet under the following
captions:
[CAPTION]
<TABLE>
<S> <C> <C>
1995 1994
Costs in excess of billings
and estimated earnings $ 3,461,984 $ 2,611,494
Billings in excess of costs
and estimated earnings (766,399) (56,278)
$ 2,695,585 $ 2,555,216
</TABLE>
(17) COMMITMENTS AND CONTINGENCIES
The Company believes it is entitled to additional compensation
on a Florida construction project and is pursuing a claim of
approximately $3.2 million against the owner of the property.
In addition to its claim, the Company has an account receivable
of approximately $500,000 from the owner of the project. Costs
in excess of billings and estimated earnings amount to
approximately $1.0 million. This amount is included in the
Company's claim of $3.2 million. While the Company believes it
has a meritorious claim, there is no assurance the claim will be
settled on a basis favorable to the Company. The Company
recorded a loss of approximately $2.3 million on this contract
in 1993. No income or loss was recorded in 1995 or 1994.
In 1989, the Company entered into a new Life Insurance and
Salary Continuation Agreement with the President of the Company.
The agreement provides that should the President cease to be
employed by the Company as a result of disablement or death, the
Company shall pay an amount equal to his salary and bonus for a
period of five years to the President or his designated
beneficiary. The Company has not accrued for the salary
continuation over the expected remaining period of the
President's active employment as the agreement does not provide
for payment upon retirement; therefore, based on present facts
and circumstances, future payments, if any, are not determinable
at this date.
In June 1995, an employee of a subsidiary of the Company filed
a lawsuit against the Company for personal injuries resulting
from an accident in which the employee alleges to have operated
an improperly maintained piece of heavy equipment. The claim of
approximately $1.5 million is currently being defended by the
Company's insurance carrier, subject to a reservation of rights.
Management believes the claim is without merit and intends to
vigorously defend its position. While the final outcome of this
lawsuit cannot be determined with certainty, Company management
believes that the final outcome will not have a material adverse
effect on the Company's consolidated financial position.
The Company is involved in other litigation and claims arising
in the normal course of business. The Company believes that
such litigation and claims will be resolved without a material
effect on its financial condition or results of operations.
The Company is subject to certain Federal, state and local
environmental laws and regulations. Management believes that
the Company is in compliance with all such laws and regulations.
Compliance with environmental protection laws has not had a
material adverse impact on the Company's financial condition or
results of operations in the past and is not expected to have a
material adverse impact in the foreseeable future.
The Company is contingently liable to the Government of Antigua
and Barbuda in respect to obligations assumed by the purchaser
of a portion of the Company's interest in a joint venture.
(18) BUSINESS AND CREDIT CONCENTRATIONS
The Company's customers are concentrated in the Caribbean and
are primarily involved in the contracting industry. Credit risk
may be affected by the economic and political conditions in the
various countries in which the Company operates. Financial
instruments which potentially expose the Company to
concentrations of credit risk consist primarily of receivables
and costs in excess of billings and estimated earnings. No
single customer accounted for a significant amount of the
Company's sales in 1995, 1994 or 1993 and there are no
significant receivables from a single customer as of December
31, 1995 or 1994, other than the notes receivable due from the
Government of Antigua and Barbuda. Although receivables are
generally not collateralized, the Company may place liens or
their equivalent in certain jurisdictions in the event of non-
payment. The Company estimates an allowance for doubtful
accounts based on the creditworthiness of customers as well as
the general economic conditions of the countries in which it
operates. Consequently, an adverse change in these factors
would affect the Company's estimate of its bad debts.
Item 9. Changes in and Disagreements with Accountants on Account-
ing and Financial Disclosure.
The Company has had no changes in or disagreements with
its independent certified public accountants on
accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information with respect to the directors and
executive officers of the Company is incorporated by
reference to the Company's Proxy Statement to be filed
with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report.
Item 11. Executive Compensation.
The information required in response to this item is
incorporated by reference to the Company's Proxy
Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this
report. The information included in the proxy statement
pursuant to Rule 402(i), (k) and (l) is not incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required in response to this item is
incorporated by reference to the Company's Proxy
Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this
report.
Item 13. Certain Relationships and Related Transactions.
The information required in response to this item is
incorporated by reference to the Company's Proxy
Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this
report.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K.
(a) The following documents are filed as part of this
report:
(1) Financial Statements.
An index to financial statements for the year ended
December 31, 1995 appears on pages 22 and 51.
(2) Financial Statement Schedule.
The following financial statement schedules for each of
the years in the three year period ended December 31,
1995 are submitted herewith:
Form 10-K
(Page Number(s)
Item
Report of Independent Auditors
Financial Statement Schedule
Schedule II - Valuation and
Qualifying Accounts
All other financial schedules are omitted because they are not
required, inapplicable, or the information is otherwise shown in
the financial statements or notes thereto.
(3) Exhibits.
Exhibit Description
3.1 Registrant's Restated Articles of Incorporation (1)(3.1)
3.2 Registrant's Bylaws(2)(3.2)
10.1 Registrant's 1986 Non-Qualified Stock Option Plan
(3)(10.1)
10.2 Dredging, Filling and Other Land Improvements Agreement
by and between Jolly Harbour Ltd. (Vaduz, Liechtenstein),
Antigua Development and Construction, Limited, and the
Registrant(4)(10.1)
10.3 Registrant's 401(k) Retirement and Savings Plan (5)(10.3)
10.4 Life Insurance and Salary Continuation Agreement dated as
of March 29, 1989, between the Registrant and Donald L.
Smith, Jr.(5)(10.13)
10.5 Form of Indemnification Agreement between the Registrant,
and its directors and certain of its officers(6)(A)
10.6 St. John's Dredging and Deep Water Pier Construction
Agreement dated as of April 3, 1987, by and between
Antigua and Barbuda and Antigua Masonry Products, Limited
(the "St. Johns Agreement") (6)(10.1)
10.7 Amendment No. 1 to the St. John's Agreement dated June
15, 1988(7)(10.2)
10.8 Mortgage Note dated June 12, 1989 of Crown Bay Marina
Joint Venture-I to Banco Popular de Puerto Rico for
$5,000,000 (7)(10.5)
10.9 Guarantee dated June 12, 1989, from the Registrant to
Banco Popular de Puerto Rico(7)(10.6)
10.10 Lease dated October 31, 1989, between William G.
Clarenbach and Pricilla E. Clarenbach, as lessors, and
Controlled Concrete Products, Inc., as lessee (1)(10.26)
10.11 Lease dated April, 18, 1988, between Jeanne Pacquette,
Jennifer Pacquette, and Siewdath Sookram, as lessors, and
the Registrant, as lessee(1)(10.27)
10.12 Lease dated April 13, 1981, between Mariano Lima and
Genevieve Lima, as lessors, and the Registrant, as
lessee(1)(10.28)
10.13 Lease dated May 23, 1983, between the Government of the
Virgin Islands, as lessor, and Controlled Concrete
Products, Inc. as lessee(1)(10.29)
10.14 Lease dated February 24, 1989, between Felix Pitterson,
as lessor, and V.I. Cement and Building Products, Inc.,
as lessee(1)(10.30)
10.15 Lease dated September 1, 1989, between Donald L. Smith,
Jr., as lessor, and the Registrant, as lessee(1)(10.31)
10.16 Lease dated September 12, 1966, between His Honour Hugh
Burrowes, a Commander of the British Empire of Government
House in the Island of Antigua, as lessor, and The
Antigua Sand and Aggregate Limited, as lessee(1)(10.32)
10.17 Stock Purchase Agreement, dated April 18, 1990, by and
between B.B.W. Holding Corporation Limited ("BBW
Holding") and Proar Construction Materials Company N.V.
