UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended March 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the transition period from to .
Commission File Number 0-23880
Monroc, Inc.
Delaware 87-0436697
(State of incorporation) (I.R.S. Employer
Identification Number)
P.O. Box 537, 1730 Beck Street, Salt Lake City, Utah 84110
(Address of principal executive offices)
Registrant's telephone number 801-359-3701
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirement for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1998
Common Stock, $0.01 par value 4,514,200 shares
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONROC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------------- -----------
<S> <C> <C>
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents $666,511 $752,280
Accounts receivable, net of allowance for discounts
and doubtful accounts of $191,346 at March 31, 1998
and $263,165 at December 31, 1997 9,324,538 9,022,922
Other Receivables 217,353 297,236
Costs and estimated earnings in excess of billings on
uncompleted contracts 4,910 215,045
Inventories 5,022,633 4,684,107
Prepaid expenses 1,379,316 1,165,697
---------- ----------
Total current assets 16,615,261 16,137,287
PROPERTY, PLANT AND EQUIPMENT, AT COST 33,218,632 30,021,473
Less accumulated depreciation and amortization 14,159,231 12,363,433
---------- ----------
19,059,401 17,658,040
AGGREGATE DEPOSITS 5,394,458 5,394,458
Less accumulated depletion 472,021 444,496
---------- ----------
4,922,437 4,949,962
LAND 4,024,638 1,377,190
LAND HELD FOR SALE 1,689,380 1,667,329
OTHER ASSETS, at cost, less accumulated amortization of
$372,446 at March 31, 1998 and $359,307 at December 31, 1997 712,776 725,915
---------- ----------
TOTAL ASSETS $47,023,893 $42,515,723
---------- ----------
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements
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<PAGE>
MONROC, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------------- -----------
<S> <C> <C>
CURRENT LIABILITIES: (Unaudited)
Notes payable $5,498,764 $5,898,872
Current maturities of long-term obligations 1,429,394 1,364,444
Trade accounts payable 5,428,729 4,581,624
Accrued liabilities 2,834,719 2,419,969
Billings in excess of costs and estimated earnings on
uncompleted contracts 42,704 161,221
--------- ---------
Total current liabilities 15,234,310 14,426,130
LONG-TERM OBLIGATIONS, less current maturities 10,451,166 6,826,736
DEFERRED COMPENSATION 762,459 748,641
DEFERRED INCOME TAXES 777,485 777,485
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
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 4,514,200 45,142 45,142
Capital in excess of par value 24,717,191 24,717,191
Accumulated deficit (3,439,814) (3,301,556)
---------- ----------
21,322,519 21,460,777
Less unpaid principal of Employee Stock Ownership Plan
note receivable (1,524,046) (1,724,046)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 19,798,473 19,736,731
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $47,023,893 $42,515,723
---------- ----------
</TABLE>
The accompanying notes are an integral part of these
statements.
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<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---------------- ---------
<S> <C> <C>
SALES $12,306,879 $14,913,135
Costs and expenses
Cost of sales 10,156.257 12,867,731
General and administrative 1,698,765 1,611,033
Contribution to ESOP 200,000 200,000
--------- ---------
12,055,022 14,678,764
--------- ---------
Operating profit (loss) 251,857 234,371
Other income (expense)
Gain on sale of property, plant, equipment
and land 0 3,825
Interest income 11,103 8,377
Interest expense (401,218) (239,245)
--------- ---------
(390,115) (227,043)
--------- ---------
Earnings (Loss) before income taxes (138,258) 7,328
Income taxes 0 0
--------- ---------
NET EARNINGS (LOSS) ($138,258) $7,328
---------- ----------
Basic earnings (loss) per common share and common equivalent ($0.03) $0.00
Fully diluted earnings (loss) per common share and common equivalent ($0.03) $0.00
---------- ----------
Weighted average common shares outstanding: 4,514,200 4,467,000
4,514,200 4,467,000
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---------------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($138,258) $7,328
Adjustments to reconcile net income (loss) to net cash generated
(used) in operating activities
Depreciation and amortization of property, plant and equipment 702,877 569,130
Provision for contribution to ESOP 200,000 200,000
Amortization of other assets 13,139 17,821
Provision for discounts and doubtful accounts (71,819) (966)
Depletion of aggregate deposits 27,525 14,865
(Gain) loss on sale and abandonment of property, plant and
equipment 0 259,230
Changes in assets and liabilities:
Accounts receivable (149,914) 1,130,138
Costs and estimated earnings in excess of billings on
uncompleted contracts 210,135 (151,357)
Inventories (338,526) 128,082
