<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 March 31, 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
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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 (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
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Not Applicable
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(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
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PUERTO RICAN CEMENT COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheet as of March 31, 2000 and
December 31, 1999 ................................................ 3 - 4
Consolidated Statement of Income for the three-month periods
ended on March 31, 2000 and 1999 ................................. 5
Consolidated Statement of Cash Flows for the three-month
periods ended on March 31, 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 - 10
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk ...................................................... 11
Part II - Other Information ............................................... 11
Signatures ....................................................... 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,850 $ 1,631
---------- ----------
Short-term investments 10,672 6,001
---------- ----------
Notes and accounts receivable - net of allowance
for doubtful accounts of $1,070 in 2000 and
$1,101 in 1999 39,227 34,968
---------- ----------
Inventories:
Finished products 1,911 2,435
Work in process 3,815 7,026
Raw materials 4,188 3,894
Maintenance and operating supplies 21,938 22,023
Land held for sale, including development costs 923 923
---------- ----------
Total inventories 32,775 36,301
---------- ----------
Prepaid expenses 6,417 5,580
---------- ----------
Total current assets 90,941 84,481
Property, plant and equipment - net of accumulated
depreciation, depletion and amortization of $96,731
in 2000 and $93,331 in 1999 172,779 168,650
Long-term investments 36,537 39,712
Other assets 11,010 11,746
---------- ----------
Total $ 311,267 $ 304,589
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(In thousands)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities
Notes payable $ 4,094 $ 654
Current portion of long-term debt 3,967 3,806
Accounts payable 12,436 9,665
Accrued liabilities 9,950 9,233
Income taxes payable 4,666 4,075
---------- ----------
Total current liabilities 35,113 27,433
---------- ----------
Long-term liabilities
Long-term debt, less current portion 80,735 81,365
Deferred income taxes 30,248 30,788
Other long-term liabilities, including
postretirement benefits 3,067 3,105
---------- ----------
Total long-term liabilities 114,050 115,258
---------- ----------
Total liabilities 149,163 142,691
---------- ----------
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 March 31, 2000 and December 31, 1999 6,000 6,000
Additional paid-in capital 14,703 14,703
Retained earnings 164,427 164,221
---------- ----------
185,130 184,924
Less: Shares of common stock in treasury, at cost
(813,726 shares as of March 31, 2000 and
December 31, 1999) 23,026 23,026
---------- ----------
Stockholders' equity - net 162,104 161,898
---------- ----------
Total $ 311,267 $ 304,589
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
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Puerto Rican Cement Company, Inc.
Consolidated Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 2000 1999
------------ ------------
(In Thousands, except share data)
<S> <C> <C>
Net sales $ 41,816 $ 44,638
Revenue from real estate operations 26 26
------------ ------------
41,842 44,664
Cost of sales 33,904 31,475
------------ ------------
Gross margin 7,938 13,189
Selling, general & administrative expenses 5,992 6,581
------------ ------------
Income from operations 1,946 6,608
------------ ------------
Other (credits) charges:
Interest and financial charges 1,525 1,517
Interest income (955) (916)
Other expenses 133 265
------------ ------------
Total other charges 703 866
------------ ------------
Income before income tax 1,243 5,742
Provision for income tax 52 1,595
------------ ------------
Net income $ 1,191 $ 4,147
============ ============
Net income per share $ 0.23 $ 0.77
============ ============
Average common shares outstanding 5,186,274 5,379,074
============ ============
</TABLE>
See notes to consolidated financial statements.
