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, 1998
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, 1998:
Common Stock, par value $.0025 per share $4,848,215
The number of shares outstanding as of the close of business on
June 25, 1998, was 2,465,540 shares of Common Stock,
par value $.0025 per share.
CANISCO RESOURCES, INC. - 1998 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 35
PART III
Item 10. Directors and Executive Officers of the Registrant 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain Beneficial Owners
and Management 35
Item 13. Certain Relationships and Related Transactions 35
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 36
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders on August 11, 1998, 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. Prior to 1993, 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's exited from
bankruptcy on July 1, 1996.
In February, 1996, 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.
On March 24, 1998, the Court administratively closed the bankruptcy
proceedings pending the resolution of two contested matters.
Subsequent to the fiscal year ended March 31, 1998, the Company acquired all
the outstanding stock of Mansfield Industrial Coatings, Inc. Mansfield
provides specialty coating, asbestos, and lead abatement services to power
generation, pulp and paper, petro-chemical and other general industries
located throughout the southeastern and gulf coast regions of the country.
The acquisition was completed April 22, 1998.
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 1998. Thirty-three percent (33%) of consolidated
revenues was attributable to nuclear, fossil fuel, hydro-electric and other
customers whose operations involve the production of electricity. This is an
increase from thirty-one percent (31%) in fiscal year 1997 and a reduction
from forty-seven percent (47%) in fiscal year 1995. This reduction of
dependence on the power generation industry is intentional and part of the
Company's strategy to balance its market mix.
Petro-chemical Market
Twenty-four percent (24%) of the Company's revenues in fiscal year 1998 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 years 1997 and 1996.
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 1998, twenty
percent (20%) was generated from customers in this industry compared to
twenty-five percent (25%) in fiscal year 1997 and eighteen percent (18%) in
fiscal year 1996.
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 1998 were generated from services provided
to this group of industries unchanged from fiscal year 1997 compared to
fourteen percent (14%) in fiscal year 1996.
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.
For the fiscal year ended March 31, 1998, Northeast Utilities accounted for
12% of consolidated revenues. No client represented more than ten percent
(10%) of revenues in fiscal years 1997 and 1996.
The Company operates primarily within the United States. The Company has or
is performing contracts in Alabama, Arizona, Arkansas, 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, the
company's 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, 1998, the
number of personnel employed at one time by the Company fluctuated between
approximately 450 and 800.
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 International 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
1998 1997 1996
<S> <C> <C> <C>
Union Project Personnel 405 432 454
Non-Union Project Personnel 81 83 215
Clerical, Administrative,
Sales and Management Personnel 92 83 130
Total Personnel 578 608 799
</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; Lakeland, FL;
Sulphur, LA; Houston, TX; and Jacksonville, FL; Chesterfield County, VA.
The following properties are leased: Longview, WA; Kennewick, WA; Palmyra,
PA; Riverside, 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 owned 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. For
information related to the Company's bankruptcy filing in 1995, please refer
to prior interim reports and Item 1.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended 1998.
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Canisco Resources, Inc. had 2,465,540 shares of common stock outstanding and
approximately 374 shareholders of record as of June 25, 1998.
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>
Stock Highlights
<CAPTION>
Fiscal Year Fiscal Year
Quarter 1998 1997
Ended High Low High Low
<S> <C> <C> <C> <C>
June 30 2 3/4 1 3/8 2 5/8 2 1/8
Sept 30 2 3/4 1 3/8 3 1/8 2 1/4
Dec 31 3 7/8 1 3/4 5 2 7/8
March 31 2 3/4 1 7/8 4 1/4 2 5/8
</TABLE>
ITEM 6 SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Financial Highlights for the Fiscal Year End
(in thousands except per share amounts)
1998 1997(1) 1996(2) 1995(3) 1994(4)
<S> <C> <C> <C> <C> <C>
Revenues $52,227 $50,191 $32,931 $83,116 $83,729
Income (loss)
before reorganization
costs and income taxes 659 1,180 736 (830) (236)
Income (loss) from
continuing operations 659 525 (357) (844) (125)
Net earnings (loss) 490 452 (1,508) (2,849) (642)
Basic earnings (loss)
per share 0.22 0.21 (0.69) (1.31) (0.30)
Total assets 20,633 21,301 26,101 39,389 35,489
Total long-term debt 10,256 11,274 5,587 5,587 15,946
Liabilities subject
to compromise - - 5,262 8,146 -
Equity per share 1.43 1.20 0.99 1.69 3.00
Return on average
Equity 17% 19% - - -
Weighted average
common and common
equivalent shares (basic) 2,193 2,170 2,169 2,169 2,169
(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 (a 6 month
period) 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)
</TABLE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All results reported herein for fiscal year 1998, fiscal year 1997 and fiscal
year 1995 are for a full year compared to fiscal year 1996 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).
