<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from . . . . . . . to . . . . . . .
Commission file number 1-7210
<TABLE>
<CAPTION>
REPUBLIC GYPSUM COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<S> <C>
DELAWARE 75-1155922
- - - ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
811 East 30th Avenue, Hutchinson, Kansas 67502-4341
- - - ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Post Office Box 1307, Hutchinson, Kansas 67504-1307
- - - ---------------------------------------- ----------
(Mailing Address) (Zip code)
</TABLE>
316-727-2700
--------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
--- ---
On January 31, 1995, there were 10,554,096 shares of the registrant's Common
Stock, $1.00 par value outstanding.
<PAGE> 2
REPUBLIC GYPSUM COMPANY
FORM 10-Q
Quarterly Report
For the Quarter Ended December 31, 1994
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Reference is made to pages 2 through 7 hereof which set forth certain
consolidated financial statements of Registrant in accordance with
Part I of Form 10-Q.
The consolidated financial statements include the accounts of the
Registrant and its subsidiaries, Republic Paperboard Company, Hollis &
Eastern Railroad Company, Delta Roofing Mills, Inc. and LaPorte
Minerals Corporation.
<PAGE> 3
REPUBLIC GYPSUM COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended December 31, 1994 and 1993 (Unaudited)
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Gross sales_____________________________ $26,297,000 $18,116,000
Less freight and discounts______________ 3,951,000 3,299,000
----------- -----------
Net sales_______________________________ 22,346,000 14,817,000
Costs and expenses:
Cost of sales_________________________ 15,251,000 10,429,000
Selling and administrative expenses___ 2,272,000 2,035,000
----------- -----------
17,523,000 12,464,000
----------- -----------
Operating profit________________________ 4,823,000 2,353,000
Other income, net_______________________ 42,000 127,000
----------- -----------
Income before income taxes______________ 4,865,000 2,480,000
Provision for income taxes______________ 2,019,000 1,006,000
----------- -----------
Net income______________________________ $ 2,846,000 $ 1,474,000
=========== ===========
Net income per share____________________ $ 0.27 $ 0.14
=========== ===========
Dividends per share $ 0.06 $ 0.04
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 4
REPUBLIC GYPSUM COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended December 31, 1994 and 1993 (Unaudited)
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Gross sales_____________________________ $51,078,000 $35,888,000
Less freight and discounts______________ 7,879,000 6,593,000
----------- -----------
Net sales_______________________________ 43,199,000 29,295,000
Costs and expenses:
Cost of sales_________________________ 29,520,000 20,644,000
Selling and administrative expenses___ 4,492,000 3,978,000
----------- -----------
34,012,000 24,622,000
----------- -----------
Operating profit________________________ 9,187,000 4,673,000
Other income, net_______________________ 58,000 241,000
----------- -----------
Income before income taxes______________ 9,245,000 4,914,000
Provision for income taxes______________ 3,723,000 1,908,000
----------- -----------
Net income______________________________ $ 5,522,000 $ 3,006,000
=========== ===========
Net income per share____________________ $ 0.52 $ 0.28
=========== ===========
Dividends per share_____________________ $ 0.11 $ 0.07
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 5
REPUBLIC GYPSUM COMPANY
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and June 30, 1994
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents_____________________ $ 3,137,000 $ 910,000
Investments and marketable securities,
at cost, which approximates market__________ 500,000 500,000
Accounts receivable, net______________________ 9,692,000 7,986,000
Income tax refunds receivable_________________ 219,000 219,000
Inventories:
Finished goods______________________________ 1,625,000 997,000
Raw materials and supplies__________________ 3,870,000 3,396,000
----------- -----------
5,495,000 4,393,000
Prepaid expenses______________________________ 475,000 366,000
Net assets held for sale______________________ 264,000 264,000
----------- -----------
Total current assets________________________ 19,782,000 14,638,000
Property, plant and equipment, at cost 72,839,000 70,166,000
Less accumulated depreciation, amortization
and depletion_______________________________ 34,063,000 32,433,000
----------- -----------
38,776,000 37,733,000
Other assets____________________________________ 620,000 648,000
----------- -----------
Total assets____________________________________ $59,178,000 $53,019,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable______________________________ $ 5,911,000 $ 4,838,000
Accrued payroll and employee benefits_________ 1,574,000 1,339,000
Income taxes payable__________________________ 460,000 -
Accrued property taxes________________________ 325,000 272,000
