<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 March 31, 1995
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
REPUBLIC GYPSUM COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
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)
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 April 30, 1995, there were 10,556,594 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 March 31, 1995
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 March 31, 1995 and 1994 (Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Gross sales_____________________________ $30,881,000 $20,427,000
Less freight and discounts______________ 4,350,000 3,623,000
----------- -----------
Net sales_______________________________ 26,531,000 16,804,000
Costs and expenses:
Cost of sales_________________________ 18,671,000 10,914,000
Selling and administrative expenses___ 2,596,000 1,857,000
----------- -----------
21,267,000 12,771,000
----------- -----------
Operating profit________________________ 5,264,000 4,033,000
Other income, net_______________________ 54,000 198,000
----------- -----------
Income before income taxes______________ 5,318,000 4,231,000
Provision for income taxes______________ 2,086,000 1,611,000
----------- -----------
Net income _____________________________ $ 3,232,000 $ 2,620,000
=========== ===========
Net income per share ___________________ $ 0.30 $ 0.25
=========== ===========
Dividends per share_____________________ $ 0.06 $ 0.05
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 4
REPUBLIC GYPSUM COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended March 31, 1995 and 1994 (Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Gross sales_____________________________ $81,959,000 $56,315,000
Less freight and discounts______________ 12,229,000 10,216,000
----------- -----------
Net sales_______________________________ 69,730,000 46,099,000
Costs and expenses:
Cost of sales_________________________ 48,191,000 31,558,000
Selling and administrative expenses___ 7,088,000 5,835,000
----------- -----------
55,279,000 37,393,000
----------- -----------
Operating profit________________________ 14,451,000 8,706,000
Other income, net_______________________ 112,000 439,000
----------- -----------
Income before income taxes______________ 14,563,000 9,145,000
Provision for income taxes______________ 5,809,000 3,519,000
----------- -----------
Net income______________________________ $ 8,754,000 $ 5,626,000
=========== ===========
Net income per share____________________ $ 0.83 $ 0.53
=========== ===========
Dividends per share_____________________ $ 0.17 $ 0.12
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 5
REPUBLIC GYPSUM COMPANY
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and June 30, 1994
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1995 1994
----------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents_________________________ $ 3,199,000 $ 910,000
Investments and marketable securities,
at cost, which approximates market______________ 1,500,000 500,000
Accounts receivable, net__________________________ 12,466,000 7,986,000
Income tax refunds receivable_____________________ 143,000 219,000
Inventories:
Finished goods__________________________________ 1,269,000 997,000
Raw materials and supplies______________________ 4,258,000 3,396,000
---------------- ----------------
5,527,000 4,393,000
Prepaid expenses__________________________________ 321,000 366,000
Net assets held for sale__________________________ 264,000 264,000
---------------- ----------------
Total current assets____________________________ 23,420,000 14,638,000
Property, plant and equipment, at cost 68,479,000 66,079,000
Construction in progress 7,527,000 4,087,000
---------------- ----------------
76,006,000 70,166,000
Less accumulated depreciation, amortization
and depletion___________________________________ 34,888,000 32,433,000
---------------- ----------------
41,118,000 37,733,000
Other assets________________________________________ 667,000 648,000
---------------- ----------------
Total assets________________________________________ $ 65,205,000 $ 53,019,000
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable__________________________________ $ 8,105,000 $ 4,838,000
Accrued payroll and employee benefits_____________ 2,219,000 1,339,000
Income taxes payable______________________________ 1,052,000 --
Accrued property taxes____________________________ 428,000 272,000
Other current liabilities_________________________ 728,000 796,000
---------------- ----------------
Total current liabilities_______________________ 12,532,000 7,245,000
Deferred income taxes_______________________________ 3,540,000 3,715,000
Other long-term liabilities_________________________ 888,000 886,000
Stockholders' equity:
Common stock, $1 par value________________________ 10,557,000 10,538,000
