UNITED STATES
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, 1996
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 1-1274-2
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 BLVD., CLEVELAND HTS., OHIO 44118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 371-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Shares without par value New York Stock Exchange
Securities registered pursuant to Section 12 (G) of the Act:
None
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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. [ ]
The aggregate market value of the voting stock of the registrant as of
February 28, 1997, was $676,519,489.
The number of shares outstanding of the issuer's classes of common stock, as
of February 28, 1997:
Common Shares without par value -- 16,966,006
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated by reference into Parts I, II and
IV.
Portions of the proxy statement for the annual shareholders meeting
April 21, 1997, are incorporated by reference into Part III.
Part I
Item 1. Business
Cement Industry Overview
Portland cement is the essential binding material used in making
concrete, which is widely used in residential and non-residential
construction and in public works and infrastructure projects. Cement
is sold primarily in bulk form to producers of ready-mix concrete and
manufacturers of concrete products.
Cement is made in a multi-stage process that begins with the crushing,
grinding and mixing of calcium carbonate (usually in the form of
quarried limestone), sand, alumina, iron oxide and other materials.
This raw materials mixture is then reacted in rotary kilns at
extremely high temperatures. The resulting marble-size pellet
material (called "clinker") is cooled and ground with a small amount
of gypsum to produce cement having the consistency of fine powder.
There are two basic methods of clinker production. The older "wet"
process involves mixing the raw materials with water to form a slurry
that is reacted in the kiln. This process involves the use of a large
amount of fuel, but enables the raw materials to be handled and mixed
easily. In the more fuel-efficient "dry" process, the slurrying step is
eliminated and clinker is produced by reacting only the dry raw
materials. Even more fuel-efficient processes involve preheater and
preheater/precalciner techniques that recycle excess heat from the kiln
to either preheat or to enhance chemical reaction of the raw materials
prior to their introduction into the kiln. The company estimates that,
in general, the energy consumed to produce cement from a dry process
preheater/precalciner kiln is approximately 40% less than a wet process
kiln. All the company's kilns use the dry process.
According to the U. S. Geological Survey Deptartment current report, the
average price of a ton of portland cement in 1996, F.O.B. the point of
sale, was $57.90. Cement markets tend to be regional because of the low
price of cement relative to its weight, making cost of transportation an
important factor in the industry. The company estimates that the
approximate distance that one ton of cement can be transported for the
same relative cost is 500 miles by water vessel, 60 miles by rail and 20
miles by truck. As a result, cement plants whose products can be
transported only by truck or rail tend to serve relatively small
geographic markets (typically not in excess of a 200 mile radius of the
plant), while plants with access to water transportation are able to
efficiently serve considerably larger geographic markets. The market
served by a cement plant may be extended through the use of distribution
terminals to which cement is transferred in bulk and inventoried for
sale to customers in surrounding areas.
PART I
Item l. Business (continued)
Demand
Demand for cement is correlated to cyclical construction activity,
which, in turn, is influenced largely by national and regional economic
conditions, including (particularly in the case of residential
construction) prevailing interest rates. In addition, levels of
government spending on infrastructure improvement affect cement
consumption. Demand for cement is also seasonal, particularly in
northern markets where inclement weather affects construction activity.
According to the Portland Cement Association ("PCA"), total annual
cement consumption (i.e.: the total demand for both portland and masonry
cements) in the United States over the past 20 years has ranged from a
low of 65.5 million tons in 1982 to a high of 100.3 million tons in
1996, generally corresponding to the prevailing economic conditions and
construction activity. Portland cement consumption in the United States
in 1996 was estimated at 96.6 million tons, of which approximately 21%
was used in residential construction, 24% in non-residential
construction, and the remainder in public construction, such as
infrastructure.
The company believes increased government spending on infrastructure
improvement should have a favorable impact on future cement demand.
Enactment of the Intermodal Surface Transportation Efficiency Act of
1991, which authorized the appropriation of federal funds primarily for
construction and improvement of highways, bridges and mass transit
systems, reflected Congressional recognition of the need for national
infrastructure repair and replacement. Future demand for cement for
infrastructure improvement will depend on the level of funding made
available for such purpose by federal, state and local governments.
Please refer to pages 9 and 10 of the company's Annual Report to
Shareholders for a more detailed discussion of this subject.
