UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 001-15217
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U.S. AGGREGATES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 57-0990958
----------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 500,
San Mateo, California 94402
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(Address, of principal executive offices) (Zip Code)
(650) 685-4880
----------------------------------------------------
(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Shares outstanding as of July 31, 2000
---------------------------- -------------------------------------------
Common stock, $.01 par value 14,900,593
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
CONTENTS
PART I. FINANCIAL INFORMATION
PAGE NO.
---------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
JUNE 30, DECEMBER 31,
2000 1999
------------ --------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,732 $ 4,478
Trade accounts receivable, net 57,380 52,294
Inventories, net 35,727 28,041
Prepaid expenses and other current assets 8,856 7,802
------------ --------------
Total current assets 104,695 92,615
------------ --------------
PROPERTY, PLANT AND EQUIPMENT 358,672 325,328
Less: Accumulated depreciation & depletion (37,475) (32,418)
------------ --------------
Net property, plant and equipment 321,197 292,910
------------ --------------
INTANGIBLE ASSETS, net 22,685 22,308
OTHER ASSETS 10,797 7,095
------------ --------------
Total assets $ 459,374 $ 414,928
============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES $ 55,653 $ 56,591
LONG-TERM DEBT, net of current portion 200,582 160,312
DEFERRED INCOME TAXES, net 57,195 55,404
OTHER 149 96
------------ --------------
Total liabilities 313,579 272,403
------------ --------------
MINORITY INTEREST, net 12 12
------------ --------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
14,908,222 shares outstanding, including 7,629 shares of treasury stock 149 149
Additional paid-in capital 123,648 123,648
Notes receivable from sale of stock (1,243) (1,195)
Treasury stock, at cost (2) (2)
Retained earnings 23,231 19,913
------------ --------------
Total shareholders' equity 145,783 142,513
------------ --------------
Total liabilities, minority interest and shareholders' equity $ 459,374 $ 414,928
============ ==============
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES $ 79,850 $ 77,768 $ 132,856 $ 126,939
COST OF PRODUCTS SOLD 53,183 54,256 93,877 91,966
------------ ----------- ------------ -----------
Gross profit 26,667 23,512 38,979 34,973
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 7,285 7,685 15,836 14,898
DEPRECIATION, DEPLETION AND AMORTIZATION 4,142 2,409 8,167 5,694
------------ ----------- ------------ -----------
Income from operations 15,240 13,418 14,976 14,381
OTHER INCOME (EXPENSES):
Interest, net (4,468) (4,481) (8,373) (8,841)
Other, net (45) (317) (40) (479)
------------ ----------- ------------ -----------
Income before provision for
income taxes and minority interest 10,727 8,620 6,563 5,061
PROVISION FOR INCOME TAXES (3,912) (3,194) (2,351) (1,898)
------------ ----------- ------------ -----------
Income before minority
Interest 6,815 5,426 4,212 3,163
MINORITY INTEREST - (627) - (39)
------------ ----------- ------------ -----------
Net income $ 6,815 $ 4,799 $ 4,212 $ 3,124
============ =========== ============ ===========
Income per common share - basic
Net income available for common shareholders $ 0.46 $ 0.60 $ 0.28 $ 0.15
Weighted average common shares outstanding 14,900,593 6,136,630 14,900,593 6,136,630
Income per common share - diluted
Net income available for common shareholders $ 0.45 $ 0.57 $ 0.28 $ 0.14
Weighted average common shares outstanding 15,216,029 6,423,011 15,181,356 6,423,011
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share amounts)
SIX MONTHS ENDED
JUNE 30,
--------------------
2000 1999
--------- ---------
(UNAUDITED)
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $(11,337) $ (3,571)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (25,524) (24,992)
Proceeds from sale of property, plant and equipment 4,836 2,868
--------- ---------
Net cash used in investing activities (20,688) (22,124)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (17,364) (17,874)
New borrowings 50,500 42,938
Dividends paid (894) -
Other (1,963) 8
--------- ---------
Net cash provided by financing activities 30,279 25,072
--------- ---------
NET DECREASE IN CASH (1,746) (623)
CASH, beginning of period 4,478 2,849
--------- ---------
CASH, end of period $ 2,732 $ 2,226
========= =========
DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 9,497 $ 8,457
Taxes 672 732
NONCASH TRANSACTIONS:
Accretion of preferred stock dividend - 2,205
Dividends declared but not paid 447 -
Conversion of operating leases to capital leases 14,224 -
The accompanying notes are an integral part of these statements.
