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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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, 1995
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)
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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)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 969-8600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH EACH CLASS REGISTERED
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Common Stock, par value $1.00 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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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. / /
Aggregate market value of the voting stock held by non-affiliates of the
registrant at March 15, 1996: approximately $328,642,000.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of Securities under a plan
confirmed by a court. Yes /X/ No / /
The number of shares outstanding of each of the registrant's classes of
common stock as of March 15, 1996: Common Stock, par value $1.00 per share --
11,477,384 shares.
PORTIONS OF THE PROXY STATEMENT OF THE REGISTRANT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 16, 1996 ARE INCORPORATED IN PART III OF THIS
REPORT.
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business........................................................................... 1
Item 2. Properties......................................................................... 8
Item 3. Legal Proceedings.................................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders................................ 9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.......... 9
Item 6. Selected Financial Data............................................................ 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 11
Item 8. Consolidated Financial Statements and Supplementary Data........................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure......................................................................... 51
PART III
Item 10. Directors and Executive Officers of the Registrant................................. 51
Item 11. Executive Compensation............................................................. 51
Item 12. Security Ownership of Certain Beneficial Owners and Management..................... 51
Item 13. Certain Relationships and Related Transactions..................................... 51
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................... 51
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Lone Star is a cement, construction aggregates and ready-mixed concrete
company with operations in the midwestern, southwestern and eastern United
States. Lone Star's cement operations consist of five plants in the Midwest and
Southwest and a 25% interest in Kosmos Cement Company, a partnership which owns
and operates one cement plant in Kentucky and one in Pennsylvania ("Kosmos").
The Company's five wholly-owned cement plants produced approximately 3.8 million
tons of cement during 1995, which approximates the rated capacity of the plants.
Lone Star's construction aggregates operations consist of two quarries in New
York State. The Company's ready-mixed concrete business owns or leases and
operates several facilities in central Illinois and the Memphis, Tennessee area.
The Company had approximately $323.0 million in net sales in 1995, with cement,
construction aggregates and ready-mixed concrete operations representing
approximately 73%, 15% and 12%, respectively, of such net sales.
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. On April 14,
1994, the Company emerged from proceedings under Chapter 11 of the United States
Bankruptcy Code. 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. Unless the context otherwise requires, as
used herein "Company" and "Lone Star" mean Lone Star Industries, Inc. together
with its subsidiaries, excluding Rosebud Holdings, Inc. and its subsidiaries
(collectively, "Rosebud"). Rosebud is a liquidating subsidiary established in
the Company's bankruptcy proceedings.
CEMENT OPERATIONS
Portland cement is the primary binding material used in the production of
concrete. The principal raw materials used in the manufacture of cement are
limestone or other calciferous materials, shale or clay, and sand. These raw
materials are crushed, ground, mixed together and then introduced into a rotary
kiln where they are heated to approximately 2700 degrees Fahrenheit. The
resultant marble-sized intermediate material produced by this process is known
as clinker. Clinker is then cooled, blended with a small amount of gypsum, and
ground to the consistency of face powder to produce cement.
Clinker can be produced utilizing either of two basic methods, a "wet" or a
"dry" process. In the wet process, the raw materials are mixed with water to
form a slurry prior to introduction into the rotary kiln. The dry process
excludes the addition of water and dried raw materials are introduced directly
into the kiln. The wet process has the advantage of greater ease in the handling
and mixing of the raw materials, however additional heat, and therefore fuel, is
required to evaporate the moisture before the raw materials can react to form
clinker. In the dry process, which is a newer more fuel efficient technology,
hot air from the rotary kiln is recycled to pre-heat the raw materials, or
separate burners are added to accomplish a significant portion of the chemical
reaction, prior to the introduction of the raw materials into the rotary kiln.
Whether a wet or dry method is utilized, the manufacture of cement is
energy intensive, and the cost of such energy accounts for approximately one
third of a cement plant's total manufacturing costs. Energy cost, and in
particular coal, varies on a regional basis due in large part to transportation
costs. In addition, the low value-to-weight ratio of cement and its constituent
raw materials results in relatively high transportation costs, creating a
largely regional business. As a result, proximity to sources of fuel and raw
materials, as well as markets, are important aspects in the profitability of a
cement plant. While subject to fluctuation and interruption resulting from
adverse weather and other factors, distribution by water is generally the least
expensive method of transporting cement.
Lone Star's cement operations consist principally of the production of Type
I portland cement at the Company's five owned cement plants and the distribution
of that cement through the Company's 14 owned or leased distribution terminals.
Other products manufactured at certain of these plants include Type III portland
cement, which is a high early strength cement required in certain applications,
and specialty cements, such as masonry, oil well and slag cements. Slag cement
is a by-product of iron blast furnaces that may be used as a replacement for
portland cement in certain instances.
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The Company also purchases cement from both domestic and international sources
for domestic resale. In addition, Lone Star owns a 25% interest in Kosmos, which
owns and operates one cement plant in Kentucky and one in Pennsylvania.
All of Lone Star's five cement plants are fully integrated from limestone
mining through cement production, and the Company estimates that it has
limestone reserves sufficient to permit operation of its plants at current
levels of production for periods ranging from 30 to 100 years. Adequate supplies
of other raw materials such as gypsum, shale, clay and sand are owned, leased or
available for purchase by Lone Star. The Company believes that its plants have
adequate sources from which to purchase power and fuel.
The following table sets forth certain information regarding Lone Star's
cement plants and their markets:
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PLANT LOCATION PROCESS FUEL PRINCIPAL MARKET AREA
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RATED ANNUAL
CEMENT CAPACITY
---------------
(IN THOUSANDS)
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Cape Girardeau, Missouri............. 1,200 Dry/Precalciner Coal-Waste-Tires E. Missouri; Central and N.E.
Arkansas; Mississippi; S.
Louisiana; N. Alabama;
Tennessee; N.W. Kentucky; S.W.
Illinois
Greencastle, Indiana................. 750 Wet Coal-Waste Indianapolis and other areas of
Indiana; S.E. Illinois;
N. Central Kentucky
Pryor, Oklahoma...................... 725 Dry Coal-Coke-Natural Gas Oklahoma; Dallas, Texas;
Kansas; W. Missouri
Oglesby, Illinois.................... 600 Dry Coal-Coke-Tires Chicago and other areas of
Northern and Central Illinois;
S. Wisconsin
Maryneal, Texas...................... 520 Dry/Preheater Coal-Coke-Natural Gas W. Texas
Kosmos Cement Company:
Kosmosdale, Kentucky............... 700 Dry/Preheater Coal-Oil Kentucky; S. Indiana;
S. Ohio; W. Virginia
Pittsburgh, Pennsylvania........... 360 Wet Coal W. Pennsylvania;
W. Virginia; E. Ohio
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Cape Girardeau Complex. Lone Star's Cape Girardeau, Missouri plant is
located on the Mississippi River, and its related terminals are located along
the Mississippi and certain of its tributaries. Approximately 80% of the plant's
cement production is shipped up and down these rivers via 16 owned barges,
enabling the plant to serve a relatively wide market. Truck or rail are also
available to transport product. The Cape Girardeau plant includes a modern
dry/precalciner kiln and burns hazardous waste fuels. These fuels at times have
provided up to 30% of the annual energy needs of the plant and have reduced
production costs. See "Business -- Environmental Regulation". The distribution
terminals supporting the Cape Girardeau plant are located in St. Louis,
Missouri; Brandon, Mississippi; Paducah, Kentucky; Nashville and Memphis,
Tennessee; and New Orleans, Louisiana. In addition to its other customers, this
complex supplies cement to Lone Star's ready-mixed concrete operations in
Memphis, Tennessee.
Greencastle Complex. Lone Star's Greencastle plant is located
approximately 40 miles southwest of Indianapolis, Indiana and is the nearest
cement plant to this market, providing a freight cost advantage. Product is
transported by truck to Indianapolis and by truck or rail to other markets. A
portion of the Greencastle plant's production is a high quality Type III
portland cement which commands a premium price relative to Type I portland
cement, the Company's primary product. The Greencastle plant utilizes the wet
process of clinker production, however, the relative fuel inefficiency of this
process is offset in part by relatively low power and coal costs and relatively
high labor productivity at this plant. Although use of waste fuels was minimal
in 1994 and 1995, hazardous waste fuels have at times provided up to 40% of the
annual energy needs of the plant and commencing in late 1995 the plant has
resumed its use of these fuels. See "Business -- Environmental Regulation". The
Greencastle complex has distribution terminals located in Fort Wayne and
Elkhart, Indiana; and has a warehousing and distribution arrangement in Itasca,
Illinois. In addition to its other customers, this plant supplies cement to Lone
Star's ready-mixed concrete operations in central Illinois.
Pryor Complex. The Pryor plant is located approximately 50 miles northeast
of Tulsa, Oklahoma and serves the Kansas; Oklahoma; and Dallas, Texas markets by
truck and rail. A portion of the plant's product is transported by barge. This
plant produces both portland and oil well cement. The plant has relatively low
power costs due to its proximity to two low cost sources. The complex has
distribution terminals located near Wichita and Kansas City, Kansas; and in
Oklahoma
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City, Oklahoma; and Dallas, Texas. The Oklahoma distribution terminal's lease is
being terminated during 1996, and the Company anticipates opening a new
distribution terminal to replace it.
Oglesby Complex. The Oglesby plant is located approximately 100 miles from
Chicago and serves that and other central and northern Illinois construction
markets by truck and rail. The complex has a distribution terminal located in
Milwaukee, Wisconsin. In addition to its other customers, this plant supplies
cement to Lone Star's ready-mixed concrete operations in central Illinois.
Maryneal Complex. The Maryneal plant produces both portland and oil well
cement and serves the western Texas market by truck and rail. The complex has a
distribution terminal located in Amarillo, Texas and also shares the use of the
Dallas terminal with the Company's Pryor plant.
Kosmos Cement Company. Lone Star owns a 25% interest in Kosmos, which owns
and operates a cement plant in Kosmosdale, Kentucky and one in Pittsburgh,
Pennsylvania. Southdown, Inc., a publicly-traded cement company, owns the
remaining 75% interest and is responsible for managing the day-to-day
operations. All major decisions relating to Kosmos, however, require unanimous
approval of its management committee which includes a Lone Star representative.
New Orleans Facility. The New Orleans facility is the site of a former
cement plant that has been converted to a distribution terminal used for
receiving and storing cement from the Company's Cape Girardeau and Pryor plants
as well as from international sources. This cement is then sold directly from
the New Orleans facility or from a terminal in Brandon, Mississippi. The New
Orleans facility is located off the Gulf Intercoastal Waterway, and can
accommodate oceangoing vessels. In 1995, Lone Star also began producing slag
cement and conducting a stevedoring operation at this location.
CONSTRUCTION AGGREGATES OPERATIONS
Lone Star, through its wholly-owned subsidiary New York Trap Rock
Corporation ("New York Trap Rock"), quarries and processes construction
aggregates, including manufactured sand, crushed stone and other stone products,
at two locations in New York State. In October 1995, another subsidiary of Lone
Star sold its assets consisting principally of a quarry and plant in Nova
Scotia. After giving effect to that sale, Lone Star's total estimated annual
production capacity is approximately 5.6 million tons and total estimated
reserves are in excess of 350 million tons. Excluding the Nova Scotia quarry,
sales volume in 1995 approximated 4.1 million tons.
The following table sets forth certain information regarding Lone Star's
construction aggregates operations:
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ESTIMATED
ESTIMATED ANNUAL MINIMUM
PLANT LOCATION PRODUCTION CAPACITY TYPE OF AGGREGATE RESERVES (YEARS)
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(IN THOUSAND TONS)
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Clinton Point, New York............................ 4,500 Wappingers Dolomite 60
West Nyack, New York............................... 1,100 Diabase Trap Rock 80
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Clinton Point Plant. The Clinton Point plant is located on the Hudson
River near the City of Poughkeepsie, New York, approximately 65 miles from the
New York metropolitan area. The Company transports approximately 80% of this
plant's product down the Hudson River via a fleet of 117 owned barges to
customers located throughout the New York City metropolitan area. The remaining
product is delivered by truck to the local market surrounding the plant. Access
to the Hudson River enables the plant to distribute its product to a relatively
wide area. A large majority of the plant's product is sold to ready-mixed
concrete and asphalt producers, with the remainder sold for roadway projects and
specialty use such as rip rap for the construction of jetties. The Wappingers
Dolomite produced by this quarry is frequently blended with granite to meet
certain pavement skid resistance specifications, and the Company has entered
into a contract with its former Nova Scotia quarry to supply this granite until
October 1997.
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, primarily to
counties surrounding the quarry location. The West Nyack plant currently is not
cost competitive, and the Company is reviewing options regarding this quarry and
the rest of New York Trap Rock, including the construction of a modern plant in
West Nyack, at an expected capital cost of approximately $25 million, and/or the
sale of New York Trap Rock.
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READY-MIXED CONCRETE OPERATIONS
Ready-mixed concrete, a versatile building material used in almost all
construction, is produced by mixing stone, sand, water and admixtures with
cement. The proximity of Lone Star's ready-mixed concrete operations to its Cape
Girardeau, Greencastle and Oglesby cement complexes have enabled them to become
vertically integrated, purchasing cement from Lone Star plants as well as
outside suppliers, and has allowed the Company to become a major supplier of
ready-mix and other concrete products in central Illinois and the Memphis,
Tennessee area. The Company sold approximately 570,000 cubic yards of
ready-mixed concrete to a variety of end users in 1995. The Company's concrete
operations include a small sand and gravel plant in central Illinois.
CONSTRUCTION INDUSTRY CONDITIONS
The markets for the Company's products are highly competitive. Portland
cement is largely a commodity product, and due to this lack of product
differentiation, the Company competes with domestic and international sources of
cement largely on the basis of price. Accordingly, cement prices and the
Company's profitability are very sensitive to small shifts in the levels of
supply and demand in the Company's markets, and the Company's ability to compete
effectively is dependent on its operating costs being at acceptable levels. To a
lesser extent, other competitive factors such as service, delivery time and
proximity to customers affect the Company's performance.
Construction spending and cement consumption historically have fluctuated
widely. Demand for cement is derived primarily from residential construction,
commercial and industrial construction and public (infrastructure) construction,
which are highly cyclical and, in turn, are influenced by prevailing economic
conditions, including interest rates and availability of public funds. Moreover,
due to cement's low value-to-weight ratio, the industry is largely regional,
with sales in a given market dependent on regional demand which is tied to local
economic factors that may fluctuate more widely than those of the United States
as a whole. In addition, the supply of cement from domestic and foreign sources
can vary from region to region and over time. As a result, even though the
Company sells in more than one area of the country, its operating results are
subject to significant fluctuation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". While sales by Lone Star
directly to federal, state and local governmental agencies are not significant,
customers of Lone Star are engaged in a substantial amount of construction in
which government funding is a component.
According to statistics compiled by the United States Bureau of Mines, the
1980's was a period of relative high cement imports, which the Company
attributes in large part to low ocean shipping rates and excess foreign capacity
relative to demand, factors that typically affect the level of cement imports.
This high level of imports negatively affected the selling price of cement in
many regional markets, and published sources indicate that cement prices
remained in a narrow range during this period. As a result of anti-dumping
petitions filed by a group of domestic cement producers beginning in 1990,
anti-dumping orders were imposed on cement imported from Mexico and Japan. The
resulting anti-dumping duties are being determined in annual administrative
reviews by the United States Department of Commerce. Notwithstanding recent
amendments to the anti-dumping provisions enacted as a result of the Uruguay
round of world trade negotiations under the General Agreement on Tariffs and
Trade ("GATT") and significant lobbying and litigation by Mexican cement
producers, which are ongoing, the Company believes that the U.S. anti-dumping
law currently provides effective remedies against unfairly priced imports. In
particular, the anti-dumping orders against Mexico and Japan are scheduled to
remain in effect until January 1, 2000 and may continue thereafter if
petitioners prevail in "sunset reviews" before the Commerce Department and the
U.S. International Trade Commission. Recent improvement in the performance of
the United States economy, coupled with lower imports, has led to a more
favorable supply/demand ratio for cement suppliers, which enabled the Company to
implement price increases in both 1994 and 1995. The Company has announced
cement price increases of $3 to $5 per ton effective April 1996.
According to published sources, 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 ten largest companies account
for approximately 60% of the total productive capacity. While modest increases
in the production capacity of the industry have been accomplished through
modifications to existing facilities, and competitors of Lone Star's have
announced plans to make capital expenditures to expand and modernize certain
existing facilities and, in one case, build a new "greenfield" cement plant, the
high cost of new plants and the requisite lengthy permitting process are
significant barriers to new
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domestic production capacity. Imported cement has traditionally filled the gap
during periods where the demand for cement was high relative to domestic
productive capacity.
Construction spending and cement consumption are seasonal, particularly in
the Company's northern markets where colder weather affects construction
activity. Other adverse weather conditions such as flooding, which can interrupt
production and transportation of cement, and extreme heat, which can affect
concrete pouring, also affect the Company's operations.
CUSTOMERS AND MARKETING; BACKLOG
The Company's customer base primarily consists of 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 during 1995. The marketing effort for
the Company's cement, construction aggregates and ready-mixed concrete
operations is handled by a local sales force. Most purchases of the Company's
products are done on a spot basis, and accordingly, order backlogs are not
significant.
ENVIRONMENTAL REGULATION
The Company, like others in the construction materials and cement
manufacturing industry, is subject to extensive, stringent and complex federal,
state and local laws, regulations and ordinances pertaining to the quality and
the protection of the environment (including those governing water discharges,
air emissions and the handling, use and disposal of hazardous and non-hazardous
waste materials) and human health and safety, requiring the Company to devote
substantial time and resources in an effort to maintain continued compliance.
Many of the laws and regulations apply to the Company's former activities,
properties and facilities as well as its current operations. Changes to such
regulations or the enactment of new regulations in the future could require the
Company to undertake capital improvement projects or to cease or curtail certain
current operations or could otherwise substantially increase the capital,
operating and other costs associated with compliance. Moreover, there can be no
assurances that judicial or administrative proceedings, seeking penalties or
injunctive relief, will not be brought against the Company for alleged
non-compliance with applicable environmental laws and regulations relating to
matters as to which the Company is currently unaware. In addition, if releases
of hazardous substances are discovered to have occurred at facilities currently
or previously owned or operated by the Company, or at facilities to which the
Company has sent waste materials, the Company may be subject to liability for
the investigation and remediation of such sites.
The federal Water Pollution Control Act, commonly known as the Clean Water
Act, provides a comprehensive federal regulatory scheme governing the discharge
of pollutants to waters of the United States. This regulatory scheme requires
that permits be secured for discharges of wastewater, including stormwater
runoff associated with industrial activity, to waters of the United States. The
Company has secured or has applied for all required permits in connection with
its wastewater and stormwater discharges.
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. In addition, certain states in which the Company operates have
enacted laws and regulations governing the emission of air pollutants and
requiring permits for sources of air pollutants. As a result of the 1990
amendments to the Clean Air Act, the Company is required to apply for federal
operating permits for each of its cement manufacturing facilities at various
dates ranging from 1996 through 1999. 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, the EPA will identify maximum available
control technology ("MACT") for the reduction of emissions of air toxins from
cement manufacturing facilities. Following the 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. On March 20, 1996, the EPA
announced proposed separate, more stringent MACT standards for those cement
manufacturing facilities (like Lone Star's Greencastle and Cape Girardeau
plants) that burn hazardous waste fuels ("HWF"). These standards, which are
subject to public comment and are not anticipated by the Company to be in full
force and effect prior to the end of 1996, are extremely lengthy and complex and
have not been reviewed by the Company, but depending on their terms could have
the effect of limiting or eliminating the use of HWF at one or both facilities.
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The Resource Conservation and Recovery Act ("RCRA") establishes a
cradle-to-grave regulatory scheme governing the generation, treatment, storage,
handling, transportation and disposal of solid wastes. Solid wastes which are
classified as hazardous wastes pursuant to RCRA, as well as facilities that
treat, store or dispose of such hazardous wastes, are subject to stringent
regulatory requirements. Generally, wastes produced by the Company's operations
are not classified as hazardous wastes and are subject to less stringent federal
and state regulatory requirements. 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 RCRA. However, on January 31, 1995 the EPA
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 RCRA hazardous waste
regulatory program, tailored to address the specific regulatory concerns posed
by CKD. The EPA regulatory determination further provides that new CKD
regulations will be designed both to be protective of the environment and to
minimize the burden on cement manufacturers. In early 1996, EPA officials
reported that certain other alternatives -- such as oversight of CKD management
by state environmental agencies -- also are being explored. It is not possible
to predict at this time what, if any, new regulatory controls on the management,
handling and disposal of CKD or what increased costs (or range of costs), if
any, would be incurred by the Company to comply with these requirements. As an
alternative to new EPA regulations or state oversight, portland cement
manufacturers, including Lone Star, are engaged in negotiations with the EPA in
an attempt to enter into other arrangements relating to the management of CKD.
On July 20, 1995, the State of Indiana made a determination that the CKD
stored at the Company's Greencastle plant is a type I waste and requested that
the Company apply for a formal permit for an on-site landfill for the CKD. The
Company understands that similar notices were sent to other cement manufacturers
in the State of Indiana. The Company is protesting this determination through
legal channels and has received a stay to allow it to demonstrate that current
management practices pose no threat to the environment. The Company believes
that the State's determination ultimately will be reversed or the Company will
receive the needed permit or other adequate relief, such as an agreed order
requiring certain additional waste management procedures that are less stringent
than those required for type I wastes. If the Company is not successful in this
regard, however, like other Indiana cement producers, the Greencastle plant
could incur substantially increased operating and capital costs.
The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are the
Company's two cement manufacturing facilities using HWF as a cost-saving energy
source, are subject to strict federal, state and local requirements governing
hazardous waste treatment, storage and disposal facilities, including those
contained in the federal Boiler and Industrial Furnace Regulations promulgated
under RCRA (the "BIF Rules"). These facilities qualified for and operate 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, in the past Lone Star has been involved in
certain environmental enforcement proceedings seeking civil penalties and
injunctive relief for past non-compliance, and there can be no assurances that
the Company 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 continue to burn HWF. As
a result of a court decision vacating a BIF Rules air emission standard, the
Company temporarily curtailed its use of HWF at the Greencastle cement plant.
The Company completed compliance testing in August 1995, has recertified under
interim status and has recommenced burning HWF.
The Company is currently engaged in the process of securing the permit
required under RCRA and the BIF Rules for the Cape Girardeau plant. The Company
anticipates that the Greencastle plant also will go through this permitting
process in late 1996. These permits are a requirement to enable Lone Star 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. In addition, if received, the
permits could contain terms and conditions with which the Company cannot comply
or could require the Company to install and operate costly control technology
equipment.
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. While, as noted above, wastes produced
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by the Company generally are not classified as hazardous wastes, many of the raw
materials, by-products and wastes currently and previously produced, used or
disposed of by the Company or its predecessors contain chemical elements or
components that have been designated as hazardous substances or which otherwise
may cause environmental contamination. Hazardous substances are or have been
used or produced by the Company in connection with its cement manufacturing
operations (e.g. grinding compounds, refractory bricks), quarrying operations
(e.g. blasting materials), equipment operation and maintenance (e.g. lubricants,
solvents, grinding aids, cleaning aids, used oils), and hazardous waste fuel
burning operations. CKD and other materials were placed in depleted quarries and
other locations for many years. The Company has been named by the EPA as a
potentially responsible party for the investigation and remediation of several
Superfund sites. In certain circumstances the Company is undertaking
investigation and remediation pursuant to state environmental requirements. See
Note 27 of Notes to Consolidated Financial Statements. In addition, the Company
is reviewing certain of its inactive properties to determine if any remedial
action may be required at these sites. There can be no assurances that the
Company will not have additional liability as a result of its being 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. Although the
Company may be able to avoid the imposition of such liability for releases or
threatened releases of hazardous substances that occurred prior to the
commencement of the Company's bankruptcy proceedings in 1990, there can be no
assurances in this regard.
The Company's operations are also subject to federal and state laws and
regulations designed to protect worker health and safety. Worker protection at
the Company's cement manufacturing and construction aggregates facilities is
governed by the federal Mine Safety and Health Act ("MSHA") and at other Company
operations is governed by the federal Occupational Safety and Health Act
("OSHA").
For additional information concerning certain environmental matters
involving the Company, see Note 27 of Notes to Consolidated Financial
Statements.
EMPLOYEES
As of December 31, 1995, the Company had approximately 1,450 employees. Of
these employees, approximately 950, including all hourly employees at all
Company operations other than certain cement distribution terminals and the New
Orleans slag cement and stevedoring operations, were members of labor unions.
During 1995, there were no labor disruptions at any of the Company's facilities.
The Company believes that relations with its employees generally have been good.
A number of collective bargaining agreements covering Lone Star's hourly
employees at its ready-mixed concrete operations were renegotiated in 1995.
During 1996, collective bargaining agreements covering substantially all Lone
Star's hourly employees at its cement and construction aggregates operations
will be renegotiated. The Company does not currently anticipate any unusual
circumstances or difficulties in obtaining replacement agreements, however,
there can be no assurances in this regard.
BANKRUPTCY REORGANIZATION PROCEEDINGS AND LIQUIDATING SUBSIDIARY
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 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 Company emerged from its Chapter 11 proceedings
pursuant to a plan of reorganization. Upon emergence from the Chapter 11
proceedings, the Company was reorganized around its core domestic operations,
and Rosebud was formed to own and liquidate remaining non-core assets and
operations (the "Rosebud Assets"). Pursuant to its plan of reorganization, Lone
Star issued certain equity securities in exchange for pre-petition equity and
paid cash and issued debt and equity securities for certain pre-petition debt
and other claims. Certain other pre-petition indebtedness was discharged,
reinstated or restructured and assumed; certain litigations were settled; and a
restructured
7
<PAGE> 10
Board of Directors was designated. The plan of reorganization also implemented
settlements relating to certain retiree health and life insurance benefits,
pension and financing obligations.
As part of a pre-petition restructuring which commenced in 1989 and
continued through the Chapter 11 proceedings, the Company implemented a
comprehensive organizational and financial restructuring through which it closed
certain facilities, reduced management, strategically disposed of assets
(including substantially all its partnership, joint venture and foreign
interests), rejected or modified agreements, and improved operating procedures
at 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 such assets were included in the Rosebud Assets. In addition, the Company
adopted fresh-start reporting. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 23 of Notes to
Consolidated Financial Statements.
