-----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, IINApL5YHw/kRlZ/osNUfoVr6dLm9W/LT3+/Nnoyq+sd/9kL++yEPRw2w8aULmcR E1KZiZFq7Gs5CqVUaEfu8w== 0000950133-98-001920.txt : 19980518 0000950133-98-001920.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950133-98-001920 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 001-08584 FILM NUMBER: 98621732 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 MARCH 31, 1998 -------------------------------------------------- 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 April 30, 1998 ----------------------------------- -------------- Common Stock of Lafarge Corporation ($1 par value) 66,698,839 ---------- Exchangeable Preference Shares of Lafarge Canada Inc. (no par value) 5,303,189 --------- Total Common Equity Interests 72,002,028 ==========
Number of pages contained in this report 17 -- Total sequentially numbered pages 17 -- Exhibit index on page 16 --
1 2 LAFARGE CORPORATION AND SUBSIDIARIES -------------------------------------- FORM 10-Q - FOR THE QUARTER ENDED MARCH 31, 1998 INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Consolidated Statements of Income (Loss) - Three-Month and Twelve-Month Periods Ended March 31, 1998 and 1997 3 b) Condensed Consolidated Balance Sheets - March 31, 1998, March 31, 1997, and December 31, 1997 4 c) Condensed Consolidated Statements of Cash Flows - Three-Month and Twelve-Month Periods Ended March 31, 1998 and 1997 5 d) Condensed Consolidated Geographic Information - Three-Month and Twelve-Month Periods Ended March 31, 1998 and 1997 6 e) Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6(a). Exhibits 16 Item 6(b). Reports on Form 8-K 16 SIGNATURE 17
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- LAFARGE CORPORATION AND SUBSIDIARIES ------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS TWELVE MONTHS ENDED MARCH 31 ENDED MARCH 31 -------------------------- -------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ NET SALES $ 267,292 $ 244,034 $1,829,609 $1,689,602 ------------ ------------ ------------ ------------ COST AND EXPENSES Cost of goods sold 265,196 255,323 1,345,079 1,283,716 Selling and administrative 42,251 37,456 165,758 153,103 Other expense, net 5,455 3,892 10,847 10,609 ------------ ------------ ------------ ------------ Total income (loss) from operations (45,610) (52,637) 307,925 242,174 ------------ ------------ ------------ ------------ Interest expense 4,042 5,559 18,432 23,762 Interest income (3,831) (2,917) (14,199) (10,321) ------------ ------------ ------------ ------------ PRE-TAX INCOME (LOSS) (45,821) (55,279) 303,692 228,733 Income tax benefit (expense) 17,654 21,158 (115,762) (83,793) ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (28,167) $ (34,121) $ 187,930 $ 144,940 ============ ============ ============ ============ NET INCOME (LOSS) PER COMMON EQUITY SHARE-BASIC $ (.39) $ (.48) $ 2.63 $ 2.07 ------------ ------------ ------------ ------------ NET INCOME (LOSS) PER COMMON EQUITY SHARE-DILUTED $ (.39) $ (.48) $ 2.60 $ 2.01 ------------ ------------ ------------ ------------ DIVIDENDS PER COMMON EQUITY SHARE $ 0.12 $ 0.10 $ 0.44 $ 0.40 ============ ============ ============ ============ Weighted average number of common equity shares and equivalents outstanding 71,737 70,517 71,429 70,078 ============ ============ ============ ============
See Notes to Condensed Consolidated Financial Statements. 3 4 LAFARGE CORPORATION AND SUBSIDIARIES ------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31 MARCH 31 DECEMBER 31 1998 1997 1997 (UNAUDITED) (UNAUDITED) (AUDITED) -------------- -------------- -------------- ASSETS Cash and cash equivalents $ 121,001 $ 118,940 $ 163,033 Short-term investments 164,423 84,032 155,368 Receivables, net 194,118 208,108 254,720 Inventories 227,093 218,840 209,220 Other current assets 34,227 29,568 33,627 -------------- -------------- -------------- Total current assets 740,862 659,488 815,968 Property, plant and equipment, (less accumulated depreciation and depletion of $1,083,549, $1,037,158 and $1,067,927) 899,249 876,951 876,744 Excess of cost over net assets of businesses acquired, net 40,284 30,682 27,859 Other assets 190,650 183,213 178,486 -------------- -------------- -------------- TOTAL ASSETS $1,871,045 $1,750,334 $1,899,057 ============== ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 227,813 $ 195,195 $ 231,528 Income taxes payable 2,295 2,469 34,434 Short-term borrowing and current portion of long-term debt 71,643 33,079 29,770 Short-term borrowings from related parties -- 100,000 -- -------------- -------------- -------------- Total current liabilities 301,751 330,743 295,732 Long-term debt 121,327 149,260 132,337 Deferred income tax 59,600 46,424 59,970 Other post-retirement benefits 127,446 125,161 126,475 Other long-term liabilities 32,942 29,450 28,855 -------------- -------------- -------------- Total liabilities 643,066 681,038 643,369 -------------- -------------- -------------- Common equity interests Common shares 66,276 63,580 65,268 Exchangeable shares 39,494 49,911 45,259 Additional paid-in-capital 656,994 626,218 649,082 Retained earnings 556,629 400,284 593,438 Foreign currency translation adjustments (91,414) (70,697) (97,359) -------------- -------------- -------------- Total shareholders' equity 1,227,979 1,069,296 1,255,688 -------------- -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,871,045 $1,750,334 $1,899,057 ============== ============== ==============
