FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the year ended December 31, 1997
[ ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ____________
Commission file number 0-3041
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below.
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
JUSTIN INDUSTRIES, INC.
2821 West 7th Street
Fort Worth, Texas 76107
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
(Name of Plan)
/S/ RICHARD J. SAVITZ
(Signature)
Richard J. Savitz
Vice President-Finance
June 26, 1998
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ERNST & YOUNG LLP
REPORT OF INDEPENDENT AUDITORS
Plan Participants
Justin Industries, Inc.
Employee Stock Ownership Plan
We have audited the accompanying statements of net assets available for benefits
of Justin Industries, Inc. Employee Stock Ownership Plan (the Plan) as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's Administrative Committee. 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 net assets available for benefits of Justin
Industries, Inc. Employee Stock Ownership Plan at December 31, 1997 and 1996,
and the changes in net assets available for benefits for the years then ended,
in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
June 5, 1998
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<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Benefits
<CAPTION>
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Assets:
Cash and cash investments $ 55 $ 898,161
Participants' contributions receivable 246,407 255,160
Company contribution receivable 1,157,926 282,180
Dividends and interest receivable 147,801 116,999
Investments, at fair value:
Common stock of Justin Industries, Inc.
($20,292,656 cost and 2,856,371 shares in 1997,
$19,000,905 cost and 2,824,777 shares in 1996) 38,918,050 32,484,935
Mutual funds:
Merrill Lynch Growth Fund 3,190,269 2,118,108
Merrill Lynch Global Allocation Fund 1,314,820 981,534
Merrill Lynch Capital Fund 932,074 624,951
Money market funds:
Merrill Lynch Retirement Preservation Trust 702,590 431,995
----------- -----------
Total investments 45,057,803 36,641,523
----------- -----------
Total assets 46,609,992 38,194,023
Liabilities:
Participants' contributions refundable 129,808 235,415
----------- -----------
Net assets available for benefits $46,480,184 $37,958,608
=========== ===========
</TABLE>
<TABLE>
Statements of Changes in Net Assets Available for Benefits
<CAPTION>
Year Ended December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Investment income:
Dividends and interest $ 1,035,552 $ 782,646
Net appreciation in fair value of investments 6,232,920 1,722,643
----------- -----------
Total investment income 7,268,472 2,505,289
Contributions:
Participants 3,274,853 3,165,683
Company 1,157,926 1,180,772
----------- -----------
Total contributions 4,432,779 4,346,455
Participants' withdrawals (3,179,675) (4,828,379)
----------- -----------
8,521,576 2,023,365
Net assets available for benefits at beginning of year 37,958,608 35,935,243
----------- -----------
Net assets available for benefits at end of year $46,480,184 $37,958,608
=========== ===========
<FN>
See accompanying notes.
</TABLE>
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JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
1. DESCRIPTION OF PLAN
The following description of the Justin Industries, Inc. (the Company) Employee
Stock Ownership Plan (the Plan) provides only general information. Participants
should refer to the Plan documents for a more complete description of the Plan's
provisions.
a. General. All employees (except those employees covered under collective
bargaining agreements that do not provide for plan participation) of
participating employers are eligible to participate in the Plan beginning on
January l or July l after each employee has completed one year of service
and reached the age of twenty-one. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).
b. Contributions. The Plan is primarily funded by two types of contributions:
Employee voluntary pre-tax contributions through salary deferrals, limited
to 15 percent of each employee's eligible earnings, but not more than the
maximum allowed by law. The maximum employee contribution was $9,500 in
1997 and 1996.
Company matching contributions are equal to a percentage of each employee's
voluntary pre-tax contributions up to 5 percent of the employee's eligible
earnings. The Board of Directors annually determines the matching
percentage. In 1997 and 1996, all employees' contributions were matched at
50 percent up to $7,500.
Any employee of the Company may rollover into the Plan distributions made
from a previous employer's qualified retirement plan.
c. Participants' Accounts. Each participant's account is credited with the
employee's contribution and an allocation of the Company's contribution and
investment earnings. Allocations are based on participants' earnings or
account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's account.
d. Vesting. Participants have a fully vested, nonforfeitable right to employee
contributions. Company matching contributions are fully vested and
nonforfeitable once allocated.
e. Investment Options. Employee contributions prior to September 1, 1994 and
all Company matching contributions are invested in Company common stock.
