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, 1999
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
The number of shares outstanding of each of the registrant's classes
of common stock as of May 4, 1999:
Common Stock, par value $1 per share - 19,552,493 shares
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations - For the
Three Months Ended March 31, 1999 and 1998
(Unaudited)...........................................3
Consolidated Statements of Retained Earnings -
For the Three Months Ended March 31, 1999 and
1998 (Unaudited)......................................4
Consolidated Balance Sheets - March 31, 1999
(Unaudited) and December 31, 1998.....................5
Consolidated Statements of Cash Flows - For the
Three Months Ended March 31, 1999 and 1998
(Unaudited)...........................................6
Notes to Unaudited Consolidated Financial Statements.....7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........12
PART II. OTHER INFORMATION..............................18
SIGNATURES..............................................19
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
<S> <C> <C>
Revenues:
Net sales $ 66,663 $ 57,794
Joint venture income 842 823
Other income, net 2,255 3,769
-------- --------
69,760 62,386
-------- --------
Deductions from revenues:
Cost of sales 41,633 38,903
Selling, general and administrative expenses 6,787 6,732
Depreciation and depletion 6,053 5,346
Interest expense 727 747
-------- --------
55,200 51,728
-------- --------
Income before income taxes 14,560 10,658
Provision for income taxes (4,914) (3,597)
-------- --------
Net income applicable to common stock $ 9,646 $ 7,061
======== ========
Weighted average common shares outstanding:
Basic 20,167 21,432
======== ========
Diluted 24,685 27,079
======== ========
Earnings per common share:
Basic $ 0.48 $ 0.33
======== ========
Diluted $ 0.39 $ 0.26
======== ========
</TABLE>
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(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
<S> <C> <C>
Retained earnings, beginning of period $ 252,671 $ 178,444
Net income 9,646 7,061
Dividends (1,015) (527)
---------- ----------
Retained earnings, end of period $ 261,302 $ 184,978
========== ==========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial
Statements are an integral part of the Financial Statements.
LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash including cash equivalents
of $104,775 and $119,896 $ 104,980 $ 120,161
Accounts and notes receivable, net 33,053 32,164
Inventories:
Finished goods 21,741 15,228
Work in process and raw materials 8,678 6,657
Supplies and fuel 23,969 23,848
---------- ----------
54,388 45,733
Deferred tax asset 4,052 4,052
Other current assets 4,369 3,736
---------- ----------
Total current assets 200,842 205,846
Joint ventures 23,409 21,517
Property, plant and equipment 434,884 418,484
Less accumulated depreciation and depletion 95,805 89,821
---------- ----------
339,079 328,663
Deferred tax asset 19,591 21,593
Other assets and deferred charges 9,989 10,895
---------- ----------
Total assets $ 592,910 $ 588,514
========== ==========
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable $ 24,382 $ 16,087
Accrued liabilities 40,328 44,281
Income taxes payable 4,150 2,086
---------- ----------
Total current liabilities 68,860 62,454
Senior notes payable 50,000 50,000
Postretirement benefits other than pensions 123,060 123,428
Other liabilities 27,822 28,316
Contingencies (See Notes 6 and 7) ---------- ----------
Total liabilities 269,742 264,198
---------- ---------
Shareholders' Equity:
Common stock 25,883 25,692
Warrants to purchase common stock 11,419 11,792
Additional paid-in capital 173,211 171,276
Retained earnings 261,302 252,671
Treasury stock, at cost (148,647) (137,115)
---------- ----------
Total shareholders' equity 323,168 324,316
---------- ----------
Total liabilities and shareholders'
equity $ 592,910 $ 588,514
========== ==========
</TABLE>
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 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 9,646 $ 7,061
Adjustments to arrive at net cash provided
by operating activities:
Depreciation and depletion 6,053 5,346
Deferred income taxes 2,002 1,465
Changes in operating assets and liabilities:
Accounts and notes receivable (901) 2,009
Inventories and other current assets (9,370) (12,552)
Accounts payable and accrued liabilities (5,590) 5,148
Equity income, net of dividends received (92) (573)
Gain on sale of a surplus property - (1,500)
Other, net 568 (1,221)
--------- ----------
Net cash provided by operating activities 2,316 5,183
Cash Flows from Investing Activities:
Capital expenditures (16,301) (15,889)
Proceeds from sales of assets 64 2,495
Advances to equity investees (1,800) -
--------- ----------
Net cash used by investing activities (18,037) (13,394)
Cash Flows from Financing Activities:
Proceeds from exercise of warrants 1,800 24
Purchase of treasury stock (267) -
Dividends paid (1,015) (527)
Proceeds from exercise of options 22 -
---------- ----------
Net cash provided (used) by
financing activities 540 (503)
Net decrease in cash and cash
equivalents (15,181) (8,714)
Cash and cash equivalents, beginning
of period 120,161 154,080
---------- -----------
Cash and cash equivalents, end of period $ 104,980 $ 145,366
========== ===========
</TABLE>
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, which are of a normal
recurring nature, necessary to present fairly the financial position of
the Company as of March 31, 1999, and the results of operations and the
cash flows for the three months ended March 31, 1999 and 1998.
