Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] For the fiscal year ended December 31, 1995
OR
[ ] For the transition period from to
Commission file number 0-7152
DEVCON INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Florida 59-0671992
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1350 E. Newport Center Dr. Suite 201, 33442
Deerfield Beach, FL (Zip Code)
(Address of principal executive offices)
(954) 429-1500
(Registrant's telephone number, including area code)
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 March 25, 1996, the number of shares of the registrant's
Common Stock outstanding was 4,464,510. The aggregate market value
of the Common Stock held by nonaffiliates of the registrant as of
March 25, 1996 was approximately $17,624,162, based on a closing
price of $9.13 for the Common Stock as reported on the NASDAQ
National Market System on such date. For purposes of the foregoing
computation, all executive officers, directors and 5 percent
beneficial owners of the registrant are deemed to be affiliates.
Such determination should not be deemed to be an admission that
such executive officers, directors or 5 percent beneficial owners
are, in fact, affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10, 11, 12 and 13) is
incorporated by reference from the registrant's definitive proxy
statement (to be filed pursuant to Regulation 14A).
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ X ]
PART I
Item 1. Business.
General
Devcon International Corp. (the "Company") is the largest producer
and distributor of ready-mix concrete and quarry products in the
United States Virgin Islands, Antigua and Barbuda, West Indies
("Antigua"), St. Maarten, Netherlands Antilles ("St. Maarten"), St.
Martin, French West Indies ("St. Martin") Saba, Netherlands
Antilles ("Saba"), Dominica, West Indies ("Dominica") and Tortola,
British Virgin Islands ("Tortola") and is a land development
contractor in the Caribbean.
In the Caribbean, the Company produces and distributes ready-mix
concrete, crushed stone, concrete block and asphalt and distributes
bulk and bagged cement. The Company's facilities have enabled the
Company to establish a significant market share in most of the
locations in which it operates and afford the Company resources,
production capacity, a local presence and a cost structure that the
Company believes would be difficult for competitors to duplicate.
As a result, the Company has less competition and, therefore,
produces a substantial percentage of the concrete and related
products used in these islands.
The Company currently performs earthmoving, excavating and filling
operations and builds golf courses, roads, utility infrastructures,
dredges waterways and constructs deep water piers and marinas in
the Caribbean. The Company has historically provided land devel-
opment contracting services to both private enterprises and govern-
ments in Florida and the Caribbean. Since early 1993, the Company
has not been seeking new contracts in the United States. The Com-
pany's project managers have substantial experience working in the
land development contracting business, and the Company has equip-
ment that is well-suited for the Caribbean markets. The Company
has equipment and personnel in the Caribbean that the Company
believes, in some instances, allow the Company to start work more
quickly and less expensively than other contractors and, therefore,
to bid competitively for and complete cost-effectively land
development contracts. The Company believes its relationships with
customers in the Caribbean give it a significant competitive advan-
tage.
The Company also owns and operates a marina in the United States
Virgin Islands and has a majority interest in a partnership that
manufactures and sells specialty ceiling tiles. The ceiling tile
business was discontinued for financial statement purposes as of
December 31, 1995.
The following table sets forth certain financial information
concerning the Company's concrete and related products, land
development contracting and other businesses:
1995 1994 1993
(in thousands)
Revenues*:
Concrete and related products $37,716 $39,342 $38,300
Contracting 16,068 22,942 16,926
Other 2,367 2,965 638
Total $56,151 $65,249 $55,864
Operating income (loss)*:
Concrete and related products 1,252 2,841 (321)
Contracting (569) 1,747 (6,943)
Other 409 321 128
Unallocated corporate overhead (818) (424) (1,019)
Total $ 274 $ 4,485 $(8,155)
* Information is presented net of intersegment sales. See Note
12 of Notes to Consolidated Financial Statements for addi-
tional financial information with respect to the Company's
business segments. See Summary of Significant Accounting
Policies in Notes to Consolidated Financial Statements.
The Company's principal executive offices are located at 1350 East
Newport Center Drive, Suite 201, Deerfield Beach, Florida 33442 and
its telephone number is (954)429-1500. Unless the context
otherwise requires, the terms the "Company" and "Devcon" as used
herein refer to Devcon International Corp. and its subsidiaries.
Business Development
The Company expanded its operations in the Caribbean by acquiring
a company in St. Martin in August 1995 which sells and distributes
ready mix concrete and operates a quarry. The Company opened ready-
mix concrete plants on the islands of Saba and St. Kitts during the
second quarter of 1993 and in 1992 completed the installation of a
bulk cement facility and cement bagging plant in Dominica. In
1991, the Company opened a ready mix concrete plant on the island
of Dominica and in October 1990 acquired the assets of a company
engaged in the ready mix concrete and quarry business on the island
of Tortola. The Company acquired an affiliated group of companies
operating a ready mix concrete operation, block plant, cement plant
and quarry in St. Maarten in April 1990. The Company is planning
to open a quarry in Puerto Rico in early 1996 and is presently
investigating the possibility of expanding its operations to other
areas of the Caribbean where the Company does not presently do
business. Such expansion can take place in the form of joint
ventures, acquisitions or other business arrangements. The Company
periodically reviews its strategic alternatives and is in the
process of such review now, with the assistance of a financial
advisor. The Company does not have any definitive agreements
regarding any particular strategic alternative, joint venture,
acquisition or business arrangement at this time and there can be
no assurance that the Company will be able to consummate any such
transactions on satisfactory terms.
Risks of Foreign Operations
Various portions of the Company's operations are conducted in
foreign areas, primarily Antigua, St. Maarten, St. Martin,
Dominica, Saba, St. Kitts and Tortola, all of which are in the
Caribbean. In 1995, 53.1 percent of the Company's revenues were
derived from foreign operations. Overseas contract work performed
by the parent company (a United States corporation) is not
considered foreign source revenue for purposes of the foregoing
calculation. The majority of contract work is performed by the
parent company. For a summary of the Company's revenues and
earnings from foreign operations, see Note 10 of Notes to
Consolidated Financial Statements. The potential risks of doing
business in foreign areas include potential adverse changes in the
diplomatic relations of foreign countries with the United States,
changes in the relative purchasing power of the United States
dollar, hostility from local populations, adverse effects of
exchange controls, restrictions on the withdrawal of foreign
investment and earnings, government policies against businesses
owned by non-nationals, expropriations of property, the instability
of foreign governments and the risk of insurrection that could
result in losses against which the Company is not insured. The
Company was not subject to these risks in Florida and is not
subject to them in the United States Virgin Islands (a United
States territory that uses the United States dollar as its
currency). The Company also is subject under certain circumstances
to United States Federal income tax upon the distribution of
certain offshore earnings. See Note 8 of Notes to Consolidated
Financial Statements. Although the Company has not encountered
significant difficulties in its foreign operations in the past,
there can be no assurance that the Company will not encounter
difficulties in the future.
Concrete and Related Products
General The Company manufactures and distributes ready-mix
concrete and crushed aggregate (both coarse and fine) on St. Thomas
and St. Croix, United States Virgin Islands, Antigua, St. Maarten,
St. Martin, Dominica, Saba, St. Kitts and Tortola (although crushed
aggregate is not manufactured on Dominica, St. Kitts and St.
Maarten). The Company's customers on St. Kitts are limited, at
this time, to those organizations or individuals engaged in duty
free contracting or development activities. The Company also
distributes bulk and bagged cement to customers on each of the
foregoing islands. In addition, the Company manufactures concrete
block on St. Thomas, Antigua and St. Maarten.
The Company's concrete and related products business employs assets
such as quarries, rock crushing plants, bulk cement terminals,
concrete block plants, concrete batch plants, a fleet of concrete
mixer trucks, cement bagging facilities and asphalt plants, in
various locations in the United States Virgin Islands, Antigua, St.
Maarten, St. Martin, Dominica, St. Kitts, Saba and Tortola. The
Company also has an oceangoing bulk cement ship that affords the
Company ready access to reliable and more economical sources of
cement. As a result, the Company has become the largest supplier
of concrete and related products in the United States Virgin
Islands, Antigua, St. Maarten, St. Martin, Dominica, Saba and
Tortola. The Company is presently investigating the possibility of
expanding its cement distribution and concrete and aggregate busi-
ness to other areas in the Caribbean. See "Business - Business
Development."
Ready-Mix Concrete and Concrete Block The Company's concrete batch
plants mix cement, sand, crushed stone, water and certain chemical
additives to produce ready-mix concrete for use in local construc-
tion. The Company's fleet of concrete mixer trucks deliver the
concrete to the customer's job site. At the Company's concrete
block plants, a low moisture concrete mixture is machine formed,
then dried and stored for later sale. The Company's ready-mix
concrete operations are significantly larger than those of any
other competitor on St. Croix, Antigua, St. Maarten, St. Martin,
Dominica, Tortola, Saba and St. Thomas. The Company has the only
concrete block plant on St. Thomas, and in Antigua and St. Maarten,
the Company's block plant is the area's largest.
Quarry Operations and Crushed Stone The Company owns or leases
quarry sites on which it blasts rock from exposed mineral forma-
tions. At the quarries, this rock is crushed and screened to
varying sizes of aggregate from 3 1/2-inch stones down to manufac-
tured sand, and the aggregate is then sorted, cleaned and stored.
The resulting aggregate is sold to customers and used in the
Company's operations to make concrete products. The Company's
quarries are the largest on St. Thomas, St. Croix, Antigua, St.
Martin, Saba and Tortola. It is significantly less expensive to
manufacture crushed rock at the Company's quarries than to import
aggregate from off-island sources.
