<PAGE> 1
________________________________________________________________________________
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, 1998
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 17, 1998:
Common Stock 21,254,122 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Parts I,
II, and III, of this Report:
(a) 1998 Annual Report to Stockholders of Centex Construction
Products, Inc. for the fiscal year ended March 31, 1998.
(b) Proxy statement for the annual meeting of stockholders of Centex
Construction Products, Inc. to be held on July 16, 1998.
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I
Item 1. Business:
General 1
Industry Segment Information 1
Employees 12
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
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 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17
SIGNATURES 18
INDEX TO EXHIBITS 19
</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, gypsum wallboard, aggregates and readymix concrete. 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 17, 1998, 21,254,122 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 three million shares of CXP Common Stock as
management determines advisable. As a result of repurchases during fiscal
years 1998 and 1997 by CXP of its common stock from the public and purchases
of CXP Common Stock by Centex, Centex now owns approximately 56.3% 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 11 terminals for the production and distribution of portland and
masonry cement. These facilities are located primarily in Texas, northern
Illinois, the Rocky Mountain area, 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 two quarries in close
proximity to its gypsum wallboard manufacturing facilities which are located in
Albuquerque and nearby Bernalillo, New Mexico and Gypsum, (near Vail) Colorado.
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, 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 (income) 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 23
of CXP's Annual Report to Stockholders for the fiscal year ended March 31, 1998
(the "1998 CXP Annual Report").
1
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<TABLE>
<CAPTION>
For The Fiscal Years Ended March 31,
----------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(In Millions)
<S> <C> <C> <C> <C> <C>
Contribution to Revenues:
Cement $140.4 $133.3 $125.7 $109.9 $101.7
Gypsum Wallboard 118.7 72.2 58.3 51.7 32.8
Concrete and Aggregates 42.0 36.8 39.9 35.2 35.1
Other, net 1.9 1.8 2.8 1.6 1.2
------ ------ ------ ------ ------
303.0 244.1 226.7 198.4 170.8
Less Intersegment Sales (5.7) (4.7) (4.1) (4.1) (4.0)
------ ------ ------ ------ ------
Total Net Revenues $297.3 $239.4 $222.6 $194.3 $166.8
====== ====== ====== ====== ======
Contribution to Operating
Earnings (Loss):
Cement $ 48.1 $ 39.8 $ 35.3 $ 26.0 $ 15.9
Gypsum Wallboard 35.8 20.5 11.9 7.2 (0.1)
Concrete and Aggregates 4.5 4.8 5.6 2.6 1.7
Other, net 1.9 1.8 2.8 1.6 1.2
------ ------ ------ ------ ------
90.3 66.9 55.6 37.4 18.7
Corporate Overhead (3.8) (3.9) (2.5) (2.3) (1.8)
------ ------ ------ ------ ------
Total Earnings Before
Interest and Income Taxes $ 86.5 $ 63.0 $ 53.1 $ 35.1 $ 16.9
====== ====== ====== ====== ======
</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: 1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Cement 45.4% 53.8% 54.8%
Gypsum Wallboard 39.9 30.2 26.2
Concrete/Aggregates:
Readymix Concrete 10.7 11.8 12.9
Aggregates 3.3 3.4 4.8
----- ----- ----
14.0 15.2 17.7
Other, net 0.7 0.8 1.3
----- ----- -----
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
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
2
<PAGE> 5
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
preheater plants, in which hot air is recycled from the rotary kiln to preheat
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 85% 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) 575 Dry - 4 Stage 1 1974 50
Preheater
Laramie, Wyoming 630 Dry - 2 Stage 1 1988 30
Preheater
Dry - Long Dry 1 1996
Kiln
Fernley, Nevada 480 Dry - Long Dry 1 1964 18
Kiln
Dry - 1 Stage 1 1969
Preheater
------
Total - Gross(3) 2,765
======
- Net(3) 1,938
======
</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.
The Company's net cement production, excluding the joint venture
partners' 50% interest in the Buda and LaSalle plants, totaled 2.0 million tons
in fiscal 1998 and 1.9 million tons in fiscal 1997. Total net cement sales
were 2.1 million tons both in fiscal 1998 and in fiscal 1997, 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 1998, 6.0% of the cement sold by the Company was acquired from
outside sources, compared to 8.8% in fiscal 1997. In fiscal 1998, the Company
approved a capital project to expand the annual clinker capacity of the
LaSalle, Illinois plant by approximately 100,000 tons and add a new finish
mill. Planned completion of the project is the fall of 1999.
3
<PAGE> 6
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
30 years or, in the case of the Company's Nevada plant, at least 18 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 and coke 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 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.
Sales 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%, 17% and 23%, respectively, of U.S. cement consumption in 1996, 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
geographic 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 11 cement storage and distribution terminals, which are strategically
located to extend the sales areas of its plants.
<TABLE>
<CAPTION>
Plant Location Principal Geographic Areas Distribution Terminals
-------------- -------------------------- ----------------------
<S> <C> <C>
Buda, Texas Texas and western Louisiana Corpus Christi, TX
Houston, TX
Orange, TX
Roanoke (DFW), TX
Waco, TX
LaSalle, Illinois Illinois and southern Wisconsin Hartland, WI
Laramie, Wyoming Wyoming, Utah, northern Rock Springs, WY
Colorado, western Nebraska Salt Lake City, UT
and eastern Nevada Denver, CO
North Platte, NE
Fernley, Nevada Nevada (except Las Vegas) and Sacramento, CA
northern California
</TABLE>
4
<PAGE> 7
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 1998.
Sales are made on the basis of competitive prices in each 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 1980's, 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 geographic area is
intense because of the fungible nature of the product. The U.S. cement
industry is fragmented into regional geographic areas rather than a single
national selling area. 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 geographic areas.
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 areas.
The United States cement industry comprises approximately 50 companies
which own 107 gray cement plants with approximately 83.5 million tons of
clinker manufacturing capacity (approximately 87.7 million tons of cement
manufacturing capacity assuming a 105% conversion ratio). The PCA estimates
that cement demand totaled approximately 106 million tons in 1997, with
approximately 18% 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 1997.
During 1997, 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 company's
Fernley, Nevada and Buda, Texas plants' 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.
5
<PAGE> 8
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 1998,
amounted to $3.5 million for the cement segment compared with $2.9 million and
$13.1 million in fiscal 1997 and 1996, respectively. Capital outlays in fiscal
1999, have been budgeted at approximately $11.7 million. Approximately 6% of
the budgeted fiscal 1999 total is related to compliance with environmental
regulations. Approximately $9.0 million of the fiscal 1999 budget total is for
the LaSalle, Illinois plant clinker capacity increase and new finish mill
project.
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."
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,
coke, 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
6
<PAGE> 9
associated with this site. The U.S. EPA has 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. 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 wallboard 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.
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<PAGE> 10
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.
The following table sets forth certain information regarding these
plants:
<TABLE>
<CAPTION>
Rated Annual Gypsum Estimated Minimum
Wallboard Capacity Gypsum Rock
Location (MMSF)(1) Reserves (years)
-------- ------------------- -----------------
<S> <C> <C>
Albuquerque, New Mexico 270 80 (2)
Bernalillo, New Mexico 445 80 (2)
Gypsum, Colorado 380 17 (3)
------
Total 1,095
======
</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 gypsum wallboard production totaled 1,090 MMSF in
fiscal 1998 and 715 MMSF in fiscal 1997. Total gypsum wallboard sales were
1,089 MMSF in fiscal 1998 and 726 MMSF in fiscal 1997.
In fiscal 1998, the Company commenced a major capital project to
modernize, upgrade and expand its Albuquerque, New Mexico plant which will
increase the plant's annual productive capacity by 60 MMSF, allow for the
production of 54" gypsum wallboard and significantly reduce fuel cost.
Completion of the project is estimated for the fall of 1998. The Company also
initiated a major capital project during fiscal 1998 to expand the annual
productive capacity of the Gypsum, Colorado plant by approximately 60% or 240
MMSF. Completion of the project is estimated for the fall of 1999.
Raw Materials and Fuel Supplies. The Company mines and extracts
gypsum rock, the principal raw material used in the manufacture of gypsum
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 50 million tons and 10 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 80 years and 17 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 65% of the Company's paper
requirements are under two evergreen paper contracts with one contract having a
six-month notice provision for termination and the other a twelve-month notice
provision for termination. The remainder of the Company's 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.
8
<PAGE> 11
The Company's gypsum wallboard manufacturing operations use large
quantities of natural gas and electrical power. Substantially all of the
Company's natural gas requirements for its gypsum wallboard plants are
currently provided by two gas producers under gas supply agreements expiring in
May, 1999 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. Power for the Gypsum, Colorado plant 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.
Sales 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 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 gypsum 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 an
estimated record $121 billion in 1997, up 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 sells gypsum wallboard to numerous building materials
dealers, gypsum wallboard specialty distributors, home center chains and other
customers located throughout the United States. One customer with multiple
shipping locations accounted for approximately 15% of the Company's total
gypsum wallboard sales during fiscal 1998.
During fiscal 1998, the principal states in which the Company had
gypsum wallboard sales were Colorado, Florida, Texas, New Mexico, Georgia and
Illinois. Prior to fiscal 1992, most of the Company's gypsum 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 1990's, the Company has focused the distribution of its gypsum
wallboard in various other areas of the country.
Although gypsum wallboard is distributed principally in regional
areas, the Company and certain other producers have the ability to ship gypsum
wallboard by rail outside their usual regional distribution area to take
advantage of these other regional increases in demand. The Company owns or
leases 168 railcars for transporting gypsum 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 1998, approximately 28% of the Company's
sales volume of gypsum wallboard was transported by rail.
