FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 1-2333
LONE STAR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE No. 13-0982660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
300 First Stamford Place, P. O. Box 120014, Stamford, CT 06912-
0014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-969-8600
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
In December, 1990, registrant and certain of its wholly-owned,
either directly or indirectly, subsidiaries each filed voluntary
petitions for relief under Chapter 11, Title 11 of the United
States Code with the United States Bankruptcy Court for the
Southern District of New York. The Modified Amended Consolidated
Plan of Reorganization of the registrant and such subsidiaries
("Plan of Reorganization") became effective on April 14, 1994 and
on that date all of registrant's old equity securities were
cancelled and new equity securities were issued to holders of
claims in the Bankruptcy and holders of old equity securities.
Indicate by check mark whether the registrant has filed all
documents and rights required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
The number of shares outstanding of each of the registrant's
classes of new Common Stock as of August 9, 1994:
Common Stock, par value $1 per share - 11,417,670 shares
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations (Unaudited) -
For the Three Months Ended June 30, 1994 and
March 31, 1994 and the Three and Six Months Ended
June 30, 1993.......................................3
Consolidated Statements of Retained Earnings
(Unaudited) - For the Three Months Ended
June 30, 1994 and March 31, 1994 and the
Three and Six Months Ended June 30, 1993............4
Consolidated Balance Sheets - June 30, 1994
(Unaudited), March 31, 1994 and
December 31, 1993...................................5
Consolidated Statements of Cash Flows (Unaudited) -
For the Three Months Ended June 30, 1994 and
March 31, 1994 and the Six Months Ended
June 30, 1993.......................................6
Notes to Unaudited Consolidated Financial
Statements..........................................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 31
PART II. OTHER INFORMATION.................................. 37
SIGNATURES................................................... 41
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands)
<CAPTION>
Successor Company Predecessor Company
For the Three For the Three For the Three For the Six
Months Ended Months Ended Months Ended Months Ended
Consolidated Income June 30, 1994 March 31, 1994 June 30, 1993 June 30, 1993
<S> <C> <C> <C> <C>
Revenues:
Net sales $86,995 $33,709 $70,580 $103,057
Joint venture income 1,269 381 10,981 12,610
Other income, net 823 2,691 2,497 5,067
89,087 36,781 84,058 120,734
Deductions from revenues:
Cost of sales 61,403 29,694 56,827 85,328
Selling, general and administrative
expenses 7,487 9,836 10,074 20,280
Depreciation and depletio 5,979 6,688 6,577 13,161
Recovery of litigation se - (6,500) - -
Interest expense 2,219 233 428 902
77,088 39,951 73,906 119,671
Income (loss) before reorganization items and
income taxes 11,999 (3,170) 10,152 1,063
Reorganization items:
Adjustments to fair value - (133,917) - -
Loss on sale of assets - - (44,889) (44,889)
Other items - (13,396) (2,589) (5,197)
- (147,313) (47,478) (50,086)
Income (loss) before income taxes and cumulative
effect of change in accou 11,999 (150,483) (37,326) (49,023)
(Provision) credit for in (4,085) (155) 9,039 7,161
Income (loss) before cumulative effect of change in
accounting principles and 7,914 (150,638) (28,287) (41,862)
Cumulative effect of change in accounting principles:
Postretirement benefits o - - - (782)
Extraordinary item: gain on discharge of
prepetition liabilities - 127,520 - -
Income (loss) before preferr 7,914 (23,118) (28,287) (42,644)
Provision for preferred divi - (1,278) (1,278) (2,556)
Net income (loss) applicable $7,914 ($24,396) ($29,565) ($45,200)
Weighted average common shar 12,000 (a) (a) (a)
Primary and fully diluted income per common share:
Income before cumulative eff $0.62 (a) (a) (a)
accounting principles
Cumulative effect of change - (a) (a) (a)
principles
Extraordinary gain on discha - (a) (a) (a)
liabilities
Net income per common share $0.62 (a) (a) (a)
(a) Earnings per share are not meaningful due to reorganization and revaluation entries and
the issuance of 12 million shares of new common stock.
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of the Financial
Statements.
3
</TABLE>
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Unaudited)
(In Thousands)
Successor
Company Predecessor Company
For the TFor the ThreFor the Three For the Six
Months EnMonths Ended Months Ended Months Ended
June 30, March 31, 19June 30, 1993 June 30, 1993
Retained earnings, beginn $ - ($187,896) ($166,356) ($151,856)
Net income (loss) 7,914 (23,118) (28,287) (42,787)
Retained earnings (accumu 7,914 (211,014) (194,643) (194,643)
Elimination of accumulate - 211,014 - -
Retained earnings, end of $7,914 $ - ($194,643) ($194,643)
The accompanying Notes to Unaudited Consolidated Financial Statements are an
integral part of the Financial Statements.
LONE STAR INDUSLONE STAR INDUSTRIES, INC.
CONSOLIDATED BACONSOLIDATED BALANCE SHEETS Predecessor
(In Thousands) (In Thousands) | Company
|
June 30, March 31, | December 31,
1994 1994 | 1993
(Unaudited) |
|
Assets: |
Current assets: |
Cash including cash equivalents $28,795 $12,147 | $244,397
Accounts and notes receivable, 42,374 29,711 | 49,022
Inventories: |
Finished goods 18,844 23,743 | 20,277
Work in process and raw mate 2,734 2,126 | 1,987
Supplies and fuel 18,229 18,925 | 16,162
39,807 44,794 | 38,426
|
Current assets of assets held fo - - | 20,634
Other current assets 4,347 15,127 | 2,733
Total current assets 115,323 101,779 | 355,212
|
|
Net assets of liquidating subsid 116,000 112,000 | -
Assets held for sale - - | 65,663
Notes receivable 1,096 105 | 5,058
Joint ventures 18,769 17,500 | 88,574
|
Property, plant and equipment 316,799 332,263 | 682,830
Less accumulated depreciation an 5,433 - | 284,745
311,366 332,263 | 398,085
|
Reorganization value in excess of amounts allocable to |
identifiable assets 10,257 14,372 | -
Cost in excess of net assets of - - | 9,273
Other assets and deferred charge 1,604 1,392 | 3,020
Total assets $574,415 $579,411 | $924,885
|
Liabilities and Shareholders' Equity: |
Current liabilities: |
Accounts payable $14,622 $15,927 | $16,079
Accrued liabilities 54,841 68,718 | 60,353
Other current liabilities 3,064 2,994 | 3,227
Total current liabilities 72,527 87,639 | 79,659
|
Asset proceeds notes of liquidating subsidiary (See |
Note 5) 116,000 112,000 | -
Senior notes payable 78,000 78,000 | -
Production payment 18,463 18,463 | -
Deferred income taxes 5,000 5,000 | 3,356
Postretirement benefits other th 126,014 125,260 | 141,950
Pensions 21,519 22,351 |
Other liabilities 35,702 37,385 | 21,886
|
Liabilities subject to Chapter 1 - - | 627,938
|
Contingencies (See Notes 18 and 19) |
|
Shareholders' Equity: |
Redeemable preferred stock - - | 37,500
Non-redeemable preferred stock (involuntary |
liquidating value, 1993 - $1,1 - - | 248
Common stock 12,000 12,000 | 18,103
Warrants to purchase common stoc 15,613 15,613 | -
Additional paid-in capital 65,700 65,700 | 239,870
Retained earnings (deficit) 7,914 - | (187,896)
Cumulative translation adjustmen (37) - | -
Pension liability adjustment - - | (21,157)
Treasury stock, at cost - - | (36,572)
Total liabilities and shareh $574,415 $579,411 | $924,885
|
The accompanying Notes to Unaudited Consolidated Financial Statements are an
integral part of the Financial Statements.
5
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
Successor
Company Predecessor Company
For the Three For the Three For the Six
Months Ended Months Ended Months Ended
June 30, 1994 March 31, 1994June 30, 1993
Cash Flows from Operating Activities:
Income (loss) before cumulative effect of change in
accounting principles $7,914 ($150,638) ($41,862)
Adjustments to arrive at net cash provided (used)
by operating activities:
Depreciation and dep 5,979 6,688 13,161
Deferred income taxe 4,080 155 1,133
Provision for crosst - (6,500) -
Loss on sale of join - - 32,389
Changes in operating assets and liabilities:
Accounts and notes (14,997) 22,157 (12,552)
Inventories and ot 3,340 (17,189) (11,567)
Accounts payable a 2,560 (1,808) (1,190)
Unremitted earnings (1,269) 619 (872)
Adjustments to fair - 133,917 -
Other reorganization - 13,396 5,197
Other, net (1,598) (5,866) 2,272
Net cash provided (used) by operating activities
before reorganization 6,009 (5,069) (13,891)
Operating cash flows from reorganization items:
Interest received on cash accumulated
because of Chapter - 1,998 2,132
Professional fees an (5,247) (5,849) (6,235)
Professional fees escrow pursuant to the
reorganization pla - (12,431) -
Net cash used by reorgan (5,247) (16,282) (4,103)
Net cash provided (used) 762 (21,351) (17,994)
Cash Flows from Investing Activities:
Capital expenditures (5,984) (6,695) (8,968)
Proceeds from sales of a 21,829 - -
Proceeds from sales of a - 2,457 6,758
Collection of notes rece - 93 576
Advances to equity inves - - (5,000)
Other, net 41 (293) (1,602)
Proceeds from sales of assets due to Chapter 11
proceedings - - 721
Net cash provided (used) 15,886 (4,438) (7,515)
Cash Flows from Financing Activities:
Cash distribution pursuant to the reorganization
plan - (200,451) -
Transfer to liquidating - (5,010) -
Reduction of production - (1,000) (4,000)
Net cash used by financi - (206,461) (4,000)
Net increase (decrease) 16,648 (232,250) (29,509)
Cash and cash equivalent 12,147 244,397 168,605
Cash and cash equivalent $28,795 $12,147 $139,096
The accompanying Notes to Unaudited Consolidated Financial Statements are
an integral part of the Financial Statements.
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position of the company as of June 30, 1994, and
the results of operations for the three months ended June 30, 1994,
the three months ended March 31, 1994 and the three and six months
ended June 30, 1993 and the cash flows for the three months ended June
30, 1994, the three months ended March 31, 1994 and the six months
ended June 30, 1993. As discussed in Notes 2, 3, and 4, the company
emerged from its bankruptcy proceedings on April 14, 1994, with an
effective date for accounting purposes of March 31, 1994.