Bulk and Bagged Cement The Company has an oceangoing bulk cement
ship with a 6,000 metric ton capacity. The ship delivers cement in
bulk to the Company's cement terminals on St. Thomas, St. Croix,
Antigua, Dominica and St. Maarten. From silos at these terminals,
the cement is transferred for use in the Company's concrete batch
plants, sold in bulk or bagged and then sold. Bulk cement is
readily available from a number of manufacturers located throughout
the Caribbean basin. As a result of the Company's bulk cement
ship, the Company is able to assure itself of reliable and
relatively economical sources of cement. See "Business -
Equipment."
Supplies The Company presently obtains all of the crushed rock and
a majority of the sand necessary for the production of ready-mix
concrete in the United States Virgin Islands, Antigua, St. Martin,
St. Maarten, Saba and Tortola by quarrying its own rock and
crushing it at its own locations. The Company's ability to produce
its own sand gives it a competitive advantage because of the
substantial investment required to produce sand, the difficulty in
obtaining the necessary environmental permits to establish quarries
and the moratorium on mining beach sand imposed by most Caribbean
countries. The sand the Company produces is blended with sand
obtained from various offshore sources unaffiliated with the
Company and, occasionally, from Company construction or dredging
sites. The Company's oceangoing bulk cement ship described above
allows it to satisfy its bulk cement requirements.
Customers The Company's primary customers are building
contractors, governments, asphalt pavers and individual homeowners.
Customers generally pick up quarry products, concrete block and
bagged cement at the Company's facilities, and the Company gen-
erally delivers ready-mix concrete and bulk cement to the
customer's job sites.
Competition The Company has few competitors in the concrete and
related products business in the locations where it conducts
business. The Company encounters competition from the producers of
asphalt, which is an alternative material to concrete for road
construction. The Company's concrete and related products facil-
ities and the Company's oceangoing bulk cement ship have enabled
the Company to establish a significant market share in the United
States Virgin Islands, Antigua, St. Maarten, St. Martin, Dominica,
Saba and Tortola and afford the Company resources, a production
capacity, a local presence and a cost structure that the Company
believes would be difficult for competitors to duplicate. As a
result, the Company believes that it presently has a competitive
advantage in the United States Virgin Islands, Antigua, St.
Maarten, St. Martin, Dominica, Saba and Tortola.
Land Development Contracting
General The Company has completed a wide variety of land
development construction projects since its inception, including
interstate highways, airport sites and runways, deep-water piers
and marinas, hydraulic dredging projects, golf courses, industrial
site development and residential and commercial site development.
The Company generally attempts to pursue the most profitable types
of land development contracting work available, rather than
attempting to maintain a high level of volume. In prior years, the
Company has been engaged in residential and commercial site
development (including golf courses) for real estate developers in
Florida and the Caribbean, and marine construction (dredging of
deep-water harbors and construction of deep-water piers and
marinas) in the Caribbean. Since early 1993, the Company has not
been seeking new contracts in the United States.
The nature of the work performed by the Company's land development
contracting division is such that the work is accomplished and
revenue generated on a contract-by-contract basis. The majority of
the Company's land development contracts are less than one year in
duration, although it does obtain multi-year contracts from time to
time. A majority of the Company's contracts are fixed-price
contracts. These contracts are bid or negotiated at an established
price that does not vary except for changes in the scope of the
work requested by the owner during the term of the contract. The
majority of the Company's work is performed using its own labor and
equipment and is not subcontracted. The Company also enters into
unit-price contracts pursuant to which the Company's fee is based
upon the quantity of work performed. The Company historically has
contracted to provide land development contracting services to both
private enterprises and governments. The Company believes that, on
occasion, it is able to obtain more desirable margins on some
private and public contracts in the United States Virgin Islands
and Antigua because the Company has equipment and personnel in
those markets that, in some instances, allow the Company to start
work more quickly and less expensively than other contractors. As
a result, the Company believes that it is able to bid competitively
for and complete cost-effectively land development contracts in the
Company's Caribbean markets.
Operations The Company's first step in any project is deciding
whether to submit a bid on, or to negotiate to undertake, a
particular project. The Company obtains leads for new projects
from a variety of sources, including past or existing customers of
the Company, referrals from past or existing customers and
referrals from engineering firms with which the Company has estab-
lished business relationships. At the appropriate time, a proposal
is submitted that the Company believes will best meet a customer's
objectives. In some instances in the past, the Company has
provided long-term or short-term financing to facilitate early com-
mencement or efficient continuation of a project. The Company
believes that providing such financing enhances its ability to
obtain more profitable construction contracts. The continuation of
such financing is contingent upon the financial position and
operating results of the Company. All project proposals and bids
are reviewed by the Company's Vice President of Construction
Operations and/or the Company's President, depending upon the size
of the contract. After a proposal has been accepted, a formal
contract is negotiated with the customer. The Company is normally
the prime contractor on any work it undertakes. The Company
assigns a project manager and a field superintendent to maintain
close contact with the customer and its engineers, to supervise
personnel and the relocation, purchase, lease and maintenance of
equipment and to schedule and monitor the Company's operations.
The Company currently employs 5 job superintendents.
Backlog The Company's backlog of unfilled portions of land
development contracts at December 31, 1995 was $11.4 million
involving 25 projects, as compared to $6.8 million involving 23
projects at December 31, 1994. Since December 31, 1995 the Company
has entered into new land development contracts in the Caribbean
amounting to $432,000. As a result of the Company's current
backlog, new contracts must be obtained as 1996 progresses, in
order to achieve the contract revenue levels obtained in 1995. The
Company reasonably expects that all of the backlog, including the
1996 contracts, will be completed during the year ending December
31, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Revenues."
Bonding In order to bid on some private construction contracts and
substantially all government contracts, the Company must obtain a
bond for the performance of the contract. The Company's bonding
capacity is sufficient to enable the Company to perform some
government and major private contracts.
Competition The land development contracting business is extremely
competitive, regardless of the general level of activity within the
construction industry. The Company believes that the primary fac-
tors of competition are price, prior experience and relationships,
the amount of machinery and heavy equipment available to complete
a given job, the speed with which a company can complete a specific
contract, the availability of an engineering staff to assist an
owner in planning its projects so as to minimize costs, the ability
to innovate and, where applicable, the ability to obtain bonding
for large contracts in order to guarantee completion. Management
believes that the Company competes effectively on the basis of the
foregoing factors and that the Company's relative competitive
position in its Caribbean markets is favorable.
Other Operations
Marina Two subsidiaries of the Company own a Virgin Islands
general partnership formed in 1988 to construct and operate a
marina on a 4.92 acre parcel of land leased by the partnership from
the United States Virgin Islands government. The lease is for a
term of 20 years commencing in 1991 and contains a renewal option
for an additional 10 years. The Company originally owned fifty
percent of the marina partnership. It acquired management control
of the marina in 1991 and acquired its partners fifty percent
interest in 1992. The marina facility contains retail and office
space, a fuel farm and 96 slips for boats ranging in size from 15
to 200 feet in length.
Discontinued Operations
In September 1989, a subsidiary of the Company obtained a minority
interest in a partnership engaged in the manufacture, sale and
distribution of acoustical ceiling tiles. The subsidiary invested
approximately $1.2 million in the partnership for a 29 percent
interest and two of the Company's directors obtained an 11 percent
interest for which they paid $450,000. In January 1994 an Antiguan
subsidiary of the Company became the new general partner and the
Company's ownership interest in the partnership was increased to
57.98 percent. The directors' ownership interest was reduced to
6.47 percent. In November 1995 the Company elected to dispose of
this operation because of its poor operating results and uncertain
prospects for improvement. Accordingly, at December 31, 1995, the
intended disposal has been accounted for as a discontinued
operation. The financial statements for all prior periods
presented have been restated to reflect the ceiling tile
partnership as a discontinued operation. The Company's investment
in the partnership was written down $800,000, to its estimated net
realizable value of approximately $749,000, which consists of
property, equipment and inventory with a net book value of
approximately $1.4 million, along with debt of approximately
$621,000. The Company provided no reserve for anticipated losses
during the phaseout period and expects to recognize no income tax
benefit on the loss from discontinued operations. The Company is
currently negotiating the sale of a major portion of the
partnership's net assets, however, no definitive sales agreement
has been concluded at this time.
In 1991 the marina, discussed in "Other Operations", was classified
as a discontinued operation for financial statement presentation
purposes. The marina assets were written down $2.2 million dollars,
to their estimated net realizable value, and a reserve of $1.3
million dollars was established for marina losses for the period
from January 1, 1992 to the expected disposal date. The Company
elected to reconsolidate the marina operation into its financial
statements as of September 30, 1993, primarily because the Company
believed it would take a significant amount of time to dispose of
the marina in the current real estate market. Approximately
$600,000 of the original $1.3 million reserve was reflected as a
gain on discontinued operations subsequently retained.
Tax Exemptions and Benefits
The Company for a number of years has benefitted from having a
substantial part of the earnings of its offshore operations taxed
at rates lower than United States statutory Federal income tax
rates due to tax exemptions and lower prevailing tax rates
offshore. The United States Virgin Islands Industrial Development
Commission ("IDC") and the Government of Antigua have granted the
Company certain tax exemptions that exempt a larger portion of the
earnings of the Company's offshore operations from tax in the
United States Virgin Islands and Antigua through 2003 and 1996, as
more fully described below.
