-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nmZd02u8xGmWGeMGZjPcgDdIu6LmcKr47jNaHvt/6HWFpbMaUqb19jmCNnyeAXoR p8yiwGUTklUVUYLpiLrW1g== 0000912057-94-002634.txt : 19940817 0000912057-94-002634.hdr.sgml : 19940817 ACCESSION NUMBER: 0000912057-94-002634 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT GROUP LTD CENTRAL INDEX KEY: 0000041296 STANDARD INDUSTRIAL CLASSIFICATION: 3241 IRS NUMBER: 230622690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04323 FILM NUMBER: 94543368 BUSINESS ADDRESS: STREET 1: HIGHWAY 453 STREET 2: P O BOX 218 CITY: HARLEYVILLE STATE: SC ZIP: 29448 BUSINESS PHONE: 8034967880 MAIL ADDRESS: STREET 1: HIGHWAY 453 PO BOX 218 STREET 2: 856 SOUTH FIGUEROA STREET CITY: HARLEYVILLE STATE: SC ZIP: 29448 FORMER COMPANY: FORMER CONFORMED NAME: GIANT PORTLAND & MASONRY CEMENT CO DATE OF NAME CHANGE: 19850610 FORMER COMPANY: FORMER CONFORMED NAME: GIANT PORTLAND CEMENT CO DATE OF NAME CHANGE: 19770921 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 30,1994 ------------ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - - --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________ to _________________. Commission File Number : 1-4323 ------ GIANT GROUP, LTD. (Exact name of registrant as specified in its charter) Delaware 23-0622690 ------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation) Identification No.) Highway 453, P.O. Box 218, Harleyville, South Carolina 29448 ------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (803) 496-7880 ------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the date of this filing. Common Stock, $.01 Par Value 5,180,000 Shares --------------------------------------------- (Not including 1,786,000 shares held by the Company as treasury shares) Page 1 of 16 Exhibit Index on Page 14 GIANT GROUP, LTD. INDEX PART I FINANCIAL INFORMATION - - ---------------------------- PAGE NO. -------- Item 1. Financial Statements Condensed Consolidated Statements of Operations - Three and Six-Month Periods Ended June 30, 1994 and 1993............ 3 Condensed Consolidated Balance Sheets - June 30, 1994 and December 31, 1993......................................... 4 Condensed Consolidated Statements of Cash Flows - Six- Month Periods Ended June 30, 1994 and 1993.................... 5 Notes to Consolidated Financial Statements.................... 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 9-12 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............................................. 14 Item 6. Exhibits and Reports on Form 8-K.............................. 14 (a)Exhibits................................................... 14 (b)Report on Form 8-K......................................... 14 2
GIANT GROUP, LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS for the three and six-month periods ended June 30, 1994 and 1993 (Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- 1994 1993(1) 1994 1993 (1) ---- ---- ---- ---- Operating revenues: Product sales $23,780,000 $19,881,000 $36,773,000 $31,478,000 Resource recovery services 3,484,000 3,550,000 6,004,000 6,458,000 ----------- ----------- ----------- ----------- Total revenues 27,264,000 23,431,000 42,777,000 37,936,000 Operating costs and expenses: Cost of sales and services 19,848,000 18,361,000 34,374,000 32,407,000 Selling, general and administrative 2,802,000 2,325,000 5,345,000 4,929,000 ----------- ----------- ----------- ----------- Operating income 4,614,000 2,745,000 3,058,000 600,000 Other income (expense): Interest expense (1,417,000) (1,447,000) (2,845,000) (2,824,000) Investment income 135,000 319,000 461,000 750,000 Equity in earnings (loss) of affiliate (490,000) 850,000 (1,340,000) 1,275,000 Gain (loss) on investments (448,000) 108,000 (1,062,000) 483,000 Other, net (205,000) 29,000 (66,000) (42,000) ----------- ----------- ----------- ----------- Income (loss) before taxes 2,189,000 2,604,000 (1,794,000) 242,000 Provision (credit) for income taxes 744,000 885,000 (610,000) 82,000 ----------- ----------- ----------- ----------- Net income (loss) $ 1,445,000 $ 1,719,000 $(1,184,000) $ 160,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Per common share: Primary $ .23 $ .29 $ (.23) $ .03 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Fully diluted $ .22 $ .26 $ * $ * ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common shares: Primary 6,463,000 6,413,000 5,180,000 5,180,000 Fully diluted 8,691,000 8,641,000 * * *Not presented, antidilutive. (1) Reclassified to conform with 1994 presentation.
