<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[MARK ONE]
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________.
Commission File No. 1-10489
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KIMMINS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 59-2763096
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(State of Incorporation) (I.R.S. Employer Identification No.)
1501 Second Avenue, East, Tampa, Florida 33605
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(Address of registrant s principal executive offices,
including zip code)
Name of Exchange
Title of Each Class on Which Registered
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Common Stock, New York
$.001 par value Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by a 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 [ ]<PAGE>
Indicate by a check mark if disclosure of delinquent filers
pursuant to Item 405 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. [X]
As of April 14, 1997, 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 April 14, 1997, was
$7,774,000.
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DOCUMENTS INCORPORATED BY REFERENCE:
NONE<PAGE>
Documents incorporated by reference: Certain exhibits
provided in Part IV are incorporated by reference from the
Company s Registration Statement on Form S-3 (File No. 33-54640).
Note: The discussions in this Form 10-K contain forward
looking statements that involve risks and uncertainties. The
actual results of Kimmins Corp., and its subsidiaries (the
"Company") could differ significantly from those set forth
herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in
"Business" and "Management s Discussion and Analysis of Financial
Condition and Results of Operations," as well as those discussed
elsewhere in this Form 10-K. Statements contained in this Form
10-K that are not historical facts are forward looking statements
that are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. A number of important
factors could cause the Company s actual results for 1997 and
beyond to differ materially from those expressed or implied in
any forward looking statements made by, or on behalf of, the
Company. These factors include, without limitation, those listed
in "Risk Factors" in the Company s Registration Statement on Form
S-1 (File No. 33-12677).
PART I
Item 1. Business
THE COMPANY
Kimmins Corp. and its subsidiaries (collectively, the
"Company") operates two business segments: solid waste
management services and specialty contracting services. The
Company provides solid waste management services through its
TransCor Waste Services, Inc., subsidiary to commercial,
industrial, residential, and municipal customers in the state of
Florida. The Company provides specialty contracting services in
the south and northeast, including infrastructure development;
underground construction; road work; site remediation services
such as excavation, removal and disposal of contaminated soil;
facilities demolition and dismantling; and asbestos abatement.
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 services
* Environmental and utility contracting - Environmental
and utility contracting, including infrastructure
services such as sewer lines, water lines, and roads.<PAGE>
* 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, and excavation and removal.
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.
During its initial 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 strategy is to continue to focus on solid
waste management services, through its TransCor Waste Services,
Inc. subsidiary, and specialty contracting projects for private
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 has also, pursuant to several municipal<PAGE>
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, third-party waste hauling organizations, 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.
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 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.<PAGE>
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 governmental 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 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 continuing to de-emphasize
its asbestos abatement services and generally will only perform
these services in conjunction with other environmental demolition
activities.<PAGE>
Hazardous Waste Services
The Company offers a range of services for the removal,
treatment, and disposal of hazardous materials. The services
offered include on-site treatment methods, construction of
containment systems, and the excavation and removal of
contaminated material. The Company has deemphasized its hazardous
waste services and will only perform these services in
conjunction with other environmental demolition activities.
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, 1994, 1995, and 1996
for the Company's financial segment information. <PAGE>
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, 1996, 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 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<PAGE>
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 and Houston, Texas. These offices are located in areas
with a high concentration of industrial facilities. The Company
believes 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 third-party waste hauling organizations, 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 years ended December 31, 1994, 1995 and 1996, the Company s
specialty contracting services segment earned gross revenue of
approximately $10,000, $3,953,000 and $14,884,000, respectively,
on contracts with the Florida Department of Transportation.
For the year ended December 31, 1996, 47 percent and 53
percent, respectively, of the Company's gross revenue were
derived from private and governmental customers, respectively.
Government contracts, which represent a significant portion of
the Company s gross revenue, 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<PAGE>
or reduced profits under fixed-price government as well as
commercial contracts.
BACKLOG
As of December 31, 1996, the Company had a backlog of
uncompleted projects under contract aggregating approximately
$137,372,000, (compared to approximately $95,661,000 as of
December 31, 1995) of which approximately $68,562,000 is
attributable to environmental and utility contracting services,
approximately $4,347,000 is attributable to demolition and
dismantling services, approximately $91,000 is attributable to
asbestos abatement services, approximately $1,433,000 is
attributable to site remediation services, and approximately
$62,940,000 is attributable to solid waste management services.
The Company anticipates that it will recognize approximately
$72,000,000 of revenues from these projects by the end of 1997
with the remaining revenue to be recognized through the year
2004.
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 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.<PAGE>
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.
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 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
as 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 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<PAGE>
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. 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 became 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.
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.
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
The Company has approximately 975 employees, of which 8 were
employed in executive capacities, 45 in professional capacities,
63 in administrative capacities, 109 as field supervisors and 750
in field operations. A total of 8 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-day 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, 1996, of $1,775,000. 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 office:
Annual
Location Lease Expiration Date Rental
---------------------- --------------------- ------
2609 Allen-Genoa Road
Pasadena, Texas Month-to-month $3,240<PAGE>
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant 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. 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. The 1995 stock prices give effect to the
one-for-three reverse stock split that became effective January
11, 1996.
1996 High Low
--------------------------- --------- ---------
First Quarter . . . . . . . $ 7.875 $ 5.250
Second Quarter . . . . . . $ 5.750 $ 4.875
Third Quarter . . . . . . . $ 5.000 $ 3.500
Fourth Quarter . . . . . . $ 4.125 $ 3.250
1995 High Low
--------------------------- --------- ---------
First Quarter . . . . . . . $ 6.000 $ 4.500
Second Quarter . . . . . . $ 7.875 $ 5.250
Third Quarter . . . . . . . $ 18.750 $ 7.125
Fourth Quarter . . . . . . $ 10.125 $ 6.375
On April 7, 1997, there were approximately 960 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.<PAGE>
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.
Item 6. Selected Financial Data
The following selected financial data are derived from the
consolidated financial statements of Kimmins Corp. The data
should be read in conjunction with the consolidated financial
statements, related notes, and other financial information
included herein.
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share data)
-------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Gross revenue . . . . . $ 87,442 $ 83,609 $ 96,755 $111,346 $113,241
Net revenue . . . . . . 78,614 77,405 85,353 95,426 97,977
Operating income
(loss) (1) . . . . . . 1,782 3,666 2,670 4,596 (7,806)
Litigation
settlements (2) . . . (379) - - - -
Income (loss) from
continuing operations
before provision
(benefit) for income
taxes . . . . . . . . 99 3,196 1,533 2,833 (10,775)
Income (loss) from
continuing
operations . . . . . . 61 1,753 797 1,343 (8,683)
Income from discontinued
operations (3) . . . . 124 - - - -
Net income (loss) (4) . 185 1,753 797 1,343 (8,683)
</TABLE> <PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share data)
-------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Income (loss) from
continuing operations
per share -
primary . . . . . . . $ - $ .39 $ .18 $ .30 $ (1.96)
Income from discontinued
operations per share -
primary . . . . . . . .03 - - - -
Net income (loss) per --------- --------- --------- --------- ---------
share - primary . . . $ .03 $ .39 $ .18 $ .30 $ (1.96)
Income (loss) from ========= ========= ========= ========= =========
continuing operations
per share - fully
diluted . . . . . . . $ - $ .39 $ .18 $ .30 $ (1.96)
Income from discontinued
operations per share -
fully diluted . . . . .03 - - - -
Net income (loss) per --------- --------- --------- --------- ---------
share - fully
diluted . . . . . . . $ .03 $ .39 $ .18 $ .30 $ (1.96)
Weighted average number ========= ========= ========= ========= =========
of common shares
outstanding -
primary . . . . . . . 4,442 4,443 4,443 4,544 4,420
Weighted average number
of common shares
outstanding - fully
diluted . . . . . . . 4,442 4,474 4,449 4,544 4,420
Cash dividends per
share . . . . . . . . None None None None None
</TABLE>
(1) The 1996 results reflect charges to operations of $6,452
during the fourth quarter related to contract estimate
changes and contract claim and change order settlements.
(2) 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.
(3) Balances relate to the Company s distribution of its surety
services.<PAGE>
(4) The 1996 results included a benefit for income taxes of
$2,092, which is net of a valuation allowance of $1,707
related to the future recoverability of deferred tax asset
balances.
HISTORICAL BALANCE SHEET DATA:
<TABLE>
<CAPTION>
As of December 31,
(In thousands)
-------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current assets . . . . $ 33,068 $ 33,716 $ 36,200 $ 44,117 $ 41,856
Working capital . . . . 8,253 12,041 11,205 11,548 5,587
Total assets . . . . . 68,381 70,192 72,689 93,629 93,083
Long-term debt . . . . 21,206 19,454 17,032 26,540 31,360
Stockholders equity . . 20,783 23,102 24,514 26,381 17,853
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Introduction
The Company conducts its business in two segments: solid
waste management services and specialty contracting services. The
solid waste management services segment offers collection,
transfer, transportation, resource recovery and disposal of
non-hazardous waste. The specialty contracting services segment
provides comprehensive services including facilities demolition
and dismantling, installation of sewer lines, water lines and
roads, excavation, removal and disposal of contaminated soil,
groundwater treatment and asbestos abatement.<PAGE>
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
Increase (Decrease)
Percentage of Net Revenue Year ended
Year Ended December 31, December 31,
----------------------------- -------------------
1995 vs. 1996 vs.