Rosebud was established for the purpose of liquidating the Rosebud Assets
for the benefit of holders of Rosebud's 10% Asset Proceeds Notes due 1997 issued
pursuant to the Company's Plan of Reorganization ("Asset Proceeds Notes"). As of
February 29, 1996, there remained outstanding an aggregate $4.4 million
principal amount of Asset Proceeds Notes, for which Lone Star has no liability.
Rosebud Assets remaining at February 29, 1996 consist of certain unimproved
property located in Louisiana, Massachusetts, Oregon, Texas and Virginia, net
available cash in the amount of approximately $2.4 million, and a secured
promissory note in the principal amount of $0.3 million.
Liabilities associated with all Rosebud Assets, sold and unsold, were
assumed by Rosebud and it has agreed to indemnify Lone Star for these
liabilities. However, 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 $7.0 million,
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 to Rosebud pursuant to a Management Services Agreement
under which Rosebud pays to Lone Star a quarterly fee of 0.25% of the value of
its unsold assets and reimburses Lone Star for any payment Lone Star makes to
third parties on behalf of Rosebud, subject to the limitations described above.
Rosebud paid Lone Star a fee of $0.6 million for services rendered during 1995.
ITEM 2. PROPERTIES.
Lone Star's main operations are conducted at its plants and distribution
terminals described in Item 1 above. Lone Star owns its five cement plants and a
majority of the distribution terminals supporting these plants. With respect to
those distribution terminals not owned, Lone Star holds a land lease for the
underlying real property and owns the facilities located on such property. There
is one additional distribution terminal that is leased to a third party. Lone
Star owns its aggregate operations except for a small sand and gravel quarry
associated with the Company's concrete operations, which is leased. 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 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.
From time to time the Company is named as a defendant in lawsuits asserting
product liability for which the Company maintains insurance coverage. In late
1995, an office building in Boston, Massachusetts, constructed in 1983 using
concrete pilings produced by San-Vel Concrete Corporation, an inactive Lone Star
subsidiary ("San-Vel"), was demolished by order of the City of Boston based upon
an engineering report that the pilings were unreliable. The owner of the
building has notified the Company, among others, that it intends to hold
responsible parties liable. At the request of the City of Boston, San-Vel has
provided a list of the approximate twenty-five other buildings built in that
City between 1980 and 1990 using San-Vel pilings. The City has reportedly
inspected these buildings visually, without noting any apparent piling failure,
although engineering studies are reportedly being conducted with final results
expected in mid-1996. The Company believes that the cement component of the
concrete used to produce the pilings in certain of these buildings, including
the demolished building, was produced by it at one of its former cement plants.
There has been no indication that the cement was defective. The Company is
conducting an investigation into these matters and believes that it has both
insurance coverage and good defenses to any claim of liability that may be
asserted against it relating to the demolished building.
8
<PAGE> 11
For information concerning certain environmental matters involving the
Company, see Note 27 of Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
OFFICE AND YEAR IN WHICH INDIVIDUAL
NAME AGE FIRST BECAME AN EXECUTIVE OFFICER
- ----------------------------------------------------- --- ----------------------------------------------
<S> <C> <C>
David W. Wallace..................................... 72 Chairman of the Board and Chief Executive
Officer (1991)
William M. Troutman.................................. 55 President and Chief Operating Officer (1986)
John J. Martin....................................... 64 Senior Vice President of the Company (1979)
and President of Rosebud (1994)
Roger J. Campbell.................................... 59 Vice President -- Cement Operations (1986)
William J. Caso...................................... 51 Vice President -- Taxes and Insurance (1994)
Pasquale P. Diccianni................................ 54 Vice President -- Aggregate Operations (1988)
Thomas S. Hoelle..................................... 44 Vice President -- Planning (1994)
Gerald F. Hyde, Jr................................... 53 Vice President -- Personnel and Labor
Relations (1983)
James W. Langham..................................... 36 Vice President, General Counsel and Secretary
(1995)
Harry M. Philip...................................... 47 Vice President -- Cement Manufacturing (1994)
Michael W. Puckett................................... 51 Vice President -- Cement Sales and Concrete
Operations (1985)
William E. Roberts................................... 56 Vice President, Chief Financial Officer,
Controller and Treasurer (1988)
</TABLE>
All of the executive officers' terms of office continue until the next
annual meeting of the Company's stockholders and until their successors 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,
except for Mr. Langham, who for more than five years prior to joining the
Company was an attorney at the law firm of Proskauer Rose Goetz & Mendelsohn LLP
in New York City.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
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<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data are derived from the Consolidated
Financial Statements of the Company. The data should be read in conjunction with
the Consolidated Financial Statements, related Notes and other financial
information included herein:
<TABLE>
<CAPTION> |
SUCCESSOR COMPANY | PREDECESSOR COMPANY
--------------------------- | -------------------------------------------------
FOR THE YEAR FOR THE NINE | FOR THE FOR THE YEAR ENDED DECEMBER 31,
ENDED MONTHS ENDED | THREE MONTHS
(IN THOUSANDS EXCEPT PER SHARE DECEMBER 31, DECEMBER 31, | ENDED MARCH 31, -------------------------------
AMOUNTS) 1995 1994 | 1994 1993 1992 1991
- --------------------------------- ------------ ------------ | -------------- -------- --------- --------
<S> <C> <C> | <C> <C> <C> <C>
Net sales........................ $323,008 $261,645 | $ 33,709 $240,071 $ 230,098 $238,692
Income (loss) before |
reorganization items, income |
taxes, and cumulative effect of |
changes in accounting |
principles and extraordinary |
item........................... $ 53,376 $ 45,133 | $ (3,170) $ 6,196 $ (42,429) $ 2,948
Income (loss) before cumulative |
effect of changes in accounting |
principles and extraordinary |
item........................... $ 35,762 $ 29,333 | $ (150,638) $(35,258) $ (45,428) $ (5,547)
Net income (loss)................ $ 35,762 $ 29,333 | $ (23,118) $(36,040) $(164,342) $ (5,547)
PER COMMON SHARE |
Primary: |
Income (loss) before cumulative |
effect of changes in accounting |
principles and extraordinary |
item........................... $ 2.66 $ 2.22 | n/m(1) $ (2.42) $ (3.03) $ (0.64)
Net income (loss)................ $ 2.66 $ 2.22 | n/m(1) $ (2.47) $ (10.18) $ (0.64)
Shares outstanding at December |
31............................. 11,477 12,000 | n/m 16,645 16,644 16,621
Cash dividends per common |
share.......................... $ 0.15 -- | -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
| PREDECESSOR COMPANY
| ------------------------------
SUCCESSOR COMPANY |
--------------------------------------- | DECEMBER 31,
DECEMBER 31, DECEMBER 31, MARCH 31, | ------------------------------
1995 1994 1994 | 1993 1992 1991
------------ ------------ --------- | -------- -------- --------
<S> <C> <C> <C> | <C> <C> <C>
FINANCIAL POSITION AT END OF PERIOD: |
Total assets........................... $480,926 $553,320 $ 579,411 | $924,885 $952,649 $914,437
Long-term debt(2): |
Senior notes......................... $ 78,000 $ 78,000 $ 78,000 | -- -- --
Asset proceeds notes................. $ 4,399 $ 87,000 $ 112,000 | -- -- --
Production payment(3).................. -- $ 19,966 $ 20,963 | $ 2,000 $ 4,000 $ 4,000
Liabilities subject to Chapter 11 |
proceedings(4)....................... -- -- -- | $627,938 $611,129 $555,331
Redeemable preferred stock............. -- -- -- | $ 37,500 $ 37,500 $ 37,500
Common shareholders' equity............ $159,740 $122,463 $ 93,313 | $ 12,348 $ 59,698 $226,162
</TABLE>
- ---------------
(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
23 of Notes to Financial Statements).
(2) See Notes 8 and 9 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 and 1991.
(4) See Note 23 of Notes to Financial Statements.
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<PAGE> 13
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.
As a result of the plan of reorganization becoming effective, the Company's
financial statements for the year ended December 31, 1995 are not comparable to
statements for the prior year. (See Note 24 for 1994 pro forma results.)
In accordance with the plan of reorganization which became effective on
April 14, 1994, the Company issued senior notes in the aggregate principal
amount of $78.0 million, 12 million shares of common stock and 4 million
warrants to purchase common stock. The senior notes bear interest at a rate of
10% per annum, payable semi-annually, and mature on July 31, 2003. 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. Both
preferred stock issues and the predecessor company's common stock were canceled
on the plan effective date.
In addition, as discussed in Note 8, the asset proceeds notes issued by
Rosebud Holdings, Inc., the Company's liquidating subsidiary, bear interest at a
rate of 10% per annum payable in cash and/or in additional asset proceeds notes
in semi-annual installments.
The asset proceeds notes mature on July 31, 1997. These notes were
guaranteed, in part, by the Company pursuant to the Company guarantee. The
Company's guarantee, guarantee agreement, and the related pledge of Rosebud's
common stock owned by the Company was terminated on July 14, 1995 as the
combined partial redemption of the asset proceeds notes made to that date
exceeded $88.1 million. As of December 31, 1995, total interest and principal
payments of approximately $150.5 million had been paid on the asset proceeds
notes.
The remaining face value of the asset proceeds notes as of December 31,
1995 was $4.4 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. Cash generated by Rosebud in
excess of the remaining face value of the asset proceeds notes, accrued interest
and Rosebud working capital requirements, if any, will be paid to Lone Star.
Upon emergence from Chapter 11 the Company entered into a three-year, $35.0
million revolving credit agreement, which is collateralized by inventory,
receivables, collection proceeds and certain intangible assets. The agreement
was subsequently amended in April, November and December 1995. The amendments
reduced the rates of interest under the agreement and increased the amounts
allowed for capital expenditures and certain other payments. 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, 1995.
In November 1995, the Board of Directors authorized the expenditure of up
to $20.0 million for the repurchase of the Company's common stock. The Company
executed a purchase of 600,000 shares through a privately negotiated transaction
in mid-November 1995 at a cost of $13.9 million.
During 1995, the Company made scheduled payments of $3.0 million and a
prepayment of $17.0 million, terminating the production payment liability.
The Company's financing agreements contain restrictive covenants which,
among other things, limit the payment of dividends, and prohibit or limit the
Company's ability to incur additional indebtedness, create liens, engage in
mergers and acquisitions or make certain capital expenditures.
Analysis of Cash Flows and Working Capital
Cash flows from operating activities of $50.3 million for the year ended
December 31, 1995, primarily reflect income from operations, changes in working
capital and $11.3 million of pension plan contributions. The utilization of net
operating loss carryforwards in 1995 will reduce cash taxes otherwise payable by
approximately $15.8 million. At
11
<PAGE> 14
December 31, 1995 the Company had net operating loss carryforwards of
approximately $200.0 million which are expected to reduce future cash taxes by
an additional $70.0 million over time.
During the year ended December 31, 1995, the Company used $21.2 million for
investing activities, primarily representing capital expenditures, partly offset
by proceeds of $15.4 million from asset sales, including the Nova Scotia, Canada
aggregate operation, and the Denver, Colorado concrete railroad tie plant, which
had been leased to a third party.
Net cash outflows from financing activities of $34.5 million for the year
ended December 31, 1995 primarily reflect payments on the remaining production
payment balance of $20.0 million and the repurchase of 600,000 shares of the
Company's common stock for $13.9 million.
Working capital on December 31, 1995, was $81.7 million as compared to
$71.4 million on December 31, 1994. Current assets increased $5.6 million
primarily due to higher inventory and prepaid expenses, partly offset by lower
marketable securities. Current liabilities decreased $4.7 million primarily due
to a $3.0 million reduction on the production payment and lower accounts
payable, partly offset by higher state taxes payable.
Investments in joint ventures increased $3.0 million due to income from
Kosmos Cement Company, less cash dividends paid. Net property, plant and
equipment increased $1.4 million reflecting capital expenditures partly offset
by depreciation and the sales of the Nova Scotia quarry and the Denver facility.
Payments of $17.0 million on the long-term portion of the production payment
terminated the liability. The long-term pension liability decreased $7.5
million, primarily reflecting contributions made during 1995 in excess of
current expenses.
The carrying value on the Company's books of net assets of Rosebud and the
related asset proceeds notes decreased $82.6 million primarily due to a $30.0
million redemption of the outstanding notes in late February 1995, a $25.0
million redemption in July 1995, a $12.0 million redemption in October 1995 and
a $35.0 million redemption in December 1995 which primarily resulted from asset
sales and recoveries. This was partly offset by an increase in asset valuation
reflecting the shorter time period used in determining the present value. The
decrease was also partly offset by a $9.4 million net proceeds recovery from the
crosstie litigation involving Northeast Cement Company and its affiliates,
Lafarge Corporation and Lafarge Canada, Inc., and by the inclusion of litigation
settlements totaling $6.7 million reached with the remaining insurance companies
related to indemnity in the crosstie cases and with two Argentine companies
related to the 1992 auction sale of the Company's Argentine subsidiary. Prior to
reaching final agreements, these recoveries were not included in the valuation
of the net assets of Rosebud. All payments related to the above litigation
settlements have been received.
Capital Expenditures
Capital expenditures of $36.6 million for 1995 were primarily for major
repairs, replacements and improvements at existing facilities, including the
expansion of the St. Louis, Missouri cement terminal to be completed in 1996.
Capital expenditures also included $5.8 million related to the purchase of a
fleet of barges used by New York Trap Rock, which had previously been leased.
In an effort to increase production, improve operating efficiencies and
reduce costs, the Company expects to make capital investments of approximately
$50.0 million in 1996. In addition to spending $8.9 million for a modern clinker
storage facility at the Cape Girardeau cement plant expected to be completed in
early 1997, the Company intends to make various other improvements at its Cape
Girardeau complex at an expected cost of approximately $5.7 million. Planned
expenditures for 1996 also include improvements to the New Orleans, Louisiana
cement terminal and slag grinding facility at a cost of approximately $5.6
million and improvements, including the expansion of two cement terminals and
the relocation of another cement terminal, at an expected cost of $7.5 million.
The Company expects to fund its 1996 capital expenditures from cash on hand in
addition to cash to be generated from operations.
Other Information
The Company is subject to extensive, stringent and complex federal, state
and local laws, regulations and ordinances pertaining to the quality and the
protection of the environment and human health and safety, requiring the Company
to devote substantial time and resources in an effort to maintain continued
compliance. Many of the laws and regulations apply to the Company's former
activities, properties and facilities as well as its current operations. Changes
to such regulations or the enactment of new regulations in the future could
require the Company to undertake capital improvement projects or to cease or
curtail certain current operations or could otherwise substantially increase the
capital,
12
<PAGE> 15
operating and other costs associated with compliance. Moreover, there can be no
assurances that judicial or administrative proceedings, seeking penalties or
injunctive relief, will not be brought against the Company for alleged
non-compliance with applicable environmental laws and regulations relating to
matters as to which the Company is currently unaware. In addition, if releases
of hazardous substances are discovered to have occurred at facilities currently
or previously owned or operated by the Company, or at facilities to which the
Company has sent waste materials, the Company may be subject to liability for
the investigation and remediation of such sites.
The Company believes that it has adequately provided for costs related to
its ongoing obligations with respect to known environmental liabilities.
Expenditures for environmental liabilities during 1995 did not have a material
effect on the financial condition or cash flows of the Company. The December 31,
1995 accompanying consolidated balance sheet includes accruals of $6.9 million
which represent the Company's current estimate of its liability related to
environmental matters.
On January 31, 1995, the United States Environmental Protection Agency
("EPA") issued a regulatory determination regarding the need for regulatory
controls on the management, handling and disposal of cement kiln dust ("CKD"), a
by-product of cement manufacturing. Generally, the 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 new CKD regulations will be designed both to be protective
of the environment and to minimize the burden on cement manufacturers. In early
1996, EPA officials reported that certain other alternatives -- such as
oversight of CKD management by state officials -- also are being explored. It is
not possible to predict at this time what, if any, new regulatory controls on
the management, handling and disposal of CKD or what increased costs (or range
of costs), if any, would be incurred by the Company to comply with these
regulatory requirements. As an alternative to new EPA regulations or state
oversight, portland cement manufacturers including Lone Star, are engaged in
negotiations with the EPA in an attempt to enter into other arrangements
relating to the management of CKD.
On July 20, 1995, the State of Indiana made a determination that the
Company's CKD was a type I waste and requested that the Company apply for a
formal permit for an on-site landfill for the CKD at the Greencastle, Indiana
plant. The Company understands that similar notices were sent to all other
cement manufacturers in the State of Indiana. The Company is protesting this
determination through legal channels and received a stay to allow it to
demonstrate that current management practices pose no threat to the environment.
The Company believes that the State's determination ultimately will be reversed
or the Company will receive the needed permit or other adequate relief such as
an agreed order requiring certain additional waste management procedures that
are less stringent than those required for type I wastes. If the Company is not
successful in this regard, however, like other Indiana cement producers, the
Greencastle plant could incur substantially increased operating costs.
A number of collective bargaining agreements covering the Company's hourly
employees at its ready-mixed concrete operations were renegotiated in 1995.
During 1996 collective bargaining agreements covering substantially all of the
Company's hourly employees at its cement and construction aggregates operations
will be renegotiated. The Company does not currently anticipate any unusual
circumstances or difficulties in obtaining replacement agreements.
DIVIDENDS AND STOCK MARKET PRICES
In April 1995 the Company's Board of Directors declared a $0.05 per share
dividend paid on June 15, 1995 to shareholders of record as of June 1, 1995 and
announced their intention to continue, so long as merited, this dividend on a
quarterly basis. The dividend represented the first cash dividend paid since
1989. The Board of Directors has since declared additional $0.05 per share
dividends paid on September 15, 1995 and December 15, 1995. On February 1, 1996
the Board of Directors declared a $0.05 per share dividend payable on March 15,
1996 to stockholders of record as of March 1, 1996.
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.
13
<PAGE> 16
<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
------------- -----------
HIGH LOW HIGH LOW
---- ---- --- ---
<S> <C> <C> <C> <C>
1995
First Quarter.................................................. $20 3/4 $17 1/4 $7 1/4 $6
Second Quarter................................................. 21 7/8 19 1/2 8 1/8 6 1/2
Third Quarter.................................................. 24 5/8 21 3/8 9 7/8 7 1/2
Fourth Quarter................................................. 25 1/4 22 1/2 9 5/8 8
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
</TABLE>
On March 15, 1996, the reported sale price of the common stock and warrants
was $29 1/4 per share and $13 1/4 per warrant, respectively. As of March 15,
1996, the Company had approximately 1,925 holders of record of common stock and
2,874 holders of record of warrants.
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 year ended
December 31, 1995 are not comparable to statements for prior periods. 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, were transferred to Rosebud. See Note 1 for a description of operations
and basis of presentation.
To facilitate a meaningful comparison of the Company's operating
performance, as historical annual results for 1995 and 1994 are not comparable,
the following discussion and analysis compares the results of the historical
year ended December 31, 1995 with the pro forma results for the 1994 period (See
Note 24). The Company believes that this comparison is useful in understanding
its operating performance for the current year.
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.
1995 COMPARED TO PRO FORMA 1994
Net Sales
Consolidated net sales of $323.0 million during 1995 were $16.1 million
higher than the prior year pro forma results. The increase in net sales
primarily reflects cement price increases implemented in April 1995 and during
1994. Cement price increases of $3 to $5 per ton have been announced effective
April 1996.
Cement sales of $237.4 million during 1995 were $24.2 million greater than
the prior year pro forma results, primarily due to 15% higher average cement net
realized selling prices in 1995, the result of price increases which began in
1994. Cement shipments for 1995 were 4% below 1994 levels.
Sales of construction aggregates of $48.4 million during 1995 were $1.8
million lower than the 1994 pro forma results. This decrease is primarily
attributable to lower shipments, particularly into the New York Metropolitan
area, resulting from soft market conditions. The 9% decrease in overall
construction aggregates' shipments was partly offset by a 5% increase in average
selling prices.
Ready-mixed concrete and other operations sales during 1995 were $37.3
million, $6.3 million below the prior year pro forma results. This reflects a
21% decrease in shipments resulting from unfavorable weather conditions
experienced
14
<PAGE> 17
during the second and third quarters of 1995 in the Midwest, combined with soft
market conditions. The decrease in shipments was partly offset by a 12% increase
in average net realized selling prices.
Net sales of cement, construction aggregates and ready mixed concrete and
other products contributed 73%, 15% and 12%, respectively, to total sales for
1995.
Gross Profits
Gross profits from the cement operations were $72.7 million in 1995 as
compared to pro forma gross profits of $52.7 million for 1994. Gross profits at
each plant in 1995 were higher than the previous year. These results primarily
reflect 15% higher average cement net realized selling prices in 1995. Partly
offsetting these favorable results were higher overall per unit costs,
reflecting higher costs and production interruptions, particularly at the
Maryneal, Texas cement plant.
The Cape Girardeau, Missouri and Greencastle cement plants use hazardous
waste fuel as cost-saving energy sources. The Company expects to continue to
operate its waste fuel program which is 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
requirements contained in the federal Boiler and Industrial Furnace Regulations
under RCRA ("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 27).
Construction aggregates gross profits of $3.5 million during 1995 increased
$1.1 million over the prior year pro forma results. These results primarily
reflect lower finance costs associated with the purchase of the fleet of barges
which had previously been leased, along with a 5% increase in overall average
selling prices, partly offset by lower shipments in 1995 in the New York
Metropolitan area due to soft market conditions. Shipments from the New York
Trap Rock operations were adversely affected by the temporary closure of a
customer's asphalt plant (for rebuilding purposes), a sluggish concrete stone
market, and the decision not to compete on certain low price jobs. Lower per
unit production costs associated with higher production volume efficiencies at
the Nova Scotia, Canada operation contributed to the improved results. The
assets of the Nova Scotia quarry were sold in October 1995 for net proceeds
including working capital of about $11.4 million, which approximated book value.
This operation contributed sales of $8.1 million and an operating loss of $0.4
million to the 1995 results.
Gross profits from ready-mixed concrete and other construction products
were $5.7 million for 1995, a $0.1 million decrease from the 1994 pro forma
results, primarily reflecting a 21% decrease in overall ready-mixed concrete
shipments, partly offset by a 12% increase in overall average net realized
selling prices. Lower ready-mixed concrete and concrete block shipments resulted
from unfavorable weather in the Midwest and soft market conditions, particularly
in the central Illinois area. Higher per unit costs at all operations adversely
affected 1995 gross profits.
Included in the calculation of gross profits 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 $6.7 million during 1995 reflects the
results of the Kosmos Cement Company, a partnership in which the Company has a
25% interest. The results for 1995 were $2.1 million higher than the prior year
reflecting higher net realized selling prices, partly offset by lower shipments.
Other Income
Other income of $4.0 million in 1995 decreased $1.0 million from 1994,
reflecting lower rental income resulting from sales of assets which had been
leased to third parties partly offset by proceeds from an insurance settlement
relating to a prior year claim.
15
<PAGE> 18
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $29.7 million during 1995
represent a decrease of $2.4 million over the prior-year pro forma expense. The
savings in selling, general and administrative expenses primarily reflect lower
corporate headquarters expenses and lower other postretirement benefit expenses
in 1995. The savings in corporate headquarters expenses reflect a corporate
downsizing which occurred on June 30, 1994, which eliminated approximately 35%
of the salaried positions at the corporate office. The lower other
postretirement benefits were the result of favorable experience for retiree
medical claims. Selling, general and administrative expenses for 1995 include
$5.7 million of other postretirement benefit costs related to the Company's
presently retired employees. Selling, general and administrative expenses for
1994 included $0.5 million relating to the filing of a registration statement.
Interest Expense
Interest expense of $9.1 million in 1995 approximated the prior year pro
forma total. Capitalized interest was $0.3 million in 1995. Interest expense was
comprised primarily of interest accrued on the $78.0 million 10% senior notes
and the Company's obligation related to the production payment.
Income Taxes
The income tax expense of $17.6 million during 1995, an increase of $5.6
million from the prior year pro forma expense, primarily reflects higher taxes
resulting from higher pre-tax earnings in 1995. The provision for income taxes
for 1995 reflects a 33% effective tax rate as compared to a 35% tax rate for
1994. The reduction in the 1995 rate is due to a higher estimated percentage
depletion allowance.
Net Income
Net income of $35.8 million, or $2.66 per share, during 1995 was $13.6
million, or $0.90 per share higher than the prior-year pro forma results.
Excluding the after-tax effect of $4.2 million related to a litigation recovery
included in the 1994 pro forma results, net income in 1995 was $17.8 million or
$1.19 per share higher than 1994. This improvement is primarily due to higher
cement results, reflecting 15% higher average net realized cement selling prices
partly offset by lower results from the construction aggregates and ready-mixed
concrete operations. Also contributing to the favorable increase in net income
for 1995 over the prior-year pro forma results were higher earnings from Kosmos
Cement Company, lower overall cost of goods sold (associated with the lower
sales volumes in all major product lines) and decreased selling, general and
administrative expenses.
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 were 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.
16
<PAGE> 19
Net sales of cement, construction aggregates and ready-mixed concrete and
other products contributed 68%, 18% and 14%, respectively, to total sales for
the 1994 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.
Gross profits from the construction aggregates operations were $8.3 million
for the 1994 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 during the first quarter in the Northeast, which delayed
the opening of customer asphalt and ready-mixed concrete plants until March. In
addition, the Company's 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.
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
17
<PAGE> 20
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 $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 the filing of a registration
statement.
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. 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.
For years subsequent to 1994, first quarter results have reflected and are
expected to continue 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.
THREE MONTHS ENDED MARCH 31, 1994
Net Sales
Consolidated net sales of $33.7 million for the three months ended March
31, 1994 were $1.2 million higher 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 affected 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 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.
18
<PAGE> 21
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.
Joint Ventures
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 venture 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. The Company's share of pre-tax income from Kosmos Cement Company
approximated the comparable prior year period's results.
Recovery of Litigation Settlement
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 such
litigation was subsequently transferred to Rosebud. The settlement was offset
against a bankruptcy claim of that carrier.
Cost of Sales
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
Selling, general and administrative expenses of $9.8 million for the three
months ended March 31, 1994 were $0.4 million lower than the comparable prior
year period.
Reorganization Items
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 Taxes
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.
Extraordinary Gain
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.
Cumulative Effect of Changes in Accounting Principles
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"). At the same time Kosmos Cement Company also adopted
SFAS No. 106. As a result, the Company recognized a charge of $0.8
19
<PAGE> 22
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.
Net Loss
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.
