<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE,
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
COMMISSION FILE NO. 1-12984
CENTEX CONSTRUCTION PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OF INCORPORATION)
75-2520779
(I.R.S. EMPLOYER IDENTIFICATION NO.)
3710 RAWLINS, SUITE 1600, LB 78, DALLAS, TEXAS 75219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214) 559-6514
(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- -------------------------- -----------------
COMMON STOCK NEW YORK STOCK
(PAR VALUE $.01 PER SHARE) EXCHANGE
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
such 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to Form 10-K.____.
Indicate the number of shares of the registrant's classes of common
stock (or other similar equity securities) outstanding as of the close of
business on June 24, 1997:
Common Stock 21,991,514 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Parts I,
II, and III, of this Report:
(a) 1997 Annual Report to Stockholders of Centex Construction
Products, Inc. for the fiscal year ended March 31, 1997.
(b) Proxy statement for the annual meeting of stockholders of Centex
Construction Products, Inc. to be held on July 17, 1997.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I
<S> <C>
Item 1. Business:
General 1
Industry Segment Information 1
Employees 13
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 16
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and Management 17
Item 13. Certain Relationships and Related Transactions 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17
SIGNATURES 19
INDEX TO EXHIBITS 20-21
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Centex Construction Products, Inc. ("CXP" or the "Company") is a
producer of a variety of basic construction products used in residential,
industrial, commercial and infrastructure applications. The Company produces
and sells cement, aggregates, readymix concrete and gypsum wallboard. The
Company is incorporated in the state of Delaware. Prior to April 19, 1994, the
Company was a wholly owned subsidiary of Centex Corporation ("Centex"). On
April 19, 1994, the Company completed an Initial Public Offering ("IPO") of 51%
of its common stock. As a result of the IPO, Centex's ownership of the Company
was reduced to 49%. Unless the context indicates to the contrary, the terms
"CXP" and the "Company" as used herein, should be understood to include
subsidiaries of CXP and predecessor corporations. The Company's common stock,
par value $0.01 per share ("CXP Common Stock"), began trading publicly on April
19, 1994. As of June 24, 1997, 21,991,514 shares of CXP Common Stock, which
are traded on the New York Stock Exchange, were outstanding.
As previously disclosed, CXP's Board of Directors authorized CXP
management to repurchase up to two million shares of CXP Common Stock as
management determines advisable. As a result of repurchases during fiscal year
1997 by CXP of its common stock from the public and recent purchases of CXP
Common Stock by Centex, Centex now owns approximately 54.4% of the outstanding
shares of CXP Common Stock.
CXP's involvement in the construction products business dates to 1963,
when it began construction of its first cement plant. Since that time, the
Company's operations have been expanded to include additional cement production
and distribution facilities and the production, distribution and sale of
aggregates, readymix concrete and gypsum wallboard.
The Company operates four quarrying and manufacturing facilities and a
network of 12 terminals for the production and distribution of portland and
masonry cement. These facilities are primarily in Texas, northern Illinois,
the Rocky Mountains, Nevada and northern California. The Company is also
vertically integrated, to a limited extent, with readymix concrete operations
in the Austin, Texas area and a portion of northern California. The Company
extracts and produces aggregates from its deposits near Sacramento, California
(the largest single permitted sand and gravel deposit in northern California)
and Austin, Texas. The Company operates a quarry located in close proximity to
two of its gypsum wallboard manufacturing facilities which are located in
Albuquerque and nearby Bernalillo, New Mexico. On February 26, 1997 the
Company purchased the equity interest of a company that owned a gypsum quarry,
a gypsum wallboard plant and an associated cogeneration power facility all
located at Gypsum (near Vail), Colorado. The Company's wallboard production is
shipped by rail and truck to markets throughout the continental United States.
The Company's corporate office is in Dallas, Texas.
INDUSTRY SEGMENT INFORMATION
The following table presents revenues and earnings before interest
expense and income taxes contributed by each of the Company's industry segments
during the periods indicated. Identifiable assets, depreciation, depletion and
amortization and capital expenditures by segment are presented in Note E of the
Notes to the Consolidated Financial Statements of CXP on page 24 of CXP's
Annual Report to Stockholders for the fiscal year ended March 31, 1997 (the
"1997 CXP Annual Report").
1
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<TABLE>
<CAPTION>
For The Fiscal Years Ended March 31,
----------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(In Millions)
<S> <C> <C>
Contribution to Revenues:
Cement $133.3 $125.7 $109.9 $101.7 $ 85.6
Gypsum Wallboard 72.2 58.3 51.7 32.8 21.4
Concrete and Aggregates 36.8 39.9 35.2 35.1 30.0
Other, Net 1.8 2.8 1.6 1.2 2.8
------ ------ ------ ------ ------
244.1 226.7 198.4 170.8 139.8
Less Intersegment Sales (4.7) (4.1) (4.1) (4.0) (3.3)
------ ------ ------ ------ ------
Total Net Revenues $239.4 $222.6 $194.3 $166.8 $136.5
====== ====== ====== ====== ======
Contribution to Operating
Earnings (Loss):
Cement $ 39.8 $ 35.3 $ 26.0 $ 15.9 $ 12.4
Gypsum Wallboard 20.5 11.9 7.2 (0.1) (4.7)
Concrete and Aggregates 4.8 5.6 2.6 1.7 (3.2)
Other, Net 1.8 2.8 1.6 1.2 2.8
------ ------ ------ ------ ------
66.9 55.6 37.4 18.7 7.3
Corporate Overhead (3.9) (2.5) (2.3) (1.8) (2.0)
------ ------ ------ ------ ------
Total Earnings Before
Interest and Income Taxes $ 63.0 $ 53.1 $ 35.1 $ 16.9 $ 5.3
====== ====== ====== ====== ======
</TABLE>
Revenues for the past three years from each of the Company's industry
segments, expressed as a percentage of total consolidated net revenues, were as
follows:
<TABLE>
<CAPTION>
Percentage of Total
Consolidated Net Revenues
--------------------------------------------
Segment: 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cement 53.8% 54.8% 54.5%
Gypsum Wallboard 30.2 26.2 26.6
Concrete/Aggregates:
Readymix Concrete 11.8 12.9 12.9
Aggregates 3.4 4.8 5.2
----- ----- ------
15.2 17.7 18.1
Other 0.8 1.3 0.8
----- ----- ------
Total Consolidated Net Revenues 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
CEMENT OPERATIONS
Company Operations. The Company's cement production facilities
are located in or near Buda, Texas; LaSalle, Illinois; Laramie, Wyoming; and
Fernley, Nevada. The Laramie, Wyoming and Fernley, Nevada facilities are
wholly-owned. The Buda, Texas plant is owned by Texas-Lehigh Cement Company, a
joint venture owned 50% by the Company and 50% by Lehigh Portland Cement
Company, a subsidiary of Heidelberger Zement AG. The LaSalle, Illinois plant is
owned by Illinois Cement Company, a joint venture owned 50% by CXP and 50% by
RAAM Limited Partnership, a partnership controlled by members of the Pritzker
family. The Company receives a management fee of $150,000 per year to manage
2
<PAGE> 5
\the Illinois joint venture. The Company's Laramie, Wyoming plant operates
under the name of Mountain Cement Company and the Fernley, Nevada plant under
the name of Nevada Cement Company.
Cement is the basic binding agent for concrete, a primary construction
material. The manufacture of portland cement primarily involves the
extracting, crushing, grinding and blending of limestone and other raw
materials into a chemically proportioned mixture which is then burned in a
rotary kiln at extremely high temperatures to produce an intermediate product
known as clinker. The clinker is cooled and interground with a small amount of
gypsum to the consistency of face powder to produce finished 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 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. The dry process,
a more fuel efficient technology, excludes the addition of water into the
process. Dry process plants are either pre-heater plants, in which hot air is
recycled from the rotary kiln to pre-heat materials, or are precalciner plants,
in which separate burners are added to accomplish a significant portion of the
chemical reaction prior to the introduction of the raw materials into the kiln.
As fuel is a major component in the cost of producing clinker, most
modern cement plants, including all four of the plants operated by the Company,
incorporate the more fuel efficient dry process technology. At present,
approximately 84% of the Company's clinker capacity is from preheater or
preheater/precalciner kilns, compared to approximately one-half of U.S. cement
capacity manufactured from such kilns. Cement production is capital-intensive
and involves high fixed costs. As a result, plant capacity utilization levels
are an important measure of a plant's profitability, since incremental sales
volumes tend to generate increasing profit margins.
<TABLE>
<CAPTION>
Rated Annual Estimated
Clinker Minimum
Capacity Number Limestone
(Thousand Manufacturing of Dedication Reserves
Location short tons)(1) Process Kilns Date (Years)
- -------- ----------- ------------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Buda, Texas (2) 1,080 Dry - 4 Stage 1 1978 60
Preheater
Flash Calciner 1983
LaSalle, Illinois (2) 530 Dry - 4 Stage 1 1974 60
Preheater
Laramie, Wyoming 630 Dry - 2 Stage 1 1988 40
Preheater
Dry - Long Dry 1 1996 (4)
Kiln
Fernley, Nevada 480 Dry - Long Dry 1 1964 20
Kiln
Dry - 1 Stage 1 1969
Preheater
-----
Total (3) 2,720
=====
</TABLE>
- -------------------------------------
(1) One short ton equals 2,000 pounds.
(2) The amounts shown represent 100% of plant capacity and production.
These plants are owned by joint ventures in which the Company has a
50% interest.
(3) Generally, a plant's cement grinding production capacity is greater
than its clinker production capacity.
(4) Commenced production during the fourth quarter of the fiscal year
ended March 31, 1996.
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<PAGE> 6
The Company's net cement production, excluding the joint venture
partners' 50% interest in the Buda and LaSalle plants, totaled 1.9 million tons
both in fiscal 1997 and fiscal 1996. Total net cement sales were 2.1 million
tons both in fiscal 1997 and in fiscal 1996, as all four cement plants sold all
of the product they produced. During the past two years, the Company purchased
minimal amounts of cement from others to be resold. Purchased cement sales
typically occur at lower gross profit margins. In fiscal 1997, 8.8% of the
cement sold by the Company was acquired from outside sources, the same
percentage as in fiscal 1996.
Raw Materials and Fuel Supplies. The principal raw material used in
the production of portland cement is calcium carbonate in the form of
limestone. Limestone is obtained by mining and extracting from quarries owned
or leased by the Company (including its joint ventures) and located in close
proximity to its plants. The Company believes that the estimated recoverable
limestone reserves owned or leased by it (or its joint ventures) will permit
each of its plants to operate at its present production capacity for at least
40 years or, in the case of the Company's Nevada plant, at least 20 years. The
Company expects that additional limestone reserves for its Nevada plant will be
available when needed on an economically feasible basis, although they may be
more distant and more expensive to transport than the Company's existing
reserves. Other raw materials used in substantially smaller quantities than
limestone are sand, clay, iron ore and gypsum, which are either obtained from
Company-owned or leased reserves or are purchased from outside suppliers.
The Company's cement plants use coal as their primary fuel, but are
equipped to burn natural gas as an alternative. The Company has not used
hazardous waste-derived fuels in its plants. The Company's LaSalle, Illinois
and Buda, Texas plants have been permitted to burn, and are burning, scrap
tires as a partial fuel alternative. Electric power is also a major cost
component in the manufacture of cement. The Company has sought to diminish
overall power costs by adopting interruptible power supply agreements which may
expose the Company to some production interruptions during periods of power
curtailment.
Marketing and Distribution. Demand for cement is highly cyclical and
derived from the demand for concrete products which, in turn, is derived from
demand for construction. According to estimates of the Portland Cement
Association (the "PCA"), the industry's primary trade organization, the three
construction sectors that are the major components of cement consumption are
(i) public works construction, including public buildings, (ii) commercial and
industrial construction and (iii) residential construction, which comprised
54%, 18% and 22%, respectively, of U.S. cement consumption in 1995, the most
recent period for which such data are available. Construction spending and
cement consumption have historically fluctuated widely. The construction
sector is affected by the general condition of the economy and can exhibit
substantial variations across the country as a result of the differing
structures of the regional economies. Regional cement markets experience peaks
and valleys correlated with regional construction cycles. Also, demand for
cement is seasonal, particularly in northern states where inclement weather
affects construction activity. While the impact on the Company of construction
cycles in individual regions may be mitigated to some degree by the geographic
diversification of the Company, profitability is very sensitive to shifts in
the balance between supply and demand. As a consequence, the Company's cement
segment sales and earnings follow a similar cyclical pattern.
The following table sets forth certain information regarding the
market area served by each of the Company's cement plants and the location of
the Company's distribution terminals in each area. The Company has a total of
12 cement storage and distribution terminals, which are strategically located
to extend the marketing areas of its plants.
4
<PAGE> 7
<TABLE>
<CAPTION>
Plant Location Principal Market Area Distribution Terminals
-------------- --------------------- ----------------------
<S> <C>
Buda, Texas Texas and western Louisiana Corpus Christi, TX
Houston, TX
Orange, TX
Roanoke (D/FW), TX
Waco, TX
LaSalle, Illinois Illinois and southern Wisconsin Hartland, WI
Laramie, Wyoming Wyoming, Utah, southern Idaho, Rock Springs, WY
northern Colorado, western Salt Lake City, UT
Nebraska and eastern Nevada Bliss, ID
Denver, CO
North Platte, NE
Fernley, Nevada Nevada (except Las Vegas) and Sacramento, CA
northern California
</TABLE>
Cement is distributed directly to customers principally by common
carriers, customer pick-up and, to a lesser extent, trucks owned by the
Company. The Company transports cement principally by rail to its storage and
distribution terminals. Cement is distributed primarily in bulk, but also in
paper bags. No single customer accounted for as much as 10% of the Company's
cement sales during fiscal 1997.
Sales are made on the basis of competitive prices in each market area.
As is customary in the industry, the Company does not typically enter into
long-term sales contracts, except with respect to major construction projects.
Competition. The cement industry is extremely competitive as a result
of multiple domestic suppliers and, beginning in the 1980s, the importation of
foreign cement through various terminal operations. Despite price inelasticity
of overall cement demand, competition among producers and suppliers of cement
is based primarily on price, with consistency of quality and service to
customers being important but of lesser significance. Price competition among
individual producers and suppliers of cement within a marketing area is intense
because of the fungible nature of the product. The U.S. cement industry is
fragmented into regional markets rather than a single national market. Because
of cement's low value-to-weight ratio, the relative cost of transporting cement
is high and limits the geographic area in which each company can market its
products economically. No one cement company has a distribution of plants
extensive enough to serve all markets. The number of principal competitors of
the Company's Texas, Illinois, Wyoming, and Nevada plants are seven, eight,
four and six, respectively, operating in these regional markets.
The United States cement industry comprises approximately 50 companies
which own 107 gray cement plants with approximately 83.0 million tons of
clinker manufacturing capacity (approximately 87.1 million tons of cement
manufacturing capacity assuming a 105% conversion ratio). The PCA estimates
that cement demand totaled approximately 102 million tons in 1996, with
approximately 15 million tons of such demand being satisfied by imported
cement. Based on the level of demand, the Company estimates that the cement
industry as a whole operated in excess of 95% of its aggregate manufacturing
capacity during 1996. During 1996, several companies announced or began
capital projects to enhance the productivity and incrementally expand the
capacity of existing cement manufacturing facilities.
Cement imports into the United States occur primarily to supplement
domestic cement production during peak demand periods. Throughout most of the
1980's, however, competition from low-priced imported cement in most coastal
and border areas of the U.S. grew significantly, which included the
5
<PAGE> 8
company's Fernley, Nevada and Buda, Texas plant's markets. According to the
PCA, the 1980's was a period of relatively high cement imports. This high
level of imports depressed cement prices during a period of strong U.S. cement
demand. As a result of antidumping petitions filed by a group of domestic
cement producers, significant antidumping duty cash deposit requirements have
been imposed on cement imported from Mexico since 1990 and from Japan since
1991. Venezuela signed a suspension agreement requiring it not to export to
the U.S. at dumped prices. The existing antidumping orders and suspension
agreement have contributed substantially to an improvement in the condition of
the U.S. cement industry.
In the case of Mexico, margins to calculate cash deposit rates and the
resulting antidumping duties are subject to annual review by the Department of
Commerce and appeal to the U.S. Court of International Trade and the U.S. Court
of Appeals for the Federal Circuit or to binational dispute panels under the
North American Free Trade Agreement ("NAFTA").
Pursuant to the Uruguay Round Agreement, the General Agreement on
Tariffs and Trade ("GATT") and the GATT Antidumping Code were superseded on
January 1, 1995, by a new GATT, which will be administered by the newly created
World Trade Organization. The antidumping orders outstanding against cement
and clinker from Mexico and Japan and the suspension agreement on cement and
clinker from Venezuela will remain in force. New legislation passed by
Congress in December 1994, however, requires the initiation of "sunset" reviews
of the antidumping orders against Mexico and Japan and the suspension agreement
with Venezuela prior to January 2000 to determine whether these antidumping
orders and the suspension agreement should terminate or remain in effect.
NAFTA thus far has had no material adverse effect on the antidumping
duty cash deposit rates imposed on gray portland cement and clinker imported
from Mexico. The Company does not believe that NAFTA will have a material,
adverse effect on the foregoing antidumping duty cash deposit rates in the near
future. A substantial reduction or elimination of the existing antidumping
duties as a result of GATT, NAFTA, or any other reason could adversely affect
the Company's results of operations.
Capital Expenditures. Capital expenditures during fiscal 1997,
amounted to $2.9 million for the cement segment compared with $13.1 million and
$3.7 million in fiscal 1996 and 1995, respectively. Capital outlays in fiscal
1998, have been budgeted at approximately $4.2 million. Approximately 9% of
the budgeted fiscal 1998 total is related to compliance with environmental
regulations. Approximately $10.5 million of fiscal 1996 total was for the
reactivation of the second kiln at the Laramie plant.
Environmental Matters. The cement manufacturing industry, including
the operations of the Company, is regulated by federal, state and local laws
and regulations pertaining to several areas including human health and safety
and environmental compliance. The Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986, as well as analogous laws in
certain states, create joint and several liability for the cost of cleaning up
or correcting releases to the environment of designated hazardous substances.
Among those who may be held jointly and severally liable are those who
generated the waste, those who arranged for disposal, those who owned or
operated the disposal site or facility at the time of disposal, and current
owners. In general, this liability is imposed in a series of governmental
proceedings initiated by the identification of a site for initial listing as a
"Superfund site" on the National Priorities List or a similar state list and
the identification of potentially responsible parties who may be liable for
cleanup costs. None of the Company's sites are listed as a "Superfund site."
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<PAGE> 9
The Company's operations are also potentially affected by the Resource
Conservation and Recovery Act ("RCRA"), which is the primary federal statute
governing the management of solid waste and which includes stringent regulation
of solid waste that is considered hazardous waste. The Company's operations
generate nonhazardous solid waste which may include cement kiln dust ("CKD").
Because of a RCRA exemption, known as the Bevill Amendment, CKD generated in
the Company's operations is currently not considered a hazardous waste under
RCRA, pending completion of a study and recommendations to Congress by the U.S.
Environmental Protection Agency ("U.S. EPA"). Nevertheless, such CKD is still
considered a solid waste and is regulated primarily under state environmental
laws and regulations. The U.S. EPA completed its review of CKD and has decided
to promulgate regulations to govern the handling and disposal of CKD which will
supersede the Bevill Amendment. The Bevill Amendment will remain in effect
until those regulations are in place.
In the past, the Company collected and stored CKD on-site at its
cement plants. The Company continues to store such CKD at its Illinois, Nevada
and Wyoming cement plants and at a former plant site in Corpus Christi, Texas,
which is no longer in operation. The Company's cement kilns utilize coal,
natural gas, minimal amounts of self-generated waste oil, and scrap tires in
the Illinois and Texas plants, as fuel. Currently, the Company recycles
substantially all CKD related to present operations at all of its cement
facilities. When the U.S. EPA removes the CKD exemption and develops
particular CKD management standards in the future, the Company might be
required to incur significant costs in connection with its CKD. CKD that comes
in contact with water might produce a leachate with an alkalinity high enough
to be classified as hazardous and might also leach certain hazardous trace
metals therein.
