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 June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to _________.
Commission File No. 1-10489
--------------------------------------------
KIMMINS CORP.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3598343
(State of incorporation) (I.R.S. Employer Identification Number)
1501 SECOND AVENUE, EAST, TAMPA, FLORIDA 33605
(Address of registrant's principal executive offices, including zip code)
--------------------------------------------
(Registrant's telephone number, including area code): (813) 248-3878
Securities registered pursuant
to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ X ] No [ ]
Applicable Only To Corporate Issuers
As of August 1, 2000, there were outstanding 4,872,135 shares of common stock
and 1,666,569 shares of Class B common stock. The aggregate market value of the
voting stock held by non-affiliates of the registrant as of August 1, 2000 was
$974,427.
<PAGE>
KIMMINS CORP.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated balance sheets at December 31, 1999 and June
30, 2000 (unaudited) 3
Consolidated statements of operations for the three months ended
June 30, 1999 and 2000 (unaudited) 5
Consolidated statements of comprehensive income for the three
months ended June 30, 1999 and 2000 (unaudited) 6
Consolidated statements of operations for the six months ended
June 30, 1999 and 2000 (unaudited) 7
Consolidated statements of comprehensive income for the six
months ended June 30, 1999 and 2000 (unaudited) 8
Consolidated statements of cash flows for the six months ended
June 30, 1999 and 2000 (unaudited) 9
Notes to consolidated financial statements 10
Item 2. Management's discussion and analysis of financial
condition and results of operations 20
Item 3. Quantitative and qualitative disclosures about market risk 24
PART II. OTHER INFORMATION
Item 1. Legal proceedings 24
Item 2. Changes in securities 24
Item 3. Defaults upon senior securities 24
Item 4. Submission of matters to a vote of security holders 24
Item 5. Other information 24
Signatures 25
2
<PAGE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1999 June 30, 2000
----------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents, including restricted cash
of $1,154,399 and $1,176,226 in 1999 and 2000,
respectively $ 194,202 $ 346,476
Marketable securities 11,520,739 9,703,582
Accounts receivable, net
Contract and trade 12,680,628 12,577,955
Other receivables including affiliates 63,702 62,553
Costs and estimated earnings in excess of billings on
uncompleted contracts 148,782 652,375
Deferred income tax, net 1,814,725 1,680,984
Property and equipment held for sale 1,083,182 1,033,182
Other current assets 148,906 610,555
--------------- ---------------
Total current assets $ 27,654,866 $ 26,667,662
=============== ===============
Property and equipment, net 37,247,209 30,573,299
Non-current portion of costs and estimated earnings in
excess of billings on uncompleted contracts 8,088,928 7,078,843
Non-current portion of accounts receivable, net
contract and trade 794,495 794,495
Deferred income tax, non-current 2,624,170 1,133,199
Accounts receivable - affiliate 900,000 900,000
Note receivable - affiliate 1,110,764 1,000,000
Investment in Apartments 4,440,840 4,269,783
Investment in Cumberland Technologies, Inc. 4,881,069 4,997,277
--------------- ---------------
Total assets $ 87,742,341 $ 77,414,558
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
December 31, June 30,
1999 2000
---- ----
(unaudited)
Current liabilities:
Accounts payable - trade $ 8,338,812 $ 6,173,352
Income tax payable 247,829 95,691
Accrued expenses 5,496,312 5,203,597
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,345,977 1,732,411
Current portion of long-term debt 16,799,575 12,557,729
------------- --------------
Total current liabilities $ 33,228,505 $ 25,762,780
------------- --------------
Long-term debt 43,767,033 38,995,040
Capital lease obligations 413,719 -0-
Minority interest in subsidiary 1,641,517 1,721,944
Related party debt to be converted to common stock 1,000,000 1,000,000
Stockholders' equity:
Common stock, $.001 par value; 32,500,000 shares
authorized; 5,072,397 shares issued and 4,872,135
outstanding 5,072 5,072
Class B common stock, $.001 par value; 10,000,000
shares authorized; 2,291,569 shares issued and
1,666,569 outstanding 1,667 1,667
Capital in excess of par value 20,204,072 20,204,072
Unrealized loss on securities (net of tax) (5,422,319) (5,598,840)
Retained earnings (deficit) (6,287,140) (3,867,392)
------------- --------------
8,501,352 10,744,579
Less treasury stock, at cost (200,262 shares) (809,785) (809,785)
------------- --------------
Total stockholders' equity 7,691,567 9,934,794
------------- --------------
Total liabilities and stockholders' equity $ 87,742,341 $ 77,414,558
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended June 30,
---------------------------
1999 2000
---- ----
(unaudited) (unaudited)
Revenue
Gross revenue $ 18,503,260 $ 16,768,933
Outside services, at cost (2,778,717) (2,806,964)
-------------- --------------
Net revenue 15,724,543 13,961,969
Costs and expenses:
Cost of revenue earned 13,300,213 11,464,851
-------------- --------------
Gross Profit 2,424,330 2,497,118
Selling, general and administrative expenses 1,371,314 1,184,768
-------------- --------------
Operating income (loss) 1,053,016 1,312,350
Gain (loss) on sale of fixed assets -0- 21,287
Minority interest in net operations of subsidiary 73,035 (154,791)
Income from marketable securities -0- 120,822
Interest expense (1,131,628) (1,286,550)
-------------- --------------
Income (loss) before provision for income taxes (benefit) (5,577) 13,118
Provision for income taxes (benefit) (2,174) 4,920
-------------- --------------
Income (loss) from continuing operations (3,403) 8,198
Discontinued operations:
Income from discontinued solid waste division
(net of tax provision of $1,321,875 in 2000) -0- 2,203,125
-------------- --------------
Net income (loss) $ (3,403) $ 2,211,323
============== ==============
Share data:
Basic income (loss) per share from continuing operations $ .00 $ .00
============== ==============
Diluted income (loss) per share from continuing operations $ .00 $ .00
============== ==============
Basic income (loss) per share from discontinued operations $ .00 $ .45
============== ==============
Dilute income (loss) per share from discontinued operations $ .00 $ .45
============== ==============
Total basic income (loss) per share $ .00 $ .45
============== ==============