</TABLE>
5
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Basis of Presentation
Founded in 1994, U.S. Aggregates, Inc. ("USAI" or the "Company") is a
leading producer of aggregates. Aggregates consist of crushed stone, sand and
gravel. The Company's products are used primarily for construction and
maintenance of highways, other infrastructure projects, and for commercial and
residential construction. USAI serves local markets in nine states in two
regions of the United States, the Mountain states and the Southeast.
The accompanying unaudited condensed consolidated financial statements of
U.S. Aggregates, Inc. and subsidiaries have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to the Quarterly Report on Form 10-Q and to Article 10 of
Regulation S-X. In the opinion of management, the interim financial information
provided herein reflects all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results of operations for the
interim periods. The results of operations for the six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the full
year.
These condensed consolidated financial statements and the notes thereto
should be read in conjunction with the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
2. Risk Factors
The Company's business is seasonal with peak revenue and profits occurring
primarily in the months of April through November. Bad weather conditions
during this period could adversely affect operating income and cash flow and
could therefore have a disproportionate impact on the Company's results for the
full year. Quarterly results have varied significantly in the past and are
likely to vary significantly from quarter to quarter in the future.
A majority of the Company's revenues are from customers who are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions. In addition, since operations occur in a variety
of geographic markets, the Company's business is subject to the economic
conditions in each such geographic market. General economic downturns or
localized downturns in the regions where the Company has operations, including
any downturns in the construction industry, could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company's operations are subject to and affected by federal, state and
local laws and regulations including such matters as land usage, street and
highway usage, noise level and health, safety and environmental matters. In
many instances, various permits are required. Although management believes that
the Company is in compliance with regulatory requirements, there can be no
assurance that the Company will not incur material costs or liabilities in
connection with regulatory requirements.
Certain of the Company's operations may from time to time involve the use
of substances that are classified as toxic or hazardous substances within the
meaning of these laws and regulations. Risk of environmental liability is
inherent in the operation of the Company's business. As a result, it is
possible that environmental liabilities will have a material adverse effect on
the Company in the future.
6
<PAGE>
3. Long-Term Debt
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---------- --------------
(dollars in thousands)
<S> <C> <C>
Prudential Insurance subordinated notes, net of discount
of $620 and $664, respectively $ 44,380 $ 44,336
Bank of America term loan A 36,901 39,238
Bank of America term loan B 46,404 46,404
Bank of America revolving loan 68,100 30,000
Notes payable to former shareholders 1,890 4,001
Other 17,303 5,631
---------- --------------
Total long-term debt 214,978 169,610
Less: Current portion (14,396) (9,298)
---------- --------------
Long-term debt, net of current portion $ 200,582 $ 160,312
========== ==============
</TABLE>
On January 13, 2000, the Company's revolving loan facility was increased
from $60 million to $90 million. The revolving loan is to be paid in full by
the revolving facility termination date in June 2004.
During the first quarter, the Company committed to purchase $14.2 million
of plant and equipment originally financed under operating leases thereby
converting the obligations to capital leases. This amount, less payments made
during the first quarter, is included in the table above under the caption
"Other". Scheduled lease payments did not change from the original lease terms.
Depreciation related to these leases is included in depreciation expense.