20
<PAGE> 23
LONE STAR INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants............................................................... 22
Consolidated Financial Statements:
Statements of Operations for the Year Ended December 31, 1995, the Nine Months Ended December
31, 1994, the Three Months Ended March 31, 1994, and the Year Ended December 31, 1993...... 23
Balance Sheets -- December 31, 1995 and 1994.................................................. 24
Statements of Changes in Common Shareholders' Equity for the Year Ended December 31, 1995, the
Nine Months Ended December 31, 1994, the Three Months Ended March 31, 1994 and the Year
Ended December 31, 1993.................................................................... 25
Statements of Cash Flows for the Year Ended December 31, 1995, the Nine Months Ended December
31, 1994, the Three Months Ended March 31, 1994 and the Year Ended December 31, 1993....... 26
Notes to Financial Statements................................................................. 27
Schedule:
II Valuation and Qualifying Accounts.......................................................... 55
Consent of Independent Accountants.............................................................. 56
</TABLE>
The foregoing supporting schedule should be read in conjunction with the
consolidated financial statements and notes thereto in the Company's 1995 Form
10-K.
The presentation of individual condensed financial information of the
Company 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, 1995.
Separate financial statements for the Company's fifty percent or less owned
affiliate are omitted because such subsidiary individually does not constitute a
significant subsidiary at December 31, 1995.
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.
21
<PAGE> 24
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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, 1995 and
1994, and the related consolidated statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1995 and the nine months
ended December 31, 1994 (post-confirmation), the three months ended March 31,
1994 and the year 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 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, 1995
and 1994, and the consolidated results of their operations and their cash flows
for the year ended December 31, 1995, the nine months ended December 31, 1994,
the three months ended March 31, 1994 and the year ended December 31, 1993, in
conformity with generally accepted accounting principles. In addition, in our
opinion, 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 Notes 1 and 23, 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.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
January 31, 1996
22
<PAGE> 25
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SUCCESSOR COMPANY | PREDECESSOR COMPANY
----------------------------- | -----------------------------
FOR THE FOR THE NINE | FOR THE THREE FOR THE
YEAR ENDED MONTHS ENDED | MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, | MARCH 31, DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1995 1994 | 1994 1993
------------- ------------- | ------------- -------------
<S> <C> <C> | <C> <C>
Revenues: |
Net sales.............................................. $ 323,008 $ 261,645 | $ 33,709 $ 240,071
Joint venture income................................... 6,728 4,424 | 381 20,440
Other income, net...................................... 4,040 3,820 | 2,691 11,238
------------- ------------- | ------------- -------------
333,776 269,889 | 36,781 271,749
------------- ------------- | ------------- -------------
Deductions from revenues: |
Cost of sales.......................................... 217,942 177,005 | 29,694 193,884
Provision for (recovery of) litigation settlements..... -- -- | (6,500) 2,500
Selling, general and administrative expenses........... 29,734 23,749 | 9,836 41,278
Depreciation and depletion............................. 23,628 17,190 | 6,688 26,254
Interest expense (contractual interest of $7,631 in the |
first quarter of 1994 and $31,227 in 1993)........... 9,096 6,812 | 233 1,637
------------- ------------- | ------------- -------------
280,400 224,756 | 39,951 265,553
------------- ------------- | ------------- -------------
Income (loss) before reorganization items and income |
taxes.................................................. 53,376 45,133 | (3,170) 6,196
Reorganization items: |
Adjustments to fair value.............................. -- -- | (133,917) --
Loss on sale of assets................................. -- -- | -- (37,335)
Other.................................................. -- -- | (13,396) (10,470)
------------- ------------- | ------------- -------------
Total reorganization items............................... -- -- | (147,313) (47,805)
------------- ------------- | ------------- -------------
Income (loss) before income taxes, cumulative effect of |
changes in accounting principles and extraordinary |
item................................................... 53,376 45,133 | (150,483) (41,609)
Credit (provision) for income taxes.................... (17,614) (15,800) | (155) 6,351
------------- ------------- | ------------- -------------
Income (loss) before cumulative effect of changes in |
accounting principles and extraordinary item........... 35,762 29,333 | (150,638) (35,258)
Cumulative effect of changes in accounting principles: |
Postretirement benefits other than pensions............ -- -- | -- (782)
Extraordinary item: gain on discharge of prepetition |
liabilities............................................ -- -- | 127,520 --
------------- ------------- | ------------- -------------
Income (loss) before preferred dividends................. 35,762 29,333 | (23,118) (36,040)
Provisions for preferred dividends..................... -- -- | (1,278) (5,112)
------------- ------------- | ------------- -------------
Net income (loss) applicable to common stock............. $ 35,762 $ 29,333 | $ (24,396) $ (41,152)
============= ============= | ============== =============
Weighted average common shares outstanding............... 11,990 12,000 | n/m(a) 16,644
============= ============= | ============== =============
Primary income (loss) per common share: |
Income (loss) before cumulative effect of changes in |
accounting principles................................ $ 2.66 $ 2.22 | n/m(a) $ (2.42)
Cumulative effect of changes in accounting |
principles........................................... -- -- | n/m(a) (0.05)
------------- ------------- | ------------- -------------
Net income (loss)...................................... $ 2.66 $ 2.22 | n/m(a) $ (2.47)
============= ============= | ============== =============
Fully diluted income (loss) per common share............. $ 2.62 $ 2.22 | n/m(a) $ (2.47)
============= ============= | ============== =============
</TABLE>
- ---------------
(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.
23
<PAGE> 26
LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including cash equivalents of $47,323 in 1995 and $54,782 in 1994...... $ 50,049 $ 55,398
Accounts and notes receivable, net........................................... 31,403 32,480
Inventories.................................................................. 55,476 45,529
Other current assets......................................................... 5,289 3,243
-------- --------
TOTAL CURRENT ASSETS............................................... 142,217 136,650
Joint ventures............................................................... 21,152 18,174
Property, plant and equipment, net........................................... 311,397 309,952
Other assets and deferred charges............................................ 1,761 1,544
-------- --------
TOTAL ASSETS OTHER THAN LIQUIDATING SUBSIDIARY..................... 476,527 466,320
Net assets of liquidating susidiary (Note 25)................................ 4,399 87,000
-------- --------
TOTAL ASSETS....................................................... $480,926 $553,320
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................................. $ 11,183 $ 14,272
Accrued liabilities.......................................................... 47,320 47,337
Other current liabilities.................................................... 2,064 3,650
-------- --------
TOTAL CURRENT LIABILITIES.......................................... 60,567 65,259
Senior notes payable......................................................... 78,000 78,000
Production payment........................................................... -- 16,966
Deferred income taxes........................................................ 6,688 6,688
Postretirement benefits other than pensions.................................. 131,226 129,634
Pensions..................................................................... 6,847 14,345
Other liabilities............................................................ 33,459 32,965
Contingencies (Notes 27 and 28)
-------- --------
TOTAL LIABILITIES OTHER THAN LIQUIDATING SUBSIDIARY................ 316,787 343,857
-------- --------
Asset proceeds notes of liquidating subsidiary (Notes 8 and 25).............. 4,399 87,000
-------- --------
TOTAL LIABILITIES.................................................. 321,186 430,857
-------- --------
Common stock, $1 par value. Authorized: 50,000,000 shares Shares issued:
1995 -- 12,080,844 1994 -- 12,000,016...................................... 12,081 12,000
Warrants to purchase common stock............................................ 15,597 15,613
Additional paid-in capital................................................... 82,709 65,700
Retained earnings............................................................ 63,315 29,333
Cumulative translation adjustment............................................ -- (183)
Treasury stock, at cost...................................................... (13,962) --
-------- --------
159,740 122,463
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................... $480,926 $553,320
======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
24
<PAGE> 27
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SUCCESSOR COMPANY | PREDECESSOR COMPANY
----------------------------- | -----------------------------
FOR THE FOR THE NINE | FOR THE THREE FOR THE
YEAR ENDED MONTHS ENDED | MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, | MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1995 1994 | 1994 1993
------------- ------------- | ------------- -------------
<S> <C> <C> | <C> <C>
COMMON STOCK |
Balance at beginning of period.................................... $ 12,000 $ 12,000 | $ 18,103 $ 18,102
Exercise of warrants to purchase common stock................... 4 -- | -- --
Exercise of stock options....................................... 77 -- | -- --
Conversions of $4.50 non-redeemable preferred stock............. -- -- | 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.......................................... 12,081 12,000 | 12,000 18,103
WARRANTS TO PURCHASE COMMON STOCK |
Balance at beginning of period.................................... 15,613 15,613 | -- --
Exercise of warrants to purchase common stock................... (16) -- | -- --
Issuance pursuant to the plan of reorganization................. -- -- | 15,613 --
-------- -------- | -------- --------
Balance at end of period.......................................... 15,597 15,613 | 15,613 --
ADDITIONAL PAID-IN CAPITAL |
Balance at beginning of period.................................... 65,700 65,700 | 239,870 239,867
Exercise of warrants to purchase common stock................... 90 -- | -- --
Sales of treasury stock......................................... 3 -- | -- --
Exercise of stock options....................................... 1,100 -- | -- --
Utilization of predecessor company deferred tax assets.......... 15,816 -- | -- --
Conversions of $4.50 non-redeemable preferred stock............. -- -- | 3 3
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.......................................... 82,709 65,700 | 65,700 239,870
RETAINED EARNINGS (ACCUMULATED DEFICIT) |
Balance at beginning of period.................................... 29,333 -- | (187,896) (151,856)
Net income (loss)............................................... 35,762 29,333 | (23,118) (36,040)
Dividends....................................................... (1,780) -- | -- --
Elimination of accumulated deficit pursuant to the plan of |
reorganization................................................ -- -- | 211,014 --
-------- -------- | -------- --------
Balance at end of period.......................................... 63,315 29,333 | -- (187,896)
CUMULATIVE TRANSLATION ADJUSTMENT |
Balance at beginning of period.................................... (183) -- | -- --
Translation adjustments......................................... 183 (183) | -- --
-------- -------- | -------- --------
Balance at end of period.......................................... -- (183) | -- --
PENSION LIABILITY ADJUSTMENT |
Balance at beginning of period.................................... -- -- | (21,157) (9,843)
Excess of additional pension liability over unrecognized prior |
service cost.................................................. -- -- | -- (11,314)
Revaluation in accordance with fresh-start reporting............ -- -- | 21,157 --
-------- -------- | -------- --------
Balance at end of period.......................................... -- -- | -- (21,157)
TREASURY STOCK |
Balance at beginning of period.................................... -- -- | (36,572) (36,572)
Repurchase of shares............................................ (13,875) -- | -- --
Odd lot program net share purchases............................. (87) -- | -- --
Shares issued to employee stock purchase plan................... -- -- | -- --
Cancellation pursuant to the plan of reorganization............. -- -- | 36,572 --
-------- -------- | -------- --------
Balance at end of period.......................................... (13,962) -- | -- (36,572)
TOTAL COMMON SHAREHOLDERS' EQUITY, END OF PERIOD.................. $ 159,740 $ 122,463 | $ 93,313 $ 12,348
======== ======== | ======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
25
<PAGE> 28
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SUCCESSOR COMPANY | PREDECESSOR COMPANY
----------------------------- | -----------------------------
FOR THE FOR THE NINE | FOR THE THREE FOR THE
YEAR ENDED MONTHS ENDED | MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, | MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1995 1994 | 1994 1993
------------- ------------- | ------------- -------------
<S> <C> <C> | <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Income (loss) before cumulative effect of changes in |
accounting principles and extraordinary item........... $35,762 $29,333 | $(150,638) $ (35,258)
Adjustments to arrive at net cash provided (used) by |
operating activities: |
Depreciation and depletion............................. 23,628 17,190 | 6,688 26,254
Provision for (recovery of) litigation settlements..... -- -- | (6,500) 2,500
Tax benefit realized from utilization of predecessor |
company deferred tax assets.......................... 15,816 13,646 | -- --
Deferred income taxes.................................. -- 1,688 | 155 (10,546)
Changes in operating assets and liabilities: |
Accounts and notes receivable........................ (1,012) (5,307) | 22,157 (2,895)
Inventories and other current assets................. (14,626) (1,542) | (17,189) 846
Accounts payable and accrued expenses................ (1,724) 2,820 | (1,808) (2,198)
Unremitted earnings of joint ventures.................. (2,978) (674) | 619 (951)
Loss (gain) on sale of joint venture interests......... -- -- | -- 37,335
Adjustments to fair value.............................. -- -- | 133,917 --
Other reorganization items............................. -- -- | 13,396 10,470
Other, net............................................. (4,595) (11,764) | (5,866) 11,398
--------- -------- | ---------- ----------
Net cash provided (used) by operating activities before |
reorganization items................................... 50,271 45,390 | (5,069) 36,955
Operating cash flows from reorganization items: |
Interest received on cash accumulated because of |
Chapter 11 proceedings............................... -- -- | 1,998 5,102
Professional fees and administrative expenses.......... -- (6,934) | (5,849) (10,459)
Professional fees escrow pursuant to the reorganization |
plan................................................. -- -- | (12,431) --
--------- -------- | ---------- ----------
Net cash used by reorganization items.................... -- (6,934) | (16,282) (5,357)
--------- -------- | ---------- ----------
Net cash provided (used) by operating activities......... 50,271 38,456 | (21,351) 31,598
CASH FLOWS FROM INVESTING ACTIVITIES: |
Capital expenditures..................................... (36,576) (16,480) | (6,695) (18,999)
Proceeds from sales of assets............................ 15,406 22,275 | -- --
Proceeds from sales of assets held for sale.............. -- -- | 2,457 9,206
Proceeds from sales of assets due to Chapter 11 |
proceedings............................................ -- -- | -- 71,162
Sales of property, plant and equipment................... -- -- | -- 888
Collection of notes receivable........................... -- -- | 93 908
Investment and advances to equity investees.............. -- -- | -- (5,000)
Other, net............................................... -- -- | (293) (5,971)
--------- -------- | ---------- ----------
Net cash provided (used) by investing activities......... (21,170) 5,795 | (4,438) 52,194
CASH FLOWS FROM FINANCING ACTIVITIES: |
Proceeds from exercise of stock options.................. 1,177 -- | -- --
Proceeds from exercise of warrants....................... 78 -- | -- --
Odd lot program purchases and sales...................... (84) -- | -- --
Purchase of treasury stock............................... (13,875) -- | -- --
Dividends paid........................................... (1,780) -- | -- --
Cash distribution pursuant to the reorganization plan.... -- -- | (200,451) --
Transfer to liquidating subsidiary....................... -- -- | (5,010) --
Reduction of production payment.......................... (19,966) (1,000) | (1,000) (8,000)
--------- -------- | ---------- ----------
Net cash used by financing activities.................... (34,450) (1,000) | (206,461) (8,000)
- -----------------------------------------------------------------------------------------|------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... (5,349) 43,251 | (232,250) 75,792
Cash and cash equivalents, beginning of period........... 55,398 12,147 | 244,397 168,605
--------- -------- | ---------- ----------
Cash and cash equivalents, end of period................. $50,049 $55,398 | $ 12,147 $ 244,397
========= ======== | ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
26
<PAGE> 29
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Operations -- The Company 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
formerly in Nova Scotia, 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 1995, which
approximates the rated capacity of such plants. In 1995 the Company's aggregate
operations served the construction markets 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. The
Company had approximately $323,000,000 in net sales in 1995, with cement,
construction aggregates and ready-mixed concrete and other construction products
operations representing approximately 73%, 15% and 12%, respectively, of such
net sales.
Demand for cement is derived primarily from residential construction,
commercial and industrial construction and public (infrastructure) construction
which are highly cyclical and are influenced by prevailing economic conditions
including interest rates and availability of public funds. Due to cement's low
value-to-weight ratio, the industry is largely regional and regional demand is
tied to local economic factors that may fluctuate more widely than those of the
nation as a whole.
The markets for the Company's products are highly competitive and portland
cement is largely a commodity product. The Company competes with domestic and
international sources largely on the basis of price. To a lesser extent, other
competitive factors such as service, delivery time and proximity to customers
affect the Company's performance.
Basis of Presentation -- 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 using the equity method. Certain prior-period amounts have
been reclassified to conform with current-period presentation.
The Company adopted "fresh-start" reporting in accordance with AICPA
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP No. 90-7"), as of March 31,
1994. 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.
In accordance with the Company's plan of reorganization (See Note 23),
certain non-core assets of the Company and their associated liabilities were
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 25). The Company's investment in Rosebud is recorded at the lower of the
estimated net realizable value of the assets or face value of the asset proceeds
notes (See Note 25).
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 were 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
27
<PAGE> 30
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
of existing assets are capitalized. Maintenance and repair costs are charged to
current earnings. Cost depletion is calculated using the units of production
method. The cost of assets and related accumulated depreciation is removed from
the accounts when such assets are disposed of, and any related gains or losses
are reflected in current earnings.
Income Taxes -- Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities. In accordance with SOP No. 90-7, income tax
benefits resulting from the realization of preconfirmation deferred tax assets
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 five-year final pay compensation for a
specified period of time. Defined benefit plans for hourly paid employees,
including those covered by multi-employer pension plans under collective
bargaining agreements, generally provide benefits of stated amounts for
specified periods of service. The Company's policy is to fund amounts as are
necessary on an actuarial basis to provide assets sufficient to meet the
benefits to be paid to plan members in accordance with the requirements of the
Employees Retirement Income Security Act of 1974 ("ERISA"). Assets of the plans
are administered by an independent trustee and are invested principally in fixed
income, equity securities and real estate.
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 includes warrants to purchase common stock and dilutive stock options as
common stock equivalents. 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 year ended December 31, 1995 were based
on adjusted weighted average shares outstanding of 14,336,774 and adjusted net
income of $38,096,000 and $37,610,000, respectively. 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 $31,427,000 and $31,341,000, 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.
Recently Issued Accounting Pronouncements -- The Company accounts for
stock-based compensation in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and has not yet determined
whether it will choose to recognize compensation expense or opt to comply with
the disclosure requirements when Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" is adopted in 1996.
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS No. 121") was issued, effective January 1, 1996. SFAS No.
121 requires that in the event certain facts and circumstances indicate an asset
may be impaired, an evaluation of recoverability must be performed to determine
whether or not the carrying amount of the asset is required to be written down.
The Company does not expect the adoption of this statement to have a material
effect on its financial condition or results of operations.
28
<PAGE> 31
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
2. ACCOUNTS AND NOTES RECEIVABLE
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Trade accounts and notes receivable.................................. $ 35,712 $ 37,914
Other receivables.................................................... 1,627 1,792
------- -------
37,339 39,706
Less: Allowance for doubtful accounts................................ 5,936 7,226
------- -------
$ 31,403 $ 32,480
======= =======
</TABLE>
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.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Finished goods....................................................... $ 27,392 $ 21,800
Work in process and raw materials.................................... 6,812 3,786
Supplies and fuel.................................................... 21,272 19,943
------- -------
$ 55,476 $ 45,529
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Land................................................................. $ 37,529 $ 39,373
Buildings and equipment.............................................. 275,389 257,659
Construction in progress............................................. 8,779 5,749
Automobiles and trucks............................................... 27,255 23,664
Other................................................................ 100 100
------- -------
349,052 326,545
Less accumulated depreciation and depletion.......................... 37,655 16,593
------- -------
$311,397 $309,952
======= =======
</TABLE>
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.
29
<PAGE> 32
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. INTEREST COSTS
Interest costs incurred during the year ended December 31, 1995, the nine
months ended December 31, 1994, the three months ended March 31, 1994, and the
year ended December 31, 1993 were $9,358,000, $6,980,000, $271,000, and
$1,832,000, respectively. Interest capitalized during the year ended December
31, 1995, the nine months ended December 31, 1994, the three months ended March
31, 1994, and the year ended December 31, 1993 was $262,000, $168,000, $38,000
and $195,000, respectively. Interest paid during the year ended December 31,
1995, the nine months ended December 31, 1994, the three months ended March 31,
1994, and the year ended December 31, 1993 was $9,654,000, $4,724,000, $20,000
and $123,000, respectively. The Company stopped accruing interest on its
unsecured prepetition debt during the Chapter 11 proceedings. Contractual
interest for the three months ended March 31, 1994, and the year ended December
31, 1993 was $7,631,000 and $31,227,000, respectively.
6. KOSMOS CEMENT COMPANY
The Company's investment in and advances to joint ventures at December 31,
1995 and 1994 consists of its 25% investment in Kosmos Cement Company
("Kosmos"). Kosmos is a partnership with cement plants in Kosmosdale, Kentucky
and Pittsburgh, Pennsylvania.
The amount of cumulative unremitted earnings of joint ventures included in
consolidated retained earnings at December 31, 1995, was $3,652,000. During the
year ended December 31, 1995, the nine months ended December 31, 1994, and the
year ended December 31, 1993, $3,750,000, $3,750,000, and $4,250,000,
respectively, of distributions were received from Kosmos.
Summarized financial information of Kosmos as of and for the year ended
December 31, 1995, the nine months ended December 31, 1994, the three months
ended March 31, 1994, and the year ended December 31, 1993 is as follows (in
thousands):
<TABLE>
<CAPTION>
AS OF AND FOR THE
--------------------------------------------------------------
NINE MONTHS
YEAR ENDED THREE MONTHS YEAR
ENDED DECEMBER ENDED ENDED
DECEMBER 31, 31, MARCH 31, DECEMBER 31,
1995 1994 1994 1993
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Current assets.................................... $ 36,018 $ 26,302 $ 24,064 $ 24,236
Property, plant and equipment, net................ 74,624 74,259 75,065 74,713
Cost in excess of net assets of businesses
acquired........................................ 23,205 24,754 25,312 25,497
Current liabilities............................... (4,303) (4,430) (3,375) (3,449)
Other liabilities................................. (2,871) (2,955) (3,457) (3,329)
-------- -------- -------- --------
Net assets........................................ $126,673 $ 117,930 $117,609 $117,668
-------- -------- -------- --------
Net sales......................................... $ 76,432 $ 65,184 $ 7,892 $ 65,597
Gross profits..................................... $ 23,894 $ 17,306 $ 651 $ 15,027
Income (loss) before cumulative effect of change
in accounting principle......................... $ 23,742 $ 15,321 $ (59) $ 12,218
Cumulative effect of change in accounting
principle....................................... $ -- $ -- $ -- $ (3,126)
Net income (loss)................................. $ 23,742 $ 15,321 $ (59) $ 9,092
</TABLE>
At December 31, 1995, December 31, 1994, March 31, 1994, and December 31,
1993, the Company's share of the underlying net assets of Kosmos Cement Company
exceeded its investment by $10,516,000, $11,309,000, $11,902,000 and $5,260,000,
respectively, and is being amortized over the estimated remaining life of the
assets.
30
<PAGE> 33
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Postretirement benefits other than pensions.......................... $ 7,800 $ 7,686
Pensions............................................................. 5,900 6,200
Insurance............................................................ 4,113 3,578
Payroll and vacation pay............................................. 3,398 3,209
Interest............................................................. 3,270 3,566
Taxes other than income taxes........................................ 2,494 2,504
Other................................................................ 20,345 20,594
------- -------
$ 47,320 $ 47,337
======= =======
</TABLE>
8. 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 are received in
connection with the litigation transferred to Rosebud. The asset proceeds notes
mature on July 31, 1997.
In July 1994, January 1995 and July 1995, Rosebud made cash interest
payments of $5,755,000, $5,320,000 and $2,570,000, respectively. An additional
cash interest payment of $209,000 was made in January 1996. Principal payments
of $31,878,000, $30,183,000, $26,090,000, $12,300,000 and $36,361,000 including
accrued interest thereon, were made in August 1994, February 1995, July 1995,
October 1995 and December 1995, respectively. As of December 31, 1995, the total
interest and principal payments paid on the assets proceeds notes was
$150,457,000.
The asset proceeds notes are recorded on the accompanying consolidated
balance sheets at their face value at December 31, 1995 and at the estimated net
value of the assets at December 31, 1994(See Note 25).
9. SENIOR NOTES PAYABLE
Upon emergence from its Chapter 11 proceedings, the Company issued
$78,000,000 of ten year senior unsecured notes due July 31, 2003, 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 impose
certain operating and financial restrictions on the Company. Such restrictions
affect, and in some respects limit or prohibit, among other things, the ability
of the Company to incur additional indebtedness, create liens, engage in mergers
and acquisitions, purchase the Company's capital stock 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.
31
<PAGE> 34
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. 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 agreement was subsequently amended in April,
November and December 1995. The amendments reduced the rates of interest under
the agreement and increased the amounts allowed for capital expenditures and
certain other payments. The advances under the agreement bear interest at a rate
of either prime plus 0.5% or LIBOR plus 2.25%, at the Company's option. A fee of
0.375% 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, 1995.
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 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, 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.
11. 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, was obligated to extract and process those
reserves into cement for the purchaser free and clear of all expenses. The
proceeds were deferred and were reflected in income, together with related costs
and expenses, as the limestone was processed into cement and the cement was
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 was 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
bore 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 0.25% or LIBOR plus 2.5%
beginning on January 1, 1996. In January and July 1995, the Company made total
scheduled principal payments of $3,000,000 and in December 1995 the Company paid
the remaining outstanding production payment balance of $16,966,000.
12. LEASES
Net rental expense for the year ended December 31, 1995, the nine months
ended December 31, 1994, the three months ended March 31, 1994, and the year
ended December 31, 1993 was $4,908,000, $4,894,000, $755,000 and $5,888,000,
respectively. Minimum rental commitments under all non-cancelable leases
principally pertaining to land, buildings and equipment are as follows:
1996 -- $1,679,000; 1997 -- $1,455,000; 1998 -- $1,028,000; 1999 -- $968,000,
and as of December 31, 1995 there were no commitments subsequent to 1999.
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.
13. 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 five-year final pay
compensation. Defined benefit plans for hourly paid employees generally provide
benefits of stated amounts for specified
32
<PAGE> 35
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 ERISA.