1994 1995 1996 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Gross revenue . . . . . 113.4% 116.7% 115.5% 15.1% 1.7%
Outside services . . . 13.4% 16.7% 15.5% 39.6% (4.1%)
--------- --------- ---------
Net revenue . . . . . . 100.0% 100.0% 100.0% 11.8% 2.7%
Cost of revenue
earned . . . . . . . 85.8% 81.2% 92.1% 5.8% 16.5%
--------- --------- ---------
Gross profit . . . . . 14.2% 18.8% 7.9% 48.2% (57.1%)
Selling, general and
administrative
expense . . . . . . . 11.1% 14.0% 15.8% 41.5% 16.1%
--------- --------- ---------
Operating income
(loss) . . . . . . . 3.1% 4.8% (7.9%) 72.1% (269.8%)
Minority interest in
net (income) loss
of subsidiary . . . . 0.0% (0.3%) 0.1% 469.6% (140.0%)
Interest expense,
net . . . . . . . . . (1.3%) (1.5%) (3.2%) 31.7% 119.1%
--------- --------- ---------
Income (loss) before
provision for income
taxes (benefit) . . . 1.8% 3.0% (11.0%) 84.8% (480.3%)
Provision for income
taxes (benefit) . . . 0.9% 1.6% (2.1%)
--------- --------- ---------
Net income (loss) . . . 0.9% 1.4% (8.9%) 68.5% (746.8%)
========= ========= =========
</TABLE> <PAGE>
Year Ended December 31, 1996, Compared to Year Ended December 31,
1995
The Company incurred a net loss of $8,683,000 for the year
ended December 31, 1996, compared to net income of $1,343,000 for
the year ended December 31, 1995. Approximately $8,295,000 of
the 1996 loss was attributable to several matters related to the
Company s specialty contracting segment, and approximately
$388,000 of the net loss (net of the minority interest) was
attributable to the solid waste management services segment. The
1996 net loss associated with the solid waste management segment
was primarily attributable to a demolition contract claim and a
change order settlement which totaled $395,000. As it relates to
the specialty contracting segment, the Company incurred
$2,903,000 of pre-tax losses related to the settlement and/or
resolution of contract claims and unapproved change orders. In
addition, the Company incurred losses on two remediation
contracts located in the northeast region that resulted in pre-
tax losses of $1,369,000. These losses were attributable to the
Company s de-emphasis of work located in the northeastern states
and focus towards operations located in the southeastern states,
primarily Florida. This de-emphasis resulted in operational
inefficiencies, such as work slow downs, that were the ultimate
causes of the losses. As management focused on the resolution of
the operating issues related to the northeast region, operational
inefficiencies in the southeast region arose, resulting in a pre-
tax charge of $3,580,000 related to five utility and two
demolition and abatement projects.
Certain of the above charges occurred in the fourth quarter
of 1996, resulting in an aggregate pre-tax loss of $6,452,000.
Information related to these matters substantially arose during
the fourth quarter of the year. As it relates to the specialty
contracting segment, the Company incurred $2,455,000 of pre-tax
losses related to the settlement and/or resolution of contract
claims and unapproved change orders during the fourth quarter of
1996. The losses associated with the remediation and utility
contracting contracts that related to the fourth quarter was
$1,543,000 and $2,454,000, respectively.
Management intends to continue to emphasize obtaining work
in the southeast. The Company anticipates that, with increased
and focused management oversight, it will be able to reduce the
possibility of reoccurrence of the conditions leading to the
losses in the southeast region during 1996. In addition, only
two contracts remain in the northeast region and are scheduled
for completion during 1997.<PAGE>
A line-by-line analysis of the Company s statements of
operations follows below:
During the year ended December 31, 1996, net revenue
increased by $2,551,000, or 3 percent, to $97,977,000 from
$95,426,000 for the year ended December 31, 1995. The increase in
revenue associated with the Company's solid waste management
services ($4,492,000 increase in net revenue) is primarily due to
the commencement of two municipal contracts during October 1995
to provide residential collection services. The increase in
revenue associated with the Company's utility contracting
services ($1,676,000 increase in net revenue) is due to the
Company's change in focus towards non-environmental projects.
The decrease in revenue associated with the Company's remediation
services ($1,602,000 decrease in net revenue), asbestos abatement
services ($1,243,000 decrease in net revenue), and industrial
demolition services ($772,000 decrease in net revenue) is due to
the Company de-emphasizing these services and only performing
this work in conjunction with the Company's other environmental
demolition activities. The impact of price increases on net
revenue is less than one percent.
Outside services, which primarily consist of subcontractor
costs, decreased as a percentage of net revenue from 17 percent
during the year ended December 31, 1995, to 16 percent during
1996. The Company will use the services of a subcontractor when
it determines that an economic opportunity exists regarding
internally providing the services. The Company utilized the
services of subcontractors to a lower extent during 1996 than
1995 due to the ongoing contracts and the specific work
requirements.
Cost of revenue earned increased to $90,269,000 for the year
ended December 31, 1996, from $77,466,000 for the comparable
period of 1995. As a result, gross profit during the year ended
December 31, 1996, decreased to $7,708,000 (8 percent of net
revenue) from $17,960,000 (19 percent of net revenue) in 1995.
The decrease in the dollar amount and percentage of gross profit
primarily is associated with the Company's utility contracting
($3,923,000 decrease in gross profit) and remediation operations
($3,703,000 decrease in gross profit). The decrease in gross
profit from utility contracting services is directly related to
management s decision to stop legal action related to two
unapproved change orders and to a project that failed to perform
to the Company s original projections. The decrease in gross
profit from remediation services is directly related to losses
incurred on two projects that failed to perform to the Company s
original projections and the settlement of a contract claim that
resulted in a pre-tax loss of approximately $448,000. In
addition, the Company incurred certain decreases in its
industrial demolition services ($1,380,000 decrease in gross
profit), solid waste management services ($848,000 decrease in
gross profit), and asbestos abatement services ($398,000 decrease<PAGE>
in gross profit). The decrease in gross profit associated with
the Company s industrial demolition services is due to a judge s
reversal of a previous jury award, resulting in a pre-tax charge
to operations of $1,572,000.
Included in the Company s operating results for the years
ended December 31, 1995 and 1996 is the activity related to the
settlement and/or resolution of contract claims and unapproved
change orders. This activity can be summarized as follows:
Years ended December 31,
---------------------------
1995 1996
------------- -------------
Claim recoveries . . . . . . . . . . $ 1,618,000 $ 2,013,000
Cost of recoveries . . . . . . . . . 1,145,000 4,916,000
------------- -------------
Gain (loss) on resolved claims . . . $ 473,000 $ (2,903,000)
============= =============
In addition, the Company incurred costs associated with
unresolved claims of $6,440,000 and $2,079,000 during 1995 and
1996, respectively.<PAGE>
The Company had the following balances recorded relating to
contract claims and unsigned change orders at December 31, 1995
and 1996:
December 31,
---------------------------
1995 1996
------------- -------------
Claims . . . . . . . . . . . . . . . $ 9,128,000 $ 5,558,000
Unapproved change orders . . . . . . 2,659,000 3,392,000
------------- -------------
$ 11,787,000 $ 8,950,000
============= =============
Cumulative external claim
preparation costs included above . . $ 1,226,000 $ 295,000
============= =============
During 1996, selling, general and administrative expenses
increased to $15,515,000 from $13,364,000 for the year ended
December 31, 1995. 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, which has an overhead structure
equal to 17 percent of its net revenue. These services have
historically operated with a higher overhead structure than the
Company's specialty contracting operations, which has an overhead
structure equal to 15 percent of its net revenue.
As a result of the foregoing, the Company incurred an
operating loss of $7,806,000 (negative 8 percent of net revenue)
during the year ended December 31, 1996, compared to operating
income of $4,596,000 (5 percent of net revenue) during the same
period in 1995.
Minority interest in net loss of the TransCor subsidiary was
$138,000 for the year ended December 31, 1996, compared to
minority interest in net income of $345,000 for the year ended
December 31, 1995. The minority interest in net income or loss 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 profit margins
earned on certain solid waste management services.
Interest expense, net of interest income, increased to
$3,107,000 during the year ended December 31, 1996, compared to
$1,418,000, for the year ended December 31, 1995. During 1996,
the Company discontinued recognition of interest income of
approximately $551,000 on certain notes receivable from
affiliates. <PAGE>
The remainder of the increase is attributable to increases in
average borrowings during the year.
During 1996, the Company converted a $5,700,000 note
receivable from Cumberland into a common stock investment,
representing a 30 percent interest in Cumberland. The note was
converted based upon current stock market prices, which was less
than the underlying equity in the book value of Cumberland. The
amount in excess of the underlying equity was attributed to
goodwill and is being amortized over 20 years. The Company
recorded equity in losses of Cumberland of approximately $37,000,
which represents the Company s proportionate share of
Cumberland s net loss for the period November 5, 1996, through
December 31, 1996.
The Company s effective tax rate was (19.5) percent for the
year ended December 31, 1996, compared to a tax rate of 52.6
percent for the year ended December 31, 1995. The decrease in
the effective tax rate was primarily due to the net operating
loss generated by the Company and the resulting recognition of
future tax benefits from credit and loss carryforwards. The net
operating loss ("NOL") generated in the year ended December 31,
1996, was approximately $11,200,000. Approximately $4,500,000
will be carried back to prior tax years, resulting in
approximately $900,000 of federal tax refunds. The remaining NOL
of approximately $6,700,000 will be carried forward to offset any
taxable income in future years. For alternative minimum tax
purposes, the loss carryforward is approximately $6,200,000.
Management expects to fully utilize these loss and credit
carryforwards before they expire in the year 2011; however, in
accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," a valuation allowance of
approximately $1,700,000 has been recognized. In addition to the
loss carryforwards, the Company has approximately $836,000 of
alternative minimum tax credit carryforwards available to offset
future federal regular income taxes. This credit does not
expire.
As a result of the foregoing, the Company incurred a net
loss for the year ended December 31, 1996, of $8,683,000
(negative 9 percent of net revenue) compared to a net income of
$1,343,000 (1 percent of net revenue) during the same period in
1995.