Supply
According to current statistics published by the PCA, United States
clinker production capacity decreased from 91.1 million tons to 83.1
million tons, or by approximately 8%, from 1975 to 1995. Statistics
published by the U. S. Geological Survey Deptartment and the PCA
indicate that from 1975 to 1995 the number of cement companies operating
in the United States has dropped from 57 to 46, and in 1995 the 10
largest of such companies accounted for approximately 59% of total
United States production capacity for clinker. The company believes
that domestic production will remain inadequate to meet demand going
into the next century. With an approximate 11.0 million ton shortfall
between supply and demand, imports will continue to be needed to
supplement domestic demand. That shortfall, the company believes, is
due principally to the unfair dumping of imports into the United States
during the 1980's, when the domestic industry was forced to dives
PART I
Item l. Business (continued)
itself of a significant portion of its capacity. Presently, with the
dumping duties imposed against offenders by the International Trade
Commission in 1990 and 1991, the United States industry is becoming
healthier and is beginning to be able to afford to reinvest in itself.
However, because of the extent of capital investment required and the
long lead times associated with establishing new or re-opening closed
facilities, the company only expects about 5 million tons of incremental
domestic cement production capacity will be added over the next three to
five years unless cement prices increase significantly on a sustained
basis over current levels.
Imports of cement and clinker, which have had the most impact on markets
along coastal and southern border areas of the United States, with
ripple effects elsewhere, have varied from a high of 19% of total United
States consumption in 1987 to a low of 8% in 1992, to an estimated 15%
in 1996, according to the latest U. S. Geological Survey Department
figures. Factors influencing imports have included the effect of anti-
dumping actions brought against several foreign importers, which
resulted in the imposition of substantial duties on cement and clinker
imports from various countries beginning in 1990, changes in domestic
and foreign demand, rising ocean shipping rates, and the decline in the
value of the United States dollar relative to other currencies.
Increased ownership of import facilities by domestic producers has also
contributed to a more orderly flow of imports into the United States.
Cement production is capital-intensive and involves high fixed costs.
As a result, plant capacity utilization levels are an important measure
of a plant's profitability, since incremental sales volumes tend to
generate increasing profit margins. The PCA has estimated that total
United States cement plant capacity utilization was 93.0% for 1996.
Price Trends
Due to the lack of product differentiation, competition in the cement
industry is based largely on price. Service and location of plants and
terminals are also competitive factors. Notwithstanding favorable
construction activity during the 1980's, cement prices remained
relatively low due to the impact of lower-priced imported cement. Until
1993, United States portland cement prices remained flat due to the
downturn in general economic conditions and consequent declines in
construction activity. However, gradual improvement in the United
States economy, coupled with reduced domestic production capacity and
lower levels of imported cement, have led to supply and demand
relationships more favorable to cement producers, resulting in increased
cement prices. In 1995, heavy demand coupled with limited domestic
supply enabled the company to increase prices by 12% over 1994 levels.
Then in 1996, with continued strong demand in our markets, price
PART I
Item l. Business (continued)
increases that were effective April 1, 1996, and April 1, 1995, allowed
the company's average price of cement to rise 5% over 1995. The company
expects these favorable market conditions to continue in 1997 and have
announced cement price increases of up to $4.00 per ton, effective April
1, 1997, in most of its markets.
General
The company produces and sells gray portland cement and masonry cement;
and, through various wholly-owned subsidiaries, mines, processes and
sells coarse aggregates (crushed stone), fine aggregates (aglime), high
calcium limestone products, home and garden and industrial limestone
products. The company also provides construction services for highway
safety. The company's operations are conducted principally in the
eastern half of the United States. During the past five years, cement,
aggregates and limestone, and highway safety operations accounted for
approximately 69% to 80%, 14% to 20%, and generally less than 10%,
respectively, of the company's consolidated net sales. From 1992
through 1996, Medusa's quarterly sales as a percentage of annual sales
have ranged from 12% to 16% during the first quarter and from 32% to 34%
during the third quarter.
