UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number
September 30, 2000 000-29619
KIEWIT MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 47-0819021
(State of Incorporation) (I.R.S. Employer Identification No.)
Kiewit Plaza, Omaha Nebraska 68131
(Address of principal executive offices) (Zip Code)
(402) 536-3661
(Registrant's telephone number, including area code)
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 [ ]
The number of shares outstanding of each of the registrant's classes of
common stock as of November 9, 2000:
Title of Class Shares Outstanding
Common Stock, $0.01 par value 36,343,869
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Table of Contents
Page
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
Consolidated Condensed Statements of Earnings
for the three and nine months ended
September 30, 2000 and 1999 1
Consolidated Condensed Balance Sheets as of
September 30, 2000 and December 25, 1999 2
Consolidated Condensed Statements of Cash Flows
for the nine months ended September 30, 2000 and 1999 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk. 13
PART II - OTHER INFORMATION
---------------------------
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K. 13
Signatures 14
Index to Exhibits 15
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KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
2000 1999 2000 1999
------------------------ --------------------------
Revenue $132,341,694 $113,739,790 $359,812,404 $322,486,609
Cost of revenue (107,187,349) (91,883,867)(297,917,284)(268,899,077)
Depreciation, depletion
and amortization (5,290,225) (4,280,993) (14,927,267) (11,888,240)
------------ ----------- ----------- ------------
Gross profit 19,864,120 17,574,930 46,967,853 41,699,292
General and administrative
expenses (6,674,865) (6,087,561) (18,516,969) (18,583,088)
------------ ----------- ----------- ------------
Operating earnings 13,189,255 11,487,369 28,450,884 23,116,204
------------ ----------- ----------- ------------
Other income (expense):
Investment income 1,041,217 1,223,400 3,746,763 3,183,053
Equity earnings -- 16,725 -- 286,279
Interest expense (119,286) (487,071) (1,401,616) (1,351,591)
Gain on sale of property,
plant and equipment, net 95,537 59,297 531,909 515,565
Other, net 243,289 31,910 355,079 317,030
----------- ----------- ---------- ----------
Total other income
(expense) 1,260,757 844,261 3,232,135 2,950,336
----------- ----------- ---------- ----------
Earnings before income
taxes and minority
interest 14,450,012 12,331,630 31,683,019 26,066,540
Minority interest (43,608) (27,252) (26,374) (72,082)
Income tax expense (5,805,109) (4,932,652) (12,673,085) (10,426,616)
----------- ----------- ------------ ------------
Net earnings $ 8,601,295 $ 7,371,726 $18,983,560 $15,567,842
=========== =========== ============ ============
Net earnings per share:
Basic and diluted $ .24 $ .20 $ .52 $ .43
=========== =========== ============ ============
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See accompanying notes to consolidated condensed financial statements.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
September 30, December 25,
2000 1999
(unaudited)
-----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 47,360,162 $ 72,330,127
Marketable securities -- 2,533,975
Receivables, less allowance of
$1,537,552 and $993,998 64,659,164 51,367,160
Inventories 14,399,532 11,140,897
Deferred income taxes 5,778,000 4,662,000
Other 2,643,328 1,884,960
------------ ------------
Total current assets 134,840,186 143,919,119
Property, plant and equipment,
less accumulated depreciation
of $108,433,313 and $96,277,685 138,365,762 100,000,530
Other assets 77,615,730 32,970,988
------------ ------------
Total assets $ 350,821,678 $ 276,890,637
Liabilities and Redeemable Common Stock ============ ============
Current liabilities:
Accounts payable $ 33,781,313 $ 23,803,632
Current portion of long-term debt 1,379,783 561,538
Accrued payroll and payroll taxes 5,996,012 6,772,340
Accrued insurance costs 9,429,197 6,776,798
Income taxes payable -- 11,815,841
Other 2,189,769 1,719,859
------------ ------------
Total current liabilities 52,776,074 51,450,008
Long-term debt, less current portion 4,950,037 3,753,298
Deferred income taxes 11,390,000 8,976,000
Other liabilities 2,234,523 2,622,906
Minority interest 382,145 355,770
------------ ------------
Total liabilities 71,732,779 67,157,982
------------ ------------
Redeemable Common Stock ($259 million
aggregate redemption value):
Preferred Stock, par $.01; 10 million
shares authorized, no shares issued -- --
Common Stock, par $.01; and 100 million
and 100 shares authorized, 36,343,869
and 100 issued and outstanding 363,439 1
Additional paid-in capital 176,638,150 126,627,470
Accumulated other comprehensive income -- 1,434
Retained earnings 102,087,310 83,103,750
------------- -------------