("Proar Construction") (9)(2.1)
10.18 Incentive Agreement, dated April 18, 1990, by and among
BBW Holding, Proar Construction, Bouwbedrijf Boven Winden
N.V., Cramer Construction N.V. and Caribbean Heavy
Construction Company Limited (9)(28.1)
10.19 Agreement, dated April 18, 1990, by and between Mr.
Richard Lawrence, Sr. and the Registrant (9)(28.2)
10.20 Agreement, dated October 31, 1990, by and between Tortola
Concrete Products, Limited "Tortola"), and Devcon Masonry
Products (BVI) Limited ("Devcon Masonry (BVI)") (10)
(10.37)
10.21 Consulting Agreement, dated October 31, 1990, by and
between Tortola and Devcon Masonry (BVI)(10)(10.38)
10.22 Amendment No. 2 to the St. John's Agreement dated
December 7, 1988 (11) (10.34)
10.23 Amendment No. 3 to the St. John's Agreement dated January
23, 1989 (11) (10.35)
10.24 Amendment No. 4 to the St. John's Agreement dated April
5, 1989 (11) (10.36)
10.25 Amendment No. 5 to the St. John's Agreement dated January
29, 1991 (11) (10.37)
10.26 Loan Agreement dated November 19, 1991 between V.I.
Cement and Building Products, Inc. ("VI Cement"), the
Registrant, Mark 21 Industries, Inc. ("Mark 21"), Masonry
Products V.I. Corporation ("Masonry Products") and
Corestates First Pennsylvania Bank ("Corestates") (11)
(10.39)
10.27 Promissory Note, dated November 19, 1991 of V.I. Cement
to Corestates for $2,000,000 (11) (10.40)
10.28 Guaranty dated November 19, 1991 of the Registrant, Mark
21 and Masonry Products to Corestates (11) (10.41)
10.29 Registrant's 1992 Stock Option Plan (12)(A)
10.30 Registrant's 1992 Directors' Stock Option Plan (12)(B)
10.31 Notes receivable from Red Pond Estates, N.V. in the
principal sums of $242,516, $139,478 and $167,740,
respectively (13) (10.41)
10.32 Amendment No. 6 to the St. Johns Agreement dated November
30, 1993 (14) (10.39)
10.33 Loan agreement, dated November 1, 1993, between Caribbean
Cement Carriers, Ltd. and First National Bank of Maryland
(14) (10.43)
10.34 Loan agreement, dated June 30, 1993, between the
Registrant and Barnett Bank of South Florida (14) (10.44)
10.35 Loan agreement, dated September 15, 1993, between Antigua
Masonry Products, Ltd. and Barnett Bank of South Florida
(14) (10.45)
10.36 Loan agreement, dated January 15, 1993, between V. I.
Cement and Building Products, Inc. and CoreStates First
Pennsylvania Bank (14) (10.48)
10.37 Second Amended and Restated Partnership Agreement of
International Perlite partners, S.C. (15) (10.38)
10.38 Limited Partnership Agreement of International Perlite
Partners, L.P. (15) (10.39)
10.39 Second Amendment to Loan Agreement and Amendment to
Promissory Note between the Registrant and Barnett Bank
of Broward County, N.A. (15) (10.40)
10.40 Second Amendment to Loan Agreement and Amendment to
Promissory Note between the Registrant, Antigua Masonry
Products, Ltd. and Barnett Bank of Broward County, N.A.
(15) (10.41)
10.41 Material Purchase Agreement, dated August 17, 1995,
between Bouwbedrijf Boven Winden, N.V. and Hubert Petit,
Francois Petit and Michel Petit (16)
10.42 Stock Purchase Agreement, dated August 17, 1995, between
the Registrant and Hubert Petit, Francois Petit and
Michel Petit (16)
22.1 Registrant's Subsidiaries (16)
24.1 Consent of KPMG Peat Marwick (16)
(1) Incorporated by reference to the exhibit shown in
parenthesis and filed with the Registrant's Registration
statement on Form S-2 (No. 33-31107).
(2) Incorporated by reference to the exhibit shown in the
parenthesis and filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1989.
(3) Incorporated by reference to the exhibit shown in the
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987 (the
"1987 10-K").
(4) Incorporated by reference to the exhibit shown in the
parenthesis and filed with the Registrant's Form 8 dated
July 14, 1988 to the 1987 10-K.
(5) Incorporated by reference to the exhibit shown in the
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1988 (the
"1988 10-K").
(6) Incorporated by reference to the exhibit shown in paren-
thesis and filed with the Registrant's Proxy Statement
dated May 30, 1989.
(7) Incorporated by reference to the exhibit shown in
parenthesis and filed with the Registrant's Form 8 dated
August 17, 1989 to the 1988 10-K.
(8) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1989.
(9) Incorporated by reference to the exhibit shown in
parenthesis and filed with Registrant's Current Report on
Form 8-K dated May 2, 1990.
(10) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1990.
(11) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991.
(12) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Proxy
Statement dated May 6, 1992.
(13) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.
(14) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.
(15) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994.
(16) Filed herewith.
Management employee contracts, compensatory plans and other
arrangements included as part of the exhibits referred to above are
as follows:
10.1 Registrant's 1986 Non Qualified Stock Option Plan (3)
10.3 Registrant's 401(k) Retirement and Savings Plan (5)
(10.3)
10.4 Life Insurance and Salary Continuation Agreement dated as
of March 29, 1989, between the Registrant and Donald L.
Smith, Jr.(5)(10.13)
10.29 Registrant's 1992 Stock Option Plan (12) (A)
10.30 Registrant's 1992 Directors' Stock Option Plan (12) (B)
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed by the Registrant during the last
quarter of the period covered by this report.
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, there-
unto duly authorized.
March 27, 1996 DEVCON INTERNATIONAL CORP.
By:/s/Donald L. Smith, Jr.
Donald L. Smith, Jr.
Chairman, President and
Chief Executive Officer
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 and on the dates
indicated.
DEVCON INTERNATIONAL CORP.
March 27, 1996 By:/s/Donald L. Smith, Jr.
Donald L. Smith, Jr.
Chairman, President and
Chief Executive Officer
March 27, 1996 By:/s/Richard L. Hornsby
Richard L. Hornsby
Executive Vice President
and Director
March 27, 1996 By:/s/Walter B. Barrett
Walter B. Barrett
Vice President of Finance,
Chief Financial Officer and
Treasurer
March 27, 1996 By:/s/Robert A. Steele
Robert A. Steele
Director
March 27, 1996 By: /s/Robert L. Kester
Robert L. Kester
Director
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
[CAPTION]
<TABLE>
<S> <C> <C>
Allowance for Doubtful Balance at Additions
Accounts for the Year Beginning Charged to
Ended December 31, of Year Expense
1993 $5,170,915 $ 690,642
1994 $4,126,402 $ 300,000
1995 $2,669,086 $ 301,510
(continued)
<S> <C> <C>
Allowance for Doubtful Balance
Accounts for the Year at End
Ended December 31, Deductions of Year
1993 $(1,735,155) $4,126,402
1994 $(1,757,316) $2,669,086
1995 $ (514,195) $2,456,401
</TABLE>
ACCOUNTANT'S CONSENT
The Board of Directors
Devcon International Corp. and Subsidiaries
We consent to incorporation by reference in the registration
statements (No. 33-32968 and No. 33-59557) on Form S-8 and (No. 33-
65235) on Form S-3 of Devcon International Corp. and subsidiaries
of our report dated March 27, 1996, relating to the consolidated
balance sheets of Devcon International Corp. and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1995, and the
related schedule, which report appears in the December 31, 1995
annual report on Form 10-K of Devcon International Corp. and
Subsidiaries. As discussed in note 1(j) to the consolidated
financial statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," in
1993.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 27, 1996
EXHIBIT 10.41
PROTOCOL
BETWEEN:
- - Hubert Petit, residing at Marigot 97150 - Saint-Martin
F.W.I.
