FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which each class registered
Common Stock, par value $1 New York Stock Exchange
per share
Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
In December, 1990, registrant and certain of its wholly-owned
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. See
Item 1.B for securities to be issued pursuant to a reorganization
plan under Chapter 11.
Aggregate market value of voting stock held by non-affiliates of
the registrant at March 1, 1994: approximately $39,500,000. This
amount does not include market value of $13.50 cumulative
convertible preferred stock which has limited voting rights due to
failure of of registrant to pay dividends.
The number of shares outstanding of each of the registrant's
classes of common stock as of March 1, 1994: Common Stock, par
value $1 per share - 16,644,000 shares
TABLE OF CONTENTS
Part I
Page
Item 1. Business........................................ 1
Item 2. Properties...................................... 14
Item 3. Legal Proceedings............................... 18
Item 4. Submission of Matters to a Vote of
Security Holders.............................. 20
Part II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters........ 21
Item 6. Selected Financial Data......................... 22
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 23
Item 8. Financial Statements and Supplementary
Data.......................................... 39
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........ 89
Part III
Item 10. Directors and Executive Officers
of the Registrant............................. 89
Item 11. Executive Compensation.......................... 89
Item 12. Security Ownership of Certain
Beneficial Owners and Management.............. 89
Item 13. Certain Relationships and
Related Transactions.......................... 89
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K....................... 89
PART I
ITEM 1. BUSINESS.
A. The Company.
Lone Star Industries, Inc. ("Lone Star" or the
"Company") its subsidiaries and affiliates are producers of cement
and clinker and a source of ready-mixed concrete, sand and gravel,
crushed stone and other construction materials. The cement and
concrete operations include the manufacture and distribution of
portland, masonry, oil-well and PyramentR cement, and the
production and distribution of ready-mixed concrete. The
construction aggregate operations include the mining, processing
and distribution of sand, gravel and crushed stone.
Lone Star was incorporated in Maine in 1919 as
International Cement Corporation and in 1936 changed its name to
Lone Star Cement Corporation. In 1969 its state of incorporation
was changed to Delaware and in 1971 its name was changed to Lone
Star Industries, Inc. Lone Star's executive offices are located at
300 First Stamford Place, P. O. Box 120014, Stamford, Connecticut
06912-0014 and its telephone number is (203) 969-8600.
Pyrament is a registered trademark of Lone Star
Industries, Inc.
B. Bankruptcy Reorganization Proceedings.
The Company in late 1989 instituted a Restructuring
Program, taking an after-tax charge of $257,600,000 related
principally to the Program. See Item 1C, Business - Restructuring
Program, and Note 4 of the Notes to Financial Statements of the
Company contained in this Form 10-K. Business conditions in the
Company's markets continued to deteriorate during 1990 and the
Company's sources of financing were restricted. Lone Star's
$250,000,000 Revolving Credit Agreement was reduced to $84,000,000
in October 1990 and was terminated on November 23, 1990. Lone Star
was not able to negotiate a replacement credit agreement with
financial institutions on favorable terms. In November 1990 the
banks which had been purchasing the Company's accounts receivable
refused to extend an agreement which provided for the purchasing of
up to $45,000,000 of accounts receivable nor would they enter into
a new agreement. In addition, $150,000,000 of 8 3/4% Notes of Lone
Star due in March 1992 would be considered short term in March 1991
thus creating a probable default under certain covenants of Lone
Star's loan agreements unless the Notes were extended or refinanced
or the Company obtained funds from other sources. Lone Star and
two subsidiaries were defendants in seven lawsuits and one
administrative proceeding against them due to alleged defects in
concrete railroad crossties which involved claims for damages
exceeding $200,000,000. These lawsuits and the administrative
proceeding were settled in 1992 and for the terms of the settlement
agreements see Note 33 of the Notes to Financial Statements
contained in this Form 10-K.
In order to preserve the Company's assets and enable it
to seek a long-term solution to its financial, litigation and
business problems, on December 10, 1990 Lone Star and the following
ten subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code (the "Code") with
the United States Bankruptcy Court for the Southern District of New
York (the "Court"):
New York Trap Rock Corporation I. C. Materials, Inc.
San-Vel Concrete Corporation Lone Star Prestress Concrete,
Inc.
NYTR Transportation Corp. Lone Star Properties, Inc.
Lone Star Cement Inc. Southern Aggregates, Inc.
Construction Materials Co., Inc. Lone Star Transportation Corp.
On December 21, 1990 two additional wholly-owned
subsidiaries filed for reorganization under Chapter 11 of the Code
with the Court:
Lone Star Building Centers, Inc.
Lone Star Building Centers (Eastern) Inc.
Lone Star and its twelve subsidiaries which have filed
for reorganization are hereinafter sometimes referred to as the
"Filed Companies". The Filed Companies operated as a Debtor-in-
Possession and the Court entered an Order authorizing joint
administration of the Filed Companies' cases for procedural
purposes ("Reorganization Proceedings"). An Official Unsecured
Creditors Committee, an Official Committee of Retired Employees and
an Official Committee of Equity Security Holders were appointed by
the United States Trustee for the Southern District of New York.
The Company has other subsidiaries incorporated in the
United States which have not filed for reorganization. None of the
Company's domestic joint ventures has filed for reorganization. No
foreign subsidiary or joint venture of the Company has filed for
reorganization or a similar arrangement under the laws of their
respective jurisdictions.
Claims of all claimants in the Reorganization
Proceedings were required to be filed with the Bankruptcy Court by
October 15, 1991. The Filed Companies reviewed the claims,
negotiated the current amount of claims and filing objections with
the Bankruptcy Court where appropriate. At January 6, 1994 there
were 5,234 filed and scheduled claims totaling approximately
$1,738,247,000 in liquidated face amount, 20 intercompany claims in
a face amount of $869,567,000 and 2,594 claims which are
unliquidated. See also Note 17 of the Notes to Financial
Statements contained in this Form 10-K.
The Board of Directors of the Company on October 28,
1992 approved for submission to the Official Committees a proposed
Business Plan and Plan of Reorganization Proposal. On March 11,
1993 the Board approved a revised Business Plan and Plan of
Reorganization Proposal (the "Revised Plan") and a related
Consolidated Plan of Reorganization and Disclosure Statement and
authorized the filing of the Revised Plan and related documents
with the Bankruptcy Court on or after April 12, 1993.
In the Revised Plan certain core assets were identified
which would constitute the reorganized Lone Star and which would
generally consist of existing domestic cement, aggregates and ready
mixed concrete businesses. Other assets of the Company would be
transferred to a liquidating entity for disposition for the benefit
of creditors.
This Revised Plan was subsequently modified and amended
at various times in 1993 until a related Modified Amended
Disclosure Statement regarding Debtors Modified Amended
Consolidated Plan of Reorganization was filed with the Bankruptcy
Court on October 27, 1993 ("Debtors Plan of Reorganization"). On
October 29, 1993 the Bankruptcy Court approved the adequacy of the
Disclosure Statement relating to Debtors' Plan of Reorganization
subject to the making of certain changes by the Company which were
subsequently made. The Debtors agreed to delay the mailing of the
Disclosure Statement and Debtors Plan of Reorganization to give
other parties an opportunity to develop a competing plan. The
mailing of the Disclosure Statement and the Debtors Plan of
Reorganization with ballots for voting commenced on December 8,
1993.
The Debtors Plan of Reorganization received the
favorable vote of all parties in interest in the bankruptcy
proceedings. The count indicated that holders of approximately $2
million of secured claims (98% of total dollars voting); 465
holders of $443 million of unsecured claims (95% of total dollars
voting); approximately 379 thousand shares of Preferred Stock (99%
of shares voting); and approximately 6 million shares of Common
Stock (79% of shares voting) voted for the Debtors Plan of
Reorganization.
The period during which, pursuant to the order of the
Bankruptcy Court, the Debtors had the exclusive right to file a
plan of reorganization expired on August 6, 1993. At a hearing on
December 7, 1993 the Bankruptcy Court authorized the Official
Committee of Equity Securities Holders to file an alternative
disclosure statement and plan of reorganization ("Alternative Plan
of Reorganization"). The Bankruptcy Court subsequently approved
the adequacy of the Disclosure Statement relating to the
Alternative Plan of Reorganization and accordingly it was mailed
with ballots for voting.
The Alternative Plan of Reorganization received the
following vote: 901 holders of $242.9 million in unsecured claims,
or 56.2%, voted to reject and 449 unsecured creditors holding
$189.2 million, or 43.8% of those voting, voted to accept; holders
of 326,004 preferred shares or 98.7% of those shares voted to
reject and preferred shareholders holding 4,325 shares voted to
accept the Alternative Plan of Reorganization. Common shareholders
holding 2,960,896, or 88.7% of common shares, voted to accept the
Alternative Plan of Reorganization.
On February 17, 1994 the Bankruptcy Court confirmed the
Debtors Plan of Reorganization ("Confirmation"). At that hearing
the Official Committee of Equity Security Holders and other parties
withdrew their objections to confirmation of the Debtors Plan of
Reorganization. The Alternative Plan was also withdrawn as a
result of agreed upon modifications to Debtors Plan of
Reorganization. As part of the Confirmation Order, the board of
directors of Lone Star was constituted as follows: Messrs. James E.
Bacon, Theodore F. Brophy, Allen E. Puckett, Robert G. Schwartz,
William M. Troutman, David W. Wallace and Jack R. Wentworth.
In general, the Debtors Plan of Reorganization as
approved by the Bankruptcy Court provides that as of the Effective
Date allowed unsecured claims (currently estimated to amount to
about $570 million) will receive their pro rata share of (i) the
approximately $182.7 million in cash expected to be available on
the Effective Date of Debtors Plan of Reorganization ("Effective
Date"), (ii) $78 million of 10% senior notes due January 31, 2004
("Senior Notes") of reorganized Lone Star, (iii) $138 million of
10% secured Asset Proceeds Notes due July 31, 1997 ("Asset Proceeds
Notes") of Rosebud Holdings, Inc., a Delaware corporation and a
wholly-owned subsidiary of Lone Star (to be paid out of the
proceeds from the sale of non core assets transferred to Rosebud
Holdings, Inc. and its subsidiaries (jointly "Rosebud"), and a
portion of which debt will be guaranteed by Lone Star as
subsequently discussed in this Item 1.B, (iv) approximately 85% of
the common equity of reorganized Lone Star.
Holders of Lone Star preferred stock will receive their
pro rata share of 10.5% of the common equity of reorganized Lone
Star and 1.25 million warrants to purchase common stock in the
reorganized Lone Star. The holders of common stock of Lone Star
will receive the balance of the reorganized Company's common
equity and 2.8 million warrants to purchase common stock in the
reorganized Lone Star. The warrants to be issued to the preferred
and common shareholders will be exercisable through December 31,
2000 and will provide for the purchase of shares of the common
stock of reorganized Lone Star at a price of $18.75 a share.
The Effective Date is expected to be March 29, 1994 and
distribution to creditors and stockholders will commence on that
date.
The Senior Notes may be guaranteed by certain of Lone
Star's subsidiaries. The Senior Notes are to be issued under an
indenture with Chemical Bank, as trustee. The Senior Notes shall
have three $10,000,000 sinking fund payments to be made in 2001,
2002 and 2003 and, in certain cases, mandatory redemptions upon the
sale of assets by Lone Star.
The Asset Proceeds Notes are to be redeemed upon the
disposition or collection of certain assets considered by Lone Star
not to be part of its core business and to be transferred to
Rosebud for sale or collection. The Asset Proceeds Notes are to be
issued under an indenture with Chemical Bank, as trustee. Lone
Star will guarantee up to $20,000,000 of Asset Proceeds Notes plus
interest thereon if asset sales do not exceed a certain amount.
The Asset Proceeds Notes will also be secured by liens and security
interests on all of the assets of Rosebud pursuant to a Collateral
Agency Agreement and a pledge by Lone Star of the stock of Rosebud
itself pursuant to a Pledge Agreement. To the extent the amounts
received upon disposition or collection and the Lone Star guarantee
do not pay the principal and interest the Asset Proceeds Notes will
not be paid.
The non-core assets to be transferred to Rosebud are (a)
(i) the 50% partnership interest in RMC LONESTAR, (ii) a Lease and
Sublease dated December 31, 1987 between RMC LONESTAR and Lone Star
relating to the Santa Cruz, California cement plant and (iii)
Promissory Notes in the principal amount of $16,833,329 executed by
RMC LONESTAR in favor of Lone Star California, Inc. (which company
is being transferred to Rosebud); (b) the 50% partnership interest
in Lone Star-Falcon; (c) the 50% partnership interest in Hawaiian
Cement; (d) cement plants located in Nazareth, Pennsylvania and
Santa Cruz, California; (e) the right to receive any recovery in
certain litigations, the most important of which are (i) Lone Star
Industries, Inc. v. Compania Naviera Perez Companc,
S.A.C.F.I.M.F.A. et al.; (ii) Lone Star Industries, Inc. et al. v.
Lafarge Corp. et al. and Lafarge Corp. et al. v. Lone Star
Industries, Inc., et al.; and (iii) Lone Star Industries, Inc. v.
Liberty Mutual Insurance Company et al.; (f) a Promissory Note in
the unpaid principal amount of $6,210,162 executed by Arthur A.
Riedel in favor of Lone Star plus unpaid interest since 1991 and
related agreements; and (g) certain surplus property. The Company
will provide management and various other services (including
personnel for the Nazareth cement plant operations) to Rosebud
pursuant to a Management Services and Asset Disposition Agreement.
Rosebud will pay to Lone Star quarterly a fee of .25% of the value
of its unsold assets (1.25% in the case of the Nazareth cement
plant) and will reimburse Lone Star for all Lone Star's payments on
behalf of Rosebud. For the various litigations, Rosebud will pay
Lone Star $10,000 per quarter for each litigation. No fees or
other payments will be made to any officer or employee of Lone Star
for services to Rosebud except as may be made pursuant to a Lone
Star Industries, Inc. Rosebud Incentive Plan.
4,003,333 warrants shall be issued pursuant to a warrant
agreement between Lone Star and Chemical Bank, as warrant agent.
The exercise price is $18.75 per warrant and the warrants are
exercisable until December 31, 2000. The number of shares of
common stock of Lone Star purchasable upon exercise of the warrants
and the price thereof are subject to adjustments in certain
circumstances.
12,000,000 shares of common stock, par value $1 per
share, shall be issued and all shares of the previously outstanding
common stock, $4.50 cumulative convertible preferred stock, $13.50
cumulative convertible preferred stock and preferred stock purchase
rights will be cancelled on the Effective Date.
See Item 3, Legal Proceedings - Bankruptcy; Item 7,
Management's Discussion and Analysis of Financial Condition and
Results of Operations; and Notes to Financial Statements of the
Company, particularly Note 1, contained in this Form 10-K for
additional information concerning the Reorganization Proceedings.
In addition, the opinion of the Company's certified public
accountants accompanying the Financial Statements of the Company
for fiscal year 1993 included in this Form 10-K is subject to
numerous substantive explanatory comments regarding uncertainties
and should, along with the Notes to Financial Statements, be
carefully reviewed in connection with the Financial Statements and
in assessing the condition (financial and otherwise) of the
Company.
C. Restructuring Program.
In November, 1989 the Board of Directors of Lone Star
approved a program for the restructuring of the Company and its
subsidiaries ("Restructuring Program") which included the sale of
certain facilities and marginal businesses, including several in
the United States Southwest, interests in certain joint ventures,
an investment in preferred stock, surplus real estate and certain
other assets, and the repatriation of earnings and capital from
South American operations.
The assets to be disposed of under the Restructuring
Program as of December 31, 1993, including related current and
other assets, have been classified as assets held for sale at their
1989 estimated net realizable value (as adjusted in 1990) in the
balance sheet in the Company's 1993 Financial Statements contained
in this Form 10-K. These assets include the cement plants located
at New Orleans, Louisiana; Pryor, Oklahoma; and Maryneal, Texas;
the Company's interest in Lone Star-Falcon, an owner of a leased
cement terminal in southern Texas; and surplus real estate.
Prior to the confirmation, Lone Star took the following
actions involving assets included in the Restructuring Program in
accordance with the procedures established by or the explicit
approval of the Bankruptcy Court.
1994
In March, the Company sold for $2,450,000 23 acres of
the site of its razed Houston, Texas cement plant.
1993
In May Lone Star sold a portion of its cement plant site
in Bonner Springs, Kansas for $6,250,000.
The Company also sold several parcels of surplus real
estate for $2,956,000 during the year.
1992
In July, San-Vel Concrete Corporation sold its ready-
mixed and aggregates operations located in Littleton, Massachusetts
for approximately $5,400,000. The inactive prestress plant and
certain real estate were retained. $4,200,000 of the purchase
price was placed into escrow due to liens upon the property held by
one of the plaintiffs in the crosstie litigation and disbursed
directly to that plaintiff as part of a settlement. See Note 33 of
the Notes to Financial Statements contained in this Form 10-K for
the disposition of the escrowed funds.
The equipment and inventory of the Lone Star
Construction Products Division, a concrete block and brick
manufacturer in Nashville, Tennessee, were sold for $503,000.
1991
A mortgage held by Lone Star on a closed Polymer-
GraniteTM facility owned by a Canadian subsidiary, PBI/Plastibeton
Inc., and the subsidiary itself were sold in November for
$2,600,000.
The $20,000,000 principal amount 8 1/2% Note maturing
May 1995 which the Company received, together with $19,500,000
cash, for sale of its 50% interest in Pacific Coast Cement
Corporation in 1990, was sold for $17,625,000 in October.
In June Lone Star sold 18 marine vessels to Lone Star
Northwest, a former affiliate, for $3,888,000.
The machinery and equipment of the San-Vel Concrete
Corporation prestressed operations were sold in December for
$460,000.
The Company sold its remaining airplane for $2,943,875
and also disposed of several pieces of surplus real estate for
approximately $1,900,000.
1990 and 1989
The following actions had been taken as part of the
Restructuring Program prior to the December 10, 1990 filing for
protection under Chapter 11 of the Code.
In December 1989 and in January, 1990, Lone Star
received through capital distributions approximately $22,800,000,
and $43,000,000, respectively, net of foreign taxes, from its South
American operations.
The partnership interests in Southern Red-E-Mix Co. and
Rivers Bend Red-E-Mix Co., two ready-mixed concrete operations in
the Kansas City metropolitan area, were sold in February 1990 for
$2,000,000.
Lone Star sold in March 1990 a 47.5% interest in Lone
Star Northwest, a partnership manufacturing and selling ready-mixed
concrete, construction aggregates and building materials and
operating cement terminals in the Pacific Northwest, for
$24,103,000. Lone Star was also repaid at that time $32,447,000
owed to it by the partnership. Lone Star has retained a 2.5%
interest in the partnership which is in the process of changing its
form of legal organization to a corporation.
A subsidiary of Lone Star (not in bankruptcy) sold in
1990 a 49% interest in Mountain Cement Company, a manufacturer and
distributor of cement in the Rocky Mountain region, and in a
related transaction Lone Star sold its Salt Lake City, Utah cement
plant and other assets for a total of $16,528,000. The subsidiary
retained a 1% interest in Mountain Cement Company which it sold to
the purchaser of the 49% interest in August 1991 for $305,380.
188,000 shares of preferred stock of Tarmac America,
Inc. having a mandatory redemption value of $1,000 per share on
December 31, 1998 and an annual dividend of $67.50 per share,
received by Lone Star in connection with the 1988 sale of its
remaining interest in a joint venture were sold to Tarmac America,
Inc. for a total of $147,000,000; $5,000,000 of which was received
in June and the remainder at the closing in September 1990.
During 1990 the Company sold an airplane and a
helicopter for $3,850,000 and also disposed of several pieces of
surplus real estate for approximately $3,300,000.
On November 2, 1990 the 50% partnership interest held by
a subsidiary of Lone Star (not in bankruptcy) was retired by
Stresscon, a prestressed and precast concrete products manufacturer
in Southern Florida. A note in the amount of $12,000,000 payable
to the subsidiary was satisfied through a $6,000,000 payment by
Stresscon and a $6,000,000 offset by the subsidiary.
In addition to the after-tax charge of $257,600,000 for
the Restructuring Program taken in 1989, the Company also took
additional after-tax charges in the fourth quarter of 1990 of
$42,148,000 in connection with the Restructuring Program and other
unusual items.
See Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, and also Note 4 of
Notes to Financial Statements contained in this Form 10-K for
further information on the Restructuring Program.
D. Other Developments since December 31, 1990
While not part of the Restructuring Program the Company
has disposed of other assets since it filed for protection under
Chapter 11 of the Code.
1993
The Company's wholly-owned subsidiary, Southern
Aggregates, Inc., sold substantially all of its equipment and
inventory in March for $721,000.
In September the Company sold its 49.6% interest in a
Brazilian joint venture, Companhia Nacional de Cimento Portland,
for $69,629,000 in cash.
Also in September, the Company sold a cement terminal
located in College Point, New York, for $812,000 to the party
leasing it.
1992
The Company's 50% percent interest in the LSM Concrete
Tie Company joint venture, a producer and seller of concrete
railroad crossties in Denver, Colorado, was sold in December for a
net $1,740,103. The purchaser also leased the plant and office
building in Denver from the Company.
In June the Company sold for $38,000,000 all of the
capital stock of its wholly-owned subsidiary, Compania Argentina de
Cemento Portland, S.A. which owned one half of the capital stock of
a company operating a cement plant in Argentina and substantially
all the stock of a company which operates a crushed stone plant in
Uruguay. See also Item 3, Legal Proceedings, of this Form 10-K.
1991
The Company sold for $4,135,000 all of the capital stock
of Compania Uruguaya Cemento Portland, S.A., a company operating a
cement plant in Uruguay in December.
E. Cement, Concrete and Concrete Products.
The Company and its affiliates have twelve domestic
portland cement plants, located in California (leased to RMC
LONESTAR, a joint venture), Hawaii (owned by Hawaiian Cement, a
joint venture), Illinois, Indiana, Kentucky (owned by Kosmos Cement
Company, a joint venture), Louisiana (presently not operating),
Missouri, Ohio (owned by Kosmos Cement Company and presently not
operating), Oklahoma, Pennsylvania (two locations, one of which is
owned by Kosmos Cement Company) and Texas, with a total 1993 rated
annual cement capacity of approximately 8.9 million tons. In
addition, the Company leases a plant in Florida to a third party
which owns the reserves used by that plant.
Through two subsidiaries, one of which, New York Trap
Rock Corporation, has a 1% interest and is in bankruptcy, Lone Star
has a 50% interest in RMC LONESTAR, a California partnership,
engaged in the production (in a plant leased from Lone Star), importation
and sale of cement, and the production and sale of ready-mixed concrete,
aggregates and building materials in California. This partnership interest
is being transferred to Rosebud for disposition.
Lone Star through subsidiaries not in bankruptcy has a
50% interest in Hawaiian Cement, a partnership which produces and
sells cement, ready-mixed concrete and aggregates in Hawaii. This
partnership interest is being transferred to Rosebud for
disposition.
Lone Star through a subsidiary in bankruptcy, Lone Star
Cement Inc., has a 25% interest in Kosmos Cement Company, a
partnership which produces cement at a plant in Kosmosdale,
Kentucky and one in Pittsburgh, Pennsylvania and sells primarily in
the states of Kentucky, Ohio, Indiana and Pennsylvania.
The cement produced by the Company and its affiliates
domestically is sold from their production and distribution
facilities. Distribution facilities of the Company and its
affiliates are operated in California (two locations), Florida (one
location which has been leased to a third party) Hawaii (five
locations), Illinois, Indiana (four locations), Kansas (two
locations), Kentucky, Louisiana (two locations; one of which is not
presently operating), Mississippi, Missouri, Ohio, Oklahoma (two
locations; one of which is not presently operating), Tennessee (two
locations), Texas (three locations), West Virginia (two locations)
and Wisconsin. Marketing of cement is handled by sales
organizations of the Company and its affiliates located at certain
of their plants and terminals and at three sales offices in the
United States.
Pyrament cement is manufactured in a facility at Lone
Star's Greencastle, Indiana cement plant.
The major portion of the domestic cement shipped by the
Company in 1993 was sold to third parties and the remainder was
used in its own ready-mixed concrete and other operations. Of the
total volume of cement shipped domestically by the Company and its
affiliates in 1993, approximately 97% consisted of portland and
oil-well cement.
The principal raw materials used in the manufacture of
cement are limestone or other calcareous materials, shale or clay,
sand and gypsum. Owned reserves of calcareous materials are
utilized by ten of the domestic cement plants. The reserves for
the leased California plant are owned by the lessee; the reserves
for the Hawaiian plant are leased from an unaffiliated entity; and
there are no related reserves for the non-operating Louisiana
plant. Lone Star estimates that available reserves are sufficient
to permit operation of all such plants at 1993 levels of production
for periods ranging upwards from a minimum of approximately twenty
years. Information concerning the sale of specific limestone
reserves located adjacent to certain of Lone Star's cement plants
appears in Note 20 of Notes to Financial Statements contained in
this Form 10-K. Such information is incorporated herein by
reference. Adequate supplies of shale, clay and sand are owned,
leased or available for purchase by the Company at all domestic
locations. Gypsum is purchased generally under short-term contracts
and is readily available in all areas of operation.
The Company produces ready-mixed concrete at various
locations in Illinois, Mississippi and Tennessee, and through joint
ventures in Northern California and Hawaii.
Certain of the joint venture agreements to which the
Company or its subsidiaries are parties contain provisions
permitting a partner to purchase a bankrupt partner's interest or
terminating the partnership due to bankruptcy. No partner took
such action and no joint venture has been dissolved due to the
Reorganization Proceedings.
F. Construction Aggregates.
The Company and certain of its affiliates produce
construction aggregates (including sand, gravel, crushed stone and
other stone products and special purpose industrial sands)
principally in California (through a joint venture), Hawaii
(through a joint venture), Illinois and New York in the United
States; and in Canada. A construction aggregates site in
Mississippi (50% owned by a subsidiary of the Company) is leased to
a third party. Of the total volume of aggregates shipped
domestically by the Company and its affiliates in 1993,
approximately 16% was used in their ready-mixed concrete and
concrete products operations, with the balance sold to others.
The Company and certain of its affiliates own or lease
reserves of aggregates sufficient, in Lone Star's opinion, to
permit operations at 1993 levels of production for periods varying
upwards from a minimum of approximately four years in the case of
sand and gravel and 50 years in the case of stone. Lone Star
anticipates that additional aggregate reserves will be acquired as
necessary.
G. Environmental Matters.
The Company is subject to the provisions of Federal,
state and local laws, regulations and ordinances pertaining to the
quality of the environment ("Environmental Regulations"). In
addition, Environmental Regulations may change in the future so as
to more stringently regulate companies such as Lone Star.
Environmental Regulations not only affect Lone Star's ongoing
operations but also can apply to closed facilities and formerly
owned properties. The Company believes that any claims for
environmental liabilities arising as a result of operations or
actions on properties owned or leased by the Filed Companies prior
to but not on or after the date of the commencement of the
Reorganization Proceedings will be discharged pursuant to
Bankruptcy Law. However, there can be no assurance that, if any
such claims are made, those claims would not be enforceable against
the Filed Companies or that the amounts thereof would not be
material. Lone Star has an ongoing program of maintaining,
updating and installing modern environmental control and monitoring
equipment at many of its domestic locations. It is impossible to
predict with accuracy the range of future costs for the Company's
program of compliance with current or proposed Environmental
Regulations, or the effect thereof on the Company; certain key
Environmental Regulations, such as the Bevill Amendment to the
Resource Conservation and Recovery Act which relates to
environmental management of cement kiln dust, are currently under
review and may be substantially changed.
In order to save on fuel costs, the Company is blending
and burning waste fuels at certain of its cement manufacturing
plants and this process involves permitting and compliance with
applicable Environmental Regulations. In 1993, various federal and
state agencies instituted inquiries or administrative actions
relating to the Company's hazardous waste fuel operations. In
particular, state and federal authorities have instituted
administrative actions with respect to hazardous waste fuel
operations at the Greencastle, Indiana plant, as well as inquiries
regarding that plant and hazardous waste fuel operations at the
Cape Girardeau, Missouri plant. The Company has responded to the
inquiries and is in the process of settling the administrative
actions. While the Company believes it is in substantial
compliance with Environmental Regulations applicable to its waste
fuel operations, changes in those Regulations or in their
interpretation by the relevant agencies or the courts (see
discussion of District of Columbia Court of Appeals decision in
Note 32 of Notes to Financial Statements contained in this Form 10-
K) could effectively prohibit the use of waste fuels or make the
cost of using them prohibitive, thus depriving the Company of the
savings.
The Company believes that its environmental program is
generally equal to those of its domestic competitors and that its
competitive position as to those competitors will not be adversely
affected by compliance with regulations currently in effect. To
the extent that foreign producers of cement do not have to meet the
same environmental standards as domestic producers, the domestic
producers, including Lone Star, are adversely affected by the need
to comply with such regulations.
For a discussion of Environmental Matters, see Item 7,
Management's Discussion and Analysis of Financial Condition and
Results of Operations, and Note 32 of Notes to Financial Statements
contained in this Form 10-K.
H. Employees.
The Company and its subsidiaries had at year end 1993
approximately 1,600 domestic employees of whom approximately 1,150
were members of various labor unions. During 1993, Lone Star
negotiated new three year labor agreements with the International
Brotherhood of Boilermakers representing employees at the Company's
Greencastle, Oglesby and Pryor cement plants and its Bonner Springs
and Milwaukee cement terminals; with the United Paperworkers
International Union representing employees at its Nazareth cement
plant; and with the United Steelworkers of America representing
employees at its Memphis cement terminal. The scheduled 1993
expiration of the labor agreement covering the employees at the
Cape Girardeau cement plant was delayed while negotiations with the
United Paperworkers continued through the year. Negotiations for a
first time labor accord with the same union was initiated in 1993
with respect to the hourly employees of the Company's Cape
Girardeau Alternate Fuels facility. New three-year contracts were
signed during 1993 with the three unions (International Union of
Operating Engineers, International Brotherhood of Teamsters and
Laborers Union) representing the hourly employees of the Company's
New York Trap Rock Corporation subsidiary. Lone Star's I.C.
Materials, Inc. d/b/a Traver Supply subsidiary entered into a new
labor agreement with the International Brotherhood of Teamsters
with respect to its ready-mix operations in Decatur, Illinois. The
Company's Canadian subsidiary, Construction Aggregates, Ltd.,
negotiated a three year agreement with the International Union of
Operating Engineers for its organized employees in Nova Scotia.
