- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
[MARK ONE]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to.
Commission File No.1-10489
--------------------------
KIMMINS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2763096
(State of incorporation) (I.R.S. Employer Identification Number)
1501 SECOND AVENUE, EAST, TAMPA, FLORIDA 33605
(Address of registrant's principal executive offices, including 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 require-ments 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 [X] No [ ]
Applicable Only to Corporate Issuers
The number of shares of Common Stock outstanding on November 12, 1996, was
4,447,397 shares.
The number of shares of Class B Common Stock outstanding on November 12, 1996,
was 2,291,569 shares.
- ------------------------------------------------------------------------------
<PAGE>
KIMMINS CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PAGE
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated balance sheets at December 31, 1995
and September 30, 1996 (unaudited) 1 - 2
Consolidated statements of operations for the three and
nine months ended September 30, 1995 and 1996 (unaudited) 3 - 4
Consolidated statements of cash flows for the nine months
ended September 30, 1995 and 1996 (unaudited) 5
Notes to consolidated financial statements 6 - 8
Item 2 Management's discussion and analysis of financial condition
and results of operations 9 - 12
PART II. OTHER INFORMATION
Item 1. Legal proceedings 13
Item 2. Changes in securities 13
Item 3. Defaults upon senior securities 13
Item 4. Submission of matters to a vote of security holders 13
Item 5. Other information 13
Item 6. Exhibits and reports on Form 8-K 13
Signatures 14
</TABLE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1995 1996
------------- ---------------
ASSETS (unaudited)
- --------------------------------------------------------
<S> <C> <C>
Current assets:
Cash $ 1,160,463 $ 2,499,886
Accounts receivable:
Contract and trade 22,152,197 24,693,755
Other receivables - affiliates 1,903,832 2,044,263
Notes receivable - affiliate 56,667 56,667
Costs and estimated earnings in excess of billings on 15,378,178 16,714,638
uncompleted contracts 1,050,625 1,720,596
Income tax refund receivable 742,130 742,130
Deferred income tax 1,673,100 2,229,938
------------- ---------------
Other current assets
Total current assets 44,117,192 50,701,873
------------- ---------------
Property and equipment, net 37,592,661 38,109,814
Intangible assets 785,175 933,030
Accounts receivable - affiliates 1,450,716 1,539,903
Note receivable - affiliate 3,794,060 4,108,137
Term note from affiliate (including accrued interest of
$506,755 and $878,821 as of December 31, 1995, and
September 30, 1996, respectively) 4,797,804 5,169,870
Other assets 1,090,942 1,183,185
------------- ---------------
$ 93,628,550 $ 101,745,812
============= ===============
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31, September 30,
1995 1996
---------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
- ------------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 17,358,270 $ 19,752,216
Accrued expenses 7,049,132 8,280,815
Billings in excess of costs and estimated earnings on
uncompleted contracts 606,614 738,112
Current portion of long-term debt 7,074,857 4,730,777
Current portion of Employee Stock Ownership Plan
Trust debt 480,000 480,000
---------------- ---------------
Total current liabilities 32,568,873 33,981,920
---------------- ---------------
Long-term debt 24,619,969 33,262,881
Employee Stock Ownership Plan Trust debt 1,920,000 1,440,000
Deferred income taxes 4,559,531 4,559,531
Minority interest in subsidiary 3,578,741 3,580,619
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; 4,447,397 shares issued and
outstanding 4,447 4,447
Class B common stock, $.001 par value; 10,000,000
shares authorized; 2,291,569 shares issued and
outstanding 2,292 2,292
Capital in excess of par value 18,730,173 18,730,173
Retained earnings 9,911,606 8,342,876
Unearned employee compensation from Employee
Stock Ownership Plan Trust (2,267,082) (1,920,000)
---------------- ---------------
26,381,436 25,159,788
Less treasury stock at cost - 26,381,436 (238,927)
---------------- ---------------
Total stockholders equity 24,920,861
---------------
$ 93,628,550
================
$ 101,745,812
===============
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30,
--------------------------------
1995 1996
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Gross revenue $29,808,309 $33,758,177
Outside services, at cost (4,636,905) (4,532,085)
------------ ------------
Net revenue 25,171,404 29,226,092
Costs and expenses:
Cost of revenue earned 19,993,099 25,918,978
Selling, general and administrative
expenses 3,781,501 3,664,664
------------ ------------
Operating income (loss) 1,396,804 (357,550)
Minority interest in net income of subsidiary 77,129 15,332
Interest expense, net 345,554 597,478
------------ ------------
Income (loss) before provision for income taxes 974,121 (970,360)
Provision for income taxes (benefit) 411,743 (440,250)
------------ ------------
Net income (loss) $ 562,378 $ (530,110)
============ ============
