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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)*
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1994 for the quarterly period ended September 30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to _________.
Commission File No. 0-7152
DEVCON INTERNATIONAL CORP.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 59-067199
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1350 E. NEWPORT CENTER DRIVE, SUITE 201, DEERFIELD BEACH, FL 33442
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(954) 429-1500
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
YES [X] NO [ ]
As of November 13, 1996, the number of shares outstanding of the Registrant's
Common Stock was 4,498,935.
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<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
INDEX
PAGE NUMBER
-----------
Part I. Financial Information:
Consolidated Balance Sheets - September 30, 1996
and December 31, 1995.................................... 3-4
Consolidated Statements of Operations and
Retained Earnings - Three and Nine Months
Ended September 30, 1996 and 1995........................ 5
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995............ 6-7
Notes to Consolidated Financial Statements............... 8
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations............................................... 8-13
Part II. Other Information........................................ 14
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------------------------------------
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS
Current assets:
Cash $ 233,398 $ 438,682
Cash equivalents 1,013,741 977,456
Receivables, net 13,745,470 12,043,706
Costs in excess of billings
and estimated earnings 3,135,181 3,461,984
Inventories 6,613,323 6,392,278
Other 1,309,847 936,446
Net assets of discontinued
operation - 749,114
------------ ------------
Total current assets 26,050,960 24,999,666
Property, plant and equipment
Land 5,667,867 5,667,867
Buildings 4,119,727 4,248,816
Leasehold interests 12,394,838 12,590,763
Equipment 70,881,888 72,319,224
Furniture and fixtures 572,950 1,057,850
Construction in process 1,358,745 1,396,187
------------ ------------
94,996,015 97,280,707
Less accumulated depreciation (42,082,067) (45,898,662)
------------ ------------
52,913,948 51,382,045
Investments in unconsolidated
joint ventures and affiliates 183,780 208,780
Advances to unconsolidated joint
ventures and affiliates 1,251,174 1,047,663
Receivables, net 18,253,618 17,585,097
Intangible assets, net of
accumulated amortization 1,108,227 1,086,801
Other assets 747,881 1,002,588
------------- ------------
$100,509,588 $ 97,312,640
============ ============
See accompanying notes to consolidated financial statements.
3
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade and other $ 7,214,878 $ 6,501,977
Accrued expenses and other liabilities 2,901,388 1,451,429
Notes payable to banks 839,589 3,467,310
Current installments of long-term debt 4,999,464 7,274,506
Billings in excess of costs and
estimated earnings 19,947 766,399
Income taxes 989,668 689,650
------------ ------------
Total current liabilities 16,964,934 20,151,271
Long-term debt, excluding current
installments 20,971,925 15,547,908
Minority interest in consolidated
subsidiaries 686,155 675,853
Deferred income taxes 651,979 651,979
Other liabilities 782,307 1,127,043
------------ ------------
Total liabilities 40,057,300 38,154,054
------------ ------------
Stockholders' Equity:
Common stock 449,894 446,451
Additional paid-in capital 12,064,133 11,987,365
Retained earnings 47,938,261 46,724,770
------------ ------------
Total stockholders' equity 60,452,288 59,158,586
------------ ------------
$100,509,588 $ 97,312,640
============ ============
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
Three and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
SEPT 30, SEPT 30, SEPT 30, SEPT 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Concrete and related
products revenues ............................ $ 13,594,124 $ 8,032,604 $ 40,364,836 $ 27,791,599
Contracting revenues ........................... 2,594,815 3,366,867 12,154,422 11,228,479
Other revenues ................................. 429,192 432,161 1,857,910 1,842,671
------------ ------------ ------------ ------------
Total revenues ............................ 16,618,132 11,831,632 54,377,168 40,862,749
Cost of concrete and
related products revenues .................... 10,068,921 6,804,224 29,269,932 21,384,054
Cost of contracting revenues ................... 2,398,186 3,262,097 10,670,824 9,859,228
Cost of other revenues ......................... 98,716 375,696 1,341,518 1,449,756
------------ ------------ ------------ ------------
Gross profit .............................. 4,052,309 1,389,615 13,094,894 8,169,711
Selling, general and
administrative expenses ...................... 3,041,424 2,754,092 9,328,555 7,994,949
------------ ------------ ------------ ------------