Accordingly, the March 31, 1994 accompanying consolidated balance
sheet represents the financial position of the reorganized Lone Star
as of the effective date. The financial statements contained herein
should be read in conjunction with the financial statements and
related notes in the company's annual report on Form 10-K for the year
ended December 31, 1993, and with the quarterly report on Form 10-Q,
for the quarter ended March 31, 1994. The company's operations are
seasonal and, consequently, interim results are not necessarily
indicative of the results to be expected for a full year. In
addition, having operated for over three years in bankruptcy, results
of operations prior to emergence from bankruptcy are not indicative
of results of operations outside of Chapter 11 proceedings. Also
affecting comparability are differences in the operating units of the
successor company and the predecessor company.
Note 2 - Reorganization
In November 1989, in an effort to improve the company's operating
results and to generate cash to pay maturing debt obligations, the
company implemented a restructuring program involving the sale of
certain marginal operations and facilities. Although progress was
made in implementing the restructuring program, depressed economic
conditions and the shortage of financing available to potential buyers
during 1990 impeded the company's ability to complete the sale of all
assets within the time frame and at the values estimated in 1989. In
addition, during the fourth quarter of 1990, the company was unable
to secure short-term borrowing arrangements, at acceptable terms and
conditions, following the termination of its revolving-credit
agreement and its agreement with financial institutions to sell trade
receivables in November 1990. Without such financing or other sources
of cash, the company probably would have been in default under its
long-term debt agreements in the first quarter of 1991. The company
decided to seek reorganization under Chapter 11 of Title 11 of the
United States Code ("Chapter 11") to achieve a long-term solution to
its financial, litigation and business problems. On December 10, 1990
(the "petition date"), Lone Star Industries, Inc. together with
certain of its subsidiaries (including two subsidiaries filing on
December 21, 1990) ("filed companies"), filed voluntary petitions for
reorganization under Chapter 11 in the United States Bankruptcy Court
for the Southern District of New York ("Bankruptcy Court"), and
operated their respective businesses as debtors-in-possession until
April 14, 1994.
On February 17, 1994, with the approval of all voting classes of
creditors and equity holders, the Bankruptcy Court confirmed the
Debtors Modified Amended Consolidated Plan of Reorganization dated
November 4, 1993 (as further modified on February 17, 1994) ("the
plan"). On April 14, 1994, (the "effective date") the plan became
effective, and distributions to creditors and shareholders commenced
(as provided by the plan, a reserve for approximately $40,000,000 in
disputed unresolved claims has been established). In accordance with
the plan, certain core cement, ready-mixed concrete and construction
aggregates operations constitute the reorganized Lone Star. Other
non-core assets and their associated liabilities of the company
including the Nazareth, Pennsylvania cement plant, the Santa Cruz,
California cement plant and the company's interests in the RMC
LONESTAR, Hawaiian Cement and Lone Star Falcon joint ventures, certain
surplus real estate and certain litigations have been transferred to
Rosebud Holdings, Inc., a wholly-owned liquidating subsidiary and its
subsidiaries (collectively "Rosebud") for disposition and distribution
of the proceeds of such dispositions, for the benefit of unsecured
creditors (See Note 5).
The plan provides for distributions on the effective date to claims
which were allowed at that time, and for the establishment of a
reserve for certain disputed, contingent, and unliquidated claims.
On the effective date, the escrow agent administering the reserve
received a distribution of cash and securities attributable to the
reserved claims. On the effective date, the total amount of allowed
and reserved claims was $590,944,000, which the company expects to be
reduced to approximately $584,016,000 when all claims are paid. On
the effective date, allowed and reserved secured claims aggregated
$435,000, allowed and reserved priority claims approximated
$5,676,000, and allowed and reserved convenience claims (under $5,000)
approximated $2,152,000. The plan provided that these claimants are
to receive full payment in cash. The plan also provided for allowed
and reserved unsecured claims of $575,753,000, to receive their pro
rata share of (i) $192,188,000 in cash, (ii) $78,000,000 ten year 10%
senior unsecured notes of the reorganized company, (The company's
March 31, 1994 balance sheet includes accrued interest of $1,300,000
for the period from February 1, 1994 through March 31, 1994 per the
terms of the senior unsecured notes indenture), (iii) $138,118,000
secured asset proceeds notes of Rosebud, to be paid out of the
proceeds from the disposition of its assets (See Note 5) and (iv)
85.0% of the common stock of reorganized Lone Star. The aggregate
recovery on unsecured claims will depend on the ultimate value of the
common stock, the senior unsecured notes, and the secured asset
proceeds notes (the value of the secured asset proceeds notes will
reflect the sums realized from the disposition of assets and
litigation recoveries of Rosebud).
Holders of the company's cumulative convertible preferred stock
received a pro rata share of 10.5% of the common stock of reorganized
Lone Star and 1,250,000 warrants to purchase common stock of the
reorganized Lone Star. The holders of common stock of Lone Star
received the balance of reorganized Lone Star's common equity and
2,753,333 warrants to purchase common stock in the reorganized Lone
Star. The warrants are exercisable through December 31, 2000, and
each warrant provides for the purchase of one share of the common
stock of reorganized Lone Star at a price of $18.75 per share.
In addition, in accordance with the plan, as part of the agreement
with the Pension Benefit Guaranty Corporation ("PBGC") the company
granted the PBGC a mortgage on the Oglesby, Illinois plant, and a
security interest in the Kosmos Cement Company partnership, to secure
certain contingent future pension obligations.
Note 3 - Basis of Presentation
As of the effective date of the plan, the sum of allowed claims plus
post-petition liabilities of the company exceeded the value of its
preconfirmation assets. In addition, the company experienced a change
in control as pre-reorganization equity holders received less than 50%
of the reorganized Lone Star common stock issued pursuant to the plan.
Therefore, in accordance with AICPA Statement of Position No. 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP No. 90-7"), the company has adopted "fresh-
start" reporting which assumes that a new reporting entity has been
created and require assets and liabilities be adjusted to their fair
values as of the effective date.
Although the plan became effective on April 14, 1994, for accounting
purposes the effective date of the plan is considered to be March 31,
1994, and accordingly, the company has adopted fresh-start reporting
as of March 31, 1994. Adjustments were recorded as of March 31, 1994
to reflect the effects of the consummation of the plan and to reflect
the implementation of fresh-start reporting. The reorganization value
of the company was determined using several factors and by reliance
on various valuation methods, including discounted cash flows,
price/earnings ratios and other applicable ratios. Reorganization
value generally approximates fair value of the entity before
considering liabilities and approximates the amount a buyer would pay
for the assets of the entity after the reorganization. Based on
information from parties in interest and from Lone Star's financial
advisors, the total reorganization value of the Company was
$579,411,000. The reorganization value was then allocated to the
company's assets and liabilities in conformity with the Accounting
Principles Board Opinion No. 16, "Business Combinations" ("APB No.
16"), as specified by SOP No. 90-7. Income related to the settlement
of liabilities subject to the company's Chapter 11 proceedings is
included in the accompanying consolidated statement of operations as
an extraordinary gain on discharge of prepetition liabilities. The
gains or losses related to the adjustments of assets and liabilities
to fair value are included in reorganization items in the accompanying
consolidated statement of operations (See Note 10). The reorganization
value in excess of amounts allocable to identifiable assets is the
portion of the reorganization value of the company which was not
attributed to specific tangible or identified intangible assets of the
company.
Total equity of reorganized Lone Star under fresh-start reporting at
March 31, 1994 was less than total equity included in the plan. This
is due to the different discount rates used to value the company's
liability for postretirement benefits other than pensions, in the plan
and under generally accepted accounting principles.