- - Francois Petit, his son, residing at Simpson Bay Sint-
Maarten
- - Michel Petit, his son, residing at Sandy-Ground at
Anguilla
hereinafter collectively, the PETIT,
as party of the first part,
AND:
BOUWVEDRIJF BOVEN WINDEN, N.V. (BBW)
with registered office at P.O. Box 2050
Juliana Airport - Sint Maarten
duly represented hereof by Mr. Kevin M. Smith
according to a power of attorney granted to him by BBW's Management
Committee,
the said power of attorney authorizing him to engage BBW and if
not, appointing him as having usurped said powers,
as a party of the second part
WHEREAS:
- - The PETIT are the owners of a property located at
Esperance - Carata and Hope Hill, French part of Saint
Martin (F.W.I.) surveyed and registered as section AR and
BD;
- - This property contains materials (stone and sand) in its
soil as both parties, the PETIT and BBW, have verified
and
recognize.
AFTER HAVING RECALLED THIS, IT IS NOW HEREBY AGREED:
1) The PETIT sell to BBW, or to any other individual or
entity elected by BBW, a quantity of 12,850,000 tons of
materials, in situ, said materials being stones, sand and
direct materials.
At the request of BBW for stone extraction, the Petit
undertake to furnish to BBW, or to any other individual
or entity elected by BBW, the adequate authorizations
necessary for BBW to request the authorizations to
extract.
2) This sale will occur during a period of 15 years starting
as of the execution hereof.
BBW will take care of the use of the materials without
being entitled to engage the Petit's liability in this
respect.
3) If, for administrative reasons, BBW could not be provided
with the agreed quantity for 12,850,000 tons during the
period provided for in article 2, said period of 15 years
would be extended for a duration equivalent to the
duration of the stoppage.
During the stoppage, the performance of this agreement
will be suspended as well as the payments set forth in
article 4 and BBW shall be entitled to terminate this
agreement.
However, the duration as provided for under article 2
hereof could not exceed 20 years starting as of the
execution hereof.
4) The parties agree that BBW will pay to the PETIT the
amount of US 12,850,000 for the 12,850,000 tons of
material (sand and stones) extracted from the property
hereabove described.
The payment will occur according to the following time
schedule:
February 1, 1996. . . . . . . . . . . . . . . . $ 287,500
May 1, 1996 . . . . . . . . . . . . . . . . . . $ 287,500
August 1, 1996. . . . . . . . . . . . . . . . . $ 575,000
February 1, 1997. . . . . . . . . . . . . . . . $ 137,500
May 1, 1997 . . . . . . . . . . . . . . . . . . $ 137,500
August 1, 1997. . . . . . . . . . . . . . . . . $ 137,500
November 1, 1997. . . . . . . . . . . . . . . . $ 137,500
Quarterly installments. . . . . . . . . . . . . $7,150,000
($137,500 on the first day of February, May,
August and November for 13 years from
1998 until 2010).
The last installment will occur at the end of
the 15th year . . . . . . . . . . . . . . . . . $4,000,000
TOTAL . . . . . . $12,850,000
5) The present agreement will be terminated:
- either, where BBW would not satisfy one of these
installments within 30 days, after the due date;
However, if BBW wishes to extend such 30 day period, it
shall obtain a written agreement for the PETIT before the
30 day has elapsed.
- of after 5 years as of the execution hereof if BBW so
wishes.
6) At the end of the 15-year period, provided under article 2
hereof or at the end of this period extended by the periods
provided for under article 3, BBW or any other individual or
entity elected by BBW is granted a purchase option on the
property hereabove mentioned for a price of USD 400,000.
This option will have to be exercised by BBW within 6 months
as of the expiration of the hereabove period and after all
conditions of the agreement of sale of materials have been
complied with.
7) During the duration hereof, the PETIT undertake not to
directly or indirectly carry on a competing professional
activity or an activity which could harm BBW's professional
interests in Saint Martin or Saint Maarten.
8) As a warranty, the PETIT represent subject to annulment
hereof:
- that they have all powers and authority to establish and
warrant the present agreement:
- that they are the owners of the 50 hectares property
hereabove mentioned and they prove it;
- that no third party has any right or authorization for
any professional or commercial activity on this property;
- that no individual or legal entity other than BBW has any
right or authorization for being entitled to the
12,850,000 tons of materials extracted from the property.
9) Indemnification
BBW agrees to indemnify and hold the Petit harmless from any
damages that they will suffer from BBW's violation of the
agreement hereof.
The PETIT agree to indemnify and hold BBW harmless from any
and all losses or damages including, without limitation,
taxes, interest indemnification, penalties, reasonable fees
and other related expenses of BBW as a result of or arising
from, any breach or inaccuracy or omission of any represen-
tation, warranty or covenant of the PETIT in this agreement or
in any document, certificate or other instrument related
thereto.
10) BBW is entitled to appoint, in its place and stead, any
individual or entity of its choice in order to proceed with
the performance hereof in all respects, subject to it
remaining liable as co-debtor jointly in respect of all the
commitments provided herein.
All rights and obligations stipulated herein shall inure to be
and be binding actively and passively on the heirs, successors
and assigns of each of the parties of the first part, whether
minors or subject to any other incapacity, jointly and
indivisibly, among themselves and with the other parties of
the first part.
The validity, construction and enforceability of this
agreement shall be governed by the laws of the Republic of
France.
This agreement may not be amended, except by an instrument in
writing signed by each of the parties hereto.
The present agreement may be filed on the record of a notary
of BBW's choice, ("depot au rang des minutes") if BBW so
wishes.
11) A sample of the plan of the property is attached hereto.
12) The expenses and fees for the drafting of this agreement shall
be borne by the Petit. The expenses in connection with the
registration shall be borne by BBW and said registration will
be achieved by SCP F. HERMANTIN F. KACY-BAMBUCK.
13) In case of dispute, the parties elect the Tribunal de Grande
Instance of Basse Terre.
14) The agreement hereof is drafted in three counterparts, one of
which for registration.
Done at Saint Martin, on July 31, 1995
BBW
By:
H. Petit Kevin M. Smith, gerant
F. Petit
M. Petit
EXHIBIT 10.42
STOCK PURCHASE AGREEMENT
BETWEEN THE UNDERSIGNED:
Mr. Hubert Petit, a French citizen, born in Saint Martin on
September 4, 1926, unremarried widow of Mrs. Claudine Genevieve
Leroy, living at Saint Martin Marigot;
Mr. Francois Petit, a French citizen, born in Montfermeil (Seine et
Oise) on November 7, 1953, single, living at Saint Martin Marigot;
Mr. Michel Petit, a French citizen, born in Paris on February 9,
1950, divorced in a first marriage and unremarried from Mrs. Edwina
Brooke, living at Saint Martin Marigot;
(Messrs. Hubert Petit, Francois Petit and Michel Petit are
hereinafter collectively referred to as the "Sellers" acting
jointly and severally for the purposes hereof);
AND
The company Devcon International Corp., company of the State of
Florida of the United States of America, with registered office
located at 1350 E. Newport Center Drive, Suite 201, Deerfield
Beach, Florida 33442, duly represented by Richard Hornsby who is
duly empowered for the purposes hereof (hereinafter, the
"Purchaser").