In April 1988, the IDC granted a subsidiary of the Company a 10-
year tax exemption expiring in 1998, pursuant to which, and subject
to certain conditions and exceptions, the Company's (i) production
and sale of ready-mix concrete; (ii) production and sale of
concrete block on St. Thomas and St. Johns and outside of the
Virgin Islands; (iii) production and sale of sand and aggregate;
and (iv) bagging of cement from imported bulk cement, are 100
percent exempt from all United States Virgin Islands real property,
gross receipts (currently set at 4 percent) and excise taxes, 90
percent exempt from United States Virgin Islands income taxes, and
approximately 83 percent exempt from United States Virgin Islands
custom duties. The IDC granted the Company the tax exemption in
return for the Company's commitment to (i) make capital expendi-
tures of at least $4.6 million for new or replacement equipment
over a 10-year period, which the Company has satisfied; (ii) employ
a minimum of 142 United States Virgin Islands residents as full-
time personnel; (iii) spend at least $75,000 annually for a youth
training program; (iv) not increase the price of its concrete and
related products except as the result of certain direct cost
increases incurred by the Company over which it has no control; and
(v) make an annual scholarship fund contribution of $150,000.
In January 1994, the Company received a five year extension,
through April 2003, of its previously granted benefits. This
extension was granted in return for the Company agreeing to (i)
continue to employ a minimum of 160 United States Virgin Islands
residents as full time personnel, (ii) make additional capital
expenditures of $1.7 million and (iii) continue to make a combined
youth training/scholarship contribution of $225,000 per annum
during the extension period.
In partial consideration for the Company's work on a major
contract, the Government of Antigua granted two subsidiaries of the
Company a 10-year tax holiday effective January 1, 1987 and
expiring on December 31, 1996 from all taxes due (i) in connection
with the Company's construction contract with Antigua to, among
other things, dredge St. John's harbor, (ii) as a result of the
Company's participation in a joint venture to develop 230 acres of
vacant land as well as 20,000 square feet of commercial property in
Antigua; and (iii) in connection with the Company's sale of
concrete and related products in Antigua. The tax holiday also
exempted the Company from certain accrued tax liabilities. In
1989, in connection with and in consideration for additional work
done by the Company with respect to the foregoing contract, the
Government of Antigua granted an additional tax exemption to the
Company. The tax exemption exempts the Company from taxes that
would otherwise result from the Company's income relating to a
construction contract in Jolly Harbor, Antigua.
Furthermore, as a result of certain United States tax laws,
earnings from the Company's offshore operations are not taxable for
United States Federal income tax purposes and most post-April 1988
concrete and related product earnings in the United States Virgin
Islands can be distributed to the Company in the United States free
of statutory United States Federal income tax. However, the
distribution to the Company's United States operations of (i) earn-
ings from the Company's United States Virgin Islands operations
accumulated prior to April 1, 1988 or (ii) earnings from the
Company's Antigua, St. Martin, St. Maarten, Dominica, Saba, St.
Kitts and Tortola operations, would in each case subject the
Company to United States Federal income tax on any amounts so
distributed, less applicable tax credits for taxes previously paid
in such jurisdictions. At December 31, 1995, $41.0 million of such
accumulated earnings from the Company's United States Virgin
Islands, Antigua, St. Martin, St. Maarten, Dominica, Saba, St.
Kitts and Tortola operations had not been distributed to the
Company's United States operations. The Company has not provided
for Federal income tax on the undistributed earnings of foreign
subsidiaries because the Company intends to permanently reinvest
those earnings in regions offshore of the United States.
The aforementioned tax exemptions, along with the Company's ability
to receive most of the current earnings from its United States
Virgin Islands operations without being subjected to United States
Federal income taxes thereon, result in a significant reduction in
the tax expense (including Federal income taxes) incurred by the
Company with respect to its earnings from Caribbean operations.
For further information on both tax exemptions and income taxes in
general, see Note 8 of Notes to Consolidated Financial Statements.
Equipment
The concrete and related products and the land development
contracting businesses require the Company to purchase and maintain
many items of equipment. As of December 31, 1995, the Company's
equipment included an ocean going bulk cement vessel, draglines,
cranes, bulldozers, road graders, rollers, backhoes, earthmovers,
hydraulic dredges, barges, traxcavators, rock crushers for use at
the Company's rock crushing plants, equipment at the Company's bulk
cement terminals and concrete block and batch plants, concrete
mixer trucks, asphalt processing and paving equipment and other
miscellaneous items. A portion of this equipment is encumbered by
chattel mortgages. See Notes 7 and 11 of Notes to Consolidated
Financial Statements.
Employees
At December 31, 1995, the Company employed 99 persons in the land
development contracting business in the Caribbean, of whom 31
United States Virgin Islands and Antigua employees are members of
a union. The Company employed 403 persons in its concrete and
related products division, of whom 128 employees in the Caribbean
are members of a union. The Company will also utilize personnel in
one division or another as its needs warrant. In addition, the
Company employs 40 managerial, supervisory and administrative
personnel in the overall administration and management of all divi-
sions of the Company. Employee relations in the Company are
considered satisfactory and the Company has never been subjected to
a work stoppage.
Miscellaneous Investments and Joint Ventures
The Company has invested or participated in several joint ventures
in connection with the activities of its land development
contracting division and concrete and related products division,
which are more particularly described below.
In connection with a land development contract with the Government
of Antigua and as partial consideration therefor, the Company
obtained a 75 percent interest in a corporation formed to own and
develop approximately 230 acres of real property
in Antigua (the "Corbkinnon Property"), and a 1 percent interest in
another corporation (the "Newport Project") formed to develop
approximately 20,000 square feet of commercial property located in
downtown St. Johns, Antigua. In 1990, the Company sold a portion
of its 75 percent interest in the Corbkinnon Property for $500,000
and the buyer's commitment to provide 50 percent of the financing
required to develop the project. The Company agreed to provide the
first $500,000 of financing and provide a guarantee for 50 percent
of all additional financing required. As a result of the
transaction, the Company's remaining interest in the Corbkinnon
Property is 34 percent. The Company did not record earnings or
losses for the Newport Project in 1995 because the amounts are not
material. The Company wrote down its investment in the Corbkinnon
Property by $200,000 in 1993. For additional information, see Notes
4 and 10 of Notes to Consolidated Financial Statements.
The Company is a 43 percent shareholder in a Tortolan corporation
formed to construct condominium housing units in Antigua. The
Company has advanced $200,000 in capital contributions to the
Tortolan corporation. In 1995, the Company recorded no earnings or
loss related to its investment in this corporation, which
investment is being accounted for under the equity method. For
additional information, see Note 4 of Notes to Consolidated
Financial Statements.
Item 2. Property
General
Substantially all of the real property that the Company owns or
leases is utilized by its concrete and related products division.
The Company has quarries, rock crushing plants and concrete batch
plants on St. Thomas, St. Croix, Antigua, St. Martin, Saba and
Tortola, concrete batch plants on Dominica, St. Maarten and St.
Kitts, and bulk cement terminals and cement bagging facilities on
St. Croix, St. Thomas, St. Maarten, Dominica and Antigua. In
addition, the Company has asphalt plants on St. Croix and Antigua
and concrete block plants on St. Thomas, Antigua and St. Maarten.
Other Property
The Company also has a 34 percent interest in 230 acres of real
property and a 1 percent interest in a commercial property
development, both in Antigua (see "Business - Miscellaneous
Investments and Joint Ventures"), and the Company owns undeveloped
parcels of land in Collier County, Florida, and St. Johns, United
States Virgin Islands. The Company has no current plans to develop
or sell the parcels located in the United States and United States
Virgin Islands.
The following table sets forth certain information concerning the
property and facilities that are owned or leased by the Company for
use in its operations.
[CAPTION]
Lease Expira-
tion with all
Description Location Options
Principal executive
offices Deerfield Beach 5/07
Maintenance shop
for heavy equip-
ment Deerfield Beach Month to Month
Concrete block plant and St. Thomas 6/04
equipment maintenance
facility
Quarry and office building St. Thomas -
Quarry and concrete
batch plant St. Thomas 2/98
Barge terminal St. Thomas 7/97
Bulk cement terminal
and bagging facility St. Thomas 5/12
Marina and adjoining
commercial property St. Thomas 6/21
Quarry St. Thomas 8/96
Bulk cement terminal,
bagging facility St. Croix -
Concrete batch plant
and office St. Croix -
Quarry, rock crushing
plant and St. Croix -
maintenance shop St. Croix 7/10
St. Croix 5/03
Concrete batch plant,
concrete block Antigua 9/16
plant, rock crushing
plant, asphalt plant,
quarry and office
Bulk cement terminal and
bagging facility Antigua -
Concrete batch plant,
cement bagging Dominica 6/12
plant, undeveloped
land, silo and office Dominica -
Concrete batch plant
and block plant St. Maarten 5/12
Equipment maintenance
facility and office
building St. Maarten 6/48
Cement terminal and
barge unloading
facility St. Maarten 6/05
Bagging facility St. Maarten 4/01
Undeveloped land - future
site of concrete St. Maarten 3/51
batch plant, concrete
block plant, equipment
maintenance facility and
office building
Quarry, rock crushing
plant, concrete Tortola -
batch plant, equipment
maintenance facility
and office building
Quarry, rock crushing
plant and Saba 12/02
concrete batch plant
Concrete batch plant St. Kitts Month to Month
Quarry, rock crushing
plant, concrete St. Martin 7/10
batch plant and
office building
Ceiling tile manu-
facturing plant and
office Matamoros -
(continued)
Description Leased Area
Principal executive
offices 8,410 sq.ft.(1)
Maintenance shop
for heavy equip-
ment 4.40 acres(1)(2)
Concrete block plant and 11.00 acres(1)
equipment maintenance facility
Quarry and office building 8.50 acres
Quarry and concrete batch plant 44.00 acres(1)
Barge terminal 1.50 acres(1)
Bulk cement terminal and bagging facility .50 acres(1)
Marina and adjoining commercial property 4.92 acres(1)
Quarry 7.49 acres (1)
Bulk cement terminal, bagging facility 7.00 acres
Concrete batch plant and office 3.20 acres
Quarry, rock crushing plant and 61.34 acres
maintenance shop 6.00 acres (1)
10.78 acres (1)
Concrete batch plant, concrete 22.61 acres (1)
block plant, rock crushing plant,
asphalt plant, quarry and office
Bulk cement terminal and bagging facility 8.00 acres
Concrete batch plant, cement bagging 1.14 acres (1)
plant, undeveloped land, silo and office .77 acres
Concrete batch plant and block plant 7.77 acres(1)
Equipment maintenance facility
and office building 5.38 acres (1)
Cement terminal and barge unloading
facility .30 acres (1)
Bagging facility .30 acres (1)
Undeveloped land - future site of concrete 3.00 acres(1)
batch plant, concrete block plant,
equipment maintenance facility and
office building
Quarry, rock crushing plant, concrete 30.00 acres
batch plant, equipment maintenance
facility and office building
Quarry, rock crushing plant and 6.00 acres(1)(3)
concrete batch plant
Concrete batch plant 1.00 acre(1)(3)
Quarry, rock crushing plant, concrete 123.5 acres (1)
batch plant and office building
Ceiling tile manufacturing plant and office 2.47 acres
(1) Underlying land is leased, however, any equipment or machinery
on the land is owned by the Company.
