<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934

                   For the fiscal year ended December 31, 2001

                          Commission file number 0-7152

                           DEVCON INTERNATIONAL CORP.

      Florida Corporation                                         TIN 59-0671992

      1350 East Newport Center Drive, Suite 201, Deerfield Beach, FL 33442

                                 (954) 429-1500

           Securities Registered Pursuant to Section 12(g) of the Act:

                           Common Stock $.10 par value

We have filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months.

This document or its amendments does not include disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K nor will disclosure be made in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

As of March 5, 2002, Devcon International Corp. had 3,592,985 shares
outstanding. The aggregate market value of the Common Stock held by
non-affiliates of Devcon International Corp. as of March 5, 2002 was
approximately $8.8 million, based on the closing price on that date of $6.35 for
the Common Stock as reported on the Nasdaq National Market System. In this
calculation all executive officers, directors and 5 percent beneficial owners of
Devcon International Corp. are considered to be affiliates. This is not an
admission that such executive officers, directors or 5 percent beneficial owners
are, in fact, affiliates of the registrant.

                       DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III (Items 10, 11, 12 and 13) is incorporated
by reference from Devcon's definitive proxy statement (to be filed pursuant to
Regulation 14A)
<PAGE>

                                     PART I

Item 1. Business

General

In the Caribbean, Devcon International Corp. (the "Company") produces and
distributes ready-mix concrete, crushed stone, concrete block, and asphalt and
distributes bagged cement. We also perform site preparation work as a land
development contractor. We have established a significant market share in most
locations where we have facilities.

We are a large producer and distributor of ready-mix concrete and quarry
products in these Caribbean islands:

Puerto Rico                                 Commonwealth of Puerto Rico
St. Thomas                                  United States Virgin Islands
St. Croix                                   United States Virgin Islands
St. Maarten                                 Netherlands Antilles
St. Martin                                  French West Indies
Antigua                                     West Indies

Our construction division performs earthmoving, excavating, and filling
operations, builds golf courses, roads, and utility infrastructures, dredges
waterways and constructs deep-water piers and marinas in the Caribbean. We have
historically provided these land development services to both private
enterprises and governments in the Caribbean. We believe that our relationships
with customers in the Caribbean give us a competitive advantage. Our project
managers have substantial experience in land development construction, and our
equipment is well suited for the Caribbean markets. We have equipment and
personnel in the Caribbean that, we believe, often allow us to start work more
quickly and less expensively than other contractors. While we can bid
competitively and cost-effectively for these land development contracts, our
ability to mobilize quickly can sometimes cause us to incur higher expense
during low activity periods.

The following table sets forth financial highlights of our materials and
construction business. During the first quarter 2000 we sold our operations in
Tortola and Dominica, our concrete operations in St. Thomas and all our bulk
cement terminals. See further information in Note 11 of Notes to Consolidated
Financial Statements.

                                               2001         2000          1999
                                             --------     --------     --------
                                                      (In thousands)

Revenue (net of intersegment sales):
     Materials                               $ 39,703     $ 50,956     $ 55,313
     Construction                              15,185       14,292       12,721
                                             --------     --------     --------
                                             $ 54,888     $ 65,248     $ 68,034
                                             ========     ========     ========

Operating (loss) income (by segment)
     Materials                               $     23     $ (1,608)    $ (2,198)
     Construction                               1,173        1,266         (301)
     Credit for litigation                         --           --        1,160
     Unallocated corporate overhead            (1,188)        (818)        (879)
                                             --------     --------     --------
                                             $      8     $ (1,160)    $ (2,218)
                                             ========     ========     ========

                                       2
<PAGE>

Our executive offices are located at 1350 East Newport Center Drive, Suite 201,
Deerfield Beach, Florida 33442 and our telephone number is (954)429-1500. In
this document, the terms "Company" and "Devcon" refer to Devcon International
Corp. and its subsidiaries.

Business Development

From time to time, we investigate opportunities to expand our operations to
areas of the Caribbean where we presently have no business, and also
opportunities to expand our existing operations in related areas of operations.

The Company decided in 2001 to stop its operations in Aguadilla, Puerto Rico and
have leased all its equipment on the site to a company affiliated with one of
the joint venture owners of the subsidiary in Puerto Rico.

Risks of Foreign Operations

Portions of our operation in 2001 were conducted in Caribbean foreign countries,
primarily Antigua and Barbuda, St. Maarten, St. Martin and the Bahamas. In 2001,
60.7 percent of our revenue was derived from foreign geographic areas. For a
summary of our revenue and earnings from foreign operations, see Notes 9 and 11
of Notes to Consolidated Financial Statements. The risks of doing business in
foreign areas include potential adverse changes in U.S. diplomatic relations
with foreign countries, changes in the relative purchasing power of the U.S.
dollar, hostility from local populations, adverse effects of exchange controls,
restrictions on the withdrawal of foreign investment and earnings, government
policies against businesses owned by non-nationals, expropriations of property,
the instability of foreign governments, and any insurrection that could result
in uninsured losses. We are not subject to these risks in Puerto Rico or the
U.S. Virgin Islands since these are United States territories. The Company is
also subject to U.S. federal income tax upon the distribution of certain
offshore earnings. See Note 8 of Notes to Consolidated Financial Statements.
Although we have not encountered significant difficulties in our foreign
operations, there can be no assurance that we will never encounter difficulties.

Materials Division

General In 2001 we manufactured and distributed ready-mix concrete, block and
crushed aggregate. We also distributed bagged cement. The different activities
on the islands are shown below:

                                                Concrete
                      Ready-Mix     Quarry        Block     Bagged
                      Concrete    Aggregates   Production   Cement
                      --------    ----------   ----------   ------
Puerto Rico                           X
St. Thomas, U.S.V.I                   X            X          X
St. Croix, U.S.V.I        X           X
St. Maarten               X           X            X          X
St. Martin                X           X                       X
Antigua                   X           X            X

                                       3
<PAGE>

Our materials business employed assets in 2001 such as:

..   Quarries                                .    Concrete Batch Plants
..   Rock Crushing Plants                    .    Fleet of Concrete Mixer Trucks
..   Concrete Block Plants                   .    Asphalt Plants

See additional information under Item 1 - Business-General.

Ready-Mix Concrete and Concrete Block Our concrete batch plants mix cement,
sand, crushed stone, water and chemical additives to produce ready-mix concrete
for use in local construction. Our fleet of concrete mixer trucks delivers the
concrete to the customer's job site. At our concrete block plants, a
low-moisture concrete mixture is machine-formed, then dried and stored for later
sale. Usually, our ready-mix concrete operations and concrete block plants are
the area's largest or only facility.

Quarry Operations and Crushed Stone We own or lease quarry sites at which we
blast rock from exposed mineral formations. This rock is crushed to sizes
ranging from 3 1/2-inch stones down to manufactured sand. The resulting
aggregate is then sorted, cleaned and stored. The aggregate is sold to customers
and used in our operations to make concrete products. Our quarries are the
largest on four Caribbean islands. It is often less expensive to manufacture
crushed rock at our quarries than to import aggregate from off-island sources.

Bagged Cement In prior years, we owned and operated several bulk cement
terminals. In the beginning of 2000, all of the Company's cement terminals were
sold. As a result of this transaction we now enter the supply chain for cement
at a later stage, and purchase cement directly from the terminals we sold. The
Company purchases cement from these terminals for use in its concrete batch
plants, block plants and on some islands for resale in the form of bagged
cement.

Supplies We presently obtain all of the crushed rock and a majority of the sand
necessary for our production of ready-mix concrete from our own quarries. We
believe our ability to produce our own sand and stone gives us a competitive
advantage because of the substantial investment required to produce aggregates,
the difficulty in obtaining the necessary environmental permits to establish
quarries and the moratorium on mining beach sand imposed by most Caribbean
countries. We purchase cement from cement terminals located on the islands where
our operations are established and bulk cement is readily available from a
number of manufacturers located throughout the Caribbean basin.

Customers Our primary customers are building contractors, governments, asphalt
pavers and individual homeowners. Customers generally pick up quarry products,
concrete block and bagged cement at our facilities, and we generally deliver
ready-mix concrete to the customers' job sites.

Competition We have some competitors in the materials business in the locations
where we conduct business. We encounter competition from the producers of
asphalt, which is an alternative material to concrete for road construction. We
believe our materials market share, resources, facilities, local presence and
cost structure give us a competitive advantage in the eastern Caribbean markets
where we operate.

                                       4
<PAGE>

Construction Division

General We have completed land development construction projects, including
interstate highways, airport sites and runways, deep-water piers and marinas,
hydraulic dredging, golf courses, and industrial, residential and commercial
site development. We pursue what we believe to be the more profitable land
development contracts available in the Caribbean, rather than attempting to
maintain a high volume.

The revenue related to the work performed by our construction division is
generated on a contract-by-contract basis. The majority of our contracts are
completed in less than one year, although we obtain multi-year contracts from
time to time. These contracts are bid or negotiated at a fixed price except for
changes in the scope of the work requested by the owner during the term of the
contract. The majority of our work is performed by our own labor and equipment
and is not subcontracted. We also enter into unit-price contracts where our fee
is based upon the quantity of work performed. This is often measured in yards,
meters or tons, rather than time.

Operations We obtain leads for new projects from customers and engineering firms
with whom we have established relationships. First, we decide whether to submit
a bid or negotiate to undertake a particular project. We prepare and submit
timely proposals detailing what we believe will best meet the customer's
objectives. We have also provided long-term or short-term financing to obtain
more profitable construction contracts, and any financing by us in the future is
contingent upon our financial position and operating results. Our Vice President
of Construction Operations and/or our President review project proposals and
bids. After a customer accepts our proposal, a formal contract is negotiated. We
are normally the prime contractor. We assign one of our field superintendents to
maintain close contact with the customer and its engineers, to supervise
personnel and the relocation, purchase, lease and maintenance of equipment, and
to schedule and monitor our operations.

Backlog Our backlog of unfulfilled portions of construction contracts at
December 31, 2001 was $10.5 million involving 7 projects. One Bahamian project's
backlog amounts to $7.2 million at the end of 2001. A subsidiary and two of our
directors are minority partners, and our President is a member of the managing
committee of the entity developing this project. In January 2002, the
partnership received the necessary financing to complete the development of the
project. The backlog of $10.5 million involving 7 projects at the end of 2001
compares to $13.0 million involving 7 projects at December 31, 2000. Since
December 31, 2001 we have not entered into any new significant construction
contracts in the Caribbean. We are actively bidding and negotiating additional
projects. We expect most of the current backlog to be completed during 2002.

Bonding We must obtain a performance bond to bid on government construction
contracts and some private contracts. We have, in the past, been able to bond
all contracts that so required.

Competition Land development construction is extremely competitive. Primary
competitive factors include price, prior experience and relationships, the
equipment available to complete the job, innovation, the available engineering
staff to assist an owner in minimizing costs, how quickly a company can complete
a contract, and the ability to obtain bonding which

                                       5
<PAGE>

guarantees contract completion. We believe that we compete effectively and have
a favorable competitive position in our Caribbean markets.

Tax Exemptions and Benefits

Most of our offshore earnings are taxed at rates lower than U.S. statutory
federal income tax rates due to tax exemptions and lower prevailing tax rates
offshore. The U.S. Virgin Islands Industrial Development Commission granted us
tax exemptions on most of our U.S. Virgin Islands earnings through 2003.

U.S. tax laws provide that our offshore earnings are not taxable for U.S.
federal income tax purposes, and most post-April 1988 materials division
earnings in the U.S. Virgin Islands can be distributed to us free of U.S. income
tax. Any distribution to our United States operations of: (1) earnings from our
U.S. Virgin Islands operations accumulated prior to April 1, 1988; or (2)
earnings from our Antigua, St. Martin and St. Maarten operations, would subject
us to U.S. federal income tax on the amounts distributed, less applicable taxes
paid in those jurisdictions. At December 31, 2001, $37.8 million of accumulated
earnings had not been distributed to our U.S. operations. We have not provided
for U. S. federal income tax on the undistributed earnings of foreign
subsidiaries because we intend to permanently reinvest those earnings offshore,
unless the earnings can be repatriated in a tax-free manner.

Our tax exemption and our ability to receive most of the current earnings from
our U.S. Virgin Islands operations without subjecting us to U.S. income taxes
reduce our income tax expense. For further information on our tax exemptions and
income taxes, see Note 8 of Notes to Consolidated Financial Statements.

Equipment

Both of our businesses require us to lease or purchase and maintain equipment.
As of December 31, 2001, our equipment included cranes, bulldozers, road
graders, rollers, backhoes, earthmovers, a hydraulic dredge, barges, rock
crushers, concrete batch and block plants, concrete mixer trucks, asphalt
processing and paving equipment and other items. Some of this equipment is
encumbered by chattel mortgages. See Notes 7 and 10 of Notes to Consolidated
Financial Statements.

Miscellaneous Investments and Joint Ventures

We have invested or participated in several joint ventures in connection with
our construction and materials division.

During the period 1998 through 2001, we invested a total of $186,000 for a 1.2
percent interest in a real estate joint venture in the Bahamas. The upscale
resort project received final financing to finish its development in January
2002. Two of our directors have an interest in the joint venture. See Note 12 of
Notes to Consolidated Financial Statements.

During the last three years we invested a total of $181,000 for a 33.3 percent
interest in a real estate joint venture in Puerto Rico that owns the land where
the Aguadilla aggregate processing plant was operating. During 2001 we
recognized earnings of $29,000 from this joint venture under the equity method
of accounting.

                                       6
<PAGE>

Executive Officers

The executive officers of the Company are as follows:

Donald L. Smith, Jr., 80, a co-founder of the Company, has served as its
Chairman of the Board, President and Chief Executive Officer since its formation
in 1951.

Richard L. Hornsby, 66, was appointed the Company's Executive Vice President in
March 1989. Mr. Hornsby served as Vice President of the Company from August 1986
to February 1989. From 1981 to 1986 he was Financial Manager for unrelated
private investment companies. He has been a director of the Company since 1975
and served as Vice President-Finance from 1972 to 1977.

Henry C. Obenauf, 72, was appointed Vice President-Engineering of the Company in
March 1989, after having served as Vice President of the Company since 1977. The
Company has employed Mr. Obenauf for over 33 years.

Jan A. Norelid, 48, was appointed Vice President-Finance and Chief Financial
Officer in October 1997. From January 1996 to September 1997, he owned and
operated a printing company. From 1991 to 1995 he served as Chief Financial
Officer for Althin Medical, Inc., a medical device manufacturer.

Donald L. Smith, III, 49, was appointed Vice President-Construction Operations
for the Company in December 1992. Mr. Smith joined the Company in 1976 and has
served in supervisory and managerial positions within the Company since that
time.

Employees

At December 31, 2001 we employed 92 persons in the construction business in the
Caribbean, of whom 10 are members of a union. As of the same date, we employed
288 persons in our materials division, of whom 88 are members of a union.
Employee relations are considered satisfactory.

Item 2. Property

General

Nearly all of the real property that the Company owns or leases is utilized by
its materials division.

Other Property

We own undeveloped parcels of land in the U.S. Virgin Islands and Antigua.

                                       7
<PAGE>

The following table shows information on the property and facilities that we
owned or leased for our operations at December 31, 2001:

<TABLE>
<CAPTION>
                                                           Lease Expiration
         Description                       Location        with all Options        Area
         -----------                       --------        ----------------        -----
<S>                                      <C>                <C>               <C>
Shared facilities
-----------------
Principal executive offices              Deerfield Beach    5/07               8,410 sq. ft.(1)
Maintenance shop for heavy equipment     Deerfield Beach    6/12                3.44 acres  (1)(2)

Materials Segment
-----------------
Concrete block plant and equipment       St. Thomas         6/04               11.00 acres  (1)
   maintenance facility
Quarry                                   St. Thomas         --                  8.50 acres
Quarry                                   St. Thomas         2/08               44.00 acres  (1)
Barge terminal                           St. Thomas         Month-to-Month      1.50 acres  (1)
Quarry                                   St. Thomas         8/06                7.49 acres  (1)
Concrete batch plant and office          St. Croix          --                  3.20 acres
Quarry, rock crushing plant              St. Croix          --                 61.34 acres
Maintenance shop                         St. Croix          7/10                6.00 acres  (1)
Quarry                                   St. Croix          5/03               10.78 acres  (1)
Concrete batch plant, concrete block     Antigua            9/16               22.61 acres  (1)
   plant, rock crushing plant, asphalt
   plant, quarry and office
Concrete block plant                     St. Maarten        Month-to-Month      3.00 acres  (1)
Barge unloading facility                 St. Maarten        5/05                 .30 acres  (1)
Office building, batch plant, shop       St. Maarten        Month-to-Month      1.39 acres
Quarry, rock-crushing plant, concrete
   batch plant and office building       St. Martin         7/10              123.50 acres  (1)
Quarry, rock crushing plant and
   office building                       Guaynabo, P.R.     3/06               40.00 acres (1)(3)
</TABLE>

(1)  Underlying land is leased but equipment and machinery on the land are owned
     by the Company.