There were no labor disruptions at any of the Company's facilities
during 1993.
I. Energy.
The manufacture of cement is highly energy-intensive,
with energy (principally in the form of kiln fuel and electricity
for the grinding mills) accounting for approximately one-third of
manufacturing costs. Approximately all of Lone Star's and its
affiliates' present domestic productive capacity is located in
plants with kilns primarily fueled by coal. Lone Star has utilized
waste materials as fuel at certain of its cement plants and is
actively exploring such usage at other plants. In this connection,
see also paragraph G of this Item 1. The effect on the energy
costs of the Company due to any energy tax as proposed by the
President of the United States and as eventually enacted into law
cannot be presently estimated.
J. Seasonality.
As is true for the construction industry in general, the
Company's various operations are materially affected by seasonal
changes.
K. Competitive Conditions.
Generally, conditions in the cement, ready-mixed
concrete and construction aggregate industry are cyclical and
highly price competitive. These products are marketed as
commodities, with price the principal method of competition. To a
lesser extent, other factors such as service, delivery time and
proximity to the customer are important considerations. Because the
Company and its affiliates sell in many areas of the country, the
number of competitors differs from area to area. Competitors
include domestic and foreign producers and importers. 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 intends to fully cooperate with the
investigation.
The Company's operations are subject to fluctuations in
governmental spending for highway construction, housing and other
projects as well as fluctuations arising from general business
conditions, increases or decreases in private housing construction,
the tightening or easing of credit and other factors, including, in
particular, the level of interest rates. While sales by the Company
directly to federal, state and local government agencies are not
significant, customers of the Company are engaged in government
contract construction to an extent which cannot be determined by
the Company but which is believed to be substantial.
The Company is not dependant upon any single or group of
customers for sales of its products. During 1993 no single
customer accounted for as much as 10% of the Company's consolidated
revenues.
ITEM 2. PROPERTIES.
The productive capacity and production of the Company's
owned and leased cement plants, and the location and general
character of the principal plants, quarries and other materially
important physical properties of the Company and its joint ventures
at December 31, 1993 are set forth below. Suitability and adequacy
of reserves of cement raw materials and of aggregates are described
in Item 1.E. Those properties or the Company's interest in them
which are to be transferred to Rosebud for disposition are
designated in this Item 2 by an asterisk. (See also Note 4 of
Notes to Financial Statements of the Company contained in this Form
10-K).
A. Cement Plants.
Rated Year End 1993
Cement Capacity,
Location Thousands Of Tons+
*Santa Cruz, California (1)................. 875
Miami, Florida (2)......................... 1,200
*Honolulu, Hawaii (3)....................... 278
Oglesby, Illinois (4)...................... 600
Greencastle, Indiana ...................... 750
Kosmosdale, Kentucky (5)................... 700
New Orleans, Louisiana (6)................. 750
Cape Girardeau, Missouri................... 1,200
Superior, Ohio (5)......................... 260
Pryor, Oklahoma ........................... 725
*Nazareth, Pennsylvania..................... 658
Pittsburgh, Pennsylvania(5)................ 360
Maryneal, Texas............................ 520
(+) Rated capacity is higher than estimated practical capacity due
to regular maintenance requirements, the impact of seasonal
weather, changes in product mix and other factors. Portland cement
production of these plants operated by Lone Star, its affiliates
and subsidiaries in 1993 was approximately 7.9 million short tons.
B. Cement Distribution Terminals.
*Redwood City and Sacramento, California (7)
Pensacola, Florida (leased to a third party until 1998)
*Hilo, Honolulu, Kahului, Kawaihae and Nawiliwili, Hawaii (3)
Waukegan, Illinois (8)
Indianapolis and Evansville (5), Elkhart and Fort Wayne, Indiana
Kechi and Bonner Springs, Kansas
Paducah, Kentucky
New Orleans, Louisiana (6)
Brandon, Mississippi
St. Louis, Missouri
Cincinnati, Ohio (5)
Oklahoma City and Woodward (presently not operating), Oklahoma
Memphis and Nashville, Tennessee
Amarillo, Dallas and * Houston, Texas (10)
Charleston and Fairmont, West Virginia (5)
Milwaukee, Wisconsin
C. Cement Raw Materials Quarries and Reserves.
*Davenport, California (7)
*Oahu, Hawaii (3)
Oglesby, Illinois (4)
Greencastle, Indiana
Kosmosdale, Kentucky (5)
Cape Girardeau, Missouri
Superior, Ohio (5)
Pryor, Oklahoma
*Nazareth, Pennsylvania
Maryneal, Texas
Decker's Creek, West Virginia (5)
D. Aggregate Plants and Quarries.
*Clayton, Fresno, Felton, Lemon Cove, Marina, Pleasanton,
Rancho Cordova, Sunol and Tracy, California (7)
*Puunene and Halawa, Hawaii (3)
Spring Bay, Illinois
Hernando, Mississippi (11)
Clinton Point and West Nyack, New York
Nova Scotia, Canada
E. Concrete Products Plants and Ready-Mixed Concrete
Facilities.
*Fourteen plants in the San Francisco Bay Area, five plants in or
near Sacramento, six plants in or near Modesto and plants in
Fresno and Bakersfield, California (7)
Bloomington, Danville, Decatur, Morton and Peoria, Illinois
*Halawa, Makakilo, Puunene, Kihei, Honokawai and Waikoloa,
Hawaii (3)
Plants at nine locations in the area of Memphis, Tennessee
F. Concrete Block Plants.
Danville and Decatur, Illinois
G. Prestressed Concrete Plants.
Denver, Colorado (9)
H. Asphalt Plants.
*Tracy and Concord, California (7)
Nova Scotia, Canada
I. Building Materials Plants.
*Marina, California (7)
Bloomington, Danville and Decatur, Illinois
J. Building Materials Supply Yards.
*Berkeley and Sacramento, California (7)
______________
(1) The site of this plant is owned by RMC LONESTAR, a
partnership in which the Company has a 50% interest, and
the plant is leased to the partnership by Lone Star.
The plant, the lease and the partnership interest are
being transferred to Rosebud for disposition.
(2) The site of this plant was sold to a third party and the
plant leased to that entity in 1988.
(3) Owned by Hawaiian Cement, a partnership, in which
subsidiaries of Lone Star have a 50% interest. The
partnership also owns a cement plant on the Island of
Oahu, Hawaii which is used as a cement grinding facility
when required. The partnership interest is being
transferred to Rosebud for disposition.
(4) Lone Star will grant to the Pension Benefit Guaranty
Corporation a mortgage on the Oglesby plant to secure
potential claims arising from any future termination of
Lone Star pension plans.
(5) Owned by Kosmos Cement Company, a joint venture in which
the Company has a 25% interest. The Superior plant is
not presently operating. The Company will grant to the
Pension Benefit Guaranty Corporation a security interest
in the Company's interest in Kosmos Cement Company to
secure potential claims arising from any future
termination of Lone Star pension plans.
(6) The cement plant is not presently operating but the
facility is operating as a terminal.
(7) Owned and operated by RMC LONESTAR, a partnership in
which the Company has a 50% interest. The partnership
interest is being transferred to Rosebud for
disposition.
(8) The land on which the facility is located is leased from
a third party and subleased to another party pursuant to
a sublease expiring December 31, 1994.
(9) Leased to Rocla Concrete Tie, Inc. until at least June
30, 1994.
(10) Houston terminal is owned by Lone Star-Falcon, a joint
venture in which Lone Star has a 50% interest. Leased
to a third party. The partnership interest is being
transferred to Rosebud for disposition.
(11) This property is jointly owned 50-50 as tenants in
common with an individual and is leased to a third party
for a term that could extend until March 1999.
The Company and its affiliates own, except as noted
above, all of their cement plants. The cement terminals are owned
or leased. If any such leases should not be renewed, the Company
does not anticipate any difficulty in obtaining satisfactory
alternative distribution facilities.
The Company and its affiliates either own or lease their
aggregate plant sites and quarries, or have purchased the aggregate
minerals in place. In each case, subject to lease termination
dates, they have the right to continue mining operations until the
deposit is no longer suitable for commercial exploitation.
The ready-mixed concrete plants of the Company and its
affiliates are located on owned sites or sites held under leases
with varying terms. No difficulty is anticipated in renewing
leases as they expire or finding satisfactory alternative plant
sites.
The Company and its affiliates lease executive offices
in Stamford, Connecticut, and own or lease offices in Pleasanton,
California; Honolulu, Hawaii; Indianapolis, Indiana; and West
Nyack, New York. The Company and its affiliates also own or lease
other offices in the United States.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in a number of pending legal
proceedings, the more significant of which are discussed in this
Item; Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations; Item 10, Directors and
Executive Officers of the Registrant; and Notes 32 and 33 of Notes
to Financial Statements of the Company contained in this Form 10-K.
No other material legal proceedings are known by the Company to be
contemplated by governmental authorities against it.
Reorganization Proceedings
These proceedings in the United States Bankruptcy Court
for the Southern District of New York are entitled "In re: New York
Trap Rock Corporation, Lone Star Industries, Inc. et al., Debtors"
Chapter 11 Case Nos. 90B21276 - 21286, 21334 and 21335. The
Company's Plan of Reorganization was approved by the Bankruptcy
Court on February 17, 1994 and is expected to become effective on
March 29, 1994. See Item 1.B, Bankruptcy Reorganization
Proceedings, Notes to Financial Statements of the Company,
particularly Note 1, Item 1B, Business - Bankruptcy Reorganization
Proceedings, particularly the discussion of the Proposed Plan, and
Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations, contained in this Form 10-K.
Other Legal Proceedings
Pursuant to a court-approved sale, Lone Star sold at
auction the stock of its wholly-owned Argentine subsidiary,
Compania Argentina de Cemento Portland, S.A. ("CACP"), which owned
a 50% interest in the stock of an Argentine cement producer,
Cemento San Martin, S.A. ("CSM"), and a 96.7% interest in the stock
of a Uruguayan crushed stone producer, Canteras de Riachuelo, S.A.
("Riachuelo"), to Loma Negra Compania Industrial Argentina S.A.
("Loma Negra") for $38 million. Subsequent to this sale, Lone Star
learned that defendant Compania Naviera Perez Companc,
S.A.C.F.I.M.F.A. ("Perez Companc"), the corporate parent of
defendant Inversora Patagonica, S.A. ("Patagonica"), the owner of
the remaining 50% interest in CSM, which had previously submitted a
bid to purchase the CACP stock for $36 million, had secretly
entered into an agreement with defendant Loma Negra, pursuant to
which Perez Companc had agreed to sell its 50% interest in CSM to
Loma Negra for $55 million and drop out of the bidding. As a
result, Lone Star filed an action in the Bankruptcy Court on
November 20, 1992. Lone Star alleges that this collusive conduct
and fraudulent concealment of this conduct from the Bankruptcy
Court and Lone Star allowed Loma Negra to purchase the CACP stock
for $38 million, $17 million less than it paid Perez Companc for an
equivalent amount of CSM stock. Lone Star also alleges that
Patagonica breached the by-laws of CSM by failing to provide its
partner, CACP, the opportunity to purchase Patagonica's 50%
interest in CSM prior to consummating the sale of its interest in
CSM to Loma Negra. In addition, Lone Star alleges that Loma Negra
and Perez Companc tortiously interfered with and induced Patagonica
to breach the CSM by-laws. Lone Star is seeking $17 million in
compensatory damages, or, in the alternative, avoidance of the sale
and $10 million in punitive damages. Motions filed by both parties
were heard by the Bankruptcy Court on May 20, 1993. On June 7,
1993, the Bankruptcy Court rendered a written decision resolving
this lawsuit against Lone Star and in favor of the defendants on
all grounds.
Lone Star appealed this decision to the U.S. District
Court. In a memorandum order dated November 16, 1993 and judgments
entered November 17, 1993, the U.S. District Court for the Southern
District of New York affirmed the Bankruptcy Court's order. Lone
Star has appealed this decision to the United States Court of
Appeals for the Second Circuit. The parties were unable to reach a
resolution of this matter at a pretrial settlement conference. The
argument of the appeal could be heard as early as the week of April
4, 1994.
The right to any recovery in this action will be
transferred to Rosebud.
In 1992 Lone Star commenced an investigation as to
whether transfers of its property to certain third parties prior to
filing for reorganization on December 10, 1990 may be of a type
which are recoverable or voidable as preferential transfers under
applicable law. In December 1992 Lone Star and a number of these
third parties stipulated and agreed that Lone Star should forego
commencing actions with respect to such transfers and that the
running of any applicable statute of limitations for claims and/or
causes of action by Lone Star not having lapsed prior to December
10, 1992 should be tolled to and including June 10, 1994. This
date was extended to May 31, 1994 by agreement. Lone Star filed
five actions in the Bankruptcy Court in December, 1992 and one
action in June 1993 to preserve its rights against those third
parties which did not enter into stipulations and agreements.
Thereafter, Lone Star has entered into agreements with the parties
in these six actions tolling any action until June 30, 1994. The
trial dates for these actions have been adjourned to April 1994.
The right to any recovery in these actions will be
transferred to Rosebud. Consequently, Rosebud will make a
determination as to whether or not to press the claims for return
of the property.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During 1993 no matters were submitted to Security
Holders other than votes on the Debtors Plan of Reorganization and
the Alternative Plan of Reorganization. For further information
concerning such votes see Item 1.B of this Form 10-K.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The names and ages of the executive officers of Lone
Star, the positions and offices with Lone Star held by each and the
periods during which each has served as an executive officer are as
follows:
Has Held Executive
Name (Age) Office Office Since
David W. Wallace (70) Chairman of the Board January 17, 1991
and Chief Executive
Officer
William M. Troutman (53) President and April 27, 1983
Chief Operating Officer
John J. Martin (62) Senior Vice President, July 31, 1979
General Counsel and
Secretary
Roger J. Campbell (57) Vice President - January 2, 1986
Cement Operations
James T. Cleven (53) Vice President, Manage- January 5, 1982
ment Information Systems
Pasquale P. Diccianni (52) Vice President - March 16, 1988
Cement Sales and
Aggregate Operations
Gerald F. Hyde, Jr. (51) Vice President - Personnel May 19, 1983
and Labor Relations
Michael W. Puckett (49) Vice President - May 15, 1985
Cement Sales and
Concrete Operations
William E. Roberts (54) Vice President, Chief March 16, 1988
Financial Officer and
Controller
All of the executive officers of Lone Star were elected
at the annual meeting of the Board of Directors in May 1993. Their
terms of office continue until the next annual meeting of the Board
of Directors and until their successors shall have been elected and
qualified. All of the executive officers has been employed by Lone
Star as an officer or in an executive capacity for more than five
years.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
At March 1, 1994 there were 7,401 record holders of Lone
Star common stock. Upon the Effective Date the shares of these
holders will be cancelled and new shares of common stock issued to
them in accordance with the terms of the Plan of Reorganization.
The other information called for by this Item appears
under the caption "Dividends and Stock Market Prices" in Item 7 of
this Form 10-K.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Lone Star Industries, Inc.
(In thousands except per share amounts)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net Sales.................................... $240,071 $230,098 $238,692 $253,850 $337,547
Income (loss) before reorganization items,
income taxes, and cumulative effect of changes
in accounting principles................... $6,196 ($42,429) $2,948 ($85,774) ($342,899)
Loss before cumulative effect of changes in
accounting principles...................... ($35,258) ($45,428) ($5,547) ($66,739) ($273,882)
Net loss..................................... ($36,040) ($164,342) ($5,547) ($66,739) ($273,882)
Net loss applicable to common stock.......... ($41,152) ($169,455) ($10,661) ($71,858) ($279,004)
Per Common Share
Primary:
Loss before cumulative effective of changes in
accounting principles...................... ($2.42) ($3.03) ($0.64) ($4.34) ($16.88)
Net loss..................................... ($2.47) ($10.18) ($0.64) ($4.34) ($16.88)
Weighted average common shares outstanding 16,644 16,641 16,582 16,559 16,532
Shares outstanding at December 31............ 16,645 16,644 16,621 16,560 16,558
Cash dividends per common share.............. - - - - -
Financial Position at December 31
Total assets................................ $924,885 $952,649 $914,437 $909,888 $1,113,615
Long-term debt (1)........................... - - - $367 $392,399
Liabilities subject to Chapter 11 proceedings $627,938 $611,129 $555,331 $544,549 -
Redeemable preferred stocks.................. $37,500 $37,500 $37,500 $37,500 $37,500
Common shareholders' equity.................. $12,348 $59,698 $226,162 $239,039 $309,605
Book value per common share.................. $0.74 $3.59 $13.61 $14.43 $18.70
(1) See Note 19 of Notes to Financial Statements.
(2) See Note 17 of Notes to Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In November 1989, in an effort to improve the company's operating
results and generate cash to pay maturing debt obligations, the
company implemented a restructuring program involving the sale of
certain marginal operations and facilities. The company was unable
to complete the sale of all assets within the projected time frame and
at 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 November
1990 termination of its revolving-credit agreement and its agreement
with financial institutions to sell trade receivables. Without such
financing or other sources of cash, the company would probably 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 voluntary
petitions for reorganization under Chapter 11 in the United States
Bankruptcy Court for the Southern District of New York ("Bankruptcy
Court"), and began operating their respective businesses as debtors-
in-possession. A committee of unsecured creditors, a committee of
equity security holders and a committee of retired employees had been
appointed and had the right to review and object to transactions not
in the ordinary course of business, which were, in any event, subject
to Bankruptcy Court approval. On February 17, the company's Plan of
Reorganization, which had been approved overwhelmingly by the
company's creditors and security holders, was confirmed without
objection. It is expected that the plan will become effective by the
end of March 1994 (See Note 3).
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the normal
course of business. The appropriateness of using the going concern
basis is dependent upon, among other things, future profitable
operations, and the ability to generate sufficient cash from
operations, asset sales and financing sources to meet obligations.
As a result of the Chapter 11 filings and related circumstances,
however, such realization of assets, and liquidation of liabilities
are subject to significant uncertainty. The company is not now
actively marketing certain operating facilities which were identified
for sale in the 1989 restructuring program and in accordance with its
plan of reorganization, the company expects to retain certain of these
operating facilities. Accordingly, prior to the plan of
reorganization becoming effective, the operations classified as assets
held for sale in the 1989 restructuring program continued to be
accounted for as assets held for sale in the accompanying consolidated
financial statements. In addition, in accordance with its plan of
reorganization, the company will dispose of certain assets which were
not previously included in the company's restructuring program and are
not currently classified as assets held for sale in the accompanying
consolidated financial statements.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability of the carrying value of
recorded asset amounts, or amounts and classification of liabilities
that might be necessary as a consequence of the company's plan of
reorganization becoming effective (See Note 3).
Results from operations currently classified as assets held for sale
but which will be retained, for the years ended December 31, 1993,
1992 and 1991 included net sales of $61.1 million, $55.9 million and
$50.6 million, respectively and operating profits of $8.6 million,
$6.5 million and $3.0 million, respectively.
Restructuring Program
The restructuring program announced in 1989 included the planned 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 to be sold, including related
current and other assets, were classified as assets held for sale in
the accompanying consolidated balance sheets at their then estimated
net realizable value (as revised in 1990) (See Note 4).
Results of Operations
Net Sales
Consolidated net sales of $240.1 million were $10.0 million higher
than 1992. Cement sales of $158.7 million were $11.6 million greater
than 1992 reflecting increased domestic cement shipments particularly
from the Cape Girardeau, Missouri cement plant due to stronger demand
and higher average net realized cement selling prices at all
locations. The favorable sales volume was partly offset by lower
cement sales from the Greencastle, Indiana cement plant as shipments
were adversely effected by production interruptions. Excluding the
operations classified as assets held for sale, domestic cement
shipments increased by 2% and average unit net realized cement selling
prices increased by 7%.
Sales of construction aggregates of $48.2 million approximated the
prior year. In March 1993 the company sold a small construction
aggregates operation in Mississippi. Excluding the operation sold in
1993, construction aggregates shipments increased 3%. Higher
shipments of lower-priced products into the New York Metropolitan area
were offset by the effects of a teamsters strike in New York City and
an operating engineers strike on Long Island during the summer which
reduced orders from our customers in the ready-mixed concrete and
asphalt businesses. Shipments from the operation in Illinois were
also below the prior year due to delays in obtaining operating permits
and production start-up problems encountered when the plant was moved
to a new quarry.
Ready-mixed concrete and concrete products sales were $29.5 million,
$1.3 million below 1992 reflecting lower shipments of ready-mixed
concrete and concrete block from the Illinois operations due to heavy
rains during the summer months and strikes affecting two major
customers in the Decatur area. The decrease in sales at the Illinois
operations was partly offset by increased sales from the Tennessee
operations reflecting higher shipments of ready-mixed concrete and
higher average selling prices due to increased residential
construction activity. In 1993 ready-mixed concrete shipments
decreased 4% and average selling prices increased approximately 1%.
Sales from other operations, primarily building materials, were $3.6
million, $0.4 million below 1992 primarily due to slow construction
activity in Illinois due to poor weather and strikes affecting certain
customers.
Gross Profits
Cement gross profits increased by $6.1 million to $26.8 million in
1993 on higher shipments and higher average net realized cement
selling prices. Also contributing to the favorable cement gross
profits were favorable production costs at the Cape Girardeau,
Missouri cement plant due to extensive maintenance and repairs
performed in 1992, increased revenues from burning waste fuels and
lower coal costs. The positive results were partly offset by higher
production costs and lower production volume at other locations
primarily due to increased kiln down-time for repairs and higher
repair and maintenance expenses in 1993. In addition, gross profits
were negatively affected by a lower rate of production at the
Greencastle, Indiana cement plant due to the installation of a new
clinker cooler in April 1993, and the temporary suspension of the use
of waste fuels in late September 1993 pending analysis of the
administrative enforcement action commenced by the Environmental
Protection Agency at that time (See Note 32). The suspension of the
use of waste fuel resulted in decreased revenues and higher coal costs
which unfavorably affected gross profits at the Greencastle plant.
The company resumed burning waste fuel, on a limited basis, in January
1994. Unless a recent decision by the D.C. Court of Appeals regarding
a U.S. EPA standard applicable to hazardous waste fuel burning at wet
process cement plants (See Note 32) results in an inability to use
such fuels, upon completion of a new precipitator at the Greencastle
plant, the company will apply for a new permit and expects the waste
fuel program at the plant to be fully operational by mid-year 1994.
The company expects to continue to operate its waste fuel program
which is subject to strict federal, state and local rules and
regulations. Changes to such rules and regulations, or their
interpretations by the relevant agencies, could prohibit the use of
such fuels or make their use cost prohibitive, thus depriving the
company of the favorable impact on production costs presently being
experienced (See Note 32).
Construction aggregates gross profits decreased $0.9 million to a loss
of $2.2 million in 1993 reflecting the continued severe effects of
depressed construction activity in the Northeast. Lower results from
the New York operations reflected higher costs resulting from changes
in New York State Department of Transportation specifications for
stone used in state road-paving projects. To comply with the needs
of its customers to meet the new specifications the company is
blending stone from its Canadian operation with the stone of one of
its New York operations. Also contributing to the decrease in the
gross profits were lower results from the Canadian operation
reflecting increased shipments of low margin products and lower
results from the Illinois operation due to lower sales and production
volumes, and higher costs as a result of delays in obtaining operating
permits after moving the plant to a new quarry location.
Gross profits from ready-mixed concrete and concrete products
decreased $0.7 million to $2.9 million in 1993 reflecting the lower
sales of ready-mixed concrete and concrete block in Illinois resulting
primarily from the heavy summer rains and strikes affecting two major
customers partly offset by favorable gross profits from the Tennessee
operations on higher shipments and increased gross margins resulting
from favorable selling prices.
Other operations gross profits, primarily from building materials, of
$0.4 million decreased $0.3 million primarily due to lower sales
resulting from poor weather and strikes affecting customers in
Decatur, Illinois.
Joint Ventures
Pre-tax income from joint ventures of $20.4 million decreased $17.4
million from 1992 principally due to the sale of the company's
Argentine investment in August 1992, and its Brazilian investment in
September 1993. The decrease in pre-tax joint venture income also
reflects reduced earnings at Hawaiian Cement attributable to lower
shipments of cement, construction aggregates and ready-mixed concrete
partly offset by higher average net realized selling prices for cement
and ready-mixed concrete. The decrease in pre-tax earnings from joint
ventures was partly offset by higher income from RMC LONESTAR and
Kosmos Cement Company.
Other Income
Other income decreased $2.6 million to $11.2 million in 1993 primarily
due to interest earned on a prior year income tax refund which was
received in 1992 and lower foreign exchange gains, partly offset by
increased interest income on notes receivable.
Litigation Settlement
In February 1994 the company settled the shareholder litigation
originally brought in 1989 in the Federal Courts by allowing claims
in its Chapter 11 proceedings in the amount of $2.5 million. The
litigation settlement expense of $66.6 million in 1992 represents the
company's settlement of the crosstie litigation (See Note 33).
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $41.3 were $0.5
million higher than the prior year due primarily to increased
postretirement benefits expense.
Interest Expense
Interest expense of $1.6 million in 1993 decreased $0.6 million from
1992. Capitalized interest was $0.2 million in 1993 and 1992. Total
interest incurred, most of which was not paid, was $1.8 million. The
company stopped accruing interest on all unsecured prepetition debt
obligations as of December 10, 1990, due to the company's filing for
reorganization under Chapter 11. Interest on certain obligations,
primarily the production payment, continues to be accrued, but will
not be paid until the plan of reorganization becomes effective or upon
specific order of the Bankruptcy Court. Total contractual interest
for 1993 would have been $31.2 million. Contractual interest includes
interest accrued for the period, plus the contractual interest on
other outstanding secured debt and on letters of credit which
specifically provide for interest.
Reorganization Items
Reorganization items, related to the Chapter 11 proceedings, include
a pre-tax loss of $37.3 million related to the sale of the company's
Brazilian investment in 1993 and a pre-tax gain of $15.5 million in
1992 which resulted from the sale of the company's Argentine
subsidiary. Other reorganization items, related to the Chapter 11
proceedings, of $10.5 million of expense in 1993 were $6.4 million
higher than in 1992 due to increased professional fee and
administrative expenses in 1993, partly offset by higher interest
income earned on higher investment balances.
Income Taxes
The income tax benefit of $6.4 million in 1993 was $20.8 million
favorable as compared to the income tax expense of $14.5 million in
1992. The improvement is due to lower local taxes related to the
Brazilian and Argentine operations and the tax benefit related to the
loss on the sale of the Brazilian operation in 1993.
The 1992 income tax expense primarily reflects local and state taxes
related to the company's foreign joint ventures. The company
currently has deferred tax assets in excess of deferred tax
liabilities. Under Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No. 109"), a valuation
reserve is required for these net tax assets and, as a result, tax
benefit can no longer be given to current domestic losses.
Cumulative Effect of Changes in Accounting Principles
In 1993, the Kosmos Cement Company joint venture adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" ("SFAS No. 106"). As a
result, the company recognized a charge of $0.8 million representing
its share of the cumulative effect of the partnership's change in
accounting principle. The company's share of the cumulative effect
is included in the results for 1993. In 1992 the company adopted SFAS
No. 106 and as a result the company recognized a pre-tax charge from
the cumulative effect of a change in accounting principle of $144.7
million and also recognized $14.2 million of tax benefits for a net
after-tax charge of $130.5 million. The charge resulting from the
adoption of SFAS No. 106 did not reflect the results of any
negotiations with representatives of the retired salaried and hourly
employees in connection with proposed modifications of their benefits
(See Note 30). The prior-year's quarterly results have been restated
to reflect the adoption of SFAS No. 106 effective January 1, 1992.
Also in 1992 the company and its Brazilian joint venture adopted
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". As a result the company recognized income of $11.6
million due to the cumulative effect of the change in accounting
principle (See Notes 10 and 31).
The loss per share from the cumulative effect of changes in accounting
principles was $0.05 in 1993 and $7.15 in 1992.
Net Loss
The net loss of $36.0 million in 1993 was $128.3 million lower than
1992. Included in the net losses for 1993 and 1992 were net charges
of $0.8 million and $118.9 million, respectively, related to the
cumulative effect of changes in accounting principles. The 1993 pre-
tax loss of $41.6 million was $10.7 million greater than 1992
reflecting the net effect of the loss on the sale of the company's
Brazilian investment in 1993, higher other reorganization expenses in
1993 and the gain on the sale of the company's Argentine subsidiary
in 1992. Also contributing to the higher pre-tax loss in 1993 were
decreased joint venture income partly offset by the provision for
settlement of crosstie litigation recorded in 1992 and increased
results from domestic operations in 1993. The improved results from
domestic operations are primarily due to higher cement results
reflecting increased shipments and higher average net realized cement
selling prices partly offset by lower results from the construction
aggregates and ready-mixed concrete operations. The lower
construction aggregates results were attributable to the continued
depressed level of construction activity in the Northeast, and the
lower results from ready-mixed concrete operations reflect lower
shipments and margins at the Illinois operations.
The tax benefit in 1993 reflects the benefit realized on the loss of
the sale of the Brazilian investment in 1993 partly offset by foreign
local taxes related to the Brazilian investment.
The net loss per common share was $2.47 per share in 1993 as compared
to $10.18 per share in 1992. The net loss per share includes a $0.05
loss per share in 1993 and a $7.15 loss per share in 1992 related to
the cumulative effect of changes in accounting principles.
The net loss per common share is based on the net loss after deducting
provisions for preferred dividends of $5.1 million in both 1993 and
1992. Due to the company's filing for reorganization under Chapter
11, the company stopped accruing preferred dividends as of the last
payment date, September 15, 1990. Although preferred dividends in
1993 and 1992 were not paid, both preferred issues are cumulative and
the full year's dividend amount is used in computing net income per
common share. The total of dividends in arrears on both preferred
issues was $16.8 million at December 31, 1993.
Weighted average common shares outstanding was 16.6 million in both
1993 and 1992.
Dividends and Stock Market Prices
The payment of cash dividends on Lone Star common stock is not
permitted as the company is in default under its financing agreements
and as a result of the Chapter 11 filings.
Lone Star's common stock is listed on the New York Stock Exchange.
