-----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, LAkbvnO30g5O7TcDVDSNbDgAVHZYz1yG/uZR8azafoCFgX8aAdnc5A1xI8maiHjr e++bsi2sK+O3uGLh0MBwWg== 0000313058-97-000008.txt : 19971113 0000313058-97-000008.hdr.sgml : 19971113 ACCESSION NUMBER: 0000313058-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHDOWN INC CENTRAL INDEX KEY: 0000313058 STANDARD INDUSTRIAL CLASSIFICATION: CEMENT, HYDRAULIC [3241] IRS NUMBER: 720296500 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06117 FILM NUMBER: 97716780 BUSINESS ADDRESS: STREET 1: 1200 SMITH ST STE 2400 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136506200 MAIL ADDRESS: STREET 1: 1200 SMITH STREET SUITE 2400 CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 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 1-6117 SOUTHDOWN, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) LOUISIANA 72-0296500 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1200 SMITH STREET SUITE 2400 HOUSTON, TEXAS 77002 (ADDRESS OF PRINCIPAL (ZIP CODE) EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 650-6200 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 periods 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 At September 30, 1997 there were 23.8 million common shares outstanding. =============================================================================== -1- SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES INDEX PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated Balance Sheet September 30, 1997 and December 31, 1996 1 Statement of Consolidated Earnings Three and nine months ended September 30, 1997 and 1996 2 Statement of Consolidated Cash Flows Nine months ended September 30, 1997 and 1996 3 Statement of Consolidated Revenues and Operating Earnings by Business Segment Three and nine months ended September 30, 1997 and 1996 4 Statement of Shareholders' Equity Nine months ended September 30, 1997 4 Notes to Consolidated Financial Statements 5 Independent Accountants' Review Report 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 18 -2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN MILLIONS) ----------------------------------------- SEPTEMBER 30, DECEMBER 31, 1997 1996 --------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 66.5 $ 45.4 Short-term investments 3.0 11.8 Accounts and notes receivable, less allowance for doubtful accounts of $4.3 and $7.4 93.4 77.3 Inventories (Note 2) 62.2 62.4 Prepaid expenses and other 8.3 13.1 --------------- --------------- Total current assets 233.4 210.0 Property, plant and equipment, less accumulated depreciation, depletion and amortization of $374.0 and $354.2 604.3 588.8 Goodwill 73.3 75.4 Other long-term assets 52.1 57.8 --------------- --------------- $ 963.1 $ 932.0 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 26.7 $ 1.2 Accounts payable and accrued liabilities 88.8 89.0 --------------- --------------- Total current liabilities 115.5 90.2 Long-term debt (Note 3) 137.9 164.4 Deferred income taxes 128.0 120.3 Minority interest in consolidated joint venture 28.5 28.0 Long-term portion of postretirement benefit obligation 68.5 71.7 Other long-term liabilities and deferred credits 16.4 18.1 --------------- --------------- 494.8 492.7 --------------- --------------- Shareholders' equity: Preferred stock redeemable at issuer's option (Note 4) - 86.3 Common stock, $1.25 par value 30.9 27.4 Capital in excess of par value 296.3 213.3 Reinvested earnings 176.3 117.9 Treasury stock, at cost (35.2) (5.6) --------------- --------------- 468.3 439.3 --------------- --------------- $ 963.1 $ 932.0 =============== ===============
-1- SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED EARNINGS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA) ---------------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- --------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenues $ 199.2 $ 189.3 $ 537.8 $ 494.9 ------------ ------------ ------------ ------------ Costs and expenses: Operating 123.9 122.0 347.1 332.5 Depreciation, depletion and amortization 11.3 10.6 34.6 30.8 Selling and marketing 4.3 4.1 12.6 12.0 General and administrative 9.5 7.7 28.0 26.1 Other income, net (5.1) (3.8) (8.5) (4.2) ------------ ------------ ------------ ------------ 143.9 140.6 413.8 397.2 Minority interest in earnings of consolidated joint venture 2.8 2.7 5.3 4.7 ------------ ------------ ------------ ------------ 146.7 143.3 419.1 401.9 ------------ ------------ ------------ ------------ Earnings before interest, income taxes and extraordinary charge 52.5 46.0 118.7 93.0 Interest, net of amounts capitalized (3.8) (4.6) (9.9) (15.8) ------------ ------------ ------------ ------------ Earnings before income taxes and extraordinary charge 48.7 41.4 108.8 77.2 Income tax expense (16.2) (14.0) (37.5) (26.1) ------------ ------------ ------------ ------------ Earnings before extraordinary charge 32.5 27.4 71.3 51.1 Extraordinary charge, net of income taxes - - - (11.4) ------------ ------------ ------------ ------------ Net earnings $ 32.5 $ 27.4 $ 71.3 $ 39.7 ============ ============ ============ ============ Dividends on preferred stock (Note 4) - $ (2.4) $ (2.5) $ (7.3) ============ ============ ============ ============ Earnings (loss) per common share: Primary Earnings before extraordinary charge $ 1.42 $ 1.39 $ 3.10 $ 2.44 Extraordinary charge, net of income taxes - - - (0.63) ------------ ------------ ------------ ------------ $ 1.42 $ 1.39 $ 3.10 $ 1.81 ============ ============ ============ ============ Fully diluted Earnings before extraordinary charge $ 1.34 $ 1.15 $ 2.92 $ 2.14 Extraordinary charge, net of income taxes - - - (0.48) ------------ ------------ ------------ ------------ $ 1.34 $ 1.15 $ 2.92 $ 1.66 ============ ============ ============ ============ Average shares outstanding: Primary 22.9 17.9 22.2 17.9 ============ ============ ============ ============ Fully diluted 24.3 23.9 24.4 23.8 ============ ============ ============ ============
