<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------
FORM 10-Q
[Mark One]
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
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.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2763096
------------------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1501 Second Avenue, East, Tampa, Florida 33605
------------------------------------------------
(Address of registrant's principal executive offices,
including zip code)
(813) 248-3878
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(Registrant's telephone number, including area code)
Not applicable
------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
<PAGE>
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by a check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes [
] No [ ]
Applicable Only to Corporate Issuers
The number of shares of Common Stock outstanding on May 14, 1997, was
4,447,397 shares.
The number of shares of Class B Common Stock outstanding on May 14,
1997, was 2,291,569 shares.<PAGE>
KIMMINS CORP.
FORM 10-Q
INDEX
Page
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated balance sheets at December
31, 1996 and March 31, 1997
(unaudited) . . . . . . . . . . . . . . . . . 1 - 2
Consolidated statements of operations for
the three months ended March 31, 1996 and
1997 (unaudited) . . . . . . . . . . . . . . . . . 3
Consolidated statements of cash flows for the
three months ended March 31, 1996 and 1997
(unaudited) . . . . . . . . . . . . . . . . . . . 4
Notes to consolidated financial statements . . 5 - 9
Item 2. Management's discussion and analysis of
financial condition and results of
operations . . . . . . . . . . . . . . . . 10 - 13
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . . . 13
Item 2. Changes in securities . . . . . . . . . . . . . . 13
Item 3. Defaults upon senior securities . . . . . . . . . 13
Item 4. Submission of matters to a vote of
security holders . . . . . . . . . . . . . . . . 13
Item 5. Other information . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and reports on Form 8-K . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . 14<PAGE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, March 31,
1996 1997
------------- -------------
(unaudited)
Current assets:
Cash . . . . . . . . . . . . . . . . .$ 968,638 $ 591,788
Accounts receivable:
Contract and trade . . . . . . . . . . 20,060,169 23,719,197
Affiliates . . . . . . . . . . . . . . 1,648,529 1,546,659
Costs and estimated earnings in
excess of billings on uncompleted
contracts . . . . . . . . . . . . . . 15,967,872 18,436,279
Income tax refund receivable . . . . . 1,199,775 1,096,607
Deferred income tax . . . . . . . . . . 1,499,329 1,499,329
Other current assets . . . . . . . . . 512,110 389,661
------------- -------------
Total current assets . . . . . . . . . 41,856,422 47,279,520
------------- -------------
Property and equipment, net . . . . . . 38,877,521 52,944,731
Intangible assets . . . . . . . . . . . 898,853 864,677
Accounts receivable - affiliates . . . 1,450,716 1,450,716
Note receivable - affiliate . . . . . . 3,850,727 3,850,727
Investment in Cumberland
Technologies, Inc. . . . . . . . . . . 5,105,632 4,982,714
Other assets . . . . . . . . . . . . . 1,043,036 1,583,709
------------- -------------
$ 93,082,907 $ 112,956,794
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, March 31,
1996 1997
------------- -------------
(unaudited)
Current liabilities:
Accounts payable - trade . . . . . . .$ 19,169,607 $ 19,819,901
Accrued expenses . . . . . . . . . . . 8,072,187 9,183,492
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . . . 752,287 1,119,682
Current portion of long-term debt . . . 7,794,848 10,121,295
Current portion of Employee Stock
Ownership Plan Trust debt . . . . . . 480,000 480,000
------------- -------------
Total current liabilities . . . . . . 36,268,929 40,724,370
------------- -------------
Long-term debt . . . . . . . . . . . . . 29,920,396 44,591,268
Employee Stock Ownership Plan
Trust debt . . . . . . . . . . . . . . 1,440,000 1,320,000
Deferred income taxes . . . . . . . . . . 4,159,605 4,159,605
Minority interest in subsidiary . . . . . 3,440,681 3,446,006
Commitments and contingencies . . . . . . - -
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(continued)
December 31, March 31,
1996 1997
------------- -------------
(unaudited)
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 . . . . . . . . . . . 1,228,167 2,047,518
