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, 1994
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 1-06124
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
Common Stock Purchase Rights New York Stock Exchange
Common Stock Purchase Warrants New York Stock Exchange
10% Senior Notes Due 2003 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. The
registrant's Plan of Reorganization became effective on April 14,
1994 and on that date all of its old equity securities were
cancelled and equity securities issued to holders of claims in the
Bankruptcy and holders of old equity securities.
Aggregate market value of voting stock held by non-affiliates of
the registrant at March 10, 1995: approximately $235,000,000.
The number of shares outstanding of each of the registrant's
classes of common stock as of March 10, 1995: new common stock, par
value $1 per share - 12,070,283 shares
Portions of the Proxy Statement of Registrant for the Annual
Meeting of Stockholders to be held on May 11, 1995 are incorporated
in Part III of this Report.
TABLE OF CONTENTS
Part I
Page
Item 1. Business........................................ 1
Item 2. Properties...................................... 16
Item 3. Legal Proceedings............................... 17
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. Consolidated Financial Statements and Supplementary
Data................................................ 42
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.............. 88
Part III
Item 10. Directors and Executive Officers
of the Registrant.................................... 88
Item 11. Executive Compensation.......................... 88
Item 12. Security Ownership of Certain
Beneficial Owners and Management..................... 88
Item 13. Certain Relationships and
Related Transactions................................. 88
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 is a cement, construction aggregates and
ready-mixed concrete company, with operations in the United
States (principally in the midwest and southwest and on the East
Coast) and Canada. Lone Star's cement operations consist of
five cement plants in the midwestern and southwestern regions of
the United States and a 25% interest in Kosmos Cement Company, a
partnership which operates one cement plant in each of Kentucky
and Pennsylvania. These five wholly-owned cement plants
produced approximately 3.8 million tons of cement in 1994, which
approximates the rated capacity of such plants. Lone Star's
aggregate operations serve the construction market in the New
York metropolitan area, the East Coast and Gulf Coast of the
United States, the Caribbean and the Nova Scotia and Prince
Edward Island areas of Canada. The ready-mixed concrete
business operates in central Illinois and the Memphis, Tennessee
area. On a pro forma basis after giving effect to the Plan of
Reorganization described below and the adoption of fresh-start
reporting in connection therewith, the Company had approximately
$307 million in net sales in 1994, with cement, construction
aggregates and ready-mixed operations representing approximately
69%, 17% and 14%, respectively, of such net sales.
Unless the context otherwise requires, as used herein the
"Company" or "company" shall mean Lone Star Industries, Inc.
together with its subsidiaries and affiliates, including Rosebud
Holdings, Inc. and its subsidiaries, and "Lone Star" shall mean
the Company excluding Rosebud Holdings, Inc. and its
subsidiaries.
Lone Star Industries, Inc. 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. The Company'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.
B. Bankruptcy Reorganization Proceedings
In December 1990, Lone Star Industries, Inc. and certain
of its subsidiaries commenced proceedings under Chapter 11 of
the Federal Bankruptcy Code (the "Chapter 11 Proceedings"). The
Chapter 11 Proceedings were precipitated by a variety of factors
including generally depressed economic and business conditions,
increasingly restricted sources of financing, potential defaults
under long-term debt agreements, potential litigation exposure
relating to concrete railroad crossties, and uncertainty and
potential liabilities with respect to environmental, retiree
benefit and pension related obligations. The Chapter 11
Proceedings were commenced 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 April 14, 1994 (the "Plan Effective Date"), the Company
emerged from its Chapter 11 Proceedings pursuant to a plan of
reorganization (the "Plan of Reorganization"). Upon emergence
from the Chapter 11 Proceedings, the Company was reorganized
around its core domestic operations, while remaining non-core
assets and operations (the "Rosebud Assets") were transferred to
Rosebud Holdings, Inc. and its subsidiaries (collectively,
"Rosebud"), a wholly-owned liquidating subsidiary formed
pursuant to the Plan of Reorganization. Also transferred to
Rosebud was Lone Star's right to recover under certain
litigations. See also Item 1.I "Liquidating Subsidiary."
Pursuant to the Plan of Reorganization, pre-petition
equity interests were canceled and Lone Star issued (i)
12,000,000 shares of common stock, par value $1 per share (the
"Common Stock"), (ii) 4,003,333 common stock purchase warrants
(the "Warrants") entitling the holders thereof to purchase one
share of Common Stock at $18.75 until December 31, 2000, (iii)
10% Senior Notes due 2003 in the aggregate principal amount of
$78,000,000 (the "Senior Notes"), and (iv) a guarantee by Lone
Star (the "Company Guarantee"), in part, of the Asset Proceeds
Notes (defined below) issued by Rosebud. These securities were
issued to holders of pre-petition equity and pre-petition
secured and unsecured creditors in exchange for the cancellation
of pre-petition equity interests and satisfaction of
pre-petition claims. In addition, certain pre-petition
indebtedness was discharged, certain pre-petition indebtedness
was reinstated or restructured and assumed, certain litigations
were settled, certain pre-petition creditors received cash, new
indebtedness and a percentage of new equity interests in
satisfaction of their claims, and a restructured Board of
Directors was designated. The Plan of Reorganization also
implemented, among other things, settlements relating to (i) a
production payment financing transaction, (ii) post-retirement
health and welfare benefits for union and non-union retirees of
the Company and (iii) pension benefit obligations of the
Company. These settlements all provide for certain ongoing
obligations of the Company. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and Notes 22, 31, and 32.
Pursuant to the Plan of Reorganization, Rosebud issued 10%
Asset Proceeds Notes due 1997 in the aggregate principal amount
of $138,118,000 (the "Asset Proceeds Notes") to pre-petition
unsecured creditors of the Company. A portion of Rosebud's
obligations under the Asset Proceeds Notes is guaranteed by Lone
Star. In connection with the Plan of Reorganization, Lone Star
entered into a Management Services and Asset Disposition
Agreement (the "Management Services Agreement") with Rosebud
pursuant to which, among other things, Lone Star makes
management personnel available to manage, market and dispose of
the Rosebud Assets in exchange for a fee payable to Lone Star.
See Item 1.I, "Liquidating Subsidiary."
As part of a pre-petition restructuring which commenced in
1989 and continued while the Chapter 11 Proceedings were
pending, the Company implemented a comprehensive organizational
and financial restructuring. As part of this process, the
Company closed various offices and facilities, centralized and
reduced its corporate management structure, sold or otherwise
disposed of non-core or unprofitable assets and operations
(including substantially all partnership, joint venture and
foreign interests), rejected, modified and assumed contracts and
leases, and implemented many programs designed to improve the
operating procedures, controls, efficiency and profitability of
its ongoing operations. Certain assets that had been held for
sale under the 1989 restructuring program were included as part
of the reorganized entity and other assets that were identified
to be sold during the Chapter 11 Proceedings but had not been
sold prior to the conclusion of the reorganization were
transferred to Rosebud for ultimate disposition. In addition,
the Company adopted fresh-start reporting, which assumed that a
new reporting entity was formed as of the Plan Effective Date,
which was deemed to be March 31, 1994 for accounting purposes,
and required assets and liabilities be adjusted to their fair
values as of the Plan Effective Date. Accordingly, there is no
comparable historical financial information available for the
assets and businesses that constitute the reorganized Company.
See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
C. Cement Operations
Lone Star produces principally portland cement, the basic
binding agent in ready-mixed concrete, and also produces
specialty cements such as masonry and oil well. In addition,
Lone Star imports portland cement and sells slag cement. The
major portion of the domestic cement shipped by Lone Star is to
unrelated ready-mixed concrete suppliers. Lone Star also
supplies its own ready-mixed concrete operations. All of Lone
Star's plants are fully integrated from limestone mining through
cement production and Lone Star estimates that limestone
reserves are sufficient to permit operation of its plants at
current levels of production for 30 to 100 years. Adequate
supplies of other raw materials such as gypsum, shale, clay and
sand are either owned, leased or available for purchase by Lone
Star.
Lone Star has a certain production payment agreement
relating to limestone reserves located adjacent to two of the
cement plants described below. Pursuant to such agreement, Lone
Star transferred such reserves in consideration of its right and
obligation to extract and process these reserves into cement.
Pursuant to the agreement, Lone Star is required to make
payments in advance for minerals used at the two plants and to
take or pay for minerals in amounts sufficient to permit the
purchaser to service the note associated with the production
payment facility. For additional information concerning the
production payment agreement, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and Note 22.
Lone Star's cement operations consist of five wholly-owned
cement plants and a 25% interest in Kosmos Cement Company, a
partnership which operates one cement plant in each of Kentucky
and Pennsylvania. Lone Star also operates a total of 14 cement
distribution terminals. The following table sets forth certain
information regarding such plants:
Tons of
Rated Annual
Cement Capacity
Plant Location (in thousands) Process Fuel
Cape Girardeau, Missouri 1,200 Dry/Precalciner Coal- Waste-Tires
Greencastle, Indiana 750 Wet Coal- Waste
Pryor, Oklahoma 725 Dry Coal- Coke-Natural Gas
Oglesby, Illinois 600 Dry Coal- Coke-Tires
Maryneal, Texas 520 Dry\Preheater Coal- Coke-Natural Gas
Kosmos Cement Company
Kosmosdale, Kentucky 700 Dry\Preheater Coal- Oil
Pittsburgh, Pennsylvania 360 Wet Coal
Plant Location Principal Market Area
Cape Girardeau, Missouri E. Missouri; Central and N.E.
Arkansas; Mississippi; S.
Louisiana; N. Alabama;
Tennessee; N.W. Kentucky;
S.W. Illinois
Greencastle, Indiana Indiana; S.E. Illinois; N.
Central Kentucky
Pryor, Oklahoma Oklahoma; Dallas, Texas;
Kansas; W. Missouri
Oglesby, Illinois Central and N. Illinois;
S. Wisconsin
Maryneal, Texas W. Texas; E. New Mexico
Kosmos Cement Company
Kosmosdale, Kentucky Kentucky; S. Indiana; S. Ohio;
W. Virginia
Pittsburgh, Pennsylvania W. Pennsylvania; W. Virginia;
E. Ohio
Cape Girardeau Complex. Lone Star's cement complex in
Cape Girardeau, Missouri consists of a cement plant which uses a
modern dry/precalciner kiln; a raw materials quarry; and several
key distribution terminals. The Cape Girardeau complex is
located on the Mississippi River and approximately 80% of such
plant's cement production is shipped from the Cape Girardeau
complex by 14 barges owned by Lone Star. Distribution by water
is the least expensive method of transporting cement and enables
the Cape Girardeau complex to serve a wider market than a
non-water-based cement plant. Distribution by barge, however,
is also subject to interruption from time to time due to
changing river conditions brought about by either flood or
drought. The Cape Girardeau complex also supplies cement to
Lone Star's ready-mixed operation that is located in Memphis,
Tennessee. Hazardous waste fuels provide up to 30% of the
annual energy needs at the plant, contributing further to a
reduction of production costs. See Item 1.J, "Environmental
Regulation" and Item 3, "Legal Proceedings--Environmental
Matters" regarding issues affecting, and the curtailment of
the use of, waste fuels. The Cape Girardeau complex has
distribution terminals located in St. Louis, Missouri; Brandon,
Mississippi; Paducah, Kentucky; Nashville and Memphis,
Tennessee; and New Orleans, Louisiana.
Greencastle Complex. Lone Star's Greencastle cement plant
is located approximately 40 miles Southwest of Indianapolis,
Indiana and is the closest cement plant to this market. The
close proximity to Indianapolis provides a freight cost
advantage to Lone Star. The Greencastle plant produces a high
quality Type III portland cement, which is a high early strength
cement required in certain applications and sells for a premium
price relative to other types of portland cement. This plant
also supplies cement to Lone Star's ready-mixed concrete
operations in central Illinois. Although this plant utilizes
the "wet" process of clinker production, the Company offsets
such disadvantage through lower power and coal costs, and higher
labor productivity. Hazardous waste fuels have provided up to
40% of the annual energy needs at the plant, although use of
such waste fuels was minimal in 1994, and is expected to
continue to be minimal unless and until costly plant upgrades
are undertaken. See Item 1.J, "Environmental Regulations" and
Item 3, "Legal Proceedings--Environmental Matters" for
information regarding issues affecting, and the curtailment of,
the use of waste fuels. In early 1994, an upgraded precipitator
was installed to facilitate the Greencastle complex's ability to
meet anticipated clean air standards that are expected to be
promulgated and effective in the next several years. The
limestone used in the production of clinker at this plant is
subject to the production payment agreement described above.
The Greencastle complex has distribution terminals located in
Fort Wayne and Elkhart, Indiana and has a warehousing and
distribution arrangement in Itasca, Illinois.
Pryor Complex. The Pryor plant provides cement to the
Kansas, Oklahoma and Dallas, Texas areas and is located
approximately 50 miles Northeast of Tulsa, Oklahoma. This plant
produces a cement used in oil wells, in addition to cement used
in construction activity. Management believes that this plant
has a competitive advantage due to its relatively low power
costs. The limestone used in the production of clinker at this
plant is subject to the production payment agreement described
above. The Pryor complex has distribution terminals located in
Kechi (Wichita) and Bonner Springs (Kansas City), Kansas,
Oklahoma City, Oklahoma and Dallas, Texas.
Oglesby Complex. The Oglesby plant provides cement to the
Chicago, Illinois area construction market by truck as well as
serving central and northern Illinois. This plant also supplies
cement to Lone Star's ready-mixed concrete operations in central
Illinois. An upgraded precipitator was installed in the Spring
of 1994 to facilitate the plant's ability to meet anticipated
clean air standards that are expected to be promulgated and
effective in the next several years. Pursuant to the Plan of
Reorganization, Lone Star granted a security interest in this
plant to the Pension Benefit Guaranty Corporation ("PBGC") to
secure potential claims arising from future pension obligations
of the Company. This plant's distribution terminal is located
in Milwaukee, Wisconsin.
Maryneal Complex. The Maryneal plant produces cement used
in oil well and construction activity and serves the western
Texas and eastern New Mexico areas. The Maryneal complex has
distribution terminals located in Amarillo and Dallas, Texas
whereby Lone Star can supplement or replace cement sourced from
the Pryor plant.
Kosmos Cement Company. Kosmos Cement Company ("Kosmos")
is a partnership in which Lone Star has a 25% interest.
Southdown, Inc., a publicly-traded cement company, holds the
remaining 75% interest. Kosmos operates a cement plant in each
of Kosmosdale, Kentucky and Pittsburgh, Pennsylvania.
Southdown, Inc. is responsible for managing the day-to-day
operations of Kosmos; however, all major decisions require
unanimous approval from the management committee of which a Lone
Star representative is a member. Pursuant to the Plan of
Reorganization, Lone Star pledged its interest in this
partnership to the PBGC to secure potential claims arising from
future pension obligations of the Company.
New Orleans Facility. The New Orleans facility is the
site of a former cement plant that has been converted to a
distribution terminal which Lone Star uses for importing cement.
The imported cement either is sold from the New Orleans facility
or the Brandon, Mississippi terminal. The New Orleans facility
is located off the Gulf Intercoastal Waterway, and can
accommodate ocean going-sized vessels. Lone Star has decided to
utilize certain pieces of equipment from the former cement plant
for use in the production of slag cement. Production of slag
cement involves the grinding of granulated slag, a by-product of
steel mill blast furnaces to a fineness that is 20% finer than
regular portland cement. This ground product can be partially
substituted for portland cement in the production of ready-mixed
concrete. Slag cement production began in early 1995.
D. Construction Aggregate Operations
Lone Star, through two wholly-owned subsidiaries New York
Trap Rock Corporation ("New York Trap Rock") and Construction
Aggregates Limited ("Construction Aggregates"), produces
construction aggregates, including sand, crushed stone and other
stone products. Lone Star's total annual production capacity is
approximately 8.5 million tons and total reserves are in excess
of 1.5 billion tons. Sales volume in 1994 approximated 6.0
million tons. The market for construction aggregates is more
highly regionalized than cement operations, with most aggregates
sold within a 50-mile radius of a quarry. Two of Lone Star's
quarries, however, are located on water, which greatly increases
the area in which the product can be distributed. The following
table sets forth certain information regarding Lone Star's
aggregate operations:
Estimated Annual
Production Capacity
Plant Location (in thousand tons) Type of Aggregate
New York Trap Rock
Clinton Point..... 4,500 Wappingers Dolomite
West Nyack........ 1,100 Diabase Trap Rock
Construction Aggregates. 2,500 Devonian Granite
Estimated
Minimum
Plant Location Reserves (Years)
New York Trap Rock
Clinton Point..... 60
West Nyack........ 80
Construction Aggregates.. 280
New York Trap Rock
Clinton Point Plant. The Clinton Point quarry is located
on the Hudson River approximately 50 miles from the New York
City area, which is its primary market. Lone Star owns one
barge and leases a fleet of 116 barges used to transport product
down the Hudson River to customers located throughout New York
City and Long Island. Approximately 80% of Clinton Point's
sales are delivered by barge, with the balance delivered by
truck to the local market surrounding the plant. The access to
water distribution enables this plant to distribute its product
to a wider area than truck-based distribution systems. Lone
Star's primary customers are ready-mixed concrete producers and
asphalt producers, which account for 80% of this plant's sales,
with the remainder of the aggregate sold for roadway projects
and specialty use such as rip rap for the construction of
jetties.
West Nyack Plant. The West Nyack quarry is located in
Rockland County, Northwest of New York City, and ships all of
its product by truck. The market served by this plant is
primarily the counties surrounding the quarry location.
The West Nyack Plant currently is not cost competitive and
the Company is reviewing all of its options regarding New York
Trap Rock, including the construction of a modern low-cost plant
at West Nyack, at an expected cost not to exceed $20 million, or
the sale of New York Trap Rock.
Construction Aggregates
The Construction Aggregates quarry is located in Nova
Scotia, Canada on the Strait of Canso, an all-weather deep water
harbor, which permits Lone Star to load vessels of up to 65,000
tons. This size vessel enables the plant to deliver a
cost-competitive product to the East Coast and Gulf Coast of the
United States and the Caribbean markets. The plant also
services Nova Scotia and Prince Edward Island in Canada. This
plant is a low-cost facility, but the lack of ships at
competitive freight rates to transport product has been a recent
deterrent to supplying the United States coastal markets. The
granite that is located in the quarry is useful in asphalt and
road construction operations where skid resistance is required.
Construction Aggregates supplies granite to the Clinton Point
quarry where it is blended with dolomite from such quarry to
meet certain skid resistance specifications.
E. Ready-Mixed Concrete Operations
Lone Star's ready-mixed concrete operations in the
vicinity of its Cape Girardeau, Greencastle and Oglesby cement
complexes have been vertically integrated, enabling it to be a
major supplier of ready-mixed concrete and other concrete
products in central Illinois and the Memphis, Tennessee area.
Lone Star's ready-mixed concrete operations purchase cement from
Lone Star's cement plant in their vicinity and from outside
suppliers. Ready-mixed concrete is sold to a variety of end
users, but is used primarily in residential construction and
infrastructure projects. The Company's sales of ready-mixed
concrete were approximately 722,000 cubic yards in 1994.
Associated with one of Lone Star's ready-mixed operations in
central Illinois is a small sand and gravel operation that
primarily provides these raw materials to Lone Star's
ready-mixed concrete operation in that vicinity.
F. Customers and Marketing
Each plant has a broad customer base that encompasses,
among others, ready-mixed concrete producers, prestressed
concrete producers, other concrete product producers and highway
construction firms. Taken as a whole, no single customer of the
company accounted for more than 10% of total sales in 1994. Due
to the low value-to-weight ratio, cement, construction
aggregates and ready-mixed concrete operations are very regional
in nature. As such, the marketing effort for such operations is
handled by a local sales force for each plant. Most purchases
of the Company's products are done on a spot basis. Accordingly,
order backlogs are not significant.
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.
G. Seasonality
The Company's operations are materially affected by
seasonal changes, particularly in the northern United States
markets where colder weather affects construction activity.
Construction spending and cement consumption historically have
fluctuated widely. Demand for cement is correlated to cyclical
construction activity, which, in turn, is influenced largely by
economic conditions, including (particularly in the case of
residential construction) prevailing interest rates and
availability of public funds for infrastructure construction
projects.
H. Competitive Conditions
The markets for the Company's products are highly
competitive. Due to the lack of product differentiation,
competition in the cement industry is based largely on price.
To a lesser extent, other factors such as service, delivery time
and proximity to the customer are important considerations.
Accordingly, the Company's profitability is dependent on levels
of cement demand and on the Company's ability to manage
operating costs, and is very sensitive to small shifts in the
balance between supply and demand. These factors can
significantly impact selling prices and the Company's
profitability. Based on statistics compiled by the United
States Bureau of Mines, the price for cement remained in a
narrow range throughout the 1980's. Improvement in the
performance of the United States economy coupled with lower
imports and declining domestic production capacity have led to a
more favorable supply/demand ratio for cement suppliers, which
enabled the Company to implement price increases in 1994.
Because the Company sells in many areas of the country, the
number of competitors differs from area to area. Competitors
include domestic and foreign producers and importers.
The United States cement industry is comprised of
approximately 50 companies with an annual cement production
capacity in the 85 to 87.5 million ton range. The 10 largest
companies account for approximately 60% of the total productive
capacity. While modest increases in the production capacity of
the industry can be accomplished through modifications to
existing facilities, significant new productive capacity is not
expected due to the high cost of new plants and the lengthy
regulatory permitting process that is necessary. Imported
cement may be required to fill the gap between the demand for
cement and the domestic productive capacity.
I. Liquidating Subsidiary
Rosebud was established pursuant to the Plan of
Reorganization for the purpose of disposing of the Rosebud
Assets for the benefit of holders of the Asset Proceeds Notes
and operating such assets pending their ultimate disposition.
Rosebud is in the process of selling the Rosebud Assets and
concluding the litigations transferred to it; however, it is
difficult to estimate the time required to complete this
process. Moreover, Rosebud's ability to sell the Rosebud Assets
may be affected by events and results of operations at the
various operating entities transferred to Rosebud and its
ability to conclude the litigations may be affected by events
outside of its control.
The assets transferred to Rosebud include (a) (i) Lone
Star's 50% partnership interest in RMC LONESTAR (a
vertically-integrated cement, aggregate and concrete producer in
California which partnership interest is owned by Lone Star
California, Inc. which company was transferred to Rosebud),
(ii) a Lease and Sublease, dated December 31, 1987, between RMC
LONESTAR and Lone Star relating to Lone Star's interest in the
Santa Cruz, California cement plant (which lease was assigned in
connection with the sale of the Santa Cruz plant) and
(iii) Promissory Notes in the principal amount of $16,833,329
executed by RMC LONESTAR in favor of Lone Star California, Inc.
(Rosebud granted an option expiring April 30, 1995 to an
affiliate of its RMC LONESTAR joint venture partner to purchase
the stock of this company); (b) Lone Star's 50% partnership
interest in Lone Star-Falcon (former owner of cement terminals
in Texas); (c) Lone Star's 50% partnership interest in Hawaiian
Cement (a vertically-integrated supplier of cement, aggregates
and ready-mixed concrete in Hawaii); (d) cement plants located
in Santa Cruz, California and Nazareth, Pennsylvania (which
plants were sold in June 1994 and December 1994, respectively);
(e) the right to receive any recovery in certain litigations,
the most significant of which are (i) Lone Star Industries, Inc.
et al. v. LaFarge Corp., et al. (a suit involving allegations
of breach of warranties in connection with Lone Star's purchase
of cement used to manufacture substantially all of the crossties
involved in the railroad crosstie litigation, alleged fraudulent
sale of defective cement and a claim of violations of the
Massachusetts Deceptive Practices Act); (ii) Lone Star
Industries, Inc. v. Liberty Mutual Insurance Company et al. (a
suit against various insurance companies related to Lone Star's
claim for indemnity in the crosstie litigation and for the
reimbursement of defense costs in connection with such
litigation, which suit was settled by Liberty Mutual Insurance
Company, the primary insurer, prior to the transfer to Rosebud
of the right to receive recovery thereunder and in July 1994 by
most of the remaining defendants by payment to Rosebud of
$5,300,000); and (iii) Lone Star Industries, Inc. v. Compania
Naviera Perez Companc, S.A.C.F.I.M.F.A. et al. (a suit which
alleges collusion, fraud and tortious interference by several
defendant companies in connection with the auction sale by Lone
Star of its Argentine subsidiary; in December 1994, the United
States Court of Appeals for the Second Circuit reversed the
summary dismissal of this case by the Bankruptcy and District
Courts and remanded the case to the Bankruptcy Court for further
proceedings); (f) a secured 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 (a judgment for the unpaid principal amount plus
interest and costs was awarded and Rosebud has entered into a
settlement agreement with Mr. Riedel calling for a cash payment
by him and the transfer to Rosebud of two parcels of real estate
securing a new note); and (g) certain surplus real estate.
Liabilities associated with the foregoing assets also were
transferred to Rosebud. Notwithstanding such transfer, the
assumption of Lone Star's liabilities by Rosebud may not be
binding upon third parties, and, in any event, as to any such
liabilities arising from actions or circumstances that existed
on or before April 14, 1994 and that result in payments to Lone
Star aggregating in excess of $7,000,000, Rosebud's obligation
to indemnify Lone Star in respect thereof is subordinated to
repayment of the Asset Proceeds Notes.
Lone Star provides management and various other services
(which included personnel for the Nazareth cement plant
operations prior to its sale) to Rosebud pursuant to the
Management Services Agreement. Rosebud pays 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, prior to its sale) and
reimburses Lone Star for all of Lone Star's payments to third
parties on behalf of Rosebud subject to the limitations
described above. For the various litigations, Rosebud pays Lone
Star a quarterly fee of $10,000. Rosebud paid Lone Star a fee of
$1,489,909 for services rendered during 1994.
