<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
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- --- 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 : 0-24850
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GIANT CEMENT HOLDING, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 57-0997411
------------------------------ ---------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer ID No.)
320-D MIDLAND PARKWAY, SUMMERVILLE, SOUTH CAROLINA 29485
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Registrant's telephone number, including area code: (803) 851-9898
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the date of this filing.
COMMON STOCK, $.01 PAR VALUE 9,877,727 SHARES OUTSTANDING
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Page 1 of 13
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GIANT CEMENT HOLDING, INC.
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three-Month Periods Ended March 31, 1996 and 1995........ 3
Condensed Consolidated Balance Sheets - March 31, 1996
and 1995 and December 31, 1995........................... 4
Condensed Consolidated Statements of Cash Flows -
Three-Month Periods Ended March 31, 1996 and 1995........ 5
Notes to Condensed Consolidated Financial Statements..... 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 8-11
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................ 12
Item 6. Exhibits and Reports on Form 8-K......................... 12
(a)Reports on Form 8-K.................................... 12
2
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GIANT CEMENT HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three-month periods ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
1996 1995
---- ----
(In thousands, except per share data)
<S> <C> <C>
Operating revenues $20,791 $19,318
Operating costs and expenses:
Cost of sales and services 16,781 16,636
Selling, general and administrative 2,134 1,912
------- -------
Operating income 1,876 770
Other income (expense):
Interest expense (261) (97)
Other, net (98) 66
------- -------
Income before taxes 1,517 739
Provision for income taxes 531 272
------- -------
Net income $ 986 $ 467
======= =======
Net income per common share $ .10 $ .05
======= =======
Weighted average common shares 9,920 10,000
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
GIANT CEMENT HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
-------------------- -----------
1996 1995 1995
-------- -------- --------
(in thousands)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,212 $ 3,877 $ 8,102
Accounts receivable, less allowances of
$1,098, $1,080 and $973, respectively 14,505 11,753 12,557
Inventories 19,695 16,761 17,102
Other current assets 1,540 2,123 1,750
-------- -------- --------
Total current assets 37,952 34,514 39,511
-------- -------- --------
Property, plant and equipment, at cost 152,452 131,257 148,778
Less accumulated depreciation 81,491 74,429 79,303
-------- -------- --------
70,961 56,828 69,475
-------- -------- --------
Deferred charges and other assets 2,714 1,802 2,728
-------- -------- --------
Total assets $111,627 $ 93,144 $111,714
======== ======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 8,519 $ 9,926 $ 8,172
Short-term borrowings 2,031 984 2,279
Accrued expenses 7,632 6,389 7,333
Current maturities of long-term debt 4,031 2,034 4,188
-------- -------- --------
Total current liabilities 22,213 19,333 21,972
Long-term debt, net of current maturities 10,444 6,346 11,337
Accrued pension and postretirement benefits 9,232 8,237 9,259
Deferred income taxes 4,569 4,558 4,532
-------- -------- --------
Total liabilities 46,458 38,474 47,100
-------- -------- --------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 20,000
shares authorized, 10,000 shares issued 100 100 100
Capital in excess of par value 41,022 40,985 40,985
Retained earnings 27,600 14,366 26,614
Less:
Common stock held in treasury: 99 shares 1,084 - 616
Reduction for additional pension
liability 2,469 781 2,469
-------- -------- --------
65,169 54,670 64,614
-------- -------- --------
Total liabilities and
shareholders' equity $111,627 $ 93,144 $111,714
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GIANT CEMENT HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three-month periods ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Operations:
Net income (loss)............................ $ 986 $ 467
Depreciation and depletion................... 2,248 1,950
Amortization of deferred charges and other... 103 196
Deferred income taxes........................ 37 -
Changes in operating assets and liabilities:
Receivables.................................. (1,948) (1,219)
Inventories.................................. (2,593) (2,717)
Other current assets and deferred charges.... 121 (581)
Accounts payable............................. (447) 1,336
Accrued expenses............................. 272 (1,469)
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Net cash used by operations............... (1,221) (2,037)
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Investing:
Purchase of property, plant and equipment.... (2,940) (5,049)
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Financing:
Repayment of long-term debt.................. (1,050) (622)
Payments to former parent.................... - (10)
Proceeds from short-term borrowings.......... 2,031 -
Repayment of short-term borrowings........... (2,279) -
Transfer of treasury stock to Profit
Sharing Plans............................. 253 -
Purchase of treasury stock................... (684) -
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Net cash used by financing................ (1,729) (632)
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Decrease in cash and
cash equivalents...................... (5,890) (7,718)
Cash and Cash Equivalents:
Beginning of period.......................... 8,102 11,595
------- -------
End of period................................ $ 2,212 $ 3,877
======= =======
Supplemental Information:
Cash paid for:
Interest..................................... $ 265 $ 98
Income taxes................................. 36 979
</TABLE>
See accompanying notes to consolidated financial statements
5
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GIANT CEMENT HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with the requirements for interim financial
statements and, accordingly, they are condensed and omit disclosures
which would substantially duplicate those contained in the most recent
Annual Report to stockholders. The financial statements as of March 31,
1996 and for the interim periods ended March 31, 1996 and 1995 are
unaudited and, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation. Due to the seasonal nature of the Company's business,
operating results for the interim periods are not necessarily indicative
of the results that may be expected for the full year.