As of December 31, 1993 the company had 7,962 registered holders of
common stock. The high and low prices of the company's common stock
for each quarterly period in 1993 and 1992, in composite transactions
as reported in The Wall Street Journal, were:
1993 1992
High Low High Low
Common
First Quarter 2 7/8 1 5/8 5 3/8 3 3/8
Second Quarter 2 1/8 1 5/8 4 1/4 3 1/8
Third Quarter 2 1 3/8 3 1/2 2 5/8
Fourth Quarter 2 3/4 1 3/8 4 1/2 2 1/2
Capital Expenditures
Capital expenditures of $19.0 million in 1993 and $22.1 million in
1992 were primarily for major repairs, replacements and upgrading of
existing facilities including a new facility in 1992 used to process
alternative fuels.
Financial Condition
The company's change in liquidity during 1993 reflects cash received
from the sale of assets in addition to cash provided by operations
(including payments for litigation and environmental expenses
previously accrued), partly offset by cash used for capital
expenditures and for two partial payments on the production payment.
The company believes that cash and marketable securities on hand of
$244.4 million, funds from operations and an expected new $35.0
million working capital facility, presently being negotiated, will be
adequate to cover distributions to creditors, payment of
reorganization expenses and current working capital and capital
expenditure needs.
Cash generated by operating activities of $31.6 million during 1993
included rents collected on leased plants and interest earned on cash
accumulated as a result of the Chapter 11 proceedings. This was
partly offset by payments for professional fees and administrative
expenses associated with the Chapter 11 proceedings, in addition to
crosstie litigation costs and payments related to environmental
testing, clean-up and monitoring.
During 1993, the company generated $52.2 million from investing
activities primarily representing the proceeds from the sale of the
company's Brazilian investment for $69.6 million and $6.3 million of
proceeds from the sale of part of a former plant site in Kansas in
addition to proceeds from the sale of several parcels of land. The
positive cash flow from investing activities was partly offset by
capital expenditures and advances and loans to the RMC LONESTAR
partnership.
Net cash outflows from financing activities of $8.0 million reflects
two agreed upon partial payments on the production payment.
Working capital on December 31, 1993 was $275.6 million, compared to
$189.0 million on December 31, 1992. Current assets increased $91.0
million principally due to increased marketable securities and
accounts receivable. Current liabilities increased $4.4 million due
to higher accruals for environmental matters, higher professional fee
accruals and higher accounts payable. Non-current assets held for
sale decreased $3.5 million primarily due to the sale of part of a
former plant site in Kansas and certain parcels of real estate partly
offset by the reclassification of certain asset valuation reserves to
liability accounts. Non-current notes receivable decreased $2.1
million mainly due to collections. Investments in joint ventures
decreased $99.3 million due to the sale of the company's Brazilian
investment and dividends received partly offset by equity income and
investments in and advances to the RMC LONESTAR partnership.
Property, plant and equipment decreased $10.2 million mainly due to
depreciation, the sale of a small construction aggregates operation
and the sale of a cement terminal which had been leased to a third
party in 1993, partly offset by capital expenditures.
Other liabilities increased by $6.3 million primarily due to higher
casualty insurance reserves and the reclassification of reserves from
non-current assets held for sale.
Liabilities subject to Chapter 11 proceedings increased $16.8
reflecting the increase in the additional minimum pension liability,
the settlement of the shareholder litigation, accrued interest for
1993 primarily related to the production payment, increases in
professional fee accruals and higher casualty insurance accruals
partly offset by a lower production payment balance. The company,
with Bankruptcy Court approval, made two partial payments on the
production payment of $4.0 million each in March and October 1993.
The remaining non-current production payment balance of $13.0 million
and applicable accrued interest is included with liabilities subject
to Chapter 11 proceedings. In accordance with the confirmed plan of
reorganization the company will assume the production payment and the
liability for accrued interest upon the plan's effective date. The
increase in insurance accruals resulted from negotiations with one of
the company's primary insurance carriers whereby the company will
allow as a claim certain prepetition liabilities relating to both the
company and its joint ventures (including joint ventures in which the
company no longer participates). The company expects to be reimbursed
by the joint ventures for their respective portions of the claim.
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. Lone Star and certain of its
subsidiaries have been identified as potentially responsible parties
by various federal, state and local authorities with respect to
contamination at certain sites, several of which are on the National
Priority List. These include sites located in Utah, Texas,
Massachusetts, Missouri, Washington, Minnesota, Colorado and Florida.
The December 31, 1993 consolidated balance sheet includes accruals
of $19.4 million which represent the claims to be allowed in the
bankruptcy proceedings related to the settlements reached regarding
the Utah sites and an allowed claim of $3.4 million related to a
settlement reached regarding the Minnesota site. In addition, the
company has been notified of potential environmental problems at a
location formerly owned by the company. This site, located in
California, is presently owned by a joint venture in which the company
has a 50% interest. The December 31, 1993 consolidated balance sheet
includes accruals totalling $8.4 million for consulting, legal fees,
monitoring and remediation for the Florida, California and certain
other sites. The company's ultimate liability for legal fees
monitoring and remediation costs, at these and other sites, in excess
of amounts recorded in the accompanying consolidated financial
statements, is not presently determinable (See Note 32).
In February 1994, as part of confirmation of the plan of
reorganization, the company settled its liability for the claim
involving two shareholder class actions which had been pending in the
U.S. District Court in New Haven, Connecticut by allowing claims in
the Chapter 11 proceedings totaling $2.5 million. The settlements are
included in provision for litigation settlements in the accompanying
consolidated financial statements (See Note 33).
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 intends
to fully cooperate with the investigation.
In September 1993, with Bankruptcy Court approval, the company sold
its 49.6% interest in Companhia Nacional de Cimento Portland, a
Brazilian joint venture to Lafarge Coppee, the company's partner in
the joint venture for $69.6 million. A pre-tax loss of $37.3 million
was recorded on the sale.
Also in September 1993, the company sold one of its cement terminals
which had been leased to a third party, for $0.8 million.
In May 1993 the company, with Bankruptcy Court approval, sold a
portion of a former plant site in Kansas for $6.3 million. The
property was included in the company's restructuring program.
In March 1993, the company sold substantially all of the equipment and
inventory of Southern Aggregates for $0.7 million.
In 1993, in separate transactions, the company sold several parcels
of real estate included in the company's restructuring program for
$3.0 million.
Comparison of 1992 to 1991
Net Sales
Consolidated net sales of $230.1 million were $8.6 million below 1991.
Cement sales of $147.2 million were $2.1 million higher than 1991
reflecting increased domestic cement shipments from all plant
locations partly offset by the sale of the company's cement operation
in Uruguay in December 1991. The improved domestic cement sales were
partly offset by lower average net realized selling prices in a number
of domestic markets, particularly in the northeast market which is
supplied by the Nazareth, Pennsylvania plant, the Indianapolis market
which is supplied by the Greencastle, Indiana plant and the markets
which are supplied by the Cape Girardeau, Missouri plant. Excluding
the operations classified as assets held for sale, domestic cement
shipments increased by 14% and average cement net realized selling
prices decreased by 4%.
Sales of construction aggregates of $48.1 million were $15.0 million
below 1991 reflecting lower shipments and lower average net realized
selling prices, particularly in the Northeast, caused by the severe
effects of depressed business conditions there. Sales were also
unfavorably affected by the company's decision to stop shipping to
certain customers for credit reasons. In 1992 construction aggregates
shipments decreased by 17% and average net realized selling prices
decreased by 9%.
Ready-mixed concrete and concrete products sales were $30.8 million,
$4.5 million above 1991 reflecting increased shipments of ready-mixed
concrete in substantially all of the company's markets and increased
shipments of concrete block in Illinois. The increase in ready-mixed
concrete shipments reflects the increase in residential construction
in Illinois, Indiana and Tennessee.
Sales from other operations, primarily building materials, were $4.0
million, $0.2 million below 1991 due to increased competition from
other building materials suppliers in the Midwest.
Gross Profits
Cement gross profits increased by $7.7 million to $20.7 million in
1992 as higher shipments and production volumes at all plants more
than offset lower average net realized selling prices and the effect
of the sale of the Uruguayan operation in December 1991. The increase
in production volume combined with lower repair and maintenance
expenses and a full year's benefit from the new raw mill at the
Oglesby plant, which was installed in 1991, resulted in favorable unit
production costs at all plants. Production costs were also favorably
impacted by lower fuel costs as two plants, operating under specific
permits, have been burning waste fuels.
Gross profits from construction aggregates decreased $5.7 million to
a loss of $1.3 million in 1992, reflecting the continued severe
effects of depressed business conditions, particularly in the
Northeast. The decline in construction activity resulted in
significantly lower shipments and lower average net realized prices
at the New York operations. Construction aggregates gross profits
were also adversely affected by lower production volume which resulted
in higher unit production costs.
Gross profits from ready-mixed concrete and concrete products
increased $1.6 million to $3.6 million in 1992 reflecting higher
shipments of ready-mixed concrete due to improved residential
construction in the Memphis, Tennessee area and several Illinois
markets.
Other operations gross profits, primarily from building materials, of
$0.6 million approximated those of 1991.
Joint Ventures
Pre-tax income from joint ventures of $37.8 million increased $13.4
million from 1991 principally due to increased earnings from the
Brazilian operation. The increase in earnings is attributable to a
considerably higher U.S. dollar average selling price for cement
resulting from significant price increases since governmental price
controls were removed during the third quarter of 1991. During the
first seven months of 1991 governmental price control and monitoring
programs caused artificially low average cement selling prices. Both
selling prices and profits at the Brazilian operation could be
adversely affected by future changes in foreign exchange rates and the
possible reinstatement of governmental price control or price
monitoring programs. The improvement in pre-tax income also reflects
increased earnings at Hawaiian Cement attributable to higher shipments
of cement and ready-mixed concrete and higher average net realized
selling prices for construction aggregates and ready-mixed concrete.
Partially offsetting the improvements were lower shipments of
construction aggregates and lower average cement net realized selling
prices caused by the continued slowdown in the construction industry
in northern California which adversely affected the RMC LONESTAR
partnership, and lower results due to the sale of the Argentine
operation in August 1992.
Other Income
Other income decreased $0.9 million to $13.8 million in 1992 as lower
interest income earned on marketable securities combined with the sale
of a note receivable during the fourth quarter of 1991 were partly
offset by interest earned on a prior year income tax refund which was
received in 1992. The lower interest on marketable securities
reflects the classification of a greater percentage of interest income
as a reorganization item in 1992.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $40.8 million were
$1.3 million lower than 1991. The improvement reflects the sale of
the cement operation in Uruguay, lower expenses associated with the
company's Pyrament operations combined with the effect of other
company-wide cost reduction programs. The reduction was almost
completely offset by $3.2 million of increased expense related to the
current year accrual for postretirement benefits resulting from the
adoption of SFAS No. 106 in 1992 (See Note 30).
Interest Expense
Interest expense of $2.2 million in 1992 decreased $1.1 million from
1991. Capitalized interest was $0.2 million in 1992 and $1.3 million
in 1991. Total interest incurred, most of which was not paid, was
$2.4 million. The company stopped accruing interest on all unsecured
prepetition debt obligations as of December 10, 1990, due to the
company's filing for reorganization under Chapter 11. Total
contractual interest for 1992 would have been $31.9 million.
Contractual interest includes interest accrued for the period, plus
the contractual interest on other outstanding secured debt and on
letters of credit which specifically provide for interest.
Reorganization Items
Reorganization items, related to the Chapter 11 proceedings, include
a pre-tax gain of $15.5 million in 1992 which resulted from the sale
of the company's Argentine subsidiary for $38.0 million. Other
reorganization items, related to the Chapter 11 proceedings, of $4.0
million of expense in 1992 were $3.3 million lower than in 1991 due
to the inclusion of $5.8 million of costs related to rejected
executory contracts in 1991 and higher interest income in 1992 partly
offset by increased professional fee expenses in 1992.
Income Taxes
Income tax expense of $14.5 million in 1992 increased by $13.0 million
from 1991. The increase is due to higher local taxes on foreign
earnings and the lack of domestic tax benefits available in 1992. All
previously provided deferred taxes at January 1, 1992 were utilized
upon adoption of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions". The 1992 income tax
expense primarily reflects local and state taxes related to the
company's foreign joint ventures. The company currently has deferred
tax assets in excess of deferred tax liabilities. Under SFAS No. 109,
a valuation reserve is required for these net tax assets and, as a
result, tax benefit can no longer be given to current domestic losses.
Cumulative Effect of Changes in Accounting Principles
In 1992 the company and its Brazilian joint venture adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". As a result the company recognized income of $11.6 million
due to the cumulative effect of the change in accounting principle
(See Notes 10 and 31).
Also in 1992 the company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions". As a result the company recognized a pre-tax
charge from the cumulative effect of a change in accounting principle
of $144.7 million and also recognized $14.2 million of tax benefits
for a net after-tax charge of $130.5 million. The charge resulting
from the adoption of SFAS No. 106 does not reflect the results of any
negotiations with representatives of the salaried and hourly employees
in connection with proposed modifications of retiree benefits (See
Note 30).
The loss per share from the cumulative effect of changes in accounting
principles was $7.15 in 1992.
Net Loss
The net loss of $164.3 million in 1992 was $158.8 million greater than
1991. Included in the net loss for 1992 is a net charge of $118.9
million related to the cumulative effect of changes in accounting
principles. Excluding the cumulative effect of changes in accounting
principles, the 1992 pre-tax loss of $31.0 million was $26.9 million
greater than 1991 reflecting a $66.6 million pre-tax provision for the
settlement of crosstie litigation partly offset by increased joint
venture income, increased results from domestic operations and the
positive effect of reorganization items including the gain on the sale
of the company's Argentine subsidiary. The improved results from
domestic operations are primarily due to higher cement results
reflecting increased shipments at all plants combined with higher
results from the ready-mixed concrete operations partly offset by
lower shipments of construction aggregates and lower average net
realized cement and aggregates selling prices.
The increased tax expense in 1992 reflects the increase in taxes
primarily related to higher foreign income and the inability to
benefit domestic operating losses in 1992.
The net loss per common share was $10.18 per share in 1992 as compared
to $0.64 in 1991. The net loss per share in 1992 includes a $7.15
loss per share related to the cumulative effect of changes in
accounting principles.
The net loss per common share is based on the net loss after deducting
provisions for preferred dividends of $5.1 million in both 1992 and
1991. Due to the company's filing for reorganization under Chapter
11, the company stopped accruing preferred dividends as of the last
payment date, September 15, 1990. Although preferred dividends in
1992 and 1991 were not paid, both preferred issues are cumulative and
the full year's dividend amount is used in computing net income per
common share. The total of dividends in arrears on both preferred
issues was $11.7 million at December 31, 1992.
Weighted average common shares outstanding was 16.6 million in both
1992 and 1991.
Financial Condition
In order to preserve the company's assets and enable it to seek a
long-term solution to its financial, litigation and business problems,
the company and certain subsidiaries filed voluntary petitions for
reorganization under Chapter 11 in December 1990.
The company's change in liquidity during 1992 reflects cash received
from the sale of assets in addition to cash provided by operations
(including payments for litigation and environmental expenses
previously accrued), and the collections of notes receivable, partly
offset by cash used for capital expenditures and for two partial
payments on the production payment.
The company believes that cash and marketable securities on hand of
$168.6 million at December 31, 1992, and funds from operations, will
be more than adequate to cover its current working capital and capital
expenditure needs.
Cash generated by operating activities of $15.9 million during 1992
included rents collected on leased plants, interest earned on a
federal income tax refund and on cash accumulated as a result of the
Chapter 11 proceedings. This was partly offset by payments related
to environmental clean-up and the crosstie litigation and payments for
professional fees and administrative expenses associated with the
Chapter 11 proceedings.
During 1992, the company generated $24.2 million from investing
activities primarily representing the proceeds from the sale of the
company's Argentine subsidiary for $38.0 million, $7.9 million of
proceeds from the sale of the San-Vel ready-mix and aggregates
operations, several parcels of land and a small concrete block
operation and the collection of notes receivable. The positive cash
flow from investing activities was partly offset by capital
expenditures and advances to the RMC LONESTAR partnership.
Net cash outflows from financing activities of $8.0 million reflects
two agreed upon partial payments on the production payment.
Working capital on December 31, 1992 was $189.0 million, compared to
$187.9 million on December 31, 1991. Current assets increased $20.7
million principally due to increased marketable securities, partly
offset by lower accounts receivable and inventories. Current
liabilities increased $19.6 million due to the $11.0 million current
accrual for other postretirement benefits recorded in 1992 and
increased accounts payable. Non-current assets held for sale
increased $10.9 million primarily due to the reclassification of
certain asset valuation reserves to liability accounts, partly offset
by the sale of certain parcels of real estate, the San-Vel ready-mix
and aggregates operation and a small concrete block operation during
1992. Non-current notes receivable decreased $4.3 million mainly due
to collections. Investments in joint ventures increased $16.8 million
due to the increase in equity resulting from the effect of adopting
SFAS No. 109, "Accounting for Income Taxes", at the Brazilian
operation, in addition to equity income and advances partly offset by
the sale of the company's Argentine operation which included the
company's share of the Cemento San Martin joint venture and dividends
received. Property, plant and equipment decreased $7.8 million mainly
due to depreciation, partly offset by capital expenditures.
LONE STAR INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants 40
Report of Other Independent Accountants 42
Consolidated Financial Statements:
Statements of Operations for the Years Ended
December 31, 1993, 1992 and 1991 43
Balance Sheets - December 31, 1993 and 1992 44
Statements of Changes in Common Shareholders' Equity
for the Years Ended December 31, 1993, 1992 and 1991 45
Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 46
Notes to Financial Statements 47
Schedules:
I Marketable Securities 92
IV Indebtedness of and to Related Parties -
Not Current 93
V Property, Plant and Equipment 94
VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment 95
VIII Valuation and Qualifying Accounts 96
X Supplementary Income Statement Information 97
The foregoing supporting schedules should be read in conjunction
with the consolidated financial statements and notes thereto in the
company's 1993 Form 10-K.
The presentation of individual condensed financial information of
the registrant is omitted because the restricted net assets of the
consolidated subsidiaries do not exceed twenty-five percent of
total consolidated net assets at December 31, 1993.
Separate financial statements for Hawaiian Cement, a significant
subsidiary of the company, as of and for the year ended June 30,
1994, will be filed as an amendment to Lone Star's 1993 Form 10-K
when they become available.
Separate financial statements for Kosmos Cement Company, a
significant subsidiary of Lone Star as of and for the year ended
December 31, 1993, are included as Exhibit 28B (See Item 14,
Exhibits, Financial Statement Schedules and Reports on Form 8-K on
page 91).
Separate financial statements for the company's other fifty percent
or less owned companies or joint ventures are omitted because such
subsidiaries individually do not constitute a significant
subsidiary at December 31, 1993.
Schedules other than those listed above are omitted because the
information required is not applicable or is included in the
financial statements or notes thereto. Columns omitted from
schedules filed are omitted because the information is not
applicable.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(Continued on the Following Page)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Lone Star Industries, Inc.:
We have audited the consolidated financial statements and the
financial statement schedules of Lone Star Industries, Inc. and
Consolidated Subsidiaries as listed in the Index to Financial
Statements and Schedules on Page 38 of this Form 10-K. These
financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and financial
statement schedules based on our audits. We did not audit the
combined financial statements or the financial statement schedule
information of the foreign operations of the Company (which, as
discussed in Note 10, were substantially sold in 1993), which
financial statements represent total assets of 13% of the
consolidated assets as of December 31, 1992 and total revenues of
10% and 14% of the consolidated revenues for 1992 and 1991,
respectively. These statements were audited by other auditors,
whose report, which has been furnished to us, includes an
explanatory paragraph regarding the change, as discussed in Note 31
herein, in accounting for income taxes by the Company's foreign
operations, and our opinion, insofar as it relates to the amounts
included for the foreign operations, is based solely on the report
of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and
the report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based upon our audits and the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Lone Star Industries, Inc. and Consolidated Subsidiaries as of
December 31, 1993 and 1992, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles. In addition, in our opinion, based upon our audits and
the report of other auditors, the financial statement schedules
referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
The accompanying consolidated financial statements and financial
statement schedules have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, in December 1990, Lone Star
Industries, Inc. and certain of its subsidiaries filed voluntary
petitions for relief under Chapter 11 of the United States
Bankruptcy Code. These filings and related circumstances raise
substantial doubt about their ability to continue as going
concerns. The continuation of their businesses as going concerns
is contingent upon, among other things, a plan of reorganization
becoming effective, future profitable operations, and the ability
to generate sufficient cash from operations, asset sales and
financing sources to meet obligations. The accompanying financial
statements and financial statement schedules do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts, or the amounts and classification of
liabilities that might be necessary as a consequence of these
uncertainties.
As discussed in Note 32, the accompanying consolidated financial
statements include accruals related to the remediation of certain
environmental sites. The Company's ultimate liability for
remediation costs, at these and other sites, in excess of amounts
recorded in the accompanying financial statements, is not presently
determinable.
As discussed in Notes 30 and 31 to the consolidated financial
statements, the Company changed its method of accounting for other
postretirement benefits and income taxes in 1992.
COOPERS & LYBRAND
Stamford, Connecticut
February 17, 1994
Report of Other Independent Accountants
To the Board of Directors of
Lone Star Industries, Inc.
In our opinion, the combined balance sheet and the related combined
statements of income and equity and of cash flows and supporting
Schedules I, V, VI, VIII and X to the Form 10-K (none of which are
presented separately herein) present fairly, in all material
respects, the financial position of Lone Star Industries, Inc.
International Division at December 31, 1992 and the results of its
operations and its cash flows for each of the two years in the
period ended December 31, 1992, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above. We have not audited the
combined financial statements of Lone Star Industries, Inc.
International Division for any periods subsequent to December 31,
1992.
As discussed in Note 31 to the financial statements, the Company
changed its method of accounting for income taxes in 1992.
PRICE WATERHOUSE
Stamford, Connecticut
February 4, 1993
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Lone Star Industries, Inc.
(In thousands except per share amounts)
<CAPTION>
For the Years Ended
1993 1992 1991
<S> <C> <C> <C>
Revenues:
Net sales .......................................... $240,071 $230,098 $238,692
Joint venture income ............................... 20,440 37,831 24,435
Other income, net .................................. 11,238 13,824 14,747
271,749 281,753 277,874
Deductions from revenues:
Cost of sales ...................................... 193,884 188,440 203,742
Provision for litigation settlements................ 2,500 66,584 -
Selling, general and administrative expenses ....... 41,278 40,817 42,137
Depreciation and depletion ......................... 26,254 26,131 25,745
Interest expense (contractual interest of $31,227 in
1992 and $33,357 in 1991)......................... 1,637 2,210 3,302
265,553 324,182 274,926
Income (loss) before reorganization items and income t 6,196 (42,429) 2,948
Reorganization items:
(Loss) gain on sale of assets....................... (37,335) 15,525 391
Other............................................... (10,470) (4,046) (7,385)
Total reorganization items.............................. (47,805) 11,479 (6,994)
Loss before income taxes and cumulative effect of changes in
accounting principles............................... (41,609) (30,950) (4,046)
Credit (provision) for income taxes ................ 6,351 (14,478) (1,501)
Loss before cumulative effect of changes in accounting (35,258) (45,428) (5,547)
Cumulative effect of changes in accounting principles:
Postretirement benefits other than pensions......... (782) (130,510) -
Income taxes........................................ 11,596 -
(782) (118,914) -
Loss before preferred dividends....................... (36,040) (164,342) (5,547)
Provisions for preferred dividends ................. (5,112) (5,113) (5,114)
Net loss applicable to common stock .................. ($41,152) ($169,455) ($10,661)
Weighted average common shares outstanding ........... 16,644 16,641 16,582
Primary and fully diluted loss per common share:
Loss before cumulative effect of changes in accounti ($2.42) ($3.03) ($0.64)
Cumulative effect of changes in accounting principle (0.05) (7.15) -
Net loss............................................ ($2.47) ($10.18) ($0.64)
The accompanying Notes to Financial Statements are an integral part of the Financial Statements.
44
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Lone Star Industries, Inc.
(Dollars in thousands)
<CAPTION>
As of December 31
1993 1992
<S> <C> <C> c>
Assets
Current Assets
Cash, including cash equivalents of $243,220 and $167,767....... $244,397 $168,605
Accounts and notes receivable, net ............................. 49,022 34,137
Inventories .................................................... 38,426 38,504
Current assets of assets held for sale.......................... 20,634 20,151
Other current assets ........................................... 2,733 2,806
Total current assets ................................. 355,212 264,203
Assets held for sale ........................................... 65,663 69,177
Notes receivable ............................................... 5,058 7,172
Joint ventures ................................................. 88,574 187,874
Property, plant and equipment, net ............................. 398,085 408,271
Cost in excess of net assets of businesses acquired, net ....... 9,273 9,659
Other assets and deferred charges .............................. 3,020 6,293
Total assets ......................................... $924,885 $952,649
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable ............................................... $16,079 $14,117
Accrued liabilities ............................................ 60,353 57,135
Other current liabilities ...................................... 3,227 4,000
Total current liabilities ............................ 79,659 75,252
Deferred income taxes .......................................... 3,356 15,612
Postretirement benefits other than pensions..................... 141,950 137,618
Other liabilities............................................... 21,886 15,588
Liabilities subject to Chapter 11 proceedings................... 627,938 611,129
Contingencies (Notes 1 and 32)
Redeemable preferred stock...................................... 37,500 37,500
Non-redeemable preferred stock (involuntary liquidating value, 1 248 252
Common stock, $1 par value. Authorized: 25,000,000 shares.
Shares issued: 1993 - 18,102,723; 1992 - 18,102,007. ........ 18,103 18,102
Additional paid-in capital ..................................... 239,870 239,867
Accumulated Deficit............................................. (187,896) (151,856)
Pension liability adjustment.................................... (21,157) (9,843)
Treasury stock, at cost......................................... (36,572) (36,572)
Total liabilities and shareholders' equity ........... $924,885 $952,649
The accompanying Notes to Financial Statements are an integral part of the Financial Statements.
45
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF
CHANGES IN COMMON SHAREHOLDERS' EQUITY
Lone Star Industries, Inc.
(In thousands)
<CAPTION>
For the Years Ende
1993 1992 1991
<S> <C> <C> <C> c>
Common Stock
Balance at beginning of year ......................... $18,102 $18,101 $18,099
Conversions of $4.50 non-redeemable preferred stock 1 1 2
Balance at end of year ............................... 18,103 18,102 18,101
Additional Paid-In Capital
Balance at beginning of year ......................... 239,867 240,329 241,502
Conversions of $4.50 non-redeemable preferred stock 3 3 13
Excess of cost over market value of treasury stock issued to
employee stock purchase plan...................... - (465) (1,186)
Balance at end of year ............................... 239,870 239,867 240,329
Accumulated Deficit
Balance at beginning of year as restated.............. (151,856) 12,486 18,033
Net loss............................................ (36,040) (164,342) (5,547)
Balance at end of year ............................... (187,896) (151,856) 12,486
Pension Liability Adjustment
Balance at beginning of year ......................... (9,843) (7,625) -
Excess of additional pension liability over unrecogn
service cost........................................ (11,314) (2,218) (7,625)
Balance at end of year ............................... (21,157) (9,843) (7,625)
Treasury Stock
Balance at beginning of year ......................... (36,572) (37,129) (38,595)
Shares issued to employee stock purchase plan....... - 557 1,466
Balance at end of year ............................... (36,572) (36,572) (37,129)
Total common shareholders' equity, end of year........ $12,348 $59,698 $226,162
The accompanying Notes to Financial Statements are an integral part of the Financial Statements.
46
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lone Star Industries, Inc.
(In thousands)
<CAPTION>
For the Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C> c>
Cash Flows from Operating Activities:
Loss before cumulative effect of changes in accounting ($35,258) ($45,428) ($5,547)
Adjustments to arrive at net cash provided (used) by operating activities:
Depreciation and depletion ....................... 26,254 26,131 25,745
Provision for litigation settlements.............. 2,500 57,200 -
Deferred income taxes ............................ (10,546) 2,920 1,902
Provision for doubtful accounts................... 1,605 1,083 3,133
Changes in operating assets and liabilities:
Accounts and notes receivable .................. (2,895) 3,382 (218)
Inventories and other current assets............ 846 6,063 8,253
Accounts payable and accrued expenses .......... (2,198) (13,295) 701
Unremitted earnings of joint ventures ............ (951) (17,942) (10,182)
Loss (gain) on sale of joint venture interests.... 37,335 (15,525) (391)
Reorganization items.............................. 10,470 4,046 7,385
Other, net ....................................... 9,793 8,655 2,522
Net cash provided by operating activities before
reorganization items................................ 36,955 17,290 33,303
Operating cash flows from reorganization items:
Interest received on cash accumulated because of Chapter 11
proceedings..................................... 5,102 4,500 4,219
Professional fees and administrative expenses..... (10,459) (5,910) (3,160)
Net cash (used) provided by reorganization items...... (5,357) (1,410) 1,059
Net cash provided by operating activities............. 31,598 15,880 34,362
Cash Flows from Investing Activities:
Capital expenditures ................................. (18,999) (22,122) (17,612)
Proceeds from sales of assets held for sale .......... 9,206 7,934 29,166
Proceeds from sales of assets due to Chapter 11 procee 71,162 39,675 4,135
Sales of property, plant and equipment ............... 888 1,064 711
Collection of notes receivable........................ 908 4,418 4,104
Investment and advances to equity investees........... (5,000) (3,500) (3,585)
Other, net ........................................... (5,971) (3,239) (1,796)
Net cash provided by investing activities ............ 52,194 24,230 15,123
Cash Flows from Financing Activities:
Net reduction of short-term debt...................... - - (1,687)
Reduction of production payment....................... (8,000) (8,000) (8,000)
Proceeds from long-term debt.......................... - - 174
Net cash used by financing activities................. (8,000) (8,000) (9,513)
Net increase in cash and cash equivalents ............ 75,792 32,110 39,972
Cash and cash equivalents, beginning of period........ 168,605 136,495 96,523
Cash and cash equivalents, end of period.............. $244,397 $168,605 $136,495
The accompanying Notes to Financial Statements are an integral part of the Financial Statement
47
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Chapter 11 Proceedings and Basis of Financial Statement
Presentation
In November 1989, in an effort to improve the company's operating
results and 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 November 1990 termination of its revolving-
credit agreement and its agreement with financial institutions to sell
trade receivables. 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 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 began operating their
respective businesses as debtors-in-possession. On February 17, 1994,
the Bankruptcy Court confirmed the company's Plan of Reorganization
which had been sent along with a related Disclosure Statement, to all
creditors and security holders involved in the company's bankruptcy
proceedings, in late 1993 and which had been overwhelmingly approved
by such creditors and security holders (the "confirmed plan"). It is
expected that the confirmed plan will become effective by March 31,
1994 (See Note 3).
