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 March 31, 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. 0-16372
-------------------------------------------
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
Kimmins Environmental Service Corp.
----------------------------------------------------------------------
(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 [X] No [ ]
Applicable Only to Corporate Issuers
The number of shares of Common Stock outstanding on May 13, 1996, was
4,447,397 shares.
The number of shares of Class B Common Stock outstanding on May 13,
1996, was 2,291,569 shares.<PAGE>
KIMMINS CORP.
FORM 10-Q
INDEX
Page
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated balance sheets at
December 31, 1995 and
March 31, 1996 (unaudited) . . . . . . . . 1 - 2
Consolidated statements of operations for
the three months ended March 31, 1995
and 1996 (unaudited) . . . . . . . . . . . . . 3
Consolidated statements of cash flows for
the three months ended March 31, 1995
and 1996 (unaudited) . . . . . . . . . . . . . 4
Notes to consolidated financial statements 5 - 6
Item 2. Management's discussion and analysis of
financial condition and results
of operations . . . . . . . . . . . . . . . 7 - 8
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . . 9
Item 2. Changes in securities . . . . . . . . . . . . . 9
Item 3. Defaults upon senior securities . . . . . . . . 9
Item 4. Submission of matters to a vote of
security holders . . . . . . . . . . . . . . . 9
Item 5. Other information . . . . . . . . . . . . . . . 9
Item 6. Exhibits and reports on Form 8-K . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . 10<PAGE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1995 1996
ASSETS ------------- -------------
------ (unaudited)
Current assets:
Cash . . . . . . . . . . . . . . $ 1,160,463 $ 137,986
Accounts receivable:
Contract and trade . . . . . 22,152,197 23,418,120
Other receivables -
affiliates . . . . . . . . 1,903,832 1,953,460
Notes receivable - affiliate . 56,667 56,667
Costs and estimated earnings
in excess of billings on
uncompleted contracts . . . . 15,378,178 14,765,469
Income tax refund receivable . 1,050,625 1,932,688
Deferred income tax . . . . . . 742,130 742,130
Other current assets . . . . . 1,673,100 1,912,721
------------- -------------
Total current assets . . . . 44,117,192 44,919,241
------------- -------------
Property and equipment, net . . . . 37,592,661 38,430,901
Intangible assets . . . . . . . . . 785,175 910,400
Accounts receivable - affiliates . 1,450,716 1,478,126
Note receivable - affiliate . . . . 3,794,060 3,896,028
Term note from affiliate (including
accrued interest of $506,755 and
$627,702 as of December 31, 1995,
and March 31, 1996, respectively) 4,797,804 4,918,751
Other assets . . . . . . . . . . . 1,090,942 1,314,973
------------- -------------
$ 93,628,550 $ 95,868,420
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1995 1996
LIABILITIES AND STOCKHOLDERS' EQUITY ------------- -------------
------------------------------------ (unaudited)
Current liabilities:
Accounts payable - trade . . . $ 17,358,270 $ 13,825,699
Accrued expenses . . . . . . . 7,049,132 7,292,547
Billings in excess of costs and
estimated earnings on
uncompleted contracts . . . . 606,614 376,869
Current portion of long-term debt 7,074,857 7,552,499
Current portion of Employee Stock
Ownership Plan Trust debt . . 480,000 480,000
------------- -------------
Total current liabilities 32,568,873 29,527,614
------------- -------------
Long-term debt . . . . . . . . . . 24,619,969 31,347,068
Employee Stock Ownership Plan
Trust debt . . . . . . . . . . . 1,920,000 1,679,250
Deferred income taxes . . . . . . . 4,559,531 4,559,531
Minority interest in subsidiary . . 3,578,741 3,531,851
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 8,645,444
Unearned employee compensation
from Employee Stock Ownership
Plan Trust . . . . . . . . . (2,267,082) (2,159,250)
------------- -------------
Total stockholders' equity 26,381,436 25,223,106
------------- -------------
$ 93,628,550 $ 95,868,420
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
----------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
Revenue:
Gross revenue . . . . . . . . . $ 25,749,750 $ 24,710,145
Outside services, at cost . . . (4,705,106) (2,299,003)
------------- -------------
Net revenue . . . . . . . . . . 21,044,644 22,411,142
Costs and expenses:
Cost of revenue earned . . . . 16,709,388 20,614,734
Selling, general and
administrative expenses . . . 2,720,542 3,612,830
------------- -------------
Operating income (loss) . . . . . . 1,614,714 (1,816,422)
Minority interest in net loss
(income) of subsidiary . . . . . (101,357) 46,890
Interest expense, net . . . . . . . (343,536) (495,258)
------------- -------------
Income (loss) before provision for
income taxes . . . . . . . . . . 1,169,821 (2,264,790)
Provision for income taxes (benefit) 506,777 (998,628)
------------- -------------
Net income (loss) . . . . . . . . $ 663,044 $ (1,266,162)
============= =============
Per Share Data:
Income (loss) per share . . . . . . $ .15 $ (.28)
============= =============
Weighted average number of shares
outstanding used in
computation . . . . . . . . . . 4,442,997 4,447,397
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
Three months ended March 31,
----------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income (loss) . . . . . . $ 663,044 $ (1,266,162)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 898,292 1,258,598
