FORM 10-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File #0-12293
CANISCO RESOURCES, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE No. 54-0952207
(State of Incorporation) IRS Employer Identification
300 Delaware Avenue, Suite 714, Wilmington, Delaware 19801
(Address of Principal Executive Offices and Zip Code)
Registrant's Telephone Number, Including Area Code
(302) 777-5050
Securities Registered Pursuant to Section 12 (b) of the Act: None
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock, Par Value $.0025 Per Share
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in the definitive proxy or
information statements incorporated by
reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [ ]
The aggregate market value held by non-affiliates of the registrant as of
March 31,1997:
Common Stock, par value $.0025 per share $4,848,215
The number of shares outstanding as of the close of business on
March 31, 1997,was 2,170,540 shares of Common Stock,
par value $.0025 per share.
CANISCO RESOURCES, INC. - 1997 Form 10-K Annual Report
Table of Contents
PART I
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 40
PART III
Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial Owners
and Management 40
Item 13. Certain Relationships and Related Transactions 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 41
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders on
August 12, 1997, are incorporated into Part III as set forth herein.
PART I
ITEM 1 BUSINESS
Canisco Resources, Inc. (stock symbol "CANR"), a Delaware corporation, was
founded in 1996 as the successor by merger of Nuclear Support Services,
Inc. (NSSI or the Company) and NSS of Delaware, Inc. Shareholder
approval for the merger of NSSI and NSS of Delaware into Canisco
Resources, Inc. was granted at a special meeting of shareholders
held March 29, 1996. This merger was also effected pursuant to the
Company's Amended Joint Plan of Reorganization
which was confirmed by the United States Bankruptcy Court for the Middle
District of Pennsylvania, Harrisburg on April 24, 1996.
Nuclear Support Services, Inc. was organized in 1973 as a Virginia business
corporation. The Company's principal business was providing staff
augmentation service on an "as needed" basis to assist in the
maintenance and operation of power generation facilities.
From 1987 through 1989, the Company acquired companies which provided valve
services involving maintenance of valves and valve actuators and
diagnostic testing of motor-operated valves to the power generation,
petro-chemical, refining and pulp and paper industries.
In 1990, the Company sold to Westinghouse Electric Corporation the nuclear
portion of the valve diagnostic, actuator and valve maintenance
operations of its subsidiary, Henze-Movats, Inc., in exchange for
cash and the Numanco and WISCO staff augmentation businesses of
Westinghouse. The non-nuclear valve and actuator operations was
retained and renamed Henze Services, Inc. (Henze).
In April 1992, the staff augmentation operations of the Company and that of
Numanco were consolidated and renamed NSS Numanco, Inc. (NSS Numanco),
headquartered in Hershey, Pennsylvania.
In June 1993, the Company created a new subsidiary, IceSolv, Inc.
(IceSolv) to provide dry ice blasting services for decontamination,
cleaning and preparation of surfaces for the nuclear power,
electrical and other general industries.
Effective October 1, 1993, NSSI acquired two companies, Oliver B. Cannon &
Son, Inc. and Sline Industrial Painters, Inc., marketed together as
Cannon Sline. Cannon Sline provides surface preparation, specialty
coatings and related services to the power generation, pulp and
paper, and other general industries across the United States.
In March 1995, the Company commenced a restructuring plan which included
increased emphasis on its more profitable lines of business and a
shift in focus from staff augmentation to contract services.
In the first week of September 1995, the Company and its subsidiaries filed
voluntary bankruptcy petitions under Chapter 11 Reorganization in
the U.S. Bankruptcy Court for the
Middle District of Pennsylvania (the "Court") in Harrisburg which
are jointly administered at Case Number 1-95-1767. This action
became necessary to gain access to the Company's own cash for continued
operations when its participant lender refused to continue funding its
working capital line. The Company obtained debtor-in-possession
financing with its agent lender and continued to operate
as debtor-in-possession.
On January 31, 1996, the Company filed its Joint Plan of Reorganization. An
Amended Joint Plan of Reorganization (the "Amended Plan") was filed
and confirmed by the Court on April 24, 1996. On June 28, 1996 the
Company met all the requirements of the Amended Plan by
executing the necessary banking documents for securing exit financing.
The Company exited from bankruptcy on July 1, 1996.
In February, 1996, the sale of the commercial nuclear power staff augmentation
business of NSS Numanco was sold. Numanco's remaining business services
were transferred to the Company's IceSolv, Inc. subsidiary.
IceSolv remains an operating subsidiary of the Company
pursuant to the reorganization and restructuring plans.
In May 1996, Oliver B. Cannon & Son, Inc. and Sline Industrial Painters Inc.
were merged pursuant to the Amended Plan. The surviving entity is
Cannon Sline, Inc., a Pennsylvania corporation. Cannon Sline remains
an operating subsidiary under the reorganization and
restructuring plans.
In June 1996 substantially all the assets of Henze Services, Inc. were sold
pursuant to the Amended Plan. This subsidiary was then self-liquidated
in bankruptcy.
The current structure of Canisco Resources, Inc. reflects these changes.
MARKETS AND SERVICES FOR CANISCO RESOURCES
Canisco Resources, Inc. provides a range of maintenance services on an as-
needed basis primarily to the power generation, petro-chemical and
pulp and paper industries through the Company's operating subsidiaries.
The Company's services consist of specialty cleaning,
decontamination, janitorial services, technical support, surface
preparation and painting and specialty coatings and linings application.
The Company also provides turnkey identification
system services along with miscellaneous metal, siding and roof
replacements to its clients.
Power Generation Market
The power generation industry was the largest market for the Company's
services in fiscal year 1997. Thirty-one percent (31%) of consolidated
revenues was attributable to nuclear, fossil fuel,
hydro-electric and other customers whose operations involve the
production of electricity. This is a reduction from forty-seven
percent (47%) in fiscal year 1996 and fifty-three percent (53%) in
fiscal year 1995. This reduction of dependence on the power generation
industry is intentional and part of the Company's strategy.
Petro-chemical Market
Twenty-one percent (21%) of the Company's revenues in fiscal year 1997 was
generated from clients in the petro-chemical and refining industry which
includes chemical, crude oil and natural
gas processing compared to twenty-one percent (21%) in fiscal year 1996 and
seventeen percent (17%) in fiscal year 1995.
Pulp and Paper Market
Pulp and paper facilities serviced by the Company include mills and production
plants whose primary operations involve the production of paper,
paperboard and pulp. Of the Company's consolidated revenues in fiscal
year 1997, twenty-five percent (25%) was generated from
customers in this industry compared to eighteen percent (18%) in fiscal year
1996 and fifteen percent (15%) in fiscal year 1995.
Other Markets Served
The Company provides services to government facilities and state and municipal
infrastructure as well as automotive, metals and mining, textiles,
marine and printing industries. No one of these
industries is a significant part of the Company's business. Twenty-three
percent (23%) of the Company's consolidated revenues during fiscal year
1997 were generated from services provided
to this group of industries compared to fifteen percent (15%) in fiscal year
1996 and sixteen percent (16%) in fiscal year 1995.
The Company's business is impacted by seasonal sensitivity. Historically,
demand for the Company's services is highest in the spring through
fall and lowest during the winter months.
The Company's assets are not assigned to a particular market.
COMPETITION
The Company's subsidiaries compete with approximately one hundred (100)
national and/or regional competitors. Price, quality and customer
service are the governing factors.
CLIENTS
The Company's clients consist primarily of electric utilities, major oil
companies, paper companies and other general industry. Because of the nature
of the services offered by the Company and the size of the projects
in which the Company is engaged, a small number of clients, at times,
account for a significant percentage of the Company's revenues in a given
fiscal year.
No client represented more than ten percent (10%) of revenues in fiscal years
1997 and 1996. For the fiscal year ended September 30, 1995,
Westinghouse Electric Corporation accounted for sixteen percent (16%)
of consolidated revenues.
The Company operates primarily within the United States. The Company has or
is performing contracts in Alabama, Arkansas, Arizona, California,
Colorado, Connecticut, Delaware, Florida, Georgia, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire,
New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon,
Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin,
and Wyoming.
The Company's contracts with its clients provide for charges for services on a
time and material, fixed-price and/or modified fixed-price basis.
The time and materials contracts generally permit the client to control
the amount, type and timing of services to be performed by the Company,
and most of the contracts permit the client to terminate the contract with
appropriate notice. The Company's clients often modify the nature
and timing of services to be performed. The fixed-
price and modified fixed-price contracts are recognized on the percentage of
completion method and are measured by the cost-to-cost method.
Revenues from time and material contracts are
recognized as work progresses. Provisions for estimated losses on
uncompleted contracts are made in the period in which losses are determined.
The Company's uncompleted contracts include both undetermined and specific
dollar contracts for services. The Company has found that the
undetermined dollar contracts are longer term and
give it more flexibility in being responsive to customers' needs.
Due to the number and nature of undetermined dollar contracts and
customer scheduling changes which may effect the timing of
contract initiation and completion, it is difficult for management
to place an exact dollar value on its present uncompleted contracts.
INSURANCE
In addition to insurance required by statute, the Company maintains insurance
coverage for general liability. Based on scope of their operations,
subsidiaries maintain environmental and pollution liability insurance
as may be applicable.
PERSONNEL
The seasonality of the business causes the employment of the Company to vary
widely throughout the year. During the fiscal year ended March 31, 1997,
the number of personnel employed at one time by the Company fluctuated
between approximately 450 and 850.
Managerial and clerical employees of the Company and its subsidiaries are not
affiliated with a union nor are the project related employees of IceSolv.
Cannon Sline, Inc. utilizes union labor for field projects on an
as-needed basis. Pertinent collective bargaining agreements to which
Cannon Sline is signatory are: Collective bargaining agreements between
District Council No. 21 Brotherhood of Painters and Allied Trades,
and the Associated Master Painters and Decorators of
Philadelphia and Vicinity and Cannon Sline (expires 04/30/01);
National Power Generating Facilities Agreement between IBPAT,
AFL-CIO-CFL and Cannon Sline; Corrosion Control
Agreement in Industrial Plants between IBPAT, AFL-CIO-CFL and
Cannon Sline; Fire-Retardant Coatings Agreement between IBPAT,
AFL-CIO-CFL and Cannon Sline; National Tank Agreement between
IBPAT, AFL-CIO-CFL and Cannon Sline; National Rubberlining
Agreement between the International Brotherhood of Boilermakers, Iron
Shipbuilders, Blacksmiths, Forgers and Helpers, AFL-CIO and
Cannon Sline; National Bridge & Tunnel
Agreement between IBPAT, AFL-CIO-CFL and Bridge Painting Contractors;
National Erectors Association National Maintenance Agreement
between IBPAT, AFL-CIO-CFL and Cannon
Sline, and, Installation of Corrosion Proof Materials Agreement
between the Operative Plasterers and Cement Masons International
and Cannon Sline. Unless otherwise noted, the foregoing
agreements provide for annual renewal absent written notice.
Cannon Sline does not expect any
significant difficulty in renewing any of its agreements.
The following table sets forth the demographics of the Company's employees for
the period indicated.
<TABLE>
<CAPTION>
Description At Fiscal Year End
<S> <C> <C> <C>
1995 1996 1997
Union Project Personnel 630 454 432
Non-Union Project Personnel 754 215 83
Clerical, Administrative,
Sales and Management Personnel 172 130 83
Total Personnel 1,556 799 608
</TABLE>
ITEM 2 PROPERTIES
The Company and its subsidiaries maintain office and shop/storage facilities
suitable to support operations. These facilities are geographically
located to provide effective customer service:
The following properties are owned: Philadelphia, PA, 19143; Lakeland, FL,
Lake Charles, LA; Houston, TX; and Jacksonville, FL.
The following properties are leased: Longview, WA; Kennewick, WA; Palmyra,
PA; Cinnaminson, NJ; Sacramento, CA; Brunswick, OH; Atlanta, GA; and
Wilmington, DE.
There are no major encumbrances on the real properties with the exception of
liens granted to the Company's lenders on the Philadelphia, PA;
Lakeland, FL; Houston, TX; Lake Charles, LA and
Jacksonville, FL properties.
