___________________________________________________________________________
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-6117
SOUTHDOWN, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0296500
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1200 Smith Street
Suite 2400
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 650-6200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X
No
At September 30, 1994 there were 17.3 million common shares
outstanding.
___________________________________________________________________________
___________________________________________________________________________<PAGE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
INDEX
Page
No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet
September 30, 1994 and December 31, 1993 1
Statement of Consolidated Earnings
Three months and nine months ended
September 30, 1994 and 1993 2
Statement of Consolidated Cash Flows
Nine months ended September 30, 1994 and 1993 3
Statement of Consolidated Revenues
and Operating Earnings by Business Segment
Three months and nine months ended
September 30, 1994 and 1993 4
Statement of Shareholders' Equity
Nine months ended September 30, 1994 4
Notes to Consolidated Financial Statements 5
Independent Accountants' Review Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 18
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
(in millions)
September 30, December 31,
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8.3 $ 7.4
Accounts and notes receivable,
less allowance for doubtful
accounts of $10.7 and $7.0 83.5 75.7
Inventories (Note 2) 55.4 54.7
Deferred income taxes 19.0 25.5
Prepaid expenses and other 4.1 3.6
Total current assets 170.3 166.9
Property, plant and equipment,
less accumulated depreciation, depletion
and amortization of $295.6 and $276.9 583.5 593.2
Goodwill 71.5 74.5
Other assets:
Long-term receivables 19.4 20.6
Other 49.8 51.8
$ 894.5 $907.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1.0 $ 19.9
Accounts payable and accrued liabilities 101.2 91.9
Total current liabilities 102.2 111.8
Long-term debt 193.3 274.0
Deferred income taxes 121.4 127.6
Minority interest in consolidated
joint venture 30.0 28.8
Long-term portion of postretirement
benefit obligations 82.5 83.8
Other liabilities and deferred credits 14.7 18.8
544.1 644.8
Shareholders' equity:
Preferred stock redeemable at
issuer's option (Note 3) 152.0 67.9
Common stock, $1.25 par value 21.6 21.3
Capital in excess of par value 124.8 127.6
Reinvested earnings 52.0 45.4
350.4 262.2
$ 894.5 $907.0
</TABLE>
<PAGE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED EARNINGS
(unaudited)
<TABLE>
<CAPTION>
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues $ 167.2 $ 156.1 $ 444.2 $ 406.6
Costs and expenses:
Operating 124.0 114.4 321.1 292.5
Depreciation, depletion and amortization 10.6 9.8 32.4 31.3
Selling and marketing 4.4 4.8 13.4 13.9
General and administrative 8.9 9.9 30.7 33.1
Other (income) expense, net 2.4 4.4 (0.4) 4.7
150.3 143.3 397.2 375.5
Minority interest in earnings of consolidated
joint venture 1.4 1.4 2.4 2.2
151.7 144.7 399.6 377.7
Operating earnings 15.5 11.4 44.6 28.9
Interest expense (6.4) (9.5) (22.6) (30.3)
Earnings (loss) before income taxes and
cumulative effect of a change in
accounting principle 9.1 1.9 22.0 (1.4)
Federal and state income tax (expense) benefit (2.6) (0.4) (6.7) 1.1
Earnings (loss) before cumulative effect of a
change in accounting principle 6.5 1.5 15.3 (0.3)
Cumulative effect of a change in accounting
principle, net of taxes - - - (48.5)
Net earnings (loss) $6.5 $ 1.5 $15.3 $(48.8)
Dividends on preferred stock (Note 3) $(2.5) $(1.2) $(7.0) $ (3.7)
Earnings (loss) available for common stock $ 4.0 $ 0.3 $ 8.3 $(52.5)
Earnings (loss) per common share (Note 3
and Exhibit 11):
Primary -
Earnings (loss) before cumulative effect
of a change in accounting principle $0.23 $0.01 $0.46 $(0.24)
Cumulative effect of a change in accounting
principle, net of taxes - - - (2.86)
$0.23 $0.01 $0.46 $(3.10)
Fully diluted -
Earnings (loss) before cumulative effect
of a change in accounting principle $0.23 $0.01 $0.46 $(0.24)
Cumulative effect of a change in accounting
principle, net of taxes - - - (2.86)
$0.23 $0.01 $0.46 $(3.10)
Average shares outstanding (Exhibit 11):
Primary 17.7 17.2 17.8 16.9
Fully diluted 17.7 17.8 17.8 16.9
</TABLE>
<PAGE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
(in millions)
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Operating activities:
Net earnings (loss) $15.3 $(48.8)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of a change in accounting principle - 48.5
Depreciation, depletion and amortization 32.4 31.3
Deferred income tax provision 1.4 (2.5)
Amortization of debt issuance costs 2.7 2.1
Changes in operating assets and liabilities (8.5) 2.6
Minority interest in earnings of consolidated
joint venture 2.4 2.2
Other adjustments 2.0 3.0
Net cash provided by operating activities 47.7 38.4
Investing activities:
Additions to property, plant and equipment (21.1) (18.5)
Proceeds from asset sales 2.0 6.3
Other (3.8) 2.4
Net cash used in investing activities (22.9) (9.8)
Financing activities:
Additions to long-term debt 11.0 -
Reductions in long-term debt (110.7) (24.1)
Proceeds from sale of preferred stock 86.3 -
Dividends (4.9) (2.8)
Securities issuance costs (4.3) -
Changes in minority interest (1.3) (2.3)
Net cash used in financing activities (23.9) (29.2)
Net increase (decrease) in cash and cash equivalents 0.9 (0.6)
Cash and cash equivalents at beginning of period 7.4 12.5
Cash and cash equivalents at end of period $ 8.3 $11.9
</TABLE>
Cash payments for income taxes totaled $257,000 in 1994 and $1.9
million in 1993. The Company received a $15.7 Federal income tax refund in
1993 from the carryback to prior year of the 1992 tax loss. Interest paid,
net of amounts capitalized, was $18.1 million and $21.8 million in 1994 and
1993, respectively. The $48.5 million noncash operating charge in 1993 for
the cumulative effect of a change in accounting principle also resulted in
a noncash charge to deferred income taxes of $25.9 million and a noncash
credit to postretirement benefit obligations of $74.4 million. Noncash
investing activities in 1993 included the sale of a hazardous waste
processing facility for $5.6 million face value of a new issue of the
purchaser s preferred stock.