Total diluted income (loss) per share $ .00 $ .45
============== ==============
Weighted average number of shares outstanding used in
computations:
Basic 4,445,206 4,872,135
=============== ==============
Diluted 4,445,206 4,872,135
=============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
<TABLE>
<CAPTION>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<S> <C> <C>
Three months ended June 30,
1999 2000
---- ----
(unaudited) (unaudited)
Net income (loss) $ (3,403) $ 2,211,323
Unrealized gain on investments in marketable securities,
net of tax expense of $1,287,136 and $656,627 2,013,212 1,094,381
Less minority interest (217,427) (76,169)
Allocable share of unrealized gain (loss) on investments
in marketable securities held by Cumberland (1,012) 487
------------ -------------
Comprehensive income (loss) $ 1,791,370 $ 3,230,022
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
Six months ended June 30,
-------------------------
1999 2000
---- ----
(unaudited) (unaudited)
Revenue
Gross revenue $ 35,429,061 $ 31,452,063
Outside services, at cost (4,656,795) (4,436,216)
------------ ------------
Net revenue 30,772,266 27,015,847
Costs and expenses:
Cost of revenue earned 26,420,460 22,161,530
------------ ------------
Gross Profit 4,351,806 4,854,317
Selling, general and administrative expenses 3,283,189 2,382,785
------------ ------------
Operating income (loss) 1,068,617 2,471,532
Gain (loss) on sale of fixed assets -0- (161,835)
Minority interest in net operations of subsidiary 30,917 (193,937)
Income from marketable securities 564,571 845,729
Interest expense (2,450,100) (2,432,594)
------------- -------------
Income (loss) before provision for income taxes (benefit) (785,995) 528,895
Provision for income taxes (benefit) (306,536) 312,273
------------- ------------
Income (loss) from continuing operations (479,459) 216,622
Discontinued operations:
Income (loss) from discontinued solid waste division (net
of tax provision of $1,321,875 in 2000). -0- 2,203,125
------------- ------------
Net income (loss) $ (479,459) $ 2,419,747
============= ============
Share data:
Basic income (loss) per share from continuing operations $ (.11) $ .05
============== ============
Diluted income (loss) per share from continuing operations $ (.00) $ .05
============== ============
Basic income (loss) per share from discontinued operations $ .00 $ .45
============= ============
Diluted income (loss) per share from discontinued operations $ .00 $ .45
============= ============
Total basic income (loss) per share $ (.11) $ .50
============= ============
Total diluted income (loss) per share $ (.11) $ .50
============= ============
Weighted average number of shares outstanding used in computations:
Basic 4,378,242 4,872,135
============= ============
Diluted 4,378,242 4,872,135
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Six months ended June 30,
1999 2000
---- ----
(unaudited) (unaudited)
Net income (loss) $ (479,459) $ 2,419,747
Unrealized gain (loss) on investments in marketable
securities, net of tax expenses of $1,178,606 in 1999
and $91,787 tax benefit in 2000 1,850,416 (152,978)
Less minority interest (196,915) 10,647
Allocable share of unrealized loss on investments
in marketable securities held by Cumberland (41,471) (34,190)
------------- -------------
Comprehensive income (loss) $ 1,132,571 $ 2,243,226
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
Six months ended June 30,
1999 2000
---- ----
(unaudited) (unaudited)
Cash flows from operating activities:
Net income (loss) from continuing operations $ (479,459) $ 216,622
Adjustments to reconcile net income from continuing operations to net
cash provided (used) by operating activities:
Depreciation and amortization 3,954,704 4,007,372
Gain on sale of marketable securities (564,571) (845,729)
Minority interest in operations of subsidiary (30,917) 193,937
Loss on disposal of property and equipment -0- 161,835
Equity in losses (earnings) of equity investees 256,340 (283,367)
Unearned employee compensation from Employee Stock Ownership
Plan Trust 240,000 -0-
Changes in operating assets and liabilities:
Accounts receivable 2,576,187 214,586
Costs and estimated earnings in excess of billings on uncompleted
contracts 448,549 506,492
Income tax refund receivable and payable (719,120) 160,135
Other (137,100) (461,649)
Accounts payable (4,856,438) (2,165,460)
Accrued expenses (480,204) (292,715)
Billings in excess of costs and estimated earnings on
uncompleted contracts (1,627,890) (613,566)
------------ ----------
Total adjustments (940,460) 581,871
------------ ----------
Net cash provided by (used in) continuing operations (1,419,919) 798,493
Gain on sale of discontinued operations -0- 2,203,125
Provision for taxes on gain on sale of discontinued operations -0- 1,321,875
------------ ----------
Net cash provided by (used in) operating activities (1,419,919) 4,323,493
------------ ----------
Cash flows from investing activities:
Capital expenditures (2,111,633) (3,943,010)
Proceeds from sale of property and equipment 3,914,745 6,781,225
Cash proceeds on sale of marketable securities 498,593 2,916,914
Purchase of marketable securities (614,002) (498,790)
Deferred revenue on open stock options 1,409,621 -0-
----------- ----------
Net cash provided by (used in) investing activities 3,097,324 5,256,339
----------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 6,423,646 298,833
Repayments of long-term debt (8,962,209) (9,312,672)
Payments on capital lease obligations (268,921) (413,719)
Repayments of Employee Stock Ownership Plan debt (120,000) -0-
------------ -----------
------------ -----------
Net cash provided by (used in) financing activities (2,927,484) (9,427,558)
------------ -----------
Net increase (decrease) in cash (1,250,079) 152,274
Cash, beginning of period 1,859,275 194,202
------------ ----------
Cash, end of period $ 609,196 $ 346,476
============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<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 one business segment: specialty-contracting services. The
Company provides specialty-contracting services in the southeastern United
States, primarily Florida, including earthwork; infrastructure development;
underground construction; roadwork; site remediation services such as
excavation, removal and disposal of contaminated soil; facilities demolition and
dismantling; and asbestos abatement. The Company formerly provided solid waste
management services through its subsidiary, TransCor Waste Services, Inc.
