<PAGE> 1
EXHIBIT 13
A solid foundation for transition and growth
6th RECORD YEAR
Centex Construction Products, Inc.
[Drawing of a tree]
2000 ANNUAL REPORT
<PAGE> 2
Centex Construction Products, Inc.
(NYSE: CXP) produces and distributes
building materials used to construct
the nation's homes, commercial and
industrial buildings, and infrastructure.
CXP is one of two publicly held companies
operating in the Cement, Gypsum
Wallboard, and Concrete and Aggregates
industries. At March 31, 2000, CXP
was 64.4%-owned by Centex Corporation.
Stock Prices and Dividends
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 2000 Fiscal Year Ended March 31, 1999
---------------------------------------------------------------------------
Price Price
--------------------------------------------------------------
Quarter High Low Dividends High Low Dividends
------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
First $ 39 1/2 $ 33 $ 0.05 $ 42 3/4 $ 35 3/8 $ 0.05
Second $ 41 13/16 $ 34 11/16 $ 0.05 $ 45 1/8 $ 34 3/4 $ 0.05
Third $ 39 $ 33 1/16 $ 0.05 $ 41 $ 31 1/4 $ 0.05
Fourth $ 39 $ 22 5/8 $ 0.05 $ 40 15/16 $ 33 15/16 $ 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 31, 2000 was 305. The closing price of CXP's
common stock on the New York Stock Exchange on May 31, 2000 was $30.00.
<PAGE> 3
Centex Construction Products, Inc.
CEMENT
CXP's four manufacturing plants and 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' interests, is approximately 2.1
million tons, or about 2.3% of the nation's total capacity. CXP is the fourth
largest domestically owned Cement manufacturer and the twelfth largest Cement
producer in the U.S.
GYPSUM WALLBOARD
CXP's Gypsum Wallboard operation, which includes three facilities located in New
Mexico and Colorado, is the nation's fifth largest Wallboard producer. Together,
the plants have a total annual production capacity of approximately 1.5 billion
square feet, representing about 4.7% of total U.S. capacity. During fiscal 2000,
CXP's Gypsum Wallboard production was shipped by rail and by truck to a total of
39 states throughout the continental United States.
CONCRETE AND AGGREGATES
CXP's Concrete and Aggregates operations consist of 10 Readymix Concrete batch
plants, approximately 114 Readymix trucks and three Aggregates production
facilities, all of which are located in northern California and central Texas.
CXP's northern California Aggregates deposit is believed to be the largest
single permitted Aggregates deposit in that area. CXP's Aggregates operation's
total annual single shift production capacity is approximately 3.7 million tons.
Table of Contents
<TABLE>
<S> <C>
Financial Highlights 2
Letter to Our Shareholders 3
Review of Operations 8
Financial Information 15
</TABLE>
1
<PAGE> 4
Centex Construction Products, Inc. and Subsidiaries
Financial Highlights
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $418,695 $336,073 $297,322 $239,380 $222,594
Earnings Before Income Taxes $170,177 $121,127 $ 88,333 $ 64,406 $ 52,304
Net Earnings $108,232 $ 77,289 $ 56,533 $ 41,799 $ 33,944
Diluted Earnings Per Share $ 5.63 $ 3.71 $ 2.56 $ 1.89 $ 1.47
Cash Dividends Per Share(1) $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.05
Debt $ 400 $ 480 $ 560 $ 2,640 $ 720
Stockholders' Equity $340,472 $279,920 $274,803 $239,436 $216,462
Average Diluted Shares
Outstanding 19,211 20,832 22,063 22,174 23,023
Book Value Per Share
At Year End $ 18.33 $ 14.18 $ 12.77 $ 10.89 $ 9.42
</TABLE>
(1) Declared initial quarterly cash dividend of five cents per share on March
12, 1996.