WHEREAS:
Whereas, the Sellers own all of the issued and outstanding shares
of the capital stock of a French company, Societe des Carrieres de
Grand-Case, S.A.R.L. ("Societe"). Societe is a company with
limited liability with a registered share capital of FF 700,000,
and headquarters located at Route du Fort Saint Louis Marigot, 97
150 Saint-Martin (France), registered with the registry of commerce
and companies of Basse-Terre, under the number B 319 179 248.
Whereas, Societe engages in the following businesses: the mining,
manufacture and sale of ready-mix concrete, concrete block and
aggregate (hereinafter, the "Businesses").
Whereas the Sellers, owners of land being used as a quarry, have
and must enter into before the date of fulfillment of the
conditions precedent with Societe, two lease agreements with a
right to extract, one concerning an area of 2 hectares for which no
prefectoral authorization has been granted, the other concerning an
area of 1 hectare for which a quarry exploitation authorization has
been granted by the Prefecture of Guadeloupe on May 30, 1988 for a
duration to expire on May 30, 1998.
Whereas the Sellers desire to sell and Purchaser desires to
purchase all of the shares of the capital stock of Societe, all of
which are owned by the Sellers (the "Shares"), upon the modalities,
terms and conditions herein set forth.
NOW THEREFORE THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:
1. SALE OF SHARES
1.1 SALE OF SHARES
Upon the terms and conditions of this agreement and in
accordance with the present agreement and pursuant to
the conditions of article 3 herebelow, the Sellers sell
to the Purchaser, and the Purchaser agrees to purchase
all of the Shares. The number of Shares being sold by
each Seller are set forth on SCHEDULE 1.1 hereto.
1.2 PURCHASE PRICE
The sale hereof is agreed upon and accepted in
consideration of a purchase price for all the Share One
Million Dollars ($1,000,000) (the "Purchase Price")
payable at the date of fulfillment of conditions
precedent (as defined in Section 2 herebelow).
1.3 FINANCING SITUATION OF SOCIETE AT THE DATE OF
FULFILLMENT OF THE CONDITIONS PRECEDENT
The accounts of Societe at the date of fulfillment of
the conditions precedent will reflect claims which
amount will be at least equivalent to the whole amount
of the Societe due liabilities.
Sellers shall remit to Purchaser, within ten days
following the date of fulfillment of the conditions
precedent, a balance sheet and an income statement of
Societe at the date of fulfillment of the conditions
precedent reflecting strictly the financial situation
hereabove described. The balance sheet and income
statement shall be certified exact and sincere by the
account firm . In the
case where the Financial Statements at the date of
fulfillment of the conditions precedent would show some
due liabilities which amount would not be covered by
the amount of the claims, the Sellers undertake to
repay forthwith these liabilities to Societe or to
Purchaser.
2. DATE OF FULFILLMENT OF THE CONDITIONS PRECEDENT
The instrument stating the fulfillment of the conditions
precedent shall be established by the most diligent party at
the notarial office of Eugene and Michel Desgranges located at
Baie-Mahault, Jarry Houelbourg (Guadeloupe) on August 1995
subject to the provisions of the second phrase of article 3.1
hereunder, or at such other place, date and time as Purchaser
and the Representative of Sellers may mutually agree.
3. CONDITIONS PRECEDENT TO CLOSING AND COMMITMENTS ESSENTIAL TO
THE OBLIGATIONS OF THE PARTIES
3.1 CONDITIONS PRECEDENT
This sale hereof shall be subject to the fulfillment of
the following condition precedent, at the latest on
, 1995.
No negative reply from the French Treasury
Department to the prior application of
acquisition that shall have been sent to it by
the Purchaser pursuant to the regulations
relating to foreign investments in France, shall
have been notified to the Purchaser within 15
days of the receipt by the said Treasury
Department of such prior applications; or Societe
shall have received explicit and unconditional
approval without any reserve from the French
Treasury Department within 90 days of the date
hereof, in the event that within 15 days of
receipt of the prior application of acquisition
by the French Treasury Department, said Treasury
Department shall have issued an adjournment
decision. In this latter case, the parties shall
use their best efforts to obtain the said
approval and each party shall consult the other
prior to taking any action with a view to
obtaining such approval and whenever possible,
shall associate the other party in such action.
In the event that the above condition precedent is not
fulfilled within the time limits provided for its
fulfillment or such other time limit accepted by joint
agreement of the parties, each of the parties shall
recover its entire freedom without any obligation as
regards the other and without any obligation to give
indemnity to the other.
3.2 COMMITMENTS ESSENTIAL TO OBLIGATIONS OF PURCHASER
The following commitments and obligations of the
Sellers are essential to the Purchaser's consent to its
obligations and commitments under this Agreement and,
consequently, are conditions to the validity of this
Agreement. Should any of these commitments and
obligations not be achieved, the present agreement
would not be perfected.
(a) REPRESENTATIONS AND WARRANTIES TRUE
The representations and warranties of Sellers
contained in Article 5 below are correct in all
respects and will so be on the date of
fulfillment of the conditions precedent, with the
same effect as though such representations and
warranties had been made on and as of such date.
(b) ABSENCE OF CERTAIN CHANGES OR EVENTS
There shall have been no material adverse change
in, or fact or event likely to have such an
adverse material effect on, the financial
condition, results or operations, business or
prospects of Societe since December 31, 1994.
(c) COVENANTS PERFORMED
The covenants of Sellers to be performed on or
before the date of fulfillment of the conditions
precedent pursuant to the terms of this Agreement
shall have been duly performed, in particular,
those taken in connection with the restructuring
set forth under article 1.3 hereinabove.
(d) RESIGNATIONS
Purchaser shall have received, at the latest on
the date of fulfillment of the conditions
precedent, resignations of the managing director
of Societe.
(e) LEASE
Societe and Sellers shall have modified by
covenant a form of which is attached hereto as
SCHEDULE 3.2, the current lease including a right
to extract dated October 15, 1980 and concluded
a
lease including a right to extract on the area of
1 hectare which has been granted a quarry
exploitation authorization delivered by the
Prefecture of Guadeloupe on May 30, 1988.
3.3 COMMITMENTS ESSENTIAL TO OBLIGATIONS OF SELLERS
The following commitments and obligations of the
Purchaser are essential to the Seller's consent to
their obligations and commitments under this Agreement
and, consequently, are conditions to the validity of
this Agreement. Should any of these commitments and
obligations not be achieved, the present agreement
would not be perfected:
(a) REPRESENTATIONS AND WARRANTIES TRUE
The representations and warranties of Purchaser
contained in article 6 below are correct in all
respects and will so be as of the date of the
fulfillment of the conditions precedent, with the
same effect as though such representations and
warranties had been made on and as of such date.
(b) COVENANTS PERFORMED
The eventual covenants of Purchaser to be
performed on or before the date of the
fulfillment of the conditions precedent pursuant
to the terms of this Agreement shall have been
duly performed.