("TransCor").
BASIS OF PRESENTATION - The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. For further information, refer
to the consolidated financial statements and notes thereto as of and for the
year ended December 31, 1999, included in the Company's Form 10-K dated December
31, 1999, as filed with the United States Securities and Exchange Commission.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Kimmins and its subsidiaries, including TransCor, a 93 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.
MARKETABLE SECURITIES - As a result of the sale of Kimmins Recycling Corp.
(KRC) to Eastern Environmental Services, Inc. (EESI), the Company received
555,329 shares of common stock of EESI. Subsequent to the sale of KRC to EESI,
Waste Management, Inc. acquired EESI. Accordingly, the Company now holds 355,742
shares of Waste Management, Inc. (WMI) common stock. Additionally, commencing in
September 1998, the Company began purchasing common stocks and other marketable
securities with a portion of the cash proceeds received from the sale of KRC. In
accordance with the Statement of Financial Accounting Standards No. 115.
"Accounting for Certain Investments in Debt and Equity Securities", the
investments are classified as available-for-sale securities. Such securities are
carried at an aggregate market value of approximately $9,704,000 as of June 30,
2000. The Company's cost basis in these investments is approximately
$19,227,000, and the unrealized loss of approximately $9,523,000, net of
deferred income taxes of approximately $3,571,000, is reported as a separate
component of shareholders' equity. Additionally, the Company's allocable share
of the unrealized loss (net of tax) on marketable securities held by Cumberland
Technologies, Inc. ("Cumberland") is approximately $34,000 for the six months
ending June 30, 2000. The balance of the unrealized loss net of deferred tax is
approximately $5,599,000 at June 30, 2000.
Since July 1999, the Company's investment of $17,000,000 in WMI decreased
approximately $10,241,000 before tax as a result of a decline in the current
market value of WMI. The per share price declined from $53.75 per share on June
30, 1999 to $19.00 per share on June 30, 2000. The Company holds 355,742 shares
of WMI at a cost of $47.79 per share.
10
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
This unrealized loss is partially offset by an unrealized gain before tax
of approximately $718,000 for the six months ended June 30, 2000 in a separate
portfolio of mostly blue chip stocks.
INVESTMENTS - The Company's 31.6 percent investment in Cumberland is
accounted for using the equity method of accounting. The Company's 49 percent
investments in Summerbreeze Apartments, Ltd., and Sunshadow Apartments, Ltd.
(the "Apartments"), are also accounted for using the equity method of
accounting. The original carrying amounts in excess of the underlying equity in
these companies is amortized over the estimated useful life of the investment.
The estimated useful lives of these intangibles are twenty years for Cumberland
and thirty years for the Apartments.
2. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, June 30,
1999 2000
---- ----
(unaudited)
Expenditures on uncompleted contracts $ 148,053,761 $ 168,464,752
Estimated earnings on uncompleted contracts 1,417,689 5,549,500
------------------- ------------------
149,471,450 174,014,252
Less actual and allowable billings on uncompleted contracts 143,579,717 168,015,445
------------------- ------------------
$ 5,891,733 $ 5,998,807
=================== ==================
Costs and estimated earnings in excess of billings on uncompleted contracts
$ 8,237,710 $ 7,731,218
Billings in excess of costs and estimated earnings on
uncompleted contracts (2,345,977) (1,732,411)
------------------- ------------------
$ 5,891,733 $ 5,998,807
=================== ==================
</TABLE>
As of December 31, 1999 and June 30, 2000, 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 approximately $10,000,000. 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. The portions at December 31, 1999 and June
30, 2000, that were not expected to be collected within twelve months are
classified as a non-current asset.
