<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4753
PUERTO RICAN CEMENT COMPANY, INC.
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(Exact Name of Registrant as Specified in Its Charter)
COMMONWEALTH OF PUERTO RICO 51-A-66-0189525
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
PO Box 364487 - San Juan, Puerto Rico 00936-4487
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(Address of Principal Executive Offices) (Zip Code)
(809) 783-3000
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
NONE
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
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[Cover page 1 of 2 pages]
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant is $110,751,551 (exclusive of shares respecting which
affiliates have either sole or shared voting and dispositive power). This
market value was computed by reference to the closing price of the stock on The
New York Stock Exchange on March 17, 1995.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the close of the period covered by this report:
Common Stock, $1.00 par value 5,494,200 shares
Documents Incorporated by Reference
1. Annual Report to security holders for the fiscal year ended
December 31, 1994, which is incorporated into Parts I and II.
2. Definitive Proxy Statement filed pursuant to Regulation 14A
which is incorporated into Part III.
[Cover page 2 of 2 pages]
<PAGE> 3
CROSS REFERENCE SHEET AND TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
or
(Reference)
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Part I.
Item 1. Business.................................... 6 (1)
a) General Development of Business.......... 6
b) Financial Information About
Industry Segments ....................... 6 (2)
c) Narrative Description of Business........ 6
d) Financial Information about Foreign and
Domestic Operations and Export Sales..... 11
e) Executive Officers of the Registrant..... 11
Item 2. Properties.................................. 14 (3)
Item 3. Legal Proceedings........................... 15 (4)
Item 4. Submission of Matters to a Vote of
Security Holders............................ 15
Part II.
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters............. (5)
Item 6. Selected Financial Data..................... (6)
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................. (7)
Item 8. Financial Statements and Supplementary
Data........................................ (8)
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure...... 15
Part III.
Item 10. Directors of the Registrant................. 15
a) Identification of Directors.............. 15 (9)
Item 11. Executive Compensation...................... 16 (10)
Item 12. Security Ownership of Certain Beneficial
Owners and Management....................... 16 (11)
Item 13. Certain Relationships and Related
Transactions................................ 16 (12)
Part IV.
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K..................... 16
a) Financial Statements..................... 16
b) Exhibits................................. 17
c) Reports on Form 8-K...................... 17
</TABLE>
(1) Information incorporated by reference to the Registrant's Annual Report
to Stockholders for the year ended December 31, 1994 ("Annual Report")
and the Board of Directors' Proxy Statement for use in connection with
the Registrant's annual meeting of stockholders to be held May 3, 1995
("Proxy Statement").
(2) Annual Report, page 28, section entitled "Notes to Consolidated
Financial Statements, Note 12/Financial Data by Industries."
(3) Annual Report, page 25, section entitled "Notes to Consolidated
Financial Statements, Note 4/Property, Plant and Equipment," and
page 29, section entitled "Notes to Consolidated Financial Statements,
Note 13/Lease Commitments."
(4) Annual Report, page 29, section entitled "Notes to Consolidated
Financial Statements, Note 15/Contingent Liabilities and Other
Commitments."
(5) Annual Report, page 33, section entitled "Common Share Prices and
Dividends Per Share," page 31, section entitled "Five-Year Statistical
Comparison," and page 25, section entitled "Notes to Consolidated
Financial Statements, Note 9/Long-term Debt."
(6) Annual Report, page 19, section entitled "Selected Financial Data."
(7) Annual Report, pages 17 to 18, section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
(8) Annual Report, pages 20 to 31, sections entitled "Consolidated Balance
Sheet," "Consolidated Statement of Income and Retained Earnings,"
"Consolidated Statement of Cash Flows," "Notes to Consolidated
Financial Statements," "Report of Independent Accountants," "Financial
Results by Quarter," "Consolidated Fourth Quarter Results," and
"Five-Year Statistical Comparison."
(9) Proxy Statement, pages 2 to 7, section entitled "Information about
Nominees, Directors and Principal Stockholders."
(10) Proxy Statement, pages 10 to 17, section entitled "Executive
Compensation," through and including section entitled "Certain
Transactions with Management."
(11) Proxy Statement, pages 2 to 9, sections entitled "Information about
Nominees, Directors and Principal Stockholders" and "Security Ownership
of Certain Beneficial Owners."
(12) Proxy Statement, pages 16 to 17, sections entitled "Certain
Transactions with Management" and "Compensation Committee Interlocks
and Insider Participation."
<PAGE> 4
PART I
Item 1. Description of Business
(a) General Development of Business
Puerto Rican Cement Company, Inc. (the "Registrant"), a corporation
organized under the laws of the Commonwealth of Puerto Rico in 1938, has been
engaged since the beginning of the fiscal year for which this report is filed
in three principal industry segments, namely: (i) cement and related products,
(ii) paper and packaging and (iii) realty operations.
During fiscal year 1994, there were no major changes in the industry
segments of the Registrant, nor was the Registrant or any of its subsidiaries
subject to any significant change in its form of organization.
(b) Financial Information About Industry Segments
Information on the industry segments in which the Registrant has been
engaged for the last three fiscal years, including the amounts of revenue,
operating profit and identifiable assets attributable to each of the
Registrant's industry segments, is included as part of the Registrant's Annual
Report to Stockholders for the year ended December 31, 1994 (the "Annual
Report"), page 28, section entitled "Notes to Consolidated Financial
Statements, Note 12/Financial Data by Industries," which includes the
financial statements and schedules furnished pursuant to Item 14 and is
incorporated herein by reference.
(c) Narrative Description of Business
(i) Principal Products or Services
The principal products produced or services rendered by the Registrant
are:
(A) Cement and related products
1. Portland grey cement, Type I, manufactured under
specifications of the American Society for Testing Materials
("A.S.T.M.")
2. Hydrated lime
(B) Paper and packaging
1. Multiwall paper bags
(C) Realty operations
The Registrant's products are sold principally on the island of Puerto
Rico.
Portland grey cement is used primarily in the construction of
residential, commercial and public buildings and in the construction of
highways. During the fiscal year ended December 31, 1994, the Registrant sold
5,104,038 barrels of grey cement. Substantially all of these sales were made to
customers in Puerto Rico.
During the fiscal year ended December 31, 1994, approximately 35.4% of
the hydrated lime produced by the Registrant was sold to the construction and
agricultural industry and the remaining 64.6% was sold to other industries for
chemical usage, both locally and in export markets. Approximately 37.4% (43.7%
in 1993) of total sales of hydrated lime, mainly for use in connection with
chemical water purification, were made to the local Government or its agencies.
Multiwall paper bags produced by the Registrant's St. Regis Paper and
Bag Division were marketed almost exclusively in Puerto Rico and were used by
the following customers: 40% by the Registrant and its subsidiaries for
packing its products; 2% for packaging of cement and related products by other
producers; 5% by sugar producers; 44% by the grain and animal feed industry;
and 9% for coffee, chemical, rice, fertilizers and other miscellaneous uses.
The Registrant and Desarrollos Multiples Insulares, Inc., a
wholly-owned subsidiary, own and hold for future development and sale
approximately 532 acres of land throughout Puerto Rico.
<PAGE> 5
Total Revenue
Set forth below are the (i) total revenue (in thousands of dollars) for
each of the last three fiscal years contributed by any class of similar
products which accounted for 10% or more of the Registrant's consolidated net
sales in such fiscal year and (ii) the Registrant's consolidated net sales (in
thousands of dollars) for each of the last three fiscal years:
<TABLE>
<CAPTION>
Registrant's
Sales of Portland Consolidated
grey cement net sales
<S> <C> <C>
1994 $84,168 $92,830
1993 73,895 84,028
1992 70,060 80,022
</TABLE>
Methods of Distribution
The Registrant sells and distributes cement (both in bulk and bagged)
and related products in Puerto Rico to (i) customers on a direct basis, (ii) to
independent local distributors (which include ready mix concrete producers,
building material dealers, concrete products manufacturers, and government
agencies), and (iii) to general and highway contractors.
(ii) New Products
The Registrant has not made any public announcements regarding, not has
it otherwise made public information about, a new product or industry segment
that is material to the Registrant's business.
(iii) Raw Materials
The Registrant owns in fee properties containing limestone and sand
deposits which directly adjoin or are close to its cement and hydrated lime
plant sites. The Registrant also owns properties near such plants which
contain clay deposits. The Registrant has not conducted a systematic
exploratory drilling program ordinarily considered necessary for the
establishment of limestone and other raw materials reserves and, accordingly,
makes no tonnage estimate of the availability of such raw materials. However,
on the basis of scattered drilling results on deposits of substantial depths,
and past and present production from the Registrant's properties, the
Registrant believes that the availability of limestone and other raw materials
presents no foreseeable problem. There have been no recent material mining
changes in the exploitation of the principal raw material deposits, and none
are expected. The Registrant purchases raw gypsum in the open market from
sources outside Puerto Rico. Coal for firing the kilns is purchased from
Carbones de Colombia, S.A., a Colombian supplier, under a long-term supply
contract. Electricity is purchased from the Puerto Rico Electric Power
Authority, and water is obtained from wells on the Registrant's properties.
(iv) Patents and Trademarks
St. Regis Paper and Bag Division has the right to use until December
31, 1995 certain trademarks, tradenames and patents owned by Stone Container
Corporation (which were once owned by St. Regis Paper Company of New York, then
acquired by Champion International during 1985, and thereafter sold to Stone
Container Corporation). The Registrant is negotiating, on an annual basis, for
renewal of this agreement for continued utilization of such trademarks,
tradenames and patents. The Registrant believes that failure to renew such
agreement would have no material impact on this segment of its business.
(v) Seasonal Effect on Sales
Demand for cement and related products is largely dependent on the
requirements of the construction industry. The requirements of the
construction industry in Puerto Rico and in the Caribbean area are not
necessarily "seasonal" because of the normally favorable climatic conditions of
the area; however, the requirements of the construction industry depend to some
extent on general economic conditions.
(vi) Credit and Working Capital Practices
As of December 31, 1994, the Registrant had invested approximately 14%
of its total assets in inventory, which consists mainly of operating supplies
and repair parts for its equipment. Taking into account the geographical
locations of the Registrant's manufacturing facilities as compared to the
geographical locations of its major suppliers, such investment in inventory is
considered normal by industry standards. No significant amounts of finished
goods are required to be maintained in inventory to meet rapid delivery
requirements of customers. The Registrant sells its products to customers
under normal commercial open account payment terms.
(vii) Customers
During fiscal year 1994, 41% of the Registrant's total dollar sales in
the cement and related products segment were made to 10 unrelated customers.
One of these customers, Concreto Mixto, Inc., accounted for approximately 11%
of the Registrant's consolidated sales.
(viii) Backlog
In the opinion of the Registrant, backlog is not a relevant
consideration in the type of business in which it is engaged.
(ix) Government Contracts
No material portion of the business of the Registrant is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
(x) Competition
The Registrant is the principal producer of cement, hydrated lime and
multiwall paper bags in Puerto Rico. During 1994, the other cement
manufacturing company in Puerto Rico, San Juan Cement Company, Inc., which
began production at the end of May 1970, accounted for approximately 40.02% of
the total bags of cement sold in Puerto Rico. No cement was imported to the
Puerto Rico market during 1994.
The Registrant competes on the basis of the price and quality of its
products.
(xi) Research and Development
During the last three fiscal years, other than the conversion of two
slurry mills to cement grinding mills which is currently in progress, the
Registrant has not spent any material amounts on research and development
activities relating to the development of new products, services or techniques
or the improvement of existing products, services or techniques for itself
or for any of its customers.
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(xii) Environmental Compliance
During 1978, the Registrant completed the installation of air pollution
control equipment in its Ponce cement and lime plants at an aggregate
approximate cost of $17,000,000. Such equipment was installed in order to
comply with (i) regulations established by the Environmental Quality Board of
Puerto Rico and (ii) the terms of a consent order signed in August 1974 (as
amended in July 1976 and February 1978) with the Federal Environmental
Protection Agency.
The Registrant financed the cost of the pollution abatement program
through a loan obtained in 1975 from the Government Development Bank for Puerto
Rico. This loan was extinguished in 1985 as fully described in a Current Report
on Form 8-K dated September 1985.
The Registrant's plants are in compliance with existing environmental
regulations. No significant expenditures for pollution control equipment are
expected in the near future.
Regulations issued by the United States Environmental Protection Agency
limit the Registrant's annual production capacity. In 1994, such regulations
limited the Registrant's capacity to 5,165,000 barrels of clinker. The
Registrant complied with these limitations and such limitations did not have a
material effect on the capital expenditures, earnings or competitive position
of the Registrant.
(xiii) Employees
As of December 31, 1994, the Registrant and its subsidiaries had 552
employees.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales
None of the Registrant's industry segments depend to any material
extent on foreign operations.
(e) Executive Officers of the Registrant
1. Carlos J. Suarez (1), age 70, Director; Chairman of the Board and
Chief Executive Officer of the Registrant from April 1, 1985 to December 31,
1994; President from October 1983 to December 31, 1987; Executive Vice
President from June 1982 to October 1983; Senior Vice President from 1980 to
June 1982, Vice President of Operations from 1973 to 1980.
2. Antonio Luis Ferre (2), age 61, Director; Vice Chairman of the Board
of the Registrant from 1985 through December 1994; Chairman of the Board from
1980 through 1985; President of El Dia, Inc. (newspaper publishing company)
since 1969; Director of Metropolitan Life Insurance Company of New York
(insurance company) since 1987; Director and Vice Chairman of BanPonce
Corporation (bank holding company) since 1984 and Banco de Ponce (commercial
bank) from 1959 to 1990; Director and Vice Chairman of Banco Popular de Puerto
Rico (commercial bank) since 1991; Director of Pueblo Extra Supermarket (food
retailer) since 1993.
3. Alberto M. Paracchini, age 62, Director; Vice Chairman of the
Board of the Registrant since 1968; Chairman of the Board and Chief Executive
Officer from 1983 to 1990 and President from 1980 to 1990 of Banco de Ponce
(commercial bank); President from 1984 to 1990 and Director and Chairman of the
Board from 1985 to 1993 of BanPonce Corporation (bank holding company);
Chairman of the Board from 1986 to 1993 of Vehicle Equipment Leasing
Corporation (automobile leasing company); Director since 1991 and Chairman of
the Board from 1991 to 1993 of Banco Popular de Puerto Rico (commercial bank),
Popular Leasing & Rental, Inc. and Popular Consumer Services, Inc.; Director of
HDA Management Corporation since December 1993, Equus Management Co. since
August 1994 and Venture Capital Fund since March 1994.
4. Miguel Nazario (3), age 47, Vice President of the Registrant from
August 8, 1994 to December 31, 1994; prior to joining the Registrant, Mr.
Nazario held various administrative positions over a ten-year period, most
recently as a member of the Corporate Manufacturing Staff of Digital Equipment
Corporation.
5. Hector del Valle (4), age 57, Director; President of the Registrant
from January 1, 1988 to December 31, 1994; Senior Vice President in charge of
Finance from October 1983 to December 31, 1987; Secretary from January 1984 to
December 31, 1987; Vice President of Finance and Treasurer from June 1982 to
October 1983; Assistant Vice President of Finance from 1976 to June 1982;
Treasurer from 1973 to 1976.
