<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended
DECEMBER 31, 1998
Commission File Number 1-12984
[COMPANY LOGO]
CENTEX CONSTRUCTION PRODUCTS, INC.
A Delaware Corporation
IRS Employer Identification No. 75-2520779
3710 Rawlins, Suite 1600 LB 78
Dallas, Texas 75219
(214) 559-6514
The registrant 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 and has
been subject to such filing requirements for the past 90 days.
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As of the close of business on February 9, 1999, 19,930,965 shares of Centex
Construction Products, Inc. common stock were outstanding.
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<PAGE> 2
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. Consolidated Financial Statements 1
Consolidated Statements of Earnings for the
Three Months Ended December 31, 1998 and 1997 2
Consolidated Statements of Earnings for the
Nine Months Ended December 31, 1998 and 1997 3
Consolidated Balance Sheets as of December 31, 1998
and March 31, 1998 4
Consolidated Statements of Cash Flows for the
Nine Months Ended December 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7-12
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1.
The consolidated financial statements include the accounts of Centex
Construction Products, Inc. and subsidiaries ("CXP" or the "Company"), and have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these unaudited consolidated financial
statements are read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's latest Annual Report on Form
10-K. In the opinion of the Company, all adjustments necessary to present fairly
the information in the following unaudited consolidated financial statements of
the Company have been included. The results of operations for such interim
periods are not necessarily indicative of the results for the full year.
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CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
December 31,
---------------------------------
For the Three Months Ended 1998 1997
------------ ------------
<S> <C> <C>
REVENUES
Cement .................................. $ 39,097 $ 32,120
Gypsum Wallboard ........................ 35,206 28,673
Concrete/Aggregates ..................... 11,637 10,505
Other, net .............................. 490 604
Less Intersegment Sales ................. (1,567) (1,392)
------------ ------------
84,863 70,510
------------ ------------
COSTS AND EXPENSES
Cement .................................. 22,793 20,204
Gypsum Wallboard ........................ 21,209 21,351
Concrete/Aggregates ..................... 9,807 9,400
Less Intersegment Purchases ............. (1,567) (1,392)
Corporate General
& Administrative .................. 1,201 916
Interest Income, net .................... (617) (668)
------------ ------------
52,826 49,811
------------ ------------
EARNINGS BEFORE INCOME TAXES ..................... 32,037 20,699
Income Taxes ............................ 11,720 7,464
------------ ------------
NET EARNINGS ..................................... $ 20,317 $ 13,235
============ ============
EARNINGS PER SHARE:
BASIC ................................... $ 1.00 $ 0.60
============ ============
DILUTED ................................. $ 0.99 $ 0.60
============ ============
AVERAGE SHARES OUTSTANDING:
BASIC ................................... 20,349,761 22,002,147
============ ============
DILUTED ................................. 20,443,870 22,177,688
============ ============
CASH DIVIDENDS PER SHARE ......................... $ 0.05 $ 0.05
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
December 31,
---------------------------------
For the Nine Months Ended 1998 1997
------------ ------------
<S> <C> <C>
REVENUES
Cement .................................. $ 122,020 $ 114,357
Gypsum Wallboard ........................ 102,243 87,495
Concrete/Aggregates ..................... 35,820 32,390
Other, net .............................. 1,333 1,852
Less Intersegment Sales ................. (4,931) (4,218)
------------ ------------
256,485 231,876
------------ ------------
COSTS AND EXPENSES
Cement .................................. 74,968 73,346
Gypsum Wallboard ........................ 62,054 60,838
Concrete/Aggregates ..................... 29,681 28,420
Less Intersegment Purchases ............. (4,931) (4,218)
Corporate General
& Administrative ..................... 2,977 2,752