3. PROPERTY AND EQUIPMENT HELD FOR SALE
As a result of management's decision to cease operations in the northeast
and to de-emphasize the performance of certain environmental services within the
specialty-contracting segment, the Company decided to sell its transportable
incineration system. This asset has a carrying value of approximately $1,800,000
as of December 31, 1999 and June 30, 2000. A purchase agreement for the sale of
the incinerator for $1,800,000 was executed in February 1998. The Company wrote
down the carrying value of the asset by $40,000 in 1997 to reflect the fair
market value based on the purchase agreement. The Company has received
approximately $1,178,000 to date from the buyer towards the purchase. The sale
of the transportable incineration system will be completed upon full receipt of
the purchase price by the Company. The deposits of $1,178,000 have been netted
against the carrying value of the asset resulting in approximately $622,000
being included in "property held for sale" at June 30, 2000.
11
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also has real estate for sale in Nashville, Tennessee, which
has a net book value of approximately $411,000. This amount is also included in
"Property Held for Sale".
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, June 30,
1999 2000
---- ----
(unaudited)
Land $ 1,058,234 $ 1,058,234
Buildings and improvements 2,166,984 2,891,806
Construction and recycling equipment 58,455,431 50,968,061
Furniture and fixtures 680,485 697,040
Construction in progress 616,742 -0-
-------------- ----------------
62,977,876 55,615,141
Less Accumulated Depreciation (35,730,667) (25,041,842)
-------------- ----------------
Net Property and Equipment $ 37,247,209 $ 30,573,299
=============== =================
</TABLE>
Property and equipment is recorded at cost. Depreciation is provided using
the straight-line method over estimated useful lives ranging from 3 to 30 years.
Depreciation expense was approximately $3,872,000 and $3,724,000 for the six
months ended June 30, 1999 and 2000, respectively.
5. INVESTMENTS IN CUMBERLAND TECHNOLOGIES, INC.,
SUMMERBREEZE APARTMENTS, LTD., AND SUNSHADOW APARTMENTS, LTD.
CUMBERLAND - 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. The amount of
$3,300,000 in excess of the underlying equity was attributed to goodwill and is
being amortized over twenty years. At June 30, 2000, the market value of the
Cumberland common stock held by the Company was approximately $3,231,000 based
on a stock price of $1.875.
12
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the financial position of Cumberland at
December 31, 1999 and June 30, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1999 June 30,
1999 2000
---- ----
(unaudited)
Cash and cash equivalents $ 2,000,000 $ 1,201,000
Investments in various marketable securities 8,394,000 9,596,000
Accounts receivable - trade, net 2,896,000 3,565,000
Reinsurance recoverable 2,899,000 3,944,000
Intangibles 1,267,000 1,188,000
Other 3,251,000 3,788,000
------------- -------------
Total assets $ 20,707,000 $ 23,282,000
============= =============
Policy liabilities and accruals $ 9,788,000 $ 11,175,000
Long-term debt 2,282,000 2,130,000
Other 1,944,000 2,595,000
------------- -------------
Total liabilities 14,014,000 15,900,000
Stockholders' equity 6,693,000 7,382,000
------------- -------------
Total liabilities and stockholders' equity $ 20,707,000 $ 23,282,000
============= =============
</TABLE>
Cumberland's operating results included revenue of approximately $2,736,000
and $3,494,000 and net income of approximately $115,000 and $362,000 during the
quarters ended June 30, 1999 and 2000. The Company's equity in this net income
(loss) was approximately $37,000 and $114,000 during the second quarter of 1999
and 2000 respectively. In addition, approximately $41,000 of amortization
expense was recorded by the Company related to the investment during the second
quarters of 1999 and 2000.
Cumberland's operating results included revenue of approximately $5,321,000
and $6,954,000 and net income of approximately $363,000 and $800,000,
respectively, during the six month periods ended June 30, 1999 and 2000. The
Company's equity in the net income amounted to approximately $115,000 and
$253,000, during the six month periods ended June 30, 1999 and 2000,
respectively. In addition, approximately $82,000 of amortization expense was
recorded by the Company relating to the investment for the six months periods
ended June 30, 1999 and 2000.
APARTMENTS - On October 22, 1997, the Company contributed its note
receivable in an amount of approximately $3,851,000 from the Apartments and
other receivables of $3,059,000 for a non-controlling 49 percent preferred
limited partnership interest in the Apartments and a receivable of $900,000 from
the Apartments. The amount of approximately $12,066,000 in excess of the
underlying equity was attributed to goodwill and is being amortized over thirty
13
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
years. The Company will be allocated 49 percent of operating income, losses and
cash flow. The preference in the Company's equity interest in the Apartments
occurs upon the sale of the underlying partnership properties. Upon the
occurrence of a capital transaction, the Company would receive cash flows from
the sale or refinancing of the Apartments' assets equal to its capital
contribution prior to any other partner receiving any proceeds. The Company
accounts for its investment in the Apartments using the equity method.
During the quarters ended June 30, 1999 and 2000, the Apartments recognized
revenue of approximately $1,132,000 and $1,062,000. During the same periods, the
Apartments recognized net losses of approximately $91,000 and $69,000,
respectively. The Company has recorded its 49 percent share of the net results
of operations. In addition, approximately $101,000 of amortization expense was
recorded by the Company related to the investments in the Apartments for the
quarters ended June 30, 1999 and 2000.