4. DOCUMENTS DELIVERED [DELIVERIES AT CLOSING]
a) Sellers or their counsel have delivered the following
to Purchaser which acknowledges the same:
i) a copy of k.bis excerpt and Societe's by-laws,
both of which are to be certified by Societe's
manager ("gerant") as conforming with the
original and being updated, at the date of
fulfillment of the conditions precedent;
ii) a resignation letter, subject to the condition
that the present sale is perfected, of Societe's
Manager ("gerant") which shall be without
indemnity;
iii) a certified copy of the resolution of Societe's
partners' general meeting approving, in
accordance with article 45 of the French company
Law dated July 24, 1966, the present sale of
shares as well as the Purchaser as transferee of
the Shares;
b) At the signature of the instrument stating the
fulfillment of the conditions precedent, the Purchaser
shall remit the Purchase Price as agreed under article
1.2 hereabove to the Sellers. The Purchase Price shall
be paid by bank cashier's check or by transmission of
funds by bank wire transfer to the specified bank
account designated by the Representative of the
Sellers;
5. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant that each of the following
representations and warranties is accurate, complete and
precise, without any reserve or exception other than those
mentioned in this article, and determining in Purchaser's
consent to enter into the agreement hereof;
5.1 CORPORATION ORGANIZATION
Societe is a corporation duly constituted. Societe has
the corporate power and all authority to own or lease
all of its properties and assets. Societe's by-laws,
of which a certified copy conforming to the original is
attached hereto as SCHEDULE 5.1, as well as the
functioning of Societe's corporate bodies, comply with
the regulations in effect. The Businesses are not
conducted by any other persons or entities other than
Societe. Furthermore, as of the date hereof and in the
past, no receiver has been appointed to administer all
or part of the assets of Societe. No request, petition
or declaration has been made with a view to an amicable
arrangement, a bankruptcy proceeding or judicial
liquidation of Societe or with a view to any equivalent
procedure. Societe has not ceased making payments to
its creditors and is not insolvent or incapable of
paying its debts. No as-yet unenforced judgment can be
invoked against Societe.
5.2. CAPITALIZATION; SHARE OWNERSHIP
The share capital of Societe consist of 700 shares, par
value FF 1,000 per share. All the Shares are owned as
of the date hereof by the Sellers as set forth on
Schedule 1.1 hereto and at the date of fulfillment of
the conditions precedent, Sellers shall own all right,
title and interest in, and have full authority to sell
and transfer good title to, the Shares. At the date of
fulfillment of the conditions precedent, the Purchaser
shall receive good title to the Shares, free and clear
of any and all liens, claims, security interests,
charges or encumbrances, of any kind or value
whatsoever. All Shares have been legally issued, duly
authorized and are fully paid and are not subject to
and will not be subject to the preemptive or similar
rights of any person. All taxes due with respect to
the issuance and the possible subsequent transfer of
such Shares have been paid.
There is no agreement or commitment in effect which has
been signed with a view to allocate to, issue to the
benefit of, or grant to any person whatsoever the right
to an allocation or an issuance of shares or to
exercising the voting rights of the Shares.
5.3. AUTHORITY AND POWER
Each of the Sellers has full power and authority to
enter into and perform this agreement which constitutes
the valid and binding obligations of each of them.
All rights and obligations stipulated herein will bind
actively and passive the heirs, successors or
beneficiaries of the Sellers, whether the persons are
minors or incapable, jointly and severally with the
other Sellers and between themselves.
5.4. NO VIOLATION
The conclusion and performance of this Agreement by the
Sellers are not contrary to i) any of the stipulations
of the Societe's by-laws, ii) any laws, customs,
regulations or judicial decision whatsoever applicable
to any of the Sellers and/or Societe or any of their
assets. The conclusion and performance of this
Agreement by the Sellers are not contrary to any of
their and/or Societe's commitments and will not result
in unfavorable consequences to Societe and/or Purchaser
such as the anticipated payability of sums of money or
the modification, termination or cancellation of any
agreement entered into by Societe.
5.5 FINANCIAL STATEMENTS
SCHEDULE 5.5 hereto set forth the financial statements
(balance sheet, income statement and Annex) of Societe
as of December 31, 1992, 1993 and 1994 (collectively
the "Financial Statements"). The Financial Statements
have been prepared in accordance with the applicable
regulations, are straight and sincere and given a true
and fair view of the financial situation and results of
Societe and comply with the principles and standards
customarily adopted in France, in particular the 1982
General Chart of Accounts. The accounting books and
other records of Societe have been, and are being,
maintained and updated in all material respects in
accordance with applicable rules and are in its
possession. Such books and records contain accurate
and in all respects significant data according to
principles generally accepted. They relate to all of
the operations to which Societe was or is a party to.
All acts, corporate records and other documents
evidencing Societe's ownership of assets and all copies
duly executed of all the agreements in effect entered
into by Societe are effectively held by it.
5.6. ABSENT OF CERTAIN CHANGES OR EVENTS
Since December 31, 1994, which is the date of the last
Financial Statements, there has not been:
- any change affecting or liable to affect the
business, operations, assets, liabilities,
financial condition, prospects of Societe from
that described in the Financial Statements;
- no damage, destruction or loss (whether or not
covered by insurance) affecting or liable to
affect any of the foregoing;
- no disposition of Societe's assets except in the
ordinary course of business;
- no change in the accounting methods and
practices;
- no social disorder, strike or other circumstances
relating to Societe's social climate.
Except as set forth on SCHEDULE 5.6, each of the
Sellers and Societe have complied since December 14,
1994 with the covenants applicable in the first phrase
of Section 7.1.
5.7. LEGAL AND OTHER PROCEEDINGS
Except as set forth on SCHEDULE 5.7, Societe is not
currently a party to, whether as claimant or defendant,
any legal, administrative (of a jurisdictional nature
or otherwise), arbitration or other proceedings. No
employee or manager of Societe is sued criminally for
acts relating to Societe's activities. There is no
current claim, civil, administrative (of a
jurisdictional nature or otherwise) or criminal
proceedings against or envisioned against Societe, and
there is no reasonable basis for any of the foregoing.
Neither any of the Sellers nor Societe is a party to
any order, judgment or decree which will or is likely
to affect the business, operations, properties, assets
or financial condition of Societe. Except as set forth
on SCHEDULE 5.7; neither any of the Sellers nor Societe
is a party or subject to any action that would or could
prevent the performance in any material respect of this
Agreement. Except as set forth on SCHEDULE 5.7,
Societe is not a party to or subject to any enforcement
action whether judicial, administrative or of whatever
nature, or to any agreement or memorandum of
understanding or similar document with any judicial,
governmental or other authority restricting its
operations or requiring that actions be taken and; no
such action, memorandum order is likely to occur.
Neither any of the Sellers nor Societe has received any
injunction, report or notice from any judicial,
governmental or other authority which requires that
Societe address any material problem or take any
material action which has not already been addressed or
taken in a manner satisfactory to such judicial,
governmental or other authority.
5.8. UNDISCLOSED LIABILITIES
As of the date of fulfillment of the conditions
precedent, Societe will have no indebtedness,
obligation, liability or commitment (contingent or
otherwise) except those reflected in the Financial
Statements at the date of fulfillment of the conditions
precedent nor does there exist any event or
circumstance resulting in particular from transactions
effected or actions occurring prior to the date of
fulfillment of the conditions precedent that could
reasonably be expected to result in any indebtedness,
obligations, liabilities or commitments of Societe.
5.9. TAX MATTERS
Societe has duly and within the legal period of time,
effected all and provided to any relevant authorities
any information requested by virtue of the tax
regulations. Such returns are accurate and complete in
all respects. Societe has duly paid all taxes,
assessments, fees, penalties, interest and other
governmental charges whatsoever owed by it. There are
no tax liens of any kind or nature upon the properties
or assets of Societe and there is no pending tax
authorities's audit, request of information whatsoever
or pending litigation. All prior audits have been
concluded and resolved definitely and Societe has not
requested any extension of statutory period of
limitation applicable to any tax or para-tax return.