Subsequent to September 1, 1994, participants direct investments from
employee contributions among a combination of Company common stock and any
of the following four investment funds.
Merrill Lynch Growth Fund - Funds are invested in shares of a registered
investment company that invests primarily in equity securities.
Merrill Lynch Global Allocation Fund - Funds are invested in shares of a
registered investment company that invests primarily in U.S. and foreign
equity, debt and money market securities.
Merrill Lynch Capital Fund - Funds are invested in shares of a registered
investment company that invests primarily in equity, debt and
convertible securities.
Merrill Lynch Retirement Preservation Trust - Funds are invested in shares
of a registered investment company that invests primarily in guaranteed
investment contracts, U.S. government agency securities and money market
securities.
f. Payment of Benefits. Withdrawals of employer contributions from the Plan
by participants can be made at normal retirement (age 65), early retirement
(age 55), when a participant dies, becomes disabled or a break in service
occurs. Distributions upon withdrawal are made in accordance with the Plan
document. The Plan document does not allow participant loans.
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JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements (Continued)
2. SUMMARY OF ACCOUNTING POLICIES
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at quoted market prices, which represent the net
asset value of shares held by the Plan at year end. The Company stock is valued
at its quoted market price. Gains and losses on the sale of investments are
accounted for on an average cost basis.
Purchases and sales of securities are recorded on a trade-date basis. Dividends
are recorded on the ex-dividend date.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Contributions by participants and participating employers are accounted for on
the accrual basis once determined. Benefit payments are recorded when paid.
3. TAX STATUS OF PLAN
The Plan is subject to the provisions of Internal Revenue Code Section 401(k),
whereby the participants' pre-tax contributions are made through a written
salary deferral election. The Plan also includes a provision whereby the Plan's
Administrative Committee may direct the Trustee to incur debt obligations to
finance the acquisition of Company common stock for the Plan. A favorable
determination letter of qualification was received on October 26, 1994, from the
Internal Revenue Service stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code, as amended. As such, the Plan is exempt from
federal income tax, and participants' voluntary pre-tax contributions, Company
matching contributions, investment income and realized gains (losses) are not
taxable to participants until withdrawal. Cash withdrawals are generally
taxable to participants in the year of withdrawal. The net unrealized
appreciation on withdrawals of Company common stock is generally not taxable to
participants until the stock is sold. Once qualified, the Plan is required to
operate in conformity with regulations promulgated by the Department of the
Treasury and the Department of Labor to maintain its qualified status. The
Plan's Administrative Committee is not aware of any course of action or series
of events that have occurred that might adversely affect the Plan's tax status.
The Plan has been amended since receiving the determination letter. However,
the Plan administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the applicable
provisions of the Internal Revenue Code.
4. PARTICIPANTS' CONTRIBUTIONS REFUNDABLE
As a result of non-discrimination testing on 1997 and 1996 contributions,
certain "highly compensated" employees received refunds in 1998 and 1997 of
excess contributions. Such amounts have been accrued in the accompanying
financial statements as a liability of the Plan as of the end of each Plan year.
5. ADMINISTRATIVE EXPENSES
All expenses of Plan administration may be paid out of Plan assets unless paid
by the Company at its discretion. In 1997 and 1996, the Company elected to pay
directly all administrative expenses of the Plan with the exception of brokerage
commissions and transfer taxes on stock purchases, which are included in the
cost of the stock purchased.
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JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements (Continued)
6. INVESTMENT ACTIVITY
Net assets available for benefits at the end of 1997 and 1996 and changes in net
assets available for benefits for the years ended December 31, 1997 and 1996 by
funds (fund information) are as follows:
<TABLE>
<CAPTION>
1997
- --------------------------------------------------------------------------------------------------------------------------------
Non-
Participant
Participant Directed Directed
-------------------------------------------------------------------------------
Merrill Merrill
Lynch Merrill Lynch Justin Justin
Merrill Global Lynch Retirement Industries, Industries,
Lynch Allocation Capital Preservation Inc. Inc.
