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, 1998
[ ] 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
Richard J. Savitz
Chief Financial Officer
June 28, 1999
===============================================================================
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 as of December 31, 1998
and 1997, 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 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 net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its 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, 1998, reportable
transactions and non-exempt transactions for the year then ended, are presented
for purposes of additional analysis and are not a required part of the financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules have been
subjected to the auditing procedures applied in our audits for 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
May 28, 1999
===============================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE
STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Benefits
<CAPTION>
December 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Assets:
Cash and cash investments $ - $ 55
Investments, at fair value:
Common stock of Justin Industries, Inc.
($22,059,049 cost and 2,889,607 shares in 1998,
$20,292,656 cost and 2,856,371 shares in 1997) 37,926,089 38,918,050
Mutual funds:
Merrill Lynch Growth Fund 2,963,736 3,190,269
Merrill Lynch Global Allocation Fund 1,498,279 1,314,820
Merrill Lynch Capital Fund 1,456,792 932,074
Money market funds:
Merrill Lynch Retirement Preservation Trust 864,843 702,590
------------- -------------
Total investments 44,709,739 45,057,803
------------- -------------
Participants' contributions receivable 311,522 246,407
Company contribution receivable 672,847 1,157,926
Dividends and interest receivable 151,972 147,801
------------- -------------
Total assets 45,846,080 46,609,992
Liabilities:
Participants' contributions refundable - 129,808
Net assets available for benefits $ 45,846,080 $ 46,480,184
============= =============
</TABLE>
<TABLE>
Statements of Changes in Net Assets Available for Benefits
<CAPTION>
Year Ended December 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Investment income:
Dividends and interest $ 927,697 $ 1,035,552
Net appreciation (depreciation) in fair value
of investments (2,523,001) 6,232,920
------------- -------------
Total investment income (1,595,304) 7,268,472
Contributions:
Participants 3,219,318 3,274,853
Company 1,235,504 1,157,926
------------- -------------
Total contributions 4,454,822 4,432,779
Participants' withdrawals (3,493,622) (3,179,675)
------------- -------------
(634,104) 8,521,576
Net assets available for benefits at beginning
of year 46,480,184 37,958,608
------------- -------------
Net assets available for benefits at end of year $ 45,846,080 $ 46,480,184
============= ============
<FN>
See accompanying notes
</TABLE>
===============================================================================
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1998
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. Employee contributions are subject to Internal
Revenue Code limitations. The maximum contribution allowed by the company
was $8,000 in 1998 and $9,500 in 1997.
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 1998 and 1997, all employees' contributions were matched at
50 percent up to $8,000 and $7,500, respectively.
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
investment funds as listed in footnote six.
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.
===============================================================================
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 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 has received a determination letter from the Internal Revenue Service
dated October 26, 1994, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan's
Administrative Committee believes the Plan is being operated in compliance with
the applicable requirements of the Code and, therefore, believes that the Plan
is qualified and the related trust is tax exempt. 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 1998 and 1997 contributions,
certain "highly compensated" employees received refunds in 1998 of excess 1997
contributions. No refunds of 1998 contributions are required. Such amounts
have been accrued in the accompanying financial statements for 1997 as a
liability of the Plan as of the end of the 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 1998 and 1997, 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.
===============================================================================
6. INVESTMENT ACTIVITY
Net assets available for benefits at the end of 1998 and 1997 and changes in net
assets available for benefits for the years ended December 31, 1998 and 1997 by
funds (fund information) are as follows:
<TABLE>
<CAPTION>
1998
- ---------------------------------------------------------------------------------------------------------------------------
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 income $ 56,290 $ 170,596 $ 80,062 $ 45,307 $ 112,274 $ 459,352 $ 3,816 $ 927,697
Net appreciation/
(depreciation) in
fair value of
investments (873,254) (158,190) (4,440) - 52,199 (1,539,316) - (2,523,001)
Contributions:
Participants' 856,510 315,333 246,532 151,050 1,427,883 25,750 196,260 3,219,318
Company - - - - - 1,720,583 (485,079) 1,235,504
Participants'
withdrawals (254,138) (156,440) (85,355) (78,569) (789,984) (2,128,099) (1,037) (3,493,622)
Interfund transfers (11,941) 12,160 287,919 44,465 85,724 (418,327) - -
------------------------------------------------------------------------------------------------------
(226,533) 183,459 524,718 162,253 888,096 (1,880,057) (286,040) (634,104)
Net assets available
for benefits at
beginning of year 3,190,269 1,314,820 932,074 702,590 7,434,867 31,483,183 1,422,381 46,480,184
------------------------------------------------------------------------------------------------------
Net assets available
for benefits at
end of year $2,963,736 $1,498,279 $1,456,792 $ 864,843 $8,322,963 $29,603,126 $1,136,341 $45,846,080
======================================================================================================
</TABLE>
<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 income $ 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 available
for benefits 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 available
for benefits 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>
===============================================================================
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,
---------------------------
1998 1997
------------ ------------
Realized gain on sales of investments:
Proceeds from sales of investments $ 4,651,496 $ 4,833,611
Cost of investments 3,380,981 3,841,343
------------ ------------
Realized gain $ 1,270,515 $ 992,268
============ ============
Unrealized appreciation on investments:
Unrealized appreciation at beginning
of year $19,036,385 $13,795,733
Net unrealized appreciation
(depreciation) during the year (3,793,516) 5,240,652
------------ ------------
Unrealized appreciation at end of year $15,242,869 $19,036,385
============ ============
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 (losses) using the DOL's
method for 1998 amounted to ($1,774) and $2,524,783, respectively.