ITEM 3 LEGAL PROCEEDINGS
The Company or its subsidiaries are involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the Company's consolidated financial position.
On September 1, 1995, Oliver B. Cannon & Son, Inc., a wholly owned subsidiary
of the Company (Nuclear Support Services, Inc.), filed a voluntary
petition under Chapter 11 of the Bankruptcy Code. On September 5, 1995,
the Company and its other subsidiaries also filed for
protection under Chapter 11. Those subsidiaries are Sline Industrial
Painters, Inc., NSS Numanco, Inc., NSS of Delaware, Inc., IceSolv, Inc.,
and Henze Services, Inc. All cases were filed in the United States
Bankruptcy Court for the Middle District of Pennsylvania in
Harrisburg. A number of first day orders were presented to the Court,
including an order allowing joint administration under the style
and case of the parent, Nuclear Support Services,
Inc. at case number 1-95-01767. From the dates of the petitions,
all of the debtors continued to operate their business as
debtors-in-possession under Section 1107 (a) of the Bankruptcy Code.
On January 31, 1996, the Company filed its Joint Plan of Reorganization.
The Amended Plan was filed and confirmed by the Court on April 24, 1996.
On June 28, 1996 the Company met all the requirements of the
Amended Plan by executing the necessary banking documents for
securing exit financing. The Company exited bankruptcy on July 1, 1996.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Canisco Resources, Inc. had 2,170,540 shares of common stock outstanding and
391 shareholders of record at the end of fiscal year 1997. The Company's
common stock traded on the NASDAQ Stock Market under the symbol
"NSSI" until May 20, 1996 at which time the Company commenced trading
on the NASDAQ Small Cap Market under the symbol "CANR".
The above was the result of the merger of Nuclear Support Services,
Inc. into Canisco Resources, Inc. in accordance with the Company's
plan of reorganization. The number of shares of common
stock and shareholders of record did not change.
<TABLE>
<CAPTION>
Stock Highlights
FY 1997 FY 1996* FY 1995
<S> <C> <C> <C> <C> <C> <C>
Quarter
ending: High Low High Low High Low
06/30 2 5/8 2 1/8 * * 4 1/8 2 1/4
09/30 3 1/8 2 1/4 * * 2 3/4 1 7/8
12/31 5 2 7/8 1 5/8 1 1/4 2 3/8 1 1/2
03/31 4 1/4 2 5/8 3 1/8 1 1/4 2 3/4 3/4
* Fiscal year 1996 was an abbreviated year of six months.
ITEM 6 SELECTED FINANCIAL DATA
Financial Highlights for the Fiscal Year End
(in thousands except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
1997 (1) 1996(2) 1995(3) 1994(4)* 1993(5)*
<S> <C> <C> <C> <C> <C>
Revenues $50,195 $32,931 $83,116 $83,729 $49,405
Income (loss)
before reorganization
costs and income taxes 1,180 736 (830) (236) (2,250)
Income (loss) from
continuing operations 525 (357) (844) (125) (1,492)
Net earnings (loss) 452 (1,508) (2,849) (642) (2,997)
Net earnings (loss)
per share 0.21 (0.69) (1.31) (0.30) (1.38)
Total assets 21,301 26,101 39,389 35,489 22,780
Total long-term debt 11,274 5,587 5,587 15,946 8,935
Liabilities subject
to compromise - 5,262 8,146 - -
Equity per share 1.20 0.99 1.69 3.00 3.29
Return on average
equity 19% - - - -
Weighted average
common and common
equivalent shares 2,170 2,169 2,169 2,169 2,167
(1) Reflects net reorganization expenses of approximately $600,000 and
settlement of the Westinghouse litigation.
(2) Fiscal year end change from September 30th to March 31st and reflects
the discontinuance of Henze operations and includes approximately $1.1
million in reorganization costs.
(3) Reflects the discontinuance of Henze operations, a write-off of
approximately $3.4 million for business restructuring activities and
an accrual of $750,000 for Federal income tax relating to a prior year.
(4) Purchased Oliver B. Cannon & Son, Inc. and Sline Industrial Painters,
Inc. (Cannon Sline)
(5) Reflects a goodwill and intangibles write-off of approximately $2.4
million.
* These years have been restated to present Henze as discontinued
operations.
</TABLE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All results reported herein for fiscal year 97, fiscal year 95
and fiscal year 94 are for a full year compared to fiscal year 96 data which
is for an abbreviated year of six months resulting from a change
in fiscal year to end March 31 versus September 30.
During fiscal 1995, the Company determined that the valve repair business as
then currently conducted by its Henze subsidiary, did not fit the
Company's future strategy. Effective June 6, 1996, the Company
divested of substantially all the assets and business of its Henze subsidiary
and it is identified in the financial statements as a discontinued operation.
As a result, the line items on the Company's Consolidated Statement of
Operations from "Revenues from services" through "Income (Loss) from
continuing operations" (inclusive) are presented absent the effects
of Henze's operations (which are identified as discontinued operations and
presented as a separate line item on a net basis). Results from
continuing and discontinued operations are then
combined to produce net earnings (loss). Results of operations for fiscal
year 1994 are restated accordingly.
Results of Operations 1997 Compared to 1996
Fiscal year 1997 revenues were $50,195,000 compared to $32,931,000 for fiscal
year 1996. The decrease on an annualized basis was due to the sale of
NSS Numanco in February, 1996 and the sale of Henze in June, 1996.
The power generation market contributed $15,592,000 or thirty-one
percent (31%) of the 1997 total revenues compared to $15,596,000 or forty-
seven percent (47%) of fiscal year 1996 revenues. The petro-chemical
business remained constant on a percentage basis at twenty-one
percent (21%). The pulp and paper market contributed twenty-five percent
(25%) of revenue in 1997 versus eighteen (18%) in fiscal year 1996. The
revenue contribution of all other markets collectively was twenty-three
percent (23%) compared to fourteen percent (14%) in fiscal year 1996.
The contribution of the various markets reflect the diversification
strategy of the Company.
The gross margin of the Company was $9,538,000 compared to $4,987,000 for the
six month 1996 fiscal year. As a percent of revenue, gross margin was
nineteen percent (19%) compared to fifteen percent (15%) in fiscal year
1996. This increase in gross margin percentage is due to the
divestiture of the staff augmentation business, which traditionally
depressed gross margins on a consolidated basis.
General and administrative expenses were $7,829,000 compared to $4,579,000 for
the prior year. This increase was due to the full 12 month fiscal year
offset somewhat by reduced expenses as a result of the Reorganization.
Income from operations increased to $1,709,000 from $407,000. This increase
was attributable to the full year business period along with increases in
gross margin and decrease in general and administrative expenses.
Interest expense for the year was $963,200 compared to $670,000 in fiscal year
1996. The increase was due to the full twelve month fiscal period
compared to the prior year offset somewhat by the reduction in
interest rates and reduction of debt.
The Company had other expenses, net of income, of $169,000 and $148,000 for
fiscal years 1997 and 1996 respectively. In 1997 significant items were
reorganization expenses, gain on the discount of compromised liabilities
and settlement of the litigation against Westinghouse. In
fiscal year 1996, significant items were reorganization expenses and gain on
the sale of the Company's NSS Numanco subsidiary.
Accrued income tax expense for fiscal year 1997 was $52,000 net of
approximately $300,000 resulting from settlement of a prior period
tax audit compared to a tax benefit of $54,000 for the
fiscal year ended March 31, 1996.
Net income from continuing operations was $525,000 or 24 cents per share
compared to a loss of $357,000 or 16 cents per share a year ago. Losses
attributable to discontinued operations were approximately $73,000
compared to a loss of $1,151,000 in the prior fiscal year.
Combining the results of continuing and discontinued operations the Company
posted a net income of $452,000 or $0.21 per share compared to a
loss of $1,508,000 or $0.69 per share a year ago.
Results of Operations 1996 Compared to 1995
Fiscal 1996 revenues were $32,931,000 compared to $83,116,000 for fiscal year
1995. The decrease on an annualized basis was due to the sale of NSS
Numanco in February, 1996. The power generation market contributed
$15,596,000 or forty-seven percent (47%) of 1996 total
revenues compared to $44,255,000 or fifty-three percent (53%) of fiscal year
1995 revenues. The petro-chemical business accounted for twenty-one
percent (21%) of revenues compared to seventeen percent (17%) in
fiscal year 1995. The pulp and paper market contributed eighteen
percent (18%) of revenue in 1996 versus fifteen percent (15%) in fiscal year
1995. The revenue contribution of all other markets collectively was
fourteen percent (14%) compared to fifteen percent (15%) in fiscal
year 1995. The contribution of the various markets reflect the
diversification strategy of the Company.
The gross margin of the Company was $4,987,000 compared to $12,901,000 for
fiscal year 1995. As a percent of revenue, gross margin was consistent at
approximately fifteen percent (15%).
General and administrative expenses decreased to $4,579,000 from $12,177,000
the prior year. This decrease was due to the abbreviated fiscal year,
deletion of prior year one-time expenses and reduced expenses as a
result of the Reorganization.
Income from operations decreased to $407,000 from $724,000 primarily due to
the abbreviated fiscal year.
Interest Expense decreased to $670,000 from $1,554,000 in fiscal year 1995 as
a result of the abbreviated fiscal year and reduction of debt.
Gain on the sale of NSS Numanco and miscellaneous income totaled approximately
$1,000,000 in fiscal 1996. These gains were offset by reorganization
expenses of $1,147,000.
Net loss from continuing operations for fiscal year 1996 was $357,000 compared
to $844,000 the prior year. Losses attributable to discontinued operations
were $586,000 from operations and $565,000 for disposal of assets,
both net of income tax benefits. Combining the losses from
continuing and discontinued operations, the Company posted a net loss of
$1,508,000 or $0.69 per share versus $2,849,000 or $1.31 per share
loss for the prior year.
Results of Operations 1995 Compared to 1994
Fiscal year 1995 revenues were $83,116,000 compared to $83,729,000 for fiscal
year 1994. The power generation market contributed $44,255,000 or
fifty-three percent (53%) of 1995 total revenues compared to
$54,361,000 or sixty-five percent (65%) of fiscal year 1994 revenues. The
petro-chemical business accounted for seventeen percent (17%) of revenues
compared to fourteen percent (14%) in fiscal year 1994. The pulp and
paper industry contributed fifteen percent (15%) of revenue in 1995
versus eleven percent (11%) in fiscal year 1994. The revenue
contribution of all other businesses collectively was fifteen percent (15%)
compared to ten percent (10%) in fiscal year 1994. These shifts in market
contribution reflect the effectiveness of
the Company's diversification strategy.
The gross margin increased nine percent (9%) in 1995 to $12,901,000
attributable to the Company's focus on its more profitable lines of
business. Margin contribution from the power
generation industry decreased fourteen percent (14%) to $6,376,000. These
were more than offset by gains from the petro-chemical, pulp and paper
and other industries combined which
contributed $6,525,000 compared to $4,460,000 the prior year.
General and administrative expenses increased to $12,177,000 from $10,932,000
in fiscal year 1994. The increase in 1995 included one time business
restructuring expenses of $2,209,000.
Net of these expenses, general and administrative expenses decreased to
$9,968,000 or twelve percent (12%) of revenues compared to thirteen
percent (13%) in fiscal year 1994.
Income from operations decreased to $724,000 from $909,000 in fiscal year 1994
as gains made in gross margin and reduction of ongoing general and
administrative expenses were offset in
1995 by the one-time business restructuring expenses.
Interest expense increased from the prior year by $313,000 to $1,554,000.
This increase was attributable to higher interest rates for 1995 over 1994.
As a result of recognizing an income tax accrual of $750,000 related to prior
years, offset somewhat by a reduction in its valuation allowance, the
Company's income tax benefit was only
$171,000. Fiscal year 1994 had an income tax benefit of $111,000.
