<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act
of 1934
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ TO ______________
For Quarter Ended Commission file number 1-4753
PUERTO RICAN CEMENT COMPANY, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO 51-A-66-0189525
- - --------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PO Box 364487 - San Juan, P.R. 00936-4487
- - ------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(809) 783-3000
--------------
(Registrant's telephone number, including area code)
NONE
----
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the Registrant (1) has filed
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
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ON AUGUST 8, 1994 THERE WERE OUSTANDING 5,608,900
SHARES OF COMMON STOCK, $1.00 PAR VALUE.
<PAGE> 2
PUERTO RICAN CEMENT COMPANY, INC.
INDEX
PAGE NO.
Part I - Financial Information
Consolidated Balance Sheet as of
June 30, 1994 and December 31, 1993 3 - 4
Consolidated Statement of Income
Second quarter ended on
June 30, 1994 and 1993 5
Consolidated Statement of Cash Flows
Six months ended on
June 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 10
PART II - Other Information 10
Signatures 10
<PAGE> 3
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 1994 31, 1993
------------ ------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 277,761 $ 431,293
Short-term investments 550,000
------------ ------------
Cash and Cash Equivalents 827,761 431,293
------------ ------------
Other short-term investments 2,178,058 520,000
------------ ------------
Notes and accounts receivable-net of allowance for
doubtful accounts of $1,095,122 in 1994 and
$1,121,601 in 1993 17,973,526 13,626,159
------------ ------------
Inventories:
Finished products 1,705,765 2,127,413
Work in process 4,287,582 6,231,167
Raw materials 3,219,283 3,276,157
Maintenance & operating supplies 20,347,322 20,855,519
Land held for sale including development costs 594,666 651,580
------------ ------------
Total inventories 30,154,618 33,141,836
------------ ------------
Prepaid expenses 4,913,121 3,488,276
------------ ------------
TOTAL CURRENT ASSETS 56,047,084 51,207,564
------------ ------------
PROPERTY, PLANT & EQUIPMENT - Net of accumulated
depreciation, depletion and amortization
of $52,272,152 in 1994 and $48,804,646 in 1993 110,164,538 107,968,603
------------ ------------
OTHER ASSETS
Long-term investments 37,612,161 32,512,367
Goodwill 697,770 697,770
Investments in real estate 704,987 704,987
Other long-term assets 172,189 192,305
------------ ------------
39,187,107 34,107,429
------------ ------------
TOTAL $205,398,729 $193,283,596
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE DECEMBER
LIABILITIES AND STOCKHOLDERS' EQUITY 30, 1994 31, 1993
------------ ------------
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 8,057,143 $ 7,491,735
Accounts payable 5,675,354 4,656,496
Accrued liabilities 6,524,640 4,500,812
Income taxes payable 520,840 624,263
------------ ------------
TOTAL CURRENT LIABILITIES 20,777,977 17,273,306
LONG-TERM LIABILITIES
Long-term debt, less current portion 28,442,857 26,633,080
Deferred income taxes 28,144,181 26,028,233
Postretirement benefit liability 2,612,291 2,673,947
------------ ------------
59,199,329 55,335,260
STOCKHOLDERS' EQUITY
Preferred stock, authorized 2,000,000
shares of $5.00 par value each; none issued
Common stock authorized 20,000,000
shares of $1.00 par value each; issued
6,000,000 shares; outstanding 5,767,700
shares as of June 30, 1994, 5,807,700
as of December 31, 1994. 6,000,000 6,000,000
Additional paid-in capital 14,367,927 14,367,927
Retained earnings 107,819,942 101,891,599
------------ ------------
128,187,869 122,259,526
Less: 232,300 (1993-192,300) shares of common
stock in treasury, at cost 2,766,446 1,584,496
------------ ------------
STOCKHOLDERS' EQUITY NET 125,421,423 120,675,030
------------ ------------
TOTAL $205,398,729 $193,283,596
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $24,762,612 $21,809,766 $47,274,946 $41,624,960
Revenue from real estate operations 24,274 24,924 48,548 605,174
----------- ----------- ----------- -----------
24,786,886 21,834,690 47,323,494 42,230,134