The Apartments recognized revenue of $2,240,000 and $2,151,000 during the
six-month periods ended June 30, 1999 and 2000 respectively. During the same
periods, the Apartments recognized net losses of approximately $258,000 and
$199,000. The Company has recorded its 49 percent share of the net results of
operations. In addition, approximately $201,000 of amortization expense was
recorded during the six-month periods ended June 30, 1999 and 2000. At June 30,
2000, the Company's balance in its total investment in the Apartments was
approximately $5,170,000 of which $900,000 is classified as an "accounts
receivable - affiliate".
The following is a summary of the financial position of the Apartments at
December 31, 1999 and June 30, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
Total investment
----------------
December 31, June 30,
1999 2000
---- ----
(unaudited) (unaudited)
Cash and cash equivalents $ 30,000 $ 14,000
Accounts receivable - affiliate 946,000 946,000
Land 3,800,000 3,800,000
Buildings, capitalized construction interest,
furniture and equipment, net 15,555,000 15,082 ,000
Other 602,000 871,000
------------- -------------
Total assets $ 20,933,000 $ 20,713,000
============= =============
Accounts payable and accrued expenses $ 743,000 $ 1,034,000
Accounts payable to affiliates 1,702,000 1,587,000
Mortgage loan payable 20,833,000 20,751,000
Note payable to partner - Francis M. Williams 2,860,000 2,860,000
------------- -------------
Total liabilities 26,138,000 26,232,000
Partners' deficit (5,205,000) (5,519,000)
------------- -------------
Total liabilities and partners' deficit $ 20,933,000 $ 20,713,000
============= =============
</TABLE>
14
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, June 30,
1999 2000
---- ----
(unaudited)
Notes payable, principal and interest payable in monthly installments through
December 1, 2004, interest at varying rates up to 13
percent, collateralized by equipment $ 52,859,023 $ 46,628,152
Term bank line of credit due June 30, 2000 interest payable
monthly at lender's base rate plus .5%. 2,451,885 -0-
Line of credit secured by Waste Management shares due and payable upon demand,
interest payable at lender's base rate of
LIBOR plus .75%. 3,491,153 3,192,036
Mortgage notes, principal and interest payable in monthly installments through
December 1, 2004, interest at varying rates
up to prime plus 1.25%, collateralized by land and buildings. 1,764,547 1,593,683
Financing agreement, principal and interest payable in monthly
installments through September 1, 2000, interest payable at 7.05% -0- 49,881
Installment agreement, payable in monthly installments through
October 19, 2000 -0- 89,017
------------- -------------
Total debt 60,566,608 51,552,769
Less current portion (16,799,575) (12,557,729)
-------------- --------------
Net long term debt $ 43,767,033 $ 38,995,040
=============== =============
</TABLE>
At December 31, 1999 and June 30, 2000, there were no borrowings available
under the revolving term bank line of credit. During 1999, the Company
restructured its loan arrangements with one of its financial institutions, which
is secured by a pledge of all of the stock of the Company's subsidiaries and
substantially all of the unsecured assets of the Company. Repayment of the
outstanding loans are guaranteed by Cumberland. The Company's outstanding letter
of credit facility of approximately $1,100,000 is secured by a restricted cash
account at a local financial institution.
There was an outstanding balance of approximately $2,452,000 on the
Company's bank line of credit as of March 31, 2000, which was scheduled to be
paid off during the first quarter of 2000. The Company paid the outstanding
balance on the line of credit during the second quarter of 2000.
15
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's revolving term line of credit with a vendor supplying
financing for heavy construction equipment purchases was discontinued during
1999. The outstanding balance on the revolving term line of credit is classified
as notes payable.
The Company established a loan and collateral account agreement with the
firm holding the majority of the Company's marketable securities during the
first quarter of 1999. The margin line of credit provides cash advances to the
Company and is based on the current value of the Waste Management shares held by
the Company.
7. 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.
In addition, conversion occurs if a sale of part of the Company's business as to
which there is a bona fide offer to purchase would have resulted in
convertibility of any of the outstanding Class B Common Stock and it is
determined by the Board of Directors of the Company not to approve such a
transaction, then, upon request of the holder or holders of a majority of the
outstanding Class B Common Stock, the number of shares thereof which would have
become convertible had the transaction occurred would become convertible. A
similar provision provides that if there is an independent valuation of a part
of the business of the Company such that if such part of the business were sold,
the result would allow conversion of all outstanding Class B Common Stock and if
the Board of Directors of the Company does not authorize such sale, then, upon
request of the holder or holders of a majority of the outstanding Class B Common
Stock, the outstanding Class B Common Stock would become convertible. No shares
of Class B common stock became eligible for conversion into common stock during
the years ended December 31, 1996 or 1997.
16
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based on 1998 earnings, 625,000 shares of Class B common stock became
eligible for conversion into common stock. The 625,000 Class B shares were
converted to common stock in 1999.
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.
Net unrealized losses on marketable securities of approximately $5,599,000
net of taxes of $3,608,000 are recorded as a decrease to stockholders' equity as
of June 30, 2000.
During the year ended December 31, 1999, the Company acquired 41,821 shares
of treasury stock at a cost of $45,522. At December 31, 1999 and June 30, 2000,
the balance of the Company's treasury stock was $809,785.