Under Chapter 11, the filed companies cannot pay claims which arose
prior to the filing of the petitions for relief under the federal
bankruptcy laws outside of the plan of reorganization or without
specific Bankruptcy Court authorization. These claims, which will be
satisfied pursuant to the plan of reorganization, are reflected in the
December 31, 1993 and 1992 consolidated balance sheets as liabilities
subject to Chapter 11 proceedings. Additional amounts for claims may
arise from claims for contingencies and other disputed amounts that
are not included in the debtors' books and records as remaining
unresolved claims are liquidated (See Note 17).
The filed companies have received approval from the Bankruptcy Court
to pay certain of their prepetition obligations. Such obligations
have been included in the appropriate liability captions on the
accompanying consolidated balance sheets. Claims secured by the
assets of the filed companies ("secured claims") also may not be paid
outside the plan of reorganization or without specific Bankruptcy
Court authorization, and actions to enforce the claims against the
filed companies' assets are stayed, although the holders of such
claims have the right to move the Bankruptcy Court for relief from the
stay.
As a result of the Chapter 11 filings, events of default occurred with
respect to substantially all of the company's debt which was
outstanding as of the petition date. Default remedies since the
petition date have been stayed. In addition, the company has
discontinued accruing interest on its unsecured prepetition debt
obligations.
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities and commitments
in the normal course of business. The appropriateness of using the
going concern basis is dependent upon, among other things, the
company's future profitable operations, and the ability to generate
sufficient cash from operations, asset sales (See Note 4) and
financing sources to meet obligations. The accompanying
consolidated financial statements do not include any adjustments
relating to the recoverability of the carrying value of recorded asset
amounts or the amounts and classification of liabilities that might
be necessary as a consequence of the plan of reorganization becoming
effective. The company expects to adopt "fresh-start" reporting, in
accordance with the Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code",
upon the effectiveness of its plan of reorganization. See Note 3,
"Plan of Reorganization", including pro forma information for further
discussion of estimated adjustments to the carrying values of
historical assets and liabilities that will be required in future
financial statements to reflect the plan of reorganization becoming
effective.
The company is not actively marketing certain facilities which were
classified as assets held for sale in the 1989 restructuring program
and, in accordance with the confirmed plan of reorganization the
company expects to retain certain of these operating facilities.
Accordingly, prior to the plan of reorganization becoming effective
these operations continued to be classified as assets held for sale
in the accompanying consolidated financial statements. In accordance
with its plan of reorganization, the company expects to dispose of
certain assets which were not previously included in the company's
restructuring program and are not currently classified as assets held
for sale (See Note 4).
The accompanying consolidated financial statements include results of
both filed and non-filed entities. The entities which had not filed
for reorganization under Chapter 11 primarily consist of the foreign
operations, the joint ventures and a subsidiary with net assets of
$45,780,000, which mainly consists of a cement plant in Florida leased
to a third party (See Notes 10 and 11).
2. Summary of Significant Accounting Policies
Consolidation - The consolidated financial statements include the
accounts of Lone Star Industries, Inc. and all domestic and foreign
subsidiaries. All intercompany transactions have been eliminated.
Joint ventures are accounted for under the equity method.
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined principally by the average cost method.
Property, Plant and Equipment - Property, plant and equipment are
stated at cost and depreciated over the estimated useful lives of the
assets using the straight-line method. Significant expenditures which
extend the useful lives of existing assets are capitalized.
Maintenance and repair costs are charged to current earnings. Cost
depletion is calculated using the units of production method. The
cost of assets and related accumulated depreciation is removed from
the accounts when such assets are disposed of, and any related gains
or losses are reflected in current earnings.
Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis
of the company's assets and liabilities. Provision is made for
appropriate taxes on the unremitted earnings of joint ventures and
foreign subsidiaries which are not considered to be permanently
reinvested or restricted. The company's equity income in corporate
joint ventures is presented on a pre-tax basis. Joint venture taxes
are combined with the company's tax provision.
Pension Plans - The company and certain of its consolidated
subsidiaries have a number of retirement plans which cover
substantially all of its employees. Defined benefit plans for
salaried employees provide benefits based on employees' years of
service and average compensation for a specified period of time.
Defined benefit plans for hourly paid employees, including those
covered by multi-employer pension plans under collective bargaining
agreements, generally provide benefits of stated amounts for specified
periods of service. The company's policy is to fund amounts as are
necessary on an actuarial basis to provide assets sufficient to meet
the benefits to be paid to plan members in accordance with the
requirements of the Employees Retirement Income Security Act of 1974
("ERISA"). Assets of the plans are administered by an independent
trustee and are invested principally in fixed income, equity
securities and real estate.
Income Per Common Share - Primary income per common share is based on
the weighted average number of shares outstanding in each year after
providing for cumulative preferred dividends including amounts in
arrears (See Notes 22 and 23). Fully diluted income per common share
assumes that dilutive convertible preferred stock had been converted
and dilutive stock options had been exercised at the beginning of each
year or on the date of issuance.
Cost in Excess of Net Assets of Businesses Acquired - The excess of
the cost of purchased businesses over the fair value of net assets at
dates of acquisition is amortized using the straight-line method over
periods not to exceed forty years.
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.
Marketable securities are recorded at cost, which approximates market
value.
3. Plan of Reorganization
On February 17, 1994 the Bankruptcy Court confirmed the Lone Star Plan
of Reorganization (the "confirmed plan"). At the hearing for the
confirmation of the plan, the Official Committee of Equity Holders and
certain other parties withdrew their objections to confirmation of the
plan as a result of negotiated settlements. The Alternative Plan
which had been proposed by that committee was rejected by the
company's creditors and preferred shareholders and was withdrawn. In
accordance with the confirmed plan certain core cement, ready-mixed
concrete and construction aggregates operations will constitute the
reorganized Lone Star. Other non-core assets of the company including
the Nazareth, Pennsylvania cement plant, the Santa Cruz, California
cement plant and the company's interest in the RMC LONESTAR, Hawaiian
Cement and Lone Star Falcon joint ventures and certain surplus
properties will be transferred to a liquidating corporation for
distribution for the benefit of creditors. The confirmed plan is
expected to become effective in late March 1994 and distributions to
the creditors and shareholders would begin immediately thereafter.
The confirmed plan, provides that allowed unsecured claims (currently
estimated to amount to about $570,000,000) would receive their pro
rata share of (i) approximately $182,700,000 in cash expected to be
available on the effective date, (ii) $78,000,000 senior unsecured
notes of the reorganized company, (iii) $138,000,000 secured notes of
the liquidating company, to be paid out of the proceeds from the
disposition of its assets (the notes and the indenture under which
they are to be issued provide for a guarantee by reorganized Lone Star
and in an amount not to exceed $20,000,000 plus interest to become
payable should a specified principal amount of such secured notes not
be paid by 1997. The principal amount of such secured notes is to be
reduced by the proceeds, if any, from certain asset dispositions and
from certain other matters occurring prior to the effective date of
the plan of reorganization) and (iv) approximately 85.0% of the common
equity of reorganized Lone Star.
Holders of preferred stock will receive their pro rata share of 10.5%
of the common equity 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 will receive the balance of the reorganized
company's common equity and 2,753,333 warrants to purchase common
stock in the reorganized Lone Star. The warrants proposed to be
issued to the preferred and common shareholders will be exercisable
through December 31, 2000 and will provide for the purchase of shares
of the common stock of reorganized Lone Star at a price of $18.75 a
share.
In connection with the confirmation of the company's plan, the Lone
Star Board of Directors has been reconstituted.
Pro Forma Information
The company will account for the plan of reorganization utilizing the
fresh start reporting principles as contained in the Statement of
Position No. 90-7 "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code". Upon adoption of fresh start reporting,
the value of the company as determined in the confirmed plan of
reorganization will be allocated to the company's net assets in
conformity with the procedures specified by Accounting Principles
Board Opinion No. 16, "Business Combinations".
The following pro forma condensed financial information of the company
and its subsidiaries illustrates the presently estimated financial
effects of the implementation of the company's plan of reorganization
(which will result 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 year ended December 31, 1993 have
been presented as if the company had emerged from Chapter 11
bankruptcy proceedings and adopted fresh start reporting as of January
1, 1993. Pro forma balance sheet data is presented as if the
effectiveness of the plan of reorganization had occurred and the
company adopted fresh start reporting on December 31, 1993.
The pro forma data is unaudited. Asset appraisals for fresh start
reporting have not yet been completed and amounts shown are subject
to changes and revisions due to the results of appraisals, differences
between the estimates used to develop the pro forma statements and the
actual amounts and other changes resulting from operations and other
activities during the period from December 31, 1993 through March 31,
1994, when the company intends to adopt fresh start reporting.
Lone Star Industries, Inc.
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
December 31, 1993
(In Millions)
Effect of
Plan of
Reorganization
and Fresh Start ProForma
Historical Reporting Results
Assets
Cash and marketable
securities................ $ 244.4 $ (218.4) $ 26.0
Assets held for sale....... 20.6 (20.6) -
Other current assets....... 90.2 15.6 105.8
Total current assets..... 355.2 (223.4) 131.8
Assets held for sale....... 65.7 54.3 120.0
Property, plant and equipment,
net....................... 398.1 (117.0) 281.1
Investment in joint ventures 88.6 (70.9) 17.7
Other...................... 17.3 (15.3) 2.0
Total assets............. $ 924.9 $ (372.3) $ 552.6
Liabilities and shareholders' equity
Accounts payable, accrued
liabilities and other current
liabilities............... $ 79.7 $ (15.4) $ 64.3
Liabilities subject to
Chapter 11 proceedings.... 627.9 (627.9) -
Postretirement benefits other
than pensions............. 142.0 (15.4) 126.6
Long-term debt............. - 198.0 198.0
Other liabilities.......... 25.3 45.1 70.4
Redeemable preferred stocks 37.5 (37.5) -
Non-redeemable preferred
stocks.................... 0.2 (0.2) -
Common stock............... 18.1 (6.1) 12.0
Additional paid-in-capital. 239.9 (158.6) 81.3
Retained earnings.......... (187.9) 187.9 -
Pension liability adjustment (21.2) 21.2 -
Treasury stock, at cost (36.6) 36.6 -
Total liabilities and
shareholders' equity.... $ 924.9 $ (372.3) $ 552.6
Lone Star Industries, Inc.
Pro Forma Statement of Operations (Unaudited)
For the Year Ended December 31, 1993
(In Millions)
Effect of
Plan of
Reorganization
and Fresh Start ProForma
Historical Reporting Results
Revenues:
Net sales.................. $ 240.1 $ 30.4 $ 270.5
Joint venture income....... 20.4 (17.0) 3.4
Other income............... 11.2 (7.4) 3.8
271.7 6.0 277.7
Deductions from revenues:
Cost of sales.............. 193.9 25.9 219.8
Provision for litigation
settlements............... 2.5 (2.5) -
Selling, general and
administrative............ 41.3 (3.2) 38.1
Depreciation and depletion. 26.3 (3.7) 22.6
Interest expense........... 1.6 7.8 9.4
265.6 24.3 289.9
Income (loss) before
reorganization items...... 6.1 (18.3) (12.2)
Reorganization items:
Loss on sale of assets..... (37.3) 37.3 -
Other...................... (10.5) 10.5 -
Total reorganization items. (47.8) 47.8 -
Loss before income taxes and
cumulative effect of change
in accounting principles.. (41.7) 29.5 (12.2)
Credit (provision) for income
taxes..................... 6.4 (7.5) (1.1)
Loss before cumulative effect
of changes in accounting
principles................ $ (35.3) $ 22.0 $ (13.3)
The above pro forma condensed financial information includes estimated
adjustments for the following items:
As a result of the implementation of the plan of reorganization and
adoption of fresh start reporting the company's 1989 Restructuring
Program will end effective March 31, 1994. Asset balances related to
the cement plants at Pryor, Oklahoma and Maryneal, Texas, which were
formerly included in assets held for sale have been reclassified to
the appropriate balance sheet captions. Operating results of these
operations are included in the pro forma consolidated operating
results for the year ended December 31, 1993.
The December 31, 1993 assets and liabilities which will be transferred
to a liquidating corporation for distribution for the benefit of
creditors, have been reclassified to assets held for sale. The
related operating results have been eliminated from the pro forma
statement of operations for the year ended December 31, 1993.
The December 31, 1993 cash and marketable securities and liabilities
subject to Chapter 11 proceedings balances have been adjusted to
reflect the expected payments to creditors, to the liquidating
corporation and to pay professional fees and other expenses. In
addition, liabilities to be assumed by the new company have been
reclassified to the appropriate balance sheet caption.
Finished goods inventories have been written up to their estimated net
selling prices less cost of disposal as required by fresh start
reporting.
Property, plant and equipment balances at December 31, 1993 have been
adjusted to reflect the estimated values of the assets under fresh
start reporting. Pro forma consolidated operating results for the
year ended December 31, 1993 have been adjusted to include the
estimated change in depreciation expense related to the new values.
The depreciation expense is subject to change based on appraisals of
individual assets.
The unamortized balances of intangible assets have been eliminated
from the pro forma December 31, 1993 balance sheet in accordance with
fresh start reporting requirements.
Long-term debt, including the senior unsecured notes of the
reorganized company and the secured notes of the liquidating company,
has been included in the pro forma consolidated balance sheet as of
December 31, 1993. The related interest expense has been included in
the pro forma statement of operations for the year ended December 31,
1993.
Common and preferred shareholders' equity of the old company has been
eliminated and replaced with common equity of the new company as of
December 31, 1993. The provision for preferred dividends for the year
ended December 31, 1993 has been eliminated from the statement of
operations. Warrants will be assigned a value based on an allocation
of equity.
The 1993 provision for litigation settlements has been eliminated.
All Chapter 11 reorganization items included in the pro forma
statement of operations for the year ended December 31, 1993 have been
eliminated.
The pension and postretirement benefits other than pensions
liabilities have been adjusted to the estimated present values of
future obligations including settlements reached with the Pension
Benefit Guaranty Corporation and retirees in accordance with the
requirements of fresh start reporting. The pro forma statement of
operations has been adjusted to reflect the reduction in expenses
resulting from the settlements.
4. Restructuring and Other Unusual Charges
In November 1989, the Board of Directors approved a restructuring
program which included the planned sale of certain facilities and
marginal businesses, interests in certain joint ventures, an
investment in preferred stock, surplus real estate, and certain other
assets, and resulted in a pre-tax provision of $311,500,000 in 1989.
The assets to be sold, including related current and other assets,
have been classified as assets held for sale in the accompanying
consolidated balance sheets at their then estimated net realizable
values (as revised in 1990).
Although progress had been 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. As a result, the company recorded
an additional restructuring charge of $63,400,000 which included
$8,200,000 to adjust the carrying value of the remaining assets held
for sale to their then current estimated net realizable value,
$14,400,000 for anticipated operating losses until disposition of the
assets, $24,200,000 for the estimated additional costs of
environmental cleanup actions and other costs associated with
operations to be disposed, and $16,600,000 for estimated losses on
other operations to be curtailed or disposed of and expenses
associated with company-wide cost reduction programs.
In 1991, the company received $29,166,000 in cash from the sale of the
following assets held for sale:
- - The company's Polymer-GraniteTM operation in Canada.
- - A note receivable related to the sale of the company's interest in
Pacific Coast Cement Corporation.
- - The company's remaining one percent interest in the Mountain Cement
Company joint venture.
- - A corporate airplane, barges and certain parcels of real estate.
In addition, the New Orleans cement plant lease was cancelled by the
lessee effective December 31, 1991. In January 1992, the company
began using the New Orleans silos and dock as a terminal for the Cape
Girardeau, Missouri cement plant. The terminal related asset balances
have been reclassified from assets held for sale to property, plant
and equipment as of December 31, 1991 (See Note 21).
In 1992, the company received $7,934,000 in cash from the sale of the
following assets held for sale:
- - A ready-mixed concrete and construction aggregates operation in
Massachusetts.
- - A concrete block operation in Tennessee.
- - Certain parcels of real estate.
In addition, the company reduced its prepetition debt and interest
obligation by $1,089,000 through the exchange of a parcel of land.
In 1993, the company received $9,206,000 in cash from the sale of the
following assets held for sale:
- - A portion of a former plant site in Kansas.
- - Certain parcels of real estate.
The assets carried on the company's books at December 31, 1993 as
assets held for sale include the cement plants at Pryor, Oklahoma; and
Maryneal, Texas; the company's interest in Lone Star Falcon, an owner
of a leased cement terminal in southern Texas; and various parcels of
surplus property.
The company is not actively marketing certain of the facilities which
were identified for sale in the 1989 restructuring program and, in
accordance with the confirmed plan of reorganization, the company will
retain certain of these operating facilities. Due to the uncertainty
at December 31, 1993 as to which of these assets, if any, would
ultimately be retained, these operations continued to be classified
as assets held for sale in the accompanying consolidated financial
statements. In accordance with its plan of reorganization, the
company intends to dispose of certain assets which were not previously
included in the company's restructuring program and are not currently
classified as assets held for sale in the accompanying consolidated
balance sheets.
Operating results related to assets held for sale included income of
$8,100,000 and $3,100,000 in 1993 and 1992 and losses in 1991 of
$1,800,000. The results from the operations held for sale were offset
by increases to restructuring and other unusual charges primarily
related to environmental monitoring, clean-up and legal costs
associated with the properties classified as assets held for sale.
5. Asset Dispositions
In March 1993, the company sold substantially all of the equipment and
inventory of Southern Aggregates for $721,000.
In September 1993, the company sold its 49.6% interest in Companhia
Nacional de Cimento Portland, a Brazilian joint venture, for
$69,629,000 in cash. A pre-tax loss of $37,335,000, offset by a tax
benefit of $12,500,000, was recognized on the transaction and is
included in reorganization items in the accompanying consolidated
statements of operations.
In September 1993, the company sold one of its cement terminals which
had been leased to a third party, for $812,000.
In August 1992, the company sold all the capital stock of Compania
Argentina de Cemento Portland, S.A. ("CACP") for $38,000,000 in cash.
CACP held a 50% interest in Cemento San Martin, S.A., a joint venture
in Argentina, and substantially all of the capital stock of Canteras
de Riachuelo, S.A., a crushed stone operation in Uruguay. The
transaction resulted in a pre-tax gain of $15,525,000 which is
included in reorganization items in the accompanying consolidated
statements of operations.
In December 1992, the company sold its 50% interest in LSM Concrete
Tie Company for $1,675,000.
In December 1991, the company sold all of the capital stock of
Compania Uruguaya de Cemento Portland, a producer of portland cement
in Uruguay, for $4,135,000. A pre-tax gain of $391,000 was recognized
on the transaction and is included in reorganization items in the
accompanying consolidated statements of operations.
The operations sold in 1993, 1992 and 1991 contributed the following
results for the years ended December 31, 1993, 1992 and 1991 through
their respective dates of disposition (in thousands):
1993 1992 1991
Net sales.................... $ 118 $ 1,339 $ 15,638
Joint venture income......... $ 9,745 $ 28,056 $ 12,695
Net income................... $ 4,564 $ 13,727 $ 5,133
6. Accounts and Notes Receivable
Receivables consist of the following (in thousands):
1993 1992
Trade accounts and notes receivable..... $ 37,185 $ 31,935
Other notes receivable.................. 299 1,566
Other receivables....................... 20,451 8,669
57,935 42,170
Less: Allowance for doubtful accounts... 8,913 8,033
$ 49,022 $ 34,137
Due to the nature of the company's products, a majority of the
company's accounts receivable are from businesses in the construction
industry. Although the company's customer base is geographically
diversified, collection of receivables is partially dependent on the
economics of the construction industry.
7. Inventories
Inventories consist of the following (in thousands):
1993 1992
Finished goods.......................... $ 20,277 $ 22,996
Work in process and raw materials....... 1,987 3,010
Supplies and fuel....................... 16,162 12,498
$ 38,426 $ 38,504
8. Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
1993 1992
Land.................................... $ 21,934 $ 21,243
Buildings and equipment................. 633,273 623,058
Construction in progress................ 4,116 6,737
Automobiles and trucks.................. 21,184 17,610
Other................................... 2,323 2,255
682,830 670,903
Less accumulated depreciation and
depletion.............................. 284,745 262,632
$ 398,085 $ 408,271
9. Interest Costs
Interest costs incurred during 1993, 1992 and 1991 were $1,832,000,
2,406,000, and $4,612,000, respectively. Interest capitalized during
1993, 1992 and 1991 was $195,000, $196,000 and $1,310,000,
respectively. Interest paid during 1993, 1992 and 1991 was $123,000,
$119,000 and $287,000, respectively. Contractual interest for 1993,
1992 and 1991 was $31,227,000, $31,914,000 and $33,357,000,
respectively. As discussed in Note 1 the filed companies have stopped
accruing interest on their unsecured prepetition debt.
10. Foreign Operations
The accompanying consolidated financial statements include the
following with respect to the company's operations in Argentina,
Brazil, Uruguay and Nova Scotia, Canada as of, and for the years
ended, December 31, 1993, 1992 and 1991 (in thousands):
1993 1992 1991
Current assets............... $ 8,515 $ 7,981 $ 8,149
Property, plant and equipment
net......................... 7,897 9,015 10,860
Investment in joint ventures:
Companhia Nacional de
Cimento Portland ("CNCP"). - 105,702 69,554
Other joint ventures....... - - 19,580
Other assets................. 2,292 1,773 1,825
Current liabilities.......... (1,592) (1,470) (1,078)
Net (payable) receivable from
Lone Star Industries........ (17,284) 22,375 (15,508)
Other liabilities............ - - (1,754)
Net assets................... $ (172) $ 145 376 $ 91,628
Net sales.................... $ 9,273 $ 9,799 $ 24,633
Joint venture income......... $ 9,745 $ 27,989 $ 12,276
Income before income taxes and
cumulative effect of change
in accounting principle..... $ 9,184 $ 43,599 $ 12,835
Income before cumulative
effect of change in
accounting principle........ $ 4,989 $ 32,019 $ 11,094
Cumulative effect of change
in accounting principle..... $ - $ 23,788 $ -
Net income................... $ 4,989 $ 55,807 $ 11,094
The company's 49.6% interest in Companhia Nacional de Cimento
Portland, ("CNCP") a Brazilian joint venture was sold in September
1993 for $69,629,000 and an after-tax loss of $24,835,000 was
recognized.
All of the capital stock of Compania Argentina de Cemento Portland,
S.A. ("CACP") was sold in August 1992 for $38,000,000 and a gain of
$15,525,000 was recognized. CACP held the company's 50% interest in
the Cemento San Martin, S.A. joint venture and substantially all of
the capital stock of Canteras de Riachuelo, S.A. The proceeds of
$38,000,000 is reflected in the above table in 1992 as a receivable
from Lone Star Industries. The cement operation in Uruguay was sold
in December 1991 for $4,135,000 and a gain of $391,000 was recognized.
The pre-tax gains and losses on the above sales are included in
reorganization items on the accompanying consolidated statements of
operations.
None of the company's foreign operations have filed for reorganization
under Chapter 11.
In 1992, the company and CNCP, its remaining international joint
venture at December 31, 1992, adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). The effect of the adoption of SFAS No. 109 on the financial
results of foreign operations for the year ended December 31, 1992 was
to decrease earnings by approximately $2,660,000. The cumulative
effect of the change in accounting principle as of January 1, 1992 was
an increase in earnings of $23,788,000.
The impact of the adoption of SFAS No. 109 on foreign operations, as
reflected in the above table, is limited to the effect on local income
taxes. For discussion of the effect of the adoption on consolidated
taxes, see Note 31.
11. Joint Ventures
The company's investment in and advances to joint ventures at December
31, 1993 and 1992 are as follows (in thousands):
1993 1992
RMC LONESTAR............................ $ 32,543 $ 25,950
Hawaiian Cement......................... 31,985 30,502
Kosmos Cement Company................... 24,149 25,774
CNCP.................................... - 105,702
Other joint ventures.................... (103) (54)
$ 88,574 $ 187,874
The amount of cumulative unremitted earnings of joint ventures
included in consolidated retained earnings at December 31, 1993, was
$22,194,000.
During 1993, 1992 and 1991, respectively, $15,294,000, $8,331,000 and
$12,512,000 in distributions were received from joint ventures.
None of the company's joint ventures have filed for reorganization
under Chapter 11.
Companhia Nacional de Cimento Portland ("CNCP")
CNCP was a joint venture formed in 1979 when the company and Lafarge
Coppee, S.A. combined substantially all of their Brazilian operations.
The company owned a 49.6% interest in the combined entity which
operates four cement plants and a grinding facility in Brazil.
Summarized financial information based on the consolidated financial
statements of CNCP as of and for the years ended December 31, 1993,
1992 and 1991 is as follows (in thousands):
1993 1992 1991
Current assets............... $ - $ 101,220 $ 57,034
Property, plant and equipment
net......................... - 149,989 150,340
Other assets................. - 7,013 6,002
Current liabilities.......... - (41,055) (21,631)
Other liabilities............ - (15,388) (64,203)
Net assets................... $ - $ 201 779 $ 127,542
Net sales.................... $ 50,967 $ 125,647 $ 96,327
Gross profit................. $ 24,729 $ 61,017 $ 28,101
Income before income taxes and
cumulative effect of change
in accounting principle..... $ 20,190 $ 51,423 $ 16,276
Income before cumulative
effect of change in
accounting principle........ $ 11,728 $ 29,765 $ 12,152
Cumulative effect of change
in accounting principle..... $ - $ 47,980 $ -
Net income................... $ 11,728 $ 77,745 $ 12,152
In September 1993, the company completed the sale of its 49.6% interest in
CNCP for $69,629,000. The above table includes results for CNCP for the
portion of the year in which the company recorded its proportional
share of income. The transaction resulted in a pre-tax loss of
$37,335,000 and a tax benefit of $12,500,000 which are included in
reorganization items and credit for income taxes in the accompanying
consolidated statements of operations.
At December 31, 1992 and 1991 the excess of the investment by the
company over its share of the underlying net tangible assets of CNCP
was $7,159,000 and $7,795,000, respectively, and was being amortized
over twenty-five years.
The effect of the adoption of SFAS No. 109 by CNCP in 1992 for the
year ended December 31, 1992, was to decrease local earnings by
approximately $5,400,000.
RMC LONESTAR
RMC LONESTAR is a partnership formed in 1987 at the time of the sale
of a 50% partnership interest in the company's ready-mixed concrete,
aggregates, cement terminals, building materials and trucking
operations in northern California. The partnership is leasing from
the company its cement manufacturing plant in Santa Cruz, California
at an annual rental of $10,048,000 through 1997 and $8,548,000 from
1998 through 2007. The excess of the average rent over the annual
rent paid during the initial years of the lease is included in the
company's investment and advances to joint ventures. The lease
contains a purchase option at the end of years ten, eleven and twenty
for the plant's then fair market value but not less than the plant's
then net book value. The carrying value of the plant at December 31,
1993, net of accumulated depreciation is $91,063,000.
Summarized financial information of RMC LONESTAR as of and for the
years ended December 31, 1993, 1992 and 1991 is as follows (in
thousands):
1993 1992 1991
Current assets............... $ 47,108 $ 43,090 $ 45,134
Property, plant and equipment
net......................... 162,134 172,771 183,345
Other assets................. 26,986 26,776 26,097
Payable to Lone Star
Industries.................. (11,833) (3,500) -
Current liabilities.......... (45,638) (36,700) (32,932)
Long-term debt............... (62,000) (83,000) (91,700)
Other liabilities............ (24,384) (24,870) (25,885)
Net assets................... $ 92,373 $ 94,567 $ 104,059
Net sales.................... $ 164,756 $ 159,054 $ 173,010
Gross profit................. $ 18,916 $ 19,127 $ 26,735
Pre-tax loss................. $ (6,930) $ (9,117) $ (3,597)
At December 31, 1993, 1992 and 1991, the company's share of the
underlying net assets of RMC LONESTAR exceeded its investment by
$41,477,000, $44,834,000 and $48,246,000, respectively, and is being
amortized over the estimated remaining life of the assets.
During 1993, the company advanced to RMC LONESTAR, $5,000,000 in cash,
received a promissory note for $5,833,000 of deferred rent payments,
and capitalized $2,500,000 of notes receivable from RMC LONESTAR,
resulting in a net payable to the company of $11,833,000 at December
31, 1993. The company expects to advance to RMC LONESTAR additional
funds in 1994.
Hawaiian Cement
Hawaiian Cement is a manufacturer of cement, ready-mixed concrete and
construction aggregates in Hawaii. The company has a 50% interest in
the entity.
Summarized financial information of Hawaiian Cement as of and for the
years ended December 31, 1993, 1992 and 1991 is as follows (in
thousands):
1993 1992 1991
Current assets............... $ 18,146 $ 22,964 $ 24,607
Property, plant and equipment
net......................... 69,701 69,593 64,435
Other assets................. 2,492 1,897 1,705
Current liabilities.......... (7,471) (7,237) (6,328)
Long-term debt............... (14,500) (21,000) (24,000)
Net assets................... $ 68,368 $ 66,217 $ 60,419
Net sales.................... $ 96,562 $ 108,067 $ 107,220
Gross profit................. $ 21,380 $ 22,821 $ 19,567
Pre-tax income............... $ 14,338 $ 15,890 $ 15,651
At December 31, 1993, 1992 and 1991, the company's share of the
underlying net assets of Hawaiian Cement exceeded its investment by
$2,199,000, $2,607,000 and $3,523,000, respectively and is being
amortized over the estimated remaining life of the assets.
Lone Star's interest in Hawaiian Cement is owned by subsidiaries of
Lone Star that have not filed for bankruptcy.
Cemento San Martin, S.A.("CSM")
CSM is a manufacturer of cement in Argentina. The company owned
through Compania Argentina de Cemento Portland ("CACP"), a wholly
owned subsidiary of the company, a 50% interest in CSM until August
1992.