(2) Leased from Donald L. Smith, Jr., the Company's Chairman,
President, and Chief Executive Officer. See "Certain
Relationships and Related Transactions."
(3) Acreage is estimated.
Item 3. Legal Proceedings
The Company is from time to time involved in routine litigation
arising in the ordinary course of its business, primarily related
to its contracting activities. No litigation in which the Company
is presently involved is material to its financial position or
results of operations.
The Company is subject to certain Federal, state and local en-
vironmental laws and regulations. Management believes that the
Company is in compliance with all such laws and regulations.
Compliance with environmental protection laws has not had a
material adverse impact on the Company's financial condition or
results of operations in the past and is not expected to have a
material adverse impact in the foreseeable future.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stock-
holder Matters.
MARKET INFORMATION
The Company's Common Stock is traded in the over-the-counter market
and quoted in the NASDAQ National Market System under the symbol
DEVC. The following table sets forth the high and low sales prices
for the Company's Common Stock for each quarter for the last two
fiscal years as quoted in the NASDAQ National Market System.
1995 High Low
First Quarter $8.75 $8.00
Second Quarter 8.38 6.75
Third Quarter 9.88 5.50
Fourth Quarter 8.88 6.87
1994 High Low
First Quarter $7.50 $6.37
Second Quarter 9.50 6.75
Third Quarter 9.75 7.75
Fourth Quarter 8.75 7.75
As of March 25, 1996, there were 247 holders of record of the
4,464,510 outstanding shares of Common Stock. The closing sales
price for the Common Stock on March 25, 1996 was $9.13. The
Company paid no dividends in 1995 or 1994. The payment of cash
dividends will depend upon the earnings, financial position and
cash requirements of the Company, its compliance with loan
agreements and other relevant factors existing from time to time.
The Company does not presently intend to pay dividends.
Item 6. Selected Financial Data
The following selected financial data of the Company and its
consolidated subsidiaries are qualified in their entirety by, and
should be read in conjunction with, the Consolidated Financial
Statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The
data for each of the 5 years in the period ended December 31, 1995,
are derived from the Consolidated Financial Statements of the
Company audited by KPMG Peat Marwick LLP, independent certified
public accountants. The Consolidated Financial Statements of the
Company as of December 31, 1995 and 1994 and for each of the years
in the three year period ended December 31, 1995, and the report
thereon appear elsewhere herein.
[CAPTION]
Year Ended December 31,
1995 1994 1993
Earnings Statement Data: (In thousands, except per
share amounts)
Concrete and related
products revenues $ 37,716 $ 39,342 $ 38,300
Contracting revenues 16,068 22,942 16,926
Other revenues 2,367 2,965 638
Total revenues 56,151 65,249 55,864
Cost of concrete and
related products 29,069 29,200 31,820
Cost of contracting 14,103 19,250 19,700
Cost of other 1,721 2,388 529
Gross profit 11,258 14,411 3,815
Selling, general and
administrative
expenses 10,984 9,926 11,970
Operating income
(loss) 274 4,485 (8,155)
Other deductions (1,961) (1,854) (3,338)
Income (loss) from
continuing
operations before
income taxes (1,687) 2,631 (11,493)
Income taxes 145 50 108
Income (loss) from
continuing
operations (1,832) 2,581 (11,601)
Income (loss) from
discontinued
operations, net (915) (470) 2,027
Cumulative effect of
change in accounting
principle - - 500
Net earnings (loss) $ (2,747) $ 2,111 $ (9,074)
Earnings (loss)per share:
From continuing
operations $ (.40) $ .57 $ (2.55)
From discontinued
operations (.20) (.11) .44
From change in
accounting
principle - - .11
$ (.60) $ .46 $ (2.00)
Weighted average number
of shares outstanding 4,567 4,560 4,541
Balance Sheet Data:
Working capital $ 4,848 $ 10,845 $ 3,312
Total assets 97,313 99,541 101,518
Long-term debt,
excluding current
installments 15,548 17,454 16,776
Total stockholders' 59,159 61,655 59,544
equity
(continued)
Year Ended December 31,
1992 1991
Earnings Statement Data: (In thousands, except per
share amounts)
Concrete and related
products revenues $ 43,042 $ 47,747
Contracting revenues 32,248 41,929
Other revenues - -
Total revenues 75,290 89,676
Cost of concrete and
related products 31,972 30,909
Cost of contracting 31,245 39,843
Cost of other - -
Gross profit 12,073 18,924
Selling, general and
administrative
expenses 11,435 15,437
Operating income
(loss) 638 3,487
Other deductions (1,801) (640)
Income (loss) from
continuing
operations before
income taxes (1,163) 2,847
Income taxes 195 60
Income (loss) from
continuing
operations (1,358) 2,787
Income (loss) from
discontinued
operations, net (87) (4,468)
Cumulative effect of
change in accounting
principle - -
Net earnings (loss) $ (1,445) $ (1,681)
Earnings(loss)per share:
From continuing
operations $ (.30) .62
From discontinued
operations (.02) (.99)
From change in
accounting
principle - -
$ (.32) $ (.37)
Weighted average number
of shares outstanding 4,515 4,536
Balance Sheet Data:
Working capital $ 8,524 $ 13,119
Total assets 105,755 107,653
Long-term debt,
excluding current
installments 10,127 11,314
Total stockholders' 68,118 70,064
equity
Item 7. 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
General
The following tables set forth, for the periods indicated, certain
financial information.
[CAPTION]
Year Ended December 31,
1995 vs. 1994 1994 vs. 1993
Percentage Increase
(Decrease) in
Revenues*:
Concrete and related
products (4.1)% 2.7%
Contracting (30.0) 35.5
Other (20.2) N/A
[CAPTION]
Year Ended December 31,
1995 1994 1993
Percentage of Concrete
and Related
Products Revenues*:
Concrete and related
products gross profit 22.9% 25.8% 16.9%
Concrete and related
products operating income 3.3 7.2 (.8)
Percentage of Contracting
Revenues*:
Contracting gross profit 12.2% 16.1% (16.4)%
Contracting operating
income (3.5) 7.6 (41.1)
Percentage of Total
Revenues*:
Selling, general and
administrative expense 19.6% 15.2% 21.4%
Operating income .5 6.9 (14.6)
* Information is presented net of intersegment sales and before
discontinued operations. See Note 12 of Notes to Consolidated
Financial Statements. See Summary of Significant Accounting
Policies in Notes to Consolidated Financial Statements.
Comparison of Year Ended December 31, 1995 with Year Ended
December 31, 1994
Revenues
The Company's revenues in 1995 were $56.2 million as compared to
$65.2 million in 1994. This 13.9 percent decrease was primarily
due to decreases in the Company's land development contracting
revenues, and to a lesser extent decreases in concrete and related
products division revenues.
The Company's concrete and related products division revenues
decreased 4.1 percent to $37.7 million in 1995 from $39.3 million
in 1994. This decrease was primarily due to decreased demand for
this division's products on two Caribbean Islands, offset by
increased demand on certain other islands. Hurricanes Luis and
Marilyn, which struck the Caribbean in September 1995, disrupted
business operations significantly in the short term, however, sales
volumes in all locations except two have returned to or exceeded
pre-storm levels.
Revenues from the Company's land development contracting division
decreased by 30.0 percent to $16.1 million in 1995 from $22.9
million in 1994. This decrease was primarily attributable to the
recognition of revenues in 1994 on several construction contracts
obtained during the latter part of 1993. The Company's contracting
operations were not significantly affected by the hurricanes,
although it did acquire a number of hurricane-related repair and
rebuilding projects. The Company needs to obtain additional new
contracts throughout 1996 in order to maintain the revenue levels
obtained in 1995.
Revenues from the Company's other operation (a marina in the U. S.
Virgin Islands) were $2.4 million in 1995 and $3.0 million in 1994.
This decline is primarily due to a decline in revenues resulting
from the disruption in business caused by the hurricane which
struck St. Thomas.