Other current liabilities_____________________ 651,000 796,000
----------- -----------
Total current liabilities___________________ 8,921,000 7,245,000
Deferred income taxes___________________________ 3,759,000 3,715,000
Other long-term liabilities_____________________ 887,000 886,000
Stockholders' equity:
Common stock, $1 par value____________________ 10,552,000 10,538,000
Additional paid-in capital____________________ 12,273,000 12,211,000
Retained earnings_____________________________ 22,812,000 18,450,000
Less pension liability adjustment_____________ ( 26,000) ( 26,000)
----------- -----------
Total stockholders' equity__________________ 45,611,000 41,173,000
----------- -----------
Total liabilities and stockholders' equity______ $59,178,000 $53,019,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 6
REPUBLIC GYPSUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 1994 and 1993 (Unaudited)
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income____________________________________ $ 5,522,000 $ 3,006,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and depletion____ 1,658,000 1,361,000
Write down of property, plant and equipment_ 20,000 -
Deferred income taxes_______________________ 44,000 ( 120,000)
(Gain) loss on sale of fixed assets_________ 8,000 ( 17,000)
Changes in assets and liabilities:
Accounts receivable_______________________ (1,706,000) ( 980,000)
Income tax refunds receivable_____________ - 15,000
Inventories_______________________________ (1,102,000) ( 444,000)
Prepaid expenses__________________________ ( 109,000) 63,000
Accounts payable and accrued liabilities__ 1,216,000 850,000
Income taxes payable______________________ 460,000 277,000
Other non-current assets and liabilities____ 29,000 268,000
----------- -----------
Net cash provided by operating activities_____ 6,040,000 4,279,000
Cash flows from investing activities:
Additions to property, plant and equipment____ (2,729,000) (4,049,000)
Proceeds from sale of property, plant and
equipment___________________________________ - 148,000
Purchases of investments______________________ ( 500,000) ( 500,000)
Proceeds from sale of investments_____________ 500,000 -
----------- -----------
Net cash used by investing activities_________ (2,729,000) (4,401,000)
Cash flows from financing activities:
Dividends paid________________________________ (1,160,000) ( 737,000)
Unearned compensation_________________________ - 186,000
Proceeds from exercise of stock options_______ 76,000 3,000
Other, net____________________________________ - 2,000
----------- -----------
Net cash used by financing activities_________ (1,084,000) ( 546,000)
Net increase (decrease) in cash and cash
equivalents___________________________________ 2,227,000 ( 668,000)
Cash and cash equivalents at beginning of year__ 910,000 2,474,000
----------- -----------
Cash and cash equivalents at end of period______ $ 3,137,000 $ 1,806,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 7
REPUBLIC GYPSUM COMPANY
Notes to Consolidated Financial Statements
December 31, 1994 and 1993 (Unaudited)
(1) Basis of Interim Presentation: In the opinion of management of the
Company, the accompanying unaudited consolidated financial statements reflect
all adjustments, of a normal recurring nature, to fairly present the Company's
financial position as of December 31, 1994, the results of operations for the
quarters ended December 31, 1994 and 1993, and the results of operations for
the six months ended December 31, 1994 and 1993. The operating results for the
interim periods are not necessarily indicative of the results to be expected
for a full year. It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Form 10-K as of June 30, 1994.
(2) Earnings Per Common and Common Equivalent Shares: Per share
computations are based on the weighted average number of common shares
outstanding during each period. Earnings per common and common equivalent
share, on a fully diluted basis, are substantially the same as primary earnings
per share as presented. The number of shares used in the per share
computations were 10,590,000 and 10,602,000 for the six month and three month
periods ended December 31, 1994 and 10,589,000 and 10,590,000 for the
comparable 1993 periods.
(3) Environmental: In connection with its preparations for a warehouse
addition to its paperboard mill located in Commerce City, Colorado, a suburb of
Denver, the Company discovered and has been investigating the presence of
subsurface petroleum hydrocarbons. The Company retained an environmental
consultant who concluded that fuel oil, jet fuel, and gasoline additives had
migrated in the subsurface of the Company's property from an adjacent property.
The Company and the adjacent property owner are jointly sponsoring additional
investigations and discussions between the parties continue. The Company has
completed the construction of the warehouse under approval of the Colorado
Department of Health. At this time, the Company has not ascertained the future
liability, if any, of the above matter.