Interest Income, net .................... (2,230) (1,072)
------------ ------------
162,519 160,066
------------ ------------
EARNINGS BEFORE INCOME TAXES ..................... 93,966 71,810
Income Taxes ............................ 34,016 25,708
------------ ------------
NET EARNINGS ..................................... $ 59,950 $ 46,102
============ ============
EARNINGS PER SHARE:
BASIC ................................... $ 2.86 $ 2.10
============ ============
DILUTED ................................. $ 2.84 $ 2.08
============ ============
AVERAGE SHARES OUTSTANDING:
BASIC ................................... 20,957,716 22,004,692
============ ============
DILUTED ................................. 21,090,736 22,178,715
============ ============
CASH DIVIDENDS PER SHARE ......................... $ 0.15 $ 0.15
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------- -----------
(Unaudited) (*)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents ............ $ 66,792 $ 62,090
Accounts & Notes Receivables, net .... 36,390 36,669
Inventories .......................... 28,662 32,537
--------- ---------
Total Current Assets ........... 131,844 131,296
--------- ---------
Property, Plant and Equipment ........... 383,435 366,353
Less Accumulated Depreciation ........ (160,137) (153,444)
--------- ---------
Property, Plant & Equipment, net .... 223,298 212,909
Notes Receivable, net ................... 751 935
Other Assets ............................ 5,002 5,972
--------- ---------
$ 360,895 $ 351,112
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable ..................... $ 17,738 $ 18,404
Accrued Liabilities .................. 37,197 35,095
Current Portion of Long-term Debt .... 80 80
Income Taxes Payable ................. 3,408 --
--------- ---------
Total Current Liabilities ...... 58,423 53,579
--------- ---------
Long-term Debt .......................... 480 480
Deferred Income Taxes ................... 21,525 22,250
Stockholders' Equity
Common Stock, Par Value $0.01;
Authorized 50,000,000 Shares;
Issued and Outstanding
20,199,177 and 21,525,148 Shares,
Respectively ........................ 202 215
Capital in Excess of Par Value ......... 79,272 130,413
Retained Earnings ...................... 200,993 144,175
--------- ---------
Total Stockholders' Equity .............. 280,467 274,803
--------- ---------
$ 360,895 $ 351,112
========= =========
</TABLE>
*From audited financial statements.
See notes to unaudited consolidated financial statements.
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CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
December 31,
----------------------
For the Nine Months Ended 1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings ................................... $ 59,950 $ 46,102
Adjustments to Reconcile Net
Earnings to Net Cash Provided
by Operating Activities -
Depreciation, Depletion
and Amortization ............. 12,021 11,903
Deferred Income Tax
(Benefit) Provision .......... (725) 1,113
Asset Disposition
Provision ................... -- 2,000
Decrease in Accounts & Notes
Receivable .............................. 463 3,545
Decrease in Inventories ........................ 3,875 3,281
Increase in Accounts Payable
& Accrued Liabilities ................... 1,436 2,958
Decrease (Increase) in
Other, net .............................. 1,715 (292)
Increase in Income Taxes Payable ............... 3,778 2,919
-------- --------
82,513 73,529
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, Plant and Equipment
Additions, net .......................... (23,460) (7,523)
-------- --------
(23,460) (7,523)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid to Shareholders ................. (3,197) (3,304)
Retirement of Common Stock ..................... (54,185) (11,185)
Stock Option Exercises Proceeds ................ 3,031 6,317
Decrease in Notes Payable ...................... -- (2,000)
-------- --------
(54,351) (10,172)
-------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS ............................... 4,702 55,834
CASH AT BEGINNING OF PERIOD ...................... 62,090 4,812
-------- --------
CASH AT END OF PERIOD ............................ $ 66,792 $ 60,646
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE> 8
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(A) A summary of changes in stockholders' equity is presented below.