In April 1992, one of the Company's subsidiaries, Nevada Cement
Company ("NCC"), was identified as a potentially responsible party under CERCLA
by the U.S. EPA at the North American Environmental, Inc. storage facility in
Clearfield, Utah ("North American Environmental Site") because of allegations
that NCC arranged for the disposal of hazardous substances at that site. The
Company has records indicating that all of the hazardous substances originating
from NCC that were temporarily stored at the North American Environmental Site
were removed from the storage facility and destroyed in accordance with
applicable laws. The Company is aware of no current estimates of the total
remediation costs or the total volume of waste associated with this site. The
U.S. EPA has also identified the NCC cement plant site in Fernley, Nevada, as a
potential hazardous waste site and entered it into the Comprehensive
Environmental Response, Compensation, and Liability Information System
("CERCLIS") data base in January 1992. U.S. EPA performed an assessment in
1992, under CERCLA at the NCC plant because of concerns over an unlined
disposal pond and a citizen complaint about disposal of wastes. NCC cleaned up
the contaminated soil in the vicinity of this pond under the jurisdiction of
the Nevada Department of Conservation and Natural Resources, Division of
Environmental Protection at an immaterial cost to NCC. There is no assurance
that the Company will not incur material liability in connection with the North
American Environmental Site or the contamination concerns at the Fernley,
Nevada plant site.
Another RCRA concern in the cement industry involves the historical
disposal of refractory brick containing chromium. Such refractory brick was
formerly widely used in the cement industry to line cement kilns. The Company
currently crushes spent refractory brick and uses it as raw feed, but such
brick does not contain chromium.
The Clean Air Act Amendments of 1990 (the "Amendments") provided
comprehensive federal regulation of all sources of air pollution and
established a new federal operating permit and fee program for virtually all
manufacturing operations. The Amendments will likely result in increased
capital and operational expenses for the Company in the future, the amounts of
which are not presently determinable. The Company's U.S. operations have
submitted detailed permit applications and will pay increased recurring permit
fees. In addition, the U.S. EPA is developing regulations for toxic air
pollutants under these Amendments for a broad spectrum of industrial sectors,
including portland cement manufacturing.
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<PAGE> 10
The U.S. EPA has indicated that the new maximum available control technology
standards could require significant reduction of air pollutants below existing
levels prevalent in the industry. Management has no reason to believe,
however, that these new standards would place the Company at a competitive
disadvantage.
The Federal Water Pollution Control Act, commonly known as the Clean
Water Act ("Clean Water Act"), provides comprehensive federal regulation of all
sources of water pollution. In September 1992, the Company filed a number of
applications under the Clean Water Act for National Pollutant Discharge
Elimination System ("NPDES") stormwater permits.
Management believes that the Company's current procedures and
practices in its operations, including those for handling and managing
materials, are consistent with industry standards. Nevertheless, because of
the complexity of operations and compliance with environmental laws, there can
be no assurance that past or future operations will not result in operational
errors, violations, remediation or other liabilities, or claims. Moreover, the
Company cannot predict what environmental laws will be enacted or adopted in
the future or how such future environmental laws will be administered or
interpreted. Compliance with more stringent environmental laws, as well as
potentially more vigorous enforcement policies of regulatory agencies or
stricter interpretation of existing environmental laws, could necessitate
significant capital outlays.
With respect to some of the Company's quarries used for the extraction
of raw materials for its cement and gypsum operations and for the mining of
aggregates for its aggregate operations, the Company is obligated under certain
of its permits and certain regulations to engage in reclamation of land within
the quarries upon completion of extraction and mining. The Company generally
accrues the reclamation costs for a specific quarry over the life of the
quarry.
GYPSUM WALLBOARD OPERATIONS
Company Operations. The Company owns and operates three gypsum
wallboard manufacturing facilities, two located in Albuquerque and nearby
Bernalillo, New Mexico and one located at Gypsum, Colorado. The Company mines
and extracts gypsum and then manufactures gypsum wallboard by first pulverizing
quarried gypsum, then placing it in a calciner for conversion into plaster.
The plaster is mixed with various chemicals and water to produce a mixture
known as slurry, which is inserted between two continuous sheets of recycled
paperboard on a high-speed production line and allowed to harden. The
resulting sheets of gypsum wallboard are then cut to appropriate lengths, dried
and bundled for sale.
The Albuquerque plant was acquired in 1985, and was operated until
early 1991. Following the start-up of the new Bernalillo plant in the spring
of 1990, the Company elected to discontinue operations at the Albuquerque plant
due to weak market conditions. Operations at the Albuquerque plant were
recommenced in May 1993, due to improvements in wallboard demand and prices.
The Gypsum, Colorado gypsum wallboard plant and accompanying electric power
cogeneration facility were purchased on February 26, 1997. The plant
originally commenced production in early 1990 and had been operated by an
independent producer until the acquisition by CXP.
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<PAGE> 11
The following table sets forth certain information regarding these plants:
<TABLE>
<CAPTION>
Rated Annual Estimated Minimum
Wallboard Capacity Gypsum Rock
Location (MMSF)(1) Reserves (years)
-------- ------------------ ------------------
<S> <C> <C>
Albuquerque, New Mexico 250 100 (2)
Bernalillo, New Mexico 420 100 (2)
Gypsum, Colorado 400 20 (3)
------
Total 1,070
======
</TABLE>
------------------------------------------
(1) Million Square Feet ("MMSF")
(2) The same reserves serve both plants.
(3) Proven reserves only. See Raw Materials and Fuel
Supplies section for additional reserves.
The Company's net wallboard production totaled 715 MMSF in fiscal
1997, and 672 MMSF in fiscal 1996. Total wallboard sales were 726 MMSF in
fiscal 1997, and 661 MMSF in fiscal 1996.
Raw Materials and Fuel Supplies. The Company mines and extracts
gypsum rock, the principal raw material used in the manufacture of wallboard,
from mines and quarries owned, leased or subject to claims owned by the Company
and located near its plants. The New Mexico and Colorado mines and quarries
are estimated to contain approximately 60 million tons and 7 million tons of
proven and probable gypsum reserves, respectively. Based on its current
production capacity, the Company estimates that the life of its existing gypsum
rock reserves is approximately 100 years and 20 years, respectively.
The Colorado plant controls 99 unpatented placer mining claims on
1,980 acres of land under the jurisdiction of the U.S. Bureau of Land
Management. The land, which is adjacent to the present quarry, has not been
drilled and therefore, the reserves cannot be classified as proven or probable.
Management believes that these claims contain substantial quantities of gypsum
rock.
Paper used in manufacturing gypsum wallboard is purchased by the
Company from third party suppliers. Approximately 40% of the Company's
requirements are under contract for a two year period with an annual automatic
renewal. The remainder of the paper requirements are purchased on the open
market from various suppliers. The Company does not believe that the loss of a
supplier would have a material, adverse effect on its business.
The Company's wallboard manufacturing operations use large quantities
of natural gas and electrical power. Substantially all of the Company's
natural gas requirements for its wallboard plants are currently provided by two
gas producers under gas supply agreements expiring in May, 1998 for both the
New Mexico and Colorado plants. If the agreements are not renewed, the Company
expects to obtain its gas supplies from other local gas producers at
competitive prices. Electrical power is supplied to the Company's New Mexico
plants at standard industrial rates by a local utility. The Company's
Albuquerque plant adopted an interruptible power supply agreement which may
expose it to some production interruptions during periods of power curtailment.
The Gypsum, Colorado plants power is supplied by the cogeneration power
facility acquired along with the gypsum wallboard plant in February, 1997.
Currently, the cogeneration power facility supplies only the power needs of the
gypsum wallboard plant and does not sell any power to third parties.
Marketing and Distribution. The principal sources of demand for
gypsum wallboard are (i) residential construction, (ii) repair and remodeling
and (iii) non-residential construction, which the Company estimates accounted
for approximately 45%, 37% and 18%, respectively, of historical industry
9
<PAGE> 12
sales. While the gypsum wallboard industry remains highly cyclical, recent
growth in the repair and remodeling segment, together with certain trends in
new residential construction activity, have partially mitigated the impact of
fluctuations in overall levels of new construction.
Although the percentage of wallboard shipments accounted for by new
residential construction has declined in recent years, new residential
construction remains the largest single source of gypsum wallboard demand. In
recent years, demand has been favorably impacted by a shift toward more single-
family detached housing within the new residential construction segment and by
an increase in the size of the average single family detached home.
The size of the total residential repair and remodel market grew to a
record $116 billion in 1995, from $46 billion in 1980. Although data on
commercial repair and remodel activity is not readily available, the Company
believes that this segment has also grown significantly in recent years. The
growth of the repair and remodeling market is primarily due to the aging of
housing stock, remodeling of existing buildings and tenant turnover in
commercial space. In addition, repair and remodeling activity has benefitted
from the fact that it has increasingly come to be viewed by the homeowner,
particularly in recessionary periods, as a low cost alternative to purchasing a
new house.
The Company markets wallboard to numerous building materials dealers,
wallboard specialty distributors, home center chains and other customers
located throughout the United States. No single customer accounted for as much
as 10% of the Company's total gypsum wallboard sales during fiscal 1997.
During fiscal 1997, the principal states in which the Company had
wallboard sales were Florida, Texas, New Mexico, Colorado and Illinois. Prior
to fiscal 1992, most of the Company's wallboard sales were made in the western
United States, with significant sales in California. However, due to the sharp
decline in construction activity in California during the early 1990s, the
Company has focused the distribution of its wallboard in various other areas of
the country.
Although wallboard is distributed principally in regional markets, the
Company and certain other producers have the ability to ship wallboard by rail
outside their usual regional distribution area to take advantage of these other
regional increases in demand. The Company owns or leases 167 railcars for
transporting wallboard. In addition, in order to facilitate distribution in
certain strategic areas, the Company maintains a distribution center in
Albuquerque, New Mexico and four reload yards in Florida, Alabama and
Illinois. The Company's rail distribution capabilities permit it to reach
customers in all states west of the Mississippi River and many eastern states.
During fiscal 1997, approximately 38% of the Company's sales volume of gypsum
wallboard was transported by rail.
Competition. The gypsum wallboard industry is highly competitive.
There are nine principal manufacturers of wallboard operating a total of 73
plants. The Company estimates that the three largest producers, including USG
Corporation, National Gypsum Company, and Georgia-Pacific Corporation, account
for over 80% of wallboard sales in the United States. In 1996 and early 1997,
the industry experienced some consolidation, the largest being Georgia-Pacific
Corporation's purchase of the gypsum business of Domtar, Inc. In general, a
number of the Company's competitors in the wallboard industry have greater
financial, manufacturing, marketing and distribution resources than the
Company. Furthermore, certain of its competitors have vertically integrated
operations consisting of wallboard manufacturing plants, paper mills and
distribution centers, which may provide them with certain cost advantages over
the Company.
Competition among wallboard producers is primarily on a regional
basis, with local producers benefiting from lower transportation costs, and to
a lesser extent on a national basis. Because of the
10
<PAGE> 13
commodity nature of the product, competition is based principally on price and,
to a lesser extent, on product quality and customer service.
Total United States wallboard production capacity is estimated
currently at 26.0 billion square feet per year. The Gypsum Association, an
industry trade group, estimates that total 1996 wallboard shipments were
approximately 25.0 billion square feet, resulting in industry capacity
utilization of over 95%. Imports are not a major factor in the wallboard
industry.
Capital Expenditures. Capital expenditures during fiscal 1997
amounted to $52,758,000 (including $52 million for the Eagle acquisition) for
the wallboard segment compared with $889,000 in fiscal year 1996, and $279,000
for fiscal year 1995. Capital outlays in fiscal 1998 have been budgeted at
approximately $6.2 million with no expenditures related to compliance with
environmental regulation.
Environmental Matters. The gypsum industry is subject to
environmental regulations similar to those governing the Company's cement
operations. None of the Company's gypsum operations are presently the subject
of any local, state or federal environmental proceedings or inquiries. The
Company does not and has not used asbestos in any of its gypsum products.
In the fiscal year ended March 31, 1996, the Company's gypsum
subsidiary entered into a consent order with the U.S. EPA to settle claims of
the U.S. EPA against potentially responsible parties with respect to a waste
disposal facility in Broomfield, Colorado. The Company's subsidiary contracted
with the facility for the disposal of a small amount of liquid waste. The
facility was eventually closed by governmental agencies. The Company's
subsidiary settled this matter by entering into the consent order and paying
approximately $50 into a settlement fund.
CONCRETE AND AGGREGATES OPERATIONS
Company Operations. Readymix concrete, a versatile building material
used in almost all construction, involves the mixing of cement, sand, gravel,
crushed stone and water to form concrete which is then marketed and distributed
to numerous construction contractors. Concrete is produced in batch plants and
transported to the customer's job site in mixer trucks.
The construction aggregates business consists of the mining,
extraction, production and sale of crushed stone, sand, gravel and lightweight
aggregates such as expanded clays and shales. Construction aggregates of
suitable characteristics are employed in virtually all types of construction,
including the production of portland and asphaltic cement concrete mixes and in
highway construction and maintenance.
As in the cement industry, the demand for readymix concrete and
aggregates largely depends on regional levels of construction activity. The
construction sector is subject to the vagaries of weather conditions, the
availability of financing at reasonable rates and overall fluctuations in
regional economies, and therefore tends to be cyclical. Both the concrete and
aggregates industries are highly fragmented, with numerous participants
operating in local markets. Because the cost of transporting concrete and
aggregates is very high relative to product values, producers of concrete and
aggregates typically can market their products only in areas within 100 miles
of their production facilities. Barriers to entry in each industry are low,
except with respect to environmental permitting requirements for new aggregate
production facilities and zoning of land to permit mining and extraction of
aggregates.
The Company produces and distributes readymix concrete north of
Sacramento, California and in Austin, Texas. The following table sets forth
certain information regarding these operations:
11
<PAGE> 14
<TABLE>
<CAPTION>
Location Number of Plants Number of Trucks
-------- ---------------- ----------------
<S> <C> <C>
Northern California 5 35
Austin, Texas 5 57
------ ------
Total 10 92
====== ======
</TABLE>
The Company's production of readymix concrete reached a ten-year peak
of 992,000 cubic yards in 1986. Since such date, production has declined in
response to decreased demand in the northern California and Austin markets.
The Company believes that it has the capacity to significantly increase its
concrete production from existing levels by adding to its fleet of trucks in
the event that market conditions improve.
The Company conducts aggregate operations near its concrete facilities
in northern California and Austin, Texas. During fiscal 1996, the Company sold
its aggregates-only, marginally profitable, non-strategic production facility
near Fort Worth, Texas. Aggregates are obtained principally by mining and
extracting from quarries owned or leased by the Company and located in close
proximity to its plants. The following table sets forth certain information
regarding these operations.
<TABLE>
<CAPTION>
Estimated Annual
Production Capacity Estimated Minimum
Location Types of Aggregates (Thousand tons)(1) Reserves (Years)
- -------- ------------------- ----------------- -----------------
<S> <C> <C> <C>
Northern California Sand and Gravel 1,285 100
Austin, Texas Limestone 1,020 70
-----
Total 2,305
=====
</TABLE>
- ------------------------------------------------------
(1) Based on single-shift operation.
The Company's net readymix concrete production was 603,000 cubic yards
in fiscal 1997, and 629,000 cubic yards in fiscal 1996. Total net aggregate
sales were 2.1 million tons in fiscal 1997, and 2.8 million tons in fiscal
1996.
Raw Materials. The Company supplies all of its cement requirements
for its Austin and northern California concrete operations. The Company
supplies approximately 38% and 33%, respectively, of its aggregates
requirements for its Austin and northern California concrete operations. The
Company obtains the balance of its aggregates requirements from multiple
sources in each of these markets.
The Company is engaged in a dispute with two federal government
agencies over title to a portion of its principal aggregates deposit in
northern California. Of the property's 10,000 acres and estimated two billion
tons of aggregates, approximately 6,500 acres containing reserves which the
Company estimates at over one billion tons are not in dispute. See "Item 3,
Legal Proceedings."
Marketing and Distribution. The Company sells readymix concrete to
numerous contractors and other customers in each plant's marketing area. The
Company's batch plants in Austin and northern California are strategically
located to serve each marketing area. Concrete is delivered from batch plants
by trucks owned by the Company.
The Company sells aggregates to building contractors and other
customers engaged in a wide variety of construction activities. Aggregates are
delivered from the Company's aggregate plants by common carriers, customer
pick-up and, to a lesser extent, trucks owned by the Company. No single
customer accounted for as much as 10% of the Company's concrete and aggregates
sales during fiscal 1997.
12
<PAGE> 15
During the past several years, the Company has been engaged in
negotiations with government officials to obtain the rights to build a rail
line across Beale Air Force Base that would permit the Company to transport
aggregates from its principal deposit north of Sacramento, California to the
San Francisco Bay Area. The north Bay Area, in particular, is expected to
experience a shortage of sand and gravel within the next ten years. In early
1997, the Company received a letter from certain representatives of the
United States Department of the Air Force ("USAF") indicating that the USAF
intended to terminate lease negotiations for the proposed right-of-way for the
rail line due to the changing mission of Beale Air Force Base. The Company is
attempting to re-commence negotiations with the USAF to conclude a lease
agreement for the right-of-way across Beale Air Force Base. However, in light
of the letter from the USAF, there can be no assurances that the Company will
execute a lease with the USAF to construct the rail line across Beale Air Force
Base or, even if it does so, whether the rail line will ever be constructed.
Competition. Competition among concrete producers within the
Company's northern California and Austin markets is strong. The Company's
competitors include five small and four large concrete producers in the
northern California and Austin markets, respectively.
Both concrete and aggregates are commodity products. Each type of
aggregate is sold in competition with other types of aggregates and in
competition with other producers of the same type of aggregates. Accordingly,
competition in both the concrete and aggregates businesses is based principally
on price and, to a lesser extent, on product quality and customer service.
Environmental matters. The concrete and aggregates industry is
subject to environmental regulations similar to those governing the Company's
cement operations. None of the Company's concrete or aggregates operations are
presently the subject of any local, state or federal environmental proceeding
or inquiries.
EMPLOYEES
The Company and its subsidiaries had approximately 1,053 employees at
March 31, 1997. Approximately 22% of the employees are represented by
collective bargaining units.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this annual report and Form 10-K
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are based on current expectations, estimates
and projections concerning the general state of the economy and the industry
and market conditions in certain geographic locations in which the Company
operates. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which are difficult to
predict. Therefore, actual results and outcomes may differ materially from
what is expressed or forecasted in such forward-looking statements. The
Company undertakes no obligation to update publicly any forward-looking
statements as a result of new information, future events or other factors.
The Company's business is cyclical and seasonal, the effects of which
cannot be accurately predicted. Risks and uncertainties include changes in
general economic and market conditions such as changes in interest rates,
adverse weather, unexpected operational difficulties, changes in governmental
and public policy including increased environmental regulation, public
infrastructure expenditures, competition, and the availability of raw materials.
Other risks and uncertainties could also affect the outcome of the
forward-looking statements.
13
<PAGE> 16
ITEM 2. PROPERTIES
The Company operates cement plants, quarries and related facilities at
Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The Buda
and LaSalle plants are each owned by separate joint ventures in which CXP has a
50% interest. The Company's principal aggregate plants and quarries are
located in Austin, Texas and Marysville, California. In addition, the Company
operates gypsum wallboard plants in Albuquerque and nearby Bernalillo, New
Mexico and Gypsum, Colorado. None of the Company's facilities are pledged as
security for any debts.
See "Item 1. Business" on pages 1-13 of this Report for additional
information relating to the Company's properties.