Continued economic expansion fueled by moderate growth and low inflation
favorably impacted the construction sector in 1996. The housing sector
rebounded from a lower 1995 pace as increased consumer confidence
(attributable to increases in income and employment) and the
availability of affordable mortgage loans spurred construction. The
nonresidential building (retail, industrial and office building) and
public construction sectors remained at high levels in 1996. Increases
in all three sectors resulted in the third consecutive year of record-
setting cement consumption in the United States. The company expects
the construction cycle to flatten or continue a slightly upward trend in
1997 as the $38 billion Federal transportation bill contains the highest
funding level ever for highways at $20.3 billion in fiscal 1997. Office
building and institutional construction could increase given the low
vacancy rates and favorable demographic patterns currently being
experienced. Housing however could experience a modest decline,
reflecting a slight slowdown in the economy and some abatement of pent-
up demand. The company believes cement consumption should remain close
to record levels. Cement industry fundamentals suggest high levels of
demand, inadequate domestic production, flat imports and an environment
which has not reached its full pricing and profit potential. The
housing sector provides about one quarter of the company's cement sales
volume.
Part I
Item l. Business (continued)
In an effort to satisfy the strong product demand, our four cement
plants achieved a 94.4% capacity utilization in 1996. The company's
focused business strategy, the principal elements of which are: a
concentration on its core business, a constant drive to lower operating
costs, centralization of pricing decisions and the maintenance of a lean
management organization, enable the company to position itself to
capitalize upon favorable market conditions. In furtherance of that
strategy, the company realized the benefits from the completion in 1996
of over half of the several projects designed to incrementally increase
cement capacity as both its Clinchfield and Demopolis plants had record
production years. In 1996 ,the company replaced its College Park
(Atlanta) terminal with a terminal located in Forest Park, Georgia
(southern Atlanta market). Completion of this terminal with its lower
cost loading and unloading capabilities and more convenient market
location further advances the company's low cost and customer focus
strategies.
Cement Operations
The company ranks eighth in capacity among all United States cement
companies and fourth in capacity among those domestically owned. The
company's cement operations serve markets in portions of the Great
Lakes, the Southeast and the Western Pennsylvania/Northeastern Ohio
portions of the United States.
Regional Markets
Great Lakes. The Great Lakes regional market, consisting of portions of
Michigan, Wisconsin, Ohio, Illinois, Indiana and Ontario, is served by
the company's Charlevoix plant and its distribution network of nine
terminals, eight of which are water-based. The water-based terminals
provide a very low cost alternative versus rail and/or trucking costs.
Demand in the Great Lakes region has been steady, with very little new
production capacity added in recent years. In 1996, the company closed
its Rhinelander, Wisconsin land-based cement distribution terminal.
Management believes that the Charlevoix plant is among the lowest cost
cement production facilities in the Great Lakes region. This is due to
its use of a single modern preheater/precalciner kiln which provides
significant energy savings over other dry and wet process kilns. In
1995, Charlevoix implemented an artificial intelligence kiln control
system and an automated process control instrumentation system to
enhance productivity and reduce operating costs. The layout of the
plant also results in an efficient utilization of manpower.
Charlevoix's deep-water shipping location and water-based terminals
enable 95% of cement produced to be shipped by water, the lowest cost
method of long-distance distribution, via the Medusa Conquest or the
PART I
Item l. Business (continued)
Medusa Challenger. These company owned vessels have a combined capacity
of 20,000 tons per load.
Southeast. The company has two plants and nine terminals in the
Southeast regional market: the Clinchfield, Georgia plant, acquired from
Penn Dixie Corporation and extensively rebuilt in 1972, and the
Demopolis, Alabama plant, built in 1977 and acquired from Lafarge
Corporation in 1993. The Demopolis plant serves water-based terminals
in Chattanooga, Tennessee and Decatur, Alabama with up to six river
barges. Together, the two plants also serve seven rail/truck terminals
in Alabama, Florida and Georgia. The two plants will benefit from the
newly completed cement terminal in Forest Park, Georgia. This new
facility has increased storage capacity and more efficient rail
unloading capabilities that will lower handling costs. Since the plants
are located 240 miles apart, a number of marketing and manufacturing
synergies exist, including the ability to alternatively ship to seven
terminals, to specialize in certain cement products and packaging, and
to rationalize distribution in what are the two plants' overlapping
markets.
Largely because both the Demopolis and Clinchfield plants operate
energy-efficient preheater kilns, management believes that they are
among the lowest cost production facilities in the region. In 1996, the
Demopolis plant burned waste derived liquid fuel (WDLF) for 23% of its
current fuel needs. The Clinchfield plant burns waste whole tires as an
alternative kiln fuel and has been able to reduce its coal usage by 16%.
