UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number
June 30, 2001 000-29619
KIEWIT MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 47-0819021
(State of Incorporation) (I.R.S. Employer Identification No.)
Kiewit Plaza, Omaha Nebraska 68131
(Address of principal executive offices) (Zip Code)
(402) 536-3661
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of each of the registrant's classes of
common stock as of August 13, 2001:
Title of Class Shares Outstanding
Common Stock, $0.01 par value 36,278,239
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Table of Contents
Page
- -----------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
Consolidated Condensed Balance Sheets as of June 30, 2001 and
December 31, 2000 1
Consolidated Condensed Statements of Earnings for the three
and six months ended June 30, 2001 and 2000 2
Consolidated Condensed Statements of Cash Flows for the six
months ended June 30, 2001 and 2000 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk. 15
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 6. Exhibits and Reports on Form 8-K. 16
Signatures 18
Index to Exhibits 19
- -----------------------------------------------------------------------------
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
June 30, December 31,
2001 2000
(in thousands, except share data) (unaudited)
- -----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 75,713 $ 68,468
Receivables, less allowance of
$1,753 and $1,424 72,068 67,556
Inventories 14,904 14,126
Deferred income taxes 4,026 3,625
Other 4,772 3,176
--------- ---------
Total current assets 171,483 156,951
Property, plant and equipment,
less accumulated depreciation
of $117,471 and $111,982 142,395 139,005
Goodwill, less accumulated amortization
Of $8,710 and $7,413 57,627 58,924
Intangible and other assets 20,200 20,234
--------- ---------
Total assets $ 391,705 $ 375,114
========= =========
Liabilities and Redeemable Common Stock
Current liabilities:
Accounts payable $ 29,174 $ 26,632
Accounts payable with affiliates 13,701 14,908
--------- ---------
Total accounts payable 42,875 41,540
Current portion of long-term debt 1,349 1,112
Accrued payroll and payroll taxes 6,312 6,824
Accrued insurance costs 5,832 5,293
Income taxes payable 4,611 1,964
Other 3,061 4,112
--------- --------
Total current liabilities 64,040 60,845
Long-term debt, less current portion 2,083 3,779
Convertible debentures 8,054 8,075
Deferred income taxes 13,789 12,528
Other liabilities 404 789
Minority interest 1,145 1,087
--------- --------
Total liabilities 89,515 87,103
--------- --------
Preferred Stock, par $.01; 10 million shares
authorized, no shares issued - -
Redeemable Common Stock ($284 million
aggregate redemption value):
Common Stock, par $.01; and 100 million shares
authorized, 36,191,599 and 36,463,482 issued
and outstanding 362 365
Additional paid-in capital 175,357 177,490
Retained earnings 126,471 110,156
------- -------
Total redeemable common stock 302,190 288,011
------- -------
Total liabilities and redeemable common stock $391,705 $375,114
======== ========
- -----------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Consolidated Condensed Statement of Earnings
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------
Revenue $ 135,611 $ 123,343 $ 247,503 $ 218,854
Revenue from affiliates 2,221 3,443 3,398 6,465
--------- --------- --------- ---------
Total revenue 137,832 126,786 250,901 225,319
Cost of revenue (110,007) (105,351) (202,711) (188,456)
Depreciation, depletion
and amortization (5,812) (5,003) (11,535) (9,716)
---------- ---------- ---------- ---------
Gross profit 22,013 16,432 36,655 27,147
General and administrative
expenses (6,794) (5,390) (13,228) (11,842)
Gain on sale of property,
plant and equipment 1,222 339 1,782 437
--------- --------- --------- ---------
Operating earnings 16,441 11,381 25,209 15,742
--------- --------- --------- ---------
Other income (expense):
Investment income 1,216 1,258 2,455 2,706
Interest expense (216) (551) (471) (1,282)
Other, net 91 34 97 69
--------- --------- --------- ---------
Total other income (expense) 1,091 741 2,081 1,493
--------- --------- --------- ---------
Earnings before income taxes and
minority interest 17,532 12,122 27,290 17,235
Minority interest in net earnings
of subsidiaries (36) 59 (59) 15
Provision for income taxes (7,015) (4,831) (10,916) (6,868)
--------- --------- --------- ---------
Net earnings $ 10,481 $ 7,350 $ 16,315 $ 10,382
========= ========= ========= ========
Net earnings per share:
Basic $ .29 $ .20 $ .45 $ .29
========= ========= ========= ========
Diluted $ .28 $ .20 $ .44 $ .29
========= ========= ========= ========
- ----------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
----------------------------
(in thousands) 2001 2000
- ----------------------------------------------------------------------------
Cash flows from operations:
Net cash provided by operations $ 29,167 $ 26,371
---------- ----------
Cash flows from investing activities:
Sales of marketable securities - 2,500
Short-term note receivable (5,824) -
Proceeds from sales of property,
