Consolidated Statements of Income
Medusa Corporation and Subsidiaries
________________________________________________________________________
Year Ended December 31 1994 1993 1992
(In Thousands, except per share data)
Net Sales $ 276,293 $ 248,038 $ 181,777
Costs and Expenses:
Cost of sales 189,028 179,101 136,460
Selling, general and administrative 21,328 21,838 15,700
Depreciation and amortization 13,830 13,958 12,703
224,186 214,897 164,863
Operating Profit 52,107 33,141 16,914
Other Income (Expense):
Interest income 1,262 236 89
Interest expense (7,526) (6,152) (4,078)
Miscellaneous-net (6) (500) 93
(6,270) (6,416) (3,896)
Income Before Taxes 45,837 26,725 13,018
Provision for Income Taxes 15,957 8,526 3,941
Income Before Cumulative Effect
of a Change in Accounting 29,880 18,199 9,077
Cumulative Effect of a Change
in Accounting For Income
Taxes in 1993 (Note A) - 711 -
Net Income $ 29,880 $ 18,910 $ 9,077
________________________________________________________________________
Net Income Per Common Share:
Primary:
Income before cumulative
effect of a change in
accounting $ 1.81 $ 1.12 $ .56
Cumulative effect of a
change in accounting - .04 -
$ 1.81 $ 1.16 $ .56
Fully Diluted:
Income before cumulative
effect of a change in
accounting $ 1.76 $ 1.12 $ .56
Cumulative effect of a
change in accounting - .04 -
$ 1.76 $ 1.16 $ .56
Average Common Shares Outstanding 16,334 16,268 16,130
_______________________________________________________________________
See Notes to Consolidated Financial Statements
Consolidated Balance Sheets
Medusa Corporation and Subsidiaries
December 31 1994 1993
(In Thousands, except share data)
Assets
Current Assets:
Cash and short-term investments $ 48,487 $ 31,218
Accounts receivable,less allowances
of $519 ($517 in 1993) 24,036 23,320
Inventories 23,292 25,678
Other current assets 4,339 4,019
Total Current Assets 100,154 84,235
Property, Plant and Equipment 106,116 105,660
Intangible and Other Assets 12,330 14,282
Total Assets $ 218,600 $ 204,177
____________________________________________________________________________
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 35,000 $ -
Accounts payable 15,257 11,097
Accrued compensation and payroll taxes 6,161 6,143
Other accrued liabilities 8,635 7,258
Income taxes payable 1,817 1,887
Total Current Liabilities 66,870 26,385
Long-Term Debt 61,300 96,300
Accrued Postretirement Health Benefit Cost 27,342 26,906
Reserves and Other Liabilities 2,879 2,857
Accrued Pension Liability 236 252
Shareholders' Equity:
Preferred shares, without par value -
3,000,000 shares authorized:
1,000,000 shares each of Class A
Serial Preferred; Class B Serial
Preferred; and Class C Preferred Shares - -
Common shares, without par value:
Authorized - 50,000,000 shares
Outstanding - 16,162,302 shares
(16,651,103 in 1993) 1 1
Paid in capital 19,724 16,377
Retained earnings 62,455 40,839
Unvested restricted common shares (26) (26)
Unearned restricted common shares (3,511) (2,759)
Currency translation adjustment (1,101) (786)
Total Paid In Capital and
Retained Earnings 77,542 53,646
Less Cost of Treasury Shares-771,706 shares
(119,549 shares in 1993) (17,569) (2,169)
Total Shareholders' Equity 59,973 51,477
Total Liabilities and
Shareholders' Equity $ 218,600 $ 204,177
____________________________________________________________________________
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Medusa Corporation and Subsidiaries
____________________________________________________________________________________________
Year Ended December 31 1994 1993 1992
(In Thousands)
Cash Provided From (Used By) Operating Activities:
Net income $ 29,880 $ 18,910 $ 9,077
Cumulative effect of a change in accounting - (711) -
Income before cumulative effect
of a change in accounting 29,880 18,199 9,077
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization 13,830 13,958 12,703
Provision (benefit) for deferred income taxes 1,660 (1,334) (1,302)
Postretirement health benefit cost 491 1,470 1,433
Loss (gain) on sale of capital assets 12 (64) 63
45,873 32,229 21,974
Cash provided from (used by) working capital
components and other:
Accounts receivable (716) (7,845) 270
Inventories and other current assets 1,774 6,469 (2,785)
Accounts payable and other current
liabilities 5,430 6,078 1,395
Other assets 1,986 (1,824) (600)
Accrued pension, reserves and other
liabilities (2,475) 1,479 (164)
Net Cash Provided From Operating Activities 51,872 36,586 20,090
Cash Provided From (Used By) Investing Activities:
Capital expenditures (14,694) (15,372) (11,548)
Payment for business acquired - (50,511) -
