10-K405 1 PUERTO RICAN CEMENT FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission file number 1-4753 PUERTO RICAN CEMENT COMPANY, INC. ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) COMMONWEALTH OF PUERTO RICO 51-A-66-0189525 ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) PO Box 364487 - San Juan, Puerto Rico 00936-4487 ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (809) 783-3000 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock, $1.00 par value New York Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: NONE 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 --- --- [Cover page 1 of 2 pages] 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant is $110,751,551 (exclusive of shares respecting which affiliates have either sole or shared voting and dispositive power). This market value was computed by reference to the closing price of the stock on The New York Stock Exchange on March 17, 1995. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the close of the period covered by this report: Common Stock, $1.00 par value 5,494,200 shares Documents Incorporated by Reference 1. Annual Report to security holders for the fiscal year ended December 31, 1994, which is incorporated into Parts I and II. 2. Definitive Proxy Statement filed pursuant to Regulation 14A which is incorporated into Part III. [Cover page 2 of 2 pages] 3 CROSS REFERENCE SHEET AND TABLE OF CONTENTS
Page Number or (Reference) ----------- Part I. Item 1. Business.................................... 6 (1) a) General Development of Business.......... 6 b) Financial Information About Industry Segments ....................... 6 (2) c) Narrative Description of Business........ 6 d) Financial Information about Foreign and Domestic Operations and Export Sales..... 11 e) Executive Officers of the Registrant..... 11 Item 2. Properties.................................. 14 (3) Item 3. Legal Proceedings........................... 15 (4) Item 4. Submission of Matters to a Vote of Security Holders............................ 15 Part II. Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............. (5) Item 6. Selected Financial Data..................... (6) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................. (7) Item 8. Financial Statements and Supplementary Data........................................ (8) Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...... 15 Part III. Item 10. Directors of the Registrant................. 15 a) Identification of Directors.............. 15 (9) Item 11. Executive Compensation...................... 16 (10) Item 12. Security Ownership of Certain Beneficial Owners and Management....................... 16 (11) Item 13. Certain Relationships and Related Transactions................................ 16 (12) Part IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................... 16 a) Financial Statements..................... 16 b) Exhibits................................. 17 c) Reports on Form 8-K...................... 17
(1) Information incorporated by reference to the Registrant's Annual Report to Stockholders for the year ended December 31, 1994 ("Annual Report") and the Board of Directors' Proxy Statement for use in connection with the Registrant's annual meeting of stockholders to be held May 3, 1995 ("Proxy Statement"). (2) Annual Report, page 28, section entitled "Notes to Consolidated Financial Statements, Note 12/Financial Data by Industries." (3) Annual Report, page 25, section entitled "Notes to Consolidated Financial Statements, Note 4/Property, Plant and Equipment," and page 29, section entitled "Notes to Consolidated Financial Statements, Note 13/Lease Commitments." (4) Annual Report, page 29, section entitled "Notes to Consolidated Financial Statements, Note 15/Contingent Liabilities and Other Commitments." (5) Annual Report, page 33, section entitled "Common Share Prices and Dividends Per Share," page 31, section entitled "Five-Year Statistical Comparison," and page 25, section entitled "Notes to Consolidated Financial Statements, Note 9/Long-term Debt." (6) Annual Report, page 19, section entitled "Selected Financial Data." (7) Annual Report, pages 17 to 18, section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." (8) Annual Report, pages 20 to 31, sections entitled "Consolidated Balance Sheet," "Consolidated Statement of Income and Retained Earnings," "Consolidated Statement of Cash Flows," "Notes to Consolidated Financial Statements," "Report of Independent Accountants," "Financial Results by Quarter," "Consolidated Fourth Quarter Results," and "Five-Year Statistical Comparison." (9) Proxy Statement, pages 2 to 7, section entitled "Information about Nominees, Directors and Principal Stockholders." (10) Proxy Statement, pages 10 to 17, section entitled "Executive Compensation," through and including section entitled "Certain Transactions with Management." (11) Proxy Statement, pages 2 to 9, sections entitled "Information about Nominees, Directors and Principal Stockholders" and "Security Ownership of Certain Beneficial Owners." (12) Proxy Statement, pages 16 to 17, sections entitled "Certain Transactions with Management" and "Compensation Committee Interlocks and Insider Participation." 4 PART I Item 1. Description of Business (a) General Development of Business Puerto Rican Cement Company, Inc. (the "Registrant"), a corporation organized under the laws of the Commonwealth of Puerto Rico in 1938, has been engaged since the beginning of the fiscal year for which this report is filed in three principal industry segments, namely: (i) cement and related products, (ii) paper and packaging and (iii) realty operations. During fiscal year 1994, there were no major changes in the industry segments of the Registrant, nor was the Registrant or any of its subsidiaries subject to any significant change in its form of organization. (b) Financial Information About Industry Segments Information on the industry segments in which the Registrant has been engaged for the last three fiscal years, including the amounts of revenue, operating profit and identifiable assets attributable to each of the Registrant's industry segments, is included as part of the Registrant's Annual Report to Stockholders for the year ended December 31, 1994 (the "Annual Report"), page 28, section entitled "Notes to Consolidated Financial Statements, Note 12/Financial Data by Industries," which includes the financial statements and schedules furnished pursuant to Item 14 and is incorporated herein by reference. (c) Narrative Description of Business (i) Principal Products or Services The principal products produced or services rendered by the Registrant are: (A) Cement and related products 1. Portland grey cement, Type I, manufactured under specifications of the American Society for Testing Materials ("A.S.T.M.") 2. Hydrated lime (B) Paper and packaging 1. Multiwall paper bags (C) Realty operations The Registrant's products are sold principally on the island of Puerto Rico. Portland grey cement is used primarily in the construction of residential, commercial and public buildings and in the construction of highways. During the fiscal year ended December 31, 1994, the Registrant sold 5,104,038 barrels of grey cement. Substantially all of these sales were made to customers in Puerto Rico. During the fiscal year ended December 31, 1994, approximately 35.4% of the hydrated lime produced by the Registrant was sold to the construction and agricultural industry and the remaining 64.6% was sold to other industries for chemical usage, both locally and in export markets. Approximately 37.4% (43.7% in 1993) of total sales of hydrated lime, mainly for use in connection with chemical water purification, were made to the local Government or its agencies. Multiwall paper bags produced by the Registrant's St. Regis Paper and Bag Division were marketed almost exclusively in Puerto Rico and were used by the following customers: 40% by the Registrant and its subsidiaries for packing its products; 2% for packaging of cement and related products by other producers; 5% by sugar producers; 44% by the grain and animal feed industry; and 9% for coffee, chemical, rice, fertilizers and other miscellaneous uses. The Registrant and Desarrollos Multiples Insulares, Inc., a wholly-owned subsidiary, own and hold for future development and sale approximately 532 acres of land throughout Puerto Rico. 5 Total Revenue Set forth below are the (i) total revenue (in thousands of dollars) for each of the last three fiscal years contributed by any class of similar products which accounted for 10% or more of the Registrant's consolidated net sales in such fiscal year and (ii) the Registrant's consolidated net sales (in thousands of dollars) for each of the last three fiscal years:
Registrant's Sales of Portland Consolidated grey cement net sales 1994 $84,168 $92,830 1993 73,895 84,028 1992 70,060 80,022
Methods of Distribution The Registrant sells and distributes cement (both in bulk and bagged) and related products in Puerto Rico to (i) customers on a direct basis, (ii) to independent local distributors (which include ready mix concrete producers, building material dealers, concrete products manufacturers, and government agencies), and (iii) to general and highway contractors. (ii) New Products The Registrant has not made any public announcements regarding, not has it otherwise made public information about, a new product or industry segment that is material to the Registrant's business. (iii) Raw Materials The Registrant owns in fee properties containing limestone and sand deposits which directly adjoin or are close to its cement and hydrated lime plant sites. The Registrant also owns properties near such plants which contain clay deposits. The Registrant has not conducted a systematic exploratory drilling program ordinarily considered necessary for the establishment of limestone and other raw materials reserves and, accordingly, makes no tonnage estimate of the availability of such raw materials. However, on the basis of scattered drilling results on deposits of substantial depths, and past and present production from the Registrant's properties, the Registrant believes that the availability of limestone and other raw materials presents no foreseeable problem. There have been no recent material mining changes in the exploitation of the principal raw material deposits, and none are expected. The Registrant purchases raw gypsum in the open market from sources outside Puerto Rico. Coal for firing the kilns is purchased from Carbones de Colombia, S.A., a Colombian supplier, under a long-term supply contract. Electricity is purchased from the Puerto Rico Electric Power Authority, and water is obtained from wells on the Registrant's properties. (iv) Patents and Trademarks St. Regis Paper and Bag Division has the right to use until December 31, 1995 certain trademarks, tradenames and patents owned by Stone Container Corporation (which were once owned by St. Regis Paper Company of New York, then acquired by Champion International during 1985, and thereafter sold to Stone Container Corporation). The Registrant is negotiating, on an annual basis, for renewal of this agreement for continued utilization of such trademarks, tradenames and patents. The Registrant believes that failure to renew such agreement would have no material impact on this segment of its business. (v) Seasonal Effect on Sales Demand for cement and related products is largely dependent on the requirements of the construction industry. The requirements of the construction industry in Puerto Rico and in the Caribbean area are not necessarily "seasonal" because of the normally favorable climatic conditions of the area; however, the requirements of the construction industry depend to some extent on general economic conditions. (vi) Credit and Working Capital Practices As of December 31, 1994, the Registrant had invested approximately 14% of its total assets in inventory, which consists mainly of operating supplies and repair parts for its equipment. Taking into account the geographical locations of the Registrant's manufacturing facilities as compared to the geographical locations of its major suppliers, such investment in inventory is considered normal by industry standards. No significant amounts of finished goods are required to be maintained in inventory to meet rapid delivery requirements of customers. The Registrant sells its products to customers under normal commercial open account payment terms. (vii) Customers During fiscal year 1994, 41% of the Registrant's total dollar sales in the cement and related products segment were made to 10 unrelated customers. One of these customers, Concreto Mixto, Inc., accounted for approximately 11% of the Registrant's consolidated sales. (viii) Backlog In the opinion of the Registrant, backlog is not a relevant consideration in the type of business in which it is engaged. (ix) Government Contracts No material portion of the business of the Registrant is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the Government. (x) Competition The Registrant is the principal producer of cement, hydrated lime and multiwall paper bags in Puerto Rico. During 1994, the other cement manufacturing company in Puerto Rico, San Juan Cement Company, Inc., which began production at the end of May 1970, accounted for approximately 40.02% of the total bags of cement sold in Puerto Rico. No cement was imported to the Puerto Rico market during 1994. The Registrant competes on the basis of the price and quality of its products. (xi) Research and Development During the last three fiscal years, other than the conversion of two slurry mills to cement grinding mills which is currently in progress, the Registrant has not spent any material amounts on research and development activities relating to the development of new products, services or techniques or the improvement of existing products, services or techniques for itself or for any of its customers. 6 (xii) Environmental Compliance During 1978, the Registrant completed the installation of air pollution control equipment in its Ponce cement and lime plants at an aggregate approximate cost of $17,000,000. Such equipment was installed in order to comply with (i) regulations established by the Environmental Quality Board of Puerto Rico and (ii) the terms of a consent order signed in August 1974 (as amended in July 1976 and February 1978) with the Federal Environmental Protection Agency. The Registrant financed the cost of the pollution abatement program through a loan obtained in 1975 from the Government Development Bank for Puerto Rico. This loan was extinguished in 1985 as fully described in a Current Report on Form 8-K dated September 1985. The Registrant's plants are in compliance with existing environmental regulations. No significant expenditures for pollution control equipment are expected in the near future. Regulations issued by the United States Environmental Protection Agency limit the Registrant's annual production capacity. In 1994, such regulations limited the Registrant's capacity to 5,165,000 barrels of clinker. The Registrant complied with these limitations and such limitations did not have a material effect on the capital expenditures, earnings or competitive position of the Registrant. (xiii) Employees As of December 31, 1994, the Registrant and its subsidiaries had 552 employees. (d) Financial Information about Foreign and Domestic Operations and Export Sales None of the Registrant's industry segments depend to any material extent on foreign operations. (e) Executive Officers of the Registrant 1. Carlos J. Suarez (1), age 70, Director; Chairman of the Board and Chief Executive Officer of the Registrant from April 1, 1985 to December 31, 1994; President from October 1983 to December 31, 1987; Executive Vice President from June 1982 to October 1983; Senior Vice President from 1980 to June 1982, Vice President of Operations from 1973 to 1980. 2. Antonio Luis Ferre (2), age 61, Director; Vice Chairman of the Board of the Registrant from 1985 through December 1994; Chairman of the Board from 1980 through 1985; President of El Dia, Inc. (newspaper publishing company) since 1969; Director of Metropolitan Life Insurance Company of New York (insurance company) since 1987; Director and Vice Chairman of BanPonce Corporation (bank holding company) since 1984 and Banco de Ponce (commercial bank) from 1959 to 1990; Director and Vice Chairman of Banco Popular de Puerto Rico (commercial bank) since 1991; Director of Pueblo Extra Supermarket (food retailer) since 1993. 3. Alberto M. Paracchini, age 62, Director; Vice Chairman of the Board of the Registrant since 1968; Chairman of the Board and Chief Executive Officer from 1983 to 1990 and President from 1980 to 1990 of Banco de Ponce (commercial bank); President from 1984 to 1990 and Director and Chairman of the Board from 1985 to 1993 of BanPonce Corporation (bank holding company); Chairman of the Board from 1986 to 1993 of Vehicle Equipment Leasing Corporation (automobile leasing company); Director since 1991 and Chairman of the Board from 1991 to 1993 of Banco Popular de Puerto Rico (commercial bank), Popular Leasing & Rental, Inc. and Popular Consumer Services, Inc.; Director of HDA Management Corporation since December 1993, Equus Management Co. since August 1994 and Venture Capital Fund since March 1994. 4. Miguel Nazario (3), age 47, Vice President of the Registrant from August 8, 1994 to December 31, 1994; prior to joining the Registrant, Mr. Nazario held various administrative positions over a ten-year period, most recently as a member of the Corporate Manufacturing Staff of Digital Equipment Corporation. 5. Hector del Valle (4), age 57, Director; President of the Registrant from January 1, 1988 to December 31, 1994; Senior Vice President in charge of Finance from October 1983 to December 31, 1987; Secretary from January 1984 to December 31, 1987; Vice President of Finance and Treasurer from June 1982 to October 1983; Assistant Vice President of Finance from 1976 to June 1982; Treasurer from 1973 to 1976. 6. Jose J. Suarez, age 59, Director; Executive Vice President in charge of Operations of the Registrant since January 1, 1988; Senior Vice President in charge of Operations from October 1983 to December 31, 1987; Vice President of Operations from June 1982 to October 1983. 7 7. Jose O. Torres, age 49, Secretary; Treasurer and Vice President of Finance of the Registrant since January 1, 1988; Vice President and Treasurer from October 1983 to December 31, 1987; Vice President of Sa1es from 1982 to October 1983; Treasurer from 1976 to 1982. 8. Angel M. Amaral, age 61, Vice President and Controller of the Registrant since June 1982; Controller from 1976 to June 1982. 9. Rene Di Cristina, age 44, Vice President of Sales of the Registrant since October 1983. 10. Juan A. Carbonell, age 73, Vice President and General Manager of St. Regis Paper and Bag Division since January 1984. 11. Benito del Cueto, age 60, Vice President of Desarrollos Multiples Insulares, Inc., a wholly-owned subsidiary of the Registrant, since 1973. 12. Antonio L. Ferre Rangel, age 28, Director; Vice President of Strategic Planning since January 1, 1995. Mr. Ferre joined the Company in 1992. All officers are elected to serve for a term of one year and until the election and qualification of their respective successors. ____________________ (1) Mr. Suarez retired from his position as Chairman and Chief Executive Officer of the Registrant as of December 31, 1994, but remained as a Director. (2) Mr. Ferre became Chairman of the Board of the Registrant as of January 1, 1995. (3) President and Chief Executive Officer of the Registrant since January 1, 1995. (4) Vice Chairman of the Board of the Registrant since January 1, 1995. 