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 in revenue associated
with the Company's utility contracting services ($14,329,000
increase in net revenue) is primarily due to the Company's change
in focus towards non-environmental projects. The increase in
revenue associated with the Company's solid waste management<PAGE>
services ($10,887,000 increase in net revenue) is primarily due
to the commencement of two municipal contracts during October
1995 to provide residential collection services. The decrease in
revenue associated with the Company's industrial demolition
services ($11,911,000 decrease in net revenue) is due to the
completion of a major contract during 1994. The decrease in
revenue associated with the Company's asbestos abatement services
($1,751,000 decrease in net revenue) is due to the Company de-
emphasizing these services and only performing this work in
conjunction with the Company's other environmental demolition
activities. The impact of price increases on net revenue is less
than one percent.
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. The Company utilized the
services of subcontractors to a greater extent during 1995 than
1994 in order to meet established minority requirements on
certain municipal contracts.
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 ($2,963,000 increase in gross profit) and solid waste
management services ($3,751,000 increase in gross profit). The
dollar and percentage increase in gross profit from solid waste
management services is directly related to the increase in
industrial and commercial solid waste services, which have
historically had higher profit margins than the Company's other
solid waste management operations. This increase offsets certain
decreases in the Company's industrial demolition services
($959,000 decrease in gross profit) and asbestos abatement
services ($228,000 decrease in gross profit).<PAGE>
Included in the Company s operating results for the years
ended December 31, 1994 and 1995 is the activity related to the
settlement and/or resolution of contract claims and unapproved
change orders. This activity can be summarized as follows:
Years ended December 31,
---------------------------
1994 1995
------------- -------------
Claim recoveries . . . . . . . . . . $ 1,198,000 $ 1,618,000
Cost of recoveries . . . . . . . . . 976,000 1,145,000
------------- -------------
Gain (loss) on resolved claims . . . $ 222,000 $ 473,000
============= =============
In addition, the Company incurred costs associated with
unresolved claims of $4,952,000 and $6,440,000 during 1995 and
1996, respectively.
The Company had the following balances recorded relating to
contract claims and unsigned change orders at December 31, 1994
and 1995:
December 31,
---------------------------
1994 1995
------------- -------------
Claims . . . . . . . . . . . . . . . $ 6,492,000 $ 9,128,000
Unapproved change orders . . . . . . - 2,659,000
------------- -------------
$ 6,492,000 $ 11,787,000
============= =============
Cumulative external claim
preparation costs included above . . $ 683,000 $ 1,226,000
============= =============
During 1995, selling, general and administrative expenses
increased to $13,364,000 from $9,447,000 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, which has an overhead structure
equal to 16 percent of its net revenue. These services have
historically operated with a higher overhead structure than the
Company's specialty contracting operations, which has an overhead
structure equal to 13 percent of its net revenue.
As a result of the foregoing, operating income increased to
$4,596,000 (5 percent of net revenue) during the year ended<PAGE>
December 31, 1995, compared to $2,670,000 (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.
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.
Liquidity and Capital Resources
Cash provided by operating activities was $3,884,000,
$4,941,000, and $1,061,000 for the years ended December 1994,
1995 and 1996, respectively. Cash provided by the Company s
solid waste management services segment amounted to $1,770,000,
$4,306,000 and $4,464,000 in 1994, 1995 and 1996, respectively.
Cash provided or (used) by the Company s specialty contracting
segment amounted to $2,114,000, $635,000 and ($3,403,000) in
1994, 1995 and 1996, respectively. Cash was provided by the
solid waste management services segment operations in 1996 at
expected levels. Cash was used in the specialty contracting
operations due to significant contract losses, discussed under
results of operations, offset by the increase or extension of
payments on accounts payable and accrued expenses. Increases in
the Company s accounts payable and accrued expenses amounted to
$1,743,000, $7,630,000 and $2,834,000 in 1994, 1995 and 1996,
respectively. While these increases in 1994 and 1995 were
generally in response to increased operating levels, the
extensions in 1996 were a result of cash management actions taken
by management to maintain liquid assets in the presence of
current operating losses.<PAGE>
The Company had capital expenditures of $5,804,000,
$15,425,000, and $6,968,000 in 1994, 1995, and 1996,
respectively. These expenditures were primarily related to the
acquisition of equipment associated with the Company's solid
waste management and utility contracting operations. Future
capital expenditures will be financed by available cash
resources, cash flow from operations and available credit
resources, as needed.
During 1996, the Company generated cash from financing
activities of $5,229,000, which was net of purchases on the open
market of 73,828 shares of the Company s common stock for
$312,000. Borrowings in 1996 related primarily to working
capital drawings on lines of credit to support current operations
in the specialty contract services segment. Net borrowings
(payments) on credit lines and debt balances were ($1,149,000)
and $10,315,000 in 1994 and 1995, respectively. Significant
borrowings in 1995 were primarily attributable to purchases of
new equipment to support increased operations in the solid waste
management services segment.
The Company is subject to a variety of restrictive covenants
under various debt agreements with one of its institutional
lenders. In 1996 the Company failed to meet the consolidated
tangible net worth, debt to consolidated tangible net worth
ratio, consolidated debt service coverage ratio, fixed charge
coverage ratio, and net income requirement with regards to
approximately $11,000,000 of its bank debt. As of December 31,
1996, the Company obtained waivers for these covenants and may be
required to obtain similar waivers for certain covenants in 1997.
The Company has obtained a representation from Mr. Francis M.
Williams should waivers not be obtained during 1997 and the
lender accelerates the maturities of the Revolving Term Bank Line
of Credit and Mortgage Note on the corporate office. This
representation 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 1997
more than the regularly scheduled maturities. There can be no
assurance that Mr. Williams will have sufficient resources to
fund the Company s capital requirements. Any further 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.
On February 26, 1997, the Company, through its Kimmins
Contracting Corp. subsidiary, entered into a credit agreement
with a financial institution that provides for unrestricted
borrowings up to $11,000,000. As of April 21, 1997, the Company
has drawn approximately $7,000,000 on the facility, which was
used to partially paydown bank debt. Borrowings on this facility
are due in February 1999. In addition, on February 26, 1997, the
Company issued approximately $13,000,000 of term debt to acquire
certain operating assets currently used in the specialty<PAGE>
contracting business that had been leased under operating leases.
The term debt requires periodic payments through February 2004.
The Company's ratio of debt to total equity was 1.29:1.00
and 2.15:1.00 at December 31, 1995 and 1996, respectively. The
increase in debt is primarily due to increased borrowings under
the Company s revolving term bank line of credit to fund
operations. In addition, the increase can be attributed to an
increase in equipment loans associated with capital expenditures
required for the commencement of two municipal solid waste
management contracts during the fourth quarter of 1995.
During the years ended December 31, 1995 and 1996, the
Company's average contract and trade receivables were outstanding
for 77 and 76 days, respectively. The Company anticipates
sustaining this rate of collection for the year ended December
31, 1997. 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 primary contracts will
generally result in a delay of payment to subcontractors.
The Company has a note receivable in an original amount of
$3,638,696 from Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships
(collectively, the "Apartments"), of which Mr. Francis M.
Williams is the sole shareholder of the corporate general partner
and the sole limited partner. The note receivable originally
accrued interest at prime plus 1.375 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. The Company did not receive any
interest or principal payments during 1996 relating to this note
receivable, and management of the Company discontinued
recognition of interest income of approximately $551,000 for the
year. Amounts due from the Apartments at December 31, 1995 and
1996, are approximately $3,851,000.
At December 31, 1995 and 1996, $5,301,000 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.
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, 1996, the Company had no material
commitments for capital expenditures.<PAGE>
See Note 18 of Notes to Consolidated Financial Statements
for the Company's business segment information.
Effects of Change in Method of Accounting
In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("FAS No. 123")
effective for transactions entered into after December 15, 1995.
FAS No. 123 provides alternatives for the methods used by
entities to record compensation expense associated with its
stock-based compensation plans. Additionally, FAS No. 123
provides further guidance on the disclosure requirements relating
to stock-based compensation plans that are effective for fiscal
years beginning after December 15, 1995. The adoption of FAS No.
123 has not had a material impact on the financial condition or
the results of operations of the Company.
In February 1997, FASB issued "Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("FAS No.
128"), which is effective for periods ending after December 15,
1997. This statement establishes standards for computing and
presenting earnings per share data. Management is currently
assessing the impact of FAS No. 128 on the Company s presentation
of earnings per share data in future periods.
Forward-Looking Information
The foregoing discussion in "Management s Discussion and
Analysis of Financial Condition and Results of Operations"
contains forward-looking statements that reflect management s
current views with respect to future events and financial
performance. Such statements involve risks and uncertainties,
and there are certain important factors that could cause actual
results to differ materially from those anticipated. Some of the
important factors that could cause actual results to differ
materially from those anticipated include, but are not limited
to, economic conditions, competitive factors, and other
uncertainties, all of which are difficult to predict and many of
which are beyond the control of the Company. Due to such
uncertainties and risk, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as
of the date hereof.
Effect of Inflation
Inflation has not had, and is not expected to have, a
material impact upon the Company's operations. If inflation
increases, the Company will attempt to increase its prices to
offset its increased expenses. No assurance can be given,
however, that the Company will be able to adequately increase its
prices in response to inflation.<PAGE>
Item 8. Financial Statements and Supplementary Data
KIMMINS CORP.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
----
Report of Independent Certified Public Accountants . . . . . 20
Consolidated balance sheets at December 31, 1995 and 1996 . . 21
Consolidated statements of operations for each of the
three years in the period ended December 31, 1996 . . . . . 23
Consolidated statements of stockholders' equity for each of
the three years in the period ended December 31, 1996 . . . 24
Consolidated statements of cash flows for each of the
three years in the period ended December 31, 1996 . . . . . 25
Notes to consolidated financial statements . . . . . . . . . 26
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. as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period
ended December 31, 1996. 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,
1995 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996, 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.