See Notes to Condensed Consolidated Financial Statements. 4 5 LAFARGE CORPORATION AND SUBSIDIARIES ------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED AND IN THOUSANDS)
THREE MONTHS TWELVE MONTHS ENDED MARCH 31 ENDED MARCH 31 ------------------------ -------------------------- 1998 1997 1998 1997 ---------- ---------- ------------ ------------ CASH FLOWS FROM OPERATIONS Net Income (Loss) $(28,167) $(34,121) $187,930 $144,940 Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation, depletion and amortization 27,332 27,060 106,576 102,165 Provision for doubtful accounts 622 695 2,292 426 Gain on sale of assets (85) (1,279) (4,844) (4,503) Other post-retirement benefits 838 470 2,713 1,105 Other non-cash charges and credits, net 961 (4,107) 15,050 4,217 Changes in working capital (600) 18,831 19,621 (34,097) ---------- ---------- ------------ ------------ Net cash provided by operations 901 7,549 329,338 214,253 ---------- ---------- ------------ ------------ CASH FLOWS FROM INVESTING Capital expenditures (40,291) (40,553) (123,708) (136,221) Acquisitions (22,061) - (30,878) (75,357) Short-term investments (9,055) 8,464 (80,391) 13,482 Proceeds from property, plant and equipment dispositions 7,007 4,147 21,807 30,745 Other (3,304) (1,574) (5,750) (4,222) ---------- ---------- ------------ ------------ Net cash used for investing (67,704) (29,516) (218,920) (171,573) ---------- ---------- ------------ ------------ CASH FLOWS FROM FINANCING Net increase (decrease) in long-term borrowings (includes current portion) 28,096 25,594 (92,106) (4,085) Issuance of equity securities 2,258 3,103 19,354 7,011 Dividends, net of reinvestments (7,745) (2,870) (27,884) (12,295) ---------- ---------- ------------ ------------ Net cash provided (consumed) by financing 22,609 25,827 (100,636) (9,369) ---------- ---------- ------------ ------------ Effect of exchange rate changes 2,162 (1,767) (7,721) (3,347) ---------- ---------- ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (42,032) 2,093 2,061 29,964 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 163,033 116,847 118,940 88,976 ---------- ---------- ------------ ------------ CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $121,001 $118,940 $121,001 $118,940 ========== ========== ============ ============
See Notes to Condensed Consolidated Financial Statements. 5 6 LAFARGE CORPORATION AND SUBSIDIARIES ------------------------------------ CONDENSED CONSOLIDATED GEOGRAPHIC INFORMATION (UNAUDITED AND IN THOUSANDS)
THREE MONTHS TWELVE MONTHS ENDED MARCH 31 ENDED MARCH 31 ------------------------ ----------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ---------- NET SALES Canada $ 98,638 $ 91,340 $ 776,765 $ 718,035 United States 168,654 152,694 1,052,844 971,567 ----------- ----------- ----------- ----------- TOTAL NET SALES $ 267,292 $ 244,034 $1,829,609 $1,689,602 =========== =========== =========== ========== INCOME (LOSS) FROM OPERATIONS (SEE NOTE 7) Canada $ (25,833) $ (30,259) $ 134,640 $ 106,227 United States (19,777) (22,378) 173,285 135,947 ----------- ----------- ----------- ----------- TOTAL INCOME (LOSS) FROM OPERATIONS (45,610) (52,637) 307,925 242,174 Interest expense, net (4,042) (5,559) (18,432) (23,761) Interest income 3,831 2,917 14,199 10,320 ----------- ----------- ----------- ---------- PRE-TAX INCOME (LOSS) $ (45,821) $ (55,279) $ 303,692 $ 228,733 =========== =========== =========== ===========
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 1997 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 March 31, 1998 and 1997, and at December 31, 1997, inventories consisted of the following (in thousands):
March 31 March 31 December 31 1998 1997 1997 -------------- ------------ -------------- Finished products $ 107,587 $ 102,204 $ 104,508 Work in process 23,746 28,466 7,791 Raw materials and fuel 49,989 44,582 50,547 Maintenance and operating supplies 45,771 43,588 46,374 -------------- ------------ -------------- Total inventories $ 227,093 $ 218,840 $ 209,220 ============== ============ ==============
7 8 5. Cash paid during the period for interest and taxes, is as follows (in thousands):