See accompanying notes to consolidated financial statements. 3
GIANT GROUP, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 1994 1993 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 1,734,000 $ 4,123,000 Marketable securities 13,000 16,945,000 Accounts receivable, less allowance of $1,136,000 in 1994 and $1,123,000 in 1993 for discounts and doubtful accounts 14,969,000 11,375,000 Inventories 13,181,000 13,414,000 Other current assets 1,908,000 1,348,000 ------------ ------------ Total current assets 31,805,000 47,205,000 ------------ ------------ Restricted cash equivalents 1,462,000 - ------------ ------------ Investment in affiliate 42,366,000 43,706,000 ------------ ------------ Property, plant and equipment, at cost 123,409,000 119,961,000 Less accumulated depreciation 70,973,000 67,590,000 ------------ ------------ 52,436,000 52,371,000 ------------ ------------ Deferred charges and other assets 3,318,000 3,463,000 ------------ ------------ Total assets $131,387,000 $146,745,000 ------------ ------------ ------------ ------------ LIABILITIES Current liabilities: Accounts payable $ 5,735,000 $ 6,789,000 Short-term borrowings 5,169,000 16,742,000 Accrued expenses 7,460,000 7,825,000 Current maturities of long-term debt 10,798,000 1,797,000 ------------ ------------ Total current liabilities 29,162,000 33,153,000 Long-term debt, net of current maturities 42,311,000 52,004,000 Accrued pension and postretirement benefits 10,818,000 10,489,000 Deferred income taxes 2,783,000 3,603,000 Other liabilities 30,000 29,000 ------------ ------------ Total liabilities 85,104,000 99,278,000 ------------ ------------ Contingent liabilities (Note 5) SHAREHOLDERS' EQUITY Common stock, $.01 par value; authorized 12,500,000 shares in 1994 and 25,000,000 shares in 1993, issued 6,966,000 shares $ 69,000 $ 69,000 Capital in excess of par value 33,508,000 33,508,000 Retained earnings 30,473,000 31,657,000 ------------ ------------ 64,050,000 65,234,000 Less common stock in treasury; 1,786,000 shares, at cost 15,763,000 15,763,000 Reduction for additional pension liability 2,004,000 2,004,000 ------------ ------------ Total shareholders' equity 46,283,000 47,467,000 ------------ ------------ Total liabilities and shareholders' equity $131,387,000 $146,745,000 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. 4
GIANT GROUP, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the six-month periods ended June 30, 1994 and 1993 (Unaudited) 1994 1993 ---- ---- Operations: Net income (loss)............................ $(1,184,000) $ 160,000 Depreciation and depletion................... 3,771,000 3,701,000 (Gain) loss on investments................... 1,062,000 (483,000) Equity in (earnings) loss of affiliate....... 1,340,000 (1,275,000) Amortization of deferred charges and other... 371,000 317,000 Changes in operating assets and liabilities: Receivables.................................. (3,594,000) (3,206,000) Inventories.................................. 233,000 240,000 Other current assets......................... (422,000) 1,253,000 Accounts payable............................. (447,000) 1,119,000 Accrued expenses............................. (855,000) 157,000 ------------ ----------- Net cash provided by operations.......... 275,000 1,983,000 ------------ ----------- Investing: Sales of marketable securities............... 15,577,000 2,593,000 Purchase of property, plant and equipment.... (4,318,000) (2,821,000) Increase in restricted cash equivalents...... (1,462,000) - ------------ ----------- Net cash provided (used) by investing.... 9,797,000 (228,000) ------------ ----------- Financing: Proceeds from (repayment of) short-term borrowings................................. (11,573,000) 414,000 Repayment of long-term debt.................. (888,000) (859,000) ------------ ----------- Net cash used by financing............... (12,461,000) (445,000) ------------ ----------- Increase (decrease) in cash and cash equivalents................. (2,389,000) 1,310,000 Cash and Cash Equivalents: Beginning of period.......................... 4,123,000 1,064,000 ------------ ----------- End of period................................ $ 1,734,000 $ 2,374,000 ------------ ----------- ------------ ----------- Supplemental Information: Cash (paid) received for: Interest................................ $(2,758,000) $(2,863,000) Income taxes............................ (220,000) 1,503,000
