UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the quarterly period ended March 31,
1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. For the transition period from
to .
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Commission File Number 0-23880
Monroc, Inc.
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Delaware 87-0436697
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(State of incorporation) (I.R.S. Employer
Identification Number)
P.O. Box 537, 1730 Beck Street, Salt Lake City, Utah 84110
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(Address of principal executive offices)
Registrant's telephone number 801-359-3701
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 and 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
requirement for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding in each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
----------------------------- -----------------------------
Common Stock, $0.01 par value 4,467,000 shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONROC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
---------- ----------
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $1,969,081 $6,506,751
Accounts receivable, net of allowance for
discounts and doubtful accounts of $296,647 at
December 31, 1995 and $225,443 at March 31, 1996 5,582,442 6,639,878
Costs and estimated earnings in excess of
billings on uncompleted contracts 549,024 152,943
Inventories 3,290,754 2,815,780
Prepaid expenses 1,517,934 1,274,892
--------- ---------
Total current assets 12,909,235 17,390,244
PROPERTY, PLANT AND EQUIPMENT, AT COST 26,168,882 24,625,327
Less accumulated depreciation
and amortization 12,119,830 11,525,532
--------- ---------
14,049,052 13,099,795
AGGREGATE DEPOSITS 2,454,654 2,454,654
Less accumulated depletion 240,773 230,385
--------- ---------
2,213,881 2,224,269
LAND 1,514,543 1,510,072
OTHER ASSETS, at cost, less accumulated amortization
of $284,526 at December 31, 1995 and $305,785
at March 31, 1996 1,363,168 1,383,376
--------- ---------
TOTAL ASSETS $32,049,879 $35,607,756
========== ==========
(Continued)
The accompanying notes are an integral part of these statements
-1-
<PAGE>
MONROC, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1996 1995
---------- ----------
(Unaudited)
CURRENT LIABILITIES
Notes payable $21,097 $86,519
Current maturities of long-term obligations 846,747 802,765
Trade accounts payable 4,236,405 5,307,303
Accrued liabilities 1,870,621 1,522,788
Billings in excess of costs and estimated
earnings on uncompleted contracts 124,276 242,530
--------- ---------
Total current liabilities 7,099,146 7,961,905
LONG-TERM OBLIGATIONS, less current maturities 4,713,350 6,591,329
DEFERRED COMPENSATION 650,259 626,710
DEFERRED INCOME TAXES 1,189,550 1,189,550
COMMITMENTS AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; none issued 0 0
Common stock, $0.01 par value; 20,000,000 shares
authorized; issued and outstanding 4,467,000
shares at December 31, 1995, and 4,467,000 at
March 31, 1996 44,670 44,670
Capital in excess of par value 24,481,864 24,481,864
Accumulated deficit (3,004,914) (1,964,226)
--------- ---------
21,521,620 22,562,308
Less unpaid principal of Employee Stock Ownership
Plan note receivable (3,124,046) (3,324,046)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 18,397,574 19,238,262
--------- ---------
TOTAL LIABILIES AND STOCKHOLDERS' EQUITY $32,049,879 $35,607,756
========== ==========
The accompanying notes are an integral part of these statements.