In June , 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income. Statement No 130 established
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. Statement No. 130 is
effective for periods beginning after December 15, 1997. This Statement
affects reporting in financial statements only and will not have impact upon
results of operations, financial condition or long-term liquidity. The
Company is in compliance with the standards established by this Statement as
required.
The Company is in the process of conducting a comprehensive review of its
computer systems to identify the systems that could be affected by the 'Year
2000' issue. The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
of the Company's programs that have time-sensitive software may recognize a
date using '00' as the year 1900 rather than the year 2000. This could result
in a major system failure or miscalculations. The Company believes its
primary operating systems and software are Year 2000 compliant and expects
no adverse impact from the Year 2000 issue.
Results of Operations 1998 Compared to 1997
Fiscal year 1998 revenues were $52,227,000 compared to $50,195,000 for fiscal
year 1997. The increase was due primarily to the award of a multi-year
maintenance agreement in the power generation market. The power generation
market accounted for thirty-three percent (33%) of the 1998 total revenues
compared to thirty-one percent (31%) for fiscal year 1997 revenues. The
petro-chemical business contribution increased to twenty-four percent (24%)
from twenty-one percent (21%) for fiscal year 1997. The pulp and paper market
business represented twenty percent (20%) of revenue in 1998 versus twenty-
five percent (25%) in fiscal year 1997. This decline was driven by the
completion of several large capital projects performed in the prior year. The
revenue contribution of all other markets collectively remained constant on a
percentage basis at twenty three percent (23%). The contribution of the
various markets reflect the diversification strategy of the Company.
The gross margin of the Company was $9,377,000 compared to $9,538,000 for
fiscal year 1997 and as a percent of revenue, gross margin was eighteen
percent (18%) compared to nineteen percent (19%). This decrease in gross
margin percentage is attributable to several large capital projects completed
in the prior year, shifts in revenues between market sectors and the impact of
weather.
General and administrative expenses were $7,790,000 compared to $7,829,000 for
the prior year. As a percent of revenue, general and administrative expenses
decreased to 15% from 16%.
Income from operations decreased to $1,586,000 compared to $1,709,000 for
fiscal year 1997. This decrease was attributable to decreases in gross
margins offset somewhat by a decrease in general and administrative expenses.
Interest expense for the year was $1,004,000 compared to $963,200 in fiscal
year 1997. The increase was due primarily to the increase of the revolving
credit facility, the proceeds of which were used to pay certain long term debt
obligations.
The Company had other income, net of expenses of $77,000 in fiscal year 1998
compared to other expenses net of income of $169,000 for fiscal year 1997.
In 1997 significant items were reorganization expenses, gain on the discount
of compromised liabilities and settlement of the litigation against
Westinghouse.
Income tax expense for fiscal year 1998 was $168,500 compared to
$52,000 for the fiscal year ended 1997.
Net income from continuing operations was $490,000 or $0.22 cents per share
compared to $525,000 or $0.24 cents per share a year ago. There were no
losses attributable to discontinued operations in the period compared to a
loss of $73,000 or $0.03 cents per share in the prior fiscal year.
Combining the results of continuing and discontinued operations the Company
posted a net income of $490,000 or $0.22 cents per share (basic) compared to
$452,000 or $0.21 per share a year ago.
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
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.
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 consisted of a five year commitment for an $11,000,000 revolving
credit line and $3,900,000 in long term debt.
At March 31, 1998, the Company had borrowed approximately $6,526,000 on its
revolving credit line of $11,000,000 and had an outstanding principal balance
of $2,535,000 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, 1998, the Company had working capital of approximately $5,293,000
compared to working capital of $5,269,000 for fiscal year end 1997. The
increase in working capital was due primarily to the increase in other current
assets, accounts payable, and costs and earnings in excess of billings on
uncompleted contracts, offset somewhat by the decrease in accounts receivable
and accrued expenses and withholding.
