<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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 I-4753
PUERTO RICAN CEMENT COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
COMMONWEALTH OF PUERTO RICO 51-A-66-0189525
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
PO BOX 364487 - SAN JUAN, PUERTO RICO 00936-4487
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(Registrant's Telephone Number, Including Area Code): (787) 783-3000
Securities registered pursuant to Section l2(b) of the Act:
<TABLE>
<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------- -----------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section l2(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section l3 or l5(d) of the Securities Exchange
Act of l934 during the preceding l2 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 [ ]
[Cover page 1 of 2 pages]
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant is $155,264,078. This market value was
computed by reference to the closing price of the common stock on The New York
Stock Exchange on March 16, 2000.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the close of the period covered by this report:
COMMON STOCK, $1.00 PAR VALUE 5,186,274 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
l. Portions of the Company's Annual Report to Security Holders for
the fiscal year ended December 3l, l999, are incorporated by
reference into Parts I and II.
2. Portions of the Company's definitive proxy statement for the
2000 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A are incorporated by reference into Part III.
[Cover page 2 of 2 pages]
<PAGE> 3
CROSS REFERENCE SHEET AND TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ITEM Number Reference
---- ------ ---------
<S> <C> <C>
PART I
1. Business.................................................................................. 6 (1)
General Development of Business....................................................... 6
Financial Information About Industry Segments......................................... 6 (2)
Narrative Description of Business..................................................... 7
Financial Information About Geographic Areas.......................................... 13
Executive Officers of the Company..................................................... 13 (3)
2. Properties................................................................................ 15
3. Legal Proceedings......................................................................... 16 (4)
4. Submission of Matters to a Vote of Security Holders....................................... 16
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters......................................................... 16 (5)
6. Selected Financial Data................................................................... 16 (6)
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................................... 17 (7)
7A. Quantitative and Qualitative Disclosures About Market Risk................................ 17
8. Financial Statements and Supplementary Data............................................... 17 (8)
9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..................................................... 17
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
PART III
l0. Directors and Executive Officers of the Registrant....................................... 18 (9)
11. Executive Compensation................................................................... 18 (10)
l2. Security Ownership of Certain Beneficial Owners
and Management......................................................................... 18 (11)
13. Certain Relationships and Related Transactions........................................... 18 (12)
PART IV
l4. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K............................................................................. 19
</TABLE>
- ---------
(l) Information incorporated by reference to the Company's Annual Report
to Stockholders for the year ended December 31, l999 ("Annual Report")
and the Board of Directors' Proxy Statement for use in connection with
the Company's Annual Meeting of Stockholders to be held on May 3, 2000
("Proxy Statement").
(2) Annual Report, page 30, section entitled "Notes to Consolidated
Financial Statements, Note 12/Segment Information."
(3) Annual Report, page 25, section entitled "Notes to Consolidated
Financial Statements, Note 4/Property, Plant and Equipment" and page
30, section entitled "Notes to Consolidated Financial Statements, Note
13/Lease Commitments."
(4) Annual Report, page 31, section entitled "Notes to Consolidated
Financial Statements, Note 15/Contingent Liabilities and Other
Commitments," and page 31, section entitled "Notes to
Consolidated Financial Statements, Note 16/Legal Proceedings."
(5) Annual Report, page 17, section entitled "Common Share Prices and
Dividends Per Share," page 33, section entitled "Five-Year Statistical
Comparison" and pages 26 to 27, section entitled "Notes to
Consolidated Financial Statements, Note 9/Long-term Debt."
<PAGE> 5
(6) Annual Report, page 17, section entitled "Selected Financial Data."
(7) Annual Report, pages 14 to 16, section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
(8) Annual Report, pages 18 to 33, sections entitled "Report of
Independent Accountants," "Consolidated Statement of Income,"
"Consolidated Balance Sheet," "Consolidated Statement of Comprehensive
Income," "Consolidated Statement of Changes in Stockholders' Equity,"
"Consolidated Statement of Cash Flows," "Notes to Consolidated
Financial Statements," "Consolidated Fourth Quarter Results,"
"Financial Results by Quarter," and "Five-Year Statistical
Comparison."
(9) Proxy Statement, pages 3 to 9, section entitled "Information about
Directors, Nominees and Principal Stockholders."
(l0) Proxy Statement, pages 12 to 21, sections entitled "Executive
Compensation" through and including section entitled "Certain
Transactions with Management."
(11) Proxy Statement, pages 3 to 11, sections entitled "Information about
Directors, Nominees and Principal Stockholders" and "Security
Ownership of Certain Beneficial Owners."
(12) Proxy Statement, pages 20 to 21, sections entitled "Compensation
Committee Interlocks and Insider Participation" and "Certain
Transactions with Management."
<PAGE> 6
PART I
Item l. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Organization
Puerto Rican Cement Company, Inc. ("PRCC" or the "Company") was organized under
the laws of the Commonwealth of Puerto Rico in l938. The Company is engaged in
the production and sale of cement, ready mix concrete and lime; the Company
is also engaged in the packaging business, in the financing business and in
realty operations.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's financial information is disclosed for the following segments:
(1) cement operations, (2) ready mix concrete operations, and (3) all others
segment. The "all others segment" category is comprised of the Company's
packaging, lime, financing and realty operations. The cement operations include
the manufacture and sale of cement. The ready mix concrete operations include
the sale and distribution of ready mix concrete. The packaging operations
include the manufacture and sale of multi-wall paper and polypropylene bags.
The lime operations include the manufacture and sale of lime. The realty
operations include the development, sale and rental of real property owned by
the Company. The financing operations mostly involve providing equipment
financing to customers in construction related industries.
Information on the industry segments in which the Company has been engaged for
the last three fiscal years, including the amounts of revenue, operating profit
and identifiable assets attributable to each of the Company's industry
segments, is included as part of PRCC's Annual Report, page 30, section
entitled "Notes to Consolidated Financial Statements, Note 12/Segment
Information," which includes the financial statements and schedules furnished
pursuant to Item 14 and is incorporated herein by reference.
6
<PAGE> 7
(c) NARRATIVE DESCRIPTION OF BUSINESS
CEMENT OPERATIONS SEGMENT
Principal product. PRCC produces Portland grey cement, Type I, manufactured
under specifications of the American Society for Testing Materials. Portland
grey cement is used primarily in the construction of residential, commercial
and public buildings and highways.
PRCC's cement plant is located in Ponce, on the southern coast of Puerto Rico.
The cement manufacturing process generally involves the extracting, crushing,
grinding and blending of limestone, clay and other raw materials. These raw
materials are proportioned automatically according to chemical analysis and
blended to obtain a stable quality. The Company manufactures cement using the
dry process technology, which is more efficient in fuel consumption than other
technologies. Pursuant to the dry process technology raw materials are first
processed through a preheating tower, where heat is supplied from hot gases
originated in a rotary kiln, to effect partial calcination of the materials
before they enter the rotary kiln. Once in the rotary kiln, the raw materials
are exposed to extremely high temperatures which create a chemical reaction
that converts them into clinker. The clinker drops from the kiln and is cooled
with air. At the same time, this air serves to recapture the kiln's heat for
use in the preheating process. Finally, gypsum is added to the clinker and both
materials are ground to form finished cement.
The Company sells and distributes cement (both in bulk and bagged) in Puerto
Rico. Sales are made on a direct basis to independent local distributors,
including ready mix concrete producers, building material dealers, concrete
product manufacturers, government agencies, and general and highway
contractors.
During the fiscal year ended December 3l, l999, the Company sold 1,255,000 tons
of Portland grey cement to customers in Puerto Rico. Approximately 28.6% of the
cement sold by PRCC in 1999 was sold to its ready mix concrete subsidiary,
Ready Mix Concrete, Inc. ("RMC").
Raw Materials. PRCC owns, in fee, properties containing limestone and sand
deposits which directly adjoin or are close to its cement plant site. The
Company also owns properties near such plants that contain clay deposits. The
Company has not conducted a systematic exploratory drilling program ordinarily
considered necessary for the establishment of limestone and other raw material
reserves and, accordingly, makes no tonnage estimate of the availability of
such raw materials. However, based on the results of scattered drilling on
deposits of substantial depths, and past and present production from PRCC's
properties, the Company believes that the availability of limestone and other
raw materials presents no foreseeable problem. There have been no recent
material changes in the exploitation of the principal raw material deposits,
and no material changes are expected.
7
<PAGE> 8
PRCC purchases raw gypsum in the open market from sources outside Puerto Rico.
Coal for firing the kilns is purchased from Carbones de Colombia, S.A., a
Colombian supplier, under a long-term supply contract. Electricity is purchased
from the Puerto Rico Electric Power Authority, and water is obtained from wells
located on the Company's properties.
Competition. PRCC is the principal producer of cement in Puerto Rico. During
l999, the other cement manufacturing company in Puerto Rico, Essroc San Juan,
Inc. (formerly known as San Juan Cement Company, Inc.) produced approximately
34.8% of the total bags of cement sold in Puerto Rico. The amount of cement
imported to the Puerto Rico market during 1999 totaled 2,941,000 tons, or 6.5%
of the total cement market of Puerto Rico for this year.
Competition in the cement market is based on the price and quality of the
products.
Seasonal Effect on Sales. Demand for cement and related products is largely
dependent on the requirements of the construction industry, which in Puerto
Rico and the Caribbean are not necessarily seasonal because of year-round
favorable climatic conditions. However, from time to time the construction
industry is affected by major hurricanes. The requirements of the construction
industry depend to some extent on Puerto Rico's general economic conditions.
READY MIX CONCRETE OPERATIONS SEGMENT
Principal product. Ready mix concrete is produced in batching plants by mixing
controlled portions of cement, aggregates, water and chemical additives. The
product is delivered to construction sites by concrete-mixer trucks owned by
RMC, the Company's ready mix concrete subsidiary. The Company sells this
product to contractors on public construction projects and to private
residential and industrial builders. Net sales totaled $94,522,000 in 1999.
The Company's annual ready mix concrete production capacity is over 1.6 million
cubic yards, which is distributed among 19 batching plants, with delivery
accomplished by a fleet of 270 concrete-mixer trucks. Four batching plants are
located on land owned by the Company and the remaining plants are located on
parcels of land leased to the Company pursuant to operating leases with terms
ranging from one to ten years.
Raw materials. RMC purchases its cement from PRCC. Aggregates, mainly sand and
gravel, and chemical additives used to produce concrete are purchased from
various outside suppliers.
Competition. The Company is the largest producer of ready mix concrete in
Puerto Rico. The Company competes with various large ready mix concrete
companies and several small ready mix concrete operators. Competition is
considered to be strong and is based primarily on price, although product
quality, consistency and customer service are also important.
8
<PAGE> 9
Seasonal Effect on Sales. Demand for cement products, including ready mix
concrete, is largely dependent on the requirements of the construction
industry, which in Puerto Rico and the Caribbean are not necessarily seasonal
because of year-round favorable climatic conditions. However, from time to time
the construction industry is affected by major hurricanes. The requirements of
the construction industry depend to some extent on Puerto Rico's general
economic conditions.
ALL OTHERS SEGMENT
PACKAGING OPERATIONS
Principal Product. Multi-wall paper bags are produced by the Company's St.
Regis Paper and Bag Division ("St. Regis"). Polypropylene bags are produced by
the Company's wholly-owned subsidiary, Poly Bags and Packaging, Inc.
("Polybags"), which commenced production during 1997. Both types of bags are
marketed almost exclusively in Puerto Rico.
During 1999, paper bag sales were made to the following customers: 55% to PRCC
and its subsidiaries; 35% to the grain and animal feed industry; 7% to sugar
and flour producers; and 3% for miscellaneous uses. Polypropylene bag sales
during the year were made to the following customers: 40% to PRCC and its
subsidiaries; 18% to fertilizer and animal feed producers; and 42% for
miscellaneous uses.
Raw Materials. The Company purchases paper, polypropylene and other related raw
materials from various sources outside of Puerto Rico.
Competition. The Company is the principal producer of multi-wall paper bags and
the only producer of polypropylene bags in Puerto Rico. The Company competes
based on the price and quality of its products principally against imported
products.
LIME OPERATIONS
Principal product. The Company manufactures and sells hydrated lime, types Q
and S (both in bulk and bagged), and pebble lime (in bulk only) through its
subsidiary, Florida Lime Corporation ("FLC").
During the fiscal year ended December 3l, 1999, approximately 27% of the lime
produced by the Company was sold to the local construction and agricultural
industries. The remaining 73% were sold to other industries for chemical use,
both in Puerto Rico and in export markets. Export sales for the year ended
December 31, 1999 represented 45% of total lime sales. A significant portion of
exported lime is used in the alumina refining industry, and thus demand may
vary depending upon the market conditions of that industry.
Raw Materials. Limestone with a high level of calcium carbonate is the only raw
material used in the production of lime. The Company currently purchases
limestone from various sources close to the plant.
9
<PAGE> 10
Competition. The Company is the only producer of lime in Puerto Rico. No
material amount of lime was imported to the Puerto Rico market during 1999.
Seasonal Effect on Sales. Due to the year-round favorable weather conditions of
Puerto Rico and the Caribbean area, sales of lime are not necessarily seasonal.
FINANCING OPERATIONS
The Company, through one of its wholly-owned subsidiaries, Ponce Capital
Corporation ("PCC"), provides equipment financing mostly to block
manufacturers, hardware stores and ready mix concrete businesses.
REALTY OPERATIONS
The Company, through one of its wholly-owned subsidiaries, owns and holds for
future development and sale approximately 592 acres of land throughout Puerto
Rico. The Company intends to develop a 300-unit, low-cost housing project on 80
of these acres located in Vega Alta.
AGGREGATES OPERATIONS
Principal product. The Company expects to commence an operation to extract
limestone from the earth's crust in the municipality of Guanica, Puerto Rico in
the second half of 2000, as legal proceedings with respect to the required
permits for this site concluded favorably to the Company. This operation is
located on property leased from the Commonwealth of Puerto Rico. The limestone
material extracted from this property will be sold principally to the Company's
subsidiary, FLC.
Additionally, in order to develop the 300-unit housing project mentioned above,
the land upon which the housing units will be built has to be leveled and
prepared, with excess material to be used in the production of aggregates
(principally sand and crushed limestone) in a separate location. These
aggregates will be used primarily to supply the Company's ready mix concrete
operations. PRC owns, in fee, the property located in Vega Alta upon which it
intends to develop the housing project.
Raw materials. Guanica - The Company signed a five-year lease contract,
renewable for three additional five-year periods. The lease period will
commence with the beginning of the extraction operation. The lease provides for
a maximum extraction of 500,000 cubic meters of raw material per year. The fees
for extraction are $1.00 per cubic meter for the first two years, $1.05 for the
next three years, $1.10 for the second and third five-year periods and $1.13 for
the fourth five-year period. The contract also provides for an annual fee of
$15,000 for the first five-year period, $20,000 for the second and third
five-year periods and $25,000 for the fourth five-year period.
10
<PAGE> 11
The Guanica facility will provide the Company with high-quality limestone
material necessary to the production of lime.
Competition. The Guanica site is expected to be the principal supplier of
limestone to the Company's lime subsidiary.
Total Revenue
Set forth below are (i) the total revenue (in thousands of dollars), net of
intercompany sales, for each of the last three fiscal years contributed by any
class of similar products that accounted for l0% or more of the Company's
consolidated net sales in such fiscal years and (ii) the Company's consolidated
net sales (in thousands of dollars) for each of the last three fiscal years:
<TABLE>
<CAPTION>
Ready mix Portland Consolidated
concrete grey cement net sales
--------- ----------- ------------
<S> <C> <C> <C>
1999 $94,522 $70,660 $173,195
1998 77,369 59,587 148,275
1997 81,501 64,790 156,675
</TABLE>
New Products and Services
On March 19, 1998, the Company organized PCC as a wholly-owned subsidiary under
the laws of the Commonwealth of Puerto Rico. PCC was established for the
purpose of providing equipment financing to block manufacturers, hardware
stores and ready mix concrete businesses. PCC began operations during September
1998, after obtaining its license from the Commonwealth's Commissioner of
Financial Institutions.
Patents and Trademarks
St. Regis had the right to use, until December 31, l999, certain trademarks,
trade names and patents owned by Stone Container Corporation (which trademarks,
trade names and patents were once owned by St. Regis Paper Company of New York,
which was acquired by Champion International during l985, and thereafter sold to
Stone Container Corporation). This agreement was not renewed. The Company
believes that the non-renewal of the agreement would have no material impact on
this business segment.
11
<PAGE> 12
Credit and Working Capital Practices
As of December 31, 1999, the Company had invested 11.9% of its total assets in
inventory, which consists mainly of operating supplies and repair parts for its
equipment. Taking into account the geographical locations of the Company's
manufacturing facilities as compared to the geographical locations of its major
suppliers, such investment in inventory is considered normal by industry
standards. No significant amounts of finished goods are required to be
maintained in inventory to meet rapid delivery requirements of customers. PRCC
sells its products to customers pursuant to normal commercial open-account
payment terms.
Customers
During fiscal year l999, 12.6% of the Company's total sales revenue in the
cement operations segment were made to five (5) unrelated customers. The
Company had no unrelated customer that individually accounted for 10% or more
of the Company's consolidated sales.
Backlog
The Company believes that backlog is not a relevant consideration in the types
of businesses in which it is engaged.
Government Contracts
No material portion of the Company's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
Government.
Research and Development
During the last three fiscal years, the Company has not spent any material
amount of money on research and development activities relating to the
development of new products, services or techniques or the improvement of
existing products, services or techniques for itself or for any of its
customers.
12
<PAGE> 13
Environmental Compliance
During l978, PRCC completed the installation of air pollution control equipment
in its cement and lime plants located in Ponce at an aggregate approximate cost
of $l7,000,000. Such equipment was installed in order to comply with
regulations established by the Puerto Rico Environmental Quality Board ("EQB")
and the terms of a consent order signed in August l974 (as amended in July l976
and February l978) with the United States Environmental Protection Agency
("EPA").
The Company financed the cost of the pollution abatement program through a loan
obtained in l975 from the Government Development Bank for Puerto Rico. This
loan was defeased in l985 as fully described in a Current Report on Form 8-K
dated September l985.
PRCC's plants are in compliance with existing environmental regulations. No
significant expenditures for pollution control equipment are expected in the
near future.
Regulations issued by the EPA limit PRCC's annual clinker production capacity.
Until November 1998, such regulations limited the Company's capacity to 971,000
tons. The Company has complied with these limitations and such limitations have
not had a material effect on the capital expenditures, earnings or competitive
position of PRCC. During 1997, the EPA authorized an increase in the Company's
annual clinker production capacity limit to 1,238,100 tons. In November 1998,
the Company obtained final approval from the local EQB for this increase in its
clinker production capacity. During 1998, the Company performed all plant
modifications necessary to increase its plant capacity to comply with the newly
approved limits.
Employees
As of December 31, l999, the Company and its subsidiaries had 1,053 employees.
(d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
In the last three fiscal years, except for Florida Lime Corporation, none of
PRCC's industry segments depended to any material extent on foreign
operations, foreign long-lived assets or foreign customers. A significant
portion of FLC's sales volume depends on export sales.
(e) EXECUTIVE OFFICERS OF THE REGISTRANT
1. Miguel Nazario, age 52, President and Chief Executive Officer of the
Company since January 1995; Vice President from August l994 to December
1994. Prior to joining PRCC, Mr. Nazario held various administrative
positions over a ten-year period, the latest as a member of the Corporate
Manufacturing Staff of Digital Equipment Corporation.
