<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
Commission File Number 0-11936
LAFARGE CORPORATION
Incorporated in Maryland
11130 Sunrise Valley Drive, Suite 300
Reston, Virginia 20191
(703) 264-3600
I.R.S. Employer Identification No.
58-1290226
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 [ ]
There were 69,015,800 shares of our Common Stock and 4,476,457 Exchangeable
Preference Shares of our subsidiary, Lafarge Canada Inc., outstanding as of
April 30, 2000, the latest practicable date. The Exchangeable Preference Shares
are exchangeable at any time into our Common Stock on a one-for-one basis,
entitle their holders to dividend and other rights economically equivalent to
those of the Common Stock, and through a voting trust, vote at meetings of our
stockholders.
<PAGE> 2
LAFARGE CORPORATION
FORM 10-Q FOR THE QUARTER
ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Loss) (unaudited) -
Three-Month and Twelve-Month Periods Ended
March 31, 2000 and 1999.......................................................1
Condensed Consolidated Balance Sheets - March 31, 2000 (unaudited),
March 31, 1999 (unaudited) and December 31, 1999..............................2
Condensed Consolidated Statements of Cash Flows (unaudited) -
Three-Month and Twelve-Month Periods Ended
March 31, 2000 and 1999.......................................................3
Notes to Condensed Consolidated Financial Statements..........................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................13
Item 4. Submission of Matters to a Vote of Security Holders..........................13
Item 6. Exhibits and Reports on Form 8-K.............................................14
SIGNATURES ...................................................................................15
INDEX TO EXHIBITS.............................................................................16
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LAFARGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31 ENDED MARCH 31
------------------------------ ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 430,588 $ 369,781 $ 2,715,168 $ 2,483,210
----------- ----------- ----------- -----------
Costs and expenses
Cost of goods sold 396,017 350,080 1,974,982 1,815,659
Selling and administrative 62,012 51,423 245,616 214,570
Amortization of goodwill 4,153 4,427 16,890 18,265
Other (income) expense, net 194 353 (8,651) 3,092
----------- ----------- ----------- -----------
Earnings (loss) from operations (31,788) (36,502) 486,331 431,624
----------- ----------- ----------- -----------
Interest expense 11,723 14,258 60,201 54,283
Interest income (4,144) (3,571) (18,478) (20,169)
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (39,367) (47,189) 444,608 397,510
Income tax benefit (expense) 14,819 18,137 (164,730) (151,308)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (24,548) $ (29,052) $ 279,878 $ 246,202
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - BASIC $ (0.34) $ (0.40) $ 3.84 $ 3.41
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - DILUTED $ (0.34) $ (0.40) $ 3.83 $ 3.39
=========== =========== =========== ===========
DIVIDENDS PER SHARE $ 0.15 $ 0.15 $ 0.60 $ 0.54
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
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LAFARGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 MARCH 31 DECEMBER 31
2000 1999 1999
(UNAUDITED) (UNAUDITED) (AUDITED)
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 248,239 $ 169,026 $ 237,812
Short-term investments 3,441 93,289 91,626
Receivables, net 335,684 274,530 421,796
Inventories 313,318 284,947 288,200
Other current assets 102,135 67,013 96,067
----------- ----------- -----------
Total current assets 1,002,817 888,805 1,135,501
Property, plant and equipment, (less accumulated depreciation and
depletion of $1,345,068, $1,182,885 and $1,312,260) 1,702,108 1,465,946 1,618,319
Excess of cost over net tangible assets of businesses acquired, net 331,311 350,517 335,464
Other assets 200,783 207,124 214,962
----------- ----------- -----------
TOTAL ASSETS $ 3,237,019 $ 2,912,392 $ 3,304,246
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 328,580 $ 338,815 $ 411,677
Income taxes payable 32,765 16,096 60,222
Short-term borrowings and current portion of long-term debt 131,389 97,619 38,344
----------- ----------- -----------
Total current liabilities 492,734 452,530 510,243
Long-term debt 708,745 746,978 719,781
Deferred income taxes 115,021 110,354 118,699
Accrued post-retirement benefit cost 153,938 152,493 153,476
Other long-term liabilities 78,424 60,879 79,163
----------- ----------- -----------
Total Liabilities 1,548,862 1,523,234 1,581,362
----------- ----------- -----------
Common Equity
Common Stock ($1.00 par value; authorized 110.1 million
shares; issued 69.0, 67.5 and 68.7 million shares) 69,009 67,471 68,686
Exchangeable shares (no par or stated value; authorized 24.3
million shares; issued 4.5, 4.9 and 4.5 million shares) 33,043 35,860 32,957
Additional paid-in-capital 703,304 674,400 697,324
Retained earnings 988,214 752,103 1,023,736
Accumulated other comprehensive income (loss) (105,413) (140,676) (99,819)
----------- ----------- -----------
Total Shareholders' Equity 1,688,157 1,389,158 1,722,884
