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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For Annual and Transition Reports
Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ___________ TO ____________
COMMISSION FILE NUMBER 0-1162
CALMAT CO.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-0645790
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3200 SAN FERNANDO ROAD, LOS ANGELES, CALIFORNIA 90065
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (213) 258-2777
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE REGISTERED
(Title of Class)
Indicate by check mark whether 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 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of Registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of the filing.
$520,375,833 COMPUTED ON THE BASIS OF $27.00 PER SHARE, WHICH WAS THE LAST SALE
PRICE ON THE NEW YORK STOCK EXCHANGE ON MARCH 23, 1998.
Indicate the number of shares outstanding of each of Registrant's classes of
common stock, as of the latest practicable date.
23,775,479 SHARES OF COMMON STOCK, $1 PAR VALUE, AS OF MARCH 23, 1998.
LIST OF DOCUMENTS INCORPORATED BY REFERENCE
CALMAT CO.'S DEFINITIVE PROXY STATEMENT WITH RESPECT TO THE ANNUAL MEETING TO BE
HELD IN MAY 1998
IS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K.
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TABLE OF CONTENTS
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ITEM
NUMBER PAGE
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PART I
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Item 1. Business........................................... 1
Item 2. Properties......................................... 5
Item 3. Legal Proceedings.................................. 5
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 8
Item 6. Selected Financial Data............................ 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 10
Item 8. Financial Statements and Supplementary Data........ 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 34
PART III
Item 10. Directors and Executive Officers of Registrant..... 34
Item 11. Executive Compensation............................. 34
Item 12. Security Ownership of Certain Beneficial Owners
and Management..................................... 34
Item 13. Certain Relationships and Related Transactions..... 34
PART IV
Item 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K................................ 34
Signatures...................................................... 42
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
CalMat Co. (the "Company" or "Registrant") has its corporate headquarters
in Los Angeles, California and has operations throughout the state of
California, in Phoenix and Tucson, Arizona, and in Albuquerque, New Mexico. The
Company was formed in 1984 by the business combination of California Portland
Cement Company ("CPC") and Conrock Co. ("Conrock"). Following its formation,
the Company operated CPC as its Cement Division. The Company subsequently
disposed of the Cement Division in an exchange transaction with Onoda
California, Inc. in 1990. The Company's operations are primarily concentrated
in two business segments. One business segment, the Construction Materials
Division, is engaged in the manufacture, production, distribution and sale of
construction materials: aggregates (crushed rock, sand and gravel), hot-mix
asphalt and ready mixed concrete. This business segment experiences
fluctuations with general levels of activity in the construction industry and
with weather-related construction delays, which normally occur during the first
and fourth quarters each year. The other business segment, the Properties
Division, is engaged in the ownership, leasing and management of industrial and
office buildings, the ownership and leasing of undeveloped real property and
sales of real property.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information about the Company's business segments for the years ended
December 31, 1997, 1996 and 1995 is incorporated in Note 11 of the "Notes to
Consolidated Financial Statements," located on pages 30 and 31 of this Annual
Report on Form 10-K.
NARRATIVE DESCRIPTION OF BUSINESS
CONSTRUCTION MATERIALS DIVISION
The Construction Materials Division produces and sells construction
aggregates, hot-mix asphalt, and ready mixed concrete for use in commercial and
residential construction, public construction projects and projects to build,
expand and repair roads and highways. Included within this Division is Western
Environmental Contracting, Inc., a wholly owned subsidiary that provides
portable crushing, recycled road base and contracting services. The Division
operates aggregates processing plants at 33 locations in the major markets of
Southern and Central California, Sacramento, the San Francisco Bay area, Phoenix
and Tucson, Arizona, and Albuquerque, New Mexico. The Division also operates
asphalt plants at 33 locations in the metropolitan Los Angeles and San Diego,
Sacramento, San Francisco Bay and San Joaquin Valley areas of California,
Phoenix and Tucson, Arizona, and Albuquerque, New Mexico. Of the 33 asphalt
locations, 18 are sites which also have aggregates processing plants and/or
ready mixed concrete plants. Ready mixed concrete batch plants are operated at
26 locations in the same markets as the aggregates processing plants, except for
Los Angeles, Sacramento and the San Francisco Bay area. Of the 26 ready mixed
concrete locations, 11 are sites which also have aggregates processing plants.
Examples of projects to which the Company will supply aggregates, asphalt and/or
ready mixed concrete in 1998 include: in California, the Alameda Corridor
project, (a $1.9 billion venture connecting downtown Los Angeles to the Long
Beach/Los Angeles Harbor areas via new rail lines and major street
improvements), Orange County's Eastern Corridor, the expansion of Highways 41,
168 and 242 and the Highway 76 overlay, and Bakersfield's Convention Center; in
Arizona, a new water treatment plant in Scottsdale and a major cross-cut
drainage channel in Phoenix; and, in New Mexico, Albuquerque's International
Airport, the city's Montano Bridge and a new cancer research center at the
University of New Mexico.
1
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Aggregates
The Company operates aggregates processing plants at 33 locations, serving
Los Angeles, San Diego, Bakersfield, Fresno, Ventura, Sacramento, Santa Barbara
and the San Francisco Bay area of California; Phoenix and Tucson, Arizona; and
Albuquerque, New Mexico. The Company believes it is the largest supplier of
construction aggregates in the greater Los Angeles area. During 1997, the
Company sold 28.6 million tons of aggregates. As of December 31, 1997, the
Company had estimated aggregates reserves of nearly 1.9 billion tons, located
near the major urban centers of the markets it serves. A schedule of the
Company's estimated aggregates reserves is found on page 40 of this Annual
Report on Form 10-K. The Company owns or has long-term leases or options for
all of the properties on which its reserves are located. In all cases where
required by law, the Company obtains permits from various governmental
authorities prior to the commencement of its mining activities. Approximately
54% of the Company's total reserves are either fully permitted or in the process
of being permitted. As is typical of major aggregates producers with a number
of production facilities, the currently permitted reserves at the Company's
quarries, expressed in terms of years of production at historical rates, varies
widely. In the Company's case, permitted reserves vary from approximately two to
three years at several older facilities to 20 years or more at many others. The
Company has permitting or alternative production plans for all of its sites
where reserves could be depleted in less than 10 years, and believes that its
current reserves position provides it with a significant long-term competitive
advantage.
To further assure sufficient reserves and adequate facilities to meet
future demand, the Company continues to add new aggregates reserves. During
1997, Triangle Rock Products, Inc., the Company's wholly-owned subsidiary,
acquired the assets of Sacramento Aggregates, Inc., which is expected to yield
30 million tons of reserves. In 1996, the Company purchased the 2,000-acre San
Emigdio reserves near Bakersfield, California. The Company believes that San
Emigdio contains enough aggregates to meet the needs of this growing area for
many years. During 1995, the Company purchased its joint venture partner's 50%
share of the partnership which owns Azusa Rock, Inc., located ten miles from Los
Angeles, to become the sole owner of this 120-million ton reserve. In March
1994, the Company was awarded a contract to remove 18 million tons of rock, sand
and silts from Irvine Lake in Orange County, California where commercial
aggregates production has recently commenced. In addition, the Company obtained
permits for more than 50 million tons of sand and gravel near San Bernardino,
California in 1993, which should allow the Company to meet the needs of that
region for several decades.
Hot-Mix Asphalt
The Company believes that its asphalt operation, known by the trade name
Industrial Asphalt, is one of the largest suppliers of hot-mix asphalt to the
construction industry nationwide, and the Company believes it is the largest
such supplier in California. The Company produces and supplies asphalt and
related specialty products.
The primary source of revenue from asphalt operations is from the sale of
hot-mix asphalt. Hot-mix asphalt consists by volume of approximately 95%
aggregates and 5% liquid asphalt (a refined petroleum product). Of the 33
Company locations with asphalt facilities, 18 are sites that also have
aggregates processing plants and/or ready mixed concrete plants. This proximity
provides the Company with a competitive advantage in those markets due to the
availability of aggregates and transportation cost savings. At all other
asphalt plants, more than one source of aggregates is available, and at all
asphalt plants, more than one source of liquid asphalt is available.
In addition, the Company operates 14 asphalt recycling systems at its major
plants that recover aggregates and oil from asphalt that has been salvaged from
roads and other surfaces. Used in the production of new asphalt paving, the
recovered aggregates and oil offer substantial cost savings, strengthen the
Company's ability to secure public projects, and provide a high return on
investment.
The Company also manufactures related specialty products, including
GUARDTOP(R), a coating material used for sealing asphalt pavement to prevent
water damage and surface erosion. Under a license agreement, the Company is the
exclusive distributor in metropolitan Los Angeles of PETROMAT(R), a
polypropylene reinforcing fabric used in the resurfacing of pavement. The
Company also maintains a fleet of paving machines and specialty paving equipment
which it rents, along with qualified operators, to contractors.
2
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Ready Mixed Concrete
Ready mixed concrete, which consists by volume of approximately 80%
aggregates and 20% cement, water and other materials, is either delivered by the
Company's fleet of approximately 375 mixer trucks or by independent haulers. The
Company has vertically integrated into the ready mixed concrete business
primarily in those geographic areas where it has been necessary from a
competitive standpoint to provide an outlet for the Company's aggregates
production.
PROPERTIES DIVISION
CalMat's 37,000 acres of fee owned and leased lands are managed and
overseen by the Properties Division in conjunction with the Resource Management
Department of the Construction Materials Division. The Resource Management
Department is responsible for the acquisition of all property used in the
Company's aggregates operations and for obtaining all necessary land use
entitlements for aggregates operations and planning for reclamation of the land
once reserves are depleted. The Properties Division is responsible for
maximizing the value of property not used in the construction materials business
by developing, selling or leasing these properties. Income sources for this
Division include rentals, landfill operations and self-storage facilities.
The Company's land management strategy encompasses a variety of post-mining
uses such as agriculture, native habitat restoration, water conservation and
commercial, residential and industrial development. Reclaimed property is
typically subdivided into lots and developed by the Company or sold in lot
parcels to developers once necessary zoning and permits are obtained.
Currently, the Company owns approximately 798,000 square feet of office and
industrial buildings, of which approximately 541,500 square feet are adjacent to
mining and processing operations.
In October 1997, the Company announced that it will emphasize growth of its
core construction materials business by selling its industrial and office
properties, and by accelerating the sale of 9,600 acres of property not being
used in its construction materials business, including prime sites currently
available for development. These properties are located in Los Angeles, San
Diego, Phoenix and Albuquerque and have a book value of approximately $93
million. The Company expects to sell these assets over the next two years, with
estimated proceeds of between $150 million and $170 million. The Company will
continue to own approximately 18,000 acres of land not being used in the
construction materials business, and will sell properties as they are no longer
so used.
Beginning in 1988, the Company discontinued its development of industrial
and office buildings. Since that time, the Company has sold 36 such buildings
(totaling approximately 1.8 million square feet).
The Division currently operates ten landfills. All of the Company's
existing and planned landfills are designed and have permits to accept only non-
hazardous construction rubble, except that the Company's landfill in Phoenix,
Arizona also accepts construction debris.
COMPETITIVE CONDITIONS
The aggregates operations and the ready mixed concrete operations have
numerous competitors in each of their markets, but generally the aggregates
operations have fewer competitors than the ready mixed concrete operations. A
majority of the ready mixed concrete business is obtained by competitive bid.
In addition to competitive pricing, the Company's other methods of meeting
competition include providing higher levels of service and higher quality
products to its customers. Most of the Company's aggregates are delivered to
customers by third-party haulers. The Company consumes a portion of its
aggregates production in the manufacturing of ready mixed concrete, and supplies
a portion of its production to its asphalt operations for use in the production
of hot-mix asphalt. Other sources of raw materials, such as cement used in
ready mixed concrete, are readily available.
The Company's asphalt operations have more than one competitor in each
market and have several competitors in most markets. These operators compete
for business through price, quality and service to customers.
3
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REGULATIONS AND EMPLOYEES
Regulations
Substantial time and resources are expended by the Company to comply with
local, state and federal regulations for land use, health and safety, air
pollution and other environmental matters. This is essential because changes in
the enforcement of existing regulations or the addition of new laws and
regulations may require the Company to modify, supplement or replace equipment
or facilities.
During the normal course of its operations, the Company uses and disposes
of materials, such as solvents and lubricants used in equipment maintenance,
which are classified as hazardous by some government agencies. The Company
attempts to minimize the generation of such waste material and recycles most of
it. A small amount of remaining waste is disposed of in fully permitted off-
site landfills.