Unearned employee compensation from
Employee Stock Ownership Plan Trust . (1,800,000) (1,680,000)
------------- -------------
18,165,079 19,104,430
Less treasury stock, at cost (73,828
and 95,428 shares at December 31,
1996, and March 31, 1997,
respectively) . . . . . . . . . . . . (311,783) (388,885)
------------- -------------
Total stockholders' equity . . . . . 17,853,296 18,715,545
------------- -------------
$ 93,082,907 $ 112,956,794
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
---------------------------
1996 1997
------------- -------------
(unaudited) (unaudited)
Revenue:
Gross revenue . . . . . . . . . . . . .$ 24,710,145 $ 33,850,378
Outside services, at cost . . . . . . . (2,299,003) (4,868,404)
------------- -------------
Net revenue . . . . . . . . . . . . . . 22,411,142 28,981,974
Costs and expenses:
Cost of revenue earned . . . . . . . . 20,614,734 23,937,943
Selling, general and administrative
expenses . . . . . . . . . . . . . . . 3,612,830 3,296,613
------------- -------------
Operating income (loss) . . . . . . . . . (1,816,422) 1,747,418
Minority interest in net loss (income)
of subsidiary . . . . . . . . . . . . . 46,890 (5,325)
Interest expense, net . . . . . . . . . . (495,258) (829,396)
------------- -------------
Income (loss) before provision for
income taxes (benefit) . . . . . . . . (2,264,790) 912,697
Provision for income taxes
(benefit) . . . . . . . . . . . . . . . (998,628) 93,346
------------- -------------
Net income (loss) . . . . . . . . . . . .$ (1,266,162)$ 819,351
============= =============
Per Share Data:
---------------
Income (loss) per share . . . . . . . . .$ (.28)$ .19
============= =============
Weighted average number of shares
outstanding used in
computation . . . . . . . . . . . . . . 4,447,397 4,358,768
============= =============
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
---------------------------
1996 1997
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . .$ (1,266,162)$ 819,351
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization . . . . 1,324,133 1,899,025
Minority interest in net income
(loss) of subsidiary . . . . . . . . (46,890) 5,325
(Gain) loss on disposal of
property and equipment . . . . . . .
Accrued interest on term note . . . . 27,726 (722)
Equity in losses of investment . . . (120,947) -
Unearned employee compensation from - 81,710
Employee Stock Ownership Plan
Trust . . . . . . . . . . . . . . . 107,832 120,000
Changes in operating assets and
liabilities:
Accounts receivable . . . . . . . . (1,444,929) (3,557,158)
Costs and estimated earnings in
excess of billings on uncompleted
contracts . . . . . . . . . . . . 612,709 (2,468,407)
Income tax refund receivable . . . (882,063) 103,168
Other assets . . . . . . . . . . . (529,187) (468,741)
Accounts payable . . . . . . . . . (3,532,571) 650,294
Accrued expenses . . . . . . . . . 243,415 1,111,305
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . (229,745) 367,395
------------- -------------
Total adjustments . . . . . . . . (4,470,517) (2,156,806)
------------- -------------
Net cash used by operating activities . . (5,736,679) (1,337,455)
------------- -------------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . (2,326,885) (15,860,062)
Proceeds from sale of property and
equipment . . . . . . . . . . . . . . 77,096 20,500
------------- -------------
Net cash used by investing activities . . (2,249,789) (15,839,562)
------------- -------------
See accompanying notes.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Three months ended
March 31,
---------------------------
1996 1997
------------- -------------
(unaudited) (unaudited)
Cash flows from financing activities:
Proceeds from long-term debt . . . . .$ 8,672,992 $ 26,042,454
Repayments of long-term debt . . . . . (1,468,251) (9,045,135)
Repayments of Employee Stock Ownership
Plan Trust debt . . . . . . . . . . . (240,750) (120,000)
Purchase of treasury stock . . . . . . - (77,102)
------------- -------------
Net cash provided by financing
activities . . . . . . . . . . . . . . 6,963,991 16,800,217
------------- -------------
Net decrease in cash . . . . . . . . . . (1,022,477) (376,850)
Cash, beginning of period . . . . . . . . 1,160,463 968,638
------------- -------------
Cash, end of period . . . . . . . . . . .$ 137,986 $ 591,788
============= =============
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") operate 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.
