UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 0-23880
MONROC, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0436697
(State of incorporation) (I.R.S. Employer Identification Number)
P.O. Box 537, 1730 Beck Street
Salt Lake City, Utah 84110
(801) 359-3701
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
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 requirement for the past 90 days. Yes X No
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 stock held by non-affiliates of the
Registrant, as of March 13, 1997, was $12,188,748 based upon the last sale
price reported for such date on The NASDAQ National Market System.
The number of shares of the Registrant's Common Stock outstanding as of March
14, 1997 was 4,467,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement, to be filed with the
Commission for use in connection with the 1997 Annual Meeting of Stockholders
is incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
The Company
Monroc, Inc., a Delaware corporation (the
"Company"), was incorporated in 1986 and is the successor to
a Utah corporation which was incorporated in 1920. The
Company was organized in 1986 to purchase the assets of its
predecessor corporation through a leveraged Employee Stock
Ownership Plan.
The Company produces and sells to the construction
industry, ready-mix concrete, prestressed and precast
concrete building components, sand and gravel products, and
accessories for the concrete trade. The Company owns 18
plants in Utah, Idaho and Wyoming. Its products are sold in
Utah, Idaho, Wyoming and adjoining states, including
Colorado, Nevada, Arizona, Montana and New Mexico and, to a
lesser extent, Washington, Oregon and California.
As discussed below under Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results
of Operations", a change in control of the Company occurred
at the end of 1995. During 1996, the Company's business and
operations were restructured in several significant
respects. The Company intends to continue to evaluate its
businesses for improvements and plans to consider possible
acquisitions and divestitures with a view to maximizing
shareholder value.
The Company's Products
The Company's products fall into three principal
categories: (i) ready-mix concrete, (ii) prestressed and
precast concrete products and (iii) sand and gravel
aggregates. The Company's three principal products are
described below.
Ready-Mix Concrete
Ready-mix concrete is produced by combining rock,
sand, cement and water with certain chemical additives in a
"batch plant." This mixture is put into a mixer truck where
it is mixed thoroughly and delivered to a construction site.
Concrete is one of the most basic building materials and is
used to some degree in almost all construction projects,
including new roads and bridge construction, commercial and
industrial projects, residential construction and
agricultural construction (such as grain and potato storage
enclosures and dairy farms).
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Prestressed and Precast Concrete Products
Prestressed and precast concrete products are used
primarily as parts of buildings or highway structures.
These products may be used architecturally, such as in a
decorative wall of a building, or structurally. Structural
uses include building walls, frames, floors, roofs or
highway bridge beams.
Prestressed concrete products are manufactured by stressing
or stretching steel cables, incasing them in concrete, and
then releasing the cable after the concrete has hardened.
The contraction of the cable compresses the concrete, adding
to its strength. The manufacturing process for prestressed
concrete products varies depending upon the intended use for
the final product. Developing the required strength to
support traffic, as in a bridge beam for instance, requires
careful engineering and the determination of the proper
number of strands of steel, their placement, and the degree
of stress or pull to which they are to be subjected.
Precast products are manufactured by a process
similar to the manufacturing process for prestressed
concrete products. Precast concrete products, however, do
not contain steel cables that have been stretched to
strengthen the concrete. Precast products may or may not
contain steel bars for reinforcement. Precast products
include architectural walls and floor panels.
Due to the comparatively higher cost of the labor
and materials used in fabricating precast and prestressed
products, freight cost is a relatively less significant
factor in the overall cost of these products than it is for
ready-mix concrete. Therefore, prestressed and precast
concrete products can often be shipped over longer distances
and sold at prices that remain competitive with those of
other manufacturers. The Company has sold its prestressed
and precast concrete throughout much of the western United
States. One area of growth activity which makes extensive
use of prestressed and precast concrete products is prison
construction.
Sand and Gravel Aggregates
Sand and gravel aggregates are produced by
crushing and screening material that is either dug from a
bank or quarried from a solid deposit by blasting or
bulldozing. The material is sized and in some cases washed
to remove dirt and other fine materials so it will bond
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better with cement in concrete. Sand and gravel aggregates
are used to produce concrete and asphalt and also as a base
or foundation material under roads and highways, airport
runways, concrete slabs or floors, or other structures.
Transportation is a significant factor in the cost of sand
and gravel aggregates. Accordingly, the market area for
sand and gravel aggregates is usually limited. The Company
also uses its aggregates as raw materials in its own
concrete operations.
The following table compares the percentage of the
Company's total sales which were represented by the
Company's three product areas over the last three years:
Percentage of Sales
Product Category 1996 1995 1994
Ready-Mix Concrete . . . . . . . . . . . . . 51% 66% 62%
Precast/Prestressed . . . . . . . . . . . . 43% 25% 24%
Sand and Gravel Aggregates . . . . . . . . . 8% 9% 14%
The Industry and Market
The Company's Market
The Company's products are used in substantially
all types of construction, including housing, buildings,
roads and highways, bridges and airport runways. The
Company's products are used in local, state and federal
building projects, as well as private construction projects.
The Company generally sells its products to
contractors. On certain projects, the Company may also act
as a subcontractor and erect or install its precast or
prestressed concrete products. Most of the Company's sales
are made pursuant to bid proposals submitted to one or more
contractors. Concrete products are typically purchased from
the supplier submitting the lowest bid; however, projects
are occasionally awarded based upon quality. A small
percentage of the Company's sales contracts are obtained by
negotiation with owners and architects.
The Regional Construction Industry
The Company's business is heavily dependent upon
the construction industry and is directly affected by the
level of construction activity in the geographic areas in
which it operates. The level of construction activity is
cyclical and the Company's business varies accordingly. The
demand for construction varies depending upon a number of
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factors, including, weather conditions, the availability of
construction financing at favorable interest rates, overall
fluctuations in regional economies, past overbuilding, labor
relations in the construction industry and the levels of
material and energy supplies. In addition, local, state and
federal building projects are dependent upon budgets and, in
many cases, voter approved bonds.
Future Land Development
When the Company's predecessors acquired and
opened the Company's current large sand and gravel aggregate
quarries near Salt Lake City and Boise, the quarries were
located beyond these cities' outskirts. The growth of these
two cities in the intervening years has now placed these
land holdings well within their respective metropolitan
areas. This has a significant immediate term advantage for
the Company, since it places the Company's operations close
to important areas of new construction activity.
In addition, being located in growing urban areas
offers the Company the possibility of eventually converting
these land holdings to residential, recreational or
commercial use. The Company believes it is conducting its
operations on these properties in a way that will optimize
their development value. The Company has closed its
aggregate operation on the Kearns land which is comprised of
158.1 acres in the west central part of the Salt Lake Valley
and has submitted an application to have the zoning changed
to residential. Plans to sell the property are being
pursued. The Company is also contemplating the development
of its properties in Boise, Idaho (265 acres) as the
reserves there are depleted over the next several years or
the quarrying operation is relocated. See Item 2
"Properties."
Past independent appraisals of the Company's real
property have indicated that the fair market value of the
Company's real property may be significantly greater than
the historical cost shown on the Company's balance sheet at
December 31, 1996; however, the ability of the Company to
develop successfully its real property is dependent on such
factors as financing, obtaining necessary zoning and other
governmental approvals, and real estate market conditions at
the time.
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Competition
The Company's products are relatively generic and,
accordingly, in many of its markets, the Company has several
competitors. In particular, equipment for producing ready-mix
concrete can be leased from several sources,
facilitating the entrance of new competitors. In Idaho and
Wyoming, the Company faces competition primarily from
locally owned and operated companies. In Utah, the Company
faces competition not only from locally owned and operated
companies but also from larger regional, national and
international companies operating in Utah, some of which may
have substantially greater financial and other resources
than the Company.
The Company faces competition from a number of
companies in the precast and prestress concrete market.
Since precast and prestress products can be shipped over
greater distances, the Company competes with producers of
precast and prestress products in large metropolitan areas
in western states.
In addition to competitive pricing, the Company's
principal methods of meeting competition are through
consistency of product quality and customer support and
service.
Seasonality and Cyclicality
Seasonality
Due to its location in the Rocky Mountains, the
Company's business is impacted by adverse weather conditions
in the winter. Historically, construction activity
decreases significantly in December, January, February and
March because of snow and cold weather. The Company
generally experiences losses during these months.
Cyclicality
The construction industry is highly cyclical and
is strongly affected by changes in economic growth and
conditions and changes in interest rates. In the past, the
Company's revenues and backlog have varied significantly
because of changes in economic conditions on either the
national or regional level.
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Raw Materials and Suppliers
The Company obtains the bulk of its raw materials
(other than aggregates, substantially all of which are
produced internally) and supplies from several sources. The
raw materials used by the Company are widely available and
the Company is not dependent upon any one supplier. The
Company's management believes that for the foreseeable
future the Company will have reserves of sand and gravel
aggregates sufficient for its operations. See Item 2.
"Properties."
Regulation
The Company's operations are subject to numerous
federal, state and local laws and regulations. The plants
and quarries are subject to regulations and safety standards
established by the Mine Safety and Health Act and the
Occupation Safety and Health Act, and the federal agencies
which oversee compliance with such acts, as well as the
safety codes of state and local governments.
The Company's management believes that the Company
has all approvals and permits from local governing bodies
which are required for the mining of sand and gravel
aggregates and the conduct of the Company's other
businesses. State and local authorities, however, may adopt
new laws and regulations relating to land use which may, in
some instances, reduce or restrict uses of the Company's
properties.
Because the Company sometimes acts as a
subcontractor in erecting its prestressed and precast
concrete products, it must maintain contractor's licenses in
the states in which it sells these products. It presently
has current contractor's licenses in all states in which it
does business.
The Company's plants are also subject to
governmental regulations concerning environmental pollution.
The Company believes that it is substantially in compliance
with all applicable regulations. The cost of maintaining
such compliance is not considered to be material. During
the normal course of its operations, the Company uses and
disposes of materials, such as solvents and lubricants used
in equipment maintenance, which are classified as hazardous
by government agencies which regulate environmental quality.
The Company attempts to minimize the generation of such
waste as much as possible, and to recycle such wastes.
Remaining wastes are disposed of in permitted off-site
disposal sites.
The Company is currently the owner of 9.9 acres of
land located in Murray, Utah which contains mining slag
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previously deposited by ASARCO, the former owner. The slag
contains certain heavy metals, including lead and arsenic,
which may have leached from the slag into the environment.
This and adjoining properties formerly owned by ASARCO have
been proposed by the Environmental Protection Agency (the
"EPA") for listing on the National Priorities List for
cleanup of the lead slag and potential groundwater
contamination from arsenic laden soils. 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. The Company has not been
named as a Potentially Responsible Party by the EPA with
respect to cleanup of any waste at the site; however, the
Company was requested to respond to a CERCLA Section
104(e)information request, and has been included in the
study group discussed below. The outcome of this matter is
uncertain.
The Company has been participating in a study
group with the EPA, the former owner, Murray City and the
other current landowners to develop a plan that would result
in the remediation of the problems described above. An
agreement in principal has been reached among all parties,
and upon execution of a formal understanding, the EPA will
begin the process of preparing a consent agreement in 1997.
Cleanup will take several years to accomplish and involves a
combination of offsite disposal, redevelopment of the area
including new road construction and on site treatment. The
Company believes that development of the land for commercial
purposes will be possible at the end of the process. The
remediation plan calls for the dedication of a certain
amount of the Company's property for the extension of a
roadway in Murray City. Until approval of a consent
agreement, it is difficult to estimate the possible
financial impact to the Company, if any.
Prior to learning of the potential presence of
lead in the slag from this site, the Company sold a portion
of this slag principally for use as road base and railroad
fill. The Company may be liable for cleanup costs if it is
determined that the lead from such slag poses an
environmental hazard to drinking water. The Company has not
received any notice of government or private action relating
to this matter. The potential cost to the Company from such
actions, 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.
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Backlog
A significant portion of the Company's business,
particularly for prestressed and precast concrete, is based
on orders for delivery at times which may be many months
after the order date. Therefore, the Company generally has
a significant amount of outstanding work orders. The
Company's outstanding backlog for prestressed and precast
concrete products as of December 31, 1996 and 1995 were
approximately $12,085,000 and $25,786,000, respectively.
The outstanding backlog represents work that is scheduled to
be produced in 1997. The Snake River Correctional Facility
which the Company has been constructing since late 1995 will
be completed by mid- 1997. Work performed on this project
during 1996 resulted in the significant decrease in backlog.
Employees
As of December 31, 1996, the Company had 555
employees, of which 81 were in administrative or clerical
areas and 474 were in production. Approximately 407 of the
production employees are represented by various unions.
Contracts covering a total of 228 employees at two plants
will expire in 1997 and the Company will be in negotiations
with the applicable unions regarding these contracts. The
Company believes its relations with its employees and their
unions are satisfactory. The Company also conducts an
active worker safety program.
ITEM 2. PROPERTIES
General
The Company operates 18 facilities in Utah, Idaho
and Wyoming. All of the Company's existing personal
property and real property are used as collateral to secure
certain Company borrowings. See Item 7 "Management's
discussion and Analysis--Liquidity and Capital Resources."
Preventive maintenance programs and policies are maintained
for maximum utilization of equipment and facilities.
The Company operates a fleet of approximately 160
transit mixing trucks to deliver ready-mixed concrete to its
customers. It also operates a fleet of tractors and
trailers for hauling prestress/precast products and cement,
and dump trucks to deliver sand and gravel. Some of the
products sold by the Company are shipped on temporarily
leased vehicles, vehicles operated by contract truckers or
customer's vehicles loaded at the Company's plants. The
Company's facilities are further described below.
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Utah Operations
Salt Lake City, Utah
The Company currently operates two ready-mix batch
plants in the Salt Lake Valley including a new central mix
plant opened in mid-1996 on its property located at the
southern end of the Salt Lake Valley (the "Point of the
Mountain Site"). The Company's other ready-mix plant in the
Salt Lake area is located in Northern Salt Lake City on Beck
Street where the Company's headquarters is also located. A
small satellite ready-mix batch plant located on the
Company's property in Kearns, Utah, was closed in late 1996
because the Kearns property is in the process of being
rezoned in order to sell the property. Presently, the
Company operates a fleet of 25 ready-mix trucks in the Salt
Lake Valley. The largest of the Company's prestress/precast
plants is also located on the Beck Street property.
The Company also has three sand and gravel pits in
the Salt Lake Valley. It owns two sand and gravel pits
located at its Beck Street, and Point of the Mountain
properties. The pit located at the Company's Beck Street
property totals approximately 256 acres and has reserves of
approximately 25,000,000 tons which are used primarily to
produce road base type products. The Point of the Mountain
pit (approximately 150 acres) has reserves estimated to be
in excess of 40,000,000 tons. Aggregates for the Company's
ready mix operations are presently produced at this pit.