Cost of Concrete and Related Products
Cost of concrete and related products as a percentage of concrete
and related products revenues increased to 77.1 percent in 1995
from 74.2 percent in 1994. This increase was primarily
attributable to changes in the mix of products sold and the decline
in revenues actually recognized.
Cost of Contracting
Cost of contracting as a percentage of land development contracting
revenues increased to 87.8 percent in 1995 from 83.9 percent in
1994. This increase is attributable to the decline in revenues
actually recognized, contract losses recognized on several
contracts and the significant levels of cost involved in owning and
operating heavy construction equipment, some of which, because of
the Company's current level of construction volume, is not heavily
used. In addition, the Company's gross margins are also affected
by the varying profitability levels of individual contracts and the
stage of completion of such contracts.
Cost of Other
Cost of other as a percentage of other revenues decreased to 72.7
percent in 1995 from 80.5 percent in 1994. This was due primarily
to the decrease in revenues recognized, offset by decreases in
costs actually incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A expense")
increased by 10.7 percent to $11.0 million in 1995 from $9.9
million in 1994. This increase was primarily attributable to the
opening of a new operation on St. Martin in 1995, and increases in
insurance and other operating costs, offset by decreases in cost
resulting from various personnel reductions. SG&A expense as a
percentage of revenue increased to 19.6 percent in 1995 from 15.2
percent in 1994. This percentage increase was primarily
attributable to the decrease in revenues recognized and the
increase in expenses actually incurred.
Divisional Operating Income
Operating income decreased to $274,000 in 1995 from $4.5 million in
1994. The Company's concrete and related products division
operating income decreased to $1.3 million in 1995 from $2.8
million in 1994. This decrease is primarily attributable to
decreases in sales revenues and increases in cost of sales.
The Company's land development contracting division operating
income decreased to a loss of $569,000 in 1995 from income of $1.7
million in 1994. This decrease is primarily attributable to
declines in contract revenues recognized and losses taken on
certain contracts.
The Company's other division operating income increased to $409,000
in 1995 from $321,000 in 1994. The increase was due to lower than
expected costs and insurance recoveries.
Income Taxes
Income taxes increased to $145,000 in 1995 from $50,000 in 1994.
The Company's tax rate varies depending on the level of the
Company's earnings in the various tax jurisdictions in which it
operates and the level of operating loss carryforwards and tax
exemptions available to the Company.
Net Earnings (Loss)
The Company's net loss was $2.7 million in 1995 as compared to
income of $2.1 million in 1994. This net loss was primarily
attributable to losses recognized in the Company's land development
contracting division, declines in the concrete and related products
division profits and the writedown of the Company's investment in
its ceiling tile business.
Comparison of Year Ended December 31, 1994 with Year Ended
December 31, 1993
Revenues
The Company's revenues in 1994 were $65.2 million as compared to
$55.9 million in 1993. This 16.8 percent increase was primarily
due to increases in the Company's land development contracting
revenues, other division revenues and, to a lesser extent,
increases in concrete and related products division revenues.
The Company's concrete and related products division revenues
increased 2.7 percent to $39.3 million in 1994 from $38.3 million
in 1993. This increase was primarily due to increased demand for
this division's products on certain Caribbean Islands, which was
generated by a modest increase in the overall level of construction
activity in certain locations in which the Company operates its
business, offset by a decrease on one island.
Revenues from the Company's land development contracting division
increased by 35.5 percent to $22.9 million in 1994 from $16.9
million in 1993. This increase was primarily attributable to the
recognition of revenues in 1994 on several construction contracts
obtained during the latter part of 1993. The Company is currently
seeking new contract work in the Caribbean only.
Revenues from the Company's other operation (a marina in the U. S.
Virgin Islands) were $3.0 million in 1994 and $638,000 in 1993.
The marina operation was only consolidated for the fourth quarter
of 1993.
Cost of Concrete and Related Products
Cost of concrete and related products as a percentage of concrete
and related products revenues decreased to 74.2 percent in 1994
from 83.1 percent in 1993. This decrease was primarily
attributable to the mix of products sold, the locations in which
sales were made during the year and the slight increase in
revenues. During 1993, the Company also reduced, by $1.5 million,
the valuations of sand and parts inventories located at two island
operations and recorded additional depreciation expense on assets
which had been earlier removed from service and subsequently
returned to the fixed asset accounts.
Cost of Contracting
Cost of contracting as a percentage of land development contracting
revenues decreased to 83.9 percent in 1994 from 116.4 percent in
1993. This decrease is attributable to the higher profit margins
obtained on several contracts, partially offset by the significant
levels of cost involved in owning and operating heavy construction
equipment, some of which, because of the Company's current level of
construction volume, is not heavily used. In addition, the
Company's gross margins are also affected by the varying
profitability levels of individual contracts and the stage of
completion of such contracts. The Company believes it is entitled
to additional compensation on a Florida construction project and
will continue to pursue a claim of approximately $3.2 million
against the owner of the property. While the Company believes it
has a meritorious claim, there is no assurance that the claim will
be settled on a basis favorable to the Company.
Cost of Other
Cost of other as a percentage of other revenues decreased to 80.5
percent in 1994 from 82.9 percent in 1993. This was due primarily
to the increase in revenues recognized, offset to some extent by
the increase in costs actually incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A expense")
decreased by 17.1 percent to $9.9 million in 1994 from $12.0
million in 1993. This decrease was primarily attributable to
reductions in insurance, professional fees and personnel costs
resulting from the phaseout of the United States construction
operations, offset by additional SG&A costs of the marina, which,
except for the fourth quarter, was not consolidated into the
Company's financial statements in 1993. SG&A expense as a
percentage of revenue decreased to 15.2 percent in 1994 from 21.4
percent in 1993. This percentage decrease was primarily
attributable to the increase in revenues recognized and the
decrease in expenses actually incurred.
Divisional Operating Income
Operating income increased to income of $4.5 million in 1994 from
a loss of $8.2 million in 1993. The Company's concrete and related
products division operating income increased to $2.8 million in
1994 from a loss of $321,000 in 1993. This increase is primarily
attributable to decreases in cost of sales and a slight increase in
revenues for this division.
The Company's land development contracting division operating
income increased to income of $1.7 million in 1994 from a loss of
$6.9 million in 1993. This increase is primarily attributable to
profits recognized on new Caribbean construction contracts, the
losses taken in 1993 on two United States construction projects and
the elimination of a significant portion of the United States
contracting overhead.
Interest Expense
Interest expense increased to $2.7 million in 1994 from $2.2
million in 1993. This increase was primarily due to the
reconsolidation into the financial statements of the marina
operation and its related debt, along with increases in interest
rate levels during 1994.
Income Taxes
Income taxes decreased to $50,000 in 1994 from $108,000 in 1993.
The Company's tax rate varies depending on the level of the
Company's earnings in the various tax jurisdictions in which it
operates, the level of operating loss carryforwards and tax
exemptions available to the Company.
Net Earnings (Loss)
The Company's net earnings increased to income of $2.1 million in
1994 from a net loss of $9.1 million in 1993. This increase in net
earnings was primarily attributable to profits recognized in the
Company's land development contracting division, improvements in
the concrete and related products division profits and reductions
of selling, general and administrative expenses.
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. 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 $4.8 million at
December 31, 1995) and funds available from lines of credit will be
adequate to meet the Company's anticipated needs for operations
during the next twelve months.
At December 31, 1995, 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 Caribbean. The Company
had $2.0 million of borrowings outstanding under the $2.0 million
line of credit, $517,000 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 expires in
May 1996, the $1.0 million line expires in June 1996 and the two
$400,000 lines have no expiration date. The interest rates on all
such indebtedness outstanding at December 31, 1995 was 9.3 percent.
The Company has a $500,000 unsecured overdraft facility from a
commercial bank in the Caribbean. The facility expires on
September 30, 1996 and bears interest at 14.0 percent per annum.
At December 31, 1995 the Company had borrowings of $512,000
outstanding under this line.
The Company 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 December 31, 1995, the Company had borrowings of
$170,000 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 December
31, 1995 ranged from 9.0 percent to 10.3 percent and the Company
had $5.0 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 December 31 1995 was 9.5 percent and
the Company has $2.0 million of borrowings outstanding. This loan
is being repaid in quarterly installments which commenced in
November 1993 and all remaining unpaid amounts are due in full on
June 30, 1996. The loan is secured by the Company's notes
receivable from the Government of Antigua and Barbuda.
The Company has borrowed $4.7 million from a Company officer. One
note has an outstanding balance of $4.5 million, is unsecured,
bears interest at the prime interest rate and is due in full on
January 1, 1997. The other note has a balance of $140,000, is
secured by equipment, bears interest at 8.0 percent per annum and
is due in monthly principal installments of $10,000, plus interest,
through February 1997.
The Company is seeking a commitment from a bank in the Caribbean
for a new $8.2 million credit facility which would be structured as
a seven year term loan of $7.2 million with a $1.0 million
revolving line of credit tied to the same facility. The bank
reacted favorably to the Company's proposal although there is no
assurance that the loan will be granted on terms acceptable to the
Company or even granted at all. The loan proceeds of $7.2 million
would be used to repay and retire a $2.0 million revolving line of
credit which expires in May 1996, two term loans totalling $1.3
million, an equipment loan with a balance of $375,000, a term loan
with a balance of $2.0 million which is due in June 1996, a line of
credit with a balance of $517,000 which expires in June 1996,
another line of credit with a balance of $400,000 which expires in
May 1996 and various other notes amounting to approximately
$318,000. The balance of $300,000 would be used to provide
additional working capital for the Company. The loan would be
collateralized by various parcels of real property located in the
United States Virgin Islands. If the new credit facility is not
obtained, the Company will seek alternative financing or extensions
of its existing facilities expiring in 1996.
