-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U3AvhzMr7c0DZ+MZbC+7dLePValElo2m3LlwZ27fybP78LS9TmVsZiXCyKiN5gfW +IFzIa1/dN8JuEbaTXfz+A== 0000950170-96-001007.txt : 19961118 0000950170-96-001007.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950170-96-001007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVCON INTERNATIONAL CORP CENTRAL INDEX KEY: 0000028452 STANDARD INDUSTRIAL CLASSIFICATION: CONCRETE GYPSUM PLASTER PRODUCTS [3270] IRS NUMBER: 590671992 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07152 FILM NUMBER: 96663439 BUSINESS ADDRESS: STREET 1: 1350 E NEWPORT CENTER DR STREET 2: STE 201 CITY: DEERFIELD BEACH STATE: FL ZIP: 33443 BUSINESS PHONE: 3054291500 MAIL ADDRESS: STREET 1: 1350 E NEWPORT CENTER DR STREET 2: SUITE 201 CITY: DEERFIELD BEACH STATE: FL ZIP: 33442 10-Q 1 =============================================================================== 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 1994 for the quarterly period ended September 30, 1996 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to _________. Commission File No. 0-7152 DEVCON INTERNATIONAL CORP. - ------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) FLORIDA 59-067199 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1350 E. NEWPORT CENTER DRIVE, SUITE 201, DEERFIELD BEACH, FL 33442 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (954) 429-1500 Securities registered pursuant to section 12(g) of the Act: COMMON STOCK, $.10 PAR VALUE (Title of Class) 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 [ ] As of November 13, 1996, the number of shares outstanding of the Registrant's Common Stock was 4,498,935. =============================================================================== DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES INDEX PAGE NUMBER ----------- Part I. Financial Information: Consolidated Balance Sheets - September 30, 1996 and December 31, 1995.................................... 3-4 Consolidated Statements of Operations and Retained Earnings - Three and Nine Months Ended September 30, 1996 and 1995........................ 5 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995............ 6-7 Notes to Consolidated Financial Statements............... 8 Management's Discussion and Analysis of Financial Conditions and Results of Operations............................................... 8-13 Part II. Other Information........................................ 14 PART I. FINANCIAL INFORMATION - ------------------------------------------------------------ DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES Consolidated Balance Sheets September 30, 1996 and December 31, 1995 SEPTEMBER 30, DECEMBER 31, 1996 1995 (UNAUDITED) (AUDITED) ------------ ------------ ASSETS Current assets: Cash $ 233,398 $ 438,682 Cash equivalents 1,013,741 977,456 Receivables, net 13,745,470 12,043,706 Costs in excess of billings and estimated earnings 3,135,181 3,461,984 Inventories 6,613,323 6,392,278 Other 1,309,847 936,446 Net assets of discontinued operation - 749,114 ------------ ------------ Total current assets 26,050,960 24,999,666 Property, plant and equipment Land 5,667,867 5,667,867 Buildings 4,119,727 4,248,816 Leasehold interests 12,394,838 12,590,763 Equipment 70,881,888 72,319,224 Furniture and fixtures 572,950 1,057,850 Construction in process 1,358,745 1,396,187 ------------ ------------ 94,996,015 97,280,707 Less accumulated depreciation (42,082,067) (45,898,662) ------------ ------------ 52,913,948 51,382,045 Investments in unconsolidated joint ventures and affiliates 183,780 208,780 Advances to unconsolidated joint ventures and affiliates 1,251,174 1,047,663 Receivables, net 18,253,618 17,585,097 Intangible assets, net of accumulated amortization 1,108,227 1,086,801 Other assets 747,881 1,002,588 ------------- ------------ $100,509,588 $ 97,312,640 ============ ============ See accompanying notes to consolidated financial statements. 3 DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES Consolidated Balance Sheets September 30, 1996 and December 31, 1995 SEPTEMBER 30, DECEMBER 31, 1996 1995 (UNAUDITED) (AUDITED) ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable, trade and other $ 7,214,878 $ 6,501,977 Accrued expenses and other liabilities 2,901,388 1,451,429 Notes payable to banks 839,589 3,467,310 Current installments of long-term debt 4,999,464 7,274,506 Billings in excess of costs and estimated earnings 19,947 766,399 Income taxes 989,668 689,650 ------------ ------------ Total current liabilities 16,964,934 20,151,271 Long-term debt, excluding current installments 20,971,925 15,547,908 Minority interest in consolidated subsidiaries 686,155 675,853 Deferred income taxes 651,979 651,979 Other liabilities 782,307 1,127,043 ------------ ------------ Total liabilities 40,057,300 38,154,054 ------------ ------------ Stockholders' Equity: Common stock 449,894 446,451 Additional paid-in capital 12,064,133 11,987,365 Retained earnings 47,938,261 46,724,770 ------------ ------------ Total stockholders' equity 60,452,288 59,158,586 ------------ ------------ $100,509,588 $ 97,312,640 ============ ============ See accompanying notes to consolidated financial statements. 4
DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES Consolidated Statements of Operations and Retained Earnings Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) THREE THREE NINE NINE MONTHS MONTHS MONTHS MONTHS ENDED ENDED ENDED ENDED SEPT 30, SEPT 30, SEPT 30, SEPT 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Concrete and related products revenues ............................ $ 13,594,124 $ 8,032,604 $ 40,364,836 $ 27,791,599 Contracting revenues ........................... 2,594,815 3,366,867 12,154,422 11,228,479 Other revenues ................................. 429,192 432,161 1,857,910 1,842,671 ------------ ------------ ------------ ------------ Total revenues ............................ 16,618,132 11,831,632 54,377,168 40,862,749 Cost of concrete and related products revenues .................... 10,068,921 6,804,224 29,269,932 21,384,054 Cost of contracting revenues ................... 2,398,186 3,262,097 10,670,824 9,859,228 Cost of other revenues ......................... 98,716 375,696 1,341,518 1,449,756 ------------ ------------ ------------ ------------ Gross profit .............................. 4,052,309 1,389,615 13,094,894 8,169,711 Selling, general and administrative expenses ...................... 3,041,424 2,754,092 9,328,555 7,994,949 ------------ ------------ ------------ ------------ Operating income (loss) ................... 1,010,885 (1,364,477) 3,766,339 174,762 Other income (deductions) Equity in loss of unconsolidated subsidiary .................. (25,000) -- (25,000) -- Interest expense ............................. (666,847) (621,524) (1,964,433) (1,913,635) Gain (loss) on sale of equipment ............................... (11,515) 2,841 (1,157) 156,062 Interest and other income .................... 93,407 96,835 269,252 344,976 Minority interest ............................ 15,200 (10,257) (10,302) (25,620) ------------ ------------ ------------ ------------ (594,755) (532,105) (1,731,640) (1,438,217) ------------ ------------ ------------ ------------ Income (loss) from continuing operations before income taxes ..................... 416,130 (1,896,582) 2,034,699 (1,263,455) Income taxes ................................... 133,089 -- 333,089 -- ------------ ------------ ------------ ------------ Income (loss) from continuing operations ................... 283,041 (1,896,582) 1,701,610 (1,263,455) Loss on disposal of discontinued operation .................................... (488,119) (1,362) (488,119) (9,152) ------------ ------------ ------------ ------------ Net earnings (loss) ....................... (205,078) (1,897,944) 1,213,491 (1,272,607) Retained earnings, beginning of period .................................... 48,143,339 50,096,610 46,724,770 49,471,273 ------------ ------------ ------------ ------------ Retained earnings, end of period .................................... $ 47,938,261 $ 48,198,666 $ 47,938,261 $ 48,198,666 ============ ============ ============ ============ Earnings (loss) per share: From continuing operations ................... $ .06 $ (.42) $ .36 $ (.28) From discontinued operation .................. (.10) -- (.10) -- ------------ ------------ ------------ ------------ $ (.04) $ (.42) $ .26 $ (.28) ============ ============ ============ ============ Weighted average number of shares outstanding ........................... 4,621,271 4,562,317 4.697,916 4,560,046 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 5 DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 ----------- ----------- Cash flows from operating activities: Net earnings (loss) ............................ $ 1,213,491 $(1,272,607) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization ................. 3,881,922 3,453,229 Provision for doubtful accounts and notes .................................... 225,000 223,000 (Gain) Loss on sale of equipment .............. 1,156 (156,069) Minority interest expense (income) ............ 15,200 (48,907) Changes in operating assets and liabilities: Decrease (Increase) in receivables, net ....... (2,192,635) 522,510 Decrease (Increase) in costs in excess of billings and estimated earnings ........... 326,803 (107,427) Decrease (Increase) in inventories ............ (221,045) 609,879 Decrease (Increase) in other current assets .............................. 373,401 (61,998) Decrease in other assets ...................... 