Competition. There are nine principal manufacturers of gypsum
wallboard operating a total of 73 plants. The Company estimates that the three
largest producers - USG Corporation, National Gypsum Company and
Georgia-Pacific Corporation - account for over 80% of gypsum wallboard sales in
the United
9
<PAGE> 12
States. In 1996 and early 1997, the industry experienced some consolidation,
the largest being Georgia-Pacific Corporation's purchase of the gypsum
wallboard business of Domtar, Inc. In general, a number of the Company's
competitors in the gypsum wallboard industry have greater financial,
manufacturing, marketing and distribution resources than the Company.
Furthermore, certain of its competitors have vertically integrated operations
consisting of gypsum wallboard manufacturing plants, paper mills and
distribution centers, which may provide them with certain cost advantages over
the Company.
Competition among gypsum wallboard producers is primarily on a
regional basis, with local producers benefitting from lower transportation
costs, and to a lesser extent on a national basis. Because of the 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 gypsum wallboard production capacity is estimated
currently at 27.5 billion square feet per year. The Gypsum Association, an
industry trade group, estimates that total 1997 gypsum wallboard shipments were
approximately 26.5 billion square feet, resulting in industry capacity
utilization of over 95%. Imports are not a major factor in the gypsum
wallboard industry.
During 1997, some of the Company's competitors in the gypsum wallboard
industry commenced, or announced an intention to commence, capital expansion
projects to construct new gypsum wallboard manufacturing facilities or to
expand existing facilities. The completion of these projects, if all of them
are actually started and carried through to completion, could increase domestic
industry capacity over the next three or four years by up to 24%. However,
some or all of this additional capacity could be absorbed if there is an
increase in domestic demand (over the past 25 years demand for gypsum wallboard
in the United States has increased at an average annual rate of 3 1/2%) and/or
if less efficient plants are shut down. If during the next three or four years
there is no corresponding increase in domestic demand for gypsum wallboard
and/or no corresponding shut down of inefficient or marginally efficient gypsum
wallboard plants, it is possible that gypsum wallboard prices could decline,
thus impacting future results in the Company's Gypsum Wallboard group.
Capital Expenditures. Capital expenditures during fiscal 1998 for the
gypsum wallboard segment amounted to $7.9 million; $52.8 million (including
$52 million for the Eagle acquisition) in fiscal year 1997; and $889,000 in
fiscal year 1996. Capital outlays in fiscal 1999 have been budgeted at
approximately $9.4 million with no expenditures related to compliance with
environmental regulation. The majority of the fiscal 1998 and budgeted fiscal
1999 expenditures are for the Albuquerque and Eagle plant upgrade projects.
Environmental Matters. The gypsum wallboard industry is subject to
environmental regulations similar to those governing the Company's cement
operations. None of the Company's gypsum wallboard 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 wallboard products.
In the fiscal year ended March 31, 1996, one of the Company's gypsum
wallboard subsidiaries 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, low-cost building
material used in almost all construction, involves the mixing of cement, sand,
gravel, crushed stone and water to form concrete which is then sold and
distributed to numerous construction contractors. Concrete is produced in
batch plants and transported to the customer's job site in mixer trucks.
10
<PAGE> 13
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 areas. Because the cost of transporting concrete and
aggregates is very high relative to product values, producers of concrete and
aggregates typically can sell 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:
<TABLE>
<CAPTION>
Location Number of Plants Number of Trucks
-------- ---------------- ----------------
<S> <C> <C>
Northern California 5 40
Austin, Texas 5 57
--- ---
Total 10 97
=== ===
</TABLE>
The Company's production of readymix concrete reached a ten-year peak
of 992,000 cubic yards in 1986. In response to decreased demand in the northern
California and Austin areas, production declined to 430,000 cubic yards in
fiscal 1990. Since such date, production has increased each successive year as
market conditions continue to improve. The Company believes that it has the
capacity to increase its concrete production from existing levels by adding to
its fleet of trucks. The Company's net readymix concrete production was
672,000 cubic yards is fiscal 1998 and 603,000 cubic yards in fiscal 1997.
The Company conducts aggregate operations near its concrete facilities
in northern California and Austin, 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 total net aggregate sales were 2.6 million tons in
fiscal 1998 and 2.1 million tons in fiscal 1997. Total aggregates production
was 2.8 million tons in fiscal 1998 and 2.3 million tons in fiscal 1997. A
portion of the company's total aggregates production is used internally by the
company's readymix concrete operations.
Raw Materials. The Company supplies 100% and 89% of its cement
requirements for its Austin and northern California concrete operations,
respectively. The Company supplies approximately 31% and 28%, respectively, of
its aggregates requirements for its Austin and northern California concrete
operations. The Company obtains the balance of its cement and aggregates
requirements from multiple sources in each of these areas.
11
<PAGE> 14
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."
Sales and Distribution. The Company sells readymix concrete to
numerous contractors and other customers in each plant's selling area. The
Company's batch plants in Austin and northern California are strategically
located to serve each selling 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 1998.
During the past several years, the Company has been engaged in
negotiations with U.S. 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
fiscal 1998, the Company received a letter from the United States Department of
the Air Force ("USAF") indicating that the USAF is terminating the 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 secure
an alternative rail link to its aggregates deposit.
Competition. Competition among concrete producers within the
Company's northern California and Austin selling areas is strong. The
Company's competitors include five small and four large concrete producers in
the northern California and Austin areas, 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.
Capital Expenditures. Capital expenditures during fiscal 1998,
amounted to $2.0 million for the concrete and aggregates segment compared with
$2.6 million and $1.7 million in fiscal 1997 and 1996, respectively. Capital
outlays in fiscal 1999, have been budgeted at approximately $506,000.
Approximately 19% of the budgeted fiscal 1999 total is related to compliance
with environmental regulations.
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 1,076 employees at
March 31, 1998. Approximately 19% of the Employees are represented by
collective bargaining units. The number of employees of the Company as opposed
to its subsidiaries is 11.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations (incorporated by reference herein from the 1998 CXP
Annual Report) and other sections of the 1998 CXP Annual Report and this Annual
Report on 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
12
<PAGE> 15
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
infrasture expenditures, competition, and the availability of raw materials.
Other risks and uncertainties could also affect the outcome of the
forward-looking statements.
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, although the
United States indicated in late fiscal 1998 that the United States desired to
terminate negotiations with WAI regarding a land exchange.
WAI notified its lessor, Yuba WestGold, 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
13
<PAGE> 16
the Yuba Goldfields. WAI notified Western Title Insurance Company's successor,
Fidelity National Title Insurance Company ("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 believed 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. In
March 1998, WAI and Fidelity entered into a settlement agreement and settled
the claims of WAI against Fidelity. While the amount of the settlement payment
from Fidelity to WAI is confidential pursuant to the terms of the settlement
agreement, the Company believes that, after taking into account funds received
by WAI from Yuba, Western Water, and Fidelity as described above, the
additional funds, if any, required to be paid by WAI to resolve the title
claims of the United States and the State of California to lands in the Yuba
Goldfields will not have a material adverse effect on the financial condition
or the results of operations of the Company.
The Company cannot predict the outcome of negotiations with the United
States or the State of California. However, even if such negotiations are
unsuccessful in resolving the adverse title claims to lands in the Yuba
Goldfields, 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 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 the Company or
any subsidiary is involved, if determined unfavorably to the Company 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, except
for Mr. House, have been employed by the Company and/or one or more
subsidiaries of the Company for the past five years. All executive officers
were elected by the Board of Directors of the Company on July 17, 1997, except
for Mr. House and Mr. Rowley who were appointed by the Chairman and Chief
Executive Officer, pursuant to the By Laws of the Company in January 1998, to
serve until the next Annual Meeting of Directors or until their respective
successors are duly elected and qualified or appointed as the case may be.
There is no family relationship between any of these officers.
<TABLE>
<CAPTION>
Name Age Positions with CXP
-------- ------- ------------------------------------------
<S> <C> <C>
O. G. (Greg) Dagnan 58 Chairman and Chief Executive Officer
(Chairman since January 1998; Chief Executive
Officer since January 1990; President from
January 1990 through December 1997;
Senior Vice President - Operations from
August 1989 to January 1990).
Richard D. Jones, Jr. 52 President and Chief Operating Officer
(President since January 1998; Chief Operating
Officer since January 1990; Executive Vice President
from January 1990 through December 1997).
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
Name Age Positions with CXP
-------- ------- -----------------------------------------------------
<S> <C> <C>
Arthur R. Zunker, Jr. 54 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).
H. David House 56 Executive Vice President - Gypsum
(Executive Vice President - Gypsum since January 1998;
President of American Gypsum Company since June
1997; President of James Hardie Gypsum Division from
August 1993 through May 1996).
Steven R. Rowley 45 Executive Vice President - Cement
(Executive Vice President - Cement since January 1998;
Executive V.P. of Illinois Cement Company from June
1995 through December 1997; Plant Manager at Nevada
Cement Company from April 1991 through May 1995).
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(See Item 7 below.)
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 1998 CXP Annual Report:
<TABLE>
<CAPTION>
Items Caption in the 1998 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>
15
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for in this Item 8 is incorporated herein by
reference to the 1998 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 18, 1998, for
the Company's July 16, 1998 Annual Meeting of Stockholders (the "1998 CXP Proxy
Statement"):
<TABLE>
<CAPTION>
Items Caption in the 1998 CXP Proxy Statement Pages
----- --------------------------------------- -----
<S> <C> <C>
10 Election of Directors 2
10 Section 16(a) Compliance 11
11 Executive Compensation 6
12 Security Ownership of Management and
Certain Beneficial Owners 4
13 Certain Transactions 11
</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.)