<PAGE>
Note 4 - Adjustments to Record Effects of Plan of Reorganization
The effect of the plan and the company's adoption of fresh-start
reporting on its March 31, 1994 balance sheet are as follows:
Adjustments to Record
Effectiveness of the Plan of
Reorganization
(In Thousands)
Effects Fresh
Predec- of Plan of Start Succes-
essor Reorgan- Report sor
Company ization ing Company
Assets:
Current assets:
Cash including cash
equivalents .......... $ 220,466 $(208,319) $ - $12,147
Accounts and notes
receivable, net....... 42,758 (13,047) - 29,711
Inventories............. 50,135 5,248 (10,589) 44,794
Current assets of assets
held for sale.......... 22,991 (22,991) - -
Other current assets..... 5,856 12,391 (3,120) 15,127
Total current assets 342,206 (226,718) (13,709) 101,779
Net assets of liquidating
subsidiary (See Note 5) - 208,668 (96,668) 112,000
Assets held for sale... 66,024 (66,024) - -
Notes receivable ....... 4,965 (4,860) - 105
Joint ventures.......... 89,405 (65,571) (6,334) 17,500
Property, plant and
equipment............ 397,638 (57,968) (7,407) 332,263
Reorganization value in
excess of amounts
allocable to identifiable
assets............... - - 14,372 14,372
Cost in excess of net
assets and deferred
charges.............. 9,132 - (9,132) -
Other assets and deferred
charges................ 3,038 (1,646) 1,392
Total assets.............. $912,408 $(212,473)$(120,524) $579,411
<PAGE>
Adjustments to Record
Effectiveness of the Plan of
Reorganization
(In Thousands)
Effects Fresh
Predec- of Plan of Start Succes-
essor Reorgan- Report- sor
Company ization ing Company
Liabilities and
Shareholders' Equity:
Current liabilities:
Accounts payable..... $16,055 $ (128) $ - $ 15,927
Accrued liabilities.. 61,489 6,034 1,195 68,718
Other current
liabilities........ 2,471 523 - 2,994
Total current liabilities 80,015 6,429 1,195 87,639
Asset proceeds notes of
liquidating subsidiary - 112,000 - 112,000
(See Note 5)
Senior notes payable - 78,000 - 78,000
Production payment - 18,463 - 18,463
Deferred income taxes 3,506 - 1,494 5,000
Postretirement benefits
other than pensions... 142,715 - (17,455) 125,260
Other liabilities.... 31,565 12 5,808 37,385
Pensions - - 22,351 22,351
Liabilities subject to
Chapter 11 proceedings.. 620,942 (620,942) - -
Equity:
Predecessor Company:
Redeemable preferred
stock............... 37,500 (37,500) - -
Non-redeemable preferred
stock 244 (244) - -
Common stock....... 18,103 (18,103) - -
Additional paid-in
capital........... 239,874 291 (240,165) -
Retained earnings... (204,327) 127,229 77,098 -
Pension liability
adjustment........ (21,157) - 21,157 -
Treasury stock, at
cost.............. (36,572) 36,572 - -
Successor Company:
Common Stock...... - 12,000 - 12,000
Warrants.......... - 15,613 15,613
Additional paid-in
capital.......... - 57,707 7,993 65,700
Total liabilities and
shareholders' equity. $912,408($212,473)($120,524) $579,411
The following entries record the provisions of the plan and the
adoption of fresh-start reporting:
Entries to record debt discharge: Debit Credit
Liabilities subject to Chapter 11
proceedings $584,016,000
Cash $200,451,000
Asset proceeds notes of
liquidating subsidiary (See Note 5) 112,000,000
Senior debt 78,000,000
Common stock 10,200,000
Additional paid-in-capital 55,845,000
Gain on discharge of
prepetition liabilities 127,520,000
$584,016,000 $584,016,000
Entries to record exchange of stock for stock:
Preferred stock $ 37,744,000
Common stock (old) 18,103,000
Treasury stock $ 36,572,000
Common stock (new) 1,800,000
Warrants to purchase common stock 15,613,000
Additional paid-in-capital 1,862,000
$ 55,847,000 $ 55,847,000
Entries to record other effects of the plan:
Inventories $ 5,248,000
Net assets of liquidating
subsidiary 208,668,000
Other current assets 12,391,000
Liabilities subject to Chapter 11
proceedings 36,926,000
Reorganization expenses 291,000
Cash and marketable securities $ 7,868,000
Accounts receivable 13,047,000
Current assets of assets
held for sale 22,991,000
Assets held for sale 66,024,000
Notes receivables 4,860,000
Joint ventures 65,571,000
Property, plant & equipment 57,968,000
Accrued expenses and accounts payable 5,906,000
Other current liabilities 523,000
Production payment 18,463,000
Other liabilities 12,000
Additional paid-in capital 291,000
$263,524,000 $263,524,000
<PAGE>
Entries to record the adoption of fresh-start reporting and
to eliminate the deficit:
Debit Credit
Reorganization value in excess
of amounts allocable to
identifiable assets $14,372,000
Postretirement benefits other than
pensions 17,455,000
Gain on discharge of prepetition
liabilities 127,520,000
Additional paid-in capital 232,172,000
Inventories $10,589,000
Other current assets 3,120,000
Net assets of liquidating
subsidiary 96,668,000
Joint ventures 6,334,000
Property, plant & equipment 7,407,000
Cost in excess of net assets
and deferred charges 9,132,000
Other assets and deferred charges 1,646,000
Accrued expenses and accounts payable 1,195,000
Pensions 22,351,000
Other liabilities 5,808,000
Deferred income taxes 1,494,000
Pension liability adjustment 21,157,000
Accumulated deficit 204,618,000
$391,519,000 $391,519,000
The company's emergence from its Chapter 11 proceedings resulted in
a new reporting entity with no retained earnings or accumulated
deficit as of March 31, 1994. Accordingly, the company's consolidated
financial statements for periods prior to March 31, 1994 are not
comparable to consolidated financial statements presented on or
subsequent to March 31, 1994. A black line has been drawn on the
accompanying consolidated financial statements to distinguish between
the pre-reorganization and post-reorganization company.
Pro Forma Information
The following pro forma condensed financial information of the company
and its subsidiaries illustrates the estimated financial effects of
the implementation of the company's plan of reorganization (which
resulted in the end of the company's 1989 Restructuring Program) and
its adoption of fresh-start reporting. Pro forma statement of
operations data for the three months ended March 31, 1994 have been
presented as if the company had emerged from Chapter 11 bankruptcy
proceedings and adopted fresh-start reporting as of January 1, 1994.
The pro forma data is unaudited.
<PAGE>
Lone Star Industries, Inc.
Pro Forma Statement of Operations (Unaudited)
For the Three Months Ended March 31, 1994
(In Millions)
Effect of Plan of
Reorganization
and Fresh Start ProForma
Historical Reporting Results
Revenues:
Net sales.....................$ 33.7 $ 11.6 $ 45.3
Joint venture income.......... 0.4 (0.3) 0.1
Other income.................. 2.7 (1.5) 1.2
36.8 9.8 46.6
Deductions from revenues:
Cost of sales................. 29.7 17.7 47.4
Recovery of litigation
settlement................... (6.5) 6.5 -
Selling, general and
administrative............... 9.9 (1.6) 8.3
Depreciation and depletion.... 6.7 (0.6) 6.1
Interest expense.............. 0.2 2.0 2.2
40.0 24.0 64.0
Loss before
reorganization items......... (3.2) (14.2) (17.4)
Reorganization items:
Adjustments to fair value..... (133.9) 133.9 -
Other......................... (13.4) 13.4 -
Total reorganization items.... (147.3) 147.3 -
Income (loss) before income
taxes and extraordinary item. (150.5) 133.1 (17.4)
Credit (provision) for income
taxes....................... (0.2) 5.4 5.2
Loss before extraordinary
item........................ (150.7) 138.5 (12.2)
Extraordinary item: gain on
discharge of prepetition
liabilities................. 127.5 (127.5) -
Loss before provision for
preferred dividends........ $ (23.2) $ 11.0 $ (12.2)
The above pro forma condensed financial information includes estimated
adjustments for the following items:
As a result of the implementation of the plan and adoption of fresh-
start reporting the company's 1989 restructuring program ended
effective as of the effective date of the plan. Operating results of
the cement plants at Pryor, Oklahoma and Maryneal, Texas, which were
formerly included in assets held for sale are included in the pro
forma consolidated operating results for the three months ended March
31, 1994 (See Note 11).
The operating results of the assets which were transferred to a
liquidating subsidiary for distribution for the benefit of unsecured
creditors, have been eliminated from the pro forma statement of
operations for the three months ended March 31, 1994.
In connection with the adjustment of the March 31, 1994 property,
plant and equipment balances to reflect the estimated values of the
assets under fresh-start reporting, the pro forma consolidated
operating results for the three months ended March 31, 1994 have been
adjusted to include the estimated change in depreciation expense
related to the new values.
Interest expense related to long-term debt, including the senior
unsecured notes of the reorganized company has been included in the
pro forma statement of operations for the three months ended March 31,
1994.
The provision for preferred dividends for the three months ended March
31, 1994 has been eliminated from the statement of operations as
common and preferred shareholders' equity of the old company has been
eliminated and replaced with common equity of the new company as of
March 31, 1994.
All Chapter 11 reorganization items included in the statement of
operations for the three months ended March 31, 1994 have been
eliminated.
The extraordinary gain on discharge of prepetition liabilities has
been eliminated.
The pro forma statement of operations has been adjusted to reflect the
reduction in expenses resulting from settlements, including
settlements reached with the Pension Benefit Guaranty Corporation and
retirees in accordance with the requirements of fresh-start reporting.
Cost of sales has been adjusted to reflect the company's change in its
method of accounting for inventory for interim reporting purposes and
the expensing of $8.4 million of deferred costs in accordance with the
adoption of fresh-start reporting. (See Note 15). In addition, cost
of sales has been adjusted to reflect $1.5 million of costs related
to its construction aggregates barges which were deferred during the
first quarter of 1994 and subsequently written-off in accordance with
fresh-start reporting. Similar costs will be incurred and expensed
in future years.
The following pro forma condensed financial information for the six
months ended June 30, 1994 illustrates the estimated operating results
as if the company had emerged from its Chapter 11 proceedings and
adopted a fresh-start reporting as of January 1, 1994 by combining the
proforma results for the three months ended March 31, 1994 and the
actual results for the three months ended June 30, 1994. Because of
the seasonality of the company's business, interim results are not
necessarily indicative of full year results.
Lone Star Industries, Inc.
Pro Forma Statement of Operations (Unaudited)
For the Six Months Ended June 30, 1994
(In Millions)
Proforma Actual Proforma
Results Results Results
for the for the for the
Three Three Six
Months Months Months
Ended Ended Ended
March 31, June 30, June 30,
1994 1994 1994
Revenues:
Net sales........................$ 45.3 $ 87.0 $ 132.3
Joint venture income............. 0.1 1.3 1.4
Other income..................... 1.2 0.8 2.0
46.6 89.1 135.7
Deductions from revenues:
Cost of sales.................... 47.4 61.4 108.8
Selling, general and
administrative................. 8.3 7.5 15.8
Depreciation and depletion....... 6.1 6.0 12.1
Interest expense................. 2.2 2.2 4.4
64.0 77.1 141.1
Income (loss) before income
taxes..........................$ (17.4) $ 12.0 (5.4)
Credit for income taxes *........ 1.6
Net (loss)....................... $ (3.8)
* The credit for income taxes is based on a pro forma tax rate of
30% for the year which includes the pro forma first quarter loss
and the effect of percentage depletion.
Note 5 - Rosebud Holdings, Inc. Liquidating Subsidiary
As part of the plan, Lone Star transferred on April 14, 1994 certain
non-core assets and their related liabilities to Rosebud Holdings,
Inc., a wholly-owned liquidating subsidiary, and its subsidiaries
(collectively "Rosebud"). The assets transferred consist of the
company's interests in the RMC LONESTAR, Lonestar Falcon and Hawaiian
Cement partnerships, cement plants located in Santa Cruz, California,
and Nazareth, Pennsylvania, certain promissory notes executed by RMC
LONESTAR, certain surplus real estate, the company's interest in any
recovery resulting from the litigation against Northeast Cement
Company and its affiliates, Lafarge Corporation, and Lafarge Canada,
Inc., certain other miscellaneous assets including a note receivable
and certain litigation and insurance claims, and a $5,000,000 cash
investment by the company to be used for working capital purposes.
The company is under no obligation to fund additional Rosebud working
capital requirements.
It was estimated by the company in connection with the plan that
disposition of the non-core assets would generate, over time, gross
proceeds of approximately $113,000,000 to $170,000,000. Lone Star's
investment in Rosebud is included in Lone Star's June 30, 1994 fresh-
start balance sheet at $116,000,000, which is the present value of
estimated net proceeds generated by the sale of assets and collection
of insurance claims and cash generated from operations, and was
determined by using the middle of the range of the proceeds contained
in the plan, discounted at 14%, plus cash, marketable securities and
escrow deposits at June 30, 1994. The increase of $4.0 million from
March 31, 1994 is primarily due to the accretion of assets reflecting
the shorter time period used in determining the present value. Other
than litigation against certain insurance companies, this amount does
not include any amount for potential recovery from any litigation
including the Northeast Cement Company litigation (See Note 19).