Summarized financial information of CSM as of December 31, 1991 and
for the seven months ended July 31, 1992 and the year ended December
31, 1991 is as follows (in thousands):
1992 1991
Current assets.......................... $ - $ 15,788
Property, plant and equipment, net...... - 34,169
Other assets............................ - 1,432
Current liabilities..................... - (8,128)
Long-term debt.......................... - (2,857)
Net assets.............................. $ - $ 40,404
Net sales............................... $ 31,111 $ 48,225
Gross profit............................ $ 10,262 $ 19,132
Income before income taxes.............. $ 6,112 $ 9,665
Net income.............................. $ 4,473 $ 10,266
In August 1992, CACP was sold for $38,000,000. The transaction
resulted in a pre-tax gain of $15,525,000 which is included in
reorganization items in the accompanying consolidated statement of
operations.
In November 1991, CACP purchased 50% of the preferred stock of CSM for
$3,760,000. This was recorded as an increase in the company's
investment in joint ventures on the accompanying consolidated balance
sheet.
Kosmos Cement Company ("Kosmos")
Kosmos is a partnership with cement plants in Kosmosdale, Kentucky and
Pittsburgh, Pennsylvania, in which the company owns a 25% interest.
Summarized financial information of Kosmos as of and for the years
ended December 31, 1993, 1992 and 1991 is as follows (in thousands):
1993 1992 1991
Current assets............... $ 24,236 $ 28,268 $ 22,485
Property, plant and equipment
net......................... 74,713 75,327 79,718
Cost in excess of net assets
of businesses acquired...... 25,497 26,242 26,987
Current liabilities.......... (3,449) (4,165) (3,120)
Other liabilities............ (3,329) (96) (230)
Net assets................... $ 117,668 $ 125,576 $ 125,840
Net revenues................. $ 65,597 $ 62,769 $ 62,500
Gross profits................ $ 15,027 $ 13,545 $ 10,906
Income before cumulative effect
of change in accounting
principle................... $ 12,218 $ 7,736 $ 7,828
Cumulative effect of change in
accounting principle........ $ 3,126 $ - $ -
Net income................... $ 9,092 $ 7,736 $ 7,828
At December 31, 1993, 1992 and 1991, the company's share of the
underlying net assets of Kosmos Cement Company exceeded its investment
by $5,260,000, $5,619,000 and $6,049,000, respectively and is being
amortized over the estimated remaining life of the assets.
Other Joint Ventures
Other joint ventures at December 31, 1992 and 1991, includes the
company's 50% interest in LSM Concrete Tie Company.
Summarized financial information of other joint ventures in which the
company participates, none of which is of significant size
individually, as of and for the years ended December 31, 1992 and 1991
is as follows (in thousands):
1992 1991
Current assets.......................... $ - $ 3,008
Property, plant and equipment, net...... - 1,772
Other assets............................ - 20
Current liabilities..................... - (530)
Net assets.............................. $ - $ 4,270
Net revenues............................ $ 736 $ 9,768
Gross profits........................... $ 124 $ 1,335
Net income.............................. $ 75 $ 833
In December 1992, the company sold its interest in LSM Concrete Tie
Company for $1,675,000.
Investments in joint ventures included in the company's restructuring
program have been reclassified to assets held for sale and are
excluded from the above summarized financial information (See Note 4).
12. Cost in Excess of Net Assets of Businesses Acquired
Cost in excess of net assets of businesses acquired and accumulated
amortization are as follows (in thousands):
1993 1992
Cost in excess of net assets of businesses
acquired............................... $ 10,793 $ 10,859
Less accumulated amortization........... 1,520 1,200
$ 9,273 $ 9,659
13. Accounts Payable
Accounts payable consist of the following (in thousands):
1993 1992
Trade................................... $ 11,327 $ 12,331
Other................................... 4,752 1,786
$ 16,079 $ 14,117
Accounts payable balances as of the petition date have been classified
as liabilities subject to Chapter 11 proceedings on the accompanying
consolidated balance sheets (See Note 17).
14. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
1993 1992
Postretirement benefits other than
pensions............................... $ 11,432 $ 10,955
Insurance............................... 7,463 9,279
Professional fees....................... 8,352 7,389
Pensions................................ 6,684 6,687
Environmental matters................... 4,475 1,389
Taxes other than income taxes........... 3,309 4,158
Payroll and vacation pay................ 3,488 3,240
Other................................... 15,150 14,038
$ 60,353 $ 57,135
Accrued liabilities as of the petition date, except for those approved
for payment or those which the company believes will be paid in the
ordinary course of business in the following year, have been
classified as liabilities subject to Chapter 11 proceedings in the
accompanying consolidated balance sheets (See Note 17).
15. Other Current Liabilities
Other current liabilities consist of the following (in thousands):
1993 1992
Current portion of production payment... $ 2,000 $ 4,000
Income taxes payable.................... 1,227 -
$ 3,227 $ 4,000
Other current liabilities as of the petition date, except those
approved for payment or those which the company believes will be paid
in the ordinary course of business in the following year, have been
classified as liabilities subject to Chapter 11 proceedings in the
accompanying consolidated balance sheets (See Note 17).
16. Notes Payable to Banks
There were no outstanding notes payable to banks during 1993 or at
December 31, 1993 and 1992. The maximum aggregate notes payable to
banks at any month end was $1,894,000 during 1991; the average
borrowings were $800,000 during 1991; and the daily weighted average
interest rate on aggregate borrowings was 22.0% during 1991. The
unusually high interest rate of 22.0% for 1991 reflects interest
expense charged on local short-term borrowings at the Uruguayan
operations.
17. Liabilities Subject to Chapter 11 Proceedings
Liabilities subject to Chapter 11 proceedings at December 31, 1993 and
1992 consist of the following (in thousands):
1993 1992
Long-term debt.......................... $ 322,403 $ 323,526
Letters of credit....................... 66,678 66,982
Crosstie litigation settlement.......... 57,200 57,200
Other liabilities....................... 46,298 44,479
Accrued liabilities..................... 40,493 28,625
Pensions................................ 37,269 28,106
Accounts payable........................ 29,095 29,538
Accrued interest........................ 15,502 13,673
Production payment (See Note 20)........ 13,000 19,000
$ 627,938 $ 611,129
Long-term debt subject to compromise at December 31, 1993 and 1992
includes the following (in thousands):
1993 1992
8-3/4% Notes due 1992................... $ 150,000 $ 150,000
9-3/4% Promissory Notes due 1993 and 1994 90,000 90,000
9-1/2% Note due 1991.................... 50,000 50,000
9.9% Term-Loan due 1995................. 25,000 25,000
Pollution Control, Industrial Development
and Industrial Revenue Bonds due 1991-
2008................................... 6,365 7,465
Other notes and debentures.............. 1,038 1,061
$ 322,403 $ 323,526
Letters of credit (used to insure payment of certain pollution
control, industrial development and industrial revenue bonds) have
been drawn down by the related debt holders. Liabilities for letters
of credit which have been drawn down are considered to be unsecured
liabilities subject to compromise and, as such, interest is no longer
accrued. Letters of credit which support debt with principal amounts
totalling $64,278,000 at December 31, 1993 do not contain a
contractual provision for interest. No interest for these liabilities
has been included in the reported contractual interest expense for the
years ended December 31, 1993, 1992 and 1991.
The filed companies stopped accruing interest on all of their
unsecured debt as of the petition date. The amount of interest not
accrued but considered to be part of contractual interest for the
years ended December 31, 1993, 1992 and 1991 was $29,592,000,
$29,704,000 and $30,055,000, respectively.
At the petition date, all liabilities subject to Chapter 11
proceedings were considered to be liabilities subject to compromise.
The company has determined that only a small portion of its
prepetition obligations are, in fact, fully secured. Consequently,
all liabilities subject to Chapter 11 proceedings continue to be
considered liabilities subject to compromise.
Interest expense, primarily related to the production payments, of
$1,832,000, $2,401,000 and $4,394,000 has been accrued for the years
ended December 31, 1993, 1992 and 1991, respectively.
The company reached an agreement, with Bankruptcy Court approval in
April 1992, with two banks which jointly issued a significant portion
of the letters of credit whereby the banks agreed not to assert any
claims for interest during the post-petition period on $45,329,000 of
prepetition debt obligations.
During 1991, the company continued the process of identifying all
prepetition claims. As a result, additional items were reclassified
as liabilities subject to Chapter 11 proceedings. In addition, the
company recorded accruals totalling $5,838,000 for the year ended
December 31, 1991, for estimated claims related to rejected executory
contracts. The bar date for filing claims in the company's bankruptcy
was October 15, 1991. Claims filed by creditors and scheduled by the
filed companies, excluding intercompany claims of $870,000,000 and
claims for which amounts were not specified ("unliquidated claims"),
totalled $1,742,000,000. To date, claims for approximately
$1,110,000,000 have been objected to by the company and expunged by
the Bankruptcy Court. The remaining total resolved and unresolved
claims amount to approximately $570,000,000. Unresolved claims will
be handled in accordance with the plan of reorganization and
Bankruptcy Court procedures. Estimation proceedings, if necessary,
will be completed prior to the plan becoming effective and a portion
of the distribution to creditors will be withheld pending final
resolution of these claims.
Certain pollution control and industrial development and industrial
revenue bonds are backed by letters of credit purchased by the company
and which can be drawn upon in the event the company fails to make
payments due on the bonds. In accordance with the underlying
agreements, letters of credit totalling $66,678,000 at December 31,
1993 are considered to have been drawn upon as of that date. Once the
letters of credit are drawn upon, the amounts drawn constitute
unsecured claims and interest is no longer being accrued.
18. 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 years ended December 31, 1993, 1992 and 1991, include the
following (in thousands):
1993 1992 1991
Professional fees and
administrative expenses..... $ (15,572) $ (8,546) $ (5,766)
Interest income.............. 5,102 4,500 4,219
Rejected executory contracts. - - (5,838)
(10,470) (4,046) (7,385)
Gain/(loss) on sale of assets (37,335) 15,525 391
$ (47,805) $ 11,479 $ (6,994)
Professional fees and administrative expenses related to the filed
companies' Chapter 11 proceedings are expensed as incurred. Interest
income represents interest earned on cash accumulated as a result of
the Chapter 11 proceedings. The loss on the sale of assets in 1993
represents the pre-tax loss on the sale of the company's 49.6%
interest in Companhia Nacional de Cimento Portland. The gain on sale
of assets in 1992 represents the pre-tax gain on the sale of the
capital stock of Compania Argentina de Cemento Portland, S.A. (See
Note 5).
19. Long-term Debt
Due to the Chapter 11 proceedings, the filed companies are in default
under their financing agreements. Long-term debt subject to
compromise has been classified as liabilities subject to Chapter 11
proceedings in the accompanying consolidated balance sheets (See Note
17).
20. Production Payment
The company entered into a production payment arrangement concerning
specific limestone reserves located adjacent to two cement plants, and
pursuant to the terms of the document, is obligated to extract and
process those reserves into cement for the purchaser free and clear
of all expenses. The purchaser is also entitled to receive the income
from mining, or specific fixed payments, whichever is less. The
proceeds have been deferred and are being reflected in income,
together with related costs and expenses, as the limestone is produced
into cement and the cement is sold. An amount equivalent to interest,
which is expensed currently, is payable by the company at a maximum
rate of prime plus 1/4% through 1990 and prime plus 1/2% through
maturity. The company is presently accruing interest on the unpaid
balance at the penalty rate of three-month LIBOR plus 1 3/4%.
One of the cement plants involved in the processing of the reserves
was included in the company's restructuring program but which, in
accordance with the plan of reorganization, is expected to be retained
by the company. The December 31, 1993 production payment balance is
$15,000,000. The non-current principal amount of $13,000,000 and
unpaid interest of $6,817,000 are included in liabilities subject to
Chapter 11 proceedings in the accompanying consolidated balance sheets
(See Notes 1 and 17). In accordance with the final settlement with
the production payment creditors, reorganized Lone Star will assume
this liability at the modified terms included in the settlement. The
company will make a payment of $2,000,000 in 1994. Accordingly, this
amount is included in other current liabilities in the accompanying
consolidated balance sheets.
21. Leases
Net rental expense in 1993, 1992 and 1991 was $5,888,000, $6,325,000
and $6,653,000, respectively. Minimum rental commitments under all
non-cancelable leases principally pertaining to land, buildings and
equipment are as follows: 1994-$5,427,000; 1995-$4,674,000; 1996-
$640,000; 1997-$531,000; 1998-$522,000; after 1998-$450,000. Certain
leases include options for renewal or purchase of leased property.
In accordance with the provisions of the Bankruptcy Code, the company
rejected certain executory contracts and leases in 1991 (See Note 17).
A total of $3,212,000 has been accrued related to rejected leases and
is included in prepetition liabilities in the accompanying
consolidated balance sheets.
A subsidiary of the company is leasing its Florida cement plant for
approximately twenty years at a current annual rental of $2,500,000.
The lease can be cancelled at the end of 1999 upon written notice by
the lessee. The lease contains an option that allows the lessee to
purchase the cement plant at the end of the lease term at the assets'
then fair market value. The carrying value of the plant at December
31, 1993, net of accumulated depreciation was $31,335,000.
22. Redeemable Preferred Stock
At December 31, 1993, 1992 and 1991, the company had 375,000 shares
outstanding of its $13.50 cumulative convertible redeemable preferred
stock originally issued for $37,500,000.
In accordance with the provisions of the preferred stock issue,
holders of the stock are entitled to receive cumulative cash dividends
of $13.50 per share annually, payable quarterly. Under a mandatory
sinking fund provision, the company is required to redeem one-fifth
of the shares annually, beginning in September 1992 at $100 per share.
Mandatory redemption can be satisfied with the company's common stock,
at its option. Each share of $13.50 preferred stock is convertible
into 2.546 shares of common stock, subject to adjustment in certain
events. As a result of the Chapter 11 filings, the company is unable
to comply with terms related to mandatory redemption of the preferred
stock and the payment of dividends. The company stopped accruing
preferred dividends as of the last payment date, September 15, 1990.
The dividends are, however, used in computing net loss per common
share. The total of dividends in arrears on the $13.50 preferred
stock at December 31, 1993 was $16,671,000. The aggregate amount of
such dividends must be paid before any dividends are paid on the
common stock. As of December 31, 1993, thirteen quarterly dividend
payments have not been made.
The redeemable preferred stock will be cancelled upon the plan of
reorganization becoming effective.
23. Non-Redeemable Preferred Stock
Authorized: 3,500,000 shares of $4.50 cumulative convertible preferred
stock, par value $1.00 per share. Transactions in non-redeemable
preferred stock are as follows (dollars in thousands):
$4.50
Shares Value
Balance December 31, 1990..................... 12,054 $ 271
Conversions of stock.......................... (679) (15)
Balance December 31, 1991..................... 11,375 256
Conversions of stock.......................... (176) (4)
Balance December 31, 1992..................... 11,199 252
Conversions of stock.......................... (179) (4)
Balance December 31, 1993..................... 11,020 $ 248
Each share of $4.50 preferred stock (stated value $22.50 per share)
is convertible into four shares of common stock. Such stock is
callable at the option of the company. The $4.50 non-redeemable
preferred stock is entitled, upon involuntary liquidation, to $100 per
share, or $1,102,000 which is $854,000 in excess of the carrying
value.
In accordance with the provisions of the preferred stock issue,
holders are entitled to receive cumulative cash dividends of $4.50 per
share annually, payable quarterly. As a result of the Chapter 11
filings, the company is unable to make any dividend payments. The
company stopped accruing preferred dividends as of the last payment
date, September 15, 1990. The dividends are, however, used in
computing net loss per common share. The total of dividends in
arrears on the $4.50 preferred stock at December 31, 1993 was
$167,000. The aggregate amount of such dividends must be paid before
any dividends are paid on the common stock. As of December 31, 1993,
thirteen quarterly dividend payments have not been made.
The non-redeemable preferred stock will be cancelled upon the plan of
reorganization becoming effective.
24. Common Stock
Authorized: 25,000,000 shares of common stock, par value $1.00 per
share. Transactions in common stock are as follows:
Common Treasury
Shares Shares
Balance December 31, 1990............. 18,098,587 1,538,810
Conversions of preferred stock........ 2,716 -
Issuance of treasury stock............ - (58,416)
Balance December 31, 1991............. 18,101,303 1,480,394
Conversions of preferred stock........ 704 -
Issuance of treasury stock............ - (22,223)
Balance December 31, 1992............. 18,102,007 1,458,171
Conversions of preferred stock........ 716 -
Balance December 31, 1993............. 18,102,723 1,458,171
At December 31, 1993, the company has reserved 4,572,484 shares of its
authorized but unissued common stock for possible future issuance in
connection with conversions of the $4.50 non-redeemable preferred
stock (44,080 shares), $13.50 redeemable preferred stock (954,750
shares), and the exercise of stock options (3,572,938 shares). The
payment of cash dividends on common stock is not permitted as the
company is in default under its financing agreements and as a result
of the Chapter 11 filings.
In May 1991, the company began using treasury shares for the purchase
by employees of Lone Star common stock under the Lone Star Employee
Stock Purchase Plan and to meet its related matching contributions.
The plan was terminated as of March 16, 1992.
The common stock will be cancelled upon the plan of reorganization
becoming effective.
25. Shareholder Rights Plan
In June 1988, the company adopted a Shareholder Rights Plan in which
preferred stock purchase rights ("Rights") were distributed as a
dividend to common shareholders as of the close of business on June
22, 1988.
The Shareholder Rights Plan provides that under certain circumstances
each Right will entitle the holder to purchase one-hundredth of a
share of Series A Junior Participating Preferred Stock par value $1.00
per share at an exercise price of $100 per Right. Upon exercise, each
holder of a Right will also have the right to receive common stock (or
a package of other Lone Star securities and/or cash) having a value
equal to two times the exercise price of the Right. Unless redeemed,
the Rights become exercisable if a person or group acquires 20% or
more of the outstanding shares of common stock or commences a tender
or exchange offer which would result in the ownership of 20% or more
of the outstanding common stock. The Rights also become exercisable
if a person or group acquires 15% or more of the outstanding common
shares and the non-officer members of the Board of Directors determine
that the owner of such shares is an "adverse person" because such
ownership is likely to have a material adverse impact on the company,
or that such ownership is intended to cause the company to purchase
those persons' common stock, or to enter into transactions intended
to provide short-term gain to such persons when the Board of Directors
determines the long-term interests of the company and its stockholders
would not be served by such transaction. The Rights Plan is designed
to deter coercive or unfair takeover tactics and to prevent an
acquirer from gaining control of the company without offering a fair
price to all shareholders. The rights expire on June 22, 1998 unless
redeemed prior to that date. As of December 31, 1993, there were
16,644,552 Rights outstanding. The Shareholder Rights Plan will be
cancelled upon to the plan of reorganization becoming effective.
26. Stock Options
Transactions in options outstanding and exercisable as of and for the
years ended December 31, 1993, 1992 and 1991 are as follows:
Option
Exercise Options Options
Price Outstanding Exercisable
Balance December 31, 1990 $13.50 -$35.625 3,008,127 3,008,127
Options granted......... 5.00 100,000 -
Options expired or
cancelled............... 13.50 - 35.625 (2,328,921)(2,328,921)
Balance December 31, 1991 5.00 - 35.625 779,206 679,206
Options which became
exercisable............. 5.00 - 100,000
Options expired or
cancelled............... 13.50 - 35.625 (85,715) (85,715)
Balance December 31, 1992 5.00 - 35.625 693,491 693,491
Options expired or
cancelled............... 13.50 - 35.625 (22,750) (22,750)
Balance December 31, 1993 $ 5.00 -$35.625 670,741 670,741
Options available for future grants were 2,902,197 at December 31,
1993 and 2,879,447 at December 31, 1992. All existing stock options
have been cancelled in accordance with the confirmed plan of
reorganization.
27. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and short-term investments - the carrying amount approximates
fair value because of the short maturity of those instruments.
Note receivable - a non-trade note receivable is carried at its
expected recoverability which is estimated by using the present value
of future cash flows discounted at a rate appropriate with the credit
risk involved. It is not practicable to estimate the fair value of
this note.
Long-term debt - the fair value of the company's long-term debt is not
presently determinable due to the company's Chapter 11 proceedings.
The plan of reorganization has been confirmed and the holders of long-
term debt will receive cash, senior unsecured notes, secured notes of
the liquidating company and common stock in reorganized Lone Star (See
Note 3).
28. Other Income, Net
Other income, net, consists of the following (in thousands):
1993 1992 1991
Rental income................ $ 8,817 $ 8,910 $ 9,793
Interest on income tax refund - 3,051 -
Other interest income........ 1,080 942 3,201
Interest income on
investments................. 159 227 1,186
Other, net................... 1,182 694 567
$ 11,238 $ 13,824 $ 14,747
29. Pension Plans
The company sponsors a number of defined benefit retirement plans
which cover substantially all employees. Defined benefit plans for
salaried employees provide benefits based on employees' years of
service and average compensation. Defined benefit plans for hourly
paid employees generally provide benefits of stated amounts for
specified periods of service. The company's policy is to fund at
least the minimum amount required under ERISA in accordance with
appropriate actuarial assumptions.
Net periodic pension cost of defined benefit plans for 1993, 1992 and
1991 included the following components (in thousands):
1993 1992 1991
Interest cost................ $ 10,236 $ 9,987 $ 10,048
Service cost - benefits
during the period........... 1,363 1,266 1,289
Actual return on plan assets. (11,913) (6,432) (5,360)
Net amortization and deferral 3,404 (2,129) (3,974)
Net pension cost............. $ 3,090 $ 2,692 $ 2,003
During 1991, the company recognized pre-tax settlement and curtailment
gains of approximately $828,000. The gains primarily resulted from
the transfer to other pensions trusts of assets and liabilities of
certain salaried and hourly plans related to joint ventures.
The following table presents the plans' funded status and amounts
recognized in the accompanying consolidated balance sheets at December
31, 1993 and 1992 (in thousands):
December 31, 1993 December 31, 1992
Over- Under- Over- Under-
funded funded funded funded
Plans Plans Plans Plans
Actuarial present value of
benefit obligations:
Vested benefits........ $ 333 $142,642 $ 31,424 $ 89,206
Non-vested benefits.... - 3,205 833 317
Accumulated benefit
obligation.............. $ 333 $145,847 $ 32,257 $ 89,523
Projected benefit
obligation.............. $ 333 $148,729 $ 35,599 $ 89,523
Plan assets at fair value 337 103,191 36,418 58,806
Projected benefit
obligation (in excess of)
or less than plan assets 4 (45,538) 819 (30,717)
Unamortized net asset at
January 1, 1987......... (64) (1,366) (74) (1,613)
Unamortized prior service
cost ................... - (3,161) (5,195) 1,655
Adjustment required to
recognize minimum
liability............... - (22,594) - (11,440)
Unrecognized net loss
(gain).................. 185 28,589 (266) 12,049
Pension asset/(liability) $ 125 $(44,070) $ (4,716) $(30,066)
The weighted average discount rates of 7.0% and 8.5% in 1993 and 1992,
respectively, and the rate of annual increase in future compensation
levels of 5.5% in both 1993 and 1992, were used in determining the
actuarial present values of the projected benefit obligation. The
expected long-term rates of return on plan assets were 8.0% and 9.0%
for 1993 and 1992, respectively.
Certain union employees are covered under multi-employer defined
benefit plans administered under collective bargaining agreements.
Multi-employer pension expenses and contributions to the plans in
1993, 1992 and 1991 were approximately $300,000, $400,000 and
$500,000, respectively.
The assets of certain of the company's various employee pension plan
trust funds are maintained for investment purposes in a master trust,
held by The Northern Trust Company. In 1983, the master trust
purchased four operating properties from the company for the benefit
of participating pension plans, and leased back partial use of the
properties to the company. As a result of various transactions, by
1987 only one property continued to be leased to a party in interest
with respect to the master trust under circumstances that may result
in a prohibited transaction under ERISA and the Internal Revenue Code
(as no longer meeting the "geographical diversity" test for "Qualified
Employer Real Property" governing transactions between a company and
its pension plans). As a result, in December 1988, the company filed
a request with the Department of Labor for an administrative exemption
from the prohibited transaction restrictions of ERISA and the Internal
Revenue Code. In furtherance of its application for exemption and as
requested by the Department of Labor, the company appointed an
independent fiduciary for the property. The company's December 1990
bankruptcy filing delayed the exemption request. The company has
reached an agreement, subject to Bankruptcy Court and Department of
Labor approval, with the fiduciary and the master trust whereby the
company will contribute additional cash to the pension plan. In
addition, the company has reached an agreement with the Pension
Benefit Guaranty Corporation ("PBGC") whereby the company will settle
the PBGC's claim in its bankruptcy proceedings by contributing
additional cash to the pension plan and secure future obligations by
granting to the PBGC a mortgage on the Oglesby plant, and a security
interest in the Kosmos Cement Company partnership.
In 1993 and 1992, as required by Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions", the company
recorded an additional pension liability, totalling $22,594,000 and
$11,440,000 at December 31, 1993 and 1992, respectively, to reflect
the excess of accumulated benefits over the fair value of pension plan
assets. To the extent that these additional liabilities exceeded
related unrecognized prior service cost, the increase in liabilities
was charged directly to shareholders' equity.
30. Postretirement Benefits Other than Pensions
The company provides retiree life insurance and health plan coverage
to employees qualifying for early, normal or disability pension
benefits under the company's salaried employees pension plan and
certain of the pension plans providing for hourly-compensated
employees. Life insurance protection presently provided to retirees
under the salaried employees pension plan is one-half their active
employment coverage declining to 25% of their active employment
coverage at age 70. The coverage provided under hourly plans is
fixed, as provided under the terms of the plans. Health care coverage
presently is extended to retirees and their qualified dependents
during the retirees' lifetime. The coverage provided assumes
participation by the retiree in the Medicare program and benefit
payments are integrated with Medicare benefit levels. The company's
postretirement benefit plans other than pension plans are not funded.
Claims are paid as incurred.
Benefits paid were approximately $9,444,000, $9,600,000 and
$10,400,000 for the years ended December 31, 1993, 1992 and 1991. The
cost of these benefits, net of liabilities recorded related to
acquisitions, was expensed as claims were paid and approximated
$8,900,000 for the year ended December 31, 1991.
As of January 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" ("SFAS No. 106"). In
accordance with the requirements of the statement, the company has
changed its accounting for postretirement benefits from a cash basis
to an accrual basis over an employee's period of service, and has
recognized the full liability as of the adoption date. The cumulative
effect of the change in accounting principle resulted in a pre-tax
charge of $144,654,000 offset by tax benefits of $14,144,000 for a net
after-tax charge of $130,510,000 or $7.84 per share. The effect of
adoption of SFAS No. 106 on 1992 operating results was to decrease
earnings by approximately $3,919,000 or $0.24 per share.
Net periodic postretirement benefit cost for 1993 and 1992 included
the following components (in thousands):
1993 1992
Service cost - benefits attributed to
service during the period.............. $ 1,912 $ 1,704
Interest cost on accumulated
postretirement benefit obligation...... 12,341 11,854
Net periodic postretirement benefit cost $ 14,253 $ 13,558
The actuarial and recorded liabilities for these postretirement
benefits, none of which have been funded, are as follows at December
31, 1993 and 1992 (in thousands):
1993 1992
Accumulated postretirement benefit obligation:
Retirees............................... $ 120,716 $ 109,306
Fully eligible active plan
participants........................... 25,789 21,142
Other active plan participants......... 24,777 18,125
Accumulated postretirement benefit
obligation............................. 171,282 148,573
Unamortized prior service cost.......... 2,613 -
Unrecognized net loss................... (20,513) -
Accrued postretirement benefit cost..... 153,382 148,573
Less current portion.................... 11,432 10,955
Long-term accrued post-retirement benefit
cost................................... $ 141,950 $ 137,618
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% and 8.5% for 1993 and 1992,
respectively. Compensation levels are assumed to increase at a rate
of 5.5% annually.
For measurement purposes, a 17% and 11% annual medical rate of
increase was assumed for 1993 for pre-medicare and post-medicare
claims, respectively; the rate was assumed to decrease 1% each year
to 6% per year after 2002 for pre-medicare claims, and decrease 1/2%
per year to 6% after 2000 for post-medicare claims. The health care
cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, increasing the assumed health care cost
trend rates by 1 percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1993
by approximately $13,200,000 and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost
for the year ended December 31, 1993 by approximately $1,200,000.
In the first quarter of 1993, the Kosmos Cement Company partnership,
in which the company owns a 25% interest, adopted SFAS No. 106. As
a result, the company recognized a charge of $782,000 or $0.05 per
share representing its share of the partnership's cumulative effect
of the change in accounting principle.
Two other domestic joint ventures are not required to adopt SFAS No.
106 until 1995. The effect of adoption of SFAS No. 106 by each of the
joint ventures is not presently determinable.
The company has reached a settlement with the salaried retirees and
an agreement in principle with the union employees with respect to
reductions and modifications of existing retiree medical and life
insurance benefits. The company expects to finalize the agreement in
principle prior to the plan of reorganization becoming effective.
The liability related to postretirement benefits at December 31, 1993
does not reflect the results of any of these agreements.
31. Income Taxes
In 1992, the company and its Brazilian joint venture (CNCP - See Note
10) adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), effective January 1,
1992. The cumulative effect of the change in accounting principle as
of January 1, 1992 was an increase in earnings of $11,596,000. The
effect of the adoption of SFAS No. 109 on financial results for the
year ended December 31, 1992 was to increase the company's share of
CNCP's income tax expense by approximately $2,660,000, and decrease
domestic income tax expense by approximately $399,000, resulting in
a net decrease of approximately $2,261,000 or $.14 per share.
In 1991, the company's international joint ventures had adopted
Statement of Financial Accounting Standards No. 96, "Accounting for
Income Taxes" ("SFAS No. 96") with retroactive application to all
prior periods.