The financial information as of December 31, 1995 has been derived from
the audited financial statements as of that date. For further
information, refer to the financial statements and notes included in the
Company's 1995 Annual Report to Shareholders.
<TABLE>
<CAPTION>
2. INVENTORIES (IN THOUSANDS): MARCH 31, DECEMBER 31
-------------------- -----------
1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Finished goods $ 5,322 $ 3,698 $ 3,913
In process 2,157 1,909 1,270
Raw materials 2,175 1,418 1,527
Supplies, repair parts and fuel 10,041 9,736 10,392
-------- -------- --------
$ 19,695 $ 16,761 $ 17,102
======== ======== ========
3. ACCRUED EXPENSES (IN THOUSANDS): MARCH 31, DECEMBER 31
-------------------- -----------
1996 1995 1995
-------- -------- --------
Compensation $ 1,379 $ 1,323 $ 1,913
Pension plan contribution 3,360 2,080 3,446
Income taxes 589 631 -
Environmental settlements 358 610 358
Other 1,946 1,745 1,616
-------- -------- --------
$ 7,632 $ 6,389 $ 7,333
======== ======== ========
</TABLE>
6
<PAGE>
4. CONTINGENCIES:
In September 1995, the Company's subsidiary Keystone was named as a
defendant in a civil complaint, filed by the Pennsylvania Environmental
Enforcement Project Inc. ("PEEP"), a non-profit corporation, under the
Citizen Suit Provisions of certain Environmental Laws. The complaint
seeks principally to enjoin Keystone from burning hazardous wastes,
enjoin Keystone from further alleged violations of certain Environmental
Laws and to abate alleged conditions which endanger health or the
environment. The complaint also seeks civil penalties for the alleged
violations. The Company has filed a motion to dismiss the complaint to
which PEEP has filed a response. The Company's motion to dismiss was
denied without prejudice. PEEP has subsequently filed for a preliminary
injunction to enjoin Keystone from burning hazardous waste. The Company
will file its response to the plaintiff's motion for preliminary
injunction in May.
The complaint is at an early stage and management and counsel believe the
claim is without merit and the Company has meritorious defenses.
However, the likelihood of an unfavorable outcome cannot presently be
determined. The burning of hazardous waste-derived fuels is a key factor
to the profitability of the Company. An unfavorable outcome to the
litigation and/or a substantial reduction in the Company's ability to
substitute hazardous waste-derived fuels for traditional fossil fuels
could have a material adverse effect on the Company's financial condition
and/or results of operations.
7
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GIANT CEMENT HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's cement operations are directly related to the construction
industry. The regional markets in which the Company operates, the
Middle-Atlantic and South-Atlantic regions, are highly cyclical, experiencing
peaks and valleys in demand corresponding to regional and national
construction cycles. Additionally, the demand for cement is seasonal because
construction activity diminishes during the winter months of December,
January and February. The seasonal impact can be particularly acute in the
Company's Middle-Atlantic market. In addition, the Company performs a
substantial portion of its routine annual major maintenance projects during
the period of low plant utilization, typically the first quarter of its
fiscal year, which results in significant additional expense during this
period. The Company believes that the routine annual maintenance performed
in the first quarter results in lower maintenance costs throughout the
remainder of the year. Accordingly, the Company has historically experienced
its lowest levels of revenue and gross profit during the first quarter and
thus the results for the interim period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the full year.
