<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------
Form 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1995
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from to
--------------- ----------------
Commission File No.: 0-16372
KIMMINS ENVIRONMENTAL SERVICE CORP.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2763096
- - - --------------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1501 Second Avenue - Tampa, Florida 33605
- - - ---------------------------------------- -----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (813) 248-3878
---------------------------
None
- - - --------------------------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report
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 ( )
--- --
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by a check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES ( ) NO ( )
--- --
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of Common Stock outstanding on November 10, 1995, was
13,342,192 shares.
The number of shares of Class B Common Stock outstanding on November 10, 1995,
was 6,874,706 shares.
<PAGE> 2
KIMMINS ENVIRONMENTAL SERVICE CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated balance sheets at
December 31, 1994 and September 30,
1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - 2
Consolidated statements of operations
for the three and nine months ended September 30,
1994 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 4
Consolidated statements of cash
flows for the nine months ended
September 30, 1994 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . 5 - 6
Notes to consolidated financial
statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - 9
Item 2. Management's discussion and analysis of
financial condition and results of
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 13
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 2. Changes in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3. Defaults upon senior securities . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of matters to a vote of security holders . . . . . . . . . . . . . . . . 14
Item 5. Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, September 30,
1994 1995
--------------- ----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash $ 479,106 $ 368,318
Accounts receivable:
Contract and trade 22,081,973 24,955,734
Other receivables - affiliates
1,464,369 1,518,238
Note receivable - affiliate 54,167 56,667
Costs and estimated earnings in excess of billings on
uncompleted contracts 10,166,227 11,740,633
Income tax refund receivable 679,538 175,543
Other current assets 1,274,469 1,779,802
-------------- ---------------
Total current assets 36,199,849 40,594,935
-------------- ---------------
Property and equipment, net 26,815,429 32,165,399
Intangible assets - 807,450
Accounts receivable - affiliates 1,349,058 1,663,113
Note receivable - affiliate 3,533,696 3,492,029
Term note from affiliate (including accrued interest of
$51,983 and $389,212 as of December 31, 1994, and
September 30, 1995, respectively) 4,343,032 4,680,261
Other assets
447,716 716,851
-------------- ---------------
$ 72,688,780 $ 84,120,038
============== ===============
</TABLE>
SEE ACCOMPANYING NOTES.
1
<PAGE> 4
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1994 1995
--------------- ----------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 13,303,408 $ 16,078,297
Deferred income taxes 73,708 73,708
Accrued expenses 3,473,775 6,531,175
Billings in excess of costs and estimated earnings on
uncompleted contracts 1,375,548 1,128,499
Current portion of long-term debt 6,168,006 6,688,018
Current portion of Employee Stock Ownership Plan
Trust debt 600,000 600,000
-------------- ---------------
Total current liabilities 24,994,445 31,099,697
-------------- ---------------
Long-term debt 14,632,115 18,194,598
Employee Stock Ownership Plan Trust debt 2,400,000 1,950,000
Deferred income taxes 2,914,597 2,914,597
Minority interest in subsidiary 3,233,421 3,535,647
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.001 par value; 32,500,000 shares
authorized; shares issued and outstanding 13,328,992
in 1994 and 13,342,192 in 1995 13,329 13,342
Class B common stock, $.001 par value; 10,000,000
shares authorized; 6,874,706 shares issued and
outstanding 6,875 6,875
Capital in excess of par value 18,696,909 18,716,695
Retained earnings 8,569,023 10,018,045
Unearned employee compensation from Employee
Stock Ownership Plan Trust (2,771,934) (2,329,458)
-------------- ---------------
Total stockholders' equity 24,514,202 26,425,499
-------------- ---------------
$ 72,688,780 $ 84,120,038
============== ===============
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE> 5
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended September 30,
----------------------------------
1994 1995
--------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Gross revenue $ 24,677,660 $ 29,808,309
Outside services, at cost (2,655,363) (4,636,905)