Accordingly, the Company believes the Point of the Mountain
site, together with the Beck Street site, should provide
adequate resources for the Company's Salt Lake operations
for several decades.
The Kearns pit was closed at the end of 1996. To
replace that operation, the Company has leased 94 acres of
property containing approximately 5,000,000 tons of
aggregate reserves on the west side of the Salt Lake Valley
and will produce road base products there in 1997.
The Company's management believes its reserves are
adequate for the foreseeable future. As zoning and
environmental permits become more difficult to obtain for
new aggregate pits, this should provide the Company with an
increasing competitive advantage. Transportation costs are
a substantial factor in the overall cost of sand and gravel
and, with the three pits spread over the Salt Lake City
metropolitan area, the Company anticipates an improved
competitive advantage.
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Park City, Utah
The Company has a ready-mix plant located in Park
City, Utah, a resort community which is approximately 40
miles from Salt lake City. The Park City area contains
several ski resorts and is scheduled to host several Olympic
events in connection with the 2002 Winter Olympics. The
Park City area is experiencing significant population growth
and the Company's management believes the Park City area
will continue to grow. The Company operates 14 ready-mix
trucks in connection with its Park City and Heber City
operations. Sand and gravel is trucked from sources in the
Salt Lake Valley to produce the concrete at these sites.
Heber City, Utah
In 1994, the Company constructed a ready-mix plant
in Heber City, Utah, which is 18 miles from Park City.
Because of the high cost of housing in Park City, Heber is
often selected as a place of residence by persons who are
employed by the Park City resorts. Aggregates are
presently trucked from the Salt Lake Valley.
Boise Operations
Boise, Idaho.
The Company has both ready-mix and
prestress/precast operations in Boise, Idaho. The Company
installed a new central mix batch plant during 1994 which
enhances the Company's ability to deliver ready-mix concrete
in the Boise area. The Company is the largest ready-mix
concrete supplier in Boise and operates a fleet of 33
ready-mix trucks at this location.
Products from the prestress/precast operations in
Boise are sold throughout southern Idaho and into the
neighboring states of Nevada, Oregon, and Washington. The
Company also operates a sand and gravel pit with estimated
reserves of approximately 4,000,000 tons. The Company's
Boise facilities are located on a 265 acre site located
adjacent to the Boise River. The Boise area is currently
experiencing significant development.
The Company has entered into an agreement to
purchase 213 acres containing aggregate reserves of
approximately 10 million tons in Middleton, Idaho, which is
about fifteen miles west of its current Boise operations.
The purchase price is approximately $2,130,000 of which
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approximately 1,600,000 is payable over 10 years between
1997 and 2007. Residential and commercial development in the
area is moving west towards this site. With these aggregate
reserves, the Company believes it is well positioned to take
advantage of future construction activity in the Boise area.
Subject to certain conditions, the Company expects the
transaction to close in late 1997.
Magic Valley Operations
The Company operates several ready-mix batch
plants in the south central part of Idaho in an area known
as Magic Valley. These plants are located at Twin Falls,
Ketchum, Bellevue, Wendell and Burley, Idaho. 25 ready-mix
trucks are maintained to service the Twin Falls, Ketchum,
Wendell and Burley markets.
Twin Falls, Idaho
The Company operates a ready-mix batch plant and a
sand and gravel facility in Twin Falls, Idaho. The sand and
gravel used in the Company's operations at this location are
obtained from a pit north of Twin Falls that is leased by
the Company. So long as the Company continues to extract
sand and gravel from the pit, the terms of the lease permit
the Company to use the pit until all sand and gravel
resources have been depleted. The Company believes the Twin
Falls pit has adequate reserves for the foreseeable future.
Ketchum/Bellevue, Idaho
The Company has a ready-mix plant in each of
Ketchum and Bellevue, Idaho. Both of these plants primarily
service the Sun Valley resort area. The Company supplies a
majority of the concrete used in this area. Concrete
aggregates for the Company's operations at this location are
purchased from a local sand and gravel supplier.
Wendell, Idaho
The Company maintains a ready-mix batch plant in
this farming community which serves as a satellite for the
Twin Falls operation. Aggregates for the concrete produced
at this location are trucked from Twin Falls.
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Burley, Idaho
The Company has a small ready-mix batch plant in
this community which is about 50 miles east of Twin Falls.
Concrete aggregates are purchased from a local sand and
gravel supplier.
Eastern Idaho Operations
The Company has plants in Idaho Falls, Pocatello,
Blackfoot and St. Anthony, Idaho. The Company operates 25
ready-mix trucks to service the Eastern Idaho area.
Idaho Falls, Idaho
Idaho Falls is one of the largest cities in
eastern Idaho. In addition to a ready-mix plant, the
Company has a prestress plant as well as a sand and gravel
pit located on a 242 acre site in Idaho Falls. The sand and
gravel pit has an estimated 3,000,000 tons of reserves.
Pocatello and Blackfoot, Idaho
The Company maintains ready-mix concrete
operations in each of these towns that are supplied from
Company owned sand and gravel pits located in Pocatello and
Blackfoot. The Blackfoot operation is located on 107 acres
of land and the Pocatello pit is approximately 239 acres.
The Company's management believes both pits have adequate
sand and gravel reserves for the foreseeable future.
St. Anthony, Idaho
The Company has a ready-mix batch plant located in
this community which is approximately 60 miles northeast of
Idaho Falls. It serves as a satellite to the Idaho Falls
plant.
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Wyoming Operations
The Company has ready-mix plants in Cody, Powell,
Greybull and Worland, Wyoming. In addition, the Company
provides construction services, such as ditch lining, road
grading and excavation, through its Wyoming facilities. 26
ready-mix trucks are operated among the Cody, Powell,
Greybull and Worland ready-mix plants. As part of the
restructuring of the Company's operations, certain sand and
gravel facilities were closed and written off in 1996. See item
7 - (Management's Discussion and Analysis of Financial Condition and
Results of Operations). The Company will be processing aggregates
for use in these areas with portable plants.
Cody, Wyoming
Through its Cody plant, the Company sells ready-mix
concrete and sand and gravel and also provides road
grading, excavation and construction services in the area.
Cody is primarily an agricultural area but tourism is a
significant industry with the east entrance of Yellowstone
National Park only 50 miles west of town. The Company has
one competitor in the Cody area.
The Sand and gravel used in the Company's Cody
operations is presently mined from a pit owned by the State
of Wyoming or from a 20 acre gravel pit owned by the
Company. The Company pays a royalty to the state based on
the number of tons extracted. The Company's agreement with
the State of Wyoming expires in 1998.
Powell, Wyoming
The Company's Powell ready-mix batch plant is
located about 30 miles northeast of Cody. The Company has
no competitors in the Powell area and supplies all the
ready-mix concrete and sand and gravel in the area. Sand
and gravel aggregates are trucked from the pits used in
connection with the Company's Cody operations.
Greybull, Wyoming
Greybull is a small agricultural town 54 miles
east of Cody. The Company is the only source of concrete
and sand and gravel in the community. The Company owns a 20
acre pit north of town and also obtains sand and gravel from
excavation work in the area.
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Worland, Wyoming
Worland lies 38 miles south of Greybull. The
Company is the sole provider of concrete and sand and gravel
in the area. Sand and gravel used in the Worland operations
is mined from a local pit pursuant to an agreement with the
Bureau of Land Management. This agreement expires in 2000
and is currently subject to a 55,000 ton limit.
ITEM 3. LEGAL PROCEEDINGS
The Company is engaged in routine legal
proceedings arising in the normal course of its business.
In the opinion of management, the ultimate outcome of such
proceedings will not have a material adverse effect on the
Company's operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO a VOTE OF SECURITY HOLDERS
None
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT
Office
Position With the held
Name Age Company Since
--------- ------- ----------------------- --------
Ronald D. Davis 52 President and Chief 1996
Executive Officer
L. William Rands 52 Vice President, 1985
Treasurer and Secretary
The recent business experience of the Company's
executive officers is summarized as follows:
Ronald D. Davis
Ronald D Davis has served as President and Chief
Executive Officer of the Company since July of 1996. From
1985 to 1996, he was Vice President and General Manager of
CalMat Company's Central and Northern California operations.
Prior to that, he was President of Bakersfield Ready Mix.
L. William Rands
L. William Rands has served as Chief Financial
Officer, Vice President - Finance and Treasurer since
joining the Company in 1985. He was elected Secretary in
1992. Prior thereto he held financial positions with
several corporations.
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Employment Contracts
On June 2, 1996, the Company entered into an
Employment Agreement with Ronald D. Davis pursuant to which
Mr. Davis is to be employed as President and Chief Executive
Officer of the Company until June 2, 1999. Mr. Davis'
Employment Agreement provides that he is to receive a base
salary of $150,000 per annum, which may be increased at the
discretion of the Board of Directors, and an annual
incentive bonus in such amount as may be determined by the
Board of Directors. Pursuant to his Employment Agreement,
in 1996 the Company paid Mr. Davis a signing bonus of
$50,000, and reimbursed him for his moving and temporary
housing expenses. The Company also granted Mr. Davis
options under the Company's 1996 Stock Option Plan to
purchase 200,000 shares of Common Stock at prices ranging
from $5.00 to $8.75 per share. The options vest over a
period of four years ending July 1, 2000.
In July 1995, the Company entered into an
employment agreement with L. William Rands, Vice President -
Finance, Secretary and Treasurer, pursuant to which Mr.
Rands is to be employed as an executive officer of the
Company until July 31, 1998. This agreement provided for
annual compensation, as determined by the Board of
Directors, in an amount at least equal to the amount
received at the date of the agreement.
On May 22, 1996, Robert A. Parry resigned as
Chairman, President and Chief Executive Officer of the
Company. Pursuant to an Employment Agreement between the
Company and Mr. Parry, Mr. Parry Will receive $150,000 per
annum until July, 1998, and deferred compensation payments
through the year 2015. See Note K(1) to the Company's
Consolidated Financial Statements
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ
National Market System under the symbol "MROC".
The following table sets forth the high and low
closing bid quotations for the Company's Common Stock as
reported by the NASDAQ National Market System for each
quarter during the last two fiscal years. These quotations
represent bid prices between dealers, do not include retail
mark-ups, mark-downs or commissions, and do not necessarily
represent actual transactions.
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1996:
First Quarter $ 5 5/8 $ 4 1/8
Second Quarter 5 3/8 4 1/2
Third Quarter 6 1/4 4 5/8
Fourth Quarter 6 3/8 4 1/2
1995:
First Quarter $ 4 1/8 $ 3 1/8
Second Quarter 5 3/4 3 5/16
Third Quarter 5 3/8 3 3/8
Fourth Quarter 5 3/8 4 3/8
The Company has approximately 650 stockholders including
employees of the Company participating in the ESOP.
The Company has never paid a cash dividend on its
Common Stock and does not contemplate paying cash dividends
on its Common Stock in the foreseeable future.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data presented below
has been derived from the Company's audited consolidated
financial statements. The selected historical financial
+data should be read in conjunction with the consolidated
financial statements, related notes and other financial
information included elsewhere in this report.
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues $70,401,396 $48,302,248 $41,156,276 $34,547,464 $33,237,045
ESOP Contribution 800,000 800,000 800,000 937,816 1,125,001
Operating Profit (Loss) (884,993) 2,511,755 1,160,462 937,318 393,612
Net Earnings (Loss) (1,367,679) 1,355,651 283,582 763,872 (441,012)
Net Earnings (Loss)
Per Share (0.31) 0.48 0.11 0.34 (0.19)
Weighted Average
Common Shares 4,467,000 2,835,063 2,611,521 2,235,738 2,290,282
CONSOLIDATED BALANCE SHEET DATA:
Total Assets $40,638,252 $35,607,756 $26,578,145 $20,008,378 $19,902,612
Long-Term Obligations* 5,161,743 6,591,329 9,030,569 6,771,793 7,137,106
Stockholders' Equity 18,670,583 19,238,262 8,306,366 4,922,549 3,388,999
* Net of current maturities
</TABLE>
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction
with the Financial Statements and related Notes included
elsewhere in this report.
Results of Operations
Years Ended December 31, 1996 and 1995
Sales for the year ended December 31, 1996 ("1996
Period") totaled $70,401,396, which represented a 46%
increase from $48,302,248 in revenues for the year ended
December 31, 1995 ("1995 Period"). Most of the increase in
revenues came from the Company's prestress/precast
operations, an increase of $18,187,000 or 149% during the
1996 Period compared to the 1995 Period. Production on the
Snake River Correctional Facility, a $21.6 million contract,
was the primary reason for the revenue increase. This
project will be completed in mid-1997. Most of the Company's
ready-mix operations showed improved sales volume in 1996
over the previous year.
Operating Loss was $884,993 for the 1996 Period
compared to an operating profit of $2,511,755 for the 1995
Period. The Company reported a $1,500,000 restructuring
charge in the third quarter of the 1996 Period (see
discussion below). Startup costs at the new ready mix and
aggregate plants at the Company's Point of the Mountain site
affected the profits for the Salt Lake ready mix and sand
and gravel divisions, respectively. In addition, lower
average sales prices in Boise and Salt Lake (due to a higher
percentage of commercial work) and in Wyoming resulted in
lower profitability. General and administrative expense
increased to $5,941,017 in the 1996 Period compared to
$4,783,696 in the 1995 Period. Corporate expenses increased
among other reasons, because of a $200,000 consulting fee
paid to Builders and Construction Capital Partners,
L.P.("BCCP"), a California Limited Partnership, as part of
the 1995 Stock Purchase Agreement described below. Also,
the change in ownership, change in senior management
described below (See "Restructuring Charge") and other
management changes resulted in higher general and
administrative costs both at the corporate level and in the
operating units.
The net loss for the 1996 Period was $1,367,679 or a
loss of 31 cents per share compared to net earnings of
$1,355,651 or earnings of 48 cents per share for the 1995
Period. The decrease in net earnings resulted from the
17
<PAGE>
restructuring charge as well as the lower profitability
discussed above. Net interest expense was $810,122 for the
1996 Period, $575,312 lower than the 1995 Period. A lower
interest rate on the Company's borrowings from the CIT Group
(See "Liquidity and Capital Resources" below) coupled with
lower average borrowing levels after the private stock
placement to BCCP on December 28, 1995 resulted in a
significant savings in interest expense.
Contributions to the ESOP of in 1996 and in 1995 were
non-cash contributions and did not decrease the level of
stockholder's equity. These contributions are charged
against income and are deductible for federal and state tax
purposes.
Years ended December 31, 1995 and 1994
Sales increased by 17% to $48,302,248 in the year ended
December 31, 1995 from $41,156,276 in the year ended
December 31, 1994 ("1994 Period"). Operating profit
increased to $2,511,755 in the 1995 Period from $1,160,462
in the 1994 Period due to higher sales volume and higher
margins on prestress/precast contracts. Net earnings
increased to $1,355,651 or 48 cents a share in the 1995
Period compared to $283,582 or 11 cents a share in the 1994
Period. The higher earnings in the 1995 period were
principally due to higher operating profit.