Because of the nature of the Company's business, both the Occupational
Safety and Health Administration (OSHA) and the Mine Safety and Health
Administration (MSHA) have jurisdiction over its safety standards and controls.
The Company expends considerable effort to train, inspect, report and enforce
OSHA and MSHA requirements.
The Company has been successful in obtaining zoning approvals and other
required permits from local governing bodies allowing the mining of aggregates
and the conducting of the Company's other businesses. The state, county and
city governing bodies within California, Arizona and New Mexico continue to
adopt new laws and regulations relating to land use. Some of these laws and
regulations, including but not limited to the California Endangered Species Act,
may lead to attempts by special interest groups to reduce or restrict the
Company's use of its properties.
Employees and Other Labor Information
The Company had 1,880 full-time employees as of December 31, 1997. Of
these, 545 were salaried and 1,335 were hourly.
The Company is party to 26 collective bargaining agreements covering a
total of 984 employees. Thirteen of these agreements, covering 351 employees,
are currently being negotiated, including one with the Company's Teamster
employees in Bakersfield. Six contracts with other local unions will expire in
1998 covering a total of 349 employees. If the Company is unable to reach
negotiated settlements for any of these contracts, it is likely that a strike
would occur. A strike, should one occur, will depress volumes and cause plant
efficiencies to suffer.
In January 1997, the National Labor Relations Board certified the results
of an election decertifying I.U.O.E. Local 12 as the bargaining representative
of the Company's 47 asphalt employees working in its 21 asphalt plants located
in Southern California. These plants are now being operated as non-union.
In January 1997, a two-week labor strike by San Diego, California's
Teamster members, affecting 61 Teamster employees, caused the Company to
experience temporary volume losses and higher costs.
In August 1997, a labor strike by Southern California's I.U.O.E. Local 12
members that began in July 1995 and affected 141 employees was ended when its
members offered to unconditionally return to work.
In March 1998, Teamsters Local 186, whose contract had expired in 1994
leading to a ten-week strike in 1994, ratified the Company's offer for a new
agreement.
4
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OTHER
In 1990 Onoda California, Inc. ("Onoda") and the Company consummated a
transaction whereby the Company distributed to Onoda all of its shares of stock
in CPC in exchange for certain shares of stock of the Company that were then
held by Onoda. In addition, prior to 1990, certain other related transactions
were accomplished, including the Company's contribution of certain assets to CPC
and CPC's distribution of all of its shares of stock in one of its subsidiaries
to the Company (along with the Company's distribution of the CPC stock to Onoda,
the "Onoda Transactions"). The Onoda Transactions were reported as tax-free
transactions for federal income tax purposes. Based on an analysis of the tax
law in effect at the time of the Onoda Transactions, the Company believes that
this treatment of the Onoda Transactions is correct, and has not established
financial statement reserves for this matter. The Internal Revenue Service (the
"IRS") is now examining the Onoda Transactions. There can be no assurance that
the IRS will not challenge the Company's position regarding the proper tax
treatment of the Onoda Transactions. If the IRS does challenge the Company's
position and is ultimately successful in denying the Company's treatment of the
Onoda Transactions, the resulting tax liability would have a material adverse
effect on the Company's financial position.
As is the case with other companies in the same industries, the Company's
products contain varying amounts of crystalline silica, a common mineral that is
a component of most sands. Excessive, prolonged inhalation of very small
particles (principally those less than ten microns in size) of crystalline
silica has been associated with non-malignant lung disease. In 1987, the
carcinogenic potential of crystalline silica was evaluated by the International
Agency for Research on Cancer ("IARC") and later by the National Toxicology
Program. The IARC found limited evidence of carcinogenicity in humans but
sufficient evidence of carcinogenicity in animals. The National Toxicology
Program concluded in 1991 that crystalline silica is "reasonably anticipated to
be a carcinogen." However, in October 1996, an IARC working group voted 10 to
7 to reclassify crystalline silica as a "Group One" substance, considered to be
a human carcinogen. The IARC Report was finalized in 1997 and is now being
considered by OSHA and MSHA. In anticipation of new federal requirements
resulting from the IARC Report, the Company has added the appropriate warnings
to its sales documents, posted warnings at affected sites, revised all Material
Safety Data Sheets (MSDSs), and now provides safety training on this topic to
all affected employees. The Company is not a party to any pending or threatened
litigation regarding crystalline silica.
ITEM 2. PROPERTIES
PLANT FACILITIES
See "Item 1. Business" on page 1 of this Annual Report on Form 10-K for
additional information relating to these properties.
The Company makes a practice of leasing idle land which has been obtained
for its aggregates reserves during periods when the land is not used for
operations. During 1997, approximately 136 leases covering more than 1,750
acres were in effect. These leaseholds were used for farming, storage locations
and other uses. Additionally, the Company owns approximately 800,000 square
feet of commercial and industrial buildings, approximately 550,000 square feet
of which are located in close proximity to aggregates operations and buffer the
adjacent mining and processing operations. A total of 36,590 acres are owned or
leased by the Company.
See "CalMat Co., Property Owned and Leased" on page 39 of this Annual
Report on Form 10-K for additional information relating to these properties.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various lawsuits and
claims which the Company considers ordinary and routine in view of its size and
the nature of its business. The Company does not believe that any ultimate
liability resulting from any such lawsuits will have a material adverse effect
on the operations or financial position of the Company.
5
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ENVIRONMENTAL - GENERAL
During the third quarter of 1992, the Company received a letter from CPC,
Onoda and Onoda U.S.A., purporting to assert a claim for indemnification with
respect to certain environmental matters, pursuant to certain provisions of the
agreement, dated July 19, 1988, under which Onoda acquired the stock of CPC.
The Company has notified these companies that it believes that it has no
liability with respect to the matters identified in the letter. No dollar
amount of damages was specified, but the July 19, 1988 agreement limits any
potential liability with respect to such matters to a maximum of $16,000,000.
ENVIRONMENTAL - ADMINISTRATIVE AND JUDICIAL PROCEEDINGS
Operating Industries, Inc. Landfill Site
The Company has been named by the U.S. Environmental Protection Agency
("EPA") as a defendant in a civil action involving one "Superfund" cleanup site.
The Company is one of many entities so named. To date, the Company has
contributed approximately $300,000 to fund certain interim remedial actions at
the site, as part of two partial settlements of this matter (which in part
remain subject to court approval). The EPA recently reached a decision as to
the Final Remedy to be implemented for the site and currently estimates the
total cost for implementation to be shared by all parties to be $289 million.
Although the Company's share of any liability is still undetermined, and the
ultimate outcome of this action cannot be predicted with certainty, the Company
believes that this matter will be resolved without a material adverse effect on
either its financial position or results of operations. The Company's belief is
based on its position that the wastes attributed to it at the site were not
hazardous, its extremely small share of the waste at the site compared to wastes
attributable to the other defendants, and its belief that it has recourse to
insurance coverage for at least a substantial portion of any resulting
liability.
San Gabriel Valley Superfund Area
The EPA has named the Company and more than 300 other entities as
"potentially responsible parties" ("PRPs") under CERCLA in connection with
alleged groundwater contamination at four sites designated as San Gabriel Valley
Areas 1 to 4 in Los Angeles County, California (the "Sites"). In January 1995,
the Company received a letter from the EPA advising it that the EPA does not
plan to ask the Company to participate in the cleanup of the regional
groundwater contamination at the Sites.
San Fernando Valley Superfund Area
The EPA named the Company as a PRP under CERCLA in connection with ongoing
containment and remediation being conducted pursuant to an EPA Record of
Decision issued in 1987 for the San Fernando Valley Area 1 Superfund Site, North
Hollywood Operable Unit. The Company was named as a defendant in joint cost
recovery actions filed by the EPA and the California Department of Toxic
Substance Control in the United States District Court, Central District of
California. Subsequently, the Company, with other PRPs, entered into a Partial
Consent Decree that was approved by the Court in July 1996 and resulted in
dismissal of the Company from the actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE COMPANY
Executive officers are elected by the Board of Directors annually, and serve at
the pleasure of the Board or until their successors are qualified and elected.
The following is a list of executive officers of the Company:
NAME OFFICE
---- ------
A. FREDERICK GERSTELL Chairman of the Board and Chief Executive Officer
Mr. Gerstell, 60, has held the office of Chairman of the Board and Chief
Executive Officer of the Company since July 1996. He previously served as
Chairman, President, Chief Executive Officer and Chief Operating Officer. He
became Chairman of the Board in January 1991. He served as President and Chief
Executive Officer from 1988 through 1990. From 1984 to 1988, he served as
President and Chief Operating Officer. Prior to the formation of the Company by
the combination of Conrock and CPC in 1984, he was President and Chief Operating
Officer of CPC and employed by CPC from 1975.
SCOTT J WILCOTT Executive Vice President, Law and Property
Mr. Wilcott, 60, was elected to his current position in August 1990. He also
serves as President of CalMat Properties Co., and CalMat Land Co., subsidiaries
of the Company. In 1989, he served as Executive Vice President, General Counsel
and Secretary of the Company. From 1984 to 1989, he served as Senior Vice
President, Legal Counsel and Secretary. From 1968 until the formation of the
Company in 1984, Mr. Wilcott was employed by Conrock.
PAUL STANFORD Executive Vice President, General Counsel and
Secretary
Mr. Stanford, 55, was elected to his current position in August 1996. From
February 1995 to August 1996, he served as Executive Vice President -
Administration, General Counsel and Secretary. From June 1993 until February
1995, he served as Senior Vice President - Administration, General Counsel and
Secretary. From August 1990 until June 1993, he served as Vice President,
General Counsel and Secretary. Before joining the Company, from 1981, he was
engaged in the practice of business law with the firm of Paul, Hastings,
Janofsky & Walker.
H. JAMES GALLAGHER Executive Vice President, Finance, Chief Financial
Officer and Treasurer
Mr. Gallagher, 51, was elected to his current position in November 1996. From
August 1993 to November 1996, he served as Executive Vice President, Finance and
Chief Financial Officer. From 1987 to August 1993, he served concurrently as
Executive Vice President, Chief Financial Officer and Director of Pacific
Enterprises Oil Co., and Senior Vice President, Chief Financial Officer and
Director of Pacific Interstate Company. He previously served as Vice President,
Controller and Chief Financial Officer of Pacific Interstate Company from 1979,
and Manager of Internal Audits of Pacific Enterprises, Inc. from 1975.
EDWARD J. KELLY Senior Vice President, Corporate Development
Mr. Kelly, 42, was elected to his current position in November 1996. From
January 1994 to November 1996, he served as Senior Vice President, Treasurer and
Chief Accounting Officer. He served as Senior Vice President, Controller and
Chief Accounting Officer from June 1993 to January 1994. From December 1990
until June 1993, he served as Vice President and Controller. He was employed by
Superior Industries International, Inc., a manufacturer of automotive products,
as Vice President, Corporate Controller and Secretary, from 1985 to 1990.
7
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York, Pacific and Chicago
Stock Exchanges under the trading symbol "CZM." The following table sets forth
the high and low sales prices of the Common Stock of the Company as reported on
the New York Stock Exchange Composite Tape for the periods indicated and the
cash dividends declared on the Company's Common Stock during each quarter
presented.
<TABLE>
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Dividends
Period High Low Declared
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1997
First Quarter 19 1/4 17 1/4 $.10
Second Quarter 22 17 .10
Third Quarter 26 20 1/2 .10
Fourth Quarter 28 23 3/8 .10
1996
First Quarter 18 3/4 17 1/4 $.10
Second Quarter 18 7/8 16 3/8 .10
Third Quarter 18 3/4 16 3/4 .10
Fourth Quarter 19 3/4 18 .10
</TABLE>
At December 31, 1997, there were 1,022 holders of record of the Company's Common
Stock, $1 par value.