13
<PAGE> 14
2. Jose O. Torres, age 54, Assistant Secretary, Vice-President of Finance
and Chief Financial Officer since February 1999; Assistant Secretary,
Treasurer and Vice-President of Finance from January 1988 to January
1999; Acting Vice-President of Sales from August 1996 to August 1997;
Vice-President and Treasurer from October l983 to December 1987; Vice-
President of Sales from l982 to October l983; Treasurer from l976 to
l982.
3. Antonio L. Ferre Rangel, age 33, Senior Corporate Vice-President since
February 1999; Executive Vice-President from February 1998 to January
1999; Vice-President of Operations and Strategic Planning from January
1996 to February 1998; Vice-President of Strategic Planning from January
1995 to December 1996. Mr. Ferre joined the Company in 1992.
4. Eufemio Toucet, age 57, Executive Vice-President of Ready Mix Concrete
since October 1999, Vice-President and General Manager of St. Regis Paper
and Bag Division from January 1996 to September 1999; Consultant to the
Company from May 1995 to December 1995. Prior to joining the Company, Mr.
Toucet was President and owner of Reliable Packaging, Inc. and prior to
that worked with Digital Equipment Corporation as Business Operations
Manager.
5. Juan R. Taraza, age 61, Vice-President of Sales and Marketing since
August 1997; Assistant Vice-President Technical Services, Sales and
Marketing department from August 1983 to July 1997; Special Project
Engineer from March 1983 to July 1983; Project Engineer from September
1981 to February 1983. Mr. Taraza joined the Company in June 1961.
6. Pedro M. Mena, age 43, Treasurer since February 1999; Assistant Treasurer
from February 1987 to January 1999; Manager Treasury department from
September 1984 to January 1987. Mr. Mena joined the Company in August
1978.
7. Fernando L. Vargas, age 39, Controller since February 1999; Plant
Administrator from July 1997 to January 1999; Accounting Manager from
April 1991 to January 1999. Prior to joining the Company, Mr. Vargas was
a senior auditor in the international audit firm Price Waterhouse.
All officers are elected to serve for a term of one year and until the election
and qualification of their respective successors.
14
<PAGE> 15
Item 2. PROPERTIES
Used in cement operations segment
PRCC owns, in fee, a cement plant located in Ponce, Puerto Rico, on a 25-acre
site. The Ponce cement plant operates under the dry process technology. During
1999, the Company produced 1,258,000 tons of cement. During that same period,
the Company produced 978,000 tons of clinker utilizing approximate 77.7% (70.7%
in 1998) of its effective kiln's clinker production capacity.
The Company owns, in fee, properties containing adequate deposits of limestone
and other raw materials, used in the production of Portland grey cement, which
directly adjoin or are near the plant sites.
PRCC leases, under a long-term lease expiring in year 2004 with the
municipality of Ponce, a parcel of land on which it has installed certain
facilities for receiving and handling coal. The coal received through this
facility is used to fuel the Company's cement and hydrated lime manufacturing
operations.
Used in ready mix concrete operations segment
PRCC owns, in fee, 19 batching plants, located in Puerto Rico, used in the
production of ready mix concrete. Four of these batching plants are located on
sites owned, in fee, by the Company. The remaining plants are located on leased
properties with lease terms ranging from one to ten years. The Company does not
expect any problem relating to the renewal of these contracts. The Company also
owns a fleet of 270 concrete-mixer trucks.
During l999, PRCC continued its repair and maintenance program on its plants.
The Company believes that its plants are currently in good condition and
properly maintained.
Used in others segment
Packaging. The manufacturing plant of St. Regis is located on a site owned, in
fee, by the Company in Ponce, Puerto Rico. The Company believes that the plant
is currently in good condition and properly maintained.
Lime. PRCC owns, in fee, a lime manufacturing plant that is located within the
Ponce cement plant premises. During 1999, the lime plant produced 29,800 tons
of lime and was operated at approximately 60.2% of its capacity. The Company
believes that the plant is currently in good condition and properly maintained.
Realty. PRCC and one of its subsidiaries own, in fee, and hold for future
development and sale, approximately 592 acres of land throughout Puerto Rico.
15
<PAGE> 16
Used for office facilities
The Company and its subsidiaries own a one story building, which houses its
executive offices, located at the Amelia Industrial Park, in Guaynabo, Puerto
Rico.
RMC's administrative offices are located on leased property in Carolina, Puerto
Rico.
Information about leased properties is incorporated by reference from the
Annual Report, page 30, section entitled "Notes to Consolidated Financial
Statements, Note 13/Lease Commitments."
Item 3. LEGAL PROCEEDINGS
There are presently pending against the Company the legal proceedings
described in the Annual Report, page 31 section entitled "Notes to
Consolidated Financial Statements, Note 15/Contingent Liabilities and Other
Commitments," and page 31, section entitled "Notes to Consolidated Financial
Statements, Note 16/Legal Proceedings," furnished pursuant to Item 14, to
which reference is hereby made and which is incorporated by reference herein.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by Item 5 is contained in the Company's Annual Report,
page 17, section entitled "Market Prices and Dividends on Common Stock,"
and is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Information required by Item 6 is contained in the Company's Annual Report,
page 17, section entitled "Selected Financial Data," and is incorporated
herein by reference.
16
<PAGE> 17
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by Item 7 is contained in the Company's Annual Report,
pages 14 to 16, section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and is incorporated herein by
reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by Item 7A is contained in the Company's Annual Report,
page 23, section entitled "Notes to Consolidated Financial Statements, Note
1/Reporting Entity and Summary of Accounting Policies," and pages 25 to 26
section entitled "Notes to Consolidated Financial Statements, Note
5/Investments," and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by Item 8 is contained in the Company's Annual Report as
follows and is incorporated herein by reference:
<TABLE>
<CAPTION>
Annual Report
Page Number
-------------
<S> <C>
Report of Independent Accountants 18
Consolidated Statement of Income 19
Consolidated Balance Sheet 20
Consolidated Statement of Comprehensive Income 21
Consolidated Statement of Changes in Stockholders' Equity 21
Consolidated Statement of Cash Flows 22
Notes to Consolidated Financial Statements 23
Consolidated Fourth Quarter Results 32
Financial Results by Quarter 32
Five-Year Statistical Comparison 33
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE> 18
PART III
Item l0. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except as provided in Item 1(e) of this Form 10-K, all information required
herein is contained in a definitive Proxy Statement for use in connection with
the Company's Annual Meeting of Stockholders to be held on May 3, 2000, filed
with the Commission pursuant to Section l6(a). This information is contained on
pages 3 to 9, section entitled "Information about Directors, Nominees and
Principal Stockholders" and pages 12 to 18, section entitled "Executive
Officers of the Company." This information is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
Information required by Item 11 is contained in the Proxy Statement, pages 12
to 21, section entitled "Executive Compensation" through and including the
section entitled "Certain Transactions with Management," and is incorporated
herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item l2 is contained in the Proxy Statement, pages 3 to
11, sections entitled "Information about Directors, Nominees and Principal
Stockholders" and "Security Ownership of Certain Beneficial Owners," and is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is contained in the Proxy Statement, pages 20
to 21, sections entitled "Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions with Management" and is incorporated
herein by reference.
18
<PAGE> 19
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report on Form 10-K:
1. Consolidated Financial Statements incorporated by reference
to the Annual Report, pages 19 to 31; and
2. Financial statement schedules and supplementary data required
by Item 8 of this Form 10-K are incorporated by reference to
the Annual Report, pages 32 to 33.
The financial statement schedules required by Item 14(d) of Form 10-K are
excluded since the Company is primarily an operating company. All subsidiaries
included in the consolidated financial statements being filed, in the aggregate,
do not have any minority equity interest and/or indebtedness to any person other
than the Company or the consolidated subsidiaries in amounts which together
exceed l0% of the Company's total consolidated assets at December 3l, l999.
(b) Reports on Form 8-K: None.
(c) Exhibits required by Item 601 of Regulation S-K:
3. Certificate of Incorporation and By-laws
Exhibit
Number
-------
3.1 Each of the following is filed herewith and attached
hereto as an exhibit: certificate of Incorporation
and amendment thereto originally filed as an
exhibit to Form S-l on March 25, 1963, with (i)
composite copy of the Certificate of Incorporation
dated May l6, l983 originally filed as an exhibit to
Form 10-K for the fiscal year ended December 31,
1983, (ii) amendment dated May 6, 1987 originally
filed as an exhibit to Form 10-Q for the fiscal
quarter ended June 30, 1987 and (iii) amendment dated
May 5, 1993 (increasing the number of authorized
shares of common stock from 10 million to 20 million)
originally filed as an exhibit to Form 10-K for the
fiscal year ended December 31, 1993.
3.2 Each of the following is filed herewith and attached
hereto as an exhibit: By-Laws of the Company, as
amended, originally filed as an exhibit to Form 10-K
for the fiscal year ended December 31, 1987, with (i)
amendment dated January 1993 originally filed as an
exhibit to Form 10-K for the fiscal year ended
December 31, 1993, (ii) amendment dated December 22,
1994, originally filed as an exhibit to Form 10-K for
the fiscal year ended December 31, 1994, and (iii)
amendment dated February 24, 1999 originally filed as
an exhibit to Form 10-K for the fiscal year ended
December 31, 1998.
19
<PAGE> 20
l0. Material contracts
10.1 Commercial Contract between PRCC and Carbones de
Colombia, S.A. dated as of April 17, 1998 filed as
an exhibit to Form 10-K for the fiscal year ended
December 31, 1998.
10.2 (a) Consolidated and restated loan agreement dated
as of September 27, 1985 among PRCC, PRCC's
Guarantors and the Government Development Bank for
Puerto Rico for approximately $18.3 million
encompassing all outstanding debt of the Company to
the bank as of that date.
(b) Indenture trust agreement dated September 27, l985
between PRCC as grantor and Banco de Ponce as
trustee for the benefit of the Government
Development Bank for Puerto Rico.
(Both documents listed above in this paragraph l0.2
were filed as exhibits to a Current Report on Form
8-K dated September l985 and are related to the
early extinguishment of the debt transaction
described therein.)
10.3 Form of Severance Compensation Agreement executed by
the Company during the third quarter of 1998 with
certain of the Company's executives, filed as an
exhibit to Form 10-Q for the fiscal quarter ended
June 30, 1998.*
10.4 Amendment to the Consulting Agreement between PRCC
and Antonio Luis Ferre dated January 1, 1995, filed
as an exhibit to Form 10-K for the fiscal year ended
December 31, 1994.*
10.5 Note Purchase Agreement dated January 27, 1997, with
respect to $50,000,000 of Series A and $20,000,000
of Series B Senior Secured Notes due January 27,
2017 (used to refinance the outstanding principal
balances of various long-term debt), filed as an
exhibit to Form 10-K for the fiscal year ended
December 31, 1996.
13. Annual Report to security holders for the year ended December
31, l999.
21. Subsidiaries of the Company are included as part of the
Annual Report to security holders, page 35, section entitled
"Subsidiaries." All of the Company's subsidiaries are
incorporated under the laws of the Commonwealth of Puerto
Rico.
23. Consent of PricewaterhouseCoopers LLP, independent public
accountants.
20
<PAGE> 21
27. Financial Data Schedule.
- ---------
ALL OF THE ABOVE DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE.
* Exhibit constitutes a management contract or compensatory plan or
arrangement required to be filed pursuant to Item 601 (b) (10) (iii).
S I G N A T U R E S
Pursuant to the requirements of Section l3 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PUERTO RICAN CEMENT COMPANY, INC.
(REGISTRANT)
Date: March 22, 2000 By: /s/ Miguel Nazario
--------------------------------------
Miguel Nazario
President and Chief Executive
Officer and Director
21
<PAGE> 22
Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: March 22, 2000 By: /s/ Miguel Nazario
---------------------------------------
Miguel Nazario
President, Chief Executive
Officer and Director
Date: March 22, 2000 By: /s/ Antonio Luis Ferre
---------------------------------------
Antonio Luis Ferre
Director and Chairman
of the Board
Date: March 22, 2000 By: /s/ Alberto M. Paracchini
---------------------------------------
Alberto M. Paracchini
Director and Vice Chairman
of the Board
Date: March 22, 2000 By: /s/ Hector del Valle
---------------------------------------
Hector del Valle
Director and Vice Chairman
of the Board
Date: March 22, 2000 By: /s/ Antonio L. Ferre Rangel
---------------------------------------
Antonio L. Ferre Rangel
Senior Corporate Vice President
and Director
Date: March 22, 2000 By: /s/ Jose O. Torres
---------------------------------------
Jose O. Torres
Assistant Secretary, Vice-President of
Finance and Chief Financial Officer
22
<PAGE> 23
Date: March 22, 2000 By: /s/ Pedro M. Mena
---------------------------------------
Pedro M. Mena
Treasurer
Date: March 22, 2000 By: /s/ Fernando L. Vargas
---------------------------------------
Fernando L. Vargas
Controller
Date: March 22, 2000 By: /s/ Jose J. Suarez
---------------------------------------
Jose J. Suarez
Director
Date: By:
---------------------------------------
Angel Torres
Director
Date: March 22, 2000 By: /s/ Oscar A. Blasini
---------------------------------------
Oscar A. Blasini
Director
Date: March 22, 2000 By: /s/ Rosario J. Ferre
---------------------------------------
Rosario J. Ferre
Director
Date: March 22, 2000 By: /s/ Federico F. Sanchez
---------------------------------------
Federico F. Sanchez
Director
Date: March 22, 2000 By: /s/ Jorge L. Fuentes
---------------------------------------
Jorge L. Fuentes
Director
Date: March 22, 2000 By: /s/ Luis A. Ferre Rangel
---------------------------------------
Luis A. Ferre Rangel
Director
23
<PAGE> 24
Date: By:
---------------------------------------
Juan A. Albors
Director
Date: March 22, 2000 By: /s/ Waldemar del Valle Armstrong
---------------------------------------
Waldemar del Valle Armstrong
Director
Date: March 22, 2000 By: /s/ Emilio M. Venegas Vilaro
---------------------------------------
Emilio M. Venegas Vilaro
Director
24
<PAGE> 25
PUERTO RICAN CEMENT COMPANY, INC.
AND SUBSIDIARY COMPANIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Schedule VIII - Valuation and Qualifying accounts for the years ended
December 31, 1999, 1998 and 1997..................................................................... 26
Report of independent accountants....................................................................... 27
Financial Data Schedule................................................................................. 28
</TABLE>
25
<PAGE> 26
SCHEDULE
VIII
PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------------------
Additions Deductions from
Balance at Charged to Additions Reserves Write-off Balance at
Beginning Cost and Charged to of Uncollectible End of
DESCRIPTION Of Year Expenses Other Accounts Year
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts
1999 $1,296,157 $420,230 $0 $615,428 $1,100,959
1998 1,451,969 145,424 0 301,236 1,296,157
1997 1,538,585 233,135 0 319,751 1,451,969
</TABLE>
26
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
(COMPOSITE COPY)
OF
PUERTO RICAN CEMENT COMPANY, INC.
We, the undersigned, for the purpose of associating to establish a
corporation for the transaction of the business hereinafter stated, under the
provisions and subject to the requirements of the laws of the Commonwealth of
Puerto Rico, and particularly an act entitled the "General Corporation Law for
the Commonwealth of Puerto Rico", approved January 9, 1956, as the same may be
amended from time to time, do make and file this certificate of incorporation
in writing and do hereby certify:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is
PUERTO RICAN CEMENT COMPANY, INC.
SECOND: The principal office of the Corporation in the Commonwealth of
Puerto Rico is located at Amelia Industrial Park, Guaynabo, Puerto Rico. The
name of the resident agent of the Corporation is Hector del Valle.
THIRD: The objects for which the Corporation is formed are the
establishment, maintenance and operation of a mercantile and industrial
enterprise for the manufacture, transportation and sale of cement, which
enterprise shall be operated and developed under all forms and within all licit
combinations which human intelligence and activity may suggest or permit,
without any other limitation than those imposed by the statutes of the United
States and the laws of Puerto Rico.
In addition to the general powers conferred upon this Corporation by
the laws of Puerto Rico, all of which are hereby claimed, the Corporation shall
possess and exercise, subject to the restrictions and liabilities contained in
an act entitled the "General Corporation Law for the Commonwealth of Puerto
Rico", approved January 9, 1956, as amended, and in this Certificate of
Incorporation, all such powers as are necessary or convenient to the attainment
of the objects of this Corporation hereinabove set forth, including, but
without limitation of the generality of the foregoing, the following:
(a) To manufacture, store, transport, sell and deal in,
export and import, purchase for its own use or for resale, or to aid
financially or otherwise in the manufacture, storage, transportation, sale and
dealing in, exportation and importation of cement, Portland cement and all
other types and kinds of natural and artificial cement, by-products of cement
manufacture, and allied materials, such as masonry cement, cement tile, cement
block, bricks, lime, highgraded lime, limestone, artificial stone, calcined
gypsum, calcined and other plasters of artificial stone, plaster of Paris, dry
ice, chemicals, drugs, any of the raw materials necessary for the manufacture
of the various types and kinds of cement, by-products thereof, allied materials
and building materials hereinabove enumerated, and such other goods, wares and
merchandise of a like nature or as are usually manufactured and dealt in by
those engaged in a similar line of business.
(b) To design, construct, assemble, make, manufacture,
produce, market, distribute and sell paper bags, sacks, cartons, packages,
packaging and any and all other types or kinds of paper and paper products
whatsoever.
(c) To engage in research in, and to obtain patents on, and
grant licenses for, new and modified types of cement, by-products, allied
materials and building materials.
(d) Subject to the limitations contained in the Constitution
of Puerto Rico to hold, to acquire by purchase, lease, or otherwise, any real
property, improved or unimproved, and any and all personal property, necessary,
1
<PAGE> 2
suitable, proper, or convenient for, in connection with, or incidental to, the
accomplishment of any one or more of the objects, purposes, or powers herein
enumerated or described and to improve, develop, maintain and operate the same,
including, but without limitation of the generality of the foregoing, the
following real and personal property: land containing or capable of producing
any of the raw materials needed for the manufacture of the products of the
Corporation; factories, kilns, warehouses, plants, depots, power plants for the
generation of steam or electric power, railroads and other roads, oil, air,
water and gas pipe lines, electric, telephone and transmission lines, trucks,
steamboats, steam tugs, barges and other boats, and any and all equipment and
machinery necessary, for its plants and other buildings or otherwise.
(e) To sell, mortgage, lease, assign, pledge or otherwise
transfer or dispose of any and all real property, improved or unimproved, and
any and all personal property which it may now hold or may hereafter acquire.
(f) To borrow or raise monies for any of the purposes of the
Corporation, and, from time to time, to draw, make, execute, and issue bonds,
debentures, promissory notes, drafts, bills of exchange, and other negotiable
or non-negotiable instruments and evidences of indebtedness, and to secure the
payment of any thereof and of the interest thereon by mortgage upon, or pledge,
or conveyance, or assignment in trust of the whole or any part of the property
of the Corporation, real or personal, whether at the time owned or thereafter
acquired, and to sell, pledge, or otherwise dispose of such bonds or other
obligations of the Corporation for its corporate purposes.
(g) To enter into, make and perform contracts and agreements
of every kind and description with any person, firm, association, corporation,
municipality, body politic, government or any agency or agencies thereof,
pertaining to the objects, purposes and powers of this Corporation, or
necessary or convenient thereof or incidental thereto.