Non-cash contributions to the ESOP expensed by the
Company in 1995 and 1994 were $800,000 for each year,
respectively.
Restructuring Charge
As a result of certain transactions between the Company
and BCCP, a change in ownership and control occurred at the
end of 1995. Subsequent to these transactions, the Board of
Directors of the Company appointed a new Chairman of the
Board and a new President. During the third quarter of
1996, the Company's management restructured the Company's
operations to be more responsive to the needs of the
marketplace and improve operating efficiencies. As a
result, the Company recorded a restructuring charge of
$1,500,000 for costs associated with the restructuring in
the third quarter. The one time restructuring charges
included: (i) the write-off of certain facilities and
equipment obsoleted by new operating strategies for those
businesses ($715,000); (ii) the closure of undersized and
unprofitable operations in Utah and Wyoming ($351,000);
(iii) an accrual of the remaining two-years of the
employment agreement with the Company's former President and
18
<PAGE>
Chief Executive Officer ($333,000); and (iv) costs
associated with restructuring management ($101,000).
Liquidity and Capital Resources
On December 28, 1995, the Company closed the
transactions contemplated by the Stock Purchase Agreement,
between the Company and BCCP whereby the Company sold
1,650,000 shares of Common Stock to BCCP at a price of $5.50
per share or an aggregate of $9,075,000. The Company also
issued to BCCP 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 $5,350,576 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. The remainder was
absorbed in working capital to finance the receivables and
inventory associated with the Snake River Correctional
Facility project.
The Company has met its need for liquidity principally
through the use of a line of credit provided by the CIT
Group. 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 thereunder from 2.5% above prime to 0.75%
above prime. The agreement provides for both revolving
loans and term loans. The Company's agreement with the CIT
Group requires the Company to pay a monthly fee on the
unused portion of the line of credit at the rate of .5% per
annum and to maintain a minimum borrowing of $4 million from
February 27, 1997 through February 26, 1998.
As of December 31, 1996, borrowings under the line of
credit in the form of revolving loans totaled $5,354,688
compared to $86,519 at December 31, 1995. A portion of the
proceeds from the sale of Common Stock to BCCP were used to
pay down the line of credit at the end of 1995. During
1996, the working capital requirements of the Snake River
Correctional Facility contract resulted in a significant
increase in the Company's short-term borrrowings under the
line of credit. The Company also has an outstanding term
note with the CIT Group which bears interest at a rate of
0.75% above prime. The outstanding balance on this note was
$2,000,000 on December 31, 1996, as compared to $4,000,000
on December 31, 1995. A portion of the proceeds from the
sale of Common Stock to BCCP were used to pay down the
outstanding balance on the note to $4,000,000 and then
subsequently to $2,000,000. At December 31, 1996, the
19
<PAGE>
Company had a maximum credit availability under the CIT
credit facility of $7,645,312.
With its expanded credit arrangement with the CIT Group
which is at a lower interest rate, the Company believes that
it has adequate working capital to meet its cash needs in
1997 and that it is well positioned to take advantage of
investment opportunities that may be presented to the
Company in the near future.
In addition to the borrowings which it owed to the CIT
Group, as of December 31, 1996, the Company had notes
outstanding to the previous owners of the Wyoming operations
in the amount of $598,142, as compared to an outstanding
balance of $770,866 as of December 31, 1995. The notes bear
interest at the rate of prime plus 2%. The Company has
pledged the fixed property and inventory of its Wyoming
operations as collateral for these notes.
The Company also had outstanding notes to Colonial
Commercial Corp. and an investor group headed by Odyssey
Partners, L.P. with an aggregate balance of $837,500 as of
December 31, 1996 and $1,107,500 as of December 31, 1995.
The notes bear interest at the prime rate. Principal
payments are due each year in eight monthly installments of
$30,000. No principal payments are required for the months
of January, February, March and September. These notes are
subordinated to the notes held by the CIT Group.
For the year ended December 31, 1996, cash used by
operating activities was $2,689,171 compared to net cash
provided by operating activities $3,511,500 in the year
ended December 31, 1995. The decrease in cash generated in
1996 was due to lower profitability (a $1,367,679 net loss
in 1996 as compared to net earnings of $1,355,651 in 1995)
and a reduction of working capital of $4,627,516 from 1995
to 1996. General and administrative expenses increased
$1,157,321 largely due to costs associated with the
restructuring of the Company and the change in ownership.
Working capital needs should be reduced with the completion
of the Snake River Correctional Facility job.
The liquidity of the Company has increased
substantially in the last two years due the sale of Common
Stock in December 1995 pursuant to the Stock Purchase
Agreement (net proceeds of $8,776,245). As a result of a
stronger capital position, the Company has also been able to
20
<PAGE>
increase its ability to borrow on more favorable terms. The
increased liquidity and capital resources will enable the
Company to pursue both internal and outside investment
opportunities that arise.
Through operating leases, the Company leased 46 new
Mack front discharge mixer trucks in the second quarter of
1996. These trucks, combined with thirty seven new trucks
acquired in 1994 and 1995, have significantly upgraded the
quality of its ready-mix delivery fleet. In addition, the
Company spent $2,300,000 in 1996 to open a new sand and
gravel plant and a central ready-mix batch plant at its
Point of the Mountain site in 1996. These plants are
strategically located for upcoming housing and commercial
growth in the Salt Lake Valley over the next several years.
ESOP Accounting
The original borrowings that the Company's Employee
Stock Ownership Plan ("ESOP") used to acquire the Company's
Common Stock were loaned to the ESOP by the Company, which
in turn borrowed these funds from two banks. Contributions
to the ESOP are non-cash expenses for the Company for
purposes of its financial and tax accounting. Although the
original borrowings with which the ESOP was financed have
now been retired, an ESOP liability to the Company remains
outstanding. The ESOP repays this liability to the Company
with contributions the ESOP receives from the Company. The
Company intends to continue to make contributions to the
ESOP as determined by the Company's management in amounts
which are deductible for tax purposes in order to permit the
ESOP to repay its liability to the Company. Subject to
various regulations and conditions, the Company is generally
allowed to deduct ESOP and pension plan contributions in an
amount equal to 25% of its qualified payroll. While the
contributions to the ESOP are repaid to the Company by the
ESOP, resulting in no net cash outflow, and are a deductible
expense for tax purposes, these amounts directly reduce the
Company's reported earnings. As of December 31, 1996, the
outstanding balance of the ESOP's note to the Company was
$2,524,046.
In addition to its effect on the Company's income
statements, ESOP accounting also impacts the Company's
balance sheets. Amounts received by the Company
representing principal payments on the loan to the ESOP are
recorded as reductions of the ESOP note receivable.
Additionally, since the loan to the ESOP is carried on the
Company's balance sheet as a reduction of stockholders'
equity rather than as an asset, repayments of principal on
the loan to the ESOP result in increases in stockholders'
21
<PAGE>
equity, which offset the reductions in equity caused by the
non-cash contributions charged against earnings.
Consequently, the ESOP contributions since the acquisition
of the stock have had no effect on total stockholders'
equity and will have no effect on total stockholders' equity
as long as contributions are used to reduce the note
receivable from the ESOP.
Inflation
Inflation in the U.S. economy has been relatively
moderate during the last few years. Price increases for
labor and materials have kept pace with inflation but the
Company has generally been successful in passing cost
increases on to customers. In 1996, although price
increases were introduced, more of the ready mix concrete
volume was commercial at lower prices resulting in lower
profitability. The Company continues to pursue work at
higher prices to cover ongoing cost increases and improve
operating margins.
Seasonality
Because of the location of its operations in the
Intermountain West, the Company experiences significantly
lower sales during the winter months due to adverse weather
conditions. The Company usually experiences losses during
these months because of the lower sales volume.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Consolidated financial statements and supplementary
data required by this Item 8 are set forth at the pages
indicated in Item 14(a) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information to be included under the caption
"Nominees for Election as Directors" is in the Company's
definitive proxy statement to be filed with the Commission
pursuant to Regulation 14(a) of the Exchange Act in
connection with the 1997 annual meeting of stockholders of
the Company (the "Proxy Statement") and is incorporated
herein by reference. In addition, reference is made to Item
10 in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information to be included under the caption
"Executive Compensation" in the Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information to be included under the caption
"Voting Securities and Principal Stockholders" in the Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information to be included under the caption
"Certain Relationships and Related Transactions" in the
Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a)(1) Index to Consolidated Financial Statements
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets
at December 31, 1996 and 1995 . . . . . . . . . . F-2
Consolidated Statements of Operations for
the Years ended December 31, 1996, 1995 and 1994 . F-4
23
<PAGE>
Consolidated Statements of Stockholders' Equity
for the Years ended December 31, 1996, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 1996, 1995 and 1994 . . . F-6
Notes to Financial Statements . . . . . . . . . . F-8
(a)(2) Financial Statement Schedules
Report of Certified Public Accountants. . . . . . F-23
Schedule II - Valuation and Qualifying Accounts. . F-24
(b) Reports on Form 8-K
None
(c) Exhibits
3.1 Certificate of Incorporation(1)
3.2 By Laws(1)
10.1 Monroc, Inc. Employee Stock Ownership Plan,
amended and restated as of April 1, 1987(1)
10.2 1994 Stock Option Plan(1)
10.3 Form of indemnity agreements
with directors(1)
10.4 Amendment dated February 27, 1996 to the Loan
and Security Agreement dated July 26, 1993
between the Company and CIT Group/Credit
Finance, Inc.(4)
10.5 Loan and Security Agreement dated July 26,
1993 between the Company and CIT Group/Credit
Finance, Inc. (1)
10.6 Stock Purchase Agreement dated July 26, 1995
by and between Building and Capital
Construction Partners, L.P. and Monroc,
Inc.(2)
10.7 Consulting Agreement dated December 28, 1995
by and between Building and Capital
Construction Partners, L.P. and Monroc,
Inc.(2)(5)
24
<PAGE>
10.8 Voting Agreement dated December 28, 1995
by and between Building and Capital
Construction Partners, L.P. and Colonial
Commercial Corp.(2)
10.9 Voting Agreement dated December 28, 1995 by
and between Building and Capital Construction
Partners, L.P. and Odyssey Partners (2)
10.10 Employment Agreement dated July 28, 1986 with
Robert A. Parry.(1)(5)
10.11 Amending Agreement dated December 28, 1995
with Robert A. Parry.(4)
10.12 Employment Agreement dated July 25, 1995 with
L. William Rands.(4)
10.13 1996 Stock Option Plan. (3)
10.14 Employment Agreement dated June 2, 1996 with
Ronald D. Davis. (5) *
10.15 Real Estate Purchase Agreement dated December
27,1997 between the Company and Whitney
Family Trust. *
11.1 Computation of earning (loss) per common
share *
21 Subsidiaries of Monroc, Inc. *
23 Consent of Grant Thornton, LLP *
27 Financial Data Schedule
(1) Incorporated by reference to the Company's
Registration Statement on Form S-1
(File No. 33-75172).
(2) Incorporated by reference to the Company's Current
Report on Form 8-K filed December 28, 1995.
(3) Incorporated by reference to the Company's Proxy
Statement dated April 29, 1996.
(4) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December
31, 1995.
25
<PAGE>
(5) Management contracts and compensatory plans and
arrangements identified pursuant to Item 14(a)(3)
of Form 10-K.
* Filed herewith
26
<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.
Date: March 27, 1997 By: /s/ Ronald D. Davis
-----------------------------
Ronald D. Davis
President and Chief Executive Officer
Pursuant to the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant
and in the capacities indicated, on the date set forth above.
Signature Title
------------- ------------
/s/ Robert L. Miller Chairman of the Board
--------------------------------
Robert L. Miller
/s/ Ronald D. Davis President and Chief Executive Officer
--------------------------------
Ronald D. Davis Officer
/s/ L. William Rands Vice President - Finance,
-------------------------------- Treasurer and Secretary
L. William Rands (Principal Financial and
Accounting Officer)
/s/ William T. Lightcap Director
--------------------------------
William T. Lightcap
/s/ Jules Ross Director
--------------------------------
Jules Ross
/s/ Marc T. Scholvink Director
--------------------------------
Marc T. Scholvinck
/s/ Delbert H. Tanner Director
--------------------------------
Delbert H. Tanner
/s/ Michael A. Kane Director
--------------------------------
Michael A. Kane
/s/ James E. Dahl Director
--------------------------------
James E. Dahl
27
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Page
3.1 Certificate of Incorporation(1)
3.2 By Laws(1)
10.1 Monroc, Inc. Employee Stock Ownership Plan,
amended and restated as of April 1, 1987(1)
10.2 1994 Stock Option Plan(1)
10.3 Form of indemnity agreements
with directors(1)
10.4 Amendment dated February 27, 1996 to the Loan
and Security Agreement dated July 26, 1993
between the Company and CIT Group/Credit
Finance, Inc.(4)
10.5 Loan and Security Agreement dated July 26,
1993 between the Company and CIT Group/Credit
Finance, Inc. (1)
10.6 Stock Purchase Agreement dated July 26, 1995
by and between Building and Capital
Construction Partners, L.P. and Monroc,
Inc.(2)
10.7 Consulting Agreement dated December 28, 1995
by and between Building and Capital
Construction Partners, L.P. and Monroc,
Inc.(2)(5)
10.8 Voting Agreement dated December 28, 1995
by and between Building and Capital
Construction Partners, L.P. and Colonial
Commercial Corp.(2)
10.9 Voting Agreement dated December 28, 1995 by
and between Building and Capital Construction
Partners, L.P. and Odyssey Partners (2)
<PAGE>
10.10 Employment Agreement dated July 28, 1986 with
Robert A. Parry.(1)(5)
10.11 Amending Agreement dated December 28, 1995
with Robert A. Parry.(4)
10.12 Employment Agreement dated July 25, 1995 with
L. William Rands.(4)
10.13 1996 Stock Option Plan. (3)
10.14 Employment Agreement dated June 2, 1996 with
Ronald D. Davis. (5) *
10.15 Real Estate Purchase Agreement dated December
27,1997 between the Company and Whitney
Family Trust. *
11.1 Computation of earning (loss) per common
share *
21 Subsidiaries of Monroc, Inc. *
23 Consent of Grant Thornton, LLP *
27 Financial Data Schedule
(1) Incorporated by reference to the Company's
Registration Statement on Form S-1
(File No. 33-75172).
(2) Incorporated by reference to the Company's Current
Report on Form 8-K filed December 28, 1995.
(3) Incorporated by reference to the Company's Proxy
Statement dated April 29, 1996.
(4) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December
31, 1995.
(5) Management contracts and compensatory plans and
arrangements identified pursuant to Item 14(a)(3)
of Form 10-K.
