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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 333-41837
CLYDE COMPANIES, INC.
(Exact Name of the Registrant as Specified in its Charter)
Utah 87-0260879
- --------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
252 West Center Street
Orem, Utah 84057
(801) 802-6900
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
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 [ ]
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]
There is no public market for the Registrant's Common Stock. Accordingly, it is
not possible to determine the market value of shares of Common Stock held by
non-affiliates.
As of March 1, 1999, there were 6,554,317 outstanding shares of the Registrant's
Common Stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits to the Registrant's Registration Statement dated May 13, 1998
are incorporated by reference into Part IV of this Form 10-K.
================================================================================
2
CLYDE COMPANIES, INC.
(THE "COMPANY")
PART I
ITEM 1. BUSINESS
INTRODUCTION
Clyde Companies, Inc. (formerly known as W.W. Clyde Investment Company
and referred to herein as the "Company") was incorporated in Utah in 1961 as a
holding company for shares of common stock of W.W. Clyde & Co. ("Clyde"), Geneva
Rock Products, Inc. ("Geneva Rock"), Utah Service, Inc. ("Utah Service") and
Beehive Insurance Agency, Inc. ("Beehive Insurance"). The reorganization of the
Clyde Companies was consummated on June 30, 1998, and on that date each issued
and outstanding share of common stock (except for shares owned by the Company)
of Clyde, Geneva Rock, Utah Service and Beehive Insurance were converted into
shares of Common Stock of the Company. See Item 13 "Certain Relationships and
Related Transactions--Consummation of Merger; Change of Control." The principal
executive offices of the Company are located at 252 West Center Street, Orem,
Utah 84057, and its telephone number is (801) 802-6900.
PRODUCTS AND SERVICES
The Company is engaged in the construction business, primarily in the
State of Utah. Its construction services include road and site construction, and
its construction products include ready mix concrete, asphalt, sand and gravel
aggregates, concrete blocks, lumber and building materials. The Company also
operates a full line insurance agency. These services and products are described
below.
ROAD AND SITE CONSTRUCTION
The Company offers heavy/highway construction services through its
subsidiaries, Clyde and Geneva Rock. Heavy construction services consist
primarily of road and site construction, as well as the construction of
interstate highways, bridges, dams, airports, mines, golf courses, environmental
and reclamation projects and other types of large construction that require
earth moving and professional management. The Company performs heavy/highway
construction work throughout the Intermountain Area.
The Company has heavy/highway construction clients in both the public
and private sector. Its clients include the Federal Highway Administration, the
Utah Department of Transportation, Utah Transit Authority, United States Bureau
of Reclamation, Utah Power & Light (PacificCorp), Kennecott Copper, Wyoming
Department of Transportation, Brush-Wellman Corporation, Laidlaw Environmental,
and the Union Pacific Railroad. Most of the projects that the Company bids on
are competitive bid projects.
2
3
SAND AND GRAVEL AGGREGATES; ASPHALT
The Company operates a number of sand and gravel pits, as described
under Item 2--"Properties." Sand and gravel aggregates are produced by crushing
and screening material that is either dug from a bank or quarried from a solid
deposit by blasting or bulldozing. The material is sized and in some cases
washed to remove dirt and other fine materials so it will bond better with
cement. Sand and gravel aggregates are used to produce concrete and asphalt, and
also as a base or foundation material under roads and highways, airport runways,
concrete slabs or floors and other structures. Transportation is a significant
factor in the cost of sand and gravel aggregates. Accordingly, the market area
for sand and gravel aggregates is usually limited. The Company also uses its
aggregates as raw materials in its own ready mix concrete and asphalt production
facilities.
The Company produces various grades of asphalt for use by its own
construction crews and for sale to other contractors.
READY MIX CONCRETE AND CONCRETE BLOCK
Combining rock, sand, cement and water with certain chemical additives
in a "batch plant" produces ready mix concrete. This mixture is put into a mixer
truck where it is mixed thoroughly and delivered to a construction site.
Concrete is one of the most basic building materials and is used to some degree
in almost all construction projects, including road and bridge construction,
commercial and industrial projects, and residential and agricultural
construction.
The Company operates 12 strategically located concrete batch plants to
service the Wasatch front and other outlying areas. The Company produces
aggregates for the batch plants at its own gravel pits. Cement powder and other
additives are purchased on the open market.
The Company operates a concrete block plant in St. George, Utah.
Concrete blocks produced by this plant are sold in Utah, Nevada, California and
Arizona.
LUMBER AND BUILDING MATERIALS
The Company sells lumber, building materials and hardware through its
wholly owned subsidiaries, J & J Building Supply, Inc., ("J&J") which is located
in St. George, Utah, and through Utah Service, located in Springville, Utah. The
Company owns or leases lumber yards and hardware stores in St. George, Cedar
City and Springville, Utah, and it owns and operates a Chevron gas
station/convenience store in Springville, Utah.
RAW MATERIALS AND SUPPLIERS
Sand and gravel aggregates are the most basic raw materials required by
the Company. As of December 31, 1998, the Company owned or leased gravel pits in
Mapleton, Provo Canyon, Mona, Draper and Bluffdale, West Valley City, South
Weber, Morgan, Willard, Cedar City and St. George, Utah and in Mesquite, Nevada.
For a description of these properties, see Item 2--
3
4
"Properties." The Company believes that current aggregate sources in Davis and
Weber Counties are sufficient to supply the Company for approximately ten years.
The Company intends to seek additional reserves in Salt Lake and Davis Counties
for purchase or lease. The Company has recently purchased property in Juab and
Box Elder Counties. Due to increased property development, it is increasingly
difficult to acquire new aggregate properties along the Wasatch Front.
The Company obtains other major raw materials from outside vendors.
Cement powder is purchased from three main suppliers in the area: Ash Grove
Cement, which owns a plant in Leamington, Utah (approximately 90 miles south of
Salt Lake City) and a plant in Southern Idaho near Inkom; Holnam Cement, which
is located in Weber Canyon, Utah. The Company purchases most of its concrete
additives from Grace Construction Products.
The Company also purchases bituminous materials for the production of
asphalt. The Company's major suppliers of bituminous materials are Sinclair Oil,
Crown Asphalt and Koch Asphalt Materials. The Company prices diesel and gasoline
fuel on a daily basis and currently purchases fuel from Kellerstraus, Chevron
and Flying J.
REGIONAL CONSTRUCTION INDUSTRY
The Company's products are used in local, state and federal building
projects, as well as in private construction projects. In 1998, the revenue mix
between the public and private sectors was approximately 38% public and 62%
private. However, this mix is subject to change from year to year. The Company
performs construction work throughout the Intermountain Area, primarily in Utah,
Wyoming, Idaho and Nevada. Most of the projects that the Company bids on are
competitive bid projects.
The Company's business is heavily dependent upon the construction
industry and is directly affected by the level of construction activity in the
geographic area in which it operates. The level of construction activity is
cyclical and the Company's business varies accordingly. The demand for
construction varies depending upon the number of factors, including weather
conditions, the availability of construction financing at favorable interest
rates, overall fluctuations in regional economies, past overbuilding, labor
relations in the construction industry and the levels of material and energy
supplies. In addition, local, state and federal government building projects are
dependent upon their budgets and, in many cases, on voter approval of bonds.
COMPETITION
The Company has a number of competitors, some of which are larger and
have greater financial resources. The Company believes that with an increasing
number of new competitors entering the construction business and the increase in
the capabilities of existing competitors that have been sold to larger firms,
the opportunities for business and expansion will be more limited than they have
been in the last five years.
The Company's primary competitors for heavy/highway construction
projects are Granite Construction, Gilbert Western, Legrande Johnson, Harper
Excavating, Ames Construction, Cox
4
5
Rock Products, Staker Paving and Meadow Valley, some of which are larger and
have greater financial resources than the Company. Since these firms are similar
in terms of performing high quality work, bid awards are usually granted to the
low cost bidder. Other factors influencing competition include reputation for
quality, the availability of materials, machinery and equipment, financial
strength, knowledge of the local markets and the conditions and estimating
abilities. The Company believes that its competitive strengths include its
excellent reputation as a heavy/highway contractor that has been in business for
more than 65 years, as well as its financial strength.
The Company's primary ready mix concrete competitors include Westroc,
Metro, Parsons, Concrete Products Company (CPC), Valley Materials, Valley
Ready-Mix, Alta View/All American, Fife Rock Products, and Western Rock.
Competitors for sand and gravel aggregate products include Valley Asphalt,
Staker Paving, Parsons, Harper Excavating, Monroc, Western Rock, Granite
Construction, and H.E. Davis & Sons and a number of smaller competitors.
Competition is based on price, product quality and service and availability. The
Company believes that it is well positioned to compete with its competitors
because it has high quality products and services in key strategic locations.
The Company's lumber, building materials and hardware business competes
primarily with chains of building supply houses, home improvement stores,
national hardware stores and warehouse clubs. Competition is based on prices,
product quality, service and availability.
SEASONALITY AND CYCLICALITY
The Company's business is seasonal, slowing during the winter months of
November through March. During this slow period the Company typically lays off a
number of employees, and its workload varies, depending upon the severity of the
weather. During the winter period, the ready-mix concrete and aggregate business
continue to operate, but on a scaled-back basis. The Company's heavy/highway
construction business almost totally shuts down during the winter months because
its work consists largely of asphalt paving and other work that cannot be
performed in the cold winter months.
The construction industry is highly cyclical and is strongly affected by
changes in economic growth and conditions and changes in interest rates. In the
past, the Company's revenues and backlog have varied significantly because of
changes in economic conditions on either the national or regional level.
EMPLOYEES
As of December 31, 1998, the Company had approximately 886 employees,
115 of which were salaried employees and the remainder of which were hourly
employees. The Company has bargaining agreements with the Operating Engineers
Union, the Teamsters Union, the Laborers Union, the Cement Masons Union and the
Carpenters Union. Because of the seasonal nature of the Company's business,
approximately 40% of its employees are laid off during the winter months. Most
of these hourly seasonal employees are in the heavy/highway sector of the
Company. The Company believes that its employee relations are satisfactory.
5
6
CUSTOMERS
Because of the large size of the Company's heavy/highway construction
projects, a relatively small number of large construction projects provide a
significant percentage of the Company's construction revenues in a given year.
For the year ended December 31, 1998, the Company's three largest customers were
Utah Transit Authority, Draper City and the Utah Department of Transportation.
No one customer generated more than 10% of the Company's total revenues.
The Company's other businesses have a large customer base, and the
Company is not dependent upon one or more of these customers with respect to its
ready-mix, sand and gravel aggregate or building materials and supplies
business.
BACKLOG
As of December 31, 1998, backlog of construction work for the Company
was estimated at $15,689,787 compared to an estimated $14,746,559 at December
31, 1997.
EQUIPMENT
The Company purchases and maintains a fleet of construction equipment,
including bulldozers, scrapers, graders, excavators, loaders, trucks, pavers,
rollers and construction materials processing equipment. The Company owns a
majority of its equipment, but during peak demand periods it leases or rents
equipment, and it leases or rents specialty equipment when needed.
The Company has the ability to service and maintain its equipment fleet
in top operating condition. Major overhauls can be performed at various
facilities maintained by the Company and complete equipment rebuilds can be
performed at the Company's Springville Maintenance facility.
REGULATION AND INSURANCE
The Company's operations are subject to regulatory requirements of
federal, state and county agencies and authorities, including regulations
covering safety, labor relations, affirmative action and the protection of the
environment. The Company continually upgrades its facilities in an effort to
insure compliance with these regulations.
All of the Company's employees are covered by workers compensation
insurance. Because of the Company's focus on safety, it enjoys competitive
insurance rates. The Company also carries general, auto and pollution liability
insurance for all operations. The Company believes that each of these insurance
policies have limits which are equal to or greater than the norm in the
industry.
6
7
INSURANCE AGENCY
Through its wholly-owned subsidiary, Beehive Insurance, the Company
operates an independent insurance agency. Beehive Insurance represents several
large national insurance companies and sells their commercial property
insurance, casualty insurance, as well as surety bonds. Beehive Insurance sells
insurance to other subsidiaries of the Company, as well as to unaffiliated
customers.
ITEM 2. PROPERTIES
PROPERTIES
The Company's corporate offices are located in Orem, Utah in a 2,076
square foot building, which it leases. In addition, the Company owns or leases a
number of operating facilities, including 14 premix concrete plants, 3 asphalt
plants, 2 lumberyards, and 3 hardware stores in Northern and Southern Utah. The
Company's principal properties are described below.
