FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
Commission File Number 1-1274-2
MEDUSA CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-0394630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3008 Monticello Boulevard, Cleveland Heights, Ohio 44118
(Address of principal executive offices) (Zip Code)
(216) 371-4000
Registrant's telephone number, including area code
Not applicable
(Former name, former address and former fiscal year,
if changed from last report.)
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 the issuer's classes of common
stock as of September 30, 1995:
Common Shares, Without Par Value - 16,319,776 shares
INDEX
MEDUSA CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income - Three months ended September
30, 1995 and 1994; Nine months ended September 30, 1995 and 1994
Consolidated Balance Sheets - September 30, 1995, September 30,
1994 and December 31, 1994
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1995 and 1994
Notes to consolidated financial statements
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURES
- -1-
Part I - Financial Information
Item 1 - Financial Statements
Medusa Corporation and Subsidiaries
Consolidated Statements of Net Income
(In Thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Unaudited)
Net Sales $ 94,827 $ 88,327 $ 220,612 $ 202,241
Costs and Expenses:
Cost of sales 57,819 58,264 143,356 140,122
Selling, general and
administrative 5,612 5,219 17,119 14,638
Depreciation and
amortization 5,021 3,984 11,881 10,475
68,452 67,467 172,356 165,235
Operating Profit 26,375 20,860 48,256 37,006
Other Income (Expense):
Interest income 549 309 1,376 667
Interest expense (1,907) (1,884) (5,682) (5,628)
Miscellaneous - net (20) (11) (32) 61
(1,378) (1,586) (4,338) (4,900)
Income Before Taxes 24,997 19,274 43,918 32,106
Provision For Income
Taxes 8,624 6,476 15,152 10,788
Net Income $ 16,373 $ 12,798 $ 28,766 $ 21,318
Average Common Shares
Outstanding 16,014 16,351 16,005 16,418
Net Income Per Common
Share:
Primary $ 1.01 $ .77 $ 1.78 $ 1.28
Fully Diluted $ .95 $ .73 $ 1.70 $ 1.25
Cash Dividends Declared
Per Common Share $ .125 $ .125 $ .375 $ .375
See notes to consolidated financial statements
-2-
Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
September 30, December 31,
1995 1994 1994
(Unaudited)
Assets
Current Assets:
Cash and short-term investments $ 50,531 $ 37,462 $ 48,487
Accounts receivable, less allowances of
$1,260, $1,304 and $519, respectively 40,199 39,205 24,036
Inventories, at lower of cost,
principally LIFO, or market:
replacement cost would be higher by
approximately $6,923, $6,634 and
$7,089, respectively
Finished goods 9,264 7,292 7,987
Work in process 2,071 1,571 1,756
Raw materials and supplies 14,671 12,531 13,549
26,006 21,394 23,292
Other current assets 7,636 6,882 4,339
Total Current Assets 124,372 104,943 100,154
Property, Plant and Equipment:
Cost 350,820 333,039 337,934
Less accumulated depreciation 238,137 229,281 231,818
112,683 103,758 106,116
Intangible and Other Assets 10,782 13,380 12,330
Total Assets $ 247,837 $ 222,081 $ 218,600
See notes to consolidated financial statements
-3-
Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
September 30, December 31,
1995 1994 1994
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of
long-term debt $ 35,000 $ - $ 35,000
Accounts payable 12,279 10,519 15,257
Accrued compensation and
payroll taxes 5,214 5,374 6,161
Other accrued liabilities 13,642 11,401 8,635
Income taxes payable 6,748 4,773 1,817
Total Current Liabilities 72,883 32,067 66,870
Long-Term Debt 61,300 96,300 61,300
Accrued Postretirement Health
Benefit Cost 27,721 27,384 27,342
Accrued Pension, Reserves and
Other Liabilities 3,286 3,235 3,115
Shareholders' Equity:
Preferred shares - - -
Common shares 1 1 1
Paid in capital 23,289 19,564 19,724
Retained earnings 85,110 55,913 62,455
Unvested restricted common shares (70) (46) (26)
Unearned restricted common shares (6,047) (4,268) (3,511)
Currency translation adjustment (837) (837) (1,101)
Total Paid in Capital and
Retained Earnings 101,446 70,327 77,542
Less Cost of Treasury Shares (18,799) (7,232) (17,569)
Total Shareholders' Equity 82,647 63,095 59,973
Total Liabilities and Shareholders'
Equity $ 247,837 $ 222,081 $ 218,600
See notes to consolidated financial statements
-4-
Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash Provided From (Used By) Operating Activities:
Net income $ 28,766 $ 21,318
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 11,881 10,475
Provision for deferred income taxes 333 129
Postretirement health benefit cost 379 648
Increase in operating working capital (15,033) (8,679)
Gain on sale of capital assets (46) (34)
Net Cash Provided By (Used By) Operating
Activities 26,280 23,857
Cash Provided From (Used By) Investing Activities:
Capital expenditures (17,798) (9,328)
Proceeds from sale of capital assets 46 1,441
Net Cash Used By Investing Activities (17,752) (7,887)
Cash Provided From (Used By) Financing Activities:
Purchase of treasury shares (1,878) (4,270)
Dividends paid (6,111) (6,244)
Stock options exercised 1,505 744
Issuance of restricted shares - 63
Other - (19)
Net Cash Used By Financing Activities (6,484) (9,726)
Increase In Cash And Short-Term Investments 2,044 6,244
Cash And Short-Term Investments At Beginning
Of Period 48,487 31,218
Cash And Short-Term Investments At End Of Period $ 50,531 $ 37,462
See notes to consolidated financial statements
-5-
Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all normal recurring adjustments considered necessary
for a fair presentation have been included. Operating results
for the nine months ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included
in the company's annual report on Form 10-K for the year ended
December 31, 1994.