Total redeemable common stock 279,088,899 209,732,655
------------- -------------
Total liabilities and redeemable
common stock $ 350,821,678 $ 276,890,637
============= =============
See accompanying notes to consolidated condensed financial statements.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
----------------------------------
2000 1999
----------------------------------------------------------------------------
Cash flows from operations:
Net cash provided by operations $ 23,581,823 $ 10,143,108
------------- -------------
Cash flows from investing activities:
Proceeds from sales of marketable
securities 2,500,000 --
Proceeds from sales of property,
plant and equipment 977,911 1,216,238
Acquisitions, net of cash acquired (78,148,003) (34,896,029)
Capital expenditures (24,508,897) (16,814,147)
------------- -------------
Net cash used in investing activities (99,178,989) (50,493,938)
------------- -------------
Cash flows from financing activities:
Issuance of convertible debentures 670,000 --
Payments on long-term debt (416,917) (15,973,285)
Contributions from former parent 50,374,118 45,286,690
------------ -------------
Net cash provided by financing activities 50,627,201 29,313,405
------------ -------------
Net decrease in cash and cash equivalents (24,969,965) (11,037,425)
Cash and cash equivalents at beginning
of period 72,330,127 65,601,870
------------ -------------
Cash and cash equivalents at
end of period $ 47,360,162 $ 54,564,445
============ ============
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See accompanying notes to consolidated condensed financial statements.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation:
Kiewit Materials Company ("Materials") was formed on February 2, 1999 as a
wholly owned subsidiary of Peter Kiewit Sons', Inc. ("Kiewit"). The
consolidated condensed financial statements include the accounts of Materials
and its subsidiaries (collectively, the "Company"). Materials subsidiaries
represent several affiliated operating corporations under common ownership,
each of which is engaged in an aspect of the materials business, that were
combined (the "Combination") on March 1, 1999 through a series of non-
monetary contributions from Kiewit. Effective September 30, 2000, Kiewit
spun off the Company in a tax free transaction.
The Combination has been accounted for at historical cost in a manner
similar to a pooling of interests. All significant intercompany
transactions have been eliminated in consolidation.
The accompanying financial statements have been prepared as if the Company
had operated as a stand-alone entity for all periods presented. Such
statements include the assets, liabilities, revenues and expenses that are
directly related to the Company's operations. They also include an
allocation of general corporate expenses of Kiewit, such as executive
payroll, legal, data processing and interest, which are related to the
Company. Amounts were allocated on a specific identification method where
appropriate and on a pro rata basis otherwise. Management believes the
allocation methods used are reasonable.
The consolidated condensed balance sheet of the Company at December 25,
1999 has been condensed from the Company's audited balance sheet as of that
date. All other financial statements contained herein are unaudited and, in
the opinion of management, contain all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of financial position
and results of operations for the periods presented. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Registration Statement on Form 10 filed with the Securities and
Exchange Commission on September 15, 2000.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The results of operations for the nine months ended September 30, 2000 are
not necessarily indicative of the results to be expected for the full year.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
2. Separation of Materials:
On September 30, 2000, Kiewit management separated Kiewit's construction
business and materials business into two separate, independent companies by
distributing shares of common stock of Materials it then held as a dividend
on a pro rate basis to Kiewit stockholders in a spin-off (the "Spin-off").
Kiewit stockholders received one share of Materials common stock for each
share of Kiewit common stock they held on the record date.
In connection with the Spin-off, Materials and Kiewit entered into various
agreements including a Separation Agreement and a Tax Sharing Agreement.
The Separation Agreement provides for the allocation of certain risks and
responsibilities between Materials and Kiewit and for cross-indemnifications
that are intended to allocate financial responsibility to Kiewit for
liabilities arising out of the construction business and to allocate to
Materials liabilities arising out of the materials businesses.