4. Shareholders' Equity
The following Statement of Changes in Shareholders' Equity summarizes the
Company's equity transactions between December 31, 1999 and June 30, 2000:
<TABLE>
<CAPTION>
TREASURY STOCK
NOTES ------------------
COMMON STOCK ADDITIONAL RECEIVABLE SHARES TOTAL
------------------- PAID-IN FROM SALE HELD IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL OF STOCK TREASURY AMOUNT EARNINGS EQUITY
---------- ------- -------- ---------- -------- -------- ---------- ---------
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1999 14,908,222 $ 149 $123,648 $ (1,195) 7,629 $ (2) $ 19,913 $142,513
Interest on notes receivable - - - (48) - - - (48)
Net income - - - - - - 4,212 4,212
Cash dividends declared - - - - - - (894) (894)
---------- ------- -------- ---------- -------- -------- ---------- ---------
BALANCE AT
JUNE 30, 2000 14,908,222 $ 149 $123,648 $ (1,243) 7,629 $ (2) $ 23,231 $145,783
========== ======= ======== ========== ======== ======== ========== =========
</TABLE>
7
<PAGE>
5. Inventories
Inventories consist of the following as of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---------- ------------
(dollars in thousands)
<S> <C> <C>
Finished products $ 32,181 $ 24,624
Raw materials 2,381 2,341
Supplies and parts 730 551
Fuel 459 541
Less: Allowances (24) (16)
---------- ------------
$ 35,727 $ 28,041
========== ============
</TABLE>
Inventories are pledged as security under various debt agreements.
6. Income Per Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------------------
2000 1999
------------------------------- ------------------------------
(in thousands, except share amounts)
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- ---------- ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 6,815 $ 4,799
Less: Accretion of preferred stock dividend - 1,116
------- -------
Basic net income available for
common shareholders 6,815 14,900,593 $ 0.46 3,683 6,136,630 $ 0.60
Effect of dilutive securities 315,436 286,381
---------- ---------
Dilutive net income available for
common shareholders $ 6,815 15,216,029 $ 0.45 $ 3,683 6,423,011 $ 0.57
======= ========== ========== ======= ========= ==========
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------
2000 1999
------------------------------- ------------------------------
(in thousands, except share amounts)
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- ---------- ---------- ------- --------- ----------
Net income $ 4,212 $ 3,124
Less: Accretion of preferred stock dividend - 2,205
------- -------
Basic net income available for
common shareholders 4,212 14,900,593 $ 0.28 919 6,136,630 $ 0.15
Effect of dilutive securities 280,763 286,381
---------- ---------
Dilutive net income available for
common shareholders $ 4,212 15,181,356 $ 0.28 $ 919 6,423,011 $ 0.14
======= ========== ========== ======= ========= ==========
</TABLE>
8
<PAGE>
7. New Accounting Pronouncements
In June 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Statement (SFAS) No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment to
SFAS No. 133. SFAS Nos. 133 and 138 are required to be adopted for all fiscal
years beginning after June 15, 2000. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of SFAS Nos. 133
and 138 will have a significant impact on net earnings or the financial position
of the Company.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation - an interpretation of APB
Opinion No. 25" (FIN 44). FIN 44 clarifies the application of APB Opinion No.
25, and among other issues clarifies the following: the definition of an
employee for purposes of applying APB Opinion No. 25; the criteria for
determining whether a plan qualifies as a noncompensatory plan; the accounting
consequence of various modifications to the terms of previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 1, 2000, but certain
conclusions in FIN 44 cover specific events that occurred after either December
15, 1998 or January 12, 2000. The adoption of FIN 44 is not expected to have a
material impact on the Company's consolidated financial statements.
8. Effective Tax Rate
In accordance with generally accepted accounting principles, the Company
uses an effective tax rate based on its best estimate of the tax rate expected
to be applicable for the full fiscal year. This estimated rate is applied to
the current year-to-date results to determine the interim provision for income
taxes.
9. Reclassifications
Certain prior-year amounts have been reclassified to conform with the
current-year presentation.
10. Commitments and Contingent Liabilities
The Company is engaged in certain legal proceedings described in Part II.
Item 1. Legal Proceedings of this Quarterly Report on Form 10-Q. While it is
not possible to determine with precision the probable outcome or the amount of
liability, if any, with respect to these proceedings, in the opinion of
management, it is unlikely that the outcome of such litigation will have a
material adverse affect on the consolidated financial statements of the Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read in
conjunction with the MD&A included in our Annual Report on Form 10-K for the
year ended December 31, 1999.
INTRODUCTION
We conduct our operations through the quarrying and distribution of
aggregate products in nine states in two regions of the United States, the
Mountain states and the Southeast. Our operations have the same general
economic characteristics including the nature of the products, production
processes, type and class of customers, methods of distribution and governmental
regulations.