plant and equipment 5,694 697
Purchases of plant and equipment (10,091) (20,882)
Investments in land and mineral properties (6,539) -
Acquisitions (750) (33,515)
---------- ----------
Net cash used in investing activities (17,510) (51,200)
---------- ----------
Cash flows from financing activities:
Payments on long-term debt (2,275) (275)
Repurchases of common stock (2,137) -
Contributions from former parent - 202
---------- ----------
Net cash used in financing activities (4,412) (73)
---------- ----------
Net increase (decrease) in cash and cash equivalents 7,245 (24,902)
Cash and cash equivalents at beginning of period 68,468 72,368
---------- ----------
Cash and cash equivalents at end of period $ 75,713 $ 47,466
========== ==========
- ----------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Organization:
Kiewit Materials Company ("KMC") was formed on February 2, 1999 as a
wholly owned subsidiary of Peter Kiewit Sons', Inc. ("PKS"). The
consolidated condensed financial statements include the accounts of KMC and
its subsidiaries (collectively, the "Company"). KMC's subsidiaries represent
several affiliated operating corporations under common ownership, each of
which is engaged in an aspect of the materials business, that were combined
(the "Combination") on March 1, 1999 through a series of non-monetary
contributions from PKS. On September 30, 2000, KMC became an independent
company when PKS spun off its materials businesses in a tax-free transaction
(the "Spin-off").
The Combination has been accounted for at historical cost in a manner
similar to a pooling of interests. All significant intercompany transactions
have been eliminated in consolidation.
2. Basis of Presentation:
Subsequent to the Spin-off, the consolidated condensed financial
statements include the accounts and operations of the Company on a stand-
alone basis. PKS and the Company have entered into a number of agreements to
facilitate the transition of the Company to an independent business
enterprise.
Prior to the Spin-off, the consolidated condensed financial statements
reflect the assets, liabilities, revenues and expenses that were directly
related to the Company as they were operated within PKS. Where assets and
liabilities were not specifically identifiable to any particular business of
PKS, only those assets and liabilities transferred to the Company are
included in the Company's consolidated balance sheets. Regardless of the
allocation of these assets and liabilities, however, the Company's
consolidated condensed statements of earnings include all of the related
costs of doing business including an allocation of certain general corporate
expenses of PKS which were not directly related to the Company including
costs for information technology, finance, legal, and corporate executive.
These allocations were based on a variety of factors including, for example,
personnel, space, time and effort and sales volume. Management believes
these allocations were made on a reasonable basis.
The financial information included herein for periods prior to the Spin-
off may not necessarily be indicative of the financial position, results of
operations or cash flows of the Company if it had been a separate,
independent company during the periods prior to the Spin-off.
The consolidated balance sheet of the Company at December 31, 2000 has
been condensed from the Company's audited balance sheet as of that date. All
other financial statements contained herein are unaudited and, in the opinion
of management, contain all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of financial position and results
of operations for the periods presented. The consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10K filed with the Securities and Exchange Commission on March
29, 2001. When appropriate, items within the consolidated condensed
financial statements have been reclassed in the previous periods to conform
to current year presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The results of operations for the six months ended June 30, 2001 are not
necessarily indicative of the results to be expected for the full year.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share data)
3. Separation of KMC:
On September 30, 2000, PKS management separated PKS's construction
business and materials business into two separate, independent companies by
distributing shares of common stock of KMC it then held as a dividend on a
pro rata basis to PKS stockholders in the Spin-off. PKS stockholders
received one share of KMC common stock for each share of PKS common stock
they held on the record date.
In connection with the Spin-off, KMC and PKS entered into various
agreements including a Separation Agreement and a Tax Sharing Agreement.
The Separation Agreement provides for the allocation of certain risks
and responsibilities between KMC and PKS and for cross-indemnifications that
are intended to allocate financial responsibility to PKS for liabilities
arising out of the construction business and to allocate to KMC liabilities
arising out of the materials business.