(Provision) credit for income taxes consists of the following (in
thousands):
1993 1992 1991
Federal:
Current.................... $ (1,541) $ - $ -
Deferred:
Difference between tax and
book depreciation........ (3,320) 1,700 2,244
Investment and other credits 635 - -
Net operating loss
carryforward............. (6,209) 3,217 6,779
Restructuring............. 3,132 7,820 (6,870)
Sale of international
joint venture............ 26,093 6,014 -
Valuation allowance....... (17,961) (15,422) -
Other, net................ (1,735) (3,329) 646
Total deferred............... 635 - 2,799
Total federal................ (906) - 2,799
Foreign:
Current.................... - (374) (1,422)
Deferred tax on unremitted
foreign earnings.......... 12,132 (2,246) (979)
Total foreign................ 12,132 (2,620) (2,401)
State and local:
Current.................... (621) (300) (240)
Deferred................... (59) - 82
Total state and local........ (680) (300) (158)
Joint venture taxes.......... (4,195) (11,558) (1,741)
$ 6,351 $ (14,478) $ (1,501)
The company has investment tax credit carryforwards for federal income
tax purposes of $15,610,000 which expire at various dates through
2001. The company also has regular tax net operating loss
carryforwards of approximately $105,122,000 which expire at various
dates through 2007 and an alternative minimum tax credit carryforward
of $4,682,000. The Internal Revenue Code of 1986, as amended (the
"Code"), imposes limitations under certain circumstances on the use
of carryforwards upon the occurrence of an "ownership change" (as
defined in Section 382 of the Code). An "ownership change" will
result from the issuance of equity securities by the company as part
of its Plan of Reorganization (See Note 35). Such an "ownership
change" could limit the use or continued availability of the company's
carryforwards.
Under SFAS No. 109, a portion of these carryforwards has been used for
financial purposes to offset the tax effect of temporary differences
between book carrying values and tax basis of certain assets which
will reverse during the carryforward period.
The following is a schedule of consolidated pre-tax loss and a
reconciliation of income taxes computed at the U.S. statutory rate to
the provision (credit) for income taxes (in thousands):
1993 1992 1991
Loss before income taxes and
cumulative effect of changes
in accounting principles.... $ (41,609) $ (30,950) $ (4,046)
Tax benefits computed at
statutory rates............. 14,563 10,523 1,376
(Decreases) increases resulting
from:
Foreign subsidiaries, net... 397 79 15
Corporate joint ventures.... 9,405 (9,358) (2,734)
Restructuring............... - - -
State tax, net.............. (680) (300) (158)
Other....................... 627 - -
Valuation allowance......... (17,961) (15,422) -
$ 6,351 $ (14,478) $ (1,501)
The components of net deferred tax assets (liabilities) as of December
31, 1993 and 1992 are as follows (in thousands):
1993 1992
Current tax assets related to:
Reserves........................ $ 3,083 $ 9,876
Miscellaneous................... 7,196 6,486
10,279 16,362
Non-current tax assets related to:
Reserves not yet deducted....... 47,777 37,283
Reserve for retiree benefits.... 53,154 49,182
Loss carryforwards.............. 36,793 43,002
Investment credits.............. 15,610 15,610
Alternative minimum tax credits. 4,682 4,047
Miscellaneous................... 8,691 7,976
166,707 157,100
Non-current tax liabilities related to:
Fixed assets.................... (72,574) (69,254)
Domestic joint ventures......... (18,336) (10,636)
International joint ventures.... - (26,093)
(90,910) (105,983)
Valuation allowance............... (85,441) (67,479)
Net federal tax asset............. 635 -
Foreign taxes..................... - (12,132)
State & other..................... (3,991) (3,480)
Net deferred...................... $ (3,356) $(15,612)
Income taxes paid during 1993, 1992 and 1991 were $1,038,000, $637,000
and $2,571,000, respectively.
32. 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
sold 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
waste fuels at two of its cement manufacturing plants and this process
involves permitting and compliance 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 could effectively
prohibit the use of, or make prohibitive the cost of using, waste
fuels, thus depriving the company of the savings. On February 22,
1994, the United States Court of Appeals for the District of Columbia
Circuit (i) vacated and remanded a standard promulgated by the U.S.
Environmental Protection Agency ("U.S. EPA") for ascertaining the
presence of products of incomplete combustion, specifically in wet
process cement kilns that burn hazardous waste fuels, ruling that the
standard had been promulgated without sufficient notice, but (ii)
upheld related non-specific standards as applicable to wet kilns.
Unless the Court's decision is reversed or a modification of the
remanded standard is adopted by U.S. EPA, the company's Greencastle,
Indiana cement plant may have to cease or curtail its use of hazardous
waste fuels. The company, with other cement producers, plans to file
a motion for reconsideration including a stay of the effect of the
remand pending a final decision. Meanwhile, the company is discussing
with U.S. EPA modifications of the remanded standard that would make
it possible for plants like the Greencastle plant to continue to burn
hazardous waste fuels. The Court's ruling does not affect the 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 September 1993, U.S. EPA, Region V, commenced
an administrative enforcement action alleging violations of certain
requirements of RCRA, against the company regarding the use of
hazardous waste fuels at its Greencastle, Indiana cement plant and
seeking civil penalties totaling over $3,800,000 and certain
affirmative injunctive relief. The action against the company is one
of thirty such actions (against a number of entities) brought as part
of an EPA Headquarters Enforcement Initiative seeking aggregate fines
in excess of $19,800,000. The company has negotiated a Consent
Agreement and Final Order with the agency, subject to Bankruptcy Court
approval, whereby it will pay a total of $315,000 in civil penalties
and will not be subject to specific injunctive relief beyond complying
with regulations. The company is also entering into a consent order,
subject to Bankruptcy Court approval, with state environmental
authorities relating to alleged violations of state regulations
regarding the handling of waste fuels at the Greencastle plant.
The Bevill Amendment to the federal Resource Conservation and Recovery
Act, as amended ("RCRA"), 42 U.S.C. Sec. 6901, et seq., which relates
to environmental management of cement kiln dust, a by-product of
cement manufacturing, is currently under review by the U.S.
Environmental Protection Agency ("U.S. EPA") and may be substantially
altered. It is impossible at this point to predict with accuracy what
increased costs (or range of costs), if any, changes in the regulation
of CKD disposal 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 (known as "CERCLA" or the
"Superfund Act"). These include sites located: in Utah (seven sites,
including three NPL sites discussed below); Indiana (one NPL site);
Texas (three sites, including one NPL site); Massachusetts (one non-
NPL site); Missouri (one NPL site); Washington (two NPL sites);
Minnesota (two sites, including one NPL site and one non-NPL site
described below); 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) and Mississippi (one non-NPL site
described below).
Except for the Utah NPL site 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. In addition, the company has
notified relevant federal and state environmental agencies of its
Chapter 11 bankruptcy filing, providing them an opportunity to file
claims by the bar date of October 15, 1991. Except for the Utah
sites, no claims were filed by the agencies with respect to NPL sites,
none of which are owned or leased by the company or its subsidiaries.
A number of PRP's also filed bankruptcy claims 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 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 VIII that
it was a PRP under CERCLA with respect to three adjoining sites in
Salt Lake City, Utah on which CKD from the company's Utah cement plant
had been deposited and in July 1990, the EPA and the Utah Department
of Health issued a record of decision selecting a remedial action
(Operable Unit One) 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 agreement with the U.S. Department of Justice, the State
of Utah and certain county authorities regarding a settlement of
outstanding claims relating to CKD deposits at all Utah sites
(including three non-NPL sites) pursuant to which 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 is subject to review by higher level authorities in the
respective governmental agencies and to approval by the Federal
District Court in Utah 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
will receive general unsecured claims in the company's bankruptcy
proceedings and all their claims against the company will be dismissed
with prejudice, subject to the landowners' reaching settlements with
EPA and the State, negotiation of which is in the final stages.
The total amount of general unsecured claims reserved for and
attributable to settlement and discharge in bankruptcy for these NPL
sites, as well as certain non-NPL sites in Utah where CKD was
deposited, is not expected to exceed $20,000,000.
In a transaction in the early 1970's, the company acquired
subsidiaries that conducted woodtreating or wood-dipping operations
at two sites in Florida and one site in Minnesota. 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 commenced by private parties.
In 1992, pursuant to an Administrative Order on Consent with U.S. EPA,
Region IV, entered into prior to its Chapter 11 filing, a clean up
of soils and water in excavated areas at the Dania, Florida site was
completed by a debtor-subsidiary of the company and approved by EPA
in 1992. The subsidiary is negotiating a stipulation with the State
of Florida Department of Environmental Protection (which filed a claim
in the company's bankruptcy proceedings) committing to undertake a
groundwater monitoring program and, if necessary, groundwater
treatment in exchange for the State's withdrawing its bankruptcy
claim.
In 1992, pursuant to a stipulation in Florida state court, executed
prior to its Chapter 11 filing, a debtor-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. The subsidiary has
been conducting negotiations with state and county environmental
authorities regarding entry into a consent decree whereby the
subsidiary would commit to undertake a groundwater monitoring program
and, if necessary, groundwater treatment, in return for withdrawal of
bankruptcy claims and a specified monetary cap on future clean-up
liability.
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 claims against
the subsidiary, an intermediate debtor-subsidiary and the company in
the bankruptcy proceedings. The subsidiary is conducting settlement
negotiations with the PRP's pursuant to which they will reimburse the
subsidiary for a portion of its clean-up costs and dismiss their
federal court and bankruptcy claims with prejudice and the subsidiary
will dismiss its federal court claims against them with prejudice.
The purchaser of a former woodtreating site located in Minneapolis,
Minnesota, from a non-debtor subsidiary of the company has invoked an
indemnification given by the subsidiary and guaranteed by the company
with respect to third-party claims against the purchaser for alleged
groundwater contamination purportedly caused by woodtreating chemicals
used by the subsidiary. In late 1993, the parties entered into an
agreement, approved by the Bankruptcy Court, pursuant to which the
purchaser will receive a general, unsecured claim in the amount of
$3,400,000 in the company's bankruptcy proceedings in return for its
agreement to use the proceeds of the claim to clean up the
contamination under a consent order it is to enter into with Minnesota
State environmental authorities. The parties have exchanged releases
of all claims arising out of this matter. The third party has
received a cash payment from the non-debtor subsidiary and its court
claim has been dismissed with prejudice.
In August 1992, Santa Cruz County, California environmental
authorities served written notice of 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 the
company holds an interest. The company has entered into a
stipulation, approved by the Bankruptcy Court, whereby the
environmental authorities will receive an administrative claim in the
company's bankruptcy proceedings in exchange for release of the
company from all criminal and civil liabilities. Also, the company
is committed to undertake closure of the investigated area. The
company expects the amount related to clean-up, certain monitoring,
consulting and legal expenses, and the claim allowed in its Chapter
11 proceedings related to the above sites in Florida, California and
other locations will not exceed $8,400,000.
The company's ultimate liability for remediation and other costs, at
these and other sites, in excess of amounts recorded in the
accompanying consolidated financial statements is not presently
determinable.
33. Litigation
As a result of the filing of Chapter 11 petitions by Lone Star and
certain of its subsidiaries, the prosecution of litigation against
such entities involving matters arising prior to the bankruptcy filing
was stayed. Such stay could be lifted by the Bankruptcy Court in
appropriate circumstances.
Between 1983 and 1989 a Lone Star subsidiary (among those in
bankruptcy) 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 them
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 are being treated
in accordance with the provisions of the company's plan of
reorganization for claims of this type.
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 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 believes 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. The cement supplier 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 has
appealed to the Federal Circuit Court of Appeals for the Fourth
Circuit for a new trial on the issue of damages. Lafarge has also
filed an appeal. Oral argument on the appeals was held on December
8, 1993 and a decision by the Court of Appeals is expected in the near
future.
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 has 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. Lone Star has
received a portion of its defense costs from such insurance carrier
and has reached an agreement with this carrier, approved by the
Bankruptcy Court, as to additional payments. Negotiations are in
progress with the insurance carrier for further payments of defense
costs and any agreement reached must also be approved by the
Bankruptcy Court. A portion of defense costs due to Lone Star under
the already approved agreement will be offset against amounts claimed
by the insurance carrier to be due it from Lone Star but not paid
because of the company's 1990 Chapter 11 filing.
Lone Star and certain of the insurance carriers have been negotiating
a settlement of the indemnity action (which would be subject to
approval by the Bankruptcy Court). Pre-trial preparation in the
action has been stayed by agreement of the parties during these
negotiations. Lone Star anticipates continuing the indemnity action
against any insurance carrier as to which no settlement is reached.
A settlement 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.
Lone Star has been 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. The company has agreed
to, and the Bankruptcy Court has approved, $2,500,000 of general
unsecured claims in the aggregate for the representatives of the
plaintiffs in both the Cohn and Garbarino actions.
34. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1993 and 1992 is as follows
(in thousands except per share data):
Quarter
1993 First Second Third Fourth
Net sales............. $ 32,477 $ 70,580 $ 72,778 $ 64,236
Gross profit (loss)... $ (638) $ 9,147 $ 10,994 $ 8,311
Net income (loss)..... $ (14,357) $ (28,287) $ 11,480 $ (4,876)
Net income (loss) per common share:
Primary and fully
diluted.............. $ (0.94) $ (1.78) $ 0.61 $ (0.37)
Quarter
1992 First Second Third Fourth
Net sales............. $ 33,500 $ 64,685 $ 73,400 $ 58,513
Gross profit.......... $ (950) $ 7,534 $ 13,000 $ 3,945
Net income (loss)..... $(129,559) $ 3,139 $ (36,847)$ (1,075)
Net income (loss) per common share:
Primary and fully
diluted.............. $ (7.87) $ .11 $ (2.29)$ (.14)
(1) Gross profit is net of depreciation expense relating to
cost of sales of $18,420,000 and $18,179,000 in 1993 and
1992, respectively.
(2) The effect of preferred stock on the fully diluted
earnings per share computation for the quarters of 1993
and 1992 was anti-dilutive and, therefore, primary and
fully diluted earnings per share are equivalent.
(3) Earnings per share are computed independently for each of
the quarters presented. Therefore, the sum of the
quarterly earnings per share in 1993 and 1992 does not
equal the total computed for the year due to stock
transactions which occurred during 1993 and 1992 (See Note
24).
(4) In the fourth quarter of 1992, the company adopted
Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other
than Pensions", and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" effective
January 1, 1992. The first three quarters of 1992 have
been restated for the effect of adopting both statements
(See Notes 30 and 31).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item concerning
directors will appear under the caption "Proposal 1. Election of
Directors" in the Company's 1994 definitive proxy statement
involving the election of directors to be filed with the Securities
and Exchange Commission not later than 120 days after the end of
the Company's fiscal year ending December 31, 1993 ("Proxy
Statement"). Such information is incorporated herein by reference.
The information called for by this Item concerning executive
officers appears under the caption "Executive Officers of the
Registrant" in Item 4 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item will appear
under the caption "Compensation of and Transaction with Executive
Officers and Directors" in the Proxy Statement. Such information
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by this Item will appear
under the caption "Common Stock Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement. Such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this Item will appear
under the caption "Compensation of and Transactions with Executive
Officers and Directors" in the Proxy Statement. Such information
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) 1. Financial Statements and Schedules: See Index
to
Financial Statements and Schedules on page F-1 of
this report.
2. Exhibits:
3. Articles of incorporation and by-laws:
3A. Amended and Restated Certificate of
Incorp-oration. Incorporated by reference to
Exhibit 19 of Lone Star's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988.
3B. Amended By-Laws. Incorporated by
reference to Exhibit 2 of Lone Star's Report
on Form 8-K, August 20, 1992.
10. Material contracts:
10A. Form of Indemnification Agreements
entered into in 1988 with directors and
certain executive officers of Lone Star.
Incorporated by reference to Exhibit 10B of
Lone Star's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
10B. Employment Agreement dated as of
August 20, 1992, with Mr. William M. Troutman.
Incorporated by reference to Exhibit 3 of Lone
Star's Report on Form 8-K, August 20, 1992.
10C. Employment Agreement dated as of May 18,
1992, with Mr. John J. Martin. Incorporated
by reference to Exhibit 4 of Lone Star's
Report on Form 8-K, August 20, 1992.
10D. Employment Agreement dated December 12,
1990, with Mr. David W. Wallace. Incorporated
by reference to Exhibit 10P of Lone Star's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1990.
10E. Order of the United States Bankruptcy
Court for the Southern District of New York
dated September 24, 1992 approving terms of a
Separation Pay and Retention Award Plan and
authorizing payments thereunder and the Plan.
Incorporated by reference to Exhibit 10F of
Lone Star's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
10F. Settlement Agreement and Order of the
United States Bankruptcy Court for the
Southern District of New York dated October
13, 1992. Incorporated by reference to
Exhibit 1 of Lone Star's Report on Form 8-K,
October 13, 1992.
11. Statement re computation of per share earnings.
22. Subsidiaries of the registrant.
28. Additional exhibits:
28A. Voluntary Petition for Relief under
Chapter 11, Title 11 of the United States Code
dated December 10, 1990. Incorporated by
reference to Exhibit 28A of Lone Star's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1990.
28B. Separate Financial Statements for Kosmos
Cement Company, a significant subsidiary of
Lone Star, as of and for the year ended
December 31, 1993.
28C. Modified Amended Disclosure Statement Re-
garding Debtors' Modified Amended Consolidated
Plan of Reorganization and exhibits thereto.
Incorpor-ated by reference to Lone Star's Form
T-3 filed 14 January, 1994, File Number 1.022-
22175; except for Exhibit J to said Modified
Amendment Disclosure Statement which is
incorporated by reference to Lone Star's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and Exhibit K to said
Modified Amended Disclosure Statement which is
incorporated by reference to Lone Star's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993 filed 12 August 1993, File
Number 1.001-06124.
28D. Modification of Debtors' Plan of Reorgan-
ization. Incorporated by reference to Exhibit
2 of Lone Star's Report on Form 8-K, March 1,
1994; filed 8 March 1994, File Number 1.001-
06124.
28E. Order Confirming Debtors Modified Amended
Consolidated Plan of Reorganization Under
Chapter 11 of The Bankruptcy Code dated
February 17, 1994.
(b) Reports on Form 8-K.
During the last quarter of the fiscal year ending
December 31, 1993 registrant filed the following
Current Reports on Form 8-K:
1) Form 8-K, November 1, 1993 - Item 5 - Other Events.
2) Form 8-K, November 3, 1993 - Item 5 - Other Events.
3) Form 8-K, December 8, 1993 - Item 5 - Other Events.
4) Form 8-K, December 27, 1993 - Item 5 - Other Events.
<TABLE>
LONE STAR INDUSTRIES, INC.
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1993
(In Thousands)
<CAPTION>
Market Value
of Each Amounts
Name of Issuer Principal Issue at Carried at
and Title of Amount of Cost of Balance Sheet Balance Sheet
Each Issue Notes Each Issue Date Date
<S> <C> <C> <C> <C>
Marketable Securities
Commercial paper $224,428 $224,366 $224,366 $224,366
U.S. dollar
time deposits 18,854 18,854 18,854 18,854
$243,282 $243,220 $243,220 $243,220
93
</TABLE>
<TABLE>
LONE STAR INDUSTRIES, INC.
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<CAPTION>
Indebtedness Of Indebtedness To
Balance at Balance at Balance at Balance at Bal
Beginning End Beginning End
Name of Issuer of Year Additions Deductions of Year of Year Additions Deductions of Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993
Joint Ventures:
RMC LONESTAR (1) $23,500 $11,000 $6,667 $27,833 - - - -
Other, net (2) 1,157 - - 1,157 1,351 - 1,351 -
$24,657 $11,000 $6,667 $28,990 $1,351 - $1,351 -
1992
Joint Ventures:
RMC LONESTAR (1) $24,000 $9,500 $10,000 $23,500 - - - -
Other, net (2) 2,102 168 1,113 1,157 - 1,351 - 1,351
$26,102 $9,668 $11,113 $24,657 - $1,351 - $1,351
1991
Joint Ventures:
RMC LONESTAR (1) $18,000 $6,000 - $24,000 - - - -
Other, net (2) 2,208 70 176 2,102 - - - -
$20,208 $6,070 $176 $26,102 - - - -
(1) The indebtedness of RMC LONESTAR represents primarily deferred rent on
Santa Cruz plant and notes payable to the company.
(2) The indebtedness of these joint ventures is primarily for working capital.
The changes from prior years' ending balances represent regular and
recurring transactions with related parties.
</TABLE>
<TABLE>
LONE STAR INDUSTRIES, INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<CAPTION>
Balance Balance
Beginning Additions Other (1) End
Classification of Year at Cost Retirements Changes of Year
<S> <C> <C> <C> <C> <C>
1993
Land $21,243 $169 - $522 $21,934
Buildings and equipment 623,058 17,015 2,148 (4,652) $633,273
Construction in progress 6,737 (2,624) - 3 4,116
Automobiles and trucks 17,610 4,238 163 (501) 21,184
Other, principally property
rights 2,255 201 - (133) 2,323
$670,903 $18,999 $2,311 ($4,761) $682,830
1992
Land $21,394 $211 $92 ($270) $21,243
Buildings and equipment 613,260 14,709 687 (4,224) 623,058
Construction in progress 4,168 2,593 - (24) 6,737
Automobiles and trucks 13,443 4,609 490 48 17,610
Other, principally property
rights 1,953 - - 302 2,255
$654,218 $22,122 $1,269 ($4,168) $670,903
1991
Land $21,745 $10 $646 $285 $21,394
Buildings and equipment 578,841 42,120 5,949 (1,752) 613,260
Construction in progress 32,517 (26,950) 269 (1,130) 4,168
Automobiles and trucks 10,851 2,376 975 1,191 13,443
Other, principally property
rights 2,197 56 - (300) 1,953
$646,151 $17,612 $7,839 ($1,706) $654,218
(1) Other changes in 1993 consist primarily of the disposition of a small
construction aggregates operation and a cement terminal. Other changes
in 1992 consist of the application of a reserve, for certain fixed
assets which are leased to a third party, to reduce their carrying value
to the value of the lease payments and a foreign exchange loss related
to the translation of the fixed asset balances of the company's
Canadian subsidiary partly offset by the reclassification of a cement
terminal which was previously included in the company's restructuring
program and classified as assets held for sale. Other changes in 1991
consisted primarily of the disposition of fixed assets related to the
sale of the capital stock of Compania Uruguaya de Cemento Portland,
partly offset by the reclassification of certain assets from assets held
for sale.
95
</TABLE>
<TABLE>
LONE STAR INDUSTRIES, INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<CAPTION>
Balance Charged to Balance
Beginning Costs and Other (1) End
Classification of Year Expenses Retirements Changes of Year
<S> <C> <C> <C> <C> <C>
1993
Accumulated for:
Depreciation of buildings
and equipment $249,847 $22,166 $1,417 ($2,277) $268,319
Depreciation of automobiles
and trucks 8,209 3,864 120 (637) 11,316
258,056 26,030 1,537 (2,914) 279,635
Depletion of mining properti 2,875 88 - - 2,963
Amortization of other,
principally property right 1,701 136 - 310 2,147
$262,632 $26,254 $1,537 ($2,604) $284,745
1992
Accumulated for:
Depreciation of buildings
and equipment $226,743 $24,302 $430 ($768) $249,847
Depreciation of automobiles
and trucks 6,968 1,610 406 37 8,209
233,711 25,912 836 (731) 258,056
Depletion of mining properti 2,805 91 - (21) 2,875
Amortization of other,
principally property right 1,600 128 - (27) 1,701
$238,116 $26,131 $836 ($779) $262,632
1991
Accumulated for:
Depreciation of buildings
and equipment $212,982 $23,735 $3,850 ($6,124) $226,743
Depreciation of automobiles
and trucks 6,327 1,793 785 (367) 6,968
219,309 25,528 4,635 (6,491) 233,711
Depletion of mining properti 3,369 127 - (691) 2,805
Amortization of other,
principally property right 1,510 90 - - 1,600
$224,188 $25,745 $4,635 ($7,182) $238,116
(1) Other changes in 1993 consist primarily of the disposition of a
small construction aggregates operation and a cement
terminal. Other changes in 1992 consist primarily of a foreign
exchange loss related to the translation of the accumulated
depreciation balance for the company's Canadian subsidiary. Other
changes in 1991 consisted primarily of depreciation related
to the disposition of accumulated depreciation resulting from
the sale of the capital stock of Compania Uruguaya de Cemento
Portland, partly offset by the reclassification of
accumulated depreciation related to assets held for sale.
</TABLE>
<TABLE>
LONE STAR INDUSTRIES, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<CAPTION>
Additions
Balance at Charged to Charged Balance a
Beginning Costs and to Other End of
Description of Year Expenses Accounts(2) Deductions(1) Year
<S> <C> <C> <C> <C> <C>
1993
Allowance for doubtful
accounts deducted from notes
and accounts receivable $8,033 1,605 63 788 $8,913
1992
Allowance for doubtful
accounts deducted from notes
and accounts receivable $7,397 1,084 397 845 $8,033
1991
Allowance for doubtful
accounts deducted from notes
and accounts receivable $8,720 2,719 20 4,062 $7,397
(1) Deductions in 1993, 1992 and 1991 primarily represent uncollectable
accounts charged off.
(2) Represents reserves related to acquisitions and dispositions.
</TABLE>
<TABLE>
LONE STAR INDUSTRIES, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
1. Maintenance and repairs $27,932 $28,263 $30,222
2. Taxes, other than payroll and
income taxes:
Social Security $3,369 $3,102 $3,764
Other Taxes 2,864 2,812 2,425
$6,233 $5,914 $6,189
98
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
LONE STAR INDUSTRIES, INC.
By: /s/ JOHN J. MARTIN
JOHN J. MARTIN
Senior Vice President,
General Counsel and
Secretary
Date: March 10, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title or Capacity Date
/s/ DAVID W. WALLACE Director, Chairman of the March 10, 1994
DAVID W. WALLACE Board and Chief Executive
Officer
/s/ THEODORE F. BROPHY Director March 10, 1994
THEODORE F. BROPHY
/s/ ALLEN E. PUCKETT Director March 10, 1994
ALLEN E. PUCKETT
/s/ ROBERT G. SCHWARTZ Director March 10, 1994
ROBERT G. SCHWARTZ
/s/ WILLIAM M. TROUTMAN Director, President and March 10, 1994
WILLIAM M. TROUTMAN Chief Operating Officer
/s/ JACK R. WENTWORTH Director March 10, 1994
JACK R. WENTWORTH
/s/ WILLIAM E. ROBERTS Vice President, Chief March 10, 1994
WILLIAM E. ROBERTS Financial Officer and
Corporate Controller
<TABLE>
LONE STAR INDUSTRIES, INC. Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
Loss before cumulative effect of
changes in accounting principles ($35,258) ($45,428) ($5,547) ($66,739) ($273,882)
Less: Provisions for preferred 5,112 5,113 5,114 5,119 5,122
Loss before cumulative effect of
changes in accounting principles
applicable to common stock (40,370) (50,541) (10,661) (71,858) (279,004)
Cumulative effect of changes in accounting principles,
net of taxes (1) (782) (118,914) - - -
Net loss applicable to common stoc ($41,152) ($169,455) ($10,661) ($71,858) ($279,004)
Weighted average shares outstandin 16,644 16,641 16,582 16,559 16,532
Loss per Common Share:
Loss before cumulative effect of
changes in accounting principl ($2.42) ($3.03) ($0.64) ($4.34) ($16.88)
Cumulative effect of changes in (0.05) (7.15) - - -
Net loss ($2.47) ($10.18) ($0.64) ($4.34) ($16.88)
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Loss before cumulative effect of
changes in accounting principles ($35,258) ($45,428) ($5,547) ($66,739) ($273,882)
Add: Interest expense and amortization of debt
issuance expense of the 5 1/8% convertible
debentures, net of - - - - 17
Less: Provisions for dividend - - - - -
Loss before cumulative effect pf
changes in accounting principles
applicable to common stock (35,258) (45,428) (5,547) (66,739) (273,899)
Cumulative effect of changes in accounting principles,
net of taxes (782) (118,914) - - -
Net loss applicable to common stoc ($36,040) ($164,342) ($5,547) ($66,739) ($273,899)
Common shares outstanding at begin 16,644 16,621 16,560 16,558 16,512
Conversion of $13.50 preferred shares
outstanding at beginning of per 955 955 955 955 955
Conversion of $4.50 preferred shares
outstanding at beginning of per 45 46 48 50 55
Conversion of 5 1/8% debentures
outstanding at beginning of per - - - - 20
Stock options and awards - - - - 226
Common shares issued from treasury - 22 58 - -
Common shares reacquired during pe - - - - (10)
Fully diluted shares outstanding 17,644 17,644 17,621 17,563 17,758
Loss per common share assuming full dilution:
Loss before cumulative effect of
changes in accounting principles ($2.00) ($2.57) ($0.31) ($3.80) ($15.42)
Cumulative effect of changes in a (0.04) (6.74) - - -
Net loss ($2.04) ($9.31) ($0.31) ($3.80) ($15.42)
(1) In 1992, the company adopted Statements of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions", and No. 109, "Accounting for Income
Taxes", effective January 1, 1992. In the first quarter of
1993, Kosmos Cement Company, one of the company's joint ventures,
adopted SFAS No. 106.
(2) Provisions for preferred dividends are computed on an accrual
basis and, therefore, may differ from preferred dividends
declared. Due to the Chapter 11 proceedings, the company stopped
accruing for preferred stock dividends as of September 15,
1990. However, the full year's amount of dividends are included
for this calculation.
(3) Common stock options are not reflected in primary earnings per
share computations because their effect is not significant.
(4) The computation of fully diluted earnings per share submitted
herein is in accordance with Regulation S-K item 601 (b) (11)
although it is contrary to Paragraph 40 of APB Opinion No. 15
because it produces anti-dilutive results.
</TABLE>
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
12/31/93
The following schedule of subsidiaries of the Registrant does not
include certain subsidiaries which, considered in the aggregate as
a single subsidiary, do not constitute a significant subsidiary.
Name (State or Jurisdiction of Incorporation)
Construction Aggregates Limited (Nova Scotia, Canada)
Construction Materials Co. (Delaware)
I. C. Materials, Inc. (Illinois)
KCOR CORPORATION (Delaware)
Lone Star California, Inc. (Delaware)
Lone Star Cement Inc. (New Jersey)
Lonestar Florida Cement, Inc. (Delaware)
Lonestar Florida Holding, Inc. (Delaware)
Lonestar Florida Pennsuco, Inc. (Delaware)
Lone Star Properties, Inc. (Delaware)
Lone Star Transportation Corp. (Delaware)
New York Trap Rock Corporation (Delaware)
NYTR Transportation Corp. (Delaware)
San-Vel Concrete Corporation (Kansas)
Southern Aggregates, Inc. (Mississippi)
In connection with the Debtors Plan of Reorganization discussed in
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 to which this is an Exhibit, it is expected that
certain of the subsidiaries listed above will be merged into
Registrant.
