SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[MARK ONE]
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[Fee required]
For the fiscal year ended December 31, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No fee required]
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 No.)
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
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Each Class on Which Registered
Common Stock, $.001 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
As of March 18, 1996, there were outstanding 4,447,397 shares of
Common Stock and 2,291,569 shares of Class B common stock. The aggregate
market value of the voting stock held by non-affiliates of the registrant
as of March 18, 1996, was $13,604,399.
DOCUMENTS INCORPORATED BY REFERENCE:
NONE<PAGE>
PART I
Item 1. Business
THE COMPANY
During January 1996, Kimmins Environmental Service Corp. filed an
amendment to its Restated Certificate of Incorporation that changed the
name of the company to Kimmins Corp. Kimmins Corp. and its subsidiaries
(collectively, the "Company") is a solid waste management and specialty
contracting company that, through its subsidiaries, provides a full range
of solid waste management services and project-oriented services for
infrastructure development and the remediation of sites and facilities.
The Company's services are as follows:
* Solid waste management services - Transfer, resource recovery,
transportation, disposal of non-hazardous waste, and demolition
of residential and commercial facilities.
* Specialty contracting
* Environmental and utility contracting -
Environmental and utility contracting, including
infrastructure services such as sewer lines, water
lines, and roads.
* Industrial demolition, dismantling, and abatement
- Dismantling of facilities or structures
including offshore oil platforms; draining liquid
wastes from pipes and tanks; asbestos removal,
cleanup, disposal, and reinsulation; removal of
above- and below-ground tanks; removal and
disposal or sale of other equipment; and sale of
scrap materials.
* Hazardous waste services - On-site treatment,
containment, incineration, and excavation and
removal.
The Company's surety services were spun-off from the Company through
the distribution of equity securities of the holding company of the surety
subsidiaries to its stockholders during October 1992.
The Company's services may be used individually or in combination as
required to meet the specific needs of customers. The Company's business
strategy is to draw upon its solid waste management and contracting
experience to perform complex projects requiring a broad range of services.
Although each of the Company's business lines can operate independently
from the other related services, the Company believes that integration of
these services gives it a competitive advantage by relieving the customer
of the burden of coordinating activities of multiple contractors.<PAGE>
During its first years of operation, the Company emphasized, among
other services offered, a broad range of contracting services. As the need
for waste-related and specialty contracting services has grown in response
to heightened public concern and government regulation, the Company has
used its capabilities in facilities demolition and dismantling and in the
management of complex construction projects to become increasingly involved
in solid waste management and project-oriented activities.
The Company's services are provided to industrial, commercial,
institutional and governmental customers, which have included Shell Oil
Company, Mobil Oil Corporation, the City of Tampa, the United States Air
Force, and the U.S. Army Corps of Engineers. Operations and marketing
efforts are managed through the Company's subsidiaries, which are located
in the south and northeast.
The Company's strategy is to continue to focus on solid waste
management services and specialty contracting projects for large
manufacturing and governmental customers. To date, the Company's
activities in solid waste management have consisted of opening and
operating resource recovery and transfer facilities in various cities in
Florida and bidding on and obtaining industrial, commercial, and municipal
solid waste management contracts. The Company does not consider its
business to be highly seasonable.
SERVICES
Solid Waste Management Services:
The Company, through its majority-owned subsidiary, TransCor Waste
Services, Inc. ("TransCor"), provides solid waste management services to
commercial, industrial, residential, and municipal customers. In
connection with such services, the Company currently owns and operates
fully-permitted construction and demolition ("C&D") transfer and recycling
("T&R") facilities in four of the largest metropolitan regions in the state
of Florida. The Company had also, pursuant to several municipal contracts,
commenced the residential curbside collection of a variety of already
segregated recyclable forms of solid waste, including such materials as
newspapers, cardboard, plastic, metals, and glass. In addition to its T&R
operations, the Company collects and disposes of all types of non-hazardous
solid waste for industrial and commercial customers in its T&R regions.
The Company also provides residential garbage collection services for
several municipalities located in Pinellas County, St. Lucie County, Lee
County and Hillsborough County, Florida. In addition, the Company provides
demolition and other related services with, and as an economic complement
to, its solid waste management services.
The Company's permits allow it to segregate and recycle part of the
C&D debris and yard waste accepted at its T&R facilities (thereby
decreasing the Company's landfill disposal costs). The Company has the
capability to haul the non-recyclable waste economically to outlying rural
landfills (where disposal fees generally are much lower than those charged
by urban landfills). Consequently, the Company can charge lower rates at
its T&R facilities than those charged by landfill operators in the same
vicinities. In addition, disposal of debris at the Company's T&R
facilities generally requires less time and results in less damage to waste
collection vehicles than landfill disposal. As a result, waste haulers,
including those in competition with the Company's own collection services,
are provided strong economic and other incentives for disposing of their
C&D debris and yard waste at the Company's T&R facilities.<PAGE>
The Company provides demolition services for commercial and
residential customers. These services include the razing and dismantling
of facilities and structures, the recovery of demolished material for reuse
and recycling, and the disposal of non-recycled demolition debris. The
typical demolition projects of the Company are single and multistory urban
buildings and small warehouses, manufacturing plants, and other facilities.
Typically, the Company enters into separate demolition contracts for each
project, which are usually for a term of less than six months.
Specialty Contracting:
Infrastructure and Utility Contracting Services
Prior to mid-1988, the Company's contracting business was directed
primarily at lower-margin general contracting for industrial, commercial,
institutional and governmental customers, including schools, apartments and
shopping centers. During 1988, the Company redirected its focus toward
environmental and utility contracting, including infrastructure and
reconstructive service work.
The Company, through its subsidiary, Kimmins Contracting Corp.,
continues to provide comprehensive non-hazardous contracting services,
including infrastructure services such as water and sewer line
installation, replacement and repair to private and government customers
primarily in the State of Florida. Related infrastructure development
includes road installation, repair and widening, and installation, repair
and enhancement of drainage and wastewater services.
Industrial Demolition, Dismantling, and Abatement Services
The Company, through its subsidiaries, Kimmins Industrial Service
Corp., Kimmins Abatement Corp., and Kimmins International, offers
demolition and dismantling of facilities or structures; asbestos removal;
cleanup, disposal, and reinsulation; removal of above- and below-ground
storage tanks; removal and disposal or sale of industrial equipment; and
the sale of equipment and scrap materials.
Demolition and dismantling projects result from the closing or
retooling of facilities due to such factors as technological obsolescence
of facilities, corporate mergers and consolidations of operations, and the
relocation of manufacturing operations to low-cost labor areas or areas
subject to less stringent regulation, primarily in foreign countries. In
addition, site remediation, particularly in the case of environmental
contamination of a site, frequently requires the demolition or dismantling
of a contaminated facility.
Dismantling is the precise disassembly of a manufacturing or
production facility on a piece-by-piece basis to recover equipment as
complete operating units that can be reinstalled at another location.
Dismantling enhances the value of the facility above scrap market values.
The Company is paid a fee for dismantling services and, usually, a
commission on the sale of non-relocated equipment.
Demolition usually requires wrecking services for which the Company is
paid a fee by the customer. In certain projects, the Company may also
receive additional revenue from selling the scrap material. The Company's
services in these areas include dismantling large structures (including
refineries, and utility plants); draining liquid wastes from pipes and<PAGE>
tanks; removing above- and below-ground tanks; cleaning and disposing of
contaminated equipment; and controlled demolition.
Certain demolition projects also involve asbestos removal, cleanup and
disposal. The Company is de-emphasizing asbestos abatement services and
generally will only perform these services with other environmental
demolition activities.
Hazardous Waste Services
The Company, through its subsidiary, ThermoCor Kimmins, Inc., offers a
full range of services for the removal, treatment, and disposal of
hazardous materials. The services offered include on-site incineration
(thermo-destruction) of hazardous waste, as well as other on-site treatment
methods, construction of containment systems, and the excavation and
removal of contaminated material.
On-site treatment. On-site remediation involves treating hazardous
materials at a customer's site to reduce or eliminate the need for off-site
transportation and disposal of hazardous materials, thus decreasing the
cost to and potential liability of the customer. On-site treatment, which
includes a variety of techniques, eliminates the substance permanently,
reduces its toxicity or volume, or stabilizes its constituents for disposal
on-site or off-site at a permitted disposal facility. Treatment and
disposal methods used by the Company include incineration, stabilization
and fixation, dechlorination, filtration, dewatering, air stripping and
carbon adsorption, precipitation, and bioremediation.
Containment. Containment systems are constructed to prevent the
migration of hazardous materials from a site to the surrounding
groundwater, surface water, soil or air. While containment can be a
permanent remedial solution, it is also used as an interim step followed by
excavation and removal or on-site treatment. The Company installs
containment systems that include containment cells, surface caps, and
slurry walls.
Excavation and removal. Excavation and removal involve the excavation
of contaminated materials for containment, on-site treatment or off-site
disposal. When off-site disposal is required, the Company subcontracts
with licensed third parties for the transportation of the material for
off-site disposal. As part of its quality control program, the Company
regularly samples and analyzes excavated materials to verify that the
contaminants are consistent with those identified in the remediation plan.
SEGMENT INFORMATION
See Note 18 of Notes to Consolidated Financial Statements of the
Company for the years ended December 31, 1993, 1994, and 1995 for the
Company's financial segment information.
PERFORMANCE BONDS
The Company is required to post performance bonds in connection with
certain asbestos abatement, waste remediation, demolition, and construction
contracts. For the year ended December 31, 1995, most of the Company's
revenue was derived from contracts or projects that required the Company to
post performance bonds. The Company's current bonding coverage for non-
environmental projects is $30 million for an individual project ($100<PAGE>
million aggregate). The Company has obtained bonding coverage in amounts
up to $8.5 million for environmental projects. However, the Company has
experienced difficulties in prior years in obtaining bonding coverage for
environmental projects more than this amount. However, some environmental
projects either do not require a bond or require a bond for less than the
complete contract price of the project value. The Company has obtained
bonding coverage for environmental projects more than $8.5 million as a
result of personal surety bonds or collateral furnished by Francis M.
Williams, President of the Company. Mr. Williams has no obligation to
provide surety bonds, collateral or otherwise to assist the Company in
connection with bonding coverage.
In addition to performance bond requirements, some jurisdictions in
the future may require the posting of substantial bonds or require
companies engaged in solid waste management and related activities to
provide other financial assurances covering the closure, post-closure
monitoring and corrective activities for certain solid waste management
facilities.
MARKETING
The Company, through its majority-owned subsidiary, TransCor Waste
Services, Inc., generally obtains solid waste collection contracts for its
services or for the operation of certain solid waste management facilities
through the process of competitive bidding, purchase orders, or
negotiations. The Company's marketing efforts include door-to-door sales,
monitoring trade journals and other industry sources for bid solicitations
by various entities, including government authorities and related
instrumentalities, and responding to such bid solicitations, which may
include requests for proposals ("RFPs") and requests for qualifications
("RFQs"). The Company also attempts to be included on lists of qualified
bidders frequently contained in RFPs and RFQs. In response to an RFP or
RFQ, the soliciting entity requires a written response within a specified
period. Generally, in the case of an RFP, a bidder submits a proposal
detailing its qualifications, the services to be provided, and the cost of
the services to the soliciting entity; then, such entity, based on its
evaluation of the proposals submitted, awards the contract to the
successful bidder. In the case of an RFQ, a bidder submits a response
describing its experience and qualifications, the soliciting entity then
selects the bidder believed to be the most qualified, and then negotiates
all of the terms of the contract, including the cost of the services. The
Company's single largest solid waste collection contract was derived
through competitive bidding, and the Company expects that future
significant contracts will be obtained through competitive bidding. The
Company has also obtained customers through recommendations and referrals
from existing customers.
The Company's specialty contracting business results primarily from
customers for whom the Company has previously provided services, prior
customer references, and from direct marketing efforts. In particular, the
Company believes its national reputation as a leading demolition and
dismantling contractor has contributed significantly to its ability to
attract specialty service business.
The Company's specialty contracting subsidiaries direct their
marketing activities through regional offices in Tampa, Florida; Houston,
Texas; and Niagara Falls, New York. These offices are located in areas
with a high concentration of industrial facilities. The Company believes<PAGE>
that accurate bidding is crucial in securing new contracting projects and
completing them profitably. The Company uses computerized bidding systems
in conjunction with site visits to develop bids for contracting projects.
While bid price is an important factor in obtaining contracts, potential
clients also consider the reputation, experience, safety record and
financial strength of the bidders in awarding contracts.
