<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For
the Quarterly period Ended
SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period
from ________ to _______
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
- --------------------------------------------------------------------------------
As of the close of business on November 10, 1999, 19,047,852 shares of Centex
Construction Products, Inc. common stock were outstanding.
- --------------------------------------------------------------------------------
<PAGE> 2
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. Consolidated Financial Statements 1
Consolidated Statements of Earnings
for the Three Months Ended
September 30, 1999 and 1998 2
Consolidated Statements of Earnings
for the Six Months Ended
September 30, 1999 and 1998 3
Consolidated Balance Sheets as of
September 30, 1999 and March 31, 1999 4
Consolidated Statements of Cash Flows
for the Six Months Ended
September 30, 1999 and 1998 5
Notes to Consolidated Financial
Statements 6-8
ITEM 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8-13
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
<PAGE> 3
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
PART I. 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 be 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.
1
<PAGE> 4
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED September 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Cement ......................................... $ 47,210 $ 45,393
Gypsum Wallboard ............................... 55,903 34,876
Concrete and Aggregates ........................ 16,011 12,818
Other, net ..................................... 295 439
Less: Intersegment Sales ....................... (1,577) (1,750)
------------ ------------
117,842 91,776
------------ ------------
COSTS AND EXPENSES
Cement ......................................... 28,179 27,270
Gypsum Wallboard ............................... 25,526 20,845
Concrete and Aggregates ........................ 12,916 10,349
Less: Intersegment Purchases ................... (1,577) (1,750)
Corporate General & Administrative ............. 1,224 905
Interest Income, net ........................... (714) (811)
------------ ------------
65,554 56,808
------------ ------------
EARNINGS BEFORE INCOME TAXES ..................... 52,288 34,968
Income Taxes ................................... 19,104 12,590
------------ ------------
NET EARNINGS ..................................... $ 33,184 $ 22,378
============ ============
EARNINGS PER SHARE:
BASIC .......................................... $ 1.72 $ 1.06
============ ============
DILUTED ........................................ $ 1.71 $ 1.05
============ ============
AVERAGE SHARES OUTSTANDING:
BASIC .......................................... 19,260,136 21,103,422
============ ============
DILUTED ........................................ 19,367,734 21,249,431
============ ============
CASH DIVIDENDS PER SHARE ......................... $ 0.05 $ 0.05
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE> 5
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED September 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Cement ......................................... $ 89,065 $ 82,923
Gypsum Wallboard ............................... 99,470 67,037
Concrete and Aggregates ........................ 29,279 24,183
Other, net ..................................... 500 843
Less: Intersegment Sales ....................... (3,293) (3,364)
------------ ------------
215,021 171,622
------------ ------------
COSTS AND EXPENSES
Cement ......................................... 56,678 52,175
Gypsum Wallboard ............................... 48,821 40,845
Concrete and Aggregates ........................ 23,824 19,874
Less: Intersegment Purchases ................... (3,293) (3,364)
Corporate General & Administrative ............. 2,282 1,776
Interest Income, net ........................... (1,248) (1,613)
------------ ------------
127,064 109,693
------------ ------------
EARNINGS BEFORE INCOME TAXES ..................... 87,957 61,929
Income Taxes ................................... 32,016 22,296
------------ ------------
NET EARNINGS ..................................... $ 55,941 $ 39,633
============ ============
EARNINGS PER SHARE:
BASIC .......................................... $ 2.88 $ 1.86
============ ============
DILUTED ........................................ $ 2.87 $ 1.85
============ ============
AVERAGE SHARES OUTSTANDING:
BASIC .......................................... 19,421,616 21,263,355
============ ============
DILUTED ........................................ 19,517,780 21,415,830
============ ============
CASH DIVIDENDS PER SHARE ......................... $ 0.10 $ 0.10
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE> 6
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
Sept. 30, March 31,
ASSETS 1999 1999
- ------ ------------ ------------