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<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 31,
1996 1995
---------- ----------
Sales $9,204,260 $7,132,047
Costs and expenses
Cost of sales 8,481,553 6,163,344
General and administrative expense 1,439,138 1,110,229
Contribution to ESOP 200,000 200,000
--------- ---------
10,120,691 7,473,573
--------- ---------
Operating loss (916,431) (341,526)
Other income (expense)
Gain on sale of property, plant, equipment
and land 168 10,355
Interest income 44,604 3,664
Interest expense (169,029) (337,998)
--------- ---------
(124,257) (323,979)
--------- ---------
Loss before income taxes (1,040,688) (665,505)
Income taxes 0 0
--------- ---------
NET LOSS ($1,040,688) ($665,505)
========== ==========
Earnings (loss) per common share ($0.23) ($0.24)
========== ==========
Weighted average common shares outstanding 4,467,000 2,817,000
The accompanying notes are an integral part of these statements
-3-
<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
---------- ----------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss ($1,040,688) ($665,505)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization of property,
plant & equipment 599,782 577,622
Provision for contribution to ESOP and
repayment of ESOP note receivable 200,000 200,000
Amortization of other assets 20,208 21,260
Provision for discounts and doubtful accounts (1,675) 5,949
Depletion of aggregate deposits 10,388 12,558
(Gain) loss on sale of property, plant, equipment
and land 168 (10,355)
Changes in assets and liabilities
Accounts receivable 1,059,111 348,853
Costs and estimated earnings in excess of
billings on uncompleted contracts (396,081) (200,570)
Inventories (474,974) (522,333)
Prepaid expenses (243,042) 155,789
Other assets (4,471) (119,090)
Trade accounts payable (1,070,898) (511,646)
Accrued liabilities 347,833 243,291
Billings in excess of costs and estimated
earnings on uncompleted contracts (118,254) 67,514
Deferred compensation 23,549 21,847
--------- ---------
Net cash used in operating activities (1,089,044) (374,816)
Cash flows from investing activities
Additions to property, plant and equipment (1,549,207) (187,732)
Proceeds from sale of property, plant, equipment,
and land 0 126,500
--------- ---------
Net cash used in investing activities (1,549,207) (61,232)
(Continued)
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Three Months Ended
March 31,
1996 1995
---------- ----------
Cash flows from financing activities
Net increase (decrease) in notes payable (65,422) 565,503
Principal payments on long-term obligation (2,062,997) (191,435)
Issuance of long-term obligations 229,000 0
--------- ---------
Net cash provided by (used in) financing
activities (1,899,419) 374,068
--------- ---------
Net increase (decrease) in cash and cash
equivalents (4,537,670) (61,980)
Cash and cash equivalents at beginning of period 6,506,751 483,081
--------- ---------
Cash and cash equivalents at end of period $1,969,081 $421,101
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $236,134 $337,998
Income taxes 8,410 960
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
MONROC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements of Monroc,
Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all normally
recurring adjustments necessary for a fair presentation of the
financial information have been reflected therein. Because of
the seasonality and cyclicality of the Company's businesses, the
operating results for the three months ended March 31, 1996 are
not necessarily indicative of the results that may be expected
for the year ending December 31, 1996. The revenues and net
earnings for any interim period are not necessarily indicative of
results that may be expected for the entire year.
These statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December
31, 1995.
Note 2. Stock Options
As of April 30, 1996, the Company had granted stock options
to various officers, directors and employees of the Company
covering the aggregate amount of 159,300 shares of common stock
at an exercise price of $5.00 per share. The expiration date of
such options is April 15, 1999.
On April 29, 1996, the Board of Directors approved a new
stock option plan which covers 300,000 shares of Common Stock.
The adoption of the plan is subject to the approval of
stockholders at the Annual Stockholders Meeting to be held on May
22, 1996. If approved, options under the new stock option plan
will be granted to various officers, managers and employees of
the Company as decided by the Compensation Committee of the Board
of Directors.
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<PAGE>
Note 3. Environmental Matters
The Company is currently the owner of property located in
Murray, Utah, formerly known as the ASARCO Smelter site, which
contains mining slag previously deposited by ASARCO. The slag
contains certain heavy metals including lead and arsenic which
may have leached from the slag into the environment. This and
adjoining properties previously owned by ASARCO have been
proposed by the Environmental Protection Agency (EPA) for listing
on the National Priorities List for cleanup of the slag and
potential groundwater contamination. Although the Company did
not generate the slag material, under the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), the current owner of a property may be liable for
cleanup costs. In such case, the Company would have a claim
against the former owner for its respective share of these costs.
Although to date the Company has not been designated a
Potentially Responsible Party by the EPA with respect to cleanup
of any waste at this site, it recently received a CERCLA 104(e)
information request. The outcome of this matter is uncertain and
it is not possible at this time to estimate the possible
financial impact on the Company, if any.