Basis of presentation. The interim condensed consolidated
financial statements of the Company are unaudited and should be read
in conjunction with the audited financial statements and notes
thereto as of and for the years ended December 31, 1995 and 1996.
In the opinion of the Company, all adjustments necessary for a
fair presentation of such financial statements have been included.
Such adjustments consist only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
The interim financial statements and notes thereto are presented as
permitted by the Securities and Exchange Commission and do not
contain information included in the Company s annual financial
statements and notes thereto.
Certain amounts in the 1996 consolidated financial statements have
been reclassified to conform to the 1997 presentation.
Principles of consolidation. The consolidated financial statements
include the accounts of the Company 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.
Intangible assets. Intangible assets consist principally of the
excess of costs over fair market value of the net assets of the
acquired solid waste management business, which will be amortized on
a straight-line basis over twenty years, and customer contracts,
which will be amortized on a straight-line basis over five years.
Amortization expense was approximately $25,000 and $34,000 for the
three months ended March 31, 1996 and 1997, respectively.
Accumulated amortization was approximately $191,000 and $225,000 at
December 31, 1996 and March 31, 1997, respectively.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting
policies (continued)
Other assets - Other assets consist primarily of pre-contract
costs associated with residential solid waste management contracts
obtained during 1995 and 1996, which are being 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 $66,000 and $51,000 for the three months
ended March 31, 1996 and 1997, respectively. Accumulated
amortization was $637,000 and $688,000 at December 31, 1996, and
March 31, 1997, respectively.
Investments. The Company s 30 percent investment in Cumberland
Technologies, Inc. ("Cumberland") is accounted for using the equity
method of accounting.
2. Costs and estimated earnings on uncompleted contracts
December 31, March 31,
1996 1997
------------- -------------
(unaudited)
Expenditures on uncompleted
contracts . . . . . . . . . . . . . .$ 76,218,248 $ 80,165,824
Estimated earnings on uncompleted
contracts . . . . . . . . . . . . . . 4,490,748 11,226,504
------------- -------------
Less actual and allowable billings 80,708,996 91,392,328
On uncompleted contracts . . . . . . 65,493,411 74,075,731
------------- -------------
$ 15,215,585 $ 17,316,597
============= =============
Costs and estimated earnings in
excess of billings on uncompleted
contracts . . . . . . . . . . . . . .$ 15,967,872 $ 18,436,279
Billings in excess of costs and
estimated earnings on uncompleted
contracts . . . . . . . . . . . . . . (752,287) (1,119,682)
------------- -------------
$ 15,215,585 $ 17,316,597
============= =============
As of December 31, 1996, and March 31, 1997, 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 $8,950,000 and $8,607,000, respectively. During the
performance of these contracts, the Company encountered site
conditions that differed from bid specifications. As a result, the
Company incurred additional labor and equipment costs in performing<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Costs and estimated earnings on uncompleted contracts (continued)
the contract. By their nature, recovery of these amounts is often
subject to negotiation with the customer and, in certain cases,
resolution through litigation. As a result, the recovery of these
amounts may extend beyond one year.
3. Property and equipment, net
December 31, March 31,
1996 1997
------------- -------------
(unaudited)
Land . . . . . . . . . . . . . . . . .$ 5,622,769 $ 5,748,795
Buildings and improvements . . . . . . 7,909,361 7,920,946
Construction and recycling
equipment . . . . . . . . . . . . . . 47,143,128 62,750,146
Furniture and fixtures . . . . . . . . 1,508,105 1,544,613
Construction in progress . . . . . . . 33,463 35,630
------------- -------------
62,216,826 78,000,130
Less accumulated depreciation . . . . (23,339,305) (25,055,399)
------------- -------------
$ 38,877,521 $ 52,944,731
============= =============
Property and equipment are recorded at cost. Depreciation is
provided using the straight-line method over estimated useful lives
ranging from three to thirty years. Depreciation expense was
$1,234,000 and $1,773,000 for the three months ended March 31, 1996
and 1997, respectively.
