ITEM 1. BUSINESS
General
International Recovery Corp. (the "Company"), is involved in three principal businesses. The Company markets aviation and marine fuel and recycles used oil.
In its aviation fueling business, the Company extends credit and provides single-supplier convenience, 24 hour service, and competitively-priced aviation fuel to cargo and passenger airlines, and to charter, corporate, and private aircraft. The Company sells aviation fuel to its customers at more than 1,100 airports located throughout the world.
In its marine fueling business, the Company markets marine fuel to a broad base of customers covering all market segments, including major international container and tanker fleets, time charter operators, as well as military vessels. Fueling services include credit terms and are available 24 hours a day in over 1,000 ports, and in over 135 countries.
In its oil recycling business, the Company collects used oil throughout the Southern and Mid-Atlantic United States from generators which include service stations, quick lube shops, automobile dealerships, and industrial, governmental, marine and utility generators. The Company recycles used oil into various fuel products and sells the recycled oil to industrial and commercial customers.
Financial information with respect to the Company's business segments and foreign operations is provided in Note 8 in the accompanying financial statements.
History
The Company was incorporated in Florida in July 1984. Its executive offices are located at 700 South Royal Poinciana Boulevard, Suite 800, Miami Springs, Florida 33166, and its telephone number at this address is (305) 884-2001. The Company presently conducts its aviation fueling business through four subsidiaries with principal offices in Florida, England, and Singapore; the Company conducts its marine fueling business through three subsidiaries with principal offices in New York, California, England and Singapore, and its oil recycling business is conducted through six subsidiaries with offices in Florida, Louisiana, Georgia, Maryland, and Delaware. See "Item 2
ITEM 2. PROPERTIES
The following page sets forth by segment and subsidiary the principal properties owned or leased by the Company as of May 15, 1995. The Company considers its properties and facilities to be suitable and adequate for its present needs.
The Company generally enters into non-cancelable equipment leases and installment notes to finance the replacement, upgrade or expansion of its vehicles and equipment. For additional information with respect to obligations under the Company's leases and installment notes, see Notes 3 and 6 to the financial statements appearing elsewhere in this report.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In January 1993, Hillsborough County, Florida sued International Petroleum Corporation, the Company's Florida subsidiary, along with 170 other defendants (or potentially responsible persons), in the U.S. District Court of the Middle District of Florida. The complaint seeks to recover response or cleanup costs for the Sydney Mine Waste Disposal Site under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. section 9601 et. seq. (CERCLA or Superfund) and under Florida Statutes. The Company intends to vigorously defend this action.
There can be no assurance the Company will prevail in the foregoing legal proceeding, and management cannot estimate at this time the exposure of the Company if it does not prevail in this proceeding. Except for the foregoing, there are no material legal proceedings to which the Company or any of its subsidiaries is a party.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of shareholders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal year 1995.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is currently traded on the New York Stock Exchange and the Pacific Stock Exchange under the symbol INT. The following table sets forth, for each quarter within the fiscal years ended March 31, 1995 and 1994, the sale prices of the Company's common stock as reported by the New York Stock Exchange.
PRICES --------------------- HIGH LOW ---- --- Year ended March 31, 1995 First quarter.................... $ 14 5/8 $ 11 5/8 Second quarter................... 16 3/8 12 3/4 Third quarter.................... 16 3/8 14 Fourth quarter................... 17 3/8 14 5/8
Year ended March 31, 1994 First quarter.................... $ 12 1/2 $ 10 1/2 Second quarter................... 15 3/8 11 Third quarter.................... 16 12 1/2 Fourth quarter................... 16 1/8 12 1/2
As of May 25, 1995, there were 478 holders of record of the Company's common stock. During fiscal year 1995, the Board of Directors approved the payment of the following cash dividends:
Declaration Date Per Share Record Date Payment Date - ---------------- --------- ----------- ------------ May 9, 1994 .05 cents June 22, 1994 July 15, 1994 September 9, 1994 .05 cents September 22, 1994 October 14, 1994 December 9, 1994 .05 cents December 22, 1994 January 12, 1995 January 19, 1995 .05 cents March 22, 1995 April 13, 1995 February 22, 1995 .10 cents March 22, 1995 April 13, 1995
The Company's loan agreement with NationsBank restricts the payment of cash dividends to a maximum of 25% of net income for the preceding four quarters. The Company's payment of the above dividends is in compliance with the NationsBank loan agreement.
On April 12, 1993, the Board of Directors authorized the repurchase from time to time of up to 400,000 shares of the Company's common stock. The timing and quantity of shares to be repurchased will depend upon a number of factors, including market price. As of March 31, 1995, a total of 5,000 shares had been purchased in the open market for approximately $57,000 pursuant to the repurchase program.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data has been summarized from the Company's consolidated financial statements set forth in Item 8 of this report. The selected financial data should be read in conjunction with the consolidated financial statements and the related notes thereto, and with "Item 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Item 6 - Selected Financial Data," and with the consolidated financial statements and related notes thereto appearing elsewhere in this report.
Results of Operations
In January 1995, the Company entered the marine fuel business through the acquisition of the Trans-Tec group of companies. The Company acquired substantially all of the assets and assumed certain liabilities of Trans-Tec Services, Inc., a New York corporation, and Trans-Tec Servicios, S.A., a Costa Rica corporation, and acquired all of the outstanding stock of Trans- Tec Services (UK), Ltd., a United Kingdom corporation ("UK"). The UK company owns Trans-Tec Services (Singapore) PTE., Ltd. Accordingly, the consolidated statement of income for the fiscal year ended March 31, 1995, includes the results of operations of the Trans-Tec group of companies from the acquisition date.
The aggregate purchase price was approximately $14,832,000, including $321,000 in acquisition costs. At closing, the Company paid approximately $3,927,000 in cash, $6,000,000 in the form of 9.0% promissory notes and $4,584,000 in the form of 387,000 shares of newly issued common stock, which were valued at $11.84 per share. The purchase price was determined as a result of the Company's arms-length negotiations with Trans-Tec, and its former shareholders.
Profit from the Company's aviation fuel business is directly related to the volume and the margins achieved on sales, as well as the extent to which the Company is required to provision for potential bad debts.
Profit from the Company's marine fuel business is determined primarily by the volume of brokering business generated and by the volume and margins achieved on marine fuel trades.
The Company's profit from oil recycling is principally determined by the spread between the selling price of recycled oil and the cost of collecting and processing waste oil.
Fiscal Year Ended March 31, 1995 Compared to the Fiscal Year Ended March 31, 1994.
The Company's revenues for the fiscal year ended March 31, 1995 were $361,891,000, an increase of $111,364,000, or 44.5%, as compared to revenues of $250,527,000 for the prior year. The Company's revenues during these periods were attributable to the following segments:
Fiscal Year Ended March 31, Percent 1995 1994 Increase -------------------------------------- Aviation Fueling $288,728,000 $233,982,000 23.4% Marine Fueling 54,578,000 - * Oil Recycling 18,591,000 16,554,000 12.3 Intersegment Eliminations (6,000) (9,000) * ------------ ------------ ---- Total Revenue $361,891,000 $250,527,000 44.5% ============ ============ ===== * Percent not meaningful
The aviation fueling segment sold 456,502,000 gallons of fuel and contributed $288,728,000 of revenue for the fiscal year ended March 31, 1995. This represented an increase in revenue of $54,746,000, or 23.4%, as compared to the prior year when the Company sold 321,154,000 gallons of fuel. This increase in revenue was due to an increase in volume, primarily the result of increased bulk sales, partially offset by a price related revenue shortfall which reflects general market conditions. Also offsetting was $4,688,000 in lower fuel terminaling revenue. The Company's fuel terminaling business, conducted solely at Miami International Airport pursuant to a month-to-month contract, was awarded to another company effective June 30, 1994.
The marine fueling segment traded 465,000 metric tons of bunker fuel and brokered 1,091,000 metric tons, contributing $53,298,000 and $824,000 in revenues, respectively. The Company also sold 104,000 gallons in lubricants totalling $456,000 in revenues.
The oil recycling segment sold 35,015,000 gallons of recycled oil products and contributed $18,591,000 of revenue for the fiscal year ended March 31, 1995. This was an increase in revenue of $2,037,000, or 12.3%, as compared to last year when the Company sold 32,756,000 gallons of recycled oil products. The revenue increase reflects higher used oil and waste water collection revenues, higher product volume sold, and a price related increase on recycled product.
The Company's gross profit of $27,757,000 increased by $806,000, or 3.0%, as compared to last year. The Company's gross margin decreased from 10.8% for the fiscal year ended March 31, 1994 to 7.7% for the fiscal year ended March 31, 1995.
The Company's aviation fueling segment achieved a 6.9% gross margin for the fiscal year ended March 31, 1995, as compared to 9.8% achieved for the prior fiscal year. The decline in the gross margin was attributed to a narrower average gross profit per gallon, as well as a decline in fuel terminaling gross profit. The decline in the average gross profit per gallon was due to increased bulk sales.
The Company's marine fueling segment achieved a 3.9% gross margin for the fiscal year ended March 31, 1995. The Company's gross margin on trading activities was 2.5%.
The gross margin in the Company's oil recycling segment increased from 24.8% for fiscal year 1994 to 30.9% for fiscal year 1995. This resulted from the combined effects of a higher average sales price of recycled oil, and a lower average cost of collection and processing used oil, and blending recycled oil. This decrease was primarily attributed to the higher volume processed by the Company and the lower cost of operating a batch process in Louisiana.
