-----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, CL5CwqBDNeYmDsSMSe5qhMR073h0wBCDLYopdlYVSEEZ06hsZbl+JlJFHQCi8MbQ mCDfMro+LxO1xUqdY49wWw== 0000950133-97-002857.txt : 19970814 0000950133-97-002857.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950133-97-002857 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAFARGE CORP CENTRAL INDEX KEY: 0000716783 STANDARD INDUSTRIAL CLASSIFICATION: CEMENT, HYDRAULIC [3241] IRS NUMBER: 581290226 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08584 FILM NUMBER: 97658636 BUSINESS ADDRESS: STREET 1: 11130 SUNRISE VALLEY DR STE 300 CITY: RESTON STATE: VA ZIP: 22091-4329 BUSINESS PHONE: 7032643600 10-Q 1 LAFARGE CORPORATION FORM 10-Q. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 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 0-11936 --------------------------------------------------------- LAFARGE CORPORATION - -------------------------------------------------------------------------------- (Exact name of Company as specified in its charter) MARYLAND 58-1290226 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11130 SUNRISE VALLEY DRIVE, SUITE 300, RESTON, VA 20191-4393 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 703-264-3600 - -------------------------------------------------------------------------------- (Company's telephone number, including area code) Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Outstanding as of Class July 31, 1997 ----------------------------------- ----------------- Common Stock of Lafarge Corporation ($1 par value) 64,623,884 Exchangeable Preference Shares of Lafarge Canada Inc. (no par value) 6,748,065 ---------- Total Common Equity Interests 71,371,949 ==========
Number of pages contained in this report 17 -- Total sequentially numbered pages 17 -- Exhibit index on page 15 -- 1 2 LAFARGE CORPORATION AND SUBSIDIARIES FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 1997 INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Consolidated Statements of Income - Three-Month, Six-Month and Twelve-Month Periods Ended June 30, 1997 and 1996 3 b) Condensed Consolidated Balance Sheets - June 30, 1997, June 30, 1996, and and December 31, 1996 4 c) Condensed Consolidated Statements of Cash Flows - Six-Month and Twelve-Month Periods Ended June 30, 1997 and 1996 5 d) Condensed Consolidated Geographic Information - Three-Month, Six-Month and Twelve-Month Periods Ended June 30, 1997 and 1996 6 e) Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 6(a). Exhibits 15 Item 6(b). Reports on Form 8-K 15 SIGNATURE 16
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LAFARGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------------------------- -------------------------------------- 1997 1996 1997 1996 ----------------- ----------------- ----------------- ----------------- NET SALES $ 476,911 $ 420,948 $ 720,945 $ 624,660 ----------------- ----------------- ----------------- ----------------- COST AND EXPENSES Cost of goods sold 333,771 307,395 589,094 530,888 Selling and administrative 40,666 38,654 78,122 74,449 Other expense, net 1,111 1,839 5,003 4,696 ----------------- ----------------- ----------------- ----------------- Total income from operations 101,363 73,060 48,726 14,627 Interest expense 5,431 6,157 10,990 12,072 Interest income (1,877) (2,602) (4,794) (5,266) ----------------- ----------------- ----------------- ----------------- PRE-TAX INCOME 97,809 69,505 42,530 7,821 Income tax expense (37,945) (26,240) (16,787) (2,751) ----------------- ----------------- ----------------- ----------------- NET INCOME $ 59,864 $ 43,265 $ 25,743 $ 5,070 ================= ================= ================= ================= NET INCOME PER COMMON EQUITY SHARE-PRIMARY $ .84 $ .62 $ .36 $ .07 ================= ================= ================= ================= NET INCOME PER COMMON EQUITY SHARE-ASSUMING FULL DILUTION $ .84 $ .59 $ .36 $ .07 ================= ================= ================= ================= DIVIDENDS PER COMMON EQUITY SHARE $ .100 $ .100 $ .200 $ .200 ================= ================= ================= ================= Weighted average number of common equity shares and equivalents outstanding 71,469 70,090 71,240 69,848 ================= ================= ================= ================= TWELVE MONTHS ENDED JUNE 30 -------------------------------------- 1997 1996 ----------------- ----------------- NET SALES $ 1,745,565 $ 1,504,010 ----------------- ----------------- COST AND EXPENSES Cost of goods sold 1,310,092 1,174,021 Selling and administrative 155,115 143,665 Other expense, net 9,881 3,762 ----------------- ----------------- Total income from operations 270,477 182,562 Interest expense 23,036 25,417 Interest income (9,596) (11,820) ----------------- ----------------- PRE-TAX INCOME 257,037 168,965 Income tax expense (95,498) (41,947) ----------------- ----------------- NET INCOME $ 161,539 $ 127,018 ================= ================= NET INCOME PER COMMON EQUITY SHARE-PRIMARY $ 2.28 $ 1.83 ================= ================= NET INCOME PER COMMON EQUITY SHARE-ASSUMING FULL DILUTION $ 2.23 $ 1.77 ================= ================= DIVIDENDS PER COMMON EQUITY SHARE $ .400 $ .400 ================= ================= Weighted average number of common equity shares and equivalents outstanding 70,849 69,576 ================= =================
See Notes to Condensed Consolidated Financial Statements. 3 4 LAFARGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED AND IN THOUSANDS)
JUNE 30 JUNE 30 DECEMBER 31 1997 1996 1996 -------------------- -------------------- -------------------- ASSETS Cash and cash equivalents $ 112,904 $ 67,501 $ 116,847 Short-term investments 48,006 50,603 92,496 Receivables, net 344,298 321,672 287,692 Inventories 216,643 218,345 205,804 Other current assets 39,459 37,293 29,391 -------------------- -------------------- -------------------- Total current assets 761,310 695,414 732,230 Property, plant and equipment, (less accumulated depreciation and depletion of $1,055,985, $1,007,658 and $1,025,533) 886,018 831,197 867,723 Excess of cost over net assets of businesses acquired, net 29,753 21,911 31,657 Other assets 178,689 170,262 181,369 -------------------- -------------------- -------------------- TOTAL ASSETS $ 1,855,770 $ 1,718,784 $ 1,812,979 ==================== ==================== ==================== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 221,251 $ 239,829 $ 214,393 Income taxes payable 17,155 12,101 28,151 Short-term borrowings and current portion of long-term debt 47,650 20,711 44,821 Short-term borrowings from related party 85,000 - 50,000 -------------------- -------------------- -------------------- Total current liabilities 371,056 272,641 337,365 Long-term debt 149,095 263,282 161,934 Deferred income tax 51,586 45,950 48,709 Other postretirement benefits 126,245 124,724 124,867 Other long-term liabilities 28,354 29,211 29,565 -------------------- -------------------- -------------------- Total liabilities 726,336 735,808 702,440 -------------------- -------------------- -------------------- Common equity interests Common shares 64,322 61,747 62,590 Exchangeable shares 47,201 55,737 53,817 Additional paid-in-capital 633,993 605,389 615,993 Retained earnings 453,039 319,744 441,481 Foreign currency translation adjustments (69,121) (59,641) (63,342) -------------------- -------------------- -------------------- Total shareholders' equity 1,129,434 982,976 1,110,539 -------------------- -------------------- -------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,855,770 $ 1,718,784 $ 1,812,979 ==================== ==================== ====================
See Notes to Condensed Consolidated Financial Statements. 4 5 LAFARGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED AND IN THOUSANDS)
SIX MONTHS TWELVE MONTHS ENDED JUNE 30 ENDED JUNE 30 ---------------------------------------- ----------------------------------------- 1997 1996 1997 1996 ------------------ ---------------- ---------------- ------------------ CASH FLOWS FROM OPERATIONS Net Income $ 25,743 $ 5,070 $ 161,539 $ 127,018 Adjustments to reconcile net income to net cash provided by operations: Depreciation, depletion and amortization 54,409 50,206 104,710 97,643 Provision for doubtful accounts 1,467 944 778 196 (Gain) loss on sale of assets (3,821) 11 (7,917) (4,698) Other postretirement benefits 1,510 1,229 1,737 1,770 Other non-cash charges and credits, net 5,786 (3,018) 15,683 (26,339) Changes in working capital (88,165) (91,904) (34,108) (35,734) ------------------ ---------------- ---------------- ------------------ Net cash provided (consumed) by operations (3,071) (37,462) 242,422 159,856 ------------------ ---------------- ---------------- ------------------ CASH FLOWS FROM INVESTING Capital expenditures (72,599) (66,068) (131,321) (126,846) Acquisitions (4,267) (8,593) (79,158) (14,463) Short-term investments 44,490 33,913 2,597 (50,603) Proceeds from property, plant and equipment dispositions 10,941 13,009 27,058 23,179 Other (1,782) 1,345 (3,330) 7,784 ------------------ ---------------- ---------------- ------------------ Net cash used for investing (23,217) (26,394) (184,154) (160,949) ------------------ ---------------- ---------------- ------------------ CASH FLOWS FROM FINANCING Net increase (decrease) in long-term borrowings (includes current portion) 24,997 (1,756) (4,418) (19,310) Issuance of equity securities 7,829 2,689 9,341 4,091 Dividends, net of reinvestments (8,898) (6,122) (14,941) (11,552) ------------------ ---------------- ---------------- ------------------ Net cash provided (consumed) by financing 23,928 (5,189) (10,018) (26,771) ------------------ ---------------- ---------------- ------------------ Effect of exchange rate changes (1,583) 111 (2,847) 921 ------------------ ---------------- ---------------- ------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,943) (68,934) 45,403 (26,943) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 116,847 136,435 67,501 94,444 ------------------ ---------------- ---------------- ------------------ CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 112,904 $ 67,501 $ 112,904 $ 67,501 ================== ================ ================ ==================
See Notes to Condensed Consolidated Financial Statements. 5 6 LAFARGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED GEOGRAPHIC INFORMATION (UNAUDITED AND IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30 JUNE 30 JUNE 30 ------------------------------ ------------------------------ -------------------------------- 1997 1996 1997 1996 1997 1996 ------------- ------------- ------------- ------------- -------------- -------------- NET SALES Canada $ 186,704 $ 164,924 $ 278,044 $ 244,661 $ 739,815 $ 652,036 United States 290,207 256,024 442,901 379,999 1,005,750 851,974 ------------- ------------- ------------- ------------- -------------- -------------- TOTAL NET SALES $ 476,911 $ 420,948 $ 720,945 $ 624,660 1,745,565 $ 1,504,010 ============= ============= ============= ============= ============== ============== INCOME (LOSS) FROM OPERATIONS (See Note 6) Canada $ 38,189 $ 24,518 $ 7,930 $ (7,255) $ 119,898 $ 68,791 United States 63,174 48,542 40,796 21,882 150,579 113,771 ------------- ------------- ------------- ------------- -------------- -------------- TOTAL INCOME FROM OPERATIONS 101,363 73,060 48,726 14,627 270,477 182,562 Interest expense, net (3,554) (3,555) (6,196) (6,806) (13,440) (13,597) ------------- ------------- ------------- ------------- -------------- -------------- PRE-TAX INCOME $ 97,809 $ 69,505 $ 42,530 $ 7,821 $ 257,037 $ 168,965 ============= ============= ============= ============= ============== ==============
See Notes to Condensed Consolidated Financial Statements. 6 7 LAFARGE CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 1. The Company is engaged in the production and sale of cement, ready-mixed concrete, other concrete products, asphalt, gypsum wallboard and related products, and aggregates. The Company operates in the U.S. and, through its major operating subsidiary, Lafarge Canada Inc. ("LCI"), in Canada. The Company's wholly-owned subsidiary, Systech Environmental Corporation, supplies cement plants with substitute fuels and raw materials. Lafarge S.A., a French corporation, and certain of its affiliates own a majority of the Company's outstanding voting securities. 2. The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures made are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 1996 Annual Report on Form 10-K. 3. Because of seasonal, weather-related conditions in most of the Company's marketing areas, earnings of any one quarter should not be considered as indicative of results to be expected for a full fiscal year or any other interim period. 4. Substantially all U.S. inventories other than maintenance and operating supplies are costed using the last-in, first-out ("LIFO") method and all other inventories are valued at average cost. At June 30, 1997 and 1996, and at December 31, 1996, inventories consisted of the following (in thousands):
June 30 June 30 December 31 1997 1996 1996 -------------- ---------------- --------------- Finished products $ 103,224 $ 101,980 $ 100,900 Work in process 22,040 27,137 13,711 Raw materials and fuel 47,690 47,891 45,550 Maintenance and operating supplies 43,689 41,337 45,643 -------------- ---------------- --------------- Total inventories $ 216,643 $ 218,345 $ 205,804 ============== ================= ===============
7 8 5. Cash paid during the period for interest and taxes is as follows (in thousands):
Six Months Twelve Months Ended June 30 Ended June 30 -------------------------- ----------------------------- 1997 1996 1997 1996 --------- --------- ---------- ----------- Interest $ 10,866 $ 12,149 $ 26,360 $ 27,641 Income Taxes (net of refunds) 22,016 26,376 70,043 69,803