CUSTOMERS
Customers for the Company's solid waste management services include
local and regional contractors, municipalities, institutions, other waste
haulers, and local businesses. The primary private customers for the
Company's specialty contracting services are Fortune 500 corporations
engaged in heavy manufacturing, such as chemical, petroleum, petrochemical,
paper, and steel companies as well as public utilities and federal, state
and local government agencies. For the year ended December 31, 1995, 56
percent and 44 percent, respectively, of the Company's gross revenue were
derived from private and governmental customers, respectively.
A substantial portion of the Company's gross revenue is derived from
services provided to federal, state and local government agencies including
the EPA. Government contracts are subject to legislation mandating a
balanced budget; delays in funding; lengthy review processes for awarding
contracts; delay or termination of contracts at the convenience of the
government; termination, reduction or modification of contracts in the
event of changes in the government's policies or because of budgetary
constraints. Furthermore, increased or unexpected costs could result in
losses or reduced profits under fixed-price government as well as
commercial contracts.
BACKLOG
As of December 31, 1995, the Company had a backlog of uncompleted
projects under contract aggregating approximately $95,661,000, (compared to
approximately $88,806,000 as of December 31, 1994) of which approximately
$35,882,000 is attributable to environmental and utility contracting
services, approximately $3,255,000 is attributable to demolition and
dismantling services, approximately $440,000 is attributable to asbestos
abatement services, approximately $10,244,000 is attributable to site
remediation services, and approximately $45,840,000 is attributable to
solid waste management services. The Company anticipates that it will
recognize approximately $61,761,000 of revenues from these projects by the
end of 1996 with the remaining revenue to be recognized through the year
2000.
COMPETITION
Although developments in the solid waste management industry have
resulted in the emergence of large private and public solid waste
management companies and in consolidating trends in the industry, the solid
waste management business is characterized by intense competition. The
Company believes that no single company has a dominant market share of the
solid waste management business in the United States or Florida. Although
competition varies by locality and type of services, the Company's
principal sources of competition are local and regional solid waste
management companies of varying size that primarily provide collection or
disposal services to customers in a limited geographic area, large regional
and national solid waste management companies that operate over more <PAGE>
extensive geographic areas and provide completely integrated solid waste
management services, own or operate disposal sites and engage in various
transfer and resource recovery activities, and counties and municipalities
that maintain their own solid waste collection and disposal services for
residents and businesses in the locality. National companies that compete
against the Company include, among others, Waste Management, Inc., and
Browning-Ferris Industries, Inc.
The Company believes that the principal competitive factors in the
solid waste management industry are price, reputation, services, managerial
experience, financial assurance capability (particularly as it relates to
municipal contracts), and range of services offered.
The Company believes that its ability to offer a broad range of
specialty contracting services provides it with significant competitive
advantage. Nevertheless, the Company faces substantial competition from
national, regional and local competitors, many of which are well
established and have much greater marketing, financial, technological and
other resources than the Company. Furthermore, some of the Company's
competitors possess certain hazardous materials handling capabilities that
the Company does not possess, including engineering, laboratory and off-
site transportation and storage and disposal. However, it has been the
Company's experience that subcontractors are available to provide these
services.
The Company believes the principal competitive factors in the
specialty contracting services industry are safety, reputation, technical
proficiency, surety bonding capability, managerial experience, price, and
breadth of services offered.
INSURANCE COVERAGE
The Company, consistent with industry trends, has experienced
difficulties in obtaining adequate insurance coverage against liabilities
that may be incurred in connection with the conduct of certain aspects of
its specialty contracting services business. Such coverage is often a
prerequisite to obtaining government and commercial contracts. The Company
currently maintains comprehensive general liability insurance, with total
coverage of $16 million for any single occurrence and $18 million for
aggregate claims relating to damage to persons or property. These policies
cover all activities of the Company and its subsidiaries except for its
asbestos-related activities and certain non-asbestos related liabilities
such as pollution liability damage (sudden or gradual) caused by the
discharge or release of any irritant or contaminant. In addition, the
Company has comprehensive general liability coverage that covers, among
other things, specific asbestos-related risks up to $10 million. In
addition, the Company has obtained a $1 million per occurrence/$2 million
aggregate blanket policy for contractors pollution liabilities and can
obtain additional coverage of up to a total of $6 million is required on a
project-by-project basis.
GOVERNMENT REGULATION
The Company is subject to an extensive and frequently evolving
statutory and regulatory framework of federal, state, and local
environmental, health, safety, and transportation authorities, which
framework imposes significant compliance burdens and risks upon the
Company. The Company believes it is in substantial compliance with all <PAGE>
material federal, state, and local laws governing its material business
operations. Nevertheless, amendments to existing statutes and regulations,
adoption of new statutes and regulations and the Company's expansion into
other jurisdictions and types of operations could result not only in the
additional risk of noncompliance, but also in the increase in regulatory
burden that could cause related increases in costs and expenses.
Two of the statutes very important to the Company are the Resource
Conservation and Recovery Act of 1976, as amended, and the EPA's
implementing regulations of that statute (collectively, "RCRA"), and the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"). RCRA establishes a comprehensive framework
for state and federal regulation of hazardous waste management. It seeks
to prevent the release into the environment of hazardous wastes through the
development of solid waste management plans and the regulation of the
generation, transportation, treatment, storage and disposal of hazardous
wastes.
While RCRA was implemented to prevent the release of hazardous wastes
into the environment, CERCLA was designed to establish a national strategy
to remedy existing hazardous environmental conditions. CERCLA establishes
liability for clean up costs and environmental damages for owners and
operators of disposal sites, as well as for persons who generate, transport
or arrange for transportation of wastes to a particular site. While CERCLA
generally exempts responsible contractors from liability arising from the
release or threatened release to which the contractor is responding, it can
impose liability on a responsible contractor for that contractor's
negligent and grossly negligent acts.
On October 9, 1991, the EPA promulgated substantial revisions to its
existing RCRA Subtitle D implementing regulations. The revisions set forth
minimum national "open dump" criteria for publicly and privately owned
municipal solid waste landfills. They include location restrictions,
design and operating criteria, groundwater monitoring and corrective action
standards, closure and post closure care requirements, and financial
assistance criteria. Most revisions have become effective October 9, 1993,
and states have revised their own laws and regulations to be consistent
with the RCRA criteria. Some revisions (i.e., groundwater monitoring
requirements) have been phased in over a five-year period that began on
October 9, 1991, and others relating to financial responsibility became
effective April 9, 1994.
Many states have enacted statutes similar to RCRA and CERCLA
regulating the handling of hazardous substances and wastes. The Company
could be subject to substantial liability under these statutes to private
parties and government entities for fines or penalties, in some instances
without any fault on the part of the Company, because of the mishandling or
release of any hazardous substances.
PERMITS AND LICENSES
Many states license such areas of the Company's operations as asbestos
abatement and general contracting. Licensing requires that workers and
supervisors receive training from EPA approved and state certified
organizations and pass required tests. The Company is currently licensed
to perform its services in 36 states. The Company also operates in certain
states that do not have a special asbestos abatement or general contracting
license requirement; however, these states have adopted regulations
regarding worker safety with which the Company must comply.<PAGE>
The Company may need additional licenses to expand its operations.
Although there can be no assurance, based upon the level of training of its
employees and its experience, the Company currently believes that it can
obtain all such required licenses.
EMPLOYEES
At March 18, 1996, the Company had approximately 1,000 employees, of
which 8 were employed in executive capacities, 60 in professional
capacities, 97 in administrative capacities, 110 as field supervisors and
725 in field operations. A total of 35 of the Company's employees are
union members, covered by various collective bargaining agreements. The
Company has not experienced any strikes or work stoppages and considers its
relationship with its employees to be satisfactory.
The Company, through its subsidiaries, has implemented employee safety
programs that require each employee to complete a general training and
safety program. Training topics include approved work procedures and
instruction on personal safety and the use of protective equipment. In
addition, all employees engaged in asbestos abatement activities are
required to attend a minimum three- to four-day course approved by the EPA
and Occupational Safety and Health Administration, and all supervisors of
abatement projects are required to attend a 40-hour safety course annually.
Moreover, employees are issued detailed training materials and are required
to attend ongoing safety seminars. The Company's subsidiaries also conduct
job safety analysis in the job bidding stage. Besides the precautions
taken with respect to projects, the Company takes additional measures to
protect its asbestos and site remediation workers, including providing them
with additional protective equipment and sponsoring periodic medical
examinations.
Item 2. Properties
The Company owns its principal executive offices that are located in
approximately 20,600 square feet of office space at 1501 and 1502 Second
Avenue, East, Tampa, Florida 33605. The offices are subject to a
mortgage, securing indebtedness evidenced by a promissory note with an
outstanding principal amount at December 31, 1995, of $1,875,000. This
variable rate note matures on August 1, 1999, and currently bears interest
at 1.25 percent above the lender's prime rate.
The Company leases the following offices:
<TABLE>
<CAPTION>
Annual
Location Lease Expiration Date Rental
<S> <C> <C>
2609 Allen-Genoa Road Month-to-month $ 3,240
Pasadena, Texas
256 Third Street
Niagara Falls, New York Month-to-month $18,300
</TABLE>
Item 3. Legal Proceedings
The Company is involved in various legal actions and claims arising in
the ordinary course of its business, none of which is expected to have a
material effect on the Company's financial position or results of
operations.<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On October 2, 1995, the Board of Directors of the Company adopted an
amendment to the Company's restated Certificate of Incorporation that
effected a one-for-three reverse stock split of the Company's common stock
and Class B common stock. The amendment was approved on October 25, 1995,
by the written consent of 61.5 percent of the combined voting power of the
Company's common stock and Class B common stock, and became effective on
January 11, 1996.<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters
The Company's common stock has been traded on the New York Stock
Exchange (symbol "KVN") since March 30, 1990. From May 19, 1987, until
March 30, 1990, the Company's common stock traded in the over-the-counter
market and was quoted on NASDAQ's National Market System. The following
table sets forth for the periods indicated high and low sales prices of the
Company's common stock as reported by the New York Stock Exchange. These
prices do not give effect to the one-for-three reverse stock split that
became effective January 11, 1996.
<TABLE>
<CAPTION>
1995 High Low
<S> <C> <C>
First Quarter . . . . . . . 2 1 1/2
Second Quarter . . . . . . 2 5/8 1 3/4
Third Quarter . . . . . . . 6 1/4 2 3/8
Fourth Quarter . . . . . . 3 3/8 2 1/8
1994 High Low
First Quarter . . . . . . . 2 3/4 2 1/8
Second Quarter . . . . . . 2 3/8 1 3/4
Third Quarter . . . . . . . 2 1/8 1 1/2
Fourth Quarter . . . . . . 1 7/8 1 3/8
</TABLE>
On March 18, 1996, there were approximately 1,500 holders of record of
the common stock. Many of such holders are brokers and other institutions
holding shares in "street name" for more than one beneficial owner.
Dividends
The payment by the Company of dividends, if any, in the future is
within the discretion of its Board of Directors and will depend upon the
Company's earnings, capital requirements (including working capital needs),
and financial condition, as well as other relevant factors. Certain
agreements between the Company and its lending institutions prohibit the
Company from paying cash dividends without the lenders' consent. Other
than a three and one-third cent per share of a common stock cash dividend
paid in July 1989, the Company has not paid any cash dividends since its
inception, and the Board of Directors does not plan to declare or pay any
cash dividends in the future. <PAGE>
Item 6. Selected Financial Data
During October 1995, the Board of Directors declared a one for three
reverse stock split of the Company's common stock and Class B common stock.
All share and per share information has been adjusted to reflect the stock
split on a retroactive basis.
During December 1991, the Company filed with the Securities and
Exchange Commission ("Commission") a registration statement for the shares
of common stock of Cumberland Holdings, Inc. ("Cumberland"), a wholly-owned
subsidiary that was a holding company for the Company's surety operations,
to spin-off Cumberland into a stand-alone, publicly-held company. The
registration statement became effective on February 10, 1992, and the spin-
off was effected on October 1, 1992. The historical balance sheet
information presented on the following page has been restated to present
the surety operations as a discontinued operation.