6. Jose J. Suarez, age 59, Director; Executive Vice President in
charge of Operations of the Registrant since January 1, 1988; Senior Vice
President in charge of Operations from October 1983 to December 31, 1987; Vice
President of Operations from June 1982 to October 1983.
<PAGE> 7
7. Jose O. Torres, age 49, Secretary; Treasurer and Vice President of
Finance of the Registrant since January 1, 1988; Vice President and Treasurer
from October 1983 to December 31, 1987; Vice President of Sa1es from 1982 to
October 1983; Treasurer from 1976 to 1982.
8. Angel M. Amaral, age 61, Vice President and Controller of the
Registrant since June 1982; Controller from 1976 to June 1982.
9. Rene Di Cristina, age 44, Vice President of Sales of the Registrant
since October 1983.
10. Juan A. Carbonell, age 73, Vice President and General Manager of
St. Regis Paper and Bag Division since January 1984.
11. Benito del Cueto, age 60, Vice President of Desarrollos Multiples
Insulares, Inc., a wholly-owned subsidiary of the Registrant, since 1973.
12. Antonio L. Ferre Rangel, age 28, Director; Vice President of
Strategic Planning since January 1, 1995. Mr. Ferre joined the Company in
1992.
All officers are elected to serve for a term of one year and until the
election and qualification of their respective successors.
____________________
(1) Mr. Suarez retired from his position as Chairman and Chief Executive
Officer of the Registrant as of December 31, 1994, but remained as a
Director.
(2) Mr. Ferre became Chairman of the Board of the Registrant as of January 1,
1995.
(3) President and Chief Executive Officer of the Registrant since January 1,
1995.
(4) Vice Chairman of the Board of the Registrant since January 1, 1995.
<PAGE> 8
Item 2. Description of Property
Used in cement and related products segments
The Registrant owns in fee a cement plant located in Ponce, Puerto Rico
on a 25-acre site. It also owns in fee a hydrated lime manufacturing plant that
is located within the Ponce cement plant premises. The Ponce Cement plant
operates under the dry process and during the last fiscal year 5,083,800
barrels of cement were produced for an approximate 94% of its effective kiln
capacity. The lime plant produced 25,292 tons of lime and was operated at
approximately 55% of its capacity.
During 1992 the Registrant purchased a 67-acre tract of land located
next to the cement plant and a 149-acre tract of land adjacent to one of the
Registrant's quarries for future quarry operations.
During 1994 the Registrant continued the repairs and maintenance
program on its plants. The Registrant believes that its plants are presently in
good condition and properly maintained.
The Registrant owns in fee properties containing adequate deposits of
limestone and other raw materials (See Item 1 (c) (iii)) which directly adjoin
or are close to the plant sites.
The Registrant leases a parcel of land under a long-term lease with the
municipality of Ponce, on which it installed certain facilities for coal
receiving and handling. The coal received through said facilities is used as
fuel in the Registrant's cement and hydrated lime manufacturing operations.
Used in paper and packaging segment
The manufacturing plant of the St. Regis Paper and Bag Division is
located on a site owned by it in fee in Ponce, Puerto Rico. The Registrant
believes the plant to be in good condition and properly maintained.
Used in realty operations
The Registrant and one of its subsidiaries own in fee, and hold for
future development and sale, approximately 532 acres of land throughout Puerto
Rico. (See Item 1 (c) (i).)
<PAGE> 9
Used for office facilities
The Registrant and its subsidiaries own a one story building housing
its executive offices located in the Amelia Industrial Park, Guaynabo, Puerto
Rico.
Information about leased properties is incorporated by reference from
the Annual Report, page 29, section entitled "Notes to Consolidated Financial
Statements, Note 13/Lease Commitments."
Item 3. Legal Proceedings
There are presently pending against the Registrant the legal
proceedings described in the Annual Report, page 29, section entitled "Notes to
Consolidated Financial Statements, Note 15/Contingent Liabilities and Other
Commitments", furnished pursuant to Item 14, to which reference is hereby made
and which is incorporated by reference herein.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
Items 5 through 8 of Part II of this report are omitted as permitted by
General Instruction G(2) since the information required by such items is
contained in the Registrant's Annual Report which is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors of the Registrant
(a) Identification of Directors
Information required herein is contained in a definitive Proxy
Statement for use in connection with the Registrant's Annual Meeting of
Stockholders to be held on May 3, 1995 filed with the Commission pursuant to
Regulation 14A (the "Proxy Statement") pages 2 to 7, section entitled
"Information about Nominees, Directors and Principal Stockholders," and is
incorporated herein by reference.
Item 11. Executive Compensation
Information required by Item 11 is contained in the Proxy Statement,
pages 10 to 17, section entitled "Executive Compensation" through and
including section entitled "Certain Transactions with Management," and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information required by Item 12 is contained in the Proxy Statement,
pages 2 to 9, sections entitled "Information about Nominees, Directors and
Principal Stockholders" and "Security Ownership of Certain Beneficial Owners,"
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required by Item 13 is contained in the Proxy Statement,
pages 16 to 17, sections entitled "Certain Transactions with Management" and
"Compensation Committee Interlocks and Insider Participation," and is
incorporated herein by reference.
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) The following documents are filed as part of this report on Form
10-K:
1. Financial Statements incorporated by reference to the Annual
Report, pages 20 to 29; and
2. Financial statement schedules and supplementary data
required by Item 8 of Form 10-K, filed herewith.
The financial statement schedules required by Item 14(d) of Form 10-K
are excluded since the Registrant is primarily an operating company. All
subsidiaries included in the consolidated financial statements being filed, in
the aggregate, do not have minority equity interest and/or indebtedness to any
person other than the Registrant or the consolidated subsidiaries in amounts
which together exceed 10% of the Registrant's total consolidated assets at
December 31, 1994.
<PAGE> 10
(b) Reports on Form 8-K: None.
(c) Exhibits required by Section 601 Regulation S-K:
3. Certificate of Incorporation and By-Laws
3.1 Certificate of Incorporation and amendment thereto
filed as an exhibit to Form S-1 on March 25, 1963, with (i) composite copy of
the Certificate of Incorporation dated May 16, 1983 filed as an exhibit to
Form 10-K for the fiscal year ended December 31, 1983, (ii) amendments dated
May 6, 1987 filed as an exhibit to Form 10-Q for the fiscal quarter ended June
30, 1987, and (iii) amendment dated May 5, 1993 (increasing the number of
authorized shares of common stock from 10 million to 20 million) filed as an
exhibit to Form 10-K for the fiscal year ended December 31, 1993.*
3.2 By-Laws of the Registrant, as amended, filed as an
exhibit to Form 10-K for the fiscal year ended December 31, 1987,
with (i) amendment dated January 1993 filed as an exhibit to Form 10-K
for the fiscal year ended December 31, 1993*, and (ii) amendment dated December
22, 1994 filed herewith.
10. Material contracts
10.1 Coal Purchase/Sale Agreement between Registrant and Carbones
de Colombia, S.A. dated as of December 14, 1982 filed as an exhibit to Form 10-K
for the fiscal year ended December 31, 1982.* Copy of addendum No. 5 which
changed the quantity of coal purchases to 100,000 tons per year through the
year 2000, was filed as an exhibit to Form 10-Q for the fiscal quarter ended
March 31, 1992.*
10.2 (a) Consolidated and restated loan agreement dated as of
September 27, 1985 among Registrant, Registrant's Guarantors and the Government
Development Bank for Puerto Rico for approximately $18.3 million encompassing
all outstanding debt of the Registrant to the bank as of that date.*
(b) Indenture trust agreement dated September 27, l985
between Registrant as grantor and Banco de Ponce as trustee for the benefit of
the Government Development Bank for Puerto Rico.*
(Both documents listed above in this paragraph 10.2 were filed as
exhibits to a Current Report on Form 8-K dated September 1985 and are related
to the early extinguishment of the debt transaction described therein.)
10.3 Loan agreement between the Registrant and Lincoln National
Pension Insurance Company, The Lincoln National Life Insurance Company, First
Penn-Pacific Life Insurance Company and Security Connecticut Life Insurance
Company in the principal amount of $15,000,000 dated as of August 1, 1987 filed
as exhibits to a Current Report on Form 8-K dated August 1987.*
10.4 Loan agreement between the Registrant and Banco Popular de
Puerto Rico in the principal amount of $10,000,000 dated as of November 6,
1987 filed as an exhibit to a Current Report on Form 8-K dated November 1987.*
Letter dated January 17, 1992, which modifies certain terms of such loan
agreement (including a reduction in the interest rate and a change in the
original repayment schedule from quarterly payments to annual payments) filed
as an exhibit to Form 10-K for the fiscal year ended December 31, 1991.*
10.5 Form of Golden Parachute Agreement executed by the
Registrant during the third quarter of 1989 with a consultant and 18
of the Registrant's key officers, filed as an exhibit to Form 10-Q for
the fiscal quarter ended September 30, 1989.*+
10.6 Loan agreement between the Registrant and Banco Popular de
Puerto Rico in the principal amount of $8,000,000 dated as of December 8, 1993
(to be used to finance the conversion to cement grinding of two existing
slurry mills) and letter dated July 11, 1994 (amending certain sections of
the original loan agreement).
10.7 Loan agreement between the Registrant and The Bank of Nova
Scotia in the principal amount of $16,000,000 dated as of February 26, 1993
(to be used in the financing of the conversion of two existing slurry mills to
cement grinding).
10.8 Loan agreement between the Registrant and Banco Popular de
Puerto Rico in the principal amount of $6,000,000 dated August 2, 1993 (to pay
a $3 million scheduled installment and an optional $3 million payment on a
long-term debt due August 1993) and letter dated July 11, 1994 (amending
certain sections of the original loan agreement).
10.9 Loan agreement between the Registrant and Banco
Popular de Puerto Rico in the principal amount of $7,000,000 dated
September 15, 1994 (used to refinance the outstanding balance of
another loan) filed as an exhibit to Form 10-Q for the fiscal quarter
ended September 30, 1994.*
10.10 Amendment to the Consulting Agreement between the Registrant
and Antonio Luis Ferre dated January 1, 1995.+
13. Annual Report to security holders for the year ended
December 31, 1994.
21. Subsidiaries of the Registrant are included as part of the
Annual Report to security holders, page 32, section entitled "Subsidiaries."
All of the Registrant's subsidiaries are incorporated under the laws of the
Commonwealth of Puerto Rico, except for Caribbean Cement Carriers Corporation,
which is incorporated under the laws of the Republic of Panama, and Ferre
Export Corporation, which is incorporated under the laws of the state of New
York.
23. Consent of Price Waterhouse, independent public accountants.
27. Financial Data Schedule (for SEC use only)
__________________________________
* Incorporated herein by reference.
+ Exhibit constitutes a management contract or compensatory plan or
arrangement required to be filed pursuant to Item 601 (b) (10) (iii).
<PAGE> 11
S I G N A T U R E S
Pursuant to the requirements of Section 13 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: March 22, 1995 By: /s/ Miguel Nazario
-------------------
Miguel Nazario
President and Chief
Executive Officer
and Director
<PAGE> 12
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
Date: March 22, 1995 By: /s/ Miguel Nazario
-----------------------------
Miguel Nazario
President and Chief
Executive Officer
and Director
Date: March 22, 1995 By: /s/ Antonio Luis Ferre
-----------------------------
Antonio Luis Ferre
Chairman of the Board and
Director
Date: March 22, 1995 By: /s/ Alberto M. Paracchini
-----------------------------
Alberto M. Paracchini
Director and Vice Chairman of
the Board
Date: March 22, 1995 By: /s/ Hector del Valle
-----------------------------
Hector del Valle
Director and Vice Chairman of
the Board
Date: March 22, 1995 By: /s/ Jose J. Suarez
-----------------------------
Jose J. Suarez
Executive Vice President in
Charge of Operations and
Director
Date: March 22, 1995 By: /s/ Antonio L. Ferre Rangel
-----------------------------
Antonio L. Ferre Rangel
Vice President of Strategic
Development and Director
Date: March 22, 1995 By: /s/ Jose O. Torres
-----------------------------
Jose O. Torres
Vice President of Finance,
Secretary and Treasurer
Date: March 22, 1995 By: /s/ Angel M. Amaral
-----------------------------
Angel M. Amaral
Vice President and Controller
Date: March 22, 1995 By: /s/ Wallace Gonzalez Oliver
-----------------------------
Wallace Gonzalez Oliver
Director
Date: March 22, 1995 By: /s/ Esteban D. Bird
-----------------------------
Esteban D. Bird
Director
Date: March 22, 1995 By: /s/ Emilio J. Venegas
-----------------------------
Emilio J. Venegas
Director
Date: March 22, 1995 By: /s/ Oscar A. Blasini
-----------------------------
Oscar A. Blasini
Director
Date: March 22, 1995 By: /s/ Hector Puig Ramirez
-----------------------------
Hector Puig Ramirez
Director
Date: March 22, 1995 By: /s/ Rosario J. Ferre
-----------------------------
Rosario J. Ferre
Director
Date: March 25, 1995 By: /s/ Federico F. Sanchez
-----------------------------
Federico F. Sanchez
Director
Date: March 25, 1995 By: /s/ Jorge L. Fuentes
-----------------------------
Jorge L. Fuentes
Director
Date: March 22, 1995 By: /s/ Carlos J. Suarez
-----------------------------
Carlos J. Suarez
Director
Date: March 22, 1995 By: /s/ Mariano J. Mier
-----------------------------
Mariano J. Mier
Director
Date: March 22, 1995 By: /s/ Juan A. Albors
-----------------------------
Juan A. Albors
Director
Date: March 22, 1995 By: /s/ Federico Stubbe
-----------------------------
Federico Stubbe
Director
<PAGE> 13
PRICE WATERHOUSE
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Puerto Rican Cement Company, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 17, 1995 appearing on page 20 of the 1994 Annual Report to
Shareholders of Puerto Rican Cement Company, Inc. (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedules listed in Item 14(a) of this Form 10-K. In our opinion these
Financial Statement Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE
----------------
PRICE WATERHOUSE
San Juan, Puerto Rico
February 17, 1995
CERTIFIED PUBLIC ACCOUNTANTS
(OF PUERTO RICO)
License No. 10 Expires Dec. 1, 1995
Stamp 1259907 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report
24
<PAGE> 14
PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT BALANCE AT
BEGINNING ADDITION END OF
CLASSIFICATIONS OF YEAR AT COST RETIREMENTS(1) TRANSFERS YEAR
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
Land and quarries $ 2,639,596 $ 1,642,779 $ 198 $ - $ 4,282,177
Buildings 27,660,916 (100,000) 258,516 772,538 28,074,938
Machinery and equipment 89,654,889 208,483 1,501,097 1,074,585 89,436,860
Pollution control equipment 27,601,476 66,269 909,897 28,445,104
Construction in progress 178,962 2,578,058 - (2,757,020) -
----------------------------------------------------------------------------
Total $147,735,839 $ 4,329,320 $1,826,080 $ - $150,239,079
============================================================================
1993
Land and quarries $ 4,282,177 $ 17,298 $ - $ - $ 4,299,475
Buildings 28,074,938 222,894 391,764 28,243,808
Machinery and equipment 89,436,860 270,882 2,161,579 1,630,539 89,176,702
Pollution control equipment 28,445,104 22,967 218,325 434,158 28,683,904
Construction in progress - 8,825,821 - (2,456,461) 6,369,360
----------------------------------------------------------------------------
Total $150,239,079 $ 9,136,968 $2,602,798 $ - $156,773,249
============================================================================
1994
Land and quarries $ 4,299,475 $ - $ - $ - $ 4,299,475
Buildings 28,243,808 - 68,220 158,047 28,333,635
Machinery and equipment 89,176,702 244,916 4,005,731 2,385,098 87,800,985
Pollution control equipment 28,683,904 700 878,748 215,137 28,020,993
Construction in progress 6,369,360 11,011,147 - (2,758,282) 14,622,225
----------------------------------------------------------------------------
Total $156,773,249 $11,256,763 $4,952,699 $ - $163,077,313
============================================================================
</TABLE>
--------------------------------
(1) Retirements relate mainly to the cost of fully depreciated assets no
longer in use. In 1994, total retirements include equipment written-off
with a book value of $587,671.