-2- SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN MILLIONS) ------------------------------------ NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------ 1997 1996 ------------- ------------- Operating activities: Earnings before extraordinary charge $ 71.3 $ 51.1 Adjustments to reconcile earnings before extraordinary charge to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 34.6 30.8 Deferred income tax expense 9.5 6.8 Amortization of debt issuance costs 0.6 2.2 Changes in operating assets and liabilities (8.6) 8.1 Other adjustments 3.0 2.4 Net cash used in discontinued operations (0.9) (0.9) ------------- ------------- Net cash provided by operating activities 109.5 100.5 ------------- ------------- Investing activities: Additions to property, plant and equipment (54.5) (32.0) Proceeds from asset sales 4.7 4.6 Purchase of short-term investments (3.0) - Maturity of short-term investments 11.8 - Acquisitions, net of cash acquired - (6.2) Other (1.4) (0.5) ------------- ------------- Net cash used in investing activities (42.4) (34.1) ------------- ------------- Financing activities: Additions to long-term debt - 125.0 Reductions in long-term debt (1.0) (132.3) Purchase of treasury stock (29.6) - Dividends (10.4) (13.4) Distributions to minority interest (4.8) (6.0) Securities issuance costs (0.2) (4.6) Premium on early extinguishment of debt - (11.6) Exercise of warrants to purchase common stock - 6.4 ------------- ------------- Net cash used in financing activities (46.0) (36.5) ------------- ------------- Net increase in cash and cash equivalents 21.1 29.9 Cash and cash equivalents at beginning of period 45.4 7.7 ------------- ------------- Cash and cash equivalents at end of period $ 66.5 $ 37.6 ============= ============= Cash payments for income taxes totaled $14.1 million and $3.4 million in the first nine months of 1997 and 1996, respectively. Interest paid, net of amounts capitalized, was $12.6 million and $16.3 million in the first nine months of 1997 and 1996, respectively.
-3- SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED REVENUES AND OPERATING EARNINGS BY BUSINESS SEGMENT (UNAUDITED)
(IN MILLIONS) -------------------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Contributions to revenues: Cement $ 148.1 $ 140.4 $ 390.8 $ 350.9 Concrete products 65.4 62.0 188.1 180.9 Intersegment sales (14.3) (13.1) (41.1) (36.9) ------------ ------------ ------------ ------------ $ 199.2 $ 189.3 $ 537.8 $ 494.9 ============ ============ ============ ============ Contributions to earnings before interest, income taxes and extraordinary charge: Operating profit Cement $ 52.4 $ 44.3 $ 124.8 $ 97.8 Concrete products 6.0 4.7 11.6 11.0 ------------ ------------ ------------ ------------ 58.4 49.0 136.4 108.8 Corporate overhead (5.9) (3.0) (17.7) (15.8) ------------ ------------ ------------ ------------ $ 52.5 $ 46.0 $ 118.7 $ 93.0 ============ ============ ============ ============
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
(IN MILLIONS) ------------------------------------------------------------------------------------ CAPITAL PREFERRED STOCK COMMON STOCK IN EXCESS REINVESTED TREASURY STOCK OF ------------------- ------------------- ------------------- SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS SHARES AMOUNT -------- --------- -------- --------- --------- ---------- -------- --------- Balance at December 31, 1996 1.7 $ 86.3 21.9 $ 27.4 $ 213.3 $ 117.9 (0.2) $ (5.6) Net earnings - - - - - 71.3 - - Dividends on preferred stock - - - - - (2.5) - - Dividends paid on common stock - - - - - (6.6) - - Purchase of treasury stock - - - - - - (0.7) (29.6) Conversion of Series D Preferred Stock into common stock (1.7) (86.3) 2.6 3.3 83.0 - - - Exercise of stock options - - 0.2 0.2 - (3.8) - - -------- --------- -------- --------- --------- ---------- -------- --------- Balance at September 30, 1997 - - 24.7 $ 30.9 $ 296.3 $ 176.3 (0.9) $ (35.2) ======== ========= ======== ========= ========= ========== ======== =========
-4- SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION: The Consolidated Balance Sheet of Southdown, Inc. and subsidiary companies (the Company) at September 30, 1997 and the Statements of Consolidated Earnings, Consolidated Cash Flows, Consolidated Revenues and Operating Earnings by Business Segment and Shareholders' Equity for the periods indicated herein have been prepared by the Company without audit. The Consolidated Balance Sheet at December 31, 1996 is derived from the December 31, 1996 audited financial statements, but does not include all disclosures required by generally accepted accounting principles. It is assumed that these financial statements will be read in conjunction with the audited financial statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature. The interim statements for the period ended September 30, 1997 are not necessarily indicative of results to be expected for the full year. NOTE 2 - INVENTORIES: (UNAUDITED IN MILLIONS) --------------------------------------- SEPTEMBER 30, DECEMBER 31, 1997 1996 --------------- ---------------- Finished goods $ 13.5 $ 16.9 Work in progress 11.2 9.6 Raw materials 6.4 6.8 Supplies 31.1 29.1 --------------- ---------------- $ 62.2 $ 62.4 =============== ================ Inventories stated on the LIFO method were $26.1 million of total inventories at September 30, 1997 and $26.1 million of total inventories at December 31, 1996 compared with current costs of $34.7 million and $34.7 million, respectively. NOTE 3 - REVOLVING CREDIT FACILITY: On August 6, 1997, the Company amended its $200 million revolving credit facility to (i) extend the maturity to June 30, 2002, (ii) reduce borrowing rates and letter of credit fees, (iii) modify certain financial covenants and other provisions, (iv) delete the limitation on the amount of subordinated debt that the Company may redeem, and (v) increase the amount of capital stock the Company may repurchase. -5- The terms of the Company's revolving credit facility permit the issuance of standby letters of credit up to a maximum of $95 million in lieu of