Total operating expenses for the fiscal year ended March 31, 1995 were $16,508,000, a decrease of $673,000, or 3.9%, as compared to the same period a year ago. This decrease resulted from a $3,001,000 decrease in the provision for bad debts due to a year over year improvement in the quality of accounts receivable, as well as a $255,000 decline in operating expenses of the Company's used oil segment. Partially offsetting were the operating expenses of the marine segment acquired in January 1995, which totalled $1,912,000, and an $877,000 increase in corporate overhead costs, discussed below. In relation to revenue, total operating expenses decreased from 6.9% to 4.6%.
The Company's income from operations for the fiscal year ended March 31, 1995 was $11,249,000, an increase of $1,479,000, or 15.1%, as compared to income from operations of $9,770,000 for the fiscal year ended March 31, 1994. Income from operations during these periods was attributable to the following segments:
Fiscal Year Ended March 31, Percent 1995 1994 Increase ----------- ----------- -------- Aviation Fueling $12,304,000 $12,066,000 2.0% Marine Fueling 220,000 - * Oil Recycling 2,973,000 1,075,000 176.6 Corporate Overhead (4,248,000) (3,371,000) 26.0 ----------- ----------- Total Income From Operations $11,249,000 $ 9,770,000 15.1% =========== =========== =====
Income from operations of the aviation fueling segment increased $238,000, or 2.0%, for the fiscal year ended March 31, 1995, as compared to the fiscal year ended March 31, 1994. This increase resulted from higher product volume sold, and a decrease in operating expenses due to a lower provision for bad debts. Partially offsetting were narrower margin fuel sales due to bulk transactions, and lower operating income from the Company's fuel terminaling activities.
The marine fueling segment earned $220,000 in income from operations for fiscal year 1995. The gross profit for this segment was $2,132,000, reduced by $1,912,000 in operating expenses.
Income from operations of the oil recycling segment increased by $1,898,000, or 176.6%, for the fiscal year ended March 31, 1995, as compared to last year. This increase resulted primarily from higher product volume sold, higher margins on recycled oil and lower operating expenses.
Corporate overhead costs not charged to the business segments totalled $4,248,000 for the fiscal year ended March 31, 1995, an increase of $877,000, or 26.0%, as compared to last year. The increase was due to higher salaries and payroll related costs. In relation to sales, total corporate overhead decreased to 1.2% for the fiscal year ended March 31, 1995, as compared to 1.3% for the prior year.
In the fiscal year ended March 31, 1995, the Company had $1,774,000 in other income, net, an increase of $3,107,000 as compared to $1,333,000 in other expense, net for the same period a year ago. In fiscal year 1994, the Company incurred a $1,300,000 expense related to the settlement of a shareholders class action, originally filed in June 1992. In fiscal year 1995, when compared to the previous fiscal year, the Company earned $737,000 in foreign currency transaction gains, $544,000 in equity earnings of a joint venture, and $502,000 in net interest income which is the result of the Company's improved liquidity.
Net income for the fiscal year ended March 31, 1995 was $8,088,000, an increase of $2,893,000, as compared to net income for the fiscal year ended March 31, 1994. Earnings per share of $1.65 for the fiscal year ended March 31, 1995 exhibited a $0.55 increase over the $1.10 achieved during the same period last year.
Fiscal Year Ended March 31, 1994 Compared to the Fiscal Year Ended March 31, 1993.
The Company's revenues for the fiscal year ended March 31, 1994 were $250,527,000, a decrease of $4,240,000, or 1.7%, as compared to revenues of $254,767,000 for the prior year. The Company's revenues during these periods were attributable to the following segments:
Percent Fiscal Year Ended March 31, Increase 1994 1993 (Decrease) ------------ ------------ ---------- Aviation Fueling $233,982,000 $241,055,000 (2.9%) Oil Recycling 16,554,000 14,014,000 18.1 Intersegment Eliminations (9,000) (302,000) * ------------ ------------ Total Revenue $250,527,000 $254,767,000 (1.7%) ============ ============ ===== * Percent not meaningful.
The aviation fueling segment sold 321,154,000 gallons of fuel and contributed $233,982,000 of revenue for the fiscal year ended March 31, 1994. This represented a decrease in revenue of $7,073,000, or 2.9%, as compared to the prior year when the Company sold 312,485,000 gallons of fuel. This decrease in revenue was due to a price related revenue shortfall which reflects general market conditions as well as competitive pressures. Partially offsetting was an increase in volume, attributed to market expansion (both domestic and international), and $1,363,000 in higher revenue contributed by the fuel terminaling operation.
The oil recycling segment sold 32,756,000 gallons of recycled oil products and contributed $16,554,000 of revenue for the fiscal year ended March 31, 1994. This was an increase in revenue of $2,540,000, or 18.1%, as compared to the prior year when the Company sold 25,484,000 gallons of recycled oil products. This reflects additional revenues provided by the Company's used oil and waste water collection activities and an improvement related to higher product volume sold. These increases reflect the opening of the Wilmington, Delaware operation. Partially offsetting was a price related decline on recycled product which resulted from an overall decline in fuel prices.
The Company's gross profit of $26,951,000 increased by $3,031,000, or 12.7%, as compared to the prior year. The Company's gross margin increased from 9.4% for the fiscal year ended March 31, 1993 to 10.8% for the fiscal year ended March 31, 1994. The gross margin improvement in the Company's aviation segment offset the decline in the oil recycling segment gross margin, as explained below.
The Company's aviation fuel business achieved a 9.8% gross margin for the fiscal year ended March 31, 1994, as compared to 8.0% achieved for the same period during the prior fiscal year. Excluding the fuel terminaling operations, the aviation fueling business achieved a gross margin of 8.2% in fiscal year 1994, as compared to 6.8% in fiscal year 1993. The improvement in the gross margin was attributed to the decline in the average sales price per gallon while the gross profit per gallon improved.
The gross margin in the Company's oil recycling operations decreased from 34.2% for the fiscal year ended March 31, 1993 to 24.8% for the fiscal year ended March 31, 1994. This resulted from the combined effects of a lower average sales price of recycled oil and a higher average cost of collecting and processing used oil, and blending recycled oil. These costs increased primarily because of the under-utilization of the Company's facilities.
Total operating expenses for the fiscal year ended March 31, 1994 were $17,181,000, an increase of $1,327,000, or 8.4%, as compared to the fiscal year ended March 31, 1993. Of this increase, $626,000 was due to increased charges to the provision for bad debts. For the fiscal year ended March 31, 1994, the Company charged $5,063,000 to the provision for bad debts, primarily to replenish the allowance for bad debts for charge-offs. The charge-offs and increases to the provision for bad debts are due primarily to collection problems encountered by the Company in its aviation segment. During fiscal year 1994, the Company has seen improvement in the quality of its accounts receivable with a substantial reduction in accounts with balances over 90 days old. Also contributing to the increase in total operating expenses was $398,000 related to the opening of the Wilmington, Delaware plant and $500,000 in legal fees, an increase related primarily to the collection of past due accounts receivable.
The Company's income from operations for the fiscal year ended March 31, 1994 was $9,770,000, an increase of $1,704,000, or 21.1%, as compared to income from operations of $8,066,000 for the same period last year. Income from operations during these periods was attributable to the following segments:
Percent Fiscal Year Ended March 31, Increase 1994 1993 (Decrease) ----------- ----------- ---------- Aviation Fueling $12,066,000 $ 8,911,000 35.4% Oil Recycling 1,075,000 2,333,000 (53.9) Corporate Overhead (3,371,000) (3,001,000) 12.3 Intersegment Eliminations - (177,000) * ----------- ----------- Total Income From Operations $ 9,770,000 $ 8,066,000 21.1% =========== =========== ====== * Percent not meaningful.
Income from operations of the aviation fueling segment increased $3,155,000, or 35.4%, for the fiscal year ended March 31, 1994, as compared to the prior year. This increase resulted from higher product volume sold, improved margins on fuel sales, and higher operating income from the Company's fuel terminaling activities. Partially offsetting was an increase in operating expenses, which included higher charges to the provision for bad debts and higher legal fees related to the collection of past due accounts receivables. The increase in operating expenses was partly offset by a reduction in salaries mostly associated with the December 31, 1992, expiration of certain employment and non-compete agreements. Also offsetting the increase in operating expenses was a decrease in administrative expenses.
The fuel terminaling business was conducted solely at Miami International Airport, pursuant to a month-to-month contract, and accounted for 34.3% of the aviation segment's operating income during the fiscal year. This contract was awarded to another company effective June 30, 1994.
Income from operations of the oil recycling segment decreased by $1,258,000, or 53.9%, for the fiscal year ended March 31, 1994, as compared to the prior year. This decrease in income from operations was in part due to a decline in gross profit which resulted from the low utilization of the Company's two main recycling plants. The Florida plant was impacted by a slowdown in sales to phosphate mining customers and the Delaware plant was a start-up operation. Although used oil collection revenues were up, sales of recycled products were lower during fiscal year 1994, when compared to the prior year. The balance of the decline in income from operations was due to an increase in operating expenses which primarily related to the Delaware operation.