8
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
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For the years ended December 31,
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(Amounts in thousands, except per share data) 1997 1996 1995 1994 1993
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Summary of Operations
Net sales and operating revenues $460,973 $399,083 $370,313 $365,243 $348,413
Net gains on sale of real estate 5,377 5,500 4,133 7,678 2,081
Total revenues 472,812 407,895 378,182 376,797 353,506
Income (loss) from continuing operations
before income taxes and cumulative effect
of change in accounting principle /(a)/ 23,644 15,178 (36,858) 29,609 14,897
Federal and state income taxes 7,042 5,844 (15,487) 10,881 6,600
Income (loss) from continuing operations
before cumulative effect of change in
accounting principle 16,602 9,334 (21,371) 18,728 8,297
Cumulative effect of change in accounting
principle -- -- -- -- 919
Net income (loss) 16,602 9,334 (21,371) 18,728 9,216
Per Share Data
Income (loss) from continuing operations
before cumulative effect of change in
accounting principle - diluted .70 .40 (.92) .81 .36
Cumulative effect of change in accounting principle -- -- -- -- .04
Net income (loss) - basic .71 .40 (.92) .81 .40
Net income (loss) - diluted .70 .40 (.92) .81 .40
Regular dividends per share .40 .40 .40 .40 .40
Weighted average number of shares outstanding - basic 23,313 23,226 23,153 23,136 23,105
Weighted average number of shares outstanding - diluted 23,724 23,263 23,176 23,223 23,157
Cash dividends declared 9,334 9,282 9,264 9,256 9,244
Balance Sheet Data
Total assets $635,808 $600,716 $559,530 $572,837 $604,895
Working capital 47,740 52,702 33,551 34,882 38,916
Long-term debt 118,401 116,233 84,321 68,694 109,635
Stockholders' equity 346,545 332,192 331,149 361,104 351,046
Stockholders' equity per share at year end 14.61 14.29 14.29 15.55 15.19
</TABLE>
(a) 1995 includes $47.0 million of special charges related to adoption of SFAS
121, the accounting standard for impairment of long-lived assets ($45.0
million) and costs related to a management consolidation within construction
materials operations ($2.0 million). Excluding these charges, income from
continuing operations before income taxes and cumulative effect of change in
accounting principle would have been $10.1 million for 1995.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion should be read in connection with the consolidated
financial statements and notes thereto included herein.
RESULTS OF OPERATIONS
The Company's California market areas continued to show economic
improvement during 1997. Construction Materials Division earnings were higher
than in 1996, due to increases in earnings from aggregates, ready mixed concrete
and asphalt operations. Properties Division earnings were slightly lower than
in 1996, due in part to recent sales of income producing property.
The Company reported net income of $16.6 million, or $0.70 per share, for
1997, compared with net income of $9.3 million, or $0.40 per share, for 1996.
Net income in 1996 was $9.3 million, or $0.40 per share, compared with net
income of $6.3 million, excluding special charges, or $0.27 per share, for 1995.
The 1995 results included a non-cash charge of $26.5 million, or $1.14 per
share, to adopt the accounting standard for impairment of long-lived assets
(SFAS 121), and a charge of $1.2 million, or $0.05 per share, related to a
management consolidation within the Company's construction materials operations.
Record rainfall and related flooding in the Company's California markets early
in the year and a labor strike which affected most of the Los Angeles area
construction materials operations had a pronounced negative impact on 1995
results.
CONSOLIDATED REVENUES AND EARNINGS
Total revenues amounted to $472.8 million, $407.9 million and $378.2
million in 1997, 1996 and 1995, respectively. Included in total revenues are
gains from real estate sales of $5.4 million, $5.5 million and $4.1 million in
1997, 1996 and 1995, respectively. Also included is other income of $6.5
million, $3.3 million and $3.7 million in 1997, 1996 and 1995, respectively. The
increase in other income in 1997 is due to a $1.1 million settlement of a prior
tax claim of a former subsidiary, $1.0 million of interest income from a
settlement of a prior year tax audit related to the sale of a landfill operation
and a $1.0 million insurance settlement. Net sales and operating revenues,
which excludes gains on sale of real estate and other income, of $461.0 million
in 1997 were up $61.9 million, or 15.5%, compared with $399.1 million in 1996.
The increase was primarily due to higher sales volumes and average selling
prices for aggregates, ready mixed concrete and asphalt operations. Net sales
and operating revenues were up $28.8 million, or 7.8%, in 1996 compared with
1995. The increase in 1996 resulted from higher sales volumes and average
selling prices for aggregates and ready mixed concrete operations. Cost of
goods sold as a percentage of net sales and operating revenues was 85.6% in 1997
compared with 87.0% in 1996 and 88.2% in 1995.
Interest expense increased $1.8 million in 1997 compared with 1996, due to
higher levels of average debt outstanding and higher weighted average interest
rates. Interest expense increased $3.3 million in 1996 compared with 1995, due
primarily to higher levels of average debt outstanding.
Income before income taxes increased to $23.6 million for 1997 from $15.2
million in 1996. The 1997 increase from 1996 consists mainly of improvements in
earnings of the Construction Materials Division of $10.3 million, partially
offset by an increase in interest expense of $1.8 million. Income (loss) before
income taxes was $15.2 million in 1996, versus ($36.9 million) in 1995. The
1995 amount includes special charges of $47.0 million related to the adoption of
SFAS 121 ($45.0 million) and costs related to a management consolidation within
the construction materials operations ($2.0 million). Excluding these special
charges, income before income taxes was $10.1 million in 1995. The 1996
increase from 1995, excluding the special charges in 1995, consists mainly of
improvements in earnings of the construction materials operations and Properties
Division of $6.8 million and $3.6 million, respectively.
Selling, general and administrative expenses increased $7.2 million in 1997
compared with 1996, which in turn increased $1.9 million from the 1995 level.
The increase in 1997 was due to higher incentive compensation costs as a result
of the improved earnings for 1997 and higher than normal legal and consulting
costs.
The effective tax rate in 1997 was 29.8% compared with 38.5% in 1996 and
42.0% in 1995. The 29.8% rate in 1997 includes a $0.8 million refund received
as a settlement of a prior year tax audit related to the sale of a landfill
operation. Excluding the refund, the effective rate in 1997 was 33.0%. The
42.0% rate in 1995 is due primarily to the fact that the SFAS 121 charge was tax
effected at 41.1%, the combined federal and state statutory rate. Excluding the
SFAS 121 charge, the effective tax rate in 1995 was 37.0%.
10
<PAGE>
OPERATING DIVISIONS
CONSTRUCTION MATERIALS DIVISION
The Construction Materials Division produces and sells construction
aggregates, hot-mix asphalt, and ready mixed concrete for use in commercial and
residential construction, public construction projects and projects to build,
expand and repair roads and highways. The Division operates aggregates
processing plants at 33 locations in the major markets of Southern and Central
California, Sacramento and the San Francisco Bay area; Phoenix and Tucson,
Arizona; and Albuquerque, New Mexico. The Division also operates asphalt plants
at 33 locations in the same markets as the aggregates processing plants. Of the
33 hot-mix locations, 18 are sites which also have aggregates processing plants
and/or ready mixed concrete plants. Ready mixed concrete batch plants are
operated at 26 locations in the same markets as the aggregates plants, except
for the Los Angeles, Sacramento and San Francisco Bay areas. Of the 26 ready
mixed concrete locations, 11 are sites which also have aggregates processing
plants.
As shown in the following table, 1997 aggregates, ready mixed concrete and
asphalt sales volumes increased from 1996, due primarily to the economic
improvement in the Company's California market areas. The 1996 aggregates and
ready mixed concrete sales volumes increased from 1995, due in part because 1995
volumes were depressed by an organized labor strike in the Los Angeles market
area.
<TABLE>
<CAPTION>
CONSTRUCTION MATERIALS - SALES VOLUMES
(Volumes in thousands) 1997 1996 1995
- --------------------------------------------------------------------
<S> <C> <C> <C>
Aggregates:
Tons sold to outside customers 19,721 16,986 15,111
Tons used in ready mixed concrete 3,077 3,094 2,958
Tons used in asphalt 5,850 5,052 4,830
------------------------
28,648 25,132 22,899
========================
Tons of hot-mix asphalt sold 8,425 7,340 7,386
========================
Yards of ready mixed concrete sold 2,540 2,364 2,241
========================
</TABLE>
Overall division revenue of $440.7 million was up 16.7% from 1996 revenue
of $377.5 million, which was up 7.7% from 1995 revenue of $350.5 million. The
increase in 1997 revenue was primarily due to higher sales volumes and average
selling prices for aggregates, ready mixed concrete and asphalt operations. The
increase in 1996 revenue resulted from higher sales volumes and average selling
prices for aggregates and ready mixed concrete operations.
Gross profit for aggregates in 1997 increased $12.5 million due to the
combination of 14% higher sales volumes, 5% higher average selling prices, and
2% lower unit production costs . Ready mixed concrete gross profit increased
$1.8 million in 1997 due to 7% higher volumes and 3% higher average selling
prices, partly offset by 2% higher unit production costs. Asphalt gross profit
increased $3.2 million in 1997 due to the combination of 15% higher sales
volumes, 1% higher average selling prices and 1% lower unit production costs.
Gross profit for aggregates in 1996 increased $6.2 million due to the
combination of 14% higher sales volumes, 3% higher average selling prices and
slightly lower unit production costs. Ready mixed concrete gross profit
increased $1.7 million in 1996 due to a 5% increase in unit sales volumes and a
2% increase in average selling prices. Asphalt gross profit declined by $6.0
million in 1996, due to 6% higher unit production costs, of which one-half was
the result of increased costs of liquid asphalt and natural gas.
Selling, general and administrative expenses increased $5.3 million in 1997
from the 1996 level, which in turn had increased $0.5 million from 1995. The
increase in 1997 was due to higher incentive compensation costs as a result of
improved earnings for 1997 and higher than normal legal and consulting costs .
Income from operations increased to $27.4 million in 1997 from $17.1 million in
1996, which had increased from 1995's level of $10.3 million.
11
<PAGE>
PROPERTIES DIVISION
CalMat's 37,000 acres of fee owned and leased lands are managed and
overseen by the Company's Properties Division in conjunction with the Resource
Management Department of the Construction Materials Division. The Resource
Management Department is responsible for the acquisition of all property used in
the Company's aggregates operations and for obtaining all necessary land use
entitlements for aggregates operations and planning for reclamation of the land
once reserves are depleted. The Properties Division is responsible for
maximizing the value of property not used in the construction materials business
by developing, selling or leasing these properties. Income sources for this
Division include rentals, landfill operations and self-storage facilities.
The Company announced in October 1997 that it will emphasize growth of its
core construction materials business by selling its industrial and office
properties, and by accelerating the sale of approximately 9,600 acres of
property not being used in its construction materials business, including prime
sites currently available for development. These properties are located in Los
Angeles, San Diego, Phoenix and Albuquerque and have a book value of
approximately $93 million. The Company expects to sell these assets over the
next two years with estimated proceeds of between $150 million and $170 million.
The Company will continue to own approximately 18,000 acres, and will sell
properties as they are no longer used in the construction materials business.
Income from operations was $14.4 million in 1997 compared with $14.9
million in 1996. Included in 1997 are gains from real estate sales of $5.4
million versus gains of $5.5 million in 1996. Excluding real estate gains,
Properties Division income from operations decreased $0.3 million, due in part
to recent sales of income producing property.
Income from operations was $14.9 million in 1996 compared with $11.2
million in 1995. Included in 1996 are gains from real estate sales of $5.5
million versus gains of $4.1 million in 1995. Excluding real estate gains,
Properties Division income from operations increased $2.3 million. All segments
of the Properties Division delivered improved results in 1996.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local environmental laws and
regulations which require the Company to remove or mitigate the effect on the
environment of the disposal or release of certain chemical, mineral and
petroleum substances at various sites. Generally, the Company's exposure has
been limited to soil contamination from underground fuel tanks or fuel spillage
rather than exposure resulting from generation of hazardous waste, although it
is a "named party" at one federal Superfund site.
The Company conducts annual environmental assessments of each of its
operating sites. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the costs can be reasonably estimated.
Generally, the timing of these accruals coincides with completion of a
feasibility study or the Company's commitment to a formal plan of action. As
investigation or remediation proceeds, and as the scope of the Company's
obligations become more clearly defined, there may be changes to estimated
costs, which might result in future charges to earnings.
During 1997, the Company charged to income $0.1 million before tax for
environmental remediation costs and made related payments of $0.3 million. At
December 31, 1997, the reserve for environmental remediation costs totaled $5.3
million. The amount reserved represents the estimated undiscounted costs which
the Company will incur to remediate sites with known contamination. No
potential insurance recoveries have been offset against the reserve.
Substantially all amounts accrued are expected to be paid out over the next five
years.
12
<PAGE>
OTHER MATTERS
The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. Based on preliminary information, costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. However, if the Company is unable to resolve such
processing issues in a timely manner, it could result in a material financial
risk. Accordingly, the Company plans to devote the necessary resources to
resolve all significant year 2000 issues in a timely manner.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Cash and cash equivalents decreased $14.6 million in 1997, mainly due to
cash used for business acquisitions. Cash and cash equivalents increased $17.1
million in 1996, mainly due to proceeds received from a private placement of
long-term debt in 1996.