KOSMOS CEMENT COMPANY
(A Partnership)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1993 AND 1992
AND
INDEPENDENT AUDITORS' REPORT
KOSMOS CEMENT COMPANY
(A Partnership)
INDEX TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1993 and 1992
Independent Auditors' Report . . . . . . . . . . . . . . . . . 1
Partnership Balance Sheets . . . . . . . . . . . . . . . . . . 2
Statements of Partnership Earnings . . . . . . . . . . . . . . 3
Statements of Changes in Partners' Capital . . . . . . . . . . 4
Statements of Partnership Cash Flows . . . . . . . . . . . . . 5
Notes to Partnership Financial Statements. . . . . . . . . . . 6
INDEPENDENT AUDITORS' REPORT
To the Partners
Kosmos Cement Company
We have audited the accompanying
partnership balance sheets of Kosmos
Cement Company, a partnership operated by
Southdown, Inc. and Lone Star Industries,
Inc. (the "Partnership"), as of December
31, 1993 and 1992, and the related
statements of partnership earnings,
changes in partners' capital and
partnership cash
flows for each of the three years in the
period ended December 31, 1993. Our
audits also included the financial
statement schedules listed in the "Index
to Other Required Schedules". These
financial statements and financial
statement schedules are the responsibility
of the Partnership's management. Our
responsibility is to express an opinion on
these financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance
with generally accepted auditing
standards. Those standards require that
we plan and perform the audit to obtain
reasonable assurance about whether the
financial statements are free of material
misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in
the financial statements. An audit also
includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating
the overall financial statement
presentation. We believe our audits
provide a reasonable basis for our
opinion.
In our opinion, such financial
statements present fairly, in all material
respects, the financial position of the
Partnership as of December 31, 1993 and
1992, and the results of its operations
and its cash flows for each of the three
years in the period ended December 31,
1993 in conformity with generally accepted
accounting principles. Also, in our
opinion, such financial statement
schedules, when considered in relation to
the basic financial statements taken as a
whole, present fairly in all material
respects the information set forth
therein.
As discussed in Note 9 of Notes to
Partnership Financial Statements, the
Partnership changed its method of
accounting for postretirement benefits
other than pensions effective January 1,
1993 to conform with Statement of
Financial Accounting Standards No. 106.
DELOITTE & TOUCHE
Houston, Texas
January 27, 1994
KOSMOS CEMENT COMPANY
PARTNERSHIP BALANCE SHEETS
(in thousands)
December 31,
1993 1992
ASSETS
Current assets:
Cash and cash equivalents $ 533 $ 631
Accounts receivable (Note 3) 6,417 6,835
Inventories (Note 4) 12,093 13,121
Prepaid expenses and other 159 63
Advances to partner (Note 5) 5,034 7,618
Total current assets 24,236 28,268
Property, plant and equipment (Note 6) 74,713 75,327
Goodwill (Note 7) 25,497 26,242
$ 124,446 $ 129,837
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued
liabilities (Note 3) $ 3,449 $ 4,165
Total current liabilities 3,449 4,165
Long-term liabilities - 96
Advances from partner (Note 5) 3,329 -
6,778 4,261
Commitments and contingent liabilities (Note 8)
Partners' capital:
Southdown, Inc. 88,251 94,182
Lone Star Industries, Inc. 29,417 31,394
117,668 125,576
$ 124,446 $ 129,837
See Notes to the Partnership Financial Statements
KOSMOS CEMENT COMPANY
STATEMENTS OF PARTNERSHIP EARNINGS
(in thousands)
Years Ended
December 31,
1993 1992 1991
Revenues:
Trade revenues $ 68,394 $ 65,399 $ 64,815
Distribution expenses (2,797) (2,630) (2,315)
65,597 62,769 62,500
Costs and expenses:
Operating 47,674 46,282 48,839
Depreciation, depletion and amortization 5,079 5,207 4,753
General and administrative 736 690 1,255
Write-off of permitting costs (Note 2) - 2,957 -
Other income, net (110) (103) (175)
53,379 55,033 54,672
Net partnership earnings before cumulative effect
of a change in accounting principle 12,218 7,736 7,828
Cumulative effect of a change in accounting
principle (Note 9) 3,126 - -
Net partnership earnings $ 9,092 $ 7,736 $ 7,828
See Notes to the Partnership Financial Statements
KOSMOS CEMENT COMPANY
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(in thousands)
Lone Star
Southdown, Inc. Industries, Inc. Total
Balance January 1, 1991 $ 93,009 $ 31,003 $ 124,012
Net partnership earnings 5,871 1,957 7,828
Partnership distributions (4,500) (1,500) (6,000)
Balance, December 31, 1991 94,380 31,460 125,840
Net partnership earnings 5,802 1,934 7,736
Partnership distributions (6,000) (2,000) (8,000)
Balance, December 31, 1992 94,182 31,394 125,576
Net partnership earnings 6,819 2,273 9,092
Partnership distributions (12,750) (4,250) (17,000)
Balance, December 31, 1993 $ 88,251 $ 29,417 $ 117,668
See Notes to the Partnership Financial Statements
KOSMOS CEMENT COMPANY
STATEMENTS OF PARTNERSHIP CASH FLOWS
(in thousands)
Years Ended December 31,
1993 1992 1991
Operating Activities:
Net partnership earnings $ 9,092 $ 7,736 $ 7,828
Adjustments to reconcile net partnership earnings
to net cash provided by operating
activities:
Cumulative effect of a change in accounting
principle 3,126 - -
Depreciation, depletion and amortization 5,079 5,207 4,753
Provision for doubtful accounts 300 501 120
Write-off of permitting costs - 2,957 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 118 (831) (137)
(Increase) decrease in inventories 1,028 (43) 450
(Increase) decrease in prepaid expenses
and other (96) 134 363
(Decrease) increase in accounts payable,
accrued and other long-term liabilities (609) (95) 931
Net cash provided by operating activities 18,038 15,566 14,308
Investing Activities:
Additions to property, plant and equipment (3,798) (3,271) (6,895)
Other 78 241 84
Net cash used in investing activities (3,720) (3,030) (6,811)
Financing Activities:
Net repayments (advances) to partner 2,584 (4,248) (1,622)
Partnership distributions (17,000) (8,000) (6,000)
Net cash used in financing activities (14,416) (12,248) (7,622)
Net increase (decrease) in cash and cash equivalents (98) 288 (125)
Cash and cash equivalents at the beginning
of the period 631 343 468
Cash and cash equivalents at the end
of the period $ 533 $ 631 $ 343
There were no payments of interest or income taxes during the years
ended December 31, 1993, 1992 and 1991.
See Notes to the Partnership Financial Statements
KOSMOS CEMENT COMPANY
NOTES TO PARTNERSHIP FINANCIAL STATEMENTS
Note 1 - Organization
Kosmos Cement Company (the "Partnership") was formed under
the Uniform Kentucky Partnership Act, on March 7, 1988 for the
purpose of mining, manufacturing, purchasing, distributing and/or
selling any and all types of cement, clinker, other intermediary products
and/or aggregates, principally in the states of Kentucky, Indiana, Ohio,
Pennsylvania and West Virginia and engaging in all activities co-incident
thereto. Kosmos Cement Company, Inc., an indirect wholly-owned
subsidiary of Moore McCormack Resources, Inc. a Delaware
corporation ("Moore McCormack") and Lone Star Cement, Inc. a New
Jersey corporation and a wholly-owned subsidiary of Lone Star
Industries, Inc. a Delaware corporation ("Lone Star") were the initial
general partners. The Partnership is presently owned 75% by
Southdown, Inc., a Louisiana corporation ("Southdown"), and 25% by
Lone Star. On April 7, 1988, Southdown succeeded to the Moore
McCormack interest in the Partnership by means of Southdown's
acquisition of Moore McCormack. During the second quarter of 1991,
Southdown consolidated all of its significant cement operating
subsidiaries, including Moore McCormack, into Southdown. The term
of the Partnership shall continue until December 31, 2030 unless sooner
terminated in accordance with the terms of the partnership agreement.
Under the terms of a contemporaneous Contribution Agreement,
Moore McCormack originally contributed its Kosmosdale, Kentucky
cement plant, related terminals and certain working capital items. Lone
Star contributed its Pittsburgh, Pennsylvania cement plant, related
terminals and facilities, a cement plant at Superior, Ohio which had
been closed, and certain working capital items. No cash contributions
were made at the formation of the Partnership.
Moore McCormack and Lone Star were originally credited with
capital contributions in the amounts of $90 million and $30 million,
respectively, to reflect the fair market value of their initial contribution
to the Partnership. Partners are obligated to make additional pro rata
capital contributions to (a) meet the working capital requirements of
the Partnership or to maintain the facilities and any other assets of the
Partnership as may be deemed necessary from time to time, provided
such amounts do not exceed $2 million per year in the aggregate; and
(b) expand the productive capacity of the Kosmosdale plant. The
Partnership may request voluntary pro rata capital contributions in
excess of the obligatory amounts.
Each partner has a preferential right of purchase or right of first
refusal if the other partner desires to dispose of its entire interest in the
Partnership. Within 60 days of a change in control with respect to the
ultimate parent of either partner, the other partner has the right to sell
its interest in the Partnership for a stipulated price to the partner which
has experienced the change in control.
On December 10, 1990, Lone Star announced that it and certain of
its subsidiaries had filed for reorganization under Chapter 11 of the
Federal Bankruptcy Code. Under the terms of the Partnership
agreement, Southdown has elected to continue the Partnership.
<PAGE>
Note 2 - Significant Accounting Policies
The books and records of the Partnership are maintained on the
accrual basis in accordance with generally accepted accounting
principles. Certain account balances have been reclassified to conform
with 1993's presentation. A summary of significant accounting policies
follows:
Cash and Cash Equivalents - Cash and cash equivalents consist of
highly liquid investments that are readily convertible to cash and of an
original maturity of three months or less from the original date of
purchase.
Inventories - Inventories of finished goods, work in process and raw
materials are stated at the lower of cost (which includes material, labor
and manufacturing overhead) or market. The cost of cement
inventories is determined on the last-in, first-out (LIFO) method. The
cost of the remaining inventories, primarily certain supplies, is
determined on the first-in, first-out (FIFO) method.
Property, Plant and Equipment - The original contributions were
recorded on the books of the Partnership at their respective fair market
value of $90 million and $30 million, respectively. Working capital
items were recorded at face value while contributed property, plant and
equipment were recorded on the Partnership's books at the net carrying
value with the excess over net carrying value recorded as goodwill,
which is being amortized over 40 years.
The Partnership capitalizes all direct and certain indirect (including
interest) expenditures incurred during the construction of major
facilities. Depreciation and amortization of these capitalized costs
commences when the completed facility is placed in service.
Depreciation and amortization of property, plant and equipment are
computed primarily on a straight-line basis over estimated useful lives
of the related assets ranging from three to fifty years. Depletion of
mineral rights is computed on the units of production method based on
management's estimates of total recoverable minerals.
Income Taxes - The Partnership is not an income tax-paying entity.
No provision is made in the accounts of the Partnership for federal and
state income taxes since such taxes are the liability of the individual
general partners and the amounts thereof depend upon the individual
partner's respective tax situations.
Allocation of Partnership Revenues, Costs and Expenses - The
partnership agreement provides that all partnership items constituting,
for federal income tax purposes, income, gain, expense, loss, deduction
or tax credit for each taxable year shall be allocated among the partners
in proportion to their initial sharing ratios of 75% Southdown, 25%
Lone Star or the respective sharing ratio in effect on the date such
revenues, costs and expenses are realized or incurred.
Environmental Expenditures - Environmental expenditures that
relate to current operations are expensed or capitalized as appropriate.
Environmental expenditures that extend the life, increase the capacity,
improve the safety or efficiency of property owned by the Partnership,
mitigate or prevent environmental contamination that has yet to occur,
or that are incurred in preparation for sale of property currently held
for sale are capitalized. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. The Partnership's
policy is to accrue environmental and clean-up related costs of a non-
capital nature when it is both probable that a liability has been incurred
and the amount can be reasonably estimated whether or not this
coincides with the completion of a remediation investigation/feasibility
study or the Partnership's commitment to a formal plan of action. Such
estimates are revised as additional information becomes known.
In the fourth quarter of 1992 the Partnership recognized an
approximate $3 million pretax write-down to expense the non-
recoverable portion of previously deferred environmental permitting
costs incurred in conjunction with the Partnership's intention of
recovering the energy value of processed organic hazardous wastes by
substituting hazardous waste derived fuels for a portion of the
conventional fossil fuels utilized in the Partnership's cement kilns.
Note 3 - Accounts Receivable, Accounts Payable and Accrued
Liabilities
Accounts receivable included the following:
December 31,
(in thousands)
1993 1992
Trade receivables $ 6,874 $ 7,543
Allowance for doubtful accounts (529) (735)
6,345 6,808
Other receivables 72 27
$ 6,417 $ 6,835
The majority of the Partnership's receivables are concentrated in users of
portland cement, such as ready-mixed concrete producers.
Accounts payable and accrued liabilities is comprised of the following:
December 31,
(in thousands)
1993 1992
Trade accounts payable $ 1,199 $ 2,115
Accrued payroll 309 255
Accrued power and water 511 491
Accrued supplies 527 350
Accrued freight 269 193
Accrued taxes, other 119 148
Other accrued liabilities 515 613
$ 3,449 $ 4,165
Note 4 - Inventories
Inventories included the following:
December 31,
(in thousands)
1993 1992
Finished goods $ 4,311 $ 3,557
Work in process 3,333 4,459
Raw materials 828 866
Inventories at lower of cost or market 8,472 8,882
Less reserve to reduce inventories to LIFO cost (1,325) (896)
Inventories, lower of LIFO cost or market 7,147 7,986
Supplies, at lower of FIFO cost or market 4,946 5,135
$ 12,093 $ 13,121
Note 5 - Related Party Transactions
As managing general partner, Southdown from time to time incurs
certain costs and expenses on behalf of the Partnership. These costs
are then passed through to the Partnership by means of intercompany
charges. As of December 31, 1993, there was $4,580,000 of
unreimbursed intercompany charges. There were no unreimbursed
intercompany charges at December 31, 1992 and 1991. Of the 1993
unreimbursed intercompany charges, $3,329,000 represents long-term
postretirement benefit obligation charges which will be reimbursed as
the postretirement benefit obligation is funded. (See Note 9.)
The Partnership, with the approval of the management committee,
uses a cash management system which provides for alternative
investment options including the investment of excess cash balances
directly with Southdown. Southdown pays a mutually agreed upon arms
length market rate of interest for the use of the funds which are
invested on a daily basis. Any such transactions between the
Partnership and Southdown are treated as discrete loan transactions
and are documented accordingly. As of December 31, 1993 and 1992,
there were approximately $6,285,000 and $7,618,000, respectively, of
such loans outstanding.
Note 6 - Property, Plant and Equipment
Property, plant and equipment is comprised of the following:
December 31,
(in thousands)
1993 1992
Land $ 4,590 $ 4,590
Mineral rights 3,266 3,266
Plant and equipment 86,700 85,608
Construction in progress 2,876 367
97,432 93,831
Less accumulated depreciation and depletion (22,719) (18,504)
$ 74,713 $ 75,327
Note 7 - Goodwill
Contributed property, plant and equipment were recorded on the
Partnership's books at their net carrying value on the respective
contributing partner's books with the excess of fair value over net
carrying value recorded as Partnership goodwill. Goodwill is being
amortized on the Partnership books on a straight-line basis over 40
years. Such amortization amounted to approximately $745,000 in 1993,
1992 and 1991. Accumulated amortization of goodwill was $4.4 million
and $3.6 million as of December 31, 1993 and 1992, respectively.
Note 8 - Commitments and Contingent Liabilities
Operating lease rental expense covering manufacturing,
transportation and certain other facilities and equipment for the periods
ended December 31, 1993, 1992 and 1991, aggregated approximately
$1,252,000, $1,192,000 and $619,000, respectively.
Minimum annual rental commitments as of December 31, 1993
under noncancellable operating leases are set forth as follows:
(in thousands)
1994 $ 1,120
1995 953
1996 846
1997 720
1998 640
Thereafter 207
$ 4,486
The Partnership has certain other commitments and contingent
liabilities incurred in the ordinary course of business, which, in the
judgment of the Partnership's management, will not result in losses
which would materially affect its financial position.
In accordance with the terms of the Partnership agreement, each
partner is liable for pre-existing environmental problems on assets
contributed to the Partnership.
Note 9 - Health Care and Life Insurance Benefits:
The Partnership offers health care benefits to active employees and
their dependents. Certain retirees under the age of sixty-five and their
dependents are also offered health care benefits which are essentially
the same as benefits available to active employees. However, benefit
payments for covered retirees over the age of sixty-five are reduced by
benefits paid by Medicare. Most of the Partnership's health care
benefits are self-insured and administered on cost plus fee
arrangements with a major insurance company or provided through
health maintenance organizations. Generally life insurance benefits for
retired employees are reduced over a number of years from the date of
retirement to a specified minimum level.
Effective January 1, 1993, the Partnership adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", (SFAS No. 106) and
recorded a $3.1 million noncash charge, which represented the initial
estimated liability for postretirement benefits attributable to employee
services provided in years prior to 1993. SFAS No. 106 required the
Partnership to accrue the estimated cost of retiree benefits as the
employee provides services to the Partnership. The Partnership
previously expensed the cost of these benefits, which are principally
medical and life benefits, as claims were incurred and continues to pay
for postretirement benefit costs as incurred.
The Partnership amended its plan for postretirement health care
benefits in the latter part of the second quarter. Effective with the
third quarter of 1993, the Partnership's accrual for estimated future
postretirement benefit costs was reduced under the revised plan which
the Partnership will amortize over the 16 years remaining average
service life of its active employees as required by SFAS No. 106.
The following table sets forth the plan's accumulated
postretirement benefit obligation, none of which have been funded,
reconciled with the amount shown in the Partnership's balance sheet at
December 31, 1993.
in thousands
Accumulated postretirement benefit
obligation (APBO)
Retirees $ 290
Fully eligible active plan participants 0
Other active plan participants 246
536
Plan assets at fair value -
Accumulated postretirement benefit obligation 536
Unrecognized prior service cost 1,659
Unrecognized net gain 1,134
Accrued postretirement benefit costs $ 3,329
The components of net periodic postretirement benefit costs
included in the results of operations for the year ended December 31,
1993 were as follows:
in thousands
Service cost $ 152
Interest cost on APBO 153
Amortization of prior service cost and
unrecognized net gain (102)
$ 203
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation as of December 31, 1993
was 9.5% for general health care and 14% for prescription drugs in
1994, decreasing each successive year until it reaches 6% in 2017 and
thereafter. The health care trend rate assumption has a significant
effect on the amount of the obligation and periodic cost reported. For
example, a one-percentage-point increase in the assumed health care
cost trend rate for each year would increase the APBO as of December
31, 1993 and the aggregate of the service and interest cost components
of net periodic postretirement health care cost by approximately 2%
and 19%, respectively. The assumed discount rate used in determining
the APBO was 7.5%.
KOSMOS CEMENT COMPANY
Index to Other Required Schedules
Page
Schedules for the years ended December 31, 1993, 1992 and 1991:
V - Property, plant and equipment S-2
VI - Accumulated depreciation, depletion and amortization of
property, plant and equipment S-3
VIII - Valuation and qualifying accounts S-4
X - Supplemental Statement of Earnings Information S-5
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
KOSMOS CEMENT COMANY Schedule V
Property, Plant and Equipment
(In Thousands)
Balance at Other Balance
beginning of Additions charges end of
period at cost Retirements add (deduct) period
Year ended December 31, 1991:
Land $ 4,484 $ - $ - $ - $ 4,484
Plant and equipment 83,115 6,895 (79) (42) 89,889
$ 87,599 $ 6,895 $ (79) $ (42) $ 94,373
Year ended December 31, 1992:
Land $ 4,484 $ 106 $ - $ - $ 4,590
Plant and equipment 89,889 3,165 (416) (3,397)(1) 89,241
$ 94,373 $ 3,271 $(416) $ (3,397) $ 93,831
Year ended December 31, 1993:
Land $ 4,590 $ - $ - $ - $ 4,590
plant and equipment 89,241 3,798 (200) 3 92,842
$ 93,831 $ 3,798 $(200) $ 3 $ 97,432
(1) Deductions included the write-down of certain deferred
environmental permitting costs.
KOSMOS CEMENT COMPANY Schedule VI
Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
(In Thousands)
Balance at Additions Other Balance at
beginning of charged to charges end of
period cost and expense Retirements add(deduct) period
Year ended
December 31, 1991: $ 10,686 $ 4,008 $ (37) $ - $ 14,657
Year ended
December 31, 1992: $ 14,657 $ 4,462 $ (388) $(227) (1) $ 18,504
Year ended
December 31, 1993: $ 18,504 $ 4,334 $ (119) $ - $ 22,719
(1) Deductions included the write-down of certain deferred
environmental permitting costs.
KOSMOS CEMENT COMPANY Schedule VIII
Valuation and Qualifying Accounts
(In Thousands)
Balance at Additions Deductions Balance at
beginning of charged to from end of
period cost and expense reserves period
Year ended December 31, 1991:
Allowance for doubtful accounts $ 150 $ 120 $ (33) $ 237
Year ended December 31, 1992:
Allowance for doubtful accounts $ 237 $ 501 $ (3) $ 735
Year ended December 31, 1993:
Allowance for doubtful accounts $ 735 $ 300 $ (506) $ 529
KOSMOS CEMENT COMPANY Schedule X
Supplemental Statement of Earnings Information
(In Thousands)
Years Ended
December 31,
1993 1992 1991
Maintenance and repairs $ 8,616 $ 9,120 $10,385
Taxes, other than payroll and
income taxes $ 1,032 $ 1,168 $ 1,150
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------x
:
In re: : (Chapter 11)
:
NEW YORK TRAP ROCK CORPORATION, : Case Nos. 92 B 21276 to
LONE STAR INDUSTRIES, INC., et al. : 90 B 21286, 90 B 21334 and
: 90 B 21335 (HS)
Debtors. :
: (Jointly
Administered)
:
- ------------------------------------x
ORDER CONFIRMING DEBTORS' MODIFIED AMENDED CONSOLIDATED
PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Lone Star Industries, Inc. ("Lone Star"), debtor
and debtor-in-possession on its own behalf and on behalf of the
above-captioned, debtors and debtors-in-possession in these jointly
administered Chapter 11 cases (together with Lone Star,
collectively, the "Debtors") having proposed and filed their
Modified Amended Consolidated Plan of Reorganization, dated
November 4, 1993 (as modified pursuant to the Modification (as
defined below) the "Plan"), under Chapter 11 of Title 11 of the
United States Code, 11 U.S.C. sections 101 et seq. (the "Bankruptcy
Code"); and the Debtors' Disclosure Statement Regarding Debtors'
Modified Amended Consolidated Plan of Reorganization, dated
November 4, 1993 (the "Disclosure Statement") having been approved
as containing "adequate information" within the meaning of Section
1125 of the Bankruptcy Code pursuant to this Court's order dated
November 5, 1993 (as amended by orders dated November 16, 23 and
December 7, 1993, the "Disclosure Statement Approval Order"); and
the Disclosure Statement Approval Order having, inter alia: (i)
authorized the Debtors to solicit acceptances or rejections of the
Plan; (ii) approved the forms of ballots and related documents and
notices to be transmitted with the Disclosure Statement; and (iii)
fixed November 11, 1993 as the record date for solicitation,
pursuant to Rule 3018 of the Federal Rules of Bankruptcy Procedure
(the "Bankruptcy Rules"); and (a) copies of the Disclosure State-
ment, together with all exhibits and attachments thereto (including
the Plan), (b) the Disclosure Statement Approval Order, (c)
appropriate ballot(s) (for those holders of Claims or Stock
Interests whose respective Allowed Claims or Interests were
designated under the Plan as impaired and, thus, who were entitled
to vote on the Plan), and (d) a notice (the "Notice") of, inter
alia, the Debtors' solicitation of acceptances or rejections of the
Plan, and the deadline for returning ballots with respect to the
Plan, having been transmitted to (i) every entity listed on the
Debtors' schedules of liabilities as a creditor, or who filed
proofs of claim in the Debtors' Chapter 11 cases (which had not
been disallowed as of November 23, 1993 by an order of this Court),
(ii) all entities which, to the Debtors' knowledge, were parties to
pre-petition executory contracts and unexpired leases with the
Debtors, (iii) every holder of record of a publicly traded equity
security of the Debtors determined as of the close of business on
November 11, 1993, (iv) every entity that, to the Debtors'
knowledge, were plaintiffs in litigation commenced against the
Debtors, (v) each of the Debtors' retirees, (vi) counsel to, and
members of, the official committees appointed herein, (vii) counsel
to the Unions (as defined in the Disclosure Statement Approval
Order), (viii) the United States Trustee for the Southern District
of New York, (ix) the Securities and Exchange Commission, (x) the
United States Attorney for the Southern District of New York, (xi)
the District Director, Internal Revenue Service, and (xii) those
parties who have filed notices of appearance in the Debtors'
Chapter 11 cases pursuant to Bankruptcy Rule 2002; and a copy of
the Notice having been published once in each of The New York Times
(national edition) and The Wall Street Journal (national edition)
on December 14, 1993; and the Disclosure Statement Approval Order
having fixed, inter alia, December 31, 1993 at 5:00 p.m. (New York
Time) as the time and date by which all ballots were to have been
received by the Debtors' ballot agent in order to be counted as
acceptances or rejections of the Plan; and an alternative plan of
reorganization (the "Alternative Plan") having been filed by the
Official Committee of Equity Security Holders (the "Equity
Committee"); and upon this Court's order dated January 14, 1994
(the "Supplemental Order"), inter alia, (a) approving the
disclosure statement regarding the Alternative Plan, (b) fixing the
time and date when (i) the Debtors' memorandum of law in support of
confirmation of the Plan, and (ii) all objections to confirmation
of the Plan, were to have been filed and received and (c) fixing
February 9, 1994 at 9:45 a.m. as the time and date for the hearing
pursuant to Sections 1128 and 1129 of the Bankruptcy Code (the
"Confirmation Hearing") to consider confirmation of the Plan and
any duly and timely filed objections thereto; and the Confirmation
Hearing having been adjourned to February 16, 1994; and sufficient
number of copies of the Disclosure Statement and Ballots (if
applicable) having been provided to bank and broker nominees
holding equity securities of the Debtors in broker (street) name
for beneficial ownership of third parties; and due notice of the
Confirmation Hearing, and the date by which objections to
confirmation of the Plan were to be filed having been given; and
objections to confirmation of the Plan having been filed by (i) the
Equity Committee, (ii) Lacos Land Company, (iii) Maurice Cohn on
behalf of himself and all other claimants within his class and
Andrew Garbarino and Madeline Garbarino on behalf of themselves and
all others within their class (collectively, the "Class Action
Claimants"), (iv) Stresscon and Adelaide Brighton Cement (Hawaii),
Inc. and (v) Don Keith; and the Confirmation Hearing having been
held before the Court on February 16 and 17, 1994; and the appear-
ance of all interested parties having been noted on the record; and
a Modification of Debtors' Plan dated February 17, 1994 (the
"Modification") having been filed; and due notice of the
Modification having been given; and the Court having considered all
objections to confirmation of the Plan; and all objections to
confirmation of the Plan having either been withdrawn or resolved
through the Modification and the provisions of this Order; and upon
all the documents and the evidence of record adduced at the
Confirmation Hearing; and upon the Court's finding, inter alia,
that the Plan has been accepted by all impaired Classes of Claims
and Stock Interests actually voting on the Plan; and upon the
Debtors' Memorandum of Law In Support of the Plan; and upon
certification of Claudia King & Associates, Inc., sworn to on
February 7, 1994, as ballot agent, pursuant to Local Bankruptcy
Rule 54, in respect of acceptances and rejections of the Plan (the
"Claudia King Certification"), and the affidavits of services and
publication respecting compliance with the Disclosure Statement
Approval Order, each submitted in connection with confirmation of
the Plan; and upon all the pleadings and proceedings heretofore had
in these Chapter 11 cases; and upon the record of the hearings held
before this Court on February 16 and 17, 1994; and after due
deliberation; and sufficient cause appearing therefor; and
IT HAVING BEEN FOUND AND DETERMINED by this Court that:
A. This Court has jurisdiction over the Debtors'
reorganization cases pursuant to 28 U.S.C. section 1334. Confirmation of
the Plan is a "core proceeding" pursuant to 28 U.S.C. section 157(b)(2)
and this Court has jurisdiction to enter a final order with respect
thereto.
B. The classification of Claims and Stock
Interests in Article II of the Plan is reasonable and necessary to
implement the Plan, and therefore the Plan satisfies the
requirements of Section 1122(a) of the Bankruptcy Code.
C. The Plan adequately classifies all Claims and
Stock Interests and therefore the Plan satisfies the requirements
of Section 1123(a)(1) of the Bankruptcy Code.
D. Article IV of the Plan specifies the classes
of Claims and Interests which are unimpaired, and therefore the
Plan satisfies the requirements of Section 1123(a)(2) of the
Bankruptcy Code as permitted by Section 1123(b)(1) of the
Bankruptcy Code.
E. Article V of the Plan specifies the treatment
of each impaired class, and therefore the Plan satisfies the
requirements of Section 1123(a)(3) of the Bankruptcy Code.
F. The Plan provides the same treatment for each
Claim or Stock Interest in a particular class and therefore the
Plan satisfies the requirements of Section 1123(a)(4) of the
Bankruptcy Code.
G. Article VI of the Plan provides adequate means
for implementing the Plan, and therefore the Plan satisfies the
requirements of Section 1123(a)(5) of the Bankruptcy Code.
H. The Plan provides for the inclusion of a
provision in the New Lone Star Charter and in the NewCo Charter
that prohibits the issuance of nonvoting equity securities, and
provides, as to the classes of securities possessing voting power,
an appropriate distribution of such power among such classes,
including, in the case of any class of equity securities having a
preference over another class of equity securities with respect to
dividends, adequate provisions for the election of directors
representing such preferred class in the event of default in the
payment of such dividends, and therefore satisfies Section
1123(a)(6) of the Bankruptcy Code.
I. The Plan provides for the management and
governance through a Board of Directors of Reorganized Lone Star in
a manner that is consistent with the interests of creditors and
equity security holders and with public policy with respect to the
manner of selection of any officer, director, or trustee under the
Plan and therefore the Plan satisfies the requirements of Section
1123(a)(7) of the Bankruptcy Code.