6. During the third quarter of 1996, the Company recorded a U.S. $13.7 million adjustment for the year 1995 based upon a 1995 agreement reached with Revenue Canada Taxation related to the pricing of certain cement sales between its operations in Canada and the U.S. The impact of this agreement was immaterial to consolidated net income. The 1996 amounts shown as income from operations for Canada and the United States in the condensed consolidated geographic information exclude this adjustment. 7. As discussed in its 1996 Annual Report on Form 10-K, LCI is a defendant in lawsuits in Canada arising from claims regarding alleged defective fly ash and cement. The amount of LCI's liability, if any, is uncertain. LCI has denied liability and is defending the lawsuits vigorously. LCI believes that it has substantial insurance coverage that will respond to defense expenses and liability, if any, in the lawsuits. Also, the Company, among others, has been named in two lawsuits in Texas alleging exposure to toxic substances. The amount of liability, if any, to the Company is uncertain. The Company filed general denials to both suits and is vigorously defending the lawsuits. Finally, the Company has been notified by the Environmental Protection Agency that it is one of several potentially responsible parties for clean-up costs at certain waste disposal sites. When the Company determines that it is probable that a liability for environmental matters or other legal actions has been incurred, an estimate of the required remediation costs is recorded as a liability in the financial statements. In addition, the Company is involved in certain other legal actions and claims. It is the opinion of management that all legal and environmental matters will be resolved without material effect on the Company's consolidated financial statements. 8. In the third quarter of 1995, the U.S. tax provision was decreased by $23.3 million due to the reduction of a valuation allowance on deferred tax assets which had been recorded in 1992. The reduction resulted from the favorable long-term outlook of the U.S. cement market, three consecutive years of taxable income in the U.S. and management's projections of future taxable income in the U.S. 8 9 9. On April 29, 1997, the Company signed a letter of intent with Laidlaw Inc. to acquire its subsidiary, JTM Industries Inc. of Kennesaw, Georgia. On July 24, 1997, the Company announced that discussions with Laidlaw Inc. regarding the possible acquisition of JTM Industries Inc. had been terminated. 10. During the first quarter of 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128") was issued. This new standard, which the Company must adopt after December 15, 1997 for the year ended December 31, 1997, replaces primary EPS with basic EPS and fully diluted EPS will be called diluted EPS. Computed pursuant to SFAS No. 128, basic and diluted EPS for the twelve months ended June 30, 1997 would have increased by $.02 and $.01 to $2.30 and $2.24, respectively, over reported primary and fully diluted EPS for this period. There would be no changes to the other earnings per share information presented on the income statement. 11. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (which included only normal recurring adjustments except as discussed in Note 8) necessary to present fairly the Company's financial position as of the applicable dates and the results of its operations and its cash flows for the interim periods presented. 9 10 LAFARGE CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 The Company's net income of $59.9 million in 1997 compares with $43.3 million for the same period in 1996. Net income per common equity share was $0.84 compared with $0.62. The increase in earnings was mainly due to strong product shipments in the Company's cement and construction materials product lines coupled with price improvements. In addition, benefiting from strong demand for gypsum wallboard and favorable pricing, the Company's two Gypsum wallboard plants that were acquired in September 1996 generated an operating profit of $3.7 million. Canadian net income of $23.5 million was $7.5 million better than 1996. In the U.S., net income of $36.4 million was $9.1 million better. The Company's net sales of $476.9 million were 13 percent higher than the $420.9 million reached in 1996. Both Canadian and U.S. net sales were 13 percent higher. The improvement is due to higher product shipments and higher cement and ready-mixed concrete prices. In addition, gypsum wallboard operations added $22.4 million of sales in the