Operating income (loss) ................... 1,010,885 (1,364,477) 3,766,339 174,762
Other income (deductions)
Equity in loss of
unconsolidated subsidiary .................. (25,000) -- (25,000) --
Interest expense ............................. (666,847) (621,524) (1,964,433) (1,913,635)
Gain (loss) on sale
of equipment ............................... (11,515) 2,841 (1,157) 156,062
Interest and other income .................... 93,407 96,835 269,252 344,976
Minority interest ............................ 15,200 (10,257) (10,302) (25,620)
------------ ------------ ------------ ------------
(594,755) (532,105) (1,731,640) (1,438,217)
------------ ------------ ------------ ------------
Income (loss) from
continuing operations
before income taxes ..................... 416,130 (1,896,582) 2,034,699 (1,263,455)
Income taxes ................................... 133,089 -- 333,089 --
------------ ------------ ------------ ------------
Income (loss) from
continuing operations ................... 283,041 (1,896,582) 1,701,610 (1,263,455)
Loss on disposal of discontinued
operation .................................... (488,119) (1,362) (488,119) (9,152)
------------ ------------ ------------ ------------
Net earnings (loss) ....................... (205,078) (1,897,944) 1,213,491 (1,272,607)
Retained earnings, beginning
of period .................................... 48,143,339 50,096,610 46,724,770 49,471,273
------------ ------------ ------------ ------------
Retained earnings, end
of period .................................... $ 47,938,261 $ 48,198,666 $ 47,938,261 $ 48,198,666
============ ============ ============ ============
Earnings (loss) per share:
From continuing operations ................... $ .06 $ (.42) $ .36 $ (.28)
From discontinued operation .................. (.10) -- (.10) --
------------ ------------ ------------ ------------
$ (.04) $ (.42) $ .26 $ (.28)
============ ============ ============ ============
Weighted average number of
shares outstanding ........................... 4,621,271 4,562,317 4.697,916 4,560,046
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
Cash flows from operating activities:
Net earnings (loss) ............................ $ 1,213,491 $(1,272,607)
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization ................. 3,881,922 3,453,229
Provision for doubtful accounts
and notes .................................... 225,000 223,000
(Gain) Loss on sale of equipment .............. 1,156 (156,069)
Minority interest expense (income) ............ 15,200 (48,907)
Changes in operating assets and
liabilities:
Decrease (Increase) in receivables, net ....... (2,192,635) 522,510
Decrease (Increase) in costs in excess
of billings and estimated earnings ........... 326,803 (107,427)
Decrease (Increase) in inventories ............ (221,045) 609,879
Decrease (Increase) in other
current assets .............................. 373,401 (61,998)
Decrease in other assets ...................... 254,709 274,713
Increase (Decrease) in accounts payable,
trade and other .............................. 1,740,289 (128,072)
Increase (Decrease) in billings in
excess of costs and estimated earnings ...... (746,452) 31,499
Increase (Decrease) in income
taxes payable ................................ 300,018 (15,201)
Decrease in other liabilities ................. (344,737) (93,328)
----------- -----------
Net cash provided by
operating activities ...................... 4,827,120 3,231,221
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment .................................... (6,995,171) (3,870,453)
Proceeds from disposition of property,
plant and equipment .......................... 1,729,826 640,601
Payment to acquire subsidiary company .......... -- (1,000,000)
Issuance of notes .............................. (1,857,491) (227,233)
Payments received on notes ..................... 1,454,841 2,643,443
Advances to affiliates ......................... (258,731) (18,310)
Advances from affiliates ....................... 55,220 340,000
----------- -----------
Net cash used in investing activities ....... $(5,871,506) $(1,491,952)
----------- -----------
See accompanying notes to consolidated financial statements.
6
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
---- ----
Cash flows from financing activities:
Proceeds from debt $ 7,039,733 $ 6,509,127
Principal payments on debt (6,518,479) (8,041,573)
Net borrowings from bank overdrafts 354,133 55,975
----------- -----------
Net cash provided by (used in)
financing activities 875,387 (1,476,471)
----------- -----------
Net increase (decrease) in
cash and cash equivalents (168,999) 262,798
Cash and cash equivalents,
beginning of period 1,416,138 942,050
----------- -----------
Cash and cash equivalents,
end of period $ 1,247,139 $ 1,204,848
=========== ===========
Supplemental disclosures of
cash flow information
Cash paid for
Interest $ 2,077,387 $ 1,974,418
=========== ===========
Income taxes $ - $ 32,773
=========== ===========
See accompanying notes to consolidated financial statements.