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,237,019 $ 2,912,392 $ 3,304,246
=========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
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LAFARGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31 ENDED MARCH 31
-------------------------- --------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
CASH FLOWS FROM OPERATIONS
<S> <C> <C> <C> <C>
Net income (loss) $ (24,548) $ (29,052) $ 279,878 $ 246,202
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Depreciation, depletion and amortization 43,822 40,536 171,558 159,858
Provision for bad debts 802 844 2,448 3,424
Gain on sale of assets (757) (2,378) (9,129) (5,177)
Accrued post-retirement benefit cost 589 2,175 712 4,971
Other noncash charges and credits, net 6,783 (506) 21,955 9,561
Net change in operating working capital (54,830) 7,290 (115,952) (12,144)
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATIONS (28,139) 18,909 351,470 406,695
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
Capital expenditures (118,701) (60,701) (373,724) (242,725)
Acquisitions (9,794) (35,313) (32,749) (104,159)
Redemptions (purchases) of short-term investments, net 88,185 (76,219) 89,848 71,134
Proceeds from property, plant and equipment
dispositions 3,255 2,917 46,277 18,740
Other (816) 4,701 7,086 6,980
--------- --------- --------- ---------
NET CASH USED FOR INVESTING (37,871) (164,615) (263,262) (250,030)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
Repayment of Lafarge S.A. payable -- -- -- (690,000)
Net increase (decrease) in short-term and long-term
borrowings (includes current portion) 82,025 48,868 (7,704) 638,349
Issuance of equity securities, net 37 1,001 2,980 11,500
Dividends, net of reinvestments (4,620) (9,912) (18,930) (35,311)
Financing costs and other -- -- -- (12,818)
--------- --------- --------- ---------
NET CASH PROVIDED (CONSUMED) BY FINANCING 77,442 39,957 (23,654) (88,280)
--------- --------- --------- ---------
Effect of exchange rate changes (1,005) 3,637 14,659 (21,259)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 10,427 (102,112) 79,213 47,126
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 237,812 271,138 169,026 121,900
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $ 248,239 $ 169,026 $ 248,239 $ 169,026
========= ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Lafarge Corporation, together with its subsidiaries, is North America's
largest diversified supplier of aggregate, concrete and concrete
products, cement and cementitious materials, gypsum wallboard and other
construction materials used for residential, commercial, institutional
and public works construction. Our business is organized into three
operating segments: Construction Materials, Cement and Gypsum. Each
represents a separately managed strategic business unit with different
capital requirements and marketing strategies. See Note 8 below for
information regarding these segments.
We have approximately 800 operations doing business in most states and
throughout Canada, where we conduct our business through our subsidiary,
Lafarge Canada Inc. Lafarge S.A., a French company, and its affiliates
hold over 50 percent of our common stock.
2. The condensed consolidated financial statements have been prepared,
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. As a result, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. We believe that the disclosures made are adequate
to make the information presented not misleading. In our opinion, the
accompanying condensed consolidated financial statements reflect all
adjustments necessary to present fairly our financial position as of the
applicable dates and the results of our operations and our cash flows
for the interim periods presented. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in our 1999 Annual
Report on Form 10-K.
3. Most of our markets are affected by seasonal, weather-related
conditions. Therefore, you should not view our quarterly earnings as
indicative of results to be expected for a full year or any other
interim period.
4. We value our inventories at the lower of cost or market. Other than
maintenance and operating supplies, we value the majority of our U.S.
cement inventories using the last-in, first-out method. We value all
other inventories at average cost. At March 31, 2000 and 1999 and at
December 31, 1999, our inventories consisted of the following (in
thousands):
<TABLE>
<CAPTION>
March 31 December 31
----------------------- -----------
2000 1999 1999
-------- -------- --------
<S> <C> <C> <C>
Finished products $162,375 $148,957 $154,567
Work in process 35,526 28,779 16,639
Raw materials and fuel 53,408 58,108 52,650
Maintenance and operating supplies 62,009 49,103 64,344
-------- -------- --------
TOTAL INVENTORIES $313,318 $284,947 $288,200
======== ======== ========
</TABLE>
5. We paid the following amounts in cash during the quarter for interest
and income taxes (in thousands):
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31 Ended March 31
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest $ 1,121 $ 1,375 $ 50,948 $ 43,740
Income taxes (net of refunds) $ 19,883 $(10,209)(a) $148,602 $128,574
</TABLE>
(a) Includes a refund of $23.4 million from the Internal Revenue
Service.