(h) To do any and all things necessary, suitable, proper, or
convenient for, in connection with, or incidental to, the accomplishment of any
one or more of the objects, purposes or powers herein enumerated or described,
or which shall appear at any time conducive or expedient for the protection or
benefit of the Corporation, provided that the same are not inappropriate to or
inconsistent with this Certificate of Incorporation, or with the provisions of
an act entitled the "General Corporation Law for the Commonwealth of Puerto
Rico", approved January 9, 1956, as amended.
(i) The foregoing clauses of this Article THIRD shall be
construed as objects, purposes, and powers and the matters expressed in each
clause shall not be limited in any way, except as otherwise expressly provided
by reference to or inference from the terms of any other clause (or any other
matter within the same clause), but shall be regarded as independent objects,
purposes and powers. The enumeration of specified objects, purposes and power
shall not be considered to exclude, limit or restrict in any manner any power,
right or privilege given to the Corporation by law or to limit or restrict the
meanings of the general terms of the general powers of the Corporation, nor
shall the expression of one thing be deemed to exclude another, although it be
of like nature, not expressed.
FOURTH: The minimum amount of capital with which the Corporation will
commence business is $1,000.00, and the total number of shares for all classes
of stock which the corporation is authorized to issue is Twenty Two Million
(22,000,000) shares, divided in two classes, namely, Twenty Million
(20,000,000) shares of Common Stock of the par value of one dollar ($1.00) each
and Two Million (2,000,000) shares of Preferred Stock of the par value of five
dollars ($5.00) each.
FIFTH: Voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions granted to or imposed upon the respective classes
of shares or the holders thereof are as follows:
(a) The holders of shares of Common Stock shall be entitled
to receive dividends, when and as declared by the Board of Directors, out of
any funds legally available therefor and, in the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, all the
assets of the Corporation remaining after
2
<PAGE> 3
payment or provision for payment of all debts and liabilities shall be
distributed to the holders of Common Stock pro rata according to the number of
shares held, subject to the provisions hereinafter set forth in paragraph (b)
of this Article FIFTH. The holders of the shares of Common Stock shall be
entitled to one vote, in person or by proxy, for each share held, and except as
otherwise specifically provided in the resolution or resolutions adopted by the
Board of Directors pursuant to the authority expressly vested in it by this
Article FIFTH with respect to any series of Preferred Stock, or as otherwise
provided by the laws of the Commonwealth of Puerto Rico, the holders of the
shares of Common Stock shall have the exclusive right to vote for the election
of directors and for all other purposes.
(b) The authority to determine the voting powers of the
Preferred Stock, the designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions granted to or imposed upon the Preferred Stock, the time or times
and prices at which the Preferred Stock is subject to redemption or conversion
and the classification or reclassification of any unissued shares of the
Preferred Stock into one or more series is expressly vested in the Board of
Directors, and any such determination by the Board of Directors shall be set
forth in resolutions providing for the issuance of such Preferred Stock duly
adopted in accordance with the Puerto Rico General Corporation Law. Each such
resolution shall be preceded by a determination by the Board of Directors that
the preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions of the Preferred Stock to be
issued are under the circumstances prevailing at the time of adopting such
resolution fair and equitable to all the existing stockholders. The Preferred
Stock shall rank prior to Common Stock with respect to payment of dividends and
with respect to distribution of the assets of the Corporation in the event of
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation. Neither the consolidation nor the merger of the Corporation with
or into any other corporation or corporations, nor a reorganization of the
Corporation alone, nor the sale, transfer or lease by the Corporation of all or
any parts of its assets, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for the purpose of this paragraph.
(c) The amount of Common Stock or Preferred Stock authorized
may be increased or decreased by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote, and no consent or
affirmative vote of the stockholders shall be required in connection with a
resolution by the Board of Directors fixing the terms of any series of
Preferred Stock and authorizing the issuance of such Preferred Stock as
permitted by paragraph (b) of this Article FIFTH.
SIXTH: No holder of stock of the Corporation shall be entitled, as
such, as a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of the Corporation of any class whatsoever, or of
warrants or rights of the Corporation, or of securities convertible into, or
carrying warrants or rights to subscribe for or purchase, stock of the
Corporation of any class whatsoever, whether now or hereafter authorized, or
whether issued for cash, property or services.
SEVENTH: The names and addresses of each of the incorporators are as
follows:
Blanton Winship La Fortaleza, San Juan, P.R.
Jose Enrique Colom Intendencia Building, San Juan, P.R.
Antonio Lucchetti Guayama, P.R.
EIGHTH: The Corporation is to have perpetual existence.
NINTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further creation, definition, limitation and
regulation of the powers of the Corporation and of its directors and
stockholders, it is further provided:
1. Subject to any special right of the holders of any capital
stock of any class or series, the number of directors of the Corporation shall
be not less than three nor more than eighteen. The Directors need not be
stockholders. The Board of Directors shall, in the manner provided in the
By-Laws, determine from time to time the number of directors who shall
constitute the entire Board of Directors. Any such determination made by the
Board of
3
<PAGE> 4
Directors shall continue in effect unless and until changed by the Board of
Directors, but no such change shall affect the term of any director then in
office. Election of directors need not be by ballot unless the By-Laws so
require. Meetings of the Board of Directors may be held either within or
without the Commonwealth of Puerto Rico.
Commencing at the annual meeting of stockholders held in 1987, the
terms of office of the Board of Directors shall be divided into three classes,
Class I, Class II and Class III, as shall be determined by the Board of
Directors. All classes shall be as nearly equal in number as possible, and no
class shall include less than one nor more than six directors. Any vacancy on
the Board of Directors that results from an increase in the number of directors
and any other vacancy on the Board of Directors may be filled only by the Board
of Directors, provided that a quorum is then present, or only by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director. Directors elected to fill a newly created directorship or other
vacancies shall be classified and hold office as provided by statute.
The terms of office and the directors initially classified shall be as
follows: (1) that of Class I shall expire at the annual meeting of stockholders
to be held in 1988, (2) that of Class II shall expire at the annual meeting of
stockholders to be held in 1989, and (3) that of Class III shall expire at the
annual meeting of stockholders to be held in 1990. At each annual meeting of
stockholders after the aforementioned initial classification, the successors to
directors whose terms shall then expire shall be elected to serve from the time
of election and qualification until the third annual meeting following election
and until a successor shall have been elected and shall have qualified.
Subject to any special right of the holders of any capital stock of
any class or series, the directors of any class of directors of the Corporation
may be removed without cause only by an affirmative vote of the holders of at
least eighty (80) per cent of the outstanding shares of Voting Stock of the
Corporation, at the annual meeting of stockholders, or at any special meeting
of stockholders called for this purpose.
In addition to any requirements of law and any other provisions of
this Certificate of Incorporation, any By-Law or any resolution or resolutions
of the Board of Directors adopted pursuant to this Certificate of
Incorporation, the affirmative vote of the holders of at least eighty (80) per
cent of the outstanding shares of Voting Stock shall be required to amend,
alter or repeal, or adopt any provision inconsistent with, the requirements of
this Section of this Article, unless such amendment, alteration or repeal, or
adoption shall have been approved by a majority of the Disinterested Directors,
then the affirmative vote of a majority of the outstanding shares of Voting
Stock shall be required.
Notwithstanding the foregoing, whenever the holders of any capital
stock of any class or series shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation or resolution or resolutions of the Board of Directors adopted
pursuant to this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Section
of this Article unless expressly provided by such terms.
2. In furtherance and not in limitation of the powers
conferred by the laws of the Commonwealth of Puerto Rico, and subject at all
times to the provisions thereof, the Board of Directors is expressly authorized
and empowered:
(a) To make, alter, and repeal By-Laws of the Corporation,
subject to the power of the stock-holders to alter or repeal the By-Laws made
by the Board of Directors.
(b) To determine, from time to time, whether and to what
extent and at what times and places and under what conditions and regulations
the account and books and documents of the Corporation (other than the stock
ledger) or any of them, shall be open to inspection by the stockholders; and no
stockholder shall have any right to inspect any account or book or document of
the Corporation, except as conferred by the laws of the Commonwealth of Puerto
Rico, unless and until duly authorized to do so by resolution of the Board of
Directors.
4
<PAGE> 5
(c) To authorize and issue obligations of the Corporation,
secured or unsecured, to include therein such provisions as to redeemability,
convertibility or otherwise, as the Board of Directors in its sole discretion
may determine, and to authorize the mortgaging or pledging of, and to authorize
and cause to be executed mortgages and liens upon, any property of the
Corporation, real or personal, including after-acquired property.
(d) To determine whether any, and, if any, what part of, the
net assets of the Corporation in excess of its capital shall be declared in
dividends and paid to the stockholders entitled thereto, and to direct and
determine the use and disposition thereof.
(e) To set apart, out of any funds of the Corporation
available for dividends, a reserve or reserves, and to abolish any such reserve
or reserves, or to make such other provisions, if any, as the Board of
Directors may deem necessary or advisable for working capital, for additions,
improvements and betterments to plant and equipment, for expansion of the
business of the Corporation (including the acquisition of real and personal
property for that purpose) and for any other purpose of the Corporation.
(f) To establish bonus, profit-sharing, pension, thrift, and
other types of incentive, compensation or retirement plans for the officers and
employees (including officers and employees who are also directors) of the
Corporation, and to fix the amounts of profits to be distributed or shared or
contributed and the amounts of the Corporation's funds otherwise to be devoted
thereto and to determine the persons to participate in any such plans and the
amounts of their respective participations.
(g) To issue, or grant options for the purchase of, shares of
stock of the Corporation to officers and employees (including officers and
employees who are also directors) of the Corporation and its subsidiaries for
such consideration and on such terms and conditions as the Board of Directors
may from time to time determine.
(h) By resolution or resolutions passed by a majority of the
whole Board, to designate one or more committees, each committee to consist of
two or more of the directors of the Corporation, which to the extent provided
in such resolution or resolutions or in the By-Laws, shall have and may
exercise the powers of the Board of Directors (other than the power to remove
or elect officers) in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it, such committee or committees to have such name or
names as may be stated in the By-Laws or as may be determined from time to time
by resolution adopted by the Board of Directors.
(i) To exercise all the powers of the Corporation, except
such as are conferred by law, or by this Certificate of Incorporation or by the
By-Laws of the Corporation, upon the stockholders.
3. No contract or other transaction between the Corporation
and any other corporation, whether or not such other corporation is related to
the Corporation through the direct or indirect ownership by such other
corporation of a majority of the shares of the capital stock of the Corporation
or by the Corporation of a majority of the shares of the capital stock of such
other corporation, and no other act of the Corporation shall, in the absence of
fraud, in any way be affected or invalidated by the fact that any of the
directors of the Corporation are pecuniarily or otherwise interested in, or are
directors or officers of, such other corporation or by the fact that such other
corporation is so related to the Corporation. Any director of the Corporation
individually, or any firm or association of which any director may be a member,
may be a party to, or may be pecuniarily or otherwise interested in, any
contract or transaction of the Corporation, provided that the fact that he
individually, or such firm or association, is so interested shall be disclosed
or shall have been known to the Board of Directors or to a majority of such
members thereof as shall be present at any meeting of the Board of Directors at
which action upon any such contract or transaction shall be taken. Any director
of the Corporation who is also a director or officer of such other corporation
or who is so interested may be counted in determining the existence of a quorum
at any meeting of the Board of Directors which shall authorize any such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so
5
<PAGE> 6
interested.
4. The Corporation shall indemnify each person who served or
has served as a director, officer or agent of the Corporation, and each person
who, at the request of the Corporation, serves as a director or officer of
another corporation in which the Corporation owns shares of capital stock or of
which it is a creditor, and the legal representatives of each such person,
against all liabilities, expenses, counsel fees and costs incurred by such
person, or the estate of such person in connection with or arising out of any
action, suit, proceeding or claim, whether civil or criminal, to which such
person is made a party by reason of being, or having been, such director,
officer, or agent. In no case shall the Corporation indemnify any such person,
or the legal representatives of such person, with respect to any matters as to
which such person shall be finally adjudged in any such action, suit or
proceeding to be liable for negligence or misconduct in the performance of his
duties; provided, however, that an entry of judgment by consent as part of a
settlement shall not be deemed a final adjudication of liability for negligence
or misconduct in the performance of duty; and provided, further, that in the
event of a settlement (whether by agreement, entry of a judgment of consent, or
otherwise), indemnification shall be provided only in connection with such
matters covered by the settlement as to which the Corporation is advised by
counsel that such person was not negligent or guilty of misconduct in the
performance of his duties. The foregoing right of indemnification shall not be
exclusive of any of other rights to which any such person may be entitled under
law, by-law, agreement, vote of stockholders or otherwise.
TENTH: The vote of the stockholders of the Corporation required to
approve any Business Combination shall be as set forth in this Article TENTH.
The term "Business Combination" shall have the meaning ascribed to it in
paragraph 1.(B) of this Article TENTH. Each other capitalized term shall have
the meaning ascribed to it in paragraph 3 of this Article TENTH.
1.(A) In addition to any affirmative vote required by law or
this Certificate of Incorporation and except as otherwise expressly provided in
paragraph 2 of this Article TENTH:
(1) any merger or consolidation of the Corporation
or any Subsidiary with (i) any Interested Stockholder or (ii)
any other person (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate of an Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value of $1,000,000 or more; or
(3) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate Fair Market Value of $1,000,000 or more, other than
the issuance of securities upon the conversion of convertible
securities of the Corporation or any Subsidiary which were
not acquired by such Interested Stockholder (or such
Affiliate) from the Corporation or a Subsidiary; or
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of an Interested Stockholder or any Affiliate of
any Interested Stockholder; or
(5) any transaction involving the Corporation or any
Subsidiary (whether or not with or into or otherwise
involving an Interested Stockholder), and including, without
limitation, any reclassification of securities (including any
reverse stock split), or recapitalization or reorganization
of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or
6
<PAGE> 7
any self tender offer for or repurchase of securities of the
Corporation by the Corporation or any Subsidiary or any other
transaction (whether or not with or into or otherwise
involving an Interested Stockholder), which in any such case
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity securities or securities convertible into equity
securities of the Corporation or any Subsidiary which is
directly or indirectly beneficially owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder;
shall require the greater of (i) the affirmative vote of the holders of at
least eighty (80) percent of the combined voting power of the then outstanding
shares of the Voting Stock, in each case voting together as a single class (it
being understood that for purposes of this Article TENTH each share of the
Voting Stock shall have the number of votes granted to it pursuant to Article
FIFTH of this Certificate of Incorporation or any resolution setting forth the
rights, powers and preferences of any class or series of Preferred Stock made
pursuant to said Article FIFTH (a "Preferred Stock Resolution"), or (ii) the
affirmative vote of the sum of (a) the number of shares of voting power of
Voting Stock then beneficially owned by the Interested Stockholder, plus (b) a
majority of the combined voting power of the outstanding shares of Voting Stock
held by stockholders other than the Interested Stockholder. Such affirmative
vote shall be required not withstanding any provision of law or any other
provision of this Certificate of Incorporation or any agreement with any
national securities exchange or otherwise which might permit a lesser vote or
no vote and in addition to any affirmative vote required of the holders of any
class or series of Voting Stock pursuant to law, this Certificate of
Incorporation or any Preferred Stock Resolution.
(B) The term "Business Combination" as used in this Article
TENTH shall mean any transaction that is referred to in any one or more clauses
(1) through (5) of paragraph 1.(A) of this Article TENTH.
2. The provisions of paragraph 1.(A) of this Article TENTH
shall not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as may be
required by law, any other provision of this Certificate of Incorporation, any
Preferred Stock Resolution and any agreement with any national securities
exchange, if, in the case of a Business Combination that does not involve any
cash or other consideration being received by the stockholders of the
Corporation, solely in their respective capacities as stockholders of the
Corporation, the condition specified in the following paragraph (A) is met, or,
in the case of any other Business Combination, the conditions specified in the
following paragraph (A) or the conditions specified in the following paragraph
(B) are met:
(A) such Business Combination shall have been
approved by a majority of the Disinterested Directors; or
(B) Each of the five conditions specified in the
following clauses (1) through (5) shall have been met:
(1) the aggregate amount of the cash and
the Fair Market Value as of the Consummation Date of
any consideration other than cash to be received per
share by holders of Common Stock in such Business
Combination shall be at least equal to the highest
of the following (it being intended that the
requirements of this clause (B) (1) shall be
required to be met with respect to all shares of
Common Stock outstanding whether or not the
Interested Stockholder has acquired any shares of
the Common Stock):
(i) if applicable, the highest per
share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any
shares of Common Stock beneficially owned
by the Interested Stockholder which were
acquired beneficially by such Interested
Stockholder (x) within the two-year period
immediately prior to the Announcement Date
or (y) in the transaction in which it
became an Interested Stockholder, whichever
is higher; or
7
<PAGE> 8
(ii) the Fair Market Value per
share of Common Stock on the Announcement
Date or on the Determination Date,
whichever is higher; or
(iii) the amount which bears the
same percentage relationship to the Fair
Market Value of the Common Stock on the
Announcement Date as the highest per share
price determined in (B) (1) (i) above bears
to the Fair Market Value of the Common
Stock on the date of the commencement of
the acquisition of the Common Stock by such
Interested Stockholder; and
(2) the aggregate amount of the cash and
the Fair Market Value as of the Consummation Date of
any consideration other than cash to be received per
share by holders of shares of any class or series of
Voting Stock (other than Common Stock) shall be at
least equal to the highest of the following (it
being intended that the requirements of this clause
(B) (2) shall be required to be met with respect to
every class and series of such outstanding Voting
Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class
or series of Voting Stock):
(i) if applicable, the highest per
share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any
shares of each such class or series of
Voting Stock beneficially owned by the
Interested Stockholder which were acquired
beneficially by such Interested Stockholder
(x) within the two-year period immediately
prior to the Announcement Date or (y) in
the transaction in which it became an
Interested Stockholder, whichever is
higher; or
(ii) if applicable, the highest
preferential amount per share to which the
holders of shares of such class or series
of Voting Stock are entitled in the event
of any voluntary or involuntary
liquidation, dissolution or winding up of
the Corporation; or
(iii) The Fair Market Value per
share of such class or series of Voting
Stock on the Announcement Date or the
Determination Date, whichever is higher; or
(iv) the amount which bears the
same percentage to the Fair Market Value of
such class or series of Voting Stock of the
Announcement Date as the highest per share
price in (B) (2) (i) above bears to the
Fair Market Value of such Voting Stock on
the date of the commencement of the
acquisition of such Voting Stock by such
Interested Stockholder; and
(3) the consideration to be received by
holders of a particular class or series of
outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as was
previously paid in order to acquire beneficially
shares of such class or series of Voting Stock that
are beneficially owned by the Interested Stockholder
and, if the Interested Stockholder beneficially owns
shares of any class or series of Voting Stock that
were acquired with varying forms of consideration,
the form of consideration to be received by each
holder of such class or series of Voting Stock shall
be, at the option of such holder, either cash or the
form used by the Interested Stockholder to acquire
beneficially the largest number of shares of such
class or series of Voting Stock beneficially
acquired by it prior to the Announcement Date; and
8
<PAGE> 9
(4) after such Interested Stockholder has
become an Interested Stockholder and prior to the
consummation of such Business Combination:
(i) such Interested Stockholder
shall not have become the beneficial owner
of any additional shares of Voting Stock of
the Corporation, except as part of the
transaction in which it becomes an
Interested Stockholder or upon conversion
of convertible securities acquired by it
prior to becoming an Interested Stockholder
or as result of a pro rata stock dividend
or stock split; and
(ii) such Interested Stockholder
shall not have received the benefit,
directly or indirectly (except
proportionately as a stockholder), of any
loans, advances, guarantees, pledges or
other financial assistance or tax credits
or other tax advantages provided by the
Corporation or any Subsidiary, whether in
anticipation of or in connection with such
Business Combination or otherwise; and
(iii) such Interested Stockholder
shall not have caused any material change
in the Corporation's business or capital
structure, including, without limitation,
the issuance of shares of capital stock of
the Corporation to any third party; and
(iv) there shall have been (x) no
failure to declare and pay at the regular
date there of the full amount of dividends
(whether or not cumulative) on any
outstanding Preferred Stock except as
approved by a majority of the Disinterested
Directors, (y) no reduction in the annual
rate of dividends paid on Common Stock
(except as necessary to reflect any
subdivision of the Common Stock), except as
approved by a majority of the Disinterested
Directors and (z) an increase in such
annual rate of dividends (as necessary to
prevent any such reduction) in the event of
any reclassification (including any reverse
stock split), recapitalization,
reorganization, self tender offer or any
similar transaction which has the effect of
reducing the number of outstanding shares
of the Common Stock, unless the failure so
to increase such annual rate was approved
by a majority of the Disinterested
Directors; and
(5) a proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing
such Act, rules and regulations), whether or not the
Corporation is then subject to such requirements,
shall be mailed by and at the expense of the
Interested Stockholder at least thirty days prior to
the Consummation Date of such Business Combination
to the public stockholders of the Corporation
(whether or not such proxy or information statement
is required to be mailed pursuant to such Act or
subsequent provisions), and shall contain at the
front thereof in a prominent place (i) any
recommendations as to the advisability (or
inadvisability) of the Business Combination which
the Disinterested Directors, if any, may choose to
state, and (ii) the opinion of a reputable national
investment banking firm as to the fairness (or not)
of such Business Combination from the point of view
of the remaining public stockholders of the
Corporation (such investment banking firm to be
engaged solely on behalf of the remaining public
stockholders, to be paid a reasonable fee for their
services by the Corporation upon receipt of such
opinion, to be unaffiliated with such Interested
Stockholder, and, if there are at the time any
Disinterested Directors, to be selected by a
majority of the Disinterested Directors).