Cost of sales 15,492,563 13,947,708 29,981,136 26,895,584
----------- ----------- ----------- -----------
Gross margin 9,294,323 7,886,982 17,342,358 15,334,550
Selling, general & administrative expenses 2,943,191 2,710,482 5,404,523 5,297,905
----------- ----------- ------------ -----------
Income from operations 6,351,132 5,176,500 11,937,835 10,036,645
----------- ----------- ----------- -----------
Other charges (credits):
Interest and financial charges 579,538 732,867 1,155,492 1,450,001
Interest income (553,035) (297,715) (1,040,001) (541,327)
Other expenses (income) (24,203) (24,865) (61,361) (64,162)
----------- ----------- ----------- -----------
Total 2,300 410,287 54,130 844,512
----------- ----------- ----------- -----------
Income before income tax 6,348,832 4,766,213 11,883,705 9,192,133
Tax provision 2,256,024 1,634,723 4,219,052 2,859,769
----------- ----------- ----------- -----------
Income before cumulative effect of changes
in accounting principles 4,092,808 3,131,490 7,664,653 6,332,364
Effect of a change in accounting for
postretirement benefits (net of tax -
$1,020,600) (1,409,400)
Cumulative effect of a change in accounting
for income taxes 853,410
----------- ----------- ----------- -----------
Net income $ 4,092,808 $ 3,131,490 $ 7,664,653 $ 5,776,374
=========== =========== =========== ===========
Income (loss) per share:
Income before cumulative effect of
changes in accounting $ 0.70 $ 0.53 $ 1.32 $ 1.08
Effect of a change in accounting for
postretirement benefits (0.24)
Cumulative effect of a change in
accounting for income taxes 0.15
Net income $ 0.70 $ 0.53 $ 1.32 $ 0.99
=========== =========== =========== ===========
Average Common Shares Outstanding 5,801,033 5,807,700 5,801,033 5,807,700
=========== =========== =========== ===========
</TABLE>
<PAGE> 6
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
<TABLE>
<CAPTION>
JUNE 30,
1994 1993
Cash flows from operating activities:
<S> <C> <C>
Net income $ 7,664,653 $ 5,776,354
------------ ------------
Adjustments to reconcile net income to
cash flows from operating activities:
Effect of a change in accounting for
postretirement benefits 1,409,400
Cumulative effect of a change in accounting
for income taxes (853,410)
Depreciation, depletion and amortization 3,467,667 3,448,153
Provision for deferred income taxes 2,115,948 2,028,305
Postretirement benefit cost (131,656) 195,000
Changes in assets and liabilities:
Increase in notes & accounts receivable (4,347,367) (3,629,273)
Decrease in inventories 2,987,218 2,679,718
Increase in prepaid expenses (1,424,845) (2,432,010)
Increase in accounts payable 1,094,858 97,420
Increase in accrued liabilities 2,023,828 1,829,082
Decrease in income taxes payable (103,423) (884,612)
Decrease in other long-term assets 20,116 48,668
------------ ------------
Total adjustments 5,702,344 3,936,441
------------ ------------
Cash provided by operations 13,366,997 9,712,795
------------ ------------
Cash flows from investing activities:
Capital expenditures (5,663,602) (3,758,735)
Decrease (increase) in other short-term investment (2,208,058) 1,000,000
Purchase of long-term investments (5,099,794) (9,075,044)
------------ ------------
Cash used in investing activities (12,971,454) (11,833,779)
------------ ------------
Cash flows from financing activities:
Proceeds from loan 2,375,185 846,791
Dividends paid (1,742,310) (1,451,925)
Purchase of treasury stocks (1,181,950)
------------ ------------
Cash provided by (used in) financing activities (549,075) (605,134)
------------ ------------
Increase in cash and cash equivalents ($153,532) ($2,726,118)
============ ============
Cash and cash equivalents - beginning of year $431,293 $5,473,502
Cash and cash equivalents - end of period 277,761 2,747,385
------------ ------------
Increase in cash and cash equivalents ($153,532) ($2,726,117)
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Registrant, the accompanying unaudited
financial statements contain all adjustments necessary to present
fairly its financial position at June 30, 1994 and December 31, 1993,
and the results of operations and cash flows for the six months ended
June 30, 1994 and 1993. The results of operations are not
necessarily indicative of the results to be expected for the full
year.
