<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
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
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PUERTO RICAN CEMENT COMPANY, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO 51-A-66-0189525
- --------------------------- ---------------
(State or other jurisdiction of incorporation) (I.R.S. Employer ID No.)
PO Box 364487 - San Juan, P.R. 00936-4487
- ------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (787) 783-3000
--------------
NONE
----
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the Registrant (1) has filed reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common stock, $1 Par Value; 5,527,074 Shares Outstanding
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<PAGE> 2
PUERTO RICAN CEMENT COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C> <C>
Part I - Financial Information
Consolidated Balance Sheet as of
June 30, 1996 and December 31, 1995 1 - 2
Consolidated Statement of Income
Three months and six months ended
on June 30, 1996 and 1995 3
Consolidated Statement of Cash Flows
Six months ended on
June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6 - 9
Part II - Other Information 9
Signatures 10
</TABLE>
<PAGE> 3
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE DECEMBER
ASSETS 30, 1996 31, 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 10,123,986 $ 11,599,636
------------ ------------
Investments available-for-sale 4,397,841 4,473,536
------------ ------------
Short-term investments 3,180,875 974,073
------------ ------------
Notes and accounts receivable-net of allowance for
doubtful accounts of $1,613,613 in 1996 and
$1,539,788 in 1995 28,161,612 24,526,385
------------ ------------
Inventories:
Finished products 1,862,314 2,207,360
Work in process 4,116,355 3,521,451
Raw materials 2,866,887 4,651,699
Maintenance & operating supplies 21,395,671 21,339,303
Land held for sale including development costs 502,602 502,602
------------ ------------
Total inventories 30,743,829 32,222,415
------------ ------------
Prepaid expenses 5,499,561 4,752,187
------------ ------------
TOTAL CURRENT ASSETS 82,107,704 78,548,232
PROPERTY, PLANT & EQUIPMENT - Net of
accumulated depreciation, depletion and amortization
of $61,313,444 in 1996 and $55,980,727 in 1995 143,200,507 142,567,213
LONG-TERM INVESTMENTS 29,706,124 31,228,541
OTHER ASSETS 3,204,843 2,670,882
------------ ------------
TOTAL $258,219,178 $255,014,868
============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE DECEMBER
LIABILITIES AND STOCKHOLDERS' EQUITY 30, 1996 31, 1995
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ - $ 4,100,000
Current portion of long-term debt 7,545,072 7,649,853
Accounts payable 8,984,244 8,440,255
Accrued liabilities 5,721,563 7,452,614
Income taxes payable 476,111 334,664
------------ ------------
TOTAL CURRENT LIABILITIES 22,726,990 27,977,386
------------ ------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 57,348,061 57,549,475
Deferred income taxes 32,433,284 30,808,654
Postretirement benefits liability 2,918,017 2,873,430
------------ ------------
92,699,362 91,231,559
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 2,000,000
shares of $5.00 par value each; none issued
Common stock, authorized 20,000,000
shares of $1.00 par value each; issued
6,000,000 shares, outstanding 5,527,074 shares
as of June 30, 1996, 5,504,722 shares as of
December 31, 1995 6,000,000 6,000,000
Additional paid-in capital 14,702,914 14,482,054
Unrealized gain (loss) on investments available-for-sale (21,029) 74,313
Retained earnings 132,550,238 126,216,785
------------ ------------
153,232,123 146,773,152
Less: Shares of common stock in treasury, at cost
(472,926 shares as of June 30, 1996 and
495,278 shares as of December 31, 1995) 10,439,297 10,967,229
------------ ------------
STOCKHOLDERS' EQUITY NET 142,792,826 135,805,923
------------ ------------
TOTAL $258,219,178 $255,014,868
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $40,986,865 $25,169,746 $78,366,920 $47,887,764
Revenue from real estate operations 23,224 30,925 46,448 55,199
----------- ----------- ----------- -----------
41,010,089 25,200,671 78,413,368 47,942,963
Cost of sales 29,096,525 15,289,923 56,136,728 30,033,596
----------- ----------- ----------- -----------
Gross margin 11,913,564 9,910,748 22,276,640 17,909,367
Selling, general & administrative expenses 4,812,297 3,193,716 9,454,556 6,336,974
----------- ----------- ----------- -----------
Income from operations 7,101,267 6,717,032 12,822,084 11,572,393
----------- ----------- ----------- -----------
Other charges (credits):
Interest and financial charges 1,113,133 522,793 2,250,969 1,048,780
Interest income (655,653) (608,883) (1,260,404) (1,211,659)
Other income (223,041) (468,992) (340,703) (504,039)
----------- ----------- ----------- -----------
Total other charges (credits) 234,439 (555,082) 649,862 (666,918)
----------- ----------- ----------- -----------
Income before income tax 6,866,828 7,272,114 12,172,222 12,239,311