(Unaudited) (*)
<S> <C> <C>
Current Assets
Cash and Cash Equivalents ..................... $ 69,978 $ 49,646
Accounts and Notes Receivable, net ............ 56,002 43,192
Inventories ................................... 30,576 33,030
------------ ------------
Total Current Assets ........................ 156,556 125,868
------------ ------------
Property, Plant and Equipment .................... 405,496 392,302
Less Accumulated Depreciation .................. (172,210) (163,745)
------------ ------------
Property, Plant & Equipment, net ............ 233,286 228,557
Notes Receivable, net ............................ 340 664
Other Assets ..................................... 13,842 9,594
------------ ------------
$ 404,024 $ 364,683
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable .............................. $ 23,830 $ 18,276
Accrued Liabilities ........................... 44,806 40,849
Current Portion of Long-term Debt ............. 80 80
Income Taxes Payable .......................... 548 --
------------ ------------
Total Current Liabilities ................... 69,264 59,205
------------ ------------
Long-term Debt ................................... 400 400
Deferred Income Taxes ............................ 24,153 25,158
Stockholders' Equity -
Common Stock, Par Value $0.01;
Authorized 50,000,000 Shares;
Issued and Outstanding 19,115,430 and
19,744,465 Shares, respectively ......... 191 197
Capital in Excess of Par Value ................ 38,659 62,376
Retained Earnings ............................. 271,357 217,347
------------ ------------
Total Stockholders' Equity ....................... 310,207 279,920
------------ ------------
$ 404,024 $ 364,683
============ ============
</TABLE>
* From audited financial statements.
See notes to unaudited consolidated financial statements.
4
<PAGE> 7
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED September 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings ................................... $ 55,941 $ 39,633
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating
Activities -
Depreciation, Depletion and
Amortization ......................... 8,650 7,665
Deferred Income Tax
Benefit .............................. (1,005) (938)
Increase in Accounts and Notes
Receivable .................................. (12,486) (8,555)
Decrease in Inventories ........................ 2,454 4,267
Increase in Accounts Payable
and Accrued Liabilities ..................... 9,511 91
(Increase) Decrease in
Other, net .................................. (3,457) 913
Increase in Income Taxes Payable ............... 548 3,945
------------ ------------
Net Cash Provided by Operating
Activities ........................... 60,156 47,021
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, Plant and Equipment
Additions, net .............................. (14,141) (15,314)
------------ ------------
Net Cash Used in Investing
Activities ........................... (14,141) (15,314)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid To Shareholders ................. (1,960) (2,137)
Retirement of Common Stock ..................... (24,415) (37,797)
Proceeds from Stock Option Exercises ........... 692 2,879
------------ ------------
Net Cash Used in Financing
Activities ........................... (25,683) (37,055)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................... 20,332 (5,348)
CASH AT BEGINNING OF PERIOD ...................... 49,646 62,090
------------ ------------
CASH AT END OF PERIOD ............................ $ 69,978 $ 56,742
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE> 8
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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, 1998 $ 215 $ 130,413 $ 144,175 $ 274,803
Net Earnings -- -- 77,289 77,289
Stock Option Exercises -- 3,806 -- 3,806
Shareholders' Dividends -- -- (4,117) (4,117)
Retirement of Common Stock (18) (71,843) -- (71,861)
------------ ------------ ------------ ------------
Balance March 31, 1999 197 62,376 217,347 279,920
Net Earnings -- -- 55,941 55,941
Stock Option Exercises -- 692 -- 692
Shareholders' Dividends -- -- (1,931) (1,931)
Retirement of Common Stock (6) (24,409) -- (24,415)
------------ ------------ ------------ ------------
BALANCE SEPTEMBER 30, 1999 $ 191 $ 38,659 $ 271,357 $ 310,207
============ ============ ============ ============
</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
September 30, March 31,
1999 1999
------------ ------------
<S> <C> <C>
Raw Materials and Materials-in-Progress $ 7,450 $ 9,124
Finished Cement 5,106 5,601
Aggregates 1,372 1,577
Gypsum Wallboard 1,380 1,289
Repair Parts and Supplies 14,562 14,770
Fuel and Coal 706 669
------------ ------------
$ 30,576 $ 33,030
============ ============
</TABLE>
6
<PAGE> 9
(C) Earnings Per Share:
The Company computes earnings per share in accordance with the
provisions of Financial Accounting Standards No. 128, "Earnings Per Share".