Three Months Twelve Months Ended March 31 Ended March 31 --------------------- ----------------------- 1998 1997 1998 1997 ---------- --------- ----------- ---------- Interest $ 677 $ 1,476 $ 19,365 $ 25,890 Income Taxes (net of refunds) 13,954 9,815 99,999 75,776
6. Earnings per share for the three and twelve months ended March 31, 1998 and 1997 includes the following components (unaudited and in thousands, except per share amounts):
Three Months Ended Twelve Months Ended March 31 March 31 ---------------------- ---------------------- 1998 1997 1998 1997 ---------- ---------- ----------- ---------- BASIC CALCULATION Net income (loss) $(28,167) $ (34,121) $ 187,930 $ 144,940 ========== =========== =========== ========== Weighted average number of common equity shares 71,737 70,517 71,429 70,078 ========== ========== =========== ========== Basic net income (loss) per common equity share $ (.39) $ (.48) $ 2.63 $ 2.07 ========== ========== =========== ========== DILUTED CALCULATION Net income (loss) $(28,167) $ (34,121) $ 187,930 $ 144,940 Add after tax interest expense applicable to 7% Convertible Subordinated Debentures - - - 3,073 ---------- ---------- ----------- ---------- Net income (loss) assuming dilution $(28,167) $ (34,121) $ 187,930 $ 148,013 ========== ========== =========== ========== Weighted average number of common equity shares outstanding 71,737 70,517 71,429 70,078 Add additional shares assuming conversion of 7% Convertible Subordinated Debentures - - - 3,170 Net effect of dilutive stock options based on the treasury stock method - - 597 358 ---------- ---------- ----------- ---------- Weighted average number of common equity shares assuming full conversion of all potentially dilutive securities 71,737 70,517 72,026 73,606 ========== ========== =========== ========== Diluted net income (loss) per common equity share $ (.39) $ (.48) $ 2.60 $ 2.01 ========== ========== =========== ==========
8 9 Basic earnings per common equity share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common equity share assumed conversion of stock options, to the extent such conversion is dilutive, and in 1997 assumed conversion of the convertible debentures. The Company's reported earnings per share for 1997 was restated as a result of adopting SFAS No. 128, "Earnings Per Share." 7. In prior years, an agreement was reached with Revenue Canada Taxation related to the pricing of certain cement sales between the Company's operations in Canada and the U.S. This increased 1997 and 1996 Canadian net sales and pre-tax income by U.S. $6.1 million and $13.7 million, respectively, with a corresponding decrease for the U.S. The impact of this agreement was immaterial to consolidated net income. The net sales and income from operations for Canada and the U.S. presented in the condensed consolidated geographic information for the twelve months ended March 31, 1998 and 1997 do not reflect this agreement. 8. In 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires that an enterprise display comprehensive income which for the Company is the total of net income (loss) and the current year foreign currency translation adjustment. Comprehensive income consists of the following (in thousands):
Three Months Ended Twelve Months Ended March 31 March 31 ------------------- ---------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Net income (loss) $(28,617) $(34,121) $187,930 $144,940 Foreign currency translation adjustments 5,945 (7,355) (20,717) (13,147) --------- --------- --------- --------- Comprehensive income (loss) $(22,672) $(41,476) $167,213 $131,793 ========= ========= ========= =========
9. On March 17, 1998, as indicated in the Company's 1997 Annual Report on Form 10-K, the Company announced that it will purchase a number of construction materials businesses in North America from Lafarge S.A., its majority shareholder. The Company's Board of Directors voted to accept the recommendation of a committee of independent directors that the Company acquire the businesses of Denver-based Western Mobile, Inc.; Redland Genstar Inc. of Towson, Maryland; and Redland Quarries Inc. of Hamilton, Ontario. Lafarge S.A. took control of these operations late last year when it acquired the British construction materials firm Redland PLC. The purchase price to be paid, subject to certain working capital adjustments, is $690 million. The acquisition is expected to close before the end of the second quarter. Until fixed rate financing is put in place, bridge financing will be obtained through a short-term loan from the seller, Lafarge S.A. On May 6 and May 12, 1998, in order to reduce the Company's risk of interest rate fluctuations, the Company entered into several forward treasury lock agreements totaling a notional $400 9 10 million. These agreements are designated as hedges and lock the Company into an effective long-term interest rate of approximately 6.7 percent. 