8 Item 2. Description of Property Used in cement and related products segments The Registrant owns in fee a cement plant located in Ponce, Puerto Rico on a 25-acre site. It also owns in fee a hydrated lime manufacturing plant that is located within the Ponce cement plant premises. The Ponce Cement plant operates under the dry process and during the last fiscal year 5,083,800 barrels of cement were produced for an approximate 94% of its effective kiln capacity. The lime plant produced 25,292 tons of lime and was operated at approximately 55% of its capacity. During 1992 the Registrant purchased a 67-acre tract of land located next to the cement plant and a 149-acre tract of land adjacent to one of the Registrant's quarries for future quarry operations. During 1994 the Registrant continued the repairs and maintenance program on its plants. The Registrant believes that its plants are presently in good condition and properly maintained. The Registrant owns in fee properties containing adequate deposits of limestone and other raw materials (See Item 1 (c) (iii)) which directly adjoin or are close to the plant sites. The Registrant leases a parcel of land under a long-term lease with the municipality of Ponce, on which it installed certain facilities for coal receiving and handling. The coal received through said facilities is used as fuel in the Registrant's cement and hydrated lime manufacturing operations. Used in paper and packaging segment The manufacturing plant of the St. Regis Paper and Bag Division is located on a site owned by it in fee in Ponce, Puerto Rico. The Registrant believes the plant to be in good condition and properly maintained. Used in realty operations The Registrant and one of its subsidiaries own in fee, and hold for future development and sale, approximately 532 acres of land throughout Puerto Rico. (See Item 1 (c) (i).) 9 Used for office facilities The Registrant and its subsidiaries own a one story building housing its executive offices located in the Amelia Industrial Park, Guaynabo, Puerto Rico. Information about leased properties is incorporated by reference from the Annual Report, page 29, section entitled "Notes to Consolidated Financial Statements, Note 13/Lease Commitments." Item 3. Legal Proceedings There are presently pending against the Registrant the legal proceedings described in the Annual Report, page 29, section entitled "Notes to Consolidated Financial Statements, Note 15/Contingent Liabilities and Other Commitments", furnished pursuant to Item 14, to which reference is hereby made and which is incorporated by reference herein. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report. PART II Items 5 through 8 of Part II of this report are omitted as permitted by General Instruction G(2) since the information required by such items is contained in the Registrant's Annual Report which is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors of the Registrant (a) Identification of Directors Information required herein is contained in a definitive Proxy Statement for use in connection with the Registrant's Annual Meeting of Stockholders to be held on May 3, 1995 filed with the Commission pursuant to Regulation 14A (the "Proxy Statement") pages 2 to 7, section entitled "Information about Nominees, Directors and Principal Stockholders," and is incorporated herein by reference. Item 11. Executive Compensation Information required by Item 11 is contained in the Proxy Statement, pages 10 to 17, section entitled "Executive Compensation" through and including section entitled "Certain Transactions with Management," and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information required by Item 12 is contained in the Proxy Statement, pages 2 to 9, sections entitled "Information about Nominees, Directors and Principal Stockholders" and "Security Ownership of Certain Beneficial Owners," and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information required by Item 13 is contained in the Proxy Statement, pages 16 to 17, sections entitled "Certain Transactions with Management" and "Compensation Committee Interlocks and Insider Participation," and is incorporated herein by reference. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report on Form 10-K: 1. Financial Statements incorporated by reference to the Annual Report, pages 20 to 29; and 2. Financial statement schedules and supplementary data required by Item 8 of Form 10-K, filed herewith. The financial statement schedules required by Item 14(d) of Form 10-K are excluded since the Registrant is primarily an operating company. All subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have minority equity interest and/or indebtedness to any person other than the Registrant or the consolidated subsidiaries in amounts which together exceed 10% of the Registrant's total consolidated assets at December 31, 1994. 10 (b) Reports on Form 8-K: None. (c) Exhibits required by Section 601 Regulation S-K: 3. Certificate of Incorporation and By-Laws 3.1 Certificate of Incorporation and amendment thereto filed as an exhibit to Form S-1 on March 25, 1963, with (i) composite copy of the Certificate of Incorporation dated May 16, 1983 filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1983, (ii) amendments dated May 6, 1987 filed as an exhibit to Form 10-Q for the fiscal quarter ended June 30, 1987, and (iii) amendment dated May 5, 1993 (increasing the number of authorized shares of common stock from 10 million to 20 million) filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1993.* 3.2 By-Laws of the Registrant, as amended, filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1987, with (i) amendment dated January 1993 filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1993*, and (ii) amendment dated December 22, 1994 filed herewith. 10. Material contracts 10.1 Coal Purchase/Sale Agreement between Registrant and Carbones de Colombia, S.A. dated as of December 14, 1982 filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1982.* Copy of addendum No. 5 which changed the quantity of coal purchases to 100,000 tons per year through the year 2000, was filed as an exhibit to Form 10-Q for the fiscal quarter ended March 31, 1992.* 10.2 (a) Consolidated and restated loan agreement dated as of September 27, 1985 among Registrant, Registrant's Guarantors and the Government Development Bank for Puerto Rico for approximately $18.3 million encompassing all outstanding debt of the Registrant to the bank as of that date.* (b) Indenture trust agreement dated September 27, l985 between Registrant as grantor and Banco de Ponce as trustee for the benefit of the Government Development Bank for Puerto Rico.* (Both documents listed above in this paragraph 10.2 were filed as exhibits to a Current Report on Form 8-K dated September 1985 and are related to the early extinguishment of the debt transaction described therein.) 10.3 Loan agreement between the Registrant and Lincoln National Pension Insurance Company, The Lincoln National Life Insurance Company, First Penn-Pacific Life Insurance Company and Security Connecticut Life Insurance Company in the principal amount of $15,000,000 dated as of August 1, 1987 filed as exhibits to a Current Report on Form 8-K dated August 1987.* 10.4 Loan agreement between the Registrant and Banco Popular de Puerto Rico in the principal amount of $10,000,000 dated as of November 6, 1987 filed as an exhibit to a Current Report on Form 8-K dated November 1987.* Letter dated January 17, 1992, which modifies certain terms of such loan agreement (including a reduction in the interest rate and a change in the original repayment schedule from quarterly payments to annual payments) filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1991.* 10.5 Form of Golden Parachute Agreement executed by the Registrant during the third quarter of 1989 with a consultant and 18 of the Registrant's key officers, filed as an exhibit to Form 10-Q for the fiscal quarter ended September 30, 1989.*+ 10.6 Loan agreement between the Registrant and Banco Popular de Puerto Rico in the principal amount of $8,000,000 dated as of December 8, 1993 (to be used to finance the conversion to cement grinding of two existing slurry mills) and letter dated July 11, 1994 (amending certain sections of the original loan agreement). 10.7 Loan agreement between the Registrant and The Bank of Nova Scotia in the principal amount of $16,000,000 dated as of February 26, 1993 (to be used in the financing of the conversion of two existing slurry mills to cement grinding). 10.8 Loan agreement between the Registrant and Banco Popular de Puerto Rico in the principal amount of $6,000,000 dated August 2, 1993 (to pay a $3 million scheduled installment and an optional $3 million payment on a long-term debt due August 1993) and letter dated July 11, 1994 (amending certain sections of the original loan agreement). 10.9 Loan agreement between the Registrant and Banco Popular de Puerto Rico in the principal amount of $7,000,000 dated September 15, 1994 (used to refinance the outstanding balance of another loan) filed as an exhibit to Form 10-Q for the fiscal quarter ended September 30, 1994.* 10.10 Amendment to the Consulting Agreement between the Registrant and Antonio Luis Ferre dated January 1, 1995.+ 13. Annual Report to security holders for the year ended December 31, 1994. 21. Subsidiaries of the Registrant are included as part of the Annual Report to security holders, page 32, section entitled "Subsidiaries." All of the Registrant's subsidiaries are incorporated under the laws of the Commonwealth of Puerto Rico, except for Caribbean Cement Carriers Corporation, which is incorporated under the laws of the Republic of Panama, and Ferre Export Corporation, which is incorporated under the laws of the state of New York. 23. Consent of Price Waterhouse, independent public accountants. 27. Financial Data Schedule (for SEC use only) __________________________________ * Incorporated herein by reference. + Exhibit constitutes a management contract or compensatory plan or arrangement required to be filed pursuant to Item 601 (b) (10) (iii). 11 S I G N A T U R E S Pursuant to the requirements of Section 13 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. PUERTO RICAN CEMENT COMPANY, INC. (Registrant) Date: March 22, 1995 By: /s/ Miguel Nazario ------------------- Miguel Nazario President and Chief Executive Officer and Director 12 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Date: March 22, 1995 By: /s/ Miguel Nazario ----------------------------- Miguel Nazario President and Chief Executive Officer and Director Date: March 22, 1995 By: /s/ Antonio Luis Ferre ----------------------------- Antonio Luis Ferre Chairman of the Board and Director Date: March 22, 1995 By: /s/ Alberto M. Paracchini ----------------------------- Alberto M. Paracchini Director and Vice Chairman of the Board Date: March 22, 1995 By: /s/ Hector del Valle ----------------------------- Hector del Valle Director and Vice Chairman of the Board Date: March 22, 1995 By: /s/ Jose J. Suarez ----------------------------- Jose J. Suarez Executive Vice President in Charge of Operations and Director Date: March 22, 1995 By: /s/ Antonio L. Ferre Rangel ----------------------------- Antonio L. Ferre Rangel Vice President of Strategic Development and Director Date: March 22, 1995 By: /s/ Jose O. Torres ----------------------------- Jose O. Torres Vice President of Finance, Secretary and Treasurer Date: March 22, 1995 By: /s/ Angel M. Amaral ----------------------------- Angel M. Amaral Vice President and Controller Date: March 22, 1995 By: /s/ Wallace Gonzalez Oliver ----------------------------- Wallace Gonzalez Oliver Director Date: March 22, 1995 By: /s/ Esteban D. Bird ----------------------------- Esteban D. Bird Director Date: March 22, 1995 By: /s/ Emilio J. Venegas ----------------------------- Emilio J. Venegas Director Date: March 22, 1995 By: /s/ Oscar A. Blasini ----------------------------- Oscar A. Blasini Director Date: March 22, 1995 By: /s/ Hector Puig Ramirez ----------------------------- Hector Puig Ramirez Director Date: March 22, 1995 By: /s/ Rosario J. Ferre ----------------------------- Rosario J. Ferre Director Date: March 25, 1995 By: /s/ Federico F. Sanchez ----------------------------- Federico F. Sanchez Director Date: March 25, 1995 By: /s/ Jorge L. Fuentes ----------------------------- Jorge L. Fuentes Director Date: March 22, 1995 By: /s/ Carlos J. Suarez ----------------------------- Carlos J. Suarez Director Date: March 22, 1995 By: /s/ Mariano J. Mier ----------------------------- Mariano J. Mier Director Date: March 22, 1995 By: /s/ Juan A. Albors ----------------------------- Juan A. Albors Director Date: March 22, 1995 By: /s/ Federico Stubbe ----------------------------- Federico Stubbe Director 13 PRICE WATERHOUSE REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Puerto Rican Cement Company, Inc. Our audits of the consolidated financial statements referred to in our report dated February 17, 1995 appearing on page 20 of the 1994 Annual Report to Shareholders of Puerto Rican Cement Company, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE ---------------- PRICE WATERHOUSE San Juan, Puerto Rico February 17, 1995 CERTIFIED PUBLIC ACCOUNTANTS (OF PUERTO RICO) License No. 10 Expires Dec. 1, 1995 Stamp 1259907 of the P.R. Society of Certified Public Accountants has been affixed to the file copy of this report 24 14 PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES SCHEDULE V PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F BALANCE AT BALANCE AT BEGINNING ADDITION END OF CLASSIFICATIONS OF YEAR AT COST RETIREMENTS(1) TRANSFERS YEAR ------------------------------------------------------------------------------------------------------------- 1992 Land and quarries $ 2,639,596 $ 1,642,779 $ 198 $ - $ 4,282,177 Buildings 27,660,916 (100,000) 258,516 772,538 28,074,938 Machinery and equipment 89,654,889 208,483 1,501,097 1,074,585 89,436,860 Pollution control equipment 27,601,476 66,269 909,897 28,445,104 Construction in progress 178,962 2,578,058 - (2,757,020) - ---------------------------------------------------------------------------- Total $147,735,839 $ 4,329,320 $1,826,080 $ - $150,239,079 ============================================================================ 1993 Land and quarries $ 4,282,177 $ 17,298 $ - $ - $ 4,299,475 Buildings 28,074,938 222,894 391,764 28,243,808 Machinery and equipment 89,436,860 270,882 2,161,579 1,630,539 89,176,702 Pollution control equipment 28,445,104 22,967 218,325 434,158 28,683,904 Construction in progress - 8,825,821 - (2,456,461) 6,369,360 ---------------------------------------------------------------------------- Total $150,239,079 $ 9,136,968 $2,602,798 $ - $156,773,249 ============================================================================ 1994 Land and quarries $ 4,299,475 $ - $ - $ - $ 4,299,475 Buildings 28,243,808 - 68,220 158,047 28,333,635 Machinery and equipment 89,176,702 244,916 4,005,731 2,385,098 87,800,985 Pollution control equipment 28,683,904 700 878,748 215,137 28,020,993 Construction in progress 6,369,360 11,011,147 - (2,758,282) 14,622,225 ---------------------------------------------------------------------------- Total $156,773,249 $11,256,763 $4,952,699 $ - $163,077,313 ============================================================================
-------------------------------- (1) Retirements relate mainly to the cost of fully depreciated assets no longer in use. In 1994, total retirements include equipment written-off with a book value of $587,671. 15 SCHEDULE VI PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F BALANCE ADDITIONS BALANCE AT CHARGED TO AT BEGINNING COSTS AND END OF DESCRIPTION OF YEAR EXPENSES RETIREMENTS TRANSFERS YEAR ------------------------------------------------------------------------------------------------------------- 1992 Land and quarries $ 407,961 $ 11,248 $ $ - $ 419,209 Buildings 5,438,376 593,921 258,518 - 5,773,779 Machinery and equipment 22,853,395 5,042,112 1,500,804 (518,580) 25,876,123 Pollution control equipment 10,682,649 1,287,327 66,269 518,580 12,422,287 --------------------------------------------------------------------------- Total $39,382,381 $6,934,608 $1,825,591 $ - $44,491,398 =========================================================================== 1993 Land and quarries $ 419,209 $ 11,397 $ $ - $ 430,606 Buildings 5,773,779 587,765 222,894 - 6,138,650 Machinery and equipment 25,876,123 5,025,196 2,161,580 - 28,739,739 Pollution control equipment 12,422,287 1,291,688 218,324 - 13,495,651 --------------------------------------------------------------------------- Total $44,491,398 $6,916,046 $2,602,798 $ - $48,804,646 =========================================================================== 1994 Land and quarries $ 430,606 $ 12,725 $ $ - $ 443,331 Buildings 6,138,650 584,410 68,220 - 6,654,840 Machinery and equipment 28,739,739 5,046,397 3,705,109 - 30,081,027 Pollution control equipment 13,495,651 1,305,590 591,699 - 14,209,542 --------------------------------------------------------------------------- Total $48,804,646 $6,949,122 $4,365,028 $ - $51,388,740 ===========================================================================
---------------------------------- (1) Retirements relate mainly to accumulated depreciation of fully depreciated assets. 16 SCHEDULE VIII PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ------------------------------------------------------------------------------------------------------------- ADDITIONS ADDITIONS DEDUCTIONS FROM BALANCE AT CHARGED TO CHARGED RESERVES WRITE-OFF BALANCE AT BEGINNING COST AND TO OF UNCOLLECTIBLE END OF DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS YEAR ------------------------------------------------------------------------------------------------------------- Allowance for doubtful accounts 1992 $1,215,674 $50,110 $62,283 $1,203,501 1993 $1,203,501 $ 1,492 $83,392 $1,121,601 1994 $1,121,601 $ 948 $28,546 $1,094,003
17 SCHEDULE IX PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES SHORT TERM BORROWING FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
----------------------------------------------------------------------------------------------------------------- OUTSTANDING DURING THE PERIOD BALANCE WEIGHTED --------------------------------- WEIGHTED AVERAGE CATEGORY AT END AVERAGE MAXIMUM AVERAGE INTEREST RATE OF BORROWINGS OF PERIOD INTEREST RATE* AMOUNT AMOUNT (1) DURING THE PERIOD ----------------------------------------------------------------------------------------------------------------- 1992 ---- Banks and other financial institutions: Under line of credit None None 1993 ---- Banks and other financial institutions: Under line of credit None None 1994 ---- Banks and other financial institutions: $2,420,000 6.15% $3,400,000 $423,700 5.69% Under line of credit
------------------- (1) The average amount outstanding during the period was computed based on the actual daily balances outstanding during the year. (2) The weighted average interest rate during the period was computed based on the sum of the actual interest rates. 18 SCHEDULE X PUERTO RICAN CEMENT COMPANY, INC. AND SUBSIDIARY COMPANIES SUPPLEMENTARY INCOME STATEMENTS INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
----------------------------------------------------------------------------- ITEMS 1994 1993 1992 ----------------------------------------------------------------------------- Maintenance and repairs (1) $5,264,126 $3,683,584 $3,754,347 Depreciation and amortization of intangible assets, pre-operating costs and similar deferrals (2) (2) (2) Taxes, other than payroll and income taxes: Excise taxes $1,698,615 $1,505,312 $1,492,675 Property taxes 2,886,411 3,222,074 2,607,055 Other 100,934 116,523 128,045 $4,685,960 $4,843,909 $4,227,775 Royalties (2) (2) (2) Advertising costs (2) (2) (2)
------------------------------- (1) Amount includes $2.3 million from a major overall maintenance and replacement work of worn interchangeable machinery parts mostly related to dry process equipment. This kind of work is not recurrent on an annual basis but is expected to take place every three to five years. (2) Amount is not disclosed because it is lower than the minimum required for reporting in accordance with Rule 12-11 of Regulation S-X.