Net loss from continuing operations in 1995 was $844,000 compared to a loss of
$125,000 for fiscal year 1994 primarily due to the restructuring expenses
of $2,209,000 noted above. Losses
attributable to discontinued operations were $2,005,000 versus $518,000 a year
ago. Combining the loss from continuing operations and discontinued
operations, the Company posted a net loss
of $2,849,000 or $1.31 per share loss for the year compared to a loss of
$642,000 or $0.30 per share loss in fiscal year 1994.
Liquidity and Capital Resources
The Company's ability to generate cash adequate to meet its needs depends
primarily upon payments for its services and periodic bank borrowings.
These sources of liquidity are reduced by the payment of direct costs,
taxes, purchase of property and equipment and periodic
repayment of the Company's revolving line of credit and term debt.
The Company was operating as a Debtor-In-Possession under the terms of Chapter
11 Reorganization of the United States Bankruptcy Code, Case Number 1-95-01767
prior to its emergence from bankruptcy on July 1, 1996.
As of March 1, 1996 the Company entered into a
cash collateral stipulation allowing it to use its own cash for continued
operations.
The use of cash collateral continued through July 1, 1996, when the Company
secured financing with a new lender, BNY Financial Corporation.
This refinancing consists of a five year commitment for an $11,000,000
revolving credit line and $3,900,000 in long term debt.
At March 31, 1997, the Company had borrowed approximately $5,400,000 on its
revolving credit line of $11,000,000 and had an outstanding principal
balance of $3,315,000 on its long term secured loan obligation.
The Company is in compliance with the debt covenants as
amended from time to time.
At March 31, 1997, the Company had working capital of approximately $5,269,000
compared to working capital of $4,050,000 for fiscal year end 1996.
The increase in working capital was due primarily to the decrease in
notes payable to the bank which was reclassified to long term debt,
offset somewhat by the disposition of assets due to the sale of NSS Numanco
and Henze.
The Company anticipates that working capital and available bank credit will be
sufficient to meet cash needs for the coming year. Capital expenditures of
approximately $600,000 are budgeted for fiscal year 1998 for upgrading
equipment to support existing and expected future contract work.
Looking Forward
Having accomplished the corporate restructuring and return to profitability,
the Company anticipates continued profitability going forward. Of course,
this will depend on several factors including continued favorable
economic conditions in the markets served by the Company and a
reasonable competitive environment.
Cautionary Statement
Statements in this Report on Form 10K which express the "belief",
"anticipation" or "expectation", as well as other statements which are
not historical fact, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Action of 1995 and
involve risks and uncertainties that could cause actual results to differ
materially from those projected.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Financial Statements
March 31, 1997 and 1996 and September 30, 1995 and 1994
With Independent Auditors' Report Thereon
Independent Auditors' Report
The Board of Directors and Shareholders
Canisco Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Canisco
Resources, Inc. (formerly Nuclear Support Services, Inc.) and subsidiaries
as of March 31, 1997 and 1996, and the related consolidated statements
of operations, shareholders' equity, and cash flows for the
year ended March 31, 1997, the six months ended March 31, 1996, and the years
ended September 30, 1995 and 1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements 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 consolidated 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
Canisco Resources, Inc. and subsidiaries at March 31, 1997 and 1996,
and the results of their operations and their cash flows for
the year ended March 31, 1997, the six months ended March 31, 1996,
and the years ended September 30, 1995 and 1994, in conformity with
generally accepted accounting principles.
May 23, 1997
Atlanta, Georgia
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
March 31, 1997 and 1996
Assets 1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,308,225 550,432
Accounts receivable
(notes 3 and 5):
Billed, less allowances of $199,050
and $760,965 at March 31, 1997 and
1996, respectively 8,637,956 10,567,409
Unbilled 222,193 1,159,966
Other 209,885 378,436
Total accounts receivable 9,070,034 12,105,811
Inventory (note 5) 407,166 1,177,691
Deferred income taxes (note 6) 391,000 2,005,000
Prepaid expenses and other current
assets 1,590,187 1,540,655
Costs and estimated earnings
in excess of billings on
uncompleted contracts (note 3) 924,075 1,837,958
Total current assets 13,690,687 19,217,547
Property and equipment (note 5):
Land 954,100 964,100
Buildings and improvements 1,085,812 1,422,687
Machinery and equipment 2,378,759 7,573,640
Furniture and fixtures 374,803 1,213,809
Vehicles 419,921 707,995
5,213,395 11,882,231
Less accumulated depreciation 1,543,280 6,277,851
3,670,115 5,604,380
Deferred income
taxes (note 6) 2,297,000 1,007,000
Intangible pension asset (note 7) 1,009,474 -
Other assets 633,675 272,370
Total assets $ 21,300,951 26,101,297
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1997 1996
<S> <C> <C>
Current liabilities:
Notes payable (note 5) $ 756,969 1,190,007
Notes payable to bank (note 5) - 3,683,354
Current portion of long-term
debt (note 5) 2,053,314 2,062,524
Accounts payable (note 4) 2,092,506 1,857,874
Accrued payroll and
employee benefits (note 4) 1,442,713 1,795,679
Billings in excess of costs
and estimated earnings
on uncompleted contracts (note 3) 516,617 784,278
Other accrued expenses (note 4) 1,559,913 3,793,400
Total current liabilities 8,422,032 15,167,116
Liabilities subject to
compromise under reorganization
proceedings (note 4) - 5,262,285
Note payable to bank (note 5) 5,412,020 -
Long-term debt, less current
portion (note 5) 3,808,314 3,524,000
Accrued pension cost (note 7) 1,052,197 -
Total liabilities 18,694,563 23,953,401
Shareholders' equity (note 9):
Common stock, $.0025 par value,
authorized 10,000,000 shares,
issued 2,477,592 and 2,476,242
shares at March 31, 1997 and
1996, respectively;
outstanding 2,170,540 and
2,169,190 shares at
March 31, 1997 and 1996,
respectively 6,194 6,190
Additional paid-in capital 3,478,576 3,472,506
Retained earnings 3,751,755 3,299,337
Treasury stock, at cost (4,630,137) (4,630,137)
Total shareholders'equity 2,606,388 2,147,896
Commitments and
contingencies (notes 7 and 11)
Total liabilities and
shareholders' equity $ 21,300,951 26,101,297
</TABLE>
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Operations
Year ended March 31, 1997, Six Months ended March 31, 1996,
and Years ended September 30, 1995 and 1994
Six months
Year ended ended Years ended
March 31, March 31, September 30,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Revenues from services (note 8) $ 50,195,491 32,930,854 83,115,904 83,729,024
Cost of services 40,657,144 27,944,340 70,215,224 71,887,234
Gross margin 9,538,347 4,986,514 12,900,680 11,841,790
General and administrative
expenses 7,829,001 4,579,371 12,176,557 10,932,301
Income from operations 1,709,346 407,143 724,123 909,489
Interest expense (963,120) (670,457) (1,554,135)(1,241,150)
Gain on sale of Numanco
subsidiary (note 10) - 883,232 - -
Other income (expense), net 433,440 116,364 (190) 96,133
Income (loss) before
reorganization
costs and income taxes 1,179,666 736,282 (830,202) (235,528)
Reorganization costs:
Professional fees (996,371)(1,147,074) (185,019) -
Gain on discount of
compromised
liabilities (note 4) 393,518 - - -
Income (loss) from continuing
operations before income
taxes 576,813 (410,792) (1,015,221) (235,528)
Income tax expense
(benefit) - (note 6) 51,690 (54,000) (171,000) (111,000)
Income (loss) from
continuing operations 525,123 (356,792) (844,221) (124,528)
Discontinued operations
(note 10):
Loss from operations of
discontinued
subsidiary (net of income
tax benefit of
$243,069, $1,080,000, and
$424,000 in 1996, 1995, and
1994, respectively) - (586,029) (2,004,755) (517,765)
Loss from disposal of
discontinued subsidiary
(net of income tax benefit
of $48,470 and $335,000
in 1997 and
1996, respectively) (72,705) (565,000) - -
Loss from discontinued
operations (72,705) (1,151,029) (2,004,755) (517,765)
Net earnings (loss) $ 452,418 (1,507,821) (2,848,976) (642,293)
Earnings (loss) per share:
Continuing operations $ .24 (.16) (.39) (.06)
Discontinued operations (.03) (.53) (.92) (.24)
Net earnings (loss)
per share $ .21 (.69) (1.31) (.30)
Weighted average common
and common
equivalent shares 2,169,865 2,169,190 2,169,190 2,169,190
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Shareholders' Equity
Year ended March 31, 1997, Six Months ended March 31, 1996,
and Years ended September 30, 1995 and 1994
Common stock Treasury stock
Number Add'l Number
of paid-in Retained of
shares Amount capital earnings shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
at
9/30/93 2,476,242 $ 6,190 3,494,542 8,298,427 309,022 $(4,659,843) 7,139,316
Exercise
of
options - - (22,036) - (1,970) 29,706 7,670
Net loss - - - (642,293) - - (642,293)
Balance
at
9/30/94 2,476,242 6,190 3,472,506 7,656,134 307,052 (4,630,137) 6,504,693
Net loss - - - (2,848,976) - - (2,848,976)
Balance
at
09/30/95 2,476,242 6,190 3,472,506 4,807,158 307,052 (4,630,137) 3,655,717
Net loss - - - (1,507,821) - - (1,507,821)
Balance
at
03/31/96 2,476,242 6,190 3,472,506 3,299,337 307,052 (4,630,137) 2,147,896
Exercise
of
options 1,350 4 6,070 - - - 6,074
Net
earnings - - - 452,418 - - 452,418
Balance
at
03/31/97 2,477,592 $ 6,194 3,478,576 3,751,755 307,052 $(4,630,137) 2,606,388
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Cash Flows
Year ended March 31, 1997, Six Months ended March 31, 1996,
and Years ended September 30, 1995 and 1994
Six months
Year ended ended Years ended
March 31 March 31 September 30,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net earnings (loss) $ 452,418 (1,507,821) (2,848,976) (642,293)
Adjustments to reconcile
net earnings (loss)
to net cash provided
by operating activities:
Depreciation
and amortization 644,467 837,393 1,441,179 1,493,619
Deferred income
taxes 324,000 (515,000)(1,197,000) (583,000)
Gain on sale of
Numanco subsidiary - (883,232) - -
Loss accrued on
disposal of
discontinued
subsidiary - 900,000 - -
Gain on discount
of compromised
liabilities (393,518) - - -
Other- 116,080 1,640 373 -
Change in assets
and liabilities
net of effects
from purchases
and sales of
subsidiaries:
Decrease
(increase)
in accounts
receivable 3,035,777 8,997,213 (4,774,332) 2,700,422
(Increase)
decrease
in
inventory (39,141) 28,726 428,734 (290,808)
(Increase)
decrease
in prepaid
expenses
and other
current
assets (213,511) 38,190 2,118,394 (442,617)
Decrease
(increase)
in costs and
estimated
earnings in excess
of billings on
uncompleted
contracts 913,883 922,481 (1,399,176) 1,054,379
Decrease
(increase)
in other
assets 272,217 (267,495) 129,100 139,357
(Decrease)
increase in
accounts payabl (708,278) (2,521,433) 4,853,357 994,149
Increase
(decrease)
in accrued
payroll and
employee
benefits 787,047 (1,230,826) 248,683 (413,328)
(Decrease)
increase
in other
accrued
expenses (2,715,328) (775,286) 1,304,819 734,420
(Decrease)
increase
in billings
in excess
of costs
and
estimated
earnings on
uncompleted
contracts (267,661) 4,557 411,140 (1,929,331)
Net cash
provided
by
operating
activities 2,092,372 4,143,547 717,562 2,815,342
Cash flows
from investing
activities:
Purchase
of property
and equipment (117,075) (22,686) (534,809) (986,975)
Sale of property
and equipment - 44,019 5,887 45,348
Purchase of
marketable
securities - - (218,427) -
Sale of
marketable
securities - 325,924 37,232 -
Acquisition
of
businesses,
net of
cash acquired - - - (8,315,335)
Proceeds from
sale of
Numanco
subsidiary - 2,350,000 - -
Proceeds
from
sale
of Henze
subsidiary 1,200,000 - - -
Net cash
provided
(used)
by
investing
activities 1,082,925 2,697,257 (710,117) (9,256,962)
Cash flows from
financing activities:
Net borrowings
(payments) on
notes payable $ 1,295,628 (8,107,298) 1,086,033 1,568,162
Proceeds from
long-term debt 3,900,000 - - 7,000,000
Debt issuance costs (745,522) - - -
Principal payments
on long-term debt (6,873,684) (32,341) (1,155,158) (455,283)
Exercise of stock
options 6,074 - - 7,670
Net cash
provided
(used) by
financing
activities (2,417,504) (8,139,639) (69,125) 8,120,549
Net increase
(decrease)
in cash
and cash
equivalents 757,793 (1,298,835) (61,680) 1,678,929
Cash and cash
equivalents at
beginning of period 550,432 1,849,267 1,910,947 232,018
Cash and cash
equivalents at end
of period $ 1,308,225 550,432 1,849,267 1,910,947
Cash paid during
the period for:
Interest $ 1,004,516 738,566 1,861,850 1,247,760
Income taxes $ 23,654 10,407 123,113 363,798
Supplemental
disclosure of
noncash financing
activity -
increase in
intangible asset
resulting from
minimum pension
liability adjustment $ 1,009,474 - - -
See accompanying notes to consolidated financial statements
</TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
Year ended March 31, 1997, Six Months ended March 31, 1996,
and Years ended September 30, 1995 and 1994
(1) Plan of Reorganization and Basis of Presentation
On September 5, 1995 (the "Petition Date"), Canisco Resources, Inc.
