FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
Commission File Number 1-1274-2
MEDUSA CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-0394630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3008 Monticello Boulevard, Cleveland Heights, Ohio 44118
(Address of principal executive offices) (Zip Code)
(216) 371-4000
Registrant's telephone number, including area code
Not applicable
(Former name, former address and former fiscal year,
if changed from last report.)
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
The number of shares outstanding of the issuer's classes of common
stock as of June 30, 1995:
Common Shares, Without Par Value - 16,275,061 shares
INDEX
MEDUSA CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income - Three months ended June 30,
1995 and 1994; Six months ended June 30, 1995 and 1994
Consolidated Balance Sheets - June 30, 1995, June 30, 1994 and
December 31, 1994
Consolidated Statements of Cash Flows - Six months ended June
30, 1995 and 1994
Notes to consolidated financial statements
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURES
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Part I - Financial Information
Item 1 - Financial Statements
Medusa Corporation and Subsidiaries
Consolidated Statements of Net Income
(In Thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Unaudited)
Net Sales $ 80,165 $ 76,534 $ 125,785 $ 113,914
Costs and Expenses:
Cost of sales 49,462 50,587 85,537 81,858
Selling, general and 5,735 4,905 11,507 9,419
administrative
Depreciation and
amortization 4,034 3,903 6,860 6,491
59,231 59,395 103,904 97,768
Operating Profit 20,934 17,139 21,881 16,146
Other Income (Expense):
Interest income 355 140 827 358
Interest expense (1,894) (1,867) (3,775) (3,744)
Miscellaneous - net (11) 115 (12) 72
(1,550) (1,612) (2,960) (3,314)
Income Before Taxes 19,384 15,527 18,921 12,832
Provision For Income
Taxes 6,688 5,218 6,528 4,312
Net Income $ 12,696 $ 10,309 $ 12,393 $ 8,520
Average Common Shares
Outstanding 15,990 16,343 16,003 16,452
Net Income Per Common
Share:
Primary $ .79 $ .63 $ .77 $ .52
Fully Diluted $ .74 $ .63 $ .76 $ .52
Cash Dividends Declared
Per Common Share $ .125 $ .125 $ .250 $ .250
See notes to consolidated financial statements
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Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
June 30, December 31,
1995 1994 1994
(Unaudited)
Assets
Current Assets:
Cash and short-term investments $ 27,897 $ 20,133 $ 48,487
Accounts receivable, less allowances of
$989, $517 and $519, respectively 37,819 34,468 24,036
Inventories, at lower of cost,
principally LIFO, or market:
replacement cost would be higher by
approximately $7,007, $6,509 and
$7,089, respectively
Finished goods 9,981 11,176 7,987
Work in process 4,028 3,581 1,756
Raw materials and supplies 14,200 12,733 13,549
28,209 27,490 23,292
Other current assets 11,542 9,567 4,339
Total Current Assets 105,467 91,658 100,154
Property, Plant and Equipment:
Cost 346,734 330,523 337,934
Less accumulated depreciation 235,704 226,110 231,818
111,030 104,413 106,116
Intangible and Other Assets 10,704 13,804 12,330
Total Assets $ 227,201 $ 209,875 $ 218,600
See notes to consolidated financial statements
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Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
June 30, December 31,
1995 1994 1994
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of
long-term debt $ 35,000 $ - $ 35,000
Accounts payable 12,654 14,053 15,257
Accrued compensation and
payroll taxes 4,502 4,612 6,161
Other accrued liabilities 9,637 8,357 8,635
Income taxes payable 5,580 3,924 1,817
Total Current Liabilities 67,373 30,946 66,870
Long-Term Debt 61,300 96,300 61,300
Accrued Postretirement Health
Benefit Cost 27,595 27,566 27,342
Accrued Pension, Reserves and
Other Liabilities 3,366 3,152 3,115
Shareholders' Equity:
Preferred shares - - -
Common shares 1 1 1
Paid in capital 23,427 19,248 19,724
Retained earnings 70,777 45,192 62,455
Unvested restricted common shares (100) (65) (26)
Unearned restricted common shares (6,120) (4,335) (3,511)
Currency translation adjustment (971) (1,048) (1,101)