10. In December 1997, the Company announced that it was in discussions with Holnam, Inc. to acquire its cement plant in Seattle, Washington and related assets including a limestone quarry in Texada Island, British Columbia and two cement terminals. In February 1998, the Company and Holnam, Inc. entered into a letter of intent regarding the foregoing transaction. Closing on the acquisition is subject to due diligence, regulatory approvals and execution of a definitive asset purchase agreement. 11. As discussed in its 1997 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. The trial of this matter commenced in September and is expected to continue through the second quarter of 1998. 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. 12. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) 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. 10 11 LAFARGE CORPORATION AND SUBSIDIARIES ------------------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Historically, the Company incurs a loss in the first quarter because sales and operating results are negatively impacted by 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. THREE MONTHS ENDED MARCH 31, 1998 - --------------------------------- The seasonal pattern was evident during the three months ended March 31, 1998 when the Company incurred a net loss of $28.2 million, or $0.39 per common diluted equity share. This compares with a net loss of $34.1 million, or $0.48 per common diluted equity share, for the first quarter of 1997. Operating results improved in all of the Company's main product lines (cement, ready-mixed concrete, aggregates and gypsum wallboard) reflecting higher sales volumes and prices. The Company's Canadian operations reported a net loss of $14.0 million, $3.3 million better than 1997 whereas the U.S. net loss was $14.2 million, $2.6 million better. The Company's net sales increased 10 percent to $267.3 million, up from $244.0 million in 1997. Canadian net sales were $98.6 million, up 8 percent, while U.S. net sales increased 10 percent to $168.7 million. A relatively mild winter across most of the United States and Canada boosted product shipments in all principal product categories and prices trended upward in all main product lines of cement, concrete, aggregate and gypsum wallboard. Cement shipments increased 7 percent while ready-mixed concrete, aggregate, and gypsum wallboard volumes rose 4 percent, 24 percent, and 5 percent, respectively. The first quarter loss from the Company's cement and waste management operations was $18.2 million, $5.6 million better than last year. The improvement is primarily due to an increase in cement shipments and prices partially offset by higher plant costs due to the timing of major maintenance projects. Net sales increased 10 percent reflecting the rise in shipments and prices. The Canadian loss was $6.4 million, $.5 million better than 1997 due to a 7 percent increase in cement shipments and a 3 percent escalation in net realization (delivered price per ton to customers less freight) partially offset by the timing of major maintenance projects. Net sales in Canada increased 3 percent. In eastern Canada, despite the historic January ice storm, cement shipments were 15 percent better than 1997 as lower shipments in the Atlantic provinces were more than offset by stronger demand in Quebec and Ontario. The U.S. loss was $11.8 million, $5.1 million better than 11 12 a year ago. Increases in shipments (7 percent) and net realization (3 percent) were partially offset by the timing of major maintenance spending. Net sales increased 13 percent reflecting the increase in shipments and prices, and the acquisition of a U.S. flyash operation in January 1998. The Company's construction materials operations lost $16.8 million, $3.6 million better than 1997. Net sales were 5 percent higher reflecting an increase in ready-mixed concrete and aggregate shipments and prices. In Canada, the loss was $14.5 million, $3.2 million better than last year. Net sales in Canada were 7 percent higher than 1997. Stronger demand in Ontario, Quebec, and Alberta resulted in a 13 percent rise in Canadian ready-mixed concrete volumes. Aggregate volumes were also strong in Canada, increasing by 23 percent. In eastern Canada, higher volumes from ready-mixed concrete and aggregates coupled with higher aggregate prices were somewhat offset by lower ready-mixed concrete prices and higher operating costs. In western Canada, higher prices, in both ready-mixed concrete and aggregates, along with higher aggregates volumes, were partially offset by lower ready-mixed concrete volumes and higher material and operating costs. In the U.S., the loss was $2.3 million, $0.4 million better than last year. Net sales in the U.S. were 1 percent higher than 