Provision for income tax 2,362,028 2,543,982 3,974,208 4,218,159
----------- ----------- ----------- -----------
Net income $ 4,504,800 $ 4,728,132 $ 8,198,014 $ 8,021,152
=========== =========== =========== ===========
Income per share:
Net income $ 0.82 $ 0.87 $ 1.48 $ 1.47
=========== =========== =========== ===========
Common Shares Outstanding 5,527,074 5,456,700 5,527,074 5,456,700
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,198,014 $ 8,021,152
------------ -----------
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and amortization 5,382,612 3,432,609
Accretion of discounts on investments (734,401) (768,733)
Provision for deferred income taxes 1,624,630 2,084,055
Postretirement benefits cost 48,362 222,701
Gain on sale of fixed assets (142,861) (421,427)
Changes in assets and liabilities:
Increase in notes & accounts receivable (3,635,227) (3,540,972)
Decrease in inventories 1,478,586 21,382
Increase in prepaid expenses (747,374) (722,073)
Decrease in accounts payable (399,414) (374,630)
(Decrease) increase in accrued liabilities (46,431) 994,239
Increase (decrease) in income taxes payable 141,447 (457,676)
(Increase) decrease in other long-term assets (563,423) 21,951
------------ -----------
Total adjustments 2,406,506 491,426
------------ -----------
Cash provided by operations 10,604,520 8,512,578
------------ -----------
Cash flows from investing activities:
Capital expenditures (6,025,183) (6,369,009)
Redemption of long-term investments 2,256,818 1,747,291
Purchase of short-term investments (2,206,802) (2,028,894)
Purchase of investments available-for-sale (19,647) -
Proceeds from sale of fixed assets 181,600 436,545
------------ -----------
Cash used in investing activities (5,813,214) (6,214,067)
------------ -----------
Cash flows from financing activities:
Repayment of long-term debt and notes payable (15,806,195) -
Dividends paid (1,860,761) (1,858,466)
Proceeds from loans 11,400,000 4,220,430
Purchase of treasury stock - (2,181,000)
Decrease in short-term borrowing - (2,420,000)
------------ -----------
Cash used in financing activities (6,266,956) (2,239,036)
------------ -----------
(Decrease) increase in cash and cash equivalents $ (1,475,650) $59,475
============ ===========
Cash and cash equivalents - beginning of year $ 11,599,636 $ 114,702
Cash and cash equivalents - end of period 10,123,986 174,177
------------ -----------
(Decrease) increase in cash and cash equivalents $ (1,475,650) $ 59,475
============ ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Registrant, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly its financial
position at June 30, 1996 and December 31, 1995, and the results of operations
for the three months and six months ended June 30, 1996 and 1995, and cash
flows for the six months ended June 30, 1996 and 1995. The results of
operations are not necessarily indicative of the results to be expected for the
full year.
Aggregated cash and cash equivalents and investments (short-term,
available-for-sale and long-term investments) totaled $47.4 million at June 30,
1996 compared with $48.2 million at December 31, 1995, a decrease of $800,000.
Investments consisted principally of short-term obligations and obligations of
the U.S. Government or its agencies with maturities ranging from more than one
year to up to seven years.
Notes and accounts receivables totaled $28.2 million as of June 30,
1996 compared with $24.5 million as of December 31, 1995. The increase of $3.6
million resulted principally from a higher balance in accounts receivable-trade
at the end of the second quarter of 1996 attributable to a higher volume of
cement and lime sales during the second quarter of 1996 than during the last
quarter of 1995. Receivables' turnover was maintained at normal levels during
the second quarter of 1996, with an average collection period below 60 days.
Consolidated inventories decreased $1.5 million from $32.2 million as
of December 31, 1995 to approximately $30.7 million as of June 30, 1996. The
decrease was partially attributable to a decline in gypsum (a raw material used
in the production of cement) because of timing of shipments and paper bags
inventory because of the increased level of cement sales; a reduction of
$819,000 in raw material inventory in the Registrant's paper bags subsidiary
resulting from increased effectiveness in inventory control; and, finally, a
decrease of $273,000 in limestone inventory used in the manufacturing of lime
as a result of a significant increase in lime sales.
Total current liabilities decreased $5.2 million from $27.9 million as
of December 31, 1995 to $22.7 million as of June 30, 1996. The decrease was
principally attributable to (i) the payment of the $4.1 million promissory note
outstanding as of December 31, 1995 related to the acquisition of the
ready-mixed concrete companies and (ii) a decrease of $1.7 million in accrued
liabilities as a result of the making of the final payment for the shares of
Ready Mix Concrete.