9
<PAGE> 10
3. For purposes of this Article TENTH:
(A) A "person" shall include, without limitation,
any individual, firm, corporation, group (as such term is
used in Regulation 13D-5 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on
January 1, 1987) or other entity.
(B) "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary or any employee
benefit plan of the Corporation or any Subsidiary) who or
which:
(1) is the beneficial owner, directly or
indirectly, of more than 20 percent of the combined
voting power of the then outstanding shares of
Voting Stock; or
(2) is an Affiliate of the Corporation and
at any time within the two-year period immediately
prior to the date in question was the beneficial
owner, directly or indirectly, of 20 percent or more
of the combined voting power of the then outstanding
shares of Voting Stock; or
(3) is an assignee of or has otherwise
succeeded to the beneficial ownership of any shares
of Voting Stock that were at any time within the
two-year period immediately prior to the date in
question beneficially owned by an Interested
Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or
series of transactions not involving a public
offering within the meaning of the Securities Act of
1933.
(C) A person shall be a "beneficial owner" of any
Voting Stock:
(1) which such person or any of its
Affiliates or Associates beneficially owns, directly
or indirectly; or
(2) which such person or any of its
Affiliates or Associates has (a) the right to
acquire (whether or not such right is exercisable
immediately) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (b) the right to vote or direct the
vote pursuant to any agreement, arrangement or
understanding; or
(3) which are beneficially owned, directly
or indirectly, by any other person with which such
person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing
of any shares of Voting Stock.
(D) For the purposes of determining whether a person
is an Interested Stockholder pursuant to paragraph 3.(B) of
this Article TENTH, the number of shares of Voting Stock
deemed to be outstanding shall include shares deemed owned by
such Interested Stockholder through application of paragraph
3.(C) of this Article TENTH but shall not include any other
shares of Voting Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(E) "Affiliate" and "Associate" shall have the
respective meanings ascribed to the term "Affiliate" in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act
10
<PAGE> 11
of 1934, as in effect on January 1, 1987.
(F) "Subsidiary" shall mean any Corporation more
than 50 percent of whose outstanding equity securities having
ordinary voting power in the election of directors is owned,
directly or indirectly, by the Corporation or by a Subsidiary
or by the Corporation and one or more Subsidiaries.
(G) "Disinterested Director" shall mean any member
of the Board of Directors of the Corporation who is
unaffiliated with, and not a nominee of, the Interested
Stockholder and was a member of the Board prior to the time
that the Interested Stockholder became an Interested
Stockholder, and any successor of a Disinterested Director
who is unaffiliated with, and not a nominee of, the
Interested Stockholder and who is recommended to succeed a
Disinterested Director by a majority of Disinterested
Directors then on the Board of Directors.
(H) "Fair Market Value" shall mean: (1) in the case
of stock, the highest closing sale price during the 30-day
period commencing on the 40th day preceding the date in
question of a share of such stock on the Composite Tape for
New York Stock Exchange-Listed Stock, or, if such stock is
not quoted on the New York Stock Exchange-Composite Tape, on
the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock
is listed, or, if such stock is not listed on any such
exchange, the highest closing sale price or bid quotation
with respect to a share of such stock during the 30-day
period commencing on the 40th day preceding the date in
question on the National Association of Securities Dealers,
Inc., Automated Quotations Systems or any systems then in
use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as
determined by a majority of the Disinterested Directors in
good faith; and (2) in the case of property other than cash
or stock, the fair market value of such property on the date
in question as determined by a majority of the Disinterested
Directors in good faith.
(1) In the event of any Business Combination in
which the Corporation survives, the phrase "any consideration
other than cash to be received" as used in paragraphs
2.(B)(1) and (2) of this Article TENTH shall include the
shares of Common Stock and/or the shares of any other class
or series of outstanding Voting Stock retained by the holders
of such shares.
(J) "Announcement Date" shall mean the date of first
public announcement of the proposed Business Combination.
(K) "Determination Date" shall mean the date on
which the Interested Stockholder became an Interested
Stockholder.
(L) "Consummation Date" shall mean the date of the
consummation of the Business Combination.
(M) The term "Voting Stock" shall mean all
outstanding shares of capital stock of all classes and series
of the Corporation entitled to vote generally in the election
of directors of the Corporation, in each case voting together
as a single class. The definition of "Voting Stock" in this
paragraph 3 shall apply to the term "Voting Stock" as used in
Article NINTH, Section 1 of this Certificate of
Incorporation.
4. A majority of the Disinterested Directors shall have the
power and duty to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance
with this
11
<PAGE> 12
Article TENTH including, without limitation:
(A) whether a person is an Interested Stockholder;
(B) the number of shares of Voting Stock
beneficially owned by any person;
(C) whether a person is an Affiliate or Associate of
another person;
(D) whether the requirements of paragraph 2.(B) of
this Article TENTH have been met with respect to any Business
Combination;
(E) whether the assets which are the subject of any
Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination
has, an aggregate Fair Market Value of $1,000,000 or more;
and
(F) such other matters with respect to which a
determination is required under this Article TENTH.
The good faith determination of a majority of the Disinterested
Directors on such matters shall be conclusive and binding for all purposes of
this Article TENTH.
5. Nothing contained in this Article TENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
6. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of
at least eighty (80) percent of the combined voting power of the
Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal this Article TENTH or to adopt any provision
inconsistent therewith; provided, however, that if there is an
Interested Stockholder on the record date for the meeting at which
such action is submitted to the stockholders for their consideration,
there shall be required the greater of (i) the affirmative vote of the
holders of at least 80 percent of the combined voting power of such
aforementioned Voting Stock, or (ii) the affirmative vote of the sum
of (a) the number of shares of such Voting Stock then beneficially
owned by the Interested Stockholder, plus (b) a majority of the
combined voting power of the outstanding shares of Voting Stock held
by stockholders other than the Interested Stockholder.
ELEVENTH: The Corporation reserves the right to amend, alter or repeal
any of the provisions of this Certificate of Incorporation and to add other
provisions authorized by the laws of the Commonwealth of Puerto Rico at the
time in force, in the manner and at the time prescribed by said laws, and all
rights, powers and privileges at any time conferred upon the Board of Directors
and the stockholders are granted subject to the provisions of this Article
ELEVENTH.
IN WITNESS WHEREOF, We the subscribers, being all the incorporators
named in the foregoing Certificate of Incorporation have hereunto set our hands
this 19th day of February, 1938.
Blanton Winship (Sgd.)
J. E. Colom (Sgd.)
A. Lucchetti (Sgd.)
12
<PAGE> 13
ACKNOWLEDGMENT
THE PEOPLE OF PUERTO RICO}
MUNICIPALITY OF SAN JUAN} SS.:
Be It Remembered that on this 19th day of February, A.D. 1938, before
me a Notary Public personally appeared Blanton Winship, Jose Enrique Colom and
Antonio Lucchetti, who I am satisfied are the persons named in and who executed
the foregoing Articles of Incorporation and I having first made known to them
the contents thereof, they, being severally duly sworn, on their oath did each
acknowledge that they executed and signed the same as their voluntary act and
deed.
Subscribed and sworn to before me this 19th day of February, A.D. 1938.
Luis Venegas Cortes (Sgd.)
Notary Public
[Notarial Seal]
13
<PAGE> 14
PUERTO RICAN CEMENT COMPANY, INC.
-------------
CERTIFICATE OF INCORPORATION
AMENDMENTS UP TO
DECEMBER 31, 1999
----------
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 3.2
PUERTO RICAN CEMENT COMPANY, INC.
B Y - L A W S
I. OFFICES
1. The principal office of the Corporation in the Commonwealth of Puerto
Rico is located at Amelia Industrial Park, Guaynabo, Puerto Rico.
2. The Corporation may also have such other offices at such other places,
either within or without the Commonwealth of Puerto Rico, as the Board of
Directors may from time to time determine or the business of the corporation may
require.
II. STOCKHOLDERS' MEETINGS
1. All meetings of the stockholders for the election of directors shall be
held at the office of the corporation, Amelia Industrial Park, Guaynabo, Puerto
Rico, or at such other place in said city as may be fixed by the Board of
Directors.
2. The annual meeting of stockholders, commencing with the year 1979,
shall be held on the first Wednesday in May in each year, if not a legal
holiday, and if a legal holiday, then on the first business day following that
is not a legal holiday, at 10:00 o'clock A.M., at which meeting the stockholders
shall elect a Board of Directors, and transact such other business as may be
properly brought before the meeting.
3. Annual Meetings. A proposal from a stockholder of the Corporation to be
presented at an annual meeting must be received by the Secretary of the
Corporation at its principal executive offices not less than 120 days in advance
of the date the proxy statement was released to stockholders in connection with
the previous year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous years' proxy statement, a proposal shall so be received by the
Corporation a reasonable time before the solicitation is made.
In the case of such a proposal that includes nominations for election to
the Board of Directors, the notice must include, as to each nominee, the
information required to be included in a proxy statement under the Securities
and Exchange Commission's proxy rules, as in effect from time to time. Proposals
must be sent by registered mail return receipt requested.
4. Written notice of the annual meeting shall be served upon or mailed to
each stockholder entitled to vote thereat at such address as appears on the
books of the Corporation, at least ten days prior to the meeting.
5. At least ten days before every election of directors, a complete list
of the stockholders entitled to vote as said election, arranged in alphabetical
order, with the residence of each and the number of voting shares held by each,
shall be prepared by the Secretary. Such list shall be open during the usual
hours of business at the place where the election is to be held for said ten
days, to the examination of any stockholders, and shall be produced and kept at
the time and place of election during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
6. Special meeting of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be called by the Chairman of the Board of Directors, the Vice-Chairman of
the Board of Director or the President and shall be called by the President or
Secretary at the request in writing of a majority of the Board of Directors.
Such request shall state the purpose or purposes of the proposed meeting.
1
<PAGE> 2
7. Written notice of a special meeting of stockholders stating the time
and place and object thereof, shall be served upon or mailed to each stockholder
entitled to vote thereat at such address as appears on the books of the
Corporation, at least ten days before such meeting.
8. Business transacted at all special meetings shall be confined to the
objects stated in the call.
9. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by statute, by the
Certificate of Incorporation or by these By-Laws. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting of which the notice was given originally.
10. When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the Certificate of
Incorporation or of these By-Laws, a different vote is required in which case
such express provision shall govern and control the decision of such question.
11. At any meeting of the stockholders each stockholder having the right
to vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder and bearing a date not more
than one year prior to said meeting, unless said instrument provides for a
longer period. Each stockholder shall have one vote for each share of stock
having voting power, registered in his name on the books of the Corporation, and
except where the transfer books of the Corporation shall have been closed or a
date shall have been fixed as a record date for the determination of its
stockholders entitled to vote, no share of stock shall be voted on at any
election of directors which shall have been transferred on the books of the
Corporation within twenty days next preceding such election of directors.
12. Whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action by any provisions
of the statutes or of the Certificate of Incorporation or of these By-Laws, the
meeting and vote of stockholders may be dispensed with, if all the stockholders
who would have been entitled to vote upon the action if such meeting were held,
shall consent in writing to such corporate action being taken.
III. DIRECTORS
1. The number of directors which will constitute the board shall be
sixteen (16). The number of directors may be changed from time to time by
affirmative vote of a majority of the Board of Directors within the limits
provided by the Certificate of Incorporation, but no such change shall affect
the term of any director then in office. The Board of Directors shall from time
to time make such determinations pursuant to this section as shall be necessary
or appropriate in order to ensure that, under any circumstances, the holders of
capital stock of any class or series of capital stock having voting rights
established under Article FIFTH, Section 1 of the Certificate of Incorporation
shall be able, after giving effect to all applicable provisions of the
Certificate of Incorporation and of these By-Laws, duly and effectively to
exercise any special right conferred upon them by the Certificate of
Incorporation or any resolution or resolutions of the Board of Directors adopted
pursuant thereto to elect directors of the Corporation. Except as otherwise
provided by law or in the Certificate of Incorporation or any resolution or
resolutions of the Board of Directors thereto, the term of office of each
director heretofore or hereafter elected shall be from time of his election and
qualification until the third annual meeting next following his election and
until his successor shall have been duly elected and shall have qualified.
2. The directors may hold their meetings and keep the books of the
Corporation, except the original or duplicate stock ledger, outside the
Commonwealth of Puerto Rico at such places as they may from time to time
determine.
2
<PAGE> 3
3. If any vacancies occur in the Board of Directors caused by death,
resignation, retirement, disqualification or removal from office of any
directors or otherwise, or any new directorship is created by any increase in
the authorized number of directors, a majority of the directors then in office,
may choose a successor or successors, or fill the newly created directorship,
and the directors so chosen shall hold office until the next annual election of
directors and until their successors shall be elected and qualified, unless
sooner displaced in accordance with the terms of these By-Laws, the Certificate
of Incorporation and applicable law.
IV. EXECUTIVE COMMITTEE
1. The Board of Directors of the Corporation may, by resolution passed by
a majority of the whole Board, appoint an Executive Committee of three or more
members, to serve during the pleasure of the Board to consist of such directors
as the Board of Directors of the Corporation may from time to time designate.
The Chairman of the Board shall be Chairman of the Executive Committee.
2. Meetings of the Executive Committee may be held from time to time as
called by the Chairman of the Executive Committee or by any two members thereof
by notice to the other members. Notice of such meeting shall be given by oral,
telegraphic or written notice not less than twenty-four (24) hours before such
meeting. The presence of three members of the Executive Committee, one of whom
shall be Chairman of the Executive Committee, shall be requisite and shall
constitute a quorum for the transaction of business.
3. During the intervals between the meetings of the Board of Directors,
the Executive Committee shall possess and may exercise all the powers of the
Board of Directors of the Corporation (other than the power to remove or elect
officers) in the management and direction of the business, affairs and
properties of the corporation and all action by the Executive Committee shall be
deemed to be the action of the Board of Directors of the Corporation.
4. The Executive Committee shall keep regular minutes of its proceedings,
and action by the Executive Committee shall be reported to the Board of
Directors of the Corporation from time to time at the request of the Board.
V. FINANCE COMMITTEE
1. The Board of Directors may, by resolution passed by a majority of the
whole Board, appoint a Finance Committee of three or more members, to serve
during the pleasure of the Board, to consist of such directors as the Board of
Directors may from time to time designate.
2. Regular meetings of the Finance Committee shall be held monthly and
special meetings may be held from time to time as called by the Chairman of the
Finance Committee or any two members thereof by notice to the other members of
the Finance Committee. Notice of such meetings shall be given by oral,
telegraphic or written notice not less than 24 hours before such meeting. The
presence of a majority of the total number of members of the Finance Committee
shall be requisite and shall constitute a quorum for the transaction of
business.
3. The Finance Committee, subject to any limitations prescribed by the
Board of Directors, shall have charge of all financial and accounting affairs of
the Corporation, including budgetary, accounting, statistical methods and
extensions of credit. It shall also make recommendations to the board of
Directors with respect to: dividend and financing policies; financial policy
regarding annual budgets for expenditures for physical assets and other
expenditures for physical assets of unusual import; and such other financial
matters as may be assigned from time to time by the Board of Directors.
4. The Finance Committee shall keep regular minutes of its proceedings,
and action taken by the Finance Committee shall be reported to the Board of
Directors of the Corporation from time to time at the request of the Board.
3
<PAGE> 4
VI. AUDIT COMMITTEE
1. The Board of Directors may, by resolution passed by a majority of the
whole Board, appoint an Audit Committee of three or more members, to serve
during the pleasure of the Board to consist of such outside directors as the
Board may from time to time designate.
2. The Audit Committee shall establish a meeting schedule and procedures
for the fulfillment of its functions. Meetings may be called by the Chairman of
the Audit Committee or any two members thereof by notice to the other members of
the Committee. Notice of such meetings shall be given by oral, facsimile, or
written notice not less than 24 hours before such meeting. The presence of a
majority of the total number of members of the Audit Committee shall be
requisite and shall constitute a quorum for the transaction of business.
3. The Audit Committee, subject to any limitations prescribed by the Board
of Directors, shall have charge of all audit functions of the Corporation,
including review of the Corporation's principal policies for internal control
and financial reporting and, in coordination with the independent auditors,
review with management any significant changes in the accounting policies and
reporting standards applicable to the preparation of the Corporation's annual
financial statements and the effect such changes in accounting policies and
reporting standards shall have upon the Corporation's accounting policies and
financial reports.
4. The Audit Committee shall keep regular minutes of its proceedings, an
action taken by the Audit Committee shall be reported to the Board of Directors
of the Corporation from time to time at the request of the Board.
VII. COMPENSATION COMMITTEE
1. The Board of Directors may, by resolution passed by a majority of the
whole Board, appoint a Compensation Committee of three or more members, to serve
during the pleasure of the Board, to consist of such directors as the Board of
Directors may from time to time designate.
2. Meetings of the Compensation Committee may be held from time to time as
called by the Chairman of the Compensation Committee or by any two members
thereof by notice to the other members. Notice of such meeting shall be given by
oral, facsimile or written notice not less than 24 hours before such meeting.