Western Pennsylvania/Northeastern Ohio. Significant steps were taken in
1996 to improve the long-term profitability of the company's Wampum
plant, located between Pittsburgh, Pennsylvania and Youngstown, Ohio,
serving markets as far east in Pennsylvania as State College, as far
south as Wheeling, West Virginia, and as far west in Ohio as Columbus.
A new three-year labor agreement that contained a reduction-in-force
agreement will allow for lower cost quarry stripping and stone hauling.
The quarry operation was combined with the company's West Pittsburg
aggregate operation allowing for further work force reductions, reduced
capital spending, quarry development costs and better utilization of the
dragline. This 40-cubic yard dragline was placed in service in April
1994 and replaced two smaller less efficient units at a capital
investment of $7.0 million. Improved efficiencies of the dragline's
operation has provided significantly increased stone harvesting at a
much lower cost/ton stone. Demand in this region continues to grow
slowly. Supply has remained relatively constant, with no new plants or
major capacity expansions having occurred in the last six years or
expected by management in the foreseeable future.
PART I
Item l. Business (continued)
Management believes that the Wampum plant's three dry kilns give it an
operating cost advantage over its wet process competitors in the region.
The Wampum plant also had the advantage in 1996 of obtaining about 15%
of its coal needs from its nearby limestone quarry which contains coal
reserves. Since 1985, the Wampum plant has burned WDLF, supplying about
32% of its fuel needs in 1996.
Energy
Cement manufacturing is an energy intensive process, using fuel to fire
kilns and electricity to grind raw materials into kiln fuel and clinker
into finished cement. The company has been an innovator in burning
alternative fuels, such as WDLF and whole tires at its plants as a coal
replacement. The company has burned whole tires at its Clinchfield
plant since 1990. The company has entered into arrangements with
independent contractors (which, in turn, contract with suppliers of
alternative fuel) which allow the company to reduce its energy costs by
receiving WDLF either at a profit through tipping fees or at a nominal
charge. In 1985, at its Wampum cement plant, the company became one of
the first such facilities to burn WDLF. The company also burns WDLF at
its Demopolis plant. The favorable economics of burning WDLF are
significantly influenced by the tipping fees, which have been declining,
the cost of environmental regulation, which has been increasing and a
small reduction in maximum clinker output when burning WDLF. The company
is constantly evaluating the potential for and use of alternative
fuels in its ongoing effort to help conserve scarce natural resources,
utilize waste in a productive manner and reduce materials that might
otherwise take up valuable space in landfills. The company will use
alternative fuels where it is environmentally and economically prudent
and provided it continues to permit the company to maintain the safe
and profitable operation of its facilities. The company also seeks to
minimize its energy costs by running its grinding mills, whenever
possible, during off-peak demand periods.
Customers and Marketing
The company's cement operations have over 1,400 customers which are
primarily ready-mix concrete dealers. No single customer accounts for
more than 4% of total consolidated sales. The company's marketing
efforts are focused on maximizing profitability, rather than market
share. This sales strategy is facilitated by the company's policy that
pricing decisions (including the decision whether to meet lower
competitive prices) are made only in the company's Cleveland
headquarters. Further, decisions whether to extend credit are made
centrally by financial management. Sales personnel are critical in
developing and maintaining relationships with, and providing technical
Part I
Item l. Business (continued)
assistance to, customers. They also facilitate production planning by
meeting with customers regularly to discuss future requirements.
Construction Aggregates
Through a wholly-owned subsidiary, Medusa Aggregates Company, the
company operates nine crushed stone plants in Bardstown, Butler, Bowling
Green (two plants) and Hartford, Kentucky; Columbia, Missouri; Lenoir,
North Carolina; and West Pittsburg, Pennsylvania. These operations
mine, crush, screen and sell various sizes of aggregates to the
construction industry, primarily to road builders for use in asphalt and
concrete paving, road and base material, drainage blankets, erosion
control and assorted small-volume applications. The company is a major
supplier of these products in all of the markets in which it operates.