<PAGE> 15
SCHEDULE VI
PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE ADDITIONS BALANCE
AT CHARGED TO AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES RETIREMENTS TRANSFERS YEAR
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
Land and quarries $ 407,961 $ 11,248 $ $ - $ 419,209
Buildings 5,438,376 593,921 258,518 - 5,773,779
Machinery and equipment 22,853,395 5,042,112 1,500,804 (518,580) 25,876,123
Pollution control equipment 10,682,649 1,287,327 66,269 518,580 12,422,287
---------------------------------------------------------------------------
Total $39,382,381 $6,934,608 $1,825,591 $ - $44,491,398
===========================================================================
1993
Land and quarries $ 419,209 $ 11,397 $ $ - $ 430,606
Buildings 5,773,779 587,765 222,894 - 6,138,650
Machinery and equipment 25,876,123 5,025,196 2,161,580 - 28,739,739
Pollution control equipment 12,422,287 1,291,688 218,324 - 13,495,651
---------------------------------------------------------------------------
Total $44,491,398 $6,916,046 $2,602,798 $ - $48,804,646
===========================================================================
1994
Land and quarries $ 430,606 $ 12,725 $ $ - $ 443,331
Buildings 6,138,650 584,410 68,220 - 6,654,840
Machinery and equipment 28,739,739 5,046,397 3,705,109 - 30,081,027
Pollution control equipment 13,495,651 1,305,590 591,699 - 14,209,542
---------------------------------------------------------------------------
Total $48,804,646 $6,949,122 $4,365,028 $ - $51,388,740
===========================================================================
</TABLE>
----------------------------------
(1) Retirements relate mainly to accumulated depreciation of fully depreciated
assets.
<PAGE> 16
SCHEDULE VIII
PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------------------------------------------------------------------------------------------------------------
ADDITIONS ADDITIONS DEDUCTIONS FROM
BALANCE AT CHARGED TO CHARGED RESERVES WRITE-OFF BALANCE AT
BEGINNING COST AND TO OF UNCOLLECTIBLE END OF
DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS YEAR
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts
1992 $1,215,674 $50,110 $62,283 $1,203,501
1993 $1,203,501 $ 1,492 $83,392 $1,121,601
1994 $1,121,601 $ 948 $28,546 $1,094,003
</TABLE>
<PAGE> 17
SCHEDULE IX
PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES
SHORT TERM BORROWING
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
OUTSTANDING DURING
THE PERIOD
BALANCE WEIGHTED --------------------------------- WEIGHTED AVERAGE
CATEGORY AT END AVERAGE MAXIMUM AVERAGE INTEREST RATE
OF BORROWINGS OF PERIOD INTEREST RATE* AMOUNT AMOUNT (1) DURING THE PERIOD
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
----
Banks and other financial
institutions:
Under line of credit None None
1993
----
Banks and other financial
institutions:
Under line of credit None None
1994
----
Banks and other financial
institutions: $2,420,000 6.15% $3,400,000 $423,700 5.69%
Under line of credit
</TABLE>
-------------------
(1) The average amount outstanding during the period was computed based on the
actual daily balances outstanding during the year.
(2) The weighted average interest rate during the period was computed based on
the sum of the actual interest rates.
<PAGE> 18
SCHEDULE X
PUERTO RICAN CEMENT COMPANY, INC.
AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENTS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
ITEMS 1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs (1) $5,264,126 $3,683,584 $3,754,347
Depreciation and amortization of
intangible assets, pre-operating
costs and similar deferrals (2) (2) (2)
Taxes, other than payroll and
income taxes:
Excise taxes $1,698,615 $1,505,312 $1,492,675
Property taxes 2,886,411 3,222,074 2,607,055
Other 100,934 116,523 128,045
$4,685,960 $4,843,909 $4,227,775
Royalties (2) (2) (2)
Advertising costs (2) (2) (2)
</TABLE>
-------------------------------
(1) Amount includes $2.3 million from a major overall maintenance and
replacement work of worn interchangeable machinery parts mostly related
to dry process equipment. This kind of work is not recurrent on an
annual basis but is expected to take place every three to five years.
(2) Amount is not disclosed because it is lower than the minimum required for
reporting in accordance with Rule 12-11 of Regulation S-X.
<PAGE> 1
EXHIBIT 3.2
Amendment to the Section XIII of the By Laws of the Corporation
RESOLUTION
"Whereas management has recommended certain changes to Section XIII of the By
Laws of the Corporation dealing with duties and responsibilities of certain
officers of the Corporation; THEREBY IT IS RESOLVED to change the following
Sections of the By Laws.
Section XIII - 6 will be changed to read:
6. The Chairman shall preside over the meetings of the Board of Directors.
A new Section XIII-8 will be inserted to read:
The Chief Executive Officer
8. The Chief Executive Officer shall be responsible for implementing the
general and financial policies; execute bonds, deeds, and contracts in the name
and on behalf of the Corporation and shall also have such other powers and
perform such other duties as from time to time may be conferred upon him by the
Board of Directors.
Following paragraphs will be renumbered due to the insertion of this new
paragraph, XIII-8."
30
<PAGE> 1
EXHIBIT 10.7
PUERTO RICAN CEMENT COMPANY INC.
February 26, 1993
The Bank of Nova Scotia
Hato Rey Branch
273 Ponce de Leon 4th Floor
Hato Rey, Puerto Rico
Attention: Mr. Victor Irizarry
Re: $16,000,000 financing mill conversion project Puerto Rican Cement Company,
Inc.
Gentlemen:
We hereby enclose a copy of your letter dated January 19, 1993 indicating terms
and conditions under which a $16,000,000 financing for the subject project has
been approved by the Bank of Nova Scotia. Said letter has been accepted by the
undersigned on behalf of Mr. Hector del Valle, subject to these additional
conditions:
a) Drafting of Loan Agreement covering terms and conditions of
the financing which shall be approved by the company's counsel
Dominguez & Totti.
b) Final approval by the Board of Directors of the company for
the execution of such agreement.
c) Final discussion and acceptance of the terms to be included in
such Agreement covering the conditions under which a
defeasance reserve at Borrower's option will be executed.
Upon execution of such Loan Agreement we will provide advanced payment of front
end fee of $40,000 as part of the cost of subject credit.
Very truly yours,
/s/ Jose O. Torres
Jose O. Torres
Vice President Finance
31
<PAGE> 2
EXHIBIT 10.7
The Bank of Nova Scotia
Hato Rey Branch
273 Ponce de Leon 4th. Floor
Hato Rey, Puerto Rico
G.P.O. Box BM
January 19, 1993 San Juan, P.R. 00936
Cable "SCOTIABANK"
Mr. Hector del Valle
President
Puerto Rican Cement Co., Inc.
P.O. Box 4487
San Juan, P.R. 00936-4487
Dear Mr. Del Valle:
We are pleased to confirm that subject to acceptance by the company,
The Bank of Nova Scotia (the "Bank") will make available to Puerto Rican Cement
Co., Inc. ("the "Borrower") the following credit facilities on the terms and
conditions set out below and in the Schedule A attached hereto (collectively
called the "Commitment Letter").
CREDIT A AUTHORIZED AMOUNT: $16,000,000
TYPE : Non-Revolving.
PURPOSE : To provide bridge financing for improvements to the
company's plant and equipment.
CURRENCY : United States Dollars.
AVAILMENT : The borrower may utilize the credit by way of Direct
advances evidenced by the Borrower's Demand
Promissory Note(s) providing all the terms and
conditions of the credit are met.
INTEREST
RATE : One (1) percent over our net cost of 936 funds, if
available, or one (1) percent over the Bank's London
Interbank Offer Rate (LIBOR) adjusted, or one (1)
percent over The Bank of Nova Scotia Base Rate in the
City of New York, fluctuating concurrently with any
changes on such Base Rate. Interest will be payable
monthly.
Borrower will have the option to fix interest rate on
the full amount or a portion of the loan, up to the
term of the loan, subject to availability to the Bank
of back to back funds.
FEES : Front end fee of $40,000 payable upon acceptance of
this commitment letter.
32
<PAGE> 3
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 2
TERM AND
REPAYMENT
ARRANGEMENT : The loan is repayable in full on completion of the
improvements or by December 31, 1995, whichever is
earlier, from proceeds of Credit B.
PREPAYMENT : No prepayments permitted at any time in whole or in
part when advances are funded with 936 or LIBOR
deposits, except on rollover dates.
SPECIFIC
SECURITY : Unsecured.
CREDIT B AUTHORIZED AMOUNT: $16,000,000
TYPE : Non-Revolving and/or Stand-by Letter of Credit
PURPOSE : To repay Credit A by way of a direct non revolving
(five year) loan or the establishment of a Standby
Letter of Credit to provide credit enhancement for
five year capital notes to be sold directly to
936 eligible companies.
CURRENCY : United States Dollars.
AVAILMENT : The borrower may utilize the credit by way of Direct
advances evidenced by the Borrower's Demand
Promissory Note(s) providing all the terms and
conditions of the credit are met.
INTEREST
RATE : One (1) percent over our net cost of 936 funds, if
available or one (1) percent over the Bank's
London Interbank Offer Rate (LIBOR) adjusted, or one
(1) percent over The Bank of Nova Scotia Base Rate in
the City of New York, fluctuating concurrently with
any changes on such Base Rate.
33
<PAGE> 4
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 3
Borrower will have the option to fix interest rate on
the full amount or a portion of the loan, up to the
term of the loan, subject to availability to the Bank
of back to back funds.
In the event of any drawdown under the Standby Letter
of Credit, interest will be applied on the
outstanding amount of any of such unpaid
drawdowns at the rate of one (1) percent over The
Bank of Nova Scotia Base Rate in the City of New
York, fluctuating concurrently with any
change on such Base Rate.
COMMISSIONS : One (1) percent per annum on the Stand-by Letter of
Credit facility.
TERM AND
REPAYMENT
ARRANGEMENT : The term of the loan is 5 years. Principal is to be
paid in full at maturity at the end of the fifth year
from disbursement date. Any drawdown under the
Standby Letter of Credit will be immediately repaid
from Borrower's own resources.
PREPAYMENT : No prepayments permitted at any time in whole or in
part when advances are funded with 936 or LIBOR
deposits, except on rollover dates.
SPECIFIC
SECURITY : Unsecured.
CONDITIONS
PRECEDENT : The following conditions must be met prior to the
interim disbursement:
All required permits from the various
governmental agencies to be in place
and provided to the Bank.
Detailed final budget to be provided to
the Bank.
GENERAL
CONDITIONS : Until all debts and liabilities have been discharged
in full, the following conditions will apply in
respect of the credits:
34
<PAGE> 5
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 4
- A new Loan Agreement to be prepared
and/or reviewed by the Bank's
attorneys to cover the now
authorized increased loans.
- Advances to be made against
certifications duly reviewed and
approved by our appointed engineer,
cost of which is for Borrower's
account.
- Selected contractor, other than the
Borrower, to be fully bonded
(payment and performance).
- Adequate builder's risk insurance to
be in place.
- Usual qualification documentation to
be provided when loans are funded
with 936 deposits.
- Quarterly in-house financial
statements to be provided within 45
days of each quarter.
- Annual audited financial statements
to be provided within 90 days of
each fiscal year end.
- Construction progress report is to
be provided monthly.
- The facility will be subject to
periodic and/or annual review.
The credit facilities herein outlined in this Commitment Letter may at any time
be participated to the Bank's subsidiary, Scotiabank de Puerto Rico.
The above credits are in addition to an existing Non-Revolving loan with a
balance of $8,571 428 granted to Puerto Rican Cement Co., Inc. and Desarrollos
Multiples Insulares, Inc. and Florida Lime Corp., covered under a Loan
Agreement dated December 6, 1989 with the former Banco de Ponce, as amended on
December 21, 1990 and August 23, 1991, which terms and conditions remain
unchanged, and an Operating facility for $4,000,000 available to Puerto Rican
Cement Co., Inc. The said credits were purchased from Banco Popular de Puerto
Rico by our subsidiary, Scotiabank de Puerto Rico under a Purchase and
Assumption Agreement on dated May 21, 1991.
35
<PAGE> 6
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 5
If the terms and conditions set out above are acceptable to you, please sign
the enclosed copy of this letter in the space indicated below and return to us
by the close of business on January 29, 1993. If not accepted by that date,
the offer will lapse.
We look forward to a continued cordial and mutually beneficial relationship.
Yours truly,
/S/ David F. Babensee
----------------------
David F. Babensee
Terms and conditions set out above and in Schedule A attached hereto are hereby
acknowledged and accepted by:
PUERTO RICAN CEMENT CO., INC.
BY:
HECTOR DEL VALLE
PRESIDENT
DATE:
36
<PAGE> 7
EXHIBIT 10.7
SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE
TO ALL CREDITS
Calculation and Payment of Interest
1. Interest on loans/advances made will be calculated on a daily basis
and payable monthly on the 22nd day of each month, (unless otherwise
stipulated by the Bank). Interest shall be payable not in advance on
the basis of a 360 day year for the actual number of days elapsed when
advances drawn in 936 and/or LIBOR funds and shall be payable not in
advance on the basis of a 365 day year for the actual number of days
elapsed when advances drawn in conventional funds both before and
after demand of payment or default and/or judgement.
"Base Rate", as used herein, is a variable per annum reference rate of
interest as announced and adjusted by the Bank from time to time for
United States dollar loans made in the United States and Puerto Rico.
No representation is made that the said rate is the lowest or most
favourable rate offered.
"LIBOR" (London Interbank Offer Rate) adjusted shall mean, with
respect to an interest period for an advance, the rate per annum at
which United States dollar deposits of equal (or more) amounts in
United States dollars are offered by the principal office of The Bank
of Nova Scotia in London, England to prime banks in the London
interbank market at 11:00 a.m. (London time) two business days before
the first day of such interest period for a period equal to such
interest period and adjusted for patente costs. The period between
the day hereof and the day of payment in full of the principal amount
thereof shall be divided into successive periods, each such period
being an interest period.
Indemnity Provision
2. If the introduction of, or any change in, or in the interpretation of,
or any change in its application to the Borrower of, any law or
regulation, or compliance with any guideline from any central bank or
other governmental authority (whether or not having the force of law)
has the effect of increasing the cost to the Bank of performing its
obligations hereunder or otherwise reducing its effective return
hereunder or on its capital allocated in support of the credit(s),
then upon demand from time to time the Borrower shall compensate the
Bank for such cost or reduction pursuant to a certificate reasonably
prepared by the Bank.