Corporate overhead costs not charged to the business segments totalled $3,371,000 for the fiscal year ended March 31, 1994, an increase of $370,000, or 12.3%, as compared to the prior year. The increase was due to higher salaries and payroll related costs. In relation to sales, total corporate overhead increased from 1.2% in fiscal year 1993 to 1.3% in fiscal year 1994.
During the fiscal year ended March 31, 1993, the Company had other income, net of $180,000, reflecting the capitalization of interest during construction of the Delaware plant. In fiscal year 1994, the Company had other expense, net of $1,333,000, which included a non-recurring charge in the fourth quarter of fiscal year 1994 for the settlement of the shareholders class action which was filed on June 23, 1992.
The Company's net income from continuing operations for the fiscal year ended March 31, 1994 was $5,195,000, a decrease of $67,000, or 1.3%, as compared to net income from continuing operations of $5,262,000 for the prior year. Earnings per share from continuing operations was $1.10 for the fiscal year ended March 31, 1994, and decreased 0.9%, as compared to the $1.11 earnings per share achieved during fiscal year 1993.
Net income for the fiscal year ended March 31, 1994, was $5,195,000, an increase of $3,648,000, as compared to net income for fiscal year 1993. Last year's net income included a $3,715,000 after-tax loss from the Company's discontinued environmental services segment operations. Earnings per share of $1.10 for the fiscal year ended March 31, 1994, exhibited a $.77 increase over the $.33 achieved during the prior year.
Liquidity and Capital Resources
In the Company's aviation and marine fuel businesses, the primary use of capital is to finance accounts receivable. The Company maintains aviation fuel inventories in the United States for competitive reasons. On average, inventory levels represent less than a three week demand. The Company's aviation and marine fuel businesses do not require significant capital investment in fixed assets as the Company subcontracts fueling services and maintains inventory at third party storage facilities.
In relation to the Company's aviation and marine fueling segments, the oil recycling segment is capital intensive. The Company normally utilizes internally generated cash to fund capital expenditures, and secondarily the Company will utilize its available line of credit or enter into leasing or installment note arrangements to match-fund the useful life of certain long-term assets with the related debt. The Company's oil recycling operations also require working capital to purchase and carry an inventory of used oil, as well as the costs of operating the plant until the proceeds from the re-refined oil sales are received.
Cash and cash equivalents amounted to $10,907,000 at March 31, 1995, as compared to $7,699,000 at March 31, 1994. The principal sources of cash during the fiscal year ended March 31, 1995 were $9,299,000 in net cash provided by operating activities, $768,000 from collections on notes receivable, and $918,000 from the issuance of common stock in connection with the exercise of warrants and options. Partially offsetting the increase in cash and cash equivalents was $3,184,000 used for the purpose of acquiring the Trans-Tec group of companies, $2,194,000 used for the purchase and construction of plant, equipment and other capital expenditures, net of proceeds from sales of assets, $717,000 in dividends paid on common stock, and $338,000 in advances to a joint venture. Other components of changes in cash and cash equivalents are detailed in the Consolidated Statements of Cash Flows.
Working capital as of March 31, 1995 was $27,520,000, exhibiting a $6,979,000 increase from working capital as of March 31, 1994. As of March 31, 1995, the Company's accounts receivable, excluding the allowance for bad debts, amounted to $43,366,000, an increase of $21,025,000 as compared to the March 31, 1994 balance. This increase was due primarily to the acquisition of the marine segment which added $18,347,000 in accounts receivable. The allowance for doubtful accounts as of March 31, 1995 amounted to $4,566,000, an increase of $2,102,000, when compared to the March 31, 1994 balance. During the fiscal year ended March 31, 1995, the Company charged $2,062,000 to the provision for bad debts and had charge-offs in excess of recoveries of $271,000.
Inventories at March 31, 1995 were $933,000 higher as compared to March 31, 1994. This consisted of a $427,000 increase in inventories in the oil recycling segment, and a $506,000 increase in the aviation fueling segment.
Capital expenditures for the fiscal year ended March 31, 1995 consisted primarily of $474,000 in construction costs related to the Company's Louisiana plant, $958,000 to acquire trucks utilized in the collection of used oil and petroleum contaminated water, and delivery of recycled products, as well as $298,000 in office equipment and furniture. During fiscal year 1996, the Company anticipates spending approximately $1,000,000 to upgrade plant, machinery and equipment. The Company also anticipates spending an additional estimated $1,000,000 over the next several years to clean up contamination which was present at one of the Company's sites when it was acquired by the Company. Clean up will be capitalized as part of the cost of the site, up to the fair market value of the site.
Current maturities of long-term debt amounted to $2,128,000 as of March 31, 1995, an increase of $1,842,000. This increase resulted from the issuance of promissory notes, of which $1,830,000 is current, related to the acquisition of the Trans-Tec group of companies.
In the aggregate, accounts payable, accrued expenses and customer deposits increased $14,885,000. This increase was largely due to the acquisition of the Trans-Tec group of companies which added $12,316,000 in accounts payable, accrued expenses and customer deposits. Accrued salaries and wages increased $461,000, principally as the result of accrued sales and management performance bonuses pursuant to employment agreements.
Long-term liabilities as of March 31, 1995, were $6,984,000, exhibiting a $6,409,000 increase as compared to March 31, 1994. This increase resulted from the issuance of promissory notes, of which $4,170,000 is long-term, related to the acquisition of the Trans-Tec group of companies. The balance of the increase is the result of the reclassification of the $1,300,000 accrued litigation settlement expense from current liabilities to a long-term liability and the assumption of obligations under the Trans-Tec deferred compensation plan which amounted to $1,237,000. For additional information, see the accompanying financial statements.
Stockholders' equity amounted to $52,066,000, or $10.01 per share, at March 31, 1995 compared to $39,971,000, or $8.44 per share, at March 31, 1994. This increase of $12,095,000 was due to $8,088,000 in earnings for the period, $4,584,000 resulting from the issuance of common stock in connection with the acquisition of the Trans-Tec group of companies, and $455,000 and $463,000 due to the issuance of common stock pursuant to the exercise of stock options and warrants, respectively. Partially offsetting was $1,509,000 in cash dividends declared.
The Company's working capital requirements for fiscal year 1996 will increase as a result of acquiring the Trans-Tec group of companies. The Company expects to meet its working capital requirements for fiscal year 1996 from existing cash, operations and additional borrowings, as necessary, under its existing line of credit.
The Company's business has not been significantly affected by inflation during the periods discussed in this report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto and filed as a part of this Form 10-K are the financial statements required by Regulation S-X and the supplementary data required by Regulation S-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No disagreements with accountants on any matter of accounting principles or practices or financial statement disclosure have been reported on a Form 8-K within the twenty-four months prior to the date of the most recent financial statement.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the directors and executive officers of the Company set forth under the captions "Election of Directors" and "Information Concerning Executive Officers", respectively in the definitive Proxy Statement of the Company for its 1995 Annual Meeting of Shareholders (the "1995 Proxy Statement") is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the 1995 Proxy Statement under the caption "Compensation of Officers" and "Board of Directors - Compensation of Directors" is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Principal Stockholders and Security Ownership of Management" in the 1995 Proxy Statement is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions with Management and Others" in the 1995 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Sequential Page Number ==========
(a)(1) The following Financial Statements are filed as a part of this report:
(i) Report of Independent Certified Public Accountants 31
(ii) Consolidated Balance Sheets as of March 31, 1995 and 1994 32
(iii) Consolidated Statements of Income for the Years Ended March 31, 1995, 1994 and 1993 34
(iv) Consolidated Statements of Stock- holders' Equity for the Years Ended March 31, 1995, 1994 and 1993 36
(v) Consolidated Statements of Cash Flows for the Years Ended March 31, 1995, 1994 and 1993 37
(vi) Notes to Consolidated Financial Statements 40
(a)(2) The following Financial Statement Schedule is filed as a part of this report:
(i) Schedule II - Valuation and Qualifying Accounts. 57
Schedules not set forth herein have been omitted either because the required information is set forth in the Consolidated Financial Statements or Notes thereto, or the information called for is not required.
(a)(3) The Exhibits set forth in the following index of Exhibits are filed as a part of this report:
EXHIBIT NO. DESCRIPTION ----------- ----------- (2) Plan of acquisition, reorganization, arrangement, liquidation or succession:
(a) Acquisition Agreement dated December 9, 1994 among International Recovery Corp., Trans-Tec Services, Inc., Trans-Tec Servicios, S.A., Theofilos A. Vatis, Michael J. Kasbar, Paul H. Stebbins, and Stacey A. Polites is incorporated by reference to the Company's Form 8-K filed January 18, 1995.
(3) Articles of Incorporation and By-laws:
(a) Articles of Incorporation are incorporated by reference to the Company's Registration Statement on Form S-18 filed February 3, 1986.
(b) By-laws are incorporated by reference to the Company's Registration Statement on Form S-18 filed February 3, 1986.
(4) Instruments defining rights of security holders:
(a) Employee Stock Option Plan is incorporated by reference to the Company's Registration Statement on Form S-18 filed February 3, 1986.
(b) 1993 Non-Employee Directors Stock Option Plan is incorporated by reference to the Company's Schedule 14A filed June 28, 1994.
(10) Material Contracts
(a) Material Contracts incorporated by reference to the Company's Report on Form 10-K filed June 17, 1991:
(i) Revolving Loan Agreement and Credit Facility, dated March 1, 1991, among The Citizens & Southern National Bank (now known as NationsBank of Florida, N.A.), International Recovery and its subsidiaries.