borrowings. The Company's ownership interest in five cement manufacturing facilities and the Company's joint venture interest in Kosmos Cement Company are pledged to secure the facility. At September 30, 1997, there were no borrowings and $52.1 million in letters of credit outstanding under the revolving credit facility, leaving $147.9 million of unused capacity. NOTE 4 - CAPITAL STOCK: COMMON STOCK At September 30, 1997, a total of approximately 24,729,000 shares of common stock were issued and approximately 23,759,000 shares of common stock were outstanding. On November 22, 1996, the Board of Directors approved a common stock repurchase program under which the Company is authorized to repurchase up to 1.5 million shares of the Company's outstanding common stock. As of September 30, 1997, 969,500 shares of common stock had been purchased in open market transactions at a cost of $35.2 million. PREFERRED STOCK REDEEMABLE AT ISSUER'S OPTION Series D Preferred Stock - The Company had approximately 1,725,000 shares of Preferred Stock, $2.875 Cumulative Convertible Series D (Series D Preferred Stock) outstanding at December 31, 1996 and September 30, 1996. Dividends paid on the Series D Preferred Stock were approximately $2.5 million during the nine months ended September 30, 1997. Dividends on the Series D Preferred Stock were approximately $1.2 million and $3.7 million, respectively, during the three and nine month periods ended September 30, 1996. In the third quarter of 1997, all of the outstanding shares of the Series D Preferred Stock were converted into approximately 2.6 million shares of common stock. Had this conversion taken place at the beginning of 1997, primary earnings per share would have been reduced by $0.08 and $0.18, respectively, for the three and nine months ended September 30, 1997. NOTE 5 - CONTINGENCIES: The Company has certain commitments and contingent liabilities incurred in the ordinary course of business including, among other things, being a named defendant in lawsuits related to various matters involving personal injury, contractual indemnifications, environmental remediation, product liability and employment matters. These various commitments and contingent liabilities, in the judgment of management, will not result in losses which would materially affect the Company's consolidated financial position. However, because the Company's results of operations vary considerably with construction activity and other factors, it is at least reasonably possible that future charges for contingencies could, depending on their timing and magnitude, have a material adverse impact on the Company's results of operations in a particular period. See also Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Known Events, Trends and Uncertainties" for a discussion of certain contingencies. -6- NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS: The Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share," (SFAS No. 128) in February 1997. SFAS No. 128, which is effective for periods ending after December 15, 1997, establishes standards for computing and presenting earnings per share (EPS). SFAS No. 128 replaces the presentation of primary EPS previously prescribed by Accounting Principles Board Opinion No. 15 (APB No. 15) with a presentation of basic EPS which is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. SFAS No. 128 also requires dual presentation of basic and diluted EPS. Diluted EPS is computed similarly to fully diluted EPS pursuant to APB No. 15. Proforma basic and diluted EPS for the three and nine months ended September 30, 1997 and 1996, assuming that SFAS No. 128 was effective as of the beginning of the year, are presented below.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ----------- ------------ ----------- ------------ Earnings (loss) per common share: Basic Earnings before extraordinary charge $ 1.44 $ 1.43 $ 3.15 $ 2.52 Extraordinary charge, net of income taxes - - - (0.65) ----------- ------------ ----------- ------------ $ 1.44 $ 1.43 $ 3.15 $ 1.87 =========== ============ =========== ============ Diluted Earnings before extraordinary charge $ 1.34 $ 1.15 $ 2.92 $ 2.15 Extraordinary charge, net of income taxes - - - (0.48) ----------- ------------ ----------- ------------ $ 1.34 $ 1.15 $ 2.92 $ 1.67 =========== ============ =========== ============
Had the conversion of all of the outstanding shares of the Series D Preferred Stock into approximately 2.6 million shares of common stock discussed in Note 4 of Notes to Consolidated Financial Statements occurred at the beginning of 1997, pro forma basic EPS above would have been reduced by $0.08 and $0.28, respectively, for the three and nine months ended September 30, 1997. Pro forma diluted EPS for these two periods would not have changed. In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income," (SFAS No. 130) and Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information," (SFAS No. 131). SFAS No. 130 and SFAS No. 131 are effective for periods beginning after December 15, 1997. SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components. SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in interim and annual financial statements. These two statements will have no effect on the Company's 1997 financial statements, but management is currently evaluating what, if any, additional disclosures may be required when these two statements are adopted in the first quarter of 1998. -7- NOTE 7 - REVIEW BY INDEPENDENT ACCOUNTANTS: The unaudited financial information presented in this report has been reviewed by the Company's independent public accountants. The review was limited in scope and did not constitute an audit of the financial information in accordance with generally accepted auditing standards such as is performed in the year-end audit of financial statements. The report of Deloitte & Touche LLP relating to its limited review of the financial information as of September 30, 1997 and for the nine month periods ended September 30, 1997 and 1996 