Prepaid expenses (213,619) 546,918
Land 0 (25,399)
Trade accounts payable 847,105 (2,064,695)
Accrued liabilities 414,750 267,447
Billings in excess of costs and estimated earnings on
uncompleted contracts (118,517) 141,920
Deferred compensation 13,818 (29,062)
--------- ----------
Net cash generated (used) in operating activities 1,398,696 1,011,400
Cash flows from investing activities:
Additions to property, plant and equipment (4,773,737) (1,043,512)
Proceeds from sale of property, plant, equipment and land 0 0
--------- ---------
Net cash used in investing activities (4,773,737) (1,043,512)
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
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<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---------------- ---------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in line of credit (400,108) (1,236,611)
Principal payments on long-term obligations (307,516) (125,078)
Purchase of Monroc Stock Warrants 0 0
Issuance of long-term obligations 3,996,896 565,291
--------- ---------
Net cash generated (used) in financing activities 3,289,272 (796,398)
--------- ---------
Net decrease in cash and cash equivalents (85,769) (828,510)
Cash and cash equivalents at beginning of period 752,280 1,189,631
--------- ---------
Cash and cash equivalents at end of period $666,511 $361,121
---------- ----------
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $401,218 $203,325
Income taxes $0 $0
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
MONROC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Monroc,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles ("GAAP"). Financial statements prepared in accordance with
GAAP require management to make estimates and assumptions that affect amounts
reported in the financial statements and related notes. Changes in the estimates
may affect amounts reported in future periods. In the opinion of management, all
normally recurring adjustments necessary for a fair presentation of the
financial information have been reflected therein. Because of the seasonal and
cyclical nature of the Company's businesses, the operating results for the three
months ended March 31, 1998 are not necessarily indicative of results that may
be expected for future periods, including for the year ending December 31, 1998.
The revenues and net earnings for any interim period are not necessarily
indicative of results that may be expected for the entire year.
These financial statements and the accompanying notes should be read in
conjunction with the audited financial statements and accompanying notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Note 2. Regulation and Environmental Matters
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. The Company 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 that 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 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
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<PAGE>
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, ASARCO, for its respective share of
these costs.
In May 1997, all of the landholders and the City of Murray entered into an
Agreement in Principle in which the landholders agreed to donate land for a
roadway through the properties which would be used as a depository for some of
the hazardous wastes on the site. In addition, the parties agreed to cooperate
in the remediation efforts to be conducted by ASARCO.
On May 12, 1998, the Company executed a Remedial Design/Remedial Action
Consent Decree (the "Consent Decree"). As proposed, the Consent Decree requires
the Company to (i) contribute a certain amount of its property for the roadway
(approximately 1.8 acres with a book value of approximately $19,000) as its
share of the cleanup costs, (ii) participate in a local improvement district for
the installation of curb, gutter, and sidewalks along the proposed roadway (an
approximately $30,000 assessment over a ten-year period) and (iii) implement
certain institutional controls. In return, the Company will receive contribution
protection and a covenant not to sue. Under the Consent Decree, the Company's
obligations terminate upon sale of the property. The Consent Decree has not yet
been lodged with the court and must undergo a public comment period before it
can be entered. The Company's estimated costs to satisfy these requirements
under the proposed Consent Decree are immaterial.
On May 5, 1997, the Company entered into an agreement to sell its total
acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase price of
approximately $1.9 million. The agreement is subject to the purchaser obtaining
necessary approvals. Pursuant to the agreement, the purchaser will assume the
Company's liabilities under the Agreement in Principle and the Consent Decree
described above. Subject to certain conditions, the Company expects the sale of
the Murray property to close on or before January 1, 1999.