(2)  Leased from Donald L. Smith, Jr., the Company's Chief Executive. See Note
     12 of Notes to Consolidated Financial Statements.

(3)  Acreage is estimated.

Item 3. Legal Proceedings

We are sometimes involved in routine litigation arising in the ordinary course
of our business, primarily construction.

In the fall of 2000, Virgin Islands Cement and Building Products, Inc.
("VICBP"), a subsidiary of the Company, was under contract with the Virgin
Islands Port Authority ("VIPA") for the construction of the expansion of the St.
Croix Airport. During the project, homeowners and residents of the Yellow Cedar
Housing Community, located next to the end of the expansion project, claimed to
have experienced several days of excessive dust in their area as a result of the
ongoing construction work. The homeowners of Yellow Cedar have filed two
separate lawsuits against VIPA and VICBP as co-defendants. One suit, filed in
the U.S. District Court by Mariepaul Antoine, Benjamin Ashe, et. al, vs. VIPA
et. al, case #2001,63 R/F, seeks equitable relief from nuisance, specific
performance and damages. The second suit, Louisa Williams et. al vs. VIPA et. al
filed in the Territorial Court of the U.S.V.I. case #548/2000 seeks equitable
relief from nuisance, specific performance and damages. In both cases, VICBP, as
defendant, has agreed to indemnify VIPA for any civil action as a result of the
construction work. Reliance Insurance Company ("Reliance"), the general
liability carrier for VICBP during that

                                       8
<PAGE>

period, has taken the legal position that "dust" is a pollutant and, therefore,
the pollution exclusion clause applies and as a result denies liability
insurance coverage to VICBP. The Company has started litigation against Reliance
to obtain insurance coverage. Corporate counsel in Florida, as well as in the
U.S. Virgin Islands, have advised the Company that laws now in place should
enable the courts to force Reliance to defend VICBP against both legal actions
brought by the lawsuits mentioned above. Reliance filed for rehabilitation in
October 2001 and subsequently filed for liquidation, and we have informed the
Florida Insurance Guarantee Association of our claim. It is too early to predict
the final outcome of this matter or to estimate the potential risk of loss, if
any, to the Company.

In the late 1980s, Bouwbedrijf Boven Winden, N.V., ("BBW") currently a Devcon
subsidiary in the Netherlands Antilles, supplied concrete to a large apartment
complex on the French side of St. Maarten. In the early 1990s the buildings
began to develop exterior cracking and "popouts." In November 1993, BBW was
named one of several defendants including the building's insurer, in a suit
filed by Syndicat des Coproprietaires la Residence Le Flamboyant (condominium
owners association of Le Flamboyant), in the French court "Tribunal de Grande
Instance de Paris", case No. 510082/93. A French court assigned an expert to
examine the cause of the cracking and popouts and to determine if the
cracking/popouts are caused by a phenomenon known as alkali reaction (ARS). The
expert found, in his report dated December 3, 1998, that BBW was responsible for
the ARS. The plaintiff is seeking unspecified damages, including demolition and
replacement of the 272 apartments. Based on the advice of legal counsel, a
judgment assessed in a French court would not be enforceable against a
Netherlands Antilles company. Thus, in order to obtain an enforceable judgment,
the plaintiff would have to file a successful claim in an Antillean court. It is
too early to predict the final outcome of this matter or to estimate the
potential risk of loss, if any, to the Company. Due to the lack of
enforceability, the Company decided not to continue the defense in the French
court. Therefore, the Company may not be aware of recent developments in the
proceedings. Management believes our defenses to be meritorious and does not
believe that the outcome will have a material adverse effect on the consolidated
financial position, results of operations or cash flows of the Company.

We are subject to federal, state and local environmental laws and regulations.
We believe that the Company is in compliance with all such laws and regulations.
Compliance with environmental protection laws has not had a material adverse
impact on our consolidated financial condition, results of operations or cash
flows in the past and is not expected to have a material adverse impact in the
foreseeable future.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our security holders during the fourth
quarter of 2001.

                                       9
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Market Information
------------------
Our Common Stock is traded on the Nasdaq National Market System under the symbol
DEVC. The following table shows high and low prices for our Common Stock for
each quarter for the last two fiscal years as quoted by Nasdaq.

2001                            High    Low
----                           -----   -----
Fourth Quarter                 $6.80   $5.70
Third Quarter                   7.28    6.55
Second Quarter                  7.50    6.43
First Quarter                   7.25    6.19

2000                            High    Low
----                           -----   -----
Fourth Quarter                 $7.06   $5.31
Third Quarter                   7.47    6.25
Second Quarter                  7.50    6.38
First Quarter                   7.38    5.13

As of March 5, 2002 there were 145 holders of record of the outstanding shares
of Common Stock and more than 500 beneficial owners holding our Common Stock in
their brokers' name. The closing sales price for the Common Stock on March 5,
2002, was $6.35. We paid no dividends in 2001 or 2000. The payment of cash
dividends will depend upon the earnings, consolidated financial position and
cash requirements of the Company, its compliance with loan agreements and other
relevant factors. We do not presently intend to pay dividends. No unregistered
securities were sold or issued in 2001, 2000 or 1999.

Item 6. Selected Financial Data

The following is our selected financial data which should be read in conjunction
with our Consolidated Financial Statements and accompanying notes and with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." This data is derived from our Consolidated Financial Statements
audited by KPMG LLP, independent certified public accountants. Our Consolidated
Financial Statements as of December 31, 2001 and 2000 and for each of the years
in the three-year period ended December 31, 2001 and the independent auditors'
report appear elsewhere in this document.

                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                 ------------------------------------------------------
                                                   2001      2000       1999       1998       1997
                                                 -------   --------   --------   --------   --------
                                                      (In thousands, except per share amounts)
<S>                                              <C>       <C>        <C>        <C>        <C>
Earnings Statement Data:
Materials revenue                                $39,703   $ 50,956   $ 55,313   $ 50,448   $ 51,461
Construction revenue                              15,185     14,292     12,721     15,359      9,852
Other revenue                                         --         --         --        371      2,931
                                                 -------   --------   --------   --------   --------

     Total revenue                                54,888     65,248     68,034     66,178     64,244

Cost of materials                                 32,182     42,608     46,364     41,281     41,659
Cost of construction                              12,447     11,461     11,000     12,900      9,709
Cost of other                                         --         --         --        246      2,311
                                                 -------   --------   --------   --------   --------

     Gross profit                                 10,259     11,179     10,670     11,751     10,565

Operating expenses                                10,251     12,339     12,888     10,806     23,143
                                                 -------   --------   --------   --------   --------

     Operating income (loss)                           8     (1,160)    (2,218)       945    (12,578)

Other income (deductions)                          3,252     20,362       (821)      (122)    (2,651)
                                                 -------   --------   --------   --------   --------

   Income (loss) from
   continuing operations
   before income taxes                             3,260     19,202     (3,039)       823    (15,229)

Income taxes                                         830        715        273        339        307
                                                 -------   --------   --------   --------   --------
     Net earnings (loss)                         $ 2,430   $ 18,487   $ (3,312)  $    484   $(15,536)
                                                 =======   ========   ========   ========   ========

Earnings (loss) per share:

Basic                                            $  0.67   $   4.80   $  (0.74)  $   0.11   $  (3.45)
Diluted                                          $  0.61   $   4.40   $  (0.74)  $   0.11   $  (3.45)

Weighted average number of shares outstanding:

Basic                                              3,632      3,851      4,481      4,499      4,499
Diluted                                            3,963      4,202      4,481      4,520      4,499

Balance Sheet Data:
Working capital                                  $16,203   $ 14,035   $  6,549   $  6,910   $  8,713
Total assets                                      67,952     72,136     81,914     82,430     86,433
Long-term debt, excl
   current portion                                 2,455      2,465     14,350     18,153     16,982
Stockholders' equity                              53,845     52,434     39,436     43,641     42,816
</TABLE>

                                       11
<PAGE>

The following is our selected quarterly financial data which should be read in
conjunction with our Consolidated Financial Statements and accompanying notes
and with our "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
                                                   Income
                   Net      Gross     Net        Per Share
                  Sales    Profit   Income     Basic   Diluted
                 -------   ------   -------   ------   -------
                  (in thousands except for per share amounts)
2001
Fourth Quarter   $12,413   $2,095   $   475   $ 0.13    $ 0.12
Third Quarter     14,673    3,332     1,036     0.29      0.26
Second Quarter    14,586    2,926       870     0.24      0.22
First Quarter     13,216    1,906        49     0.01      0.01

2000
Fourth Quarter   $15,584   $2,553   $   441   $ 0.12    $ 0.11
Third Quarter     17,433    3,609     1,584     0.42      0.39
Second Quarter    16,494    3,006       671     0.17      0.16
First Quarter     15,737    2,011    15,791     3.94      3.66

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Dollar amounts of $1.0 million or more are rounded to the nearest one tenth of a
million; all other dollar amounts are rounded to the nearest one thousand and
all percentages are stated to the nearest one tenth of one percent.

This Form 10-K contains certain "forward-looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which represent the Company's expectations and beliefs. These statements
involve risks and uncertainties that are beyond our control, and actual results
may differ materially depending on many factors, including, without limitation,
the financial condition of our customers, changes in domestic and foreign
economic and political conditions, demand for our services, changes in our
competitive environment, changes in infrastructure requirements, changes in
available financing and/or cash flow, fixed price contract risks, bidding
errors, unanticipated increase in costs, penalty clauses, United States currency
fluctuations versus other currencies, foreign nations' exchange controls,
restrictions on withdrawal of foreign investments and terrorist acts that
directly or indirectly could affect our business.

These and other factors could cause actual results or outcomes to differ
materially from those expressed in our forward-looking statements. Any
forward-looking statement speaks only as of the date it is made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date it is made. It is not possible for management to
predict what factors might have an affect on our business in the future.

Critical Accounting Policies and Estimates

Our discussion of our financial condition and results of operations is an
analysis of the Consolidated Financial Statements, which have been prepared in
accordance with accounting principles generally accepted in the United

                                       12
<PAGE>

States of America ("GAAP"), consistently applied. The preparation of these
Consolidated Financial Statements requires our management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those related to bad debts,
inventories, cost to complete construction contracts, assets held for sale,
intangible assets, income taxes, warranty obligations, restructuring, business
divestitures, pensions and other employee benefit plans or arrangements,
environmental matters, and contingencies and litigation. We base our estimates
on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.

We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our Consolidated
Financial Statements:

     .    We estimate costs to complete our construction contracts based on
          experience from similar work in the past. If the conditions of the
          work to be performed changes or if the estimated costs are not
          accurately projected, the gross profit from construction contracts may
          vary significantly in the future.

     .    We maintain allowances for doubtful accounts for estimated losses
          resulting from management's review and assessment of our customers'
          ability to make required payments. If the financial condition of our
          customers were to deteriorate, resulting in an impairment of their
          ability to make payments, additional allowances might be required. If
          the customers pay a previous impaired receivable, income will be
          taken.

     .    We maintain reserves for estimated obsolescence or unmarketable
          inventory for the difference between the cost of inventory and the
          estimated market value based upon assessments about current and future
          demand and market conditions. If actual market conditions were to be
          less favorable than those projected by management, additional
          inventory reserves could be required. If the actual market demand
          surpasses the projected levels, certain inventory reserves would be
          removed and the result of operations would be higher than expected.

     .    We maintain an accrual for deferred compensation agreements with the
          Company's President and certain other employees. This accrual is based
          on the life expectancy of these persons. Should the actual longevity
          vary significantly from the United States insurance norms, the accrual
          may have to be significantly increased or diminished at that time.

     .    Based on written legal opinion, we have not recorded a liability of
          $6.1 million for taxes assessed by the Government of Antigua and
          Barbuda for the years 1995 through 1999. The Government may also
          assess further taxes for the years prior and subsequent to the
          assessed tax years. We are appealing said assessments. However, if our
          appeal is not successful, a significant tax liability may have to be
          recorded. We do not believe losing the appeal would have an immediate
          effect on our cash flow, as the Government of Antigua and Barbuda owes
          us in excess

                                       13
<PAGE>

          of $30 million. See Notes 3 and 8 of Notes to Consolidated Financial
          Statements.

     .    We have $37.8 million of un-repatriated earnings in our foreign
          subsidiaries. We have no intention of bringing these earnings back to
          the United States, unless we can do so in a tax-free manner. However,
          should we be forced to repatriate the earnings, we would have to
          recognize and pay a substantial U.S. federal income tax. The tax would
          be approximately 34 percent of the repatriated amount, or potentially
          $12.9 million.

     .    We were accounting for the notes receivable from the Government of
          Antigua and Barbuda under the cost-recovery method until April 2000.
          Subsequent to a restructuring of the notes, we started to account for
          the notes using the accrual method. Should the payments from the
          government diminish or become uncertain, we may have to revert to the
          cost-recovery method or impair the notes. This could decrease our
          earnings significantly. See Note 3 to Consolidated Financial
          Statements.

     .    We record a valuation allowance to reduce our deferred tax assets to
          the amount that is more likely than not to be realized. While we have
          considered future taxable income and ongoing prudent and feasible tax
          planning strategies in assessing the need for the valuation allowance,
          in the event that we were to determine that we would be able to
          realize our deferred tax assets in the future in excess of its net
          recorded amount, an adjustment to the deferred tax asset would
          increase income in the period such determination was made. Likewise,
          should we determine that we would not be able to realize all or part
          of our net deferred tax asset in the future, an adjustment to the
          deferred tax asset would be charged to income in the period such
          determination was made.

Comparison of Year Ended December 31, 2001 with Year Ended December 31, 2000

Revenue

Our revenue was $54.9 million in 2001 and $65.2 million in 2000. This 15.9
percent decrease reflects a decrease in materials revenue, partially offset by
an increase in construction revenue.

Our materials revenue decreased 22.1 percent to $39.7 million in 2001 from $51.0
million in 2000. This decrease was primarily due to the sale of our cement
terminals in the Caribbean and the sale of our operations in Dominica in 2000
and to the termination of a cement distribution agreement in March 2001.
Excluding these operations, materials revenue decreased by 7.2 percent,
primarily due to decreased demand for block and concrete in St. Martin and
Antigua. We have, during the fourth quarter of 2001, seen significantly
diminished demand in our St. Martin and Antigua operations. We believe this is a
result of a slowdown in the islands' economy due to reduced tourism in those
islands in the aftermath of the events of September 11, 2001. However, we have
seen continued strengthening demand in the U.S. Virgin Islands over the last
year. At this time, we cannot predict materials revenue levels in 2002.

                                       14
<PAGE>

Revenue from our construction division increased 6.2 percent to $15.2 million in
2001 from $14.3 million in 2000. This increase resulted primarily from increased
activity with our dredge in St. Martin, partially offset by lower activity in
the U.S. Virgin Islands and Antigua. Our backlog of unfilled portions of land
development contracts at December 31, 2001 was $10.5 million involving 7
projects, as compared to $13.0 million involving 7 projects at December 31,
2000. The backlog of the contract in the Bahamas at December 31, 2001 was $7.2
million. We expect most of the current backlog to be completed during 2002.
Since December 31, 2001 we have not entered into any new significant
construction and dredging contracts in the Caribbean. We are actively bidding
and negotiating additional projects. If no significant new construction
contracts are finalized in the next few months, the construction division will
experience a reduction in revenue in 2002.

Cost of Materials

Cost of materials decreased slightly to 81.1 percent of materials revenue from
83.6 percent in 2000. The cost decrease was due to the reduction of sales of
cement that had a lower margin than the rest of our business. The cost of
materials for the materials division, excluding cement, decreased to 80.5
percent in 2001 as compared to 81.5 percent in 2000.

Cost of Construction

Cost of construction increased to 82.0 percent of construction revenue in 2001
from 80.2 percent in 2000. Increased costs as a percent of revenue were due to
lower profitability on some 2001 contracts. Our gross margins are also affected
by the profitability of each contract and the stage of completion.

Operating Expenses

Selling, general and administrative expenses ("SG&A expense") decreased by 11.0
percent to $10.1 million in 2001 from $11.3 million in 2000. This decrease is
primarily due a reduction in labor cost, fees and other taxes.