At the effective date of the plan, Rosebud issued asset proceeds notes
in the aggregate principal amount of $138,118,000. The asset proceeds
notes bear interest at a rate of 10% per annum payable in cash or in
additional asset proceeds notes, in semi-annual installments. The
asset proceeds notes are to be repaid as Rosebud's assets are disposed
of and proceeds, if any, are received in connection with the
litigation transferred to Rosebud. All net cash proceeds less a
$5,000,000 cash reserve are to be deposited in a cash collateral
account for distribution to the noteholders. The asset proceeds notes
mature on July 31, 1997. These notes are guaranteed, in part, by Lone
Star. In the event that, at the maturity date, the aggregate amounts
of all cash payments of principal and interest on the asset proceeds
notes is less than $88,118,000, the guarantee is payable in either
cash, notes or a combination thereof to cover the shortfall between
the actual payments and $88,118,000 dollar for dollar plus interest
provided however that the amount paid pursuant to the guarantee cannot
exceed $28,000,000. The asset proceeds notes are recorded on Lone
Star's June 30, 1994 balance sheet at an amount equal to the
investment in Rosebud of $116,000,000.
In June 1994, a subsidiary of Rosebud sold all of its interest in a
cement plant located in Santa Cruz, California for $33,063,000. The
net proceeds from the sale, after making provisions for an
environmental reserve for landfill and other costs related to the
transaction, are being used to redeem a portion of the outstanding
asset proceeds notes on a pro rata basis and to pay interest on the
redeemed notes through the date of redemption. $31,719,000 has been
transferred to the collateral agent who will make payments to note
holders on August 19, 1994.
In addition, in July 1994, Rosebud reached final agreements with all
but one insurance carrier involved in litigation related to the
reimbursement of defense costs. Rosebud will receive $5,300,000 from
the insurance carriers involved in the settlements.
Note 6 - Production Payment
As part of the plan, the company's production payment agreement terms
were revised as of April 14, 1994. In connection therewith, a new
note was issued, with an outstanding principal balance of $20,963,000
as of that date, and which bears interest at the company's option at
a rate of either prime or LIBOR plus 1.75% through December 31, 1995
and either prime plus .25% or LIBOR plus 2.5% beginning on January 1,
1996. The principal balance is payable semi-annually through July 31,
1998 in increasing installments.
Note 7 - Revolving Credit Line
Upon emergence from Chapter 11, the company entered into a three year
$35,000,000 revolving credit agreement which is collateralized by
inventory, receivables, collection proceeds and certain intangible
assets. The company's borrowings under this agreement are limited to
55% of eligible inventory plus 85% of eligible receivables. Advances
under the agreement bear interest at a rate of either prime plus 1.25%
or LIBOR plus 3%. A fee of .50% per annum is charged on the unused
portion of the credit line. There was no outstanding balance at June
30, 1994.
The company's financing agreements contain restrictive covenants
which, among other things, restrict the payment of cash dividends.
Note 8 - Senior Unsecured Notes
Upon emergence from its Chapter 11 proceedings, the company issued
$78,000,000 of ten year senior unsecured notes. The notes bear
interest at a rate of 10% per annum, payable semi-annually.
Note 9 - Stock Options
Upon emergence from Chapter 11 proceedings, the board of directors of
the company adopted the Lone Star Management Stock Option Plan
("Management Plan") and the Lone Star Industries, Inc. Directors'
Stock Option Plan ("Directors' Plan). Both plans were ratified by the
company's shareholders at the 1994 Annual Meeting. Total options
authorized for grant are 700,000 and 50,000 under the Management and
the Directors' Plans, respectively. In June 1994, options to purchase
common stock for 700,000 at an exercise price of $15.875 and 6,000
shares at an exercise price of $15.375 were granted under the
Management and Directors' Plans, respectively.
Note 10 - Reorganization Items
The effects of transactions occurring as a result of the Chapter 11
filings have been segregated from ordinary operations in the
accompanying consolidated statements of operations. Such items for
the three months ended March 31, 1994 and the three and six months
ended June 30, 1993 include the following (in thousands):
For the For the For the
Three Three Six
Months Months Months
Ended Ended Ended
March 31, June 30, June 30,
1994 1993 1993
Professional fees and administrative
expenses.........................$ (15,431) $(3,578) $(7,329)
Interest income.................... 2,035 989 2,132
(13,396) (2,589) (5,197)
Loss on sale of assets............ - (44,889) (44,889)
Adjustments to fair value........ (133,917) - -
$(147,313) $(47,478) $(50,086)
Note 11 - Restructuring Program
In November 1989, the Lone Star Board of Directors approved a
restructuring program which included the proposed sale of certain
facilities and marginal businesses, interests in certain joint
ventures, an investment in preferred stock, surplus real estate, and
certain other assets. The assets held for sale, including related
current and other assets, were classified as assets held for sale in
the accompanying consolidated December 31, 1993 balance sheet at their
estimated net realizable values. As a result of the effectiveness of
the company's plan of reorganization, certain assets included in the
restructuring program have been transferred to Rosebud to be sold with
the proceeds to be used to pay off the asset proceeds notes, and other
assets are being retained by the company.
In accordance with the plan, the company will retain the Pryor,
Oklahoma and Maryneal, Texas cement plants. The results from the
operations which the company is retaining, but which were previously
classified as assets held for sale, consist of net sales of
$14,030,000, $16,831,000 and $28,060,000 for the three months ended
March 31, 1994 and the three and six months ended June 30, 1993,
respectively and pre-tax income of $1,278,000, $1,799,000 and
$2,999,000, the three months ended March 31, 1994 and the three and
six months ended June 30, 1993, respectively.
Note 12 - Kosmos Cement Company
Summarized financial information of Kosmos Cement Company, a 25% owned
partnership which produces and sells cement in Kentucky and
Pennsylvania, for the three months ended June 30, 1994 and March 31,
1994 and the three and six months ended June 30, 1993 is as follows
(in thousands):
For the For the For the For the
Three Three Three Six
Months Months Months Months
Ended Ended Ended Ended
June 30, March 31, June 30, June 30,
1994 1994 1993 1993
Net sales............. $19,619 $ 6,825 $18,626 $26,077
Gross profit.......... $ 3,956 $ 159 $ 3,319 $ 3,462
Income (loss) before
cumulative effect of
change in accounting
principles........... $ 4,284 $ (59) $ 3,431 $ 3,514
Cumulative effect of
change in accounting
principles............ $ - $ - $ - $(3,126)
Net income.(loss)...... $ 4,284 $ (59) $ 3,431 $ 388
In the first quarter of 1993, the Kosmos Cement Company partnership
adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than
Pensions". As a result, the company recognized a charge of $782,000
representing its share of the partnership's cumulative effect of the
change in accounting principles.
Note 13 - Cash and Cash Equivalents
Cash equivalents include the company's marketable securities which are
comprised of short-term, highly liquid investments with original
maturities of three months or less. Interest paid during the three
months ended June 30, 1994, the three months ended March 31, 1994, and
the three and six months ended June 30, 1993 was $57,000, $20,000,
$31,000 and $63,000, respectively. Income taxes paid during the three
months ended June 30, 1994, the three months ended March 31, 1994 and
the three and six months ended June 30, 1993 were $57,000, $756,000,
$51,000, and $77,000, respectively.
Note 14 - Interest
Interest expense of $2,259,000, $271,000, $482,000, and $1,001,000 has
been accrued for the three months ended June 30, 1994, the three
months ended March 31, 1994 and the three and six months ended June
30, 1993 respectively. Interest capitalized during the three months
ended June 30, 1994, the three months ended March 31, 1994 and the
three and six months ended June 30, 1993 was $40,000, $38,000, $54,000
and $100,000, respectively.
The filed companies stopped accruing interest on all of their
unsecured debt as of the petition date. The amount not accrued for
the three months ended March 31, 1994 and the three and six months
ended June 30, 1993 was $7,398,000, $7,427,000 and $14,853,000
respectively.
Note 15 - Inventories
Effective April 1, 1994, the company adopted, on a prospective basis,
a change in the method of accounting for inventory for interim
reporting purposes. Under the previous method, planned capacity
variances were deferred in periods of low production and absorbed
later in the year. Under the new method, the expense resulting from
capacity variances will be recognized as incurred. Fresh-start
adjustments recorded as of March 31, 1994 included the write-off of
$8,391,000 of deferred costs related to operations included in
predecessor company results.
Note 16 - Earnings Per Share
Due to the company having common stock equivalents in excess of 20%
of the number of shares of outstanding common stock, primary and fully
diluted earnings per share of the successor company are calculated
using the modified treasury stock method in accordance with Accounting
Principles Board Opinion No. 15, "Earnings per Share", and are based
on adjusted weighted average shares outstanding of 13,774,000 and
adjusted net income of $8,585,000.
Note 17 - Sale of Florida Cement Plant
In June 1994, the company sold its interest in a cement plant located
in Florida for $21,750,000. The company did not recognize any gain
or loss on the transaction.
Note 18 - Environmental Matters
The company is subject to federal, state and local laws, regulations
and ordinances pertaining to the quality and the protection of the
environment. Such environmental regulations not only affect the
company's operating facilities but also apply to closed facilities and
previously owned and operated properties.
While it is not possible to predict with accuracy the range of future
costs for the company's program of compliance with current or future
environmental regulations or their expected impact on the company, the
capital, operating and other costs of the program could be
substantial.