NORTHERN UTAH
OREM
The Company owns approximately 38 acres of industrial property in Orem,
Utah. In addition to corporate offices for the Company, a 300-ton per hour
asphalt plant, a 100-yard per hour and a 200-yard per hour premix concrete
plant, a nine-bay shop with paint room and a three-bay weld shop are located on
the property.
SPRINGVILLE, PROVO AND LEHI
The Company owns approximately 10.8 acres of land at 1375 North Main
Street in Springville, Utah. An office building, equipment sheds, a repair shop
and warehouse are located on this property. The Company also owns approximately
20 acres of land at 1455 North Main Street, in Provo, Utah, which is used to
store equipment. The Company owns approximately 2.75 acres of land in
Springville, Utah that is the site of a 23,500 square foot hardware facility and
houses 2,000 square feet of corporate office space. The Company also owns a gas
station, a convenience store and a lumber yard located on that 2.75-acre parcel
of land, and it owns a 1.75-acre parcel of land that is primarily used for
lumber storage. The Company also owns a 7.33-acre parcel of land in Springville,
Utah that is being developed for a lumber and building contractor center.
The Company also owns an 18-acre parcel of land located at 2600 North
300 West, Lehi, Utah, which is currently being developed into residential
building lots
7
8
DRAPER AND BLUFFDALE
The Company's two most important gravel pits are located at Draper and
Bluffdale, Utah. The Bluffdale Pit is owned by the Company and contains gravel
washing operations and miscellaneous screening equipment. The Draper Pit is
owned by the Company and contains a washing operation, road base and asphalt
plant material crushing equipment, a concrete batch plant, and a 500-ton per
hour asphalt plant. Geneva Rock's Gravel and Asphalt Materials Division is
located at the Draper site, together with a combination shop/office facility.
The shop/office facility, with 20 bays, is used to service crushing equipment,
large front-end loaders and trucks.
SANDY
The Company owns approximately 12.7 acres of land in Sandy, Utah, which
is the site of a ready-mix concrete batch plant and a small shop.
MURRAY
The Company owns a 25,000 square foot office building located in Murray,
Utah. Approximately one-fourth of the building currently is used to house Geneva
Rock's sales and dispatch office and the remaining space is leased to other
tenants.
WEST VALLEY CITY
The Company has three gravel pits with gravel crushers located in West
Valley City, Utah. One of these properties, the Pioneer Property, is located on
100 acres of land and is leased from West Valley City, with two years remaining
on the lease. The Company owns the second property, the 150-acre West Valley
Pit, and the Company leases the third property, the Bacchus Pit, which is
located on 143 acres of property adjacent to the West Valley Pit.
SOUTH SALT LAKE
The Company owns approximately 22.1 acres of land in South Salt Lake,
which is the site of a ready-mix concrete batch plant and an eight-bay truck
shop.
DOWNTOWN SALT LAKE CITY
The Company owns 4.3 acres of land located in downtown Salt Lake City,
which is the site of a ready-mix batch plant and a small truck shop.
LAYTON
The Company owns 8.5 acres of land in Layton, Utah, which is the site of
a sales office, a premix concrete batch plant and a small truck shop. This sales
office services Davis County and Weber County, Utah.
8
9
PARK CITY
The Company owns 5 acres of land located in Park City, Utah, which is
the site of a sales office, a small concrete batch plant and a small service
shop.
HELPER
The Company owns 13 acres of land located in Helper, Utah, which is the
site of a sales office and a small dry mix concrete batch plant which services
Carbon County and Emery County, Utah
OTHER SOURCES
The Company also owns gravel resources in Mapleton and Mona, Utah.
SOUTHERN UTAH AND NEVADA
ST. GEORGE
The Company leases a lumber yard and hardware store located on
approximately 37.2 acres of land in St. George, Utah, on which is the site of
the J & J Building Supply office building, a hardware store and a lumber yard.
The Company also leases 21.6 acres of land in St. George, Utah, which is the
site of a small shop and a ready-mix batch plant. In addition, the Company owns
a concrete block plant located on approximately 10.73 acres of land in the
Bloomington Hills area of St. George, Utah. This site also houses a masonry
store and sales office. Also, the Company leases two gravel pits in St. George,
which are the two main sources of sand and gravel aggregates in the St. George
area.
CEDAR CITY, UTAH
The Company leases a 6,000 square foot hardware store and owns a 42-acre
site on which a ready-mix concrete plant and a sand and gravel aggregate pit are
located.
MESQUITE, NEVADA
The Company owns approximately 12.3 acres of land in Mesquite, Nevada,
which is the site of a small concrete batch plant and a small sand and gravel
aggregate pit.
FUTURE LAND DEVELOPMENT
In order for the Company to continue and expand its business, it is
important that it acquire additional sand and gravel reserves. The Davis and
Weber County, Utah areas have relatively few gravel reserves compared to other
areas in the State of Utah. The Company's current reserves in Davis and Weber
County are expected to last approximately 10 years based on current
requirements. The Company intends to seek additional gravel reserves in these
counties for purchase or lease. The Company believes that its reserves in Salt
Lake County, Utah
9
10
County and St. George, Utah are sufficient for approximately 20 years,
based upon the current requirements.
ITEM 3. LEGAL PROCEEDINGS
In connection with the merger (the "Merger") of Clyde, Geneva
Rock, Utah Service and Beehive Insurance (which are together referred to as the
"Operating Companies") with and into wholly-owned subsidiaries of the Company,
18 shareholders of the Operating Companies (the "Dissenting Shareholders"), who
collectively owned the equivalent of 419,188 shares of Common Stock of the
Company, gave notice that they intended to exercise their statutory dissenters'
rights and seek payment of the fair value of their shares. Following the
consummation of the Merger on June 30, 1998, the Operating Companies paid the
Dissenting Shareholders an aggregate amount of $4,453,000 for their shares,
which is the amount the Operating Companies determined to be the fair value of
the shares held by the Dissenting Shareholders immediately before the effective
date of the Merger. All of the Dissenting Shareholders, except the Estate of
Scott Clyde, were paid $394.13, $2,779.36, $504.45 and $50.30, respectively, for
each share of Clyde, Geneva Rock, Utah Service and Beehive Insurance, which they
held. No payment was made to the Estate of Scott Clyde with respect to the
shares of Clyde which it held, because it did not properly exercise its
dissenters' rights with respect to Clyde.
After receiving payment for their shares from the Operating Companies,
16 of the Dissenting Shareholders, who collectively owned the equivalent of
243,223 shares of Common Stock of the Company, notified the Operating Companies
that, in their opinion, on the date of the Merger the fair value of Clyde,
Geneva Rock, Utah Service and Beehive Insurance was $657, $5,509, $975 and $116
per share, respectively, and they demanded payment of the additional amounts,
plus interest. The aggregate additional amount demanded by the Dissenting
Shareholders, exclusive of interest, is approximately $2,361,666.
The Operating Companies believe the amounts that were paid to the
Dissenting Shareholders represented the fair value of the shares held by the
Dissenting Shareholders immediately before the effective date of the Merger.
Accordingly, pursuant to Utah Code Annotated, as amended, Section 16-10A-1330,
on November 3, 1998, the Operating Companies filed a Petition with the Third
Judicial District Court of Salt Lake County (Case No. 980911145) to request the
Court to determine the fair value of the shares of the Operating Companies held
by the 16 Dissenting Shareholders who have demanded the payment of additional
amounts for their shares. In addition, the Operating Companies requested a
ruling to the effect that the Estate of Scott Clyde did not properly exercise
its dissenters' rights with respect to Clyde and, therefore, is not entitled to
payment for the shares of Clyde which it held. The Petition named the following
Dissenting Shareholders as respondents: Terry Carlson; Scott Carlson; Claudia
Snyder; Kenneth Snyder; Kurt Gramoll; Junko Gramoll; James Gramoll; Damon Clyde;
Christina Schroeder; Brian Clyde; Ronald Clyde; Stephen W. Clyde; Robert Clyde;
Marcia Clyde, as personal representative of the Estate of Daniel Clyde,
deceased; Janice Clyde, personally; and Janice Clyde, as personal representative
of the Estate of Scott Clyde, deceased.
10
11
The Dissenting Shareholders filed a Motion for Partial Summary Judgment,
and on March 11, 1999 the Court granted the motion and ruled, among other
things, that in determining the fair value of the shares held by the Dissenting
Shareholders, the Operating Companies may not apply a discount for minority
interest. As of the date of this report, the Operating Companies had not
determined whether they will appeal this ruling. While the Company believes that
the amounts paid to the Dissenting Shareholders represent the fair value of the
shares they held in the Operating Companies immediately before the effective
date of the Merger and, therefore, that they are not entitled to be paid the
additional amounts demanded, the Company is not able to predict the outcome of
this proceeding, and there can be no assurance that the Operating Companies will
not be required to pay additional amounts to the Dissenting Shareholders.
The Company and its subsidiaries are also parties to routine legal
proceedings incident to their business, none of which are material to the
business or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
During the fourth quarter of 1998, no matter was submitted to a vote of
the Company's stockholders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no public market for the Company's Common Stock and none is
expected to develop. As of March 1, 1999, the Company had approximately 190
stockholders. The Company acts as its own transfer agent.
In 1998 and 1997 the Company paid dividends of $1,967,000, or $.30 per
share, based on the number of shares outstanding at December 31, 1998, and
$441,000, or $.19 per share based on the number of shares outstanding on
December 31, 1997. Prior to the consummation of the Merger on June 30, 1998 the
amount and frequency of the dividends which the Company paid to its shareholders
depended on the amount of dividends it received on the shares of common stock of
Clyde, Geneva Rock, Utah Service and Beehive Insurance which the Company owned.
The amount, type and frequency of dividends to be paid by the Company to its
shareholders in the future will be determined by the Board of Directors of the
Company based on the results of operations, financial condition and liquidity
needs of the Company and its subsidiaries.
During 1998 the Company did not sell any securities that were not
registered under the Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data have been summarized from the
Company's consolidated financial statements and are qualified in their entirety
by reference to, and should be
11
12
read in conjunction with, such consolidated financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," under Item 7 below.
Year ended December 31,
----------------------------------------------------------------------
1998(1) 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(in thousands, except per share data)
STATEMENT OF EARNINGS DATA:
Revenues $ 107,987 $ 487 $ 404 $ 530 $ 508
Costs of goods sold 89,125 -- -- -- --
Gross profit 18,862 487 404 530 508
General and administrative expenses 7,419 8 6 7 8
---------- ---------- ---------- ---------- ----------
Operating profit 11,443 479 398 523 500
Other income, net 625 2,377 2,504 3,414 2,472
---------- ---------- ---------- ---------- ----------
Earnings before income taxes 12,068 2,856 2,902 3,937 2,972
Income taxes 4,471 928 967 1,321 963
---------- ---------- ---------- ---------- ----------
NET EARNINGS $ 7,597 $ 1,928 $ 1,935 $ 2,616 $ 2,009
========== ========== ========== ========== ==========
Earnings per common share-basic(2) $ 1.69 $ 0.84 $ 0.84 $ 1.14 $ 0.87
Weighted-average common shares
outstanding (2) 4,493,184 2,303,920 2,303,920 2,303,920 2,303,920
Dividends per common share(2) 0.44 0.19 0.16 0.21 0.21
December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
Current assets $ 64,763 $ 23 $ 31 $ 40 $ 39
Current liabilities 20,361 338 5 20 19
Total assets 167,731 27,794 25,088 22,593 19,180
Total liabilities 59,015 10,377 9,158 8,240 6,949
Total stockholders' equity 108,716 17,417 15,930 14,353 12,231
(1) See Note L to the Consolidated Financial Statements for a description of the
merger of the Operating Companies with and into wholly-owned subsidiaries of
the Company as of June 30, 1998.
(2) Earnings per common share--basic and dividends per common share are based
upon the weighted average of common shares outstanding during the period
presented after giving retroactive effect to all periods presented for the
subsequent 40:1 stock split effected November 13, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this section is to discuss and analyze the Company's
consolidated financial condition, liquidity and capital resources and results of
operations. This analysis should be read in conjunction with the consolidated
financial statements and related notes which appear elsewhere in this report.
12
13
OVERVIEW
The Company was organized as a holding company for the shares of common
stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance which it owned.
On June 30, 1998, Clyde, Geneva Rock, Utah Service and Beehive Insurance (the
"Operating Companies") were merged (the "Merger") with and into the Company, and
each issued and outstanding share of common stock (except for shares owned by
the Company) of Clyde, Geneva Rock, Utah Service and Beehive Insurance was
converted into, respectively, 33.93, 239.27, 43.43 and 4.33 shares of Common
Stock of the Company. See Item 13 - "Certain Relationships and Related
Transactions--Consummation of Merger; Change of Control."