The presence of a majority of the total number of members of the Compensation
Committee shall be requisite and shall constitute quorum for the transaction of
business.
3. The Compensation Committee, subject to any limitations prescribed by
the Board of Directors, shall establish and periodically review policies for the
compensation of directors and officers and shall make recommendations to the
Board regarding levels and form of compensation to said directors and officers.
4. The Compensation Committee shall review management's recommendations
regarding compensation to all other salaried employees.
5. The Compensation Committee shall keep regular minutes of its
proceedings, and action taken by the Committee shall be reported to the Board of
Directors from time to time at the request of the Board.
VIII. PENSION PLAN COMMITTEE
1. The Board of Directors may, by resolution passed by a majority of the
whole Board, appoint a Pension Plan Committee of three or more members, to serve
during the pleasure of the Board, to consist of such directors as the Board of
Directors may from time to time designate.
2. Meetings of the Pension Plan Committee may be held from time to time as
called by the Chairman of the Pension Plan Committee or by any two members
thereof by notice to the other members. Notice of such meeting shall be given by
oral, facsimile or written notice not less than 24 hours before such meeting,.
The presence of a majority of the total number of members of the Pension Plan
Committee shall be requisite and shall constitute quorum for the transaction of
business.
4
<PAGE> 5
3. The Pension Plan Committee, subject to any limitations prescribed by
the Board of Directors, shall establish and periodically review actuarial
policies and objectives of the pension plan, review the investment performance,
management's administration of the pension plan and the Company's compliance
with laws and regulations governing the pension plan.
4. The Pension Plan Committee shall keep regular minutes of its
proceedings, and action by the Committee shall be reported to the Board of
Directors from time to time at the request of the Board.
5. The Secretary of the Corporation shall act as Secretary of the Pension
Plan Committee.
IX. NOMINATING COMMITTEE
1. The Board of Directors may, by resolution passed by a majority of the
whole Board, appoint a Nominating Committee of three or more members, to serve
during the pleasure of the Board, to consist of such directors as the Board of
Directors may from time to time designate.
2. Meetings of the Nominating Committee may be held from time to time as
called by the Chairman of the nominating Committee or by any two members thereof
by notice to the other members. Notice of such meeting shall be given by oral,
facsimile or written notice not less than 24 hours before such meeting. The
presence of a majority of the total number of members of the Nominating
Committee shall be requisite and shall constitute quorum for the transaction of
business.
3. The Nominating Committee, subject to any limitations prescribed by the
Board of Directors shall make recommendations on nominees for election as
directors and shall recommend to the Board criteria for Board membership, review
qualifications of incumbent directors in determining whether to recommend them
for reelection for the Board and recommend to the Board the removal of a
director where appropriate.
4. The Nominating Committee shall also review external developments in
corporate governance matters and recommend action to the Board where
appropriate.
5. The Nominating Committee shall keep regular minutes of its proceedings,
and action taken by the Nominating Committee shall be reported to the Board of
Directors of the Corporation from time to time at the request of the Board.
X. ADDITIONAL COMMITTEES OF DIRECTORS
1. The Board of Directors may, by resolution or resolutions passed by
majority of the whole Board designate one or more committees in addition to the
Executive, Finance, Audit, Compensation, Pension Plan, and Nominating Committees
as herein provided, each committee to consist of two or more of the directors of
the corporation, which, to the extent provided in said resolution or
resolutions, shall have and may exercise the powers of the Board of Directors
(other than the power to remove or elect officers) in the management and
direction of the business, affairs and properties of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
2. The committees shall keep regular minutes of their proceedings and
report the same to the Board when required.
XI. COMPENSATION OF DIRECTORS
1. Directors, as such, shall not receive any stated salary for their
services, but by resolution of the Board a fixed
5
<PAGE> 6
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board; provided that nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
2. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
XII. MEETINGS OF THE BOARD
1. Immediately following each annual meeting of stockholders, the Board of
Directors shall hold a regular meeting for the purpose of organization, election
of officers, and the transaction of other business and no notice of such meeting
shall be necessary to the newly elected directors in order to legally to
constitute the meeting provided a quorum shall be present, or they may meet at
such place and time as shall be fixed by consent in writing of all the
directors.
2. Regular meetings of the Board of Directors shall also be held without
notice at the principal office of the Corporation on the fourth Wednesday of
each month, if such day is not a legal holiday; otherwise, on the next business
day, at 2:30 p.m., or at such other time and place as the Board may previously
determine, for the purpose of considering any business that may lawfully come
before the meetings.
3. Meetings may be held at any time and place without notice if all the
directors are present.
4. Special meetings of the Board may be called by either the Chairman of
the Board of Directors, the Vice Chairman of the Board of Directors or the
President, on two days' notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of two directors.
5. Except as otherwise specifically provided by law or by the Certificate
of Incorporation, 7 directors shall be requisite and shall constitute a quorum
for the transaction of business, except in the case of the designation of one or
more committees, when the resolution or resolutions must be passed by a majority
of the whole Board. If at any meeting of the Board of Directors of the
Corporation there shall be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without notice other than announcement of the adjournment at the meeting, and at
such adjourned meeting at which a quorum is present any business may be
transacted which might have been transacted at the meeting pursuant to the
original notice.
6. Any action taken or permitted to be taken at any meeting of the Board
of Directors of the Corporation or of any committee thereof may be taken without
a meeting if prior to such action a written consent thereto is signed by all
members of the Board of Directors of the Corporation or of such committee as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Board or committee.
XIII. NOTICES
1. Whenever under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail or telegram, addressed to such
director or stockholder at such address as appears on the books of the
Corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed or delivered to the telegraph company.
2. Whenever any notice is required to be given under the provisions of the
statutes or of the Certificate of Incorporation, or of these By-Laws, a waiver
thereof in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
6
<PAGE> 7
XIV. OFFICERS
1. The Board of Directors, as soon as may be after the election of
directors in each year, shall elect a Chairman of the Board, one or more
Vice-Chairman of the Board, and a President from its members and shall also
elect one or more Vice-Presidents, a Secretary, a Treasurer and a Comptroller,
none of whom need be a member of the Board.
2. Any two offices (but not more than two), other than the offices of
President and Secretary, may be held by the same person.
3. The Board may from time to time elect such other officers as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board.
4. The salaries of all officers shall be fixed by the Board.
5. The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer may be removed at
any time by the affirmative vote of a majority of the whole Board of Directors.
If the office of any officer becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD OF DIRECTORS
6. The Chairman shall preside over the meetings of the Board of Directors.
THE VICE-CHAIRMAN OF THE BOARD OF DIRECTORS
7. The Vice-Chairman or Vice-Chairmen of the Board of Directors shall
assist the Chairman in matters relative to the general affairs of the Board and
will preside over the board meeting in the absence of the Chairman. The Board
shall designate the Vice-Chairman who will preside over a board meeting in the
event that there is more than one Vice-Chairman present at a meeting of the
Board from which the Chairman is absent.
THE CHIEF EXECUTIVE OFFICER
8. The Chief Executive Officer shall be responsible for establishing the
general and financial policies; execute bonds, deeds, and contracts in the name
and on behalf of Corporation and shall also have such other powers and perform
such other duties as from time may be conferred upon him by the Board of
Directors.
THE PRESIDENT
9. The President shall be the administrative officer of the Corporation
and the Executive Officer in charge of the operations of the Corporation, and
shall report directly to the Chairman of the Board of Directors. He shall be
responsible for the administration of the business and operations of the
Corporation, and shall see that all orders and resolutions of the Board are
carried into effect. He shall have general authority to execute bonds, deeds,
and contracts in the name and on behalf of the Corporation, shall have the
authority to cause the employment or appointment of such employees and agents of
the Corporation (other than officers) as the conduct of the Corporation may
require, to remove or suspend any employee or agent who shall not have been
appointed by the Board of Directors or the Executive Committee, and in general
may exercise all the powers generally vested in the administrative and
operations officer of a corporation. In the absence of the Chairman and the
Vice-Chairman of the Board of Directors he may exercise all of the powers and
shall perform all of the duties of the Chairman of the Board of Directors.
THE VICE-PRESIDENTS
10. The Vice-Presidents shall perform such duties and exercise such powers
as the Board of Directors shall
7
<PAGE> 8
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
11. (a) The Secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the Board
of Directors. He shall keep in safe custody the seal of the Corporation, and
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or an Assistant
Secretary.
(b) The Assistant Secretaries in order of their seniority shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as the Board of
Directors shall prescribe.
THE TREASURER AND THE ASSISTANT TREASURERS
12. (a) The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
(b) He shall disburse the funds of the Corporation as may be ordered
by the Board, taking proper vouchers for such disbursements, and shall render to
the Chairman of the Board of Directors, or the President and Directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
(c) If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board to the faithful performance of the duties of his
office and for the restoration to the Corporation, in the case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
(d) The Assistant Treasurers in the order of their seniority shall, in
the absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as the Board of
Directors shall prescribe.
THE COMPTROLLER AND THE ASSISTANT COMPTROLLERs
13. (a) The Comptroller shall maintain adequate records of all assets,
liabilities and transactions of the Corporation and shall audit, or cause to be
audited, such records, currently and regularly. He shall, in conjunction with
other officers and employees of the Corporation, and subject to the Board of
Directors, initiate and enforce measures and procedures for the maximum safety,
efficiency and economy of the business of the Corporation.
(b) The Assistant Comptrollers in the order of their seniority shall,
in the absence or disability of the Comptroller, perform the duties and exercise
the powers of the Comptroller and shall perform such other duties as the Board
of Directors shall prescribe.
XV. DELEGATION OF DUTIES
1. In the absence or disability of an officer of the Corporation or in any
other case that the Board of Directors may deem sufficient reason therefor, the
Board of Directors may delegate for the time being any or all of the powers or
duties
8
<PAGE> 9
of any officer to any other officer or to any director or to any other person.
XVI. CERTIFICATE OF STOCK
1. The certificates of stock of the Corporation shall be numbered and
shall be entered in the books of the Corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
Chairman, or the President, or a Vice-President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary. If any stock
certificate is signed (1) by a transfer agent or an assistant transfer agent or
(2) by a transfer clerk acting on behalf of the Corporation and a registrar, the
signature of any such officer may be facsimile.
XVII. TRANSFERS OF STOCK
1. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
XVIII. CLOSING OF TRANSFER BOOKS
1. The Board of Directors shall have power to close the stock transfer
books of the Corporation for a period not exceeding fifty days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date for the allotment of rights or the date when any change or conversion
or exchange of stock shall go into effect or for a period of not exceeding fifty
days in connection with obtaining the consent of stockholders for any purpose;
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding fifty
days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of stock shall go into effect, or a
date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment or rights, or to exercise the rights in
respect of any such change, conversion or exchange of stock, or to give such
consent, and in such case such stockholders and only such stockholders as shall
be stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.
XIX. REGISTERED STOCKHOLDERS
1. The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the
Commonwealth of Puerto Rico.
XX. LOST CERTIFICATE
1. The Board of Directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the Corporation a bond in such
sum at it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost or
9
<PAGE> 10
destroyed.
XXI. DIVIDENDS
1. Dividends upon the stock of the Corporation, subject to the provisions
of the Certificate of Incorporation, may be declared by the Board of Directors
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of stock, subject to the provisions of the
Certificate of Incorporation
2. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
XXII. SEAL
1. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization (1938) and the works "Corporate Seal,
Puerto Rico". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
XXIII. FISCAL YEAR
1. The fiscal year of the Corporation shall be the calendar year.
XXIV. VOTING SHARES IN OTHER CORPORATIONS
1. The Corporation may vote any and all shares of stock and/or other
certificates of interest held by it in any other corporation or corporations by
such officer, agent or proxy as the Board of Directors may appoint or, in
default of such appointment, by the President or any Vice-President.
XXV. AMENDMENTS
1. These By-Laws may be amended, altered, changed or repealed and new
By-Laws adopted by the holders of a majority of the stock of the Corporation
having voting power or by affirmative vote of a majority of the Board of
Directors of the Corporation at any meeting the notice of which includes this
purpose; provided, however, that any action with respect thereto taken by the
Board of Directors of the Corporation shall be subject to the power of the
holders of a majority of the stock of the Corporation having voting power to
alter, amend or repeal By-Laws made by the Board of Directors; provided,
however, that no change in the time or place for the election of directors shall
be made within sixty days next before the day on which such election is to be
held and that in case of any change in such time or place, notice thereof shall
be given to each stockholder twenty days before such election is held, in person
or by letter mailed to his address as shown on the books of the Corporation.
PUERTO RICAN CEMENT COMPANY, INC.
10
<PAGE> 11
---------
By-Laws
ADOPTED MARCH 14, 1963 WITH AMENDMENTS UP TO
DECEMBER 31, 1999
---------
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 13
Puerto Rican Cement Company, Inc. Annual Report
Financial Information
CONTENTS
<TABLE>
<S> <C>
14 Management's Discussion and Analysis
17 Selected Financial Data
17 Common Share Prices and Dividends Per Share
18 Report of Independent Accountants
19 Consolidated Statement of Income
20 Consolidated Balance Sheet
21 Consolidated Statement of Comprehensive Income
21 Consolidated Statement of Changes in Stockholders' Equity
22 Consolidated Statement of Cash Flows
23 Notes to Consolidated Financial Statements
32 Consolidated Fourth Quarter Results
32 Financial Results by Quarters
33 Five-Year Statistical Comparison
34 Directors and Officers
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________________________________________________________________________________
[PUERTO RICAN CEMENT COMPANY, INC. LOGO]
This section represents Management's discussion and analysis of the Company's
consolidated financial condition and results of operations. It should be read
in conjunction with the accompanying financial statements.
RESULTS OF OPERATIONS
1999 COMPARED WITH 1998
Consolidated sales of $173.3 million for 1999 were $24.9 million higher than
sales of $148.4 million in 1998. Sales in 1999 were 17% higher than in
previous year due to increases in cement and ready mix sales. Vigorous
construction activity throughout the year resulted in a 21% increase in gross
cement sales and a 22% increase in sales of ready mix concrete. This increase
was offset by a sales decline in both the lime and paper and bags operations.
Consolidated gross margin improved from $39.7 million in 1998 to $46.6 million
in 1999. This was a result of higher net sales, although it remained at
approximately 27% as a percentage of sales for both years. This increase is
partly due to a lower level of consolidated gross margin in 1998 caused by
interruption in clinker production schedules associated with the passage of
Hurricane Georges and scheduled plant shut down to complete and upgrade
project. Consolidated gross margin was affected by an increase in the cost of
aggregates used in the manufacturing of ready mix concrete which went up as
alternate sources of this material had to be found due to the increased demand
for this product. In addition, higher unit production costs in the paper and
bags operations caused by lower utilization of the plant production capacity,
as sales in that segment decreased, also affected gross margins.
Selling, general and administrative expenses in 1999 increased $3.3 million
from 1998 to $27.5 million, although they declined from 16.3% of net sales in
1998 to 15.9% in 1999. Most of this increase was associated with higher sales
volumes, but it also included approximately a $450,000 increase in legal
expense related to the now concluded case against local government agencies.
Interest expenses for 1999 increased $944,000 or 18% when compared to the prior
year. Approximately $244,000 of this increase was related to financial charges
on loans attributable to the operations of PCC, which began operations in
September of 1998. Also, as disclosed in the 1998 financial statements, the
Company was audited by the Puerto Rico tax authority. This audit, which
concluded in 1999, resulted in a settlement where the Company paid over
$300,000 in interest. Interest income for 1999 increased $258,000, principally
reflecting the revenues from the Company's new financing operations, PCC.
During 1998, the Company reported a gain on sale of investments of
approximately $1.2 million. Also, included in income before taxes for that year
was a $240,000 gain on the expropriation of a piece of land owned by one of the
Company's subsidiaries. Excluding the effect of these two non-recurring gains
in the 1998 results, income before taxes for 1999 increased by over $3.8
million, or 27%, over the adjusted 1998 figure.
Legal expenses, mostly related to the now concluded case against the local
government, totaled $4.8 million in 1999 and $4.3 million in 1998. As indicated
previously, the case was resolved on terms favorable to the Company and, the
related work to commence the aggregates business is well in progress. The
Company expects legal expenses to decrease significantly during the next year.
The effective tax rate for 1999 increased to 26% compared to 19.6% in 1998. The
increase resulted from a higher proportion of capital gains in 1998, which are
taxed at lower rates than ordinary income, and a proportionately higher
tax-free income during 1998.
CEMENT SEGMENT
Cement operations. Reflecting a year of strong construction activity, the
Company finished 1999 with an increase of 21% in cement sales deliveries, with
volumes for the year rising from 1,037,000 tons in 1998 to 1,255,000 tons in
1999. This increase was also partly a result of a decrease in sales deliveries
in 1998 caused by the passage of Hurricane Georges, as discussed above. Cement
selling prices for 1999 were almost at the same level as in the prior year.
Gross margin in 1999 was 33.5% compared with 33.1% in 1998, remaining
essentially the same. This happened despite increases of 88,000 tons, or 9.9%,
in clinker production and 225,000 tons, or 21.8%, in cement production and was
due principally to higher power and maintenance costs. Due to the high volume
of sales during 1999, the Company had to buy clinker from external sources at a
slightly higher cost than purchases made in 1998, affecting also average cost
of sales for 1999.
At the beginning of 2000, the Department of Consumer Affairs of Puerto Rico
abolished its regulations relating to quality standards for cement. This
abolition may have the effect of increasing competition in the cement market in
Puerto Rico, since competitors of the Company that have a cement product not
satisfying the quality standards of the Department may now attempt to enter the
Puerto Rico market. Notwithstanding, all cement sold on the Island has to
comply with the U.S. Uniform Building Code, which will be enforced through
requirements established by the Regulations and Permits Administration.
Management believes that these requirements, in addition to market conditions
for cement on the Island, may be a deterrent for the imports of low quality
cement.
The House of Representative and the Senate of Puerto Rico are currently
considering reversing this abolition, but is unclear what the outcome of the
consideration will be. The Company is not certain what effect the abolition
will have, but, it may materially affect competition on the cement market.
READY MIX CONCRETE SEGMENT
Ready mix concrete operations. Ready mix concrete sales for the year were up
22%. Revenues increased $17.1 million from $77.4 million in 1998 to $94.5
million in 1999. The rise in sales resulted from increases in sales volumes and
average selling prices. Operating margins in 1999 were hurt, however, by an
increase of 2.6% in the average cost per unit produced. This was the result of
higher aggregate costs and labor expenses. Cost of aggregate increased, as this
material became scarce with the expanded level of construction experienced in
1999. The level of construction drove higher labor costs, as well as required
extended delivery schedules, thus
________________________________________________________________________________
14
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
_______________________________________________________________________________
[PUERTO RICAN CEMENT COMPANY, INC. LOGO]
affecting delivery expenses. Finally, the last quarter of the year was affected
by an unusual and extended rainy season which also impacted labor costs.
ALL OTHERS SEGMENT
Lime operations. Operating income for the lime operation decreased 31% to
$258,000 in 1999 compared with $373,000 in 1998. This change can be attributed
to a reduction of 48% in export sales, partially offset by a smaller increase
in sales to local market.
Multi-wall paper bags operations. In 1999, there was a marked decrease in sales
volume on the small (pockets) bags division due to lower sales to a large
customer. This decline affected the average cost per unit, as less production
was required to meet actual sales. As a result, gross margin for the year
decline from 21% in 1998 to 18% for the year 1999.