Due to lower profitability, lower volumes and hurricane damages affecting
certain assets, management upon its review in 2001 and 2000 of long-lived
assets, determined that impairment had occurred to some of our assets. An
impairment expense of $31,000 was recognized in 2001 compared to $702,000 in
2000. In 2000, goodwill recorded in connection with the purchase of our
subsidiary in St. Martin was written down by $378,000 due to low profitability.
In addition, in 2000 the remaining assets in Saba were determined to be impaired
due to the closure of its operations, and certain obsolete equipment was also
determined to be impaired.

Divisional Operating Income (Loss)

Operating income was $8,000 in 2001 compared to a loss of $1.2 million in 2000.
Our materials division had operating income of $23,000 in 2001, compared to a
loss of $1.6 million in 2000. This improvement is primarily due to improved
profitability in most islands relating primarily to reduced cost of production
as well as reduced SG&A expenses. Over the last two years we have seen an
improvement in the operating earnings of the materials division. However, there
are risks that this trend cannot be sustained and that the division's results
may decrease in the near future. Our construction division had operating income
of $1.2 million in 2001 compared to $1.3 million in 2000. This is primarily
attributable to lower margins on some contracts. Due

                                       15
<PAGE>

to possible lower activity in 2002, we may see reduced earnings, however, the
remaining backlog is estimated to have reasonable gross profit margins.

Other Income

In 2000, we recognized a gain on the sale of our cement terminals and the
concrete business in St. Thomas and the Tortola operation, in the aggregate
amount of $18.3 million. We had gains on sale of other property and equipment of
$71,000 in 2001 compared to $154,000 in 2000. Our interest expense decreased to
$435,000 in 2001 from $913,000 in 2000 due to a substantial reduction of
outstanding debt, utilizing the proceeds of our sales of operations as mentioned
above. Our interest income increased to $3.5 million in 2001 compared to $2.5
million in 2000. Our interest income increased due to interest recognized on
notes receivable due from the Government of Antigua and Barbuda, and to interest
received on outstanding accounts and notes receivable. The minority interest
allocation of losses decreased to $52,000 in 2001 from $314,000 in 2000, mainly
because the losses in Puerto Rico cannot be allocated to the joint venture
partners as their equity has been exhausted.

Income Taxes

Income taxes increased to $829,000 in 2001 from $716,000 in 2000. Our tax rate
varies depending on the level of our earnings in the various tax jurisdictions
where we operate, the tax loss carry-forwards and tax exemptions available to
us. See Notes 8 and 16 of Notes to Consolidated Financial Statements.

Net Earnings (Loss)

Our net income was $2.4 million in 2001 compared to a net income of $18.5
million in 2000. This reduction in profitability was primarily attributable to
the $18.3 million profit recognized on the sales of assets in the beginning of
year 2000, partially offset by a net interest income increase from $1.6 million
in 2000 to $3.1 million in 2001, and a reduction of our operating loss by $1.2
million.

Comparison of Year Ended December 31, 2000 with Year Ended December 31, 1999

Revenue

Our revenue was $65.2 million in 2000 and $68.0 million in 1999. This 4.1
percent decrease reflects a decrease in materials revenue, partially offset by
an increase in construction revenue.

Our materials revenue decreased 7.9 percent to $51.0 million in 2000 from $55.3
million in 1999. This decrease was primarily due to the sale of the concrete
operations on St. Thomas, Tortola and Dominica. Excluding the sale of these
operations, materials revenue increased by 20.8 percent, primarily due to
increased demand for quarry products in St. Martin and Puerto Rico and increased
sales of cement in St. Croix.

Revenue from our construction division increased 12.3 percent to $14.3 million
in 2000 from $12.7 million in 1999. This increase resulted primarily from
increased activity with our dredge. Our backlog of unfilled portions of land
development contracts at December 31, 2000 was $13.0 million involving 7
projects, as compared to $18.7 million involving 6 projects at December 31,

                                       16
<PAGE>

1999. The backlog of the contract in the Bahamas at December 31, 2000 was $12.3
million.

Cost of Materials

Cost of materials decreased slightly to 83.6 percent of materials revenue in
2000 from 83.8 percent in 1999. The cost decrease was due to improved sales
volumes and, therefore, better margins on St. Martin and Puerto Rico, offset to
a lesser extent by higher production costs in Antigua and lower margin on our
cement sales.

Cost of Construction

Cost of construction decreased to 80.2 percent of construction revenue in 2000
from 86.5 percent in 1999. Decreased costs as a percent of revenue were due to
higher profitability on some 2000 contracts, especially dredging contracts, and
the completion of contracts with very low or negative margins in 1999. Our gross
margins are also affected by the profitability of each contract and the stage of
completion.

Operating Expenses

Selling, general and administrative expenses ("SG&A expense") decreased by 13.1
percent to $11.3 million in 2000 from $13.0 million in 1999. This decrease is
primarily due to the sale of the operations in St. Thomas and Tortola and to
accruals established in 1999 in connection with collective bargaining
agreements. SG&A expense as a percentage of revenue decreased to 17.3 percent in
2000 from 19.1 percent in 1999.

In 1999 we reduced our provision for litigation by $1.2 million due to the
settlement of two major lawsuits.

Due to lower profitability, lower volumes and hurricane damages, management upon
its review in 2000 and 1999 of long-lived assets, determined that impairment had
occurred to some of our assets. An impairment expense was recognized of $702,000
in 2000 compared to $805,000 in 1999. In 2000, goodwill recorded in connection
with our purchase of our subsidiary in St. Martin was written down by $378,000
due to low profitability. In addition, the remaining assets in Saba were
determined to be impaired due to the closure of its operations, and certain
obsolete equipment was also determined to be impaired. In 1999, a significant
portion of our quarry assets in Saba were written down and idle assets on St.
Kitts and St. Croix were also determined to be impaired.

Divisional Operating Loss

The operating loss was $1.2 million in 2000 compared to an operating loss of
$2.2 million in 1999. Our materials division had an operating loss of $1.6
million in 2000, representing an improvement of $591,000 compared to an
operating loss of $2.2 million in 1999. This reduction in the loss is primarily
due to improved profitability in St. Martin and Puerto Rico and accruals
recorded in 1999 in connection with collective bargaining agreements, offset to
a lesser extent by higher cement cost and the effect that the sale of our
operations in St. Thomas, Tortola and Dominica had on our operating income in
2000. Our construction division had operating income of $1.3 million in 2000
compared to an operating loss of $301,000 in 1999, an

                                       17
<PAGE>

improvement of $1.6 million. This increase is primarily attributable to improved
margins and a $200,000 write down of a note in 1999.

Other Income (Deductions)

We recognized a gain on the sale of our cement terminals and the concrete
business in St. Thomas and the Tortola operation, in the aggregate amount of
$18.3 million. We had gains on sale of other property and equipment of $154,000
in 2000 compared to $14,000 in 1999. Our interest expense decreased to $913,000
in 2000 from $2.4 million in 1999 due to a substantial reduction of outstanding
debt, utilizing the proceeds of our sales of operations as mentioned above. Our
interest income increased to $2.5 million in 2000 compared to $630,000 in 1999.
Our interest income increased due to interest recognized on notes receivable due
from the Government of Antigua and Barbuda, and to a lesser extent, to higher
levels of cash and cash equivalents. Previously we had estimated we would record
$2.1 million for year 2000 in interest from these Antigua notes, however, due to
the fact that the payments received were less than anticipated, the interest
recorded was $1.5 million. The decrease in payments was due to a delay in the
implementation of property taxes. The minority interest allocation of losses
decreased to $314,000 in 2000 from $830,000 in 1999, mainly due to improved
result in our operations in Puerto Rico.

Income Taxes

Income taxes increased to $716,000 in 2000 from $273,000 in 1999. Our tax rate
varies depending on the level of our earnings in the various tax jurisdictions
where we operate, the tax loss carry-forwards and tax exemptions available to
us. See Note 8 of Notes to Consolidated Financial Statements and "Business - Tax
Exemptions and Benefits."

Net Earnings (Loss)

Our net income was $18.5 million in 2000 compared to a net loss of $3.3 million
in 1999. This change in profitability was primarily attributable to the profit
recognized on the sales of assets in the beginning of the year, net interest
income, and to a lesser extent, reduced operating loss.


Liquidity and Capital Resources

We generally fund our working capital needs from operations and bank borrowings.
In the construction business, we expend considerable funds for equipment, labor
and supplies. Our capital needs are greatest at the start of a new contract,
since we generally must complete 45 to 60 days of work before receiving the
first progress payment. As a project continues, a portion of the progress
billing is usually withheld as retainage until the work is complete. We
sometimes provide long-term financing to customers who have previously utilized
our construction services. Accounts receivable for the materials division are
typically outstanding for 60 days or longer. Our business requires a continuing
investment in plant and equipment, along with the related maintenance and upkeep
costs.

Management believes our cash flow from operations, existing working capital, and
funds available from lines of credit will be adequate to meet our needs during
the next 12 months. Historically, we have used a number of lenders to finance a
portion of our machinery and equipment purchases. At December 31,

                                       18
<PAGE>

2001 there were no amounts outstanding to these lenders. Management believes it
has significant collateral and financial stability to be able to obtain
significant financing, should it be required.

As of December 31, 2001, our liquidity and capital resources included cash and
cash equivalents of $8.0 million, working capital of $16.2 million and an
available line of credit of $1.0 million. Total outstanding liabilities were
$14.1 million as of December 31, 2001 compared to $19.7 million a year earlier.

Cash flow provided by operating activities for the year ended December 31, 2001
was $3.3 million compared with $2.3 million for the year ended December 31,
2000. The primary use of cash for operating activities during the year ended
December 31, 2001 was a decrease in accounts payable and accrued expenses of
$3.2 million, an increase in receivables of $1.8 million and an increase in
inventory of $807,000. The primary source of cash from operating activities was
a decrease in costs and estimated earnings in excess of billings of $1.2 million
and an increase in taxes payable of $467,000.

Net cash used in investing activities was $2.2 million in 2001, including
purchases of property, plant, and equipment of $4.5 million. Net cash used in
financing activities was $1.3 million, including purchases of treasury stock of
$701,000.

We turned our fiscal year-end accounts receivable, excluding notes and employee
receivables, approximately 4.6 times in 2001 compared to 5.1 times in 2000. The
reduction resulted from a lower turnover rate for the construction division
accounts receivable of 3.2 in 2001 as compared to 3.7 in 2000, mainly due to a
$3.3 million receivable from the project in the Bahamas. This receivable was
greatly reduced in January 2002 by a cash payment of $3.0 million. The materials
division showed a small improvement in the turnover rate from 5.8 to 6.0.
Another reason for our total turnover rate reduction is that the materials
division, which had a better turnover rate than the construction division, had
significantly reduced sales and receivables greatly reduced in 2001, therefore
its weight in the composite turnover rate diminished. See Notes 3 and 12 of
Notes to Consolidated Financial Statements.

We have financed some construction projects during the last six months. Included
in our receivables are $3.5 million expected to be paid back within a four-year
period.

On November 1, 1999, we extended a $1.0 million note to the venture in the
Bahamas, secured by equipment and guarantees. The note has been paid in full. As
of December 31, 2001, we had trade receivables from the venture of approximately
$3.3 million. Subsequent to the year-end we have received $3.6 million in
payments and billed an additional $1.2 million.

We entered into a credit agreement with a Caribbean bank in November 1996 for a
total credit of $7.0 million. One part of the credit agreement is a term loan
for $6.0 million, which was fully paid in 2000. The second part was a revolving
line of credit of $1.0 million. We did not seek to renew the credit line in July
2001.

We have a $1.0 million unsecured overdraft facility from a commercial bank in
the United States. The facility is due on demand and bears interest at a rate
variable with LIBOR. The bank can demand repayment of the loan and

                                       19
<PAGE>

cancellation of the overdraft facility, if certain financial or other covenants
are in default. At December 31, 2001, we had no borrowings outstanding under
this line. This facility was put in place to help cash management strategies and
is seldom utilized.

At December 31, 2001 we had borrowed $2.8 million from the Company President.
The note to the President is unsecured and bears interest at the prime rate.
Presently, $1.0 million is due on demand and $1.8 million is due on July 1,
2003. The President has the option to make the note due on demand should a
"Change of Control" occur. A Change of Control has occurred if a person or group
acquires 15 percent or more of the common stock or announces a tender offer
that, if successful, would result in ownership by a person or group of 15
percent or more of the common stock.

We purchase equipment as needed for our ongoing business operations. We are
currently replacing or upgrading some equipment used by the materials division,
principally concrete trucks and quarry equipment. This resulted in a net cash
expenditure of $4.5 million in 2001. At present, management believes that our
inventory of construction equipment is adequate for our current contractual
commitments and operating activities. New construction contracts may, depending
on the nature of the contract and job location and duration, require us to make
significant investments in heavy construction equipment. During 2001 we sold
equipment with an original cost basis of $1.3 million and a net book value of
$879,000. The net proceeds consisting of cash and notes receivable were
$968,000. We realized a gain of approximately $71,000 on these transactions. We
believe we have available funds or can obtain sufficient financing for our
contemplated equipment replacements and additions.

In September 2001 the Company decided to stop its operations on Aguadilla,
Puerto Rico. There was no material impact on the Consolidated Financial
Statements. The Company has leased, with option to buy, its equipment on this
site to a company controlled by one of the joint venture owners of the Company's
subsidiary in Puerto Rico. The lease rate should generate a small income after
depreciation and interest on the equipment.

Our notes receivable at December 31, 2001 include $7.2 million in promissory
notes from the Government of Antigua with approximately $205,000 classified as a
current receivable. See Notes 3, 8 and 16 of Notes to Consolidated Financial
Statements.

We have not guaranteed any other person's or company's debt. We have not entered
into any currency or interest options, swaps or future contracts, nor do we have
any off-balance sheet debts or transactions.

We are sometime involved in litigation; the outcome of such litigation may in
the future have an impact on our liquidity. See item 3 above.

Related Party Transactions

We have certain transactions with some of our Directors or employees. See Note
12 of Notes to the Consolidated Financial Statements.

We lease from the Company President, Mr. Donald L. Smith, Jr. a 3.4-acre parcel
of real property in Deerfield Beach, Florida. This property is being

                                       20
<PAGE>

used for our equipment logistics and maintenance activities. The annual rent for
the period 1996 through 2001 was $49,000, which was below market rent. In
January 2002 a new 5-year agreement was signed, the rent was increased to
$90,000. This rent was based on comparable rental contracts for similar
properties in Deerfield Beach.

We have borrowed $2.8 million from Mr. Smith to provide long-term financing to
the Company. The loan is documented with an unsecured note; of which one million
is payable on demand and $1.8 million is due on July 1, 2003. The interest
charged by Mr. Smith is the prime rate. We believe that these terms are similar
to what the Company would be able to achieve if we were to borrow this money
from a bank. See Liquidity and Capital Resources above.

We have a $24 million construction contract with an entity in the Bahamas. Mr.
Smith and one of the Directors, Mr. Robert A. Steele, are minority shareholders
in the entity. Mr. Smith is member of the entity's managing committee. We
believe the contract has been entered into at arm's length and at terms and
conditions that we would offer our other customers. Prices established for the
work are dependant on market conditions and unique conditions to the environment
of the Bahamas. In connection with this contract, the Company has recorded
revenue of $5.2 million during 2001. The backlog on the contract as of December
31, 2001 was $7.2 million. The project received its final financing in January
2002. As of December 31, 2001 we had trade receivables from the venture of
approximately $3.3 million. Subsequent to year-end the Company received $3.6
million in payments from the venture and billed an additional $1.2 million.

Our joint venture subsidiary in Puerto Rico has transactions with the joint
venture partners. A company controlled by one of the partners provides drilling
and blasting services for our quarry in Guaynabo. The price for the services are
negotiated periodically, and primarily by comparison to the cost of performing
that work by ourselves. The subsidiary recently entered into a 36-month lease
agreement for equipment located in the Aguadilla facility with another company
controlled by this partner. The agreement also contains an option to buy the
equipment. The price of the lease and the sales price of the equipment were
negotiated between the parties at arm's length. There are no clear comparable
prices in the market place, and no third party evaluation of the fairness of the
transaction was completed. The subsidiary will recuperate its recorded book
value of the assets, should the purchase option be exercised.

The same subsidiary sells a significant portion of its products to a company
controlled by another joint venture partner. This partner is controlled by one
of our Directors, Jose A. Bechara, Jr. esq. The price of the products is
governed by firm supply agreements, renegotiated every other year. Comparable
prices from other quarries are studied and used in the price negotiation.

Other assets include amounts due from officers and employees as a result of
payments made by the Company pursuant to a split-dollar life insurance plan. Our
advances to pay premiums are secured by a pledge of the cash value of the issued
policies. Amounts due to the Company under the split-dollar life insurance plan
were $943,638 in 2001 and $853,488 in 2000, respectively.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board ("FASB") approved the
issuance of Statements of Financial Accounting Standards ("SFAS") No. 141,

                                       21
<PAGE>

"Business Combinations"; SFAS No. 142, "Goodwill and Other Intangible Assets";
and SFAS No. 143, "Accounting for Asset Retirement Obligations."