<TABLE>
HISTORICAL INCOME STATEMENT DATA:
<CAPTION>
Years ended December 31,
(In thousands, except per share data)
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Gross revenue . . . . . . . . . $ 100,646 $ 87,442 $ 83,609 $ 96,755 $111,346
Net revenue . . . . . . . . . . 73,741 78,614 77,405 85,353 95,426
Operating income . . . . . . . 5,012 1,782 3,666 2,670 4,596
Litigation settlements (1) . . 296 (379) - - -
Income from continuing
operations before provision
for income taxes . . . . . . 4,216 99 3,196 1,533 2,833
Income from continuing
operations . . . . . . . . . 2,593 61 1,753 797 1,343
Income (loss) from discontinued
operations (2) . . . . . . . (271) 124 - - -
Net income . . . . . . . . . . 2,322 185 1,753 797 1,343
PER SHARE DATA:
Income from continuing
operations per share -
primary . . . . . . . . . . .57 - .39 .18 .30
Income (loss) from discontinued
operations per share -
primary . . . . . . . . . . (.06) .03 - - -
Net income per share - primary .51 .03 .39 .18 .30
Weighted average number of
common shares outstanding -
primary . . . . . . . . . . 4,441 4,442 4,443 4,443 4,544
Income from continuing
operations per share - fully
diluted . . . . . . . . . . .57 - .39 .18 .30
Income (loss) from discontinued
operations per share - fully
diluted . . . . . . . . . . (.06) .03 - - -
Net income per share - fully
diluted . . . . . . . . . . .51 .03 .39 .18 .30
Weighted average number of
common shares outstanding -
fully diluted . . . . . . . 4,441 4,442 4,474 4,449 4,544
Cash dividends per share . . . None None None None None
</TABLE>
<PAGE>
(1) Balances relate to the settlement of separate contract claims for
work performed in excess of the original contract amounts due to
changes in conditions. Amounts applied against the settlements
included legal fees and other direct costs.
(2) Balances relate to the Company's distribution of its surety
services.
<TABLE>
HISTORICAL BALANCE SHEET DATA:
<CAPTION>
As of December 31,
(In thousands)
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Current assets . . . . . . . . $ 36,880 $ 33,068 $ 33,716 $ 36,200 $ 44,117
Working capital . . . . . . . . 14,034 8,253 12,041 11,205 11,548
Total assets . . . . . . . . . 70,712 68,381 70,192 72,689 93,629
Long-term debt . . . . . . . . 23,680 21,206 19,454 17,032 26,540
Stockholders' equity . . . . . 22,527 20,783 23,102 24,514 26,381
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
The Company conducts its business in two segments: specialty
contracting services and solid waste management services. The specialty
contracting services segment provides comprehensive services including
facilities demolition and dismantling, mobile incineration, excavation,
removal and disposal of contaminated soil, groundwater treatment and
asbestos abatement. The solid waste management services segment offers
storage, collection, transfer, transportation, resource recovery and
disposal of non-hazardous waste.
During March 1993, the initial public offering of the Company's
subsidiary, TransCor, became effective. The offering consisted of
1,000,000 shares of TransCor's common stock, at a price of $5.00 per share.
This offering resulted in the Company owning 74 percent of TransCor.
Results of Operations
The following table sets forth for the periods indicated (i) the
percentage of net revenue represented by certain items in the financial
statements of the Company, and (ii) the percentage change in the dollar
amount of such items from period to period.
<TABLE>
<CAPTION>
Percentage
Percentage of Net Revenue Increase (Decrease)
Year ended December 31, Year ended December 31,
1995 vs. 1994 vs.
1993 1994 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Gross revenue . . . . . . . . . . . . . . . . 108.0% 113.4% 116.7% 15.1% 15.7%
Outside services . . . . . . . . . . . . . . 8.0% 13.4% 16.7% 39.6% 83.8%
Net revenue . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 11.8% 10.3%
Cost of revenue earned . . . . . . . . . . . 82.6% 85.8% 81.2% 5.8% 14.5%
Gross profit . . . . . . . . . . . . . . . . 17.4% 14.2% 18.8% 48.2% (9.9%)
Selling, general and
administrative expense . . . . . . . . . . 12.6% 11.1% 14.0% 41.5% (3.4%)
Operating income . . . . . . . . . . . . . . 4.7% 3.1% 4.8% 84.8% (27.2%)
Non-operating gain . . . . . . . . . . . . . 1.1% 0.0% 0.0% 0.0% (100.0%)
Minority interest in net income
of subsidiary . . . . . . . . . . . . . . (0.3%) 0.0% (.03%) 469.6% 0.0%
Interest expense, net . . . . . . . . . . . . (1.4%) (1.3%) (1.5%) 31.6% 1.3%
Income before provision for
income taxes . . . . . . . . . . . . . . . 4.1% 1.8% 3.0% 84.8% (52.0%)<PAGE>
Provision for income taxes . . . . . . . . . 1.8% 0.9% 1.6%
Net income . . . . . . . . . . . . . . . . . 2.3% 0.9% 1.4% 68.5% (54.5%)
</TABLE>
<PAGE>
Year Ended December 31, 1995, Compared to Year Ended December 31, 1994
During the year ended December 31, 1995, net revenue increased by 12
percent to $95,426,000 from $85,353,000 for the year ended December 31,
1994. The increase primarily is due to the growth of the Company's utility
contracting services ($19,479,000 increase in net revenue) and to the
continued growth of the Company's solid waste management services
($12,112,000 increase in net revenue). This increase offsets certain
decreases in the Company's industrial demolition services ($14,764,000
decrease in net revenue) and asbestos abatement services ($2,323,000
decrease in net revenue).
Outside services, which primarily consist of payments to
subcontractors, increased as a percentage of net revenue from 13 percent
during the year ended December 31, 1994, to 17 percent during 1995. The
Company will use the services of a subcontractor when it determines that an
economic opportunity exists regarding internally providing the services.
Cost of revenue earned increased to $77,466,000 for the year ended
December 31, 1995, from $73,235,000 for the comparable period of 1994. As
a result, gross profit during the year ended December 31, 1995, increased
to $17,960,000 (19 percent of net revenue) from $12,117,000 (14 percent of
net revenue) in 1994. The increase in the dollar amount and percentage of
gross profit primarily is associated with the growth of the Company's
utility contracting and solid waste management services.
During 1995, selling, general and administrative expenses increased to
$13,364,000 (14 percent of net revenue) from $9,447,000 (11 percent of net
revenue) for the year ended December 31, 1994. The dollar increase in
selling, general, and administrative expenses primarily is attributable to
increased overhead costs, such as office salaries and marketing costs,
associated with higher levels of operations. The percentage increase in
selling, general and administrative expenses primarily is associated with
the growth of the Company's solid waste management operations. These
services have historically operated with a higher overhead structure than
the Company's specialty contracting operations.
As a result of the foregoing, operating income increased to $4,596,000
(5 percent of net revenue) during the year ended December 31, 1995, from
$2,760,000 (3 percent of net revenue) during the same period in 1994.
Minority interest in net income of the TransCor subsidiary was
$345,000 for the year ended December 31, 1995, compared to $61,000 for the
year ended December 31, 1994. The minority interest in net income of such
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 increased to $1,418,000 from $1,077,000, which
corresponds with the increase in the interest-bearing debt outstanding
between periods.<PAGE>
The Company's effective tax rate was 52.6 percent for the year ended
December 31, 1995, compared to a tax rate of 48.0 percent for the year
ended December 31, 1994. The increase in the effective tax rate was
primarily due to higher state income taxes and additional taxes on the
income of TransCor.
As a result of the foregoing, net income for the year ended December
31, 1995, was $1,343,000 (1 percent of net revenue) compared to a net
income of $797,000 (less than 1 percent of net revenue) during the same
period in 1994.<PAGE>
Year Ended December 31, 1994, Compared to Year Ended December 31, 1993
During the year ended December 31, 1994, net revenue increased by 10
percent to $85,353,000 from $77,405,000 for the year ended December 31,
1993. The increase primarily is due to the growth of the Company's utility
contracting services ($10,700,000 increase in net revenue) and to the
continued growth of the Company's solid waste management services
($4,098,000 increase in net revenue). This increase offsets certain
decreases in the Company's industrial demolition services ($2,789,000
decrease in net revenue) and hazardous waste services ($2,729,000 decrease
in net revenue).
Outside services, which primarily consist of payments to
subcontractors, increased as a percentage of net revenue from 8 percent
during the year ended December 31, 1993, to 13 percent during 1994. The
Company will use the services of a subcontractor when it determines that an
economic opportunity exists with regards to internally providing the
services.
Cost of revenue earned increased to $73,235,000 for the year ended
December 31, 1994, from $63,959,000 for the comparable period of 1993. As
a result, gross profit during the year ended December 31, 1994, decreased
to $12,117,000 (14 percent of net revenue) from $13,496,000 (17 percent of
net revenue) in 1993. The decrease in gross profit primarily is associated
with losses on two utility contracting projects during the fourth quarter
of 1994 that failed to perform to the Company's original projections and
lower profit margins earned on certain solid waste management services.
During 1994, selling, general and administrative expenses decreased to
$9,447,000 (11 percent of net revenue) from $9,780,000 (13 percent of net
revenue) for the year ended December 31, 1993. The dollar and percentage
decreases were primarily a result of consolidation of certain field offices
and the corresponding reduction of the Company's administrative functions.
As a result of the foregoing, operating income decreased to $2,760,000
(3 percent of net revenue) during the year ended December 31, 1994, from
$3,666,000 (5 percent of net revenue) during the same period in 1993.
Minority interest in net income of the TransCor subsidiary was $61,000
for the year ended December 31, 1994, compared to $287,000 for the year
ended December 31, 1993. The minority interest in net income of such
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 and to the effects of a fire at its Jacksonville facility.
Net interest expense increased slightly to $1,077,000 from $1,063,000.
The average amount of interest-bearing debt outstanding was consistent
between periods.
The Company's effective tax rate was 48.0 percent for the year ended
December 31, 1994, compared to a tax rate of 45.2 percent for the year
ended December 31, 1993. The increase in the effective tax rate was
primarily due to higher state income taxes and additional taxes on the
income of TransCor.<PAGE>
As a result of the foregoing, net income for the year ended December
31, 1994, was $797,000 (less than 1 percent of net revenue) compared to a
net income of $1,753,000 (2 percent of net revenue) during the same period
in 1993.
Liquidity and Capital Resources
Cash provided by operating activities was $2,145,000, $3,884,000, and
$5,793,000 in 1993, 1994, and 1995, respectively. For 1995, the cash
provided by operating activities of $5,793,000 is due primarily to cash
provided by net income, plus the effect of depreciation and amortization,
net of changes in certain operating assets and liabilities (primarily costs
and estimated earnings in excess of billings on uncompleted contracts,
accounts payable, and accrued expenses). For 1994, the cash provided by
operating activities of $3,884,000 is due primarily to cash provided by net
income plus the effect of depreciation and amortization, net of changes in
certain operating assets and liabilities (primarily accounts receivable,
accounts payable, and accrued expenses). For 1993, the cash provided by
operating activities of $2,145,000 is due primarily to cash provided by net
income plus the effect of depreciation and amortization, net of changes in
certain operating assets and liabilities (primarily costs and estimated
earnings on uncompleted contracts, accounts receivable, and accounts
payable). The Company had cash requirements related to capital
expenditures of $4,574,000, $5,804,000, and $16,277,000 in 1993, 1994, and
1995, respectively.
The Company is subject to a variety of restrictive covenants under
various debt agreements with one of its institutional lenders. In 1995 the
Company failed to meet the consolidated tangible net worth, consolidated
debt service coverage ratio and net income requirement with regards to its
bank debt. As of December 31, 1995, the Company obtained waivers for these
covenants and may be required to obtain similar waivers for certain
covenants in 1996. The Company has obtained the personal guarantee of Mr.
Francis M. Williams should waivers not be obtained during 1996 and the
lender accelerates the maturities of the Revolving Term Bank Line of
Credit, Bank Note Payable, and 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. Any inability to achieve future compliance with the loan
covenants could affect the Company's access to further borrowings or
require it to secure additional equity by other means.
As of December 31, 1995, the Company has borrowed $3,293,000 of its
revolving term bank line of credit, with $1,707,000 available for future
borrowings. 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 December 31, 1995, the Company
had cash of $1,160,000.
During the years ended December 31, 1994 and 1995, the Company's
average contract and trade receivables were outstanding for 80 and 71 days,
respectively. Both averages were based on fourth quarter gross revenue
annualized and compared to year end contract and trade receivables.
Management believes that the number of days outstanding for its receivables
approximates industry norms. Part of the Company's contracting operations
is subcontracted, and any delay in collections of receivables relating to<PAGE>
primary contracts will generally result in a delay of payment to
subcontractors.
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 Mr.