U.S. Cement shipments reflect a 3 percent increase. Ready-mixed concrete and aggregate volumes rose 9 percent and 7 percent, respectively. Second quarter earnings from the Company's cement operations were $87.1 million, $15.6 million better than last year. The improvement is due to the increase in shipments and 4 percent higher net reals (delivered price per ton to customer less freight). Net sales were 7 percent higher reflecting the rise in shipments and prices. Despite the sales increase, cost of sales per ton remained at the 1996 level. Earnings from Canadian cement operations were $29.4 million, $6.4 million better than 1996. Shipments were 7 percent higher with increases of 25 percent in Ontario and 44 percent in Alberta compensating for weak market conditions in Quebec and lower shipments in the Canadian Maritimes due to the completion of the Confederation Bridge project. Net reals (excluding exchange rate fluctuation) were 4 percent and net sales were 13 percent higher. Clinker capacity utilization at Canadian plants rose to 85 percent in 1997 from 75 percent in 1996 primarily due to higher demand and the planned extension of kiln shutdowns in 1996 at four plants because of high inventory levels at December 31, 1995. In the U.S., earnings of $57.7 million were $9.2 million better than 1996. Higher cement prices (3 percent) and an increase in shipments (2 percent) drove the improvement. Net sales rose 4 percent. Clinker capacity utilization at U.S. plants was 100 percent in 1997 10 11 compared to 90 percent in 1996. The improvement is mainly due to higher production at the Davenport plant (operational problems in 1996) and Whitehall (higher demand) plant. Earnings from the Company's construction materials and waste management operations were $23.5 million, $9.4 million better than 1996. The improvement was due mainly to higher shipments and ready-mixed concrete prices. Net sales were 9 percent higher than a year ago. Aggregate cost per tonne decreased from 1996 due to continued cost containment efforts, the sale of non-strategic assets in mid-1996 in the U.S. and higher shipments. In Canada, earnings were $12.0 million, $6.5 million better than last year, primarily due to an increase in ready-mixed concrete and aggregate shipments, and higher ready-mixed concrete prices in western Canada. Net sales were 12 percent higher. Ready-mixed concrete and aggregate shipments improved 14 percent and 9 percent as demand rose sharply in Ontario and the western provinces, more than offsetting a drop in shipments to the Confederation Bridge project in the Canadian Maritimes and lower shipments in Quebec. Improvements from higher volumes and prices were somewhat reduced by higher material and operating costs in western Canada. In the U.S., earnings were $11.5 million, $2.9 million better than a year ago mostly due to a 6 percent escalation in ready-mixed concrete prices. Net sales improved 4 percent. Ready-mixed concrete cost per cubic meter (M3) declined mainly due to restructuring of operations in St. Louis in 1996 to strengthen the competitive position in the market and continued cost containment. Due to adverse weather conditions in some U.S. markets, ready-mixed concrete and aggregate volumes were a modest 2 percent higher. Income tax expense was $37.9 million, $11.7 million greater than 1996. The increase is primarily due to higher earnings. The Company's effective income tax rate was 38.8 percent in 1997 and 37.8 percent in 1996. SIX MONTHS ENDED JUNE 30, 1997 The Company's net income of $25.7 million, or $0.36 per common equity share compares with net income of $5.1 million, or $0.07 per share for the first six months of 1996. Historically, the Company's first quarter sales and operating results are negatively impacted by seasonal weather conditions which reduce construction activity. In addition, a substantial portion of the year's major maintenance projects are performed during this period of low plant utilization with the associated costs being charged to expense as incurred. The earnings improvement resulted from higher shipments in all main product lines (cement, ready-mixed concrete and aggregates), and 4 percent increases in cement net reals and ready-mixed concrete prices. Additionally, gypsum wallboard operations earned $6.6 million. These improvements were partly offset by higher cement plant costs and higher material costs in the construction materials operations. In Canada, net income was $6.2 million, $8.5 million better than 1996. U.S. net income of $19.5 million was $12.1 million higher. Net sales were $720.9 million, a 15 percent increase