See accompanying notes to consolidated financial statements. 5 GIANT GROUP, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they are condensed and omit disclosures which would substantially duplicate those contained in the most recent annual report to stockholders. The financial statements as of June 30, 1994 and for the interim periods ended June 30, 1994 and 1993 are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Due to the seasonal nature of the Company's business, operating results for the interim period ended June 30, 1994 are not necessarily indicative of the results that may be expected for the full year. The financial information as of December 31, 1993 has been derived from the audited financial statements as of that date. For further information, refer to the financial statements and notes included in the Company's 1993 Annual Report to Shareholders. 2. INVENTORIES
June 30, December 31, 1994 1993 ---- ---- Finished goods $ 2,914,000 $ 2,698,000 In process 886,000 1,512,000 Raw materials 1,040,000 1,026,000 Supplies, repair parts and fuel 8,341,000 8,178,000 ----------- ----------- $13,181,000 $13,414,000 ----------- ----------- ----------- -----------
3. INVESTMENTS IN AFFILIATES Summarized unaudited financial information for Rally's Hamburgers, Inc., the Company's 38% owned affiliate, follows:
Three Months Three Months Ended Ended July 3, 1994 July 4, 1993 ------------ ------------ Revenues $52,103,000 $45,407,000 Operating income 945,000 4,834,000 Net income (loss) (931,000) 2,606,000 Company's share of net income (loss) and amortization of excess purchase cost $ (490,000) $ 850,000 Six Months Six Months Ended Ended July 3, 1994 July 4, 1993 ------------ ------------ Revenues $94,908,000 $82,281,000 Operating income 453,000 7,274,000 Net income (loss) (2,793,000) 4,022,000 Company's share of net income (loss) and amortization of excess purchase cost $(1,340,000) $ 1,275,000
6 GIANT GROUP, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The quoted market value of the Company's investment in Rally's at June 30, 1994 was $27,117,000 and declined to $18,489,000 at July 29, 1994. The Company believes that the decline in the market value of its investment in Rally's is temporary. Accordingly, the Company has not adjusted the carrying value of its investment in Rally's to reflect a decline in value. 4. ACCRUED EXPENSES
June 30, December 31, 1994 1993 ---- ---- Compensation $ 1,481,000 $ 1,500,000 Pension plan contributions 1,674,000 2,069,000 Interest 805,000 789,000 Income taxes 365,000 544,000 Other 3,135,000 2,923,000 ------------ ------------ $ 7,460,000 $ 7,825,000 ------------ ------------ ------------ ------------
5. CONTINGENT LIABILITIES On March 31, 1992, as a result of Keystone's voluntary disclosure to the Pennsylvania Department of Environmental Resources (DER) of possible violations of its waste fuel substitution permits, the DER undertook a preliminary investigation of Keystone's waste fuel substitution rates from 1989 through early 1992. The DER subsequently issued an Order charging Keystone with numerous violations of its air quality permits, relating to alleged burning of hazardous waste fuels in quantities in excess of permit limits and suspending Keystone's permits to burn waste fuels. In addition, the DER referred the matter to the Pennsylvania Attorney General for potential criminal prosecution. In August 1993, the Attorney General of the State of Pennsylvania charged Keystone with one criminal count of altering computer records and one count of falsifying records relating to the burning of hazardous wastes in late 1991 and early 1992. The maximum penalty to Keystone for both counts is a fine of $25,000. There were no allegations or charges by the Attorney General that Keystone violated any environmental laws or that there was any harm to the environment or to anyone's health. Violations of the terms of the permits are additionally subject to civil penalties under the Pennsylvania Air Pollution Control Act and related statutes. Keystone has filed an appeal of the DER Order before the Pennsylvania Environmental Hearing Board. Keystone also filed, and has been granted, a motion for supersedeas to stay the DER Order and reinstate the permits until such time as the appeal can be adjudicated. 