Operating activities are the principal source of the Company's cash flows.
Over the past three years, operating activities have provided $112.5 million in
cash. Net cash of $31.4 million provided by operating activities in 1997 was
$5.8 million less than in 1996. Net cash of $37.2 million provided by operating
activities in 1996 was $6.6 million less than in 1995.
Cash used for investing activities totaled $49.1 million in 1997, a $13.6
million increase from 1996. The primary reasons for this increase were the
acquisition of businesses for $23.6 million, partially offset by a decrease in
spending on property, plant and equipment of $12.5 million. Cash used for
investing activities totaled $35.5 million in 1996, an $18.1 million decrease
from 1995. The primary reasons for this decrease were the 1995 acquisition of
the remainder of a business previously partially owned for $11.7 million,
decreases in installment notes receivable of $11.3 million and decreased
spending on property, plant and equipment of $2.6 million, partially offset by a
decrease in proceeds from sale of real estate of $7.1 million.
Net cash used for financing activities was essentially zero in 1997, a
$24.0 million decrease from cash provided by financing activities during 1996.
Net cash provided by financing activities during 1996 increased $16.4 million
from the $7.6 million cash provided by financing activities during 1995. The
1996 amount included $115 million in proceeds from issuance of senior notes,
partially offset by $48 million in net payments on notes payable to banks and
$35 million in payments on senior notes.
Capital expenditures decreased in 1997 to $41.8 million from $54.3 million
in 1996. Capital expenditures decreased in 1996 to $54.3 million from $57.0
million in 1995. Management believes that cash provided by operations and
existing borrowing arrangements will provide adequate funds for current
commitments and expected working capital requirements during 1998.
During 1997, 1996 and 1995, the Company paid $9.3 million each year in cash
dividends.
WORKING CAPITAL
Working capital totaled $47.7 million at December 31, 1997, a $5.0 million
decrease from the 1996 level of $52.7 million. The decrease in working capital
was due to a $17.7 million decrease in cash and a $16.0 million increase in
accounts payable and accrued liabilities, partially offset by a $22.7 million
increase in trade accounts receivable and a $4.9 million increase in income
taxes receivable. Working capital totaled $52.7 million at December 31, 1996, a
$19.2 million increase from the 1995 level of $33.6 million. The increase was
mainly due to an increase of $25.8 million in cash and a decrease of $3.5
million in accounts payable, partially offset by decreases in trade accounts
receivable of $9.7 million and installment notes receivable of $6.9 million.
13
<PAGE>
OTHER
Total consolidated long-term and short-term borrowings at December 31, 1997
of $118.7 million increased $2.4 million from the balance at December 31, 1996
of $116.3 million, which had in turn increased $31.9 million from the balance at
December 31, 1995 of $84.4 million. Debt as a percent of total capitalization
was 25.5% and 25.9% at December 31, 1997 and 1996, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The location in this Form 10-K of the Company's Consolidated Financial
Statements, Financial Statement Schedule and Selected Quarterly Financial Data
are set forth in the "Index" on page 15 hereof.
14
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
Report of Independent Accountants.............................. 16
Consolidated Balance Sheets as of December 31, 1997 and 1996... 17
Consolidated Statements of Operations for the
three years ended December 31, 1997, 1996, and 1995............ 18
Consolidated Statements of Cash Flow for the
three years ended December 31, 1997, 1996, and 1995............ 19
Consolidated Statements of Stockholders' Equity
for the three years ended December 31, 1997, 1996, and 1995.... 20
Notes to Consolidated Financial Statements..................... 21
Financial Statement Schedule:
II - Valuation and Qualifying Accounts and Reserves......... 33
</TABLE>
Schedules other than those listed above are omitted since they are not
applicable, not required, or the information required to be set forth therein is
included in the financial statements, or in notes thereto.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
CalMat Co.
Los Angeles, California
We have audited the accompanying consolidated balance sheets of CalMat Co.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1997, and the related financial
statement schedule as listed in the index on page 15 of this Annual Report on
Form 10-K. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 consolidated financial position of
CalMat Co. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
February 20, 1998
16
<PAGE>
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
______________________
(Amounts in thousands, except share data) 1997 1996
- -------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,519 $ 17,127
Cash held in trust for section
1031 exchanges 5,547 8,648
Trade accounts receivable, less
allowance for discounts and
doubtful accounts ($5,898 in
1997 and $5,309 in 1996) 75,305 52,558
Income taxes receivable 6,252 1,395
Inventories 15,466 13,972
Prepaid expenses 4,187 4,335
Deferred income taxes 9,536 11,867
Installment notes receivable 2,740 337
----------------------
Total current assets 121,552 110,239
Installment notes receivable and
other assets 34,059 28,602
Costs in excess of net assets of
businesses acquired, net 48,719 50,410
Property, plant and equipment:
Land and deposits 193,332 183,516
Buildings, machinery and equipment 504,889 495,320
Construction in progress 38,447 31,763
----------------------
736,668 710,599
Less: accumulated depreciation and
depletion (305,190) (299,134)
----------------------
Property, plant and equipment, net 431,478 411,465
----------------------
Total assets $ 635,808 $ 600,716
======================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 32,257 $ 20,208
Accrued liabilities 38,872 34,905
Notes and bonds payable - current
portion 337 100
Dividends payable 2,346 2,324
----------------------
Total current liabilities 73,812 57,537
Notes and bonds payable - long-term
portion 118,401 116,233
Other liabilities and deferred
credits 37,701 38,429
Deferred income taxes 59,349 56,325
----------------------
Total liabilities 289,263 268,524
----------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $1;
authorized 5,000,000 shares;
none issued or outstanding
Common stock, par value $1;
authorized 100,000,000 shares;
issued and outstanding 23,578,860
shares in 1997 and 23,240,312
shares in 1996 23,579 23,240
Additional paid-in capital 48,374 41,521
Retained earnings 274,592 267,431
----------------------
Total stockholders' equity 346,545 332,192
Total liabilities and stockholders' ----------------------
equity $635,808 $600,716
======================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
(Amounts in thousands, except per share data) 1997 1996 1995
- -------------------------------------------------------------------------------------
Revenues:
<S> <C> <C> <C>
Net sales and operating revenues $460,973 $399,083 $370,313
Net gains on sale of real estate 5,377 5,500 4,133
Other income 6,462 3,312 3,736
-------- -------- --------
472,812 407,895 378,182
-------- -------- --------
Costs and expenses:
Cost of products sold and operating expenses 394,764 347,163 326,513
Selling, general and administrative expenses 44,908 37,746 35,847
Interest expense 7,713 5,944 2,675
Other expenses 1,783 1,864 3,005
Special charges -- -- 47,000
-------- -------- --------
449,168 392,717 415,040
-------- -------- --------
Income (loss) before income taxes 23,644 15,178 (36,858)
Federal and state income taxes 7,042 5,844 (15,487)
-------- -------- --------
Net income (loss) $ 16,602 $ 9,334 $(21,371)
======== ======== ========
Per Share Data
Net income (loss) - basic $ .71 $ .40 $ (.92)
======== ======== ========
Net income (loss) - diluted $ .70 $ .40 $ (.92)
======== ======== ========
Cash dividends $ .40 $ .40 $ .40
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
(Amounts in thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 16,602 $ 9,334 $(21,371)
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation, cost depletion and amortization 35,158 31,803 31,181
Special charges -- -- 47,000
Net gains from sale of real estate (5,377) (5,500) (4,133)
Net gains on disposal of property, plant and equipment (444) (224) (422)
Deferred income taxes 5,355 700 (19,356)
Changes in operating assets and liabilities
Trade accounts receivable, net (22,242) 9,716 457
Inventories, prepaid expenses and other assets (12,097) (8,895) 113
Accounts payable, accrued liabilities and other liabilities 18,389 3,100 8,850
Federal and state income taxes (4,091) (2,798) 2,117
Other 145 3 (592)
--------------------------------
Cash provided by operating activities 31,398 37,239 43,844
--------------------------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (41,783) (54,320) (56,962)
Proceeds from sale of property, plant and equipment 1,612 835 1,554
Proceeds from sale of real estate 16,709 11,297 18,438
Installment notes receivable (2,008) 6,817 (4,455)
Investment in and advances to affiliates -- (129) (706)
Businesses acquired (23,610) -- (11,682)
Other -- -- 250
--------------------------------
Cash used for investing activities (49,080) (35,500) (53,563)
--------------------------------
FINANCING ACTIVITIES:
Stock options exercised 6,319 991 680
Net borrowings (payments) - bank lines of credit 6,000 (48,000) 15,750
Principal payments on notes and bonds payable (3,178) (98) (88)
Retirement of senior notes -- (35,000) --
Proceeds from senior notes -- 115,000 --
Payment of cash dividends (9,306) (9,285) (9,260)
Hedge costs and other loan fees, net 138 428 498
--------------------------------
Cash provided by (used for) financing activities (27) 24,036 7,580
--------------------------------
Increase (decrease) in cash (17,709) 25,775 (2,139)
Decrease (increase) in cash held in trust for section 1031 exchanges 3,101 (8,648) --
--------------------------------
Increase (decrease) in cash and cash equivalents (14,608) 17,127 (2,139)
Balance, beginning of period 17,127 -- 2,139
--------------------------------
Balance, end of period $ 2,519 $ 17,127 $ --
================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 7,501 $ 6,569 $ 2,353
Income taxes 6,533 7,711 2,129
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1997, 1996 and 1995
------------------------------------------------------
Additional Total
Common Paid-In Retained Stockholders'
(Amounts in thousands) Stock Capital Earnings Equity
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $23,139 $39,930 $298,035 $361,104
Net loss for 1995 -- -- (21,371) (21,371)
Common stock repurchased (1) (2) (21) (24)
Stock options exercised 44 660 -- 704
Cash dividends declared -- -- (9,264) (9,264)
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1995 23,182 40,588 267,379 331,149
Net income for 1996 -- -- 9,334 9,334
Stock options exercised 58 933 -- 991
Cash dividends declared -- -- (9,282) (9,282)
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1996 23,240 41,521 267,431 332,192
Net income for 1997 -- -- 16,602 16,602
Common stock repurchased (4) (4) (107) (115)
Stock options exercised 343 6,908 -- 7,251
Employee stock purchase plan -- (51) -- (51)
Cash dividends declared -- -- (9,334) (9,334)
- ----------------------------------------------------------------------------------------------
Balance, December 31, 1997 $23,579 $48,374 $274,592 $346,545
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of CalMat Co. (the Company) and all of its majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The Company uses the equity method of accounting for companies
where ownership is between 20 and 50 percent.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash balances
and highly liquid investments with a maturity of three months or less when
purchased.
INVENTORIES: Inventories are recorded when purchased or produced and are stated
at the lower of cost or market.
COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED: Costs in excess of the
fair value of net assets of businesses acquired are amortized on a straight-line
basis over periods not exceeding 40 years. Accumulated amortization of such
costs was $14.4 million and $12.8 million at December 31, 1997 and 1996,
respectively. The Company periodically assesses whether there has been a
permanent impairment in the value of goodwill and other intangible assets by
considering factors such as expected future operating income, current operating
results, trends and prospects, as well as the effects of demand, competition,
and other economic factors. Management believes no impairment has occurred.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is carried at
cost. Depreciation is computed using straight-line rates over estimated useful
lives (5 to 35 years for plant structures and components and 4 to 25 years for
machinery and equipment). Depletion of rock and sand deposits is computed by
the unit-of-production method based upon estimated recoverable quantities of
rock and sand. Significant expenditures which add materially to the utility or
useful lives of property, plant and equipment are capitalized. All other
maintenance and repair costs are charged to current operations. The cost and
related accumulated depreciation of assets replaced, retired or otherwise
disposed of are eliminated from the property accounts, and any gain or loss is
reflected in income.
RECLAMATION COSTS: The estimated costs of reclamation associated with mining
activities are accrued during production and are included in determining the
cost of production. The reserve for reclamation costs was $14.9 million and
$14.6 million at December 31, 1997 and 1996, respectively. Of these balances,
the non-current portions of $13.7 million and $13.6 million were included in
other liabilities and deferred credits at December 31, 1997 and 1996,
respectively.
INCOME TAXES: Income taxes are determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Deferred income taxes are determined by the liability method and arise from
differences in bases between tax reporting and financial reporting.