Effective April 17, 1998, the Company amended its credit facility with its
current lender, BNY Financial Corporation. The amended credit facility
consists of a three year commitment for a $25,000,000 credit facility. The
amended facility includes a $5,000,000 acquisition credit line.
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 $1,000,000 are budgeted for fiscal year 1998 for upgrading
equipment to support existing and expected future contract work.
Looking Forward
Subsequent to year end, the Company accelerated payment of its prepetition
debt on a selected basis to those creditors willing to accept a discount.
This action will reduce expenses going forward. The Company has implemented a
growth plan and completed its first acquisition under that plan. Revenues
associated with the acquisition are anticipated to increase the Company's
revenue by forty percent (40%) with earnings increasing commensurately.
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. Certain factors such as competitive market pressures, material
changes in demand from larger customers, changes in weather, availability of
labor, changes in government policies and changes in economic conditions could
cause actual results to differ materially from those in the forward-looking
statements.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Financial Statements
Years Ended March 31, 1998 and 1997
Six Months ended March 31, 1996, and
Year ended September 30, 1995
(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, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years ended March 31,
1998 and 1997, the six months ended March 31, 1996, and the year ended
September 30, 1995. 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, 1998 and 1997, and the results
of their operations and their cash flows for the years ended March 31, 1998
and 1997, the six months ended March 31, 1996, and the year ended September
30, 1995, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
June 3, 1998
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
<CAPTION>
Consolidated Balance Sheets
March 31, 1998 and 1997
<S> <C> <C>
Assets 1998 1997
Current assets:
Cash and cash equivalents $ 1,188,393 1,308,225
Accounts receivable
Billed, less allowances of $137,933
and $199,050 at March 31, 1998 and
1997, respectively 7,749,599 8,637,956
Unbilled 242,930 222,193
Other 283,491 209,885
Total accounts receivable 8,276,020 9,070,034
Inventory 419,697 407,166
Deferred income taxes 289,000 391,000
Costs and estimated earnings
in excess of billings
on uncompleted contracts 1,377,433 924,075
Prepaid expenses and other
current assets 1,961,818 1,590,187
Total current assets 13,512,361 13,690,687
Property and equipment:
Land 954,100 954,100
Buildings and improvements 1,085,812 1,085,812
Machinery and equipment 2,545,281 2,378,759
Furniture and fixtures 404,811 374,803
Vehicles 389,516 419,921
5,379,520 5,213,395
Less accumulated depreciation 1,886,289 1,543,280
3,493,231 3,670,115
Deferred income taxes 2,116,000 2,297,000
Intangible pension asset 905,938 1,009,474
Other assets 605,779 633,675
Total assets $ 20,633,309 21,300,951
See accompanying notes to consolidated financial statements.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
March 31, 1998 and 1997
Liabilities and Shareholders' Equity 1998 1997
Current liabilities:
Current portion of long-term debt $ 1,974,993 2,053,314
Accounts payable and bank overdrafts 3,301,171 2,849,475
Accrued payroll and employee benefits 1,137,532 1,442,713
Billings in excess of costs and
estimated earnings on uncompleted
contracts 379,462 516,617
Other accrued expenses (note 4) 1,425,957 1,559,913
Total current liabilities 8,219,115 8,422,032
Note payable to bank 6,526,421 5,412,020
Long-term debt, less current portion 1,755,000 3,808,314
Accrued pension cost 962,869 1,052,197
Total liabilities 17,463,405 18,694,563
Shareholders' equity:
Common stock, $.0025 par value,
authorized 10,000,000 shares,
issued 2,477,592 shares at
March 31, 1998 and 1997,
outstanding 2,215,540 and
2,170,540 shares at
March 31, 1998 and 1997,
respectively 6,194 6,194
Additional paid-in capital 2,873,101 3,478,576
Retained earnings 4,242,146 3,751,755
Treasury stock, at cost (3,951,537) (4,630,137)
Total shareholders' equity 3,169,904 2,606,388
Commitments and contingencies
Total liabilities and shareholders' equity $20,633,309 21,300,951
</TABLE>
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Operations
Years ended March 31, 1998 and 1997,
Six Months ended March 31, 1996,
and Year ended September 30, 1995
Six months
ended Year ended
Year ended March 31, March 31, September 30,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Revenues from services $ 52,227,363 50,195,491 32,930,854 83,115,904