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, 1998. The Company's operations
are seasonal and, consequently, interim results are not indicative of the
results to be expected for a full year.
Note 2 - Common Stock
In February 1999, the Board of Directors declared a $0.05 dividend per common
share, which was paid on March 15, 1999 to shareholders of record as of March
1, 1999. In late March 1999, the Company purchased 393,839 shares of its
common stock for $11,613,000. Most of these transactions were settled early
in the second quarter of 1999 and therefore are not included in the statement
of cash flows for the period ended March 31, 1999. In addition, in April
1999, the Company purchased 385,969 shares of its stock and 25,000 of its
warrants for $13,609,000.
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, 1999 and 1998 was $1,854,000 and $1,827,000, respectively. Income taxes
paid during the three months ended March 31, 1999 and 1998 were $848,000 and
$1,078,000, respectively.
Note 4 - Interest
Interest expense of $945,000 has been accrued duringboth of the three-month
periods ended March 31, 1999 and 1998. Interest capitalized during the three
months ended March 31, 1999 and 1998 was $218,000 and $198,000, respectively.
Note 5 - Earnings Per Share
Basic earnings per common share for the three months ended March 31, 1999 and
1998 are calculated by dividing net income by weighted average common shares
outstanding during the period. Diluted earnings per common share for the
three months ended March 31, 1999 and 1998 are calculated by dividing net
income by weighted average common shares outstanding during the period plus
dilutive potential common shares which are determined as follows:
For the Three Months Ended March 31,
1999 1998
Weighted average common shares 20,166,935 21,432,130
Effect of dilutive securities:
Warrants 4,304,227 5,433,016
Options to purchase common stock 213,795 214,272
Adjusted weighted average common shares 24,684,957 27,079,418
Dilutive potential common shares are calculated in accordance with the
treasury stock method which assumes that the proceeds from the exercise of
all warrants and options are used to repurchase common stock at market value.
The number of shares remaining after the proceeds are exhausted represents
the potentially dilutive effect of the securities.
Note 6 - Environmental Regulation
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. 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. For instance, 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. In
addition, 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 operations or could otherwise
substantially increase the capital, operating and other costs associated
with compliance. For example, recent worldwide initiatives for limitations
on carbon dioxide emissions could result in the promulgation of statutes
or regulations that would adversely affect certain aspects of United
States manufacturing, including the cement industry.
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 provides for a uniform federal regulatory scheme
governing the 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. The Company is required
to apply for federal operating permits for each of its cement
manufacturing facilities. All of these applications have been made. 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 United States Environmental Protection Agency ("EPA") is
required 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
has announced proposed maximum available control technology ("MACT")
standards for cement manufacturing facilities (like Lone Star's
Greencastle and Cape Girardeau plants) that burn hazardous waste fuels
("HWF") and other MACT standards for facilities burning fossil fuels.
These MACT standards are anticipated by the Company to be effective in
1999 and implemented over a three-year period. The Company currently
anticipates that it will be able to achieve these MACT standards. The EPA
has also promulgated under the Clean Air Act new standards for small
particulate matter and ozone emissions, and related testing will be
carried out over the next several years. Depending on the result of this
testing, additional regulatory burdens could be imposed on the cement
industry by states not in compliance with the regulations. The EPA has
promulgated new regulations to reduce nitrogen oxide emissions
substantially over the next eight years. These rules would affect 22
states including three in which the Company has cement plants: Indiana,
Illinois and Missouri. Depending on state implementation, this emissions
reduction could adversely affect the cement industry in these states.