RESULTS OF OPERATIONS
The Merger was accounted for using the purchase method of accounting.
The purchase method of accounting requires that consolidated results of
operations be reflected only from the date of the Merger, forward. Because the
Merger was consummated on June 30, 1998, consolidated operating results are
included in the Consolidated Statements of Earnings only for the six-month
period ended December 31, 1998. Prior to June 30, 1998, the Company recorded
only its equity in the net earnings of the Operating Companies. Since the
six-month period ended December 31, 1998 was the first six months of
consolidated results of operations for the Company, it is not possible to
compare operating results for that period with operating results in prior
periods.
During the year ended December 31, 1998, the Utah construction markets
continued to be strong and the economic climate in Utah during the period was
positive. Unemployment in Utah continued at the rate of about 3.2%, which
resulted in continuing labor shortages. Such labor shortages exerted an upward
pressure on wages which in turn increased costs, resulting in lower profit
margins.
The construction market in Utah is seasonal, slowing down significantly
during winter months. Historically the third quarter of the year has been the
most profitable quarter of the year, due to favorable weather conditions.
Construction work slowed down during the fourth quarter of 1998, as the weather
became more unfavorable.
LIQUIDITY AND CAPITAL RESOURCES
As explained in Note L to the Consolidated Financial Statements and
under Item 3 "Legal Proceedings", in connection with the Merger certain
shareholders, who collectively own the equivalent of 419,188 shares of Common
Stock of the Company, exercised their statutory dissenters' rights and demanded
payment for the fair value of the shares they held in the Operating Companies.
The Operating Companies have paid the Dissenting Shareholders an aggregate
amount of $4,453,000, which is the amount the Operating Companies determined to
be the fair value of the shares held by those Dissenting Shareholders that
properly exercised their dissenters rights immediately before the effective date
of the Merger. The Dissenting Shareholders notified the Operating Companies
that, in their opinion, the fair value of their shares immediately before the
effective date of the Merger was greater than the amounts paid to them by the
Operating Companies, and demanded that the Operating Companies pay them
13
14
additional amounts for their shares, in the aggregate amount of approximately
$2,361,666, plus interest. The Operating Companies have petitioned the Third
Judicial District Court of Salt Lake County to determine the fair value of the
shares held by such Dissenting Shareholders.
The Dissenting Shareholders filed a Motion for Partial Summary Judgment,
and on March 11, 1999 the Court granted the motion and ruled, among other
things, that in determining the fair value of the shares held by the Dissenting
Shareholders, the Operating Companies may not apply a discount for minority
interest. As of the date of this report, the Operating Companies had not
determined whether they will appeal this ruling. While the Company believes that
the amounts paid to the Dissenting Shareholders represented the fair value of
the shares they held in the Operating Companies immediately before the effective
date of the Merger, there can be no assurance that the Court will not determine
that the fair value of the Operating Companies was higher, and require that
additional amounts be paid to the Dissenting Shareholders. If the Company is
required to pay substantial additional amounts to the Dissenting Shareholders,
the ability of the Company to pay dividends to its shareholders and make capital
expenditures may be adversely affected. See Item 3 "Legal Proceedings."
Commencing in 1999, the Company will make funds available for the
redemption of a limited number of shares of its Common Stock pursuant to the
Company's Stock Redemption Plan. The Stock Redemption Plan provides for a
Redemption Fund (a) for the years 1999 through 2003 in an amount which is
greater than or equal to 7% and less than or equal to 15% of the net earnings of
the Company (after taxes) for the prior year and (b) for the years 2004 and
thereafter an amount which is greater than or equal to 5% and less than or equal
to 10% of net earnings of the Company (after taxes) for the prior year.
Management believes the limitation of the Redemption Fund to an amount not
greater than 15% for the years 1999 through 2003, and 10% for the years 2004 and
thereafter, of the net earnings of the Company (after taxes) for the prior year
is a limitation sufficient to protect the liquidity requirements of the Company
and would not adversely affect the Company's cash requirements.
INFLATION
Inflation in the U.S. economy has been relatively moderate during the
last few years. Price increases for labor and materials, for the most part, have
kept pace with inflation. The low unemployment rate in Utah and the rapid
increase in the number of workers required in the construction industry in the
state has put increased pressure on the cost of labor. Labor contracts
negotiated in 1997 provide for increases in the 5% to 6% range per year through
the year 2000.
The Company expects that inflation will affect cost of wages and
materials during 1999, and that the current competitive circumstances of the
Utah market will preclude the Company from passing all of such increases on to
its customers. This circumstance may result in lower profit margins for the
Company in 1999.
SEASONALITY
Because the operations of the Company are located primarily in central
and northern Utah, the Company experiences significantly lower sales during the
winter months due to adverse weather conditions. Historically, the months of
November through March have shown
14
15
losses, with April through October being profitable months. The Company has
historically been able to deal with these seasonal variations in sales and has
established adequate cash reserves to address its liquidity requirements in the
winter months.
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Certain statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations, including without
limitation statements containing the words "believes," "anticipates," "intends,"
"expects" and words of similar import, constitute forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company and its subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among other things, the following: (1)
expected cost savings from the Merger may not be realized; (2) costs or
difficulties related to the integration of the businesses of Clyde, Geneva Rock,
Utah Service and Beehive Insurance may be greater than expected; (3) an increase
of competitive pressure in the construction industry may adversely affect the
businesses of the Company; and (4) general economic conditions, either
nationally or in the states in which the Company does business, may be less
favorable than expected. The Company disclaims any obligation to update such
factors or to publicly announce the result of any revisions to any
forward-looking statements included or incorporated by reference herein to
reflect future events or developments.
YEAR 2000 COMPLIANCE
The Company has performed an analysis and has implemented procedures to
address year 2000 issues. The Company is converting its financial systems to
year 2000 systems and it does not anticipate that significant future costs will
be incurred in order to modify its systems to accommodate the impact of the
upcoming change in the century. Although the Company is working cooperatively
with certain third parties, the Company cannot give any assurances that the
systems of other parties will be year 2000 compliant on a timely basis.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data required by this Item 8 are
set forth at the pages indicated in Item 14(a) below. None of the supplementary
data schedules referred to in Item 8 are applicable to the Company.
15
16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The names, ages and positions of the Company's directors are as follows:
Director
Name Age Position(s) with the Company since
- ---- --- ---------------------------- -----
Richard C. Clyde 63 Director, President, Chief Executive Officer 1997
Carol C. Salisbury 71 Director, Secretary 1961
Ila C. Cook. 78 Director 1972
William R. Clyde 80 Director 1961
Louise C. Gammell 74 Director 1961
Paul B. Clyde 57 Director 1988
H. Michael Clyde 48 Director 1998
Tawna Clyde Smith 42 Director 1998
Richard C. Clyde has served as the President of the Company since 1998,
and he served as President and General Manager of Clyde from 1986 to 1998. He
was Vice President and Treasurer of Clyde from 1982 to 1986, and Project
Manager/Superintendent from 1976 to 1982. Mr. Clyde holds a B.S. degree from
Brigham Young University. He serves on the National Board of Directors of the
American Road and Transportation Builders Association and is Director of the
Utah Highway Users Federation. Mr. Clyde has served on the Board of Directors of
Clyde since 1970, on the Board of Directors of Geneva Rock since 1971 and on the
Board of Directors of Beehive Insurance since 1987. Richard C. Clyde is the
father of Jeffrey R. Clyde, Contracts Manager and a Director of Clyde; and a
nephew of William R. Clyde, Ila C. Cook, Louise C. Gammell and Carol C.
Salisbury.
Carol C. Salisbury served as President of the Company from 1997 to 1998.
Prior to becoming President of the Company, Mrs. Salisbury was Secretary and
Treasurer of the Company for twenty-two years. Mrs. Salisbury has served as the
Secretary and Treasurer of Beehive Insurance since 1988, and as a director of
Beehive Insurance since 1971. She holds a Bachelors degree in economics from the
University of Utah. Carol C. Salisbury is a sister of William R. Clyde, Ila C.
Cook and Louise C. Gammell; and an aunt of Richard C. Clyde, Paul B. Clyde and
Wilford W. Clyde.
16
17
Ila C. Cook served as Vice President of the Company from 1988 to 1998.
She holds a Bachelors degree from the University of Utah and a Masters degree
from New York University. Ila C. Cook is the wife of Vernon O. Cook, who is
currently the Chairman of the Board of Utah Service, the mother of David O.
Cook, President, Chief Executive Officer and a Director of Utah Service; the
sister of William R. Clyde, Louise C. Gammell and Carol C. Salisbury; and an
aunt of Richard C. Clyde, Paul B. Clyde and Wilford W. Clyde.
William R. Clyde served as Vice President of the Company from 1997 to
1998. Mr. Clyde retired from employment with Clyde in 1983 after working for
over 45 years as a superintendent, project manager and equipment manager for
Clyde. Mr. Clyde has served as the Secretary of Geneva Rock since 1969 and on
the Boards of Directors of Utah Service and Geneva Rock since 1954. William R.
Clyde is the father of Steven L. Clyde, Project Superintendent and a Director of
Clyde, and the brother of Ila C. Cook, Louise C. Gammell and Carol C. Salisbury;
and an uncle of Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, David O.
Cook, A. Ray Gammell and B. Clyde Gammell.
Louise C. Gammell holds a Bachelors degree from the University of Utah.
Ms. Gammell has served on the Board of Directors of Utah Service since 1968.
Louise C. Gammell is the mother of A. Ray Gammell, a Director of Geneva Rock,
and of B. Clyde Gammell, Vice President and a Director of Beehive Insurance; the
sister of William R. Clyde, Ila C. Cook and Carol C. Salisbury; and an aunt of
Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L. Clyde and David O.
Cook.
Paul B. Clyde is President and General Manager of Clyde. He served as
Vice President of Construction of Clyde from 1992 to 1998. Prior to that, he was
Vice President of Marketing, Estimating and Safety of Clyde from 1986 to 1992;
Vice President of Marketing and Estimating from 1983 to 1992; Chief Estimator
from 1982 to 1983; and Project Manager/Superintendent from 1969 to 1982. Mr.
Clyde holds a B.S. degree in construction engineering and management from
Arizona State University. He is responsible for field construction, estimating
and bidding of all projects performed by Clyde. Mr. Clyde has served on the
Boards of Directors of Clyde and Geneva Rock since 1971 and on the Board of
Directors of Utah Service since 1987. Paul B. Clyde is the brother of Wilford W.
Clyde, Vice President and Chief Operating Officer of the Company, and a nephew
of William R. Clyde, Ila C. Cook, Louise C. Gammell and Carol C. Salisbury.
H. Michael Clyde has served as a director of the Company since 1998.
Since 1984, Mr. Clyde has been a lawyer with the law firm of Brown & Bain, P.A.
("Brown & Bain") in Phoenix, Arizona, where he is a general litigator practicing
primarily in the areas of securities, antitrust and professional liability.
Neither Mr. Clyde nor Brown & Bain has provided legal services to the Company or
to any of its subsidiaries. Mr. Clyde received a J.D. degree from the University
of Utah. H. Michael Clyde is son of Hal M. Clyde, a director of Utah Service and
Beehive Insurance; and a nephew of Norman D. Clyde, a director of Utah Service,
Clyde, Geneva Rock, and Beehive Insurance.
17
18
Tawna Clyde Smith has served as a Director of the Company since 1998.
Mrs. Smith has not otherwise been involved in business during the last five
years. Mrs. Smith earned an R.N. degree from Brigham Young University. She
worked as a secretary and bookkeeper for Geneva Rock from 1974 to 1976 and as an
office manager at a medical clinic from 1982 to 1985. Tawna Clyde Smith is the
daughter of Norman D. Clyde, a director of Utah Service, Clyde, Geneva Rock, and
Beehive Insurance; and a niece of Hal M. Clyde, a director of Utah Service and
Beehive Insurance.
VOTING AGREEMENT
On all matters with respect to which the Company's shareholders have a
right to vote, including the election of directors, each share of Common Stock
is entitled to one vote. The original shareholders of the Company (the "Original
CCI Shareholders") have entered into a 10-year Voting Agreement for the purpose
of controlling the voting of the 2,303,920 shares of Common Stock of the Company
owned by the Original CCI Shareholders, representing approximately [33.20%] of
the outstanding shares of Common Stock. So long as the Voting Agreement is in
place, the Original CCI shareholders may have the ability (subject to the
restrictions in the Company's Bylaws relating to the configuration of its Board
of Directors) to elect the entire Board of Directors of the Company and
determine the outcome of all matters involving a shareholder vote. See Item 13.