Under the Tax Sharing Agreement, with respect to periods, or portions
thereof, ending on or before the Spin-off, Materials and Kiewit generally
will be responsible for paying the taxes relating to such returns, including
any subsequent adjustments resulting from the redetermination of such tax
liabilities by the applicable taxing authorities, that are allocable to the
materials businesses and construction businesses, respectively. The Tax
Sharing Agreement also provides that Materials and Kiewit will indemnify the
other from certain taxes and expenses that would be assessed if the Spin-off
were determined to be taxable, but solely to the extent that such
determination arose out of the breach by Materials or Kiewit, respectively,
of certain representations made to the Internal Revenue Service in connection
with the private letter ruling issued with respect to the Spin-off.
3. Earnings Per Share:
Basic earnings per share have been computed using the weighted average
number of shares outstanding during each period. Diluted earnings per share
gives effect to convertible debentures considered to be dilutive common stock
equivalents. The potentially dilutive convertible debentures are calculated
in accordance with the "if converted" method. This method assumes that the
after-tax interest expense associated with the debentures is an addition to
income and the debentures are converted into equity with the resulting common
shares being aggregated with the weighted average shares outstanding.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
Earnings per share, as presented in the Consolidated Condensed Statements
of Earnings, for periods prior to and including the Spin-off was calculated
by dividing net income by the 36,343,869 common shares issued in connection
with the Spin-off as if these shares were outstanding for such periods.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
2000 1999 2000 1999
------------------------ --------------------------
Net earnings available
to common stockholders $8,601,295 $7,371,726 $18,983,560 $15,567,842
Interest expense, net
of tax effect,
associated with
convertible debentures 1,403 -- 1,403 --
---------- ---------- ----------- -----------
Net earnings for diluted
shares $8,602,698 $7,371,726 $18,984,963 $15,567,842
========== ========== =========== ===========
Total number of weighted
average shares outstanding
used to compute basic
earnings per share 36,343,869 36,343,869 36,343,869 36,343,869
Additional dilutive shares
assuming conversion of
convertible debentures 22,255 -- 7,472 --
---------- ---------- ---------- ----------
Total number of shares
used to compute diluted
earnings per share 36,366,124 36,343,869 36,351,341 36,343,869
========== ========== =========== ===========
Net earnings
Basic earnings per
share $ .24 .20 $ .52 .43
Diluted earnings
per share $ .24 .20 $ .52 .43
========== ========== =========== ===========
4. Inventories:
Inventories consist of the following:
September 30, December 25,
2000 1999
----------------- -------------
Raw Materials $ 10,851,933 $ 9,523,973
Other 3,547,599 1,616,924
----------------- -------------
Total inventories 14,399,532 $ 11,140,897
================= =============
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KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
5. Other Assets
Other assets consists of the following:
September 30, December 25,
2000 1999
--------------- -------------
Intangible assets, principally
goodwill, net of accumulated
amortization of $7,957,992 and
$6,050,026 $ 75,196,787 $ 29,738,772
Land option 2,000,000 2,000,000
Notes receivable 41,823 949,252
Other 377,120 282,964
-------------- -------------
Total other assets $ 77,615,730 $ 32,970,988
============== =============
6. Comprehensive Income:
Comprehensive income includes net earnings and unrealized gains (losses)
on securities and minimum pension liability adjustments.
Comprehensive income for the three months and nine months ended September
30, 2000 and 1999 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
2000 1999 2000 1999
------------------------ --------------------------
Net earnings $ 8,601,295 $ 7,371,726 $ 18,983,560 $ 15,567,842
Other comprehensive
income(loss),
before tax:
Unrealized losses
arising during period -- (8,996) (2,323) (32,941)
Minimum pension
liability adjustment -- 5,983 17,954
Income tax related to
items of other
comprehensive income -- 1,347 889 6,316
----------- ----------- ------------ -----------
Comprehensive income $ 8,601,295 $ 7,370,060 $ 18,982,126 $ 15,559,171
=========== =========== ============ ============
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KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
7. Segment Reporting:
The Company currently operates as one segment.