Cost of services 42,851,839 40,657,144 27,944,340 70,215,224
Gross margin 9,375,524 9,538,347 4,986,514 12,900,680
General and administrative
expenses 7,789,533 7,829,001 4,579,371 12,176,557
Income from operations 1,585,991 1,709,346 407,143 724,123
Interest expense (1,003,979) (963,120) (670,457) (1,554,135)
Gain on sale of Numanco
Subsidiary - - 883,232 -
Other income (expense), net 76,909 433,440 116,364 (190)
Income (loss) before
reorganization costs
and income taxes 658,921 1,179,666 736,282 (830,202)
Reorganization costs:
Professional fees - (996,371)(1,147,074) (185,019)
Gain on discount of
compromised liabilities - 393,518 - -
Income (loss) from continuing
operations before
income taxes 658,921 576,813 (410,792) (1,015,221)
Income tax expense
(benefit) 168,530 51,690 (54,000) (171,000)
Income (loss) from
continuing operations 490,391 525,123 (356,792) (844,221)
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Operations
Years ended March 31, 1998 and 1997,
Six Months ended March 31, 1996,
and Year ended September 30, 1995
Six months
ended Year ended
Years ended March 31, March 31, September 30,
1998 1997 1996 1995
Discontinued operations:
Loss from operations of
discontinued subsidiary
(net of income tax
benefit of $243,069 and
$1,080,000, in 1996
and 1995, respectively) $ - - (586,029) (2,004,755)
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)
Net earnings (loss) $ 490,391 452,418 (1,507,821) (2,848,976)
Earnings (loss) per share,
(basic):
Continuing operations $ .22 .24 (.16) (.39)
Discontinued operations - (.03) (.53) (.92)
Net earnings (loss) per share,
(basic) $ .22 .21 (.69) (1.31)
Weighted average common and
common equivalent shares
(basic) 2,193,040 2,169,865 2,169,190 2,169,190
Earnings (loss) per share:
(diluted):
Continuing operations $ .20 .21 - -
Discontinuing operations - (.03) - -
Net earnings
per share (diluted) $ .20 .18 - -
Weighted average
common shares (diluted) 2,405,436 2,488,635 - -
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Shareholders' Equity
Years ended March 31, 1998 and 1997,
Six Months ended March 31, 1996,
and Year ended September 30, 1995
Common Stock Treasury Stock
Number Additional Number
of paid in Retained of
shares Amount capital earnings shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
at
9/30/94 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
9/30/95 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
3/31/96 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
3/31/97 2,477,592 6,194 3,478,576 3,751,755 307,052 (4,630,137) 2,606,388
Re-
issuance
of
treasury
stock - - (605,475) - (45,000) 678,600 73,125
Net
earnings - - - 490,391 - - 490,391
Balance
at
3/31/98 2,477,592 $6,194 2,873,101 4,242,146 262,052 $(3,951,537) 3,169,904
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Cash Flows
Years ended March 31, 1998 and 1997,
Six Months ended March 31, 1996,
and Year ended September 30, 1995
Six months
ended Year ended
Year ended March 31, March 31, September 30,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings (loss) $ 490,391 452,418 (1,507,821) (2,848,976)
Adjustments to reconcile
net earnings (loss)
to net cash provided by
operating activities:
Depreciation and amortization 629,329 644,467 837,393 1,441,179
Deferred income taxes 283,000 324,000 (515,000) (1,197,000)
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
Change in assets and
liabilities net of
effects from purchases
and sales of subsidiaries:
Decrease (increase) in
accounts receivable 794,014 3,035,777 8,997,213 (4,774,332)
(Increase) decrease
in inventory (12,531) (39,141) 28,726 428,734
(Increase) decrease
in prepaid expenses
and other current assets (371,631) (213,511) 38,190 2,118,394
Decrease (increase) in
costs and estimated
earnings in excess of
billings on uncompleted
contracts (453,358) 913,883 922,481 (1,399,176)
Increase (decrease) in
other assets (121,204) 272,217 (267,495) 129,100
(Decrease) increase in
accounts payable 383,541 (708,278)(2,521,433) 4,853,357
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Cash Flows Continued
Six months
ended Year ended
Year ended March 31, March 31, September 30,
1998 1997 1996 1995
Increase (decrease)
in accrued payroll
and employee benefits $ (305,181) 787,047 (1,230,826) 248,683
(Decrease) increase in
other accrued expenses (133,956)(2,715,328) (775,286) 1,304,819
(Decrease) increase in
billings in excess
of costs and estimated
earnings on uncompleted
contracts (137,155) (267,661) 4,557 411,140
Decrease in accrued
pension cost (89,328) - - -
Net cash provided by
operating activities 955,931 2,092,372 4,143,547 717,562
Cash flows from investing
activities:
Purchase of property and
equipment (199,809) (117,075) (22,686) (534,809)