SFAS No. 141 supersedes Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations." The most significant changes made by SFAS No. 141 are
requiring the purchase method of accounting for all business combinations
initiated after June 30, 2001, establishing specific criteria for the
recognition of intangible assets separately from goodwill, and requiring that
unallocated negative goodwill be written off immediately as an extraordinary
gain. We do not expect a material impact from the adoption of SFAS No. 141 on
our Consolidated Financial Statements.

SFAS No. 142 supersedes APB 17, "Intangible Assets," and primarily addresses
accounting for goodwill and intangible assets subsequent to their acquisition
(i.e., the post-acquisition accounting). The provisions of SFAS No. 142 will be
effective for fiscal years beginning after December 15, 2001. The most
significant changes made by SFAS No. 142 are that goodwill and intangible assets
with indefinite lives will no longer be amortized, goodwill will be tested for
impairment at least annually at the reporting unit level, intangible assets
deemed to have an indefinite life will be tested for impairment at least
annually, and the amortization period of intangible assets with finite lives
will no longer be limited to forty years. We do not expect a material impact
from the adoption of SFAS No. 142 on our Consolidated Financial Statements.

SFAS No. 143 requires that entities record as a liability obligations associated
with the retirement of a tangible long-lived asset when such obligations are
incurred, and capitalize the cost by increasing the carrying amount of the
related long-lived asset. SFAS No. 143 will be effective for fiscal years
beginning after June 15, 2002. We do not expect a material impact from the
adoption of SFAS No. 143 on our Consolidated Financial Statements.

In August 2001, the FASB approved the issuance of SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," and certain parts of APB Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 establishes an accounting model based on SFAS No.
121 for long-lived assets to be disposed of by sale, previously accounted for
under APB Opinion No. 30. This Statement is effective for fiscal years beginning
after December 15, 2001. We are currently assessing the impact of the adoption
of this statement, but believe it will not materially affect our financial
position or results of operations.

Environmental Matters

We are involved, on a continuing basis, in monitoring our compliance with
environmental laws and in making capital and operating improvements necessary to
comply with existing and anticipated environmental requirements. While it is
impossible to predict with certainty, management currently does not foresee such
expenses in the future as having a material effect on our business, results of
operations, or financial condition.

                                       22
<PAGE>

Item 7A Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to financial market risks due primarily to changes in
interest rates, which it manages primarily by managing the maturities of its
financial instruments. The Company does not use derivatives to alter the
interest characteristics of its financial instruments. Management does not
believe a change in interest rate will materially affect the Company's financial
position or results of operations.

The Company has significant operations overseas. Generally, all significant
activities of the overseas affiliates are recorded in their functional currency,
which is generally the currency of the country of domicile of the affiliate. The
foreign functional currencies that the Company deals with are Netherlands
Antilles Guilders, Eastern Caribbean Units, French Francs and Euros. The first
two are pegged to the U.S. dollar and have remained fixed for many years.
Management does not believe a change in the French Franc or Euro exchange rate
will materially affect the Company's financial position or result of operations.
The French operations are less than 10 percent of the Company's total
operations.

                                       23
<PAGE>

Item 8. Financial Statements and Supplementary Data

The financial information and the supplementary data required in response to
this Item are as follows:

                                                                         Page
                                                                       Number(s)
                                                                       ---------

Independent Auditors' Report                                              25

Financial Statements:

     Consolidated Balance Sheets                                         26-27
     December 31, 2001 and 2000

     Consolidated Statements of Operations                                28
     For Each of the Years in the Three-Year Period
     Ended December 31, 2001

     Consolidated Statements of Stockholders' Equity                      29
     and Comprehensive Income for Each of the Years
     in the Three-Year Period Ended December 31, 2001

     Consolidated Statements of Cash Flows                               30-31
     For Each of the Years in the Three-Year Period
     Ended December 31, 2001

     Notes to Consolidated Financial Statements                          32-54

     Schedule II - Valuation and Qualifying Accounts                      60

                                       24
<PAGE>

                          Independent Auditors' Report

The Board of Directors and Stockholders
Devcon International Corp.:

We have audited the consolidated financial statements of Devcon International
Corp. and subsidiaries (the "Company") as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and this financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and this
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Devcon International
Corp. and subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

                                                                        KPMG LLP

Fort Lauderdale, Florida
March 19, 2002

                                       25
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 2001 and 2000

Assets                                               2001               2000
------                                           ------------      -------------

Current assets:

     Cash and cash equivalents                   $  7,994,327      $  8,166,954
     Receivables, net                              12,162,049        13,800,628
     Costs and estimated earnings
       in excess of billings                          229,056         1,405,898
     Inventories                                    3,736,759         2,938,099
     Prepaid expenses and other assets                645,665           593,691
                                                 ------------      ------------
     Total current assets                          24,767,856        26,905,270

Property, plant and equipment, net
     Land                                           1,462,068         1,455,045
     Buildings                                      1,135,954         1,217,706
     Leasehold improvements                         3,159,536         3,203,760
     Equipment                                     49,567,905        51,090,785
     Furniture and fixtures                           684,849           802,615
     Construction in process                        2,793,580         1,024,035
                                                 ------------      ------------
                                                   58,803,892        58,793,946

     Less accumulated depreciation                (27,578,652)      (25,643,780)
                                                 ------------      ------------
                                                   31,225,240        33,150,166

Investments in unconsolidated joint
     ventures and affiliates, net                     315,858           281,819
Receivables, net                                   10,596,702        10,797,177
Other assets                                        1,046,091         1,001,639
                                                 ------------      ------------
Total assets                                     $ 67,951,747      $ 72,136,071
                                                 ============      ============

See accompanying notes to consolidated financial statements.


                                       26
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

                     Consolidated Balance Sheets (continued)

                           December 31, 2001 and 2000

Liabilities and Stockholders' Equity                   2001           2000
------------------------------------               ------------   ------------
Current liabilities:
     Accounts payable, trade and other             $  4,093,229   $  7,175,610
     Accrued expenses and other liabilities           2,214,575      2,945,490
     Notes payable to banks                                  --        300,000
     Current installments of long-term debt           1,143,097      1,501,656
     Billings in excess of costs and
         estimated earnings                             414,837        535,547
     Income taxes                                       699,118        412,454
                                                   ------------   ------------

     Total current liabilities                        8,564,856     12,870,757

Long-term debt, excluding current
     installments                                     2,454,809      2,464,834
Minority interest in consolidated
     subsidiaries                                            --        474,444
Deferred income taxes                                   205,344        366,095
Deferred gain on sale of businesses                   1,142,537      2,070,859
Other liabilities                                     1,738,930      1,454,618
                                                   ------------   ------------

     Total liabilities                               14,106,476     19,701,607

Stockholders' equity
     Common stock, $0.10 par value
     Authorized 15,000,000 shares,
         Issued 3,741,285 in 2001 and
         3,836,285 in 2000, outstanding
         3,586,585 and 3,664,985
         shares in 2001 and 2000,
         respectively                                   374,128        383,628
     Additional paid-in capital                      10,133,527     10,279,284
     Accumulated other comprehensive loss -
         cumulative translation adjustment           (2,516,382)    (2,037,502)
     Retained earnings                               46,941,249     45,018,868
     Treasury stock, at cost                         (1,087,251)    (1,209,814)
                                                   ------------   ------------

Total stockholders' equity                           53,845,271     52,434,464
                                                   ------------   ------------

Commitments and contingencies

     Total liabilities and
         stockholders' equity                      $ 67,951,747   $ 72,136,071
                                                   ============   ============

See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations

     For Each of the Years in the Three-Year Period Ended December 31, 2001

<TABLE>
<CAPTION>
                                                   2001            2000            1999
                                               ------------    ------------    ------------
<S>                                            <C>             <C>             <C>
Materials revenue                              $ 39,702,788    $ 50,956,382    $ 55,312,885
Construction revenue                             15,184,727      14,291,801      12,720,918
                                               ------------    ------------    ------------
         Total revenue                           54,887,515      65,248,183      68,033,803

Cost of materials                               (32,181,968)    (42,607,478)    (46,364,378)
Cost of construction                            (12,446,142)    (11,461,423)    (10,999,585)
                                               ------------    ------------    ------------
         Gross profit                            10,259,405      11,179,282      10,669,840

Operating expenses:
     Selling, general and
         administrative                         (10,057,669)    (11,302,430)    (13,012,443)
     Provision for doubtful accounts
         and notes                                 (162,695)       (334,811)       (230,517)
     Impairment of long-lived assets                (30,570)       (702,345)       (804,695)
     Credit for litigation                               --              --       1,160,137
                                               ------------    ------------    ------------

         Operating income (loss)                      8,471      (1,160,304)     (2,217,678)
                                               ------------    ------------    ------------
Other income (deductions):
     Joint venture equity earnings (loss)            28,733         (23,166)        (17,700)
     Gain on sale of property
         and equipment                               70,678         153,561          13,620
     Gain on sale of businesses                          --      18,293,045              --
     Interest expense                              (434,802)       (913,456)     (2,408,414)
     Interest income                              3,524,784       2,464,971         629,735
     Minority interest                               51,798         313,748         830,484
     Other income                                    10,041          73,965         131,540
                                               ------------    ------------    ------------
                                                  3,251,232      20,362,668        (820,735)
                                               ------------    ------------    ------------
         Income (loss) before
           income taxes                           3,259,703      19,202,364      (3,038,413)

Income taxes                                       (829,334)       (715,756)       (273,231)
                                               ------------    ------------    ------------
         Net earnings (loss)                   $  2,430,369    $ 18,486,608    $ (3,311,644)
                                               ============    ============    ============
Earnings (loss) per common
     share - basic                             $       0.67    $       4.80    $      (0.74)
                                               ============    ============    ============
Earnings (loss) per common
     share - diluted                           $       0.61    $       4.40    $      (0.74)
                                               ============    ============    ============
Weighted average number of common
     shares outstanding - basic                   3,631,703       3,850,566       4,481,304
                                               ============    ============    ============
Weighted average number of common
     shares outstanding - diluted                 3,963,278       4,201,537       4,481,304
                                               ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

    Consolidated Statements of Stockholders' Equity and Comprehensive Income

     For Each of the Years in the Three-Year Period Ended December 31, 2001

<TABLE>
<CAPTION>
                                                              Accumulated
                                              Additional         Other
                                   Common       Paid-in      Comprehensive      Retained       Treasury
                                    Stock       Capital       (Loss)Income      Earnings         Stock          Total
                                  -------     ----------     -------------     ----------     ----------     ----------
<S>                               <C>         <C>             <C>              <C>            <C>            <C>
Balance at
 Dec. 31, 1998                    449,894     12,064,133        (859,376)      31,985,908             --     43,640,559

Comprehensive loss:
   Net loss                                                                    (3,311,644)                   (3,311,644)
   Currency translation
     adjustment                                                 (735,201)                                      (735,201)
                                                              ----------       ----------                    ----------
   Comprehensive loss                                                                                        (4,046,845)

Repurchase of 41,800 shares                                                                     (157,504)      (157,504)
                                  -------     ----------      ----------       ----------     ----------     ----------
Balance at
 Dec. 31, 1999                    449,894     12,064,133      (1,594,577)      28,674,264       (157,504)    39,436,210

Comprehensive income:
   Net earnings                                                                18,486,608                    18,486,608
   Currency translation
     adjustment                                                 (442,925)                                      (442,925)
                                                              ----------       ----------                    ----------
Comprehensive income                                                                                         18,043,683

Repurchase of
   805,350 shares                                                                             (5,074,229)    (5,074,229)
Retirement of
   675,850 shares                 (67,586)    (1,812,329)                      (2,142,004)     4,021,919             --
Exercise of stock options           1,320         27,480                                                         28,800

                                  -------     ----------      ----------       ----------     ----------     ----------
Balance at
 Dec. 31, 2000                    383,628     10,279,284      (2,037,502)      45,018,868     (1,209,814)    52,434,464

Comprehensive income:
   Net earnings                                                                 2,430,369                     2,430,369
   Currency translation
     adjustment                                                 (478,880)                                      (478,880)
                                                              ----------       ----------                    ----------
Comprehensive income                                                                                          1,951,489

Repurchase of
   97,000 shares                                                                                (700,925)      (700,925)
Retirement of
  113,600 shares                  (11,360)      (304,140)                        (507,988)       823,488             --
Noncash stock compensation                       127,843                                                        127,843
Exercise of stock options           1,860         30,540                                                         32,400
                                  -------     ----------      ----------       ----------     ----------     ----------

Balance at
  Dec. 31, 2001                   374,128     10,133,527      (2,516,382)      46,941,249     (1,087,251)    53,845,271
                                  =======     ==========      ==========       ==========     ==========     ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       29
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

     For Each of the Years in the Three-Year Period Ended December 31, 2001

<TABLE>
<CAPTION>
                                                  2001            2000           1999
                                               -----------    ------------    -----------
<S>                                            <C>            <C>             <C>
Cash flows from operating activities:
     Net earnings (loss)                       $ 2,430,369    $ 18,486,608    $(3,311,644)

Adjustments to reconcile net earnings
(loss) to net cash provided by operating
   activities:
       Depreciation and amortization             4,895,406       5,174,699      6,371,683
       Deferred income tax benefit                (152,775)       (253,898)       (19,404)
       Joint venture equity
         (earnings)loss                            (28,733)         23,166         17,700
       Noncash stock compensation                  127,843              --             --
       Provision for doubtful accounts
         and notes                                 162,695         334,811        230,517
       Impairment on long-lived assets              30,570         702,345        804,695
       Gain on sale of property
         and equipment                             (70,678)       (153,561)       (13,620)
       Gain on sale of business                         --     (18,293,045)            --
       Credit for litigation                            --              --     (1,160,137)
       Minority interest in loss of
         consolidated subsidiaries                 (51,798)       (313,748)      (830,484)

Changes in operating assets and liabilities:
       (Increase) in receivables                (1,781,028)     (4,455,005)      (512,426)
       Decrease (increase) in costs
         and estimated earnings
         in excess of billings                   1,176,842      (1,147,118)       451,777
       (Increase) decrease in
         inventories                              (806,664)          2,788        625,161
       (Increase) decrease in other
         current assets                            (59,950)        135,356       (136,555)
       (Increase) decrease in other
         assets                                    (90,151)            951        (56,761)
       (Decrease) increase in accounts
         payable and accrued expenses           (3,162,787)      2,268,072       (956,287)
       (Decrease) increase in billings
         in excess of costs and estimated
         earnings                                 (120,710)       (490,769)       711,309
       Increase in income taxes payable            467,391         228,684         53,046
       Increase in other non-current
         liabilities                               355,989          45,177         90,640
                                               -----------    ------------    -----------
       Net cash provided by operating
         activities                            $ 3,321,831    $  2,295,513    $ 2,359,210
                                               -----------    ------------    -----------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       30
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (Continued)

     For Each of the Years in the Three-Year Period Ended December 31, 2001

<TABLE>
<CAPTION>
                                                         2001           2000           1999
                                                     -----------    ------------    -----------
<S>                                                  <C>            <C>             <C>
Cash flows from investing activities:
   Purchases of property, plant and
     equipment                                       $(4,515,495)   $ (4,981,110)   $(8,282,294)
   Proceeds from disposition of
     property, plant and equipment                       219,617         845,325        787,425
   Proceeds and deposits from
     disposition of business                                  --      23,196,405      8,000,000
   Issuance of notes                                    (564,000)       (414,000)    (1,016,000)
   Payments on notes                                   2,682,638       1,888,224      4,101,724
   Investments in affiliates                              (5,306)        (27,904)       (57,411)
                                                     -----------    ------------    -----------
       Net cash (used in) provided by
        investing activities                          (2,182,638)     20,506,940      3,533,444
                                                     -----------    ------------    -----------

Cash flows from financing activities:
   Issuance of stock                                      32,400          28,800             --
   Purchase of treasury stock                           (700,925)     (2,684,700)      (157,504)
   Proceeds from debt                                  1,896,761         810,389      6,952,371
   Principal payments on debt                         (2,240,056)    (18,609,240)    (9,339,019)
   Net (repayments) borrowings on
     notes payable to banks                             (300,000)       (325,000)       536,892
                                                     -----------    ------------    -----------
       Net cash used in financing
         activities                                   (1,311,820)    (20,779,751)    (2,007,260)
                                                     -----------    ------------    -----------
       Net (decrease) increase in cash
         and cash equivalents                           (172,627)      2,022,702      3,885,394

Cash and cash equivalents at
  beginning of year                                    8,166,954       6,144,252      2,258,858
                                                     -----------    ------------    -----------
Cash and cash equivalents at
  end of year                                        $ 7,994,327    $  8,166,954    $ 6,144,252
                                                     ===========    ============    ===========
Supplemental disclosures of cash flow information:
       Cash paid for interest                        $   416,472    $    986,386    $ 2,415,150
                                                     ===========    ============    ===========
       Cash paid for income taxes                    $   288,223    $    732,702    $   237,790
                                                     ===========    ============    ===========
Supplemental non-cash items:

       Issuance of notes in settlement
         of receivables                              $ 3,972,607    $    269,220    $    44,644
                                                     ===========    ============    ===========
       Reduction of note receivable
         and deferred income                         $ 1,000,000    $         --    $        --
                                                     ===========    ============    ===========
       Translation loss adjustment                   $  (478,880)   $   (442,925)   $  (735,201)
                                                     ===========    ============    ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       31
<PAGE>

                           DEVCON INTERNATIONAL CORP.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1)  Description of Business and Summary of Significant Accounting Policies

     (a)  Devcon International Corp. and its subsidiaries (the "Company")
          produce and distribute ready-mix concrete, crushed stone, concrete
          block, and asphalt and distribute bagged cement in the Caribbean. The
          Company also performs earthmoving, excavating and filling operations,
          builds golf courses, roads, and utility infrastructures, dredges
          waterways and constructs deep-water piers and marinas in the
          Caribbean.