Basic earnings per share is computed using the average number of common shares
outstanding in each of the three and six month periods ended September 30, 1999
and 1998. Diluted earnings per share for the periods ended September 30, 1999
and 1998 assume the dilutive impact of stock options. Anti-dilutive options to
purchase shares of common stock that were excluded from the computation of
diluted earnings per share were 28,000 shares at an average price of $39.53 and
173,000 shares at an average price of $36.80 for the three months and six months
ended September 30, 1999, respectively. The anti-dilutive options have
expiration dates ranging from April 2008 to July 2009.
(D) Segment Information:
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 and extraction of limestone; the
manufacture, production, distribution and sale of Portland cement (a basic
construction material which is the essential binding ingredient in concrete);
the mining and extraction of gypsum and the manufacture and sale of gypsum
wallboard; the sale of ready-mix concrete; and the mining, extraction 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.
Intersegment sales are recorded at prices which approximate market prices.
Segment operating earnings represent revenues less direct operating expenses,
segment depreciation, and segment selling, general and administrative expenses.
Corporate general and administrative expense includes corporate overhead and
other administrative expenses.
The following table sets forth certain business segment information:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues (External Customers):
Cement $ 45,754 $ 43,751 $ 86,027 $ 79,749
Gypsum Wallboard 55,903 34,876 99,470 67,037
Concrete and Aggregates 15,890 12,710 29,024 23,993
Other, net 295 439 500 843
------------ ------------ ------------ ------------
$ 117,842 $ 91,776 $ 215,021 $ 171,622
============ ============ ------------ ------------
Intersegment Sales:
Cement $ 1,456 $ 1,642 $ 3,038 $ 3,174
Concrete and Aggregates 121 108 255 190
------------ ------------ ------------ ------------
$ 1,577 $ 1,750 $ 3,293 $ 3,364
============ ============ ============ ============
Operating Income:
Cement $ 19,031 $ 18,123 $ 32,387 $ 30,748
Gypsum Wallboard 30,377 14,031 50,649 26,192
Concrete and Aggregates 3,095 2,469 5,455 4,309
Other, net 295 439 500 843
------------ ------------ ------------ ------------
Total 52,798 35,062 88,991 62,092
Corporate General and Administrative (1,224) (905) (2,282) (1,776)
Interest Income, net 714 811 1,248 1,613
------------ ------------ ------------ ------------
Earnings Before Income Taxes $ 52,288 $ 34,968 $ 87,957 $ 61,929
============ ============ ============ ============
</TABLE>
7
<PAGE> 10
Total assets by segment are as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Cement $ 144,247 $ 139,183
Gypsum Wallboard 153,822 143,464
Concrete and Aggregates 29,038 23,634
Corporate and Other 76,917 58,402
------------ ------------
$ 404,024 $ 364,683
============ ============
</TABLE>
The increase in Cement segment assets resulted primarily from the
completion of the Illinois Cement plant's finish mill project. The increase in
Gypsum Wallboard assets is due to the completion of the Eagle Gypsum wallboard
plant expansion project early in fiscal 2000 and seasonal increases in accounts
receivable balances. Concrete and Aggregates assets increased from the Texas
Highway 190 aggregates project and seasonal increases in account receivable
balances. Corporate and other assets consist primarily of cash and cash
equivalents, general office assets and miscellaneous other assets.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Benefitting from increased sales volume and higher net sales prices in
each of its business segments, particularly Gypsum Wallboard, the Company
reported the highest financial results in its history for both the quarter ended
September 30, 1999, the second quarter of fiscal 2000, and for the first six
months of fiscal 2000. Revenues for the second quarter of fiscal 2000 were an
all-time high $117,842,000, a 28% increase over revenues of $91,776,000 for the
same quarter last year. CXP's net earnings for the quarter ended September 30,
1999 were a record high $33,184,000, a 48% increase over $22,378,000 for the
same quarter last year. Diluted earnings per share for this year's quarter of
$1.71, also an all-time record high, increased 63% over $1.05 per share for the
same quarter in fiscal 1999.