Including the opening of the Pride, Alabama quarry in October 1999, we have
started nine major greenfield aggregate production sites serving large
metropolitan markets to date. The development of greenfield aggregate
production sites includes securing all necessary permits and zoning to ensure
that commercially economic quantities of aggregates can be produced. These new
sites include both sites which have never been permitted or mined, as well as
sites which may have been properly zoned, but were not operating at sufficient
volumes to be economically viable. Based on our experience, a new aggregate
production site's net sales, cash flow and profitability tend to increase over
the first five years of operation as production increases and the site matures.
On April 24, 2000, U.S. Aggregates, Inc. sold its ready mix operations in
the Birmingham market to Ready Mix USA, Inc., one of the largest producers of
ready mix in Alabama. This sale is not expected to have a material impact on
the Company's revenues or net income. Terms of the sale include the
establishment of a long-term contract for U.S. Aggregates to provide Ready Mix
USA with aggregates for its ready mix operations.
Also during the second quarter, U.S. Aggregates made significant
investments in three of its businesses to expand into new geographical markets
in the Southeast, Utah, and Nevada. First, distribution of aggregate products
in the Southeast was expanded with the startup of a major distribution yard in
Memphis, Tennessee. In addition, three new distribution yards were started in
Mississippi and two in the Florida panhandle. We also formed a new
subsidiary, Eagle Valley Ready Mix, to expand our geographical market in the
Salt Lake City Wasatch Front area. The new operation is located in Lehi, Utah,
adjacent to one of the fastest growing cities in Utah and expects excellent
volume growth as a result. Tri-State Testing Laboratories, Inc., a subsidiary
of U.S. Aggregates, Inc., opened a new location in Las Vegas, Nevada. Tri-State
Testing is an independent testing laboratory for aggregates and asphalt
producers with offices in Salt Lake City, Utah County, and St. George, Utah. The
new laboratory will enable U.S. Aggregates to benefit from the high growth area
of Las Vegas.
Our business is seasonal, with peak sales and profits occurring primarily
in the months of April through November. Accordingly, our results of operations
for any individual quarter are not necessarily indicative of our results for the
full year.
RESULTS OF OPERATIONS
Second Quarter Ended June 30, 2000 Compared to Second Quarter Ended June 30,
1999
Net sales for the second quarter in 2000 increased by 2.7% to $79.9 million
compared to $77.8 million for the second quarter in 1999. Processed aggregate
shipments grew by 12.8% versus last year during the same period. Volumes for
asphalt remained relatively flat while ready mix volumes declined 5.6% compared
to the second quarter in 1999. Aggregate prices were up an average of 4% (net
of freight to remote distribution yards), asphalt prices rose by 8.5%, due to a
favorable product mix, while ready mix prices remained flat compared to last
year. The Company sold its ready mix operations in Birmingham, Alabama,
and discontinued a portion of its coal hauling business in the Mountain
states, both at the beginning of the second quarter in 2000.
10
<PAGE>
Gross profit for the quarter increased to $26.7 million, or 33.4% of net
sales, compared with $23.5 million, or 30.2% of net sales, in the second quarter
of 1999. This increase in gross profit primarily reflects higher prices in
aggregates and asphalt, the sale of the Company's lower-margin ready mix
business in Birmingham and cost savings achieved by redeploying the fleet of
Company owned trucks, which were previously used in coal hauling operations, to
the higher margin asphalt and aggregates businesses. The Company's gross profit
also benefited from enhanced asphalt plant efficiencies as a result of capital
improvements as well as a favorable mix of products.
Selling, general and administrative expenses were $7.3 million for the
second quarter in 2000 versus $7.7 million in 1999. As a percentage of net
sales, the selling, general, and administrative expenses were 9.1% in 2000
compared to 9.9% during the same period in 1999. This decrease is primarily
attributable to lower bonuses paid during the second quarter of 2000 versus
second quarter 1999. As a result of the investment in our business in 1998 and
1999, depreciation and amortization grew by $1.7 million. Income from
operations for the second quarter in 2000 was $15.2 million compared to $13.4
million in 1999. Net interest expense was consistent at $4.5 million for the
three months ended June 30, 2000 compared to 1999. The effective tax rate for
the quarter was 36.5%, compared to 37.1% from last year's second quarter.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Net sales for the first half in 2000 increased by 4.7% to $132.9 million
compared to $126.9 million for the first half in 1999. Processed aggregate
shipments grew by 12.1% versus last year during the same period. Volumes for
asphalt and ready mix remained relatively flat compared to last year's first
half. Aggregate prices were up an average of 4.3% (net of freight to remote
distribution yards), asphalt prices rose by 7.3%, due to a favorable product
mix, while ready mix prices remained flat compared to last year. The Company
sold its ready mix operations in Birmingham, Alabama, and discontinued a portion
of its coal hauling business in the Mountain states, both at the beginning of
the second quarter in 2000.