Proceeds from sale of capital assets 1,622 64 24
Net Cash Used By Investing Activities (13,072) (65,819) (11,524)
Cash Provided From (Used By) Financing Activities:
Purchase of treasury shares (14,608) (1,747) (490)
Dividends paid (8,264) (4,407) (4,341)
Stock options exercised 1,278 1,521 671
Proceeds from issuance of senior long-term debt
and convertible subordinated notes - 107,500 -
Payments on long-term debt - (50,000) (145)
Issuance of restricted shares 63 - -
Net Cash Provided From (Used By)
Financing Activities (21,531) 52,867 (4,305)
Increase In Cash And Short-Term
Investments 17,269 23,634 4,261
Cash And Short-Term Investments At Beginning
Of Year 31,218 7,584 3,323
Cash And Short-Term Investments At End Of Year $ 48,487 $ 31,218 $ 7,584
____________________________________________________________________________________________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (net of $153 capitalized in 1993) $ 7,509 $ 5,716 $ 4,085
Income taxes 14,367 8,699 6,225
____________________________________________________________________________________________
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Medusa Corporation and Subsidiaries
__________________________________________________________________________________________________
Unvested Unearned
Restricted Restricted
Common Paid in Retained Common Common
Shares Capital Earnings Shares Shares
(In Thousands, except share data)
Balance At January 1, 1992 $ 1 $ 11,909 $ 21,600 $ (4,323) $ (877)
Net income 9,077
Dividends paid - $.27 per common
share (4,341)
Issuance of 89,685
restricted common shares 1,142 (91) (1,051)
Exercise of 75,435 stock options 671
Purchase of 38,714 treasury shares
Amortization for vesting of
restricted common shares 2,572
Currency translation adjustment
Balance At December 31, 1992 1 13,722 26,336 (1,842) (1,928)
Net income 18,910
Dividends paid - $.27 per common
share (4,407)
Issuance of 117,420
restricted common shares 2,116 (79) (2,037)
Forfeiture of 56,250
restricted common shares (768) 768
Exercise of 510,651 stock options 5,108
Purchase of 280,275 treasury shares
Retirement of 212,897 treasury shares (3,801)
Amortization for vesting of
restricted common shares 1,895 438
Currency translation adjustment
Balance At December 31, 1993 1 16,377 40,839 (26) (2,759)
Net income 29,880
Dividends paid - $.50 per common
share (8,264)
Issuance of 83,070
restricted common shares 2,045 (79) (1,903)
Forfeiture of 51,000
restricted common shares (768) 768
Exercise of 187,536 stock options 2,070
Purchase of 652,157 treasury shares
Amortization for vesting of
restricted common shares 79 383
Currency translation adjustment
Balance At December 31, 1994 $ 1 $ 19,724 $ 62,455 $ (26) $ (3,511)
___________________________________________________________________________________________________
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Medusa Corporation and Subsidiaries
_________________________________________________________________________
Currency Total
Translation Treasury Shareholders'
Adjustment Shares Equity
(In Thousands, except share data)
Balance At January 1, 1992 $ 5 $ (146) $ 28,169
Net income 9,077
Dividends paid - $.27 per common
share (4,341)
Issuance of 89,685
restricted common shares
Exercise of 75,435 stock options 671
Purchase of 38,714 treasury shares (490) (490)
Amortization for vesting of
restricted common shares 2,572
Currency translation adjustment (684) (684)
Balance At December 31, 1992 (679) (636) 34,974
Net income 18,910
Dividends paid - $.27 per common
share (4,407)
Issuance of 117,420
restricted common shares
Forfeiture of 56,250
restricted common shares
Exercise of 510,651 stock options 5,108
Purchase of 280,275 treasury shares (5,334) (5,334)
Retirement of 212,897 treasury share 3,801
Amortization for vesting of
restricted common shares 2,333
Currency translation adjustment (107) (107)
Balance At December 31, 1993 (786) (2,169) 51,477
Net income 29,880
Dividends paid - $.50 per common
share (8,264)
Issuance of 83,070
restricted common shares 63
Forfeiture of 51,000
restricted common shares
Exercise of 187,536 stock options 2,070
Purchase of 652,157 treasury shares (15,400) (15,400)
Amortization for vesting of
restricted common shares 462
Currency translation adjustment (315) (315)
Balance At December 31, 1994 $ (1,101) $(17,569) $ 59,973
_______________________________________________________________________
See Notes to Consolidated Financial Statements
MEDUSA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the company and its
wholly-owned subsidiaries. All significant intercompany items have been
eliminated.