Under the Tax Sharing Agreement, with respect to periods, or portions
thereof, ending on or before the Spin-off, KMC and PKS generally will be
responsible for paying the taxes relating to such returns, including any
subsequent adjustments resulting from the redetermination of such tax
liabilities by the applicable taxing authorities, that are allocable to the
materials businesses and construction businesses, respectively. The Tax
Sharing Agreement also provides that KMC and PKS will indemnify the other
from certain taxes and expenses that would be assessed if the Spin-off were
determined to be taxable, but solely to the extent that such determination
arose out of the breach by KMC or PKS, respectively, of certain
representations made to the Internal Revenue Service in connection with the
private letter ruling issued with respect to the Spin-off.
4. Earnings Per Share:
Basic earnings per share have been computed using the weighted average
number of shares outstanding during each period. Diluted earnings per share
gives effect to convertible debentures considered to be dilutive common stock
equivalents. The potentially dilutive convertible debentures are calculated
in accordance with the "if converted" method. This method assumes that the
after-tax interest expense associated with the debentures is an addition to
income and the debentures are converted into equity with the resulting common
shares being aggregated with the weighted average shares outstanding.
Earnings per share, as presented in the Consolidated Condensed
Statements of Earnings was calculated as if the 36,343,869 common shares
issued in connection with the Spin-off were outstanding for all periods prior
to the Spin-off.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
- -----------------------------------------------------------------------------
Net earnings available to
common stockholders $ 10,481 $ 7,350 $ 16,315 $ 10,382
Interest expense, net of tax
effect, associated with
convertible debentures 93 - 184 -
--------- -------- --------- ---------
Net earnings for diluted shares$ 10,574 $ 7,350 $ 16,499 $ 10,032
========= ======== ========= =========
Total number of weighted
average shares outstanding
used to compute basic
earnings per share 36,248 36,344 36,302 36,344
Additional dilutive shares
assuming conversion of
convertible debentures 1,158 - 1,158 -
--------- -------- --------- ---------
Total number of shares used
to compute diluted earnings
per share 37,406 36,344 37,460 36,344
========= ======== ========= =========
Net Earnings per share:
Basic $ .29 $ .20 $ .45 $ .29
========= ======== ========= =========
Diluted $ .28 $ .20 $ .44 $ .29
========= ======== ========= =========
5. Inventories:
Inventories consist of the following:
June 30, December 31,
2001 2000
---------- ------------
Raw materials $ 13,293 $ 12,147
Other 1,611 1,979
---------- ------------
Total inventories $ 14,904 $ 14,126
========== ============
- -------------------------------------------------------------------------
6. Intangible and Other Assets
Intangible and other assets consist of the following:
June 30, December 31,
2001 2000
---------- ------------
Intangible assets, net of
accumulated amortization
of $1,708 and $1,363 $ 15,110 $ 15,454
Land option 2,000 2,000
Notes receivable 2,713 2,403
Other 377 377
---------- ------------
Total intangible and other assets $ 20,200 $ 20,234
========== ============
- -------------------------------------------------------------------------
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share data)
7. Comprehensive Income:
Comprehensive income includes net earnings and unrealized gains (losses)
on securities.
Comprehensive income for the three and six months ended June 30, 2001
and 2000 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
- ----------------------------------------------------------------------------
Net earnings $ 10,481 $ 7,350 $ 16,315 $ 10,382
Other comprehensive
income (loss), before tax:
Unrealized losses
arising during period - (1) - (1)
--------- --------- ---------- ---------
Comprehensive income $ 10,481 $ 7,349 $ 16,315 $ 10,381
========= ========= ========== =========
8. Segment Reporting:
The Company has four operating segments: Arizona Operations, Pacific
Northwest Operations, Northern California Operations and Quarries Operations,
which represent separately managed strategic business units that have
different marketing strategies. Arizona Operations derives its revenue from
the sale of aggregates, ready-mix, asphalt and paving operations. The
Pacific Northwest Operations and Northern California Operations derive their
revenues from the sale of aggregates, ready-mix and asphalt. Quarries
Operations derives its revenue from the sale of aggregates. Arizona and
Pacific Northwest Operations met the requirements of quantitative thresholds
and are being disclosed as reportable operating segments. Other Operations
includes the Northern California and Quarries Operations. Corporate
Operations include corporate overhead, amortization and management fees for
corporate overhead, which collectively are not reported to the chief
operating decision maker by segment.