Gross profit for the first half increased to $39.0 million, or 29.3% of net
sales, compared with $35.0 million, or 27.5% of net sales, in the first half of
1999. This increase in gross profit primarily reflects higher prices in
aggregates and asphalt, the sale of the Company's lower-margin ready mix
business in Birmingham and cost savings achieved by redeploying the fleet of
Company owned trucks, which were previously used in coal hauling operations, to
the higher margin asphalt and aggregates businesses. The Company's gross profit
also benefited from enhanced asphalt plant efficiencies as a result of capital
improvements as well as a favorable mix of products.
Selling, general and administrative expenses were $15.8 million for the
first half in 2000 versus $14.9 million in 1999. As a percentage of net sales,
the selling, general, and administrative expenses were 11.9% in 2000, in line
with 11.7% during the same period in 1999. As a result of the investment in our
business in 1998 and 1999, depreciation and amortization grew by $2.5 million.
Income from operations for the first half in 2000 was $15.0 million compared to
$14.4 million in 1999. Net interest expense was $8.4 million for the six months
ended June 30, 2000 compared to $8.8 million during the same period in 1999.
This decrease was the result of debt reduction from the use of proceeds from the
initial public offering on August 18, 1999 less additional capital investments
in the Company.
The Company's effective tax rate for the first half was 35.8% compared to
37.5% from last year. The decrease in the Company's effective tax rate
was primarily attributable to revised estimates of differences in book and
tax accounting arising from the net permanent benefits associated with depletion
allowances for mineral reserves.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, working capital, exclusive of current maturities of debt
and cash items, totaled $60.7 million compared to $40.8 million at December 31,
1999, up 48.6% and compared to $45.0 million at March 31, 2000, up 34.8%. The
increase in net working capital was primarily the result of activity associated
with the seasonal demand for construction materials.
Net cash used in operating activities for the six months ended June 30,
2000 was $11.3 million, compared to $3.6 million used during the same period
last year. The increased use of cash was due to the working capital needs
caused by increased sales and operating activities to support USAI's growing
operations. Net cash used in investing activities for the six months ended June
30, 2000 was $20.7 million primarily used for the geographical expansion
described in the opening paragraphs on page 10, compared to $22.1 million for
the same period in 1999, which consisted of $25.0 million for the purchase of
property, plant, and equipment, offset by proceeds of $2.9 million from the sale
of assets. During the first quarter of 2000, the Company converted $14.2
million of existing operating leases to capital leases. Net cash provided by
financing activities was $30.3 million for the six months ended June 30, 2000
compared to $25.1 million during the same period last year. In January 2000,
the revolving portion of our credit facility was increased to $90 million from
$60 million.
Based on prior performance and current expectations, we expect cash flows
from internally generated funds and our access to capital markets will continue
to be sufficient to provide the capital resources necessary to fund the
operating needs of our existing businesses, cover debt service requirements, and
allow for the payment of dividends.
On August 18, 1999, the minority owned shares of SRM Holdings Corp. (SRMHC)
and Western Aggregates Holding Corp. (WAHC) were converted to 649,363 shares of
U.S. Aggregates, Inc.'s common stock.
FORWARD LOOKING STATEMENTS
Certain matters discussed in this report contain forward-looking statements
and information based on management's belief as well as assumptions made by and
information currently available to management. Such statements are subject to
risks, uncertainties and assumptions including, among other matters, future
growth in the construction industry; the ability of U.S. Aggregates, Inc. to
complete acquisitions and effective integration of acquired companies
operations; and general risks related to the markets in which U.S. Aggregates,
Inc. operates. Should one or more of these risks materialize, or should
underlying assumptions prove incorrect, actual results may differ materially
from those projected. Additional information regarding these risk factors and
other uncertainties may be found in the Company's filings with the Securities
and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks arising from transactions
that are entered into in the normal course of business.