"Certain Relationships and Related Transactions--Voting Agreement."
BYLAWS
The Company's Bylaws restrict the configuration of the Board of
Directors of the Company during the five year period beginning on November 12,
1997 and ending on November 12, 2002. During this period, six of the directors
must be direct descendants (or the spouse of a direct descendant) of W.W. Clyde
and two of the directors must be direct descendants (or the spouse of a direct
descendant) of Edward Clyde. The Bylaws require that there be between eight and
eleven directors on the Board of Directors. There are currently eight directors,
and this number may be increased to include as many as eleven directors. The
effect of the foregoing restriction on Board membership is that, during the five
year period described above, the W.W. Clyde family will have effective control
of the Board of Directors. Such control will give the W.W. Clyde family the
ability to determine all matters that come before the Board, such as the amount
which will be made available by the Company to fund the redemption of shares of
Common Stock pursuant to the Company's Stock Redemption Plan and the amount of
dividends to be paid on Common Stock. See Item 13.
"Certain Relationships and Related Transactions--Bylaws."
18
19
EXECUTIVE OFFICERS
The names, ages and positions of the Company's executive officers are as
follows:
Name Age Position with the Company
- ---- --- -------------------------
Richard C. Clyde 63 President and Chief Executive Officer
Wilford W. Clyde. 46 Vice President and Chief Operating Officer
Paul B. Clyde 57 President of subsidiary, Clyde
Carol C. Salisbury 71 Secretary
Don C. McGee 45 Treasurer
For a description of the business backgrounds of Richard C. Clyde, Paul
B. Clyde and Carol C. Salisbury, see "Directors" above. The business backgrounds
of Wilford W. Clyde and Don C. McGee is described below.
Wilford W. Clyde has been Vice President and Chief Operating Officer of
the Company since 1998. Also, he has been President and General Manager of
Geneva Rock since 1988. Mr. Clyde also has served on the Board of Directors of
Clyde since 1994, on the Board of Directors of Geneva Rock since 1978 and on the
Board of Directors of Beehive Insurance since 1988. Mr. Clyde graduated from
Brigham Young University. Wilford W. Clyde is the brother of Paul B. Clyde, and
a nephew of William R. Clyde, Ila C. Cook, Louise C. Gammell and Carol C.
Salisbury.
Don C. McGee has been the Treasurer of the Company since 1998. Mr. McGee
graduated in 1976 from Brigham Young University and began working in 1979 for
Geneva Rock as the Credit Manager and, subsequently, as the Accounting Manager
and then as the Controller. He continues to serve as Assistant Secretary and
Treasurer of Geneva Rock, a position he has held since 1988.
COMMITTEES OF BOARD
The Board of Directors of the Company currently has no committee.
ATTENDANCE AT BOARD MEETINGS
The Board of Directors held five meetings in 1998, and all of the
directors attended 75% or more of such meetings.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth information for the three years ended
December 31, 1998 concerning the cash and non-cash compensation paid or to be
paid by the Company or its subsidiaries to each person who served as its chief
executive officer, and to each of its executive
19
20
officers and the executive officers of the Company's subsidiaries whose total
annual salary and bonus exceeded $100,000 for services in all capacities.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------------------------------------------------
(a) (b) (c) (d) (e)
Name and Principal Other Annual
Position Year Salary Bonus ($) Compensation
($) ($)(4)
----------------------------------------------------------------------
Richard C. Clyde1 1998 $91,545 $80,000 $ 0
President, Chief 1997 $73,835 $38,000 $ 0
Executive Officer 1996 $69,880 $65,000 $ 0
of the Company
Carol C. Salisbury(1) 1998 $ 0 $ 0 $ 0
President, Chief 1997 0 $ 0 $ 0
Executive Officer 1996 $ 0 $ 0 $ 0
of the Company
Wilford W. Clyde(2) 1998 $94,660 $78,000 $ 0
Vice President 1997 $78,140 $88,000 $ 0
of the Company; 1996 $78,710 $80,000 $ 0
President of
Geneva Rock
Paul B. Clyde(3) 1998 $74,276 $50,000 $ 0
President of Clyde 1997 $63,235 $30,000 $ 0
1996 $59,912 $50,000 $ 0
- -----------------------------------
(1) Carol C. Salisbury served as President and Chief Executive Officer of the
Company until June 1998, when Richard C. Clyde became President and Chief
Executive Officer. Prior to June 1998, Richard C. Clyde was President and
General Manager of Clyde. Mrs. Salisbury did not receive any compensation for
serving as President and Chief Executive Officer of the Company. During 1998,
Mrs. Salisbury received directors' fees of $1500 and Mr. Clyde received
directors' fees of $1500.
(2) Wilford W. Clyde became Vice President and Chief Operating Officer of the
Company in June 1998, and he continues to serve as President of Geneva Rock.
(3) Paul B. Clyde served as Vice President of Clyde until June 1998, when he
became president of Clyde.
(4) Column (e) of the above table includes the value of certain benefits [i.e.,
prerequisites] (valued on the basis of the aggregate incremental value to the
Company) provided by the Company to its executive officers, including personal
use of a Company car, social club dues, life and health insurance policies.
20
21
EMPLOYMENT AGREEMENT
For a description of the Employment Agreement between the Company and
Richard C. Clyde, see Item 13 - "Certain Relationships and Related
Transactions."
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors does not have a compensation committee. The
compensation paid to Paul B. Clyde was determined by the Board of Directors of
Clyde. The terms of the Employment Agreement between the Company and Richard C.
Clyde, and the compensation paid to Wilford W. Clyde for the year ended December
31, 1998 were determined by an informal working group (the "Task Force"), which
was responsible for negotiating the terms of the Merger between the Company and
its subsidiaries. See "Compensation Committee Interlocks and Insider
Participation" below. The Task Force considered a number of factors in
establishing compensation for executive officers, including whether such
executive officers receive compensation from any subsidiary of the Company.
Prior to the consummation of the Merger in June 1998, the compensation paid to
Richard C. Clyde, Wilford W. Clyde and Paul B. Clyde was determined by the
companies that employed them, that is, by Clyde for Richard C. Clyde and Paul B.
Clyde, and by Geneva Rock for Wilford C. Clyde. In the future, it is anticipated
that the compensation to be paid to executive officers of the Company and its
subsidiaries will be determined by the Board of Directors of the Company as a
whole, or by a compensation committee to be appointed for the purpose.
The foregoing report is submitted by Richard C. Clyde.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the Board of Directors does not have a compensation
committee and the Task Force determined the compensation paid to the persons
listed in the Summary Compensation Table. The Task Force included the following
directors and executive officers of the Company (or their spouse): Richard C.
Clyde, Wilford W. Clyde, Paul B. Clyde and Carol C. Salisbury's husband, David
E. Salisbury. The Task Force also included the following persons who are
officers or directors of subsidiaries of the Company: Hal M. Clyde, a director
of Utah Service and Beehive Insurance; David O. Cook, the President and a
director of Utah Services; Steven L. Clyde, a director of Clyde; A. Ray Gammell,
Vice President and a director of Utah Services and a director of Geneva Rock;
Norman D. Clyde, a director of Clyde, Geneva Rock, Utah Service and Beehive
Insurance; and William R. Clyde, formerly Vice President of the Company.
COMPENSATION OF DIRECTORS
Directors of the Company receive $1,000 per year for serving on the
Board of Directors of the Company, plus $250 for each meeting attended.
Directors of the Company's subsidiaries, Clyde, Geneva Rock, Utah Service,
Beehive Insurance and J&J Building Supply, receive director's fees of $1,500,
$1,500, $750, $500 and $750, per year, respectively.
21
22
DEFINED BENEFIT RETIREMENT PLANS
Each of Clyde, Geneva Rock, Utah Service, Beehive Insurance and J & J
has a defined benefit pension plan collectively referred to as (the "Plans"),
qualified under Section 401 of the Internal Revenue Code (the "Code"). The
annual pension benefit under the Plans is determined by the number of years of
employment multiplied by a percentage of the participant's average monthly
compensation for the five highest consecutive years of participation. Each of
the executive officers listed under the heading "Summary Compensation Table"
above, except Carol C. Salisbury, is a participant in one of the Plans. The
annual benefits payable at retirement under the Plans are calculated as 1.800%
of the participant's average monthly compensation multiplied by the
participant's total years of employment with the applicable company.
The table below may be used to calculate the approximate annual benefits
payable at retirement at age 65 under the Plans to individuals in the specified
average annual compensation and years of service classifications:
PENSION TABLE
Years of Service
Average
Compensation 10 15 20 25 30 35
- ------------ ------- ------- ------- ------- ------- -------
$60,000 $10,800 $16,200 $21,600 $27,000 $32,400 $37,800
70,000 12,600 18,900 25,200 31,500 37,800 44,100
80,000 14,400 21,600 28,800 36,000 43,200 50,400
90,000 16,200 24,300 32,400 40,500 48,600 56,700
100,000 18,000 27,000 36,000 45,000 54,000 63,000
110,000 19,800 29,700 39,600 49,500 59,400 69,300
120,000 21,600 32,400 43,200 54,000 64,800 75,600
130,000 23,400 35,100 46,800 58,500 70,200 81,900
140,000 25,200 37,800 50,400 63,000 75,600 88,200
The salary amounts listed under the heading "Summary Compensation Table"
above qualify under the Plans. The present credited years of service for the
officers listed under the heading Summary Compensation Table are as follows:
Richard C. Clyde, 34 years; Wilford W. Clyde, 22 years; and Paul B. Clyde, 29
years.
22
23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of March 1, 1999 with respect
to the beneficial ownership of Common Stock by (i) each person who, to the
knowledge of the Company, is the beneficial owner of more than 5% of the
outstanding Common Stock (the Company's only class of voting securities), (ii)
each director and nominee for director, (iii) executive officers and (iv) all
directors and executive officers as a group.
Name and Address Shares Percent of
of Beneficial Owner Beneficially Owned (1) Class(1)
- ------------------- ---------------------- --------
Louise C. Gammell (2) 2,650,464 40.4%
1100 East 400 South
Springville, UT 84663
Richard C. Clyde (3) 2,516,894 38.4%
776 South 600 West
Orem, UT 84057
Carol C. Salisbury (4) 2,561,426 38.3%
1423 Devonshire Drive
Salt Lake City, UT 84108
William R. Clyde(5) 2,502,983 38.2%
2000 Canyon Road
Springville, UT 84663
Paul B. Clyde(6) 2,482,011 37.9%
3308 N. 350 E
Provo, UT 84601
Ila C. Cook(7) 2,544,063 38.8%
2711 Sherwood Dr.
Salt Lake City, UT 84108
Wilford W. Clyde(8) 184,240 2.8%
1324 East 950 South
Springville, UT 84663
H. Michael Clyde 22,946 *
4338 North 56th Street
Phoenix, Arizona 85018
23
24
Tawna Clyde Smith 17,398 *
3223 Apache Lane
Provo, Utah 84604
Don C. McGee 0
252 West Center Street
Orem, Utah 84057
Voting Committee(9) 2,303,920 35.1%
All directors and executive officers
of the Company as a group (9 people)(10) 3,907,307 59.6%
- ----------
* Less than 1%
(1) Applicable percentage of ownership is based on 6,554,317 shares of
Common Stock of the Company. Beneficial ownership is determined in
accordance with the rules of the Commission, and includes voting and
investment power with respect to such shares.
(2) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Ms. Gammell may be deemed to beneficially own as a result of her
membership on the Voting Committee, 291,802 shares owned directly by Louise
C. Gammell, 51,008 shares owned indirectly by Ms. Gammell as custodian for
her son, John Scott Gammell, and 3,734 shares owned directly by Ms.
Gammell's husband, Blake Gammell.
(3) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Mr. Clyde may be deemed to beneficially own as a result of his
membership on the Voting Committee, 127,684 shares owned indirectly by
Richard C. Clyde through the Richard C. Clyde Trust and 85,290 shares owned
indirectly by Patricia T. Clyde through the Patricia T. Clyde Trust.
(4) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Ms. Salisbury may be deemed to beneficially own as a result of her
membership on the Voting Committee, 199,506 shares owned directly by Carol
C. Salisbury and 8,482 shares owned directly by her husband, David E.
Salisbury.
(5) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Mr. Clyde may be deemed to beneficially own as a result of his
membership on the Voting Committee, 10,523 shares owned indirectly by Mr.