Total Paid in Capital and
Retained Earnings 87,014 58,993 77,542
Less Cost of Treasury Shares (19,447) (7,082) (17,569)
Total Shareholders' Equity 67,567 51,911 59,973
Total Liabilities and Shareholders'
Equity $ 227,201 $ 209,875 $ 218,600
See notes to consolidated financial statements
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Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended
June 30, June 30,
1995 1994
Cash Provided From (Used By) Operating Activities:
Net income $ 12,393 $ 8,520
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 6,860 6,491
Provision for deferred income taxes 519 2
Postretirement health benefit cost 253 660
Increase in operating working capital (24,895) (14,073)
Gain on sale of capital assets (28) (41)
Net Cash Provided By (Used By) Operating
Activities (4,898) 1,559
Cash Provided From (Used By) Investing Activities:
Capital expenditures (11,209) (6,190)
Proceeds from sale of capital assets 28 1,448
Net Cash Used By Investing Activities (11,181) (4,742)
Cash Provided From (Used By) Financing Activities:
Purchase of treasury shares (1,878) (4,270)
Dividends paid (4,071) (4,167)
Stock options exercised 852 511
Issuance of restricted shares 586 63
Other - (39)
Net Cash Used By Financing Activities (4,511) (7,902)
Decrease In Cash And Short-Term Investments (20,590) (11,085)
Cash And Short-Term Investments At Beginning
Of Period 48,487 31,218
Cash And Short-Term Investments At End Of Period $ 27,897 $ 20,133
See notes to consolidated financial statements
-5-
Part I - Financial Information
Item 1 - Financial Statements (Cont'd)
Medusa Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all normal recurring adjustments considered necessary
for a fair presentation have been included. Operating results
for the six months ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included
in the company's annual report on Form 10-K for the year ended
December 31, 1994.
2. Use of the percentage depletion method and other permanent tax
adjustments reduced the company's effective tax rate for the
second quarter of 1995 and 1994 to 34.5% and 33.6%,
respectively, and for the first six months of 1995 and 1994 to
34.5% and 33.6%, respectively, from the federal statutory rate
of 35%.
3. At both June 30, 1995 and December 31, 1994, 50,000,000 common
shares, without par value were authorized. At June 30, 1995,
16,275,061 shares were outstanding (16,162,302 at December 31,
1994).
4. 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 Common Shares and Common Share
equivalents outstanding during the period, as if the convertible
subordinated notes were converted into Common Shares 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.
- -6-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Three Months Ended June 30, 1995 Compared With Three Months
Ended June 30, 1994
Net sales for the second quarter of 1995 increased to $80.2
million from $76.5 million in 1994. Cement net sales rose 7%
over last years' second quarter. While cement unit volume for
the quarter decreased by 6%, price increases implemented April
1, 1995 and August 1, 1994, resulted in 15% higher cement
prices over 1994. Heavy rains for much of the period hampered
both our cement operations and the construction industries
served. In addition to the inclement weather conditions, some
of the reduced volume in the 1995 quarter may also reflect
customer purchases in advance of price increases implemented on
April 1, 1995 and production constraints in the Southeast.
Poor weather conditions contributed to reduced unit sales
volume for Aggregate operations resulteding in 9% lower sales
for the second quarter of 1995 compared to 1994. In addition,
the quarter reflected higher sales for the company's highway
and safety construction operation.
Cost of sales as a percent of sales fell to 61.7% in the second
quarter of 1995 compared to 66.1% in same period of 1994 due
primarily to increased cement prices. The effect of higher
prices was partially offset by higher repairs and maintenance
costs. Cement capacity utilization for the quarter was 102% in
1995 compared to 103% in 1994.
