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, 1997
- -- 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
GIANT CEMENT HOLDING, INC.
(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
Registrant's telephone number, including area code: (803) 851-9898
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 9,447,782 Shares Outstanding
Page 1 of 13
<PAGE>
GIANT CEMENT HOLDING, INC.
INDEX
PART I FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three-Month Periods Ended March 31, 1997 and 1996........ 3
Condensed Consolidated Balance Sheets - March 31, 1997
and 1996 and December 31, 1996........................... 4
Condensed Consolidated Statements of Cash Flows -
Three-Month Periods Ended March 31, 1997 and 1996........ 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
<PAGE>
GIANT CEMENT HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three-month periods ended March 31, 1997 and 1996
(Unaudited)
Three Months Ended
(in thousands, except per share data) 1997 1996
---- ----
Operating revenues ................................. $ 24,358 $ 20,791
Operating costs and expenses:
Cost of sales and services ................. 20,295 16,781
Selling, general and administrative ........ 2,023 2,134
-------- --------
Operating income ........................... 2,040 1,876
Other income (expense):
Interest expense ........................... (228) (261)
Other, net ................................. 91 (98)
-------- --------
Income before taxes ........................ 1,903 1,517
Provision for income taxes ..................... 665 531
-------- --------
Net income .......................... $ 1,238 $ 986
======== ========
Net income per common share ........................ $ .13 $ .10
======== ========
Weighted average common shares ..................... 9,618 9,920
See accompanying notes to consolidated financial statements.
3
<PAGE>
GIANT CEMENT HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31 December 31
(in thousands) 1997 1996 1996
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 2,973 $ 2,212 $ 10,432
Accounts receivable, less allowances of,
$1,186, $1,098 and $1,123, respectively 15,034 14,505 14,897
Inventories 18,972 19,695 17,656
Other current assets 1,889 1,540 2,071
-------- -------- --------
Total current assets 38,868 37,952 45,056
-------- -------- --------
Property, plant and equipment, at cost 160,185 152,452 155,770
Less accumulated depreciation 87,024 81,491 85,352
-------- -------- --------
73,161 70,961 70,418
-------- -------- --------
Deferred charges and other assets 3,166 2,714 3,142
-------- -------- --------
Total assets $115,195 $111,627 $118,616
======== ======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 8,635 $ 8,519 $ 10,437
Short-term borrowings -- 2,031 --
Accrued expenses 6,419 7,632 6,843
Current maturities of long-term debt 938 4,031 1,070
-------- -------- --------
Total current liabilities 15,992 22,213 18,350
Long-term debt, net of current maturities 10,329 10,444 10,681
Accrued pension and postretirement benefits 6,411 9,232 6,332
Deferred income taxes 6,125 4,569 6,125
-------- -------- --------
Total liabilities 38,857 46,458 41,488
-------- -------- --------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 20,000
shares authorized, 10,000 shares issued 100 100 100
Capital in excess of par value 41,103 41,022 41,022
Retained earnings 43,273 27,600 42,035
Less:
Treasury stock, at cost; 458, 99 and 6,600 1,084 4,491
336 shares, respectively
Reduction for additional pension
liability 1,538 2,469 1,538
-------- -------- --------
76,338 65,169 77,128
-------- -------- --------
Total liabilities and
shareholders' equity $115,195 $111,627 $118,616
======== ======== ========
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, 1997 and 1996
(Unaudited)
(in thousands) 1997 1996
---- ----
Operations:
Net income ............................... $ 1,238 $ 986
Depreciation and depletion ............... 2,397 2,248
Amortization of deferred charges and other 107 140
Changes in operating assets and liabilities:
Receivables .............................. (137) (1,948)
Inventories .............................. (1,316) (2,593)
Other current assets and deferred charges 51 121
Accounts payable ......................... (595) (447)
Accrued expenses ......................... (176) 525
-------- --------
Net cash provided (used) by operations .. 1,569 (968)
-------- --------
Investing:
Purchase of property, plant and equipment (6,347) (2,940)
-------- --------
Financing:
Repayment of long-term debt .............. (484) (1,050)
Proceeds from short-term borrowings ...... -- 2,031
Repayment of short-term borrowings ....... -- (2,279)
Purchase of treasury stock ............... (2,197) (684)
-------- --------
Net cash used by financing ............. (2,681) (1,982)
-------- --------
Decrease in cash and
cash equivalents ........... (7,459) (5,890)
Cash and Cash Equivalents:
Beginning of period ...................... 10,432 8,102
-------- --------
End of period ............................ $ 2,973 $ 2,212
======== ========
See accompanying notes to consolidated financial statements
5
<PAGE>
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, 1997 and for the interim
periods ended March 31, 1997 and 1996 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, 1996 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 1996 Annual Report
to Shareholders.