4
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6. Net income (loss) per share for the three and twelve months ended March
31, 2000 and 1999 (in thousands, except per share amounts) are as
follows:
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31 Ended March 31
---------------------------------------- --------------------------
2000 1999 2000 1999
-------------- ------------------ -------- --------
BASIC CALCULATION
<S> <C> <C> <C> <C>
Net income (loss) $ (24,548) $ (29,052) $279,878 $246,202
============== ================== ======== ========
Weighted average number of shares
outstanding 73,271 72,342 72,855 72,221
============== ================== ======== ========
Basic net income (loss) per share $ (0.34) $ (0.40) $ 3.84 $ 3.41
============== ================== ======== ========
DILUTED CALCULATION
Net income (loss) assuming dilution $ (24,548) $ (29,052) $279,878 $246,202
============== ================== ======== ========
Weighted average number of shares
outstanding 73,271 72,342 72,855 72,221
Net effect of dilutive stock options
based on the treasury stock method -- -- 305 506
Weighted average number of shares
outstanding assuming full conversion of all
potentially dilutive securities 73,271 72,342 73,160 72,727
============== ================== ======== ========
Diluted net income (loss) per share $ (0.34) $ (0.40) $ 3.83 $ 3.39
============== ================== ======== ========
</TABLE>
Basic net income (loss) per common equity share was computed by dividing
net income (loss) by the weighted average number of shares of common
stock outstanding during the period. Diluted net income (loss) per
common equity share assumed the exercise of stock options, to the extent
such conversion is dilutive, for all periods presented.
7. Comprehensive income (loss) consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31 Ended March 31
-------------------------- --------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ (24,548) $ (29,052) $ 279,878 $ 246,202
Foreign currency translation
adjustments (5,594) 11,947 35,263 (49,764)
--------- --------- --------- ---------
COMPREHENSIVE INCOME (LOSS) $ (30,142) $ (17,105) $ 315,141 $ 196,438
========= ========= ========= =========
</TABLE>
8. The operating segments reported below are those for which separate
financial information is available and for which executive management
regularly evaluates operating income or loss amounts (before other
post-retirement benefit expense for retirees, goodwill amortization
related to the 1998 acquisition of certain Redland PLC businesses in
North America from Lafarge S.A., income taxes, interest and foreign
exchange gains and losses) in deciding how to allocate resources and in
assessing performance. Each of our three reportable operating segments,
Construction Materials, Cement and Gypsum, represents a
separately managed strategic business unit with its own capital
requirements and marketing strategies. The basis of segmentation is
consistent with our year-end consolidated financial statements. We
account for intersegment sales and transfers at market prices. We
attribute revenue to geographic areas based on the location of the
assets producing the revenue.
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<PAGE> 8
Operating segment information consists of the following (in millions):
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31 Ended March 31
------------------------ --------------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales:
Construction Materials
Revenues from external customers $ 213.4 $ 187.7 $ 1,442.2 $ 1,360.0
Intersegment revenues - 1.8 .9 3.2
Cement
Revenues from external customers 177.2 150.8 1,111.8 1,013.5
Intersegment revenues 21.6 18.1 120.9 119.9
Gypsum
Revenues from external customers 40.0 31.3 161.2 109.7
Eliminations (21.6) (19.9) (121.8) (123.1)
--------- --------- ---------- ----------
TOTAL NET SALES $ 430.6 $ 369.8 $ 2,715.2 $ 2,483.2
========= ========= ========== ==========
Earnings (loss) from operations:
Construction Materials (a) $ (21.6) $ (22.4) $ 190.3 $ 178.6
Cement (a) 0.1 (7.7) 328.3 299.2
Gypsum (a) 7.3 8.5 40.7 25.2
Corporate and other (17.6) (14.9) (73.0) (71.4)
--------- --------- ---------- ----------
Earnings (loss) before interest and
income taxes (31.8) (36.5) 486.3 431.6
Interest expense, net (7.6) (10.7) (41.7) (34.1)
--------- --------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES $ (39.4) $ (47.2) $ 444.6 $ 397.5
========= ========= ========== ==========
</TABLE>
(a) Excludes other post-retirement benefit expense for retirees, goodwill
amortization related to the Redland acquisition, income taxes, interest
and foreign exchange gains and losses.