The company's vertically integrated line of business includes the
production and sale of cement and aggregates to the construction
industry which constitutes more than ninety percent of sales and net
income.
Reclassification
The 1993 consolidated financial statements were reclassified to conform
with the manner of presentation used in 1994.
Cash and Short-Term Investments
For purposes of the statement of cash flows, the company considers cash
equivalents to be all highly liquid securities with an original maturity
of three months or less. Estimated fair value approximates the carrying
amount.
Inventories
Inventories are valued principally at the lower of cost or market
determined using the last-in, first-out (LIFO) cost method. The average
cost method is used for substantially all supplies.
Property, Plant and Equipment
Depreciation of property, plant and equipment for financial reporting
purposes is provided over the estimated useful lives of the assets
principally by the straight-line method.
Income Taxes
Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standard No. 109 (FAS 109), "Accounting for Income Taxes,"
which changed the method of accounting for income taxes from the
deferred method under APB 11 to an asset and liability method. The
cumulative effect from the adoption of FAS 109 added $711,000, or $.04
per common share, to net income in 1993. Had the company adopted FAS
109 effective January 1, 1992, approximately $1,200,000 would have been
added to net income in 1992.
Net Income Per Share
Primary net income per share is computed by dividing net income by the
weighted average number of shares of common stock and common stock
equivalents (options) outstanding during the period. Fully diluted net
income per share is computed based on the weighted average number of
shares of common stock and common stock equivalents outstanding during
the period, as if the convertible subordinated notes were converted into
common stock at the beginning of the period after giving retroactive
effect to the elimination of interest expense, net of income tax effect,
applicable to the subordinated notes.
NOTE B - ACQUISITION
On February 1, 1993, the company acquired the Demopolis, Alabama cement
plant and related assets for $50.5 million which was accounted for by
the purchase method. Accordingly, its results of operations have been
included in the consolidated statements of income from the date of
acquisition.
NOTE C - INVENTORIES
At December 31 (in thousands):
________________________________________________________
1994 1993
Finished goods $ 7,987 $11,309
Work in process 1,756 2,887
Raw materials 2,136 2,109
Supplies 11,413 9,373
$23,292 $25,678
Use of the first-in, first-out (FIFO) cost method would have increased
inventories from the amounts reported at December 31 by $7,089,000 in
1994 and $6,396,000 in 1993.
NOTE D - PROPERTY, PLANT AND EQUIPMENT - AT COST
At December 31 (in thousands):
___________________________________________________________
1994 1993
Land $ 10,159 $ 10,218
Buildings and improvements 20,528 20,513
Machinery and equipment 307,247 296,954
337,934 327,685
Less accumulated depreciation (231,818) (222,025)
$106,116 $105,660
NOTE E - LEASES
The company leases various cement storage facilities, vehicles and
various other equipment under capital and operating leases with terms of
from one to forty years.