17
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EARNINGS (LOSS) PER SHARE
As required by FASB Statement No. 128, the following table sets forth the
computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended June 30,
1999 2000
---- ----
(unaudited) (unaudited)
Numerator:
---------
Income (loss) from continuing operations $ (3,403) $ 8,198
Adjustment for basic earnings per share
------------- -------------
Numerator for basis earnings per share -
Income (loss) available to common stockholders from
continuing operations (3,403) 8,918
Effect of dilutive securities Numerator for diluted earnings per share:
Income (loss) from continuing operations (3,403) 8,198
Income (loss) from discontinued operations -0- 2,203,125
------------
-------------
Income (loss) applicable to common stockholders
after assumed conversions $ (3,403) $ 2,211,323
============= ============
Denominator:
-----------
Denominator for basic earnings per share -
weighted-average shares 4,288,956 4,872,135
Effective of dilutive securities:
Stock options -0- -0-
Dilutive potential common shares 625,000 -0-
------------- ------------
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions 4,913,956 4,872,135
============= ============
Basic income (loss) per share from continuing operations $ (.11) $ .00
============= ============
Diluted income (loss) per share from continuing operations $ (.11) $ .00
============= ============
============= ============
Basic income (loss) per share from discontinued operations $ .00 $ .45
============= ============
============= ============
Diluted income (loss) per share from discontinued operations $ .00 $ .45
============= ============
============= ============
Total basic income (loss) per share $ (.11) $ .45
============= ============
Total diluted income (loss) per share $ (.11) $ .45
============= ============
</TABLE>
18
<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Six months ended June 30,
1999 2000
---- ----
(unaudited) (unaudited)
Numerator:
---------
Income (loss) from continuing operations $ (479,459) $ 216,622
Adjustment for basic earnings per share -0- -0-
------------- -------------
Numerator for basic earnings per share -
Income (loss) available to common stockholders
from continuing operations (479,459) 216,622
Effect of dilutive securities Numerator for diluted earnings per share:
Income (loss) from continuing operations (479,459) 216,622
Income (loss) from discontinued operations -0- 2,203,125
------------- -------------
Income (loss) applicable to common stockholders
after assumed conversions $ (479,459) $ 2,419,747
============= =============
Denominator:
-----------
Denominator for basic earnings per share -
weighted-average shares 4,378,242 4,872,135
Effective of dilutive securities:
Stock options -0- -0-
Dilutive potential common shares -0- -0-
-------------- -------------
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions 4,378,242 4,872,135
============== =============
Basic income (loss) per share from continuing operations $ (.11) $ .05
============== ============
Diluted income (loss) per share from continuing operations $ (.11) $ .05
============== ============
Basic income (loss) per share from discontinued operations $ .00 $ .45
============== ============
============== ============
Diluted income (loss) per share from discontinued operations $ .00 $ .45
============== ============
Total basic income (loss) per share $ (.11) $ .50
============== ============
============== ============
Total diluted income (loss) per share $ (.11) $ .50
============== ============
</TABLE>
9. DISCONTINUED OPERATIONS
In 1998, the Company sold its solid waste management services (SWMS)
operations to Eastern Environmental Services of Florida, Inc. Subsequently
Eastern Environmental was acquired by Waste Management, Inc., (WMI).
On June 27, 2000, the Company received, net of related legal fees,
$3,525,000 from WMI as final settlement. This settlement was for adjustments
required under the purchase agreement and for other disputes related to the sale
of the SWMS operations.
This amount, net of tax of $1,321,875 has been reflected on the Statement
of Operations as Income from discontinued operations.
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 AND 2000
Net revenue for the three months ended June 30, 2000 decreased 11 percent
to approximately $13,962,000 from $15,725,000 for the three months ended June
30, 1999. The decrease is due primarily to the contraction of the Company's
mining services ($1,743,000 decrease in net revenue) and utility services
($2,710,000 decrease in net revenue), as well as other services ($917,000
decrease in net revenue). These decreases were somewhat offset by increases in
the Company's demolition services ($3,607,000 increase in net revenue).
Outside services, which largely represent subcontractor costs increased as
a percentage of net revenue to 20 percent for the second quarter of 2000 from 18
percent for the same period of 1999. The Company will use the services of a
subcontractor when it determined that an economic opportunity exists regarding
internally providing the services. The Company utilized the services of
subcontractors to a greater extent during the second quarter of 2000 than 1999
due to the specific contracts in progress and the associated work requirements.
Cost of revenue earned, as a percentage of net revenue, for the second
quarter of 2000 decreased to approximately 82% from 85% for the same period in
1999. As a result, the gross profit for the second quarter of 2000 was
approximately $2,497,000 (18% of net revenue) compared to approximately
$2,424,000 (15% of net revenue) for the second quarter of 1999. The increase in
the dollar amount and percentage of gross margin is primarily associated with
demolition services ($204,000 increase in gross margin) and mining services
($258,000 increase in gross margin). These increases were somewhat offset by
decreases in gross margin of utility services ($389,000 decrease in gross
margin) due to reduced revenues.
The Company has recognized continued improvement in gross margin during the
second quarter of 2000 as compared to the second quarter of 1999. Management has
focused their efforts on obtaining project work with higher gross margin
potential. Actual costs have been comparable to cost estimates included in
project bids and the Company has experienced gains in productivity.
During the three months ended June 30, 2000, selling, general and
administrative expenses decreased to approximately $1,185,000 (8% of net
revenue) from $1,371,000 (9% of net revenue) for the three months ended June 30,
1999. The dollar and percentage decrease were primarily attributable to
management's continued efforts to contain and reduce administration and overhead
costs. In addition, equity income from the partnerships and Cumberland increased
from approximately $111,000 loss to $168,000 income during the second quarters
of 1999 and 2000, respectively.