<PAGE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED REVENUES AND OPERATING EARNINGS
BY BUSINESS SEGMENT
(unaudited)
<TABLE>
<CAPTION>
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Contributions to revenues:
Cement $ 115.8 $ 109.6 $ 297.2 $ 277.6
Concrete products 53.6 49.0 156.8 129.6
Environmental services 8.9 8.3 24.6 27.5
Corporate and other 0.1 0.1 0.5 0.4
Intersegment sales (11.2) (10.9) (34.9) (28.5)
$ 167.2 $ 156.1 $ 444.2 $ 406.6
Contributions to operating earnings (loss)
before interest expense
and income taxes:
Cement $ 21.6 $ 21.8 $ 66.1 $ 61.1
Concrete products 3.3 0.5 6.2 (1.1)
Environmental services (1.1) (1.0) (4.2) (1.2)
Write-down of environmental
services assets (2.0) - (2.0) -
Corporate
General and administrative (5.0) (6.5) (19.5) (23.7)
Depreciation, depletion and
amortization (1.3) (1.1) (3.7) (3.3)
Miscellaneous income (expense) - (2.3) 1.7 (2.9)
$ 15.5 $ 11.4 $ 44.6 $ 28.9
</TABLE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
(in millions)
Capital
Preferred Stock Common Stock in exces of Reinvested
Shares Amount Shares Amount par value earnings
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 3.0 $ 67. 9 17.0 $ 21.3 $ 127.6 $ 45.4
Net earnings - - - - - 15.3
Issuance of Series D 1.7 86.3 - - - -
Preferred Stock (Note 3)
Dividends on preferred
stock (Note 3) - - - - - (7.0)
Issuance expense of
capital stock - - - - (4.0) -
Exercise of stock options - - 0.2 0.2 (0.2) (1.6)
Other (0.1) (2.2) 0.1 0.1 1.4 (0.1)
Balance at September 30, 1994 4.6 $ 152.0 17.3 $ 21.6 $ 124.8 $ 52.0
/TABLE
<PAGE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - Unaudited Consolidated Financial Statements:
The Consolidated Balance Sheet of Southdown, Inc. and subsidiary
companies (the Company) at September 30, 1994 and the Statements of
Consolidated Earnings, Consolidated Cash Flows, Consolidated Revenues
and Operating Earnings by Business Segment and Shareholders' Equity
for the periods indicated herein have been prepared by the Company
without audit. The Consolidated Balance Sheet at December 31, 1993 is
derived from the December 31, 1993 audited financial statements, but
does not include all disclosures required by generally accepted
accounting principles. It is assumed that these financial statements
will be read in conjunction with the audited financial statements and
notes thereto included in the Company's 1993 Annual Report on Form 10-
K, as amended by Form 10-K/A dated May 11, 1994.
In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the financial
position, results of operations and cash flows of the Company on a
consolidated basis and all such adjustments are of a normal recurring
nature. The interim statements for the period ended September 30,
1994 are not necessarily indicative of results to be expected for the
full year.
Note 2 - Inventories:
<TABLE>
<CAPTION>
(unaudited, in millions)
September 30, December 31,
1994 1993
<S> <C> <C>
Finished goods $13.9 $15.4
Work in progress 8.1 7.0
Raw materials 5.4 6.0
Supplies 28.0 26.3
$55.4 $54.7
</TABLE>
Inventories stated on the LIFO method were $17.8 million at
September 30, 1994 and $20.4 million at December 31, 1993 compared
with current costs of $25.7 million and $28.3 million, respectively.
Note 3 - Capital Stock:
Common Stock
At September 30, 1994, the Company had 17,259,000 shares of
common stock issued and outstanding.
<PAGE>
Preferred Stock Redeemable at Issuer's Option
Series A Preferred Stock - The Company had 1,994,000 shares of
Preferred Stock, $0.70 Cumulative Convertible Series A (Series A
Preferred Stock) issued and outstanding at September 30, 1994, and
1,999,000 shares issued and outstanding at December 31, 1993 and
September 30, 1993. Dividends paid on the Series A Preferred Stock
were approximately $350,000 and $1 million, respectively, during each
of the three and nine month periods ended September 30, 1994 and 1993.
Series B Preferred Stock - The Company had 917,000 shares of
Preferred Stock, $3.75 Convertible Exchangeable Series B (Series B
Preferred Stock) issued and outstanding at September 30, 1994, and
959,000 shares issued and outstanding at December 31, 1993 and
September 30, 1993. Dividends accrued on the Series B Preferred Stock
were approximately $860,000 and $900,000, respectively, during the
three months ended September 30, 1994 and 1993. Dividends accrued on
the Series B Preferred Stock were approximately $2.6 million and $2.7
million, respectively, during the nine months ended September 30, 1994
and 1993.
Series D Preferred Stock - On January 27, 1994, the Company
issued 1,725,000 shares of Preferred Stock, $2.875 Cumulative
Convertible Series D (Series D Preferred Stock) all of which were
outstanding at September 30, 1994. The net proceeds of approximately
$82 million were utilized to reduce long-term debt and to fund working
capital requirements. Dividends accrued on the Series D Preferred
Stock were approximately $1.3 million and $3.4 million, respectively,
during the three and nine month periods ended September 30, 1994.
Note 4 - Contingencies:
See Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources
- - Known Events, Trends and Uncertainties" for discussion of certain
contingencies.
Note 5 - Review by Independent Accountants:
The unaudited financial information presented in this report
has been reviewed by the Company's independent public accountants.
The review was limited in scope and did not constitute an audit of the
financial information in accordance with generally accepted auditing
standards such as is performed in the year-end audit of financial
statements. The report of Deloitte & Touche on its limited review of
the financial information as of September 30, 1994 and for the three
and nine month periods ended September 30, 1994 and 1993 follows.
<PAGE>
INDEPENDENT ACCOUNTANTS REVIEW REPORT
To the Shareholders and
Board of Directors of
Southdown, Inc.
Houston, Texas
We have reviewed the accompanying consolidated balance sheet
of Southdown, Inc. and subsidiary companies as of September 30, 1994,
and the related statement of consolidated earnings and the statement
of consolidated cash flows for the three and nine months ended
September 30, 1994 and 1993 and the statement of shareholders equity
for the nine months ended September 30, 1994. These financial
statements are the responsibility of the Company s management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public Accountants.