EX-3.2 2 RESOLUTION 1 EXHIBIT 3.2 Amendment to the Section XIII of the By Laws of the Corporation RESOLUTION "Whereas management has recommended certain changes to Section XIII of the By Laws of the Corporation dealing with duties and responsibilities of certain officers of the Corporation; THEREBY IT IS RESOLVED to change the following Sections of the By Laws. Section XIII - 6 will be changed to read: 6. The Chairman shall preside over the meetings of the Board of Directors. A new Section XIII-8 will be inserted to read: The Chief Executive Officer 8. The Chief Executive Officer shall be responsible for implementing the general and financial policies; execute bonds, deeds, and contracts in the name and on behalf of the Corporation and shall also have such other powers and perform such other duties as from time to time may be conferred upon him by the Board of Directors. Following paragraphs will be renumbered due to the insertion of this new paragraph, XIII-8." 30 EX-10.7 3 THE BANK OF NOVA SCOTIA LOAN AGREEMENT 1 EXHIBIT 10.7 PUERTO RICAN CEMENT COMPANY INC. February 26, 1993 The Bank of Nova Scotia Hato Rey Branch 273 Ponce de Leon 4th Floor Hato Rey, Puerto Rico Attention: Mr. Victor Irizarry Re: $16,000,000 financing mill conversion project Puerto Rican Cement Company, Inc. Gentlemen: We hereby enclose a copy of your letter dated January 19, 1993 indicating terms and conditions under which a $16,000,000 financing for the subject project has been approved by the Bank of Nova Scotia. Said letter has been accepted by the undersigned on behalf of Mr. Hector del Valle, subject to these additional conditions: a) Drafting of Loan Agreement covering terms and conditions of the financing which shall be approved by the company's counsel Dominguez & Totti. b) Final approval by the Board of Directors of the company for the execution of such agreement. c) Final discussion and acceptance of the terms to be included in such Agreement covering the conditions under which a defeasance reserve at Borrower's option will be executed. Upon execution of such Loan Agreement we will provide advanced payment of front end fee of $40,000 as part of the cost of subject credit. Very truly yours, /s/ Jose O. Torres Jose O. Torres Vice President Finance 31 2 EXHIBIT 10.7 The Bank of Nova Scotia Hato Rey Branch 273 Ponce de Leon 4th. Floor Hato Rey, Puerto Rico G.P.O. Box BM January 19, 1993 San Juan, P.R. 00936 Cable "SCOTIABANK" Mr. Hector del Valle President Puerto Rican Cement Co., Inc. P.O. Box 4487 San Juan, P.R. 00936-4487 Dear Mr. Del Valle: We are pleased to confirm that subject to acceptance by the company, The Bank of Nova Scotia (the "Bank") will make available to Puerto Rican Cement Co., Inc. ("the "Borrower") the following credit facilities on the terms and conditions set out below and in the Schedule A attached hereto (collectively called the "Commitment Letter"). CREDIT A AUTHORIZED AMOUNT: $16,000,000 TYPE : Non-Revolving. PURPOSE : To provide bridge financing for improvements to the company's plant and equipment. CURRENCY : United States Dollars. AVAILMENT : The borrower may utilize the credit by way of Direct advances evidenced by the Borrower's Demand Promissory Note(s) providing all the terms and conditions of the credit are met. INTEREST RATE : One (1) percent over our net cost of 936 funds, if available, or one (1) percent over the Bank's London Interbank Offer Rate (LIBOR) adjusted, or one (1) percent over The Bank of Nova Scotia Base Rate in the City of New York, fluctuating concurrently with any changes on such Base Rate. Interest will be payable monthly. Borrower will have the option to fix interest rate on the full amount or a portion of the loan, up to the term of the loan, subject to availability to the Bank of back to back funds. FEES : Front end fee of $40,000 payable upon acceptance of this commitment letter. 32 3 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 2 TERM AND REPAYMENT ARRANGEMENT : The loan is repayable in full on completion of the improvements or by December 31, 1995, whichever is earlier, from proceeds of Credit B. PREPAYMENT : No prepayments permitted at any time in whole or in part when advances are funded with 936 or LIBOR deposits, except on rollover dates. SPECIFIC SECURITY : Unsecured. CREDIT B AUTHORIZED AMOUNT: $16,000,000 TYPE : Non-Revolving and/or Stand-by Letter of Credit PURPOSE : To repay Credit A by way of a direct non revolving (five year) loan or the establishment of a Standby Letter of Credit to provide credit enhancement for five year capital notes to be sold directly to 936 eligible companies. CURRENCY : United States Dollars. AVAILMENT : The borrower may utilize the credit by way of Direct advances evidenced by the Borrower's Demand Promissory Note(s) providing all the terms and conditions of the credit are met. INTEREST RATE : One (1) percent over our net cost of 936 funds, if available or one (1) percent over the Bank's London Interbank Offer Rate (LIBOR) adjusted, or one (1) percent over The Bank of Nova Scotia Base Rate in the City of New York, fluctuating concurrently with any changes on such Base Rate. 33 4 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 3 Borrower will have the option to fix interest rate on the full amount or a portion of the loan, up to the term of the loan, subject to availability to the Bank of back to back funds. In the event of any drawdown under the Standby Letter of Credit, interest will be applied on the outstanding amount of any of such unpaid drawdowns at the rate of one (1) percent over The Bank of Nova Scotia Base Rate in the City of New York, fluctuating concurrently with any change on such Base Rate. COMMISSIONS : One (1) percent per annum on the Stand-by Letter of Credit facility. TERM AND REPAYMENT ARRANGEMENT : The term of the loan is 5 years. Principal is to be paid in full at maturity at the end of the fifth year from disbursement date. Any drawdown under the Standby Letter of Credit will be immediately repaid from Borrower's own resources. PREPAYMENT : No prepayments permitted at any time in whole or in part when advances are funded with 936 or LIBOR deposits, except on rollover dates. SPECIFIC SECURITY : Unsecured. CONDITIONS PRECEDENT : The following conditions must be met prior to the interim disbursement: All required permits from the various governmental agencies to be in place and provided to the Bank. Detailed final budget to be provided to the Bank. GENERAL CONDITIONS : Until all debts and liabilities have been discharged in full, the following conditions will apply in respect of the credits: 34 5 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 4 - A new Loan Agreement to be prepared and/or reviewed by the Bank's attorneys to cover the now authorized increased loans. - Advances to be made against certifications duly reviewed and approved by our appointed engineer, cost of which is for Borrower's account. - Selected contractor, other than the Borrower, to be fully bonded (payment and performance). - Adequate builder's risk insurance to be in place. - Usual qualification documentation to be provided when loans are funded with 936 deposits. - Quarterly in-house financial statements to be provided within 45 days of each quarter. - Annual audited financial statements to be provided within 90 days of each fiscal year end. - Construction progress report is to be provided monthly. - The facility will be subject to periodic and/or annual review. The credit facilities herein outlined in this Commitment Letter may at any time be participated to the Bank's subsidiary, Scotiabank de Puerto Rico. The above credits are in addition to an existing Non-Revolving loan with a balance of $8,571 428 granted to Puerto Rican Cement Co., Inc. and Desarrollos Multiples Insulares, Inc. and Florida Lime Corp., covered under a Loan Agreement dated December 6, 1989 with the former Banco de Ponce, as amended on December 21, 1990 and August 23, 1991, which terms and conditions remain unchanged, and an Operating facility for $4,000,000 available to Puerto Rican Cement Co., Inc. The said credits were purchased from Banco Popular de Puerto Rico by our subsidiary, Scotiabank de Puerto Rico under a Purchase and Assumption Agreement on dated May 21, 1991. 35 6 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 5 If the terms and conditions set out above are acceptable to you, please sign the enclosed copy of this letter in the space indicated below and return to us by the close of business on January 29, 1993. If not accepted by that date, the offer will lapse. We look forward to a continued cordial and mutually beneficial relationship. Yours truly, /S/ David F. Babensee ---------------------- David F. Babensee Terms and conditions set out above and in Schedule A attached hereto are hereby acknowledged and accepted by: PUERTO RICAN CEMENT CO., INC. BY: HECTOR DEL VALLE PRESIDENT DATE: 36 7 EXHIBIT 10.7 SCHEDULE A ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO ALL CREDITS Calculation and Payment of Interest 1. Interest on loans/advances made will be calculated on a daily basis and payable monthly on the 22nd day of each month, (unless otherwise stipulated by the Bank). Interest shall be payable not in advance on the basis of a 360 day year for the actual number of days elapsed when advances drawn in 936 and/or LIBOR funds and shall be payable not in advance on the basis of a 365 day year for the actual number of days elapsed when advances drawn in conventional funds both before and after demand of payment or default and/or judgement. "Base Rate", as used herein, is a variable per annum reference rate of interest as announced and adjusted by the Bank from time to time for United States dollar loans made in the United States and Puerto Rico. No representation is made that the said rate is the lowest or most favourable rate offered. "LIBOR" (London Interbank Offer Rate) adjusted shall mean, with respect to an interest period for an advance, the rate per annum at which United States dollar deposits of equal (or more) amounts in United States dollars are offered by the principal office of The Bank of Nova Scotia in London, England to prime banks in the London interbank market at 11:00 a.m. (London time) two business days before the first day of such interest period for a period equal to such interest period and adjusted for patente costs. The period between the day hereof and the day of payment in full of the principal amount thereof shall be divided into successive periods, each such period being an interest period. Indemnity Provision 2. If the introduction of, or any change in, or in the interpretation of, or any change in its application to the Borrower of, any law or regulation, or compliance with any guideline from any central bank or other governmental authority (whether or not having the force of law) has the effect of increasing the cost to the Bank of performing its obligations hereunder or otherwise reducing its effective return hereunder or on its capital allocated in support of the credit(s), then upon demand from time to time the Borrower shall compensate the Bank for such cost or reduction pursuant to a certificate reasonably prepared by the Bank. 37 8 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 7 (a) Prepayment Without Fee In the event of the Borrower becoming liable for such costs, the Borrower shall have the right to cancel without fee all of any unutilized portion of the affected credit (other than any portion in respect of which the Borrower has requested utilization of the credit in which case cancellation may be effected upon indemnification of the Bank for any costs incurred by the Bank thereby), and to prepay, without fee the outstanding principal balance thereunder as long as same has been drawn in conventional funds, other than the face amount of any document or instrument issued or accepted by the Bank for the account of the Borrower, such as a Letter of Credit, a Guarantee or a Banker's Acceptance. (b) Prepayment of Fixed Advances If any prepayment is made, for any reason, of an advance bearing a fixed rate of interest, including without limitation a 936 or LIBOR funded advance, the Borrower shall compensate the Bank for the cost of any early termination of its funding arrangements in accordance with its normal practices, such costs to be notified to the Borrower in a certificate reasonably prepared by the Bank. Notice of Drawdown/Payments 3. The Borrower shall give the Bank prior notice of a drawdown or payment of any loan/advance as follows: - two bank business days when the amount is $5 million dollars or more. Initial Drawdown 4. The right of the Borrower to obtain the initial drawdown under the Credit(s) is subject to the condition precedent that there shall not have been any material adverse changes in the financial condition of the Borrower or any guarantor of the Borrower. Periodic Review 5. The obligation of the Bank to make further advances or other accommodation available under any Credit(s) of the Borrower under which the indebtedness or liability of the Borrower is payable on demand, is subject to periodic review and to no adverse change occurring in the financial condition of the Borrower. 38 9 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 8 Waiver 6. Any waiver by either party of a breach of any part of this Agreement caused by the other party will not operate as or be interpreted as a waiver of any other breach. The failure of a party to insist on strict adherence to any term of the Agreement on one or more occasions is not to be considered to be a waiver of any of their rights under this Agreement or to deprive that party of the right to insist upon strict adherence to that term or any other term in the future. No waiver shall be of any effect unless it is in writing and authenticated by the waiving party. Brokerage Commission 7. The Borrower agrees to indemnify and hold harmless the Bank, from and against all loss, damage, liability and arising out of, or in connection with, brokerage commissions or finder's fees due or alleged to be due in connection with this offer or the loan to be made pursuant hereto. Acceleration 8. (a) All indebtedness and liability of the Borrower to the Bank payable on demand, is repayable by the Borrower to the Bank at any time on demand; (b) All indebtedness and liability of the Borrower to the Bank not payable on demand, shall, at the option of the Bank, become immediately due and payable, the security held by the Bank shall immediately become enforceable, and the obligation of the Bank to make further advances or other accommodation available under the Credits shall terminate, if any one of the following Events of Default occurs: (i) the Borrower fails to make when due, whether on demand or at a fixed payment date, by acceleration or otherwise, any payment of interest, principal fees, commissions or other amounts payable to the Bank; (ii) there is a breach by the Borrower of any other term or condition contained in this Commitment Letter or in any other agreement to which the Borrower and the Bank are parties; (iii) any default occurs under the security listed in this Commitment Letter under the headings "Specific Security" or "General Security" or under any other credit, loan or security agreement to which the Borrower is a party; 39 10 EXHIBIT 10.7 PUERTO RICAN CEMENT CO., INC. 9 (iv) any bankruptcy, reorganization, compromise, arrangement, insolvency or liquidation proceedings or other proceedings for the relief of debtors are instituted by or against the Borrower and, if instituted against the Borrower, are allowed against or consented to by the Borrower or are not dismissed or stayed within 60 days after such institution; (v) a trustee is appointed over any property of the Borrower or any judgement or order or any process of any court becomes enforceable against the Borrower or any property of the Borrower or any creditor takes possession of any property of the Borrower; (vi) any adverse change occurs in the financial conditions of the Borrower. Costs 9. All costs, including legal and appraisal fees incurred by the Bank relative to security and other documentation, shall be for the account of the Borrower and may be charged to the Borrower's deposit account when submitted. 40 EX-10.8 4 LOAN AGREEMENT BETWEEN P.R. CEMENT & BANCO POPULAR 1 EXHIBIT 10.8 BANCO POPULAR July 2, 1993 Mr. Jose 0. Torres Vice President & Treasurer Puerto Rican Cement Co., Inc. PO Box 364487 San Juan, Puerto Rico 00936-4487 Dear Mr. Torres: We are pleased to inform you that Banco Popular de Puerto Rico (the Bank) has available to Puerto Rican Cement Co., Inc. (the Company) the credit facilities outlined below and subject to the following terms and conditions: 1. Amount and Purpose: $6,000,000- An unsecured five years term loan to refinance certain payments to the Lincoln National Life Insurance Company that will become due and payable on August 1, 1993. 2. Repayment Schedule: Five (5) annually installments of $1,200,000 or at the option of borrower one bullet payment at the end of the five (5) year term, subject to the creation of a sinking fund, with an acceptable Trustee to the Bank, that will annuallyincrease by a present value equivalent to $1,200,000 until reaching $6,000,000 as of 8-01-98. Maturities of such investments will fluctuate from one (1) to five (5) years. The Company should provide the Bank with a Corporate Resolution authorizing the pledge of the fund as a reserve for payment of the term loan on maturity date. On both alternatives the interest will become due and payable every thirty (30) days. 3. Interest Rate: Six and a quarter of one percent per annum (6.250) effective from takedown date through the next sixty (60) months. 4. Prepayment: The Company may choose to prepay the outstanding balance of the loan providing, however, that the Company will compensate the Bank for any funding loss on such prepayment. 