FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 1-06124
LONE STAR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE No. 13-0982660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 First Stamford Place, P. O. Box 120014, Stamford, CT 06912-0014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-969-8600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
The number of shares outstanding of each of the registrant's classes
of common stock as of April 26, 1996:
Common Stock, par value $1 per share - 11,478,550 shares
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations - For the
Three Months Ended March 31, 1996 and 1995
(Unaudited)...........................................3
Consolidated Statements of Retained Earnings -
For the Three Months Ended March 31, 1996 and
1995 (Unaudited)......................................4
Consolidated Balance Sheets - March 31, 1996
(Unaudited) and December 31, 1995.....................5
Consolidated Statements of Cash Flows - For the
Three Months Ended March 31, 1996 and 1995
(Unaudited)...........................................6
Notes to Unaudited Consolidated Financial Statements.....7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........13
PART II. OTHER INFORMATION.......................................17
SIGNATURES.........................................................18
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
For the Three For the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
(Unaudited) (Unaudited)
Consolidated Income
Revenues:
Net sales $ 52,987 $ 52,711
Joint venture income 530 673
Other income, net 1,563 1,167
55,080 54,551
Deductions from revenues:
Cost of sales 44,941 46,575
Selling, general and administrative expenses 7,211 7,624
Depreciation and depletion 5,944 5,830
Interest expense 1,874 2,341
59,970 62,370
Loss before income taxes (4,890) ( 7,819)
Credit for income taxes 1,614 2,737
Net loss applicable to common stock $ (3,276) $( 5,082)
Weighted average common stock shares outstanding 11,475 12,067
Primary and fully diluted loss per common share $ (0.29) $( 0.42)
The accompanying Notes to Unaudited Consolidated Financial Statements are an
integral part of the Financial Statements.
LONE STAR INDUSTRIES, INC
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For the Three For the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
(Unaudited) (Unaudited)
Retained earnings, beginning of period $ 63,315 $ 29,333
Net loss (3,276) (5,082)
Dividends (574) -
Retained earnings, end of period $ 59,465 $ 24,251
The accompanying Notes to Unaudited Consolidated Financial Statements are an
intergral part of the Financial Statements.
LONE STAR INDUSTRIES, INC
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
1996 1995 _
(Unaudited)
Assets:
Current assets:
Cash, including cash equivalents of $34,320
and $47,323 $ 34,665 $ 50,049
Accounts and notes receivable, net 25,156 31,403
Inventories:
Finished goods 31,024 27,392
Work in process and raw materials 13,795 6,812
Supplies and fuel 21,480 21,272
66,299 55,476
Other current assets 5,767 5,289
Total current assets 131,887 142,217
Joint ventures 20,182 21,152
Property, plant and equipment 358,298 349,052
Less accumulated depreciation and depletion 43,397 37,655
314,901 311,397
Other assets and deferred charges 2,512 1,761
Total assets other than liquidating subsidiary 469,482 476,527
Net assets of liquidating subsidiary
(See Note 6) 4,399 4,399
Total assets $ 473,881 $ 480,926
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable $ 14,913 $ 11,183
Accrued liabilities 44,320 47,320
Other current liabilities 2,219 2,064
Total current liabilities 61,452 60,567
Senior notes payable 78,000 78,000
Postretirement benefits other than pensions 131,450 131,226
Pensions 5,291 6,847
Deferred income taxes 5,075 6,688
Other liabilities 33,297 33,459
Contingencies (See Notes 7 and 8)
Total liabilities other than liquidating subsidiary 314,565 316,787
Asset proceeds notes of liquidating subsidiary
(See Note 6) 4,399 4,399
Total liabilities 318,964 321,186
Shareholders' Equity:
Common stock 12,081 12,081
Warrants to purchase common stock 15,595 15,597
Additional paid-in capital 82,717 82,709
Retained earnings 59,465 63,315
Treasury stock (14,941) (13,962)
154,917 159,740
Total liabilities and shareholders' equity $ 473,881 $ 480,926
The accompanying Notes to Unaudited Consolidated Financial Statements are an
integral part of the Financial Statements.