Per Share Date:
Income (loss) per share $ .13 $ (.12)
============ ============
Weighted average number of shares
outstanding used in computation 4,445,293 4,415,964
============ ============
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended September 30,
-------------------------------
1995 1996
------------- ------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Gross revenue $ 81,026,355 $85,842,526
Outside services, at cost (11,917,518) (9,122,827)
------------- ------------
Net revenue 69,108,837 76,719,699
Costs and expenses:
Cost of revenue earned 55,558,887 66,849,424
Selling, general and administrative
expenses 9,656,303 11,074,491
------------- ------------
Operating income (loss) 3,893,647 (1,204,216)
Minority interest in net income of subsidiary 302,226 1,878
Interest expense, net 1,020,454 1,643,500
------------- ------------
Income (loss) before provision for income taxes 2,570,967 (2,849,594)
Provision for income taxes (benefit) 1,121,945 (1,280,864)
------------- ------------
Net income (loss) $ 1,449,022 $(1,568,730)
============= ============
Per Share Data:
- ------------------------------------------------
Income (loss) per share $ .33 $ (.35)
============= ============
Weighted average number of shares
outstanding used in computation 4,443,771 4,434,838
============= ============
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
Nine months ended September 30,
-------------------------------
1995 1996
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,449,022 $(1,568,730)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,877,373 3,878,943
(Gain) loss on disposal of property and
equipment (243,213) (34,458)
Accrued interest on term note (337,229) (372,066)
Minority interest in net income of
subsidiary 302,226 1,878
Unearned employee compensation from
Employee Stock Ownership Plan Trust 442,476 347,082
Changes in operating assets and liabilities:
Accounts receivable (3,202,518) (3,085,253)
Costs and estimated earnings in excess of
billings on uncompleted contracts (1,574,406) (1,336,460)
Income tax refund receivable 503,995 (669,971)
Other assets (774,468) (649,081)
Accounts payable 2,774,889 2,393,946
Accrued expenses 3,057,400 1,231,683
Billings in excess of costs and estimated
earnings on uncompleted contracts (247,049) 131,498
------------ ------------
Total adjustments 3,579,476 1,837,741
------------ ------------
Net cash provided by operating activities 5,028,498 269,011
------------ ------------
Cash flows from investing activities:
Capital expenditures (9,561,478) (4,971,678)
Proceeds from sale of property and equipment 769,898 462,185
------------ ------------
Net cash used by investing activities (8,791,580) (4,509,493)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt 11,919,824 12,206,052
Repayments of long-term debt (7,837,329) (5,907,220)
Repayments of Employee Stock Ownership Plan
Trust debt (450,000) (480,000)
Proceeds from stock options 19,799 -
Purchase of treasury stock - (238,927)
------------ ------------
Net cash provided by financing activities 3,652,294 5,579,905
------------ ------------
Net increase (decrease) in cash (110,788) 1,339,423
Cash, beginning of period 479,106 1,160,463
------------ ------------
Cash, end of period $ 368,318 $ 2,499,886
============ ============
</TABLE>
See accompanying notes.
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------
Basis of presentation - These financial statements of Kimmins Corp. (f/k/a
- -----------------------
Kimmins Environmental Service Corp.) and its subsidiaries (collectively, 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.
Treasury stock - Treasury stock is shown at cost and in 1996, consists of
- ---------------
53,828 shares of common stock (none during 1995).
2.COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
-----------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-------------- ---------------
(unaudited)
<S> <C> <C>
Expenditures on uncompleted contracts $ 65,767,913 $ 66,538,381
Estimated earnings on uncompleted contracts 7,456,516 7,807,834
-------------- ---------------
73,224,429 74,346,215
Less actual and allowable billings on uncompleted
contracts 58,452,865 58,369,689
-------------- ---------------
$ 14,771,564 $ 15,976,526
============== ===============
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 15,378,178 $ 16,714,638
Billings in excess of costs and estimated earnings
on uncompleted contracts (606,614) (738,112)
-------------- ---------------
$ 14,771,564 $ 15,976,526
============== ===============
</TABLE>
3.PROPERTY AND EQUIPMENT, NET
------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-------------- ---------------
(unaudited)
<S> <C> <C>
Land $ 5,067,437 $ 5,622,814
Buildings and improvements 7,317,544 7,769,931
Construction and recycling equipment 42,345,792 45,282,000
Furniture and fixtures 1,463,600 1,428,987
Construction in progress 615,846 90,831
-------------- ---------------
56,810,219 60,194,563
Less accumulated depreciation (19,217,558) (22,084,749)
-------------- ---------------
$ 37,592,661 $ 38,109,814
============== ===============
</TABLE>
Property and equipment are 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.