Williams entered into a settlement and note renewal agreement whereby the
Chapter 11 bankruptcy filings with respect to the Apartments 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 originally accrued interest at prime plus 1 3/8 percent,
increasing to prime plus 2 percent on July 1, 1995, with principal and
interest payable in monthly installments through December 31, 1998, and is
guaranteed by Mr. Williams. Amounts due from the partnerships at December
31, 1994 and 1995, are approximately $3,588,000 and $3,851,000,
respectively.
At December 31, 1994 and 1995, $4,937,000 and $5,301,000,
respectively, of the contract and trade - affiliates balance is due from
corporate affiliates of the Company's president. The affiliated
receivables relate to contract services performed and are guaranteed by Mr.
Williams.
During March 1993, the Company's solid waste management subsidiary,
TransCor Waste Services, Inc., completed an initial public offering of
1,000,000 shares, at a public offering price of $5.00 per share, of its
common stock, thereby decreasing the Company's percentage of ownership of
such subsidiary to approximately 74 percent.
Historically, the Company has obtained 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 more than this amount. Although each project has its own distinct
and separate bond requirements, the Company may be unable to bid on
projects competitively that require a bond more than $8.5 million.
At December 31, 1995, the Company had no material commitments for
major capital expenditures.
See Note 18 of Notes to Consolidated Financial Statements for the
Company's business segment information.
Effects of Change in Method of Accounting
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"),
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of," which is effective for fiscal years beginning after
December 15, 1995. This statement establishes financial accounting and
reporting standards for the effects of potential impairment and what
disclosures are necessary in the financial statements. Effective January
1, 1995, the Company adopted SFAS No. 121. There was no cumulative effect
of that accounting change on operations, nor did the change affect income
for 1995.<PAGE>
Effect of Inflation
Inflation has not had, and is not expected to have, a material impact
upon the Company's operations.
Quarterly Results of Operations
The following is a summary of the quarterly results of operations for
the years ended December 31, 1994 and 1995. The per share data has been
adjusted to reflect the reverse stock split on a retroactive basis.
<TABLE>
<CAPTION>
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Year ended December 31, 1994: (In thousands, except per share data)
Gross revenue . . . . . . . . . . . . . . . . . . . . . . $ 20,810 $ 26,801 $ 24,678 $ 24,466
Net revenue . . . . . . . . . . . . . . . . . . . . . . . 18,837 23,467 22,022 21,027
Gross profit . . . . . . . . . . . . . . . . . . . . . . 3,113 3,987 3,392 1,625
Net income (loss) . . . . . . . . . . . . . . . . . . . . 377 519 347 (445)
Per share data:
Income (loss) per share . . . . . . . . . . . . . . . $ .09 $ .12 $ .09 $ (.09)
Year ended December 31, 1995:
Gross revenue . . . . . . . . . . . . . . . . . . . . . . $ 25,750 $ 25,468 $ 29,808 $ 30,320
Net revenue . . . . . . . . . . . . . . . . . . . . . . . 21,045 22,893 25,171 26,317
Gross profit . . . . . . . . . . . . . . . . . . . . . . 4,335 4,036 5,178 4,411
Net income (loss) . . . . . . . . . . . . . . . . . . . . 663 224 562 (106)
Per share data:
Income (loss) per share . . . . . . . . . . . . . . . $ .15 $ .06 $ .12 $ (.03)
</TABLE>
Item 8. Financial Statements and Supplementary Data
KIMMINS CORP.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Certified Public Accountants . . . . . . . . . . 17
Consolidated balance sheets at December 31, 1994 and 1995 . . . . . . . 18
Consolidated statements of operations for each of the three years
in the period ended December 31, 1995 . . . . . . . . . . . . . . . . . 20
Consolidated statements of stockholders' equity for each of the three
years in the period ended December 31, 1995 . . . . . . . . . . . . . . 21
Consolidated statements of cash flows for each of the three years
in the period ended December 31, 1995 . . . . . . . . . . . . . . . . . 22
Notes to consolidated financial statements . . . . . . . . . . . . . . 24
Financial statement schedule:
Schedule II - Valuation and qualifying accounts . . . . . . . . . S-1
All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule or
because the information required is included in the financial statements
and notes thereto.<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Kimmins Corp.
We have audited the accompanying consolidated balance sheets of
Kimmins Corp. (f/k/a/ Kimmins Environmental Service Corp.) as of December
31, 1994 and 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1995. Our audits also included the financial
statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
and the schedule 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 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 consolidated financial
position of Kimmins Corp. at December 31, 1994 and 1995, and the con-
solidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Tampa, Florida
March 8, 1996<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . $ 479,106 $ 1,160,463
Accounts receivable:
Contract and trade . . . . . . . 22,081,973 22,152,197
Other receivables - affiliates . 1,464,369 1,903,832
Note receivable - affiliate . . . . 54,167 56,667
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . . . 10,166,227 15,378,178
Income tax refund receivable . . . . 679,538 1,050,625
Deferred income tax . . . . . . . . - 742,130
Other current assets . . . . . . . . 1,274,469 1,673,100
Total current assets . . . . . . 36,199,849 44,117,192
Property and equipment, net . . . . . . . 26,815,429 37,592,661
Intangible assets . . . . . . . . . . . . - 785,175
Accounts receivable - affiliates . . . . 1,349,058 1,450,716
Note receivable - affiliate . . . . . . . 3,533,696 3,794,060
Term note from affiliate (including
accrued interest of $51,983 and
$506,755 at December 31, 1994 and 1995,
respectively) . . . . . . . . . . . . 4,343,032 4,797,804
Other assets . . . . . . . . . . . . . . 447,716 1,090,942
$ 72,688,780 $ 93,628,550
</TABLE>
See accompanying notes
<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Current liabilities:
Accounts payable - trade . . . . . . $ 13,303,408 $ 17,358,270
Deferred income taxes . . . . . . . 73,708 -
Accrued expenses . . . . . . . . . . 3,473,775 7,049,132
Billings in excess of costs and
estimated earnings on
uncompleted contracts . . . . . . 1,375,548 606,614
Current portion of long-term debt . 6,168,006 7,074,857
Current portion of Employee Stock
Ownership Plan Trust debt . . . . 600,000 480,000
Total current liabilities . . . 24,994,445 32,568,873
Long-term debt . . . . . . . . . . . . . 14,632,115 24,619,969
Employee Stock Ownership Plan Trust debt. 2,400,000 1,920,000
Deferred income taxes . . . . . . . . . . 2,914,597 4,559,531
Minority interest in subsidiary . . . . . 3,233,421 3,578,741
Commitments and contingencies (Note 15) . - -
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
4,442,997 in 1994 and 4,447,397
in 1995 . . . . . . . . . . . . . 4,443 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 . . . 18,710,378 18,730,173
Retained earnings . . . . . . . . . 8,569,023 9,911,606
Unearned employee compensation from
Employee Stock Ownership Plan
Trust . . . . . . . . . . . . . . (2,771,934) (2,267,082)
Total stockholders' equity . . 24,514,202 26,381,436
$ 72,688,780 $ 93,628,550 <PAGE>
</TABLE>
See accompanying notes.
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Revenue:
Gross revenue . . . . $ 83,608,764 $ 96,755,001 $111,346,075
Outside services, at
cost . . . . . . . (6,203,454) (11,402,286) (15,919,816)
Net revenue . . . . . 77,405,310 85,352,715 95,426,259
Costs and expenses:
Cost of revenue earned 63,959,362 73,235,439 77,465,818
Selling, general and
administrative
expenses . . . . . 9,779,815 9,447,064 13,364,168
Operating income . . . . . 3,666,133 2,670,212 4,596,273
Non-operating gain relating
to the public offering
of subsidiary . . . . 879,797 - -
Minority interest in net
income of subsidiary . (286,519) (60,624) (345,320)
Interest expense (net of
interest income from
affiliates of
approximately $848,000,
$1,060,000, and
$1,005,000 for the
years ended December
31, 1993, 1994, and
1995, respectively) . (1,063,201) (1,076,911) (1,417,802)
Income before provision for
income taxes . . . . . 3,196,210 1,532,677 2,833,151
Provision for income taxes:
Current . . . . . . . 360,107 650,788 661,472
Deferred . . . . . . . 1,083,440 84,897 829,096
1,443,547 735,685 1,490,568
Net income . . . . . . . . $ 1,752,663 $ 796,992 $ 1,342,583
PER SHARE DATA
Income per share . . . $ .39 $ .18 $ .30
Weighted average number
of shares
outstanding used
in computation . . 4,442,997 4,442,997 4,544,180 <PAGE>
</TABLE>
See accompanying notes.
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
Unearned
Employee
Compensation
from
Capital Employee
Class B in Stock Total
Comon Stock Common Stock Excess of Retained Ownership Stockholders'
Shares Amount Shares Amount Par Value Earnings Plan Trust Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1993 . . . 13,328,992 $ 13,329 6,874,706 $ 6,875 $ 18,696,909 $ 6,019,368 $ (3,953,159) $ 20,783,322
Effect of reverse
stock split . . . . . (8,885,995) (8,886) (4,583,137) (4,583) 13,469 - - -
Employee compensation
from Employee Stock
Ownership Trust . . . - - - - - - 565,568 565,568
Net income . . . . . . . - - - - - 1,752,663 - 1,752,663
Balance at
December 31, 1993 . . 4,442,997 4,443 2,291,569 2,292 18,710,378 7,772,031 (3,387,591) 23,101,553
Employee compensation
from Employee Stock
Ownership Trust . . . . - - - - - - 615,657 615,657
Net income . . . . . . . - - - - - 796,992 - 796,992
Balance at
December 31, 1994 . . 4,442,997 4,443 2,291,569 2,292 18,710,378 8,569,023 (2,771,934) 2,451,202
Stock options exercised . 4,400 4 - - 19,795 - - 19,799
Employee compensation
from Employee Stock
Ownership Trust . . . - - - - - - 504,852 504,852
Net income . . . . . . . - - - - - 1,342,583 - 1,342,583
Balance at
December 31, 1995 . . 4,447,397 $ 4,447 2,291,569 $ 2,292 $ 18,730,173 $ 9,911,606 $ (2,267,082) $ 26,381,436
</TABLE>
See accompanying notes.
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Years ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income . . . . . . . $ 1,752,663 $ 796,992 $ 1,342,583
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization . . . . 3,681,120 3,890,325 4,104,383
Provision for
uncollectible accounts
receivable . . . . 961,325 495,375 404,455
Minority interest in
income of subsidiary 286,519 60,624 345,320
(Gain) loss on
disposal of property
and equipment . . . 6,940 407,325 (241,034)
Accrued interest on
term note/surplus
debenture . . . . . (117,361) 65,378 (454,772)
Deferred income taxes 1,083,440 84,897 829,096
Unearned employee
compensation from
Employee Stock
Ownership Plan
Trust . . . . . . . 565,568 615,657 504,852
Gain from sale of
subsidiary's common
stock . . . . . . . (879,797) - -
Changes in operating
assets and
liabilities:
Accounts receivable 3,541,902 (4,518,539) (1,278,664)
Costs and estimated
earnings in excess
of billings on
uncompleted
contracts . . . . (4,837,773) (388,478) (5,211,951)
Income tax refund
receivable . . . (606,003) 253,963 (371,087)
Other assets . . . (433,785) 32,788 (1,041,857)
Accounts payable . (2,073,920) 823,160 4,054,862
Accrued expenses . (379,563) 920,094 3,575,357
Billings in excess
of costs and
estimated earnings
on uncompleted
contracts . . . . (405,858) 344,836 (768,934)
Total adjustments 392,754 3,087,405 4,450,026
Net cash provided by
operating activities . . . 2,145,417 3,884,397 5,792,609
</TABLE>
See accompanying notes.
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(continued)
<TABLE>
<CAPTION>
Years ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Cash flows from investing
activities:
Capital expenditures
including $2,267,000
of business
acquisitions during
1995 . . . . . . . . . (4,574,263) (5,803,781) (16,277,379)
Proceeds from sale of
property and
equipment . . . . . . 318,100 1,017,482 851,623
Net cash used by investing
activities . . . . . . . (4,256,163) (4,786,299) (15,425,756)
Cash flows from financing
activities:
Proceeds from long-term
debt . . . . . . . . . 7,094,085 16,604,165 19,611,436
Repayments of long-term
debt . . . . . . . . . (8,447,818) (17,153,585) (8,716,731)
Repayments of Employee
Stock Ownership Plan
Trust debt . . . . . . (550,000) (600,000) (600,000)
Proceeds from
subsidiary's
issuance of its
common stock . . . . . 3,766,075 - -
Proceeds from stock
options . . . . . . . - - 19,799
Net cash provided (used) by
financing activities . . 1,862,342 (1,149,420) 10,314,504
Net increase (decrease) in
cash . . . . . . . . . . (248,404) (2,051,322) 681,357
Cash, beginning of year . . 2,778,832 2,530,428 479,106
Cash, end of year . . . . . $ 2,530,428 $ 479,106 $ 1,160,463
</TABLE>
See accompanying notes.