A review of the interim financial information consists principally of
applying analytical procedures to financial data and making inquiries
of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
Southdown, Inc. and subsidiary companies as of December 31, 1993 and
the related consolidated statements of earnings, shareholders equity,
and cash flows for the year then ended (not presented herein); and in
our report dated January 27, 1994, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet
as of December 31, 1993 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
Deloitte & Touche LLP
Houston, Texas
October 27, 1994<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Consolidated Third Quarter Earnings
Operating earnings for the third quarter of 1994 were $15.5
million compared with $11.4 million in the prior year quarter. Net
earnings for the third quarter of 1994 were $6.5 million, $0.23 per
share fully diluted, including a $2 million, $0.06 per share, charge
to adjust the carrying value of the Birmingham, Alabama waste
processing facility in conjunction with a proposed sale of that
facility. For the comparable quarter in 1993, net earnings were $1.5
million, $0.01 per share fully diluted.
Consolidated revenues in the third quarter of 1994 increased
7% over the same period of the prior year primarily because of
improved sales prices in both the Cement and Concrete Products
segments. Third quarter 1994 operating earnings improved 36% or $4.1
million over the same quarter of the prior year. The improvement
reflects a $2.8 million increase in operating earnings from the
Concrete Products segment over the comparable 1993 quarter. The
Concrete Products segment s continued improvement resulted primarily
from higher ready-mixed concrete sales prices. Cement segment
operating earnings were flat because improved sales prices were offset
by higher costs. Cement sales prices improved an average of $4.57 per
ton over the prior year quarter reflecting price increases implemented
at all locations except for Victorville, California. Excluding the
previously mentioned $2 million write-down, the operating loss
reported by the Environmental Services segment for the third quarter
of 1994 was approximately the same as the comparable quarter in 1993.
General and administrative expenses declined because the
current quarter included a $1.9 million credit to pension expense.
Miscellaneous expense in the prior year quarter included a $3 million
additional charge for remediation of an inactive cement kiln dust
disposal site at Fairborn, Ohio. The decline in interest expense
reflects significantly lower debt levels from the prior year quarter
resulting from the early retirement of $90 million of 12% Senior
Subordinated Notes Due 1997 (12% Notes); $45 million in January 1994
and the remainder in May 1994.
Consolidated Year-to-date Earnings
Operating earnings for the nine months ended September 30,
1994 were $44.6 million compared with $28.9 million for the prior year
period. Net earnings for the nine months ended September 30, 1994
were $15.3 million, $0.46 per share fully diluted, compared with a net
loss of $300,000, $0.24 per share, in the prior year excluding the
$48.5 million, $2.86 per share, initial charge related to the 1993
adoption of new accounting rules for postretirement benefits (SFAS No.
106).
Consolidated revenues in the 1994 period increased 9% over the
prior year period primarily because of improvements in sales volumes
and prices from the Concrete Products segment and improved prices in
the Cement segment. The year-over-year improvement in net earnings
resulted from an 8% increase in Cement segment operating earnings, a
$7.3 million improvement in the results reported by Concrete Products,
a 14% reduction in corporate expenses and a 25% reduction in interest
expense. The Cement segment benefited from an 8% improvement in the
weighted average sales price. The Concrete Products segment achieved
a significant improvement primarily as a result of a substantial
upturn in the Florida operations. The Company s California concrete
product s operating results included $1.4 million in gains realized
from sales of ready-mixed concrete mixer trucks. Despite
restructuring efforts in the Company s Environmental Services segment,
the year-to-date loss from operations increased to $4.2 million in
1994 compared with $1.2 million in the prior year period. The
Environmental Services segment s 1994 results were also adversely
impacted by the aforementioned $2 million write-down of the carrying
value of its Alabama facility.
General and administrative expenses declined because the prior
year period included a $3.2 million charge to accrue benefits under
SFAS No. 106, while additional accruals have not been necessary
subsequent to the July 1, 1993 effective date of the Company s amended
postretirement benefits plan. General and administrative expenses in
the current year period also benefited from the $1.9 million pension
credit discussed above, however this benefit was partially offset by
higher costs incurred by the Florida concrete products operations.
Miscellaneous income in 1994 included the realization of a $2.3
million gain stemming from the 1988 acquisition of Moore McCormack
Resources, Inc. (Moore McCormack), while the prior year period
included a $3 million remediation charge discussed previously. The
reduction in interest expense reflects the early retirement of the 12%
Notes also mentioned above. The Company s effective tax rate, which
includes state taxes, was lower than the federal statutory rate for
1994 because of the favorable impact of permanent differences related
primarily to statutory depletion in excess of cost depletion
applicable to the Company s limestone mining operations. The
effective tax benefit rate for 1993 was higher than the statutory rate
because of the positive impact of statutory depletion relative to an
estimated improvement in annual operating results.
Segment Operating Earnings
Cement
Third quarter - Operating earnings for the three month period
ended September 30, 1994 of $21.6 million were slightly lower than the
$21.8 million reported in the prior year quarter. Operating earnings
were nearly unchanged because improved sales prices were offset by
higher costs. Cement sales prices improved an average of $4.57 per
ton for the quarter, reflecting price increases implemented at all
locations except the southern California market area. Operating costs
were higher because of: (i) unscheduled repairs during the quarter;
(ii) a painting and plant clean-up program at the Fairborn, Ohio
plant; (iii) an unfavorable clinker inventory adjustment at the
Fairborn, Ohio plant and (iv) kiln damage resulting from an unusual
storm at the Victorville, California plant. The Company is in the
process of submitting a business interruption insurance claim related
to the Victorville storm and believes it has sufficient grounds to
enable it to eventually recover a substantial portion of the estimated
$600,000 in losses incurred in excess of the Company s deductible. No
such recovery was reflected in the results for the third quarter.
Year-to-date - Operating earnings for the nine months ended
September 30, 1994 were $66.1 million compared with $61.1 million in
the prior year period. Despite higher per unit operating costs,
operating earnings improved over the prior year period primarily
because of a $3.87 per ton increase in average cement sales prices.