(ii) Promissory Note, dated March 1, 1991, executed by International Recovery Corp. and its subsidiaries in favor of The Citizens & Southern National Bank (now known as NationsBank of Florida, N.A.)
(b) Material Contract incorporated by reference to the Company's Report on Form 10-K filed May 24, 1993.
(i) Amended and Restated Employment Agreement with Phillip S. Bradley, dated November 10, 1992, amending and restating his employment and non-competition agreements.
(c) Material contracts incorporated by reference to the Company's Report on Form 10-K filed May 9, 1994.
(i) Consolidated Amendment No. 2 dated January 21, 1994 among NationsBank of Florida, N.A., International Recovery Corp. and its subsidiaries.
(ii) Promissory Note, dated January 21, 1994, executed by International Recovery Corp. and its subsidiaries in favor of NationsBank of Florida, N.A.
(d) Material contracts filed with this Form 10-K.
(i) Amended and Restated Employment Agreement with Jerrold Blair, dated February 15, 1995.
(ii) Amended and Restated Employment Agreement with Ralph Weiser, dated February 15, 1995.
(iii) Consolidated Amendment Agreement dated May 5, 1995, No. 3 among NationsBank of Florida, N.A., International Recovery Corp. and its subsidiaries.
(iv) Promissory Note dated January 3, 1995, executed by International Recovery Corp. in favor of Theofilos A. Vatis.
(v) Promissory Note dated January 3, 1995, executed by International Recovery Corp. in favor of Michael J. Kasbar.
(vi) Promissory Note dated January 3, 1995, executed by International Recovery Corp. in favor of Paul H. Stebbins.
(vii) Promissory Note dated January 3, 1995, executed by International Recovery Corp. in favor of Stacey A. Polites.
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Accountants
(27) Financial Data Schedule
(b) A Form 8-K was filed during the Company's fiscal year ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL RECOVERY CORP.
Dated: May 22, 1995 By: /S/ Jerrold Blair ------------------------ Jerrold Blair, President
Dated: May 22, 1995 By: /S/ Carlos A. Abaunza ------------------------ Carlos A. Abaunza, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: May 22, 1995 By: /S/ Ralph R. Weiser ------------------------- Ralph R. Weiser, Director
Dated: May 22, 1995 By: /S/ Jerrold Blair ------------------------- Jerrold Blair, Director
Dated: May 22, 1995 By: /S/ Phillip S. Bradley ------------------------- Phillip S. Bradley, Director
Dated: May 22, 1995 By: /S/ Ralph Feuerring ------------------------- Ralph Feuerring, Director
Dated: May 22, 1995 By: /S/ John R. Benbow ------------------------- John R. Benbow, Director
Dated: May 22, 1995 By: /S/ Celestin Durand III ------------------------- Celestin Durand III, Director
Dated: May 22, 1995 By: /S/ Myles Klein ------------------------- Myles Klein, Director
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of International Recovery Corp.:
We have audited the accompanying consolidated balance sheets of International Recovery Corp. (a Florida corporation) and subsidiaries as of March 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1995. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of International Recovery Corp. and subsidiaries as of March 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1995 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14 (a)(2) is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida, May 19, 1995.
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
MARCH 31, --------------------------- 1995 1994 =========== =========== CURRENT ASSETS: Cash and cash equivalents $10,907,000 $ 7,699,000 Accounts receivable, net of allowance for bad debts of $4,566,000 and $2,464,000 at March 31,1995 and 1994, respectively 38,800,000 19,877,000 Inventories 3,714,000 2,781,000 Prepaid expenses and other current assets 4,585,000 3,325,000 ----------- ----------- Total current assets 58,006,000 33,682,000 ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost: Land 705,000 705,000 Buildings and improvements 2,929,000 3,272,000 Office equipment and furniture 2,394,000 1,549,000 Plant, machinery and equipment 15,052,000 12,751,000 Construction in progress 184,000 1,089,000 ----------- ----------- 21,264,000 19,366,000
Less accumulated depreciation and amortization 5,680,000 4,950,000 ----------- ----------- 15,584,000 14,416,000 ----------- ----------- OTHER ASSETS: Unamortized cost in excess of net assets of acquired companies, net of accumulated amortization 12,391,000 1,847,000 Other 3,555,000 3,742,000 ----------- ----------- $89,536,000 $53,687,000 =========== ===========
(Continued)
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, ---------------------------- 1995 1994 =========== =========== CURRENT LIABILITIES: Current maturities of long-term debt $ 2,128,000 $ 286,000 Accounts payable and accrued expenses 24,334,000 9,908,000 Customer deposits 1,559,000 1,100,000 Accrued salaries and wages 747,000 286,000 Accrued litigation settlement expense - 1,300,000 Income taxes payable 1,718,000 261,000 ----------- ----------- Total current liabilities 30,486,000 13,141,000 ----------- -----------
LONG-TERM LIABILITIES: Long-term debt, net of current maturities 4,447,000 575,000 Accrued litigation settlement expense 1,300,000 - Deferred compensation 1,237,000 - ----------- ----------- 6,984,000 575,000 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 5, 6, and 7)
STOCKHOLDERS' EQUITY: Preferred stock, $1.00 par value; 100,000 shares authorized, none issued - - Common stock, $.01 par value; 10,000,000 shares authorized, 5,203,000 and 4,738,000 shares issued and outstanding at March 31, 1995 and 1994, respectively 52,000 47,000 Capital in excess of par value 20,440,000 14,929,000 Retained earnings 31,631,000 25,052,000 Less treasury stock, at cost 57,000 57,000 ----------- ----------- 52,066,000 39,971,000 ----------- ----------- $89,536,000 $53,687,000 =========== ===========
The accompanying notes to the consolidated financial statements are an integral part of these consolidated balance sheets.
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended March 31, ------------------------------------------ 1995 1994 1993 ============ ============ ============
Revenue $361,891,000 $250,527,000 $254,767,000
Cost of sales 334,134,000 223,576,000 230,847,000 ------------ ------------ ------------ Gross profit 27,757,000 26,951,000 23,920,000 ------------ ------------ ------------ Operating expenses: Salaries and wages 8,117,000 6,558,000 6,039,000 Provision for bad debts 2,062,000 5,063,000 4,437,000 Other 6,329,000 5,560,000 5,378,000 ------------ ----------- ------------ 16,508,000 17,181,000 15,854,000 ------------ ----------- ------------ Income from operations 11,249,000 9,770,000 8,066,000 ------------ ----------- ------------ Other income (expense): Litigation settlement - (1,300,000) - Other, net 1,774,000 (33,000) 180,000 ------------ ----------- ------------ 1,774,000 (1,333,000) 180,000 ------------ ----------- ------------ Income from continuing operations before income taxes 13,023,000 8,437,000 8,246,000
Provision for income taxes 4,935,000 3,242,000 2,984,000 ------------ ----------- ------------ Net income from continuing operations 8,088,000 5,195,000 5,262,000 ------------ ----------- ------------
(Continued)
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
For the Year Ended March 31, ---------------------------------------- 1995 1994 1993 ========== ============ ==========
Discontinued operations: Loss from operations of discontinued environmental services segment (net of applicable income tax benefit of $1,033,000) - - (1,793,000)
Loss on disposal of environmental services segment including a provision of $1,350,000 for operating losses during the phase-out period (net of applicable income tax benefit of $993,000) - - (1,922,000) ---------- ------------ ------------ Net loss from discontinued operations - - (3,715,000) ---------- ------------ ------------ Net income $8,088,000 $ 5,195,000 $ 1,547,000 ========== ============ ============
Earnings (losses) per common and common equivalent share:
Income from continuing operations $ 1.65 $ 1.10 $ 1.11
Loss from discontinued operations - - (.78) ---------- ------------ ------------ Net income $ 1.65 $ 1.10 $ .33 ========== ============ ============
Weighted average shares outstanding 4,906,000 4,734,000 4,749,000 ========== ============ ============
The accompanying notes to the consolidated financial statements are an integral part of these consolidated statements.
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Capital in ------------------- Excess of Retained Treasury Shares Amount Par Value Earnings Stock ========= ======== =========== =========== ========= Balance at March 31, 1992 4,689,000 $ 47,000 $14,332,000 $18,310,000 $ -
Exercise of warrants 15,000 - 105,000 - -
Net income - - - 1,547,000 -
Other - - 29,000 - - ---------- -------- ----------- ----------- --------- Balance at March 31, 1993 4,704,000 47,000 14,466,000 19,857,000 -
Exercise of warrants 39,000 - 463,000 - -
Repurchase of common stock (5,000) - - - (57,000)
Net income - - - 5,195,000 - ---------- -------- ----------- ----------- --------- Balance at March 31, 1994 4,738,000 47,000 14,929,000 25,052,000 (57,000)
Exercise of warrants 38,000 - 463,000 - -
Exercise of options 40,000 - 455,000 - -
Issuance of shares for acquisition 387,000 5,000 4,579,000 - -
Cash dividends declared - - - (1,509,000) -
Net income - - - 8,088,000 -
Other - - 14,000 - - --------- -------- ----------- ----------- --------- Balance at March 31, 1995 5,203,000 $ 52,000 $20,440,000 $31,631,000 $ (57,000) ========= ======== =========== =========== =========
The accompanying notes to the consolidated financial statements are an integral part of these consolidated statements.