* Filed herewith
<PAGE>
C O N T E N T S
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS F-2
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF STOCKHOLDERS' EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Monroc, Inc.
We have audited the accompanying consolidated balance sheets of Monroc,
Inc. and Subsidiary, as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Monroc,
Inc. and Subsidiary, as of December 31, 1996 and 1995, and the consolidated
results of their operations and their consolidated cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Salt Lake City, Utah
February 11, 1997
F-1
<PAGE>
Monroc, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
1996 1995
------------- ------------
CURRENT ASSETS (Notes E and F)
Cash and cash equivalents $ 1,189,631 $ 6,506,751
Accounts receivable, net of allowance
for discounts and doubtful accounts
of $301,624 in 1996 and $296,647 in
1995 (Note B) 13,201,601 6,639,878
Costs and estimated earnings in excess
of billings on uncompleted contracts
(Note B) 181,634 152,943
Inventories (Note C) 3,977,274 2,815,780
Prepaid expenses 1,305,491 1,274,892
------------- ------------
Total current assets 19,855,631 17,390,244
PROPERTY, PLANT AND EQUIPMENT, AT COST
(Notes D, E, F, and P) 27,310,062 24,625,327
Less accumulated depreciation and
amortization 11,802,432 11,525,532
------------- ------------
15,507,630 13,099,795
AGGREGATE DEPOSITS (Notes E, F and O) 2,477,154 2,454,654
Less accumulated depletion 337,595 230,385
------------- ------------
2,139,559 2,224,269
LAND (Notes E and F) 2,352,155 1,510,072
OTHER ASSETS, at cost, less accumulated
amortization of $363,660 in 1996 and
$284,526 in 1995, (Notes E, and F) 783,277 1,383,376
------------- ------------
$ 40,638,252 $ 35,607,756
============= ============
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
Monroc, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
------------ ------------
CURRENT LIABILITIES
Line of credit (Note E) $ 5,354,688 $ 86,519
Current maturities of long-term
obligations (Notes E and F) 1,131,289 802,765
Trade accounts payable 6,328,925 5,307,303
Accrued liabilities (Note G) 1,549,652 1,522,788
Billings in excess of costs and
estimated earnings on uncompleted
contracts (Note B) 690,254 242,530
------------ ------------
Total current liabilities 15,054,808 7,961,905
LONG-TERM OBLIGATIONS, less current
maturities (Notes E and F) 5,161,743 6,591,329
DEFERRED COMPENSATION (Note K) 779,263 626,710
DEFERRED INCOME TAXES (Note H) 971,855 1,189,550
COMMITMENTS AND CONTINGENCIES (Notes E,
F, I, J, K, L and P) - -
STOCKHOLDERS' EQUITY (Notes L and M)
Preferred stock, $0.01 par value; 1,000,000
shares authorized; none issued - -
Common stock, $0.01 par value; 20,000,000
shares authorized; issued and outstanding
4,467,000 shares 44,670 44,670
Capital in excess of par value 24,481,864 24,481,864
Accumulated deficit (Note I) (3,331,905) (1,964,226)
------------ ------------
21,194,629 22,562,308
Less unpaid principal of Employee Stock
Ownership Plan note receivable (Note I) (2,524,046) (3,324,046)
------------ ------------
18,670,583 19,238,262
------------ ------------
$ 40,638,252 $ 35,607,756
============= ============
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Monroc, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1996 1995 1994
----------- ----------- -----------
Net sales $70,401,396 $48,302,248 $41,156,276
----------- ----------- -----------
Costs and expenses
Cost of sales 63,045,372 40,206,797 35,736,218
General and administrative expenses 5,941,017 4,783,696 3,459,596
Contribution to ESOP (Note I) 800,000 800,000 800,000
Restructuring charges (Note O) 1,500,000 - -
----------- ----------- -----------
71,286,389 45,790,493 39,995,814
----------- ----------- -----------
Operating profit (loss) (884,993) 2,511,755 1,160,462
----------- ----------- -----------
Other income (expense)
Gain on sale of property, plant,
equipment and land 35,930 129,085 56,039
Interest income 73,811 34,222 9,373
Interest expense (810,122) (1,385,434) (965,354)
----------- ----------- -----------
(700,381) (1,222,127) (899,942)
----------- ----------- -----------
Earnings (loss) before income
taxes (1,585,374) 1,289,628 260,520
Income taxes (benefit) (Note H) (217,695) (66,023) (23,062)
----------- ----------- -----------
NET EARNINGS (LOSS) $(1,367,679) $ 1,355,651 $ 283,582
=========== =========== ============
Earnings (loss) per common share $ (0.31) $ 0.48 $ 0.11
=========== =========== ============
Weighted average common shares
outstanding 4,467,000 2,835,063 2,611,521
=========== =========== ============
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Monroc, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 1996, 1995, and 1994
<TABLE>
<S> <C> <C> <C> <C> <C>
Employee
Stock
Capital in Ownership
Common stock excess of Accumulated Plan note
Shares Amount par value deficit receivable
--------- -------- ----------- ----------- -----------
Balance at January 1, 1994 2,217,000 $ 22,170 $13,427,884 $(3,603,459) $(4,924,046)
Common stock issued 600,000 6,000 2,294,235 - -
Net earnings for the year - - - 283,582 -
Reduction of ESOP note
receivable (Note I) - - - - 800,000
--------- -------- ----------- ----------- -----------
Balance at December 31, 1994 2,817,000 28,170 15,722,119 (3,319,877) (4,124,046)
Common stock issued (Note L) 1,650,000 16,500 8,759,745 - -
Net earnings for the year - - - 1,355,651 -
Reduction of ESOP note
receivable (Note I) - - - - 800,000
--------- -------- ----------- ----------- -----------
Balance at December 31, 1995 4,467,000 44,670 24,481,864 (1,964,226) (3,324,046)
Net loss for the year - - - (1,367,679) -
Reduction of ESOP note
receivable (Notes I) - - - - 800,000
--------- -------- ----------- ----------- -----------
Balance at December 31, 1996 4,467,000 $ 44,670 $24,481,864 $(3,331,905) $(2,524,046)
========= ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Monroc, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents
Cash flows from operating activities
Net earnings (loss) $(1,367,679) $ 1,355,651 $ 283,582
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities
Depreciation and amortization of
property, plant and equipment 2,376,609 2,384,383 1,837,125
Provision for contribution to ESOP
and repayment of ESOP note
receivable 800,000 800,000 800,000
Amortization of other assets 81,886 82,153 55,558
Provision for discounts and
doubtful accounts 536,863 532,764 603,851
Depletion of aggregate deposits 107,210 60,776 43,607
Gain on sale of property, plant,
equipment, and land (35,197) (129,085) (56,039)
Deferred compensation 18,779 92,441 77,291
Deferred income taxes (217,695) (106,887) 1,296,437
Restructuring charges 1,500,000 - -
Changes in assets and liabilities
Accounts receivable (7,098,586) (2,597,383) (460,893)
Costs and estimated earnings in
excess ofbillings on
uncompleted contracts (28,691) 5,943 (49,114)
Inventories (1,161,494) (846,865) 39,459
Prepaid expenses (215,599) (693,941) 226,550
Other assets 518,213 (158,710) (128,102)
Trade accounts payable 1,021,622 2,280,071 (1,263,905)
Accrued liabilities 26,864 365,864 (213,584)
Billings in excess of costs and
estimated earnings on
uncompleted contracts 447,724 84,325 2,759
----------- ----------- -----------
Net cash provided by
(used in) operating
activities (2,689,171) 3,511,500 3,094,582
----------- ----------- -----------
Cash flows from investing activities
Additions to property, plant and
equipment (4,502,562) (1,996,270) (3,227,258)
Additions to aggregate deposits (22,500) - (350,000)
Addition to land (842,083) (40,278) (145,000)
Proceeds from sale of property, plant,
equipment, and land 329,323 390,572 144,588
Acquisition of businesses - - (5,100,000)
----------- ----------- -----------
Net cash used in
investing activities (5,037,822) (1,645,976) (8,677,670)
----------- ----------- -----------
</TABLE>
(Continued)
F-6
<PAGE>
Monroc, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
----------- ----------- -----------
Cash flows from financing activities
Net increase (decrease) in line of
credit 5,268,170 (787,846) 140,608
Principal payments on long-term
obligations (3,626,970) (4,287,363) (1,703,909)
Issuance of long-term obligations 768,673 457,110 4,850,253
Issuance of common stock - 8,776,245 2,300,235
----------- ----------- -----------
Net cash provided by
financing activities 2,409,873 4,158,146 5,587,187
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (5,317,120) 6,023,670 4,099
Cash and cash equivalents at
beginning of year 6,506,751 483,081 478,982
----------- ----------- -----------
Cash and cash equivalents at end
of year $ 1,189,631 $ 6,506,751 $ 483,081
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 907,054 $ 1,468,677 $ 1,009,245
Income taxes 32,410 960 17,083
Acquisition of businesses
Amount paid $ - $ - $ 5,100,000
Assets acquired
Inventory - - 83,962
Property, plant, equipment,
and land - - 4,500,000
----------- ----------- -----------
- - 4,583,962
----------- ----------- -----------
Amounts paid in excess of
assets acquired (goodwill) $ - $ - $ 516,038
=========== =========== ===========
Noncash investing and financing activities
The Company acquired equipment under capital lease obligations totaling
$1,424,000 in 1996 ($19,060 and $584,215 in 1995 and 1994, respectively).
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial
statements follows.
1. Business activity
Monroc, Inc. and Subsidiary (the Company), operates in one industry
segment, the production and sale of sand and gravel products, ready-mix
concrete, prestress/precast concrete products and accessories for the
building and construction industry, principally in Utah, Idaho, and
Wyoming.
2. Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Big Horn Redi-Mix, Inc. (Big
Horn). Effective December 1995, the Company merged Cody Concrete, Inc.
(Cody Concrete), and Powell Ready Mix, Inc. (Powell Ready Mix) with and
into Big Horn with Big Horn as the surviving corporation. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
3. Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method, except for sand
and gravel which uses the lower of average cost or market.
4. Property, plant and equipment and aggregate deposits
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided for in amounts sufficient to relate the cost
of depreciable assets to operations over their estimated service lives.
Leased property under capital leases is amortized over the lives of the
respective leases or over the service lives of the assets for those
leases which substantially transfer ownership. The straight-line
method of depreciation is followed for financial reporting purposes;
however, straight-line and accelerated methods are used for tax
purposes. Depletion on aggregate deposits is calculated on a units-of-
production basis. The estimated lives used in determining depreciation
and amortization are:
Years
Mobile equipment 5-12
Plant equipment 5-12
Administrative equipment and buildings 5-50
5. Other assets
Other assets include miscellaneous amortizable assets including
financing commitment fees, which fees are being amortized on the
interest method over the term of the notes payable to banks. Other
assets also includes goodwill which is being amortized on the straight-
line method over 20 years. The Company evaluates its goodwill annually
to determine potential impairment by comparing the carrying value to
the undiscounted estimated expected future cash flows of the related
asset.
F-8
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
6. Revenue recognition
Revenues on contracts which are primarily for prestress/precast
concrete products are recognized on the percentage-of-completion
method. The percentage-of-completion is determined on the units-of-
production basis. Under this method, revenues, costs, and estimated
profits are recognized as individual units are completed. The amounts
included in the accompanying balance sheets as "costs and estimated
earnings in excess of billings on uncompleted contracts" represent
revenues recognized in excess of amounts billed (underbillings) and
"billings in excess of costs and estimated earnings on uncompleted
contracts" represent billings in excess of revenues recognized
(overbillings).
During 1996, the Company recognized revenue of approximately
$15,600,000 on a significant project which is scheduled to be completed
during 1997. No single project with revenues recognized in excess of
10% of total consolidated revenues existed during 1995.
Contract costs include all direct labor and benefits, materials unique
to or installed in the project, and indirect cost allocations,
including employee benefits and construction equipment expense. As
long-term contracts extend over one or more years, revisions in cost
and earnings estimates during the course of the work are reflected in
the accounting period in which the facts which require the revision
become known. At the time a loss on a contract becomes known, the
entire amount of the estimated ultimate loss is recognized in the
financial statements.
Costs attributable to contract claims or disputes are carried in the
accompanying balance sheets only when realization is probable. The
amounts are recorded at the lesser of actual costs incurred or the
amount expected to be realized.
Revenues on all other products are recognized when the product is
shipped.
7. Income taxes
The Company utilizes the liability method of accounting for income
taxes. Under the liability method, deferred tax assets and liabilities
are determined based on the difference between the financial statement
and tax bases of assets and liabilities and are measured using enacted
tax rates and laws that will be in effect when the differences are
expected to reverse. An allowance against deferred tax assets is
recorded when it is more likely than not that such tax benefits will
not be realized.
8. ESOP Accounting
As described in Note I, the Company established an Employee Stock
Ownership Plan (ESOP) in 1986 to facilitate the acquisition of assets
from a predecessor company. In conjunction with the acquisition, the
Company loaned the ESOP $10 million, which the ESOP used to finance the
acquisition of its interest in the Company. Generally accepted
accounting principles require that the note receivable from the ESOP be
included in the balance sheet as a reduction of stockholders' equity.
F-9
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
8. ESOP Accounting - continued
The ESOP allocates the shares issued to the ESOP in 1986 to the
participants of the ESOP as described below. The Company makes
contributions to the ESOP which allow the ESOP to make the debt
payments back to the Company on the note receivable from the ESOP.
ESOP contributions by the Company are expensed and charged against
income for accounting purposes and are deductible for income tax
purposes. Shares allocable to participants for a given year are
determined based on the ratio of the current year's ESOP debt service
payments (principal and interest) on the original note from the Company
as compared to the total remaining required debt service on that loan.
The contribution to the ESOP is a noncash expense of the Company
because the contributions are paid back to the Company and reduce the
note receivable from the ESOP. Consequently, no cash is consumed as a
result of the contributions. Furthermore, since the note receivable
from the ESOP is reduced by contributions, total stockholders' equity
is not affected by the contributions to the ESOP.
9. Cash equivalents
For financial statement purposes, the Company considers all highly
liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
10. Concentration of credit risk
A significant portion of the Company's sales are to customers whose
activities are related to the building and construction industry.
These customers reside primarily in the intermountain west. The
Company generally extends credit to these customers and, therefore,
collection of receivables is affected by the economy of the building
and construction industry. However, the Company closely monitors
extensions of credit.
The Company maintains cash and money market balances at several
financial institutions in the intermountain west. Accounts at each
institution are insured up to $100,000 by the Federal Deposit Insurance
Corporation. Uninsured balances aggregate to approximately $860,000 at
December 31, 1996.
11. Earnings (loss) per share
Earnings (loss) per common and common equivalent share are computed by
dividing net earnings (loss) by the weighted average common shares
outstanding during each year. Common stock equivalents are
antidilutive in the loss year and are not included in the weighted
average common shares outstanding.