254,709 274,713 Increase (Decrease) in accounts payable, trade and other .............................. 1,740,289 (128,072) Increase (Decrease) in billings in excess of costs and estimated earnings ...... (746,452) 31,499 Increase (Decrease) in income taxes payable ................................ 300,018 (15,201) Decrease in other liabilities ................. (344,737) (93,328) ----------- ----------- Net cash provided by operating activities ...................... 4,827,120 3,231,221 ----------- ----------- Cash flows from investing activities: Purchase of property, plant and equipment .................................... (6,995,171) (3,870,453) Proceeds from disposition of property, plant and equipment .......................... 1,729,826 640,601 Payment to acquire subsidiary company .......... -- (1,000,000) Issuance of notes .............................. (1,857,491) (227,233) Payments received on notes ..................... 1,454,841 2,643,443 Advances to affiliates ......................... (258,731) (18,310) Advances from affiliates ....................... 55,220 340,000 ----------- ----------- Net cash used in investing activities ....... $(5,871,506) $(1,491,952) ----------- ----------- See accompanying notes to consolidated financial statements. 6 DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 ---- ---- Cash flows from financing activities: Proceeds from debt $ 7,039,733 $ 6,509,127 Principal payments on debt (6,518,479) (8,041,573) Net borrowings from bank overdrafts 354,133 55,975 ----------- ----------- Net cash provided by (used in) financing activities 875,387 (1,476,471) ----------- ----------- Net increase (decrease) in cash and cash equivalents (168,999) 262,798 Cash and cash equivalents, beginning of period 1,416,138 942,050 ----------- ----------- Cash and cash equivalents, end of period $ 1,247,139 $ 1,204,848 =========== =========== Supplemental disclosures of cash flow information Cash paid for Interest $ 2,077,387 $ 1,974,418 =========== =========== Income taxes $ - $ 32,773 =========== =========== See accompanying notes to consolidated financial statements. 7 DEVCON INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. The accounting policies followed by the Company are set forth in Note (l) to the Company's financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 1995. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position as of September 30, 1996 and the results of its operations and cash flows for the nine months ended September 30, 1996 and 1995. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All dollar amounts of $1.0 million or more are rounded to the nearest one tenth of a million; all other dollar amounts are rounded to the nearest one thousand and all percentages are stated to the nearest one tenth of one percent. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 VS THREE MONTHS ENDED SEPTEMBER 30, 1995 REVENUES The Company's revenues during the third quarter of 1996 were $16.6 million, as compared to $11.8 million during the same period in 1995. This increase was primarily due to increases in the Company's concrete and related products revenues, offset to a lesser extent, by decreases in land development contracting division revenues. The Company's concrete and related products division revenues increased to $13.6 million during the third quarter of 1996 from $8.0 million during the same period in 1995. The Company believes the increased sales are a result of rebuilding required to repair homes and other buildings damaged during Hurricanes Luis and Marilyn, which struck the Caribbean in September 1995. The Company believes that demand for concrete and related products for the balance of 1996 will remain strong in Antigua, St. Maarten, St. Martin and St. Thomas, as the owners of storm damaged homes and businesses begin and continue repair and rebuilding work. Revenues from the Company's land development contracting division decreased to $2.6 million during the third quarter of 1996 from $3.4 million for the same period in 1995. This decrease was primarily attributable to the winding down of several hurricane related repair and reconstruction contracts obtained in late 1995. The Company's backlog of unfilled portions of land development contracts at September 30, 1996 was $4.3 million, involving 19 projects. The Company expects that all of the backlog outstanding at September 30, 1996 will be completed by the end of 1996. As its current backlog is expected to be completed by the end of the year, the Company needs to obtain new contracts over the remainder of 1996 in order to maintain comparable revenue and backlog levels in 1997. 