Net periodic pension cost of defined benefit plans included the following
components (in thousands):
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR FOR THE NINE THREE MONTHS FOR THE YEAR
ENDED MONTHS ENDED ENDED MARCH ENDED
DECEMBER 31, DECEMBER 31, 31, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest cost.................................... $ 10,108 $ 7,377 $ 2,477 $ 10,236
Service cost -- benefits accrued during the
period......................................... 1,631 1,379 407 1,363
Actual return on plan assets..................... (28,824) (3,938) (2,338) (11,913)
Net amortization and deferral.................... 20,538 (2,125) 1,029 3,404
-------- ------- ------- --------
Net pension cost................................. $ 3,453 $ 2,693 $ 1,575 $ 3,090
======== ======= ======= ========
</TABLE>
The following tables present the plans' funded status and amounts
recognized in the accompanying consolidated balance sheets at December 31, 1995
and 1994 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- --------------------
OVER- UNDER- OVER- UNDER-
FUNDED FUNDED FUNDED FUNDED
PLANS PLANS PLANS PLANS
------- -------- ------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.......................................... $51,668 $ 91,185 $79,272 $ 50,856
Non-vested benefits...................................... 1,389 3,364 3,212 997
------- -------- ------- --------
Accumulated benefit obligation............................. $53,057 $ 94,549 $82,484 $ 51,853
------- -------- ------- --------
Projected benefit obligation............................... $53,057 $ 99,986 $85,314 $ 51,853
Plan assets at fair value.................................. 59,290 91,658 86,380 36,773
------- -------- ------- --------
Projected benefit obligation (in excess of) less than plan
assets................................................... 6,233 (8,328) 1,066 (15,080)
Unrecognized prior service cost............................ 12 4,165 -- --
Unrecognized net gain...................................... (8,013) (6,816) (4,564) (1,975)
------- -------- ------- --------
Pension asset/(liability).................................. $(1,768) $(10,979) $(3,498) $(17,055)
======= ======== ======= ========
</TABLE>
The weighted average discount rates of 7.0% and 7.5% for 1995 and 1994,
respectively, and the rate of annual increase in future compensation levels of
4.5% for 1995 and 5.5% for 1994, were used in determining the actuarial present
values of the projected benefit obligation. The expected long-term rate of
return on plan assets was 8.0% for both 1995 and 1994.
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 year ended December 31,
1995, the nine months ended December 31, 1994, the three months ended March 31,
1994 and the year ended December 31, 1993 were approximately $300,000, $200,000,
$50,000 and $300,000, respectively.
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.
33
<PAGE> 36
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
14. 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.
Upon adoption of fresh-start reporting, postretirement benefit liabilities
were recorded based on the unfunded accumulated postretirement 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 $4,378,000 and
$3,705,000 to the VEBA during the year ended December 31, 1995 and the nine
months ended December 31, 1994.
Net periodic postretirement benefit cost for the year ended December 31,
1995, the nine months ended December 31, 1994, the three months ended March 31,
1994 and the year ended December 31, 1993 included the following components (in
thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service cost -- benefits attributed to service during
the period............................................ $ 1,548 $1,536 $ 557 $ 1,912
Interest cost on accumulated postretirement benefit
obligation............................................ 8,595 6,786 2,896 12,341
Net amortization and deferral........................... (1,182) -- 22 --
------- ------ ------ -------
Net periodic postretirement benefit cost................ $ 8,961 $8,322 $3,475 $ 14,253
======= ====== ====== =======
</TABLE>
Benefits paid, including VEBA contributions, were approximately $7,255,000,
$6,749,000, $2,195,000 and $9,444,000 for the year ended December 31, 1995, the
nine months ended December 31, 1994, the three months ended March 31, 1994 and
the year ended December 31, 1993, respectively.
34
<PAGE> 37
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, are as follows at December 31, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................... $ 88,341 $ 89,640
Fully eligible active plan participants............................ 18,652 19,070
Other active plan participants..................................... 15,160 11,861
-------- --------
Accumulated postretirement benefit obligation........................ 122,153 120,571
Unrecognized net gain................................................ 16,873 16,749
-------- --------
Accrued postretirement benefit cost.................................. 139,026 137,320
Less current portion................................................. 7,800 7,686
-------- --------
Long-term accrued post-retirement benefit cost....................... $131,226 $129,634
======== ========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% and 7.5% for 1995 and 1994,
respectively. Compensation levels are assumed to increase annually at a rate of
4.5% in 1995 and 5.5% in 1994.
For measurement purposes, a 12.5% and 10.0% annual medical rate of increase
was assumed for 1995 for pre-medicare and post-medicare claims, respectively;
the rate was assumed to decrease 1/2% each year to 6.0% per year after 2007 for
pre-medicare claims, and decrease 1/2% per year to 6.0% 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,
1995 by approximately $8,800,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for the year ended
December 31, 1995 by approximately $974,000.
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.
15. 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 23). In 1995, the authorized number of shares of
common stock was increased from 25,000,000 to 50,000,000. Transactions in common
stock are as follows:
<TABLE>
<CAPTION>
COMMON TREASURY
SHARES SHARES
---------- -------
<S> <C> <C>
Balance, March 31, 1994................................................. 12,000,000 --
Exercise of warrants.................................................... 16 --
---------- -------
Balance, December 31, 1994.............................................. 12,000,016 --
Exercise of warrants.................................................... 4,140 --
Exercise of options..................................................... 76,688 --
Odd lot program net share purchases..................................... -- 4,157
Purchase of shares...................................................... -- 600,000
---------- -------
Balance, December 31, 1995.............................................. 12,080,844 604,157
========== =======
</TABLE>
At December 31, 1995, the Company has reserved 4,672,489 shares of its
authorized but unissued common stock for possible future issuance in connection
with the exercise of the warrants to purchase common stock (3,999,177 shares),
35
<PAGE> 38
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and the exercise of stock options (673,312 shares). The payment of cash
dividends on common stock is restricted under the provisions of the Company's
debt agreements (See Notes 9 and 10). As of December 31, 1995, $10,000,000 was
available for the payment of dividends under the Company's most restrictive
agreement.
In April 1995, the Company's revolving credit agreement was amended. The
amendment, among other changes, revised the limitation on paying dividends. In
April, August and November 1995, the Board of Directors declared $0.05 dividends
per common share, which were paid on June 15, 1995, September 15, 1995 and
December 15, 1995 to shareholders of record as of June 1, 1995, September 1,
1995 and December 1, 1995, respectively. In addition, on February 1, 1996, the
Board of Directors declared a $0.05 dividend per common share, payable on March
15, 1996 to shareholders of record as of March 1, 1996.
On April 18, 1995, the Board of Directors approved a plan to repurchase
common stock from shareholders who own less than 100 shares, and to allow
shareholders to increase their shares owned up to 100 shares. The original
program was extended through July 28, 1995. No brokerage commissions were
incurred by shareholders related to these transactions. A total of 24,454 shares
were tendered for sale by the shareholders and shareholders purchased 20,297
shares, under this program.
In November 1995, the Board of Directors authorized the expenditure of up
to $20,000,000 for the repurchase of the Company's common stock. In November
1995, the Company repurchased 600,000 shares of its common stock for
$13,875,000.
16. 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, 1995, 3,999,177 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.
17. 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. Management believes that 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.
36
<PAGE> 39
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
18. 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"). All options will expire 10 years from the date of
grant.
<TABLE>
<CAPTION>
OPTION
EXERCISE OPTIONS OPTIONS
PRICE OUTSTANDING EXERCISABLE
----------------- ----------- -----------
<S> <C> <C> <C>
Balance, March 31, 1994............................. $ -- -- --
Options granted................................... $15.375-$15.6875 706,000 368,754
------- -------
Balance, December 31, 1994.......................... 706,000 368,754
Options granted................................... $20.75 -$21.50 31,000 --
Options exercised................................. $15.375 (77,185) (77,185)
Options which became exercisable.................. $15.375-$21.50 -- 125,004
Options expired or canceled....................... $15.375 (25,000) (12,500)
------- -------
Balance, December 31, 1995.......................... $15.375-$21.50 634,815 404,073
======= =======
</TABLE>
Options available for future grants under the Directors' Plan were 38,000
and 44,000 at December 31, 1995 and 1994, respectively. Options generally become
exercisable over a three-year period.
19. 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, 1995 (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.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------
CARRYING FAIR
AMOUNT VALUE
-------- -------
<S> <C> <C>
Financial assets:
Cash and cash equivalents............................................... $ 50,049 $50,049
Financial liabilities:
Asset proceeds notes of liquidating subsidiary.......................... $ 4,399 $ 4,399
Senior notes payable.................................................... $ 78,000 $79,609
</TABLE>
The carrying amounts shown in the table are included in the accompanying
consolidated balance sheet under the indicated captions.
37
<PAGE> 40
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 represents the amount expected to be paid by the
liquidating subsidiary which is equal to the lesser of the value of the net
assets of the liquidating subsidiary to be utilized to liquidate these
obligations or the face value of the notes(See Note 25). The face value of the
notes at December 31, 1995 is $4,399,000, and the notes are not publicly traded.
Senior notes payable -- the fair value of long-term debt is based on quoted
market prices. As of December 31, 1995 the senior notes were trading at 102.063%
of face value.
20. OTHER INCOME, NET
Other income, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Rental income.................................. $ 507 $1,105 $2,184 $ 8,817
Interest income on investments................. 2,783 1,266 179 512
Other interest income.......................... 27 49 160 727
Other, net..................................... 723 1,400 168 1,182
------ ------ ------ -------
$4,040 $3,820 $2,691 $ 11,238
====== ====== ====== =======
</TABLE>
38
<PAGE> 41
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
21. INCOME TAXES
(Provision) credit for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Federal:
Current.............................................. $ (1,098) $ -- $ 635 $ (1,541)
-------- -------- -------- --------
Deferred:
Difference between tax and book depreciation...... (1,308) 3,548 3,348 (3,320)
Sale of assets.................................... (7,868) (9,716) -- --
Investment and other credits...................... 864 (7,790) (851) 635
Net operating loss carryforward................... (1,308) (2,388) 37,526 (6,209)
Restructuring and other reserves.................. (10,184) (4,946) 12,578 3,132
Sale of international joint venture............... -- -- -- 26,093
Valuation allowance............................... 18,504 21,295 (53,249) (17,961)
Other, net........................................ 1,300 (3) 13 (1,735)
-------- -------- -------- --------
Total deferred......................................... -- -- (635) 635
-------- -------- -------- --------
Reduction of reorganization value/Reduction of paid in
capital.............................................. (14,196) (13,830) -- --
-------- -------- -------- --------
Total federal.......................................... (15,294) (13,830) -- (906)
-------- -------- -------- --------
Foreign:
Current.............................................. -- (16) (5) --
Deferred tax on unremitted foreign earnings.......... -- -- -- 12,132
-------- -------- -------- --------
Total foreign.......................................... -- (16) (5) 12,132
-------- -------- -------- --------
State and local:
Current.............................................. (700) (750) (150) (621)
Deferred............................................. -- (1,204) -- (59)
Reduction of reorganization value/Reduction of paid
in capital........................................ (1,620) -- -- --
-------- -------- -------- --------
Total state and local.................................. (2,320) (1,954) (150) (680)
-------- -------- -------- --------
Joint venture taxes.................................... -- -- -- (4,195)
-------- -------- -------- --------
$(17,614) $(15,800) $ (155) $ 6,351
======== ======== ======== ========
</TABLE>
As of December 31, 1995, the Company has investment tax credit
carryforwards for federal income tax purposes of $5,940,000 which expire at
various dates through 2001. The Company also has regular tax and alternative
minimum tax net operating loss carryforwards of approximately $201,000,000 and
$56,000,000, respectively, which expire at various dates through 2009 and an
alternative minimum tax credit carryforward of $6,575,000. 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 23). Such an "ownership change" could limit the use or
continued availability of the Company's carryforwards. Under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" a portion
of these carryforwards has been used for
39
<PAGE> 42
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
financial reporting purposes to offset the tax effect of temporary differences
between book carrying value 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):
<TABLE>
<CAPTION>
FOR THE
FOR THE NINE MONTHS FOR THE FOR THE
YEAR ENDED THREE MONTHS YEAR
ENDED DECEMBER ENDED ENDED
DECEMBER 31, 31, MARCH 31, DECEMBER 31,
1995 1994 1994 1993
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Income (loss) before income taxes and cumulative
effect of changes in accounting principles...... $ 53,376 $ 45,133 $(22,963) $(41,609)
-------- -------- -------- --------
Tax (provision) benefit computed at statutory
rates........................................... (18,681) (15,796) 8,037 14,563
Differences resulting from:
Foreign subsidiaries, net.................... (140) (175) (294) 397
Corporate joint ventures..................... -- -- -- 9,405
Restructuring................................ -- -- 45,212 --
State tax, net............................... (2,320) (1,954) (150) (680)
Other........................................ 3,527 2,125 -- 627
Valuation allowance.......................... -- -- (52,960) (17,961)
-------- -------- -------- --------
$(17,614) $ (15,800) $ (155) $ 6,351
======== ======== ======== ========
</TABLE>
Components of net deferred tax assets (liabilities) as of December 31, 1995
and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Current tax assets related to:
Reserves........................................................... $ 4,958 $ 3,670
Miscellaneous...................................................... 6,094 8,126
-------- ---------
11,052 11,796
Non-current tax assets related to:
Reserves not yet deducted.......................................... 14,633 20,879
Reserve for retiree benefits....................................... 45,817 43,851
Loss carryforwards................................................. 70,334 71,642
Investment credits................................................. 5,940 6,628
Alternative minimum tax credits.................................... 6,575 5,023
Miscellaneous...................................................... 3,331 7,191
-------- ---------
146,630 155,214
Non-current tax liabilities related to:
Fixed assets....................................................... (50,317) (33,742)
Domestic joint ventures............................................ (8,763) (16,162)
-------- ---------
(59,080) (49,904)
Valuation allowance.................................................. (98,602) (117,106)
-------- ---------
Net federal tax asset................................................ -- --
State & other........................................................ (6,688) (6,688)
-------- ---------
Net deferred......................................................... $ (6,688) $ (6,688)
======== =========
</TABLE>
40
<PAGE> 43
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with AICPA Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code", income tax
benefits including those realized from preconfirmation net operating loss
carryforwards were used first to reduce the reorganization value in excess of
amounts allocable to identifiable assets and then increase to paid-in capital.
Net income taxes paid during the year ended December 31, 1995, the nine
months ended December 31, 1994, the three months ended March 31, 1994 and the
year ended December 31, 1993 were $395,000, $86,000, $756,000 and $1,038,000,
respectively.
22. ASSET DISPOSITIONS
In December 1995, the Company sold its concrete railroad cross-tie plant
and office building in Denver, Colorado for $2,250,000, which approximated book
value.
In October 1995, the Company sold the assets of its Nova Scotia, Canada
aggregate quarry including working capital for $11,408,000, which approximated
book value.
In February, March and June 1995, the Company sold the assets of its hollow
metal door/hardware business in Illinois, a piece of surplus property in
Mississippi and a cement terminal in Florida for $290,000, $325,000 and
$390,000, respectively. The Company had been leasing the terminal to the buyer
prior to the sale.
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.
The operations sold in 1995, 1994 and 1993 contributed the following
results for the period through their respective dates of disposition (in
thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR NINE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1995 1994 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales................................ $8,130 $7,789 $997 $ 11,361
Joint venture income..................... $-- $-- -$- $ 9,745
Pre-tax income (loss).................... $ (176) $ (741) $(93) $ 3,851
</TABLE>
23. CHAPTER 11 PROCEEDINGS AND THE ADOPTION OF "FRESH-START" REPORTING
On February 17, 1994, with the approval of all voting classes of creditors
and equity holders, the United States Bankruptcy Court for the Southern District
of New York 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 were 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
25).
41
<PAGE> 44
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The plan provided 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, (iii) $138,118,000 secured asset proceeds notes of
Rosebud, to be paid out of the proceeds from the disposition of its assets (See
Notes 8 and 25) and (iv) 85.0% of the common stock of reorganized Lone Star.
Holders of the Company's cumulative convertible preferred stock received a
pro rata share of 10.5% of the common stock of reorganized Lone Star and
1,250,000 warrants to purchase common stock of the reorganized Lone Star. The
holders of common stock of Lone Star received the balance of reorganized Lone
Star's common equity and 2,753,333 warrants to purchase common stock in the
reorganized Lone Star. The warrants are exercisable through December 31, 2000,
and each warrant provides for the purchase of one share of the common stock of
reorganized Lone Star at a price of $18.75 per share.
In addition, in accordance with the plan, as part of the agreement with the
Pension Benefit Guaranty Corporation ("PBGC") the Company granted the PBGC a
mortgage on the Oglesby, Illinois plant, and a security interest in the
Company's 25% interest in the Kosmos Cement Company partnership, to secure
certain contingent future pension obligations.
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 26). 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.
24. 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
42
<PAGE> 45
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
prior to January 1, 1994. 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)
<TABLE>
<CAPTION>
EFFECT OF PLAN OF
REORGANIZATION
AND FRESH-START PRO FORMA
HISTORICAL REPORTING RESULTS
---------- ----------------- ---------
<S> <C> <C> <C>
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)
========
</TABLE>
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 fresh-start reporting
prior to January 1, 1994 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.
43
<PAGE> 46
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LONE STAR INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
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
------------ ------------ ------------
<S> <C> <C> <C>
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
=====
</TABLE>
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 year ended December 31, 1994.
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.
44
<PAGE> 47
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
25. 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, certain other miscellaneous
assets, and a $5,000,000 cash investment to be used for working capital
purposes, to Rosebud. The Company is under no obligation to fund additional
Rosebud working capital requirements.
Lone Star's investment in Rosebud, which is comprised of real estate and
cash, net of associated liabilities, is included in the Company's December 31,
1995 consolidated balance sheet at the face value of the asset proceeds notes of
$4,399,000. This reflects the expectation at December 31, 1995 that the net
realizable value of the assets will be, at a minimum, enough to liquidate the
asset proceeds notes in their entirety. Generally, net realized value is the
amount which is reasonably expected to be received upon a sale to a willing
buyer, less costs to sell. Net realizable value may differ from the eventual
realizable value of the assets. In addition, it is difficult to estimate the
time required to complete this process. The asset proceeds notes are recorded on
the accompanying consolidated balance sheet at the lesser of the face value of
the notes or the estimated value of the assets to be utilized to liquidate these
obligations. Prior to December 31, 1995, the Company's investment in Rosebud
reflected the estimated net realizable value of the assets, which was less than
the face value of the asset proceeds notes. The decrease of $82,601,000 from the
December 31, 1994 balance is primarily due to asset sales, certain insurance and
other settlements and the subsequent distribution of the net proceeds to asset
proceeds note holders.
On 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, January 31, 1995,
July 31, 1995 and January 31, 1996 interest payments were paid in cash). The
asset proceeds notes are to be repaid as Rosebud's assets are sold. 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 were guaranteed, in part, by Lone
Star. As a result of the interest and principal payments made by Rosebud, the
Company's guarantee, the guarantee agreement and the related pledge of Rosebud's
common stock owned by the Company were terminated as of July 14, 1995.
Liabilities associated with all Rosebud Assets, sold and unsold, were
assumed by Rosebud and it has agreed to indemnify Lone Star for these
liabilities. The assumption by Rosebud of Lone Star's liabilities may not be
binding upon third parties, and, in any event, as to such liabilities, however,
arising from actions or circumstances that existed on or
45
<PAGE> 48
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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. In January 1995, Rosebud sold surplus
property in Florida for $1,500,000. In March 1995, Rosebud received proceeds of
$4,000,000 from the sale of surplus property in Texas. In May 1995, Rosebud sold
the stock of a wholly-owned subsidiary, Lone Star California, Inc. and the
promissory notes executed by RMC LONESTAR payable to Lone Star California, Inc.
for cash proceeds of $18,826,000. In June 1995, Rosebud sold surplus property in
Florida for $5,000,000. In January and June 1995, Rosebud sold surplus property
in Louisiana, Maryland and Florida for total proceeds of $954,000. In September
1995, Rosebud sold its 50% interest in Hawaiian Cement, a Hawaiian partnership
for $31,000,000. In October 1995, Rosebud sold surplus property in Texas
receiving $5,000,000 in net proceeds.
During 1994, Rosebud had reached final agreements with substantially all
the insurance carriers involved in litigation, related to indemnity in the
railroad crosstie litigation cases, and received $5,300,000. In April 1995 a
settlement was reached with the remaining insurance companies and a payment of
$4,200,000 was subsequently received. In May 1995 agreements in principle were
reached with two Argentine companies to settle the litigation related to the
1992 auction sale of the Company's Argentine subsidiary. Payments totaling
$2,500,000 were received. In addition, in July 1995, a settlement was reached in
the railroad crosstie litigation against Northeast Cement Company and its
affiliates, which resulted, in August 1995, in a net payment to Rosebud of
$9,402,000.
In 1995, Rosebud made total principal payments of $102,000,000 and total
interest payments of $10,825,000. An additional interest payment of $209,000 was
made in January 1996. Total principal and interest payments made through
December 31, 1995 were $150,457,000. In January 1996, Rosebud sold surplus
property in Washington for cash proceeds of $1,358,000.
Cash generated by Rosebud in excess of the remaining face value of the
asset proceeds notes, accrued interest and Rosebud working capital requirements,
if any, will be paid to Lone Star.
26. 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 year ended December 31, 1993, include the following (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, 1994 1993
-------------- ------------
<S> <C> <C>
Professional fees and administrative expenses...................... $ (15,431) $(15,572)
Interest income.................................................... 2,035 5,102
--------- --------
(13,396) (10,470)
Gain (loss) on sale of assets...................................... -- (37,335)
Adjustments to fair value.......................................... (133,917) --
--------- --------
$ (147,313) $(47,805)
========= ========
</TABLE>
Professional fees and administrative expenses related to the 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.
46
<PAGE> 49
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
27. ENVIRONMENTAL MATTERS
The Company is subject to extensive, stringent and complex federal, state
and local laws, regulations and ordinances pertaining to the quality and the
protection of the environment and human health and safety, requiring the Company
to devote substantial time and resources in an effort to maintain continued
compliance. Many of the laws and regulations apply to the Company's former
activities, properties and facilities as well as its current operations. Changes
to such regulations or the enactment of new regulations in the future could
require the Company to undertake capital improvement projects or to cease or
curtail certain current operations or could otherwise substantially increase the
capital, operating and other costs associated with compliance. Moreover, there
can be no assurances that judicial or administrative proceedings, seeking
penalties or injunctive relief, will not be brought against the Company for
alleged non-compliance with applicable environmental laws and regulations
relating to matters as to which the Company is currently unaware. In addition,
if releases of hazardous substances are discovered to have occurred at
facilities currently or previously owned or operated by the Company, or at
facilities to which the Company has sent waste materials, the Company may be
subject to liability for the investigation and remediation of such sites.
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, on
January 31, 1995 the Environmental Protection Agency ("EPA") 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 RCRA hazardous waste regulatory
program, tailored to address the specific regulatory concerns posed by CKD. The
EPA regulatory determination further provides that new CKD regulations will be
designed both to be protective of the environment and to minimize the burden on
cement manufacturers. In early 1996, EPA officials reported that certain other
alternatives -- such as oversight of CKD management by state environmental
agencies -- also are being explored. It is not possible to predict at this time
what, if any, new regulatory controls on the management, handling and disposal
of CKD or what increased costs (or range of costs), if any, would be incurred by
the Company to comply with these requirements. As an alternative to new EPA
regulations or state oversight, portland cement manufacturers, including Lone
Star, are engaged in negotiations with the EPA in an attempt to enter into other
arrangements relating to the management of CKD.
On July 20, 1995, the State of Indiana made a determination that the CKD
stored at the Company's Greencastle plant is a type I waste and requested that
the Company apply for a formal permit for an on-site landfill for the CKD. The
Company understands that similar notices were sent to other cement manufacturers
in the State of Indiana. The Company is protesting this determination through
legal channels and has received a stay to allow it to demonstrate that current
management practices pose no threat to the environment. The Company believes
that the State's determination ultimately will be reversed or the Company will
receive the needed permit or other adequate relief, such as an agreed order
requiring certain additional waste management procedures that are less stringent
than those required for type I wastes. If the Company is not successful in this
regard, however, like other Indiana cement producers, the Greencastle plant
could incur substantially increased operating and capital costs.
The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are the
Company's two cement manufacturing facilities using hazardous waste fuels
("HWF") as a cost saving energy source, are subject to strict federal, state and
local requirements governing hazardous waste treatment, storage and disposal
facilities, including those contained in the Boiler and Industrial Furnace
Regulations promulgated under RCRA (the "BIF Rules"). These facilities qualified
for and operate 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, in the past Lone Star has been
involved in certain environmental enforcement proceedings seeking civil
penalties and injunctive relief for past noncompliance, and there can be no
assurances that the Company 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
continue to burn HWF. As a result of a court decision vacating a BIF Rules air
emission standard, the
47
<PAGE> 50
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company temporarily curtailed its use of HWF at the Greencastle plant. The
Company completed compliance testing in August 1995, has recertified under
interim status and has commenced burning HWF.
The Company is currently engaged in the process of securing the permit
required under RCRA and the BIF Rules for the Cape Girardeau plant. The Company
anticipates that the Greencastle plant also will go through this permitting
process in late 1996. These permits are a requirement to enable Lone Star 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. In addition, if received, the
permits could contain terms and conditions with which the Company cannot comply
or could require the Company to install and operate costly control technology
equipment.
Since 1991, federal and state environmental agencies have conducted
inspections and instituted inquiries and administrative actions regarding waste
fuel operations at both of the Company's 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, the 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 the EPA
which requires the payment by the Company of a civil penalty of approximately
$200,000, approximately $87,000 of which was offset by two supplemental
environmental projects completed in 1995.
Lone Star was given official notices 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. The Company has negotiated a settlement
of this matter with the EPA which will involve the payment of $40,000 to the EPA
and the paving of certain roads at the facility to control fugitive dust at an
estimated cost of $150,000.
The Texas Natural Resource Conservation Committee ("TNRCC") has issued a
notice of violations in respect of certain air permitting application matters at
the Company's Maryneal, Texas plant. The TNRCC has also investigated certain
solid waste and water matters, and has had two conferences with the Company
concerning all of these matters. The TNRCC has advised the Company that it will
propose formal enforcement action in respect of the Company's air permits, which
could include a penalty and injunctive relief, and will require certain
additional safeguards in respect of solid waste disposal. The Company does not
expect that these matters will have a material adverse affect on its Maryneal,
Texas operations.
Past operations of the Company, certain of its subsidiaries, or its
predecessors have resulted in releases of hazardous substances at sites
currently or formerly owned by the Company and certain of its subsidiaries or
where waste materials generated by the Company have been disposed. CKD and other
materials were placed in depleted quarries and other locations for many years.