/s/ Ernst & Young LLP
Tampa, Florida
April 14, 1997<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
---------------------------
1995 1996
------------- -------------
Current assets:
Cash . . . . . . . . . . . . . . . . $ 1,160,463 $ 968,638
Accounts receivable:
Contract and trade . . . . . . . . 21,755,341 20,060,169
Affiliates . . . . . . . . . . . . 1,903,832 1,648,529
Note receivable - affiliate . . . . 56,667 -
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . . . 17,001,286 15,967,872
Income tax refund receivable . . . . 1,050,625 1,199,775
Deferred income tax, net . . . . . . 742,130 1,499,329
Other current assets . . . . . . . . 446,848 512,110
------------- -------------
Total current assets . . . . . . . 44,117,192 41,856,422
------------- -------------
Property and equipment, net . . . . . 37,592,661 38,877,521
Intangible assets, net . . . . . . . 785,175 898,853
Accounts receivable - affiliates . . 1,450,716 1,450,716
Note receivable - affiliate . . . . . 3,794,060 3,850,727
Term note from affiliate (including
accrued interest of $506,755 at
December 31, 1995) . . . . . . . . . 4,797,804 -
Investment in Cumberland
Technologies, Inc. . . . . . . . . . - 5,105,632
Other assets, net . . . . . . . . . . 1,090,942 1,043,036
------------- -------------
$ 93,628,550 $ 93,082,907
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
---------------------------
Current liabilities: 1995 1996
------------- -------------
Accounts payable - trade . . . . . . $ 17,358,270 $ 19,169,607
Accrued expenses . . . . . . . . . . 7,049,132 8,072,187
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . 606,614 752,287
Current portion of long-term debt. . 7,074,857 7,794,848
Current portion of Employee Stock
Ownership Plan trust debt . . . . 480,000 480,000
------------- -------------
Total current liabilities . . . . 32,568,873 36,268,929
------------- -------------
Long-term debt . . . . . . . . . . . 24,619,969 29,920,396
Employee Stock Ownership Plan
Trust debt . . . . . . . . . . . . . 1,920,000 1,440,000
Deferred income taxes . . . . . . . 4,559,531 4,159,605
Minority interest in subsidiary . . . 3,578,741 3,440,681
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;
4,447,397 shares issued and
outstanding . . . . . . . . . . . 4,447 4,447
Class B common stock, $.001 par
value; 10,000,000 shares
authorized, 2,291,569 shares
issued and outstanding . . . . . . 2,292 2,292
Capital in excess of par value . . . 18,730,173 18,730,173
Retained earnings . . . . . . . . . 9,911,606 1,228,167
Unearned employee compensation
from Employee Stock Ownership
Plan Trust . . . . . . . . . . . (2,267,082) (1,800,000)
------------- -------------
26,381,436 18,165,079
Less treasury stock, at cost
(73,828 shares) . . . . . . . . . - (311,783)
------------- -------------
Total stockholders' equity . . . 26,381,436 17,853,296
------------- -------------
$ 93,628,550 $ 93,082,907
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Revenue:
Gross revenue . . . $ 96,755,001 $111,346,075 $113,240,908
Outside services, at
cost . . . . . . . . (11,402,286) (15,919,816) (15,264,042)
------------- ------------- -------------
Net revenue . . . . . 85,352,715 95,426,259 97,976,866
Costs and expenses:
Cost of revenue
earned . . . . . . . 73,235,439 77,465,818 90,268,700
Selling, general and
administrative
expenses . . . . . . 9,447,064 13,364,168 15,514,654
------------- ------------- -------------
Operating income
(loss) . . . . . . . . 2,670,212 4,596,273 (7,806,488)
Minority interest in
net (income) loss of
subsidiary . . . . . . (60,624) (345,320) 138,060
Interest expense (net
of interest income of
approximately
1,060,000, $1,005,000,
and $569,000 for the
years ended December
31, 1994, 1995, and
1996, respectively). . (1,076,911) (1,417,802) (3,107,000)
------------- ------------- -------------
Income (loss) before
provision for income
taxes (benefit) . . . 1,532,677 2,833,151 (10,775,428)
Provision for income
taxes (benefit):
Current . . . . . . 650,788 661,472 (934,864)
Deferred . . . . . . 84,897 829,096 (1,157,125)
------------- ------------- -------------
735,685 1,490,568 (2,091,989)
------------- ------------- -------------
Net income (loss) . . $ 796,992 $ 1,342,583 $ (8,683,439)
============= ============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(continued)
Per Share Data:
Income (loss) per
share . . . . . . . $ .18 $ .30 $ (1.96)
============= ============= =============
Weighted average
number of shares
outstanding used in
computation . . . . 4,442,997 4,544,180 4,420,175
============= ============= =============
See accompanying notes.<PAGE>
<TABLE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
<CAPTION>
Class B
Common Stock Common Stock Capital in
------------------- ------------------- Excess of
Shares Amount Shares Amount Par Value
---------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
January 1, 1994 . 4,442,997 $ 4,443 2,291,569 $ 2,292 $ 18,710,378
Employee
compensation from
Employee Stock
Ownership Trust . - - - - -
Net income . . . . - - - - -
---------- -------- ---------- -------- ------------
Balance at
December 31, 1994 4,442,997 4,443 2,291,569 2,292 18,710,378
Stock options
exercised . . . . 4,400 4 - - 19,795
Employee
compensation from
Employee Stock
Ownership Trust . - - - - -
Net income . . . . - - - - -
---------- -------- ---------- -------- ------------
Balance at
December 31, 1995 4,447,397 4,447 2,291,569 2,292 18,730,173
Employee
compensation from
Employee Stock
Ownership Trust . - - - - -
Purchase of treasury
stock, at cost . . - - - - -
Net loss . . . . . - - - - -
---------- -------- ---------- -------- ------------
Balance at
December 31, 1996 4,447,397 $ 4,447 2,291,569 $ 2,292 $ 18,730,173
========== ======== ========== ======== ============
</TABLE>
See accompanying notes.<PAGE>
<TABLE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(continued) <CAPTION>
Unearned
Employee
Compenation
from
Employee
Stock Total
Retained Ownership Treasury Stockholders
Earnings Plan Trust Stock Equity
----------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Balance at
January 1, 1994 . $ 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 8,569,023 (2,771,934) - 24,514,202
Stock options
exercised . . . . - - - 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 9,911,606 (2,267,082) - 26,381,436
Employee
compensation from
Employee Stock
Ownership Trust . - 467,082 - 467,082
Purchase of treasury
stock, at cost . - - (311,783) (311,783)
Net loss . . . . . (8,683,439) - - (8,683,439)
----------- ------------ ---------- --------------
Balance at
December 31, 1996 $ 1,228,167 $(1,800,000) $(311,783) $ 17,853,296
=========== ============ ========== ==============
</TABLE>
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Cash flows from
operating activities:
Net income (loss) . $ 796,992 $ 1,342,583 $ (8,683,439)
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Depreciation and
amortization . . 4,050,339 4,301,711 5,650,341
Provision for
uncollectible
accounts
receivable . . . 495,375 404,455 430,381
Minority interest
in income (loss)
of subsidiary . . 60,624 345,320 (138,060)
(Gain) loss on
disposal of
property and
equipment . . . 407,3235 (241,034) (22,359)
Accrued interest
on term note . . 65,378 (454,772) (372,066)
Equity in losses
of investment . . - - 36,766
Deferred income
taxes . . . . . 84,897 829,096 (1,157,125)
Unearned employee
compensation from
Employee Stock
Ownership Plan
Trust . . . . . . 615,657 504,852 467,082
Changes in
operating assets
and liabilities:
Accounts and
notes
receivable . . (4,518,539) (881,808) 1,520,094
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Years ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Costs and
estimated
earnings in
excess of
billings on
uncompleted
contracts . . (388,478) (6,835,059) 1,033,414
Income tax
refund
receivable . . 253,963 (371,087) (149,150)
Other assets . (127,226) (864,933) (535,230)
Accounts
payable -
trade . . . . 823,160 4,054,862 1,811,337
Accrued
expenses . . . 920,094 3,575,357 1,023,055
Billings in
excess of
costs and
estimated
earnings on
uncompleted
contracts . . 344,836 (768,934) 145,673
------------- ------------- -------------
Total
adjustments . 3,087,405 3,598,026 9,744,153
------------- ------------- -------------
Net cash provided by
operating
activities . . . . . . 3,884,397 4,940,609 1,060,714
------------- ------------- -------------
Cash flows from
investing activities:
Capital expenditures
including
$2,267,000 and
$500,000 of
business
acquisitions during
1995 and 1996,
respectively . . . (5,803,781) (15,425,379) (6,968,009)
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Years ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Proceeds from sale
of property and
equipment . . . . . 1,017,482 851,623 486,835
------------- ------------- -------------
Net cash used by
investing
activities . . . . . . (4,786,299) (14,573,756) (6,481,174)
------------- ------------- -------------
Cash flows from
financing activities:
Proceeds from long-
term debt . . . . . 16,604,165 19,611,436 14,556,332
Repayments of
long-term debt . . (17,153,585) (8,716,731) (8,535,914)
Repayments of
Employee Stock
Ownership Plan
Trust debt . . . . (600,000) (600,000) (480,000)
Purchase of treasury
stock . . . . . . . - - (311,783)
Proceeds from stock
options . . . . . . - 19,799 -
------------- ------------- -------------
Net cash provided
(used) by financing
activities . . . . . . (1,149,420) 10,314,504 5,228,635
------------- ------------- -------------
Net increase (decrease)
in cash . . . . . . (2,051,322) 681,357 (191,825)
Cash, beginning
of year . . . . . . . 2,530,428 479,106 1,160,463
------------- ------------- -------------
Cash, end of year . . . $ 479,106 $ 1,160,463 $ 968,638
============= ============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of
significant accounting policies
Organization - Kimmins Corp. and its subsidiaries
(collectively, the "Company") operates two business segments:
solid waste management services and specialty contracting
services. The Company provides solid waste management services
to commercial, industrial, residential and, municipal customers
in the state of Florida. The Company provides specialty
contracting services in the south and northeast, including
infrastructure development; underground construction; road work;
site remediation services such as excavation, removal and
disposal of contaminated soil; facilities demolition and
dismantling; and asbestos abatement.