ENVIRONMENTAL: Environmental remediation expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do not contribute
to current or future revenue generation, are expensed. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and the
costs can be reasonably estimated. Estimated liabilities are not discounted to
present value. Generally, the timing of these accruals coincides with
completion of a feasibility study or the Company's commitment to a formal plan
of action. The reserve for environmental remediation costs was $5.3 million and
$5.5 million at December 31, 1997 and 1996, respectively. Of these balances,
the non-current portion of $4.5 million at both December 31, 1997 and 1996 was
included in other liabilities and deferred credits.
SELF-INSURANCE: The Company is self-insured up to certain levels for automobile
liability and general liability. The Company is also self-insured up to certain
levels for health care claims for eligible active and retired employees. The
Company accrues its estimated costs monthly in connection with its portion of
insurance losses/claims. Claims paid by the Company are charged against the
reserve. Additionally, the Company maintains a reserve for claims incurred but
not reported based on actuarially estimated costs.
21
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
REVENUE RECOGNITION: Sales and operating revenues are recorded upon shipment of
product, net of discounts, if any, and include revenue earned pursuant to the
terms of property leasing contracts. Gains and losses on real estate are
recorded upon consummation of the transaction. Other income relates primarily
to interest and dividend income, miscellaneous rental income and gains on sale
of fixed assets which are recognized in accordance with the terms of various
contractual arrangements or upon receipt (as applicable).
RECLASSIFICATION: During the fourth quarter of 1997, the Company adopted SFAS
No. 128, which establishes standards for computing and presenting earnings per
share (EPS). This statement simplifies the previous standard for computing EPS
and makes them comparable to international EPS standards. This statement
requires restatement of all prior period EPS data presented.
NOTE 2: ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Payroll, vacation and other benefits $13,928 $11,607
Profit sharing 5,537 4,248
Other 19,407 19,050
-----------------
$38,872 $34,905
=================
</TABLE>
NOTE 3: FEDERAL AND STATE TAXES
Income (loss) before income taxes and the related income tax expense (benefit)
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) Before Income Taxes and Cumulative
Effect of Change in Accounting Principle $23,644 $15,178 $(36,858)
=============================
Income Tax Expense (Benefit) $ 7,042 $ 5,844 $(15,487)
=============================
</TABLE>
22
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996 1995
- --------------------------------------------------------
<S> <C> <C> <C>
Federal Income Tax:
Currently payable $3,862 $ 4,672 $ 1,376
Deferred 1,484 (169) (13,475)
-----------------------------
5,346 4,503 (12,099)
=============================
State Income Tax:
Currently payable 1,029 1,327 532
Deferred 667 14 (3,920)
-----------------------------
1,696 1,341 (3,388)
-----------------------------
$7,042 $5,844 $(15,487)
=============================
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 36,240 $ 34,162
Real estate exchanges 29,441 29,104
Purchase accounting basis differences 13,247 13,076
Depletion and other land basis adjustments 3,715 4,952
Other 7,594 3,368
--------------------
Gross deferred tax liabilities 90,237 84,662
--------------------
Postretirement benefits (4,587) (4,592)
Impairment of long-lived assets (16,251) (18,304)
Net operating loss carryforwards (2,567) (2,954)
Reclamation and environmental accruals (8,266) (8,261)
Inventory valuation reserves (3,114) (4,079)
Compensation (4,007) (1,987)
Other (4,198) (2,981)
--------------------
Gross deferred tax assets (42,990) (43,158)
Valuation allowance 2,566 2,954
--------------------
$ 49,813 $ 44,458
====================
</TABLE>
A reconciliation of the income tax expense (benefit) to the federal statutory
income tax rate is as follows:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rates $8,275 $5,312 $(12,900)
Less effect of:
Federal tax benefit (expense) of state income tax 543 384 (1,180)
Percentage depletion 1,804 1,593 916
Goodwill and other amortization (462) (462) (462)
Settlement of tax audit 762 -- --
Other 282 (706) (75)
-----------------------------
Reported federal income tax expense (benefit) 5,346 4,503 (12,099)
State income tax expense (benefit) 1,696 1,341 (3,388)
-----------------------------
$7,042 $5,844 $(15,487)
=============================
</TABLE>
23
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1997, the Company had alternative minimum tax credit
carryforwards of approximately $2.7 million available to offset regular tax in
future years.
The Company's federal consolidated income tax returns have been examined and
settlements have been reached for all years through 1989. The Company believes
that adequate provision has been made for possible assessments of additional
taxes.
NOTE 4: NOTES AND BONDS PAYABLE
Notes and bonds payable consist of the following at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996
- -----------------------------------------------------
<S> <C> <C>
Senior notes $115,000 $115,000
Notes payable 2,927 -
Municipal improvement bonds 811 1,333
--------------------
Total 118,738 116,333
Less current portion 337 100
--------------------
Long-term portion $118,401 $116,233
====================
</TABLE>
At December 31, 1997, the Company had a formal committed revolving credit
facility with a group of banks totaling $125.0 million which will expire in
1999. The Company pays a facility fee on the committed facility. There were no
borrowings outstanding under this credit facility at December 31, 1997.
The $115.0 million of senior notes outstanding at December 31, 1997 and 1996
were issued pursuant to a note purchase agreement dated December 18, 1996
between the Company and a group of institutional investors. This private
placement of senior notes was issued in four tranches at interest rates ranging
from 7.19% through 7.66%, with maturities beginning in December 2003 through
December 2011.
The loan agreements contain certain covenants which address the incurrence of
additional debt, creation of liens, and maintenance of minimum net worth and
financial ratios.
Maturities of notes and bonds payable during the next five years are as
follows: 1998, $0.3 million; 1999, $0.2 million; 2000, $0.2 million; 2001, $0.2
million; and 2002, $2.3 million.
NOTE 5: STOCK OPTIONS AND STOCK PURCHASE PLANS
In 1997, the Company had three stock option plans: the 1987 Stock Option Plan,
which expired in April 1997, the 1990 Stock Option Plan and the 1993 Stock
Option Plan. Under these plans, the Company has authorized the issuance of
options up to 1,000,000, 600,000 and 900,000 shares of common stock for the
1987, 1990 and 1993 Plans, respectively, to executives and certain employees as
determined by the Stock Option Sub-Committee of the Management Development and
Compensation Committee of the Board of Directors. The price of the shares
subject to each option is set by the Committee but may not be less than the fair
market value of the shares at the date of grant. Options generally become
exercisable in four annual installments beginning one year after the date of
grant and expire ten years after the date of grant. In 1997 and 1996, 97,213
and 92,484 options expired, respectively. No options expired in 1995. Stock
option activity and the weighted average option exercise price for the years
1997, 1996 and 1995 are as follows:
24
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997 1996 1995
Weighted-Average Weighted-Average Weighted-Average
(Share amounts in thousands) Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the beginning of the year 2,027 $20.54 1,797 $21.28 1,899 $21.32
Granted 443 24.96 549 17.79 69 18.23
Exercised (341) 19.01 (58) 17.05 (45) 15.32
Forfeited and expired (152) 25.19 (261) 20.63 (126) 22.23
------------------------------------------------------------------------------
Outstanding at the end of the year 1,977 $21.43 2,027 $20.54 1,797 $21.28
==============================================================================
Exercisable at the end of the year 1,071 $21.44 1,229 $22.12 1,288 $22.16
==============================================================================
Available for future options 42 431 812
==============================================================================
</TABLE>
As of December 31, 1997, the stock options outstanding under the plans had an
exercise price between $17.25 and $30.50 and a weighted average remaining
contractual life of 6.1 years.
The weighted average fair value at date of grant for options granted during
1997, 1996 and 1995 was $7.23, $3.53 and $4.03 per option, respectively. The
fair value of options at date of grant was estimated using the Black Scholes
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 4.75 3.5 3.5
Interest rate 5.94% 6.31% 5.66%
Volatility 0.2716 0.1972 0.2561
Dividend yield 1.62% 2.15% 2.32%
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related Interpretations in accounting for its
stock option plans. Accordingly, no compensation cost has been recognized for
these plans. Had compensation cost for the Company's plans been determined
based on the fair value at the grant dates for awards under the plans consistent
with the method of SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company would have recorded stock-based compensation expense of $3.2 million
($1.9 million after tax or $0.08 per share) in 1997, $0.9 million ($0.7 million
after tax or $0.03 per share) in 1996 and $0.9 million ($0.7 million after tax
or $0.03 per share) in 1995.
In September 1987, the Company declared a dividend distribution of one
common share purchase right on each outstanding share of common stock. When
exercisable, each right will entitle its holder to buy one share of the
Company's stock at a price of $90 per share until September 2007. The rights
will become exercisable if a person acquires 25.0% or more of the Company's
stock or makes an offer, the consummation of which will result in the person's
owning 30.0% or more of the Company's stock. In the event the Company is
acquired in a merger, each right entitles the holder to purchase common stock of
the surviving company having a market value twice the exercise price of the
right. The rights may be redeemed by the Company at a price of $.05 per right
at any time prior to a person acquiring 25.0% of the Company's common stock.
Effective July 1, 1997, the Company adopted an Employee Stock Purchase
Plan to provide all employees the opportunity to purchase the Company's common
stock at a discount through payroll deduction. The price an employee pays for a
share of stock is 85% of the lower of the stock price at the first or at the
last business day of a calendar quarter. During 1997, 7,810 shares were
purchased by employees enrolled in the Plan.
25
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: EARNINGS PER SHARE
Basic and diluted earnings per share were computed using the method
prescribed by SFAS No. 128, "Earnings Per Share (EPS)." Basic EPS was computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted EPS is similar
to basic EPS except that the denominator was increased to include the number of
additional common shares that would have been outstanding if dilutive potential
common shares had been issued.
In accordance with SFAS No. 128, net income (loss) per common share
computations for the years ended December 31, 1997, 1996 and 1995 were as
follows (amounts and shares in thousands, except per share data):
<TABLE>
<CAPTION>
For the year ended December 31, 1997
-------------------------------------
Net Income Shares Per Share
-------------------------------------
<S> <C> <C> <C>
Basic EPS $ 16,602 23,313 $ 0.71
Effect of dilutive securities-options 411
-------------------------------------
Diluted EPS $ 16,602 23,724 $ 0.70
=====================================
For the year ended December 31, 1996
-------------------------------------
Net Income Shares Per Share
-------------------------------------
Basic EPS $ 9,334 23,226 $ 0.40
Effect of dilutive securities-options 37
-------------------------------------
Diluted EPS $ 9,334 23,263 $ 0.40
=====================================
For the year ended December 31, 1995
-------------------------------------
Net Income Shares Per Share
-------------------------------------
Basic EPS $(21,371) 23,153 $(0.92)
Effect of dilutive securities-options 23
-------------------------------------
Diluted EPS $(21,371) 23,176 $(0.92)
-------------------------------------
</TABLE>
NOTE 7: FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company enters into
interest rate swap agreements to manage its interest rate risk. Interest rate
swaps allow the Company to effectively convert a portion of its floating-rate
borrowings into fixed-rate obligations. The interest rate differential to be
received or paid is recognized over the lives of the agreements as an adjustment
to interest expense. Counter parties to these agreements are high credit quality
financial institutions, and nonperformance is considered remote. In the unlikely
event that a counter party fails to meet the terms of an agreement, the
Company's exposure is limited to the interest rate differential.
At December 31, 1997 and 1996 the Company had no outstanding interest rate
swaps.
26
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of periodic temporary investments of excess
cash and trade receivables. The Company places its temporary excess cash
investments in high-quality, short-term money market instruments through several
high credit quality financial institutions. A significant portion of the
Company's sales are to customers in the construction industry, and, as such, the
Company is directly affected by the well-being of that industry. However, the
credit risk associated with trade receivables is minimal due to the Company's
large customer base and ongoing control procedures which monitor the
creditworthiness of customers. The Company generally obtains lien rights on all
major projects. Historically, the Company has not experienced significant
losses on trade receivables.
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments." The estimated fair value amounts have
been determined by the Company using available market information and valuation
methodologies described below. However, considerable judgments are required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein may not be indicative of the amounts that the
Company could realize among willing parties in a current market transaction.
The carrying values of cash equivalents, trade receivables and accounts
payable approximate fair values due to the short-term maturities of these
instruments. The carrying amounts and estimated fair values of the Company's
other financial instruments at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------------------
(Amounts in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes receivable $ 3,740 $ 3,685 $ 2,842 $ 2,569
Notes and bonds payable 118,738 124,611 116,333 117,333
The methods and assumptions used to estimate the fair value of each
class of financial instruments are as follows:
</TABLE>
NOTES RECEIVABLE: The fair value has been estimated using the expected future
cash flows discounted at market interest rates.