F-10
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
12. Estimates and assumptions
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.
13. Fair value of financial instruments
The carrying value of the Company's cash, and short-term trade
receivables and payables approximate their fair values.
NOTE B - CONTRACTS IN PROCESS
Costs incurred to date, estimated earnings, and the related progress
billings are as follows:
1996 1995
----------- ----------
Costs incurred to date $20,418,275 $2,622,137
Estimated earnings 1,303,930 568,171
----------- ----------
Revenue recognized 21,722,205 3,190,308
Less billings to date 22,230,825 3,279,895
----------- ----------
$ (508,620) $ (89,587)
=========== ==========
The above are included in the accompanying balance sheets under the
following captions:
1996 1995
----------- ----------
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 181,634 $ 152,943
Billings in excess of costs and estimated
earnings on uncompleted contracts (690,254) (242,530)
----------- ----------
$ (508,620) $ (89,587)
=========== ==========
Retainage on uncompleted contracts amounted to $869,884 and $172,616 at
December 31, 1996 and 1995, respectively. All accounts receivable,
including retainage, under contracts in process are expected to be
collected within one year.
F-11
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - INVENTORIES
Inventories are summarized as follows:
1996 1995
----------- ----------
Raw materials $ 605,182 $ 431,290
Resale and admixture products 409,836 377,848
Supplies 142,710 260,182
Sand and gravel 2,819,546 1,746,460
----------- ----------
$3,977,274 $2,815,780
=========== ==========
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
1996 1995
----------- ----------
Mobile equipment $14,639,448 $14,112,455
Plant equipment 10,555,358 9,213,950
Administrative equipment
and buildings 870,391 812,144
Construction in progress 1,244,865 486,778
----------- ----------
$27,310,062 $24,625,327
=========== ===========
Included above is $2,107,266 and $606,920 in 1996 and 1995,
respectively, of equipment under capital leases. The related
accumulated amortization is $520,627 and $152,781 at 1996 and 1995,
respectively.
NOTE E - LINE OF CREDIT
At December 31, 1996 and 1995, the Company has a line of credit with a
financing company, bearing interest at prime plus 0.75% (9% and 11% at
December 31, 1996 and 1995, respectively), payable monthly. The
Company had drawn $5,354,688 and $86,519 at December 31, 1996 and
1995, respectively. Advances on the line of credit are limited to 85%
of qualified accounts receivable up to a maximum of $15,000,000 minus
the balances on the other notes payable to this financing company. The
line of credit is cross-collateralized with the $2,000,000 notes
payable (Note F) through a security interest on all the Company's
personal and real property. The agreement also requires the Company
pay a monthly fee at the rate of 0.5% per annum of the unused credit
line of $15,000,000. The line of credit agreement expires in February
2002.
F-12
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - LINE OF CREDIT - CONTINUED
The Company borrows on the line to pay for all operating costs, debt
service, and other costs. The Company deposits all daily cash
collections from accounts receivable and other sources against the line
to minimize amounts outstanding on the line. Total borrowings and
repayments under this line of credit are as follows:
1996 1995 1994
----------- ----------- -----------
Total borrowings $69,073,268 $47,901,811 $45,751,871
Total repayments 63,805,098 48,689,657 45,611,263
----------- ----------- -----------
Net increase (decrease) $ 5,268,170 $ (787,846)$ 140,608
=========== =========== ===========
<TABLE>
<S> <C> <C>
NOTE F - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
1996 1995
---------- -----------
Variable interest rate notes payable to entities owned
or controlled by stockholders at prime (8.25% at
December 31, 1996); principal due in eight monthly
installments per year; interest payments are due
monthly; not collateralized; subordinated to the
line of credit (Note E) and notes payable to a financing
company. $ 837,500 $1,107,500
Variable interest rate notes payable to a financing
company at prime plus .75% (9% at December 31,
1996) principal payments due monthly from April
through December and to be paid in full no later than
August 15, 2000; cross-collateralized with the line of
credit (Note E) through a security interest on all the
Company's personal and real property. The agreements
require, among other things, that the Company maintain
minimum levels of working capital and net worth and
prohibits the payment of dividends. The agreement also
requires the Company pay a fee of 0.5% per annum of
the unused credit line of $15,000,000. 2,000,000 4,000,000
Variable interest rate notes payable to individuals at prime
plus 2% (10.25% at December 31, 1996); principal
payments due in equal monthly installments of $28,306
through September 1999; collateralized by land,
buildings, and inventory. 598,142 770,866
6.0% to 16.6% notes and capital leases payable in monthly
installments of principal plus interest, collateralized
by equipment and land. 2,857,390 1,515,728
---------- -----------
6,293,032 7,394,094
Less current maturities 1,131,289 802,765
---------- -----------
$5,161,743 $6,591,329
========== ==========
</TABLE>
F-13
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - LONG-TERM OBLIGATIONS - CONTINUED
The following is a schedule of maturities of long-term debt obligations
at December 31, 1996:
Year ending
December 31,
1997 $ 797,944
1998 801,804
1999 724,373
2000 353,268
2001 29,004
Thereafter 2,000,000
-----------
$ 4,706,393
===========
Because the Company's long-term debt has variable interest rates
directly related to the prime rate, the carrying value of these
instruments approximates the fair value.
The following is a schedule of capital lease obligations at December
31, 1996:
Year ending
December 31,
1997 $ 462,769
1998 431,187
1999 367,619
2000 327,028
2001 356,721
Thereafter -
-----------
Total minimum lease payments 1,945,324
Less amount representing interest 358,685
-----------
Present value of minimum lease
payments 1,586,639
Less current maturities 333,345
-----------
Long-term maturities $1,253,294
===========
The Company has entered into several operating leases on certain
equipment expiring through 2002. Lease expense for the years ended
December 31, 1996, 1995, 1994, was $1,492,798, $687,462, and $327,912,
respectively. The following is a schedule of future minimum lease
payments on the Company's operating leases at December 31, 1996:
Year ending
December 31,
1997 $ 2,888,568
1998 2,804,618
1999 2,263,429
2000 1,892,427
2001 1,429,880
Thereafter 841,044
------------
$ 12,119,966
============
F-14
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - LONG-TERM OBLIGATIONS - CONTINUED
Not included in the above schedule are production royalties which the
Company has agreed to pay on aggregate deposits mined on leased
property. The payments are based on a progressive scale ranging from
$0.25 per ton in 1997 to $0.31 per ton in 2000.
NOTE G - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
1996 1995
----------- -----------
Deferred restructuring costs $ 192,127 $ -
Vacation payable 389,215 324,998
Accrued payroll taxes 241,660 212,222
Workmens compensation payable 115,043 31,957
Property taxes payable 91,569 101,163
Sales and use tax payable 198,893 223,310
Accrued income tax payable - 40,864
Interest payable 14,372 111,304
Other accrued liabilities 306,773 476,970
----------- -----------
$ 1,549,652 $ 1,522,788
=========== ===========
NOTE H - INCOME TAXES
Income taxes (benefit) consist of the following:
1996 1995 1994
--------- ----------- ----------
Current-Federal $ - $ 40,864 $ 8,123
Deferred-Federal (217,695) (106,887) (31,185)
--------- ----------- ----------
$(217,695) $ (66,023) $ (23,062)
========= =========== ==========
The components of the Company's deferred tax assets and liabilities are
as follows:
1996 1995
----------- -----------
Deferred tax assets (liabilities)
Net operating loss carryforward $ 1,914,893 $ 1,911,900
Deferred compensation 243,356 219,348
Allowance for doubtful accounts 102,790 103,826
Accrued expenses 258,536 115,849
Inventory cost capitalization 74,266 76,477
Other 10,955 6,284
Excess of tax depreciation and
amortization (1,096,580) (1,175,118)
Difference in assigned values
and tax basis in purchase of
subsidiaries (971,855) (1,189,550)
Valuation allowance (1,508,216) (1,258,566)
-----------------------
Net deferred tax liability $ (971,855) $(1,189,550)
=======================
F-15
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - INCOME TAXES - CONTINUED
There were no deferred tax assets or income tax benefits recorded in
the financial statements for net deductible temporary differences or
net operating loss carryforwards due to the fact that the likelihood of
realization of the related tax benefits cannot be established. A
deferred tax liability was recognized upon the purchase of three
subsidiary corporations during 1994. The initial deferred liability
was calculated on the differences between the assigned values and tax
bases of the assets and liabilities acquired in the purchase.
At December 31, 1996, the Company had net operating loss carryforwards
for tax reporting purposes of approximately $5,850,000, which expire
through the year 2011. The net operating loss carryforwards are
subject to limitation in any given year upon the occurrence of certain
events, including significant changes in ownership.
Reconciliation of income taxes computed at the federal statutory rate
and income tax expense (benefit) are as follows:
1996 1995 1994
--------- -------- ---------
Income taxes (benefit)
computed at the Federal
statutory rate $(554,881) $ 451,370 $ 91,181
Net operating loss (utilized)
generated 402,108 (524,941) (113,099)
Percentage depletion (89,693) (51,098) (18,211)
Alternative minimum tax - 40,864 5,323
Nondeductible expenses 32,804 21,417 12,573
All other, net (8,033) (3,635) (829)
--------- --------- ---------
Income taxes (benefit) $(217,695) $ (66,023) $ (23,062)
========= ========= =========
NOTE I - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Company has an ESOP covering substantially all full-time employees
who have at least one year of service. Under the terms of the ESOP,
the Company contributes amounts as determined by the Board of
Directors, except as discussed below. Shares of stock allocated for a
given year are further allocated to individual participants based on
the ratio of the participants' annual compensation to total
compensation for all participants. Shares allocated to participants
vest over six years.
In 1986, the ESOP purchased 1,606,796 shares of the Company's common
stock representing a 68% interest, in exchange for a $10,000,000
promissory note. The interest rate and payment terms of the note
receivable were identical to those of the Company's notes payable to
banks, which were paid in full during 1993. The balance on the note
receivable from ESOP was $2,524,046 and $3,324,046 at December 31, 1996
and 1995, respectively.
F-16
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) - CONTINUED
The principal reductions on the ESOP note are $800,000 for each of the
years ended December 31, 1996, 1995, and 1994, and are shown as
contributions to the ESOP. The accumulated deficit at December 31,
1996, includes $7,475,954 of contributions since 1986 to the ESOP,
which have been used to reduce principal on the ESOP note.
NOTE J - RETIREMENT PLANS
The Company makes payments to a defined contribution pension plan
(Plan) covering most full-time nonbargaining employees who have
completed at least one full year of service with the Company based on a
percentage of the employee's salary. Payments are made to the Plan as
they accrue. The contributions for the years ended December 31, 1996,
1995, and 1994, were $480,757, $344,968 and $288,443 respectively.
There are also certain bargaining employees who are covered under this
Plan. The Company has no liability under the Plan beyond the amounts
contributed. The Company also makes payments to various bargaining
union trust funds, as negotiated under union contracts. The
contributions for the years ended December 31, 1996, 1995, and 1994,
were, $334,364, $220,791, and $181,282 respectively.
NOTE K - COMMITMENTS AND CONTINGENCIES
1. Deferred compensation and employment agreements
In May 1996, the Company amended the employment agreement with its
former president and chief executive officer (president). The amended
agreement stipulates that the Company will no longer accrue amounts
towards the former president's deferred compensation effective May 22,
1996. In addition, the amount accrued in the former president's
deferred compensation account will continue to earn interest at 1%
below the prime interest rate (7.25% at December 31, 1996). The total
accrued amount plus interest will be paid over a period equal to one
and one-fourth times the length of Company service of the president as
follows:
Year ending
December 31,
1997 $ -
1998 32,717
1999 78,519
2000 78,519
2001 78,519
Thereafter 1,105,823
-----------
$ 1,374,097
===========
Deferred compensation of $779,263 and $626,710 was accrued in this
account as of December 31, 1996 and 1995, respectively.
F-17
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE K - COMMITMENTS AND CONTINGENCIES - CONTINUED
1. Deferred compensation and employment agreements - continued
The Company has entered into employment agreements with certain
officers. These agreements provide for annual compensation through
July 1998 as determined by the Board of Directors. The board of
directors has approved annual compensation of $312,000 for these
officers as of December 31, 1996.
2. Environmental matters
The Company is currently the owner of certain property located in
Murray, Utah, which contains lead slag deposited by the former owner.
The slag contains certain heavy metals including lead and arsenic which
may have leached from the slag into the environment. This and
adjoining properties have been proposed by the Environmental Protection
Agency (EPA) for listing on the National Priorities List for cleanup of
the lead slag, and potential groundwater contamination. Although the
Company did not generate the slag material, under the Comprehensive
Environmental Response, Compensation and Liability Act, the current
owner of a property may be liable for clean-up costs. In such case,
the Company would have a claim against the former owner for its
respective share of these costs. The Company has not been designated a
Potentially Responsible Party by the EPA with respect to cleanup of any
waste at this site.
The Company has been participating in a study group with the EPA, the
former owner, Murray City and the other current landowners to develop a
plan that would result in the remediation of the problems described
above. An agreement in principal has been reached among all parties,
and upon executing of a formal understanding, the EPA will begin the
process of preparing a consent agreement in 1997. Cleanup will take
several years to accomplish and involves a combination of offsite
disposal, redevelopment of the area including new road construction,
and on site treatment. Development of the land for commercial purposes
will be possible at the end of the process. The remediation plan calls
for the dedication of a certain amount of the Company's property for
the extension of a roadway in Murray City. Until approval of a consent
agreement, it is difficult to estimate the possible financial impact to
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
to drinking water. 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.
F-18
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE K - COMMITMENTS AND CONTINGENCIES - CONTINUED
3. Other
The Company is engaged in various lawsuits as plaintiff or defendant
arising in the normal course of business. In the opinion of
management, based upon advice of counsel, the ultimate outcome of these
lawsuits will not have a material impact on the Company's financial
statements.
NOTE L - CAPITAL STOCK
On December 28, 1995 the Company issued 1,650,000 shares of common
stock in a private placement to a single purchaser at $5.50 per share.
Net proceeds of $8,776,245 after issuance costs of $298,755 were
received. The Company also entered into an agreement with the
purchaser wherein the purchaser will receive $200,000 per year, payable
in quarterly installments, for consulting services so long as the
purchaser's nominees constitute a majority of the members of the board
of directors.
On May 5, 1994, the Company completed an initial public offering of
600,000 shares of common stock at $5 per share. Net proceeds of
$2,300,235 after offering costs of $699,765 were received. The
Company's common stock is now listed on the NASDAQ National Market
System.
NOTE M - STOCK OPTIONS AND WARRANTS
Effective January 20, 1994, the Company adopted a stock option plan
which provides for the granting of stock options to purchase up to
200,000 shares of common stock, subject to adjustment under certain
circumstances. As of December 31, 1996, the Company had granted stock
options under the Company's 1994 stock option plan to various officers,
directors and employees of the Company covering the aggregate amount of
167,600 shares of common stock.