Prior to learning of the potential presence of lead in the slag from the
Murray site, the Company sold some of the slag for use in road base and railroad
fill. The Company has not sold any material from this site since 1988. The
Company may be liable for cleanup costs if it is determined that the lead from
this slag poses an environmental hazard. The Company has not determined that the
lead from this slag poses an environmental hazard, nor has the Company received
any notice of government action on this matter. The potential cost to the
Company, if any, is not ascertainable at the present time. The Company's
management believes that there are economically reasonable methods of containing
the slag should this become necessary.
Note 3. Seasonality and Cyclicality
Due to its location in the Rocky Mountain region, the Company's business is
impacted by adverse weather conditions. 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.
The construction industry is highly cyclical and is strongly affected by
changes in economic growth and conditions and changes in interest rates. The
demand for construction varies depending upon a number of factors, including,
weather conditions, the availability of construction financing at favorable
interest rates, overall fluctuations in regional economies, past under or
overbuilding, labor relations in the construction industry and the levels of
material and energy supplies. 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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<PAGE>
Note 4. Acquisition and Proposed Merger
Treasure Valley Concrete Acquisition. On January 6, 1998, the Company
acquired all of the outstanding capital stock of privately held Treasure Valley
Concrete, Inc., an Idaho corporation ("Treasure Valley Concrete"), for
approximately $3.35 million in cash. Treasure Valley Concrete is a producer of
ready mix concrete in the Boise, Idaho market. Upon consummation of the
acquisition, Treasure Valley Concrete became a wholly owned subsidiary of the
Company.
Proposed Merger. The Company has entered into an Amended and Restated
Agreement and Plan of Merger dated as of January 29, 1998 and amended and
restated as of March 4, 1998 (the "Merger Agreement") with U.S. Aggregates,
Inc., a Delaware corporation, and Western Acquisition, Inc. a Delaware
corporation and a subsidiary of USAI ("Sub"), providing for the merger of Sub
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation and a subsidiary of USAI. Pursuant to the Merger
Agreement, each outstanding share of common stock, par value $.01 per share, of
the Company (the "Common Stock") will be converted into the right to receive
$10.771 per share in cash. In addition, the Merger Agreement provides that each
option or warrant to purchase shares of Common Stock will be canceled in
consideration for the right to receive in cash an amount equal to the number of
shares subject to such option or warrant multiplied by the difference between
$10.771 and the exercise price of such option or warrant, less any applicable
tax withholdings.
The Merger is conditioned upon, among other things, the approval of the
stockholders of the Company, certain regulatory and governmental approvals and
other customary conditions. A Special Meeting of the stockholders of the Company
with respect to approval of the Merger is scheduled to be held on June 5, 1998.
In connection with the proposed Merger, the Board of Directors of the Company
received a fairness opinion from SBC Warburg Dillon Read Inc. to the effect
that, as of the date of the opinion, the merger consideration is fair to the
stockholders of the company from a financial point of view.
Note 5. Recently Issued Financial Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general purpose financial statements. This statement requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS No. 130 will require the
Company to add disclosure to the financial statements about comprehensive
income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
and Enterprise and Related Information", which redefines how public business
enterprises report information about operating segments in annual financial
statements. It also establishes standards for related disclosures about products
and services, geographical areas, and major customer. SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier years is to be
restated. The adoption of SFAS No. 131 will result in additional disclosures
regarding the Company's segments. SFAS No. 131 need not be applied to interim
financial statements in the initial year of its application, but comparative
information for interim periods in the initial year of application is to be
reported in financial statements for interim periods in the second year of
application.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and related Notes included in Item 1 of this
report. Also, the discussion should be read in conjunction with the audited
consolidated Financial Statements and related Notes thereto and Management's
Discussion and Analysis of Financial Conditions and Results of Operations for
the year ended December 31, 1997 contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
Results of Operations - Three Months Ended March 31, 1998
Sales for the three-month period ended March 31, 1998 (the "1998 Period")
were $12.3 million compared to $14.9 million for the three-month period ended
March 31, 1997 (the "1997 Period"), a decrease of $2.6 million or 17%. Sales for
the Company's prestressed/precast division decreased $4.7 million or 42%, to
$3.4 million for the 1998 Period from $8.1 million for the 1997 Period as a
result of the completion of the Company's Snake River Correctional Facility
contract in Ontario, Oregon in May 1997. This decrease was partially offset by
increases in the Company's sand and gravel and ready mix operations from the
comparable period in 1997. Sand and Gravel sales increased by $1.5 million, or
156%, in the 1998 Period compared to the 1997 Period, primarily due to strong
demand for the Company's products in the Salt Lake City, Utah area from both
commercial development and road projects, particularly with respect to the
ongoing I-15 freeway reconstruction project. Net sales of ready mix concrete
increased $1.4 million, or 29%, to $6.3 million in the 1998 Period compared to
$4.8 million in the 1997 Period. This increase was due primarily to the
Company's acquisition of Treasure Valley Concrete in January 1998 and strong
economic conditions, sustained construction activity and increased sales efforts
in the Boise, Idaho and Salt Lake City areas.