The Company's external revenues by product for the three months and nine
months ended September 30, 2000 and 1999 are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
------------------------- -------------------------
Aggregates (sand,
gravel, crushed stone
and railroad ballast)$ 30,377,210 $ 21,084,071 $ 82,505,057 $ 75,580,281
Asphalt 24,653,637 23,957,222 57,553,979 58,327,742
Ready mix concrete 73,858,853 67,564,530 211,161,288 181,854,428
Other 3,451,994 1,133,967 8,592,080 6,724,158
------------ ------------ -------------------------
Total revenue $132,341,694 $113,739,790 $359,812,404 $322,486,609
============ ============ ============ ============
8. Acquisitions:
On February 28, 1999, the Company purchased the remaining 60% of Pacific
Rock Products, L.L.C., and Pacific Rock Products Trucking, L.L.C.,(formerly
River City Machinery L.L.C.), (collectively, "Pac Rock") a materials
operation operating in the Portland,Oregon area, for $40,000,000. The
acquisition was accounted for by the purchase method of accounting. The
excess of aggregate purchase price over fair value of identifiable assets and
liabilities acquired of $17,305,204 was recognized as goodwill and is being
amortized over 20 years. The operating results of Pac Rock are included in
the consolidated results of operations from the date of acquisition. Prior
to the acquisition, the Company used the equity method to account for Pac
Rock.
On January 3, 2000, the Company acquired 100% of the outstanding common
stock and related assets of Solano Concrete Co., Inc., a materials operation
operating in the Northern California area, for $30,880,432. Identifiable
intangible assets related to this purchase of $15,447,711 are being amortized
over their useful life of 27.5 years. There was no goodwill related to this
transaction.
On August 4, 2000, the Company acquired substantially all of the assets of
Fort Calhoun Stone Company, a limestone quarry located in Washington County,
Nebraska, for $41,753,079. The acquisition was accounted for by the purchase
method of accounting. The excess of aggregate purchase price over fair value
of identifiable assets and liabilities acquired of $30,836,369 was recognized
as goodwill and is being amortized over 40 years.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
The following pro forma financial information assumes the aforementioned
acquisitions occurred at the beginning of 1999. These results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made at the beginning of
1999, or the results which may occur in the future:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2000 1999 2000 1999
------------------------- --------------------------
Revenue $133,364,567 $123,474,526 $367,532,377 $353,594,042
Net earnings $ 8,888,152 $ 8,971,505 $ 20,917,438 $ 19,987,633
Net earnings per share:
Basic and diluted $ .24 $ .25 $ .58 $ .55
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During the first nine months of 2000, the Company acquired the assets of
various materials operations other than those previously described. All of
these were accounted for by the purchase method and, accordingly, results of
operations for the acquired businesses have been included in the Consolidated
Condensed Statement of Earnings from their respective dates of acquisition.
Pro forma financial information is not presented for these acquisitions
because the impact is not material to the results of operations. The
aggregate purchase price paid for acquisitions was $7,276,393 during the
first nine months of 2000. Notes payable of $1,761,900 were issued in
connection with the purchases. Goodwill related to one of the acquisitions
was $961,901 and is being amortized over a period of 27.25 years.
9. Related Party Transactions:
Administrative services fees paid by the Company to Kiewit for 2000 and
1999 were $1,781,165 and $2,869,390, respectively.
Sales made to Kiewit were $12,801,755 and $4,469,202 during 2000 and 1999,
respectively.
10.Other Matters:
The Company is involved in various lawsuits and claims incidental to its
business. Management believes that any resulting liability, beyond that
provided, should not materially affect the Company's future financial
position, results of operations or cash flows.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This document contains forward-looking statements and information that are
based on the beliefs of management as well as assumptions made by and
information currently available to the Company. When used in this document,
the words "anticipated," "believe," "estimate," "expect" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to certain
risks or uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this document.
The following discussion is based upon and should be read in conjunction
with our Consolidated Condensed Financial Statements, including the notes
thereto, included elsewhere in this quarterly report on Form 10-Q.
On September 30, 2000, Peter Kiewit Sons', Inc. ("Kiewit") management
separated Kiewit's construction business and materials business into two
separate, independent companies by distributing shares of common stock of
Kiewit Materials Company ("Materials") to Kiewit stockholders in a spin-off
that is intended to be tax-free for U.S. federal income tax purposes (the
"Spin-off"). Prior to the completion of the share exchange, the debenture
exchange offer and the Spin-off described below, Materials was a wholly owned
subsidiary of Kiewit.