5
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Puerto Rican Cement Company, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31, 2000 1999
-------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,191 $ 4,147
-------- --------
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and amortization 3,557 3,371
Accretion of discount on investments (496) (647)
Provision for deferred income taxes (539) 1,844
Postretirement benefits cost (16) 9
(Gain) loss on sale of fixed assets (11) 2
Changes in assets and liabilities:
Increase in notes and accounts receivable (4,687) (7,792)
Decrease in inventories 3,526 1,951
Increase in prepaid expenses (837) (527)
Decrease (increase) in other long-term assets 958 (195)
Increase in accounts payable 2,780 6,764
Increase (decrease) in accrued liabilities 717 (282)
Increase (decrease) in income taxes payable 591 (251)
Decrease in long-term liabilities (22)
-------- --------
Total adjustments 5,521 4,247
-------- --------
Cash provided by operations 6,712 8,394
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,672) (5,063)
Decrease (increase) in long-term notes receivable 192 (20)
Redemption of long-term investments -- 416
Purchase of investments (1,000) (2,660)
Proceeds from sale of fixed assets 11 24
-------- --------
Cash used in investing activities (8,469) (7,303)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 3,000 --
Proceeds from loans 500 --
Repayment of long-term debt (969) (570)
Dividends paid (995) (1,022)
Increase (decrease) in notes payable 440 (312)
-------- --------
Cash provided by (used in) financing activities 1,976 (1,904)
-------- --------
Increase (decrease) in cash and cash equivalents 219 (813)
Cash and cash equivalents - beginning of period 1,631 7,481
-------- --------
Cash and cash equivalents - end of period $ 1,850 $ 6,668
======== ========
</TABLE>
See notes to consolidated financial statements.
6
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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 March 31, 2000 and December
31, 1999, the results of operations and cash flows, and the changes in
stockholders' equity for the three-month periods ended March 31, 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 net realized
and unrealized gains and losses on investments in available-for-sale
securities. There were no investment securities classified as
available-for-sale during the first quarter of 2000 and 1999.
3. Segment information: Puerto Rican Cement has identified three
reportable segments: cement operations, ready mix concrete operations
and other, which includes the lime, realty, financing, and paper and
packaging operations. Segment detail for the quarter is summarized as
follows (000's omitted):
<TABLE>
<CAPTION>
Ready mix All
Cement Concrete Others Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
March 31, 2000
Revenues
Total revenues $ 24,412 $ 23,135 $ 2,774 $ 50,321
Less - Intersegment revenues 7,576 -- 903 8,479
-------- -------- -------- --------
Net revenues $ 16,836 $ 23,135 $ 1,871 $ 41,842
======== ======== ======== ========
Total assets $175,335 $ 64,631 $ 71,301 $311,267
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Ready mix All
Cement Concrete Others Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
March 31, 1999
Revenues
Total revenues $ 27,742 $ 22,693 $ 3,981 $ 54,416
Less - Intersegment revenues 8,446 -- 1,306 9,752
-------- -------- -------- --------
Net revenues $ 19,296 $ 22,693 $ 2,675 $ 44,664
======== ======== ======== ========
Total assets $171,012 $ 57,832 $ 80,252 $309,096
======== ======== ======== ========
</TABLE>
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Cash and cash equivalents increased $200,000 from $1.6 million as of
December 31, 1999 to $1.8 million as of March 31, 2000. Short-term and
long-term investments held to maturity increased $1.5 million to $47.2 million
at March 31, 2000 from $45.7 million at December 31, 1999. This was the result
of an addition of $1.0 million in new investments and the accretion of $496,000
in the value of the Company's investment in zero-coupon notes.
Notes and accounts receivable increased by $4.3 million, to $39.2
million at March 31, 2000 from $34.9 million as of December 31, 1999. The
increase is mainly attributable to comparative higher balances in account
receivables-trade resulting from historically higher volume of sales during the
first quarter of each year as compared to the last quarter of the previous
year.
Inventories decreased by $3.5 million to $32.8 million as of March 31,
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.
Property, plant and equipment increased by $4.1 million to $172.8
million as of March 31, 2000 from $168.7 million as of December 31, 1999. This
increase resulted from capital expenditures of $7.7 million net of depreciation
and amortization of $3.6 million.
Total current liabilities increased $7.2 million to $34.6 million as
of March 31, 2000 from $27.4 million as of December 31, 1999. The increase was
mainly due to a $3.0 million increase in short-term borrowing used by the ready
mix concrete segment for working capital and a $2.8 million increase in
accounts payable trade. The increase in accounts payable resulted from a
greater amount of purchases of raw materials in the first quarter of 2000 as
compared to the last quarter of 1999, a consequence of higher volume of sales.
At its March 15, 2000 meeting, the Board of Directors of PRCC declared
a $0.19 per share dividend on its common stock, payable on May 11, 2000 to
stockholders of record on April 20, 2000. As of March 31, 2000, PRCC had
5,186,274 shares of common stock issued and outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 2000, decreased slightly to $55.8 million
from $57.0 million at December 31, 1999. The current ratio decreased to 2.59 to
1 as of March 31, 2000, from 3.54 to 1 as of December 31, 1999. The reduction
in these items was due mainly to an increase in current liabilities resulting
from higher short-term borrowing outstanding as mentioned above.