On May 22, 1996, the stockholders approved the Company's 1996 stock
option plan which provides for the granting of stock options to
purchase up to 300,000 shares of common stock. As of December 31,
1996, the Company had granted stock options under the 1996 stock option
plan covering 200,000 shares of common stock. Of these, 40,000 options
vested immediately. The remaining 160,000 options vest at 40,000
annually through July 2000.
On December 28, 1995, in connection with the issuance of 1,650,000
shares of common stock (Note L), the Company issued a warrant to a
single purchaser to purchase 1,500,000 shares of common stock at an
exercise price of $6.25 per share. The warrant vested immediately and
expires in December 2000. As of December 31, 1996, none of the
warrants have been exercised.
F-19
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M - STOCK OPTIONS AND WARRANTS - CONTINUED
During 1996 the Company adopted only the disclosure provisions of
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). Therefore, the Company accounts for stock
based compensation under APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations under which no
compensation cost has been recognized. If the Company had elected to
recognize compensation expense based upon the fair value at the grant
date for awards under these plans consistent with the methodology
prescribed by FAS 123, the Company's net earnings (loss) and earnings
(loss) per share would be reduced to the pro forma amounts indicated
below:
1996 1995
Net earnings (loss)
As reported $(1,367,679) $ 1,355,651
Pro forma (1,565,723) 1,329,402
Earnings (loss) per common share
As reported $ (0.31) $ 0.48
Pro forma (0.35) 0.47
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation costs
related to grants made before 1995. The fair value of these options
was estimated at the date of grant using the modified Black-Scholes
American option-pricing model with the following weighted-average
assumptions for 1996 and 1995: expected volatility of 61%, risk-free
interest rate of 6%, and expected life of 3.6 years for both periods.
The weighted average fair value of options granted during 1996 and 1995
was $3.07 and $2.11, respectively.
Option pricing models require the input of highly subjective
assumptions including the expected stock price volatility. Also, the
Company's employee stock options have characteristics significantly
different from those of traded options, and changes in the subjective
input assumptions can materially affect the fair value estimate.
Management believes the best input assumptions available were used to
value the options and the resulting option values are reasonable.
F-20
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M - STOCK OPTIONS AND WARRANTS - CONTINUED
Information with respect to the Company's stock option plans at
December 31, 1996, and changes for the three years then ended, is as
follows:
Exercise Weighted-Average
Stock options price exercise price
Outstanding at January 1, 1994 - $ - $ -
Granted 136,500 5.00 5.00
-------
Outstanding at December 31, 1994 136,500 5.00 5.00
Granted 20,100 5.00 5.00
-------
Outstanding at December 31, 1995 156,600 5.00 5.00
Granted 217,700 5.00-8.75 6.61
Canceled 6,700 5.00-8.75 5.00
-------
Outstanding at December 31, 1996 367,600 5.00-8.75 5.95
======= ---------- ----------
Exercisable at December 31, 1996 207,600 $5.00-5.38 $ 5.01
======= ========== ==========
Additional information about stock options outstanding and exercisable
at December 31, 1996, is summarized as follows:
Options Outstanding
Weighted-
average
Range of Number remaining Weighted-average
exercise-prices outstanding contractual life exercise-price
--------------- ----------- ---------------- ----------------
$5.00-5.75 247,600 3.1 years $5.13
6.60 40,000 4.5 years 6.60
7.60 40,000 4.5 years 7.60
8.75 40,000 4.5 years 8.75
-------
367,600
=======
Options Exercisable
Range of Number Weighted-average
exercise-prices exercisable exercise price
--------------- ----------- ----------------
$5.00-5.38 207,600 $5.01
F-21
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE N - QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial results for the year ended December 31, 1996, 1995 and
1994 are as follows:
Earnings
Operating Net earnings (loss) per
Net sales profit (loss) (loss) common share
1996 ----------- ----------- ------------ ------------
First quarter $ 9,204,260 $ (916,431) $ (1,040,688) $ (0.23)
Second quarter 19,416,157 888,028 771,339 0.17
Third quarter 22,245,881 (458,711) (656,845) (0.15)
Fourth quarter 19,535,098 (397,879) (441,485) (0.10)
----------- ----------- ------------ --------
$70,401,396 $ (884,993) $ (1,367,679) $ (0.31)
=========== =========== ============ ========
1995
First quarter $ 7,132,047 $ (341,526) $ (665,505) $ (0.24)
Second quarter 12,500,024 1,269,853 911,321 0.32
Third quarter 14,876,696 1,493,652 1,199,899 0.43
Fourth quarter 13,793,481 89,776 (90,064) (0.03)
----------- ----------- ------------ --------
$48,302,248 $ 2,511,755 $ 1,355,651 $ 0.48
=========== =========== ============ ========
1994
First quarter $7,049,432 $ (472,285) $ (640,384) $ (0.29)
Second quarter 12,098,029 1,070,602 856,183 0.33
Third quarter 11,712,854 594,510 404,263 0.14
Fourth quarter 10,295,961 (32,365) (336,480) (0.07)
----------- ----------- ------------ --------
$41,156,276 $ 1,160,462 $ 283,582 $ 0.11
=========== =========== ============ ========
NOTE O - RESTRUCTURING CHARGES AND PLANT CLOSING
A change in control of the Company occurred in December 1995. The
Company's management has restructured the operations so that the Company
can be more responsive to the needs of the marketplace and improve
operating efficiencies. Due to these changes, the Company incurred
certain restructuring charges totaling $1,500,000 ($0.34 per share)
during 1996. These one time restructuring charges included: (i) the
write-off of certain facilities and equipment obsoleted by new operating
strategies ($715,000); (ii) the closure of undersized and unprofitable
operations in Utah and Wyoming ($351,000); (iii) the payout remaining on
the Company's two-year employment agreement with its former president
and chief executive officer ($333,000); and (iv) costs associated with
restructuring management $(101,000).
F-22
<PAGE>
Monroc, Inc. and Subsididary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O - RESTRUCTURING CHARGES AND PLANT CLOSING - CONTINUED
Also during 1996, the Company closed a plant and spent approximately
$840,000 to prepare the land for commercial or residential development.
The $840,000 is included in land on the balance sheet at December 31,
1996. The Company does not believe the closure of the plant will have a
significant impact on future operations.
NOTE P - SUBSEQUENT EVENTS
On December 27, 1996, the Company entered into an agreement and
deposited earnest money to purchase approximately 213 acres of land in
Canyon County, Idaho, for the production of aggregates. The total
purchase price is approximately $2,130,000. The Company had until
February 6, 1997 to complete its due diligence inspection and elect to
continue with or terminate the transaction. The Company elected to
proceed, and the transaction is scheduled to close on April 15, 1997.
The Company can extend the closing date until December 1997 by
depositing additional earnest money. The Company will make a 25% down
payment at closing and the seller will carry a 10 year note with
interest at a rate of 9% per annum. The Company will make monthly
payments on the note based on a twenty year amortization, with the
balance of unpaid interest and principal due in 2007.
The Company has also issued a promissory note to a commercial lender to
purchase equipment costing approximately $147,000. The Company plans to
pay approximately $26,000 on the note during 1997 with the remainder of
the balance being over the next five years.
F-23
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULES
Board of Directors
Monroc, Inc.
In connection with our audit of the consolidated financial statements of
Monroc Inc. and Subsidiary, referred to in our report dated February 11,
1997, which is included in the annual report to stockholders and form 10-K,
we have also audited Schedule II for each of the three years in the period
ended December 31, 1996. In our opinion, this schedule presents fairly, in
all material respects, the information required to be set forth therein.
GRANT THORNTON LLP
Salt Lake City, Utah
February 11, 1997
S-1
<PAGE>
MONROC, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------
(2)
(1) Charged to Balance
Description Balance at Charged to other at
beginning costs and accounts Deductions end of
of period expenses describe write-offs Period
- -------------------------------------------------------------------------------------------
Allowance for discounts and doubtful accounts
Year ended December 31, 1996 $ 296,647 $ 536,863 $ - $ (531,886) $ 301,624
Year ended December 31, 1995 209,495 532,764 - (445,612) 296,647
Year ended December 31, 1994 267,680 603,851 - (662,036) 209,495
Deferred taxes valuation allowance
Year ended December 31, 1996 $1,258,566 $ 249,650 $ - $ - $1,508,216
Year ended December 31, 1995 1,783,302 - - (524,736) 1,258,566
Year ended December 31, 1994 1,878,335 - - (95,033) 1,783,302
</TABLE>
S-2
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") made as of the 2nd
day of June, 1996, by and between MONROC, INC., a Delaware corporation (the
"Company"), having its principal place of business at 1730 Beck Street,
Salt Lake City, Utah, and RONALD DAVIS, residing at 27701 Clear Creek Road,
Keene, California 93531, (the "Executive").
WHEREAS, the Executive wishes to be employed by the Company as
President and Chief Executive Officer of the Company, and the Company
wishes to employ the Executive in such capacity;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment. The Company agrees to employ the Executive and
the Executive agrees to serve the Company upon the terms and conditions
hereinafter set forth. The Executive shall commence full-time employment
with the Company on or before July 1, 1996 ("Commencement Date").
2. Term. The employment of the Executive by the Company
pursuant to this Agreement will be for a period of three years from the
date hereof.
3. Duties. The Executive shall, subject to overall direction
consistent with the legal authority of the Board of Directors of the
Company (the "Board"), serve as, and have all power and authority inherent
in the office of Chief Executive Officer of the Company during his
employment and, as such, shall supervise, control and be responsible for
the general management and operations of the Company and have such other
executive powers and duties as may from time to time be prescribed by the
Board. The Executive shall also serve as a member of the Board and its
Executive Committee and Compensation Committee, if any, during his
employment. While sitting on the Compensation Committee, if any, he may
make any presentation concerning his own compensation but shall not
otherwise participate in the consideration of his own compensation. The
Executive shall devote his business time and efforts to the business of the
Company.
4. Compensation and Other Provisions.
(a) Base Salary. The Company shall pay to the Executive a
base salary at the rate of $150,000.00 per annum from and after the
Commencement Date, payable in substantially equal semi-monthly installments
025\105480.1
<PAGE>
(such amount, as it may be increased from time to time, hereinafter
referred to as the "Base Salary"). The Base Salary and the Executive's
other compensation will be reviewed by the Board at least annually and may
be increased or maintained as the Board may determine.
(b) Signing Bonus. The Company shall pay to the Executive
a one-time signing bonus of $50,000, which shall be payable in full within
30 days after the Commencement Date.
(c) Annual Incentive Bonus. Beginning with the calendar
year ending December 31, 1997, the Company shall pay the Executive with
respect to each calendar year during his employment an annual incentive
bonus in such amount as the Board shall determine. The incentive bonus
shall be paid no later than March 31 following the end of each calendar
year.
(d) Participation in Benefit Plans. The Executive shall be
eligible to participate in all employee benefit plans and arrangements now
in effect or which may hereafter be established which are generally
applicable to other senior executive officers of the Company or any of its
subsidiaries or divisions, including without limitation, the Company's
Employee Stock Ownership Plan ("ESOP"), all life, group insurance and
medical care plans and all disability, retirement and other employee
benefit plans of the Company, so long as any such plan or arrangement
remains generally applicable to other senior executives of the Company or
any of its divisions or subsidiaries. The Company shall purchase and,
during the term of this Agreement, pay the premiums with respect to a one-
million dollar term life insurance policy on the life of the Executive,
which policy shall designate the Executive's wife as the beneficiary of the
policy.
(e) Vacation, Expenses, etc. The Executive shall be
entitled to the same vacation benefits as are generally available to other
senior executives of the Company. He shall be reimbursed for all
reasonable expenses incurred by him in the discharge of his duties,
including but not limited to expenses for entertainment and travel. The
Executive shall account to the Company for all such expenses.
(f) Other Benefits. The Executive shall be entitled to
receive the following non-salary benefits including, an automobile, a
country club membership, and such other benefits as the Board of Directors
may from time to time determine. In the event any expenses provided under
this subparagraph shall not be deductible to the Company under the Internal
Revenue Code of 1986, as the same shall hereinafter be amended, then the
Company shall pay to the Executive additional compensation equal to the
025\105480.1 2
<PAGE>
expense thereof and the Executive shall pay such expenses directly. All
such additional compensation to the Executive shall be subject to
applicable withholding taxes.
(g) Stock Options. The Company shall grant to the
Executive stock options ("Options") to purchase an aggregate of 200,000
shares of Common Stock of the Company pursuant to the Company's 1996 Stock
Option Plan (the "Plan"). The Options shall be granted as of the
Commencement Date and shall expire on July 1, 2001; provided, however, the
Options shall terminate eighty-nine (89) days after the Executive's
employment has been terminated. On each anniversary of this Agreement
twenty percent (20%) of the Options shall vest and become exercisable at
the prices indicated below, so that all of the Options will become
exercisable over a period of four years:
July 1, 1996 - 40,000 shares at a price of $5.00 per share
July 1, 1997 - 40,000 shares at a price of $5.75 per share
July 1, 1998 - 40,000 shares at a price of $6.60 per share
July 1, 1999 - 40,000 shares at a price of $7.60 per share
July 1, 2000 - 40,000 shares at a price of $8.75 per share
Provided, however, in the event of a "change in control" of the Company, as
defined in the Plan, all of the outstanding Options shall vest and become
immediately exercisable, and the exercise price for the previously unvested
Options shall be the exercise price of the most recently vested Options
(for example, if the Company is sold during Year 2, the 120,000 unvested
Options shall become immediately exercisable at an exercise price of $5.75
per share); further provided, however, if the Executive elects to have the
Options qualify as incentive stock options under Section 422 of the
Internal Revenue Code, the Company will make such changes in the terms and
provisions of the Options, including the exercise prices thereof, as may be
necessary in order for the Options to qualify as incentive stock options.
(h) Moving and Housing Allowance. The Company shall pay
the reasonable expenses incurred by Executive in moving his residence from
Keene, California to Salt Lake City, Utah. In addition, for a period of up
to ninety days (90) from and after the date of this Agreement, the Company
will pay or reimburse the Executive for the payment of: (i) the weekly
round-trip airfare incurred by the Executive in traveling between Salt Lake
City, Utah and Bakersfield, California; and (ii) the sums expended by the
Executive for renting a residence in Salt Lake City, Utah.
5. Termination. The Executive's employment hereunder shall
terminate as a result of any of the following events:
025\105480.1 3
<PAGE>
(a) Optional Termination by Company. The Company may
terminate the Executive's Employment at any time after the third
anniversary of this Agreement by giving the Executive one-hundred eighty
(180) days' prior written notice.