The Asset Proceeds Notes bear interest at a rate of 10%
per annum, payable in cash and/or additional Asset Proceeds
Notes (at the option of Rosebud), in semi-annual installments on
each of January 31 and July 31, and have a maturity date of
July 31, 1997. The indenture governing the Asset Proceeds Notes
(the "Rosebud Indenture") provides that interest and principal
on the Asset Proceeds Notes shall be paid from the net proceeds
of Rosebud Asset dispositions and net proceeds, if any, received
by Rosebud in connection with certain litigations transferred to
it. The Asset Proceeds Notes are secured by liens and security
interests, as the case may be, on all of the Rosebud Assets.
Pursuant to the Rosebud Indenture, Rosebud is required to
transfer to a collateral agent all net proceeds received by it
from asset dispositions or from the litigations transferred to
it; provided, however, Rosebud is entitled to retain $5,000,000
as a cash reserve and up to an additional $5,000,000 for
anticipated working capital needs. A portion of Rosebud's
obligations under the Asset Proceeds Notes is guaranteed by the
Company Guarantee. If, at the maturity date of the Asset
Proceeds Notes, the aggregate amounts of all cash payments of
principal and interest on such notes is less than $88,118,000,
the Company Guarantee is, and any five-year notes issued
pursuant thereto will be, payable in either cash, five-year
notes or a combination thereof (at the option of Lone Star) to
cover the shortfall between the actual payments and $88,118,000,
plus interest; provided, however, that the total amount paid
pursuant to the Company Guarantee cannot exceed $28,000,000.
The Company Guarantee is secured by a pledge of Lone Star's
right, title and interest in and to all of the issued and
outstanding common stock of Rosebud. Rosebud made cash payments
of principal and interest on the Asset Proceeds Notes of
approximately $37,633,000 in 1994. In 1995, Rosebud made the
first semi-annual interest payment in cash and made a cash
payment of principal and interest on the Asset Proceeds Notes of
approximately $35,503,000. As a result of such payments, the
total amount paid pursuant to the Company Guarantee cannot
exceed $14,982,000. To the extent that amounts received upon
disposition of the Rosebud Assets and the Company Guarantee are
not sufficient to pay the principal and interest of the Asset
Proceeds Notes, such notes will not be paid. Other than the
initial $5,000,000 cash contribution made by Lone Star for
working capital purposes, Lone Star is not obligated to fund
additional Rosebud working capital requirements. See Item 7,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes 5 and 19.
In June 1994, Rosebud sold its cement plant located in
Santa Cruz, California for $33,063,000. Net proceeds from the
sale were transferred to the collateral agent to redeem a
portion of the Asset Proceeds Notes. In connection with the sale
of the Santa Cruz cement plant, Rosebud committed to complete,
and is presently undertaking, the closure of a former waste
landfill area on a portion of a site that was the subject of an
investigation by Santa Cruz County authorities at an anticipated
cost of approximately $1,500,000. Rosebud also has committed to
perform other environmental remediation activities at certain of
its real property locations. See Item 3, "Legal Proceedings--
Environmental Matters."
In December 1994, Rosebud sold its cement plant located in
Nazareth, Pennsylvania for $22,134,000. Net proceeds from the
sale were transferred to the collateral agent and were used to
redeem a portion of the Asset Proceeds Notes. In October 1994,
Rosebud granted an option exercisable through April 30, 1995 to
acquire the stock of the company holding the 50% interest in the
RMC LONESTAR partnership to an affiliate of the joint venture
partner.
The operator of Lone Star-Falcon's cement terminals
exercised an option to purchase Lone Star-Falcon's interest in
such facilities for $18,000,000. In January 1995, Rosebud
received approximately $9,000,000 as a return of capital from
the Lone Star-Falcon partnership, which amount was transferred
to the collateral agent and used to redeem a portion of the
Asset Proceeds Notes. Net proceeds of $200,000 representing a
payment received from Arthur A. Riedel in partial satisfaction
of the judgment secured against Mr. Riedel were transferred to
the collateral agent and used to redeem a portion of the Asset
Proceeds Notes. In addition, in 1994 Rosebud sold certain
surplus real estate for net cash proceeds of $695,000.
In November 1994, the jury in the retrial of the railroad
crosstie litigation returned a verdict entitling Lone Star to a
recovery from LaFarge Corporation on its claim of breach of
express warranty and awarded Lone Star $8,391,483. On
December 20, 1994, the trial court entered a partial judgment in
favor of Lone Star in the amount of $9,308,058, which amount
included prejudgment interest and reflected rejection of
Lafarge's claim to reduce the judgment by applying a statue of
limitations to the jury verdict. Interest on this judgment will
continue to accrue until it is paid. A hearing was held on
March 3, 1995 to consider Lone Star's pending claim under a
Massachusetts statute governing unfair trade. The rights to any
recovery of damages in this action have been assigned to Rosebud
pursuant to the Plan of Reorganization.
J. Environmental Regulation
The Company, like others in the construction materials and
cement manufacturing industry, is subject to federal, state and
local laws and regulations pertaining to the protection of the
environment and human health and safety. Many of these laws and
regulations apply to the Company's current operations, as well
as to past activities and closed or formerly owned or operated
properties or facilities. These laws and regulations are
extensive and technically complex and require the Company to
devote time and resources to ensure continued compliance with
applicable requirements. While it is not possible to assess
accurately the expected impact of future changes in existing
regulations or the enactment of new regulations on the Company,
the capital, operating and other costs of compliance with such
environmental requirements could be substantial. In certain
instances, future changes in regulatory requirements may require
the Company to undertake capital improvement projects or to
cease or curtail certain current operations.
The Clean Air Act was amended in 1990 to provide for a
uniform federal regulatory scheme governing control of air
pollutant emissions and permit requirements. As a result of
these amendments, in 1995 the Company will be required to apply
for federal operating permits for each of its cement
manufacturing facilities. As part of the permitting process,
the Company may be required to install equipment to monitor
emissions of air pollutants from its facilities. In addition,
the Clean Air Act amendments require the United States
Environmental Protection Agency ("EPA") to develop regulations
directed at reducing emissions of toxic air pollutants from a
variety of industrial sources, including the portland cement
manufacturing industry. As part of this process, EPA will
identify maximum available control technology ("MACT") for the
reduction of emissions of air toxics from cement manufacturing
facilities. Following EPA's promulgations of MACT for the
cement industry, the Company, like others in the industry, may
be required to install additional control technology at its
cement manufacturing facilities and meet more stringent air
emissions standards. It is possible that EPA will promulgate
separately MACT standards for those cement manufacturing
facilities (like Lone Star's Greencastle and Cape Girardeau
plants) which burn hazardous waste fuels ("HWF") which standards
may be even more stringent than those which apply to cement
manufacturing facilities not utilizing hazardous wastes as a
fuel source.
Cement kiln dust ("CKD"), a by-product of cement
manufacturing, is currently exempted from regulation as a
hazardous waste pursuant to the Bevill Amendment to the Resource
Conservation and Recovery Act ("RCRA"). However, the EPA
recently completed the Congressionally-mandated study of the
potential hazards posed by CKD, and on January 31, 1995 issued a
regulatory determination regarding the need for regulatory
controls on the management, handling and disposal of CKD.
Generally, the EPA regulatory determination provided that EPA
intends to draft and promulgate regulations imposing controls on
the management, handling and disposal of CKD that will be based
largely on selected components of the existing RCRA hazardous
waste regulatory program, tailored to address the specific
regulatory concerns posed by CKD. The EPA regulatory
determination further provided that the CKD regulations it will
be promulgating will be designed to be protective of the
environment while at the same time to minimize the burden on the
regulated community. It is not possible to predict at this time
what EPA's CKD regulations will provide regarding the imposition
of regulatory controls on the management, handling and disposal
of CKD, and what, if any, increased costs will be incurred by
the Company to comply with such new regulatory requirements.
Until the new EPA CKD regulations are finally promulgated (which
likely will take substantial time), CKD will remain exempt from
regulation as a hazardous waste pursuant to the Bevill
Amendment.
Lone Star's two cement manufacturing facilities which burn
HWF (Cape Girardeau and Greencastle plants) are currently
operating under interim status pursuant to RCRA. Lone Star is
in the process of securing the permit required under RCRA and
the federal Boiler and Industrial Furnace regulations (the "BIF
Rules) to enable it to continue the use of HWF at those
facilities. Due to a February 1994 court decision affecting BIF
Rules air emissions standard applicable to wet process cement
kilns, the Greencastle cement plant has substantially curtailed
its use of hazardous waste fuels pending capital upgrades to the
plant or the promulgation by EPA of a modified or new BIF Rules
air emission standard. There can be no assurances that Lone
Star will be successful in securing a final RCRA permit for
either or both of its HWF facilities, or, if able to secure such
permits, that the permits will contain terms and conditions with
which Lone Star will be able to comply or which will not require
costly upgrades to the facilities to enable Lone Star to achieve
such compliance.
While Lone Star believes that it is currently in
compliance with the extensive and complex technical requirements
of the BIF Rules and state requirements, the Company has been,
or is presently, involved in certain environmental enforcement
proceedings seeking civil penalties and injunctive relief for
past non-compliances. See Item 3, "Legal Proceedings --
Environmental Matters." There can be no assurances that Lone
Star will be able to maintain compliance with the BIF Rules or
that changes to such rules or their interpretation by the
relevant agencies or courts might not make it more difficult or
cost prohibitive to maintain compliance or continue to burn HWF.
Many of the raw materials, by-products and wastes used or
produced by cement manufacturing facilities, may contain
chemical elements or compounds which have been designated as
hazardous substances. The federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or
"Superfund"), as well as many comparable state statutes, creates
a joint and several liability scheme for the investigation and
remediation of facilities where releases of hazardous substances
are found to have occurred. Liability may be imposed upon
current owners and operators of the facility, upon owners and
operators of the facility at the time of the release and upon
generators and transporters of hazardous substances released at
the facility. The Company has been named by the EPA as a
potentially responsible party for the investigation and
remediation of several Superfund sites and is currently
undertaking investigation and remediation activities at several
facilities presently or formerly owned or operated by the
Company or at facilities to which the Company has sent waste
material under similar state environmental requirements. There
can be no assurances that the Company will not be named as a
potentially responsible party at additional Superfund Sites, or
that additional releases of hazardous substances will not be
found to have occurred at facilities presently or formerly owned
or operated by the Company.
For information concerning certain environmental matters
involving the Company, see Item 3, "Legal Proceedings--
Environmental Matters", Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
Note 34.
L. Employees
As of December 31, 1994, the Company had approximately
1,500 employees, of whom approximately 1,050 were members of
various labor unions. During 1994, Lone Star negotiated new
three-year labor contracts with the United Steelworkers of
America who represent the Company's hourly paid employees at its
Maryneal, Texas cement plant and Dallas, Texas cement terminal.
New three-year contracts were also negotiated with the
International Brotherhood of Teamsters who represent truck
drivers at the Company's ready-mixed concrete operations in
Danville and Bloomington, Illinois. In addition, the Company
successfully negotiated a new four-year labor contract with the
United Paperworkers International Union, covering hourly paid
employees at the Company's alternative fuels operation in Cape
Girardeau, Missouri.
Except for employees at certain cement distribution
terminals, all of the Company's hourly employees in its cement,
construction aggregates and ready-mixed concrete operations are
represented by labor unions. Upon Rosebud's sale of the
Nazareth, Pennsylvania cement plant in December 1994, a
negotiated plant closeout agreement, intended to resolve all
employment related issues between Lone Star and the collective
bargaining representative of the hourly employees at the cement
plant became effective.
In 1994, there were no labor disruptions at any of the
Company's facilities. The Company believes that relations with
its employees are good.
A number of collective bargaining agreements covering Lone
Star's hourly employees are scheduled to expire during 1995 and
1996. Significant agreements that expire in early 1995 are those
with the International Brotherhood of Teamsters who represent
the truck drivers employed by Lone Star's ready-mixed concrete
operations in Memphis, Tennessee and Peoria, Illinois. The
Company does not anticipate any unusual circumstances or
difficulties in obtaining replacement agreements.
ITEM 2. PROPERTIES.
Lone Star's main operations are conducted at its plants
and distribution terminals as set forth in Item 1, "Cement
Operations", "Construction Aggregate Operations" and "Ready-
Mixed Concrete Operations" above. Lone Star owns all of the
cement plants and a majority of the distribution terminals used
in its cement operations. With respect to those distribution
terminals not owned, Lone Star holds a landlease for the
underlying real property and owns the facilities located on such
property. There are two additional distribution terminals that
are leased to third parties, one of which terminals Lone Star is
presently negotiating to sell. Lone Star has sold certain
limestone reserves adjacent to two of its cement plants,
pursuant to the production payment agreement. See Item 1,
"Cement Operations" and Note 22. Lone Star owns or leases its
aggregate plant sites or has purchased the aggregate minerals in
place. In each case, subject to lease termination dates, it has
the right to continue mining operations until the deposit is no
longer suitable for commercial exploitation. The ready-mixed
concrete plants are located on owned land or sites held under
leases for varying terms. No difficulty is anticipated in
renewing leases as they expire or finding satisfactory
alternative plant sites. The Company leases executive offices
in Stamford, Connecticut and owns or leases offices in
Indianapolis, Indiana and West Nyack, New York. The Company
also owns or leases 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
section or in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 35.
Environmental Matters
While the Company generally has been able to maintain its
operations in compliance with the requirements of environmental
laws and regulations, it has been, or is presently, involved in
certain environmental enforcement matters. In September 1992, as
part of an EPA enforcement initiative targeting facilities
burning hazardous waste fuels, a complaint was issued by EPA
against Lone Star's Greencastle cement facility alleging
violations of the BIF Rules and seeking a civil penalty in
excess of $3.8 million. In 1994 Lone Star resolved with EPA all
the matters alleged in the complaint and paid a penalty of
$315,000. Lone Star also resolved certain violations alleged by
the State of Indiana in connection with the Greencastle cement
plant's hazardous waste fuel burning operations and paid a
penalty of $87,250. In March 1994, the EPA commenced an
administrative proceeding against Lone Star in connection with
alleged violations of regulations governing the handling and
burning of hazardous waste fuels at Lone Star's Cape Girardeau
cement facility and seeking a civil penalty in excess of
$500,000. Lone Star negotiated a final settlement with EPA
which requires the payment by Lone Star of a civil penalty of
approximately $189,500, approximately $87,000 of which will be
offset by two supplemental environmental projects being
undertaken at the Cape Girardeau plant to improve its record
keeping and compliance capabilities. In addition, in 1994, Lone
Star was given official notice by the EPA that it intended to
pursue a civil penalty action for alleged regulatory violations
at the Cape Girardeau facility with respect to the installation
of a secondary crusher and the replacement of screens in 1986
and 1987. During discussions with EPA to resolve this issue,
EPA indicated that a monetary settlement of approximately
$190,000 would be expected. Lone Star has made a counter offer
to EPA to which it has not yet received a response. No civil
penalty action has yet been filed, pending ongoing attempts to
resolve the issue without litigation. None of the foregoing
proceedings has had or is expected to have a material adverse
effect on the Company's operations or financial condition.
Past operations of the Company or its predecessors have
resulted in releases of hazardous substances at sites currently
or formerly owned by the Company or where waste materials
generated by the Company have been disposed. The Company has
been identified as one of the parties that may be held
responsible by federal or state governmental authorities
pursuant to CERCLA or similar state laws for the costs of
investigation and remediation of contamination at sites where
waste materials generated by the Company were deposited. For
thirteen such sites which are on the National Priority List of
sites requiring investigation and remediation pursuant to
CERCLA, the Company is one of numerous potentially responsible
parties and available factual information indicates that the
Company's contributions of waste to the site was small and the
Company may have certain defenses arising out of the
reorganization. For one of those sites Lone Star recently
availed itself of a de minimis settlement offered by EPA to
resolve its liability for that site for a cost of approximately
$14,000, subject to certain limitations and the potential for a
reopener if the total clean-up exceeds a certain sum. For
another of those sites, which includes property the Company
formerly owned and operated, Lone Star recently elected to
participate in a settlement opportunity with EPA and other
potentially responsible parties to resolve its liability for an
operable unit of this Superfund site at an approximate cost of
$250,000. This amount represents the costs attributable to
remediating the property formerly owned and operated by the
Company. Such costs may be borne by Rosebud in accordance with
an agreement contemplated by the reorganization transferring
certain assets and liabilities of Lone Star to Rosebud.
With respect to sites located in the vicinity of Salt Lake
City, Utah, where waste materials, including CKD, generated by
the Company and its predecessors were deposited as fill, Lone
Star reached a settlement agreement approved in December 1994 by
the Bankruptcy Court with federal, state and local governmental
authorities resolving Lone Star's liability for those sites,
including natural resource damages, in exchange for a general
unsecured claim of $18.5 million in the Chapter 11 Proceedings.
In addition, in connection with the Company's Chapter 11
Proceedings, settlement agreements were entered into between
Lone Star and the other individuals and entities identified by
EPA as potentially responsible parties as well as other property
owners generally resolving Lone Star's liability to those
individuals and entities. With respect to certain of those
individuals and entities, the settlement agreements which also
resolve a related cost-recovery and property damage action
pending in federal district court in Utah, are subject to those
individuals and entities reaching settlements with EPA, the
negotiation of which is continuing.
In connection with the Company's prior lumber yard
operations, the Company has been involved in the investigation
and clean up of certain sites contaminated by wood treating
chemicals. With respect to one former wood treating site
previously leased by the Company, in connection with the
Chapter 11 Proceedings the Company resolved its liability to
State and local governmental entities by agreeing to undertake
further groundwater investigation of the site and, if necessary,
soil remediation, groundwater treatment and groundwater
monitoring programs all with a specified monetary cap of
$2 million. Lone Star sued two of its insurance carriers for
its defense costs and indemnification in such dispute. The
Company was awarded a judgment on the defense cost claim, which
is currently on appeal. The appeals court is to consider Lone
Star's basis for its defense cost claim under the terms of the
insurance policy.
Additional investigation and remedial activities are also
required at a former wood treating facility located on land
which was transferred to Rosebud pursuant to the Plan of
Reorganization. The Company is currently negotiating a consent
order with state governmental authorities regarding additional
investigative and clean up efforts required at the site,
including ground water monitoring and possible remediation,
which activities are anticipated to be undertaken by Rosebud and
funded through a sale of the property. There can be no
assurances, however, that such funds will be available or that
governmental authorities will not seek to recover costs of
investigation or remediation from Lone Star.
Other Legal Proceedings
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 Plan of Reorganization
was confirmed by the Bankruptcy Court on February 17, 1994 and
became effective on April 14, 1994. The final decree closing
these proceedings is expected to be issued in 1995. See Item 1,
"Bankruptcy Reorganization Proceedings."
Cement Industry Antitrust Investigation. 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 antitrust laws and
has cooperated with the investigation. No charges of alleged
violation of Section 1 have been filed against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
This item is inapplicable, as no matters were submitted to
a vote of the Company's stockholders during the fourth quarter
of 1994.
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information
regarding the executive officers of the Company.
Office and Date From Which Individual
Name Age First became an Executive Officer
David W. Wallace 71 Chairman of the Board and Chief Executive
Officer (1991)
William M. Troutman 54 President and Chief Operating Officer
(1986)
John J. Martin 63 Senior Vice President of the Company
(1979) and President of Rosebud (1994)
Roger J. Campbell 58 Vice President--Cement Operations (1986)
William J. Caso 50 Vice President--Taxes and Insurance (1994)
Pasquale P. Diccianni 53 Vice President--Cement Sales and Aggregate
Operations (1988)
Thomas S. Hoelle 43 Vice President--Planning (1994)
Gerald F. Hyde, Jr. 52 Vice President--Personnel and Labor
Relations (1983)
John S. Johnson 64 Vice President, General Counsel and
Secretary (1994)
Harry M. Philip 46 Vice President--Cement Manufacturing
(1994)
Michael W. Puckett 50 Vice President--Cement Sales and Concrete
Operations (1985)
William E. Roberts 55 Vice President, Chief Financial Officer,
Controller and Treasurer (1988)
All of the executive officers of the Company were elected
at a meeting of the Board of Directors on August 24, 1994.
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 have
been employed by the Company as an officer or in an executive
capacity for more than five years.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information on the Company's Common Stock prices,
Warrant prices, Common Stock dividends, principal exchange on
which the Common Stock and Warrants are traded and number of
stockholders and warrantholders of record is contained in Item
7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of this Report.
ITEM 6. SELECTED FINANCIAL DATA Lone Star Industries, Inc.
Successor
Company Predecessor Company
For the | For the For the
Nine Months | Three Months Year
Ended | Ended Ended
(In thousands except December 31,| March 31, December 31,
per share amounts) 1994 | 1994 1993
|
Net sales............................ $ 261,645 | $ 33,709 $ 240,071
|
Income (loss) before reorganization |
items, income taxes, and cumulative |
effect of changes in accounting |
principles and extraordinary items.. $ 45,133 | $ (3,170) $ 6,196
|
Income (loss) before cumulative |
effect of changes in accounting |
principles and extraordinary items.. $ 29,333 | $(150,638) $ (35,258)
|
Net income (loss).................... $ 29,333 | $ (23,118) $ (36,040)
|
Net income (loss) applicable to |
common stock........................ $ 29,333 | $ (24,396) $ (41,152)
Per Common Share |
Primary: |
Income (loss) before cumulative |
effect of changes in accounting |
principles and extraordinary items.. $2.22 | n/m (1) $(2.42)
|
Net income (loss).................... $2.22 | n/m (1) $(2.47)
Weighted average common shares |
outstanding......................... 12,000 | n/m 16,644
Shares outstanding at December 31.... 12,000 | n/m 16,645
Cash dividends per common share...... - | - -
Predecessor
Successor Company Company
December 31, March 31, | December 31,
1994 1994 | 1993
Financial Position at End of Period: |
|
Total assets......................... $ 553,320 $ 579,411 | $ 924,885
Long-term debt (2): |
Senior notes........................ $ 78,000 $ 78,000 | -
Asset proceeds notes................ $ 87,000 $ 112,000 | -
Other............................... - - | -
Production payment (3)............... $ 19,966 $ 20,963 | $ 2,000
Liabilities subject to Chapter 11 |
proceedings (4)..................... - - | $ 627,938
Redeemable preferred stocks.......... - - | $ 37,500
Common shareholders' equity.. ....... $ 122,463 $ 93,313 | $ 12,348
(1) Earnings per share for the three months ended March 31, 1994 are not
meaningful and prior period per share amounts are not comparable to the
Successor Company per share amounts due to reorganization and revaluation
entries and the issuance of 12 million shares of new common stock (See Note
1 of Notes to Financial Statements).
(2) See Notes 19 and 20 of Notes to Financial Statements.
(3) The long-term portion of the production payment is included in
Liabilities Subject to Chapter 11 Proceedings at December 31, 1993, 1992,
1991 and 1990.
(4) See Note 2 of Notes to Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED) Lone Star Industries, Inc.
Predecessor Company
(In thousands except For the year ended December 31,
per share amounts) 1992 1991 1990
Net sales............................ $ 230,098 $ 238,692 $ 253,850
Income (loss) before reorganization
items, income taxes, and cumulative
effect of changes in accounting
principles and extraordinary items.. $ (42,429) $ 2,948 $ (85,774)
Income (loss) before cumulative
effect of changes in accounting
principles and extraordinary items.. $ (45,428) $ (5,547) $ (66,739)
Net income (loss).................... $(164,342) $ (5,547) $ (66,739)
Net income (loss) applicable to
common stock........................ $(169,455) $ (10,661) $ (71,858)
Per Common Share
Primary:
Income (loss) before cumulative
effect of changes in accounting
principles and extraordinary items.. $ (3.03) $(0.64) $(4.34)
Net income (loss).................... $(10.18) $(0.64) $(4.34)
Weighted average common shares
outstanding......................... 16,641 16,582 16,559
Shares outstanding at December 31.... 16,644 16,621 16,560
Cash dividends per common share...... - - -
Predecessor Company
December 31,
1992 1991 1990
Financial Position at End of Period:
Total assets......................... $ 952,649 $ 914,437 $ 909,888
Long-term debt (2):
Senior notes........................ - - -
Asset proceeds notes................ - - -
Other............................... - - $ 367
Production payment (3)............... $ 4,000 $ 4,000 $ 4,000
Liabilities subject to Chapter 11
proceedings (4)..................... $ 611,129 $ 555,331 $ 544,549
Redeemable preferred stocks.......... $ 37,500 $ 37,500 $ 37,500
Common shareholders' equity.. ....... $ 59,698 $ 226,162 $ 239,039
(1) Earnings per share for the three months ended March 31, 1994 are not
meaningful and prior period per share amounts are not comparable to the
Successor Company per share amounts due to reorganization and revaluation
entries and the issuance of 12 million shares of new common stock (See Note
1 of Notes to Financial Statements).
(2) See Notes 19 and 20 of Notes to Financial Statements.
(3) The long-term portion of the production payment is included in
Liabilities Subject to Chapter 11 Proceedings at December 31, 1993, 1992,
1991 and 1990.
(4) See Note 2 of Notes to Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
As of March 31, 1994, in accordance with AICPA Statement of
Position No. 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" the Company adopted fresh-start reporting
which included adjustments for bankruptcy-related cash transactions
through the effective date, which for accounting purposes was March
31, 1994, to properly reflect the Reorganization. Through the
adoption of fresh-start reporting, the Company recorded its assets and
liabilities at fair value as of March 31, 1994 and as such, balance
sheet comparisons to prior periods are not meaningful. A black line
has been used to separate the December 31, 1993 balance sheet from the
March 31, 1994 and December 31, 1994 balance sheets to emphasize the
fact that the March 31, 1994 and December 31, 1994 balance sheets
relate to the reorganized company, a new reporting entity.
Activities in Connection with the Plan of Reorganization
In accordance with the Plan of Reorganization which became
effective on April 14, 1994, the Company disbursed $200.5 million in
cash and pre-petition creditors became entitled to receive the Senior
Notes in the aggregate principal amount of $78.0 million, the Asset
Proceeds Notes in the aggregate principal amount of $138.1 million and
85% of 12 million shares of Common Stock.
Holders of the predecessor company's preferred stock became
entitled to receive their pro rata share of 10.5% of the new Common
Stock and 1,250,000 Warrants. The Warrants are exercisable through
December 31, 2000 and each Warrant provides for the purchase of one
share of common stock at a price of $18.75 per share. The holders of
the predecessor company's common stock became entitled to receive 4.5%
of the new Common Stock and 2,753,333 Warrants. Both preferred stock
issues and the predecessor company's common stock were canceled on the
Plan Effective Date.