follows. -8- INDEPENDENT ACCOUNTANTS' REVIEW REPORT TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF SOUTHDOWN, INC. HOUSTON, TEXAS We have reviewed the accompanying consolidated balance sheet of Southdown, Inc. and subsidiary companies as of September 30, 1997, and the related consolidated statements of earnings and cash flows for the nine months ended September 30, 1997 and 1996 and the consolidated statement of shareholders' equity for the nine months ended September 30, 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of the interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Southdown, Inc. and subsidiary companies as of December 31, 1996 and the related consolidated statements of earnings, shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated January 22, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1996 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP Houston, Texas October 22, 1997 -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations included on pages 18 through 29 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 should be read in conjunction with the discussion contained herein. RESULTS OF OPERATIONS CONSOLIDATED THIRD QUARTER EARNINGS Net earnings for the third quarter of 1997 were $32.5 million, $1.34 per share on a fully diluted basis, a 19% increase over the $27.4 million, $1.15 per share for the prior year quarter. Consolidated revenues in the third quarter of 1997 increased 5% over the same period of the prior year, primarily because of improved sales prices in the Cement segment. Third quarter 1997 earnings before interest and income taxes improved $6.5 million over the same quarter of the prior year, primarily reflecting record quarterly earnings achieved by the Cement segment in 1997. Third quarter interest expense for 1997 declined compared with the prior year quarter, reflecting no borrowings under the Company's revolving credit facility in the 1997 period and lower debt issuance costs amortization. CONSOLIDATED YEAR-TO-DATE EARNINGS Net earnings for the nine months ended September 30, 1997 were $71.3 million, $2.92 per share, fully diluted. Net earnings for the prior year period were $39.7 million, $1.66 per share, fully diluted, including an extraordinary charge of $11.4 million, $0.48 per share, reflecting prepayment premium and other costs incurred on the early retirement of 14% senior subordinated notes. A 9% improvement in consolidated revenues resulted from higher sales prices in both the Cement and Concrete Products segments and improved cement sales volumes. The year-over-year improvement in operating results includes a 28% increase in Cement segment earnings, an 5% increase in Concrete Products earnings and a 37% reduction in interest expense. Interest expense in 1997 declined compared with the prior year period, reflecting the refinancing of 14% senior subordinated notes with 10% senior subordinated notes in March 1996 and no borrowings on the Company's revolving credit facility. The effective income tax rate in 1997 increased over the prior year period primarily because of the lessened impact of permanent differences on higher levels of earnings. -10- SEGMENT OPERATING EARNINGS CEMENT THIRD QUARTER - Operating earnings were up 18% compared with the prior year quarter. The period-to-period improvement in the segment was primarily attributable to a weighted average $5.28 per ton improvement in 1997 cement sales prices over the comparable period in the prior year. The higher sales price was the result of price increases implemented during previous months at all locations, particularly in the southern California market area, as well as the expiration at the end of 1996 of a low-priced wholesale supply agreement. Sales volumes decreased slightly for the third quarter of 1997 compared with the 1996 quarter. The volume decrease for the quarter is primarily attributable to constrained shipments from the Victorville, California plant during the July and August, 1997 modernization shutdown of one of the Victorville plant kilns to expand production capacity. The prior year quarter also included significant shipments under the final year of the wholesale supply agreement. Per unit Cement segment operating costs increased slightly in the 1997 period because of regular maintenance costs incurred during the voluntary shutdown at the Victorville plant. The adverse impact of the shutdown at the Victorville plant on cement operations for the 1997 quarter was also mitigated by the favorable impact of several non-recurring gains. YEAR-TO-DATE - Operating earnings for the nine months ended September 30, 1997 were $124.8 million compared with $97.8 million in the prior year period. The Cement segment benefitted from a 4% increase in cement sales volumes and a 7% improvement in the average sales price. Higher sales volumes and sales prices reflected strong demand in most market areas. Management believes the Cement segment will achieve an approximately 3% increase in cement sales volumes for the full year 1997 compared with 1996. Despite a 6% increase in clinker production, unit cost of sales increased slightly compared with the prior year period, primarily because of a 105,000 ton increase in outside purchases of higher cost cement. Sales volumes, average unit price and cost data and unit operating profit margins relating to the Company's cement plant operations appear in the following table:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Tons of cement sold (thousands) 1,927 1,971 5,215 5,003 ========== ========== ========== ========== Weighted average per ton data: Sales price (net of freight) $ 68.27 $ 62.99 $ 66.75 $ 62.28 Cost of sales (1) 41.40 40.75 43.33 42.78 ---------- ---------- ---------- ---------- Margin $ 26.87 $ 22.24 $ 23.42 $ 19.50 ========== ========== ========== ========== - -------------- (1) Includes fixed and variable manufacturing costs, cost of purchased cement, selling expenses, plant general and administrative costs, other plant overhead and miscellaneous costs.