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
Organization - Kimmins Corp. (f/k/a Kimmins Environmental Service
Corp.) ("Kimmins") and its subsidiaries (collectively, the "Company") is a
solid waste management and specialty contracting company that provides a
full range of solid waste handling, demolition, and project-oriented
services. The Company provides specialty contracting services including
infrastructure development, underground construction, roadwork, site
remediation services such as mobile incineration; excavation, removal and
disposal of contaminated soil; facilities demolition and dismantling; and
asbestos abatement.
Reverse stock split - During October 1995, the Board of Directors
declared a one-for-three reverse stock split of the Company's common stock
and Class B common stock. All share and per share information in the
consolidated financial statements has been adjusted to reflect the reverse
stock split on a retroactive basis.
Principles of consolidation - The consolidated financial statements
include the accounts of Kimmins and its subsidiaries, including TransCor
Waste Services, Inc. ("TransCor"), a 74 percent owned subsidiary after
March 25, 1993 (see Note 2). All material intercompany transactions have
been eliminated.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
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 $66,825 at December 31, 1995 (none during 1994).
Income taxes - Income taxes have been provided using the liability
method in accordance with Financial Accounting Standards Board ("FASB")
Statement No. 109, "Accounting for Income Taxes."
Revenue recognition - Contracts generally range from 6 to 18 months in
duration, and earnings from contracting operations (including contracts
with affiliates) are reported under the percentage-of-completion method for
financial statement purposes. The estimated earnings for each contract
reflected in the accompanying financial statements represent the percentage
of estimated total earnings that costs incurred to date bear to estimated
total costs, based on the Company's current estimates. With respect to
contracts that extend over one or more accounting periods, revisions in
costs and earnings estimates are reflected in the period the revisions
become known. When current estimates of total contract costs indicate a
loss, provision is made for the entire estimated loss. Revenue from claims
against owners and proceeds from negotiated settlements are recognized when
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
realization is probable and the amount can be reliably estimated. Outside
services represent subcontractor costs for which the Company is typically
reimbursed on a dollar-for-dollar basis.
Fees arising from services other than contracting activities are
recognized when the negotiated services are provided.
Stock based compensation - The Company grants stock options for a
fixed number of shares to employees with an exercise price equal to the
fair value of the shares at the date of grant. The Company accounts for
stock option grants in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), and,
accordingly, recognizes no compensation expense for the stock option
grants.
Earnings per share - Earnings per common share are computed based on
the weighted average number of shares outstanding. Any shares of Class B
common stock that are eligible for conversion (none for 1993, 1994, and
1995) would be included in the computation of earnings per share. The
effect of common stock equivalents is not material.
<TABLE>
Statements of cash flows -
<CAPTION>
Years ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Cash paid:
Interest . . . . . $ 1,881,000 $ 2,007,000 $ 2,423,000
Income taxes . . . $ 642,000 $ 499,000 $ 1,453,000
</TABLE>
Accounting standard - In March 1995, FASB issued Statement No. 121
("SFAS No. 121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Assets to be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undisclosed cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. Effective January 1, 1995, the Company adopted
SFAS No. 121. There was no cumulative effect of that accounting change on
operations, nor did the change affect income for 1995.
In October 1995, the FASB issued Statement No. 123, ("Statement No.
123") "Accounting and Disclosure of Stock-Based Compensation," which
encourages but does not require companies to recognize stock awards based
on their fair value at the date of grant. The Company currently follows,
and expects to follow, the provisions of APB No. 25 and related
interpretations in accounting for its employee stock options. Under APB
No. 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Although the Company is permitted to<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
(continued)
continue to follow the provisions of APB No. 25, under Statement No. 123,
certain pro forma disclosure will be required beginning in 1996 as if the
Company had accounted for its stock options under the Statement No. 123
fair value method.
2. Sale of common stock of subsidiary and business acquisition
On March 25, 1993, the initial public offering of the subsidiary,
TransCor, became effective. The offering consisted of 1,000,000 shares of
TransCor's common stock at $5 per share. The net proceeds from the stock
offering were received on April 2, 1993. The Company's 1993 statement of
operations includes a gain of $879,797 resulting from this transaction. In
connection with this offering, TransCor issued a convertible subordinated
term note to Kimmins, which is eliminated in consolidation, that may be
converted into 400,652 shares of TransCor's common stock.
On March 31, 1995, Kimmins Recycling Corp., a wholly-owned subsidiary
of TransCor acquired certain assets from County Sanitation, Inc., for
$2,267,000 relating to its solid waste management operations. This
acquisition has been accounted for under the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets
acquired (approximately $1,415,000) based on the estimated fair values at
the date of acquisition. The purchase price associated with the
acquisition exceeded the net assets acquired by approximately $852,000,
which was assigned to intangible assets, including goodwill. The operating
results associated with this business acquisition are included in the
Company's consolidated results of operations from April 1, 1995, to
December 31, 1995.
The pro forma unaudited results of operations for the years ended
December 31, 1994 and 1995, assuming this acquisition had been consummated
as of January 1, 1994, are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1994 1995
<S> <C> <C>
Revenue . . . . . . . . . . . . . . $100,475,000 $112,276,000
Net income . . . . . . . . . . . . . $ 817,000 $ 1,348,000
Net income per common share . . . . $ .18 $ .30
</TABLE>
3. Related party transactions
During 1993, 1994, and 1995, the Company paid landfill fees of
approximately $288,000, $28,000, and $88,000, respectively, to a company
that is primarily owned by the brother of the Company's president. The
amounts paid approximated the fair market rate for the type of services
involved.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Accounts receivable
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Contract and trade:
Billed contract receivables:
Completed and uncompleted
contracts . . . . . . . . $ 12,241,873 $ 12,919,805
Retainage . . . . . . . . 5,407,372 3,916,769
Unbilled contract receivables . - 805,500
Trade receivables . . . . . . . 5,095,725 4,907,334
22,744,970 22,549,408
Less allowance for doubtful accounts (662,997) (397,211)
$ 22,081,973 $ 22,152,197
Contract and trade - affiliates:
Billed contract receivables . $ 1,349,058 $ 1,767,747
</TABLE>
All unbilled receivables relate to work performed or material shipped
by the balance sheet date and are billed as soon as is administratively
feasible.
Accounts receivable are comprised primarily of amounts due on
specialty contracting contracts and from solid waste management customers.
Credit is extended based on an evaluation of the customer's financial
condition. Collateral is generally not required; however, the Company can
usually file for a mechanic's lien to protect their interest in contract
accounts receivable. Credit losses are provided for in the financial
statements and have been within management's expectations.
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 Chapter 11 bankruptcy filings with respect to
the Apartments 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 originally accrued interest at prime plus
1 3/8 percent, increasing to prime plus 2 percent on July 1, 1995, 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, 1994 and 1995, are approximately $3,588,000 and $3,851,000,
respectively.
At December 31, 1994 and 1995, $4,937,000 and $5,301,000,
respectively, of the combined accounts receivable - affiliates and note
receivable - affiliate balances are due from corporate affiliates of the
Company's president. The affiliated receivables relate to contract
services performed and are guaranteed by Mr. Williams.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Costs and estimated earnings on uncompleted contracts
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Expenditures on uncompleted contracts $ 92,911,600 $ 65,767,913
Estimated earnings on uncompleted
contracts . . . . . . . . . . . . 17,028,013 7,456,516
109,939,613 73,224,429
Less actual and allowable billings on
uncompleted contracts . . . . . . 101,148,934 58,452,865
$ 8,790,679 $ 14,771,564
Costs and estimated earnings in
excess of billings on uncompleted
contracts . . . . . . . . . . . . $ 10,166,227 $ 15,378,178
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . (1,375,548) (606,614)
$ 8,790,679 $ 14,771,564
</TABLE>
During the years ended December 31, 1993, 1994, and 1995, the Company
recognized revenue from contract claims of approximately $50,000,
$1,189,000 and $1,894,000, respectively. In addition, as of December 31,
1994 and 1995, the costs and estimated earnings in excess of billings on
uncompleted contracts includes the Company's cost associated with
unapproved or disputed contract change orders and costs claimed from
customers on completed contracts of $5,412,000 and $10,164,000,
respectively. By their nature, recovery of these amounts is often subject
to negotiation with the customer and, in certain cases, resolution through
litigation. As a result, the recovery of these amounts may extend beyond
one year.
Other current assets include certain legal costs of $683,000 and
$1,226,000 at December 31, 1994 and 1995, respectively, that are
capitalized as contract costs associated with the above contract claims.
6. Property and equipment
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Land . . . . . . . . . . . . . . . . $ 4,699,480 $ 5,067,437
Buildings and improvements . . . . . 6,275,216 7,317,544
Construction and recycling equipment 31,170,987 42,345,792
Furniture and fixtures . . . . . . . 1,258,249 1,463,600
Construction in progress . . . . . . 486,128 615,846
43,890,060 56,810,219
Less accumulated depreciation . . . (17,074,631) (19,217,558)
$ 26,815,429 $ 37,592,661
</TABLE>
Property and equipment is recorded at cost. Depreciation is provided
using the straight-line method over estimated useful lives ranging from 3
to 30 years. Construction in progress will be depreciated over the
estimated useful lives when placed into service.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Term note from affiliate
In 1988, Cumberland Casualty & Surety Company ("CCS") issued a surplus
debenture to the Company that bears interest at 10 percent per annum in
exchange for $3,000,000. In 1992, such debenture was assigned to
Cumberland Holdings, Inc. ("Cumberland"). Cumberland entered into a term
note agreement with the Company for the outstanding amount of the
debenture, including accrued interest at September 30, 1992, as part of the
Distribution. The term note is pari passu with the other debts of
Cumberland, bears interest at 10 percent, and is due on October 1, 2002.
Interest and principal are due quarterly for five years, with minimum
interest payments equal to one-half of annual net earnings before interest
and income taxes. Payments for the second five years are due quarterly and
are payable in equal installments to amortize the remaining balance. Each
of these payments will be credited first to the accrued interest and then
to principal. Interest accrued on the term note at December 31, 1995, is
$506,755 ($51,983 at December 31, 1994).
8. Accrued expenses
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Deferred revenue . . . . . . . . . . $ 1,285,112 $ 1,858,148
Accrued insurance . . . . . . . . . 1,249,858 3,130,582
Accrued real estate taxes . . . . . 275,660 332,725
Other . . . . . . . . . . . . . . . 663,145 1,727,677
$ 3,473,775 $ 7,049,132
</TABLE>
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-term debt
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Notes payable, principal and interest
payable in monthly installments
through March 1, 2001, interest at
varying rates up to 13 percent,
collateralized by equipment . . . . $ 10,220,373 $ 20,215,486
Revolving term bank line of credit,
$5,000,000 ($1,290,000 during 1994),
maximum, due October 31, 1997,
interest at lender's base rate plus
1/2 percent . . . . . . . . . . . . - 3,292,607
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 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 . . . . . . . . . 3,679,748 5,286,733
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
20,800,121 31,694,826
Less current portion . . . . . . . . 6,168,006 7,074,857
$ 14,632,115 $ 24,619,969
</TABLE>
Annual principal maturities subsequent to December 31, 1995, are as
follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . $ 7,074,857
1997 . . . . . . . . . . . . . . . . . . . 11,010,480
1998 . . . . . . . . . . . . . . . . . . . 4,944,474
1999 . . . . . . . . . . . . . . . . . . . 5,113,589
2000 . . . . . . . . . . . . . . . . . . . 2,333,113
Thereafter . . . . . . . . . . . . . . . . 1,218,313
$ 31,694,826
</TABLE>
The lenders' prime rate under the bank line at both December 31, 1994
and 1995, was 8.5 percent. At December 31, 1995, there was approximately
$1,707,000 of borrowings available under the revolving term bank line of
credit. The Company was also contingently liable for letters of credit in
the amount of approximately $3,500,000 at December 31, 1995.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-term debt (continued)
The revolving term bank line of $5,000,000 and the letter of credit
facility of $5,000,000 are secured by a pledge of all of the Company's
subsidiaries, the Cumberland term note, and substantially all of the assets
of Kimmins. The use of funds under these lines is limited among certain
subsidiaries.