(formerly Nuclear Support Services, Inc.) - (the "Debtor") filed a
voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy
Court for the Middle District of Pennsylvania in Harrisburg. Under
Chapter 11, certain claims against the Debtor in existence prior to
the filing of the petition for relief under the
federal bankruptcy laws were stayed while the Debtor continued business
operations as Debtor-in-possession. These claims are reflected in the
March 31, 1996 consolidated balance sheet as "Liabilities subject to
compromise under reorganization proceedings."
The Debtor exited its bankruptcy reorganization on July 1, 1996.
(2) Summary of Significant Accounting Policies
(a) Basis of Consolidation
The consolidated financial statements include the accounts of Canisco
Resources, Inc. and its wholly owned subsidiaries (together referred
to as the "Company"). All significant intercompany transactions and
balances have been eliminated in consolidation. The results of
operations of the Company's Henze Services, Inc. subsidiary are
shown as discontinued operations for all periods presented. In 1996,
the Company changed its name from Nuclear Support Services, Inc.
to Canisco Resources, Inc. and changed its fiscal year-end from
September 30 to March 31.
(b) Accounting Estimates
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the dates of the consolidated
balance sheets and income and expenses for the periods
Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents. Included in cash and cash
equivalents at March 31, 1997 is cash of approximately $1,028,000
restricted as to use in connection with the Company's workers'
compensation insurance program.
(d)Revenue and Cost Recognition
Revenues from fixed-price and modified fixed-price construction
contracts are recognized on the percentage-of-completion method,
measured by the cost-to-cost method. Revenues from cost-plus-fee
contracts are recognized on the basis of costs incurred during the
period plus the fee earned, measured by the cost-to-cost method.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs, and depreciation costs. General and
administrative costs are charged to expense as incurred. Provisions
for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in job performance,
job conditions, and estimated profitability, including those arising
from contract penalty provisions, and final contract settlements
may result in revisions to costs and income and are recognized in
the period in which the revisions are determined.
Profit incentives are included in revenues when their realization is
reasonably assured. An amount equal to contract costs attributable to
claims is included in revenues when realization is probable and the
amount can be reliably estimated.
The asset, "Cost and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of
amounts billed. The liability, "Billings in excess of costs and
estimated earnings on uncompleted contracts," represents billings in
excess of revenues recognized. Contract retentions are included in
accounts receivable.
(e) Inventory
Inventory consists primarily of consumable supplies and is stated at
the lower of average cost or market.
(f) Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets
ranging from three to 40 years. Capital leases are included at the
capitalized amount less accumulated amortization. Amortization of
capital leases is included in depreciation expense. Leasehold
improvements are amortized over the shorter of their estimated useful
lives or the terms of the respective leases.
Maintenance and repairs are expensed when incurred, and expenditures
for improvements are capitalized. Any gains or losses from the
disposal of assets are recorded in the year of disposal.
(g) Stock Option Plan
Prior to April 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense to be recognized over
the related vesting period would generally be recorded on the date of
grant only if the current market price of the underlying stock
exceeded the exercise price. On April 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation ("SFAS 123"), which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net earnings (loss) and pro forma earnings (loss)
per share disclosures for employee stock option grants made in fiscal
1996 and future years as if the fair-value based method defined in
SFAS 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS 123.
(h) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
on April 1, 1996. This statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs
to sell. Adoption of this statement did not have a material impact on
the Company's financial position, results of operations, or liquidity.
(i) Income Taxes
Deferred income taxes are recognized for the tax consequences of
"temporarydifferences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities.
Additionally, the effect on deferred taxes of a change in tax rates
is recognized in earnings in the period that includes the enactment date.
(j) Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains reserves
for potential credit losses and such losses have been within management's
expectations.
(k) Net Earnings (Loss) Per Share of Common Stock
Primary earnings (loss) per common share and common share equivalent
are based on the weighted average number of shares outstanding and
common share equivalents derived from dilutive stock options. Fully
diluted earnings per share are not significantly different from
primary earnings per share.
(l) Reclassifications
Certain reclassifications were made to the 1996, 1995, and 1994
consolidated financial statements to conform to classifications
adopted in 1997.
(3) Costs and Estimated Earnings on Uncompleted Contracts and Retainage
Costs and estimated earnings on uncompleted contracts are summarized as
follows:
<TABLE>
<S> <C> <C>
March 31,
1997 1996
Costs incurred on uncompleted contracts $ 69,831,710 58,747,846
Estimated earnings 15,092,433 11,905,167
84,924,143 70,653,013
Less billings to date 84,516,685 69,599,333
$ 407,458 1,053,680
Included in the accompanying
consolidated balance
sheets under the following captions:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $ 924,075 1,837,958
Billings in excess of costs
and estimated earnings on
uncompleted contracts (516,617) (784,278)
$ 407,458 1,053,680
</TABLE>
Accounts receivable billed include amounts retained by customers, in
accordance with contract provisions, of approximately $222,000 and
$660,000 at March 31, 1997 and 1996, respectively. These amounts
are expected to be collected within one year.
(4) Liabilities Subject to Compromise Under Reorganization Proceedings
As of March 31, 1996, certain prepetition liabilities were approved by
the Bankruptcy Court for payment and are included in accounts payable,
accrued payroll and employee benefits, and other accrued expenses in
the March 31, 1996 consolidated balance sheet.
Additionally, secured debt which was eventually paid in full in
accordance with its original terms is included in notes payable to bank.
The remainder of the Company's prepetition liabilities whose
disposition was dependent upon the outcome of the Chapter 11
proceedings are classified in the March 31, 1996 consolidated balance sheet
as liabilities subject to compromise under reorganization proceedings.
These liabilities as of March 31, 1996 are summarized as follows:
Unsecured capital lease obligations $ 31,308
Trade accounts payable and other unsecured
liabilities 5,230,977
$ 5,262,285
In accordance with the bankruptcy reorganization plan, $3,217,480 of the
Company's prepetition liabilities were compromised and are to be paid
to creditors in ten equal quarterly payments. These payments began
October 1, 1996 and bear interest at 2% per annum. In accordance
with Statement of Position 90-7, Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code, the total payments have been
discounted at 9% resulting in a gain of $393,518.
(5) Long-Term Debt and Notes Payable
Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt is summarized as follows:
March 31,
1997 1996
<S> <C> <C>
Term loan payable to bank,
collateralized by the
Company's accounts receivable,
inventory, machinery and equipment,
real estate, and general intangibles.
The note bears interest at
prime + 1.0% (9.30% at March 31, 1997)
and is payable in equal monthly
installments through June 2001 $ 3,315,000 -
Term loan payable to bank;
paid off in 1997 - 5,586,524
Prepetition compromised liabilities,
net of discount
of $260,000 at March 31, 1997;
effective interest
rate of 9% payable in equal
quarterly installments
through January 1,1998 2,546,628 -
Capital lease obligations - 31,308
5,861,628 5,617,832
Less current maturities 2,053,314 2,062,524
Less liabilities subject
to compromise under
reorganization proceedings - 31,308
$ 3,808,314 3,524,000
</TABLE>
<TABLE>
At March 31, 1997, future long-term debt payments are as follows:
<S> <S>
1998 $2,053,314
1999 2,053,314
2000 780,000
2001 780,000
2002 195,000
$5,861,628
</TABLE>
Based on the borrowing rates currently available to the Company for debt
with similar terms and average maturities, the fair value of long-term debt
approximates its carrying value.
Notes Payable
The Company had an installment note payable for insurance premiums of
$329,383 at March 31, 1996. The note was paid off in 1997. Also
included in notes payable at March 31, 1997 and 1996 are cash overdrafts
of $756,969 and $860,624, respectively.
Notes Payable to Bank
On June 28, 1996, the Company entered into an $11,000,000 revolving credit
agreement (the "Credit Agreement") with a bank which expires on
June 1, 2001. The amount outstanding under the Credit Agreement was
$5,412,020 at March 31, 1997. Borrowings bear interest at the prime
rate plus 0.75% (9.05% at March 31, 1997), and are secured by
the Company's accounts receivable, inventory, machinery and equipment,
real estate, and general intangibles. The Credit Agreement, among
other things, requires the Company to meet various covenants including
minimum levels of tangible net worth and earnings before interest,
taxes, depreciation, and amortization. Commitment fees are 1/4 of 1% of
the average daily unused amount of the Credit Agreement. The Company is
also required to pay a monthly collateral monitoring fee of $7,500.
At March 31, 1996, the Company had a revolving loan agreement with two
participating financial institutions under which the Company was in
default. The amount outstanding under this revolving loan agreement
was $3,683,354 at March 31, 1996. The amount outstanding under the
agreement is classified as a current liability in the March 31, 1996
consolidated balance sheet due to the events of default. The revolving
loan agreement was paid off in June 1996 with the establishment of the
Credit Agreement described above.
(6) Income Taxes
Income tax expense (benefit) relating to continuing operations consists
of the following:
<TABLE>
<CAPTION>
Six months
Year ended ended Years ended
March 31, March 31, September 30,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Current:
Federal $ (272,310) - 579,000 325,000
State - - (88,000) 62,000
Total current (272,310) - 491,000 387,000
Deferred -
Federal and state 324,000 (54,000) (662,000) (498,000)
Total income tax
expense (benefit) $ 51,690 (54,000) (171,000) (111,000)
</TABLE>
The reconciliation between the tax expense (benefit) computed by
multiplying pretax income (loss) from continuing operations by
the U.S. Federal statutory tax rate and the
reported amounts of income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Six months
Year ended ended Years ended
March 31, March 31, September 30,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Computed at U.S.
statutory tax rate $ 196,000 (140,000) (345,000) (80,000)
State income taxes,
net of Federal
income tax effect 21,000 (14,000) (26,000) (29,000)
Federal income taxes
relating to prior
year (298,000) - 534,000 -
Decrease in beginning-
of-year balance
of valuation
allowance - - (613,000) -
Nondeductible expenses
and other, net 132,690 100,000 279,000 (2,000)
Total income tax
expense (benefit) $ 51,690 (54,000) (171,000) (111,000)
(Continued)
</TABLE>
SFAS 109 requires the recognition of deferred tax assets and liabilities
for both the expected future tax impact of differences between the
financial statement and tax basis of assets and liabilities, and for
the expected future tax benefit to be derived from tax loss
and tax credit carryforwards. SFAS 109 additionally requires the
establishment of a valuation allowance to reflect the likelihood
of realization of deferred tax assets. The tax effects of temporary
differences that give rise to significant portions
of the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
March 31,
1997 1996
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 26,000 276,000
Inventory valuation allowance - 293,000
Operating loss carryforwards 2,452,000 778,000
Accruals not deducted for tax purposes 466,000 1,479,000
Other 167,000 277,000
Total gross deferred tax assets 3,111,000 3,103,000
Less valuation allowance 71,000 71,000
Net deferred tax assets 3,040,000 3,032,000
Deferred tax liabilities:
Fixed asset depreciation 251,000 -
Other 101,000 20,000
Total deferred tax liabilities 352,000 20,000
Net deferred tax asset $ 2,688,000 3,012,000
</TABLE>
The Company's operating loss carryforwards, which total approximately
$6,287,000 at March 31, 1997, expire beginning in 2010. The valuation
allowance for deferred tax assets as of April 1, 1996 was $71,000
and did not change for the year ended March 31, 1997. In assessing
the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred
tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income
over the periods which the deferred tax assets are deductible management
believes it is more likely than not the Company will realize the benefits
of these deductible differences, net of the existing valuation
allowances at March 31, 1997.