-11- CONCRETE PRODUCTS THIRD QUARTER - Operating earnings for the Concrete Products segment increased $1.3 million in the 1997 period compared with the prior year quarter. Although a 4% improvement was achieved in Florida ready-mixed concrete sales prices, third quarter 1997 operating results were adversely impacted by higher raw material costs and lower earnings from concrete block and other related products. Earnings from the California Concrete Products operation increased because of significantly higher earnings from the aggregate operation which was favorably impacted both by higher sales prices and a 9% improvement in sales volumes. Operating results from the California ready-mixed concrete operation were adversely impacted by higher raw material and strike-related costs. Also included in third quarter 1997 operating earnings for Concrete Products were gains aggregating $2.0 million on sales of surplus real estate, while the prior year quarter included gains of approximately $1.5 million from sales of surplus real estate. YEAR-TO-DATE - Earnings from the Concrete Products segment were essentially flat for the two nine-month periods. Earnings from the Florida Concrete operation declined by 10% in 1997 primarily because of lower earnings from the concrete block operations. Block operations were adversely impacted by higher purchases of concrete block from other producers and lower sales volumes resulting primarily from the loss of a large customer. Earnings from the California Concrete Products operations in 1997 improved over the prior year quarter because of higher aggregate earnings. Earnings from the aggregate operation were favorably impacted by the previously mentioned price increase and higher sales volumes. Despite improved ready-mixed concrete sales prices, operating results from the ready-mixed concrete operation in California declined because of higher raw material and strike-related costs. Also included in the Concrete Products segment year-to-date results are the asset sale gains of $2.6 million and $2.5 million for 1997 and 1996, respectively, including the above mentioned third quarter real estate sales. Sales volumes, unit price and cost data and unit operating margins relating to the Company's sales of ready-mixed concrete appear in the following table:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1997 1996 1997 1996 ----------- ---------- ----------- ---------- Cubic yards of ready-mixed concrete sold (thousands) 953 947 2,783 2,779 =========== ========== =========== ========== Weighted average per cubic yard data: Sales price (net of freight) $ 55.25 $ 53.21 $ 54.82 $ 53.10 Operating costs (1) (2) 54.03 51.62 53.77 51.48 ----------- ---------- ----------- ---------- Margin (3) $ 1.22 $ 1.59 $ 1.05 $ 1.62 =========== ========== =========== ========== - -------------- (1) Includes variable and fixed plant costs, delivery, selling, general and administrative and miscellaneous operating costs. (2) Excludes a $2.0 million and $1.5 million gain, respectively, from the sale of surplus real estate for the three and nine month periods ended September 30, 1997 and 1996. (3) Does not include aggregate, concrete block and other related products which totaled $2.7 million and $1.6 million of operating earnings for the three months periods ended September 30, 1997 and 1996, respectively, and $6.5 million of operating earnings in the year-to-date 1997 period compared with $5.0 million in the 1996 period.
-12- CORPORATE THIRD QUARTER - Corporate overhead expenses for the third quarter of 1997 exceeded those in the third quarter of 1996, primarily because the prior year period included $1.8 million in non-recurring gains and the current year quarter included higher accruals with respect to the Company's performance based bonus plan. Included in corporate overhead is interest income in the third quarter of 1997 of $600,000 compared with $200,000 in the prior year quarter. YEAR-TO-DATE - Corporate overhead expenses for the first nine months of 1997 exceeded the prior year period by $1.9 million, primarily for the same reasons discussed above. Also included in corporate overhead for the first nine months of 1997 is interest income of $1.7 million compared with interest income of $600,000 in the prior year period. LIQUIDITY AND CAPITAL RESOURCES The Company generated $109.5 million in cash provided by operating activities for the nine months ended September 30, 1997, a 9% increase over the comparable period in 1996. The Company has used these 1997 operating cash flows, plus existing cash and short-term investment balances, to fund $54.5 million in capital additions related to several expansion/cost reduction projects in the Cement segment and to repurchase $29.6 million of the Company's common stock, in addition to meeting all working capital requirements and paying $10.4 million of dividends on capital stock. Internally generated cash flow during the first nine months of 1996 were utilized to (i) invest approximately $32 million in property, plant and equipment, (ii) acquire a cement distribution terminal in Phoenix, Arizona, (iii) reduce borrowings outstanding under the revolving credit facility, and (iv) pay dividends on capital stock. In March 1996, the Company realized approximately $122 million in net proceeds from the issuance of $125 million of 10% senior subordinated notes. The net proceeds combined with borrowings under the Company's revolving credit facility were utilized to repurchase $120.2 million of 14% senior subordinated notes and to pay the related prepayment premium and other costs. On August 6, 1997, the Company amended its $200 million revolving credit facility to (i) extend the maturity to June 30, 2002, (ii) reduce borrowing rates and letter of credit fees, (iii) modify certain financial covenants and other provisions, (iv) delete the limitation on the amount of subordinated debt that the Company may redeem, and (v) increase the amount of capital stock the Company may repurchase. At September 30, 1997, there were no borrowings and $52.1 million in letters of credit outstanding under the revolving credit facility, leaving $147.9 million of unused capacity. In the third quarter of 1997, all of the outstanding shares of the Company's Series D Preferred Stock were converted into approximately 2.6 million shares of common stock. Conversion of the Series D Preferred Stock into common stock has improved the Company's annual cash flow by the difference between preferred and common stock dividends of approximately $3.9 million per year. -13- CHANGES IN FINANCIAL CONDITION The change in the financial condition of the Company between December 31, 1996 and September 30, 1997 reflected the utilization of short-term investments and internally generated cash flow during the period to fund capital expenditures, repurchases of common stock, working capital requirements and capital stock dividends. Accounts and notes receivable increased primarily because of the additional sales activity occurring in the summer construction season relative to the winter months. Prepaid expenses and other decreased because of payments made by the Voluntary Employee Beneficiary Association to fund employee health care costs. Current maturities of long-term debt increased because of the reclassification of certain industrial development and pollution control bonds that become due in the