The Company purchases equipment from time to time as needed for its
ongoing business operations. At present, management believes that
the Company's inventory of equipment is adequate for its current
contractual commitments and operating activities, however, the
acquisition of significant new construction contracts, depending on
the nature of the contract, the job location and job duration, may
require the Company to make significant investments in heavy
construction equipment. During 1995, the Company sold equipment
with an original cost basis of approximately $2.4 million and net
book value of $534,000.
Accordingly, except for the circumstances previously discussed, and
normal equipment replacements and additions, management does not
anticipate having to make a substantial investment in new equipment
during the current year. The Company believes it has available or
can obtain sufficient financing for all of its contemplated
equipment replacements and additions. Historically, the Company
has used a number of lenders to finance machinery and equipment
purchases, including its ocean going bulk cement vessel, on an
individual asset basis. At December 31, 1995 amounts outstanding
to these lenders totalled $7.1 million. These loans are typically
repaid over a three to six year term in monthly principal and
interest installments.
The Company is in violation of certain loan covenants in several of
its loan agreements with two lenders. One of its lenders has
provided the Company a waiver of the violations and the Company
believes it can obtain a waiver from the other lender.
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. As part of the 1995
acquisition of Societe des Carrieres de Grand Case (SCGC), a French
company operating a ready-mix concrete plant and quarry in St.
Martin, the Company agreed to pay the quarry owners (who were also
the owners of SCGC), a royalty payment of $550,000 per year through
August 2000, which at the Company's option, may be renewed for two
successive five year periods and requires annual payments of
$550,000 per year. At the end of the fifteen year royalty period,
the Company has the option to purchase a fifty hectare parcel of
property for $4,400,000. In connection with the 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 December 31, 1995 include
$16.2 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, $2.5 million of which is
classified as a current receivable. Scheduled payments call for
both quarterly and monthly principal and interest payments until
maturity in 1997. The Government of Antigua has routinely made the
required quarterly payments aggregating $2.0 million per year but
has made only some of the required monthly payments. The Company
does not presently anticipate material increases in or
accelerations of payments by the Government of Antigua. The
Company expects that the notes will not be satisfied at maturity
but the Antiguan government has advised the Company that the
current payment stream will continue until the obligation is
satisfied. A portion of the payment received from Antigua is
derived from the lease proceeds the Antiguan government receives
from the United States Department of Defense for the rental of two
military bases. In January 1995, the Antiguan government was
notified by the United States government that one of the bases
would be closed in late 1995. The Antiguan government has advised
the Company that it will make up any shortfall in the payments to
the Company from the military base rents from its general treasury.
Item 8. Financial Statements and Supplementary Data
The financial information and the supplementary data required in
response to this Item are as follows:
[CAPTION]
Page Number(s)
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets
December 31, 1995 and 1994
Consolidated Statements of Operations
For Each of the Years in the Three Year
Period Ended December 31, 1995
Consolidated Statements of Stockholders'
Equity Each of the Years in the Three
Year Period Ended December 31, 1995
Consolidated Statements of Cash Flows
For Each of the Years in the Three Year
Period Ended December 31, 1995
Notes to Consolidated Financial
Statements
Schedule II - Valuation and
Qualifying Accounts
Independent Auditors' Report
The Board of Directors and Stockholders
Devcon International Corp.:
We have audited the consolidated financial statements of Devcon
International Corp. and subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedules
as listed in the accompanying index. These consolidated financial
statements and this financial statement schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
and this financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Devcon International Corp. and subsidiaries at December
31, 1995 and 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1995 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in note 1(j) to the consolidated financial statements,
the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," in 1993.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 27, 1996
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
[CAPTION]
Assets 1995 1994
Current assets:
Cash (note 8) $ 438,682 $ 21,106
Cash equivalents
(notes 7 and 8) 977,456 920,944
Receivables, net
(notes 2 and 7) 12,043,706 14,461,672
Costs in excess of
billings and estimated
earnings (note 16) 3,461,984 2,611,494
Inventories (note 3) 6,392,278 7,614,635
Other 936,446 953,845
Net assets of discontinued
operation (note 9) 749,114 1,535,825
Total current assets 24,999,666 28,119,521
Property, plant and equipment
(note 7):
Land 5,667,867 5,394,676
Buildings 4,248,816 4,087,282
Leasehold interests 12,590,763 12,454,758
Equipment 72,319,224 68,107,860
Furniture and fixtures 1,057,850 956,613
Construction in process 1,396,187 2,184,367
97,280,707 93,185,556
Less accumulated
depreciation (45,898,662) (43,203,809)
51,382,045 49,981,747
Investments in unconsolidated
joint ventures and
affiliates (note 4) 208,780 230,280
Advances to unconsolidated
joint ventures and
affiliates (note 4) 1,047,663 1,351,454
Receivables, net
(notes 2 and 7) 17,585,097 18,420,072
Intangible assets, net of
accumulated amortization
(note 5) 1,086,801 500,582
Other assets 1,002,588 937,339
$ 97,312,640 $ 99,540,995
1995 1994
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable, trade and
other $ 6,501,977 $ 6,486,401
Accrued expenses and other
liabilities 1,451,429 1,248,121
Notes payable to banks (note 7) 3,467,310 2,667,500
Current installments of
long-term debt (note 7) 7,274,506 6,768,174
Billings in excess of costs
and estimated earnings
(note 16) 766,399 56,278
Income taxes (note 8) 689,650 48,275
Total current liabilities 20,151,271 17,274,749
Long-term debt, excluding current
installments and notes payable
to banks (note 7) 15,547,908 17,453,937
Minority interest in consolidated
subsidiaries 675,853 644,160
Deferred income taxes (note 8) 651,979 1,429,000
Other liabilities 1,127,043 1,084,058
Total liabilities 38,154,054 37,885,904
Stockholders' equity (note 14):
Common stock, $0.10 par value.
Authorized 15,000,000 shares,
issued and outstanding,
4,464,510 shares in 1995 and
4,431,177 shares in 1994 446,451 443,118
Additional paid-in capital 11,987,365 11,740,700
Retained earnings (note 8) 46,724,770 49,471,273
Total stockholders'
equity 59,158,586 61,655,091
Commitments and contingencies
(notes 8, 11 and 17) $97,312,640 $99,540,995
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
For Each of the Years in the Three Year Period Ended December 31,
1995
[CAPTION]
1995 1994 1993
Concrete and related products
revenues $37,716,253 $39,342,107 $38,300,065
Contracting revenues
(note 13) 16,068,283 22,941,915 16,926,065
Other revenues 2,366,926 2,965,081 638,196
Total revenues 56,151,462 65,249,103 55,864,326
Cost of concrete and related
products 29,069,207 29,200,324 31,819,998
Cost of contracting 14,102,977 19,249,741 19,700,120
Cost of other 1,720,911 2,387,592 528,781
Gross profit 11,258,367 14,411,446 3,815,427
Operating expenses:
Selling, general and
administrative 10,682,423 9,626,374 11,280,103
Provision for doubtful
accounts and notes 301,510 300,000 690,642
Operating income
(loss) 274,434 4,485,072 (8,155,318)
Other income (deductions):
Equity in earnings of
unconsolidated joint
ventures and affiliates
(note 4) - - 447,117
Gain (loss) on sale of
equipment 164,116 34,895 (317,717)
Interest expense (2,555,848) (2,704,105) (2,238,703)
Interest and other
income 462,840 854,024 1,227,959
Writedown of assets to net
realizable value - - (250,000)
Minority interest (31,693) (38,344) (7,103)
Impairment loss on
discontinued operations
subsequently retained
(note 9) - - (2,200,000)
(1,960,585) (1,853,530) (3,338,447)
Income (loss) from
continuing operations
before income
taxes (1,686,151) 2,631,542 (11,493,765)
Income taxes (note 8) 145,352 50,000 107,486
Income (loss) from
continuing
operations (1,831,503) 2,581,542 (11,601,251)
See accompanying notes to consolidated financial statements.
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations (Continued)
[CAPTION]
1995 1994 1993
Discontinued operations
(note 9):
Impairment gain
(loss) $ (800,000) $ - $ 2,200,000
Loss from discontinued
operations (115,000) (470,076) (173,256)
Income (loss) from
discontinued
operations (915,000) (470,076) 2,026,744
Income (loss) from
continuing and
discontinued
operations
before cumulative
effect of
change in
accounting prin-
ciple (2,746,503) 2,111,466 (9,574,507)
Cumulative effect of
change in
accounting prin-
ciple - - 500,000
Net earnings
(loss) $(2,746,503) $2,111,466 $(9,074,507)
Earnings (loss) per share:
From continuing
operations $ (.40) $ .57 $ (2.55)
From discontinued
operations (.20) (.11) .44
From change in
accounting
principle - - .11
Net earnings
(loss) $ (.60) $ .46 $ (2.00)
Weighted average
number of shares 4,566,671 4,560,397 4,540,804
See accompanying notes to consolidated financial statements.