ITEM 3. LEGAL PROCEEDINGS
The Company's Western Aggregates, Inc. subsidiary ("WAI") has received
notices of possible claims against WAI in a title dispute relating to WAI's
leasehold interest under a 99-year mineral lease on the aggregates in 10,000
acres of property north of Sacramento, California commonly known as the Yuba
Goldfields. WAI is currently negotiating with the State Lands Commission of
the State of California to resolve title problems in the Yuba Goldfields
involving the historic and current riverbeds of the Yuba River. Additionally,
the Company has received preliminary indications that the U.S. Bureau of Land
Management and U.S. Army Corps of Engineers will assert claims to property
interests affecting the aggregates in approximately 3,500 acres in the Yuba
Goldfields. The United States has also indicated that it may have certain
other property interests in an additional 1,300 acres in the Yuba Goldfields
that may affect WAI's ability to mine aggregates from this property and WAI has
requested further clarification from the United States regarding the effect of
these other property interests. WAI has also been involved in negotiations
with the United States in an attempt to negotiate a land exchange in an effort
to resolve the federal claims to lands within the Yuba Goldfields.
WAI notified its lessor, Yuba West Gold, Inc. ("Yuba"), and the
lessor's successor-in-interest, Western Water Company ("Western Water"), of
WAI's claims against both parties for title defects in the Yuba Goldfields.
Yuba filed for protection under Chapter 11 of the United States Bankruptcy Code
in September 1992, and subsequent to the April 1994 confirmation of Yuba's plan
of reorganization, WAI received payments in cash from Yuba's bankruptcy estate
amounting to approximately $1.05 million in satisfaction of the claims filed by
WAI in such bankruptcy proceedings. In April 1994, WAI completed a transaction
with Western Water to settle WAI's claims that Western Water breached its
obligations to cure the Yuba Goldfields title defects. As a part of the
settlement, Western Water released WAI from its obligation under the mineral
lease to pay annual production royalties to Western Water for the remainder of
the lease term.
At the time WAI entered into its mineral lease in 1987, WAI obtained a
$5.525 million policy of title insurance from Western Title Insurance Company
to insure a significant majority of its leasehold estate in the Yuba
Goldfields. WAI notified Western Title Insurance Company's successor, Fidelity
National Title Insurance Company of California ("Fidelity"), of possible
insured claims of the United States to lands within the Yuba Goldfields and
made demands upon Fidelity to take action to cure the title claims of the
United States that encumbered WAI's leasehold estate. Because WAI believes
that Fidelity breached its obligation under the title policy and acted in bad
faith, in October 1996, WAI filed a civil action against Fidelity in Superior
Court in Orange County, California seeking compensatory and punitive damages.
Although management cannot predict the outcome of this action, it intends to
pursue its rights and remedies vigorously.
14
<PAGE> 17
In summary, although both the state and federal governments assert
certain claims to portions of the Yuba Goldfields, the majority of the losses
are covered by title insurance, and unless WAI's current mining plan changes,
the portion of WAI's mineral lease which is not in dispute contains sufficient
estimated reserves to meet WAI's current mining requirements for aggregates for
a period of more than 100 years.
In addition to the proceedings described above, the Company is a party
to certain other ordinary routine legal proceedings incidental to its business.
In general, although the outcome of litigation is inherently uncertain, the
Company believes that none of the litigation matters in which CXP or any
subsidiary is involved, if determined unfavorable to CXP or any subsidiary,
would have a material, adverse effect on the consolidated financial condition
or operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF CXP (See Item 10 of Part III)
The following is an alphabetical listing of the Company's executive
officers, as such term is defined under the rules and regulations of the
Securities and Exchange Commission. All of these executive officers have been
employed by the Company and/or one or more subsidiaries of the Company for the
past five years. All of these executive officers were elected by the Board of
Directors of the Company on July 18, 1996, to serve until the next Annual
Meeting of Directors or until their respective successors are duly elected and
qualified. There is no family relationship between any of these officers.
<TABLE>
<CAPTION>
Name Age Positions with CXP
-------- ------- ------------------------------------------
<S> <C> <C>
O. G. (Greg) Dagnan 57 President and Chief Executive Officer
(President and Chief Executive Officer
since January 1990; Senior Vice President
- Operations from August 1989, to January
1990).
Richard D. Jones, Jr. 51 Executive Vice President and Chief Operating
Officer (since January 1990).
Arthur R. Zunker, Jr. 53 Senior Vice President - Finance and Treasurer
(Senior Vice President - Finance and Treasurer since
January 1994; Senior Vice President - Administration
from August 1984, to January 1994).
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(See Item 7 below.)
15
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA
(See Item 7 below.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information called for by Items 5, 6 and 7 is incorporated herein
by reference to the information set forth under the following captions (on the
page or pages indicated) in the 1997 CXP Annual Report:
<TABLE>
<CAPTION>
Items Caption in the 1997 CXP Annual Report Pages
----- ------------------------------------- -----
<S> <C> <C>
5 Stock Prices and Dividends 37
5 Indebtedness (Note (C) to Consolidated Financial Statements
of CXP) 21
6 Summary of Selected Financial Data 34-35
7 Short-term Borrowings and Long-term Debt (Note (C) to Consolidated
Financial Statements of CXP) 21
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 29-32
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for in this Item 8 is incorporated herein by
reference to the 1997 CXP Annual Report as set forth in the index to
consolidated financial statements and schedules on page 17 of this Report (see
Item 14).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(See Item 11 below.)
ITEM 11. EXECUTIVE COMPENSATION
Except for the information relating to the executive officers of the
Company, which follows Item 4 of Part I of this Report, the information called
for by Items 10, 11, 12 and 13 is incorporated herein by reference to the
information included and referenced under the following captions (on the page
or pages indicated) in the Company's Proxy Statement dated June 26, 1997, for
the Company's July 17, 1997 Annual Meeting of Stockholders (the "1997 CXP Proxy
Statement"):
16
<PAGE> 19
<TABLE>
<CAPTION>
Items Caption in the 1997 CXP Proxy Statement Pages
----- --------------------------------------- -----
<S> <C> <C>
10 Election of Directors 2-4
10 Section 16(a) Compliance 15
11 Executive Compensation 9-14
12 Security Ownership of Management and
Certain Beneficial Owners 7-8
13 Certain Transactions 15
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(See Item 11 above.)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(See Item 11 above.)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report.
(1) and (2) See the Index to Consolidated Financial Statements and Schedules
below for a list of the Financial Statements and Financial Statement schedules
filed herewith.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Reference
------------------
1997 CXP
CENTEX CONSTRUCTION PRODUCTS, INC. Annual Report Page
------------------
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Statements of Consolidated Earnings for the years ended March 31, 1997, 1996 and 1995 . . . . . . . 14
Consolidated Balance Sheets as of March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . 15
Statements of Consolidated Cash Flows for the years ended March 31, 1997, 1996 and 1995 . . . . . . 16
Statements of Consolidated Stockholders' Equity for the years ended March 31, 1997, 1996 and 1995 . 17
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-27
Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
17
<PAGE> 20
Consolidated supporting schedules have been omitted either because the
required information is contained in notes to the consolidated financial
statements or because such schedules are not required or are not applicable.
(3) Exhibits
The information on exhibits required by this Item 14 is set forth in
the CXP Index to Exhibits appearing on page 20 and 21 of this Report.
(b) Reports on Form 8-K:
On March 12, 1997, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K to report the acquisition on February
26, 1997 of all of the equity interests in the owner of a gypsum mine, gypsum
wallboard plant, and a related cogeneration power facility, all located near
Vail, Colorado. See "Item 1. Business - General" and "Item 1. Business -
Gypsum Wallboard Operations".
On May 12, 1997, the Company filed with the Securities and Exchange
Commission an amended Current Report on Form 8-K/A to amend its prior Form 8-K
filing to include the audited financial statements of the businesses acquired
and the pro forma financial information of the Company required by Form 8-K.
18
<PAGE> 21
SIGNATURES
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 in the capacities and on the dates indicated.
June 25, 1997 /s/ O. G. DAGNAN
----------------------------------------------
O. G. Dagnan, Director, President and
Chief Executive Officer
(principal executive officer)
June 25, 1997 /s/ ARTHUR R. ZUNKER, JR.
----------------------------------------------
Arthur R. Zunker, Jr., Senior Vice President -
Finance and Treasurer
(principal financial and accounting officer)
June 25, 1997 /s/ ROBERT L. CLARKE
----------------------------------------------
Robert L. Clarke, Director
June 25, 1997 /s/ LAURENCE E. HIRSCH
----------------------------------------------
Laurence E. Hirsch, Director
June 25, 1997 /s/ DAVID W. QUINN
----------------------------------------------
David W. Quinn, Director
June 25, 1997 /s/ HAROLD K. WORK
----------------------------------------------
Harold K. Work, Director
19
<PAGE> 22
INDEX TO EXHIBITS
CENTEX CONSTRUCTION PRODUCTS, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------- -----------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Centex
Construction Products, Inc. (the "Company")(filed
as Exhibit 3.1 to the Form S-8 Registration Statement
of the Company (No. 33-82928)(the "S-8 Registration
Statement"), filed on August 16, 1994, and incorporated
herein by reference)
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the S-8 Registration Statement and
incorporated herein by reference)
4.1 Form of Certificate evidencing Common Stock (filed as
Exhibit 4.1 to Amendment No. 3 to the Form S-1
Registration Statement of the Company (No. 33-74816),
filed on April 4, 1994, ("Amendment No. 3"), and
incorporated by reference herein)
4.2 Credit Agreement dated as of April 18, 1994, among the
Company, The First National Bank of Chicago,
Individually and as Agent, and the other Lenders named
therein (filed as Exhibit 4.2 to the Annual Report on Form
10-K of the Company (File No. 1-12984) for the fiscal
year ended March 31, 1995 (the "Form 10-K") and
incorporated herein by reference)
4.3 Amendment No. 1 to the Credit Agreement, dated as of
March 20, 1996, among the Company, the First National
Bank of Chicago, individually and as agent, and the other
lenders named therein (filed as Exhibit 4.3 to the Annual
Report on Form 10-K of the Company (File No. 1-12984)
for the fiscal year ended March 31, 1996 and incorporated
herein by reference)
10.1 Joint Venture Agreement between Ilce, Inc. (f/k/a
Illinois Cement Company, Inc.) and RAAM Limited
Partnership, dated April 1, 1972, as amended (filed
as Exhibit 10.1 to the Form S-1 Registration
Statement (No. 33-74816) of the Company, filed on
February 4, 1994, (the "S-1 Registration Statement")
and incorporated herein by reference)
10.2 Joint Venture Agreement by and among Texas Cement
Company, the Company, and Lehigh Portland Cement
Company, dated March 25, 1986, as amended (filed as
Exhibit 10.2 to the S-1 Registration Statement) and
incorporated herein by reference)
10.3* The Centex Construction Products, Inc. amended and restated
Stock Option Plan(1)
</TABLE>
20
<PAGE> 23
<TABLE>
<S> <C>
10.4 Supplemental Executive Retirement Plan of Centex
Construction Products, Inc. (filed as Exhibit 10.4 to the
1995 Form 10-K and incorporated herein by reference)(1)
10.5 Indemnification Agreement dated as of April 19, 1994,
between the Company and Centex Corporation ("Centex")
(filed as Exhibit 10.5 to the 1995 Form 10-K
and incorporated herein by reference)
10.6 Tax Separation Agreement dated as of April 1, 1994,
among Centex, the Company and its subsidiaries
(filed as Exhibit 10.6 to the 1995 Form 10-K
and incorporated herein by reference)
10.7 Administrative Services Agreement dated as of
April 1, 1994, between the Company and Centex
Service Company (filed as Exhibit 10.7 to the 1995
Form 10-K and incorporated herein by reference)
10.8 Trademark License Agreement dated as of April 19, 1994,
between the Company and Centex (filed as Exhibit 10.8 to the
1995 Form 10-K and incorporated herein by reference)
10.9 Form of Indemnification Agreement between the
Company and each of its directors (filed as Exhibit
10.9 to Amendment No. 3 and incorporated herein by
reference)(1)
10.10 Limited Liability Company Unit Purchase Agreement (EGP),
dated as of December 5, 1997, among Centex American Gypsum
Company, Centex Eagle Gypsum Company, and Eagle-Gypsum
Products (filed as Exhibit 2.1 to the Company's Current Report
on Form 8-K (File No. 1-12984), filed on March 12, 1997,
(the "Form 8-K") and incorporated herein by reference)
10.11 Limited Liability Company Unit Purchase Agreement (NES),
dated as of December 5, 1997, among Centex American Gypsum
Company, CEGC Holding Company, and National Energy Systems,
Inc. (filed as Exhibit 2.2 to the Form 8-K and incorporated herein
by reference)
13** Annual Report to Stockholders of the Company for fiscal
year ended March 31, 1997 (the "Annual Report to Stockholders")
21* Subsidiaries of the Company
23* Consent of Independent Public Accountants
27* Financial Data Schedule
</TABLE>
- -------------------------------
* Filed herewith.
** With the exception of the information expressly incorporated by reference
in this Annual Report on Form 10-K from the Annual Report to Stockholders,
the Annual Report to Stockholders is not deemed filed with the Commission
as a part of this Annual Report on Form 10-K.
(1) Required to be identified as a management contract or a compensatory plan
or arrangement pursuant to Item 14(a)(3) of Form 10-K.
21
<PAGE> 1
EXHIBIT 10.3
CENTEX CONSTRUCTION PRODUCTS, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
1. PURPOSE
The purpose of this Plan is to assist Centex Construction Products,
Inc., a Delaware corporation, in attracting and retaining as officers and key
employees of the Company and its Affiliates, and as non-employee directors of
the Company, individuals of training, experience, and ability and to furnish
additional incentive to such individuals by encouraging them to become owners
of Shares of the Company's capital stock, by granting to such individuals
Incentive Options, Nonqualified Options, Restricted Stock, or any combination
of the foregoing.
2. DEFINITIONS
Unless the context otherwise requires, the following words as used
herein shall have the following meanings:
(a) "Plan" -- This Centex Construction Products, Inc. Amended and
Restated Stock Option Plan.
(b) "Company" -- Centex Construction Products, Inc., a Delaware
corporation.
(c) "Board" -- The Board of Directors of the Company as the same may
be constituted from time to time.
(d) "Committee" -- The Committee provided for in Section 3 of this
Plan, as such Committee may be constituted from time to time.
(e) "Share" -- A share of the Company's present one cent ($0.01) par
value common stock and any share or shares of capital stock or other securities
of the Company hereafter issued or issuable upon, in respect of or in
substitution or in exchange for each present share. Such Shares may be unissued
or reacquired Shares, as the Board, in its sole and absolute discretion, shall
from time to time determine.
(f) "Option" -- An option to purchase one or more Shares of the
Company granted under and pursuant to the Plan. Such Option may be either an
Incentive Option or a Nonqualified Option.
(g) "Optionee" -- An individual who has been granted an Option under
this Plan and who has executed a written option Agreement with the Company.
(h) "Affiliates" -- Any corporation (other than the Company) in any
unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain, and (b) any corporation (other than the Company) in
any unbroken chain of corporations ending with the Company if, at the time of
the granting of the Option, each of the corporations, other than the Company,
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
(i) "Fair Market Value" -- If a Share is traded on one or more
established market or exchanges, the mean of the opening and closing price of
the Share in the primary market or exchange on which the Share is traded, and
if the Share is not so traded or the Share does not trade on the relevant date,
the value determined in good faith by the Board. For purposes of valuing Shares
to be made subject to Incentive Options, the Fair Market Value of stock shall
be determined without regard to any restriction other than one which, by its
terms, will never lapse.
<PAGE> 2
(j) "Agreement" -- The written agreement between the Company and the
Optionee evidencing the Option granted by the Company and the understanding of
the parties with respect thereto.
(k) "Incentive Option" -- Stock Options that are intended to satisfy
the requirements of Section 422 of the Code and Section 16 of this Plan.
(l) "Nonqualified Options" -- Stock Options which do not satisfy the
requirements of Section 422 of the Code.
(m) "Code" -- The Internal Revenue Code of 1986, as amended from time
to time.
(n) "Restricted Stock" -- Shares issued pursuant to Section 19 of the
Plan.
(o) "Act" -- The Securities Exchange Act of 1934, as amended.
(p) "Non-Employee Director" -- An individual who satisfies the
requirements of Rule 16b-3 promulgated under the Act.
3. ADMINISTRATION
Except as is herein expressly provided otherwise, the Plan shall be
administered by the Board. The selection of individuals who shall receive
grants of Options or awards of Restricted Stock shall be made by the Committee.
The Committee shall consist of two or more individuals who shall be appointed
by and shall serve at the pleasure of the Board and may be comprised of the
entire Board. When the Committee is so comprised of the entire Board, the
terms "Board" and "Committee", as used herein, shall be deemed synonymous.
Notwithstanding the provisions of the immediately preceding sentence, unless
the Board provides otherwise by resolution, the Committee shall be composed
only of individuals who are Non-Employee Directors, and until and unless the
Board provides or has provided that individuals who are not Non-Employee
Directors may be members of the Committee, no individual appointed to the
Committee shall have been eligible at any time within one year prior to his
appointment to the Committee for the grant of an option, stock allocation, or
stock appreciation right under the Plan or any other plan of the Company or its
affiliates (within the meaning of Rule 12b-2 promulgated under the Act), nor
shall such individual be eligible to receive an option, allocation of stock, or
stock appreciation right under any such plan while a member of the Committee.
The Board may by resolution at any time and from time to time provide that the
Committee shall be comprised only of individuals who are Non-Employee Directors
or that the Committee may be comprised of individuals some or all of whom are
not Non-Employee Directors, all as the Board may deem from time to time
appropriate. ln making grants or awards, the Committee shall take into
consideration the contribution the individual has made or may make to the
success of the Company or its Affiliates and such other considerations as the
Board may from time to time specify.
The Committee shall elect one of its members as its chairman and shall
hold its meetings at such times and places as it may determine. All decisions
and determinations of the Committee shall be made by the majority vote or
decision of all of its members present at a meeting; provided, however, that
any decision or determination reduced to writing and signed by all of the
members of the Committee shall be as fully effective as if it had been made at
a meeting duly called and held. The Committee may make any rules and
regulations for the conduct of its business that are not inconsistent with the
provisions hereof, the bylaws of the Company or any resolutions of the Board.
All questions of interpretation and application of the Plan shall be
subject to the determination of a majority of the whole Board, which
determination shall be final and binding upon all parties. All questions of
interpretation and application of an Option grant or an award of Restricted
Stock, including questions of interpretation and application of an Agreement,
shall be subject to the determination of a majority of the Committee, which
determination shall be final and binding upon all parties.
Subject to the express provisions hereof, the Board shall have the
authority, in its sole and absolute discretion, (a) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to the
Plan,
<PAGE> 3
(b) to construe the Plan, and (c) to make all other determinations necessary or
advisable for administering the Plan. The Board may correct any defect or
supply any omission or reconcile any inconsistency in the Plan in the manner
and to the extent it shall deem expedient to carry it into effect, and it shall
be the sole and final judge of such expediency. Subject to the express
provisions hereof, the Committee shall have the authority, in its sole and
absolute discretion, (a) to determine the terms and provisions of the
respective Agreements (which need not be identical), including provisions
defining or otherwise relating to (i) subject to the specific provisions of the
Plan, the term and the period or periods and extent of exercisability of the
Options, (ii) the extent to which the transferability of Shares issued upon
exercise of Options is restricted, (iii) the effect of termination of
employment or directorship upon the exercisability of the Options, and (iv) the
effect of approved leaves of absence (consistent with any applicable
regulations of the Internal Revenue Service), (b) subject to Sections 8 and 10,
to accelerate, for any reason, regardless of whether the Agreement so provides,
the time of exercisability of any Option that has been granted, (c) to construe
the respective Agreements, and (d) to exercise the powers conferred on the
Committee under Section 19. The determinations of the Board or Committee, as
the case may be, on the matters referred to in this Section 3 shall be final
and conclusive.
4. SHARES SUBJECT TO PLAN
(a) A maximum of 2,000,000 Shares shall be subject to grants of
Options and awards of Restricted Stock under the Plan; provided that such
maximum shall be increased or decreased as provided below in Section 12.
(b) At any time and from time to time after the Plan takes effect, the
Committee, pursuant to the provisions herein set forth, may grant Options and
award Restricted Stock until the maximum number of Shares shall be exhausted or
the Plan shall be sooner terminated; provided, however, that no Option shall be
granted and no Restricted Stock shall be awarded after March 31, 2004.