8 COST OF CONCRETE AND RELATED PRODUCTS Cost of concrete and related products as a percentage of concrete and related products revenues decreased to 74.1 percent during the third quarter of 1996 from 84.7 percent for the same period in 1995. This decrease was primarily attributable to the increase in revenues recognized. The Company's margins will also fluctuate depending on the mix of products sold and the locations in which sales were made during the quarter. COST OF CONTRACTING Cost of contracting as a percentage of land development contracting revenues decreased to 92.4 percent during the third quarter of 1996 from 96.9 percent during the same period in 1995. This decrease is primarily attributable to the higher profit margins on current projects, offset by costs incurred as a result of owning and operating heavy construction equipment. In addition, the Company's gross margins are affected by the varying profitability levels of individual contracts and the stage of completion of such contracts. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expense ("SG&A expense") was $3.0 million during the third quarter of 1996 and $2.8 million for the same period in 1995. This increase was primarily attributable to SG&A expense related to the Company's new operation on St. Martin and higher than expected operating expenses, offset by a reduction in expense attributable to personnel reductions. As a percentage of revenue, SG&A expense decreased to 18.3 percent for the third quarter of 1996 from 23.3 percent for the same period in 1995. This percentage decrease was primarily attributable to the increase in revenues actually recognized, offset by the increase in SG&A expense actually incurred. DIVISIONAL OPERATING INCOME (LOSS) The Company had operating income of $1.0 million for the third quarter of 1996 as compared to an operating loss of $1.4 million for the same period in 1995. The Company's concrete and related products division operating income increased to $1.1 million during the third quarter of 1996 from an operating loss of $604,000 during the same period in 1995. This increase is primarily attributable to increases in revenues and gross profits by this division, offset by increases in SG&A expense. The Company's land development contracting division operating loss decreased to $250,000 for the third quarter of 1996 from a loss of $428,000 during the same period in 1995. This decrease is primarily attributable to the modest increase in gross profit, offset by some increases in SG&A expense. LOSS ON DISPOSAL OF DISCONTINUED OPERATION In September 1996, the Company sold its interest in its ceiling tile business. This business had been treated as a discontinued operation at December 31, 1995. As a result of the sale price obtained, an additional write down of the Company's investment was required. NET EARNINGS (LOSS) The Company had a net loss of $205,000 during the third quarter of 1996 as compared to a net loss of $1.9 million during the same period in 1995. This reduction in loss is primarily attributable to increases in concrete and related products revenues and operating profits, offset by an additional write down required as a result of the Company's disposal of its ceiling tile business. 9 COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 VS NINE MONTHS ENDED SEPTEMBER 30, 1995 REVENUES The Company's revenues during the first nine months of 1996 were $54.4 million, as compared to $40.9 million during the same period in 1995. This increase was primarily due to increases in the Company's concrete and related products revenues, and to a lesser extent, land development contracting division revenues. The Company's concrete and related products division revenues increased to $40.4 million during the first nine months of 1996 from $27.8 million during the same period in 1995. The Company believes the increased sales are a result of rebuilding required to repair homes and other buildings damaged during Hurricanes Luis and Marilyn, which struck the Caribbean in September 1995. The Company believes that demand for concrete and related products for the balance of 1996 will remain strong in Antigua, St. Maarten, St. Martin and St. Thomas, as the owners of storm damaged homes and businesses begin and continue repair and rebuilding work. Revenues from the Company's land development contracting division increased to $12.2 million during the first nine months of 1996 from $11.2 million for the same period in 1995. This increase was primarily attributable to the Company obtaining several hurricane related repair and reconstruction contracts in late 1995. The Company's backlog of unfilled portions of land development contracts at September 30, 1996 was $4.3 million, involving 19 projects. The Company expects that all of the backlog outstanding at September 30, 1996 will be completed by the end of 1996. As its current backlog is expected to be completed by the end of the