The Resource Conservation and Recovery Act ("RCRA") establishes a cradle-
to-grave regulatory scheme governing the generation, treatment, storage,
handling, transportation and disposal of solid wastes. Solid wastes which
are classified as hazardous wastes pursuant to RCRA, as well as facilities
that treat, store or dispose of such hazardous wastes, are subject to
stringent regulatory requirements. Generally, wastes produced by the
Company's operations are not classified as hazardous wastes and are
subject to less stringent federal and state regulatory requirements.
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 RCRA. However, in 1995, the 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. It
is not possible to predict at this time precisely what new regulatory
controls on the management, handling and disposal of CKD or what increased
costs (or range of costs) would be incurred by the Company to comply with
these requirements. These regulations will be promulgated through a
rulemaking scheduled to be completed shortly. These rules will be
implemented over a three-year period following promulgation. 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.
The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are
the Company's two cement manufacturing facilities using 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 federal Boiler and Industrial
Furnace Regulations promulgated under RCRA (the "BIF Rules"). The Company
has secured the permit required under RCRA and the BIF Rules for the Cape
Girardeau plant, and the Greencastle plant also will go through this
permitting process and has completed a three-year recertification of its
existing interim status. The Greencastle permit is a requirement to enable
Lone Star to continue the use of HWF at the plant. The permitting process
is lengthy and complex, involving the submission of extensive technical
data, and there can be no assurances that the plant will be successful in
securing its final RCRA permit. In addition, if received, the permit could
contain terms and conditions with which the Company cannot comply or could
require the Company to install and operate costly control technology
equipment. While Lone Star believes that it is currently in compliance
with the extensive and complex technical requirements of the BIF Rules,
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.
The federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund"), as well as many comparable state
statutes, creates a joint and several liability scheme for the
investigation and remediation of facilities where releases of hazardous
substances are found to have occurred. Liability may be imposed upon
current owners and operators of the facility, upon owners and operators of
the facility at the time of the release and upon generators and
transporters of hazardous substances released at the facility. While, as
noted above, wastes produced by the Company generally are not classified
as hazardous wastes, many of the raw materials, by-products and wastes
currently and previously produced, used or disposed of by the Company or
its predecessors contain chemical elements or components that have been
designated as hazardous substances or which otherwise may cause
environmental contamination. Hazardous substances are or have been used or
produced by the Company in connection with its cement manufacturing
operations (e.g. grinding compounds, refractory bricks), quarrying
operations (e.g. blasting materials), equipment operation and maintenance
(e.g. lubricants, solvents, grinding aids, cleaning aids, used oils), and
hazardous waste fuel burning operations. Past operations of the Company
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,
although it does not currently contemplate that future costs relating to
such sites will be material.
The Company's operations are subject to federal and state laws and
regulations designed to protect worker health and safety. Worker
protection at the Company's cement manufacturing facilities is governed by
the federal Mine Safety and Health Act ("MSHA") and at other Company
operations is governed by the federal Occupational Safety and Health Act
("OSHA").
Note 7 - Legal Proceedings
From time to time, the Company is named as a defendant in lawsuits
asserting, among other things, products liability. The Company maintains
such liability insurance coverage for its operations as it deems
reasonable. The Company does not expect the effect of such matters to have
a material effect on the financial condition of the Company.
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 $105.0 million and funds generated by operations will be
adequate to cover current working capital and capital expenditure
needs.
The Company's financing agreement and the revolving credit
facility contain certain restrictive covenants which, among other
things, could have the effect of limiting the payment of dividends
and the repurchase of common stock and warrants. Approximately
$34.9 million is currently available for such payments under the
most restrictive of such covenants.
During 1999, the Company has purchased 779,800 shares of its
stock and 25,000 warrants at a cost of $25.2 million. This
includes 393,800 shares of stock that were purchased during the
first quarter at a cost of $11.6 million. Since the inception of
its repurchase program in July 1995, the Company has purchased a
total of 7,323,900 shares and 204,400 warrants at a cost of $185.5
million. The Company is currently authorized to purchase an
additional $14.8 million of common stock and warrants.
Cash flows from operating activities of $2.3 million for the
three months ended March 31, 1999 primarily reflect income from
operations and changes in working capital. The utilization of net
operating loss carryforwards and other deferred tax assets during
the first quarter reduced cash taxes otherwise payable by $2.0
million.
During the three months ended March 31, 1999, investing
activities used $18.0 million, primarily representing $16.3
million for capital expenditures and a $1.8 million advance to
Kosmos Cement Company, a partnership in which the Company owns a
25% interest.