Management believes the company to be among the low-cost producers in
its primary markets and that it has achieved this result through
constant review of its competitive position and the installation of cost
improving plant modifications. The total capacity of the company's
aggregate plants is approximately 3,800 tons per hour, or in excess of 6
million tons annually. Approximately 13% of the company's total
construction aggregate capacity is covered by mineral reserves of over
50 years, 18% is covered by reserves of from 25 to 50 years, 46% is
covered by reserves from 10 to 25 years and 23% is covered by reserves
under 10 years. Most aggregates are generally sold within a radius of
25 miles of the plant and are shipped to customers primarily by truck.
During the second quarter of 1996, the company completed its rebuild of
the Bardstown, Kentucky plant providing among other things better
operating efficiencies and locating the major operating components of
the plant closer to the stone reserves.
Industrial Materials
Through a wholly-owned subsidiary, Medusa Minerals Company (formerly The
Thomasville Stone and Lime Company) ("Minerals"), the company mines and
processes high calcium limestone from an underground deposit possessing
chemical purity and whiteness at Thomasville, Pennsylvania. Chemical
grade limestone is used by customers to manufacture white cement, supply
calcium for livestock and poultry feeds, and neutralize soil for more
efficient crop production. White stone is pulverized to a fine powder
and used in joint compound, caulk, carpet padding, floor tile and paper.
Chemical stone is packaged for lawn application and white stone is
processed and packaged for use as a decorative mulch by homeowners and
landscaped contractors. Limestone which does not meet chemical and
color specifications is reduced to powder and used as a filler by
PART I
Item l. Business (continued)
manufacturers of asphalt shingles. Industrial minerals are marketed
primarily in the mid-Atlantic states. Thomasville now has 14 products
serving over 30 specialized agricultural, white cement, home
improvement, consumer products and environmental markets.
In January 1997, the company acquired Lime Crest Corporation located in
a Sparta, New Jersey. The operation consists of a 400 acre quarry
located in Sparta, New Jersey and a 200 acre quarry located in Franklin,
New Jersey. The Sparta location also contains a limestone pelletizing
plant. Products include construction aggregates, bulk and packaged
aglime, decorative stone, washed sand, water conditioning products and
industrial fillers. A major portion of its home and garden products are
sold through specialty retailers. The combined operations provide the
company with a major presence in home and garden and industrial
limestone products in the eastern half of the United States.
Highway Safety Construction
The James H. Drew Corporation ("Drew"), a wholly-owned subsidiary of the
company, operates generally in the mid-western states installing highway
safety systems such as guardrail, traffic signals, signs, and highway
lighting. Although Drew functions primarily as a subcontractor to
paving and bridge contractors, approximately 30% of its work is bid
directly to state highway departments and municipalities.
Competition
Generally, market conditions in the cement and construction aggregate
industry are cyclical and highly price-competitive. Because there is
generally no product differentiation, these products are marketed as
commodities, with price as the principal method of competition. To some
extent, factors other than price, such as service, delivery time and
proximity to the customer are competitively important. The number and
size of the company's competitors differ from market area to market
area. The company estimates that it competes with 28 cement
manufacturers in its overall market areas and between 5 and 10 producers
within each sales region. Competitors include domestic and foreign
producers and importers. Because cement has a low value-to-weight
ratio, cement companies with access to water-based transportation have a
significant advantage in shipping over land-locked plants and terminals.
Short-Term Borrowings
During 1996 and 1995, the company had no short-term borrowings.
PART I
Item l. Business (continued)
Capital Expenditures
In 1996, Medusa's capital expenditures were approximately $13.3 million
in its cement operations and $3.7 million in its aggregates operations.
For 1995, Medusa's capital expenditures were approximately $21.2 million
in its cement operations and $3.9 million in its aggregates operations.
Backlog
Backlog for Medusa and its subsidiaries totaled approximately $15.8
million as of December 31, 1996, compared with $12.2 million as of
December 31, 1995. Management does not believe that backlog is material
to an understanding of Medusa's business, because long-term contracts
generally comprise only a small portion of total sales.
Raw Materials
The principal raw materials used by the company in the manufacture of
cement are limestone or other calcareous materials, clay or shale, sand,
iron ore, and gypsum. Owned reserves of limestone and clay or shale are
available at or near all of the company's cement plants, while other raw
materials are readily available for local purchase by the company at all
of its plant locations.
Employees
As of December 31, 1996, the company had about 1,100 employees. The
company's business is seasonal and employment therefore declines from
August 31 to December 31 of each year. Most of the company's hourly
employees in its cement operations are represented by labor unions.