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 at least 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
December 31, 1995, the Company was in compliance with or obtained waivers
for all loan covenants, and the Company may be required to obtain similar
waivers for certain covenants in 1996. The Company has obtained the
personal guarantee of Mr. Francis M. Williams should waivers not be
obtained and the lender accelerates the maturities of the Revolving Term
Bank Line of Credit, Bank Note Payable, 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.
10. Employee Stock Ownership Plan Trust Debt
In March 1990, the Company's Employee Stock Ownership Plan Trust
("ESOP") (Note 13) originally was funded from a $5,100,000 loan. This loan
was refinanced during December 1995 and bears interest at prime plus 1/2
percent, with quarterly principal and monthly interest payments through
October 2000. 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
(Note 12), is recorded as a deduction from stockholders' equity.
Annual principal maturities for each of the next five years are as
follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . $ 480,000
1997 . . . . . . . . . . . . . . . . . . . . . 480,000
1998 . . . . . . . . . . . . . . . . . . . . . 480,000
1999 . . . . . . . . . . . . . . . . . . . . . 480,000
2000 . . . . . . . . . . . . . . . . . . . . . 480,000
$ 2,400,000
</TABLE>
11. Leasing arrangements
The Company rents equipment, machinery, and office space for varying
periods. Rental expense for the years ended December 31, 1993, 1994, and
1995, was approximately $7,855,000, $9,500,000, and $9,079,000,
respectively.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Pension and other benefit plans
Employee Stock Ownership Plan. On January 1, 1989, the Company, for
the benefit of its employees, formed the ESOP to purchase shares of the
Company's common stock from time to time in the open market or in
negotiated transactions at prices deemed to be attractive. Contributions to
the ESOP are made at the discretion of the Board of Directors. During
1989, the ESOP acquired from the Company's president 257,371 shares of
common stock at a cost of $5,100,000. The shares were acquired in exchange
for a note payable to the Company's president. Simultaneous with this
purchase, the Company's president purchased certain receivables and
interests in certain investments from the Company for a purchase price of
$5,100,000, which was paid by the assignment to the Company of the note
received from the ESOP. The note originally was funded during March 1990,
through a long-term bank financing agreement guaranteed by the Company
(Note 10). As the debt is repaid, shares are released from collateral and
allocated to active employees, based on the proportion of debt service paid
in the current year. Debt of the ESOP is recorded as debt, and the shares
pledged as collateral are reported as unearned employee compensation in the
balance sheet. For financial statement purposes, as of December 31, 1994
and 1995, the unearned employee compensation (net of accrued contributions
of approximately $228,000 and $133,000, respectively) was reflected as a
reduction in stockholders' equity.
Interest and compensation expenses relating to the ESOP are as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Interest . . . . . . . $ 287,577 $ 274,519 $ 354,449
Compensation . . . . . $ 565,568 $ 615,657 $ 504,852
</TABLE>
The ESOP shares were as follows:
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Allocated shares . . . . . . . . . . 105,000 135,000
Shares released for allocation . . . - -
Unreleased shares . . . . . . . . . 150,000 120,000
Total ESOP shares . . . . . . . . . 255,000 255,000
Market value of unreleased shares $ 675,000 $ 900,000 <PAGE>
</TABLE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Pension and other benefit plans (continued)
Stock Option Plan. The Company originally reserved 288,400 shares of
its common stock for issuance upon the exercise of options to be granted
under the Company's 1987 Stock Option Plan (the Company Plan). The
exercise price of an incentive stock option granted under the Company Plan
may not be less than the fair market value of the common stock at the time
the option is granted. The exercise price of a non-qualified stock option
granted under the Company Plan may be any amount determined by the Board of
Directors but not less than the par value of the common stock on the date
of the grant. Options granted under the Company Plan must, in general,
expire no later than ten years from the date of the grant.
All options granted to date provide that the grantees' rights therein
vest over five years from the date of the grant. At December 31, 1995,
options to purchase 208,243 shares of the Company's common stock have been
granted under the Company Plan, of which approximately 92,657 are currently
exercisable at prices ranging from $3.33 to $4.50 per share. Options for
4,400 shares, at a price of $4.50 per share, were exercised during the year
ended December 31, 1995. No options were exercised during 1993 and 1994.
The following is a summary of stock option transactions:
<TABLE>
<CAPTION>
Years ended December 31,
1994 1995
<S> <C> <C>
Options outstanding at beginning of
the year . . . . . . . . . . . . 206,143 205,143
Options granted . . . . . . . . . . 182,643 7,500
Options cancelled . . . . . . . . . (183,643) -
Options exercised . . . . . . . . . - (4,400)
Options outstanding at end of year . 205,143 208,243
Options eligible at end of year . . 59,029 92,657
Options available for future grants
at end of year . . . . . . . . . 45,057 37,557
Option price range:
Options granted . . . . . . . . . . $4.50 $4.50
Options exercised . . . . . . . . . N/A $4.50
Options outstanding at end of year . $3.33-$4.50 $3.33-$4.50
</TABLE>
Options cancelled during 1994 include 173,476 options with exercise
prices ranging from $6.00 to $13.74 that were subsequently reissued during
1994 with an exercise price of $4.50.
Multi-Employer Defined Contribution Plan. The Company makes payments
to collectively bargained, multi-employer defined contribution plans
covering Company union employees. Under the Multi-Employer Pension Plan
Amendment Act, a withdrawing employer is required to continue funding its
share of the plan's unfunded vested benefits. The Company does not possess
sufficient information to determine its portion of the unfunded vested
benefits, if any. Contributions to such plans for the years ended December
31, 1993, 1994, and 1995, were not significant.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Income taxes
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 109, "Accounting for Income
Taxes." Under the asset and liability method required by Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
As of December 31, 1995, the Company has utilized all net operating
loss carryforwards. However, the Company has alternative minimum tax credit
carryforwards of approximately $299,000 available to offset future regular
tax liabilities.
As a result of TransCor's sale of its common stock in March 1993 (Note
2), it is no longer consolidated with the Company for income tax purposes.
The Company has provided deferred income taxes respect to differences
between its book and tax basis in TransCor. These differences result from
income recognized for book, not tax, for the gain on the sale of TransCor
and TransCor's post-offering earnings, which are collectively referred to
as the outside basis difference. The rate used to provide taxes on the
outside basis difference is the statutory rate for the first $785,000 that
represents the Company's share of TransCor's accumulated deficit at the
date of the sale of its common stock. The rate for the remaining
difference assumes the dividend received deduction because the Company
expects to recover its investment through dividends.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Income taxes (continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 254,200 $ 152,222
Costs deferred for tax expensed
for books . . . . . . . . . 146,800 154,553
Alternative minimum tax credit
carryforwards . . . . . . . 339,000 299,172
Accrued workers' compensation . - 750,552
Other . . . . . . . . . . . . . 15,200 56,721
755,200 1,413,220
Deferred tax liabilities:
Excess of tax over book
depreciation . . . . . . . . 2,911,365 3,842,918
Uncompleted long-term contracts 395,400 655,975
Costs deferred for book expensed
for tax . . . . . . . . . . 74,740 301,250
Outside basis difference in
TransCor . . . . . . . . . . 362,000 430,478
3,743,505 5,230,621
Net deferred tax liability . . . . . 2,988,305 3,817,401
Less current portion liability/plus
current portion asset . . . . . . (73,708) 742,130
$ 2,914,597 $ 4,559,531
</TABLE>
Factors causing the effective tax rate to differ from the statutory
rate are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Federal statutory rate . . 34.0% 35.0% 34.0%
State income taxes . . . . 4.5% 7.5% 10.0%
Additional tax on the
Company's share of
TransCor's earnings
after March 25, 1993 . . 2.0% 4.0% 8.0%
Other . . . . . . . . . . . 4.7% 1.5% 0.6%
Effective tax rate . . . . 45.2% 48.0% 52.6%
</TABLE>
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Stockholders' equity
The Company's Class B common stock has the same voting rights as
common stock and is not entitled to participate in cash dividends. Upon
liquidation or dissolution of the Company, the holders of common stock are
entitled to receive up to $9.00 per share, after which the holders of Class
B common stock are entitled to receive up to $9.00 per share. Thereafter,
all assets remaining for distribution will be distributed pro rata to the
holders of common stock and Class B common stock. The right to convert
Class B common stock to common stock occurs in any fiscal year in which the
Company achieves net earnings equal to a specified amount (currently $.84
per share), which is calculated by adding the total shares outstanding at
fiscal year end to the number of shares that could be converted during the
fiscal year. The holders of the Class B common stock will thereafter have
the right to convert up to 625,000 shares of Class B common stock into
common stock on a share for share basis as follows. Each cumulative
incremental increase in net earnings in any subsequent year of $.21 per
share above the specified level of earnings previously obtained will afford
holders the right to convert up to an additional 625,000 shares of Class B
common stock into common stock on a share for share basis. Holders of
Class B common stock will not be entitled to convert more than 625,000 of
such shares in any fiscal year unless the Company achieves earnings of
$1.44 per share of common stock in any fiscal year, which will entitle
holders to convert all shares of Class B common stock into common stock.
No shares of Class B common stock became eligible for conversion into
common stock during the years ended December 31, 1993, 1994, and 1995.
The Company has authorized 1,000,000 shares of preferred stock with a
par value of $.001, none of which is presently outstanding. Such preferred
stock may be issued in series and will have such designations, rights,
preferences, and limitations as may be fixed by the Board of Directors.
15. Contingencies
The Company is involved in various legal actions and claims arising in
the ordinary course of its business. After taking into consideration legal
counsel's evaluation of such actions and claims, management is of the
opinion that their outcome will not have a material adverse effect on the
consolidated financial position of the Company.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Fourth Quarter Adjustments (unaudited)
During the fourth quarter of 1995, the Company refined its estimate of
income tax expense, with an additional expense of $241,000. Also, in the
fourth quarter of 1995, the Company capitalized certain contract costs.
This refinement resulted in a credit to operations of $505,000 in the
fourth quarter of 1995. During the fourth quarter of 1993, TransCor
refined its estimate of bad debt expense, with the Company's share of the
expense being $442,000.
17. Fair Value of Financial Investment
The following estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Cash. The carrying amount reported in the balance sheet for cash
approximates its fair value.
Long-term debt. The fair values of the Company's long-term debt are
estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
December 31, 1995
Carrying Fair
Amount Value
<S> <C> <C>
Assets:
Cash . . . . . . . . . . . . . . $ 1,160,463 $ 1,160,463
Liabilities:
Notes payable . . . . . . . . . $ 31,694,826 $ 31,230,000
Employee Stock Ownership Plan
Trust debt . . . . . . . . . $ 2,400,000 $ 2,400,000
</TABLE>
18. Business segments and major customers
The Company conducts business in two segments: specialty contracting
services and solid waste management services. The specialty contracting
services segment provides comprehensive services including infrastructure
development, underground utility construction, roadwork, dismantling,
asbestos abatement, mobile incineration, excavation, removal and disposal
of contaminated soil. The solid waste management services segment offers
storage, collection, transfer, transportation, resource recovery and
disposal of non-hazardous waste and demolition services. <PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Business segments and major customers (continued)
For the years ended December 31, 1993, 1994 and 1995, the Company's
specialty contracting services segment earned gross revenue of ap-
proximately $5,325,000, $5,887,000, and $1,727,000, respectively, on
contracts with the United States Government.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Business segments and major customers (continued)
A summary of information about the Company's segments for the years
ended December 31, 1993, 1994 and 1995 is as follows (in thousands):
Specialty
Contracting Solid Waste
1993 Services Services Total
Gross revenue:
Unaffiliated customers . $ 58,679 $ 24,909 $ 83,588
Affiliated customers . . 21 - 21
Total gross revenue . $ 58,700 $ 24,909 $ 83,609
Operating income . . . . $ 414 $ 3,252 $ 3,666
Interest income . . . . 848 - 848
Interest expense . . . . 1,096 814 1,910
Non-operating gain . . . 879 - 879
Minority interest . . . - (287) (287)
Income (loss) before
income taxes . . . . $ 1,045 $ 2,151 $ 3,196
Identifiable assets . . $ 38,737 $ 31,455 $ 70,192
Depreciation and
amortization . . . . $ 2,242 $ 1,439 $ 3,681
Capital expenditures . . $ 1,045 $ 3,529 $ 4,574
Specialty
Contracting Solid Waste
1994 Services Services Total
Gross revenue:
Unaffiliated customers . $ 67,748 $ 29,007 $ 96,755
Affiliated customers . . - - -
Total gross revenue . $ 67,748 $ 29,007 $ 96,755
Operating income . . . . $ 1,853 $ 817 $ 2,670
Interest income . . . . 1,060 - 1,060
Interest expense . . . . 1,590 547 2,137
Minority interest . . . - (61) (61)
Income (loss) before
income taxes . . . . . $ 1,323 $ 210 $ 1,533
Identifiable assets . . $ 42,448 $ 30,241 $ 72,689
Depreciation and
amortization . . . . $ 2,024 $ 1,866 $ 3,890
Capital expenditures . . $ 3,365 $ 2,439 $ 5,804 <PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Business segments and major customers (continued)
Specialty
Contracting Solid Waste
1995 Services Services Total
Gross revenue:
Unaffiliated customers . $ 70,227 $ 41,119 $ 111,346
Affiliated customers . . - - -
Total gross revenue . $ 70,227 $ 41,119 $ 111,346
Operating income . . . . $ 1,892 $ 2,704 $ 4,596
Interest income . . . . 1,005 - 1,005
Interest expense . . . . 1,875 548 2,423
Minority interest . . . - (345) (345)
Income (loss) before
income taxes . . . . $ 1,022 $ 1,811 $ 2,833
Identifiable assets . . $ 46,778 $ 46,851 $ 93,629
Depreciation and
amortization . . . . $ 1,748 $ 2,355 $ 4,103
Capital expenditures . . $ 2,429 $ 13,848 $ 16,277 <PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are as follows:
Name Age Position
Francis M. Williams 54 President and Director
Norman S. Dominiak 51 Vice President
Joseph M. Williams 39 Secretary/Treasurer
Michael Gold 47 Director
George Chandler 66 Director
All directors of the Company hold office until the next annual meeting
of stockholders and the election and qualification of their successors.