Net cash inflows from financing activities of $0.5 million
for the three months ended March 31, 1999 primarily reflect
proceeds from the exercise of warrants, offset by the purchase of
the Company's common stock and dividends paid during the first
quarter.
Working capital on March 31, 1999 was $132.0 million as
compared to $143.4 million on December 31, 1998. Current assets
decreased $5.0 million primarily due to lower short-term
investments, partially offset by higher inventory balances.
Current liabilities increased $6.4 million primarily due to an
increase in accounts payable and accrued taxes , partially offset
by a decrease in accrued expenses. The increase in accounts
payable reflects purchases of the Company's common stock at the
end of March 1999.
The $2.0 million decrease in the Company's long-term deferred
tax asset is due to the utilization of a portion of the tax assets
during the first quarter of 1999. Investments in joint ventures
increased $1.9 million primarily due to a $1.8 million advance to
Kosmos Cement Company. Net property, plant and equipment
increased $10.4 million reflecting capital expenditures, partly
offset by depreciation expense.
In February 1999, the Company's Board of Directors declared a
$0.05 per share dividend which was paid on March 15, 1999 to
shareholders of record as of March 1, 1999. Total dividends paid
were $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. There can be no assurances that judicial
or administrative proceedings, seeking penalties or injuctive
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.
For instance, 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. In addition,
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 operations or
could otherwise substantially increase the capital, operating and
other costs associated with compliance (See Note 6).
The Company believes that it has adequately provided for
costs related to its ongoing obligations with respect to known
environmental liabilities. Expenditures for environmental
liabilities during the first quarter of 1999 did not have a
material effect on the financial condition or cash flows of the
Company.
Year 2000
The Company is in the process of conducting a company-wide
assessment of its computer systems and operations to identify
computer hardware and software and process control systems that
are not Year 2000 compliant. The Company expects that the
identification and repair of any problems will be successfully
completed during 1999. The Company's goal is to have its
remediated and replaced systems operational during the third
quarter of 1999 to allow time for testing and verification. In
particular, the Company will perform tests of its cement plants'
operations during their normal maintenance shutdowns in the first
half of 1999. Expenses incurred to date have not been material,
and the Year 2000 issue has had no known effect on the Company to
date. Future costs are not expected to be material. Since 1990,
the Company has been replacing and upgrading its corporate and
plant computer systems, including its maintenance tracking
system, sales order entry system, treasury system and other
financial programs. The Company has replaced all employee
desktop computer systems within the past several years. Such
improvements have been made in the normal course of business.
Vendors have assured the Company that all of these recently
purchased machines and software programs are Year 2000 compliant.
The Company has been in communication with third parties
such as critical vendors and major service suppliers,
communications providers and banks whose system failures
potentially could have a material impact on the Company. No
single customer accounts for more than 10% of the Company's total
sales and the Company has no material executory contracts to sell
cement that extend past December 31, 1999. Accordingly, the
Company is not canvassing its customers as to their Year 2000
compliance. There can be no guarantee that customer and vendor
systems will be Year 2000 compliant. Moreover, the potential
effect of such noncompliance cannot be quantified because of the
impossibility of estimating the magnitude, duration, or ultimate
impact of noncompliance by others.
If the Company is unsuccessful in identifying or fixing all
Year 2000 problems in its critical operations, or if it is
affected by the inability of suppliers or customers to continue
operations due to such a problem, the results of operations or
financial condition could be materially impacted. In the event
of the failure to correct all compliance issues related to
manufacturing control systems, the plants have the ability, in
many instances, to continue operations mechanically, rather than
electronically. However, operations at a plant would shut down
if that plant's main control center failed or if power suppliers
failed to deliver electricity due to a Year 2000 problem. Failure
of other major third parties, such as coal and gas suppliers and
railroads, to correct Year 2000 problems could also affect the
Company's business.
The Company anticipates developing a contingency plan that
would be designed to mitigate, in part, the impact on its
business of certain Year 2000 problems. This plan, however, can
not cover all eventualities, such as a power outage. The Company
expects this plan to be in place by mid-1999.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this
Form 10-Q contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements
are based on current expectations, estimates and projections
concerning the general state of the economy and the industry and
market conditions in certain geographic locations in which the
Company operates. Words such as "expects", "anticipates",
"intends", "plans", "believes", "estimates" and variations of such
words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual
results and outcomes may differ materially from what is expressed
or forecasted in such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking
statements as a result of new information, future events or other
factors.