Sales volumes, average unit price and cost data and unit
operating profit margins relating to the Company's cement operations
appear in the following table:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Tons of cement sold (thousands) 1,769 1,784 4,687 4,637
Weighted average per ton data:
Sales price (net of freight) $ 57.25 $52.68 $55.30 $ 51.43
Manufacturing and other plant
operating costs <F1> 43.31 38.37 41.83 39.23
Margin $13.94 $14.31 $13.47 $ 12.20
<FN>
<F1> Includes fixed and variable manufacturing costs, selling expenses, plant general
and administrative costs, other plant overhead and miscellaneous costs.
</TABLE>
The increase in the average sales price per ton for the nine
months ended September 30, 1994 reflects the realization of price
increases implemented in most of the Company s markets during the
previous twelve months. The increase in operating costs per ton for
the nine months ended September 30, 1994 compared with the prior year
period was attributable primarily to higher maintenance and repair
costs at several of the manufacturing facilities, some of which were
related to abnormally severe weather conditions in the first and third
quarters of 1994.
<PAGE>
Concrete Products
Third quarter - In addition to ready-mixed concrete, segment
operating results include the sale of concrete block, aggregate, fly
ash and various masonry supplies. Operating earnings for the Concrete
Products segment were $3.3 million in the third quarter of 1994
compared with $492,000 in the prior year quarter. Revenues increased
9% from the prior year quarter primarily because of improved sales
prices in both the Florida and southern California concrete products
operations.
Despite lower sales volumes, results for the southern
California operation improved over the prior year quarter because of
certain non-recurring earthquake recovery projects and a $304,000 gain
from the sale of certain additional used ready-mixed concrete mixer
trucks. Operating results for the Florida operations improved
significantly, reflecting a 10% improvement in sales prices from the
ready-mixed concrete operation as well as continuing improvement from
the concrete block, resale and fly ash operations.
Year-to-date - The Concrete Products segment's operating
earnings for the nine months ended September 30, 1994 were $6.2
million compared with a $1.1 million operating loss reported in the
prior year period. Revenues increased 21% over the prior year period
as sales volumes and prices from all of the product lines showed
improvement.
Results from the southern California operation improved $2.5
million primarily because of $1.4 million in gains realized on sales
of used mixer trucks and higher ready-mixed concrete sales volumes and
prices. Florida s operating results increased by approximately $4.8
million compared with the prior year period reflecting higher sales
volumes and sales prices from the ready-mixed concrete operation as
well as continuing improvement from the block, resale and fly ash
operations. Ready-mixed concrete sales volumes and prices in the
Florida market area improved by 12% and 7%, respectively, reflecting
the continued economic recovery in that region.
Sales volumes, unit price and cost data and unit operating
profit (loss) margins relating to the Company's ready-mixed concrete
operations appear in the following table:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Yards of ready-mixed concrete
sold (thousands) 883 920 2,695 2,420
Weighted average per cubic
yard data:
Sales price $ 48.93 $ 43.32 $ 47.29 $ 43.70
Operating costs <F1> 47.27 44.15 47.04 45.23
Margin $1.66 $ (0.83) $ 0.25 $ (1.53)
<FN>
<F1> Includes variable and fixed plant costs, delivery, selling, general and administrative and
miscellaneous operating costs, but excluding the $304,000 and $1.4 million gain,
respectively, realized on the sale of trucks for the three and nine months ended September
30, 1994.
</TABLE>
The increase in the weighted average sales price per yard
for the three and nine months ended September 30, 1994 compared with
the 1993 periods reflects higher sales prices in both the Company's
Florida and southern California markets. The increase in the weighted
average operating costs per yard for the three and nine months ended
September 30, 1994 compared with the 1993 periods is attributable to
higher material costs in Florida (primarily the cement sales prices
which increased as discussed under - Cement above).
<PAGE>
Environmental Services
Third quarter - Excluding the previously mentioned $2
million write-down, the operating loss of the Environmental Services
segment for the three months ended September 30, 1994 was
approximately the same as the prior year quarter. The closing of the
announced October 1994 sale of the Company s Alabama hazardous waste
processing facility was cancelled and the agreement to sell that
facility to the proposed purchaser was terminated by the Company. The
Company, however, will actively continue its efforts to sell the
facility.
Year-to-date - The Environmental Services segment reported
an operating loss of $4.2 million for the nine months ended September
30, 1994, excluding the previously mentioned $2 million write-down,
compared with an operating loss of $1.2 million in the prior year
period. The hazardous waste processing facilities had operating
earnings of $729,000 in the current period compared with $2.7 million
in the prior year period as operating results from all facilities
except Alabama were lower than the previous year because of abnormally
severe winter weather conditions and lower sales volumes and, on solid
hazardous waste derived fuel, lower margins. In March 1994, the
Company sold its Illinois hazardous waste processing facility for $1
million. No gain or loss was recognized on the transaction. Resource
recovery operations declined $1.4 million to an operating loss of
$619,000 in the current period primarily as a result of a 11% decrease
in solid hazardous waste derived fuel volumes burned and higher
professional fees. The decrease in solid hazardous waste derived fuel
volumes was primarily the result of shortages of available volumes
because of competitive market conditions.
Corporate
Third quarter - Corporate general and administrative
expenses were $5 million in the third quarter of 1994 compared with
$6.5 million in the same period of the prior year. The current
quarter included a $1.9 million credit to pension expense.
Miscellaneous expense in the third quarter of 1993 included
a $3 million additional charge for remediation of an inactive cement
kiln dust disposal site at Fairborn, Ohio.
Year-to-date - Corporate general and administrative
expenses for the first nine months of 1994 were substantially below
the prior year period primarily because 1993 included a $3.2 million
charge to accrue the estimated postretirement health care benefit
calculated under SFAS No. 106. Corporate general and administrative
expense also benefited from the $1.9 million pension credit discussed
above.
Miscellaneous income and expense during 1994 included a $2.3
million gain stemming from the 1988 acquisition of Moore McCormack and
first quarter charges totaling $1.7 million in conjunction with the
disposition of lawsuits. Miscellaneous expense in the prior year
quarter included the $3 million remediation charge discussed
previously.
<PAGE>
Liquidity and Capital Resources
The discussion of liquidity and capital resources included on
pages 37 through 47 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, as amended by Form 10-K/A dated May
11, 1994, should be read in conjunction with the discussion of
liquidity and capital resources contained herein.
The Company's Revolving Credit Facility totals $200 million
and matures in November 1996. The Revolving Credit Facility includes
$19.6 million of borrowing capacity that is restricted solely for
contingent obligations under an agreement between the Company and the
U.S. Maritime Administration related to certain shipping operations
owned previously by Moore McCormack. The facility also includes the
issuance of standby letters of credit up to a maximum of $95 million.