Officers of the Company are elected annually by the Board of Directors and
hold office at the discretion of the Board of Directors.
Francis M. Williams has been President and Chairman of the Board of
the Company since its inception. For more than five years prior to
November 1988, Mr. Williams had been Chairman of the Board and Chief
Executive Officer of Kimmins Corp. and its predecessors and sole owner of K
Management Corp. From June 1981 until January 1988, Mr. Williams was also
the President and a Director of College Venture Equity Corp., a small
business investment company. Mr. Williams has also been a Director of the
National Association of Demolition Contractors and a member of the
Executive Committee of the Tampa Bay International Trade Council.
Norman S. Dominiak, 51, has been the Vice President of the Company
since March 1995, and has been employed by the Company as its Chief
Financial Officer since January 1994. Mr. Dominiak served as controller of
ThermoCor Kimmins, Inc., a subsidiary of the Company, from October 1991
until January 1994. From May 1988 until September 1991, Mr. Dominiak
served as Senior Vice President of Creative Edge, a company engaged in the
manufacturing and distribution of educational products. From October 1982
until April 1988, Mr. Dominiak served as senior vice president of Cecos
Environmental Services, Inc., a company engaged in treatment,
transportation, and disposal of hazardous waste. From 1965 until 1982, Mr.
Dominiak was employed in various financial capacities for the Carborundum
Company.
Joseph M. Williams has been the Secretary and Treasurer of the Company
since October 1988. Since November 1991, Mr. Williams has served as
President and has been a Director of Cumberland Holdings, Inc., a holding
company whose wholly-owned subsidiaries provide reinsurance and specialty
sureties and performance and payment bonds. Since June 1986, Mr. Williams
has served as President and Vice President and has been a Director of
Cumberland Real Estate Holdings, Inc., the corporate general partner of
Sunshadow Apartments, Ltd. ("Sunshadow") and Summerbreeze Apartments, Ltd.
("Summerbreeze"), both of which are limited partnerships. In June 1992,
both Sunshadow and Summerbreeze filed voluntary petitions under Chapter 11
of the United States bankruptcy law, and each entity submitted a <PAGE>
prepackaged plan of reorganization. In June 1993, Sunshadow and
Summerbreeze entered into a settlement and note renewal agreement and the
bankruptcy filings were voluntarily dismissed. Mr. Williams has been
employed by the Company and its subsidiaries in various capacities since
January 1984. From January 1982 to December 1983, he was the managing
partner of Williams and Grana, a firm engaged in public accounting. From
January 1978 to December 1981, Mr. Williams was employed as a senior tax
accountant with Price Waterhouse & Co. Joseph M. Williams is the nephew of
Francis M. Williams.
Michael Gold has been a Director of the Company since November 1987.
For more than the past five years, Mr. Gold has been a partner in the
Niagara Falls, New York law firm of Gold and Gold.
George Chandler has been a Director of the Company since January 1990.
Since November 1989, Mr. Chandler has been a business consultant. Mr.
Chandler was Chairman of the Board from July 1986 to November 1989, and
President and Chief Executive Officer from October 1985 to November 1989 of
Aqua-Chem, Inc., a manufacturer of packaged boilers and water treatment
equipment. From May 1983 to October 1985, he was President, Chief
Executive Officer and a Director of American Ship Building Co., which is
engaged in the construction, conversion and repair of cargo vessels. Mr.
Chandler is also a Director of The Allen Group Inc., and DeVlieg Bullard,
Inc.
Set forth below is information regarding certain key employees of the
Company:
Thomas C. Andrews, 55, a registered professional engineer, has been
employed as President of ThermoCor Kimmins, Inc., the Company's subsidiary
engaged in site remediation, since January 1989. From November 1985 to
January 1989, Mr. Andrews was employed as Vice President of Operations for
ENSCO Environmental Services, Inc., a company engaged in hazardous waste
incineration and remediation. From September 1981 to November 1985, Mr.
Andrews served as Operations Manager of Cecos Environmental Services, Inc.,
a company engaged in treatment, transportation and disposal of hazardous
waste. From December 1964 to September 1981, Mr. Andrews provided
construction management services to contractors throughout the eastern
United States. Mr. Andrews has more than 25 years experience in all phases
of hazardous waste and construction management.
Charles A. Baker Jr., 53, has been employed as Vice President of
TransCor Waste Services, Inc., the Company's subsidiary engaged in solid
waste management, since November 1989. From June 1981 to November 1989,
Mr. Baker was employed as Vice President of Kimmins Contracting Corp., one
of the Company's principal operating subsidiaries.
Michael D. O'Brien, 45, has been employed by TransCor Waste Services,
Inc. (including its predecessor) as Vice President since October 1992.
From June 1987 to October 1992, Mr. O'Brien served as Vice President of
Kimmins Industrial Service Corp., a subsidiary of the Company. From July
1983 to June 1987, Mr. O'Brien served as Vice President of Jordan Foster
Scrap Corporation in Buffalo, New York, a company specializing in
demolition and preparation of scrap for sale. From November 1972 to July
1983, Mr. O'Brien was employed by a national demolition contractor.<PAGE>
John V. Simon Jr., 40, has been President and General Manager of
Kimmins Contracting Corp., responsible for supervising utility construc-
tion, since May 1981, and served as a Vice President of the Company from
1981 until October 1988. From January 1978 to May 1981, Mr. Simon owned
Simon Construction Company, a company that performed site work and
utilities and demolition projects.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10 percent
of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange. Officers, directors,
and greater than 10 percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
received by it, or written representations from certain reporting persons
that no Forms 5 were required for those persons, the Company believes that,
during the year ended December 31, 1995, all filing requirements applicable
to its officers, directors, and greater than 10 percent beneficial owners
were complied with except that one report was filed late by Mr. Michael
Gold.
Item 11. Executive Compensation
Summary Compensation Table. The following table provides certain
summary information concerning compensation paid or accrued by the Company
and its subsidiaries to the Chief Executive Officer and all other executive
officers whose salary and bonus exceeded $100,000 for the year ended
December 31, 1995 (the "Named Executives"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Other Securities
Annual Restricted Underlying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) Award(s) ($) SARs (#) Payouts ($) sation ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Francis M. Williams 1995 $ 271,137 $ 0 $0 $0 0 $0 $ 989 (*)
Chairman of the 1994 $ 171,139 $ 0 $0 $0 0 $0 $ 977 (*)
Board, President and 1993 $ 171,137 $ 0 $0 $0 0 $0 $ 498 (*)
Chief Executive
Officer
John V. Simon, Jr. 1995 $ 95,000 $ 81,489 $0 $0 0 $0 $1,647 (*)
President of Kimmins 1994 $ 95,000 $ 15,759 $0 $0 0 $0 $1,635 (*)
Contracting Corp. 1993 $ 95,000 $ 13,193 $0 $0 0 $0 $1,069 (*)
(*) Represents the Company's contribution to the employee's account of the Company's 401(k) Plan and premiums
paid by the Company for term life insurance and long-term disability. These plans, subject to the terms
and conditions of each plan, are available to all employees.<PAGE>
</TABLE>
Stock Option/SAR Grants in the Last Fiscal Year. The following
table summarizes stock options granted to the Named Executives in 1995.
The amount shown as potentially realizable values of these options are
based on assumed annual rates of appreciation in the price of the Company's
common stock of 5 and 10 percent over the terms of the options and are not
intended to forecast future appreciation of the Company's stock price:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at Assumed
Total Options Annual Rates of
Granted to Exercise Stock Price
Options Employees in or Base Expiration Appreciation for
Name Granted (#) Fiscal Year Price ($/SH) Date Option Term
5 Percent 10 Percent
<S> <C> <C> <C> <C> <C> <C>
Francis M. Williams 0 0.00% $ 0.00 - $ 0 $ 0
John V. Simon, Jr. 3,333 44.44% $ 4.50 03/15/05 $ 9,400 $ 23,900
</TABLE>
No stock options or stock appreciation rights were granted to
Francis M. Williams during the year ended December 31, 1995, and
Mr. Williams does not have any stock options or stock appreciation rights
that were granted in previous years.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-
End Option/SAR Values. The following table summarizes the net value
realized on the exercise of options in 1995 and the value of outstanding
options as of December 31, 1995, for the Named Executives.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Year-End (#) Year-End ($)(1)
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Francis M. Williams 0 $0 0/0 $0/$0
John V. Simon, Jr. 0 $0 9,800/11,867 $10,970/$11,867
(1) Value is calculated using the Company's closing stock price on December 31, 1995, of $7.50 per share
(adjusted to reflect the reverse stock split on a retroactive basis) less the exercise price for
such shares.
</TABLE>
No stock options or stock appreciation rights were exercised by
Francis M. Williams during the year ended December 31, 1995, and Mr.
Williams does not have any outstanding stock options or SAR at December 31,
1995.<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price Exercise Option Term
Underlining of Stock at Price at Remaining
Options/SARs Time of Time of New at Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended (#) Amendment ($) Amendment ($) Price ($) Amendment
<S> <C> <C> <C> <C> <C> <C>
Norman S. Dominiak 10/30/94 3,333 $4.50 $6.39 $4.50 4 years
Vice President 833 $4.50 $7.14 $4.50 4 years
Joseph M. Williams 10/30/94 10,333 $4.50 $6.75 $4.50 4 years
Secretary/Treasurer
Thomas C. Andrews 10/30/94 11,667 $4.50 $6.75 $4.50 4 years
President of
ThermoCor Kimmins, Inc.
Charles A. Baker, Jr. 10/30/94 12,833 $4.50 $6.75 $4.50 4 years
Vice President of
TransCor
Michael D. O'Brien 10/30/94 15,976 $4.50 $6.75 $4.50 4 years
Vice President of
TransCor
John V. Simon, Jr. 10/30/94 12,833 $4.50 $6.75 $4.50 4 years
President of Kimmins 2,500 $4.50 $6.00 $4.50 4 years
Contracting Corp.
</TABLE>
Compensation Committee Interlocks and Insider Participation. During
the year ended December 31, 1995, Francis M. Williams, the Company's
President and Chairman of the Board of Directors, has served as President
and Chairman of the Board of Directors of TransCor.
Compensation of Directors. During the year ended December 31, 1995,
the Company paid non-officer Directors an annual fee of $5,000 and $1,000
per board meeting attended. Directors are reimbursed for all out-of-pocket
expenses incurred in attending Board of Directors and committee meetings.
Stock Option and Other Plans
1987 Stock Option Plan
The Company adopted a stock option plan (the "Plan") pursuant to which
288,400 shares of common stock were originally reserved for issuance to
persons upon exercise of options designated as "incentive stock options,"
within the meaning of Section 422A of the Internal Revenue code of 1986
(the "Code"), and non-qualified stock options. The purpose of the Plan is
to attract, retain, and motivate officers and other full-time employees of
the Company, and certain other persons instrumental to the success of the
Company, and to provide them with a means to acquire a proprietary interest
in the Company. The Plan is administered by a committee consisting of
three members of the Board of Directors. The exercise price of an
incentive stock option granted under the Plan may not be less than the fair
market value of the common stock at the time the option is granted (110
percent of fair market value in the case of an incentive stock option
granted to an employee owning more than 10 percent of the voting stock of
the Company). The exercise price of a non-qualified stock option granted
under the Plan may be any amount determined by the Board of Directors but <PAGE>
not less than the par value of the common stock on the date of the grant.