37
<PAGE> 8
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 7
(a) Prepayment Without Fee
In the event of the Borrower becoming liable for such
costs, the Borrower shall have the right to cancel
without fee all of any unutilized portion of the
affected credit (other than any portion in respect of
which the Borrower has requested utilization of the
credit in which case cancellation may be effected
upon indemnification of the Bank for any costs
incurred by the Bank thereby), and to prepay, without
fee the outstanding principal balance thereunder as
long as same has been drawn in conventional funds,
other than the face amount of any document or
instrument issued or accepted by the Bank for the
account of the Borrower, such as a Letter of Credit,
a Guarantee or a Banker's Acceptance.
(b) Prepayment of Fixed Advances
If any prepayment is made, for any reason, of an
advance bearing a fixed rate of interest, including
without limitation a 936 or LIBOR funded advance, the
Borrower shall compensate the Bank for the cost of
any early termination of its funding arrangements in
accordance with its normal practices, such costs to
be notified to the Borrower in a certificate
reasonably prepared by the Bank.
Notice of Drawdown/Payments
3. The Borrower shall give the Bank prior notice of a drawdown or payment
of any loan/advance as follows:
- two bank business days when the amount is $5 million dollars
or more.
Initial Drawdown
4. The right of the Borrower to obtain the initial drawdown under the
Credit(s) is subject to the condition precedent that there shall not
have been any material adverse changes in the financial condition of
the Borrower or any guarantor of the Borrower.
Periodic Review
5. The obligation of the Bank to make further advances or other
accommodation available under any Credit(s) of the Borrower under
which the indebtedness or liability of the Borrower is payable on
demand, is subject to periodic review and to no adverse change
occurring in the financial condition of the Borrower.
38
<PAGE> 9
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 8
Waiver
6. Any waiver by either party of a breach of any part of this Agreement
caused by the other party will not operate as or be interpreted as a
waiver of any other breach. The failure of a party to insist on
strict adherence to any term of the Agreement on one or more occasions
is not to be considered to be a waiver of any of their rights under
this Agreement or to deprive that party of the right to insist upon
strict adherence to that term or any other term in the future. No
waiver shall be of any effect unless it is in writing and
authenticated by the waiving party.
Brokerage Commission
7. The Borrower agrees to indemnify and hold harmless the Bank, from and
against all loss, damage, liability and arising out of, or in
connection with, brokerage commissions or finder's fees due or alleged
to be due in connection with this offer or the loan to be made
pursuant hereto.
Acceleration
8. (a) All indebtedness and liability of the Borrower to the Bank
payable on demand, is repayable by the Borrower to the Bank at any time on
demand;
(b) All indebtedness and liability of the Borrower to the Bank not
payable on demand, shall, at the option of the Bank, become
immediately due and payable, the security held by the Bank
shall immediately become enforceable, and the obligation of
the Bank to make further advances or other accommodation
available under the Credits shall terminate, if any one of the
following Events of Default occurs:
(i) the Borrower fails to make when due, whether on
demand or at a fixed payment date, by acceleration or
otherwise, any payment of interest, principal fees,
commissions or other amounts payable to the Bank;
(ii) there is a breach by the Borrower of any other term
or condition contained in this Commitment Letter or
in any other agreement to which the Borrower and the
Bank are parties;
(iii) any default occurs under the security listed in this
Commitment Letter under the headings "Specific
Security" or "General Security" or under any other
credit, loan or security agreement to which the
Borrower is a party;
39
<PAGE> 10
EXHIBIT 10.7
PUERTO RICAN CEMENT CO., INC. 9
(iv) any bankruptcy, reorganization, compromise,
arrangement, insolvency or liquidation proceedings or
other proceedings for the relief of debtors are
instituted by or against the Borrower and, if
instituted against the Borrower, are allowed against
or consented to by the Borrower or are not dismissed
or stayed within 60 days after such institution;
(v) a trustee is appointed over any property of the
Borrower or any judgement or order or any process of
any court becomes enforceable against the Borrower or
any property of the Borrower or any creditor takes
possession of any property of the Borrower;
(vi) any adverse change occurs in the financial conditions
of the Borrower.
Costs
9. All costs, including legal and appraisal fees incurred by the Bank
relative to security and other documentation, shall be for the account
of the Borrower and may be charged to the Borrower's deposit account
when submitted.
40
<PAGE> 1
EXHIBIT 10.8
BANCO POPULAR
July 2, 1993
Mr. Jose 0. Torres
Vice President & Treasurer
Puerto Rican Cement Co., Inc.
PO Box 364487
San Juan, Puerto Rico 00936-4487
Dear Mr. Torres:
We are pleased to inform you that Banco Popular de Puerto Rico (the Bank) has
available to Puerto Rican Cement Co., Inc. (the Company) the credit facilities
outlined below and subject to the following terms and conditions:
1. Amount and Purpose:
$6,000,000- An unsecured five years term loan to refinance
certain payments to the Lincoln National Life
Insurance Company that will become due and payable on
August 1, 1993.
2. Repayment Schedule:
Five (5) annually installments of $1,200,000 or at the option of
borrower one bullet payment at the end of the five (5) year term,
subject to the creation of a sinking fund, with an acceptable Trustee
to the Bank, that will annuallyincrease by a present value equivalent
to $1,200,000 until reaching $6,000,000 as of 8-01-98. Maturities of
such investments will fluctuate from one (1) to five (5) years. The
Company should provide the Bank with a Corporate Resolution
authorizing the pledge of the fund as a reserve for payment of the
term loan on maturity date. On both alternatives the interest will
become due and payable every thirty (30) days.
3. Interest Rate:
Six and a quarter of one percent per annum (6.250) effective from
takedown date through the next sixty (60) months.
4. Prepayment:
The Company may choose to prepay the outstanding balance of the loan
providing, however, that the Company will compensate the Bank for any
funding loss on such prepayment.
41
<PAGE> 2
EXHIBIT 10.8
Mr. Jose 0. Torres
July 2, 1993
Page 2
An event of default under the loan agreement executed by and between the Bank
and the Company on December 6, 1989 and under the terms and conditions of our
commitment letter dated March 9, 1993 will automatically constitute a default
on these credit facilities.
These terms and conditions, and others required by our legal counsel as to the
pledge of the investment instruments, will be incorporated into a loan
agreement to be executed by and between the Bank and the Company. All legal
expenses will be paid by the Company.
Kindly sign the enclosed copy of this letter in acceptance to the terms and
conditions previously described and return it to us on or before August 1,
1993, the date in which our commitment letter will expire.
Cordially
/S/ Pedro J. Pena
--------------------
Pedro J. Pena
Vice President
Corporate Banking
xdc
Enclosure
PUERTO RICAN CEMENT CO., INC.
/S/ Jose O. Torres
July 21, 1993
42
<PAGE> 3
EXHIBIT 10.8
BANCO POPULAR
July 11, 1994
Mr. Jose 0. Torres
Vice President and Treasurer
Puerto Rican Cement Company, Inc.
PO Box 364487
San Juan, Puerto Rico 00936-4487
Dear Mr. Torres:
Reference is made to your request for certain modifications to the Loan
Agreements executed by and between Puerto Rican Cement Company (the Borrower)
and Banco Popular de Puerto Rico (the Bank) on August 20, 1993 and December 8,
1993 respectively.
We are pleased to inform you that the Bank is hereby amending the following
section of said loan agreements, to read as follows:
August 20, 1993 Loan Agreement:
Section 1. Term Loan:
Item C. Principal on the term loan shall be paid by BORROWER to the
BANK in (I) four (4) equal and consecutive annual installments of
Seven Hundred and Fifty Thousand Dollars ($750,000.00) each, due and
payable on the first (1st) day of August of the years 1994, 1995,
1996, 1997 and a balloon payment of Three Million Dollars
($3,000,000.00) or 50% of the total amount loaned to Borrower due and
payable on August 1, 1998, or (II) in one (1) bullet payment due on
the first (1st.) day of August of the year nineteen hundred ninety
eight (1998), subject to the creation by the BORROWER of a sinking
fund, with a Trustee acceptable to the BANK, to increase annually by a
present value equivalent to ONE MILLION TWO HUNDRED THOUSAND DOLLARS
($1,200,000.00) until reaching the principal sum of SIX MILLION
DOLLARS ($6,000,000.00) on or before the first (1st.) day of August of
the year nineteen hundred ninety eight (1998) or (III) in five (5)
equal and consecutive annual installments of one million Two Hundred
Thousand Dollars ($1,200,000.00) each,
43
<PAGE> 4
EXHIBIT 10.8
Mr. Jose 0. Torres
July 11, 1994
Page 2
due and payable on the first (1st) day of August of the years 1994,
1995, 1996, 1997 and 1998. The outstanding principal balance shall
accrue interest from this date and until payment in full, even after
maturity, at a fixed annual rate of SIX AND ONE FOURTH PERCENT (6
1/4%) based on a 360 days-year. Interest on the decreasing balance of
the principal sum of the term loan at the rate specified shall be paid
by BORROWER monthly on the last day of each and every month.
December 8. 1993 Loan Agreement:
Section 1, Loan
Item C
Principal on the loan shall be paid by borrower to the Bank, in one of
the following terms (I) five (5) equal and consecutive annual
installments of one million Six Hundred Thousand dollars
($1,600,000.00) each, due and payable on the tenth (10th) day of
November of the years 1994, 1995, 1996, 1997 and 1998 or (II) in four
(4) equal and consecutive annual installments of 12.5 % each of the
total principal amount loaned to Borrower, due and payable on the
tenth (10th) day of November of the years 1994, 1995, 1996, 1997 and a
balloon payment of Four Million Dollars ($4,000,000.00) or 50% of the
total principal amount loaned to borrower, due and payable on November
10, 1998, or (II) in one (1) bullet payment due on the tenth (10th)
day of November of the year nineteen hundred ninety eight (1998),
subject to the creation by the Borrower of a sinking fund, duly
pledged in favor of the Bank, with A Trustee acceptable to the bank,
to increase annually by A present value equivalent to One Million Six
Hundred Thousand Dollars ($1,600,000.00) or by 20% of the total loaned
to Borrower until reaching the principal sum of Eight Million Dollars
($8,000,000.00) on or before the tenth (10th) day of November of the
year nineteen hundred ninety eight (1998). The outstanding principal
balance shall accrue interest from this date and until payment in
full, even after maturity, at a fixed annual rate of Six and One
Fourth Percent (6 1/4%) based on a 360 days year. Interest on the
decreasing. balance of the principal sum of the loan, at the rate
specified, shall be paid by borrower monthly on the last day of each
month.
44
<PAGE> 1
EXHIBIT 10.10
AMENDMENT NO. 1 TO CONSULTANT AGREEMENT
AMENDMENT, dated as of January 1, 1995 between PUERTO RICAN CEMENT COMPANY,
INC. (the "COMPANY") and MR. ANTONIO LUIS FERRE (the "CONSULTANT").
W I T N E S S E T H
WHEREAS, the CONSULTANT and the COMPANY are parties to a Consultant
Agreement dated as of July 15, 1988 (the "Agreement").
WHEREAS, the CONSULTANT has continued to make substantial contributions to
the profitability, growth and financial strength of the COMPANY through his
expertise in the areas of financing, sales, project development, executive
salaries, shareholder relationship and strategic planning.
WHEREAS, the CONSULTANT and the COMPANY desire to amend and revise the
Agreement to reflect the foregoing, and to reflect a change in the compensation
of the CONSULTANT.
NOW, THEREFORE, in consideration of the premises, the CONSULTANT and the
COMPANY hereby agree that the Agreement be amended as follows:
1. The second "WHEREAS" clause on the first page of the Agreement is
hereby amended in its entirety to read as follows:
WHEREAS, the CONSULTANT has been Chairman and/or Co-Chairman of the Board
of the Company from 1976 to 1985, Vice Chairman of the Board from April 1, 1985
to December 31, 1994 and effective January 1, 1995, the CONSULTANT is again
serving as the Chairman of the Board of the COMPANY.
2. The first sentence of Section 2 of the Agreement shall be amended to
read as follows:
The CONSULTANT shall receive an annual compensation of $200,000.00
effective the 1st. of January, 1995, subject to annual increases each year on
lst. of January based on, among other factors, a cost of living adjustment
applicable to Puerto Rico.
The rest of Section 2 of the Agreement shall remain without amendment.
3. Section 3 of the Agreement shall be amended in its entirety to read as
follows:
3. SERVICES: The CONSULTANT shall provide approximately ten (10) to
fifteen (15) hours of services a week to the COMPANY in those areas that the
Board of Directors and/or the President of the COMPANY mutually agree with the
CONSULTANT.
4. Except as amended by this Amendment, all of the provisions, terms and
conditions of the Agreement shall remain in full force and effect.
5. This Amendment shall be governed by and construed in accordance with
the laws of Puerto Rico without regard to principles of conflict of laws.
6. All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided such terms in the Agreement.
45
<PAGE> 2
EXHIBIT 10.10
7. This Amendment may be executed in one or more counterparts, each of
which shall be deemed and original and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
CONSULTANT
/S/ Antonio Luis Ferre
-----------------------
ANTONIO LUIS FERRE
PUERTO RICAN CEMENT COMPANY, INC.
BY: /S/ Miguel A. Nazario
----------------------------
MIGUEL A. NAZARIO
PRESIDENT
Affidavit Number: 520
Sworn and subscribed to before me by Antonio Luis Ferre, of legal age, and
resident of Guaynabo, Puerto Rico, and by Miguel A. Nazario in his capacity as
President of Puerto Rican Cement Company, Inc., of legal age and resident of
Mayaguez, Puerto Rico, at San Juan, Puerto Rico, this 10 day of February, 1995.
JORGE CARLOS
PIZARRO GARCIA
ABOGADO NOTARIO
NOTARY PUBLIC
46
<PAGE> 1
PUERTO RICAN CEMENT COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section represents Management's discussion and analysis of the Company's
consolidated financial condition and results of operations. It should be read
in conjunction with the accompanying financial statements.
RESULTS OF OPERATIONS
1994 compared to 1993
Consolidated net sales increased $9,359,000 in 1994 compared to 1993. A
stronger demand for cement in 1994 allowed the Company to increase its cement
sales by 2,213,000 bags to 20,416,000 bags, or 12% over the prior year. The
strong demand for cement resulted from the continued strength of the
construction sector of the Puerto Rico economy and favorable weather
conditions.
Consolidated cost of sales increased $6,223,000 in 1994 to $59,514,000,
an increase of 11.7%. A substantial part of this change is attributable to
increased production levels required to meet the higher sales volume
experienced in 1994. The increased production levels resulted in higher
consumption of materials used in the production of cement, which together with
major general repair and maintenance works performed during the year, affected
cost of sales. As a percentage of sales, cost of sales increased from 63.4% in
1993 to 64.1% in 1994.
The Company performed during the third quarter of 1994 general maintenance
and replacement work on worn interchangeable machinery parts mostly related to
the dry process equipment at a cost of $2.3 million. This kind of repair is
expected to take place every three to five years.
Consolidated selling, general and administrative expenses were $11,308,000
in 1994 and $10,397,000 in 1993. The increase of $911,000 was mainly due to:
higher equipment rental expenses attributable to higher sales; increased
pension plan expenses resulting from changes in interest rates used in
actuarial computations; and normal inflationary increases in salaries and
related benefits.