41 2 EXHIBIT 10.8 Mr. Jose 0. Torres July 2, 1993 Page 2 An event of default under the loan agreement executed by and between the Bank and the Company on December 6, 1989 and under the terms and conditions of our commitment letter dated March 9, 1993 will automatically constitute a default on these credit facilities. These terms and conditions, and others required by our legal counsel as to the pledge of the investment instruments, will be incorporated into a loan agreement to be executed by and between the Bank and the Company. All legal expenses will be paid by the Company. Kindly sign the enclosed copy of this letter in acceptance to the terms and conditions previously described and return it to us on or before August 1, 1993, the date in which our commitment letter will expire. Cordially /S/ Pedro J. Pena -------------------- Pedro J. Pena Vice President Corporate Banking xdc Enclosure PUERTO RICAN CEMENT CO., INC. /S/ Jose O. Torres July 21, 1993 42 3 EXHIBIT 10.8 BANCO POPULAR July 11, 1994 Mr. Jose 0. Torres Vice President and Treasurer Puerto Rican Cement Company, Inc. PO Box 364487 San Juan, Puerto Rico 00936-4487 Dear Mr. Torres: Reference is made to your request for certain modifications to the Loan Agreements executed by and between Puerto Rican Cement Company (the Borrower) and Banco Popular de Puerto Rico (the Bank) on August 20, 1993 and December 8, 1993 respectively. We are pleased to inform you that the Bank is hereby amending the following section of said loan agreements, to read as follows: August 20, 1993 Loan Agreement: Section 1. Term Loan: Item C. Principal on the term loan shall be paid by BORROWER to the BANK in (I) four (4) equal and consecutive annual installments of Seven Hundred and Fifty Thousand Dollars ($750,000.00) each, due and payable on the first (1st) day of August of the years 1994, 1995, 1996, 1997 and a balloon payment of Three Million Dollars ($3,000,000.00) or 50% of the total amount loaned to Borrower due and payable on August 1, 1998, or (II) in one (1) bullet payment due on the first (1st.) day of August of the year nineteen hundred ninety eight (1998), subject to the creation by the BORROWER of a sinking fund, with a Trustee acceptable to the BANK, to increase annually by a present value equivalent to ONE MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,000.00) until reaching the principal sum of SIX MILLION DOLLARS ($6,000,000.00) on or before the first (1st.) day of August of the year nineteen hundred ninety eight (1998) or (III) in five (5) equal and consecutive annual installments of one million Two Hundred Thousand Dollars ($1,200,000.00) each, 43 4 EXHIBIT 10.8 Mr. Jose 0. Torres July 11, 1994 Page 2 due and payable on the first (1st) day of August of the years 1994, 1995, 1996, 1997 and 1998. The outstanding principal balance shall accrue interest from this date and until payment in full, even after maturity, at a fixed annual rate of SIX AND ONE FOURTH PERCENT (6 1/4%) based on a 360 days-year. Interest on the decreasing balance of the principal sum of the term loan at the rate specified shall be paid by BORROWER monthly on the last day of each and every month. December 8. 1993 Loan Agreement: Section 1, Loan Item C Principal on the loan shall be paid by borrower to the Bank, in one of the following terms (I) five (5) equal and consecutive annual installments of one million Six Hundred Thousand dollars ($1,600,000.00) each, due and payable on the tenth (10th) day of November of the years 1994, 1995, 1996, 1997 and 1998 or (II) in four (4) equal and consecutive annual installments of 12.5 % each of the total principal amount loaned to Borrower, due and payable on the tenth (10th) day of November of the years 1994, 1995, 1996, 1997 and a balloon payment of Four Million Dollars ($4,000,000.00) or 50% of the total principal amount loaned to borrower, due and payable on November 10, 1998, or (II) in one (1) bullet payment due on the tenth (10th) day of November of the year nineteen hundred ninety eight (1998), subject to the creation by the Borrower of a sinking fund, duly pledged in favor of the Bank, with A Trustee acceptable to the bank, to increase annually by A present value equivalent to One Million Six Hundred Thousand Dollars ($1,600,000.00) or by 20% of the total loaned to Borrower until reaching the principal sum of Eight Million Dollars ($8,000,000.00) on or before the tenth (10th) day of November of the year nineteen hundred ninety eight (1998). The outstanding principal balance shall accrue interest from this date and until payment in full, even after maturity, at a fixed annual rate of Six and One Fourth Percent (6 1/4%) based on a 360 days year. Interest on the decreasing. balance of the principal sum of the loan, at the rate specified, shall be paid by borrower monthly on the last day of each month. 44 EX-10.10 5 AMEND. #1 TO CONSULTANT AGREEMENT 1 EXHIBIT 10.10 AMENDMENT NO. 1 TO CONSULTANT AGREEMENT AMENDMENT, dated as of January 1, 1995 between PUERTO RICAN CEMENT COMPANY, INC. (the "COMPANY") and MR. ANTONIO LUIS FERRE (the "CONSULTANT"). W I T N E S S E T H WHEREAS, the CONSULTANT and the COMPANY are parties to a Consultant Agreement dated as of July 15, 1988 (the "Agreement"). WHEREAS, the CONSULTANT has continued to make substantial contributions to the profitability, growth and financial strength of the COMPANY through his expertise in the areas of financing, sales, project development, executive salaries, shareholder relationship and strategic planning. WHEREAS, the CONSULTANT and the COMPANY desire to amend and revise the Agreement to reflect the foregoing, and to reflect a change in the compensation of the CONSULTANT. NOW, THEREFORE, in consideration of the premises, the CONSULTANT and the COMPANY hereby agree that the Agreement be amended as follows: 1. The second "WHEREAS" clause on the first page of the Agreement is hereby amended in its entirety to read as follows: WHEREAS, the CONSULTANT has been Chairman and/or Co-Chairman of the Board of the Company from 1976 to 1985, Vice Chairman of the Board from April 1, 1985 to December 31, 1994 and effective January 1, 1995, the CONSULTANT is again serving as the Chairman of the Board of the COMPANY. 2. The first sentence of Section 2 of the Agreement shall be amended to read as follows: The CONSULTANT shall receive an annual compensation of $200,000.00 effective the 1st. of January, 1995, subject to annual increases each year on lst. of January based on, among other factors, a cost of living adjustment applicable to Puerto Rico. The rest of Section 2 of the Agreement shall remain without amendment. 3. Section 3 of the Agreement shall be amended in its entirety to read as follows: 3. SERVICES: The CONSULTANT shall provide approximately ten (10) to fifteen (15) hours of services a week to the COMPANY in those areas that the Board of Directors and/or the President of the COMPANY mutually agree with the CONSULTANT. 4. Except as amended by this Amendment, all of the provisions, terms and conditions of the Agreement shall remain in full force and effect. 5. This Amendment shall be governed by and construed in accordance with the laws of Puerto Rico without regard to principles of conflict of laws. 6. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Agreement. 45 2 EXHIBIT 10.10 7. This Amendment may be executed in one or more counterparts, each of which shall be deemed and original and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. CONSULTANT /S/ Antonio Luis Ferre ----------------------- ANTONIO LUIS FERRE PUERTO RICAN CEMENT COMPANY, INC. BY: /S/ Miguel A. Nazario ---------------------------- MIGUEL A. NAZARIO PRESIDENT Affidavit Number: 520 Sworn and subscribed to before me by Antonio Luis Ferre, of legal age, and resident of Guaynabo, Puerto Rico, and by Miguel A. Nazario in his capacity as President of Puerto Rican Cement Company, Inc., of legal age and resident of Mayaguez, Puerto Rico, at San Juan, Puerto Rico, this 10 day of February, 1995. JORGE CARLOS PIZARRO GARCIA ABOGADO NOTARIO NOTARY PUBLIC 46 EX-13 6 ANNUAL REPORT 1 PUERTO RICAN CEMENT COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section represents Management's discussion and analysis of the Company's consolidated financial condition and results of operations. It should be read in conjunction with the accompanying financial statements. RESULTS OF OPERATIONS 1994 compared to 1993 Consolidated net sales increased $9,359,000 in 1994 compared to 1993. A stronger demand for cement in 1994 allowed the Company to increase its cement sales by 2,213,000 bags to 20,416,000 bags, or 12% over the prior year. The strong demand for cement resulted from the continued strength of the construction sector of the Puerto Rico economy and favorable weather conditions. Consolidated cost of sales increased $6,223,000 in 1994 to $59,514,000, an increase of 11.7%. A substantial part of this change is attributable to increased production levels required to meet the higher sales volume experienced in 1994. The increased production levels resulted in higher consumption of materials used in the production of cement, which together with major general repair and maintenance works performed during the year, affected cost of sales. As a percentage of sales, cost of sales increased from 63.4% in 1993 to 64.1% in 1994. The Company performed during the third quarter of 1994 general maintenance and replacement work on worn interchangeable machinery parts mostly related to the dry process equipment at a cost of $2.3 million. This kind of repair is expected to take place every three to five years. Consolidated selling, general and administrative expenses were $11,308,000 in 1994 and $10,397,000 in 1993. The increase of $911,000 was mainly due to: higher equipment rental expenses attributable to higher sales; increased pension plan expenses resulting from changes in interest rates used in actuarial computations; and normal inflationary increases in salaries and related benefits. Consolidated interest expense of $2,305,000 for 1994 decreased from $2,654,000 in 1993 principally because of the refinancing during the second half of 1994 of high interest-bearing credit facilities to benefit from lower interest rates. In addition, the interest expense attributed to the credit facilities related to the mill conversion project, in the construction stage, was capitalized as part of the cost of the project. Interest income increased 84.6% from $1,239,000 in 1993 to $2,287,000 in 1994. This increase resulted from higher average investment balances and interest rates when compared to the prior year. Other expenses rose $869,000 in 1994 when compared to 1993. As discussed later, this increase reflects principally the net effect of the write-off of goodwill purchased before 1970, the write-off of equipment no longer used in cement manufacturing operations and an adjustment of accrued property taxes after the final assessment of such taxes on equipment related to the dry process. The provision for income taxes decreased $1,131,000 when compared to 1993, despite the increase in income before taxes of $2,197,000. The 1994 Puerto Rico Internal Revenue Code, enacted in October 1994, reduced the maximum corporate tax rate from 42% to 39%, as further discussed later on. This change resulted in a favorable one-time adjustment to the deferred tax liability of $2,016,000, which is reflected in the provision for income taxes for 1994. 1993 compared to 1992 Consolidated net sales increased 4% in 1993 compared to 1992 due principally to the increase of 5%, or $0.25 cents per bag, in selling prices of cement decreed in April 1993. Cement sales increased moderately from 18,130,000 bags in 1992 to 18,203,000 in 1993. Consolidated cost of sales for 1993 increased 1.4% or $759,000 when compared to the prior year. This modest increase was principally attributed to higher property tax rates. Consolidated selling, general and administrative expenses were $10.4 million and $9.8 million in 1993 and 1992, respectively, an increase of 6%. This increase mainly resulted from the adoption, as further explained in the notes to the financial statements, of SFAS 106 during 1993. Interest and financial charges of $2,654,000 in 1993 were $318,000 lower than in 1992 due principally to the repayment of various loans. Interest on loans related to the mill conversion project was capitalized during 1993. Interest income increased $607,000 in 1993 reflecting both the effect of securities bearing higher interest rates and higher average investment balances outstanding during this year. Income before cumulative effect of changes in accounting principles was $12,436,000, or $2.14 per share, in 1993, compared to $10,107,000, or $1.74 per share, in the prior year. During 1993, the Company adopted SFAS 106 and SFAS 109. The adoption of these two standards, as explained in more detail in the notes to the financial statements, decreased net income for the year to $11,880,000, or $2.05 per share. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1994, the Company had $115,000 in cash and cash equivalents compared to $431,000 at December 31, 1993. Working capital declined slightly, from $33,934,000 at December 31, 1993 to $30,426,000 at December 31, 1994. The current ratio remained stable at 2.8 to 1 in 1994 compared to 3.0 to 1 in 1993. Net cash provided by operations remained strong at $25,557,000 when compared to $24,571,000 in the prior year. The cash provided by operations was principally used to: pay $3,455,000 in dividends; repurchase 313,500 shares of the Company's common stock for $9,953,000; and acquire additional long-term investments of $9,085,000. 17 2 PUERTO RICAN CEMENT COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Consolidated notes and accounts receivable were $733,000 higher than in 1993. This change resulted principally from the increase in cement sales experienced during 1994. A decline of $4,225,000 in consolidated inventories was principally the net result of decreases in clinker and coal inventories, net of an increase in gypsum. Clinker (our work-in-process), as well as coal inventories, declined primarily from increases in consumption of both materials resulting from the rise in total cement production. This increase in cement production is tied to the higher cement sales experienced during 1994. Gypsum inventory was higher than in 1993, despite an increase in its consumption, principally because shipments totaling 88,000 tons were received during the latter part of this year, while no shipment was received in 1993. Accrued liabilities decreased $1,632,000 due principally to the payment of the property tax liability related to the dry process equipment, mentioned earlier. Capital spending totaled $11,257,000 and was mainly attributable to the ongoing conversion of two existing slurry mills to cement grinding. This project, with an estimated cost of $17 million, is an integral part of the Company's long-term capital improvement program aimed at achieving maximum efficiency through modern and technologically advanced facilities. Funding for this project has been obtained from commercial banks. Long-term debt increased to $31,696,000 at December 31, 1994 from $26,633,000 at December 31, 1993. This increase in long-term debt resulted from proceeds related to the financing facilities for the mill conversion project, net of scheduled repayments on other long-term debt. The increase of $1,695,000 in deferred income taxes resulted principally from the use, for tax purposes, of the flexible depreciation method offsetted by the effect of the decrease in the maximum income tax rate previously discussed. As discussed in Note 8 to the Consolidated Financial Statements, the Company had available credit facilities for short-term borrowing and discount of trade notes receivable of $16.6 million at December 31, 1994. In Management's opinion, future cash flows from operations, actual cash and cash equivalent balances and the short-term borrowing resources available to the Company will be sufficient to provide for the Company's cash requirements in the foreseeable future. The Company's Board of Directors declared a quarterly dividend of $0.17 per common share at its December 1994 meeting, an increase of 13% over previous quarters. Dividends declared in 1994 totaled $0.62 per common share. SIGNIFICANT EVENTS New Tax Law In October 1994, a new Puerto Rico Internal Revenue Code was enacted. Among the more significant changes brought by this new legislation were: a decrease in the maximum corporate tax rate from 42% to 39% effective for calendar year 1996 and thereafter; the repeal of the flexible depreciation method with respect to property purchased after December 31, 1995 and its prospective replacement with a new accelerated depreciation method; the elimination of the reserve method to claim deductions for bad debts with recapture of the existing reserve over a four-year period; and a decrease in the rate for tax withholding on dividend payments from 20% to 10% for calendar year 1996 and thereafter. The reduction in the maximum corporate income tax rate resulted in a decrease of $2,016,000 ($0.35 per share) in both the deferred tax liability and the provision for income taxes in 1994. Management estimates that the repeal of the flexible depreciation method for property purchased in 1996 and thereafter, and its replacement with the new accelerated depreciation method, will reduce the alternative for deferral of income taxes in the future. However, no significant impact on cash flow is expected over the next few years because property purchased until December 31, 1995 will be available to be depreciated under the flexible method. Property Tax Assessment Late in 1994, the property tax related to the dry process equipment was assessed by the tax authorities. The final assessment paid was lower than the amount previously accrued and the excess of $782,000 was credited to other income for this period. Goodwill Goodwill, in the amount of $698,000, resulting from the acquisition in 1969 of the remaining 20% minority interest of St. Regis Paper & Bag Corp. was not amortized as permitted by generally accepted accounting principles. However, in 1994, the Company decided to write-off, as a charge to other expenses, the recorded amount as the value of this asset was determined to be impaired. This determination was based principally on Management's opinion that no significant future benefit could be derived from this asset. Write-off of Equipment In 1994, equipment related to various kilns no longer used in cement operations after the conversion to the dry process with a book value of $588,000 was written-off. This write-off was also charged to other expenses. 18 3 PUERTO RICAN CEMENT COMPANY, INC. SELECTED FINANCIAL DATA