Condensed consolidated geographic information consists of the following
(in millions):
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31 Ended March 31
------------------------ --------------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
Net sales:
<S> <C> <C> <C> <C>
United States $ 308.2 $ 271.8 $ 1,904.3 $ 1,738.1
Canada 122.4 98.0 810.9 745.1
--------- --------- ---------- ----------
TOTAL NET SALES $ 430.6 $ 369.8 $ 2,715.2 $ 2,483.2
========= ========= ========== ==========
Earnings (loss) from operations:
United States $ (9.8) $ (12.9) $ 337.6 $ 281.4
Canada (22.0) (23.6) 148.7 150.2
--------- --------- ---------- ----------
Total earnings (loss) from operations: (31.8) (36.5) 486.3 431.6
Interest expense, net (7.6) (10.7) (41.7) (34.1)
--------- --------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES $ (39.4) $ (47.2) $ 444.6 $ 397.5
========= ========= ========== ==========
</TABLE>
Assets by operating segment consist of the following (in millions):
<TABLE>
<CAPTION>
March 31 December 31
------------------------- -----------
2000 1999 1999
---------- ---------- ----------
<S> <C> <C> <C>
Construction materials $ 1,118.2 $ 1,094.6 $ 1,239.1
Cement 1,193.0 981.0 1,098.3
Gypsum 156.5 78.6 125.1
Corporate, Redland goodwill and other 769.3 758.2 841.7
---------- ---------- ----------
TOTAL ASSETS $ 3,237.0 $ 2,912.4 $ 3,304.2
========== ========== ==========
</TABLE>
6
<PAGE> 9
9. In February 2000, we formed a joint venture with Rock-Tenn Company to
produce gypsum wallboard liner. With full-scale production projected to
commence in the later half of 2001, the joint venture intends to sell
all of its production to our U.S. drywall plants.
In late March 2000, we entered into an agreement with Ispat Inland Inc.
to manage up to one million tons of blast furnace slag annually. Under
the agreement, we will install slag-processing equipment, including our
patented technology, at Ispat Inland's East Chicago, Indiana steel
plant. When the facility comes on line in the spring of 2001, we intend
to sell the processed slag into several core market segments.
10. On April 17, 2000, the Ontario (Canada) Court (General Division) ruled
against our subsidiary Lafarge Canada Inc. and other defendants in the
1992 lawsuit arising from claims of building owners, the Ontario New
Home Warranty Program and other plaintiffs regarding allegedly defective
concrete, flyash and cement used in defective footings, foundations and
floors. The portion of the judgment attributed by the Court to Lafarge
Canada Inc., net of insured amounts, was Canadian $9.9 million. Lafarge
Canada Inc. intends to appeal this decision. We believe that our
insurance coverage and recorded reserves are adequate to cover the
defense expenses and liabilities arising from the 1992 lawsuit. To date,
no further action has been taken before the Court in connection with the
related 1999 class action which had been stayed pending a decision in
the 1992 lawsuit. Although the outcome of any legal proceedings related
to the 1999 class action cannot be predicted with certainty, we believe
that any liability which Lafarge Canada Inc. may incur arising from the
1999 class action will not have a material adverse effect on our
financial condition.
By order dated January 28, 2000, the Court granted summary judgment in
favor of our directors in the stockholder derivative lawsuit filed
against them on March 18, 1998 in the Circuit Court for Montgomery
County, Maryland, which lawsuit alleged breach of fiduciary duty,
corporate waste and gross negligence in connection with our purchase of
North American construction materials assets from Lafarge S.A., our
majority stockholder. We have been advised that plaintiffs have appealed
the Court's ruling and that our directors intend to vigorously contest
that appeal.
Currently, we are involved in two remediations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986,
which together are referred to as Superfund. At one site where we have
been named a potentially responsible party, the remedial activities are
complete, long-term maintenance and monitoring are under way and partial
contribution has been obtained from financially viable parties,
including us. The U.S. Environmental Protection Agency ("EPA") delisted
this site from the National Priority List in 1999. At the other site,
which is on the National Priority List, some of the potentially
responsible parties named by the EPA have initiated a third-party action
against 47 other parties, including us. We also have been named a
potentially responsible party at this site. The suit alleges that in
1969 one of our predecessor companies sold equipment containing
hazardous substances that may now be present at the site. It appears
that the largest disposer of hazardous substances at this site is the
U.S. Department of Defense and numerous other large disposers of
hazardous substances are associated with this site. We believe that
neither matter is material to our financial condition, results of
operations or liquidity.
We are involved in one state site cleanup in the State of Michigan. In
December 1999, we were served with a complaint alleging that some time
between 1952 and 1992 air-scrubber baghouse bags were transported to and
disposed of at the Arthur Fivenson Iron and Metal Company. We are one of
six defendants in the State action to recover response activity costs
which Michigan incurred in responding to releases and threatened
releases of hazardous substances at this site. We intend to
7
<PAGE> 10
vigorously defend this action and believe that resolution of this matter
will not have a material impact on our financial condition.