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended March 31, ------------------------------------ 1995 1994 1993 =========== =========== ===========
Cash flows from operating activities: Net income $ 8,088,000 $ 5,195,000 $ 1,547,000 ----------- ----------- ----------- Adjustments to reconcile net income to net cash provided by (used in) operating activities- Estimated loss on disposal of discontinued operations - - 1,233,000 Depreciation and amortization 1,373,000 1,502,000 1,473,000 Provision for bad debts 2,062,000 5,063,000 4,437,000 Litigation settlement - 1,300,000 - Deferred income tax (benefit) provision 181,000 (176,000) (441,000) Equity in earnings of joint venture (544,000) - - Deferred compensation expense - - 29,000 Other non-cash operating charges (credits) 35,000 (4,000) 19,000
Changes in assets and liabilities, net of assets acquired and liabilities assumed: (Increase) decrease in- Accounts receivable 1,959,000 223,000 (6,921,000) Inventories (933,000) 165,000 (278,000) Prepaid expenses and other current assets (72,000) (1,347,000) (36,000) Net cash provided by discontinued operations - 2,431,000 1,033,000 Other assets (15,000) 332,000 (29,000)
Increase (decrease) in- Accounts payable, accrued expenses, customer deposits and deferred compensation (4,148,000) (1,751,000) (3,957,000) Accrued salaries and wages 461,000 (299,000) 79,000 Income taxes payable 852,000 (1,510,000) 1,703,000 ----------- ----------- ---------- Total adjustments 1,211,000 5,929,000 (1,656,000) ----------- ----------- ---------- Net cash provided by (used in) operating activities 9,299,000 11,124,000 (109,000) ----------- ----------- ---------- (Continued)
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Year Ended March 31, ------------------------------------ 1995 1994 1993 =========== =========== ==========
Cash flows from investing activities: Additions to property, plant and equipment (2,194,000) (3,114,000) (3,885,000) Proceeds from sales of assets 585,000 77,000 93,000 Payment for acquisition of business, net of cash acquired (3,184,000) - - Purchase of short-term investments (3,500,000) - - Proceeds from short-term investments 3,500,000 - - Proceeds from notes receivable 768,000 - - Advances to joint venture (338,000) - - ---------- ---------- ---------- Net cash used in investing activities (4,363,000) (3,037,000) (3,792,000) ---------- ---------- ----------
Cash flows from financing activities: Net (repayments) borrowings under the revolving line of credit - (4,000,000) 3,000,000 Repayment of long-term debt (286,000) (489,000) (511,000) Proceeds from issuance of notes payable - - 750,000 Repayment of notes payable (1,643,000) - (839,000) Proceeds from issuance of common stock 918,000 463,000 105,000 Repurchase of common stock - (57,000) - Dividends paid on common stock (717,000) - - ---------- ---------- ---------- Net cash (used in) provided by financing activities (1,728,000) (4,083,000) 2,505,000 ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 3,208,000 4,004,000 (1,396,000)
Cash and cash equivalents, at beginning of year 7,699,000 3,695,000 5,091,000 ----------- ----------- ---------- Cash and cash equivalents, at end of year $10,907,000 $ 7,699,000 $3,695,000 =========== =========== ==========
(Continued)
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Year Ended March 31, ------------------------------------ 1995 1994 1993 ========== ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, including discontinued operations: Cash paid during the year for: Interest, net of capitalized interest $ 129,000 $ 149,000 $ 67,000 ========== ========== ==========
Income taxes $3,714,000 $3,219,000 $1,912,000 ========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In April 1995, the Company paid $1,300,000, representing its share of the stockholders class action settlement, by issuing 78,550 of the Company's common stock at an agreed upon price of $16.55 per share. Accordingly, as of March 31, 1995, the Company reclassified from current liabilities to long-term liabilities the accrued litigation settlement expense.
In connection with the acquisition of the Trans-Tec group of companies, the Company also issued 387,000 of its common stock valued at $4,584,000, and $6,000,000 in notes payable. See Note 1 for additional information.
Cash dividends declared, but not yet paid totaling $792,000, are included in accounts payable and accrued expenses as of March 31, 1995.
In connection with the sale of certain land and buildings, the Company received $1,317,000 in notes receivable during fiscal year 1994.
Net assets totaling $419,000 were transferred from the Company's discontinued operations to continuing operations during fiscal year 1994. Equipment totaling $185,000 was transferred from the Company's discontinued operations to continuing operations during fiscal year 1993.
Borrowings totaling $220,000 were incurred during fiscal year 1994 in connection with the acquisition of equipment.
Accounts receivable totaling $1,500,000 as of March 31, 1993, were converted to long-term notes receivable during fiscal year 1994.
The accompanying notes to the consolidated financial statements are an integral part of these consolidated statements.
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
International Recovery Corp. (the "Company") was incorporated on July 20, 1984. The Company is involved in three principal businesses. The Company markets aviation and marine fuel and recycles used oil.
Organization and Nature of Acquisitions and Divestitures
In December 1986, the Company entered the aviation fueling business with the acquisition of Advance Petroleum, Inc. ("Advance"). In October 1989, the Company expanded its aviation fueling capabilities by acquiring JCo Energy Partners, Ltd. and shortly thereafter renamed these operations World Fuel Services, Inc.
The Company formed a subsidiary, Air-Terminaling, Inc. ("ATI") which began operations in December 1991. ATI managed the fuel storage facilities owned by the Metropolitan Dade County, Florida Aviation Department Authority which are used to distribute aviation fuel at Miami International Airport. On May 3, 1994, the Metropolitan Dade County Board of Commissioners voted to award the fuel management contract to another company effective June 30, 1994.
The Company formed a subsidiary, International Petroleum Corp. of Delaware which began operations in April 1993, upon the completion of its used oil and water recycling plant in Wilmington, Delaware.
In August 1994, the Company began aviation fueling operations in Ecuador through a joint venture which enables the Company to provide point-to-point aviation fuel sales within Ecuador. See Note 7 for additional information.
On January 3, 1995, the Company entered the marine fueling business by purchasing the assets and assuming certain liabilities of Trans-Tec Services, Inc. and Trans-Tec Servicios, S.A. The Company also purchased the stock of Trans-Tec Services (UK) Ltd., which owns Trans-Tec Services, (Singapore) Pte., Ltd. The acquisition of Trans-Tec by the Company has been accounted for as a purchase. The aggregate purchase price, including acquisition costs of approximately $321,000, was $14,832,000. The Company paid approximately $3,927,000 in cash, $6,000,000 in the form of 9% promissory notes, payable over three years, of which $1,830,000 is due within one year, and $4,584,000 ($11.84 per share, or approximately 78% of the quoted market price) in the Company's restricted common stock. In accordance with the related acquisition agreement, the Company can recover a portion of the purchase price (by direct offset to the promissory notes issued to certain of the sellers) in the event that certain representations and warranties related to the collectability of accounts receivables are not met. The newly issued shares of the Company's common stock issued in connection with the acquisition were valued by the Company's Board of Directors. This valuation was made based upon the volume of shares issued in relation to total shares outstanding and the restricted nature of the newly issued shares. The difference between the purchase price and the $4,158,000 fair value of the net assets of the acquired companies, which amounted to $10,674,000, has been allocated to goodwill, and is being amortized over a period of 35 years. The Company determined that no other identifiable intangible assets existed.
The following unaudited pro-forma results of operations for the fiscal years ended March 31, 1995 and 1994 assume that the Company acquired the Trans-Tec companies, as of April 1, 1993.
For the Year Ended March 31, ------------------------------ 1995 1994 ============ ============
Revenue $524,893,000 $388,094,000 ============ ============ Net income $ 8,585,000 $ 6,117,000 ============ ============ Net income per share $ 1.65 $ 1.19 ============ ============
In December 1992, the Board of Directors approved the Company's exit from the environmental services sector. The Company substantially completed its plan of discontinuance in fiscal year 1994. See Note 2 for additional discussion.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company classifies as cash equivalents all highly liquid investments with a maturity of three months or less from the date of purchase. The Company's investments at March 31, 1995 and 1994, amounted to $8,863,000 and $7,712,000 respectively, and consisted principally of bank repurchase agreements collaterized by United States Government Securities. Investment maturities do not exceed 30 days and are not rated lower than A1-P1 by Standard & Poor's Corporation - Moody's Investors Services, Inc. Interest income, which is included in other, net, in the accompanying statements of income, totalled $765,000, $182,000 and $83,000 for the years ended March 31, 1995, 1994 and 1993, respectively. Effective April 1, 1994, the Company adopted FASB No. 115, "Accounting for Certain Investments in Debt and Equity Securities" as required. The adoption of this pronouncement did not have a material effect on the Company's financial position or results of operations.
Inventories
Inventories are stated at the lower of cost (principally, first-in, first- out) or market. Components of inventory cost include oil and fuel purchase cost, direct materials, direct and indirect labor and factory overhead.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the estimated useful lives of the assets as follows: YEARS =========================
Buildings and improvements 10-40 Leasehold improvements Minimum term of the lease Office equipment and furniture 3-8 Plant, machinery and equipment 3-40
The Company leases premises in New Orleans, Louisiana and Plant City, Florida. The leases expire in August 1996. The Company has an option to purchase the properties at current market value at any time during the lease term. The Company intends to exercise the purchase options and, accordingly, is depreciating the improvements to the premises over their estimated economic lives. See Note 6 for additional information.
Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs which do not extend the lives of the assets are expensed. Upon sale or disposition of property, plant and equipment, the cost and related accumulated depreciation are eliminated from the accounts and any resultant gain or loss is credited or charged to income.
Unamortized Cost in Excess of Net Assets of Acquired Companies
Unamortized cost in excess of net assets of acquired companies is being amortized over 35-40 years using the straight-line method. Accumulated amortization amounted to $413,000 and $284,000, as of March 31, 1995 and 1994, respectively. Subsequent to its acquisition, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of this asset may warrant revision or that the remaining balance of this asset may not be recoverable.
Revenue Recognition
Revenue is generally recorded in the period when the sale is made or as the services are performed. In the Company's aviation and marine fueling segments, the Company contracts third parties to provide the fuel and/or intoplane services. This may cause delays in receiving the necessary information for invoicing. Accordingly, revenue may be recognized in a period subsequent to when the delivery of fuel took place. Costs not yet billed are classified as current assets and are included under "Inventories".
Income Taxes
The Company and its United States subsidiaries file consolidated income tax returns. During the first quarter of fiscal year 1994, the Company adopted the liability method of accounting for income taxes pursuant to the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". See Note 4 for additional information.
Foreign Currency Translation
The Company's primary functional currency is the U.S. Dollar which also serves as its reporting currency. Most foreign entities translate monetary assets and liabilities at fiscal year-end exchange rates while non-monetary items are translated at historical rates. Income and expense accounts are translated at the average rates in effect during the year, except for depreciation which is translated at historical rates. The Company's joint venture uses the Company's reporting currency as the functional currency (as it operates in a highly inflationary economy) and translates net assets at fiscal year-end rates while income and expense accounts are translated at average exchange rates. Gains or losses from changes in exchange rates are recognized in consolidated income in the year of occurrence.
The Company's purchases from certain aviation fuel suppliers are denominated in local currency. Foreign currency exchange gains and losses resulting from payments to aviation fuel suppliers are included in Other, net, in the period incurred, and amounted to net gains of $737,000 for the fiscal year ended March 31, 1995. There were no significant foreign currency gains or losses in fiscal years 1994 and 1993.
Earnings Per Share
Earnings (losses) per common and common equivalent share have been computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents include all potentially dilutive outstanding stock options and warrants applying the treasury stock method. Primary and fully diluted earnings per share are not materially different.
(2) DISCONTINUED OPERATIONS
On December 10, 1992, the Company's Board of Directors authorized the sale of the Company's environmental services segment. Accordingly, as of December 31, 1992, the Company reported its environmental services segment as a discontinued operation.
As of March 31, 1995, assets included in the accompanying consolidated balance sheet related to entities which were discontinued, consist primarily of $1,288,000 in notes receivable, net of an allowance for bad debts.
On April 17, 1995 the Company obtained certified closure of its soil storage permit from the Florida Department of Environmental Protection for the Part-B facility. This enabled the Company to transfer the building ownership under a previously agreed arrangement and to request permit closure from the Environmental Protection Agency. At this time, the Company is unable to determine the period of time or cost required to complete the Environmental Protection Agency permit closure.
During fiscal year 1995, the Company was undergoing the completion of certain environmental projects under state reimbursement programs. However, in March 1995, the State of Florida amended its environmental remediation program. This resulted in the suspension of reimbursement for work performed effective March 27, 1995 on all of the sites at which the Company was contracted to perform work. Pursuant to the enacted changes, the Company believes that it no longer has contractual liability to complete these projects, and accordingly has notified the project owners that pursuant to the legislation all work has ceased, effective March 27, 1995.
The Company periodically reevaluates the adequacy of its accruals related to its discontinued operations, including the amounts which may be realized from the reimbursement for remediation work performed under the state reimbursement programs. Any changes in those estimates have been included in discontinued operations in the accompanying financial statements. As of March 31, 1995, the Company had $50,000 in estimated accrued expenses related to its discontinued operations.
Revenues applicable to the discontinued operations were $36,000, $49,000 and $7,835,000 for the fiscal years 1995, 1994 and 1993, respectively.
(3) LONG-TERM DEBT
Long-term debt consists of the following at March 31:
1995 1994 =========== ========== Promissory notes issued in $ 6,000,000 $ - connection with the acquisition of the Trans-tec group of companies, payable annually through January 1998, bearing interest at 9%, unsecured Capitalized lease obligations, payable through August 1996, interest at rates ranging from 10.19% to 10.70% (secured by property with a net book value of $263,000 and $416,000 at March 31, 1995 and 1994, respectively) 251,000 479,000 Equipment notes, payable monthly through May 1998, interest rates ranging from 6.76% to 7.00%, secured by equipment 147,000 188,000 Mortgage note, bearing interest at 12.0%, payable monthly through July 2001, secured by land, plant and equipment 177,000 194,000 ---------- ---------- 6,575,000 861,000
Less current maturities 2,128,000 286,000 ---------- ---------- $4,447,000 $ 575,000 ========== ==========
The Company has an unsecured credit facility providing a $25,000,000 revolving line of credit with sublimits of $8,000,000 and $6,000,000 for standby letters of credit and documentary letters of credit, respectively. The amendment was effective March 31, 1995. Approximately $2,554,000 in standby letters of credit were outstanding as of March 31, 1995 under the credit facility. The Company also has $1,635,000 outstanding in standby letters of credit from other financing institutions and has pledged $1,635,000 of cash as collateral on these letters of credit.
The revolving line of credit bears interest, at the Company's option, at the Prime rate (9.0% at March 31, 1995), or LIBOR plus 1.45%. Interest is payable quarterly in arrears. As of March 31, 1995 and 1994, there were no amounts outstanding under the revolving line of credit. The outstanding principal and interest will mature on March 31, 1998. The revolving line of credit, in addition to other restrictions, requires the maintenance of certain financial ratios and account balances, limits cash outlays for capital expenditures, places certain restrictions on additional borrowings outside of NationsBank of Florida, NA and restricts the payment of dividends, except for the Company's quarterly dividend which complies with the NationsBank facility. See Note 5 for additional discussion. As of March 31, 1995, the Company was in compliance with its debt covenants.
Aggregate annual maturities of long-term debt as of March 31, 1995, are as follows:
1996 $2,128,000 1997 2,080,000 1998 2,249,000 1999 37,000 2000 32,000 Thereafter 49,000 ---------- $6,575,000 ==========
Interest expense, which is included in other, net, in the accompanying statements of income, is as follows for the year ended March 31:
1995 1994 1993 ======== ======== ======== Interest cost $263,000 $175,000 $272,000
Capitalized interest - 32,000 272,000 -------- -------- -------- Interest expense $263,000 $143,000 $ - ======== ======== ========
(4) INCOME TAXES
During fiscal year 1995, the U.S. Federal Income Tax Returns for the Company's fiscal years ended March 31, 1992 and 1993, were audited by the Internal Revenue Service. The adjustments for the years under audit and the anticipated effect of amending fiscal year 1994, resulted in a tax benefit which was recognized in fiscal year 1995 for financial reporting purposes.
The provision for income taxes consists of the following components for the year ended March 31:
1995 1994 1993 ========== ========== ========== Continuing operations $4,935,000 $3,242,000 $2,984,000 Discontinued operations - - (2,026,000) ---------- ---------- ---------- $4,935,000 $3,242,000 $ 958,000 ========== ========== ========== Current: Federal $3,764,000 $2,648,000 $1,629,000 State 990,000 412,000 241,000 ---------- ---------- ---------- 4,754,000 3,060,000 1,870,000 ---------- ---------- ---------- Deferred: Federal 142,000 158,000 (800,000) State 39,000 24,000 (112,000) ---------- ---------- ---------- 181,000 182,000 (912,000) ---------- ---------- ---------- Total $4,935,000 $3,242,000 $ 958,000 ========== ========== ==========
Effective April 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This new statement supersedes Statement No. 96, previously implemented by the Company, and also requires the liability method in accounting for income taxes. The adoption of this new pronouncement did not have a material effect on the Company's consolidated financial position or results of operations.
The difference between the reported tax provision and the provision computed by applying the statutory Federal income tax rate currently in effect to income before income taxes for each of the three years ended March 31, 1995, is primarily due to state income taxes.
The temporary differences which comprise the Company's net deferred tax assets are as follows:
March 31, -------------------------------- 1995 1994 =========== ============ Excess of provision for bad debts over charge-offs $ 1,340,000 $ 888,000
Excess of tax over financial reporting depreciation and amortization (1,284,000) (900,000)
Accrued litigation settlement expense recognized for financial reporting purposes, not currently deductible 481,000 481,000
Excess of tax over financial reporting amortization of identifiable intangibles (248,000) -
Other, net (24,000) (111,000) ----------- ----------- $ 265,000 $ 358,000 =========== ===========
The net deferred tax assets as of March 31, 1995 and 1994, are included in other assets in the accompanying consolidated balance sheets.
(5) STOCKHOLDERS' EQUITY
Common Stock Activity
On January 3, 1995, the Company issued 387,000 shares of the Company's common stock pursuant to the Trans-Tec Services acquisition. See Note 1 for additional information.