The Company evaluates operating performance based on profit or loss from
operations before the following items: goodwill amortization related to
acquisitions, interest income, interest expense, management fees for
corporate overhead and income taxes.
Due to geographic locations, no intersegment sales or transfers are made
between the segments. Segment asset information has not been presented as it
is not reported to or reviewed by the chief operating decision maker.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share data)
Pacific
Arizona Northwest Other Corporate
Operations Operations Operations Operations Total
------------------------------------------------------
Three months ended
June 30, 2001
- ------------------
Revenues $ 109,871 $ 11,740 $ 16,221 $ - $ 137,832
Depreciation,
depletion and
amortization $ 2,667 $ 1,295 $ 1,029 $ 821 $ 5,812
Operating income
(loss) $ 14,570 $ 2,420 $ 4,553 $ (5,102) $ 16,441
Three months ended
June 30, 2000
- ------------------
Revenues $ 100,350 $ 14,091 $ 12,345 $ - $ 126,786
Depreciation,
depletion and
amortization $ 898 $ 1,057 $ 2,422 $ 626 $ 5,003
Operating income
(loss) $ 9,040 $ 1,975 $ 3,784 $ (3,418) $ 11,381
Pacific
Arizona Northwest Other Corporate
Operations Operations Operations Operations Total
------------------------------------------------------
Six months ended
June 30, 2001
- ------------------
Revenues $ 202,482 $ 21,728 $ 26,691 $ - $ 250,901
Depreciation,
depletion and
amortization $ 5,214 $ 2,612 $ 2,067 $ 1,642 $ 11,535
Operating income
(loss) $ 23,925 $ 2,408 $ 5,875 $ (6,999) $ 25,209
Six months ended
June 30, 2000
- ------------------
Revenues $ 180,563 $ 24,277 $ 20,479 $ - $ 225,319
Depreciation,
depletion and
amortization $ 3,146 $ 2,323 $ 3,024 $ 1,223 $ 9,716
Operating income
(loss) $ 13,514 $ 2,200 $ 5,291 $ (5,263) $ 15,742
The Company's revenues by product for the three and six months ended
June 30, 2001 and 2000 are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------
2001 2000 2001 2000
--------------------------------------------
Aggregates (sand, gravel,
crushed stone and railroad
ballast) $ 31,585 $ 30,244 $ 56,363 $ 51,969
Asphalt 26,465 19,755 43,761 32,521
Ready mix concrete 75,799 74,397 142,858 135,689
Other 3,983 2,390 7,919 5,140
--------- --------- --------- ---------
Total revenue $ 137,832 $ 126,786 $ 250,901 $ 225,319
========= ========= ========= =========
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share data)
9. Acquisitions and Dispositions:
On January 3, 2000, the Company acquired 100% of the outstanding common
stock and related assets of Solano Concrete Co., Inc., a materials operation
operating in the Northern California area, for $30,880. The acquisition was
accounted for by the purchase method of accounting. Identifiable intangible
assets related to this purchase of $15,448 are being amortized over their
useful life of 27.5 years. There was no goodwill related to this
transaction.
On August 4, 2000, the Company acquired substantially all of the assets
of Fort Calhoun Stone Company, a limestone quarry located in Washington
County, Nebraska, for $41,753. The acquisition was accounted for by the
purchase method of accounting. The excess of aggregate purchase price over
fair value of identifiable assets and liabilities acquired of $30,836 was
recognized as goodwill and is being amortized over 40 years.
The following pro forma financial information assumes the aforementioned
acquisitions occurred at the beginning of 2000. These results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made at the beginning of
2000, or the results which may occur in the future:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------
2001 2000 2001 2000
--------------------------------------------
Revenue $ 137,832 $ 129,522 $ 250,901 $ 229,666
Net earnings $ 10,481 $ 8,042 $ 16,315 $ 11,172
Net earnings per share:
Basic $ .29 $ .22 $ .45 $ .31
Diluted $ .28 $ .22 $ .44 $ .31
On June 22, 2001, the Company acquired the assets of an operation in
Arizona. This acquisition was accounted for by the purchase method and,
accordingly, results of operations for the acquired business have been
included in the consolidated statements of income from the date of
acquisition. Pro forma financial information is not presented for the
acquisition because the impact is not material to the results of operations.
The initial purchase price was $1,000 of which $750 has been paid.