In order to save on fuel costs, the company is blending and burning
hazardous waste fuels at two of its cement manufacturing plants. This
process involves obtaining permits and complying with applicable state
and federal environmental regulations. While the company believes it
is in substantial compliance with such regulations, changes in them
or in their interpretation by the relevant agencies or courts could
limit, effectively prohibit the use of, or make prohibitive the cost
of using, hazardous waste fuels, thus depriving the company of the
economic benefits of its waste fuel program. In February 1994, the
United States Court of Appeals for the District of Columbia Circuit
(i) vacated and remanded a facility-specific standard promulgated by
the U.S. Environmental Protection Agency ("U.S. EPA") for ascertaining
the presence of products of incomplete combustion designed for wet
process cement kilns that burn hazardous waste fuels, ruling that the
standard had been promulgated without sufficient notice, but (ii)
upheld related standards applicable to the industry. In April 1994,
the Circuit Court denied plaintiffs' motion to reconsider its
decision. Unless the Circuit Court's decision (from which a petition
for certiorari to the U.S. Supreme Court has been filed) is reversed
or a modification of the remanded standard is adopted by U.S. EPA, or
the company can institute operational changes which will enable it to
meet the industry standards upheld by the Circuit Court, the company's
Greencastle, Indiana cement plant may have to cease or curtail its use
of hazardous waste fuels. Meanwhile, the Circuit Court's ruling is
stayed pending the Supreme Court's decision on plaintiffs' petition
for certiorari, and the company is investigating modifications to
operations at this plant that would enable it to continue to burn
hazardous waste fuels under the surviving standards. The Circuit
Court's ruling has no impact upon the current use of hazardous waste
fuels at the company's Cape Girardeau, Missouri cement plant.
Since 1991, federal and state environmental agencies have conducted
inspections and instituted inquiries and administrative actions
regarding waste fuel operations at both of the company's waste fuel
burning facilities. In the first half of 1994 the company paid amounts
totalling approximately $402,000 representing negotiated settlements
with federal and state environmental authorities of administrative
actions that alleged violations of regulations pertaining to the
handling and burning of hazardous waste fuels at the Greencastle
plant. In March 1994, U.S. EPA, Region 7, instituted an administrative
proceeding regarding waste fuel operations at the company's Cape
Girardeau plant, seeking over $500,000 in civil penalties. The
company is holding settlement negotiations with officials of Region
7.
Cement kiln dust, ("CKD") a by-product of cement manufacturing, is
currently exempted from environmental regulation by the Bevill
Amendment to the Federal Resource Conservation and Recovery Act
pending the completion of a Congressionally-mandated study and
regulatory determination by U.S. EPA regarding the need for regulatory
controls on the management, handling and disposal of cement kiln dust.
The regulatory determination is scheduled to be made in January 1995.
It is impossible at this time to predict with accuracy what increased
costs (or range of costs), if any, changes in regulatory control of
CKD would impose on the company.
The company and certain of its subsidiaries have been identified as
parties that may be held responsible by various federal, state and
local authorities with respect to contamination at certain sites of
former operations or sites where waste materials from the company or
its subsidiaries, such as equipment containing polychlorinated
biphenyls, were deposited, including sites placed on the National
Priority List ("NPL") pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). These include
sites located: in Utah (seven sites, including three NPL sites
discussed below); Illinois (one NPL site); Texas (two sites, including
one NPL site); Missouri (one NPL site); Washington (two NPL sites);
Minnesota (two NPL sites); Colorado (one NPL site); Florida (four
sites, including two related NPL sites and two non-NPL sites described
below); California (one non-NPL site described below); Pennsylvania
(one NPL site); and Louisiana (one NPL site).
Except for the Utah NPL sites described below, all of the NPL sites
referred to above involve numerous potentially responsible parties
("PRP's") and factual investigation indicates that in each case the
company's or subsidiary's contributions of waste were small in
comparison to those of other PRP's. Except for the Utah sites, no
timely proofs of claim were filed with the Bankruptcy Court by the
environmental regulatory agencies with respect to NPL sites, none of
which are currently owned or leased by the company or its
subsidiaries. However, a number of PRP's filed timely proofs of claim
with the Bankruptcy Court with respect to various NPL sites; these
claims have either been (i) allowed in full as de minimis, (ii)
resolved through negotiation and allowed as general unsecured claims,
or (iii) objected to and disallowed in the company's Chapter 11
proceedings.
Following are descriptions of proceedings involving certain NPL and
non-NPL sites mentioned above:
In July 1989, the company was advised by U.S. EPA, Region 8 that it
was a PRP under CERCLA with respect to three adjoining sites in Salt
Lake City, Utah on which CKD and small amounts of chrome-containing
kiln brick from the company's Utah cement plant had been deposited.
In July 1990, the U.S. EPA and the Utah Department of Health issued
a record of decision selecting a remedial action calling for removal
of the CKD, over a period of time, to a location to be selected in the
Salt Lake City vicinity where an industrial type landfill would be
constructed. The company has reached an agreement with the U.S.
Department of Justice, U.S. EPA, the U.S. Department of the Interior,
the Utah Department of Environmental Quality and Davis County, Utah
regarding a settlement pursuant to which among other things, U.S. EPA
will receive a general unsecured claim in the company's bankruptcy
proceedings in exchange for releases from further liability for
investigation and clean-up costs and natural resource damage claims
and protection against third-party claims for investigation and clean-
up costs. The agreement has been executed by the company and by the
respective governmental agencies and is subject to a CERCLA-mandated
public notice and comment period and approval by the company and the
Bankruptcy Court.
In October 1989, the company commenced an action in United States
District Court in Utah seeking contribution from the two principal
owners of these Utah NPL sites, who had also been named PRP's, for
their share of investigative clean-up costs. Following pre-trial
litigation, settlement agreements with the landowners were negotiated
and approved by the Bankruptcy Court, pursuant to which the landowners
receive general unsecured claims in the company's bankruptcy
proceedings and all their claims against the company were dismissed
with prejudice, subject to the landowners' reaching settlements with
U.S. EPA, the negotiation of which is continuing.
In a transaction in the early 1970's, the company acquired
subsidiaries that conducted woodtreating or wood-dipping operations
at two sites in Florida. Contamination from chemicals at these non-
NPL sites has been the subject of various proceedings by federal,
state or local environmental authorities, as well as lawsuits
involving private parties.
In 1992, pursuant to an Administrative Order on Consent with U.S. EPA,
Region 4, entered into prior to the company's Chapter 11 filing, a
clean up of soils and water in excavated areas at the Dania, Florida
site was completed by a subsidiary of the company and approved by U.S.
EPA in 1992. The subsidiary has entered into a stipulation approved
by the Bankruptcy Court, with the State of Florida Department of
Environmental Protection ("FDEP") (which filed a claim in the
company's bankruptcy proceedings) committing to undertake a
groundwater monitoring program and, if necessary, groundwater
treatment in settlement of the State's proof of claim it filed in the
bankruptcy proceedings. The subsidiary is currently negotiating a
consent order with FDEP setting forth the monitoring and possible
remediation efforts in detail. This site has been transferred to
Rosebud pursuant to the plan.
In 1992, pursuant to a stipulation in Florida state court, executed
prior to its Chapter 11 filing, a subsidiary of the company completed
the clean-up of soils under Florida environmental regulations at a
site in Dade County, Florida which it had leased for woodtreating
operations in the 1960's and 1970's. In settlement of the proofs of
claim filed in the company's bankruptcy proceedings, the subsidiary
has executed a stipulation with state and county environmental
authorities regarding entry into a consent order whereby the
subsidiary has committed to undertake further groundwater
investigation of the site and, if necessary, soil remediation,
groundwater treatment and groundwater monitoring programs all within
a specified monetary cap.
Prior to its Chapter 11 filing, the subsidiary filed a lawsuit in
federal district court in Florida against other PRP's, including past
and present owners of the site, for cost recovery and contribution
under CERCLA. Two of the PRP's filed counterclaims and proofs of
claim in the bankruptcy proceedings. The subsidiary has entered into
a settlement agreement, approved by the Bankruptcy Court, with the
PRP's pursuant to which they will reimburse the subsidiary for a
portion of its clean-up costs and dismiss their federal and state
court and claims filed in the bankruptcy proceedings, with prejudice
and the subsidiary will dismiss its court claims against them with
prejudice, while committing to undertake the further investigation
and, if necessary, remedial work under the Bankruptcy Court
stipulation with state and county environmental authorities described
above.
In August 1992, Santa Cruz County, California authorities served the
company with written notice that it had commenced a criminal and civil
investigation of long-term waste disposal practices at a site formerly
owned by the company and now owned by a partnership in which a
subsidiary of Rosebud holds a partnership interest. The investigation
and negotiations by the company and others with interests in the site
culminated in the resolution of the matter by the concurrent filing
of a complaint and stipulated final judgment. Pursuant to the
settlement, certain county and state authorities received an
administrative priority claim in the company's bankruptcy proceedings
totaling $150,000 and all claims raised in the complaint were released
and dismissed. Rosebud Holdings, Inc. has also committed to complete
and is presently undertaking the closure of a former waste landfill
area on the investigated site at an anticipated cost of approximately
$1,200,000, which is for the account of the Rosebud subsidiary. The
closure work is not expected to commence until 1995.
Note 19 - Litigation
Between 1983 and 1989 a Lone Star subsidiary (among those who filed
Chapter 11 petitions) manufactured and sold approximately 500,000
concrete railroad crossties to various railroads. In 1989 and early
1990 purchasers of most of the crossties sued Lone Star and such
subsidiary, alleging that the crossties were defective because of
cracking, and seeking substantial compensatory and punitive damages.
The suits by four purchasers, which sought damages of over
$200,000,000 were consolidated for pre-trial purposes in the U.S.
District Court for the District of Maryland under the Federal Courts
Multi-District Rules. In addition, an administrative proceeding was
brought by the Baltimore Mass Transit Authority ("MTA"), involving
crossties sold to the MTA, and an MTA procurement officer found Lone
Star and its subsidiary liable to the MTA for damages in an amount of
approximately $10,000,000.
Lone Star determined that it would be in the best interest of the
company to settle the proceedings brought by the railroads, and in
late 1992 Lone Star entered into separate agreements with each of the
four purchasers providing for the release of their respective claims
against the company and its subsidiaries relating to the crossties,
and for the railroads to receive in the aggregate allowed liquidated
unsecured claims in its bankruptcy proceedings of $57,200,000, for one
railroad to receive a cash payment of $5,000,000 and for the payment
of $4,384,000 to another railroad from an escrow fund established to
hold the proceeds from the sale of property by a Lone Star subsidiary
on which that railroad had obtained liens in the litigation. These
agreements have been approved by the Bankruptcy Court, and the
$9,384,000 cash payments have been made. The claims were treated in
accordance with the provisions of the company's plan.