In 1995, the Internal Revenue Service (IRS), completed an audit of the
Company's income tax returns for the years ended September 30, 1993,
1992, 1991, and 1990. As a result of the audit, the IRS challenged
the write-off for tax purposes of certain intangible
assets made during the year ended September 30, 1993. The Company had
previously accrued $750,000 relating to this audit. The Company
settled this matter for approximately $450,000 in April 1997.
(7) Employee Benefit Plans
Effective October 1, 1996, the Company established a defined benefit
pension plan for the benefit of a certain select group of former (retired)
senior management. The benefits to be paid are based on specified
amounts for a specified period of time. The Company has decided to
fund the plan by contributing amounts when necessary for benefit
disbursements.
The following table sets forth the plan's funded status at March 31,
1997:
Actuarial present value of accumulated plan benefits,
including vested benefits of $1,052,197 $ 1,052,197
Plan assets at fair value -
Accumulated plan benefits in excess of plan assets 1,052,197
Unrecognized prior service cost (1,009,474)
Minimum liability adjustment 1,009,474
Accrued pension cost $ 1,052,197
Net pension cost for the period from
October 1, 1996 to March 31, 1997
included the following components:
Interest cost on projected benefit obligation $ 40,955
Amortization of prior service cost 51,768
$ 92,723
The weighted-average discount rate used to measure the projected benefit
obligation was 8.0%.
Effective February 1, 1990, the Company established the Nuclear Support
Services, Inc. Retirement Savings Plan (401(k) Plan) for qualified
Company employees. No Company contributions were made to the Plan
during any of the periods presented.
The Company terminated the Plan effective March 31, 1996.
The Company established an Employee Stock Purchase Plan in 1988 for
substantially all of its employees. The Plan offers employees the
opportunity to purchase Company common stock through regular
payroll deductions. Participation in this Plan is voluntary,
and the Company pays transaction fees for purchases made under this Plan.
The Company is obligated under the terms of a thrift plan for
substantially all employees of its subsidiary, Cannon Sline, Inc.,
not covered by union-sponsored plans. The Plan
allows participants to contribute after-tax earnings up to a maximum of
10% of annual compensation. The Plan provides for Company matching
and additional discretionary contributions as defined in the Plan
document. Cannon Sline expensed approximately
$150,000, $48,000, $74,000, and $135,000 in combined matching and
discretionary contributions to the Plan during the year ended
March 31, 1997, the six months ended March 31, 1996, and the years
ended September 30, 1995 and 1994, respectively.
Cannon Sline is required to contribute to pension plans (defined
contribution) administered by collective bargaining organizations.
Contributions are based on hours worked, as specified in the
various contracts. Information regarding these plans is not
currently made available by the union administrators or trustees.
(8) Major Customer
In the years ended September 30, 1995 and 1994, one customer accounted
for 16% and 12%, respectively, of consolidated revenues. No single customer
accounted for more than 10% of consolidated revenues in the year ended
March 31, 1997 or the six months ended March 31, 1996.
(9) Stock-Based Incentive Plans
(a) Stock Appreciation Rights Plan
On January 1, 1995, the Board of Directors adopted the Nuclear Support
Services, Inc.Non-Qualified Executive Stock Appreciation Plan
(the "SAR Plan") to provide incentive to key officers and executives
of the Company. A total of 230,000 appreciation rights (Rights) can
be granted under the SAR Plan through January 1, 2001.
Rights granted under the SAR Plan are immediately exercisable and
expire five years from the date of grant. Each Right entitles the
grantee to receive in cash, upon exercise
thereof, the excess of the market value of one share of the Company's
common stock on the date of exercise over a price specified at the
date of grant. At March 31, 1997, a total of 180,000 Rights have been
granted under the SAR Plan at grant prices ranging from $2.50-$3.00
per Right. As of March 31, 1997, no Rights have been exercised. The
total appreciation value of all Rights granted as of March 31, 1997
was approximately $7,000.
(b) Stock Option Plan
On February 6, 1990, the Board of Directors adopted the Nuclear
Support Services, Inc. 1990 Stock Option Plan (the "1990 Plan") to
provide incentive to key full-time employees and consultants of
the Company. Under the 1990 Plan, stock options could be granted
for up to 416,897 shares of common stock. Options granted under the
1990 Plan are immediately exercisable and expire five years from the
date of grant. All stock options were granted at not less than the
fair market value of the stock on the date granted. The 1990 Plan
was effective January 1, 1990 and expired December 31, 1994.
Options outstanding under the 1990 Plan remain exercisable by their
terms after expiration of the Plan.
On February 8, 1991 the Board of Directors adopted the Directors Stock
Option Program wherein Directors, at their election made in advance,
could accept non qualified stock options in lieu of cash for all or a
portion of Director compensation. Such options could be acquired at
the rate of 17% of the market value of the stock as of the date such
compensation was payable. Options granted under this program were
included in the 1990 Plan and are exercisable at the fair market value
of the stock on the date that each Directors compensation became
payable.
Following is a summary of activity in the 1990 Plan for the year ended
March 31, 1997, the six months ended March 31, 1996, and the years
ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Option price per share
Weighted
Shares Range average
<S> <C> <C> <C>
Options outstanding at
September 30, 1993 193,497 $3.25-9.00 5.52
Issued 221,746 3.38-5.50 4.12
Exercised (1,970) 3.75 3.75 3.75
Canceled or expired (15,641) 3.75-6.88 5.27
Options outstanding at
September 30, 1994 397,632 3.25-9.00 4.75
Issued 11,258 4.12 4.12
Canceled or expired (76,292) 3.25-7.13 4.40
Options outstanding at
September 30, 1995 332,598 3.38-9.00 4.81
Canceled or expired (43,805) 3.75-6.13 4.45
Options outstanding at
March 31, 1996 288,793 3.38-9.00 4.87
Exercised (1,350) 4.50 4.50
Canceled or expired (38,696) 3.75-8.50 6.12
Options outstanding and exercisable
at March 31, 1997 248,747 3.38-9.00 4.68
</TABLE>
The following table summarizes information about stock options
outstanding at March 31, 1997:
<TABLE>
<CAPTION>
Options outstanding
Range of Weighted average Weighted average
exercise Number remaining exercise
prices outstanding contractual life price
<S> <C> <C> <C>
$ 3.38-5.00 159,412 17 months $ 3.96
5.01-9.00 89,335 16 months 5.96
(10) Dispositions and Discontinued Operations
In February 1996, the Company sold certain operations of its NSS Numanco
subsidiary. The sale resulted in proceeds to the Company of $2,350,000
and a pretax gain of approximately $883,000.
During September 1995, the Company adopted plans to sell the operations
of its Henze Services subsidiary. Revenues from this subsidiary were
$2,226,000, $4,964,000, $14,567,000, and $12,661,000 for the year ended
March 31, 1997, the six months ended March 31, 1996, and the years
ended September 30, 1995 and 1994, respectively. Certain
expenses have been allocated to discontinued operations, including
interest expense, which was allocated based on the ratio of Henze
net assets to the sum of total net assets of the consolidated
Company plus consolidated debt. Interest expense allocated to
discontinued operations for the year ended March 31, 1997, the six months
ended March 31, 1996, and the years ended September 30, 1995 and 1994 was
$45,439, $183,937, $255,702, and $187,673, respectively. The assets and
liabilities of Henze included in the Company's consolidated balance sheet
as of March 31, 1996 are summarized as follows:
Current Assets $ 3,018,000
Property and Equipment, net 1,620,000
Other Assets 35,000
Current Liabilities 2,207,000
$2,466,000
On June 4, 1996, the Company completed the sale of Henze which resulted
in proceeds to the Company of $1,350,000 and a pretax loss of
approximately $1,000,000.
(11) Commitments and Contingencies
(a) Legal Matters
The Company or its subsidiaries are involved in various claims and
legal actions arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these matters will
not have a material adverse effect on the Company's consolidated
financial position.
In November, 1994, the Company filed suit against Westinghouse
Electric Corporation alleging the breach of various terms of a certain
Asset Purchase Agreement and the related Supply Agreement. The
lawsuit was settled in June 1996.
(b) Rental Agreements
The Company leases office space and various equipment under operating
leases which provide for minimum rentals as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
March 31,
1998 $ 330,986
1999 283,686
2000 91,098
2001 51,960
2002 21,650
Total minimum lease payments $ 779,380
</TABLE>
Rental expense under all agreements for the year ended March 31, 1997,
the six months ended March 31, 1996, and the years ended September 30,
1995 and 1994 was approximately $490,000, $597,000, $1,019,000, and
$890,000, respectively.
(12) Comparable Consolidated Statements of Operations Data (Unaudited)
Consolidated statements of operations data for the six-month periods
ended March 31 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues from services $ 37,117,738 42,598,661
Gross margin 5,854,480 5,839,688
Income tax benefit (976,780) (292,000)
Earnings (loss) from
continuing operations (1,465,170) 53,965
Earnings (loss) from
discontinued operations (1,319,023) 235,335
Net earnings (loss) (2,784,193) 289,300
Earnings (loss) per share $ (1.28) .13
ITEM 9 CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is presented under
captions "Election of Directors," "Executive Officers," and
"Compliance with Section 16(a)" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held August 12, 1997 and is
incorporated herein by reference.
ITEM 11 EXECUTIVE COMPENSATION
The information required by Item 11 presented under the
caption "Committees and Meetings, and under several captions
commencing with "Executive Compensation" and continuing through and
including "Performance Graph," in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held August 12, 1997 and is
incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is presented under the
caption "Security Ownership of Certain Beneficial Owners and
Management," in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held August 12, 1997 and is incorporated herein by
reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is presented under
captions, "Compensation Committee Interlocks and Insider
Participation," and "Certain Transactions," in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held August 12, 1997
and is incorporated herein by reference.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
A. Reports on Form 8-K and other forms
Form 8-K filed September 20, 1995 relating to the
Bankruptcy.
Form 8-K filed May 9, 1996 related to Confirmation
of Plan of Reorganization Change of Fiscal Year.
Form 8-B filed May 25, 1996 related to Registration
of Securities of Certain Successor Issuers
Form 10-C filed June 3, 1996 related to Name Change
B. Exhibits
Exhibit Number Description of Document
2.1 Plan and Agreement of Merger by and
among Nuclear Support Services, Inc.,
NSS of Delaware, Inc. and Canisco
Resources, Inc. (filed as exhibit
2.1 to the Company's form 8-B filed May 24, 1996
and incorporated herein by reference).
2.2 Agreement for purchase of stock of Oliver
B. Cannon & Son, Inc. and Sline Industrial
Painters, Inc. (filed as Exhibit 2.1 to the
Company's form 8-K dated November 19,
1993 and incorporated herein by reference).
3.1 Articles of Incorporation of the Company,
as amended (filed as Exhibit 3.1 to Form 8-
B filed May 24, 1996 and incorporated
herein by reference).
3.2 By-laws of the Company (filed as Exhibit
3.2 to Form 8-B filed May 24, 1996 and
incorporated herein by reference).