Contingent consideration of $1,500 may be paid in August 2001 based on the
seller obtaining permits and zoning.
In April 2001, the Company sold land, which resulted in the recognition
of a gain of $882. The Company also purchased land for $947 in cash and
issued a note with a face value of $797, due August 2003. The note has no
stated interest rate and is collateralized by land.
On June 25, 2001, the Company paid $5,592 for land and mineral property
and $300 for assets unrelated to the materials businesses. In connection
with this purchase, the Company issued a $5,824 short-term note, which is
reflected as accounts receivable in the financial statements at June 30,
2001. Later this year, the Company anticipates receiving full payment on the
note and utilizing the proceeds to purchase additional land and mineral
property for $5,824.
KIEWIT MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share data)
10. Other Matters:
The Company is involved in various lawsuits and claims incidental to its
business. Management believes that any resulting liability, beyond that
provided, should not materially affect the Company's future financial
position, results of operations or cash flows.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This document contains forward-looking statements and information
that are based on the beliefs of management as well as assumptions made by
and information currently available to the Company. When used in this
document, the words "anticipate," "believe," "estimate," "expect" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to certain
risks or uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this document.
The following discussion is based upon and should be read in
conjunction with our Consolidated Condensed Financial Statements, including
the notes thereto, included elsewhere in this quarterly report on Form 10-Q.
On September 30, 2000, Peter Kiewit Sons', Inc. ("PKS") management
separated PKS's construction business and materials business into two
separate, independent companies by distributing shares of common stock of
Kiewit Materials Company ("KMC") to PKS stockholders in a tax-free
transaction (the "Spin-off"). Prior to the completion of the share exchange,
the debenture exchange offer and the Spin-off described below, KMC was a
wholly owned subsidiary of PKS.
On August 15, 2000, PKS commenced a share exchange in which it
offered PKS stockholders who were KMC employees the opportunity to exchange
their shares of PKS common stock for shares of KMC common stock with an equal
aggregate formula price. The share exchange expired September 14, 2000. In
the share exchange, KMC employees collectively exchanged 1,081,226 shares of
PKS common stock, representing 100% of the shares of PKS common stock
collectively owned by them and 3.24% of the total issued and outstanding PKS
common stock on September 14, 2000. For each share of PKS common stock
tendered, KMC employees received 2.85 shares of KMC common stock. KMC
employees who participated in the share exchange collectively received
3,081,646 shares of KMC common stock, representing 8.48% of the issued and
outstanding KMC common stock on September 15, 2000.
On August 15, 2000, PKS also commenced a debenture exchange offer in
which it offered the holders of its outstanding convertible debentures the
opportunity to exchange their debentures for (1) KMC debentures convertible
into shares of KMC common stock, or (2) both shares of KMC common stock and
new reduced principal amount PKS debentures convertible into shares of PKS
common stock. In the debenture exchange offer, PKS debentureholders
collectively exchanged $13,095,000 principal amount original PKS debentures
for (1) $670,000 aggregate principal amount KMC debentures, and (2) both
973,383 shares of KMC common stock and $5,475,045 principal amount new PKS
debentures.
On September 30, 2000, PKS distributed the shares of KMC common stock
it then held as a dividend on a pro rata basis to holders of PKS common stock
in the Spin-off. The record date for the Spin-off dividend was the close of
business on September 15, 2000. PKS stockholders received one share of KMC
common stock for each share of PKS common stock they held on the record date.
Upon completion of the Spin-off, PKS no longer had any interest in
its materials operations. The materials operations are owned and operated
solely by KMC. The Spin-off has not and is not expected to adversely impact
KMC's equity, revenue or net income. Current cash flows are expected to be
sufficient to fund current operations. KMC's ability to execute its future
growth strategy will, however, be dependent upon its ability to continue to
obtain borrowings on terms deemed appropriate.
Results of Operations - Second Quarter 2001 vs. Second Quarter 2000
Revenue. Revenue increased $11 million to $138 million for the
second quarter of 2001 as compared to $127 million in the same period of
2000. Revenue from Arizona Operations increased $10 million, primarily due
to higher unit sales of aggregates, ready mix concrete and asphalt. This
segment also benefited from higher average asphalt selling prices as they
become more selective in supplying the market in an effort to improve gross
profit margins. Revenue from Pacific Northwest Operations decreased $2
million between the two periods primarily resulting from a 9% decline in
aggregate unit sales volumes. Other Operations increased $3 million as
revenue produced from 2000 acquisitions compensated for a 25% decrease in
aggregate unit sales for operations, which existed during both periods.
Gross Profit. Gross profit margins increased to 16% in the second
quarter of 2001 from 13% in the second quarter of 2000. Gross profit for
Arizona Operations increased largely due to improved asphalt margins as a
result of higher average selling prices. Gross profit margins for both
Pacific Northwest Operations and Other Operations declined. Pacific
Northwest Operations and Other Operations margins were adversely affected by
the decrease in aggregate unit sales.
General and Administrative. General and administrative expenses
increased $1 million in the second quarter of 2001 when compared to the
second quarter of 2000. Cost efficiency measures at the Arizona Operations
and Pacific Northwest Operations were responsible for decreases at these
segments. Other Operations expenses increased to support an expanded
operating area as a result of an acquisition in the second half of 2000 at
the Northern California Operations. Corporate Operations experienced an
increase due to ongoing costs related to becoming an independent company in
September 2000.
Gain on Sale of Property, Plant and Equipment. Gain on sale of
property, plant and equipment increased $1 million in the second quarter of
2001 when compared to the second quarter of 2000 due to the gain realized on
the sale of land at the Pacific Northwest Operations.
Other Income and Expenses. Other income increased $0.4 million in
the second quarter of 2001 when compared to the same period in 2000. The
increase was attributable to higher invested cash balances in 2001 that
generated greater investment income and to the payoff of long-term debt,
which decreased interest expense.
Provision for Income Taxes. The income tax rates for the second
quarter of 2001 and 2000 were 40%. Income taxes differ from the federal
statutory rate primarily because of state income taxes and percentage
depletion.
Results of Operations - Six Months 2001 vs. Six Months 2000
Revenue. Revenue increased $26 million to $251 million for the first
six months of 2001 as compared to $225 million in the same period of 2000.
Revenue from Arizona Operations increased $22 million, primarily due to
higher unit sales of aggregates, ready mix concrete and asphalt. This
segment also benefited from higher average asphalt selling prices as they
become more selective in supplying the market in an effort to improve gross
profit margins. Revenue from Pacific Northwest Operations decreased $2
million between the two periods resulting from a 18% decline in aggregate
unit sales volumes, which was partially offset by 8% and 3% increases in
asphalt and ready-mix unit sales volumes, respectively. Other Operations
increased $6 million as revenue produced from 2000 acquisitions compensated
for a 38% decrease in aggregate unit sales for operations, which existed
during both periods.
Gross Profit. Gross profit margins increased to 15% in the first six
months of 2001 from 12% in the first six months of 2000. Gross profit for
Arizona Operations increased largely due to improved asphalt margins as a
result of higher average selling prices. Gross profit margins for both
Pacific Northwest Operations and Other Operations declined. Pacific
Northwest Operations and Other Operations margins were adversely affected by
the decrease in aggregate unit sales.
General and Administrative. General and administrative expenses
increased $1 million in the first six months of 2001 when compared to the
first six months of 2000. Cost efficiency measures at the Arizona Operations
and Pacific Northwest Operations were responsible for decreases at these
segments. Other Operations expenses increased to support an expanded
operating area as a result of an acquisition in the second half of 2000 at
the Northern California Operations. Corporate Operations experienced an
increase due to ongoing costs related to becoming an independent company in
September 2000.
Gain on Sale of Property, Plant and Equipment. Gain on sale of
property, plant and equipment increased $1 million in the first six months of
2001 when compared to the first six months of 2000 due to the gain realized
on the sale of land at the Pacific Northwest Operations.
Other Income and Expenses. Other income increased $0.6 million in
the first six months of 2001 when compared to the same period in 2000. The
increase was attributable to higher invested cash balances in 2001 that
generated greater investment income and to the payoff of long-term debt,
which decreased interest expense.
Provision for Income Taxes. The income tax rates for the first six
months of 2001 and 2000 were 40%. Income taxes differ from the federal
statutory rate primarily because of state income taxes and percentage
depletion.
Financial Condition - June 30, 2001
- --------------------------------------------
Cash and cash equivalents increased $7 million to $75 million at June
30, 2001 from $68 million at December 31, 2000. The increase reflects cash
provided from operations of $29 million less $18 million used in investing
activities and $4 million used in financing activities.
Net cash provided by operations amounted to $29 million compared to
$26 million for the same period in 2000. Increased cash provided of $6
million from higher net income and $2 million from greater depreciation,
depletion and amortization were offset by an overall increase in working
capital requirements.
Net cash used in investing activities in the first six months of 2001
decreased $33 million as compared to the first six months of 2000. A $32
million decrease in acquisitions, $4 million decrease in purchases of plant
and equipment and investments in land and mineral properties and an increase
in proceeds from sales of property, plant and equipment of $5 million were
offset by a $2 million decrease in proceeds from the sales of marketable
securities and a $6 million increase in accounts receivable due to the
issuance of a short-term note receivable in connection with a land and
mineral property purchase.
Net cash used in financing activities increased $4 million compared
to the first quarter of 2000. Repurchases of common stock of $2 million and
$2 million of payments on long-term debt were responsible for the increase.
KMC believes that its current cash position together with anticipated
cash flows from operations will be sufficient for the working capital and
equipment replacement requirements of KMC for the next twelve months. KMC
does not have any established credit facilities. At June 30, 2001, KMC had
$11 million of notes payable and convertible debentures payable. Further,
KMC does not currently intend to pay any cash dividends.
KMC intends to pursue a business plan to grow through acquisitions
that will require capital that is in addition to ongoing operational
requirements. While historically KMC has received contributions from PKS to
fund a portion of acquisitions, KMC believes that cash on hand, cash
generated by operations and the ability to borrow funds will allow KMC to
make investments in connection with future acquisitions. Ultimate growth
strategy capital requirements will largely depend on the number of
acquisition candidates, the cost of the acquisitions, and the level of
success KMC has in completing these transactions. Should KMC be unable to
obtain any necessary funds from borrowings on terms deemed appropriate, KMC
would be limited in its ability to fully execute its growth strategy. While
KMC believes its growth strategy to be important in enhancing shareholder
value, KMC does not believe that the inability to fully pursue it would have
a material adverse impact on current operations, financial condition or
liquidity.
Recent Accounting Pronouncements.
In September 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which established accounting and reporting standards for derivative
instruments and for hedging activities. This statement as amended, is
effective for all fiscal years beginning after September 15, 2000. The
adoption of this statement on January 1, 2001 had no impact on our financial
statements as KMC has no derivative instruments or hedging activities.
In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statements of Financial Accounting Standards No. 141 (SFAS 141),
"Business Combinations," and No. 142 (SFAS 142), "Goodwill and Other
Intangible Assets."
SFAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB
16), "Business Combinations." The most significant changes made by SFAS 141
are: (1) requiring that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001, (2) establishing
specific criteria for the recognition of intangible assets separately from
goodwill, and (3) requiring unallocated negative goodwill to be written off
immediately as an extraordinary gain (instead of being deferred and
amortized).
SFAS 142 supercedes APB 17, "Intangible Assets." SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to
their acquisition (i.e., the post-acquisition accounting). The provisions of
SFAS 142 will be effective for fiscal years beginning after December 15,
2001. The most significant changes made by SFAS 142 are: (1) goodwill and
indefinite-lived intangible assets will no longer be amortized, (2) goodwill
will be tested for impairment at least annually at the reporting unit level,
(3) intangible assets deemed to have an indefinite life will be tested for
impairment at least annually, and (4) the amortization period of intangible
assets with finite lives will no longer be limited to forty years.
KMC has not yet determined the effect the adoption of SFAS No. 141
and 142 will have on our consolidated financial position or results of
operations.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
KMC does not believe that its business is subject to significant
market risks arising from interest rates, foreign exchange rates or equity
prices.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of KMC was held on June 15, 2001.
The holders of 26,999,001 of the 36,279,655 issued and outstanding shares of
$0.01 par value common stock of KMC ("Common Stock") eligible to vote were
present in person or by proxy at the annual meeting. At the annual meeting,
the slate of nominees for Class I directors of KMC listed below was proposed
by the incumbent Board of Directors ("Board"). No additional nominations
were received and all of the nominees proposed by the Board were elected to
serve for a term expiring at the end of the third succeeding annual meeting
of stockholders, or until their respective successors are elected and
qualified. The results were as follows:
Director Nominee Votes For Withheld
---------------- ---------- --------
Bruce E. Grewcock 26,991,000 8,001
William L. Grewcock 26,975,697 23,304
Water Scott, Jr. 26,996,601 600
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits required by Item 601 of Regulation S-K. Exhibits
incorporated by reference are indicated in parentheses:
Exhibit
Number Description
- ------- -----------
3.1 Restated Certificate of Incorporation, effective July 28, 2000
(Incorporated by reference to Exhibit 3.1 to Amendment No. 5 to
Kiewit Materials Company's Registration Statement on Form 10, filed
with the Securities and Exchange Commission on September 15, 2000)
3.2 Amended and Restated By-laws, effective July 28, 2000 (Incorporated
by reference to Exhibit 3.2 to the Amendment No. 5 to Kiewit
Materials Company's Registration Statement on Form 10, filed with
the Securities and Exchange Commission on September 15, 2000).
4.1 Indenture, dated as of September 14, 2000, by and between Kiewit
Materials Company and UMB Bank, N.A., as trustee. (Incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q, for the quarter ended June 30, 2000).
4.2 Form of Series 2000A Convertible Debentures due October 31, 2010 of
Kiewit Materials Company. (Incorporated by reference to Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2000).
4.3 Form of Series 2000B Convertible Debentures due October 31, 2010 of
Kiewit Materials Company. (Incorporated by reference to Exhibit
4.3 to the Company's Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2000).
4.4 Form of Series 2000C Convertible Debentures due October 31, 2010 of
Kiewit Materials Company. (Incorporated by reference to Exhibit
4.4 to the Company's Quarterly Report of Form 10-Q, for the quarter
ended June 30, 2000).
4.5 Form of Series 2000D Convertible Debentures due November 30, 2010
of Kiewit Materials Company (Incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-8 filed
October 13, 2000).
4.6 Form of Repurchase Agreement for Convertible Debentures
(Incorporated by reference to Exhibit 4.15 to Amendment No. 4 to
the Company's and Kiewit's Joint Registration Statement on Form S-4
filed with the Securities and Exchange Commission on August 8,
2000).
4.7 Form of Series 2001 Convertible Debentures due July 31, 2011 of
Kiewit Materials Company (Incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-8 filed June 7,
2001).
b) No reports on Form 8-K have been filed during the second quarter of 2001.
SIGNATURES
Pursuant to the requirements 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.
KIEWIT MATERIALS COMPANY
Date:
/s/ Donald E. Bowman
--------------------------------
Donald E. Bowman
Vice President, Chief Financial Officer
KIEWIT MATERIALS COMPANY
INDEX TO EXHIBITS
Exhibit
Number Description
- -------- -----------
3.1 Restated Certificate of Incorporation, effective July 28, 2000
(Incorporated by reference to Exhibit 3.1 to Amendment No. 5 to
Kiewit Materials Company's Registration Statement on Form 10, filed
with the Securities and Exchange Commission on September 15, 2000)
3.2 Amended and Restated By-laws, effective July 28, 2000 (Incorporated
by reference to Exhibit 3.2 to the Amendment No. 5 to Kiewit
Materials Company's Registration Statement on Form 10, filed with
the Securities and Exchange Commission on September 15, 2000).
4.1 Indenture, dated as of September 14, 2000, by and between Kiewit
Materials Company and UMB Bank, N.A., as trustee. (Incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q, for the quarter ended June 30, 2000).
4.2 Form of Series 2000A Convertible Debentures due October 31, 2010 of
Kiewit Materials Company. (Incorporated by reference to Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2000).
4.3 Form of Series 2000B Convertible Debentures due October 31, 2010 of
Kiewit Materials Company. (Incorporated by reference to Exhibit
4.3 to the Company's Quarterly Report on Form 10-Q, for the quarter
ended June 30, 2000).
4.4 Form of Series 2000C Convertible Debentures due October 31, 2010 of
Kiewit Materials Company. (Incorporated by reference to Exhibit
4.4 to the Company's Quarterly Report of Form 10-Q, for the quarter
ended June 30, 2000).
4.5 Form of Series 2000D Convertible Debentures due November 30, 2010
of Kiewit Materials Company (Incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-8 filed
October 13, 2000).
4.6 Form of Repurchase Agreement for Convertible Debentures
(Incorporated by reference to Exhibit 4.15 to Amendment No. 4 to
the Company's and Kiewit's Joint Registration Statement on Form S-4
filed with the Securities and Exchange Commission on August 8,
2000).
4.7 Form of Series 2001 Convertible Debentures due July 31, 2011 of
Kiewit Materials Company (Incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-8 filed June 7,
2001).