Growth Fund Fund Fund Trust Common Stock Common Stock Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends and
interest $ 244,999 $ 167,202 $ 71,714 $ 37,046 $ 82,815 $ 401,599 $ 30,177 $1,035,552
Net appreciation/
(depreciation) in
fair value of
investments 190,833 (49,899) 70,855 - 1,037,245 4,983,886 - 6,232,920
Contributions:
Participants' 845,898 391,196 244,813 151,505 1,534,294 9,278 97,869 3,274,853
Company - - - - - 1,180,772 (22,846) 1,157,926
Participants'
withdrawals (355,733) (139,907) (147,677) (62,235) (622,457) (1,851,762) 96 (3,179,675)
Interfund transfers 146,164 (35,306) 67,418 144,279 (249,253) (73,302) - -
---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
1,072,161 333,286 307,123 270,595 1,782,644 4,650,471 105,296 8,521,576
Net assets at
beginning of year 2,118,108 981,534 624,951 431,995 5,652,223 26,832,712 1,317,085 37,958,608
---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
Net assets at end
of year $3,190,269 $1,314,820 $932,074 $702,590 $7,434,867 $31,483,183 $1,422,381 $46,480,184
========== ========== ========== ========== ========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
1996
- --------------------------------------------------------------------------------------------------------------------------------
Non-
Participant
Participant Directed Directed
-------------------------------------------------------------------------------
Merrill Merrill
Lynch Merrill Lynch Justin Justin
Merrill Global Lynch Retirement Industries, Industries,
Lynch Allocation Capital Preservation Inc. Inc.
Growth Fund Fund Fund Trust Common Stock Common Stock Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends and
interest $ 158,312 $ 91,149 $ 54,004 $ 20,538 $ 63,660 $ 402,074 $ (7,091) $ 782,646
Net appreciation
in fair value of
investments 240,265 25,466 9,775 - 378,287 1,068,481 369 1,722,643
Contributions:
Participants' 734,356 393,704 246,200 152,403 1,711,740 - (72,720) 3,165,683
Company - - - - - 1,242,385 (61,613) 1,180,772
Participants'
withdrawals (234,689) (132,519) (55,857) (62,484) (836,166) (3,506,180) (484) (4,828,379)
Interfund transfers 164,077 8,063 41,800 10,084 43,330 (267,470) 116 -
---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
1,062,321 385,863 295,922 120,541 1,360,851 (1,060,710) (141,423) 2,023,365
Merger of ATS Plan 224,525 59,625 37,874 66,803 45,906 - (434,733) -
Net assets at
beginning of year 831,262 536,046 291,155 244,651 4,245,466 27,893,422 1,893,241 35,935,243
---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Net assets at end
of year $2,118,108 $981,534 $624,951 $431,995 $5,652,223 $26,832,712 $1,317,085 $37,958,608
========== ========== ========== ========== ========== =========== ========== ===========
</TABLE>
===============================================================================
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements (Continued)
The Plan's investment activity for each of the two years ended December 31
(including investments bought and sold, as well as held during the year)
appreciated in fair value as shown below.
Year Ended December 31,
-------------------------
1997 1996
----------- -----------
Realized gain on sales of investments:
Proceeds from sales of investments $ 4,833,611 $ 5,371,792
Cost of investments 3,841,343 3,793,192
----------- -----------
Realized gain $ 992,268 $ 1,578,600
=========== ===========
Unrealized appreciation on investments:
Unrealized appreciation at beginning of year $13,795,733 $13,651,690
Net unrealized appreciation during the year 5,240,652 144,043
----------- -----------
Unrealized appreciation at end of year $19,036,385 $13,795,733
=========== ===========
7. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
8. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The Department of Labor (DOL) requires realized and unrealized gains (losses) to
be calculated in a different manner than required by generally accepted
accounting principles. Realized and unrealized gains using the DOL's method for
1997 amounted to $245,401 and $5,987,519, respectively.
In addition, 1997's net assets available for benefits is $925,535 less and
participants' withdrawals is $925,535 more per Form 5500 than shown in the
accompanying financial statements. These differences are due to the DOL's
requirements for Form 5500 to accrue withdrawals processed and approved for
payment prior to December 31, 1997 but not yet paid as of that date.