16
<PAGE> 19
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
------------------
1998 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, 1998, 1997 & 1996 . . . . . . . . . . 14
Consolidated Balance Sheets as of March 31, 1998 & 1997 . . . . . . . . . . . . . . . . . . . . . . . . 15
Statements of Consolidated Cash Flows for the years ended March 31, 1998, 1997 & 1996 . . . . . . . . . 16
Statements of Consolidated Stockholders' Equity for the years ended March 31, 1998, 1997 & 1996 . . . . 17
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-27
Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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 19, 20 and 21 of this Report.
(b) Reports on Form 8-K:
None
17
<PAGE> 20
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 19, 1998 /s/ O. G. DAGNAN
----------------------------------------
O. G. Dagnan, Director, Chairman of the
Board and Chief Executive Officer
(principal executive officer)
June 19, 1998 /s/ ARTHUR R. ZUNKER, JR.
----------------------------------------
Arthur R. Zunker, Jr., Senior Vice
President - Finance and Treasurer
(principal financial and
accounting officer)
June 19, 1998 /s/ ROBERT L. CLARKE
----------------------------------------
Robert L. Clarke, Director
June 19, 1998 /s/ LAURENCE E. HIRSCH
----------------------------------------
Laurence E. Hirsch, Director
June 19, 1998 /s/ DAVID W. QUINN
----------------------------------------
David W. Quinn, Director
June 19, 1998 /s/ HAROLD K. WORK
---------------------------------------
Harold K. Work, Director
18
<PAGE> 21
INDEX TO EXHIBITS
CENTEX CONSTRUCTION PRODUCTS, INC.
AND SUBSIDIARIES
Exhibit
Number Description of Exhibits
- ------- -----------------------
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)
4.4* Amendment No. 2 to the Credit Agreement, dated as of
March 27, 1998, among the Company, the First National
Bank of Chicago, individually and as agent, and the other
lenders named therein
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)
19
<PAGE> 22
10.3 The Centex Construction Products, Inc. amended and restated
Stock Option Plan (filed as Exhibit 10.3 to the Annual Report
on Form 10-K of the Company (File No. 1-12984) for the fiscal
year ended March 31, 1997 and incorporated herein by
reference)(1)
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, 1998 (the "Annual Report to Stockholders")
21* Subsidiaries of the Company
23* Consent of Independent Public Accountants
27* Financial Data Schedule
20
<PAGE> 23
- ------------------------------
* 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
AMENDMENT NO. 2
This Amendment No. 2 (this "Amendment"), dated as of March 27, 1998, is
among Centex Construction Products, Inc. (the "Borrower"), the Lenders party to
the Credit Agreement (defined below) and The First National Bank of Chicago, as
Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement dated as of April 18, 1994 (as heretofore amended, the
"Credit Agreement") and the other Loan Documents referred to therein; and
WHEREAS, the Borrower, the Lenders and the Agent desire to amend the
Credit Agreement in order to amend certain provisions thereof;
NOW, THEREFORE, in consideration of the premises and the undertakings set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. Amendment. The Credit Agreement is hereby amended as follows:
(a) Section 7.10 of the Credit Agreement is hereby amended by
deleting clause (ii) contained therein and inserting in lieu thereof the
following: "(ii) the Borrower may pay dividends or redeem, repurchase or
otherwise acquire or retire any of its capital stock if, after giving
effect to the proposed dividend, redemption, repurchase, acquisition or
retirement, there exists no Default or Unmatured Default hereunder."
(b) Section 7.11 of the Credit Agreement is hereby amended by adding
a new subsection (v) as follows:
(v) Additional unsecured Indebtedness in an aggregate amount at
any time outstanding not to exceed $20,000,000.
3. Representations and Warranties. In order to induce the Agent and the
Lenders to enter into this Amendment, the Borrower hereby represents and
warrants to the Agent and the Lenders as of the date of this Amendment that:
(a) There exists no Default or Unmatured Default and the execution
of this Amendment shall not create a Default or Unmatured Default.
(b) The representations and warranties contained in Article VI of
the Credit Agreement are true and correct as of the date of this Amendment.
4. Legal Expenses. The Borrower agrees to reimburse the Agent for
reasonable legal fees and expenses incurred by attorneys for the Agent (who may
be employees of the Agent) in connection with the preparation, negotiation and
consummation of this Amendment and the transactions contemplated herein.
5. Ratification of Credit Agreement. Except as specifically provided
herein, all of the terms
<PAGE> 2
and conditions of the Credit Agreement shall remain in full force and effect
and the Credit Agreement as amended hereby is agreed to, ratified and confirmed
by the Borrower, the Agent and the Lenders in all respects.
6. Miscellaneous.
(a) This Amendment may be executed in counterparts and by the
different parties hereto on separate counterparts each of which, when so
executed and delivered, shall be deemed an original, and all of which taken
together shall constitute one and the same agreement.
(b) This Agreement shall be effective as of the date first above
written; provided, that, the Agent has received executed counterparts of
this Amendment from the Borrower, the Agent and the Lenders.
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have
executed this Amendment as of the date first above written.
CENTEX CONSTRUCTION PRODUCTS, INC.
By: /s/ ARTHUR R. ZUNKER
-----------------------------
Title: Senior Vice President
----------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: /s/ [ILLEGIBLE]
-----------------------------
Title: Authorized Agent
----------------------------
BANK OF AMERICA TEXAS, N.A.
By: /s/ DANIEL BROWN
-----------------------------
Title: Vice President
----------------------------
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
-----------------------------
Title: Senior Vice President
----------------------------
BANK ONE, TEXAS, N.A.
By: /s/ FRED POINT
-----------------------------
Title: Vice President
----------------------------
Page 2
<PAGE> 1
CENTEX CONSTRUCTION PRODUCTS, INC.
ROCK
SOLID
RESULTS
1998 ANNUAL REPORT
<PAGE> 2
Centex Construction Products, Inc. (NYSE: CXP) produces and distributes
building materials used in the construction of the nation's homes, commercial
and industrial buildings, and infrastructure. CXP is one of two publicly held
companies that participate in both the Cement and the Gypsum Wallboard
industries. As of March 31, 1998, CXP was 55.6%-owned by Centex Corporation.
CEMENT
CXP's four manufacturing plants and a network of 11 distribution terminals
produce and market Cement in the western half of the United States. Annual
production capacity, net of two joint-venture partners' interest, is
approximately 2.0 million tons, or about 3% of the nation's total capacity. CXP
is the thirteenth largest Cement producer in the U.S. and the sixth largest
domestically owned Cement manufacturer.
GYPSUM WALLBOARD
CXP's Gypsum Wallboard operation, which includes three facilities located in
New Mexico and Colorado, is the nation's fifth largest Gypsum Wallboard
producer. The operations have a total annual production capacity of
approximately 1.1 billion square feet, representing about 4% of total U.S.
capacity. In fiscal 1998, CXP's Gypsum Wallboard production was shipped by rail
and by truck to a total of 32 states throughout the nation.
CONCRETE AND AGGREGATES
CXP's Concrete and Aggregates operations consist of 10 Readymix Concrete batch
plants, approximately 100 Readymix trucks and two Aggregates operations, all
located in California and Texas. The Aggregates operation's total annual single
shift production capacity is about 2.3 million tons.
<TABLE>
<CAPTION>
----------------------------
TABLE OF CONTENTS
<S> <C>
Financial Highlights 1
Letter to Our Shareholders 2
Review of Operations 6
Financial Information 13
</TABLE>
<PAGE> 3
Centex Construction Products, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $297,322 $239,380 $222,594 $194,313 $166,826
Earnings Before Income Taxes $ 88,333 $ 64,406 $ 52,304 $ 33,829 $ 16,580
Net Earnings $ 56,533 $ 41,799 $ 33,944 $ 21,820 $ 10,240
Diluted Earnings Per Share (1) $ 2.56 $ 1.89 $ 1.47 $ 0.95 $ 0.45
Cash Dividends Per Share (2) $ 0.20 $ 0.20 $ 0.05 $ -- $ --
Debt $ 560 $ 2,640 $ 720 $ 24,500 $ 16,200
Stockholders' Equity $274,803 $239,436 $216,462 $183,405 $170,839
Average Diluted Shares Outstanding (1) 22,063 22,174 23,023 22,988 23,000
Book Value Per Share At Year End (1) $ 12.77 $ 10.89 $ 9.42 $ 7.99 $ 7.43
</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 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.
[REVENUES CHART] [NET EARNINGS CHART]
<TABLE>
<CAPTION>
Revenues ($ in Millions) Net Earnings ($ in Millions)
- ------------------------ ----------------------------
<S> <C> <C> <C>
1998 $297 1998 $56.5
1997 $239 1997 $41.8
1996 $223 1996 $33.9
1995 $194 1995 $21.8
1994 $167 1994 $10.2
</TABLE>
1
<PAGE> 4
TO OUR SHAREHOLDERS
CXP's experienced team effectively utilized our well-positioned, efficient
operations to take maximum advantage of fiscal 1998's dynamic economic
environment. Benefitting from robust demand fueled by a strong construction
market and resurging prices due to capacity constraints, CXP's all-time high
Cement and Gypsum Wallboard production volumes led to record financial results.
Fiscal 1998 was the Company's fourth consecutive year of increasingly higher
revenues, net earnings and earnings per share, stockholders' equity and return
on assets since becoming publicly held in April 1994.
FISCAL 1998 HIGHLIGHTS
- - Increased sales volume in all segments along with higher Cement and Gypsum
Wallboard sales prices resulted in a 24% revenue gain to $297,322,000 from
$239,380,000 in fiscal 1997.