NOTES AND BONDS PAYABLE: The fair value was estimated by discounting the future
cash flows using rates currently available for debt of similar terms and
maturity.
NOTE 8: RETIREMENT PLANS
The Company has a trusteed 401(k) and a profit-sharing plan, and a money
purchase pension plan to provide funds from which retirement benefits are paid
to substantially all salaried employees of the Company and its wholly owned
subsidiaries, including officers and directors who are also employees. Annual
contributions to these plans made by the Company approximate 15.0% of the
aggregate compensation paid or accrued each year to participants in the plan.
The Company also has a non-qualified, defined benefit Supplemental Executive
Retirement Plan (SERP) for certain key executives. Benefits earned under the
SERP are fully vested at age 55 and seven years of service, however, the full
amount of accrued benefit will not begin until age 62. The plan is unfunded and
had a projected benefit obligation of $2.9 million and $5.3 million at December
31, 1997 and December 31, 1996, respectively. The decrease from 1996 is due to
changes in the actuarial assumptions. Pension expense related to the plan was
$1.2 million and $1.1 million in 1997 and 1996, respectively. The Company also
contributes to various union pension plans, as specified by certain union
agreements, and non-union pension plans which cover substantially all hourly
employees. Contributions to all retirement plans charged to income totaled
$11.1 million in 1997, $9.9 million in 1996 and $7.9 million in 1995.
27
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company provides certain health care and life insurance benefits to eligible
retired employees. Salaried and non-union hourly participants generally become
eligible after reaching age 62 with 20 years of service or after reaching age 65
with 15 years of service. The health care plan is contributory and the life
insurance plan is noncontributory. The plans are unfunded.
The following table sets forth the plans' funded status reconciled with the
amount included in the caption other liabilities and deferred credits in the
Company's balance sheets at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated Postretirement Benefit Obligation
Retirees $ 4,010 $ 5,165 $ 6,224
Fully eligible active plan participants 562 630 675
Other active plan participants 1,480 1,472 1,488
---------------------------
6,052 7,267 8,387
Plan assets at fair value -- -- --
---------------------------
Accumulated Postretirement Benefit Obligation in excess of plan assets 6,052 7,267 8,387
---------------------------
Unrecognized prior service cost 1,169 1,348 1,528
Unrecognized net gain 3,621 2,178 628
---------------------------
Accrued postretirement benefit cost at December 31 $10,842 $10,793 $10,543
===========================
</TABLE>
The net periodic postretirement benefit cost for 1997, 1996 and 1995 included
the following components:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits attributed to service during the period $ 263 $ 290 $ 230
Interest cost on the Accumulated Postretirement Benefit Obligation 507 554 452
Net amortization (295) (180) (293)
---------------------------
Net periodic postretirement benefit cost $ 475 $ 664 $ 389
===========================
</TABLE>
For measurement purposes, a 10.9% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1997; the rate was assumed
to decrease gradually to 6.0% by 2011 and remain at that level thereafter. The
weighted-average discount rate used in determining the Accumulated
Postretirement Benefit Obligation was 7.0% in 1997, 7.5% in 1996 and 7.0% in
1995.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the Accumulated Post-
retirement Benefit Obligation as of December 31, 1997 by $0.7 million and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $0.1 million.
NOTE 9: SPECIAL CHARGES
The Company recorded a special charge of $2.0 million in the second quarter of
1995 relating to the consolidation of the Company's construction materials
operations. The net after-tax effect of this charge was $1.2 million, or $0.05
per share.
The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and For Long-Lived Assets to be Disposed Of" during the fourth quarter of
1995. This required accounting change resulted in a pre-tax charge of $45.0
million ($26.5 million after-tax, or $1.14 per share).
28
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 121 changed the method of determining and measuring impairment for long-
lived assets. For operating properties, the standard requires that impairment be
measured at the plant or specific property level; under previous accounting
rules it was acceptable to measure impairment at the regional or divisional
level. Further, if an impairment, as now defined, is identified, the standard
requires measurement of the impairment using fair value, which in most cases
requires the use of discounted cash flows, which is the principal reason for the
write-down of real estate development projects. Given the nature of the
Company's assets, the requirements resulted in substantially greater write-downs
than under previous accounting rules.
The $45.0 million pre-tax charge can be broken out as follows:
<TABLE>
- ----------------------------------------------
<S> <C>
Operating properties $24,648
Real estate development projects 14,821
Assets to be disposed of 5,531
-------
$45,000
=======
</TABLE>
Impairment charges for operating properties relate to sites where, due to
intense competition and/or difficult production environments, marginally
profitable or loss operations persist. Impairment charges for real estate,
including assets to be disposed of, stem from severe declines in California and
Arizona real estate values for properties acquired or development projects
committed to at the peak of those markets.
NOTE 10: COMMITMENTS AND CONTINGENCIES
The Company had surety bonds and standby letters of credit outstanding
totaling approximately $70.5 million at December 31, 1997, which collateralize
various insurance and performance obligations.
The Company has retained certain self-insurance risks with respect to
automobile and general liability and certain health care claims.
The Company has been named by the U.S. Environmental Protection Agency (EPA)
as a defendant in a civil action involving one "Superfund" cleanup site. The
Company is one of many entities so named. To date, the Company has contributed
approximately $300,000 to fund certain interim remedial actions at the site, as
part of two partial settlements of this matter (which in part remain subject to
court approval). The EPA recently reached a decision as to the Final Remedy to
be implemented for the site and currently estimates the total cost for
implementation to be shared by all parties to be $289 million. Although the
Company's share of any liability is still undetermined, and the ultimate outcome
of this action cannot be predicted with certainty, the Company believes that
this matter will be resolved without a material adverse effect on either its
financial position or results of operations. The Company's belief is based on
its position that the wastes attributed to it at the site were not hazardous,
its extremely small share of the waste at the site compared to wastes
attributable to the other defendants, and its belief that it has recourse to
insurance coverage for at least a substantial portion of any resulting
liability.
At two other sites, the Company has been named as a potentially responsible
party. With respect to one site, a settlement with the EPA has been entered
into, and with respect to the other, the EPA has indicated that it will not
pursue a claim against the Company.
The Company is subject to various legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions will
not have a material adverse effect on either the Company's results of
operations, cash flow or financial position.
29
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: BUSINESS SEGMENT INFORMATION
The Company operates principally in two business segments: Construction
Materials and Properties. Operations in the Construction Materials Division
include the mining and sale of aggregates (rock, sand and gravel), the
manufacture and sale of ready mixed concrete, and the manufacture and sale of
hot-mix asphalt. The Construction Materials Division also manufactures
GUARDTOP(R), an asphalt surface sealer, and is a distributor of paving
reinforcement fabric. These products are used primarily in commercial and
residential construction, public construction projects and projects to build,
expand and repair roads and highways.
The Construction Materials Division operates aggregates processing plants at
33 locations serving the Los Angeles, San Diego, Bakersfield, Fresno, Ventura,
Santa Barbara, Sacramento and San Francisco Bay areas of California; Phoenix and
Tucson, Arizona; and Albuquerque, New Mexico. Ready mixed concrete batch plants
are operated at 26 locations in these markets except for the Los Angeles,
Sacramento and San Francisco Bay areas. Of the 26 ready mixed concrete
locations, 11 are sites which also have aggregates processing plants. Asphalt
plants are operated at 33 locations in metropolitan Los Angeles, in San Diego,
the San Francisco Bay and San Joaquin Valley areas of California; Phoenix and
Tucson, Arizona; and Albuquerque, New Mexico. Of the 33 asphalt plant
locations, 18 are sites which also have aggregates processing plants and/or
ready mixed concrete plants.
CalMat's 37,000 acres of fee owned and leased lands are managed and overseen
by the Company's Properties Division in conjunction with the Resource Management
Department of the Construction Materials Division. The Resource Management
Department is responsible for the acquisition of all property used in the
Company's aggregates operations and for obtaining all necessary land use
entitlements for aggregates operations and planning for reclamation of the land
once reserves are depleted. The Properties Division is responsible for
maximizing the value of property not used in the construction materials business
by developing, selling or leasing these properties. Income sources for this
Division include rentals, landfill operations and self-storage facilities.
30
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Business segment information for the years ended December 31, is as follows:
<TABLE>
<CAPTION>
(Amounts in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Construction Materials $440,672 $377,452 $ 350,536
Properties - Operations 20,301 21,631 19,777
Properties - Real estate gains 5,377 5,500 4,133
Corporate and other 6,462 3,312 3,736
---------------------------------
Total $472,812 $407,895 $ 378,182
=================================
Income (loss) before income taxes:
Construction Materials $ 27,408 $ 17,134 $ 10,316
Properties - Operations 9,077 9,362 7,103
Properties - Real estate gains 5,377 5,500 4,133
Corporate and unallocated expenses, net (13,801) (11,678) (11,092)
Interest expense (7,713) ( 5,944) (2,675)
Other income 3,296 804 2,357
Special charges -- -- (47,000)
---------------------------------
Total $ 23,644 $ 15,178 $ (36,858)
=================================
Identifiable assets (as of December 31):
Construction Materials $493,737 $439,148 $ 428,437
Properties 106,551 117,360 102,233
Corporate and other 35,520 44,208 28,860
---------------------------------
Total $635,808 $600,716 $ 559,530
=================================
Depreciation, cost depletion and
amortization:
Construction Materials $ 31,856 $ 28,272 $ 27,552
Properties 2,490 2,674 2,729
Corporate and other 812 857 900
---------------------------------
Total $35,158 $ 31,803 $ 31,181
=================================
Capital expenditures and business expansion:
Construction Materials $59,229 $39,421 $61,108
Properties 5,407 14,862 8,365
Corporate and other 757 37 295
---------------------------------
Total $65,393 $54,320 $69,768
=================================
</TABLE>
Income (loss) from operations by business segment represents total revenues
less direct operating expenses, segment selling, general and administrative
expenses and certain allocated corporate general and administrative expenses.
Corporate and unallocated expenses include corporate administrative expenses and
support expenses not allocated to business segments. Assets classified as
corporate and other consist primarily of cash and cash equivalents, notes
receivable, general office facilities and other assets.
A substantial portion of the Company's revenues and income before income taxes
results from construction materials operations located in Southern California.
31
<PAGE>
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: QUARTERLY OPERATING RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1997 Quarter Ended
- ------------------------------------------------------------------------------------------------------------------------
(Unaudited; Amounts in thousands, except per share data) March 31 June 30 Sept. 30 Dec. 31 Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $90,619 $118,437 $136,343 $127,413 $472,812
Gross profit 10,905 22,012 26,458 18,673 78,048
Net income (loss) (638) 5,486 9,264 2,490 16,602
Net income (loss) per share - diluted /(a)/ (.03) .23 .39 .10 .70
<CAPTION>
1996 Quarter Ended
- ------------------------------------------------------------------------------------------------------------------------
(Unaudited; Amounts in thousands, except per share data) March 31 June 30 Sept. 30 Dec. 31 Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $82,656 $106,682 $116,560 $101,997 $407,895
Gross profit 9,989 18,543 19,987 12,213 60,732
Net income (loss) (524) 4,368 5,194 296 9,334
Net income (loss) per share - diluted /(a)/ (.02) .19 .22 .01 .40
</TABLE>
(a) The sum of the quarterly net income per share amounts may not equal the year
because quarterly and annual figures are required to be independently
calculated.
32
<PAGE>
CALMAT CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
- ----------------------------------------------------------------------------------------------------------------
Balance at Additions Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997:
Reserves deducted from assets to
which they apply:
Allowance for doubtful trade receivables.. $ 4,797 $ 1,524 $ -- $ 825(a) $ 5,496
Allowance for cash discounts.............. 512 3,333 -- 3,443(b) 402
Allowance for doubtful notes receivable... 546 168 -- 714
Reserves included in liabilities:
Environmental remediation................. 5,547 120 -- 333(c) 5,334
Reclamation............................... 14,583 1,527 -- 1,175(c) 14,935
-----------------------------------------------------------
Total................................... $25,985 $ 6,672 $ -- $5,776 $26,881
===========================================================
DECEMBER 31, 1996:
Reserves deducted from assets to
which they apply:
Allowance for doubtful trade receivables.. $ 4,176 $ 1,946 $ -- $1,325(a) $ 4,797
Allowance for cash discounts.............. 394 3,602 -- 3,484(b) 512
Allowance for doubtful notes receivable... 1,219 86 -- 759(a) 546
Reserves included in liabilities:
Environmental remediation.................. 5,388 944 -- 785(c) 5,547
Reclamation................................ 11,604 3,186 -- 207(c) 14,583
-----------------------------------------------------------
Total................................... $22,781 $ 9,764 $ -- $6,560 $25,985
===========================================================
DECEMBER 31, 1995:
Reserves deducted from assets to
which they apply:
Allowance for doubtful trade receivables.. $ 3,906 $ 3,368 $ -- $3,098(a) $ 4,176
Allowance for cash discounts.............. 348 2,790 -- 2,744(b) 394
Allowance for doubtful notes receivable... 938 404 -- 123(a) 1,219
Reserves included in liabilities:
Environmental remediation.................. 3,214 2,343 -- 169(c) 5,388
Reclamation................................ 5,019 7,767 -- 1,182(c) 11,604
-----------------------------------------------------------
Total................................... $13,425 $16,672 $ -- $7,316 $22,781
===========================================================
</TABLE>
______________________
Notes:
(a) Writeoffs of uncollectible accounts, less recoveries.