(b) Death. The death of the Executive;
(c) Disability. The Board may terminate the Executive's
employment in the event the Executive shall have been unable to
substantially perform his duties hereunder by reason of illness, accident
or other physical or mental disability for a continuous period of at least
six months or an aggregate of nine months during any continuous twelve
month period;
(d) Cause. The Board may terminate the Executive's
employment for "cause" at any time upon written notice to the Executive
stating the facts constituting such "cause". For purposes of this section,
the term "cause" shall mean:
(1) Conviction for commission of a felony by the
Executive; or
(2) Gross negligence or intentional or willful
misconduct by the Executive in the performance of his duties as determined
in good faith by the Board.
(e) Termination by Executive. The Executive may terminate
his employment at any time after the third anniversary of this Agreement by
giving the Company one-hundred eighty (180) days' prior written notice or
such lesser notice as the Board shall approve.
6. Representations and Warranties.
(a) The Executive represents and warrants to the Company
that the Executive is under no contractual or other restriction or
obligation which would prevent the performance of his duties hereunder, or
interfere with the rights of the Company hereunder.
(b) The Company represents and warrants to the Executive
that (i) it has all requisite power and authority to execute, deliver and
perform this Agreement; (ii) all necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery, and
performance of this Agreement; and (iii) this Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid and
025\105480.1 4
<PAGE>
binding obligation of the Company, and is enforceable as to the Company in
accordance with its terms.
7. Survival. The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall survive
the Executive's termination of employment.
8. Amendment. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject
matter, and may be amended only by a written instrument duly executed by
each party.
9. Notice. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to
the party to whom it is to be given at the address of such party as set
forth in the preamble to this Agreement (or to such other address as the
party shall have furnished in writing in accordance with the provisions of
this Section). Notice to the estate of the Executive shall be sufficient
if addressed to the Executive as provided in this Section. Any notice or
other communication given by certified mail shall be deemed given at the
time of certification thereof, except for notice changing a party's
address, which shall be deemed given at the time of receipt thereof.
10. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not
be considered a waiver or deprive that party the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
Any waiver must be in writing.
11. Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Executive and his heirs and
personal representatives and shall be binding upon and inure to the benefit
of each of the Company, its successors and assigns.
12. Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.
025\105480.1 5
<PAGE>
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah, without giving
effect to rules governing conflicts of law.
14. Invalidity. The invalidity or unenforceability of any term
of this Agreement shall not invalidity, make unenforceable or otherwise
effect any other term of this Agreement which shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first hereinabove written.
MONROC, INC., a Delaware
corporation
By /s/ Robert L. Miller
-----------------------------
Robert L. Miller, Chairman of
the Board of Directors
EXECUTIVE:
/s/ Ronald Davis
-----------------------------
Ronald Davis
025\105480.1 6
<PAGE>
Exhibit 10.15
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, made and entered into this 27th day of December, 1996,
by and between GARY WHITNEY and RICHARD C. GIVEN, in their capacity as
co-trustees of the WHITNEY FAMILY TRUST, hereinafter referred to as
"Sellers", and MONROC, INC., a Delaware corporation, hereinafter referred
to collectively as "Purchaser",
WITNESS:
WHEREAS, the Sellers are desirous to sell and the Purchaser is
desirous to purchase real property (the "Property") located in the County
of Canyon, State of Idaho, more particularly described on Exhibit A hereto,
which exhibit is incorporated herein by reference as if set forth in full,
TOGETHER with all and singular the tenements, hereditaments, and
appurtenances thereunto belonging or in anywise appertaining, the reversion
and reversions, remainder and remainders, rents, issues and profits
thereof; and all estate, right title and interest in and to the Property,
as well in law as in equity, of the Grantor, but subject to all current
year taxes to be prorated at closing, easements of records, or matters
apparent or visible on the Property, and as set forth in the Warranty Deed
to be provided by Sellers to Buyer.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND COVENANTS HEREIN
CONTAINED AND THE PROVISIONS OF THIS AGREEMENT BY BOTH SELLERS AND
PURCHASER AS HEREIN SET OUT, the Sellers agree to transfer, sell, and
assign all of their right, title and interest in and to the above described
Property which Purchaser agrees to purchase.
I.
From the date of this Agreement is executed, Purchaser will have
thirty (30) days to make a due diligence inspection of the Property. In
consideration of Sellers keeping the Property off the market and allowing
the thirty (30) day inspection, Purchaser shall pay to Sellers the sum of
$25,000.00 earnest money, which shall be non-refundable, save and except
only if Sellers cannot deliver good and marketable title at closing or
other failure to close which is not the fault of Purchaser, in which event
the earnest money shall be returned to Purchaser. The earnest money shall
be credited against the purchase price at closing.
During the thirty (30) day inspection period Purchaser shall have
reasonable access to the Property and shall conduct such environmental and
geological testing including drilling of test holes as Purchaser deems
necessary and appropriate at Purchaser's sole cost. Purchaser shall
additionally confirm as it deems necessary the ability to obtain zoning and
other necessary government approvals for its intended uses of the Property,
and obtain a survey of the Property by a licensed surveyor acceptable to
Seller. Purchaser shall also present this Agreement to the Purchaser's
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 1
<PAGE>
Board of Directors for approval, and within the thirty (30) day period
shall provide Seller with a Secretary's certificate containing a copy of
the resolution of Purchaser's Board of Directors authorizing Purchaser to
purchase the Property on the terms and conditions set forth herein. Should
Purchaser, at the end of the thirty (30) day period, not elect to continue
with the purchase of the Property, the Property will be returned to Sellers
in the condition which it was prior to the testing being done and shall
share with Sellers the results of geological tests and the survey. If the
transaction is terminated, with the exception of the hold harmless and
indemnification provisions of this section, each party will release the
other from any other obligation concerning this Agreement and the non-
refundable $25,000.00 shall remain with the Sellers.
At the end of the thirty (30) day inspection period, should Purchaser
elect to continue with the transaction, then Purchaser shall pay to Sellers
$50,000.00 additional earnest money, which shall be non-refundable, save
and except only if Sellers cannot deliver good and marketable title at
closing or other failure to close which is not the fault of Purchaser, in
which event the earnest money shall be returned to Purchaser. The earnest
money shall be credited against the purchase price at closing.
Further, Purchaser agrees and does hold Sellers harmless from any and
all liability, causes of action, claims and/or damages arising out of
Purchaser's occupancy of the Property or for the performing of such
inspections and the testing process.
Should the transaction close, all earnest money payments made by
Purchaser shall be credited against the purchase price as set forth below.
II.
The total purchase price for the above-described Property is the sum
of TWO MILLION ONE HUNDRED THIRTY THOUSAND FOUR HUNDRED DOLLARS
($2,130,400.00). Said purchase price is based upon the assumption that
there are 213.04 acres of real property being sold at the price of $10,000
per acre. Purchaser shall have the Property surveyed by a licensed surveyor
acceptable to Sellers at the Purchaser's sole cost and if the total acreage
is other than 213.04 acres, then the purchase price will be increased or
decreased based upon the per-acre purchase price of $10,000 per acre. The
purchase price shall be paid in U.S. Currency as follows:
(a) On the date this Agreement is executed, Purchaser shall pay to
Sellers $25,000 earnest money, which shall be non-refundable, save and
except only if Seller cannot deliver good and marketable title at closing
or other failure to close which is not the fault of Purchaser.
(b) At the end of the thirty (30) day inspection period, if Purchaser
elects to continue with the transaction, shall pay to Sellers an additional
$50,000.00 earnest money, which shall be non-refundable, save and except
only if Seller cannot deliver good and marketable title at closing or other
failure to close which is not the fault of Purchaser.
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 2
<PAGE>
(c) At closing, Purchaser shall deposit a sum equal to 25% of the
purchase (receiving credit for the $25,000.00 and $50,000.00 earnest money
payments and any other earnest money payments previously received by
Sellers).
(d) The remaining balance of the purchase price, to-wit, the sum of
$1,597,800.00 (subject to adjustment incident to the above-referenced
survey), shall be amortized over 20 years, with interest commencing from
and after the date of closing at the rate of 8.25% per annum, with monthly
payments of $_________ per month. The first monthly payment will be due 30
days from the date of closing, with continuing monthly payments on the same
day of each and every month thereafter until the ___ day of ___________,
2002, at which time all accrued interest and unpaid principal will be due
and payable in full. The amount set forth in this subparagraph II(d) shall
be evidenced by a promissory note ( the "Promissory Note",), a copy of
which shall be attached hereto as Exhibit B to this Agreement and
incorporated herein by reference as if set forth in full. Said Promissory
Note shall provide for the prepayment of all amounts by Purchaser to
Sellers without penalty.
III.
The Sellers shall present at closing a sufficient Warranty Deed
transferring the above described Property to Purchaser, subject to all
easements, Declaration of Restrictions and Covenants on said Property which
do not unreasonably restrict Purchaser's intended use and subject to any
other exceptions set forth therein which are acceptable to Purchaser.
Sellers and Purchaser agree to cooperate in the modification or release of
such agricultural leases in the Property as may be reasonably requested by
Purchaser.
IV.
At closing, Purchaser shall also execute a mortgage (the
"Mortgage"),a copy of which shall be attached hereto as Exhibit C to this
Agreement, which shall secure the Promissory Note. Sellers shall execute a
Satisfaction of Mortgage, which Satisfaction of Mortgage shall be held by
the long term escrow holder to be recorded only upon payment in full of all
principal and accrued interest under the Promissory Note.
V.
Stewart Title Company of Canyon County is hereby named as the escrow
holder and the closing agent for this transaction. The parties shall each
pay one-half(1/2) of the respective closing agent's fees and one-half (1/2)
of all escrow fees for set up in the future. The parties shall execute the
escrow holder's escrow agreement. This Agreement and all accompanying
documents as it affects the escrow shall be a part of the escrow agreement
and incorporated therein as if set forth in full.
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 3
<PAGE>
VI.
Sellers shall provide Purchaser with a Title Insurance Policy
insuring title in Purchaser in the property in the sum of TWO MILLION ONE
HUNDRED THIRTY THOUSAND FOUR HUNDRED DOLLARS ($2,130,400.00)and shall order
a preliminary title report within thirty (30) days from the date this
Agreement is executed and provide a copy of the same to Purchaser.
Purchaser shall within fifteen (15) days of receipt of said preliminary
title report notify Sellers in writing of any exceptions to title not
accepted by Purchaser. All exceptions not objected to in writing by
Purchaser within said fifteen (15) day period shall be deemed accepted by
Purchaser. If Purchaser is not willing to accept the policy as set forth in
the commitment for title insurance and has given the prerequisite written
notice, then Seller shall have thirty (30) days to delete the exceptions
reasonably objected to by Purchaser and if not so done, then either party
has the right to terminate this Agreement by giving written notice to
terminate to the other.
VII.
Purchaser understands that it is purchasing this Property "as is" in
its present condition based on Purchaser's own independent inspection of
the Property and Purchaser is not relying upon any representations of
Sellers or Sellers' agents, or employees, with regard to the Property,
egress and ingress to the Property, the boundaries of said Property,
zoning, or any other matters. There are no representation or warranties
concerning this Property which are given by Sellers to Purchaser, except as
set forth in writing in this Agreement. Purchaser understands it has a
right to enter the Property to make any test or inspection of the Property
that it reasonably deems appropriate, at Purchaser's sole cost and expense,
and, at Purchaser's option and expense, to do any soil tests, hazardous
substance condition test or reports as it deems appropriate incident to the
purchase or Purchaser's intended use of the Property. Sellers agree to
disclose any adverse condition known to Sellers which would materially
affect Purchaser's intended use of the Property.
VIII.
This transection shall close on April 15, 1997. The Purchaser shall
have the right to request up to a three month extension of the closing date
and, upon such request shall pay to Sellers $100,000.00 additional earnest
money, which shall be non-refundable, save and except only if Sellers
cannot deliver good and marketable title at closing or other failure to
close which is not the fault of Purchaser, in which event the earnest money
shall be returned to Purchaser. The earnest money shall be credited against
the purchase price at closing. In the event Purchaser requests extension of
the closing date, closing shall occur at the expiration of the three month
extension or within fifteen (15) days of receipt by Purchaser of all
necessary governmental approvals for the Purchaser's anticipated uses of
the Property, whichever first occurs.
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 4
<PAGE>
IX.
The parties understand that there is a real estate company involved in this
matter which is ERA West Wind/Eagle Excellence and the brokerage fee will
be the responsibility of Sellers, to be paid pursuant to separate agreement
with said brokers.
X.
The parties understand that the terms and agreements of the Promissory
Note and Mortgage to be executed by the Purchaser shall control as to
matters of default once the transaction closes. Prior to the transaction
closing, the terms of this Agreement shall be in full force and effect and
be binding upon the parties. However, all terms, covenants and conditions
of this Agreement not incorporated in the Mortgage shall remain in full
force and effect and shall survive the closing of this transaction.
XI.
If either party breaches this Agreement, then the other party shall
give the alleged breaching party 15 days written notice of the alleged
breach, which notice shall be given by certified or registered mail, return
receipt requested, and shall be deemed given three days after the mailing
of said notice. The failure of the party to cure the alleged breach within
said period of time shall allow the non-breaching party to commence an
action for damages and/or the enforcement of said Agreement and/or, as to
Purchaser, any right of specific enforcement. Each party shall have
available to them all remedies at law or equity to enforce the provisions
of this Agreement.
XII.
Any notices to be given under and in accordance with this Agreement
shall be given to the respective parties as follows:
SELLERS: GARY WHITNEY
10516 Lincoln
Caldwell, ID 83605
RICHARD C. GIVEN
2406 Cleveland
Caldwell, Idaho 83605
Copy to: David W. Gratton
EVANS, KEANE LLP
P.O. Box 959
Boise, ID 83701
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 5
<PAGE>
PURCHASER: MONROC, INC.
P.O. Box 789
Eagle, ID 83616
Copy to: Judith K. Holcombe
Attorney at Law
P.O. Box 621
Boise, ID 83701
XIII.
Should Purchaser sell, transfer, or hypothecate any portion or all of
the Property being sold herein, then in that event, all amounts due and
owing to Seller shall become immediately due and payable in full.
XIV.
It is understood and agreed that Sellers own real property in Section
20 adjacent to the Property (the "Adjacent Property"), containing three (3)
houses. Sellers hereby grant to Purchaser, on the following terms, a first
right of refusal to purchase the Adjacent Property. From and after the date
hereof, should Sellers decide to accept a bona fide offer to purchase the
Adjacent Property, or any portion thereof, from a third party, Sellers
shall first offer the same to Purchaser on the same terms and conditions as
the proposed third party sale, and shall provide Purchaser with written
notice of such proposed sale and the terms thereof. If Purchaser does not
agree, within fifteen (15) days after receipt of the Sellers' notice, to
purchase the Adjacent Property, then Sellers shall be entitled to sell the
Adjacent Property to the third party and this right of first refusal shall
thereafter be null and void; provided, however that if, prior to closing
the sale to the third party, any substantive terms or conditions of the
sale should change, the Seller shall re-offer the Adjacent Property to
Purchaser on the revised terms and conditions, granting Purchaser an
additional fifteen (15) day period within which to accept.