(c) Should any Option expire or be canceled without being fully
exercised, or should any Restricted Stock previously awarded be reacquired by
the Company, the number of Shares with respect to which such Option shall not
have been exercised prior to its expiration or cancellation and the number of
Shares of such Restricted Stock so reacquired may again be optioned or awarded
pursuant to the provisions hereof.
(d) Any Shares withheld pursuant to subsection 18(c) shall not be
available after such withholding for being optioned or awarded pursuant to the
provisions hereof.
5. ELIGIBILITY
Eligibility for the receipt of the grant of Options under the Plan
shall be confined to (a) a limited number of persons who are employed by the
Company, or one or more of its Affiliates and who are officers of or who, in
the opinion of the Board, hold other key positions in or for the Company or one
or more of its Affiliates and (b) directors of the Company, including directors
who are not employees of the Company or its Affiliates; provided that only
employees of the Company or its Affiliates shall be eligible for the grant of
Incentive Options. In addition, an individual who becomes a director of the
Company, but who is not at the time he becomes a director also an employee of
the Company, shall not be eligible for a grant of Options or an award of
Restricted Stock, and shall not be eligible for the grant of an option, stock
allocation, or stock appreciation right under any other plan of the Company or
its affiliates (within the meaning of Rule 12b-2 promulgated under the Act)
until the Board expressly declares such person eligible by resolution. In no
event may an Option be granted to an individual who is not an employee of the
Company or an Affiliate or a director of the Company. In addition, to provide
for Non-Employee Directors to serve on the Committee, the Board may from time
to time specify individuals described in the first sentence of this Section 5
who shall not be eligible for the grant of Options or the award of Restricted
Stock or the grant of options or stock appreciation rights or allocations of
stock under any plan of the Company or its affiliates (within the meaning of
Rule 12b-2 promulgated under the Act); provided however, that the Board may at
any time determine that any individual who has been so excluded from
eligibility shall become eligible for grants of Options or awards of Restricted
Stock.
<PAGE> 4
6. GRANTING OF OPTIONS
(a) From time to time while the Plan is in effect, the Committee may
in its absolute discretion, select from among the persons eligible to receive a
grant of Options under the Plan (including persons who have already received
such grants of Options) such one or more of them as in the opinion of the
Committee should be granted Options. The Committee shall thereupon, likewise in
its absolute discretion, determine the number of Shares to be allotted for
option to each person so selected; provided, however, that the total number of
Shares subject to Options granted to any one person, including directors of the
Company, when aggregated with the number of Shares of Restricted Stock awarded
to such person, shall not exceed 400,000 Shares.
(b) Each person so selected shall be offered an Option to purchase the
number of Shares so allotted to him, upon such terms and conditions, consistent
with the provisions of the Plan, as the Committee may specify. Options granted
to directors of the Company at such times as the Committee is not composed
solely of Non-Employee Directors shall provide that such Options may not be
exercised until the first anniversary of their grant and then may be exercised
in full at any time on or after such first anniversary date until the date that
is ten (10) years from the date when the Option was originally granted. Each
such person shall have a reasonable period of time, to be fixed by the
Committee, within which to accept or reject the proffered Option. Failure to
accept within the period so fixed may be treated as a rejection.
(c) Each person who accepts an Option offered to him shall enter into
an Agreement with the Company, in such form as the Committee may prescribe,
setting forth the terms and conditions of the Option, whereupon such person
shall become a participant in the Plan. In the event an individual is granted
both one or more Incentive Options and one or more Nonqualified Options, such
grants shall be evidenced by separate Agreements, one each for the Incentive
Option grants and one each for the Nonqualified Options grants. The date which
the Committee specifies to be the grant date of an Option to an individual
shall constitute the date on which the Option covered by such Agreement is
granted. In no event, however, shall an Optionee gain any rights in addition
to those specified by the Committee in its grant, regardless of the time that
may pass between the grant of the Option and the actual signing of the
Agreement by the Company and the Optionee.
7. OPTION PRICE
The option price for each Share covered by each Incentive Option shall
not be less than the greater of (a) the par value of each such Share or (b) the
Fair Market Value of the Share at the time such Option is granted, except as
provided hereinafter. The option price for each Share covered by each
Nonqualified Option shall not be less than the greater of (a) the par value of
each such Share or (b) 85% of the Fair Market Value of the Share at the time
the Option is granted; provided, however, that the number of Shares covered by
Nonqualified Options granted under this Plan that have an option price less
than the Fair Market Value of a Share at the time the respective Option is
granted shall not exceed 10% of the total number of Shares authorized to be
issued under this Plan. If the Company or an Affiliate agrees to substitute a
new Option under the Plan for an old Option, or to assume an old Option, by
reason of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation (any of such events being referred
to herein as a "Corporate Transaction"), the option price of the Shares covered
by each such new Option or assumed Option may be other than the Fair Market
Value of the stock at the time the Option is granted as determined by reference
to a formula, established at the time of the Corporate Transaction, which will
give effect to such substitution or assumption; provided, however, in no event
shall --
(a) the excess of the aggregate Fair Market Value of the Share
subject to the Option immediately after the substitution or assumption
over the aggregate option price of such Shares be more than the excess
of the aggregate Fair Market Value of all Shares subject to the Option
immediately prior to the substitution or assumption over the aggregate
option price of such Shares;
<PAGE> 5
(b) in the case of an Incentive Option, the new Option or the
assumption of the old Option give the Optionee additional benefits
which he would not have under the old Option; or
(c) the ratio of the option price to the Fair Market Value of
the stock subject to the Option immediately after the substitution or
assumption be more favorable to the Optionee than the ratio of the
option price to the Fair Market Value of the stock subject to the old
Option immediately prior such substitution or assumption, on a Share
by Share basis.
Notwithstanding the above, the provisions of this Section 7 with
respect to the Option price in the event of a Corporate Transaction shall, in
case of an Incentive Option, be subject to the requirements of Section 25(a) of
the Code and the Treasury regulations and revenue rulings promulgated
thereunder. In the case of an Incentive Option, in the event of a conflict
between the terms of this Section 7 and the above cited statute, regulations,
and rulings, or in the event of an omission in this Section 7 of a provision
required by said laws, the latter shall control in all respects and are hereby
incorporated herein by reference as if set out at length.
8. OPTION PERIOD
(a) Each Option shall run for such period of time as the Committee may
specify, but in no event for longer than ten (10) years from the date when the
Option is granted, including the period of time provided in subsections (i) and
(ii) of this subsection (a); and subject to such limits, and the further
condition that, unless designated otherwise by the Committee, no Incentive
Option shall become exercisable prior to one year from the date of its grant,
(i) Except as provided below in this subsection (i), all
rights to exercise an Option shall terminate within three months after
the date the Optionee ceases to be an employee of at least one of the
employers in the group of employers consisting of the Company and its
Affiliates, or after the date the Optionee ceases to be a director of
the Company, whichever may occur later, for any reason other than
death, except that, (x) in the case of a Nonqualified Option which is
held by an Optionee who is, on the date of cessation referred to in
this clause, an officer or director of the Company (within the
meanings thereof under Section 16(b) of the Act), all rights to
exercise such Option shall terminate within seven months after the
date the Optionee ceases to be an employee of at least one of the
employers in the group of employers consisting of the Company and its
Affiliates, or, if later, after the date the Optionee ceases to be a
director of the Company, for any reason other than death; and, except
that, (y) the Committee, in its discretion, may provide in new Option
grants or amend outstanding Options to provide an extended period of
time during which an Optionee can exercise a Nonqualified Option to
the maximum permissible period for which such Optionee's Option would
have been exercisable in the absence of the Optionee's ceasing to be
an employee of the Company and its Affiliates or ceasing to be a
director of the Company; and, except that (z) in case the employment
of the Optionee is terminated for cause, the Option shall thereafter
be null and void for all purposes.
(ii) If the Optionee ceases to be employed by at least one of
the employers in the group of employers consisting of the Company and
its Affiliates, or ceases to be a director of the Company, whichever
may occur later, by reason of his death, all rights to exercise such
Option shall terminate fifteen (15) months thereafter.
(iii) If an Option is granted with a term shorter than ten
(10) years, the Committee may extend the term of the Option, but for
not more than ten (10) years from the date when the Option was
originally granted.
<PAGE> 6
9. OPTIONS NOT TRANSFERABLE
No Option or interest therein shall be transferable by the person to
whom it is granted otherwise than by will or by the applicable laws of descent
and distribution. Notwithstanding the foregoing, the Committee may, in its sole
discretion, provide in the Agreement relating to the grant of an Option that
the Optionee may transfer such Option, without consideration, to members of the
Optionee's immediate family or to one or more trusts for the benefit of such
immediate family members or partnerships in which such immediate family members
are the only partners. For purposes of this Section 9, "immediate family" shall
mean the Optionee's spouse, parents, children (including adopted children), and
grandchildren.
10. EXERCISE OF OPTIONS
(a) During the lifetime of an Optionee only he or his guardian or
legal representative may exercise an Option granted to him. In the event of his
death, any then exercisable portion of his Option may, within fifteen (15)
months thereafter, or earlier date of termination of the Option, be exercised
in whole or in part by any person empowered to do so under the deceased
Optionee's will or under the applicable laws of descent and distribution.
(b) At any time, and from time to time, during the period when any
Option, or a portion thereof, is exercisable, such Option, or portion thereof,
may be exercised in whole or in part; provided, however, that the Committee may
require any Option which is partially exercised to be so exercised with respect
to at least a stated minimum number of Shares.
(c) Each exercise of an Option or portion or part thereof shall be
evidenced by a notice in writing to the Company accompanied by payment in full
of the option price of the Shares then being purchased. Payment in full shall
mean payment of the full amount due, either in cash, by certified check or
cashier's check, or, with the consent of the Committee, with Shares owned by
the Optionee, including an actual or deemed multiple series of exchanges of
such Shares. Options granted to directors of the Company at such times as the
Committee is not composed solely of Non-Employee Directors shall be paid for in
cash, by certified check or cashier's check, or with Shares owned by the
director, including an actual or deemed multiple series of exchanges of such
Shares, as elected by the director.
(d) No Shares shall be issued until full payment therefor has been
made, and an Optionee shall have none of the rights of a stockholder until
Shares are issued to him.
(e) Nothing herein or in any Agreement executed or Option granted
hereunder shall require the Company to issue any Shares upon exercise of an
Option if such issuance would, in the opinion of counsel for the Company,
constitute a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect. Upon the exercise of an Option or portion or
part thereof, the Optionee shall give to the Company satisfactory evidence that
he is acquiring such Shares for the purpose of investment only and not with a
view to their distribution; provided, however, if or to the extent that the
Shares subject to the Option shall be included in a registration statement
filed by the Company, or one of its Affiliates, such investment representation
shall be abrogated.
11. DELIVERY OF STOCK CERTIFICATES
As promptly as may be practicable after an Option, or a portion or
part thereof, has been exercised as hereinabove provided, the Company shall
make delivery of one or more certificates for the appropriate number of Shares.
In the event that an Optionee exercises both an Incentive Option, or a portion
thereof, and a Nonqualified Option, or a portion thereof, separate stock
certificates shall be issued, one for the Shares subject to the Incentive
Option and one for the Shares subject to the Nonqualified Option.
<PAGE> 7
12. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE TRANSACTIONS
(a) If at any time while the Plan is in effect there shall be an
increase or decrease in the number of issued and outstanding Shares of the
Company effected without receipt of consideration therefor by the Company,
through the declaration of a stock dividend or through any recapitalization or
merger or otherwise in which the Company is the surviving corporation,
resulting in a stock split-up, combination, or exchange of Shares of the
Company, then and in each such event:
(i) An appropriate adjustment shall be made in the maximum
number of Shares then subject to being optioned or awarded as
Restricted Stock under the Plan, to the end that the same proportion
of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned and awarded;
(ii) Appropriate adjustment shall be made in the number of
Shares and the option price per Share thereof then subject to purchase
pursuant to each Option previously granted, to the end that the same
proportion of the Company's issued and outstanding Shares in each such
instance shall remain subject to purchase at the same aggregate option
price: and
(iii) In the case of Incentive Options, any such adjustments
shall in all respects satisfy the requirements of Section 424(a) of
the Code and the Treasury regulations and revenue rulings promulgated
thereunder.
Except as is otherwise expressly provided herein, the issue by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of or option price of Shares then
subject to outstanding Options granted under the Plan. Furthermore, the
presence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities
or preferred or preference stock which would rank above the Shares subject to
outstanding Options granted under the Plan; (iv) the dissolution or liquidation
of the Company; (v) any sale, transfer, or assignment of all or any part of the
assets or business of the Company; or (vi) any other corporate act or
proceeding, whether of a similar character or otherwise.
(b) Notwithstanding anything to the contrary above, a dissolution or
liquidation of the Company, a merger (other than a merger effecting a
reincorporation of the Company in another state) or consolidation in which the
Company is not the surviving corporation (or survives only as a subsidiary of
another corporation in a transaction in which the stockholders of the parent of
the Company and their proportionate interests therein immediately after the
transaction are not substantially identical to the stockholders of the Company
and their proportionate interests therein immediately prior to the
transaction), a transaction in which another corporation (other than Centex
Corporation or one of its affiliates (as defined in Section 12b-2 of the Act))
becomes the owner of 50% or more of the total combined voting power of all
classes of stock of the Company, or a change in control (as specified below),
shall cause every Option then outstanding to become exercisable in full,
subject to the limitation on the aggregate Fair Market Value of Shares that may
become first exercisable during any calendar year set forth in Section 16,
immediately prior to such dissolution, liquidation, merger, consolidation,
transaction, or change in control, to the extent not theretofore exercised,
without regard to the determination as to the periods and installments of
exercisability contained in the Agreements if (and only if) such Options have
not at that time expired or been terminated. For purposes of this paragraph, a
change in control shall be deemed to have taken place if: (i) a third person
(other than Centex Corporation or one of its affiliates (as defined in Section
12b-2 of the Act)), including a "group" as defined in Section 13(d)(3) of the
Act, becomes the beneficial owner of Shares of the Company having 50% or more
of the total number of votes that may be cast for the election of directors of
the Company; of (ii) as a result of, or in connection with, a contested
election for directors, the persons who were directors of the Company
immediately before such election shall cease to constitute
<PAGE> 8
a majority of the Board. Notwithstanding the foregoing provisions of this
paragraph, in the event of any such dissolution, merger, consolidation,
transaction, or change in control, the Board may completely satisfy all
obligations of the Company and its Affiliates with respect to any Option
outstanding on the date of such event by delivering to the Optionee cash in an
amount equal to the difference between the aggregate exercise price for Shares
under the Option and the Fair Market Value of such Shares on the date of such
event, such payment to be made within a reasonable time after such event.
13. EFFECTIVE DATE
The Plan shall be effective on April 1, 1994, the date of its adoption
by the Board and its approval by Centex Corporation, a Nevada corporation and
the sole stockholder of the Company as of the effective date.
14. AMENDMENT, SUSPENSION OR TERMINATION
(a) Subject to the other terms and conditions of this Plan and the
limitations set forth in subsection 14(b) below, the Board may at any time
amend, suspend or terminate the Plan; provided, however, that after the
stockholders have ratified the Plan, the Board may not, without approval of the
stockholders of the Company, amend the Plan so as to:
(i) Increase the maximum number of Shares subject thereto, as
specified above in Sections 4(a) and 12; or
(ii) Increase the proportionate number of Shares which may be
purchased pursuant to Option by any one person or awarded as
Restricted Stock to any one person, as specified above in Section 6(a)
or below in Section 19(a); or
(b) Neither the Board nor the Committee may amend the Plan or any
Agreement to reduce the option price of an outstanding Option or modify, impair
or cancel any existing Option without the consent of the holder thereof.
15. REQUIREMENTS OF LAW
Notwithstanding anything contained herein to the contrary, the Company
shall not be required to sell or issue Shares under any Option if the issuance
thereof would constitute a violation by the Optionee or the Company of any
provisions of any law or regulation of any governmental authority or any
national securities exchange; and as a condition of any sale or issuance of
Shares under Option the Company may require such agreements or undertakings, if
any, as the Company may deem necessary or advisable to assure compliance with
any such law or regulation.
16. INCENTIVE STOCK OPTIONS
The Committee, in its discretion, may designate any Option granted
under the Plan as an Incentive Option intended to qualify under Section 422 of
the Code. Any provision of the Plan to the contrary notwithstanding, (i) no
Incentive Option shall be granted to any person who, at the time such Incentive
Option is granted, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or any Affiliate
unless the purchase price under such Incentive Option is at least 110 percent
of the Fair Market Value of the Shares subject to an Incentive Option at the
date of its grant and such Incentive Option is not exercisable after the
expiration of five years from the date of its grant, and (ii) the aggregate
Fair Market Value of the Shares subject to such Incentive Option and the
aggregate Fair Market Value of the shares of stock of any Affiliate (or a
predecessor of the Company or an Affiliate) subject to any other incentive
stock option (within the meaning of Section 422 of the Code) of the Company and
its Affiliates (or a predecessor corporation of any such corporation), that may
become first exercisable in any calendar year, shall not (with respect to any
Optionee) exceed $100,000, determined as of the date the Incentive Option is
granted. For purposes of this Section 16, "predecessor corporation" means a
corporation that was a party to a transaction described in Section 424(a) of
the Code (or which would be so described if a substitution
<PAGE> 9
or assumption under such section had been effected) with the Company, or a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is an Affiliate of the Company
or a predecessor corporation of any such corporations.
17. MODIFICATION OF OPTIONS
Subject to the terms and conditions of and within the limitations of
the Plan, the Committee may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of Options outstanding hereunder (to
the extent not theretofore exercised) and authorize the granting of new Options
hereunder in substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing provisions of this Section 17, no modification of
an Option granted hereunder shall, without the consent of the Optionee, alter
or impair any rights or obligations under any Option theretofore granted
hereunder to such Optionee under the Plan, except as may be necessary, with
respect to Incentive Options, to satisfy the requirements of Section 422 of the
Code.
18. AGREEMENT PROVISIONS
(a) Each Agreement shall contain such provisions (including, without
limitation, restrictions or the removal of restrictions upon the exercise of
the Option and the transfer of shares thereby acquired) as the Committee shall
deem advisable. Each Agreement shall identify the Option evidenced thereby as
an Incentive Option or Nonqualified Option, as the case may be. Incentive
Options and Nonqualified Options may not both be covered by a single Agreement.
Each such Agreement relating to Incentive Options granted hereunder shall
contain such limitations and restrictions upon the exercise of the Incentive
Option as shall be necessary for the Incentive Option to which such Agreement
related to constitute an incentive stock option, as defined in Section 422 of
the Code.
(b) The Plan shall be annexed to each Agreement and each Agreement
shall recite that it is subject to the Plan and that the Plan shall govern
where there is any inconsistency between the Plan and the Agreement.
(c) Each Agreement shall contain an agreement and covenant by the
Optionee, in such form as the Committee may require in its discretion, that he
consents to and will take whatever affirmative actions are required, in the
opinion of the Board or Committee, to enable the Company or appropriate
Affiliate to satisfy its Federal income tax and FICA withholding obligations.
An Agreement may contain such provisions as the Committee deems appropriate to
enable the Company or its Affiliates to satisfy such withholding obligations,
including provisions permitting the Company, on exercise of an Option, to
withhold Shares otherwise issuable to the Optionee exercising the Option to
satisfy the applicable withholding obligations.
(d) Each Agreement relating to an Incentive Option shall contain a
covenant by the Optionee immediately to notify the Company in writing of any
disqualifying disposition (within the meaning of section 421(b) of the Code) of
an Incentive Option.
19. RESTRICTED STOCK
(a) Shares of Restricted Stock may be awarded by the Committee to
such individuals as are eligible for grants of Options, as the Committee may
determine at any time and from time to time before the termination of the Plan.
The total number of Shares of Restricted Stock awarded to any one person,
including directors of the Company, when aggregated with the number of Shares
subject to Options in favor of such person, shall not exceed 400,000 Shares.
