-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kqh4DKWefjl8/lnqKzuD26LlFcD8HEkw/KRRiDw/Cj2y/R/qH5giQP12mNXvKUWA BZCRqXfSI5affOWUs+jKIQ== 0000930413-01-500298.txt : 20010420 0000930413-01-500298.hdr.sgml : 20010420 ACCESSION NUMBER: 0000930413-01-500298 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20010418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S AGGREGATES INC CENTRAL INDEX KEY: 0001054422 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 570990958 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-15217 FILM NUMBER: 1605640 BUSINESS ADDRESS: STREET 1: 400 SOUTH EL CAMINO REAL, SUITE 500 CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 6506854880 10-Q/A 1 c20690-10q_a.txt FORM 10Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 on FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 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 001-15217 U.S. AGGREGATES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 57-0990958 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 South El Camino Real, Suite 500, San Mateo, California 94402 ---------------------------------------------------- (Address, of principal executive offices) (Zip Code) (650) 685-4880 ---------------------------------------------------- (Registrant's telephone number, including area code) None ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 latest practicable date: Class Shares outstanding as of October 31, 2000 ---------------------------- ----------------------------------------- Common stock, $.01 par value 14,900,593 EXPLANATORY NOTE During the preparation of the Company's annual financial statements and the completion of the annual audit for 2000, certain adjustments were identified that affected the three-month and nine-month periods ended September 30, 2000. Management determined that the net income previously reported for the three-month and nine-month periods was overstated by approximately $3.8 million or $0.25 per diluted share and approximately $10.0 million or $0.66 per diluted share, respectively. Therefore, the Company is filing this Amendment No. 1 on Form 10-Q/A for the quarter ended September 30, 2000 to amend the Company's financial statements and the related Management's Discussion and Analysis of Financial Condition and Results of Operations. This amendment reflects increased revenues and cost of products sold resulting from the adoption of EITF 00-10, the adjustment of revenue and cost recognition on certain construction contracts, an adjustment related to the resolution of certain accounts receivable reconciliation discrepancies, a true-up relating to the Company's health insurance accrual, the reversal of previously capitalized costs associated with the development of new quarries and with repair and maintenance expenditures, the expense of capitalized data conversion costs in connection with the system integration and research and development costs, a true-up of depreciation of certain equipment, the reclassification of amortization of deferred financing costs to other expenses, the reduction of the amount of overhead, burden and other costs capitalized into inventory, the reclassification of asbestos-related clean-up costs and costs to sell assets from other expenses to selling, general and administrative expenses, the reclassification of the gain from sale of the Birmingham ready mix assets and a true-up related to various accruals. The restated results have been tax effected using a rate of 35% versus 27.3% for the quarter and 31.3% for the nine month period as previously reported. - -------------------------------------------------------------------------------- U.S. AGGREGATES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000 CONTENTS PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 EXHIBIT INDEX 19 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS U.S. AGGREGATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
September 30, December 31, 2000 1999 Restated ----------- ----------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 6,103 $ 4,478 Trade accounts receivable, net 58,758 52,294 Inventories, net 32,798 28,041 Prepaid expenses and other current assets 7,868 7,802 ----------- ----------- Total current assets 105,527 92,615 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT 366,925 325,328 Less: Accumulated depreciation & depletion (41,382) (32,418) ----------- ----------- Net property, plant and equipment 325,543 292,910 ----------- ----------- INTANGIBLE ASSETS, net 21,991 22,308 OTHER ASSETS 12,130 7,095 ----------- ----------- Total assets $ 465,191 $ 414,928 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES $ 68,893 $ 56,591 LONG-TERM DEBT, net of current portion 198,845 160,312 DEFERRED INCOME TAXES, net 56,459 55,404 OTHER 182 96 ----------- ----------- Total liabilities 324,379 272,403 ----------- ----------- MINORITY INTEREST, net 12 12 ----------- ----------- SHAREHOLDERS' EQUITY: Common stock, $.01 par value, 100,000,000 shares authorized, 14,908,222 shares outstanding, including 7,629 shares of treasury stock 149 149 Additional paid-in capital 123,648 123,648 Notes receivable from sale of stock (1,267) (1,195) Treasury stock, at cost (2) (2) Retained earnings 18,272 19,913 ----------- ----------- Total shareholders' equity 140,800 142,513 ----------- ----------- Total liabilities, minority interest and shareholders' equity $ 465,191 $ 414,928 =========== ===========