- - Record results from Cement and Gypsum Wallboard boosted CXP's fiscal 1998
net earnings 35% to $56,533,000 versus $41,799,000 last year. Diluted
earnings per share of $2.56 this year were 36% higher than $1.89 last year.
- - CXP's consolidated gross operating margin rose to 30% in fiscal 1998 from
28% last year.
- - During fiscal 1998, CXP repurchased 836,834 shares of its own stock.
- - At March 31, 1998, CXP was virtually debt-free, had $62 million in cash
and $275 million of equity.
In addition to the benefits of the vibrant economy, the most significant
boost to CXP's fiscal 1998 results was our successful integration of the Eagle
Gypsum Wallboard plant acquired by CXP in late fiscal 1997. The plant in
Gypsum, Colorado expanded the production capacity of our Gypsum Wallboard
operations by 50% in fiscal 1998 to almost 1.1 billion square feet. This
additional production, coupled with a 10% price increase in our average
Wallboard price, resulted in a 74% rise in segment operating earnings this year.
[OPERATING MARGIN CHART] [EARNINGS PER SHARE CHART]
<TABLE>
<CAPTION>
Operating Margin (Percent) Earnings Per Share (Dollars)
- -------------------------- ---------------------------
<S> <C> <C> <C>
1998 30% 1998 $2.56
1997 28% 1997 $1.89
1996 25% 1996 $1.47
1995 19% 1995 $0.95
1994 11% 1994 $0.45
</TABLE>
2
<PAGE> 5
CXP's total operating earnings also were boosted by a 21% increase in
results from our Cement segment, which benefitted from record clinker
production, higher sales volumes, increased sales prices, and reduced production
costs.
In a move that holds great significance for CXP's future, toward fiscal
year end we approved and initiated a total of $54 million for three expansion
projects - two in our Gypsum Wallboard operation and another at one of our
Cement facilities. These enhancements, which should be completed by late
calendar 1999, will add capacity, diversify our product base, improve
production volume and plant efficiency and ultimately increase earnings.
Since becoming publicly held in April 1994, CXP has repurchased 1,915,130
shares of its own stock and has approximately 1,085,000 shares remaining under
its current authorization. From time to time, we may repurchase additional
shares.
During the year, CXP President and Chief Executive Officer O.G. Dagnan was
elected the Company's Chairman. Executive Vice President and Chief Operating
Officer Richard D. Jones, Jr. was named President. Mr. Dagnan replaces
Laurence E. Hirsch, CXP Chairman since the Company became publicly held. Mr.
Hirsch remains a CXP Director and Chairman of the Company's Executive Committee.
The record-breaking results reported by CXP for fiscal 1998 were achieved
by our alliance of 1,076 employees, several of whom are featured in this
report. Those pictured and described here represent the many others whose
combined talents, dedication and daily commitment enable CXP to produce rock
solid returns for our shareholders. We are extremely grateful to all members
of our workforce for their contributions.
[STOCKHOLDERS' EQUITY CHART] [EBITDA CASH FLOW CHART]
<TABLE>
<CAPTION>
Stockholders' Equity ($ in Millions) EBITDA Cash Flow ($ in Millions)
- ------------------------------------ --------------------------------
<S> <C> <C> <C>
1998 $275 1998 $102
1997 $239 1997 $ 77
1996 $216 1996 $ 67
1995 $183 1995 $ 50
1994 $171 1994 $ 31
</TABLE>
3
<PAGE> 6
OUTLOOK
The expansion phase of the current cycle, although lengthy by traditional
standards, appears to be continuing. Favorable interest rates are positively
impacting the housing market, demand for our products is unabated and pricing
in the near future should escalate due to ongoing capacity constraints in our
industries. With out strong balance sheet and controlled expansion philosophy,
CXP is poised for continuing growth and anticipates a fifth consecutive record
financial performance in fiscal 1999.
[PHOTOGRAPH OF O.G. DAGNAN AND RICHARD D. JONES, JR.]
/s/ O.G. DAGNAN /s/ RICHARD D. JONES, JR.
O.G. Dagnan Richard D. Jones, Jr.
Chairman and President and
Chief Executive Officer Chief Operating Officer
May 29, 1998
4
<PAGE> 7
ROCK
SOLID
PEOPLE
5
<PAGE> 8
[PHOTOGRAPH OF A MAN STANDING AMONG INSULATED CONCRETE FORMS]
Lee Hunter Since 1995, Texas-Lehigh Cement's Vice President of Marketing has
led the cement industry in a state-wide effort to promote an innovative,
energy-efficient home construction method utilizing insulated concrete forms
(ICF's). Due largely to Lee's endeavors, Texas now leads the nation in ICF
projects, and the industry is capitalizing on a new source of revenue.
CEMENT
Cement revenues rose 5% to $140.3 million in fiscal 1998, and operating profits
from Cement increased 21% to $48.1 million. All of our plants were sold out for
the tenth consecutive year and total Cement sales volume of 2,153,000 tons this
year was 3% higher than last year's sales volume. CXP's average Cement net sales
price for fiscal 1998 was $65.19 per ton, 2.4% higher than last year. Unit
operating margins of $22.34 per ton of Cement were 18% higher than last year's
margin.
[PHOTOGRAPH OF A MAN STANDING IN FRONT OF A CEMENT KILN]
6
<PAGE> 9
[PHOTOGRAPH OF A MAN STANDING AMONG INSULATED CONCRETE FORMS]
In fiscal 1998, the increased sales volume of manufactured Cement versus
purchased product reduced cost of sales and raised unit operating margins for
CXP's Cement group, particularly at our Mountain Cement plant.
During the year, CXP initiated a $20 million expansion of our Illinois
Cement plant will expand the facility's annual clinker capacity by 100,000 tons,
add a new finish mill and position the plant to add more capacity in the future.
[PHOTOGRAPH OF A MAN STANDING IN FRONT OF A CEMENT KILN]
Terrance "T" Lyons From laboratory mix chemist to control room operator, "T"
has done it all at Mountain Cement, and that decade of experience makes him an
ideal Production Supervisor. The former college football star and his team were
a major reason for the operation's record-breaking production results this year
for both the cement kilns and the finish grinding mills.
7
<PAGE> 10
[PHOTOGRAPH OF A MAN STANDING IN A WALLBOARD PLANT]
GYPSUM WALLBOARD
Gypsum Wallboard revenues increased 64% to $118.7 million in fiscal 1998, and
operating earnings jumped 74% to $35.8 million. The gains resulted from a 50%
increase in sales volume to 1,089 million square feet (MMSF) due to the addition
of the Eagle Gypsum plant, a 10% increase in average net sales price to $109.01
per thousand square feet (MSF), and a 16% increase in the operating margin to
$32.88 per MSF. All three CXP plants operated at capacity.
The operation currently
[PHOTOGRAPH OF A MAN STANDING IN A GYPSUM MINE]
Jim Holley Quarry Manager Jim Holley's innovative idea is simplifying the
mining process at American Gypsum's White Mesa Mine. A "pavement profiler,"
normally utilized in highway reconstruction, crushes the gypsum in a single
operation, eliminating drilling and blasting. Combined with better use of
manpower, the technique will cut mine operating costs 30%.
8
<PAGE> 11
[PHOTOGRAPH OF A MAN STANDING IN A WALLBOARD PLANT]
Peter Bauer Plant Manager Peter Bauer established a Safety Committee and a
Quality Awards Program at American Gypsum's original Albuquerque facility,
resulting in enhanced safety awareness, a better working environment, and
higher employee morale. The plant reported an 18% increase in production, less
waste and no lost-time injuries for fiscal 1998.
has two expansion projects underway. A $16 million upgrade of the Albuquerque
plant will add 60 MMSF to capacity, allow the production of all specialty
products, and reduce dryer fuel costs substantially. An $18 million expansion
of the Eagle Gypsum plant will add 240 MMSF, a 60% increase, to current annual
capacity.
The Albuquerque plant upgrade will shift most of the specialty products to
this facility, optimizing board line-speeds and further increasing production.
[PHOTOGRAPH OF A MAN STANDING IN A GYPSUM MINE]
9
<PAGE> 12
Mark Hill In addition to working as Quality Control Manager for Mathews
Readymix, Mark finds time to train new technicians for the American Concrete
Institute's certification program. No wonder Mark is recognized by customers,
government agencies and industry associations in northern California as a
significant educational resource in the concrete and aggregates field.
[PHOTOGRAPH OF A MAN STANDING BESIDE A PICK-UP TRUCK]
CONCRETE AND AGGREGATES
Revenues from our Concrete and Aggregates operations were $42.0 million in
fiscal 1998, 14% higher than last year. Operating earnings of $4.5 million were
6% lower than a year ago despite increased Concrete and Aggregates sales volume
and higher Concrete sales prices, which were offset by lower Aggregates sales
prices and increased Concrete costs.
Concrete sales volume for fiscal 1998 was 672,000 cubic yards, 11% higher
than sales volume last year. Sales volume this year was posi-
[PHOTOGRAPH OF A MAN STANIDNG IN AN AGGREGATES QUARRY]
Mark O'Conner In his two years as Manager of Centex Materials' Buda
Quarry, Mark's ideas have cut the Aggregates plant's production costs by 16%.
Environmental efforts include the ongoing reclamation of old pit areas and
recycling wet plant processing water for reuse. The operation also improved its
ratio of production tons per man hour without capital improvements.
10
<PAGE> 13
[PHOTOGRAPH OF A MAN STANDING BESIDE A PICK-UP TRUCK]
tively impacted by a large commercial job in northern California, as well as a
strong commercial construction market in Austin, Texas.