(4) Commitments: At December 31, 1994, the Company has commitments to
purchase property, plant, and equipment totaling approximately $700,000.
(5) Reclassification: Certain prior balances have been reclassified to
conform with current year presentation.
-6-
<PAGE> 8
(6) Subsequent Event: On January 20, 1995, the Company declared a cash
dividend of $.06 per share payable to the stockholders of record on February
28, 1995, to be paid on March 15, 1995. Dividend payments of approximately
$633,000 will be paid out of existing cash balances.
(7) Subsequent Event: On January 20, 1995, the Company entered into a
letter of intent with Old Dominion Box Company and its subsidiary, Halltown
Paperboard Company, to purchase substantially all of the assets of Halltown
Paperboard Company for $24.5 million plus the value of inventories on hand.
Closing of the transaction is subject to satisfactory completion of customary
due diligence investigations. These due diligence investigations are in their
initial stages. The Company intends to fund the purchase with debt financing.
(8) Income Taxes: The provisions for income taxes are based on estimated
annual effective tax rates, which differ from the federal statutory rates
principally due to state income taxes and certain non-deductible expenses.
These estimates are updated quarterly.
-7-
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarters ended December 31, 1994 and 1993. Consolidated net income
for the second quarter ended December 31, 1994 was $2,846,000 or $.27 per share
on net sales of $22,346,000. These results compare favorably to consolidated
net income of $1,474,000 or $.14 per share on net sales of $14,817,000
experienced in the 1993 quarter. The 51% increase in quarterly net sales
between 1994 and 1993 is primarily attributable to a 7% increase in shipments
and a 41% increase in net selling prices of gypsum wallboard. The acquisition
of the Company's reclaimed paper facilities as of March 31, 1994 and higher net
selling prices for the Company's recycled paperboard also contributed to the
improvement in net sales during the quarter ended December 31, 1994.
Operating profits were $4,823,000 for the quarter ended December 31,
1994 compared to $2,353,000 for the same quarter of 1993. The improvement in
net sales of gypsum wallboard was the primary cause. Profits from the
Company's reclaimed paper facilities also were a contributing factor.
Demand for gypsum wallboard continued to exceed supply during the most
recent quarter. It is still too early to determine when and to what extent the
latest increases in interest rates will affect the demand for, and the pricing
of, gypsum wallboard.
Recycled paperboard operating margins, which had been adversely
impacted by spiraling reclaimed paper costs, rose to 19% of net sales in the
December 1994 quarter from 9% in the September 1994 quarter and 8% in the June
1994 quarter. Reclaimed paper costs are expected to rise significantly again
in the third quarter of fiscal 1995. Management believes it will be able to
offset, to a major extent, rises in its reclaimed fiber costs with increases in
the selling price of its products, however, the implementation of selling price
increases typically trails cost increases by thirty to ninety days. Demand for
the Company's recycled paperboard products has been strong in recent quarters
despite rising selling prices, however, additional increases in selling prices
could adversely affect future demand.
Six Months Ended December 31, 1994 and 1993. Consolidated net income
for the six months ended December 31, 1994 was $5,522,000 or $.52 per share, as
compared to consolidated net income of $3,006,000 or $.28 per share for the
comparable period in 1993. Operating profits were $9,187,000 for the six
months ended December 31, 1994 compared to $4,673,000 for the same period in
1993. Consolidated net sales were 47% higher and consolidated net income 84%
higher than in the prior year period primarily due to the same reasons as
stated for the quarterly comparisons.
-8-
<PAGE> 10
In connection with its preparations for a warehouse addition to its
paperboard mill located in Commerce City, Colorado, a suburb of Denver, the
Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel, and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company
and the adjacent property owner are jointly sponsoring additional
investigations and discussions between the parties continue. The Company has
completed the construction of the warehouse under approval of the Colorado
Department of Health. At this time, the Company has not ascertained the future
liability, if any, of the above matter.
On January 20, 1995, the Company entered into a letter of intent with
Old Dominion Box Company and its subsidiary, Halltown Paperboard Company, to
purchase substantially all of the assets of Halltown Paperboard Company for
$24.5 million plus the value of inventories on hand. Halltown operates a
recycled paperboard mill located in Halltown, West Virginia which has a rated
productive capacity of approximately 70,000 tons per year. In connection with
the asset purchase, Republic and Old Dominion will enter into a paperboard
supply contract covering uncoated paperboard to be supplied to Old Dominion's
converting operations. Closing of the transaction is subject to satisfactory
completion of customary due diligence investigations. These due diligence
investigations are in their initial stages.