over $624.7 million in 1996. Cement shipments were 4 percent higher. Ready-mixed concrete and aggregate volumes 11 12 improved by 10 percent. Canadian net sales of $278.0 million were 14 percent above 1996. U.S. net sales improved by 17 percent. Earnings from the Company's cement operations were $63.4 million, $19 million better than last year due to higher shipments and prices somewhat offset by higher plant costs. Net sales climbed 8 percent. Earnings from Canadian operations of $22.4 million were $10.4 million better than 1996. Net reals and cement shipments were 4 percent and 8 percent higher which boosted net sales by 13 percent. In eastern Canada, higher shipments in Ontario were offset by declines in Quebec (weak economic conditions) and in the Atlantic due to higher shipments in 1996 to the Confederation Bridge project. Shipments in the west were substantially higher in the Prairie provinces due to the improvement in market conditions. In the U.S., earnings were $41 million, $8.6 million higher than 1996. The improvement was due to 3 percent increases in shipments and net reals partly offset by higher plant costs. The Company's construction materials and waste management operations earned $2.9 million, $10.1 million better than 1996. Net sales were 9 percent higher. In Canada, earnings were $5.9 million better. Net sales were 13 percent greater reflecting a 14 percent increase in both ready-mixed concrete and aggregate volumes. In eastern Canada, gains in Ontario were partly offset by a slow Quebec economy and lower shipments in the Canadian Maritimes. Earnings in the west were up because of higher demand somewhat offset by higher material costs. Aggregate cost per tonne declined due to continued containment efforts and higher shipments. The U.S. results were $8.7 million, $4.2 million better mainly due to a 5 percent escalation in ready-mixed concrete prices and lower operating costs. Net sales were up 3 percent. Ready-mixed concrete and aggregate volumes were 2 percent and 3 percent higher. Ready-mixed concrete operating costs per M3 decreased primarily due to the restructuring of some operations coupled with higher shipments. Aggregate cost per tonne was lower mainly due to the sale of non-strategic assets in 1996 and cost containment. TWELVE MONTHS ENDED JUNE 30, 1997 During the third quarter of 1996, the Company recorded a U.S. $13.7 million adjustment for the year 1995 based upon a 1995 agreement reached with Revenue Canada Taxation related to the pricing of certain cement sales between its operations in Canada and the U.S. The impact of this agreement was immaterial to consolidated net income. Management's Discussion and Analysis that follows excludes the impact of this agreement. The Company's net income of $161.5 million in 1997 was $34.5 million better than the same period ended June 30, 1996. Net sales improved by 16 percent primarily due to higher product shipments and greater cement net reals, as well as earnings from the gypsum wallboard acquisition in the U.S. Canadian net sales were 13 percent higher while U.S. net sales rose 18 percent. Cement net reals escalated 4 percent in Canada and 3 percent in the U.S. Cement sales volumes improved by 11 percent in Canada and 7 12 13 percent in the U.S. Ready-mixed concrete and aggregate volumes in Canada grew 22 percent and 8 percent, respectively. This growth reflects improved economic activity, particularly in Ontario, coupled with the impact of acquisitions in western Canada. In the U.S., ready-mixed concrete and aggregates volumes were 21 percent and 10 percent higher and ready-mixed concrete prices were 3 percent higher. Selling and administrative expenses were $11.4 million higher mainly due to acquisitions along with higher legal and other professional fees. Selling and administrative expenses as a percentage of net sales declined to 9.0 percent in 1997 from 9.6 percent in 1996. Other expense, net was $9.9 million compared with $3.8 million in 1996. The change primarily reflects lower gains from the sale of non-strategic assets and costs associated with the redemption of $100 million 7% convertible debentures in December 1996. Income tax expense increased from $41.9 million in 1996 (which included the reduction totaling $23.3 million of a valuation allowance in the third quarter of 1995) to $95.5 million in 1997. Beginning in the second quarter of 1996, earnings in the U.S. became fully taxable whereas prior earnings included a reduced tax provision as a result of the utilization of net operating loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES Net cash of $3.1 million was