It is further understood and agreed that notwithstanding the
foregoing, Sellers retain the right to transfer or sell the Adjacent
Property, or any part thereof, to the children, grandchildren and/or great
grandchildren of Georgia M. Whitney without any right of Purchaser to
purchase such Adjacent Property pursuant to the terms of this Article XIV,
it being understood that the children, grandchildren end great
grandchildren of Georgia M. Whitney are not considered to be third parties
for purposes of this Article XIV, provided, however, that such children,
grandchildren and/or great grandchildren are bound by the terms of this
Article XIV as if the same were identified as Sellers in this paragraph.
XV.
The Purchaser warrants and represents that the person executing this
Agreement on behalf of the Purchaser corporation is duly authorized to
execute this Agreement and bind the corporation hereto. Not later than
thirty (30) days after execution of this Agreement, Purchaser shall supply
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 6
<PAGE>
Sellers with a copy of a resolution with Purchaser's Board of Directors
authorizing this transaction at the time this Agreement is executed.
XVI.
Each of the parties to this Agreement has been represented in this
transaction by legal counsel of his or her choice. This Agreement shall be
interpreted as if each party equally participated in the drafting of this
Agreement. The recitals are a part of this Agreement.
XVII.
Time is deemed to be of the essence in the performance of each and
every term and condition of this Agreement.
XVIII.
If either party obtains the services of any attorney to enforce the
provisions of this Agreement, or of the Mortgage or Promissory Note,
whether or not litigation is commenced, the prevailing party shall have the
right to reimbursement of all costs and attorney fees incurred both as to
trial and on appeal.
XIX.
This agreement shall inure to the benefit of the respective parties,
their heirs, assigns, their personal representatives and successors in
interest.
XX.
This Agreement affects real estate in the state of Idaho and shall be
interpreted in accordance with the laws of the state of Idaho.
This Agreement is executed this 27th day of December, 1996.
SELLERS:
GARY WHITNEY
By /s/ Gary Whitney
-----------------------------
Gary Whitney, Co-Trustee
By /s/ Richard C. Given
-----------------------------
Richard C. Given, Co-Trustee
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 7
<PAGE>
PURCHASER:
MONROC, INC., a Delaware corporation
By /s/ Michael R. Matzdorff
-----------------------------
Its Division Manager
STATE OF IDAHO )
)ss.
County of Ada )
On this :27th day of December, 1996, before me, the undersigned,
a Notary Public in and for said State, personally appeared GARY WHITNEY and
RICHARD C. GIVEN, known to me to be the co-trustees of the WHITNEY FAMILY
TRUST, the trust that executed the above instrument or the persons who
executed the instrument on behalf of said corporation, and acknowledged to
me that such trust executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
. /s/ Diane Salisbury
-----------------------------
NOTARY PUBLIC for Idaho
Residing at Boise
My Commission Expires: 2/12/02
STATE OF IDAHO )
) ss.
County of Ada )
On this 27 day of December, 1996, before me, the undersigned, a
Notary Public in and for said State, personally appeared MICHAEL R.
MATZDORFF, known or identified to me to be the Division Manager of MONROC,
INC., the corporation that executed the above instrument or the person who
executed the instrument on behalf of said corporation, and acknowledged to
me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
/s/ Diane Salisbury
-----------------------------
NOTARY PUBLIC for Idaho
Residing at Boise
My Commission Expires:2/12/02
261\142747
REAL ESTATE PURCHASE AND SALE AGREEMENT, PAGE 8
<PAGE>
FIRST ADDENDUM TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
DATED DECEMBER 27, 1996
IT IS HEREBY AGREED by and between Gary Whitney and Richard C. Given,
in their capacity as co-trustees of the Whitney Family Trust, hereinafter
referred to as "Sellers," and Monroc Inc., hereinafter referred to as
"Purchaser," that the Real Estate Purchase and Sale Agreement dated
December 27, 1996, hereinafter "Agreement," be amended as follows:
1. Purchaser shall have an additional ten (10) days to complete its
due diligence inspection of the Property as described in Section I of the
Agreement. On or before February 6, 1997, Purchaser shall elect to
terminate or continue with the transaction as and in accordance with the
terms outlined in Section I of the Agreement.
2. In consideration of this extension of time to complete the due
diligence inspection of the Property, Purchaser shall pay to Sellers the
sum of $25,000.00 additional earnest money, which shall be non-refundable,
save and except only if Sellers cannot deliver good and marketable title at
closing, or other failure to close which is not the fault of the Purchaser,
in which event the additional earnest money shall be returned to Purchaser.
The additional earnest money shall be credited against the purchase price
at closing.
3. All other terms and conditions of the Agreement, not expressly
modified herein, remain in full force and effect.
This First Addendum is executed this 27th day of January,
1997.
SELLERS:
By /s/ Gary Whitney
------------------------------
Gary Whitney, Co-Trustee
By /s/ Richard C. Given
------------------------------
Richard C. Given, Co-Trustee
PURCHASER:
MONROC, INC., a Delaware corporation
By /s/ Michael R. Matzdorff
------------------------------
Its Division Manager
261\142747
FIRST ADDENDUM TO REAL ESTATE PURCHASE AND SALE AGREEMENT DATED DECEMBER 27,
1996.
PAGE 1
<PAGE>
STATE OF IDAHO )
) ss.
County of Ada )
On this 27th day of January,1997,before me, the undersigned, a
Notary Public in and for said State, personally appeared GARY WHITNEY and
RICHARD C. GIVEN, known to me to be the co-trustees of the WHITNEY FAMILY
TRUST, the trust that executed the above instrument or the persons who
executed the instrument on behalf of said corporation, and acknowledged to
me that such trust executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
.... /s/ Pamela K. Wolt
-------------------------------
NOTARY PUBLIC for Idaho
Residing at Boise, Idaho
My Commission Expires: 10/3/97
STATE OF IDAHO )
)ss.
County of Ada )
On this 27th day of January, 1997, before me, the undersigned, a
Notary Public in and for said State, personally appeared MICHAEL MATZDORFF,
known or identified to me to be the Division Manager of MONROC, INC., the
corporation that executed the above instrument or the person who executed
the instrument on behalf of said corporation, and acknowledged to me that
such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
.... /s/ Pamela K. Wolt
--------------------------------
NOTARY PUBLIC for Idaho
Residing at Boise, Idaho
My Commission Expires: 10/3/97
261\142747
FIRST ADDENDUM TO REAL ESTATE PURCHASE AND SALE AGREEMENT DATED DECEMBER 27,
1996.
PAGE 2
<PAGE>
SECOND ADDENDUM TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
DATED DECEMBER 27, 1996
IT IS HEREBY AGREED by and between Gary Whitney and Richard C. Given,
in their capacity as co-trustees of the Whitney Family Trust, hereinafter
referred to as "Sellers," and Monroc Inc., hereinafter referred to as
"Purchaser," that the Real Estate Purchase and Sale Agreement dated
December 27, 1996, hereinafter "Agreement," be amended as follows:
1. That Section II of the Agreement shall be amended to read as follows:
The total purchase price for the above-described Property is the
sum of TWO MILLION ONE HUNDRED THIRTY THOUSAND FOUR HUNDRED
DOLLARS ($2,130,400.00). Said purchase price is based upon the
assumption that there are 213.04 acres of real property being
sold at the price of $10,000 per acre. Purchaser shall have the
Property surveyed by a licensed surveyor acceptable to Sellers at
the Purchaser's sole cost and if the total acreage is other than
213.04 acres, then the purchase price will be increased or
decreased based upon the per-acre purchase price of $10,000 per
acre. It is expressly understood and agreed that a railroad right
of way exists or existed over and/or through a portion of the
Property. The total acreage of the Property sold hereunder shall
include all of the property included in and/or under the railroad
right of way to the extent Sellers shall have a transferrable
interest in such right of way property. Sellers shall, to the
extent necessary, use Sellers' best efforts to perfect and secure
right, title and interest in such railroad right of way property
prior to closing. Sellers shall convey to Purchaser any and all
such right, title and interest in the railroad right of way
property at closing. The purchase price shall be paid in U.S.
Currency as follows:
2. That Section II (d) of the Agreement shall be amended to read as
follows:
(d) The remaining balance of the purchase price, to-wit, the sum
of $1,597,800.00 (subject to adjustment incident to the above-
referenced survey), shall be amortized over 20 years, with
interest commencing from and after the date of closing at the
rate of 9.00% per annum, with monthly payments of $________ per
month. The first monthly payment will be due 30 days from the
date of closing, with continuing monthly payments on the same day
of each and every month thereafter until the _____ day of
__________, 2007, at which time all accrued interest and unpaid
principal will be due and payable in full. The amount set forth
in this subparagraph II(d) shall be evidenced by a promissory
note (the "Promissory Note"), a copy of which shall be attached
hereto as Exhibit B to this Agreement and incorporated herein by
reference as if set forth in full. Said Promissory Note shall
provide for the prepayment of all amounts by Purchaser to Sellers
without penalty, but only after five years from the date of the
Promissory Note. Purchaser shall have no prepayment right in the
first five years.
261\142747
SECOND ADDENDUM TO REAL ESTATE PURCHASE AND SALE AGREEMENT DATED DECEMBER 27,
1996.
PAGE 1
<PAGE>
3. That Section VIII of the Agreement shall be amended to read as
follows.
This transaction shall close on April 15, 1997. The Purchaser
shall have the right to request up to a three month extension of
the closing date and, upon such request shall pay to Sellers
$100,000.00 additional earnest money. At the end of the three
month extension of the closing date, Purchaser shall have the
right to request up to a five month extension of the closing date
and, upon such request shall pay to Sellers $200,000.00
additional earnest money. All additional earnest money paid to
Sellers to extend the closing date shall be non-refundable, save
and except only if Sellers cannot deliver good and marketable
title at closing or other failure to close which is not the fault
of Purchaser, in which event the earnest money shall be returned
to Purchaser. The additional earnest money paid at the time of
request for each such extension, shall be credited against the
purchase price at closing. In the event Purchaser requests
extension of the closing date, closing shall occur at the
expiration of the extension or within fifteen (15) days of
receipt by Purchaser of all necessary governmental approvals for
the Purchaser's anticipated uses of the Property, whichever first
occurs. Purchaser shall regularly keep Sellers informed of the
status of proceedings and progress in securing the governmental
approvals.
4. All other terms and conditions of the Agreement, not expressly
modified herein, remain in full force and effect.
This Second Addendum is executed this 28th day of January, 1997.
SELLERS:
By /s/ Gary Whitney
----------------------------------
Gary Whitney, Co-Trustee
By /s/ Richard C. Given
----------------------------------
Richard C. Given, Co-Trustee
PURCHASER:
MONROC, INC., a Delaware corporation
By /s/ Michael R. Matzdorff
----------------------------------
Its Division Manager
261\142747
SECOND ADDENDUM TO REAL ESTATE PURCHASE AND SALE AGREEMENT DATED DECEMBER 27,
1996.
PAGE 2
<PAGE>
STATE OF IDAHO )
) ss.
County of Ada )
On this 28th day of January,1997,before me, the undersigned, a
Notary Public in and for said State, personally appeared GARY WHITNEY and
RICHARD C. GIVEN, known to me to be the co-trustees of the WHITNEY FAMILY
TRUST, the trust that executed the above instrument or the persons who
executed the instrument on behalf of said corporation, and acknowledged to
me that such trust executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
.... /s/ Pamela K. Wolt
-----------------------------
NOTARY PUBLIC for Idaho
Residing at Boise, Idaho
My Commission Expires: 10/3/97
STATE OF IDAHO )
)ss.
County of Ada )
On this 28th day of January, 1997, before me, the undersigned, a
Notary Public in and for said State, personally appeared MICHAEL MATZDORFF,
known or identified to me to be the Division Manager of MONROC, INC., the
corporation that executed the above instrument or the person who executed
the instrument on behalf of said corporation, and acknowledged to me that
such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
.... /s/ Pamela K. Wolt
----------------------------
NOTARY PUBLIC for Idaho
Residing at Boise, Idaho
My Commission Expires: 10/3/97
261\142747
SECOND ADDENDUM TO REAL ESTATE PURCHASE AND SALE AGREEMENT DATED DECEMBER 27,
1996.
PAGE 3
EXHIBIT 11.1
MONROC, INC
STATEMENT REGARDING COMPUTATION OF NET EARNINGS (LOSS) PER SHARE
Years Ended December 31,
1996 1995 1994
Weighted average number of
common shares outstanding
during the period (1) 4,467,000 2,835,063 2,611,521
Net Earnings (Loss) $(1,367,679) $1,355,651 $ 283,582
Net Earnings (Loss) Per Share $ (0.31) $ 0.48 $ 0.11
(1) Weighted average number of common shares outstanding during the period is
based upon the relative number of days which shares of common stock are
outstanding.
EXHIBIT 21
Subsidiaries of Monroc, Inc. (the "Registrant")
Percentage of
Outstanding
Place of Stock Held by
Name of Subsidiary Incorporation the Registrant
- ---------------------- ------------- --------------
Big Horn Redi-Mix Inc. Wyoming 100%
CONSENT
We have issued our report dated February 11, 1997, accompanying
the financial statements of Monroc, Inc., incorporated by
reference or included in the Annual Report of Monroc, Inc., on
Form 10-K for the year ended December 31, 1996. We hereby
consent to the incorporation by reference of said report in the
Registration Statement of Monroc, Inc., on Form S-8 (File No. 33-
80242 effective June 15, 1994).
GRANT THORNTON LLP
Salt Lake City, Utah
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MONROC, INC. DECEMBER 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,189,631
<SECURITIES> 0
<RECEIVABLES> 13,201,601
<ALLOWANCES> 301,624
<INVENTORY> 3,977,274
<CURRENT-ASSETS> 19,855,631
<PP&E> 27,310,062
<DEPRECIATION> 11,802,432
<TOTAL-ASSETS> 40,638,252
<CURRENT-LIABILITIES> 15,054,808
<BONDS> 5,161,743
0
0
<COMMON> 44,670
<OTHER-SE> 18,625,913
<TOTAL-LIABILITY-AND-EQUITY> 40,638,252
<SALES> 70,401,396
<TOTAL-REVENUES> 70,401,396
<CGS> 63,045,372
<TOTAL-COSTS> 71,286,389
<OTHER-EXPENSES> 35,930
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 736,311
<INCOME-PRETAX> (1,585,374)
<INCOME-TAX> (217,695)
<INCOME-CONTINUING> (1,367,679)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,367,679)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