7
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries.
The accounting policies followed by the Company are set forth in Note (l) to the
Company's financial statements included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of September 30, 1996 and the results of its operations
and cash flows for the nine months ended September 30, 1996 and 1995.
The results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All dollar amounts of $1.0 million or more are rounded to the nearest one tenth
of a million; all other dollar amounts are rounded to the nearest one thousand
and all percentages are stated to the nearest one tenth of one percent.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 VS THREE MONTHS ENDED
SEPTEMBER 30, 1995
REVENUES
The Company's revenues during the third quarter of 1996 were $16.6 million, as
compared to $11.8 million during the same period in 1995. This increase was
primarily due to increases in the Company's concrete and related products
revenues, offset to a lesser extent, by decreases in land development
contracting division revenues.
The Company's concrete and related products division revenues increased to $13.6
million during the third quarter of 1996 from $8.0 million during the same
period in 1995. The Company believes the increased sales are a result of
rebuilding required to repair homes and other buildings damaged during
Hurricanes Luis and Marilyn, which struck the Caribbean in September 1995. The
Company believes that demand for concrete and related products for the balance
of 1996 will remain strong in Antigua, St. Maarten, St. Martin and St. Thomas,
as the owners of storm damaged homes and businesses begin and continue repair
and rebuilding work.
Revenues from the Company's land development contracting division decreased to
$2.6 million during the third quarter of 1996 from $3.4 million for the same
period in 1995. This decrease was primarily attributable to the winding down of
several hurricane related repair and reconstruction contracts obtained in late
1995. The Company's backlog of unfilled portions of land development contracts
at September 30, 1996 was $4.3 million, involving 19 projects. The Company
expects that all of the backlog outstanding at September 30, 1996 will be
completed by the end of 1996. As its current backlog is expected to be completed
by the end of the year, the Company needs to obtain new contracts over the
remainder of 1996 in order to maintain comparable revenue and backlog levels in
1997.
8
<PAGE>
COST OF CONCRETE AND RELATED PRODUCTS
Cost of concrete and related products as a percentage of concrete and related
products revenues decreased to 74.1 percent during the third quarter of 1996
from 84.7 percent for the same period in 1995. This decrease was primarily
attributable to the increase in revenues recognized. The Company's margins will
also fluctuate depending on the mix of products sold and the locations in which
sales were made during the quarter.
COST OF CONTRACTING
Cost of contracting as a percentage of land development contracting revenues
decreased to 92.4 percent during the third quarter of 1996 from 96.9 percent
during the same period in 1995. This decrease is primarily attributable to the
higher profit margins on current projects, offset by costs incurred as a result
of owning and operating heavy construction equipment. In addition, the Company's
gross margins are affected by the varying profitability levels of individual
contracts and the stage of completion of such contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense ("SG&A expense") was $3.0 million
during the third quarter of 1996 and $2.8 million for the same period in 1995.
This increase was primarily attributable to SG&A expense related to the
Company's new operation on St. Martin and higher than expected operating
expenses, offset by a reduction in expense attributable to personnel reductions.
As a percentage of revenue, SG&A expense decreased to 18.3 percent for the third
quarter of 1996 from 23.3 percent for the same period in 1995. This percentage
decrease was primarily attributable to the increase in revenues actually
recognized, offset by the increase in SG&A expense actually incurred.
DIVISIONAL OPERATING INCOME (LOSS)
The Company had operating income of $1.0 million for the third quarter of 1996
as compared to an operating loss of $1.4 million for the same period in 1995.
The Company's concrete and related products division operating income increased
to $1.1 million during the third quarter of 1996 from an operating loss of
$604,000 during the same period in 1995. This increase is primarily attributable
to increases in revenues and gross profits by this division, offset by increases
in SG&A expense.
The Company's land development contracting division operating loss decreased to
$250,000 for the third quarter of 1996 from a loss of $428,000 during the same
period in 1995. This decrease is primarily attributable to the modest increase
in gross profit, offset by some increases in SG&A expense.
LOSS ON DISPOSAL OF DISCONTINUED OPERATION
In September 1996, the Company sold its interest in its ceiling tile business.
This business had been treated as a discontinued operation at December 31, 1995.
As a result of the sale price obtained, an additional write down of the
Company's investment was required.
