- Sales up 12 percent in quarter; 15 percent year to date HERNDON,
Va., Nov. 7 /PRNewswire-FirstCall/ -- Lafarge North America Inc.
(NYSE:LAF) Toronto, the leading supplier of construction materials
in the U.S. and Canada, today reported third-quarter 2005 net
income of $172.1 million, or $2.17 per share diluted, compared with
net income of $165.6 million, or $2.16 per share diluted in the
third quarter 2004. The results for the third quarter 2004 include
$2.3 million, or $0.02 per share diluted, related to litigation
expenses from a settled case in our cement segment (see table below
for reconciliation). Operating income for the quarter was $278.5
million, up $12.3 million, or 5 percent, compared with the year-ago
quarter, reflecting the contribution of higher prices in all
product lines and continued strong performance in the gypsum
segment. The strengthening of the Canadian dollar contributed $11
million to operating income during the quarter. Increased energy
prices negatively affected operating income by $19.4 million during
the quarter compared with the same period last year. Increased
production costs, the impact of Hurricane Katrina, and softness in
several markets held back growth in operating income during the
quarter. Selling, general and administrative expenses were also
higher, reflecting planned investments in an Enterprise Resource
Planning system that will allow the company to manage its
operations more efficiently across its many locations. "Our volumes
year-to-date remain ahead of 2004 record levels, although demand in
some markets was weaker during the quarter," said Philippe Rollier,
president and chief executive officer of Lafarge North America.
"Increased inflation, reduced cement plant production, and weather
disruptions offset the gains we wanted to achieve this quarter.
However, our pricing performance continues to be strong, and we
expect to deliver strong earnings growth this year." Consolidated
net sales during the quarter were $1.4 billion, up 12 percent over
record sales in the same quarter last year. Excluding the favorable
Canadian exchange rate effect, net sales were 8 percent higher than
the same period last year. Third-Quarter Results by Operating
Segment Aggregates, Concrete & Asphalt The Aggregates, Concrete
& Asphalt segment reported operating income of $133.7 million
in the quarter, an increase of 2 percent compared with income of
$131.4 million during the third quarter 2004. The strengthening of
the Canadian dollar contributed $6.7 million to operating income
during the quarter. Net sales for the quarter were $859.1 million,
up 10 percent over the same period a year ago. Excluding the
favorable impact of the exchange rate, revenues were 5 percent
higher than the same period in 2004. Aggregate (crushed stone, sand
and gravel) shipments totaled 41.9 million tons during the quarter,
5 percent below 2004 levels primarily due to volume declines in
eastern Canada and the Great Lakes markets. Canadian shipments
declined 4 percent to 21.8 million tons, while U.S. shipments
decreased 6 percent to 20.2 million tons. Volumes remained strong
in both western Canada and western U.S. as residential and
commercial construction has continued to grow, particularly in the
Alberta and British Columbia markets. Average aggregate selling
prices were up 6 percent compared with the year ago quarter,
reflecting the successful implementation of a second price increase
in key markets during the year. Gains from these pricing
improvements, as well as continued cost control measures, more than
offset the effects of volume declines and higher energy and
subcontracting costs. Ready-mixed concrete shipments were down 4
percent from the same time last year to 3.2 million cubic yards. In
Canada, shipments increased 1 percent while U.S. volumes declined
11 percent. Most of the decline in U.S. volumes was due to
temporary losses associated with Hurricane Katrina and cement
shortages in the West. Softer market conditions in Montreal and
Toronto were offset by stronger demand in other areas of Canada.