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
Year Ended December 31,
---------------------------
1998 1997
------------ ------------
Net assets available for benefits
per the financial statements $45,846,080 $46,480,184
Amounts allocated to withdrawing
participants (691,698) (925,535)
------------ ------------
Net assets available for benefits
per the Form 5500 $45,154,382 $45,554,649
============ ============
Year Ended
December 31,
1998
--------------
Participants' withdrawals per the
financial statements $ 3,493,622
Add amounts allocated to withdrawing
participants at December 31, 1998 691,698
Less amounts allocated to withdrawing
particpants at December 31, 1997 (925,535)
--------------
Participants' withdrawals per the
Form 5500 $ 3,259,785
==============
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
===============================================================================
9. YEAR 2000 ISSUE (UNAUDITED)
The Company determined that it was necessary to take certain steps in order to
ensure that the Plan's information systems were prepared to handle year 2000
dates. The Company took a two phase approach. The first phase addressed
internal systems that had to be modified or replaced to function properly. Both
internal and external resources were utilized to replace or modify existing
software applications, and test the software and equipment for the year 2000
modifications. The Company is complete with this phase of the project. Costs
associated with modifying software and equipment were not significant and were
paid by the Company.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third party service providers have indicated that
they are year 2000 compliant. If modication of data processing systems of
either the Plan, the Company, or its service providers are not completed timely,
the year 2000 problem could have a material impact on the operations of the
Plan. Plan management has not developed a contingency plan, because they are
confident that all systems are year 2000 ready.
===============================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
EIN: 75-0102185 Plan Number: 014
Line 27a-Schedule of Assets Held for Investment Purposes
December 31, 1998
<CAPTION>
(c) Description of investment including
including maturity date, rate of interest, (e) Current
(a) (b) Issuer collateral, par, or maturity value (d) Cost Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrill Lynch Growth Fund for Investment and Retirement $ 3,462,056 $ 2,963,736
Merrill Lynch Global Allocation Fund, Inc. 1,688,657 1,498,279
Merrill Lynch Capital Fund, Inc. 1,392,260 1,456,792
Merrill Lynch Retirement Preservation Trust 864,843 864,843
* Justin Industries, Inc. Common Stock 22,059,049 37,926,089
---------------------------
$29,466,865 $44,709,739
<FN> ===========================
* - Indicates party-in-interest to the Plan.
</TABLE>
===============================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
EIN: 75-0102185 Plan Number: 014
Line 27d - Schedule of Reportable Transactions
Year Ended December 31, 1998
<CAPTION>
(a) and (b) Identity of Party (c) Purchase (d) Selling (h) Cost of (i) Net Gain
Involved and Description of Assets Price (1) Price (1) Asset or (Loss)
- --------------------------------------------------------------------------------------------------
Category (iii) - series of transactions in excess of 5% of plan assets:
<S> <C> <C> <C> <C>
Justin Industries, Inc. Common Stock $ 3,783,058 $ - $3,783,058 $ -
Justin Industries, Inc. Common Stock $ - $2,656,307 $1,663,160 $ 993,147
<FN>
(1) - Also represents current value of assets on transaction date.
Note: All transactions were made on the market. There were no category (i), (ii), or (iv)
reportable transactions during 1998.
There were no columns (e) or (f) activities.
</TABLE>
===============================================================================
<TABLE>
JUSTIN INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN
EIN: 75-0102185 Plan Number: 014
Line 27f - Schedule of Nonexempt Transactions
Year Ended December 31, 1998
<CAPTION> (c) Description of Transactions
Including Maturity Date, Rate
(b) Relationship to Plan, Employer of Interest, Collateral, Par or
(a) Identity of Party Involved or Other Party-in-Interest Maturity value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Justin Industries, Inc. Employer/Plan Sponsor Contributions of $146,646 for
the January payroll were
deposited on February 26, 1998.
Justin Industries, Inc. Employer/Plan Sponsor Contributions of $161,336 for
the February payroll were
deposited on March 30, 1998.
Justin Industries, Inc. Employer/Plan Sponsor Contributions of $115,183 for
the March payroll were
deposited on April 28, 1998.
Justin Industries, Inc. Employer/Plan Sponsor Contributions of $111,462 for
the May payroll were
deposited on June 23, 1998.
Justin Industries, Inc. Employer/Plan Sponsor Contributions of $105,370 for
the June payroll were
deposited on July 24, 1998.
Justin Industries, Inc. Employer/Plan Sponsor In addition, contributions of
$150,645 for the December payroll
were deposited on January 28, 1999.
<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 Justin Industries, Inc. Employee Stock
Ownership Plan of our report dated May 28, 1999, 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,
1998.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
June 26, 1999