year, the Company needs to obtain new contracts over the remainder of 1996 in order to maintain comparable revenue and backlog levels in 1997. COST OF CONCRETE AND RELATED PRODUCTS Cost of concrete and related products as a percentage of concrete and related products revenues decreased to 72.5 percent during the first nine months of 1996 from 76.9 percent for the same period in 1995. This decrease was primarily attributable to the increase in revenues recognized. The Company's margins will also fluctuate depending on the mix of products sold and the locations in which sales are made during the quarter. COST OF CONTRACTING Cost of contracting as a percentage of land development contracting revenues was 87.8 percent during the first nine months of 1996 and 1995. The Company's gross margins are generally affected by the varying profitability levels of individual contracts and the stage of completion of such contracts, as well as the cost involved in owning and operating heavy construction equipment. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expense ("SG&A expense") was $9.3 million during the first nine months of 1996 and $8.0 million for the same period in 1995. This increase was primarily attributable to SG&A expense related to the Company's new operation on St. Martin and higher than expected operating expenses, offset by a reduction in expense attributable to personnel reductions. As a percentage of revenue, SG&A expense decreased to 17.2 percent for the first nine months of 1996 from 19.6 percent for the same period in 1995. This percentage decrease was primarily attributable to the increase in revenues actually recognized, offset by the increase in SG&A expense actually incurred. 10 DIVISIONAL OPERATING INCOME The Company had operating income of $3.8 million for the first nine months of 1996 as compared to $175,000 for the same period in 1995. The Company's concrete and related products division operating income increased to $4.2 million during the first nine months of 1996 from $894,000 during the same period in 1995. This increase is primarily attributable to increases in revenues and gross profits by this division, offset by increases in SG&A expense. The Company's land development contracting division operating income decreased to a loss of $325,000 for the first nine months of 1996 from a loss of $370,000 during the same period in 1995. This reduction is primarily attributable to the increases in revenues achieved by this division. LOSS ON DISPOSAL OF DISCONTINUED OPERATION In September 1996, the Company sold its interest in its ceiling tile business. This business had been treated as a discontinued operation at December 31, 1995. As a result of the sale price obtained, an additional write down of the Company's investment was required. NET EARNINGS (LOSS) The Company had net earnings of $1.2 million during the first nine months of 1996 as compared to a net loss of $1.3 million during the same period in 1995. This increase is primarily attributable to increases in concrete and related products revenues and gross profits, offset by an additional write down required as a result of the Company's disposal of its ceiling tile business. LIQUIDITY AND CAPITAL RESOURCES The Company generally funds its working capital needs from operations and bank borrowings. In the land development contracting business, the Company must expend considerable amounts of funds for equipment, labor and supplies to meet the needs of particular projects. The Company's capital needs are greatest at the start of any new contract, since the Company generally must complete 45 to 60 days of work before receiving the first progress payment. In addition, as a project continues, a portion of the progress billing is usually withheld as retainage until all work is complete, further increasing the need for capital. On occasion the Company has provided long-term financing to certain customers who have utilized its land development contracting services. The Company has also provided financing for other business ventures from time to time. With respect to the Company's concrete and related products division, accounts receivable are typically outstanding for a minimum of 60 days and in some cases much longer. The nature of the Company's business requires a continuing investment in plant and equipment, along with the related maintenance and upkeep costs of such equipment. The Company has funded many of these expenditures out of its current working capital. The sales increases achieved during 1996, along with related increases in accounts receivable, inventories and plant and equipment, have had a short term negative impact on the Company's cash reserves. However, notwithstanding the foregoing and after factoring in the Company's obligations as set forth