No tax authorities audit or request for information
whatsoever would disclose incomes which would not have
been properly declared by Societe.
All social security contributions payable or due by
Societe have been paid at the proper time (or reserves
have been made therefor) and all returns required under
the regulations have been filed on time and are sincere
and true. Societe has provided all information
required. No social authorities audit is in progress,
no request for information has been made and, to the
knowledge of the Sellers, no such claim is likely to be
made.
All instruments granting any rights whatsoever to
Societe subject to stamp duty or registration tax have
been properly stamped or registered in accordance with
applicable tax regulations.
5.10. PROPERTY - TITLE AND LEASES
SCHEDULE 5.10 contains a complete and accurate list of
all real property and personal property owned or leased
by Societe specifying for each item its exact nature
and if it is owned, leased or otherwise held. All of
the lease agreements, commercial lease or leasing are
listed in SCHEDULE 5.10. Except as set forth on
SCHEDULE 5.10, Societe has good, valid and marketable
title, free and clear of any and all liens, easements,
security interests, claims, encumbrances, charges or
other limitations, including any restriction to the
right of disposal. All buildings, equipment and other
property held under leases or subleases by Societe are
held under valid instruments enforceable in accordance
with their terms and Societe has complied with all
obligations thereunder. All operating facilities,
buildings, furniture, equipment and other tangible
property owned or used by Societe are in a good
condition. Such properties and all fixtures and
improvements and the use thereof, conform in all
respects with all regulations which are applicable to
them, in particular the applicable building, zoning,
environmental and other rules, and do not materially
encroach in any respect on property of others.
There exists no covenant, restriction or stipulation,
agreed to by Societe which would conflict with the use
or affect the value of the real property. All required
administrative authorizations have been obtained for
the occupancy and use of the buildings and for all work
carried out in the real property; they are effective
and in full effect; valid and final certificates of
compliance have been issued in respect of such work
undertaken in the buildings; there exists no notice
currently in force against Societe served by any
competent authority and instancing any breach of any
provision under the Town Planning Code or Building and
Housing Code or under any other laws, regulations
(including local or municipal regulations) or
ordinances concerning real property or the use thereof.
No action, claim or demand in connection with the real
property is pending and no notice of any such action,
claim or demand has been or is likely to be given or
received.
5.11. CONTRACTS
SCHEDULE 5.11 sets forth a list of all agreements and
other commitments to which Societe is a party or by
which Societe is bound including contracts or purchase
order to sell ready-mix concrete, concrete block,
paving stones and aggregate. No commitment entered
into by Societe exists whose conditions would be
abnormal. As of the date hereof, except for this
Agreement and agreements described in SCHEDULE 5.11,
Societe is not a party to or bound by any agreement or
commitment. Societe is not in default in any respect
under its by-laws or, to the best of any of the
Sellers' knowledge, under any contract, agreement or
commitment or other instrument to which it is a party
or by which any of its assets, business or operations
may be bound or affected and, in particular, the
contract relating to the excavator Liebherr 962. To
the knowledge of the Sellers, no event or omission has
occurred entitling a third party to demand accelerated
payment or to proceed with early termination of any
contract to which Societe is a party. Societe has not
provided services which were not, or are not
satisfactory or which breached any stipulated
representation or warranty or condition. The Sellers
are not aware of any event capable of leading to an
action for damages for breach of any contract or
obligation whatsoever. Societe has not received notice
or special information leading it to understand that
prior to the date of execution hereof any major
customer or supplier of Societe intended to cease or
materially reduce its operations. The transfer of the
Shares to the Purchaser is snot liable to affect
Societe's relations with third parties.
The Purchaser has been informed that the following
inventory remains on the site and does not belong any
longer to Societe and shall be loaded on trucks:
-25,000 CM of material belonging to SEMSAMAR;
-400 CM of stone belonging to SDL.
5.12. COMPLIANCE WITH APPLICABLE LAW
Neither Societe nor any oft the Sellers has received
any notice of non compliance with the necessary
authorizations to exercise its activities. The
authorizations and permits of Societe are enforceable
vis-a-vis third parties and are not likely to be
challenged and have been performed pursuant to their
terms.
5.13. EMPLOYEES AND EMPLOYEE BENEFIT PLANS
Except as set forth on SCHEDULE 5.13, Societe is not a
party to any employment agreement containing stock
option, stock purchase, deferred compensation, bonus,
percentage compensation, profit sharing, service award,
severance payment higher than those computed by
application of the Collective Bargaining Agreement or
any other arrangement, whether verbal or written. All
contributions payable and due to Societe in respect of
the benefits referred to in SCHEDULE 5.13 have been
duly paid.
The employment contracts listed in SCHEDULE 5.13 BIS do
not contain any provision which would be contrary to
French Labor Law and/or rules other than those
resulting from the Collective Bargaining Agreement and
Company Agreements listed in SCHEDULE 5.13BIS. No
amount is owed to any person presently or formerly
employed by Societe by virtue of his employment
contract, other than remuneration rights accumulated
but not yet payable or reimbursement of business
expenses duly evidenced. Societe has not effected or
agreed to effect any payments whatsoever to one of its
employees, presently or formerly employed by it, which
would not be tax deductible.
Except where a provision would have been entered ins
the Financial Statements in this respect, Societe has
not incurred any liabilities in respect of breach of
any contract or in respect of, in particular, severance
indemnities with the exception, however, of a pending
litigation before the labor courts of which Sellers
expressly undertake to personally and jointly assume
the consequences, and in the case of condemnation of
Societe, pay all accessory indemnities and related
expenses. Societe has not entered into any contract
still in force providing for any ex gratia payment to
be made in the event of dismissal or suspension or
variance of the terms of the employment contract of any
current or former employee. Societe has at all times
observed all applicable enactments in the field of
labor law, social security law, hygiene and safety
regulations and all other regulations concerning staff
employment.
5.14. INSURANCE
Societe is properly and validly insured and the
insurance policies set forth adequate coverage and
complete coverage of the risks of liability. SCHEDULE
5.14 contains a complete and correct list of all
insurance policies maintained in effect on the date
hereof by Societe. All premiums due on such policies
have been paid and all such policies are enforceable
and in full force and effect, none are cancelable for
non-disclosure of the insured party of an act, omission
or absence of disclosure. Societe has not received any
notice of premium increases.
5.15. INTANGIBLE PERSONAL PROPERTY
SCHEDULE 5.15 contains a true, correct and complete
list of all franchises, patents, trademarks, trade or
corporate names and licenses (collectively, "Intangible
Rights") which are owned or used by Societe. The
Intangible Rights have been duly registered, filed and,
as the case may be, renewed within the required legal
period of time; none are subject to abandonment.
Except as set forth in SCHEDULE 5.15, Societe is the
sole and exclusive owner of, and has the unrestricted
right to use, each of the copyrights and industrial
rights set forth on SCHEDULE 5.15. No claims or
demands whatsoever have been asserted against Societe
with respect to any of the Intangible Rights and no
proceedings have been instituted, are pending or, to
the knowledge of Sellers, are likely to be threatened
which challenge the rights of Societe with respect
thereto.
None of the processes utilized by Societe infringes any
third party intellectual property or requires the use
of any third party confidential information.
5.16. AFFILIATE TRANSACTIONS
Societe has no obligations or commitments existing on
the date hereof to or from any partner, manager or
employee of Societe or any member of their respective
families or to or from any other legal entity of which
one of the persons hereabove mentioned has control or
is associated.