(b) Cash discounts allowed.
(c) Payments made.
33
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Except for information as to identification and business experience of
executive officers which is set forth in Part I of this report, the information
called for by Item 10 is incorporated herein by reference to the information
included under the caption "Election of Directors for a Term of One Year" on
pages 2 through 9 of the Company's Proxy Statement for the May 1998 Annual
Meeting of Stockholders ("Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated herein by reference to
the information included under the captions "Employment Agreements," "Summary
Compensation," "Option Grants for 1997," "Option Exercises and Year-End Value,"
and "Pension Plans" on pages 12 through 15 of the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by Item 12 is incorporated herein by reference to
the information included under the captions "Stock Ownership of Certain
Beneficial Owners and Management" and "Election of Directors for a Term of One
Year" on pages 2 through 9 of the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated herein by reference to
the information included under the caption "Election of Directors for a Term of
One Year" on pages 2 through 9 of the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
(1) Financial Statements:
See Index to Consolidated Financial Statements and Financial Statement
Schedule on page 15 of this Annual Report on Form 10-K.
(2) Financial Statement Schedule:
See Index to Consolidated Financial Statements and Financial Statement
Schedule on page 15 of this Annual Report on Form 10-K.
(3) Exhibits:
The following exhibits are included as part of the Company's 1997
Annual Report on Form 10-K as required by Item 601 of Regulation S-K.
The exhibits identified by asterisks are the management contracts and
compensatory plans or arrangements required to be filed as exhibits to
this Annual Report on Form 10-K. Stockholders may obtain copies of the
exhibits not presented herein upon written request to: Secretary,
CalMat Co., 3200 San Fernando Road, Los Angeles, CA 90065.
34
<PAGE>
Exhibit 3.1: CalMat Co. Certificate of Incorporation, as amended,
filed as Exhibit 3.1 to the Company's 1987 Annual
Report on Form 10-K, is incorporated herein by
reference.
Exhibit 3.2: Certificate of Amendment of Certificate of
Incorporation, filed May 20, 1992, with Delaware
Secretary of State, filed as Exhibit 3.2 to the
Company's 1992 Annual Report on Form 10-K, is
incorporated herein by reference.
Exhibit 3.3: CalMat Co. By-Laws, filed as Exhibit 3.3 to the
Company's 1993 Annual Report on Form 10-K, is
incorporated herein by reference.
Exhibit 4.1: Rights Agreement, dated as of September 22, 1987,
between CalMat Co. and Security Pacific National
Bank, filed as Exhibit 1 to the Company's Report on
Form 8-K, dated October 5, 1987, is incorporated
herein by reference.
Exhibit 4.2: First Amendment to Rights Agreement, dated as of
October 26, 1992, between CalMat Co. and Bank of
America, N.T.&S.A., formerly known as Security
Pacific National Bank, filed as Exhibit 4.2 to the
Company's 1992 Annual Report on Form 10-K, is
incorporated herein by reference.
Exhibit 4.3: Amendment #2, dated as of July 22, 1997, to the
Rights Agreement, dated as of September 22, 1987,
between CalMat Co., a Delaware corporation, and First
Chicago Trust Company of New York, a national banking
association, as Rights Agent, filed as Exhibit 4.3 to
the Company's Report on Form 10-Q for the Quarterly
Period Ended June 30, 1997, is incorporated herein by
reference.
Exhibit 4.4: Form 8-A for Registration of Certain Classes of
Securities, dated and filed with the Securities and
Exchange Commission on September 30, 1997, is
incorporated herein by reference.
Exhibit 4.5: Amendment #1 to Form 8-A for Registration of Certain
Classes of Securities, dated and filed with the
Securities and Exchange Commission on September 30,
1997, filed as Exhibit 4.1 to the Company's Report on
Form 10-Q for the Quarterly Period Ended September
30, 1997, is incorporated herein by reference.
Exhibit 10.1: Standby Letter of Credit Facility dated September 26,
1995, between CalMat Co. and ABN-AMRO Bank N.V.,
filed as Exhibit 10.1 to the Company's Report on Form
10-Q for the Quarterly Period Ended September 30,
1995, is incorporated herein by reference.
Exhibit 10.2: First Amended and Restated Credit Agreement dated as
of June 30, 1994, among CalMat Co., Bank of America
National Trust and Savings Association, as Agent, and
The Other Financial Institution Parties Hereto,
Arranged by BA Securities, Inc., filed as Exhibit
10.1 to the Company's Report on Form 10-Q for the
Quarterly Period Ended June 30, 1994, is incorporated
herein by reference.
Exhibit 10.3: Second Amendment, dated February 26, 1996, effective
December 31, 1995, to First Amended and Restated
Credit Agreement dated as of June 30, 1994, among
CalMat Co., Bank of America National Trust and
Savings Association, as Agent, and The Other
Financial Institution Parties Hereto, Arranged by BA
Securities, Inc., filed as Exhibit 10.3 to the
Company's 1995 Annual Report on Form 10-K, is
incorporated herein by reference.
Exhibit 10.4: Note Purchase Agreement, dated as of December 18,
1996, between CalMat Co. and each of the Purchasers
listed therein, filed as Exhibit 10.4 to the
Company's 1996 Annual Report on Form 10-K, is
incorporated herein by reference.
35
<PAGE>
*Exhibit 10.5: Amended and Restated CalMat Co. Supplemental
Executive Retirement Plan, effective February 1,
1996, signed by CalMat Co., filed as Exhibit 10.1 to
the Company's Report on Form 10-Q for the Quarterly
Period Ended June 30, 1996, is incorporated herein by
reference.
*Exhibit 10.6: First Amendment dated November 25, 1997 to the
Amended and Restated CalMat Co. Supplemental
Executive Retirement Plan, effective February 1,
1996.
*Exhibit 10.7: Restatement of Amended and Restated Employment
Agreement originally effective as of July 1, 1984,
between the Company and A. Frederick Gerstell,
executed on April 13, 1993, filed as Exhibit 10.7 to
the Company's 1995 Annual Report on Form 10-K, is
incorporated herein by reference.
*Exhibit 10.8: First Amendment to Restatement of Amended and
Restated Employment Agreement, dated April 13, 1993,
originally effective as of July 1, 1984, between the
Company and A. Frederick Gerstell, executed June 6,
1996, filed as Exhibit 10.2 to the Company's Report
on Form 10-Q for the Quarterly Period Ended June 30,
1996, is incorporated herein by reference.
*Exhibit 10.9: Supplemental Executive Retirement Plan Agreement,
entered into as of February 1, 1996, between the
Company and A. Frederick Gerstell, executed May 15,
1996, filed as Exhibit 10.3 to the Company's Report
on Form 10-Q for the Quarterly Period Ended June 30,
1996, is incorporated herein by reference.
*Exhibit 10.10: Amended and Restated Trust Agreement, dated April 13,
1993, by and between CalMat Co. and Wachovia Bank and
Trust Company, filed as Exhibit 10.6 to the Company's
1994 Annual Report on Form 10-K, is incorporated
herein by reference.
*Exhibit 10.11: First Amendment to Amended and Restated Trust
Agreement dated April 13, 1993, by and between CalMat
Co. and Wachovia Bank and Trust Company, effective
August 1, 1996, filed as Exhibit 10.1 to the
Company's Report on Form 10-Q for the Quarterly
Period Ended March 31, 1997, is incorporated herein
by reference.
*Exhibit 10.12: Master Trust Agreement entered into by and between
CalMat Co. and Wachovia Bank of North Carolina, N.A.,
as Trustee, effective July 1, 1996, filed as Exhibit
10.2 to the Company's Report on Form 10-Q for the
Quarterly Period Ended March 31, 1997, is
incorporated herein by reference.
*Exhibit 10.13: Amended Employment Agreement between the Company and
Scott J Wilcott dated January 15, 1990, filed as
Exhibit 10.6 to the Company's 1990 Annual Report on
Form 10-K, is incorporated herein by reference.
*Exhibit 10.14: Second Amendment to Employment Agreement between the
Company and Scott J Wilcott, dated April 8, 1991,
filed as Exhibit 10.11 to the Company's 1995 Annual
Report on Form 10-K, is incorporated herein by
reference.
*Exhibit 10.15: Third Amendment to Employment Agreement made
effective as of October 30, 1987, between the Company
and Scott J Wilcott, executed June 6, 1996, filed as
Exhibit 10.5 to the Company's Report on Form 10-Q for
the Quarterly Period Ended June 30, 1996, is
incorporated herein by reference.
*Exhibit 10.16: Supplemental Executive Retirement Plan Agreement,
entered into as of February 1, 1996, between the
Company and Scott J Wilcott, executed May 15, 1996,
filed as Exhibit 10.6 to the Company's Report on Form
10-Q for the Quarterly Period Ended June 30, 1996, is
incorporated herein by reference.
36
<PAGE>
*Exhibit 10.17: Amended Employment Agreement between the Company and
Paul Stanford dated August 25, 1992, filed as Exhibit
10.9 to the Company's 1992 Annual Report on Form 10-
K, is incorporated herein by reference.
*Exhibit 10.18: Second Amendment to Employment Agreement between the
Company and Paul Stanford, dated October 4, 1995,
filed as Exhibit 10.13 to the Company's 1995 Annual
Report on Form 10-K, is incorporated herein by
reference.
*Exhibit 10.19: Third Amendment to Employment Agreement made
effective as of May 31, 1991, between the Company and
Paul Stanford, executed June 6, 1996, filed as
Exhibit 10.7 to the Company's Report on Form 10-Q for
the Quarterly Period Ended June 30, 1996, is
incorporated herein by reference.
*Exhibit 10.20: Supplemental Executive Retirement Plan Agreement,
entered into as of February 1, 1996, between the
Company and Paul Stanford, executed May 15, 1996,
filed as Exhibit 10.8 to the Company's Report on Form
10-Q for the Quarterly Period Ended June 30, 1996, is
incorporated herein by reference.
*Exhibit 10.21: Letter Agreement Regarding Employment between the
Company and H. James Gallagher, dated August 10,
1993, executed August 12, 1993, filed as Exhibit
10.17 to the Company's 1993 Annual Report on Form 10-
K, is incorporated herein by reference.
*Exhibit 10.22: Amendment, dated December 15, 1996, to Letter
Agreement regarding Employment dated August 10, 1993,
between the Company and H. James Gallagher, filed as
Exhibit 10.19 to the Company's 1996 Annual Report on
Form 10-K, is incorporated herein by reference.
*Exhibit 10.23: Agreement between the Company and H. James Gallagher
dated December 15, 1996, and executed December 30,
1996, filed as Exhibit 10.20 to the Company's 1996
Annual Report on Form 10-K, is incorporated herein by
reference.
*Exhibit 10.24: Supplemental Executive Retirement Plan Agreement,
entered into as of February 1, 1996, between the
Company and H. James Gallagher, executed May 15,
1996, filed as Exhibit 10.9 to the Company's Report
on Form 10-Q for the Quarterly Period Ended June 30,
1996, is incorporated herein by reference.
*Exhibit 10.25: Letter Agreement Regarding Employment between the
Company and R. Bruce Rieser, dated January 20, 1995,
executed February 2, 1995, filed as Exhibit 10.16 to
the Company's 1995 Annual Report on Form 10-K, is
incorporated herein by reference.
*Exhibit 10.26: Amendment, dated December 15, 1996, to Letter
Agreement Regarding Employment, dated January 10,
1995, between the Company and R. Bruce Rieser, filed
as Exhibit 10.23 to the Company's 1996 Annual Report
on Form 10-K, is incorporated herein by reference.
