-----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, IgepbjdKGz9AWJj9Mhn4Lg0aWDr9buEdN8brwoECAFmu5ltRyUEieGD4bMtKiPBl AL4Ln1mTS/3EBD4aGkQX4Q== /in/edgar/work/20000809/0001054422-00-000018/0001054422-00-000018.txt : 20000921 0001054422-00-000018.hdr.sgml : 20000921 ACCESSION NUMBER: 0001054422-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S AGGREGATES INC CENTRAL INDEX KEY: 0001054422 STANDARD INDUSTRIAL CLASSIFICATION: [1400 ] IRS NUMBER: 570990958 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15217 FILM NUMBER: 689393 BUSINESS ADDRESS: STREET 1: 400 SOUTH EL CAMINO REAL, SUITE 500 CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 6506854880 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 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 July 31, 2000 - ---------------------------- ------------------------------------------- Common stock, $.01 par value 14,900,593 U.S. AGGREGATES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED JUNE 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 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 EXHIBIT INDEX 16 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
U.S. AGGREGATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) JUNE 30, DECEMBER 31, 2000 1999 ------------ -------------- ASSETS (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $ 2,732 $ 4,478 Trade accounts receivable, net 57,380 52,294 Inventories, net 35,727 28,041 Prepaid expenses and other current assets 8,856 7,802 ------------ -------------- Total current assets 104,695 92,615 ------------ -------------- PROPERTY, PLANT AND EQUIPMENT 358,672 325,328 Less: Accumulated depreciation & depletion (37,475) (32,418) ------------ -------------- Net property, plant and equipment 321,197 292,910 ------------ -------------- INTANGIBLE ASSETS, net 22,685 22,308 OTHER ASSETS 10,797 7,095 ------------ -------------- Total assets $ 459,374 $ 414,928 ============ ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES $ 55,653 $ 56,591 LONG-TERM DEBT, net of current portion 200,582 160,312 DEFERRED INCOME TAXES, net 57,195 55,404 OTHER 149 96 ------------ -------------- Total liabilities 313,579 272,403 ------------ -------------- 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 (1,243) (1,195) Treasury stock, at cost (2) (2) Retained earnings 23,231 19,913 ------------ -------------- Total shareholders' equity 145,783 142,513 ------------ -------------- Total liabilities, minority interest and shareholders' equity $ 459,374 $ 414,928 ============ ============== The accompanying notes are an integral part of these statements.
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U.S. AGGREGATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 2000 1999 2000 1999 ------------ ----------- ------------ ----------- (UNAUDITED) (UNAUDITED) NET SALES $ 79,850 $ 77,768 $ 132,856 $ 126,939 COST OF PRODUCTS SOLD 53,183 54,256 93,877 91,966 ------------ ----------- ------------ ----------- Gross profit 26,667 23,512 38,979 34,973 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 7,285 7,685 15,836 14,898 DEPRECIATION, DEPLETION AND AMORTIZATION 4,142 2,409 8,167 5,694 ------------ ----------- ------------ ----------- Income from operations 15,240 13,418 14,976 14,381 OTHER INCOME (EXPENSES): Interest, net (4,468) (4,481) (8,373) (8,841) Other, net (45) (317) (40) (479) ------------ ----------- ------------ ----------- Income before provision for income taxes and minority interest 10,727 8,620 6,563 5,061 PROVISION FOR INCOME TAXES (3,912) (3,194) (2,351) (1,898) ------------ ----------- ------------ ----------- Income before minority Interest 6,815 5,426 4,212 3,163 MINORITY INTEREST - (627) - (39) ------------ ----------- ------------ ----------- Net income $ 6,815 $ 4,799 $ 4,212 $ 3,124 ============ =========== ============ =========== Income per common share - basic Net income available for common shareholders $ 0.46 $ 0.60 $ 0.28 $ 0.15 Weighted average common shares outstanding 14,900,593 6,136,630 14,900,593 6,136,630 Income per common share - diluted Net income available for common shareholders $ 0.45 $ 0.57 $ 0.28 $ 0.14 Weighted average common shares outstanding 15,216,029 6,423,011 15,181,356 6,423,011 The accompanying notes are an integral part of these statements.