-------------- ---------------
Net revenue 22,022,297 25,171,404
Costs and expenses:
Cost of revenue earned 18,629,870 19,993,099
Selling, general and administrative
expenses 2,526,169 3,781,501
-------------- ---------------
Operating income 866,258 1,396,804
Minority interest in net income of subsidiary 3,815 77,129
Interest expense, net 295,079 345,554
-------------- ---------------
Income from before provision for income taxes 567,364 974,121
Provision for income taxes 220,877 411,743
-------------- ---------------
Net income $ 346,487 $ 562,378
============== ===============
Income per share $ .03 $ .04
============== ===============
Weighted average number of shares
outstanding used in computation 13,328,992 13,335,879
============== ===============
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE> 6
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------------
1994 1995
---------------- ------------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Gross revenue $ 72,288,571 $ 81,026,355
Outside services, at cost (7,962,376) (11,917,518)
--------------- -----------------
Net revenue 64,326,195 69,108,837
Costs and expenses:
Cost of revenue earned 53,833,146 55,558,887
Selling, general and administrative
expenses 7,724,113 9,656,303
--------------- -----------------
Operating income 2,768,936 3,893,647
Minority interest in net income of subsidiary 33,700 302,226
Interest expense, net 701,721 1,020,454
--------------- -----------------
Income before provision for income taxes 2,033,515 2,570,967
Provision for income taxes 790,931 1,121,945
--------------- -----------------
Net income $ 1,242,584 $ 1,449,022
=============== =================
Income per share $ .09 $ .11
=============== =================
Weighted average number of shares
outstanding used in computation 13,328,992 13,331,313
=============== =================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE> 7
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECREASE IN CASH
<TABLE>
<CAPTION>
Nine months ended September 30,
----------------------------------
1994 1995
--------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,242,584 $ 1,449,022
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,906,557 2,877,373
(Gain) loss on disposal of property and
equipment 53,708 (243,213)
Accrued interest on term note (132,988) (337,229)
Minority interest in subsidiary 33,700 302,226
Unearned employee compensation from
Employee Stock Ownership Plan Trust 464,462 442,476
Changes in operating assets and liabilities:
Accounts receivable (4,498,077) (3,202,518)
Costs and estimated earnings in excess of
billings on uncompleted contracts 557,958 (1,574,406)
Income tax refund receivable 546,861 503,995
Other assets (71,314) (774,468)
Accounts payable (1,462,907) 2,774,889
Accrued expenses 693,769 3,057,400
Billings in excess of costs and estimated
earnings on uncompleted contracts 327,412 (247,049)
-------------- ---------------
Total adjustments (580,859) 3,579,476
-------------- ---------------
Net cash provided by operating activities 661,725 5,028,498
-------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE> 8
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECREASE IN CASH
(CONTINUED)
<TABLE>
<CAPTION>
Nine months ended September 30,
----------------------------------
1994 1995
--------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures (4,272,706) (9,561,478)
Proceeds from sale of property and equipment 935,137 769,898
-------------- --------------
Net cash used by investing activities (3,337,569) (8,791,580)
-------------- --------------
Cash flows from financing activities:
Proceeds from long-term debt 14,517,869 11,919,824
Repayments of long-term debt (13,283,880) (7,837,329)
Repayments of Employee Stock Ownership Plan
Trust debt (450,000) (450,000)
Proceeds from stock options - 19,799
-------------- --------------
Net cash provided by financing activities 783,989 3,652,294
-------------- --------------
Net decrease in cash (1,891,855) (110,788)
Cash, beginning of period 2,530,428 479,106
-------------- --------------
Cash, end of period $ 638,573 $ 368,318
============== ==============
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE> 9
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation - These financial statements of Kimmins
Environmental Service Corp. (the "Company") omit or condense certain
footnotes and other information normally included in financial
statements prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary for fair presentation of
the financial information for the interim periods reported have been
made.
Intangible assets - Intangible assets consist principally of the
excess of costs over fair market value of the net assets of the
acquired solid waste management business, which are being amortized on
a straight-line basis over twenty years, and customer contracts, which
are being amortized on a straight-line basis over five years.
Accumulated amortization was $44,550 at September 30, 1995 (none
during 1994).