Liquidity and Capital Resources
The following is a summary of certain financial statistics related to the
liquidity of the Company at December 31, 1994, and at June 30, 1994.
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------ ------------
<S> <C> <C>
Working Capital $ 10,861,000 $ 7,393,000
Current Ratio 2.2:1 2.0:1
Cash and investments $ 3,637,000 $ 1,410,000
</TABLE>
The Company had a $6,000,000 working capital line of credit from a
commercial bank as of December 31, 1994. To date, no amounts have been
borrowed against the line of credit which expires on November 1, 1995.
Management believes that cash and investments, internally generated funds and
possible asset sales, supplemented as needed by advances under the working
capital line of credit, will be sufficient to meet the Company's short-term,
and at least for the foreseeable future, long-term working capital
requirements, including the working capital requirements of the Halltown
Paperboard Company operation described above.
-9-
<PAGE> 11
The Company's capital expenditure budget for the 1995 fiscal year
totals approximately $8,697,000. Approximately $5,000,000 of that amount is
earmarked for paperboard mill improvements and other capital upgrades included
in the Company's five-year capital plan. Cash provided by operations and
existing cash balances should be sufficient to fund these expenditures.
On January 20, 1995, the Board of Directors of the Company declared a
quarterly cash dividend of $.06 per share on its outstanding common stock to be
paid on March 15, 1995, to stockholders of record on February 28, 1995. The
dividend payment will amount to approximately $633,000 and will be paid from
existing cash balances.
Republic intends to fund the purchase of Halltown Paperboard Company
with long-term debt financing. The Company is currently discussing financing
arrangements with several potential lenders.
-10-
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings involving the
Company or any of its subsidiaries, other than ordinary
routine litigation incidental to the Company's business.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The following matter was submitted in 1st Quarter 10-Q, Fiscal
1995:
The Company held its Annual Meeting of Stockholders on October
27, 1994. At the meeting, the stockholders elected
management's nine (9) nominees for the Board of Directors.
The names of the persons elected to the Board and the votes
cast for, the votes withheld and broker non-votes with respect
to each such director are set forth below:
<TABLE>
<CAPTION>
Votes Votes Broker
For Withheld Non-Votes
----- -------- ---------
<S> <C> <C> <C>
Phil Simpson 9,301,050 101,245 0
Stephen L. Gagnon 9,388,749 13,546 0
Bert A. Nelson 9,388,067 14,228 0
Talbot Rain 9,367,863 34,432 0
Gerald L. Ray 9,382,342 19,953 0
Robert F. Sexton 9,388,539 13,756 0
David P. Simpson 9,268,641 133,654 0
L.L. Wallace 9,311,035 91,260 0
David B. Yarbrough 9,368,080 34,215 0
</TABLE>
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Article 5 of Regulation S-X - Financial Data
Schedule.
(b) Reports on Form 8-K
None.
-11-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REPUBLIC GYPSUM COMPANY
January 31, 1995 /s/ Doyle R. Ramsey
------------------------------
Doyle R. Ramsey
Vice President and Chief
Financial Officer
January 31, 1995 /s/ John W. McCracken
------------------------------
John W. McCracken
Controller and Principal
Accounting Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 2ND QUARTER 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 3,137,000
<SECURITIES> 500,000
<RECEIVABLES> 10,214,000
<ALLOWANCES> 522,000
<INVENTORY> 5,495,000
<CURRENT-ASSETS> 19,782,000
<PP&E> 72,839,000
<DEPRECIATION> 34,063,000
<TOTAL-ASSETS> 59,178,000
<CURRENT-LIABILITIES> 8,921,000
<BONDS> 0
<COMMON> 10,552,000
0
0
<OTHER-SE> 35,059,000
<TOTAL-LIABILITY-AND-EQUITY> 59,178,000
<SALES> 22,346,000
<TOTAL-REVENUES> 22,346,000
<CGS> 15,251,000
<TOTAL-COSTS> 15,251,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 132,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,865,000
<INCOME-TAX> 2,019,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,846,000
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