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4.LONG-TERM DEBT
---------------
December 31, September 30,
1995 1996
------------- ---------------
(unaudited)
<S> <C> <C>
Notes payable, principal and interest payable in
monthly installments through September 1, 2001,
interest at varying rates up to 13 percent,
collateralized by equipment $ 20,215,486 $ 20,193,173
Revolving term bank line of credit, $12,250,000
($5,000,000 during 1995), maximum, due October 31,
1997, interest at lender's base rate plus percent
3,292,607 11,334,810
Bank note payable, varying principal and interest
payments through August 1, 1996, interest at prime
plus 1 3/4 percent, collateralized by equipment 1,500,000 -
Mortgage notes, principal and interest payable in
monthly installments through October 1, 2010,
interest at varying rates up to prime plus 1 3/4
percent, collateralized by land and buildings 5,286,733 5,065,675
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,
collateralized by land and buildings 1,400,000 1,400,000
------------- ---------------
31,694,826 37,993,658
Less current portion 7,074,857 4,730,777
------------- ---------------
$ 24,619,969 $ 33,262,881
============= ===============
</TABLE>
At September 30, 1996, $1,400,000 of the Mortgage Notes have been
classified as long-term debt as it is the Company's intent to refinance this
debt on a long-term basis.
The debt agreements contain certain covenants, the most restrictive of
which require maintenance of a consolidated tangible net worth, as defined, of
not less than $15,900,000, maintenance of a debt to consolidated tangible net
worth ratio of no more than 4.0 to 1.0, consolidated debt service coverage
ratio of not less than 0.9 to 1.0, and a fixed charge coverage ratio of not
less than 0.9 to 1.0. In addition, the covenants prohibit the ability,
without lender approval, of the Company to pay dividends. As of September 30,
1996 the Company was in compliance with or obtained waivers for all loan
covenants. The Company has also obtained the personal guarantee of Mr.
Francis Williams should waivers not be obtained in the future and the lender
accelerates the maturities of the Revolving Term Bank Line of Credit and the
Mortgage Note on the corporate office. This guarantee provides that Mr.
Williams will lend the necessary funds to the Company, or arrange for the
Company to borrow a similar amount under similar terms and maturities so that
the Company is not required to pay any principal payments during 1996 more
than the regularly scheduled maturities.
7
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SUBSEQUENT EVENT
-----------------
On November 5, 1996, the Company received 1,723,290 shares of Cumberland
Holdings, Inc. ("CHI") common stock in exchange for the Term Note from
Affiliate. The CHI common stock had a fair market value of $3.00 per share on
the date of the exchange. This transaction will result in the Company holding
an approximately 30 percent ownership interest in CHI, and this investment
will be accounted for using the equity method.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net revenue for the three months ended September 30, 1996, increased by
16 percent to $29,226,000 from $25,171,000 for the three months ended
September 30, 1995. The increase was due primarily to the growth of the
Company's utility contracting services ($3,373,000 increase in net revenue).
This increase offsets certain decreases in the Company's abatement services
($412,000 decrease in net revenue).
Outside services, which largely represent subcontractor costs, decreased,
as a percentage of net revenue, to 16 percent for the three months ended
September 30, 1996, from 18 percent for the three months ended September 30,
1995. The Company will utilize the services of a subcontractor when it
determines that an economic opportunity exists regarding internally providing
the services.
Cost of revenue earned, as a percentage of net revenue, for the three
months ended September 30, 1996, increased to 89 percent from 79 percent for
the three months ended September 30, 1995. As a result, the gross margin
percentage decreased to 11 percent of net revenue for the three months ended
September 30, 1996, from 21 percent for the three months ended September 30,
1995. The gross profit for the three months ended September 30, 1996, was
$3,307,000 compared to $5,178,000 for the three months ended September 30,
1995. The decrease in the dollar amount of gross margin was associated
primarily with a loss incurred during the third quarter on a remedial services
contract which was performed by the recently closed Niagara Falls, New York
office, that failed to perform to the Company's original projections.