10.1 1990 Stock Option Plan (filed as Exhibit
28.2 to Registration Statement on Form S-8
(No. 33-33180) and incorporated herein by
reference)
22 Subsidiaries of the Registrant.
23 Accountants' Consent
27 Financial Data Schedule (EDGAR)
99.1 Index to Financial Statement
Schedule.
99.2 Independent Auditors' Report -
Schedule.
99.3 Schedule II - Valuation and
Qualifying Accounts.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DATE: June 30, 1997
CANISCO RESOURCES, INC.
/s/ Ralph A. Trallo
Ralph A. Trallo
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934,
this report has been signed below by the
following persons, on behalf of the Registrant and in the
capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
/s/Donald E. Lyons Chairman of the Board June 30, 1997
/s/Robert A. Hess Director June 30, 1997
/s/Dale L. Ferguson Director June 30, 1997
/s/Wm. Lawrence Petcovic Director June 30, 1997
/s/Heath L. Allen Director June 30, 1997
/s/Thomas P. McShane Director June 30, 1997
/s/ Joe C. Quick Director June 30, 1997
/s/ Ralph A. Trallo President, CEO June 30, 1997
/s/ Michael J. Olson
Chief Financial Officer June 30, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CANISCO RESOURCES, INC.'S FORM 10K FOR THE PERIOD ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,308,225
<SECURITIES> 0
<RECEIVABLES> 9,269,084
<ALLOWANCES> 199,050
<INVENTORY> 407,166
<CURRENT-ASSETS> 13,690,687
<PP&E> 5,213,395
<DEPRECIATION> 1,543,280
<TOTAL-ASSETS> 21,300,951
<CURRENT-LIABILITIES> 8,422,032
<BONDS> 10,272,531
0
0
<COMMON> 6,194
<OTHER-SE> 2,600,194
<TOTAL-LIABILITY-AND-EQUITY> 21,300,951
<SALES> 50,195,491
<TOTAL-REVENUES> 50,195,491
<CGS> 40,657,144
<TOTAL-COSTS> 7,829,001
<OTHER-EXPENSES> (169,413)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 963,120
<INCOME-PRETAX> 576,180
<INCOME-TAX> 51,690
<INCOME-CONTINUING> 525,123
<DISCONTINUED> (72,705)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 452,418
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
SUBSIDIARIES OF THE REGISTRANT
IceSolv, Inc. - a Pennsylvania corporation which was formed in June 1993.
Cannon Sline, Inc. -- a Pennsylvania corporation formed by merger of
Oliver B. Cannon & Son, Inc. & Sline Industrial Painters, Inc.
IMCON Painters, Inc. - a Texas corporation which was formed in
October, 1996.
Other notes:
(1) Canisco Resources, Inc. is the survivor by merger of Canisco
Resources, Inc., a Delaware corporation, Nuclear Support Services, Inc., a
Virginia corporation and NSS of Delaware, Inc. a Delaware corporation.
Shareholder approval of the merger of these entities was received at a
Special Meeting of Shareholders held March 29, 1996. The merger was
effective May 24, 1996.
(2) NSS Numanco, Inc. - The stock of NSS Numanco, Inc. was sold to
Nuvest L.L.C. of Tulsa, Oklahoma effective February 25, 1996.
(3) Henze Services, Inc. - Substantially all the assets of Henze were
sold to Harley Industries, Inc. of Tulsa, Oklahoma in June, 1996.
Exhibit 22
ACCOUNTANT'S CONSENT
We consent to incorporation by reference in the Registration Statement
(No. 33-33180) on Form S-8 of Canisco Resources, Inc. of our reports
dated May 23, 1997, relating to the consolidated balance sheets of Canisco
Resources, Inc. and subsidiaries as March 31, 1997 and 1996 and the
related consolidated statements of operations, shareholders' equity, and
cash flows and related schedule for the years ended March 31, 1997, the
six months ended March 31, 1996, and the years ended September 30,
1995 and 1994, which reports appear in the March 31, 1997 annual report
on Form 10-K of Canisco Resources, Inc.
Atlanta, Georgia
June 25, 1997
Exhibit 23
INDEX TO FINANCIAL STATEMENT SCHEDULE
FOR CANISCO RESOURCES, INC.
March 31, 1997 and 1996, September 30, 1995 and 1994
SCHEDULE II Valuation and Qualifying Accounts
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Canisco Resources, Inc.
Under date of May 23, 1997, we reported on the consolidated
balance sheets of Canisco Resources, Inc. and subsidiaries as of
March 31, 1997 and 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years ended
March 31, 1997, the six months ended March 31, 1996, and the years
ended September 30, 1995 and 1994, which are included in the
annual report on Form 10-K for the fiscal year 1997. In connection
with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial
statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
May 23, 1997
Exhibit 99.2
CANISCO RESOURCES, INC.
SCHEDULE II Valuation and Qualifying Accounts
March 31, 1997 and 1996 and September 30, 1995 and 1994
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
beginning operating at end of
of period expense Other Deductions period
<S> <C> <C> <C> <C> <C>
Description
Allowance for
doubtful accounts
deducted from
accounts
receivable in
the consolidated
balance sheets:
March 31, 1997 $760,965 265,360 -- 827,275 199,050
March 31, 1996 585,941 233,121 -- 58,097 760,965
September 30, 1995 784,330 572,096 -- 770,485(1) 585,941
September 30, 1994 107,606 1,359,415 276,434(2) 959,125(1) 784,330
Inventory reserves
deducted from
inventories in the
consolidated balance
sheets:
March 31, 1997 $800,000 -- -- 750,000(3) 50,000
March 31, 1996 800,000 -- -- -- 800,000
September 30, 1995 300,000 500,000 -- -- 800,000
September 30, 1994 150,000 100,000 50,000(2) -- 300,000
(1) Write-off of uncollectible accounts.
(2) Increase from acquisition of subsidiaries.
(3) Decrease from disposition of subsidiary.
Exhibit 99.3
</TABLE>
CANISCO RESOURCES, INC.
300 Delaware Avenue, Suite 714
Wilmington, Delaware 19801
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 12, 1997
To the Shareholders of Canisco Resources, Inc.
The Annual Meeting of the Shareholders of Canisco Resources, Inc. (the
"Company") will be held at the Sheraton Suites Wilmington, 422 Delaware Avenue,
Wilmington, Delaware on Tuesday, August 12, 1997, at 10:00 AM, prevailing time,
for the following purposes:
(1) To elect six Directors for the ensuing year as proposed in the attached
Proxy Statement;
(2) To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick, LLP, as the independent auditors of the Company for the
fiscal year commencing April 1, 1997;
(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on June 30, 1997, as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting. Accordingly, only shareholders of record at the
close of business on that date will be entitled to vote at the meeting.
Management of the Company extends a cordial invitation to all
shareholders to be present at the meeting.
The Annual Report for 1997 is enclosed herewith.
By Order of the Board of Directors
Ralph A. Trallo
President and Chief Executive Officer
Wilmington, Delaware
July 10, 1997
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE FILL IN, DATE, SIGN AND
RETURN YOUR PROXY PROMPTLY IN THE POSTAGE PAID, PRE-ADDRESSED ENVELOPE ENCLOSED
FOR THAT PURPOSE. IF YOU ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
CANISCO RESOURCES, INC.
300 Delaware Avenue, Suite 714
Wilmington, Delaware 19801
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on August 12, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Canisco Resources, Inc., (the "Company") of proxies
for use at the Annual Meeting of Shareholders to be held on Tuesday,
August 12, 1997, at the Sheraton Suites Wilmington, 422 Delaware Avenue,
Wilmington, Delaware, at 10 AM, prevailing time, and at any adjournment
thereof. This Proxy Statement and the accompanying form of proxy are
being mailed to shareholders on or about July 15, 1997.
A form of proxy is enclosed for use at the Annual Meeting. When the enclosed
form of proxy is signed, dated and returned, the shares represented
thereby will be voted in accordance with the instructions specified
thereon. If no contrary instructions are given, the shares will be
voted FOR the election of the six nominees for Directors named below;
FOR ratification of KPMG Peat Marwick, LLP as independent auditors for
the Company for the fiscal year commencing April 1, 1997; and, at the
discretion of the proxies, upon such other matters as may properly come
before the Annual Meeting. Any shareholder executing a form of
proxy may revoke that proxy by written notice delivered to the Company's
Secretary at any time before it is voted.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may, if necessary, be solicited by Directors,
Officers, or regular employees of the Company personally or by telephone or
telegram. It is contemplated that brokerage houses, nominees, and other
custodians and fiduciaries will be requested to send proxy material to their
principals, and the Company will reimburse them for their charges and
expenses in so doing.
The Company's Annual Report on Form 10K for the fiscal year ended March 31,
1997, accompanies this Proxy Statement, the meeting notice and the proxy.
VOTING SHARES
The Board of Directors has fixed the close of business on June 30, 1997, as
the record date for determination of the shareholders entitled to notice
of and to vote at the Annual Meeting of Shareholders or any adjournment
thereof. Shareholders of record as of that date will receive the notice
of Annual Meeting of Shareholders, the Proxy Statement, the proxy and
the Annual Report of the Company. As of June 30, 1997, there were 2,170,540
shares of common stock, par value $.0025 per share, outstanding and entitled
to notice of and to vote at the Annual Meeting. The Company has no other
class of stock outstanding. Each share of common stock is entitled to one
vote on each matter properly submitted to the shareholders for action at
the Annual Meeting. There are no cumulative voting rights.
VOTE REQUIRED
The nominees for the Board of Directors receiving a plurality of the votes
cast will be elected as Directors. An affirmative vote of a majority of the
shares present in person or by proxy and entitled to vote at the Annual
Meeting is required for shareholder approval for the proposal to ratify KPMG
Peat Marwick, LLP as independent auditors for the Company. Abstentions and
broker non-votes do not have the effect of negative votes, but may prevent
attainment of a quorum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 30, 1997
(unless otherwise noted), with respect to persons with beneficial ownership
of more than five percent (5%) of the Company's outstanding common stock:
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Owned(1) Percentage
of Class
<S> <C> <C>
Joe C. Quick 239,640(2) 11.04%
83 Almond Avenue
Hershey, PA 17033
ROI Capital Management, Inc. 174,600(3) 8.04%
One Bush Street, Suite 1150
San Francisco, CA 94104
Phronesis Partners, L.P. 111,800(4) 5.15%
2206 Beachwood Road
Amelia Island, FL 32034
</TABLE>
(1) The shares reported may be deemed to be beneficially owned under
rules and regulations of the U.S. Securities and Exchange
Commission, but the inclusion of these shares in this table
does not constitute an admission of beneficial ownership.
(2) The shares shown include 104,490 shares over which Mr. Quick
exerts sole voting and investment power and 42,124 shares subject
to stock options in favor of Mr. Quick. Mr. Quick shares voting
and investment power over the remaining shares which are held
by his spouse or certain relatives (excluding adult children).
(3) ROI Capital Management, Inc. and affiliates ROI Partners, L.P.,
ROI & Lane, L.P., Mark T. Boyer and Mitchell Soboleski,
report shared voting and investment power over 174,600 shares.
The information shown has been derived from ROI Capital Management,
Inc.'s form 13D filed with the SEC on or about January 25, 1996.
(4) Phronesis Partners, L.P. and James Wiggins report sole voting
and investment power over 111,800 shares. The information shown
has been derived from Phronesis Partner's form 13D filed with the
SEC on or about July 11, 1996.
The following table gives certain information as of June 30, 1997,
with respect to the beneficial ownership, direct or indirect, of the
Company's common stock by each present Director and Nominee for Director
and executive officer and by all Directors and executive officers as
a group, as reported by each person.