Minority interest in net
income (loss) of
subsidiary . . . . . . . . 101,357 (46,890)
(Gain) loss on disposal of
property and equipment . . (70,924) 27,726
Accrued interest on term note (109,985) (120,947)
Unearned employee compensation
from Employee Stock
Ownership Plan Trust . . . 149,448 107,832
Changes in operating assets
and liabilities:
Accounts receivable . . . 854,842 (1,444,929)
Costs and estimated earnings
in excess of billings on
uncompleted contracts . . (559,208) 612,709
Income tax refund receivable 574,516 (882,063)
Other assets . . . . . . . . (396,822) (463,652)
Accounts payable . . . . . . (568,273) (3,532,571)
Accrued expenses . . . . . . (177,479) 243,415
Billings in excess of costs
and estimated earnings on
uncompleted contracts . . (411,853) (229,745)
------------- -------------
Total adjustments . . . 283,911 (4,470,517)
------------- -------------
Net cash provided (used) by
operating activities . . . . . . 946,955 (5,736,679)
------------- -------------
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(continued)
Three months ended March 31,
----------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
Cash flows from investing
activities:
Capital expenditures . . . . . . (3,520,572) (2,326,885)
Proceeds from sale of property
and equipment . . . . . . . . 218,000 77,096
------------- -------------
Net cash used by investing
activities . . . . . . . . . . . (3,302,572) (2,249,789)
------------- -------------
Cash flows from financing
activities:
Proceeds from long-term debt . 3,933,597 8,672,992
Repayments of long-term debt . (1,119,063) (1,468,251)
Repayments of Employee Stock
Ownership Plan Trust debt . . (150,000) (240,750)
------------- -------------
Net cash provided by financing
activities . . . . . . . . . . . 2,664,534 6,963,991
------------- -------------
Net increase (decrease) in cash . . 308,917 (1,022,477)
Cash, beginning of period . . . . . 479,106 1,160,463
------------- -------------
Cash, end of period . . . . . . . . $ 788,023 $ 137,986
============= =============
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.) ("Kimmins") 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.
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 will be amortized
on a straight-line basis over twenty years, and customer
contracts, which will be amortized on a straight-line basis over
five years.
2. Costs and estimated earnings on uncompleted contracts
December 31, March 31,
1995 1996
------------- -------------
(unaudited)
Expenditures on uncompleted
contracts . . . . . . . . . . $ 65,767,913 $ 63,884,084
Estimated earnings on
uncompleted contracts . . . . 7,456,516 6,111,438
------------- -------------
Less actual and allowable 73,224,429 69,995,522
billings on uncompleted
contracts . . . . . . . . . . 58,452,865 55,606,922
------------- -------------
$ 14,771,564 $ 14,388,600
============= =============
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . $ 15,378,178 $ 14,765,469
Billings in excess of costs and
estimated earnings on
uncompleted contracts . . . . (606,614) (376,869)
------------- -------------
$ 14,771,564 $ 14,388,600
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Property and equipment, net
December 31, March 31,
1995 1996
------------- -------------
(unaudited)
Land . . . . . . . . . . . . . . $ 5,067,437 $ 5,421,440
Buildings and improvements . . . 7,317,544 7,366,736
Construction and recycling
equipment . . . . . . . . . . 42,345,792 44,116,927
Furniture and fixtures . . . . . 1,463,600 1,385,014
Construction in progress. . . . . 615,846 332,861
------------- -------------
56,810,219 58,622,978
Less accumulated depreciation . . (19,217,558) (20,192,077)
------------- -------------
$ 37,592,661 $ 38,430,901
============= =============
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>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Long-term debt
December 31, March 31,
1995 1996
------------- -------------
(unaudited)
Notes payable, principal and
interest payable in monthly
installments through March 1,
2001, interest at varying rates
up to 13 percent, collateralized
by equipment . . . . . . . . . . $ 20,215,486 $ 20,833,883
Revolving term bank line of
credit, $10,000,000 ($5,000,000
during 1995), maximum, due
October 31, 1997, interest at
lender's base rate plus 1/2
percent . . . . . . . . . . . . . 3,292,607 9,952,607
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 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 5,213,077
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 38,899,567
Less current portion . . . . . . 7,074,857 7,552,499
------------- -------------
$ 24,619,969 $ 31,347,068
============= =============
At March 31, 1996, $1,400,000 of the Mortgage Note is classified
as long-term debt since it is the Company's intent to refinance the
debt on a long-term basis.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net revenue for the three months ended March 31, 1996, increased
by 6 percent to $22,411,000 from $21,045,000 for the three months
ended March 31, 1995. The increase is due primarily to the continued
growth of the Company's solid waste management segment as it expands
its operations in the Florida market ($2,242,000 increase in net
revenue) and the growth of the Company's utility contracting services
($839,000 increase in net revenue). This increase offsets certain
decreases in the Company's remediation services ($1,630,000 decrease
in net revenue) and industrial demolition services ($110,000 decrease
in net revenue).