During the three months ended September 30, 1996, selling, general and
administrative expenses decreased to $3,665,000 (13 percent of net revenue)
from $3,782,000 (15 percent of net revenue) for the three months ended
September 30, 1995. The dollar and percentage decreases in selling, general,
and administrative expenses are primarily a result of the consolidation of
certain administrative functions.
Minority interest in net income of subsidiary was $15,000 for the three
months ended September 30, 1996, compared to $77,000 for the three months
ended September 30, 1995. 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.
Net interest expense increased to $597,000 from $346,000 primarily due to
additional borrowings under the Company's revolving term bank line associated
with working capital requirements from increased operating volume.
The Company's loss before provision for income taxes for the three
months ended September 30, 1996, was ($970,000) (negative 3 percent of net
revenue) compared to income before provision for income taxes of $974,000 (4
percent of net revenue) during the same period in 1995.
The Company's effective tax rate was 45.3 percent for the three months
ended September 30, 1996, compared to a tax rate of 42.3 percent for 1995.
The increase in the effective tax rate was due primarily to higher state
income taxes.
As a result of the foregoing, net loss for the three months ended
September 30, 1996, was $530,000 (negative 2 percent of net revenue) as
compared with net income of $562,000 (2 percent of net revenue) for the three
months ended September 30, 1995.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net revenue for the nine months ended September 30, 1996, increased by 11
percent to $76,720,000 from $69,109,000 for the nine months ended September
30, 1995. The increase was due primarily to the continued growth of the
Company's solid waste management segment as it expands its operations in the
Florida market ($3,117,000 increase in net revenue) and the growth of the
Company's utility contracting services ($6,463,000 increase in net revenue).
This increase offsets certain decreases in the Company's remediation services
($1,497,000 decrease in net revenue) and abatement services ($748,000
decrease in net revenue).
Outside services, which largely represent subcontractor costs, decreased,
as a percentage of net revenue, to 12 percent for the nine months ended
September 30, 1996, from 17 percent for the nine months ended September 30,
1995. The Company will utilize the services of a subcontractor when it
determines that an economic opportunity exists regarding internally providing
the services.
Cost of revenue earned, as a percentage of net revenue, for the nine
months ended September 30, 1996, increased to 83 percent from 80 percent for
the six months ended September 30, 1995. As a result, the gross margin
percentage decreased to 17 percent of net revenue for the first half of 1996
from 20 percent for the same period in 1995. The gross profit for the nine
months ended September 30, 1996, was $9,870,000 compared to $13,550,000 for
the nine months ended September 30, 1995. The decrease in the dollar amount
and percentage of gross margin was primarily associated with a loss incurred
during the third quarter on a remedial services contract which was performed
by the recently closed Niagara Falls, New York office, and losses incurred
during the first quarter of 1996 on two utility contracting projects that
failed to perform to the Company's original projections.
During the nine months ended September 30, 1996, selling, general, and
administrative expenses increased to $11,074,000 (14 percent of net revenue)
from $9,656,000 (14 percent of net revenue for the six months ended September
30, 1995. The dollar increase in selling, general, and administrative
expenses is primarily attributable to increased overhead and marketing costs
that are associated with higher levels of operations.
Minority interest in net income of subsidiary was $2,000 for the nine
months ended September 30, 1996 compared to minority interest in net income of
subsidiary of $302,000 for the nine months ended September 30, 1995. 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.
Net interest expense increased to $1,644,000 from $1,020,000 primarily
due to additional borrowings under the Company's revolving term bank line
associated with working capital requirements from increased operating volume.
The Company's loss before provision for income taxes for the nine months
ended September 30, 1996, was ($2,850,000) (negative 4 percent of net revenue)
compared to income before provision for income taxes of $2,571,000 (4 percent
of net revenue) during the nine months ended September 30, 1995.
The Company's effective tax rate was 44.9 percent for the nine months
ended September 30, 1996, compared to a tax rate of 43.6 percent for 1995.
The increase in the effective tax rate was primarily due to higher state
income taxes.
As a result of the foregoing, the net loss incurred for the nine months
ended September 30, 1996, was ($1,569,000) (negative 2 percent of net revenue)
as compared with net income for the nine months ended September 30, 1995, of
$1,449,000 (2 percent of net revenue).