LONE STAR INDUSTRIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the Three For the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net loss $ (3,276) $ (5,082)
Adjustments to arrive at net cash used by
operating activities:
Depreciation and depletion 5,944 5,830
Deferred income taxes (1,614) (2,742)
Changes in operating assets and liabilities:
Accounts and notes receivable 6,160 5,465
Inventories and other current assets (10,743) (9,231)
Accounts payable and accrued liabilities (598) (2,444)
Equity income, net of dividends received 970 (673)
Other, net (1,238) (1,313)
Net cash used by operating activities (4,395) (10,190)
Cash Flows from Investing Activities:
Capital expenditures (9,533) (6,797)
Proceeds from sales of assets - 806
Other, net 91 -
Net cash used by investing activities (9,442) (5,991)
Cash Flows from Financing Activities:
Exercise of warrants 6 -
Purchase of treasury stock (979) -
Dividends paid (574) -
Proceeds from exercise of options - 1,076
Reduction of production payment - (1,500)
Net cash used by financing activities (1,547) (424)
Net decrease in cash and cash equivalents (15,384) (16,605)
Cash and cash equivalents, beginning of period 50,049 55,398
Cash and cash equivalents, end of period $ 34,665 $ 38,793
The accompanying Notes to Unaudited Consolidated Financial Statements are an
integral part of the Financial Statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of the Company as of March 31, 1996, and the
results of operations and the cash flows for the three months ended March
31, 1996 and 1995.
The year-end consolidated balance sheet was derived from the Company's
audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. The financial
statements contained herein should be read in conjunction with the
financial statements and related notes in the Company's annual report on
Form 10-K for the year ended December 31, 1995. The Company's operations
are seasonal and, consequently, interim results are not indicative of the
results to be expected for a full year.
Certain previously reported amounts have been reclassified in order to
conform with current year presentation. In accordance with AICPA Statement
of Position No. 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP No. 90-7"), income tax benefits realized
from preconfirmation deferred tax assets were used first to reduce the
reorganization value in excess of amounts allocable to identifiable assets
and then used to increase additional paid-in capital.
Note 2 - Common Stock
In February 1996 the Board of Directors declared a $0.05 dividend per common
share, which was paid on March 15, 1996 to shareholders of record as of March
1, 1996.
As part of its stock repurchase program, in the first quarter of 1996 the
Company purchased in open market transactions 32,300 shares of treasury stock
at a total cost of $979,000.
Note 3 - Supplemental Disclosures of Cash Flow Information
Cash equivalents include the Company's marketable securities which are
comprised of short-term, highly liquid investments with original maturities
of three months or less. Interest paid during the three months ended March
31, 1996 and 1995 was $3,932,000 and $4,328,000, respectively. Income taxes
paid during the three months ended March 31, 1996 and 1995, were $229,000,
and $21,000, respectively.
Note 4 - Interest
Interest expense of $1,982,000 and $2,362,000 has been accrued for the three
months ended March 31, 1996 and 1995, respectively. Interest capitalized
during the three months ended March 31, 1996 and 1995, was $108,000 and
$21,000, respectively.
Note 5 - Earnings Per Share
Due to the Company having outstanding common stock equivalents in excess of
20% of the number of shares of outstanding common stock, primary and fully
diluted earnings per share of the Company are calculated using the modified
treasury stock method in accordance with Accounting Principles Board Opinion
No. 15, "Earnings per Share", except when primary and fully diluted earnings
per share is anti-dilutive. Primary earnings per share for the three months
ended March 31, 1996 and 1995 were calculated based on adjusted weighted
average shares outstanding of 11,475,043 and 12,067,108 and net loss of
$3,276,000 and $5,082,000, respectively.
Note 6 - Rosebud Holdings, Inc. Liquidating Subsidiary
In connection with its emergence from bankruptcy proceedings on April 14,
1994, the Company transferred certain non-core assets and their related
liabilities, certain other miscellaneous assets and a $5,000,000 cash
investment to a liquidating subsidiary, Rosebud Holdings, Inc. and its
subsidiaries (collectively "Rosebud") for liquidation, and Rosebud issued an
aggregate $138,118,000 initial principal amount of asset proceeds notes. As
of March 31, 1996, most of Rosebud's assets had been liquidated and its
remaining net assets consist of cash and unimproved real estate, net of
certain liabilities related to both sold and existing assets. An aggregate
$4,399,000 of outstanding asset proceeds notes remains as of March 31, 1996.