5.17. NO MISREPRESENTATIONS
To the best of each Seller's knowledge, all of the
information contained in the representations and
warranties set forth in this Agreement its Schedules,
or in any of the documents or certificates which would
have been delivered to the Purchaser are true and
sincere.
The Sellers are not aware of any fact or circumstance,
not known to the public or not having been disclosed by
writing to the Purchaser, rendering the said
information false, inaccurate or misleading.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that each of the following
representations and warranties is accurate, complete and
precise, without any reserve or exceptions other than those
mentioned in this article, and acknowledge that they are
determinant in Sellers' consent to enter into the agreement
hereof.
6.1. CORPORATE ORGANIZATION
The Purchaser is a corporation duly constituted; its
functioning conforms to the regulations in effect. The
Purchaser has the corporate power and all authority to
own or lease all of its properties and assets and to
carry on it business as it is now being conducted.
6.2. AUTHORITY AND POWER
The Purchaser has full corporate power and authority to
enter into and perform this agreement which constitutes
the valid and binding obligations of it. All rights
and obligations stipulated herein will actively and
passively bind the heirs, successors or beneficiaries
of the Purchaser, whether these persons are minors or
incapable, jointly and severally with the Purchaser and
between themselves.
6.3. NO VIOLATION
The conclusion, performance, execution and delivery of
this Agreement by Purchaser will not (i) violate any
provision of Purchaser's by-laws or (ii) violate any
law, use, regulation, judicial decision whatsoever
applicable to the Purchaser or to any of its assets.
The conclusion and performance of this agreement by the
Purchaser will not violate any of the Purchaser's
undertakings or result in unfavorable consequences for
the Sellers.
7. CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1. Between the date hereof and the date of fulfillment of
the conditions precedent, Societe will not undertake
any act other than in the ordinary course of business
and shall preserve intact its assets, its activity and
its going concern.
Each of the parties represents and warrants that the
statements in articles 5 and 6 shall remain correct and
true at the date of fulfillment of the conditions
precedent.
Between the date hereof and the date of fulfillment of
the conditions precedent, the parties undertake to
cooperate with a view to perfecting this agreement, in
particular, by spontaneously providing all information
susceptible to be reasonably requested by the
authorities or the other party.
7.2. In the case where the extraction activities of Societe
would be stopped by any administrative or
jurisdictional authority because of a withdrawal or a
non-renewal and more generally because of the loss of
the current authorizations, the parties undertake to
perform the following commitments:
a) For a period not to exceed 12 months and during
which it is prevented from exercising its
extraction activity, Societe shall idle its
mining and crushing equipment and shall make its
best efforts to obtain from the competent
authorities the authorization to resume its
extraction activity.
b) If after the 12 months period hereabove
described, Societe has not obtained the
authorization to resume its extraction activity,
the Sellers undertake, upon simple request of
Purchaser, to:
i) purchase the mining and crushing equipment of
Societe at a price appraised by a third party
expert.
The third party expert shall be elected by
mutual agreement of the parties within 15
days following the end of the 12 month period
hereabove described. In the event where the
parties would not agree on the election of
the third party expert, such expert shall be
appointed by ordinance of the President of
the Tribunal de Grande Instance of Basse-
Terre, at the request of the most diligent
party.
The mission of the third party expert shall
be to determine the price of the extraction
equipment of Societe within the conditions of
articles 1591 and seq. of the French Civil
Code. The third party expert shall remit,
via certified mail with return receipt
requested, to the parties its appraisal
report within 30 days of its appointment.
The conclusions of the third party expert
shall bind the parties who waive the
possibility of discussing such conclusions
for whatever reason.
One-half of the fee of the third party expert
shall be paid by Sellers and the other half
by Purchaser, and
ii) sell Societe, in the framework of their
mining operation, all extracted materials at
the herebelow defined prices:
Crushed Stone $12.50/CM
Manufactured Sand $12.50/CM
Washed Sand $ 7.00/CM
Crusher Run $ 9.00/CM
Boulders $ 9.00/CM
The prices indicated above have been computed
on the basis of the average selling price of
concrete at $140/CM. These prices shall be
revised in proportion to any variation of the
average concrete selling price.
In the event where the Sellers cannot furnish
Societe with 96,000 CM per year of crushed
stone and/or manufactured sand, they agree to
pay $5,500 for each 1% of quantity of
material not furnished to Societe in
comparison with the 96,000 CM commitment.
For example, if the Sellers have produced
80,000 CM of stone instead of 96,000 CM for
a
given year, the quantity of material not
furnished is equivalent to 16.7%
(80,000/96,0000); consequently, the Sellers
shall pay to Societe the sum of $91,850
($5,500 x 16.7%), and
c) At such time, Societe is again allowed to mine
and it will then repurchase the assets sold to
the Societe for a price appraised by a third
party expert intervening within the conditions
defined under b)ii) hereabove.
8. INDEMNIFICATION
8.1. OBLIGATIONS OF THE PURCHASER
The Purchaser agrees to indemnify and hold harmless the
Sellers from any and all losses or damages including,
without limitation, taxes, interest, indemnification,
penalties, reasonable fees and other related expenses
asserted against, imposed upon or paid, incurred or
suffered by the Sellers as a result of or arising from,
any breach or inaccuracy or omission of any
representation, warranty, covenant or agreement of the
Purchaser in this Agreement or in any document,
certificate or other instrument related thereof.
8.2. OBLIGATIONS OF THE SELLERS
The Sellers hereby agree to indemnify and hold harmless
the Purchaser from i) any and all losses or damages,
including without limitation, taxes, interest,
indemnification, penalties, reasonable fees and other
related expenses asserted against, imposed upon or
paid, incurred or suffered by the Purchaser as a result
of or arising from any breach or inaccuracy or omission
of any representation, warranty, covenant or agreement
of the Sellers in this Agreement, or in any document,
certificate or other instrument related thereto, and/or
any increase of Societe's liabilities or decrease of
Societe's assets which would occur during the duration
of Sellers warranty and which would have been
originated prior to the date of fulfillment of the
conditions precedent, and ii) any violation of any
applicable regulations, in particular, those relating
to permits or authorizations necessary for carrying on
Societe's activities or any violation of the said
permits or authorizations, the consequences of which
would occur after the date of fulfillment of the
conditions precedent, during the duration of the
applicable statute of limitation, and that would have
been originated before the date of fulfillment of the
conditions precedent.
As a consequence, the Sellers agree to pay, at the
election of the Purchaser, either to Societe or to the
Purchaser, an amount corresponding to any loss or
damage including, in particular, taxes, interests,
indemnities and other related expenses of any nature
whatsoever borne or incurred by Societe as a result of
any tax or social security adjustment or of any claim
from the Customs Service or from any other competent
authority relating to a period prior to the date of
fulfillment of the conditions precedent that may be, or
have been, made or accepted or that may be, or have
been, the subject matter of a settlement agreement.
Generally, the Sellers hereby agree to be responsible
for any social security or other contribution and/or
any debt or contribution, tax or charge, whether direct
or indirect, including but not limited to customs
charges, payable by Societe, that may not appear in the
Financial Statements or for which allowance may not
have been made in such Financial Statements, or of
which the origin may be prior to the date of
fulfillment of the conditions precedent.