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. 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.
Concentrations of credit risk - Financial instruments which
subject the Company to concentrations of credit risk consist
primarily of trade receivables in the State of Florida. Trade
receivables are comprised primarily of amounts due from solid
waste management customers and on specialty contracting
contracts. Credit is extended based on an evaluation of the
customer's financial condition. Collateral is generally not
required; however, the Company has the ability to file for a
mechanic's lien to protect its interest in contract accounts
receivable. Credit losses are provided for in the financial
statements and have been within management's expectations.
Accounts receivable - trade, net includes $1,322,000 related
to a municipal solid waste management contract with St. Lucie
County. Unlike other municipal solid waste management contracts,
St. Lucie County requires the Company to bill and collect
directly from individual property owners. Pursuant to St. Lucie
County ordinances, property owners that are delinquent in payment
are subject to lien rules. The Company has placed liens on
approximately 2,250 individual properties representing
approximately $511,000 of the balance as of December 31, 1996.
Management intends to file additional liens when considered<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of
significant accounting policies (continued)
appropriate, and all such liens will be maintained in accordance
with applicable laws until the outstanding balances are recovered
by payment, judgement, foreclosure, or other action.
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 amortized
on a straight-line basis over twenty years, and customer lists,
which are amortized on a straight-line basis over five years.
Amortization expense was $67,000 and $124,000 for the years ended
December 31, 1995 and 1996 (none for 1994), respectively.
Accumulated amortization was approximately $67,000 and $191,000
at December 31, 1995 and 1996, respectively.
Investments - The Company s 30 percent investment in
Cumberland Technologies, Inc. ("Cumberland") is accounted for
using the equity method of accounting.
Other assets - Other assets consist primarily of pre-
contract costs associated with residential solid waste management
contracts obtained during 1995 and 1996, which are amortized on a
straight-line basis over five years, the term of the contracts,
and loan costs, which are amortized over the term of the loans.
Amortization expense was $160,000, $197,000, and $280,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
Accumulated amortization was $357,000 and $637,000 at December
31, 1995 and 1996, respectively.
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."
Contracts and revenue recognition - Contracts generally
range from 6 to 18 months in duration, and earnings from
contracting operations 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.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of
significant accounting policies (continued)
Change orders are modifications to an original contract that
effectively change the scope and/or price of the contract. They
may include changes in specifications or design, method or manner
of performance, facilities, equipment, materials, site, or period
for completion of the work. Certain change orders may be priced
under the terms of the contract. Other change orders are
unpriced; that is, the work to be performed is defined; however,
the adjustment to the contract price is negotiated subsequent to
performance. Finally, in some cases, both scope and price of a
change order may be unapproved or in dispute. Accounting for
change orders depends on the underlying circumstances, which may
differ for each change order depending on the customer, the
contract, and the nature of the change. The Company evaluates
each change order according to its characteristics and the
circumstances in which they occur.
Contract revenue and associated profit are recognized for
change orders approved by the customer and the contractor
regarding both scope and price to the extent performance related
to the change order matter has occurred.
Accounting for change orders, where either scope or price
have not been determined, depends on careful consideration of the
underlying characteristics and the circumstances in which they
occur. For all unpriced change orders, recovery is deemed
probable if the terms of the contracts or other applicable legal
principles provide a legal basis for recoverability, the costs
incurred are objective and verifiable, and, finally, all future
events necessary for recovery are more likely than not to occur.
The Company considers the following factors in evaluating whether
recovery is probable: the customer s written approval of the
scope and/or price of the change order, the objectivity,
verifiability, and reasonableness of underlying accounting
documentation for change order costs, and the Company s
experience in negotiating change orders in similar instances.
The following guidelines are followed by the Company in
accounting for change orders whose scope and price, but not both,
have not been approved by the customer.
A. Costs directly attributable to change orders whose scope
and/or price is not determinable are charged directly to
operations in the period in which the costs are incurred
if it is not probable that the costs will be recovered
through a change in the contract price.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of
significant accounting policies (continued)
B. If it is probable that the costs will be recovered
through a change in the contract price, the costs are
treated as costs of contract performance in the period
in which they are incurred and contract revenue is
recognized to the extent of the costs incurred. Costs
incurred in excess of amounts that are probable of
recovery are charged directly to operations when
incurred.
C. In the case of change orders that are approved as to
scope but not price, profit recognition is deferred
until receipt of the priced change order.
Contract claims are amounts incurred by the Company related
to contract changes that are unapproved as to both scope and
price, or are directly disputed or contested as to either, by the
customer. Claims are amounts in excess of the agreed contract
price (or amounts not included in the original contract price)
that are due to customer-caused delays, errors in specification
and designs, contract terminations, or other causes of
unanticipated additional costs. The Company recognizes contract
revenue relating to claims to the extent of its costs incurred
only if it is probable that the claim will result in additional
contract revenue and if the amount of contract revenue and
related costs can be reliably estimated. Those two requirements
are satisfied by the existence of all of the following
conditions:
A. The contract or other applicable legal principles
provides a legal basis for the claim; or a legal opinion
has been obtained, stating that the Company is entitled
to recover amounts under the contract or other
applicable legal principles.
B. Additional costs are caused by circumstances that were
unforeseen at the contract date and are not the result
of deficiencies in the contractor s performance.
C. Costs incurred by the Company that are associated with
the claim are identifiable and reasonable in view of the
work performed.
D. The evidence supporting the claim is objective and
verifiable.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of
significant accounting policies (continued)
Except in rare circumstances, claim preparation and legal
costs are expensed as incurred. Exceptions include instances in
which the contract document provides for their recovery or legal
costs are incurred to pursue approved settlements by court
ruling, binding arbitration, and otherwise. In all instances
where such amounts are recorded, it is probable that the amounts
associated with claim preparation and legal costs will be
recovered. As of December 31, 1995 and 1996, $1,226,000 and
$295,000, respectively, of the claim preparation and legal costs
were deferred.
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.
In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement No. 123 ("SFAS 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. Unaudited pro forma
financial information, assuming that the Company had adopted the
measurement standards of SFAS No. 123, was considered by
management to be immaterial for separate presentation.
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 1994, 1995, and 1996) would be included in the
computation of earnings per share to the extent that they would
be dilutive. The effect of common stock equivalents is not
material.
Accounting standard - In February 1997, FASB issued
"Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("FAS No. 128"), which is effective for periods ending
after December 15, 1997. This statement establishes standards
for computing and presenting earnings per share data. Management
is currently assessing the impact of FAS No. 128 on the Company's
presentation of earnings per share data in future periods.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of
significant accounting policies (continued)
Statements of cash flows -
Years ended December 31,
----------------------------------------
1994 1995 1996
------------ ------------ -------------
Cash paid:
Interest . . . . $ 2,007,000 $ 2,423,000 $ 3,524,000
Income taxes . . $ 499,000 $ 1,453,000 $ 28,000
2. Business acquisitions
On February 21, 1996, Kimmins Recycling Corp. ("KRC"), a
wholly-owned subsidiary of the Company, acquired certain assets
from Automated Resource Recovery, Inc., for $300,000 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 $150,000) 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 $150,000, which was assigned to intangible assets,
including customer lists. The operating results associated with
this business acquisition are included in the Company's
consolidated results of operations from February 22, 1996, to
December 31, 1996.
On May 31, 1996, KRC acquired certain assets from Paper
Stock Dealers, Inc., for $200,000 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 $112,000) 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
$88,000, which was assigned to intangible assets, principally
customer lists. The operating results associated with this
business acquisition are included in the Company s consolidated
results of operations from June 1, 1996, to December 31, 1996.
On March 31, 1995, KRC 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<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Business acquisitions (continued)
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 unaudited pro forma results of operations for the year
ended December 31, 1995, assumes the acquisition of County
Sanitation, Inc., had been consummated as of January 1, 1995.
The pro forma effects of Automated Recovery, Inc., and Paper
Stock Dealers, Inc., were considered by management to be
immaterial for purposes of pro forma presentation. Pro forma
results of operations are not necessarily indicative of the
results that would have occurred if County Sanitation, Inc., had
been acquired at the beginning of the period.
Year ended
December 31,
1995
-------------
Revenue . . . . . . . . . . . . . . . . . . . $112,276,000
Net income (loss) . . . . . . . . . . . . . . $ 1,348,000
Net income (loss) per common share . . . . . . $ .30
3. Related party transactions
During 1994, 1995, and 1996, the Company paid landfill fees
of approximately $28,000, $88,000, and $139,000, 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.
The Company's President and majority stockholder also
controls Cumberland, a property and casualty insurance company
that provides insurance for specialty sureties and performance
and payment bonds for contractors. Through Cumberland, the
Company has obtained performance and payment bonds in connection
with certain of its contracts and projects. The fees that the
Company paid for these services for the years ended December 31,
1994, 1995 and 1996, were approximately $14,000, $5,000, and
$2,900, respectively (see Footnote 7 of the Notes to the
Consolidated Financial Statements).<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Accounts receivable
December 31,
---------------------------
1995 1996
------------- -------------
Contract and trade:
Billed contract receivables:
Completed and uncompleted
contracts . . . . . . . . . $ 12,522,949 $ 12,104,803
Retainage . . . . . . . . . . 3,916,769 3,576,869
Unbilled contract receivables . 805,500 353,708
Trade receivables . . . . . . 4,907,334 4,641,497
------------- -------------
Less allowance for doubtful 22,152,552 20,676,877
accounts . . . . . . . . . . . (397,211) (616,708)
------------- -------------
$ 21,755,341 $ 20,060,169
============= =============
All unbilled receivables relate to work performed or
material shipped by the balance sheet date and are billed as soon
as is administratively feasible.
The Company has a note receivable in an original amount of
$3,638,696 from Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships
(collectively, the "Apartments"). The note receivable originally
accrued interest at prime plus 1.375 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. The Company did not receive any
interest or principal payments during 1996 relating to this note
receivable, and management of the Company has discontinued
recognition of interest income of approximately $551,000 for the
year. Amounts due from the Apartments at December 31, 1995 and
1996, are approximately $3,851,000.
At December 31, 1995 and 1996, $5,301,000 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 in excess of
billings on uncompleted contracts
December 31,
---------------------------
1995 1996
------------- -------------
Expenditures on uncompleted
contracts . . . . . . . . . . $ 67,391,021 $ 76,218,248
Estimated earnings on
uncompleted contracts . . . . . 7,456,516 4,490,748
------------- -------------
74,847,537 80,708,996
Less actual and allowable
billings on uncompleted
contracts . . . . . . . . . . . 58,452,865 65,493,411
------------- -------------
$ 16,394,672 $ 15,215,585
============= =============
Costs and estimated earnings in
excess of billings on
uncompleted contracts . . . . . $ 17,001,286 $ 15,967,872
Billings in excess of costs and
estimated earnings on
uncompleted contracts . . . . . (606,614) (752,287)
------------- -------------
$ 16,394,672 $ 15,215,585
============= =============
During the years ended December 31, 1994, 1995, and 1996,
the Company recognized revenue from contract claims of
approximately $1,198,000, $1,624,000, and $38,000, respectively.
During 1996, the Company agreed to a settlement agreement
relating to a contract claim that resulted in a pre-tax loss of
approximately $448,000 and revised its estimate regarding the
collectibility of several claims that resulted in a pre-tax loss
of approximately $883,000. In addition, subsequent to December
31, 1996, the Company received a judge s decision regarding a
previous jury award, resulting in a pre-tax charge to operations
of approximately $1,572,000. During 1995, the Company settled
two contract claims that resulted in a net gain of approximately
$473,000. <PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Costs and estimated earnings in excess of
billings on uncompleted contracts (continued)
As of December 31, 1995 and 1996, 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 $11,787,000 and $8,950,000, respectively.
During the performance of these contracts, the Company
encountered site conditions that differed from bid
specifications. As a result, the Company incurred additional
labor and equipment costs in performing the contract. 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.
6. Property and equipment
December 31,
---------------------------
1995 1996
------------- -------------
Land . . . . . . . . . . . . . . $ 5,067,437 $ 5,622,769
Buildings and improvements . . . 7,317,544 7,909,361
Construction and recycling
equipment . . . . . . . . . . . 42,340,792 47,143,128
Furniture and fixtures . . . . . 1,468,600 1,508,105
Construction in progress . . . . 615,846 33,463
------------- -------------
56,810,219 62,216,826
Less accumulated depreciation. . (19,217,558) (23,339,305)
------------- -------------
$ 37,592,661 $ 38,877,521
============= =============
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. Depreciation expense was
$3,890,000, $4,038,000, and $5,219,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. Construction in
progress will be depreciated over the estimated useful lives of
respective assets when placed into service.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Term note from affiliate/
Investment in Cumberland Technologies, Inc.
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 Technologies, Inc.
("Cumberland"), a holding company that provides, among other
services, reinsurance for specialty sureties and performance and
payment bonds for contractors. Cumberland entered into a term
note agreement with the Company for the outstanding amount of the
debenture, including accrued interest. Interest accrued on the
term note was $506,755 at December 31, 1995 ($372,066 in 1996
prior to the conversion discussed below).
On November 5, 1996, the Company received 1,723,290 shares,
or 30 percent of the outstanding common stock, of Cumberland
common stock in exchange for the term note from affiliate. The
Cumberland common stock had a fair market value of $3.00 per
share on the date of the exchange, based upon the quoted market
price. This investment is accounted for under the equity method.
At December 31, 1996, the market value of the Cumberland common
stock held by the Company was approximately $5,170,000.
The following is a summary of the financial position at
December 31, 1996, and results of operations of Cumberland for
the period November 5, 1996, through December 31, 1996:
December 31,
1996
-------------
Cash and cash equivalents . . . . . . . . . . $ 669,000
Investments . . . . . . . . . . . . . . . . . 6,110,000
Accounts receivable - trade, net . . . . . . . 906,000
Intangibles . . . . . . . . . . . . . . . . . 1,957,000
Other . . . . . . . . . . . . . . . . . . . . 2,127,000
-------------
Total assets . . . . . . . . . . . . . . . . $ 11,769,000
=============
Policy liabilities and accruals . . . . . . . $ 3,854,000
Long-term debt . . . . . . . . . . . . . . . . 1,533,000
Other . . . . . . . . . . . . . . . . . . . . 569,000
-------------
Total liabilities . . . . . . . . . . . . . $ 5,956,000
Stockholders equity . . . . . . . . . . . . . 5,813,000
-------------
Total liabilities and stockholders equity . $ 11,769,000
=============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Term note from affiliate/
Investment in Cumberland Technologies, Inc. (continued)
Cumberland s operating results included revenue of
$1,727,000 and a net loss of $117,000 during the period in 1996
that the Company carried its equity investment. The equity in
this net loss amounted to $37,000. In addition, approximately
$27,000 of amortization expense was recorded by the Company
related to the investment.
8. Accrued expenses
December 31,
---------------------------
1995 1996
------------- -------------
Deferred revenue . . . . . . . . $ 1,858,148 $ 1,641,857
Accrued insurance . . . . . . . 3,130,582 3,608,350
Accrued disposal costs . . . . . 846,606 744,229
Accrued interest . . . . . . . . 118,332 270,133
Accrued real estate taxes . . . 332,725 441,566
Other . . . . . . . . . . . . . 762,739 1,366,052
------------- -------------
$ 7,049,132 $ 8,072,187
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-term debt
December 31,
---------------------------
1995 1996
------------- -------------
Notes payable, principal and
interest payable in monthly
installments through March 1,
2001, interest at varying rates
up to 13 percent,
collateralized by equipment . . $ 19,615,486 $ 19,548,486
Revolving term bank line of
credit, $12,390,000 ($5,000,000
during 1995), maximum, due July
31, 1999, interest payable
monthly at lender s base rate
plus .5 percent, permanent
quarterly principal reductions
of $250,000 begin on July 1,
1997 . . . . . . . . . . . . . 3,292,607 11,190,002
Bank note payable, varying
principal and interest payments
through August 1, 1996,
interest at prime plus 1.75
percent, collateralized by
equipment . . . . . . . . . . . 1,500,000 -
Mortgage notes, principal and
interest payable in monthly
installments through October 1,
2010, interest at varying rates
up to prime plus 1 3/4 percent,
collateralized by land and
buildings . . . . . . . . . . . 5,886,733 6,976,756
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 -
------------- -------------
31,694,826 37,715,244
Less current portion . . . . . . 7,074,857 7,794,848
------------- -------------
$ 24,619,969 $ 29,920,396
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-term debt (continued)
Annual principal maturities subsequent to December 31, 1996,
are as follows:
1997 . . . . . . . . . . . . . . . . . . . . . $ 7,794,848
1998 . . . . . . . . . . . . . . . . . . . . . 12,615,882
1999 . . . . . . . . . . . . . . . . . . . . . 12,269,747
2000 . . . . . . . . . . . . . . . . . . . . . 2,022,111
2001 . . . . . . . . . . . . . . . . . . . . . 818,412
Thereafter . . . . . . . . . . . . . . . . . . 2,194,244
-------------
$ 37,715,244
=============
The lenders' prime rate under the bank line at both December
31, 1995 and 1996, was 8.5 percent. At December 31, 1996, there
was approximately $1,200,000 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 $2,610,000 at December 31, 1996.
The revolving term bank line of $12,390,000 and the letter
of credit facility of $2,610,000 are secured by a pledge of all
of the stock 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,
and repayment is guaranteed by Cumberland.
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 3.5 to 1.0, consolidated debt service coverage ratio
of at least 1.0 to 1.0, and a fixed charge coverage ratio of not
less than 1.0 to 1.0. In addition, the covenants prohibit the
ability, without lender approval, of the Company to pay
dividends. As of December 31, 1996, 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 1997. The Company has a representation from Mr. Francis M.
Williams should waivers not be obtained and the lender
accelerates the maturities of the Revolving Term Bank Line of
Credit and the Mortgage Note on the corporate office. This
representation 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<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-term debt (continued)
Company is not required to pay any principal payments during 1997
more than the regularly scheduled maturities.
Subsequent to December 31, 1996, Kimmins Contracting Corp.
("KCC"), a wholly-owned subsidiary of the Company, entered into
two separate debt agreements. KCC converted equipment previously
rented under operating leases into an equipment note of
approximately $13 million under terms similar to the Company s
other equipment notes outstanding. In addition, KCC obtained an
$11 million working capital loan, of which $7 million was used to
reduce the Company s outstanding revolving term bank line of
credit during March 1997.
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 .5 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 four years
are as follows:
1997 . . . . . . . . . . . . . . . . . . . . . $ 480,000
1998 . . . . . . . . . . . . . . . . . . . . . 480,000
1999 . . . . . . . . . . . . . . . . . . . . . 480,000
2000 . . . . . . . . . . . . . . . . . . . . . 480,000
-------------
$ 1,920,000
=============
11. Leasing arrangements
The Company rents equipment and machinery as needed, as well
as office space, under operating leases for varying periods not
to exceed one year. Rental expense for the years ended December
31, 1994, 1995, and 1996, was approximately $9,500,000,
$9,079,000, and $11,808,000, 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, 1995 and 1996, the unearned employee
compensation (net of accrued contributions of approximately
$133,000 and $0, respectively) was reflected as a reduction in
stockholders' equity.
Interest and compensation expenses relating to the ESOP are
as follows:
Years ended December 31,
-----------------------------------------
1994 1995 1996
------------- ------------- -------------
Interest . . . . . $ 274,519 $ 354,449 $ 185,728
Compensation . . . $ 615,657 $ 504,852 $ 467,082 <PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Pension and other benefit plans (continued)
The ESOP shares were as follows:
December 31,
---------------------------
1995 1996
------------- -------------
Allocated shares . . . . . . . . 135,000 159,000
Shares released for allocation . - -
Unreleased shares . . . . . . . 120,000 96,000
------------- -------------
Total ESOP shares . . . . . . . 255,000 255,000
============= =============
Market value of unreleased
shares . . . . . . . . . . . . $ 900,500 $ 324,000
============= =============
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.
The Company s 1987 Stock Option Plan has the option to
acquire an aggregate of 288,400 shares of common stock that may
be granted to employees, officers, directors and consultants of
the Company. The Plan authorizes the Board of Directors (the
"Board") to issue incentive stock options ("ISOs"), as defined in
Section 422A(b) of the Internal Revenue Code, and stock options
that do not conform to the requirements of that Code section
("Non-ISOs"). The Board has discretionary authority to determine
the types of stock options to be granted, the persons among those
eligible to whom options will be granted, the number of shares to
be subject to such options, and the terms of the stock option
agreements. Options may be exercised in the manner and at such
times as fixed by the Board, but may not be exercised after the
tenth anniversary of the grant of such options.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Pension and other benefit plans (continued)
The following table summarizes the transactions for the
three years ended December 31, 1996, relating to the Plan:
Number of Per Share
Shares Option Price
------------ ---------------
Outstanding January 1, 1994: . . 206,143 $3.33 - $13.74
Granted . . . . . . . . . . . 182,643 $ 4.50
Exercised . . . . . . . . . . - $ -
Canceled . . . . . . . . . . . (183,643) $6.00 - $13.74
------------
Outstanding December 31, 1994: . 205,143 $3.33 - $ 4.50
Granted . . . . . . . . . . . 7,500 $ 4.50
Exercised . . . . . . . . . . (4,400) $ 4.50
Canceled . . . . . . . . . . . - $ -
------------
Outstanding December 31, 1995: . 208,243 $3.33 - $ 4.50
Granted . . . . . . . . . . . - $ -
Exercised . . . . . . . . . . - $ -
Canceled . . . . . . . . . . . (51,167) $ 3.33 - $4.50
------------
Outstanding December 31, 1996: . 157,076 $ 3.33 - $4.50
============
Exercisable December 31, 1996: . 91,586
============
Pro forma information regarding net income (loss) and
earnings per share is required by Statement 123, which also
requires that the information be determined as if the Company had
accounted for its employee stock options granted subsequent to
December 31, 1993, under the fair value method of that Statement.
The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1994, 1995 and 1996;
risk-free interest rates of 5.5 percent; a dividend yield of
zero; volatility factors of the expected market price of the
Company s common stock based on historical trends; and a
weighted-average expected life of the options of seven years.
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferrable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company s employee stock options have characteristics<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Pension and other benefit plans (continued)
significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management s opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
The pro forma effect of compensation expense related to
outstanding stock options on net income (loss) and earnings per
share were considered by management to be immaterial for purposes
of pro forma presentation.
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, 1994, 1995, and 1996, were not significant.
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.
For the year ended December 31, 1996, the Company incurred
net operating losses ("NOL") for federal tax purposes of
approximately $11,200,000. The NOL consists of $9,350,000
generated by the Company and approximately $1,850,000 generated
by TransCor, which files separately as explained below.
Approximately $4,500,000 of the federal NOL will be carried back
to prior tax years, resulting in approximately $900,000 of
refunds, of which $600,000 is attributable to the Company and the
remaining $300,000 to TransCor. After the carryback,<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Income taxes (continued)
approximately $6,700,000 is available as a NOL carryforward to
future periods. The loss carryforward expires in the year 2011
if not used. The deferred tax assets include a valuation
allowance of approximately $1,700,000 as an offset to the
expected future benefit of the NOL carryforward attributable to
the Company due to the uncertainty of realizing the benefit. For
alternative minimum tax ("AMT") purposes, the NOL carryforward is
approximately $6,200,000. The Company also has alternative
minimum tax credit carryforwards of approximately $836,000
available to reduce future federal regular income taxes. The AMT
credit carryforwards do not expire.
As a result of TransCor's sale of its common stock in March
1993, 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:
December 31,
---------------------------
1995 1996
Deferred tax assets: ------------- -------------
Net operating loss
carryforward . . . . . . . . $ - $ 2,598,970
Valuation allowance . . . . . - (1,707,009)
Allowance for doubtful
accounts . . . . . . . . . . 152,222 236,903
Costs deferred for tax
expensed for books . . . . . 154,553 210,556
Alternate minimum tax credit
carryforwards . . . . . . . . 299,172 836,430
Accrued workers
compensation . . . . . . . . 750,552 907,782
State tax credit
carryforward . . . . . . . . - 32,730
Other . . . . . . . . . . . . 56,721 194,293
------------- -------------
1,413,220 3,310,655
------------- -------------
Deferred tax liabilities:
Excess of tax over book
depreciation . . . . . . . . $ 3,842,918 $ 4,704,561
Uncompleted long-term
contracts . . . . . . . . . . 655,975 323,798
Costs deferred for book
expensed for tax . . . . . . 301,250 337,390
Outside basis difference in
TransCor . . . . . . . . . . 430,478 605,182
------------- -------------
5,230,621 5,970,931
------------- -------------
Net deferred tax liability . . . 3,817,401 2,660,276
Less current net deferred
asset . . . . . . . . . . . . 742,130 1,499,329
Net non-current deferred ------------- -------------
liability . . . . . . . . . $ 4,559,531 $ 4,159,605
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Income taxes (continued)
Factors causing the effective tax rate to differ from the
statutory rate are as follows:
Years ended December 31,
-----------------------------
1994 1995 1996
--------- --------- ---------
Federal statutory rate . . . 35.0% 34.0% (34.0%)
Valuation allowance . . . . 0.0% 0.0% 15.9%
State income taxes . . . . . 7.5% 10.0% (3.5%)
Additional tax on the
Company's shares of
TransCor's earnings . . . . 4.0% 8.0% 2.3%
Other . . . . . . . . . . . 1.5% 0.6% (0.2%)
--------- --------- ---------
Effective tax rate . . . . . 48.0% 52.6% (19.5%)
========= ========= =========
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<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Stockholders' equity (continued)
became eligible for conversion into common stock during the years
ended December 31, 1994, 1995, and 1996.
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.
16. Fourth quarter adjustments (unaudited)
During the fourth quarter of 1996, the Company recorded
certain charges to operations related to contract estimate
changes and contract claim and change order settlements. The
aggregate effect of these charges related to the Company s pre-
tax loss for 1996 amounted to approximately $6,452,000.
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.
17. Fair value of financial instruments
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.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Fair value of financial instruments (continued)
Cash, accounts receivable, note receivable - affiliate, and
accounts payable. The carrying amount reported in the balance
sheet for cash, accounts receivable, and accounts payable
approximates their 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, 1996, are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1996
-------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Liabilities:
Notes payable . $ 31,694,826 $ 31,230,000 $ 37,715,244 $ 37,715,000
Employee Stock
Ownership Plan
Trust deby . . $ 2,400,000 $ 2,400,000 $ 1,920,000 $ 1,920,000
</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, road work, dismantling, asbestos abatement,
excavation, removal and disposal of contaminated soil. The solid
waste management services segment offers collection, transfer,
transportation, resource recovery and disposal of non-hazardous
waste and demolition services.
For the years ended December 31, 1994, 1995 and 1996, the
Company s specialty contracting services segment earned gross
revenue of approximately $10,000, $3,953,000 and $14,884,000,
respectively, on contracts with the Florida Department of
Transportation.<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, 1994, 1995 and 1996, is as follows
(in thousands):
Specialty Solid Waste
Contracting Management
1994 Services Services 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 $ 1,533 $ 210
============= ============= =============
Identifiable assets . . $ 42,448 $ 30,241 $ 72,689
============= ============= =============
Depreciation and
amortization . . . . $ 2,157 $ 1,893 $ 4,050
============= ============= =============
Capital expenditures . $ 3,365 $ 2,439 $ 5,804
============= ============= =============
Specialty Solid Waste
Contracting Management
1995 Services Services 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 . . . . $ 1,855 $ 2,447 $ 4,302
============= ============= =============
Capital expenditures . $ 1,577 $ 13,848 $ 15,425
============= ============= =============
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Business segments and major customers (continued)
Specialty Solid Waste
Contracting Management
1996 Services Services Total
----------------------- ------------- ------------- -------------
Gross revenue . . . . . $ 69,048 $ 44,193 $ 113,241
============= ============= =============
Operating income (loss) $ (8,298) $ 492 $ (7,806)
Interest income . . . . 569 - 569
Interest expense . . . 2,322 1,354 3,676
Minority interest . . . - 138 138
Loss before income tax ------------- ------------- -------------
benefit . . . . . . $ (10,051) $ (724) $ (10,775)
============= ============= =============
Identifiable assets . . $ 47,073 $ 46,010 $ 93,083
============= ============= =============
Depreciation and
amortization . . . . $ 2,039 $ 3,611 $ 5,650
============= ============= =============
Capital Expenditures . $ 4,429 $ 2,539 $ 6,968
============= ============= ============= <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 . . . . . . 55 President, Chief Executive
Norman S. Dominiak . . . . . . 52 Officer, and Director
Joseph M. Williams . . . . . . 40 Vice President
Michael Gold . . . . . . . . . 48 Secretary and Treasurer
George Chandler . . . . . . . . 67 Director
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 was the 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 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<PAGE>
has served as President and has been a Director of Cumberland
Technologies, 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
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:
Ira D. Cohen, 50, has been President of TransCor Waste
Services, Inc., since July 1, 1996. Mr. Cohen is responsible for
the operations, safety, profitability, and compliance with all
federal, state and local regulations for the Company s solid
waste facilities. From 1992 to June 1996, Mr. Cohen served as
President for John Sexton Contractors Company. Mr. Cohen also
served as Chief Operating Officer for Land Reclamation Company
from 1989 to 1992. From 1986 to 1989, Mr. Cohen served as the
Regional Landfill Manager and Director of Landfill Operations of
Chambers Development Company, Inc.<PAGE>
Michael D. O'Brien, 46, 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.