<TABLE>
<CAPTION>
Name Sole Voting Shared
and Voting and
Investment Investment Aggregate Percentage
Power Power Other Total (3) of Class
<S> <C> <C> <C> <C> <C>
Joe C. Quick 104,490 93,026 42,124 239,640 11.04%
D.L. Ferguson 19,000 30,000 31,470 80,470 3.71%
H.L. Allen 20,000 -0- 43,634 63,634 2.93%
R. A. Trallo 21,878 -0- 27,282 49,160 2.26%
W. L. Petcovic 886 -0- 43,723 44,609 2.06%
R. A. Hess -0- 21,800 5,932 27,732 1.28%
D. E. Lyons 1,350 -0- 13,396 14,747 0.68%
M. J. Olson(4) 2,871 -0- 10,000 12,871 0.59%
T. P. McShane 8,300 -0- 4,332 12,632 0.58%
All Directors
and
Officers
as a Group
(9 Persons) 178,775 144,826 221,893 545,495 25.13%
</TABLE>
(1) Included are shares held by the Director (or Officer)
and his spouse or certain relatives (excluding adult children).
(2) Shares subject to options in favor of the respective individual.
(3) The shares reported may be deemed to be beneficially owned under
rules and regulations of the U.S. Securities and Exchange Commission,
but the inclusion of these shares in this table does not constitute
an admission of beneficial ownership.
(4) Executive officers who are neither directors or nominees.
ELECTION OF DIRECTORS
Unless otherwise instructed, the persons named in the accompanying form of
proxy intend to vote the shares represented by the proxies for the election
of the six nominees listed below to the Board of Directors. All nominees are
presently Directors of the Company and were elected by the shareholders at the
last Annual Meeting. Directors elected at the Annual Meeting will hold office
until the next Annual Meeting of Shareholders or until their respective
successors are elected and qualified. In the event that any one or more
of the nominees should become unavailable for election at the time of
the Annual Meeting, for any reason, an event that the Board of
Directors does not anticipate, the persons named in the accompanying
form of proxy will vote for the remaining nominees and for such
substitute nominee or nominees, if any, as may be designated by
the Board of Directors.
The nominees this year are:
Dale L. Ferguson, Age 63. Employed by the Company from 1974 through
retirement on March 31, 1996. Director of the Company since 1974.
Donald E. Lyons (1), Age 67. Former President and CEO of
the Power Systems Group of Combustion Engineering (retired 1987).
Director of Salient 3 Communications, Inc. Director of the
Company since 1993 and Chairman of the Board since August, 1996.
Thomas P. McShane (1)(2), Age 44. 1987 to present, President
of McShane Group, Inc., (a financial and management consulting firm)
Timonium, MD. Director of the Company since 1991.
Wm. Lawrence Petcovic (1), Age 51. Director of Employment
& Training of The Ryland Group, Inc., Columbia, MD from 1989
to January 1993 and Director of Continuous
Improvement until December 1993. Business consultant for
L.P. Associates, Columbia, MD, 1994 to September, 1996.
Currently Vice President, Process Improvement and
Training of Chevy Chase Bank. Director of the Company since 1981.
Joe C. Quick (2), Age 62. Employed by the Company from 1974
through retirement on December 31, 1996. Chairman of the Board of
Directors from 1974 through fiscal year 1996. President from
February 1990 to December 1994 and Chief Executive Officer from
February 1990 to October 1995. Director of the Company since 1974.
Ralph A. Trallo, Age 52. President and CEO of Cannon Sline of
Philadelphia, PA; from 1987 to present. Named Senior Vice President
of the Company in April 1994. Named President and Chief Operating
Officer of Company in December 1994 and Chief Executive
Officer in October 1995. Mr. Trallo has an employment
contract with Company. Director of the Company since 1993.
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
On September 1, 1995, Oliver B. Cannon & Son, Inc., a wholly owned
subsidiary of the Company (Nuclear Support Services, Inc., predecessor
in interest to Canisco Resources, Inc.), filed a voluntary
petition under chapter 11 of the Bankruptcy Code. On September 5, 1995,
the Company and its other subsidiaries also filed for protection under
chapter 11. Those subsidiaries are Sline Industrial Painters,
Inc., NSS Numanco, Inc., NSS of Delaware, Inc., IceSolv, Inc.
and Henze Services, Inc. All cases were filed in the United States
Bankruptcy Court for the Middle District of Pennsylvania
in Harrisburg. A number of first day orders were presented
to the Court, including an order allowing joint administration
under the style and case of the parent, Nuclear Support
Services, Inc. at case number 1-95-01767.
On January 31, 1996, the Company filed its Joint Plan of Reorganization.
The Amended Joint Plan of Reorganization was filed and confirmed by the
Court on April 24, 1996. On June 28, 1996, the Company met all the
requirements of the Amended Plan by executing the necessary banking documents
for securing exit financing. The Company exited from bankruptcy on
July 1, 1996.
COMMITTEES AND MEETINGS
The Board of Directors meets on a regularly scheduled basis and, during the
fiscal year ended March 31, 1997, met on four occasions. During fiscal
year 1997, each Director was present for all of the meetings of the
Board of Directors. Outside Directors of the Company were paid an annual
retainer of $7,500. All Directors except the Chairman of the Board and
active employees, were paid $800 for each meeting attended and 2500 SAR's
at $3.00 per share; the Chairman was paid $1,200 for each meeting and
was awarded 25,000 SAR's at $3.00 per share.
The Audit and Compensation committees were active in fiscal year 1997. Each
committee member was present for all the meetings of the Board Committees
on which such Director served. Outside Board members appointed to
serve on the Compensation and Audit Committees were paid an annual
retainer of $1,500. In addition, outside Board members serving on
Committees, except the Committee Chairman, were paid $750
for each Committee meeting; the Chairman was paid $1,000.
The Audit Committee was created by the Board of Directors in October 1986.
The function of the Audit Committee is to recommend an accounting
firm to conduct an annual audit engagement to include audit scope
and results of such audit. The Audit Committee reviews the
adequacy of internal controls, Company policies and procedures, and
reports its findings to the Board of Directors. The Audit
Committee met twice during fiscal year 1997.
The Compensation Committee was created by the Board of Directors in February
1989. The function of the Compensation Committee is to administer
the Company's 1990 Stock Option Plan and the Director's Stock
Option Program. In July 1993, the Salary and Incentive Committee,
whose functions included determination and administration of plans
for salary and incentives for Company management and employees, including
directors' fees, was consolidated with the Compensation Committee.
The Compensation Committee met three times during fiscal year 1997.
The Board of Directors does not have a nominating committee or any other
committee performing similar functions.
EXECUTIVE OFFICERS
The following table identifies the Company's present executive
officers, sets forth their ages, principal occupation or employment
of each during the past five years, positions and offices held with
the Company and the terms served as such.
<TABLE>
<CAPTION>
Name Age Principal Occupation or Employment
<S> <C> <C>
Ralph A. Trallo 52 See Election of Directors.
Michael J. Olson 43 Vice President, Secretary/Treasurer and Chief
Financial Officer of Cannon Sline, Inc. since
1986. Named Acting Chief Financial Officer of
Nuclear Support Services, Inc. in January,
1995. Named Chief Financial Officer, Vice
President and Secretary/Treasurer of the
Company in April, 1995.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all
compensation paid or accrued by the Company and its subsidiaries
in respect to the three fiscal years for 1995, 1996 and 1997 to or
for the chief executive officer and each of the executive
officers of the Company whose compensation exceeded $100,000:
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Fiscal Year Compensation Long-Term
Long-Term
Compensation
Awards
Name Other annual Securities
and Principal Position Year Salary Bonus Compensation Underlying
($) ($)(2) ($)(3) Option/SAR(#)
<S> <C> <C> <C> <C> <C>
RALPH A. TRALLO
President, Chief
Executive Officer 1997 185,000 77,700 7,210 50,000(4)
and Director; 1996(1) 75,000 82,154 5,200 10,000(4)
also President 1995 150,000 167,904 9,600 10,000(4)
and CEO of Cannon
Sline
MICHAEL J. OLSON
Vice President, 1997 105,000 44,100 5,469 30,000(4)
Secretary/Treasurer 1996(1) 45,000 49,292 2,675 10,000(4)
and Chief Financial 1995 90,000 100,743 5,530 10,000(4)
Officer
</TABLE>
SAR (Stock Appreciation Rights)
(1) Fiscal year 1996 was a six month period from October 1,
1995 through March 31, 1996.
(2) Mr. Trallo and Mr. Olson did not participate in the Senior
Executive Group Compensation Program for 1995 or 1996 but were
covered under separate incentive arrangements with Cannon Sline.
Under those arrangements, Mr. Trallo and Mr. Olson were awarded
cash bonuses for 1995 and 1996. In fiscal year 1997, Mr. Trallo and
Mr. Olson were covered under the Company's Executive Compensation
Program and all renumeration was in accordance with that program.
Bonuses for Mr. Trallo and Mr. Olson for FY96 and FY97 have not been
paid as of the date of this proxy.
(3) Included in Other Compensation are Board of Director fees,
automobile allowances, and excess life insurance benefits
provided by the Company.
(4) A Stock Appreciation Program for Key Executives was established
in fiscal year 1995. Mr. Trallo and Mr. Olson were awarded SAR's
under this Program in 1995, 1996 and 1997.
STOCK OPTIONS
At the 1990 Annual Meeting, the shareholders approved the Nuclear Support
Services, Inc. 1990 Stock Option Plan (the "1990 Plan"), which is designed to
promote continuity of management and increased incentive to those key
employees and consultants responsible for the Company's long-range
financial success.
The 1990 Plan terminated on December 31, 1994, although outstanding options
at that time were not canceled by such termination. No immediate plans are in
place at this time to implement a new Stock Option Program for the Company.
The 1990 Plan is administered by the Compensation Committee formed by the
Board of Directors, which extended rights to selected employees or
consultants to purchase shares of stock in the Company at stated
option prices. The aggregate number of shares available for grant
under the 1990 Plan was 416,897. As of June 30, 1997, options for 247,954
shares were outstanding to approximately 24 employees and/or consultants,
including Company directors. 1350 options were exercised during the
1997 fiscal year.
Options may be incentive stock options, which qualify for certain tax
benefits (relating primarily to the deferral of gain recognition until the
underlying stock is sold and the treatment of same as a capital gain as
opposed to ordinary income), or non-qualified options, which do not
qualify as incentive stock options. Incentive stock options must be
granted at not less than the fair market value of the stock on
the date granted, and non-qualified stock options must be granted at
not less than one-half of the fair market value of the stock on the
date granted. The Company may take a deduction for
gain realized by its employees upon the exercise of a non-qualified option.
Generally this is not so in the case of an incentive stock option.
Options generally are nontransferable, conditioned upon continued employment
with the Company and expire within five years of grant or upon stated
occurrences. Other option terms may vary depending upon provisions of the
specific option agreement. On January 26, 1990, the Company filed an initial
S-8 Registration Statement for Company stock subject to the 1990 Plan and on
September 8, 1993, filed an amendment to its registration statement for
additional shares subject to the Plan. The closing market price of the
Company's common stock as of April 30, 1997 was $2.125 per share.
DIRECTORS STOCK OPTION PROGRAM
The Directors' Stock Option Program (as Amended), was approved by
shareholder vote at the Annual Meeting in February 1992. The Program provides
a mechanism for compensating Directors for their services by means other than
cash payment, promotes Director stock ownership and increases
the incentive for those responsible for the long-range success of
the Company. Pursuant to the Program, each Director may elect to
take non-qualified stock options for Company stock issued under the
1990 Stock Option Plan in lieu of all or a portion of the normal cash
retainer and/or fee for Board or Committee meetings
attended. Directors who select options pursuant to the Program
make a standing election to do so (or to rescind such election) at
least six (6) months in advance of the meeting for which the election
(or rescission) is to be effective. For the purpose of this election,
options are valued at 17% of the market price of the stock on grant
date (i.e., date set for payment of retainer or meeting fees
as the case may be) and applied against the fees to be earned.
The Company's 1990 Stock Option Program expired in December 1994, thus fees
and retainers for Board and Committee participation are
being paid to Directors in cash. As of June 30, 1997,
Messrs. Hess, Allen, Petcovic, McShane, Lyons and Trallo had
acquired options for 5,932; 43,634; 43,723; 4,332; 13,396; and
2,282, respectively, pursuant to the Program with exercise prices
ranging from $3.38 to $9.00.