NET EARNINGS (LOSS)
The Company had a net loss of $205,000 during the third quarter of 1996 as
compared to a net loss of $1.9 million during the same period in 1995. This
reduction in loss is primarily attributable to increases in concrete and related
products revenues and operating profits, offset by an additional write down
required as a result of the Company's disposal of its ceiling tile business.
9
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 VS NINE MONTHS ENDED
SEPTEMBER 30, 1995
REVENUES
The Company's revenues during the first nine months of 1996 were $54.4 million,
as compared to $40.9 million during the same period in 1995. This increase was
primarily due to increases in the Company's concrete and related products
revenues, and to a lesser extent, land development contracting division
revenues.
The Company's concrete and related products division revenues increased to $40.4
million during the first nine months of 1996 from $27.8 million during the same
period in 1995. The Company believes the increased sales are a result of
rebuilding required to repair homes and other buildings damaged during
Hurricanes Luis and Marilyn, which struck the Caribbean in September 1995. The
Company believes that demand for concrete and related products for the balance
of 1996 will remain strong in Antigua, St. Maarten, St. Martin and St. Thomas,
as the owners of storm damaged homes and businesses begin and continue repair
and rebuilding work.
Revenues from the Company's land development contracting division increased to
$12.2 million during the first nine months of 1996 from $11.2 million for the
same period in 1995. This increase was primarily attributable to the Company
obtaining several hurricane related repair and reconstruction contracts in late
1995. The Company's backlog of unfilled portions of land development contracts
at September 30, 1996 was $4.3 million, involving 19 projects. The Company
expects that all of the backlog outstanding at September 30, 1996 will be
completed by the end of 1996. As its current backlog is expected to be completed
by the end of the year, the Company needs to obtain new contracts over the
remainder of 1996 in order to maintain comparable revenue and backlog levels in
1997.
COST OF CONCRETE AND RELATED PRODUCTS
Cost of concrete and related products as a percentage of concrete and related
products revenues decreased to 72.5 percent during the first nine months of 1996
from 76.9 percent for the same period in 1995. This decrease was primarily
attributable to the increase in revenues recognized. The Company's margins will
also fluctuate depending on the mix of products sold and the locations in which
sales are made during the quarter.
COST OF CONTRACTING
Cost of contracting as a percentage of land development contracting revenues was
87.8 percent during the first nine months of 1996 and 1995. The Company's gross
margins are generally affected by the varying profitability levels of individual
contracts and the stage of completion of such contracts, as well as the cost
involved in owning and operating heavy construction equipment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense ("SG&A expense") was $9.3 million
during the first nine months of 1996 and $8.0 million for the same period in
1995. This increase was primarily attributable to SG&A expense related to the
Company's new operation on St. Martin and higher than expected operating
expenses, offset by a reduction in expense attributable to personnel reductions.
As a percentage of revenue, SG&A expense decreased to 17.2 percent for the first
nine months of 1996 from 19.6 percent for the same period in 1995. This
percentage decrease was primarily attributable to the increase in revenues
actually recognized, offset by the increase in SG&A expense actually incurred.
10
<PAGE>
DIVISIONAL OPERATING INCOME
The Company had operating income of $3.8 million for the first nine months of
1996 as compared to $175,000 for the same period in 1995. The Company's concrete
and related products division operating income increased to $4.2 million during
the first nine months of 1996 from $894,000 during the same period in 1995. This
increase is primarily attributable to increases in revenues and gross profits by
this division, offset by increases in SG&A expense.
The Company's land development contracting division operating income decreased
to a loss of $325,000 for the first nine months of 1996 from a loss of $370,000
during the same period in 1995. This reduction is primarily attributable to the
increases in revenues achieved by this division.
LOSS ON DISPOSAL OF DISCONTINUED OPERATION
In September 1996, the Company sold its interest in its ceiling tile business.
This business had been treated as a discontinued operation at December 31, 1995.
As a result of the sale price obtained, an additional write down of the
Company's investment was required.
NET EARNINGS (LOSS)
The Company had net earnings of $1.2 million during the first nine months of
1996 as compared to a net loss of $1.3 million during the same period in 1995.
