<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, 2000
-------------
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 (I.R.S. Employer Identification No.)
Incorporation or Organization)
P.O. 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
--------------
Not Applicable
--------------
(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, $1.00 Par Value: 5,186,274 Shares Outstanding
-----------------------------------------------------------
<PAGE> 2
PUERTO RICAN CEMENT COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheet as of June 30, 2000 and
December 31, 1999 ................................................................. 3 - 4
Consolidated Statement of Income for the three-month and six-month
periods ended on June 30, 2000 and 1999 ........................................... 5
Consolidated Statement of Cash Flows for the six-month
periods ended on June 30, 2000 and 1999 ........................................... 6
Notes to Consolidated Financial Statements ........................................ 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................................... 8 - 11
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk ....................................................................... 11
Part II - Other Information ................................................................. 12
Signatures ........................................................................ 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June December
30, 2000 31, 1999
---------- ----------
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 2,691 $ 1,631
-------------------------------------------------------------------------------------------------
Short-term investments 11,386 6,001
-------------------------------------------------------------------------------------------------
Notes and accounts receivable - net of allowance
for doubtful accounts of $907 in 2000 and
$1,101 in 1999 37,905 34,968
-------------------------------------------------------------------------------------------------
Inventories:
Finished products 2,525 2,435
Work in process 5,712 7,026
Raw materials 4,370 3,894
Maintenance and operating supplies 22,204 22,023
Land held for sale, including development costs 615 923
-------------------------------------------------------------------------------------------------
Total inventories 35,426 36,301
-------------------------------------------------------------------------------------------------
Prepaid expenses 9,354 5,580
-------------------------------------------------------------------------------------------------
Total current assets 96,762 84,481
Property, plant and equipment - net of accumulated
depreciation, depletion and amortization of $100,401
as of June 30, 2000 and $93,331 as of December 31, 1999 171,586 168,650
Long-term investments 35,468 39,712
Other assets 11,679 11,746
-------------------------------------------------------------------------------------------------
Total $ 315,495 $ 304,589
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June December
30, 2000 31, 1999
---------- ----------
(In thousands)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities
Notes payable $ 5,687 $ 654
Current portion of long-term debt 3,985 3,806
Accounts payable 14,028 9,665
Accrued liabilities 10,960 9,233
Income taxes payable 1,141 4,075
-------------------------------------------------------------------------------------------------
Total current liabilities 35,801 27,433
-------------------------------------------------------------------------------------------------
Long-term liabilities
Long-term debt, less current portion 80,437 81,365
Deferred income taxes 30,927 30,788
Other long-term liabilities, including
postretirement benefits 3,067 3,105
-------------------------------------------------------------------------------------------------
Total long-term liabilities 114,431 115,258
-------------------------------------------------------------------------------------------------
Total liabilities 150,232 142,691
-------------------------------------------------------------------------------------------------
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 5,186,274 shares
as of June 30, 2000 and December 31, 1999 6,000 6,000
Additional paid-in capital 14,703 14,703
Retained earnings 167,586 164,221
-------------------------------------------------------------------------------------------------
188,289 184,924
Less: Shares of common stock in treasury, at cost
(813,726 shares as of June 30, 2000 and
December 31, 1999) 23,026 23,026
-------------------------------------------------------------------------------------------------
Stockholders' equity - net 165,263 161,898
-------------------------------------------------------------------------------------------------
Total $ 315,495 $ 304,589
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
Puerto Rican Cement Company, Inc.