When we determine that it is probable that a liability for our
environmental matters or other legal actions has been incurred and the
amount of the loss is reasonably estimable, an estimate of the required
remediation costs is recorded as a liability in the financial
statements. As of March 31, 2000, the liabilities recorded for the
environmental obligations are not material to our financial statements.
Although we believe our environmental accruals are adequate,
environmental costs may be incurred that exceed the amounts provided at
March 31, 2000. However, we have concluded that the possibility of
material liability in excess of the amount reported in the March 31,
2000 Condensed Consolidated Balance Sheet is remote.
In the ordinary course of business, we are involved in certain legal
actions and claims, including proceedings under laws and regulations
relating to environmental and other matters. Because such matters are
subject to many uncertainties and the outcomes are not predictable with
assurance, the total amount of these legal actions and claims cannot be
determined with certainty. We believe that all legal and environmental
matters will be resolved without material adverse impact to our
financial condition, results of operations or liquidity.
11. At our Annual Meeting of Stockholders held on May 2, 2000, our
stockholders approved an amendment to our Articles of Incorporation to
increase the number of Common Stock we are authorized to issue from
110,100,000 to 150,000,000 shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Lafarge Corporation, together with its subsidiaries, is North America's
largest diversified supplier of construction materials. Our core businesses are
organized into three operating segments:
Construction Materials - produces and distributes construction
aggregate, ready-mixed concrete, other concrete products and asphalt and
constructs and paves roads.
Cement - produces and distributes portland and specialty cements and
cementitious materials, and processes fuel-quality waste and alternative
raw materials for use in cement kilns.
Gypsum - produces and distributes gypsum wallboard and related products.
Our broad range of products is complemented by our geographic diversity.
We have approximately 800 operations doing business in most states and
throughout Canada, where we operate through our major operating subsidiary,
Lafarge Canada Inc.
Historically, we incur a loss in the first quarter because sales and
operating results in many of our operating regions are negatively impacted by
winter weather conditions, which reduce construction activity. In addition,
substantial portions of the year's major maintenance projects are performed
during this period of low plant utilization with the associated costs expensed
as incurred. Due to seasonal, weather-related conditions, earnings of any one
quarter should not be considered indicative of results to be expected for a full
year or any other interim period.
8
<PAGE> 11
THREE MONTHS ENDED MARCH 31, 2000
The seasonal pattern was evident during the three months ended March 31,
2000 when we incurred a net loss of $24.5 million, or $0.34 per share on a
diluted basis. This compares with a net loss of $29.1 million, or $0.40 per
diluted share, for the first quarter of 1999. Operating results improved in most
of our main product lines (ready-mixed concrete, aggregate and cement)
reflecting higher sales volumes and prices. Our U.S. operations reported an
operating loss of $9.8 million, $3.1 million better than 1999, and the Canadian
operating loss was $22.0 million, $1.6 million better than 1999.
Net sales increased 16 percent to $430.6 million, up from $369.8 million
in 1999. U.S. net sales increased 13 percent to $308.2 million and Canadian net
sales were $122.4 million, up 25 percent. A relatively mild winter across most
of the U.S. and Canada, similar to the first quarters of 1999 and 1998, boosted
product shipments in most principal product categories and prices increased from
the 1999 comparable period in all main product lines of ready-mixed concrete,
aggregate, cement and gypsum wallboard.
CONSTRUCTION MATERIALS
Our construction materials operations lost $21.6 million, an improvement
of 4 percent from last year. Net sales of $213.4 million were 13 percent higher
than 1999, reflecting an increase in both ready-mixed concrete and aggregate
shipments of 12 percent and 7 percent, respectively, and higher selling prices
of 2 percent and 6 percent, respectively. In the U.S., the operating loss of
$7.9 million was 2 percent higher than 1999. Net sales were up 8 percent as a
result of increased shipments and higher average prices for both ready-mixed
concrete and aggregate. Ready-mixed concrete volumes increased 10 percent mainly
due to strong demand in Denver and mild weather conditions. Aggregate volumes
increased 6 percent due to favorable weather conditions and increased demand in
Denver, partially offset by poor weather in Colorado in March and scheduled
plant reconfigurations. Ready-mixed concrete and aggregate average selling
prices increased 3 and 5 percent, respectively, due to strong market conditions
and favorable product and geographic mix. The increased volumes and selling
prices were offset by higher costs due to completing maintenance and repairs
earlier in the year than normal in response to a strong demand and favorable
weather. In Canada, the loss of $13.7 million was 7 percent lower than last
year. Net sales in Canada were 20 percent higher than 1999 due to a combination
of higher ready-mixed concrete and aggregate volumes and average selling prices.