The Company is under no obligation to fund additional Rosebud working
capital requirements.
Rosebud's assets are included in the Company's March 31, 1996 consolidated
balance sheet at the face value of the notes of $4,399,000. This reflects the
expectation at March 31, 1996 that the net realizable value of the assets
will be, at a minimum, enough to repay the asset proceeds notes in their
entirety. Cash generated by Rosebud, in excess of the face value of the
remaining asset proceeds notes, accrued interest and Rosebud working capital
requirements, if any, will be paid to Lone Star.
The January 1996 interest payment of $220,000 related to the asset proceeds
notes was made in cash. Total principal and interest payments of
$133,719,000 and $16,958,000, respectively, had been made as of March 31,
1996.
In January 1996, Rosebud sold surplus property in Washington State for cash
proceeds of $1,358,000. In March 1996, Rosebud sold surplus property in
Virginia for cash proceeds of $200,000.
Note 7 - Environmental Matters
The Company is subject to extensive, stringent and complex federal, state
and local laws, regulations and ordinances pertaining to the quality and
the protection of the environment and human health and safety, requiring
the Company to devote substantial time and resources in an effort to
maintain continued compliance. Many of the laws and regulations apply to
the Company's former activities, properties and facilities as well as its
current operations. Changes to such regulations or the enactment of new
regulations in the future could require the Company to undertake capital
improvement projects or to cease or curtail certain current operations or
could otherwise substantially increase the capital, operating and other
costs associated with compliance. Moreover, there can be no assurances
that judicial or administrative proceedings, seeking penalties or
injunctive relief, will not be brought against the Company for alleged
non-compliance with applicable environmental laws and regulations relating
to matters as to which the Company is currently unaware. In addition, if
releases of hazardous substances are discovered to have occurred at
facilities currently or previously owned or operated by the Company, or at
facilities to which the Company has sent waste materials, the Company may
be subject to liability for the investigation and remediation of such
sites.
The federal Water Pollution Control Act, commonly known as the Clean Water
Act, provides a comprehensive federal regulatory scheme governing the
discharge of pollutants to waters of the United States. This regulatory
scheme requires that permits be secured for discharges of wastewater,
including stormwater runoff associated with industrial activity, to waters
of the United States. The Company has secured or has applied for all
required permits in connection with its wastewater and stormwater
discharges.
The Clean Air Act was amended in 1990 to provide for a uniform federal
regulatory scheme governing control of air pollutant emissions and permit
requirements. In addition, certain states in which the Company operates
have enacted laws and regulations governing the emission of air pollutants
and requiring permits for sources of air pollutants. As a result of the
1990 amendments to the Clean Air Act, the Company is required to apply for
federal operating permits for each of its cement manufacturing facilities
at various dates ranging from 1996 through 1999. As part of the
permitting process, the Company may be required to install equipment to
monitor emissions of air pollutants from its facilities. In addition, the
Clean Air Act amendments require the United States Environmental
Protection Agency ("EPA") to develop regulations directed at reducing
emissions of toxic air pollutants from a variety of industrial sources,
including the portland cement manufacturing industry. As part of this
process, the EPA will identify maximum available control technology
("MACT") for the reduction of emissions of air toxins from cement
manufacturing facilities. Following the EPA's promulgations of MACT for
the cement industry, the Company, like others in the industry, may be
required to install additional control technology at its cement
manufacturing facilities and meet more stringent air emissions standards.
On March 20, 1996, the EPA announced proposed separate, more stringent
MACT standards for those cement manufacturing facilities (like Lone Star's
Greencastle and Cape Girardeau plants) that burn hazardous waste fuels
("HWF"). These standards, which are subject to public comment and are not
anticipated by the Company to be in full force and effect prior to the end
of 1996, are extremely lengthy and complex and are being reviewed by the
Company, but depending on their terms when they become effective could
have the effect of limiting or eliminating the use of HWF at one or both
facilities.
Cement kiln dust ("CKD"), a by-product of cement manufacturing, is
currently exempted from regulation as a hazardous waste pursuant to the
Bevill Amendment to the Resource Conservation and Recovery Act ("RCRA").