(b) A Share of Restricted Stock is a Share that does not irrevocably
vest in the holder or that may not be sold, exchanged, pledged, transferred,
assigned or otherwise encumbered or disposed of until the terms and conditions
set by the Committee at the time of the award of the Restricted Stock have been
satisfied. A Share of Restricted Stock shall be subject to a minimum
three-year vesting period and shall contain such other restrictions, terms and
conditions as the Committee may establish, which may include, without
limitation, the rendition of services to the Company or its Affiliates for a
specified time or the achievement of specific goals. The Committee may, when
it deems it appropriate,
<PAGE> 10
require the recipient of an award of Restricted Stock to enter into an
agreement with the Company evidencing the understanding of the parties with
respect to such award.
If an individual receives Shares of Restricted Stock, whether or not
escrowed as provided below, the individual shall be the record owner of such
Shares and shall have all the rights of a stockholder with respect to such
Shares (unless the escrow agreement, if any, specifically provides otherwise),
including the right to vote and the right to receive dividends or other
distributions made or paid with respect to such Shares. Any certificate or
certificates representing Shares of Restricted Stock shall bear a legend
similar to the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO THE TERMS OF THE CENTEX CONSTRUCTION PRODUCTS, INC.
AMENDED AND RESTATED STOCK OPTION PLAN AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, ASSIGNED, OR OTHERWISE ENCUMBERED IN ANY MANNER EXCEPT AS
SET FORTH IN THE TERMS OF SUCH AWARD DATED , 19 .
In order to enforce the restrictions, terms and conditions that may be
applicable to an individual's Shares of Restricted Stock, the Committee may
require the individual, upon the receipt of a certificate or certificates
representing such Shares, or at any time thereafter, to deposit such
certificate or certificates, together with stock powers and other instruments
of transfer, appropriately endorsed in blank, with the Company or an escrow
agent designated by the Company under an escrow agreement in such form as shall
be determined by the Committee.
After the satisfaction of the terms and conditions set by the
Committee at the time of an award of Restricted Stock to an individual, which
award is not subject to a non-lapse feature, a new certificate, without the
legend set forth above, for the number of Shares that are no longer subject to
such restrictions, terms and conditions shall be delivered to the individual.
If an individual to whom Restricted Stock has been awarded dies after
satisfaction of the terms and conditions for the payment of all or a portion of
the award but prior to the actual payment of all or such portion thereof, such
payment shall be made to the individual's beneficiary or beneficiaries at the
time and in the same manner that such payment would have been made to the
individual.
The Committee may cancel all or any portion of any outstanding
restrictions prior to the expiration of such restrictions with respect to any
or all of the Shares of Restricted Stock awarded to an individual hereunder
only upon the individual's death, disability or retirement on or after the
earlier of (i) age 65 or (ii) such time as the sum of the individual's age and
years of service equals 70, provided such individual is at least 55. With
respect to the occurrence of any event specified to the last paragraph of
Section 12, the restrictions, if any, applicable to any outstanding Shares
awarded as Restricted Stock shall lapse immediately prior to the occurrence of
the event.
(c) Subject to the provisions of subsection 19(b) above, if an
individual to whom Restricted Stock has been awarded ceases to be employed by
at least one of the employers in the group of employers consisting of the
Company and its Affiliates, or ceases to be a director of the Company,
whichever may occur later, for any reason prior to the satisfaction of any
terms and conditions of an award, any Restricted Stock remaining subject to
restrictions shall thereupon be forfeited by the individual and transferred to,
and reacquired by, the Company or an Affiliate. In such event, the individual,
or in the event of his death, his personal representative, shall forthwith
deliver to the Secretary of the Company the certificates for the Shares of
Restricted Stock remaining subject to such restrictions, accompanied by such
instruments of transfer, if any, as may reasonably be required by the Secretary
of the Company.
(d) In case of any consolidation or merger of another corporation into
the Company in which the Company is the surviving corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the Shares (other than a change in par
value, or from par value to no par value, or as a result of a subdivision or
combination, but including any change in such shares into two or more classes
or series of shares), the Committee may provide that payment of Restricted
Stock shall take the form of the kind and amount of shares of
<PAGE> 11
stock and other securities (including those of any new direct or indirect
parent of the Company), property, cash or any combination thereof receivable
upon such reclassification, change, consolidation, or merger.
20. GENERAL
(a) The proceeds received by the Company from the sale of Shares
pursuant to Options shall be used for general corporate purposes.
(b) Nothing contained in the Plan, or in any Agreement, shall confer
upon any Optionee or recipient of Restricted Stock the right to continue in the
employ of the Company or any Affiliate, or interfere in any way with the rights
of the Company or any Affiliate to terminate his employment at any time.
(c) Neither the members of the Board nor any member of the Committee
shall be liable for any act, omission, or determination taken or made in good
faith with respect to the Plan or any Option or Restricted Stock granted under
it; and the members of the Board and the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage, or expense (including counsel fees) arising therefrom to the full
extent permitted by law and under any directors and officers liability or
similar insurance coverage that may be in effect from time to time.
(d) As partial consideration for the granting of each Option or award
of Restricted Stock hereunder, the Optionee or recipient shall agree with the
Company that he will keep confidential all information and knowledge which he
has relating to the manner and amount of his participation in the Plan;
provided, however, that such information may be disclosed as required by law or
given in confidence to the individual's spouse, tax or financial advisors, or
to a financial institution to the extent that such information is necessary to
secure a loan. In the event any breach of this promise comes to the attention
of the Committee, it shall take into consideration such breach, in determining
whether to grant any future Option or award any future Restricted Stock to such
individual, as a factor militating against the advisability of granting any
such future Option or awarding any such future Restricted Stock to such
individual.
(e) Participation in the Plan shall not preclude an individual from
eligibility in any other stock option plan of the Company or any Affiliate or
any old age benefit, insurance, pension, profit sharing, retirement, bonus, or
other extra compensation plans which the Company or any Affiliate has adopted,
or may, at any time, adopt for the benefit of its employees or directors.
(f) Any payment of cash or any issuance or transfer of Shares to the
Optionee, or to his legal representative, heir, legatee, or distributee, in
accordance with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Board or Committee
may require any Optionee, legal representative, heir, legatee, or distributee,
as a condition precedent to such payment, to execute a release and receipt
therefor in such form as it shall determine.
(g) Neither the Committee nor the Board nor the Company guarantees the
Shares from loss or depreciation.
(h) All expenses incident to the administration, termination, or
protection of the Plan, including, but not limited to, legal and accounting
fees, shall be paid by the Company or its Affiliates.
(i) Records of the Company and its Affiliates regarding an
individual's period of employment, termination of employment and the reason
therefor, leaves of absence, re-employment, tenure as a director, and other
matters shall be conclusive for all purposes hereunder, unless determined by
the Board or Committee to be incorrect.
(j) The Company and its Affiliates shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished, all of the
information or documentation which is necessary or required by the Board or
Committee to perform its duties and functions under the Plan.
<PAGE> 12
(k) The Company assumes no obligation or responsibility to an Optionee
or recipient of Restricted Stock or his personal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Board or Committee.
(l) Any action required of the Company shall be by resolution of its
Board or by a person authorized to act by resolution of the Board. Any action
required of the Committee shall be by resolution of the Committee or by a
person authorized to act by resolution of the Committee.
(m) If any provision of this Plan or any Agreement is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions of the Plan or the Agreement, as the case may
be, but such provision shall be fully severable and the Plan or the Agreement,
as the case may be, shall be construed and enforced as if the illegal or
invalid provision had never been included herein or therein.
(n) Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by mail. Any notice
required or permitted to be delivered hereunder shall be deemed to be delivered
on the date on which it is personally delivered, or, whether actually received
or not, on the third business day after it is deposited in the United States
mail, certified or registered, postage prepaid, addressed to the person who is
to receive it at the address which such person has theretofore specified by
written notice delivered in accordance herewith. The Company, an Optionee or a
recipient of Restricted Stock may change, at any time and from time to time, by
written notice to the other, the address which it or he had theretofore
specified for receiving notices. Until changed in accordance herewith, the
Company and each Optionee and recipient of Restricted Stock shall specify as
its and his address for receiving notices the address set forth in the
Agreement pertaining to the shares of Stock to which such notice relates.
(o) Any person entitled to notice hereunder may waive such notice.
(p) The Plan shall be binding upon the Optionee or recipient of
Restricted Stock, his heirs, legatees, and legal representatives, upon the
Company, its successors, and assigns, and upon the Board and Committee, and
their successors.
(q) The titles and headings of Sections and paragraphs are included
for convenience of reference only and are not to be considered in construction
of the provisions hereof.
(r) All questions arising with respect to the provisions of the Plan
shall be determined by application of the laws of the State of Nevada except to
the extent Nevada law is preempted by federal law. The obligation of the
Company to sell and deliver Shares hereunder is subject to applicable laws and
to the approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Shares.
(s) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Plan dictates, the plural shall be
read as the singular and the singular as the plural.
21. WITHHOLDING TAXES
Federal, state, or local law may require the withholding of taxes
applicable to gains resulting from the exercise of Nonqualified Options granted
hereunder. Unless otherwise prohibited by the Committee, each participant may
satisfy any such withholding tax obligation by electing (i) to tender a cash
payment to the Company, (ii) to authorize the Company to withhold from the
shares of stock of the Company otherwise issuable to the participant as a
result of the exercise of the Nonqualified Option a number of shares having a
fair market value, as of the date the withholding tax obligation arises, equal
to the withholding obligations, or, at the election of the participant, up to
the maximum of taxes due (the "Share Withholding Alternative"), (iii) to
deliver to the Company previously acquired shares of common stock
<PAGE> 13
of the Company having a fair market value, as of the date the withholding tax
obligation arises, equal to the amount to be withheld, or at the election of
the participant, up to the maximum of taxes due, or (iv) any combination of the
foregoing, provided the combination permits the payment of all withholding
taxes attributable to the exercise of the Nonqualified Option. Any withholding
election may not be made within six months after the grant of the stock option
(except in the event of death or disability of the optionee). A participant's
election to pay the withholding tax obligation must be made (a) in the case of
officers or directors of the Company, (i) during the period beginning on the
third business day following the date of release of the Company's quarterly or
annual summary statement of sales and earnings and ending on the twelfth
business day following such date (but in no event later than the Tax Date, as
hereinafter defined), or (ii) at least six months less one day prior to the Tax
Date, and (b) in the case of other participants, at any time; provided however,
that if any participant (whether or not he is an officer or director) elects to
have his withholding tax obligation satisfied (in whole or in part) through the
Share Withholding Alternative, then such election shall be void and of no legal
effect unless it is made in writing delivered to the Company before the time of
exercise, or simultaneously with the exercise, of such participant's
Nonqualified Option. A valid and binding written election of the Share
Withholding Alternative shall be irrevocable. A participant's failure to elect
a withholding alternative prior to the time such election is required to be
made shall be deemed to be an election to pay the withholding tax by tendering
a cash payment to the Company. For purposes of this Section 21, the fair market
value of the shares used to pay withholding taxes is the mean between the
highest and lowest price quoted on the New York Stock Exchange for one share of
common stock of the Company on the Tax Date. Also, as used in this Section 21,
"Tax Date" shall mean the date on which a withholding tax obligation arises in
connection with an exercise of a nonqualified stock option, which date shall be
presumed to be the date of exercise, unless shares subject to a substantial
risk of forfeiture (as defined in section 83(c)(1) or (c)(3) of the Code) are
issuable on exercise of the option and the participant does not make a timely
election under section 83(b) of the Code with respect thereto, in which case
the Tax Date for such shares is the date on which the substantial risk of
forfeiture lapses. Fractional shares remaining after payment of the
withholding taxes shall be paid to the participant in cash.
<PAGE> 1
EXHIBIT 13
1997 Annual Report
Centex
Construction
Products, Inc.
It all begins
within the
Earth
[PICTURE OF QUARRY FACE]
<PAGE> 2
One earth, a wealth of minerals: limestone, gypsum, simple rock
There to be discovered, extracted, processed, combined, mixed
Transformed into materials that benefit mankind.
Products that become:
Sidewalks, roads and bridges that lead us where we want to go.
Foundations of our family homes.
Walls that shelter and make us feel secure.
Buildings where we work and play as we dwell upon the earth
Within which it all begins.
Centex Construction Products, Inc. (CXP) produces and distributes building
materials used in the construction of the nation's homes, commercial and
industrial buildings, and infrastructure. As of March 31, 1997,
CXP was 51.4% owned by Centex Corporation.
TABLE OF CONTENTS
Financial Highlights 2
Letter to Our Shareholders 3
Review of Operations 12
Financial Information 13
[Picture of Aggregates Plant and
Finished Aggregates Stockpile
with Cement Silos in Background]
<PAGE> 3
CEMENT
CXP's four manufacturing plants and a network of 12 distribution terminals
produce and market Cement in Texas, northern Illinois, the Rocky Mountain
states, Nevada and northern California. Annual production capacity, net of two
joint-venture owners' interests, is approximately 2.0 million tons, or about
2.5% of the nation's total capacity. CXP is the sixth largest
domestically-owned Cement manufacturer.
GYPSUM WALLBOARD
CXP's three Gypsum Wallboard manufacturing facilities, located in Albuquerque
and Bernalillo, New Mexico and in Eagle County, Colorado, have a total annual
production capacity of approximately 1.1 billion square feet. This represents
about 4.2% of total U.S. capacity. CXP's Gypsum Wallboard production is shipped
by rail or by truck to markets throughout the contiguous United States.
CONCRETE AND
AGGREGATES
CXP's Readymix Concrete operations are located in the Austin, Texas area and in
northern California. CXP also produces and markets Aggregates from its deposit
near Sacramento, which is the largest single permitted sand and gravel deposit
in northern California, as well as from a deposit in Austin. The Aggregates
operation's total annual single shift production capacity is about 2.3 million
tons.
<PAGE> 4
Centex Construction Products, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
------------------------------------------------------------
For the Years Ended March 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $239,380 $222,594 $194,313 $166,826 $136,526
Earnings Before Income Taxes $ 64,406 $ 52,304 $ 33,829 $ 16,580 $ 4,111
Net Earnings $ 41,799 $ 33,944 $ 21,820 $ 10,240 $ 3,112
Earnings Per Share (1) $ 1.89 $ 1.48 $ 0.95 $ 0.45 $ 0.14
Cash Dividends Per Share (2) $ 0.20 $ 0.05 $ -- $ -- $ --
Debt $ 2,640 $ 720 $ 24,500 $ 16,200 $ 38,943
Stockholders' Equity $239,436 $216,462 $183,405 $170,839 $160,599
Average Shares Outstanding (1) 22,148 22,970 22,988 23,000 23,000
Book Value Per Share At Year End (1) $ 10.89 $ 9.42 $ 7.99 $ 7.43 $ 6.98
</TABLE>
(1) Prior to April 1994, CXP was a wholly-owned subsidiary of Centex
Corporation and accordingly did not report per share information. To facilitate
comparability between periods, per share data for 1993 and 1994 has been
presented using the 23,000,000 shares outstanding immediately after the Initial
Public Offering.
(2) Declared initial quarterly cash dividend of five cents per share on March
12, 1996.
<TABLE>
<CAPTION>
Revenues
($ in Millions)
[Chart]
<S> <C> <C>
93 $137
94 $167
95 $194
96 $223
97 $239
</TABLE>
<TABLE>
<CAPTION>
Net Earnings
($ in Millions)
[Chart]
<S> <C> <C>
93 $3.1
94 $10.2
95 $21.8
96 $33.9
97 $41.8
</TABLE>
2
<PAGE> 5
To Our Shareholders
Since CXP's Initial Public Offering in April 1994, the company has progressed
steadily, reporting 12 consecutive quarters of year-over-year earnings
improvements and a three-fold increase in net earnings. Bolstered by a
sustained expansion of the U.S. economy and resulting demand for CXP's
products, the company's continued focus on productivity and profitability
raised fiscal 1997 revenues, net earnings, earnings per share and return on net
assets to record levels.
FISCAL 1997 HIGHLIGHTS
- Historically high sales volume of Cement and Gypsum Wallboard and improved
net pricing in all segments resulted in fiscal 1997's revenue gain to
$239,380,000, 8% higher than $222,594,000 in fiscal 1996.
- Improved margins in our Cement and Gypsum Wallboard segments increased CXP's
fiscal 1997 net earnings 23% to $41,799,000 or $1.89 per share, from
$33,944,000 or $1.48 per share in fiscal 1996.
- CXP's consolidated gross operating margin rose to a record 28% in fiscal
1997, a 12% improvement over last year's margin of 25%, and return on net
assets escalated concurrently.
- During the year, CXP repurchased 1,038,100 shares of its own stock from the
public.
- In February 1997, CXP acquired Eagle-Gypsum Products' gypsum wallboard
plant and a related cogeneration electrical power facility located in Eagle
County, Colorado.
<TABLE>
<CAPTION>
Operating Margin
(Percent)
[Chart]
<S> <C> <C>
93 5%
94 11%
95 19%
96 25%
97 28%
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Share
(Dollars)
[Chart]
<S> <C> <C>
93 $0.14
94 $0.45
95 $0.95
96 $1.48
97 $1.89
</TABLE>
3
<PAGE> 6
The acquisition expands the total productive capacity of our Gypsum
Wallboard operations 60% from approximately 700 million square feet to 1.1
billion square feet. The new operation's first month of production increased
CXP's fiscal 1997 Gypsum Wallboard production by more than 4%.
The Eagle facility's combination with CXP's existing Gypsum Wallboard
plants in the Albuquerque, New Mexico area gives CXP a solid regional marketing
position. The market synergy and improved overhead efficiencies achieved by
joining the two operations will positively impact CXP's future earnings. The
new combined organization recently began doing business as American Gypsum and
is marketing CXP's Gypsum Wallboard products under the brand name "Eagle Rock."
The acquisition purchase price of $52.0 million plus $4.0 million of
working capital was substantially funded from CXP's excess cash, leaving CXP
virtually debt-free as it pursues additional expansion opportunities. As the
business cycle continues to mature, we believe CXP will find other
opportunities to make reasonably priced acquisitions, enabling the company to
continue to provide our shareholders with attractive returns in the future.
SEARCHING FOR RELATED OPPORTUNITIES
All our existing operations - Cement, Gypsum Wallboard and Aggregates - employ
many of the same extraction, mining and manufacturing technologies. As CXP
continues to actively seek out and evaluate acquisition opportunities, it is
focusing on construction products-related companies that utilize these same
technologies.
<TABLE>
<CAPTION>
Stockholders' Equity
($ in Millions)
[Chart]
<S> <C> <C>
93 $161
94 $171
95 $183
96 $216
97 $239
</TABLE>
<TABLE>
<CAPTION>
EBITDA Cash Flow
($ in Millions)
[Chart]
<S> <C> <C>
93 $20
94 $31
95 $50
96 $67
97 $77
</TABLE>
4
<PAGE> 7
During its three years as a public company, CXP has repurchased 1,078,296
of its own shares and from time to time may repurchase additional shares.
During fiscal 1997, CXP's Board of Directors authorized the company to
repurchase an additional 1,000,000 shares of stock, raising the current
repurchase authorization to 2,000,000 shares.
We appreciate our excellent relationships with our customers, suppliers
and investors and want to offer a special word of thanks to our employees for
their support. Their performance, melded with efficient use of the company's
physical assets and market opportunities, produced the past three consecutive
years of record earnings and many years of progress prior to that time. We also
want to welcome our Eagle-Gypsum workforce to the CXP organization, which is
now 1,050 employees strong.
OUTLOOK
Even though the expansion phase of the current business cycle is long by
historic standards and could be subject to a slowdown, we remain cautiously
optimistic about fiscal 1998. The economic climate remains positive and should
enable CXP to sustain its momentum. Construction activity is strong and the
supply/demand balance in our markets should positively impact earnings.
CXP is the strongest it has ever been operationally and is poised for
continued growth. Given a stable economic environment, we expect CXP to report
another record performance in fiscal 1998.
/s/ Laurence E. Hirsch /s/ O.G. Dagnan
- ------------------------ -------------------------------
Laurence E. Hirsch O.G. Dagnan
Chairman President and
Chief Executive Officer
June 12, 1997
[Picture of Larry Hirsch and Greg Dagnan]
5
<PAGE> 8
Cement
Cement revenues rose 6% to $133.3 million this year and operating profits
increased 13% to $39.8 million, primarily due to higher sales prices at all of
our plants and to improved operating margins in our western region plants.