Consolidated interest expense of $2,305,000 for 1994 decreased from
$2,654,000 in 1993 principally because of the refinancing during the second
half of 1994 of high interest-bearing credit facilities to benefit from lower
interest rates. In addition, the interest expense attributed to the credit
facilities related to the mill conversion project, in the construction stage,
was capitalized as part of the cost of the project.
Interest income increased 84.6% from $1,239,000 in 1993 to $2,287,000 in
1994. This increase resulted from higher average investment balances and
interest rates when compared to the prior year.
Other expenses rose $869,000 in 1994 when compared to 1993. As discussed
later, this increase reflects principally the net effect of the write-off of
goodwill purchased before 1970, the write-off of equipment no longer used in
cement manufacturing operations and an adjustment of accrued property taxes
after the final assessment of such taxes on equipment related to the dry
process.
The provision for income taxes decreased $1,131,000 when compared to 1993,
despite the increase in income before taxes of $2,197,000. The 1994 Puerto Rico
Internal Revenue Code, enacted in October 1994, reduced the maximum corporate
tax rate from 42% to 39%, as further discussed later on. This change resulted
in a favorable one-time adjustment to the deferred tax liability of $2,016,000,
which is reflected in the provision for income taxes for 1994.
1993 compared to 1992
Consolidated net sales increased 4% in 1993 compared to 1992 due principally to
the increase of 5%, or $0.25 cents per bag, in selling prices of cement decreed
in April 1993. Cement sales increased moderately from 18,130,000 bags in 1992
to 18,203,000 in 1993.
Consolidated cost of sales for 1993 increased 1.4% or $759,000 when
compared to the prior year. This modest increase was principally attributed to
higher property tax rates.
Consolidated selling, general and administrative expenses were $10.4
million and $9.8 million in 1993 and 1992, respectively, an increase of 6%.
This increase mainly resulted from the adoption, as further explained in the
notes to the financial statements, of SFAS 106 during 1993.
Interest and financial charges of $2,654,000 in 1993 were $318,000 lower
than in 1992 due principally to the repayment of various loans. Interest on
loans related to the mill conversion project was capitalized during 1993.
Interest income increased $607,000 in 1993 reflecting both the effect of
securities bearing higher interest rates and higher average investment balances
outstanding during this year.
Income before cumulative effect of changes in accounting principles was
$12,436,000, or $2.14 per share, in 1993, compared to $10,107,000, or $1.74 per
share, in the prior year. During 1993, the Company adopted SFAS 106 and SFAS
109. The adoption of these two standards, as explained in more detail in the
notes to the financial statements, decreased net income for the year to
$11,880,000, or $2.05 per share.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company had $115,000 in cash and cash
equivalents compared to $431,000 at December 31, 1993. Working capital declined
slightly, from $33,934,000 at December 31, 1993 to $30,426,000 at December 31,
1994. The current ratio remained stable at 2.8 to 1 in 1994 compared to 3.0 to
1 in 1993.
Net cash provided by operations remained strong at $25,557,000 when
compared to $24,571,000 in the prior year. The cash provided by operations was
principally used to: pay $3,455,000 in dividends; repurchase 313,500 shares of
the Company's common stock for $9,953,000; and acquire additional long-term
investments of $9,085,000.
17
<PAGE> 2
PUERTO RICAN CEMENT COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Consolidated notes and accounts receivable were $733,000 higher than in
1993. This change resulted principally from the increase in cement sales
experienced during 1994.
A decline of $4,225,000 in consolidated inventories was principally the
net result of decreases in clinker and coal inventories, net of an increase in
gypsum. Clinker (our work-in-process), as well as coal inventories, declined
primarily from increases in consumption of both materials resulting from the
rise in total cement production. This increase in cement production is tied to
the higher cement sales experienced during 1994. Gypsum inventory was higher
than in 1993, despite an increase in its consumption, principally because
shipments totaling 88,000 tons were received during the latter part of this
year, while no shipment was received in 1993.
Accrued liabilities decreased $1,632,000 due principally to the payment of
the property tax liability related to the dry process equipment, mentioned
earlier.
Capital spending totaled $11,257,000 and was mainly attributable to the
ongoing conversion of two existing slurry mills to cement grinding. This
project, with an estimated cost of $17 million, is an integral part of the
Company's long-term capital improvement program aimed at achieving maximum
efficiency through modern and technologically advanced facilities. Funding for
this project has been obtained from commercial banks.
Long-term debt increased to $31,696,000 at December 31, 1994 from
$26,633,000 at December 31, 1993. This increase in long-term debt resulted from
proceeds related to the financing facilities for the mill conversion project,
net of scheduled repayments on other long-term debt.
The increase of $1,695,000 in deferred income taxes resulted principally
from the use, for tax purposes, of the flexible depreciation method offsetted
by the effect of the decrease in the maximum income tax rate previously
discussed.
As discussed in Note 8 to the Consolidated Financial Statements, the
Company had available credit facilities for short-term borrowing and discount
of trade notes receivable of $16.6 million at December 31, 1994.
In Management's opinion, future cash flows from operations, actual cash
and cash equivalent balances and the short-term borrowing resources available
to the Company will be sufficient to provide for the Company's cash
requirements in the foreseeable future.
The Company's Board of Directors declared a quarterly dividend of $0.17
per common share at its December 1994 meeting, an increase of 13% over previous
quarters. Dividends declared in 1994 totaled $0.62 per common share.
SIGNIFICANT EVENTS
New Tax Law
In October 1994, a new Puerto Rico Internal Revenue Code was enacted. Among the
more significant changes brought by this new legislation were: a decrease in
the maximum corporate tax rate from 42% to 39% effective for calendar year 1996
and thereafter; the repeal of the flexible depreciation method with respect to
property purchased after December 31, 1995 and its prospective replacement with
a new accelerated depreciation method; the elimination of the reserve method to
claim deductions for bad debts with recapture of the existing reserve over a
four-year period; and a decrease in the rate for tax withholding on dividend
payments from 20% to 10% for calendar year 1996 and thereafter.
The reduction in the maximum corporate income tax rate resulted in a
decrease of $2,016,000 ($0.35 per share) in both the deferred tax liability and
the provision for income taxes in 1994. Management estimates that the repeal of
the flexible depreciation method for property purchased in 1996 and thereafter,
and its replacement with the new accelerated depreciation method, will reduce
the alternative for deferral of income taxes in the future. However, no
significant impact on cash flow is expected over the next few years because
property purchased until December 31, 1995 will be available to be depreciated
under the flexible method.
Property Tax Assessment
Late in 1994, the property tax related to the dry process equipment was
assessed by the tax authorities. The final assessment paid was lower than the
amount previously accrued and the excess of $782,000 was credited to other
income for this period.
Goodwill
Goodwill, in the amount of $698,000, resulting from the acquisition in 1969 of
the remaining 20% minority interest of St. Regis Paper & Bag Corp. was not
amortized as permitted by generally accepted accounting principles. However, in
1994, the Company decided to write-off, as a charge to other expenses, the
recorded amount as the value of this asset was determined to be impaired. This
determination was based principally on Management's opinion that no significant
future benefit could be derived from this asset.
Write-off of Equipment
In 1994, equipment related to various kilns no longer used in cement operations
after the conversion to the dry process with a book value of $588,000 was
written-off. This write-off was also charged to other expenses.
18
<PAGE> 3
PUERTO RICAN CEMENT COMPANY, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues(1)........................... $ 92,829,872 $ 84,027,588 $ 80,021,520 $ 77,968,505 $ 81,993,050
Income before income tax........................ 21,342,365 19,145,787 15,426,354 14,666,908 17,922,924
Tax provision................................... 5,579,153 6,710,065 5,319,720 4,388,418 5,851,873
Cumulative effect of changes in accounting
principles................................... (555,990)
Net income...................................... 15,763,212 11,879,732 10,106,634 10,278,490 12,071,051
Net income per share(2)......................... 2.76 2.14 1.74 1.77 2.08
Current assets.................................. 47,298,323 51,207,564 57,862,068 58,209,916 63,946,232
Current liabilities............................. 16,872,039 17,273,306 13,965,498 12,072,586 12,672,238
Working capital................................. 30,426,284 33,934,258 43,896,570 46,137,330 51,273,994
Current ratio................................... 2.80 2.96 4.14 4.82 5.05
Property, plant and equipment................... 111,688,573 107,968,603 105,747,681 108,353,458 95,519,838
Long-term investments........................... 42,030,507 32,512,367 8,866,765
Total assets.................................... 201,869,754 193,283,596 174,185,209 168,294,577 162,141,277
Long-term debt (exclusive of current portion)... 31,696,403 26,633,080 24,500,000 30,357,143 33,375,000
Deferred income taxes........................... 27,722,814 26,028,233 23,875,370 21,755,663 20,182,252
Stockholders' equity-net........................ 122,971,336 120,675,030 111,844,341 104,109,185 95,911,788
Dividends per share............................. 0.62 0.53 0.41 0.36 0.31
Cement sales in barrels......................... 5,104,038 4,550,738 4,532,476 4,424,466 4,679,424
</TABLE>
(1) Including revenue from realty operations of: 1994-$97,095; 1993-$653,721;
1992-$119,634; 1991-$816,503; 1990-$437,258.
(2) Excluding, in 1993, the cumulative effects of changes in accounting for
postretirement benefits and income taxes of ($0.24) and $0.15, respectively.
Purchase of Treasury Stock
During 1994, the Company repurchased 313,500 shares of its outstanding stock at
a cost of $9,953,000. With these purchases, the Company completed its
repurchase program, originally approved in 1987 and subsequently amended in
1989, to acquire up to 450,000 additional shares of its outstanding stock.
New Accounting Standards
Three new accounting standards that became effective in 1994 are discussed
below.
The Company adopted in 1994 the provisions of SFAS 115, "Accounting for
Investments in Certain Debt and Equity Securities." The Company's policy is to
hold its investments until their maturity; therefore, the adoption of this
standard had no effect on the Company's financial position or results of
operations.
The adoption of SFAS 119 in 1994, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," had no effect since the
Company is not engaged in activities involving derivative financial
instruments.
The Company also adopted in 1994 SFAS 112, "Employers' Accounting for
Postemployment Benefits." The adoption of this statement had no significant
impact on the Company's financial position and results of operations.
19
<PAGE> 4
PUERTO RICAN CEMENT COMPANY, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE
February 17, 1995
To the Board of Directors
and Stockholders of
Puerto Rican Cement Company, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Puerto
Rican Cement Company, Inc. and its subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its methods of accounting for postretirement health benefits and income
taxes in 1993.
PRICE WATERHOUSE
----------------
PRICE WATERHOUSE
Certified Public Accountants
(OF PUERTO RICO)
License No. 10 Expires Dec. 1, 1995
Stamp 1259733 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report.
20
<PAGE> 5
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales.................................................................... $ 92,732,777 $ 83,373,867 $79,901,886
Revenue from realty operations - net......................................... 97,095 653,721 119,634
-----------------------------------------------------------------------------------------------------------------------------
92,829,872 84,027,588 80,021,520
-----------------------------------------------------------------------------------------------------------------------------
Cost and expenses:
Cost of sales............................................................. 59,514,156 53,290,853 52,531,736
Selling, general and administrative expenses.............................. 11,307,574 10,396,754 9,843,764
-----------------------------------------------------------------------------------------------------------------------------
70,821,730 63,687,607 62,375,500
-----------------------------------------------------------------------------------------------------------------------------
Income from operations................................................ 22,008,142 20,339,981 17,646,020
-----------------------------------------------------------------------------------------------------------------------------
Other charges (credits):
Interest and financial charges, net of interest charged to construction... 2,304,604 2,654,054 2,971,529
Interest income........................................................... (2,286,583) (1,238,858) (632,030)
Other expenses (income)................................................... 647,756 (221,002) (119,833)
-----------------------------------------------------------------------------------------------------------------------------
665,777 1,194,194 2,219,666
-----------------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 21,342,365 19,145,787 15,426,354
-----------------------------------------------------------------------------------------------------------------------------
Provision for income taxes:
Current income taxes...................................................... 3,884,572 2,683,192 3,200,013
Deferred income taxes..................................................... 1,694,581 4,026,873 2,119,707
-----------------------------------------------------------------------------------------------------------------------------
5,579,153 6,710,065 5,319,720
-----------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes................. 15,763,212 12,435,722 10,106,634
Cumulative effect of changes in accounting principles - net.................. (555,990)
-----------------------------------------------------------------------------------------------------------------------------
Net income............................................................ 15,763,212 11,879,732 10,106,634
Retained earnings at beginning of year....................................... 101,891,599 93,060,910 89,325,754
Common stock split........................................................... (4,000,000)
Cash dividends declared; $0.62, $0.53 and $0.41 per share in 1994,
1993 and 1992, respectively............................................... (3,514,314) (3,049,043) (2,371,478)
-----------------------------------------------------------------------------------------------------------------------------
Retained earnings at end of year............................................. $114,140,497 $101,891,599 $93,060,910
=============================================================================================================================
Earnings per share:
Income before cumulative effect of accounting changes..................... $2.76 $2.14 $1.74
Cumulative effect of changes in accounting principles..................... (0.09)
-----------------------------------------------------------------------------------------------------------------------------
Net income per share.................................................. $2.76 $2.05 $1.74
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
21
<PAGE> 6
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
December 31, 1994 1993
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................................. $ 114,702 $ 431,293
Short-term investments..................................................................... 520,000
Notes and accounts receivable - net........................................................ 14,358,827 13,626,159
Inventories................................................................................ 28,916,950 33,141,836
Prepaid expenses........................................................................... 3,907,844 3,488,276
-----------------------------------------------------------------------------------------------------------------------------
Total current assets................................................................ 47,298,323 51,207,564
Property, plant and equipment - net........................................................ 111,688,573 107,968,603
Long-term investments...................................................................... 42,030,507 32,512,367
Other assets............................................................................... 852,351 1,595,062
-----------------------------------------------------------------------------------------------------------------------------
$201,869,754 $193,283,596
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Short-term borrowing.................................................................... $ 2,420,000 --
Current portion of long-term debt....................................................... 6,178,571 7,491,735
Accounts payable........................................................................ 3,810,152 3,785,341
Accrued liabilities..................................................................... 2,868,989 4,500,812
Dividends payable....................................................................... 929,818 871,155
Income taxes payable.................................................................... 664,509 624,263
-----------------------------------------------------------------------------------------------------------------------------
Total current liabilities........................................................... 16,872,039 17,273,306
-----------------------------------------------------------------------------------------------------------------------------
Long-term liabilities:
Long-term debt, less current portion.................................................... 31,696,403 26,633,080
Deferred income taxes................................................................... 27,722,814 26,028,233
Postretirement benefit liability........................................................ 2,607,162 2,673,947
-----------------------------------------------------------------------------------------------------------------------------
Total long-term liabilities......................................................... 62,026,379 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;
6,000,000 shares issued............................................................. 6,000,000 6,000,000
Additional paid-in capital.............................................................. 14,367,927 14,367,927
Retained earnings....................................................................... 114,140,497 101,891,599
-----------------------------------------------------------------------------------------------------------------------------
134,508,424 122,259,526
LESS - 505,800 (1993-192,300) shares of common stock in treasury, at cost............... 11,537,088 1,584,496
-----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity.......................................................... 122,971,336 120,675,030
-----------------------------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities..................................................