However, on January 31, 1995 the Environmental Protection Agency ("EPA")
issued a regulatory determination regarding the need for regulatory
controls on the management, handling and disposal of CKD. Generally, the
EPA regulatory determination provides that the EPA intends to draft and
promulgate regulations imposing controls on the management, handling and
disposal of CKD that will be based largely on selected components of the
existing RCRA hazardous waste regulatory program, tailored to address the
specific regulatory concerns posed by CKD. The EPA regulatory
determination further provides that new CKD regulations will be designed
both to be protective of the environment and to minimize the burden on
cement manufacturers. While it is not possible to predict at this time
what, if any, new regulatory controls on the management, handling and
disposal of CKD or what increased costs (or range of costs), if any, would
be incurred by the Company to comply with these requirements, the EPA has
recently announced that the regulations will be promulgated through a
rulemaking scheduled to be completed in mid-1997. The types of controls
being considered by the EPA include fugitive dust emission controls,
restrictions for landfills located in sensitive areas, groundwater
monitoring, standards for liners and caps, metals limits and corrective
action for currently active units.
On July 20, 1995, the State of Indiana made a determination that the CKD
stored at the Company's Greencastle plant is a type I waste and requested
that the Company apply for a formal permit for an on-site landfill for the
CKD. The Company understands that similar notices were sent to other
cement manufacturers in the State of Indiana. The Company is protesting
this determination through legal channels and has received a stay to allow
it to demonstrate that current management practices pose no threat to the
environment. The Company believes that the State's determination
ultimately will be reversed or the Company will receive the needed permit
or other adequate relief, such as an agreed order requiring certain
additional waste management procedures that are less stringent than those
required for type I wastes. If the Company is not successful in this
regard, however, like other Indiana cement producers, the Greencastle
plant could incur substantially increased operating and capital costs.
The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are
the Company's two cement manufacturing facilities using hazardous waste
fuels ("HWF") as a cost saving energy source, are subject to strict
federal, state and local requirements governing hazardous waste treatment,
storage and disposal facilities, including those contained in the Boiler
and Industrial Furnace Regulations promulgated under RCRA (the "BIF
Rules"). These facilities qualified for and operate under interim status
pursuant to RCRA and the BIF Rules. While Lone Star believes that it is
currently in compliance with the extensive and complex technical
requirements of the BIF Rules, in the past Lone Star has been involved in
certain environmental enforcement proceedings seeking civil penalties and
injunctive relief for past non-compliance, and there can be no assurances
that the Company will be able to maintain compliance with the BIF Rules or
that changes to such rules or their interpretation by the relevant
agencies or courts might not make it more difficult or cost-prohibitive to
continue to burn HWF. As a result of a court decision vacating a BIF
Rules air emission standard, the Company temporarily curtailed its use of
HWF at the Greencastle plant. The Company completed compliance testing in
August 1995, has recertified under interim status and has commenced
burning HWF.
The Company is currently engaged in the process of securing the permit
required under RCRA and the BIF Rules for the Cape Girardeau plant. The
Company anticipates that the Greencastle plant also will go through this
permitting process in late 1996. These permits are a requirement to
enable Lone Star to continue the use of HWF at those facilities. The
permitting process is lengthy and complex, involving the submission of
extensive technical data. There can be no assurances that the Company
will be successful in securing a final RCRA permit for either or both of
its HWF facilities. In addition, if received, the permits could contain
terms and conditions with which the Company cannot comply or could require
the Company to install and operate costly control technology equipment.
The Texas Natural Resource Conservation Committee ("TNRCC") has issued a
notice of violations in respect of certain air permitting application
matters at the Company's Maryneal, Texas plant. The TNRCC has also
investigated certain solid waste and water matters, and has had two
conferences with the Company concerning all of these matters. The TNRCC
has advised the Company that it will propose formal enforcement action in
respect of the Company's air permits, which could include a penalty and
injunctive relief, and will require certain additional safeguards in
respect of solid waste disposal. The Company does not expect that these
matters will have a material adverse affect on its Maryneal, Texas
operations.