The Company derives revenues from the sales of products, primarily cement, as
well as from the provision of resource recovery services. Resource recovery
services revenue is primarily derived from third parties that pay the Company
to utilize their waste as fuel, which additionally reduces the cost of
traditional fossil fuels used in the manufacture of cement. Due to the
nature of the Company's operations and the fact that the burning of
waste-derived fuels is inseparable from the manufacture of cement, it is
impractical to disaggregate the costs of sales and services by revenue
classification.
8
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RESULTS OF OPERATIONS
Three month period ended March 31, 1996 versus three month period ended March
31, 1995.
Operating revenues increased 7.6% to $20.8 million in 1996 as compared to
$19.3 million in 1995. Revenues from product sales increased $2.1 million or
12.7% to $18.3 million in 1996, as compared to $16.2 million in 1995, as a
result of increased shipping volumes and higher average selling prices of
cement. Cement shipping volumes increased 5.8% in 1996, primarily as a
result of a significant increase in the Company's South-Atlantic region,
which was partially offset by lower shipments in the Company's
Middle-Atlantic region as a result of the harsh winter weather in the region
in January.
The Company's average selling price per ton of cement increased 8.7% for the
quarter ended March 31, 1996 compared to the comparable period in 1995, as a
result of price increases implemented in April 1995. The Company realized
greater price increases in April 1995 in its South-Atlantic market where
demand and the Company's ability to increase prices were particularly strong.
Effective April 1, 1996, the Company announced price increases of $4 per ton
and $5 per ton in its South-Atlantic and Middle-Atlantic markets,
respectively. The Company expects to fully realize the $4 increase in the
South-Atlantic region. However, in spite of seasonally strong shipments
subsequent to January in the Middle-Atlantic region, high inventory levels in
the region resulted in the Company rescinding the $5 per ton April 1st
increase and announcing a $3 per ton increase effective August 1, 1996.
Resource recovery services revenues decreased $584,000 or 18.8% to $2.5
million in 1996, compared to $3.1 million in 1995. The decrease resulted
from lower prices realized for liquid fuels processing in both of the
Company's markets and slightly lower overall volumes. Subsequent to March
31, 1996, both the supply and pricing of liquid fuels have improved.
Gross profit increased 49.5% to $4.0 million in 1996, compared to $2.7
million in 1995, as a result of higher operating revenues. The Company's
gross margins increased to 19.3% in 1996 from 13.9% in 1995. In 1996, cost
of sales and services increased $145,000 or .9% for the quarter primarily as
a result of higher shipping volumes. Cement manufacturing costs per ton
increased less than 1% in 1996 compared to the first quarter of 1995.
Selling, general and administrative expenses increased $222,000 to $2.1
million in 1996. The expense increase primarily related to increased
compensation costs and higher expense accruals for uncollectible accounts
receivable in the first quarter of 1996.
9
<PAGE>
Interest costs increased $164,000 for the quarter to $261,000 as a result of
higher average borrowings outstanding.
The income tax provisions recorded for the three month periods ended March
31, 1996 and 1995, relate to federal and state income taxes and were recorded
at estimated annual effective rates of 35% in 1996 and 37% in 1995.
Net income increased $519,000 or 111% to $986,000, in 1996 compared to
$467,000 in 1995, primarily as a result of increased operating revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise primarily from the funding of
capital expenditures, debt service obligations and working capital needs.
The Company has historically met these needs through internal generation of
cash and borrowings on revolving credit facilities. The Company's borrowings
have historically increased during the first half of the year because of the
seasonality of its business and the annual plant maintenance performed in the
first quarter.