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
December 31, September 30,
1994 1995
--------------- ----------------
(unaudited)
<S> <C> <C>
Expenditures on uncompleted contracts $ 92,911,600 $ 73,892,468
Estimated earnings on uncompleted contracts 17,028,013 13,710,252
------------ ---------------
109,939,613 87,602,720
Less actual and allowable billings on uncompleted
contracts 101,148,934 76,990,586
------------ ---------------
$ 8,790,679 $ 10,612,134
============ ===============
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 10,166,227 $ 11,740,633
Billings in excess of costs and estimated earnings
on uncompleted contracts (1,375,548) (1,128,499)
------------ ---------------
$ 8,790,679 $ 10,612,134
============ ===============
</TABLE>
3. PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
December 31, September 30,
1994 1995
-------------- ---------------
(unaudited)
<S> <C> <C>
Land $ 4,699,480 $ 5,099,924
Buildings and improvements 6,275,216 7,014,159
Construction and recycling equipment 31,170,987 34,139,563
Furniture and fixtures 1,258,249 1,433,651
Construction in progress 486,128 2,856,309
----------- -------------
43,890,060 50,543,606
(17,074,631) (18,378,207)
----------- -------------
Less accumulated depreciation $26,815,429 $ 32,165,399
=========== =============
</TABLE>
7
<PAGE> 10
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. PROPERTY AND EQUIPMENT, NET (CONTINUED)
Property and equipment is recorded at cost. Depreciation is provided
using the straight-line method over estimated useful lives ranging
from three to thirty years. Construction in progress will be
depreciated over the estimated useful lives when placed into service.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31, September 30,
1994 1995
---------------- -----------------
(unaudited)
<S> <C> <C>
Notes payable, principal and interest payable in
monthly installments through October 1, 2000, interest
at varying rates up to 13 percent, collateralized by
equipment $ 10,220,373 $ 15,520,043
Revolving term bank line of credit, $1,640,000
($1,290,000 during 1994) maximum due November 1, 1997,
interest at prime plus 1 3/4 percent - 1,640,000
Bank note payable, varying principal and interest
payments through August 1, 1996, interest at prime
plus 1 3/4 percent, collateralized by equipment 5,500,000 2,000,000
Mortgage notes, principal and interest payable in
monthly installments through July 1, 2003, interest at
varying rates up to prime plus 1 3/4 percent,
collateralized by land and buildings 3,679,748 4,322,573
Mortgage notes - $500,000 with related parties
interest payable in quarterly installments at 10
percent, plus a performance based return not to exceed
6 percent, principal due January 9, 1997, collateral-
ized by land and buildings 1,400,000 1,400,000
--------------- ----------------
20,800,121 24,882,616
Less current portion 6,168,006 6,688,018
--------------- ----------------
$ 14,632,115 $ 18,194,598
=============== ================
</TABLE>
8
<PAGE> 11
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. EMPLOYEE STOCK OWNERSHIP PLAN TRUST DEBT
In March 1990, the Company's Employee Stock Ownership Plan Trust was
funded from a $5,100,000 loan. The loan bears interest at prime plus
2 percent, with varying principal and interest payments through
September 1996. The loan is guaranteed by the Company as to payment
of principal and interest and, therefore, the unpaid balance of the
borrowing is reflected as debt of the Company. An equivalent amount
representing unearned employee compensation, less the Company's
accrued contribution is recorded as a deduction from stockholders'
equity.
At September 30, 1995, $1,950,000 of the loan is classified as a
long-term debt since it is the Company's intent to refinance the debt
on a long-term basis. Refinancing under similar terms and maturities
is guaranteed by the President of the Company.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net revenue for the three months ended September 30, 1995 increased by
14 percent to $25,171,000 from $22,022,000 for the three months ended September
30, 1994. The increase is due primarily to the continued growth of the
Company's solid waste management segment ($3,805,000 increase in net revenue)
and to the growth of the Company's utility contracting services ($2,955,000
increase in net revenue). This increase offsets a decrease in the Company's
industrial demolition services ($2,729,000 decrease in net revenue).
Outside services, which largely represent subcontractor costs,
increased, as a percentage of net revenue, to 18 percent for the third quarter
of 1995 from 12 percent for the same period in 1994. The Company will utilize
the services of a subcontractor when it determines that an economic opportunity
exists with regards to internally providing the services.
Cost of revenue earned, as a percentage of net revenue, for the third
quarter of 1995 decreased to 79 percent from 85 percent for the same period in
1994. As a result, the gross margin percentage increased to 21 percent of net
revenue for the third quarter of 1995 from 15 percent for the same period in
1994. The gross profit for the third quarter of 1995 was $5,178,000 compared
to $3,392,000 for the third quarter of 1994. The increase in the dollar amount
and percentage of gross margin is associated primarily with the Company's solid
waste management subsidiary.
During the three months ended September 30, 1995, selling, general and
administrative expenses increased to $3,782,000 (15 percent of net revenue)
from $2,526,000 (11 percent of net revenue) for the three months ended
September 30, 1994. The dollar increase in selling, general, and
administrative expenses is attributable primarily to increased overhead costs,
such as office salaries, and marketing costs that are associated with higher
levels of operations. The percentage increase in selling, general and
administrative costs primarily is associated with the growth of the Company's
solid waste management operations. These services historically have operated
with a higher overhead structure than the Company's specialty contracting
operations.