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U.S. AGGREGATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share amounts) SIX MONTHS ENDED JUNE 30, -------------------- 2000 1999 --------- --------- (UNAUDITED) NET CASH USED IN OPERATING ACTIVITIES $(11,337) $ (3,571) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (25,524) (24,992) Proceeds from sale of property, plant and equipment 4,836 2,868 --------- --------- Net cash used in investing activities (20,688) (22,124) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (17,364) (17,874) New borrowings 50,500 42,938 Dividends paid (894) - Other (1,963) 8 --------- --------- Net cash provided by financing activities 30,279 25,072 --------- --------- NET DECREASE IN CASH (1,746) (623) CASH, beginning of period 4,478 2,849 --------- --------- CASH, end of period $ 2,732 $ 2,226 ========= ========= DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 9,497 $ 8,457 Taxes 672 732 NONCASH TRANSACTIONS: Accretion of preferred stock dividend - 2,205 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 six months ended June 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. 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 substances 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. 6 3. Long-Term Debt A summary of long-term debt is as follows:
JUNE 30, DECEMBER 31, 2000 1999 ---------- -------------- (dollars in thousands) Prudential Insurance subordinated notes, net of discount of $620 and $664, respectively $ 44,380 $ 44,336 Bank of America term loan A 36,901 39,238 Bank of America term loan B 46,404 46,404 Bank of America revolving loan 68,100 30,000 Notes payable to former shareholders 1,890 4,001 Other 17,303 5,631 ---------- -------------- Total long-term debt 214,978 169,610 Less: Current portion (14,396) (9,298) ---------- -------------- Long-term debt, net of current portion $ 200,582 $ 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. 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". Scheduled lease payments did not change from the original lease terms. Depreciation related to these leases is included in depreciation expense. 4. Shareholders' Equity The following Statement of Changes in Shareholders' Equity summarizes the Company's equity transactions between December 31, 1999 and June 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 - - - (48) - - - (48) Net income - - - - - - 4,212 4,212 Cash dividends declared - - - - - - (894) (894) ---------- ------- -------- ---------- -------- -------- ---------- --------- BALANCE AT JUNE 30, 2000 14,908,222 $ 149 $123,648 $ (1,243) 7,629 $ (2) $ 23,231 $145,783 ========== ======= ======== ========== ======== ======== ========== =========
7 5. Inventories Inventories consist of the following as of:
JUNE 30, DECEMBER 31, 2000 1999 ---------- ------------ (dollars in thousands) Finished products $ 32,181 $ 24,624 Raw materials 2,381 2,341 Supplies and parts 730 551 Fuel 459 541 Less: Allowances (24) (16) ---------- ------------ $ 35,727 $ 28,041 ========== ============
Inventories are pledged as security under various debt agreements. 6. Income Per Share
THREE MONTHS ENDED JUNE 30, --------------------------------------------------------------- 2000 1999 ------------------------------- ------------------------------ (in thousands, except share amounts) PER SHARE PER SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT ------- ---------- ---------- ------- --------- ---------- Net income $ 6,815 $ 4,799 Less: Accretion of preferred stock dividend - 1,116 ------- ------- Basic net income available for common shareholders 6,815 14,900,593 $ 0.46 3,683 6,136,630 $ 0.60 Effect of dilutive securities 315,436 286,381 ---------- --------- Dilutive net income available for common shareholders $ 6,815 15,216,029 $ 0.45 $ 3,683 6,423,011 $ 0.57 ======= ========== ========== ======= ========= ========== SIX MONTHS ENDED JUNE 30, --------------------------------------------------------------- 2000 1999 ------------------------------- ------------------------------ (in thousands, except share amounts) PER SHARE PER SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT ------- ---------- ---------- ------- --------- ---------- Net income $ 4,212 $ 3,124 Less: Accretion of preferred stock dividend - 2,205 ------- ------- Basic net income available for common shareholders 4,212 14,900,593 $ 0.28 919 6,136,630 $ 0.15 Effect of dilutive securities 280,763 286,381 ---------- --------- Dilutive net income available for common shareholders $ 4,212 15,181,356 $ 0.28 $ 919 6,423,011 $ 0.14 ======= ========== ========== ======= ========= ==========