Future minimum payments, by year, and in the aggregate, under
capitalized leases and operating leases with initial or remaining terms
of one year or more are as follows at December 31, 1994 (in thousands):
______________________________________________________________
Capital Operating
Leases Leases Total
1995 $ 181 $ 1,159 $ 1,340
1996 181 906 1,087
1997 181 610 791
1998 181 431 612
1999 181 159 340
Thereafter 5,048 1,869 6,917
Total minimum lease payments 5,953 $ 5,134 $ 11,087
Less interest (2,153)
Present value of future minimum
lease payments $ 3,800
The costs of assets capitalized under leases at December 31 are as
follows (in thousands):
______________________________________________________________
1994 1993
Machinery and equipment $ 4,035 $ 4,035
Less accumulated depreciation (1,491) (1,290)
$ 2,544 $ 2,745
The weighted average interest rate for capital leases was
3.4% in 1994.
The capital lease agreements contain certain covenants which, among
other things, require the company to meet certain consolidated financial
tests, including tests relating to minimum net worth, financial
leverage, fixed obligation coverage and cash flow coverage. At December
31, 1994, the minimum required level of net worth under these covenants
was
$25.0 million.
Rental expense was $2,069,000, $1,549,000, and $1,263,000 for 1994, 1993
and 1992, respectively.
NOTE F - SHORT AND LONG-TERM FINANCING
The company has an unsecured $20,000,000 Revolving Credit Agreement
("Revolver") with three banks that expires December 31, 1996. The
Revolver allows borrowings bearing interest at the company's option, at
either the prime rate, as adjusted from time-to-time, or 3/4% per annum
above the reserve-adjusted rate at which Eurodollar deposits are offered
by prime banks in the Eurodollar interbank market ("LIBOR"). The
Revolver bears a commitment fee of 3/8% per annum on the unused portion.
The company also has unsecured bank lines of credit totalling $15.0
million. At December 31, 1994, no amounts were outstanding under any of
these credit facilities.
Long-term debt consists of the following at December 31 (in thousands):
_____________________________________________________________
1994 1993
6% convertible subordinated notes, due
2003, interest payable semi-annually $57,500 $57,500
10% unsecured Senior Notes, due 1995,
interest payable semi-annually 35,000 35,000
Capitalized leases 3,800 3,800
96,300 96,300
Less current portion (35,000) -
$61,300 $96,300
The 6% convertible subordinated notes ("Notes") are convertible at any
time into common shares, without par value, of the company at an initial
conversion price of $33.125 principal amount per common share, subject
to adjustment under certain circumstances. The Notes are redeemable at
any time at the option of the company, in whole or in part, beginning
November 15, 1996 at various redemption prices, plus accrued and unpaid
interest to the redemption date. Upon a change in control, a holder of
the Notes may require the company to redeem such holder's Notes at a
price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest to the redemption date. The Notes are subordinated to
all existing and future senior indebtedness of the company.
The 10% Senior Notes and Revolver contain certain covenants which, among
other things, (1) requires the maintenance of minimum tangible net
worth, which at December 31, 1994 was $42.1 million; (2) limits the
payment of dividends in a sum not to exceed $10.0 million plus, among
other adjustments, eighty percent of net income or minus one hundred
percent of net loss after June 30, 1990; and (3) limits the incurrence
of additional long-term debt.
Average interest rate incurred on all borrowings was 7.3% in 1994, 6.7%
in 1993, and 8.9% in 1992.
The company has available bank stand-by letter of credit facilities of
$10.0 million of which $6.2 million was being utilized at December 31,
1994. These instruments are considered off-balance-sheet risk and
represent conditional commitments issued to guarantee the company's
performance to various third parties.
The fair value of the company's long-term debt of $55,913,000 for the
Notes and $35,680,000 for the Senior Notes is estimated based on the
current rates offered to the company for debt of the same remaining
maturities.
NOTE G - POSTRETIREMENT HEALTH BENEFITS
The company provides substantially all employees with health care and
life insurance benefits through unfunded defined benefit plans upon
retirement.