     (b)  Principles of Consolidation
          ---------------------------

          These consolidated financial statements include the accounts of Devcon
          International Corp. and its majority-owned subsidiaries. Significant
          intercompany balances and transactions have been eliminated in
          consolidation.

          The Company's investments in unconsolidated joint ventures and
          affiliates are accounted for under the equity and cost methods. Under
          the equity method, original investments are recorded at cost and then
          adjusted by the Company's share of undistributed earnings or losses of
          these ventures. Other investments in unconsolidated joint ventures in
          which the Company owns less than 20 percent are accounted for by using
          the cost method.

     (c)  Revenue Recognition
          -------------------

          Materials Division
          ------------------

          Revenue is recognized when the products are delivered, invoiced at a
          fixed price and the collectibility of the invoice is reasonably
          assured.

          Construction Division
          ---------------------

          The Company uses the percentage-of-completion method of accounting for
          both financial statements and tax reports. Revenue is recorded based
          on the Company's estimates of the completion percentage of each
          project, based on the cost-to-cost method. Anticipated contract
          losses, when probable and estimatable, are charged to earnings.
          Changes in estimated contract profits are recorded in the period of
          change. Selling, general and administrative expenses are not allocated
          to contract costs. Monthly billings are based on the percentage of
          work completed in accordance with each specific contract. While some
          contracts extend longer, most are completed within one year. Revenue
          is recognized under the percentage-of-completion method when there is
          a contract for the work, with a fixed price for the work performed or
          a fixed price for a quantity of work delivered, and the collectibility
          is reasonably assured.

                                       32
<PAGE>

     (d)  Cash and Cash Equivalents
          -------------------------

          Cash and cash equivalents include cash, time deposits and all highly
          liquid debt instruments with an original maturity of three months or
          less.

     (e)  Allowance for Doubtful Accounts
          -------------------------------

          The Company performs periodic credit evaluations of its customers and
          maintains an allowance for potential credit losses based on historical
          experience and other information available to management.

     (f)  Notes Receivable
          ----------------

          Notes receivable are recorded at cost, less the related allowance for
          impaired notes receivable. Management, considering current information
          and events regarding the borrowers' ability to repay their
          obligations, considers a note to be impaired when it is probable that
          the Company will be unable to collect all amounts due according to the
          contractual terms of the note agreement. When a loan is considered to
          be impaired, the amount of the impairment is measured based on the
          present value of expected future cash flows discounted at the note's
          effective interest rate. Impairment losses are included in the
          allowance for doubtful accounts through a charge to bad debt expense.

     (g)  Inventories
          -----------

          Inventories are stated at the lower of average cost or market.

     (h)  Property, Plant and Equipment
          -----------------------------

          Property, plant and equipment are stated at cost. Depreciation is
          calculated on the straight-line method over the estimated useful life
          of each asset. Leasehold improvements are amortized using the
          straight-line method over the shorter of the lease term or the
          estimated useful life of the asset.

          Useful lives or lease terms for each asset type are summarized below:

Buildings                                   15 - 40 years
Leasehold improvements                       3 - 35 years
Equipment                                    3 - 20 years
Furniture and fixtures                       3 - 10 years

                                       33
<PAGE>

     (i)  Impairment of Long-Lived Assets and for Long-Lived Assets to Be
                                              ---------------------------
          Disposed Of
          -----------

          The Company accounts for long-lived assets in accordance with
          Statement of Financial Accounting Standard ("SFAS") No. 121,
          "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
          Assets to Be Disposed Of."

          This Statement requires that long-lived assets and certain
          identifiable intangibles be reviewed for impairment whenever events or
          changes in circumstances indicate that the carrying value of an asset
          may not be recoverable. Recoverability of assets to be held and used
          is measured by comparing the carrying amount of an asset to future net
          cash flows expected to be generated by the asset. If such assets are
          considered to be impaired, the impairment to be recognized is measured
          by the amount by which the carrying amount of the assets exceeds the
          fair value of the assets. Assets to be disposed of are reported at the
          lower of the carrying amount or fair value less costs to sell.

          In accordance with its policy, the Company recorded charges for
          impairment losses in the materials segment in 2001, 2000 and 1999 of
          approximately $14,000, $659,000 and $471,000, respectively. The
          construction segment recorded charges for impairment losses in 2001,
          2000 and 1999 of $17,000, $43,000 and $334,000, respectively.

          Other assets, dredge equipment, asphalt plant, batch plant,
          generators, and other assets, not in use in Puerto Rico, St. Croix,
          St. Kitts and other islands were written down to net realizable value
          with an impairment charge of $31,000 in 2001 and $174,000 in 2000. In
          2000, impairment of goodwill in St. Martin of $378,000 was determined
          based on future projected undiscounted cash flows compared to
          remaining asset value as of the end of the period. There is no
          remaining goodwill relating to the operations in St Martin. In 1999,
          due to the planned closing of the Saba operations, the asset values in
          Saba were reduced to estimated net realizable value, by an impairment
          charge of $267,000. During the actual closing of the plant, additional
          impairment of $150,000 was recognized in 2000 due to an additional
          write-down of inventories, unforeseen additional dismantling costs and
          lower than expected proceeds received upon the sale of the fixed
          assets. There were no remaining assets in Saba as of December 31,
          2000. A dredge was impaired due to obsolescence in 1999.

     (j)  Foreign Currency Translation
          ----------------------------

          All balances denominated in foreign currencies are remeasured at
          year-end rates to the respective functional currency of each
          consolidating company.

          For those subsidiaries, with a functional currency other than the US
          dollar, assets and liabilities have been translated into U.S.

                                       34
<PAGE>

          dollars at year-end exchange rates. Income statement accounts are
          translated into U.S. dollars at average exchange rates during the
          period. The translation adjustment decreased equity by $478,880 in
          2001, $442,925 in 2000, and $735,201 in 1999. Gains or losses on
          foreign currency transactions are reflected in the net income of the
          period.

          The French subsidiary does not record a foreign exchange loss or gain
          on long-term inter-company debt. This gain or loss is deferred and
          combined with the translation adjustment of said subsidiary. If and
          when the debt is paid, in part or whole, the deferred loss or gain
          will be realized and will affect the net respective result of the
          period.

     (k)  Earnings (Loss) Per Share
          -------------------------

          The Company computes earnings per share in accordance with the
          provisions of SFAS No. 128, "Earnings per Share," which establishes
          standards for computing and presenting basic and diluted earnings per
          share.

          Basic earnings per share are computed by dividing net earnings (loss)
          by the weighted average number of shares outstanding during the
          period. Diluted earnings per share are computed assuming the exercise
          of stock options and the related income tax effects if not
          antidilutive. For loss periods, common share equivalents are excluded
          from the calculation, as their effect would be antidilutive. See Note
          2 of Notes to Consolidated Financial Statements for the computation of
          basic and diluted earnings per share.

     (l)  Income Taxes
          ------------

          Income taxes are accounted for under the asset and liability method.
          Deferred tax assets and liabilities are recognized for the future tax
          consequences attributable to differences between the financial
          statement carrying amounts of existing assets and liabilities and
          their respective tax bases and operating loss and tax credit
          carry-forwards. Deferred tax assets and liabilities are measured using
          enacted tax rates expected to apply to taxable income in the years in
          which those temporary differences are expected to be recovered or
          settled. The effect on deferred tax assets and liabilities of a change
          in tax rates is recognized in income in the period that includes the
          enactment date. The Company and certain of its domestic subsidiaries
          file consolidated federal and state income tax returns. Subsidiaries
          located in U.S. possessions and foreign countries file individual
          income tax returns. U.S. income taxes are not provided on
          undistributed earnings, which are expected to be permanently
          reinvested by foreign subsidiaries, unless the earnings can be
          repatriated in a tax-free manner.

     (m)  Use of Estimates
          ----------------

          Management of the Company has made a number of estimates and
          assumptions relating to the reporting of assets and liabilities and
          the disclosure of contingent assets and liabilities to

                                       35
<PAGE>

          prepare these consolidated financial statements in conformity with
          generally accepted accounting principles. Actual results could differ
          from these estimates.

     (n)  Stock Option Plans
          ------------------

          The Company applies the intrinsic value-based method of accounting
          prescribed by Accounting Principles Board ("APB") Opinion No. 25,
          "Accounting for Stock Issued to Employees," and related
          interpretations, in accounting for its fixed plan stock options. As
          such, compensation expense would be recorded on the date of grant only
          if the current market price of the underlying stock exceeded the
          exercise price. SFAS No. 123, "Accounting for Stock-Based
          Compensation," established accounting and disclosure requirements
          using a fair value-based method of accounting for stock-based employee
          compensation plans. As allowed by SFAS No. 123, the Company has
          elected to continue to apply the intrinsic value-based method of
          accounting described above, and has adopted the disclosure
          requirements of SFAS No. 123.

     (o)  Reclassification
          ----------------

          Certain prior year amounts have been reclassified to conform to the
          current year presentation.

(2)  Earnings Per Share
     ------------------

     The following table sets forth the computation of basic and diluted
     earnings per share data:

                                               2001        2000        1999
                                             ---------   ---------   ---------
Weighted average number of
  common shares outstanding -
  basic                                      3,631,703   3,850,566   4,481,304

Effect of dilutive securities:
Options                                        331,575     350,971          --
                                             ---------   ---------   ---------

Weighted average number of
  common shares outstanding -
  diluted                                    3,963,278   4,201,537   4,481,304
                                             =========   =========   =========

     Options to purchase 560,300 shares of common stock at prices ranging from
     $2.17 to $3.75 per share were outstanding for the year ended December 31,
     1999 but were not included in the computation of diluted earnings per share
     because the inclusion of the options would be antidilutive. The options
     expire on various dates.

     The Company acquired a total of 97,000 of its outstanding common shares and
     retired 113,600 shares in 2001. As of December 31, 2001, the Company had
     154,700 shares of treasury stock, which may be used for exercise of stock
     options, may be used for other Company purposes or retired.

                                       36
<PAGE>

(3)  Receivables
     -----------

     Receivables consist of the following:

                                                          December 31,
                                                  -----------------------------
                                                     2001              2000
                                                  ------------     ------------
Materials division trade accounts                 $  7,984,474     $ 10,679,035
Construction division trade
  accounts receivable, including
  retainages                                         4,942,402        4,248,595
Accrued interest and other receivables                  25,938          338,214
Notes and bonds due from the
  Government of Antigua and Barbuda, net             7,318,035        7,669,420
Trade notes receivable - other                       5,951,291        5,373,493
Due from employees and officers                         64,604          247,101
                                                  ------------     ------------
                                                    26,286,744       28,555,858
Allowance for doubtful accounts
  and notes                                         (3,527,993)      (3,958,053)
                                                  ------------     ------------
                                                  $ 22,758,751     $ 24,597,805
                                                  ============     ============

     Receivables are classified in the consolidated balance sheets as follows:

                                                          December 31,
                                                  ----------------------------
                                                     2001              2000
                                                  -----------       ----------

Current assets                                    $12,162,049      $13,800,628
Non-current assets                                 10,596,702       10,797,177
                                                  -----------       ----------
                                                  $22,758,751      $24,597,805
                                                  ===========      ===========

     Included in notes and other receivables are unsecured notes due from the
     Government of Antigua and Barbuda (the "Government") totaling a net amount
     of $7,249,375 and $7,483,329 in 2001 and 2000, respectively, approximately
     $205,000 of which is classified as a current receivable in 2001. These
     notes were originally executed in connection with a construction contract
     in 1987. During the following nine years, eight amendments to the agreement
     were executed, primarily due to additional work contracted. In 1987, the
     notes were placed on the cost recovery method, and all payments received
     from the Government from agreed upon sources were recorded as reduction of
     the principal balance of the notes. Payments from agreed upon sources were
     derived from lease proceeds from a rental of a United States military base,
     fuel tax revenues and proceeds from a real estate venture. The contractual
     outstanding balance of the notes, including the balance of prepayment of
     taxes and duties, was $31.7 million and $32.8 million as of December 31,
     2001 and 2000, respectively.

     In April 2000, the Company executed the ninth amendment to the agreement
     with the Government and the notes were removed from the cost recovery
     method. The original notes receivable were consolidated into two new
     15-year notes and the stated interest rate was reduced from 10 percent to 6
     percent annually. Payments from agreed upon sources were expanded to
     include an additional monthly payment of $61,400, starting in August 2000,
     and up to $2.5 million in offsets against future duties and taxes to be
     incurred by the Company. In total, the agreement calls for $155,000 to be
     received monthly and $312,000 to be received

                                       37
<PAGE>

     quarterly, until maturity in 2015. Since April 28, 2000 the Company has
     been recognizing interest income on the notes under the accrual basis. The
     Company expects to receive principal payments against the book balance of
     $205,000, $196,000, $134,000, $230,000, and $372,000 during each of the
     next 5 years, respectively.

     From time to time in the future the Company expects to incur taxes and
     duties in excess of the $2.5 million stipulated in the agreement. As a
     result, the contractual outstanding balance of the notes may be further
     reduced to pay these additional taxes and duties; and the notes may be paid
     off prior to the scheduled maturity. At the time of recording the actual
     duty or taxes incurred the Company will record the offsetting payment from
     the Government.

     Receipts on the notes were $2.9 million and $2.1 million, in 2001 and 2000,
     respectively. Interest income recognized in 2001, 2000 and 1999 was
     $2,385,842, $1,538,540 and $417,147, respectively. The Government was
     delayed in implementing certain property taxes, which were to provide funds
     for increased payments of $61,400 monthly; therefore, additional
     agreed-upon payments of approximately $1.0 million were not received during
     a 17-month period ending in December 2001. Subsequent to the ninth
     amendment, a new agreement was signed by the Government, which stipulates
     that the additional payments of $61,400 will start in 2002. The Company has
     received the first two additional payments in the first quarter of 2002.
     The Company records payments received, first to the projected principal
     reductions for the period, then to accrued interest, and lastly to
     additional reduction of principal. Interest income is recognized on the
     notes only to the extent payments are recorded for accrued interest.

     Antigua-Barbuda Government Development Bonds 1994-1997 series amounting to
     $68,660 and $186,091 in 2001 and 2000, respectively, are included in the
     total due from the Government.

     The Company also has net trade receivables from various Government agencies
     of $31,331 and $29,796 in 2001 and 2000, respectively.