4. Investment in Cumberland Technologies, Inc.
On November 5, 1996, the Company received 1,723,290 shares, or 30
percent of the outstanding common stock of Cumberland 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 May 14, 1997, the market value of the
Cumberland common stock held by the Company was approximately
$4,739,000.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investment in Cumberland Technologies, Inc. (Continued)
The following is a summary of the financial position at March 31,
1997, and results of operations of Cumberland for the three-month
period ending March 31, 1997:
March 31,
1997
-------------
(unaudited)
Cash and cash equivalents . . . . . . . . . . . . $ 1,513,000
Investments . . . . . . . . . . . . . . . . . . . 5,226,000
Accounts receivable - trade, net . . . . . . . . . 1,548,000
Intangibles . . . . . . . . . . . . . . . . . . . 2,628,000
Other . . . . . . . . . . . . . . . . . . . . . . 1,157,000
-------------
Total assets . . . . . . . . . . . . . . . . . . $ 12,072,000
=============
Policy liabilities and accruals . . . . . . . . . $ 4,491,000
Long-term debt . . . . . . . . . . . . . . . . . . 1,502,000
Other . . . . . . . . . . . . . . . . . . . . . . 618,000
-------------
Total liabilities . . . . . . . . . . . . . . . . $ 6,611,000
Stockholders equity . . . . . . . . . . . . . . . 5,461,000
-------------
Total liabilities and stockholders equity . . . $ 12,072,000
=============
Cumberland s operating results included revenue of $1,494,000 and
a net loss of $289,000 during the three-month period ending March 31,
1997. The Company s equity in this net loss amounted to
approximately $82,000. In addition, approximately $41,000 of
amortization expense was recorded by the Company related to the
investment during the three months ended March 31, 1997. Accumulated
amortization was approximately $27,000 and $69,000 at December 31,
1996, and March 31, 1997, respectively.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-term debt
December 31, March 31,
1996 1997
------------- -------------
(unaudited)
Notes payable, principal and interest
payable in monthly installments
through March 1, 2003, interest at
varying rates up to 10 percent,
collateralized by equipment . . . . .$ 19,548,486 $ 34,233,254
Revolving term bank line of credit,
$6,200,000 ($12,390,000 during 1996)
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 . . . . . . . . 11,190,002 3,607,202
Revolving term line of credit,
$11,000,000 (none during 1996)
maximum, due February 26, 1999,
interest payable monthly at lender s
base rate of LIBOR plus 2.5 percent,
collateralized by equipment . . . . . - 10,000,000
Mortgage notes, principal and interest
payable in monthly installments
through October 1, 2010, interest at
varying rates up to prime plus 1.75
percent, collateralized by land and
buildings . . . . . . . . . . . . . . 6,976,756 6,872,107
------------- -------------
37,715,244 54,712,563
Less current portion . . . . . . . . . 7,794,848 10,121,295
------------- -------------
$ 29,920,396 $ 44,591,268
============= =============
At March 31, 1997, 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 $1,800,000 at March 31, 1997.
The revolving term bank line of $3,607,000 and the letter of
credit facility of $1,800,000 are secured by a pledge of all of the
stock of the Company's subsidiaries, the Investment in Cumberland,
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.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-term debt (continued)
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 March 31, 1997, 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 Company is not required to
pay any principal payments during 1997 more than the regularly
scheduled maturities.
During March 1997, 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 $13,000,000
under terms similar to the Company s other equipment notes
outstanding. In addition, KCC obtained an $11,000,000 working
capital loan, of which $7,000,000 was used to reduce the Company s
outstanding revolving term bank line of credit during March 1997.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Net revenue for the three months ended March 31, 1997, increased
by 29 percent to $28,982,000 from $22,411,000 for the three months
ended March 31, 1996. The increase is due primarily to the growth of
the Company's utility contracting services ($6,323,000 increase in
net revenue) and continued growth of the Company's solid waste
management segment as it expands its operations in the Florida market
($914,000 increase in net revenue). This increase offsets certain
decreases in the Company's remediation services ($386,000 decrease in
net revenue) and abatement services ($317,000 decrease in net
revenue).