*Exhibit 10.27: Agreement between the Company and R. Bruce Rieser,
dated December 15, 1996, and executed December 30,
1996, filed as Exhibit 10.24 to the Company's 1996
Annual Report on Form 10-K, is incorporated herein by
reference.
*Exhibit 10.28: Supplemental Executive Retirement Plan Agreement,
entered into as of February 1, 1996, between the
Company and R. Bruce Rieser, executed May 15, 1996,
filed as Exhibit 10.4 to the Company's Report on Form
10-Q for the Quarterly Period Ended June 30, 1996, is
incorporated herein by reference.
37
<PAGE>
*Exhibit 10.29: Supplemental Executive Retirement Plan Agreement,
entered into as of February 1, 1996, between the
Company and Edward J. Kelly, executed May 15, 1996,
filed as Exhibit 10.10 to the Company's Report on
Form 10-Q for the Quarterly Period Ended June 30,
1996, is incorporated herein by reference.
*Exhibit 10.30: Thrift and Profit Sharing Retirement Plan and Money
Purchase Pension Plan for Employees of CalMat Co.,
dated January 1, 1989, filed as Exhibit 10.8 to the
Company's 1989 Annual Report on Form 10-K, is
incorporated herein by reference.
*Exhibit 10.31: Trust Agreement pursuant to the Thrift and Profit
Sharing Retirement Plan and the Money Purchase
Pension Plan for Employees of CalMat Co., dated
October 24, 1989, filed as Exhibit 10.9 to the
Company's 1989 Annual Report on Form 10-K, is
incorporated herein by reference.
*Exhibit 10.32: Second Amended and Restated CalMat Co. Deferred
Compensation Plan, effective December 31, 1996,
executed December 1, 1996, filed as Exhibit 10.29 to
the Company's 1996 Annual Report on Form 10-K, is
incorporated herein by reference.
*Exhibit 10.33: 1987 Stock Option Plan for Executive and Key
Employees of CalMat Co., as amended, filed as Exhibit
4 to the Company's Registration Statement on Form S-8
(File Number 33-18760) effective December 19, 1987,
is incorporated herein by reference.
*Exhibit 10.34: 1990 Stock Option Plan for Executive and Key
Employees of CalMat Co., filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (File
Number 33-43558) effective October 28, 1991, is
incorporated herein by reference.
*Exhibit 10.35: Amended and Restated 1993 Stock Option Plan for
Officers, Directors and Key Employees of CalMat Co.,
filed as Exhibit "A" to the Company's Definitive
Proxy Statement filed with the Commission on March
16, 1994, and mailed to the Company's stockholders on
March 17, 1994, is incorporated herein by reference.
*Exhibit 10.36: 1998 Stock Option Plan for Officers, Directors and
Key Employees of CalMat Co., filed as Exhibit "B" to
the Company's Definitive Proxy Statement filed with
the Commission on or about April 8, 1998, and mailed
to the Company's stockholders on or about April 9,
1998, is incorporated herein by reference.
Exhibit 21.1: Subsidiaries of the Company.
Exhibit 23.1: Consent of Coopers & Lybrand L.L.P., certified public
accountants, to incorporation by reference in the
Registration Statements on Form S-8 (File Numbers 33-
18760, 33-43558 and 33-56301) and the related
prospectuses pertaining to the 1987 Stock Option Plan
for Executive and Key Employees of CalMat Co., the
1990 Stock Option Plan for Executive and Key
Employees of CalMat Co., and the Amended and Restated
1993 Stock Option Plan for Officers, Directors and
Key Employees of CalMat Co., respectively, is on page
41 of this Annual Report on Form 10-K.
Exhibit 27: Financial Data Schedule.
(b) Reports on Form 8-K:
There were no Form 8-K reports filed by the Company during the fourth
quarter of 1997.
38
<PAGE>
CALMAT CO.
PROPERTY OWNED AND LEASED
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
ACREAGE /(a)/
--------------------------------
JOINT
OWNED LEASED VENTURES TOTAL
--------------------------------
<S> <C> <C> <C> <C>
CONSTRUCTION MATERIALS /(b)/
Production and sales property........................... 10,538 7,393 17,931
Reserve property held for future production/not zoned... 3,979 1,115 5,094
Fully depleted property................................. 98 98
Reserve property held for future production/zoned....... 2,599 2,599
Joint ventures, partnerships, partially owned
subsidiaries............................................ 610 610
--------------------------------
Total Construction Materials Division............ 17,214 8,508 610 26,332
PROPERTIES:
Developable............................................. 915 13 928
Improved property/finished lots......................... 52 3 55
Improved property/fully developed....................... 53 2 55
Landfill/permitted...................................... 244 244
Public storage.......................................... 48 48
Property leased to others............................... 96 7 103
Miscellaneous properties /(C)/.......................... 8,825 8,825
--------------------------------
Total Properties Division...................... 10,233 12 13 10,258
Total All Divisions............................ 27,447 8,520 623 36,590
===============================
</TABLE>
______________________
(a) The Company's continuing program of evaluating the best use of property may
result in reclassification of properties between categories from time to
time.
(b) Certain land in the Construction Materials Division is leased on a short-
term basis as undeveloped property and the revenues generated are reported
in the Properties Division.
(c) Consists of numerous parcels which have limited access and of which
approximately 63% are located in the Mojave Desert, Kern County, California.
39
<PAGE>
CALMAT CO.
SCHEDULE OF ESTIMATED AGGREGATES RESERVES
AS OF DECEMBER 31, 1997
(AMOUNTS IN MILLIONS)
TONS OWNED TONS LEASED TOTAL TONS
---------- ----------- ----------
Aggregates Reserves................. 1,012.0 846.9 1,858.9
40
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of CalMat Co. and subsidiaries on Form S-8 (File Numbers 33-18760, 33-43558,
33-56301 and 333-28547) of our report dated February 20, 1998, on our audits of
the consolidated financial statements and the financial statement schedule of
CalMat Co. and subsidiaries as of December 31, 1997 and 1996, and for the years
ended December 31, 1997, 1996 and 1995, which report is included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 23, 1998
41
<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.
CalMat Co.
By: /s/ A. FREDERICK GERSTELL
----------------------------------
A. Frederick Gerstell
Chairman of the Board and
Chief Executive Officer
March 24, 1998
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 date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ---------------------------- ----------------------- --------------
<S> <C> <C>
/s/ A. FREDERICK GERSTELL March 24, 1998
- ---------------------------- Chairman of the Board
A. Frederick Gerstell and Chief Executive
Officer
/s/ H. JAMES GALLAGHER
- ----------------------------
H. James Gallagher Chief Financial Officer March 24, 1998
/s/ BRENT L. STUMME
- ----------------------------
Brent L. Stumme Corporate Controller March 24, 1998
/s/ JOHN C. ARGUE
- ----------------------------
John C. Argue Director March 24, 1998
/s/ ARTHUR BROWN
- ---------------------------- Director March 24, 1998
Arthur Brown
Director March 24, 1998
/s/ DENIS R. BROWN
- ----------------------------
Denis R. Brown
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------- ----------------------- --------------
<S> <C> <C>
- -----------------------------
Harry M. Conger Director
/s/ RAYBURN S. DEZEMBER Director March 24, 1998
- -----------------------------
Rayburn S. Dezember
/s/ RICHARD A. GRANT, JR. Director March 24, 1998
- -----------------------------
Richard A. Grant, Jr.
/s/ WILLIAM T. HUSTON Director March 24, 1998
- -----------------------------
William T. Huston
- -----------------------------
Edward A. Landry Director
/s/ THOMAS L. LEE Director March 24, 1998
- -----------------------------
Thomas L. Lee
/s/ THOMAS M. LINDEN
- ----------------------------- Director March 24, 1998
Thomas M. Linden
/s/ GEORGIA R. NELSON
- ----------------------------- Director March 24, 1998
Georgia R. Nelson
/s/ STUART T. PEELER Director March 24, 1998
- -----------------------------
Stuart T. Peeler
</TABLE>
43
<PAGE>
[LOGO OF CALMAT]
CalMat Co.
3200 San Fernando Road
Los Angeles, California 90065
(213) 258-2777
<PAGE>
FIRST AMENDMENT TO
THE AMENDED AND RESTATED CALMAT CO.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The AMENDED AND RESTATED CALMAT CO. SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN is amended, effective September 23, 1997, as follows:
Section 1.1. of the AMENDED AND RESTATED CALMAT CO. SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN shall be amended in its entirety to read as follows:
"1.1 "Actuarial Equivalent" shall mean an actuarial equivalent value of an
amount payable in a different form and/or at a different date computed in
accordance with actuarial principles, and based on the following actuarial
assumptions:
Mortality: 85% of the 1983 GAM Mortality Table
Initial Maximum Interest Rate: Four and One-Half Percent (4.5%)
Notwithstanding the previous sentence, if the interest rate equal to 200
basis points below the 30-year U.S. Treasury Bond yield as of any date
subsequent to September 23, 1997 is less than the maximum interest rate in
effect on such date, the maximum interest rate shall be adjusted downward
to an interest rate equal to 200 basis points below the 30-year U.S.
Treasury Bond yield on such date. Once the maximum interest rate has been
adjusted downward, it shall not be thereafter adjusted upward, except as
provided in Section 5.1. Moreover, the interest rate used by the Pension
Benefit Guaranty Corporation to value immediate and deferred annuities
shall be used at the time of a calculation under this Plan if its use will
generate a greater benefit for or payment to a Participant, or create a
greater contribution obligation to the Trust, than the maximum interest
rate as set forth herein and in effect at such time.
As the Committee deems necessary, in its sole discretion, the above
actuarial assumptions may be adjusted from time to time, and no
Participant shall be deemed to have any right, vested or nonvested,
regarding the continued use of any previously adopted actuarial
assumption; provided however that the mortality table shall assume no
shorter life expectancies than the one provided above and provided further
that the interest rate assumption shall in no event exceed the maximum
interest rate in effect at the time of the adjustment by the Committee."
IN WITNESS WHEREOF, CALMAT CO. has caused this First Amendment to the
AMENDED AND RESTATED CALMAT CO. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN to be
executed by its duly authorized officer this 25th day of November, 1997.
--
CALMAT CO.
BY: /s/ Paul Stanford
----------------------------------
ITS: Executive Vice President, General
---------------------------------
Counsel and Secretary
<PAGE>
ACTIVE SUBSIDIARIES OF CALMAT CO.
- ---------------------------------
(100% owned and California corporation, unless otherwise indicated)
Allied Concrete & Materials Co. (ARIZONA)
Allied Concrete, Inc. (ARIZONA) (Subsidiary of Allied Concrete & Materials Co.)
CalMat Co. of Arizona (ARIZONA)
CalMat Co. of New Mexico (NEW MEXICO)
CalMat Land Co.
CalMat Leasing Co. (ARIZONA)
CalMat of Central California
CalMat Properties Co.
CC Plaza Co. (Subsidiary of CalMat Properties Co.)
Mission Valley Development Co. (Subsidiary of CalMat Properties Co.)
River Vista Development Co. (Subsidiary of CalMat Properties Co.)
Kirst Construction Co., Inc.
Azusa Rock, Inc. (Subsidiary of Kirst Construction Co., Inc.)
Palomar Transit Mix Co.
Reliance Land Co.
Reliance Transport Co.
Rio Norte Este Co.
River Bend Corp.
Sanger Rock and Sand
Sloan Canyon Sand Co.
Triangle Rock Products, Inc.
Western Environmental Contracting, Inc.
Western Thermal Soils Co.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,519
<SECURITIES> 0
<RECEIVABLES> 81,203
<ALLOWANCES> (5,898)
<INVENTORY> 15,466
<CURRENT-ASSETS> 121,552
<PP&E> 736,668
<DEPRECIATION> (305,190)
<TOTAL-ASSETS> 635,808
<CURRENT-LIABILITIES> 73,812
<BONDS> 118,401
0
0
<COMMON> 23,579
<OTHER-SE> 322,966
<TOTAL-LIABILITY-AND-EQUITY> 635,808
<SALES> 460,973
<TOTAL-REVENUES> 472,812
<CGS> 394,764
<TOTAL-COSTS> 438,346
<OTHER-EXPENSES> 1,783
<LOSS-PROVISION> 1,326
<INTEREST-EXPENSE> 7,713
<INCOME-PRETAX> 23,644
<INCOME-TAX> 7,042
<INCOME-CONTINUING> 16,602
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,602
<EPS-PRIMARY> 0.71<F1>
<EPS-DILUTED> 0.70
<FN>
<F1>ESP-PRIMARY IS EQUAL TO ESP-BASIC
</FN>
</TABLE>