During 1996, the company entered into a labor agreements with the local
union of the United Cement, Lime, Gypsum and Allied Workers Division
(International Brotherhood of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers and Helpers, AFL-CIO) covering the hourly workers
at the Wampum and Demopolis plants. Wampum's agreement is a three-year
agreement expiring April 30, 1999. A four-year agreement expiring April
30, 2000 was negotiated for the Demopolis plant. A new four-year
contract with the United Steel Workers of America Local #13051-7
covering the Minerals (formerly Thomasville) hourly employees expires on
April 30, 2000.
PART I
Item l. Business (continued)
Environmental Matters
The information contained in the company's 1996 Annual Report to
Shareholders, Management's Discussion and Analysis, under "Environmental
Matters" pages 22 and 23 is hereby incorporated by reference.
Item 2. Properties
Medusa's principal physical properties are utilized by its cement
manufacturing operations.
These operations consist of four cement plants and a total of 20
distribution terminals (excluding Orlando, Florida terminal closed
February 1995). All four of the company's plants are fully integrated,
from limestone mining through bulk cement production, and all possess at
least 50 years of limestone reserves. The annual rated cement and
clinker capacities of Medusa as of February 28, 1997, are shown in the
following table:
Regional Capacity in Tons
Market Plant Location Clinker Cement Kiln Type
Great Lakes Charlevoix, Michigan 1,395,000 1,465,000 Preheater/precalciner
Southeast Demopolis, Alabama 824,000 868,000 Preheater
Southeast Clinchfield, Georgia 620,000 809,000 Preheater
W. PA/N.E. OH Wampum, Pennsylvania 722,000 750,000 Long-Dry
3,561,000 3,892,000
"Annual rated capacity" is defined as the annual output of cement or
clinker theoretically to be achieved from full operation of a facility
after giving consideration to such factors as down-time for regular
maintenance, location and climatic conditions bearing upon the number of
days per year during which the particular plant may be expected to
operate, and actual historical performance. Cement plant capacities are
evaluated periodically taking into account actual experience in
producing cement, plant modifications and innovations, and other
factors.
During 1996, the company continued to demolish its wet process kiln at
Clinchfield. This kiln has not been operated in over 10 years.
The company's cement plants, as a group, operated at 94.4% of annual
rated clinker capacity in 1996 (95.0% in 1995).
Part I
Properties (continued)
The Wampum and Clinchfield cement manufacturing plants are equipped to
ship products by either rail or truck. The Charlevoix plant can ship
products by water or truck. The Demopolis plant can ship products by
water, rail or truck, The plants are well maintained and in good
operating condition. There have been no physical changes in quarrying
techniques over the past several years, nor is it anticipated that there
will be any changes which would materially affect the cost of
production. All plants operate their own quarries, located adjacent to
each of the plants.
During 1996, The company operated at 37 locations in 13 states and
Canada. Property, including those described above, is as follows:
Number of buildings 291
Square feet of buildings 1,297,183
Total acreage 14,100
Of the total acreage above, approximately 791 acres are leased.
Item 3. Legal Proceedings
See "Environmental Matters" section under Item 1. Business, above.
PART I
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant are as follows:
Robert S. Evans Chairman and Chief Chairman & Chief Executive 53
Executive Officer Officer, Medusa Corporation:
Chairman and Chief Executive
Officer, Crane Co. (Diversified
Manufacturer of Engineered
Products).
George E. Uding, President and Chief President and Chief Operating 65
Jr. Operating Officer Officer of the company;
formerly Senior Vice President,
Essroc Corporation.
Robert J. Kane Senior Vice Senior Vice President of the 47
President Company and President of Medusa
Cement Group; previously Vice
President of the company and
President of Medusa Aggregates
Group; Vice-President and
Controller of Medusa Aggregates
Company, a subsidiary.
John P. Siegfried Vice President Vice President, Secretary 58
Secretary and and General Counsel of the
General Counsel company; previously Corporate
Attorney and Assistant Secretary
of the company.
Dennis R. Knight Vice President Vice President of the company; 51
and President of Medusa
Aggregates group; formerly
Regional Vice President -
General Manager Vulcan Materials
(Wisconsin, Indiana, Central
Illinois and Iowa).