The accompanying notes are an integral part of these statements. 3 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 Restated Restated ------------ ------------ ------------ ------------ (unaudited) (unaudited) NET SALES $ 92,966 $ 96,952 $ 230,975 $ 228,629 COST OF PRODUCTS SOLD 72,813 67,966 180,212 164,670 ------------ ------------ ------------ ------------ Gross profit 20,153 28,986 50,763 63,959 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 7,449 7,806 24,220 22,704 DEPRECIATION, DEPLETION AND AMORTIZATION 4,208 3,517 12,347 9,211 ------------ ------------ ------------ ------------ Income from operations 8,496 17,663 14,196 32,044 OTHER INCOME (EXPENSES): Interest, net (5,246) (4,018) (13,968) (12,859) Other, net (662) 97 (690) (382) ------------ ------------ ------------ ------------ Income (loss) before provision for (benefit from) income taxes, minority interest and extraordinary item 2,588 13,742 (462) 18,803 PROVISION FOR (BENEFIT FROM) INCOME TAXES (906) (5,138) 162 (7,036) ------------ ------------ ------------ ------------ Income (loss) before minority interest and extraordinary item 1,682 8,604 (300) 11,767 MINORITY INTEREST -- (533) -- (572) ------------ ------------ ------------ ------------ Income (loss) before extraordinary item 1,682 8,071 (300) 11,195 EXTRAORDINARY ITEM: Loss on extinguishment of debt, less applicable income tax benefit of $161 -- (264) -- (264) ------------ ------------ ------------ ------------ Net income (loss) $ 1,682 $ 7,807 $ (300) $ 10,931 ============ ============ ============ ============ Income (loss) per common share-basic Income (loss) before extraordinary item available for common shareholders $ 0.11 $ 0.69 $ (0.02) $ 1.09 Extraordinary item, net of tax -- (0.02) -- (0.03) ------------ ------------ ------------ ------------ Net income (loss) available for common shareholders $ 0.11 $ 0.67 $ (0.02) $ 1.06 ============ ============ ============ ============ Weighted average common shares outstanding 14,900,593 10,804,389 14,900,593 7,709,642 Income (loss) per common share-diluted Income (loss) before extraordinary item available for common shareholders $ 0.11 $ 0.67 $ (0.02) $ 1.05 Extraordinary item, net of tax -- (0.02) -- (0.03) ------------ ------------ ------------ ------------ Net income (loss) available for common shareholders $ 0.11 $ 0.65 $ (0.02) $ 1.02 ============ ============ ============ ============ Weighted average common shares outstanding 15,202,644 11,078,626 14,900,593 7,991,930
The accompanying notes are an integral part of these statements. 4 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share amounts)
Nine Months Ended September 30, ----------------------- 2000 1999 Restated ---------- ---------- (unaudited) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,115 $ 4,103 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (35,101) (43,251) Acquisition of subsidiaries, net of cash acquired -- (325) Proceeds from sale of property, plant & equipment 5,055 2,874 ---------- ---------- Net cash used in investing activities (30,046) (40,702) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (39,639) (92,342) New borrowings 71,500 64,115 Proceeds from sale of stock, net -- 65,706 Dividends paid (1,341) -- Other (1,964) 45 ---------- ---------- Net cash provided by financing activities 28,556 37,524 ---------- ---------- NET INCREASE IN CASH 1,625 925 CASH AND CASH EQUIVALENTS, beginning of period 4,478 2,849 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ 6,103 $ 3,774 ========== ========== DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 14,619 $ 14,260 Taxes 679 755 NONCASH TRANSACTIONS: Accretion of preferred stock dividend -- 2,814 Conversion of minority interest to equity -- 8,273 Conversion of preferred shares and accreted dividends to common shares -- 46,377 Dividends declared but not paid 447 -- Conversion of operating leases to capital leases 14,224 --
The accompanying notes are an integral part of these statements. 5 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Basis of Presentation Founded in 1994, U.S. Aggregates, Inc. ("USAI" or the "Company") is a leading producer of aggregates. Aggregates consist of crushed stone, sand and gravel. The Company's products are used primarily for construction and maintenance of highways, other infrastructure projects, and for commercial and residential construction. USAI serves local markets in nine states in two regions of the United States, the Mountain states and the Southeast. The accompanying unaudited condensed consolidated financial statements of U.S. Aggregates, Inc. and subsidiaries have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and to Article 10 of Regulation S-X. In the opinion of management, the interim financial information provided herein reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the nine months ended September 30, 2000 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements and the notes thereto should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 2. Restatement of Financial Statements During the preparation of the Company's annual financial statements and the completion of the annual audit for 2000, certain adjustments were identified that affected the three-month and nine-month periods ended September 30, 2000. Management determined that the net income previously reported for the three-month and nine-month periods was overstated by approximately $3.8 million or $0.25 per diluted share and approximately $10.0 million or $0.66 per diluted share, respectively. In addition, in the fourth quarter of 2000, the Company adopted EITF 00-10, which requires that amounts billed to customers related to shipping and handling be classified as revenue, and that the related costs be included in cost of goods sold. Such an accounting change, when made, has to be applied retroactively to the beginning of the year in which the change is made. Accordingly, the restated amounts reflect the adoption of EITF 00-10. The following table presents the impact and the nature of the adjustments recorded by the Company.