The Senior Notes bear interest at a rate of 10% per annum,
payable semi-annually, and mature on July 31, 2003. Pursuant to the
Senior Note Indenture, the Senior Notes are subject to mandatory
redemption by the Company in the event of a change in control or with
the excess net proceeds of certain sales or dispositions of assets.
The Senior Note Indenture also provides for optional redemption of the
Senior Notes by the Company; however, the Company's revolving credit
agreement ("credit agreement") prohibits such optional redemption
except in accordance with the terms thereof. The Asset Proceeds Notes
bear interest at a rate of 10% per annum payable in cash and/or in
additional Asset Proceeds Notes in semi-annual installments. The
indenture governing the Asset Proceeds Notes provides that interest
and principal on the Asset Proceeds Notes are to be repaid as the
Rosebud assets are disposed of and proceeds, if any, are received in
connection with the litigations transferred to Rosebud. The Asset
Proceeds Notes are secured by liens and security interests, as the
case may be, on substantially all of the Rosebud Assets pursuant to a
Security, Pledge and Collateral Agency Agreement. All net proceeds
less a $5.0 million cash reserve, plus up to an additional $5.0
million for estimated Rosebud working capital needs, are to be
deposited in a cash collateral account for distribution to the
noteholders. The Asset Proceeds Notes mature on July 31, 1997. These
notes are guaranteed, in part, by the Company pursuant to the Company
Guarantee. If, at the maturity date, the aggregate amount of all cash
payments of principal and interest on the Asset Proceeds Notes is less
than $88.1 million, the Company Guarantee is payable either in cash,
five-year notes or a combination thereof (at the option of the
Company) to cover the shortfall between the actual payments and $88.1
million, plus interest; provided, however, that the total amount paid
pursuant to the Company Guarantee cannot exceed $28.0 million. If the
Company elects to pay the Company Guarantee in five-year notes, such
notes will rank pari passu with the Senior Notes and will also be
secured by a pledge of the stock of Rosebud owned by the Company. The
Asset Proceeds Notes are recorded on the Company's balance sheet at
December 31, 1994 at an amount equal to the estimated value of assets
to be utilized to liquidate these obligations. To the extent that
amounts received upon disposition of the Rosebud Assets and the
Company Guarantee are not sufficient to pay the principal and interest
of the Asset Proceeds Notes, such notes will not be paid. As of
February 22, 1995 the total interest and principal payments paid on
the Asset Proceeds Notes was approximately $73.1 million. Other than
an initial $5.0 million cash contribution by the Company for working
capital purposes, the Company is not obligated to fund additional
Rosebud working capital requirements (See Notes 5 and 19).
In connection with the Plan of Reorganization, the terms of the
Company's production payment agreement were revised as of April 14,
1994. In connection therewith, a new note was issued, with an
outstanding principal balance of $21.0 million as of that date, and
which bears interest at a rate, at the Company's option, of either
prime or LIBOR plus 1.75% through December 31, 1995 and either prime
plus 0.25% or LIBOR plus 2.5% beginning on January 1, 1996. The
principal balance is payable semi-annually through July 31, 1998 in
increasing installments. A principal payment of $1.0 million was made
in August 1994. In February 1995 an additional $1.5 million principal
payment was made. The Company is required to make payments in advance
for minerals used at the two plants subject to the production payment
agreement and to take or pay for minerals in amounts sufficient to
permit the purchaser to service the note associated with the
production payment facility.
Following the reorganization, the Company entered into a three-
year $35.0 million revolving credit agreement which is collateralized
by inventory, receivables, collection proceeds and certain intangible
assets. The Company's borrowings under the credit agreement are
limited to 55% of eligible inventory plus 85% of eligible receivables.
Advances under the credit agreement bear interest at a rate, at the
Company's option, of either prime plus 1.25% or LIBOR plus 3%. A fee
of 0.5% per annum is charged on the unused portion of the credit line.
Although the Company from time to time has used the letter of credit
facility provided by the credit agreement, it has not drawn any funds
under the credit agreement for working capital purposes. Accordingly,
there was no outstanding balance at December 31, 1994.
The Company's financing agreements contain restrictive covenants
which, among other things, limit or prohibit the Company to incur
additional indebtedness, repay certain indebtedness prior to its
stated maturity, create liens, apply proceeds from asset sales, engage
in mergers and acquisitions, make certain capital expenditures or pay
cash dividends.
In accordance with the Plan of Reorganization, as part of the
agreement with the PBGC, the Company has granted the PBGC a mortgage
on its Oglesby, Illinois cement plant, and a security interest in the
Company's interest in the Kosmos Cement Company partnership, to secure
future pension obligations.
Analysis of Cash Flows and Working Capital
The Company operated under the protection of the bankruptcy
court for the period from December 10, 1990 to April 14, 1994. During
such time, the companies which filed Chapter 11 petitions were
prohibited from paying claims which arose prior to the filing date
outside of a plan of reorganization or without specific bankruptcy
court authorization. In addition, during the Chapter 11 proceedings,
the Company discontinued accruing interest on unsecured pre-petition
debt obligations. Also, the Company received interest income on its
cash balances during this period. However, as a result of the Chapter
11 proceedings, the Company incurred substantial professional fees and
administrative expenses which partially offset the above financial
benefits.
Cash flows from operating activities of $38.5 million for the
nine-month period ended December 31, 1994 primarily reflect $45.4
million generated by the cement, ready-mixed concrete and construction
aggregates operations resulting from increased average cement and
ready-mixed concrete selling prices and higher overall shipments of
all product lines partly offset by payments of professional fees and
administrative expenses of $6.9 million related to the reorganization.
During the nine months ended December 31, 1994, the Company
generated $5.8 million from investing activities, primarily
representing proceeds of $21.8 million from the sale of the Pennsuco
cement plant in Florida, partly offset by capital expenditures.
Net cash outflows from financing activities of $1.0 million for
the nine-month period ending December 31, 1994 reflects a scheduled
payment on the production payment.
Working capital on December 31, 1994 was $71.4 million, compared
to $14.1 million at March 31, 1994. Current assets increased $34.9
million principally due to a higher marketable securities balance,
resulting from cash generated from operations, the sale of the
Pennsuco cement plant in Florida and higher accounts receivable. This
increase was partly offset by lower other current assets primarily due
to the payment of Chapter 11 professional fees from a current escrow
account. Current liabilities decreased $22.4 million primarily due to
the payment of Chapter 11 professional fees which were held in escrow
pending final approval of the bankruptcy court, the payment of other
bankruptcy-related costs previously accrued for and decreased accounts
payable.
The carrying value on the Company's books of net assets of
Rosebud and the related Asset Proceeds Notes decreased $25.0 million
primarily due to principal payments partly offset by the accretion of
assets reflecting the shorter time period used in determining the
present value. In August 1994, net proceeds from the sale of the Santa
Cruz cement plant were used to make principal payments of $31.7
million in addition to interest thereon on the outstanding Asset
Proceeds Notes. Investments in joint ventures increased $0.7 million
due to the equity income in excess of dividends received from Kosmos
Cement Company, a partnership in which the Company has a 25% interest.
Net property, plant and equipment decreased $22.3 million reflecting
the sale of the Pennsuco cement plant in Florida and depreciation,
partly offset by capital expenditures. The reorganization value in
excess of amounts allocable to identifiable assets has been reduced by
$14.4 million representing the income tax benefits realized for the
nine-month period from the preconfirmation net operating loss
carryforwards and amortization of $0.5 million. A disbursement of
$1.0 million was made against the production payment and the pension
liability decreased by $8.0 million, primarily reflecting payments
made during the nine-month period ended December 31, 1994 in excess of
current expenses. Other liabilities decreased $4.4 million primarily
due to the reclassification of certain long-term liabilities to
current accruals.
Other Information
Following the Chapter 11 proceedings, the Board of Directors of
the Company adopted the Lone Star Industries, Inc. Management Stock
Option Plan (the "Management Plan") and the Lone Star Industries, Inc.
Directors Stock Option Plan (the "Directors' Plan"). These plans were
ratified by the Company's shareholders at its 1994 Annual Meeting.
Pursuant to the Management and Directors' Plans, the number of shares
of common stock which may be issued pursuant to options is 700,000 and
50,000 shares, respectively. In June 1994, options to purchase
700,000 and 6,000 shares of common stock were granted under the
Management and Directors' Plans, respectively.
In June 1994, Rosebud sold all of its interest in a cement plant
located in Santa Cruz, California to an affiliate of its partner in
the RMC LONESTAR partnership for $33.1 million. The net proceeds from
the sale, after making provisions for an environmental reserve for
construction of a landfill and other costs related to the transaction,
were used to redeem a portion of the outstanding Asset Proceeds Notes
on a pro rata basis. Rosebud transferred an aggregate of $31.9 million
to the collateral agent which redeemed such notes (including the
payment of accrued and unpaid interest thereon) on August 19, 1994.
Also, in July 1994, Rosebud made a $5.8 million cash payment for
interest on the Asset Proceeds Notes.
In July 1994, Rosebud reached final agreements with
substantially all of its insurance carriers involved in litigation
related to the Company's claims for indemnity in the crosstie
litigation and for the reimbursement of related defense costs. Rosebud
received $5.3 million from the insurance carriers involved in the
settlements most of which is being used by Rosebud for working capital
purposes pursuant to the Rosebud Indenture.
In October 1994, Rosebud granted an option to acquire the stock
of the company holding the 50% interest in the RMC LONESTAR
partnership to the affiliate of the joint venture partner. The
purchase option is exercisable at any time prior to May 1995.
In December 1994, Rosebud sold all of its interest in a cement
plant located in Nazareth, Pennsylvania for $22.1 million. Net
proceeds of $17.6 million were transferred in December 1994 to the
collateral agent to redeem a portion of the outstanding Asset Proceeds
Notes. The remainder of the proceeds were set aside to cover future
expenses and liabilities related to the plant.
In January 1995, Rosebud received $9.0 million as a return of
capital from the Lone Star-Falcon partnership upon completion of the
sale of the partnership's cement terminals in Texas, which funds in
addition to other funds on hand generated from asset sales, operations
and cash accumulated for working capital purposes were also
transferred to the collateral agent to redeem a portion of the Asset
Proceeds Notes.
The Company is subject to extensive federal, state and local
laws, regulations and ordinances pertaining to the quality and
protection of the environment and human health and safety. Such
environmental regulations not only affect the Company's operating
facilities but also apply to past activities and closed or formerly
owned or operated facilities or properties. While it is not possible
at this time to assess accurately the expected impact of future
changes in existing regulations or the enactment of new regulations on
the Company, the capital, operating and other costs of compliance with
such environmental requirements could be substantial.
Prior to the Company's emergence from bankruptcy proceedings,
the Company's environmental liabilities had a material effect on the
Company's financial condition and operating results. These
liabilities were a contributing factor in the Company's decision to
seek reorganization under the protection of Chapter 11. During the
reorganization, most of the Company's known environmental liabilities
were resolved including those which had a material effect on the
Company's financial condition and operating results (See Note 34). The
Company believes that it has adequately provided for costs related to
its ongoing obligations with respect to the known environmental
liabilities resolved in connection with the bankruptcy proceedings and
other known unresolved environmental liabilities. Expenditures for
environmental liabilities during the nine months ended December 31,
1994 did not have a material effect on the financial condition of the
Company. The December 31, 1994 accompanying consolidated balance
sheet includes accruals of $7.2 million which represent the Company's
current estimate of its liability related to environmental matters.
Cement kiln dust, a by-product of cement manufacturing, is
currently exempted from environmental regulation by the Bevill
Amendment to the Federal Resource Conservation and Recovery Act
("RCRA"). The EPA has recently completed the Congressionally-mandated
study of the potential hazards posed by cement kiln dust, and on
January 31, 1995 issued a regulatory determination regarding the need
for regulatory controls on the management, handling and disposal of
cement kiln dust. Generally the EPA regulatory determination provided
that EPA intends to draft and promulgate regulations imposing controls
on the management, handling and disposal of cement kiln dust that will
be based largely on selected components of the existing RCRA hazardous
waste regulatory program, tailored to address the specific regulatory
concerns posed by cement kiln dust. The EPA regulatory determination
further provided that the regulations it will be promulgating will be
designed to be protective of the environment while at the same time to
minimize the burden on the regulated community. It is not possible to
predict at this time what EPA's regulations will provide regarding the
imposition of regulatory controls on the management, handling and
disposal of cement kiln dust, and what, if any, increased costs will
be incurred by the Company to comply with such new regulatory
requirements. Until the new regulations are finally promulgated
(which likely will take substantial time), cement kiln dust will
remain exempt from regulation as a hazardous waste pursuant to the
Bevill Amendment.
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 the 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 policy of
complying with the antitrust laws and has cooperated with the
investigation. No charges of alleged violation of Section 1 have been
filed against the Company.
In 1989 Lone Star and a subsidiary commenced an action in the
Maryland Federal District Court, against Northeast Cement Co. and its
affiliates, Lafarge Corporation and Lafarge Canada, Inc., alleging
breach of warranties in connection with the purchase from Northeast
Cement Company by the Lone Star subsidiary of the cement used to
manufacture substantially all of the crossties involved in litigation
between Lone Star, its subsidiary and a number of railroads which had
purchased concrete crossties from the Lone Star subsidiary and
claiming a fraudulent sale of defective cement. The 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 due to limitations on
the awarding of damages in the trial judge's instructions to the jury.
Lone Star believed that these instructions were in error and filed a
motion for a new trial. Following a hearing on March 5, 1993 the
judge denied these motions. Lone Star consequently appealed to the
Federal Circuit Court of Appeals for the Fourth Circuit for a new
trial on the issue of damages. A 1993 judgment was vacated by the
Fourth Circuit Court of Appeals and the case was remanded for a new
trial. The Company amended its complaint to add a claim of violation
of a Massachusetts consumer protection law which allows for attorney
fees and doubling and trebling of damages (See Note 35). On November
30, 1994, a jury in the new trial in the Maryland Federal District
Court found Lone Star was entitled to recover from Lafarge Corporation
on Lone Star's claim of breach of express warranty and awarded Lone
Star $8.4 million. On December 20, 1994, the trial court entered a
partial judgment in favor of Lone Star in the amount of $9.3 million,
which amount included prejudgment interest and held that the award
should not be reduced by the statute of limitations claim raised by
Lafarge. Interest on this judgment will continue to accrue until it
is paid. A hearing was held on March 3, 1995 to consider Lone Star's
pending claim under the Massachusetts statute governing unfair trade
practices. The rights to any recovery of damages in this action have
been assigned to Rosebud pursuant to the Plan of Reorganization.
A series of toxic tort lawsuits recently filed against numerous
parties, including the Company, currently are not expected to have a
material adverse effect on the company's financial condition or
operating results (See Note 35).
Results of Operations
On April 14, 1994 the Plan of Reorganization became effective.
Upon the Plan of Reorganization becoming effective, the Company issued
new Common Stock, Warrants, Senior Notes and Asset Proceeds Notes,
transferred certain assets to Rosebud and for accounting purposes
adopted fresh-start reporting as of March 31, 1994. As a result, the
Company's financial statements for the nine months ended December 31,
1994 are not comparable to statements for prior periods. Accordingly,
the Company has not presented historical information for the twelve
months ended December 31, 1994, since such information requires
consolidating statements of the predecessor company and successor
company. Also affecting comparability are differences in the
operating units of the successor company and the predecessor company.
The successor company's operations include the Pryor, Oklahoma and
Maryneal, Texas cement plants which were previously classified as
assets held for sale and were excluded from the predecessor company's
results. The successor company's operations exclude the Nazareth,
Pennsylvania and Santa Cruz, California cement plants and the Hawaiian
Cement and RMC LONESTAR partnerships. These operations, along with
certain other assets, have been transferred to Rosebud. The
predecessor company's operations also included a Brazilian joint
venture which was sold in September 1993.
Nine Months Ended December 31, 1994
Net Sales
Consolidated net sales for the nine months ended December 31,
1994 were $261.6 million following the Company's emergence from
bankruptcy in April 1994. Cement operations recorded sales of $176.7
million for the nine-month period ended December 31, 1994. Cement
sales for the nine-month period from comparable operations were $18.7
million higher than the prior year comparable period reflecting a 13%
increase in average net realized selling prices and a 2% increase in
cement shipments. The increase in cement shipments, particularly from
the Cape Girardeau, Missouri and the Greencastle, Indiana cement
plants, and higher average net realized selling prices at all
locations, resulted from strong demand in all local markets.
Sales of construction aggregates were $47.7 million for the
nine-month period ending December 31, 1994. Sales of construction
aggregates increased $4.7 million from the comparable prior year nine-
month period primarily due to a 7% increase in shipments. Increased
shipments of construction aggregates in the New York metropolitan area
were partly offset by decreased shipments from the Company's Canadian
operations.
Ready-mixed concrete and other operations recorded sales of
$37.2 million for the nine-month period ended December 31, 1994. The
increase in ready-mixed concrete sales of $7.9 million was attributed
to a 24% increase in shipments and an 8% increase in prices as
compared to the comparable prior-year period. Shipments of ready-
mixed concrete have been favorable at all locations during this
period, particularly in the Memphis, Tennessee area where strong
demand from increased commercial building resulted in both higher
shipments and favorable prices.
Net sales of cement, construction aggregates and ready-mixed
concrete and other products contributed 68%, 18% and 14%,
respectively, to total sales for the current nine-month period.
Gross Profits
Gross profits from the cement operations were $54.4 million for
the nine months ended December 31, 1994, primarily reflecting the 13%
increase in overall average net realized selling prices and higher
cement shipments. Also contributing to the favorable cement gross
profits were favorable per unit production costs at the Cape
Girardeau, Missouri cement plant reflecting operating efficiencies due
to increased production volumes. The positive results were partly
offset by higher production costs at the other locations, particularly
the Greencastle, Indiana facility, which was affected by higher coal
costs and lower waste fuel revenues due to the decreased use of waste
fuels in the production process. In September 1993, the Greencastle
plant temporarily suspended the use of hazardous waste fuels pending
analysis of the administrative enforcement action commenced by the
EPA. The Company resumed burning hazardous waste fuel in 1994, but on
a substantially reduced basis throughout the year, resulting in
decreased revenues and higher coal costs.
The Cape Girardeau and Greencastle cement plants use hazardous
waste fuel as cost-saving energy sources. They are thus subject to
stringent regulation pursuant to federal, state and local requirements
governing hazardous waste treatment, storage and disposal facilities.
There can be no assurance that the Company's hazardous waste fuel
operations will be able to maintain compliance with the BIF Rules and
state requirements or that changes to such rules or requirements or
their interpretation by the relevant agencies or courts will not make
it more difficult or cost prohibitive to maintain regulatory
compliance or to continue to burn hazardous waste fuel (See Note 34).
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.
Gross profits from the construction aggregates operations were
$8.3 million for the current nine-month period reflecting a 7%
increase in overall shipments and a 6% increase in overall average net
realized selling prices from the comparable prior-year period.
Shipments from the New York Trap Rock operation increased 15% over the
comparable period. This increase reflects higher shipments in the
second quarter of 1994 caused by the prolonged and adverse winter
weather conditions experienced in the Northeast this year, which
delayed the opening of customer asphalt and ready-mixed concrete
plants into March. In addition, our customers were adversely affected
by strikes in the summer of 1993 which did not occur in 1994. Also
contributing to the favorable construction aggregates gross profits
were favorable per unit production costs from the West Nyack, New York
operation due to increased production volumes. The positive results
were partly offset by decreased shipments from the Canadian operation,
due to the lack of available ships to transport product to its coastal
U.S. and Caribbean markets and lower overall customer demand.
Gross profits from ready-mixed concrete and other construction
products were $5.7 million for the nine-month period ended December
31, 1994 primarily due to the increase in overall shipments and
average net realized selling prices, reflecting strong demand in the
Memphis, Tennessee and Central Illinois areas.
Included in the calculation of gross profit are sales less cost
of sales including depreciation related to cost of sales (which
excludes depreciation related to facilities leased to third parties
and depreciation on office equipment, furniture and fixtures which are
not related to the cost of sales).
Joint Ventures
Pre-tax income from joint ventures of $4.4 million for the nine
months ended December 31, 1994 reflects the results of the Kosmos
Cement Company, a partnership in which the Company has a 25% interest.
Results from Kosmos Cement Company were $1.1 million higher from the
comparable prior year period reflecting increased shipments and higher
net realized selling prices. The RMC LONESTAR and Hawaiian Cement
joint ventures were transferred to Rosebud in connection with the Plan
of Reorganization.
Other Income
Other income of $3.8 million for the nine-month period ended
December 31, 1994 primarily reflects interest earned on investments,
rental income and interest earned on accounts and notes receivable.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $23.7 million
for the nine months ended December 31, 1994 reflects savings achieved
during and after the Company's bankruptcy proceedings. The savings in
selling, general and administrative expenses primarily reflect lower
other postretirement benefit expense and lower pension expense due to
settlements reached through negotiations with retirees including the
establishment of a Voluntary Employee Beneficiary Association ("VEBA")
for salaried retirees whereby the Company makes quarterly
contributions to a trust. The Company also reached a settlement with
the PBGC whereby the Company contributed additional cash to its
pension plans. Lower insurance expenses also contributed to the
savings in selling, general and administrative expenses reflecting
settlements reached with insurance carriers and the Company's joint
ventures and certain former joint ventures which settled certain
ultimate liabilities for periods prior to the petition date. Other
savings in selling, general and administrative expenses reflect lower
employee-related expenses primarily achieved by reductions in
personnel, prior to June 30, 1994 through attrition, combined with a
corporate downsizing on June 30, 1994 which eliminated approximately
35% of salaried positions at the corporate office. Selling, general
and administrative expenses for the nine-month period ended December
31, 1994 include $0.4 million of pension costs and $4.6 million of
other postretirement benefit costs related to the Company's presently
retired employees. In addition selling, general and administrative
expenses for the nine-month period include $0.5 million relating to
professional and filing fees in connection with the filing of the
Company's registration statement on Form S-1 which was recently filed
to register certain Common Stock, Warrants, and Senior Notes of the
Company.
Interest Expense
Interest expense of $6.8 million for the nine months ended
December 31, 1994 was comprised primarily of interest accrued on the
$78.0 million 10% Senior Notes and the Company's obligation relating
to the production payment.
Income Taxes
The income tax expense of $15.8 million primarily reflects taxes
computed at the U.S. statutory rate in addition to net state taxes and
foreign subsidiary taxes.
Net Income
Net income for the nine-month period ended December 31, 1994 of
$29.3 million, or $2.22 per share, reflects higher cement and ready-
mixed concrete shipments and selling prices combined with reduced
selling, general and administrative expenses. Net income for the nine
months reflects joint venture income of $4.4 million, which represents
the Company's share of earnings from Kosmos Cement Company, a
partnership in which the Company has a 25% interest. The RMC LONESTAR
and Hawaiian Cement partnerships were transferred to Rosebud in
connection with the Plan of Reorganization. The positive net income
for the current period was partly offset by higher interest expense
primarily related to the Senior Notes.
In future years, first quarter results are expected to reflect
losses (which may be significant), due to the impact of the winter
months on construction activity, particularly at the Company's
northern operations, production curtailments at plants to perform
annual maintenance, and higher costs associated with the annual
maintenance. Historically, for accounting purposes planned capacity
variances during a fiscal year were deferred in the first quarter and
recognized during the last nine months. These deferred costs in 1994
totaling $8.4 million were written off as part of the revaluation of
assets in accordance with fresh-start reporting. Beginning in 1995,
due to a change in the Company's accounting policies, these costs will
be expensed more quickly than in prior years and will primarily impact
first quarter results of the year in which they occur.
Dividends and Stock Market Prices
The Company's financing agreements contain certain restrictive
convenants which, among other things, restrict the payment of cash
dividends.
The Common Stock, Warrants and Senior Notes are listed on the
New York Stock Exchange ("NYSE") and began trading May 3, 1994 (Prior
to this the old common stock and preferred stock traded on the NYSE).
The following table sets forth the high and low sales prices for the
Common Stock and Warrants in composite transactions as reported on the
NYSE.
Common Stock (1) Warrants
High Low High Low
1994
Second Quarter (commencing
May 3, 1994)...................... $16 $14 1/4 $7 5/8 $6
Third Quarter....................... 18 1/8 14 7/8 7 3/4 6 1/8
Fourth Quarter...................... 19 3/4 15 8 1/4 6 1/8
1995
First Quarter (through
February 28, 1995)................ 20 3/4 17 1/4 7 1/4 6
(1) Prior to April 15, 1994, the Company's old common stock was traded
on the NYSE. Pursuant to the Plan of Reorganization, this common
stock was canceled. From April 15, 1994 through May 2, 1994, the
Common Stock and Warrants traded on the NYSE on a "when issued"
basis.
On February 28, 1995, the reported sale price of the Common
Stock and Warrants was $19 7/8 per share and $6 3/4 per warrant,
respectively. As of February 28, 1995, the Company had approximately
2,930 holders of record of Common Stock and 2,828 holders of record of
the Warrants.
Capital Expenditures
Capital expenditures of $16.5 million for the nine months ended
December 31, 1994 were primarily for major repairs, replacements and
improvements at existing facilities, such as kiln precipitator
upgrades performed at the Greencastle, Indiana and Oglesby, Illinois
cement plants. Capital expenditures also included a $3.6 million
investment in the new slag cement operation at New Orleans during the
nine-month period ended December 31, 1994. The new operation will
begin shipping product in the first quarter of 1995.
In an effort to increase production, improve operating
efficiencies and reduce costs, the Company expects to make capital
investments of approximately $40.0 million in 1995. The Company
intends to make various improvements at its Maryneal, Texas cement
plant at an expected cost of approximately $5.6 million and also
intends to exercise its option to purchase the fleet of barges used by
the New York Trap Rock aggregates operation at a cost of approximately
$5.1 million. Expected expenditures for 1995 also include an
expansion of the St. Louis, Missouri cement terminal and part of the
cost of constructing a modern clinker storage facility at the Cape
Girardeau plant which is expected to be completed in 1996. The
Company expects to fund its 1995 capital expenditures from cash on
hand in addition to cash generated from operations. In addition to
the planned $40.0 million of capital expenditures, the Company is
reviewing a proposed $20.0 million expansion and modernization project
at the West Nyack, New York construction aggregates operation.
