<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, 1997
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
--------- ---------
Commission File Number: 1-4753
--------
PUERTO RICAN CEMENT COMPANY, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO 51-A-66-0189525
- --------------------------- ---------------
(State or other jurisdiction of 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 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
--- ---
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
--------------------------------------------------------
<PAGE> 2
PUERTO RICAN CEMENT COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I - Financial Information
Consolidated Balance Sheet as of June 30,
1997 and December 31, 1996 ................................... 1 - 2
Consolidated Statement of Income for the three-month and
six-month periods ended on June 30, 1997 and 1996 ............ 3
Consolidated Statement of Cash Flows for the six-month
period ended on June 30, 1997 and 1996 ....................... 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 ............................................ 10
Signatures ................................................... 11
</TABLE>
<PAGE> 3
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June December
30, 1997 31, 1996
-------- --------
(In thousands)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 2,327 $ 14,809
-------- --------
Investments available-for-sale 4,627 4,596
-------- --------
Short-term investments 2,991 1,918
-------- --------
Notes and accounts receivable-net of allowance for
doubtful accounts of $1,616 in 1997 and $1,539 in 1996 34,057 27,410
-------- --------
Inventories:
Finished products 2,040 2,219
Work in process 5,143 4,510
Raw materials 3,773 3,544
Maintenance and operating supplies 22,305 22,667
Land held for sale, including development costs 503 503
-------- --------
Total Inventories 33,764 33,443
-------- --------
Prepaid expenses 6,214 4,625
-------- --------
Total current assets 83,980 86,801
Property, plant and equipment - net of accumulated
depreciation, depletion and amortization
of $70,132 in 1997 and $64,163 in 1996 147,990 143,088
Long-term investments 46,729 46,980
Other assets 4,573 4,334
-------- --------
Total $283,272 $281,203
-------- --------
</TABLE>
See notes to consolidate financial statements.
-1-
<PAGE> 4
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June December
30, 1997 31, 1996
-------- --------
(In thousands)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt $ 8,354 $ 15,401
Accounts payable 8,120 7,799
Accrued liabilities 7,964 6,350
Income taxes payable 438 931
-------- --------
Total current liabilities 24,876 30,481
-------- --------
Long-term Liabilities
Long-term debt, less current portion 65,623 67,023
Deferred income taxes 35,376 33,323
Other long-term liabilities, including
postretirement benefits 2,992 2,955
-------- --------
Total long-term liabilities 103,991 103,301
-------- --------
Total liabilities 128,867 133,782
-------- --------
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, 1997 and December 31, 1996 6,000 6,000
Additional paid-in capital 14,703 14,703
Unrealized gain on investments available-for-sale 105 110
Retained earnings 144,036 137,047
-------- --------
164,844 157,860
Less: Shares of common stock in treasury, at cost
(472,926 shares as of June 30, 1997 and
December 31, 1996) 10,439 10,439
-------- --------
Stockholders' Equity-Net 154,405 147,421
-------- --------
Total $283,272 $281,203
======== ========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE> 5
Puerto Rican Cement Company, Inc.
Consolidate Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 43,404 $ 40,987 $ 80,592 $ 78,367
Revenue from real estate operations 25 23 49 46
--------- --------- --------- ---------
43,429 41,010 80,641 78,413
Cost of sales 29,654 29,096 56,217 56,136
--------- --------- --------- ---------
Gross margin 13,775 11,914 24,424 22,277
Selling, general and administrative expenses 5,252 4,813 10,026 9,455
--------- --------- --------- ---------
Income from operations 8,523 7,101 14,398 12,822
--------- --------- --------- ---------
Other charges (credits):
Interest and financial charges 1,384 1,113 2,707 2,251
Interest income (819) (656) (1,660) (1,260)
Other (income) expense 11 (223) 115 (341)
--------- --------- --------- ---------
Total other charges (credits) 576 234 1,162 650
--------- --------- --------- ---------
Income before income tax 7,947 6,867 13,236 12,172
Provision for income tax 2,801 2,362 4,147 3,974
--------- --------- --------- ---------
Net income $ 5,146 $ 4,505 $ 9,089 $ 8,198
--------- --------- --------- ---------
Income per share:
Net income $ 0.93 $ 0.82 $ 1.64 $ 1.48
--------- --------- --------- ---------
Common shares outstanding 5,527,074 5,527,074 5,527,074 5,527,074
========= ========= ========= =========
See notes to consolidated financial statements.
</TABLE>
-3-
<PAGE> 6
Puerto Rican Cement Company, Inc.