Sale of property and equipment - - 44,019 5,887
Purchase of marketable
securities - - - (218,427)
Sale of marketable
securities - - 325,924 37,232
Proceeds from sale of
Numanco subsidiary - - 2,350,000 -
Proceeds from sale of
Henze subsidiary - 1,200,000 - -
Net cash provided by
(used in) investing
activities (199,809) 1,082,925 2,697,257 (710,117)
Cash flows from financing
activities:
Net borrowings (payments)
on notes payable 1,182,556 1,295,628 (8,107,298) 1,086,033
Proceeds from long-term debt - 3,900,000 - -
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Cash Flows Continued
Six months
ended Year ended
Years ended March 31, March 31, September 30,
1998 1997 1996 1995
Debt issuance costs $ - (745,522) - -
Principal payments on
long-term debt (2,131,635)(6,873,684) (32,341) (1,155,158)
Exercise of stock options - 6,074 - -
Treasury stock issuance 73,125 - - -
Net cash used in
financing activities (875,954)(2,417,504)(8,139,639) (69,125)
Net increase (decrease)
in cash and cash
equivalents (119,832) 757,793 (1,298,835) (61,680)
Cash and cash equivalents
at beginning of period 1,308,225 550,432 1,849,267 1,910,947
Cash and cash equivalents
at end of period $ 1,188,393 1,308,225 550,432 1,849,267
Cash paid during the
period for:
Interest $ 958,776 1,004,516 738,566 1,861,850
Income taxes 23,990 23,654 10,407 123,113
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
Years ended March 31, 1998 and 1997,
Six Months ended March 31, 1996,
and Year ended September 30, 1995
(1) Description of Business and Basis of Presentation
Canisco Resources, Inc. provides painting and surface preparation,
specialty coatings and linings, specialty cleaning, decontamination,
janitorial, and technical support services. 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
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 through its sale in
June 1996. 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.
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.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(2) Continued
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, 1998 and 1997 is cash of approximately
$1,085,000 and $1,028,000, respectively, restricted as to use in
connection with the Company's workers' compensation insurance program.
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.
Inventory
Inventory consists primarily of consumable supplies and is stated at
the lower of average cost or market.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(2) Continued
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 10 years for property and equipment other than buildings. The
estimated useful life of buildings is 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.
Accounts Payable and Bank Overdrafts
Included in accounts payable and bank overdrafts is $825,124 and $756,969
of bank overdrafts at March 31, 1998 and 1997, respectively.
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
exceededthe exercise price. On April 1, 1996, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation, 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 No. 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 as if the fair-value based method defined in SFAS No. 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 No. 123.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
The Company adopted the provisions of SFAS 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
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(2) Continued
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.
Income Taxes
Deferred income taxes are recognized for the tax consequences of
'temporary differences' 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.
Concentration of Credit Risk
The Company provides its services primarily to the power generation,
petro-chemical and pulp and paper industries.
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.
Net Earnings (Loss) Per Share of Common Stock
During fiscal year 1998, the Company adopted SFAS No. 128, 'Earnings per
Share'. The adoption of SFAS No. 128 requires the Company to replace
primary and fully diluted earnings per share with basic and diluted
earnings per share. Basic earnings per share are computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per common share reflects the potential
dilution of securities that could share in the earnings. Prior year
earnings per share have been restated.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(3) Prepaid Expenses and Other Current Assets
Included in prepaid expenses and other current assets is approximately
$1,300,000 and $660,000 at March 31, 1998 and 1997, respectively, related
to workers' compensation refunds due from the Company's insurance carrier.