Minority interest in net income of subsidiary was $77,000 for the
three months ended September 30, 1995 compared to $4,000 for the three months
ended September 30, 1994. The minority interest in net income of subsidiary
reflects approximately 26 percent of TransCor's earnings as a result of the
March 25, 1993, initial public offering of TransCor's common stock. The
increase in TransCor's earnings between years is attributable to the higher
profit margins earned on certain solid waste management services.
Net interest expense for the three months ended September 30, 1995,
was $346,000 compared to $295,000 for the three months ended September 30,
1994. The increase in net interest expense corresponds with the increase in
the amount of interest-bearing debt outstanding.
The Company's effective tax rate was 42 percent for the three months
ended September 30, 1995, compared to a tax rate of 39 percent for 1994. The
increase in the effective tax rate was due primarily to higher state income
taxes.
As a result of the foregoing, net income for the quarter ended
September 30, 1995, was $562,000 (2 percent of net revenue) as compared with
$346,000 (2 percent of net revenue) for the same period during 1994.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net revenue for the nine months ended September 30, 1995, increased by
7 percent to $69,109,000 from $64,326,000 for the nine months ended September
30, 1994. The increase is due primarily to an increase of approximately
$9,075,000 in the Company's utility contracting segment and to an increase of
approximately $8,726,000 in the Company's solid waste management segment as it
expands its operations in the Florida market. This increase offsets a decrease
in the Company's industrial demolition services ($9,910,000 decrease in net
revenue) and a decrease in the Company's asbestos abatement services
($1,687,000 decrease in net revenue).
Outside services, which largely represent subcontractor costs,
increased, as a percentage of net revenue, to 17 percent for the first nine
months of 1995 from 12 percent for the same period in 1994. The Company will
utilize the services of a subcontractor when it determines that an economic
opportunity exists with regards to internally providing the services.
Cost of revenue earned, as a percentage of net revenue, for the first
nine months of 1995 decreased to 80 percent from 84 percent for the same period
in 1994. As a result, the gross margin percentage increased to 20 percent of
net revenue for the first nine months of 1995 from 16 percent for the same
period in 1994. The gross profit for the first nine months of 1995 was
$13,550,000 compared to $10,493,000 for the first nine months of 1994. The
dollar increase in gross margin is associated with the increased revenue volume
from the Company's solid waste management segment, which generally generates a
higher gross margin return than the Company's other operating segments.
During the nine months ended September 30, 1995, selling, general, and
administrative expenses increased to $9,656,000 (14 percent of net revenue)
from $7,724,000 (12 percent of net revenue for the nine months ended September
30, 1994. The dollar increase in selling, general, and administrative expenses
is attributable primarily to increased overhead costs, such as office salaries,
and marketing costs that are associated with higher levels of operations.
The percentage increase in selling, general and administrative costs primarily
is associated with the growth of the Company's solid waste management
operations. These services historically have operated with a higher overhead
structure than the Company's specialty contracting operations.
Minority interest in net income of subsidiary was $302,000 for the nine
months ended September 30, 1995, compared to $34,000 for the nine months ended
September 30, 1994. The minority interest in net income of subsidiary reflects
approximately 26 percent of TransCor's earnings as a result of the March 25,
1993, initial public offering of TransCor's common stock. The increase in
TransCor's earnings between years is attributable to the higher profit margins
earned on certain solid waste management services.
Net interest expense for the nine months ended September 30, 1995, was
$1,020,000 compared to $702,000 for the nine-month period ended September 30,
1994. The increase in net interest expense corresponds with the increase in
the amount of interest-bearing debt outstanding.
The Company's effective tax rate was 44 percent for the nine months
ended September 30, 1995, compared to a tax rate of 39 percent for 1994. The
increase in the effective tax rate was due primarily to higher state income
taxes.
As a result of the foregoing, net income for the nine months ended
September 30, 1995, was $1,449,000 (2 percent of net revenue) as compared with
$1,243,000 (2 percent of net revenue) for the same period during 1994.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had working capital of $9,495,000
compared to $14,310,000 at September 30, 1994. Current financial resources and
anticipated funds from operations are expected to be adequate to meet cash
requirements in the year ahead and the foreseeable future. At September 30,
1995, the Company had cash of $368,000.
Cash provided by operating activities was $5,028,000 and $662,000
during the nine months ended September 30, 1995 and 1994, respectively. For
the first nine months of 1995, the cash provided by operating activities of
$5,028,000 was due primarily to cash provided by net income plus the effect of
depreciation, net of changes in certain operating assets and liabilities
(primarily accounts receivable, costs and estimated earnings in excess of
billings on uncompleted contracts, accounts payable, and accrued expenses).