<TABLE>
<CAPTION>
Capital in
Common Excess of Retained
Stock Par Value Earnings Total
--------- ----------- ---------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance, March 31, 1997 $ 220 $ 147,212 $ 92,004 $ 239,436
Net Earnings -- -- 56,533 56,533
Stock Option Exercises -- 6,727 -- 6,727
Dividends Paid to Shareholders -- -- (4,362) (4,362)
Retirement of Common stock (5) (23,526) -- (23,531)
--------- --------- --------- ---------
Balance March 31, 1998 215 130,413 144,175 274,803
Net Earnings -- -- 59,950 59,950
Stock Option Exercises -- 3,031 -- 3,031
Dividends Paid to Shareholders -- -- (3,132) (3,132)
Retirement of Common Stock (13) (54,172) -- (54,185)
--------- --------- --------- ---------
BALANCE DECEMBER 31, 1998 $ 202 $ 79,272 $ 200,993 $ 280,467
========= ========= ========= =========
</TABLE>
(B) 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>
Unaudited Audited
December 31, March 31,
1998 1998
------------ ---------
(dollars in thousands)
<S> <C> <C>
Raw Materials and Materials-in-Progress $ 6,243 $ 8,478
Finished Cement 4,919 5,169
Aggregates 1,495 1,830
Gypsum Wallboard 1,152 2,020
Repair Parts and Supplies 14,291 14,121
Fuel and Coal 562 919
-------- --------
$ 28,662 $ 32,537
======== ========
</TABLE>
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CENTEX CONSTRUCTION PRODUCTS, INC.
(C) Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128, which
simplifies the standards for computing and presenting earnings per share, became
effective for periods ending after December 15, 1997. Accordingly, earnings per
share as previously reported have been restated to conform to the new standard.
Basic earnings per share were computed using the average number of common shares
outstanding in each of the three and nine month periods ended December 31, 1998
and 1997. Diluted earnings per share for this three and nine months ended
December 31, 1998 and 1997 assume the dilutive impact of stock options.
(D) New Accounting Standards:
Effective April 1, 1998, the Company adopted Statement of Financial
Accounting Standards: Statement No. 130, "Reporting Comprehensive Income,"
("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. There are no items that the
Company is required to recognize as components of comprehensive income.
Statement of Financial Accounting Standards No. 131, issued in June
1997, 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 report selected 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.
Although this Statement will be effective for the Company's 1999 annual
financial statements, the Company does not expect a significant effect on the
presentation of its financials.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company reported the highest earnings and revenues in its history
for both the quarter ended December 31, 1998, the third quarter of fiscal 1999,
and for the first nine months of fiscal 1999. Revenues for the third quarter of
fiscal 1999 totaled $84,863,000, a 20% increase over revenues of $70,510,000 for
the same quarter last year. CXP's net earnings for the quarter ended December
31, 1998 were $20,317,000, a 54% increase over $13,235,000 for the same quarter
last year. Diluted earnings per share for this year's quarter of $0.99 increased
65% over $0.60 per diluted share for the same quarter in fiscal 1998.
For the nine months ended December 31, 1998, CXP's net earnings
increased 30% to a record $59,950,000 or $2.84 per diluted share from
$46,102,000 or $2.08 per diluted share for the same period a year ago. Revenues
for the nine months rose 11% to $256,485,000 from $231,876,000 for the same
period in the prior fiscal year. Diluted earnings per share for the quarter and
nine months increased more than net earnings due to fewer average shares
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<PAGE> 10
outstanding in the current periods versus the same periods a year ago. The
quarter's and nine month's earnings gain resulted from increased earnings in
each of the Company's business segments, particularly cement and gypsum
wallboard. A strong national economy has resulted in cement and gypsum wallboard
consumption exceeding last year's same period record consumption rates.