(4) Costs and Estimated Earnings on Uncompleted Contracts and Retainage
<TABLE>
<CAPTION>
Costs and estimated earnings on uncompleted contracts are summarized as
follows:
March 31,
1998 1997
<S> <C> <C>
Costs incurred on uncompleted contracts $ 67,512,400 69,831,710
Estimated earnings 14,141,842 15,092,433
81,654,242 84,924,143
Less billings to date 80,656,271 84,516,685
$ 997,971 407,458
Included in the accompanying consolidated
balance sheets under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 1,377,433 924,075
Billings in excess of costs and estimated
earnings on uncompleted contracts (379,462) (516,617)
$ 997,971 407,458
</TABLE>
Accounts receivable billed includes amounts retained by customers, in
accordance with contract provisions, of approximately $243,000 and
$220,000 at March 31, 1998 and 1997, respectively. These amounts are
expected to be collected within one year.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(5) Liabilities Subject to Compromise Under Reorganization Proceedings
In accordance with the bankruptcy reorganiziation plan, $3,217,480 of the
Company's prepetition liabilities were comprised and are to be paid to
creditors in ten equal quarterly payments. These paymentsbegan October 1,
1996 and bear interest at 2% per annum. In accorandance with Statement of
Position 90-7, Financial Reporting by Entities in Reorganization Under the
Bankrupcty Code, the total payments were discounted at 9% resulting in a
gain of $393,518. This gain was recorded in the year ended March 31, 1997.
(6) Long-Term Debt and Notes Payable
<TABLE>
<CAPTION>
Long-term debt is summarized as follows:
March 31,
1998 1997
<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%
(9.50% at March 31, 1998) and is payable
in equal monthly installments through
June 2001) $ 2,535,000 3,315,000
Prepetition compromised liabilities, net
of discount of $74,000 and $260,000 at
March 31, 1998 and 1997, respectively,
effective interest rate of 9%
payable in equal quarterly installments
through January 1999 1,194,993 2,546,628
3,729,993 5,861,628
Less current maturities 1,974,993 2,053,314
$ 1,755,000 3,808,314
</TABLE>
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 $6,526,421 at
March 31, 1998 and $5,412,020 at March 31, 1997. Borrowings bear interest
at the prime rate plus 0.75% (9.25% and 9.05% at March 31, 1998 and 1997,
respectively),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.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(6) Continued
At March 31, 1998, future long-term debt payments, excluding payments under
the revolving credit agreement, are as follows:
Year Amount
1999 $1,974,993
2000 780,000
2001 780,000
2002 195,000
$3,729,993
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.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.
Notes to Consolidated Financial Statements
(7) Income Taxes
Income tax expense (benefit) relating to continuing operations
consists of the following:
<TABLE>
<CAPTION>
Six months Year
Years ended March 31 ended ended
1998 1997 3-31-96 9-30-95
<S> <C> <C> <C> <C>
Current:
Federal $ (114,470) (272,310) - 579,000
State - - - (88,000)
Total current (114,470) (272,310) - 491,000
Deferred - Federal
and state 283,000 324,000 (54,000) (662,000)
Total income tax
expense
(benefit) $ 168,530 51,690 (54,000) (171,000)
</TABLE>
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(7) Continued
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, Sept. 30,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Computed at U.S.
statutory
tax rate $ 224,000 196,000 (140,000) (345,000)
State income taxes,
net of Federal
income tax effect 24,000 21,000 (14,000) (26,000)
Federal income taxes
relating to prior
year (95,000) (298,000) - 534,000
Decrease in
beginning-of-year
balance of valuation
allowance - - - (613,000)
Nondeductible expenses
and other, net 15,530 132,690 100,000 279,000
Total income tax
expense (benefit) $ 168,530 51,690 (54,000) (171,000)
</TABLE>
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(7) Continued
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 and carryforwards that
give rise to significant portions of the deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 2,000 26,000
Operating loss carryforwards 2,479,000 2,452,000
Accruals not deducted for tax
purposes 315,000 466,000
AMT credit carryforwards 167,000 167,000
Total gross deferred tax assets 2,963,000 3,111,000
Less valuation allowance 71,000 71,000
Net deferred tax assets 2,892,000 3,040,000
Deferred tax liabilities:
Fixed asset depreciation 458,000 251,000
Other 29,000 101,000
Total deferred tax liabilities 487,000 352,000
Net deferred tax asset $ 2,405,000 2,688,000
</TABLE>
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(7) Continued
The Company's net operating loss carryforwards, which total approximately
$6,400,000 at March 31, 1998, expire beginning in 2010. The valuation
allowance for deferred tax assets did not change for the year ended March
31, 1998. 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, 1998.
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. Included in other accrued expenses
on the Company's consolidated balance sheets is $420,000 and $440,000 at
March 31, 1998 and 1997, respectively, related to this matter.