----------------------------------------------------------------------------------------------------------------------------- Year Ended December 31, 1994 1993 1992 1991 1990 ----------------------------------------------------------------------------------------------------------------------------- Operating revenues(1)........................... $ 92,829,872 $ 84,027,588 $ 80,021,520 $ 77,968,505 $ 81,993,050 Income before income tax........................ 21,342,365 19,145,787 15,426,354 14,666,908 17,922,924 Tax provision................................... 5,579,153 6,710,065 5,319,720 4,388,418 5,851,873 Cumulative effect of changes in accounting principles................................... (555,990) Net income...................................... 15,763,212 11,879,732 10,106,634 10,278,490 12,071,051 Net income per share(2)......................... 2.76 2.14 1.74 1.77 2.08 Current assets.................................. 47,298,323 51,207,564 57,862,068 58,209,916 63,946,232 Current liabilities............................. 16,872,039 17,273,306 13,965,498 12,072,586 12,672,238 Working capital................................. 30,426,284 33,934,258 43,896,570 46,137,330 51,273,994 Current ratio................................... 2.80 2.96 4.14 4.82 5.05 Property, plant and equipment................... 111,688,573 107,968,603 105,747,681 108,353,458 95,519,838 Long-term investments........................... 42,030,507 32,512,367 8,866,765 Total assets.................................... 201,869,754 193,283,596 174,185,209 168,294,577 162,141,277 Long-term debt (exclusive of current portion)... 31,696,403 26,633,080 24,500,000 30,357,143 33,375,000 Deferred income taxes........................... 27,722,814 26,028,233 23,875,370 21,755,663 20,182,252 Stockholders' equity-net........................ 122,971,336 120,675,030 111,844,341 104,109,185 95,911,788 Dividends per share............................. 0.62 0.53 0.41 0.36 0.31 Cement sales in barrels......................... 5,104,038 4,550,738 4,532,476 4,424,466 4,679,424
(1) Including revenue from realty operations of: 1994-$97,095; 1993-$653,721; 1992-$119,634; 1991-$816,503; 1990-$437,258. (2) Excluding, in 1993, the cumulative effects of changes in accounting for postretirement benefits and income taxes of ($0.24) and $0.15, respectively. Purchase of Treasury Stock During 1994, the Company repurchased 313,500 shares of its outstanding stock at a cost of $9,953,000. With these purchases, the Company completed its repurchase program, originally approved in 1987 and subsequently amended in 1989, to acquire up to 450,000 additional shares of its outstanding stock. New Accounting Standards Three new accounting standards that became effective in 1994 are discussed below. The Company adopted in 1994 the provisions of SFAS 115, "Accounting for Investments in Certain Debt and Equity Securities." The Company's policy is to hold its investments until their maturity; therefore, the adoption of this standard had no effect on the Company's financial position or results of operations. The adoption of SFAS 119 in 1994, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments," had no effect since the Company is not engaged in activities involving derivative financial instruments. The Company also adopted in 1994 SFAS 112, "Employers' Accounting for Postemployment Benefits." The adoption of this statement had no significant impact on the Company's financial position and results of operations. 19 4 PUERTO RICAN CEMENT COMPANY, INC. REPORT OF INDEPENDENT ACCOUNTANTS PRICE WATERHOUSE February 17, 1995 To the Board of Directors and Stockholders of Puerto Rican Cement Company, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income and retained earnings and of cash flows present fairly, in all material respects, the financial position of Puerto Rican Cement Company, Inc. and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Company changed its methods of accounting for postretirement health benefits and income taxes in 1993. PRICE WATERHOUSE ---------------- PRICE WATERHOUSE Certified Public Accountants (OF PUERTO RICO) License No. 10 Expires Dec. 1, 1995 Stamp 1259733 of the P.R. Society of Certified Public Accountants has been affixed to the file copy of this report. 20 5 PUERTO RICAN CEMENT COMPANY, INC. CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
----------------------------------------------------------------------------------------------------------------------------- Year ended December 31, 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------------- Net sales.................................................................... $ 92,732,777 $ 83,373,867 $79,901,886 Revenue from realty operations - net......................................... 97,095 653,721 119,634 ----------------------------------------------------------------------------------------------------------------------------- 92,829,872 84,027,588 80,021,520 ----------------------------------------------------------------------------------------------------------------------------- Cost and expenses: Cost of sales............................................................. 59,514,156 53,290,853 52,531,736 Selling, general and administrative expenses.............................. 11,307,574 10,396,754 9,843,764 ----------------------------------------------------------------------------------------------------------------------------- 70,821,730 63,687,607 62,375,500 ----------------------------------------------------------------------------------------------------------------------------- Income from operations................................................ 22,008,142 20,339,981 17,646,020 ----------------------------------------------------------------------------------------------------------------------------- Other charges (credits): Interest and financial charges, net of interest charged to construction... 2,304,604 2,654,054 2,971,529 Interest income........................................................... (2,286,583) (1,238,858) (632,030) Other expenses (income)................................................... 647,756 (221,002) (119,833) ----------------------------------------------------------------------------------------------------------------------------- 665,777 1,194,194 2,219,666 ----------------------------------------------------------------------------------------------------------------------------- Income before income taxes and cumulative effect of accounting changes 21,342,365 19,145,787 15,426,354 ----------------------------------------------------------------------------------------------------------------------------- Provision for income taxes: Current income taxes...................................................... 3,884,572 2,683,192 3,200,013 Deferred income taxes..................................................... 1,694,581 4,026,873 2,119,707 ----------------------------------------------------------------------------------------------------------------------------- 5,579,153 6,710,065 5,319,720 ----------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting changes................. 15,763,212 12,435,722 10,106,634 Cumulative effect of changes in accounting principles - net.................. (555,990) ----------------------------------------------------------------------------------------------------------------------------- Net income............................................................ 15,763,212 11,879,732 10,106,634 Retained earnings at beginning of year....................................... 101,891,599 93,060,910 89,325,754 Common stock split........................................................... (4,000,000) Cash dividends declared; $0.62, $0.53 and $0.41 per share in 1994, 1993 and 1992, respectively............................................... (3,514,314) (3,049,043) (2,371,478) ----------------------------------------------------------------------------------------------------------------------------- Retained earnings at end of year............................................. $114,140,497 $101,891,599 $93,060,910 ============================================================================================================================= Earnings per share: Income before cumulative effect of accounting changes..................... $2.76 $2.14 $1.74 Cumulative effect of changes in accounting principles..................... (0.09) ----------------------------------------------------------------------------------------------------------------------------- Net income per share.................................................. $2.76 $2.05 $1.74 =============================================================================================================================
The accompanying notes are an integral part of this statement. 21 6 PUERTO RICAN CEMENT COMPANY, INC. CONSOLIDATED BALANCE SHEET
----------------------------------------------------------------------------------------------------------------------------- December 31, 1994 1993 ----------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents.................................................................. $ 114,702 $ 431,293 Short-term investments..................................................................... 520,000 Notes and accounts receivable - net........................................................ 14,358,827 13,626,159 Inventories................................................................................ 28,916,950 33,141,836 Prepaid expenses........................................................................... 3,907,844 3,488,276 ----------------------------------------------------------------------------------------------------------------------------- Total current assets................................................................ 47,298,323 51,207,564 Property, plant and equipment - net........................................................ 111,688,573 107,968,603 Long-term investments...................................................................... 42,030,507 32,512,367 Other assets............................................................................... 852,351 1,595,062 ----------------------------------------------------------------------------------------------------------------------------- $201,869,754 $193,283,596 ============================================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowing.................................................................... $ 2,420,000 -- Current portion of long-term debt....................................................... 6,178,571 7,491,735 Accounts payable........................................................................ 3,810,152 3,785,341 Accrued liabilities..................................................................... 2,868,989 4,500,812 Dividends payable....................................................................... 929,818 871,155 Income taxes payable.................................................................... 664,509 624,263 ----------------------------------------------------------------------------------------------------------------------------- Total current liabilities........................................................... 16,872,039 17,273,306 ----------------------------------------------------------------------------------------------------------------------------- Long-term liabilities: Long-term debt, less current portion.................................................... 31,696,403 26,633,080 Deferred income taxes................................................................... 27,722,814 26,028,233 Postretirement benefit liability........................................................ 2,607,162 2,673,947 ----------------------------------------------------------------------------------------------------------------------------- Total long-term liabilities......................................................... 62,026,379 55,335,260 ----------------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock, authorized 2,000,000 shares of $5.00 par value each; none issued Common stock, authorized 20,000,000 shares of $1.00 par value each; 6,000,000 shares issued............................................................. 6,000,000 6,000,000 Additional paid-in capital.............................................................. 14,367,927 14,367,927 Retained earnings....................................................................... 114,140,497 101,891,599 ----------------------------------------------------------------------------------------------------------------------------- 134,508,424 122,259,526 LESS - 505,800 (1993-192,300) shares of common stock in treasury, at cost............... 11,537,088 1,584,496 ----------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity.......................................................... 122,971,336 120,675,030 ----------------------------------------------------------------------------------------------------------------------------- Commitments and contingent liabilities.................................................. ----------------------------------------------------------------------------------------------------------------------------- $201,869,754 $193,283,596 =============================================================================================================================
The accompanying notes are an integral part of this statement. 22 7 PUERTO RICAN CEMENT COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------------------------------------------------------------------------------------- Year ended December 31, 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income................................................................ $ 15,763,212 $ 11,879,732 $ 10,106,634 ----------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of changes in accounting principles - net........... 555,990 Depreciation, depletion and amortization.............................. 6,949,122 6,916,046 6,934,608 Accretion of discounts on investments................................. (1,619,542) Provision for deferred income taxes................................... 1,694,581 4,026,873 2,119,707 Provision for postretirement benefits................................. 72,485 390,000 Postretirement benefits paid.......................................... (139,270) (146,053) Loss on disposition of idle equipment................................. 587,671 Write-off of goodwill................................................. 697,770 Loss on sale of short-term investments................................ 5,534 Gain on sales of long-term investments................................ (103,613) Gain on sale of land.................................................. (22,454) Changes in assets and liabilities: (Increase) decrease in notes and accounts receivable................ (732,668) (2,664,330) 1,615,886 Decrease (increase) in inventories.................................. 4,224,886 2,631,267 (4,568,410) Increase in prepaid expenses........................................ (419,568) (562,579) (111,403) Decrease in other assets............................................ 44,941 113,633 22,508 Increase (decrease) in accounts payable............................. 24,811 1,376,823 (2,221,931) (Decrease) increase in accrued liabilities.......................... (1,631,823) 620,351 704,446 Increase (decrease) in income taxes payable......................... 40,246 (469,150) 1,083,794 ----------------------------------------------------------------------------------------------------------------------------- Total adjustments................................................ 9,793,642 12,690,792 5,556,751 ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities........................ 25,556,854 24,570,524 15,663,385 ----------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Decrease (increase) in short-term investments............................. 520,000 2,202,403 (2,727,937) Capital expenditures...................................................... (11,256,763) (9,136,968) (4,329,320) Proceeds from sale of land................................................ 22,943 Proceeds from maturities of long-term investments......................... 1,186,400 Purchase of long-term investments......................................... (9,084,998) (40,892,391) (8,866,765) Proceeds from sale of long-term investments............................... 17,350,402 ----------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities................................. (18,635,361) (30,476,554) (15,901,079) ----------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Purchase of treasury stock................................................ (9,952,592) Proceeds from short-term borrowing........................................ 2,420,000 Proceeds from loans....................................................... 17,071,589 12,624,815 Payment of principal on long-term debt.................................... (13,321,430) (8,857,143) (3,482,143) Dividends paid............................................................ (3,455,651) (2,903,851) (2,419,875) ----------------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities................... (7,238,084) 863,821 (5,902,018) ----------------------------------------------------------------------------------------------------------------------------- Decrease in cash and cash equivalents........................................ (316,591) (5,042,209) (6,139,712) Cash and cash equivalents at beginning of year............................... 431,293 5,473,502 11,613,214 ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year..................................... $ 114,702 $ 431,293 $ 5,473,502 =============================================================================================================================