All of the Company's borrowings under our floating rate credit facilities
are subject to interest rate risk. Borrowings under our syndicated revolving
credit facility bear interest, at our option, at either the Eurodollar rate or
the ABR rate, plus margin. Each 1.0% increase in the interest rates on the
total of our floating rate debt would impact pretax earnings by approximately
$1.5 million. The Company does not use interest rate swap contracts to hedge
the impact of interest rate fluctuations on certain variable rate debt.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
An operating subsidiary of the Company has received a notice of violation
regarding the removal and disposal of asbestos-containing insulation from
two above ground asphalt storage tanks at one of the subsidiary's facilities and
is the subject of several related state and federal civil and criminal
investigations. The agencies involved include the Federal Environmental
Protection Agency, the United States Department of Justice, the Occupational
Safety and Health Administration and the Utah Department of Air Quality (DAQ).
The site has been fully cleaned up under the supervision and with the approval
of the Utah DAQ and costs related to the clean up have been recorded. In
order to fully resolve the matter, the Company anticipates entering into
settlements with the various governmental entities which will involve the
payment of fines and the establishment of certain environmental compliance
procedures.
From time to time, the Company and our subsidiaries have been involved in
various legal proceedings relating to our and our subsidiaries' operations and
properties which, except for the proceedings described in the previous
paragraph, we believe are routine in nature and incidental to the conduct of our
and our subsidiaries' business.
Our and our subsidiaries' ultimate legal and financial liability with
respect to these matters cannot be estimated with certainty, but we believe,
based on our examination of such matters, that none of these proceedings, if
determined adversely, would have a material adverse effect on our business,
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 16, 2000, the
shareholders of U.S. Aggregates, Inc.:
(1) Elected Edward A. Dougherty, Michael J. Stone and Raymond R. Wingard to
the Board of Directors of the Company to terms expiring at the Annual Meeting of
Shareholders in the year 2003. The following table sets forth the votes for
each director.
Votes For Abstain
--------- -------
Edward A. Dougherty 13,357,203 277,025
Michael J. Stone 13,357,453 276,775
Raymond R. Wingard 13,367,228 267,000
(2) Ratified the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000. The voting
results for this ratification were 13,613,728 - - For; 300 - - Against; and
20,200 - - Abstained.
ITEM 5. OTHER INFORMATION
On April 24, 2000, U.S. Aggregates, Inc. sold its ready mix operations in
the Birmingham market to Ready Mix USA, Inc., one of the largest producers of
ready mix in Alabama. This sale is not expected to have a material impact on
the Company's revenues or net income. Terms of the sale include the
establishment of a long-term contract for U.S. Aggregates to provide Ready Mix
USA with aggregates for its ready mix operations.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
------------ -----------
3.1* Form of Restated Certificate of Incorporation of
the Company (Amendment No. 1 to Form S-1 (Reg. No.
333-79209), Exhibit 3.1(vi), filed July 14, 1999)
3.2* Form of Restated By-laws of the Company (Amendment No. 1
to Form S-1 (Reg. No. 333-79209), Exhibit 3.2(ii),
filed July 14, 1999)
27.1 Financial Data Schedule (EDGAR Filing Only)
* Incorporated by reference to the filing indicated
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 30, 2000.
All other items specified by Part II of this report are inapplicable and
accordingly have been omitted.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. AGGREGATES, INC.
Dated: August 9, 2000 /s/ Michael J. Stone
-----------------------------------------------------
Michael J. Stone
Executive Vice President,
Chief Financial Officer, Treasurer and Secretary
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EXHIBIT INDEX
Exhibit No. Description
------------ -----------
3.1* Form of Restated Certificate of Incorporation of
the Company (Amendment No. 1 to Form S-1 (Reg. No.
333-79209), Exhibit 3.1(vi), filed July 14, 1999)
3.2* Form of Restated By-laws of the Company (Amendment No. 1
to Form S-1 (Reg. No. 333-79209), Exhibit 3.2(ii),
filed July 14, 1999)
27.1 Financial Data Schedule (EDGAR Filing Only)
* Incorporated by reference to the filing indicated
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