Lafarge North America Reports First Quarter Results * Sales up
sharply on good weather and demand HERNDON, Va., May 4
/PRNewswire-FirstCall/ -- Lafarge North America Inc. Toronto, the
leading supplier of construction materials in the U.S. and Canada,
today reported a first-quarter 2004 net loss of $70.8 million, or
$0.96 per share diluted. The results compare to a net loss of $87
million, or $1.19 per share diluted, in the first quarter 2003.
Lafarge North America normally reports a loss in the first quarter
of the year as its business activity slows during the winter months
and the company performs most of its major plant maintenance
programs in preparation for the main construction season. Weather
conditions during the quarter were more typical compared with the
unusually harsh winter experienced last year. Consequently, volumes
in the cement and construction materials divisions were up
significantly. Moderate improvements were also realized compared
with 2002 and 2001 when weather conditions were more favorable. The
cement and construction materials businesses reported better
operating results compared with the year-ago quarter, and the
gypsum segment reported its third consecutive quarterly profit.
These gains were partially offset by higher pension and post-
retirement expenses, small divestment losses from the sale of
certain construction materials assets, and higher depreciation
expenses. "We have had a good start to the year," said Philippe
Rollier, president and chief executive officer of Lafarge North
America. "Even though we benefited from better weather compared
with last year, we are also seeing improvements in underlying
demand that are encouraging for the balance of the year. We are
particularly pleased with the momentum in our gypsum division,
which just reported its third consecutive quarterly profit."
Consolidated net sales were up 24 percent over last year to $509
million. Excluding a favorable Canadian exchange rate effect, net
sales were 17 percent higher than last year. U.S. net sales
increased 19 percent compared with last year, while Canadian sales
increased 15 percent in local currency. The strengthening of the
Canadian dollar negatively impacted operating income during the
quarter by $6.2 million, or $0.05 per share diluted. First-Quarter
Results by Operating Segment Construction Materials The
construction materials segment reported an operating loss of $63.6
million in the quarter, an improvement of 6 percent compared with
an operating loss of $67.3 million during the first quarter 2003.
Excluding a $5.5 million impact from the change in the value of the
Canadian dollar, operating results from construction aggregates,
ready-mixed concrete and concrete products were considerably better
compared with 2003. Results from asphalt and paving were in line
with last year. Volumes improved due to more normal weather
conditions, and higher aggregate prices and lower operating costs
offset increased pension expenses. As expected, pension expenses
during the quarter increased by $2.7 million over the same period
last year. Net sales during the quarter were $286.7 million, up 25
percent over last year, or 17 percent higher excluding the impact
of the exchange rate. Sales volumes in aggregates and ready-mixed
concrete improved compared with last year, while asphalt and paving
volumes remained flat. The paving season in most markets does not
begin in earnest until summer. Aggregate (crushed stone, sand and
gravel) shipments totaled 16.1 million tons during the quarter, 28
percent above 2003 levels. Volumes in the U.S. were up 39 percent
compared with the year-ago quarter, due to stronger market
conditions in the Great Lakes region and Maryland, and higher sales
in Colorado. In the Canadian markets, sales volumes were up 18
percent due to stronger demand in Vancouver and higher levels of
project work in central Ontario. Average selling prices increased 4
percent over last year due to the successful implementation of
price increases in most regions. Ready-mixed concrete volumes
improved 10 percent over the same period last year to 1.9 million
cubic yards. Volumes in Canada increased 13 percent to 1 million
cubic yards due to sustained residential construction, particularly
in Vancouver. In the U.S., volumes increased 7 percent to 0.9
million cubic yards in the quarter, primarily due to strong demand
in Maryland. Average selling prices were down slightly in the
quarter as continued price degradation in the metro Denver area
offset price and margin improvements elsewhere. Cement and
Cement-Related Products In 2003, the company divested its Florida
cement operations, and results from this business have been
reclassified as discontinued operations. Cement and cement-related
products reported an operating loss of $18.2 million during the
quarter, a $12.3 million improvement from the loss of $30.5 million
in the first quarter 2003. The improvement reflects increased sales
volumes and production, partially offset by increased pension
expenses. As expected, pension costs in the quarter increased by
$1.7 million over the same period last year. Net sales from
continuing operations were $177 million, an increase of 19 percent
compared with last year. Excluding the favorable impact of the
exchange rate, revenues were up 13 percent from the same period in
2003. Total cement sales volumes during the quarter improved by 15
percent compared with last year due to favorable weather conditions
and increased demand. U.S. volumes were up 18 percent to 1.3
million tons and Canadian volumes were up 9 percent to 0.6 million
tons. Average cement prices were 1 percent lower than the year-ago
quarter as a result of declines experienced in selected U.S.
markets during the last three quarters of 2003. Higher prices went
into effect in most Canadian markets on January 1, 2004. Price
increases in virtually all U.S. markets went into effect on April
1, and increases in the balance of Canadian and U.S. markets will
be implemented during the second quarter. Gypsum The gypsum segment
reported its third consecutive quarterly profit, earning $4.5
million compared with a loss of $5.4 million in the first quarter
2003, a $9.9 million improvement. Strong sales volumes and higher
selling prices contributed to the gain. Wallboard sales volumes
increased to 542 million square feet, 11 percent higher compared
with the same period last year, mainly due to continued high levels
of activity in residential construction. In response to increased
demand, the company's gypsum plants ran at full capacity during the
entire quarter. The average mill net price of $112 per msf during
the quarter was 22 percent higher compared with last year. This
price reflects the realization of two price increases made in
January and March of this year. A further price increase is
expected in May. While energy prices were lower than last year,
manufacturing costs increased due to higher prices for paper and
gypsum, as well as higher labor costs attributable to increased
production. Outlook Although many signs point to a recovery in the
general economy and construction industry during 2004, the strength
and timing of the recovery remains uncertain. The strong start to
the year increases the company's optimism about its prospects in
2004. However, because activity during this quarter represents only
a small percentage of the company's annual business, it is not
necessarily indicative of the full-year trend. The company expects
volumes to increase modestly for the full year and believes that
current market conditions are supportive of price increases in each
of our product lines. The absence of gains realized as a result of
cement-related divestitures made during 2003, as well as a further
$20 million increase in pension and post-retirement expenses during
2004, will negatively affect year-over-year net income comparisons.
Although it is still early, barring significant changes in current
market conditions, the company expects to realize strong growth in
earnings from continuing operations in 2004 compared with 2003,
excluding gains on asset divestitures in both years. Quarterly
Dividend Declared At its meeting today, the board of directors
declared a cash dividend of twenty cents ($0.20) per share of
Lafarge North America common stock, payable on June 1, 2004 to
shareholders of record on May 17, 2004. Stock Repurchase Plan In
May 2003, the board of directors approved a stock repurchase plan
authorizing the company to spend up to $50 million to repurchase
its common stock. The plan allows Lafarge North America, at
management's discretion, to buy back its common stock from time to
time in the market or through privately negotiated transactions
through December 31, 2004. During the quarter, the company
repurchased 126,000 shares at an average price of $40.78 per share.
To date, the company has repurchased 154,000 shares for a total of
$6 million at an average price of $38.95 per share. Conference Call
Lafarge North America will broadcast its earnings conference call
over the Internet beginning at 11 a.m., Eastern Daylight Time on
Wednesday, May 5, 2004. Interested investors may log on to the
company's Web site for further information at
http://www.lafargenorthamerica.com/. The conference call will also
be archived on the company's Web site for 90 days after the event.
Profile Lafarge North America is the U.S. and Canada's largest
diversified supplier of construction materials such as cement and
cement-related products, ready-mixed concrete, gypsum wallboard,
aggregates, asphalt and concrete products. The company's materials
are used in residential, commercial, institutional and public works
construction across the U.S. and Canada. In 2003, net sales
exceeded $3.3 billion. Lafarge North America's majority shareholder
is Lafarge (NYSE: LR; Paris: LG). The Lafarge Group is the world
leader in building materials, with 77,000 employees in 75
countries. It holds top-ranking positions in all four of its
divisions: Cement, Aggregates and Concrete, Roofing and Gypsum. In
2003, the Lafarge Group recorded sales of more than 13.6 billion
euros. Statements made in this press release that are not
historical facts are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions
("Factors"), which are difficult to predict. Some of the Factors
that could cause actual results to differ materially from those
expressed in the forward-looking statements include, but are not
limited to: the cyclical nature of the Company's business; national
and regional economic conditions in the U.S. and Canada; Canadian
currency fluctuations; seasonality of the Company's operations;
levels of construction spending in major markets; supply/demand
structure of the industry; competition from new or existing
competitors; unfavorable weather conditions during peak
construction periods; changes in and implementation of
environmental and other governmental regulations; our ability to
successfully identify, complete and efficiently integrate
acquisitions; our ability to successfully penetrate new markets;
and other Factors disclosed in the Company's Annual Report on Form
10-K and Quarterly Reports on Form 10-Q filed with the Securities
and Exchange Commission. In general, the Company is subject to the
risks and uncertainties of the construction industry and of doing
business in the U.S. and Canada. The forward-looking statements are
made as of this date and the Company undertakes no obligation to
update them, whether as a result of new information, future events
or otherwise. Visit the Lafarge North America web site at
http://www.lafargenorthamerica.com/ LAFARGE NORTH AMERICA INC.
Consolidated Income Statement Information (1) (unaudited and in
thousands, except per share amounts) Quarter Ended 12 Months Ended
March 31 March 31 2004 2003 2004 2003 Net Sales from Continuing
Operations Construction materials $286,706 $228,625 $2,090,615
$1,936,570 Cement and cement-related products 177,013 148,888
1,226,494 1,122,428 Gypsum 74,032 57,159 271,134 231,643
Eliminations (28,882) (22,933) (172,177) (145,854) Total Net Sales
from Continuing Operations $508,869 $411,739 $3,416,066 $3,144,787
Income (Loss) from Continuing Operations Construction materials
$(63,603) $(67,337) $ 187,476 $ 181,676 Cement and cement-related
products (18,235) (30,461) 302,729 268,806 Gypsum 4,533 (5,440)
4,923 (19,293) (77,305) (103,238) 495,128 431,189 Corporate and
unallocated expenses (2)(3) (21,982) (16,720) (62,739) (76,936)
Total Income from Continuing Operations Before Interest and Taxes
(99,287) (119,958) 432,389 354,253 Minority interest (1,726)
(1,675) (7,422) (7,810) Interest expense, net (7,207) (13,026)
(47,883) (46,119) Earnings from Continuing Operations Before Income
Taxes (108,220) (134,659) 377,084 300,324 Income taxes (4) 37,426
47,201 (142,973) (74,777) Net Income from Continuing Operations
(70,794) (87,458) 234,111 225,547 Income from discontinued
operations, net of tax (5) - 3,646 62,678 12,359 Change in
accounting principle, net of tax - (3,214) - (3,214) Net Income
$(70,794) $(87,026) $ 296,789 $ 234,692 Net Income per Common
Equity Share From continuing operations - basic $ (0.96) $ (1.20) $
3.19 $ 3.08 From discontinued operations - basic - 0.05 0.85 0.17
Cumulative effect of change in accounting principle - basic -
(0.04) - (0.04) Net income per share - basic $ (0.96) $ (1.19) $
4.04 $ 3.21 From continuing operations - diluted $ (0.96) $ (1.20)
$ 3.14 $ 3.05 From discontinued operations - diluted - 0.05 0.84
0.17 Cumulative effect of change in accounting principle - diluted
- (0.04) - (0.04) Net income per share - diluted $ (0.96) $ (1.19)
$ 3.98 $ 3.18 Average Number of Common Equity Shares Outstanding
Basic 73,903 73,135 73,495 73,017 Diluted 73,903 73,135 74,628
73,743 NOTES: (1) Because of seasonal, weather-related conditions
in several of the company's marketing areas, earnings in any one
quarter should not be considered as indicative of the results for a
full year. (2) Corporate and unallocated expenses for the quarter
and 12 months ended March 31, 2004 include a loss of $1.8 million
and a gain of $26.6 million on divestitures of non-strategic
businesses and other assets, compared to a gain of $0.5 million and
a gain of $28.1 million reflected in the quarter and 12 months
ended March 31, 2003. (3) Corporate and unallocated expenses for
the 12 months ended March 31, 2003 include a $26 million loss for
the idling of a gypsum plant in Wilmington, Delaware. (4) Income
tax expense for the 12 months ended March 31, 2004 was unfavorably
affected by $7.6 million (approximately Canadian $11 million) due
to higher provincial tax rates in Canada. Income tax expense for
the 12 months ended March 31, 2003 includes a $28.3 million one
time tax benefit resulting from the reversal of a valuation
allowance and other nonrecurring tax benefits. (5) Income from
discontinued operations relates to Lafarge Florida Inc. and
includes an after tax gain on sale of $58.0 million in the 12
months ended March 31, 2004. The sale was completed in August 2003.
Consolidated Balance Sheet Information (unaudited and in thousands)
March 31 December 31 2004 2003 2003 Assets from Continuing
Operations: Cash, cash equivalents and short-term investments $
544,396 $ 363,289 $ 699,217 Other current assets 971,342 903,642
966,997 Property, plant and equipment, net 2,346,075 2,253,381
2,369,452 Other long-term assets 804,138 679,447 730,998 Total
Assets from Continuing Operations 4,665,951 4,199,759 4,766,664
Assets from Discontinued Operations: (1) Net current assets - 6,155
- Net noncurrent assets - 14,324 - Total Assets from Discontinued
Operations - 20,479 - Total Assets $4,665,951 $4,220,238 $4,766,664
Liabilities and Shareholders' Equity from Continuing Operations:
Short-term debt $ 160,024 $ 314,922 $ 1,775 Other current
liabilities 421,916 383,786 581,470 Long-term debt 722,150 663,446
715,391 Other long-term liabilities 805,290 707,657 808,386
Shareholders' equity 2,556,571 2,145,136 2,659,642 Total
Liabilities and Shareholders' Equity from Continuing Operations
4,665,951 4,214,947 4,766,664 Current Liabilities from Discontinued
Operations (1) - 5,291 - Total Liabilities and Shareholders' Equity
$4,665,951 $4,220,238 $4,766,664 Indebtedness Long-term debt,
including current portion $ 882,174 $ 978,368 $ 717,166 Cash, cash
equivalents and short-term investments (544,396) (363,289)
(699,217) Total debt, net of cash, cash equivalents and short-term
investments $ 337,778 $ 615,079 $ 17,949 Consolidated Cash Flow
Information (unaudited and in thousands) March 31 2004 2003 Net
cash used by operating activities $ (254,788) $ (175,680) Capital
expenditures and acquisitions (48,163) (19,220) Proceeds from
property, plant and equipment dispositions 3,863 2,016 Cash
provided by financing activities 158,662 161,156 Purchases of short
term investments (16,625) (8,091) Effect of exchange rate changes
(10,535) 20,160 Other (3,860) 1,487 Net decrease in cash and cash
equivalents (171,446) (18,172) Cash and cash equivalents at
beginning of period 630,644 351,110 Cash and cash equivalents at
end of period $ 459,198 $ 332,938 (1) Discontinued operations
relate to Lafarge Florida Inc. The sale was completed in August
2003. DATASOURCE: Lafarge North America CONTACT: Investors: Larry
Waisanen, +1-703-480-3670, or Media: Sherry Peske, +1-703-480-3632,
both of Lafarge North America Inc. Web site:
http://www.lafarge-na.com/
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