Three Months Ended March 31, 1994
Net Sales
Consolidated net sales of $33.7 million were $1.2 million higher
for the three months ended March 31, 1994 than the comparable prior
year period reflecting higher shipments of cement and ready-mixed
concrete, partially offset by lower sales of construction aggregates.
Cement sales of $24.6 million were $2.4 million greater than the
comparable prior year period 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 Nazareth, Pennsylvania cement plant
(subsequently transferred to Rosebud) as shipments were adversely
effected by severe winter weather conditions in the Northeast.
Sales of construction aggregates of $2.8 million for the three
months ended March 31, 1994 were $2.2 million below the comparable
prior year period. The reduction in shipments of construction
aggregates reflects a slow start in construction activity caused by
the prolonged and adverse winter weather conditions experienced in the
Northeast in 1994. These adverse conditions extended into the month
of March, which delayed the opening of customer asphalt and ready-mix
concrete plants. Also contributing to the lower aggregate shipments
was the shortage of available commercial freighters to transport
construction aggregates from the Company's Canadian operation to the
Caribbean market.
Ready-mixed concrete and concrete products sales were $6.1
million for the three months ended March 31, 1994, which were $1.1
million above the comparable prior-year period reflecting higher
shipments of ready-mixed concrete, concrete block, and building
materials due to increased business activity and higher average net
realized selling prices.
The Company's operations are seasonal and, consequently, the
interim results are not necessarily indicative of the results to be
expected for the full year.
Pre-tax income from joint ventures of $0.4 million for the first
quarter of 1994 was $1.2 million below the comparable prior-year
period due to the sale of the Company's Brazilian joint in September
1993 which contributed pre-tax joint venture earnings of $3.5 million
in the first quarter of 1993. Results from the RMC LONESTAR
partnership increased $2.7 million from the comparable prior-year
period due to higher shipments, the result of increased construction
activity, favorable weather conditions, and lower per unit production
costs associated with increased production volumes. Results from the
Hawaiian Cement partnership decreased $0.4 million from the first
quarter of 1993 reflecting lower shipments of cement, construction
aggregates, and ready-mixed concrete as a result of a slowdown in the
construction industry in Hawaii. Pre-tax income from the Kosmos
Cement Company joint venture approximated the comparable prior year
period's results.
Included in income in the first quarter of 1994 is an insurance
settlement of $6.5 million from the Company's primary carrier
regarding indemnification pursuant to the railroad crosstie
litigation, the right of recovery to which litigation was subsequently
transferred to Rosebud. The settlement was offset against a
bankruptcy claim of that carrier.
Cost of sales of $29.7 million for the first quarter of 1994 was
$1.2 million higher than the comparable prior-year period primarily
due to higher cement and ready-mixed concrete costs reflecting higher
shipments. This was partly offset by lower sales of construction
aggregates and the delayed startup of production at the domestic
construction aggregates plants.
Selling, general and administrative expenses for the three
months ended March 31, 1994 of $9.8 million were $0.4 million lower
than the comparable prior year period.
Reorganization items, related to the bankruptcy, of $147.3
million during the first quarter of 1994 were $144.7 million higher
than the comparable prior-year period primarily reflecting adjustments
to fair value of fixed assets in connection with the adoption of
fresh-start reporting, and higher professional fee expenses and higher
administrative costs associated with the emergence from bankruptcy
pursuant to the Plan of Reorganization.
Income tax expense of $0.2 million for the first quarter of 1994
was $1.7 million lower than the comparable prior-year period
reflecting lower foreign taxes due to the sale of the Brazilian
operation in September 1993.
The results of the first quarter of 1994 include an
extraordinary gain of $127.5 million related to the discharge of
prepetition liabilities in accordance with the Plan of Reorganization.
In the first quarter of 1993, the Company's partner in the
Kosmos Cement Company partnership, which owns a 75% interest in the
partnership (the Company owns the remaining 25% interest), 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 partnership's cumulative effect of the
change in accounting principle. There were no changes in accounting
principles during the first quarter of 1994.
The net loss of $23.1 million for the first quarter of 1994 is
$8.9 million greater than the comparable prior year period. Included
in the first quarter 1994 results are reorganization expenses of
$147.3 million relating to adjustments of assets and liabilities to
their respective fair values, and increased professional fees and
administrative costs associated with the Company's reorganization.
These reorganization expenses are partly offset by an extraordinary
gain of $127.5 million due to the discharge of pre-petition
liabilities and a $6.5 million insurance recovery relating to
indemnification pursuant to the railroad crosstie litigation. The
first quarter of 1993 results reflect pre-tax joint venture income of
$3.5 million provided by the Brazilian subsidiary, which was sold in
September 1993, and a charge for the cumulative effect of a change in
accounting principle of $0.8 million. Excluding the pre-tax earnings
from the Brazilian joint venture and the insurance recovery, pre-tax
operating results for the first quarter of 1994 were $2.9 million
better than the same prior-year period. This increase reflects higher
results from the cement and ready-mixed operations and domestic joint
ventures on higher shipments due to increased business activity and
lower selling, general and administrative expenses. The increase was
partly offset by decreased results from construction aggregates
primarily reflecting lower shipments as a result of severe winter
weather conditions.
Comparison of Fiscal Year 1993 With Fiscal Year 1992
Net Sales
Consolidated net sales of $240.1 million were $10.0 million
higher in 1993 than 1992. Cement sales of $158.7 million were $11.6
million greater in 1993 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 in 1993 as compared to 1992 by 2% and
average unit net realized cement selling prices increased by 7%.
Sales of construction aggregates of $48.2 million in 1993
approximated that of the prior year. In March 1993 the Company sold a
small construction aggregates operation in Mississippi. Excluding the
shipments from the Mississippi operation sold in 1993, construction
aggregates shipments increased 3% over 1992. 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, New York during summer 1993 which
resulted in the reduction of orders from our customers in the ready-
mixed concrete and asphalt businesses. In 1993, 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 location.
Ready-mixed concrete and concrete products sales were $29.5
million in 1993, which were $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, Illinois 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% over 1992.
Sales from other operations, primarily building materials, were
$3.6 million in 1993, which were $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. 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. Lone Star resumed burning
waste fuel, on a limited basis, in January 1994. Lone Star will
continue to burn hazardous waste fuel at its Greencastle plant on a
limited basis unless and until necessary upgrades are implemented to
allow that plant to operate at desirable production levels while
complying with an EPA air emission standard as a consequence of a
recent Court of Appeals decision.
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 in 1993
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 remaining aspects of
shareholder litigation which had been pending 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.
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, continued to accrue, but remained
unpaid pending the plan of reorganization becoming 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 32). 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 33).
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 was
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 included
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 were cumulative
and the full year's dividend amount were used in computing net income
per common share.
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.
LONE STAR INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Accountants 43
Report of Other Independent Accountants 45
Consolidated Financial Statements:
Statements of Operations for the Nine Months Ended
December 31, 1994, the Three Months Ended March 31,
1994, and the Years Ended December 31, 1993 and 1992 46
Balance Sheets - December 31, 1994, March 31, 1994
and December 31, 1993 47
Statements of Changes in Common Shareholders' Equity
for the Nine Months Ended December 31, 1994, the
Three Months Ended March 31, 1994 and the Years
Ended December 31, 1993 and 1992 48
Statements of Cash Flows for the Nine Months Ended
December 31, 1994, the Three Months Ended March 31,
1994 and the Years Ended December 31, 1993 and 1992 49
Notes to Financial Statements 50
Schedule:
II Valuation and Qualifying Accounts 95
Consent of Independent Accountants 96
Consent of Other Independent Accountants 97
The foregoing supporting schedules should be read in conjunction with
the consolidated financial statements and notes thereto in the
Company's 1994 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, 1994.
Separate financial statements for the Company's fifty percent or less
owned companies or joint ventures are omitted because such
subsidiaries individually do not constitute a significant subsidiary
at December 31, 1994.
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
Lone Star Industries, Inc.
We have audited the consolidated balance sheets of Lone Star
Industries, Inc. and Consolidated Subsidiaries ("the Company") as of
December 31, 1994, March 31, 1994 and December 31, 1993, and the
related consolidated statements of operations, shareholders' equity
and cash flows for the nine months ended December 31, 1994 (post-
confirmation), the three months ended March 31, 1994, and each of the
two years in the period ended December 31, 1993 (pre-confirmation).
We have also audited the Financial Statement Schedule II included in
this annual report on Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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 13, were substantially sold
in 1993), which financial statements represent total revenues of 10%
of the consolidated revenues for 1992. 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 33 herein, in accounting for income taxes by the Company's
foreign operations, and in 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 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 consolidated financial
position of Lone Star Industries, Inc. and Consolidated Subsidiaries
as of December 31, 1994, March 31, 1994 and December 31, 1993, and
the consolidated results of their operations and their cash flows for
the nine months ended December 31, 1994, the three months ended March
31, 1994 and each of the two 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 schedule referred to above,
when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the
information required to be included therein.
As discussed in Note 2, effective April 14, 1994, the Company
was reorganized under a plan confirmed by the United States
Bankruptcy Court for the Southern District of New York and adopted a
new basis of accounting whereby all remaining assets and liabilities
were adjusted to their estimated fair values. Accordingly, the
consolidated financial statements for periods subsequent to the
reorganization are not comparable to the consolidated financial
statements presented for prior periods.
As discussed in Notes 32 and 33 to the consolidated financial
statements, the Company changed its method of accounting for other
postretirement benefits and income taxes in 1992.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
February 10, 1995
Report of Other Independent Accountants
To the Board of Directors of
Lone Star Industries, Inc.
In our opinion, the combined statements of income and equity and of cash
flows and supporting Schedule II to the Form 10-K (not presented
separately herein) present fairly, in all material respects, the results
of operations and cash flows of Lone Star Industries, Inc. International
Division for the year 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
audit. We conducted our audit 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 audit provides 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 33 to the financial statements, the Company changed
its method of accounting for income taxes in 1992.
PRICE WATERHOUSE LLP
Stamford, Connecticut
February 4, 1993
CONSOLIDATED STATEMENTS OF OPERATIONS Lone Star Industries, Inc.
Successor
Company Predecessor Company
For the | For the For the For the
Nine Months |Three Months Year Year
Ended | Ended Ended Ended
(In thousands except December 31,| March 31, December 31, December 31,
per share amounts) 1994 | 1994 1993 1992
|
Revenues: |
Net sales................... $261,645 | $ 33,709 $240,071 $230,098
Joint venture income........ 4,424 | 381 20,440 37,831
Other income, net........... 3,820 | 2,691 11,238 13,824
269,889 | 36,781 271,749 281,753
|
Deductions from revenues: |
Cost of sales............... 177,005 | 29,694 193,884 188,440
Provision for (recovery of) |
litigation settlements..... - | (6,500) 2,500 66,584
Selling, general and |
administrative expenses.... 23,749 | 9,836 41,278 40,817
Depreciation and depletion.. 17,190 | 6,688 26,254 26,131
Interest expense (contractual |
interest of $7,631 in the |
first quarter of 1994, |
$31,227 in 1993 and $31,914 |
in 1992)................... 6,812 | 233 1,637 2,210
224,756 | 39,951 265,553 324,182
|
Income (loss) before |
reorganization items and |
income taxes................ 45,133 | (3,170) 6,196 (42,429)
Reorganization items: |
Adjustments to fair value... - | (133,917) - -
(Loss) gain on sale of |
assets..................... - | - (37,335) 15,525
Other....................... - | (13,396) (10,470) (4,046)
Total reorganization items... - | (147,313) (47,805) 11,479
|
Income (loss) before income |
taxes, cumulative effect of |
changes in accounting principles |
and extraordinary item...... 45,133 | (150,483) (41,609) (30,950)
Credit (provision) for |
income taxes............... (15,800)| (155) 6,351 (14,478)
|
Income (loss) before |
cumulative effect of changes |
in accounting principles and |
extraordinary item.......... 29,333 | (150,638) (35,258) (45,428)
|
Cumulative effect of changes |
in accounting principles: |
Postretirement benefits other |
than pensions.............. - | - (782) (130,510)
Income taxes................ - | - - 11,596
Extraordinary item: gain on |
discharge of prepetition |
liabilities................. - | 127,520 - -
|
Income (loss) before preferred |
dividends................... 29,333 | (23,118) (36,040) (164,342)
Provisions for preferred |
dividends.................. - | (1,278) (5,112) (5,113)
|
Net income (loss) applicable |
to common stock............. $ 29,333 | ($24,396) ($41,152) ($169,455)
Weighted average common stock |
shares outstanding.......... 12,000 | n/m (a) 16,644 16,641
|
|
Primary and fully diluted income |
(loss) per common share: |
Income (loss) before cumulative |
effect of changes in |
accounting principles...... $2.22 | n/m (a) ($2.42) ($3.03)
Cumulative effect of changes |
in accounting principles... - | n/m (a) (0.05) (7.15)
Net income (loss)........... $2.22 | n/m (a) ($2.47) ($10.18)
(a) Earnings per share for the three months ended March 31, 1994 are not
meaningful and prior period per share amounts are not comparable to the
Successor Company per share amounts due to reorganization and revaluation
entries and the issuance of 12 million shares of new common stock.
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
CONSOLIDATED BALANCE SHEETS Lone Star Industries, Inc.
Predecessor
Successor Company Company
December 31, March 31, | December 31,
1994 1994 | 1993
|
Assets |
Current Assets |
Cash, including cash equivalents of |
$54,782, $3,498, and $243,220......... $ 55,398 $ 12,147 | $244,397
Accounts and notes receivable, net..... 32,480 29,711 | 49,022
Inventories............................ 45,529 44,794 | 38,426
Current assets of assets held for sale. - - | 20,634
Other current assets................... 3,243 15,127 | 2,733
Total current assets............... 136,650 101,779 | 355,212
|
Net assets of liquidating subsidiary |
(Note 5).............................. 87,000 112,000 | -
Assets held for sale................... - - | 65,663
Joint ventures......................... 18,174 17,500 | 88,574
Property, plant and equipment, net..... 309,952 332,263 | 398,085
Reorganization value in excess of amounts |
allocable to identifiable assets...... - 14,372 | -
Cost in excess of net assets of |
businesses acquired, net.............. - - | 9,273
Other assets and deferred charges...... 1,544 1,497 | 8,078
Total assets....................... $553,320 $579,411 | $924,885
|
|
Liabilities and Shareholders' Equity |
Current Liabilities |
Accounts payable....................... $ 14,272 $ 15,927 | $ 16,079
Accrued liabilities.................... 47,337 68,718 | 60,353
Other current liabilities.............. 3,650 2,994 | 3,227
Total current liabilities.......... 65,259 87,639 | 79,659
|
Asset proceeds notes of liquidating |
subsidiary (Notes 5 and 19)........... 87,000 112,000 | -
Senior notes payable................... 78,000 78,000 | -
Production payment..................... 16,966 18,463 | -
Deferred income taxes.................. 6,688 5,000 | 3,356
Postretirement benefits other than |
pensions.............................. 129,634 125,260 | 141,950
Pensions............................... 14,345 22,351 | -
Other liabilities...................... 32,965 37,385 | 21,886
|
Liabilities subject to Chapter 11 |
proceedings........................... - - | 627,938
|
Contingencies (Notes 34 and 35) |
|
430,857 486,098 | 874,789
|
Redeemable preferred stock............. - - | 37,500
Non-redeemable preferred stock (involuntary |
liquidating value, 1993 - $1,102)..... - - | 248
Common stock, $1 par value. |
Authorized: 25,000,000 shares. |
Shares issued: 1994 - 12,000,016; |
1993 - 18,102,723. ................... 12,000 12,000 | 18,103
Warrants to purchase common stock...... 15,613 15,613 | -
Additional paid-in capital............. 65,700 65,700 | 239,870
Retained earnings (accumulated deficit) 29,333 - | (187,896)
Cumulative translation adjustment...... (183) - | -
Pension liability adjustment........... - - | (21,157)
Treasury stock, at cost................ - - | (36,572)
122,463 93,313 | 50,096
|
Total liabilities and shareholders' |
equity............................ $553,320 $579,411 | $924,885
|
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES Lone Star Industries, Inc.
IN COMMON SHAREHOLDERS' EQUITY
Successor
Company Predecessor Company
For the | For the For the For the
Nine Months |Three Months Year Year
Ended | Ended Ended Ended
December 31,| March 31, December 31, December 31,
(In thousands) 1994 | 1994 1993 1992
|
Common Stock |
Balance at beginning of |
period..................... $ 12,000 | $ 18,103 $ 18,102 $ 18,101
Conversions of $4.50 non- |
redeemable preferred stock. - | 1 1 1
Cancellation of predecessor |
company stock pursuant to |
the plan of reorganization. - | (18,104) - -
Issuance of successor company |
stock pursuant to the plan |
of reorganization.......... - | 12,000 - -
Balance at end of period..... 12,000 | 12,000 18,103 18,102
Warrants To Purchase Common Stock |
Balance at beginning of |
period..................... 15,613 | - - -
Issuance pursuant to the |
plan of reorganization..... - | 15,613 - -
Balance at end of period..... 15,613 | 15,613 - -
Additional Paid-In Capital |
Balance at beginning of |
period..................... 65,700 | 239,870 239,867 240,329
Conversion of $4.50 non- |
redeemable preferred stock. - | 3 3 3
Excess of cost over market |
value of treasury stock |
issued to employee stock |
purchase plan.............. - | - - (465)
Elimination of predecessor |
company additional paid-in- |
capital pursuant to the |
plan of reorganization..... - | (239,873) - -
Additional paid-in-capital |
of the successor company |
pursuant to the plan of |
reorganization............. - | 65,700 - -
Balance at end of period..... 65,700 | 65,700 239,870 239,867
Retained Earnings (Accumulated Deficit) |
Balance at beginning of |
period..................... - | (187,896) (151,856) 12,486
Net income (loss)........... 29,333 | (23,118) (36,040) (164,342)
Elimination of accumulated |
deficit pursuant to the |
plan of reorganization..... - | 211,014 - -
Balance at end of period..... 29,333 | - (187,896) (151,856)
Cumulative Translation Adjustment |
Balance at beginning of |
period..................... - | - - -
Translation adjustments..... (183)| - - -
Balance at end of period..... (183)| - - -
Pension Liability Adjustment |
Balance at beginning of |
period..................... - | (21,157) (9,843) (7,625)
Excess of additional pension |
liability over unrecognized |
prior service cost......... - | - (11,314) (2,218)
Revaluation in accordance |
with fresh-start reporting. - | 21,157 - -
Balance at end of period..... - | - (21,157) (9,843)
Treasury Stock |
Balance at beginning of |
period..................... - | (36,572) (36,572) (37,129)
Shares issued to employee |
stock purchase plan........ - | - - 557
Cancellation pursuant to the |
plan of reorganization..... - | 36,572 - -
Balance at end of period..... - | - (36,572) (36,572)
|
Total common shareholders' |
equity, end of period...... $122,463 | $ 93,313 $ 12,348 $ 59,698
|
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Lone Star Industries, Inc.
Successor
Company Predecessor Company
For the | For the For the For the
Nine Months |Three Months Year Year
Ended | Ended Ended Ended
December 31,| March 31, December 31, December 31,
(In thousands) 1994 | 1994 1993 1992
|
Cash Flows from Operating |
Activities: |
Income (loss) before cummulative |
effect of changes in |
accounting principles and |
extraordinary item............ $ 29,333 | ($150,638) ($ 35,258) ($ 45,428)
Adjustments to arrive at net |
cash provided (used) by |
operating activities: |
Depreciation and depletion... 17,190 | 6,688 26,254 26,131
Provision for (recovery of) |
litigation settlements..... - | (6,500) 2,500 57,200
Tax benefit realized from |
utilization of net operating |
loss carryforwards......... 13,646 | - - -
Deferred income taxes........ 1,688 | 155 (10,546) 2,920
Changes in operating assets |
and liabilities: |
Accounts and notes |
receivable................. (5,307)| 22,157 (2,895) 3,382
Inventories and other |
current assets............. (1,542)| (17,189) 846 6,063
Accounts payable and other |
accrued expenses........... 2,820 | (1,808) (2,198) (13,295)
Unremitted earnings of joint |
ventures................... (674)| 619 (951) (17,942)
Loss (gain) on sale of joint |
venture interests.......... - | - 37,335 (15,525)
Adjustments to fair value.... - | 133,917 - -
Other reorganization items... - | 13,396 10,470 4,046
Other, net................... (11,764)| (5,866) 11,398 9,738
Net cash provided (used) by |
operating activities before |
reorganization items.......... 45,390 | (5,069) 36,955 17,290
|
Operating cash flows from |
reorganization items: |
Interest received on cash |
accumulated because of |
Chapter 11 proceedings...... - | 1,998 5,102 4,500
Professional fees and |
administrative expenses..... (6,934)| (5,849) (10,459) (5,910)
Professional fees escrow |
pursuant to the |
reorganization plan......... - | (12,431) - -
Net cash used by reorganization |
items......................... (6,934)| (16,282) (5,357) (1,410)
|
Net cash provided (used) by |
operating activities.......... 38,456 | (21,351) 31,598 15,880
|
Cash Flows from Investing |
Activities: |
Capital expenditures........... (16,480)| (6,695) (18,999) (22,122)
Proceeds from sales of assets.. 21,861 | - - -
Proceeds from sales of assets |
held for sale................. - | 2,457 9,206 7,934
Proceeds from sales of assets |
due to Chapter 11 proceedings. - | - 71,162 39,675
Sales of property, plant and |
equipment..................... - | - 888 1,064
Collection of notes receivable. - | 93 908 4,418
Investment and advances to |
equity investees.............. - | - (5,000) (3,500)
Other, net..................... 414 | (293) (5,971) (3,239)
Net cash provided (used) by |
investing activities.......... 5,795 | (4,438) 52,194 24,230
|
Cash Flows from Financing |
Activities: |
Cash distribution pursuant to |
the reorganization plan....... - | (200,451) - -
Transfer to liquidating |
subsidiary.................... - | (5,010) - -
Reduction of production payment (1,000)| (1,000) (8,000) (8,000)
Net cash used by financing |
activities.................... (1,000)| (206,461) (8,000) (8,000)
|
Net increase (decrease) in cash |
and cash equivalents......... 43,251 | (232,250) 75,792 32,110
Cash and cash equivalents, |
beginning of period........... 12,147 | 244,397 168,605 136,495
Cash and cash equivalents, end |
of period..................... $ 55,398 | $ 12,147 $244,397 $168,605
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Chapter 11 Proceedings
In order 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 of Title 11 of the United
States Code ("Chapter 11") in the United States Bankruptcy Court for the
Southern District of New York ("Bankruptcy Court"), and operated their
respective businesses as debtors-in-possession until April 14, 1994. On
February 17, 1994, with the approval of all voting classes of creditors
and equity holders, the Bankruptcy Court confirmed the Debtors Modified
Amended Consolidated Plan of Reorganization dated November 4, 1993 (as
further modified on February 17, 1994) (the "plan"). On April 14, 1994,
(the "effective date") the plan became effective, and distributions to
creditors and shareholders commenced. In accordance with the plan,
certain core cement, ready-mixed concrete and construction aggregates
operations constitute the reorganized Lone Star. Other non-core assets
of the company and their associated liabilities including the Nazareth,
Pennsylvania cement plant, the Santa Cruz, California cement plant and
the company's interests in the RMC LONESTAR, Hawaiian Cement and Lone
Star-Falcon joint ventures, certain surplus real estate and certain
litigations have been transferred to Rosebud Holdings, Inc., a wholly-
owned liquidating subsidiary and its subsidiaries (collectively
"Rosebud") for disposition and distribution of the proceeds of such
dispositions, for the benefit of unsecured creditors (See Note 5).
The plan provides for distributions on the effective date to claims
which were allowed at that time, and for the establishment of a reserve
for certain disputed, contingent, and unliquidated claims. On the
effective date, the escrow agent administering the reserve received a
distribution of cash and securities attributable to the reserved claims.
As of the effective date, the total amount of allowed and reserved
claims was $590,944,000, which the company expects to be reduced to
approximately $584,016,000 when all claims are paid. In connection with
the plan, holders of allowed and reserved secured claims, priority
claims and convenience claims were paid $8,262,000 in cash. Holders of
allowed and reserved unsecured claims, which the company estimates will
be $575,754,000 when all claims are paid, were entitled to receive their
pro rata share of (i) $192,189,000 in cash, (ii) $78,000,000 ten year
10% senior unsecured notes of the reorganized company, (the company's
March 31, 1994 balance sheet includes accrued interest of $1,300,000 for
the period from February 1, 1994 through March 31, 1994 per the terms of
the senior unsecured notes indenture), (iii) $138,118,000 secured asset
proceeds notes of Rosebud, to be paid out of the proceeds from the
disposition of its assets (See Note 19) and (iv) 85.0% of the common
stock of reorganized Lone Star. The aggregate recovery on unsecured
claims will depend on the ultimate value of the common stock, the senior
unsecured notes, and the secured asset proceeds notes (the value of the
secured asset proceeds notes will reflect the sums realized from the
disposition of assets and litigation recoveries of Rosebud).
Holders of the company's cumulative convertible preferred stock became
entitled to receive a pro rata share of 10.5% of the common stock of
reorganized Lone Star and 1,250,000 warrants to purchase common stock of
the reorganized Lone Star. The holders of common stock of Lone Star
became entitled to receive the balance of reorganized Lone Star's common
equity and 2,753,333 warrants to purchase common stock in the
reorganized Lone Star. The warrants are exercisable through December
31, 2000, and each warrant provides for the purchase of one share of the
common stock of reorganized Lone Star at a price of $18.75 per share.