In 1989 Lone Star and its subsidiary filed a plenary action in the
Maryland Federal District Court, and third party complaints in other
actions, against Northeast Cement Co. and its affiliates, Lafarge
Corporation and Lafarge Canada, Inc. ("Lafarge"), alleging breach of
warranties in connection with the purchase from Northeast Cement Co.
by Lone Star's subsidiary of the cement used to manufacture
substantially all of the crossties involved in the above proceedings
and claiming a fraudulent sale of defective cement. The plenary
action and the third party complaints sought compensatory damages
growing out of the various crosstie actions, including the foregoing
settlements and defense costs at approximately $15,750,000. The
plenary action brought against the cement supplier was tried before
a jury in the Maryland Federal District Court in late 1992. The jury
found that Lone Star had proven its claims of fraud, breach of certain
warranties and negligence, but Lone Star's recovery was limited to
$1,213,000 for direct lost profits due to limitations on the awarding
of damages in the trial judge's instructions to the jury. Lone Star
believed that these instructions were in error and filed a motion for
a new trial on damages based on the judge's refusal to permit the jury
to even consider certain damages. Lafarge also moved for judgment as
a matter of law and for a new trial. Following a hearing on March 5,
1993 the judge denied these motions. Lone Star consequently appealed
to the Federal Circuit Court of Appeals for the Fourth Circuit for a
new trial on the issue of damages. Lafarge also filed an appeal. On
April 7, 1994 the Fourth Circuit Court of Appeals vacated the judgment
of the District Court and remanded the case for a new trial on all
issues relating to both liability and damages and permitted the
company to amend its complaint to add a claim of violation of a
Massachusetts consumer protection law which allows for attorney fees
and doubling and trebling of damages. A request by Lafarge for a
rehearing of that decision by the Fourth Circuit Court of Appeals en
banc was denied and new trial is scheduled for October of this year.
The rights to any recovery of damages in this action have been
assigned to Rosebud pursuant to the plan.
The primary insurance carrier insuring the company has asserted that
Lone Star has only limited insurance coverage for the various crosstie
claims and, while agreeing that certain defense costs are covered by
insurance, did not agree to Lone Star's position as to the amount of
defense costs covered. Consequently, in 1989 Lone Star began an
action in the Superior Court of the State of Delaware against the
insurance companies (both primary and excess carriers) which insured
it during the 1983 to 1989 period, seeking a declaratory judgment as
to their duty under the applicable policies to indemnify Lone Star for
all damages incurred by it in the various crosstie proceedings which
includes the settlements of $66,584,000 and as to the duty of the
primary insurance carrier to pay the costs of defending those
proceedings. The Superior Court made a preliminary ruling that the
primary insurance carrier has a duty to pay certain of the costs of
the company's defense in the crosstie proceedings. With the approval
of the Bankruptcy Court, Lone Star settled its claims against the
primary insurance carrier for defense costs for payments to Lone Star
of $14,733,000 in cash; and setoffs to the carrier's claim in the
bankruptcy of approximately $4,778,000.
Lone Star, with the approval of the Bankruptcy Court, settled its
indemnity action against the primary insurance carrier in March 1994
for $6,500,000 as a set-off to a claim filed in the company's
bankruptcy proceedings by that carrier. The rights to any additional
recoveries from insurance carriers has been assigned to Rosebud
pursuant to the plan. Rosebud and certain of the remaining insurance
carriers have negotiated a settlement of the indemnity action which
provides for payments to Rosebud of $5,300,000. Pre-trial preparation
in the action was stayed by agreement of the parties during these
negotiations. Rosebud is in the process of continuing the indemnity
action against any insurance carriers as to which no settlement has
been reached and will also seek to recover the costs of the Lafarge
action.
In addition, a settlement with all parties has been reached in the
consolidated shareholders' class action lawsuits brought against the
company and certain of its past and present officers and directors.
The settlement involves the actions entitled Cohn v. Lone Star
Industries, Inc., et al. filed in November 1989 on behalf of persons
who purchased Lone Star common stock between February 8, 1988 and
November 16, 1989 and the action entitled Garbarino, et ano. v.
Stewart, et al. filed in December 1990 on behalf of persons who
purchased Lone Star common stock between November 16, 1989 and
December 9, 1990. The settlements were adopted and approved by an
order and final judgment of a magistrate judge and the order and
judgment was in turn approved and adopted by an order of the U.S.
District Court for the District of Connecticut on January 20, 1994.
The terms of the settlement agreement, which was entered into by Mr.
James E. Stewart, the former Chairman and Chief Executive Officer of
Lone Star, includes the dismissal of the claims against Mr. Stewart
and the officers and directors of Lone Star and the agreement of Lone
Star's directors and officers liability insurers to pay $40,000,000
to establish settlement funds on behalf of the plaintiff classes. In
order to participate in these settlement funds, eligible plaintiffs
were required to submit a proof of claim by July 29, 1994.
Distribution from these settlement funds is to take place on or about
October 29, 1994. Lone Star was dismissed without prejudice from the
Cohn action, the only action in which it was named as a defendant by
the plaintiffs. The settlement does not constitute an admission by
Lone Star, or any of its past and present officers, directors and
employees of any liability or wrongdoing on their part. In connection
with the company's bankruptcy proceedings, in order to resolve the
claims filed by both plaintiff classes without admitting any
liability, a claim in the aggregate of $2,500,000 was allowed to the
plaintiff classes by the company. The proceeds from the claim have
been added to the settlement funds for distribution in October 1994.
The company, along with numerous other parties, has been named a
defendant in a series of toxic tort lawsuits filed in a Texas state
court commencing in March, 1994 in which multiple plaintiffs claim to
have suffered injury from the proximity of deposits of toxic wastes
or substances at a site located near Galveston, Texas. The wastes
or substances are alleged to have been deposited at the site starting
in the 1940's. The company has retained Texas counsel and has filed,
or is in the process of filing, answers denying the allegations of the
various complaints. The company intends to contest these lawsuits
vigorously. The company's insurance carriers have been notified of
the claims but the extent of the company's insurance coverage, if any,
for these lawsuits has not yet been determined.
Item 2. MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On April 14, 1994 the company's plan of reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code became effective (See
Note 2). Upon its plan of reorganization becoming effective the
company issued new common stock , warrants to purchase common stock
and debt, transferred certain assets to a liquidating subsidiary and
its subsidiaries and for accounting purposes adopted fresh-start
reporting as of March 31, 1994. As a result, the company's financial
statements for the periods ended June 30, 1994 are not comparable to
statements for prior periods. Accordingly, the company has not
presented information for the six months ended June 30, 1994, since
such information requires consolidating statements of the predecessor
and successor company. Also affecting comparability are differences
in the operating units of the successor company and the predecessor
company. The successor company's operations include the Pryor,
Oklahoma and Maryneal, Texas cement plants which were previously
classified as assets held for sale and were excluded from the
predecessor company's results. The successor company's operations
exclude the Nazareth, Pennsylvania and Santa Cruz, California cement
plants and the Hawaiian Cement and RMC LONESTAR partnerships. These
operations, along with certain other assets, have been transferred to
Rosebud Holdings, Inc., a liquidating corporation and its
subsidiaries. The predecessor company's operations also included a
Brazilian joint venture which was sold in September 1993.
Financial Condition
In accordance with the company's plan of reorganization which became
effective on April 14, 1994, the company disbursed $200.5 million in
cash and issued senior notes in the principal amount of $78.0 million,
asset proceed notes with a face value of $138.1 million and 12 million
shares of new common stock, (of which 85% of the outstanding common
stock of the successor company was distributed to the prepetition
creditors).
Holders of preferred stock received their pro rata share of 10.5% of
the new common stock and 1,250,000 warrants to purchase common stock.
The holders of the company's old common stock received the balance of
the new company's common stock and 2,753,333 warrants to purchase
common stock. Both preferred stock issues and the old common stock
were cancelled upon the effectiveness of the plan.
At the effective date of the plan, Rosebud issued asset proceeds notes
in the aggregate principal amount of $138.1 million. The asset
proceeds notes bear interest at a rate of 10% per annum payable in
cash or in additional asset proceeds notes in semi-annual
installments. The asset proceeds notes are to be repaid as Rosebud's
assets are disposed of and proceeds, if any, are received in
connection with the litigation transferred to Rosebud. All cash
proceeds less a $5.0 million cash reserve are to be deposited in a
cash collateral account for distribution to the noteholders. The
asset proceeds notes mature on July 31, 1997. These notes are
guaranteed, in part, by Lone Star. In the event that, at the maturity
date, the aggregate amounts of all cash payments of principal and
interest on the asset proceeds notes is less than $88.1 million the
guarantee is payable in either cash, notes or a combination thereof
to cover the shortfall between the actual payments and $88.1 million
dollar for dollar plus interest provided however that the amount paid
pursuant to the guarantee cannot exceed $28.0 million. The asset
proceeds notes are recorded on Lone Star's June 30, 1994 balance sheet
at an amount equal to the investment in Rosebud of $116.0 million.
In June 1994, a subsidiary of Rosebud sold all of its interest in a
cement plant located in Santa Cruz, California for $33.0 million The
net proceeds from the sale, after making provisions for an
environmental reserve for landfill and other costs related to the
transaction, are being used to redeem a portion of the outstanding
asset proceeds notes on a pro rata basis. $31.7 million has been
transferred to the collateral agent who will make payments to note
holders on August 19, 1994.
In July 1994, Rosebud reached final agreements with all but one
insurance carrier involved in litigation related to the reimbursement
of defense costs. Rosebud will receive $5.3 million from the
insurance carriers involved in the settlements.
As part of the plan, the company's production payment agreement terms
were revised as of April 14, 1994. In connection therewith, a new
note was issued, with an outstanding principal balance of $21.0
million as of that date, and which bears interest at a rate of either
prime or LIBOR plus 1.75% through December 31, 1995 and either prime
plus .25% or LIBOR plus 2.5% beginning on January 1, 1996. The
principal balance is payable semi-annually through July 31, 1998 in
increasing installments.
Upon emergence from Chapter 11, the company entered into a three year
$35.0 million revolving credit agreement which is collateralized by
inventory, receivables, collection proceeds and certain intangible
assets. The company's borrowings under this agreement are limited to
55% of eligible inventory plus 85% of eligible receivables. Advances
under the agreement bear interest at a rate of either prime plus 1.25%
or LIBOR plus 3%. A fee of .50% per annum is charged on the unused
portion of the credit line. There was no outstanding balance at June
30, 1994.
The company's financing agreements contain restrictive covenants
which, among other things, restrict the payment of cash dividends.