Clyde through the William R. Clyde Family Trust and 182,540 shares owned
indirectly by Mr. Clyde through the Wells Fargo Bank Trust.
(6) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Mr. Clyde may be deemed to beneficially own as a result of his
membership on the Voting Committee, 112,090 shares owned directly by Paul B.
Clyde and 66,001 shares jointly owned by Paul B. and Jeanette P. Clyde
(husband and wife).
(7) Includes 2,303,920 shares controlled by the Voting Committee, which
shares Ms. Cook may be deemed to beneficially own as a result of her
membership on the Voting Committee, 9,784 shares
24
25
owned indirectly by Ila C. Cook through the Ila C. Cook Family Trust, and
230,359 shares owned indirectly by Mrs. Cook through Invoc LLC, a family
limited liability company.
(8) Includes 120,639 shares owned directly by Wilford W. Clyde and 63,601
shares owned jointly by Wilford W. and Natalie Clyde (husband and wife).
(9) Pursuant to the Voting Agreement among the Original CCI Shareholders,
each Original CCI Shareholder has granted to the Voting Committee, comprised
of William R. Clyde, Ila C. Cook, Louise C. Gammell, Carol C. Salisbury,
Richard C. Clyde and Paul B. Clyde, the right to vote such shares on each
matter to be voted upon by the shareholders of CCI. See Item 13 "Certain
Relationships and Related Transactions--Voting Agreement."
(10) In computing the aggregate number of shares owned by officers and
Directors as a group, the shares controlled by the Voting Committee, which
shares certain of the officers and directors may be deemed to beneficially
own, are counted only once.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSUMMATION OF MERGER; CHANGE OF CONTROL
A change of control of the Company occurred on June 30, 1998, the
effective date of the merger (the "Merger") of Clyde, Geneva Rock, Utah Service
and Beehive Insurance with and into wholly-owned subsidiaries of the Company. As
a result of the Merger, Clyde, Geneva Rock, Utah Service and Beehive Insurance
became wholly-owned subsidiaries of the Company, and the issued and outstanding
shares of common stock of Clyde, Geneva Rock, Utah Service and Beehive Insurance
were converted into Common Shares of the Company.
In connection with the Merger, H. Michael Clyde and Tawna Clyde Smith
were elected as directors of the Company. Also, Richard C. Clyde was elected as
President and Chief Executive Officer of the Company, Wilford W. Clyde was
elected as Vice President and Chief Operating Officer of the Company, Carol C.
Salisbury was elected as Secretary, and Don C. McGee was elected as Assistant
Secretary and Treasurer of the Company.
The Merger was discussed in detail in the Company's Proxy
Statement/Prospectus dated May 13, 1998, which was furnished to all shareholders
of the Company, Clyde, Geneva Rock, Utah Service and Beehive Insurance for use
in connection with the June 19, 1998 Special Meetings of Shareholders at which
the shareholders of each such company voted to approve the Merger.
APPRAISAL PROCEEDING
In connection with the Merger of Clyde, Geneva Rock, Utah Service and
Beehive Insurance (together referred to as the "Operating Companies") with and
into the Company, 18 shareholders of the Operating Companies (the "Dissenting
Shareholders"), who collectively owned the equivalent of 419,188 Common Shares
of the Company, gave notice that they intended to exercise their statutory
dissenters' rights and seek payment of the fair value of their shares. Following
the consummation of the Merger on June 30, 1998, the Operating Companies
25
26
paid the Dissenting Shareholders that properly exercised their dissenters rights
an aggregate amount of $4,453,000 for the shares they owned in the Operating
Companies, which is the amount the Operating Companies determined to be the fair
value of the shares held by those Dissenting Shareholders immediately before the
effective date of the Merger. All of the Dissenting Shareholders, except for the
Estate of Scott Clyde, were paid $394.13, $2,779.36, $504.45 and $50.30 for each
share of common stock they held in Clyde, Geneva Rock, Utah Service and Beehive
Insurance, respectively. No payment was made to the Estate of Scott Clyde with
respect to the shares of Clyde which it held, because it did not properly
exercise its dissenter's rights with respect to Clyde.
After receiving payment for the shares they owned in the Operating
Companies, 16 of the Dissenting Shareholders, who collectively owned the
equivalent of 243,223 Common Shares of the Company, notified the Operating
Companies that, in their opinion, immediately before the effective date of the
Merger the fair value of Clyde, Geneva Rock, Utah Service and Beehive Insurance
was $657, $5,509, $975 and $116 per share, respectively, and they demanded
payment of the difference between such amounts and the amounts paid to them by
the Operating Companies, plus interest. The aggregate additional amount demanded
by the Dissenting Shareholders, exclusive of interest, is approximately
$2,361,666.
The Operating Companies believe the amounts that were paid to the
Dissenting Shareholders represented the fair value of the shares held by the
Dissenting Shareholders on the date of the Merger. Accordingly, pursuant to Utah
Code Annotated, as amended, Section 16-10A-1330, on November 3, 1998, the
Operating Companies filed a Petition with the Third Judicial District Court of
Salt Lake County (Case No. 980911145) to request the Court to determine the fair
value of the shares of the Operating Companies held by the 16 Dissenting
Shareholders who have demanded the payment of additional amounts for their
shares. In addition, the Operating Companies requested a ruling to the effect
that the Estate of Scott Clyde did not properly exercise its dissenter's rights
with respect to Clyde and, therefore, is not entitled to payment for the shares
of Clyde which it held. The Petition named the following Dissenting Shareholders
as respondents: Terry Carlson; Scott Carlson; Claudia Snyder; Kenneth Snyder;
Kurt Gramoll; Junko Gramoll; James Gramoll; Damon Clyde; Christina Schroeder;
Brian Clyde; Ronald Clyde; Stephen W. Clyde; Robert Clyde; Marcia Clyde, as
personal representative of the Estate of Daniel Clyde, deceased; Janice Clyde,
personally; and Janice Clyde, as personal representative of the Estate of Scott
Clyde, deceased.
The Dissenting Shareholders filed a Motion for Partial Summary Judgment,
and on March 11, 1999 the Court granted the motion and ruled, among other
things, that in determining the fair value of the shares held by the Dissenting
Shareholders, the Operating Companies may not apply a discount for minority
interest. As of the date of this report, the Operating Companies had not
determined whether they will appeal this ruling. While the Company believes that
the amounts paid to the Dissenting Shareholders represented the fair value of
the shares they held in the Operating Companies on the date of the Merger, there
can be no assurance that the Court will not determine that the fair value of the
Operating Companies was higher, and require that additional amounts be paid to
the Dissenting Shareholders.
26
27
VOTING AGREEMENT
In connection with the Merger, the then shareholders of the Company (the
"Original CCI Shareholders") entered into a Voting Agreement dated as of
November 14, 1997 (the "Voting Agreement") for the purpose of controlling the
voting of the 2,303,920 shares of Common Stock of the Company owned by the
Original CCI Shareholders, representing approximately 33.20% of the shares of
Common Stock of the Company (the "Voting Agreement Shares"). Pursuant to the
Voting Agreement, William R. Clyde, Ila C. Cook, Louise C. Gammell, Carol C.
Salisbury, Richard C. Clyde and Paul B. Clyde (the "Voting Committee Members")
have been appointed to act as a committee (the "Voting Committee") to determine
how the Voting Agreement Shares will be voted on each matter to be voted upon by
the shareholders of the Company. Each Voting Committee Member represents the
other members of his or her family who are Original CCI Shareholders.
Pursuant to the Voting Agreement, each Original CCI Shareholder has
granted to the Voting Committee an irrevocable proxy, for a period of 10 years
from November 13, 1997 (or until such time as the Voting Agreement is
terminated), authorizing the Voting Committee to vote such shareholder's Voting
Agreement Shares in accordance with the Voting Agreement. However, under the
Voting Agreement, the Original CCI Shareholders retain their right to vote any
shares of Common Stock which they own, other than the Voting Agreement Shares,
as they wish. The Voting Agreement will remain in effect for 10 years, unless
earlier terminated because (i) the Voting Committee Members unanimously agree in
writing to terminate the Voting Agreement, (ii) the Company is in bankruptcy or
receivership or is dissolved, (iii) the Company ceases it business, (iv) the
Company enters into an underwriting agreement with respect to a public offering
of its Common Stock in excess of $30,000,000, (v) the Company sells all or
substantially all of its assets or is the non-surviving corporation in a merger,
or (vi) there is only one Shareholder bound by the terms of the Voting
Agreement.
The Voting Agreement provides that an Original CCI Shareholder may not
sell, transfer or otherwise dispose of any Voting Agreement Shares, except to
(i) a spouse of such Original CCI Shareholder, (ii) a child of such Original CCI
Shareholder or such spouse, (iii) a trustee in trust for the benefit of such
Original CCI Shareholder, such spouse or such child, (iv) the Company in the
event such Original CCI Shareholder owns no Common Stock of the Company other
than such Voting Agreement Shares and (v) a third party upon obtaining the prior
written consent of the Committee Members. All transferees of the Voting
Agreement Shares will be required to enter into the Voting Agreement and to
receive and hold the Voting Agreement Shares subject to the terms and provisions
of the Voting Agreement.
BYLAWS OF THE COMPANY
Section 3.2(c) of the Company's Bylaws restricts the configuration of
the Company's Board of Directors until November 12, 2002. Until that date, six
of the Company's directors must be direct descendants (or the spouse of a direct
descendant) of W.W. Clyde and two of the directors must be direct descendants
(or the spouse of a direct descendant) of Edward Clyde. The Company's Bylaws
require that there be between eight and eleven directors on the Board of
Directors. There are currently eight directors on the Board, and this number may
be increased to include as many as eleven directors. The effect of the foregoing
restriction on the Board
27
28
membership is that until November 12, 2002, the W.W. Clyde family will have
effective control of the Board. Such control will give the W.W. Clyde family the
ability to determine all matters that come before the Board, such as the amount
which will be made available by the Company to fund the redemption of Common
Shares pursuant to the Stock Redemption Plan described below, and the amount of
dividends to be paid on the Common Shares.
EMPLOYMENT AGREEMENT
In connection with the Merger, the Company entered into an Employment
Agreement with Richard C. Clyde pursuant to which Richard C. Clyde is employed
as President and Chief Executive Officer for a term of three years from and
after June 1998. The Employment Agreement provides for a minimum annual base
salary of $110,000 and a discretionary annual incentive bonus in an amount as
the Board of Directors of the Company may determine. The Employment Agreement
also provides that if Richard C. Clyde is terminated by the Company prior to the
end of the term of employment, other than for cause, death or disability, the
Company will pay him an amount equal to his annual salary multiplied by the
number of years remaining under the term of the Employment Agreement.
STOCK REDEMPTION PLAN
The Board of Directors of the Company has adopted a Stock Redemption
Plan, pursuant to which it is anticipated that the Company will make funds
available for the redemption of a limited number of shares of Common Stock each
year beginning in 1999, on a date to be established each year by the Board of
Directors (the "Redemption Date"). Each year commencing in 1999, as soon as
practicable following the issuance by the Company's independent auditors of
their report regarding the consolidated financial statements of the Company and
its subsidiaries for the prior year, the Board of Directors will (i) cause an
appraisal (or an update of a prior appraisal) of the Company to be completed by
an independent individual or firm selected by the Board of Directors which will
set forth a determination of the total fair market value of the Company as of
the last day of the prior year (the "Appraisal Value"), and (ii) determine the
amount which shall be made available, if any, by the Company on the Redemption
Date to fund the redemption of shares of Common Stock (the "Redemption Fund").
The price to be paid to shareholders for each share of redeemed Common Stock
(the "Redemption Price") will be an amount equal to the Appraisal Value divided
by the number of shares of Common Stock outstanding on the last day of the prior
year, discounted by 25%. The Redemption Fund (a) for the years 1999 through 2003
will be an amount which is greater than or equal to 7% and less than or equal to
15% of the net earnings of the Company (after taxes) for the prior year, and (b)
for the years 2004 and thereafter will be an amount which is greater than or
equal to 5% and less than or equal to 10% of the net earnings of the Company
(after taxes) for the prior year. All shares of Common Stock will be eligible
for redemption subject to and in accordance with the terms of the Stock
Redemption Plan. In the event that the number of shares offered for redemption
by shareholders is greater than the number of shares that can be redeemed from
the Redemption Fund, such shares will be redeemed on a pro rata basis. Unused
portions of the Redemption Fund will not be carried forward to increase the
Redemption Fund in future years. The Stock Redemption Plan will be administered
and interpreted by the Board of Directors of the Company in its sole and
absolute discretion, and the Stock Redemption Plan may be amended or
28
29
terminated, and/or the Redemption for any particular year may be canceled, upon
a vote of more than 75% of the directors of the Company.