In addition, in accordance with the plan, as part of the agreement with
the Pension Benefit Guaranty Corporation ("PBGC") the company granted
the PBGC a mortgage on the Oglesby, Illinois plant, and a security
interest in the company's 25% interest in the Kosmos Cement Company
partnership, to secure certain contingent future pension obligations.
2. Basis of Presentation
As of the effective date of the plan, the sum of allowed claims plus
post-petition liabilities of the company exceeded the value of its pre-
confirmation assets. In addition, the company experienced a change in
control as pre-reorganization equity holders received less than 50% of
the reorganized Lone Star common stock issued pursuant to the plan.
Therefore, in accordance with AICPA Statement of Position No. 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP No. 90-7"), the company adopted "fresh-start" reporting
which assumes that a new reporting entity has been created and requires
assets and liabilities be adjusted to their fair values as of the
effective date.
Although the plan became effective on April 14, 1994, for accounting
purposes the effective date of the plan is considered to be March 31,
1994, and accordingly, the company adopted fresh-start reporting as of
March 31, 1994. Adjustments were recorded as of March 31, 1994 to
reflect the effects of the consummation of the plan and to reflect the
implementation of fresh-start reporting. The reorganization value of
the company was determined using several factors and by reliance on
various valuation methods, including discounted cash flows,
price/earnings ratios and other applicable ratios. Reorganization value
generally approximates fair value of the entity before considering
liabilities and approximates the amount a buyer would pay for the assets
of the entity after the reorganization. Based on information from
parties in interest and from Lone Star's financial advisors, the total
reorganization value of the company was $579,411,000. The reorganization
value was then allocated to the company's assets and liabilities in
conformity with the Accounting Principles Board Opinion No. 16,
"Business Combinations" ("APB No. 16"), as specified by SOP No. 90-7.
Income related to the settlement of liabilities subject to the company's
Chapter 11 proceedings is included in the accompanying consolidated
statement of operations as an extraordinary gain on discharge of
prepetition liabilities. The gains or losses related to the adjustments
of assets and liabilities to fair value are included in reorganization
items in the accompanying consolidated statement of operations (See Note
29). The reorganization value in excess of amounts allocable to
identifiable assets is the portion of the reorganization value of the
company which was not attributed to specific assets of the company.
The company's emergence from its Chapter 11 proceedings resulted in a new
reporting entity with no retained earnings or accumulated deficit as of
March 31, 1994. Accordingly, the company's consolidated financial
statements for periods prior to March 31, 1994 are not comparable to
consolidated financial statements presented on or subsequent to March 31,
1994. A black line has been drawn on the accompanying consolidated
financial statements to distinguish between the pre-reorganization and
post-reorganization company. In addition, having operated for over three
years in bankruptcy, results of operations prior to emergence from
bankruptcy are not indicative of results of operations outside of Chapter
11 proceedings.
Under Chapter 11, the filed companies could not 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 were satisfied
pursuant to the plan of reorganization, are reflected in the December 31,
1993 consolidated balance sheet as liabilities subject to the Chapter 11
proceedings.
3. 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. Certain prior period amounts have
been reclassified to conform with current period presentation.
Cash and Cash Equivalents - Cash equivalents include short-term, highly
liquid investments with original maturities of three months or less, and
are recorded at cost, which approximates market value.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined principally by the weighted average cost method.
Property, Plant and Equipment - Property, plant and equipment are stated at
fair market value as of March 31, 1994. Additions subsequent to March 31,
1994 are stated at cost. Property, plant and equipment are 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.
Reorganization Value in Excess of Amounts Allocable to Identifiable Assets-
The portion of the reorganization value of the company which was not
attributed to specific tangible or identified intangible assets of the
company is amortized using the straight-line method over a twenty-year
period which approximates the useful life of the company's long-term
assets. In accordance with AICPA Statement of Position No. 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP No. 90-7"), reorganization value in excess of amounts allocable
to identifiable assets is reduced by the income tax benefits realized from
preconfirmation net operating loss carryforwards.
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.
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. In accordance with AICPA SOP No. 90-7, income tax benefits
realized from preconfirmation net operating loss carryforwards are used
first to reduce reorganization value in excess of amounts allocable to
identifiable assets and then to increase additional paid-in capital.
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") and the
provisions of the company's agreement with the Pension Benefit Guaranty
Corporation. Assets of the plans are administered by an independent
trustee and are invested principally in fixed income, equity securities and
real estate.
Postretirement Benefits Other Than Pensions - The company provides retiree
life insurance and health plan coverage to qualifying employees. The
company accounts for these benefits on an accrual basis, under the
provisions of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions".
These plans are unfunded.
Income Per Common Share - Primary and fully diluted income per common share
is based on the weighted average number of shares outstanding in each year
and assumes that warrants to purchase common stock and dilutive stock
options have been exercised at the beginning of each year or on the date of
issuance. Due to the large number of outstanding common stock equivalents,
primary and fully diluted earnings per share of the successor company are
calculated using the modified treasury stock method. Primary and fully
diluted earnings per share for the nine months ended December 31, 1994 were
based on adjusted weighted average shares outstanding of 14,132,145 and
adjusted net income of $31,426,717 and $31,341,307, respectively.
Environmental Matters - Accruals for environmental matters are recorded
when it is probable that a liability has been incurred and the amount of
the liability can be reasonably estimated, or if an amount is likely to
fall within a range and no amount within that range can be determined to be
the better estimate, the minimum amount of the range is recorded. Accruals
for environmental matters exclude claims for recoveries from insurance
carriers and other third parties until it is probable that such recoveries
will be realized.
4. Pro Forma Information
The following pro forma condensed financial information of the company and
its subsidiaries illustrates the estimated financial effects of the
implementation of the plan (which resulted in the end of the company's 1989
restructuring program) and its adoption of fresh-start reporting. Pro
forma statement of operations data for the three months ended March 31,
1994 have been presented as if the company had emerged from its Chapter 11
bankruptcy proceedings and adopted fresh-start reporting as of January 1,
1993. The pro forma data is unaudited.
Lone Star Industries, Inc.
Pro Forma Consolidated Statement of Operations (Unaudited)
For the Three Months Ended March 31, 1994
(In Millions Except Per Share Amounts)
Effect of Plan of
Reorganization
and Fresh-Start Pro Forma
Historical Reporting Results
Revenues:
Net sales.......................... $ 33.7 $ 11.6 $ 45.3
Joint venture income............... 0.4 (0.3) 0.1
Other income....................... 2.7 (1.5) 1.2
36.8 9.8 46.6
Deductions from revenues:
Cost of sales...................... 29.7 17.7 47.4
Recovery of litigation settlement.. (6.5) - (6.5)
Selling, general and administrative 9.9 (1.6) 8.3
Depreciation and depletion......... 6.7 (0.6) 6.1
Interest expense................... 0.2 2.0 2.2
40.0 17.5 57.5
Loss before reorganization items... (3.2) (7.7) (10.9)
Reorganization items:
Adjustments to fair value.......... (133.9) 133.9 -
Other.............................. (13.4) 13.4 -
Total reorganization items......... (147.3) 147.3 -
Loss before income taxes
and extraordinary item............ (150.5) 139.6 (10.9)
Credit (provision) for income
taxes............................. (0.2) 4.0 3.8
Loss before extraordinary item..... (150.7) 143.6 (7.1)
Extraordinary item: gain on
discharge of prepetition
liabilities....................... 127.5 (127.5) -
Loss before provision for
preferred dividends............... $ (23.2) $ 16.1 $ (7.1)
Primary and fully diluted
loss per common share............. $ (0.59)
___________________________________________________________________________
The following pro forma condensed financial information for the year ended
December 31, 1994 illustrates the estimated operating results as if the
company had emerged from its Chapter 11 proceedings and adopted a fresh-
start reporting as of January 1, 1993 by combining the pro forma results
for the three months ended March 31, 1994 and the actual results for the
nine months ended December 31, 1994.
Lone Star Industries, Inc.
Pro Forma Consolidated Statement of Operations (Unaudited)
For the Year Ended December 31, 1994
(In Millions Except Per Share Amounts)
Pro Forma Actual Pro Forma
Results for Results for Results
the Three the Nine for the
Months Ended Months Ended Year Ended
March 31, December 31, December 31,
1994 1994 1994
Revenues:
Net sales........................... $ 45.3 $ 261.6 $ 306.9
Joint venture income................ 0.1 4.5 4.6
Other income........................ 1.2 3.8 5.0
46.6 269.9 316.5
Deductions from revenues:
Cost of sales....................... 47.4 177.0 224.4
Recovery of litigation settlement... (6.5) - (6.5)
Selling, general and administrative. 8.3 23.8 32.1
Depreciation and depletion.......... 6.1 17.2 23.3
Interest expense.................... 2.2 6.8 9.0
57.5 224.8 282.3
Income (loss) before income taxes... $ (10.9) $ 45.1 34.2
Provision for income taxes.......... (12.0)
Net income.......................... $ 22.2
Primary income per common share..... $ 1.76
Fully diluted income per common
share.............................. $ 1.75
The following pro forma condensed financial information of the company and
its subsidiaries illustrates the estimated operating results as if the
company had emerged from its Chapter 11 bankruptcy proceedings and adopted
fresh-start reporting as of January 1, 1993.
Lone Star Industries, Inc.
Pro Forma Consolidated Statement of Operations (Unaudited)
For the Year Ended December 31, 1993
(In Millions Except Per Share Amounts)
Effect of Plan
of Reorganization
and Fresh-Start Pro Forma
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 24.9 218.8
Provision for litigation settlements 2.5 - 2.5
Selling, general and
administrative..................... 41.3 (3.2) 38.1
Depreciation and depletion.......... 26.3 (2.7) 23.6
Interest expense.................... 1.6 7.8 9.4
265.6 26.8 292.4
Income (loss) before
reorganization items............... 6.1 (20.8) (14.7)
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) 27.0 (14.7)
Credit (provision) for income taxes. 6.4 (7.5) (1.1)
Loss before cumulative effect
of changes in accounting
principles......................... $ (35.3) $ 19.5 $ (15.8)
Primary and fully diluted loss
per common share................... $ (1.32)
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
ended effective March 31, 1994. Operating results of the cement plants at
Pryor, Oklahoma and Maryneal, Texas, which were formerly included in assets
held for sale are included in the pro forma consolidated operating results
for the three months ended March 31, 1994 and the years ended December 31,
1994 and 1993.
The operating results of the assets and liabilities which were transferred
to Rosebud for distribution for the benefit of creditors, have been
eliminated from the pro forma statements of operations.
Cost of sales has been adjusted to reflect the write-up of inventory in
accordance with fresh-start reporting.
In connection with the adjustment of the property, plant and equipment
balances to reflect the values of the assets under fresh-start reporting,
the pro forma consolidated operating results have been adjusted to include
the change in depreciation expense related to the new values.
Interest expense related to long-term debt, including the senior notes of
the reorganized company, has been included in the pro forma statements of
operations.
Due to the elimination of common and preferred shareholders' equity of the
predecessor company, and its replacement with common equity of the
successor company, the provision for preferred dividends has been
eliminated from the pro forma statements of operations.
Cost of sales for the three months ended March 31, 1994 has been adjusted
to reflect the company's change in its method of accounting for inventory
for interim reporting purposes and the expensing of deferred costs in
accordance with the adoption of fresh-start reporting. In addition, cost
of sales has been adjusted to reflect costs related to its construction
aggregates barges which were deferred during the first quarter of 1994 and
subsequently written-off in accordance with fresh-start reporting. Similar
costs will be incurred and expensed in future years.
All Chapter 11 reorganization items included in the historical statements
of operations have been eliminated from the pro forma statements of
operations.
The extraordinary gain on discharge of pre-petition liabilities has been
eliminated.
The pro forma statements of operations have been adjusted, in accordance
with the requirements of fresh-start reporting, to reflect the reduction in
expenses resulting from bankruptcy-related settlements, including
settlements reached with the PBGC and retirees.
5. Rosebud Holdings, Inc. Liquidating Subsidiary
As part of the plan, the company transferred on April 14, 1994 certain non-
core assets and their related liabilities to Rosebud. The assets
transferred consisted of the company's interests in the RMC LONESTAR, Lone
Star-Falcon and Hawaiian Cement partnerships, cement plants located in
Santa Cruz, California, and Nazareth, Pennsylvania, certain promissory
notes executed by RMC LONESTAR, certain surplus real estate, the company's
interest in any recovery resulting from the litigation against Northeast
Cement Company and its affiliates, Lafarge Corporation, and Lafarge Canada,
Inc., certain other miscellaneous assets including a note receivable and
certain litigation and insurance claims, and a $5,000,000 cash investment
by the company to be used for working capital purposes. The company is
under no obligation to fund additional Rosebud working capital
requirements.
It was estimated by the company in connection with the plan, that
disposition of the non-core assets would generate, over time, gross
proceeds of approximately $113,000,000 to $170,000,000. Lone Star's
investment in Rosebud is included in the company's December 31, 1994
consolidated balance sheet at $87,000,000, which is the present value,
discounted at 14%, of estimated net proceeds to be generated by the sale of
assets, the receipt of dividends, and cash on hand. The decrease of
$25,000,000 from March 31, 1994 is primarily due to asset sales and the
subsequent distribution of the net proceeds to asset proceeds note holders,
partially offset by the greater value of the remaining assets reflecting
the shorter time period used in determining the present value. The Rosebud
investment amount does not include any amount for potential recovery from
any litigation including the Northeast Cement Company litigation (See Note
35).
At the effective date of the plan, Rosebud issued secured asset proceeds
notes in the aggregate principal amount of $138,118,000. The asset
proceeds notes are secured by liens and security interests, as the case may
be, on substantially all of the Rosebud assets. The asset proceeds notes
bear interest at a rate of 10% per annum payable in cash and/or additional
asset proceeds notes, payable in semi-annual installments (the July 31,
1994 and January 31, 1995 interest payments were paid in cash). The asset
proceeds notes are to be repaid as Rosebud's assets are disposed of and
proceeds, if any, are received in connection with the litigation
transferred to Rosebud. All net cash proceeds less a $5,000,000 cash
reserve plus up to an additional $5,000,000 for estimated Rosebud working
capital needs, are to be deposited in a cash collateral account for
distribution to the note holders. The asset proceeds notes mature on July
31, 1997. These notes are guaranteed, in part, by Lone Star. In the event
that, at the maturity date, the aggregate amount of all cash payments of
principal and interest on the asset proceeds notes is less than
$88,118,000, the guarantee is payable in either cash, five-year notes or a
combination thereof, at the option of Lone Star, to cover the shortfall
between the actual payments and $88,118,000 dollar for dollar plus
interest; provided, however, that the amount paid pursuant to the guarantee
cannot exceed $28,000,000. If amounts become due and payable under the
company guarantee, such obligation and the notes which may be issued
thereunder will rank pari passu with the senior notes. The company
guarantee is secured by a pledge of the company's right, title and interest
in and to all of the issued and outstanding common stock of Rosebud. To
the extent that amounts received upon disposition of the Rosebud assets and
the company guarantee are not sufficient to pay the principal and interest
of the asset proceeds notes, such notes will not be paid. In addition, the
assumption by Rosebud of Lone Star's liabilities which arose from actions
or circumstances that existed on or before April 14, 1994, may not be
binding on third parties, to the extent that those liabilities result in
payments to Lone Star aggregating in excess of $7,000,000. The asset
proceeds notes, including accrued interest thereon, are recorded on the
accompanying consolidated balance sheets at an amount equal to the
estimated value of the assets to be utilized to liquidate these
obligations.
In June 1994, Rosebud sold all of its interest in a cement plant located in
Santa Cruz, California for $33,063,000. The net proceeds from the sale,
after making provisions for an environmental reserve for landfill and other
costs related to the transaction, were used to redeem a portion of the
outstanding asset proceeds notes on a pro rata basis and to pay interest on
the redeemed notes through the date of redemption. A total of $31,878,000
representing principal and accrued interest thereon was transferred to the
collateral agent who made payments to note holders on August 19, 1994. In
July 1994, Rosebud made a $5,755,000 cash interest payment related to the
asset proceeds notes.
In May, July and December 1994, Rosebud sold surplus property in Virginia,
Massachusetts and Louisiana for net cash proceeds of $695,000 which was
retained by Rosebud for working capital needs.
In July 1994, Rosebud reached final agreements with substantially all the
insurance carriers involved in litigation, related to indemnity in the
railroad crosstie litigation cases (See Note 35). During the third quarter
1994, Rosebud received $5,300,000 from the insurance carriers involved in
the settlements, the net cash proceeds of which were retained for working
capital needs.
In October 1994, Rosebud granted an option to acquire the stock of the
company holding the 50% interest in the RMC LONESTAR partnership to an
affiliate of the joint venture partner. The purchase option is exercisable
through April 30, 1995.
In November 1994, the jury in the retrial of the railroad crosstie
litigation returned a verdict entitling the company to a recovery from
Lafarge on its claim of breach of express warranty and awarded the company
$8,391,483, which award could have been subject to adjustment as a result
of the application of prejudgment interest and a statute of limitation
claims. In December 1994, the court entered a partial judgment in favor of
the company in the amount of $9,308,058, which amount included prejudgment
interest but was not reduced by the statute of limitations claim. Interest
will continue to accrue on the judgment until it is paid. The company's
pending claim under a Massachusetts statute governing unfair trade
practices is expected to be considered by the trial court judge in the
first quarter of 1995. The rights to any recovery of damages in this
action have been assigned to Rosebud. (See Note 35).
In December 1994, Rosebud sold its Nazareth, Pennsylvania cement plant for
$22,134,000. Net proceeds of approximately $17,600,000 were transferred to
the collateral agent to be used to redeem a portion of the asset proceeds
notes. The remainder of the proceeds were set aside to cover future
expenses and liabilities related to the plant.
In December 1994, Rosebud received $300,000 representing a payment received
from Arthur Riedel, two parcels of property securing a new note, and
certain surplus real estate in satisfaction of the judgment secured against
Mr. Riedel.
In January 1995, Rosebud received $9,000,000 as a return of capital from
the Lone Star-Falcon partnership upon completion of the sale of the
partnership's cement terminals in Texas, which funds were transferred to
the collateral agent and were used to redeem a portion of the asset
proceeds notes.
On February 22, 1995, the collateral agent made principal payments and
accrued interest thereon of $30,183,000 to asset proceeds note holders. In
addition, on January 31, 1995 Rosebud made a $5,320,000 cash interest
payment on the asset proceeds notes. As of February 22, 1995, the total
interest and principal payments paid on the asset proceeds notes was
$73,136,000.
6. 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. 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. The assets to
be sold, including related current and other assets, were classified as
assets held for sale in the accompanying December 31, 1993 consolidated
balance sheet at their then estimated net realizable values (as revised in
1990). Upon emergence from the Chapter 11 proceedings, the company's
restructuring program was terminated and certain assets which were
previously classified as assets held for sale were retained by the company,
including the Pryor, Oklahoma and Maryneal, Texas cement plants. In
addition, the Lone Star-Falcon joint venture was transferred to Rosebud.
Operating results related to assets held for sale included pre-tax income
of $1,200,000, $8,100,000 and $3,100,000 for the three months ended March
31, 1994, and the years ended December 31, 1993 and 1992, respectively. 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.
Net proceeds from sales of assets held for sale were $2,457,000, $9,206,000
and $7,934,000 for the three months ended March 31, 1994 and the years
ended December 31, 1993 and 1992, respectively. Included in the assets
sold were a portion of a former plant site in Kansas, a ready-mixed
concrete and construction aggregates operation in Massachusetts, a concrete
block operation in Tennessee, the site of a former cement plant in Texas,
and certain parcels of real estate.
7. Asset Dispositions
In June 1994, the company sold its interest in a cement plant located in
Florida for $21,750,000, which approximated book value. The plant had been
leased to a third party and was purchased by the lessee.
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 statement 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 statement of
operations.
In December 1992, the company sold its 50% interest in LSM Concrete Tie
Company for $1,675,000.
The operations sold in 1994, 1993 and 1992 contributed the following
results for the period through their respective dates of disposition (in
thousands):
For the Nine For the Three For the For the
Months Ended Months Ended Year Ended Year Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Net sales............. $ - $ - $ 118 $ 1,339
Joint venture income.. $ - $ - $ 9,745 $ 28,056
Pre-tax income........ $ 65 $ 65 $ 4,564 $ 13,727
8. Accounts and Notes Receivable
Receivables consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Trade accounts and notes receivable.. $ 37,914 $ 34,439 $ 37,185
Other notes receivable............... - 52 299
Other receivables.................... 1,792 4,063 20,451
39,706 38,554 57,935
Less: Allowance for doubtful accounts 7,226 8,843 8,913
$ 32,480 $ 29,711 $ 49,022
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.
9. Inventories
Inventories consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Finished goods....................... $ 21,800 $ 23,743 $ 20,277
Work in process and raw materials.... 3,786 2,126 1,987
Supplies and fuel.................... 19,943 18,925 16,162
$ 45,529 $ 44,794 $ 38,426
Inventories were revalued at March 31, 1994 in accordance with fresh-start
reporting. Cost is determined principally by the weighted average cost
method.
10. Other Current Assets
Other current assets consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Prepaid expenses..................... $ 3,243 $ 2,695 $ 2,733
Professional fees escrow............. - 12,432 -
$ 3,243 $ 15,127 $ 2,733
11. Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Land................................... $ 39,373 $ 40,427 $ 21,934
Buildings and equipment................ 257,659 259,386 633,273
Construction in progress............... 5,749 10,723 4,116
Automobiles and trucks................. 23,664 21,627 21,184
Other.................................. 100 100 2,323
326,545 332,263 682,830
Less accumulated depreciation and
depletion............................. 16,593 - 284,745
$ 309,952 $ 332,263 $ 398,085
Property, plant and equipment was revalued in accordance with fresh-start
reporting using the March 31, 1994 fair market values, as appraised, and
depreciation is determined based on the estimated remaining useful lives of
the assets.
12. Interest Costs
Interest costs incurred during the nine months ended December 31, 1994, the
three months ended March 31, 1994, and the years ended December 31, 1993
and 1992 were $6,980,000, $271,000, $1,832,000, and $2,406,000,
respectively. Interest capitalized during the nine months ended December
31, 1994, the three months ended March 31, 1994, and the years ended
December 31, 1993 and 1992 was $168,000, $38,000, $195,000 and $196,000,
respectively. Interest paid during the nine months ended December 31,
1994, the three months ended March 31, 1994, and the years ended December
31, 1993 and 1992 was $4,724,000, $20,000, $123,000 and $119,000,
respectively. Contractual interest for the three months ended March 31,
1994, and the years ended December 31, 1993 and 1992 was $7,631,000,
$31,227,000 and $31,914,000, respectively. The filed companies stopped
accruing interest on their unsecured prepetition debt during the Chapter 11
proceedings.
13. Joint Ventures
The company's investment in and advances to joint ventures at December 31,
1994, March 31, 1994 and December 31, 1993 are as follows (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Kosmos Cement Company.............. $ 18,174 $ 17,500 $ 24,149
Other joint ventures............... - - 64,425
$ 18,174 $ 17,500 $ 88,574
The amount of cumulative unremitted earnings of joint ventures included in
consolidated retained earnings at December 31, 1994, was $674,000.
During the nine months ended December 31, 1994, the three months ended
March 31, 1994, and the years ended December 31, 1993 and 1992, $3,750,000,
$1,000,000, $15,294,000 and $8,331,000, respectively, in distributions were
received from joint ventures.
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 nine months
ended December 31, 1994, the three months ended March 31, 1994, and the
years ended December 31, 1993 and 1992 is as follows (in thousands):
As of and As of and As of and As of and
For the For the For the For the
Nine Months Three Months Year Year
Ended Ended Ended Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Current assets............. $ 26,302 $ 24,064 $ 24,236 $ 28,268
Property, plant and
equipment, net............ 74,259 75,065 74,713 75,327
Cost in excess of net assets
of businesses acquired.... 24,754 25,312 25,497 26,242
Current liabilities........ (4,430) (3,375) (3,449) (4,165)
Other liabilities.......... (2,955) (3,457) (3,329) (96)
Net assets................. $ 117,930 $ 117,609 $ 117,668 $ 125,576
Net sales.................. $ 65,184 $ 7,892 $ 65,597 $ 62,769
Gross profits.............. $ 17,306 $ 651 $ 15,027 $ 13,545
Income (loss) before
cumulative effect of change
in accounting principle... $ 15,321 $ (59) $ 12,218 $ 7,736
Cumulative effect of change
in accounting principle... $ - $ - $ 3,126 $ -
Net income (loss).......... $ 15,321 $ (59) $ 9,092 $ 7,736
At December 31, 1994, March 31, 1994, and December 31, 1993 and 1992, the
company's share of the underlying net assets of Kosmos Cement Company
exceeded its investment by $11,309,000, $11,902,000, $5,260,000 and
$5,619,000, respectively and is being amortized over the estimated
remaining life of the assets.
Other Joint Ventures
Other joint ventures included: RMC LONESTAR, a 50% partnership interest
with ready-mixed concrete, aggregates, cement terminals, building materials
and trucking operations in northern California, the company's 50% interest
in Hawaiian Cement, a manufacturer of cement, ready-mixed concrete and
construction aggregates in Hawaii, the company's 49.6% interest in
Companhia Nacional de Cimento Portland ("CNCP"), a joint venture which
operates four cement plants and a grinding facility in Brazil, the
company's 50% interest in Cemento San Martin, S.A. ("CSM"), a manufacturer
of cement in Argentina (owned through Compania Argentina de Cemento
Portland ("CACP"), a wholly owned subsidiary of the company), and the
company's 50% interest in LSM Concrete Tie Company.
As of March 31, 1994, in accordance with the company's plan, the company's
interest in the RMC LONESTAR, Hawaiian Cement and Lone Star-Falcon
(previously included in the company's restructuring program) joint
ventures, were transferred to Rosebud (See Note 5).
In September 1993, the company completed the sale of its 49.6% interest in
CNCP for $69,629,000. The table below 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 statement of
operations.
In December 1992, the company sold its interest in LSM Concrete Tie Company
for $1,675,000.
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.