CXP's average Cement net sales price for fiscal 1997 was $63.66 per ton, 6%
higher than last year. Total Cement sales volume of 2,095,000 tons in 1997 was
slightly higher than fiscal 1996 volume.
During fiscal 1997, CXP's four Cement facilities (two wholly-owned plants
located in Nevada and Wyoming and two 50%-owned plants in Texas and Illinois)
operated at capacity and were "sold out" for the ninth consecutive year. All of
CXP's plants utilize fuel-efficient "dry process" technology and do not burn
hazardous waste fuel.
During the year, we corrected a dust collector problem associated with the
previously completed $12 million reconstruction of an existing kiln at our
Wyoming plant. The project added 150,000 tons, or 30%, to the plant's annual
net production and about 8% to CXP's total Cement production.
In quarries located near each of our four cement plants, CXP mines limestone.
[Picture of Cement Bag, Glove and Cement]
6
<PAGE> 9
[Picture of Texas-Lehigh Quarry]
<PAGE> 10
Gypsum Wallboard
Gypsum Wallboard revenues increased 24% to $72.2 million in fiscal 1997 while
operating earnings jumped 72% to $20.6 million due to several factors: a 10%
increase in sales volume to 726 million square feet (MMSF); a 13% increase in
our average net sales price to $99.39; and a 57% increase in our Gypsum
Wallboard operating margin. Both of CXP's existing plants in New Mexico
operated at capacity during the fiscal year.
In February 1997, CXP fulfilled a major strategic objective with the
acquisition of the Eagle-Gypsum Products gypsum wallboard plant and a related
cogeneration facility in Eagle County, Colorado, expanding our total annual
production capacity by approximately 60% to 1.1 billion square feet. CXP
expects to significantly expand the Eagle plant's production capacity. In
addition, the acquisition creates an efficient regional marketing network for
CXP's Gypsum Wallboard facilities in New Mexico and Colorado.
The manufacturing of wallboard at our facilities requires the extraction of
gypsum.
[Picture of 3 sheets of gypsum wallboard and an Eagle silver dollar coin]
8
<PAGE> 11
[Picture of Eagle Gypsum Quarry
and wheel loader]
<PAGE> 12
Concrete and Aggregates
Revenues from our Concrete and Aggregates operations located in Austin, Texas
and northern California were $36.8 million in fiscal 1997, 8% lower than last
year. Segment operating earnings of $4.8 million were 14% lower than last year.
Higher sales prices for both products were negated by lower Concrete and
Aggregates sales volume and higher production cost.
Concrete sales volume for fiscal 1997 was 603,000 cubic yards, 4% below
fiscal 1996 volume, primarily due to the impact of wet weather in the Austin
market late in the year. The higher Concrete net sales price was offset by
increased costs for production and raw materials.
Fiscal 1997 Aggregates sales volume totaled 2.1 million tons, 26% lower
than last year, due mostly to our fiscal 1996 sale of a north Texas sand and
gravel operation. Excluding sales volume from the sold operation, Aggregates
volume declined just 2%.
CXP uses similar techniques to extract all its basic raw materials, including
aggregates.
[Picture of aggregates and safety glasses]
10
<PAGE> 13
[Picture of Haul Truck being loaded
with aggregates by a wheel loader
at Centex Materials' quarry]
<PAGE> 14
STRATEGIC LOCATIONS
CXP operates four Cement plants, 12 Cement distribution terminals, three Gypsum
Wallboard plants, four Gypsum Wallboard reload centers, one Gypsum Wallboard
distribution center, 10 Readymix Concrete batch plant locations and two
Aggregates processing locations. The principal markets for our Cement products
are Texas, northern Illinois (including Chicago), the Rocky Mountains, northern
Nevada and northern California. Gypsum Wallboard is distributed throughout the
continental United States. Concrete and Aggregates are sold to local readymix
producers and paving contractors in the Austin, Texas area and northern
California.
CXP's strategically located plants in geographically diverse locations
reduce our dependence on any one market.
Centex Construction Products-Fiscal 1997
[Picture of U.S. Map indicating locations of
Company Operations]
<PAGE> 15
<TABLE>
<CAPTION>
Financial Information
<S> <C>
Statements of Consolidated Earnings 14
Consolidated Balance Sheets 15
Statements of Consolidated Cash Flows 16
Statements of Consolidated Stockholders' Equity 17
Notes to Consolidated Financial Statements 18
Report of Independent Public Accountants 28
Management's Discussion and Analysis of Results
of Operations and Financial Condition 29
Quarterly Results 33
Summary of Selected Financial Data 34
Board of Directors and Officers 36
Corporate Information 37
Stock Prices and Dividends 37
</TABLE>
13
<PAGE> 16
Centex Construction Products, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
---------------------------------------
For the Years Ended March 31,
---------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Cement $ 133,348 $ 125,705 $ 109,900
Gypsum Wallboard 72,184 58,343 51,730
Concrete and Aggregates 36,809 39,902 35,217
Other, net 1,823 2,782 1,601
Less Intersegment Sales (4,784) (4,138) (4,135)
--------- --------- ---------
239,380 222,594 194,313
--------- --------- ---------
COSTS AND EXPENSES
Cement 93,551 90,374 83,893
Gypsum Wallboard 51,619 46,409 44,482
Concrete and Aggregates 32,041 34,344 32,631
Less Intersegment Purchases (4,784) (4,138) (4,135)
Corporate General and Administrative 3,904 2,498 2,343
Interest (Income) Expense, net (1,357) 803 1,270
--------- --------- ---------
174,974 170,290 160,484
--------- --------- ---------
EARNINGS BEFORE INCOME TAXES 64,406 52,304 33,829
Income Taxes 22,607 18,360 12,009
--------- --------- ---------
NET EARNINGS $ 41,799 $ 33,944 $ 21,820
========= ========= =========
EARNINGS PER SHARE $ 1.89 $ 1.48 $ 0.95
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE> 17
Centex Construction Products, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------
March 31,
-----------------------------
1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets -
Cash and Cash Equivalents $ 4,812 $ 20,799
Accounts and Notes Receivable, net 38,700 33,532
Inventories 31,482 29,691
--------- ---------
Total Current Assets 74,994 84,022
--------- ---------
Property, Plant and Equipment 363,409 308,600
Less Accumulated Depreciation (139,033) (128,419)
--------- ---------
Property, Plant & Equipment, net 224,376 180,181
--------- ---------
Notes Receivable, net 1,407 1,395
Other Assets 4,860 3,977
--------- ---------
$ 305,637 $ 269,575
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities -
Accounts Payable $ 16,472 $ 15,020
Accrued Liabilities 28,254 23,029
Notes Payable 2,000 --
Current Portion of Long-term Debt 80 80
--------- ---------
Total Current Liabilities 46,806 38,129
--------- ---------
Long-term Debt 560 640
Deferred Income Taxes 18,835 14,344
Stockholders' Equity -
Common Stock, Par Value $0.01; Authorized 50,000,000
Shares; Issued and Outstanding 21,983,814 and
22,978,504 Shares, respectively 220 230
Capital in Excess of Par Value 147,212 161,617
Retained Earnings 92,004 54,615
--------- ---------
Total Stockholders' Equity 239,436 216,462
--------- ---------
$ 305,637 $ 269,575
========= =========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 18
Centex Construction Products, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------
For the Years Ended March 31,
------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $ 41,799 $ 33,944 $ 21,820
Adjustments to Reconcile Net Earnings to Net Cash
Provided by Operating Activities -
Depreciation, Depletion and Amortization 13,752 13,791 14,576
Deferred Income Tax Provision 4,491 7,639 2,658
Gain on Sale of Assets -- (783) --
Increase in Accounts and Notes Receivable (1,456) (6,073) (1,203)
(Increase) Decrease in Inventories (30) 1,053 (2,014)
Increase in Accounts Payable 10 424 64
Increase in Accrued Liabilities 5,225 859 3,078
(Increase) Decrease in Other Assets (883) 974 2,207
-------- -------- ---------
62,908 51,828 41,186
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, Plant and Equipment Additions, net (5,934) (15,294) (5,718)
Proceeds from Asset Dispositions -- 5,308 --
Acquisition of Centex Eagle Gypsum (56,006) -- --
-------- -------- ---------
(61,940) (9,986) (5,718)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to Notes Payable 7,500 -- --
Reductions in Notes Payable (5,500) -- --
Repayment of Notes Payable to Centex -- -- (15,585)
(Decrease) Increase in Other Long-term Debt (80) (23,860) 24,500
Increase (Decrease) in Current Portion of Long-term Debt -- 80 (615)
Proceeds from Bridge Loan -- -- 192,000
Repayment of Bridge Loan -- -- (192,000)
Dividends Paid to Centex -- -- (162,600)
Stock Sale Net Proceeds -- -- 153,733
Proceeds from Stock Option Exercises 561 262 --
Retirement of Common Stock (14,976) -- (387)
Payment of Deferred Income Taxes to Affiliate -- -- (34,328)
Dividends Paid to Shareholders (4,460) -- --
-------- -------- ---------
(16,955) (23,518) (35,282)
-------- -------- ---------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (15,987) 18,324 186
CASH AT BEGINNING OF PERIOD 20,799 2,475 2,289
-------- -------- ---------
CASH AT END OF PERIOD $ 4,812 $ 20,799 $ 2,475
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 19
Centex Construction Products, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at Beginning of Period $ 230 $ 230 $ 2
Stock Split -- -- 111
Stock Sale -- -- 117
Retirement of Common Stock (10) -- --
--------- --------- ---------
Balance at End of Period 220 230 230
--------- --------- ---------
CAPITAL IN EXCESS OF PAR VALUE
Balance at Beginning of Period 161,617 161,355 22,466
Stock Split -- -- (111)
Stock Sale -- -- 153,616
Dividend to Centex -- -- (14,229)
Retirement of Common Stock (14,966) -- (387)
Stock Option Exercises 561 262 --
--------- --------- ---------
Balance at End of Period 147,212 161,617 161,355
--------- --------- ---------
RETAINED EARNINGS
Balance at Beginning of Period 54,615 21,820 148,371
Dividend to Centex -- -- (148,371)
Dividends to Shareholders (4,410) (1,149) --
Net Earnings 41,799 33,944 21,820
--------- --------- ---------
Balance at End of Period 92,004 54,615 21,820
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY $ 239,436 $ 216,462 $ 183,405
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 20
Centex Construction Products, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(A) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Centex
Construction Products, Inc. and its majority-owned subsidiaries ("CXP" or the
"Company") after the elimination of all significant intercompany balances and
transactions. In addition, the Company holds 50% joint venture interests in its
cement plants in Illinois and Texas and has proportionately consolidated its
pro rata interest in the revenues, expenses, assets and liabilities of those
ventures.
On April 19, 1994, the Company completed an Initial Public Offering
("IPO") of 51% of its common stock. As a result of the IPO, Centex
Corporation's ("Centex") ownership of the Company was reduced to 49%, with the
public owning 51%. Prior to that time, the Company was a wholly owned
subsidiary of Centex. See Note (I) for further discussion.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable have been shown net of the allowance for doubtful
accounts of $2.1 million at both March 31, 1997 and 1996. The Company has no
significant credit risk concentration among its diversified customer base.
Notes receivable at March 31, 1997 are collectible primarily over three
years. The weighted average interest rate at March 31, 1997 and 1996 was 9.1%
and 8.6%, respectively.
INVENTORIES
Inventories are stated at the lower of average cost (including applicable
material, labor, depreciation, and plant overhead) or market. Inventories
consist of the following:
<TABLE>
<CAPTION>
-------------------------
March 31,
-------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw Materials and Materials-in-Progress $ 8,448 $ 6,949
Finished Cement 5,170 5,368
Aggregates 2,088 2,092
Gypsum Wallboard 1,932 2,124
Repair Parts and Supplies 13,241 12,395
Fuel and Coal 603 763
------- -------
$31,482 $29,691
======= =======
</TABLE>
18
<PAGE> 21
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized and depreciated. Repairs and maintenance are
expensed as incurred. Depreciation is provided on a straight-line basis over
the estimated useful lives of depreciable assets. Raw material deposits are
depleted as such deposits are extracted for production utilizing the
units-of-production method. Costs and accumulated depreciation applicable to
assets retired or sold are eliminated from the accounts, and any resulting
gains or losses are recognized at such time. The estimated lives of the related
assets are as follows:
Plants 20 to 30 years
Buildings 20 to 40 years
Machinery and Equipment 3 to 20 years
INCOME TAXES
Through April 19, 1994, the Company was included in the Centex consolidated
federal tax return. The Company accounted for income taxes on a separate
company basis without benefit of a surtax exemption. Accordingly, related
payables and receivables were due to or from Centex. Subsequent to April 19,
1994, the Company files its own separate consolidated federal tax returns.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." That
statement requires, among other things, that deferred taxes be provided on
differences between the financial reporting basis and tax basis of assets and
liabilities using existing tax laws and rates.
STATEMENTS OF CONSOLIDATED EARNINGS - SUPPLEMENTAL DISCLOSURES
Selling, general and administrative expenses of the operating units are
included in costs and expenses of each segment. Corporate general and
administrative expenses are shown separately in the statements of consolidated
earnings. Total selling, general and administrative expenses for each of the
periods are summarized below:
<TABLE>
<CAPTION>
------------------------------------------
For the Years Ended March 31,
------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Units Selling, General and Administrative $12,808 $11,442 $10,866
Corporate General & Administrative 3,904 2,498 2,343
------- ------- -------
$16,712 $13,940 $13,209
======= ======= =======
</TABLE>
Maintenance and repair expenses are included in each segment's costs and
expenses. The Company incurred expenses of $26.2 million, $23.8 million and
$26.0 million in the years ended March 31, 1997, 1996 and 1995, respectively,
for maintenance and repairs.
Other net revenues include clinker sales, lease and rental income, asset
sale income, and trucking income as well as other miscellaneous revenue items
and costs which have not been allocated to a business segment.
STATEMENTS OF CONSOLIDATED CASH FLOWS - SUPPLEMENTAL DISCLOSURES
All cash equivalents have original maturities of three months or less.
Interest payments made during the years ended March 31, 1997, 1996 and
1995 were $0.2 million, $1.3 million and $1.8 million, respectively.
Net payments made for federal and state income taxes during the years
ended March 31, 1997, 1996 and 1995 were $17.9 million, $9.8 million and $42.2
million, respectively. Included therein are payments to (receipts from) Centex
of ($2.9) million and $35.3 million during the years ended March 31, 1996 and
1995, respectively.
In connection with a litigation settlement, the Company reclassified into
property, plant, and equipment $4.2 million of construction cost that was
previously classified as a receivable in the year ended March 31, 1996.
19
<PAGE> 22
EMPLOYEE BENEFIT PLANS
Certain of the Company's hourly employees are covered by defined benefit plans.
At April 1, 1996, the Company's pro rata share of the projected benefit
obligation (assuming a 7 1/4% discount rate) was $3.3 million. The market value
of assets available to pay these obligations at April 1, 1996, was $3.1
million.
In addition, certain salaried employees previously participated in
Centex's Profit Sharing and Retirement plan. Subsequent to the IPO, the Company
established its own Profit Sharing and Retirement plan, which is similar to the
Centex plan. The expenses for each period were as follows:
<TABLE>
<CAPTION>
--------------------------------------
For the Years Ended March 31,
--------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Defined Benefit Plans $ 219 $ 176 $176
Defined Contribution Plan $1,053 $1,038 $934
</TABLE>
Statement of Financial Accounting Standards No. 106, "Employers Accounting
for Postretirement Benefits Other Than Pensions," specifies certain required
methods of accounting for postretirement benefits other than pensions. This
pronouncement has no impact on the Company's financial statements as the
Company has no other postretirement obligations.
EARNINGS PER SHARE
Earnings per common share is based on the weighted average number of common
shares outstanding in 1997, 1996 and 1995 of 22,148,222, 22,969,643 and
22,987,768, respectively.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent with the
1997 presentation.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS No. 121). SFAS No. 121, which is
effective for fiscal years beginning after December 15, 1995, requires that
certain long-lived assets and intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company adopted SFAS No. 121 in fiscal 1997,
and this pronouncement had no impact on the financial statements of the
Company.
In October 1995, the FASB Issued Statement No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123). SFAS No. 123, which is also effective
for fiscal years beginning after December 15, 1995, allows companies either to
continue to measure compensation cost based on the method prescribed by
Accounting Principles Board Opinion No. 25 ( APB No. 25) or adopt a "fair
value" method of accounting for all employee stock-based compensation. The
Company adopted SFAS No. 123 in fiscal 1997. The Company will continue utilizing
the accounting for stock issued to employees prescribed by APB No. 25 and has
implemented the expanded disclosure requirements. The adoption of SFAS No. 123
did not have any impact on the financial position or results of operations of
the Company. See Note (G) for further discussion.
Statement of Financial Accounting Standards No. 128,"Earnings Per Share,"
issued in February 1997 establishes standards for computing and presenting
earnings per share (EPS). This statement replaces the presentation of primary
EPS with a presentation of basic EPS and requires dual presentation of basic and
diluted EPS. The Company will adopt this statement in its fiscal year ending
March 31, 1998.
20
<PAGE> 23
(B) PROPERTY, PLANT AND EQUIPMENT
Cost by major category and accumulated depreciation are summarized below:
<TABLE>
<CAPTION>
-------------------------------
March 31,
-------------------------------
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Land and Quarries $ 37,420 $ 36,419
Plants 284,158 233,221
Buildings, Machinery and Equipment 41,831 38,960
--------- ---------
363,409 308,600
Accumulated Depreciation (139,033) (128,419)
--------- ---------
$ 224,376 $ 180,181
========= =========
</TABLE>
(C) INDEBTEDNESS
<TABLE>
<CAPTION>
SHORT-TERM DEBT
Short-term debt is set forth below:
---------------------
March 31,
---------------------
1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Bank Line of Credit, with Interest at Prevailing Rates,
Due February 1998, Unsecured $2,000 $ --
</TABLE>
On February 24, 1997, the Company established a $10,000,000 uncommitted
unsecured line of credit (the "Line") from a bank. Borrowings under the Line
bear interest at prevailing market rates. The Line is utilized for short-term
working capital needs. The weighted average interest rate on outstanding
borrowings during fiscal 1997 was 5.9%. The interest rate on the balance
outstanding at March 31, 1997 was 7 1/4%.
LONG-TERM DEBT
Long-term debt is set forth below:
<TABLE>
<CAPTION>
----------------------
March 31,
----------------------
1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Property Note, Interest at 7%, Due March 2005, Secured $ 640 $ 720
Less Current Maturities (80) (80)
----- -----
$ 560 $ 640
===== =====
</TABLE>
CREDIT FACILITY
Upon the completion of the April 19, 1994 IPO, the Company established a $65
million unsecured long-term revolving credit line (the "Bank Revolver").
Borrowings under the Bank Revolver bear interest, at the option of the Company,
at (i) a Eurodollar-based rate that varies depending on the Company's ratio of
total indebtedness to total capitalization (the "Debt-to-Capital Ratio") or
(ii) the greater of the bank's base rate or the federal funds rate plus .5%.
Under the Bank Revolver, the Company is obligated to pay certain fees,
including an annual commitment fee on the unused portion of the commitment. The
Bank Revolver contains certain customary restrictive covenants (including
restrictions on the consummation of mergers or asset sales, the payment of
dividends, the creation of liens and the incurrence of additional indebtedness)
and requires the Company to maintain or meet certain financial ratios or tests.
Among other things, the Bank Revolver requires the Company to maintain a
minimum ratio of earnings before interest and taxes to interest and not to
exceed a maximum Debt-to-Capital Ratio and to meet a minimum tangible net worth
test. The Company was in compliance with such financial ratios and tests at
March 31, 1997, and throughout the fiscal year then ended. On March 20, 1996,
the Bank Revolver was amended to lower the maximum
21
<PAGE> 24
borrowing capacity to $35 million, reduce the annual commitment fee, create a
new lower interest rate bracket, and extend the commitment four years to expire
on March 31, 2001. The Company had no borrowings outstanding under the Bank
Revolver as of March 31, 1997 or 1996.