The following table compares sales volume, average unit sales prices
and unit operating margins for each of the Company's operations:
<TABLE>
<CAPTION>
Gypsum
Cement Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
----------------- ------------------ ------------------- -----------------
Three Months Ended Dec. 31, 1998 1997 1998 1997 1998 1997 1998 1997
--------------------------- ----------------- ------------------ ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (M) 568 494 283 262 163 164 817 680
Average Net Sales Price $ 68.84 $ 65.12 $ 124.38 $ 109.08 $ 51.21 $ 47.70 $ 4.00 $ 3.93
Operating Margin (1) $ 28.71 $ 24.16 $ 49.45 $ 27.85 $ 6.31 $ 4.22 $ 0.98 $ 0.60
Nine Months Ended Dec. 31,
--------------------------
Sales Volume (M) 1,771 1,752 860 806 538 508 2,261 2,100
Average Net Sales Price $ 68.90 $ 65.28 $ 118.94 $ 108.51 $ 49.65 $ 47.45 $ 4.03 $ 3.94
Operating Margin (1) $ 26.57 $ 23.41 $ 46.75 $ 33.06 $ 7.65 $ 5.89 $ 0.90 $ 0.46
</TABLE>
- -----------------------
(1) Segment operating margins represent revenues less direct operating
expenses, segment depreciation, and segment selling, general and
administrative expenses.
Cement revenues for the current quarter totaled $39,097,000, up 22%
from $32,120,000 for the same quarter in the prior year. Operating earnings were
$16,304,000, a 37% increase over $11,916,000 for the same quarter last year. A
combination of higher operating margins due to a 5.7% increase in average net
sales prices, a 2% decrease in cost of sales, and a 74,000 ton gain in sales
volume accounted for the quarterly operating earnings gain. As a result of
strong demand in all of the Company's sales regions during the previous twelve
months, average cement sales price of $68.84 per ton improved $3.72 per ton over
the prior year's quarter. Unseasonably warm weather during this year's quarter
resulted in a 15% increase in sales volume over the same period last year. Cost
of sales declined $0.89 per ton due to lower production costs and the impact of
increased sales volume on fixed costs.
For the current nine months, Cement revenues were $122,020,000, a 7%
increase over $114,357,000 for the same period a year ago. Operating earnings
from Cement were $47,052,000, up 15% from $41,011,000 for the similar period
last year. The operating earnings gain resulted from higher operating margins
and increased sales volume. Average cement sales price of $68.90 per ton was 5
1/2% greater than for the prior year. Cement sales volume of 1,771,000 tons was
1% higher than sales volume for the first nine months of fiscal 1998. While all
of CXP's cement plants continue to produce clinker at capacity, due to low
finished cement production rates earlier in the fiscal year and the delayed
start of contract work, the quantity of finished cement available to sell at
December 31 was down from last year's finished cement inventory levels. Demand
continues to be strong in all of the Company's cement markets and the Company
expects fiscal 1999 to be another "sold out" year. Total U.S. portland cement
consumption through October 1998 was 5% ahead of last year's shipments for the
same period.
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<PAGE> 11
Gypsum Wallboard revenues of $35,206,000 for the quarter increased 23%
over revenues of $28,673,000 for the same quarter in the prior fiscal year.
Favorable shipments and pricing levels elevated operating earnings for the
quarter to a record $13,997,000, up 91% over $7,322,000 for the same period last
year. Increased sales volume and a 77% gain in operating margins resulted in the
quarterly gain. Sales volume of 283 million square feet ("MMSF") for this year's
quarter was 21 MMSF or 8% higher than 262 MMSF sold during the prior year's
quarter. Average net sales price for the quarter was $124.38 per thousand board
feet ("MSF"), 14% higher than $109.08 per MSF for the same quarter last year.
Cost of sales declined $6.30 per MSF mainly due to last year's $2.0 million
asset disposition provision associated with the Albuquerque plant expansion. The
Albuquerque plant was down between September 28 and October 7, 1998 to allow for
the installation of the new board line. Start-up went smoothly and the plant is
producing at anticipated levels.
For the current nine month period, Gypsum Wallboard revenues were
$102,243,000, a 17% increase over $87,495,000 for the same period a year ago.
Operating earnings from Gypsum Wallboard rose 51% to $40,189,000 for the first
nine months of this fiscal year from $26,657,000 for last year's similar period.