8
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Capital expenditures incurred during the three-month period ended
March 31, 2000, totaled $7.7 million. These expenditures were primarily related
to several machinery and equipment improvement projects at the cement and ready
mix batching plants. Depreciation expense for the same period totaled $3.6
million.
As of March 31, 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 $2,990
2001 4,709
2002 4,414
2003 2,056
2004 and thereafter 70,533
--------
Total $84,702
========
</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 March 31, 2000, the Company
complied with the provisions of the loan agreements.
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
first quarter of 2000 was $3,000,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1999
First-quarter net income declined to $1,191,000, or $0.23 per share,
compared with $4,147,000, or $0.77 per share, in the first quarter of 1999.
Consolidated net sales for the first quarter of 2000 declined 6% from
$44.6 million in the first quarter of 1999 to $41.8 million during the first
quarter of 2000. Cement sales totaled 288,000 tons during the first quarter of
2000, a 12% drop from sales of 326,000 tons during the first quarter of 1999.
The total amount of cement purchased in Puerto Rico decreased 3.7% during the
first quarter of 2000 compared to the same quarter of 1999. Sales of cement in
the first quarter of 1999, reflect record volumes resulting from reconstruction
efforts induced by Hurricane Georges which, hit the island in September of
1998.
Lime sales were also down principally as the result of a decline in
export sales. Ready mix concrete sales remained at approximately the same
level, with sales of 368,000 cubic yards during the first quarter of 2000
compared with sales of 363,000 cubic yards during the same period of 1999.
9
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Consolidated cost of sales for the first quarter increased 8% to $33.9
million in 2000 from $31.5 million for the comparable period of 1999. The rise
was mainly due to increased shutdown and repair costs during the first quarter
of 2000 as the result of a scheduled production shut down of our cement
facilities during the first quarter of 2000. In addition, recent spikes in oil
prices have increased energy costs in all production areas. As the result of
these increases, the gross margin for the first quarter decreased from 29% in
1999 to 19% in 2000. During the 32-day shutdown, a major overhaul on our
clinker production facilities was performed. This five-week overhaul project
resulted in a reduced plant capacity utilization which, adversely affected
cement production cost. Also, the higher profit margins for 1999 resulted from
a better production capacity utilization on the various segments of the
Company. This increase in production was a direct result of the record sales
volumes experienced in the cement and ready mix concrete businesses due
primarily to the reconstruction efforts mentioned above.
Selling, general and administrative expenses decreased 9% to $6.0
million during the first quarter of 2000 from $6.6 million over the comparable
quarter of 1999. The decrease was principally attributable to lower fees for
legal services.
The provision for income taxes, decreased from 28% for the first
quarter of 1999 to 4% for the same period of 2000. This decrease is directly
related to the decline in gross margins that resulted in lower taxable income
during the first quarter of 2000.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document, including 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.
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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 also
invested in a US government security with a 20-year term to serve as collateral
and source of repayment of one of its long-term debts.
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).
11
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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: May 12, 2000
By: /s/ Jose O. Torres
-----------------------------------------
Jose O. Torres
Vice President and Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,850,466
<SECURITIES> 10,671,716
<RECEIVABLES> 40,297,779
<ALLOWANCES> 1,070,328
<INVENTORY> 32,775,313
<CURRENT-ASSETS> 90,941,907
<PP&E> 269,509,999
<DEPRECIATION> 96,730,841
<TOTAL-ASSETS> 311,266,541
<CURRENT-LIABILITIES> 35,113,110
<BONDS> 80,735,104
0
0
<COMMON> 6,000,000
<OTHER-SE> 156,103,464
<TOTAL-LIABILITY-AND-EQUITY> 311,266,541
<SALES> 41,816,112
<TOTAL-REVENUES> 41,842,203
<CGS> 33,904,194
<TOTAL-COSTS> 39,895,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,525,884
<INCOME-PRETAX> 1,242,779
<INCOME-TAX> 51,624
<INCOME-CONTINUING> 1,191,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,191,155
<EPS-BASIC> 0.23
<EPS-DILUTED> 0.23
</TABLE>