Outside services, which largely represent subcontractor costs,
decreased, as a percentage of net revenue, to 10 percent for the first
quarter of 1996 from 22 percent for the same period in 1995. The
Company will utilize the services of a subcontractor when it
determines that an economic opportunity exists with regards to
providing the services internally.
Cost of revenue earned, as a percentage of net revenue, for the
first quarter of 1996 increased to 92 percent from 79 percent for the
same period in 1995. As a result, the gross margin percentage
decreased to 8 percent of net revenue for the first quarter of 1996
from 21 percent for the same period in 1995. The gross profit for the
first quarter of 1996 was $1,796,000 compared to $4,335,000 for the
first quarter of 1995. The decrease in the dollar amount and
percentage of gross margin is primarily associated with losses on two
utility contracting projects that failed to perform to the Company's
original projections and lower profit margins earned on certain solid
waste management services.
During the three months ended March 31, 1996, selling, general
and administrative expenses increased to $3,613,000 (16 percent of net
revenue) from $2,721,000 (13 percent of net revenue) for the three
months ended March 31, 1995. The dollar increase is primarily a
result of increased overhead costs associated with higher net revenue.
Minority interest in net loss of subsidiary was $47,000 for the
three months ended March 31, 1996, compared to minority interest in
net income of subsidiary of $101,000 during the same period in 1995.
The minority interest in net income (loss) of the 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 decrease in TransCor's earnings between years is attributable to
the lower profit margins earned on certain solid waste management
services.
Net interest expense increased to $495,000 from $344,000
primarily due to the increase in the amount of interest-bearing debt.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
As a result of the foregoing, income (loss) before provision for
income taxes for the three months ended March 31, 1996, was
($2,265,000) (10 percent of net revenue) compared to $1,170,000 (6
percent of net revenue) during the same period in 1995.
The Company's effective tax rate was 44.1 percent for the three
months ended March 31, 1996, compared to a tax rate of 43.3 percent
for 1995.
As a result of the foregoing, net loss for the three months ended
March 31, 1996, was $1,266,000 (6 percent of net revenue) as compared
with net income of $663,000 (3 percent of net revenue) for the same
period during 1995.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash provided (used) by operating activities was ($5,737,000) and
$947,000 during the three months ended March 31, 1996 and 1995,
respectively. For the first three months of 1996, the cash used by
operating activities of $5,737,000 is 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
receivable, income tax refund receivable, and accounts payable). For
the first three months of 1995, the cash provided by operating
activities of $947,000 is 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 accounts payable). The Company had cash requirements
related to capital expenditures during the three months ended March
31, 1996 and 1995 of $2,327,000 and $3,521,000, respectively. These
expenditures were primarily related to the acquisition of equipment
associated with the Company's solid waste transfer stations. At March
31, 1996, the Company had borrowed $9,953,000 of its revolving term
bank line of credit, with $47,000 available for future borrowing.
During the three months ended March 31, 1996 and 1995, the
Company's average contract and trade receivables less retainage were
outstanding for 77 and 63 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 is 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 March 31, 1996, are
approximately $3,851,000 and $3,953,000, respectively.
At December 31, 1995, and March 31, 1996, $5,301,000, and
$5,431,000, 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.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
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
that 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.<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: May 13, 1996 By: /s/ Francis M. Williams
------------------ -----------------------------
Francis M. Williams
President and
Chief Executive Officer
(Principle Executive Officer)
Date: May 13, 1996 By: /s/ Norman S. Dominiak
------------------ -----------------------------
Norman s. Dominiak
Vice President and
Chief Financial Officer
(Principle Accounting and
Financial Officer)<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 137,986
<SECURITIES> 0
<RECEIVABLES> 23,843,833
<ALLOWANCES> (425,713)
<INVENTORY> 222,223
<CURRENT-ASSETS> 44,919,241
<PP&E> 58,622,978
<DEPRECIATION> (20,192,077)
<TOTAL-ASSETS> 95,868,420
<CURRENT-LIABILITIES> 29,527,614
<BONDS> 0
0
0
<COMMON> 4,447
<OTHER-SE> 25,218,659
<TOTAL-LIABILITY-AND-EQUITY> 95,868,420
<SALES> 24,710,145
<TOTAL-REVENUES> 24,710,145
<CGS> 22,913,737
<TOTAL-COSTS> 22,913,737
<OTHER-EXPENSES> 3,612,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 495,258
<INCOME-PRETAX> (2,264,790)
<INCOME-TAX> (998,628)
<INCOME-CONTINUING> (1,266,162)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,266,162)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