At its June 26, 1996 meeting, the Board of Directors of the Registrant
declared a 17 cents per share dividend on its common stock, payable on August
17, 1996 to stockholders of record on July 15, 1996. As of June 30, 1996, the
Registrant had 5,527,074 shares of common stock issued and outstanding as
compared with 5,456,700 as of June 30, 1995.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Working capital at June 30, 1996 was $59.4 million compared with $50.6
million at December 31, 1995. The current ratio increased to 3.61 to 1 as of
June 30, 1996 from 2.81 to 1 as of December 31, 1995. The change resulted from
the decrease in current liabilities attributable to the payment of the $4.1
million note as well as the decrease in accrued liabilities and the higher
balance in receivables, as previously discussed.
During the six-month period ended on June 30, 1996, net cash provided
by operating activities totaled $10.6 million. This amount was principally used
to finance additions to property, plant and equipment for $6.0 million and to
pay $4.1 million in notes payable.
As mentioned above, capital expenditures for the six-month period
ended on June 30, 1996 were approximately $6.0 million. This amount included
$3.5 million of expenditures by the Company's ready-mixed concrete
subsidiaries, principally for the acquisition of new trucks. Depreciation
expense for the six-month period ended on June 30, 1996 totaled $5.4 million.
During the second quarter of 1996, the Company refinanced $11.3
million of its long-term debts with a new $11.4 million loan. Additionally, a
principal payment of $400,000 was made during the six-month period ended on
June 30, 1996. The approximate aggregate maturities of long-term debt for the
remainder of 1996 and thereafter are as follows:
<TABLE>
<S> <C>
1996 $ 7,249,853
1997 13,600,423
1998 10,205,357
1999 7,819,907
2000 and thereafter 26,017,593
-----------
Total $64,893,133
===========
</TABLE>
Loan agreements with term lenders impose certain restrictions on the
Company concerning working capital, indebtedness, dividends, investments and
certain advances, among others restrictions.
The Company has available credit facilities in the aggregate amount of
$20,600,000 with commercial banks for short-term financing and discount of
trade paper from customers. There were no outstanding balances under these
credit facilities at any month-end during the first six months of 1996. During
such period the facilities were used to secure payment of $180,000 of
discounted notes. These short-term facilities are renewable annually at the
discretion of the banks. Currently, no commitment fees are payable under these
credit facilities.
-6-
<PAGE> 9
Results of Operations
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Consolidated net sales for the second quarter of 1996 increased $15.8
million, or 63%, to $40.1 million from $25.1 million for the second quarter of
1995. In 1996, consolidated net sales benefited from $13.9 million (net of
$7.5 million of intercompany sales) of additional sales contributed by the
ready-mixed concrete subsidiaries. To a lesser degree, second quarter sales
benefited from increases of (i) 493,000 in total bags of cement sold and (ii)
8,700 tons of lime sales made principally to export markets.
Consolidated cost of sales totaled $29.1 million in the second quarter
of 1996, an increase of $13.8 million over the $15.3 million reported for the
second quarter of 1995. Cost of sales for the second quarter of 1996 included
$11.5 million from the ready-mixed concrete subsidiaries not reflected in the
second quarter of 1995. Gross margin figures for the quarter, excluding
ready-mixed operations, was 36.5% in 1996 compared with 39.3% in 1995. The
decrease was due to (i) an increase in the cost of cement shipments caused by a
revision in the freight tariff, and (ii) an increase in repairs expense due to
the shutdown of the Registrant's cement kiln for maintenance work.
Selling, general and administrative expenses increased $1.6 million to
$4.8 million in the second quarter of 1996 compared with $3.2 million in the
second quarter of 1995. This increase was principally attributable to $1.3
million of expenses related to the ready-mixed concrete operations.
During the second quarter of 1996, interest expense was $590,000
higher than in the same period of 1995 because (i) the interest on the loans
related to the mills' conversion project was capitalized during 1995 but
expensed in 1996 and (ii) interest expense increased as a result of the
increase in outstanding long-term debt associated to the acquisition of the
ready-mixed companies. Compared with 1995, other income decreased by $246,000.
Although the 1996 figure reflects for the first time other income from the
ready-mixed concrete subsidiaries totaling $287,000, the 1995 figure reflects
income of $415,000 from the sale of idle equipment reported in the second
quarter of 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Consolidated net sales increased $30.5 million, or 64%, to $78.3
million for the six-month period ended June 30, 1996 compared with consolidated
net sales of $47.9 million for the six-month period ended June 30, 1995. The
improvement from last year resulted from:
- An increase in net cement sales of $3.7 million due primarily to 1.1
million additional cement bags sold for this period.
- An increase of $1.7 million in lime sales, resulting from the
Company's effort, attributable to substantial sales to the export
market, in which 17,700 tons had been sold as of June 30, 1996. There
were no export sales during the first half of 1995.
