UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 2
[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.
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 ]
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]
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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]
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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 turned its fiscal year-end accounts receivable
approximately 4.7 times in 1995, 4.5 times in 1994 and 3.9 times in
1993. The improvement in the Company's accounts receivable
turnover ratio from 1993 to 1995 is due primarily to (i) a
reduction in contract retainage receivables as a result of a
gradual decline in the number of pending construction contracts
held by the Company and (ii) improvements in the Company's
collection process. The increase in the Company's accounts
receivable turnover ratio has had only a modest effect on the
Company's liquidity as the additional cash generated has been used
for debt repayment and capital expenditures.
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]
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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
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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]
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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 - - 250,000
(Gain) loss on sale of
equipment (164,116) (34,896) 317,717
Loss from discontinued
operations 915,000 470,076 173,256
Increase (decrease) in
minority interest in
unconsolidated sub-
sidiaries 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 858,170 (75,814) (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
continuing operations $5,198,863 $6,212,393 $ 857,763
Net cash used by
discontinued operations <165,886><1,010,422> -
Net cash provided by
operating activities $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 -
<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.
The Company's weighted average effective interest rate for
borrowing was 8.5% at both December 31, 1995 and 1994.
(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
The Company adopted stock option plans for officers and
employees in 1986 (the "1986 Plan") and 1992 (the "1992
Plan"). Each plan terminates 10 years after its adoption
date. Options to acquire up to 300,000 and 350,000 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 under the 1986 Plan and 1992 Plan, respectively.
All stock options granted pursuant to the 1986 Plan vest and
become fully exercisable (i) on the date the Optionee reaches
the age of 65 and for the six month period thereafter, (ii)
on the date of permanent disability of the Optionee and for
the six month period thereafter, (iii) on the date of a
change of control and for the six month period thereafter and
(iv) on the date of termination of the Optionee by the
Company from employment with the Company without cause and
for the six month period after termination. All stock
options granted pursuant to the 1992 Plan vest and become
exercisable in varying terms and periods which are
established by the Compensation Committee of the Board of
Directors. All options issued pursuant to the 1992 Plan
expire ten years after the date of issue.
The Company adopted a stock option plan for non-employee
directors in 1992 (the "1992 Directors Plan"). This plan
terminates in 2002. Options to acquire up to 50,000 shares
of common stock may be granted to non-employee directors at
no less than the fair market value of the Company's common
stock on the date of the option grant. The 1992 Directors
Plan provides that each director shall receive an initial
grant of 8,000 shares and an additional 1,000 shares annually
immediately subsequent to his reelection as a director of the
Company. All stock options have ten year terms and vest and
become fully exercisable six months after the date of
issuance.
Stock option activity with respect to the above-identified
Company option plans during the periods indicated is as
follows:
[CAPTION]
<TABLE>
<S> <C> <C>
1986 Plan 1992 Plan
Exercise Exercise
Shares Price Shares Price
Balance at 12/31/92203,380 $2.33-7.0040,000 $9.63
Granted - - - -
Exercised - - - -
Expired - - - -
Balance at 12/31/93203,380 $2.33-7.0040,000 $9.63
Granted - - - -
Exercised - - - -
Expired - - - -
Balance at 12/31/94203,380 $2.33-7.0040,000 $9.63
Granted - - - -
Exercised - - - -
Expired - - - -
Balance at 12/31/95203,380 $2.33-7.00250,000 $6.75-$9.63
Exercisable 156,415 30,000
Available for Future
Grant 30,950 100,000
(continued)
<S> <C>
Directors Plan
Exercise
Shares Price
Balance at 12/31/92 24,000 $14.00
Granted 3,000 $ 6.25
Exercised - -
Expired - -
Balance at 12/31/93 27,000 $6.25-14.00
Granted 3,000 $8.75
Exercised - -
Expired - -
Balance at 12/31/94 30,000 $6.25-14.00
Granted 3,000 $7.75
Exercised - -
Expired - -
Balance at 12/31/95 33,000 $6.25-14.00
Exercisable 33,000
Available for Future
Grant 17,000
</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 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 $4.4 million.
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.
The Company sold substantially all of its interest in a real
estate joint venture with the Government of Antigua and Barbuda
to a third party in 1990. In connection with this sale, the
third party purchaser assumed the Company's guarantee of payment
to the Government of Antigua and Barbuda made upon the formation
of the joint venture. This guarantee, which would become an
obligation of the Company in the event of a default by the
purchaser, provides a guarantee that net profits from the joint
venture's operations will equal or exceed $20,000 per month. No
liability has been incurred by the Company nor have payments
been made by the Company or the purchaser in connection with
this guarantee. The guarantee expires upon the sale or disposal
by the venture of its real estate. There are no current plans
to sell or dispose of any of the venture's property.
(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.
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 (17)
(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) Incorporated by reference to the exhibit showing in
parenthesis and filed with the Registrant's Form 10-K for
the year ended December 31, 1995.
(17) 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.
February 27, 1997 DEVCON INTERNATIONAL CORP.
By:/s/Walter B. Barrett
Walter B. Barrett
Chief Financial Officer and
Treasurer
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, as amended, 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
February 27, 1997