2. Use of the percentage depletion method and other permanent tax
adjustments reduced the company's effective tax rate for the
third quarter of 1995 and 1994 to 34.5% and 33.6%, respectively,
and for the first nine months of 1995 and 1994 to 34.5% and
33.6%, respectively, from the federal statutory rate of 35%.
3. At both September 30, 1995 and December 31, 1994, 50,000,000
common shares, without par value were authorized. At September
30, 1995, 16,319,776 shares were outstanding (16,162,302 at
December 31, 1994).
4. Primary net income per share is computed by dividing net income
by the weighted average number of Common Shares and Common Share
equivalents (options) outstanding during the period. Fully
diluted net income per share is computed based on the weighted
average number of Common Shares and Common Share equivalents
outstanding during the period, as if the convertible
subordinated notes were converted into Common Shares at the
beginning of the period after giving retroactive effect to the
elimination of interest expense, net of income tax effect,
applicable to the subordinated notes.
- -6-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Three Months Ended September 30, 1995 Compared With Three Months
Ended September 30, 1994
Net sales for the third quarter of 1995 increased to $94.8
million from $88.3 million in 1994. Cement net sales rose 7%
over last years' third quarter. As a result of unfavorable
weather and a flat economy, cement unit volume decreased by 3%
for the quarter. Price increases implemented in August 1994
and April 1995, have resulted in 12% higher cement prices over
the third quarter 1994.
Slightly higher unit sales volume for Aggregate operations
resulted in 2% higher sales for the third quarter of 1995
compared to 1994. In addition, the quarter reflected 22% higher
sales for the company's highway and safety construction
operation.
As previously mentioned in Medusa's second quarter report, in
August, Medusa closed its Edinburg, Pennsylvania sand and
gravel facility. The closure was the result of continuing
operating losses. The facility contributed less than one-half
of one percent to Medusa's 1994 consolidated sales. A charge
of $1.3 million, or $.05 per fully diluted share, was incurred
during the quarter to reflect the cost of the closing. The net
book value of the facility, less proceeds anticipated from
asset sales, are recorded as additional depreciation expense of
$.9 million. Other closing costs are recorded as additional
cost of sales of $.4 million.
Cost of sales as a percent of sales fell to 61.0% in the third
quarter of 1995 compared to 66.0% in same period of 1994 due
primarily to increased cement prices. Cement capacity
utilization for the quarter was 104% in 1995 compared to 100%
in 1994.
Depreciation and amortization expense increased $1.0 million
from $4.0 million in 1994. The increase was due to the
Edinburg closure as well as high levels of capital expenditures
in 1995.
Selling, general and administrative expense for both quarters
was 5.9% percent of sales. Higher human relations related
costs and other inflationary pressures caused the $.4 million
increase in 1995 expense.
Operating profit for the third quarter of 1995 of $26.4 million
compares to $20.9 million in 1994. The improvement in
operating results can be attributed to the reasons discussed
above.
- -7-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd)
Nine Months Ended September 30, 1995 Compared With Nine Months
Ended September 30, 1994
Net sales for the nine months ended September 30, 1995
increased to $220.6 million from $202.2 million in 1994.
Cement net sales rose 10% over last year. While cement unit
volume for the period decreased by 2%, price increases
implemented April 1, 1995, August 1, 1994 and April 1, 1994,
resulted in 13% higher cement prices over 1994.
Aggregate's sales for the nine months ended September 30, 1995
rose 1% over 1994. Higher selling prices offset a 1% decline
in unit volume for Aggregates. In addition, the period
reflected 20% higher sales for the company's highway and safety
construction operation.
Cost of sales as a percent of sales fell to 65.0% for the first
nine months of 1995 compared to 69.3% in same period for 1994
due primarily to increased cement prices. The effect of higher
prices was partially offset by higher repairs and maintenance
costs. Cement capacity utilization was 92% in 1995 compared to
88% in 1994.
Depreciation and amortization expense increased $1.4 million
from $10.5 million in 1994. The increase was due to the
Edinburg closure as well as high levels of capital expenditures
in 1995.
Selling, general and administrative expense as a percent of
sales increased to 7.8% in 1995 from 7.2% in 1994. Higher
human relations related costs and other inflationary pressures
caused this overall increase.