On August 15, 2000, Kiewit commenced a share exchange in which it offered
Kiewit stockholders who were Materials employees the opportunity to exchange
their shares of Kiewit common stock for shares of Materials common stock with
an equal aggregate formula price. The share exchange expired September 14,
2000. In the share exchange, Materials employees collectively exchanged
1,081,226 shares of Kiewit common stock, representing 100% of the shares of
Kiewit common stock collectively owned by them and 3.24% of the total issued
and outstanding Kiewit common stock on September 14, 2000. For each share of
Kiewit common stock tendered, Materials employees received 2.85 shares of
Materials common stock. Materials employees who participated in the share
exchange collectively received 3,081,646 shares of Materials common stock,
representing 8.48% of the issued and outstanding Materials common stock on
September 15, 2000.
On August 15, 2000, Kiewit also commenced a debenture exchange offer in
which it offered the holders of its outstanding convertible debentures the
opportunity to exchange their debentures for (1) Materials debentures
convertible into shares of Materials common stock, or (2) both shares of
Materials common stock and new reduced principal amount Kiewit debentures
convertible into shares of Kiewit common stock. In the debenture exchange
offer, Kiewit debentureholders collectively exchanged $13,095,000 principal
amount original Kiewit debentures for (1) $670,000 aggregate principal amount
Materials debentures, and (2) both 973,383 shares of Materials common stock
and $5,475,045 principal amount new Kiewit debentures.
On September 30, 2000, Kiewit distributed the shares of Materials
common stock it then held as a dividend on a pro rata basis to holders of
Kiewit common stock in the Spin-off. The record date for the Spin-off
dividend was the close of business on September 15, 2000. Kiewit
stockholders received one share of Materials common stock for each
share of Kiewit common stock they held on the record date.
Upon completion of the Spin-off, Kiewit no longer had any interest in its
materials operations. The materials operations are owned and operated solely
by Materials. The Spin-off is not expected to adversely impact Materials'
equity, revenue or net income. Current cash flows are expected to be
sufficient to fund current operations. Materials' ability to execute its
future growth strategy will, however, be dependent upon its ability to obtain
borrowings on terms deemed appropriate.
Results of Operations - Third Quarter 2000 vs. Third Quarter 1999
Revenue. Revenues increased $18,601,904 or 16% in the third quarter of
2000 to $132,341,694 compared to $113,739,790 for the same period in 1999.
The increase is comprised of a 4% increase in average selling prices, and
the inclusion of $10,913,071 of additional revenues from companies acquired
in 2000 or after the end of the third quarter in 1999. Unit volumes were
greater for ready mix concrete but were offset by a decline in asphalt sales
and a small decline in aggregate volumes. Asphalt sales declined as we
became more selective in supplying the market in an effort to improve gross
profit margins for asphalt.
Gross Profit. Gross profit margins were consistent at approximately 15%
for the two periods. The increased selling prices were offset by higher fuel
prices and asphalt oil costs.
General and Administrative Expenses. General and administrative expenses
were relatively constant for the third quarter of 2000 when compared to the
same period of 1999. As a percentage of sales, this expense decreased to
5.0% in 2000 from 5.4% in 1999. This was due to the increase in revenues
without requiring a proportionate increase in expenses due to the fixed
nature of these expenses.
Other Income and Expense. Other income increased $416,496 to $1,260,757
in the third quarter of 2000 from $844,261 in the same period of 1999. A
decrease in interest expense and an increase in interest income due to an
improved cash position and higher interest rates were responsible for the
increase.
Income Tax Expense. The effective income tax rate during the third
quarter of 2000 and 1999 was 40%. The rate differs from the federal
statutory rate of 35% primarily due to state income taxes.
Results of Operations - Nine Months 2000 vs. Nine Months 1999
Revenue. Revenues increased $37,325,795 or 12% in the first nine
months of 2000 to $359,812,404, as compared to $322,486,609 for the same
period of 1999. The increase is primarily due to the inclusion of additional
revenues of $27,540,304 from companies acquired in 2000 or after the end of
the third quarter in 1999 and a 3% increase in average selling prices.
Offsetting the increases were declines in unit volumes of asphalt sales.
Asphalt sales declined as we became more selective in supplying the market in
an effort to improve gross profit margins for asphalt.
Gross Profit. Gross profit margins were consistent at approximately 13%
for the two periods. A higher average selling price and a more selective
approach to supplying asphalt demand were offset by increases in asphalt oil
costs and higher fuel prices.