Options granted under the Plan must, in general, expire no later than ten
years from the date of the grant (five years from the date of grant in the
case of an incentive stock option granted to an employee owning more than
10 percent of the voting stock of the Company). All options granted to
date provide that the grantees' rights vest over five years from the date
of grant. At December 31, 1995, Joseph M. Williams held 13,333 options to
purchase the Company's stock at between $3.33 and $4.50 per share of which
7,133 shares are exercisable. At December 31, 1995, John V. Simon, Jr.,
held 21,667 options to purchase the Company's stock at between $3.33 and
$4.50 per share, of which 9,800 shares are exercisable.
Savings and Profit-Sharing Plan
The Company offers a savings and profit-sharing plan (the "401(k)
Plan"), which qualifies under Sections 401(a) and (k) of the Code.
Employees of the Company and certain affiliates who have been employed for
a specified period of time are eligible to participate in the 401(k) Plan.
All contributions made by the employees vest immediately. Amounts
contributed by the Company vest 20 percent after three years of service and
20 percent each year thereafter.
Profit and Equity Participation Plan
The Company's Profit and Equity Participation Plan (the "Profit
Participation Plan"), a defined contribution plan, covers employees of the
Company and certain affiliates who have been employed for a specified
period of time. Contributions to the Profit Participation Plan are made at
the discretion of the Board of Directors. Employees' rights in the Profit
Participation Plan vest 20 percent after three years of service and 20
percent each year thereafter. The Profit Participation Plan was merged
into The Kimmins Environmental Service Corp. Employee Stock Ownership Plan
Trust ("ESOP") on January 1, 1989.
Employee Stock Ownership Plan
Effective January 1, 1989, the Company formed the ESOP for the benefit
of the employees of the Company and its subsidiaries to purchase shares of
the Company's common stock from time to time on the open market or in
negotiated transactions at prices deemed to be attractive and,
simultaneously, the Profit Participation Plan was merged into the ESOP.
Contributions to the ESOP are made at the discretion of the Board of
Directors and, for the year ended December 31, 1989, was $200,000. During
1989, the ESOP acquired from the Company's President approximately 772,000
shares of common stock at a cost of $5,100,000. The shares were acquired
in exchange for a note payable to the President. Simultaneously with such
purchase, the President purchased certain receivables and interests in
certain investments from the Company for a purchase price of $5,100,000,
which was paid by the assignment to the Company of the note received from
the ESOP. The note was funded, during March 1990, through a long-term bank
financing agreement guaranteed by the Company. Expenses with respect to
the ESOP include the recognition of interest expense relating to the ESOP
debt and to earned compensation. For the year ended December 31, 1995,
interest expense and compensation expense relating to the ESOP were
$354,000 and $600,000, respectively. As of December 31, 1995, the unpaid
ESOP debt (net of the $113,000 accrued contribution) is also reflected as a
reduction in stockholders' equity.<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of March 18, 1996, by (i) persons known
by the Company to own more than 5 percent of the Company's outstanding
common stock, (ii) by each Named Executive and director of the Company, and
(iii) all Named Executives and directors of the Company as a group:
<TABLE>
<CAPTION>
Percent of
Name and Address Percent Total
of Beneficial of Voting
Owner (1) Title of Class Number of Shares Class Power
<S> <C> <C> <C> <C>
Francis M. Williams Common Stock 1,856,081 (2) 41.7% 61.5%
Class B Common Stock 2,291,569 100.0%
Joseph M. Williams Common Stock 360,945 (3) 8.1% 5.4%
Michael Gold Common Stock 13,223 (4) * *
George Chandler Common Stock 6,314 (5) * *
All directors and Common Stock 2,236,563 (2)(3) 50.3%
executive officers (4)(6) 67.2%
as a group Class B Common Stock 2,291,569 100.0%
(four persons)
(1) The addresses of all officers and directors of the Company above are in care of the
Company at 1501 Second Avenue, East, Tampa, Florida 33605.
(2) Includes 1,479,136 shares owned directly by Mr. Francis M. Williams; 133,333
shares owned by Summerbreeze and 121,750 shares owned by Sunshadow, both of
which Mr. Williams is the sole shareholder of the corporate general partner
and the sole limited partner (see Item 13, "Certain Relationships and Related
Transactions"); 48,908 shares owned by Mr. Williams' wife; 30,493 shares held
by Mr. Williams as Trustee for his wife and children; 37,913 shares held by
Mr. Williams as Custodian under the New York Uniform Gifts to Minors Act for
his children; 3,482 shares held by the Company's 401(k) and ESOP Plans of
which Mr. Williams is fully vested; and 1,067 shares held by Kimmins Realty
Investment, Inc., of which is owned 100 percent by Mr. Williams.
(3) Includes 10,000 shares owned by Mr. Joseph M. Williams; 7,133 shares issuable
upon exercise of currently exercisable stock options; 2,592 shares held by the
Company's 401(k) and ESOP Plans of which Mr. Williams is fully vested; and
341,220 shares held by the Company's 401(k) Plan and ESOP of which Mr.
Williams is a trustee with shared voting and investment power.
(4) Includes 1,150 shares owned by Mr. Gold; 5,775 shares currently owned by Mr.
Gold's wife; 2,898 held by Mr. Gold as trustee for Mr. Gold's minor children;
and 3,400 shares issuable upon exercise of currently exercisable stock
options.
(5) Includes 3,114 shares owned by Mr. Chandler; and 3,200 shares issuable upon
exercise of currently exercisable stock options.<PAGE>
(6) Includes 13,733 shares issuable upon exercise of currently exercisable stock
options; 6,074 shares held by the Company's 401(k) and ESOP Plans of which
certain officers of the Company are fully vested; and 341,471 shares held by
the Company's 401(k) and ESOP Plans of which the Secretary of the Company is a
trustee.
* Less than one percent.
</TABLE>
Item 13. Certain Relationships and Related Transactions
During 1994 and 1995, the Company paid landfill fees of approximately
$28,000 and $88,000, respectively, to a company that is owned primarily by
the brother of Mr. Francis M. Williams. The amount paid approximated fair
market rates for the type of services involved.
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 Mr.
Williams entered into a settlement and note renewal agreement whereby the
Chapter 11 bankruptcy filings with respect to the Apartments 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 originally accrued interest at prime plus 1 3/8 percent,
increasing to prime plus 2 percent on July 1, 1995, with principal and
interest payable in monthly installments through December 31, 1998, and is
guaranteed by Mr. Williams. Amounts due from the partnerships at December
31, 1994 and 1995, are approximately $3,588,000 and $3,851,000,
respectively.
At December 31, 1994 and 1995, $4,937,000 and $5,301,000,
respectively, of the contract and trade - affiliates balance is due from
corporate affiliates of the Company's president. The affiliated
receivables relate to contract services performed and are guaranteed by Mr.
Williams.<PAGE>
Item 14. Exhibits, Financial Statement, Schedules, and Reports on Form 8-K
(a) List of documents filed as part of this Report
1. Financial Statements
- Report of Independent Certified Public Accountants
- Consolidated balance sheets at December 31, 1994 and 1995
- Consolidated statements of operations for each of the three
years in the period ended December 31, 1995
- Consolidated statements of stockholders' equity for each of
the three years in the period ended December 31, 1995
- Consolidated statements of cash flows for
each of the three years in the period ended
December 31, 1995
- Notes to consolidated financial statements
2. Financial statement schedule
Schedule Page
Number Number
II - Valuation and Qualifying Accounts . . . . . . . . . . . S-1
All other Schedules are omitted since the required information is
not present or is not present in amounts sufficient to require
submission of the Schedules, or because the information required is
included in the financial statements and notes thereto.
3. The following documents are filed as exhibits to this Annual
Report on Form 10-K:
3 (a) -- Restated Certificate of Incorporation of Regi-
strant, as amended.
3 (b) * -- By-laws of Registrant
10.1 ** -- Stock Option Plan
21 -- Subsidiaries of the Reg-
istrant.
23 -- Consent of Ernst & Young
LLP
27 -- Financial Data Schedule (for SEC use only)
______________
* Previously filed on March 17, 1987, as part of Registrant's
Registration Statement on Form S-1, File No. 33-12677, and
incorporated herein by reference thereto.
** Previously filed on June 29, 1989, as part of Registrant's Form
S-8, File No. 33-29612, and incorporated herein by reference
thereto.
(b) Reports on Form 8-K.
None<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunder duly authorized.
KIMMINS CORP.
Date: March 28, 1996 By: /s/ Francis M. Williams
Francis M. Williams
President
Pursuant to the requirements of the Securities Exchange 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.
Date: March 28, 1996 /s/ Francis M. Williams
Francis M. Williams
President and Director
(Chief Executive Officer)
Date: March 28, 1996 /s/ Joseph M. Williams
Joseph M. Williams
Secretary/Treasurer
Date: March 28, 1996 /s/ Norman S. Dominiak
Norman S. Dominiak
Vice President and Chief
Financial Officer
(Principal Accounting and
Financial Officer)
Date: March 28, 1996 /s/ Michael Gold
Michael Gold, Director
Date: March 28, 1996 /s/ George A. Chandler
George A. Chandler, Director
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State or Providence
of Incorporation
Company or Organization
Kimmins Contracting Corp. . . . . . . . . . . . . . . Florida
Kimmins Ltd. . . . . . . . . . . . . . . . . . . . . Ontario, Canada
Kimmins Industrial Service Corp. . . . . . . . . . . Delaware
Kimmins Abatement Corp. . . . . . . . . . . . . . . . Delaware
ThermoCor Kimmins, Inc. (f/k/a Kimmins Thermal Corp.) Florida
TransCor Waste Services, Inc. . . . . . . . . . . . . Florida
Kimmins Recycling Corp. . . . . . . . . . . . . . . . Florida
Kimmins Incorporated . . . . . . . . . . . . . . . . Texas
Kimmins International . . . . . . . . . . . . . . . . Florida
Fourth Avenue Holdings, Inc. . . . . . . . . . . . . Florida
40th Street, Inc. . . . . . . . . . . . . . . . . . . Florida
Lantana Eighth Avenue Corp. . . . . . . . . . . . . . Florida
Factory Street Corporation . . . . . . . . . . . . . Tennessee
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-29612) pertaining to the 1987 Stock Option Plan
of Kimmins Corp. and in the related Prospectus, of our report dated March
8, 1996, with respect to the consolidated financial statements and schedule
of Kimmins Corp. included in the Annual Report (Form 10-K) for the year
ended December 31, 1995.
ERNST & YOUNG LLP
Tampa, Florida
March 28, 1996<PAGE>
KIMMINS CORP.
Schedule II - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Additions
Balance at Charged Deductions Balance at
Beginning of to Costs from End of
Description Period and Expenses Allowances (a) Period
<S> <C> <C> <C> <C>
Year ended December 31, 1993 . $ 644,907 $ 961,325 $ (1,168,216) $ 438,016
Year ended December 31, 1994 . $ 438,016 $ 495,375 $ (270,394) $ 662,997
Year ended December 31, 1995 . $ 662,997 $ 404,455 $ (670,241) $ 397,211
</TABLE>
(a) Balance represents the write-off of uncollectible accounts.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000811562
<NAME> KIMMINS CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,160,463
<SECURITIES> 0
<RECEIVABLES> 24,317,155
<ALLOWANCES> (397,211)
<INVENTORY> 0
<CURRENT-ASSETS> 44,117,192
<PP&E> 56,810,219
<DEPRECIATION> (19,217,558)
<TOTAL-ASSETS> 93,628,550
<CURRENT-LIABILITIES> 32,568,873
<BONDS> 0
0
0
<COMMON> 4,447
<OTHER-SE> 26,376,989
<TOTAL-LIABILITY-AND-EQUITY> 93,628,550
<SALES> 111,346,075
<TOTAL-REVENUES> 111,346,075
<CGS> 93,385,634
<TOTAL-COSTS> 13,364,168
<OTHER-EXPENSES> 345,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,417,802
<INCOME-PRETAX> 2,833,151
<INCOME-TAX> 1,490,568
<INCOME-CONTINUING> 1,342,583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,342,583
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