Past operations of the Company, certain of its subsidiaries, or its
predecessors have resulted in releases of hazardous substances at sites
currently or formerly owned by the Company and certain of its subsidiaries
or where waste materials generated by the Company have been disposed. CKD
and other materials were placed in depleted quarries and other locations
for many years. The Company has been named by the EPA as a potentially
responsible party for the investigation and remediation of several
Superfund sites. Available factual information indicates that the
Company's disposal of waste at these sites (other than sites that are
remediated or as to which the Company has entered into settlement
agreements with the EPA) was small or non-existent, and the Company may
have certain defenses arising out of its reorganization. In certain
instances the Company has availed itself of settlement offers it has found
attractive. The Company recently received a letter from the EPA Region 4
reasserting a claim for approximately $830,000 of oversight costs
associated with the Company's cleanup of the site of a former woodtreating
operation in Dania, Florida. The Company plans to contest this claim.
The Company is also reviewing certain of its inactive properties to
determine if any remedial action may be required at these sites.
Note 8 - Litigation
From time to time the Company is named as a defendant in lawsuits
asserting product liability for which the Company maintains insurance
coverage. In late 1995 an office building in Boston, Massachusetts,
constructed in 1983 using concrete pilings produced by San-Vel Concrete
Corporation ("San- Vel"), an inactive Lone Star subsidiary, was demolished
by order of the City of Boston based upon an engineering report that the
pilings were unreliable. The owner of the demolished building has notified
the Company, among others, that it intends to hold responsible parties
liable. At the request of the City of Boston, San-Vel has provided a list
of the approximate twenty-five other buildings built in that City between
1980 and 1990 using San-Vel pilings. The City has reportedly inspected
these buildings visually, without noting any apparent piling failure,
although engineering studies are being conducted with final results
expected in mid-1996. The Company believes that the cement component of
the concrete used to produce the pilings in certain of these buildings,
including the demolished building, was produced by it at one of its former
cement plants. There has been no indication that the cement was
defective. The Company is conducting an investigation into these matters
and believes that it has both insurance coverage and good defenses to any
claim of liability that may be asserted against it relating to the
demolished building.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company believes that cash and marketable securities on hand of
$34.7 million and funds from operations will be adequate to cover
current working capital and capital expenditure needs.
Cash outflows from operating activities of $4.4 million for the first
three months of 1996 primarily reflects the funding of operating
requirements.
During the first three months of 1996, the Company used $9.4 million
for investing activities primarily representing capital expenditures.
Net cash outflows from financing activities of $1.5 million reflects
the purchase of treasury stock and the payment of a cash dividend.
Working capital on March 31, 1996 was $70.4 million, compared to $81.7
million at December 31, 1995. Current assets decreased $10.3 million
principally due to lower marketable securities and accounts receivable
reflecting the seasonal nature of the Company's business, partly
offset by higher inventory and prepaid expenses. Current liabilities
increased $0.9 million primarily due to higher accounts payable partly
offset by lower accrued expenses and interest.
Investments in joint ventures decreased $1.0 million reflecting a $1.5
million cash dividend received partly offset by equity income from
Kosmos Cement Company. Net property, plant and equipment increased
$3.5 million reflecting capital expenditures partly offset by
depreciation. The pension liability decreased by $1.6 million,
primarily reflecting payments made during the three-month period ended
March 31, 1996 in excess of expenses.
The carrying value on the Company's books of net assets of Rosebud and
the related asset proceeds notes of $4.4 million remained unchanged
from December 31, 1995, as no additional principal payments were made
during the first quarter of 1996.
In February 1996, the Company's Board of Directors declared a $0.05
per share dividend paid on March 15, 1996 to shareholders of record as
of March 1, 1996. This dividend represents the fourth consecutive
quarterly cash dividend paid since the Company resumed dividend
payments in June 1995.
As part of its stock purchase program, during the first quarter of
1996 the Company repurchased in open market transactions an additional
32,300 shares of treasury stock at a total cost of approximately $1.0
million.
The Company is subject to extensive, stringent and complex federal,
state and local laws, regulations and ordinances pertaining to the
quality and the protection of the environment and human health and
safety, requiring the Company to devote substantial time and resources
in an effort to maintain continued compliance. Many of the laws and
regulations apply to the Company's former activities, properties and
facilities as well as its current operations. Changes to such
regulations or the enactment of new regulations in the future could
require the Company to undertake capital improvement projects or to
cease or curtail certain current operations or could otherwise
substantially increase the capital, operating and other costs
associated with compliance. Morever, there can be no assurances that
judicial or administrative proceedings, seeking penalties or
injunctive relief, will not be brought against the Company for alleged
non-compliance with applicable environmental laws and regulations
relating to matters as to which the Company is currently unaware. In
addition, if releases of hazardous substances are discovered to have
occurred at facilities currently or previously owned or operated by
the Company, or at facilities to which the Company has sent waste
materials, the Company may be subject to liability for the
investigation and remediation of such sites.