The net periodic postretirement benefit cost for 1994, 1993 and 1992 was
as follows (in thousands):
_______________________________________________________________
1994 1993 1992
Service cost $ 470 $ 575 $ 499
Interest cost on accumulated
postretirement benefit
obligation 1,511 1,927 1,892
Net amortization (523) - -
Net periodic postretirement
benefit cost $ 1,458 $ 2,502 $ 2,391
The following table sets forth the plans' funded status reconciled with
the amounts shown in the company's balance sheets at December 31, 1994
and 1993 (in thousands):
_______________________________________________________________
1994 1993
Accumulated Postretirement Benefit
Obligation:
Retirees $10,311 $12,868
Eligible active plan participants 4,560 4,681
Other active plan participants 6,300 7,496
21,171 25,045
Unrecognized net gain 7,245 2,880
28,416 27,925
Less current amount in other
accrued liabilities 1,074 1,019
Accrued Postretirement Health
Benefit Cost $27,342 $26,906
In 1994 and 1993, the cost of benefits was assumed to increase 11% for
1994 through 1996, and then decrease gradually to 5% by 2002 (4% by 2010
in 1993), and remain at that level thereafter. In prior years, the cost
of benefits was assumed to increase 12% annually through 1994 and then
decrease gradually to 5% by 2010, and remain at that level thereafter.
An increase in the assumed health care cost trend rate by one percentage
point would increase the accumulated postretirement benefit obligation
as of December 31, 1994 by $2.3 million and the net periodic
postretirement benefit cost by approximately $.3 million for the year.
The discount rate in determining the accumulated postretirement benefit
obligation was 8.5% in 1994 (7.5% in 1993 and 8.5% in 1992).
NOTE H - INCOME TAXES
A reconciliation between the statutory federal income tax rate and the
company's effective income tax rate for 1994, 1993 and 1992 is as
follows:
_____________________________________________________________
1994 1993 1992
Statutory rate 35.0% 35.0% 34.0%
State income tax, net of federal
income tax benefits 4.2 3.7 4.8
Percentage depletion (4.7) (6.5) (9.0)
Goodwill .1 .1 .2
Other .2 (.4) .3
Effective rate 34.8% 31.9% 30.3%
Components of the provision for income taxes for 1994, 1993 and 1992
were as follows (in thousands):
______________________________________________________________
1994 1993 1992
Deferred income tax expense
(benefit) $ 1,660 $(1,334) $(1,302)
Current income tax expense 14,297 9,860 5,243
$15,957 $8,526 $3,941
The income tax provisions include state income tax provisions of
$2,988,000, $1,521,000 and $948,000 for 1994, 1993 and 1992,
respectively.
Components of the net deferred tax asset shown in the company's balance
sheets at December 31, 1994 and 1993 were as follows (in thousands):
_____________________________________________________________
1994 1993
Net book value of fixed assets in
excess of tax basis $(10,535) $(9,344)
Financial reporting accrual for
postretirement health benefits 11,622 11,338
Other financial reporting accruals 2,686 3,235
Other taxable temporary
differences (502) (1,189)
Other deductible temporary
differences 972 1,891
$ 4,243 $ 5,931
Net deferred income tax assets associated with certain current items
included in other current assets were $2,366,000 and $2,658,000 at
December 31, 1994 and 1993, respectively.
Net deferred income tax assets associated with certain non-current items
are included in intangible and other assets.
NOTE I - PENSIONS AND EMPLOYEE BENEFIT PLANS
The company has defined benefit pension plans which cover substantially
all of its employees. The plans generally provide benefit payments
using a formula based on length of service and final average
compensation, except for most hourly employees for whom the benefits are
a fixed amount per year of service. The company's policy is to fund at
least the minimum required by the applicable regulations.
Net periodic pension cost for 1994, 1993 and 1992 was as follows (in
thousands):
_____________________________________________________________
1994 1993 1992
Service cost-benefits earned
during the year $ 1,013 $ 873 $ 717
Interest cost on projected
benefit obligation 1,859 1,734 1,585
Actual return on plan assets 966 (2,805) (1,409)
Net amortization and deferral (2,750) 1,046 (236)
Net periodic pension cost $ 1,088 $ 848 $ 657
The following table sets forth, by funded status, the amounts recognized
in the company's balance sheets at December 31, 1994 and 1993 for its
pension plans (in thousands):
1994 1993
Over- Under- Over- Under-
funded* funded* funded* funded*
Actuarial present value of
benefit obligations:
Vested $ 6,045 $15,408 $19,766 $ 1,497
Nonvested 79 241 218 138
Accumulated benefit
obligation 6,124 15,649 19,984 1,635
Effect of future pay
increases 2,182 - 2,235 -
Projected benefit obligation 8,306 15,649 22,219 1,635
Plan assets at fair value 8,540 15,413 22,311 1,272
Projected benefit obligation
less than (in excess
of) plan assets 234 (236) 92 (363)
Unrecognized net (gain)
loss on assets 107 (169) (267) (152)
Unrecognized net (asset)
obligation (71) 963 910 (27)
Unrecognized prior service cost 194 1,372 648 290
Additional minimum liability - (2,166) - (111)
Net recorded pension asset
(liability) $ 464 $ (236) $ 1,383 $ (363)
*Overfunded plans are those in which plan assets at fair value exceed
the accumulated benefit obligation. Underfunded plans are those in
which the accumulated benefit obligation exceeds plan assets at fair
value.