below, management believes that the Company's cash flow from operations, existing working capital (approximately $9.1 million at September 30, 1996) and funds available from existing and anticipated lines of credit and extensions thereof (assuming that they are obtained) will be adequate to meet the Company's anticipated needs for operations during the next twelve months. At September 30, 1996, the Company had a revolving secured line of credit in the amount of $2.0 million and three secured lines of credit in the amount of $1.0 million, $400,000 and $400,000 from commercial banks in South Florida and the 11 Caribbean. At September 30, 1996 the Company had $2.0 million of borrowings outstanding under the $2.0 million line of credit, $567,000 of borrowings outstanding under the $1.0 million line of credit and $800,000 of borrowings outstanding under the two $400,000 lines of credit. The $2.0 million line and one $400,000 line expired in May 1996 and are being continued on a month to month basis pending the closing of the new commitment discussed below, the $1.0 million line expires in November 1996 and the other $400,000 line has no expiration date. The interest rates on all such indebtedness outstanding at September 30, 1996 ranged from 8.5 to 8.8 percent. The Company has a $500,000 unsecured overdraft facility from a commercial bank in the Caribbean. The facility expired on September 30, 1996 and is being continued on a month to month basis until reapproved. The facility bears interest at 14.0 percent per annum. At September 30, 1996 the Company had borrowings of $410,000 outstanding under this line. The Company also has a $500,000 secured line of credit from a commercial bank in the United States. The line expires in October 1996 and bears interest at the prime interest rate plus one half of one percent. At September 30, 1996, the Company had borrowings of $440,000 outstanding under this line. The Company has entered into three term loans with a Caribbean bank, repayable in varying monthly installments through December 2001. The interest rate on indebtedness outstanding at September 30, 1996 ranged from 8.5 percent to 9.8 percent and the Company had $4.2 million of borrowings outstanding. The loans are secured by individual leasehold mortgages on a block manufacturing plant, a cement distribution facility and a marina in the U.S. Virgin Islands. In September 1993, the Company entered into a $4.0 million secured term loan. Borrowings outstanding bear interest at the prime interest rate plus three fourths of one percent. The interest rate on indebtedness outstanding at September 30, 1996 was 9.0 percent and the Company has $1.5 million of borrowings outstanding. This loan is due in full on November 30, 1996. The loan is secured by the Company's notes receivable from the Government of Antigua and Barbuda. The Company has borrowed $5.6 million from a Company officer. One note has an outstanding balance of $5.5 million, is unsecured, bears interest at the prime interest rate and is due in full on January 1, 1998. The other note has a balance of $50,000, is secured by equipment, bears interest at 8.0 percent per annum and is due in monthly principal installments through February 1997 of $10,000, plus interest. The Company has received a commitment from a bank in the Caribbean for a six year term loan of $6.0 million and a $1.0 million revolving line of credit. The term loan proceeds would be used to repay and retire a revolving line of credit that was due in May 1996 with a $2.0 million balance, two term loans totalling $583,000, an equipment loan with a balance of $172,000, a term loan due in November 1996 with a balance of $1.5 million, a line of credit due in November 1996 with a balance of $567,000, another line of credit that was due in May 1996 with a balance of $400,000 and various other notes amounting to approximately $365,000. The balance of $413,000 be used to provide additional working capital for the Company. The loan will be collateralized by various assets, primarily land and equipment, located in the Caribbean. The Company purchases equipment from time to time as needed for its ongoing business operations. The Company is currently upgrading and replacing various equipment used by the concrete and related products division, principally concrete delivery trucks and quarry equipment. This upgrading and replacement program will continue throughout 1996. At present, management believes that the Company's inventory of construction equipment is adequate for its current contractual commitments, however, the acquisition of significant new construction contracts, depending on the nature of the contract, the job location and job 12 duration, may require the Company to make significant investments in heavy construction equipment. If