Summarized financial information of other joint ventures in which the
company participated as of and for the three months ended March 31, 1994,
and the years ended December 31, 1993 and 1992 is as follows (in
thousands):
As of and As of and As of and
For the Three For the For the
Months Ended Year Ended Year Ended
March 31, December 31, December 31,
1994 1993 1992
Current assets...................... $ - $ 65,254 $ 167,274
Property, plant and equipment, net.. - 231,835 392,353
Other assets........................ - 29,478 35,686
Payable to Lone Star Industries..... - (11,833) (3,500)
Current liabilities................. - (53,109) (84,992)
Long-term debt...................... - (76,500) (104,000)
Other liabilities................... - (24,384) (40,258)
Net assets.......................... $ - $ 160,741 $ 362,563
Net revenues........................ $ 58,307 $ 312,285 $ 424,615
Gross profits....................... $ 6,823 $ 65,025 $ 113,351
Income (loss) before income taxes
and cumulative effect of change
in accounting principle........... $ (1,182) $ 27,598 $ 64,383
Income (loss) before cumulative
effect............................ $ (1,182) $ 19,136 $ 41,086
Cumulative effect of change in
accounting principle.............. $ - $ - $ 47,980
Net income (loss)................... $ (1,182) $ 19,136 $ 89,066
14. Reorganization Value In Excess of Amounts Allocable to Identifiable
Assets
Reorganization value in excess of amounts allocable to identifiable assets
are as follows (in thousands):
December 31, March 31,
1994 1994
Reorganization value in excess of amounts
allocable to identifiable assets................. $ 14,372 $ 14,372
Less accumulated amortization..................... 542 -
Less tax benefit of net operating loss
carryforwards utilized........................... 13,830 -
$ - $ 14,372
In accordance with SOP No. 90-7, the reorganization value in excess of
amounts allocable to identifiable assets has been reduced by the income tax
benefits realized from preconfirmation net operating loss carryforwards.
15. 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):
December 31,
1993
Cost in excess of net assets of businesses acquired... $ 10,793
Less accumulated amortization......................... 1,520
$ 9,273
Cost in excess of net assets of businesses acquired by the predecessor
company were written off as part of the adoption of fresh-start reporting.
16. Accounts Payable
Accounts payable consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Trade................................. $ 13,862 $ 15,462 $ 11,327
Other................................. 410 465 4,752
$ 14,272 $ 15,927 $ 16,079
Accounts payable balances as of the petition date were classified as
liabilities subject to Chapter 11 proceedings on the accompanying December
31, 1993 consolidated balance sheet.
17. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Postretirement benefits other than
pensions............................... $ 7,686 $ 10,487 $ 11,432
Pensions................................ 6,200 6,913 6,684
Insurance............................... 3,578 3,036 7,463
Interest................................ 3,566 1,310 80
Payroll and vacation pay................ 3,209 3,030 3,488
Environmental matters................... 2,596 2,596 4,475
Taxes other than income taxes........... 2,504 2,920 3,309
Professional fees and administrative
expenses.............................. 1,782 18,897 8,352
Other................................... 16,216 19,529 15,070
$ 47,337 $ 68,718 $ 60,353
Accrued liabilities as of the petition date, except for those approved for
payment or those which the company believed would be paid in the ordinary
course of business in the following year, were classified as liabilities
subject to Chapter 11 proceedings in the accompanying December 31, 1993
consolidated balance sheet.
18. Other Current Liabilities
Other current liabilities consist of the following (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Current portion of production payment... $ 3,000 $ 2,523 $ 2,000
Income taxes payable.................... 650 471 1,227
$ 3,650 $ 2,994 $ 3,227
19. Asset Proceeds Notes of Liquidating Subsidiary
Upon emergence from the company's Chapter 11 proceedings, Rosebud issued
secured asset proceeds notes in the aggregate principal amount of
$138,118,000. The notes bear interest at a rate of 10% per annum payable
in cash and/or additional asset proceeds notes, payable semi-annually. The
notes are to be repaid as Rosebud's assets are disposed of and proceeds, if
any, are received in connection with the litigation transferred to Rosebud.
The asset proceeds notes mature on July 31, 1997. A portion of Rosebud's
obligations under these notes is guaranteed by the company. If, at the
maturity date, the aggregate amount of all cash payments of principal and
interest on the asset proceeds notes is less than $88,118,000, the
guarantee is payable in either cash, five-year notes or a combination
thereof, at the option of Lone Star, to cover the shortfall between the
actual payments and $88,118,000 dollar for dollar plus interest; provided,
however, that the amount paid pursuant to the guarantee cannot exceed
$28,000,000. The company's guarantee is, and any five-year notes issued
pursuant thereto will be, secured by a pledge of the company's right, title
and interest in and to all of the issued and outstanding common stock of
Rosebud. To the extent that amounts received upon disposition of the
Rosebud assets, from litigation proceeds or from the company guarantee are
not sufficient to pay the principal and interest of the asset proceeds
notes, such notes will not be paid.
All net cash proceeds less a $5,000,000 cash reserve plus up to an
additional $5,000,000 for estimated Rosebud working capital needs, are to
be deposited in a cash collateral account for distribution to the note
holders. In July 1994, Rosebud made a cash interest payment of $5,755,000.
An additional cash interest payment of $5,320,000 was made in January 1995.
Principal payments of $31,878,000 including accrued interest thereon, were
made in August 1994. Additional principal payments and accrued interest
thereon of $30,183,000 were made in February 1995. As of February 22,
1995, the total interest and principal payments paid on the assets proceeds
notes was $73,136,000.
The asset proceeds notes, including accrued interest thereon, are recorded
on the accompanying consolidated balance sheets at an amount equal to the
estimated value of the assets to be utilized to liquidate these obligations
(See Note 5).
20. Senior Notes Payable
Upon emergence from its Chapter 11 proceedings, the company issued
$78,000,000 of ten year senior unsecured notes, which bear interest at a
rate of 10% per annum. The indenture governing the senior notes and other
agreements entered into in connection with the reorganization, imposes
certain operating and financial restrictions on the company. Such
restrictions affect, and in some respects significantly limit or prohibit,
among other things, the ability of the company to incur additional
indebtedness, repay certain indebtedness prior to its stated maturity,
create liens, apply proceeds from asset sales, engage in mergers and
acquisitions, make certain capital expenditures or pay dividends.
Commencing in the year 2000, the company is required to make three annual
payments of $10,000,000 each into a sinking fund account for redemption of
the senior notes. The amount of any such required sinking fund account
will be reduced, without duplication, by the principal amount of any senior
notes that the company has optionally redeemed or purchased.
The company has the option to redeem the senior notes payable for an amount
equal to 100% of the principal amount plus accrued and unpaid interest.
Optional redemption of the senior notes is restricted by the company's
credit agreement.
21. Credit Agreement
Upon emergence from Chapter 11, the company entered into a three-year
$35,000,000 revolving credit agreement which is collateralized by
inventory, receivables, collection proceeds and certain intangible assets.
The company's borrowings under this agreement are limited to 55% of
eligible inventory plus 85% of eligible receivables. The advances under
the agreement bear interest at a rate of either prime plus 1.25% or LIBOR
plus 3%, at the company's option. A fee of 0.5% per annum is charged on
the unused portion of the line. Although the company from time to time has
used the letter of credit facility provided by the credit agreement, it has
not drawn any funds under the credit agreement for working capital
purposes. Accordingly, there was no outstanding balance as of December 31,
1994.
The credit agreement and other agreements entered into in connection with
the reorganization, impose certain operating and financial restrictions on
the company. Such restrictions affect, and in some respects significantly
limit or prohibit, among other things, the ability of the company to incur
additional indebtedness, repay certain indebtedness prior to its stated
maturity, create liens, apply proceeds from asset sales, engage in mergers
and acquisitions, make certain capital expenditures or pay dividends. In
addition, pursuant to the credit agreement, and other agreements entered
into in connection with the reorganization, certain of the company's assets
are subject to liens or negative pledges.
Due to the Chapter 11 proceedings, the filed companies were in default
under their financing agreements. Long-term debt subject to compromise was
classified as liabilities subject to Chapter 11 proceedings in the
accompanying December 31, 1993 consolidated balance sheet.
22. 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 proceeds have been deferred and are being reflected in
income, together with related costs and expenses, as the limestone is
processed into cement and the cement is sold.
As part of the plan, the terms of the production payment agreement were
revised as of April 14, 1994. Under the revised terms, the company is
required to make payments in advance for minerals used at the two plants
subject to the production payment agreement and to take or pay for minerals
in amounts sufficient to permit the purchaser to service the note
associated with the production payment facility. In connection therewith,
a new note was issued, with an outstanding principal balance of $20,963,000
as of that date, and which bears interest, at the company's option, at a
rate of either prime or LIBOR plus 1.75% through December 31, 1995 and
either prime plus .25% or LIBOR plus 2.5% beginning on January 1, 1996.
The principal balance is payable semi-annually through July 31, 1998 in
increasing installments. As of December 31, 1994, the company expects to
remit payments as follows: 1995-$3,000,000, 1996-$4,000,000, 1997-
$5,000,000, 1998-$7,966,000. In August 1994, the company made a $1,000,000
principal payment. The total production payment balance included in the
accompanying December 31, 1994 consolidated balance sheet is $19,966,000.
23. Leases
Net rental expense for the nine months ended December 31, 1994, the three
months ended March 31, 1994, and the years ended 1993 and 1992 was
$4,894,000, $755,000, $5,888,000 and $6,325,000, respectively. Minimum
rental commitments under all non-cancelable leases principally pertaining
to land, buildings and equipment are as follows: 1995-$5,607,000; 1996-
$1,433,000; 1997-$1,318,000; 1998-$1,115,000; 1999-$1,108,000; after 1999-
$6,000. Certain leases include options for renewal or purchase of leased
property.
A subsidiary of the company was leasing its Florida cement plant with an
original term of approximately twenty years at an annual rental of
$2,500,000. In June 1994, the company sold its interest in the cement
plant located in Florida, for $21,750,000, which approximated book value.
24. Common Stock
Upon emergence from its Chapter 11 proceedings, the company authorized
25,000,000 shares of $1.00 par value common stock and issued 12,000,000
shares of that common stock (See Note 1). Transactions in common stock are
as follows:
Shares
Balance, March 31, 1994....................................... 12,000,000
Exercise of warrants.......................................... 16
Balance, December 31, 1994.................................... 12,000,016
At December 31, 1994, the company has reserved 4,753,317 shares of its
authorized but unissued common stock for possible future issuance in
connection with the exercise of the warrants to purchase common stock
(4,003,317 shares), and the exercise of stock options (750,000 shares). The
payment of cash dividends on common stock is restricted under the
provisions of the company's debt agreements (See Notes 20 and 21).
All predecessor company common and preferred stock issues were canceled in
accordance with the plan of reorganization.
25. Warrants to Purchase Common Stock
Upon emergence from its Chapter 11 proceedings, the company issued
4,003,333 warrants to purchase common stock at an exercise price of $18.75
per share. Each warrant entitles the holder thereof to purchase one share
of common stock. The warrants are non-callable, non-redeemable and expire
on December 31, 2000. As of December 31, 1994, 4,003,317 warrants were
outstanding.
The number of shares of common stock purchasable upon the exercise of each
warrant and the exercise price of the warrant are subject to adjustment if
the company (i) pays a dividend in shares of common stock, (ii) subdivides
its outstanding shares of common stock, (iii) combines its outstanding
shares of common stock into a smaller number of shares of common stock, or
issues by reclassification or recapitalization of its shares of common
stock, other securities of the company or (iv) issues certain stock rights
convertible into, or exchangeable for, common stock. An adjustment will
not result from the company's sale of common stock on the open market or
from the declaration of regular cash dividends.
26. Stockholder Rights Plan
In November 1994, the Board of Directors adopted a Stockholder Rights Plan
("rights plan") under which stock purchase rights were distributed as a
dividend to holders of common stock payable to the shareholders of record
on December 19, 1994. The rights plan represents a means of deterring
abusive and coercive takeover tactics not offering an adequate price to all
stockholders, and seeks to ensure that stockholders realize the long-term
value of their investments.
The rights plan provides that if, subject to certain exemptions, any person
or group acquires 15% or more of the company's common stock, each right not
owned by a 15% or more stockholder or related parties will entitle its
holder to purchase, at the right's then current exercise price, shares of
common stock having a value of twice the right's then current exercise
price. This right to purchase common stock at a discount will not be
triggered by a person's or group's acquisition of 15% or more of the common
stock pursuant to a tender or exchange offer which is for all outstanding
shares at a price and on terms that the Board of Directors determines
(prior to acquisition) to be adequate and in the best interests of the
company and its stockholders. In addition, this right will not be
triggered by the stockholdings of certain existing stockholders.
Under the rights plan, holders of the rights will initially be entitled to
buy one one-tenth of a share of the company's common stock at an exercise
price of $70.00 for each whole share which a holder of rights may purchase.
Until a person or group acquires 15% or more of the common stock or
commences a tender or exchange offer for 15% or more of the common stock,
the rights will attach to and trade with the common stock. The rights will
expire in the year 2004.
The company may redeem the rights, at the option of the Board of Directors,
at a redemption price of $0.01 per right at any time prior to the
acquisition by any person or group of 15% or more of the common stock. In
addition, after a person or group has acquired 15% or more of the common
stock but before any person or group has acquired 50% or more of the common
stock, the company may exchange shares of common stock for rights.
The 1988 Shareholder Rights Plan was canceled in accordance with the plan
of reorganization.
27. Stock Options
Upon emergence from its Chapter 11 proceedings, the Board of Directors of
the company adopted the Lone Star Industries, Inc. Management Stock Option
Plan ("Management Plan") and the Lone Star Industries, Inc. Directors Stock
Option Plan ("Directors' Plan"). As of March 31, 1994, no options were
outstanding or granted. Total options available for grant at March 31,
1994 were 700,000 and 50,000 under the Management and Directors' plans,
respectively. In June 1994, options to purchase 700,000 shares of common
stock at an exercise price of $15.375 per share and 6,000 shares of common
stock at an exercise price of $15.6875 per share were granted under the
Management and Directors' Plans, respectively. No options were exercised
in 1994. In January 1995, 70,000 options granted under the Management Plan
were exercised. All options will expire 10 years from the date of grant.
Options available for future grants under the Directors' Plan were 44,000
at December 31, 1994. All predecessor company stock options have been
canceled in accordance with the plan of reorganization.
28. Disclosures about Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of the company's financial instruments at December 31, 1994 (in thousands).
In accordance with Statement of Financial Accounting Standard No. 107,
"Disclosures about Fair Value of Financial Instruments", the fair value of
a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties.
December 31, 1994
Carrying Fair
Amount Value
Financial assets:
Cash and cash equivalents...................... $ 55,398 $ 55,398
Financial liabilities:
Asset proceeds notes of liquidating
subsidiary................................... $ 87,000 $ 87,000
Senior notes payable........................... $ 78,000 $ 74,295
Production payment............................. $ 19,966 $ 19,966
The carrying amounts shown in the table are included in the accompanying
consolidated balance sheet under the indicated captions.
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 cash equivalents - the carrying amount approximates fair value
because of the short maturity of those instruments.
Asset proceeds notes of liquidating subsidiary - the fair value of the
asset proceeds notes is based on the value of the net assets of the
liquidating subsidiary to be utilized to liquidate these obligations (See
Note 5). The fair value of the net assets is estimated by discounting the
expected cash flows to be realized from liquidation of the assets. The
face value of the notes at December 31, 1994 is $106,399,000, and the notes
are not publicly traded. The carrying amount of the asset proceeds notes
approximates fair value.
Senior notes payable - the fair value of long-term debt is based on quoted
market prices. As of December 31, 1994 the senior notes were trading at
95.25% of face value.
Production payment - the production payment is not publicly traded and no
quoted market price is available. The carrying value of the production
payment approximates fair value as the underlying notes bear interest at
variable rates and reprice frequently (See Note 22).
29. Reorganization Items
The effects of transactions occurring as a result of the Chapter 11 filings
have been segregated from ordinary operations in the accompanying
consolidated statements of operations. Such items for the three months
ended March 31, 1994, and for the years ended December 31, 1993 and 1992,
include the following (in thousands):
For the Three For the For the
Months Ended Year Ended Year Ended
March 31, December 31, December 31,
1994 1993 1992
Professional fees and
administrative expenses........ $ (15,431) $ (15,572) $ (8,546)
Interest income................. 2,035 5,102 4,500
(13,396) (10,470) (4,046)
Gain (loss) on sale of assets... - (37,335) 15,525
Adjustments to fair value....... (133,917) - -
$ (147,313) $ (47,805) $ 11,479
Professional fees and administrative expenses related to the filed
companies' Chapter 11 proceedings were 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.
30. Other Income, Net
Other income, net, consists of the following (in thousands):
For the For the For the For the
Nine Months Three Months Year Year
Ended Ended Ended Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Rental income............. $ 1,105 $ 2,184 $ 8,817 $ 8,910
Interest income on
investments.............. 1,266 179 512 527
Other interest income..... 49 160 727 642
Interest on income tax
refund................... - - - 3,051
Other, net................ 1,400 168 1,182 694
$ 3,820 $ 2,691 $ 11,238 $ 13,824
31. 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 and under the company's agreement with the PBGC, in accordance with
appropriate actuarial assumptions.
Net periodic pension cost of defined benefit plans included the following
components (in thousands):
For the For the For the For the
Nine Months Three Months Year Year
Ended Ended Ended Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Interest cost............. $ 7,377 $ 2,477 $ 10,236 $ 9,987
Service cost - benefits
accrued during the period 1,379 407 1,363 1,266
Actual return on plan
assets................... (3,938) (2,338) (11,913) (6,432)
Net amortization and
deferral................. (2,125) 1,029 3,404 (2,129)
Net pension cost.......... $ 2,693 $ 1,575 $ 3,090 $ 2,692
The following tables present the plans' funded status and amounts
recognized in the accompanying consolidated balance sheets at December 31,
1994, March 31, 1994 and 1993 (in thousands):
Successor Company
December 31, 1994 March 31, 1994
Over- Under- Over- Under-
funded funded funded funded
Plans Plans Plans Plans
Actuarial present value of
benefit obligations:
Vested benefits........... $ 79,272 $ 50,856 $ 4,387 $132,674
Non-vested benefits....... 3,212 997 181 5,610
Accumulated benefit
obligation................. $ 82,484 $ 51,853 $ 4,568 $138,284
Projected benefit
obligation................. $ 85,314 $ 51,853 $ 4,568 $141,334
Plan assets at fair value... 86,380 36,773 4,624 112,013
Projected benefit
obligation (in excess of)
less than plan assets...... 1,066 (15,080) 56 (29,321)
Unrecognized net gain....... (4,564) (1,975) - -
Pension asset/(liability)... $ (3,498) $(17,055) $ 56 $(29,321)
Predecessor Company
December 31, 1993
Over- Under-
funded funded
Plans Plans
Actuarial present value of
benefit obligations:
Vested benefits................................. $ 333 $142,642
Non-vested benefits............................. - 3,205
Accumulated benefit
obligation....................................... $ 333 $145,847
Projected benefit
obligation....................................... $ 333 $148,729
Plan assets at fair value......................... 337 103,191
Projected benefit obligation (in excess of)
less than plan assets............................ 4 (45,538)
Unamortized net asset at January 1, 1987.......... (64) (1,366)
Unamortized prior service cost ................... - (3,161)
Adjustment required to recognize minimum
liability........................................ - (22,594)
Unrecognized net loss............................. 185 28,589
Pension asset/(liability)......................... $ 125 $(44,070)
The weighted average discount rates of 7.5%, 7.0% and 7.0% for December 31,
1994, March 31, 1994 and December 31, 1993, respectively, and the rate of
annual increase in future compensation levels of 5.5% in both 1994 and
1993, 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% for both 1994 and 1993.
Upon adoption of fresh-start reporting, pension liabilities were recorded
based on the unfunded projected benefit obligation as of March 31, 1994.
All outstanding unamortized and unrecognized items as of March 31, 1994
were recognized and recorded on the company's consolidated balance sheet.
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 the nine months ended
December 31, 1994, the three months ended March 31, 1994 and the years
ended December 31, 1993 and 1992 were approximately $200,000, $50,000,
$300,000 and $400,000, respectively.
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, totaling $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.
In accordance with the plan of reorganization, future obligations are
secured by the grant to the PBGC of a mortgage on the Oglesby, Illinois
cement plant and a security interest in the Kosmos Cement Company
partnership.
32. 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.
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 changed its accounting for
postretirement benefits from a cash basis to an accrual basis over an
employee's period of service, and 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.
Upon adoption of fresh-start reporting, postretirement benefit liabilities
were recorded based on the unfunded projected benefit obligation as of
March 31, 1994. All outstanding unamortized and unrecognized
postretirement benefit items as of March 31, 1994 were recognized and
recorded on the company's consolidated balance sheet.
As part of its emergence from Chapter 11 proceedings, the company reached
settlements with the salaried and union retirees with respect to reductions
and modifications of retiree medical and life insurance benefits. As part
of the settlement with salaried retirees, the company established a
Voluntary Employees Beneficiary Association ("VEBA"), a tax-exempt trust,
and agreed to make defined quarterly contributions to the trust. The
company has the option to prepay all future quarterly contributions to the
VEBA in a single cash amount equal to 110% of the discounted present value
(using an 8.5% discount factor) of all future quarterly contributions. The
company made contributions of $3,705,000 to the VEBA during the nine months
ended December 31, 1994.
Net periodic postretirement benefit cost for the nine months ended December
31, 1994, the three months ended March 31, 1994, and the years ended
December 31, 1993 and 1992 included the following components (in
thousands):
For the For the For the For the
Nine Months Three Months Year Year
Ended Ended Ended Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Service cost - benefits
attributed to service
during the period........ $ 1,536 $ 557 $ 1,912 $ 1,704
Interest cost on
accumulated postretirement
benefit obligation....... 6,786 2,896 12,341 11,854
Net amortization and
deferral................. - 22 - -
Net periodic postretirement
benefit cost............. $ 8,322 $ 3,475 $ 14,253 $ 13,558
Benefits paid, including VEBA contributions, were approximately $6,749,000,
$2,195,000, $9,444,000 and $9,600,000 for the nine months ended December
31, 1994, the three months ended March 31, 1994 and the years ended
December 31, 1993 and 1992, respectively.
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, are as follows at December 31, 1994, March
31, 1994 and 1993 (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Accumulated postretirement
benefit obligation:
Retirees.......................... $ 89,640 $ 93,767 $ 120,716
Fully eligible active plan
participants...................... 19,070 22,393 25,789
Other active plan participants.... 11,861 19,587 24,777
Accumulated postretirement
benefit obligation................. 120,571 135,747 171,282
Unamortized prior service cost...... - - 2,613
Unrecognized net gain (loss)........ 16,749 - (20,513)
Accrued postretirement benefit
cost............................... 137,320 135,747 153,382
Less current portion................ 7,686 10,487 11,432
Long-term accrued post-retirement
benefit cost....................... $ 129,634 $ 125,260 $ 141,950
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%, 7.0% and 7.0% for December 31,
1994, March 31, 1994 and December 31, 1993, respectively. Compensation
levels are assumed to increase at a rate of 5.5% annually.
For measurement purposes, a 12.5% and 10.0% annual medical rate of increase
was assumed for 1994 for pre-medicare and post-medicare claims,
respectively; the rate was assumed to decrease 1/2% each year to 6% per
year after 2007 for pre-medicare claims, and decrease 1/2% per year to 6%
after 2002 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, 1994 by approximately $8,400,000 and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the nine months ended December 31, 1994 by
approximately $800,000.
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.
33. Income Taxes
In 1992, the company and its Brazilian joint venture 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 the joint venture'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 $0.14
per share.
(Provision) credit for income taxes consists of the following (in
thousands):
For the For the For the For the
Nine Months Three Months Year Year
Ended Ended Ended Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Federal:
Current................. $ - $ 635 $ (1,541) $ -
Deferred:
Difference between tax
and book depreciation. 3,548 3,348 (3,320) 1,700
Sale of assets......... (9,716) - - -
Investment and other
credits............... (7,790) (851) 635 -
Net operating loss
carryforward.......... (2,388) 37,526 (6,209) 3,217
Restructuring and other
reserves.............. (4,946) 12,578 3,132 7,820
Sale of international
joint venture......... - - 26,093 6,014
Valuation allowance.... 21,295 (53,249) (17,961) (15,422)
Other, net............. (3) 13 (1,735) (3,329)
Total deferred............ - (635) 635 -
Reduction of reorganization
value.................... (13,830) - - -
Total federal............. (13,830) - (906) -
Foreign:
Current................. (16) (5) - (374)
Deferred tax on unremitted
foreign earnings....... - - 12,132 (2,246)
Total foreign............. (16) (5) 12,132 (2,620)
State and local:
Current................. (750) (150) (621) (300)
Deferred................ (1,204) - (59) -
Total state and local..... (1,954) (150) (680) (300)
Joint venture taxes....... - - (4,195) (11,558)
$ (15,800) $ (155) $ 6,351 $ (14,478)
As of December 31, 1994, the company has investment tax credit
carryforwards for federal income tax purposes of $6,628,000 which expire at
various dates through 2001. The company also has regular tax and
alternative minimum tax net operating loss carryforwards of approximately
$225,000,000 and $100,000,000, respectively, which expire at various dates
through 2009 and an alternative minimum tax credit carryforward of
$5,023,000. 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" resulted from the issuance of equity
securities by the company as part of its plan of reorganization (See Note
2). 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 income (loss) and a
reconciliation of income taxes computed at the U.S. statutory rate to the
(provision) credit for income taxes (in thousands):
For the For the For the For the
Nine Months Three Months Year Year
Ended Ended Ended Ended
December 31, March 31, December 31, December 31,
1994 1994 1993 1992
Income (loss) before income
taxes and cumulative effect
of changes in accounting
principles............... $ 45,133 $ (22,963) $ (41,609) $ (30,950)
Tax (provision) benefit
computed at statutory
rates.................... (15,796) 8,037 14,563 10,523
Differences resulting
from:
Foreign subsidiaries, net (175) (294) 397 79
Corporate joint ventures. - - 9,405 (9,358)
Restructuring............ - 45,212 - -
State tax, net........... (1,954) (150) (680) (300)
Other.................... 2,125 - 627 -
Valuation allowance...... - (52,960) (17,961) (15,422)
$ (15,800) $ (155) $ 6,351 $ (14,478)
Components of net deferred tax assets (liabilities) as of December 31,
1994, March 31, 1994 and December 31, 1993 are as follows (in thousands):
December 31, March 31, December 31,
1994 1994 1993
Current tax assets related to:
Reserves..................... $ 3,670 $ 3,670 $ 3,083
Miscellaneous................ 8,126 13,986 7,196
11,796 17,656 10,279
Non-current tax assets related to:
Reserves not yet deducted.... 20,879 15,019 47,777
Reserve for retiree benefits. 43,851 51,664 53,154
Loss carryforwards........... 71,642 87,110 36,793
Investment credits........... 6,628 14,418 15,610
Alternative minimum tax credits 5,023 4,047 4,682
Miscellaneous................ 7,191 - 8,691
155,214 172,258 166,707
Non-current tax liabilities related to:
Fixed assets................. (33,742) (58,495) (72,574)
Domestic joint ventures...... (16,162) (8,697) (18,336)
(49,904) (67,192) (90,910)
Valuation allowance............ (117,106) (122,722) (85,441)
Net federal tax asset.......... - - 635
State & other.................. (6,688) (5,000) (3,991)
Net deferred................... $ (6,688) $ (5,000) $ (3,356)
In accordance with AICPA Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code", income
tax benefits realized from preconfirmation net operating loss carryforwards
are used first to reduce the reorganization value in excess of amounts
allocable to identifiable assets and then applied to paid-in capital.