General and Administrative Expenses. General and administrative expenses
for the first nine months of 2000 remained relatively constant when compared
to the same period in 1999. As a percentage of sales, general and
administrative expenses decreased to 5.1% in 2000 from 5.8% in 1999. This
was due to the increase in revenues without requiring a proportionate
increase in expenses due to the fixed cost nature of these expenses.
Other Income and Expense. Other income increased $281,799 to $3,232,135
for the first nine months of 2000 from $2,950,336 for the same period in
1999. Increases in interest income from higher interest rates were
partially offset by the elimination of equity earnings due to the
consolidation of Pac Rock in the first quarter of 1999.
Income Tax Expense. The effective income tax rate for the first nine
months of 2000 and 1999 was 40%. The rate differs from the federal
statutory rate of 35% primarily due to state income taxes.
Financial Condition - September 30, 2000
Cash and cash equivalents decreased $24,969,965 to $47,360,162 at
September 30, 2000 from $72,330,127 at December 25, 1999. The decrease
reflects net cash provided by operations of $22,573,283 and by financing
activities of $50,627,201 offset by net cash used in investing activities
of $98,170,449.
Net cash provided by operating activities from the first nine months of
2000 of $23,581,823 represented an increase of $13,438,715 from the same
period in 1999. The principal sources of the increase in net cash from
operating activities were increased earnings, higher depreciation and
amortization and an increase in accounts payable. These sources were
partially offset by the direct payment of estimated taxes for our 1999
and 2000 tax liabilities.
Net cash used in investing activities for the first nine months of 2000
increased by $48,685,051 to $99,178,989 as compared to the same period in
1999. This increase was due to additional acquisitions of $43,251,974,
decreases in proceeds from the sale of property, plant and equipment in the
ordinary course of business of $238,327 and additional capital expenditures
of $7,694,750. These changes were partially offset by $2,500,000 of proceeds
from the sale of marketable securities.
Net cash provided by financing activities for the first nine months of
2000 increased by $21,313,796 to $50,627,201 as compared to $29,313,405
for the same period in 1999. This change was due to the issuance of $670,000
of convertible debentures, an increase in contributions from Kiewit of
$5,087,428, and a decrease in payments on long-term debt of $15,556,368.
We believe that our current cash position together with anticipated cash
flows from operations will be sufficient for the working capital and
equipment replacement requirements of our company for the next twelve months.
We do not have any established credit facilities. At September 30, 2000, we
had $6.3 million of notes payable. Further, we do not currently anticipate
paying any cash dividends.
We intend to pursue a business plan to grow through acquisitions that will
require capital that is in addition to ongoing operational requirements.
While historically we have received contributions from Kiewit to fund
a portion of acquisitions, we believe that cash on hand at the time of the
Spin-off, cash generated by operations, and the ability to borrow funds will
allow us to make significant investments in connection with future
acquisitions. Ultimate growth strategy capital requirements will largely
depend on the number of acquisition candidates, the cost of the acquisitions,
and the level of success we have in completing these transactions. Should we
be unable to obtain any necessary funds from borrowings on terms deemed
appropriate, we would be limited in our ability to fully execute our growth
strategy. While we believe our growth strategy to be important in enhancing
shareholder value, we do not believe that the inability to fully pursue it
would have a material adverse impact on current operations, financial
condition or liquidity.
New Accounting Pronouncement.
In September 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which established accounting and reporting standards for derivative
instruments and for hedging activities. This statement as amended, is
effective for all fiscal years beginning after September 15, 2000.
Management does not expect adoption of this statement to materially affect
our financial statements as we have no significant derivative instruments or
hedging activities.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
We do not believe that our business is subject to significant market risks
arising from interest rates, foreign exchange rates or equity prices.
PART II - OTHER INFORMATION
Item 5. Other Information.
On July 27, 2000, by unanimous written consent, the Board of
Directors of the Company changed the Company's fiscal year to December 31.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit
Number Description
--------- -----------
27.1 Financial Data Schedule.
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.
KIEWIT MATERIALS COMPANY
Date: November 9, 2000 /s/ Donald E. Bowman
------------------------
Donald E. Bowman
Vice President, Chief Financial Officer
KIEWIT MATERIALS COMPANY
INDEX TO EXHIBITS
Exhibit
Number Description
--------- -----------
27.1 Financial Data Schedule.