Cash and cash equivalents totalled $2.2 million at March 31, 1996 compared to
$8.1 million at December 31, 1995. At March 31, 1996, and December 31, 1995
the Company had net working capital of $15.7 million, and $17.5 million, with
current ratios of 1.7 and 1.8, respectively. Accounts receivable increased
$1.9 million or 15.5% to $14.5 million at March 31, 1996 as a result of
higher cement and resource recovery revenues in March 1996 compared to
December 1995. Inventories increased $2.6 million or 15.2% to $19.7 million
at March 31, 1996, as a result of seasonally higher clinker and finished
cement inventories as compared to December 31, 1995. Total current
liabilities increased $241,000 or 1.1% to $22.2 million at March 31, 1996,
primarily as a result of increased amounts payable to vendors.
Cash used by operations for the three month period ended March 31, 1996 was
$1.2 million compared to $2.0 million for the comparable 1995 period. The
decrease in cash used by operations was primarily the result of increased net
income and depreciation. Net cash used by investing activities decreased
from $5.0 million in 1995 to $2.9 million in 1996 as a result of decreased
capital expenditures in 1996. Net cash used by financing activities
increased from $632,000 in 1995 to $1.7 million in 1996 as a result of
increased debt payments and repurchases of the Company's outstanding common
stock. Through March 31, 1996, the Company has expended $1.0 million of the
$5.0 million approved for stock repurchases. The Company utilized a total of
$5.9 million in cash in 1996 versus $7.7 million in 1995, primarily as a
result of decreased capital spending.
10
<PAGE>
The Company believes that its Term Loan and Credit Facility, together with
internally generated funds, will be sufficient to meet its needs for the
foreseeable future.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This document contains forward-looking statements that involve a number of
business risks and uncertainties including; economic conditions, construction
spending, supply and demand and other risks as described in the Company's
Annual Report on Form 10-K, filed with the SEC for the year ended December
31, 1995.
11
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GIANT CEMENT HOLDING, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September 1995, the Company's subsidiary Keystone was named as a defendant
in a civil complaint, filed by the Pennsylvania Environmental Enforcement
Project Inc. ("PEEP"), a non-profit corporation, under the Citizen Suit
Provisions of certain Environmental Laws. The complaint seeks principally to
enjoin Keystone from burning hazardous wastes, enjoin Keystone from further
alleged violations of certain Environmental Laws and to abate alleged
conditions which endanger health or the environment. The complaint also
seeks civil penalties for the alleged violations. The Company has filed a
motion to dismiss the complaint to which PEEP has filed a response. The
Company's motion to dismiss was denied without prejudice. PEEP has
subsequently filed for a preliminary injunction to enjoin Keystone from
burning hazardous waste. The Company will file its response to the
plaintiff's motion for preliminary injunction in May.
The complaint is at an early stage and management and counsel believe the
claim is without merit and the Company has meritorious defenses. However,
the likelihood of an unfavorable outcome cannot presently be determined. The
burning of hazardous waste-derived fuels is a key factor to the profitability
of the Company. An unfavorable outcome to the litigation and/or a
substantial reduction in the Company's ability to substitute hazardous
waste-derived fuels for traditional fossil fuels could have a material
adverse effect on the Company's financial condition and/or results of
operations.
For additional information regarding environmental proceedings and legal
matters, see "Legal Proceedings" as reported in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
During the quarter ended March 31, 1996, the Company did not
file any reports on Form 8-K.
Items 2 through 5 are not applicable.
12
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SIGNATURE
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.
GIANT CEMENT HOLDING, INC. - Registrant
By: /s/ Terry L. Kinder
------------------------------
Terry L. Kinder
Vice President and Chief Financial Officer
Secretary-Treasurer
By: /s/ Victor Whitworth
-------------------------------
Victor Whitworth
Corporate Controller
Principal Accounting Officer
Date: May 8, 1996
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2212
<SECURITIES> 0
<RECEIVABLES> 14505
<ALLOWANCES> 1098
<INVENTORY> 19695
<CURRENT-ASSETS> 37952
<PP&E> 152452
<DEPRECIATION> 81491
<TOTAL-ASSETS> 111627
<CURRENT-LIABILITIES> 22213
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 65069
<TOTAL-LIABILITY-AND-EQUITY> 111627
<SALES> 20791
<TOTAL-REVENUES> 20791
<CGS> 16781
<TOTAL-COSTS> 16781
<OTHER-EXPENSES> 0
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<NET-INCOME> 986
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