2. Inventories (in thousands): March 31, December 31
-------------- -----------
1997 1996 1996
---- ---- ----
Finished goods .......... $ 3,967 $ 5,322 $ 3,141
In process .............. 1,388 2,157 1,236
Raw materials ........... 2,042 2,175 2,025
Supplies, repair parts and coal .. 11,575 10,041 11,254
------- ------- -------
$18,972 $19,695 $17,656
======= ======= =======
3. Accrued Expenses (in thousands): March 31, December 31
--------------- -----------
1997 1996 1996
---- ---- ----
Compensation ............ $ 1,537 $ 1,379 $ 2,161
Pension plan contribution 2,528 3,360 2,781
Income taxes ............ 427 589 --
Other ................... 1,927 2,304 1,901
------- ------- -------
$ 6,419 $ 7,632 $ 6,843
======= ======= =======
6
<PAGE>
4. Contingencies
The Company's operations and properties are subject to extensive and
changing federal, state and local laws (including common law), regulations and
ordinances relating to noise and dust suppression, air and water quality, as
well as to the handling, treatment, storage and disposal of wastes
("Environmental Laws"). In connection with the Company's quarry sites and
utilization of hazardous waste-derived fuel, Environmental Laws require certain
permits and other authorizations mandating procedures under which the Company
shall operate. Environmental Laws also provide significant penalties for
violators, as well as liabilities and costs of cleaning up releases of hazardous
wastes into the environment. Violations of mandated procedures under operating
permits, even if immaterial or unintentional, may result in fines, shutdowns,
remedial actions or revocation of such permits.
5. Pending Acquisition
In December 1996, the Company announced it had entered into a Letter of
Intent to acquire certain lightweight aggregate plants, concrete block plants
and a drum processing/fuel blending facility of a privately held manufacturer
with operations principally in the South- Atlantic United States. The
acquisition is subject to finalization of a definitive agreement and, among
other matters, approvals by various regulatory authorities. If completed, the
acquisition (which would be accounted for as a purchase) would require
approximately $38 million to be financed through the issuance of approximately
1.3 million common shares and bank borrowings of approximately $18 million.
Additional consideration could be payable over a three-year period, contingent
upon the acquired operations achieving certain earnings levels.
6. Earnings Per Share
The Financial Accounting Standards Board has issued Statement No. 128
"Earnings Per Share". FAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997. FAS No. 128 will be implemented in
the Company's 10K for the year ended December 31, 1997. The Company does not
expect that FAS No. 128 will have a material impact on the earnings per share
computation.
7
<PAGE>
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,
1997 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.
The Company's cement manufacturing hourly employees are represented by the
United Paperworkers International Union ("UPIU"). The Agreement between Giant
Cement Company and UPIU Local 50216 was due to expire May 1, 1997. At the
request of the UPIU, the commencement of negotiations was delayed. The UPIU is
agreeable to extend the present Agreement while negotiations continue. While the
Company will endeavor to negotiate a new agreement with the UPIU, there can be
no assurance that an agreement will be reached on terms favorable to the
Company, nor can there be assurance that the Company will not incur work
stoppages, slowdowns or a strike.
8
<PAGE>
Results of Operations
Three month period ended March 31, 1997 versus three month period ended March
31, 1996.
Operating revenues increased 17.2% to $24.4 million in 1997 as compared to $20.8
million in 1996. Revenues from product sales increased $2.8 million or 15.3% to
$21.0 million in 1997, as compared to $18.3 million in 1996, as a result of
increased shipping volumes and higher average selling prices of cement. Cement
shipping volumes increased 9.8% in 1997, as a result of favorable weather and
strong demand in both of the Company's markets.
The Company's average selling price per ton of cement increased 4.5% for the
quarter ended March 31, 1997 compared to the same period in 1996, as a result of
price increases implemented in April 1996. Effective for April 1, 1997, the
Company has announced a $4 per ton increase in its Middle- Atlantic markets; and
for package products only, a $4 per ton increase in its South-Atlantic markets.
Based upon current cement demand, both increases are expected to be realized;
however, there can be no assurance that these price increases will be realized
or that current price levels will not decline should cement demand decline in
relation to supply.
Resource recovery services revenues increased $781,000 or 30.9% to $3.3 million
in 1997, compared to $2.5 million in 1996. Liquid fuels utilized increased 8.4%,
while liquids pricing improved 2.4% over a year earlier. The Company's solid
fuels volume increased 64% to 4,000 tons with the net increase in tonnage
expected to be 20% for the full year. The average price realized improved 29%
over the first quarter of 1996 for solid fuels.