The accompanying notes are an integral part of this statement. 23 8 PUERTO RICAN CEMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - REPORTING ENTITY AND SUMMARY OF ACCOUNTING POLICIES: The Company was organized in 1938 under the laws of the Commonwealth of Puerto Rico. It is engaged primarily in the production of cement and related products. Summary of accounting policies The following summarizes the most significant accounting policies judged by management to be the most appropriate in the circumstances to present the Company's consolidated financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Principles of consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Statement of cash flows For purposes of the statement of cash flows, interest-bearing deposits and other investments with maturities of less than three months at the time of acquisition are considered cash equivalents. Investments Investments are carried at cost, adjusted for amortization of premiums or accretion of discounts. Short-term investments consist primarily of bank time deposits, U.S. Treasury Bills, and other U.S. government securities. Long-term investments consist primarily of U.S. government and agency securities with original maturities over one year and up to seven years. Effective January 1994, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Investments in Certain Debt and Equity Securities." This statement requires the Company to classify and account for investment in equity securities that have readily determinable fair values and all investments in debt securities as follows: - Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. - Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. - Equity securities and debt securities not classified as either held-to-maturity or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders' equity. The Company's policy is to hold its investments to maturity. Accordingly, the adoption of SFAS 115 had no effect on the Company's financial position or results of operations. Inventories Inventories are stated at the lower of average cost or market. Inventory cost includes the related material, labor and overhead cost. Land for sale includes the original cost of land and all development costs incurred to bring land to a saleable condition. Property, plant and equipment Property, plant and equipment are stated at cost. Depreciation is provided on the straight-line basis over the estimated useful life of each type of asset. Depletion of quarries is calculated on the units-of-production method. Maintenance and repair costs which do not extend the life or improve productive capacity of the respective assets are expensed as incurred. Cost of renewals and betterments is capitalized. When assets are sold, retired or otherwise disposed of, their cost and related accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to income. Interest charged to construction The Company capitalizes interest as a component of the cost of construction. Interest capitalized totaled $579,700 and $88,800 in 1994 and 1993, respectively. No interest was capitalized in 1992. Income taxes As discussed in Note 10, the Company adopted, in January 1993, SFAS 109, "Accounting for Income Taxes." This standard requires an asset and liability approach to the recognition of the tax consequences of differences between the tax basis of assets and liabilities and their reported amounts in financial statements. Certain expenses, primarily depreciation, are reported for tax purposes in different periods from those in which they are reported in the financial statements. Deferred taxes are provided on these and other temporary differences between the tax basis of assets and liabilities and their reported amounts in financial statements. The financial statements for 1992 have not been restated for the adoption of SFAS 109. For that year, deferred taxes resulting from timing differences were accounted for by the net change method in accordance with Accounting Principles Board Opinion No. 11 (APB 11). Employee benefit plans The Company has a trusteed, non-contributory retirement plan. Pension costs are computed on the basis of accepted actuarial methods. The Projected Unit Credit method is used to determine pension expense. Pension expense includes service cost for benefits earned during the period, interest cost and amortization of unrecognized prior service cost, of gains and losses on plan assets and of the transition amount over a 15-year period. The Company's funding policy is to contribute annually the maximum amount deductible for income tax. The Company also offers post-retirement medical and life insurance benefits. This plan is not funded and expenses were recognized as paid until 1992. As discussed in Note 11, the Company adopted, in January 1993, SFAS 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" (OPEB), which requires the recognition of the expected cost of providing post-retirement health care and other benefits to an employee or its beneficiaries over their service period. In January 1994, the Company adopted SFAS 112, "Employers' Accounting for Postemployment Benefits," which requires employers to accrue the cost of postemployment benefits (including salary continuation, severance and disability benefits, job training and counseling and continuation of benefits such as health care and life insurance coverage) to former or inactive employees. The adoption of this standard had no significant impact on the Company's financial position and results of operations. Earnings per share Earnings per share are computed on the basis of the weighted average number of shares of common stock outstanding during the year. The weighted average number of shares outstanding during the year was 5,704,800 in 1994, and 5,807,700 in 1993 and in 1992, as adjusted for the stock split. Profit recognition on sales of real estate Land and development costs are allocated to lots sold proportionately based on area and total project cost. Income on sale of land is recognized at the time of sale except where the collectibility is not reasonably assured and revenue therefore is not measurable. 24 9 NOTE 2 - NOTES AND ACCOUNTS RECEIVABLE: Notes and accounts receivable consist of:
------------------------------------------------------------- 1994 1993 ------------------------------------------------------------- Notes receivable: Trade........................ $ 1,698,752 $ 3,317 Other........................ 80,253 89,131 ------------------------------------------------------------- 1,779,005 92,448 ------------------------------------------------------------- Accounts receivable: Trade........................ 13,418,151 13,566,340 Employees and affiliated companies 26,428 19,789 Other........................ 229,246 1,069,183 ------------------------------------------------------------- 13,673,825 14,655,312 LESS - Allowance for doubtful accounts.......... 1,094,003 1,121,601 ------------------------------------------------------------- 12,579,822 13,533,711 ------------------------------------------------------------- $ 14,358,827 $13,626,159 =============================================================
NOTE 3 - INVENTORIES: Inventories consist of:
------------------------------------------------------------- 1994 1993 ------------------------------------------------------------- Finished products................ $ 1,964,131 $ 2,127,413 Work-in-process.................. 3,561,875 6,231,167 Raw materials.................... 4,202,704 3,276,157 Coal and fuel oil................ 1,195,542 3,171,069 Maintenance and operating supplies 17,685,316 17,684,450 Land for sale.................... 307,382 651,580 ------------------------------------------------------------- $28,916,950 $33,141,836 =============================================================
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of:
-------------------------------------------------------------------- Useful life in years 1994 1993 -------------------------------------------------------------------- Land and quarries............. $ 4,299,475 $ 4,299,475 Buildings and structures...... 50 27,680,111 27,590,284 Machinery and equipment....... 5-20 87,007,090 88,202,303 Pollution control equipment... 25 28,020,993 28,683,904 Automobiles and trucks........ 3-10 793,895 974,399 Rental property............... 10 653,524 653,524 Construction in progress...... 14,622,225 6,369,360 -------------------------------------------------------------------- 163,077,313 156,773,249 LESS - Accumulated depreciation, depletion and amortization 51,388,740 48,804,646 -------------------------------------------------------------------- $111,688,573 $107,968,603 ====================================================================
NOTE 5 - INVESTMENTS: The carrying, market values and maturities of investments held-to-maturity at December 31, 1994 and 1993 are as follows:
----------------------------------------------------------------------------------------- 1994 1993 ----------------------------------------------------------------------------------------- CARRYING MARKET Carrying Market VALUE VALUE Value Value ----------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS U.S. Treasury securities $ -- $ -- $ 520,000 $ 538,824 ========================================================================================= LONG-TERM INVESTMENTS ========================================================================================= U.S. Treasury securities 1-5 years.............. $19,574,629 $18,404,049 $13,316,429 $11,300,255 5-10 years............. 13,296,734 12,006,978 15,087,148 18,120,054 ----------------------------------------------------------------------------------------- 32,871,363 30,411,027 28,403,577 29,420,309 ----------------------------------------------------------------------------------------- Municipal and other U.S. government agency securities 1-5 years............ 7,320,996 6,825,744 2,813,842 3,071,765 5-10 years........... 1,838,148 1,660,538 1,294,948 1,951,786 ----------------------------------------------------------------------------------------- 9,159,144 8,486,282 4,108,790 5,023,551 ----------------------------------------------------------------------------------------- $42,030,507 $38,897,309 $32,512,367 $34,443,860 =========================================================================================
During 1993, the Company sold securities for a total of $17,350,000 and realized a gain of $104,000. The Company has $2,801,000 in municipal bonds classified as long-term which are callable in 1995. NOTE 6 - OTHER ASSETS: Other assets consist of:
------------------------------------------------------------- 1994 1993 ------------------------------------------------------------- Investment in real estate.......... $704,987 $ 704,987 Goodwill........................... 697,770 Other long-term assets............. 147,364 192,305 ------------------------------------------------------------- $852,351 $1,595,062 =============================================================
Goodwill, included in other assets in 1993 and earlier years, was acquired before November 1, 1970 and, as permitted by generally accepted accounting principles, was not amortized. In 1994, Management determined that the value of this goodwill had been impaired and the recorded balance was written-off. NOTE 7 - ACCRUED LIABILITIES: Accrued liabilities consist of:
------------------------------------------------------------- 1994 1993 ------------------------------------------------------------- Accrued taxes other than income.... $ 153,985 $1,969,933 Accrued payroll expenses........... 1,917,403 1,821,371 Accrued interest expense........... 386,510 435,779 Other accrued liabilities.......... 411,091 273,729 ------------------------------------------------------------- $ 2,868,989 $4,500,812 =============================================================
NOTE 8 - SHORT-TERM BORROWING: The Company has lines of credit available for short-term borrowing and discount of trade notes receivable in the aggregate amount of $16,600,000. However, under other loan agreements with financial institutions, the Company may incur unsecured short-term borrowing up to $10,000,000 and may discount trade notes receivable up to $5,000,000 through 1999. Short-term borrowing at December 31, 1994 was $2,420,000 at rates ranging from 6.1% to 6.3%. Maximum aggregate short-term borrowing outstanding at any month-end was $3,400,000. The approximate average aggregate short-term borrowing outstanding during the year was $424,000. The weighted average interest rate of such borrowing computed on a monthly basis was 5.69%. There was no short-term borrowing outstanding at any month-end during 1993. NOTE 9 - LONG-TERM DEBT: Long-term debt consists of:
------------------------------------------------------------------------------- 1994 1993 ------------------------------------------------------------------------------- 9.9% dry process conversion loan, payable in equal annual installments of $3,000,000 through 1996.................................. $ 6,000,000 $ 9,000,000 6.25% term loan, payable in annual installments of $750,000 and a final payment of $3,000,000 in 1998................. 5,250,000 6,000,000 $16 million revolving line of credit, convertible on December 31, 1995 into a five-year term loan.................... 5,696,403 3,148,083 6.25% term loan, payable in annual installments of $1,000,000 and a final payment of $4,000,000 in 1998................. 7,000,000 3,476,732 7.0% dry process conversion loan, payable in annual installments of $1,428,571 and a final payment of $1,071,428 in 1997 3,928,571 5,357,143 Term loan for dry process conversion, prepaid in 1994....................................... 7,142,857 7.35% loan, payable in full on August 13, 1999; interest payable monthly................ 3,000,000 7.30% term loan, payable in full on August 12, 1999; interest payable monthly................ 7,000,000 ------------------------------------------------------------------------------- Total......................................... 37,874,974 34,124,815 LESS - Current portion........................... 6,178,571 7,491,735 ------------------------------------------------------------------------------- Total long-term debt.......................... $31,696,403 $26,633,080 ===============================================================================
25 10 PUERTO RICAN CEMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In August 1994, the Company entered into a $3 million unsecured non-revolving loan, payable in August 1999, which bears interest at a fixed rate of 7.35%. Proceeds from this loan were used to pay the $3 million scheduled installment on the 9.9% dry process conversion loan. In September 1994, the Company entered into a $7 million, five-year term loan which bears interest at a fixed rate of 7.30%. Loan proceeds were used to refinance the $7 million outstanding balance related to the dry process conversion loan. Financing facilities of up to $24 million were obtained in 1993 for the conversion of two existing slurry mills to finished cement grinding. The expected cost of this project is estimated at $17 million. One of the credit facilities is a $16 million credit agreement which provides for interest at 1% over the bank's 936 funds rate, subject to availability, or 1% over the bank's London Interbank Offer Rate (LIBOR) as adjusted, or 1% over the bank's base rate in the City of New York. The Company has the option to fix the interest rate on the full amount or a portion of the loan up to the term of the loan. Interest rates on advances on this line of credit ranged from 6.86% to 7.15% at December 31, 1994. In February 1995, the Company fixed at 7.58% the interest rate on the outstanding balance of this credit facility. The second facility is an $8 million, unsecured term loan bearing interest at a fixed rate of 6.25% with principal payable over a 5 year period. At December 31, 1994, the Company had $11.3 million available under these lines of credit. In September 1985, the Company restructured the terms of all of its outstanding debt with the Government Development Bank for Puerto Rico (GDB). The maturity date on the loans from GDB was extended to September 2002, and the annual interest rate was fixed. No interest or principal payments are required before maturity. Simultaneously, the Company placed U.S. government securities, with a cost of $8 million and a maturity value of $49.8 million, in an irrevocable trust. The principal and interest of these securities will be sufficient to fund the scheduled principal and interest payments on the Company's debt with the GDB. Accordingly, such debt was considered to be extinguished in 1985 and is not included as a liability in the consolidated balance sheet. The total balance of debt with GDB not included in the consolidated balance sheet, consisting of principal plus accumulated interest, amounted to $34.8 million at December 31, 1994 (1993 - $33 million). The loan agreements with banks and other financial institutions impose certain restrictions on the Company. The most important restrictions are limitations on unsecured short-term borrowing and on discounting with recourse of trade paper from customers (Note 8), maintaining working capital in excess of certain defined minimums and limitations on funded debt and other indebtedness. Other restrictions under such loan agreements relate to investments in and advances to subsidiaries and other persons, disposition of fixed assets, and payment of dividends. At December 31, 1994, the Company was in compliance with the provisions of the loan agreements. The agreements also impose certain prepayment penalties. In 1994, the Company paid the maximum amount that may be paid under these loan agreements without triggering the prepayment penalties. Aggregate maturities of long-term debt at December 31, 1994 are as follows:
--------------------------------------------------------- Years Amount --------------------------------------------------------- 1995....................................... $ 6,178,571 1996 ...................................... 6,178,571 1997....................................... 2,821,429 1998....................................... 7,000,000 1999 and thereafter........................ 15,696,403 --------------------------------------------------------- $37,874,974 =========================================================
NOTE 10 - INCOME TAXES: Consolidated tax returns are not permitted under the Puerto Rico Income Tax Law; therefore, losses, if any, of subsidiaries cannot be used to offset taxable income of other members of the consolidated group. The Puerto Rico Income Tax Law currently allows an accelerated flexible depreciation, whereby a taxpayer may claim depreciation at any rate without reference to useful lives, but limited to an amount not greater than income before taxes (determined without taking into consideration the depreciation deduction). Deferred income taxes of $27,722,814 (1993 - $26,028,233) have been accumulated primarily as a result of using the flexible depreciation method for tax purposes only. The benefits available under the accelerated depreciation methods are limited by the alternative minimum tax (AMT) provisions of the income tax law. The AMT is based on 22% of regular taxable income with certain adjustments for preference items, one of which relates to the accelerated depreciation method. Any AMT paid may be used to reduce the regular tax liability of future years, to the extent the regular tax exceeds the AMT. As discussed in Note 1, the Company adopted SFAS 109, "Accounting for Income Taxes," effective January 1, 1993. The cumulative effect of adopting this standard was a reduction of $853,410 ($0.15 per share) in the deferred income tax liability, which reflects the impact of the tax rates then in effect. The impact of adopting SFAS 109 on the income tax provision for 1993 was not significant. A new Puerto Rico Internal Revenue Code was enacted in 1994. This law further reduced the maximum corporate income tax rate from 42% to 39% for calendar year 1996 and thereafter. This reduction resulted in a decrease of $2,016,000 ($0.35 per share) in the deferred tax liability. Other provisions of the new code include the prospective replacement of the flexible depreciation method with a new accelerated depreciation method and repeal of the reserve method for bad debts with recapture of the existing reserve over a four year period. These provisions, effective for calendar year 1996, will reduce the alternatives for deferral of income taxes; however, Management does not expect the impact on cash flow to be significant in the near term because of the availablity of property that qualified for flexible depreciation. The 1994 and 1993 amounts presented below were determined in accordance with SFAS 109, the 1992 amounts were determined in accordance with APB 11. The increase in the deferred tax liability during 1994 and 1993 was the result of the following:
----------------------------------------------------------------------------- 1994 1993 ----------------------------------------------------------------------------- Deferred income tax provision for the year......... $1,694,581 $4,026,873 Cumulative effect of adoption of SFAS 109.......... (853,410) Deferred tax effect of adoption of SFAS 106........ (1,020,600) ----------------------------------------------------------------------------- $1,694,581 $2,152,863 =============================================================================
Deferred income taxes consist of the following:
----------------------------------------------------------------------------- 1994 1993 1992 ----------------------------------------------------------------------------- Income tax applicable to: Flexible depreciation taken during the year.................. $ 9,423,882 $ 5,355,405 $ 3,578,526 Reversal of flexible depreciation taken in prior years............ (2,188,381) (1,732,359) (1,561,990) Reduction in income tax rates....... (2,016,293) AMT credit.......................... (3,867,582) Postretirement benefit obligation... 28,050 (102,458) Difference between pension credits and amounts deductible for tax.......................... 78,187 122,840 87,678 Interest charged to construction.... 243,474 37,308 Other temporary differences......... (6,756) 346,137 15,493 ----------------------------------------------------------------------------- $ 1,694,581 $ 4,026,873 $ 2,119,707 =============================================================================
26 11 The reconciliation of the difference between the Puerto Rico statutory tax rate on income before taxes and the consolidated effective tax rate follows:
---------------------------------------------------------------------------------------------------------------------------------- 1994 1993 1992 ---------------------------------------------------------------------------------------------------------------------------------- % of % of % of pre-tax pre-tax pre-tax Amount income Amount income Amount income ---------------------------------------------------------------------------------------------------------------------------------- Computed tax provision........................... $8,963,793 42.0 $8,041,231 42.0 $6,479,068 42.0 Increase (decrease) in taxes resulting from: Enacted future rate changes................... (2,016,293) (9.4) Write-off of goodwill......................... 293,063 1.4 Tax exempt income............................. (164,729) (0.9) (192,800) (1.2) Interest earned on exempt securities.......... (952,765) (4.5) (514,190) (2.7) (256,586) (1.7) Interest deducted for tax but not for financial statements........................ (995,407) (4.7) (789,241) (4.1) (747,029) (4.8) Other items................................... 286,762 1.3 136,994 0.7 37,067 0.2 ---------------------------------------------------------------------------------------------------------------------------------- $5,579,153 26.1 $6,710,065 35.0 $5,319,720 34.5 ==================================================================================================================================
The deferred tax assets and liabilities at December 31, 1994 and 1993 are as follows:
---------------------------------------------------------------------------------------------------------------------------------- 1994 1993 ---------------------------------------------------------------------------------------------------------------------------------- Deferred Deferred Deferred Deferred Tax Assets Tax Liabilities Tax Assets Tax Liabilities ---------------------------------------------------------------------------------------------------------------------------------- Current: Prepaid pension cost............................................ $ 1,128,609 $ 1,137,238 Non-current: AMT credit...................................................... $4,235,307 $ 295,832 Postretirement benefit liability................................ 1,016,793 1,123,058 Unremitted earnings of subsidiaries............................. 251,051 138,359 Property, plant and equipment................................... 31,595,254 26,171,526 ---------------------------------------------------------------------------------------------------------------------------------- Total deferred tax asset/liability.............................. $5,252,100 $32,974,914 $ 1,418,890 $27,447,123 ================================================================================================================================== Net deferred tax liability...................................... $27,722,814 $26,028,233 ==================================================================================================================================
One of the consolidated subsidiaries enjoys a tax exemption grant under the provisions of the Puerto Rico Tax Incentives Act of 1987. Under this grant, the exemption rates applicable to income, property and municipal taxes range from 50% to 90% through year 2008. The subsidiaries' aggregate retained earnings amounted to $20,065,000 at December 31, 1994 (1993 - $18,900,000) and arise substantially from partially tax exempt operations. The subsidiaries' retained earnings are substantially exempt upon distribution to the Company. As required by SFAS 109, deferred taxes have been provided on the post-1992 unremitted earnings of subsidiaries to the extent these are taxable upon distribution to the Company. NOTE 11 - EMPLOYEE BENEFIT PLANS: The Company has a defined benefit pension plan covering substantially all of its non-union employees. The benefits are based on years of service and the employee's average compensation during the last five years of employment. The net periodic pension cost for 1994 totaled $155,880, which decreased the prepaid pension cost by the same amount. In 1993 and 1992 the net periodic pension cost resulted in a credit to income of $342,039 and $292,477, respectively. Net pension cost included the following components:
-------------------------------------------------------------------------- 1994 1993 1992 -------------------------------------------------------------------------- Service cost - benefits earned during the period............ $ 450,622 $ 307,352 $ 326,077 Interest cost on projected benefit obligation........... 1,224,251 1,042,511 1,012,081 Actual return on plan assets (1,571,822) (1,452,608) (1,805,618) Deferral and amortization - net 52,829 (239,294) 174,983 -------------------------------------------------------------------------- Net periodic pension expense (income)............. $ 155,880 ($342,039) ($292,477) =========================================================================
The following table sets forth the plan's obligations and amounts recognized in the Company's consolidated balance sheet at December 31:
---------------------------------------------------------------------- 1994 1993 ---------------------------------------------------------------------- Actuarial present value of benefit obligations - Accumulated benefit obligation, including vested benefits of $14,906,312 (1993 - $12,108,330) ................. $15,167,679 $12,293,647 ====================================================================== Projected benefit obligation for service rendered to date .................... $17,994,484 $14,783,155 Plan assets at fair value .............. 20,351,302 20,143,670 ---------------------------------------------------------------------- Excess of plan assets over projected benefit obligation .................. 2,356,818 5,360,515 Unrecognized prior service cost ........ 2,134,858 751,870 Unrecognized gain ...................... (482,654) (1,788,175) Unrecognized portion of transition cost at January 1, 1987, being recognized over 15 years ....................... (1,115,152) (1,274,460) ---------------------------------------------------------------------- Prepaid pension cost included in prepaid expenses .................... $ 2,893,870 $ 3,049,750 ======================================================================
The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of benefit obligations and the projected benefit obligation were 7.5% and 5.5%, respectively. The expected long-term rate of return on assets is 8%. Investments held by the plan include high grade corporate bonds, U.S. Treasury Bills, and common stock, including shares of the Company. The plan is administered by a Board of Trustees composed of five Directors. The Board utilizes two independent money managers which, within certain established guidelines, make investment decisions regarding the assets of the plan. 27 12 PUERTO RICAN CEMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company also provides health care and life insurance benefits to participants of the plan after retirement. The employees, upon retirement, have the option to continue participating in the Company's medical group insurance coverage under the same terms and conditions as prescribed for active employees. The life insurance plan coverage decreases, for a period of ten years after age 65, at an annual rate of 7 1/2%. In January 1, 1993, the Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and elected to immediately recognize the transition obligation for future benefits to be paid related to past employee services. This resulted in a non-cash pre-tax charge of $2,430,000 ($1,409,400 after tax or $0.24 per share) that represents the effect of the change in accounting for prior years. The postretirement benefit expense for 1994 and 1993 included the following components:
------------------------------------------------------------- 1994 1993 ------------------------------------------------------------- Service cost of benefits earned...... $ 56,341 $ 62,966 Interest cost........................ 195,064 195,945 Amortization and deferral - net...... (178,920) 131,089 ------------------------------------------------------------- Postretirement benefit expense....... $ 72,485 $390,000 =============================================================
The postretirement benefit liability included the following components:
-------------------------------------------------------------------------- 1994 1993 -------------------------------------------------------------------------- Actuarial present value of postretirement benefit obligations: Retirees ................................. $1,181,571 $ 880,331 Fully eligible active plan participants... 663,331 456,370 Other active plan participants ........... 965,189 1,257,241 -------------------------------------------------------------------------- Accumulated postretirement benefit obligation 2,810,091 2,593,942 Unrecognized actuarial (loss) gain .......... (202,929) 80,005 -------------------------------------------------------------------------- Postretirement benefit liability at the end of the year .......................... $2,607,162 $2,673,947 ==========================================================================
The discount rate used to determine the accumulated postretirement benefit obligation was 7.5%. The assumed health care cost trend rate used to measure the accumulated postretirement benefit obligation was 10.5% initially, declining gradually to 5.5% in year 2018 and thereafter. A one-percentage-point increase in the assumed health care cost trend rate would have increased the 1994 postretirement benefit expense by $30,000 and would have increased the 1994 accumulated postretirement benefit obligation by $282,000. The cost of postretirement health and life insurance benefits for the year ended December 31, 1992 determined based on actual expenditures was $133,000. NOTE 12 - FINANCIAL DATA BY INDUSTRIES: The Company's financial data by industries for the years ended December 31, 1994, 1993 and 1992 is as follows (000's omitted):
----------------------------------------------------------------- 1994 1993 1992 ----------------------------------------------------------------- Sales to unaffiliated customers: Cement and related products . $ 87,486 $ 77,796 $ 74,085 Paper and packaging ......... 5,247 5,578 5,817 Realty operations ........... 97 654 120 ----------------------------------------------------------------- $ 92,830 $ 84,028 $ 80,022 ================================================================= Inter-segment sales: Paper and packaging ......... $ 3,581 $ 3,444 $ 3,028 ================================================================= Operating profit: Cement and related products . $ 21,064 $ 18,564 $ 16,665 Paper and packaging ......... 847 1,122 861 Realty operations ........... 97 654 120 $ 22,008 $ 20,340 $ 17,646 ================================================================= Identifiable assets: Cement and related products . $158,038 $156,373 $150,216 Paper and packaging ......... 1,556 2,351 5,460 Realty operations ........... 1,241 1,256 1,271 Corporate ................... 41,035 33,304 17,238 ----------------------------------------------------------------- $201,870 $193,284 $174,185 ================================================================= Depreciation, depletion and amortization: Cement and related products . $ 6,869 $ 6,837 $ 6,856 Paper and packaging ......... 80 79 79 ----------------------------------------------------------------- $ 6,949 $ 6,916 $ 6,935 ================================================================= Capital expenditures: Cement and related products . $ 11,217 $ 9,125 $ 4,302 Paper and packaging ......... 40 12 27 ----------------------------------------------------------------- $ 11,257 $ 9,137 $ 4,329 =================================================================
The Company operates in the cement and related products and the paper and packaging industries, as well as in realty operations, mainly within the island of Puerto Rico. Operations in the cement and related products industry involve production and sale of cement and hydrated lime. Operations in the paper and packaging industry involve production and sale of paper bags. Realty operations involve the sale and lease of real property. Operating profit is total revenue less operating expenses. Interest expense and income taxes have not been deducted in computing operating profit. Identifiable assets are those that are used in the Company's operations in each segment. Corporate assets are principally investments and other assets not used by any industry segment. In 1994 the Company's largest customer in the cement and related products segment accounted for 11% of total consolidated sales. Export sales were not significant. To reconcile industry information with consolidated amounts, the following eliminations have been made: $3,581,000 in 1994, $3,444,000 in 1993 and $3,028,000 in 1992 of inter-segment sales; $3,600 in 1994, $47,500 in 1993 and $51,000 in 1992 relating to the net change in inter-segment operating profit in 28 13 beginning and ending inventories; ($2,500) in 1994, $5,900 in 1993 and $1,200 in 1992 of inter-segment operating (loss) profit in inventory at December 31; and $8,392,000 in 1994, $6,957,000 in 1993 and $3,127,000 in 1992 of receivables arising from inter-segment sales. NOTE 13 - LEASE COMMITMENTS: The Company and its subsidiaries lease certain equipment under operating lease agreements. Rental expense under such agreements aggregated $1,523,000 in 1994, $1,339,000 in 1993 and $1,375,000 in 1992. At December 31, 1994, the approximate future minimum lease payments under noncancellable operating leases were as follows:
-------------------------------------------------------- Year Amount -------------------------------------------------------- 1995........................................ $ 108,120 1996........................................ 108,120 1997........................................ 108,120 1998........................................ 108,120 1999........................................ 111,364 2000 and beyond............................. 515,732 -------------------------------------------------------- $1,059,576 ========================================================
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used to estimate the fair value of each class of financial instrument: CASH AND CASH EQUIVALENTS The carrying amount of these assets approximates fair value because of the short maturity of those instruments. INVESTMENTS The fair value of investments are estimated based on quoted market prices for these or similar investments. LONG-TERM DEBT The fair value of the Company's long-term debt is estimated using discounted cash flows based on the current rates offered to the Company for debt of the same remaining maturities. The carrying amount and estimated fair values of these financial instruments at December 31 are as follows:
----------------------------------------------------------------- 1994 1993 ----------------------------------------------------------------- CARRYING FAIR Carrying Fair AMOUNT VALUE Amount Value ----------------------------------------------------------------- (000's omitted) FINANCIAL ASSETS Cash and cash equivalents $ 115 $ 115 $ 431 $ 431 Short-term investments .. 520 539 Long-term investments ... 42,031 38,897 32,512 34,443 FINANCIAL LIABILITIES Long-term debt .......... 37,875 36,417 34,125 34,287
NOTE 15 - CONTINGENT LIABILITIES AND OTHER COMMITMENTS: The Company is obligated to purchase, under a long-term supply contract renegotiated in January 1992, a minimum of 100,000 metric tons of coal annually through the year 2000. The purchase price is negotiated annually. Coal purchases have exceeded the minimum amount required by the contract. Purchases under the contract amounted to $4,278,000 in 1994, $4,690,000 in 1993 and $5,853,000 in 1992. The Company is a defendant in a number of legal proceedings arising in the normal course of business. Management believes, based on the opinion of legal counsel, that the final outcome of these matters will not have a material adverse effect on the Company's financial position and results of operations. NOTE 16 - STOCKHOLDERS' EQUITY: On May 6, 1992, the Board of Directors declared a three-for-one stock split on the Company's common stock. The distribution of 4,000,000 shares was made on June 30, 1992 to shareholders of record on May 29, 1992. The stock split resulted in an increase of $4 million in common stock (par value $1.00) and a reduction of the same amount in retained earnings. All share and per share data in these financial statements have been restated to give effect to the stock split. NOTE 17 - TREASURY STOCK: During 1994, the Company completed a program to purchase up to 450,000 additional shares of its outstanding stock through the acquisition of 313,500 shares for $9,952,592. The changes in the treasury stock component of shareholders' equity, which is carried at cost, are detailed below:
---------------------------------------------------------------- Number of shares Cost ---------------------------------------------------------------- Treasury stock at December 31, 1993.... 192,300 $ 1,584,496 Treasury stock purchased............... 313,500 9,952,592 ---------------------------------------------------------------- Treasury stock at December 31, 1994.... 505,800 $11,537,088 ================================================================
NOTE 18 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash was paid during the year for:
----------------------------------------------------------------------------- 1994 1993 1992 ----------------------------------------------------------------------------- Interest (net of amount capitalized).... $2,354,000 $2,855,000 $2,982,000 ============================================================================= Income taxes............................ $3,844,000 $3,169,000 $1,930,000 =============================================================================
29 14 PUERTO RICAN CEMENT COMPANY, INC. CONSOLIDATED FOURTH QUARTER RESULTS
(000's Omitted Except Per Share Amounts) ----------------------------------------------------------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31, ----------------------------------------------------------------------------------------------------------------------------- 1994 1993 1994 1993 ----------------------------------------------------------------------------------------------------------------------------- Operating revenues..................................................... $21,940 $20,122 $92,830 $84,028 Cost of sales.......................................................... 12,962 13,137 59,514 53,291 ----------------------------------------------------------------------------------------------------------------------------- Gross margin........................................................... 8,978 6,985 33,316 30,737 Selling, general and administrative expenses........................... 2,945 2,554 11,307 10,397 ----------------------------------------------------------------------------------------------------------------------------- Income from operations................................................. 6,033 4,431 22,009 20,340 ----------------------------------------------------------------------------------------------------------------------------- Other charges (credits): Interest and financial charges...................................... 556 501 2,305 2,654 Interest income..................................................... (626) (336) (2,286) (1,239) Other expense (income).............................................. 740 (129) 648 (221) ----------------------------------------------------------------------------------------------------------------------------- 670 36 667 1,194 ----------------------------------------------------------------------------------------------------------------------------- Income before income taxes............................................. 5,363 4,395 21,342 19,146 Tax provision(1)....................................................... 124 1,749 5,579 6,710 ----------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of changes in accounting principles.... 5,239 2,646 15,763 12,436 Cumulative effect of changes in accounting principles.................. (556) ----------------------------------------------------------------------------------------------------------------------------- Net income............................................................. $ 5,239 $ 2,646 $15,763 $11,880 ============================================================================================================================= Earnings per share of common stock*(2)................................. $ 0.92 $ 0.46 $ 2.76 $ 2.14 =============================================================================================================================
FINANCIAL RESULTS BY QUARTERS
(000's Omitted Except Per Share Amounts) -------------------------------------------------------------------------------------------------------------------------------- Three Months Ended MAR. 31 JUNE 30 SEPT. 30 DEC. 31 1994 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 1993 -------------------------------------------------------------------------------------------------------------------------------- Operating revenues.......... $22,537 $24,787 $23,566 $21,940 $92,830 $20,395 $21,835 $21,676 $20,122 $84,028 ================================================================================================================================ Gross profit................ 8,048 9,294 6,996 8,978 33,316 7,448 7,887 8,417 6,985 30,737 ================================================================================================================================ Income before income tax.... 5,535 6,349 4,095 5,363 21,342 4,426 4,766 5,559 4,395 19,146 Tax provision (1)........... 1,963 2,256 1,236 124 5,579 1,225 1,635 2,101 1,749 6,710 -------------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of changes in accounting............... 3,572 4,093 2,859 5,239 15,763 3,201 3,131 3,458 2,646 12,436 Cumulative effect of changes in accounting principles. (556) (556) -------------------------------------------------------------------------------------------------------------------------------- Net income.................. $3,572 $4,093 $2,859 $5,239 $15,763 $ 2,645 $ 3,131 $ 3,458 $2,646 $11,880 ================================================================================================================================ Per share*(2)............... $ 0.62 $ 0.72 $ 0.50 $ 0.92 $ 2.76 $ 0.55 $ 0.53 $ 0.60 $ 0.46 $ 2.14 ================================================================================================================================
* Based on weighted average of outstanding shares of 5,704,800 in 1994 and 5,807,700 in 1993. (1) Includes an adjustment decreasing the provision by approximately $2,000,000 caused by the reduction in the deferred liability resulting from a decrease in the maximum tax rate from 42% to 39% beginning in calendar year 1996. (2) Excluding, in 1993, a non-cash charge of $0.24 and credit of $0.15 per share for cumulative effects of changes in accounting for postretirement benefits and income taxes, respectively. 30 15 PUERTO RICAN CEMENT COMPANY, INC. FIVE-YEAR STATISTICAL COMPARISON
----------------------------------------------------------------------------------------------------------------------------- Years ended December 31, 1994 1993 1992 1991 1990 ----------------------------------------------------------------------------------------------------------------------------- BALANCE SHEET SUMMARY Cash.......................................... $ 114,702 $ 431,293 $ 130,782 $ 221,351 $ 184,766 Short-term investments........................ 520,000 8,070,657 11,391,863 18,420,013 Accounts receivable-net....................... 14,358,827 13,626,159 10,961,829 12,577,715 12,034,639 Inventories................................... 28,916,950 33,141,836 35,773,103 31,204,693 30,565,337 Prepaid expenses.............................. 3,907,844 3,488,276 2,925,697 2,814,294 2,741,477 ----------------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS - TOTAL..................... 47,298,323 51,207,564 57,862,068 58,209,916 63,946,232 Property, plant and equipment-net............. 111,688,573 107,968,603 105,747,681 108,353,458 95,519,838 Cash restricted for use in the dry process conversion project......................... 942,009 Other assets.................................. 852,351 1,595,062 1,708,695 1,731,203 1,733,198 Long-term investments......................... 42,030,507 32,512,367 8,866,765 ----------------------------------------------------------------------------------------------------------------------------- $201,869,754 $193,283,596 $174,185,209 $168,294,577 $162,141,277 ============================================================================================================================= Notes payable (include current portion of long-term debt and short-term borrowing)... $ 8,598,571 $ 7,491,735 $ 5,857,143 $ 3,482,143 $ 3,142,858 Accounts payable and accrued liabilities...... 8,273,468 9,781,571 8,108,355 8,590,443 9,529,379 ----------------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES - TOTAL................ 16,872,039 17,273,306 13,965,498 11,982,586 12,572,237 Long-term debt (exclusive of current portion). 31,696,403 26,633,080 24,500,000 30,357,143 33,375,000 Deferred income taxes......................... 27,722,814 26,028,233 23,875,370 21,755,663 20,182,252 Postretirement benefit liability.............. 2,607,162 2,673,947 Capital stock (1)............................. 8,830,839 18,783,431 18,783,431 14,783,431 14,783,431 Retained earnings............................. 114,140,497 101,891,599 93,060,910 89,325,754 81,128,357 ----------------------------------------------------------------------------------------------------------------------------- $201,869,754 $193,283,596 $174,185,209 $168,294,577 $162,141,277 ============================================================================================================================= STATISTICAL DATA Book value per share.......................... $ 22.38 $ 20.78 $ 19.26 $ 17.93 $ 14.74 Shares outstanding at year-end................ 5,494,200 5,807,700 5,807,700 5,807,700 5,807,700 Number of stockholders........................ 684 705 729 729 807 Average number of employees................... 552 533 534 555 554 Capital expenditures (including expenditures in mill conversion in 1994 and 1993 and dry process conversion until 1991)............. $ 11,256,763 $ 9,136,968 $ 4,329,321 $ 19,803,268 $ 18,423,975 =============================================================================================================================
(1) Including, in 1994, the purchase of 313,500 shares of the Company's outstanding common stock for $9,953,000. 31 16 PUERTO RICAN CEMENT COMPANY, INC. DIRECTORS AND OFFICERS DIRECTORS ANTONIO LUIS FERRE Chairman of the Board of the Company and President of El Dia, Inc. (Newspaper Publishing Group) ALBERTO M. PARACCHINI Vice Chairman of the Board of the Company and Director of Banco Popular de Puerto Rico (Commercial Bank) and BanPonce Corporation (Bank Holding Company) HECTOR DEL VALLE Vice Chairman of the Board of the Company MIGUEL A. NAZARIO President and Chief Executive Officer of the Company JOSE J. SUAREZ Executive Vice President in Charge of Operations of the Company ANTONIO LUIS FERRE RANGEL Vice President of Strategic Planning CARLOS J. SUAREZ Consultant to the Company ESTEBAN D. BIRD President of Bird Construction Company (General Contractors) OSCAR A. BLASINI President of G.B. Investments, Inc. (Real Estate Development and Investments) ROSARIO J. FERRE Second Vice President of Luis A. Ferre Foundation, Inc. WALLACE GONZALEZ OLIVER Attorney At Law, Partner, Gonzalez Oliver, Correa Calzada, Collazo Salazar, Herrero &Jimenez (Law Firm) HECTOR PUIG RAMIREZ President of Ferreterias Puig, Inc. (Distributors of Construction Materials), Livio Puig, Inc. (Real Estate Company) and Puig Rental, Inc. (Construction Equipment and Tools Leasing) FEDERICO M. STUBBE President of Comunidades Fermaral, Inc. (Real Estate) EMILIO J. VENEGAS President of Sanson Corporation (Rock and Concrete Products) and Secretary of Venegas Construction Corporation (General Contractors) FEDERICO F. SANCHEZ President of Federico F. Sanchez and Company, Inc. and Interlink Group, Inc. (Real Estate Consultants, Brokers and Developers) JORGE L. FUENTES Chairman of the Board and Chief Executive Officer of Gabriel Fuentes, Jr. Construction Company, Inc. and Chairman of the Board and Chief Executive Officer of Fuentes Concrete Pile, Inc. (Concrete Pile Foundations) JUAN A. ALBORS Chairman and Chief Executive Officer of Albors Housing Development Corporation (Real Estate Developers and Investors) MARIANO MIER Dean of Business Administration at Universidad Metropolitana (four year college) OFFICERS MIGUEL A. NAZARIO President and Chief Executive Officer JOSE J. SUAREZ Executive Vice President in Charge of Operations JOSE O. TORRES Secretary, Vice President of Finance, and Treasurer RENE DI CRISTINA Vice President - Sales ANGEL M. AMARAL Vice President and Controller BENITO DEL CUETO Vice President of Desarrollos Multiples Insulares, Inc. JUAN A. CARBONELL Vice President and General Manager St. Regis Paper and Bag Division ANTONIO LUIS FERRE RANGEL Vice President of Strategic Planning STATUTORY OFFICES Ponce, Puerto Rico EXECUTIVE OFFICES Guaynabo, Puerto Rico SUBSIDIARIES* Caribbean Cement Carriers Corporation Desarrollos Multiples Insulares, Inc. Ferre Export Corporation Florida Lime Corporation *All Subsidiaries are 100% owned REGISTRAR AND TRANSFER AGENT Mellon Financial Services Ridgefield Park, New Jersey INDEPENDENT ACCOUNTANTS Price Waterhouse San Juan, Puerto Rico PUBLIC RELATIONS Ludgage Communications New York, New York LEGAL COUNSEL Totti, Rodriguez Diaz &Fuentes San Juan, Puerto Rico 32 17 PUERTO RICAN CEMENT COMPANY, INC. STOCKHOLDER INFORMATION FORM 10-K A copy of the Annual Report as filed with the Securities and Exchange Commission on Form 10-K will be mailed upon request made to Mr. Jose Osvaldo Torres, Vice President of Finance and Treasurer, Puerto Rican Cement Company, Inc., PO Box 364487, San Juan, Puerto Rico 00936-4487. PUERTO RICAN CEMENT COMPANY, INC. ANNUAL MEETING The Annual Meeting of Stockholders of Puerto RicanCement Company, Inc. will be held at the office of the Company, Amelia Industrial Park, Guaynabo,Puerto Rico, Wednesday, May 3, 1995 at 10:00 a.m. COMMON STOCK PRICES AND DIVIDENDS PER SHARE The Company's common stock is listed on the New York Stock Exchange (trading symbol:PRN). The following table sets forth the high and low sales price per share of the common stock.
-------------------------------------------------------------- Price per share ($) 1994 1993 -------------------------------------------------------------- HIGH LOW High Low -------------------------------------------------------------- First Quarter 29 1/2 24 1/2 26 1/4 22 3/8 Second Quarter 30 1/4 28 1/8 26 23 Third Quarter 33 1/8 28 3/8 26 3/4 23 7/8 Fourth Quarter 33 1/4 27 1/2 27 1/4 24 Full Year 33 1/4 24 1/2 27 1/4 22 3/8 Dividends per share $0.62 $0.53
EX-27 7 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS YEAR DEC-31-1994 DEC-31-1994 1 114,702 0 15,452,830 1,094,003 28,916,950 47,298,323 163,077,313 51,388,740 201,869,754 16,872,039 31,696,403 6,000,0000 0 0 116,971,336 201,869,754 92,732,777 97,095 59,514,156 70,821,730 665,777 0 0 21,342,365 5,579,153 0 0 0 0 15,763,212 0 0