Consolidated Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
(In Thousands, except share data)
<S> <C> <C> <C> <C>
Net sales $ 41,697 $ 48,054 $ 83,513 $ 92,692
Revenue from real estate operations 531 26 557 52
------------------------------------------------------------------------------------------------------------------------------------
42,228 48,080 84,070 92,744
Cost of sales 30,567 33,402 64,471 64,878
------------------------------------------------------------------------------------------------------------------------------------
Gross margin 11,661 14,678 19,599 27,866
Selling, general & administrative expenses 5,677 7,728 11,669 14,309
------------------------------------------------------------------------------------------------------------------------------------
Income from operations 5,984 6,950 7,930 13,557
------------------------------------------------------------------------------------------------------------------------------------
Other (credits) charges:
Interest and financial charges 1,591 1,563 3,116 3,080
Interest income (980) (916) (1,935) (1,832)
Other expenses (59) 327 74 592
------------------------------------------------------------------------------------------------------------------------------------
Total other charges 552 974 1,255 1,840
------------------------------------------------------------------------------------------------------------------------------------
Income before income tax 5,432 5,976 6,675 11,717
Provision for income tax 1,287 1,844 1,339 3,438
------------------------------------------------------------------------------------------------------------------------------------
Net income $ 4,145 $ 4,132 $ 5,336 $ 8,279
====================================================================================================================================
Net income per share $ 0.80 $ 0.78 $ 1.03 $ 1.55
====================================================================================================================================
Average common shares outstanding 5,186,274 5,314,807 5,186,274 5,346,941
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
Puerto Rican Cement Company, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30, 2000 1999
--------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,336 $ 8,279
--------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and amortization 7,301 6,916
Accretion of discount on investments (990) (1,231)
Provision for deferred income taxes 139 544
Postretirement benefits cost (15) 13
(Gain) loss on sale of fixed assets (4) 13
Changes in assets and liabilities:
Increase in notes and accounts receivable (2,912) (9,555)
Decrease in inventories 875 1,949
Increase in prepaid expenses (3,774) (2,924)
Decrease (increase) in other long-term assets 14 (144)
Increase in accounts payable 3,387 6,355
Increase in accrued liabilities 1,727 1,995
Decrease in income taxes payable (2,935) (147)
Decrease in long-term liabilities (23) --
-------------------------------------------------------------------------------------------------
Total adjustments 2,790 3,784
-------------------------------------------------------------------------------------------------
Cash provided by operations 8,126 12,063
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,228) (9,536)
Increase in long-term notes receivable -- (146)
Redemption of long-term investments 849 11,817
Purchase of investments (1,000) (2,660)
Proceeds from sale of fixed assets 23 109
-------------------------------------------------------------------------------------------------
Cash used in investing activities (10,356) (416)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 3,000 --
Proceeds from loans 1,200 1,249
Repayment of long-term debt (1,949) (1,129)
Purchase of treasury stock -- (6,403)
Dividends paid (995) (2,044)
Increase in notes payable 2,033 754
-------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 3,290 (7,573)
-------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 1,060 4,074
Cash and cash equivalents - beginning of period 1,631 7,481
-------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 2,691 $ 11,555
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
PUERTO RICAN CEMENT COMPANY, INC.
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements: In the opinion of Puerto Rican Cement Company,
Inc. (the "Company", "Registrant" or "PRCC"), the accompanying
unaudited financial statements contain all adjustments necessary to
present fairly its financial position at June 30, 2000 and December 31,
1999; the results of operations for the six-month and three-month
periods ended June 30, 2000 and 1999; and its cash flows and changes in
stockholders' equity for the six-month periods ended June 30, 2000 and
1999. The results of operations for this interim period are not
necessarily indicative of the results to be expected for the full year.
2. Comprehensive income: Other comprehensive income includes, among other
things, net realized and unrealized gains and losses on investments in
available-for-sale securities. The Company had no item reported as
comprehensive income during the second quarter of 2000 and 1999.
3. Segment information: The Company has identified three reportable
segments: cement operations, ready mix concrete operations and all
others, which includes the lime, realty, financing, and paper and
packaging operations. Segment detail for the six-month period is
summarized as follows (000's omitted):
<TABLE>
<CAPTION>
Ready Mix All
Cement Concrete Others Total
-------- --------- -------- --------
<S> <C> <C> <C> <C>
June 30, 2000
Revenues
Total revenues $ 48,632 $ 47,052 $ 5,982 $101,666
Less - Intersegment revenues 14,986 -- 2,610 17,596
-------- -------- -------- --------
Net revenues $ 33,646 $ 47,052 $ 3,372 $ 84,070
======== ======== ======== ========
Total assets $180,099 $ 64,104 $ 71,292 $315,495
======== ======== ======== ========
<CAPTION>
Ready Mix All
Cement Concrete Others Total
-------- --------- -------- --------
<S> <C> <C> <C> <C>
June 30, 1999
Revenues
Total revenues $ 56,792 $ 50,390 $ 7,110 $114,292
Less - Intersegment revenues 19,116 -- 2,432 21,548
-------- -------- -------- --------
Net revenues $ 37,676 $ 50,390 $ 4,678 $ 92,744
======== ======== ======== ========
Total assets $172,185 $ 62,382 $ 73,668 $308,235
======== ======== ======== ========
</TABLE>
7
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Cash and cash equivalents increased $1.1 million from $1.6 million as
of December 31, 1999 to $2.7 million as of June 30, 2000. Short-term and
long-term investments held to maturity increased $1.2 million to $46.9 million
at June 30, 2000 from $45.7 million at December 31, 1999. This was mainly the
result of the increase of $990,000 in the investment in zero-coupon notes
intended to pay at maturity notes issued by the company to certain institutional
investors.