Substantially all of the Company's assets are pledged to secure this
facility. At September 30, 1994, $30 million of borrowings and $49.6
million of letters of credit were outstanding under the Revolving
Credit Facility and the $19.6 million of restricted capacity was
undrawn, leaving $100.8 million of unused and unrestricted capacity.
On May 1, 1994 the Company utilized borrowings under its
Revolving Credit Facility to redeem the remaining $45 million
outstanding principal amount of the Company s 12% Notes. The Company
had previously utilized borrowings under its Revolving Credit Facility
to redeem $45 million of the 12% Notes in January 1994. Internally
generated cash flow was utilized to fund working capital requirements
(primarily seasonal increases in accounts receivable) and to invest
approximately $21.1 million in plant, property and equipment. In late
January 1994, the Company realized approximately $82 million in net
proceeds from the sale of 1,725,000 shares of a new issue of preferred
stock. The net proceeds were used to prepay an $18 million promissory
note due in March 1994 and to reduce borrowings under the Company's
Revolving Credit Facility.
During the first nine months of 1993, the Company utilized
internally generated cash flow from operations, including a $15.7
million federal income tax refund from the carryback to prior years of
the 1992 tax loss and $6.3 million from asset sales primarily to (i)
finance the seasonal build-up of accounts receivable, (ii) make
scheduled debt principal payments of $24.1 million and (iii) make
investments of approximately $18.5 million in property, plant and
equipment.
Changes in Financial Condition
The change in the financial condition of the Company between
December 31, 1993 and September 30, 1994 reflects the realization of
approximately $82 million in net proceeds from the sale of a new issue
of preferred stock which was used to pay down debt, including $18
million classified as current maturities of long-term debt, and to
fund working capital requirements and capital expenditures. Accounts
and notes receivable increased because of the additional sales
activity occurring in the summer construction season relative to the
slower winter months. Accounts payable and accrued liabilities
increased because of the timing of payments on normal trade and other
obligations. Other liabilities and deferred credits decreased because
of payments made in conjunction with the shipping operations formerly
owned by Moore McCormack and other obligations.
Known Events, Trends and Uncertainties
Environmental Matters
The Company is subject to extensive Federal, state and local
air, water and other environmental laws and regulations. These
constantly changing laws regulate the discharge of materials into the
environment and may require the Company to remove or mitigate the
environmental effects of the disposal or release of certain substances
at the Company's various operating facilities.
The Federal Water Pollution Control Act, commonly known as
the Clean Water Act, provides comprehensive federal regulation of
various sources of water pollution. The Clean Air Act Amendments of
1990 provided comprehensive federal regulation of various sources of
air pollution, and established a new federal operating permit program
for virtually all manufacturing operations. The Clean Air Act
Amendments will likely result in increased capital and operational
expenses for the Company in the future, the amounts of which are not
presently determinable. By the end of 1995, the Company's U.S.
operations will have to submit detailed permit applications and pay
recurring permit fees. In addition, the U.S. Environmental Protection
Agency (U.S. EPA) is developing air toxics regulations for a broad
spectrum of industrial sectors, including portland cement
manufacturing. U.S. EPA has indicated that the new maximum available
control technology standards could require significant reduction of
air pollutants below existing levels prevalent in the industry.
Management has no reason to believe, however, that these new standards
would place the Company at a competitive disadvantage. The
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (CERCLA), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (SARA), as well as analogous laws in
certain states, create joint and several liability for the cost of
cleaning up or correcting releases to the environment of designated
hazardous substances. Among those who may be held jointly and
severally liable are those who generated the waste, those who arranged
for disposal, those who owned the disposal site or facility at the
time of disposal and current owners. Federal and state regulations
also hold owners or operators of hazardous waste facilities liable for
all costs of closure and post-closure monitoring and maintenance of
these facilities upon cessation of operations.
Hazardous waste processing facilities and the cement plants
that burn hazardous waste derived fuel (HWDF), by definition, involve
materials that have been designated as hazardous wastes. The
Company's utilization of HWDF in some of its cement kilns has
necessitated the familiarization of its work force with the more
exacting requirements and varying interpretations of applicable
environmental laws and regulations with respect to human health and
the environment. The failure to observe the exacting requirements of
these laws and regulations could jeopardize the Company's hazardous
waste management permits and, under certain circumstances, may expose
the Company to significant liabilities and costs of cleaning up
releases of hazardous wastes into the environment or claims by
employees or others alleging exposure to toxic or hazardous
substances. Management believes that the Company's current procedures
and practices for handling and management of materials are generally
consistent with industry standards and legal requirements and that
appropriate precautions are taken to protect employees and others from
harmful exposure to hazardous materials. However, because of the
complexity of operations and legal requirements, there can be no
assurance that past or future operations will not result in
operational errors, violations, remediation liabilities or claims by
employees or others alleging exposure to toxic or hazardous materials.
Owners and operators of industrial facilities and those who handle,
store or dispose of hazardous substances may be subject to fines or
other actions imposed by the U.S. EPA and corresponding state
regulatory agencies for violations of laws or regulations relating to
those substances. The Company has incurred fines imposed by various
environmental regulatory agencies in the past.
Cement kiln dust - Industrial operations have been conducted
at some of the Company's cement manufacturing facilities for almost
100 years. Many of the raw materials, products and by-products
associated with the operation of any industrial facility, including
those for the production of cement or concrete products, may contain
chemical elements or compounds that are designated as hazardous
substances. Some examples of such materials are the trace metals
present in cement kiln dust (CKD), chromium present in refractory
brick formerly widely used to line cement kilns and general purpose
solvents. Under the Bevill amendment, CKD is currently exempt from
management as a hazardous waste, except CKD which is produced by kilns
burning HWDF and which fails to meet certain criteria. In December
1993, as required by the Bevill amendment, the U.S. EPA issued a
Report to Congress on CKD and hearings were held on February 15, 1994.