1997. Ready-mixed concrete volumes declined 9 percent due to poor weather in the Midwest while robust demand in the Ohio and Missouri markets helped drive aggregate volumes up 26 percent. Operating profit from the Company's gypsum wallboard operations was $3.3 million, $.4 million better than 1997 due to higher shipments and prices. Mill net (net selling price to customers less freight) and shipments were 4 and 5 percent higher which boosted net sales by 9 percent. For the quarters ended March 31, 1998 and 1997 the Company recorded an income tax benefit as a result of the seasonal loss from its Canadian and U.S. operations. The Company's effective income tax rate was 38.5 percent in 1998, consistent with the prior year. TWELVE MONTHS ENDED MARCH 31, 1998 - ---------------------------------- During the fourth quarter of 1997 and the third quarter of 1996, the Company recorded adjustments of U.S. $6.1 and $13.7 million adjustment for the years 1996 and 1995, respectively, based upon an agreement with Revenue Canada Taxation. (see note 7 on page 9). The impact of these adjustments on consolidated net income was immaterial. Management's Discussion and Analysis that follows excludes the impact of this agreement. The Company reported net income of $187.9 million in 1998 compared to $144.9 million for the same period ended March 31, 1997. Operating profits were $361.8 million, a $67.7 million improvement over 1997. Net sales increased 8 percent primarily due to greater product shipments and improved cement and ready-mixed concrete selling prices, 12 13 as well as the effect of the U.S. gypsum wallboard acquisition. Canadian and U.S. net sales increased 8 percent. Earnings from the Company's cement and waste management operations were $264.5 million, $36.6 million better than last year. Earnings from U.S. operations of $163.0 million were $17.6 million better than 1997. In the U.S., cement net realization and shipments increased 4 percent and 2 percent, respectively. Earnings from Canadian operations of $101.5 million were $19.0 million better than 1997. Net realization in Canada increased 2 percent (excluding exchange rate fluctuation) while sales volumes rose 6 percent. The Company's construction materials operations earned $83.7 million, $22.8 million better than 1997. In Canada, earnings were $56.3 million, $18.8 million better than 1997. Ready-mixed concrete and aggregate volumes in Canada increased 10 percent and 14 percent, respectively, reflecting improved economic activity, particularly in Ontario, coupled with the impact of late 1996 acquisitions in western Canada. Canadian ready-mixed concrete selling prices were 2 percent higher while aggregate prices were relatively flat. In the U.S., earnings were $27.4 million, $4.0 million better than 1997. U.S. ready-mixed concrete volumes decreased 2 percent while selling prices improved 4 percent. Aggregate volumes were down 4 percent but selling prices increased 1 percent. Selling and administrative expenses were $12.7 million higher mainly due to acquisitions, coupled with higher legal and other professional fees. The Company's effective income tax rate was 38.1 percent in 1998 and 36.6 percent in 1997. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Net cash of $0.9 million was provided by operating activities in the first quarter of 1998 compared to $7.5 million in 1997. Net cash used for investing activities in 1998 was $38.2 million higher than the same period last year due to the acquisition of a flyash operation in the U.S. and the purchase of short-term investments. In 1998, net cash provided by financing activities was $22.6 million compared to $25.8 million in 1997. Net cash provided by operating activities for the twelve-month period ended March 31, 1998 increased over the same period in 1997 primarily due to higher net income and non-cash charges, and a decrease in working capital. Compared to 1997, net cash used for investing activities in 1998 increased due to the purchase of short-term investments partially offset by lower capital spending and acquisitions. Acquisitions in 1998 included the Company's purchase of a U.S. flyash operation whereas 1997 included the purchase of two gypsum wallboard plants in September 1996. Net cash consumed by financing activities for the twelve-month period ended March 31, 1998 was $91.3 million higher than the same period in 1997 due to higher debt reductions. Capital expenditures (including acquisitions already completed or in process) are expected to be approximately $1.07 billion in 1998. The acquisition of a number of 13 14 construction materials businesses from Lafarge S.A. at a purchase price of $690 million will be financed with fixed rate debt. Until financing is put in place, bridge financing will be obtained through a short-term loan from the seller, Lafarge S.A. On