-----------------------------------------------------------------------------------------------------------------------------
$201,869,754 $193,283,596
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
22
<PAGE> 7
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 15,763,212 $ 11,879,732 $ 10,106,634
-----------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of changes in accounting principles - net........... 555,990
Depreciation, depletion and amortization.............................. 6,949,122 6,916,046 6,934,608
Accretion of discounts on investments................................. (1,619,542)
Provision for deferred income taxes................................... 1,694,581 4,026,873 2,119,707
Provision for postretirement benefits................................. 72,485 390,000
Postretirement benefits paid.......................................... (139,270) (146,053)
Loss on disposition of idle equipment................................. 587,671
Write-off of goodwill................................................. 697,770
Loss on sale of short-term investments................................ 5,534
Gain on sales of long-term investments................................ (103,613)
Gain on sale of land.................................................. (22,454)
Changes in assets and liabilities:
(Increase) decrease in notes and accounts receivable................ (732,668) (2,664,330) 1,615,886
Decrease (increase) in inventories.................................. 4,224,886 2,631,267 (4,568,410)
Increase in prepaid expenses........................................ (419,568) (562,579) (111,403)
Decrease in other assets............................................ 44,941 113,633 22,508
Increase (decrease) in accounts payable............................. 24,811 1,376,823 (2,221,931)
(Decrease) increase in accrued liabilities.......................... (1,631,823) 620,351 704,446
Increase (decrease) in income taxes payable......................... 40,246 (469,150) 1,083,794
-----------------------------------------------------------------------------------------------------------------------------
Total adjustments................................................ 9,793,642 12,690,792 5,556,751
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities........................ 25,556,854 24,570,524 15,663,385
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Decrease (increase) in short-term investments............................. 520,000 2,202,403 (2,727,937)
Capital expenditures...................................................... (11,256,763) (9,136,968) (4,329,320)
Proceeds from sale of land................................................ 22,943
Proceeds from maturities of long-term investments......................... 1,186,400
Purchase of long-term investments......................................... (9,084,998) (40,892,391) (8,866,765)
Proceeds from sale of long-term investments............................... 17,350,402
-----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities................................. (18,635,361) (30,476,554) (15,901,079)
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Purchase of treasury stock................................................ (9,952,592)
Proceeds from short-term borrowing........................................ 2,420,000
Proceeds from loans....................................................... 17,071,589 12,624,815
Payment of principal on long-term debt.................................... (13,321,430) (8,857,143) (3,482,143)
Dividends paid............................................................ (3,455,651) (2,903,851) (2,419,875)
-----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities................... (7,238,084) 863,821 (5,902,018)
-----------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents........................................ (316,591) (5,042,209) (6,139,712)
Cash and cash equivalents at beginning of year............................... 431,293 5,473,502 11,613,214
-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year..................................... $ 114,702 $ 431,293 $ 5,473,502
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
23
<PAGE> 8
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - REPORTING ENTITY AND SUMMARY OF ACCOUNTING POLICIES:
The Company was organized in 1938 under the laws of the Commonwealth of Puerto
Rico. It is engaged primarily in the production of cement and related products.
Summary of accounting policies
The following summarizes the most significant accounting policies judged by
management to be the most appropriate in the circumstances to present the
Company's consolidated financial position, results of operations and cash flows
in conformity with generally accepted accounting principles.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries. All material intercompany accounts and transactions
have been eliminated in consolidation.
Statement of cash flows
For purposes of the statement of cash flows, interest-bearing deposits and
other investments with maturities of less than three months at the time of
acquisition are considered cash equivalents.
Investments
Investments are carried at cost, adjusted for amortization of premiums or
accretion of discounts. Short-term investments consist primarily of bank time
deposits, U.S. Treasury Bills, and other U.S. government securities. Long-term
investments consist primarily of U.S. government and agency securities with
original maturities over one year and up to seven years.
Effective January 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Investments in Certain
Debt and Equity Securities." This statement requires the Company to classify
and account for investment in equity securities that have readily determinable
fair values and all investments in debt securities as follows:
- Debt securities that the Company has the positive intent and ability to hold
to maturity are classified as held-to-maturity securities and reported at
amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and reported at fair value, with unrealized gains and losses included in
earnings.
- Equity securities and debt securities not classified as either
held-to-maturity or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of shareholders'
equity.
The Company's policy is to hold its investments to maturity. Accordingly,
the adoption of SFAS 115 had no effect on the Company's financial position or
results of operations.
Inventories
Inventories are stated at the lower of average cost or market. Inventory cost
includes the related material, labor and overhead cost.
Land for sale includes the original cost of land and all development costs
incurred to bring land to a saleable condition.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided on
the straight-line basis over the estimated useful life of each type of asset.
Depletion of quarries is calculated on the units-of-production method.
Maintenance and repair costs which do not extend the life or improve
productive capacity of the respective assets are expensed as incurred. Cost of
renewals and betterments is capitalized. When assets are sold, retired or
otherwise disposed of, their cost and related accumulated depreciation are
removed from the accounts, and any gain or loss is credited or charged to
income.
Interest charged to construction
The Company capitalizes interest as a component of the cost of construction.
Interest capitalized totaled $579,700 and $88,800 in 1994 and 1993,
respectively. No interest was capitalized in 1992.
Income taxes
As discussed in Note 10, the Company adopted, in January 1993, SFAS 109,
"Accounting for Income Taxes." This standard requires an asset and liability
approach to the recognition of the tax consequences of differences between the
tax basis of assets and liabilities and their reported amounts in financial
statements. Certain expenses, primarily depreciation, are reported for tax
purposes in different periods from those in which they are reported in the
financial statements. Deferred taxes are provided on these and other temporary
differences between the tax basis of assets and liabilities and their reported
amounts in financial statements.
The financial statements for 1992 have not been restated for the adoption
of SFAS 109. For that year, deferred taxes resulting from timing differences
were accounted for by the net change method in accordance with Accounting
Principles Board Opinion No. 11 (APB 11).
Employee benefit plans
The Company has a trusteed, non-contributory retirement plan. Pension costs are
computed on the basis of accepted actuarial methods. The Projected Unit Credit
method is used to determine pension expense. Pension expense includes service
cost for benefits earned during the period, interest cost and amortization of
unrecognized prior service cost, of gains and losses on plan assets and of the
transition amount over a 15-year period. The Company's funding policy is to
contribute annually the maximum amount deductible for income tax.
The Company also offers post-retirement medical and life insurance
benefits. This plan is not funded and expenses were recognized as paid until
1992. As discussed in Note 11, the Company adopted, in January 1993, SFAS 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" (OPEB),
which requires the recognition of the expected cost of providing
post-retirement health care and other benefits to an employee or its
beneficiaries over their service period.
In January 1994, the Company adopted SFAS 112, "Employers' Accounting for
Postemployment Benefits," which requires employers to accrue the cost of
postemployment benefits (including salary continuation, severance and
disability benefits, job training and counseling and continuation of benefits
such as health care and life insurance coverage) to former or inactive
employees. The adoption of this standard had no significant impact on the
Company's financial position and results of operations.
Earnings per share
Earnings per share are computed on the basis of the weighted average number of
shares of common stock outstanding during the year. The weighted average number
of shares outstanding during the year was 5,704,800 in 1994, and 5,807,700 in
1993 and in 1992, as adjusted for the stock split.
Profit recognition on sales of real estate
Land and development costs are allocated to lots sold proportionately based on
area and total project cost. Income on sale of land is recognized at the time
of sale except where the collectibility is not reasonably assured and revenue
therefore is not measurable.
24
<PAGE> 9
NOTE 2 - NOTES AND ACCOUNTS RECEIVABLE:
Notes and accounts receivable consist of:
<TABLE>
<CAPTION>
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
<S> <C> <C>
Notes receivable:
Trade........................ $ 1,698,752 $ 3,317
Other........................ 80,253 89,131
-------------------------------------------------------------
1,779,005 92,448
-------------------------------------------------------------
Accounts receivable:
Trade........................ 13,418,151 13,566,340
Employees and affiliated
companies 26,428 19,789
Other........................ 229,246 1,069,183
-------------------------------------------------------------
13,673,825 14,655,312
LESS - Allowance for
doubtful accounts.......... 1,094,003 1,121,601
-------------------------------------------------------------
12,579,822 13,533,711
-------------------------------------------------------------
$ 14,358,827 $13,626,159
=============================================================
</TABLE>
NOTE 3 - INVENTORIES:
Inventories consist of:
<TABLE>
<CAPTION>
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
<S> <C> <C>
Finished products................ $ 1,964,131 $ 2,127,413
Work-in-process.................. 3,561,875 6,231,167
Raw materials.................... 4,202,704 3,276,157
Coal and fuel oil................ 1,195,542 3,171,069
Maintenance and operating supplies 17,685,316 17,684,450
Land for sale.................... 307,382 651,580
-------------------------------------------------------------
$28,916,950 $33,141,836
=============================================================
</TABLE>
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Useful life
in years 1994 1993
--------------------------------------------------------------------
<S> <C> <C> <C>
Land and quarries............. $ 4,299,475 $ 4,299,475
Buildings and structures...... 50 27,680,111 27,590,284
Machinery and equipment....... 5-20 87,007,090 88,202,303
Pollution control equipment... 25 28,020,993 28,683,904
Automobiles and trucks........ 3-10 793,895 974,399
Rental property............... 10 653,524 653,524
Construction in progress...... 14,622,225 6,369,360
--------------------------------------------------------------------
163,077,313 156,773,249
LESS - Accumulated depreciation,
depletion and amortization 51,388,740 48,804,646
--------------------------------------------------------------------
$111,688,573 $107,968,603
====================================================================
</TABLE>
NOTE 5 - INVESTMENTS:
The carrying, market values and maturities of investments held-to-maturity at
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1994 1993
-----------------------------------------------------------------------------------------
CARRYING MARKET Carrying Market
VALUE VALUE Value Value
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
U.S. Treasury securities $ -- $ -- $ 520,000 $ 538,824
=========================================================================================
LONG-TERM INVESTMENTS
=========================================================================================
U.S. Treasury securities
1-5 years.............. $19,574,629 $18,404,049 $13,316,429 $11,300,255
5-10 years............. 13,296,734 12,006,978 15,087,148 18,120,054
-----------------------------------------------------------------------------------------
32,871,363 30,411,027 28,403,577 29,420,309
-----------------------------------------------------------------------------------------
Municipal and other
U.S. government
agency securities
1-5 years............ 7,320,996 6,825,744 2,813,842 3,071,765
5-10 years........... 1,838,148 1,660,538 1,294,948 1,951,786
-----------------------------------------------------------------------------------------
9,159,144 8,486,282 4,108,790 5,023,551
-----------------------------------------------------------------------------------------
$42,030,507 $38,897,309 $32,512,367 $34,443,860
=========================================================================================
</TABLE>
During 1993, the Company sold securities for a total of $17,350,000 and
realized a gain of $104,000. The Company has $2,801,000 in municipal bonds
classified as long-term which are callable in 1995.
NOTE 6 - OTHER ASSETS:
Other assets consist of:
<TABLE>
<CAPTION>
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
<S> <C> <C>
Investment in real estate.......... $704,987 $ 704,987
Goodwill........................... 697,770
Other long-term assets............. 147,364 192,305
-------------------------------------------------------------
$852,351 $1,595,062
=============================================================
</TABLE>
Goodwill, included in other assets in 1993 and earlier years, was acquired
before November 1, 1970 and, as permitted by generally accepted accounting
principles, was not amortized. In 1994, Management determined that the value of
this goodwill had been impaired and the recorded balance was written-off.
NOTE 7 - ACCRUED LIABILITIES:
Accrued liabilities consist of:
<TABLE>
<CAPTION>
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
<S> <C> <C>
Accrued taxes other than income.... $ 153,985 $1,969,933
Accrued payroll expenses........... 1,917,403 1,821,371
Accrued interest expense........... 386,510 435,779
Other accrued liabilities.......... 411,091 273,729
-------------------------------------------------------------
$ 2,868,989 $4,500,812
=============================================================
</TABLE>
NOTE 8 - SHORT-TERM BORROWING:
The Company has lines of credit available for short-term borrowing and discount
of trade notes receivable in the aggregate amount of $16,600,000. However,
under other loan agreements with financial institutions, the Company may incur
unsecured short-term borrowing up to $10,000,000 and may discount trade notes
receivable up to $5,000,000 through 1999.
Short-term borrowing at December 31, 1994 was $2,420,000 at rates ranging
from 6.1% to 6.3%. Maximum aggregate short-term borrowing outstanding at any
month-end was $3,400,000. The approximate average aggregate short-term
borrowing outstanding during the year was $424,000. The weighted average
interest rate of such borrowing computed on a monthly basis was 5.69%. There
was no short-term borrowing outstanding at any month-end during 1993.
NOTE 9 - LONG-TERM DEBT:
Long-term debt consists of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
9.9% dry process conversion loan, payable in
equal annual installments of $3,000,000
through 1996.................................. $ 6,000,000 $ 9,000,000
6.25% term loan, payable in annual
installments of $750,000 and a final
payment of $3,000,000 in 1998................. 5,250,000 6,000,000
$16 million revolving line of credit,
convertible on December 31, 1995
into a five-year term loan.................... 5,696,403 3,148,083
6.25% term loan, payable in annual
installments of $1,000,000 and a final
payment of $4,000,000 in 1998................. 7,000,000 3,476,732
7.0% dry process conversion loan, payable
in annual installments of $1,428,571 and
a final payment of $1,071,428 in 1997 3,928,571 5,357,143
Term loan for dry process conversion, prepaid
in 1994....................................... 7,142,857
7.35% loan, payable in full on August 13,
1999; interest payable monthly................ 3,000,000
7.30% term loan, payable in full on August 12,
1999; interest payable monthly................ 7,000,000
-------------------------------------------------------------------------------
Total......................................... 37,874,974 34,124,815
LESS - Current portion........................... 6,178,571 7,491,735
-------------------------------------------------------------------------------
Total long-term debt.......................... $31,696,403 $26,633,080
===============================================================================
</TABLE>
25
<PAGE> 10
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In August 1994, the Company entered into a $3 million unsecured
non-revolving loan, payable in August 1999, which bears interest at a fixed
rate of 7.35%. Proceeds from this loan were used to pay the $3 million
scheduled installment on the 9.9% dry process conversion loan.
In September 1994, the Company entered into a $7 million, five-year term
loan which bears interest at a fixed rate of 7.30%. Loan proceeds were used to
refinance the $7 million outstanding balance related to the dry process
conversion loan.
Financing facilities of up to $24 million were obtained in 1993 for the
conversion of two existing slurry mills to finished cement grinding. The
expected cost of this project is estimated at $17 million. One of the credit
facilities is a $16 million credit agreement which provides for interest at 1%
over the bank's 936 funds rate, subject to availability, or 1% over the bank's
London Interbank Offer Rate (LIBOR) as adjusted, or 1% over the bank's base
rate in the City of New York. The Company has the option to fix the interest
rate on the full amount or a portion of the loan up to the term of the loan.
Interest rates on advances on this line of credit ranged from 6.86% to 7.15% at
December 31, 1994. In February 1995, the Company fixed at 7.58% the interest
rate on the outstanding balance of this credit facility. The second facility is
an $8 million, unsecured term loan bearing interest at a fixed rate of 6.25%
with principal payable over a 5 year period. At December 31, 1994, the Company
had $11.3 million available under these lines of credit.
In September 1985, the Company restructured the terms of all of its
outstanding debt with the Government Development Bank for Puerto Rico (GDB).