The U.S. EPA is expected to issue its decision on the regulatory
status of CKD by January 31, 1995. A change in the status of CKD
would require the cement industry to develop new methods for handling
this high volume, low toxicity waste. Also, CKD that is infused with
water may produce a leachate with an alkalinity high enough to be
classified as hazardous and may also leach certain hazardous trace
metals present therein. Leaching has led to the classification of at
least three CKD disposal sites of other companies as federal Superfund
sites. Several of the Company's inactive CKD disposal sites around
the country have been under investigation by the Company, as well as
in some cases by federal and state environmental agencies, to
determine if remedial action is required at any of the sites and, if
so, the extent of any such remedial action. The Company has recorded
charges totaling $9.7 million as the estimated remediation cost for
one of these sites.
On a voluntary basis, without administrative or legal action
being taken, the Company is also investigating two other inactive Ohio
CKD disposal sites. The two additional sites in question were part of
a cement manufacturing facility that was owned and operated by a now
dissolved cement company from 1924 to 1945 and by a division of USX
Corporation (USX) from 1945 to 1975. On September 24, 1993, the
Company filed a complaint against USX, alleging that USX is a
potentially responsible party under CERCLA and under applicable Ohio
law, and therefore jointly and severally liable for costs associated
with cleanup of the larger of the two sites (USX Site). Based on the
limited information available, the Company has received two
preliminary engineering estimates of the potential magnitude of the
remediation costs for the USX Site, $8 million and $32 million,
depending on the assumptions used.
The Company intends to vigorously pursue its right to
contribution from USX for cleanup costs under CERCLA and Ohio law.
The Company believes that USX is a responsible party because it owned
and operated the USX Site at the time of disposal of the hazardous
substances, arranged for the disposal of the hazardous substances and
transported the hazardous substances to the USX Site. Therefore,
based on the advice of counsel, the Company believes there is a
reasonable basis for the apportionment of cleanup costs relating to
the USX Site between the Company and USX with USX shouldering
substantially all of the cleanup costs because, based on the facts
known at this time, the Company itself disposed of no CKD at the USX
Site and is potentially liable under CERCLA only because of its
current ownership of the USX Site. A court-supervised settlement
conference was held on September 30, 1994 and the parties are
presently engaged in settlement discussions.
Under CERCLA and applicable Ohio law, a court generally
applies equitable principles in determining the amount of contribution
which a potentially responsible party must provide with respect to a
cleanup of hazardous substances and such determination is within the
sole discretion of the court. In addition, no regulatory agency has
directly asserted a claim against the Company as the owner of the USX
Site requiring it to remediate the property, and no cleanup of the USX
Site has yet been initiated.
No substantial investigative work has been undertaken at
other CKD sites. Although data necessary to enable the Company to
estimate total remediation costs is not available, the Company
acknowledges that the ultimate cost to remediate the CKD disposal
problem in Ohio could be significantly more than the amounts reserved.
While the Company's facilities at several locations are
presently the subject of various local, state and federal
environmental proceedings and inquiries, including being named a
potentially responsible party with regard to Superfund sites,
primarily at several locations to which they are alleged to have
shipped materials for disposal, most of these matters are in their
preliminary stages and final results may not be determined for years.
Management of the Company believes, however, based solely upon the
information the Company has developed to date, that known matters can
be successfully resolved in cooperation with local, state and federal
agencies without having a material adverse effect, either individually
or in the aggregate, upon the consolidated financial statements of the
Company. However, because the Company's results of operations vary
considerably with construction activity and other factors, it is
possible that future charges for environmental contingencies could,
depending on their timing and magnitude, have a material adverse
impact on the Company's results of operations in a particular period.
Until all environmental studies, investigations, remediation work and
negotiations with potential sources of recovery have been completed,
however, it is impossible to determine the ultimate cost of resolving
these environmental matters.
Environmental Services Industry Trends
The environmental services industry remains adversely
affected by low volumes and excess disposal capacity. Despite
restructuring and narrowing the focus of the Company s Environmental
Services segment in late 1992, the segment has continued to generate
losses. Management will present a comprehensive evaluation of all
aspects of the Environmental Services segment for consideration by the
Company s Board of Directors at its regularly scheduled November 17,
1994 meeting.
Other Contingencies
Discontinued Moore McCormack Operations - In conjunction
with the acquisition of Moore McCormack in 1988, the Company assumed
certain liabilities for operations that Moore McCormack had previously
discontinued. These liabilities, some of which are contingent,
represent guarantees and undertakings related primarily to Moore
McCormack's divestiture of certain businesses in 1986 and 1987.
Payments relating to liabilities from these discontinued operations
were $1.6 million in the first nine months of 1994, $2.4 million in
fiscal 1993 and $2.5 million in fiscal 1992. The Company is either a
guarantor or directly liable under certain charter hire debt
agreements totaling approximately $9 million at September 30, 1994,
declining by approximately $4 million per year thereafter through
February 1997. Although the estimated liability under these
guaranties has been included in the liability for discontinued Moore
McCormack operations, enforcement of the guaranty, while not resulting
in a charge to earnings, would result in a substantial cash outlay by
the Company. However, the Company believes it currently has
sufficient borrowing capacity under its Revolving Credit Facility to
fund these guaranties, if required, as well as meet its other
borrowing needs for the foreseeable future.
Restructured Accounts Receivable - For many years, the
Company has from time-to-time offered extended credit terms to certain
of its customers, including converting trade receivables into longer
term notes receivable. This practice became more prevalent during
1992 and continued during 1993, particularly in the southern
California market area where many of the Company's customers have been
adversely affected by the prolonged recession in the construction
industry in that region. A group of four such customers were indebted
to the Company at September 30, 1994 in the amount of $19.3 million.
All of the notes and a portion of the accounts receivable,
approximately 80% of the $19.3 million, are collateralized.
During 1993, two of these customers defaulted on the payment
terms of their notes. The Company restructured its agreement with one
of the defaulting customers late in the second quarter of 1993 and
that customer was in compliance with the terms of the restructured
agreement as of September 30, 1994. The Company has stopped selling
cement on credit to the other customer in default and is presently
evaluating its options for collection of outstanding balances.
A third customer in the California group, while not in
default on its note, had difficulty in maintaining prompt payment for
its cement purchases and restructuring discussions were commenced in
late 1993. In March 1994, the Company withdrew a preliminary purchase
proposal to acquire certain ready-mixed concrete and aggregate assets
of this customer but restructuring discussions are continuing. The
Company is contractually committed to supply up to 90% of the cement
requirements of the other non-defaulting customer on extended credit
terms, provided this customer remains current with respect to both
current purchases and payments on its note.