For the six months ended September 30, 1999, CXP's net earnings
increased 41% to a record $55,941,000 or $2.87 per diluted share from
$39,633,000 or $1.85 per diluted share for the same period a year ago. Revenues
for the six months rose 25% to $215,021,000 from $171,622,000 for the same
period in the prior fiscal year. Diluted earnings per share for the quarter and
six months increased more than net earnings due to fewer average shares
outstanding in the current periods versus the same periods a year ago. A strong
national economy has resulted in U.S. cement and gypsum wallboard consumption
for the first nine months of 1999 exceeding last year's same period record
consumption.
The following table compares sales volume, average unit sales prices
and unit operating margins for the Company's operations:
8
<PAGE> 11
<TABLE>
<CAPTION>
Gypsum
Cement Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
------------------- ------------------- ------------------- -------------------
Quarter Ended September 30, 1999 1998 1999 1998 1999 1998 1999 1998
- --------------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (M) 675 652 353 295 230 191 923 808
Average Net Sales Price $ 69.94 $ 69.69 $ 158.36 $ 118.55 $ 52.31 $ 50.09 $ 4.31 $ 4.06
Operating Margin (1) $ 28.19 $ 27.82 $ 86.05 $ 47.69 $ 8.83 $ 8.96 $ 1.15 $ 0.95
</TABLE>
<TABLE>
<CAPTION>
Gypsum
Cement Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
------------------- ------------------- ------------------- -------------------
Six Months Ended September 30, 1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (M) 1,269 1,203 653 577 425 375 1,687 1,444
Average Net Sales Price $ 70.16 $ 68.94 $ 152.32 $ 116.27 $ 51.86 $ 48.96 $ 4.30 $ 4.04
Operating Margin (1) $ 25.51 $ 25.56 $ 77.56 $ 45.43 $ 8.48 $ 8.23 $ 1.10 $ 0.85
</TABLE>
- ---------
(1) Segment operating margins represent revenues less direct operating expenses,
segment depreciation, and segment selling, general and administrative expenses.
Cement revenues for the quarter totaled $47,210,000, up 4% over the
same quarter in the prior year. Operating earnings were $19,031,000, a 5%
increase over $18,123,000 for the same quarter last year. Higher sales volume
accounted for the net quarterly operating earnings gain. Sales volume of 675,000
tons for the quarter was 4% above the prior year's quarter. The sales volume
gain resulted from strong sales in the Texas and Illinois markets. Demand
continues to be strong in all of the Company's Cement markets and the Company
expects fiscal 2000 to be another "sold out" year. Average cement sales prices
improved to $69.94 per ton from $69.69 per ton for the same quarter last year.
For the current six months, Cement revenues were $89,065,000 million, a
7% increase over $82,923,000 for the same period a year ago. Operating earnings
from Cement were $32,387,000, up 5% from $30,748,000 for the similar period last
year. The operating earnings gain resulted primarily from higher sales volume.
Cement sales volume of 1,269,000 tons was 5% higher than sales volume for the
first six months of fiscal 1999, mostly due to an increase in purchased cement
sales. Purchased cement sales volume of 129,000 tons for this year's period was
48% higher than last year's six months sales volume.
Gypsum Wallboard revenues of $55,903,000 for the quarter increased 60%
over last year's same quarter revenues of $34,876,000. Operating earnings for
the quarter were $30,377,000, up 116% over $14,031,000 for the same period last
year. Increased sales volume and higher operating margins resulted in the
quarterly gain. Sales volume of 353 million square feet ("MMSF") for this year's
quarter was 20% greater than 295 MMSF sold during the prior year's quarter. The
sales volume increase resulted from the Albuquerque and Eagle plant expansion
projects completed in late fiscal 1999 and early fiscal 2000. As with Cement,
the Company anticipates that its Gypsum Wallboard operations will be "sold out"
in fiscal 2000. National wallboard consumption for the first nine months of
calendar 1999 was at a record pace as single-family home construction and repair
and remodeling activities remained strong. Supported by record demand and a July
price increase, the Company's average net sales price for the second quarter
improved to $158.36 per thousand board feet ("MSF"), 34% above $118.55 per MSF
for the same quarter last year.
For the current six month period, Gypsum Wallboard revenues were
$99,470,000, a 48% increase over $67,037,000 for the same period a year ago.