Prepaid pension cost included in intangible and other assets was
$464,000 and $2,084,000 at December 31, 1994 and 1993, respectively.
The pension intangible asset included in intangible and other assets was
$2,166,000 and $111,000 at December 31, 1994 and 1993, respectively.
A non-cash increase of $2,055,000 to the pension intangible asset and
accrued pension liability was required to record the additional minimum
liability in 1994.
Assumptions used as of December 31 were:
_____________________________________________________________
1994 1993 1992
Discount rate 8.5% 7.50% 8.50%
Rate of increase in
compensation levels 5.0% 4.25% 5.25%
Expected long-term rate of
return on assets 8.5% 8.50% 9.50%
At December 31, 1994 and 1993 all plan assets were primarily invested in
listed stocks and bonds.
Certain company employees are covered under multi-employer union pension
plans. Amounts contributed under these plans were approximately
$113,000, $88,000, and $115,000 for 1994, 1993 and 1992, respectively.
NOTE J - STOCK OPTION AND AWARD PLANS
A summary of stock option transactions follows:
Number of Shares
1994 1993 1992
Outstanding at January 1 542,477 870,053 791,738
Options granted 246,000 174,750 153,750
Options cancelled (36,876) (6,750) -
Options exercised (187,536) (495,576) (75,435)
Outstanding at December 31 564,065 542,477 870,053
At December 31, 1994, options for 211,238 shares were exercisable;
615,688 shares were available for grant. Per share option prices ranged
from $8.71 to $28.31.
The company's 1991 long-term incentive plan provides for awards of
common shares to certain officers. Fifty percent of the shares are
restricted until a measurement date two and one-half years from the date
of grant and the remaining fifty percent is restricted until a
measurement date five years from date of grant. For the shares to vest,
on each measurement date, the cumulative total return from the company's
common shares must exceed a specified return.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Medusa Corporation
and subsidiaries have been prepared by management in conformity with
generally accepted accounting principles and, in the judgment of
management, present fairly and consistently the company's financial
position and results of operations. These statements by necessity
include amounts that are based on management's best estimates and
judgments and give due consideration to materiality.
The accounting systems and internal accounting controls of the company
are designed to provide reasonable assurance that the financial records
are reliable for preparing consolidated financial statements and
maintaining accountability for assets and that, in all material
respects, assets are safeguarded against loss from unauthorized use or
disposition. Qualified personnel throughout the organization maintain
and monitor these internal accounting controls on an ongoing basis.
Management continually monitors the system of internal control for
compliance. In addition, the company's internal auditor systematically
reviews the adequacy and effectiveness of the controls and reports
thereon.
The consolidated financial statements have been audited by Deloitte &
Touche LLP, independent auditors, whose report appears on this page.
The Audit Committee of the Board of Directors, composed solely of
outside directors, meets periodically with management, with the
company's internal auditor, and with the independent auditors to review
matters relating to the quality of financial reporting and internal
accounting control and the nature, extent and results of their audits.
The company's internal auditor and independent auditors have free access
to the Audit Committee.
Robert S. Evans
Chairman & Chief Executive Officer
R. Breck Denny
Vice President - Finance & Treasurer
Edward A. Doles
Corporate Controller
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Medusa Corporation:
We have audited the accompanying consolidated balance sheets of Medusa
Corporation and subsidiaries (the "Company") as of December 31, 1994 and
1993 and the related consolidated statements of income, shareholders'
equity and of cash flows for each of the three years in the period ended
December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at
December 31, 1994 and 1993 and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993.
Cleveland, Ohio
January 23, 1995