Outside services, which largely represent subcontractor costs,
increased, as a percentage of net revenue, to 17 percent for the
first quarter of 1997 from 10 percent for the same period in 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 greater extent during 1997 than 1996 due to the
specific contracts in progress and the associated work requirements.
Cost of revenue earned, as a percentage of net revenue, for the
first quarter of 1997 decreased to 83 percent from 92 percent for the
same period in 1996. As a result, the gross profit for the first
quarter of 1997 was $5,044,000 (17 percent of net revenue) compared
to $1,796,000 (8 percent of net revenue) for the first quarter of
1996. The increase in the dollar amount and percentage of gross
margin is primarily associated with the growth of the Company s
utility contracting services ($3,216,000 increase in gross profit)
and solid waste management services ($696,000 increase in gross
profit). This increase offsets certain decreases in the Company s
remediation services ($497,000 decrease in gross profit), industrial
demolition services ($120,000 decrease in gross profit), and asbestos
abatement services ($47,000 decrease in gross profit).
During the three months ended March 31, 1997, selling, general and
administrative expenses decreased to $3,297,000 (11 percent of net
revenue) from $3,613,000 (16 percent of net revenue) for the three
months ended March 31, 1996. The percentage decrease is primarily a
result of the increase in revenue, which has provided a larger base
for which to allocate these costs. The dollar decrease is also
attributable to the Company s de-emphasis of operations in the
northeast region, which resulted in a savings of approximately
$428,000 between periods.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
(Continued)
Minority interest in net income of subsidiary was $5,000 for the
three months ended March 31, 1997, compared to minority interest in
net loss of subsidiary of $47,000 during the same period in 1996.
The minority interest in net income (loss) of the subsidiary reflects
approximately 26 percent of TransCor's earnings as a result of the
March 25, 1993, initial public offering of TransCor's common stock.
The increase in TransCor's earnings between years is attributable to
the higher profit margins earned on certain solid waste management
services.
Interest expense, net of interest income, increased to $829,000
during the three months ended March 31, 1997, compared to $495,000
for the three months ended March 31, 1996. During 1997 the Company
discontinued recognition of interest income of approximately $151,000
on certain notes receivable from affiliates. The remainder of the
increase is attributable to increases in average borrowings during
the first quarter of 1997.
As a result of the foregoing, income before provision for income
taxes for the three months ended March 31, 1997, was $913,000 (3
percent of net revenue) compared to a loss before provision for
income taxes of $2,265,000 (negative 10 percent of net revenue)
during the same period in 1996.
The Company's effective tax rate was 10.2 percent for the three
months ended March 31, 1997, compared to a rate of 44.1 percent for
1996 tax benefits. The decrease in the effective tax rate was
primarily due to the net operating loss generated by the Company
during 1996 and the resulting tax benefits from credit and loss
carryforwards. 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 was recognized during 1996. Included in the tax benefit,
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 net income for
the three months ended March 31, 1997, was $819,000 (3 percent of net
revenue) as compared with net loss of $1,266,000 (negative 6 percent
of net revenue) for the same period during 1996.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities was $5,737,000 and $1,377,000
during the three months ended March 31, 1996 and 1997, respectively.
Cash provided by the Company s solid waste management services
segment approximated $549,000 and $628,000 for the three months ended
March 31, 1996 and 1997, respectively. Cash used by the Company s
specialty contracting segment approximated $6,286,000 and $1,965,000,
respectively. Cash was provided by the solid waste management
services operations during the first quarter of 1997 at expected
levels. Cash was used in the specialty contracting operations during
the first quarter of 1997 due to the increase in accounts receivable
and costs and estimated earnings in excess of billings on uncompleted
contracts associated with the increase in revenue. Cash was used in
the specialty contracting operations during the first quarter of 1996
due to two significant contract losses, plus a significant reduction
of accounts payable.
The Company had capital expenditures during the three months ended
March 31, 1996 and 1997 of $2,327,000 and $15,860,000, respectively.