Ready-mixed concrete volumes in Canada increased 15 percent due to project work
and strong economic conditions in eastern Canada. Aggregate volumes in Canada
increased due to favorable weather and economic conditions in eastern Canada,
partly offset by reduced project work in western Canada. Ready-mixed concrete
and aggregate average selling prices increased 1 and 7 percent, respectively,
due to price increases and favorable product and geographic mix.
CEMENT
Our cement operations essentially broke even in the first quarter, an
improvement of eight million dollars from last year. The improvement was due to
an increase in cement shipments and higher prices in both the U.S. and Canada.
Net sales increased 18 percent reflecting the rise in shipments and prices. U.S.
earnings from operations totaled $3.4 million, seven million dollars better than
last year mainly due to increases in shipments of 14 percent. Net sales
increased 15 percent reflecting the increase in shipments due to favorable
weather conditions, strong commercial activity and increased project work. Net
selling prices were slightly higher in the first quarter of 2000 in the U.S. as
compared to 1999. The Canadian loss was $3.3 million, one million dollars better
than 1999. Net sales in Canada increased 27 percent primarily due to a 19
percent increase in shipments and 1 percent escalation in net realization
(delivered price per ton to customers less freight). Canadian cement shipments
increased due to favorable economic
9
<PAGE> 12
conditions in Quebec, higher consumption by construction materials operations, a
sharp increase in oilwell cement demand, favorable weather conditions and
increased project work. Our total clinker production volumes increased in most
regions, with an overall increase of 66,000 tons or 3 percent.
GYPSUM
Operating profit from our gypsum wallboard operations was $7.3 million,
$1.2 million worse than 1999 due to increased spending on the preparation of the
startup of the Silver Grove, Kentucky plant and to restructure the
administrative functions and put in place new customer service systems to
support the continued growth in operations, increased prices for paper and rock
and timing of repairs and maintenance. These increased costs were partly offset
by higher shipments and prices. Shipments and net selling price to customers
less freight were 6 and 17 percent higher, respectively, which boosted net sales
by 28 percent. Shipments increased due to continued strong demand in the U.S.
Although prices were higher year over year, the average price realization by the
end of March 2000 was somewhat lower than December 1999 levels.
Selling and administrative expenses increased by $10.6 million from 1999
mainly due to increased staffing, acquisition studies and restructuring the
gypsum operations administrative support to meet the continued growth in
operations.
For the quarters ended March 31, 2000 and 1999, we recorded an income
tax benefit as a result of the seasonal loss from our U.S. and Canadian
operations. Our effective income tax rate was 37.6 percent in 2000 and 38.4
percent in 1999.
TWELVE MONTHS ENDED MARCH 31, 2000
We reported net income of $279.9 million in 2000, a $33.7 million
increase over the $246.2 million reported for the twelve months ended March 31,
1999. Operating profits were $486.3 million, a $54.7 million improvement over
the $431.6 million earned in 1999. Net sales of $2,715.2 million increased 9
percent from $2,483.2 million in 1999 primarily due to greater product shipments
and improved selling prices in all main product lines. U.S. and Canadian net
sales increased 10 percent 9 percent, respectively.
CONSTRUCTION MATERIALS
Our construction materials operations earned $190.3 million, $11.7
million better than the $178.6 million earned in 1999. In the U.S., earnings
were $115.1 million, $9.2 million better than 1999. U.S. ready-mixed concrete
volumes increased 4 percent and selling prices increased 3 percent. Aggregate
volumes decreased 3 percent while selling prices increased 7 percent. The
decrease in aggregate sales volumes was accounted for by softness in some key
markets, such as New Mexico, Ohio and Maryland, which offset the generally
overall healthy demand in most other markets. In Canada, earnings were $75.2
million, $2.5 million higher than 1999. Ready-mixed concrete volumes in Canada
increased 3 percent and aggregate volumes increased 9 percent. Canadian
ready-mixed concrete selling prices were 3 percent higher than last year while
aggregate prices increased 5 percent.
CEMENT
Earnings from our cement operations were $328.3 million, $29.1 million
better than last year. Earnings from U.S. operations of $228.9 million were
$33.9 million better than 1999. In the U.S., cement shipments and net
realization increased 7 and 1 percent, respectively. Earnings from Canadian
operations
10
<PAGE> 13
of $99.4 million were $4.8 million lower than 1999 due to the timing of winter
maintenance. Shipments and net realization in Canada increased 5 and 3 percent,
respectively.
GYPSUM
Earnings from our gypsum wallboard operations were $40.7 million, $15.5
million better than last year. Shipments and net selling price to customers less
freight were 20 and 23 percent higher, respectively.