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash provided by operating activities was $269,000 and $5,028,000 during
the nine months ended September 30, 1996 and 1995, respec-tively. For the
first nine months of 1996, the net cash provided by operating activities of
$269,000 was due primarily to the company's net loss, offset by the effect of
depreciation, net of changes in certain operating assets and liabilities
(primarily accounts receivables, costs and estimated earnings in excess of
billings on uncompleted contracts, and accounts payable). For the first nine
months of 1995, 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, and accrued expenses). The Company had cash requirements related
to capital expenditures during the nine months ended September 30, 1996 and
1995, of $4,972,000 and $9,561,000, respectively. These expenditures were
primarily related to the acquisition of equipment associated with the
Company's solid waste management and utility contracting segments. At
September 30, 1996, the Company has borrowed approximately $11,335,000 of its
term bank line of credit, with $915,000 available for future borrowings.
The debt agreements contain certain covenants, the most restrictive of
which require maintenance of a consolidated tangible net worth, as defined, of
not less than $15,900,000, maintenance of a debt to consolidated tangible net
worth ratio of no more than 4.0 to 1.0, consolidated debt service coverage
ratio of not less than 0.9 to 1.0, and a fixed charge coverage ratio of not
less than 0.9 to 1.0. In addition, the covenants prohibit the ability,
without lender approval, of the Company to pay dividends. As of September 30,
1996 the Company was in compliance with or obtained waivers for all loan
covenants. The Company has also obtained the personal guarantee of Mr.
Francis Williams should waivers not be obtained in the future and the lender
accelerates the maturities of the Revolving Term Bank Line of Credit and the
Mortgage Note on the corporate office. This guarantee provides that Mr.
Williams will lend the necessary funds to the Company, or arrange for the
Company to borrow a similar amount under similar terms and maturities so that
the Company is not required to pay any principal payments during 1996 more
than the regularly scheduled maturities.
The Company's ratio of total debt to total equity was 2.41 : 1.00 and
2.94 : 1.00 at December 31, 1995 and September 30, 1996, respectively. The
increase in total debt is primarily due to increased borrowings under the
Company's revolving term bank line of credit to fund operations.
During both the nine months ended September 30, 1996 and 1995, the
Company's average contract and trade receivables less retainage were
outstanding for 69 days. 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.
Mr. Francis M. Williams is the sole shareholder of the corporate general
partner and the sole limited partner of Sunshadow Apartments, Ltd., and
Summerbreeze Apartments, Ltd., two Florida real estate limited partnerships
(collectively, the "Apartments"). On June 30, 1993, the Company, Citicorp
Real Estate, Inc. ("Citicorp"), the Apartments, 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 2 percent, with
principal and interest payable in monthly installments through December 31,
1998, and is guaranteed by Mr. Williams. Amounts due from the Apartments at
December 31, 1995, and September 30, 1996, are approximately $3,851,000 and
$4,165,000, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At December 31, 1995, and September 30, 1996, $5,301,000, and $5,705,000,
respectively, of the combined accounts receivable - affiliates and note
receivable - affiliates are due from affiliates of the Company's president.
The affiliated receivables relate to contract services performed and are
guaranteed by Mr. Williams.
The Company's current bonding coverage for non-environmental projects is
$30 million for an individual project ($100 million aggregate). The Company
has been able to obtain bonding coverage in amounts up to $8.5 million for
environmental projects. However, the Company has experienced difficulties in
obtaining bonding coverage for environmental 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 environmental
projects which require a bond in excess of $8.5 million.
On November 5, 1996, the Company received 1,723,290 shares of Cumberland
Holdings, Inc. ("CHI") common stock in exchange for the Term Note from
Affiliate. The CHI common stock had a fair market value of $3.00 per share on
the date of the exchange. This transaction will result in the Company holding
an approximately 30 percent ownership interest in CHI, and this investment
will be accounted for using the equity method.
Inflation has not had, and is not expected to have, a material effect
upon the Company's operations.
<PAGE>
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.
<PAGE>
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 CORP.
Date: November 12, 1996 By: /s/ Francis M. Williams
------------------- ------------------------------------------
Francis M. Williams
President and Chief Executive Officer
(Principle Executive Officer)
Date: November 12, 1996 By: /s/ Norman S. Dominiak
------------------- ------------------------------------------
Norman S. Dominiak
Vice President and Chief Financial Officer
(Principle Accounting and Financial Officer)
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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