Consolidated Statement of Cash Flows
For The Six Months Ended
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,089 $ 8,198
-------- -------
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and amortization 6,034 5,382
Accretion of discounts on investments (1,261) (734)
Provision for deferred income taxes 2,052 1,624
Postretirement benefits cost 38 48
Gain on sale of fixed assets (2) (143)
Changes in assets and liabilities:
Increase in notes and accounts receivable (6,647) (3,635)
(Increase) decrease in inventories (320) 1,478
Increase in prepaid expenses (1,588) (747)
Increase in other long-term assets (266) (563)
Decrease in accounts payable (729) (399)
Increase (decrease) in accrued liabilities 2,665 (46)
(Decrease) increase in income taxes payable (493) 141
-------- -------
Total adjustments (517) 2,406
-------- -------
Cash provided by operations 8,572 10,604
-------- -------
Cash flows from investing activities:
Capital expenditures (10,968) (6,025)
Redemption of long-term investments 1,512 2,257
Purchase of short-term investments (1,073) (2,207)
Purchase of investments available-for-sale (35) (20)
Proceeds from sale of fixed assets 58 182
-------- -------
Cash used in investing activities (10,506) (5,813)
-------- -------
Cash flows from financing activities:
Repayment of long-term debt and notes payable (58,448) (15,806)
Dividends paid (2,100) (1,861)
Proceeds from loans 50,000 11,400
-------- -------
Cash used in financing activities (10,548) (6,267)
-------- -------
Decrease in cash and cash equivalents $(12,482) $(1,476)
-------- -------
Cash and cash equivalents-beginning of year $ 14,809 $11,600
Cash and cash equivalents-end of period 2,327 10,124
-------- -------
Decrease in cash and cash equivalents $(12,482) $(1,476)
-------- -------
</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, 1997 and December 31, 1996, and the results of operations
for the three-month and six-month periods ended June 30, 1997 and 1996, and cash
flows for the six-month period ended June 30, 1997 and 1996. The results of
operations are not necessarily indicative of the results to be expected for the
full year.
Total cash and cash equivalents decreased from $14.8 million as of December
31, 1996 to $2.3 million as of June 30, 1997. Capital expenditures of $11
million, consisting principally of equipment purchased for the Registrant's
cement and related products segment, and $8 million in payments on a revolving
credit facility contributed to the decline in the cash and cash equivalents
balance during this period.
Investments consisted principally of short-term obligations and obligations
of the U.S. Government or its agencies with a maturity ranging from more than
one year to seven years.
Notes and accounts receivable were $34.1 million as of June 30, 1997
compared with $27.4 million as of December 31, 1996, an increase of $6.7
million. The increase resulted from a higher balance of accounts
receivable-trade attributable to stronger consolidated sales amounting to $43.4
million during the second quarter of 1997 as compared to $37.2 million
consolidated sales during the last quarter of 1996. Receivable turnover was
maintained at normal levels during the second quarter of 1997.
Consolidated inventories increased $0.4 million to $33.8 million as of June
30, 1997 compared with $33.4 million as of December 31, 1996. The increase
resulted mostly from additional work in process inventory.
Total current liabilities decreased $5.6 million from $30.5 million as of
December 31, 1996 to $24.9 million as of June 30, 1997. The decrease was
principally attributable to the repayment of $7.0 million classified as current
liability of the revolving credit facility mentioned above, offset by an
increase in accounts payable-trade related to the ready-mixed concrete
subsidiary, Ready Mix Concrete, Inc. ("RMC").
At its June 25, 1997 meeting, the Board of Directors of the Registrant
declared a 19 cents per share dividend on its common stock, payable on August
11, 1997 to stockholders of record on July 14, 1997. As of June 30, 1997, the
Registrant had 5,527,074 shares of common stock issued and outstanding.
As of June 30, 1997, $54.5 million or 19% of the Company's total
consolidated assets were attributable to RMC.
- 5-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
Working capital at June 30, 1997, improved to $59.1 million compared with
$56.3 million at December 31, 1996. The current ratio increased to 3.38 to 1 as
of June 30, 1997, from 2.85 to 1 as of December 31, 1996. The improvement in
both items resulted from a decrease in current liabilities caused by the
repayment of $7.0 million of the current portion of long-term debt.
Capital expenditures incurred during the six-month period ended June 30,
1997, totaled $11.0 million. Depreciation expense for the same period totaled
$6.0 million.
As of June 30, 1997, the approximate aggregate maturities of long-term
debt for the remainder of 1997 and thereafter are as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 7,954
1998 800
1999 10,423
2000 800
2001 and thereafter 54,000
-------
Total $73,977
-------
</TABLE>
During June 1997, the Company paid $1 million towards a $10.6 million
revolving credit facility due in 1999. During July 1997, the Company paid-off
the remaining $9.6 million with cash flows generated from the operation. As a
result, the aggregate maturities of $10.4 million due in 1999 as indicated above
were reduced to $800,000 after the statement date.