(8) 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.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(8) Continued
The following table sets forth the plan's funded status at March 31,
1998 and 1997:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
<S> <C> <C>
Actuarial present value of accumulated
plan benefits, including vested benefits
of $962,869 and $1,052,197 at March 31,
1998 and 1997, respectively $ 962,869 1,052,197
Plan assets at fair value - -
Accumulated plan benefits in excess of
plan assets 962,869 1,052,197
Unrecognized prior service cost (905,938) (1,009,474)
Minimum liability adjustment 905,938 1,009,474
Accrued pension cost $ 962,869 1,052,197
</TABLE>
Net pension cost for the year ended March 31, 1998 and the period from
October 1, 1996 to March 31, 1997 included the following components:
March 31, March 31,
1998 1997
Interest cost on projected benefit obligation $ 75,672 40,955
Amortization of prior service cost 103,536 51,768
$ 179,208 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.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(8) Continued
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
$163,000, $150,000, $48,000, and $74,000, in combined matching and
discretionary contributions to the Plan during the
years ended March 31, 1998 and 1997, the six months ended March 31, 1996,
and the year ended September 30, 1995 , 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.
(9) Major Customer
In the year ended March 31, 1998, one customer accounted for the 12% of
consolidated revenues. In the year ended September 30, 1995, one customer
accounted for 16% 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.
(10) 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 250,000 appreciation rights
(Rights) can be granted under the SAR Plan through January 1, 2002.
(Contined)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(10) Continued
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, 1998, a total of
235,000 Rights have been granted under the SAR Plan at grant prices
ranging from $2.50-$3.00 per Right. As of March 31, 1998, no Rights have
been exercised. The total appreciation value of all Rights granted as of
March 31, 1998 was approximately $3,500.
(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.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(10) Continued
Following is a summary of activity in the 1990 Plan for the years ended
March 31, 1998 and 1997, the six months ended March 31, 1996, and the
year ended September 30, 1995:
<TABLE>
<CAPTION>
Option price per share
Weighted
Shares Range average
<S> <C> <C> <C>
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
Canceled or expired (72,703) 4.63-9.00 5.71
Options outstanding and exercisable at
March 31, 1998 176,044 $ 3.38-5.50 4.25
</TABLE>
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(10) Continued
The following table summarizes information about stock options
outstanding at March 31, 1998:
<TABLE>
<CAPTION>
Weighted
average Weighted
Range of remaining average
Exercise Number contractual exercise
Prices outstanding life price
<S> <C> <C> <C>
$ 3.38-5.00 127,593 9 months $ 3.78
5.01-9.00 48,451 10 months 5.49
</TABLE>
(11) 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. 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. Revenues from this subsidiary
were $2,226,000, $4,964,000, and $14,567,000 for the year ended March 31,
1997, the six months ended March 31, 1996, and the year ended September 30,
1995, 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 year ended September 30, 1995 was $45,439,
$183,937, and $255,702, respectively.
(Continued)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(12) 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.
(b) Rental Agreements
The Company leases office space and various equipment under Operating
leases which provide for minimum rentals as follows:
Year Amount
1999 $ 470,384
2000 218,059
2001 104,716
2002 31,911
Total minimum lease payments $ 825,070
Rental expense under all agreements for the year ended March 31, 1998,
and 1997, the six months ended March 31, 1996, and the year ended
September 30, 1995 was approximately $506,000, $490,000, $597,000, and
$1,019,000, respectively.
(13) Comparable Consolidated Statement of Operations Data (Unaudited)
Consolidated statements of operations data for the six-month period
ended March 31, 1995 is as follows:
1995
Revenues from services $ 37,117,738
Gross margin 5,854,480
Income tax benefit (976,780)
Loss from continuing operations (1,465,170)
Loss from discontinued operations (1,319,023)
Net Loss (2,784,193)
Loss per share $ (1.28)
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Notes to Consolidated Financial Statements
(14) Subsequent Events
On April 17, 1998, the Company amended its Credit Agreement (see Note 6)
with its existing lender extending the credit limit to $25.0 million. The
amended facility includes a $5.0 million acquisition credit line.