Depreciation and amortization expense increased $0.1 million
from $3.9 million in 1994. The increase was due to the high
levels of capital expenditures in 1995.
Selling, general and administrative expense as a percent of
sales increased to 7.2% in 1995 from 6.4% in 1994. Higher
personnel related costs and other inflationary pressures caused
this overall increase.
Operating profit for the second quarter of 1995 of $20.9
million compares to $17.1 million in 1994. The improvement in
operating results can be attributed to the reasons discussed
above.
- -7-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd)
Six Months Ended June 30, 1995 Compared With Six Months Ended
June 30, 1994
Net sales for the first half of 1995 increased to $125.8
million from $113.9 million in 1994. Cement net sales rose 12%
over last years' first half. While cement unit volume for the
period decreased by 1% due primarily to inclement weather
conditions, price increases implemented April 1, 1995, August
1, 1994 and April 1, 1994, resulted in 14% higher cement prices
over 1994.
Aggregates' sales for the first half for 1995 approximated
1994. Unit sales of aggregates were 7% less than 1994, as a
result of poor weather, offsetting a 18% unit volume
improvement for the company's industrial minerals subsidiary.
In addition, the first half reflected higher sales for the
company's highway and safety construction operation.
Cost of sales as a percent of sales fell to 68.0% in the first
half of 1995 compared to 71.9% in same period of 1994 due
primarily to increased cement prices. The effect of higher
prices was partially offset by higher repairs and maintenance
costs. Cement capacity utilization was 86% in 1995 compared to
82% in 1994.
Depreciation and amortization expense increased $0.4 million
from $6.5 million in 1994. The increase was due to the high
levels of capital expenditures in 1995.
Selling, general and administrative expense as a percent of
sales increased to 9.1% in 1995 from 8.3% in 1994. Higher
personnel related costs and other inflationary pressures caused
this overall increase.
Operating profit for the first half of 1995 of $21.9 million
compares to $16.1 million in 1994. The improvement in
operating results can be attributed to the reasons discussed
above.
Interest income increased by $215,000 for the quarter and
$469,000 for the first half, 1995 compared to 1994, due to
higher levels of cash and short-term investments. Interest
expense was approximately the same for both periods.
- -8-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd)
The company's effective tax rate of 34.5% for the second
quarter and first half of 1995 was lower than the federal
statutory rate of 35% principally due to our percentage
depletion deduction. The effective tax rate for the second
quarter and first half of 1994 was 33.6%. The increase in 1995
is due to lower percentage depletion deductions partially
offset by lower effective state tax rates.
Net income for the second quarter of 1995 of $12.7 million, or
$.74 per common share, compares to a net income of $10.3
million, or $.63 per common share, in 1994. Net income for the
first six months of 1995 of $12.4 million, or $.76 per common
share, compares to a net income of $8.5 million, or $.52 per
common share, in 1994,
The company's business is highly seasonal and particularly
sensitive to weather conditions. Interim results are not
indicative of annual results.
Liquidity and Capital Resources
At June 30, 1995, the company had $27.9 million of cash and
short-term investments. The company has available an unsecured
$20.0 million five-year revolving credit facility for short-
term seasonal working capital needs that expires December 31,
1996, and unsecured bank lines of credit totaling $15.0
million. At June 30, 1995, no amounts were outstanding under
any of these facilities.
Working capital at June 30, 1995, was $22.6 million less than
at June 30, 1994, due principally to the reclassification from
long-term to current of $35.0 million of 10% unsecured Senior
Notes due on December 15, 1995. The decrease is partially
offset by higher balances of cash and short-term investments
and accounts receivable, resulting from increased sales. The
ratio of current assets to current liabilities was 1.6:1 at
June 30, 1995, 3.0:1 at June 30, 1994, and 1.5:1 at December
31, 1994.