consumed by operating activities in the first six months of 1997 as compared with $37.5 million in 1996 mainly due to higher net income. In 1997, cash provided by financing activities was $23.9 million compared to net cash consumed of $5.2 million in 1996. The change was primarily due to higher borrowings. Net cash provided by operating activities for the twelve-months ended June 30, 1997 was $82.6 million more than 1996 primarily as a result of higher net income and non-cash charges. Net cash of $184.2 million was used for investing activities in 1997 as compared with $160.9 million in 1996. The change from last year resulted from an increase in acquisitions (the Company's purchase of two gypsum wallboard plants in September 1996) partially offset by the lack of increase in short-term investments. For the twelve-month period ended June 30, 1997, net cash consumed by financing activities was $16.8 million lower than the same period in 1996 due to lower debt reductions. Capital expenditures (excluding acquisitions) are not expected to exceed $200 million in 1997. At June 30, 1997, the Company had approximately $30 million of capital commitments related to the modernization of a cement plant. Committed bank lines of credit totaled $150 million under which no amounts were outstanding. 13 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Part I, Notes to Condensed Consolidated Financial Statements, page 8 for a discussion of developments in legal and environmental matters. In addition, the Company is involved in the following other legal actions and claims. It is the opinion of management that the ultimate resolution of such matters will not have a material effect on the Company's consolidated financial statements. With respect to the Company's slag processing plant in Duquesne, Pennsylvania, the Company has failed to comply with certain portions of a 1980 Consent Order and Agreement ("COA") with the Pennsylvania Department of Environmental Resources ("DEP"). This order was entered into by the prior owners of the plant which the Company acquired in 1989. The cooling or "quenching" of slag on the site gave rise to large volumes of runoff water which was determined to create a pollution problem. The 1980 COA required the construction and operation of a collection and treatment system for all surface water and drainage leaving the plant site and the submission of a plan and permit applications therefor by January 1987. However, in 1982, the quenching process was moved to another site and the water quality at the plant improved significantly. At that time, the prior owners apparently attempted to have the COA modified in light of the cessation of quenching at the plant but they were not successful. Recently, the Company's representatives have been engaged in discussions with DEP about how to resolve this matter and DEP has agreed that the COA should be modified in light of changed circumstances; however, it is likely that the Company will have to pay a fine for violating the COA, which fine could exceed $100,000, and to submit and accomplish an acceptable corrective action plan to eliminate or collect and treat discharge at the site. At the Company's cement plant in Davenport, Iowa, in connection with the permitting process for burning certain plastic materials in the kiln, plant personnel discovered that the plant was exceeding its permit limit for emissions of nitrous oxide gas. The Company reported the issue to the Iowa Department of Environmental Quality ("IDEQ") and has submitted a proposed permit revision which is being reviewed by IDEQ. The permit violation may result in a fine in excess of $100,000. At the Company's cement plant in Alpena, Michigan, after a recent change in the mix of raw materials entering the kiln, plant personnel discovered that the plant was exceeding its permit limit for emissions of hydrogen chloride gas. The Company reported the issue to the Michigan Department of Environmental Quality ("MDEQ"). A previous consent order entered into by the Company provided for a stipulated penalty if the plant violates any of its permits, which penalty could exceed $300,000. The Company is engaged in discussions with MDEQ regarding a reduction in such penalty. Also at the Alpena plant, the storm and surface water runoff has exceeded the plant's water discharge permit with respect to temperature and suspended particulates. These permit violations may result in a fine in excess of $100,000. 