Selling and administrative expenses were $31.0 million higher mainly due
to acquisitions, coupled with higher legal and other professional fees. Our
effective income tax rate was 37.1 percent in 2000 and 38.1 percent in 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have a syndicated, committed revolving credit facility totaling $300
million extending through December 8, 2003. At March 31, 2000, no amounts were
outstanding. We are required to pay annual commitment fees of 0.10 percent of
the total amount of the facilities. Borrowings made under the revolving credit
facilities will bear interest at variable rates based on a bank's prime lending
rate or the applicable federal funds rate and are subject to certain conditions.
Net cash of $28.1 million was used in operating activities in the first
quarter of 2000 compared with net cash provided of $18.9 million in the same
period in 1999. The increase in cash used for operations was primarily due to
changes in operating working capital as accounts payable and accrued liabilities
decreased to more traditional, seasonal levels. Net cash used for investing
activities in the three-month period of 2000 was $126.7 million less than the
same period last year due to redemptions of short-term investments, partly
offset by higher capital expenditures primarily attributable to the construction
of the Silver Grove, Kentucky and Palatka, Florida gypsum wallboard plants and
the Sugar Creek, Missouri cement plant expansion. In the first quarter of 2000,
net cash provided by financing activities was $77.4 million compared with $40.0
million in the same period in 1999.
During the first quarter of 2000, the most significant uses of cash were
capital expenditures of $118.7 million, acquisitions of $9.8 million and
dividends, net of reinvestments of $4.6 million. The most significant sources of
funds were redemptions of short-term investments, net of $88.2 million and net
short-term and long-term borrowings of $82.0 million. This compares with capital
expenditures of $60.7 million, acquisitions of $35.3 million, dividends, net of
reinvestments of $9.9 million, purchases of short-term investments, net of $76.2
million and a net increase in short-term and long-term borrowings of $48.9
million during the first quarter of 1999.
Net cash provided by operating activities for the twelve-months ended
March 31, 2000 decreased by $55.2 million over the same period in 1999 due to
increases in operating working capital, offset slightly by higher net income and
non-cash charges. Increased depreciation, depletion and amortization charges are
primarily related to increased capital expenditures on plant and equipment.
Compared with the twelve-months ended March 31, 2000, net cash used for
investing activities in the same period in 1999 increased by $13.2 million due
to increased capital spending. Net cash consumed by financing activities
decreased $64.6 million compared with the twelve-months ended March 31, 1999.
Capital expenditures (including acquisitions already completed or in
process) are expected to be approximately $550 million to $600 million in 2000.
11
<PAGE> 14
We are exposed to foreign currency exchange rate risk inherent in our
Canadian revenues, expenses, assets and liabilities denominated in Canadian
dollars, as well as interest rate risk inherent in our debt. We primarily use
fixed-rate debt instruments to reduce the risk of exposure to changes in
interest rates and have used forward treasury lock agreements to hedge interest
rate change on anticipated debt issuances. There has been no significant change
from year-end.
OTHER FACTORS AFFECTING THE COMPANY - YEAR 2000
Our business application software and supporting computer infrastructure
("IT Systems") and embedded technology systems such as process control
equipment, instrumentation and other field systems ("Non-IT Systems") were not
affected by Year 2000 problems at the turn of the millennium or during the
quarterly period ended March 31, 2000.
Commencing in 1997, we organized and implemented our Year 2000
compliance program. The Year 2000 program addressed the essential phases,
activities and tasks that we had to undertake to ensure that our computer
systems would handle date sensitive calculations beyond the year 1999. We
identified four phases to describe our process of achieving Year 2000 readiness:
(1) inventory and assessment, (2) optimum scenario definition, (3) transition
plan definition and (4) implementation. Prior to year-end, we completed the
first three phases and substantially all of phase four, the implementation
phase, of our Year 2000 program and determined that we were Year 2000 compliant.
The uncompleted portion of phase four related to Non-IT Systems in a few plants
in the construction materials operations that had been shutdown for the winter.
These plants required minor upgrading of their Non-IT Systems prior to their
planned seasonal openings. There have not been any significant disruptions or
shutdowns related to these plants because of the Year 2000 issue to date and
management believes as a result of the attention to the readiness of these
plants no significant disruptions are expected.
We expected to spend approximately $18.6 million to $21.3 million in
nonrecurring Year 2000 program costs. Through March 31, 2000, we incurred
approximately $17.8 million ($10.1 million capital and $7.7 million expense) for
upgrading or replacing our IT and Non-IT Systems. We estimate that no
significant additional costs will be incurred to complete the Year 2000 program.