Costs of sales decreased $2.7 million, or 21%, from $12.9 million in the
1997 Period to $10.2 million in the 1998 Period. This decrease was due primarily
to a lower volume of net sales in the 1998 Period of prestress/precast concrete
products which carry a higher costs of sales component relative to the Company's
sand and gravel and ready mix concrete products. General and administrative
expenses increased approximately $88,000, or 5.5%, in the 1998 Period compared
to the 1997 Period. As a percentage of net sales, general and administrative
expenses increased from 11% in the 1997 Period to 14% in the 1998 Period. This
increase was attributable primarily due to absorption of Treasure Valley
Concrete personnel along with increased legal and accounting costs related to
ongoing transactions by the Company. Contributions to the Company's Employee
Stock Ownership Plan remained constant at $200,000 for the 1998 Period and the
1997 Period.
Operating profit increased $17,516, or 7.5%, to $251,857 in the 1998 Period
from $234,341 in the 1997 Period and increased as a percentage of net sales to
2% in the 1998 Period from 1.6% in the 1997 Period. The increase in operating
gross profit as a percentage of net sales was due primarily to a lower volume of
net sales of prestress/precast concrete products in the 1998 Period which carry
lower margins and an increase in net sales of sand and gravel. Ready Mix
operating profit margins for the 1998 Period compared to the 1997 Period
remained constant. Sand and gravel product operating profit margins increased
to approximately 47% for the 1998 Period compared to 10% for the 1997 Period.
The higher profitability of sand and gravel sales for the 1997 Period is
primarily attributable to sand and gravel sales for use in the I-15 freeway
reconstruction project in Salt Lake Ciy.
Net other expense increased to $390,115 for the 1998 Period from $227,043
for the 1997 Period. This increase resulted primarily from an increase of
$161,973 in interest expense for the 1998 Period as compared to the 1997 Period
because of increased borrowings and higher average balances outstanding under
the Credit Facility (defined below).
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<PAGE>
The Company incurred a net loss of $138,258 for the 1998 Period as compared
to net earnings of $7,328 in the 1997 Period for the reasons stated above.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been comprised of cash flow
from operating activities, borrowings under its $15.0 million credit facility
provided by the CIT Group (the "Credit Facility") and the issuance of Common
Stock. The Company requires capital for the procurement of property, plant,
equipment, aggregate deposits, land and inventory, normal operating expenses and
for general working capital purposes.
The Credit Facility provides for both revolving and term loans. As of March
31, 1998, outstanding borrowings on the Credit Facility in the form of revolving
loans totaled $ 5.5 million compared to $5.9 million as of December 31, 1997. As
of March 31, 1998, the outstanding term loan balance under the Credit Facility
was $5.5 million compared to $2.0 million as of December 31, 1997. The increase
in the outstanding term loan balance was related to the Company's acquisition of
Treasure Valley Concrete in January 1998. As of March 31, 1998, the Company had
a maximum credit availability under the Credit Facility of $4.2 million.
Availability under the Credit Facility is based upon the level of eligible
receivables and the amount of unamortized availability under the term loan. The
Credit Facility is secured by a general lien on all of the Company's assets and
expires in February 2002.