Operating earnings from Gypsum Wallboard rose 93% to $50,649,000 for the first
six months of this fiscal year from $26,192,000 for
9
<PAGE> 12
last year's similar period. The operating earnings gain resulted from increased
sales volume and a 71% increase in operating margins. Gypsum Wallboard sales
volume for the six months increased 13% to 653 MMSF due to increased plant
efficiencies and additional volume generated from the Albuquerque and Eagle
plant expansion projects. The gain in operating margins resulted from the
combination of a 31% sales price increase partially offset by a 6% increase in
cost of sales. Cost of sales were negatively impacted by start-up costs
associated with the Eagle plant expansion.
Revenues from Concrete and Aggregates were $16,011,000 for the quarter,
up 25% from $12,818,000 for the same quarter a year ago. Concrete and Aggregates
reported operating earnings for the quarter of $3,095,000, up 25% from
$2,469,000 for the same quarter last year. Concrete earnings of $2,031,000
increased 19% from last year's comparable quarter mainly due to a 20% increase
in sales volume. Concrete sales volume for the quarter was 230,000 cubic yards,
compared to 191,000 cubic yards for the same quarter last year. The gain was
primarily attributable to strong demand in the Austin, Texas market. The
Company's average Concrete net sales price of $52.31 per cubic yard for the
quarter was 4% higher than $50.09 for the same quarter a year ago. Aggregates
earnings of $1,064,000 increased 40% from the prior year's quarter due to
increased sales volume and higher operating margins. The Company's Aggregates
operation reported sales volume of 923,000 tons for the quarter, 14% above sales
volume of 808,000 tons for the same quarter last year due to a 136,000 ton
increase in California sales volume. Product mix and higher net sales prices
resulted in Aggregates net sales price of $4.31 per ton, an increase of 6% over
$4.06 per ton for the same quarter last year.
For the six months, Concrete and Aggregates revenues were $29,279,000
this fiscal year, up 21% from $24,183, 000 for the same period last year.
Operating earnings were $5,455,000 for the six months this year, a 27% increase
over $4,309,000 for the same period last year. Concrete earnings of $3,601,000
increased 17% due to higher sales volume and improved operating margins. Sales
volume of 425,000 cubic yards for the first six months of fiscal 2000 was 13%
above the prior year's six month total due to a strong Texas residential market.
Aggregates operating earnings for the six months this year were $1,834,000, up
50% over the same period last year. Increased operating margins due to higher
net sales prices and higher sales volume resulted in the improvement.
Corporate general and administrative expenses increased $319,000 in the
quarter and $506,000 for the six months due to higher incentive compensation
accruals and the cost of additional corporate personnel.
Net interest income of $714,000 and $1,248,000 was $97,000 and $365,000
below last year's quarter and six months, respectively, due to lower cash
balances during this year's comparable periods.
The Company's annual effective tax rate increased to 36.4% from 36.2%
due to higher state income taxes.
STOCK REPURCHASE PROGRAM
The Company's Board of Directors previously approved the repurchase of
up to five million shares of the Company's common stock. The Company has
repurchased 727,400 shares from the public since March 31, 1999. As of November
10, 1999, there are approximately 404,000 shares remaining under the Company's
current repurchase authorization. Centex Corporation owns approximately 62.8% of
the outstanding shares of CXP common stock as of November 10, 1999.
10
<PAGE> 13
FINANCIAL CONDITION
The Company has a $35 million unsecured revolving credit facility that
expires on March 31, 2001 to finance its working capital and capital
expenditures requirements. Based on its financial condition and a virtually
debt-free balance sheet at September 30, 1999, CXP 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 September 30, 1999 was $87.3 million as compared to
$66.7 million at March 31, 1999. The increase resulted mainly from a $20.3
million increase in cash. The $12.8 million seasonal increases in accounts and
notes receivable were offset by higher accounts payable and accrued liabilities
coupled with decreased inventories. Stock repurchases of 659,000 shares during
the six months amounted to $24.4 million. Capital spending of $14.1 million for
this year's six months included the completion of the Eagle wallboard plant
expansion project and the Texas Highway 190 aggregates project. Cash payments
for income taxes totaled $29.5 million and $17.4 million in the first six months
of fiscal 2000 and 1999, respectively.