the Company does not obtain additional contract backlog, then it plans to sell a portion of the equipment it currently owns. The Company will have to bear the carrying costs, principally depreciation and interest, on any idle equipment not sold. Since the beginning of the year and through September 30, 1996, the Company has sold equipment with an original cost basis of approximately $9.3 million and net book value of $1.7 million. In November 1996, the Company entered into an agreement to sell its cement hauling vessel to a third party for $4.0 million. The Company intends to lease the vessel back from the new owners for a four year term, with options to renew the lease for four additional one year periods. After the related debt on the vessel is repaid, the Company should net approximately $2.2 million as a result of this transaction. The Company currently intends to use these funds to retire debt and enhance its working capital position. The Company expects to complete additional equipment sales during the remainder of 1996. The Company believes it has available or can obtain sufficient financing for most of its contemplated equipment replacements and additions. Historically, the Company has used a number of lenders to finance a portion of its machinery and equipment purchases, including its ocean going bulk cement vessel, on an individual asset basis. At September 30, 1996 amounts outstanding to these lenders totalled $7.3 million. These loans are typically repaid over a three to six year term in monthly principal and interest installments. A significant portion of the Company's outstanding debt bears interest at variable rates. The Company could be negatively impacted by a substantial increase in interest rates. The Company has contingent obligations and has made certain guarantees in connection with acquisitions, its participation in certain joint ventures, certain employee and construction bonding matters and its receipt of a tax exemption. In connection with a 1990 St. Maarten acquisition, the Company agreed to pay the seller annually an amount per unit of certain concrete and stone products sold by the Company in St. Maarten from April 1, 1990 to March 31, 1998, but in no event less than $500,000 per year. The Company has certain offsets available against this payment which has reduced the minimum annual payment to $350,000 per year. Notes receivable and accrued interest at September 30, 1996 include $15.0 million, net due the Company pursuant to certain promissory notes delivered to the Company in connection with two construction contracts with the Government of Antigua, $2.0 million of which is classified as a current receivable. The notes call for both quarterly and monthly principal and interest payments until maturity in 1997. The notes will not be satisfied at maturity but the Antiguan government has advised the Company that payments will continue until the obligation is satisfied. The Government of Antigua has made required quarterly payments through December 1995 aggregating $2.0 million per year but has made only some of the required monthly payments. A portion of the payment received from Antigua has been derived from the lease proceeds the Antiguan government has received from the United States Department of Defense for the rental of two military bases. One of the bases was closed at the end of 1995, resulting in a shortfall of $700,000 per year in the required quarterly payments. To partially make up this shortfall, the Antiguan government has entered into a written agreement with the Company requiring Antigua to pay $600,000 per year from its fuel tax revenues. Payments under this agreement are scheduled to start in December 1996. The Company does not presently anticipate any other material increases in or accelerations of payments by the Government of Antigua. 13 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) Exhibits: None (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the first nine months of fiscal 1996. 14 SIGNATURES Pursuant to the requirement 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. Date: NOVEMBER 13, 1996 By: /S/ DONALD L. SMITH, JR. ----------------- ------------------------- Donald L. Smith, Jr. President and Chief Executive Officer Date: NOVEMBER 13, 1996 By: /S/ WALTER B. BARRETT ----------------- ---------------------- Walter B. Barrett Vice President, Finance and Chief Financial Officer 15 EX-27 2
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 233,398 0 16,677,773 2,932,303 6,613,323 26,050,960 94,996,015 (42,082,067) 100,509,588 16,964,934 0 0 0 449,894 12,064,133 100,509,588 54,377,168 54,377,168 41,282,274 41,282,274 2,034,699 225,000 1,964,433 2,034,699 333,089 1,701,610 488,119 0 0 1,213,491 .26 .26
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