As of March 31, 1998, the Company had positive working capital of $1.4
million compared to a positive working capital balance of $1.7 million at
December 31, 1997. During the 1998 Period, net cash generated by operating
activities totaled $1.4 million compared to net cash generated by operating
activities of 1.0 million for the 1997 Period. For the 1998 Period, the cash
generated by operating activities resulted primarily from an increase in trade
accounts payable of $847,105 and an increase in accrued liabilities of $414,750.
The increases in these liabilities was due primarily to the purchase of the
Treasure Valley Concrete operations and the increased time taken to pay
suppliers.
For the 1998 Period, the Company used $4.8 million of cash for investing
activities compared to a usage of $1.0 million for the 1997 Period. The
increased use of cash for investing activities during the 1998 Period was due
primarily increased investment in equipment and facilities and the Company's
purchase of Treasure Valley Concrete in January 1998. The Company expects to
continue to make significant investments in equipment and facilities during
1998.
Net cash used in financing activities was $3.3 million during the 1998
Period compared to $796,398 for the 1997 Period. For the 1998 Period, the
increased use of cash for financing activities resulted primarily from the
Company's acquisition of Treasure Valley Concrete in January 1998.
The Company continues to pursue the sale of its Wyoming subsidiary.
However, no definitive agreement has been entered into regarding the potential
sale of the Company's Wyoming operations. In addition, the Company had been in
negotiations with a potential buyer regarding the sale of certain assets of the
Company's prestress/precast division during March of 1997 and into early 1998.
However, discussions with the potential buyer have ended, and the Company does
not know at this time whether discussions with the potential buyer will resume
or whether the Company will be able to enter into discussions with any other
potential buyer of its prestress/precast division. No assurances can be given
that a definitive agreement will be entered into with any party or that the
Company will be able to successfully consummate the sale of its Wyoming
subsidiary or its prestressed/precast division assets.
The Company believes that its existing cash balances, combined with
additional availability under the Credit Facility, cash from operations and cash
from planned asset sales and equipment refinancings, will enable it
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to meet its working capital requirements for at least 12 months. However, if the
Company's capital requirements increase or if the Company is unable to conserve
cash or generate cash through asset sales, the Company could be required to
limit its capital expenditures, aggregate deposit purchases and acquisition
activities or secure additional sources of capital. There can be no assurance
the Company will be capable of securing additional capital or that the terms
upon which such capital will be available to the Company will be acceptable.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. Investors and prospective
investors in the Company should understand that several factors affect whether
any forward-looking statements contained herein will be or can be achieved. Any
one of those factors could cause actual results to differ materially from those
projected or discussed herein. These forward-looking statements relate to (i)
the merger contemplated pursuant to the Merger Agreement; (ii) the contemplated
sale of the Company's Wyoming subsidiary, certain precast/prestressed assets and
equipment refinancings; (iii) the expected increase in net sales of sand and
gravel and ready mix concrete; (iv) the Company's cash usage trend and the
Company's potential need for and access to capital sources; (v) operational
restrictions applicable to the Company pending consummation of the Merger; (vi)
the Company's projected liquidity for the next 12 months; (vii) integration of
the Treasure Valley Concrete operations; (viii) seasonality and cyclicality
issues: and (ix) other statements containing the words "expects", "intends",
"anticipates", "estimates", "projects", "will continue", "plans", or words of
similar effect and that are not statements of historical fact. These
forward-looking statements are subject to certain risks, uncertainties and
factors which could cause the anticipated results to not be realized. These
risks, uncertainties and factors include, without limitation, (a) the merger may
not be consummated or may not be consummated on the terms currently set forth in
the Merger Agreement; (b) in the event of price competition or a decrease in
demand for the Company's sand and gravel or ready mix concrete products for
reasons of market proximity, price, quality, general economic conditions, or
state of federal budgetary changes affecting freeway projects generally and the
I-15 reconstruction project specifically, the Company may not be able to
increase sales of its sand and gravel or its ready mix concrete products or may
not be able to do so at anticipated profit margins; (c) weather conditions and
other circumstances beyond the Company's control may impact its ability to
increase sales of sand and gravel and ready mix concrete products; (d) if the
Company is forced to conserve cash or is unable to access liquidity under its
Credit Facility, through the debt or equity capital markets or through asset
sales, the Company may be unable to fund operations or purchase additional
aggregate properties and in any event may be unable to purchase such properties
on terms acceptable to the Company; (e) the Company may be unable to consummate
a sale of its Wyoming subsidiary or its prestress/precast concrete division; and
(f) other factors discussed in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 under the caption "Forward-Looking Statements and
Risk Factors." Although the Company believes that its assumptions underlying the
forward-looking statements contained herein are reasonable, any of those
assumptions could prove inaccurate and, therefore, there is no assurance that
the results contemplated in any such forward- looking statement will be
utilized. Budgeting and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revision. The
impact of actual experience and business developments may cause the Company to
alter its marketing, capital expenditure plans or other budgets, which may in
turn affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of any such statement should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved.