Additional paid-in capital________________________ 12,303,000 12,211,000
Retained earnings_________________________________ 25,411,000 18,450,000
Less pension liability adjustment_________________ (26,000) (26,000)
---------------- ----------------
Total stockholders' equity______________________ 48,245,000 41,173,000
---------------- ----------------
Total liabilities and stockholders' equity__________ $ 65,205,000 $ 53,019,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 6
REPUBLIC GYPSUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1995 and 1994 (Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income__________________________________________ $ 8,754,000 $ 5,626,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and depletion__________ 2,561,000 2,023,000
Write down of property, plant and equipment_______ -- 35,000
Deferred income taxes_____________________________ (175,000) (112,000)
(Gain) loss on sale of fixed assets_______________ 29,000 (124,000)
(Gain) loss on sales of investments_______________ -- (37,000)
Changes in current assets and liabilities:
Accounts receivable_____________________________ (4,480,000) (2,313,000)
Income tax refunds receivable___________________ 76,000 7,000
Inventories_____________________________________ (1,134,000) (576,000)
Prepaid expenses________________________________ 45,000 (3,000)
Accounts payable and accrued liabilities________ 4,235,000 1,683,000
Income taxes payable____________________________ 1,052,000 661,000
Other non-current assets and liabilities__________ (17,000) 301,000
-------------- -------------
Net cash provided by operating activities___________ 10,946,000 7,171,000
Cash flows from investing activities:
Additions to property, plant and equipment__________ (5,975,000) (9,006,000)
Proceeds from sale of property, plant and
equipment_________________________________________ -- 587,000
Purchases of investments____________________________ (1,500,000) (500,000)
Proceeds from sale of investments___________________ 500,000 262,000
Other, net__________________________________________ -- (5,000)
-------------- -------------
Net cash used by investing activities_______________ (6,975,000) (8,662,000)
Cash flows from financing activities:
Dividends paid______________________________________ (1,793,000) (1,265,000)
Additions in short-term debt________________________ -- 1,345,000
Unearned compensation_______________________________ -- 187,000
Proceeds from exercise of stock options_____________ 111,000 6,000
-------------- -------------
Net cash provided (used) by financing activities____ (1,682,000) 273,000
Net increase (decrease) in cash and cash
equivalents_________________________________________ 2,289,000 (1,218,000)
Cash and cash equivalents at beginning of year________ 910,000 2,474,000
-------------- -------------
Cash and cash equivalents at end of period____________ $ 3,199,000 $ 1,256,000
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 7
REPUBLIC GYPSUM COMPANY
Notes to Consolidated Financial Statements
March 31, 1995 and 1994 (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 March 31, 1995, the results of operations for the
quarters ended March 31, 1995 and 1994, and the results of operations for the
nine months ended March 31, 1995 and 1994. 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 10,604,000 and 10,633,000 for the nine month and three month
periods ended March 31, 1995 and 10,602,000 and 10,644,000 for the comparable
1994 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 March 31, 1995, the Company has commitments to
purchase property, plant, and equipment totaling approximately $500,000.
-6-
<PAGE> 8
(5) Reclassification: Certain prior balances have been reclassified to
conform with current year presentation.
(6) Subsequent Event: On April 25, 1995, the Company declared a cash
dividend of $.06 per share payable to the stockholders of record on May 31,
1995, to be paid on June 15, 1995. Dividend payments of approximately $633,000
will be paid out of existing cash balances.
(7) 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.
(8) 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. The acquisition is
scheduled to close in the current fiscal quarter.
-7-
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarters ended March 31, 1995 and 1994. Consolidated net sales
improved 58% and consolidated net income 23% during the third quarter ended
March 31, 1995 compared to the same quarter a year ago. Operating profits were
$5,264,000 for the quarter just ended compared to $4,033,000 for the same
quarter of 1994. The improvements were primarily due to average net selling
prices for wallboard, which increased 25% between the March quarters of 1994
and 1995, and the net sales and operating profits of the Company's reclaimed
paper facilities which were acquired in April 1994.