Financing operations. On March 19, 1998, the Company incorporated a new
subsidiary, PCC, under the laws of the Commonwealth of Puerto Rico. PCC was
established for the purpose of providing equipment financing, primarily to
existing or prospective customers in construction and related industries. As
mentioned earlier, PCC began operations during September 1998 after obtaining
its license from the Commonwealth's Commissioner of Financial Institutions. In
1999, its first full year of operations, the PCC contributed $136,000 to income
before taxes.
1999 COMPARED WITH 1997
During 1998, consolidated sales decreased by $8.4 million, or 5%, to $148.4
million from $156.8 million during 1997. This was principally a result of
decreases of 8.0% in cement dollar sales, and 5.1% in ready mix concrete sales,
slightly offset by an increase in lime sales.
Consolidated gross margin, reported at 26.7% for 1998, had decreased from a
gross margin of 29.8% for 1997. The principal reason for this decrease was the
interruptions in the clinker production schedules associated with the passage
of Hurricane Georges and scheduled plant shutdowns to complete the upgrade
project during 1998. These interruptions resulted in higher production costs.
Consolidated selling, general and administrative expenses increased by $2.3
million, or 10.6%, to $24.2 million in 1998 from $21.9 million in 1997. This
increase was principally attributable to higher professional fees for legal
services associated mainly with then ongoing legal proceedings against local
Government agencies in the federal and local courts. As explained above, these
expenses continued to impact general and administrative expenses during 1999.
Interest and financial charges decreased $550,000, or 9.5%, to $5.2 million in
1998 compared with $5.8 million for 1997. This decrease was due to the
capitalization of $712,000 in interest expense associated with the upgrade of
the cement production facilities. Interest income decreased by $200,000, or
5.6%, to $3.4 million in 1998 compared with $3.6 million in 1997. This decrease
resulted from a reduction in the Company's investment portfolio due to the sale
and redemption of investments during 1998 to supplement cash flow.
The provision for income taxes as a proportion of income decreased to 19.6% for
1998 from 29.8% for 1997. This decrease resulted from the acquisition at a
discount of tax credits derived from investments in governmental incentive
programs, the taxation of gains on the sale of investments at capital gain
rates instead of higher corporate tax rates, and a proportionately higher
tax-free income during 1998.
CEMENT SEGMENT
Cement operations. During 1998, cement dollar sales decreased by 6.9%. This was
principally due to a decrease in sales volume of 60,000 tons, or 5.5%, to
1,037,000 tons in 1998 from 1,097,000 tons in 1997. This decrease was
attributable mainly to unfavorable weather during 1998, particularly the
passage of Hurricane Georges during September. The cement production costs were
adversely affected by several interruptions in the clinker production schedules
during 1998. Hurricane Georges disrupted clinker production schedules during
1998 due to frequents power outages. In addition, the Company shut down its
clinker production for 33 days during the months of January and February to
perform work on its kiln as part of a plant upgrade project. The Company
purchased higher-cost clinker to continue the production of cement during the
shutdown.
READY MIX CONCRETE SEGMENT
Ready mix concrete operations. Sales by Ready Mix Concrete, decreased by $4.1
million, or 5.1%, to $77.4 million in 1998 from $81.5 million in 1997. This was
the result of a 5.9% decrease in sales volume attributable mainly to
unfavorable weather conditions during 1998 as mentioned above, and to labor
shortages in the construction industry during the fourth quarter of 1998.
ALL OTHERS SEGMENT
Lime operations. Total lime sales increased during 1998 by 5,000 tons, or
15.1%, as a result of an increase in export sales, slightly offset by a
decrease in local sales. This increase contributed to better capacity
utilization of the hydrated lime plant, thereby resulting in lower production
cost per ton.
Multi-wall paper bags operations. During 1998, sales of multi-wall paper bags
remained at levels similar to those in 1997. There was a reduction in the
pasted bag division sales, entirely offset by increases in the sewn bag and
pocket bag division sales. Reductions in pasted bag sales are associated with
lower packed cement sales.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had $1.6 million in cash and cash equivalents
compared with $7.5 million at December 31, 1998. Working capital decreased from
$68.9 million in 1998 to $57.1 million in 1999. The current ratio at December
31, 1999 decreased to 3.08 to 1 from 4.06 to 1 at December 31, 1998. These
decreases were principally due to a reduction of $15.9 million in cash and cash
equivalents and short-term investments combined with an increase in current
liabilities, principally caused by higher income taxes payable.
The Company's operating activities generated $17.3 million in cash during 1999
compared to $17.2 million in 1998. This cash, in addition to net proceeds of
$9.2 million from the redemption of investments held-
_______________________________________________________________________________
15
<PAGE> 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
_______________________________________________________________________________
]Puerto Rican Cement Company, Inc. LOGO]
to-maturity, and $5.2 million in proceeds from new loans, was used to finance
capital expenditures of $20.7 million, pay $4.0 million in dividends and
repurchase capital stocks of the Company for $6.4 million. In Management's
opinion, future cash flows provided by operating activities, actual cash and
cash equivalent balances and short-term borrowing facilities available to the
Company, will be sufficient to satisfy its cash requirements in the future.
Notes and accounts receivable increased by $6.2 million to $34.9 million at
December 31, 1999 due to higher sales and an increase of $1.5 million in notes
receivable related to new loans issued by the Company's new financing
subsidiary. Inventories increased $2.4 million to $36.3 million at December 31,
1999 due to comparable higher stocks of clinker, cement, coal and spare parts
inventory.
Capital expenditures for 1999 totaled $20.7 million of which $7.3 million was
invested in the cement segment, $12.4 million in the ready mix concrete segment
and $1.0 million in other segments. Cement segment additions consisted
principally of improvements to equipment and machinery related to the production
capacity of the plant. Expenditures in the ready mix concrete segment included
$7.6 million for the acquisition of new trucks, mixers and related vehicles,
plants modernization of $2.1 million and acquisition of land for $1.9 million.
Long-term notes receivable increased $2.3 million to $6.2 million at December
31, 1999 due to new loans granted by the Company's financing subsidiary.
Total current liabilities grew $4.9 million to $27.4 million at December 31,
1999 from $22.5 million at December 31, 1998. The increase was principally due
to a $2.6 million increase in income taxes payable caused by the reversing for
tax purposes of temporary differences recorded in previous years as deferred
income taxes.
During 1999, the Company obtained new loans totaling $5.2 million and paid $3.1
million in principal on its outstanding debt. The new loans were principally
used to finance the operations of the Company's financing subsidiary, PCC.
Significant events
- ------------------
Year 2000 Status
- ----------------
The Year 2000 problem is the result of certain computers being unable to
distinguish between the years 1900 and 2000. If not addressed, these systems may
not have properly interpreted dates beyond the year 1999 which, could have led
to business disruptions. Accordingly, the Company identified and performed all
needed material modifications and testing of significant systems, including
migrating its computerized applications to a new processing architecture
commonly known as an Enterprises Resources Planning System. Although the Company
does not depend heavily on third parties, it communicated with customers,
suppliers, bank and others with whom it does significant business to determine
their Year 2000 readiness and the extent to which the Company was vulnerable to
any other organization's Year 2000 issues.
The Company considers the transition into the Year 2000 successful from the
perspective of its systems. In addition to the changeover to January 1, 2000, it
has been shows that certain other dates may also present similar problems for
some systems. The Company continues to monitor the situation. To date, the
Company has not experienced any material Year 2000 issues with respect to its
systems, customers or suppliers.
End of legal case against local government
- ------------------------------------------
In May 1999, the Company and various local Government agencies, agreed to
dismiss with prejudice a civil rights suit filed in December 1997 by the Company
under the Federal civil rights law. In a joint stipulation filed by all parties
and approved by the United States District Court for Puerto Rico all proceedings
were terminated. With the conclusion of this case, the Company could proceed
with the development of its projects in Vega Alto and Guanica, plus the
operation of an aggregates processing plant in Carolina, Puerto Rico (see notes
16 to the Consolidated Financial Statements for further information).
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 at 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 referred to in this Management's and Discussion Analysis. The Company
could 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.
Realty/Limestone Extraction
- ---------------------------
The Company is preparing to begin its operations at Vega Alta and Guanica. The
Vega Alta project consists of the development of a 300-unit, low-cost housing
project on 80 acres of real estate owned by the Company. The Guanica project
consists of the extraction of limestone from a leased facility.
Stock Repurchase
- ----------------
The Company repurchased 192,800 shares of its common stock for $6.4 million
during June 1999 on the open market.
_______________________________________________________________________________
16
<PAGE> 5
PUERTO RICAN CEMENT
COMPANY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Puerto Rican Cement Company, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of comprehensive income, of changes in
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Puerto Rican Cement Company, Inc. and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
February 18, 2000
18
<PAGE> 7
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net sales $ 173,195,360 $ 148,275,297 $ 156,675,080
Revenue from realty operations, net 104,456 101,908 99,012
------------- ------------- -------------
173,299,816 148,377,205 156,774,092
------------- ------------- -------------
Cost and expenses, including depreciation,
depletion and amortization of $14,049,348
(1998 - $13,331,479 ; 1997 - $12,383,769):
Cost of sales 126,738,540 108,706,775 110,010,997
Selling, general and administrative expenses 22,741,247 20,216,093 20,441,365
Legal expenses 4,766,761 3,989,820 1,438,234
------------- ------------- -------------
154,246,548 132,912,688 131,890,596
------------- ------------- -------------
Income from operations 19,053,268 15,464,517 24,883,496
------------- ------------- -------------
Other expense (income):
Interest and financial charges, net of
interest charged to construction 6,160,542 5,216,096 5,765,894
Interest income (3,655,997) (3,398,485) (3,601,063)
Gain on sale of investments -- (1,174,705) (50,451)
Other 280,788 675,205 (36,356)
------------- ------------- -------------
2,785,333 1,318,111 2,078,024
------------- ------------- -------------
Income before income taxes 16,267,935 14,146,406 22,805,472
------------- ------------- -------------
Provision for income taxes:
Current 5,795,819 6,080,332 4,265,955
Deferred (1,570,708) (3,315,110) 2,536,306
------------- ------------- -------------
4,225,111 2,765,222 6,802,261
------------- ------------- -------------
Net income $ 12,042,824 $ 11,381,184 $ 16,003,211
============= ============= =============
Earnings per share:
Basic and diluted net income per share $ 2.29 $ 2.11 $ 2.91
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 8
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,630,750 $ 7,480,900
Short-term investments 6,001,346 16,066,648
Notes and accounts receivable, net 34,968,168 28,799,150
Inventories 36,301,359 33,945,940
Prepaid expenses 5,579,699 5,087,218
------------ ------------
Total current assets 84,481,322 91,379,856
Property, plant and equipment, net 168,650,305 162,278,187
Long-term investments 39,711,592 36,587,498
Long-term notes receivable 6,225,351 3,973,232
Other assets 5,520,256 4,550,784
------------ ------------
Total assets $304,588,826 $298,769,557
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 654,157 $ 550,773
Current portion of long-term debt 3,805,714 2,452,649
Accounts payable 8,679,411 8,820,074
Accrued liabilities 9,233,146 8,224,974
Dividends payable 985,392 1,022,024
Income taxes payable 4,075,291 1,458,038
------------ ------------
Total current liabilities 27,433,111 22,528,532
------------ ------------
Long-term liabilities:
Long-term debt, less current portion 81,365,209 80,541,666
Deferred income taxes 30,787,824 32,358,532
Other long-term liabilities 3,104,981 3,082,449
------------ ------------
Total long-term liabilities 115,258,014 115,982,647
------------ ------------
Total liabilities 142,691,125 138,511,179
------------ ------------
Stockholders' equity:
Preferred stock, authorized 2,000,000 shares of $5.00
par value each; none issued
Common stock, authorized 20,000,000 shares of $1.00
par value each; 6,000,000 shares issued 6,000,000 6,000,000
Additional paid-in capital 14,702,914 14,702,914
Retained earnings 164,221,041 156,170,341
------------ ------------
184,923,955 176,873,255
Less - 813,726 (1998 - 620,926) shares of common stock
in treasury, at cost 23,026,254 16,614,877
------------ ------------
Total stockholders' equity 161,897,701 160,258,378
------------ ------------
Commitments and contingent liabilities
------------ ------------
Total liabilities and stockholders' equity $304,588,826 $298,769,557
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE> 9
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income $ 12,042,824 $ 11,381,184 $ 16,003,211
------------- ------------- -------------
Other comprehensive income, before tax:
Unrealized gain on available-for-sale securities:
Unrealized gain arising during the period -- 420,945 660,296
Reclassification of realized gain included in net -- (1,174,705) (50,451)
income ------------- ------------- -------------
-- (753,760) 609,845
Income taxes related to items of other
comprehensive income -- 186,015 (152,461)
------------- ------------- -------------
-- (567,745) 457,384
------------- ------------- -------------
Comprehensive income $ 12,042,824 $ 10,813,439 $ 16,460,595
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 10
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year $ 6,000,000 $ 6,000,000 $ 6,000,000
------------- ------------- -------------
Additional paid-in capital:
Balance at beginning and end of year 14,702,914 14,702,914 14,702,914
------------- ------------- -------------
Accumulated other comprehensive income:
Balance at January 1 -- 567,745 110,361
Other comprehensive income -- (567,745) 457,384
------------- ------------- -------------
Balance at December 31 -- -- 567,745
------------- ------------- -------------
Retained earnings:
Balance at January 1 156,170,341 148,878,203 137,047,068
Net income 12,042,824 11,381,184 16,003,211
Dividends declared (3,992,124) (4,089,046) (4,172,076)
------------- ------------- -------------
Balance at December 31 164,221,041 156,170,341 148,878,203
------------- ------------- -------------
Treasury stock:
Balance at January 1 (16,614,877) (13,084,547) (10,439,297)
Treasury shares acquired (6,411,377) (3,530,330) (2,645,250)
------------- ------------- -------------
Balance at December 31 (23,026,254) (16,614,877) (13,084,547)
------------- ------------- -------------
Total stockholders' equity $ 161,897,701 $ 160,258,378 $ 157,064,315
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE> 11
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,042,824 $ 11,381,184 $ 16,003,211
------------ ------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 13,994,135 13,276,268 12,328,558
Amortization of goodwill 55,211 55,211 55,211
Provision for doubtful accounts 420,230 145,424 233,135
Accretion of discounts on investments (2,306,657) (2,627,384) (2,859,626)
Provision for deferred income taxes (1,570,708) (3,315,110) 2,536,306
Loss (gain) on sale of property, plant and equipment 106,855 (225,804) (30,976)
Gain on sale of investments (1,174,705) (50,451)
Changes in assets and liabilities:
Increase in accounts receivable (5,037,764) (844,922) (1,586,506)
(Increase) decrease in inventories (2,355,419) (1,060,197) 557,547
(Increase) decrease in prepaid expenses (492,481) (554,148) 91,621
Increase in other assets (1,024,683) (258,649) (68,154)
(Decrease) increase in accounts payable (140,663) 1,976,818 (955,339)
Increase in accrued liabilities 1,008,172 1,149,814 1,774,976
Increase (decrease) in income taxes payable 2,617,253 (733,271) 1,259,981
Increase in long-term liabilities 22,532 59,221 68,618
------------ ------------ ------------
Total adjustments 5,296,013 5,868,566 13,354,901
------------ ------------ ------------
Net cash provided by operating activities 17,338,837 17,249,750 29,358,112
------------ ------------ ------------
Cash flows from investing activities:
Issuance of notes receivable (5,150,492) (3,849,309)
Collections on notes receivable 1,346,889 540,108
Capital expenditures (20,703,609) (17,699,254) (28,028,571)
Proceeds from sale of property, plant and equipment 230,501 981,236 208,600
Proceeds from sale of investments available-for-sale 13,248,180 1,102,609
Proceeds from sale of short-term investments 1,711,408
Purchase of investments available-for-sale (1,130,294)
Redemptions and maturities of investments 19,108,000 10,710,000 1,974,000
Purchase of investments held-to-maturity (9,860,135) (16,360,398) (4,000,000)
------------ ------------ ------------
Net cash used in investing activities (15,028,846) (10,718,029) (29,873,656)
------------ ------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (6,411,377) (3,530,330) (2,645,250)
Increase (decrease) in notes payable 103,384 (117,951) 668,724
Proceeds from loans 5,249,000 7,000,000 70,800,000
Payment of principal on long-term debt (3,072,392) (1,295,258) (75,934,679)
Dividends paid (4,028,756) (4,102,916) (4,186,326)
------------ ------------ ------------
Net cash used in financing activities (8,160,141) (2,046,455) (11,297,531)
------------ ------------ ------------
(Decrease) increase in cash and cash equivalents (5,850,150) 4,485,266 (11,813,075)
Cash and cash equivalents at beginning of year 7,480,900 2,995,634 14,808,709
------------ ------------ ------------
Cash and cash equivalents at end of year $ 1,630,750 $ 7,480,900 $ 2,995,634
============ ============ ============
Supplemental cash flow disclosure:
Interest paid (net of amount capitalized) $ 6,135,000 $ 5,611,000 $ 3,833,000
============ ============ ============
Income taxes paid $ 3,488,000 $ 6,197,000 $ 3,535,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 12
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1. REPORTING ENTITY AND SUMMARY OF ACCOUNTING POLICIES
The Company was organized in 1938 under the laws of the Commonwealth
of Puerto Rico. It is engaged primarily in the production and sale of
cement and related products principally within the island of Puerto
Rico.
Ponce Capital Corporation ("PCC"), a subsidiary organized under the
laws of the Commonwealth of Puerto Rico in 1998, provides financing for
purchases of equipment to businesses, primarily in the construction
and related industries. PCC began operations on August 11, 1998, after
obtaining its license from the Puerto Rico Commissioner of Financial
Institutions.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Summary of Accounting Policies
The following summarizes the most significant accounting policies
judged by management to be the most appropriate in the circumstances
to present the Company's consolidated financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and all of its wholly-owned subsidiaries: Florida Lime
Corporation ("FLC"), Ready Mix Concrete, Inc. ("RMC"), Desarrollos
Multiples Insulares, Inc. ("DMI"), Poly Bags and Packaging, Inc.
("PBPI"), and Ponce Capital Corporation ("PCC"). All material
intercompany accounts and transactions have been eliminated in
consolidation.
Statement of Cash Flows
For purposes of the statement of cash flows, interest-bearing deposits
and other investments with maturities of less than three months at the
time of acquisition are considered cash equivalents.
Revenue Recognition
Revenue is recognized when the product is shipped in accordance with
billing terms which are generally FOB shipping point.
<PAGE> 13
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Investments
Investments in equity securities that have readily determinable fair
values and all investments in debt securities are accounted for as
follows:
- Debt securities which the Company has the positive intent and
ability to hold to maturity are classified as investments
held-to-maturity and reported at cost, adjusted for
amortization of premiums or accretion of discounts. Such debt
securities are reported as short-term or long-term
investments, depending on whether the remaining term to
maturity is shorter or longer than one year.
- Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term
are classified as trading securities and reported at fair
value, with unrealized gains and losses included in earnings.
- Debt and equity securities not classified as either
held-to-maturity or trading securities are classified as
investments available-for-sale and reported at fair value,
with unrealized gains and losses excluded from earnings and
reported, net of taxes, in a separate component of
stockholders' equity.
At December 31, 1999 and 1998, all investment securities held by the
Company were classified as held-to-maturity.