In June 1994, the United States District Court for the Southern District of Florida approved the settlement of the shareholders class action pending against the Company. The settlement had a total value of approximately $2,600,000, of which the Company's insurance company paid $1,300,000 in cash and the Company paid the balance in April 1995, by issuing 78,550 shares of the Company's common stock at an agreed upon price of $16.55 per share.
Stock Options Activity
In January 1986, the stockholders approved a stock option plan under the terms of which the Board of Directors is authorized to grant options to full-time employees of the Company and its subsidiaries. The plan permits the issuance of options to purchase up to an aggregate of 300,000 shares of the Company's common stock. The minimum price at which any option may be exercised will be the fair market value of the stock on the date of grant; provided, however, that with respect to an option granted to an individual owning more than 10% of the Company's outstanding common stock, the minimum exercise price will be 110% of the fair market value of the common stock on the date of grant. All options granted pursuant to the plan must be exercised within ten years after the date of grant, except that options granted to individuals owning more than 10% of the Company's outstanding common stock must be exercised within five years after the date of grant.
The following summarizes the status of the plan as of, and for the year ended March 31: 1995 1994 1993 ================ ============= =============
Granted 46,206 None 81,500 Per Share $14.875 - $15.50 $14.00
Expired 20,000 None None
Exercised None None None
Outstanding 171,427 145,221 145,221 Per Share $3.00 - $15.50 $3.00 - $14.75 $3.00 - $14.75
Available for future grant 37,294 63,500 63,500
Exercisable 125,221 63,721 63,721 Per Share $3.00 - $14.75 $3.00 - $14.75 $3.00 - $14.75
During fiscal year 1995, the Board of Directors granted options to several employees for the purchase of 46,206 shares of the Company's common stock under the stock option plan. The exercise prices range from $14.875 to $15.50 per share. On May 10, 1995, the Board of Directors granted options to certain executive officers to purchase 25,894 shares of the Company's common stock at an exercise price of $18.875 per share.
During fiscal year 1995, previously granted options to purchase 20,000 shares of the Company's common stock under the stock option plan expired. Accordingly, as of March 31, 1995, options to purchase 171,427 shares of the Company's common stock remain outstanding and 37,294 additional shares are available for future grant.
On June 3, 1994, the Company extended through December 31, 1995, Mr. Phillip Bradley's (an executive officer and director of the Company) non- qualified option to purchase 25,000 shares of the Company's common stock. The exercise price remained unchanged at $10.00 per share. The difference between the fair market value on the extension date of $12.13, and the option price, is being amortized over 1995 as compensation expense. On January 3, 1995, the Board of Directors granted a non- qualified option to two employees to each purchase 5,647 shares of the Company's common stock at an exercise price of $15.50 per share. On May 10, 1995, the Board of Directors granted a non-qualified option to an executive officer to purchase 9,106 shares of the Company's common stock at an exercise price of $18.875 per share. As of March 31, 1995, non- qualified options to purchase a total of 55,036 shares of the Company's common stock at exercise prices ranging from $10.00 to $16.50 per share, remain outstanding.
Non-Employee Directors Stock Option Plan
On August 8, 1994, at the annual meeting of the shareholders of the Company, the 1993 Non-Employee Directors Stock Option Plan ("Plan") was adopted. An aggregate of 50,000 shares of the Company's common stock have been reserved for issuance under the Plan.
Under the Plan, members of the Board of Directors who are not employees of the Company or any of its subsidiaries or affiliates will receive annual stock options to purchase common stock in the Company pursuant to the following formula. Each non-employee director will receive a non- qualified option to purchase 2,500 shares when such person is first elected to the Board of Directors (or when the Plan was adopted, for those individuals already members of the Board), and will receive a non- qualified option to purchase 2,500 shares each year, starting in August 1995, that the individual is re-elected. On the date the Plan was adopted there were three individuals who qualified and each received an option to purchase 2,500 shares of the Company's common stock at an exercise price of $15.125. This price reflects the fair market value of the Company's common stock on December 31, 1993, the date of grant. As of March 31, 1995, options to purchase 7,500 shares of the Company's common stock remain outstanding under the plan and 42,500 shares are available for future grant.
The exercise price for options granted under the Plan may not be less than the fair market value of the common stock, which is defined as the closing bid quotation for the common stock at the end of the day preceding the grant. Options granted under the Plan become fully exercisable one year after the date of grant. All options expire five years after the date of grant. The exercise price must be paid in cash or in common stock, subject to certain restrictions.
Stock Warrants Activity
In April 1994, warrants to purchase a total of 38,625 shares of the Company's common stock at $12.00 per share were exercised. No additional warrants were issued or exercised during fiscal year 1995 and subsequent to the April 1994 exercise, no additional warrants remain outstanding.
Stock Repurchase
On April 12, 1993, the Board of Directors authorized the repurchase from time to time of up to 400,000 shares of the Company's common stock. The timing and quantity of shares to be repurchased will depend upon a number of factors, including market price. As of March 31, 1995, a total of 5,000 shares had been purchased in the open market for approximately $57,000 pursuant to the repurchase program.
Dividend Declarations
The Board of Directors approved the payment of the following cash dividends:
Declaration Date Per Share Record Date Payment Date ---------------- --------- ----------- ------------ May 9, 1994 .05 cents June 22, 1994 July 15, 1994 September 9, 1994 .05 cents September 22, 1994 October 14, 1994 December 9, 1994 .05 cents December 22, 1994 January 12, 1995 January 19, 1995 .05 cents March 22, 1995 April 13, 1995 February 22, 1995 .10 cents March 22, 1995 April 13, 1995
(6) COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases premises in New Orleans, Louisiana and Plant City, Florida from a trust managed by the President of the Company under two operating leases with rent aggregating $86,000 per year. The leases expire in August 1996. The Company has an option to purchase the properties at current market value at any time during the lease term. The Company intends to exercise the purchase options on both leases.
The Company also leases additional office space and railroad tank cars from unrelated third parties.
The future minimum lease payments under capital leases and operating leases with an initial noncancellable term in excess of one year, as of March 31, 1995 are as follows: Capital Operating Leases Leases ========= ========== 1996 $ 248,000 $ 596,000 1997 17,000 438,000 1998 - 324,000 1999 - 61,000 --------- ---------- Total minimum lease payments 265,000 $1,419,000 ========== Less amounts representing interest 14,000 --------- Present value of minimum lease payments $ 251,000 =========
Rental expense under operating leases with an initial noncancellable term in excess of one year was $535,000, $461,000, and $514,000 for the years ended March 31, 1995, 1994 and 1993, respectively.
Capital Expenditures
During fiscal year 1995, the Company completed the construction of a water and used oil treatment plant in Louisiana at a total cost of $1,550,000. During fiscal year 1996, the Company anticipates spending approximately $1,000,000 to upgrade plant, machinery and equipment. The Company intends to spend an estimated $1,000,000 over the next several years to clean up contamination which was present at one of the Company's sites when it was acquired by the Company. Clean up will be capitalized as part of the cost of the site, up to the fair market value of the site.
Surety Bonds
In the normal course of business the Company is required to post bid, performance and garnishment bonds. The majority of the bonds issued relate to the Company's aviation fueling business. As of March 31, 1995, the Company had $2,675,000 in outstanding bonds.
Purchase Commitments and Off-Balance Sheet Transaction
The Company may from time to time enter into short term fuel purchase commitments. In order to fix the profit on the end market sale of the purchase commitment, the Company may enter into a hedge transaction in the financial futures market. As of March 31, 1995, the Company did not have any outstanding purchase commitments or hedges.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to credit risk consist primarily of trade accounts receivable. The Company extends credit on an unsecured basis to many of its aviation and marine customers, some of which have a line of credit in excess of $1,000,000. The Company's management recognizes that extending credit and setting appropriate reserves for receivables is largely a subjective decision, based on knowledge of the customer. Active management of this risk is essential to the Company's success. A strong capital position and liquidity provide the financial flexibility necessary to respond to customer needs. The Company's management meets regularly to evaluate credit exposure in the aggregate, and by individual credit. This group is also responsible for setting and maintaining credit standards and ensuring the overall quality of the credit portfolio.
Potential Liability and Insurance
The Company, through the use of subcontractors and its own operations, transports, stores, or processes flammable aviation, marine and residual fuel subjecting it to possible claims by employees, customers, regulators, and others who may be injured. In addition, the Company may be held liable for the clean-up costs of spills or releases of materials from its facilities or vehicles, or for damages to natural resources arising out of such events. The Company follows what it believes to be prudent procedures to protect its employees and customers and to prevent spills or releases of these materials.
The Company's activities subject it to the risks of significant potential liability under Federal and state statutes, common law, and contractual indemnification agreements. The Company has general and automobile liability insurance coverage, including the statutory Motor Carrier Act/MCS 90 endorsement for sudden and accidental pollution.
In the aviation and marine fuel segments, the Company utilizes subcontractors which provide various services to customers, including intoplane fueling at airports, fueling of vessels in port and at sea, and transportation and storage of fuel and fuel products. Although the Company generally requires its subcontractors to carry liability insurance, not all subcontractors carry adequate insurance. The Company's liability insurance policy does not cover the acts or omissions of its subcontractors. If the Company is held responsible for any liability caused by its subcontractors, and such liability is not adequately covered by the subcontractor's insurance, the Company will be adversely affected.