The 1997 capital expenditures were primarily related to the
conversion of approximately $13,000,000 of construction equipment
utilized in the Company s specialty contracting operations, which was
previously rented under operating leases. Future capital
expenditures will be financed by available cash resources, cash flow
from operations, and available credit resources, as needed.
During 1997 the Company generated cash from financing activities
of $16,800,000, which was net of purchases on the open market of
21,599 shares of the Company s common stock for $77,000. Borrowings
in 1997 related primarily to the conversion of approximately
$13,000,000 of equipment previously rented under operating leases
into a term note. This equipment note requires periodic payments
through February 2004. In addition, 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, of which $7,000,000
was used to reduce the Company s outstanding revolving term bank line
of credit during March 1997. Borrowings on this facility are due in
February 1999.
The Company s ratio of debt to equity was 2.22:1.00 and 3.02:1.00
at December 31, 1996, and March 31, 1997, respectively. The increase
in debt is primarily due to the conversion of approximately
$13,000,000 of equipment previously rented under operating leases
into an equipment note and the use of a $11,000,000 credit facility
as described above.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
(continued)
During the three months ended March 31, 1996 and 1997, the
Company's average contract and trade receivables less retainage were
outstanding for 76 and 53 days, respectively. Management believes
that the number of days outstanding for its current receivables
approximates industry norms. A portion of the Company's contracting
operations is subcontracted, and any delay in collections of
receivables relating to primary contracts will usually result in the
ability of the Company to delay payment of offsetting subcontract
payables.
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 bears interest
at prime plus 2 percent, with principal and interest payable in
monthly installments through December 31, 1998, and is guaranteed by
Mr. Williams. The Company did not receive any interest or principal
payments during 1996 or 1997 relating to this note receivable, and
management of the Company has discontinued recognition of interest
income. Amounts due from the Apartments at December 31, 1996, and
March 31, 1997, are approximately $3,851,000.
At December 31, 1996, and March 31, 1997, $5,301,000, of the
combined accounts receivable - affiliates and note receivable -
affiliates are due from affiliates of the Company's President. The
affiliated receivables relate to contract services performed and are
guaranteed by Mr. Williams.
The Company's current bonding coverage for non-environmental
projects is $30 million for an individual project ($100 million
aggregate). The Company has been able to obtain bonding coverage in
amounts up to $8.5 million for environmental projects. However, the
Company has experienced difficulties in obtaining bonding coverage
for environmental projects in excess of this amount. Although each
project has its own distinct and separate bond requirements, the
Company may be unable to competitively bid on environmental projects
that require a bond in excess of $8.5 million.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
(continued)
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. 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>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
None
Item 6. Exhibits and reports on Form 8-K
(a) The following document is filed as an exhibit to
this Quarterly Report on Form 10-Q:
27 - Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
KIMMINS CORP.
Date: May 14, 1997 By: /s/Francis M. Williams
-------------------------- ----------------------------
Francis M. Williams
President and Chief
Executive Officer
Date: May 14, 1997 By: /s/Norman S. Dominiak
-------------------------- ----------------------------
Norman S. Dominiak
Vice President and Chief
Financial Officer
(Principle Accounting and
Financial Officer)
<PAGE>
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 591,788
<SECURITIES> 0
<RECEIVABLES> 24,266,586
<ALLOWANCES> (547,389)
<INVENTORY> 0
<CURRENT-ASSETS> 47,279,520
<PP&E> 78,000,130
<DEPRECIATION> (25,055,399)
<TOTAL-ASSETS> 112,956,794
<CURRENT-LIABILITIES> 40,724,370
<BONDS> 0
0
0
<COMMON> 4,447
<OTHER-SE> 18,711,098
<TOTAL-LIABILITY-AND-EQUITY> 112,956,794
<SALES> 33,850,378
<TOTAL-REVENUES> 33,850,378
<CGS> 28,806,347
<TOTAL-COSTS> 28,806,347
<OTHER-EXPENSES> 3,301,938
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<INTEREST-EXPENSE> 829,396
<INCOME-PRETAX> 912,697
<INCOME-TAX> 93,346
<INCOME-CONTINUING> 819,351
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<EXTRAORDINARY> 0
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