(D) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
--------------------------------------------
For the Years Ended March 31,
--------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Provision (Benefit)
Federal $16,799 $ 12,174 $ 38,495
State 1,317 (1,453) 3,700
------- -------- --------
18,116 10,721 42,195
------- -------- --------
Deferred Provision (Benefit)
Federal 3,038 4,012 (28,214)
State 1,453 3,627 (1,972)
------- -------- --------
4,491 7,639 (30,186)
------- -------- --------
Provision for Income Taxes $22,607 $ 18,360 $ 12,009
======= ======== ========
</TABLE>
In connection with the IPO in April 1994, $34.3 million of deferred income
taxes became currently payable to Centex as a result of the Company no longer
being included in Centex's consolidated federal tax return.
The effective tax rates vary from the federal statutory rates due to the
following items:
<TABLE>
<CAPTION>
-------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings Before Income Taxes $ 64,406 $ 52,304 $ 33,829
======== ======== ========
Income Taxes at Statutory Rate $ 22,542 $ 18,306 $ 11,840
Increases (Decreases) in Tax Resulting from -
State Income Taxes, net 1,800 1,414 1,097
Statutory Depletion in Excess of Cost (1,957) (1,588) (1,147)
Other 222 228 219
-------- -------- --------
Provision for Income Taxes $ 22,607 $ 18,360 $ 12,009
======== ======== ========
Effective Tax Rate 35% 35% 35%
</TABLE>
The deferred income tax provision (benefit) results from the following
temporary differences in the recognition of revenues and expenses for tax and
financial reporting purposes:
<TABLE>
<CAPTION>
---------------------------------------------
For the Years Ended March 31,
---------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Excess Tax Depreciation and Amortization $ 5,048 $ 5,653 ($29,423)
Bad Debts (162) 269 (122)
Uniform Capitalization (151) 76 (11)
Accrual Changes (425) 685 (2,143)
Other 181 956 1,513
------- -------- --------
$ 4,491 $ 7,639 ($30,186)
======= ======== ========
</TABLE>
22
<PAGE> 25
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
March 31,
------------------------
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Items Giving Rise to Deferred Taxes
Excess Tax Depreciation and Amortization $ 19,006 $ 13,957
Other 3,962 3,782
-------- --------
22,968 17,739
-------- --------
Items Giving Rise to Prepaid Taxes
Accrual Changes (3,275) (2,850)
Bad Debts (694) (532)
Uniform Capitalization (164) (13)
-------- --------
(4,133) (3,395)
-------- --------
Net Deferred Income Tax Liability $ 18,835 $ 14,344
======== ========
</TABLE>
(E) BUSINESS SEGMENTS
The Company operates in three business segments: Cement, Gypsum Wallboard, and
Concrete and Aggregates, with Cement and Gypsum Wallboard being the Company's
principal lines of business. These operations are conducted in the United
States and include the mining of limestone and the manufacture, production,
distribution and sale of Portland cement (a basic construction material which
is the essential binding ingredient in concrete), the mining of gypsum and the
manufacture and sale of gypsum wallboard, the sale of readymix concrete, and
the mining and sale of aggregates (crushed stone, sand and gravel). These
products are used primarily in commercial and residential construction, public
construction projects and projects to build, expand and repair roads and
highways.
Demand for the Company products are 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 the low value-to-weight ratio of cement, concrete and
aggregates, these industries are largely regional and local with demand tied to
local economic factors that may fluctuate more widely than those of the nation
as a whole.
The Company operates four Cement plants, twelve Cement distribution
terminals, three Gypsum Wallboard plants, four Gypsum Wallboard reload centers,
a Gypsum Wallboard distribution center, ten Readymix Concrete batch plant
locations, and two Aggregate processing plant locations. The principal markets
for Cement products are Texas, northern Illinois (including Chicago, Illinois),
the Rocky Mountains, northern Nevada, and northern California. Gypsum Wallboard
is distributed throughout the continental United States. Concrete and
Aggregates are sold to local readymix producers and paving contractors, in the
Austin, Texas area and northern California.
23
<PAGE> 26
The following table sets forth certain financial information relating to the
Company's operations by segment:
<TABLE>
<CAPTION>
For the Years Ended March 31,
---------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Cement $ 133,348 $ 125,705 $ 109,900
Gypsum Wallboard 72,184 58,343 51,730
Concrete and Aggregates 36,809 39,902 35,217
Other, net 1,823 2,782 1,601
--------- --------- ---------
244,164 226,732 198,448
Less Intersegment Sales (4,784) (4,138) (4,135)
--------- --------- ---------
$ 239,380 $ 222,594 $ 194,313
========= ========= =========
SEGMENT OPERATING EARNINGS
Cement $ 39,797 $ 35,331 $ 26,007
Gypsum Wallboard 20,565 11,934 7,248
Concrete and Aggregates 4,768 5,558 2,586
Other, net 1,823 2,782 1,601
--------- --------- ---------
$ 66,953 $ 55,605 $ 37,442
========= ========= =========
IDENTIFIABLE ASSETS
Cement $ 141,622 $ 145,969 $ 142,122
Gypsum Wallboard 125,490 67,516 68,047
Concrete and Aggregates 28,939 28,749 33,128
Corporate and Other 9,586 27,341 6,806
--------- --------- ---------
$ 305,637 $ 269,575 $ 250,103
========= ========= =========
CAPITAL EXPENDITURES
Cement $ 2,915 $ 13,082 $ 3,680
Gypsum Wallboard 758 889 279
Concrete and Aggregates 2,602 1,746 1,869
Corporate and Other 40 43 89
--------- --------- ---------
$ 6,315 $ 15,760 $ 5,917
========= ========= =========
DEPRECIATION, DEPLETION AND AMORTIZATION
Cement $ 7,938 $ 7,778 $ 8,281
Gypsum Wallboard 3,331 2,908 2,987
Concrete and Aggregates 2,225 2,871 3,068
Corporate and Other 258 234 240
--------- --------- ---------
$ 13,752 $ 13,791 $ 14,576
========= ========= =========
</TABLE>
Segment operating earnings represent revenues less direct operating
expenses, segment depreciation, and segment selling, general and administrative
expenses. Corporate assets consist primarily of cash and cash equivalents,
general office assets and miscellaneous other assets.
(F) COMMITMENTS AND CONTINGENCIES
The Company, in the ordinary course of business, has various litigation,
commitments and contingencies. Management believes that none of the litigation
in which it or any subsidiary is involved, if finally determined unfavorably to
CXP, would have a material adverse effect on the consolidated financial
condition or results of operations of the Company.
The Company's operations and properties are subject to extensive and
changing federal, state and local laws, regulations and ordinances governing
the protection of the environment, as well as laws relating to worker health
and workplace safety. The Company carefully considers the requirements mandated
by such
24
<PAGE> 27
laws and regulations and has procedures in place at all of its operating units
to monitor compliance. Any matters which are identified as potential exposures
under these laws and regulations are carefully reviewed by management to
determine the Company's potential liability. Although management is not aware
of any exposures which would require an accrual under Statement of Financial
Accounting Standards No. 5, "Accounting for Contingencies," there can be no
assurance that prior or future operations will not ultimately result in
violations, claims or other liabilities associated with these regulations.
The Company has certain deductible limits under its workers' compensation
and liability insurance policies for which reserves are established based on
the estimated costs of known and anticipated claims.
The Company has certain operating leases covering manufacturing,
transportation and certain other facilities and equipment. Rental expense for
the fiscal years 1997, 1996, and 1995 totaled $2.3 million, $1.9 million and
$1.8 million, respectively. Minimum annual rental commitments as of March 31,
1997, under noncancelable leases are set forth as follows:
<TABLE>
<CAPTION>
------
Fiscal Year Total
- ----------------------------------------------------------------------------
<S> <C>
1998 $1,600
1999 $1,531
2000 $1,376
2001 $1,036
2002 $ 850
Thereafter $3,981
</TABLE>
(G) STOCK OPTION PLAN
The Company has a stock option plan for certain directors, officers and key
employees of the Company, the 1994 Stock Option Plan ("1994 Plan"). The 1994
Plan provides for a total of 2,000,000 shares to be reserved for issuance. The
exercise price of option grants under the 1994 Plan may not be less than the
fair market value at the date of grant. Option periods and exercise dates may
vary within a maximum period of 10 years. The options are performance-based
options and will vest on the achievement of specific financial goals of the
Company. Failure to meet the specified goals will delay vesting until the end
of the 10-year period. A summary of the activity of the 1994 Plan is presented
below.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------
1997 1996
-------------------------------------------------------------------
Number Weighted Avg. Number Weighted Avg.
of Shares Exercise Price of Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding Options at Beginning of Year 742,600 $ 12.12 768,300 $ 12.19
Granted 72,500 $ 14.00 30,000 $ 13.00
Exercised (43,410) $ 12.93 (18,700) $ 14.00
Forfeited/Expired (34,740) $ 12.36 (37,000) $ 13.38
--------- --------
Outstanding Options at End of Year 736,950 $ 12.25 742,600 $ 12.12
========= ========
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 1997:
<TABLE>
<CAPTION>
------------------------------------------- ----------------------------
Options Outstanding Options Exercisable
------------------------------------------- ----------------------------
Weighted Avg. Weighted Weighted
Number of Remaining Average Number of Average
Range of Shares Contractual Exercise Shares Exercise
Exercise Prices Outstanding Life Price Outstanding Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12.00 to $14.00 736,950 7.5 years $12.25 552,347 $ 12.06
</TABLE>
25
<PAGE> 28
The weighted-average fair value of options granted during fiscal year 1997 was
$3.96 and $3.56 for options granted in fiscal year 1996. Options available for
future grants were 1,200,940 at March 31, 1997.
The Company records proceeds from the exercise of options as additions to
common stock and capital in excess of par value. The federal tax benefit, if
any, is considered additional capital in excess of par value. No charges or
credits would be made to earnings unless options were to be granted at less
than fair market value at the date of grant.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123), encourages, but does not require
companies to record compensation cost for employee stock-based compensation
plans at fair value as determined by generally recognized option pricing models
such as the Black-Scholes model or the binomial model. Because of the inexact
and subjective nature of deriving stock option values using these methods, the
Company has adopted the disclosure-only provisions of SFAS No. 123 and
continues to account for stock-based compensation as it has in the past using
the intrinsic value method prescribed in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense has been recognized for options issued under the 1994
Plan. Had compensation cost for options issued under the 1994 Plan been
determined based on the fair value at the grant date for awards consistent with
the provisions of SFAS No. 123, the Company's net income and earnings per share
for the fiscal years ended March 31, 1997 and 1996 would not have been
materially different than those reported.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's notes payable and long-term debt are estimated
using discounted cash flow analyses based upon the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
The carrying values of the Company's notes payable and long-term debt
approximates fair value.
All assets and liabilities which are not considered financial instruments
have been valued using historical cost accounting. The carrying values of cash
and cash equivalents, accounts and notes receivable, accounts payable and
accrued liabilities approximate their fair values due to the short-term
maturities of these assets and liabilities.
(I) INITIAL PUBLIC OFFERING
On April 19, 1994 ("Closing Date") the Company completed the sale of 11,730,000
shares or 51% of its common stock through an IPO. The stock sales price was
$14.00 per share and net proceeds received, after commissions and offering
expenses, were $153.7 million. On the Closing Date, the Company paid a dividend
of $162.6 million to its parent, Centex Corporation. To fund the remainder of
the dividend and also pay its outstanding debt to Centex, the Company borrowed
funds under the Bank Revolver.
As a result of the IPO, approximately $34.3 million of deferred taxes became
payable to Centex during fiscal 1995. Payment was funded from cash flow from
operations and borrowings under the Bank Revolver.
The Company entered into certain agreements with Centex on the Closing Date
to define the Company's ongoing relationship with Centex. The major agreements
are:
Indemnification Agreement: The Company and Centex entered into an
Indemnification Agreement, pursuant to which (i) the Company agreed generally
to indemnify Centex against substantially all liabilities relating to the
businesses of the Company and its subsidiaries as they had been and will be
conducted, including environmental liabilities, and (ii) Centex agreed
generally to indemnify the Company against substantially all liabilities
relating to the businesses of Centex and its subsidiaries (other than the
Company and its subsidiaries) as they had been and will be conducted, including
environmental liabilities.
26
<PAGE> 29
Tax Separation Agreement: The Company and Centex entered into a Tax
Separation Agreement (the "Tax Agreement"). The Tax Agreement (i) provides for
the termination of any existing tax sharing or allocation arrangements between
the Company and Centex, (ii) specifies the manner in which the federal income
tax liability and certain state tax liabilities (including any subsequent
adjustments to such federal and state liabilities) of the consolidated group of
which Centex is the common parent (the "Group") will be allocated for the final
year in which the Company is a member of the Group and for any prior tax year of
the Group and (iii) specifies the manner in which audits or administrative or
judicial proceedings relating to federal income taxes and certain state taxes of
the Group will be controlled.
Administrative Services: Historically, the Company has participated in
various of Centex's overall employee benefit and administrative programs,
including the Profit Sharing and Retirement Plan of Centex Corporation,
internal audit, tax reporting, risk management and legal services. All
significant costs associated with the Company's operations under these programs
have historically been paid by the Company. Following the completion of the
IPO, the Company established its own employee benefit programs and files its
own tax return. Centex Service Company ("CSC"), a subsidiary of Centex,
provides the Company with employee benefit administration, public/investor
relations and certain other services. The Administrative Services Agreement
will expire on March 31, 1999, unless earlier terminated at the option of the
Company. The Company pays to CSC a fee of $18,750 per month, subject to annual
adjustment, for such services. In addition, the Company reimburses CSC for its
out-of-pocket expenses incurred in connection with the performance of such
services.
(J) ACQUISITIONS
The Company acquired all of the Common Units of Centex Eagle Gypsum Company,
L.L.C., a limited liability company, owned by Eagle-Gypsum Products and
National Energy System, Inc. on February 26, 1997 for a total purchase price of
$52.0 million plus $4.0 million of net working capital. The operations of
Centex Eagle Gypsum Company, L.L.C. consist of a gypsum wallboard manufacturing
facility, a gypsum mine, and a cogeneration power facility, all located in
Eagle County, Colorado.
The acquisition has been accounted for as a purchase, and accordingly, the
purchase price was allocated to the underlying assets acquired and liabilities
assumed based upon their estimated fair market values at the date of
acquisition. The purchase price was allocated as follows: $52.0 million to
property, plant, and equipment and $4.0 million to various components of net
working capital. The results of operations of Centex Eagle Gypsum Company,
L.L.C. are included in the Company's financial statements since the date of
acquisition.
The unaudited pro forma results below assume the acquisition occurred at the
beginning of the fiscal year presented:
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
1997 1996
-----------------------------
(Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C>
Revenues $270,030 $255,046
Net Earnings $ 44,370 $ 34,880
Net Earnings Per Share $ 2.00 $ 1.52
</TABLE>
The pro forma results have been prepared for comparative purposes only and
include certain adjustments such as reduced manufacturing and overhead costs,
reduced depreciation expenses due to a difference in asset lives and the
increased interest expense on acquisition debt. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect at the beginning of fiscal 1997 and fiscal 1996
or of future results of operations of the consolidated entities.
27
<PAGE> 30
Centex Construction Products, Inc. and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Centex Construction
Products, Inc.:
We have audited the accompanying consolidated balance sheets of Centex
Construction Products, Inc. (a Delaware corporation) and subsidiaries as of
March 31, 1997 and 1996, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended March 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Centex Construction
Products, Inc. and subsidiaries as of March 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 8, 1997
28
<PAGE> 31
Centex Construction Products, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Increased Gypsum Wallboard shipments and higher net pricing in all product
segments resulted in Centex Construction Products, Inc. reporting the highest
net earnings in its history in fiscal 1997.
During fiscal 1997, consolidated revenues increased 8% to $239.4 million
from $222.6 million in fiscal 1996. A combination of increased Gypsum Wallboard
sales volume along with higher Cement and Gypsum Wallboard sales prices
generated the majority of the revenue gain. Operating earnings of $67.0 million
increased 20% over fiscal 1996 operating earnings of $55.6 million primarily
due to improved margins in the Cement and Gypsum Wallboard segments. Corporate
general and administrative expenses were $1.4 million higher than prior year's
expense of $2.5 million mainly due to performance incentive accruals. Net
interest income was $1.4 million in fiscal 1997 compared to $803,000 of net
interest expense in fiscal 1996 due to payment of the Company's revolving
credit line last fiscal year. The Company's effective tax rate in fiscal 1997
was 35%, the same as fiscal 1996. As a result of the foregoing, net earnings
increased 23% to $41.8 million in fiscal 1997 from $33.9 million in fiscal
1996. Earnings per share for fiscal 1997 increased 28% to $1.89 compared to
$1.48 for fiscal 1996. Earnings per share for fiscal 1997 increased more than
net earnings due to fewer average shares outstanding in fiscal 1997.
The following table compares sales volumes, average unit sales prices and
unit operating margins for the Company's operations:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Cement Gypsum Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
--------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (Thousands) 2,095 2,092 726 661 603 629 2,073 2,801
Average Net Sales Price $ 63.66 $ 60.09 $ 99.39 $ 88.21 $ 46.86 $ 45.62 $ 4.13 $ 4.01
Operating Margin $ 19.00 $ 16.89 $ 28.32 $ 18.04 $ 6.36 $ 7.01 $ 0.45 $ 0.41
</TABLE>
Cement. Cement revenues for the fiscal year ended March 31, 1997, were
$133.3 million, 6% higher than $125.7 million for the prior fiscal year.
Segment operating earnings increased 13% to $39.8 million from $35.3 million
last fiscal year due to unit operating margins increasing 13% over last year's
margin of $16.89 per ton. Strong construction activity in the regions served by
the Company resulted in a 6% increase in price realizations. Sales volume of
2.1 million tons was 3,000 tons higher than last fiscal year's record high
sales volume. All plants operated at capacity and were again "sold out". The
Company purchased 185,000 tons of cement, the same as last year, to supplement
its fiscal 1997 manufactured cement shipments. Cement unit costs were 3% higher
than the prior year primarily due to increased maintenance costs.
29
<PAGE> 32
Gypsum Wallboard. Gypsum Wallboard revenues increased 24% during fiscal 1997
to $72.2 million from $58.3 million in fiscal year 1996. Segment operating
earnings totaled $20.6 million for fiscal 1997, a 72% improvement over $11.9
million in fiscal 1996. Unit operating margins increased 57% to $28.32 per
thousand square feet ("MSF") over $18.04 per MSF last year primarily due to
increased sales prices. Wallboard average sales prices increased $11.18 per MSF
in fiscal 1997 to $99.39 per MSF as a result of record high industry
consumption. Wallboard sales volume of 726 million square feet ("MMSF") for
fiscal 1997 increased 10% over fiscal 1996 primarily due to one month of sales
volume from the recently acquired Eagle Gypsum plant. Both of the Company's
existing Wallboard plants operated at capacity during the fiscal year. Unit
costs increased one percent from $70.17 per MSF in fiscal 1996 as a result of
increased maintenance cost at the Albuquerque plant and higher overhead costs
being partially offset by a 15% decrease in paper cost.
Concrete and Aggregates. Concrete and Aggregates revenues of $36.8 million
in fiscal year 1997 were 8% lower than fiscal 1996 revenues of $39.9 million.
Segment operating earnings of $4.8 million in fiscal 1997 decreased 14% from
$5.6 million in the prior fiscal year. Concrete operating earnings of $3.8
million in fiscal 1997 were 13% lower than last fiscal year's earnings due to
decreased sales volume and lower operating margins. Concrete sales volume of
603,000 cubic yards in fiscal 1997 decreased 4% from fiscal 1996 due to a 6%
decline in sales in the Texas market. Increased Concrete net sales prices were
negated by higher production and materials costs. Aggregates operating earnings
of $933,000 for fiscal 1997 declined 19% from fiscal 1996 due to decreased
sales volume being partially offset by higher operating margins. Aggregates
sales volume of 2.1 million tons decreased 26% from 2.8 million tons in fiscal
1996 mostly due from the sale in fiscal 1996 of a north Texas sand and gravel
operation. Unit costs increased 5% in fiscal 1997 as a result of increased
production cost.