J. The assumption of executory contracts and
unexpired leases by the Debtors (as to which there are no defaults
other than those specified on Exhibit "A" to the Plan) and the
assignment of certain thereof to NewCo pursuant to Sections 365 and
1123 of the Bankruptcy Code, as provided in Article VIII of the
Plan, is a reasonable exercise of the Debtors' sound business
judgment and is in the best interests of the Debtors and their
Estates, and therefore the Plan complies with Section 1123(b)(2) of
the Bankruptcy Code.
K. The Plan complies with Section 1123(b)(3)(A)
of the Bankruptcy Code because any settlement and compromise
incorporated in the Plan or set forth in this Order, including,
without limitation, the settlement of the confirmation objections
of the Class Action Claimants, the Equity Committee and Lacos Land
Company, and the terms and provisions of any such settlement in its
entirety:
(i) reflects a reasonable balance of the
risks and expenses of litigation against the benefits and early
resolution of the disputes;
(ii) falls within the range of reasonableness
for the resolution of complex litigation or litigable issues and
claims;
(iii) is fair and equitable and in the best
interests of the Debtors, their Estate, and all holders of Claims
or Stock Interests; and
(iv) and the Court holds that no additional
notice of such settlements is required under Bankruptcy Rules 9019
and 2002.
L. The Plan complies with all applicable
provisions of the Bankruptcy Code and, as required pursuant to Rule
3016(b) of the Federal Rules of Bankruptcy Procedure, is dated and
identifies the Debtors as the proponents of the Plan, and therefore
the Plan satisfies the requirements of Section 1129(a)(1) of the
Bankruptcy Code.
M. The Debtors, as proponents of the Plan, have
complied with the applicable provisions of the Bankruptcy Code,
including, without limitation, Sections 1125 and 1126, and
therefore the Debtors have satisfied the requirements of Section
1129(a)(2) of the Bankruptcy Code.
N. The Plan has been proposed in good faith and
not by any means forbidden by law, as evidenced by the totality of
the circumstances surrounding the formulation of the Plan and the
overwhelming acceptance of the Plan by all impaired classes, and
therefore the Plan satisfies the requirements of Section 1129(a)(3)
of the Bankruptcy Code.
O. Any payment made or to be made by the Debtors
or any person issuing securities or acquiring property under the
Plan, for services or for costs and expenses in, or in connection
with, these Chapter 11 cases, or in connection with the Plan and
incident to these Chapter 11 cases, has been approved by, or will
be subject to the approval of, the Court as reasonable and
therefore the Plan satisfies the requirements of Section 1129(a)(4)
of the Bankruptcy Code.
P. The Debtors have disclosed the identity,
affiliation and compensation of seven individuals, including
insiders, proposed to serve, after confirmation of the Plan, as a
director, officer or voting trustee of the Debtors pursuant to the
Statement of Officers and Directors dated February 14, 1994 (the
"Statement of Officers and Directors") filed by the Debtors
respecting officers and directors and the terms of their
employment, and the appointment to, or continuance in such office
of each such individual is consistent with the interests of
creditors and equity security holders and with public policy, and,
therefore, the Plan satisfies the requirements of Section
1129(a)(5) of the Bankruptcy Code.
Q. Section 1129(a)(6) is inapplicable to the Plan
since there are no rate changes provided for in the Plan for which
a governmental regulatory commission will have jurisdiction over
the Debtors after confirmation.
R. With respect to each impaired Class of Claims
and Stock Interests, (i) each holder of a Claim or Stock Interest
of such Class has accepted the Plan, or will receive or retain
under the Plan on account of such Claim or Stock Interest, property
of a value, as of the Effective Date of the Plan, that is not less
than the amount that such holder would so receive or retain if the
Debtors were liquidated under Chapter 7 of the Bankruptcy Code on
such date, and (ii) if Section 1111(b)(2) of the Bankruptcy Code is
applicable to the Claims of such Class, each holder of a claim of
such Class will receive or retain under the Plan on account of such
Claim property of a value, as of the Effective Date of the Plan,
that is not less than the value of such holder's interest in the
Estates' interest in the property that secures such claim.
Therefore, the Plan satisfies the requirements of Section
1129(a)(7) of the Bankruptcy Code.
S. Each Class, except Classes 7 and 9, has
accepted the Plan or is not impaired under the Plan, and thus is
presumed to have accepted the Plan such that solicitation of
acceptances or rejections with respect to such class has not been
required pursuant to Section 1129(a)(8) of the Bankruptcy Code, and
therefore the Plan satisfies the requirements of Section 1129(a)(8)
of the Bankruptcy Code except with respect to Classes 7 and 9.
T. The Plan provides for no distributions to
Classes 7 and 9, and therefore, Classes 7 and 9 are deemed to have
rejected the Plan.
U. The Plan satisfies the requirements of Section
1129(a)(9) of the Bankruptcy Code since, except to the extent that
the holder of a particular Claim has agreed to a different
treatment of such Claim, the Plan provides that:
(i) With respect to a Claim of a kind
specified in Sections 507(a)(1) or (2) of the Bankruptcy Code, as
soon as practicable after the Effective Date or upon Order of this
Court, the holder of such Claim will receive on account of such
Claim cash equal to the allowed amount of such Claim; and
(ii) With respect to a Claim of a kind
specified in Section 507(a)(7) of the Bankruptcy Code, the holder
of such Claim will receive as soon as practicable after the
Effective Date, on account of such Claim, cash equal to the allowed
amount of such Claim or deferred cash payments, over a period not
exceeding six years after the date of assessment of such claim, of
a value, as of the Effective Date, equal to the allowed amount of
the claim.
V. Section 1129(a)(9)(B) of the Bankruptcy Code
is inapplicable since there are no Claims of the kind specified in
Sections 507(a)(3), (4), (5), or (6) of the Bankruptcy Code.
W. At least one Class of Claims that is impaired
under the Plan has accepted the Plan, determined without including
any acceptance of the Plan by any insider holding a Claim in such
Class, and therefore the Plan satisfies the requirements of Section
1129(a)(10) of the Bankruptcy Code.
X. Confirmation of the Plan is not likely to be
followed by the liquidation, or the need for further financial
reorganization, of the Debtors or Reorganized Debtors and therefore
the Plan satisfies the requirements of Section 1129(a)(11) of the
Bankruptcy Code.
Y. The Debtors have paid or shall pay on or prior
to the Effective Date all amounts due under 28 U.S.C. section 1930 and
therefore the Plan satisfies the requirements of Section
1129(a)(12) of the Bankruptcy Code.
Z. The Plan provides that all retiree benefits
shall continue, at the level established or modified pursuant to
11 U.S.C. section 1114(e)(i)(B) or (g), solely to the extent, and for
the period, the Debtors are contractually or legally obligated to
provide such benefits. Therefore, the Plan complies with Section
1129(a)(13) of the Bankruptcy Code.
AA. In light of the provisions of this Order, the
Plan does not discriminate unfairly against, and is fair and
equitable with respect to, any class of Claims or Stock Interests
that is impaired under, and has not accepted the Plan and therefore
the Plan satisfies the requirements of Section 1129(b) of the
Bankruptcy Code.
BB. No party in interest that is a governmental
unit has requested that the Plan not be confirmed on the grounds
the principal purpose of the Plan is the avoidance of taxes or the
avoidance of the application of section 5 of the Securities Act of
1933 and therefore the Plan satisfies the requirements of Section
1129(d) of the Bankruptcy Code.
CC. The release provisions set forth in Article VI
of the Plan:
(i) are within the jurisdiction of this Court
under 28 U.S.C. Sections 1334(a), (b) and (d);
(ii) are each an essential means of
implementing the Plan pursuant to Section 1123(a)(5) of the
Bankruptcy Code;
(iii) are integral elements of the
settlements and compromises incorporated in the Plan;
(iv) confer material benefits on, and thus are
in the best interests of, the Debtors' Estates; and
(v) are consistent with and permitted
pursuant to Sections 105, 524, 1123, 1129 and all other applicable
provisions of the Bankruptcy Code.
DD. Proper, timely, adequate and sufficient notice
of the Confirmation Hearing has been provided in accordance with
the Disclosure Statement Approval Order and the Supplemental Order.
EE. The solicitation and tabulation of acceptances
was accomplished in a proper and fair manner and the Plan has been
duly accepted by the creditors and interest holders whose
acceptance is required in accordance with the provisions of Section
1126 of the Bankruptcy Code.
FF. All transfers, issuances or exchanges of
securities by the Debtors and Reorganized Debtors are transfers
under the Plan free from the imposition of taxes of the kind
specified in Section 1146(c) of the Bankruptcy Code.
GG. The modifications of the Plan pursuant to the
Modification are non-material and do not adversely change the
treatment of the holder of any Claim or Stock Interest who has not
accepted such modifications in writing.
HH. The Alternative Plan has been withdrawn.
THEREFORE, NOW, upon the motion of the Debtors and
after due deliberation, the Court hereby ORDERS, ADJUDGES AND
DECREES THAT:
1. The Plan shall be, and hereby is, confirmed
having met the requirements of Section 1129 of the Bankruptcy Code.
2. In accordance with Bankruptcy Rule 3021, the
record date for the purposes of determining those holders of
Allowed Claims and Stock Interests entitled to distributions under
the Plan shall be the Effective Date.
3. In accordance with Section 1142 of the
Bankruptcy Code, the implementation and consummation of the Plan in
accordance with its terms shall be, and hereby is, authorized and
approved, and the Debtors, Reorganized Debtors or any other Person
shall be, and they hereby are, authorized, empowered and directed
to issue, execute, deliver, file and record any document, whether
or not any such document is specifically referred to in the Plan,
the Disclosure Statement, or any exhibit thereto, and to take any
action necessary or appropriate to consummate the Plan in
accordance with its terms including, without limitation,
establishing the Reserve(s) contemplated by the Plan, all without
further application to or order of this Court. Without limiting
the foregoing, the execution and delivery, performance, filing or
recordation by the appropriate Debtor or Debtors, or Reorganized
Debtors and any other entity created or Person designated pursuant
to the Plan, of each of the documents, instruments and agreements
contemplated by or necessary in connection with consummation of the
Plan, including those documents substantially in the form attached
as exhibits to the Disclosure Statement (the final forms of which
shall be reasonably satisfactory to the Official Committee of
Unsecured Creditors (the "Creditors' Committee") and shall be filed
with the Court), is hereby authorized and approved including but
not limited to: (a) the New Lone Star Charter (including the
Restated and Amended Certificate of Incorporation of Reorganized
Lone Star and the Amended By-Laws of Reorganized Lone Star); and
(b) the NewCo Charter.
4. In accordance with Section 1141(a) of the
Bankruptcy Code, the Plan and its provisions shall be, and hereby
are, binding upon each of the Debtors, Reorganized Debtors, any
Person acquiring or receiving a property distribution under the
Plan, any lessor or lessee of property to or from the Debtors, any
creditor of the Debtors and any holder of a Claim against or Stock
Interest in the Debtors, whether or not the Claim or Stock Interest
of such holder is impaired under the Plan and whether or not such
holder (i) has filed, or is deemed to have filed, a proof of Claim
or Stock Interest, or (ii) has accepted or rejected the Plan, or
(iii) will or will not receive a distribution under the Plan.
5. Pursuant to Section 1146(c) of the Bankruptcy
Code, neither (i) the issuance, transfer or exchange of New Lone
Star Common Stock or Reorganized Lone Star Warrants, (ii) the
creation of any mortgage, deed of trust, lien or other security
interest including, without limitation, such mortgages, deeds of
trust, liens or other security interests to be granted to the
collateral agent to secure repayment of the Asset Proceeds Notes,
(iii) the making or assignment of any lease or sublease, nor (iv)
the making or delivery of any deed or other instrument of transfer
under, in furtherance of, or in connection with, the Plan,
including any merger agreements or agreements of consolidation,
deeds, bills of sale or assignments executed in connection with any
restructuring transactions consummated pursuant to this Plan, shall
be subject to any stamp tax, real estate transfer tax or similar
tax.
6. Each and every federal, state and local
governmental agency or department is hereby directed to accept, and
lessors and holders of liens are directed to execute, any and all
documents and instruments, necessary and appropriate to consummate
the transactions contemplated by the Plan including, without
limitation, documents and instruments for recording in (i) county
recording offices necessary to transfer title to real estate, (ii)
county and state offices wherein financing or termination
statements under the Uniform Commercial Code are authorized to be
filed and (iii) county and state offices wherein the New Lone Star
Charter or other documents may need to be filed in order to
effectuate the Plan.
7. All prior orders of this Court entered in the
Debtors' cases, all documents and agreements executed by the
Debtors as authorized and directed thereunder including, without
limitation, (i) the settlement agreement dated as of December 12,
1991, as amended, among Lone Star, The Mitsubishi Bank Limited and
Credit Commercial de France, and (ii) the settlement agreement
dated as of September 30, 1992, by and among Lone Star, Lone Star
Transportation Corp., San-Vel Concrete Corporation and National
Railroad Transportation Corporation, and all motions or requests
for relief by the Debtors pending before the Court as of the
Effective Date shall be, and hereby are, binding upon, and shall
inure to the benefit of the Debtors, Reorganized Debtors and their
respective successors and assigns.
8. All transactions effected by the Debtors
during the period commencing on the Filing Date and ending on the
Confirmation Date and such other transactions as of the Effective
Date taken pursuant to the Plan in implementation therefor are
hereby ratified.
9. As of the Effective Date, pursuant to Section
7.1 of the Plan, the Debtors' Estates shall be substantively
consolidated for the purposes of the Plan and accordingly: (i) all
Intercompany Claims by and among the Debtors and/or their non-
Debtor affiliates will be eliminated; (ii) except as otherwise
provided in the Plan, all assets and all proceeds thereof and all
liabilities of the Debtors will be merged or treated as though they
were merged; (iii) any obligation of any Debtor, and all guarantees
thereof executed by, or joint liability of, any of the Debtors will
be deemed to be one obligation of the consolidated Debtors; (iv)
any Claims filed or to be filed in connection with any such
obligation guaranteed, or joint liability, will be deemed one Claim
against the consolidated Debtors; (v) each and every Claim filed in
the individual case of any of the Debtors will be deemed filed
against the consolidated Debtors in the consolidated case; and (vi)
for purposes of determining the availability of the right of set-
off under Section 553 of the Bankruptcy Code, the Debtors shall be
treated as one entity so that, subject to the other provisions of
Section 553 of the Bankruptcy Code, debts due to any of the Debtors
may be set off against the debts of any of the Debtors. Except as
expressly provided in the Plan, the Debtors shall continue to
maintain their separate corporate existences for all purposes other
than the treatment of Claims under the Plan. This decretal
paragraph shall constitute the Substantive Consolidation Order for
purposes of the Plan.
10. Pursuant to Section 303 of the Delaware
General Corporation Law, all terms of this Plan, and all documents
which are contemplated to be executed in connection with the Plan
including, without limitation, the documents which are annexed as
exhibits to the Disclosure Statement, may be put into effect and
carried out, without further action by the directors or
shareholders of the Debtors or Reorganized Lone Star, who shall be
deemed to have unanimously approved the Plan and all agreements and
transactions provided for or contemplated therein. From and after
the Effective Date, the Chairman of the Board, Vice Chairman of the
Board, President, any Executive Vice President, Senior Vice
President or Vice President of Reorganized Lone Star shall be
authorized to execute, deliver, file or record such contracts,
instruments, releases, indentures and other agreements or documents
and take such actions as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the
Plan. The Secretary or any Assistant Secretary of Lone Star or
Reorganized Lone Star shall be authorized to certify or attest to
any of the foregoing actions. Reorganized Lone Star shall be, and
hereby is, authorized to issue the New Lone Star Common Stock
Reorganized Lone Star Warrants and any other Securities which are
to be issued in connection with the Plan.
11. The board of directors of Reorganized Lone
Star as set forth in the Statement of Officers and Directors shall
become effective as of the Confirmation Date.
12. In the event the Debtors determine that in
connection with the Plan a merger, dissolution or other similar
corporate restructuring of the Debtors and any Subsidiaries of the
Debtors is appropriate or desirable, the Debtors are authorized to
execute, enter into and file in accordance with the relevant
provisions of applicable state and foreign law, such certificates
of amendment, change, alteration, liquidation or dissolution, or
any agreement of merger or consolidation that may be required to
effect such corporate restructuring including, without limitation,
the Reorganized Lone Star Charter.
13. Lone Star and such Subsidiaries that are not
merged into Lone Star or dissolved prior to the Effective Date
shall continue to exist after the Effective Date, each as a
separate corporate entity with all of the powers of a corporation
under applicable law, and without prejudice to any right to alter
or terminate its existence.
14. Except as provided in the Plan or any other
contract, instrument, release, indenture or other agreement entered
into in connection with the Plan, in accordance with Section
1123(b) of the Bankruptcy Code, the Reorganized Debtors shall
retain and may enforce any claims, rights and causes of action that
the Debtors or their Estates may hold against any entity, and the
Reorganized Debtors or their successors may pursue such retained
claims, rights or causes of action, as appropriate, in accordance
with the best interests of the Reorganized Debtors.
15. On and after the Effective Date, the
Reorganized Debtors may operate their businesses and may use,
acquire and dispose of property and compromise or settle any post-
Effective Date claims or interests without supervision or approval
by the Bankruptcy Court and free of any restrictions of the
Bankruptcy Code or Bankruptcy Rules, other than restrictions
expressly imposed by the Plan or this Confirmation Order.
16. The exemption from the requirements of Section
5 of the Securities Act of 1933, 15 U.S.C. Section 77e, and any state or
local law requiring registration for the offer or sale of a
security provided for in Section 1145 of the Bankruptcy Code shall
apply to the New Lone Star Common Stock and other Securities issued
under the Plan.
17. Shares of New Lone Star Common Stock to be
disbursed to holders of Allowed Claims shall not be issued and
outstanding until actually disbursed by the Disbursing Agent to the
holders of such Allowed Claims entitled thereto, and shall not be
entitled to vote in any election of directors of Reorganized Lone
Star, or any other matter requiring the vote of shareholders, until
such time as the New Lone Star Common Stock has actually been
distributed to the holders of the Allowed Claims. In addition, a
holder of a Disputed Claim shall not be entitled to vote in any
election of directors of Reorganized Lone Star, or any other matter
requiring the vote of shareholders until such time as the Disputed
Claim has become an Allowed Claim and the holder of such Allowed
Claim has received its distribution and become a shareholder of
record of Reorganized Lone Star.
18. The Debtors, or their authorized agent, shall
be, and hereby are, authorized and directed to make all
distributions required under the Plan (i) to the holders of Allowed
Claims and Stock Interests and (ii) thereafter, subject to such
other and further orders of this Court, to the extent Disputed
Claims or Disputed Interests become Allowed, to the holders of such
Allowed Claims or Stock Interests.
19. Except as otherwise provided in Article VII of
the Plan, distributions to be made on the Effective Date, or as
promptly thereafter as practicable, on account of Claims or
interests that are allowed as of the Effective Date shall be made
as of the Effective Date. New Lone Star Common Stock and other
Securities to be issued and distributed pursuant to the Plan shall
be issued as of the Effective Date regardless of the date on which
the New Lone Star Common Stock or such other Securities are
actually distributed.
20. Nothing contained in the Plan shall constitute
a waiver or release by the Debtors or Reorganized Debtors of any
rights of set-off or recoupment the Debtors may have against any
holder.
21. Except as otherwise provided by the Plan or in
this Order, the Reorganized Debtors shall be, and hereby are,
discharged of all of the Debtors' liabilities, and, upon the
Effective Date, title to all properties and assets of the Debtors
dealt with by the Plan shall pass to the Reorganized Debtors, free
and clear of all Claims and interests, including all liens or other
encumbrances of any kind or nature, of or asserted, or which could
have been asserted, by any and all creditors and equity security
holders of the Debtors.
22. Except as otherwise expressly provided in
Section 1141 of the Bankruptcy Code, the Plan or in this Order, the
distributions made pursuant to the Plan will be in full and final
satisfaction, settlement, release and discharge as against the
Debtors, of any debt that arose before the Confirmation Date and
any debt of a kind specified in Section 502(g), 502(h) or 502(i) of
the Bankruptcy Code and all Claims and interests of any nature
including, without limitation, any interest accrued thereon from
and after the Filing Date, whether or not (i) a proof of Claim or
interest based on such debt, obligation or equity interest is filed
or deemed filed under Section 501 of the Bankruptcy Code, (ii) such
Claim or interest is allowed under Section 502 of the Bankruptcy
Code or (iii) the holder of such Allowed Claim or Interest has
accepted the Plan. Therefore, except as otherwise provided herein,
upon the Effective Date, all Claimants holding claims against the
Debtors, and holders of interests in the Debtors shall be precluded
from asserting against the Debtors or Reorganized Debtors, or any
of their assets or properties, any other or further Claims or
interests based upon any act or omission, transaction or other
activity of any kind or nature that occurred prior to the Effective
Date, and this Order shall permanently enjoin all said Claimants
and holders of equity interests, their successors and assigns, from
enforcing or seeking to enforce any such Claims or equity
interests.
23. Except as provided in the Plan or in this
Order, on the Effective Date, in consideration for past and future
services, and other valuable consideration, all of the Debtors'
present and former officers, directors, agents, employees,
Professionals and counsel, and the Committees, and their respective
members, agents, Professionals, and counsel (collectively, the
"Released Parties") shall be deemed discharged and released from
any and all claims asserted or assertable by any Person arising in
any way out of such Person's relationship with or work performed
for the Debtors on or prior to the Effective Date; provided,
however, that (i) the foregoing discharge and release shall only
apply to those claims for which the Released Parties are entitled
to indemnification by the Debtors pursuant to applicable laws or as
provided in any of (a) Lone Star's Restated Certificate of
Incorporation in effect prior to or as of the date hereof, Lone
Star's by-laws in effect prior to the date hereof, (c) any
agreement with Lone Star, or (d) the certificates of incorporation,
by-laws or similar documents or agreements of any of Lone Star's
subsidiaries as in effect prior to or as of the date hereof, in
each case with respect to matters occurring on or prior to the
Effective Date, and (ii) the foregoing discharge and release shall
not apply to (a) any individuals to the extent such individuals
were not members of the Debtors' Board of Directors as of February
16, 1994 or entities which have been released prior to the
Effective Date by order of the Bankruptcy Court and as to such
individuals or entities, the terms of their respective releases
shall govern, (b) any individuals or entities which are the subject
of a proceeding to recover property or money commenced by the
Debtors prior to the Effective Date, (c) any claims asserted or
assertable by or against any of the Debtors' present or former
officers or directors in the following litigations pending in the
United States District Court for the District of Connecticut: (1)
Cohn v. Lone Star Industries, Inc., et al., Civ. No. B-89-617
(JAC), and (2) Garbarino, et ano v. Stewart, et al., Civ. No. B-90-
631 (JAC), or (d) any claims asserted or assertable by the United
States of America or its agencies in connection with the Debtors
and their operations on or prior to the Effective Date.
24. Except as otherwise provided in the Plan or in
this Order, or in any contract, instrument, indenture or other
agreement or document created in connection with the Plan, on the
Effective Date, all mortgages, deeds of trust, liens or other
security interest against the property of the Estates will be
released, and all the right, title and interest of any holder of
such mortgages, deeds of trust, liens or other security interests
shall revert to Reorganized Lone Star and its successors and
assigns.
25. Upon full satisfaction of an Allowed Secured
Claim pursuant to Section 5.1 of the Plan, all liens respecting
such Claim shall be deemed extinguished and of no further force and
effect.
26. All Persons holding Claims or Stock Interests
which are dealt with under the Plan shall be, and they hereby are,
directed to execute, deliver, file or record any document, and to
take any action necessary to implement, effectuate and consummate
the Plan in accordance with its terms and all such Persons shall be
bound by the terms and provisions of all documents to be executed
by them in connection with the Plan, whether or not such documents
actually have been executed by such Persons.
27. Except as provided in the Plan or in this
Order, as of the Confirmation Date, all Persons that have held,
currently hold or may have asserted a Claim or other debt or
liability or other right of a holder of a Stock Interest that is
released or terminated pursuant to the terms of the Plan are
permanently enjoined from taking any of the following actions on
account of such released Claims, debts or liabilities: (i)
commencing or continuing, in any manner or in any place, any action
or other proceeding; (ii) enforcing, attaching, collecting or
recovering in any manner any judgment, award, decree or order;
(iii) creating, perfecting or enforcing any lien or encumbrance;
(iv) asserting a setoff, right of subrogation or recoupment of any
kind against any debt, liability or obligation due to any such
releasing entity; and (v) commencing or continuing any action, any
manner or in any place, that does not comply with or is
inconsistent with the provisions of the Plan.
28. Reorganized Lone Star shall assume, to the
extent such obligations have not been rejected prior to
Confirmation, all obligations relating to indemnification and
exculpation of Lone Star and its subsidiaries and affiliates, and
respective present or former directors, officers, employees,
fiduciaries, agents or controlling persons as arise under
applicable laws or as provided in any of (a) Lone Star's restated
certificate of incorporation in effect prior to or as of the date
hereof, (b) Lone Star's by-laws in effect prior to or as of the
date hereof, (c) any agreement with Lone Star, or (d) the
certificates of incorporation, bylaws or similar documents or
agreements of any of Lone Star's subsidiaries as in effect prior to
or as of the date hereof, in each case with respect to matters
occurring on or prior to the Effective Date.
29. Any and all executory contracts and unexpired
leases of the Debtors not expressly rejected and disaffirmed prior
to the Confirmation Date, or that are not as of the Confirmation
Date the subject of pending applications to reject and disaffirm,
shall be deemed assumed by the Debtors; provided, however, that the
entry of this Order shall be deemed to be a rejection of all then
outstanding unexercised stock options.
30. This Court hereby retains jurisdiction of
these Chapter 11 Cases pursuant to and for the purposes of (i)
Article X of the Plan, (ii) Titles 11 and 28 of the United States
Code and (iii) such other purposes as may be necessary or useful to
aid in the confirmation and consummation of the Plan and its
implementation. Except as may have been expressly provided in
prior orders of the Court, notwithstanding anything in the Plan to
the contrary, the Court shall retain sole and exclusive juris-
diction to determine any dispute or cause of action arising under
any agreement or arrangement approved by the Court providing for a
sale, transfer or assignment of assets of any of the Debtors, and
to determine the scope, extent and applicability of all compromises
and releases under the Plan or this Order.
31. Following the Effective Date, Reorganized Lone
Star shall be, and it hereby is, ordered and appointed to represent
the Debtors' Estates, assume the Debtors' authority in respect
thereof and complete the Debtors' responsibilities in regard to
matters in relation to the cases including, inter alia, with
respect to objection to Claims, post-confirmation notices, reports
and the final report and decree in accordance with Bankruptcy Rule
3022 and Local Rule 58 and Reorganized Lone Star shall select its
own counsel and advisors with respect to the foregoing.
32A. Notwithstanding anything to the contrary
contained in the Plan, the claims (collectively, the "Class
Claims") filed by or on behalf of Maurice Cohn on behalf of himself
and all other claimants within his class (the "Cohn Action Claims")
and by or on behalf of Andrew Garbarino and Madeline Garbarino on
behalf of themselves and all others within their class (the
"Garbarino Class Action Claim"), in or related to their capacities
as lead plaintiffs in two consolidated actions in the United States
District Court for the District of Connecticut, captioned Cohn v.
Lone Star Industries, Inc. et al. (now captioned Maurice Cohn
against James E. Stewart Class No. B-84-617 (JAC), and Garbarino et
ano v. Stewart et al. v. Stewart et al. (now captioned Andrew
Garbarino et ano against James E. Stewart (Case No. B-90-631
(JAC)), shall be fixed and allowed as Class 4B unsecured claims as
follows:
Cohn Class Action Claim: $1,875,000.00
Garbarino Class Action Claim: $ 625,000.00
B. A further order of this Court will be entered
to further memorialize the restitution and settlement of the
objection filed by the Class Action Claimants as provided for
herein and as set forth on the record of the hearing held before
this Court on February 17, 1994.
33. Prior to the Effective Date, each proof of
claim filed in these cases by Stresscon, Adelaide Brighton Cement
(Hawaii), Inc., RMC LONESTAR, Hawaiian Cement, Lone Star Northwest,
Inc., and Rocla Concrete Tie Inc. (collectively, the "Joint
Ventures") shall either be (i) allowed, or (ii) subject to the
reserve created in accordance with Section 6.8 of the Plan. In
accordance with the Plan, the amount to be reserved will either be
agreed to by the parties or will be determined by this Court.
Notwithstanding anything herein to the contrary, confirmation of
the Plan shall not affect the rights of any Joint Venture or Joint
Venture partner to assert any cause of action, legal theory or
defense in connection with their proof of claim or any issues
relating to insurance wherein a Joint Venture or Joint Venture
partner was provided insurance directly or indirectly through or by
Lone Star, or the establishment of the reserve amount for such
claim. The Debtors reserve their rights to dispute or defend any
such assertion of a cause of action, legal theory or defense on any
ground.
34. Notice of entry of this Order and the
Effective Date of the Plan, substantially in the form annexed
hereto as Exhibit "A" (which is hereby approved in its entirety),
shall be, and hereby is, deemed sufficient (a) if served by first
class mail within 20 days from the Effective Date upon (i) all
persons having filed a notice of appearance herein (ii) all holders
of Allowed Claims and (b) if published once within 20 days from the
Effective Date in the national editions of The New York Times and
The Wall Street Journal.
35. The Debtors are hereby authorized and directed
to reimburse Hellman & Friedman Capital Partners II, L.P.
("HFCPII") and Lacos Land Company for their reasonable documented
fees and expenses incurred in connection with these Chapter 11
cases, without further order of this Court, in the respective
amounts of $400,000 and $200,000; provided, however, that
reimbursement to HFCPII shall only be made upon HFCPII's submission
of invoices to the Debtors, the Creditors' Committee, the Retiree
Committee and the Equity Committee evidencing its incurrence of
fees and expenses in at least the amount set forth above.
36. The occurrence of the Effective Date shall be
conditioned upon the entry of a final order approving the
settlement with the Pension Benefit Guaranty Corporation.
37. In light of the Modification and the
statements made on the record of the Confirmation Hearing, the
Debtors shall be deemed to have complied with Local Bankruptcy Rule
57(b).
38. The Debtors shall submit to this Court a
separate scheduling order with respect to final Professional Fee
applications.
Dated: New York, New York
February 17, 1994
/s/ Tina L. Brozman
UNITED STATES BANKRUPTCY JUDGE