The companies' cash investment in operating working capital for
the six months ended June 30, 1995 was $10.8 million higher
than the six months ended June 30, 1994. Higher than normal
1994 year end accounts payable due to the timing of maintenance
and capital projects were settled in 1995. Higher 1995 sales
and profits have increased accounts receivable and income taxes
payable. The company invested $3.1 million more in inventories
during the six months ended June 30, 1995 than for the same
period in 1994, due to unusually low inventory levels at the
end of 1994. Certain major maintenance spending, which is
treated as a deferred asset and amortized over annual
production, was higher in the first six months of 1995 compared
to 1994, further increasing the investment in working capital
in 1995.
- -9-
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd)
Capital expenditures for the first six months of 1995 were
$11.2 million compared to $6.2 million for the first six months
of 1994. The higher expenditures relate to capital
improvements to expand clinker capacity, enhance productivity
and reduce operating costs.
By quarter end, Medusa had substantially completed the first
phase of its three year plan to increase clinker capacity by
total of 6% to 8%. This first phase, which cost about $2.6
million, has increased clinker capacity by about 64,000 tons
per year, or 1.9%. Most planned second phase projects are
underway and are anticipated to increase capacity by an
additional 116,000 tons per year, beginning around mid-year
1996.
The company believes the recent decline in interest rates will
help sustain current strong demand the remainder of 1995 and
into 1996. The company expects its cement plants will continue
to run full out in 1995 to meet the strong demand. The
company's full year 1995 cement unit volume is currently
expected to be limited to 2% higher than last year due to
production constraints and low inventories.
On April 1, 1995 cement price increases of up to $8 per ton
became effective in most of the company's southern markets and
from $3.50 to $6.00 per ton in northern markets. Continued
tight supply conditions make Medusa optimistic about future
cement prices. However, economic conditions in some markets
make further price increases unlikely in 1995.
As a result of continuing operating losses the company ceased
operations at its Edinburg, Pennsylvania sand and gravel
facility in early August, 1995. The facility contributed less
than one-half of one percent to Medusa's 1994 consolidated
sales. While estimates are not yet available, the cost of
closing the facility, less proceeds of asset sales, are not
expected to have a material effect on the company's financial
results. A charge for the closure will be included in the
company's third quarter results.
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Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed for the second quarter of 1995.
Exhibit 11 - Statements Re Computation of Per Share Earnings
Computation of Primary and Fully Diluted Income Per Common Share
(In thousands, except per share)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Primary
Earnings-Net income $12,696 $10,309 $12,393 $ 8,520
Shares
Weighted average number
of common shares
outstanding 15,990 16,343 16,003 16,452
Additional shares
assuming conversion of:
stock options 107 (a) 115 (a)
Average common shares
outstanding and
equivalents 16,097 16,343 16,118 16,452
Primary income per
common share $ .79 $ .63 $ .77 $ .52
Fully Diluted
Earnings
Net income $12,696 $10,309 $12,393 $ 8,520
Interest on convertible
subordinated notes,
net of taxes 565 - 1,130 -
Pro forma net income
available to common
stock $13,261 $10,309 $13,523 $ 8,520
Shares
Weighted average number
of common shares
outstanding 15,990 16,343 16,003 16,452
Additional shares
assuming conversion of:
stock options 128 (a) 130 (a)
convertible notes 1,736 - 1,736 -
Average common shares
outstanding and
equivalents 17,854 16,343 17,869 16,452
Fully diluted income
per common share $ .74 $ .63 $ .76 $ .52
* Amounts not restated, not dilutive under 3% test.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed of its behalf
by the undersigned thereunto duly authorized.
MEDUSA CORPORATION
REGISTRANT
Date August 11, 1995 By/s/George E. Uding, Jr.
George E. Uding, Jr.
President and Chief
Operating Officer
Date August 9, 1995 By/s/R. Breck Denny
R. Breck Denny
Vice President-
Finance and Treasurer
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