May 6 and May 12, 1998, in order to reduce the Company's risk of interest rate fluctuations, the Company entered into several forward treasury lock agreements totaling a notional $400 million. These agreements are designated as hedges and lock the Company into an effective long-term interest rate of approximately 6.7%. The Company also has committed bank lines of credit totaling $150 million under which no amounts were outstanding. OTHER FACTORS AFFECTING THE COMPANY - YEAR 2000 - ----------------------------------------------- As discussed in the Company's 1997 Annual Report on Form 10-K, the Company has business application software programs that were developed over the years and computer infrastructure including computerized devices that could be affected by the "Year 2000" issue. Excluding the acquisition of a number of construction materials businesses from Lafarge S.A. ("Redland acquisition"), the Company has completed an initial Compliance Assessment of the potential impact of the Year 2000 on computer applications, operating software and hardware and has developed an implementation plan to resolve the issue. The plan includes the replacement of certain equipment and modification of certain software to recognize the turn of the century. The plan is currently expected to result in estimated non-recurring spending over the next two years of approximately $9 million to $15 million. The Company is currently completing the process of identifying the systems and infrastructure within the Redland acquisition that could be affected by the Year 2000 issue and developing an implementation program to resolve. The Company believes, with appropriate replacement or modification, it will be able to operate its time-sensitive business-application software programs and infrastructure through the turn of the century. 14 15 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ----------------- See Part I: Notes to Condensed Consolidated Financial Statements (page 10) for a description of certain legal and environmental matters. There are no new matters to report, and there have been no significant developments in previously reported matters. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- The annual meeting of shareholders of the Company was held May 5, 1998. A total of 71,780,028 shares were entitled to be voted. At the meeting, shareholders elected the 16 nominees for the Board of Directors identified below:
Director Elected Votes For Votes Withheld - ---------------- --------- -------------- Thomas A. Buell 55,908,032 186,833 Marshall A. Cohen 55,911,757 183,108 Bertrand P. Collomb 55,911,465 183,400 Philippe Dauman 55,911,757 183,108 Bernard L. Kasriel 55,911,782 183,093 Jacques Lefevre 55,911,732 183,133 Paul W. MacAvoy 55,911,782 183,083 Claudine B. Malone 55,907,930 186,935 Alonzo L. McDonald 55,911,781 183,084 Robert W. Murdoch 55,910,746 184,119 Bertin F. Nadeau 55,909,321 185,544 John M. Piecuch 55,911,582 183,283 John D. Redfern 55,911,047 183,818 Joe M. Rodgers 55,908,046 186,819 Michel Rose 55,911,431 183,434 Ronald Southern 55,907,899 186,966
The shareholders approved and adopted the 1998 Stock Option Plan, with voting as follows:
Votes For Votes Against Abstentions Broker Non-Votes - --------- ------------- ----------- ---------------- 51,802,124 2,065,185 43,228 2,184,328
The shareholders approved certain amendments to the Company's Employee Stock Purchase Plan, with voting as follows: 15 16
Votes For Votes Against Abstentions Broker Non-Votes - --------- ------------- ----------- ---------------- 53,545,961 315,984 48,392 2,184,528
The shareholders ratified the appointment of Arthur Andersen LLP as auditors to audit the financial statements of the Company for the year ending December 31, 1998, with voting as follows:
Votes For Votes Against Abstentions Broker Non-Votes - --------- ------------- ----------- ---------------- 56,060,738 13,062 21,065 -0-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits -------- See Part I: Notes to Condensed Consolidated Financial -------------------------------------------------- Statements (page 8) for computation of net income per ---------- common equity share. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed by the Company during the three-months ended March 31, 1998. 16 17 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: May 14, 1998 By: -------------- --------------------- LARRY J. WAISANEN Executive Vice President and Chief Financial Officer 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 121,001 164,423 214,841 (20,723) 227,093 740,862 1,982,798 (1,083,549) 1,871,045 301,751 121,327 0 0 762,764 462,215 1,871,045 267,292 267,292 265,196 265,196 5,455 0 4,042 (45,821) 17,654 (28,167) 0 0 0 (28,167) (.39) (.39) Note: EPS Primary is EPS Basic
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