The Company believes that it has adequately provided for costs related
to its ongoing obligations with respect to the known environmental
liabilities resolved in connection with the bankruptcy proceedings and
other known unresolved environmental liabilities. Expenditures for
environmental liabilities during the three months ended March 31, 1996
did not have a material effect on the financial condition of the
Company.
Results of Operations
Net Sales
Consolidated net sales of $53.0 million for the first three months of
1996 were $0.3 million above the comparable prior-year period. The
increase in net sales reflects the cumulative impact of cement price
increases implemented during the last three quarters of 1995 and
higher average net realized ready-mixed concrete selling prices,
partly offset by lower shipments of construction aggregates.
Cement operations recorded sales for the first three months of 1996 of
$42.9 million, a $2.0 million increase over the comparable prior-year
period. Cement shipments for the first three months were 4% below the
comparable 1995 period due to prolonged winter weather conditions
throughout the midwestern states during 1996. The decrease in
shipments was more than offset by an 8% increase in 1996 average
cement net realized selling prices. Cement price increases of $3 to $5
per ton have been announced effective April 1996.
Sales of construction aggregates for the first three months of 1996
were $3.1 million. This represents a $2.6 million decrease from the
comparable prior-year period primarily due to the October 1995 sale of
the Nova Scotia aggregates operation, combined with lower shipments by
New York Trap Rock, resulting from harsh winter weather conditions in
the Northeast this year. The decrease in shipments was partly offset
by higher average selling prices.
Ready-mixed concrete and other operations recorded sales of $7.0
million for the current three-month period, which was $0.8 million
higher than the comparable prior-year period. The improvement
reflects a 10% increase in average selling prices for the first three
months of 1996, particularly in the Memphis, Tennessee area due to
product mix and increased activity resulting from favorable weather
conditions. Overall, ready-mixed concrete shipments increased 3% in
1996 as compared to the prior-year period.
The Company's operations are seasonal and, consequently, the interim
results are not indicative of the results to be expected for the full
year.
Gross profits from the cement operations were $5.9 million for the
three months ended March 31, 1996 as compared to a gross profit of
$4.7 million for the comparable prior-year period. These results
primarily reflect 8% higher overall average net realized selling
prices in 1996, partly offset by higher per unit production costs
associated with lower production volumes and a 4% decrease in overall
cement shipments, the result of prolonged winter weather conditions in
the Midwest.
Construction aggregates recorded a loss at the gross profit level of
$4.0 million for the three months ended March 31, 1996 as compared to
a loss at the gross profit level of $4.2 million for the comparable
prior year period. These results primarily reflect lower shipments
resulting from the October 1995 sale of the Nova Scotia operation and
the severe winter weather conditions experienced in the Northeast,
which resulted in substantially reduced production volume at one New
York Trap Rock location and no production at the other location. The
lower results were partly offset by higher average net realized
selling prices.
Gross profits from the ready-mixed concrete and other construction
products of $0.4 million for the three months ended March 31, 1996
were $0.5 million higher than the comparable prior-year period
primarily due to 10% higher average selling prices and higher ready-
mixed concrete and concrete block shipments.
Included in the calculation of gross profit are sales less cost of
sales including depreciation related to cost of sales (which excludes
depreciation related to facilities leased to third parties and
depreciation on office equipment, furniture and fixtures which are not
related to the cost of sales).
Pre-tax income from joint ventures of $0.5 million represents the
Company's share of earnings from the Kosmos Cement Company.
Other income of $1.6 million increased $0.4 million from the
comparable prior-year period reflecting the receipt of a sales and use
tax refund, including interest, related to a prior year.
The improvement in selling, general and administrative expense is
primarily due to lower other postretirement benefit expense related
to retired employees and lower corporate headquarters expenses.
The $0.5 million reduction in interest expense represents the savings
resulting from paying the production payment liability in December
1995.
The income tax benefit of $1.6 million for the first three months of
1996 was $1.1 million lower than the comparable prior-year benefit due
to lower pre-tax losses and a lower effective tax rate in 1996.