FAMILY RELATIONSHIPS; INTERRELATED MANAGEMENT
Carol C. Salisbury formerly was the President of the Company and
presently is a director and the Secretary of the Company. Mrs. Salisbury is: the
wife of David E. Salisbury, who served as a member of the Task Force and is a
director of Clyde; a sister of William R. Clyde, Ila C. Cook and Louise C.
Gammell; and an aunt of Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde,
Steven L. Clyde, David O. Cook, A. Ray Gammell and B. Clyde Gammell.
Ila C. Cook, a director of the Company is: the wife of Vernon O. Cook,
who formerly was the Chairman of the Board of Utah Service, and is the mother of
David O. Cook, who served as a member of the Task Force and is the President,
Chief Executive Officer and a director of Utah Service; the sister of William R.
Clyde, Louise C. Gammell and Carol C. Salisbury; and an aunt of Richard C.
Clyde, Paul B. Clyde, Wilford W. Clyde, Steven L. Clyde, A. Ray Gammell and B.
Clyde Gammell.
William R. Clyde is a director of the Company, Clyde, Geneva Rock and
Utah Service. William R. Clyde is: the father of Steven L. Clyde, who served as
a member of the Task Force and is the Project Superintendent and a Director of
Clyde; the brother of Ila C. Cook, Louise C. Gammell and Carol C. Salisbury; and
an uncle of Richard C. Clyde, Paul B. Clyde, Wilford W. Clyde, David O. Cook, A.
Ray Gammell and B. Clyde Gammell.
Louise C. Gammell, a director of the Company, formerly was Secretary and
Treasurer of the Company and a director of Utah Service. Mrs. Gammell is: the
mother of A. Ray Gammell, who served as a member of the Task Force, and
currently is the Vice President and a director of Utah Service and a director of
Geneva Rock; the mother of B. Clyde Gammell, who is currently the Vice President
and a Director of Beehive Insurance; the sister of William R. Clyde, Ila C. Cook
and Carol C. Salisbury; and an aunt of Richard C. Clyde, Paul B. Clyde, Wilford
W. Clyde, Steven L. Clyde and David O. Cook.
Paul B. Clyde, a director of the Company, served as a member of the Task
Force. He currently is: President and a director of Clyde, and a director of
Geneva Rock and Utah Service; the brother of Wilford W. Clyde, the Vice
President and Chief Operating Officer of the Company, the President and a
director of Geneva Rock, a director of Clyde and Beehive Insurance, and served
as a member of the Task Force; and a nephew of William R. Clyde, Ila C. Cook,
Louise C. Gammell and Carol C. Salisbury.
Richard C. Clyde, a director, President and Chief Executive Officer of
the Company, served as a member of the Task Force. Mr. Clyde formerly was the
President and General Manager of Clyde. He is: a director of Clyde, Geneva Rock
and Beehive Insurance; the father of Jeffrey R. Clyde, who is currently the
Contracts Manager and a director of Clyde; and a nephew of William R. Clyde, Ila
C. Cook, Louise C. Gammell and Carol C. Salisbury.
29
30
Wilford W. Clyde, Vice President and the Chief Operating Officer of the
Company, served as a member of the Task Force. He is the President of Geneva
Rock, a director of Clyde, Geneva Rock and Beehive Insurance, is the brother of
Paul B. Clyde, who was a member of the Task Force and currently is a director
and the President of Clyde, and a director of Clyde, CCI, Geneva Rock and Utah
Service; and a nephew of William R. Clyde, Ila C. Cook, Louise C. Gammell and
Carol C. Salisbury.
H. Michael Clyde, a director of the Company, is the son of Hal M. Clyde,
who served as a member of the Task Force, and currently is: a director of Utah
Service and Beehive Insurance; and a nephew of Norman D. Clyde, who served as a
member of the Task Force and a director of Utah Service, Clyde, Geneva Rock, and
Beehive Insurance.
Tawna Clyde Smith, a director of the Company, is the daughter of Norman
D Clyde, who served as a member of the Task Force and currently is a director of
Utah Service, Clyde, Geneva Rock, and Beehive Insurance; and a niece of Hal M.
Clyde, who served as a member of the Task Force and currently is a Director of
Utah Service and Beehive Insurance.
30
31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Report of Certified Public Accountants F-1
Consolidated Balance Sheets at December 31, 1998 and 1997 F-2
Consolidated Statements of Earnings for the years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statement of Stockholders' Equity
for the years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-8
(a)(2) Financial Statement Schedules - not applicable
(a)(3) The following exhibits are filed herewith or incorporated by reference:
Exhibit
Number Exhibit
- ------ -------
2.2 Amended and Restated Agreement and Plan of Merger dated as of November 13,
1997 by and among CCI, W.W. Clyde Reorganization Corporation, Clyde, Geneva
Rock Reorganization Corporation, Geneva Rock, Utah Service Reorganization
Corporation, Utah Service, Beehive Insurance Reorganization Corporation and
Beehive Insurance*
3.1 Articles of Incorporation of the Company*
3.2 Bylaws of the Company*
4.2 Form of the Company's Common Stock Certificate*
10.1 Voting Agreement dated November 14, 1997 among the persons named on Schedule 1
thereto*
31
32
EXHIBIT
NUMBER
- ------
10.2 Stock Redemption Plan adopted by the Board of Directors of the Company as of
November 12, 1997*
10.3 Employment Agreement between the Company and Richard C. Clyde*
[Geneva Rock Material Contracts: Exhibits 10.4-10.10C]
10.4 Promissory Note dated June 28, 1996 in favor of J&J Mill and Lumber Company*
10.5 Promissory Note dated October 18, 1994 in favor of Ideal Concrete Corporation*
10.10B Purchase Order dated May 29, 1997 from Jacobsen, Okland Joint Venture
regarding Little America Grand Hotel project*
10.10C Material Contract dated September 12, 1997 between Geneva Rock and Wasatch
Constructors*
[Clyde Material Contracts: Exhibits 10.11-10.17]
10.11 Contract dated May 13, 1998, between Clyde and Draper City
10.12 Contract No. ES-01 dated July 21, 1997 between Clyde and Kennecott Utah Copper
Corporation*
10.13 Agreement dated September 12, 1997 between Clyde and Sun River St. George
Development, L.C.*
10.28 Retirement Plan for Employees of Clyde, Geneva Rock and Beehive Insurance*
21 Subsidiaries of the Registrant.
27.1 Financial Data Schedule
99.2 Valuation report of Houlihan Valuation Advisors with respect to Clyde*
99.3 Valuation report of Houlihan Valuation Advisors with respect to Geneva Rock*
99.4 Valuation report of Houlihan Valuation Advisors with respect to Utah Service*
99.5 Valuation report of Houlihan Valuation Advisors with respect to Beehive
Insurance*
* Incorporated by reference to Registrant's Registration Statement dated May 13,
1998.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended
December 31, 1998.
32
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CLYDE COMPANIES, INC.
By /s/ Richard C. Clyde
--------------------------------
Date: March 19, 1999 Richard C. Clyde, President and
Chief Executive Officer
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 19, 1999 By /s/ Richard C. Clyde
---------------------------------------
Richard C. Clyde, Director
(Principal Executive Officer)
Date: March 19, 1999 By /s/ Don C. McGee
---------------------------------------
Don C. McGee, Treasurer
(Principal Financial and
Accounting Officer
Date: March 25, 1999 By /s/ Carol C. Salisbury
---------------------------------------
Carol C. Salisbury, Director
Date: March 25, 1999 By /s/ Ila C. Cook
---------------------------------------
Ila C. Cook, Director
Date: March 19, 1999 By /s/ William R. Clyde
---------------------------------------
William R. Clyde, Director
Date: March 19, 1999 By /s/ Louise C. Gammell
---------------------------------------
Louise C. Gammell, Director
Date: March 19, 1999 By /s/ Paul B. Clyde
---------------------------------------
Paul B. Clyde, Director
Date: __________, 1999 By _________________________________
H. Michael Clyde, Director
Date: March 19, 1999 By /s/ Tawna Clyde Smith
---------------------------------------
Tawna Clyde Smith, Director
33
34
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
As of the date hereof, no Annual Report or proxy material has been sent
to Registrant's security holders. Registrant intends to furnish proxy
materials to its security holders, together with a copy of this Form
10-K Annual Report, in connection with Registrant's 1999 Annual Meeting
of Shareholders. Registrant shall furnish copies of such proxy materials
to the Commission when such materials are sent to Registrant's security
holders.
34
35
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Clyde Companies, Inc.
We have audited the accompanying consolidated balance sheets of Clyde Companies,
Inc. and Subsidiaries (the Company) as of December 31, 1998 and 1997, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1998. 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, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of Clyde Companies,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Provo, Utah
February 12, 1999, except for Note L for which
the date is March 11, 1999.
F-1
36
Clyde Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
(dollars in thousands)
1998 1997
--------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 17,421 $ 14
Held-to-maturity investments 4,000 --
Accounts receivable, net 27,813 --
Inventories (Note C) 12,033 --
Costs and estimated earnings in excess of billings
on uncompleted contracts (Note D) 1,184 --
Deferred income taxes (Note H) 275 --
Income taxes receivable 1,762 --
Other assets 275 9
--------- ---------
Total current assets 64,763 23
PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes E and I) 151,663 --
Less accumulated depreciation and amortization (77,503) --
--------- ---------
74,160 --
LAND (Note I) 5,192 --
INTANGIBLE ASSETS, net 20,574 --
DEFERRED PENSION COSTS 511 --
INVESTMENT IN AFFILIATES (Note L) -- 27,433
OTHER ASSETS, AT COST, net 2,531 338
--------- ---------
$ 167,731 $ 27,794
========= =========
The accompanying notes are an integral part of these statements.
F-2
37
Clyde Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(dollars in thousands)
1998 1997
--------- ---------
CURRENT LIABILITIES
Accounts payable $ 13,134 $ --
Accrued expenses (Note F) 3,869 --
Current portion of long-term obligations (Note I) 3,303 --
Billings in excess of costs and estimated earnings on
uncompleted contracts (Note D) 55 --
Due to related party -- 338
--------- ---------
Total current liabilities 20,361 338
LONG-TERM OBLIGATIONS, net of current portion (Note I) 6,586 --
ACCRUED PENSION COSTS, less current portion (Note J) 1,241 --
DEFERRED INCOME TAXES (Note H) 30,827 10,039
COMMITMENTS AND CONTINGENCIES (Notes G, J, K and L) -- --
STOCKHOLDERS' EQUITY (Note L)
Common stock, no par value; authorized 10,000,000
shares; issued and outstanding 6,554,317 and 2,303,920
shares in 1998 and 1997, respectively 90,901 707
Retained earnings 17,887 16,710
Accumulated other comprehensive loss (72) --
--------- ---------
Total stockholders' equity 108,716 17,417
--------- ---------
$ 167,731 $ 27,794
========= =========
F-3
38
Clyde Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31,
(dollars in thousands, except per share data)
1998 1997 1996
----------- ----------- -----------
Revenues, net $ 107,987 $ 487 $ 404
Cost of goods sold 89,125 -- --
----------- ----------- -----------
Gross profit 18,862 487 404
General and administrative expenses 7,419 8 6
----------- ----------- -----------
Operating profit 11,443 479 398
Other income (expense)
Interest income, net 65 2 1
Loss on disposal of property, plant and equipment (23) -- --
Other income, net 48 -- --
Equity in net earnings of affiliates (Note L) 535 2,375 2,503
----------- ----------- -----------
625 2,377 2,504
----------- ----------- -----------
Earnings before income taxes 12,068 2,856 2,902
Income taxes (Note H) 4,471 928 967
----------- ----------- -----------
NET EARNINGS $ 7,597 $ 1,928 $ 1,935
=========== =========== ===========
Earnings per common share - basic $ 1.69 $ 0.84 $ 0.84
=========== =========== ===========
Weighted-average shares outstanding 4,493,184 2,303,920 2,303,920
=========== =========== ===========
The accompanying notes are an integral part of these statements.