Fiscal 1998 Aggregates sales volume totaled 2,592,000 tons, a 25% increase
over sales volume in the prior year. Overall Aggregates pricing declined 5%
this year from fiscal 1997 pricing due to product mix, particularly the sale of
a larger quantity of lower-priced road construction Aggregates in fiscal 1998
versus a year ago.
[PHOTOGRAPH OF A MAN STANDING IN AN AGGREGATES QUARRY]
11
<PAGE> 14
STRATEGIC LOCATIONS
CXP's strategically located plants in geographically diverse areas reduce our
dependence on any one market. CXP's Cement operation includes four plants,
two of which are 50%-owned with joint-venture partners, and 11 Cement
distribution terminals. Our Gypsum Wallboard operation consists of three
Wallboard plants, four Wallboard reload centers and one Wallboard distribution
center. Our Concrete and Aggregates group includes 10 Readymix Concrete batch
plant locations and two Aggregates processing operations.
The principal markets for CXP's 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. Our Concrete and Aggregates are sold to local readymix concrete
producers and paving contractors in the Austin, Texas area and in northern
California.
MAJOR FACILITIES
CEMENT PLANTS CONCRETE AND AGGREGATES PLANTS
o Illinois Cement Company, LaSalle, Illinois o Centex Materials, Inc.,
o Mountain Cement Company, Laramie, Wyoming Buda, Texas
o Nevada Cement Company, Fernley, Nevada o Mathews Readymix, Inc.,
o Texas-Lehigh Cement Company, Buda Texas Marysville, California
o Western Aggregates, Inc.,
Marysville, California
GYPSUM WALLBOARD PLANTS
o American Gypsum Company, Albuquerque
and Bernalillo, New Mexico and Gypsum, Colorado
[MAP OF THE UNITED STATES INDICATING THE LOCATION OF CENTEX CONSTRUCTION
PRODUCTS' OPERATIONS]
Centex Construction Products-Fiscal 1998
12
<PAGE> 15
FINANCIAL INFORMATION
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
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,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Cement $ 140,326 $ 133,348 $ 125,705
Gypsum Wallboard 118,718 72,184 58,343
Concrete and Aggregates 42,004 36,809 39,902
Other, net 1,939 1,823 2,782
Less Intersegment Sales (5,665) (4,784) (4,138)
---------- ---------- ----------
297,322 239,380 222,594
---------- ---------- ----------
COSTS AND EXPENSES
Cement 92,245 93,551 90,374
Gypsum Wallboard 82,905 51,619 46,409
Concrete and Aggregates 37,501 32,041 34,344
Less Intersegment Purchases (5,665) (4,784) (4,138)
Corporate General and Administrative 3,825 3,904 2,498
Interest (Income) Expense, net (1,822) (1,357) 803
---------- ---------- ----------
208,989 174,974 170,290
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 88,333 64,406 52,304
Income Taxes 31,800 22,607 18,360
---------- ---------- ----------
NET EARNINGS $ 56,533 $ 41,799 $ 33,944
========== ========== ==========
EARNINGS PER SHARE
Basic $ 2.58 $ 1.89 $ 1.48
========== ========== ==========
Diluted $ 2.56 $ 1.89 $ 1.47
========== ========== ==========
</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,
------------------------
1998 1997
-------- --------
<S> <C> <C>
A S S E T S
Current Assets-
Cash and Cash Equivalents $ 62,090 $ 4,812
Accounts and Notes Receivable, net 36,669 38,700
Inventories 32,537 31,482
-------------------------
Total Current Assets 131,296 74,994
-------------------------
Property, Plant and Equipment 366,353 363,409
Less Accumulated Depreciation (153,444) (139,033)
-------------------------
Property, Plant and Equipment, net 212,909 224,376
-------------------------
Notes Receivable, net 935 1,407
Other Assets 5,972 4,860
-------------------------
$ 351,112 $ 305,637
=========================
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
Current Liabilities-
Accounts Payable $ 18,404 $ 16,472
Accrued Liabilities 35,095 28,254
Notes Payable -- 2,000
Current Portion of Long-term Debt 80 80
-------------------------
Total Current Liabilities 53,579 46,806
-------------------------
Long-term Debt 480 560
Deferred Income Taxes 22,250 18,835
Stockholders' Equity-
Common Stock, Par Value $0.01; Authorized 50,000,000
Shares; Issued and Outstanding 21,525,148 and
21,983,814 Shares, respectively 215 220
Capital in Excess of Par Value 130,413 147,212
Retained Earnings 144,175 92,004
-------------------------
Total Stockholders' Equity 274,803 239,436
-------------------------
$ 351,112 $ 305,637
=========================
</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,
------------------------------------------
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $ 56,533 $ 41,799 $ 33,944
Adjustments to Reconcile Net Earnings to Net Cash
Provided by Operating Activities--
Depreciation, Depletion and Amortization 15,880 13,752 13,791
Deferred Income Tax Provision 3,415 4,491 7,639
Gain on Sale of Assets -- -- (783)
Asset Disposition Provision 2,276 -- --
Decrease (Increase) in Accounts and Notes Receivable 2,503 (1,456) (6,073)
(Increase) Decrease in Inventories (1,055) (30) 1,053
Increase in Accounts Payable 1,956 10 424
Increase in Accrued Liabilities 6,841 5,225 859
(Increase) Decrease in Other Assets, net (234) (883) 974
---------- ---------- ----------
88,115 62,908 51,828
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, Plant and Equipment Additions, net (13,092) (5,934) (15,294)
Proceeds from Asset Dispositions 5,525 -- 5,308
Acquisition of Centex Eagle Gypsum -- (56,006) --
---------- ---------- ----------
(7,567) (61,940) (9,986)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to Notes Payable -- 7,500 --
Reductions in Notes Payable (2,000) (5,500) --
Decrease in Other Long-term Debt (80) (80) (23,860)
Increase in Current Portion of Long-term Debt -- -- 80
Proceeds from Stock Option Exercises 6,727 561 262
Retirement of Common Stock (23,531) (14,976) --
Dividends Paid to Shareholders (4,386) (4,460) --
---------- ---------- ----------
(23,270) (16,955) (23,518)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 57,278 (15,987) 18,324
CASH AT BEGINNING OF PERIOD 4,812 20,799 2,475
---------- ---------- ----------
CASH AT END OF PERIOD $ 62,090 $ 4,812 $ 20,799
========== ========== ==========
</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,
------------------------------------------------
1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at Beginning of Period $ 220 $ 230 $ 230
Retirement of Common Stock (5) (10) ---
------------ ------------ ------------
Balance at End of Period 215 220 230
------------ ------------ ------------
CAPITAL IN EXCESS OF PAR VALUE
Balance at Beginning of Period 147,212 161,617 161,355
Retirement of Common Stock (23,526) (14,966) ---
Stock Option Exercises 6,727 561 262
------------ ------------ ------------
Balance at End of Period 130,413 147,212 161,617
------------ ------------ ------------
RETAINED EARNINGS
Balance at Beginning of Period 92,004 54,615 21,820
Dividends to Shareholders (4,362) (4,410) (1,149)
Net Earnings 56,533 41,799 33,944
------------ ------------ ------------
Balance at End of Period 144,175 92,004 54,615
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 274,803 $ 239,436 $ 216,462
============ ============ ============
</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.
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, 1998 and 1997. The Company has no
significant credit risk concentration among its diversified customer base.
Notes receivable at March 31, 1998 are collectible primarily over three
years. The weighted average interest rate at March 31, 1998 and 1997 was 8.6%
and 9.1%, 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
----------------------
1998 1997
----------------------
<S> <C> <C>
Raw Materials and Materials-in-Progress $ 8,478 $ 8,448
Finished Cement 5,169 5,170
Aggregates 1,830 2,088
Gypsum Wallboard 2,020 1,932
Repair Parts and Supplies 14,121 13,241
Fuel and Coal 919 603
----------------------
$32,537 $31,482
======================
</TABLE>
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
18
<PAGE> 21
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:
<TABLE>
<S> <C>
Plants 20 to 30 years
Buildings 20 to 40 years
Machinery and Equipment 3 to 20 years
</TABLE>
INCOME TAXES
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,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Operating Units Selling, General and Administrative $ 15,979 $ 12,808 $ 11,442
Corporate General & Administrative 3,825 3,904 2,498
-------- -------- --------
$ 19,804 $ 16,712 $ 13,940
======== ======== ========
</TABLE>
Maintenance and repair expenses are included in each segment's costs and
expenses. The Company incurred expenses of $28.9 million, $26.2 million and
$23.8 million in the years ended March 31, 1998, 1997 and 1996, respectively,
for maintenance and repairs.
Other net revenues include clinker sales income, lease and rental income,
asset sale income, non-inventoried aggregates sales 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, 1998, 1997 and 1996
were $0.1 million, $0.2 million and $1.3 million, respectively.
Net payments made for federal and state income taxes during the years ended
March 31, 1998, 1997 and 1996 were $26.4 million, $17.9 million and $9.8
million, respectively. Included therein are receipts from the Company's former
parent, Centex Corporation, of $2.9 million during the year ended March 31,
1996.
EMPLOYEE BENEFIT PLANS
Certain of the Company's hourly employees are covered by defined benefit plans.
At April 1, 1997, the Company's pro rata share of the projected benefit
obligation (assuming a 7 1/4% discount rate) was $3.7 million. The market value
of assets available to pay these obligations at April 1, 1997, was $3.8 million.