Inventories
Inventories are stated at the lower of average cost or market.
Inventory cost includes the related material, labor and overhead cost.
Land for sale includes the original cost of land and all development
costs incurred to bring land to a salable condition.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and depletion. Depreciation is provided on the
straight-line basis over the estimated useful life of each type of
asset. Depletion of quarries is calculated on the units-of-production
method.
Maintenance and repair costs which do not extend the life or improve
productive capacity of the respective assets are expensed as incurred.
Cost of renewals and betterments is capitalized. When assets are sold,
retired or otherwise disposed of, their cost and related accumulated
depreciation are removed from the accounts, and any gain or loss is
credited or charged to income.
Interest Charged to Construction
The Company capitalizes interest as a component of the cost of
construction. Capitalized interest totaled $406,000 and $712,000 in
1999 and 1998, respectively.
23
<PAGE> 14
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Goodwill
Goodwill, included in other assets, is amortized on a straight-line
basis over the estimated period of benefit not to exceed 30 years.
Income Taxes
Income taxes are accounted for following an asset and liability
approach. Under this approach, deferred taxes are recognized for
temporary differences between the tax and financial reporting bases of
assets and liabilities, using enacted tax laws and rates.
Employee Benefit Plans
The Company has non-contributory defined benefit pension plans
covering substantially all of its non-union employees and those of its
wholly-owned subsidiaries. The pension benefits are based on years of
service and the employees' average compensation as defined in the
respective plans.
Pension costs are computed on the basis of accepted actuarial methods.
The Projected Unit Credit method is used to determine pension expense.
Pension expense includes service cost for benefits earned during the
period, interest cost and amortization of unrecognized prior service
cost, of gains and losses on plan assets and of the transition amount
over a 15-year period. The Company's funding policy is to contribute
annually the maximum amount deductible for income tax.
The Company also offers postretirement medical and life insurance
benefits to certain retired employees under an unfunded plan. The
expected cost of providing postretirement health care and other
benefits to an employee or its beneficiaries is recognized over their
service period, is computed based on accepted actuarial methods, and
includes service costs for benefits earned during the period, interest
costs and amortization of actuarial gains and losses.
Earnings Per Share
Earnings per share ("EPS") are computed based on the weighted average
number of shares of common stock outstanding during the year. The
weighted average number of shares outstanding was 5,266,607 in 1999,
5,392,491 in 1998 and 5,502,074 in 1997. The Company has no dilutive
or potentially dilutive securities outstanding. Accordingly, there is
no difference between basic and diluted EPS.
Profit Recognition on Sales of Real Estate
Land and development costs are allocated proportionately to lots sold
based on area and total project cost. Income on sale of land is
recognized at the time of sale except where the collection of such
income is not reasonably assured and revenue therefore is not
measurable.
Treasury Stock
Treasury stock is carried at cost.
<PAGE> 15
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Reclassifications
Certain reclassifications have been made to the 1998 and 1997
financial statements to conform with the 1999 presentation.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities."
This statement establishes accounting and reporting standards for
derivative financial instruments and for hedging activities. It
requires that an entity recognize all derivative instruments as either
assets or liabilities on the balance sheet and measure those
instruments at fair value. The Company adopted SFAS 133 effective July
1, 1998. As permitted by this Statement, upon its adoption the Company
reclassified to available-for-sale investments that were previously
classified as held-to-maturity. These investments had a book value of
$7,842,000 and a market value of $8,033,000.
At December 31, 1999 and 1998, the Company did not carry derivative
financial instruments.
NOTE 2. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable at December 31, consist of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Notes receivable:
Trade $ 242,529 $ 115,934
Other 3,302,907 857,027
------------ ------------
3,545,436 972,961
------------ ------------
Accounts receivable:
Trade 29,975,647 27,422,419
Employees and affiliated companies 489,134 517,578
Other 2,058,910 1,182,349
------------ ------------
32,523,691 29,122,346
Less - Allowance for doubtful accounts 1,100,959 1,296,157
------------ ------------
31,422,732 27,826,189
------------ ------------
$ 34,968,168 $ 28,799,150
============ ============
</TABLE>
24
<PAGE> 16
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 3. INVENTORIES
Inventories at December 31, consist of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Finished products $ 2,434,617 $ 1,802,707
Work-in-process 7,026,102 6,467,063
Raw materials 3,894,011 3,787,700
Coal and fuel oil 2,011,451 1,649,393
Maintenance and operating supplies 20,011,973 19,315,872
Land for sale 923,205 923,205
------------ ------------
$ 36,301,359 $ 33,945,940
============ ============
</TABLE>
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consist of:
<TABLE>
<CAPTION>
USEFUL LIFE
IN YEARS 1999 1998
<S> <C> <C> <C>
Land and quarries $ 16,126,838 $ 13,443,523
Buildings and structures 50 47,901,085 44,914,069
Machinery and equipment 5-20 128,578,361 124,752,869
Pollution control equipment 25 32,745,736 32,580,450
Automobiles and trucks 3-10 29,482,127 23,752,085
Rental property 10 653,524 653,524
Construction in progress 6,493,533 5,298,909
------------ ------------
261,981,204 245,395,429
Less - Accumulated depreciation
and depletion 93,330,899 83,117,242
------------ ------------
$168,650,305 $162,278,187
============ ============
</TABLE>
<PAGE> 17
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5. INVESTMENTS
The carrying and market values, and scheduled maturities of investments
at December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Short-term investments held-to-maturity,
at amortized cost:
Municipal and other U.S.
Government agency securities $ 1,361,693 $ 1,352,941 $ 11,461,513 $ 11,460,713
U.S. Treasury securities 4,639,653 4,592,494 4,605,135 4,611,456
------------ ------------ ------------ ------------
$ 6,001,346 $ 5,945,435 $ 16,066,648 $ 16,072,169
============ ============ ============ ============
Long-term investments held-to-maturity,
at amortized cost:
U.S. Treasury securities
Due from 1 to 5 years $ 3,545,342 $ 3,469,750 $ 7,790,692 $ 7,830,134
Due after 10 years 21,687,760 21,853,300 20,254,637 25,900,000
------------ ------------ ------------ ------------
25,233,102 25,323,050 28,045,329 33,730,134
Municipal and other U.S.
Government agency securities
Due from 1 to 5 years 14,478,490 14,267,056 8,542,169 8,511,897
------------ ------------ ------------ ------------
$ 39,711,592 $ 39,590,106 $ 36,587,498 $ 42,242,031
============ ============ ============ ============
</TABLE>
-25-
<PAGE> 18
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The scheduled maturities of investments, based on their carrying
values, at December 31, 1999, are summarized below:
<TABLE>
<S> <C>
Due within one year $ 6,001,346
Due within 1 to 5 years 18,023,832
Due after 10 years 21,687,760
-----------
$45,712,938
-----------
</TABLE>
Gross and net unrealized gains and losses at December 31, amounted to:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Gross unrealized gains $ 826,782 $ 5,693,793
Gross unrealized losses (1,004,179) (33,739)
------------ ------------
Net unrealized (loss) gain $ (177,397) $ 5,660,054
============ ============
</TABLE>
No sales of available-for-sale investments occurred during 1999.
Gross proceeds from the sale of available-for-sale investments in 1998 and 1997
amounted to $13,248,000 and $1,103,000, respectively. Gross realized gains on
the sale of these investments amounted to $1,175,000 and $50,000 in 1998 and
1997, respectively.
During 1998, gross proceeds from the sale of short-term investments held-to-
maturity amounted to $1,711,000. These securities were sold near their maturity.
As discussed in Note 1, during 1998 the Company reclassified securities with an
amortized cost of $7,842,000 and a market value of $8,033,000 from held-to-
maturity to available-for-sale upon adoption of SFAS 133. These securities were
subsequently sold.
NOTE 6. OTHER ASSETS
Other assets at December 31, consist of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Investment in real estate $ 94,533 $ 94,533
Goodwill, net of accumulated amortization
of $222,635 (1998 - $167,423) 1,430,898 1,486,110
Other long-term assets 3,994,825 2,970,141
------------ ------------
$ 5,520,256 $ 4,550,784
============ ============
</TABLE>
<PAGE> 19
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities at December 31, consist of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Accrued taxes other than on income $ 1,466,892 $ 1,290,245
Accrued payroll expenses 3,592,073 3,428,063
Accrued interest payable 2,302,510 2,277,055
Other accrued liabilities 1,871,671 1,229,611
------------ ------------
$ 9,233,146 8,224,974
============ ============
</TABLE>
NOTE 8. SHORT-TERM BORROWING
The Company has lines of credit available for short-term borrowing and
for discount of trade notes receivable in the aggregate amount of
$42,000,000. However, under other loan agreements with financial
institutions, the Company may discount trade notes receivable up to
$10,000,000 through 2000. No commitment fees are paid on these credit
facilities.
The maximum aggregate short-term borrowing outstanding at any
month-end was $2,500,000 in 1999 and $3,100,000 in 1998. The
approximate average aggregate short-term borrowing outstanding during
the year was $56,389 in 1999 and $919,361 in 1998. The weighted
average interest rate of such borrowings computed annually was 5.94%
during 1999 and 6.06% during 1998.
There were no borrowings outstanding under these facilities at
December 31, 1999 and 1998.
<PAGE> 20
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9. LONG-TERM DEBT
Long-term debt at December 31, consists of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
7.29% Series A Senior Secured Notes, payable in full on
January 27, 2017, interest payable semiannually $ 50,000,000 $ 50,000,000
7.34% Series B Senior Secured Notes, payable in full on
January 27, 2017, interest payable semiannually 20,000,000 20,000,000
6.32% note, payable in quarterly installments of $200,000
from 1996 to 2000, followed by quarterly installments of
$500,000 in 2001 and 2002; interest payable monthly 4,800,000 5,600,000
Drawings on $12 million revolving credit facility due in sixty equal
monthly installments of $75,000 commencing in December
1998, through August 1999; and of $141,667 from September
1999, interest payable monthly ranging from 5.85% to 7.00% 7,258,333 4,425,000
Drawing on $2.5 million revolving credit facility due in sixty equal
monthly installments of $41,667 commencing in November
1998, interest payable monthly at 5.34% 1,916,662 2,416,666
7.00% notes payable, due in installments until July 2001 347,772 552,649
Other, interest ranging from 3.75% to 5.75% due in monthly
installments from May 1999 to July 2001 848,156
------------ ------------
Total 85,170,923 82,994,315
Less - Current portion 3,805,714 2,452,649
------------ ------------
Total long-term debt $ 81,365,209 $ 80,541,666
============ ============
</TABLE>
The Series A and Series B Senior Secured Notes are secured by a $70
million zero-coupon U. S. Treasury bond pledged as collateral. The
bond was purchased for $17.6 million in December 1996 and will accrue
to $70 million shortly after the maturity of the Notes. This bond is
included in long-term investments held-to-maturity.
26
<PAGE> 21
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
In October 1998, RMC obtained a $2,500,000 revolving credit facility
to finance the purchase of concrete-mixer trucks. Drawings on this
facility are guaranteed by the Company and bear interest at a variable
rate equal to 90-day LIBOR plus 0.75%, adjusted quarterly, or at a
fixed rate equal to the prevailing rate for similar debt at the date
of the drawing.
In November 1998, PCC obtained a $12,000,000 revolving credit facility
to finance its operations. Drawings on this facility are secured by
the notes issued by PCC, and are also guaranteed by the Company.
Drawings on this facility bear interest at a variable rate equal to
90-day LIBOR plus 0.75%, adjusted quarterly, or at a fixed rate equal
to 0.75% plus the LIBOR-Ask rate for the loan term on the date of the
drawing.
Aggregate maturities of long-term debt at December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
Years Amount
<S> <C>
2000 $ 3,805,714
2001 4,542,438
2002 4,247,771
2003 2,041,667
2004 533,333
2005 and thereafter 70,000,000
------------
$ 85,170,923
============
</TABLE>
In September 1985, the Company restructured the terms of its
outstanding debt with the Government Development Bank for Puerto Rico
("GDB"). The maturity date on the loans from GDB was extended to
September 2002, and the annual interest rate was fixed with no
interest or principal payments required before maturity.
Simultaneously, the Company placed U.S. Government securities, with a
cost of $8 million and a maturity value of $49.8 million, in an
irrevocable trust. The principal and interest of these securities will
be sufficient to fund the scheduled principal and interest payments on
the Company's debt with the GDB. Accordingly, such debt was considered
extinguished in 1985 and is not included as a liability in the
consolidated balance sheet. The total balance of debt with GDB, not
included in the consolidated balance sheet, consisting of principal
plus accumulated interest, amounted to $43.7 million at December 31,
1999 (1998 - $42.0 million).
The Series A and Series B Senior Secured Notes and other loan
agreements impose certain restrictions on the Company. The most
important restrictions are limitations on unsecured short-term
borrowing and on discounting with recourse of trade paper from
customers (See Note 8), maintaining working capital in excess of
certain defined minimums and limitations on funded debt and other
indebtedness. Other restrictions under such loan agreements relate to
investments in and advances to subsidiaries and other persons,
disposition of fixed assets, and payment of dividends. At December 31,
1999, the Company was in compliance with the provisions of the loan
agreements.
<PAGE> 22
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10. INCOME TAXES
Consolidated tax returns are not permitted under the 1994 Puerto Rico
Internal Revenue Code (the "Code"); therefore, losses, if any, of
subsidiaries cannot be used to offset taxable income of other members
of the consolidated group. However, the Code provides a 100% deduction
for dividends from controlled Puerto Rico corporations.
The Code allows an accelerated flexible depreciation method for
certain property purchased prior to 1996, by which a taxpayer may
claim depreciation at any rate without reference to useful lives. The
depreciation claimed is limited to an amount not greater than income
before taxes (determined without taking into consideration the
depreciation deduction). Deferred income taxes have been accumulated
primarily from using the flexible depreciation method for tax purposes
only.
The benefits of the accelerated depreciation methods are limited by
the alternative minimum tax ("AMT") provisions of the income tax law.
The AMT is based on 22% of regular taxable income with certain
adjustments for preference items, one of which relates to the
accelerated depreciation methods. Any AMT paid may be used to reduce
the regular tax liability of future years, to the extent that the
regular tax exceeds the AMT.
27
<PAGE> 23
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The reconciliation of the difference between the Puerto Rico statutory
tax rate on income before taxes and the consolidated effective tax
rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- -----------------------
% of % of % of
pre-tax pre-tax pre-tax
Amount income Amount income Amount income
------------ -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Computed tax provision $ 6,344,495 39.0 $ 5,517,098 39.0 $ 8,894,134 39.0
Increase (decrease) in taxes
Resulting from:
Exempt interest earned (1,177,897) (7.2) (1,229,030) (8.7) (1,317,225) (5.8)
Interest deducted for tax but not
for financial statements (698,223) (4.3) (698,223) (4.9) (698,223) (3.1)
Discount on income tax credits (122,150) (.8) (712,000) (5.0) (200,000) (0.9)
Valuation allowance on carryforward
losses of subsidiary 280,000 2.0
Effect of capital gain preferential rate (196,071) (1.4)
Other items (121,114) (.7) (196,552) (1.4) 123,575 0.6
------------ ------ ------------ ------ ------------ ----
$ 4,225,111 26.0 $ 2,765,222 19.6 $ 6,802,261 29.8
============ ====== ============ ====== ============ ====
</TABLE>
The deferred tax assets and liabilities at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES
<S> <C> <C> <C> <C>
Current:
--------
Prepaid pension cost $ 1,325,329 $ 1,279,230
Tax credits applicable to future years $ 2,000,000
AMT credit $ 155,487
Allowance for doubtful accounts 263,602 256,831
Non-current:
------------
Post-retirement benefit liability 1,210,943 1,202,155
Property, plant and equipment 31,240,323 34,126,981
Other 174,739 26,943 411,307
------------ ------------ ------------ ------------
Total deferred tax asset/liability $ 1,804,771 32,592,595 $ 3,458,986 35,817,518
============ ============ ============ ============
Net deferred tax liability $ 30,787,824 $ 32,358,532
============ ============
</TABLE>
One of the consolidated subsidiaries enjoys a tax exemption granted
under the provisions of the Puerto Rico Tax Incentives Act of 1987.
Under this grant, the exemption rates applicable to income, property
and municipal taxes range from 50% to 90% through year 2008.
One of the Company's subsidiaries has net operating losses available
to reduce future taxable income amounting to $893,000 which expire
between 2004 and 2006, respectively.
The subsidiaries' aggregate retained earnings amounted to $27,702,000
at December 31, 1999, (1998 - $25,921,000) and arose substantially
from partially tax exempt operations. The subsidiaries' retained
earnings are substantially exempt upon distribution to the Company;
therefore, no income taxes have been provided on such earnings.
28
<PAGE> 24
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 11. EMPLOYEE BENEFIT PLANS
The following table sets forth the Company's pension and
post-retirement benefit obligations and amounts recognized in the
Company's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 31,476,642 $ 28,820,939 $ 2,924,705 $ 2,837,886
Service cost 798,783 745,360 59,001 58,821
Interest cost 2,068,008 1,998,007 190,327 190,161
Actuarial (gain) loss (3,814,678) 1,423,841 (301,269) 63,229
Benefits paid (1,643,186) (1,511,505) (240,081) (225,392)
------------ ------------ ------------ ------------
Benefit obligation at end of year 28,885,569 31,476,642 2,632,683 2,924,705
------------ ------------ ------------ ------------
Change in plan assets:
Fair value of plan assets at beginning
of year 34,959,475 36,062,458
Actual return on plan assets 103,283 408,522
Benefits paid (1,643,186) (1,511,505)
------------ ------------ ------------ ------------
Fair value of plan assets at end of year 33,419,572 34,959,475 -- --
------------ ------------ ------------ ------------
Funded status - Fair value of plan
assets greater (less) than benefit obligation 4,534,003 3,482,833 (2,632,683) (2,924,705)
Unrecognized net actuarial (gain) loss (2,038,376) (1,142,035) (174,660) 126,609
Unrecognized prior service cost 633,281 783,362
Unrecognized portion of transition
asset at January 1, 1987, being
recognized over 15 years (152,759) (245,724)
------------ ------------ ------------ ------------
Prepaid (accrued) benefit cost $ 2,976,149 $ 2,878,436 $ (2,807,343) $ (2,798,096)
============ ============ ============ ============
</TABLE>
<PAGE> 25
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
benefit obligation and the projected benefit obligation were as
follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Weighted average assumptions as of December 31:
Discount rate 8.00% 6.75% 8.00% 6.75%
Expected return on plan assets 9.00% 9.00% -- --
Rate of compensation increase 5.50% 5.25% 5.25% 5.25%
</TABLE>
In measuring the post-retirement healthcare and life insurance benefit
obligation for 1999, the Company assumed a 9.5% annual rate of
increase in the per capita cost of covered healthcare benefits. The
rate was assumed to decrease gradually to 5.5% through the year 2019
and remain at that level thereafter.