Three Months Ended September 30, 2000 Nine Months Ended September 30, 2000 --------------------------------------- --------------------------------------- As Previously Restatement As As Previously Restatement As Reported Adjustments Restated Reported Adjustments Restated ----------- ----------- ----------- ----------- ----------- ----------- (dollars in thousands) Net sales (a) $ 89,257 $ 3,709 $ 92,966 $ 222,113 $ 8,862 $ 230,975 Cost of products sold (b) 64,629 8,184 72,813 158,506 21,706 180,212 ----------- ----------- ----------- ----------- ----------- ----------- Gross profit 24,628 (4,475) 20,153 63,607 (12,844) 50,763 Selling, general and administrative expenses (c) 6,640 809 7,449 22,476 1,744 24,220 Depreciation, depletion and amortization (d) 4,187 21 4,208 12,354 (7) 12,347 ----------- ----------- ----------- ----------- ----------- ----------- Income from operations $ 13,801 $ (5,305) $ 8,496 $ 28,777 $ (14,581) $ 14,196 =========== =========== =========== =========== =========== =========== Other expenses (e) $ 6,206 $ (298) $ 5,908 $ 14,619 $ 39 $ 14,658 Net income (loss) (f) $ 5,521 $ (3,839) $ 1,682 $ 9,733 $ (10,033) $ (300)
(a) Net Sales Three Months Ended September 30, 2000 Net sales was increased by $3.8 million to reflect the impact of the adoption of EITF 00-10, which requires that amounts billed to customers related to shipping and handling be classified as revenue, and that the related costs be included in cost of products sold. 6 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Net sales was decreased by $0.1 million to adjust revenue recognition on certain construction contracts. Nine Months Ended September 30, 2000 Net sales was increased by $9.8 million to reflect the impact of the adoption of EITF 00-10, which requires that amounts billed to customers related to shipping and handling be classified as revenue, and that the related costs be included in cost of products sold. Net sales was decreased by $0.3 million to adjust revenue recognition on certain construction contracts. Net sales was also decreased by 0.7 million to reflect an adjustment related to the resolution of certain accounts receivable reconciliation discrepancies. (b) Cost of Products Sold Three Months Ended September 30, 2000 Cost of products sold was increased by $3.8 million to reflect the adoption of EITF 00-10, as discussed above. Cost of products sold was increased by $4.4 million to reflect the reversal of previously capitalized costs associated with the development of new quarries and with repair and maintenance expenditures. Cost of products sold was increased by $0.2 million to reflect a true-up related to the Company's health insurance accrual. Cost of products sold was increased by $0.1 million to reflect the reduction of the amount of overhead, burden and other costs capitalized into inventory during the quarter. Cost of products sold was decreased by $0.3 million to reflect the adjustment of cost recognition on certain construction contracts. Nine Months Ended September 30, 2000 Cost of products sold was increased by $9.8 million to reflect the adoption of EITF 00-10, as discussed above. Cost of products sold was increased by $1.5 million to reflect a true-up related to the Company's health insurance accrual. Cost of products sold was increased by $0.3 million to reflect previously unidentified costs associated with certain construction contracts. Cost of products sold was increased by $2.9 million to reflect the reduction of the amount of overhead, burden and other costs capitalized into inventory during the quarter. Cost of products sold was increased by $7.2 million to reflect the reversal of previously capitalized costs associated with the development of new quarries and with repair and maintenance expenditures. (c) Selling, General and Administrative ("SG&A") Expenses Three Months Ended September 30, 2000 SG&A expenses were increased $0.1 million to reflect the reversal of costs previously capitalized related to data conversion in connection with the system integration and research and development. 7 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SG&A expenses were also increased $0.1 million and $0.2 million to reflect reclassifications from other expenses of certain asbestos-related clean-up costs and costs to sell assets, respectively. SG&A expenses were increased by $0.4 million to reflect a true-up related to various accruals. Nine Months Ended September 30, 2000 SG&A expenses were increased by $0.6 million to reflect the reversal of costs previously capitalized related to data conversion in connection with the system integration and research and development. SG&A expenses were increased by $0.2 million to reflect a true-up related to the Company's health insurance accrual. SG&A expenses were increased by $0.3 million and $0.2 million to reflect reclassifications from other expenses of certain asbestos-related clean-up costs and costs to sell assets, respectively. SG&A expenses were increased by $0.7 million to reflect a true-up related to various accruals. SG&A expenses were decreased by $0.3 million to reflect a reclassification from other expenses of the gain on sale of the Birmingham ready mix assets. (d) Depreciation, Depletion and Amortization ("DD&A") Three Months Ended September 30, 2000 DD&A were increased by $0.1 million to reflect a true-up of depreciation of certain equipment. DD&A were decreased by $0.1 million to reflect the reclassification of amortization of deferred financing costs to other expenses. Nine Months Ended September 30, 2000 DD&A were increased by $0.4 million to reflect a true-up of depreciation of certain equipment. DD&A were decreased by $0.4 million to reflect the reclassification of amortization of deferred financing costs to other expenses. (e) Other Expenses Three Months Ended September 30, 2000 Other expenses were increased by $0.1 million to reflect the reclassification of amortization of deferred financing costs from DD&A. Other expenses were decreased by $0.1 million and $0.3 million to reflect a reclassification to SG&A of certain asbestos-related clean-up costs and costs to sell assets, respectively. Nine Months Ended September 30, 2000 Other expenses were increased by $0.4 million to reflect the reclassification of amortization of deferred financing costs from DD&A. Other expenses were also increased by $0.3 million to reflect a reclassification to SG&A of the gain on sale of the Birmingham ready mix assets. 