The operating earnings improvement resulted from increased sales volume and a
41% gain in operating margins. Gypsum Wallboard sales volume for the nine months
increased 6.7% to 860 MMSF due to improved plant efficiencies. U.S. wallboard
consumption for calendar year 1998 was 6% greater than last year, as both new
construction and remodeling activity remains strong. The gain in operating
margins resulted from the combination of a 9.6% sales price increase and a 4%
reduction in cost of sales. Cost of sales declined $3.26/MSF mainly due to last
year's $2.0 million asset disposition provision.
Revenues from Concrete and Aggregates were $11,637,000 for the third
quarter this fiscal year, up 11% from $10,505,000 for the same quarter a year
ago. Concrete and Aggregates reported operating earnings for the quarter of
$1,830,000, up 66% from $1,105,000 for the same quarter last year. Concrete
earnings this year increased 48% to $1,030,000 from last year's comparable
quarter primarily due to higher sales prices. Concrete sales volume for the
quarter this year was 163,000 cubic yards compared to 164,000 cubic yards for
the same quarter last year. The Company's average Concrete net sales price of
$51.21 per cubic yard for the current quarter was 7.4% higher than $47.70 per
cubic yard for the same quarter a year ago. Higher sales prices at both concrete
operations resulted in the sales price gain. Aggregates earnings of $800,000
increased 95% from the prior year's quarter due to a 63% gain in operating
margins and increased sales volume. The Company's Aggregates operation reported
sales volume of 817,000 tons for the quarter this year, 20% above sales volume
of 680,000 tons for the same quarter last year. The sales volume gain resulted
from higher crushed products sales volume at the Texas operation. Product mix
and higher net sales prices resulted in average aggregates pricing of $4.00 per
ton for this year's quarter versus $3.93 per ton for the same quarter a year
ago. Cost of sales declined $0.31 per ton due to reduced production cost and
lower legal fees.
Concrete and Aggregates revenues were $35,820,000 for the first nine
months this fiscal year, up 11% from $32,390,000 for the same period last year.
Operating earnings were $6,139,000 for the first nine months of this year, a 55%
increase over $3,970,000 for the same period last year. Concrete earnings of
$4,115,000 increased 37% due to higher sales volume and improved operating
margins. Sales volume of 538,000 cubic yards for the first nine months of fiscal
1999 was 6% above the prior year's nine month total due to a strong Texas
residential housing market. Operating margins increased 36% mainly due to a 5%
increase in average net sales
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<PAGE> 12
price. Aggregates operating earnings for the nine months this year were
$2,024,000, up 107% over the same period last year. Operating margins increased
96% due to the combination of a 2.3% improvement in net sales prices and a 10%
reduction in cost of sales.
Other Income of $490,000 and $1,333,000 for the quarter and nine months
decreased $114,000 and $519,000, respectively, from the prior year's quarter and
nine months. The quarter and nine month's decline is due to lower trucking
income and increased product development costs. Other Income includes clinker
sales income, non-inventoried aggregates income, trucking income, asset sales
and other miscellaneous income and cost items.
Corporate general and administrative expenses of $1,201,000 for the
quarter was up $285,000 over prior years quarter primarily due to increased
incentive compensation accruals.
Net Interest Income of $2,230,000 for the nine months was up $1,158,000
due to higher cash balances this year.
STOCK REPURCHASE PROGRAM
Reflecting the Company's continuing confidence in its future
performance, during the second quarter, CXP's Board of Directors authorized the
repurchase of an additional one million shares of the Company's stock. A
cumulative total of four million shares have been authorized for repurchase
since the Company became publicly held in April 1994. The Company repurchased
473,000 shares from the public during the third quarter and 273,800 shares since
the end of the third quarter, bringing total shares repurchased from the public
since March 31, 1998 to 1,736,300. Centex Corporation now owns 60.0% of the
outstanding shares of CXP common stock. There are approximately 348,000 shares
remaining under the Company's current authorization.