8.3. INDEMNIFICATION PROCEDURE
The party claiming indemnification hereunder is
referred to as the "Indemnified Party." The other
party is called the "Indemnifying Party." The
Indemnified Party shall give as soon as possible by
mail with return receipt requested to the Indemnifying
Party of any event, situation, notice or claim from any
authority which might give rise to a claim for
indemnity under this Agreement. As to any claim,
action or proceeding by a third party, the Indemnified
Party shall keep control of the proceedings and the
Indemnifying Party shall be entitled, together with the
Indemnified Party, to participate in the defense by
presenting its allegations and to be associated to the
discussions with a view to compromise or settle any
such matter at the Indemnifying Party's own expense;
each of the Indemnifying and the Indemnified Party
shall provide such cooperation and such reasonable
access to its books, records and properties as the
other party shall reasonably request with respect to
any such matter, and the parties agree to cooperate
with each other in order to ensure the proper and
adequate defense thereof. The payment of any amount
due by the Sellers under this warranty agreement may be
made, at Purchaser's election, either by means of set-
off against any amount that may be due by Purchaser, or
any other company of its group, to the Sellers or some
of them, or by actual payment by Sellers to Societe or
to Purchaser, as appropriate, no later than thirty (30)
calendar days after the payment demand was made.
Interest at the rate of 12% per annum shall
automatically accrue for the benefit of Purchaser or
Societe on any amounts not paid within the aforesaid
period, without prior formal notice being required and
without this provision implying any respite of payment.
The Indemnifying Party shall not make any settlement of
any claims without the prior written consent of the
Indemnified Party, which consent shall not be
unreasonably withheld.
8.4. TERM
The indemnification obligations of the parties set
forth in this Section 8 are given for a period expiring
on December 31, 1999 with respect to the situation of
Societe and the general representations and warranties
given hereof, and at the latest thirty (30) days after
the time period of limitation of administrations and
competent authorities, in particular, fore tax, para-
tax, social and custom matters, have elapsed.
9. MISCELLANEOUS
9.1. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between
the parties hereto with respect to the matter hereof.
It supersedes all prior agreements, both oral and
written, which could have existed between the parties
hereto and/or companies to which they are affiliated
with, with respect to such subject matter.
9.2. NOTICES
Any notice by either party shall be in writing and
hand-delivered or mailed by certified mail with return
receipt requested or telecopied (with confirmation by
certified mail with return receipt requested sent the
same day) to the following addresses and number:
If to Purchaser, to:
c/o Devcon International Corp.
1350 E. Newport Center Drive, Suite 201
Deerfield Beach, Florida 33442
Attention: Richard Hornsby
If to Sellers:
Fernand Hubert Petit
Marigot 97150
Saint Martin (France)
9.3. SEVERABILITY
The nullity of any provision hereof shall not cause the
rest of this agreement to be null and void and neither
party hereto shall be entitled to claim damages by
reason of any such nullity.
9.4. JURISDICTION
The commercial court of Basse-Terre shall be competent
for all disputes arising from or related to the
construction, validity, performance or non performance
of the agreement hereof.
9.5. HEADINGS AND CAPTIONS FOR REFERENCE ONLY
The titles preceding the text of each section and
subsection of this Agreement have been inserted solely
for convenient reference and neither constitute a part
of this Agreement or affect is meaning, interpretation
or effect.
9.6. SUCCESSORS AND ASSIGNS
All rights and obligations stipulated herein shall
insure to and be binding on the heirs, successors and
assigns of each of the Sellers, whether minors or
subject of any other incapacity, jointly and
indivisibly, among themselves and with the other
Sellers.
9.7. GOVERNING LAW:
The validity, construction, interpretation and
enforceability of this Agreement shall be governed by
the laws of the Republic of France. All of the parties
to this Agreement have participated fully in the
negotiation and preparation hereof, and, accordingly,
this Agreement shall not be more strictly construed
against any one of the parties hereto.
9.8. INTERMEDIARIES
Each of the Sellers and Purchaser represent and warrant
to the others that it has not employed or dealt with
any broker, agent or finder in respect of the
transactions provided for herein.
9.9. EXPENSES
Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with
the negotiation, preparation, execution and performance
of this Agreement, in particular, for Devcon the 4.8%
tax to be levied on the Purchase Price (at the exchange
rate of the dollar at the date of the drafting of the
instrument stating the fulfillment of the conditions
precedent) as well as the instrument stating the
fulfillment of the conditions precedent.
As expressly agreed, Devcon shall pay to the notary,
holder of the agreement, in application of article 4 of
the notary fee regulation, the sum of FF 100,000 as
agreed by letter of June 13, 1995.
9.10. UNITED STATES DOLLARS
Except where otherwise specifically stated, all
references to "dollars" contained herein shall refer to
United States Dollars.
9.11. AMENDMENTS
This agreement may not be amended, except by an
instrument in writing signed by each of the parties
hereto.
9.12. REGISTRATION OF TRANSFER; RECORDATION
The transfer of the Shares shall be registered with the
relevant French Tax Authorities and thereafter notified
to Societe either (i) under article 1690 of the Civil
Code, by way of notification by a "huissier de justice"
(bailiff) or by way of an acceptation by the Gerant of
Societe in an authenticated deed or, (ii) by deposit to
the Societe registered office, of an original copy of
the present Stock Purchase Agreement against remittance
by the manager of Societe of a statement of deposit
("Certificat de depot").
In addition, two original copies of the Stock Purchase
Agreement shall be filed with the relevant commercial
court within the jurisdiction of which Societe is
recorded.
Done at
On , 1995.
In counterparts.
SELLERS; PURCHASER: BBW
Mr. Fernand Hubert Petit By: Mr. Richard Hornsby
Mr. Francois Petit
Mr. Michel Petit
EXHIBIT 22.1
Antigua Cement, Ltd.
Antigua Development and Construction, Ltd.
Antigua Heavy Constructors, Ltd.
Antigua Masonry Products, Ltd.
Bahamas Construction and Development, Ltd.
Bouwbedrifj Boven Winden, N.V.
Bouwbedrifj Boven Winden (Saba), N.V.
Bouwbedrifj Boven Winden (St. Eustatius), N.V.
Caribbean Cement Carriers, Ltd.
Caribbean Construction and Development, Ltd.
Caribbean Heavy Construction, Ltd.
Caribbean Masonry Products, Ltd.
Cramer Construction, N.V.
Crown Bay Marina Joint Venture I
Devcon Caribbean Purchasing Corp.
Devcon Crown Bay II Corp.
Devcon Crown Bay Corp.
Devcon Masonry Products (BVI), Ltd.
Eurostone, Inc.
Industrias de Productos Pelita de Mexico, S.A. de C.V.
International Perlite Partners, L.P.
International Perlite Partners, S.C.
Marco, Inc.
M21 Industries, Inc.
Proar Construction Materials Company, N.V.
Seaward Shipping & Dredging Co., Ltd.
Societe des Carriers de Grand Case, S.A.R.L.
St. Martin Block, S.A.R.L.
V.I. Cement and Building Products, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 438,682
<SECURITIES> 0
<RECEIVABLES> 12,043,706
<ALLOWANCES> (2,456,402)
<INVENTORY> 6,392,278
<CURRENT-ASSETS> 24,999,666
<PP&E> 97,280,707
<DEPRECIATION> 45,898,662
<TOTAL-ASSETS> 97,312,640
<CURRENT-LIABILITIES> 20,151,271
<BONDS> 0
0
0
<COMMON> 446,451
<OTHER-SE> 11,987,365
<TOTAL-LIABILITY-AND-EQUITY> 97,312,640
<SALES> 56,151,462
<TOTAL-REVENUES> 56,151,462
<CGS> 44,893,095
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,388,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,555,848
<INCOME-PRETAX> (1,686,151)
<INCOME-TAX> (145,352)
<INCOME-CONTINUING> (1,831,503)
<DISCONTINUED> (915,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,746,503)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> 0
</TABLE>