The Company issued the remaining $20 million in Series B Senior Secured
Notes ("Series B Notes") On July 10, 1997 as part of a total $70 million
refinancing transaction initiated in December 1996. Proceeds from these Notes,
bearing interest at a 7.34% rate and due on 2017, were used mostly to finance
the acquisition of new equipment and for the improvement and modernization of
the cement plant. The Company has a zero-coupon bond which will accrete in value
to $70 million shortly after the Notes' due date and may be used to repay them.
Thus, the repayment in 2017 of the aggregate $70 million in Notes is not
expected to have an impact on the Company's operating cash flows.
Loan agreements with term lenders impose certain restrictions on the
Company concerning working capital, indebtedness, dividends, investments and
certain advances, among other restrictions. At June 30, 1997, the Company was in
compliance with the provisions of the loan agreements.
- 6 -
<PAGE> 9
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. No amount was outstanding under these facilities at
June 30, 1997. The maximum aggregate short-term borrowing outstanding at any
month-end during the six-month period ended June 30, 1997 was $3,940,000
bearing interest at a 6.44% rate. These short-term facilities are renewable
annually at the discretion of the banks, which at this time do not require any
commitment fees for these credit facilities.
Results of Operations
- ---------------------
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1996
Consolidated net sales for the second quarter of 1997 increased by
approximately $2.4 million to $43.4 million compared with $41.0 million in the
same quarter of 1996. Total cement sales increased 7% to 305,000 tons in the
second quarter of 1997 from 284,000 tons for the same quarter of 1996. Lime
sales for the second quarter of 1997 decreased 39% from the same period of 1996
due to lower lime export sales during this quarter. The Company's paper and bag
division sales increased by 5% attributable to higher sales in the small bags
department. Sales in RMC represented the most significant change in consolidated
net sales resulting from an increase of 6% in cubic yards sold in the second
quarter of 1997 over the same quarter of 1996, and an increase in the average
selling prices due mainly to pass through of recent increments in transportation
and raw material costs.
Gross margins reported at 31.7% over the second quarter of 1997 compared
favorably with gross margins of 29.1% over the same quarter of 1996. Gross
margins increased as a result of improvements in inventory management and
production schedules in both the cement and the paper and bag division which
were partially offset by an increase in the cost of raw material and in
freight-in expense in RMC.
Selling, general and administrative expenses increased by $400,000 to $5.2
million in the second quarter of 1991 but remained at 12% of total sales over
the comparable quarter of 1996. This increase was principally attributable to
contracted professional services and normal inflationary growth.
Interest and financial charges increased $300,000 to $1.4 million in the
second quarter of 1997 compared with $1.1 million for the same quarter of 1996.
This increase reflects the effect of a slightly higher interest rate related to
the 20-year, $50 million Series A Senior Secured Notes ("Series A Notes") issued
in January 1997 as compared to the shorter term indebtedness refinanced with the
proceeds from issuance of the Series A Notes. In addition, in December 1996 the
Company obtained a $17.6 million revolving credit facility to purchase a
zero-coupon bond used to secure the Series A and B Notes. During most of the
second quarter of 1997, $10.6 million of such facility remained outstanding. As
explained above, this remaining balance was repaid during June and July 1997.
- 7 -
<PAGE> 10
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
Consolidated net sales for the six-month period ended June 30, 1997
increased by approximately $2.2 million to $80.6 million compared with $78.4
million in the same period of 1996. The improvement from last year resulted from
the net effect of the following: (1) cement sales increased by 13,000 to 558,000
tons in the six-month period ended June 30, 1997; (2) lime sales for the
six-month period ended June 30, 1997 decreased 53% due to lower lime export
sales during this period; (3) sales in the Company's paper and bag division
increased by 5% due to higher sales in the small bags department; and, (4) RMC
sales increased significantly principally as a result of an increase in average
selling prices from pass through of increased costs.
Gross margins over the six-month period were reported at 30.3% in 1997 as
compared to 28.4% in 1996. Increase in the gross margins resulted from
reductions in the cost of sales of cement and paper bags which resulted from
improved operational efficiencies and inventory management, partially offset by
an increase in the cost of sale of ready-mixed concrete mostly as a result of
higher cost of raw materials and freight-in expenses.