For the first nine months of 1994, cash provided by operating activities of
$662,000 was due primarily to cash provided by net income plus the effect of
depreciation, net of changes in certain operating assets and liabilities
(primarily accounts receivable and accounts payable). The Company had cash
requirements related to capital expenditures during the nine months ended
September 30, 1995 and 1994, of $9,561,000 and $4,273,000, respectively. These
expenditures were primarily related to the acquisition of equipment associated
with the Company's utility contracting and solid waste management segments. At
September 30, 1995, the Company has utilized $1,640,000 of its term bank line
of credit, with no additional funds available for future borrowings.
During the nine months ended September 30, 1995 and 1994, the
Company's average contract and trade receivables less retainage were
outstanding for 69 and 68 days, respectively. Management believes that the
number of days outstanding for its current receivables approximates industry
norms. A portion of the Company's contracting operations are subcontracted,
and any delay in collections of receivables relating to primary contracts will
usually result in the ability of the Company to delay payment of offsetting
subcontract payables.
On June 30, 1993, Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships (collectively,
the "Apartments"), the Company, Citicorp Real Estate, Inc. ("Citicorp"), and
Francis M. Williams entered into a settlement and note renewal agreement
whereby the Apartments' Chapter 11 bankruptcy filings were voluntarily
dismissed. In accordance with the terms of the settlement agreement,
$3,638,696 of the accounts receivable - affiliates balance recorded by the
Company was converted into a note receivable. The note receivable bears
interest at prime plus 1 3/8 percent, increasing to prime plus 2 percent at
July 1, 1995, with principal and interest payable in monthly installments
through December 31, 1998, and is guaranteed by Mr. Williams. Citicorp also
renewed their mortgage notes with the Apartments through December 31, 1998.
Management of the Company believes that this note receivable balance is fully
collectible since an independent appraisal showed the appraised value of the
properties exceeded all recorded liabilities and all monthly obligations of the
Apartments, including debt, are being met. The Company will also receive
reimbursement for substantially all legal fees and costs incurred related to
this matter.
At December 31, 1994, and September 30, 1995, approximately $4,937,000
and $5,199,000, respectively, of the combined accounts receivable - affiliates
and the note receivable - affiliate balances are due from affiliates of Mr.
Williams. Amounts due from the Apartments discussed above at December 31,
1994, and September 30, 1995, are approximately $3,588,000 and $3,785,000,
respectively. The accounts receivable - affiliates relates to contract
services performed, bear interest at prime plus 1/2 percent, and are guaranteed
by Mr. Williams.
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
(CONTINUED)
Historically, the Company has been able to obtain bonding coverage in
amounts up to $20 million for non-hazardous specialty contracting projects and
up to $8.5 million for hazardous waste remediation projects. However, the
Company has experienced difficulties in obtaining bonding coverage for certain
hazardous waste remediation projects in excess of this amount. Although each
project has its own distinct and separate bond requirements, the Company may be
unable to competitively bid on certain hazardous waste remediation projects
which require a bond in excess of $8.5 million.
Inflation has not had, and is not expected to have, a material effect
upon the Company's operations.
13
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
None
Item 6. Exhibits and reports on Form 8-K
(a) The following document is filed as an exhibit to this
Quarterly Report on Form 10-Q:
27 - Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMMINS ENVIRONMENTAL SERVICE CORP.
Date: November 10, 1995 By: /s/ Francis M. Williams
------------------ ------------------------------------
Francis M. Williams, President and
Chief Executive Officer
(Principle Executive Officer)
Date: November 10, 1995 By: /s/ Norman S. Dominiak
------------------ ------------------------------------
Norman S. Dominiak,
Chief Financial Officer
(Principle Financial Officer and
Principle Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF KIMMINS ENVIRONMENTAL SERVICE CORPORATION FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 368,318
<SECURITIES> 0
<RECEIVABLES> 26,530,639
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,594,935
<PP&E> 50,543,606
<DEPRECIATION> (18,378,207)
<TOTAL-ASSETS> 84,120,038
<CURRENT-LIABILITIES> 31,099,697
<BONDS> 0
<COMMON> 13,342
0
0
<OTHER-SE> 26,412,157
<TOTAL-LIABILITY-AND-EQUITY> 84,120,038
<SALES> 81,026,355
<TOTAL-REVENUES> 81,026,355
<CGS> 67,476,405
<TOTAL-COSTS> 67,476,405
<OTHER-EXPENSES> 9,656,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,020,454
<INCOME-PRETAX> 2,570,967
<INCOME-TAX> 1,121,945
<INCOME-CONTINUING> 1,449,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,449,022
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