Prior to learning of the potential presence of lead in the
slag from this site, the Company sold some of the slag for use in
road base and railroad fill. The Company may be liable for
cleanup costs if it is determined that the lead from this slag
poses an environmental hazard. The Company has not received any
notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at
the present time. The Company's management believes that there
are economically reasonable methods of containing the slag should
this become necessary.
Note 4. Sale of Stock
On December 28, 1995, the Company issued 1,650,000 shares of
common stock in a private placement to a BCCP I, L.P., a
California limited partnership ("BCCP I") at $5.50 a share or an
aggregate purchase price of $9,075,000. It also issued a warrant
for an additional 1,500,000 shares exercisable within a five year
period at $6.25 a share. The sole general partner of BCCP I is
Building and Construction Capital Partners, L.P., a California
limited partnership ("BCCP"). The general partner of BCCP is
Richard C. Blum & Associates, L.P.. As part of the transaction,
the Company will pay an annual $200,000 consultants fee to BCCP
and reimburse BCCP I for up to $150,000 of its costs related to
completing the transaction. As part of the transaction, BCCP
appointed a majority of the Company's Board of Directors.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the unaudited Consolidated Financial Statements and related Notes
included elsewhere in this report. Also, the discussion should
be read in conjunction with the audited Financial Statements and
related Notes contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
Results of Operations - Three Months Ended March 31
Sales increased 29% from $7,132,047 for the three month
period ended March 31, 1995 ("1995 period") to $9,204,260 for the
three months ended March 31, 1996 ("1996 period"). Sales for the
Prestress Division increased 48% from the 1995 period to
$4,037,392 in the 1996 period due to the start up of production
on the Company's Snake River Correctional Facility contract which
is a $20 MM project to be completed by the third quarter of 1997.
Ready mix concrete volumes were up 28% in the 1996 period
compared to the 1995 period primarily due to volume increases of
60% and 42% in the Boise and Salt Lake City markets,
respectively. However, concrete prices were 4% lower overall in
the 1996 period.
General and Administrative expenses increased from
$1,110,229 for the 1995 period to $1,439,138 for the 1996 period
due to the addition of support personnel in the Prestress
Division for the Snake River Correctional Facility contract and
higher costs in Salt Lake due to expanded operations. In
addition, corporate expenses were higher due to the payment of
the consulting fee to Building and Construction Capital Partners,
L.P., and other outside professional services.
The operating loss increased from $341,526 for the 1995
period to $916,431 in the 1996 period. In addition to the
increase in General and Administrative costs discussed above,
operating margins were affected by start-up costs on the Snake
River Correctional Facility contract and by higher operating
costs resulting from more adverse winter conditions during the
1996 period compared to the 1995 period.
Net Interest expense was $124,425 in the 1996 period or
$209,909 lower than the 1995 period due to the application of a
portion of the net proceeds from the private placement of common
stock to a pay down of outstanding loans with the CIT Group and
short term investment of the remaining balances (See "Liquidity
and Capital Resources" below).
Net losses were $1,040,688 or 23 cents a share in the 1996
period versus $665,505 or 24 cents a share for the 1995 period
for the reasons indicated above.
-8-
<PAGE>
Liquidity and Capital Resources
On December 28, 1995, the Company closed the transactions
contemplated by a Stock Purchase Agreement, between the Company
and Building and Construction Capital Partners, L.P ("BCCP").
Prior to the closing of these transactions, BCCP assigned most of
its rights under the Stock purchase Agreement to BCCP I, L.P.
("BCCP I"). Pursuant to the Stock Purchase Agreement, the
Company sold 1,650,000 shares of Common Stock to BCCP I at a
price of $5.50 per share, or an aggregate of $9,075,000. The
Company also issued to BCCP I a Warrant to purchase up to
1,500,000 additional shares of Common Stock at a price of $6.25
per share, exercisable through December 28, 2000. The Company
used $3,350,576 of the net proceeds of $8,776,245 which it
received from this issuance to pay down outstanding balances on
the Company's loans from the CIT Group after which $5,425,669
remained in cash and cash equivalents as of December 31, 1995.