Upon emergence from its Chapter 11 proceedings, the company issued
$78.0 million of ten year senior unsecured notes. The notes bear
interest at a rate of 10% per annum.
In accordance with its plan of reorganization, as part of the
agreement with the Pension Benefit Guaranty Corporation "(PBGC") the
company has granted the PBGC a mortgage on the Oglesby plant, and a
security interest in the Kosmos Cement Company partnership, to secure
its future pension obligations.
Also upon emergence from Chapter 11 proceedings, the board of
directors of the company adopted the Lone Star Management Stock Option
Plan ("Management Plan") and the Lone Star Industries, Inc.
Directors' Stock Option Plan ("Directors' Plan). Both of the plans
were ratified by the company's shareholders at the 1994 Annual
Meeting. Total options authorized for grant are 700,000 and 50,000
under the Management and the Directors' Plans, respectively. In June
1994, 700,000 and 6,000 options were granted under the Management and
Directors' Plans, respectively.
In addition, the company adopted fresh-start reporting as of March 31,
1994, including adjustments for bankruptcy related cash transactions
through the effective date to properly reflect the company's
reorganization. Through the adoption of fresh-start reporting, the
company has recorded its assets and liabilities at fair value on March
31, 1994 and as such, balance sheet comparisons to prior periods are
not meaningful. A black line has been used to separate the December
31, 1993 and the March 31, 1994 balance sheets to emphasize the fact
that the March 31, 1994 balance sheet belongs to reorganized Lone
Star, a new reporting entity.
The company operated under the protection of the Bankruptcy Court for
the period from December 10, 1990 to April 14, 1994. Pursuant to the
provisions of the Bankruptcy Code, the companies which filed Chapter
11 petitions were prohibited from paying claims which arose prior to
the filing date outside of a plan of reorganization or without
specific bankruptcy court authorization. In addition, during the
period the company operated under Chapter 11, it discontinued accruing
interest on unsecured pre-petition debt obligations. Also, the
company received interest income on its cash balances during this
period. However, as a result of the Chapter 11 proceedings, the
company incurred substantial professional fees and administrative
expenses which partially offset the above financial benefits.
Cash flows from operating activities of $0.8 million in the second
quarter of 1994 primarily reflects $6.0 million generated by the
cement and ready-mixed concrete operations resulting from increased
average selling prices and shipments partly offset by payments of
professional fees and administrative expenses of $5.2 million related
to the reorganization.
During the second quarter of 1994, the company received $15.9 million
from investing activities, primarily representing proceeds from the
sale of the Pennsuco cement plant in Florida, partly offset by capital
expenditures.
Working capital on June 30, 1994 was $42.8 million, compared to $14.1
million at March 31, 1994. Current assets increased $13.5 million
principally due to increased amounts of marketable securities,
resulting from the sale of a cement plant in Florida and higher
accounts receivable due to seasonal increases, partly offset by
decreased inventories and other current assets. Current liabilities
decreased $15.1 million primarily due to the payment of Chapter 11
professional fees which were held in escrow pending final approval of
the Bankruptcy Court.
The carrying value on the company's books of net assets of the Rosebud
liquidating subsidiary increased $4.0 million primarily due to the
accretion of assets reflecting the shorter time period used in
determining the present value. Notes receivable increased $1.0
million due to the receipt of a new trade note partly offset by
collections. Investments in joint ventures increased $1.3 million due
to results from the Kosmos Cement Company joint venture. Net
property, plant and equipment decreased $20.9 million reflecting the
sale of the Pennsuco cement plant in Florida and depreciation, partly
offset by capital expenditures. The reorganization value in excess
of amounts allocable to identifiable assets has been reduced by the
current period's deferred taxes of $4.1 million. The liability for
the Rosebud asset proceeds notes increased $4.0 million due to the
increase in the present value of the assets. Other liabilities
decreased $1.7 million due to the reclassification of certain accruals
to current liabilities.
The company is subject to federal, state and local laws, regulations
and ordinances pertaining to the quality and protection of the
environment. Such environmental regulations not only affect the
company's operating facilities but also apply to closed facilities and
sold properties. While it is not possible at this time to assess
accurately their expected impact on the company, the capital,
operating and other costs of compliance with applicable environmental
requirements (currently in effect or likely to be in effect in the
future) could be substantial (See Note 18).
In early March 1994, the company, along with other cement companies,
received a civil investigative demand from the Atlanta, Georgia
Regional Office of the U.S. Department of Justice Antitrust Division.
The investigation concerns possible violations of Section 1 of the
Sherman Antitrust Act (price fixing and market allocation) by cement
sellers on a nationwide basis and seeks company records relating to
its cement business. The company has a long-standing policy of
complying with the letter and spirit of the antitrust laws and has
fully cooperated with the investigation.
In 1989 Lone Star and its subsidiary filed a plenary action in the
Maryland Federal District Court, and third party complaints in other
actions, against Northeast Cement Co. and its affiliates, Lafarge
Corporation and Lafarge Canada, Inc., alleging breach of warranties
in connection with the purchase from Northeast Cement Company by Lone
Star's subsidiary of the cement used to manufacture substantially all
of the crossties involved in the railroad crosstie litigation
proceedings and claiming a fraudulent sale of defective cement. On
April 7, 1994 the Fourth Circuit Court of Appeals vacated the judgment
of the District Court and remanded the case for a new trial on all
issues relating to both liability and damages (See Note 19). The
rights to any recovery of damages in this action have been assigned
to a subsidiary of Rosebud pursuant to the plan of reorganization.
Results of Operations
Net sales for the three months ended June 30, 1994 were $87.0 million
which is $7.0 million greater than sales from comparable operations
for the same period of 1993. The favorable sales reflect increased
cement and ready-mixed shipments and higher average ready-mixed
concrete and cement selling prices. Increased shipments of
construction aggregates in the New York Metropolitan Area were offset
by decreased shipments from the company's Canadian operations.
Net income for the three months ended June 30, 1994 of $7.9 million,
or $0.62 per share, reflects the higher cement and ready-mixed
concrete shipments and selling prices combined with reduced selling
general and administrative expenses reflecting savings achieved during
and after the company's bankruptcy proceeding. Selling, general and
administrative expenses for the current quarter include $1.8 million
of costs related to other postretirement benefit expenses. Net income
for the current quarter also reflects joint venture income of $1.3
million which represents the company's share of earnings from Kosmos
Cement Company (See Note 12). Joint venture income for the prior-year
period included the company's share of earnings from the RMC LONESTAR
and Hawaiian Cement partnerships which were transferred to Rosebud
Holdings, Inc. and the company's share of earnings from a Brazilian
joint venture which was sold in September 1993. The positive net
income for the current period were partly offset by higher interest
expense primarily related to the issuance of $78.0 million in senior
notes resulting from implementing the plan of reorganization.
The company's operations are seasonal and, consequently the interim
results are not necessarily indicative of the results to be expected
for a full year.
In future years, first quarter results are expected to reflect losses,
(which may be significant) due to the impact of the winter months on
construction activity, particularly at the company's northern
operations, plant production curtailments at plants to perform annual
maintenance, and higher costs associated with the annual maintenance.
Historically, for accounting purposes planned capacity variances
during a fiscal year were deferred in the first quarter and recognized
during the last nine months. These deferred costs in 1994 totaling
$8.4 million were written of as part of the revaluation of assets in
accordance with fresh-start reporting. Beginning in 1995, due to a
change in the company's accounting policies, these costs will be
expensed as incurred and will primarily impact first quarter results
of the year in which they occur (See Note 15).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 2 of Notes to Financial Statements regarding the
confirmation under the Federal Bankruptcy Laws of the
Company's Modified Amended Consolidated Plan of
Reorganization ("Plan of Reorganization") by the United
States Bankruptcy Court on February 17, 1994 and the
effectiveness of the Plan of Reorganization on April 14,
1994 in the proceedings in the United States Bankruptcy
Court for the Southern District of New York entitled "In
re: New York Trap Rock Corporation, Lone Star Industries,
Inc. et al., Debtors", Chapter 11 Case Nos. 90B21276-
90B21286, 90B21334 and 90B21335.
See Note 19 of Notes to Financial Statements regarding
litigation involving the Company and certain of its
subsidiaries.
See Note 18 of Notes to Financial Statements regarding
environmental proceedings involving the Company and certain
of its subsidiaries.
See also Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition.
ITEM 2. CHANGES IN SECURITIES
a) On April 14, 1994, the effective date of the Plan of
Reorganization, and in accordance with the Plan of
Reorganization, the Company's old common stock and the
Company's $4.50 Cumulative Convertible Preferred Stock and
$13.50 Cumulative Convertible Preferred Stock (the $13.50
Cumulative Convertible Preferred Stock and the $4.50
Cumulative Convertible Preferred Stock are jointly referred
to as "Preferred Stock") were cancelled. In exchange for
the old common stock each holder of shares of old common
stock received the right to .032441 of a share of new
Common Stock and .165413 of a warrant to purchase a share
of new Common Stock for each share of old common stock
held. In exchange for the Preferred Stock and any and all
dividends accrued thereunder, each holder of shares of
Preferred Stock received the right to 3.268151 shares of
new Common Stock and 3.242214 warrants to purchase an equal
number of shares of new Common Stock for each share of
Preferred Stock held.
b) (i) Pursuant to the terms of the Financing Agreement dated
as of April 13, 1994, among the Company and its subsidiary,
New York Trap Rock Corporation, and The CIT Group/Business
Credit, Inc. ("Financing Agreement"), the Company may not
pay any cash dividends on the Company's new Common Stock.
(ii) Pursuant to the terms of the Indenture dated as of
March 29, 1994 between the Company and Chemical Bank, as
Trustee ("Indenture") governing the Company's 10% Senior
Notes Due 2003, dividends on the Company's new Common Stock
can be paid only in certain circumstances and up to a
maximum amount.
(iii) Reference is made to the Indenture and to the
Financing Agreement, Exhibits 4A and 4C, respectively, to
this Quarterly Report, for the complete terms thereof which
may materially limit or qualify the rights of the holders
of shares of new Common Stock of the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At March 31, 1994, dividends were in arrears aggregating
$17,937,000 on the Company's $13.50 Cumulative Convertible
Preferred Stock and $179,000 on the Company's $4.50
Cumulative Convertible Preferred Stock. Both of these
issues of Preferred Stock were subsequently cancelled on
April 14, 1994, the effective date of the Plan of
Reorganization.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of Stockholders of the Company was held
on June 9, 1994.
b) The names of each director elected at the Annual Meeting
are: Arthur B. Newman, Allen E. Puckett and David W.