     Trade notes receivable - other consist of the following:

                                       38
<PAGE>

                                                            December 31,
                                                     -----------------------
                                                        2001         2000
                                                     ----------   ----------
Unsecured promissory notes receivable
with varying terms and maturity dates                $  249,869   $  455,992

Notes receivable with varying terms and
maturity dates, secured by real estate
or equipment                                          2,362,128      951,058

8.0 percent note receivable, due on demand,
secured by first mortgage on real property              817,788      817,788

Unsecured notes receivable bearing interest
at 1.0 percent over the prime rate,
due in monthly installments through 2005              1,946,506           --

8.0 percent note receivable, due in
installments through July 2005, secured
by land and building                                    575,000      600,000

Note receivable bearing interest at the
prime rate due in installments through
November 2001 secured by equipment                           --      826,433

Note receivable bearing interest at the
prime rate due in installments
through December 2003, secured by land, equipment
and stock                                                    --    1,722,222
                                                     ----------   ----------
                                                     $5,951,291   $5,373,493
                                                     ==========   ==========

(4)  Inventories
     -----------

                                                          December 31,
                                                  --------------------------
                                                     2001            2000
                                                  ----------      ----------
Inventories consist of the following:

Sand, stone, cement and concrete block            $3,240,910      $2,422,566
Maintenance parts                                    175,589         275,589
Other                                                320,260         239,944
                                                  ----------      ----------
                                                  $3,736,759      $2,938,099
                                                  ==========      ==========

(5)  Investments in Unconsolidated Joint Ventures and Affiliates
     -----------------------------------------------------------

     At December 31, 2001 and 2000, the Company had investments in
     unconsolidated joint ventures and affiliates consisting of equity interests
     in a 1.2 percent equity interest in a real estate project in the Bahamas
     (see Note 12) and a 33.3 percent interest in a real estate company in
     Puerto Rico. Equity earnings of $28,733 were recognized in 2001 and an
     equity loss of $23,166 was recognized in 2000, on ventures accounted for
     under the equity method.

                                       39
<PAGE>

(6)  Fair Value of Financial Instruments
     -----------------------------------

     The carrying amount of financial instruments including cash, cash
     equivalents, most of the receivables - net, other current assets, accounts
     payable trade and other, accrued expenses and other liabilities, and notes
     payable to banks approximated fair value at December 31, 2001 because of
     the short maturity of these instruments. The carrying value of debt and
     most notes receivable approximated fair value at December 31, 2001 based
     upon the present value of estimated future cash flows. Given the nature of
     the notes and lack of comparable instruments, estimation of fair value of
     the notes due from the Government of Antigua and Barbuda is not
     practicable. The carrying amount of these notes as of December 31, 2001 was
     $7.4 million. The effective interest rate of the notes was 33 percent in
     2001. The notes call for monthly and quarterly payments until maturity in
     2015.

(7)  Long-term Debt
     --------------

     Long-term debt consists of the following:

                                                            December 31,
                                                   -----------------------------
                                                      2001               2000
                                                   ----------         ----------

     Installment notes payable in
     monthly installments through
     2005, bearing interest at a
     weighted average rate of 7.8
     percent and secured by equipment
     with a carrying value of
     approximately $265,000                        $  200,006         $1,284,878

     Unsecured note payable to the Company's
     President, $1,000,000 due on demand with
     the balance due July 1, 2003 and
     bearing interest at the prime interest
     rate                                           2,780,000          2,075,000

     Unsecured notes payable due through
     2011 bearing interest at a weighted
     average rate of 6.8 percent                      617,900            465,987

     Notes and mortgages payable in
     installments, bearing
     interest at 9.50 percent                           --               140,625

     Note payable to a bank under a $1,000,000
     line of credit, due on demand, bearing
     interest at 1 percent over the prime
     rate secured by equipment and property             --               300,000
                                                   ----------         ----------
        Total debt outstanding                     $3,597,906         $4,266,490
                                                   ==========         ==========

     The effective interest on all debt outstanding was 8.5 percent at December
     31, 2001 and 9.5 percent at December 31, 2000.

     Outstanding debt is shown in the consolidated balance sheets under the
     following captions:

                                       40
<PAGE>

                                                       December 31,
                                              -----------------------------
                                                 2001               2000
                                              ----------         ----------
Current installments of long-term debt        $1,143,097         $1,501,656
Notes payable to banks                             --               300,000
Long-term debt                                 2,454,809          2,464,834
                                              ----------         ----------
                                              $3,597,906         $4,266,490
                                              ==========         ==========

     The total maturities of all outstanding debt subsequent to December 31,
     2001 are as follows:

2002                            $1,143,097
2003                             1,826,992
2004                                50,893
2005                                44,892
2006                                  -
Thereafter                         532,032
                                ----------
                                $3,597,906
                                ==========

(8)  Income Taxes
     ------------

     Income tax expense (benefit) consists of:

                                 Current            Deferred             Total
                                ---------           ---------          ---------
2001:
  Federal                       $ 358,435           $(190,162)         $ 168,273
  State                                --                  --                 --
  Foreign                         623,674              37,387            661,061
                                ---------           ---------          --------
                                $ 982,109           $(152,775)         $829,334
                                =========           =========          ========
2000:
  Federal                       $ 502,826           $ (32,539)         $ 470,287
  State                                --                  --                 --
  Foreign                         466,828            (221,359)           245,469
                                ---------           ---------          --------
                                $ 969,654           $(253,898)         $715,756
                                =========           =========          ========
1999:
  Federal                       $      --           $ (19,404)         $(19,404)
  State                                --                  --                --
  Foreign                         292,635                  --            292,635
                                ---------           ---------          --------
                                $ 292,635           $ (19,404)         $273,231
                                =========           =========          ========

     The actual expense differs from the "expected" tax expense
     (benefit)computed by applying the U.S. federal corporate income tax rate of
     34 percent to income (loss) before income taxes is as follows:

                                           2001          2000          1999
                                        ----------    ----------    -----------
Computed "expected"
  tax expense (benefit)                 $1,108,300    $6,528,804    $(1,033,060)
Increase (reduction) in
  income taxes resulting from:
  State taxes net of federal
   tax expense                                  --            --             --
  Distribution of deemed
   dividends                               141,100     2,035,275        901,000

                                       41
<PAGE>

                                           2001          2000           1999
                                        ---------     -----------     ---------
Intercompany interest income
  untaxed by foreign
  jurisdiction                           (137,194)        --            (27,600)
Tax incentives granted to
  foreign subsidiaries                   (399,403)     (2,864,131)           --
Nontaxable capital gains                        --     (1,156,048)           --
Adjustment to prior year
  deemed dividends from
  foreign subsidiaries                          --             --      (155,852)
Net operating loss not
  utilized                                 27,985          47,594        20,696
Change in deferred tax
  valuation allowance                    (845,729)     (2,902,361)      648,759
Differences in effective
  rate in foreign
  jurisdiction and other                  934,275        (973,377)      (80,712)
                                        ---------     -----------     ---------
                                        $ 829,334     $   715,756     $ 273,231
                                        =========     ===========     =========

     Deferred income taxes reflect the net tax effects of (a) temporary
     differences between the carrying amounts of assets and liabilities for
     financial reporting purposes and the amounts used for income tax purposes,
     and (b) net operating loss carryforwards.

     Significant portions of the deferred tax assets and liabilities results
     from the tax effects of temporary difference:

                                                           December 31,
                                                   ----------------------------
                                                      2001             2000
                                                   -----------      -----------
Deferred tax assets:
  Allowance for bad debts                          $   165,889      $   220,380
  Net operating loss carry-forwards                  4,076,320        4,949,521
  Reserves and other                                   493,805          435,492
  Deferred income                                      388,464          366,958
                                                   -----------      -----------
Total gross deferred tax assets                      5,124,478        5,972,351
Less valuation allowance                            (4,464,784)      (5,310,513)
                                                   -----------      -----------
         Net deferred tax assets                       659,694          661,838
                                                   -----------      -----------
Deferred tax liabilities:
  Plant and equipment, principally
    due to differences in depreciation
    and capitalized interest                          (632,673)        (787,592)
      Total gross deferred tax
        liabilities                                   (632,673)        (787,592)
                                                   -----------      -----------
      Net deferred tax asset
        (liabilities)                              $    27,021      $  (125,754)
                                                   ===========      ===========
Net deferred tax assets (liabilities):
   Net current deferred tax assets                 $   232,365      $   240,341

   Net non-current deferred
     tax liabilities                                  (205,344)        (366,095)
                                                   -----------      -----------
                                                   $    27,021      $  (125,754)
                                                   ===========      ===========

                                       42
<PAGE>

     The valuation allowance for deferred tax assets as of December 31, 2001 was
     $4.5 million or about 87.1 percent of the potential deferred tax benefit.

     In April 1988, the U.S. Virgin Islands Industrial Development Commission
     (IDC) granted one of the Company's subsidiaries a 10-year tax exemption
     expiring in April 1998. With some conditions and exceptions, the Company's
     operations related to (1) production and sale of ready-mix concrete; (2)
     production and sale of concrete block on St. Thomas and St. Johns and
     outside of the U.S. Virgin Islands; (3) production and sale of sand and
     aggregate; and (4) bagging of cement from imported bulk cement, are 100
     percent exempt from U.S. Virgin Islands real property, gross receipts
     (currently 4 percent) and excise taxes, 90 percent exempt from U.S. Virgin
     Islands income taxes, and about 83 percent exempt from U.S. Virgin Islands
     customs duties. In 1998, the Company was granted a five-year extension,
     through April 2003, of the exemptions.

     At December 31, 2001, approximately $37.8 million of foreign subsidiaries'
     earnings have not been distributed and no U.S. income taxes have been
     provided on them. These earnings are considered permanently reinvested in
     the subsidiaries' operations, unless the earnings can be repatriated in a
     tax-free manner, and when earned, did not require income tax recognition
     under U.S. laws. Should the foreign subsidiaries distribute these earnings
     to the parent company or provide access to these earnings, taxes of
     approximately $12.9 million at the U.S. federal tax rate of 34 percent, net
     of foreign tax credits, may be incurred.

     At December 31, 2001, the Company had accumulated net operating loss
     carryforwards available to offset future taxable income in its Caribbean
     operations of about $12.2 million, which expire at various times through
     the year 2010.

     During the fourth quarter 2001, the Company's three subsidiaries in Antigua
     were assessed $6.1 million in income taxes and withholding taxes for the
     years 1995 through 1999. The Company is appealing the assessments in the
     appropriate venues. The Company is owed a total of $31.7 million from the
     Government of Antigua and Barbuda; see further Note 3, of which $7.4
     million is reflected as a receivable in the Company's financial statements.
     The difference between the gross balance and the reflected balance is the
     result of the notes receivable being on the cost recovery method from the
     notes inception through April 2000. In the event that the appeal is denied,
     the Company believes it has the right to offset any amounts owed to the
     Government against what is owed to the Company. Therefore, the Company
     believes that if any tax is accrued in the future, it will not have an
     immediate cash flow effect on the Company, but will result in an offset
     between tax owed and receivables outstanding. It is too early to predict
     the final outcome of the appeals process or to estimate the ultimate amount
     of loss, if any, to the Company. Based on the advice from local Antiguan
     tax consultants and local Antiguan counsel, management believes the
     Company's defenses to be meritorious and does not believe that the ultimate
     outcome will have a material adverse effect on the consolidated financial
     position or results of operations of the Company.

                                       43
<PAGE>

(9)  Foreign Subsidiaries
     --------------------

     Combined financial information for the Company's foreign Caribbean
     subsidiaries, except for those located in the U.S. Virgin Islands and
     Puerto Rico, are summarized here:

                                                            December 31,
                                                    ----------------------------
                                                       2001             2000
                                                    -----------      -----------

Current assets                                      $11,822,302      $ 7,225,459
Advances to the Company                               7,734,792        9,923,726
Property, plant and equipment, net                   10,933,035       11,963,903
Investments in joint ventures and
   affiliates, net                                      186,490          184,184
Notes receivable, net                                 9,752,049        8,218,904
Other assets                                             11,147           56,848
                                                    -----------      -----------

         Total assets                               $40,439,815      $37,573,024
                                                    ===========      ===========

Current liabilities                                 $ 2,512,409      $ 3,161,433
Long-term debt                                          946,725               --
Equity                                               36,980,681       34,411,591
                                                    -----------      -----------
         Total liabilities and equity               $40,439,815      $37,573,024
                                                    ===========      ===========

                                      2001             2000            1999
                                   -----------     -----------     ------------
Revenue                            $25,607,906     $32,419,421     $ 38,093,152
Gain on sale of business                    --       9,751,585               --
Income (loss) before
   income taxes                      3,440,105      10,343,782         (904,252)
Net earnings(loss)                   2,853,800      10,309,560       (1,170,284)

(10) Lease Commitments
     -----------------

     The Company leases real property, buildings and equipment under operating
     leases that expire over periods of one to thirty-one years. Future minimum
     lease payments under noncancellable operating leases with terms in excess
     of one year as of December 31, 2001 are as follows:

                                                   Operating
                                                    Leases
                                                  -----------
Years ending December 31,
         2002                                     $ 1,731,406
         2003                                       1,687,306
         2004                                       1,559,249
         2005                                       1,491,523
         2006                                       1,172,523
         Thereafter                                 2,847,334
                                                  -----------
Total minimum lease payments                      $10,489,341
                                                  ===========

     Total operating lease expense for real property and buildings was
     $1,977,537 in 2001, $3,473,000 in 2000 and $4,118,946 in 1999. Total
     operating lease and rental expense for equipment was $903,455 in 2001,
     $904,709 in 2000 and $788,360 in 1999. The equipment leases are normally on
     a month-to-month basis. Some operating leases provide for contingent
     rentals or royalties based on related sales and production;

                                       44
<PAGE>

     contingent expense amounted to $10,755 in 2001, $112,770 in 2000 and $9,422
     in 1999. Included in the above minimum lease commitments are royalty
     payments due to the owners of the Societe des Carrieres de Grand Case
     (SCGC) quarry. See Note 16.

(11) Segment Reporting
     -----------------

     The Company is organized based on the products and services it provides.
     Under this organizational structure the Company has two reportable
     segments: materials and construction. Materials segment includes
     manufacturing and distribution of ready-mix concrete, block, crushed
     aggregate and cement. Construction segment consists of land development
     construction projects. The accounting policies of the segments are the same
     as those described in the summary of significant accounting policies.

                                                   December 31,
                                   ---------------------------------------------
                                       2001            2000            1999
                                   ------------    ------------    ------------
Revenue (incl. inter-segment):
  Materials                        $ 40,985,155    $ 51,466,445    $ 55,718,952
  Construction                       15,282,867      14,421,338      13,289,689
Elimination of inter-segment
     revenue                         (1,380,507)       (639,600)       (974,838)
                                   ------------    ------------    ------------
         Total                     $ 54,887,515    $ 65,248,183    $ 68,033,803
                                   ============    ============    ============
Operating income (loss):
  Materials                        $     23,330    $ (1,607,653)   $ (2,198,221)
  Construction                        1,173,141       1,266,349        (300,594)
  Credit for litigation                      --              --       1,160,137
  Unallocated corporate
     overhead                        (1,188,000)       (819,000)       (879,000)
                                   ------------    ------------    ------------
         Total                     $      8,471    $ (1,160,304)   $ (2,217,678)
                                   ============    ============    ============
Total assets:
  Materials                        $ 43,787,877    $ 46,852,093    $ 55,210,123
  Construction                       13,441,816      10,983,399      10,720,392
  Other                              10,722,054      14,300,579      15,983,499
                                   ------------    ------------    ------------
         Total                     $ 67,951,747    $ 72,136,071    $ 81,914,014
                                   ============    ============    ============
Depreciation and
 amortization:
  Materials                        $  3,309,717    $  3,596,902    $  4,723,099
  Construction                        1,585,689       1,577,797       1,648,584
                                   ------------    ------------    ------------
         Total                     $  4,895,406    $  5,174,699    $  6,371,683
                                   ============    ============    ============
Capital expenditures:
  Materials                        $  3,709,789    $  2,854,719    $  7,924,195
  Construction                          805,706       2,126,391         358,099
                                   ------------    ------------    ------------
         Total                     $  4,515,495    $  4,981,110    $  8,282,294
                                   ============    ============    ============

     Operating income (loss) is revenue less operating expenses. In computing
     operating income (loss), the following items have not been added or
     deducted: interest expense, income tax expense, equity in earnings from
     unconsolidated joint ventures and affiliates, interest and other income,
     minority interest and gain or loss on sales of equipment. The note
     receivable from the Government of Antigua and Barbuda is included in total
     assets, other.

                                       45
<PAGE>

     Revenue by geographic area includes only sales to unaffiliated customers,
     as reported in the Company's consolidated statements of operations. The
     Company moves its equipment from country to country, therefore, to make
     this disclosure meaningful the geographic area separation for assets is
     based on the location of the legal entity owning the assets.