The Company has met its need for liquidity principally
through the use of a credit facility provided by the CIT Group
that includes a line of credit for working capital and term
loans. The Company's liabilities to the CIT Group are secured by
liens on substantially all of the Company's real and personal
property. In February 1996, the Company signed a new six year
loan agreement with the CIT Group which increased the total
credit available from $11,000,000 to $15,000,000 and reduced the
interest rate from prime plus 2.5% to prime plus 0.75%.
On December 28, 1995, $3,350,576 from the proceeds of the
sale of Common Stock to BCCP I were used to pay down the CIT
Group term notes to $4,000,000. Additional proceeds were used to
reduce the notes to $2,000,000 in March, 1996. Total borrowings
under the line of credit totalled only $21,097 on March 31, 1996.
Total availability under the line of credit was $12,978,903 as of
that date.
As of March 31, 1996, the Company had positive working
capital of $5,810,089 compared to a positive working capital
balance of $9,428,339 at December 31, 1995. $2,000,000 of cash
was used to reduce the CIT notes in March, 1996. Cash used in
operations was $1,089,044 for the 1996 Period versus $374,816 for
the 1995 period. In addition to the increased loss for the 1996
quarter, prepaid expense increased due to the build up for the
Snake River Correctional Facility contract and accounts payable
decreased. Cash used in investing activities increased to
$1,549,207 in the 1996 period from $61,232 in the 1995 period
primarily due to increased capital spending for the installation
of plants at the Point of the Mountain and the purchase of
equipment to service the prison contract discussed above. Also,
cash used in financing activities was $1,899,419 for the 1996
period because of the $2,000,000 pay down of the CIT term loans
as discussed above.
-9-
<PAGE>
The Company acquired four new Mack front discharge ready mix
trucks in October, 1995, and thirty six new Mack front discharge
ready mix trucks in March, 1996 through operating leases
totalling $5,580,160. These trucks significantly upgraded the
capability of the Company's delivery fleet. In addition, the
Company will be installing a central ready mix plant and sand and
gravel wash plant at its Point of the Mountain site at a cost of
over $2,000,000 to service customers in the south end of the Salt
Lake Valley. In addition, the Company has acquired several long
haul tractors, flatbed trailers, front end loaders, hydro cranes
and other equipment to upgrade its equipment efficiency and
capability.
Seasonality
The Company services the construction industry principally
in areas where construction activity is restricted during the
winter. As a result, the Company experiences reduced revenues
from December through March and realizes the substantial part of
its revenues during the other months of the year. The Company
generally incurs losses during the winter months and must have
sufficient working capital to fund operations at a reduced level.
Financial performance of the Company in any one quarter of
the year should not be considered a reliable indicator of the
anticipated current year results. The seasonality and
variability of weather conditions as well as the cyclicality of
demand in response to factors such as interest rate changes can
cause significant fluctuations in financial results from quarter
to quarter and from year to year.
-10-
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed during the
quarter ended March 31, 1996.
-11-
<PAGE>
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.
Monroc, Inc.
-----------------------------
Registrant
Date: May 14, 1996 /s/ Robert A. Parry
--------------------- -----------------------------
Robert A. Parry
President and Chief
Executive Officer
/s/ L. William Rands
-----------------------------
L. William Rands
Vice President and Chief
Financial and Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONROC, INC.
MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,026,105
<SECURITIES> 942,975
<RECEIVABLES> 5,582,442
<ALLOWANCES> 225,443
<INVENTORY> 3,290,754
<CURRENT-ASSETS> 12,909,235
<PP&E> 26,168,882
<DEPRECIATION> 12,119,830
<TOTAL-ASSETS> 32,049,879
<CURRENT-LIABILITIES> 7,099,146
<BONDS> 4,713,350
<COMMON> 44,670
0
0
<OTHER-SE> 18,353,209
<TOTAL-LIABILITY-AND-EQUITY> 32,049,879
<SALES> 9,204,260
<TOTAL-REVENUES> 9,204,260
<CGS> 10,120,691
<TOTAL-COSTS> 10,120,691
<OTHER-EXPENSES> 168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,425
<INCOME-PRETAX> (1,040,688)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,040,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,040,688)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