In addition, certain salaried employees are covered by the Company's Profit
Sharing and Retirement plan. The expenses for each period were as follows:
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Defined Benefit Plans $ 227 $ 219 $ 176
Defined Contribution Plan $ 1,224 $ 1,053 $ 1,038
</TABLE>
19
<PAGE> 22
Statement of Financial Accounting Standard 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
In March 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128).
This statement establishes new standards for computing and presenting earnings
per share (EPS). SFAS No. 128 replaces the presentation of primary EPS
previously prescribed by Accounting Principles Board Opinion No. 15 (APB No. 15)
with a presentation of basic EPS which is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period.
SFAS No. 128 also requires dual presentation of basic and diluted EPS.
Diluted EPS is computed similarly to fully diluted EPS pursuant to APB No. 15.
The Company adopted SFAS No. 128 in fiscal 1998, and prior year basic and
diluted EPS have been restated to facilitate comparison between the years.
Basic earnings per common share is based on the weighted average number of
common shares outstanding in 1998, 1997 and 1996 of 21,895,312, 22,148,222 and
22,969,643, respectively. Diluted earnings per common share is based on the
weighted average number of common shares outstanding and share equivalents
outstanding, assuming dilution from issued and unexercised stock options
outstanding, of 22,062,654, 22,174,222 and 23,023,323 in 1998, 1997 and 1996,
respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for employee stock options using the intrinsic value method
of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Generally, no expense is recognized related to the Company's stock
options because the option's exercise price is set at the stock's fair market
value on the date the option is granted.
Effective April 1, 1996 the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123), by making the required note disclosures (see Note G). Accordingly,
adoption of this new standard has no impact on the Company's reported financial
position or operating results.
ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which requires that changes in comprehensive income be shown in a financial
statement that is displayed with the same prominence as other financial
statements. The Company will adopt this statement in its fiscal year ending
March 31, 1999 and does not expect adoption of the statement to have a material
effect on the presentation of its financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," (SFAS No. 131) which changes the way
public companies report information about segments. SFAS No. 131, which is based
on the management approach to segment reporting, requires companies to
selectively report quarterly segment information and entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenues. The Company will adopt this
statement in its fiscal year ending March 31, 1999 and does not expect adoption
of the statement to have a material effect on the presentation of its financial
statements.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent with the
1998 presentation.
20
<PAGE> 23
(B) PROPERTY, PLANT AND EQUIPMENT
Cost by major category and accumulated depreciation are summarized below:
<TABLE>
<CAPTION>
March 31,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Land and Quarries $ 33,363 $ 37,420
Plants 289,886 284,158
Buildings, Machinery and Equipment 43,104 41,831
-----------------------
366,353 363,409
Accumulated Depreciation (153,444) (139,033)
-----------------------
$212,909 $224,376
=======================
</TABLE>
In December 1997, The Company recorded a $2.3 million asset write down
provision resulting from the Albuquerque plant upgrade project.
(C) INDEBTEDNESS
SHORT-TERM DEBT
Short-term debt is set forth below:
<TABLE>
<CAPTION>
March 31,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Bank Line of Credit, with Interest at
Prevailing Rates, Due February 1998,
Unsecured $ 0 $2,000
</TABLE>
On August 31, 1997, the $10,000,000 uncommitted unsecured line of credit
(the "Line") from a bank was terminated. The Line was utilized for short-term
working capital needs. Borrowings under the Line bore interest at prevailing
market rates. The weighted average interest rate on outstanding borrowings
during fiscal 1998 and 1997 was 6.1% and 5.9%, respectively.
LONG-TERM DEBT
Long-term debt is set forth below:
<TABLE>
<CAPTION>
March 31,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Property Note, Interest at 7%, Due March 2005, Secured $ 560 $ 640
Less Current Maturities (80) (80)
-----------------------
$ 480 $ 560
=======================
</TABLE>
CREDIT FACILITY
In April 1994, 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 1/2%. 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, 1998, and throughout the fiscal year
21
<PAGE> 24
then ended. During fiscal 1996, the Bank Revolver was amended to lower the
maximum 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. On March 20, 1998, the Bank Revolver was amended to
allow additional unsecured indebtedness not to exceed $20 million and removal
of the limitation on the amount of repurchases of the Company's capital stock.
The Company had no borrowings outstanding under the Bank Revolver as of March
31, 1998 or 1997.
(D) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
For the Years Ended March 31,
---------------------------------------
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Current Provision (Benefit)
Federal $ 25,701 $ 16,799 $ 12,174
State 2,684 1,317 (1,453)
--------- --------- ---------
28,385 18,116 10,721
--------- --------- ---------
Deferred Provision
Federal 2,185 3,038 4,012
State 1,230 1,453 3,627
--------- --------- ---------
3,415 4,491 7,639
--------- --------- ---------
Provision for Income Taxes $ 31,800 $ 22,607 $ 18,360
========= ========= =========
</TABLE>
The effective tax rates vary from the federal statutory rates due to the
following items:
<TABLE>
<CAPTION>
For the Years Ended March 31,
---------------------------------------
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Earnings Before Income Taxes $ 88,333 $ 64,406 $ 52,304
========= ========= =========
Income Taxes at Statutory Rate $ 30,917 $ 22,542 $ 18,306
Increases (Decreases) in Tax Resulting from --
State Income Taxes, net 2,526 1,800 1,414
Statutory Depletion in Excess of Cost (2,225) (1,957) (1,588)
Other 582 222 228
--------- --------- ---------
Provision for Income Taxes $ 31,800 $ 22,607 $ 18,360
========= ========= =========
Effective Tax Rate 36% 35% 35%
</TABLE>
The deferred income tax provision 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,
---------------------------------------
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Excess Tax Depreciation and Amortization $ 6,544 $ 5,048 $ 5,653
Bad Debts (29) (162) 269
Uniform Capitalization 36 (151) 76
Accrual Changes (3,611) (425) 685
Other 475 181 956
--------- --------- ---------
$ 3,415 $ 4,491 $ 7,639
========= ========= =========
</TABLE>
22
<PAGE> 25
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
----------------------------
<S> <C> <C>
Items Giving Rise to Deferred Taxes
Excess Tax Depreciation and Amortization $25,550 $19,006
Other 4,437 3,962
----------------------------
29,987 22,968
----------------------------
Items Giving Rise to Prepaid Taxes
Accrual Changes (6,886) (3,275)
Bad Debts (723) (694)
Uniform Capitalization (128) (164)
----------------------------
(7,737) (4,133)
----------------------------
Net Deferred Income Tax Liability $22,250 $18,835
============================
</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's 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, eleven 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 the Company's 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.
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,
------------------------------------------
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Revenues
Cement $ 140,326 $ 133,348 $ 125,705
Gypsum Wallboard 118,718 72,184 58,343
Concrete and Aggregates 42,004 36,809 39,902
Other, net 1,939 1,823 2,782
---------- ---------- ----------
302,987 244,164 226,732
Less Intersegment Sales (5,665) (4,784) (4,138)
---------- ---------- ----------
$ 297,322 $ 239,380 $ 222,594
========== ========== ==========
Segment Operating Earnings
Cement $ 48,081 $ 39,797 $ 35,331
Gypsum Wallboard 35,813 20,565 11,934
Concrete and Aggregates 4,503 4,768 5,558
Other, net 1,939 1,823 2,782
---------- ---------- ----------
$ 90,336 $ 66,953 $ 55,605
========== ========== ==========
Identifiable Assets
Cement $ 141,462 $ 141,622 $ 145,969
Gypsum Wallboard 123,997 125,490 67,516
Concrete and Aggregates 22,922 28,939 28,749
Corporate and Other 62,731 9,586 27,341
---------- ---------- ----------
$ 351,112 $ 305,637 $ 269,575
========== ========== ==========
Capital Expenditures
Cement $ 3,513 $ 2,915 $ 13,082
Gypsum Wallboard 7,982 758 889
Concrete and Aggregates 2,027 2,602 1,746
Corporate and Other 27 40 43
---------- ---------- ----------
$ 13,549 $ 6,315 $ 15,760
========== ========== ==========
Depreciation, Depletion and Amortization
Cement $ 7,860 $ 7,938 $ 7,778
Gypsum Wallboard 5,552 3,331 2,908
Concrete and Aggregates 2,194 2,225 2,871
Corporate and Other 274 258 234
---------- ---------- ----------
$ 15,880 $ 13,752 $ 13,791
========== ========== ==========
</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
the Company, would have a material adverse effect on the consolidated financial
condition or results of operations of the Company.
24
<PAGE> 27
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 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 1998, 1997, and 1996 totaled $3.0 million, $2.3 million and
$1.9 million, respectively. Minimum annual rental commitments as of March 31,
1998, under noncancelable leases are set forth as follows:
<TABLE>
<CAPTION>
Fiscal Year Total
- --------------------------------------------------------------------------------
<S> <C>
1999 $1,542
2000 $1,479
2001 $1,069
2002 $ 853
2003 $ 761
Thereafter $3,281
</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. 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. A summary of the activity
of the 1994 Plan is presented below.