Income taxes paid during the nine months ended December 31, 1994, the three
months ended March 31, 1994, and the years ended December 31, 1993 and 1992
were $86,000, $756,000, $1,038,000 and $637,000, respectively.
34. Environmental Matters
The company is subject to extensive 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 past activities and
closed or formerly owned or operated properties or facilities.
While it is not possible to assess accurately the expected impact of
future changes in existing regulations or the enactment of new
regulations on the company, the capital, operating and other costs of
compliance with such environmental requirements could be substantial.
The United States Environmental Protection Agency ("EPA") has completed
the Congressionally - mandated study of the potential hazards posed by
cement kiln dust ("CKD"), a by-product of cement manufacturing, and on
January 31, 1995 issued a regulatory determination regarding the need
for regulatory controls on the management, handling and disposal of CKD.
Generally, the EPA regulatory determination provides that the EPA
intends to draft and promulgate regulations imposing controls on the
management, handling and disposal of CKD that will be based largely on
selected components of the existing Resource Conservation and Recovery
Act ("RCRA") hazardous waste regulatory program, tailored to address the
specific regulatory concerns posed by CKD. The EPA regulatory
determination further provides that the CKD regulations it will be
promulgating will be designed to be protective of the environment while
at the same time to minimize the burden on the regulated parties. It is
not possible to predict at this time what EPA's CKD regulations will
provide regarding the imposition of regulatory controls on the
management, handling and disposal of CKD, and what, if any, increased
costs (or range of costs) will be incurred by the company to comply with
the new regulatory requirements. Until the new EPA CKD regulations are
finally promulgated (which may take substantial time), CKD will remain
exempt from regulation as a hazardous waste pursuant to the Bevill
Amendment to RCRA.
The company's cement manufacturing facilities which use hazardous waste
fuels as a cost saving energy source are subject to strict RCRA, state
and local requirements governing hazardous waste treatment, storage and
disposal facilities, including those contained in the federal Boiler and
Industrial Furnace Regulations (the "BIF Rules"). The two cement
manufacturing facilities which burn hazardous waste fuels ("HWF") (Cape
Girardeau, Missouri and Greencastle, Indiana plants) qualified for and
are currently operating under interim status pursuant to RCRA and the
BIF Rules. While Lone Star believes that it is currently in compliance
with the extensive and complex technical requirements of the BIF Rules,
there can be no assurances that Lone Star will be able to maintain
compliance with the BIF Rules or that changes to such rules or their
interpretation by the relevant agencies or courts might not make it more
difficult or cost prohibitive to maintain compliance or continue to burn
HWF. In February 1994, a decision was issued by the United States Court
of Appeals for the District of Columbia Circuit in a lawsuit challenging
certain aspects of the BIF Rules. Among other things, that court's
decision vacated and remanded to EPA a challenged BIF Rules air
emissions standard applicable to wet process cement kilns with which the
company's Greencastle cement plant had been complying, but upheld two
related standards. Prior to the issuance of that Court's mandate
vacating and remanding this standard, which followed denials of a motion
to reconsider and a petition for certiorari to the United States Supreme
Court made by the company and other cement manufacturers adversely
affected by the Court's decision, the Greencastle cement plant was able
to demonstrate compliance with a surviving standard but only at less
than desirable production levels or operating conditions. Accordingly,
the Greencastle cement plant has substantially curtailed its use of
hazardous waste fuels pending capital upgrades to the plant or the
promulgation by EPA of a modified or new BIF Rules air emission
standard. The Circuit Court's ruling has no impact upon the current use
of hazardous waste fuels at the company's Cape Girardeau cement plant.
In addition, the company is currently engaged in the process of securing
the permit required under RCRA and the BIF Rules for each of the Cape
Girardeau and Greencastle plants to enable it to continue the use of HWF
at those facilities. The permitting process is lengthy and complex,
involving the submission of extensive technical data. There can be no
assurances that the company will be successful in securing a final RCRA
permit for either or both of its HWF facilities, or, if able to secure
such permits, that the permits will contain terms and conditions with
which the company will be able to comply or which will not require
costly upgrades to the facilities to enable the company to achieve such
compliance.
Since 1991, federal and state environmental agencies have conducted
inspections and instituted inquires and administrative actions regarding
waste fuel operations at both of the company's cement manufacturing
facilities which burn HWF. In the first half of 1994 the company paid
amounts totaling approximately $402,000 representing negotiated
settlements with federal and state environmental entities of
administrative actions that alleged violations of regulations pertaining
to the handling and burning of HWF at the Greencastle plant. In March
1994, EPA instituted an administrative proceeding regarding waste fuel
operations at the company's Cape Girardeau plant, seeking over $500,000
in civil penalties. The company negotiated a settlement with EPA which
requires the payment by the company of a civil penalty of approximately
$190,000, approximately $87,000 of which will be offset by two
supplemental environmental projects being undertaken at the Cape
Girardeau plant to improve its record keeping and compliance
capabilities. In addition, in 1994, Lone Star was given official notice
by EPA that it intended to pursue a civil penalty action for alleged
regulatory violations at the Cape Girardeau facility with respect to the
installation of a secondary crusher and the replacement of screens in
1986 and 1987. During discussions with EPA to resolve this issue,
EPA indicated that a monetary settlement of approximately $190,000
would be expected. Lone Star has made a counter offer to EPA to which it
has not yet received a response. No civil penalty action has yet been
filed, pending ongoing attempts to resolve the issue without litigation.
Past operations of the company or its predecessors have resulted in
releases of hazardous substances at sites currently or formerly owned by
the company or where waste materials generated by the company have been
disposed. The company has been identified as one of the parties that
may be held responsible by federal or state governmental authorities
pursuant to The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA") or similar state laws for
the costs of investigation and remediation of contamination at sites
where waste materials generated by the company were deposited. For
thirteen such sites (none of which are currently owned or leased by the
company or its subsidiaries) which are on the National Priority List
("NPL") of sites requiring investigation and remediation pursuant to
CERCLA, the Company is one of numerous potentially responsible parties
("PRP's") (with the exception of the Utah sites) and available factual
information indicates that the company's contributions of waste to the
site was small and the company may have certain defenses arising out of
the Reorganization.
Included are sites located in: Utah (seven sites, including three NPL
sites); Illinois (one NPL site); Texas (two sites, including one NPL
site); Missouri (one NPL site); Washington (two NPL sites); Minnesota
(two NPL sites); Colorado (one NPL site); Florida (four sites, including
two related NPL sites and two non-NPL sites); California (one non-NPL
site); Pennsylvania (one NPL site); and Louisiana (one NPL site).
Following are descriptions of proceedings involving certain of the NPL
and non-NPL sites set forth above:
For the site located in Colorado, the company availed itself of a de
minimis settlement offered by EPA to resolve its liability for that site
for a cost of approximately $14,000, subject to certain limitations and
the potential for a reopener if the total clean-up ultimately exceeds a
certain sum. For another site, one of those located in Washington
(i.e., the Harbor Island Superfund site), the company availed itself of
the opportunity to join a settling group of PRP's and to resolve its
liabilities to the EPA for the soil and groundwater operable unit of the
Harbor Island Superfund site at an approximate cost, which Rosebud has
agreed to pay, of $250,000 (including the contemplated benefits of a
cost-allocation agreement the company has negotiated with another PRP
for certain of the site-specific costs for which the company is also
responsible). While there may be liability for other operable units
associated with this site, the extent of such liability and validity of
any defenses to that future imposition of liability is not presently
ascertainable. These costs may be borne by Rosebud in accordance with
an agreement contemplated by the reorganization transferring certain
assets and liabilities of the company to Rosebud.
In July 1989, the company was advised by EPA, that it was a PRP with
respect to three adjoining sites in Salt Lake City, Utah on which CKD
and small amounts of chrome-containing kiln brick from the company's
Utah cement plant had been deposited. In July 1990, EPA and the Utah
Department of Health issued a record of decision selecting a remedial
action calling for removal of the CKD, over a period of time, to a
location to be selected in the Salt Lake City vicinity where an
industrial type landfill would be constructed. In December 1994, the
Bankruptcy Court approved an agreement among the company, the U.S.
Department of Justice, EPA, the U.S. Department of the Interior, the
Utah Department of Environmental Quality and Davis County, Utah
regarding a settlement pursuant to which among other things, EPA
received a general unsecured claim in the company's bankruptcy
proceedings in exchange for releases from further liability for
investigation and clean-up costs, natural resource damage claims and
protection against third-party claims for investigation and clean-up
costs.
In October 1989, the company commenced an action in United States
District Court in Utah seeking contribution from two PRP's for their
share of investigative clean-up costs of the Utah NPL sites. Settlement
agreements with the PRP's were approved by the Bankruptcy Court, in 1994
pursuant to which the PRP's received general unsecured claims in the
company's bankruptcy proceedings and all their claims against the
company were dismissed, subject to their reaching settlements with EPA,
the negotiation of which is continuing.
In the early 1970's, the company acquired subsidiaries that conducted
woodtreating or wood-dipping operations at two sites in Florida.
Contamination from chemicals used in the woodtreating operations at
these non-NPL sites have been the subject of various proceedings by
federal, state and local environmental entities, as well as lawsuits
involving private parties.
In 1992 EPA approved a clean up of soils and water at the Dania, Florida
site completed by a subsidiary of the company, pursuant to a pre-
petition Administrative Order on Consent. The subsidiary has entered
into a Bankruptcy Court approved stipulation with the State of Florida
Department of Environmental Protection ("FDEP") committing to undertake
a groundwater monitoring program and, if necessary, groundwater
treatment. The subsidiary is currently negotiating a consent order with
FDEP setting forth the monitoring and possible remediation efforts in
detail. This site has been transferred to Rosebud pursuant to the plan
and Rosebud has entered into a contract for sale calling for its sale,
subject to due diligence, in the first half of 1995. Rosebud plans to
fund the clean-up from the proceeds of the sale.
Pursuant to a pre-petition Florida state court-ordered stipulation, a
subsidiary of the company completed the clean-up of soils at a site in
Dade County, Florida in 1993. The subsidiary had leased this site for
woodtreating operations in the 1960's and 1970's. In connection with
the Chapter 11 proceedings, the subsidiary resolved its liability to
state and local governmental entities by agreeing to undertake further
groundwater investigation of the site and, if necessary, soil
remediation, groundwater treatment and ground water monitoring programs
all within a specified monetary cap of $2,000,000.
Prior to its Chapter 11 filing, the subsidiary commenced a lawsuit in
Florida Federal District Court against other PRP's of the Dade County
site, for cost recovery and contribution under CERCLA. Two of the PRP's
filed counterclaims and proofs of claim in the company's bankruptcy
proceedings. A Bankruptcy Court approved settlement agreement entered
into among the parties provided that the PRP's will reimburse the
subsidiary for a portion of its clean-up costs and dismiss their
federal, state and bankruptcy court claims, and the subsidiary will
dismiss its federal court claim against the PRP's while committing to
undertake the future investigation and, if necessary, remedial work
under the Bankruptcy Court stipulation with the state and local
environmental entities described above.
At the time of its 1994 sale of its interest in the Santa Cruz cement
plant, Rosebud committed to regulatory authorities to undertake the
closure of a former waste landfill area at the plant site. The closure
is expected to be completed in 1995 at an anticipated cost of
approximately $1,500,000. Postclosure monitoring of the site will be
the responsibility of the plant owner.
The December 31, 1994 accompanying consolidated balance sheet includes
accruals of $7,200,000 which represent the company's current estimate of
its liability related to future remediation costs at such sites. This
amount includes a $1,000,000 liability recorded during the second
quarter of 1994 as part of the sale of the Pennsuco cement plant in
Florida to cover any future liability related to Lone Star per the sale
contract.
The company believes that it has adequately provided for estimated
remediation and other costs at these and other known sites.
35. Litigation
In 1989 and early 1990 purchasers of concrete crossties manufactured by
a Lone Star subsidiary brought an action against Lone Star and its
subsidiary seeking damages over $200,000,000.
After extensive pre-trial discovery, 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 agreements
with the purchasers providing 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. The
$9,384,000 cash payments have been made and the claims which were
approved by the Bankruptcy Court were treated in accordance with the
provisions of the company's plan.
In 1989 Lone Star and its subsidiary sued Northeast Cement Co. and its
affiliates, Lafarge Corporation and Lafarge Canada, Inc. ("Lafarge"),
alleging breach of warranties in connection with the purchase from
Northeast Cement Co. by Lone Star's subsidiary of the cement used to
manufacture substantially all of the crossties involved in the above
proceedings claiming a fraudulent sale of defective cement and seeking
compensatory damages growing out of the various crosstie actions,
including the foregoing settlements and defense costs at approximately
$15,750,000. The suit was tried before a jury in the Maryland Federal
District Court in late 1992. The jury found that Lone Star had proven
its claim 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. Both sides appealed their verdict and in 1994
the Fourth Circuit Court of Appeals vacated the judgment of the District
Court and remanded the case for a new trial on all issues relating to
both liability and damages and permitted the company to amend its
complaint to add a claim of violation of a Massachusetts consumer
protection law which allows for attorney fees and doubling and trebling
of damages.
On November 30, 1994, the jury in the retrial of the litigation returned
a verdict entitling Lone Star to a recovery from Lafarge only on its
claim of breach of express warranty and the court entered a partial
judgment in favor of Lone Star. Subsequently, the judgment was
increased to $9,308,058 to include interest. A hearing was held on
March 3, 1995 to consider Lone Star's pending claim under a
Massachusetts statute governing unfair trade practices. Both sides can
appeal the results of the jury trial and any judgment under the
Massachusetts statute. The rights to any recovery of damages in this
action have been assigned to Rosebud pursuant to the Plan of
Reorganization.
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 and as to the duty of the primary insurance carrier
to pay the costs of defending those proceedings. With the approval of
the Bankruptcy Court, Lone Star settled its claims against the primary
insurance carrier for defense costs for payments to Lone Star of
$14,733,000 in cash; setoffs to the carrier's claim in the bankruptcy of
approximately $4,778,000 and for $6,500,000 as a set-off to a claim
filed in the company's bankruptcy proceedings by that carrier. The
rights to any additional recoveries from insurance carriers has been
assigned to Rosebud pursuant to the plan. Rosebud and certain of the
remaining insurance carriers have negotiated a settlement of the
indemnity action which provided for payments to Rosebud of an aggregate
of $5,300,000, which was received in July 1994. Rosebud is continuing
the indemnify action against the insurance carriers as to which no
settlement has been reached and will also seek to recover the costs of
the Lafarge action.
The settlement of the consolidated shareholders' class action lawsuits
brought against the company and certain of its past and present officers
and directors entitled Cohn v. Lone Star Industries, Inc., et al. and
Garbarino, et ano. v. Stewart, et al. was approved and adopted by an
order of the U.S. District Court for the District of Connecticut on
January 20, 1994.
The terms of the settlement agreement, which was entered into by Mr.
James E. Stewart, the former Chairman and Chief Executive Officer of
Lone Star, includes the dismissal of the claims against Mr. Stewart and
the officers and directors of Lone Star and the agreement of Lone Star's
directors and officers liability insurers to pay $40,000,000 to
establish settlement funds on behalf of the plaintiff classes. In order
to participate in these settlement funds, eligible plaintiffs were
required to submit a proof of claim by July 29, 1994. Lone Star was
dismissed without prejudice from the Cohn action, the only action in
which it was named as a defendant by the plaintiffs. The settlement
does not constitute an admission by Lone Star, or any of its past and
present officers, directors and employees of any liability or wrongdoing
on their part. In connection with the company's bankruptcy proceedings,
in order to resolve the claims filed by both plaintiff classes without
admitting any liability, a claim in the aggregate of $2,500,000 was
allowed to the plaintiff classes by the company.
The company, along with numerous other parties, has been named a
defendant in a series of toxic tort lawsuits filed in a Texas state
court commencing in March, 1994 in which multiple plaintiffs claim to
have suffered injury from the proximity of deposits of toxic wastes or
substances at a site located near Galveston, Texas. The toxic wastes or
substances are alleged to have been deposited at the site starting in
the 1940's. The company has retained Texas counsel and has filed
answers denying the allegations of the various complaints. The company
intends to contest these lawsuits vigorously. The company's insurance
carriers have been notified of the claims but the extent of the company
insurance coverage, if any, for these lawsuits has not yet been
determined. The company has not recorded any provision related to these
lawsuits.
36. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1994 and 1993 is as follows (in
thousands except per share data):
Predecessor| Successor Company
Company |
| Quarter
1994 First | Second Third Fourth
Net sales............. $ 33,709 | $ 86,995 $ 95,969 $ 78,681
Gross profit(loss).... $ (443)| $ 20,264 $ 28,276 $ 19,783
Net income (loss) before |
extraordinary item... $(150,638)| $ 7,914 $ 13,441 $ 7,978
Net income(loss)...... $ (23,118)| $ 7,914 $ 13,441 $ 7,978
Primary and fully diluted |
net income per |
common share: ....... $ n/m | $ 0.62 $ 0.99 $ 0.61
|
Predecessor Company
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) before
cumulative effect of
change in accounting
principle............ $ (13,575) $ (28,287) $ 11,480 $ (4,876)
Net income (loss)..... $ (14,357) $ (28,287) $ 11,480 $ (4,876)
Primary and fully
diluted net income
(loss) per common share:
Income (loss) before
cumulative effect of
change in accounting
principle.......... $ (0.89) $ (1.78) $ 0.61 $ (0.37)
Net income (loss)... $ (0.94) $ (1.78) $ 0.61 $ (0.37)
(1) Gross profit is net of depreciation expense relating to cost of sales
of $16,326,000, $4,697,000 and $18,420,000 in the nine months ended
December 31, 1994, the three months ended March 31, 1994 and the year
ended December 31, 1993, respectively.
(2) The effect of preferred stock on the fully diluted earnings per share
computation for the four quarters of 1993 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
1994 and 1993 does not equal the total computed for the year due to
the emergence from Chapter 11 proceedings in 1994 (See Note 2) and the
stock transactions which occurred during 1993.
(4) Earnings per share for the first quarter of 1994 are not meaningful
due to reorganization and revaluation entries and the issuance of
12,000,000 shares of new common stock (See Note 2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
This item is inapplicable as no such changes or
disagreements have occurred.
PART III
Certain information required by Part III is omitted from
this Report in that the Company will file a definitive proxy
statement pursuant to Regulation 14A (the "Proxy Statement") not
later than 120 days after the end of the fiscal year covered by
this Report, and certain information included therein is
incorporated herein by reference. Only those sections of the
Proxy Statement which specifically address the items set forth
herein are incorporated by reference. Such incorporation does
not include the Compensation and Stock Option Committee Report
or the Performance Graph included in the Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except for information regarding the Company's executive
officers set forth in Part I, Item 4, entitled "Executive
Officers of the Registrant," the information called for by this
Item is incorporated in this Report by reference to the Proxy
Statement for the Company's 1995 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item is incorporated in
this Report by reference to the Proxy Statement for the
Company's 1995 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by this Item is incorporated in
this Report by reference to the Proxy Statement for the
Company's 1995 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this Item is incorporated in
this Report by reference to the Proxy Statement for the
Company's 1995 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) The following documents are filed as a part of this
Report:
1. Financial Statements and Schedules: See Index to Financial
Statements and Schedules on page 42 of this Report.
2. Exhibits:
2.1 Voluntary Petition for Relief under Chapter 11,
Title 11 of the United States Code dated December 10,
1990 (incorporated herein by reference to Exhibit 28A
of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990).
2.2 Modified Amended Disclosure Statement Regarding
Debtors' Modified Amended Consolidated Plan of
Reorganization and exhibits thereto (incorporated
herein by reference to the Registrant's Form T-3
filed January 14, 1994, File No. 1.022-22175; except
for Exhibit J to said Modified Amendment Disclosure
Statement which is incorporated by reference to the
Registrant'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 the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1993, filed August 12, 1993, File
Number 1.001-06124).
2.3 Modification of Debtors' Plan of Reorganization
(incorporated herein by reference to Exhibit 2 of the
Registrant's Current Report on Form 8-K dated
March 1, 1994, filed March 8, 1994, File Number
1.001-06124).
2.4 Order Confirming Debtors' Modified Amended and
Consolidated Plan of Reorganization Under Chapter 11
of the Bankruptcy Code dated February 17, 1994
(incorporated herein by reference to Exhibit 28E of
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
3.1 Amended and Restated Certificate of Incorporation
(filed herewith).
3.2 Amended By-Laws (incorporated herein by reference to
Exhibit 3(ii) of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
4.1 Indenture, dated as of March 29, 1994, between Lone
Star Industries, Inc. and Chemical Bank, as Trustee,
relating to 10% Senior Notes Due 2003 of Lone Star
Industries, Inc. (incorporated herein by reference to
Exhibit 4A of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
4.2 Warrant Agreement, dated April 13, 1994, between Lone
Star Industries, Inc. and Chemical Bank, as Warrant
Agent (incorporated herein by reference to Exhibit 4B
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
4.3 Financing Agreement, dated as of April 13, 1994,
among Lone Star Industries, Inc., its subsidiary, New
York Trap Rock Corporation, and the CIT
Group/Business Credit, Inc. (incorporated herein by
reference to Exhibit 4C of the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
June 30, 1994).
10.1 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 herein by
reference to Exhibit 10E of the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992).
10.2 Settlement Agreement and Order of the United States
Bankruptcy Court for the Southern District of New
York, dated October 13, 1992 (incorporated herein by
reference to Exhibit 1 of the Registrant's Current
Report on Form 8-K, dated October 13, 1992).
10.3 Indenture, dated as of March 29, 1994, between
Rosebud Holdings, Inc. and its subsidiaries and
Chemical Bank, as Trustee, relating to 10% Asset
Proceeds Note Due 1997 of Rosebud Holdings, Inc.
(incorporated herein by reference to Exhibit 10A of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
10.4 Guarantee Agreement, dated as of March 29, 1994, by
Lone Star Industries, Inc. in favor of each and every
holder of 10% Asset Proceeds Notes Due 1997 of
Rosebud Holdings, Inc. (incorporated herein by
reference to Exhibit 10B of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994).
10.5 Management Services and Asset Disposition Agreement,
dated as of April 13, 1994, between Lone Star
Industries, Inc. and Rosebud Holdings, Inc. and its
subsidiaries (incorporated herein by reference to
Exhibit 10C of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
*10.6 Employment Agreement, dated July 1, 1994, between
David W. Wallace and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10D(i)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.7 Stock Option Agreement, dated as of June 8, 1994,
between David W. Wallace and Lone Star Industries,
Inc. (incorporated herein by reference to Exhibit
10D(ii) of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
*10.8 Employment Agreement, dated July 1, 1994, between
William M. Troutman and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10E(i)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.9 Agreement, dated April 15, 1994, between William
M. Troutman and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10E(ii)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.10 Stock Option Agreement, dated as of June 8, 1994,
between William M. Troutman and Lone Star Industries,
Inc. (incorporated herein by reference to
Exhibit 10E(iii) of the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30,
1994).
*10.11 Employment Agreement, dated July 1, 1994, between
John J. Martin and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10F(i)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.12 Stock Option Agreement, dated as of June 8, 1994,
between John J. Martin and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10F(ii)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.13 Form of Indemnification Agreement entered into
between Lone Star Industries, Inc. and directors and
an executive officer (incorporated herein by
reference to Exhibit 10G of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994).
*10.14 Form of "Change of Control" agreement for executive
officers of Lone Star Industries, Inc. (incorporated
herein by reference to Exhibit 10H of the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994).
*10.15 Change of Control Agreement, dated as of July 1,
1994, between Lone Star Industries, Inc. and Pasquale
P. Diccianni (incorporated herein by reference to
Exhibit 10.15 of the Registrant's Registration
Statement on Form S-1, File Number 33-55377).
*10.16 Form of 25,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10I of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.17 Form of 75,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10J of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.18 Lone Star Industries, Inc. Rosebud Incentive Plan
(incorporated herein by reference to Exhibit 10K of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.19 Lone Star Industries, Inc. Management Stock Option
Plan (incorporated herein by reference to Appendix A
of the Registrant's Definitive Proxy Statement, dated
May 11, 1994).
*10.20 Lone Star Industries, Inc. Directors Stock Option
Plan (incorporated herein by reference to Appendix B
of the Registrant's Definitive Proxy Statement, dated
May 11, 1994).
*10.21 Lone Star Industries, Inc. Employees Stock Purchase
Plan (incorporated herein by reference to Appendix C
of the Registrant's Definitive Proxy Statement, dated
May 11, 1994).