YEAR 2000
The Company has a variety of operating systems, computer software
program applications, computer hardware equipment (collectively, "IT Systems")
and other equipment with embedded electronic circuits, including applications
that the Company uses in its administrative functions and in the operations of
its various subsidiaries (collectively, the "Non-IT Systems" and together with
the IT Systems, the "Systems"). Pursuant to the services agreement the Company
has with Centex Service Company, Year 2000 compliance issues are being addressed
by a Year 2000 Task Force consisting of key personnel in the management and
accounting, financial planning, management information systems, legal, and
internal audit departments of Centex Corporation as well as by the management of
the Company.
Since fiscal 1997, the Company has been engaged in an ongoing process
of identifying, evaluating and implementing changes to its Systems in order to
ensure Year 2000 compliance. As a result of this process, a small number of
Systems were identified as being unable to interpret dates after December 31,
1999.
Affected Systems are primarily Non-IT Systems that are not critical to
the material operations of the Company and its subsidiaries. The Company and its
subsidiaries have replaced and tested all critical Systems and anticipate that
they will replace and test all non-critical non-compliant Systems by December
31, 1999. In substantially all of the cases, the replacement or upgrading of, or
other changes to, the non-compliant Systems (i) has occurred for reasons
unrelated to the non-compliance of the Systems and (ii) has not been accelerated
as a result of the non-compliance of such Systems. To date, the timetable for
addressing non-compliance of Systems has been substantially the same for both IT
Systems and Non-IT Systems. The Company anticipates that this will continue to
be the case.
The Company does not believe (i) that the non-compliant Systems pose a
material risk to the financial condition of the Company as a whole, or to the
individual operations or subsidiaries that currently have non-compliant Systems
or (ii) that the cost of replacing, upgrading or otherwise changing the
non-compliant Systems is material to the Company as a whole, or to the
individual subsidiaries. The Company has used, and believes that it will be able
to continue to use, internally generated cash to fund the correction of Systems
that are not compliant.
11
<PAGE> 14
In order to further confirm the Company's Year 2000 readiness, Centex
Service Company engaged the services of a third-party consulting firm to
evaluate the Company's Year 2000 readiness program. The consulting firm's review
was completed during the fourth quarter of fiscal 1999. The firm's conclusions
were consistent with the Task Force's determinations of the Company's Year 2000
readiness. The Company has implemented the consulting firm's recommendations for
achieving Year 2000 compliance.
The Task Force has completed the Company's Year 2000 contingency plan.
The plan includes, depending on the particular Company subsidiary and location,
the use of electric generators as an alternate power supply, the manual
operation of certain machinery currently controlled by computers, the use of
alternate communication devices and services and the temporary closing and
securing of certain non-critical job sites.
As a result of the Company's Year 2000 compliance program, the Company
believes that it is highly unlikely that any interruption to its operations
resulting from a compliance failure will have a material adverse effect on the
Company's operations or financial condition. Achieving Year 2000 compliance is
dependent on many factors, however, and some of these factors are not completely
within the Company's control. Although the Company and its subsidiaries obtain
information, materials and services from numerous sources and provide goods and
services to numerous customers, the failure of these third-parties (including
U.S. government agencies) to achieve Year 2000 readiness may adversely impact
the Company's operations.
The Company believes the most likely Year 2000 worst-case scenario
would be the failure of some significant vendors, subcontractors or third
parties to achieve compliance, resulting in a slowdown of the Company's
operations. The Company is not aware of any such third parties that are not Year
2000 compliant. In order to address the potential non-compliance of third
parties affecting the Company's operations, the Company has surveyed its largest
customers, subcontractors, and vendors by sending questionnaires or requests for
disclosure of Year 2000 readiness. To date, the Company has received responses
from a majority of the parties surveyed. The completed surveys indicate material
Year 2000 compliance by the responding parties. With respect to unanswered
surveys, the Company will continue to follow-up throughout the remainder of 1999
either through a second request or direct conversations with those parties whose
operations are material to the Company to ascertain the Year 2000 readiness of
such parties.