first nine months of 1998. The Company is in the process of extending the maturity of $25 million of these industrial development and pollution control bonds, subject to approval of the bondholders. Reissuance of the bonds, expected to be completed in the fourth quarter of 1997, will extend their maturity for fifteen years to the year 2013. KNOWN EVENTS, TRENDS AND UNCERTAINTIES Environmental Matters - The Company is subject to a wide range of federal, state and local laws, regulations and ordinances pertaining to the protection of the environment. These laws regulate water discharges and air emissions, as well as the handling, use and disposal of hazardous and non-hazardous waste materials. These laws also create joint and several liability for the cost of cleaning up or correcting releases to the environment of designated hazardous substances which may, as a result, require the Company to remove or mitigate the environmental effects of the disposal or release of certain substances at the Company's various operating facilities or elsewhere. Industrial operations have been conducted at the Company's cement manufacturing facilities for many years. In the past, the Company disposed of various materials used in its cement manufacturing and concrete products operations in onsite and offsite facilities. Some of these materials, if discarded today, might be classified as hazardous substances. Most manufacturing plants in the industry have typically disposed of cement kiln dust (CKD), a by-product of the cement manufacturing process, in and around their respective plant sites since the inception of cement manufacturing operations. CKD that is infused with water may produce a leachate with an alkalinity high enough to be classified as hazardous and may also leach certain hazardous trace metals present therein. The regulatory status of CKD is governed by the so-called Bevill amendment, enacted as part of the Solid Waste Disposal Act Amendments of 1980. Under the Bevill amendment, CKD, along with several other low hazard, high volume wastes identified by Congress, was excluded from regulation as hazardous waste under the Resource Conservation and Recovery Act (RCRA), Subtitle C, pending completion of a study and recommendations to Congress by the U.S. Environmental Protection Agency (U.S. EPA). Although the U.S. EPA in a 1995 decision determined further regulation of CKD was necessary, the agency stated that it (i) found no evidence of risks associated with the use of cement products and (ii) believes most secondary uses of CKD do not present significant risks to people or the environment. The U.S. EPA has initiated a rulemaking process in order to develop specially tailored CKD management standards. This rulemaking is not expected to require the Company to manage CKD as a RCRA hazardous waste and the Bevill amendment exemption will remain in effect for CKD until issuance of the new CKD management standards. It is estimated that the proposed new standards for CKD will be published in early 1998. A change in the status of CKD may require the cement industry to develop new methods for handling this high volume, low toxicity waste. -14- Several of the Company's previously and currently owned facilities have become the subject of various local, state or federal environmental proceedings and inquiries. Included among these environmental matters are being named a potentially responsible party with regard to Superfund sites, primarily at locations to which the Company is alleged to have shipped materials for disposal. The Company has also voluntarily undertaken the remediation of an inactive CKD site in Ohio and investigation of several other inactive CKD disposal sites in Ohio and elsewhere around the country. While some of these matters have been settled, others are in their preliminary stages and final results may not be determined for years. Based on the information developed to date, the Company has no reason to believe it will be required to spend significant sums in excess of the amounts reflected in the Company's reserves. However, until all environmental studies, investigations, remediation work and negotiations with or litigation against potential sources of recovery have been completed, it is impossible to determine the ultimate cost that might be incurred by the Company to resolve these environmental matters. Amendments to the Clean Air Act in 1990 provided comprehensive federal regulation of various sources of air pollution, and established a new federal operating permit and fee program for virtually all manufacturing operations. The Clean Air Act Amendments may result in increased capital and operational expenses for the Company in the future, the amounts of which are not presently determinable. As mandated by the Clean Air Act, beginning in late 1995, the Company commenced submitting permit applications and paying annual permit fees for its cement manufacturing plants. In addition, the U.S. EPA is developing air toxics regulations for a broad spectrum of industrial sectors, including portland cement manufacturing. U.S. EPA has indicated that the new maximum available control technology standards could require significant reduction of air pollutants below existing levels prevalent in the industry. Management has no reason to believe, however, that these new standards would place the Company at a disadvantage with respect to its competitors. Status of Antidumping Orders - In response to the surge of unfairly priced imports, groups of U.S. industry participants, including the Company, filed antidumping petitions in 1989 against imports from Mexico and, in subsequent years, against imports from certain other countries. Based upon affirmative final determinations of the International Trade Commission and the Department of Commerce (DOC), an antidumping order was imposed against Mexican cement and clinker in 1990 and against Japanese cement and clinker in 1991. In addition, in February 1992, the DOC suspended antidumping and countervailing duty investigations of cement and clinker from Venezuela, based upon (i) the Venezuelan cement producers' agreement to revise their prices to eliminate the dumping of gray portland cement and clinker from Venezuela into the U.S., and (ii) the Venezuelan government's agreement not to subsidize the Venezuelan cement producers. As a result of these orders, importers must make cash deposits to the U.S. Customs Service with each entry of cement or clinker from Mexico or Japan equal to the customs value of the cement times the cash deposit rate applicable to the exporter. In the case of Japan, imports of cement and clinker have declined precipitously since the imposition of antidumping duty cash deposits. Imports from Mexico have continued. The dumping margins and resulting rates of antidumping duty cash deposits are subject to annual review by the DOC. In addition, legislation passed by the U.S. Congress in 1994 requires the initiation of "sunset" reviews of the antidumping orders prior to January 2000 to determine whether these antidumping orders and the Venezuelan suspension agreement should terminate or remain in effect. A substantial reduction or elimination of the existing antidumping duties as a result of the World Trade Organization, North American Free Trade Agreement, currency devaluation or any other reason, -15- or an influx of low-priced cement