Average ready-mix prices increased by 9 percent compared with the
same period last year, but increased energy and fuel costs, as well
as competitive pricing pressures in eastern Canada, more than
offset these contributions to profits during the quarter. Asphalt
and paving sales volumes were slightly ahead of last year. Strong
demand in western Canada and the western U.S. was partially offset
by weakness in eastern Canada. Higher prices contributed to
improved profitability, as the company was able to pass through
higher costs associated with liquid asphalt cement, fuel and
energy, as well as increased subcontractor activity. Cement The
Cement segment reported operating income of $145.8 million during
the quarter, a decline of $4 million, or 3 percent, compared with
the third quarter 2004. The strengthening of the Canadian dollar
contributed $5 million to operating income during the period. Net
sales were $509.5 million, an increase of 12 percent compared with
the third quarter 2004. Excluding the favorable impact of the
exchange rate, revenues were up 9 percent from the same period last
year. Operating results were negatively affected by several demand
and cost factors during the quarter. Cement sales volumes slowed to
4.7 million tons following strong growth during 2004 and the first
half of 2005. U.S. volumes declined 4 percent compared with last
year, while Canadian shipments increased 4 percent. Hurricane
Katrina disrupted shipments in the Gulf Coast region, and market
demand in the Great Lakes region and eastern Canada was weaker
during the quarter. Market demand remained very strong in western
Canada where volumes were up 19 percent over the third quarter
2004. Energy, raw material and other variable production costs were
up significantly compared with the same period last year. In
addition, production issues at a few cement plants, increased use
of lower-margin imports, and higher logistical costs resulting from
market shifts and hurricane activity negatively impacted
profitability. Average cement prices were up 11 percent from levels
in the same quarter last year. A second price increase in 2005 was
implemented during the third quarter in many U.S. markets. In the
U.S., average cement prices during the current quarter were up 13
percent compared with the third quarter 2004, while prices in
Canada were up 6 percent. A further price increase of $10 per ton
in local currency has been announced in U.S. and Canadian markets
effective January 1, 2006. Gypsum The Gypsum segment reported
operating income of $18.4 million compared with $11.7 million in
the third quarter 2004. Higher selling prices and continued strong
sales volumes resulted in a $6.7 million improvement in operating
income compared with the third quarter 2004. Net sales were $105.8
million, an increase of 22 percent over the year-ago quarter.
Wallboard sales volumes increased to 575 million square feet, 4
percent higher compared with the same period last year. Production
costs increased over the same period last year due to higher energy
costs; however, pricing gains more than offset these increases.
Gypsum wallboard prices increased to $155 per msf during the
quarter, 19 percent higher than during the same period last year.
Four price increases have been successfully implemented this year,
including a price increase in September. As previously announced,
the company will recognize a recurring accelerated depreciation
expense of $1.1 million each quarter in 2005 and during the first
two quarters of 2006. This expense is related to old equipment that
will be replaced during the modernization of the company's gypsum
drywall plant in Buchanan, NY. Consolidated Nine-Month Results For
the first nine months of 2005, Lafarge North America recorded net
income of $126.5 million, or $1.60 per share diluted. Excluding the
one-time tax charge of $102.8 million, or $1.30 per share diluted,
associated with the company's cash repatriation from Canada for the
first nine months of 2005, net income was $2.90 per share diluted.
This compares with net income of $196.8 million, or $2.58 per share
diluted, during the same period last year, which included $7.5
million, or $0.06 per share diluted, related to litigation expenses
from a settled case in our cement segment (see table below for
reconciliation). Consolidated net sales for the first nine months
of 2005 were $3.2 billion, up 15 percent from $2.8 billion during
the first nine months of 2004. Lafarge North America's financial
position was very strong during the first nine months. Including
cash, cash equivalents, and short-term investments of $282.1
million in 2005 and $590.1 million in 2004, net debt totaled $244.8
million as of September 30, 2005, compared with $224.7 million as
of September 30, 2004. While, as of September 30, 2004, the company
had $75 million of receivable securitization outstanding, as of
September 30, 2005, the company had no receivable securitization
outstanding. Taking this into account, net borrowings decreased by
$54.9 million during the twelve months ending September 30, 2005.