8 7. 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. 8. Effective Tax Rate In accordance with generally accepted accounting principles, 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. 9. Reclassifications Certain prior-year amounts have been reclassified to conform with the current-year presentation. 10. 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. 9 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. Based on our experience, a new aggregate production site's net sales, cash flow and profitability tend to increase over the first five years of operation as production increases and the site matures. 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 Ready Mix, 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. 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 Second Quarter Ended June 30, 2000 Compared to Second Quarter Ended June 30, 1999 Net sales for the second quarter in 2000 increased by 2.7% to $79.9 million compared to $77.8 million for the second quarter in 1999. Processed aggregate shipments grew by 12.8% versus last year during the same period. Volumes for asphalt remained relatively flat while ready mix volumes declined 5.6% compared to the second quarter in 1999. Aggregate prices were up an average of 4% (net of freight to remote distribution yards), asphalt prices rose by 8.5%, due to a favorable product mix, while ready mix prices remained flat compared to last year. The Company sold its ready mix operations in Birmingham, Alabama, and discontinued a portion of its coal hauling business in the Mountain states, both at the beginning of the second quarter in 2000. 10 Gross profit for the quarter increased to $26.7 million, or 33.4% of net sales, compared with $23.5 million, or 30.2% of net sales, in the second quarter of 1999. This increase in gross profit primarily reflects higher prices in aggregates and asphalt, the sale of the Company's lower-margin ready mix business in Birmingham and cost savings achieved by redeploying the fleet of Company owned trucks, which were previously used in coal hauling operations, to the higher margin asphalt and aggregates businesses. The Company's gross profit also benefited from enhanced asphalt plant efficiencies as a result of capital improvements as well as a favorable mix of products. Selling, general and administrative expenses were $7.3 million for the second quarter in 2000 versus $7.7 million in 1999. As a percentage of net sales, the selling, general, and administrative expenses were 9.1% in 2000 compared to 9.9% during the same period in 1999. This decrease is primarily attributable to lower bonuses paid during the second quarter of 2000 versus second quarter 1999. As a result of the investment in our business in 1998 and 1999, depreciation and amortization grew by $1.7 million. Income from operations for the second quarter in 2000 was $15.2 million compared to $13.4 million in 1999. Net interest expense was consistent at $4.5 million for the three months ended June 30, 2000 compared to 1999. The effective tax rate for the quarter was 36.5%, compared to 37.1% from last year's second quarter. Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 Net sales for the first half in 2000 increased by 4.7% to $132.9 million compared to $126.9 million for the first half in 1999. Processed aggregate shipments grew by 12.1% versus last year during the same period. Volumes for asphalt and ready mix remained relatively flat compared to last year's first half. Aggregate prices were up an average of 4.3% (net of freight to remote distribution yards), asphalt prices rose by 7.3%, due to a favorable product mix, while ready mix prices remained flat compared to last year. The Company sold its ready mix operations in Birmingham, Alabama, and discontinued a portion of its coal hauling business in the Mountain states, both at the beginning of the second quarter in 2000. Gross profit for the first half increased to $39.0 million, or 29.3% of net sales, compared with $35.0 million, or 27.5% of net sales, in the first half of 1999. This increase in gross profit primarily reflects higher prices in aggregates and asphalt, the sale of the Company's lower-margin ready mix business in Birmingham and cost savings achieved by redeploying the fleet of Company owned trucks, which were previously used in coal hauling operations, to the higher margin asphalt and aggregates businesses. The Company's gross profit also benefited from enhanced asphalt plant efficiencies