Notes and accounts receivable increased by $3.0 million, to $37.9
million as of June 30, 2000 from $34.9 million as of December 31, 1999. The
increase is mainly attributable to comparatively higher balances in account
receivables-trade. These higher balances have resulted from historically higher
volume of sales during the second quarter of each year as compared to the last
quarter of the previous year.
Inventories decreased by $900,000 to $35.4 million as of June 30, 2000
from $36.3 million as of December 31, 1999. The decrease was caused primarily by
a reduction in clinker inventory as the result of a scheduled plant shutdown in
the first quarter of 2000.
The increase of $3.8 million in prepaid expenses is mainly due to the
timing of scheduled payments related to property and municipal taxes, as well
as insurance.
Property, plant and equipment increased by $2.9 million to $171.6
million as of June 30, 2000 from $168.7 million as of December 31, 1999. This
increase resulted from capital expenditures of $10.2 million net of depreciation
and amortization of $7.3 million. The capital expenditures were primarily
related to machinery and equipment improvements at the cement and ready mix
batching plants.
Total current liabilities increased $8.4 million to $35.8 million as of
June 30, 2000 from $27.4 million as of December 31, 1999. The increase was
mainly due to a $5.7 million increase in short-term borrowing for short term
working capital needs. In addition, there was a $2.7 million increase in
accounts payable and accrued liabilities. The increase in accounts payable
resulted mainly from a greater amount of purchases of raw materials in the
second quarter of 2000 as compared to the last quarter of 1999, a consequence of
higher volume of sales explained above.
At its June 28, 2000 meeting, the Board of Directors of PRCC declared a
$0.19 per share dividend on its common stock, payable on August 7, 2000 to
stockholders of record on July 10, 2000. As of June 30, 2000, PRCC had 5,186,274
shares of common stock issued and outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 2000, increased to $61.0 million from $57.0
million at December 31, 1999 but current ratio decreased to 2.70 to 1 as of June
30, 2000, from 3.08 to 1 as of December 31, 1999. The reduction in current ratio
was due mainly to the increase in current liabilities as explained above.
8
<PAGE> 9
As of June 30, 2000, the approximate aggregate maturities of long-term
debt for the remainder of 2000 and thereafter are as follows (000's omitted):
<TABLE>
<S> <C>
2000 $ 2,139
2001 4,849
2002 4,507
2003 2,196
2004 and thereafter 70,731
--------
Total $ 84,422
========
</TABLE>
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, 2000, the Company
complied with the provisions of the loan agreements. The Company's long term
debt includes $70 million in notes issued pursuant to a loan agreement to
several institutional investors. These notes require no payment of principal
until their maturity date and are secured by a $70 million zero-coupon U.S.
Treasury bond pledged as collateral.
The Company has available credit facilities in the aggregate amount of
$42,000,000 with commercial banks for short-term financing and discount of trade
paper from customers. These short-term facilities are renewable annually at the
discretion of the banks, which at this time do not require any commitment fees.
The average borrowing outstanding for the quarter and the maximum aggregate
short-term borrowing outstanding at any month-end during the second quarter of
2000 was $5,650,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1999
Net income for the second quarter of 2000 totaled $4,145,000, or $0.80
per share, compared with $4,132,000, or $0.78 per share, in the comparable
quarter of 1999.
Consolidated net revenues of $42,228,000 during the second quarter in
2000 compare with $48,080,000 for the same period in 1999. The reconstruction
works related to damages caused by Hurricane Georges resulted in record sales
levels for the first half of 1999. The Company's cement sales for the second
quarter of 2000 amounted to 287,000 tons as compared to 349,000 tons sold in the
same quarter of 1999, a decrease of 17.8%. During the second quarter of 2000
total sales volume for cement on the Island decreased 5.6% in relation to the
same period of 1999. During the first half of 2000 the cement industry of the
Island has been impacted by higher imports of cement.
The reduction in the construction activity during the first half of
2000 also affected our ready mix concrete subsidiary. Ready mix concrete sales
decreased to 367,000 cubic yards for the second quarter of 2000 from 438,000
cubic yards sold during the same period of 1999.
9
<PAGE> 10
During the second quarter of 2000, the Company realized a $504,000
profit on the sale of the remaining lot at the Amelia Industrial Park.
Consolidated cost of sales for the second quarter of 2000 decreased 8%
to $30.6 million from $33.4 million for the comparable period of 1999. The
reduction was principally due to lower sales volume as mentioned above. On a per
ton basis, cost of sales reflect higher production costs resulting mainly from
increased repair costs during the first quarter of 2000 as the result of a
scheduled production shut down of our cement facilities. In addition, recent
spikes in oil prices have increased energy costs in all production areas. As a
result of these increases, the gross margin for the second quarter decreased
from 30.5% in 1999 to 27.6% in 2000.