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------------------------------------------------------------
1998 1997 1996
------------------------- ------------------------- -------------------------
Number Weighted Avg. Number Weighted Avg. Number Weighted Avg.
of Shares Exercise Price of Shares Exercise Price of Shares Exercise Price
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding Options
at Beginning of Year 736,950 $12.25 742,600 $12.12 768,300 $12.19
Granted 6,300 $24.73 72,500 $14.00 30,000 $13.00
Exercised (378,438) $12.08 (43,410) $12.93 (18,700) $14.00
Forfeited/Expired (2,113) $12.00 (34,740) $12.36 (37,000) $13.38
--------- -------- --------
Outstanding Options at End of Year 362,699 $12.64 736,950 $12.25 742,600 $12.12
========= ======== ========
Options Exercisable at End of Year 356,399 552,347 305,330
========= ======== ========
Weighted Average Fair Value of
Options Granted during the Year $ 13.58 $ 3.96 $ 3.56
</TABLE>
25
<PAGE> 28
The following table summarizes information about stock options outstanding
at March 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ----------------------------
Wtd. Avg. Weighted Weighted
Number of Remaining Average Number of Average
Range of Shares Contractual Exercise Shares Exercise
Exercise Prices Outstanding Life Price Outstanding Price
- ---------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$12.00 to $14.00 356,399 6.7 years $ 12.43 356,399 $ 12.43
$22.25 to $29.69 6,300 9.4 years $ 24.73 -- --
------- -------
362,699 6.8 years $ 12.64 356,399 $ 12.43
======= =======
</TABLE>
Options available for future grants were 1,196,753 at March 31, 1998.
The Company has adopted the disclosure-only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation" 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, proforma net earnings
would have been $56,462, $41,754 and $33,934 for the fiscal years ended March
31, 1998, 1997 and 1996, respectively. Basic and diluted earnings per share
would remain unchanged.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------------
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Expected Volatility 36.1% 39.2% 39.2%
Risk-Free Interest Rate 6.4% 6.7% 6.1%
Dividend Yield .8% 1.4% 1.5%
Expected Life (Years) 10 10 10
</TABLE>
(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 receivables, 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. Prior to that time, the
Company was a wholly owned subsidiary of Centex Corporation ("Centex"). 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.
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:
26
<PAGE> 29
Indemnification Agreement: The Company and Centex entered into an
Indemnification Agreement, pursuant to which the Company and Centex agreed
generally to indemnify each other 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.
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: Centex Service Company ("CSC"), a subsidiary of
Centex, will provide the Company with employee benefit administration,
public/investor relations and certain other services. The Administrative
Services Agreement will expire on March 31, 1999, unless terminated earlier at
the option of the Company. The Company pays to CSC a fee of $7,916 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,
LLC, 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, LLC consist of a gypsum wallboard manufacturing facility, a
gypsum mine, and a cogeneration power facility, all located in Eagle County,
Colorado.
The acquisition was 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 and equipment and $4.0 million to various components of net working
capital. The results of operations of Centex Eagle Gypsum Company, LLC have been
included in the Company's financial statements since the date of acquisition.
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, 1998 and 1997, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended March 31, 1998. 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, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 4, 1998
28
<PAGE> 31
Centex Construction Products, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Benefitting from increased sales volume in each of its product lines and higher
cement and gypsum wallboard operating margins, Centex Construction Products,
Inc. reported the highest net earnings in its history for fiscal 1998.
During fiscal 1998, consolidated revenues increased 24% to $297.3 million
from $239.4 million in fiscal 1997. A combination of increased sales volume in
all segments along with higher cement and gypsum wallboard sales prices
generated the revenue gain. Operating earnings of $90.3 million increased 35%
over fiscal 1997 operating earnings of $67.0 million primarily due to increased
sales volumes and higher margins in the Cement and Gypsum Wallboard segments.
Net interest income was $1.8 million in fiscal 1998 compared to $1.4 million in
fiscal 1997 due to higher average investment cash balances this fiscal year. The
Company's effective tax rate in fiscal 1998 was 36%, one percent higher than
fiscal 1997 due to increased state income taxes. As a result of the foregoing,
net earnings increased 35% to $56.5 million in fiscal 1998 from $41.8 million in
fiscal 1997. Diluted earnings per share for fiscal 1998 increased 36% to $2.56
compared to $1.89 for fiscal 1997. Diluted earnings per share for fiscal 1998
increased more than net earnings as a result of fewer average shares outstanding
in fiscal 1998.
The following table compares sales volumes, average unit sales prices and
unit operating margins for the Company's operations:
<TABLE>
<CAPTION>
Gypsum
Cement Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
------------------ ------------------- ------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (Thousands) 2,153 2,095 1,089 726 672 603 2,592 2,073
Average Net Sales Price $ 65.19 $ 63.66 $109.01 $ 99.39 $ 47.33 $ 46.86 $ 3.93 $ 4.13
Operating Margin $ 22.34 $ 19.00 $ 32.88 $ 28.32 $ 5.12 $ 6.36 $ 0.41 $ 0.45
</TABLE>
Cement. Cement revenues for the fiscal year ended March 31, 1998 were
$140.3 million, 5% higher than $133.3 million for the prior fiscal year. Segment
operating earnings increased 21% to $48.1 million from $39.8 million last fiscal
year mainly due to an increase in sales volume and unit operating margins to
$22.34 per ton, an 18% improvement over last year's margin of $19.00 per ton.
Sales volume of 2.15 million tons was 58,000 tons higher than last fiscal year's
record high sales volume due to strong sales in the Texas and Illinois markets.
All plants operated at capacity and were again "sold out". The Company purchased
129,000 tons of cement this year, down 56,000 tons from last year, to supplement
its fiscal 1998 manufactured cement shipments. Strong construction activity in
the regions served by the Company resulted in price realizations increasing
2 1/2% to $65.19 per ton. Cement unit costs were 4% lower than the prior year
primarily due to a reduction in manufacturing cost and the cost impact of
replacing 56,000 tons of more expensive purchased cement with lower costing
manufactured cement.
Gypsum Wallboard. Gypsum Wallboard revenues increased 64% during fiscal
1998 to $118.7 million from $72.2 million in fiscal year 1997. As a result of
increased sales volume and improved operating margins, segment operating
earnings totaled $35.8 million for fiscal 1998, a 74% improvement over $20.6
million in fiscal 1997. Operating margins increased 16% to $32.88 per thousand
square feet ("MSF") over $28.32 per MSF last year primarily due to higher
average sales prices. Gypsum wallboard average sales prices increased $9.62 per
MSF or 10% in fiscal 1998 to $109.01 per MSF as a result of record high industry
consumption. Gypsum wallboard sales volume of 1,089 million square feet ("MMSF")
for fiscal 1998 increased 50% over fiscal 1997 primarily due to sales volume
from the Eagle Gypsum plant acquired in the fourth quarter of fiscal 1997. The
Company's wallboard plants operated at capacity during the fiscal year. Unit
costs
29
<PAGE> 32
increased 7% in fiscal 1998 from $71.07 per MSF last fiscal year due to the
combination of higher Eagle plant production cost and the $2.3 million asset
write down provision resulting from the Albuquerque plant upgrade project.
Concrete and Aggregates. Concrete and Aggregates revenues of $42.0 million
in fiscal year 1998 were 14% higher than fiscal 1997 revenues of $36.8 million.
Segment operating earnings of $4.5 million in fiscal 1998 declined 6% from $4.8
million in the prior fiscal year mainly due to a decline in concrete operating
earnings. Concrete operating earnings of $3.4 million in fiscal 1998 were 10%
below last fiscal year's earnings due to lower operating margins offsetting
higher sales volume. Concrete sales volume of 672,000 cubic yards in fiscal
1998 increased 11% over fiscal 1997 due to a large contract job in the northern
California market and a strong commercial construction market in Austin, Texas.
Higher concrete net sales prices were negated by increased materials and
operating costs. Aggregates operating earnings of $1.1 million for fiscal 1998
increased 13% from fiscal 1997 due to higher sales volume being partially offset
by lower operating margins. Aggregates sales volume of 2.6 million tons
increased 25% from 2.1 million tons in fiscal 1997 mostly due to higher highway
road base sales in the Texas and northern California markets. Product mix
caused unit costs to decrease 4% in fiscal 1998.
Other Income. Other income of $1.9 million during fiscal 1998 increased
$116,000 over fiscal year 1997 primarily due to a $250,000 increase in clinker
sales income.
Interest Income. Net interest income of $1.8 million for fiscal year 1998
increased $465,000 over last fiscal year due to higher average investment cash
balances this year.
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
expenses of $2.5 million mainly due to additional 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 the pay down 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. Diluted earnings per share for fiscal 1997 increased
29% to $1.89 compared to $1.47 for fiscal 1996. Diluted 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>
Gypsum
Cement 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 $ 60.99 $ 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 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 cost.
30
<PAGE> 33
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 year 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. Gypsum 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. Gypsum wallboard sales volume of 726 million square feet ("MMSF")
for fiscal year 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% over 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 lower 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 and clinker sales income this
year.
LIQUIDITY AND CAPITAL RESOURCES
Each of the Company's business segments operates in capital-intensive
industries. The Company at March 31, 1998 is virtually debt-free, has a cash
balance of $62 million, and has a $35 million unsecured revolving credit
facility in place to finance its working capital and capital expenditures needs.
Working capital at March 31, 1998 was $77.7 million, an increase of $49.5
million from March 31, 1997, principally due to a $57.3 million increase in
cash. During fiscal year 1998 the Company approved three expansion projects; a
$16 million plant upgrade at its Albuquerque gypsum wallboard plant that
increases annual plant capacity by 60 MMSF and accommodates 54" board
production; an $18 million expansion of the Company's recently acquired Eagle
gypsum wallboard plant in Gypsum, Colorado that will add 240 MMSF to the
plant's current annual capacity; and a $20 million expansion of the 50% owned
LaSalle, Illinois cement plant that will increase its annual clinker capacity
by 100,000 tons and add a new 4,000 horsepower finish mill. The projects will
be completed at various times between late calendar 1998 and late calendar
1999. Capital expenditures for fiscal 1998 were $13.1 million compared to $5.9
million in fiscal 1997. The higher capital spending in fiscal 1998 was
primarily due to the commencement of the Albuquerque plant upgrade project.