from countries not subject to antidumping orders, could materially adversely affect the Company's results of operations. The Company, however, is of the opinion an influx of low-priced cement imports from countries not subject to antidumping orders is unlikely given the present circumstances in the U.S. market and the ownership profile of import terminals. U.S. imports of foreign cement once again increased in the mid-1990's as U.S. cement consumption began its recovery. During this recent period of strong demand, however, the prices of cement imports have risen. Unlike the imports during the 1980's, many of the current imports are playing a supplementary rather than a disruptive role. Claims for Indemnification - The Company has been notified by Energy Development Corporation (EDC), the 1989 purchaser of the Company's then oil and gas subsidiary, Pelto Oil Company (Pelto), that EDC was exercising its indemnification rights under the 1989 stock purchase for Pelto with respect to preliminary determinations by the Mineral Management Service (MMS) of the Department of the Interior (DOI) that two separate gas settlement payments made to Pelto prior to its purchase by EDC were royalty bearing. The Company disagrees with MMS' preliminary determinations of royalty underpayment. However, if the determinations as to the payments to Pelto are ultimately upheld, the Company could have liability for royalties, plus late payment charges. Such expenditures would result in a charge to discontinued operations. In a 1996 case in which the Company is not involved, a three judge panel of the U.S. Circuit Court of Appeals for the D.C. Circuit ruled that the DOI impermissibly departed from established agency practices in attempting to collect royalties on a settlement payment and that gas producers cannot be required to pay royalties on payments in settlement of take-or-pay contracts and related contract claims. Recently, in a different case, the U.S. Circuit Court of Appeals for the Sixth Circuit reached a decision which may be contrary and this 1997 case has been appealed to the United States Supreme Court. Final resolution of other cases now pending before the MMS at the administrative hearing level, including that of EDC, may depend upon the final outcome of the appeal of this 1997 case. Discontinued Environmental Services Segment - The Company has both given environmental and other indemnifications to and received environmental and other indemnifications from others for properties previously owned although a few courts have held that indemnification for such environmental liabilities is unenforceable. No estimate of the extent of contamination, remediation cost or recoverability of cost from prior owners, if any, is presently available regarding these discontinued operations. Labor Dispute - Certain employees at the Company's Transit Mixed Concrete Company (Transmix) ready-mixed concrete operations in southern California are represented by Local Union No. 420 (Local No. 420) and certain other Transmix employees are represented by Local Union No. 186 (Local No. 186) of the International Brotherhood of Teamsters. Transmix's collective bargaining agreement with Local No. 420 expired in April 1997. After extensions to the agreement, the Company implemented its "best, last and final" offer on June 30, 1997. The employees represented by Local No. 420 went on strike, however, as of September 30, 1997, all had returned to work or the Company had hired replacement workers. The extension to Transmix's collective bargaining agreement with Local No. 186 expired on July 15, 1997, but the employees represented by Local No. 186 continued to work without an agreement. The Company implemented a portion of its "best, last and final" offer during the third quarter of 1997 and the remainder shortly thereafter. The Transmix employees represented by Local No. 186 have continued to work under these revised terms. Other - The Company has certain other commitments and contingent liabilities incurred in the ordinary course of business including, among other things, being a named defendant in lawsuits related to various matters involving personal injury, contractual indemnifications, environmental remediation, product -16- liability and employment matters. These various commitments and contingent liabilities, in the judgment of management, will not result in losses which would materially affect its consolidated financial position. However, because the Company's results of operations vary considerably with construction activity and other factors, it is at least reasonably possible that future charges for contingencies could, depending on their timing and magnitude, have a material adverse impact on the Company's results of operations in a particular period. Disclosure Regarding Forward Looking Statements - Part I, Item 2 and Part II, Item 1 of this document include forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations, estimates and projections about the general economy and the Company's line of business. Although the Company believes that the expectations reflected in such forward looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Future performance involves certain assumptions, risks and uncertainties and is not guaranteed. Important factors that could cause actual results to differ materially from the Company's expectations, including, among others, foreign and domestic price competition, cost effectiveness, changes in environmental regulation and general economic and market conditions such as interest rates, the availability of capital and the cyclical nature of the construction industry, are disclosed in conjunction with the forward looking statements included herein (Cautionary Disclosures). Subsequent written and oral forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Disclosures. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In the ordinary course of business, the Company may from time-to-time be a named defendant in lawsuits related to various matters including, among others, personal injury, contractual indemnifications, environmental remediation, product liability and employment matters. Based on the information developed to date and advice of outside counsel, the Company is of the opinion the liability related to these lawsuits individually or in the aggregate, if any, will not materially exceed the amounts accrued on the Company's books as of September 30, 1997 and will have no material adverse effect on the consolidated financial position of the Company. However, because the Company's results of operations vary considerably with construction activity and other factors, it is at least reasonably possible that future charges for contingencies could, depending on their timing and magnitude, have a material adverse impact on the Company's results of operations in a particular period. (a) The information appearing under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Known Events, Trends and Uncertainties - Environmental Matters" is incorporated hereunder by reference, pursuant to Rule 12b-23. (b) The Company previously owned two inactive CKD disposal sites in Ohio that were formerly owned by a division of USX Corporation (USX). In late July 1993, a citizens environmental group brought suit in U.S. District Court for the Southern District of Ohio, Western Division (Greene Environmental