8 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Other expenses were decreased by $0.3 million and $0.3 million to reflect a reclassification to SG&A of certain asbestos-related clean-up costs and costs to sell assets, respectively. (f) The restated results have been tax effected using a rate of 35% versus 27.3% for the quarter and 31.3% for the nine month period as previously reported. 3. Risk Factors The Company's business is seasonal with peak revenue and profits occurring primarily in the months of April through November. Bad weather conditions during this period could adversely affect operating income and cash flow and could therefore have a disproportionate impact on the Company's results for the full year. Quarterly results have varied significantly in the past and are likely to vary significantly from quarter to quarter in the future. A majority of the Company's revenues are from customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions. In addition, since operations occur in a variety of geographic markets, the Company's business is subject to the economic conditions in each such geographic market. General economic downturns or localized downturns in the regions where the Company has operations, including any downturns in the construction industry, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company's operations are subject to and affected by federal, state and local laws and regulations including such matters as land usage, street and highway usage, noise level and health, safety and environmental matters. In many instances, various permits are required. Although management believes that the Company is in compliance with regulatory requirements, there can be no assurance that the Company will not incur material costs or liabilities in connection with regulatory requirements. Certain of the Company's operations may from time to time involve the use of substances that are classified as toxic or hazardous within the meaning of these laws and regulations. Risk of environmental liability is inherent in the operation of the Company's business. As a result, it is possible that environmental liabilities will have a material adverse effect on the Company in the future. We market our aggregates products to customers in a variety of industries, including public infrastructure, commercial and residential construction contractors; producers of asphaltic concrete, ready-mix concrete, concrete blocks, and concrete pipes; and railroads. A substantial amount of our aggregates is used in publicly funded projects. A decrease or delay in government funding of highway construction and maintenance and other infrastructure projects could reduce our sales and profits. A material rise in the price or a material decrease in the availability of oil could adversely affect operating results. The cost of asphalt is correlated to the price of oil. Any increase in the price of oil might result in the company's customers using less asphalt. A material increase in the price of oil could also lead to higher gasoline costs which could increase the company's operating costs. These increases may not be accepted by customers in the form of higher prices. 9 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. Long-Term Debt A summary of long-term debt is as follows:
September 30, December 31, 2000 1999 ----------- ----------- (dollars in thousands) Prudential Insurance subordinated notes, net of discount of $597 and $664, respectively $ 44,403 $ 44,336 Bank of America term loan A 35,108 39,238 Bank of America term loan B 46,404 46,404 Bank of America revolving loan 70,000 30,000 Notes payable to former shareholders 1,890 4,001 Other 15,920 5,631 ----------- ----------- Total long-term debt 213,725 169,610 Less: Current portion (14,880) (9,298) ----------- ----------- Long-term debt, net of current portion $ 198,845 $ 160,312 =========== ===========
On January 13, 2000, the Company's revolving loan facility was increased from $60 million to $90 million. The revolving loan is to be paid in full by the revolving facility termination date in June 2004. Subsequently, the Company has amended its facility agreements on November 13, 2000. See the "Liquidity and Capital Resources" discussion contained in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. During the first quarter, the Company committed to purchase $14.2 million of plant and equipment originally financed under operating leases thereby converting the obligations to capital leases. This amount, less payments made during the first quarter, is included in the table above under the caption "Other". Depreciation related to these leases is included in depreciation expense. 5. Shareholders' Equity The following Statement of Changes in Shareholders' Equity summarizes the Company's equity transactions between December 31, 1999 and September 30, 2000:
Treasury Stock Notes ----------------------- Common Stock Additional Receivable Shares Total ---------------------- Paid-in from Sale Held in Retained Shareholders' Shares Amount Capital of Stock Treasury Amount Earnings Equity ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (in thousands, except share amounts) BALANCE AT DECEMBER 31, 1999 14,908,222 $ 149 $ 123,648 $ (1,195) 7,629 $ (2) $ 19,913 $ 142,513 Interest on notes receivable -- -- -- (72) -- -- -- (72) Net loss -- -- -- -- -- -- 9,733 9,733 Cash dividends declared -- -- -- -- -- -- (1,341) (1,341) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- BALANCE AT SEPTEMBER 30, 2000, AS PREVIOUSLY REPORTED 14,908,222 149 123,648 (1,267) 7,629 (2) 28,305 150,833 Restatement adjustments -- -- -- -- -- -- (10,033) (10,033) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- BALANCE AT SEPTEMBER 30, 2000 AS RESTATED 14,908,222 $ 149 $ 123,648 $ (1,267) 7,629 $ (2) $ 18,272 $ 140,800 ========== ========== ========== ========== ========== ========== ========== ==========
10 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. Inventories Inventories consist of the following as of: September 30, December 31, 2000 1999 Restated ------------ ------------ (dollars in thousands) Finished products $ 29,611 $ 24,624 Raw materials 1,943 2,341 Supplies and parts 782 551 Fuel 486 541 Less: Allowances (24) (16) ------------ ------------ $ 32,798 $ 28,041 ============ ============ Inventories are pledged as security under various debt agreements. 7. Income Per Share
Three Months Ended September 30, ------------------------------------------------------------------------------------------- 2000 Restated 1999 -------------------------------------------- ------------------------------------------- (in thousands, except share amounts) Per Share Per Share Income Shares Amount Income Shares Amount ------------ ------------ ------------ ------------ ------------ ------------ Income before extraordinary item $ 1,682 $ 8,071 Less: Accretion of preferred stock dividend -- 609 ------------ ------------ Basic income before extraordinary item available for common shareholders 1,682 14,900,593 $ 0.11 7,462 10,804,389 $ 0.69 Effect of dilutive securities 302,051 274,237 ------------ ------------ Dilutive income before extraordinary item available for common shareholders $ 1,682 15,202,644 $ 0.11 $ 7,462 11,078,626 $ 0.67 ============ ============ ============ ============ ============ ============
Nine Months Ended September 30, ------------------------------------------------------------------------------------------- 2000 Restated 1999 -------------------------------------------- ------------------------------------------- (in thousands, except share amounts) Per Share Per Share Income Shares Amount Income Shares Amount ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before extraordinary item $ (300) $ 11,195 Less: Accretion of preferred stock dividend -- 2,814 ------------ ------------ Basic income (loss) before extraordinary item available extraordinary shareholders (300) 14,900,593 $ (0.02) 8,381 7,709,642 $ 1.09 Effect of dilutive securities -- 282,288 ------------ ------------ Dilutive income (loss) before extraordinary item available for common shareholders $ (300) 14,900,593 $ (0.02) $ 8,381 7,991,930 $ 1.05 ============ ============ ============ ============ ============ ============
11 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8. New Accounting Pronouncements In June 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Statement (SFAS) No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment to SFAS No. 133. SFAS Nos. 133 and 138 are required to be adopted for all fiscal years beginning after June 15, 2000. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of SFAS Nos. 133 and 138 will have a significant impact on net earnings or the financial position of the Company. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25" (FIN 44). FIN 44 clarifies the application of APB Opinion No. 25, and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The adoption of FIN 44 is not expected to have a material impact on the Company's consolidated financial statements. The Emerging Issues Task Force issued No. 00-10, Accounting for Shipping and Handing Fees and Costs ("EITF 00-10), which requires that amounts billed to customers related to shipping and handling be classified as revenue and that the related costs should be included in costs of goods sold. The Company previously reported a portion of its shipping revenue as a reduction of shipping costs. The Company adopted EITF 00-10 in the fourth quarter of 2000 and has reflected the impact of this pronouncement in the financial statements for all periods presented herein. The Company reports freight and delivery charges as sales and the related cost of freight and delivery is reported as cost of products sold. Gross profit has not changed from amounts that have been reported prior to the adoption of EITF 00-10. The adoption of this resulted in additional sales and cost of products sold of $3.8 million and $3.0 million, respectively, for the three months ended September 30, 2000 and 1999 and $9.8 million and $7.7 million, respectively, for the nine months ended September 30, 2000 and 1999. 9. Effective Tax Rate The Company uses an effective tax rate based on its best estimate of the tax rate expected to be applicable for the full fiscal year. This estimated rate is applied to the current year-to-date results to determine the interim provision for income taxes. 10. Reclassifications Certain prior-year amounts have been reclassified to conform with the current-year presentation. 11. Commitments and Contingent Liabilities The Company is engaged in certain legal proceedings described in Part II. Item 1. Legal Proceedings of this Quarterly Report on Form 10-Q. While it is not possible to determine with precision the probable outcome or the amount of liability, if any, with respect to these proceedings, in the opinion of management, it is unlikely that the outcome of such litigation will have a material adverse affect on the consolidated financial statements of the Company. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 1999. INTRODUCTION We conduct our operations through the quarrying and distribution of aggregate products in nine states in two regions of the United States, the Mountain states and the Southeast. Our operations have the same general economic characteristics including the nature of the products, production processes, type and class of customers, methods of distribution and governmental regulations. Including the opening of the Pride, Alabama quarry in October 1999, we have started nine major greenfield aggregate production sites serving large metropolitan markets to date. The development of greenfield aggregate production sites includes securing all necessary permits and zoning to ensure that commercially economic quantities of aggregates can be produced. These new sites include both sites which have never been permitted or mined, as well as sites which may have been properly zoned, but were not operating at sufficient volumes to be economically viable. On April 24, 2000, U.S. Aggregates, Inc. sold its ready mix operations in the Birmingham market to Ready Mix USA, Inc., one of the largest producers of ready mix in Alabama. This sale is not expected to have a material impact on the Company's revenues or net income. Terms of the sale include the establishment of a long-term contract for U.S. Aggregates to provide Ready Mix USA with aggregates for its ready mix operations. Also during the second quarter, U.S. Aggregates made significant investments in three of its businesses to expand into new geographical markets in the Southeast, Utah, and Nevada. First, distribution of aggregate products in the Southeast was expanded with the startup of a major distribution yard in Memphis, Tennessee. In addition, three new distribution yards were started in Mississippi and two in the Florida panhandle. We also formed a new subsidiary, Eagle Valley Materials, Inc., to expand our geographical market in the Salt Lake City Wasatch Front area. The new operation is located in Lehi, Utah, adjacent to one of the fastest growing cities in Utah and expects excellent volume growth as a result. Tri-State Testing Laboratories, Inc., a subsidiary of U.S. Aggregates, Inc., opened a new location in Las Vegas, Nevada. Tri-State Testing is an independent testing laboratory for aggregates and asphalt producers with offices in Salt Lake City, Utah County, and St. George, Utah. The new laboratory will enable U.S. Aggregates to benefit from the high growth area of Las Vegas. On September 1, 2000 U.S. Aggregates, Inc. announced that it hired Deutsche Banc Alex. Brown earlier this year to assist the Company in a review of strategic alternatives. Our business is seasonal, with peak sales and profits occurring primarily in the months of April through November. Accordingly, our results of operations for any individual quarter are not necessarily indicative of our results for the full year. RESULTS OF OPERATIONS Third Quarter Ended September 30, 2000 Compared to Third Quarter Ended September 30, 1999 Net sales for the third quarter in 2000 decreased by 4.1% to $93.0 million compared to $97.0 million for the third quarter in 1999. Processed aggregate shipments grew by 7.4% with prices up an average of 5.3%, resulting in $5.3 million increase in sales versus last year during the same period. Asphalt and construction sales decreased 17.8% or $7.3 million. The decrease in demand for asphalt and construction is due to a number of factors, including the effect of rising oil prices and interest rate on delaying commercial and residential paving projects, a curtailment of state paving projects in Utah, as well as delays in the implementation of TEA-21, the Federal highway funding program. Ready mix volumes declined 13.9%, or 4.7% excluding the impact of Birmingham ready mix, which was sold in April 2000, compared to the third quarter in 1999. Gross profit for the quarter decreased $8.8 million to $20.2 million, or 21.7% of net sales, compared with $29.0 million, or 29.9% of net sales, in the third quarter of 1999. The decline in gross margin was primarily due to a 13 reduction in pricing for the Company's asphalt and construction businesses, which was caused by increased competition in the marketplace. In addition, an increase in energy, liquid asphalt and fuel costs negatively affected gross margins in all product lines, resulting in a total cost increase of approximately $4.0 million. The Company was unable to implement price increases sufficient to offset these increases in costs, particularly in the asphalt and ready mix businesses. Higher production costs at the Company's quarries also contributed to the decline in gross margin. Finally, the Company wrote-off approximately $0.8 million of fixed assets due to flash flood damage in its Las Vegas quarry. These cost increases, combined with the decrease in sales, were the primary contributors to the decline in gross profit and gross margin in 2000. Selling, general and administrative expenses were $7.4 million for the third quarter in 2000 versus $7.8 million in 1999. As a percentage of net sales, the selling, general, and administrative expenses were 8.0% in 2000 compared to 8.1% during the same period in 1999. As a result of the investment in our business in 1999 and 2000, depreciation and amortization grew by $0.7 million. Income from operations for the third quarter in 2000 was $8.5 million compared to $17.7 million in 1999, due to the decline in sales and gross margin described above. Net interest expense was $5.2 million for the three months ended September 30, 2000 compared to $4.0 million in 1999 due to higher debt levels and increased interest rates. Other nonoperating expenses, net for the third quarter of 2000 were $0.7 million compared with $0.1 million in income in 1999. Other nonoperating expenses in 2000 comprised primarily of fees and expenses incurred by the company in its review of strategic alternatives for its business. The effective tax rate for the quarter was 35.0% compared to 37.4% in last year's third quarter. The decrease in the Company's effective tax rate was primarily attributable to lower earnings and the resulting impact of differences in book and tax accounting arising from the net permanent benefits associated with depletion allowances for mineral reserves. Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 Net sales for the first nine months in 2000 increased by 1.0% to $231.0 million compared to $228.6 million for the same period in 1999. Processed aggregate shipments grew by 10.1%, with prices up an average of 3.7%, resulting in a $12.2 million increase in sales relative to the same period in 1999. Asphalt and construction sales decreased 8.9% or $6.8 million. Ready mix volumes declined 5.1%; however, excluding the impact of the ready mix operations in Birmingham, which was sold in April 2000, volumes increased by 2.7% compared to last year's first nine months. Gross profit for the first nine months decreased $13.2 million to $50.8 million, or 22.0% of net sales, compared with $64.0 million, or 28.0% of net sales, in the first nine months of 1999. The decline in gross margin was due to several factors, including a reduction in pricing for the Company's asphalt and construction businesses, which was caused by increased competition in the marketplace. In addition, an increase in energy, liquid asphalt and fuel costs negatively affected gross margins in all product lines, resulting in a total cost increase of approximately $7.5 million. Higher production costs at the Company's quarries also contributed to the decline in gross margin. The Company was unable to implement price increases sufficient to offset these increases in costs, particularly in the asphalt and ready mix businesses. Selling, general and administrative expenses were $24.2 million for the first nine months in 2000 compared with $22.7 million in 1999. As a percentage of net sales, the selling, general, and administrative expenses were 10.5% in 2000, compared with 9.9% during the same period in 1999. This increase is primarily attributable to increased selling, general and administrative expenses in the regional operating units where we have added personnel to meet the increased demand for our materials and services. In addition, the company incurred an increase in corporate overhead related to public company expenses, added personnel, higher health insurance expenses, offset in part by a decrease of $0.5 million in bonuses paid to executives in 1999. As a result of the investment in our business in 1999 and 2000, depreciation and amortization grew by $3.1 million. Income from operations for the first nine months in 2000 was $14.2 million compared to $32.0 million in 1999. Net interest expense increased $1.1 million from $12.9 for the first nine months of 1999 to $14.0 million for the same period in 2000, due primarily to higher debt levels and increased interest rates during the year. 14 The effective tax rate for the first nine months was 35.0% compared to 37.4% last year. The decrease in the Company's effective tax rate was primarily attributable to lower earnings and the resulting impact of differences in book and tax accounting arising from the net permanent benefits associated with depletion allowances for mineral reserves. LIQUIDITY AND CAPITAL RESOURCES On November 13, 2000, we agreed to enter into a Fourth Amendment with our existing lenders pursuant to our senior secured credit facility effective September 29, 2000. The facility provides the Company with a $90 million revolving line of credit and a $105 million term loan. The term loan consists of an "A" tranche and a "B" tranche. The term loan A accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 2.00% to 3.50% and the term loan B accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 3.25% to 4.00%. The term loan A matures in March 2004 and the term loan B matures in March 2006. The Revolving facility of $90 million will be automatically and permanently reduced over the next three years and terminates on June 2004. The agreement also amends the following, amongst other matters, minimum interest coverage ratio, minimum fixed charge coverage ratio, maximum leverage ratios, a minimum EBITDA, limitations on capital expenditures and acquisitions, the use of proceeds from the sale of assets, and limitations on the Company's ability to pay dividends. The Company has also similarly agreed to amend its agreements with the holders of our existing senior subordinated notes to parallel the covenants in the Fourth Amendment to our senior secured credit facility. Our $30 million senior subordinated notes interest rate is 12% per annum, which matures in November 2006. Our $15 million senior subordinated notes interest rate is 12% per annum, which matures in November 2008. In addition both senior subordinated notes will accrue interest at a rate per annum of 2%, which is not paid in cash until the maturity of these notes. At September 30, 2000, working capital, exclusive of current maturities of debt and cash items, totaled $45.4 million, an increase of 11.3% compared to the total of $40.8 million at December 31, 1999, and an decrease of 18.3% compared to the total of $55.6 million at June 30, 2000. The change in net working capital was primarily the result of activity associated with the seasonal demand for construction materials. Net cash provided by operating activities for the nine months ended September 30, 2000 was $3.1 million, compared to $4.1 million during the same period last year. Net cash used in investing activities for the nine months ended September 30, 2000 was $30.0 million primarily used for the geographical expansion described in the opening paragraphs on page 11, compared to $40.7 million for the same period in 1999. During the first quarter of 2000, the Company converted $14.2 million of existing operating leases to