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For Each of the Years in the Three Year Period Ended December 31,
1995
[CAPTION]
Additional
Common Paid-in Retained
Stock Capital Earnings
Balances at
December 31, 1992 $436,867 $11,246,950 $56,434,314
Proceeds from sale of
restricted stock 6,251 493,750 -
Net loss - - (9,074,507)
Balances at December
31, 1993 443,118 11,740,700 47,359,807
Net earnings - - 2,111,466
Balances at December
31, 1994 443,118 11,740,700 49,471,273
Stock issued in
connection with
acquisition of
additional
partnership
interest 3,333 246,665 -
Net loss - - (2,746,503)
Balances at December
31, 1995 $446,451 $11,987,365 $46,724,770
(continued)
Total
Balances at December 31, 1992 $68,118,131
Proceeds from sale of restricted
stock 500,001
Net loss (9,074,507)
Balances at December 31, 1993 59,543,625
Net income 2,111,466
Balances at December 31, 1994 61,655,091
Stock issued in connection with
acquisition of additional
partnership interest 249,998
Net loss (2,746,503)
Balances at December 31, 1995 $59,158,586
See accompanying notes to consolidated financial statements.
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For Each of the Years in the Three Year Period Ended December 31,
1995
[CAPTION]
1995 1994 1993
Cash flows from operating
activities:
Net earnings (loss) $(2,746,503) $2,111,466 $(9,074,507)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Depreciation and
amortization 4,714,254 6,459,492 6,733,618
Deferred income
tax benefit (777,021) - -
Cumulative effect of
change in accounting
principle - - (500,000)
Equity in (earnings)
loss of unconsolidated
joint ventures and
affiliates - - (447,117)
Provision for doubtful
accounts and notes 301,510 300,000 690,642
Writedown of assets to
net realizable value 800,000 - 250,000
(Gain) loss on sale of
equipment (164,116) (34,896) 317,717
Loss from discontinued
operations 115,000 - 173,256
Increase (decrease) in
minority interest in
unconsolidated
subsidiaries 31,693 38,345 7,103
Changes in operating assets
and liabilities:
(Increase) decrease in
receivables 347,378 (523,019) 1,898,431
Decrease (increase) in
costs in excess of
billings and estimated
earnings (850,490) (1,534,007) 2,714,172
(Increase) decrease in
inventories 1,222,357 (78,381) 565,932
Decrease (increase) in
other current assets 17,399 (150,394) (37,433)
Decrease (increase) in
other assets (65,249) (33,887) (119,589)
(Decrease) increase in
accounts payable and
accrued expenses 692,284 (616,160) (1,421,665)
Decrease in billings in
excess of costs and
estimated earnings 710,121 (375,372) (880,429)
Decrease in income taxes
payable (641,375) (72,992) (12,368)
Increase in other non
current liabilities 42,985 (288,224) -
Net cash provided by
operating activi-
ties $5,032,977 $5,201,971 $ 857,763
Cash flows from investing activities:
Purchase of property, plant
and equipment $(6,249,083) $(3,319,741) $(6,493,675)
Proceeds from disposition of
property, plant and
equipment 697,887 665,945 2,420,459
Payment to acquire
subsidiary company (1,000,000) - (338,115)
Issuance of notes (227,233) (2,697,116) (1,293,666)
Payments on notes 2,831,286 3,137,015 1,111,361
Advances to affiliates (36,209) (59,130) (91,636)
Advances from affiliates 340,000 100,000 746,184
Net cash used in investing
activities (3,643,352) (2,173,027) (3,939,088)
Cash flows from financing activities:
Proceeds from debt 9,540,913 7,301,564 20,074,559
Principal payments on
debt (10,140,800) (11,350,542) (16,598,568)
Net borrowings
(repayments)
from bank overdrafts (315,650) 698,257 (841,174)
Net cash provided by
(used in) financing
activities (915,537) (3,350,721) 2,634,817
Net decrease in cash and
cash equivalents 474,088 (321,777) (446,508)
Cash and cash equivalents at
beginning of year 942,050 1,263,827 1,710,335
Cash and cash equivalents at
end of year $ 1,416,138 $ 942,050 $ 1,263,827
Supplemental disclosures of
cash flow information:
Cash paid for:
Interest $ 2,579,748 $ 3,017,610 $ 2,188,965
Income taxes $ 87,888 $ 147,938 $ 119,854
Supplemental non-cash items:
During 1995, the Company issued 33,333 shares of common stock to
acquire an additional partnership interest in a Mexican
manufacturing partnership.
During 1993 the Company reclassified approximately $3,900,000 from
assets held for sale to property, plant and equipment.
During 1993, the Company reduced by $1.5 million the valuations of
sand and parts inventory at two island operations.
During 1993, the company wrote down a concrete block manufacturing
facility by $250,000. This operation was sold in 1993.
During 1993, a $628,000 note receivable from the sale of the block
operation was offset against existing debt owed to the same party.
During 1993, the Company recorded a writedown of $200,000 on the
investment in Corbkinnons and recognized a loss of $775,000 on the
Mexican manufacturing company.
During 1993, the Company issued 62,500 shares of stock to the
former owner of a purchased subsidiary as partial payment for
amounts due related to the purchase of the subsidiary by the
Company.
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1995, 1994 and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the
accounts of Devcon International Corp. and its majority
owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in
consolidation.
The Company's investments in unconsolidated joint
ventures and affiliates are accounted for by the equity
method. Under the equity method, original investments
are recorded at cost and adjusted by the Company's share
of undistributed earnings or losses of these companies.
(b) REVENUE RECOGNITION
CONCRETE AND RELATED PRODUCTS
Revenue is recognized when the products are delivered.
CONTRACTING
The Company uses the percentage of completion method of
accounting for financial statement preparation and tax
reporting purposes. Revenues earned and related costs
are recorded based on the Company's estimates of the
percentage of completion of each project using the cost
to cost method. Anticipated losses on contracts are
charged to earnings when probable and estimable. Changes
in estimated profits on contracts are recorded in the
period of change. Selling, general and administrative
expenses are not allocated to contract costs. Monthly
billings are based on the percentage of work completed in
accordance with a specific contract. Contracts are
generally completed within one year of the commencement
date, although the Company has had contracts that
extended past one year.
OTHER
Other revenue consists of revenue from a marina owned by
the Company. Revenue is recognized when products or
services are delivered.
(c) CASH AND CASH EQUIVALENTS
The Company considers certificates of deposits,
commercial paper and repurchase agreements with an
original maturity or restriction of three months or less
at time of purchase to be cash equivalents.
(d) INVENTORIES
The cost of sand, stone, cement and concrete block
inventories is determined using average costs
approximating the first-in, first-out (FIFO) method and
is not in excess of market. All other inventories are
stated at the lower of average cost or market.
(e) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
Depreciation on property, plant and equipment is
calculated on the straight-line method over the estimated
useful lives of the assets. Property, plant and
equipment held under capital leases and leasehold
improvements are amortized using the straight-line method
over the shorter of the lease term or the estimated
useful life of the asset.
Useful lives and/or lease terms for each asset type are
summarized below:
Buildings 15 - 40 years
Leasehold interests 3 - 55 years
Equipment 3 - 20 years
Furniture and fixtures 3 - 10 years
During 1995, the Company changed the estimated useful
lives of certain equipment of assets used by the concrete
and related products and land development contracting
divisions in order to more closely match the useful lives
to the actual service life of the assets. This change in
useful lives was made prospectively and reduced annual
depreciation expense by approximately $900,000.
(f) FOREIGN CURRENCY TRANSLATION
The Company owns subsidiaries whose functional currency
is the Eastern Caribbean Dollar. The assets and
liabilities of these subsidiaries have been translated
into U.S. dollars at year end exchange rates. Income
statement accounts are translated into U.S. dollars at
average exchange rates during the period. Resulting
translation adjustments were not significant.
(g) INTANGIBLE ASSETS
The excess of cost over the fair value of net assets of
subsidiaries acquired is amortized over five to ten year
periods on a straight-line basis. The Company
periodically reevaluates the recoverability of its
intangible assets as well as their amortization periods
to determine whether an adjustment to the carrying value
or a revision to the estimated useful lives is
appropriate. The primary indicators of recoverability
are the current and forecasted operating cash flows,
which pertain to that particular asset. An entity that
has a deficit in its cash flow from operations for a full
fiscal year, in light of the surrounding economic
environment, is viewed by the Company as a situation
which could indicate an impairment of value. Taking into
account the above factors, the Company determines that an
impairment loss has been triggered when the future
projected undiscounted cash flows associated with the
intangible asset does not exceed its current carrying
amount and the amount of the impairment loss to be
recorded is the difference between the current carrying
amount and the future projected undiscounted cash flows.
Based on the Company's policy, management believes that
there is no impairment of value related to the intangible
assets as of December 31, 1995.
Accumulated amortization on intangible assets amounted to
$206,582 in 1995 and $109,120 in 1994.
(h) EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is computed by dividing
the weighted average number of shares outstanding during
each year, increased by common equivalent shares (stock
options) using the treasury stock method. Fully diluted
earnings per share did not differ significantly from
primary earnings per share in any of the years presented.
(i) FOREIGN OPERATIONS
Significant portions of the Company's operations are
conducted in foreign areas, primarily Antigua, St.
Maarten, St. Martin, Dominica, Saba, St. Kitts and
Tortola, all of which are in the Caribbean. Operations
are also conducted in Mexico.
(j) INCOME TAXES
The Company and certain of its domestic subsidiaries file
consolidated Federal and state income tax returns.
Subsidiaries located in U.S. possessions and foreign
countries file individual income tax returns. Deferred
income taxes are recognized for income and expense items
that are reported in different years of financial
reporting and income tax purposes.
U.S. income taxes are not provided on undistributed
earnings which are expected to be permanently reinvested
by the foreign subsidiaries located in Antigua, the
Netherlands Antilles, the French West Indies, the British
Virgin Islands, Dominica, Grand Cayman, the Bahamas and
certain subsidiaries located in U.S. possessions.
The Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Under the asset
and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the estimated
future tax consequence attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered
or settled. Under Statement 109, the effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income for the period that includes the
enactment date.