The maturity date on the loans from GDB was extended to September 2002, and the
annual interest rate was fixed. No interest or principal payments are required
before maturity. Simultaneously, the Company placed U.S. government securities,
with a cost of $8 million and a maturity value of $49.8 million, in an
irrevocable trust. The principal and interest of these securities will be
sufficient to fund the scheduled principal and interest payments on the
Company's debt with the GDB. Accordingly, such debt was considered to be
extinguished in 1985 and is not included as a liability in the consolidated
balance sheet. The total balance of debt with GDB not included in the
consolidated balance sheet, consisting of principal plus accumulated interest,
amounted to $34.8 million at December 31, 1994 (1993 - $33 million).
The loan agreements with banks and other financial institutions impose
certain restrictions on the Company. The most important restrictions are
limitations on unsecured short-term borrowing and on discounting with recourse
of trade paper from customers (Note 8), maintaining working capital in excess
of certain defined minimums and limitations on funded debt and other
indebtedness. Other restrictions under such loan agreements relate to
investments in and advances to subsidiaries and other persons, disposition of
fixed assets, and payment of dividends. At December 31, 1994, the Company was
in compliance with the provisions of the loan agreements. The agreements also
impose certain prepayment penalties. In 1994, the Company paid the maximum
amount that may be paid under these loan agreements without triggering the
prepayment penalties.
Aggregate maturities of long-term debt at December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------
Years Amount
---------------------------------------------------------
<S> <C>
1995....................................... $ 6,178,571
1996 ...................................... 6,178,571
1997....................................... 2,821,429
1998....................................... 7,000,000
1999 and thereafter........................ 15,696,403
---------------------------------------------------------
$37,874,974
=========================================================
</TABLE>
NOTE 10 - INCOME TAXES:
Consolidated tax returns are not permitted under the Puerto Rico Income Tax
Law; therefore, losses, if any, of subsidiaries cannot be used to offset
taxable income of other members of the consolidated group.
The Puerto Rico Income Tax Law currently allows an accelerated flexible
depreciation, whereby a taxpayer may claim depreciation at any rate without
reference to useful lives, but limited to an amount not greater than income
before taxes (determined without taking into consideration the depreciation
deduction). Deferred income taxes of $27,722,814 (1993 - $26,028,233) have been
accumulated primarily as a result of using the flexible depreciation method for
tax purposes only. The benefits available under the accelerated depreciation
methods are limited by the alternative minimum tax (AMT) provisions of the
income tax law. The AMT is based on 22% of regular taxable income with certain
adjustments for preference items, one of which relates to the accelerated
depreciation method. Any AMT paid may be used to reduce the regular tax
liability of future years, to the extent the regular tax exceeds the AMT.
As discussed in Note 1, the Company adopted SFAS 109, "Accounting for
Income Taxes," effective January 1, 1993. The cumulative effect of adopting
this standard was a reduction of $853,410 ($0.15 per share) in the deferred
income tax liability, which reflects the impact of the tax rates then in
effect. The impact of adopting SFAS 109 on the income tax provision for 1993
was not significant.
A new Puerto Rico Internal Revenue Code was enacted in 1994. This law
further reduced the maximum corporate income tax rate from 42% to 39% for
calendar year 1996 and thereafter. This reduction resulted in a decrease of
$2,016,000 ($0.35 per share) in the deferred tax liability.
Other provisions of the new code include the prospective replacement of
the flexible depreciation method with a new accelerated depreciation method and
repeal of the reserve method for bad debts with recapture of the existing
reserve over a four year period. These provisions, effective for calendar year
1996, will reduce the alternatives for deferral of income taxes; however,
Management does not expect the impact on cash flow to be significant in the
near term because of the availablity of property that qualified for flexible
depreciation.
The 1994 and 1993 amounts presented below were determined in accordance
with SFAS 109, the 1992 amounts were determined in accordance with APB 11.
The increase in the deferred tax liability during 1994 and 1993 was the
result of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1994 1993
-----------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax provision for the year......... $1,694,581 $4,026,873
Cumulative effect of adoption of SFAS 109.......... (853,410)
Deferred tax effect of adoption of SFAS 106........ (1,020,600)
-----------------------------------------------------------------------------
$1,694,581 $2,152,863
=============================================================================
</TABLE>
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax applicable to:
Flexible depreciation taken
during the year.................. $ 9,423,882 $ 5,355,405 $ 3,578,526
Reversal of flexible depreciation
taken in prior years............ (2,188,381) (1,732,359) (1,561,990)
Reduction in income tax rates....... (2,016,293)
AMT credit.......................... (3,867,582)
Postretirement benefit obligation... 28,050 (102,458)
Difference between pension
credits and amounts deductible
for tax.......................... 78,187 122,840 87,678
Interest charged to construction.... 243,474 37,308
Other temporary differences......... (6,756) 346,137 15,493
-----------------------------------------------------------------------------
$ 1,694,581 $ 4,026,873 $ 2,119,707
=============================================================================
</TABLE>
26
<PAGE> 11
The reconciliation of the difference between the Puerto Rico statutory tax
rate on income before taxes and the consolidated effective tax rate follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
% of % of % of
pre-tax pre-tax pre-tax
Amount income Amount income Amount income
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed tax provision........................... $8,963,793 42.0 $8,041,231 42.0 $6,479,068 42.0
Increase (decrease) in taxes resulting from:
Enacted future rate changes................... (2,016,293) (9.4)
Write-off of goodwill......................... 293,063 1.4
Tax exempt income............................. (164,729) (0.9) (192,800) (1.2)
Interest earned on exempt securities.......... (952,765) (4.5) (514,190) (2.7) (256,586) (1.7)
Interest deducted for tax but not for
financial statements........................ (995,407) (4.7) (789,241) (4.1) (747,029) (4.8)
Other items................................... 286,762 1.3 136,994 0.7 37,067 0.2
----------------------------------------------------------------------------------------------------------------------------------
$5,579,153 26.1 $6,710,065 35.0 $5,319,720 34.5
==================================================================================================================================
</TABLE>
The deferred tax assets and liabilities at December 31, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------------------------------------------------------------------
Deferred Deferred Deferred Deferred
Tax Assets Tax Liabilities Tax Assets Tax Liabilities
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
Prepaid pension cost............................................ $ 1,128,609 $ 1,137,238
Non-current:
AMT credit...................................................... $4,235,307 $ 295,832
Postretirement benefit liability................................ 1,016,793 1,123,058
Unremitted earnings of subsidiaries............................. 251,051 138,359
Property, plant and equipment................................... 31,595,254 26,171,526
----------------------------------------------------------------------------------------------------------------------------------
Total deferred tax asset/liability.............................. $5,252,100 $32,974,914 $ 1,418,890 $27,447,123
==================================================================================================================================
Net deferred tax liability...................................... $27,722,814 $26,028,233
==================================================================================================================================
</TABLE>
One of the consolidated subsidiaries enjoys a tax exemption grant under
the provisions of the Puerto Rico Tax Incentives Act of 1987. Under this grant,
the exemption rates applicable to income, property and municipal taxes range
from 50% to 90% through year 2008.
The subsidiaries' aggregate retained earnings amounted to $20,065,000 at
December 31, 1994 (1993 - $18,900,000) and arise substantially from partially
tax exempt operations. The subsidiaries' retained earnings are substantially
exempt upon distribution to the Company. As required by SFAS 109, deferred
taxes have been provided on the post-1992 unremitted earnings of subsidiaries
to the extent these are taxable upon distribution to the Company.
NOTE 11 - EMPLOYEE BENEFIT PLANS:
The Company has a defined benefit pension plan covering substantially all of
its non-union employees. The benefits are based on years of service and the
employee's average compensation during the last five years of employment. The
net periodic pension cost for 1994 totaled $155,880, which decreased the
prepaid pension cost by the same amount. In 1993 and 1992 the net periodic
pension cost resulted in a credit to income of $342,039 and $292,477,
respectively.
Net pension cost included the following components:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period............ $ 450,622 $ 307,352 $ 326,077
Interest cost on projected
benefit obligation........... 1,224,251 1,042,511 1,012,081
Actual return on plan assets (1,571,822) (1,452,608) (1,805,618)
Deferral and amortization - net 52,829 (239,294) 174,983
--------------------------------------------------------------------------
Net periodic pension
expense (income)............. $ 155,880 ($342,039) ($292,477)
=========================================================================
</TABLE>
The following table sets forth the plan's obligations and amounts
recognized in the Company's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations -
Accumulated benefit obligation,
including vested benefits
of $14,906,312
(1993 - $12,108,330) ................. $15,167,679 $12,293,647
======================================================================
Projected benefit obligation for service
rendered to date .................... $17,994,484 $14,783,155
Plan assets at fair value .............. 20,351,302 20,143,670
----------------------------------------------------------------------
Excess of plan assets over projected
benefit obligation .................. 2,356,818 5,360,515
Unrecognized prior service cost ........ 2,134,858 751,870
Unrecognized gain ...................... (482,654) (1,788,175)
Unrecognized portion of transition cost
at January 1, 1987, being recognized
over 15 years ....................... (1,115,152) (1,274,460)
----------------------------------------------------------------------
Prepaid pension cost included in
prepaid expenses .................... $ 2,893,870 $ 3,049,750
======================================================================
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of benefit
obligations and the projected benefit obligation were 7.5% and 5.5%,
respectively. The expected long-term rate of return on assets is 8%.
Investments held by the plan include high grade corporate bonds, U.S. Treasury
Bills, and common stock, including shares of the Company. The plan is
administered by a Board of Trustees composed of five Directors. The Board
utilizes two independent money managers which, within certain established
guidelines, make investment decisions regarding the assets of the plan.
27
<PAGE> 12
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company also provides health care and life insurance benefits to
participants of the plan after retirement. The employees, upon retirement, have
the option to continue participating in the Company's medical group insurance
coverage under the same terms and conditions as prescribed for active
employees. The life insurance plan coverage decreases, for a period of ten
years after age 65, at an annual rate of 7 1/2%.
In January 1, 1993, the Company adopted SFAS 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," and elected to immediately
recognize the transition obligation for future benefits to be paid related to
past employee services. This resulted in a non-cash pre-tax charge of
$2,430,000 ($1,409,400 after tax or $0.24 per share) that represents the effect
of the change in accounting for prior years.
The postretirement benefit expense for 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
<S> <C> <C>
Service cost of benefits earned...... $ 56,341 $ 62,966
Interest cost........................ 195,064 195,945
Amortization and deferral - net...... (178,920) 131,089
-------------------------------------------------------------
Postretirement benefit expense....... $ 72,485 $390,000
=============================================================
</TABLE>
The postretirement benefit liability included the following components:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of postretirement
benefit obligations:
Retirees ................................. $1,181,571 $ 880,331
Fully eligible active plan participants... 663,331 456,370
Other active plan participants ........... 965,189 1,257,241
--------------------------------------------------------------------------
Accumulated postretirement benefit obligation 2,810,091 2,593,942
Unrecognized actuarial (loss) gain .......... (202,929) 80,005
--------------------------------------------------------------------------
Postretirement benefit liability at the
end of the year .......................... $2,607,162 $2,673,947
==========================================================================
</TABLE>
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.5%. The assumed health care cost trend rate used to measure
the accumulated postretirement benefit obligation was 10.5% initially,
declining gradually to 5.5% in year 2018 and thereafter. A one-percentage-point
increase in the assumed health care cost trend rate would have increased the
1994 postretirement benefit expense by $30,000 and would have increased the
1994 accumulated postretirement benefit obligation by $282,000.
The cost of postretirement health and life insurance benefits for the year
ended December 31, 1992 determined based on actual expenditures was $133,000.
NOTE 12 - FINANCIAL DATA BY INDUSTRIES:
The Company's financial data by industries for the years ended December 31,
1994, 1993 and 1992 is as follows (000's omitted):
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Cement and related products . $ 87,486 $ 77,796 $ 74,085
Paper and packaging ......... 5,247 5,578 5,817
Realty operations ........... 97 654 120
-----------------------------------------------------------------
$ 92,830 $ 84,028 $ 80,022
=================================================================
Inter-segment sales:
Paper and packaging ......... $ 3,581 $ 3,444 $ 3,028
=================================================================
Operating profit:
Cement and related products . $ 21,064 $ 18,564 $ 16,665
Paper and packaging ......... 847 1,122 861
Realty operations ........... 97 654 120
$ 22,008 $ 20,340 $ 17,646
=================================================================
Identifiable assets:
Cement and related products . $158,038 $156,373 $150,216
Paper and packaging ......... 1,556 2,351 5,460
Realty operations ........... 1,241 1,256 1,271
Corporate ................... 41,035 33,304 17,238
-----------------------------------------------------------------
$201,870 $193,284 $174,185
=================================================================
Depreciation, depletion and
amortization:
Cement and related products . $ 6,869 $ 6,837 $ 6,856
Paper and packaging ......... 80 79 79
-----------------------------------------------------------------
$ 6,949 $ 6,916 $ 6,935
=================================================================
Capital expenditures:
Cement and related products . $ 11,217 $ 9,125 $ 4,302
Paper and packaging ......... 40 12 27
-----------------------------------------------------------------
$ 11,257 $ 9,137 $ 4,329
=================================================================
</TABLE>
The Company operates in the cement and related products and the paper and
packaging industries, as well as in realty operations, mainly within the island
of Puerto Rico. Operations in the cement and related products industry involve
production and sale of cement and hydrated lime. Operations in the paper and
packaging industry involve production and sale of paper bags. Realty operations
involve the sale and lease of real property.
Operating profit is total revenue less operating expenses. Interest
expense and income taxes have not been deducted in computing operating profit.
Identifiable assets are those that are used in the Company's operations in
each segment. Corporate assets are principally investments and other assets not
used by any industry segment.
In 1994 the Company's largest customer in the cement and related products
segment accounted for 11% of total consolidated sales. Export sales were not
significant.
To reconcile industry information with consolidated amounts, the following
eliminations have been made: $3,581,000 in 1994, $3,444,000 in 1993 and
$3,028,000 in 1992 of inter-segment sales; $3,600 in 1994, $47,500 in 1993 and
$51,000 in 1992 relating to the net change in inter-segment operating profit in
28
<PAGE> 13
beginning and ending inventories; ($2,500) in 1994, $5,900 in 1993 and $1,200
in 1992 of inter-segment operating (loss) profit in inventory at December 31;
and $8,392,000 in 1994, $6,957,000 in 1993 and $3,127,000 in 1992 of
receivables arising from inter-segment sales.
NOTE 13 - LEASE COMMITMENTS:
The Company and its subsidiaries lease certain equipment under operating lease
agreements. Rental expense under such agreements aggregated $1,523,000 in 1994,
$1,339,000 in 1993 and $1,375,000 in 1992.
At December 31, 1994, the approximate future minimum lease payments under
noncancellable operating leases were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------
Year Amount
--------------------------------------------------------
<S> <C>
1995........................................ $ 108,120
1996........................................ 108,120
1997........................................ 108,120
1998........................................ 108,120
1999........................................ 111,364
2000 and beyond............................. 515,732
--------------------------------------------------------
$1,059,576
========================================================
</TABLE>
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
CASH AND CASH EQUIVALENTS
The carrying amount of these assets approximates fair value because of the
short maturity of those instruments.
INVESTMENTS
The fair value of investments are estimated based on quoted market prices for
these or similar investments.