On April 22, 1998, the Company purchased the stock of Mansfield Industrial
Coatings Inc. ('Mansfield') of Pensacola, Florida for a purchase price of
$7,216,000, consisting of cash and common stock. In addition, an earnout
agreement was entered into, whereby the Company may pay additional
consideration of $750,000 over a three-year period depending on the results
of operations of Mansfield. Mansfield is a provider of painting,
insulation, fireproofing, asbestos, and lead abatement services. These
services are provided to a broad range of industrial clients located
throughout the southeastern and gulf coast regions of the United States.
The acquisition will be accounted for as a purchase.
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 11, 1998 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 11, 1998 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 11, 1998
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 11, 1998 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 May 7, 1998 related to the acquisition
of Mansfield Industrial Coatings, Inc.
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 25, 1998
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 25, 1998
/s/Dale L. Ferguson Director June 25, 1998
/s/Wm. Lawrence Petcovic Director June 25, 1998
/s/Thomas P. McShane Director June 25, 1998
/s/ Joe C. Quick Director June 25, 1998
/s/ Ralph A. Trallo President, CEO June 25, 1998
/s/ Michael J. Olson Chief Financial Officer June 25, 1998
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.
Mansfield Industrial Coatings, Inc. - a Mississippi corporation which
was acquired by Canisco Resources, Inc. on April 22, 1998. For further
information, see the 8-K filing dated May 7, 1998.
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 June 3, 1998, relating to the consolidated
balance sheets of Canisco Resources, Inc. and subsidiaries as of
March 31, 1998 and 1997, and the related consolidated statements
of operations, shareholders' equity, and cash flows and related schedule
for the years ended March 31, 1998 and 1997, the six months ended
March 31, 1996 and the year ended September 30, 1995,
which reports appear in the March 31, 1998 annual report on Form 10-K
of Canisco Resources, Inc. which is incorporated by reference in the
Registration Statement.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
June 23, 1998
Exhibit 23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CANISCO RESOURCES, INC.'S FORM 10-K FOR THE PERIOD ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,188,393
<SECURITIES> 0
<RECEIVABLES> 8,413,953
<ALLOWANCES> (137,933)
<INVENTORY> 419,697
<CURRENT-ASSETS> 13,512,361
<PP&E> 5,379,520
<DEPRECIATION> 1,886,289
<TOTAL-ASSETS> 20,633,309
<CURRENT-LIABILITIES> 8,219,115
<BONDS> 9,244,290
0
0
<COMMON> 6,194
<OTHER-SE> 3,163,710
<TOTAL-LIABILITY-AND-EQUITY> 20,633,309
<SALES> 52,227,363
<TOTAL-REVENUES> 52,227,363
<CGS> 42,851,839
<TOTAL-COSTS> 42,851,839
<OTHER-EXPENSES> 7,712,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,003,979
<INCOME-PRETAX> 658,921
<INCOME-TAX> 168,530
<INCOME-CONTINUING> 490,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 490,391
<EPS-PRIMARY> .22
<EPS-DILUTED> .20
</TABLE>
INDEX TO FINANCIAL STATEMENT SCHEDULE
FOR CANISCO RESOURCES, INC.
March 31, 1998,1997 and 1996, September 30, 1995
SCHEDULE II Valuation and Qualifying Accounts
EXHIBIT 99.1
Exhibit 99.2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Canisco Resources, Inc.
Under date of June 3, 1998, we reported on the consolidated
balance sheets of Canisco Resources, Inc. and subsidiaries as of
March 31, 1998 and 1997, and the related consolidated statements
of operations, shareholders' equity, and cash flows for the years ended
March 31, 1998 and 1997 the six months ended March 31, 1996, and
the year ended September 30, 1995, as contained in the
1998 annual report on Form 10-K. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the
related 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
Philadelphia, Pennsylvania
June 3, 1998
Exhibit 99.2
CANISCO RESOURCES, INC.
SCHEDULE II Valuation and Qualifying Accounts
March 31, 1998, 1997 and 1996 and September 30, 1995
Additions
Balance at charged to Balance
Beginning operating at end of
Of period expense Other Deductions Period
Description
Allowance for
doubtful
accounts
deducted from
accounts
receivable
in the
consolidated
balance sheets:
March 31, 1998 $199,050 -- -- $61,117 $137,933
March 31, 1997 760,965 265,360 -- 827,275 199,050
March 31, 1996 584,941 233,121 -- 58,097 760,965
September 30, 1995 784,330 572,096 -- 770,485(1) 585,941
(1) Write-off of uncollectible accounts.
Exhibit 99.3