Effective January 1, 1993, the Company adopted Statement
109 and has reported the cumulative effect of that change
in the method of accounting for income taxes in the 1993
consolidated statement of earnings.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these consolidated financial
statements in conformity with generally accepted
accounting principles.
(l) RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 consolidated
financial statements have been reclassified to conform
with the 1995 presentation.
(m) NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long Lived Assets to be
Disposed Of." The statement requires that long-lived
assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The
impairment of value is based on estimated future cash-
flows expected to result from the use of the asset and
its eventual disposition. The provisions of this
statement must be adopted for fiscal years beginning
after December 15, 1995. The Company has not determined
the effect of the adoption of this pronouncement.
In October 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based
Compensation." The statement permits a company to choose
either a new fair value based method or the current APB
Opinion 25 intrinsic value based method of accounting for
its stock-based employee compensation plans in which an
employer grants shares of its stock or other equity
instruments to employees. The statement requires pro
forma disclosures of net income and earnings per share
computed as if the fair value based method had been
applied in financial statements of companies that elect
to follow current practice in accounting for such
arrangements under Opinion 25. The Company has not
determined the effect of the adoption of this
pronouncement.
(2) RECEIVABLES
Receivables consist of the following:
[CAPTION]
December 31,
1995 1994
Concrete and related products
division trade accounts
receivable $7,734,882 $7,965,570
Land development contracting
division trade accounts
receivable, including
retainages 3,367,229 2,830,908
Other division trade
accounts receivable 73,180 64,391
Accrued interest and
other receivables 706,750 562,288
Notes and other receivables
due from the Government of
Antigua and Barbuda
(note 10) 17,274,649 19,111,166
Trade notes receivable
- other 2,853,674 4,861,494
Due from employees and
officers 74,841 155,013
32,085,205 35,550,830
Allowance for doubtful
accounts and notes (2,456,402) (2,669,086)
$29,628,803 $32,881,744
Receivables are classified in the consolidated balance sheets as
follows:
[CAPTION]
December 31,
1995 1994
Current assets $12,043,706 $14,461,672
Noncurrent assets 17,585,097 18,420,072
$29,628,803 $32,881,744
Retainage will be due upon completion of construction contracts
and acceptance by the customer. The Company expects retainage
will be collected during 1996.
Included in notes and other receivables are unsecured notes due
from the Government of Antigua and Barbuda amounting to
$16,218,549 and $18,055,066 in 1995 and 1994, respectively, and
having maturity dates through 1997. See note 10. The Company
believes payments of approximately $2,500,000 will be received
in 1996. The current payment schedule calls for both quarterly
and monthly payments until note maturity. The Government of
Antigua has routinely made the required quarterly payments
totalling $2.0 million per year but has only made some of the
required monthly payments. The Company does not presently
anticipate material increases or decreases in the level of
payments by the Government of Antigua. The Company expects that
the notes will not be satisfied at maturity but the Antigua
government has advised the Company that the current payment
stream will continue until the obligation is satisfied. A
portion of the payment received from Antigua is derived from the
lease proceeds the Antiguan government receives from the United
States Department of Defense for the rental of two military
bases. In January 1995, the Antiguan government was notified by
the United States government that one of the bases would be
closed in late 1995. The Antiguan government has advised the
Company that it will make up any shortfall in payments to the
Company from the military base rents from its general treasury.
Notes receivable, from an Antiguan government agency, amounting
to $855,803 in 1995 and 1994 are included in the total due from
the government of Antigua, along with Antigua-Barbuda Government
Development Bonds 1994-1997 series amounting to $200,297 in 1995
and 1994.
The Company also has trade receivables from various Antiguan
government agencies of $717,554 and $112,020 in 1995 and 1994,
respectively. Several of the Company's customers perform
services for the Antiguan government and depend on payments from
the government to satisfy their obligations to the Company.
Trade notes receivable - other consist of the following:
[CAPTION]
December 31,
1995 1994
8 percent note receivable due
in weekly installments from
April 1994 through April 1997,
secured by first and second
mortgages on two parcels of
land $ 536,431 $ 599,773
Unsecured promissory notes
receivable with varying terms
and maturity dates 262,711 2,010,490
Secured promissory notes
receivable with varying terms
and maturity dates 921,485 889,878
8 percent note receivable,
due on demand, secured by first
mortgage on real property 812,763 1,040,034
10 percent note receivable,
due in installments commencing
May 1, 1994 continuing through
May 1, 1999, secured by real
property in the United States
Virgin Islands 320,284 321,319
$2,853,674 $4,861,494
(3) INVENTORIES
Inventories consist of the following:
[CAPTION]
December 31,
1995 1994
Sand, stone, cement and
concrete block $4,744,067 $5,859,320
Maintenance parts 1,318,037 1,283,372
Other 330,174 471,943
$6,392,278 $7,614,635
(4) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
AND AFFILIATES
At December 31, 1995, the Company has equity interests in two
real estate ventures, a 43 percent equity interest in a foreign
construction company and a 1 percent equity interest in a
commercial property development in Antigua. One real estate
joint venture was formed primarily to acquire and develop land
for sale in Antigua, West Indies. The other real estate venture
was formed to develop property in Florida and has insignificant
assets and operations. No income or loss was recognized in 1995
and 1994 on any of these ventures because the amounts were not
material.
[CAPTION]
December 31, 1995
Unconsolidated joint
ventures and affiliates
Advances Investments
To In
Commercial property $ 11,323 $ -
Real estate 960,130 8,780
Construction 76,210 200,000
$1,047,663 $ 208,780
(continued)
December 31, 1994
Unconsolidated joint
ventures and affiliates
Advances
To In
Commercial property $ 11,323 $ -
Real estate 1,300,131 30,280
Construction 40,000 200,000
$1,351,454 $ 230,280
(5) ACQUISITIONS
On August 16, 1995, the Company acquired for $1,000,000 cash,
the stock of Societe des Carrieres de Grand Case (SCGC), a
French company engaged in the ready mix concrete and quarry
business on the French island of St. Martin. The transaction
was accounted for as a purchase. As a result of the
transaction, the Company recorded costs in excess of the fair
value of the net assets purchased in the amount of $615,000.
(6) Fair Value of Financial Instruments
The carrying amount of financial instruments including cash,
cash equivalents, receivables, net, other current assets,
accounts payable trade and other, accrued expenses and other
liabilities, notes payable to banks, and current installments
of long-term debt approximated fair value at December 31,
1995 because of the short maturity of these instruments. The
carrying value of debt and notes receivable approximated fair
value at December 31, 1995 based upon the present value of
estimated future cash flows.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
[CAPTION]
December 31,
1995 1994
Installment notes payable in monthly
installments through 1999 bearing
interest at a weighted average
rate of 9.45 percent and secured by
equipment with a carrying value
of approximately $9,071,000 $ 5,255,811 $ 4,425,692
Notes and mortgages payable in
installments through 2003, bearing
interest at 9.5 percent to 10
percent and secured by equipment
and real property with a carrying
value of approximately
$10,021,000 6,174,188 7,201,714
Obligation arising from an
acquisition, payable in $350,000
monthly installments through 1998,
discounted at 10 percent 621,520 1,211,945
Unsecured notes payable due
through 1998 bearing interest at
a weighted average rate of 8.0
percent 2,269,445 1,690,924
Unsecured note payable to a
Company officer, due January 1,
1997, bearing interest at the
prime interest rate 4,572,561 3,152,561
8 percent installment note
payable in monthly installments
to a Company officer
secured by equipment with a
net carrying value of
approximately $454,000 140,000 260,000
Note payable to bank under a
$400,000 line of credit, expiring
in May 1996, secured by a
certificate of deposit and
bearing interest at the prime
interest rate plus one-half of
one percent per annum 400,000 400,000
Note payable to bank under a
$2.0 million line of credit,
expiring in May 1996,
secured by an assignment of
specific accounts receivable
and bearing interest
at the prime interest rate
plus one-quarter
of one percent per annum 1,980,000 1,680,000
Note payable to bank under a
$400,000 line of credit,
expiring in June 1996, secured
by a certificate of deposit
and bearing interest at the
prime interest rate 400,000 400,000
Note payable to bank under a
$500,000 line of credit, expiring
in October 1996, secured by
a second mortgage on equipment
and bearing interest at the prime
interest rate plus one-half of one
percent 170,310 -
[CAPTION]
December 31,
1995 1994
Note payable to bank on $1.0
million line of credit bearing
interest at the prime interest
rate plus 1/2 of 1 percent,
secured by real property and
certificate of deposit
with a value of $532,000 due in
full on June 30, 1996 517,000 187,500
Note payable to bank under a
$4,000,000 term loan due in
quarterly installments
from November 1993 through
May 1996 with a balloon payment
of $1,500,000 due June 30, 1996.
Interest accrues at 3/4 of 1
percent over the prime interest
rate. Note secured by notes
receivable from the government
of Antigua with a net carrying
value of approximately
$9,133,000 2,000,000 3,000,000
Note payable to bank, due in
monthly installments of
$38,889 through 1999, plus
interest at 1-5/8 of 1 percent
over the LIBOR rate, secured by
equipment with a carrying
value of approximately
$4,088,000 1,788,889 2,255,556
Installment and bank notes
payable repaid or refinanced during 1995 - 1,023,719
Total debt outstanding $26,289,724 $26,889,611
Shown in the consolidated balance sheet under the following
captions:
[CAPTION]
Current installments of
long term debt $ 7,274,506 $ 6,768,174
Notes payable to banks 3,467,310 2,667,500
Long-term debt 15,547,908 17,453,937
$26