The Company has been named by the EPA as a potentially responsible party for the
investigation and remediation of several Superfund sites. Included are sites
located in: Utah (seven sites, including three National Priority List ("NPL")
sites which were settled during the bankruptcy proceedings as discussed below);
Illinois (one NPL site); Texas (two sites, including one NPL site); Missouri
(one NPL site); Washington (one NPL site); Minnesota (two NPL sites); Colorado
(one NPL site); Florida (five sites, including two related NPL sites and the two
non-NPL sites described below); California (one non-NPL site described below);
Pennsylvania (one NPL site); and Louisiana (one NPL site). Except for the
matters described below, available factual information indicates that the
Company's disposal of waste at these sites was small or non-existent, and the
Company may have certain defenses arising out of its reorganization. In certain
instances the Company has availed itself of settlement offers it has found
attractive. The Company is also reviewing certain of its inactive properties to
determine if any remedial action may be required at these sites.
In July 1989, the Company was advised by the EPA, that it was a potentially
responsible person ("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, the EPA and
the Utah Department of Health
48
<PAGE> 51
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
issued a record of decision selecting a remedial action calling for removal of
the CKD, over a period of time, to a location to be selected in the Salt Lake
City vicinity where an industrial type landfill would be constructed. The
Company settled this matter during its bankruptcy proceedings and has also
settled an action brought by the Company in United States District Court in Utah
seeking contribution from two other PRP's for their share of investigation and
cleanup costs of the sites. The settlement agreement relating to the
contribution claims are subject to the other PRP's reaching settlements with the
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. The
Company has brought actions against its insurers in respect of defense and
cleanup costs at both sites.
In 1992, an EPA approved cleanup of soils and water at a site in Dania,
Florida previously owned by Lone Star was completed. Lone Star has also agreed
with the State of Florida Department of Environmental Protection ("FDEP") to
undertake a monitoring program for the presence of pentachlorophenol ("PCP") in
the groundwater. The monitoring has shown the groundwater to be free of PCP, and
the FDEP has advised the Company that no further remediation or monitoring of
PCP will be required. However, traces of other elements have been noted, and
monitoring of these elements will continue. This site was transferred to Rosebud
in 1994 and sold by Rosebud in 1995. From the proceeds of the sale, $2,000,000
was placed in escrow to assure compliance with the Company's agreement with the
FDEP, and Rosebud is currently negotiating to receive the funds remaining in
this escrow.
The Company completed certain cleanup of soils at a site in Dade County,
Florida in 1992 and agreed 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.
At the time of the 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 has been completed,
and postclosure monitoring of the site is the responsibility of the plant owner.
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 does not believe that
it has any responsibility for the site and intends to contest these lawsuits
vigorously. The Company's insurance carriers have been notified of the claims
but have denied coverage.
The December 31, 1995 consolidated balance sheet includes accruals of
$6,900,000 which represent the Company's current estimate of its liability
related to future remediation costs at sites where known environmental
conditions exist. The Company believes these reserves to be adequate for known
environmental matters.
28. LITIGATION
From time to time the Company is named as a defendant in lawsuits asserting
product liability for which the Company maintains insurance coverage. In late
1995 an office building in Boston, Massachusetts, constructed in 1983 using
concrete pilings produced by San-Vel Concrete Corporation ("San-Vel"), an
inactive Lone Star subsidiary, was demolished by order of the City of Boston
based upon an engineering report that the pilings were unreliable. The owner of
the demolished building has notified the Company, among others, that it intends
to hold responsible parties liable. At the request of the City of Boston,
San-Vel has provided a list of the approximate twenty-five other buildings built
in that City between 1980 and 1990 using San-Vel pilings. The City has
reportedly inspected these buildings visually, without noting any apparent
piling failure, although engineering studies are reportedly being conducted with
final results expected in mid-1996. The Company believes that the cement
component of the concrete used to produce the pilings in certain of these
buildings, including the demolished building, was produced by it at one of its
former cement plants. There has been no indication that the cement was
defective. The Company is conducting an investigation into these matters and
believes that
49
<PAGE> 52
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
it has both insurance coverage and good defenses to any claim of liability that
may be asserted against it relating to the demolished building.
29. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 is as follows (in
thousands except per share data):
<TABLE>
<CAPTION>
SUCCESSOR COMPANY
QUARTER
--------------------------------------------
1995 FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------ ------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales................................................... $52,711 $87,553 $100,611 $82,133
Gross profit................................................ $ 427 $26,563 $ 31,478 $23,491
Net income (loss)........................................... $(5,082) $12,133 $ 18,122 $10,589
------- ------- -------- -------
Primary net income per common share......................... $ (0.42) $ 0.89 $ 1.30 $ 0.79
------- ------- -------- -------
Fully diluted net income per common share................... $ (0.42) $ 0.89 $ 1.30 $ 0.78
------- ------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR COMPANY
COMPANY QUARTER
--------- -------------------------------
1994 FIRST SECOND THIRD FOURTH
- ----------------------------------------------------------- --------- ------- ------- -------
<S> <C> <C> <C> <C>
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
--------- ------- ------- -------
</TABLE>
- ---------------
(1) Gross profit is net of depreciation expense relating to cost of sales of
$23,107,000, $16,326,000 and $4,697,000 in the year ended December 31, 1995,
the nine months ended December 31, 1994 and the three months ended March 31,
1994, respectively.
(2) Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share in 1994
and 1995 does not equal the total computed for the year due primarily to the
use of the modified treasury stock method throughout the two years except
for the first quarter of 1995 in which the result was anti-dilutive.
(3) 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 23).
50
<PAGE> 53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
The information required by Part III (Items 10-13) is incorporated herein
by reference to the captions "Election of Directors," "Executive Compensation"
and "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement which pursuant to Regulation 14A will be
filed not later than 120 days after the end of the fiscal year covered by this
Report. Certain information relating to the Company's executive officers is
included in Part I of this Report under the caption "Executive Officers of
Registrant."
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 SCHEDULE: See Index to Financial
Statements and Schedule on page 21 of this Report.
2. EXHIBITS:
<TABLE>
<C> <C> <S>
2.1 -- Voluntary Petition for Relief under Chapter 11 of the United States Bankruptcy
Code dated December 10, 1990 (incorporated herein by reference on Exhibit 28A
of the Registrant's Annual Report on Form 10-K for the 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).
2.3 -- Modification of Debtor's Plan of Reorganization (incorporated herein by
reference to Exhibit 2 of the Registrant's Current Report on Form 8-K dated
March 1, 1994).
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 year ended December 31, 1993).
3.1 -- Amended and Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
3.2 -- Certificate of Amendment of Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995).
3.3 -- Amended By-Laws (incorporated herein by reference to Exhibit 3(ii) of the
Registrant's Quarterly Report on Form 10-Q for the 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 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 quarter ended June
30, 1994).
4.3 -- Financing Agreement, dated as of April 13, 1994 (the "Financing Agreement"),
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 quarter ended June 30, 1994).
</TABLE>
51
<PAGE> 54
<TABLE>
<C> <C> <S>
4.3(i) -- Amendment No. 1, dated as of March 24, 1995, to the Financing Agreement
(incorporated herein by reference to Exhibit 4C(i) of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).
4.3(ii) -- Second Amendment, dated as of November 14, 1995, to the Financing Agreement
(filed herewith).
4.3(iii) -- Third Amendment, dated as of December 11, 1995, to the Financing Agreement
(filed herewith).
4.4 -- 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).
10.1 -- 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).
10.2 -- 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).
10.3 -- 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).
10.4 -- 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).
10.5 -- 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).
*10.6 -- Amended and Restated Employment Agreement, dated as of February 1, 1996,
between David W. Wallace and Lone Star Industries, Inc. (filed herewith).
*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 quarter ended June
30, 1994).
*10.8 -- Amended and Restated Employment Agreement, dated as of February 1, 1996,
between William M. Troutman and Lone Star Industries, Inc. (filed herewith).
*10.9 -- Amended and Restated Agreement, dated February 1, 1996, between William M.
Troutman and Lone Star Industries, Inc. (filed herewith).
*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 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 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 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
quarter ended June 30, 1994).
*10.14 -- Form of "Change of Control" agreement for certain executive officers of Lone
Star Industries, Inc. (filed herewith).
</TABLE>
52
<PAGE> 55
<TABLE>
<C> <C> <S>
10.15 -- Change of Control agreement, dated July 1, 1994, between the Company and Mr.
Pasquale P. Diccianni (filed herewith).
*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 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 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 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. Employees Stock Purchase 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).
11 -- Statement re computation of per share earnings (filed herewith).
12 -- Statement re computation of per share earnings to fixed charges (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 -- Consent of Coopers & Lybrand L.L.P. (filed herewith).
27 -- Financial Data Schedules (filed herewith).
</TABLE>
(b) Reports on Form 8-K.
During the last quarter of the fiscal year ending December 31, 1995
Registrant filed the following Current Reports on Form 8-K:
Form 8-K, November 10, 1995 -- Item 5 -- Other Events.
- ---------------
* Indicates management contract or compensatory plan or arrangement.
53
<PAGE> 56
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/ JAMES W. LANGHAM
-------------------------------------
JAMES W. LANGHAM
Vice President, General
Counsel and Secretary
Date: March 20, 1996
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE OR CAPACITY DATE
- ------------------------------------- ---------------------------------------------- ---------------
<C> <S> <C>
/s/ DAVID W. WALLACE Director, Chairman of the Board and Chief March 20, 1996
- ------------------------------------- Executive Officer
DAVID W. WALLACE
/s/ JAMES E. BACON Director March 20, 1996
- -------------------------------------
JAMES E. BACON
/s/ THEODORE F. BROPHY Director March 20, 1996
- -------------------------------------
THEODORE F. BROPHY
/s/ ARTHUR B. NEWMAN Director March 13, 1996
- -------------------------------------
ARTHUR B. NEWMAN
/s/ ALLEN E. PUCKETT Director March 21, 1996
- -------------------------------------
ALLEN E. PUCKETT
/s/ ROBERT G. SCHWARTZ Director March 12, 1996
- -------------------------------------
ROBERT G. SCHWARTZ
/s/ WILLIAM M. TROUTMAN Director, President and Chief Operating March 20, 1996
- ------------------------------------- Officer
WILLIAM M. TROUTMAN
/s/ JACK R. WENTWORTH Director March 20, 1996
- -------------------------------------
JACK R. WENTWORTH
/s/ WILLIAM E. ROBERTS Vice President, Chief Financial Officer, March 20, 1996
- ------------------------------------- Controller and Treasurer
WILLIAM E. ROBERTS
</TABLE>
54
<PAGE> 57
LONE STAR INDUSTRIES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995, THE NINE MONTHS ENDED
DECEMBER 31, 1994, THE THREE MONTHS ENDED MARCH 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE --------------------------
AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) PERIOD
- ------------------------------------------- --------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts deducted
from notes and accounts receivable....... $ 7,226 399 509 2,198 $5,936
====== === === ===== ======
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
====== === === ===== ======
</TABLE>
- ---------------
(1) Deductions in the year ended December 31, 1995, the nine months ended
December 31, 1994 and the year ended December 31, 1993 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.
55
<PAGE> 58
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Lone Star Industries, Inc. on Form S-3 (File No. 33-55377) and S-8 (File Nos.
33-55277, 33-55261, and 33-55229) of our report, dated January 31, 1996, 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, 1995 and 1994, and for the year ended December
31, 1995, the nine months ended December 31, 1994, the three months ended March
31, 1994, and the year ended December 31, 1993, which report is included in this
Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
March 20, 1996
(LOGO)
Printed on Recycled Paper
56
<PAGE> 59
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <C> <S>
2.1 -- Voluntary Petition for Relief under Chapter 11 of the United States Bankruptcy
Code dated December 10, 1990 (incorporated herein by reference on Exhibit 28A
of the Registrant's Annual Report on Form 10-K for the 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).
2.3 -- Modification of Debtor's Plan of Reorganization (incorporated herein by
reference to Exhibit 2 of the Registrant's Current Report on Form 8-K dated
March 1, 1994).
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 year ended December 31, 1993).
3.1 -- Amended and Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
3.2 -- Certificate of Amendment of Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995).
3.3 -- Amended By-Laws (incorporated herein by reference to Exhibit 3(ii) of the
Registrant's Quarterly Report on Form 10-Q for the 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 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 quarter ended June
30, 1994).
4.3 -- Financing Agreement, dated as of April 13, 1994 (the "Financing Agreement"),
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 quarter ended June 30, 1994).
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <C> <S>
4.3(i) -- Amendment No. 1, dated as of March 24, 1995, to the Financing Agreement
(incorporated herein by reference to Exhibit 4C(i) of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).
4.3(ii) -- Second Amendment, dated as of November 14, 1995, to the Financing Agreement
(filed herewith).
4.3(iii) -- Third Amendment, dated as of December 11, 1995, to the Financing Agreement
(filed herewith).
4.4 -- 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).
10.1 -- 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).
10.2 -- 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).
10.3 -- 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).
10.4 -- 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).
10.5 -- 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).
*10.6 -- Amended and Restated Employment Agreement, dated as of February 1, 1996,
between David W. Wallace and Lone Star Industries, Inc. (filed herewith).
*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 quarter ended June
30, 1994).
*10.8 -- Amended and Restated Employment Agreement, dated as of February 1, 1996,
between William M. Troutman and Lone Star Industries, Inc. (filed herewith).
*10.9 -- Amended and Restated Agreement, dated February 1, 1996, between William M.
Troutman and Lone Star Industries, Inc. (filed herewith).
*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 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 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 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
quarter ended June 30, 1994).
*10.14 -- Form of "Change of Control" agreement for certain executive officers of Lone
Star Industries, Inc. (filed herewith).
</TABLE>
<PAGE> 1
Exhibit 4.3(ii)
SECOND AMENDMENT
TO
FINANCING AGREEMENT
Second Amendment, dated as of November 14, 1995 to the Financing
Agreement, dated as of April 13, 1994 (as amended, the "Financing Agreement"),
by and among Lone Star Industries, Inc., a Delaware corporation ("LSI") and New
York Trap Rock Corporation, a Delaware corporation ("Trap Rock" and together
with LSI, each a "Company" and collectively, the "Companies") and The CIT
Group/Business Credit, Inc. (the "Lender").
The Companies and the Lender desire to (i) increase the amount of
capital expenditures permitted to be made by the Companies during 1996, and (ii)
permit certain additional Restricted Payments (as defined in the Financing
Agreement), in each case on the terms and conditions hereinafter set forth.
Accordingly, the Companies and the Lender hereby agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein are used herein as defined in the Financing Agreement.
2. Investments. Section 7.14(g) of the Financing Agreement is
hereby amended by (i) deleting the word "or" at the end of subclause (xiii)
thereof and substituting in lieu thereof "," and (ii) adding the following at
the end of subclause (xiv) thereof:
"and (xv) repurchases and/or redemptions by LSI of its common
stock for an aggregate consideration not exceeding
$20,000,000."
<PAGE> 2
3. Restricted Payments. Section 7.14(h) of the Financing
Agreement is hereby amended by (i) deleting the word "and" at the end of
subclause (ii) thereof and substituting in lieu thereof "," and (ii) adding the
following at the end of subclause (iii) of Section 7.14(h):
"and (iv) LSI may repurchase or redeem its common stock for
aggregate consideration not exceeding $20,000,000."
4. Capital Expenditures. Section 7.15 of the Financing Agreement
is hereby amended by deleting the amount "$25,000,000" in subclause C of clause
(ii) thereof and substituting in lieu thereof "$50,000,000."
5. Conditions to Effectiveness. This Amendment shall become
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions have been satisfied being herein
called the "Effective Date"):
(i) The Lender shall have received counterparts of this
Amendment which bear the signatures of Companies.
(ii) All legal matters incident to this Amendment shall be
satisfactory to the Lender and its counsel.
6. Representations and Warranties. Each of the Companies
represents and warrants to the Lender as follows:
(a) Each Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and (ii)
has all requisite corporate power, authority and legal right to execute, deliver
and perform this Amendment, and to perform the Financing Agreement, as amended
hereby.
2
<PAGE> 3
(b) The execution, delivery and performance by the Companies of
this Amendment and the performance by the Companies of the Financing Agreement
as amended hereby (i) have been duly authorized by all necessary corporate
action, (ii) do not and will not violate or create a default under either
Company's charter or by-laws, any such applicable law or any contractual
restriction binding on or otherwise affecting either Company or any of such
Company's properties, and (iii) except as provided in the Loan Documents, do not
and will not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to either Company's property.
(c) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by
either Company of this Amendment and the performance by the Companies of the
Financing Agreement as amended hereby.
(d) This Amendment and the Financing Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Companies,
enforceable against the Companies in accordance with their terms.
(e) The representations and warranties contained in Section 6 of
the Financing Agreement are correct on and as of the Effective Date as though
made on and as of the Effective Date (except to the extent such representations
and warranties expressly relate to an earlier date), and no Event of Default or
Potential Default, has occurred and is continuing on and as of the Effective
Date.
7. Continued Effectiveness of Financing Agreement. Each of the
Companies hereby (i) confirms and agrees that each Loan Document to which it is
a party is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all
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respects except that on and after the Effective Date of this Amendment all
references in any such Loan Document to "the Financing Agreement", "thereto",
thereof", "thereunder" or words of like import referring to the Financing
Agreement shall mean the Financing Agreement as amended by this Agreement, and
(ii) confirms and agrees that to the extent that any such Loan Document purports
to assign or pledge to the Lender, or to grant to the Lender a security interest
in or lien on, any collateral as security for the Obligations of the Companies
from time to time existing in respect of the Financing Agreement and the Loan
Documents, such pledge, assignment and/or grant of the security interest or lien
is hereby ratified and confirmed in all respects.
8. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
(d) The Companies will pay on demand all fees, costs and expenses
of the Lender in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the reasonable fees, disbursements and
other charges of Schulte Roth & Zabel, counsel to the Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANIES
LONE STAR INDUSTRIES, INC.
By: /s/ William E. Roberts
---------------------------
Title: Vice President
NEW YORK TRAP ROCK CORPORATION
By: /s/ William E. Roberts
---------------------------
Title: Vice President
LENDER
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Frank A. Grimaldi
---------------------------
Title: Vice President
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<PAGE> 1
Exhibit 4.3(iii)
THIRD AMENDMENT
TO
FINANCING AGREEMENT
Third Amendment, dated as of December 11, 1995 to the Financing
Agreement, dated as of April 13, 1994 (as amended, the "Financing Agreement"),
by and among Lone Star Industries, Inc., a Delaware corporation ("LSI") and New
York Trap Rock Corporation, a Delaware corporation ("Trap Rock" and together
with LSI, each a "Company" and collectively, the "Companies") and The CIT
Group/Business Credit, Inc. (the "Lender").
The Companies and the Lender desire to (i) decrease the interest rates
to be charged on Revolving Loans pursuant to the Financing Agreement, (ii)
decrease the Line of Credit Fee (as defined in the Financing Agreement), (iii)
decrease the administrative fee charged pursuant to the Financing Agreement, and
(iv) permit certain prepayments under the Production Payment Agreements (as
defined in the Financing Agreement), in each case on the terms and conditions
hereinafter set forth. Accordingly, the Companies and the Lender hereby agree as
follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein are used herein as defined in the Financing Agreement.
2. Existing Definitions. The definition of the term "Line of
Credit Fee" in Section 1.1 of the Financing Agreement is hereby amended by
deleting the phrase "one-half of one percent (1/2 of 1%)" in clause (ii)(B)
thereof and substituting in lieu thereof "three-eighths of one percent (3/8 of
1%)".
<PAGE> 2
3. Prepayment. Section 7.14(i) of the Financing Agreement is
hereby amended by adding the following to the end of subsection (iii) of the
second sentence thereof:
"; provided that, notwithstanding anything to the contrary,
LSI may prepay any amounts that it is required to pay pursuant
to the terms of the Production Payment Agreements"
4. Production Payments. Section 7.25 of the Financing Agreement
is hereby amended to read in its entirety as follows:
"7.25 Production Payments. Notwithstanding anything to the
contrary contained in this Agreement, LSI may prepay any
amounts that it is required to pay pursuant to the terms of
the Production Payment Agreements."
5. Interest Rates. Section 8.1(a) of the Financing Agreement is
hereby amended by (i) deleting the phrase "one percent (1%)" in clause (i)
thereof and substituting in lieu thereof "one half percent (1/2%)" and (ii)
deleting the phrase "two and three quarters percent (2-3/4%)" in clause (ii)
thereof and substituting in lieu thereof "two and one quarter percent (2-1/4%)".
6. Administration Fee. Section 8.8 of the Financing Agreement is
hereby amended by deleting the amount "$75,000" and substituting in lieu thereof
"$50,000".
7. Conditions to Effectiveness. This Amendment shall become
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions have been satisfied being herein
called the "Effective Date"):
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(i) The Lender shall have received counterparts of this
Amendment which bear the signatures of Companies.
(ii) All legal matters incident to this Amendment shall be
satisfactory to the Lender and its counsel.
8. Representations and Warranties. Each of the Companies
represents and warrants to the Lender as follows:
(a) Each Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and (ii)
has all requisite corporate power, authority and legal right to execute, deliver
and perform this Amendment, and to perform the Financing Agreement, as amended
hereby.
(b) The execution, delivery and performance by the Companies of
this Amendment and the performance by the Companies of the Financing Agreement
as amended hereby (i) have been duly authorized by all necessary corporate
action, (ii) do not and will not violate or create a default under either
Company's charter or by-laws, any such applicable law or any contractual
restriction binding on or otherwise affecting either Company or any of such
Company's properties, and (iii) except as provided in the Loan Documents, do not
and will not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to either Company's property.
(c) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by
either Company of this Amendment and the performance by the Companies of the
Financing Agreement as amended hereby.
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(d) This Amendment and the Financing Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Companies,
enforceable against the Companies in accordance with their terms.
(e) The representations and warranties contained in Section 6 of
the Financing Agreement are correct on and as of the Effective Date as though
made on and as of the Effective Date (except to the extent such representations
and warranties expressly relate to an earlier date), and no Event of Default or
Potential Default, has occurred and is continuing on and as of the Effective
Date.
9. Continued Effectiveness of Financing Agreement. Each of the
Companies hereby (i) confirms and agrees that each Loan Document to which it is
a party is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects except that on and after the Effective
Date of this Amendment all references in any such Loan Document to "the
Financing Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Financing Agreement shall mean the Financing Agreement as
amended by this Amendment, and (ii) confirms and agrees that to the extent that
any such Loan Document purports to assign or pledge to the Lender, or to grant
to the Lender a security interest in or lien on, any collateral as security for
the Obligations of the Companies from time to time existing in respect of the
Financing Agreement and the Loan Documents, such pledge, assignment and/or grant
of the security interest or lien is hereby ratified and confirmed in all
respects.
10. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but
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<PAGE> 5
all of which taken together shall constitute one and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
(d) The Companies will pay on demand all fees, costs and expenses
of the Lender in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the reasonable fees, disbursements and
other charges of Schulte Roth & Zabel, counsel to the Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANIES
LONE STAR INDUSTRIES, INC.
By: /s/ William E. Roberts
-----------------------------
Title: Vice President
NEW YORK TRAP ROCK CORPORATION
By: /s/ William E. Roberts
-----------------------------
Title: Vice President
LENDER
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Frank A. Grimaldi
-----------------------------
Title: Vice President
5
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement")
made as of the 1st day of February, 1996 between David W. Wallace ("Executive")
and Lone Star Industries, Inc., a Delaware corporation, having its principal
office at 300 First Stamford Place, Stamford, Connecticut 06912 and its
successors and assigns ("Lone Star" or the "Company").
W I T N E S S E T H :
WHEREAS, the Company and the Executive are parties to an
Employment Agreement dated as of July 1, 1994 (the "Employment Agreement"), and
desire to amend and restate the Employment Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants hereby made, the mutual benefits to be derived from
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
and restate the Employment Agreement as follows:
1. Lone Star hereby employs Executive, and Executive
hereby accepts employment by Lone Star, on the terms and conditions set forth
in this Agreement for an initial term of twenty-nine (29) consecutive months
commencing as of the date hereof and ending on June 30, 1998 (the "Initial
Term"), as Chairman and Chief Executive Officer, with such duties as are
<PAGE> 2
specified in the By-Laws of Lone Star and such other duties customary to the
position as may be assigned to Executive from time to time by the Board of
Directors of Lone Star. Unless terminated pursuant to the other terms hereof,
this Agreement shall continue in full force and effect after the Initial Term
for successive terms of two years (each such term, and the Initial Term, a
"Term").
2. Lone Star shall pay Executive a salary ("Salary") at
the rate of $150,000 per annum until the effective date of termination of this
Agreement. Salary shall continue to be paid to Executive on the currently
established pay periods of Lone Star. The Compensation and Stock Option
Committee (or such other Board committee as shall then be responsible for
making such decisions or, if none, the full Board of Directors) may in its
discretion consider increases in the Executive's Salary from time to time, and
upon any such increase "Salary" for purposes hereof shall thereafter mean the
Executive's salary as so increased notwithstanding any purported subsequent
reduction thereof by any such committee or the Board. In addition, the
Compensation and Stock Option Committee (or such other Board committee as shall
then be responsible for making such decisions, or if none, the full Board of
Directors) may in its discretion consider granting to the Executive from time
to time such bonuses, stock options or other incentive compensation as it deems
appropriate.
3. (a) (i) Either party, by written notice to
the other at least six months prior to the expiration of the then
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current Term, may terminate this Agreement effective at the expiration of such
Term. (ii) Lone Star, by written notice which sets forth the effective date of
termination (which shall not be earlier than six (6) months after receipt of
the written notice), may terminate this Agreement at any time for reasons
(including without limitation disability of the Executive) other than Cause (as
hereinafter defined).
(b) In the event that this Agreement is
terminated by the Executive pursuant to Section 4 below or Lone Star terminates
this Agreement pursuant to Section 3(a) above, Executive shall be entitled to a
severance payment in an amount equal to the Executive's Salary for the period
from the effective date of the termination through the date one year (18
months, in the case of a termination pursuant to Section 4) after the effective
date of the termination (such period, the "Severance Period"). In addition,
the Executive shall continue to receive life insurance and medical insurance
under the Company's Executive Medical Plan for Active Employees (as in effect
as of the date of this Agreement) provided pursuant to Sections 5 and 6 hereof
during the Severance Period (which is in addition to, and not in lieu of,
benefit continuation under the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA")). In furtherance and not in limitation of the immediately
preceding sentence, the Executive shall be deemed to have continued his
employment at his Salary during the Severance Period for purposes of vesting,
eligibility and benefit accrual under any applicable
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<PAGE> 4
employee pension plan (subject to the requirements of the Internal Revenue Code
of 1986, as amended (the "Code")). In the event the Executive cannot receive
any such credit under any Company employee pension plan because of limitations
under the Code, within ninety days after the expiration of the Severance
Period, the Executive shall receive a lump sum payment from the Company equal
to the present value of any additional benefits to which the Executive would
have been entitled under any Company employee pension plan had the Severance
Period counted for purposes of vesting, eligibility and benefit accrual
(discounted at 5% per annum). Severance shall be paid in lump sum on the
effective date of the termination. Severance pay pursuant to this Section
shall be in lieu of severance pay pursuant to any Lone Star policy, except
severance in respect of service as a director.