Wallace. Each was elected for a three year term. The
names of each other director whose term of office as a
director continued after the Annual Meeting are: James E.
Bacon, Theodore F. Brophy, Robert G. Schwartz, William M.
Troutman and Jack R. Wentworth.
c) The following were the matters voted upon at the Annual
Meeting and the number of votes cast for, against or
abstentions and broker non-votes, as to each such matter,
including a separate tabulation with respect to each
nominee for office.
1. For the election of the persons
named below as directors of the
Company:
Arthur B. Newman For: 7,779,975
Withheld: 95,489
Allen E. Puckett For: 7,779,529
Withheld: 95,935
David W. Wallace For: 7,779,624
Withheld: 95,840
2. Upon the approval of the Management For: 6,772,075
Stock Option Plan. Against: 445,690
Abstain and
Broker Non-Votes: 657,699
3. Upon the approval of the Directors For: 6,766,328
Stock Option Plan. Against: 448,113
Abstain and
Broker Non-Votes: 661,023
4. Upon the approval of the Employees For: 7,150,962
Stock Purchase Plan. Against: 66,572
Abstain and
Broker Non-Votes: 657,930
5. Upon the ratification of the
appointment of Coopers & Lybrand as For: 7,863,175
auditors of the Company for the Against: 8,078
year ending December 31, 1994. Abstain and
Broker Non-Votes: 4,211
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits
3(i)A Amended and Restated Certificate of Incorporation.
3(i)B Certificate of Correction of Amended and Restated
Certificate of Incorporation.
3(ii) By-Laws.
4A Indenture dated as of March 29, 1994 between Lone
Star Industries, Inc. and Chemical Bank, as
Trustee, relating to the 10% Senior Notes Due 2003
of Lone Star Industries, Inc.
4B Warrant Agreement dated April 13, 1994 between Lone
Star Industries, Inc. and Chemical Bank, as Warrant
Agent.
4C Financing Agreement dated as of April 13, 1994
among Lone Star Industries, Inc., its subsidiary,
New York Trap Rock Corporation, and The CIT
Group/Business Credit, Inc.
10A Indenture dated as of March 29, 1994 between
Rosebud Holdings, Inc. and its Subsidiaries and
Chemical Bank, as Trustee, relating to the 10%
Asset Proceeds Notes Due 1997 of Rosebud Holdings,
Inc.
10B Guarantee Agreement dated as of March 29, 1994 by
Lone Star Industries, Inc. in favor of each and
every "Holder" of 10% Asset Proceeds Notes Due 1997
of Rosebud Holdings, Inc.
10C Management Services and Asset Disposition Agreement
dated as of April 13, 1994 between Lone Star
Industries, Inc. and Rosebud Holdings, Inc. and its
subsidiaries.
10D(i) Employment Agreement dated July 1, 1994 between
David W. Wallace and Lone Star Industries, Inc.
10D(ii) Stock Option Agreement dated as of June 8, 1994
between David W. Wallace and Lone Star Industries,
Inc.
10E(i) Employment Agreement dated July 1, 1994 between
William M. Troutman and Lone Star Industries, Inc.
10E(ii) Agreement dated April 15, 1994 between William M.
Troutman and Lone Star Industries, Inc.
10E(iii) Stock Option Agreement dated as of June 8, 1994
between William M. Troutman and Lone Star
Industries, Inc.
10F(i) Employment Agreement dated July 1, 1994 between
John J. Martin and Lone Star Industries, Inc.
10F(ii) Stock Option Agreement dated as of June 8, 1994
between John J. Martin and Lone Star Industries,
Inc.
10G Form of Indemnification Agreement entered into
between Lone Star Industries, Inc. and directors
and an executive officer.
10H Form of "Change of Control" agreement for executive
officers of Lone Star Industries, Inc.
10I Form of 25,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
10J Form of 75,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
10K Lone Star Industries, Inc. Rosebud Incentive Plan.
11. Computation of earnings per common share.
(b) Reports on Form 8-K
Reports on Form 8-K were filed during the quarter for
which this Report is filed as follows:
(i) April 4, 1994 - reporting on Item 5 "Other Events".
(ii) June 30, 1994 - reporting on Item 5 "Other Events".
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Lone Star Industries, Inc. has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
LONE STAR INDUSTRIES, INC.
Date: August , 1994 By: _______________________
John S. Johnson
Vice President
Date: August , 1994 By: _______________________
William E. Roberts
Vice President, Chief
Financial Officer and
Controller
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Lone Star Industries, Inc. has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
LONE STAR INDUSTRIES, INC.
Date: August 12, 1994 By: JOHN S. JOHNSON
John S. Johnson
Vice President
Date: August 12, 1994 By: WILLIAM E. ROBERTS
William E. Roberts
Vice President, Chief
Financial Officer and
Controller
<TABLE>
EXHIBIT 11
LONE STAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
Computation of Earnings Per Common Share (Unaudited)
(In Thousands Except Per Share Amounts)
<CAPTION>
Successor
Company Predecessor Company
For the Three For the Three For the Three For the Six
Months Ended Months Ended Months Ended Months Ended
June 30, March 31, June 30, June 30,
1994 1994 1993 1993
PER SHARE OF COMMON STOCK - PRIMARY
<S> <C> <C> <C> <C>
Income(loss) before cumulative ef $7,914 ($23,118) ($28,287) ($41,862)
Less: Provisions for preferred 0 1,278 1,278 2,556
Income(loss) before cumulative ef 7,914 (24,396) (29,565) (44,418)
Cumulative effect of change in - - - (782)
Net interest expense reduction 670 - - -
Net income(loss) applicable to co $8,584 ($24,396) ($29,565) ($45,200)
Weighted average shares outstandi 12,000 n/m n/m n/m
Options and warrants in excess 1,774 - - -
Net weighted average shares outst 13,774 n/m n/m ( n/m (2)
Income(loss) per common share:
Income(loss) before cumulative $0.62 n/m n/m n/m
Cumulative effect of change in - - - -
Net income(loss) $0.62 n/m n/m ( n/m (2)
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Income(loss) before cumulative ef $7,914 ($23,118) ($28,287) ($41,862)
Plus: Net interest expense redu 670 - - -
Less: Provisions for preferred - - - -
Income(loss) before cumulative ef 8,584 (23,118) (28,287) (41,862)
Cumulative effect of change in - - - (782)
Net income(loss) $8,584 ($23,118) ($28,287) ($42,644)
Common shares outstanding at begi 12,000 n/m n/m n/m
Conversion of $13.50 preferred shares outstanding
at beginning of period - n/m n/m n/m
Conversion of $4.50 preferred shares outstanding
at beginning of period - n/m n/m n/m
Options and warrants in excess of 1,774 - - -
Fully diluted shares outstanding 13,774 n/m n/m ( n/m (2)
Income(loss) per common share assuming full dilution
Income(loss) before cumulative $0.62 n/m n/m n/m
Cumulative effect of changes in - - - -
Net income(loss) $0.62 n/m n/m ( n/m (2)
(1) Due to the fact that the company's aggregate number of common stock
equivalents is in excess of 20% of its outstanding common
stock, primary and fully diluted earnings per share has been calculated
using the modifid treasury stock method for the three months ended
June 30, 1994.
(2) Earnings per share are not meaningful due to reorganization and
revaluation entries and the issuance of 12 million shares of new common
stock.
</TABLE>
INDEX OF EXHIBITS TO QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTERLY PERIOD
ENDING JUNE 30, 1994
OF LONE STAR INDUSTRIES, INC.
Item
No.
1) 3(i)A Amended and Restated Certificate of
Incorporation.
2) 3(i)B Certificate of Correction of Amended and Restated
Certificate of Incorporation.
3) 3(ii) By-Laws.
4) 4A Indenture dated as of March 29, 1994 between Lone
Star Industries, Inc. and Chemical Bank, as
Trustee, relating to the 10% Senior Notes Due
2003 of Lone Star Industries, Inc.
5) 4B Warrant Agreement dated April 13, 1994 between
Lone Star Industries, Inc. and Chemical Bank, as
Warrant Agent.
6) 4C Financing Agreement dated as of April 13, 1994
among Lone Star Industries, Inc., its subsidiary,
New York Trap Rock Corporation, and The CIT
Group/Business Credit, Inc.
7) 10A Indenture dated as of March 29, 1994 between
Rosebud Holdings, Inc. and its Subsidiaries and
Chemical Bank, as Trustee, relating to the 10%
Asset Proceeds Notes Due 1997 of Rosebud
Holdings, Inc.
8) 10B Guarantee Agreement dated as of March 29, 1994 by
Lone Star Industries, Inc. in favor of each and
every "Holder" of 10% Asset Proceeds Notes Due
1997 of Rosebud Holdings, Inc.
9) 10C Management Services and Asset Disposition
Agreement dated as of April 13, 1994 between Lone
Star Industries, Inc. and Rosebud Holdings, Inc.
and its subsidiaries.
10) 10D(i) Employment Agreement dated July 1, 1994 between
David W. Wallace and Lone Star Industries, Inc.
11) 10D(ii) Stock Option Agreement dated as of June 8, 1994
between David W. Wallace and Lone Star
Industries, Inc.
12) 10E(i) Employment Agreement dated July 1, 1994 between
William M. Troutman and Lone Star Industries,
Inc.
13) 10E(ii) Agreement dated April 15, 1994 between William M.
Troutman and Lone Star Industries, Inc.
14) 10E(iii) Stock Option Agreement dated as of June 8, 1994
between William M. Troutman and Lone Star
Industries, Inc.
15) 10F(i) Employment Agreement dated July 1, 1994 between
John J. Martin and Lone Star Industries, Inc.
16) 10F(ii) Stock Option Agreement dated as of June 8, 1994
between John J. Martin and Lone Star Industries,
Inc.
17) 10G Form of Indemnification Agreement entered into
between Lone Star Industries, Inc. and directors
and an executive officer.
18) 10H Form of "Change of Control" agreement for
executive officers of Lone Star Industries, Inc.
19) 10I Form of 25,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
20) 10J Form of 75,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
21) 10K Lone Star Industries, Inc. Rosebud Incentive
Plan.
11. Computation of earnings per common share.