This increase is primarily attributable to increases in concrete and related
products revenues and gross profits, offset by an additional write down required
as a result of the Company's disposal of its ceiling tile business.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally funds its working capital needs from operations and bank
borrowings. In the land development contracting business, the Company must
expend considerable amounts of funds for equipment, labor and supplies to meet
the needs of particular projects. The Company's capital needs are greatest at
the start of any new contract, since the Company generally must complete 45 to
60 days of work before receiving the first progress payment. In addition, as a
project continues, a portion of the progress billing is usually withheld as
retainage until all work is complete, further increasing the need for capital.
On occasion the Company has provided long-term financing to certain customers
who have utilized its land development contracting services. The Company has
also provided financing for other business ventures from time to time. With
respect to the Company's concrete and related products division, accounts
receivable are typically outstanding for a minimum of 60 days and in some cases
much longer. The nature of the Company's business requires a continuing
investment in plant and equipment, along with the related maintenance and upkeep
costs of such equipment.
The Company has funded many of these expenditures out of its current working
capital. The sales increases achieved during 1996, along with related increases
in accounts receivable, inventories and plant and equipment, have had a short
term negative impact on the Company's cash reserves. However, notwithstanding
the foregoing and after factoring in the Company's obligations as set forth
below, management believes that the Company's cash flow from operations,
existing working capital (approximately $9.1 million at September 30, 1996) and
funds available from existing and anticipated lines of credit and extensions
thereof (assuming that they are obtained) will be adequate to meet the Company's
anticipated needs for operations during the next twelve months.
At September 30, 1996, the Company had a revolving secured line of credit in the
amount of $2.0 million and three secured lines of credit in the amount of $1.0
million, $400,000 and $400,000 from commercial banks in South Florida and the
11
<PAGE>
Caribbean. At September 30, 1996 the Company had $2.0 million of borrowings
outstanding under the $2.0 million line of credit, $567,000 of borrowings
outstanding under the $1.0 million line of credit and $800,000 of borrowings
outstanding under the two $400,000 lines of credit. The $2.0 million line and
one $400,000 line expired in May 1996 and are being continued on a month to
month basis pending the closing of the new commitment discussed below, the $1.0
million line expires in November 1996 and the other $400,000 line has no
expiration date. The interest rates on all such indebtedness outstanding at
September 30, 1996 ranged from 8.5 to 8.8 percent.
The Company has a $500,000 unsecured overdraft facility from a commercial bank
in the Caribbean. The facility expired on September 30, 1996 and is being
continued on a month to month basis until reapproved. The facility bears
interest at 14.0 percent per annum. At September 30, 1996 the Company had
borrowings of $410,000 outstanding under this line.
The Company also has a $500,000 secured line of credit from a commercial bank in
the United States. The line expires in October 1996 and bears interest at the
prime interest rate plus one half of one percent. At September 30, 1996, the
Company had borrowings of $440,000 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 September 30, 1996 ranged from 8.5 percent to 9.8
percent and the Company had $4.2 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
September 30, 1996 was 9.0 percent and the Company has $1.5 million of
borrowings outstanding. This loan is due in full on November 30, 1996. The loan
is secured by the Company's notes receivable from the Government of Antigua and
Barbuda.
The Company has borrowed $5.6 million from a Company officer. One note has an
outstanding balance of $5.5 million, is unsecured, bears interest at the prime
interest rate and is due in full on January 1, 1998. The other note has a
balance of $50,000, is secured by equipment, bears interest at 8.0 percent per
annum and is due in monthly principal installments through February 1997 of
$10,000, plus interest.
The Company has received a commitment from a bank in the Caribbean for a six
year term loan of $6.0 million and a $1.0 million revolving line of credit. The
term loan proceeds would be used to repay and retire a revolving line of credit
that was due in May 1996 with a $2.0 million balance, two term loans totalling
$583,000, an equipment loan with a balance of $172,000, a term loan due in
November 1996 with a balance of $1.5 million, a line of credit due in November
1996 with a balance of $567,000, another line of credit that was due in May 1996
with a balance of $400,000 and various other notes amounting to approximately
$365,000. The balance of $413,000 be used to provide additional working capital
for the Company. The loan will be collateralized by various assets, primarily
land and equipment, located in the Caribbean.