(c) Lone Star shall have the right to terminate
this Agreement for Cause during the Initial Term and thereafter and (subject to
Section 7 below) Executive shall not be entitled to receive severance pay
pursuant to this Section or any other policy or agreement of Lone Star except
severance in respect of service as a director. Cause shall be construed to
mean:
(1) The willful and continued failure
by the Executive to substantially perform his duties with Lone Star (other than
any such failure resulting from his disability due to physical or mental
illness) after a written demand for
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<PAGE> 5
performance is delivered which specifically identifies the manner in which he
has not substantially performed his duties, or
(2) the willful engaging by
Executive in gross misconduct materially and demonstrably injurious to the
Company, monetarily or otherwise, or
(3) conviction of fraud, theft or
embezzlement.
For purposes of this Section, no act, or failure to
act, shall be considered "willful" unless done, or omitted to be done, not in
good faith or without reasonable belief that the action or omission was in the
best interest of the Company.
The written demand in Section (c)(1) shall be
delivered to the Executive by the Board of Directors and shall set forth a
reasonable period (not shorter than 30 business days) in which Executive is
expected to comply with said demand. If Executive does not comply thereafter,
Lone Star shall have the right to terminate this Agreement upon seven (7) days'
written notice to Executive.
4. (a) Lone Star hereby agrees not to: (i) change
the Executive's duties so that a reasonable man would interpret the change to
be a demotion; or (ii) direct the Executive to relocate his office to a new
location which is either in a State other than Connecticut or more than
twenty-five (25) miles from Stamford, Connecticut (excluding any relocation
occurring prior
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<PAGE> 6
to a Change in Control, as defined below, of the Executive's office (A) as a
result of a relocation of Lone Star's operations presently located in Stamford,
Connecticut, and (B) applicable to substantially all officers of Lone Star).
In the event Lone Star breaches its obligations in the immediately preceding
sentence, Executive, at his option (and without limiting his remedies), can (if
such demotion or direction to relocate is not rescinded or corrected by the
Company within 30 days after written notice by Executive to the Company,
reasonably identifying, in the case of a demotion, the change in duties
complained of) declare himself terminated for "Good Reason" by giving written
notice to Lone Star, Lone Star shall pay Executive severance pay and benefits
as provided in Section 3(b) of this Agreement. In no event shall Executive be
required to perform duties or to suffer relocation prohibited by this Section
4.
(b) In the event of the Executive's physical or
mental incapacity, the Executive may declare himself terminated for
"Incapacity" by giving written notice to Lone Star, Lone Star shall pay
Executive severance pay and benefits as provided in Section 3(b) of this
Agreement. "Physical or mental incapacity" shall mean the inability of
Executive by reason of a physical or mental illness to perform his duties
hereunder for a period of 90 consecutive days or a total of 120 days in any
twelve month period and such incapacity is determined by a physician selected
by Executive (or his legal representatives) and reasonably acceptable to the
Company to be such as prevents Executive from
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<PAGE> 7
performing adequately his normal duties to the Company. During any period that
the Executive is unable to perform his duties by reason of physical or mental
incapacity, Executive shall continue to receive his full compensation and
benefits hereunder.
5. Executive shall participate in Lone Star's employee
benefit programs and plans in the same manner as other executive salaried
employees of Lone Star and in accordance with the terms thereof. Benefit
programs and plans include, but are not limited to, life insurance, accidental
death and dismemberment insurance, hospital, medical, surgical and major
medical insurance, dental insurance, short and long-term disability insurance,
401(k) savings plan and pension plan for salaried employees and directors' and
officers' liability insurance ("Employee Benefit Plans"). Executive shall also
participate in Lone Star's vacation and holiday programs. In addition to and
not in limitation of the foregoing, and notwithstanding the Company's policy
with respect to other employees, the Company shall, during their lives and
whether or not the Executive's employment or this Agreement terminates (for
Cause or otherwise), provide the Executive with life and medical insurance and
the Executive's spouse with medical insurance at no cost to the Executive or
his spouse at least equal to the life and medical insurance provided to senior
executive officers of the Company; provided however, the medical benefits
provided to the Executive and his spouse shall be at least equal to the medical
benefits described in Exhibit A; provided further, the
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annual deductible for medical coverage described in Exhibit A is $750 for each
individual. The Executive and his spouse are each entitled to receive monthly
reimbursement of Medicare Part B premiums.
The Company agrees to use its best efforts to provide the
benefits listed on Appendix A to the Executive and his spouse in a manner that
will not result in any income inclusion under federal, state or local tax law.
To the extent, any such income inclusion results to either the Executive or his
spouse, the Executive and his spouse (as the case may be) shall receive an
annual payment from the Company to fully pay for the federal, state or local
tax on such income inclusion (a "Gross-up Payment") as well as any income
inclusion from the Gross-up Payment based on the highest marginal tax rate on
the payment, so that neither the Executive nor his spouse have any tax
liability as a result of participation in the Executive Medical Plan on
Appendix A. For each year, such payment shall be made no later than January
31st of the following year.
No later than 120 days after the date hereof, the Company
shall purchase an insurance policy covering the Executive Medical Plan to
insure non-payment by the Company in accordance with the terms on Exhibit B.
This section shall survive any termination of this Agreement.
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6. To the extent Executive voluntarily terminates his
employment at the end of any Term, he shall be entitled to participate in Lone
Star's employee benefit plans to the full extent that they may be provided to
other retirees (and spouses, if applicable) including but not limited to the
Pension Plan for Salaried Employees, in the same manner as other salaried
retirees of Lone Star and in accordance with the terms thereof.
7. Following a Change in Control, as defined below, the
Executive, on thirty days written notice (which notice must be delivered within
twelve months after the Company gives the Executive notice of the Change in
Control or the Executive has actual knowledge of such Change in Control), may
terminate his employment with the Company. Upon any such termination, the
Executive shall be entitled to severance pay in an amount equal to thirty
months' Salary. In addition, the Executive shall continue to receive life
insurance and medical insurance under the Company's Executive Medical Plan for
Active Employees (as in effect as of the date of this Agreement) provided
pursuant to Sections 5 and 6 hereof during the Severance Period (which is in
addition to, and not in lieu of, benefit continuation under COBRA). In
furtherance and not in limitation of the immediately preceding sentence, the
Executive shall be deemed to have continued his employment at his Salary during
the Severance Period for purposes of vesting, eligibility and benefit accrual
under any applicable employee pension plan (subject to the requirements of the
Code). In the event the Executive cannot
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<PAGE> 10
receive any such credit under any employee pension plan because of limitations
under the Internal Revenue Code, within ninety days after the expiration of the
Severance Period, the Executive shall receive a lump sum payment from the
Company equal to the present value of any additional benefits to which the
Executive would have been entitled under any Company employee pension plan had
the Severance Period counted for purposes of vesting, eligibility and benefit
accrual (discounted at 5% per annum). Severance hereunder shall be paid in
lump sum on the effective date of the termination. Severance pay pursuant to
this Section shall be in lieu of severance pay pursuant to any Lone Star policy
or other agreement (other than severance in respect of service as a director)
and all other obligations of the Company for severance pay under this
Agreement. For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred upon the occurrence of any of the following events:
(i) Any acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares of
common stock of the Company (the "Common Stock") and/or other voting securities
of the Company entitled to vote generally in the election of directors
("Outstanding Company Voting Securities") after which acquisition such
individual, entity or group is the beneficial owner of twenty percent (20%) or
more of either (A)
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(1) the then outstanding shares of Common Stock or (2) the Outstanding Company
Voting Securities; excluding, however, the following: (1) any acquisition by
the Company, (2) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or (3) any acquisition by any
corporation pursuant to a reorganization, merger, consolidation or similar
corporate transaction (in each case, a "Corporate Transaction"), if, pursuant
to such Corporate Transaction, the conditions described in clauses (1), (2) and
(3) of paragraph (iii) of this Section 7 are satisfied; or (B) any transaction
in which the Chief Executive Officer and President of the Company (both as of
the date of this Agreement and subject to health related availability) (1)
retain their current positions with the Company immediately after such
transaction and (2) will immediately after such transaction beneficially own an
aggregate (for both such executives), directly or indirectly (including,
without limitation, ownership by family members or trusts for family members),
more than 5% of either the (a) then outstanding shares of common stock of the
Company and/or (b) the other voting securities of the Company entitled to vote
generally in the election of directors (any transaction under the clause (B)
hereinafter referred to as a "Management Event").
(ii) A change in the composition of the Board of Directors of
the Company (other than in connection with a Management Event) such that the
individuals who, as of the date hereof, comprise a class of directors of the
Board (the members
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of each class of directors of the Board as of the date hereof shall be
hereinafter referred to as an "Incumbent Class" and the members of all of the
Incumbent Classes shall be hereinafter collectively referred to as the
"Incumbent Board") cease for any reason to constitute at least a majority of
the class; provided, however, for purposes of this subsection that any
individual who becomes a member of an Incumbent Class subsequent to the date
hereof whose election, or nomination for election by the Company's
stockholders, was approved in advance or contemporaneously with such election
by a vote of at least a majority of those individuals who are members of the
Incumbent Board and a majority of those individuals who are members of such
Incumbent Class (or deemed to be such pursuant to this proviso), shall be
considered as though such individual were a member of the Incumbent Class; but,
provided further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of the Company or actual
or threatened tender offer for shares of the Company or similar transaction or
other contest for corporate control (other than a tender offer by the Company)
shall not be so considered as a member of the Incumbent Class; or
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(iii) The approval by the stockholders of the Company of a
Corporate Transaction or, if consummation of such Corporate Transaction is
subject, at the time of such approval by stockholders, to the consent of any
government or governmental agency, the obtaining of such consent (either
explicitly or implicitly); excluding, however, a Management Event or a
Corporate Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
outstanding shares of Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than eighty percent (80%) of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction and the combined voting power of the outstanding voting securities
of such corporation entitled to vote generally in the election of directors,
(2) no Person (other than the Company, any employee benefit plan (or related
trust) of the Company or the corporation resulting from such Corporate
Transaction and any Person beneficially owning, immediately prior to such
Corporate Transaction, directly or indirectly, twenty percent (20%) or more of
the outstanding shares of Common Stock or Outstanding Company Voting
Securities, as the case may be) will beneficially own, directly or indirectly,
twenty percent (20%) or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding securities of such corporation
entitled to vote generally in the
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election of directors and (3) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of board of directors
of the corporation resulting from such Corporate Transaction; or
(iv) The approval of the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or other
disposition of all or substantially all of the assets of the Company;
excluding, however, such a sale or other disposition to a corporation (A) in
connection with a Management Event or (B) with respect to which following such
sale or other disposition, (1) more than eighty percent (80%) of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors will be
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the outstanding shares of Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition, (2) no Person
(other than the Company and any employee benefit plan (or related trust) of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty percent
(20%) or more of the outstanding shares of Common Stock or Outstanding Company
Voting Securities, as the case may be) will beneficially own, directly or
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indirectly, twenty percent (20%) or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (3) individuals who were members of
the Incumbent Board will constitute at least a majority of the members of the
board of directors of such corporation.
In the event of any conflict between this Section 7 and any
other Section of this Agreement (other than Section 5), the terms of this
Section 7 shall control, so that, without limitation, the Executive shall be
entitled to the payment and benefits provided under this Section 7
notwithstanding any purported termination (whether for Cause or otherwise) and
regardless of whether such purported termination precedes or follows the giving
of a notice of termination by the Executive under this Section 7 by the
Company.
8. Immediately upon the occurrence of a Change in
Control, the Company shall establish a grantor trust on behalf of the
Executive, subject to the claims of the Company's creditors (commonly referred
to as a "Rabbi Trust"). The Company shall contribute to the Rabbi Trust an
amount sufficient to provide for the severance benefits and payment of all
other benefits under this Agreement (except benefits under the Executive
Medical Plan for Retired Employees). Any payments made to the Executive under
this Agreement shall be made from such Rabbi Trust. The Rabbi Trust shall
terminate and any remaining assets shall be returned
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to the Company no sooner than July 1, 2005, unless the Executive has provided
written notice of an unsatisfied claim to the trustee of the Rabbi Trust, in
which case the Rabbi Trust shall not terminate until such claim is resolved
pursuant to paragraph 12.
9. Upon presentation to Lone Star of appropriate
documentation, Executive will be entitled to reimbursement within guidelines
established by Lone Star for all reasonable and necessary business expenses
incurred by him for entertainment, travel and similar items and for costs for
operating from the Executive's Greenwich, Connecticut office. However, the
Executive shall be personally responsible for rental payments such office as
long as he decides, in his discretion, to maintain such office.
10. Executive agrees that during his period of employment
by Lone Star and thereafter he shall hold in confidence and not disclose to any
unauthorized person any knowledge or information acquired and possessed by him
of a confidential nature or any trade secret with respect to the business of
Lone Star, and not to disclose, publish or make use of the same without the
prior express consent of Lone Star. Executive shall be free to disclose such
information, knowledge or trade secret in the ordinary course of his carrying
out his duties as an officer of Lone Star, and shall be free to disclose such
information, knowledge or trade secret during his period of
16
<PAGE> 17
employment by Lone Star and thereafter if such matters become public or if
compelled by legal process.
11. Executive agrees that during the term of his
employment, he will not without the consent of Lone Star, in any manner,
directly or indirectly, own, manage, be employed by, operate, join, control,
participate in, be connected with, engage in, or become interested in any
business competitive with, the business then carried on by Lone Star in those
parts of the world where Lone Star does business. Ownership of publicly traded
securities of a business of the same or similar nature to, or competitive with,
that carried on by Lone Star, shall not violate this paragraph, provided the
Executive does not acquire more than 5% of the voting stock of any such
corporation. Notwithstanding any other provision of this Agreement, the
Executive shall not be required to use his full time efforts hereunder and may
take on outside business commitments provided they do not unreasonably impair
his ability or capacity to serve as the Chairman of the Board and CEO of the
Company.
12. (a) Any dispute relating to this Agreement
arising between the Executive and the Company shall be settled by arbitration
in accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA"). The arbitration proceedings, including the rendering of
an award, shall take place in Stamford, Connecticut (or such other location
mutually agreed upon by the Company and the Executive), and shall be
administered by the AAA.
17
<PAGE> 18
(b) The arbitral tribunal shall be appointed
within 30 days of the notice of dispute, and shall consist of three
arbitrators, one of which shall be appointed by the Company, one by the
Executive, and the third by both the Company and the Executive jointly;
provided, however, that, if the Company and the Executive do not select the
third arbitrator within such 30-day period, such third arbitrator shall be
chosen by the AAA as soon as practicable following notice to the AAA by the
parties of their inability to choose such third arbitrator.
(c) Decisions of such arbitral tribunal shall be
in accordance with the laws of the State of Connecticut (excluding the
conflicts of law rules which require the application of any other law). The
award of any such arbitral tribunal shall be final (except as otherwise
provided by the laws of the State of Connecticut and the Federal laws of the
United States, to the extent applicable). Judgement upon such award may be
entered by the prevailing party in any state or Federal court sitting in
Connecticut or any other court having jurisdiction thereof, or application may
be made by such party to any such court for judicial acceptance of such award
and an order of enforcement.
(d) The Company shall reimburse the Executive for
all costs, including reasonable attorneys' fees, in connection with any
proceeding (whether or not in arbitration) to obtain or enforce any right or
benefit under this Agreement in which the Executive is the prevailing party.
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<PAGE> 19
Any amounts not paid by the Company under this
Agreement within five business days after the date they are due shall be paid
with interest from their due date at the rate announced from time to time by
Citibank, N.A. as its prime or similar rate plus 3%.
13. Nothing is this Agreement shall in any manner affect
any benefit to which the Executive is entitled as a result of Executive's
position as an outside director of the Company.
14. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the Code
on the amounts in Section 7 above required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts provided under this Agreement shall be automatically reduced to an
amount one dollar less than that, when combined with such other amounts and
benefits required to be so included, would subject the Executive to the excise
tax under Section 4999 of the Code.
15. No later than May 1, 1996, the Company shall
purchase, on behalf of the Executive, an insurance policy to cover any
litigation costs of the Executive (or his spouse) associated with the
enforcement of this Agreement against the Company in an amount of $250,000.
The Company shall fully reimburse the Executive for the federal, state and
local taxes incurred by the Executive in connection with the purchase of such
19
<PAGE> 20
policy (the "Reimbursement") and any federal, state or local taxes on the
Reimbursement, based on the highest marginal tax rate in effect so that the
Executive has no federal, state or local tax liability as a result of this
section.
16. This Agreement constitutes the entire agreement
between the parties and may not be changed or modified except by an agreement
in writing signed by Lone Star and the Executive. This Agreement supersedes
the employment agreement between the Executive and Lone Star, dated July 1,
1994.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
18. This Agreement shall be binding upon and inure to the
benefit of the Company, including any purchaser of all or substantially all of
the assets of the Company and the surviving entity of any merger or
consolidation to which the Company is a party and the Executive and his heirs,
executors, administrators and legal representatives.
19. The Company agrees that if the Executive's employment
with the Company is terminated pursuant to this Agreement during the term of
this Agreement, the Executive shall not be required to seek other employment or
to attempt in any way to reduce any amounts payable to the Executive by the
Company pursuant to this Agreement. Further, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by any compensation
earned by the Executive or benefit provided to
20
<PAGE> 21
the Executive as the result of employment by another employer or otherwise.
Except as otherwise provided herein and apart from any disagreement between the
Executive and the Company concerning interpretation of this Agreement or any
term or provision hereof, the Company's obligations to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive.
20. Except as provided herein, this Agreement cannot be
assigned by Lone Star or Executive without prior written consent.
21. All notices, communications, etc., shall be sent to:
(a) Corporate Secretary
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, CT 06912
(b) David W. Wallace
Two Greenwich Place, Suite 100
Greenwich, CT 06830
By /s/ David W. Wallace
LONE STAR INDUSTRIES, INC.
By /s/ William M. Troutman
--------------------------------
President
By /s/ Jack R. Wentworth
--------------------------------
Chairman of the Compensation and
Stock Option Committee
21
<PAGE> 1
EXHIBIT 10.8
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement")
made as of the 1st day of February, 1996 between William M. Troutman
("Executive") and Lone Star Industries, Inc., a Delaware corporation, having
its principal office at 300 First Stamford Place, Stamford, Connecticut and its
successors and assigns ("Lone Star" or the "Company").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to an
Employment Agreement dated as of July 1, 1994 (the "Employment Agreement"), and
desire to amend and restate the Employment Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants hereby made, the mutual benefits to be derived from
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree and
understand as follows:
1. Lone Star hereby employs Executive, and Executive
hereby accepts employment by Lone Star, on the terms and conditions set forth
in this Agreement for an initial term of twenty-nine (29) consecutive months
commencing as of the date hereof and ending on June 30, 1998 (the "Initial
Term"), as President and Chief Operating Officer, with such duties as are
<PAGE> 2
specified in the By-Laws of Lone Star and such other duties customary to the
position as may be assigned to Executive from time to time by the Board of
Directors of Lone Star or its Chairman and Chief Executive Officer. Unless
terminated pursuant to the other terms hereof, this Agreement shall continue in
full force and effect after the Initial Term for successive terms of two years
(each such term, and the Initial Term, a "Term").
2. Lone Star shall pay Executive a salary ("Salary") at
the rate of $275,000 per annum until the effective date of termination of this
Agreement. Salary shall continue to be paid to Executive on the currently
established pay periods of Lone Star. The Compensation and Stock Option
Committee (or such other Board committee as shall then be responsible for
making such decisions or, if none, the full Board of Directors) may in its
discretion consider increases in the Executive's Salary from time to time, and
upon any such increase "Salary" for purposes hereof shall thereafter mean the
Executive's salary as so increased, notwithstanding any purported subsequent
reduction thereof by any such committee or the Board. In addition, the
Compensation and Stock Option Committee (or such other Board committee as shall
then be responsible for making such decisions, or if none, the full Board of
Directors) may in its discretion consider granting to the Executive from time
to time such bonuses, stock options or other incentive compensation as it deems
appropriate.
3. (a) (i) Either party, by written notice to
the other at least six months prior to the expiration of the then current Term,
may terminate this Agreement effective at the
<PAGE> 3
expiration of such Term. (ii) Lone Star, by written notice which sets forth
the effective date of termination (which shall not be earlier than six (6)
months after receipt of the written notice), may terminate this Agreement at
any time for reasons (including without limitation, disability of the
Executive) other than Cause (as hereinafter defined).
(b) In the event that this Agreement is
terminated by the Executive pursuant to Section 4 below or Lone Star terminates
this Agreement pursuant to Section 3(a) above, Executive shall be entitled to a
severance payment in an amount equal to Executive's Salary for the period from
the effective date of the termination through the date one year (18 months, in
the case of a termination pursuant to Section 4) after the effective date of
the termination (the "Severance Period"); provided, however, the severance
payment shall be reduced in the case of the Executive's disability, on a
dollar-for-dollar basis, by any disability pay the Executive receives pursuant
to the Supplemental Agreement (as described in Section 5) during the Severance
Period. Severance shall be paid in lump sum on the effective date of the
termination. In addition, the Executive shall continue to receive life
insurance and medical insurance under the Company's Executive Medical Plan for
Active Employees (as in effect as of the date of this Agreement) provided
pursuant to Sections 5 and 6 hereof during the Severance Period (which is in
addition to, and not in lieu of, benefit continuation under the Consolidated
Omnibus Budget Reconciliation Act of 1985
3
<PAGE> 4
("COBRA")). In furtherance and not in limitation of the immediately preceding
sentence, the Executive shall be deemed to have continued his employment at his
Salary during the Severance Period for purposes of vesting, eligibility and
benefit accrual under any applicable Company employee pension plan (subject to
the requirements of the Internal Revenue Code of 1986, as amended (the
"Code")). In the event the Executive cannot receive any such credit under any
employee pension plan because of limitations under the Code, within ninety days
after the expiration of the Severance Period, the Executive shall receive a
lump sum payment from the Company equal to the present value of any additional
benefits to which the Executive would have been entitled under any Company
employee pension plan had the Severance Period counted for purposes of vesting,
eligibility and benefit accrual (discounted at 5% per annum). Severance pay
pursuant to this Section shall be in lieu of severance pay pursuant to any Lone
Star severance policy (except that the supplemental retirement benefit and all
other provisions of the Supplemental Agreement shall remain in full force and
effect).
(c) Lone Star shall have the right to terminate
this Agreement for Cause during the Initial Term and thereafter and (subject to
Section 6 below) Executive shall not be entitled to receive severance pay
pursuant to this Section or any other policy or agreement of Lone Star except
the Supplemental Agreement. Cause shall be construed to mean:
4
<PAGE> 5
(1) The willful and continued failure
by the Executive to substantially perform his duties with Lone Star (other than
any such failure resulting from his disability due to physical or mental
illness) after a written demand for performance is delivered which specifically
identifies the manner in which he has not substantially performed his duties,
or
(2) the willful engaging by
Executive in gross misconduct materially and demonstrably injurious to the
Company, monetarily or otherwise, or
(3) conviction of fraud, theft or
embezzlement.
For purposes of this Section, no act, or failure to
act, shall be considered "willful" unless done, or omitted to be done, not in
good faith or without reasonable belief that the action or omission was in the
best interest of the Company.
The written demand in Section (c)(1) shall be
delivered to the Executive by the Board of Directors or Lone Star's Chairman
and Chief Executive Officer and shall set forth a reasonable period (not
shorter than 30 business days) in which Executive is expected to comply with
said demand. If Executive does not comply thereafter, Lone Star shall have the
right to terminate this Agreement upon seven (7) days' written notice to
Executive.
5
<PAGE> 6
4. (a) Lone Star hereby agrees not to: (i) change
the Executive's duties so that a reasonable man would interpret the change to
be a demotion; or (ii) direct the Executive to relocate his office to a new
location which is either in a State other than Connecticut or more than
twenty-five (25) miles from Stamford, Connecticut (excluding any relocation
occurring prior to a Change in Control, as defined below, of the Executive's
office (A) as a result of a relocation of Lone Star's operations presently
located in Stamford, Connecticut and (B) applicable to substantially all
officers of Lone Star). In the event Lone Star breaches its obligations in the
immediately preceding sentence, Executive, at his option (and without limiting
his remedies), can (if such demotion or direction to relocate is not rescinded
or corrected by the Company within 30 days after written notice by Executive to
the Company, reasonably identifying, in the case of a demotion, the change in
duties complained of) declare himself terminated for "Good Reason" by giving
written notice to Lone Star, and Lone Star shall pay Executive severance pay
and benefits as provided in Section 3(b) of this Agreement. In no event shall
Executive be required to perform duties or to suffer relocation prohibited by
this Section 4.
(b) In the event of the Executive's physical or
mental incapacity, the Executive may declare himself terminated for
"Incapacity" by giving written notice to Lone Star, Lone Star shall pay
Executive severance pay and benefits as provided in Section 3(b) of this
Agreement. "Physical or mental incapacity"
6
<PAGE> 7
shall mean the inability of Executive by reason of a physical or mental illness
to perform his duties hereunder for a period of 90 consecutive days or a total
of 120 days in any twelve month period and such incapacity is determined by a
physician selected by Executive (or his legal representatives) and reasonably
acceptable to the Company to be such as prevents Executive from performing
adequately his normal duties to the Company. During any period that the
Executive is unable to perform his duties by reason of physical or mental
incapacity, Executive shall continue to receive his full compensation and
benefits hereunder.
5. Executive shall participate in Lone Star's 401(k)
savings plan and vacation and holiday programs and other benefits in the same
manner as other executive salaried employees of Lone Star and in accordance
with the terms thereof. Notwithstanding the foregoing, nothing contained in
this Agreement (including, without limitation, Section 12 below) shall affect
the force and effect of the Agreement, dated April 15, 1994, and amended and
restated on February 1, 1996 between the Company and the Executive relating to
certain supplemental retirement, medical insurance, disability and other
benefits and rights, a copy of which is attached hereto as Exhibit A (the
"Supplemental Agreement").