capital leases. Net cash provided by financing activities was $28.6 million for the nine months ended September 30, 2000 compared to $37.5 million during the same period last year. In January 2000, the revolving portion of our credit facility was increased to $90 million from $60 million. Based on prior performance and current expectations, we expect cash flows from internally generated funds and our access to capital markets will continue to be sufficient to provide the capital resources necessary to fund the operating needs of our existing businesses and cover debt service requirements. On August 18, 1999, the minority owned shares of SRM Holdings Corp. (SRMHC) and Western Aggregates Holding Corp. (WAHC) were converted to 649,363 shares of U.S. Aggregates, Inc.'s common stock. FORWARD LOOKING STATEMENTS Certain matters discussed in this report contain forward-looking statements and information based on management's belief as well as assumptions made by and information currently available to management. Such statements are subject to risks, uncertainties and assumptions including, among other matters, future growth in the construction industry; the ability of U.S. Aggregates, Inc. to complete acquisitions and effective integration of acquired companies operations; and general risks related to the markets in which U.S. Aggregates, Inc. operates. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those projected. Additional information regarding these risk factors and other uncertainties may be found in the Company's filings with the Securities and Exchange Commission. 15 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to certain market risks arising from transactions that are entered into in the normal course of business. All of the Company's borrowings under our floating rate credit facilities are subject to interest rate risk. Borrowings under our syndicated revolving credit facility bear interest, at our option, at either the Eurodollar rate or the ABR rate, plus margin. Each 1.0% increase in the interest rates on the total of our floating rate debt would impact pretax earnings by approximately $1.5 million. The Company does not use interest rate swap contracts to hedge the impact of interest rate fluctuations on certain variable rate debt. 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS An operating subsidiary of the Company has received a notice of violation regarding the removal and disposal of asbestos-containing insulation from two above ground asphalt storage tanks at one of the subsidiary's facilities and is the subject of several related state and federal civil and criminal investigations. The agencies involved include the Federal Environmental Protection Agency, the United States Department of Justice, the Occupational Safety and Health Administration and the Utah Department of Air Quality (DAQ). The site has been fully cleaned up under the supervision and with the approval of the Utah DAQ and costs related to the clean up have been recorded. In order to fully resolve the matter, the Company anticipates entering into settlements with the various governmental entities which will involve the payment of fines and the establishment of certain environmental compliance procedures. From time to time, the Company and our subsidiaries have been involved in various legal proceedings relating to our and our subsidiaries' operations and properties which, except for the proceedings described in the previous paragraph, we believe are routine in nature and incidental to the conduct of our and our subsidiaries' business. Our and our subsidiaries' ultimate legal and financial liability with respect to these matters cannot be estimated with certainty, but we believe, based on our examination of such matters, that none of these proceedings, if determined adversely, would have a material adverse effect on our business, financial condition or results of operations. ITEM 5. OTHER INFORMATION Charles R. Pullin has resigned from the Board of Directors because of ill health effective October 30, 2000. Mr. Pullin, former Chairman of Koppers Company, Inc., has served on the Board since 1994, providing more than forty years of experience with the aggregate business to the Board. Mr. Pullin was elected on October 30 as Director Emeritus to the Board of Directors where he will be able to continue to provide advice, health permitting, but without the right to vote. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NO. DESCRIPTION 3.1* Form of Restated Certificate of Incorporation of the Company (Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit 3.1(vi), filed July 14, 1999) 3.2* Form of Restated By-laws of the Company (Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit 3.2(ii), filed July 14, 1999) * Incorporated by reference to the filing indicated (b) Reports on Form 8-K On September 22, 2000, the Company filed a current report on Form 8-K reporting under item 5 the September 1, 2000 Press Release commenting on the outlook for second half and full year. No other reports on Form 8-K were filed during the three months ended September 30, 2000. All other items specified by Part II of this report are inapplicable and accordingly have been omitted. 17 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. U.S. AGGREGATES, INC. Dated: April 18, 2001 /s/ DANIEL YIH ---------------------------------------- Daniel Yih Vice President, Chief Financial Officer and Treasurer 18 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3.1* Form of Restated Certificate of Incorporation of the Company (Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit 3.1(vi), filed July 14, 1999) 3.2* Form of Restated By-laws of the Company (Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit 3.2(ii), filed July 14, 1999) * Incorporated by reference to the filing indicated 19 -----END PRIVACY-ENHANCED MESSAGE-----