Year 2000 Forward-Looking Statements
Certain statements in this section, other than historical information,
are "forward-looking" statements. See "Forward-Looking Statements," below. These
statements involve risks and uncertainties relative to the Company's ability to
assess and remediate any Year 2000 compliance issues, the ability of third
parties to correct material non-compliant systems and the Company's assessment
of the Year 2000 issue's impact on its financial results and operations.
OTHER DEVELOPMENTS
The Company's Laramie cement plant will have one of its kilns down
during the third quarter for approximately 30 days for major maintenance. In
addition, the Company implemented an $8.00 per MSF average Gypsum Wallboard
price increase during the first week of October, 1999. Also, the Company has
experienced some deterioration in cement pricing in the Houston, Texas market
due to the entrance of additional cement importers.
12
<PAGE> 15
OUTLOOK
Positive market fundamentals continue to sustain the high level of
demand for its products, and the Company anticipates a "sold out" position to
continue in fiscal 2000. As a result, given the current and anticipated levels
of pricing, the Company expects to post record third quarter results and a sixth
consecutive year of record earnings for fiscal 2000.
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, Section 21E of
the Securities Exchange Act of 1934 and the Private Litigation Reform Act of
1995. 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. These statements involve known and unknown risks and
uncertainties that may cause the Company's actual results to be materially
different from planned or expected results. Those risks and uncertainties
include, but are not limited to, the cyclical and seasonal nature of the
Company's business, public infrastructure expenditures, adverse weather,
availability of raw materials, unexpected operational difficulties, governmental
regulation and changes in governmental and public policy, changes in economic
conditions specific to any one or more of the Company's markets, competition,
announced increases in capacity in the gypsum wallboard and cement industries,
general economic conditions, interest rates and the Year 2000 compliance
readiness of the Company's suppliers and service producers. Investors should
take such risks and uncertainties into account when making investment decisions.
These and other factors are described in the Annual Report on Form 10-K for
Centex Construction Products, Inc. for the fiscal year ended March 31, 1999. The
report is filed with the Securities and Exchange Commission. The Company
undertakes no obligation to update publicly any forward-looking statement as a
result of new information, future events or other factors.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 15, 1999, CXP held its Annual Meeting of Stockholders. At the
Annual Meeting, Robert L. Clarke, Laurence E. Hirsch, Richard D. Jones, Jr.,
David W. Quinn, and Harold K. Work were elected as directors to serve until the
next Annual Meeting of Stockholders. Voting results for these nominees are
summarized as follows:
<TABLE>
<CAPTION>
Number of Shares
--------------------------
Name For Withheld
---- ---------- --------
<S> <C> <C>
Robert L. Clarke 18,446,260 421,409
Laurence E. Hirsch 18,446,163 421,506
Richard D. Jones, Jr. 18,445,653 422,016
David W. Quinn 18,446,160 421,509
Harold K. Work 18,478,860 388,809
</TABLE>
13
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
All other items required under Part II are omitted because they are not
applicable.
14
<PAGE> 17
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
November 11, 1999 /s/ RICHARD D. JONES, JR.
------------------------------------------
Richard D. Jones, Jr.
President and Chief Executive Officer
November 11, 1999 /s/ ARTHUR R. ZUNKER, JR.
------------------------------------------
Arthur R. Zunker, Jr.
Senior Vice President-Finance and Treasurer
(principal financial and
chief accounting officer)
15
<PAGE> 18
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 SEPTEMBER 30, 1999, FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 69,978
<SECURITIES> 0
<RECEIVABLES> 56,002
<ALLOWANCES> 0
<INVENTORY> 30,576
<CURRENT-ASSETS> 156,556
<PP&E> 405,496
<DEPRECIATION> 172,210
<TOTAL-ASSETS> 404,024
<CURRENT-LIABILITIES> 69,264
<BONDS> 400
0
0
<COMMON> 191
<OTHER-SE> 310,016
<TOTAL-LIABILITY-AND-EQUITY> 404,024
<SALES> 214,521
<TOTAL-REVENUES> 216,269
<CGS> 0
<TOTAL-COSTS> 126,030
<OTHER-EXPENSES> 2,282
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 87,957
<INCOME-TAX> 32,016
<INCOME-CONTINUING> 55,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,941
<EPS-BASIC> 0
<EPS-DILUTED> 2.87
</TABLE>