Assumed healthcare cost trend rates have a significant effect on the
amounts reported for the healthcare plans. A one-percentage-point
change in assumed healthcare cost trend rates would have the following
effects:
<TABLE>
<CAPTION>
1999 1998
1 % 1 % 1 % 1 %
INCREASE DECREASE INCREASE DECREASE
<S> <C> <C> <C> <C>
Effect on total of service and interest cost components $ 18,551 $ (16,623) $ 15,329 $ (15,320)
Effect on post-retirement benefit obligation $ 128,831 $ (121,245) $ 133,285 $ (132,422)
</TABLE>
The components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 798,783 $ 745,360 $ 626,142 $ 59,001 $ 58,821 $ 57,237
Interest cost 2,068,008 1,998,007 1,903,451 190,327 190,161 190,010
Expected return on plan assets (3,021,620) (3,167,252) (2,576,676)
Amortization of transition asset (92,965) (92,965) (92,965)
Amortization of prior service cost 150,081 150,081 150,081 (415)
Recognized net actuarial gain (110,733) (4,877)
------------ ------------ ------------ ------------ ------------ ------------
Net periodic benefit (credit) cost $ 97,713 $ (477,502) $ 5,156 $ 249,328 $ 248,982 $ 246,832
============ ============ ============ ============ ============ ============
</TABLE>
29
<PAGE> 26
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 12. SEGMENT INFORMATION
The Company operates in the cement and related products, paper and
packaging industries, and in realty operations mainly within the
island of Puerto Rico. Operations in the cement and related products
industry involve production and sale of cement, ready mix concrete,
and lime. Operations in the paper and packaging industry involve
production and sale of paper and polypropylene bags. Realty operations
involve the development, sale and lease of real property.
The cement and ready mix concrete operations are the two reportable
segments. The remaining operations have been combined in the "All
Others" column in the table that follows.
The accounting policies of the segments are the same as those
described in Note 1.
The Company's management evaluates the performance of its segments and
allocates resources to them based on operating profit. Operating
profit is total revenue less operating expenses. Interest income and
expense, other income and expenses, and income tax expense are not
deducted in computing operating profit.
The following table presents the required segment information (in
thousands):
<TABLE>
<CAPTION>
(ALL AMOUNTS IN THOUSANDS)
CEMENT OPERATIONS READY MIX OPERATIONS
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue from customers $ 70,660 $ 59,587 $ 64,789 $ 94,522 $ 77,369 81,501
Intersegment revenues 35,324 28,709 30,003 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
105,984 88,296 94,792 94,522 77,369 81,501
Depreciation, depletion and
amortization 8,918 8,685 7,770 4,558 4,241 4,202
Other operating expenses 81,436 68,029 66,429 87,663 70,625 74,617
---------- ---------- ---------- ---------- ---------- ----------
Operating profit $ 15,630 $ 11,582 $ 20,593 $ 2,301 $ 2,503 $ 2,682
========== ========== ========== ========== ========== ==========
Other charges
Income tax provision
Net income
Capital expenditures $ 7,315 $ 10,295 $ 13,944 $ 12,418 $ 5,640 $ 3,280
========== ========== ========== ========== ========== ==========
Identifiable assets:
Segment assets $ 204,771 $ 212,919 $ 209,861 $ 61,723 $ 49,371 $ 49,393
========== ========== ========== ========== ========== ==========
<CAPTION>
(ALL AMOUNTS IN THOUSANDS)
ALL OTHERS SEGMENT INTERSEGMENT ELIMINATIONS TOTAL
1999 1998 1997 1999 1998 1997 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue from customers $ 8,118 $ 11,421 $ 10,484 $ 173,300 $ 148,377
Intersegment revenues 4,818 3,946 4,267 $ (40,142) $ (32,655) $ (34,270)
---------- ---------- ---------- ---------- ----------
12,936 15,367 14,751 173,300 148,377
Depreciation, depletion and
amortization 573 405 412 14,049 13,331
Other operating expenses 11,240 13,588 12,709 (40,141) (32,660) (34,248) 140,198 119,582
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit $ 1,123 $ 1,374 $ 1,630 $ (1) $ 5 $ (22) 19,053 15,464
========== ========== ========== ========== ========== ==========
Other charges 2,451 1,318
Income tax provision 4,559 2,765
---------- ----------
Net income $ 12,043 $ 11,381
========== ==========
Capital expenditures $ 971 $ 1,764 $ 10,805 $ 20,704 $ 17,699
========== ========== ========== ========== ==========
Identifiable assets:
Segment assets $ 50,877 $ 38,119 $ 16,739 $ 62,122 $ (62,861) $ (46,063) $ 255,249 $ 237,548
========== ========== ========== ========== ========== ==========
Corporate assets 49,340 61,222
---------- ----------
Total assets $ 304,589 $ 298,770
========== ==========
<CAPTION>
1997
----------
<S> <C>
Revenue from customers $ 156,774
Intersegment revenues
----------
156,774
Depreciation, depletion and
amortization 12,384
Other operating expenses 119,507
----------
Operating profit $ 24,883
==========
Other charges 2,078
Income tax provision 6,802
Net income $ 16,003
==========
Capital expenditures $ 28,029
==========
Identifiable assets:
Segment assets $ 229,930
==========
Corporate assets 61,221
----------
Total assets $ 291,051
==========
</TABLE>
<PAGE> 27
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 13. LEASE COMMITMENTS
The Company and its subsidiaries lease certain facilities and
equipment under operating lease agreements. Rental expense under such
agreements amounted to $817,000 in 1999, $928,000 in 1998 and $898,000
in 1997.
At December 31, 1999, the approximate future minimum lease payments
under noncancellable operating leases were as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
2000 $ 531,811
2001 368,511
2002 356,511
2003 331,511
2004 and thereafter 801,104
----------
$2,389,447
==========
</TABLE>
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:
Cash and Cash Equivalents
The carrying amount of these assets approximates fair value because of
the short period of time to maturity of the instruments.
Investments
The fair values of investments are estimated based on their quoted
market prices or those of similar investments.
Other Current Financial Instruments
The carrying amount of notes and accounts receivable, notes payable,
accounts payable and other current liabilities approximate fair value
due to their short-term to maturity.
30
<PAGE> 28
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Long-term Debt
The fair value of the Company's long-term debt is estimated using
discounted cash flow techniques based on the current rates offered to
the Company for debt of the same remaining maturities.
The carrying amount and estimated fair values of these financial
instruments at December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,631 $ 1,631 $ 7,481 $ 7,481
Short-term investments 6,001 5,945 16,067 16,072
Notes and accounts receivable 34,968 34,968 28,799 28,799
Long-term investments 39,712 39,590 36,587 42,242
Long-term notes receivable 6,225 6,036 3,973 3,973
Notes payable 654 654 551 551
Accounts payable and other liabilities 22,973 22,973 19,524 19,524
Long-term debt 85,171 79,912 82,995 88,228
</TABLE>
NOTE 15. CONTINGENT LIABILITIES AND OTHER COMMITMENTS
The Company is obligated to purchase, under a long-term supply
contract, a minimum of 100,000 metric tons of coal annually through
the year 2005. The purchase price is calculated using an agreed-upon
formula based on market prices. Purchases under the contract amounted
to $5,747,000 in 1999, $6,884,000 in 1998 and $6,729,000 in 1997 and
exceeded the minimum amount required by the contract.
NOTE 16. LEGAL PROCEEDINGS
On May 10, 1999, the Company entered into a comprehensive settlement
with the Government of Puerto Rico and various other parties relating
to disputes involving its Vega Alta and Guanica projects.
Under the terms of the settlement agreement and related order, the
Company was granted all Puerto Rico permits necessary to develop and
operate its limestone quarry at Guanica, and develop the 300-unit real
estate project at Vega Alta. Included were the permits necessary to
remove aggregates from the Vega Alta site and process them at a new
facility in Carolina.
In its order, the Court ruled that the Company "has complied with all
laws and regulations concerning the issuance of permits and
authorizations" for the Guanica, Vega Alta and Carolina projects, and
that all permits for the projects have been validly issued as a matter
of law. As part of the settlement, the Company terminated its civil
rights suit against the Governor of Puerto Rico and various other
individual government officials.
The settlement and order also resulted in the termination of all other
pending agency and court actions relating to the Guanica and Vega Alta
projects.
The Company is a defendant in a number of legal proceedings arising in
the normal course of business. Management believes, based on the
advice of its legal counsel, that the outcome of these legal matters
will not significantly affect the Company's financial position or
results of operations.
<PAGE> 29
PUERTO RICAN CEMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 17. STOCKHOLDERS' EQUITY
In 1999 and 1998 the Company purchased 192,800 shares and 73,000
shares, respectively, of its outstanding stock for $6,411,377 and
$3,530,330, respectively. The Company purchased these shares for
future corporate purposes and does not intend to retire or cancel
them.
31
<PAGE> 30
CONSOLIDATED FOURTH QUARTER RESULTS
(000's Omitted Except Per Share Amounts)
<TABLE>
<CAPTION>
----------------------- --------------------------
Three months ended Twelve months ended
December 31 December 31
----------------------- --------------------------
1999 1998 1999 1998
----------------------- --------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 37,112 $ 35,984 $ 173,300 $ 148,377
Cost of sales 28,444 27,350 126,739 108,707
-------- -------- --------- ---------
Gross margin 8,668 8,634 46,561 39,670
Selling, general and administrative expenses 7,029 6,486 27,508 24,206
-------- -------- --------- ---------
Income from operations 1,639 2,148 19,053 15,464
-------- -------- --------- ---------
Other charges (credits):
Interest and financial
charges 1,743 1,359 6,160 5,216
Interest income (964) (896) (3,656) (3,398)
Other expenses (income) (123) (274) 281 (500)
-------- -------- --------- ---------
656 189 2,785 1,318
-------- -------- --------- ---------
Income before income taxes 983 1,959 16,268 14,146
Tax provision (222) (69) 4,225 2,765
-------- -------- --------- ---------
Net income $ 1,205 $ 2,028 $ 12,043 $ 11,381
======== ======== ========= =========
Earnings per share of common stock * $ 0.26 $ 0.38 $ 2.29 $ 2.11
======== ======== ========= =========
</TABLE>
* Based on weighted average of outstanding shares of 5,266,607 in 1999 and
5,392,491 in 1998.
FINANCIAL RESULTS BY QUARTERS
(000's Omitted Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MAR. 31 JUN. 30 SEPT. 30 DEC. 31 1999
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenues $44,664 $48,080 $43,444 $ 37,112 $173,300
======= ======= ======= ======== ========
Gross profit 13,189 14,678 10,026 8,668 46,561
======= ======= ======= ======== ========
Income before income tax 5,742 5,976 3,567 983 16,268
Tax provision 1,595 1,844 1,008 (222) 4,225
------- ------- ------- -------- --------
Net income $ 4,147 $ 4,132 $ 2,559 $ 1,205 $ 12,043
======= ======= ======= ======== ========
Per share * $ 0.77 $ 0.78 $ 0.48 $ 0.26 $ 2.29
======= ======= ======= ======== ========
<CAPTION>
THREE MONTHS ENDED MAR. 31 JUN. 30 SEPT. 30 DEC. 31 1998
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenues $36,484 $39,359 $36,550 $ 35,984 $148,377
======= ======= ======= ======== ========
Gross profit 8,807 12,134 10,095 8,634 39,670
======= ======= ======= ======== ========
Income before income tax 3,879 5,005 3,303 1,959 14,146
Tax provision 565 1,385 884 (69) 2,765
------- ------- ------- -------- --------
Net income $ 3,314 $ 3,620 $ 2,419 $ 2,028 $ 11,381
======= ======= ======= ======== ========
Per share * $ 0.61 $ 0.67 $ 0.45 $ 0.38 $ 2.11
======= ======= ======= ======== ========
</TABLE>
* Based on weighted average of outstanding shares of 5,266,607 in 1999 and
5,392,491 in 1998.
32
<PAGE> 31
FIVE YEAR STATISTICAL COMPARISON
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET SUMMARY
Cash and cash equivalents $ 1,630,750 $ 7,480,900 $ 2,995,634 $ 14,808,709 $ 11,599,636
Investments available-for-sale - - 5,580,202 4,595,908 4,473,536
Short-term Investments 6,001,346 16,066,648 6,967,225 1,917,616 974,073
Accounts receivable-net 34,968,168 28,799,150 28,763,683 27,410,312 24,526,385
Inventories 36,301,359 33,945,940 32,885,743 33,443,290 32,222,415
Prepaid expenses 5,579,699 5,087,218 4,533,070 4,624,691 4,752,187
------------ ------------ ------------ ------------ ------------
Current assets-total 84,481,322 91,379,856 81,725,557 86,800,526 78,548,232
Property, plant and equipment-net 168,650,305 162,278,187 158,610,632 143,088,242 142,567,213
Other long-term assets 11,745,607 8,524,016 4,347,346 4,334,404 2,670,882
Long-term investments 39,711,592 36,587,498 46,367,581 46,960,338 31,228,541
------------ ------------ ------------ ------------ ------------
$304,588,826 $298,769,557 $291,051,116 $281,203,510 $255,014,868
============ ============ ============ ============ ============
Notes payable (include current portion
of long-term debt and short-term borrowing) $ 4,459,871 $ 3,003,422 $ 1,778,505 $ 15,401,050 $ 11,749,853
Accounts payable and accrued liabilities 22,973,240 19,525,110 17,145,619 15,080,253 16,227,533
------------ ------------ ------------ ----------- -----------
Current liabilities-total 27,433,111 22,528,532 18,924,124 30,481,303 27,977,386
Long-term debt (exclusive of current portion) 81,365,209 80,541,666 76,179,792 67,023,200 57,549,475
Deferred income taxes 30,787,824 32,358,532 35,859,657 33,323,351 30,808,654
Other long-term liabilities 3,104,981 3,082,449 3,023,228 2,954,610 2,873,430
Stockholders' equity 161,897,701 160,258,378 157,064,315 147,421,046 135,805,923
------------ ------------ ------------ ----------- -----------
$304,588,826 $298,769,557 $291,051,116 $281,203,510 $255,014,868
============ ============ ============ ============ ============
STATISTICAL DATA
Book value per share $ 31.22 $ 29.79 $ 28.81 $ 26.67 $ 24.67
Shares outstanding at year-end 5,186,274 5,379,074 5,452,074 5,527,074 5,504,722
Number of stockholders 543 568 597 622 655
Average number of employees 1,053 1,008 1,015 969 939
Capital expenditures (including expenditures
in mill conversion in 1995) $ 20,703,609 $ 17,699,254 $ 28,028,571 $ 11,662,959 $ 10,249,840
============ ============ ============ ============ ============
</TABLE>
33
<PAGE> 32
DIRECTORS
ANTONIO LUIS FERRE
Chairman of the Board of the Company and President
of El Dia, Inc. (Newspaper Publishing Group)
ALBERTO M. PARACCHINI
Vice Chairman of the Board of the Company and Director
of Banco Popular de Puerto Rico (Commercial Bank)
HECTOR DEL VALLE
Vice Chairman of the Board of the Company
MIGUEL A. NAZARIO
President and Chief Executive Officer of the Company
ANTONIO LUIS FERRE RANGEL
Senior Corporate Vice President of the Company
WALDEMAR DEL VALLE ARMSTRONG
Attorney-at-Law, Partner of Parra, Del Valle, Frau & Limeres
JOSE J. SUAREZ
Consultant to the Company
ANGEL O. TORRES
President of Bacardi Corporation
OSCAR A. BLASINI
President of G.B. Investments, Inc.
(Real Estate Development and Investments)
ROSARIO J. FERRE
Second Vice President of Luis A. Ferre Foundation, Inc.
EMILIO J. VENEGAS VILARO
President of Venegas Construction Corporation (General Contractors)
FEDERICO F. SANCHEZ
President of Federico F. Sanchez and Company and Interlink
Group, Inc. (Real Estate Consultants, Brokers and Developers)
JORGE L. FUENTES
Chairman of the Board and Chief Executive Officer of Gabriel
Fuentes, Jr. Construction Company, Inc. and Chairman of the
Board and Chief Executive Officer of Fuentes Concrete Pile,
Inc. (Concrete Pile Foundations).
JUAN A. ALBORS
President and General Partner of Albors Development Corp.
(Real Estate Developers and Investors)
LUIS ALBERTO FERRE RANGEL
Co Director, El Dia, Inc. (Newspaper Publishing Group)
OFFICERS
MIGUEL A. NAZARIO
President and Chief Executive Officer
ANTONIO LUIS FERRE RANGEL
Senior Corporate Vice President
EUFEMIO TOUCET
Executive Vice President, Ready Mix Concrete, Inc.
JOSE O. TORRES
Assistant Secretary, Vice President of Finance
and Chief Financial Officer
JUAN R. TARAZA
Vice President - Sales
PEDRO M. MENA
Treasurer
FERNANDO L. VARGAS
Controller
ETIENNE TOTTI DEL VALLE
Secretary
34
<PAGE> 33
STOCKHOLDER INFORMATION
STATUTORY OFFICES
Ponce, Puerto Rico
EXECUTIVE OFFICES
Guaynabo, Puerto Rico
SUBSIDIARIES*
Florida Lime Corporation
Ready Mix Concrete, Inc.
Poly Bags & Packaging, Inc.
Desarrollos Multiples Insulares, Inc.
Limestone Materials, Inc.
Ponce Capital Corporation
* All Subsidiaries are 100% owned
REGISTRAR AND TRANSFER AGENT
ChaseMellon Shareholder Services
New York, New York
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers, LLP
San Juan, Puerto Rico
PUBLIC RELATIONS
Citigate Dewe Rogerson
New York, New York
LEGAL COUNSEL
Totti & Rodriguez Diaz
San Juan, Puerto Rico
FORM 10-K
A copy of the Annual Report as filed with the Securities and Exchange
Commission on Form 10-K will be mailed upon request made to
Mr. Jose O. Torres, Vice President of Finance and Chief Financial
Officer, Puerto Rican Cement Company, Inc., PO Box 364487,
San Juan, Puerto Rico 00936-4487.
PUERTO RICAN CEMENT COMPANY, INC.
ANNUAL MEETING
The Annual Meeting of Stockholders of Puerto Rican
Cement Company, Inc. will be held at the office of the
Company in Amelia Industrial Park, Guaynabo, Puerto Rico,
Wednesday, May 3, 2000 at 10:00 a.m.
Member:
-------------------
PRN
Listed
NYSE
-------------------
<PAGE> 1
EXHIBIT 23
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Report of Independent Accountants
On Financial Statement Schedules
To the Board of Directors of
Puerto Rican Cement Company, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 18, 2000 appearing on page 18, of the 1999 Annual Report to
Shareholders of Puerto Rican Cement Company, Inc. (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedules listed in Item 14(a) of this Form 10-K. In our opinion these
Financial Statement Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PRICEWATERHOUSECOOPERS LLP
San Juan, Puerto Rico
February 18, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,630,750
<SECURITIES> 6,001,346
<RECEIVABLES> 30,218,176
<ALLOWANCES> 1,100,959
<INVENTORY> 36,301,359
<CURRENT-ASSETS> 84,481,322
<PP&E> 261,981,204
<DEPRECIATION> 93,330,899
<TOTAL-ASSETS> 304,588,826
<CURRENT-LIABILITIES> 27,433,111
<BONDS> 81,365,209
0
0
<COMMON> 6,000,000
<OTHER-SE> 155,897,701
<TOTAL-LIABILITY-AND-EQUITY> 304,588,826
<SALES> 173,195,360
<TOTAL-REVENUES> 173,299,816
<CGS> 126,738,540
<TOTAL-COSTS> 154,246,548
<OTHER-EXPENSES> 2,785,333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,267,935
<INCOME-TAX> 4,225,111
<INCOME-CONTINUING> 12,042,824
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,042,824
<EPS-BASIC> 2.29
<EPS-DILUTED> 2.29
</TABLE>