PART I
Item 4. Submission of Matters to a Vote of Security Holders
(continued)
R. Breck Denny Vice President Vice President-Finance and 48
Finance and Treasurer, (Chief Financial
Treasurer Officer) of the company;
previously Director of
Strategic Planning, Medusa
Corporation; formerly Vice
President - Advisory, Mergers
and Acquisitions, J.P. Morgan
Alan E. Redeker Vice President Vice President of the company 53
and Vice President
Manufacturing, Medusa Cement
Company, a division; formerly
General Manager of Northern
California operations of
Associated Concrete Products
and held various positions at
Kaiser Cement Corporation.
Richard A. Brown Vice President Vice President - Human 49
Resources of the company;
previously Director of
Human Resources
All executive officers serve at the pleasure of the Board of Directors with
no fixed term of office.
PART II
Item 5. Market for Registrant's Common Shares and Related
Stockholder Matters
Market prices and dividends paid for the company's common shares are
hereby incorporated by reference to page 24 of the 1996 Annual Report to
Shareholders. The number of shareholders is 4,457 as of February 28,
1997. On February 26, 1996, the Board of Directors increased the
company's quarterly dividend 25% to $.15 per common share.
Items 6 through 8. Selected Financial Data; Management's Discussion
and Analysis of Results of Operations and Financial
Condition; Financial Statements and Supplementary Data
The information required by Items 6 through 8 is hereby incorporated by
reference to pages 11 through 24 of the 1996 Annual Report to
Shareholders.
Item 9. Disagreements on Accounting and Financial Disclosure
None
PART III
Item 10. (a)Directors of Registrant
The information required by Item 10(a) has been omitted from this report
as the company will file with the Commission a definitive proxy
statement pursuant to Regulation 14A.
(b)Executive Officers of the Registrant
Included pursuant to Instruction 3 to paragraph (b) of Item 401 to
Regulation S-K under Part I above.
Item 11. Executive Compensation
The information required by Item 11 has been omitted from this report as
the company will file with the Commission a definitive proxy statement
pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by Item 12 has been omitted from this report as
the company will file with the Commission a definitive proxy statement
pursuant to Regulation 14A.
PART III
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 has been omitted from this
report as the company will file with the Commission a definitive proxy
statement pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
Page
a)Financial Statements and Schedules
The consolidated balance sheets of Medusa Corporation and
subsidiaries as of December 31, 1996 and 1995 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, 1995 and the Independent Auditors' Report relating
thereto, appearing on Pages 11 through 20 of Medusa Corporation's
1996 Annual Report to Shareholders are incorporated herein by
reference.
Independent Auditors' Report on Financial Statement Schedule... 18
Schedule VIII Valuation and Qualifying Accounts................ 19
All other statements and schedules for which provision is made in the
applicable regulations of the Securities and Exchange Commission have
been omitted because they are not required under related instructions or
are inapplicable, or the information is shown in the consolidated
financial statements and related financial review.
(b) No Reports on Form 8-K were filed during last quarter of 1996:
(c) Exhibits to Form 10-K:
Exhibit 11 - Statement Re Computation of Per Share Earnings
Exhibit 13 - Annual Report to Shareholders for the Year Ended
December 31, 1996
Exhibit 21 - Subsidiaries of the Registrant
PART IV
(d) Financial Statements Required by Regulation S-X which are excluded from the
Annual Report to Shareholders by Rule 14a-3(b):
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MEDUSA CORPORATION
(Registrant)
Robert S. Evans
Robert S. Evans
Chairman, Chief Executive
Officer and a Director
Date March 21, 1997
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.