Operating profit for the nine months ended September 30, 1995
of $48.3 million compares to $37.0 million in 1994. The
improvement in operating results can be attributed to the
reasons discussed above.
Interest income increased by $240,000 for the quarter and
$709,000 for the first nine months of 1995 compared to 1994,
due to higher levels of cash and short-term investments.
Interest expense was approximately the same for both periods.
- -8-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd)
The company's effective tax rate of 34.5% for the third quarter
and first nine months of 1995 was lower than the federal
statutory rate of 35% principally due to our percentage
depletion deduction. The effective tax rate for the third
quarter and first nine months of 1994 was 33.6%. The increase
in 1995 is due to lower percentage depletion deductions
partially offset by lower effective state tax rates.
Net income for the third quarter of 1995 of $16.4 million, or
$1.01 per common share, compares to a net income of $12.8
million, or $.77 per common share, in 1994. Net income for the
first nine months of 1995 of $28.8 million, or $1.78 per common
share, compares to a net income of $21.3 million, or $1.28 per
common share, in 1994.
The company's business is highly seasonal and particularly
sensitive to weather conditions. Interim results are not
indicative of annual results.
Liquidity and Capital Resources
At September 30, 1995, the company had $50.5 million of cash
and short-term investments. The company has available an
unsecured $20.0 million five-year revolving credit facility for
short-term seasonal working capital needs that expires December
31, 1996, and unsecured bank lines of credit totaling $15.0
million. At September 30, 1995, no amounts were outstanding
under any of these facilities.
Working capital at September 30, 1995, was $21.4 million less
than at September 30, 1994, due principally to the
reclassification from "long-term" to "current" of $35.0 million
of 10% unsecured Senior Notes due on December 15, 1995. The
decrease is partially offset by higher balances of cash and
short-term investments and inventories. The ratio of current
assets to current liabilities was 1.7:1 at September 30, 1995,
3.3:1 at September 30, 1994, and 1.5:1 at December 31, 1994.
The companies' cash investment in operating working capital for
the nine months ended September 30, 1995 was $6.8 million
higher than the nine months ended September 30, 1994. This
increase to working capital was due to inventories rising $7.0
million more during the first nine months of 1995 than for the
same period in 1994, and having now been restored to more
normal levels. Additionally, accounts payable balances are
lower in 1995 than at year end 1994 as a result of the timing
and payment of maintenance and capital projects. Partially
offsetting the increases were higher income taxes payable due
to higher 1995 profits.
- -9-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd)
Capital expenditures for the first nine months of 1995 were
$17.8 million compared to $9.3 million for the first nine
months of 1994. The higher expenditures relate to capital
improvements to expand clinker capacity, enhance productivity
and reduce operating costs.
Medusa's full year 1995 cement unit volume is currently
expected to follow the trends evident in the first nine months
of the year. While 1995 industry demand seems likely to be
essentially level with 1994 record levels, Medusa is cautiously
optimistic that demand will accelerate in 1996. The current
economic environment with low inflation, interest rates and
unemployment is fundamentally positive. In addition, Medusa
has announced cement price increases averaging a 6% improvement
over current levels effective April 1, 1996.
- -10-
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed for the third quarter of 1995.
Exhibit 11 - Statements Re Computation of Per Share Earnings
Computation of Primary and Fully Diluted Income Per Common Share
(In thousands, except per share)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Primary
Earnings-Net income $16,373 $12,798 $28,766 $21,318
Shares
Weighted average number
of common shares
outstanding 16,014 16,351 16,005 16,918
Additional shares
assuming conversion of:
stock options 151 233 127 234
Average common shares
outstanding and
equivalents 16,165 16,584 16,132 16,652
Primary income per
common share $ 1.01 $ .77 $ 1.78 $ 1.28
Fully Diluted
Earnings
Net income $16,373 $12,798 $28,766 $21,318
Interest on convertible
subordinated notes,
net of taxes 565 573 1,695 1,718
Pro forma net income
available to common
stock $16,938 $13,371 $30,461 $23,036
Shares
Weighted average number
of common shares
outstanding 16,014 16,351 16,005 16,418
Additional shares
assuming conversion of:
stock options 172 235 145 234
convertible notes 1,736 1,736 1,736 1,736
Average common shares
outstanding and
equivalents 17,922 18,322 17,886 18,388
Fully diluted income
per common share $ .95 $ .73 $ 1.70 $ 1.25
- -11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed of its behalf
by the undersigned thereunto duly authorized.
MEDUSA CORPORATION
REGISTRANT
Date November 1, 1995 By/s/George E. Uding, Jr.
George E. Uding, Jr.
President and Chief
Operating Officer
Date November 1, 1995 By/s/R. Breck Denny
R. Breck Denny
Vice President-
Finance and Treasurer
- -12-
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDUSA
CORPORATION AND SUBSIDIARIES' STATEMENT OF INCOME AND BALANCE SHEET AND IS
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