as a result of capital improvements as well as a favorable mix of products. Selling, general and administrative expenses were $15.8 million for the first half in 2000 versus $14.9 million in 1999. As a percentage of net sales, the selling, general, and administrative expenses were 11.9% in 2000, in line with 11.7% during the same period in 1999. As a result of the investment in our business in 1998 and 1999, depreciation and amortization grew by $2.5 million. Income from operations for the first half in 2000 was $15.0 million compared to $14.4 million in 1999. Net interest expense was $8.4 million for the six months ended June 30, 2000 compared to $8.8 million during the same period in 1999. This decrease was the result of debt reduction from the use of proceeds from the initial public offering on August 18, 1999 less additional capital investments in the Company. The Company's effective tax rate for the first half was 35.8% compared to 37.5% from last year. The decrease in the Company's effective tax rate was primarily attributable to revised estimates of differences in book and tax accounting arising from the net permanent benefits associated with depletion allowances for mineral reserves. 11 LIQUIDITY AND CAPITAL RESOURCES At June 30, 2000, working capital, exclusive of current maturities of debt and cash items, totaled $60.7 million compared to $40.8 million at December 31, 1999, up 48.6% and compared to $45.0 million at March 31, 2000, up 34.8%. The increase in net working capital was primarily the result of activity associated with the seasonal demand for construction materials. Net cash used in operating activities for the six months ended June 30, 2000 was $11.3 million, compared to $3.6 million used during the same period last year. The increased use of cash was due to the working capital needs caused by increased sales and operating activities to support USAI's growing operations. Net cash used in investing activities for the six months ended June 30, 2000 was $20.7 million primarily used for the geographical expansion described in the opening paragraphs on page 10, compared to $22.1 million for the same period in 1999, which consisted of $25.0 million for the purchase of property, plant, and equipment, offset by proceeds of $2.9 million from the sale of assets. 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 $30.3 million for the six months ended June 30, 2000 compared to $25.1 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, cover debt service requirements, and allow for the payment of dividends. 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. 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. 12 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Shareholders held on May 16, 2000, the shareholders of U.S. Aggregates, Inc.: (1) Elected Edward A. Dougherty, Michael J. Stone and Raymond R. Wingard to the Board of Directors of the Company to terms expiring at the Annual Meeting of Shareholders in the year 2003. The following table sets forth the votes for each director. Votes For Abstain --------- ------- Edward A. Dougherty 13,357,203 277,025 Michael J. Stone 13,357,453 276,775 Raymond R. Wingard 13,367,228 267,000 (2) Ratified the appointment of Arthur Andersen LLP as the Company's independent auditors for the fiscal year ending December 31, 2000. The voting results for this ratification were 13,613,728 - - For; 300 - - Against; and 20,200 - - Abstained. ITEM 5. OTHER INFORMATION 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. 13 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) 27.1 Financial Data Schedule (EDGAR Filing Only) * Incorporated by reference to the filing indicated (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the three months ended June 30, 2000. All other items specified by Part II of this report are inapplicable and accordingly have been omitted. 14 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: August 9, 2000 /s/ Michael J. Stone ----------------------------------------------------- Michael J. Stone Executive Vice President, Chief Financial Officer, Treasurer and Secretary 15 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) 27.1 Financial Data Schedule (EDGAR Filing Only) * Incorporated by reference to the filing indicated 16 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 2,732 0 58,783 1,403 35,727 104,695 358,672 37,475 459,374 55,653 200,582 0 0 149 145,634 459,374 132,856 132,856 93,877 117,880 40 0 8,373 6,563 2,351 4,212 0 0 0 4,212 .28 .28
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