In the opinion of management, the Company is adequately
reserved for credit risks related to its potentially uncollectible
receivables. However, the Company continues to assess its allowance
for doubtful accounts and may increase or decrease its periodic
provision as additional information regarding the collectibility of
these and other accounts become available.
Labor Matters - The hourly workers at the Company's
Fairborn, Ohio cement plant are represented by the International
Brotherhood of Boilermakers, Cement, Lime, Gypsum and Allied Workers
Division Local Lodge No. D-357 (Boilermakers). The Fairborn plant's
collective bargaining agreement with the Boilermakers expired in March
1994. A new four year collective bargaining agreement with the
Boilermakers was approved in October, 1994.
Claims for Indemnification - In late August 1993, the
Company was notified by Energy Development Corporation (EDC), the 1989
purchaser of the common stock of the Company s then oil and gas
subsidiary, Pelto Oil Company (Pelto), that EDC was exercising its
indemnification rights under the 1989 stock purchase agreement with
respect to a Department of Energy (DOE) Remedial Order regarding the
audit of crude oil produced and sold during the period September 1973
through January 1981 from an offshore, federal waters field in which
the Company s oil and gas subsidiary owned an interest. The DOE
alleged certain price overcharges and sought to recover a total of $68
million in principal and interest from Murphy Oil Corporation
(Murphy), as operator of the property. Murphy estimated the Company s
share of this total to be approximately $4 million. On January 24,
1994, the presiding Administrative Law Judge at the Federal Energy
Regulatory Commission (FERC) rendered a favorable decision for Murphy,
materially reducing the amount it potentially owed to the DOE. This
decision also had the effect of precluding the DOE from recovering
from Murphy for any alleged overcharges attributable to Pelto s in-
kind production. In late July 1994, Murphy notified the Company that
it had settled with the DOE by agreeing to pay $10.7 million and that
it would contact the Company later concerning the Company s alleged
share of this amount. The Murphy/DOE settlement has now been
concluded. The Company has advised Murphy that it does not accept
liability for any portion of the settlement amount paid to the DOE
other than its pro rata share of attorney s fees.
Prior to the sale of Pelto in 1989, Pelto entered into
certain gas settlement agreements, including one with Transcontinental
Gas Pipe Line Corporation (Transco). The Minerals Management Service
(MMS) of the Department of the Interior has reviewed the 1988
agreement Pelto entered into with Transco to determine whether a
payment to Pelto thereunder is associated with Federal or Indian
leases and whether, in its view, any additional royalties may be due
as a result of that payment. In late December 1993, the Company was
notified by EDC that EDC was exercising its indemnification rights
under the 1989 stock purchase agreement for Pelto with respect to this
matter. By letter dated September 30, 1994, the MMS s Houston
Compliance Division advised the Company that it had determined that a
$5.9 million payment made by Transco to Pelto was for a Contract Buy-
Down and was royalty bearing. The letter directed the Company to
compute and pay royalties on the $5.9 million sum. It also indicated
that upon receipt of the Company s payment, late payment charges would
be computed and assessed from May 1, 1987. The Company timely
appealed the MMS directive, thereby staying compliance with the letter
in accordance with the settlement of the so-called IPAA litigation.
The Company disagrees with the MMS determination; however,
if the MMS determination as to the $5.9 million dollar payment to
Pelto is ultimately upheld, the Company could have liability for
royalty on that sum, plus late payment charges.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) The information appearing under "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Known Events, Trends and
Uncertainties - Environmental Matters" is incorporated
hereunder by reference, pursuant to Rule 12b-23.
(b) In early March 1994, the Company and a number of other cement
producers and industry associations received requests for
information (Civil Investigative Demand or CID) relating to
the period from 1991 to April 1994 from the Antitrust Division
of the U.S. Department of Justice (DOJ). The DOJ is
investigating possible price-fixing and market allocation by
cement producers. The commencement of such an investigation
does not necessarily indicate that an enforcement action will
be commenced against any cement producer. The Company has
produced documents and answered certain interrogatories in
response to the CID. Because of the early stage of the
investigation, it is not possible to predict the outcome of
this matter.
(c) The Company owns two inactive CKD disposal sites in Ohio that
were formerly owned by a division of USX. In late July 1993,
a citizens environmental group brought suit in U.S. District
Court for the Southern District of Ohio, Western Division
(Greene Environmental Coalition, Inc. (GEC), an Ohio not-for-
profit corporation v. Southdown, Inc., a Louisiana corporation
- Case No. C-3-93-270) alleging the Company is in violation of
the Clean Water Act by virtue of the discharge of pollutants
in connection with the runoff of stormwater and groundwater
from the larger of these two sites (USX Site) and is seeking
injunctive relief, unspecified civil penalties and attorneys'
fees, including expert witness fees (GEC case). In September
1993, the Company filed a complaint against USX alleging that
with respect to the USX Site, USX is a potentially responsible
party and therefore jointly and severally liable for costs
associated with cleanup of the USX Site. (Southdown, Inc. v.
USX Corporation, Case No. C-3-93-354, U.S. District Court,
Southern District of Ohio Western Division) (USX case). On
July 5, 1994, the Court consolidated these cases, under the
caption In Re Southdown, Inc., Litigation, Case No. C-3-93-
270. On July 13, 1994, the Magistrate Judge issued a
Supplemental Report and Recommendation recommending that a USX
motion to dismiss filed in the USX case be denied in its
entirety, reconfirming his previous recommendation. On August
26, 1994, the Company responded to the motion to dismiss filed
by third-party defendant USX in the GEC case. The court has
not yet ruled in USX s motion to dismiss in the GEC case. A
court-supervised settlement conference was held on September
30, 1994 and the parties are presently engaged in settlement
discussions.
(d) As a result of an aggressive inspection and enforcement
initiative targeting combustion industry facilities, the
Company was among the group of owners and operators of 28
boilers and industrial furnaces, including several other major
cement manufacturers, from which the U.S. EPA is seeking over
$19.8 million in penalties. On September 27, 1993, the U.S.