                                                      December 31,
                                       -----------------------------------------
                                          2001           2000           1999
                                       -----------    -----------    -----------
Revenue by geographic areas:
     U.S. and its territories          $21,562,985    $25,235,399    $22,970,710
     Netherlands Antilles                9,459,217     12,689,209      8,725,220
     Antigua and Barbuda                10,534,677     12,593,564     11,822,155
     French West Indies                  6,384,890      9,158,988      8,718,285
     Other foreign areas                 6,945,746      5,571,023     15,797,433
                                       -----------    -----------    -----------
       Total                           $54,887,515    $65,248,183    $68,033,803
                                       ===========    ===========    ===========
Property, plant and equipment,
 net, by geographic areas:
     U.S. and its territories          $20,292,205    $21,186,263    $18,849,542
     Netherlands Antilles                  285,045        344,305      1,232,142
     Antigua and Barbuda                 6,720,267      7,280,881      8,501,170
     French West Indies                  3,873,834      4,206,217      4,581,460
     Other foreign areas                    53,889        132,500      5,178,977
                                       -----------    -----------    -----------
       Total                           $31,225,240    $33,150,166    $38,343,291
                                       ===========    ===========    ===========

(12) Related Party Transactions
     --------------------------

     The Company leases a 3.4-acre parcel of real property in Deerfield Beach,
     Florida from the Company's President. Annual rent on the property was
     $49,303 in 2001, 2000, and 1999, respectively. The lease was renewed for
     five years from January 1, 2002 with an annual rent of $90,000.

     At December 31, 2001, the Company had a note payable of $2.8 million to the
     Company's President resulting from various advances made to the Company in
     previous years. The note is unsecured and bears interest at the prime rate.
     Presently, one million dollars is due on demand and $1.8 million is due on
     July 1, 2003. The President has the option to make the note due on demand
     should a "Change of Control" occur. A Change of Control has occurred if a
     person or group acquires 15 percent or more of the common stock or
     announces a tender offer that, if successful, would result in ownership by
     a person or group of 15 percent or more of the common stock. See Note 7 of
     Consolidated Financial Statements.

     At December 31, 2001 the Company had an investment and advances totaling
     $186,091 representing 1.2 percent interest in a real estate joint venture
     in the Bahamas in which the President and one Board member also participate
     with equity interests of 11.3 percent and 1.0 percent, respectively. The
     investment is carried at cost; accordingly no income or loss has been
     recorded from this investment. The Company has a $23.8 million contract
     with the venture to perform land preparation services. In connection with
     this contract, the Company has

                                       46
<PAGE>

     recorded revenue of $5.2 million during 2001. The backlog on the contract
     as of December 31, 2001 was $7.2 million. The project received its final
     financing in January 2002.

     On November 1, 1999, the Company extended a $1.0 million note to the
     venture in the Bahamas, secured by equipment. This note was fully paid
     during 2001. See Note 3 of Notes to Consolidated Financial Statements.

     As of December 31, 2001 the Company had trade receivables from the venture
     of approximately $3.3 million. Subsequent to year-end the Company received
     $3.6 million in payments from the venture and billed an additional $1.2
     million.

     Other assets include amounts due from officers and employees as a result of
     payments made by the Company pursuant to a split-dollar life insurance
     plan. The Company's advances to pay premiums are secured by a pledge of the
     cash value of the issued policies. Amounts due to the Company under the
     split-dollar life insurance plan were $943,638 in 2001 and $853,488 in
     2000, respectively.

(13) Stock Option Plans
     ------------------

     The Company adopted stock option plans for officers and employees in 1986,
     1992 and 1999. While each plan terminates 10 years after the adoption date,
     issued options have their own schedule of termination. Until 1996, 2002 and
     2009, options to acquire up to 300,000, 350,000 shares, and 350,000 shares
     respectively, of common stock may be granted at no less than fair market
     value on the date of grant.

     All stock options granted pursuant to the 1986 Plan not already
     exercisable, vest and become fully exercisable (1) on the date the optionee
     reaches 65 years of age and for the six-month period thereafter or as
     otherwise modified by the Company's Board of Directors, (2) on the date of
     permanent disability of the optionee and for the six-month period
     thereafter, (3) on the date of a change of control and for the six-month
     period thereafter, and (4) on the date of termination of the optionee from
     employment by the Company without cause and for the six-month period after
     termination.

     Stock options granted under the 1992 and 1999 Plan vest and become
     exercisable in varying terms and periods set by the Compensation Committee
     of the Board of Directors. Options issued under the 1992 and 1999 Plan
     expire after 10 years.

     The Company adopted a stock-option plan for directors in 1992 that
     terminates in 2002. Options to acquire up to 50,000 shares of common stock
     may be granted at no less than the fair-market value on the date of grant.
     The 1992 Directors' Plan provides each director an initial grant of 8,000
     shares and additional grants of 1,000 shares annually immediately
     subsequent to their reelection as a director. Stock optionsgranted under
     the Directors' Plan have 10-year terms, vest and become fully exercisable
     six months after the issue date. As the director's plan was fully granted
     in 2000, the directors have received their annual options since then from
     the employee plans.

                                       47
<PAGE>

                  Stock option activity by year was as follows:

                                         Employee Plans     Directors' Plan
                                      ------------------   -----------------
                                                Weighted            Weighted
                                                Average             Average
                                                Exercise            Exercise
                                      Shares     Price     Shares    Price
                                      -------   --------   ------   --------
Balance at
  12/31/98                            501,775     4.67     38,000     10.21
  Granted                             318,000     1.57     11,000      2.97
  Exercised                                --       --         --        --
  Expired                             (30,000)    3.75         --        --
                                      -------              ------     -----
Balance at
  12/31/99                            789,775     3.45     49,000      8.59
  Granted                              13,000     5.76      1,000      6.63
  Exercised                           (13,200)    1.50         --        --
  Expired                              (5,000)    1.50         --        --
                                      -------              ------
Balance at
  12/31/00                            784,575     3.53     50,000      8.55
  Granted                               6,500     6.92         --        --
  Exercised                           (18,600)    1.74         --        --
  Expired                              (9,180)    7.00         --        --
Balance at
  12/31/01                            763,295     3.56     50,000      8.55
                                      =======              ======
  Exercisable                         515,135     4.27     50,000      8.55
                                      =======              ======
  Available for
   future grant                        55,500                  --
                                      =======              ======

Weighted average information:

                   Total Outstanding Options      Exercisable Options
                 ------------------------------   -------------------
                           Weighted                         Weighted
                 Number     Average   Weighted    Number    Average
                   of      Exercise   Remaining     of      Exercise
Price Range      Shares      Price      Life      Shares     Price
-----------      -------   --------   ---------   -------   --------

1.50 - 2.33      455,500     1.83       7.92      251,325      2.01
2.94 - 6.25      113,000     3.99       6.41       73,000      3.99
6.63 - 7.00      184,795     6.76       3.74      180,810      6.75
7.75 - 14.00      60,000    10.16       2.52       60,000     10.16

     The per-share weighted-average fair value of stock options granted during
     2001, 2000 and 1999 was $3.88, $1.10 and $1.89 respectively, on the grant
     date using the Black Scholes option-pricing model with the following
     assumptions:

                               2001         2000         1999
                              -------      -------      -------

Expected dividend yield            --           --           --
Expected price volatility        34.0%        39.8%        51.5%
Risk-free interest rate           5.3%         6.5%         5.4%
Expected life of options      10 years     10 years     10 years

     The Company applies APB Opinion No. 25 in accounting for its plan and,
     accordingly, stock compensation cost of $127,843 was recognized in 2001 in
     the consolidated financial statements for the extension of certain stock
     options. Had the Company determined compensation costs based on

                                       48
<PAGE>

     fair value at the grant date for our stock options under SFAS 123, the
     Company's consolidated net earnings or loss would have been the pro forma
     amounts below:

                               2001          2000          1999
                            -----------   -----------   -----------
 Net earnings (loss),
   as reported              $ 2,430,369   $18,486,608   $(3,311,644)
 Net earnings (loss),
   pro forma                $ 2,317,103   $18,288,801   $(3,471,627)

 Basic earnings (loss)
   per share from
   continuing operations,
   as reported              $      0.67   $      4.80   $     (0.74)
                            ===========   ===========   ===========

 Basic earnings (loss)
   per share from
   continuing operations,
   pro forma                $      0.64   $      4.75   $     (0.77)
                            ===========   ===========   ===========

(14) Employee Benefit Plans
     ----------------------

     The Company sponsors a 401(k) plan for some employees over the age of 21
     with 1,000 hours of service in the previous 12 months of employment. The
     Company matches employee contributions up to 3.0 percent of an employee's
     salary. Company contributions totaled $138,544 in 2001, $140,257 in 2000,
     and $167,975 in 1999.

(15) Costs and Estimated Earnings on Contracts
     -----------------------------------------

     Included in the accompanying consolidated balance sheets under the
     following captions:

                                                         December 31,
                                                 ---------------------------
                                                     2001           2000
                                                 ------------   ------------
Costs and estimated earnings
  in excess of billings                          $    229,056   $  1,405,898
Billings in excess of costs
  and estimated earnings                             (414,837)      (535,547)
                                                 ------------   ------------
                                                 $   (185,781)  $    870,351
                                                 ============   ============

                                                     2001           2000
                                                 ------------   ------------

Costs incurred on uncompleted contracts          $ 19,770,486   $  4,810,581
Costs incurred on completed contracts               7,866,967     22,345,159
Estimated earnings                                  5,730,422      6,212,302
                                                 ------------   ------------
                                                   33,367,875     33,368,042
     Less:  Billings to date                       33,553,656    (32,497,691)
                                                 ------------   ------------
                                                 $   (185,781)  $    870,351
                                                 ============   ============

(16) Commitments and Contingencies
     -----------------------------

     The Company has contingent obligations and has made guarantees in
     connection with acquisitions, joint ventures, employee and construction
     bonding and a tax exemption. As part of the 1995 acquisition of Societe

                                       49
<PAGE>

     des Carrieres de Grand Case ("SCGC"), a French company operating a
     ready-mix concrete plant and quarry in St. Martin, the Company agreed to
     pay the quarry owners, who were also the owners of SCGC, a royalty payment
     of $550,000 per year through August 2005. The agreement may be renewed, at
     the Company's option, for a successive five-year period and would require
     annual payments of $550,000 per year. At the end of the 15-year royalty
     period, the Company has the option to purchase this 50-hectare property for
     $4.4 million.

     In June 2000, the Company entered into an amended Life Insurance and Salary
     Continuation Agreement with the Company President. The President shall
     receive a retirement benefit upon the sooner of his retirement from his
     position after March 31, 2003, or a change in control of the Company.
     Benefits to be received shall equal 75 percent of his base salary, and
     shall continue for the remainder of his life. In the event that a spouse
     survives him, then the surviving spouse shall receive a benefit equal to
     100 percent of his base salary for the shorter of five years or the
     remainder of the surviving spouse's life. The Company will recognize the
     expense of the retirement agreement over his expected remaining period of
     active employment with the Company. The expense related to this agreement
     was $480,000 and $220,000 in 2001 and 2000, respectively. The accrued
     liability in connection with this agreement was $700,000 and $220,000 as of
     December 31, 2001 and 2000, respectively, and the Company estimates to
     accrue an additional $612,000 through March 2003. At that point the Company
     estimates that the total accrual will be sufficient to cover its
     obligations under the aforementioned agreement.

     During the fourth quarter 2001, the Company's three subsidiaries in Antigua
     were assessed $6.1 million in income taxes and withholding taxes for the
     years 1995 through 1999. The Company is appealing the assessments in the
     appropriate venues. The Company is owed a total of $31.7 million from the
     Government of Antigua and Barbuda; see further Note 3, of which $7.4
     million is reflected as a receivable in the Company's financial statements.
     The difference between the gross balance and the reflected balance is the
     result of the notes receivable being on the cost recovery method from the
     notes inception through April 2000. In the event that the appeal is denied,
     the Company believes it has the right to offset any amounts owed to the
     Government against what is owed to the Company. Therefore, the Company
     believes that if any tax is accrued in the future, it will not have an
     immediate cash flow effect on the Company, but will result in an offset
     between tax owed and receivables outstanding. It is too early to predict
     the final outcome of the appeals process or to estimate the ultimate amount
     of loss, if any, to the Company. Based on the advice from local Antiguan
     tax consultants and local Antiguan counsel, management believes the
     Company's defenses to be meritorious and does not believe that the ultimate
     outcome will have a material adverse effect on the consolidated financial
     position or results of operations of the Company.

     In the fall of 2000, Virgin Islands Cement and Building Products, Inc.
     ("VICBP"), a subsidiary of the Company, was under contract with the Virgin
     Islands Port Authority ("VIPA") for the construction of the expansion of
     the St. Croix Airport. During the project, homeowners and residents of the
     Yellow Cedar Housing Community, located next to the end of the expansion
     project, claimed to have experienced several days

                                       50
<PAGE>

     of excessive dust in their area as a result of the ongoing construction
     work. The homeowners of Yellow Cedar have filed two separate lawsuits
     against VIPA and VICBP as co-defendants. One suit, filed in the U.S.
     District Court by Mariepaul Antoine, Benjamin Ashe, et. al, vs. VIPA et.
     al, case #2001,63 R/F, seeks equitable relief from nuisance, specific
     performance and damages. The second suit, Louisa Williams et. al vs. VIPA
     et. al filed in the Territorial Court of the U.S.V.I. case #548/2000 seeks
     equitable relief from nuisance, specific performance and damages. In both
     cases, VICBP as defendant has agreed to indemnify VIPA for any civil action
     created during the course of work. Reliance Insurance Company ("Reliance"),
     the general liability carrier for VICBP, has taken the legal position that
     "dust" is a pollutant and, therefore, the pollution exclusion clause
     applies and as a result denies liability insurance coverage to VICBP. The
     Company has started litigation against Reliance to obtain insurance
     coverage. Corporate counsel in Florida, as well as in the U.S. Virgin
     Islands, have advised the Company that laws now in place should enable the
     courts to force Reliance Insurance Company to defend VICBP against both
     legal actions brought by the lawsuits mentioned above. Reliance declared
     bankruptcy in October 2001 and the Company has informed the Florida
     Guarantee Insurance Fund of its claim. It is too early to predict the final
     outcome of this matter or to estimate the potential risk of loss, if any,
     to the Company.

     In the late 1980s, Bouwbedrijf Boven Winden, N.V., ("BBW") currently a
     Devcon subsidiary in the Netherlands Antilles, supplied concrete to a large
     apartment complex on the French side of St. Maarten. In the early 1990s the
     buildings began to develop exterior cracking and "popouts." In November
     1993, BBW was named one of several defendants including the building's
     insurer, in a suit filed by Syndicat des Coproprietaires la Residence Le
     Flamboyant (condominium owners association of Le Flamboyant), in the French
     court "Tribunal de Grande Instance de Paris", case No. 510082/93. A French
     court assigned an expert to examine the cause of the cracking and popouts
     and to determine if the cracking/popouts are caused by a phenomenon known
     as alkali reaction (ARS). The expert found, in his report dated December 3,
     1998, that BBW was responsible for the ARS. The plaintiff is seeking
     unspecified damages, including demolition and replacement of the 272
     apartments. Based on the advice of legal counsel, a judgment assessed in a
     French court would not be enforceable against a Netherlands Antilles
     company. Thus, in order to obtain an enforceable judgment, the plaintiff
     would have to file a successful claim in an Antillean court. It is too
     early to predict the final outcome of this matter or to estimate the
     potential risk of loss, if any, to the Company. Due to the lack of
     enforceability, the Company decided not to continue the defense in the
     French court. Therefore, the Company may not be aware of developments of
     the court proceedings. Management believes the Company's defenses to be
     meritorious and does not believe that the outcome will have a material
     adverse effect on the consolidated financial position, results of
     operations or cash flows of the Company.

     The Company sold substantially all of its interest in a real estate joint
     venture with the Government of Antigua and Barbuda to a third party in
     1990. In connection with this sale, the purchaser assumed the Company's
     guarantee of payment to the Government of Antigua and Barbuda made upon the
     formation of the joint venture. This guarantee, which would become an
     obligation of the Company in the event of a default by

                                       51
<PAGE>

     the purchaser, provides that net profits from the joint venture's
     operations will equal or exceed $20,000 per month. No liability has been
     incurred by the Company nor have payments been made by the Company or the
     purchaser in connection with this guarantee. The guarantee expires upon the
     earlier of the sale or disposal by the venture of its real estate or
     September 2003. There are no current plans to sell or dispose of any of the
     venture's property.

     The Company is subject to federal, state and local environmental laws and
     regulations. Management believes that the Company is in compliance with
     these laws and regulations. Compliance with environmental protection laws
     has not had a material adverse impact on the Company's consolidated
     financial condition or results of operations and is not expected to have a
     material adverse impact in the foreseeable future.

     The Company is involved in other litigation and claims arising in the
     normal course of business. The Company believes that such litigation and
     claims will be resolved without a material adverse effect on the Company's
     consolidated financial position or results of operations.