The Company purchases equipment from time to time as needed for its ongoing
business operations. The Company is currently upgrading and replacing various
equipment used by the concrete and related products division, principally
concrete delivery trucks and quarry equipment. This upgrading and replacement
program will continue throughout 1996. At present, management believes that the
Company's inventory of construction equipment is adequate for its current
contractual commitments, however, the acquisition of significant new
construction contracts, depending on the nature of the contract, the job
location and job
12
<PAGE>
duration, may require the Company to make significant investments in heavy
construction equipment. If the Company does not obtain additional contract
backlog, then it plans to sell a portion of the equipment it currently owns. The
Company will have to bear the carrying costs, principally depreciation and
interest, on any idle equipment not sold. Since the beginning of the year and
through September 30, 1996, the Company has sold equipment with an original cost
basis of approximately $9.3 million and net book value of $1.7 million. In
November 1996, the Company entered into an agreement to sell its cement hauling
vessel to a third party for $4.0 million. The Company intends to lease the
vessel back from the new owners for a four year term, with options to renew the
lease for four additional one year periods. After the related debt on the vessel
is repaid, the Company should net approximately $2.2 million as a result of this
transaction. The Company currently intends to use these funds to retire debt and
enhance its working capital position. The Company expects to complete additional
equipment sales during the remainder of 1996. The Company believes it has
available or can obtain sufficient financing for most of its contemplated
equipment replacements and additions. Historically, the Company has used a
number of lenders to finance a portion of its machinery and equipment purchases,
including its ocean going bulk cement vessel, on an individual asset basis. At
September 30, 1996 amounts outstanding to these lenders totalled $7.3 million.
These loans are typically repaid over a three to six year term in monthly
principal and interest installments.
A significant portion of the Company's outstanding debt bears interest at
variable rates. The Company could be negatively impacted by a substantial
increase in interest rates.
The Company has contingent obligations and has made certain guarantees in
connection with acquisitions, its participation in certain joint ventures,
certain employee and construction bonding matters and its receipt of a tax
exemption. In connection with a 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 September 30, 1996 include $15.0
million, net due the Company pursuant to certain promissory notes delivered to
the Company in connection with two construction contracts with the Government of
Antigua, $2.0 million of which is classified as a current receivable. The notes
call for both quarterly and monthly principal and interest payments until
maturity in 1997. The notes will not be satisfied at maturity but the Antiguan
government has advised the Company that payments will continue until the
obligation is satisfied. The Government of Antigua has made required quarterly
payments through December 1995 aggregating $2.0 million per year but has made
only some of the required monthly payments. A portion of the payment received
from Antigua has been derived from the lease proceeds the Antiguan government
has received from the United States Department of Defense for the rental of two
military bases. One of the bases was closed at the end of 1995, resulting in a
shortfall of $700,000 per year in the required quarterly payments. To partially
make up this shortfall, the Antiguan government has entered into a written
agreement with the Company requiring Antigua to pay $600,000 per year from its
fuel tax revenues. Payments under this agreement are scheduled to start in
December 1996. The Company does not presently anticipate any other material
increases in or accelerations of payments by the Government of Antigua.
13
<PAGE>
II. OTHER INFORMATION
- ------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
None
ITEM 2. CHANGES IN SECURITIES
- ------- ---------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ------- -------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- ------- -----------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
first nine months of fiscal 1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: NOVEMBER 13, 1996 By: /S/ DONALD L. SMITH, JR.
----------------- -------------------------
Donald L. Smith, Jr.
President and Chief
Executive Officer
Date: NOVEMBER 13, 1996 By: /S/ WALTER B. BARRETT
----------------- ----------------------
Walter B. Barrett
Vice President, Finance and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 233,398
<SECURITIES> 0
<RECEIVABLES> 16,677,773
<ALLOWANCES> 2,932,303
<INVENTORY> 6,613,323
<CURRENT-ASSETS> 26,050,960
<PP&E> 94,996,015
<DEPRECIATION> (42,082,067)
<TOTAL-ASSETS> 100,509,588
<CURRENT-LIABILITIES> 16,964,934
<BONDS> 0
0
0
<COMMON> 449,894
<OTHER-SE> 12,064,133
<TOTAL-LIABILITY-AND-EQUITY> 100,509,588
<SALES> 54,377,168
<TOTAL-REVENUES> 54,377,168
<CGS> 41,282,274
<TOTAL-COSTS> 41,282,274
<OTHER-EXPENSES> 2,034,699
<LOSS-PROVISION> 225,000
<INTEREST-EXPENSE> 1,964,433
<INCOME-PRETAX> 2,034,699
<INCOME-TAX> 333,089
<INCOME-CONTINUING> 1,701,610
<DISCONTINUED> 488,119
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,213,491
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