6. Following a Change in Control, as defined below, the
Executive, on thirty days written notice (which notice must be delivered within
twelve months after the Company gives the Executive notice of the Change in
Control or the Executive has
7
<PAGE> 8
actual knowledge of such Change in Control), may terminate his employment with
the Company. Upon any such termination, the Executive shall be entitled to
severance pay in an amount equal to thirty months' Salary. In addition, the
Executive shall continue to receive life insurance and medical insurance under
the Company's Executive Medical Plan for Active Employees (as in effect as of
the date of this Agreement) provided pursuant to Sections 5 and 6 hereof during
the Severance Period (which is in addition to, and not in lieu of, benefit
continuation under COBRA). In furtherance and not in limitation of the
immediately preceding sentence, the Executive shall be deemed to have continued
his employment at his Salary during the Severance Period for purposes of
vesting, eligibility and benefit accrual under any applicable employee pension
plan (subject to the requirements of the Code). In the event the Executive
cannot receive any such credit under any employee pension plan because of
limitations under the Code, within ninety days after the expiration of the
Severance Period, the Executive shall receive a lump sum payment from the
Company equal to the present value of any additional benefits to which the
Executive would have been entitled under any Company employee pension plan had
the Severance Period counted for purposes of vesting, eligibility and benefit
accrual (discounted at 5% per annum). Severance pay pursuant to this Section
shall be in lieu of severance pay pursuant to any Lone Star policy or other
agreement (except that the supplemental retirement benefit and all other
provisions of the Supplemental Agreement shall remain in full force and effect)
8
<PAGE> 9
and all other obligations of the Company for severance pay under this
Agreement. For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred upon the occurrence of any of the following events:
(i) Any acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares of
common stock of the Company (the "Common Stock") and/or other voting securities
of the Company entitled to vote generally in the election of directors
("Outstanding Company Voting Securities") after which acquisition such
individual, entity or group is the beneficial owner of twenty percent (20%) or
more of either (A)(1) the then outstanding shares of Common Stock or (2) the
Outstanding Company Voting Securities; excluding, however, the following: (1)
any acquisition by the Company, (2) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or (3) any
acquisition by any corporation pursuant to a reorganization, merger,
consolidation or similar corporate transaction (in each case, a "Corporate
Transaction"), if, pursuant to such Corporate Transaction, the conditions
described in clauses (1), (2) and (3) of paragraph (iii) of this Section 6 are
satisfied; or (B) any transaction in which the Chief Executive Officer and
President of the Company (both as of the date of this Agreement and subject to
9
<PAGE> 10
health related availability) (1) retain their current positions with the
Company immediately after such transaction and (2) will immediately after such
transaction beneficially own an aggregate (for both such executives), directly
or indirectly (including, without limitation, ownership by family members or
trusts for family members), more than 5% of either the (a) then outstanding
shares of common stock of the Company and/or (b) the other voting securities of
the Company entitled to vote generally in the election of directors (any
transaction under the clause (B) hereinafter referred to as a "Management
Event").
(ii) A change in the composition of the Board of Directors of
the Company (other than in connection with a Management Event) such that the
individuals who, as of the date hereof, comprise a class of directors of the
Board (the members of each class of directors of the Board as of the date
hereof shall be hereinafter referred to as an "Incumbent Class" and the members
of all of the Incumbent Classes shall be hereinafter collectively referred to
as the "Incumbent Board") cease for any reason to constitute at least a
majority of the class; provided, however, for purposes of this subsection that
any individual who becomes a member of an Incumbent Class subsequent to the
date hereof whose election, or nomination for election by the Company's
stockholders, was approved in advance or contemporaneously with such election
by a vote of at least a majority of those individuals who are members of the
Incumbent Board and a majority of those individuals who are members of such
10
<PAGE> 11
Incumbent Class (or deemed to be such pursuant to this proviso), shall be
considered as though such individual were a member of the Incumbent Class; but,
provided further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of the Company or actual
or threatened tender offer for shares of the Company or similar transaction or
other contest for corporate control (other than a tender offer by the Company)
shall not be so considered as a member of the Incumbent Class; or
(iii) The approval by the stockholders of the Company of a
Corporate Transaction or, if consummation of such Corporate Transaction is
subject, at the time of such approval by stockholders, to the consent of any
government or governmental agency, the obtaining of such consent (either
explicitly or implicitly); excluding, however, a Management Event or a
Corporate Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
outstanding shares of Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than eighty percent (80%) of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
11
<PAGE> 12
Transaction and the combined voting power of the outstanding voting securities
of such corporation entitled to vote generally in the election of directors,
(2) no Person (other than the Company, any employee benefit plan (or related
trust) of the Company or the corporation resulting from such Corporate
Transaction and any Person beneficially owning, immediately prior to such
Corporate Transaction, directly or indirectly, twenty percent (20%) or more of
the outstanding shares of Common Stock or Outstanding Company Voting
Securities, as the case may be) will beneficially own, directly or indirectly,
twenty percent (20%) or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding securities of such corporation
entitled to vote generally in the election of directors and (3) individuals who
were members of the Incumbent Board will constitute at least a majority of the
members of board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval of the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or other
disposition of all or substantially all of the assets of the Company;
excluding, however, such a sale or other disposition to a corporation (A) in
connection with a Management Event or (B) with respect to which following such
sale or other disposition, (1) more than eighty percent (80%) of, respectively,
the then outstanding shares of common stock of such
12
<PAGE> 13
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors will be then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding shares of Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition,
(2) no Person (other than the Company and any employee benefit plan (or related
trust) of the Company or such corporation and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or indirectly,
twenty percent (20%) or more of the outstanding shares of Common Stock or
Outstanding Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, twenty percent (20%) or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (3) individuals who
were members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of such corporation.
In the event of any conflict between this Section 6 and any
other Section of this Agreement (other than Section 5), the terms of this
Section 6 shall control so that, without limitation, the Executive shall be
entitled to the payment and benefits provided under this Section 6
notwithstanding any
13
<PAGE> 14
purported termination (whether for Cause or otherwise) and regardless of
whether such purported termination precedes or follows the giving of a notice
of termination by the Executive under this Section 6 by the Company.
7. Immediately upon the occurrence of a Change in
Control, the Company shall establish a grantor trust on behalf of the
Executive, subject to the claims of the Company's creditors (commonly referred
to as a "Rabbi Trust"). The Company shall contribute to the Rabbi Trust an
amount sufficient to provide for the severance benefits and payment of all
other benefits under this Agreement. Any payments made to the Executive under
this Agreement shall be made from such Rabbi Trust. The Rabbi Trust shall
terminate and any remaining assets shall be returned to the Company no sooner
than July 1, 2005, unless the Executive has provided written notice of an
unsatisfied claim to the trustee of the Rabbi Trust, in which case the Rabbi
Trust shall not terminate until such claim is resolved pursuant to paragraph
12.
8. Upon presentation to Lone Star of appropriate
documentation, Executive will be entitled to reimbursement within guidelines
established by Lone Star for all reasonable and necessary business expenses
incurred by him for entertainment, travel and similar items.
9. Executive agrees that during his period of employment
by Lone Star and thereafter he shall hold in confidence and not disclose to any
unauthorized person any
14
<PAGE> 15
knowledge or information acquired and possessed by him of a confidential nature
or any trade secret with respect to the business of Lone Star, and not to
disclose, publish or make use of the same without the prior express consent of
Lone Star. Executive shall be free to disclose such information, knowledge or
trade secret in the ordinary course of his carrying out his duties as an
officer of Lone Star, and shall be free to disclose such information, knowledge
or trade secret during his period of employment by Lone Star and thereafter if
such matters become public or if compelled by legal process.
10. Executive agrees that during the term of his
employment, he will not without the consent of Lone Star, in any manner,
directly or indirectly, own, manage, be employed by, operate, join, control,
participate in, be connected with, engage in, or become interested in any
business of the same or similar nature to, or competitive with, that carried on
by Lone Star during the Executive's employment by Lone Star, in those parts of
the world where Lone Star does business. Ownership of publicly traded
securities of a business of the same or similar nature to, or competitive with,
that carried on by Lone Star, shall not violate this paragraph, provided the
Executive does not acquire more than 5% of the voting stock of any such
corporation.
11. The Executive agrees that any copyright or patentable
invention that he may conceive, make, invent, suggest or reduce to practice
during the period of his employment with Lone Star (whether individually or
jointly with any other person
15
<PAGE> 16
or persons), relating in any way to the business of Lone Star shall be the
sole, exclusive and absolute property of Lone Star.
12. Any dispute hereunder shall be resolved in the same
manner as is provided in Section 4.1 of the Supplemental Agreement. Any
amounts not paid by the Company hereunder within five business days after the
date they are due shall be paid with interest from its due date at the rate
announced from time to time by Citibank, N.A. as its prime or similar rate plus
3%.
13. This Agreement constitutes the entire agreement
between the parties and may not be changed or modified except by an agreement
in writing signed by Lone Star and the Executive. This Agreement supersedes
the employment agreements between the Executive and Lone Star, dated, July 1,
1994 except for Section 12 thereof and August 20, 1992, except for Section 10
thereof, which shall continue in effect.
14. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the Code
on the amounts in Section 6 above required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts provided under this Agreement shall be automatically reduced to an
amount one dollar less than that, when combined with such other amounts and
benefits required to be so included, would subject the Executive to the excise
tax under Section 4999 of the Code.
16
<PAGE> 17
15. No later than May 1, 1996, the Company shall
purchase, on behalf of the Executive, an insurance policy to cover any
litigation costs of the Executive (or his spouse) associated with the
enforcement of this Agreement or the Agreement between the Executive and the
Company dated February 1, 1996 against the Company in an amount of $250,000.
The Company shall fully reimburse the Executive for the federal, state and
local taxes incurred by the Executive in connection with the purchase of such
policy (the "Reimbursement") and any federal, state or local taxes on the
Reimbursement, based on the highest marginal tax rate in effect so that the
Executive has no federal, state or local tax liability as a result of this
section.
16. The Company agrees that if the Executive's employment
with the Company is terminated pursuant to this Agreement during the term of
this Agreement, the Executive shall not be required to seek other employment or
to attempt in any way to reduce any amounts payable to the Executive by the
Company pursuant to this Agreement. Further, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by any compensation
earned by the Executive or benefit provided to the Executive as the result of
employment by another employer or otherwise. Except as otherwise provided
herein and apart from any disagreement between the Executive and the Company
concerning interpretation of this Agreement or any term or provision hereof,
the Company's obligations to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder
17
<PAGE> 18
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
18. This Agreement shall be binding upon an inure to the
benefit of the Company, including any purchaser of all or substantially all of
the assets of the Company and the surviving entity of any merger or
consolidation to which the Company is a party and the Executive and his heirs,
executors, administrators and legal representatives.
19. Except as provided herein, this Agreement cannot be
assigned by Lone Star or Executive without prior written consent.
18
<PAGE> 19
20. All notices, communications, etc., shall be sent to:
(a) Corporate Secretary
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, CT 06912
(b) William M. Troutman
30 Thorp Drive
Weston, CT 06883
By /s/ William M. Troutman
-------------------------------
LONE STAR INDUSTRIES, INC.
By /s/ David W. Wallace
-------------------------------
Chairman of the Board
By /s/ Jack R. Wentworth
-------------------------------
Chairman of the Compensation
and Stock Option Committee
19
<PAGE> 1
EXHIBIT 10.9
This AMENDED AND RESTATED AGREEMENT made this 1st day of
February 1996, by and between Lone Star Industries, Inc., a corporation
organized under the laws of the State of Delaware with its principal office at
300 First Stamford Place, Stamford, Connecticut 06912 and its successors and
assigns (the "Corporation"), and William M. Troutman (the "Executive") residing
at 30 Thorp Drive, Weston, Connecticut 06883 (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Executive is currently employed as President and
Chief Operating Officer at the Corporation; and
WHEREAS, the Corporation and the Executive previously entered
into an employment agreement, dated August 17, 1987 (the "1987 Agreement")
which provided for certain supplemental retirement benefits for the Executive
and his spouse; and
WHEREAS, the Corporation and the Executive entered into a
subsequent employment agreement, dated June 26, 1990 (the "1990 Agreement")
which also provided for supplemental retirement benefits for the Executive and
his spouse; and
WHEREAS, the 1987 Agreement and the 1990 Agreement also
provided the Executive, his spouse and eligible dependents with enhanced health
and medical coverage; and
WHEREAS, on December 10, 1990 the Corporation and certain of
its subsidiaries filed in this Court (the "Bankruptcy Court") their respective
voluntary petitions for reorganization under Chapter 11 of Title 11 of the
United States Code; and
WHEREAS, subsequently, on December 21, 1990, Lone Star
Building Centers, Inc. and Lone Star Building Centers (Eastern), Inc. filed
their respective voluntary petitions under Chapter 11 of the Bankruptcy Code;
and
WHEREAS, the 1990 Agreement was rejected by the Corporation,
with the Executive's consent, by order of the U.S. Bankruptcy Court, dated
March 28, 1991; and
<PAGE> 2
WHEREAS, on or about June 26, 1991, the Executive filed a
proof of claim against the Corporation asserting, among other things,
contingent and unliquidated damages resulting from the rejection of the 1990
Agreement; and
WHEREAS, on April 14, 1994, the Bankruptcy Court approved a
settlement with respect to the Executive's claims relating the supplemental
retirement and medical benefits in exchange for the assumption of certain
obligations by the Corporation; and
WHEREAS, on April 14, 1994, the Corporation and the Executive
entered into an Agreement (the "1994 Agreement") to provide certain
supplemental and medical benefits; and
WHEREAS, the Corporation and the Executive desire to amend and
restate the 1994 Agreement; and
NOW, THEREFORE, in consideration of the agreements hereinafter
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 "ANNUITY" shall mean National Home Life Assurance
Company Policy Number N101058 (August 7, 1989).
1.2 "BOARD" shall mean the Board of Directors of the
Corporation or its duly authorized committee.
1.3 "DISABILITY" shall mean Executive's inability,
because of physical or mental incapacity, to perform in a competent manner
executive duties of a nature equivalent to the duties the Executive currently
performs.
1.4 "DISCONTINUATION DATE" shall mean the date of the
later to occur of: (i) the death of the Executive; or (ii) the death of the
Spouse.
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<PAGE> 3
1.5 "EMPLOYMENT AGREEMENT" shall mean the employment
agreement between the Executive and the Corporation, dated August 20, 1993.
1.6 "PLAN" shall mean the Lone Star Industries, Inc.
Salaried Employees Pension Plan.
1.7 "QUALIFIED DEPENDENTS" shall mean the Executive's:
(i) spouse, if not divorced or legally separated from the Executive; (ii)
children under the age of (A) 19 or (B) 23 if a full-time student, unmarried,
and not employed on a regular and full-time basis, and dependent on the
Executive for support; provided however, if due proof is received within 31
days of the day the Qualified Dependent has reached his maximum age that he is
incapable of self-sustaining employment by reason of mental retardation or
physical handicap, the child shall continue to be deemed a dependent after such
birthday, for purposes of only accident and health coverage; and (iii) legally
adopted children, or children living in a parent-child relationship and
primarily dependent on the Executive.
1.8 "SPOUSE" shall mean the Executive's legal spouse on
the Termination Date.
1.9 "TERMINATION DATE" shall mean the date of the earlier
to occur of the date the Executive: (i) attains age 65; or (ii) ceases
full-time employment with the Corporation.
ARTICLE II
2.1 AMOUNT OF BENEFITS.
(a) Lone Star agrees that Executive's annual
retirement benefits at age 65 shall include the sum of: (X) the annual
retirement benefits paid to Executive pursuant to the Plan and (Y) the annual
payments to which the Executive is entitled under the Annuity, whether or not
payable but shall not be less than $225,000.
(b) Except as provided below, the benefits shall
commence at age 65 and shall continue until the Discontinuation Date.
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<PAGE> 4
2.2 BENEFITS PAYABLE BEFORE AGE 65. Effective upon the
Termination Date, the Executive may elect to receive the annual retirement
benefits pursuant to Section 2.1 from the Corporation on or after the date the
Executive attains the age of 55; provided however, such benefits shall be
reduced by 5% for each full year that benefits commence prior to the attainment
of age 62 by the Executive. No such reduction in benefits shall occur on or
after the date the Executive attains the age of 62. The benefits shall be paid
until the Discontinuation Date.
2.3 BENEFITS PAYABLE ON DISABILITY. In the event of
Executive's Disability at any age prior to the commencement of retirement
benefits pursuant to Sections 2.1 or 2.2, the annual retirement benefits
pursuant to Section 2.1 shall commence immediately and shall continue until the
Discontinuation Date. There shall be no reduction in benefits for Executive's
age at date of Disability.
2.4 BENEFITS PAYABLE UPON DEATH. In the event of Executive's
death prior to the Termination Date, the annual retirement benefits called for
by Section 2.1 shall be paid to the Spouse until the Discontinuation Date.
Benefits paid to the Spouse shall be reduced by 5% for each full year that
Executive's age at death is less than age 62.
2.5 PAYMENT OF BENEFITS. There shall be no reduction in
benefits payable under this Agreement due to the age of the Spouse. All
payments under this Agreement shall be made to the Executive until his death,
and then to the Spouse for her life if she survives the Executive.
2.6 PURCHASE OF ANNUITY. The Corporation agrees to
purchase within thirty days after the Termination Date, an annuity from a
reputable provider of annuities rated at least "AA" by Standard & Poors for the
Executive and the Spouse which provides annual retirement benefits to Executive
and his Spouse equal to the retirement benefits called for by this Agreement in
excess of the benefits provided under the Plan and the Annuity. Within 30 days
after the purchase of such annuity, the Corporation shall pay the Executive an
amount equal to the federal income taxes which shall be payable by the
Executive upon receipt of the annuity, said amount to be grossed up to reflect
the additional taxes payable due to the receipt of said payment. The
retirement benefits provided by the annuity shall be adjusted for this payment
of federal income taxes so that the after tax retirement benefits provided by
the annuity are at least equal to the after tax retirement benefits the
Executive would have received from Lone Star had Lone Star paid the retirement
4
<PAGE> 5
benefits directly rather than provide the retirement benefits through the
annuity.
ARTICLE III
HEALTH AND MEDICAL BENEFITS
From the date hereof until the Discontinuation Date, the
Corporation agrees to provide the Executive with life insurance and the
Executive and Qualified Dependents with medical insurance at no cost to the
Executive and Qualified Dependents at least equal to the life and medical
insurance provided to senior elected officers of the Corporation; provided
however, upon the earlier to occur of the Executive's attainment of age 65 or
the Executive's application for a pension benefit under the Plan, the medical
benefits provided to the Executive and Qualified Dependents shall be at least
equal to the medical benefits described in Appendix A; provided further, the
annual deductible for medical coverage described in Exhibit A is $1,000.00 for
the Executive and each Qualified Dependent prior to each such individual's
attainment of the age of 65 and $750.00 for each individual after such
individual's attainment of the age of 65. The Executive and the Spouse are
each entitled to receive monthly reimbursement of Medicare Part B premiums
until the Discontinuation Date.
The Corporation agrees to use its best efforts to provide the
benefits listed on Appendix A to the Executive and his spouse in a manner that
will not result in any income inclusion under federal, state or local tax law.
To the extent, any such income inclusion results to either the Executive or his
spouse, the Executive and his spouse (as the case may be) shall receive an
annual payment from the Corporation to fully pay for the federal, state or
local tax on such income inclusion (a "Gross-up Payment") as well as any income
inclusion from the Gross-up Payment based on the highest marginal tax rate on
the payment, so that neither the Executive nor his Spouse have any federal,
state or local tax liability as a result of participation in the Executive
Medical Plan on Exhibit A. For each year, such payment shall be made no later
than January 31st of the following year.
No later than 120 days after the date hereof, the Corporation
shall purchase an insurance policy covering the Executive Medical Plan to
insure non-payment by the Corporation in accordance with the terms on Exhibit
B.
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<PAGE> 6
This section shall survive any termination of this Agreement.
ARTICLE IV
4.1 DISPUTE RESOLUTION.
(a) The Executive hereby agrees that any dispute
relating to this Agreement arising between the Executive (and/or the Spouse)
and the Corporation (or any successor or assign) shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). The arbitration proceeding, including the
rendering of an award, shall take place in Stamford, Connecticut, (or such
other location mutually agreed upon by the Corporation and the Executive
(and/or the Spouse)) and shall be administered by the AAA.
(b) The arbitral tribunal shall be appointed
within 30 days of the notice of dispute, and shall consist of three
arbitrators, one of which shall be appointed by the Company, one by the
Executive, and the third by both the Company and the Executive (and/or the
Spouse) jointly; provided, however, that, if the Company and the Executive
(and/or the Spouse) do not select the third arbitrator within such 30-day
period, such third arbitrator shall be chosen by the AAA as soon as practicable
following notice to the AAA by the parties of their inability to choose such
third arbitrator.
(c) Decisions of such arbitral tribunal shall be
in accordance with the laws of the State of Connecticut (excluding the
conflicts of law rules which require the application of any other law). The
award of any such arbitral tribunal shall be final (except as otherwise
provided by the laws of the State of Connecticut and the Federal laws of the
United States, to the extent applicable). Judgement upon such award may be
entered by the prevailing party in any state or Federal court sitting in
Connecticut or any other court having jurisdiction thereof, or application may
be made by such party to any such court for judicial acceptance of such award
and an order of enforcement.
(d) The Corporation shall reimburse the Executive
and Spouse for all costs, including reasonable attorneys' fees, in connection
with any arbitration hereunder in which the Executive (and/or the Spouse) is
the prevailing party.
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<PAGE> 7
ARTICLE V
MISCELLANEOUS
5.1 UNFUNDED PLAN. This Agreement is unfunded and shall
at all times remain unfunded until required pursuant to Section 2.6. The
obligations of the Corporation with respect to the benefits payable hereunder
shall be paid out of the Corporation's general assets and shall not be secured.
At its discretion, the Corporation may establish one or more trusts, with such
trustees as the Board may appoint, for the purpose of providing payment of such
benefits. Such trust or trusts may be irrevocable, but the assets thereof
shall be subject to the claims of the Corporation's creditors. To the extent
any benefits provided under the Agreement are actually paid from any such
trust, the Corporation shall have no further obligation with regard thereto,
but to the extent not so paid, such benefit shall remain the obligation of, and
shall be paid by the Corporation. To the extent that any person acquires a
right to receive payments from the Corporation under this agreement, such right
shall be no greater than the right of any unsecured general creditor of the
Corporation.
5.2 NO EFFECT ON EMPLOYMENT. Nothing contained herein
shall be construed as adversely affecting, in any manner, the terms and
conditions of the Executive's employment including, without limitation, the
terms and conditions of the Employment Agreement; provided however, in the
event there are any conflicts between this Agreement and the Employment
Agreement regarding supplemental retirement benefits and life and medical
insurance, the terms of this Agreement shall prevail.
5.3 PAYMENTS NOT COMPENSATION. Any compensation payable
under this Agreement shall not be deemed salary or other compensation to the
Executive for the purposes of computing benefits to which he may be entitled
under any pension plan or other arrangement of the Corporation for the benefit
of its employees.
5.4 NO REDUCTION IN PLAN BENEFITS. Nothing in this
Agreement shall reduce the benefits to which the Executive and the Spouse are
entitled under the Plan.
5.5 INVALIDITY. In case any provision of this Agreement
shall be illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining parts
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<PAGE> 8
hereof, but this Agreement shall be construed and enforced as if such illegal
and invalid provision never existed.
5.6 WITHHOLDING OF TAXES. The Corporation shall have
the right to make such provisions as it deems necessary or appropriate to
satisfy any obligations it may have to withhold federal, state or local income
or other taxes incurred by reason of payments pursuant to this Agreement.
5.7 Binding Affect. This Agreement shall be binding
upon and inure to the benefit of the Corporation, including any purchaser of
all or substantially all of the assets of the Corporation and the surviving
entity of any merger or consolidation to which the Corporation is a party and
the Executive and his heirs, executors, administrators and legal
representatives.
5.8 NO ASSIGNMENT. Except as provided herein, the
benefits payable under this Agreement shall not be subject to alienation,
transfer, assignment, garnishment, execution or levy of any kind, and any
attempt to cause any benefits to be so subjected shall not be recognized.
5.9 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed by its duly authorized officers and the Executive has hereunto
set his hand and seal as of the date first above written.
By: /s/ William M. Troutman
-------------------------------
LONE STAR INDUSTRIES, INC.
By: /s/ David W. Wallace
-------------------------------
Chairman of the Board
By: /s/ Jack R. Wentworth
-------------------------------
Chairman of the
Compensation and Stock
Option Committee
8
<PAGE> 1
EXHIBIT 10.14
As of February 1, 1996
[NAME]
[ADDRESS]
Dear Mr. ________:
This letter will evidence the agreement of Lone Star
Industries, Inc. and its successors and assigns (the "Company") with you on the
terms specified herein.
1. If, after the occurrence of a Change in Control,
"Substantially Comparable" employment (as defined below) does not continue to
be offered to you by the Company for a period of at least one year following
such Change in Control (whether because of a termination of your employment by
such Company for any reason, or because of a change in the terms of such
employment so that it is no longer Substantially Comparable to your employment
by the Company prior to the Change in Control), and as a result your employment
is terminated by you or the Company) or if you separate from the Company (or
are terminated by the Company) for any reason in the thirty-day period
commencing on the first anniversary of the occurrence of a Change in Control,
then, you shall be entitled to severance in an amount equal to the greater of
(A) thirty months of your base salary as in effect upon your
<PAGE> 2
[NAME]
As of February 1, 1996
Page 2
separation of employment from the Company or (B) thirty months of your base
salary as in effect immediately prior to the Change in Control (the higher of
the salary upon your separation or immediately prior to the Change in Control
hereinafter referred to as the "Effective Base Salary"). Such severance shall
be paid in a lump sum on the effective date of the termination of your
employment. In addition, (A) you and your spouse and eligible dependents shall
continue to receive health insurance and medical benefits under the Company's
Executive Medical Plan (as in effect immediately prior to such Change in
Control) during a period of thirty months commencing upon the termination of
your employment and (B) you shall receive such life insurance as is in effect
immediately prior to such Change in Control during a period of thirty months
commencing upon the termination of your employment. In addition, you shall be
deemed to have continued your employment at your Effective Base Salary during
such thirty-month period for purposes of vesting, eligibility and benefit
accrual under any applicable employee pension plan and shall receive, within
fifteen days after the commencement of the thirty-month period of benefit
continuation, a lump sum payment equal to the present value of any additional
benefits to which you would have been entitled under any Company employee
pension plan (and, if eligible, the Company's Supplemental Employee Retirement
Plan) had the thirty-month period counted for purposes of vesting,
2
<PAGE> 3
[NAME]
As of February 1, 1996
Page 3
eligibility and benefit accrual (discounted at 5% per annum) as computed by the
actuarial firm engaged by the Company immediately prior to the Change in
Control. Nothing in this Agreement shall limit your eligibility for or
entitlement to any benefits or programs to which you are otherwise entitled,
including any severance due under the Company's regular severance policy
("Policy Severance"). However, if you are entitled to severance under this
Agreement, you will also be entitled to receive any Policy Severance in a lump
sum at date of termination. Any severance received under this Agreement shall
be reduced by any Policy Severance actually received by you.