Selling, general and administrative expenses decreased 27% to $5.7
million during the second quarter of 2000 from $7.7 million over the comparable
quarter of 1999. The decrease was principally attributable to lower professional
fees associated with legal proceedings against local government agencies in the
federal and local courts that were settled during 1999.
The provision for income taxes as a percentage of income before taxes,
decreased from 31% for the second quarter of 1999 to 25% for the same period of
2000. This decrease is principally attributable to the capital gain on the sale
of the lot at the Amelia Industrial Park, which was taxed at a lower rate.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999
Net income for the first six months of 2000 totaled $5,336,000, or
$1.03 per share, compared with $8,279,000, or $1.55 per share, for the
comparable period of 1999.
Consolidated net revenues of $84,070,000 during the first half of 2000
compare with $92,744,000 for the same period in 1999. As discussed above,
reconstruction efforts due to Hurricane Georges resulted in an increased demand
for cement and ready mix concrete in 1999. This demand for cement has returned
to normal levels in 2000. The company's cement sales in the first six months of
2000 were 575,000 tons compared to 674,000 tons in the first half of 1999. Our
ready mix concrete subsidiary sold 735,000 cubic yards for the first six months
of 2000 and 801,000 cubic yards during the same period of 1999.
Consolidated cost of sales for the first six months of 2000 decreased
slightly to $64.5 million from $64.9 million for the comparable period of 1999.
This decrease was minimal compared to the decrease in sales volume resulting in
the reduction of the Company's gross margin from 30% for the first six months of
1999 to 23.3% for the comparable 2000 period. This was mainly caused by higher
production costs resulting from increased shutdown and repair expenses during
the first quarter of 2000 as the result of a scheduled production shut down of
our cement facilities, and higher energy costs in all production areas.
Selling, general and administrative expenses during the first half of
2000 decreased 18% to $11.7 million from $14.3 million over the comparable
period of 1999. Selling, general and administrative expenses were higher in 1999
because of legal fees resulting from proceedings against local government
agencies in the federal and local courts.
10
<PAGE> 11
The provision for income taxes as a percentage of income before taxes,
decreased from 29% for the first six months of 1999 to 20% for the same period
of 2000. This decrease is principally related to the decline in taxable income
during the first half of 2000 and the more favorable tax treatment of the gain
on the sale of the lot at the Amelia Industrial Park, as explained above.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document, including those in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, that are not historical facts constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results or performance
of the Company and its businesses to be materially different from that expressed
or implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions; political and
social conditions; government regulations and compliance therewith; demographic
changes; sales mix; pricing levels; changes in sales to, or the identity of,
significant customers; changes in technology, including the technology of cement
production; capacity constraints; availability of raw materials and adequate
labor; availability of liquidity sufficient to meet the Company's needs; the
ability to adapt to changes resulting from acquisitions; and various other
factors referenced in this Management's and Discussion Analysis. The Company can
be particularly affected by weather in Puerto Rico, changes in the Puerto Rico
economy, and changes in the Government of Puerto Rico or the manner in which it
regulates the Company.
The Company assumes no obligation to update forward-looking statements
to reflect actual results or changes in or additions to the factors affecting
such forward-looking statements.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's investment portfolio is subject to market risk. Market
risk is the risk of economic loss arising from adverse changes in market rates
and prices, such as interest rates and other relevant market prices. The
Company's primary market risk exposure relates to interest rates, as interest
rate volatility impacts the value of the Company's investment portfolio. The
re-pricing of the Company's financial assets and liabilities also affects
interest income and interest expense. The Company manages its interest rate risk
exposure to maintain the stability of interest income and interest expense under
varying interest rate environments. Taking advantage of the favorable interest
rate scenario in recent years, the Company has taken certain steps to minimize
its interest rate risk exposure, which include obtaining long-term financing at
fixed interest rates (see discussion under liquidity and capital resources.) At
the same time, to minimize its interest rate risk exposure and manage its
liquidity needs, the Company invests primarily in securities issued or
guaranteed by the US government and its agencies with short-term (one year or
less) and medium-term (over 1 through 7 years) maturities. The Company has also
invested in a US government security with a 20-year term to serve as collateral
and a source of repayment for one of its long-term debts.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
27. Financial Data Schedule (for SEC use only).
12
<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.
---------------------------------
Registrant
Date: August 11, 2000 By: /s/ Jose O. Torres
---------------------------------------
Jose O. Torres
Vice President and Chief Financial Officer
13