Coalition, Inc. (GEC) v. Southdown, Inc., Case No. C-3-93-270) alleging the -17- Company is in violation of the Clean Water Act by virtue of the discharge of pollutants in connection with the runoff of stormwater and groundwater from the larger of these two sites (USX Site) and is seeking injunctive relief, unspecified civil penalties and attorney's fees, including expert witness fees (GEC Case). In September 1993, the Company filed a complaint against USX alleging that with respect to the USX Site, USX is a potentially responsible party under CERCLA and, therefore, jointly and severally liable for costs associated with cleanup of the USX Site. (Southdown, Inc. vs. USX Corporation, Case No. C-3-93-354, U.S. District Court, Southern District of Ohio Western Division) (USX Case). In December 1994, GEC agreed to a separate out-of-court settlement which included a cash payment by the Company to GEC and a covenant by the Company not to store, burn or dispose of hazardous wastes at the Ohio cement plant. As a result of the settlement, the GEC Case was stayed pending the completion of a Phase II investigation in the USX Case. On September 30, 1997, the Company sold the property that is the subject of these lawsuits to independent third parties. The property was sold "as is, where is" and the Company assumed no obligations to remediate the property. Because of the transaction, the Company is negotiating a stipulated dismissal of this lawsuit with USX Corporation. Also, since the Company no longer owns this property, the Company believes it should have no ongoing obligation under the Clean Water Act to obtain a permit for the alleged discharge from the property, which is the sole allegation in the GEC Case. The Court has ordered the parties to attend a settlement conference with the Court. A date for this conference has not been established as of this writing. The Company intends to move the Court for a dismissal of the GEC Case based on the recent transaction. (c) In the matter of Jack Blair, et al. vs. Ideal Basic Industries, Inc., United Cement, Lime, Gypsum and Allied Workers International Union, and Dixie Cement Company (Chancery Court of Knox County, Tennessee, No. 03A1-CH-00029), the plaintiffs were fifteen former employees of Ideal Basic Industries, Inc. (Ideal), and the defendants were Ideal, Dixie Cement Company (Dixie) (a subsidiary of Moore McCormack Resources, Inc., which was acquired by the Company in 1988), and the United Cement, Lime, Gypsum and Allied Workers International Union (Union). The Union and Plaintiffs reached a separate settlement agreement in early 1996 and Plaintiffs' claim against the Union has been dismissed. In September 1997, the Company and Plaintiffs reached a final settlement agreement and the Plaintiff's claim against Ideal and Dixie have been dismissed. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 11 Statement of Computation of Per Share Earnings 15 Independent Accountants' Letter re Unaudited Interim Financial Information 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1997. -18- 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. SOUTHDOWN, INC. (Registrant) Date: , 1997 By: JAMES L. PERSKY -------------- ------------------------------- James L. Persky Executive Vice President- Finance & Administration (Principal Financial Officer) Date: , 1997 By: ALLAN KORSAKOV --------------- ------------------------------ Allan Korsakov Corporate Controller (Principal Accounting Officer) -19- EX-11 2 Exhibit 11 - ------------ SOUTHDOWN, INC. AND SUBSIDIARIES STATEMENT OF COMPUTATION OF PER SHARE EARNINGS (In millions, except per share amounts - Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------------------- 1997 1996 1997 1996 ----------- ----------- ---------- ----------- Earnings (loss) for primary earnings per share: Earnings before extraordinary charge and preferred stock dividends $ 32.5 $ 27.4 $ 71.3 $ 51.1 Preferred stock dividends - (2.4) (2.5) (7.3) ------------ ----------- ---------- ----------- Earnings before extraordinary charge 32.5 25.0 68.8 43.8 Extraordinary charge, net of income taxes - - - (11.4) ------------ ----------- ---------- ----------- Net earnings for primary earnings per share $ 32.5 $ 25.0 $ 68.8 $ 32.4 ====+======= =========== ========== =========== Earnings (loss) for fully diluted earnings per share: Earnings before extraordinary charge $ 32.5 $ 27.4 $ 71.3 $ 51.1 Extraordinary charge, net of income taxes - - - (11.4) ------------ ----------- ---------- ----------- Net earnings for fully diluted earnings per share $ 32.5 $ 27.4 $ 71.3 $ 39.7 ============ =========== ========== =========== Average shares outstanding: Common stock 22.6 17.4 21.8 17.3 Common stock equivalents from assumed exercise of stock options and warrants 0.4 0.5 0.4 0.6 ------------ ----------- ---------- ----------- Total for primary earnings per share 23.0 17.9 22.2 17.9 Other potentially dilutive securities: - additional common stock equivalent from assumed conversion of stock options and warrants at ending market price - 0.1 - - - assumed conversion of Series A convertible preferred stock at one-half share of common stock - 1.0 - 1.0 - assumed conversion of Series B convertible preferred stock at 2.5 shares of common stock - 2.3 - 2.3 - assumed conversion of the Series D convertible preferred stock at 1.51 shares of common stock 1.3 2.6 2.2 2.6 ------------ ----------- ---------- ----------- Total for fully diluted earnings per share 24.3 23.9 24.4 23.8 ============ =========== ========== =========== Earnings (loss) per share: Primary Earnings before extraordinary charge $ 1.42 $ 1.39 $ 3.10 $ 2.44 Extraordinary charge, net of income taxes - - - (0.63) ------------ ----------- ---------- ----------- $ 1.42 $ 1.39 $ 3.10 $ 1.81 ============ =========== ========== =========== Fully diluted Earnings before extraordinary charge $ 1.34 $ 1.15 $ 2.92 $ 2.14 Extraordinary charge, net of income taxes - - - (0.48) ------------ ----------- ---------- ----------- $ 1.34 $ 1.15 $ 2.92 $ 1.66 ============ =========== ========== ===========
EX-15 3 EXHIBIT 15 October 22, 1997 Southdown, Inc. 1200 Smith Street, Suite 2400 Houston, Texas 77002 We have made a review, in accordance with the standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Southdown, Inc. and subsidiary companies for the periods ended September 30, 1997 and 1996, as indicated in our report dated October 22, 1997. Because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 is incorporated by reference in Registration Statement No. 33-23328, Registration Statement No. 33-35011, Registration Statement No. 33- 45144, Registration Statement No. 33-26529, Registration Statement No. 33-26523, all on Form S-8, and Registration Statement No. 33-16517 on Form S-3. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1993, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Section 7 and 11 of that Act. DELOITTE & TOUCHE LLP Houston, Texas EX-27 4
5 This schedule contains summary financial information extracted from the Company's consolidated balance sheet as of September 30, 1997 and the related statement of consolidated earnings and is qualified in its entirety by reference to such statements. 1,000,000 9-MOS DEC-31-1997 SEP-30-1997 67 3 98 4 62 233 978 374 963 116 138 31 0 0 437 963 538 538 379 419 0 0 10 109 38 71 0 0 0 71 3.10 2.92
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