Silver Grove Gypsum Plant Expansion Approved At its meeting on
Friday, November 4, 2005, the Board of Directors approved the
expansion of the company's state-of-the-art Silver Grove, Kentucky,
gypsum drywall manufacturing facility. The company will invest
approximately $120 million to install a new manufacturing line to
increase the annual capacity of the plant from 900 million square
feet of gypsum wallboard to 1,600 million square feet. The expanded
facility will help to meet the growing needs of the company's
customers in the north central region of the U.S. by increasing the
supply and the range of products available in these markets. New
Aggregates, Concrete and Asphalt Acquisition Completed On November
4, 2005, the company completed the purchase of Ritchie Companies, a
leading supplier of aggregates, concrete, asphalt and paving in the
Wichita, Kansas area. The acquisition brings more than 450
employees, approximately two million tons of annual aggregate
volumes, seven ready-mixed concrete plants, and one of the region's
largest paving contractors into the company's growing business in
the western U.S. These operations will be consolidated into the
Aggregates, Concrete & Asphalt business segment. Outlook
October cement volumes are ahead of last year's levels; however, it
is too early to determine if the softness seen in selected markets
during the third quarter will continue. In addition, comparisons
with the record fourth-quarter volumes of 2004 will be challenging,
and will largely be determined by weather conditions. Demand in
hurricane-affected regions is not expected to rebound until 2006.
Higher energy prices and inflation are expected to increase
pressure on margins during the balance of the year. However, the
company expects pricing power to remain strong and has announced
further price increases for 2006. The company expects to continue
its year-to-date trend of strong earnings growth year-over-year.
Quarterly Dividend Declared At its quarterly board meeting on
Friday, November 4, 2005, the Board of Directors declared a cash
dividend of twenty-four cents ($0.24) per share of Lafarge North
America common stock, payable on December 1, 2005, to shareholders
of record on November 15, 2005. The dividend is equivalent to an
annual rate of $0.96 per share. Stock Repurchase Plan In July 2005,
the Board approved a $40 million increase to its previous stock
repurchase plan, effective July 26, 2005. Under the expanded plan,
the company is authorized to spend up to $100 million to repurchase
its common stock through December 31, 2005. During the first nine
months of 2005, the company repurchased 988,000 shares of stock for
a total of $61.4 million at an average price of $62.10 per share.
On November 4, 2005, the Board approved a share repurchase program
to commence on January 1, 2006, and expire on December 31, 2006.
Under this new program, the company is authorized to repurchase up
to $100 million of its common stock from time to time in the market
or through privately negotiated transactions. Conference Call
Lafarge North America will broadcast its earnings conference call
over the Internet beginning at 2 p.m., Eastern Standard Time on
Monday, November 7, 2005. 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 2004, net sales
exceeded $3.7 billion. Lafarge North America's majority shareholder
is Lafarge S.A. (Paris Stock Exchange: LG; NYSE: LR). Lafarge, the
world leader in building materials, holds top-ranking positions in
all four of its divisions: Cement, Aggregates & Concrete,
Roofing and Gypsum. Lafarge employs 77,000 people in 75 countries
and posted sales of 14.4 billion euros in 2004. LAFARGE NORTH
AMERICA INC. Consolidated Income Statement Information (1)
(unaudited and in millions, except per share amounts) Three Months
Ended Nine Months Ended September 30 September 30 2005 2004 2005
2004 Net Sales Aggregates, Concrete & Asphalt $859.1 $780.0
$1,861.0 $1,650.5 Cement 509.5 456.2 1,159.0 1,008.2 Gypsum 105.8
87.1 297.4 240.5 Eliminations (57.8) (63.7) (150.5) (140.9) Total
Net Sales $1,416.6 $1,259.6 $3,166.9 $2,758.3 Income from
Operations Aggregates, Concrete & Asphalt $133.7 $131.4 $144.6
$138.6 Cement 145.8 149.9 258.3 244.1 Gypsum 18.4 11.7 48.4 23.3
297.9 293.0 451.3 406.0 Corporate and unallocated expenses (2)
(19.4) (26.7) (66.1) (69.7) Total Income Before Interest and Income
Taxes 278.5 266.3 385.2 336.3 Redeemable preferred shares dividends
(1.9) (1.8) (5.9) (5.2) Interest expense, net (2) (6.1) (8.6)
(20.0) (25.5) Earnings Before Income Taxes 270.5 255.9 359.3 305.6
Income tax provision (98.4) (90.3) (232.8) (108.8) Net Income
$172.1 $165.6 $126.5 $196.8 Net Income per Share Basic $2.27 $2.22
$1.67 $2.65 Diluted $2.17 $2.16 $1.60 $2.58 Average Number of
Shares Outstanding Basic 75.7 74.5 75.5 74.2 Diluted 79.5 76.7 79.0
76.3 NOTES: (1) Because of seasonal, weather-related conditions in
several of the company's markets, earnings in any one quarter
should not be considered as indicative of the results for a full
year. (2) Certain reclassifications have been made to prior periods
to conform to the 2005 presentation. Consolidated Balance Sheet
Information (in millions) September 30 December 31 2005 2004 2004
(unaudited) (unaudited) (audited) Assets: Cash, cash equivalents
and short-term investments $282.1 $590.1 $852.0 Other current
assets 1,554.2 1,345.4 1,119.1 Property, plant and equipment, net
2,575.3 2,384.2 2,491.8 Other long-term assets 1,017.9 857.6 941.2
Total Assets $5,429.5 $5,177.3 $5,404.1 Liabilities and
Shareholders' Equity: Short-term borrowings and current portion of
long-term debt $58.9 $346.5 $356.5 Other current liabilities 869.1
595.6 692.8 Long-term debt 468.0 468.3 470.8 Other long-term
liabilities 793.5 901.3 771.1 Shareholders' equity 3,240.0 2,865.6
3,112.9 Total Liabilities and Shareholders' Equity $5,429.5
$5,177.3 $5,404.1 Indebtedness Long-term debt, including current
portion $526.9 $814.8 $827.3 Cash, cash equivalents and short- term
investments (282.1) (590.1) (852.0) Total debt, net of cash, cash
equivalents and short-term investments $244.8 $224.7 $(24.7) NOTE:
Certain reclassifications have been made to the 2004 balances to
conform to the 2005 presentation. Consolidated Cash Flow
Information (unaudited and in millions) Nine Months Ended September
30 2005 2004 Net cash provided (used) by operating activities $23.9
$(20.6) Capital expenditures and acquisitions (276.7) (220.5)
Proceeds from property, plant and equipment dispositions 11.9 47.7
Cash provided (used) by financing activities (326.9) 78.1
Redemptions of short-term investments 7.4 41.0 Effect of exchange
rate changes (3.1) 5.2 Other 1.0 1.1 Net decrease in cash and cash
equivalents (562.5) (68.0) Cash and cash equivalents at beginning
of period 817.7 630.6 Cash and cash equivalents at end of period
$255.2 $562.6 Lafarge North America Use of Non-GAAP Financial
Information In addition to the results reported in accordance with
accounting principles generally accepted in the United States
("GAAP") included in this press release, the company has provided
information regarding diluted earnings per share ("EPS") and net
income excluding unusual items. Management believes EPS and net
income excluding unusual items better reflect the ongoing
performance of the company and enables management and investors to
meaningfully trend, analyze and benchmark the performance of the
company's operations. These measures are also more comparable to
financial measures reported by our competitors. EPS and net income
excluding unusual items should not be considered substitutes for
EPS and net income calculated in accordance with GAAP. The tables
below reconcile net income per share and net income prepared in
accordance with GAAP to net income per share and net income
excluding unusual items: Three Months Ended Nine Months Ended
September 30 September 30 2005 2004 2005 2004 Diluted Net Income
per Share: Net income (GAAP basis) $2.17 $2.16 $1.60 $2.58 Tax on
Jobs Act related dividend repatriation - - 1.30 - Cement litigation
expenses - 0.02 - 0.06 Adjusted Net Income per Share (Non- GAAP
basis) $2.17 $2.18 $2.90 $2.64 Net Income (in millions): Net income
(GAAP basis) $172.1 $165.6 $126.5 $196.8 Tax on Jobs Act related
dividend repatriation - - 102.8 - Cement litigation expenses, net
of tax - 1.5 - 4.9 Adjusted Net Income (Non-GAAP basis) $172.1
$167.1 $229.3 $201.7 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. You can identify these statements by
forward-looking words such as "may," "will," "expect," "intend,"
"anticipate," "believe," "estimate," "plan," "could," "should," and
"continue" or similar words. These forward-looking statements may
also use different phrases. Such forward-looking 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/ DATASOURCE: Lafarge North
America Inc. CONTACT: Investors: Eric C. Olsen, +1-703-480-6705, or
Media: Sherry E. Peske, +1-703-480-3632, both of Lafarge North
America Inc. Web site: http://www.lafargenorthamerica.com/
Copyright