- The contribution of $24.9 million (net of $14.6 million of
intercompany sales) in sales by the ready-mixed concrete subsidiaries
compared to none in 1995.
-7-
<PAGE> 10
Consolidated cost of sales increased $26.1 million from $30.0 million
as of June 30, 1995 to $56.1 million as of June 30, 1996. Of this increase,
$21.2 million (net of intercompany charges) were related to additional cost
associated with the ready-mixed concrete operations bought in November 1995.
Other increases, principally in the cement and lime operations, were caused by
increased repair and maintenance work and the effect of the increased sales
volume experienced throughout the first six months of 1996. Gross margin for
the period, excluding the ready-mixed concrete operations, decreased from 37.4%
in 1995 to 34.8% in 1996 as the result of the increased repair and maintenance
works.
Selling, general and administrative expenses increased $3.1 million in
the first six months of 1996 compared with the first six months of 1995. The
ready-mixed concrete subsidiaries were responsible for $2.7 million, or 87%, of
such increase.
Interest and financial charges increased to $2.2 million for the
six-month period ended June 30, 1996 compared with $1.0 million for the
six-month period ended June 30, 1995. The increase of $1.2 million was
primarily due to (i) interest charges resulting from the $16.0 million
financing facilities of the ready-mixed concrete subsidiaries, (ii) interest
expense on the loans related to the mills' conversion project the
capitalization of which ended in the third quarter of 1995 and (iii) additional
interest expense resulting from the notes payable to the former owners of the
ready-mixed concrete companies.
READY-MIXED CONCRETE SUBSIDIARIES
Net sales for the quarter ended June 30, 1996 totaled $13.2 million
(excluding intercompany transactions) compared with $11.6 million for the
quarter ended March 31, 1996. The increase of $1.6 million was the result of a
higher volume of sales. Gross margin for the quarter decreased from 4.6% in
March 1996 to 3.0% in June 1996 as the result of increases in the cost of
aggregates used in the production of the ready-mixed.
As of June 30, 1996, $46.8 million or 18% of the Company's total
consolidated assets were attributable to the ready-mixed concrete subsidiaries.
LEGAL PROCEEDING INVOLVING SAN JUAN CEMENT
The Registrant and its two ready-mixed concrete subsidiaries, Concreto
Mixto, Inc. and Ready Mix Concrete, Inc. (the "Defendants") are currently
defendants in a lawsuit brought by San Juan Cement, Inc. in the United States
District Court for the District of Puerto Rico seeking rescission of the
acquisition by the Registrant of the ready-mixed concrete subsidiaries or
divestiture of such companies. The suit alleges that the acquisition violates
the federal antitrust laws. A motion made by the Defendants to dismiss the
complaint for lack of subject matter jurisdiction was denied. The Registrant's
petition to the Court of Appeals for the First Circuit asking that it accept
the question of subject matter jurisdiction for interlocutory review was also
denied. The case is continuing and is currently in the discovery phase.
While there can be no certainty, the Registrant believes that an
adverse final ruling in the lawsuit brought by San Juan Cement, Inc. is not
reasonably likely to have a material adverse effect on the Registrant's
financial condition or results of operations. In addition, the Registrant
believes that the cost of the defense of such litigation will not have a
material adverse effect on the Registrant's financial condition or results of
operations.
-8-
<PAGE> 11
Part II. OTHER INFORMATION.
Item 2. NONE
Item 5. NONE
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule (for SEC use only)
-9-
<PAGE> 12
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUERTO RICAN CEMENT COMPANY, INC.
- ---------------------------------
Registrant
Date: 08/13/96
----------
By: /s/ Angel Amaral
---------------------------------------
Angel Amaral
Vice President and Controller
Date: 08/13/96
------------
By: /s/ Jose O. Torres
---------------------------------------
Jose O. Torres
Vice President of Finance and Treasurer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,123,986
<SECURITIES> 7,578,716
<RECEIVABLES> 29,775,225
<ALLOWANCES> 1,613,613
<INVENTORY> 30,743,829
<CURRENT-ASSETS> 82,107,704
<PP&E> 204,513,951
<DEPRECIATION> 61,313,444
<TOTAL-ASSETS> 258,219,178
<CURRENT-LIABILITIES> 22,726,990
<BONDS> 57,348,061
0
0
<COMMON> 6,000,000
<OTHER-SE> 136,792,826
<TOTAL-LIABILITY-AND-EQUITY> 258,219,178
<SALES> 78,366,920
<TOTAL-REVENUES> 78,413,368
<CGS> 56,136,728
<TOTAL-COSTS> 65,591,284
<OTHER-EXPENSES> 649,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,172,222
<INCOME-TAX> 3,974,208
<INCOME-CONTINUING> 8,198,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,198,014
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 0
</TABLE>