Without limiting your right to the life and health insurance
coverage set forth above, you shall continue to have the right to apply for and
secure your entitlement to any life insurance and health coverage you may
become entitled to as a retiree or terminated employee awaiting retirement
eligibility (e.g., retiree health and life insurance) or as a terminated
employee (e.g., "COBRA" insurance). It is not the intent of this agreement to
provide for any duplication of insurance coverage; but any benefit contribution
payment made by you in connection with one coverage (e.g., Company provided
Executive Medical) shall be an offset against the same type of obligation under
a comparable plan in which you may be a participant (e.g., retiree
3
<PAGE> 4
[NAME]
As of February 1, 1996
Page 4
medical or COBRA medical insurance) for the same period of coverage).
2. For purposes of this Agreement (i) a "Change in
Control" shall be deemed to have occurred upon the occurrence of any of the
following events:
(i) Any acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares of
common stock of the Company (the "Common Stock") and/or other voting securities
of the Company entitled to vote generally in the election of directors
("Outstanding Company Voting Securities") after which acquisition such
individual, entity or group is the beneficial owner of twenty percent (20%) or
more of either (1) the then outstanding shares of Common Stock or (2) the
Outstanding Company Voting Securities; excluding, however, the following:
(A)(1) any acquisition by the Company, (2) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company or (3)
any acquisition by any corporation pursuant to a reorganization, merger,
consolidation or similar corporate transaction (in each case, a Corporate
Transaction), if, pursuant to such Corporate
4
<PAGE> 5
[NAME]
As of February 1, 1996
Page 5
Transaction, the conditions described in clauses (1), (2) and (3) of paragraph
(iii) of this Section 2 are satisfied; or (B) any transaction in which the
Chief Executive Officer and President of the Company (both as of the date of
this Agreement and subject to health related availability) (1) retain their
current positions with the Company immediately after such transaction and (2)
will immediately after such transaction beneficially own an aggregate (for both
such executives), directly or indirectly (including, without limitation,
ownership by family members, trusts or foundations for or controlled by family
members), more than 5% of either the (a) then outstanding shares of common
stock of the Company and/or (b) the other voting securities of the Company
entitled to vote generally in the election of directors (any transaction under
the clause (B) hereinafter referred to as a "Management Event").
(ii) A change in the composition of the Board of Directors of
the Company (other than in connection with a Management Event) such that the
individuals who, as of the date hereof, comprise a class of directors of the
Board (the members of each class of directors of the Board as of the date
hereof shall be hereinafter referred to as an "Incumbent Class" and the members
of all of the Incumbent Classes shall be hereinafter collectively referred to
as the "Incumbent Board") cease for any
5
<PAGE> 6
[NAME]
As of February 1, 1996
Page 6
reason to constitute at least a majority of the class; provided, however, for
purposes of this subsection that any individual who becomes a member of an
Incumbent Class subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved in advance or
contemporaneously with such election by a vote of at least a majority of those
individuals who are members of the Incumbent Board and a majority of those
individuals who are members of such Incumbent Class (or deemed to be such
pursuant to this proviso), shall be considered as though such individual were a
member of the Incumbent Class; but, provided further, that any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors of the Company or actual or threatened tender
offer for shares of the Company or similar transaction or other contest for
corporate control (other than a tender offer by the Company) shall not be so
considered as a member of the Incumbent Class; or
(iii) The approval by the stockholders of the Company of a
Corporate Transaction or, if consummation of such Corporate
6
<PAGE> 7
[NAME]
As of February 1, 1996
Page 7
Transaction is subject, at the time of such approval by stockholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly); excluding, however, a Management Event or a
Corporate Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
outstanding shares of Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than eighty percent (80%) of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction and the combined voting power of the outstanding voting securities
of such corporation entitled to vote generally in the election of directors,
(2) no Person (other than the Company, any employee benefit plan (or related
trust) of the Company or the corporation resulting from such Corporate
Transaction and any Person beneficially owning, immediately prior to such
Corporate Transaction, directly or indirectly, twenty percent (20%) or more of
the outstanding shares of Common Stock or Outstanding Company Voting
Securities, as the case may be) will beneficially own, directly or indirectly,
twenty percent (20%) or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding
7
<PAGE> 8
[NAME]
As of February 1, 1996
Page 8
securities of such corporation entitled to vote generally in the election of
directors and (3) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) The approval of the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or other
disposition of all or substantially all of the assets of the Company;
excluding, however, such a sale or other disposition to a corporation (A) in
connection with a Management Event or (B) with respect to which following such
sale or other disposition, (1) more than eighty percent (80%) of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors will be
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the outstanding shares of Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition, (2) no Person
(other than the Company and any employee benefit plan (or related trust) of the
Company or such corporation and any Person beneficially owning,
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<PAGE> 9
[NAME]
As of February 1, 1996
Page 9
immediately prior to such sale or other disposition, directly or indirectly,
twenty percent (20%) or more of the outstanding shares of Common Stock or
Outstanding Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, twenty percent (20%) or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (3) individuals who
were members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of such corporation.
3. For purposes of this Agreement, "Substantially
Comparable" employment shall mean employment which (a) has a base salary which
is equal to or higher than your Effective Base Salary and a benefits package
which, in total, is equivalent or superior to your benefits package in effect
prior to the Change in Control; (b) is at the same or a higher Level of
Responsibility and Title; and (c) is at a location no more than 25 miles from
(and located in the same State as) your then current employment location.
"Level of Responsibility and Title" are set forth in Exhibit A hereto. In any
dispute under this Agreement concerning "Substantially Comparable" employment,
the
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<PAGE> 10
[NAME]
As of February 1, 1996
Page 10
burden of proving that your employment was not "Substantially Comparable" shall
be with the Company.
4. (i) Immediately upon the occurrence of a Change in
Control, the Company shall: (A) establish a grantor trust subject to the claims
of the Company's creditors (commonly referred to as a "Rabbi Trust"); and (B)
contribute to the Rabbi Trust an amount sufficient to provide for the severance
benefits and payment of all other benefits under Section 1 of this Agreement.
The amount of payments made to you from the Rabbi Trust shall be determined by
the accounting firm engaged by the Company immediately prior to the Change in
Control and reviewed by outside legal counsel (which costs shall be borne by
the Company). Payments made to you under this Agreement shall be made from
such Rabbi Trust unless made directly by the Company; provided however, that in
the event the funds contributed in the Rabbi Trust by the Company on your
behalf are insufficient to provide for benefits under this Agreement, nothing
in this Agreement shall limit the Company's liability to you for payments
hereunder. The Rabbi Trust shall terminate and any remaining assets shall be
returned to the Company no sooner than July 1, 2005, unless you have provided
written notice of an unsatisfied claim to the trustee of the Rabbi Trust, in
which case the Rabbi Trust shall not terminate until such claim is resolved
pursuant to paragraph 9.
10
<PAGE> 11
[NAME]
As of February 1, 1996
Page 11
(ii) The Company agrees to use its best efforts to provide
the benefits under the Executive Medical Plan to you and your eligible
dependents in a manner that will not result in any income inclusion under
federal, state or local tax law. To the extent, any such income inclusion
results to either you or your eligible dependents, you and your eligible
dependents (as the case may be) shall receive an annual payment from the
Company to fully pay for the federal, state or local tax on such income
inclusion (a "Gross-up Payment") as well as any income inclusion from the
Gross-up Payment based on the highest marginal tax rate on the payment, so that
neither you nor your eligible dependents have any net tax liability as a result
of participation in the Executive Medical Plan. Such payments will be made by
the Company within 15 days of final determination by the Internal Revenue
Service (I.R.S.), state taxing authorities or Court of Law that taxes are due
or, if it is determined in advance of any audit that the payments will be
taxable, 30 days after the end of the calendar year such payments are
includible in income.
5. This Agreement shall not confer upon you any right to
continuance of employment with the Company or with any successor or in any way
interfere with the right of the Company or such successor to terminate such
employment.
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<PAGE> 12
[NAME]
As of February 1, 1996
Page 12
6. This Agreement constitutes the entire agreement
between the parties and may not be changed or modified except by an agreement
in writing signed by you and the Company. The effectiveness of this Agreement
shall commence as of February 1, 1996 and shall terminate on July 1, 1999.
7. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
8. This Agreement shall inure to the benefit of, and be
binding upon, any successor in interest or assign of the Company including,
without limitation, purchaser of all or substantially all of the assets of the
Company and the surviving entity of any merger or consolidation to which the
Company is a party. This Agreement cannot be assigned by you without prior
written consent of the Company.
9. a. Any dispute relating to this Agreement arising
between you and the Company (or any successor or assign) shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). The arbitration proceedings, including the
rendering of an award, shall take place in Stamford, Connecticut (or such other
location mutually agreed upon by the Company and you), and shall be administered
by the AAA.
12
<PAGE> 13
[NAME]
As of February 1, 1996
Page 13
b. The arbitral tribunal shall be appointed within 30
days of the notice of dispute, and shall consist of three arbitrators, one of
which shall be appointed by the Company, one by you, and the third by both you
and the Company jointly; provided, however, that, if you and the Company do not
select the third arbitrator within such 30-day period, such third arbitrator
shall be chosen by the AAA as soon as practicable following notice to the AAA by
the parties of their inability to choose such third arbitrator.
c. Decisions of such arbitral tribunal shall be in accordance with the laws
of the State of Connecticut (excluding the conflicts of law rules which require
the application of any other law). The award of any such arbitral tribunal
shall be final (except as otherwise provided by the laws of the State of
Connecticut and the Federal laws of the United States, to the extent
applicable). Judgement upon such award may be entered by the prevailing party
in any state or Federal court sitting in Connecticut or any other court having
jurisdiction thereof, or application may be made by such prevailing party to
any such court for judicial acceptance of such award and an order of
enforcement.
d. The Company shall reimburse you for all costs,
including reasonable attorneys' fees, in connection with
13
<PAGE> 14
[NAME]
As of February 1, 1996
Page 14
any proceeding (whether or not in arbitration) to obtain or enforce any right
or benefit under this Agreement in which you are the prevailing party.
e. Without intending to limit the remedies available to
you, the Company acknowledges that a breach of any of the covenants contained in
this Agreement may result in material irreparable injury to you for which there
is no adequate remedy at law, that it will not be possible to measure damages
for such injuries precisely and that, in the event of such a breach or threat
thereof, you shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction requiring the Company to specific
performance or such other relief as may be required to specifically enforce any
of the provisions of this Agreement.
10. Notwithstanding anything else herein, to the extent you
would be subject to the excise tax under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") on the amounts in Section 1 above required
to be included in the calculation of parachute payments for purposes of Sections
280G and 4999 of the Code, the amounts provided under this Agreement shall be
automatically reduced to an amount one dollar less than that, when combined with
such other amounts and benefits required
14
<PAGE> 15
[NAME]
As of February 1, 1996
Page 15
to be so included, would subject you to the excise tax under Section 4999 of
the Code.
11. No later than May 1, 1996, the Company shall purchase,
on your behalf, an insurance policy to cover any of your litigation costs (or
your spouse) associated with the enforcement of this Agreement against the
Company (or defense against claims made under this Agreement by the Company) in
an amount of $100,000. The Company shall fully reimburse you for the federal,
state and local income and employment-related taxes incurred by you in
connection with the purchase of such policy (the "Reimbursement") and any
federal, state or local taxes on the Reimbursement, based on the highest
marginal tax rate in effect, so that you have no federal, state or local tax
liability as a result of this Section.
12. All notices, communications, etc., shall be sent to
(a) Corporate Secretary
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, CT 06912
(b) [NAME]
[ADDRESS]
15
<PAGE> 16
[NAME]
As of February 1, 1996
Page 16
13. This Agreement replaces and supersedes the Agreement
between the Company and the Executive, dated July 1, 1994.
Very truly yours,
LONE STAR INDUSTRIES, INC.
By_____________________________________
Read and Agreed to:
_______________________________
16
<PAGE> 1
Exhibit 10.15
Dated as of July 1, 1994
Pasquale P. Diccianni
24 Mohawk Road
Ramsey, NJ 07446
Dear Mr. Diccianni:
This letter will evidence the agreement of Lone Star Industries, Inc.
(the "Company") with you on the terms specified herein.
1. If, at any time prior to or at the consummation (during the
effectiveness of this Agreement) of a Sale of Trap Rock, as defined below, you
are not, upon your written request given at least 30 days prior to the
consummation of the Sale of Trap Rock, addressed to the Company and the company
(the "Surviving Entity") which thereafter owns the capital stock or assets of
New York Trap Rock Corporation, a Delaware corporation ("Trap Rock"), offered
employment in writing by the Surviving Entity which is Substantially Comparable,
as defined below, to your employment with the Company prior to such Sale of Trap
Rock, or if such Substantially Comparable employment does not continue to be
tendered to you by the Surviving Entity thereafter for a period of at least one
year following the consummation of such Sale of Trap Rock (whether because of a
termination of your employment by the Surviving Entity, for a cause or
otherwise, or because of a change in the terms of such employment so that it is
no longer Substantially Comparable), then you may by written notice to the
<PAGE> 2
Company (and to the Surviving Entity if such notice is given following
consummation of the Sale of Trap Rock) terminate your employment with the
Company and decline employment (or decline further employment) with the
Surviving Company and its affiliates and thereafter you shall be entitled to
severance from the Company in an amount equal to your base salary immediately
prior to the Sale of Trap Rock, for a period of one year (reduced by any period
of your continued employment by the Surviving Entity). Such severance shall be
paid in substantially equal installments on the Company's regularly established
pay periods during the one year period (or the balance of such one year period
following any continued employment by you by the Surviving Entity) following
consummation of the Sale of Trap Rock. In addition, you shall continue to
receive medical insurance and other benefits from the Company during such period
(the "Benefit Period") as you remain unemployed, but in no event shall the
Benefit Period be longer than the period ending one year from the date of
consummation of the Sale of Trap Rock. Benefits pursuant to the immediately
preceding sentence shall be substantially comparable to those you received from
the Company prior to the Sale of Trap Rock. In furtherance and not in limitation
of the second preceding sentence, you shall be deemed to have continued your
employment with the Company at your salary effective prior to the Sale of Trap
Rock during the Benefit Period for purposes of vesting, eligibility and benefit
accrual under any applicable employee benefit plan. Severance pay pursuant to
this Agreement shall be in lieu of severance pay pursuant to any other Lone Star
severance policy.
2
<PAGE> 3
2. For purposes of this Agreement (i) a "Sale of Trap Rock" shall
be deemed to have occurred upon the sale of all or substantially all of the
capital stock or assets of Trap Rock (including any sale by way of merger or
consolidation), but excluding any sale to or merger or consolidation with a
wholly owned subsidiary of the Company; and (ii) "Substantially Comparable"
employment shall mean employment which (a) has an annual salary equivalent or
superior to your annual salary in effect prior to the Sale of Trap Rock; and (b)
is at a location within the same State as your State of employment prior to the
Sale of Trap Rock and no more than 25 miles from your then current employment
location.
3. This Agreement shall not confer upon you any right to
continuance of employment with the Company or Trap Rock, or with any successor
thereof (including the Surviving Entity), or in any way interfere with the right
of the Company, Trap Rock or such successor to terminate such employment.
4. This Agreement constitutes the entire agreement between the
parties and may not be changed or modified except by an agreement in writing
signed by you and the Company. The effectiveness of this Agreement shall
commence as of July 1, 1994 and shall terminate on July 1, 1996.
5. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
3
<PAGE> 4
6. This Agreement shall inure to the benefit of, and be binding
upon, any successor in interest or assign of the Company. This Agreement may not
be assigned by you without the prior written consent of the Company.
7. a. Any dispute relating to this Agreement arising
between you and the Company (or any successor or assign) shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). The arbitration proceedings, including the
rendering of an award, shall take place in Stamford, Connecticut (or such other
location mutually agreed upon by the Company and you), and shall be administered
by the AAA.
b. The arbitral tribunal shall be appointed within 30 days of the
notice of dispute, and shall consist of three arbitrators, one of which shall be
appointed by the Company, one by you, and the third by both you and the Company
jointly; provided, however, that, if you and the Company do not select the third
arbitrator within such 30-day period, such third arbitrator shall be chosen by
the AAA as soon as practicable following notice to the AAA by the parties of
their inability to choose such third arbitrator.
c. Decisions of such arbitral tribunal shall be in accordance
with the laws of the State of Connecticut (excluding the conflicts of law rules
which require the application of any other law). The award of any such arbitral
tribunal shall be final (except as otherwise provided by the laws of the State
of Connecticut and the Federal laws of the United States, to the
4
<PAGE> 5
extent applicable). Judgment upon such award may be entered by the prevailing
party in any state or Federal court sitting in Connecticut or any other court
having jurisdiction thereof, or application may be made by such party to any
such court for judicial acceptance of such award and an order of enforcement.
d. The company shall reimburse you for all costs, including
reasonable attorneys' fees, in connection with any proceeding (whether or not in
arbitration) to obtain or enforce any right or benefit under this Agreement in
which you are the prevailing party.
8. All notices, communications, etc., shall be sent to:
(a) Corporate Secretary
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, CT 06912
(b) Pasquale P. Diccianni
24 Mohawk Road
Ramsey, NJ 07446
Very truly yours,
LONE STAR INDUSTRIES, INC.
By: /s/ David W. Wallace
David W. Wallace
Read and Agreed to:
/s/ P. P. Diccianni
Pasquale P. Diccianni
5
<PAGE> 1
LONE STAR INDUSTRIES, INC. EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Successor Company
For the For the Nine
Year Ended Months Ended
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
Income (loss) before cumulative effect of
changes in accounting principles $ 35,762 $ 29,333
Less: Provisions for preferred dividends(4) -- --
--------- ---------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock 35,762 29,333
Cumulative effect of changes in accounting principles,
net of taxes (3) -- --
Net interest expense reduction (1) 2,334 2,094
--------- ---------
Net income (loss) applicable to common stock $ 38,096 $ 31,427
========= =========
Weighted average shares outstanding during period(5) 11,990 12,000
Options and warrants in excess of 20% limit (1) 2,347 2,132
--------- ---------
Weighted average shares outstanding during period(5) 14,337 14,132
========= =========
Income (loss) per common share:
Income (loss) before cumulative effect of
changes in accounting principles $ 2.66 $ 2.22
Cumulative effect of changes in accounting principles -- --
--------- ---------
Net income (loss) $ 2.66 $ 2.22
========= =========
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Income (loss) before cumulative effect of
changes in accounting principles $ 35,762 $ 29,333
Plus: Net interest expense reduction(1) 1,848 2,008
Less: Provisions for dividends -- --
--------- ---------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock 37,610 31,341
Cumulative effect of changes in accounting principles,
net of taxes -- --
--------- ---------
Net income (loss) applicable to common stock $ 37,610 $ 31,341
========= =========
Common shares outstanding at beginning of period
Weighted average shares outstanding during period 11,990 12,000
Conversion of $13.50 preferred shares
outstanding at beginning of period -- --
Conversion of $4.50 preferred shares
outstanding at beginning of period -- --
Stock options and warrants in excess of 20% limit(1) 2,347 2,132
Common shares issued from treasury stock -- --
--------- ---------
Fully diluted shares outstanding(6) 14,337 14,132
========= =========
Income (loss) per common share assuming full dilution:
Income (loss) before cumulative effect of
changes in accounting principles $ 2.62 $ 2.22
Cumulative effect of changes in accounting principles -- --
--------- ---------
Net income (loss) $ 2.62 $ 2.22
========= =========
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company
For the Three For the Year Ended December 31,
Months Ended ------------------------------------------
March 31, 1994 1993 1992 1991
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
Income (loss) before cumulative effect of
changes in accounting principles ($ 23,118) ($ 35,258) ($ 45,428) ($ 5,547)
Less: Provisions for preferred dividends(4) 1,278 5,112 5,113 5,114
--------- --------- --------- ---------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock (24,396) (40,370) (50,541) (10,661)
Cumulative effect of changes in accounting principles,
net of taxes (3) -- (782) (118,914) --
Net interest expense reduction (1) -- -- -- --
--------- --------- --------- ---------
Net income (loss) applicable to common stock ($ 24,396) ($ 41,152) ($169,455) ($ 10,661)
========= ========= ========= =========
Weighted average shares outstanding during period(5) n/m 16,644 16,641 16,582
Options and warrants in excess of 20% limit (1) -- -- -- --
--------- --------- --------- ---------
Weighted average shares outstanding during period(5) n/m 16,644 16,641 16,582
========= ========= ========= =========
Income (loss) per common share:
Income (loss) before cumulative effect of
changes in accounting principles n/m(2) ($ 2.42) ($ 3.03) ($ 0.64)
Cumulative effect of changes in accounting principles -- (0.05) (7.15) --
--------- --------- --------- ---------
Net income (loss) n/m(2) ($ 2.47) ($ 10.18) ($ 0.64)
========= ========= ========= =========
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Income (loss) before cumulative effect of
changes in accounting principles ($ 23,118) ($ 35,258) ($ 45,428) ($ 5,547)
Plus: Net interest expense reduction(1) -- -- -- --
Less: Provisions for dividends -- -- -- --
--------- --------- --------- ---------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock (23,118) (35,258) (45,428) (5,547)
Cumulative effect of changes in accounting principles,
net of taxes -- (782) (118,914) --
--------- --------- --------- ---------
Net income (loss) applicable to common stock ($ 23,118) ($ 36,040) ($164,342) ($ 5,547)
========= ========= ========= =========
Common shares outstanding at beginning of period n/m 16,644 16,621 16,560
Weighted average shares outstanding during period
Conversion of $13.50 preferred shares
outstanding at beginning of period n/m 955 955 955
Conversion of $4.50 preferred shares
outstanding at beginning of period n/m 45 46 48
Stock options and warrants in excess of 20% limit(1) n/m -- -- --
Common shares issued from treasury stock n/m -- 22 58
--------- --------- --------- ---------
Fully diluted shares outstanding(6) n/m(2) 17,644 17,644 17,621
========= ========= ========= =========
Income (loss) per common share assuming full dilution:
Income (loss) before cumulative effect of
changes in accounting principles n/m ($ 2.00) ($ 2.57) ($ 0.31)
Cumulative effect of changes in accounting principles -- (0.04) (6.74) --
--------- --------- --------- ---------
Net income (loss) n/m(2) ($ 2.04) ($ 9.31) ($ 0.31)
========= ========= ========= =========
</TABLE>
(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 year ended December 31, 1995 and 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 and 1991 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 three years ended December 31, 1993.
<PAGE> 1
EXHIBIT 12
LONE STAR INDUSTRIES, INC.
Statement Re Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
|
Successor Company | Predecessor Company
|
For the For the Nine | For the Three For the Year Ended December 31,
Year Ended Months Ended | Months Ended ---------------------------------
December 31, 1995 December 31, 1994 | March 31, 1994 1993 1992 1991
----------------- ----------------- | -------------- ---- ---- ----
<S> <C> <C> | <C> <C> <C> <C>
|
Continuing Operations: |
|
Earnings Available: |
|
Income (loss) before provision |
for income taxes $53,376 $45,133 | ($3,170) $6,196 ($42,429) $2,948
|
Less: Excess of earnings over |
dividends of less than fifty |
percent owned companies (2,978) (674) | (75) 844 (294) (817)
|
Capitalized interest (262) (168) | (38) (195) (196) (1,310)
------ ------ | ------- ------ ------- -------
50,136 44,291 | (3,283) 6,845 (42,919) 821
====== ====== | ======= ====== ======= =======
|
|
Fixed Charges: |
|
Interest expense (including |
capitalized interest) and |
amortization of debt |
discount and expenses 9,358 6,980 | 271 1,832 2,406 4,612
|
Portion of rent expense |
representative of an |
interest factor 1,636 1,631 | 252 1,963 2,108 2,218
------ ------ | ------- ------ ------- -------
|
Total Fixed Charges 10,994 8,611 | 523 3,795 4,514 6,830
------ ------ | ------- ------ ------- -------
|
Total Earnings Available $61,130 $52,902 | ($2,760) $10,640 ($38,405) $7,651
====== ====== | ======= ====== ======= =======
|
Ratio of Earnings to Fixed Charges 5.56 6.14 | (5.28) 2.80 (8.51) 1.12
====== ====== | ======= ====== ======= =======
|
Earnings deficiency 0 0 | (3,283) 0 (42,919) 0
====== ====== | ======= ====== ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Lone Star Industries, Inc. on Form S-3 (File No. 33-55377) and S-8 (File Nos.
33-55277, 33-55261, and 33-55229) of our report, dated January 31, 1996, 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, 1995 and 1994, and for the year ended December
31, 1995, the nine months ended December 31, 1994, the three months ended March
31, 1994, and the year ended December 31, 1993, which report is included in this
Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
March 20, 1996
(LOGO)
Printed on Recycled Paper
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,726
<SECURITIES> 47,323
<RECEIVABLES> 37,339
<ALLOWANCES> 5,936
<INVENTORY> 55,476
<CURRENT-ASSETS> 142,217
<PP&E> 349,052
<DEPRECIATION> 37,655
<TOTAL-ASSETS> 480,926
<CURRENT-LIABILITIES> 60,567
<BONDS> 78,000
0
0
<COMMON> 12,081
<OTHER-SE> 147,659
<TOTAL-LIABILITY-AND-EQUITY> 480,926
<SALES> 323,008
<TOTAL-REVENUES> 333,776
<CGS> 217,942
<TOTAL-COSTS> 271,304
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,096
<INCOME-PRETAX> 53,376
<INCOME-TAX> 17,614
<INCOME-CONTINUING> 35,762
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,762
<EPS-PRIMARY> 2.66
<EPS-DILUTED> 2.62
</TABLE>