FINANCIAL CONDITION
To finance its working capital and capital expenditures requirements,
the Company has a four year $35 million unsecured revolving credit facility that
expires on March 31, 2001. Based on its financial condition and a virtually debt
free balance sheet at December 31, 1998, the Company believes that its
internally generated cash flow, coupled with funds available under the credit
facility, will enable CXP to provide adequately for its current operations and
future growth.
Working capital at December 31, 1998 was $73.4 million, down from $77.7
million at March 31, 1998. The decrease resulted primarily from a $4.8 million
increase in current liabilities. Cash flow from operating activities of $82.5
million exceeded capital expenditures and stock repurchases by $4.9 million. The
increase in cash was partially offset by a $3.9 million decrease in inventories.
Stock repurchases during the nine months amounted to $54.2 million. Capital
spending of $23.5 million for this year's nine months is up $15.9 million over
the same period last year as a result of expenditures relating to the three
previously announced expansion projects. Cash payments for income taxes totaled
$28.8 million and $19.9 million in the first nine months of fiscal 1999 and
1998, respectively.
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<PAGE> 13
YEAR 2000 COMPLIANCE
The Company has a variety of operating systems, computer software
program applications, computer hardware equipment and other equipment with
embedded electronic circuits, including applications used in the Company's
financial business systems, manufacturing processes and administrative functions
(collectively, the "Systems"). To the extent that the Systems are unable to
interpret appropriately the upcoming calendar year 2000, some level of
modification or possible replacement will be necessary.
The Company's Year 2000 Task Force is overseeing the Company's Year
2000 compliance. The Task Force, consisting of members of the Company's
management, accounting and legal department, has oversight of the information
systems managers and other administrative personnel charged with implementing
the Company's Year 2000 compliance program (collectively, the "Year 2000
Compliance Team").
From fiscal 1995 through the present, the Company in its normal course
of business has replaced, upgraded or changed substantially all of its business
systems and administrative hardware and software. Such replacements, upgrades
and changes occurred primarily for reasons unrelated to Year 2000
non-compliance, and have not been accelerated to any material extent as a result
of Year 2000 non-compliance. The Year 2000 Compliance Team has evaluated and
tested critical financial Systems for Year 2000 compliance. For non-compliant
Systems, the replacement or upgrading of any non-compliant components will be
completed by March 31, 1999. The Year 2000 Compliance Team has completed the
assessment phase concerning non-financial Systems and remediation and testing is
taking place. The replacement or upgrading of non-compliant Systems will be
completed by September 30, 1999.
The Task Force is presently developing its Year 2000 contingency plan.
Additionally, in order to further confirm the Company's Year 2000 readiness, the
Company has engaged the services of a third-party consulting firm to evaluate
its Year 2000 readiness. The contingency plan and the consulting firm's review
will be completed during the second quarter of fiscal 2000 (i.e., the September
30, 1999 quarter).
To date, expenses associated with Year 2000 compliance have been
minimal. Since the Company's manufacturing operations are not highly automated,
the Company believes that the total cost to correct remaining Year 2000
manufacturing non-compliance issues will not be material. Internally generated
cash has been, and the Company anticipates that it will continue to be,
sufficient to fund the expenditures.
As a result of the Company's Year 2000 compliance program, the Company
believes that a material adverse effect of the Year 2000 issue on the Company or
of the individual operations or subsidiaries is highly unlikely. Nevertheless,
it is not possible to anticipate all possible future outcomes or accurately
determine the effects upon the Company's operations, business or financial
condition, because the Year 2000 issue is far-reaching and consequences are
dependent on many factors, some of which are not completely within the Company's
control. If third party providers, due to the Year 2000 issue, fail to provide
the Company with components or materials which are necessary to manufacture its
products, with sufficient electrical power and other utilities to sustain its
manufacturing process, or with adequate, reliable means of transporting its
products to its customers, then any such failure could have a material adverse
effect on the
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<PAGE> 14
business, operations and financial performance of the Company. The amount of
potential liability and lost revenue cannot be estimated. Currently, the Company
is not aware of any significant third party providers or customers that are not
Year 2000 compliant. In order to address the potential Year 2000 non-compliance
by third parties affecting the Company's operations, the Company will continue
to survey its key customers and third party providers requesting that they
respond regarding their Year 2000 plans. If the Company finds a third party
whose lack of Year 2000 readiness would have a substantial impact on the
Company's operations, the Company will take corrective action.