9. YEAR 2000 ISSUE (UNAUDITED)
The Company has developed a plan to modify its internal information technology
to be ready for the year 2000 and has begun converting critical data processing
systems. The project also includes determining whether third party service
providers have reasonable plans in place to become year 2000 compliant. The
Company does not expect this project to have a significant effect on plan
operations.
================================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<CAPTION>
(c) Description of investment including
maturity date, rate of interest, (e) Current
(a) b) Issuer collateral, par, or maturity value (d) Cost Value
- --- ----------------------- ---------------------------------------------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Merrill Lynch Growth Fund for Investment
and Retirement 114,953 $ 2,826,132 $ 3,190,269
Merrill Lynch Global Allocation Fund, Inc. 92,986 1,345,914 1,314,820
Merrill Lynch Capital Fund, Inc. 27,009 854,127 932,074
Merrill Lynch Retirement Preservation
Trust 702,590 702,590 702,590
* Justin Industries, Inc. Common Stock 2,856,371 20,292,656 38,918,050
----------- -----------
$26,021,419 $45,057,803
=========== ===========
<FN>
* - Indicates party-in-interest to the Plan.
</TABLE>
================================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Line 27b - Schedule of Reportable Transactions
Year Ended December 31, 1997
<CAPTION>
(g) Detailed
description of loan
including dates of
making and maturity,
Amounts received interest rate, the type
during reporting and value of collateral,
(c) year any renegotiation of the Amount Overdue
(b) Identity and Original ------------------- (f) Unpaid loan and the terms of --------------------
address of Amount of (d) (e) balance at the renegotiation and (h) (i)
(a) obliger Loan Principal Interest end of year other material items Principal Interest
- --- ------------------ --------- --------- --------- ----------- ------------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Juan Diaz $ 1,000 $ - $ - $ 915 Date of loan 05/29/95 $ 915 $ 111
412 N. Phinney Maturity 05/29/97
Dallas, TX 75211 Interest Rate 11%
Type and value of
collateral ESOP account
No renegotiation of loan
or terms
</TABLE>
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<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Line 27d - Schedule of Reportable Transactions
Year Ended December 31, 1997
<CAPTION>
(g) and (h)
Number of Number of (c) Purchase (d) Selling Cost of (i) Net
(a) and (b) Description of Assets Transactions Shares Price Price (1) Asset (1) Gain (Loss)
- ------------------------------------- ------------ --------- ------------ ----------- ----------- -----------
Category (iii) - series of transactions in excess of 5% of plan assets:
<S> <C> <C> <C> <C> <C> <C>
Justin Industries, Inc. Common Stock* 35 267,693 $3,261,008 $ - $3,261,008 $ -
Justin Industries, Inc. Common Stock* 89 153,631 $ - $1,901,670 $1,385,492 $516,178
ML Growth Fund CL A 89 56,511 $1,644,780 $ - $1,644,780 $ -
ML Growth Fund CL A 72 25,670 $ - $ 747,444 $ 670,064 $ 77,380
<FN>
* - Indicates party-in-interest to the plan.
(1) - Also represents market value at date of transaction.
Note: All transactions were made on the market. There were no category (i),(ii), or (iv) reportable transactions during 1997.
There were no columns (e) or (f) activities.
</TABLE>
================================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Line 27f - Schedule of Reportable Transactions
Year Ended December 31, 1997
<CAPTION>
(c) Description of Transactions
(b) Relationship to Plan, Including Maturity Date, Rate
Employer or Other of Interst, Collateral, Par
(a) Identity of Party Involved Party-in-Interest or Maturity value
- ----------------------------------- ------------------------ ---------------------------------
<S> <C> <C>
Justin Industries, Inc. Employer/Plan Sponsor Contributions of $131,888 for
the August payroll were
deposited on September 23, 1997.
In addition, contributions of
$119,443 for the December
payroll were deposited on
January 26, 1998.
<FN>
Columns (d) through (j) are not applicable.
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-52783) pertaining to the Employee Stock Ownership Plan of Justin
Industries, Inc. of our report dated June 5, 1998, with respect to the financial
statements and schedules of the Justin Industries, Inc. Employee Stock Ownership
Plan included in this Annual Report (Form 11-K) for the year ended December 31,
1997.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
June 26, 1998