Due to factors noted above and elsewhere in this filing, the Company's
future earnings and stock price may be subject to significant volatility,
particularly on a quarterly basis. Past financial performance should not be
considered a reliable indicator of future performance and investors should not
use historical trends to anticipate
-12-
<PAGE>
results or trends in future periods. Any shortfall in sales or earnings from the
levels anticipated by parties other than the Company could have an immediate and
significant effect on the trading price of the Company's Common Stock in any
given period. Additionally, the Company may not learn of such shortfalls until
late in the fiscal quarter, which would result in an even more immediately and
adverse effect on the trading price of the Company's Common Stock.
-13-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The list of exhibits contained in the accompanying Exhibit Index is
incorporated herein by reference.
(b) Reports on Form 8-K
A Report on Form 8-K dated as of January 6, 1998 was filed on
January 15, 1998 in connection with the Company's acquisition of
Treasure Valley Concrete, Inc. Also, a Report on Form 8-K dated as of
January 29, 1998 was filed on February 3, 1998 in connection with the
Company's proposed merger with U.S. Aggregates, Inc. and Western
Acquisition, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Monroc, Inc.
Registrant
Date: May 15, 1998 /s/ L. William Rands
--------------------
L. William Rands
Vice President and Chief
Financial and Accounting
Officer
-14-
<PAGE>
INDEX OF EXHIBITS
*Exhibit 2.2 - Agreement and Plan of Merger dated January 29, 1998 among the
Company, U.S. Aggregates, Inc. and Western Acquisition, Inc.
Exhibit 11 - Calculation of Earnings (Loss) per Share
Exhibit 27 - Financial Data Schedule
*Incorporated by reference to the Company's Current Report on Form 8-K filed on
February 3, 1998
-15-
<PAGE>
EXHIBIT 11
Calculation of Earnings (Loss) Per Share
(in thousands except per share data)
3 Months Ended
March 31,
------------------------------
1998 1997
Weighted average common and common 4,507 4,467
equivalent shares outstanding
Diluted weighted average common and common 4,507 4,467
equivalent shares outstanding
Net Earnings (Loss) $(138,258) $7,328
Basic Earnings (Loss) Per Common Share $(0.03) $.00
Diluted Earnings (Loss) Per Common Share $(0.03) $.00
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from March 31,
1998 financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 666,511
<SECURITIES> 0
<RECEIVABLES> 9,324,538
<ALLOWANCES> 0
<INVENTORY> 5,022,633
<CURRENT-ASSETS> 16,615,261
<PP&E> 33,218,632
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,023,893
<CURRENT-LIABILITIES> 15,234,310
<BONDS> 10,451,166
0
0
<COMMON> 45,142
<OTHER-SE> 19,753,331
<TOTAL-LIABILITY-AND-EQUITY> 47,023,893
<SALES> 12,306,879
<TOTAL-REVENUES> 12,306,879
<CGS> 10,156,765
<TOTAL-COSTS> 12,055,022
<OTHER-EXPENSES> 11,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (401,218)
<INCOME-PRETAX> (138,258)
<INCOME-TAX> 0
<INCOME-CONTINUING> (138,258)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,258)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