John V. Simon Jr., 41, has been President and General
Manager of Kimmins Contracting Corp., responsible for supervising
utility construction, 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.
Section 16(a) Beneficial Ownership Reporting Compliance.
Pursuant to Section 16(a) of the Securities Exchange Act of 1934
and the rules issued thereunder, the Company s executive officers
and directors and any persons holding more than 10 percent of the
Company s common stock are required to file with the Securities
and Exchange Commission and the New York Stock Exchange reports
of their initial ownership of the Company s common stock and any
changes in ownership of such common stock. Specific due dates
have been established, and the Company is required to disclose in
its Annual Report on Form 10-K and Proxy Statement any failure to
file such reports by these dates. Copies of such reports are
required to be furnished to the Company. Based solely on its
review of the copies of such reports furnished to the Company, or
written representations that no reports were required, the
Company believes that, during 1996, all of its executive officers
(including the Named Executive Officers), directors and persons
owning more than 10 percent of its common stock complied with the
Section 16(a) requirements.<PAGE>
Item 11. Executive Compensation
Summary Compensation Table. The following table provides
certain summary information concerning compensation paid or
acrued by the Company and its subsidiaries to the Chief Executive
Officer and all other executive officers whose salary and bonus
exceeded $100,000 for the year ended December 31, 1996 (the
"Named Executives"):
<TABLE> SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
-------------------------------
Annual Compensation Awards Payouts
-------------------------- ---------------------- --------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation Award(s) SARs Payout sation
Principal Position Year ($) ($) ($) ($) (#) (s) ($)
------------------- ---- -------- -------- ------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Francis M. Williams 1996 $318,482 $0 $0 $0 0 $0 $995 (*)
Chairman of the 1995 $271,137 $0 $0 $0 0 $0 $989 (*)
Board, President 1994 $171,139 $0 $0 $0 0 $0 $977 (*)
and Chief
Executive Officer
John V. Simon, Jr. 1996 $95,000 $25,000 $0 $0 0 $0 $1,655 (*)
President of 1995 $95,000 $81,489 $0 $0 0 $0 $1,647 (*)
Kimmins 1994 $95,000 $15,759 $0 $0 0 $0 $1,635 (*)
Contracting Corp.
(*) Represents the Company's contribution to the employee's account of the Company's 401(k)
Plan and premiums paid by the Company for term life insurance and long-term disability.
These plans, subject to the terms and conditions of each plan, are available to all
employees.
</TABLE>
Stock Option/SAR Grants in the Last Fiscal Year. No stock
options or stock appreciation rights were granted to the Named
Executives during the year ended December 31, 1996.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year- End Option/SAR Values. The following table
summarizes the net value realized on the exercise of options in
1996 and the value of outstanding options as of December 31,
1996, for the Named Executives.<PAGE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION> Number of
Securites Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value Year-End (#) Year-End ($)(1)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
--------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
John V. Simon, Jr. 0 $0 13,533/8,134 $135/$0
(1) Value is calculated using the Company's closing stock price on December 31, 1996, of
$3.375 per share less the exercise price for such shares.
</TABLE>
No stock options or stock appreciate rights were exercised by
Francis M. Williams during the year ended December 31, 1996, and Mr.
Williams does not have any outstanding stock options or SARs at
December 31, 1996.
<TABLE>
TEN-YEAR OPTION/SAR REPRICINGS
<CAPTION> Length of
Number of Market Original
Securities Price Exercise Option Term
Underlining of Stock at Price at Remaining
Options/SARs Time of Time of New at Date of
Repriced or Repricing or Repricing or Exercise Repricing
Amended Amendment Amendment Price or
Name Date (#) ($) ($) ($) 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
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, 1996, 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.<PAGE>
Compensation of Directors. During the year ended December
31, 1996, 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 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, 1996, Joseph M. Williams held 13,333 options to purchase the
Company's stock at between $3.33 and $4.50 per share of which
9,200 shares are exercisable. At December 31, 1996, 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 13,533 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.<PAGE>
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, 1996,
interest expense and compensation expense relating to the ESOP
were $186,000 and $480,000, respectively. As of December 31,
1996, the unpaid ESOP debt 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 April 1, 1997, 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>
Name and Address of Percent Total
Beneficial Owner of Voting
(1) Title of Class Number of Shares Class Power
---------------------- -------------------- ------------------- ------- ----------
<S> <C> <C> <C> <C> <C>
Francis M. Williams Common Stock 1,857,065 (2) 41.8% 61.6%
Class B Common Stock 2,291,569 100.0%
Joseph M. Williams Common Stock 362,775 (3) 8.2% 5.4%
John V. Simon, Jr. Common Stock 20,759 (4) * *
Michael Gold Common Stock 14,923 (5) * *
George Chandler Common Stock 7,914 (6) * *
All directors and Common Stock 2,263,436 (2)(3) 50.9%
and executive officers (5)(7)
as a group 67.3%
(five persons) Class B Common Stock 2,291,569 100.0%
</TABLE>
(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; 4,464 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., which is owned 100 percent by Mr.
Williams.<PAGE>
(3) Includes 10,000 shares owned by Mr. Joseph M. Williams;
9,200 shares issuable upon exercise of currently exercisable
stock options; 2,355 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 1,500 shares owned by Mr. Simon; 13,533 shares
issuable upon exercise of currently exercisable stock
options; and 5,726 shares held by the Company s 401(k) and
ESOP plans of which Mr. Simon is fully vested.
(5) 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 5,100 shares
issuable upon exercise of currently exercisable stock
options.
(6) Includes 3,114 shares owned by Mr. Chandler; and 4,800
shares issuable upon exercise of currently exercisable stock
options.
(7) Includes 19,100 shares issuable upon exercise of currently
exercisable stock options; 6,250 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.
Item 13. Certain Relationships and Related Transactions
During 1994, 1995 and 1996, the Company paid landfill fees
of approximately $28,000, $88,000, and $139,000, 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.
The Company has a note receivable in an original amount of
$3,638,696 from Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships
(collectively, the "Apartments"), of which Mr. Francis M.
Williams is the sole shareholder of the corporate general partner
and the sole limited partner. The note receivable originally
accrued interest at prime plus 1.375 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. The Company did not receive any
interest or principal payments during 1996 relating to this note
receivable, and management of the Company discontinued
recognition of interest income of approximately $551,000 for the<PAGE>
year. Amounts due from the Apartments at December 31, 1995 and
1996, are approximately $3,851,000.
At December 31, 1995 and 1996, $5,301,000 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.
On November 5, 1996, the Company received 1,723,290 shares
of Cumberland common stock in exchange for the term note from
affiliate. The Cumberland common stock had a fair market value
of $3.00 per share on the date of the exchange, based upon the
quoted market price. This investment is accounted for under the
equity method, and the Company s interest in Cumberland
represents an ownership share of approximately 30 percent. At
December 31, 1996, the market value of the Cumberland common
stock held by the Company was approximately $5,170,000.<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, 1995 and 1996
- Consolidated statements of operations for each
of the three years in the period ended December 31, 1996
- Consolidated statements of stockholders' equity for each
of the three years in the period ended December 31, 1996
- Consolidated statements of cash flows for each
of the three years in the period ended December 31, 1996
- 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 Registrant, as amended.
3 (b) * -- By-laws of Registrant
10.1 ** -- Stock Option Plan
21 -- Subsidiaries of the Registrant
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: April 15, 1997 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: April 15, 1997 /s/ Francis M. Williams
----------------------------------
Francis M. Williams
President and Director
(Chief Executive Officer)
Date: April 15, 1997 /s/ Jospeh M. Williams
----------------------------------
Joseph M. Williams
Secretary/Treasurer
Date: April 15, 1997 /s/ Norman S. Dominiak
----------------------------------
Norman S. Dominiak
Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
Date: April 15, 1997 /s/ Michael Gold
----------------------------------
Michael Gold, Director
Date: April 15, 1997 /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. . . . . . . . Florida
(f/k/a Kimmins Thermal Corp.)
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 April 14, 1997, 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, 1996.
/s/ Ernst & Young LLP
Tampa, Florida
April 18, 1997<PAGE>
<TABLE>
KIMMINS CORP.
Schedule II - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
<caption)
Balance Additions Deductions
at Charged to from Balance at
Beginning Costs and Allowances End of
Description of Period Expenses (a) Period
------------------------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
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
Year ended
December 31, 1996 . . . $397,211 $430,381 $(210,884) $616,708
</TABLE>
(a) Balance represents the write-off of uncollectible accounts.
S-1<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $968,638
<SECURITIES> $0
<RECEIVABLES> $20,676,877
<ALLOWANCES> $(616,708)
<INVENTORY> $0
<CURRENT-ASSETS> $41,856,422
<PP&E> $62,216,826
<DEPRECIATION> $(23,339,305)
<TOTAL-ASSETS> $93,082,907
<CURRENT-LIABILITIES> $36,268,929
<BONDS> $0
$0
0
<COMMON> 4,447
<OTHER-SE> $17,848,849
<TOTAL-LIABILITY-AND-EQUITY> $93,082,907
<SALES> $113,240,908
<TOTAL-REVENUES> $113,240,908
<CGS> $105,532,742
<TOTAL-COSTS> $105,532,742
<OTHER-EXPENSES> $15,376,594
<LOSS-PROVISION> $15,376,594
<INTEREST-EXPENSE> $3,107,000
<INCOME-PRETAX> $(10,775,428)
<INCOME-TAX> $(2,091,989)
<INCOME-CONTINUING> $(8,683,439)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(8,683,439)
<EPS-PRIMARY> $(1.96)
<EPS-DILUTED> $(1.96)
</TABLE>