The Company recorded a net loss of $3.3 million or $0.29 loss per
share for the three-month period ended March 31, 1996. This loss
reflects the seasonal nature of the construction industry and the
expenses incurred at the production facilities for annual winter
maintenance programs. These results represent a 35% improvement over
the comparable prior-year period net loss of $5.1 million, or $0.42
loss per share, primarily reflecting the impact of cement price
increases implemented in the last three quarters of 1995 and higher
ready-mixed concrete net realized selling prices. The improvement in
the per share results was partly offset by the use of less common
shares in the per share calculation resulting from the repurchase of
the Company's common stock in late 1995 and during the first quarter
of 1996.
13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits:
11. Statement Re Computation of Per Share Earnings.
12. Statement Re Computation of Ratio of Earnings to
Fixed Charges.
27. Financial Data Schedule.
(b) Reports on Form 8-K
Form 8-K, April 22, 1996 - Item 5 - Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Lone Star Industries, Inc. has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
LONE STAR INDUSTRIES, INC.
Date: May 9, 1996 By: WILLIAM E. ROBERTS
William E. Roberts
Vice President, Chief
Financial Officer,
Controller and Treasurer
Date: May 9, 1996 By: JAMES W. LANGHAM
James W. Langham
Vice President, General
Counsel and Secretary
EXHIBIT 11
LONE STAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
Computation of Earnings Per Common Share(Unaudited)
(In Thousands Except Per Share Amounts)
For the Three For the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
PER SHARE OF COMMON STOCK - PRIMARY
Net loss $ (3,276) $ (5,082)
Net interest expense reduction (1) 315 614
Net loss applicable to common stock $ (2,961) $ (4,468)
Weighted average shares outsatnding during period 11,475 12,067
Options and warrants in excess of 20% limit (1) 2,345 2,227
Weighted average shares outstanding during period 13,820 14,294
Net loss per common share $ (0.21) $ (0.31)
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Net loss $ (3,276) $ (5,082)
Plus: Net interest expense reduction (1) 272 589
Net loss applicable to common stock $ (3,004) $ (4,493)
Weighted average shares outstanding during period 11,475 12,067
Stock options and warrants in excess of 20%
limit(1) 2,345 2,227
Fully diluted shares outstanding (2) 13,820 14,294
Net loss per common share assuming full
dilution $ (0.22) $ (0.31)
(1) Due to the fact that the Company's aggregate number of common stock
equivalents is in excess of 20% of its outstanding common stock, primary
and fully diluted earnings per share has been calculated using the
modified treasury stock method for the three months ended March 31, 1996
and 1995.
(2) The computation of fully diluted earnings per share submitted herein is
in accordance with Regulation S-K item 601 (b)(11) although it is
contrary to Paragraph 40 of APB Opinion No. 15 because it produces anti-
dilutive results for three months ended March 31, 1996 and 1995.
Exhibit 12
LONE STAR INDUSTRIES, INC.
Statement Re Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands)
For the For the
Three Months Three Months
Ended Ended
March March
31, 1996 31, 1995
(Unaudited) (Unaudited)
Earnings Available:
Loss before
provision for
income taxes $ (3,276) $ (5,082)
Less: Excess of earnings
over dividends of
less than fifty
percent owned
companies 970 (673)
Capitalized interest (108) (21)
(2,414) (5,776)
Fixed Charges:
Interest expense (including
capitalized interest)
and amortization of
debt discount and
expenses 1,982 2,362
Portion of rent expense
representative of an
interest factor 262 544
Total Fixed Charges 2,244 2,906
________ ________
Total Earnings Available $ (170) $ (2,870)
Ratio of Earnings to Fixed
Charges n/mX n/mX
Earnings deficiency $ (2,414) $ (5,776)
* n/m - not meaningful
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 345
<SECURITIES> 34,320
<RECEIVABLES> 31,131
<ALLOWANCES> 5,975
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0
0
<COMMON> 12,081
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<SALES> 52,987
<TOTAL-REVENUES> 55,080
<CGS> 44,941
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<INCOME-PRETAX> (4,890)
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<INCOME-CONTINUING> (3,276)
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<EXTRAORDINARY> 0
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<NET-INCOME> (3,276)
<EPS-PRIMARY> (0.29)
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