Minority interest in net income of subsidiary was approximately $155,000
for the three months ended June 30, 2000 compared to minority interest in net
income of $73,000 during the same period in 1999. The minority interest in net
income or loss of the subsidiary had reflected approximately 26% of TransCor's
earnings as a result of the March 25, 1993 initial public offering of TransCor's
common stock. In September 1998, the Company acquired approximately 297,000
shares of TransCor stock from Francis M. Williams the majority owner of the
Company and Chairman of the Board of the Company and of TransCor. This purchase
of approximately 7% of the outstanding shares increased the Company's ownership
in TransCor to 81%. Also, since August 1998 TransCor acquired 514,925 shares of
Treasury Stock on the open market effectively increasing the Company's ownership
an additional 12% to 93%.
Investment income from marketable securities was $-0- and approximately
$121,000 for the second quarters of 1999 and 2000 respectively.
Interest expense, net of interest income increased to approximately
$1,287,000 during the three months ended June 30, 2000 compared to $1,132,000
for the three months ended June 30, 1999. The increase is primarily attributable
to interest adjustments associated with final payoff of the Company's line of
credit balance during June, as well as a change in accounting for accrued
interest on outstanding debt. These increases were partially offset by decreased
interest expense attributable to reductions in the outstanding debt balance.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company received income from discontinued operations of approximately
$2,203,000 net of tax of $1,322,000 as final settlement due the Company as a
result of the sale of the SWMS operations.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 AND 2000
Net revenue for the six months ended June 30, 2000 decreased by
approximately $3,756,000 or 12% to $27,016,000 from $30,772,00 for the same
period in 1999. The decrease is due primarily to contraction of the Company's
utility contracting services of $4,421,000, decreases in mining services
($3,624,000 decrease in net revenue), as well decreases in other services
($1,714,000). These decreases were somewhat offset by increases in demolition
services ($6,003,000 increase in net revenue).
Outside services, which largely represent subcontractor costs, increased,
as a percentage of net revenue, to 16 percent for the six months ended June 30,
2000, from 15 percent for the same period in 1999. 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 2000 than 1999 due to the
specific contracts in progress and the associated work requirements.
Cost of revenue earned, as a percentage of net revenue for the six months
ended June 30, 2000 decreased to 82 percent from 86 percent for the same period
in 1999. As a result, the gross profit for the six months ended June 30, 2000
was approximately $4,854,000 (18 percent of net revenue) compared to $4,352,000
(14 percent of net revenue) for the same period in 1999. The increase in the
dollar amount ($502,000) and percentage of gross margin (4 percent) is primarily
associated with demolition services ($1,042,000 in gross profit) and
additionally from mining services ($1,164,000 in gross profit). These increases
were somewhat offset by decreases in utility services ($1,301,000 in gross
profit) and other services ($402,000 in gross profit) due to reduced revenues.
During the six months ended June 30, 2000, selling, general and
administrative expenses decreased to approximately $2,383,000 (9 percent of net
revenue) from $3,283,000 (11 percent of net revenue) for the same period in
1999. The dollar and percentage decrease in selling, general, and administrative
expenses is primarily attributable to reduced overhead costs, such as
administrative, sales, marketing and labor costs that are associated with
management's actions to reduce these costs. In addition, equity income from the
partnerships and Cumberland increased from approximately $256,000 loss to
$229,000 income during the six month periods ended June 30, 1999 and 2000,
respectively.
Minority interest in net loss of subsidiary was $31,000 for the six months
ended June 30, 2000, compared to minority interest in net income of the
subsidiary of $194,000 during the same period in 1999. The Company's ownership
in TransCor has increased from 92 percent to 94 percent between June 30, 1999
and June 30, 2000, as a result of treasury stock purchased on the open market
during this period.
Interest expense, net of interest income, decreased to approximately
$2,433,000 during the six months ended June 30, 2000, compared to $2,450,000 for
the same period in 1999. The decrease is attributable to decreases in average
borrowings during 2000 due to scheduled debt paydowns and was partially offset
by interest adjustments associated with final payoff of the Company's line of
credit balance during June, as well as a change in accounting for accrued
interest on outstanding debt.
As a result of the foregoing, income before provision for income taxes for
the six months ended June 30, 2000 was approximately $529,000 (2 percent of net
revenue) compared to a loss before provision for income taxes of approximately
$786,000 (3 percent of net revenue) during the same period in 1999.
The Company's effective tax rate was 59 percent for the six months ended
June 30, 2000, compared to a rate of 40 percent for 1999 tax benefits. The
higher than statutory effective tax rate was due to a change in an estimate of a
deferred tax asset.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company generated income from continuing operations of approximately
$217,000 (1 percent of net revenue) for the six months ended June 30, 2000 as
compared with a loss from continuing operations of $479,000 (2 percent of net
revenue) for the same period during 1999.
The Company received income from discontinued operations of approximately
$2,203,000 net of tax of $1,322,000 as final settlement due the Company as a
result of the sale of the SWMS operations.
As a result of the foregoing, the Company reported net income for the six
months ended June 30, 2000 of approximately $2,420,000 (9% of net revenue) as
compared with a net loss of $479,000 (2% of net revenue) for the same period
during 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities was approximately $1,420,000 during the
six months ended June 30, 1999 compared to cash provided by operating activities
of approximately $4,323,000 during the six month period ended June 30, 2000.