(17) Business and Credit Concentrations
     ----------------------------------

     The Company's customers are concentrated in the Caribbean and are primarily
     involved in contracting. Credit risk may be affected by economic and
     political conditions in the countries where the Company operates. Potential
     concentrations of credit risk include receivables and costs and estimated
     earnings in excess of billings. No single customer accounted for more than
     10 percent of the Company's sales in 2001, 2000 or 1999 and there are no
     receivables from a single customer that represent more than 10 percent of
     total receivables as of December 31, 2001 or 2000, other than the notes
     receivable from the Government of Antigua and Barbuda and the receivable
     from the construction project in the Bahamas. Although receivables are
     generally not collateralized, the Company may place liens or their
     equivalent in the event of nonpayment. The Company estimates an allowance
     for doubtful accounts based on the creditworthiness of customers as well as
     general economic conditions of the countries where it operates. An adverse
     change in these factors would affect the Company's estimate of bad debts.

     The Company has a construction project with a backlog of $7.2 million. A
     subsidiary and two of the Company's directors are minority partners of, and
     the Company's President is a member of, the managing committee of the
     entity developing the project. See further Note 12.

     The Company has separate union agreements with its employees on St. Thomas,
     St. Croix and Antigua. The agreement on St. Thomas expires March 2003, on
     St. Croix March 2006 and on Antigua November 2003. The Company renewed the
     union contracts for St. Croix and Antigua during 2001. In the past there
     have been no labor conflicts.

     Management believes that the Company's ability to produce its own sand and
     stone gives it a competitive advantage because of the substantial
     investment required to produce sand and stone, the difficulty in obtaining
     the necessary environmental permits to establish quarries, and the
     moratorium on mining beach sand imposed by most Caribbean countries. If the
     Company is unable to produce its own sand and stone,

                                       52
<PAGE>

     the consolidated financial position, results of operations, or cash flows
     could be adversely affected.

(18) Sale of Businesses
     ------------------

     In January 7, 2000, the Company closed a transaction to sell certain
     concrete related assets on St. Thomas, USVI and the subsidiary Devcon
     Masonry Products (BVI), Ltd. to a purchaser and the purchaser's related
     parties. The selling price was $6 million in cash, a note for $2.5 million
     payable over three years and 420,100 shares of Devcon International Corp.
     held by the buyer. The shares were valued at $2.4 million at the day of
     closing. The book value of the assets sold, including certain expenses and
     deferred gain due to a $1 million contingency accrual, was $8.7 million.
     Therefore, the Company realized in the first quarter of 2000 a gain on this
     transaction before tax of $2.2 million. During 2001 the contingency was
     resolved and the outstanding note was reduced by $1.0 million and the
     remaining note was fully paid during 2001.

     On February 3, 2000, the Company closed a transaction to sell real property
     in St. Croix. The selling price was $2.3 million in cash, and the book
     value of the property was $1.9 million. As a result, the Company realized a
     gain on the transaction of approximately $336,000 before taxes.

     On February 22, 2000, the Company closed a transaction to sell certain bulk
     cement terminal assets on four of the islands in the Caribbean. The
     purchasers were Union Maritima International (UMAR) and some of its
     affiliated companies. The selling price was $19.6 million in cash. The book
     value of the assets, including certain expenses and contingency accruals,
     was $3.8 million, resulting in a gain on the transaction of $15.8 million
     before taxes. The Company simultaneously entered into an agreement to
     manage the terminals for one year. This management agreement was amended
     and renewed on March 1, 2001 for an additional year, with a 90-day
     termination option for both parties. The Company also entered into a supply
     agreement to buy cement from the terminals for five years for its own use
     in the Company's batch and block plants. The agreement has stipulations so
     that the Company will be able to enjoy the best price available in the
     local market from any cement supplier. The Company sold cement to third
     parties in 1999 and entered into a one-year contract to distribute cement
     on these four islands. This distribution agreement was terminated on March
     1, 2001. The Company has continued to distribute cement on a non-exclusive
     basis on some of the islands for the buyers.

     On March 16, 2000, the Company closed on a related transaction to sell its
     subsidiary in Dominica to an affiliated company of UMAR. The selling price
     was $4.1 million plus an earnout of 50 percent of the profits or losses of
     a portion of the Company's operations. The book value of the assets,
     including certain expenses and contingency accruals, was $3.0 million. The
     gain of approximately $1.1 million on the transaction will be deferred to
     the first quarter of 2002, when the earnout period has finished. The
     Company received earnout payments from the former subsidiary of $72,000 in
     2001, which has been added to the deferred income.

                                       53
<PAGE>

     The Company has used the proceeds from these transactions to pay off most
     of its equipment financing debt, bank debt and other debt. The original
     gain on sale of businesses during 2000 was computed as follows:

Aggregate selling price               $36,849,822

Assets sold:
   Receivables                         (2,155,172)
   Inventory                             (857,146)
   Property, plant and equipment      (11,562,801)
   Intangibles                           (573,323)
   Other assets                          (528,947)
                                      -----------
                                      (15,677,389)
Liabilities assumed:
   Accounts payable                       353,768
   Income taxes                            84,153
                                      -----------
                                          437,921

Selling expenses                         (269,965)
Sales related accruals                   (976,485)
                                      -----------

Total gain on sale of businesses       20,363,904

Deferred gain on sale of businesses    (2,070,859)
                                      -----------

Gain on sale of businesses            $18,293,045
                                      ===========

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

We have had no changes in or disagreements with our independent certified public
accountants on accounting and financial disclosure.

                                       54
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

     The information on our directors and executive officers is incorporated by
     reference to the our Proxy Statement to be filed with the Securities and
     Exchange Commission pursuant to Regulation 14A not later than 120 days
     after the end of the fiscal year covered by this report. Information as to
     executive officers is included in Part I of this report.

Item 11. Executive Compensation.

     The information required for this item is also incorporated by reference to
     our Proxy Statement. The information included in the proxy statement
     pursuant to Rule 402(i), (k) and (l) is not incorporated herein by
     reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     The information required for this item is also incorporated by reference to
     our Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

     The information required for this item is also incorporated by reference to
     our Proxy Statement.

PART IV

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

          (a) The following documents are filed as part of this report:

               (1) Consolidated Financial Statements.

     An index to consolidated financial statements for the year ended December
     31, 2001 appears on page 20.

               (2) Financial Statement Schedule.

     The following financial statement schedule for each of the years in the
     three-year period ended December 31, 2001 is submitted herewith:

<TABLE>
<CAPTION>
                                                                         Form 10-K
                                                                       (Page Number(s)
                                                                       ---------------
Item
----
<S>                                                                           <C>
Financial Statement Schedule
   Schedule II - Valuation and Qualifying Accounts..................          60
</TABLE>

     All other financial schedules are omitted because they are not required,
     inapplicable, or the information is otherwise shown in the consolidated
     financial statements or notes thereto.

                                       55
<PAGE>

     (3) Exhibits.

Exhibit   Description
-------   -----------

  3.1     Registrant's Restated Articles of Incorporation (1)(3.1)
  3.2     Registrant's Amended and Restated Bylaws (11) (3.2)
 10.1     Registrant's 1986 Non-Qualified Stock Option Plan (2)(10.1)
 10.2     Registrant's 1992 Stock Option Plan (7)(A)
 10.3     Registrant's 1992 Directors' Stock Option Plan (7)(B)
 10.4     V. I. Cement and Building Products Inc. 401(k) Retirement and Savings
          Plan (10)(10.4)
 10.5     Form of Indemnification Agreement between the Registrant, and its
          directors and certain of its officers (4)(A)
 10.6     St. John's Dredging and Deep Water Pier Construction Agreement dated
          as of April 3, 1987, by and between  Antigua and Barbuda and Antigua
          Masonry Products, Limited (the "Set. Johns Agreement") (4)(10.1)
 10.7     Amendment No. 1 to the St. John's Agreement dated June 15,
          1988(5)(10.2)
 10.8     Amendment No. 2 to the St. John's Agreement dated December 7, 1988 (6)
          (10.34)
 10.9     Amendment No. 3 to the St. John's Agreement dated January 23, 1989 (6)
          (10.35)
10.10     Amendment No. 4 to the St. John's Agreement dated April 5, 1989 (6)
          (10.36)
10.11     Amendment No. 5 to the St. John's Agreement dated January 29, 1991 (6)
          (10.37)
10.12     Amendment No. 6 to the St. Johns Agreement dated November 30, 1993
          (8)(10.39)
10.13     Amendment No. 7 to the St. John's Agreement, dated December 21, 1994
          (10) (10.14)
10.14     Amendment No. 8 to the St. John's Agreement, dated October 23, 1996
          (10) (10.15)
10.15     Guarantee dated June 12, 1989, from the Registrant to Banco Popular de
          Puerto Rico (5)(10.6)
10.16     Lease dated October 31, 1989,  between William G. Clarenbach and
          Pricilla E. Clarenbach, as lessors,  and Controlled Concrete Products,
          Inc., as lessee (1)(10.26)
10.17     Lease dated April 13, 1981,  between  Mariano Lima and Genevieve Lima,
          as lessors,  and the  Registrant,  as lessee (1)(10.28)
10.18     Lease dated February 24, 1989, between Felix Pitterson, as lessor, and
          V.I. Cement and Building Products,  Inc., as lessee (1)(10.30)
10.19     Lease dated September 1, 1989, between Donald L. Smith, Jr., as
          lessor, and the Registrant, as lessee (1)(10.31)
10.20     Lease dated  September 12, 1966,  between His Honour Hugh  Burrowes, a
          Commander of the British Empire of Government House in the Island of
          Antigua, as lessor, and The Antigua Sand and Aggregate Limited, as
          lessee (1)(10.32)
10.21     Material  Purchase  Agreement,  dated August 17, 1995,  between
          Bouwbedrijf  Boven  Winden, N.V. and Hubert  Petit, Francois Petit and
          Michel Petit (9) (10.41)
10.22     Stock Purchase Agreement,  dated August 17, 1995, between the
          Registrant and Hubert Petit,  Francois Petit and Michel Petit
          (9)(10.42)
10.23     Form of Note between Devcon International Corp. and Donald L. Smith,
          Jr. (11)(10.31)

                                       56
<PAGE>

10.24     Asset Purchase Agreement between Caricement B.V., Union Maritima
          International S.A. and Devcon International Corp. and its subsidiaries
          dated February 22, 2000 (14)
10.25     Stock Purchase  Agreement  between  Caribbean  Construction and
          Development, Ltd., Devcon International Corp. and Caricement Antilles
          N.V. dated February 22, 2000 (14)
10.26     Purchase Agreement by and among Devcon  International  Corp., V.I.
          Cement and Building Products, Inc., Paulina Dean, St. Thomas Concrete,
          Inc. and W. Kemble Ketcham dated January 7, 2000 (12)
10.27     Supply Agreement between Union Maritima  International S.A. and Devcon
          International  Corp. dated December 29, 1999 (15)(10.36)
10.28     Registrant's 1999 Stock Option Plan (13)
10.29     Second Amended and Restated Salary Continuation and Retirement Benefit
          Agreement dated June 30, 2000 (16)(10.32)
10.30     Amendment No. 9 to the St. John's Agreement, dated April 28, 2000
          (16)(10.33)
10.31     Antigua Delinquent Letter dated March 12, 2001 (17) (10.1)
21.1      Registrant's Subsidiaries (18)
23.1      Consent of KPMG LLP (18)

  (1)     Incorporated  by  reference  to the  exhibit  shown in parenthesis and
          filed  with the  Registrant's  Registration statement on Form S-2 (No.
          33-31107).
  (2)     Incorporated by reference to the exhibit shown in the parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1987 (the "1987 10-K").
  (3)     Incorporated by reference to the exhibit shown in the parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1988 (the "1988 10-K").
  (4)     Incorporated by reference to the exhibit shown in parenthesis and
          filed with the  Registrant's  Proxy Statement dated May 30, 1989.
  (5)     Incorporated  by reference to the exhibit shown in parenthesis  and
          filed with the  Registrant's  Form 8 dated August 17, 1989 to the 1988
          10-K.
  (6)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1991.
  (7)     Incorporated  by reference to the exhibit  showing in parenthesis  and
          filed with the  Registrant's  Proxy  Statement dated May 6, 1992.
  (8)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1993.
  (9)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1995.
 (10)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1996.
 (11)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1998.
 (12)     Incorporated  by reference to the exhibit showing in parenthesis  and
          filed with the  Registrant's  Report on Form 8K dated January 7, 2000.
 (13)     Incorporated by reference to the exhibit showing in parenthesis  and
          filed with the Registrant's Report on Form S-8 dated December 7, 1999.
 (14)     Incorporated  by reference to the exhibit showing in parenthesis  and
          filed with the Registrant's Report on Form 8K dated February 22, 2000.

                                       57
<PAGE>

 (15)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 1999
 (16)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 2000
 (17)     Incorporated by reference to the exhibit showing in parenthesis and
          filed with the Registrant's Report on Form 10-Q dated November 9, 2001
 (18)     Filed herewith

Management employee contracts, compensatory plans and other arrangements
included as part of the exhibits referred to above are as follows:

 10.1     Registrant's 1986 Non Qualified Stock Option Plan (2) (10.1)
 10.2     Registrant's 1992 Stock Option Plan (7)(A)
 10.3     Registrant's 1992 Directors' Stock Option Plan (7) (B)
 10.4     V. I. Cement and Building Products, Inc. 401(k) Retirement and Savings
          Plan (10) (10.4)
 10.5     Second Amended and Restated Salary Continuation and Retirement Benefit
          Agreement dated June 30, 2000. (16) (10.32)
 10.6     Registrant's 1999 Stock Option Plan (13)

     (b) Reports on Form 8-K.

No Reports on Form 8-K were filed by the Registrant during the last quarter of
the period covered by this report.

                                       58
<PAGE>

                                   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.

March 19, 2002                                  DEVCON INTERNATIONAL CORP.


                                                BY:/S/ DONALD L. SMITH, JR.
                                                   -----------------------------
                                                   Donald L. Smith, Jr.
                                                   Chairman, President and
                                                   Chief Executive 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.

March 19, 2002                                  DEVCON INTERNATIONAL CORP.


                                                By:/S/ DONALD L. SMITH, JR.
                                                   -----------------------------
                                                   Donald L. Smith, Jr.
                                                   Chairman, President and
                                                   Chief Executive Officer


March 19, 2002                                  By:/S/ RICHARD L. HORNSBY
                                                   -----------------------------
                                                   Richard L. Hornsby
                                                   Executive Vice President
                                                   and Director


March 19, 2002                                  By:/S/ JAN A. NORELID
                                                   -----------------------------
                                                   Jan A. Norelid
                                                   Vice President of Finance,
                                                   Chief Financial Officer and
                                                   Treasurer


March 19, 2002                                  By:/S/ ROBERT A. STEELE
                                                   -----------------------------
                                                   Robert A. Steele
                                                   Director


March 19, 2002                                  By:/S/ ROBERT L. KESTER
                                                   -----------------------------
                                                   Robert L. Kester
                                                   Director


March 19, 2002                                  By:/S/ W. DOUGLAS PITTS
                                                   -----------------------------
                                                   W. Douglas Pitts
                                                   Director


March 19, 2002                                  By:/S/ JOSE A. BECHARA, JR.
                                                   -----------------------------
                                                   Jose A. Bechara, Jr.
                                                   Director

                                       59
<PAGE>

                                   Schedule II

                        Valuation and Qualifying Accounts

Allowance for
Doubtful Accounts    Balance at    Additions                      Balance
For the Year          Beginning    Charged to                     at End
Ended December 31,     of Year      Expense       Deductions      of Year
------------------   ----------   -----------    ------------    ----------

      1999           $4,705,035   $      (174)   $   (352,252)   $4,352,609
                     ==========   ===========    ============    ==========

      2000           $4,352,609   $   174,209    $ (1,704,861)   $2,821,957
                     ==========   ===========    ============    ==========

      2001           $2,821,957   $   278,960    $   (469,582)   $2,631,335
                     ==========   ===========    ============    ==========

Allowance for
Doubtful Notes
Receivable Accounts   Balance at    Additions                      Balance
For the Year           Beginning    Charged to                     at End
Ended December 31,      of Year      Expense       Deductions      of Year
------------------    ----------   -----------    ------------    ----------

      1999            $  682,525   $   230,691    $         --    $  913,216
                      ==========   ===========    ============    ==========

      2000            $  913,216   $   160,602    $     62,278    $1,136,096
                      ==========   ===========    ============    ==========

      2001            $1,136,096   $  (116,265)   $   (123,173)   $  896,658
                      ==========   ===========    ============    ==========

Notes:

Deductions include amounts to reflect the sale of CCD and DMP in the year 2000.

Reduction in Allowance for Doubtful Notes Receivable in the year 2001 represents
collection of previously reserved amounts.

                                       60
<PAGE>

                                EXHIBIT SCHEDULE

Exhibit         Description

21.1            Registrant's Subsidiaries

23.1            Consent of KPMG LLP


Exhibits will be furnished upon request.