14 15 Lafarge Canada Inc. ("LCI") has been charged with violations of the Fisheries Act as a result of deposits of deliterious substances into the Fraser River. The incident occurred in March, 1997 during a heavy rainstorm at an LCI Vancouver, British Columbia ready-mix plant. The extreme rain conditions overwhelmed the containment and recycling system of the plant creating a flood situation necessitating an emergency release of the pent up waters into the yard and ultimately into the river. LCI has been charged with violations of the Act and is conducting discussions with representatives of the Federal Department of Fisheries and Oceans. This violation may result in a fine in excess of $100,000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Page Exhibit 11 - Statement regarding computation of net income per common equity share. 17 (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three-months ended June 30, 1997. 15 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LAFARGE CORPORATION Date: August 13, 1997 By: /s/ Larry J. Waisanen -------------------- ------------------------------ LARRY J. WAISANEN Senior Vice President and Chief Financial Officer 16 EX-11 2 COMPUTATION. 1 EXHIBIT 11 LAFARGE CORPORATION AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON EQUITY SHARE (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 ----------------------- ----------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- PRIMARY CALCULATION - ------------------- Net income $ 59,864 $ 43,265 $ 25,743 $ 5,070 ========== ========== ========== ========== Weighted average number of common equity shares outstanding 70,876 69,650 70,697 69,488 Net effect of dilutive stock options based on the treasury stock method 593 440 543 360 ---------- ---------- ---------- ---------- Weighted average number of common equity shares and equivalents outstanding 71,469 70,090 71,240 69,848 ========== ========== ========== ========== Primary net income per common equity share $ .84 $ .62 $ .36 $ .07 ========== ========== ========== ========== FULLY DILUTED CALCULATION - ------------------------- Net income $ 59,864 $ 43,265 $ 25,743 $ 5,070 Add after tax interest expense applicable to 7% Convertible Subordinated Debentures -0- 1,110 -0- 2,219 ---------- ---------- ---------- ---------- Net income assuming full dilution $ 59,864 $ 44,375 $ 25,743 $ 7,289 ========== ========== ========== ========== Weighted average number of common equity shares outstanding 70,876 69,650 70,697 69,488 Add additional shares assuming conversion of 7% Convertible Subordinated Debentures -0- 4,520 -0- 4,520 Net effect of dilutive stock options based on the treasury stock method 711 440 741 401 ---------- ---------- ---------- ---------- Weighted average number of common equity shares assuming full conversion of all potentially dilutive securities 71,587 74,610 71,438 74,409 ========== ========== ========== ========== Fully diluted net income per common equity share $ .84 $ .59 $ .36 $ .10 (a) ========== ========== ========== ========== TWELVE MONTHS ENDED JUNE 30 ----------------------- 1997 1996 ---------- ---------- PRIMARY CALCULATION - ------------------- Net income $ 161,539 $ 127,018 ========== ========== Weighted average number of common equity shares outstanding 70,384 69,221 Net effect of dilutive stock options based on the treasury stock method 465 355 ---------- ---------- Weighted average number of common equity shares and equivalents outstanding 70,849 69,576 ========== ========== Primary net income per common equity share $ 2.28 $ 1.83 ========== ========== FULLY DILUTED CALCULATION - ------------------------- Net income $ 161,539 $ 127,018 Add after tax interest expense applicable to 7% Convertible Subordinated Debentures 1,980 4,439 ---------- ---------- Net income assuming full dilution $ 163,519 $ 131,457 ========== ========== Weighted average number of common equity shares outstanding 70,384 69,221 Add additional shares assuming conversion of 7% Convertible Subordinated Debentures 2,043 4,520 Net effect of dilutive stock options based on the treasury stock method 768 409 ---------- ---------- Weighted average number of common equity shares assuming full conversion of all potentially dilutive securities 73,195 74,150 ========== ========== Fully diluted net income per common equity share $ 2.23 $ 1.77 ========== ==========
(a) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. 17 EX-27 3 FINANCIAL DATA SCHEDULE.
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 112,904 48,006 344,298 0 216,243 761,310 1,942,003 (1,055,985) 1,855,770 371,056 149,095 0 0 745,516 383,918 1,855,770 720,945 720,945 589,094 589,094 5,003 0 6,196 42,530 (16,787) 25,743 0 0 0 25,743 .36 .36
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