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated using discounted
cash flows based on the current rates offered to the Company for debt of the
same remaining maturities.
The carrying amount and estimated fair values of these financial
instruments at December 31 are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1994 1993
-----------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
-----------------------------------------------------------------
(000's omitted)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents $ 115 $ 115 $ 431 $ 431
Short-term investments .. 520 539
Long-term investments ... 42,031 38,897 32,512 34,443
FINANCIAL LIABILITIES
Long-term debt .......... 37,875 36,417 34,125 34,287
</TABLE>
NOTE 15 - CONTINGENT LIABILITIES AND OTHER COMMITMENTS:
The Company is obligated to purchase, under a long-term supply contract
renegotiated in January 1992, a minimum of 100,000 metric tons of coal annually
through the year 2000. The purchase price is negotiated annually. Coal
purchases have exceeded the minimum amount required by the contract. Purchases
under the contract amounted to $4,278,000 in 1994, $4,690,000 in 1993 and
$5,853,000 in 1992.
The Company is a defendant in a number of legal proceedings arising in the
normal course of business. Management believes, based on the opinion of legal
counsel, that the final outcome of these matters will not have a material
adverse effect on the Company's financial position and results of operations.
NOTE 16 - STOCKHOLDERS' EQUITY:
On May 6, 1992, the Board of Directors declared a three-for-one stock split on
the Company's common stock. The distribution of 4,000,000 shares was made on
June 30, 1992 to shareholders of record on May 29, 1992. The stock split
resulted in an increase of $4 million in common stock (par value $1.00) and a
reduction of the same amount in retained earnings. All share and per share data
in these financial statements have been restated to give effect to the stock
split.
NOTE 17 - TREASURY STOCK:
During 1994, the Company completed a program to purchase up to 450,000
additional shares of its outstanding stock through the acquisition of 313,500
shares for $9,952,592. The changes in the treasury stock component of
shareholders' equity, which is carried at cost, are detailed below:
<TABLE>
<CAPTION>
----------------------------------------------------------------
Number
of shares Cost
----------------------------------------------------------------
<S> <C> <C>
Treasury stock at December 31, 1993.... 192,300 $ 1,584,496
Treasury stock purchased............... 313,500 9,952,592
----------------------------------------------------------------
Treasury stock at December 31, 1994.... 505,800 $11,537,088
================================================================
</TABLE>
NOTE 18 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash was paid during the year for:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest (net of amount capitalized).... $2,354,000 $2,855,000 $2,982,000
=============================================================================
Income taxes............................ $3,844,000 $3,169,000 $1,930,000
=============================================================================
</TABLE>
29
<PAGE> 14
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED FOURTH QUARTER RESULTS
<TABLE>
<CAPTION>
(000's Omitted Except Per Share Amounts)
-----------------------------------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
-----------------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues..................................................... $21,940 $20,122 $92,830 $84,028
Cost of sales.......................................................... 12,962 13,137 59,514 53,291
-----------------------------------------------------------------------------------------------------------------------------
Gross margin........................................................... 8,978 6,985 33,316 30,737
Selling, general and administrative expenses........................... 2,945 2,554 11,307 10,397
-----------------------------------------------------------------------------------------------------------------------------
Income from operations................................................. 6,033 4,431 22,009 20,340
-----------------------------------------------------------------------------------------------------------------------------
Other charges (credits):
Interest and financial charges...................................... 556 501 2,305 2,654
Interest income..................................................... (626) (336) (2,286) (1,239)
Other expense (income).............................................. 740 (129) 648 (221)
-----------------------------------------------------------------------------------------------------------------------------
670 36 667 1,194
-----------------------------------------------------------------------------------------------------------------------------
Income before income taxes............................................. 5,363 4,395 21,342 19,146
Tax provision(1)....................................................... 124 1,749 5,579 6,710
-----------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in accounting principles.... 5,239 2,646 15,763 12,436
Cumulative effect of changes in accounting principles.................. (556)
-----------------------------------------------------------------------------------------------------------------------------
Net income............................................................. $ 5,239 $ 2,646 $15,763 $11,880
=============================================================================================================================
Earnings per share of common stock*(2)................................. $ 0.92 $ 0.46 $ 2.76 $ 2.14
=============================================================================================================================
</TABLE>
FINANCIAL RESULTS BY QUARTERS
<TABLE>
<CAPTION>
(000's Omitted Except Per Share Amounts)
--------------------------------------------------------------------------------------------------------------------------------
Three Months Ended MAR. 31 JUNE 30 SEPT. 30 DEC. 31 1994 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 1993
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues.......... $22,537 $24,787 $23,566 $21,940 $92,830 $20,395 $21,835 $21,676 $20,122 $84,028
================================================================================================================================
Gross profit................ 8,048 9,294 6,996 8,978 33,316 7,448 7,887 8,417 6,985 30,737
================================================================================================================================
Income before income tax.... 5,535 6,349 4,095 5,363 21,342 4,426 4,766 5,559 4,395 19,146
Tax provision (1)........... 1,963 2,256 1,236 124 5,579 1,225 1,635 2,101 1,749 6,710
--------------------------------------------------------------------------------------------------------------------------------
Income before cumulative
effect of changes in
accounting............... 3,572 4,093 2,859 5,239 15,763 3,201 3,131 3,458 2,646 12,436
Cumulative effect of changes
in accounting principles. (556) (556)
--------------------------------------------------------------------------------------------------------------------------------
Net income.................. $3,572 $4,093 $2,859 $5,239 $15,763 $ 2,645 $ 3,131 $ 3,458 $2,646 $11,880
================================================================================================================================
Per share*(2)............... $ 0.62 $ 0.72 $ 0.50 $ 0.92 $ 2.76 $ 0.55 $ 0.53 $ 0.60 $ 0.46 $ 2.14
================================================================================================================================
</TABLE>
* Based on weighted average of outstanding shares of 5,704,800 in 1994 and
5,807,700 in 1993.
(1) Includes an adjustment decreasing the provision by approximately $2,000,000
caused by the reduction in the deferred liability resulting from a decrease
in the maximum tax rate from 42% to 39% beginning in calendar year 1996.
(2) Excluding, in 1993, a non-cash charge of $0.24 and credit of $0.15 per
share for cumulative effects of changes in accounting for postretirement
benefits and income taxes, respectively.
30
<PAGE> 15
PUERTO RICAN CEMENT COMPANY, INC.
FIVE-YEAR STATISTICAL COMPARISON
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET SUMMARY
Cash.......................................... $ 114,702 $ 431,293 $ 130,782 $ 221,351 $ 184,766
Short-term investments........................ 520,000 8,070,657 11,391,863 18,420,013
Accounts receivable-net....................... 14,358,827 13,626,159 10,961,829 12,577,715 12,034,639
Inventories................................... 28,916,950 33,141,836 35,773,103 31,204,693 30,565,337
Prepaid expenses.............................. 3,907,844 3,488,276 2,925,697 2,814,294 2,741,477
-----------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS - TOTAL..................... 47,298,323 51,207,564 57,862,068 58,209,916 63,946,232
Property, plant and equipment-net............. 111,688,573 107,968,603 105,747,681 108,353,458 95,519,838
Cash restricted for use in the dry process
conversion project......................... 942,009
Other assets.................................. 852,351 1,595,062 1,708,695 1,731,203 1,733,198
Long-term investments......................... 42,030,507 32,512,367 8,866,765
-----------------------------------------------------------------------------------------------------------------------------
$201,869,754 $193,283,596 $174,185,209 $168,294,577 $162,141,277
=============================================================================================================================
Notes payable (include current portion of
long-term debt and short-term borrowing)... $ 8,598,571 $ 7,491,735 $ 5,857,143 $ 3,482,143 $ 3,142,858
Accounts payable and accrued liabilities...... 8,273,468 9,781,571 8,108,355 8,590,443 9,529,379
-----------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES - TOTAL................ 16,872,039 17,273,306 13,965,498 11,982,586 12,572,237
Long-term debt (exclusive of current portion). 31,696,403 26,633,080 24,500,000 30,357,143 33,375,000
Deferred income taxes......................... 27,722,814 26,028,233 23,875,370 21,755,663 20,182,252
Postretirement benefit liability.............. 2,607,162 2,673,947
Capital stock (1)............................. 8,830,839 18,783,431 18,783,431 14,783,431 14,783,431
Retained earnings............................. 114,140,497 101,891,599 93,060,910 89,325,754 81,128,357
-----------------------------------------------------------------------------------------------------------------------------
$201,869,754 $193,283,596 $174,185,209 $168,294,577 $162,141,277
=============================================================================================================================
STATISTICAL DATA
Book value per share.......................... $ 22.38 $ 20.78 $ 19.26 $ 17.93 $ 14.74
Shares outstanding at year-end................ 5,494,200 5,807,700 5,807,700 5,807,700 5,807,700
Number of stockholders........................ 684 705 729 729 807
Average number of employees................... 552 533 534 555 554
Capital expenditures (including expenditures in
mill conversion in 1994 and 1993 and dry
process conversion until 1991)............. $ 11,256,763 $ 9,136,968 $ 4,329,321 $ 19,803,268 $ 18,423,975
=============================================================================================================================
</TABLE>
(1) Including, in 1994, the purchase of 313,500 shares of the Company's
outstanding common stock for $9,953,000.
31
<PAGE> 16
PUERTO RICAN CEMENT COMPANY, INC.
DIRECTORS AND OFFICERS
DIRECTORS
ANTONIO LUIS FERRE
Chairman of the Board of the Company and President of
El Dia, Inc. (Newspaper Publishing Group)
ALBERTO M. PARACCHINI
Vice Chairman of the Board of the Company and Director
of Banco Popular de Puerto Rico (Commercial Bank) and
BanPonce Corporation (Bank Holding Company)
HECTOR DEL VALLE
Vice Chairman of the Board of the Company
MIGUEL A. NAZARIO
President and Chief Executive Officer of the Company
JOSE J. SUAREZ
Executive Vice President in Charge of Operations of the
Company
ANTONIO LUIS FERRE RANGEL
Vice President of Strategic Planning
CARLOS J. SUAREZ
Consultant to the Company
ESTEBAN D. BIRD
President of Bird Construction Company (General Contractors)
OSCAR A. BLASINI
President of G.B. Investments, Inc. (Real Estate Development
and Investments)
ROSARIO J. FERRE
Second Vice President of Luis A. Ferre Foundation, Inc.
WALLACE GONZALEZ OLIVER
Attorney At Law, Partner, Gonzalez Oliver, Correa Calzada,
Collazo Salazar, Herrero &Jimenez (Law Firm)
HECTOR PUIG RAMIREZ
President of Ferreterias Puig, Inc. (Distributors of Construction
Materials), Livio Puig, Inc. (Real Estate Company) and Puig
Rental, Inc. (Construction Equipment and Tools Leasing)
FEDERICO M. STUBBE
President of Comunidades Fermaral, Inc. (Real Estate)
EMILIO J. VENEGAS
President of Sanson Corporation (Rock and Concrete Products)
and Secretary of Venegas Construction Corporation (General
Contractors)
FEDERICO F. SANCHEZ
President of Federico F. Sanchez and Company, Inc. and
Interlink Group, Inc. (Real Estate Consultants, Brokers and
Developers)
JORGE L. FUENTES
Chairman of the Board and Chief Executive Officer of Gabriel
Fuentes, Jr. Construction Company, Inc. and Chairman of the
Board and Chief Executive Officer of Fuentes Concrete Pile,
Inc. (Concrete Pile Foundations)
JUAN A. ALBORS
Chairman and Chief Executive Officer of Albors Housing
Development Corporation (Real Estate Developers and Investors)
MARIANO MIER
Dean of Business Administration at Universidad Metropolitana
(four year college)
OFFICERS
MIGUEL A. NAZARIO
President and Chief Executive Officer
JOSE J. SUAREZ
Executive Vice President in Charge of Operations
JOSE O. TORRES
Secretary, Vice President of Finance, and Treasurer
RENE DI CRISTINA
Vice President - Sales
ANGEL M. AMARAL
Vice President and Controller
BENITO DEL CUETO
Vice President of Desarrollos Multiples Insulares, Inc.
JUAN A. CARBONELL
Vice President and General Manager
St. Regis Paper and Bag Division
ANTONIO LUIS FERRE RANGEL
Vice President of Strategic Planning
STATUTORY OFFICES
Ponce, Puerto Rico
EXECUTIVE OFFICES
Guaynabo, Puerto Rico
SUBSIDIARIES*
Caribbean Cement Carriers Corporation
Desarrollos Multiples Insulares, Inc.
Ferre Export Corporation
Florida Lime Corporation
*All Subsidiaries are 100% owned
REGISTRAR AND TRANSFER AGENT
Mellon Financial Services
Ridgefield Park, New Jersey
INDEPENDENT ACCOUNTANTS
Price Waterhouse
San Juan, Puerto Rico
PUBLIC RELATIONS
Ludgage Communications
New York, New York
LEGAL COUNSEL
Totti, Rodriguez Diaz &Fuentes
San Juan, Puerto Rico
32
<PAGE> 17
PUERTO RICAN CEMENT COMPANY, INC.
STOCKHOLDER INFORMATION
FORM 10-K
A copy of the Annual Report as filed with the Securities and Exchange
Commission on Form 10-K will be mailed upon request made to Mr. Jose Osvaldo
Torres, Vice President of Finance and Treasurer, Puerto Rican Cement Company,
Inc., PO Box 364487, San Juan, Puerto Rico 00936-4487.
PUERTO RICAN CEMENT COMPANY, INC.
ANNUAL MEETING
The Annual Meeting of Stockholders of Puerto RicanCement Company, Inc. will be
held at the office of the Company, Amelia Industrial Park, Guaynabo,Puerto
Rico, Wednesday, May 3, 1995 at 10:00 a.m.
COMMON STOCK PRICES
AND DIVIDENDS PER SHARE
The Company's common stock is listed on the New York Stock Exchange (trading
symbol:PRN). The following table sets forth the high and low sales price per
share of the common stock.
<TABLE>
<CAPTION>
--------------------------------------------------------------
Price per share ($) 1994 1993
--------------------------------------------------------------
HIGH LOW High Low
--------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 29 1/2 24 1/2 26 1/4 22 3/8
Second Quarter 30 1/4 28 1/8 26 23
Third Quarter 33 1/8 28 3/8 26 3/4 23 7/8
Fourth Quarter 33 1/4 27 1/2 27 1/4 24
Full Year 33 1/4 24 1/2 27 1/4 22 3/8
Dividends per share $0.62 $0.53
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 114,702
<SECURITIES> 0
<RECEIVABLES> 15,452,830
<ALLOWANCES> 1,094,003
<INVENTORY> 28,916,950
<CURRENT-ASSETS> 47,298,323
<PP&E> 163,077,313
<DEPRECIATION> 51,388,740
<TOTAL-ASSETS> 201,869,754
<CURRENT-LIABILITIES> 16,872,039
<BONDS> 31,696,403
<COMMON> 6,000,0000
0
0
<OTHER-SE> 116,971,336
<TOTAL-LIABILITY-AND-EQUITY> 201,869,754
<SALES> 92,732,777
<TOTAL-REVENUES> 97,095
<CGS> 59,514,156
<TOTAL-COSTS> 70,821,730
<OTHER-EXPENSES> 665,777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,342,365
<INCOME-TAX> 5,579,153
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,763,212
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