The Company's business is cyclical and seasonal, the effects
of which cannot be accurately predicted. Risks and uncertainties
include changes in general economic conditions (such as changes in
interest rates), changes in economic conditions specific to any
one or more of the Company's markets (such as the strength of
local real estate markets and the availability of public funds for
construction), adverse weather, unexpected operational
difficulties, changes in governmental and public policy including
increased environmental regulation, the outcome of pending and
future litigation, the successful negotiation of labor contracts,
unforeseen operational difficulties including difficulties
relating to the construction and installation of improvements to
property, plant and equipment, financial losses due to Year 2000
computer problems, and the continued availability of financing in
the amounts, at the times, and on the terms required to support
the Company's future business. Other risks and uncertainties
could also affect the outcome of the forward-looking statements.
Results of Operations
Consolidated net sales of $66.7 million during the first
quarter of 1999 were $8.9 million higher than the comparable
prior-year results. Cement sales were higher due to a 2% increase
in average net realized cement selling prices in 1999, combined
with a 14% increase in cement shipments. The increase in
shipments is attributable to continued strong demand for cement in
the Company's major markets as well as mild weather during the
quarter.
Gross profit from the Company's cement and ready-mixed
concrete operations of $19.1 million for the first quarter of 1999
was $5.4 million higher than the comparable 1998 period. The
increase in gross profit reflects higher overall shipments, higher
average net realized cement selling prices, and greater cement
production for the quarter. In addition, costs associated with
annual plant maintenance during the first quarter of 1999 were
approximately $2.0 million lower than last year's first quarter,
due to the timing of plant maintenance outages at certain
facilities. The first quarter timing variance is expected to
reverse later in the year when the maintenance is performed.
Included in the calculation of gross profit are sales less
cost of sales including depreciation related to cost of sales
(which excludes depreciation on office equipment, furniture and
fixtures which are not related to the cost of sales).
The Company's operations are seasonal and, consequently, the
interim results are not indicative of the results to be expected
for the full year.
Pre-tax income from joint ventures of $0.8 million during the
first quarter of 1999 reflects the results of the Kosmos Cement
Company, a partnership in which the Company has a 25% interest.
The results for the three months ended March 31, 1999 were
comparable with the prior-year period.
Other income of $2.3 million during the first quarter of 1999
decreased $1.5 million from the comparable 1998 period. Last
year's first quarter results included a gain of $1.5 million on
the sale of a surplus parcel of real estate. Lower interest
income during the current quarter, reflecting lower short-term
investment balances, was offset by receipts from litigation
settlements.
Interest expense of $0.7 million during the first quarter of
1999 was comparable with the prior-year period expense.
Capitalized interest was $0.2 million for the three months ended
March 31, 1999 and 1998.
The income tax expense of $4.9 million during the first
quarter of 1999, an increase of $1.3 million from the prior-year
expense, primarily reflects higher pre-tax earnings in the first
quarter of 1999.
Net income of $9.6 million during the first quarter of 1999
was $2.6 million higher than the prior-year results. On a per
share basis, basic and diluted earnings for the first quarter of
1999 were $0.48 and $0.39, respectively, compared to $0.33 and
$0.26, respectively, for 1998. This improvement is primarily due
to higher results for the cement operations reflecting higher
average selling prices and increased shipments. These favorable
results were partly offset by higher income tax expense due to
higher pre-tax earnings and lower other income.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits:
27. Financial Data Schedule.
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 5, 1999 By: WILLIAM E. ROBERTS
William E. Roberts
Vice President, Chief
Financial Officer,
Controller and Treasurer
Date: May 5, 1999 By: JAMES W. LANGHAM
James W. Langham
Vice President, General
Counsel and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Statement of Operations and Balance Sheet and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 205
<SECURITIES> 104,775
<RECEIVABLES> 36,600
<ALLOWANCES> 3,547
<INVENTORY> 54,388
<CURRENT-ASSETS> 200,842
<PP&E> 434,884
<DEPRECIATION> 95,805
<TOTAL-ASSETS> 592,910
<CURRENT-LIABILITIES> 68,860
<BONDS> 50,000
0
0
<COMMON> 25,883
<OTHER-SE> 297,285
<TOTAL-LIABILITY-AND-EQUITY> 592,910
<SALES> 66,663
<TOTAL-REVENUES> 69,760
<CGS> 41,633
<TOTAL-COSTS> 54,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 727
<INCOME-PRETAX> 14,560
<INCOME-TAX> 4,914
<INCOME-CONTINUING> 9,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,646
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.39
</TABLE>