Cash and cash equivalents of approximately $828,000 as of June
30, 1994 consisted principally of short-term obligations of the U.S.
Federal Government or its agencies. The other short-term and long-term
investments were principally obligations of the U.S. Federal
Government or its agencies with maturities ranging from over 3 months
to up to 7 years. These investments resulted from excess funds generated
from operations.
As of June 30, 1994, notes and accounts receivable of $17.9
million were $4.3 million higher than the $13.6 million at December
31, 1993. Increases in notes receivable-trade and in accounts
receivable-trade of $579,000 and $3.7 million, respectively, resulted mainly
from higher volume sales during this period. Receivables' turnover has been
maintained within normal historical levels, with an average collection period
below 60 days.
Consolidated inventories declined from $33.1 million at December
31, 1993 to $30.1 million at June 30, 1994 mainly from a reduction of finished
products and work-in-process inventories (cement and clinker, respectively),
as a result of the higher cement sales experienced during this period.
Production of these materials during this six-month period was slightly
higher, but still below the production level required by the attained volume
of sales.
The increase of $1.4 million in prepaid expenses resulted
chiefly from the increase in prepaid pension expenses and the
prepayment of property tax and insurance policies scheduled for this
period.
Property, Plant & Equipment of $110.2 million at June 30, 1994
includes the accumulation of $3.5 million in depreciation and
depletion, and capital expenditures of $5.7 million related
principally to the conversion of two existing slurry mills to
cement grinding mills.
<PAGE> 8
Total current liabilities increased approximately $3.5 million
on June 30, 1994 from the $17.3 million balance on December 31, 1993.
Principal changes were noted in accounts payable and accrued
liabilities that increased by $1.0 and $2.0 million, respectively.
The $1 million increase in accounts payable represents mostly
purchases of materials and equipment related to the cement grinding
conversion project. Increase of $2 million in accrued liabilities
from the December 31, 1993 figure was mainly due to accruals in the
property tax related to the dry process equipment combined with a seasonal
high point of accruals for charges such as sales taxes and workmens
compensation insurance as compared to year end.
Under the Puerto Rico income tax law the Registrant may exercise
the option to claim accelerated depreciation to defer current income
tax liability to future periods. Such depreciation, however, is
limited to an amount not greater than income before taxes (determined
without taking into consideration the depreciation deduction).
Benefits available under this accelerated depreciation method are
limited by the alternative minimum tax (AMT) provisions of the income
tax law. In Management's opinion, the Registrant will be subject to
the AMT provisions of the income tax law during the current year.
At its June 22, 1994 meeting, the Board of Directors of the
Registrant declared a 15 cents per share dividend on its common
stock, payable on August 12, 1994 to stockholders of record on July
15, 1994. As of June 30, 1994, the Registrant had 5,767,700 shares
of common stock issued and outstanding, reflecting the purchase of
40,000 shares during the second quarter of 1994. This compares
with 5,807,700 shares outstanding as of June 30, 1993.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The current ratio for the period decreased from 2.96 to 1 in
December 1993 to a 2.70 to 1 ratio as of June 1994. Working capital
for the period improved from $33.9 million in December 1993 to $35.3
million in June 1994, respectively.
Cash provided by operations totaled $13.4 million. This excess
cash provided by operating activities was used to purchase long-term
investments for $5.1 million and short-term investments for $2.2
million and to buy 40,000 shares of the Company's outstanding shares at
a total cost of $1.2 million.