7 GIANT GROUP, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Based upon the current status of settlement negotiations with the DER, the Company estimates its potential liabilities relating to settlement of the Order range from $500,000 to $750,000, of which $500,000 has been accrued. The Company intends to vigorously defend itself with respect to the allegations in the Order if it is unable to reach an acceptable alternative resolution of this matter through settlement negotiations with the DER. Based on the current stage of negotiations with the DER, the Company believes that the ultimate outcome of this matter will not have a material effect on the consolidated financial position of the Company or its results of operations, after consideration of the charges incurred or accrued to date. In January 1994, two class action lawsuits were filed on behalf of the shareholders of Rally's Hamburgers, Inc. in the United States District Court, Western District of Kentucky, against Rally's, its controlling shareholders, the Company and Burt Sugarman, Chairman of the Company and former Chairman of Rally's, and certain of Rally's officers and directors. The Complaints allege violations of the Securities Exchange Act of 1934 with respect to Rally's common stock and seek unspecified damages. Management is unable to predict the outcome of this matter at the present time or whether or not certain available insurance coverages will apply. Rally's and the Company are defending themselves vigorously in this matter. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's cement operations are directly related to the construction industry. The regional markets in which the Company operates, the Middle- Atlantic and South-Atlantic regions, are highly cyclical, experiencing peaks and valleys in demand corresponding to regional and national construction cycles. Additionally, the demand for cement is seasonal because construction activity diminishes during the winter months of December, January and February. The seasonal impact can be particularly acute in the Company's Middle-Atlantic market. In addition, the Company performs a substantial portion of its routine annual major maintenance projects during the period of low plant utilization, typically the first quarter of its fiscal year, which results in significant additional expense during this period. The Company believes that the routine annual maintenance performed in the first quarter results in lower maintenance costs throughout the remainder of the year, however, the Company expenses these costs as incurred. Accordingly, the Company has historically experienced its lowest levels of revenue and gross profit during the first quarter and thus the results for the interim period ended June 30, 1994 are not necessarily indicative of the results that may be expected for the full year. The Company derives revenues from the sales of products, primarily cement and construction aggregates, as well as from the provision of resource recovery services. Resource recovery services revenue is primarily derived from third parties that pay the Company to utilize their waste as fuel, which additionally reduces the cost of traditional fossil fuels used in the manufacture of cement. Due to the nature of the Company's operations and the fact that the burning of waste-derived fuels is inseparable from the manufacture of cement, it is impractical to disaggregate the costs of sales and services by revenue classification. RESULTS OF OPERATIONS Operating revenues increased 16.4% to $27,264,000 and 12.8% to $42,777,000 for the three and six-month periods ended June 30, 1994, respectively. Revenues from product sales increased $3,899,000 or 19.6% to $23,780,000 and $5,295,000 or 16.8% to $36,773,000 for the three and six-month periods respectively, as a result of increased shipping volumes and net selling prices of cement. Cement shipping volumes increased 8.7% and 5.7% for the three and six-month periods ended June 30, 1994, respectively, compared to the comparable periods in 1993. Cement shipping volumes in the Company's South-Atlantic markets increased as a result of particularly strong demand in the region, which has resulted in shortages of supply. The Company's shipping volumes in the Middle-Atlantic markets declined in the first quarter of 1994 as a result of the unusually harsh winter. However, the Company's cement shipping volumes in its Middle-Atlantic markets exceeded 1993 levels in the second quarter of 1994 and equalled 1993 levels for the six months ended June 30, 1994. 