F-4
39
Clyde Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1998, 1997 and 1996
(dollars in thousands)
Accumulated
Common Stock other
Number comprehensive Retained
of shares Amount loss earnings Total
---------- --------- -------------- ---------- --------
Balance at January 1, 1996 2,303,920 707 $ -- $ 13,647 $ 14,354
Net earnings -- -- -- 1,935 1,935
Cash dividends -- -- -- (359) (359)
---------- ------- -------- -------- ---------
Balance at December 31, 1996 2,303,920 707 -- 15,223 15,930
Net earnings -- -- -- 1,928 1,928
Cash dividends -- -- -- (441) (441)
---------- ------- -------- -------- ---------
Balance at December 31, 1997 2,303,920 707 16,710 17,417
Comprehensive income
Net earnings -- -- -- 7,597 7,597
Adjustment to excess
pension obligation -- -- (72) -- (72)
---------
Comprehensive income 7,525
Stock issued in merger (Note L) 4,634,791 90,194 -- -- 90,194
Cash paid to dissenting
stockholders (Note L) (384,394) -- -- (4,453) (4,453)
Cash dividends -- -- -- (1,967) (1,967)
---------- ------- -------- -------- ---------
Balance at December 31, 1998 6,554,317 $90,901 $ (72) $ 17,887 $ 108,716
========== ======= ======== ======== =========
The accompanying notes are an integral part of this statement.
F-5
40
Clyde Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
(dollars in thousands)
1998 1997 1996
-------- -------- --------
Increase in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 7,597 $ 1,928 $ 1,935
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 8,152 - -
Equity in net earnings of affiliates (535) (2,375) (2,503)
Loss on the disposal of property, plant
and equipment 23 - -
Deferred income taxes (447) 886 934
Deferred pension costs 55 - -
Changes in assets and liabilities
Due to related party 210 338 -
Accounts receivable 4,413 - -
Other current assets 925 (5) -
Inventories (1,475) - -
Costs and estimated earnings in excess
of billings on uncompleted contracts (209) - -
Other assets 121 (338) -
Accounts payable 5,402 - -
Accrued expenses (876) (6) (16)
Income taxes receivable (1,762) - -
Billings in excess of costs and
estimated earnings on uncompleted (82) - -
contracts
-------- -------- --------
Total adjustments 13,195 (1,500) (1,585)
-------- -------- --------
Net cash provided by
operating activities 21,512 428 350
-------- -------- --------
Cash flows from investing activities
Cash payments for the purchase of property,
plant and equipment (15,826) - -
Proceeds from the sale of property, plant and
equipment 244 - -
Cash acquired in merger 18,022 - -
Increase in held-to-maturity investments (4,000) - -
-------- -------- --------
Net cash used in
investing activities (1,560) - -
-------- -------- --------
(continued)
F-6
41
Clyde Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
(dollars in thousands)
1998 1997 1996
-------- -------- --------
Cash flows from financing activities
Cash paid to dissenting stockholders (4,453) - -
Proceeds from issuance of long-term
obligations 4,050 - -
Repayment of long-term obligations (175) - -
Dividends paid (1,967) (441) (359)
-------- -------- --------
Net cash used in
investing activities (2,545) (441) (359)
-------- -------- --------
Net increase (decrease) in cash 17,407 (13) (9)
Cash and cash equivalents at beginning of year 14 27 36
-------- -------- --------
Cash and cash equivalents at end of year $ 17,421 $ 14 $ 27
======== ======== ========
Supplement disclosures of cash flow information
Cash paid during the year for
Income taxes $ 6,128 $ 34 $ 40
Interest 899 -- --
Noncash investing activities
As explained in the notes to these financial statements, a merger was
consummated on June 30, 1998, where the following was recorded:
Assets
Current assets $ 62,972
Property, plant, equipment and land 71,349
Previous investment in subsidiaries (27,967)
Intangible assets 21,170
Other long-term assets 2,369
---------
129,893
Liabilities
Current Liabilities (12,829)
Long-term Liabilities (26,870)
---------
(39,699)
Common stock issued $ 90,194
========
Included in the current assets acquired is $18,022 of cash.
The accompanying notes are an integral part of these statements.
F-7
42
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
1. Financial statements presentation
The consolidated financial statements of Clyde Companies, Inc. and
Subsidiaries (the Company) include the accounts of Clyde Companies, Inc. a
holding company and its wholly-owned subsidiaries, Geneva Rock Products,
Inc. (Geneva), W.W. Clyde & Co. (W.W. Clyde), Utah Service, Inc. (Utah),
Beehive Insurance Agency, Inc. (Beehive), and J & J Building Supply, Inc.
(J & J), which is a wholly-owned subsidiary of Geneva Rock Products, Inc.
All significant intercompany transactions and balances have been
eliminated in consolidation.
2. Business activity
The Company operates in one business segment as a construction services
and materials provider. The activities of each operating subsidiary are
outlined below.
Geneva is engaged in the manufacturing and distribution of construction
materials consisting primarily of concrete, asphalt, sand, and gravel
products. Geneva has manufacturing facilities in Utah.
In 1996, Geneva formed J & J which acquired the assets of J & J Mill &
Lumber Supply Co. of St. George, Utah. Also during 1996, J & J acquired
the assets of Quality Concrete, a ready-mix concrete producer located in
Cedar City, Utah. J & J is headquartered in St. George, Utah and also has
operations in Cedar City, Utah and Mesquite, Nevada. J & J's primary
construction products consist of concrete, sand, gravel and concrete block
products, which it produces through its concrete block plant in St.
George, and other building materials, such as lumber, sheet rock, roofing,
and hardware products, which it sells through its stores in St. George and
Cedar City. Subsequent to December 31, 1998, Geneva dividended its
ownership in J&J to Clyde Companies, Inc.
In addition to manufacturing and distributing construction materials,
Geneva and J & J also perform certain construction services. These
services include excavation and light city construction of streets and
parking lots.
W.W. Clyde is involved in the construction of highways, bridges, dams, and
other types of construction work involving the moving of large quantities
of earth. Work is primarily performed in the private and governmental
sectors of Utah and Wyoming.
Utah is a retailer of lumber, hardware, home improvement and petroleum
products.
Beehive is an independent insurance agency selling all types of insurance
to the Company and the general public.
F-8
43
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
3. Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
4. Held-to-maturity investments
Investments are classified as held-to-maturity investments.
Held-to-maturity investments consist of certificates of deposit that
management has the positive intent and ability to hold to maturity. These
investments are carried at amortized cost, which approximate fair value.
Of the $4,000 of held-to-maturity investments at December 31, 1998,
approximately $750 are pledged as collateral on a construction project.
5. Inventories
Inventories consist of sand, gravel, cement, additives, equipment
maintenance parts, and purchased products. The sand and gravel as well as
block and masonry components of inventory are self-produced. All
inventories are valued at the lower of cost or market using the first-in,
first-out method.
6. Property, plant and equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs are charged to operations as incurred, whereas major
replacements and improvements are capitalized and subsequently
depreciated. Depreciation and amortization is provided on a declining
balance and straight-line basis over the lesser of the estimated useful
lives of the assets or the life of the respective lease, if applicable.
Depletion is provided on a unit of production basis.
The estimated useful lives used for depreciation and amortization are as
follows:
Years
-----
Buildings 10-33
Office equipment 5-10
Machinery and equipment 5-10
Transportation equipment 5-8
Batch plant 8-10
Wells 20
F-9
44
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
7. Intangible assets
Intangible assets at December 31, 1998 consisted primarily of goodwill
recorded in the merger explained in Note L. Goodwill is being amortized
over fifteen years. The accumulated amortization was $1,034 at December
31, 1998.
On an ongoing basis, management reviews the valuation and amortization of
intangible assets to determine possible impairment by comparing the
carrying value to the undiscounted estimated future cash flows of the
related assets. If the sum of the expected future cash flows is less than
the carrying amount of goodwill, an impairment loss is recognized. Any
necessary adjustment would reduce the goodwill and related assets to their
fair value. The resulting loss is reported as a component of operating
profit.
8. Revenue recognition
Product revenue is recognized as products are delivered. Contract revenue
is recognized on the percentage-of-completion method, measured by the
percentage of cost incurred to date to estimated total cost for each
contract.
As these long-term contracts extend over one or more years, revisions in
cost and profit estimates during the course of the work are reflected in
the accounting period in which the facts become known. At the time a loss
on a contract becomes known, the entire amount of the estimated ultimate
loss is recognized.
9. Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. An allowance against deferred tax
assets is recorded in whole or in part when it is more likely than not
that such tax benefits will not be realized.
10. Use of estimates
In preparing the Company's financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
11. Fair value of financial instruments
The carrying value of the Company's cash and cash equivalents, trade
receivables, notes payable and trade payables approximates their fair
values due to their short-term nature.
F-10
45
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
12. Earnings per share
Basic earnings per common share is based on the weighted average number of
common shares outstanding during each period. Diluted earnings per common
share is substantially the same as basic earnings per common share.
13. Comprehensive income
Effective for periods beginning after December 15, 1997, Statement of
Financial Accounting Standards No. 130 requires financial statements to
include details of comprehensive income that arise in the reporting
period. Comprehensive income is defined as all changes in equity during a
period except those resulting from investments by owners and distributions
to owners. Classifications within other comprehensive income include
foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities.
The Company's only comprehensive income item results from net losses
recognized as an additional pension liability not yet recognized as net
periodic pension cost.
NOTE B - CREDIT CONCENTRATION
The Company maintains cash balances at several financial institutions
located in the United States. Accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100. Uninsured balances
aggregate to approximately $9,713 at December 31, 1998. The Company also
maintains a cash balance with a brokerage firm. The money market carrying
value at December 31, 1998 is $205. The account is guaranteed by the
brokerage company with U.S. treasury bills, which are not insured.
Financial instruments which potentially subject the Company to credit risk
concentration consist primarily of trade accounts receivable. The Company
sells to customers in the construction industry in Utah, Nevada and
Wyoming. The Company performs ongoing credit evaluations of its customers.
Historically, the Company has not experienced significant losses on
receivables. The Company generally does not require collateral.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's
customer base.
F-11
46
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE C - INVENTORIES
Inventories consist of the following:
1998 1997
------- ------
Retail goods $ 3,893 $ --
Finished goods 2,916 --
Raw materials 4,056 --
Supplies 1,168 --
------- ------
$12,033 $ --
======= ======
NOTE D - CONTRACTS IN PROGRESS
Costs incurred to date, estimated earnings, and the related progress
billings to date on contracts in progress are as follows:
1998 1997
------- -------
Costs incurred to date $13,411 $ --
Estimated earnings 1,681 --
------- -------
Revenue recognized 15,092 --
Progress billings to date 13,963 --
------- -------
$ 1,129 $ --
======= =======
Included in the accompanying balance sheets under the following captions:
1998 1997
------- -----
Costs and estimated earnings in excess of
billings on contracts in progress $ 1,184 $ --
Billings in excess of costs and estimated
earnings on contracts in progress (55) --
------- -----
$ 1,129 $ --
======= =====
F-12
47
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE E - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
1998 1997
-------- -----
Depletable reserves $ 21,353 $ --
Buildings 12,356 --
Office equipment 1,520 --
Machinery and equipment 71,365 --
Transportation equipment 33,731 --
Batch plant and wells 11,338 --
-------- -----
$151,663 $ --
======== =====
NOTE F - ACCRUED EXPENSES
Accrued expenses consist of the following:
1998 1997
------ ----
Payroll, payroll taxes and benefits $1,643 $-
Interest 310 --
Sales taxes 464 --
Current portion of pension liability 650 --
Other 802 --
------ ----
$3,869 $ --
====== ====
NOTE G - LINES-OF-CREDIT
At December 31, 1998, the Company has $3,500 of noncollateralized
lines-of-credit with a financial institution. Interest is charged at LIBOR
plus 150 basis points. The lines-of-credit are scheduled for renewal on
May 30, 1999. At December 31, 1998, no amount was outstanding on these
lines-of-credit.