10.22 Registration Rights Agreement, dated as of July 18,
1994, among Lone Star Industries, Inc., Metropolitan
Life Insurance Company, Metropolitan Insurance and
Annuity Company and TCW Special Credits, as Agent and
Nominee (incorporated herein by reference to Exhibit
10.22 of the Registrant's Registration Statement on
Form S-1, File Number 33-55377).
10.23 Settlement Agreement, dated as of February 4, 1994,
between Lone Star Industries, Inc., et al. and the
Official Committee of Retired Employees of Lone Star
Industries, Inc., et al. (incorporated herein by
reference to Exhibit 10.23 of the Registrant's
Registration Statement on Form S-1, File Number 33-
55377).
10.24 Settlement Agreement, dated as of April 12, 1994, by
and between Pension Benefit Guaranty Corporation and
the Lone Star Group (incorporated herein by reference
to Exhibit 10.24 of the Registrant's Registration
Statement on Form S-1, File Number 33-55377).
10.25 Agreement, dated as of March 11, 1994, by and between
the Debtors and the Unions (incorporated herein by
reference to Exhibit 10.25 of the Registrant's
Registration Statement on Form S-1, File Number 33-
55377).
10.26 Second Amended and Restated Conveyance of Production
Payment, dated as of March 29, 1994, Lone Star
Industries, Inc. to John Fouhey, as Trustee for
Selleck Hill Trust (incorporated herein by reference
to Exhibit 10.26 of the Registrant's Registration
Statement on Form S-1, File Number 33-55377).
10.27 Second Amended and Restated Term Loan Agreement,
dated as of March 29, 1994, among John Fouhey, as
Trustee for Selleck Hill Trust, Morgan Guaranty Trust
Company of New York, TCW Special Credits, The Chase
Manhattan Bank (N.A.), Wells Fargo Bank, N.A. and
Morgan Guaranty Trust Company of New York, as Agent
(incorporated herein by reference to Exhibit 10.26 of
the Registrant's Registration Statement on Form S-1,
File Number 33-55377).
10.28 Rights Agreement, dated as of November 10, 1994,
between Lone Star Industries, Inc. and Chemical Bank
(incorporated herein by reference to the Registrant's
Form 8-A, dated November 17, 1994).
11 Statement re computation of per share earnings (filed
herewith).
21 Subsidiaries of the Company (incorporated herein by
reference to Exhibit 21 of the Registrant's
Registration Statement on Form S-1, File Number 33-
55377).
23.1 Consent of Coopers & Lybrand L.L.P. (filed
herewith).
23.2 Consent of Price Waterhouse LLP (filed herewith).
27 Financial Data Schedules (filed herewith).
99 Form 11-K for the fiscal year ended December 31, 1994
for the Lone Star Industries, Inc. Employees Stock
Purchase Plan (filed herewith).
(b) Reports on Form 8-K.
During the last quarter of the fiscal year ending December
31, 1994 Registrant filed the following Current Reports on Form
8-K:
(1) Form 8-K, November 30, 1994 - Item 5 - Other Events.
*Indicates management contract or compensatory plan or
arrangement.
LONE STAR INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994, THE THREE MONTHS
ENDED MARCH 31, 1994 AND THE YEARS ENDED DECEMBER 31, 1993 AND 1992
(In Thousands)
Additions
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deductions End of
Description of Period Expenses Accounts(2) (1) Period
For the Nine Months Ended
December 31, 1994
Allowance for doubtful
accounts deducted from notes
and accounts receivable $8,843 700 54 2,371 $7,226
For the Three Months Ended
March 31, 1994
Allowance for doubtful
accounts deducted from notes
and accounts receivable $8,913 260 15 345 $8,843
For the Year Ended
December 31, 1993
Allowance for doubtful
accounts deducted from notes
and accounts receivable $8,033 1,605 63 788 $8,913
For the Year Ended
December 31, 1992
Allowance for doubtful
accounts deducted from notes
and accounts receivable $7,397 1,084 397 845 $8,033
(1) Deductions in the nine months ended December 31, 1994 and the years ended
December 31, 1993 and 1992 primarily represent uncollectible accounts charged
off. Deductions in the three months ended March 31, 1994 also include certain
adjustments related to the company's emergence from its Chapter 11 proceedings.
(2) Represents recoveries of accounts previously charged off, and reserves
related to acquisitions and dispositions.
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 S. JOHNSON
JOHN S. JOHNSON
Vice President, General
Counsel and Secretary
Date: March 9, 1995
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 9, 1995
DAVID W. WALLACE Board and Chief Executive
Officer
/s/ THEODORE F. BROPHY Director March 9, 1995
THEODORE F. BROPHY
/s/ JAMES E. BACON Director March 9, 1995
JAMES E. BACON
/s/ ARTHUR B. NEWMAN Director March 9, 1995
ARTHUR B. NEWMAN
/s/ ALLEN E. PUCKETT Director March 9, 1995
ALLEN E. PUCKETT
/s/ ROBERT G. SCHWARTZ Director March 9, 1995
ROBERT G. SCHWARTZ
/s/ WILLIAM M. TROUTMAN Director, President and March 9, 1995
WILLIAM M. TROUTMAN Chief Operating Officer
/s/ JACK R. WENTWORTH Director March 9, 1995
JACK R. WENTWORTH
/s/ WILLIAM E. ROBERTS Vice President, Chief March 9, 1995
WILLIAM E. ROBERTS Financial Officer, Treasurer
and Corporate Controller
INDEX TO EXHIBITS
Exhibit No. Description
2.1 Voluntary Petition for Relief under Chapter 11,
Title 11 of the United States Code dated December 10,
1990 (incorporated herein by reference to Exhibit 28A
of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990).
2.2 Modified Amended Disclosure Statement Regarding
Debtors' Modified Amended Consolidated Plan of
Reorganization and exhibits thereto (incorporated
herein by reference to the Registrant's Form T-3
filed January 14, 1994, File No. 1.022-22175; except
for Exhibit J to said Modified Amendment Disclosure
Statement which is incorporated by reference to the
Registrant'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 the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1993, filed August 12, 1993, File
Number 1.001-06124).
2.3 Modification of Debtors' Plan of Reorganization
(incorporated herein by reference to Exhibit 2 of the
Registrant's Current Report on Form 8-K dated
March 1, 1994, filed March 8, 1994, File Number
1.001-06124).
2.4 Order Confirming Debtors' Modified Amended and
Consolidated Plan of Reorganization Under Chapter 11
of the Bankruptcy Code dated February 17, 1994
(incorporated herein by reference to Exhibit 28E of
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
3.1 Amended and Restated Certificate of Incorporation
(filed herewith).
3.2 Amended By-Laws (incorporated herein by reference to
Exhibit 3(ii) of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
4.1 Indenture, dated as of March 29, 1994, between Lone
Star Industries, Inc. and Chemical Bank, as Trustee,
relating to 10% Senior Notes Due 2003 of Lone Star
Industries, Inc. (incorporated herein by reference to
Exhibit 4A of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
4.2 Warrant Agreement, dated April 13, 1994, between Lone
Star Industries, Inc. and Chemical Bank, as Warrant
Agent (incorporated herein by reference to Exhibit 4B
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
4.3 Financing Agreement, dated as of April 13, 1994,
among Lone Star Industries, Inc., its subsidiary, New
York Trap Rock Corporation, and the CIT
Group/Business Credit, Inc. (incorporated herein by
reference to Exhibit 4C of the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
June 30, 1994).
10.1 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 herein by
reference to Exhibit 10E of the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992).
10.2 Settlement Agreement and Order of the United States
Bankruptcy Court for the Southern District of New
York, dated October 13, 1992 (incorporated herein by
reference to Exhibit 1 of the Registrant's Current
Report on Form 8-K, dated October 13, 1992).
10.3 Indenture, dated as of March 29, 1994, between
Rosebud Holdings, Inc. and its subsidiaries and
Chemical Bank, as Trustee, relating to 10% Asset
Proceeds Note Due 1997 of Rosebud Holdings, Inc.
(incorporated herein by reference to Exhibit 10A of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
10.4 Guarantee Agreement, dated as of March 29, 1994, by
Lone Star Industries, Inc. in favor of each and every
holder of 10% Asset Proceeds Notes Due 1997 of
Rosebud Holdings, Inc. (incorporated herein by
reference to Exhibit 10B of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994).
10.5 Management Services and Asset Disposition Agreement,
dated as of April 13, 1994, between Lone Star
Industries, Inc. and Rosebud Holdings, Inc. and its
subsidiaries (incorporated herein by reference to
Exhibit 10C of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
*10.6 Employment Agreement, dated July 1, 1994, between
David W. Wallace and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10D(i)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.7 Stock Option Agreement, dated as of June 8, 1994,
between David W. Wallace and Lone Star Industries,
Inc. (incorporated herein by reference to Exhibit
10D(ii) of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1994).
*10.8 Employment Agreement, dated July 1, 1994, between
William M. Troutman and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10E(i)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.9 Agreement, dated April 15, 1994, between William
M. Troutman and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10E(ii)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.10 Stock Option Agreement, dated as of June 8, 1994,
between William M. Troutman and Lone Star Industries,
Inc. (incorporated herein by reference to
Exhibit 10E(iii) of the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30,
1994).
*10.11 Employment Agreement, dated July 1, 1994, between
John J. Martin and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10F(i)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.12 Stock Option Agreement, dated as of June 8, 1994,
between John J. Martin and Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10F(ii)
of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.13 Form of Indemnification Agreement entered into
between Lone Star Industries, Inc. and directors and
an executive officer (incorporated herein by
reference to Exhibit 10G of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994).
*10.14 Form of "Change of Control" agreement for executive
officers of Lone Star Industries, Inc. (incorporated
herein by reference to Exhibit 10H of the
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994).
*10.15 Change of Control Agreement, dated as of July 1,
1994, between Lone Star Industries, Inc. and Pasquale
P. Diccianni (incorporated herein by reference to
Exhibit 10.15 of the Registrant's Registration
Statement on Form S-1, File Number 33-55377).
*10.16 Form of 25,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10I of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.17 Form of 75,000 shares stock option agreement for
executive officers of Lone Star Industries, Inc.
(incorporated herein by reference to Exhibit 10J of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.18 Lone Star Industries, Inc. Rosebud Incentive Plan
(incorporated herein by reference to Exhibit 10K of
the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
*10.19 Lone Star Industries, Inc. Management Stock Option
Plan (incorporated herein by reference to Appendix A
of the Registrant's Definitive Proxy Statement, dated
May 11, 1994).
*10.20 Lone Star Industries, Inc. Directors Stock Option
Plan (incorporated herein by reference to Appendix B
of the Registrant's Definitive Proxy Statement, dated
May 11, 1994).
*10.21 Lone Star Industries, Inc. Employees Stock Purchase
Plan (incorporated herein by reference to Appendix C
of the Registrant's Definitive Proxy Statement, dated
May 11, 1994).
10.22 Registration Rights Agreement, dated as of July 18,
1994, among Lone Star Industries, Inc., Metropolitan
Life Insurance Company, Metropolitan Insurance and
Annuity Company and TCW Special Credits, as Agent and
Nominee (incorporated herein by reference to Exhibit
10.22 of the Registrant's Registration Statement on
Form S-1, File Number 33-55377).
10.23 Settlement Agreement, dated as of February 4, 1994,
between Lone Star Industries, Inc., et al. and the
Official Committee of Retired Employees of Lone Star
Industries, Inc., et al. (incorporated herein by
reference to Exhibit 10.23 of the Registrant's
Registration Statement on Form S-1, File Number 33-
55377).
10.24 Settlement Agreement, dated as of April 12, 1994, by
and between Pension Benefit Guaranty Corporation and
the Lone Star Group (incorporated herein by reference
to Exhibit 10.24 of the Registrant's Registration
Statement on Form S-1, File Number 33-55377).
10.25 Agreement, dated as of March 11, 1994, by and between
the Debtors and the Unions (incorporated herein by
reference to Exhibit 10.25 of the Registrant's
Registration Statement on Form S-1, File Number 33-
55377).
10.26 Second Amended and Restated Conveyance of Production
Payment, dated as of March 29, 1994, Lone Star
Industries, Inc. to John Fouhey, as Trustee for
Selleck Hill Trust (incorporated herein by reference
to Exhibit 10.26 of the Registrant's Registration
Statement on Form S-1, File Number 33-55377).
10.27 Second Amended and Restated Term Loan Agreement,
dated as of March 29, 1994, among John Fouhey, as
Trustee for Selleck Hill Trust, Morgan Guaranty Trust
Company of New York, TCW Special Credits, The Chase
Manhattan Bank (N.A.), Wells Fargo Bank, N.A. and
Morgan Guaranty Trust Company of New York, as Agent
(incorporated herein by reference to Exhibit 10.26 of
the Registrant's Registration Statement on Form S-1,
File Number 33-55377).
10.28 Rights Agreement, dated as of November 10, 1994,
between Lone Star Industries, Inc. and Chemical Bank
(incorporated herein by reference to the Registrant's
Form 8-A, dated November 17, 1994).
11 Statement re computation of per share earnings (filed
herewith).
21 Subsidiaries of the Company (incorporated herein by
reference to Exhibit 21 of the Registrant's
Registration Statement on Form S-1, File Number 33-
55377).
23.1 Consent of Coopers & Lybrand L.L.P. (filed
herewith).
23.2 Consent of Price Waterhouse LLP (filed herewith).
27 Financial Data Schedules (filed herewith).
99 Form 11-K for the fiscal year ended December 31, 1994
for the Lone Star Industries, Inc. Employees Stock
Purchase Plan (filed herewith).
*Indicates management contract or compensatory plan or
arrangement.
RESTATED CERTIFICATE OF INCORPORATION OF
LONE STAR INDUSTRIES, INC.
LONE STAR INDUSTRIES, INC., a corporation organized and existing
under the laws of the State of Delaware (the "corporation"), hereby
certifies as follows:
The name under which the corporation was originally incorporated
is LCE Corporation which was changed to Lone Star Cement Corporation on
May 28, 1969, and the name Lone Star Cement Corporation was changed to
Lone Star Industries, Inc. on May 20, 1971. The date of the filing of
the original Certificate of Incorporation of the corporation with the
Secretary of State of the State of Delaware is October 14, 1968.
This Restated Certificate of Incorporation merely restates and
integrates and does not further amend the provisions of the Amended and
Restated Certificate of Incorporation of this corporation as heretofore
amended or supplemented by a Certificate of Correction and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
The text of the Amended and Restated Certificate of Incorporation
as amended or supplemented heretofore is hereby restated without further
amendments or changes to read as herein set forth in full:
FIRST: The name of the corporation is Lone Star Industries, Inc.
SECOND: The registered office of the corporation is to be located
at 1209 Orange Street, in the City of Wilmington, County of New Castle,
State of Delaware. The name of its registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The corporation shall have the authority to issue Twenty
Five Million (25,000,000) shares of common stock, par value one dollar
($1.00) per share.
FIFTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of Section 291 of Title 8
of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under the
provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders of class
of stockholders of this corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class or
creditors, and/or on all the stockholders or class of stockholders, of
this corporation, as the case may be, and also on this corporation.
SIXTH: To the fullest extent that elimination or limitation of
the liability of directors is permitted by law, as the same is now or
may hereafter be in effect, no director of the corporation shall be
liable to the corporation or its stockholders for monetary damages for
breach of his or her fiduciary duty as a director.
SEVENTH: The corporation shall, to the fullest extent permitted
by law, as the same is now or may hereafter be in effect, indemnity each
person (including the heirs, executors, administrators and other
personal representatives of such person) against expenses including
attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by such person in connection with any
threatened, pending or completed suit, action or proceeding (whether
civil, criminal, administrative or investigative in nature or otherwise)
in which such person may be involved by reason of the fact that he or
she is or was a director or officer of the corporation or is or was
serving any other incorporated or unincorporated enterprise in such
capacity at the request of the corporation.
EIGHTH: Unless, and except to the extent that the by-laws of the
corporation shall so require, the election of directors of the
corporation need not be by written ballot. The board of directors
shall be divided into three classes of directors, each class to be as
nearly equal in number of directors, as possible. The initial term of
office of each director in the first class will expire at the annual
meeting of stockholders in 1994; the initial term of office of each
director in the second class will expire at the annual meeting of
stockholders in 1995; and the initial term of office of each director in
the third class shall expire at the annual meeting of stockholders in
1996. At each annual election, commencing at the annual meeting of
stockholders in 1994, the successors to the class of directors whose
term expires at that time shall be elected to hold office for a term of
three (3) years, and until their respective successors shall be elected
and qualified, to succeed those directors whose term expires, so that
the term of one class of directors will expire each year.
NINTH: The board of directors may from time to time adopt, amend
or repeal the by-laws of the corporation, subject to the power of the
stockholders to adopt any by-laws or to amend or repeal any by-laws
adopted, amended or repealed by the board of directors.
This Restated Certificate of Incorporation was duly adopted by the
board of directors in accordance with Section 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has
been executed and attested by the corporation's duly authorized officers
this 16th day of January, 1995.
/s/John S. Johnson
Name: John S. Johnson
Title: Vice President, General
Counsel and Secretary
ATTEST:
/s/Beth M. Geller
Name: Beth M. Geller
Title Assistant Secretary
EXHIBIT 11
LONE STAR INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
Successor
Company Predecessor Company
For the | For the For the
Nine Months | Three Months Year
Ended | Ended Ended
December 31,| March 31, December 31,
1994 | 1994 1993
PER SHARE OF COMMON STOCK - PRIMARY |
Income (loss) before cumulative |
effect of changes in accounting |
principles.......................... $ 29,333 | $ (23,118) $ (35,258)
Less: Provisions for preferred |
dividends (4)...................... - | 1,278 5,112
Income (loss) before cumulative |
effect of changes in accounting |
principles applicable to common |
stock............................... 29,333 | (24,396) (40,370)
Cumulative effect of changes in |
accounting principles, net of taxes(3) - | - (782)
|
Net interest expense reduction (1)... 2,094 | - -
|
Net income (loss) applicable to |
common stock........................ $ 31,427 | $ (24,396) $ (41,152)
Weighted average shares outstanding |
during period (5)................... 12,000 | n/m 16,644
Options and warrants in excess of |
20% limit (1)...................... 2,132 | - -
Weighted average shares outstanding |
during period (5)................... 14,132 | n/m 16,644
Income (loss) per common share: |
Income (loss) before cumulative |
effect of changes in accounting |
principles......................... $ 2.22 | n/m (2) $ (2.43)
Cumulative effect of changes in |
accounting principles.............. - | - (0.05)
Net income (loss).............. $ 2.22 | n/m (2) $ (2.47)
|
PER SHARE OF COMMON STOCK ASSUMING |
FULL DILUTION |
Income (loss) before cumulative |
effect of changes in accounting |
principles.......................... $ 29,333 | $ (23,118) $ (35,258)
Plus: Net interest expense |
reduction (1)................ 2,008 | - -
Less: Provisions for dividends..... - | - -
Income (loss) before cumulative |
effect of changes in accounting |
principles applicable to common |
stock............................... 31,341 | (23,118) (35,258)
Cumulative effect of changes in |
accounting principles, net of taxes. - | - (782)
Net income (loss) applicable to |
common stock........................ $ 31,341 | $ (23,118) $ (36,040)
|
Common shares outstanding at |
beginning of period................. 12,000 | n/m 16,644
Conversion of $13.50 preferred shares |
outstanding at beginning of period.. - | n/m 955
Conversion of $4.50 preferred shares |
outstanding at beginning of period.. - | n/m 45
Stock options and warrants in excess |
of 20% limit (1).................... 2,132 | n/m -
Common shares issued from treasury |
stock............................... - | n/m -
Fully diluted shares outstanding..... 14,132 | n/m (2) 17,644
Income (loss) per common share |
assuming full dilution: |
Income (loss) before cumulative |
effect of changes in accounting |
principles......................... $ 2.22 | n/m $ (2.00)
Cumulative effect of changes in |
accounting principles............... - | - (.04)
Net income (loss).............. $ 2.22 | n/m (2) $ (2.04)
(1) Due to the fact that the company's aggregate number of common stock
equivalents is in excess of 20% of its outstanding common stock,
primary and fully diluted earnings per share have been calculated using
the modified treasury stock method for the nine months ended December
31, 1994.
(2) Earnings per share for the three months ended March 31, 1994 are not
meaningful due to reorganization and revaluation entries and the
issuance of 12 million shares of new common stock. Earnings per share
amounts for the successor company are not comparable to those of the
predecessor company.
(3) 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.
(4) 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.
(5) Common stock options are not reflected in primary earnings per share
computations for the years ended December 31, 1993, 1992, 1991 and 1990
because their effect is not significant.
(6) 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 for the four years ended December 31, 1993.
EXHIBIT 11
(Continued)
LONE STAR INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
Predecessor Company
For the Year Ended December 31,
1992 1991 1990
PER SHARE OF COMMON STOCK - PRIMARY
Income (loss) before cumulative
effect of changes in accounting
principles.......................... $ (45,428) $ (5,547) $ (66,739)
Less: Provisions for preferred
dividends (4)...................... 5,113 5,114 5,119
Income (loss) before cumulative
effect of changes in accounting
principles applicable to common
stock............................... (50,541) (10,661) (71,858)
Cumulative effect of changes in
accounting principles, net of taxes. (118,914) - -
Net interest expense reduction (1)... - - -
Net income (loss) applicable to
common stock........................ $(169,455) $ (10,661) $ (71,858)
Weighted average shares outstanding
during period (5)................... 16,641 16,582 16,559
Options and warrants in excess of
20% limit (1)...................... - - -
Weighted average shares outstanding
during period (5)................... 16,641 16,582 16,559
Income (loss) per Common Share:
Income (loss) before cumulative
effect of changes in accounting
principles......................... $ (3.03) $ (0.64) $ (4.34)
Cumulative effect of changes in
accounting principles.............. (7.15) - -
Net income (loss).............. $ (10.18) $ (0.64) $ (4.34)
PER SHARE OF COMMON STOCK ASSUMING
FULL DILUTION
Income (loss) before cumulative
effect of changes in accounting
principles.......................... $ (45,428) $ (5,547) $ (66,739)
Plus: Net interest expense
reduction (1)................ - - -
Less: Provisions for dividends..... - - -
Income (loss) before cumulative
effect of changes in accounting
principles applicable to common
stock............................... (45,428) (5,547) (66,739)
Cumulative effect of changes in
accounting principles, net of taxes. (118,914) - -
Net income (loss) applicable to
common stock........................ $(164,342) $ (5,547) $ (66,739)
Common shares outstanding at
beginning of period................. 16,621 16,560 16,558
Conversion of $13.50 preferred shares
outstanding at beginning of period.. 955 955 955
Conversion of $4.50 preferred shares
outstanding at beginning of period.. 46 48 50
Stock options and warrants in excess
of 20% limit (1).................... - - -
Common shares issued from treasury
stock............................... - 22 58 -
Fully diluted shares outstanding..... 17,644 17,621 17,563
Income (loss) per common share
assuming full dilution:
Income (loss) before cumulative
effect of changes in accounting
principles......................... $ (2.57) $ (0.31) $ (3.80)
Cumulative effect of changes in
accounting principles............... (6.74) - -
Net income (loss).............. $ (9.31) $ (0.31) $ (3.80)
(1) Due to the fact that the company's aggregate number of common stock
equivalents is in excess of 20% of its outstanding common stock,
primary and fully diluted earnings per share have been calculated using
the modified treasury stock method for the nine months ended December
31, 1994.
(2) Earnings per share for the three months ended March 31, 1994 are not
meaningful due to reorganization and revaluation entries and the
issuance of 12 million shares of new common stock. Earnings per share
amounts for the successor company are not comparable to those of the
predecessor company.
(3) 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.
(4) 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.
(5) Common stock options are not reflected in primary earnings per share
computations for the years ended December 31, 1993, 1992, 1991 and 1990
because their effect is not significant.
(6) 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 for the four years ended December 31, 1993.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Lone Star Industries, Inc. on Form S-1 (File No. 33-
55377)and S-8 (File Nos. 33-55277, 33-55261, and 33-55229) of our
report, dated February 10, 1995, which includes an explanatory paragraph
related to the Company's reorganization effective April 14, 1994,
accompanying the consolidated financial statements and financial
statement schedule of Lone Star Industries, Inc. and Consolidated
Subsidiaries as of December 31, 1994, March 31, 1994 and December 31,
1993 and for the nine months ended December 31, 1994, the three months
ended March 31, 1994, and the two years ended December 31, 1993, which
report is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
March 13, 1995
Exhibit 23.2
CONSENT OF OTHER INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-1 (No. 33-
55377) and in the Registration Statements on Form S-8 (Nos. 33-55277,
33-55261, 33-55229) of Lone Star Industries, Inc. of our report dated
February 4, 1993 related to the combined financial statements of the
Lone Star Industries, Inc. International Division appearing on page 45
of this Form 10-K of Lone Star Industries, Inc.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 13, 1995
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to ________________
Commission File Number 1-06124
A. Full title of the plan and address of the plan, if different from
that of the issuer named below:
Lone Star Industries, Inc.
Employees Stock Purchase Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Lone Star Industries, Inc.
300 First Stamford Place
P. O. Box 120014
Stamford, CT 06912-0014
The Plan has no financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF LONE STAR INDUSTRIES AS OF AND FOR THE NINE
MONTHS ENDED DECEMBER 31, 1994 AS INCLUDED ON ITS 1994 FORM 10-K, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> APR-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 616
<SECURITIES> 54,782
<RECEIVABLES> 39,706
<ALLOWANCES> 7,226
<INVENTORY> 45,529
<CURRENT-ASSETS> 136,650
<PP&E> 326,545
<DEPRECIATION> 16,593
<TOTAL-ASSETS> 553,320
<CURRENT-LIABILITIES> 65,259
<BONDS> 78,000
<COMMON> 12,000
0
0
<OTHER-SE> 110,463
<TOTAL-LIABILITY-AND-EQUITY> 553,320
<SALES> 261,645
<TOTAL-REVENUES> 269,889
<CGS> 177,005
<TOTAL-COSTS> 217,944
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,812
<INCOME-PRETAX> 45,133
<INCOME-TAX> 15,800
<INCOME-CONTINUING> 29,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,333
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
</TABLE>