We believe there are no significant contingencies related to the Year
2000 issue. However, it is possible that the full impact of the date change has
not been fully recognized. For example, it is possible that Year 2000 or similar
issues may occur with billing, payroll or monthly, quarterly or year-end
financial closings. We believe that such problems, if any, are likely to be
minor and correctable. Further, we may still be negatively affected if our
customers or suppliers are adversely affected by Year 2000 or similar issues. We
currently are not aware of any significant Year 2000 or similar problems that
have arisen for our customers or suppliers, and we believe there are no
significant remaining contingencies related to the Year 2000 issue.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Statements made in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements may be identified by
the context of the statement and generally arise when we are discussing our
beliefs, estimates or expectations. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions ("Factors")
which are difficult to predict. Some of the Factors that could cause actual
results to differ materially from those expressed in the forward-looking
statements include, but are not limited to: the cyclical nature of our business;
national and regional economic conditions in the U.S. and Canada;
12
<PAGE> 15
Canadian currency fluctuations; the seasonality of our operations; the levels of
construction spending in major markets; supply/demand structure of our industry;
competition from new or existing competitors; unfavorable weather conditions
during peak construction periods; changes in and implementation of environmental
and other governmental regulations; and other Factors disclosed in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission. In
general, we are subject to the risks and uncertainties of the construction
industry and of doing business in the U.S. and Canada. The forward-looking
statements are made as of this date, and we undertake no obligation to update
them, whether as a result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is contained in "Liquidity and Capital
Resources" in Management's Discussion and Analysis of Financial Condition and
Results of Operations reported in Item 2 of Part I of this Quarterly Report on
Form 10-Q and is incorporated herein by reference.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information presented in Note 10 of the "Notes to Condensed
Consolidated Financial Statements" is incorporated herein by reference, pursuant
to Rule 12b-23.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of stockholders was held on May 2, 2000. A total of
73,493,647 shares were entitled to be voted. At the meeting, stockholders
elected the nominees for the Board of Directors identified below:
<TABLE>
<CAPTION>
Director Elected Votes For Votes Withheld
---------------- --------- --------------
<S> <C> <C>
Thomas A. Buell.......................................................55,613,674 1,451,600
Marshall A. Cohen ....................................................55,613,874 1,451,460
Bertrand P. Collomb...................................................55,184,265 1,881,070
Philippe P. Dauman ...................................................55,614,014 1,451,321
Bernard L. Kasriel ...................................................55,614,056 1,451,278
Jacques Lefevre ......................................................55,613,951 1,451,384
Paul W. MacAvoy ......................................................55,613,816 1,451,518
Claudine B. Malone ...................................................55,613,546 1,451,788
Robert W. Murdoch ....................................................55,613,937 1,451,397
Bertin F. Nadeau .....................................................55,614,056 1,451,278
John M. Piecuch ......................................................55,612,968 1,452,367
John D. Redfern ......................................................55,613,616 1,451,718
Joe M. Rodgers .......................................................55,611,707 1,453,627
Michel Rose ..........................................................55,613,478 1,451,857
Ronald D. Southern ...................................................55,613,737 1,451,597
Gerald H. Taylor .....................................................55,612,739 1,452,596
</TABLE>
13
<PAGE> 16
The stockholders ratified the appointment of Arthur Andersen LLP as
auditors to audit the consolidated financial statements of the company for the
year ending December 31, 2000, with voting as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
56,742,480 4,821 318,034 0
</TABLE>
The stockholders approved an amendment to our Articles of
Incorporation increasing to 150,000,000 the number of authorized shares of our
Common Stock, with voting as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
55,329,063 1,594,507 141,764 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
We did not file any reports on Form 8-K during the quarterly period
ended March 31, 2000.
14
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAFARGE CORPORATION
Date: May 15, 2000 By: /s/ Larry J. Waisanen
---------------------
Larry J. Waisanen
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
15
<PAGE> 18
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000, OF LAFARGE CORPORATION AND
IS QUALIFIED IN ITS ENTIRIETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 248,239
<SECURITIES> 3,441
<RECEIVABLES> 335,684
<ALLOWANCES> 0
<INVENTORY> 313,318
<CURRENT-ASSETS> 1,002,817
<PP&E> 3,047,176
<DEPRECIATION> 1,345,068
<TOTAL-ASSETS> 3,237,019
<CURRENT-LIABILITIES> 492,734
<BONDS> 708,745
0
0
<COMMON> 805,356
<OTHER-SE> 882,801
<TOTAL-LIABILITY-AND-EQUITY> 3,237,019
<SALES> 430,588
<TOTAL-REVENUES> 430,588
<CGS> 396,017
<TOTAL-COSTS> 396,017
<OTHER-EXPENSES> 4,347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,723
<INCOME-PRETAX> (39,367)
<INCOME-TAX> 14,819
<INCOME-CONTINUING> (24,548)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,548)
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