<PAGE> 9
Management believes that the quality and excellent secondary
market for the long-term investments ensure good liquidity in the
future. Pursuant to a share repurchase program approved in 1987 the
company has continued purchasing its shares.
The Registrant has available credit facilities with commercial
banks for short-term financing and discount of trade paper from
customers in the aggregate amount of $12,600,000. These credit
facilities were unused during the six-month period ended on June 30,
1994.
Over the six months ended June 30, 1994 the Company borrowed $2.4
million in additional long-term debt under the financing facilities for
the conversion of two existing slurry mills to cement grinding mills. Total
long-term debt includes total borrowings of $9 million related to the
mill conversion to cement grinding project.
The approximate aggregate maturities of long-term debt for the
remainder of 1994 and thereafter are as follows:
1994 $ 8,057,143
1995 9,057,143
1996 8,057,143
1997 6,128,571
1998 5,200,000
-----------
Totals $36,500,000
===========
Loan agreements with term lenders contain certain restrictions
concerning working capital, indebtedness, dividends, investments and
certain advances, among others.
Results of Operations
Consolidated net sales for the second quarter reported an
increase of 13.5% when compared to the same period of the prior year,
mainly due to an increase of 868,000 bags or 18.7%, in total cement sales
(5,507,000 bags in 1994 - 4,639,000 in 1993). For the six-month period
ended on June 30, 1994 the value of reported sales reached a total of
$47.3 million against $41.6 million for the same period of 1993, an
increase of $5.7 million. Sales of cement, in bags, went from 9,206,000
as of June 30, 1993 to 10,471,000 as of June 30, 1994, an increase of
1,265,000 bags. An increase in the selling price of cement, effective April
1993, also affected dollar sales volume in the first half of 1994 as
compared to the same period in 1993. Total local cement consumption
registered a 10.5% increase as a result of extremely good weather
resulting from the drought experienced on the Island over the first
half of 1994. Management estimates higher construction levels result
from accelerated work on actual backlogs and future volume might not be
sustained at these levels unless an increase in backlogs from new construction
work is generated.
The drought and product substitution has also affected sales of chemical lime
used for water purification by the government owned Acueducts and Sewer
Authority, a factor which has motivated a decline in total sales for our
Florida Lime subsidiary during the first half in 1994. Sales on the lime
subsidiary declined 21.7% from $2.1 million in 1993 to $1.7 million in 1994 as
a consequence of the decline in local sales, while sales on the paper and bag
division remained almost unchanged.
Revenue from real estate decreased because in 1993 a land lot was sold
during the first quarter while no real estate has been sold in 1994.
<PAGE> 10
The Company's gross margin held steady at 36% for the six-month
periods ended on June 30, 1994 and June 30, 1993 despite the
increase in total cost of sales from one year to another. Higher
average selling prices compensated for the increase in selling
costs resultant from the higher sales volume in the first
half of 1994 as compared to the same period in 1993.
Selling and administrative expenses were $5.4 million in 1994
compared to $5.3 million in 1993. The 2% increase was principally
due to normal inflationary increases in salaries, wages and related
fringe benefits.
Interest and financial charges of $1.1 million at June 30, 1994
declined approximately $295,000 compared with 1993 in spite of the
increase in long-term debt outstanding. Capitalization of interest
related to the financing of the mills' conversion project and lower
average rates on term debt offset the effect of this increased level
of long-term debt.
Interest income for the period reflects an increase of $499,000
over the 1993 figure. A higher volume in long-term investments, as
compared to the same period in 1993, was the principal reason of this
increase.
Part II. OTHER INFORMATION.
Item 2. NONE
Item 5. NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
<PAGE> 11
SIGNATURES
Pursuant to the requirement 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.
PUERTO RICAN CEMENT COMPANY, INC.
(Registrant)
Date: August 8, 1994 By: /s/ Angel Amaral
-------------- ---------------------------
Angel Amaral
Vice President & Controller
Date: August 8, 1994 By: /s/ Jose O. Torres
-------------- ---------------------------
Jose O. Torres
Vice President of Finance
& Treasurer