Other Income. Other income of $1.8 million during fiscal 1997 decreased
$959,000 from fiscal year 1996 primarily due to a $783,000 gain realized on two
asset sales last year along with less trucking income and outside clinker sales
this year.
Corporate Overhead. Corporate overhead was $1.4 million higher than the
prior year due to $1.2 million of additional performance incentive accruals
this year.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Benefitting from increased shipments and higher operating margins in all
business segments, Centex Construction Products, Inc. reported the highest net
earnings in its history in fiscal 1996.
During fiscal 1996, consolidated revenues increased 15% to $222.6 million
from $194.3 million in fiscal 1995. A combination of increased sales volume in
all of the Company's operations along with higher Cement and Concrete sales
prices generated the revenue gain. Operating earnings of $55.6 million
increased 49% over fiscal 1995 operating earnings of $37.4 million due to
improved margins in all of the Company's operations. Corporate general and
administrative expenses were $155,000 higher than prior year's expense of $2.3
million due mainly to increased professional and public company related
expenses. Net interest expense declined to $803,000 in fiscal 1996 from $1.3
million in fiscal 1995 due to payment of the Company's revolving credit line
late in the fiscal year. The Company's effective tax rate in fiscal 1996 was
35%, the same as fiscal 1995. As a result of the foregoing, net earnings
increased 56% to $33.9 million in fiscal 1996 from $21.8 million in fiscal
1995. Earnings per share for fiscal 1996 increased 56% to $1.48 compared to
$0.95 for fiscal 1995.
The following table compares sales volumes, average unit sales prices and
unit operating margins for the Company's operations:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Cement Gypsum Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
-------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (Thousands) 2,092 1,941 661 584 629 563 2,801 2,507
Average Net Sales Price $60.09 $56.62 $88.21 $88.53 $45.62 $44.46 $4.01 $4.06
Operating Margin $16.89 $13.40 $18.04 $12.40 $7.01 $4.38 $0.41 $0.05
</TABLE>
30
<PAGE> 33
Cement. Cement revenues for the fiscal year ended March 31, 1996, were
$125.7 million, 14% higher than $109.9 million for the prior fiscal year.
Segment operating earnings increased 36% to $35.3 million from $26.0 million
last fiscal year due to unit operating margins increasing 26% over last year's
margin of $13.40 per ton. Strong construction activity in the regions served by
the Company resulted in a 6% increase in price realizations. Sales volume of
2.1 million tons, a record high, was 8% higher than last fiscal year's sales
volume of 1.9 million tons. The Company purchased 185,000 tons of cement to
supplement its fiscal 1996 manufactured cement shipments. All plants operated
at capacity and were again "sold out." Cement unit costs were level with the
prior year due to increased clinker production.
Gypsum Wallboard. Gypsum Wallboard revenues increased 13% during fiscal 1996
to $58.3 million from $51.7 million in fiscal year 1995. Segment operating
earnings totaled $11.9 million for fiscal 1996, a 65% improvement over $7.2
million in fiscal 1995. Unit operating margins increased 46% to $18.04 per
thousand square feet ("MSF") over $12.40 per MSF last year due mostly to
decreased production cost. Wallboard average sales prices declined $0.32 per
MSF in fiscal 1996 to $88.21 per MSF as a result of decreased home construction
activity in some markets, expanding industry production capacity and the
industry's increased utilization of rail to distribute wallboard into markets
with more favorable pricing. Wallboard sales volume of 661 million square feet
("MMSF") for fiscal 1996 increased 13% over fiscal 1995 due mostly to a 39%
increase in production volume at the Albuquerque plant. Both of the Company's
Wallboard plants operated at capacity during the fiscal year. Unit costs
declined 8% from $76.13 per MSF in fiscal 1995 to $70.17 per MSF in fiscal 1996
due to the combination of the volume impact of 85,000 MSF increased production
on fixed costs, increased efficiency at the Albuquerque plant, and lower
Albuquerque maintenance cost, partially offset by increased paper costs.
Concrete and Aggregates. Concrete and Aggregates revenues of $39.9 million
in fiscal year 1996 were 13% higher than fiscal 1995 revenues of $35.2 million.
Segment operating earnings of $5.6 million in fiscal 1996 increased 115% over
$2.6 million in the prior fiscal year. Concrete operating earnings of $4.4
million in fiscal 1996 were 79% higher than last fiscal year's earnings due to
increased sales volume and improved operating margins. Concrete sales volume of
629,000 cubic yards in fiscal 1996 increased 12% over fiscal 1995 due to
improved market conditions in both the Texas and northern California markets.
Concrete net sales price increases, along with reduced production cost at the
northern California operation resulted in the operating margin gain. Aggregates
operating earnings of $1.2 million for fiscal 1996 improved 845% over fiscal
1995 due to increased sales volume and higher operating margins. Aggregates
sales volume of 2.8 million tons increased 12% over 2.5 million tons in fiscal
1995 due to higher highway construction aggregates sales. Unit cost declined
10% in fiscal 1996 as a result of increased production volume. During the third
quarter of fiscal 1996, a north Texas sand and gravel operation that was both
marginally-profitable and non-strategic was sold.
Other Income. Other income of $2.8 million during fiscal 1996 increased $1.2
million over fiscal year 1995 due primarily to a $783,000 gain realized on two
asset sales along with increased trucking income and outside clinker sales.
LIQUIDITY AND CAPITAL RESOURCES
Each of the Company's business segments operates in capital-intensive
industries. Prior to the completion of the Initial Public Offering, the Company
operated as a wholly-owned subsidiary of Centex. Because Centex has in the past
provided capital for the Company through intercompany loans, the Company
historically has had only a limited amount of borrowings from third parties. As
part of the Initial Public Offering the Company obtained a three-year $65
million unsecured revolving credit facility to finance its working capital,
capital expenditures, and payment of $34.3 million of deferred income taxes to
Centex. Late in fiscal year 1996, the credit facility was amended to lower the
maximum borrowing capacity to $35 million. During fiscal 1997, the Company
established a $10 million unsecured swing line to provide for its short-term
working capital needs.
31
<PAGE> 34
Working capital at March 31, 1997 was $28.2 million, a decrease of $17.7
million from March 31, 1996, principally due to a $16.0 million decrease in
cash. In February 1997, the Company completed the purchase of a gypsum
wallboard manufacturing facility and associated power cogeneration facility.
Total purchase price of the acquisition was $52.0 million plus $4.0 net million
working capital. Acquisition funds were provided from existing cash balances
and borrowings under a new $10 million Bank Line of Credit. Excluding the
wallboard and cogeneration facilities acquisition, other capital expenditures
for fiscal 1997 were $5.9 million compared to $15.3 million in fiscal 1996. The
higher capital spending in fiscal 1996 was primarily due to the recommissioning
of the second kiln at the Laramie plant. Based on its financial condition and
low debt levels at March 31, 1997, CXP believes that its internally generated
cash flow coupled with funds available under its credit facilities will enable
CXP to provide adequately for its current operations and future growth.
STOCK REPURCHASE PROGRAM
The Company's Board of Directors has approved the repurchase of up to two
million shares of the Company's common stock. The Company repurchased a total
of 40,196 shares during fiscal 1995, zero in fiscal 1996, and 1,038,100 shares
in fiscal 1997. Since the fiscal 1997 stock repurchases did not include
purchasing a proportionate amount of stock from its former parent, Centex
Corporation, Centex's ownership interest in CXP at March 31, 1997, increased to
approximately 51.4% from 49%.
INFLATION AND CHANGING PRICES
Inflation has become less of a factor in the U.S. economy as the rate of
increase has moderated during the last several years. The Consumer Price Index
rose 3.3% in calendar 1996, 2.9% in 1995, and 2.7% in 1994. Prices of materials
and services, with the exception of wallboard paper, have remained relatively
stable over the three-year period. Strict cost control and improving
productivity also minimize the impact of inflation. The impact of inflation on
income from operations along with increasing sales prices due to full or near
full utilization of industry capacity during the three years ended March 31,
1997, have enabled the Company to increase per unit profit margins, except for
concrete, in each successive year.
DISCLOSURE REGARDING FORWARD LOOKING-STATEMENTS
Certain sections of this Management's Discussion and Analysis of Financial
Condition and Results of Operations contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements are based on current
expectations, estimates and projections concerning the general state of the
economy and the industry and market conditions in certain geographic locations
in which the Company operates. Although the Company believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no guarantees of future performance and
they involve certain risks, uncertainties and assumptions which are difficult
to predict. Therefore, actual results and outcomes may differ materially from
what is expressed or forecasted in such forward-looking statements.
The Company's business is cyclical and seasonal, the effects of which cannot
be accurately predicted. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following: general economic conditions, interest rates, changes in
economic conditions specific to any one or more of the Company's markets,
adverse weather, unexpected operational difficulties, changes in governmental
and public policy including increased environmental regulations, public
infrastructure expenditures, competition, and the availability of raw
materials. Other risks and uncertainties could also affect the outcome of the
forward-looking statements.
32
<PAGE> 35
Centex Construction Products, Inc. and Subsidiaries
QUARTERLY RESULTS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
------------------------
March 31,
------------------------
1997 1996
- -----------------------------------------------------------------
<S> <C> <C>
FIRST QUARTER
Revenues $61,058 $55,104
Earnings Before Income Taxes $15,198 $12,064
Net Earnings $ 9,863 $ 7,830
Earnings Per Share $ 0.44 $ 0.34
SECOND QUARTER
Revenues $65,538 $66,483
Earnings Before Income Taxes $20,052 $16,179
Net Earnings $13,014 $10,500
Earnings Per Share $ 0.59 $ 0.46
THIRD QUARTER
Revenues $59,117 $55,429
Earnings Before Income Taxes $17,291 $15,344
Net Earnings $11,222 $ 9,958
Earnings Per Share $ 0.51 $ 0.43
FOURTH QUARTER
Revenues $53,667 $45,578
Earnings Before Income Taxes $11,865 $ 8,717
Net Earnings $ 7,700 $ 5,656
Earnings Per Share $ 0.35 $ 0.25
</TABLE>
33
<PAGE> 36
Centex Construction Products, Inc. and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $239,380 $222,594 $194,313 $166,826 $136,526
Net Earnings $ 41,799 $ 33,944 $ 21,820 $ 10,240 $ 3,112
Total Assets $305,637 $269,575 $250,103 $257,315 $258,994
Total Long-term Debt $ 640 $ 720 $ 24,500 $ 15,585 $ 34,519
Total Debt $ 2,640 $ 720 $ 24,500 $ 16,200 $ 38,943
Deferred Income Taxes $ 18,835 $ 14,344 $ 6,705 $ 37,925 $ 36,224
Stockholders' Equity $239,436 $216,462 $183,405 $170,839 $160,599
Total Debt as a Percent of Total
Capitalization (Total Debt,
Deferred Income Taxes and
Stockholders' Equity) 1.0% 0.3% 11.4% 7.2% 16.5%
Net Earnings as a Percent of
Beginning Stockholders' Equity 19.3% 18.5% 12.8% 6.4% 2.0%
Per Common Share -
Net Earnings (1) $ 1.89 $ 1.48 $ 0.95 $ 0.45 $ 0.14
Cash Dividends (2) $ 0.20 $ 0.05 -- -- --
Book Value Based on Shares
Outstanding at Year End (1) $ 10.89 $ 9.42 $ 7.99 $ 7.43 $ 6.98
Stock Prices (1)
High $ 20 $ 15 1/2 $ 14 3/8 -- --
Low $ 12 1/2 $ 11 3/8 $ 8 7/8 -- --
</TABLE>
(1) Prior to April 1994, CXP was a wholly-owned subsidiary of Centex
Corporation and accordingly did not report per share information. To facilitate
comparisons between periods, per share data for prior years has been presented
using the 23,000,000 shares outstanding immediately after the Initial Public
Offering.
(2) Declared initial quarterly cash dividend of five cents per share on March
12, 1996.
34
<PAGE> 37
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------------------
1992 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $129,832 $142,188 $126,358 $121,211 $118,002
Net Earnings $ 713 $ 1,118 $ 3,911 $ 5,015 $ 17,840
Total Assets $267,303 $267,654 $238,817 $225,797 $250,856
Total Long-term Debt $ 37,713 $ 47,094 $ 24,085 $ 24,937 $ 56,762
Total Debt $ 49,308 $ 52,322 $ 28,521 $ 28,086 $ 59,516
Deferred Income Taxes $ 35,881 $ 31,553 $ 31,977 $ 29,326 $ 25,930
Stockholders' Equity $157,487 $156,774 $155,656 $151,745 $146,730
Total Debt as a Percent of Total
Capitalization (Total Debt,
Deferred Income Taxes and
Stockholders' Equity) 20.3% 21.7% 13.2% 13.4% 25.6%
Net Earnings as a Percent of
Beginning Stockholders' Equity 0.5% 0.7% 2.6% 3.4% 13.8%
Per Common Share -
Net Earnings (1) $ 0.03 $ 0.05 $ 0.17 $ 0.22 $ 0.78
Cash Dividends (2) -- -- -- -- --
Book Value Based on Shares
Outstanding at Year End (1) $ 6.85 $ 6.82 $ 6.77 $ 6.60 $ 6.38
Stock Prices (1)
High -- -- -- -- --
Low -- -- -- -- --
</TABLE>
35
<PAGE> 38
BOARD OF DIRECTORS
Robert L. Clarke (2, 3)
Partner
Bracewell & Patterson, L.L.P.
O. G. Dagnan (1)
President and
Chief Executive Officer
Laurence E. Hirsch (1, 2, 4)
Chairman and
Chief Executive Officer,
Centex Corporation
David W. Quinn (1, 4)
Vice Chairman,
Centex Corporation
Harold K. Work (2, 3)
President, Elk Corporation
Executive Vice President,
Elcor Corporation
(Numbers in parentheses indicate Board Committees)
(1) Executive Committee
(2) Compensation Committee
(3) Audit Committee
(4) Stock Option Committee
CENTEX CONSTRUCTION
PRODUCTS, INC.
Laurence E. Hirsch
Chairman
O. G. Dagnan
President and
Chief Executive Officer
Richard D. Jones, Jr.
Executive Vice President and
Chief Operating Officer
Arthur R. Zunker, Jr.
Senior Vice President-Finance, Treasurer and
Chief Financial Officer
Rodney E. Cummickel
Vice President
Hubert L. Smith, Jr.
Vice President
AMERICAN GYPSUM COMPANY
H.D. House
President
David P. Emanuel
Vice President
Kerry G. Gannaway
Vice President
Geoff W. Gray
Vice President
CENTEX MATERIALS, INC.
James E. Bailey
President
J. David Loftis
Vice President
ILLINOIS CEMENT COMPANY
Joseph L. Baker
President
Steven R. Rowley
Executive Vice President
Thomas F. Clarke
Vice President
Henry V. Gross
Vice President
Frank P. Koeppel
Vice President
MATHEWS READYMIX, INC.
Craig J. Callaway
President
James D. Elliott
Vice President
MOUNTAIN CEMENT COMPANY
Alan J. Steagall
President
W. Jerald Hoyle
Executive Vice President
John R. Bremner
Vice President
George B. Coates
Vice President
NEVADA CEMENT COMPANY
Alan J. Steagall
President
John R. Bremner
Vice President
Ronald L. Gross
Vice President
TEXAS-LEHIGH
CEMENT COMPANY
Gerald J. Essl
President
R. Lee Hunter
Vice President
Robert W. Mull
Vice President
WESTERN
AGGREGATES, INC.
Craig J. Callaway
President
James D. Elliott
Vice President
36
<PAGE> 39
CORPORATE HEADQUARTERS
3710 Rawlins Street
Suite 1600, LB 78
Dallas, Texas 75219
(214) 559-6514
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Center
Ridgefield Park, NJ 07660
1-800-635-9270 (toll-free)
STOCK LISTINGS
New York Stock Exchange
Ticker Symbol "CXP"
ANNUAL MEETING
The Annual Meeting of Stockholders of Centex Construction Products, Inc.
will be held on Thursday, July 17, 1997 at 10:00 a.m. in the Emerald Room at
the Wyndham Anatole Hotel, 2201 Stemmons Freeway, Dallas, Texas.
STOCKHOLDER INQUIRIES
Communications concerning transfer requirements, lost certificates, dividends
or change of address should be sent to ChaseMellon Shareholder Services,
L.L.C.at the address listed above.
FORM 10-K
A copy of the Annual Report on Form 10-K of Centex Construction Products, Inc.
is available upon request to the Senior Vice President-Finance at corporate
headquarters.
STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
----------------------------------- ---------------------------------
Fiscal Year Ended March 31, 1997 Fiscal Year Ended March 31, 1996
----------------------------------- ---------------------------------
Price Price
--------------------- --------------------
Quarter High Low Dividends High Low Dividends
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $ 15 1/4 $13 5/8 $ 0.05 $13 3/4 $11 3/8 None
Second $ 16 $12 1/2 $ 0.05 $15 $12 5/8 None
Third $ 18 1/2 $14 3/8 $ 0.05 $14 5/8 $11 7/8 None
Fourth $ 20 $16 1/4 $ 0.05 $15 1/2 $13 5/8 $0.05
</TABLE>
The common stock of Centex Construction Products, Inc. is traded on the New
York Stock Exchange (ticker symbol CXP). The approximate number of record
holders of the common stock of CXP as of June 12, 1997 was 195. The closing
price of CXP's common stock on the New York Stock Exchange on June 12, 1997 was
$20 7/8.
37
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
Caption
FORM OF STATE OF
NAME OF SUBSIDIARY ORGANIZATION ORGANIZATION
- ------------------ ------------ ------------
<S> <C> <C>
American Gypsum Company corporation New Mexico
BP Sand & Gravel, Inc. corporation Delaware
CCP Cement Company corporation Nevada
CCP Concrete/Aggregates Company corporation Nevada
CCP Gypsum Company corporation Nevada
CCP Land Company corporation Nevada
CEGC Holding Company corporation Delaware
Centex Eagle Gypsum Company corporation Delaware
Centex Eagle Gypsum Company, L.L.C. limited liability company Delaware
Centex Materials, Inc. corporation Nevada
Ilce, Inc. corporation Nevada
Illinois Cement Company corporation Illinois
Illinois Cement Company joint venture Texas
M & W Drywall Supply Company corporation Nevada
Mathews Readymix, Inc. corporation California
Mountain Cement Company corporation Nevada
Nevada Cement Company corporation Nevada
Texas Cement Company corporation Nevada
</TABLE>
<PAGE> 2
<TABLE>
Caption
FORM OF STATE OF
NAME OF SUBSIDIARY ORGANIZATION ORGANIZATION
- ------------------ ------------ ------------
<S> <C> <C>
Texas-Lehigh Cement Company corporation Texas
Texas-Lehigh Cement Company joint venture Texas
Western Aggregates, Inc. corporation Nevada
Western Cement Company of California corporation California
Wisconsin Cement Company corporation Wisconsin
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the incorporation by
reference in this Form 10-K of our report dated May 8, 1997, included in the
Centex Construction Products, Inc. (the "Company") annual report to
stockholders. We also hereby consent to the incorporation by reference of our
report dated May 8, 1997, into the Company's previously filed registration
statements on Form S-8 (No. 33-82820; No. 33-82928; No. 33-84394) and to all
references to our firm included in these registration statements.
ARTHUR ANDERSEN, LLP
Dallas, Texas,
June 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM CENTEX
CONSTRUCTION PRODUCTS, INC.'S MARCH 31, 1997, FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 4,812
<SECURITIES> 0
<RECEIVABLES> 38,700
<ALLOWANCES> 0
<INVENTORY> 31,482
<CURRENT-ASSETS> 74,994
<PP&E> 363,409
<DEPRECIATION> 139,033
<TOTAL-ASSETS> 305,637
<CURRENT-LIABILITIES> 46,726
<BONDS> 640
0
0
<COMMON> 220
<OTHER-SE> 239,216
<TOTAL-LIABILITY-AND-EQUITY> 305,637
<SALES> 237,557
<TOTAL-REVENUES> 240,737
<CGS> 0
<TOTAL-COSTS> 172,427
<OTHER-EXPENSES> 3,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 64,406
<INCOME-TAX> 22,607
<INCOME-CONTINUING> 41,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,799
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 0
</TABLE>