SENIOR EXECUTIVE GROUP COMPENSATION PROGRAM
The following tables list information regarding stock options and stock
appreciation rights (SAR) granted to and exercised or held by the Company's
executive officers in respect to its last fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential realizable
value at
assumed annual
rates of stock
price appreciation
Individual Grants for option term
Number of Percent of
securities Total
underlying Options/
options/ SARs Exercise Market Exp 0%($) 5%($) 10%($)
SARs granted to base Price Date
granted employees price Grant
(#) (1) in fiscal ($/sh) ($/sh)
Name year (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.TRALLO 50,000 29% 3.00 4.12 2002 $56,250 $113,000 $182,000
M.OLSON 30,000 18% 3.00 4.12 2002 $33,750 $67,800 $109,200
</TABLE>
(1) Stock Appreciation Rights awarded to Mr. Trallo and Mr. Olson.
(2) The market price of these shares when they were awarded on
August 13, 1996, to be effective on the Grant Date of 1-1-97 was $2.75/share.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of
securities unexercised
Shares underlying in-the-money
acquired unexercised options/SARs
on Value options/SARs at FY end
exercise realized at FY end ($) (1)
Name (#) ($) (#) (1)
<S> <C> <C> <C> <C>
RALPH A. TRALLO -0- -0- 97,282(2) $2500
MICHAEL J. OLSON -0- -0- 60,000(3) $2500
(1) Options include those granted under the Company's Senior
Executive Compensation Program, the Company's Stock Option
Program, the Directors Stock Option Program, and the Company's
Stock Appreciation Plan. All options and SAR's are exercisable.
(2) Mr. Trallo's options include 27,282 shares under the Company's
Stock Option Program and the Director's Stock Option Program and
70,000 shares under the Company's Stock Appreciation Plan.
(3) Mr. Olson's options include 10,000 shares under the Company's
Stock Option Program and 50,000 shares under the Company's Stock
Appreciation Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and makes recommendations to the Board
of Directors on matters of Executive Officer compensation. The current
members of the committee are William Lawrence Petcovic (Chairman),
Thomas P. McShane and Donald E. Lyons, all of whom are non-employee
"outside" directors as noted in this proxy statement. The committee
establishes the Company's policies and performance requirements
for Executive Officer compensation and the total compensation paid for
each fiscal year. The committee met before or after scheduled Board
meeting as part of the Chairman's program to minimize Board
expenses. The committees report for fiscal year 1997 is set forth below.
The Committee formulated the 1997 Executive Compensation Program to
replace the direct compensation program in the employment contracts for Mr.
Trallo and Mr. Olson that were part of the Cannon-Sline acquisition.
Since the exit from bankruptcy, the committee limited the Executive
Program to full-time Canisco executives, Ralph Trallo and Michael Olson.
Subsidiary officer compensation was delegated to the executive group.
Under the 1997 Executive Compensation Program, the total compensation
for executives is managed utilizing three (3) components: base pay,
incentive pay and benefits.
Base salaries for FY 1997 changed for Mr. Trallo and Mr. Olson. Based on
compensation data for similar organizations, the base pay for each executive
was increased to $185,000 for Mr. Trallo and $105,000 for Mr. Olson. The FY
1997 base salary is applicable for three years or until designated revenue
goals are achieved. In addition, 50,000 SAR's for Mr. Trallo and
30,000 SAR's for Mr. Olson were part of the conversion from Cannon Sline
employment agreements to Canisco employment agreements. Incentive pay was
linked directly to earnings per share. Benefits, the third component of
executive pay were unchanged for FY97.
The Company entered into employment contracts with Mr. Trallo and Mr.
Olson during FY97. Both executives were party to similar contracts assumed
in the acquisition of Cannon-Sline in 1993. The term of the Agreements is a
minimum of twelve (12) months with a twelve month notice required by the
Company and/or the executive of intent to terminate. The executives are
bound by competitive restrictions upon termination of employment.
Compensation is comprised of three components: base pay, incentive pay
and benefits.
As an enticement to retain its key executives, the Company entered into a
Change of Control Severance Agreement with Mr. Trallo and Mr. Olson which
provides the following payments and benefits to the executives in the
event the executive is terminated within three (3) years after a change
of control of the corporation: 1. Lump sum cash payment of three times
highest annual compensation paid or payable to the executive during the
thirty-six months preceding the termination of the executive. 2. All
rights and full vesting and accrued benefits under profit sharing, pension,
retirement or deferred compensation plans, as may be applicable. 3.Continued
participation in the life, accident, health insurance and other fringe
benefits, provided prior to the change of control, for a period of three
years after termination at no cost to the executive. Immediate vesting
in any incentive compensation, stock options and other similar programs
as may be applicable.
Effective October 1, 1996, the Board of Directors approved for adoption a
Non-Qualified Retirement Program for Joe C. Quick, Dale Ferguson and Robert
Hess. This Plan provides for annual retirement benefits of
$50,000 to Messrs. Ferguson and Hess and $65,000 for Mr. Quick over a ten
year period. The retirement benefit due Messrs. Ferguson and
Hess shall be offset by consulting fees paid prior to the effective date
of the Plan, but after their retirement from employment from the Company
in the amounts of $25,000 and $133,333, respectively.
Board of Directors compensation was also modified to include SAR's. In
addition, "Inside Directors" defined as any Director receiving any form of
income from the Company, are not eligible for retainers. Active
employees of the Company receive no Board compensation.
The Committee continues to focus on short term financial and customer
satisfaction results while positioning for long term business development.
The Compensation Committee
William Lawrence Petcovic
Thomas P. McShane
Donald E. Lyons
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than Board and Committee fees, there was no other compensation paid.
CERTAIN TRANSACTIONS
The firm of Keefer, Wood, Allen, and Rahal, of which Heath L. Allen,
a Director, is a partner, performed services during fiscal year 1997
in an amount less than 5% of Keefer, Wood, Allen & Rahal's annual
gross revenues.
Mssrs. Robert A. Hess and Dale Ferguson received $31,000 and $31,250,
respectively, in fiscal year 1997 for consulting services provided to the
Company.
COMPLIANCE WITH SECTION 16(a)
For 1997 fiscal year, no late Form 4 filings were submitted.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its common stock with (i) the
cumulative total return of a broad market index (the NASDAQ MARKET INDEX)
and (ii) the cumulative total return of the Standard Industrial
Classification Index, Code 1799 - Specialty Contractors. Last year,
the Company used a peer group index that compared entities which provided
technical manpower and support services. The selection of public
companies for the current peer group is based on a published, industry
index and looks to entities which provide specialty construction services.
This industry index more closely reflects the business complexion of the
Company. Cumulative return for the Company and both indices were calculated
assuming dividend reinvestment. For fiscal year 1997, the Standard
Industrial Classification Index, Code 1799 - Specialty Contractors was
comprised of the following nine (9) publicly traded companies: Canisco
Resources, Inc.; Cerbco Inc. CL A; Chicago Bride & Iron NV; Heist C.H.
Corporation; IDM Environmental Corp. Instituform East, Inc.; Leak-X
Environmental CP; National Environ Service Co.; and U.S. Bridge of NY, Inc.
</TABLE>
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURNS
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
COMPANY FISCAL YEAR ENDING
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
CANISCO
RESOURCES,
INC. 100 85.19 72.22 27.78 37.04 38.89
INDUSTRY
INDEX 100 105.77 108.84 59.38 70.19 38.77
BROAD
MARKET 100 111.91 129.33 137.21 184.56 206.47
</TABLE>
THE INDUSTRY INDEX CHOSEN WAS:
SIC CODE 1799 - SPECIAL TRADE CONTRACTORS, N.E.C.
THE BROAD MARKET INDEX CHOSED WAS:
NASDAQ MARKET INDEX
THE CURRENT COMPOSITION OF THE INDUSTRY INDEX IS
AS FOLLOWS:
CANISCO RESOURCES, INC.
CERBCO. INC. CL A
CHICAGO BRIDGE & IRON NV
HEIST C.H. CORPORATION
IDM ENVIRONMENTAL CORP.
INSITUFORM EAST INC.
LEAK-X ENVIRONMENTAL CP
NATIONAL ENVIRON SVC CO
U.S. BRIDGE OF NY INC.
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors selects each year the accounting firm to perform the
financial audit and related work for the Company for that year. KPMG Peat
Marwick, LLP has been selected by the Board of Directors as the independent
auditors for the Company's current fiscal year commencing April 1, 1997.
Selection of this firm will be submitted for ratification at the Annual
Meeting. In the event the shareholders do not ratify the appointment of KPMG
Peat Marwick, LLP, the selection of other independent accountants will be
considered by the Board of Directors.
A representative of KPMG Peat Marwick, LLP, expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
If a shareholder intends to present a proposal at the next Company's Annual
Meeting of Shareholders, the proposal must be submitted in writing
and received by the Secretary of the Company at its executive offices
located at 300 Delaware Avenue, Suite 714, Wilmington, Delaware no
later than March 15, 1998, in order to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the notice of the
Annual Meeting and knows of no matters to be brought before the meeting by
others. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy, or their substitutes,
to vote said proxy in accordance with their best judgment on such matters
to the extent allowed by SEC Rule 14a-4(c) which limits the purpose for
which discretionary authority may be granted.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION WILL BE AVAILABLE AT THE ANNUAL MEETING.
ANY SHAREHOLDER, UPON WRITTEN REQUEST TO THE SECRETARY, MAY OBTAIN A COPY OF
THE COMPANY'S FORM 10-K WITHOUT CHARGE.
By Order of the Board of Directors
Ralph A. Trallo
President and Chief Executive Officer
Wilmington, Delaware
July 10, 1997
This Proxy is Solicited on Behalf of the Board of Directors of
CANISCO RESOURCES, INC.
300 Delaware Avenue, Suite 714
Wilmington, Delaware 19801
The undersigned hereby appoints Joe C. Quick, Dale L. Ferguson, or Ralph A.
Trallo as proxy (and if the undersigned is a proxy, as substitute proxy),
each with the power to appoint his substitute, and hereby authorizes any one
of them to vote as designated on the reverse side all the shares of common
stock of Canisco Resources, Inc., held of record by the undersigned on
June 30, 1997, at the Annual Meeting of Shareholders to be
held on Tuesday, August 12, 1997, at 10:00 AM at the Sheraton Suites
Wilmington, 422 Delaware Avenue, Wilmington, Delaware, and at any
adjournment thereof. (continued on reverse side)
============================================================================
ALL PROXIES WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS NOTED HEREON.
IN THE ABSENCE OF INSTRUCTIONS, THIS PROXY WILL BE TREATED AS GRANTING
AUTHORITY TO VOTE "FOR" THE ELECTION OF DIRECTORS AND IN FAVOR OF
PROPOSALS 2 AND 3.
1. FOR all nominees WITHHOLD D.L.Ferguson, D.E.Lyons, T.P.McShane,
listed to the AUTHORITY to Wm.L. Petcovic, J.C.Quick, R.A.Trallo
right (except as vote for
marked to the nominees INSTRUCTION: To withhold authority to
contrary) listed to the vote for any individual nominee, write
right that nominee's name in the space
provided below
2. FOR AGAINST ABSTAIN With respect to the ratification of the
selection by the Board of Directors of
KPMG Peat Marwick, LLP as Certified
Public Accountants, as independent
auditors of the Company for the fiscal
year commencing April 1, 1997.
3. FOR AGAINST ABSTAIN OTHER BUSINESS: In their discretion,
the proxies are authorized to vote
upon such other business as may
properly come before the meeting.
The undersigned hereby acknowledges receipt of
the Proxy Statement dated July 15, 1997 and
hereby revokes any proxy or proxies heretofore
given to vote shares at said meeting or any
adjournments thereof.
Dated:_____________________________________________
Sign here exactly as name(s) appear on left
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED, ADDRESSED ENVELOPE
INDEX TO EXHIBITS
Exhibit No. Description
22 Subsidiaries of the Registrant
23 Accountants' Consent
27 Financial Data Schedule
99.1 Index to Financial Statement Schedule for
Canisco Resources, Inc.
99.2 Independent Auditors' Report
99.3 Schedule II - Valuation and Qualifying Accounts