Cash of $3,525,000 received from Waste Management, Inc. was the primary reason
for net cash provided by operating activities.
The Company had capital expenditures during the six months ended June 30,
1999 and 2000 of $2,112,000 and $3,944,000, respectively. During 1999 and 2000,
most capital expenditures were related to the conversion of leases to fixed
asset purchases of construction equipment utilized in the Company's specialty
contracting operations. In addition, 1999 capital expenditures included the
purchase of accounting software. Future capital expenditures will be financed by
available cash resources, cash flow from operations and available credit
resources, as needed.
Net cash provided by investing activities was $3,097,000 and $5,256,000
during the six months ended June 30, 1999 and 2000. During the six months ended
of June 30, 2000, the Company realized approximately $6,781,000 and $2,917,000
proceeds from the sale of equipment and marketable securities, respectively.
The net cash used in financing activities was approximately $9,428,000
during the six months ended June 30, 2000. The majority of this amount is
attributable to repayments of long-term debt and capital lease obligations.
The Company's ratio of debt to equity was 7.9 to 1 and 5.2 to 1 at December
31, 1999 and June 30, 2000, respectively. The decrease in debt is primarily due
to the debt paydowns exceeding new debt and the increase in stockholders' equity
is primarily related to the additional gain realized in June, 2000 from the
final settlement on the sale of the SWMS operations.
During the six months ended June 30, 1999 and 2000, the Company's average
contract and trade receivables less retainage were outstanding for 62 and 58
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 payments.
At December 31, 1999 and June 30, 2000, approximately $2,074,000 and
$1,963,000, respectively of the combined accounts receivable-affiliates and note
receivable-affiliates are due from affiliates of the Company's President. The
affiliated receivables are guaranteed by Mr. Williams.
The Company's current bonding capacity for qualification purposes is
$60,000,000 for an individual project and $120,000,000 in the aggregate.
Historically, the Company has obtained bonding coverage in amounts up to
$53,000,000. However, bonding coverage is not guaranteed on projects up to the
above limits because each project has its own distinct and separate bond
requirements and it is customary for surety bonding companies to underwrite each
surety obligation individually. Management believes that bonding coverages are
adequate for the size and scope of projects being performed.
22
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities. The Financial
Accounting Standards Board has issued Statement No. 137 Accounting for
Derivative Instruments and Hedging Activities - Deferral of the effective date
of SFAS No. 133, which delays the implementation date of SFAS 133 for one year,
to fiscal years beginning after June 15, 2000. The Statement requires the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge changes
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. Because of the
Company's minimal use of derivatives, management does not anticipate the
adoption of the statement to have a significant effect on earnings or the
financial position of the Company.
Given the complexity of the new Standard and that the impact hinges on
market values at the date of adoption, it is extremely difficult to estimate the
impact of adoption unless adoption is imminent.
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 from those anticipated include, but are not
limited to, economic conditions, competitive factors, changes in market prices
of the Company's investments 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 increased, 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.
23
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During 2000, the Company has not entered into any transactions using
derivative financial instruments or derivative commodity instruments. As of June
30, 2000, the Company has debt of approximately $51,553,000 of which $49,959,000
has a fixed interest rate. The remaining debt of $1,594,000 has variable
interest rates. However, an increase in the rates of 1% would have an effect of
only $16,000, exclusive of the effect of income taxes. Accordingly, the Company
believes its exposure to market interest rate risk is not material. As of June
30, 2000, the Company's 93% owned subsidiary TransCor, held for other than
trading purposes, marketable equity securities of publicly traded companies
having a value of approximately $9,704,000 ($6,759,000 related to Waste
Management, Inc.). These securities are subject to price risk.
Beginning in January 1999, TransCor began trading covered options on Waste
Management, Inc. common stock. Management believes although there is always
price risk in this type of transaction, management is able to reduce this risk
due to its knowledge of the solid waste industry. During the six months ended
June 30, 1999, TransCor invested approximately $3,033,000 in covered options and
recognized income of approximately $525,000 on proceeds of $2,508,000.
Subsequent to June 30, 1999, the Company closed all open option transactions
recognizing income of $1,833,000 from this trade. During the six months ended
June 30, 2000 the Company had no outstanding covered options.
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
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as exhibits to this Quarterly Report on
Form 10-Q:
3.1 Articles of Incorporation of the Registrant (incorporated herein by
reference to Appendix B to the Proxy Statement filed August 16, 1999).
3.2 Bylaws of the Registrant (incorporated herein by reference to the
Registrant's Current Report on Form 8-K dated October 19, 1999 as
filed with the Securities and Exchange Commission).
27.1 Financial Data Schedule - June 30, 2000.
27.2 Restated Financial Data Schedule - June 30, 1999.
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
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.
By: /s/ Francis M. Williams
-------------------------------------
Francis M. Williams
President and Chief Executive Officer
August 14, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on August 14, 2000.
Date: 8-14-00 /s/ Francis M. Williams
---------------------- ----------------------------------------
Francis M. Williams
President and Chief Executive Officer
(Principal Executive Officer)
Date: 8-14-00 /s/ Norman S. Dominiak
----------------------- ----------------------------------------
Norman S. Dominiak
Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