Year 2000 Forward-looking Statements
Certain statements in this section, other than historical information,
are "forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve risks and uncertainties,
including the ability of third parties to correct material non-compliant
systems, the ability of the Company to remediate any Year 2000 non-compliance
issues, and the Company's assessment of the impact of the Year 2000 issue on the
Company's financial results and operations.
OUTLOOK
Key drivers of demand for the Company's products, such as consumer
confidence, employment rates and interest rates, all remain at favorable levels.
Assuming no significant change in overall economic climate, and given the
current and anticipated levels of pricing, the Company should post its fifth
consecutive year of record financial performance.
The Eagle gypsum wallboard plant expansion project is expected to be
completed during the first quarter of fiscal year 2000. The project is ahead of
schedule and on budget. The 4000 horsepower finished cement mill project at the
Illinois plant is on schedule and budget with a planned start-up during the
second quarter of fiscal year 2000.
FORWARD-LOOKING STATEMENTS
The information contained in this Report includes forward-looking
statements involving a number of risks and uncertainties. Forward-looking
statements may be identified by the context of the statement and generally arise
when the Company is discussing its beliefs, estimates or expectations. In
addition to the factors discussed elsewhere in this document, other determinants
that could cause actual results to differ from the anticipated results or other
expectations expressed in the Company's forward-looking statements include
increases in short- and/or long-term interest rates or changes in the
relationship between short- and long-term interest rates; changes in general
market conditions; decline or growth in home building and other construction
industries; changes in public infrastructure expenditures; competition in the
local markets in which the Company, through it subsidiaries, conducts business;
changes in the economy in general; changes in governmental regulation; and the
cost and availability of raw materials. These and other factors are described in
the Annual Report on Form 10-K of Centex Construction Products, Inc. for the
fiscal year ended March 31, 1998. The report is filed with the Securities and
Exchange Commission.
-12-
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during
the quarter ended December 31, 1998.
All other items required under Part II are omitted because they are not
applicable.
-13-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTEX CONSTRUCTION PRODUCTS, INC.
------------------------------------------
Registrant
February 10, 1999 /s/ O.G. DAGNAN
-------------------------------------------
O.G. Dagnan
Chairman and Chief Executive Officer
February 10, 1999 /s/ ARTHUR R. ZUNKER, JR.
------------------------------------------
Arthur R. Zunker, Jr.
Senior Vice President-Finance and Treasurer
(principal financial and
chief accounting officer)
-14-
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX
CONSTRUCTION PRODUCTS, INC.'S DECEMBER 31, 1998, FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 66,792
<SECURITIES> 0
<RECEIVABLES> 36,390
<ALLOWANCES> 0
<INVENTORY> 28,662
<CURRENT-ASSETS> 131,844
<PP&E> 383,435
<DEPRECIATION> 160,137
<TOTAL-ASSETS> 360,895
<CURRENT-LIABILITIES> 58,343
<BONDS> 540
0
0
<COMMON> 202
<OTHER-SE> 280,265
<TOTAL-LIABILITY-AND-EQUITY> 360,895
<SALES> 255,152
<TOTAL-REVENUES> 258,715
<CGS> 0
<TOTAL-COSTS> 161,772
<OTHER-EXPENSES> 2,977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 93,966
<INCOME-TAX> 34,016
<INCOME-CONTINUING> 59,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,950
<EPS-PRIMARY> 0
<EPS-DILUTED> 2.84
</TABLE>