- -Officers-
R. Breck Denny George E. Uding, Jr. Edward A. Doles
R. Breck Denny George E. Uding, Jr. Edward A. Doles
Vice President-Finance President, and Chief Corporate Controller
and Treasurer Operating Officer and a
Director
Date March 25, 1997 Date March 25, 1997 Date March 25, 1997
- -DIRECTORS-
Mone Anathan, III E. Thayer Bigelow, Jr. Richard S. Forte'
Mone Anathan, III E. Thayer Bigelow, Jr. Richard S. Forte'
Date March 21, 1997 Date March 21, 1997 Date March 24, 1997
Dorsey R. Gardner Jean Gaulin Dwight C. Minton
Dorsey R. Gardner Jean Gaulin Dwight C. Minton
Date March 24, 1997 Date March 25, 1997 Date March 21, 1997
Charles J. Queenan, Jr. Boris Yavitz
Charles J. Queenan, Jr. Boris Yavitz
Date March 24, 1997 Date March 24, 1997
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Medusa Corporation:
We have audited the consolidated financial statements of Medusa
Corporation and subsidiaries as of December 31, 1996 and 1995 and for
each of the three years in the period ended December 31, 1996, and have
issued our report thereon dated January 27, 1997; such financial
statements and report are included in your 1996 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also
included the consolidated financial statement schedule of Medusa
Corporation and subsidiaries, listed in Item 14(a). This financial
statement schedule is the responsibility of the company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such consolidated financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Deloitte & Touche LLP
Cleveland, Ohio
January 27, 1997
MEDUSA CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31,
Balance at Additions (deductions) Balance at
beginning charged (credited) to (deductions)- end of
DESCRIPTION of year costs and expenses additions year
1996
Deducted from Asset Accounts:
Allowances for Doubtful
Accounts $ 351,257 $ 141,090 (A) $ (141,707)(C) $ 350,640
Reserve for Cash Discounts 185,408 (185,408)(B)
Reserve for Policy
Adjustments 72,033 750,591 822,624
TOTAL $ 608,698 $ 891,681 $ (327,115) $1,173,264
1995
Deducted from Asset Accounts:
Allowances for Doubtful
Accounts $ 228,503 $ 122,754 (A) $ $ 351,257
Reserve for Cash Discounts 209,570 (24,162) 185,408
Reserve for Policy
Adjustments 80,719 (8,686) 72,033
TOTAL $ 518,792 $ 89,906 $ 0 $ 608,698
1994
Deducted from Asset Accounts:
Allowances for Doubtful
Accounts $ 221,203 $ 7,300 (A) $ $ 228,503
Reserve for Cash Discounts 212,776 (3,206) 209,570
Reserve for Policy
Adjustments 83,438 (2,719) 80,719
TOTAL $ 517,417 $ 1,375 $ 0 $ 518,792
Note A - Additional reserve based on receivable balance.
Note B - Adjust company receivables to net vs gross.
Note C - Portion of reserve no longer considered necessary.
MEDUSA CORPORATION AND SUBSIDIARIES
Exhibit 11 to Form 10-K
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
Years Ended December 31
1996 1995 1994
Primary
Earnings
Income before extraordinary item $54,260 $43,212 $29,880
Extraordinary item (1,770) - -
Net income $52,490 $43,212 $29,880
Shares
Weighted average number of
common shares outstanding 16,054 16,018 16,334
Additional shares
assuming conversion of:
stock options 127 121 206
Average common shares
outstanding and equivalents 16,181 16,139 16,540
Primary:
Before extraordinary item $ 3.35 $ 2.68 $ 1.81
Extraordinary item (.11) - -
Net income per share $ 3.24 $ 2.68 $ 1.81
Fully Diluted
Earnings
Income before extraordinary item $54,260 $43,212 $29,880
Extraordinary item (1,770) - -
Interest on convertible
subordinated notes, net of taxes 2,137 2,336 2,249
Pro forma net income
available to common stock $54,627 $45,548 $32,129
Shares
Weighted average number of
common shares outstanding 16,054 16,018 16,334
Additional shares
assuming conversion of:
stock options 151 139 221
convertible notes 1,587 1,736 1,736
Average common shares
outstanding and equivalents 17,792 17,893 18,291
Fully diluted:
Before extraordinary item $ 3.17 $ 2.55 $ 1.76
Extraordinary item (.10) - -
Fully diluted net increase
per share $ 3.07 $ 2.55 $ 1.76
MEDUSA CORPORATION AND SUBSIDIARIES
Exhibit 21 to Form 10-K
Subsidiaries of the Registrant
December 31, 1996
The following is a list of active subsidiaries of the Registrant and
their jurisdiction of incorporation. All of these subsidiaries are wholly-
owned, directly or indirectly, and are included in the consolidated financial
statements.
Cement Transit Company Delaware
James H. Drew Corporation Indiana
Medusa Aggregates Company Iowa
Medusa Minerals Company Maryland
Canadian Medusa Cement Limited Ontario, Canada
Medusa-Citadel, Inc. Alabama
Medusa-Crescent, Inc. Pennsylvania
Medusa Aggregates LLC Pennsylvania
Medusa Portland Cement Company Michigan
21