9 The Company's average selling price per ton of cement increased 12.1% for the quarter and 13.4% for the six-month period ended June 30, 1994, compared to the comparable periods in 1993, as a result of price increases implemented in the second and third quarters of 1993 and in the second quarter of 1994. The Company realized greater price increases in its South-Atlantic markets where demand and the Company's ability to increase prices were particularly strong. Price increases of $5 per ton and $3 per ton were implemented effective April 1, 1994 in the Company's South-Atlantic and Middle-Atlantic markets, respectively. The Company has announced another $5 per ton price increase effective August 1, 1994 in its South-Atlantic market. There can be no assurance, however, that this price increase will be realized. Resource recovery services revenues decreased $66,000 or 1.9% to $3,484,000 for the quarter and $454,000 or 7.0% to $6,004,000 year to date primarily as a result of lower quantities of waste fuels utilized at Giant in 1994 compared to the record levels processed in the first half of 1993, offset somewhat by slightly higher utilization and pricing of waste fuels at Keystone. Pricing for resource recovery services at Giant in 1994 was level with that of 1993. Gross profit increased 46.3% to $7,416,000 for the quarter and 52.0% to $8,403,000 for the six-month period ended June 30, 1994, as a result of higher operating revenues. The Company's gross margins increased from 21.6% and 14.6% in 1993 to 27.2% and 19.6% in 1994 for the three and six-month periods, respectively. In 1994, cost of sales and services increased $1,487,000 or 8.1% for the quarter and $1,967,000 or 6.1% year to date primarily as the result of higher shipping volumes and higher repair and maintenance costs incurred during the 1994 winter overhaul of the Company's plant and equipment. Selling, general and administrative expenses increased $477,000 to $2,802,000 for the quarter and increased $416,000 to $5,345,000 for the six-month period ended June 30, 1994, but declined as a percentage of operating revenues year to date, from 13.0% in 1993 to 12.5% in 1994, as a result of the increase in operating revenues. The expense increase primarily related to increased employee benefit costs and increased bad debt expense. Interest costs decreased $30,000 for the quarter to $1,417,000 and increased $21,000 to $2,845,000 for the six-month period ended June 30, 1994. Margin borrowings of $14,594,000 were repaid in the second quarter of 1994, however the resulting interest savings were partially offset by higher average borrowings and interest rates on the Company's term loan and revolving credit facilities. Investment income for the quarter and year to date decreased $184,000 and $289,000, respectively, as a result of lower average amounts of funds invested compared to the comparable periods in 1993. Declines in the fair market value of the Company's marketable securities in 1994 resulted in losses of $448,000 for the quarter and $1,062,000 year to date. The losses were the result of the general decline in the market value of fixed income securities in 1994, which was due to an increase in prevailing interest rates. 10 Equity in earnings of affiliate decreased from earnings of $850,000 and $1,275,000 in 1993 to a loss of $490,000 and $1,340,000 in 1994 for the three and six-month periods ended June 30, 1994, respectively, as a result of losses incurred by the Company's 38% owned affiliate Rally's Hamburger's, Inc. ("Rally's"). The income tax provisions recorded for the three and six-month periods ended June 30, 1994 and 1993, relate to federal and state income taxes and have been recorded at an estimated annual effective rate of 34%. Net income for the second quarter of 1994 was $1,445,000 as compared to $1,719,000 for the second quarter of 1993. For the six-month period ended June 30, 1994, net loss was $1,184,000 compared to net income of $160,000 for the comparable period in 1993. The decreases in net income for the quarter and six months were a result of the aforementioned marketable securities losses in 1994 and the Company's share of Rally's losses in 1994 compared to its share of income in 1993. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise primarily from the funding of capital expenditures, debt service obligations and working capital needs. The Company has historically met these needs through internal generation of cash and borrowings on revolving credit facilities. The Company's borrowings have historically increased during the first half of the year because of the seasonality of its business and the annual plant maintenance performed in the first quarter. Cash and cash equivalents totalled $1,734,000 at June 30, 1994 compared to $4,123,000 at December 31, 1993. At June 30, 1994 and December 31, 1993 the Company had working capital of $2,643,000 and $14,052,000, with current ratios of 1.1 and 1.4, respectively. The decrease in working capital was primarily due to the current maturity classification of the $8,950,000 14.5% Subordinated Notes, due April 15, 1995. Accounts receivable increased $3,594,000 or 31.6% to $14,969,000 at June 30, 1994 as a result of higher cement revenues in June 1994 compared to December 1993. Inventories decreased $233,000 or 1.7% to $13,181,000 at June 30, 1994. Marketable securities declined $16,932,000 to $13,000 at June 30, 1994 as a result of the Company's sale of all of its marketable debt securities during the first six months of 1994. The proceeds from the sales of marketable securities were used primarily to repay margin loans to brokerage firms. Total current liabilities decreased $3,991,000 or 12.0% to $29,162,000 at June 30, 1994, primarily as a result of the repayment of $11,573,000 of short-term borrowings from stockbrokers and banks, offset by the reclassification to current of the 14.5% Subordinated Notes. 11 Cash provided by operations for the six-month period ended June 30, 1994 was $275,000 compared to $1,983,000 for the comparable 1993 period. The decrease in cash provided by operations was primarily the result of income tax payments of $220,000 in 1994, compared to a refund of $1,503,000 received in 1993, and the reduction of accounts payable and accrued expenses in 1994. Net cash provided (used) by investing activities increased from $228,000 used in 1993 to $9,797,000 provided in 1994 as a result of increased sales of marketable securities in 1994 versus 1993, offset by increased capital additions in 1994. Net cash used by financing activities increased from $445,000 in 1993 to $12,461,000 in 1994 as a result of short-term borrowings repaid during 1994. At June 30, 1994 cash equivalents of $1,462,000, in addition to a substantial portion of the Company's Rally's common stock, were pledged as collateral for loans totalling $10,594,000. At June 30, 1994 the quoted market value of the Company's investment in Rally's common stock was $27,117,000 and declined to $18,489,000 at July 29, 1994. The Company believes that the decline in the market value of its investment in Rally's is temporary. Accordingly, the Company has not adjusted the carrying value of its investment in Rally's to reflect a decline in value. On April 28, 1994, the Company's indirect wholly-owned subsidiary Giant Cement Holding, Inc. filed a registration statement with the Securities and Exchange Commission for an initial public offering of 10,000,000 shares of Giant Cement Holding Common Stock. Giant Cement Holding was formed to hold the cement facilities and resource recovery operations of the Company and to engage in the public offering. Of the shares to be offered, 9,500,000 shares, comprising all of the presently outstanding shares of Giant Cement Holding, will be sold by KCC Delaware Company, a wholly-owned subsidiary of the Company, and 500,000 shares will be sold by Giant Cement Holding. After the offering, GIANT GROUP would have no further interest in the cement business. Should the initial public offering be consummated, the Company intends to utilize a portion of the net proceeds to prepay its $8,950,000 14.5% Subordinated Notes, due April 15, 1995 and its $34,350,000 7% Convertible Subordinated Debentures, due April 15, 2006. The Company intends to refinance the $8,950,000 14.5% Subordinated Notes due April 15, 1995, should they not be repaid as a result of the offering of Giant Cement Holding stock. Exclusive of the refinancing, the Company believes that its existing credit facilities, together with internally generated funds will be sufficient to meet its working capital needs for the foreseeable future. 12 GIANT GROUP, LTD. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS For information regarding environmental proceedings and legal matters, see Note 5 of the Notes to Consolidated Financial Statements elsewhere herein and see Item 3 "Legal Proceedings" as reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1993. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On May 9, 1994, the Company held its 1994 Annual Meeting of Stockholders. (b) Not applicable. (c) The stockholders approved the following matters: (1) A vote was conducted by ballot on the election of directors for the forthcoming year, and the nominees listed below received the vote of the holders of the number of shares of Common Stock as set forth below:
Nominee For Against Abstain ------- --- ------- ------- Burt Sugarman 4,758,471 109,289 93,015 Dean M. Boylan 4,851,486 16,274 0 Edward Brodsky 4,851,239 16,521 247 David Gotterer 4,851,336 16,424 150 Robert L. Jones 4,851,389 16,371 97
(2) Coopers & Lybrand was ratified as the Company's independent auditors for fiscal 1994 (4,809,480 shares for, 53,267 against, 5,013 abstain). (2) An amendment to the Company's Restated Certificate of Incorporation to reduce the authorized Common Stock to 12,500,000 shares, $.01 par value, from 25,000,000 shares, $.01 par value (4,841,634 shares for, 12,285 against 13,841 abstain). 13 ITEM 5. OTHER INFORMATION On April 29, 1994, the Company filed a Form S-1 Registration Statement (File No. 33-78260) with the Securities and Exchange Commission, registering securities for the initial public offering of 100% of the Company's interest in Giant Cement Holding, Inc., a newly-formed wholly owned subsidiary of the Company, which in turn wholly owns Giant Cement Company, Keystone Cement Company and Giant Resource Recovery Company. On July 29, 1994, the Company filed Amendment No. 2 to the Form S-1 Registration Statement with the Securities and Exchange Commission. See Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 11. Earning per share calculations. (b) Reports on Form 8-K During the quarter ended June 30, 1994, the Company did not file any reports on Form 8-K. 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GIANT GROUP, LTD. - Registrant By: /s/ Terry L. Kinder --------------------------------------- Terry L. Kinder Vice President Secretary-Treasurer By: /s/ Bratton Fennell --------------------------------------- Bratton Fennell Principal Accounting Officer Date: August 11, 1994 15 GIANT GROUP, LTD. EARNINGS PER SHARE Exhibit 11
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ---- ---- ---- ---- PRIMARY EARNINGS PER SHARE Net income (loss) $1,445,000 $1,719,000 $(1,184,000) $ 160,000 Add: Interest expense reduction, net of tax (3) 62,000 117,000 - - ----------- ----------- ------------- ----------- $1,507,000 $1,836,000 $(1,184,000) $ 160,000 ----------- ----------- ------------- ----------- ----------- ----------- ------------- ----------- Weighted average number of common shares outstanding (1) ** 6,463,000 6,413,000 5,180,000 5,180,000 Net income (loss) per common share $ .23 $ .29 $ (.23) $ .03 ----------- ----------- ------------ ----------- ----------- ----------- ------------ ----------- FULLY DILUTED EARNINGS PER SHARE Net income (loss) $1,445,000 $1,719,000 $(1,184,000) $ 160,000 Add: Interest expense on subordinated debentures assumed converted, net of tax 396,000 396,000 793,000 793,000 Add: Interest expense reduction, net of tax (3) 62,000 117,000 - - ----------- ----------- ------------- ----------- Net income (loss) for fully diluted shares $1,903,000 $2,232,000 $ (391,000) $ 953,000 ----------- ----------- ------------- ----------- ----------- ----------- ------------- ----------- Fully diluted weighted average number of common shares outstanding (1) (2) ** 8,691,000 8,641,000 7,409,000 7,409,000 Net income (loss) per common share $ .22 $ .26 $ (.05) $ .13 ----------- ----------- ------------- ----------- ----------- ----------- ------------- ----------- (1) Includes incremental common shares issuable upon exercise of outstanding options, if dilutive. (2) Includes common shares issuable upon conversion of the 7% convertible subordinated debentures. (3) Reduction of interest expense, net of tax on the Company's 14 1/2% Subordinated Notes assumed retired with option exercise proceeds in excess of that amount required to retire twenty percent of the Company's outstanding stock. ** Actual common shares outstanding at June 30, 1994 and 1993 were 5,180,000.
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