F-13
48
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE H - INCOME TAXES
Income tax expense (benefit) consists of the following:
1998 1997 1996
------- ---- ----
Current
Federal $ 4,395 $ 18 $ 14
State 661 24 19
------- ---- ----
5,056 42 33
Deferred
Federal (507) 767 809
State (78) 119 125
------- ---- ----
(585) 886 934
------- ---- ----
$ 4,471 $928 $967
======= ==== ====
The income tax provision reconciled to the tax computed at the statutory
Federal rate of 34 percent is:
1998 1997 1996
------- ----- -----
Income taxes at statutory rate $ 4,103 $ 971 $ 987
State income taxes, net of federal tax
benefit 398 94 95
Depletion (159) -- --
Nondeductible expenses 12 -- --
Dividends received deduction -- (132) (110)
All other, net 117 (5) (5)
------- ----- -----
$ 4,471 $ 928 $ 967
======= ===== =====
F-14
49
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE H - INCOME TAXES - CONTINUED
Deferred tax assets and liabilities consist of the following:
1998 1997
-------- --------
Current deferred tax assets (liabilities)
Allowance for uncollectible accounts $ 118 $ --
Accrued vacation 192 --
Inventory 2 --
Contract accounting (37) --
-------- --------
275 --
-------- --------
Long-term deferred tax assets (liabilities)
Property, plant and equipment temporary differences (1,485) --
Excess tax over book depreciation (3,570) --
Amortization of intangible assets 2 --
Investment in subsidiaries (18,801) (10,039)
Accrued pension cost 365 --
Dividends from cooperative (18) --
Purchase adjustment due to merger (7,320) --
-------- --------
$(30,827) $(10,039)
======== ========
NOTE I - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
1998 1997
------ ----
8.5% note payable to a partnership (the Company
was a partner in the partnership) with two
annual payments of $2,287 including interest;
matures October 2000; collateralized by the real
property which was purchased from the
partnership for $6,180 $4,050 $ --
Variable rate note payable to a concrete company,
interest at 2% below the commercial loan variable
rate (8.5% at December 31, 1998), monthly
payments of $16 plus interest; matures
October 1999; collateralized by real property 163 --
F-15
50
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE I - LONG TERM OBLIGATIONS - CONTINUED
1998 1997
------ ----
Noninterest note payable to two employees for
noncompetition and confidentiality agreements;
annual payments of $28 ($14 in 1998) including
interest; matures April 2000; not collateralized. 55 --
8.25% note payable for assumed debt in the purchase
of J & J with annual payments of $1,298 including
interest; matures June 2003; collateralized by
real property. 5,127 --
10% note payable to an individual with monthly
payments of $1, including interest; matures May
2002; collateralized by real property. 54 --
8.5% note payable to an individual with
semi-annual payments of $13, plus interest;
collateralized by real property. 113 --
Noninterest note payable to an individual due on
July 1, 1999; collateralized by real property. 47 --
8% obligations under capital leases for equipment;
$221 and $59 due in 1999 and 2000 respectively;
collateralized by equipment. 280 --
------ -----
9,889 --
Less current portion 3,303 --
------ -----
$6,586 $ --
====== =====
Future maturities of long-term obligations are as follows:
Year ending December 31,
------------------------
1999 $3,303
2000 3,181
2001 1,067
2002 1,142
2003 1,196
Thereafter --
------
$9,889
======
F-16
51
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE J - PENSION PLAN
The Company has a defined benefit pension plan covering all nonbargaining
employees who meet age and length of service requirements. The benefits
are based on years of service and the employee's compensation during the
last five years of employment. The Company's funding policy is to
contribute annually an amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to services to date but also for those benefits expected to be
earned in the future. Contributions vest to the employees at the end of
five years of service.
Year ended December 31,
----------------------
1998 1997
------- -------
Change in benefit obligation
Benefit obligation at beginning of year $ -- $ --
Benefit obligation assumed in merger 6,869 --
Service cost 309 --
Interest cost 204 --
Actuarial loss 533 --
Benefits paid (43) --
------- -------
Benefit obligation at end of year 7,872 --
------- -------
Change in plan assets
Fair value of plan assets at beginning of year -- --
Fair value of plan assets acquired in merger 4,126 --
Actual return on plan assets 127 --
Employer contribution 183 --
Benefits paid (43) --
------- -------
Fair value of plan assets at end of year 4,393 --
------- -------
Funded status at beginning of year -- --
Funded status assumed in merger (3,479) --
Unrecognized net actuarial loss 2,140 --
Unrecognized net obligation 115 --
Unrecognized prior service cost (84) --
------- -------
Accrued benefit costs $(1,308) $ --
======= =======
F-17
52
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE J - PENSION PLAN - CONTINUED
The components of net periodic pension cost are as follows:
Year ended December 31,
-----------------------------
1998 1997 1996
----- ----- ------
Service cost $ 309 $ -- $ --
Interest cost 204 -- --
Expected return on plan assets (132) -- --
Amortization of net obligations (8) -- --
Amortization of prior service cost 9 -- --
Recognized net actuarial gain (9) -- --
----- ----- ------
$ 373 $ -- $ --
===== ===== ======
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 6.5 percent for the
year ended December 31, 1998. The expected long-term rate of return was
7.5 percent for the year ended December 31, 1998. The expected average
percentage increase in compensation levels was 4 percent for the year
ended December 31, 1998.
NOTE K - COMMITMENTS AND CONTINGENCIES
1. Operating leases
The Company has entered into several long-term leases of real property and
has assumed leases on machinery and equipment and trucks and vehicles with
monthly payments ranging from $1 to $18 and expiring in various years
through 2005. These leases are classified as operating leases. The real
property leases have four, five year renewal options and options to cancel
without penalties provided that six month's notice is given. The terms of
the leases call for payments of property taxes and repairs and maintenance
expenditures to be made by the Company.
F-18
53
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE K - COMMITMENTS AND CONTINGENCIES - CONTINUED
The future minimum lease payments required under long-term, non-cancelable
leases are as follows:
Year ending
December 31, Total
------------ --------
1999 $ 4,266
2000 4,065
2001 2,694
2002 1,371
2003 397
Thereafter 7
-------
$12,800
=======
Rent expense for the year ended December 31, 1998, approximated $6,076
(none in 1997 and 1996).
2. Purchase commitments
The Company has committed, at December 31, 1998, to obtain through
operating leases machinery and equipment in the amount of $7,552 that will
be delivered in 1999.
3. Stock redemption plan
Commencing in 1999, the Company will make funds available for the
redemption of a limited number of shares of its Common Stock pursuant to
the Company's Stock Redemption Plan. The Stock Redemption Plan provides
for a Redemption Fund (a) for the years 1999 through 2003 in an amount
which is greater than or equal to 7% and less than or equal to 15% of the
net earnings of the Company (after taxes) for the prior year and (b) for
the years 2004 and thereafter an amount which is greater than or equal to
5% and less than or equal to 10% of net earnings of the Company (after
taxes) for the prior year.
4. Contingencies
The Company is from time to time involved in litigation in the normal
course of business. In the opinion of management, at December 31, 1998,
there was no contingency that would have a material impact on the
financial condition of the Company. See Note L for a discussion on the
litigation with the dissenting stockholders.
F-19
54
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE L - AGREEMENT AND PLAN OF MERGER
The merger ("Merger") of W.W. Clyde, Geneva, Utah and Beehive (the
"Operating Companies") with and into wholly-owned subsidiaries of the
Company was consummated as of June 30, 1998, and in connection therewith,
4,634,791 shares of common stock of the Company were issued. Each of the
Operating Companies was affiliated with the Company as a result of common
stockholders, common directors, and the Company's minority equity
investment in each entity. Each Operating Company now is a wholly-owned
subsidiary of the Company.
The Merger was effected by exchanging shares of the Company's common stock
for shares of common stock of each Operating Company held by their
respective stockholders. The Merger was accounted for using the "purchase"
method of accounting. The exchange ratios used in determining the number
of shares to be exchanged were based upon independent valuations of each
Operating Company.
The purchase method of accounting requires consolidated results of
operations to be reflected only from the date of Merger forward. Because
the Merger was consummated on June 30, 1998, consolidated operating
results are included only in the consolidated statements of earnings for
the six months ended December 31, 1998. Prior to June 30, 1998, the
Company recorded only its equity in the net earnings of the Operating
Companies.
The following pro forma consolidated data for the years ended December 31,
1998 and 1997 presents the results of operations of the Company as if the
Operating Companies had merged on January 1, 1997 (in thousands except per
share data). This data does not purport to be indicative of the results of
operations of the Company that might have occurred nor which might occur
in the future.
Year Year
Ended Ended
December 31, December 31,
1998 1997
------------ ------------
Pro forma net revenues $175,378 $158,473
Pro forma net earnings 7,824 5,899
Pro forma earnings per common
share - basic 1.19 0.90
The property, plant and equipment acquired by the Company in the Merger
will be depreciated over periods ranging from 3 to 12 years, and the
intangible assets are to be amortized over 15 years.
In connection with the Merger, 18 stockholders of the Operating Companies
(the "Dissenting Stockholders"), who collectively own the equivalent of
419,188 shares of common stock of the Company, gave notice that they
intend to exercise their statutory dissenters' rights and seek payment of
the fair value of their shares. Following the consummation of the Merger,
certain of the Dissenting Stockholders were paid an
F-20
55
Clyde Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(dollars in thousands)
NOTE L - AGREEMENT AND PLAN OF MERGER - CONTINUED
aggregate of $4,453 for their shares, which is the amount management of
the Operating Companies determined to be the fair value of the shares held
by the Dissenting Stockholders immediately before the effective date of
the Merger.
After receiving payment for their shares in the Operating Companies, 16 of
the Dissenting Stockholders, who collectively own the equivalent of
243,223 shares of common stock of the Company, notified the Operating
Companies that, in their opinion, the fair value of their shares on the
date of the Merger was greater than the amounts which the Operating
Companies had paid to them for their shares, and they demanded that the
Operating Companies pay them an additional aggregate amount of
approximately $2,362, plus interest. This amount is not reflected in the
consolidated financial statements of the Company.
The Operating Companies believe that the amounts paid to those Dissenting
Stockholders that properly exercised their dissenters rights represented
the fair value of their shares immediately before the effective date of
the Merger. Accordingly, on November 3, 1998 the Operating Companies filed
a petition with the Third Judicial District Court of Salt Lake County to
request the Court to determine the fair value of the shares of the
Operating Companies held by the Dissenting Stockholders who have demanded
payment of additional amounts for their shares. The Dissenting
Stockholders filed a Motion for Partial Summary Judgment, and on March 11,
1999, the Court granted the motion and ruled, among other things, that in
determining the fair value of the shares held by the Dissenting
Stockholders, the Operating Companies may not apply a minority discount.
The Operating Companies have not determined whether they will appeal this
ruling. While the Company believes that the amounts paid to the Dissenting
Stockholders represented the fair value of the shares they held in the
Operating Companies immediately before the effective date of the Merger,
the Company is not able to predict the outcome of these proceedings, and
there can be no assurance that the Operating Companies will not be
required to pay additional amounts to the Dissenting Stockholders. If any
amounts are paid, interest paid will impact the results of operations, and
principal payments will be a reduction of equity.
F-21
56
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------ -------
2.2 Amended and Restated Agreement and Plan of Merger dated as of November 13,
1997 by and among CCI, W.W. Clyde Reorganization Corporation, Clyde, Geneva
Rock Reorganization Corporation, Geneva Rock, Utah Service Reorganization
Corporation, Utah Service, Beehive Insurance Reorganization Corporation and
Beehive Insurance*
3.1 Articles of Incorporation of the Company*
3.2 Bylaws of the Company*
4.2 Form of the Company's Common Stock Certificate*
10.1 Voting Agreement dated November 14, 1997 among the persons named on Schedule 1
thereto*
10.2 Stock Redemption Plan adopted by the Board of Directors of the Company as of
November 12, 1997*
10.3 Employment Agreement between the Company and Richard C. Clyde*
[Geneva Rock Material Contracts: Exhibits 10.4-10.10C]
10.4 Promissory Note dated June 28, 1996 in favor of J&J Mill and Lumber Company*
10.5 Promissory Note dated October 18, 1994 in favor of Ideal Concrete Corporation*
10.10B Purchase Order dated May 29, 1997 from Jacobsen, Okland Joint Venture
regarding Little America Grand Hotel project*
10.10C Material Contract dated September 12, 1997 between Geneva Rock and Wasatch
Constructors*
[Clyde Material Contracts: Exhibits 10.11-10.17]
10.11 Contract dated May 13, 1998, between Clyde and Draper City
10.12 Contract No. ES-01 dated July 21, 1997 between Clyde and Kennecott Utah Copper
Corporation*
10.13 Agreement dated September 12, 1997 between Clyde and Sun River St. George
Development, L.C.*
57
10.28 Retirement Plan for Employees of Clyde, Geneva Rock and Beehive Insurance*
21 Subsidiaries of the Registrant.
27.1 Financial Data Schedule
99.2 Valuation report of Houlihan Valuation Advisors with respect to Clyde*
99.3 Valuation report of Houlihan Valuation Advisors with respect to Geneva Rock*
99.4 Valuation report of Houlihan Valuation Advisors with respect to Utah Service*
99.5 Valuation report of Houlihan Valuation Advisors with respect to Beehive
Insurance*
* Incorporated by reference to Registrant's Registration Statement dated May 13,
1998.