Based on its financial condition and low debt levels at March 31, 1998, the
Company believes that its internally generated cash flow coupled with funds
available under its credit facility will enable the Company 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 three
million shares of the Company's common stock. The Company repurchased a total
of 836,834 shares during fiscal 1998, 1,038,100 shares in fiscal 1997, zero
shares in fiscal 1996, and 40,196 shares in fiscal 1995. Since the fiscal 1998
and 1997 stock repurchases did not include purchasing a proportionate amount of
stock from its former parent, Centex Corporation, Centex's ownership interest
in the Company at March 31, 1998 has increased to approximately 55.6%.
31
<PAGE> 34
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 1.7% in calendar 1997, 3.3% in 1996, and 2.9% in 1995. 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 has been a factor along with increasing sales prices due
to full or near full utilization of industry capacity during the three years
ended March 31, 1998 have enabled the Company to increase per unit profit
margins for its products (other than concrete and aggregates) in each
successive year.
YEAR 2000
The Company has conducted an assessment of the potential impact of the Year
2000 problem on its computer applications, operating software and hardware.
Based upon the results of this assessment, management believes the Company does
not have a Year 2000 problem with its financial and management information
processing systems. The Company is continuing on an ongoing basis to examine
other equipment that could be affected by the Year 2000 problem to determine
any noncompliance and to effect changes to such equipment to make it compliant.
Costs of these efforts are not significant and will be expensed. The Company
does not anticipate any material disruption in its operations as a result of
any failure by the Company to be in compliance. However, the Company does not
currently have any information concerning the Year 2000 compliance status of
its suppliers and customers. In the event that any of the Company's significant
suppliers or customers does not successfully and timely achieve Year 2000
compliance, the Company's business or operations could be adversely affected.
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,
------------------------
1998 1997
-------- --------
<S> <C> <C>
F I R S T Q U A R T E R
Revenues $77,954 $61,058
Earnings Before Income Taxes $23,406 $15,198
Net Earnings $15,097 $ 9,863
Diluted Earnings Per Share $ 0.68 $ 0.44
S E C O N D Q U A R T E R
Revenues $83,412 $65,538
Earnings Before Income Taxes $27,705 $20,052
Net Earnings $17,770 $13,014
Diluted Earnings Per Share $ 0.80 $ 0.59
T H I R D Q U A R T E R
Revenues $70,510 $59,117
Earnings Before Income Taxes $20,699 $17,291
Net Earnings $13,235 $11,222
Diluted Earnings Per Share $ 0.60 $ 0.51
F O U R T H Q U A R T E R
Revenues $65,446 $53,667
Earnings Before Income Taxes $16,523 $11,865
Net Earnings $10,431 $ 7,700
Diluted Earnings Per Share $ 0.48 $ 0.35
</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,
--------------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $297,322 $239,380 $222,594 $194,313
Net Earnings $ 56,533 $ 41,799 $ 33,944 $ 21,820
Total Assets $351,112 $305,637 $269,575 $250,103
Total Long-term Debt $ 560 $ 640 $ 720 $ 24,500
Total Debt $ 560 $ 2,640 $ 720 $ 24,500
Deferred Income Taxes $ 22,250 $ 18,835 $ 14,344 $ 6,705
Stockholders' Equity $274,803 $239,436 $216,462 $183,405
Total Debt as a Percent of Total
Capitalization (Total Debt,
Deferred Income Taxes and
Stockholders' Equity) 0.2% 1.0% 0.3% 11.4%
Net Earnings as a Percent of
Beginning Stockholders' Equity 23.6% 19.3% 18.5% 12.8%
Per Common Share -
Diluted Net Earnings(1) $ 2.56 $ 1.89 $ 1.47 $ 0.95
Cash Dividends(2) $ 0.20 $ 0.20 $ 0.05 --
Book Value Based on Shares
Outstanding at Year End(1) $ 12.77 $ 10.89 $ 9.42 $ 7.99
Stock Prices(1)
High $ 39 $ 20 $ 15 1/2 $ 14 3/8
Low $ 18 $ 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
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,
--------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $166,826 $136,526 $129,832 $142,188 $126,358 $121,211
Net Earnings $ 10,240 $ 3,112 $ 713 $ 1,118 $ 3,911 $ 5,015
Total Assets $257,315 $258,994 $267,303 $267,654 $238,817 $225,797
Total Long-term Debt $ 15,585 $ 34,519 $ 37,713 $ 47,094 $ 24,085 $ 24,937
Total Debt $ 16,200 $ 38,943 $ 49,308 $ 52,322 $ 28,521 $ 28,086
Deferred Income Taxes $ 37,925 $ 36,224 $ 35,881 $ 31,553 $ 31,977 $ 29,326
Stockholders' Equity $170,839 $160,599 $157,487 $156,774 $155,656 $151,745
Total Debt as a Percent of Total
Capitalization (Total Debt,
Deferred Income Taxes and
Stockholders' Equity) 7.2% 16.5% 20.3% 21.7% 13.2% 13.4%
Net Earnings as a Percent of
Beginning Stockholders' Equity 6.4% 2.0% 0.5% 0.7% 2.6% 3.4%
Per Common Share -
Diluted Net Earnings(1) $ 0.45 $ 0.14 $ 0.03 $ 0.05 $ 0.17 $ 0.22
Cash Dividends(2) -- -- -- -- -- --
Book Value Based on Shares
Outstanding at Year End(1) $ 7.43 $ 6.98 $ 6.85 $ 6.82 $ 6.77 $ 6.60
Stock Prices(1)
High -- -- -- -- -- --
Low -- -- -- -- -- --
</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.
35
<PAGE> 38
[PHOTOGRAPH OF THREE MEN STANDING]
Corporate officers, from left:
Steve Rowley, Art Zunker, Dave House
BOARD OF DIRECTORS
Robert L. Clarke (2,3)
Partner
Bracewell & Patterson, L.L.P.
O.G. Dagnan (1)
Chairman 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
Chairman, President and CEO,
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.
O.G. Dagnan
Chairman and
Chief Executive Officer
Richard D. Jones, Jr.
President and
Chief Operating Officer
H.D. House
Executive Vice President-Gypsum
Steven R. Rowley
Executive Vice President-Cement
Arthur R. Zunker, Jr.
Senior Vice President-Finance,
Treasurer and
Chief Financial Officer
Rodney E. Cummickel
Vice President
Walter W. Rowe
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
Mark J. Hamilton
Vice President
J. David Loftis
Vice President
ILLINOIS CEMENT
COMPANY
Joseph L. Baker
President
Thomas F. Clarke
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
W. Jerald Hoyle
Executive Vice President
John R. Bremner
Vice President
Ronald L. Gross
Vice President
TEXAS-LEHIGH
CEMENT COMPANY
Gerald J. Essl
President
R. Lee Hunter
Vice President
Larry E. Roberson
Vice President
WESTERN
AGGREGATES, INC.
Craig J. Callaway
President
James D. Elliott
Vice President
[PHOTOGRAPH Operational management,
OF from left: seated --
FIVE MEN Joe Baker, Jim Bailey;
STANDING AND standing -- Jerry Hoyle,
TWO MEN Al Steagall, Gerry Essl, Craig
SEATED] Callaway, Dave House
36
<PAGE> 39
CORPORATE HEADQUARTERS
3710 Rawlins Street
Suite 1600, LB 78
Dallas, Texas 75219
(214) 559-6514 (Phone)
(214) 559-6554 (Fax)
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 16, 1998 at 10:00 a.m. in the Red Oak Room at the
Sheraton Suites Market Center, 2101 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, 1998 Fiscal Year Ended March 31, 1997
---------------------------------------- --------------------------------------
Price Price
---------------------- ----------------------
Quarter High Low Dividends High Low Dividends
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $ 21 1/2 $ 18 $ 0.05 $ 15 1/4 $ 13 5/8 $ 0.05
Second $ 31 1/2 $ 20 $ 0.05 $ 16 $ 12 1/2 $ 0.05
Third $ 32 5/8 $ 26 7/8 $ 0.05 $ 18 1/2 $ 14 3/8 $ 0.05
Fourth $ 39 $ 29 1/2 $ 0.05 $ 20 $ 16 1/4 $ 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 May 29, 1998 was 218. The closing
price of CXP's common stock on the New York Stock Exchange on May 29, 1998 was
$38 1/4.
37
<PAGE> 40
[LOGO]
<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 Cement Company corporation Nevada
Centex Eagle Gypsum Company corporation Delaware
Centex Eagle Gypsum Company, L.L.C. limited liability company Delaware
Centex Materials, 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 4, 1998, 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 4, 1998, 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.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas
June 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX
CONSTRUCTION PRODUCTS, INC.'S MARCH 31, 1998 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-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 62,090
<SECURITIES> 0
<RECEIVABLES> 36,669
<ALLOWANCES> 0
<INVENTORY> 32,537
<CURRENT-ASSETS> 131,296
<PP&E> 366,353
<DEPRECIATION> 153,444
<TOTAL-ASSETS> 351,112
<CURRENT-LIABILITIES> 53,499
<BONDS> 560
0
0
<COMMON> 215
<OTHER-SE> 274,588
<TOTAL-LIABILITY-AND-EQUITY> 351,112
<SALES> 295,383
<TOTAL-REVENUES> 299,144
<CGS> 0
<TOTAL-COSTS> 206,986
<OTHER-EXPENSES> 3,825
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 88,333
<INCOME-TAX> 31,800
<INCOME-CONTINUING> 56,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,533
<EPS-PRIMARY> 0
<EPS-DILUTED> 2.56
</TABLE>