Despite the rise in interest rates, demand for gypsum wallboard
continued to be strong, and as a result net selling prices continued to rise in
the March 1995 quarter. There are some indications, however, that housing
activity is being impacted negatively by the higher interest rates. The rate
of housing starts is an important factor in the demand for gypsum wallboard.
Although recycled paperboard shipments and average net selling prices
increased 6% and 27%, respectively, operating margins were significantly lower
in the quarter ended March 31, 1995 than the comparable 1994 quarter. The cost
of reclaimed paper fiber, which is the primary raw material used in the
manufacture of recycled paperboard, was approximately three times as high in
the March 1995 quarter as it was in the March 1994 quarter. In addition, a
malfunction of the line shaft on the number 2 paper machine at the Hutchinson
mill resulted in three weeks of unplanned downtime on that machine during March
1995. Insurance and reserves should offset the majority of the Company's out of
pocket expenses associated with repairing the machine, but lost production
during the downtime reduced shipments for the quarter by approximately 2,100
tons.
The Company has been successful in raising selling prices of recycled
paperboard, but there is generally a 30 to 60 day delay between raw material
cost increases and subsequent selling price increases.
-8-
<PAGE> 10
Nine Months Ended March 31, 1995 and 1994. In the nine months ended
March 31, 1995, consolidated net sales increased 51% and consolidated net
income 56% compared to the same period in 1994. Operating profits were
$14,451,000 for the nine months just ended compared to $8,706,000 for the same
period in 1994. The improvements were primarily due to a 7% increase in
shipments and a 36% increase in the average net selling prices for gypsum
wallboard. Additionally, selling and administrative expenses declined to 10%
of net sales in 1995 compared to 13% in 1994. Recycled paperboard margins for
the comparable period were still affected adversely primarily due to the same
reasons as stated for the quarterly comparisons.
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. The acquisition is
scheduled to close in the current fiscal quarter.
-9-
<PAGE> 11
Liquidity and Capital Resources
The following is a summary of certain financial statistics related to the
liquidity of the Company at March 31, 1995, and at June 30, 1994.
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
------------ ------------
<S> <C> <C>
Working Capital $ 10,888,000 $ 7,393,000
Current Ratio 1.9:1 2.0:1
Cash and investments $ 4,699,000 $ 1,410,000
</TABLE>
The Company had a $6,000,000 working capital line of credit from a
commercial bank as of March 31, 1995. 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.
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. Through March
31, 1995, Republic's additions to plant, property, and equipment totaled
$5,975,000. These additions were all funded internally.
On April 25, 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 June 15, 1995, to stockholders of record on May 31, 1995. The dividend
payment will amount to approximately $633,000 and will be paid from existing
cash balances.
Republic will fund the purchase of Halltown Paperboard Company with
long-term debt financing. The Company is currently finalizing acquisition and
working capital financing arrangements with a lender.
-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
None.
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
May 1, 1995 /s/ Doyle R. Ramsey
------------------------------
Doyle R. Ramsey
Vice President and Chief
Financial Officer
May 1, 1995 /s/ John W. McCracken
----------------------------
John W. McCracken
Controller and Principal
Accounting Officer
-12-
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - - - - ------- ----------- ------------
<S> <C> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,199,000
<SECURITIES> 1,500,000
<RECEIVABLES> 13,144,000
<ALLOWANCES> 678,000
<INVENTORY> 5,527,000
<CURRENT-ASSETS> 23,420,000
<PP&E> 76,006,000
<DEPRECIATION> 34,888,000
<TOTAL-ASSETS> 65,205,000
<CURRENT-LIABILITIES> 12,532,000
<BONDS> 0
<COMMON> 10,557,000
0
0
<OTHER-SE> 37,688,000
<TOTAL-LIABILITY-AND-EQUITY> 65,205,000
<SALES> 26,531,000
<TOTAL-REVENUES> 26,531,000
<CGS> 21,267,000
<TOTAL-COSTS> 21,267,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 151,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,318,000
<INCOME-TAX> 2,086,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,232,000
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