Consolidated selling, general, and administrative expenses increased by
$500,000 to $10.0 million during the six-month period ended June 30, 1997 when
compared to $9.5 for the same period of 1996. This increase resulted from an
increase in contracted professional services, non-recurring severance payments
pursuant to the merger of the Company's two ready-mixed concrete subsidiaries,
and normal inflationary increase in salaries and related expenses.
Interest and financial charges increased by $450,000 to $2.7 million during
the six-month period ended June 30, 1997 when compared to $2.3 million for the
same period of 1996. This increase resulted mainly from a slightly higher
interest rate on the 20-year, $50 million Series A Notes issued in January,
1997, and an additional $10.6 million in debt outstanding of a $17.6 million
revolving credit facility obtained in December, 1996 to purchase a zero-coupon
bond.
Interest income increased by $400,000 to $1.7 million during the six-month
period ended June 30, 1997 when compared to $1.3 million for the same period of
1996. This increase resulted mainly from the accretion in value of the $70
million zero-coupon bond purchased for $17.6 million on December 1996. Other
(income) expense changed by $450,000 during the second quarter of 1997 when
compared to the same period of 1996 mainly due to other non-recurring expenses
incurred in 1997 related to the merger of the Company's ready-mixed concrete
subsidiaries.
- 8 -
<PAGE> 11
LEGAL PROCEEDING INVOLVING SAN JUAN CEMENT COMPANY, INC.
As reported in the Company's 1996 annual report, the Company and RMC are
the defendants in a claim filed by San Juan Cement Company, Inc. before the
United States District Court of Puerto Rico. On April 15, 1997, the parties
filed a joint motion requesting a 90-day stay of the proceedings.
REAL ESTATE AND AGGREGATES BUSINESS
The Company announced that, due to disputes with the Government of Puerto
Rico, the development of its real estate project at Vega Alta and the work at
its limestone quarry at Guanica have been suspended.
On July 8, 1997, the Puerto Rico Planning Board (the "Planning Board")
issued a cease and desist order against the Vega Alta project, asserting that
the Company does not have the permit needed to extract and use sand and gravel
from the site. The Company had previously received permits to build a housing
project there, including a "temporary aggregate permit" which the Company
believes was properly obtained and is sufficient to conduct the planned
operations. The Planning Board has scheduled a public hearing on the matter for
August 25, 1997. The Company is considering various responses to the Planning
Board's action.
On July 11, 1997, the Puerto Rico Permits and Regulations Administration
(the "Administration"), revoked a permit granted to the Company to operate a
limestone quarry at its Guanica site. A permit had been granted by that
Administration's Ponce office. The Company believes it had received and remains
entitled to a valid permit for the Guanica operation and is considering various
responses to the Administration's actions.
Management believes that the outcome of these matters will not have a
material adverse effect on the Company's financial position or results of
operations.
OTHER LEGAL PROCEEDINGS
The Company has brought a lawsuit against the Puerto Rico Department of
Consumer Affairs (the "Department") in response to a Department's investigation
of the Company's labeling of bags of cement in 1995 and 1996. The Department has
asserted that the bags should have disclosed that the cement was manufactured
with imported clinker. The Company's lawsuit is based on the Company's belief
that the Department does not have the legal authority with respect to this
matter. The Company believes it has defenses including the jurisdictional
defense and is considering various additional responses. Management believes
that outcome of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
- 9 -
<PAGE> 12
Part II. OTHER INFORMATION.
Item 2. NONE
Item 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
NONE
- 10 -
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUERTO RICAN CEMENT COMPANY, INC.
Date: 08/14/97 By: /s/ ANGEL AMARAL
---------------------------------
Angel Amaral
Vice President and Controller
Date: 08/14/97 By: /s/ JOSE O. TORRES
---------------------------------
Jose O. Torres
Vice President of Finance and
Treasurer
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,327,406
<SECURITIES> 7,617,328
<RECEIVABLES> 35,673,626
<ALLOWANCES> 1,616,382
<INVENTORY> 33,764,015
<CURRENT-ASSETS> 83,979,545
<PP&E> 218,121,875
<DEPRECIATION> 70,131,627
<TOTAL-ASSETS> 283,272,045
<CURRENT-LIABILITIES> 24,876,189
<BONDS> 65,623,200
6,000,000
0
<COMMON> 0
<OTHER-SE> 148,405,303
<TOTAL-LIABILITY-AND-EQUITY> 283,272,045
<SALES> 80,591,946
<TOTAL-REVENUES> 80,640,852
<CGS> 56,216,951
<TOTAL-COSTS> 66,243,300
<OTHER-EXPENSES> 1,161,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,236,197
<INCOME-TAX> 4,146,924
<INCOME-CONTINUING> 9,089,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,089,273
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 0
</TABLE>