The Company has exited several environmental businesses which handled hazardous wastes. These wastes were transported to various disposal facilities and/or treated by the Company. The Company may be held liable as a potentially responsible party for the clean-up of such disposal facilities in certain cases pursuant to current Federal and state laws and regulations. Due to the cost of insurance relative to potential exposure, tail coverages were not purchased for businesses exited. The Company is currently responsible to Federal and state environmental agencies for clean-up costs at a site formerly operated by its subsidiary, Resource Recovery of America, which has been sold by the Company.
The Company continuously reviews the adequacy of its insurance coverages. However, the Company lacks coverage for various risks. A claim arising out of the Company's activities, if successful and of sufficient magnitude, could have a material adverse effect on the Company's financial position or results of operations.
Legal Matters
In January 1993, Hillsborough County sued the Company's International Petroleum Corporation of Florida subsidiary ("IPC"), along with 170 other defendants (or potentially responsible persons), in the U.S. District Court of the Middle District of Florida. The complaint seeks to recover response or cleanup costs for the Sydney Mine Waste Disposal Site under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. section 9601 et. seq. (CERCLA or Superfund) and under Florida Statutes. The Company intends to vigorously defend this action.
There can be no assurance the Company will prevail in the foregoing legal proceeding, and management cannot estimate at this time the exposure of the Company if it does not prevail in this proceeding.
The Company is involved in other litigation and administrative proceedings primarily arising in the normal course of its business. In the opinion of management, the Company's liability, if any, under any other pending litigation or administrative proceedings, would not materially affect its financial condition or operations.
Employment Agreements
The Company amended and restated its employment agreements with the Chairman of the Board and the President which expire on March 31, 2000. Each agreement provides for a salary and an annual bonus equal to 5% of the Company's income before income taxes in excess of $2,000,000. The agreements also provide that if the Company terminates the employment of the executive for reasons other than death, disability, or cause, or, if the executive terminates employment with the Company for good reason, including under certain circumstances, a change in control of the Company, the Company will pay the executive compensation of up to three times his average salary and bonus during the five year period preceding his termination.
The Company and its subsidiaries have also entered into employment, consulting and non-competition agreements with certain of their executive officers and previous and current employees. The agreements provide for minimum salary levels, as well as bonuses which are payable if specified management goals are attained.
During the years ended March 31, 1995, 1994 and 1993, approximately $3,963,000, $3,124,000 and $2,795,000, respectively, was expensed under the terms of the above described agreements.
The future minimum commitments under employment agreements, excluding bonuses, as of March 31, 1995 are as follows:
1996 $2,709,000 1997 1,844,000 1998 1,425,000 1999 574,000 2000 662,000 ---------- $7,214,000 ==========
Deferred Compensation Plan
The Company has an incentive compensation plan which provides incentive compensation to certain key personnel whose performance contributes to the profitability and growth of the existing Trans-Tec group of companies. The plan is unfunded and is not a qualified plan under the Internal Revenue Code. Under the plan, participants will be awarded units equal to 20% of the Trans- Tec group's net income, excluding the incentive compensation expense, and earn interest on their deferred amounts. The plan allows for distributions of vested amounts over a five year period, subject to certain requirements, during and after employment with the Company. Participants become fully vested over a five year period, fully vested participants must wait two years from the year of contribution to be eligible for the distribution of deferred account balances. The plan is administered by a plan committee appointed by the Board of Directors of Trans-Tec Services, Inc. The plan committee has the authority to suspend or terminate the plan, as well as the responsibility to allocate the amount of incentive compensation among participants, during each plan year. The plan's fiscal year corresponds to the Company's fiscal year.
(7) JOINT VENTURE
In August 1994, the Company, through its wholly-owned subsidiary World Fuel Services, Inc., began operation of a joint venture with Petrosur, an Ecuador corporation. The Company's ownership interest in the joint venture is 42%. The joint venture was organized under the name PetroSur-World Fuel to distribute jet fuel in Ecuador pursuant to a contract with the nationally owned oil company. The contract with the government may be terminated at any time. The Company has management oversight of the business activities of the joint venture. The joint venture arrangement has a term of five years and will automatically renew for a similar term unless one of the partners objects at least ninety days prior to the end of the term.
During fiscal year 1995, the Company has recorded in the accompanying consolidated statement of income its proportionate share of the net earnings of the joint venture which amounted to $544,000, included as part of Other, net. The amount of the investment in the joint venture totalled $544,000, and advances to the joint venture amounted to $338,000 as of March 31, 1995, and are included in other assets and prepaid expenses and other current assets, respectively, in the accompanying consolidated balance sheet.
(8) BUSINESS SEGMENTS, FOREIGN OPERATIONS AND MAJOR CUSTOMERS
Business Segments
The Company operates in three business segments: aviation fueling, marine fueling and oil recycling. Information concerning the Company's operations by business segment is as follows:
FOR THE YEAR ENDED MARCH 31, ------------------------------------------- 1995 1994 1993 ============ ============ ============ REVENUE: Aviation fueling $288,728,000 $233,982,000 $241,055,000 Marine fueling (1) 54,578,000 - - Oil recycling 18,591,000 16,554,000 14,014,000 Intersegment eliminations (6,000) (9,000) (302,000) ------------ ------------ ------------ Consolidated revenues $361,891,000 $250,527,000 $254,767,000 ============ ============ ============ INCOME FROM OPERATIONS: Aviation fueling $ 12,304,000 $ 12,066,000 $ 8,911,000 Marine fueling (1) 220,000 - - Oil recycling 2,973,000 1,075,000 2,333,000 Corporate (4,248,000) (3,371,000) (3,001,000) Intersegment eliminations - - (177,000) ------------ ------------ ------------ Consolidated income from operations $ 11,249,000 $ 9,770,000 $ 8,066,000 ============ ============ ============ IDENTIFIABLE ASSETS: Aviation fueling $ 27,920,000 $ 26,535,000 $ 32,039,000 Marine fueling 34,313,000 - - Oil recycling 17,557,000 16,548,000 14,005,000 Corporate 9,746,000 10,604,000 4,506,000 Discontinued operations - - 4,167,000 ------------ ------------ ------------ Consolidated identifiable assets $ 89,536,000 $ 53,687,000 $ 54,717,000 ============ ============ ============ CAPITAL EXPENDITURES: Aviation fueling $ 27,000 $ 101,000 $ 58,000 Marine fueling (1) 104,000 - - Oil recycling 1,901,000 3,078,000 3,755,000 Corporate 162,000 155,000 72,000 ------------ ------------ ------------ Consolidated capital expenditures $ 2,194,000 $ 3,334,000 $ 3,885,000 ============ ============ ============ DEPRECIATION AND AMORTIZATION: Aviation fueling $ 236,000 $ 194,000 $ 222,000 Marine fueling (1) 140,000 - - Oil recycling 824,000 1,150,000 1,071,000 Corporate 173,000 158,000 180,000 ------------ ------------ ------------ Consolidated depreciation and amortization $ 1,373,000 $ 1,502,000 $ 1,473,000 ============ ============ ============
(1) The marine fueling segment reflects activity from January 1, 1995 to March 31, 1995.
Net assets of the discontinued operations, as described in Note 2, were transferred to continuing operations as of March 31, 1994.
Foreign Operations
A summary of financial data for foreign operations is shown below as of, and for the fiscal years ended March 31, 1995, 1994 and 1993. Non-U.S. operations of the Company and its subsidiaries are conducted primarily in the United Kingdom. Income from operations is before the allocation of corporate general and administrative expenses and income taxes.
1995 1994 1993 =========== =========== =========== Revenue $47,045,000 $28,382,000 $23,760,000 =========== =========== =========== Income from operations $ 1,572,000 $ 190,000 $ 240,000 =========== =========== =========== Identifiable assets $11,770,000 $ 1,872,000 $ 3,367,000 =========== =========== ===========
Major Customers
No customer accounted for more than 10% of total consolidated revenue for the years ended March 31, 1995, 1994 and 1993.
(9) QUARTERLY INFORMATION (UNAUDITED)
FOR THE THREE MONTHS ENDED, ------------------------------------------------------- June 30, September 30, December 31, March 31, 1994 1994 1994 1995 =========== =========== =========== ============ Revenue $72,524,000 $76,660,000 $78,103,000 $134,604,000 =========== =========== =========== ============ Gross profit $ 7,242,000 $ 5,731,000 $ 5,802,000 $ 8,982,000 =========== =========== =========== ============ Net income $ 1,944,000 $ 1,760,000 $ 2,054,000 $ 2,330,000 =========== =========== =========== ============ Earnings per common and common equivalent share $ 0.41 $ 0.37 $ 0.43 $ 0.45 =========== =========== =========== ============
FOR THE THREE MONTHS ENDED, -------------------------------------------------------- June 30, September 30, December 31, March 31, 1993 1993 1993 1994 =========== =========== =========== ============ Revenue $61,403,000 $63,128,000 $62,529,000 $ 63,467,000 =========== =========== =========== ============ Gross profit $ 6,464,000 $ 6,958,000 $ 5,847,000 $ 7,682,000 =========== =========== =========== ============ Net income $ 1,446,000 $ 1,555,000 $ 1,259,000 $ 935,000 =========== =========== =========== ============ Earnings per common and common equivalent share $ 0.31 $ 0.33 $ 0.27 $ 0.19 =========== =========== =========== ============
SCHEDULE II
INTERNATIONAL RECOVERY CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS