UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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 0-3041
JUSTIN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0102185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2821 West 7th Street, Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 336-5125
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.50 Par Value
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)
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
$297,939,940 as of February 28, 1996
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
26,631,503 Common Shares as of March 20, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II, and IV incorporate certain information by reference from the
Annual Report to Shareholders for the year ended December 31, 1995. Part III
incorporates information by reference from the Proxy Statement for the Annual
Meeting of Shareholders to be held on April 11, 1996.
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PART I
ITEM 1. BUSINESS
Justin Industries, Inc. ("Justin") and its subsidiaries are herein
collectively and/or singly referred to as the "company". The company where
specifically indicated has incorporated by reference certain information
contained in its 1995 Annual Report to Shareholders. Other references made to
that report are for information purposes only and the information in the Annual
Report to Shareholders is not deemed incorporated in this Form 10-K.
GENERAL DEVELOPMENT OF BUSINESS
Justin's business origins can be traced back to 1879, when H. J. Justin
began making boots at Spanish Fort, Texas on the Chisholm Trail. Justin was
incorporated under the laws of the State of Texas on April 26, 1916, as Acme
Brick Company, the successor to an Illinois company incorporated in 1891. In
August 1968, the company changed its name to First Worth Corporation and created
a division, later incorporated with the name "Acme Brick Company" ("Acme"), to
handle the company's business relating to brick, concrete block, concrete
panels, and prestressed concrete structural components. The company changed its
name in October 1972 to Justin Industries, Inc.
In 1968, Justin purchased for cash and promissory notes all the outstanding
Common Stock of Louisiana Concrete Products, Inc. ("Louisiana Concrete"). Also
during 1968, Justin acquired the net assets or the outstanding stock of six
additional small firms in the concrete products field for cash and shares of
Justin Common Stock. The operations of Louisiana Concrete and the six small
firms were combined with the concrete products operations of Featherlite
Building Products Corporation and Featherlite Precast Corporation (whose
acquisition is discussed below).
In December 1968, Justin acquired all of the outstanding common stock of
Justin Belt Company, Inc., H. J. Justin & Sons, Inc., and its subsidiary, Justin
Leathergoods Company, which companies were reorganized in 1984 to be known as
the "Justin Boot Company" ("Justin Boot"). Justin Boot's stock was acquired in
exchange for Justin Common Stock and Justin voting Preferred Stock (subsequently
converted into shares of Justin Common Stock). The acquisition of Justin Boot
was treated as a pooling of interests for accounting purposes.
In May 1973, Justin acquired all of the outstanding common stock of
Northland Publishing Company, Inc. ("Northland") in exchange for shares of
Justin Common Stock. The acquisition was accounted for as a purchase. In April
1974, Justin acquired for cash all the outstanding capital stock of Sanford
Brick Corporation ("Sanford"), Sanford, North Carolina. The acquisition was
accounted for as a purchase. On April 30, 1984, all of the common stock of
Sanford was sold.
In August 1976, Justin acquired 62.6% of the outstanding common stock of
Kingstip, Inc. ("Kingstip") for cash and effective January 31, 1977, acquired
the remaining 37.4% of Kingstip's capital stock in exchange for shares of Justin
Common Stock. The acquisition was accounted for as a purchase. Through 1983,
all operations of Kingstip were conducted through its subsidiary, The
Featherlite Corporation. Effective December 31, 1983, these operations were
reorganized into two distinct operating entities, Featherlite Building Products
Corporation and Featherlite Precast Corporation.
Ceramic Cooling Tower Company ("CCT") was incorporated by Justin in 1968,
as an outgrowth of Acme's operations in the design and sale of water cooling
systems. Effective December 31, 1991, the net assets and business of CCT were
sold for $20 million cash.
In June 1981, Justin issued shares of Justin Common Stock for all the
outstanding common stock of Nocona Boot Company ("Nocona").
In September 1984, the company's Featherlite Building Products Corporation
subsidiary purchased all of the common stock of Gulde Block and Brick, Inc. for
cash.
In 1985, the company acquired the operations of four additional companies
for cash and the assumption of certain liabilities. These acquisitions were
Chippewa Shoe Company, Builders Block Company, Inc., RLI, Inc. (name changed to
Tradewinds Technologies, Inc. ("Tradewinds")), and MEGA Equipment Company.
(Page 1)
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In 1986, the company acquired the operating assets of Parr Block Company
for cash and notes.
Pursuant to a tender offer and subsequent merger effective October 15,
1990, the company acquired all of the outstanding shares of Tony Lama Company,
Inc. ("Tony Lama") at a price of $9.00 per share in cash with the aggregate
purchase price for such shares and related costs totaling approximately
$18,787,000. Tony Lama is in the business of designing, manufacturing, and
selling western style boots. The acquisition was accounted for as a purchase.
On October 7, 1991, the company purchased the brick manufacturing assets of
Elgin-Butler Brick Company for cash and subordinated notes totaling
approximately $4,527,000.
Effective August 1, 1995, the Company purchased American Tile Supply
Company and its related companies ("American Tile") for cash and subordinated
notes totaling approximately $16 million. American Tile distributes floor and
wall tile primarily in Texas. The acquisition was accounted for as a purchase.
In December 1987, the company made the decision to discontinue operations
of two of its businesses, Featherlite Precast Corporation (manufacturers of
precast/prestressed concrete components) and MEGA Equipment Company (distributor
of John Deere construction and utility earthmoving equipment). Both of these
companies were more severely affected by the cyclical nature of the building
industry and it was felt that Justin and its shareholders would be better served
by concentrating the company's resources in its remaining core group of
businesses. In 1988, the operations of MEGA Equipment Company and two of the
three Featherlite Precast Corporation plants were sold to third parties.
Justin's continuing operations are in two principal business areas: (i)
manufacture and sale of building materials, which includes the operations of
Acme, American Tile, Featherlite Building Products Corporation, and Tradewinds,
and (ii) manufacture and sale of footwear products, which includes the
operations of Justin Boot, Nocona and Tony Lama.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (LINES OF BUSINESS)
A five year analysis of sales and operating profit contribution by industry
segment is presented on page 17 of the company's 1995 Annual Report to
Shareholders and additional financial information, including identifiable
assets, by industry segment is included in Note 8 of Notes to Consolidated
Financial Statements on page 26 of the Shareholders' Report. Such information
is hereby incorporated by reference.
NARRATIVE DESCRIPTION OF BUSINESS
The following information is presented in addition to the information
included in the Report on Operations contained on pages 5 through 11 of the
company's 1995 Annual Report to Shareholders, which is incorporated herein by
reference.
Manufacture and Sale of Building Materials
The building materials segment includes clay brick manufactured and sold
under the name Acme Brick for use in residential and commercial construction.
The primary market for Acme Brick is the Central and Southwest United States
where distribution is mainly through company operated sales offices. Acme also
distributes through independent dealerships in other parts of the United States.
Acme is one of the largest manufacturers of face brick in the United States.
Other products in the company's building materials segment include concrete
block manufactured and sold under the trade name Featherlite Building Products
and cut limestone manufactured under the name Texas Quarries. The primary
markets for these products are in Texas and its neighboring states.
Acme and Featherlite also represent other manufacturers as distributors of
such items as clay brick, glass block, glazed and unglazed tile and masonry
units, fireplace equipment, masonry cleaners, masonry saws, wall reinforcements,
masonry tools, masonry cement, and purchased used brick for resale.
Since August, 1994, this segment also includes the sale of ceramic and
marble floor and wall tile through American Tile Supply distribution centers in
Texas.
Tradewinds manufactures a unique line of premium quality evaporative
coolers used primarily for central residential cooling and light commercial and
spot cooling.
(Page 2)
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In the states of Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Kansas,
Tennessee, and Missouri, Acme, American Tile, and Featherlite market their
building materials through approximately 480 full-time company sales employees
serving architects, contractors, home builders, and others in the construction
market. These direct sales comprise the majority of the company's building
materials sales. In the other states, sales are made principally through
independent distributors and dealers. The majority of the building materials
manufactured by the company are utilized within a 250 mile radius of the plant
where they are produced. Tradewinds' coolers are sold by direct sales personnel
in selected major markets and by distribution elsewhere.
Manufacture and Sale of Footwear Products
Footwear operations include the design, manufacture and distribution of
men's, women's, and children's western style, safety, work and sports boots and
shoes, primarily for sale in the United States under the primary trade names of
"Justin(R)", "Nocona(R)", "Tony Lama(R)", "Chippewa(R)", "Sport Lace-R(R)", and
"Diamond J(R)".
Justin Boot Company, headquartered in Fort Worth, Texas, started business
in 1879 as H. J. Justin & Sons, Inc. The company owns and operates footwear
manufacturing plants in Fort Worth, Texas, Cassville, Sarcoxie, and Carthage,
Missouri. Nocona Boot Company, headquartered in Nocona, Texas, started business
in 1925 and owns and operates its boot manufacturing plant in Nocona. Tony Lama
Company, Inc., headquartered in El Paso, Texas, was established in 1911. The
company owns and operates a western boot manufacturing plant in El Paso, Texas.
Administrative functions of the three companies are centralized in Fort Worth,
Texas.
The company's footwear products are marketed by company salesmen and
independent sales representatives who are compensated on a commission basis.
Sales are made throughout the United States to a network of approximately 6,500
authorized retail outlets and dealers such as western goods stores, department
stores, chain stores, and mail order houses. Footwear products are sold in the
general price range of other medium to high quality lines and are manufactured
using a wide range of leathers.
Other
Northland's primary activity is publishing books about the history and art
of the West. Many of these books have won awards for fine design, printing, and
binding in major book competitions including the Western Heritage Awards at the
National Cowboy Hall of Fame. Northland's books are marketed by company
personnel throughout the United States.
RAW MATERIALS
The principal raw materials for the company's brick are clay and shale
mined from company-owned or leased properties. The company has developed
adequate clay reserves located at or near plant sites to supply its needs for
the foreseeable future. Other raw materials used in the building materials
operations, such as cement, aggregate, and additives, are purchased by the
company in the open market and appear to be readily available for the
foreseeable future from numerous domestic suppliers. Materials for evaporative
coolers are purchased in the open market or manufactured to the company's
specifications and all appear to be readily available for the foreseeable future
from numerous suppliers.
The company consumes large quantities of natural gas and other combustible
fuels in the drying and firing of its clay products. In periods of severe cold
weather and occasionally at other times, the company's natural gas supplies have
been limited by its suppliers at certain locations. The company believes it
will be able to obtain an adequate supply of energy in the future to meet its
requirements.
The primary raw material used in the footwear product line is finished
leather. Finished leather, which is readily available, is purchased from
various tanneries in the United States and from tanneries in foreign countries
and their representatives in the United States. Inventories are maintained to
meet production requirements. Other raw materials incidental to the production
of these products such as thread, tacks, staples, buckles, and clasps appear to
be readily available for the foreseeable future from numerous domestic
suppliers.
(Page 3)
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PATENTS AND TRADEMARKS
Many of the company's products and processes are patented. In addition,
most of the company's products are marketed under registered trademarks.
SEASONAL NATURE OF BUSINESS
Demand for building materials and evaporative coolers is seasonal, with
sales during periods of warm weather representing a higher than average
proportion of total yearly sales while sales of footwear products are generally
highest in the fourth quarter.
WORKING CAPITAL REQUIREMENTS
It is the company's policy to increase inventory levels during periods when
production capabilities exceed sales. The company may also from time to time
increase its inventory of raw materials in its footwear business segment to
assure itself of an adequate supply of such raw materials.
Historically, funds required for working capital have been generated from
operations and from borrowings from commercial banks.
SIGNIFICANT CUSTOMERS
No material part of the company's business is dependent upon a single
customer or upon a few customers, the loss of any one or more of whom would have
a material adverse effect on the company's business.
BACKLOG OF ORDERS AT END OF FISCAL YEAR
An analysis of backlog orders is presented on page 16 of the company's 1995
Annual Report to Shareholders, which is incorporated herein by reference. In
accordance with industry practice, unfilled orders for clay brick and footwear
products are generally cancelable by customers at any time and for this reason
may not be considered firm backlog in the traditional sense, despite the fact
that in the past orders have been canceled only infrequently. Substantially all
unfilled orders are expected to be filled within one year.
COMPETITION
The business environment in which the company operates is highly
competitive in the areas of price, service, and product quality. Unless
otherwise indicated below, the company's relative competitive position within
its product lines and market areas is not readily available due to constant
changes in the number and identity of competitors and types of competitive
products.
In the building materials segment, competition includes other suppliers of
brick and concrete products, as well as suppliers of diverse alternative
building materials such as steel, aluminum, glass, plastic, and wood products.
There are numerous manufacturers of various types of brick and concrete products
in the United States, virtually all of which operate on a regional or local
basis. In every geographical area served by the company, there are numerous
competitors in all significant building product lines. The company is one of
the largest face brick manufacturers in the United States and the largest in the
Southwest. There are numerous plants manufacturing concrete products in the
area in which the company owns and operates plants. Tradewinds' evaporative
coolers compete with approximately five other major manufacturers, two of which
currently have approximately 70 percent of the market. None of the competition,
however, manufactures coolers constructed of injection molded polypropylene
material.
The company's western style boots and other footwear products compete with
approximately 20 other major manufacturers of high quality merchandise, and many
more manufacturers of lesser quality footwear.
RESEARCH ACTIVITIES
In the normal course of business, the company conducts research and
development activities to improve existing products and to develop new products
within its current product lines. These activities include developing new
styles, effective use of new materials, and developing new manufacturing
techniques. The amount spent during each of the last three fiscal years on
these activities did not exceed one percent of the company's total operating
revenues.
(Page 4)
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ENVIRONMENT
There are numerous federal, state, and local statutes, regulations and
ordinances regulating discharge of materials into the environment or otherwise
relating to the protection of the environment, including those concerning clean
air, water, and waste disposal. In management's opinion, none of these will
materially affect the company's earnings or competitive position and should not
require any material increase in capital expenditures.
EMPLOYEES
The company had 4,481 employees in its operations as of December 31, 1995.
The number of employees by job position at December 31, 1995, was as
follows:
Building Parent and
Materials Footwear Other Total
--------- -------- ---------- -----
Production 1,383 1,659 3 3,045
Sales 539 213 5 757
Administrative, Engineering,
Clerical, and Other 439 202 38 679
----- ----- ----- -----
2,361 2,074 46 4,481
===== ===== ===== =====
FOREIGN OPERATIONS
Footwear products are marketed in foreign countries, primarily Canada,
Western Europe, and Japan. Foreign operations are not material to consolidated
operations.
ITEM 2. PROPERTIES
Information concerning the company's principal production facilities is as
follows:
The company's current annual brick manufacturing capacity is approximately
775 million brick. The company's 16 operating brick plants are located on
approximately 6,000 acres of land, which includes associated clay mining
operations. The plants have individual production capacities ranging from 16.5
million to 128 million brick each year. The company began construction on a new
brick manufacturing facility that is scheduled for completion in the second
quarter of 1996. This facility will add approximately 8% to the total brick
manufacturing capacity of the company.
The company's tile distribution centers operate out of 11 leased
facilities, consisting of approximately 167,000 square feet of showroom, office
and warehouse space, and one owned showroom/warehouse facility containing 30,000
square feet.
The company's concrete operations include 8 concrete block plants operated
by Featherlite and one plant operated by Acme on tracts of land ranging from 5
acres to 24 acres. In addition, Featherlite operates a limestone mill on a 36
acre tract of land and owns 62 acres of volcanic cinder mines and leases mining
rights on 2,100 acres of land for quarrying architectural limestone.
Tradewinds manufactures its evaporative coolers in Phoenix, Arizona, in a
leased facility containing approximately 90,000 square feet.
The footwear manufacturing facilities consist of 7 plants, one of which is
currently not operating, and related warehouses containing approximately 784,000
square feet, located on land owned by the company. These plants have a designed
capacity to produce in excess of 3 million pair of footwear annually.
(Page 5)
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The company's corporate administrative headquarters in Fort Worth, Texas,
is contained in 26,000 square feet of modern office facilities.
The company owns various interests in oil and gas mineral leases in Texas,
Oklahoma, Louisiana, and Arkansas. Revenues received to date from these
interests have not and are not anticipated to have a material effect on
consolidated revenues.
ITEM 3. LEGAL PROCEEDINGS
The company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and lawsuits in the
aggregate will not have a material adverse effect on the company's consolidated
financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the company's security holders
during the last quarter of its fiscal year ended December 31, 1995.
EXECUTIVE OFFICERS
Certain information regarding the executive officers is as follows:
Employed
by Date First
Company Appointed an
Name Age In Officer Title
- -------------------- --- -------- ------------- --------------------------
John Justin 79 1936 December 1969 Chairman of the Board and
Chief Executive Officer
J. T. Dickenson 66 1974 September 1983 President and Chief
Operating Officer
Richard J. Savitz 49 1979 March 1982 Vice President-Finance
and Treasurer
Jon M. Bennett 64 1969 December 1979 Vice President-
Administration and
Secretary
Edward L. Stout, Jr. 70 1949 March 1974 Vice President-Brick
Operations
Frank A. Scivetti 53 1982 March 1995 Vice President-Footwear
Operations
Judy B. Hunter 37 1990 October 1990 Controller, Assistant
Treasurer
There are no family relationships among any of the above officers and there
are no known arrangements or understandings between any executive officer and
any other person pursuant to which any of the above named persons was selected
as an officer.
(Page 6)
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference from the 1995 Annual Report to Shareholders,
pages 28, 29, and 30.
As of February 28, 1996, there were 1,758 common shareholders of record.
In addition, approximately 2,617 shareholders are participants in the Justin
Industries, Inc. Employee Stock Ownership Plan.
Dividends declared for the most recent two fiscal years are as follows:
Quarter Ended Cash Dividend Declared
3/31/94 $.04
6/30/94 $.04
9/30/94 $.04
12/31/94 $.04
3/31/95 $.04
6/30/95 $.04
9/30/95 $.04
12/31/95 $.04
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the 1995 Annual Report to Shareholders,
pages 28 and 29.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from the 1995 Annual Report to Shareholders,
pages 13 through 17.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the company at December 31, 1995 and
1994 and the consolidated statements of income, shareholders' equity, and cash
flows for the years 1995, 1994, and 1993 and the report of independent auditors
thereon, and the company's unaudited quarterly financial data for the two-year
period ended December 31, 1995 are incorporated by reference from the 1995
Annual Report to Shareholders, pages 18 through 27 and page 30.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
(Page 7)
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Incorporated herein by reference from the company's definitive proxy
statement for the Annual Meeting of Shareholders to be held April 11, 1996
("Proxy Statement"), pages 3, 4 and 7.
Information regarding the executive officers is included in Part I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Proxy Statement, pages 9 through
12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required as to security ownership is incorporated herein by
reference from the Proxy Statement, pages 7 and 8.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Proxy Statement, page 16.
(Page 8)
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Reference
-----------------------------
Annual Report
to Shareholders
Form 10-K (page)
----------- -----------------
Data incorporated by reference from attached
Annual Report to Shareholders of
Justin Industries, Inc.:
Report of independent auditors 27
Consolidated balance sheet at
December 31, 1995 and 1994 18
For the years ended December 31, 1995,
1994, and 1993:
Consolidated statement of income 19
Consolidated statement of shareholders'
equity 19
Consolidated statement of cash flows 20
Notes to consolidated financial statements 21-26
2. Financial Statement Schedules
Report of Independent Auditors and Consent of
Independent Auditors S-1
Schedules for years ended December 31, 1995,
1994, and 1993:
II - Valuation and qualifying accounts S-2
All other schedules and compliance information have been omitted since the
required information is not present or is not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the financial statements and the notes thereto.
(Page 9)
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3. Exhibits
Exhibit
No. Description
- ------- -----------
3.1 Articles of Incorporation of Registrant, as amended (incorporated by
reference to the Registrant's Current Report on Form S-8 dated March 22,
1995)
3.2 By-Laws of Registrant, as amended (incorporated by reference to the
Registrant's Current Report on Form 8-K dated September 7, 1990)
4.1 Rights Agreement dated as of October 6, 1989 between Registrant and
Team Bank, as Rights Agent (incorporated by reference to Registrant's
Registration Statement on Form 8-A dated October 10, 1989)
4.2 First Amendment to Rights Agreement dated as of October 4, 1990
between Registrant and Ameritrust Texas, N.A., as successor Rights Agent
(incorporated by reference to Registrant's Amendment No. 1 on Form 8 to
Registration Statement on Form 8-A dated October 4, 1990)
10.1 Registrant's 1981 Stock Option Plan*
10.2 Registrant's 1984 Incentive Stock Option Plan*
10.3 Registrant's Justin Industries, Inc. 1996 Non-Employee Director Stock
Option Plan (incorporated by reference from the company's definitive
proxy statement for the Annual Meeting of Shareholders to be held on
April 11, 1996)
10.4 Registrant's 1992 Stock Option Plan (incorporated by reference from
the company's definitive proxy statement for the Annual Meeting of
Shareholders held on April 3, 1992)
10.5 Registrant's Deferred Compensation Plan*
10.6 Form of Registrant's Special Executive Benefit Program*
10.7 Registrant's Supplemental Executive Retirement Plan of 1992
(incorporated by reference to Registrant's 1992 Annual Report on Form
10-K)
10.8 Registrant's Employee Stock Ownership Plan, as restated January 1,
1989 (incorporated by reference to Registrant's 1994 Annual Report on
Form 10-K)
10.9 First Amendment to the Registrant's Restated Employee Stock Ownership
Plan, effective July 1, 1995 (incorporated by reference to Registrant's
1994 Annual Report on Form 10-K)
10.10 Second Amendment to the Registrant's Restated Employee Stock
Ownership Plan, effective August 1, 1995 (incorporated by reference to
Registrant's 1994 Annual Report on Form 10-K)
10.11 Employment Agreement dated as of December 14, 1995 between
Registrant and John S. Justin, Jr. (incorporated by reference to
Registrant's 1994 Annual Report on Form 10-K)
10.12 Form of Severance Agreement dated March 23, 1990 between Registrant
and certain of its executive officers*
10.13 Form of Severance Agreement dated March 23, 1990 between Registrant
and certain of its officers and employees*
10.14 Revolving Loan Agreement between Registrant, NationsBank of Texas,
N.A. (formerly NCNB Texas National Bank) as Administrative Lender and
the several banks listed on the signature pages thereof, as amended in
the First and Second Amendments through June 9, 1990*
(Page 10)
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Exhibit
No. Description
- ------- -----------
10.15 Third Amendment to the Revolving Loan Agreement dated as of December
3, 1990 among Registrant, NationsBank of Texas, N.A. (formerly NCNB
Texas National Bank), Bank One, Texas, N.A. (formerly Team Bank),
Citibank, N.A., The Bank of New York and Texas Commerce Bank--Fort
Worth, N.A. (incorporated by reference to Registrant's Current Report on
Form 8-K dated December 3, 1990)
10.16 Fourth Amendment to the Revolving Loan Agreement dated as of
December 31, 1991 among Registrant, certain subsidiaries of the
Registrant, NationsBank of Texas, N.A., as Administrative Lender,
NationsBank of Texas, N.A., Bank One, Texas, N.A. (formerly Team Bank),
Citibank, N.A., The Bank of New York and Texas Commerce Bank, National
Association (successor by merger to Texas Commerce Bank--Fort Worth,
N.A.) (incorporated by reference to Registrant's 1991 Annual Report on
Form 10-K)
10.17 Fifth Amendment to the Revolving Loan Agreement dated as of May 1,
1992 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A. (formerly Team Bank), Citibank, N.A.,
The Bank of New York and Texas Commerce Bank, National Association
(successor by merger to Texas Commerce Bank--Fort Worth, N.A.)
(incorporated by reference to Registrant's 1992 Annual Report on Form
10-K)
10.18 Sixth Amendment to the Revolving Loan Agreement dated as of December
31, 1993 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A., Citibank, N.A., The Bank of New York
and Texas Commerce Bank, National Association (incorporated by reference
to Registrant's 1993 Annual Report on Form 10-K)
10.19 Seventh Amendment to the Revolving Loan Agreement dated as of July
24, 1995 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A., The Bank of New York, and Texas
Commerce Bank, National Association
10.20 Term Loan Agreement dated as of December 3, 1990 among the
Registrant, NationsBank of Texas, N.A. (formerly NCNB Texas National
Bank), Bank One, Texas, N.A. (formerly Team Bank), Citibank, N.A. and
Texas Commerce Bank--Fort Worth, N.A. (incorporated by reference to
Amendment No. 4 to Registrant's Schedule 14D-9 dated December 6, 1990)
10.21 First Amendment to the Term Loan Agreement dated as of December 31,
1991 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A. (formerly Team Bank), Citibank, N.A.
and Texas Commerce Bank, National Association (successor by merger to
Texas Commerce Bank--Fort Worth, N.A.) (incorporated by reference to
Registrant's 1991 Annual Report on Form 10-K)
10.22 Second Amendment to the Term Loan Agreement dated as of May 1, 1992
among Registrant, certain subsidiaries of the Registrant, NationsBank of
Texas, N.A., as Administrative Lender, NationsBank of Texas, N.A., Bank
One, Texas, N.A. (formerly Team Bank), Citibank, N.A. and Texas Commerce
Bank, National Association (successor by merger to Texas Commerce Bank--
Fort Worth, N.A.) (incorporated by reference to Registrant's 1992 Annual
Report on Form 10-K)
10.23 Third Amendment to the Term Loan Agreement dated as of December 31,
1993 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A., Citibank, N.A. and Texas Commerce
Bank, National Association (incorporated by reference to Registrant's
1993 Annual Report on Form 10-K)
10.24 Fourth Amendment to the Term Loan Agreement dated as of July 24,
1995 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A., and Texas Commerce Bank, National
Association
(Page 11)
================================================================================
Exhibit
No. Description
- ------- -----------
13 Annual report to shareholders for the year ended December 31, 1995
21 Subsidiaries of the Registrant
23 Report of Independent Auditors and Consent of Independent Auditors
(included herein at page S-1)
27 Financial Data Schedules
*Incorporated by reference to Registrant's Amendment No. 1 on Form 8 to Annual
Report on Form 10-K dated August 23, 1990.
(b) Reports on Form 8-K
None.
(Page 12)
================================================================================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JUSTIN INDUSTRIES, INC.
(Registrant)
By: /S/ JOHN JUSTIN
John Justin
Chairman of the Board and Chief Executive Officer
March 15, 1996
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:
/S/ JOHN JUSTIN /S/ BAYARD H. FRIEDMAN
- -------------------------------- --------------------------------
John Justin Bayard H. Friedman
Chairman of the Board and Director, March 15, 1996
Chief Executive Officer
March 15, 1996
/S/ J. T. DICKENSON /S/ DEE J. KELLY
- -------------------------------- --------------------------------
J. T. Dickenson Dee J. Kelly
Director, President and Chief Director, March 15, 1996
Operating Officer
March 15, 1996
/S/ RICHARD J. SAVITZ /S/ JOSEPH R. MUSOLINO
- -------------------------------- --------------------------------
Richard J. Savitz Joseph R. Musolino
Vice President-Finance, Principal Director, March 15, 1996
Finance and Accounting Officer
March 15, 1996
/S/ MARVIN GEARHART /S/ JOHN V. ROACH
- -------------------------------- --------------------------------
Marvin Gearhart John V. Roach
Director, March 15, 1996 Director, March 15, 1996
/S/ ROBERT E. GLAZE /S/ WILLIAM E. TUCKER
- -------------------------------- --------------------------------
Robert E. Glaze William E. Tucker
Director, March 15, 1996 Director, March 15, 1996
(Page 13)
================================================================================
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Justin Industries, Inc.
as of December 31, 1995 and 1994, and for each of the three years in the period
ended December 31, 1995, and have issued our report thereon dated January 24,
1996, incorporated by reference in this Annual Report (Form 10-K). Our audits
also included the financial statement schedule listed in Item 14(a) of the
Annual Report (Form 10-K). This schedule is the responsibility of the company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
January 24, 1996
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Justin Industries, Inc. of our report dated January 24, 1996, included in the
1995 Annual Report to Shareholders of Justin Industries, Inc.
We also consent to the incorporation by reference in the a) Registration
Statement (Form S-8 No. 33-11915) pertaining to the Justin Industries, Inc. 1981
Stock Option Plan and the Justin Industries, Inc. 1984 Incentive Stock Option
Plan and in the related Prospectus; b) Registration Statement (Form S-8 No. 33-
52783) pertaining to the Justin Industries, Inc. Employee Stock Ownership Plan
and in the related Prospectus; and c) Registration Statement (Form S-8 No. 33-
61776) pertaining to the Justin Industries, Inc. 1992 Stock Option Plan and in
the related Prospectus of our reports dated January 24, 1996, with respect to
the consolidated financial statements and schedule of Justin Industries, Inc.
included or incorporated by reference in this Annual Report (Form 10-K) for the
year ended December 31, 1995.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
March 15, 1996
(Page S-1)
================================================================================
JUSTIN INDUSTRIES, INC.
CONSOLIDATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31,
(in thousands of dollars)
Balance at Additions Balance at
Beginning Charged to Deductions End of
of Year Income (1) Year (2)
---------- ---------- ---------- ----------
Reserve Deducted from
Related Assets:
1993
- ----
Doubtful Accounts $ 3,054 $ 1,004 $ 1,044 $ 3,014
1994
- ----
Doubtful Accounts $ 3,014 $ 866 $ 661 $ 3,219
1995
- ----
Doubtful Accounts $ 3,219 $ 1,347 $ 1,226 $ 3,340
(1) Accounts written off, less recoveries.
(2) The reserve for doubtful accounts is deducted from accounts receivable in
the financial statements.
(Page S-2)
================================================================================
SEVENTH AMENDMENT TO
LOAN AGREEMENT
This Seventh Amendment to Loan Agreement (this "Seventh Amendment"), dated
as of July 24, 1995, is entered into among Justin Industries, Inc., a Texas
corporation ("Borrower"), the banks listed on the signature pages hereof other
than Citibank, N.A. ("Citibank") (singly, a "Lender," and collectively
"Lenders"), Citibank for the purpose of Section 3 hereto only, and NationsBank
of Texas, N.A. (formerly known as NCNB Texas National Bank), as Administrative
Lender ("Administrative Lender").
BACKGROUND
A. Borrower, certain banks and Administrative Lender have entered into
that certain Loan Agreement dated as of May 15, 1989, as amended by that certain
First Amendment to Loan Agreement, dated as of February 12, 1990, that certain
Second Amendment to Loan Agreement, dated as of August 31, 1990, that certain
Third Amendment to Loan Agreement, dated as of December 3, 1990, that certain
Fourth Amendment to Loan Agreement, dated as of June 1, 1991, that certain
Fourth Amendment to Loan Agreement, dated as of December 31, 1991, that certain
Fifth Amendment to Loan Agreement, dated as of May 1, 1992 and that certain
Sixth Amendment to Loan Agreement, dated as of December 31, 1993 (said Loan
Agreement, as amended, the "Loan Agreement"; capitalized terms used herein shall
have the meaning given to them in the Loan Agreement).
B. Borrower has requested to remove (i) Citibank as a lender under the
Loan Agreement and (ii) reduce the Total Commitment by the amount of Citibank's
Commitment. Lenders and Citibank are willing to consent to such request,
subject to the terms and conditions of this Seventh Amendment.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto covenant and agree as follows:
AGREEMENT
1. Amendments.
a. The second paragraph of page 1 of the Loan Agreement, entitled
"BACKGROUND" is hereby amended to read as follows:
"BACKGROUND
Borrower has requested Lenders to make loans to Borrower in the
aggregate principal amount at any one time outstanding to Borrower not
in excess of $52,000,000.00, convertible into term loans on April 1,
1998, or later as herein provided. Borrower requests each Lender to
commit to lend up to the amount stated opposite its name in the
following schedule, and each Lender is willing to extend such credit,
subject to the terms and conditions hereinafter set forth:
Specified
Bank Commitment Percentage
---- ---------- ----------
NationsBank of Texas, N.A. $24,000,000 46.15384%
Bank One, Texas, N.A. $12,000,000 23.07692%
The Bank of New York $10,000,000 19.23076%
Texas Commerce Bank National
Association $ 6,000,000 11.53846%
----------- ---------
Total $52,000,000 100.00%
In consideration of the mutual covenants and agreements contained
herein and other good and valuable consideration, receipt of which is
acknowledged by all parties hereto, the parties agree as follows:"
b. The definition of "Commitment" set forth in Article I of the Loan
Agreement is hereby amended by deleting "$72,000,000" and substituting
"$52,000,000" in lieu thereof.
2. Representations and Warranties. Borrower represents and warrants to
Administrative Lender and each Lender that, as of the date hereof and after
giving effect to the amendments provided in Section 1:
a. the representations and warranties contained in the Loan
Agreement and each of the other Loan Papers are true and correct in all
material respects on and as of the date hereof as though made on and as of
such date;
b. no event has occurred and is continuing which constitutes a
Default or an Event of Default;
c. Borrower has full power and authority to execute and deliver this
Seventh Amendment, and this Seventh Amendment and the Loan Agreement, as
amended hereby, constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms, except as
enforceability may be limited by Debtor Relief Laws and except as rights to
indemnity may be limited by federal or state securities laws; and
d. no authorization, approval, consent or other action by, notice
to, or filing with, any Tribunal or other Person (including the Board of
Directors of Borrower or any Subsidiary), is required for the
(i) execution, delivery or performance by Borrower of this Seventh
Amendment or (ii) the acknowledgment of this Seventh Amendment by each
Subsidiary which executed a Guaranty.
3. Acknowledgement. By signing below, Citibank, Borrower and each Lender
acknowledges and agrees that upon payment in full of the amounts specified in
Section 4.d of this Seventh Amendment, Citibank shall no longer be a Lender
under the Loan Agreement and the other Loan Papers and all the rights (except as
set froth in the immediately succeeding proviso) and obligations of Citibank
thereunder shall terminate; provided, however, Citibank shall continue to be
entitled to indemnification rights with respect to any liabilities or expenses
which arise as a result of matters which occurred at such time as Citibank was a
lender under the Credit Agreement.
4. Conditions of Effectiveness. This Seventh Amendment shall be
effective as of July 24, 1995 ("Effective Date"), subject to the following:
a. Lenders shall have each executed a counterpart of this Seventh
Amendment;
b. Administrative Lender shall have received counterparts of this
Seventh Amendment executed by Borrower;
c. Administrative Lender shall have received counterparts of this
Seventh Amendment acknowledged by each Subsidiary which executed a
Guaranty;
d. Citibank shall have received the accrued and unpaid portion of
all Loans, interest, fees and all other amounts owed to Citibank up to but
not including the date of this Seventh Amendment; and
e. Administrative Lender shall have received, in form and substance
satisfactory to Administrative Lender and Special Counsel, such other
documents, certificates, and instruments as Administrative Lender shall
require.
5. Guarantor Acknowledgement. By signing below, each Subsidiary which
has executed a Guaranty (i) acknowledges, consents and agrees to the execution,
delivery and performance by Borrower of this Seventh Amendment,
(ii) acknowledges and agrees that its obligations in respect of its Guaranty are
not released, diminished, waived, modified, impaired or affected in any manner
by this Seventh Amendment or any of the provisions contemplated herein,
(iii) ratifies and confirms its obligations under its Guaranty and
(iv) acknowledges that it has no claims or offsets against, or defenses or
counterclaims to, its Guaranty.
6. Reference to the Loan Agreement.
6.1. Upon the effectiveness of this Seventh Amendment, each reference in
the Loan Agreement to "this Agreement", "hereunder", "herein", or words of like
import shall mean and be a reference to the Loan Agreement, as affected and
amended hereby.
6.2. The Loan Agreement, as amended by the amendments referred to above,
shall remain in full force and effect and is hereby ratified and confirmed.
6.3. THE LOAN AGREEMENT, AS AMENDED BY THE AMENDMENTS REFERRED TO ABOVE,
TOGETHER WITH EACH OTHER LOAN PAPER, REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN.
7. Costs, Expenses and Taxes. Borrower agrees to pay within five days
after demand all costs and expenses of Administrative Lender in connection with
the preparation, reproduction, execution and delivery of this Seventh Amendment
and the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for Administrative Lender
with respect thereto and with respect to advising Administrative Lender as to
its rights and responsibilities under the Loan Agreement, as hereby amended).
8. Execution in Counterparts. This Seventh Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
9. Governing Law; Binding Effect. This Seventh Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon Borrower, Lenders, Citibank and their respective
successors and assigns.
10. Headings. Section headings in this Seventh Amendment are included
herein for convenience of reference only and shall not constitute part of this
Seventh Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amendment
as of the date first above written.
SPECIFIED PERCENTAGE: NATIONSBANK OF TEXAS, N.A.
46.15384% (formerly known as NCNB Texas National Bank),
as a Lender and as Administrative Lender
By: /S/ Vince Liberio
Vince Liberio, SVP
(Print Name) (Print Title)
SPECIFIED PERCENTAGE: BANK ONE, TEXAS, N.A.
23.07692% (Successor to Team Bank, successor to Team
Bank, N.A., formerly known as Texas American
Bridge Bank, N.A., assignee of the Federal
Deposit Insurance Corporation, as receiver
for Texas American Bank/Fort Worth, N.A.)
By: /S/ J. Michael Wilson
J. Michael Wilson, Vice President
(Print Name) (Print Title)
SPECIFIED PERCENTAGE: THE BANK OF NEW YORK
19.23076%
By: /S/ H. S. Griffith
H. S. Griffith, Senior Vice President
(Print Name) (Print Title)
SPECIFIED PERCENTAGE: TEXAS COMMERCE BANK NATIONAL
11.53846% ASSOCIATION (Successor by merger to
Texas Commerce Bank - Fort Worth, N.A.)
By: /S/ B. B. Wuthrich
B. B. Wuthrich, Vice President
(Print Name) (Print Title)
ACKNOWLEDGED AND AGREED:
CITIBANK, N.A.
By: /S/ Barbara A. Cohen
Barbara A. Cohen, Vice President
(Print Name) (Print Title)
ACKNOWLEDGED AND AGREED:
JUSTIN INDUSTRIES, INC., a
Texas corporation
FEATHERLITE BUILDING PRODUCTS
CORPORATION, a Delaware corporation
FEATHERLITE PRECAST
CORPORATION, a Texas corporation
JUSTIN MANAGEMENT COMPANY,
a Delaware corporation
ACME BRICK COMPANY,
a Delaware corporation
ALPHA CARGO MOTOR EXPRESS,
INC., a Texas corporation
FOOTWEAR MANAGEMENT COMPANY,
a Delaware corporation
JUSTIN BELT COMPANY,
a Texas corporation
H. J. JUSTIN & SONS, INC.,
a Texas corporation
KINGSTIP, INC., a
Delaware corporation
FOOTWEAR INVESTMENT COMPANY,
a Delaware corporation
BRICK INVESTMENT COMPANY, a
Delaware corporation
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance of All
JUSTIN MANAGEMENT COMPANY, L.P.,
a Delaware limited partnership
By: JUSTIN MANAGEMENT COMPANY,
General Partner
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance
ACME ROYALTY COMPANY, L.P., a
Delaware limited partnership
By: BRICK INVESTMENT COMPANY,
General Partner
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance
BOOT ROYALTY COMPANY, L.P., a
Delaware limited partnership
By: FOOTWEAR INVESTMENT
COMPANY, General Partner
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance
ACME ROYALTY COMPANY,
a Delaware corporation
BOOT ROYALTY COMPANY,
a Delaware corporation
J I COMPANY, a Delaware corporation
By: /S/ James Green
James Green, President of all
FOURTH AMENDMENT TO
LOAN AGREEMENT
This Fourth Amendment to Loan Agreement (this "Fourth Amendment"), dated as
of July 24, 1995, is entered into among Justin Industries, Inc., a Texas
corporation ("Borrower"), the banks listed on the signature pages hereof other
than Citibank, N.A. ("Citibank") (singly, a "Lender," and collectively
"Lenders"), Citibank for the purpose of Section 3 hereto only, and NationsBank
of Texas, N.A. (formerly known as NCNB Texas National Bank), as Administrative
Lender ("Administrative Lender").
BACKGROUND
A. Borrower, certain banks and Administrative Lender have entered into
that certain Loan Agreement dated as of December 3, 1990, as amended by that
certain First Amendment to Loan Agreement, dated as of December 31, 1991, that
certain Second Amendment to Loan Agreement, dated as of May 1, 1992, and that
certain Third Amendment to Loan Agreement, dated as of December 31, 1993 (said
Loan Agreement, as amended, the "Loan Agreement"; capitalized terms used herein
shall have the meaning given to them in the Loan Agreement).
B. Borrower has requested to (i) remove Citibank as a lender under the
Loan Agreement and (ii) adjust the Commitment of each Lender. Lenders and
Citibank are willing to consent to such request, subject to the terms and
conditions of this Fourth Amendment.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto covenant and agree as follows:
AGREEMENT
1. Amendments.
a. The second paragraph of page 1 of the Loan Agreement, entitled
"BACKGROUND" is hereby amended to read as follows:
"BACKGROUND
Borrower has requested Lenders to make loans to Borrower in the
aggregate principal amount at any one time outstanding to Borrower not
in excess of $26,000,000. Borrower requests each Lender to commit to
lend up to the amount stated opposite its name in the following
schedule, and each Lender is willing to extend such credit, subject to
the terms and conditions hereinafter set forth:
Specified
Bank Commitment Percentage
---- ---------- ----------
NationsBank of Texas, N.A. $10,920,000 42.00%
Bank One, Texas, N.A. $ 7,540,000 29.00%
Texas Commerce Bank National
Association $ 7,540,000 29.00%
----------- -------
Total $26,000,000 100.00%
In consideration of the mutual covenants and agreements contained
herein and other good and valuable consideration, receipt of which is
acknowledged by all parties hereto, the parties agree as follows:"
b. The definition of "Commitment" set forth in Article I of the Loan
Agreement is hereby amended by deleting "$35,000,000" and substituting
"$26,000,000" in lieu thereof.
c. The definition of "Note" or "Notes" set forth in Article I of the
Loan Agreement is hereby amended to read as follows:
"'Note' or 'Notes' shall mean any and all promissory notes or
Borrower evidencing Advances, in the form of Exhibit "B" attached
hereto, duly completed and executed, together with any extension,
renewal or amendment thereof, or substitution or replacement
therefor."
2. Representations and Warranties. Borrower represents and warrants to
Administrative Lender and each Lender that, as of the date hereof and after
giving effect to the amendments provided in Section 1:
a. the representations and warranties contained in the Loan
Agreement and each of the other Loan Papers are true and correct in all
material respects on and as of the date hereof as though made on and as of
such date;
b. no event has occurred and is continuing which constitutes a
Default or an Event of Default;
c. Borrower has full power and authority to execute and deliver this
Fourth Amendment and the Replacement Notes (as defined in Section 4.d of
this Fourth Amendment), and this Fourth Amendment, the Replacement Notes
and the Loan Agreement, as amended hereby, constitute the legal, valid and
binding obligations of Borrower, enforceable in accordance with their
respective terms, except as enforceability may be limited by Debtor Relief
Laws and except as rights to indemnity may be limited by federal or state
securities laws; and
d. no authorization, approval, consent or other action by, notice
to, or filing with, any Tribunal or other Person (including the Board of
Directors of Borrower or any Subsidiary), is required for the
(i) execution, delivery or performance by Borrower of this Fourth Amendment
or the Replacement Notes or (ii) the acknowledgment of this Fourth
Amendment by each Subsidiary which executed a Guaranty.
3. Acknowledgement. By signing below, Citibank, Borrower and each Lender
acknowledges and agrees that upon payment in full of the amounts specified in
Section 4.e of this Fourth Amendment, Citibank shall no longer be a Lender under
the Loan Agreement and the other Loan Papers and all the rights (except as set
forth in the immediately succeeding proviso) and obligations of Citibank
thereunder shall terminate; provided, however Citibank shall continue to be
entitled to indemnification rights with respect to any liabilities or expenses
which arise as a result of matters which occurred at such time as Citibank was a
lender under the Credit Agreement.
4. Conditions of Effectiveness. This Fourth Amendment shall be effective
as of July 24, 1995 ("Effective Date"), subject to the following:
a. Lenders shall have each executed a counterpart of this Fourth
Amendment;
b. Administrative Lender shall have received counterparts of this
Fourth Amendment duly executed by Borrower;
c. Administrative Lender shall have received counterparts of this
Fourth Amendment acknowledged by each Subsidiary which executed a Guaranty;
d. Administrative Lender shall have received respective original
promissory notes dated the Effective Date in the respective original
principal amounts of (i) $10,920,000 payable to the order of NationsBank of
Texas, N.A., (ii) $7,540,000 payable to the order of Bank One, Texas, N.A.,
and (iii) $7,540,000 payable to the order of Texas Commerce Bank National
Association, each duly executed by Borrower (collectively, the "Replacement
Notes");
e. Citibank shall have received the accrued and unpaid portion of
all Loans, interest, fees and all other amounts owed to Citibank up to but
not including the date of this Fourth Amendment; and
f. Administrative Lender shall have received, in form and substance
satisfactory to Administrative Lender and Special Counsel, such other
documents, certificates, and instruments as Administrative Lender shall
require.
5. Guarantor Acknowledgement. By signing below, each Subsidiary which
has executed a Guaranty (i) acknowledges, consents and agrees to the execution,
delivery and performance by Borrower of this Fourth Amendment, (ii) acknowledges
and agrees that its obligations in respect of its Guaranty are not released,
diminished, waived, modified, impaired or affected in any manner by this Fourth
Amendment or any of the provisions contemplated herein, (iii) ratifies and
confirms its obligations under its Guaranty and (iv) acknowledges that it has no
claims or offsets against, or defenses or counterclaims to, its Guaranty.
6. Reference to the Loan Agreement.
6.1. Upon the effectiveness of this Fourth Amendment, each reference in the
Loan Agreement to "this Agreement", "hereunder", "herein", or words of like
import shall mean and be a reference to the Loan Agreement, as affected and
amended hereby.
6.2. The Loan Agreement, as amended by the amendments referred to above,
shall remain in full force and effect and is hereby ratified and confirmed.
6.3. THE LOAN AGREEMENT, AS AMENDED BY THE AMENDMENTS REFERRED TO ABOVE,
TOGETHER WITH EACH OTHER LOAN PAPER, REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN.
7. Costs, Expenses and Taxes. Borrower agrees to pay within five days
after demand all costs and expenses of Administrative Lender in connection with
the preparation, reproduction, execution and delivery of this Fourth Amendment
and the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for Administrative Lender
with respect thereto and with respect to advising Administrative Lender as to
its rights and responsibilities under the Loan Agreement, as hereby amended).
8. Execution in Counterparts. This Fourth Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
9. Governing Law; Binding Effect. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon Borrower, Lenders, Citibank and their respective
successors and assigns.
10. Headings. Section headings in this Fourth Amendment are included
herein for convenience of reference only and shall not constitute part of this
Fourth Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as of the date first above written.
SPECIFIED PERCENTAGE: NATIONSBANK OF TEXAS, N.A.
42.00% (formerly known as NCNB Texas National Bank),
as a Lender and as Administrative Lender
By: /S/ Vince Liberio
Vince Liberio, SVP
(Print Name) (Print Title)
SPECIFIED PERCENTAGE: BANK ONE, TEXAS, N.A.
29.00% (Successor to Team Bank, successor to Team
Bank, N.A., formerly known as Texas American
Bridge Bank, N.A., assignee of the Federal
Deposit Insurance Corporation, as receiver
for Texas American Bank/Fort Worth, N.A.)
By: /S/ J. Michael Wilson
J. Michael Wilson, Vice President
(Print Name) (Print Title)
SPECIFIED PERCENTAGE: TEXAS COMMERCE BANK NATIONAL
29.00% ASSOCIATION (Successor by merger to
Texas Commerce Bank - Fort Worth, N.A.)
By: /S/ B. B. Wuthrich
B. B. Wuthrich, Vice President
(Print Name) (Print Title)
ACKNOWLEDGED AND AGREED:
CITIBANK, N.A.
By: /S/ Barbara A. Cohen
Barbara A. Cohen, Vice President
(Print Name) (Print Title)
ACKNOWLEDGED AND AGREED:
JUSTIN INDUSTRIES, INC., a
Texas corporation
FEATHERLITE BUILDING PRODUCTS
CORPORATION, a Delaware corporation
FEATHERLITE PRECAST
CORPORATION, a Texas corporation
JUSTIN MANAGEMENT COMPANY,
a Delaware corporation
ACME BRICK COMPANY,
a Delaware corporation
ALPHA CARGO MOTOR EXPRESS,
INC., a Texas corporation
FOOTWEAR MANAGEMENT COMPANY,
a Delaware corporation
JUSTIN BELT COMPANY,
a Texas corporation
H. J. JUSTIN & SONS, INC.,
a Texas corporation
KINGSTIP, INC., a
Delaware corporation
FOOTWEAR INVESTMENT COMPANY,
a Delaware corporation
BRICK INVESTMENT COMPANY, a
Delaware corporation
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance of All
JUSTIN MANAGEMENT COMPANY, L.P.,
a Delaware limited partnership
By: JUSTIN MANAGEMENT COMPANY,
General Partner
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance
ACME ROYALTY COMPANY, L.P., a
Delaware limited partnership
By: BRICK INVESTMENT COMPANY,
General Partner
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance
BOOT ROYALTY COMPANY, L.P., a
Delaware limited partnership
By: FOOTWEAR INVESTMENT
COMPANY, General Partner
By: /S/ Richard J. Savitz
Richard J. Savitz
Vice President - Finance
ACME ROYALTY COMPANY,
a Delaware corporation
BOOT ROYALTY COMPANY,
a Delaware corporation
J I COMPANY, a Delaware corporation
By: /S/ James Green
James Green, President of all
(FRONT COVER - Picture of boot, brick and building block.)
JUSTIN INDUSTRIES
ANNUAL REPORT
1995
AN ENDURING TRADITION OF QUALITY
================================================================================
(INSIDE FRONT COVER)
CONTENTS
Letter to Shareholders, 2
Report on Operations, 5
Management's Discussion and Analysis, 13
Consolidated Financial Statements, 18
Eleven-Year Financial Summary, 28
Shareholder Information, 30
Directors and Officers, 31
Manufacturing Locations - Map, 32
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
1995 % 1994 % 1993 %
Change Change Change
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $461,448 - 4.5 $483,009 + 1.7 $474,931 + 4.8
Income (before change in accounting*) 25,651 - 30.5 36,905 + 2.4 36,035 + 33.0
Net Income 25,651 - 30.5 36,905 - .6 37,141 + 37.1
Earnings Per Share (before change in .94 - 29.3 1.33 + 3.1 1.29 + 31.6
accounting*)
Earnings Per Share .94 - 29.3 1.33 - 1.33 + 35.7
Return on Shareholders' Equity* 11.6% - 40.5 19.5% - 15.9 23.2% + 9.4
Capital Expenditures 26,020 + 39.7 18,627 + 7.8 17,278 + 43.9
Working Capital 181,385 - 2.3 185,722 + .3 185,193 + 12.4
Total Assets 376,409 + .4 374,921 + 8.1 346,680 + 9.6
Long-Term Debt 57,137 - 12.5 65,323 - 26.2 88,504 - 11.8
Shareholders' Equity 236,489 + 6.6 221,900 + 17.5 188,803 + 21.6
Book Value Per Share 8.88 + 9.0 8.15 + 17.3 6.95 + 20.9
Cash Dividends Per Share .16 - .16 - .16 + 14.3
Average Number of Shares Outstanding 27,411 - 1.4 27,810 - .5 27,953 + .7
- ---------------------------------------------------------------------------------------------------------
* before cumulative effect on prior years of in thousands, except per share data
change in accounting for income taxes
</TABLE>
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(PAGE 1)
1995
CORPORATE PROFILE
Justin Industries, headquartered in Fort Worth, Texas, is a leader in each of
its principal businesses:
BUILDING MATERIALS -- including Acme Brick Company, one of the nation's
largest producers of face brick; Featherlite Building Products Corporation, the
Southwest leader in manufactured concrete building products; American Tile
Supply Company, a major Texas distributor of ceramic and marble floor and wall
tile; and Tradewinds Technologies, Inc., producer of Tradewinds evaporative
coolers for home and light commercial applications.
FOOTWEAR -- consisting of Justin Boot Company, Nocona Boot Company, and
Tony Lama Company, whose products give Justin Industries a national identity as
the preeminent producer of western boots, and quality work and sport footwear.
Northland Publishing, a distinguished publisher of western and southwestern
Americana, art, and Native American culture, is also part of Justin Industries.
Justin Industries common stock is traded in the Nasdaq National Market
System using the symbol "JSTN."
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(PAGE 2)
TO OUR SHAREHOLDERS,
January 24, 1996
This was a very challenging year for Justin Industries. While net income of
$25.7 million ($.94 per share) was the fourth highest in our history, it was
below our expectations. Revenues of $461.4 million were also less than we had
hoped for.
We are quite pleased with the achievements of our Building Materials
companies, spearheaded by Acme Brick Company and Featherlite Building Products
Corporation. Both companies were able to capitalize on their strengths as
leaders in the brick and block manufacturing industries, with strong unit sales
and solid prices adding up to an excellent year.
For our Footwear segment, 1995 was not a benchmark year. Reduced levels of
consumer spending across the spectrum of retail business took a toll on western
boots, along with apparel, consumer electronics, and a myriad of other products.
Adding to the dilemma, rising raw material costs narrowed our margins, which
were already affected by an excess of footwear products competing for a reduced
amount of consumer dollars. We have curtailed production in order to maintain
appropriate levels of inventory to service our dealers' needs and will continue
to monitor demand and adjust our output through 1996, conceivably through
further consolidation of manufacturing facilities.
The western boot business, while performing below our hopes in 1995, is far
from extinct. Unit sales, although tracking below the peak years of 1992-93,
were substantially ahead of the trough of the last down-cycle, due to the
broadening of the market for this universally appealing footwear.
The consolidation of administrative activities in the Footwear segment is
now coming to full fruition, and the final result will achieve our major
objectives of reducing overhead expenses and improving our service to customers.
We expect that 1996 will see these objectives fully realized, and appreciable
cost reductions will accrue.
Acme Brick Company's newest brick plant will open in 1996, at the site of
the "Mother Church" at Bennett Community near Millsap, Parker County, Texas,
about forty-five miles west of Fort Worth. It was on these acres that George
Bennett, founder of Acme Brick, discovered a valuable deposit of shale and began
producing high- quality brick in 1891. Acme's new plant will feature the
longest tunnel kiln continuous feed process west of the Mississippi, adding 8
percent to the company's total production and helping to assure our dominant
position in the North Texas market for quality building material.
Featherlite Building Products Corporation will undertake a major expansion
and reconfiguration of its Dallas Block Plant, adding new buildings and forming
equipment to enable the company to produce a wider range of products, including
paving block, at improved efficiency. Located in West Dallas, the plant has a
long record of success, and, upon completion of this additional investment, will
be prepared to compete even more vigorously for a wider range of building
products sales.
Featherlite's products, including its unique Texas Quarries limestone, will
be featured in the performing arts center now under construction in downtown
Fort Worth. This center is the only such facility under construction in the
world at this time and when completed will be a jewel in the crown of North
Texas.
Justin Industries' already solid financial position strengthened further in
1995, with shareholders' equity growing 7 percent to $236.5 million and total
interest-bearing debt declining 7 percent to $73.6 million at year-end. These
improvements were realized while spending $7.3 million to acquire 677,000 shares
of treasury stock.
================================================================================
(PAGE 3)
(Picture of John Justin and J. T. Dickenson)
The value of our common stock, as measured by market trading during 1995,
has been quite restrained, no doubt because of the limitation on our growth
rates. We are certainly desirous of seeing higher market prices for our stock,
along with paying regular dividends to our investors. We strongly believe that
shareholder value will be enhanced by careful attention to our long-range plans,
which include maintaining strength in our balance sheet, investing wisely in
capital assets for future growth, and continuing to develop the new products and
services that will be required for the markets of 1996 and beyond.
For 1996, we do not have a great deal of optimism that we will grandly
exceed 1995's financial performance. Early reports from western-wear markets
are that retailers were generally disappointed with the level of holiday sales,
compared to past years when sales boomed during the Christmas period, and
consequently will be filling shelf space at a reduced level.
On the positive side, if interest rates remain at an attractive level for
builders and home buyers and demand for housing continues, our building
materials companies should continue to enjoy good results. But all of the early
part of 1996, and probably the ensuing many months, will depend on reasonable
solutions to political struggles and the following presidential campaign and
election. Much of your company's future will be determined by these upcoming
economic and political events.
We thank you for your investment in the Company and for your confidence in
its management team. And finally, we express our continued gratitude to our
excellent employees and our board of directors.
/S/ John Justin
JOHN JUSTIN
Chairman and Chief Executive Officer
/S/ J. T. Dickenson
J. T. DICKENSON
President and Chief Operating Officer
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(PAGE 4)
(Picture of brick and block)
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(PAGE 5)
Report on Operations
BUILDING MATERIALS
Acme Brick Company
American Tile Supply Company
Featherlite Building Products Corp.
Tradewinds Technologies, Inc.
Justin Industries' Building Materials segment was again the major profit
contributor for the Company in 1995. Improved levels of commercial construction
helped offset a slower year in home building, enabling this division to post
outstanding earnings, almost equal to the record high set in 1994.
ACME BRICK COMPANY'S primary sales territory experienced a decline in
residential construction in 1995. Historically, a drop in construction forces
downward pressure on selling prices of building materials, and while unit brick
shipments fell approximately 10 percent in 1995, Acme was able not only to
maintain but actually increase average prices modestly during the year. As a
result, Acme had the second most profitable year in its 104-year history,
narrowly missing the all-time record established in 1994.
In 1995, Acme continued efforts to establish intrinsic value for its
products, contributing to the company's strong performance this year. Acme's
long-term commitment to home builders and home buyers was reinforced by the
continuing program of imprinting brick with the Acme logo and by introducing
their exclusive One Hundred Year Limited Guarantee. Radio and print ads,
billboards, numerous point-of-sales materials, and elaborate presentation
packets featuring football star Troy Aikman were used to introduce the guarantee
in Acme's major markets. Additionally, a successful publicity campaign placed
Acme's message in twenty-four regional and national publications, and customers
can now access additional information about Acme Brick Company at its Internet
address, http://www.eden.com/acmebrick.
Acme also took a leading role in a Texas-wide brick marketing council
program educating consumers on the impermanence of certain competitive building
materials. Also in 1995, Acme's team of registered engineers gave over two
hundred presentations to universities and architectural firms on the latest
technology in masonry construction.
Construction of the new state-of-the-art brick plant at Bennett, Texas,
progressed well in 1995. With start up scheduled for late April 1996, this
plant will add 8 percent to Acme's total capacity.
Periodic kilns are used to produce about one-fifth of Acme's brick output,
with the remainder produced from continuous process tunnel kilns. While the
periodic kiln technology is used primarily in older plants, it enables the
production of unique brick products that yield premium prices and also have the
capability to remain cost effective even at widely varying levels of production.
New programmable logic controllers and simplified combustion systems have been
developed and recently installed in these plants to improve fuel efficiency,
safety, and overall performance.
One of the company's goals is to use applied technology, wherever possible,
and this year that resulted in the incorporation of new raw material analysis
equipment. Similar equipment has been installed at the research and production
service facility in Denton, Texas, and is enabling evaluation of new and
prospective raw materials, and the control and quality assurance of existing raw
materials and product mixes. Also, at the Denton laboratory, a new software
system has been installed that greatly improves analysis of clay reserves and
assists in the development of efficient mining plans for clay withdrawal.
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(PAGE 6)
(Picture of brick)
New maintenance systems were installed at most plants during 1995 to
improve efficiency and lower costs. These systems monitor repair expenses and
schedule preventive maintenance for individual pieces of equipment.
The company continued its outstanding safety performance in 1995, setting
the pace for the brick industry. Acme's incidence of lost-time injuries is
dramatically better than the national average. Not only do the company's
employees have a working environment with minimal risk of injury, but the
company realizes cost savings from the continuing focus on safety.
Acme Brick Company has closely followed its long range strategic plan and
eagerly anticipates the challenges of 1996 and following years.
AMERICAN TILE SUPPLY COMPANY completed its first full year as a member of the
Justin Industries' Building Materials family. Acquired in August 1994, American
Tile offers the largest selection of premier domestic and European tile in the
Southwest. To expand its leadership role, two new sales locations have been
opened in Houston, giving the company its first entry into that large market.
In addition, property was purchased in far-north Houston for the construction of
another sales facility. Also in 1995, a new distribution location was opened in
the Fort Worth-Dallas area, bringing the total number of sales locations in
operation to seventeen.
The first phase of an inventory stocking system for smaller markets was
begun in 1995 when American Tile acquired a unique delivery vehicle. Currently
used on a scheduled route from West Texas to Louisiana, the forty-five-foot-long
trailer is equipped with vinyl sides that open accordion-style to allow easy
off-loading of inventory. This new delivery concept allows smaller sales
offices to offer a wider selection of tile with delivery time of only a few
days.
The outlook for growth in the tile business is very good. While still
behind worldwide average use, the United States' tile usage per capita has
doubled since the early 1980s and is expected to continue growing. American
Tile Supply is well positioned to take advantage of this anticipated growth.
FEATHERLITE BUILDING PRODUCTS CORPORATION recorded another year of sales and
earnings growth in 1995. With the continued strong commercial construction
market, most of Featherlite's production facilities operated at historically
high levels. Optimum production rates, along with improved prices, led to
record earnings.
The company is dedicated to upgrading its facilities in order to meet both
the growth potential of its markets and to achieve greater manufacturing
efficiency and flexibility. Featherlite completed the installation of a new,
fully automated plant at its location just north of Austin in Round Rock, Texas,
in 1995. This new plant has proven to be much superior to non-automated
facilities in operating ease and efficiency. In 1996, a major expansion will
begin at the Dallas location with the installation of a state-of-the-art
facility capable of producing a variety of concrete masonry products including
block, pavers, and landscape products. This expansion will position Featherlite
to continue its dominance in the Fort Worth-Dallas concrete block market and to
aggressively market other, more profitable, specialty concrete products.
================================================================================
(PAGE 7)
(Picture of concrete building block)
Texas Quarries, Featherlite's architectural limestone division, also had an
outstanding year in 1995. The quality of workmanship of Texas Quarries
limestone is the focus of its employees, and Texas Quarries' products are the
standard by which others are judged. Capital improvements in equipment and
facilities in recent years helped to enhance the already excellent quality of
its product and to expand volume potential. Those improvements allowed this
operation to craft over 50 percent more stone than in any previous year. With
good backlogs going into 1996, Texas Quarries is poised for another excellent
year.
Featherlite completed the third year of its Total Quality Management
program. With the help of ad hoc committees comprised of employees and
management working together, many goals were reached in 1995 that helped
Featherlite attain the success it has enjoyed. Featherlite and its employees
are committed to the quality of its products, services, and total operations.
TRADEWINDS TECHNOLOGIES, INC.'s evaporative cooler sales in both the wholesale
and retail segments were hampered by unusually cool weather in 1995. With lower
revenues, profits dipped slightly for the year. Product quality, durability,
and ease of maintenance continue to be important in the consumer's buying
decision, however, and for these reasons Tradewinds coolers continue to gain
market acceptance.
Responding to requests from contractors and homeowners, a new residential
model, the TS571 large side-draft, was introduced in 1995. This product opens a
new market segment in large residential and commercial projects requiring side-
draft units with higher output. Tooling was completed in February and first-
year sales were on target. Also during the year, further product development
continued for the single inlet evaporative cooler, resulting in a sturdier and
easier-to-assemble design.
Tradewinds continued its aggressive advertising, telemarketing, and direct
mail campaigns, which have strengthened the Tradewinds brand recognition in all
markets. Specifications have been written for several large public sector and
privately owned projects for 1996
Tradewinds expects to be well positioned for growth in unit sales and
profitability in 1996 because of quality products and expansion in retail
outlets within key markets, as well as enhancement of the product line.
================================================================================
(PAGE 8)
(Picture of boots)
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(PAGE 9)
(Picture of boot)
Report on Operations
FOOTWEAR
Justin Boot Company
Nocona Boot Company
Tony Lama Company
Chippewa Shoe Company
Justin Industries' Footwear group experienced its second consecutive year of
revenue declines. Hoped-for improvements in business conditions did not
materialize, and margins were negatively affected by the reduced sales volume
and the expense of reorganizing production facilities and administrative
functions.
As 1995 unfolded, it became increasingly apparent that retail apparel sales
could be expected to decline over the course of the year. This trend was
particularly noticeable in the "big ticket" segment of apparel, of which western
boots are a part. Industry-wide sales of boots and other apparel continued to
edge downward as western specialty shops experienced a decrease in consumer
spending. Justin Industries' Footwear group, however, was able to maintain or
improve its market share.
The outlook for 1996 is encouraging, as there has been renewed interest in
western apparel and accessories, not only domestically, but also in the European
market. Trends in Europe generally foretell fashions in the United States.
There is a developing trend in the ladies' market as fashion editors and
designers incorporate the "western look" in layouts where the models display
western boots with upscale, non-western attire. Exposure is also coming from
traditionally non-western designers who are using western accessories with their
clothing lines.
Western boots have become a staple part of the casual wardrobe of fashion-
conscious individuals; therefore, the downturn the Footwear operations
experienced over the last two years is considered to be temporary, and should
turn around as the divisions continue to produce boots with the highest
standards of quality, up-to-date styling, and competitive pricing.
Each of Footwear's branded boot divisions -- Justin, Nocona, and Tony Lama
- -- is seeking to make the most of existing markets by continuing to diversify
into new product categories and new market niches. The Tony Lama division has
introduced a line of children's cowboy boots that has been well received, and
complements the established line of Justin children's ropers and lacers.
================================================================================
(PAGE 10)
(Picture of boots)
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(PAGE 11)
(Picture of boot)
The Justin division has further developed a category of functional and
casual footwear, with a variety of styles of "Specialty Ropers and Lacers"
designed to capture a share of the fastest growing segment of the boot business.
In addition, Justin has been focusing on assisting retailers with visual
merchandising by providing more sophisticated fixtures, intended to better
display products at the critical point of sale, as well as differentiating and
highlighting Justin's own brands.
At Nocona, the introduction of the new "Fit Wall" concept has been
exceptionally successful. As the smallest division in the Footwear group,
Nocona has been disadvantaged by a relative lack of shelf space, a less-than-
adequate representation of styles, and lower visibility. The Nocona Fit Wall
"store within a store" enables a retailer to purchase at least one pair of every
style boot, to be displayed along with samples of every size (from 3AAA to
15EEE), in one section of the store. Consumers are then able to select the
styles of their choice in their own particular sizes, with delivery guaranteed
within three weeks. This marketing effort has moved the Nocona brand to the
forefront of the thirty-nine stores that were utilizing this technique by the
end of 1995, and has resulted in increased sales of Nocona boots in each of
these locations. In 1996, 111 additional independently owned stores are
scheduled to begin using the "Fit-Wall" concept.
Sales of Footwear products in Europe have thus far been short of
expectations. However, the company continues to believe that the market has
very good potential, and therefore more aggressive advertising and promotional
programs are planned for 1996. Moreover, the marketing thrust that has
previously been focused entirely on fashion issues has been expanded. There is
significant equestrian activity in Europe, particularly in Germany, Italy, and
France. Initial incursions into these markets have been encouraging, and the
company intends to develop this opportunity further.
Footwear operations reacted to the slowdown in mainstream retail by
reducing production and employee levels at the plants in 1995. Inventory levels
were lowered during the year and a key goal is to further improve inventory
turnover by matching production of finished goods to consumer demand in 1996.
While western boots experienced declines in unit shipments in 1995, sales
of Chippewa shoe products were relatively unchanged from 1994. Chippewa has
been able to generate demand by positioning the brand as the premier quality
utilitarian footwear available in the market today. Chippewa's marketing
efforts have emphasized outdoor lifestyles. New product programs have been
developed for 1996 to expand the line and increase business.
The administrative consolidation of Footwear operations started in 1994 was
completed in late 1995, and the efficiencies gained by eliminating redundant
activities will benefit the Company's future earnings through reduced overhead
expenses. Analysis of other activities is ongoing to develop further cost
savings and improve all aspects of Footwear operations.
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(PAGE 12)
(Picture of brick, block, and boots)
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(PAGE 13)
(Graph of Net Sales by Line of Business)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Following five consecutive years of increased profitability, earnings for Justin
Industries declined in 1995, as both of the Company's business segments,
Building Materials and Footwear, experienced lower profitability. While the
Building Materials' profits were only 6% below the record high of 1994,
Footwear's declined about 60% from the previous year, as weak consumer spending
on apparel and similar goods depressed sales of western boots. Footwear
earnings were also impacted by costs associated with the now-completed
reorganization of administrative functions and workforce reductions. Net income
of $25.7 million, while less than the previous three years, was the fourth
highest in the Company's history.
Operations
Consolidated net sales in 1995 were $461.4 million, a decrease of 4.5% from
1994. Revenues of $483 million in 1994 were 1.7% above those of 1993.
In the Building Materials segment, revenues in 1995 increased for the
seventh consecutive year to $240.1 million, a new high. This amount was 7.1%
greater than 1994 net sales. Total Building Materials sales in 1994 of $224.2
million were 24.7% above 1993. The Building Materials group includes Acme Brick
Company and its subsidiary American Tile Supply Company (acquired in August
1994), along with Featherlite Building Products Corporation and Tradewinds
Technologies, Inc. Net sales at Acme (including American Tile) increased 7.4%
in 1995 from 1994 due to the inclusion of American Tile revenues for a full
year, versus only five months in 1994. Acme's revenues would have declined 6.6%
in 1995 had American Tile been excluded in all years. In 1995, Acme sold 10.3%
fewer brick than in 1994 due to lower levels of residential construction in its
market areas. The average selling price, however, was 3.6% greater in 1995 than
1994. Sales of purchased products at Acme (excluding American Tile) declined 4%
in 1995. Acme's total revenues in 1994 were 26.7% above 1993. Of this
increase, 16.1% related to existing operations, with the remainder resulting
from the acquisition of American Tile. Among the components of Acme's 1994
revenue growth were unit brick sales gains of 6.2%, growth in the average
selling price of 7.7%, and an almost 20% gain in the sale of purchased products
(excluding American Tile).
Featherlite's revenues increased 7.6% in 1995, following a 19.3% gain in
1994. Featherlite has benefited from increasing levels of commercial
construction in Texas. Gains in both years are attributable to increased
revenues of all product lines, which include concrete block, cut limestone, and
purchased products. In addition, the average selling price of concrete block
products has increased in each of the last two years.
Tradewinds sold fewer evaporative coolers in 1995 as wet weather conditions
prevailed for much of their selling season, resulting in a 6% decline in sales.
Tradewinds represents only 2% of segment revenues.
Footwear revenues declined to $221.4 million in 1995, down 14.5% from
1994's net sales of $258.8 million. Sales in 1994 were 12.3% below the record
high of $295.2 million set in 1993. In 1995, unit sales of footwear products
were 19.8% below those of 1994, while the average selling price increased 6.5%
in 1995.
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(PAGE 14)
(Graph of Income from Continuing Operations)
(Graph of Net Income)
Unit shipments in 1994 were approximately 15% less than 1993, while the
average selling price in 1994 increased 2.5% over that of 1993. The western
boot business is not only seasonal in nature, but is also cyclical in that sales
are subject to trends in men's and women's fashions as well as consumer spending
patterns in general. Since mid-1993, sales of the Company's footwear products
have declined on a quarterly as well as annual basis. The slowness has been in
all western boot lines, with a greater reduction in the more fashion-sensitive
ladies' segment. As noted above, average selling prices have increased since
1993. Changes in the product mix have brought about higher average prices as
the percentage of exotic skin boot sales has grown.
Justin Industries' Building Materials business operates primarily in a
seven-state region in the central and southwestern United States, while Footwear
segment sales are made to customers nationwide.
As a percentage of sales, cost of sales was 65.2% in 1995, compared to
65.1% in 1994 and 66.2% in 1993. Consolidated gross profit margins were
relatively unchanged in 1995 from 1994 because of the higher percentage of
Building Materials sales in 1995; however, individually the two business
segments realized lower gross margins in 1995. Gross profit margins in the
Building Materials segment were 41.2% in 1995, 41.7% in 1994, and 39.4% in 1993.
Product mix is a major factor in margin fluctuation. Brick is the highest
margin product in the Company, and although gross profit margins in the brick
business were higher in 1995 due to the above-mentioned pricing gains, brick
revenues decreased both in actual dollars and as a percentage of Building
Materials sales, as Featherlite reached new revenue highs and American Tile
Supply contributed twelve months of revenues versus only five in 1994.
Featherlite's margins also improved in 1995 as concrete block were sold at
higher average prices than in the previous year. The overall improvement in the
Building Materials' gross profit margin in 1994 from 1993 was due to significant
brick volume and pricing gains at Acme, resulting from increased levels of
residential construction. Acme's manufacturing costs have remained about the
same over the last three years as production levels have been at or near
capacity. In 1994, Featherlite's gross profit margin was less than in 1993 due
to product mix and higher maintenance costs. Tradewinds' margins declined
slightly in 1995 due to volume.
Footwear gross profit margins were 27.9% in 1995, 29.0% in 1994, and 30.3%
in 1993. As revenues have declined over the last two years, production levels
have been lowered. As a result, gross profit margins have been adversely
affected. In addition, 1995 margins were impacted by approximately $700,000 in
costs incurred with the reconfiguration of the Fort Worth Justin Boot plant.
Expenses were related to the temporary closure of the plant, workforce
reductions, and changes to production lines to accommodate more efficient
manufacturing techniques.
Selling, general, and administrative expenses as a percentage of net sales
were 25.0% in 1995 versus 22.1% in 1994. The total of these expenses increased
approximately $8.6 million in 1995 from the prior year. Approximately $6
million of the increase resulted from including American Tile for the full year
versus the five months in 1994. Also in 1995, advertising costs were $2.8
million more than in 1994, and the Footwear segment spent approximately $2
million in 1995 to complete the consolidation of administrative departments.
Footwear sales commissions were lower in 1995 because of reduced volume. The
increase in selling, general, and administrative costs in 1994 from 1993 was
primarily due to the August 1994 acquisition of American Tile and general
inflation. In addition, approximately $500,000 of costs were incurred in 1994
in connection with the Footwear administrative consolidation.
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(PAGE 15)
(Graph of Capital Expenditures)
(Graph of Interest-Bearing Debt)
Due to the decrease in interest rates during 1995, the discount rate used
to determine the Company's pension obligations as of December 31, 1995, and the
related expense for 1996, has been reduced. The effect on 1996 income should be
minimal, however, due to the higher-than-expected return on assets in 1995.
Interest expense in 1995 was $5.03 million, compared to $4.06 million in
1994 and $4 million in 1993. Interest rates on most of the Company's borrowings
are based on short-term money market indices, and while total interest-bearing
indebtedness has declined almost $36 million since 1992, interest rates have
risen as the Federal Reserve Bank adjusted the discount rate. As a result, the
Company's average effective interest rate was 6.3% in 1995 compared to 4.7% in
1994 and 3.9% in 1993. Note 4 to the Consolidated Financial Statements on page
22 describes the Company's borrowing arrangements.
Income tax expense, as a percentage of pre-tax income, was 36.2% in 1995,
35.8% in 1994, and 35.7% in 1993. The federal statutory rate was 35% for all
three years. See Note 7 to the Consolidated Financial Statements on page 25 for
a reconciliation of the actual tax rate to the federal statutory tax rate and
other information relating to income tax.
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. This statement,
issued in 1992, established new financial accounting reporting standards for the
effect of income taxes that result from the Company's activities during the
current and preceding years. A credit to net income of $1.106 million was
realized in 1993, resulting from the cumulative effect of the change in
accounting for income taxes under the new statement.
The table on page 30, Quarterly Financial Data, presents summarized
operating results for each quarter in the two years ended December 31, 1995.
The Company's businesses are seasonal in nature, with Building Materials
operations generating greater activity in the second and third quarters and
Footwear operations accelerating in the third and fourth. As a result, first
quarter earnings are generally the lowest, with the fourth quarter usually
producing the highest. In 1995, each three-month period's earnings were less
than the comparable 1994 quarter, as Footwear profitability was down due to
weaker revenues.
The Company's Building Materials operations are dependent on levels of
construction activity which are influenced somewhat by interest rates. Changes
in interest rates therefore can affect the Company's future earnings prospects.
Inflation has not had a significant impact on the Company's operations in
recent years; however, the Company attempts to recover any cost increases
through improvements to its manufacturing processes and through increases in
price where competitively feasible.
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(PAGE 16)
(Graph of Shareholders' Equity)
(Graph of Book Value Per Share)
Financial Condition, Liquidity and Capital Resources
The Company's financial condition strengthened further in 1995 due to another
solid earnings performance, as well as to continued focus on the goal of
leverage ratio improvement through reduced borrowings and equity growth. In
1995, borrowings were lowered $5.7 million, and equity increased $14.6 million.
As a result, the ratio of total interest-bearing debt to shareholders' equity
declined to .31:1 at December 31, 1995, from .36:1 a year earlier. The ratio of
long-term debt to equity was lowered from .29:1 at December 31, 1994, to .24:1
at year-end 1995.
The Balance Sheet Trends table on page 17 reflects the percentage
relationship of the major asset, liability and equity accounts to total assets.
In 1995, total assets increased .4% to $376.4 million. Working capital of
$181.4 million at December 31, 1995 was $4.3 million less than a year ago,
although the current ratio improved to 3.6:1 from 3.5:1 at year-end 1994.
Net cash provided by operating activities totaled $37.8 million in 1995,
compared to $45.7 million in 1994 and $42.8 million in 1993. In addition to
paying down debt, significant usages in 1995 included capital additions,
treasury stock purchases, and cash dividends. The company spent $26 million in
1995 for fixed asset additions. Approximately 70% of these expenditures were by
Acme Brick for upgrading production equipment and distribution facilities, as
well as initial construction costs for its new plant west of Fort Worth.
Approximately $11 million will be spent in the first half of 1996 to complete
the new brick plant. During the year, the company spent $7.3 million to
purchase 677,000 shares of treasury stock pursuant to a one-million-share
repurchase program. Dividends for the year were unchanged from 1994 at $.16 a
share and totaled $4.3 million.
The Company's primary source of cash is from operations. In addition, the
Company has credit facilities available from commercial banks. The Company
believes that its borrowing arrangements are adequate to support its
requirements for the foreseeable future. During 1995, the Company reduced its
revolving credit facility from $72 million to $52 million. Unused lines of
credit available to the Company at December 31, 1995, were approximately $50
million.
Backlogs
The Company maintains information on sales backlogs in order to plan for future
production levels and to project sales volume. At December 31, 1995, the
backlog for clay brick was $16.5 million, compared with $21.2 million at year-
end 1994. The sales backlog for Footwear products at year-end 1995 was $8.3
million, compared with $13.0 million in 1994.
================================================================================
(PAGE 17)
Balance Sheet Trends
Percent of Total Assets
ASSETS: 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------
Receivables 21% 22% 22% 26% 24%
Inventories 42 43 42 41 41
Property, plant, and equipment 26 23 23 24 27
All other assets 11 12 13 9 8
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
LIABILITIES AND EQUITY:
- ------------------------------------------------------------------------
Interest-bearing debt 19% 21% 27% 35% 40%
All other liabilities 18 20 19 16 17
Equity 63 59 54 49 43
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
- ------------------------------------------------------------------------
Operating Trends
Percent of Net Sales
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.2 65.1 66.2 69.3 70.8
------ ------ ------ ------ ------
Gross profit 34.8 34.9 33.8 30.7 29.2
Operating expenses 26.1 23.0 22.0 21.4 25.4
Income taxes 3.1 4.3 4.2 3.3 1.4
------ ------ ------ ------ ------
Income from continuing operations 5.6 7.6 7.6 6.0 2.4
Discontinued operations - - - - 2.8
Cumulative effect on prior years of
change in accounting for income taxes - - .2 - -
------ ------ ------ ------ ------
Net income 5.6% 7.6% 7.8% 6.0% 5.2%
====== ====== ====== ====== ======
- --------------------------------------------------------------------------------
<TABLE>
Five-Year Analysis of Sales and Operating Profit from Continuing Operations by
Product Lines
(in thousands of dollars)
<CAPTION>
1995 1994 1993 1992 1991
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Building Materials:
Net sales $240,094 52% $224,213 46% $179,740 38% $158,808 35% $123,004 33%
Operating profit 42,107 82 44,600 66 31,445 48 16,423 31 4,979 18
Footwear:
Net sales 221,354 48 258,796 54 295,191 62 294,459 65 245,346 67
Operating profit 9,234 18 22,871 34 34,168 52 36,054 69 22,934 82
- -----------------------------------------------------------------------------------------------------------------------------------
Totals:
Net sales $461,448 100% $483,009 100% $474,931 100% $453,267 100% $368,350 100%
Operating profit $ 51,341 100% $ 67,471 100% $ 65,613 100% $ 52,477 100% $ 27,913 100%
Less interest and parent
company operations 11,137 9,995 9,583 10,080 14,180
- -----------------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations before income
taxes and cumulative effect
on prior years of change in
accounting for income taxes $ 40,204 $ 57,476 $ 56,030 $ 42,397 $ 13,733
===================================================================================================================================
</TABLE>
================================================================================
(PAGE 18)
CONSOLIDATED BALANCE SHEET
In Thousands of Dollars, Except Share Data, at
December 31, 1995 1994
- --------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------
Current assets:
Cash $ 2,180 $ 6,071
Accounts receivable, less allowance for doubtful
accounts of $3,340 and $3,219, respectively 78,213 82,266
Inventories 158,330 160,894
Federal and state income taxes 9,800 8,387
Prepaid expenses 2,155 1,953
- --------------------------------------------------------------------------
Total current assets 250,678 259,571
Other assets, at cost 24,195 24,367
Assets held for sale 4,879 5,523
Property, plant, and equipment, at cost:
Land 18,558 17,204
Buildings and equipment 222,576 208,513
Construction in progress 11,069 3,935
- --------------------------------------------------------------------------
252,203 229,652
Less accumulated depreciation 155,546 144,192
- --------------------------------------------------------------------------
Net property, plant, and equipment 96,657 85,460
- --------------------------------------------------------------------------
$376,409 $374,921
==========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------
Current liabilities:
Notes payable to banks $ 10,000 $ 5,000
Trade accounts payable 14,152 19,087
Accrued payroll items 11,786 11,775
Accrued insurance 15,283 15,839
Accrued state and local taxes 2,141 2,769
Other accrued expenses 8,424 9,359
Dividends payable 1,071 1,089
Current portion of long-term debt 6,436 8,931
- --------------------------------------------------------------------------
Total current liabilities 69,293 73,849
Long-term debt, less current portion 57,137 65,323
Deferred income taxes 13,490 13,849
Shareholders' equity:
Voting preferred stock, $2.50 par value;
1,000,000 shares authorized -- Series Two
convertible, 100 shares issued and outstanding - -
Common stock, $2.50 par value; 100,000,000
shares authorized, 27,869,888 shares issued 69,674 69,674
Capital in excess of par value 16,800 16,959
Retained earnings 161,932 140,593
Treasury stock, at cost, 1,234,585 and 637,237
shares, respectively (11,917) (5,326)
- --------------------------------------------------------------------------
Total shareholders' equity 236,489 221,900
- --------------------------------------------------------------------------
$376,409 $374,921
==========================================================================
See accompanying notes.
================================================================================
(PAGE 19)
CONSOLIDATED STATEMENT OF INCOME
In Thousands of Dollars, Except Per Share
Data, for Years Ending on December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
Net sales $461,448 $483,009 $474,931
Costs and expenses:
Cost of goods sold 300,842 314,661 314,431
Selling, general, and
administrative expenses 115,370 106,814 100,465
Interest expense 5,032 4,058 4,005
- ------------------------------------------------------------------------------
421,244 425,533 418,901
- ------------------------------------------------------------------------------
Income before income taxes and cumulative
effect on prior years of change in
accounting for income taxes 40,204 57,476 56,030
Income taxes 14,553 20,571 19,995
- ------------------------------------------------------------------------------
Income before cumulative effect
on prior years of change in accounting
for income taxes 25,651 36,905 36,035
- ------------------------------------------------------------------------------
Cumulative effect on prior years of change
in accounting for income taxes - - 1,106
- ------------------------------------------------------------------------------
Net income $ 25,651 $ 36,905 $ 37,141
==============================================================================
Earnings per share:
Before cumulative effect on prior years of
change in accounting for income taxes $ .94 $ 1.33 $ 1.29
Cumulative effect on prior years of change
in accounting for income taxes - - .04
- ------------------------------------------------------------------------------
$ .94 $ 1.33 $ 1.33
==============================================================================
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<CAPTION> Capital in
In Thousands of Dollars, Except Share Data, for Preferred Common excess of Retained Treasury ESOP loan
Years Ending on December 31, 1995, 1994, and 1993 stock stock par value earnings stock guarantee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1993 $ - $34,837 $16,510 $110,072 $(5,899) $(250)
- ----------------------------------------------------------------------------------------------------------------------------
Issuance of 13,934,944 shares in connection
with a 2-for-1 stock split effected in the form
of a 100% stock dividend - 34,837 - (34,837) - -
Issuance of 157,668 shares of stock from treasury
upon exercise of stock options - - 537 - (57) -
Repayment of ESOP debt - - - - - 250
Net income - - - 37,141 - -
Cash dividends declared -- $.16 per share - - - (4,338) - -
- ----------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 $ - $69,674 $17,047 $108,038 $(5,956) $ -
- ----------------------------------------------------------------------------------------------------------------------------
Issuance of 76,165 shares of stock from treasury
upon exercise of stock options - - (88) - 630 -
Net income - - - 36,905 - -
Cash dividends declared -- $.16 per share - - - (4,350) - -
- ----------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 $ - $69,674 $16,959 $140,593 $(5,326) $ -
- ----------------------------------------------------------------------------------------------------------------------------
Purchase of 677,000 shares of stock for treasury - - - - (7,259) -
Issuance of 79,652 shares of stock from treasury
upon exercise of stock options - - (159) - 668 -
Net income - - - 25,651 - -
Cash dividends declared -- $.16 per share - - - (4,312) - -
- ----------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 $ - $69,674 $16,800 $161,932 $(11,917) $ -
============================================================================================================================
<FN>
See accompanying notes.
</TABLE>
================================================================================
(PAGE 20)
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
In Thousands of Dollars
for Years Ending on December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $25,651 $36,905 $37,141
Adjustments to reconcile net income to cash
provided by operating activities:
Cumulative effect of change in accounting
method for income taxes - - (1,106)
Depreciation 14,742 13,852 13,473
Provision for losses on accounts receivable 1,347 866 1,004
Gain on sale of property, plant, and equipment (167) (122) (589)
Deferred income taxes (1,198) (3,190) (2,566)
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable 2,706 (1,624) 4,494
(Increase) decrease in inventories 2,564 (7,398) (17,077)
(Increase) decrease in other current assets (776) (240) 3,042
Increase (decrease) in accounts payable and
accrued expenses (7,043) 6,628 4,839
Effect of adoption of SFAS No. 109 - - 107
- --------------------------------------------------------------------------------------
Net cash provided by operating activities 37,826 45,677 42,762
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant,
and equipment 261 841 1,080
Purchase of property, plant, and equipment (26,020) (18,627) (17,278)
(Increase) decrease in other long-term assets 803 (115) 1,151
Payment for purchase of business, net of
cash acquired - (9,332) -
- --------------------------------------------------------------------------------------
Net cash used in investing activities (24,956) (27,233) (15,047)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 41,000 57,500 41,058
Repayment of borrowings (46,681) (76,655) (56,862)
Dividends paid (4,330) (4,347) (4,197)
Purchase of treasury stock (7,259) - -
Proceeds from exercise of stock options 509 542 480
- --------------------------------------------------------------------------------------
Net cash used in financing activities (16,761) (22,960) (19,521)
- --------------------------------------------------------------------------------------
Net increase (decrease) in cash (3,891) (4,516) 8,194
Cash at beginning of year 6,071 10,587 2,393
- --------------------------------------------------------------------------------------
Cash at end of year $ 2,180 $ 6,071 $10,587
======================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION:
Cash paid during the year for:
Interest $ 5,129 $ 4,105 $ 4,335
Income taxes, net of refunds $16,140 $23,286 $17,801
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Purchase of business:
Fair value of assets acquired $ - $17,757 $ -
Cash paid for assets and related costs - (9,332) -
Subordinated debt issued - (5,000) -
- --------------------------------------------------------------------------------------
Liabilities assumed $ - $ 3,425 $ -
Decrease in ESOP loan guarantee $ - $ - $ (250)
======================================================================================
<FN>
See accompanying notes.
</TABLE>
================================================================================
(PAGE 21)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ending on December 31
1. Summary of Significant Accounting Policies
NATURE OF OPERATIONS. Justin Industries, Inc. (the "Company") is a
manufacturing and distribution company whose principal lines of business are 1)
building materials -- including face brick, concrete block, and floor and wall
tile; and 2) footwear products, primarily western-style boots. Based on 1995
revenues, the two segments are approximately equal in size. Building materials
are sold directly through Company sales offices primarily in a seven-state area
consisting of Texas, Oklahoma, Arkansas, Louisiana, Kansas, Missouri, and
Tennessee. Approximately 60% of Building Materials' sales are in Texas.
Building Materials' sales are dependent upon construction levels within market
areas served with face brick sales specifically influenced by housing starts.
Footwear products are sold primarily through independent western-wear retailers
in the United States, with approximately 30% of sales in Texas.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its subsidiaries. All material intercompany
accounts and transactions are eliminated upon consolidation. Certain
reclassifications have been made in December 31, 1994 and 1993, amounts to
conform with the 1995 presentation.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INVENTORIES. Inventories are valued at the lower of cost or market.
Finished products and work-in-process are costed using an average cost method,
while raw materials and manufacturing supplies are costed on the first-in,
first-out method.
PROPERTY, PLANT, AND EQUIPMENT. Depreciation is computed principally by
the straight-line method for financial reporting purposes. The annual
depreciation provision has been based upon the following estimated lives:
Buildings 10 to 20 years
Equipment 3 to 15 years
INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS. Intangible assets
resulting from business acquisitions consist of trademarks/tradenames and the
excess of the acquisition cost over the fair value of the net assets of
businesses acquired. Intangibles are amortized on a straight-line basis over 40
years. As of December 31, 1995 and 1994, intangibles were $14.9 million and
$15.2 million, respectively, net of accumulated amortization of $1.3 million and
$.9 million, respectively.
REVENUE RECOGNITION. Revenue from sale of manufactured products is
recognized primarily upon passage of title to the customer, which generally
coincides with physical delivery and acceptance.
ADVERTISING. The Company's policy is to expense advertising costs as
incurred. Total advertising expense for the years ended December 31, 1995,
1994, and 1993, was $16,999,000, $14,242,000, and $15,020,000, respectively.
EARNINGS PER SHARE. Earnings per share is determined by dividing net
income by the average number of common shares outstanding, plus common stock
equivalents. Common stock equivalents include shares issuable under outstanding
stock options reduced by shares assumed to be purchased from the proceeds of
such options upon exercise and the effect of the possible conversion of the
voting preferred stock. Earnings per share, as presented, is both primary and
fully diluted.
PENSION AND EMPLOYEE BENEFIT PLANS. The Company and its subsidiaries have
pension plans for the benefit of substantially all employees. Benefits are
primarily based on years of service and the employees' average compensation
during the last five years of employment. The Company's policy is to fund
pension cost accrued, but not in excess of the maximum allowable deduction for
federal income tax purposes.
================================================================================
(PAGE 22)
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants. Proceeds from
common stock issued pursuant to the Company's employee stock option plans are
credited to common stock or treasury stock and capital in excess of par value at
the time an option is exercised.
The Company has no postretirement health benefits and, therefore, realized
no effect from recent accounting requirements under Statement of Financial
Accounting Standards (SFAS) No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
STATEMENT OF CASH FLOWS. For purposes of reporting cash flows, cash
includes cash on hand and unrestricted time deposits that have an original
maturity of three months or less.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS. In March 1995, the
Financial Accounting Standards Board issued SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company will adopt SFAS No. 121 in the
first quarter of 1996 and, based on current conditions, does not believe the
effect of adoption will be material.
2. Acquisition
Effective August 1, 1994, the Company purchased American Tile Supply Company and
its related companies ("American Tile") for a total purchase price of
approximately $16,000,000. American Tile distributes floor and wall tile
primarily in Texas. Operations of the business are included in the Consolidated
Statement of Income from date of acquisition.
3. Inventories
Inventories include the following:
(in thousands of dollars)
1995 1994
-------- --------
Finished products $121,835 $124,340
Work-in-process 6,068 6,834
Raw materials and supplies 30,427 29,720
-------- --------
$158,330 $160,894
======== ========
4. Borrowings
Long-term debt consists of the following:
(in thousands of dollars)
1995 1994
-------- --------
Revolving credit loans $22,000 $21,000
Term loan 21,000 26,000
Industrial Revenue Bonds 17,515 17,900
Note payable to bank 3,000 4,500
Subordinated notes payable - 4,750
Other, unsecured 58 104
-------- --------
63,573 74,254
Less current portion 6,436 8,931
-------- --------
$57,137 $65,323
======== ========
The Company may borrow up to a total of $52,000,000 in revolving credit
loans pursuant to an agreement among four commercial banks originally entered
into in May 1989. The revolving credit loans are repayable beginning in April
1998, when outstanding amounts are converted to term loans payable over three
years. The conversion date may be extended annually for an additional twelve
months by consent of all participating banks.
The $21,000,000 term loan is an agreement among three commercial banks
providing for annual principal reductions that began in November 1992, of
$2,000,000, increasing $1,000,000 each year thereafter until 1998, when the
final payment is due.
Borrowings under the revolving credit and term loan agreements bear
interest at rates determined on certain margins based on prime, certificates of
deposit, and the London Interbank Offered Rate ("LIBOR"). Interest on all of
these borrowings at December 31, 1995, was based on LIBOR in effect at the time
of origination plus 50 basis points, and averaged 6.2%. Interest rate margins
may fluctuate in increments of 12.5 basis points based on attaining certain
quarterly funded debt-to-equity ratios stipulated in the loan agreements. The
loans are unsecured; however, the loan agreements contain certain minimum
requirements as to working capital, cash flow from operations, and tangible net
worth, redemption of outstanding stock, and change in control of the Company.
As of December 31, 1995, the Company was in compliance with all such
requirements and restrictions.
================================================================================
(PAGE 23)
The Industrial Revenue Bonds are payable in varying amounts through 2014,
plus interest at fixed rates of 6.6% and varying rates based on certain indices
(approximately 5.3% at December 31, 1995), secured by property, plant, and
equipment with a net book value of approximately $13,629,000. In certain
circumstances, the Company may be required to purchase up to $16,250,000 of its
Industrial Revenue Bonds prior to their maturity. In such circumstances, the
Company may borrow the purchase price under long-term standby letter of credit
agreements, and also has the right to resell the bonds.
During 1995, subordinated notes payable to American Tile's former
shareholders were paid off prior to maturity.
Note payable to bank is an unsecured borrowing due in 1997. Interest is
based on LIBOR plus 50 basis points, and was 6.3% at December 31, 1995.
Notes payable to bank included in current liabilities in 1995 are unsecured
borrowings due in 1996 pursuant to a $10,000,000 one-year credit facility from a
commercial bank. Interest is based on LIBOR plus 50 basis points and was 6.2%
at December 31, 1995.
The aggregate maturities of long-term debt through 2000 are as follows:
1996, $6,436,000; 1997, $10,407,000; 1998, $11,827,000; 1999, $7,493,000; and
2000, $7,493,000.
At December 31, 1995, unused lines of credit for short-term, revolving, and
term credit agreements were approximately $50,000,000. Outstanding standby
letters of credit at December 31, 1995, amounted to approximately $21,995,000.
Since interest rates on the majority of the Company's borrowings float with
prevailing market rates, the fair value of such debt approximates carrying value
at December 31, 1995 and 1994. Based on fixed interest rates currently
available to the Company for bank loans and industrial revenue bonds with
similar terms and maturities, the fair value of fixed rate borrowings
approximates carrying value at December 31, 1995 and 1994.
5. Shareholders' Equity
The average number of common shares outstanding plus common stock equivalents
used to calculate earnings per share was 27,411,000 in 1995; 27,810,000 in 1994;
and 27,953,000 in 1993.
The Company has outstanding options to purchase its common stock under
qualified incentive stock option plans and non-qualified stock option agreements
(the Plans) with certain of its employees. The Plans, as amended, provide for
the granting of either incentive stock options or stock options that are not
qualified under the Internal Revenue Code, at the discretion of the Compensation
Committee of the Board of Directors. The amended Plans also provide for
exercise of stock options without regard to the sequence of dates of original
grants. All outstanding stock options are non-qualified and expire over a
period of ten years. Options are granted at the fair market value at the date
of grant and vest over a five year period. Stock option activity is summarized
as follows:
1995 1994 1993
-------------- -------------- --------------
Outstanding at January 1 1,481,286 1,406,877 1,542,856
Granted 160,600 155,300 152,250
Canceled (25,370) (2,680) (38,206)
Exercised (92,449) (78,211) (250,023)
-------------- -------------- --------------
Outstanding at December 31 1,524,067 1,481,286 1,406,877
============== ============== ==============
Exercise price per share $2.42 - $18.00 $2.42 - $18.00 $2.42 - $18.00
============== ============== ==============
Aggregate purchase price (in
thousands) $ 13,283 $ 12,376 $ 11,201
============== ============== ==============
Exercisable options outstanding 1,001,717 841,394 641,787
============== ============== ==============
================================================================================
(PAGE 24)
At December 31, 1995, approximately 713,000 additional shares were reserved
for future grants under these Plans.
In September 1995, the Board of Directors adopted, subject to the approval
of the shareholders at the annual meeting in April 1996, a non-employee
directors stock option plan that permits the issuance of up to 200,000 shares of
common stock to directors who are not employees of the Company. Under this
plan, options to purchase common stock, at the fair market value on the date of
the grant are granted to each non-employee director annually. As of December
31, 1995, no options have been granted under this plan.
The preferred stock is convertible into 2,826 shares of common stock at
December 31, 1995. The Board of Directors is empowered to set the dividend,
redemption, and liquidation rights pertaining to the preferred stock and to
establish the voting rights and any special rights or restrictions.
One Common Stock Purchase Right is outstanding for each share of common
stock. Following Board of Directors approval, a) the rights will be exercisable
at an exercise price of $13.33 if a person or group acquires 20% or more of the
Company's common stock or announces a tender offer that would result in
ownership of 30% or more of the common stock; or b) the rights may be redeemed
at $.05 per right at any time before a 20% position has been acquired. The
rights expire on October 6, 1999.
6. Retirement Plans
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet at December 31, 1995 and 1994, related
to the Company's pension plans: (in thousands of dollars)
1995 1994
-------- --------
Actuarial present value of benefit obligations:
Vested $ 46,768 $ 35,233
Non-vested 2,742 2,088
-------- --------
$ 49,510 $ 37,321
======== ========
Projected benefit obligations for service
rendered to date $(56,629) $(44,191)
Plan assets at fair value 80,717 66,477
-------- --------
Plan assets in excess of projected
benefit obligations 24,088 22,286
Unrecognized net gain from past experience
different from that assumed and effects
of changes in assumptions (13,282) (11,349)
Prior service cost not yet recognized in net
periodic pension cost (1,114) (1,229)
Unrecognized net asset at January 1, 1985,
being recognized over 15 years (3,163) (3,954)
-------- --------
Prepaid pension cost $ 6,529 $ 5,754
======== ========
Plan assets at December 31, 1995, are invested primarily in listed stocks
and bonds or cash equivalents. The Company's own common stock accounts for
approximately 13.3% of plan assets at December 31, 1995.
Net pension credit includes the following components: (in thousands of
dollars)
1995 1994 1993
-------- -------- --------
Service cost - benefits earned
during the period $ 1,903 $ 2,347 $ 1,731
Interest cost on projected benefit
obligation 3,864 3,531 3,439
Actual (return) loss on plan assets (16,590) 4,125 (1,337)
Net amortization and deferral 10,048 (10,180) (4,191)
-------- -------- --------
Net pension credit $ (775) $ (177) $ (358)
======== ======== ========
The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligations were 7.25% in 1995 and 9.0%
in 1994. The rate of increase in future compensation was 4% in 1995 and 4.5% in
1994. The expected long-term rate of return on assets was 9% for all years
above.
================================================================================
(PAGE 25)
Contributions to the plans, limited by federal income tax regulations, were
$0 in 1995 and 1994 and $9,400 in 1993.
The Company also has an Employee Stock Ownership Plan (ESOP) for the
benefit of substantially all employees. Eligible employees may contribute up to
the lesser of 15% of their compensation or the maximum amount authorized by the
Company ($9,240 in 1995 and 1994, and $8,994 in 1993). In 1995 and 1994, 50% of
the amount contributed by all employees was matched by the Company, up to 5% of
total compensation. In 1993, contributions by "highly compensated" and "non-
highly compensated" employees, as defined by the Internal Revenue Code (IRC),
were matched 25% and 50%, respectively, up to 5% of total compensation.
Pursuant to Internal Revenue Service Regulation 401(k), the employees'
contributions are on a pre-tax basis. For 1996, employees may contribute up to
the lessor of 15% of their compensation or the maximum allowable amount under
IRS regulations ($9,500).
The amount of Company contributions made to the ESOP and charged to expense
was $1,239,000, $1,260,000, and $896,000 in 1995, 1994, and 1993, respectively.
7. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31, 1995 and
1994, are as follows: (in thousands of dollars)
1995 1994
-------- --------
Deferred tax assets:
Insurance and claims accruals $ 6,495 $ 6,539
Asset valuation allowances 5,092 4,225
Employee benefit plans 216 318
Other 830 712
-------- --------
$12,633 $11,794
======== ========
Deferred tax liabilities:
Intangible assets $ 4,265 $ 4,412
Depreciation 7,716 8,137
Employee benefit plans 1,509 1,300
-------- --------
$13,490 $13,849
======== ========
Significant components of the provision for income taxes are as follows:
1995 1994 1993
-------- -------- --------
Current $15,751 $23,761 $22,561
Deferred (1,198) (3,190) (2,566)
-------- -------- --------
Total income tax expense $14,553 $20,571 $19,995
======== ======== ========
In addition, the Company recognized income tax benefits of $192,000,
$221,000, and $1,420,000 in 1995, 1994, and 1993, respectively, upon employees'
exercise of non-qualified stock options. Such benefits were recognized as an
increase in shareholders' equity when realized.
A reconciliation of the statutory federal income tax rate and the effective
tax rate follows:
1995 1994 1993
------ ------ ------
Statutory tax rate 35.0% 35.0% 35.0%
State taxes 1.8 1.2 .3
Federal income tax rate increase - - .4
Other (.6) (.4) -
------ ------ ------
Effective tax rate 36.2% 35.8% 35.7%
====== ====== ======
In connection with the acquisition of Tony Lama, the Company acquired a tax
net operating loss carryforward. None of the carryforward was utilized in 1995,
1994, or 1993. Approximately $802,000 of the acquired carryforward is available
to offset future taxable income. The carryforward will expire in 2004. Future
utilization of such carryforward will be recognized through adjustment of the
value of acquired net assets.
During 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes,
effective January 1, 1993. Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
As of January 1, 1993, the Company recognized a one-time benefit to consolidated
income of $1,106,000 for the change in accounting for income taxes from the
deferred method to the liability method, as required by SFAS No. 109.
================================================================================
(PAGE 26)
8. Financial Information By Product Lines
The five-year analysis of sales and operating profit from continuing
operations by product lines on page 17, as it pertains to the last three years,
is an integral part of the Company's consolidated financial statements. A
discussion of the Company's products and business is located on pages 5 to 11.
The following additional information is presented by industry segments: (in
thousands of dollars)
Identifiable Depreciation Capital
Assets Expense Expenditures
------------ ------------ ------------
1995
Building Materials $150,440 $ 9,595 $23,013
Footwear 198,870 4,910 2,990
Corporate assets 22,220 237 17
Assets held for sale 4,879 - -
-------- -------- --------
Total $376,409 $14,742 $26,020
======== ======== ========
1994
Building Materials $135,857 $ 8,616 $14,725
Footwear 211,126 5,008 3,825
Corporate assets 22,415 228 77
Assets held for sale 5,523 - -
-------- -------- --------
Total $374,921 $13,852 $18,627
======== ======== ========
1993
Building Materials $110,310 $ 8,175 $11,232
Footwear 210,839 5,035 5,931
Corporate assets 20,008 263 115
Assets held for sale 5,523 - -
-------- -------- --------
Total $346,680 $13,473 $17,278
======== ======== ========
Assets held for sale relate primarily to idled facilities.
During 1995, the Footwear segment implemented and completed a program to
reduce general and administrative costs on a long-term basis. Costs of
approximately $2,000,000 were incurred in 1995 associated with this
reorganization.
9. Commitments
At December 31, 1995, approximate future minimum rental commitments for all
noncancellable operating leases are as follows: (in thousands of dollars)
1996 $3,605
1997 2,719
1998 1,513
1999 664
2000 315
Thereafter 615
--------
$9,431
========
Total rent expense for all operating leases amounted to approximately
$4,682,000, $3,976,000, and $3,359,000 in 1995, 1994, and 1993, respectively.
The Company began construction of a new brick manufacturing facility during
1995. Approximately $11 million will be spent in the first half of 1996 to
complete the facility, which will increase brick production capacity by
approximately 8%.
================================================================================
(PAGE 27)
REPORT OF ERNST & YOUNG LLP
Independent Auditors
Board of Directors
Justin Industries, Inc.
We have audited the accompanying consolidated balance sheets of Justin
Industries, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1995. 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 Justin Industries,
Inc. at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 7 to the financial statements, in 1993 the Company changed
its method of accounting for income taxes.
/S/ Ernst & Young LLP
Fort Worth, Texas
January 24, 1996
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Consolidated Financial Statements for Justin Industries, Inc., and its
subsidiaries are prepared by the Company in conformity with consistently
applied, generally accepted accounting principles. Management selects
appropriate accounting principles, makes necessary estimates, and uses its
judgment to ensure the objectivity, accuracy, and integrity of the data
presented. The Company has established and maintains systems of management
reporting and internal controls that are designed to provide reasonable
assurance that Company policies are followed and that Company assets are
safeguarded. These systems are constantly monitored and revised where necessary
to meet changing requirements and to strengthen controls while maintaining a
cost-effective method of providing credible and timely information necessary to
the operations of Justin Industries.
The Board of Directors carries out its oversight responsibility for the
financial statements through its Audit Committee. This committee is composed of
directors who are neither officers nor employees of the Company. The committee
meets periodically with the independent auditors and representatives of
management to assure that each is carrying out its responsibilities. To ensure
the integrity of the Audit Committee function, the Company's outside auditors
have complete access to the committee, without company representatives present.
The results of their audits and their reviews of the adequacy of internal
controls and the quality of financial reporting are freely discussed during
these conferences.
================================================================================
(PAGE 28 and PAGE 29)
<TABLE>
ELEVEN-YEAR FINANCIAL SUMMARY
<CAPTION>
Years ending on December 31, 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS: (see note)
(in thousands of dollars)
Net sales:
Building Materials 240,094 224,213 179,740 158,808 123,004 118,943
Footwear 221,354 258,796 295,191 294,459 245,346 181,370
- ------------------------------------------------------------------------------------------
461,448 483,009 474,931 453,267 368,350 300,313
- ------------------------------------------------------------------------------------------
Operating profit:
Building Materials 42,107 44,600 31,445 16,423 4,979 3,698
Footwear 9,234 22,871 34,168 36,054 22,934 17,748
- ------------------------------------------------------------------------------------------
51,341 67,471 65,613 52,477 27,913 21,446
- ------------------------------------------------------------------------------------------
Selected costs and expenses:
Cost of goods sold 300,842 314,661 314,431 313,961 260,968 211,559
Selling, general, and
administrative 115,370 106,814 100,465 91,695 84,167 70,666
Interest 5,032 4,058 4,005 5,214 9,482 6,815
Depreciation 14,742 13,852 13,473 13,837 12,338 10,164
Income taxes 14,553 20,571 19,995 15,304 5,280 3,697
- ------------------------------------------------------------------------------------------
Income:
From continuing operations
(before accounting change
in 1993) 25,651 36,905 36,035 27,093 8,453 7,576
Net income 25,651 36,905 37,141 27,093 19,233 7,293
- ------------------------------------------------------------------------------------------
Income per share:
From continuing operations
(before accounting change
in 1993) .94 1.33 1.29 .98 .32 .29
Net income .94 1.33 1.33 .98 .73 .28
- ------------------------------------------------------------------------------------------
Dividends declared per share .16 .16 .16 .14 .135 .135
Capital expenditures* 26,020 18,627 17,278 12,006 10,666 12,646
- ------------------------------------------------------------------------------------------
YEAR-END STATISTICS: (in thousands
of dollars)
Working capital 181,385 185,722 185,193 164,822 151,588 147,307
Net property, plant, and equipment 96,657 85,460 80,270 76,544 78,750 84,653
Total assets 376,409 374,921 346,680 316,368 295,947 292,923
Long-term debt 57,137 65,323 88,504 100,362 116,040 124,724
Shareholders' equity 236,489 221,900 188,803 155,270 127,549 111,135
KEY FINANCIAL RATIOS:
Pre-tax profit margin (%)* 8.71 11.90 11.80 9.35 3.73 3.75
Income-return on sales (%)* 5.56 7.64 7.59 5.98 2.29 2.52
Return on shareholders' equity (%)* 11.56 19.55 23.21 21.24 7.61 7.12
Return on assets (%)* 6.83 10.23 10.87 8.85 2.87 3.00
Effective income tax rate (%)* 36.2 35.8 35.7 36.1 38.4 32.8
Ratio of long-term debt to
shareholders' equity .24:1 .29:1 .47:1 .65:1 .91:1 1.12:1
Ratio of total interest-bearing
debt to shareholders' equity .31:1 .36:1 .49:1 .70:1 .93:1 1.14:1
Ratio of current assets to current
liabilities 3.6:1 3.5:1 4.4:1 4.0:1 4.4:1 4.1:1
OTHER STATISTICS:
Average number of shares
outstanding (in thousands) 27,411 27,810 27,953 27,772 26,382 26,412
Book value per share 8.88 8.15 6.95 5.75 4.92 4.31
Dividends as a percent of
net income 16.8 11.8 11.7 13.7 17.9 47.1
Market price of common stock:
High 12 1/8 16 3/4 25 3/8 19 6 5 7/8
Low 9 1/2 9 3/4 11 3/4 5 5/8 3 5/8 3 5/8
==========================================================================================
<FN>
*Continuing Operations (before accounting change in 1993)
Note: Per share income amounts have been computed on the average number of
common and common equivalent shares outstanding during each year and
include preferred stock as common share equivalents. Book value per
equivalent share of common stock has been computed on the number of common
shares outstanding at December 31. All per share information has been
adjusted for 3-for-2 stock splits in 1989 and 1992, and a 2-for-1 stock
split in 1993. Operating profit for the business segments is income before
interest, allocation of parent-company overhead expenses, and income taxes.
</TABLE>
<TABLE>
<CAPTION>
ELEVEN-YEAR FINANCIAL SUMMARY (Continued)
Years ending on December 31, 1989 1988 1987 1986 1985
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS: (see note)
(in thousands of dollars)
Net sales:
Building Materials 113,662 108,864 113,204 119,104 134,454
Footwear 142,707 123,455 109,662 101,195 103,892
- ---------------------------------------------------------------------------------
256,369 232,319 222,866 220,299 238,346
- ---------------------------------------------------------------------------------
Operating profit:
Building Materials 604 4,369 6,685 7,437 17,861
Footwear 15,650 12,223 10,184 9,946 9,997
- ---------------------------------------------------------------------------------
16,254 16,592 16,869 17,383 27,858
- ---------------------------------------------------------------------------------
Selected costs and expenses:
Cost of goods sold 182,365 164,596 154,600 148,503 158,231
Selling, general, and
administrative 60,251 54,590 53,590 57,682 53,565
Interest 6,402 4,574 4,369 4,140 4,975
Depreciation 10,003 10,263 10,152 10,218 8,839
Income taxes 2,432 2,696 3,121 4,131 8,980
- ---------------------------------------------------------------------------------
Income:
From continuing operations
(before accounting change
in 1993) 5,281 5,954 7,382 5,843 16,131
Net income 7,198 7,469 752 5,033 15,050
- ---------------------------------------------------------------------------------
Income per share:
From continuing operations
(before accounting change
in 1993) .21 .24 .29 .22 .61
Net income .28 .30 .03 .19 .57
- ---------------------------------------------------------------------------------
Dividends declared per share .10 .09 .09 .09 .09
Capital expenditures* 7,405 8,681 4,540 5,922 30,047
- ---------------------------------------------------------------------------------
YEAR-END STATISTICS: (in thousands
of dollars)
Working capital 97,983 105,114 90,206 87,407 78,873
Net property, plant, and equipment 64,261 67,682 75,205 80,362 84,743
Total assets 211,308 214,403 219,013 224,608 231,119
Long-term debt 56,238 69,590 70,509 69,489 68,089
Shareholders' equity 106,431 98,687 92,938 96,321 95,382
KEY FINANCIAL RATIOS:
Pre-tax profit margin (%)* 3.01 3.72 4.71 3.47 10.54
Income-return on sales (%)* 2.06 2.56 3.31 2.08 6.77
Return on shareholders' equity (%)* 5.35 6.41 7.66 4.81 19.19
Return on assets (%)* 2.48 2.75 3.33 2.01 7.49
Effective income tax rate (%)* 31.5 31.2 29.7 40.0 35.8
Ratio of long-term debt to
shareholders' equity .53:1 .71:1 .76:1 .72:1 .71:1
Ratio of total interest-bearing
debt to shareholders' equity .56:1 .73:1 .79:1 .75:1 .77:1
Ratio of current assets to
current liabilities 3.5:1 3.9:1 2.9:1 2.8:1 2.4:1
OTHER STATISTICS:
Average number of shares
outstanding (in thousands) 25,668 25,134 25,408 26,218 26,358
Book value per share 4.15 3.98 3.76 3.78 3.71
Dividends as a percent of
net income 35.1 29.5 296.7 45.5 15.3
Market price of common stock:
High 5 5/8 3 5/8 3 7/8 4 5/8 4 5/8
Low 3 3/8 2 5/8 2 1/4 2 7/8 3 1/8
=================================================================================
<FN>
*Continuing Operations (before accounting change in 1993)
Note: Per share income amounts have been computed on the average number of
common and common equivalent shares outstanding during each year and
include preferred stock as common share equivalents. Book value per
equivalent share of common stock has been computed on the number of common
shares outstanding at December 31. All per share information has been
adjusted for 3-for-2 stock splits in 1989 and 1992, and a 2-for-1 stock
split in 1993. Operating profit for the business segments is income before
interest, allocation of parent-company overhead expenses, and income taxes.
</TABLE>
================================================================================
(PAGE 30)
SHAREHOLDER INFORMATION
Annual Meeting
The annual meeting of shareholders will be held on Thursday, April 11, 1996, at
the Fort Worth Club Building, twelfth floor, 306 West Seventh Street, Fort
Worth, Texas, at 10:30 a.m. All shareholders are cordially invited to attend
and are urged to be represented by proxy if unable to attend.
Dividend Reinvestment and Shareholder Savings Program
Any shareholder of record may have dividends automatically reinvested, or make
voluntary investments in the company's common stock through a service offered by
Society National Bank. For additional information, contact Vice President
Finance, Justin Industries, Inc., P. O. Box 425, Fort Worth, Texas 76101 (817)
336-5125; or Society National Bank, c/o KeyCorp Shareholder Services, Inc., 1201
Elm Street, Suite 5050, Dallas, Texas 75270 (800) 527-7844 or (214) 871-8844.
Form 10-K/10-Q
Investors who wish to receive a copy of the company's annual report on Form 10-K
or quarterly 10-Q reports filed with the Securities and Exchange Commission, or
other shareholder mailings, may obtain them upon request to Investor Relations,
Justin Industries, Inc., P. O. Box 425, Fort Worth, Texas 76101 (817) 336-5125.
Stock Listing
Justin Industries, Inc., common stock trades on the Nasdaq National Market tier
of The Nasdaq Stock Market under the symbol "JSTN."
Stock Transfer and Dividend Disbursing Agent
Society National Bank, c/o KeyCorp Shareholder Services, Inc., 1201 Elm Street,
Suite 5050, Dallas, Texas 75270 (800) 527-7844 or (214) 871-8844.
Independent Auditors
Ernst & Young LLP, 500 Throckmorton Street, Suite 2200, Fort Worth, Texas 76102.
Executive Offices
Justin Industries, Inc., 2821 West Seventh Street, Fort Worth, Texas 76107 (817)
336-5125.
<TABLE>
QUARTERLY FINANCIAL DATA
The following table presents summarized quarterly operating results for the
two-year period ending December 31, 1995.
Unaudited - In thousands, except per share data
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------------------
1995 1994
------------------------------------------ ------------------------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $113,654 $109,918 $112,421 $125,455 $109,891 $114,894 $119,692 $138,532
Gross profit 38,951 39,276 39,811 42,568 36,995 41,149 43,173 47,031
Net income 5,268 6,034 5,778 8,571 6,669 9,452 9,440 11,344
Per share:
Net income .19 .22 .21 .32 .24 .34 .34 .41
Dividends paid .04 .04 .04 .04 .04 .04 .04 .04
</TABLE>
Market Makers
as of January 24, 1996
Dean Witter Reynolds, Inc.
Equitable Securities Corp.
First Southwest Company
Gruntal & Co., Inc.
Herzog, Heine, Geduld, Inc.
Jefferies & Co., Inc.
Knight Securities L.P.
Mayer & Schweitzer, Inc.
Merrill Lynch, Pierce, Fenner and Smith, Inc.
Nash Weiss/Div. of Shatkin Inv.
PaineWebber, Inc.
Parker/Hunter, Inc.
Principal Financial Securities
Sherwood Securities Corp.
Smith Barney, Inc.
Southwest Securities, Inc.
Troster Singer Corp.
Market Price
of Common Stock
Price
Year --------------------------------
Quarter High Low Close
1993
1 25 3/8 17 5/8 24 3/4
2 24 7/8 16 1/2 17 1/2
3 22 1/4 15 18
4 19 11 3/4 14 3/4
1994
1 16 3/4 13 14
2 15 11 1/2 12
3 13 3/4 10 12 7/8
4 13 3/4 9 3/4 11 7/8
1995
1 12 1/8 9 1/2 9 5/8
2 12 9 5/8 11
3 11 5/8 10 1/2 11
4 11 3/8 9 7/8 11
================================================================================
(PAGE 31)
DIRECTORS
JOHN JUSTIN
Chairman and Chief Executive Officer of Justin Industries
J. T. DICKENSON
President and Chief Operating Officer of Justin Industries
BAYARD H. FRIEDMAN
Investment Advisor
MARVIN GEARHART
Chairman of the Board of Rock Bit International, Inc.
ROBERT E. GLAZE
Personal Investments
DEE J. KELLY
Shareholder and Director of the law firm of
Kelly, Hart & Hallman
JOSEPH R. MUSOLINO
Vice Chairman of NationsBank of Texas
JOHN V. ROACH
Chairman and Chief Executive Officer of
Tandy Corporation
DR. WILLIAM E. TUCKER
Chancellor of Texas Christian University
COMMITTEES
Audit Committee
BAYARD H. FRIEDMAN
ROBERT E. GLAZE
DR. WILLIAM E. TUCKER
Compensation Committee
BAYARD H. FRIEDMAN
MARVIN GEARHART
OFFICERS
JOHN JUSTIN
Chairman of the Board and Chief Executive Officer
J. T. DICKENSON
President and Chief Operating Officer
RICHARD J. SAVITZ
Vice President Finance and Treasurer
JON M. BENNETT
Vice President Administration and Secretary
EDWARD L. STOUT, JR.
Vice President Brick Operations
FRANK A. SCIVETTI
Vice President Footwear Operations
JUDY B. HUNTER
Controller
W. O. BURROUGH
Assistant Treasurer
(Picture of bronze statue of Mr. John Justin)
On January 8, 1996, John Justin was singularly honored with the unveiling of a
life-size bronze, appropriately titled The Chairman, to commemorate his years of
leadership of the Fort Worth Livestock Show and Rodeo, which observes its
centennial year in 1996. The economic growth of Fort Worth, North and West
Texas, and Justin Industries has been due in no small measure to the annual
Livestock Show and Rodeo and its visitors, exhibitors, performers, and patrons.
================================================================================
(PAGE 32 and PAGE 33)
(Picture of map of the United States)
MANUFACTURING AND DISTRIBUTION LOCATIONS
ACME BRICK COMPANY
Manufacturing - Brick
Bennett, Texas
Bridgeport, Texas
Denton, Texas
Elgin, Texas
Garrison, Texas
McQueeney, Texas
San Felipe (Houston), Texas
Fort Smith, Arkansas
Malvern, Arkansas
Perla, Arkansas (2)
Kanopolis, Kansas
Weir, Kansas
Jamestown, Louisiana
Oklahoma City, Oklahoma
Tulsa, Oklahoma
Manufacturing - Brick
Baton Rouge, Louisiana (Concrete Block)
Distribution
Abilene, Texas
Amarillo, Texas
Austin, Texas
Beaumont, Texas
Dallas, Texas
Denton, Texas
Fort Worth, Texas
Houston, Texas
Longview, Texas
Lubbock, Texas
Midland, Texas
San Antonio, Texas
Texarkana, Texas
Wichita Falls, Texas
Alexandria, Louisiana
Baton Rouge, Louisiana
Lafayette, Louisiana
Lake Charles, Louisiana
Monroe, Louisiana
New Orleans, Louisiana
Shreveport, Louisiana
Fort Smith, Arkansas
Little Rock, Arkansas
Russellville, Arkansas
Springdale, Arkansas
Joplin, Missouri
Springfield, Missouri
St. Louis, Missouri
Oklahoma City, Oklahoma
Tulsa, Oklahoma
Kansas City, Kansas
Wichita, Kansas
Memphis, Tennessee (2)
AMERICAN TILE SUPPLY COMPANY
Distribution
Austin, Texas
Dallas, Texas, area (8)
Fort Worth, Texas, area (2)
Houston, Texas, area (2)
Longview, Texas
San Antonio, Texas, area (2)
FEATHERLITE BUILDING PRODUCTS CORPORATION
Manufacturing - Concrete Block
Abilene, Texas
Amarillo, Texas
Austin, Texas, area
Beaumont/Port Arthur, Texas
Dallas, Texas
El Paso, Texas
Lubbock, Texas
San Antonio, Texas
Manufacturing - Architectural Stone
Cedar Park, Texas
d/b/a Texas Quarries
Distribution
Corpus Christi, Texas
Midland, Texas
Las Cruces, New Mexico
TRADEWINDS TECHNOLOGIES, INC.
Phoenix, Arizona
JUSTIN BOOT COMPANY
Manufacturing
Fort Worth, Texas
Carthage, Missouri
Cassville, Missouri (2)
Sarcoxie, Missouri
NOCONA BOOT COMPANY
Manufacturing
Nocona, Texas
TONY LAMA COMPANY
Manufacturing
El Paso, Texas
NORTHLAND PUBLISHING COMPANY, INC.
Flagstaff, Arizona
================================================================================
(BACK COVER - Picture of boot, brick and building block.)
JUSTIN INDUSTRIES, INC.
2821 West Seventh Street - Box 425
Fort Worth, Texas 76101 - 817-336-5125
LISTING OF SUBSIDIARIES
Percentage
of Voting
Place of Securities
Name Organization Owned
- ------------------------------------------- ------------ ----------
Significant subsidiaries of the company:
Acme Brick Company Delaware 100%
American Tile Supply, Inc. Delaware 100%
Featherlite Building Products Corporation Delaware 100%
Footwear Management Company Delaware 100%
d/b/a Justin Boot Company
d/b/a Nocona Boot Company
d/b/a Tony Lama Company, Inc.
Justin Management Company Delaware 100%
d/b/a Justin Management Company
d/b/a Northland Publishing Company, Inc.
Tradewinds Technologies, Inc. Delaware 100%
All other subsidiaries are omitted from this list because they do not,
considered in the aggregate as a single subsidiary, constitute a significant
subsidiary. All wholly-owned subsidiaries are included in the consolidated
financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1995 Financial Statements included in the Company's Form 10-K and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,180
<SECURITIES> 0
<RECEIVABLES> 81,553
<ALLOWANCES> 3,340
<INVENTORY> 158,330
<CURRENT-ASSETS> 250,678
<PP&E> 252,203
<DEPRECIATION> 155,546
<TOTAL-ASSETS> 376,409
<CURRENT-LIABILITIES> 69,293
<BONDS> 0
0
0
<COMMON> 69,674
<OTHER-SE> 166,815
<TOTAL-LIABILITY-AND-EQUITY> 376,409
<SALES> 461,448
<TOTAL-REVENUES> 461,448
<CGS> 300,842
<TOTAL-COSTS> 300,842
<OTHER-EXPENSES> 115,370
<LOSS-PROVISION> 1,347
<INTEREST-EXPENSE> 5,032
<INCOME-PRETAX> 40,204
<INCOME-TAX> 14,553
<INCOME-CONTINUING> 25,651
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,651
<EPS-PRIMARY> .94
<EPS-DILUTED> .94
</TABLE>