EPA issued a Complaint and Compliance Order (Order) (United
States Environmental Protection Agency, Region 5 v. Southdown,
Inc. d/b/a Southwestern Portland Cement - Docket No. VW 27-
93) alleging certain violations of the Resource Conservation
and Recovery Act (RCRA) applicable to the burning or
processing of hazardous waste in an industrial furnace. The
alleged violations included, among others, exceedence of
certified feed rates for total hazardous waste at the
Company s Ohio cement manufacturing facility, failure to
demonstrate that CKD generated at the facility is excluded
from the definition of hazardous waste and storage at the
facility without a permit of CKD alleged to be hazardous by
virtue of that failure to demonstrate its exclusion from the
definition. The Order proposed the assessment of a civil
penalty in the amount of $1.1 million and closure of certain
storage silos containing the CKD that allegedly is hazardous
waste.
The Company has engaged counsel to respond to the U.S. EPA
Order and believes, after reviewing the complaint and the
Company s compliance with the applicable regulations, there
are substantial mitigating factors to the interpretations and
all allegations contained in the Order. Over the last several
months, the Company has engaged in extensive settlement
negotiations with U.S. EPA in order to resolve this matter in
a mutually satisfactory manner. As part of this effort, the
Company has supplied U.S. EPA with detailed legal arguments
and factual information that the Company and its counsel
believe support a substantial reduction in proposed penalties.
Although a final agreement between the parties has not yet
been reached, both parties have indicated that they expect to
reach an agreement in principle in the near future. Based on
the progress of the settlement negotiations to date, the
Company and its counsel believe the Order can be resolved
without material adverse effect on the consolidated financial
statements of the Company.
(e) On November 17, 1992, Region IV of the U.S. EPA advised the
Company of certain alleged violations of the National
Pollution Discharge Elimination System (NPDES) permit issued
to a ready-mixed concrete facility operated by the Company in
Tallahassee, Florida. The letter requested that Company
representatives attend a meeting on December 15, 1992 to show
cause why an enforcement action should not be commenced on
account of the alleged violations. U.S. EPA officials
indicated at the meeting that they would evaluate the
information provided by the Company and would determine what,
if any, enforcement action they believe is warranted. In
January 1993, the Company s attorneys were informed through a
telephone call that the U.S. EPA was planning to refer the
matter to the United States Department of Justice (DOJ) for
consideration of civil enforcement. The Company voluntarily
terminated operations at the facility in the Spring of 1993
and, in October 1993, the property was sold.
Although the Company no longer owns the property involved in
the alleged violation, on September 13, 1994, the DOJ, acting
on behalf of EPA, brought an action against the Company in the
United States District Court for the Northern District of
Florida alleging prior NPDES Clean Water Act violations and
seeking the statutory maximum penalty of $25,000 per day of
violation. The parties currently are engaged in negotiations
to settle this matter.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11 Statement of Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SOUTHDOWN, INC.
(Registrant)
Date: By: JAMES L. PERSKY
James L. Persky
Executive Vice President-Finance
and Administration
(Principal Financial Officer)
Date: By: ALLAN KORSAKOV
Allan Korsakov
Corporate Controller
(Principal Accounting Officer)
<TABLE>
<CAPTION>
Exhibit 11
SOUTHDOWN, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In millions, except per share amounts - Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Earnings (loss) for primary earnings per share:
Earnings (loss) before cumulative effect of a
change in accounting principle and
preferred stock dividends $ 6.5 $ 1.5 $ 15.3 $ (0.3)
Preferred stock dividends (2.5) (1.2) (7.0) (3.7)
Earnings (loss) for primary earnings per
share before cumulative effect of
a change in accounting principle 4.0 0.3 8.3 (4.0)
Cumulative effect of a change in accounting
principle - - - (48.5)
Net earnings (loss) for primary earnings
per share $ 4.0 $ 0.3 $ 8.3 $ (52.5)
Earnings (loss) for fully diluted earnings per
share:
Earnings (loss) before cumulative effect of a
accounting principle and preferred
stock dividends $ 6.5 $ 1.5 $ 15.3 $ (0.3)
Antidilutive preferred stock dividends (2.5) (1.2) (7.0) (3.7)
Earnings (loss) for fully diluted
earnings per share before
cumulative effect of a change
in accounting principle 4.0 0.3 8.3 (4.0)
Cumulative effect of a change in accounting
principle - - - (48.5)
Net earnings (loss) for fully diluted earnings
per share $ 4.0 $ 0.3 $ 8.3 $ (52.5)
Average shares outstanding:
Common stock 17.2 16.9 17.2 16.9
Common stock equivalents from assumed
exercise of stock options and warrants
(treasury stock method) 0.5 0.3 0.6 0.1
Total for primary earnings per share 17.7 17.2 17.8 17.0
Other potentially dilutive securities:
- additional common stock equivalent from
assumed exercise of stock options and
warrants at ending market price - 0.6 - 0.8
- assumed conversion of Series A
convertible preferred stock at
one-half share of common stock 1.0 1.0 1.0 1.0
- assumed conversion of Series B
convertible preferred stock at
2.5 shares of common stock 2.3 2.4 2.3 2.4
- assumed conversion of the Series D
convertible preferred stock at
1.51 shares of common stock 2.6 - 2.4 -
Total for fully diluted earnings per share 23.6 21.2 23.5 21.2
Less: Antidilutive securities
Stock options and warrants - - - (0.9)
Series A preferred stock (1.0) (1.0) (1.0) (1.0)
Series B preferred stock (2.3) (2.4) (2.3) (2.4)
Series D preferred stock (2.6) - (2.4) -
17.7 17.8 17.8 16.9
Earnings (loss) per share primary and fully
diluted:
Earnings (loss) before cumulative effect of
a change in accounting principle $ 0.23 $ 0.01 $ 0.46 $ (0.24)
Cumulative effect of a change in
accounting principle - - - (2.86)
$ 0.23 $ 0.01 $ 0.46 $ (3.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1994 AND STATEMENT OF
CONSOLIDATED EARNINGS FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS."
</LEGEND>
<MULTIPLIER> 1,000,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 94
<ALLOWANCES> 11
<INVENTORY> 55
<CURRENT-ASSETS> 170
<PP&E> 879
<DEPRECIATION> 296
<TOTAL-ASSETS> 895
<CURRENT-LIABILITIES> 102
<BONDS> 193
<COMMON> 22
0
152
<OTHER-SE> 177
<TOTAL-LIABILITY-AND-EQUITY> 895
<SALES> 444
<TOTAL-REVENUES> 444
<CGS> 0
<TOTAL-COSTS> 350
<OTHER-EXPENSES> 46
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> 22
<INCOME-TAX> 7
<INCOME-CONTINUING> 15
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