Gross profit increased 1.3% to $4.1 million in 1997, compared to $4.0 million in
1996, as a result of higher operating revenues. The Company's gross margins
decreased to 16.7% in 1997 from 19.3% in 1996. In 1997, cost of sales and
services increased $3.5 million or 20.9% to $20.3 million, compared to $16.8
million in 1996. The increase in cost is a result of an earlier, more extensive
winter maintenance shutdown, higher shipping volumes, and higher costs incurred
to import clinker to meet customer demand in the Company's South-Atlantic
markets. Cement manufacturing costs per ton increased 8.3% in 1997 compared to
the first quarter of 1996.
Selling, general and administrative expenses decreased $111,000 to $2.0 million
in 1997. The expense decrease primarily related to lower insurance costs, which
may not continue into subsequent quarters in 1997.
Interest costs decreased $33,000 for the quarter to $228,000 as a result of
lower average borrowings outstanding.
9
<PAGE>
The income tax provisions recorded for the three month periods ended March 31,
1997 and 1996, relate to federal and state income taxes and were recorded at
estimated annual effective rates of 35%.
Net income increased $252,000 or 25.6% to $1.2 million, in 1997 compared to
$986,000 in 1996, 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 $3.0 million at March 31, 1997 compared to
$10.4 million at December 31, 1996. At March 31, 1997, and December 31, 1996 the
Company had net working capital of $22.9 million, and $26.7 million, with
current ratios of 2.4 and 2.5, respectively. Accounts receivable increased
$137,000 or .9% to $15.0 million at March 31, 1997 as a result of higher cement
and resource recovery revenues in March 1997 compared to December 1996.
Inventories increased $1.3 million or 7.5% to $19.0 million at March 31, 1997,
as a result of an increase in repair parts and seasonally higher finished cement
inventories as compared to December 31, 1996. Total current liabilities
decreased $2.4 million or 12.9% to $16.0 million at March 31, 1997, primarily as
a result of decreased amounts payable to vendors for capital projects.
Cash provided by operations for the three month period ended March 31, 1997 was
$1.6 million compared to $1.0 million cash used for the comparable period in
1996. The increase in cash provided by operations was primarily the result of
increased net income and lesser increases in accounts receivable and inventories
compared to 1996. Net cash used by investing activities increased from $2.9
million in 1996 to $6.3 million in 1997 as a result of increased capital
expenditures in 1997. Net cash used by financing activities increased from $2.0
million in 1996 to $2.7 million in 1997 as a result of increased repurchases of
the Company's outstanding common stock. Through March 31, 1997, the Company has
expended $6.9 million of the $10.0 million approved by its Board of Directors
for stock repurchases. The Company utilized a total of $7.5 million in cash in
1997 versus $5.9 million in 1996, primarily as a result of increased capital
spending.
The Company believes that its Term Loan and Credit Facility, together with
internally generated funds, will be sufficient to meet its working capital needs
for the foreseeable future.
10
<PAGE>
Disclosure Regarding Forward Looking Statements
This document contains certain forward-looking statements, containing the words
"believe," "anticipates," "expects," and words of similar import, based upon
current expectations that involve a number of known and unknown business risks
and uncertainties. The factors that could cause results to differ materially
include the following: national and regional economic conditions, changes in the
levels of construction spending, changes in supply or pricing of waste fuels and
other risks as further described in the Company's Annual Report on Form 10-K
filed with the SEC for the year ended December 31, 1996.
11
<PAGE>
GIANT CEMENT HOLDING, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For 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, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
During the quarter ended March 31, 1997, the Company did
not file any reports on Form 8-K.
Items 2 through 5 are not applicable.
12
<PAGE>
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, 1997
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's financial statements and is qualified in its entirey by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2973
<SECURITIES> 0
<RECEIVABLES> 15034
<ALLOWANCES> 1186
<INVENTORY> 18972
<CURRENT-ASSETS> 38868
<PP&E> 160185
<DEPRECIATION> 87024
<TOTAL-ASSETS> 115195
<CURRENT-LIABILITIES> 15992
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 76238
<TOTAL-LIABILITY-AND-EQUITY> 115195
<SALES> 24358
<TOTAL-REVENUES> 24358
<CGS> 20295
<TOTAL-COSTS> 20295
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228
<INCOME-PRETAX> 1903
<INCOME-TAX> 665
<INCOME-CONTINUING> 1238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1238
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