2
<PAGE> 5
To Our Shareholders
TO OUR
SHAREHOLDERS
Fiscal 2000, CXP's sixth consecutive year of stellar financial results, was also
a period of significant operational and strategic achievement for the Company -
establishing a firm foundation for our future growth.
o Net earnings, earnings per share, operating earnings and revenues for
fiscal 2000 all reached record levels.
o CXP's gross operating margin rose to 41% in fiscal 2000 from 36% in fiscal
1999.
o For fiscal 2000, CXP's annualized rate of return on beginning stockholders'
equity was 38.7% versus 28.1% for fiscal 1999.
o At March 31, 2000, CXP had $96 million in cash and $340 million of equity.
o Record production was reported by CXP's Gypsum Wallboard operations, three
of our four Cement plants and both Aggregates facilities.
o During fiscal 2000, we completed three major expansion and renovation
projects.
o In preparation for the next phase of CXP's growth, we added a mergers and
acquisitions team.
CXP's fiscal 2000 net earnings reached an all-time high $108.2 million or $5.63
per diluted share, 40% and 52% higher, respectively, than fiscal 1999's record
earnings of $77.3 million or $3.71 per diluted share. Fiscal 2000 revenues were
also a record, increasing 25% to $418.7 million from $336.1 million a year ago.
[Bar graph indicating [Bar graph indicating
growth in revenues from growth in net earnings from
1995 to 2000] 1995 to 2000]
3
<PAGE> 6
To Our Shareholders
The key to this year's outstanding performance was CXP's Gypsum Wallboard
segment, which posted all-time-high operating earnings of $107.6 million - a 90%
gain over last year. Fueled by favorable market conditions, wallboard pricing
reached record levels. This pricing, coupled with a 30% expansion in our Gypsum
Wallboard manufacturing capacity, lifted operating margins to 51% in fiscal 2000
compared to 40% in the prior year.
Although CXP's Cement operations achieved a 3% sales volume gain, operating
earnings of $53.0 million for fiscal 2000 were 7% less than last year's record
results. Sales volume and slightly higher pricing was more than offset by a 10%
decline in operating margins, due mostly to maintenance and downtime at the
Wyoming facility and an increase in lower-margin purchased cement sales. Our
Texas, Illinois and Nevada plants each reported all-time-high production, and in
the fourth quarter our Cement operations collectively produced at a rate that,
annualized, would have exceeded fiscal 1999's record. The Wyoming kiln was
upgraded and a new finish mill at the Illinois plant came on line early in the
fiscal year. Both projects have been performing above design capacities.
CXP's Concrete and Aggregates businesses reported operating earnings of $9.3
million for fiscal 2000, 26% higher than in fiscal 1999. Robust conditions in
our northern California and Texas markets necessitated extended hours of
operation at both of our Aggregates quarries. Fiscal 2000 Aggregates production
rose 26% over last year and product pricing increased 7%. To take advantage of
the expanding Austin, Texas economy, CXP brought on line a new quarry north of
Austin that will initially serve the road construction market. In addition, we
continued to add Concrete delivery trucks to our Readymix fleets at both our
Austin and northern California operations to enable us to keep pace with demand.
[Bar graph indicating [Bar graph indicating
growth in operating growth in diluted
margin from 1995 earnings per share
to 2000] from 1995 to 2000]
4
<PAGE> 7
To Our Shareholders
During fiscal 2000,
CXP continued to
cultivate its
Aggregates growth
strategy.
[Drawing of an aggregates sack]
<PAGE> 8
To Our Shareholders
CXP's focus during the past six years has been to maximize the operational
opportunities and profitability of our existing base of assets. Having surpassed
the goals we originally set, we are focusing our energies in a new direction:
actively seeking acquisitions in other major construction markets and adding
greenfield or expansion operations in our existing markets. Our strong balance
sheet leaves CXP well-positioned to make significant acquisitions or expansions
without overleveraging the Company.
CXP will actively continue to seek growth opportunities in its core Cement and
Gypsum Wallboard businesses, while maintaining its long standing philosophy of
investing capital in existing assets in order to improve efficiencies and remain
a low-cost producer.
To accelerate its development, CXP will focus on growing Aggregates into a
significant third line of business. This makes sense strategically because the
aggregates industry is dominated by hundreds of small- to medium-sized
companies, so there are many acquisition candidates and the transaction sizes
are well matched with CXP's financial capabilities. In addition, publicly traded
aggregates businesses are more highly valued by investors than are cement or
wallboard businesses.
To help CXP meet the challenges of growing our businesses, and, as appropriate,
downstream value-added products, we have added two Business Development
personnel and a senior Aggregates operating executive to CXP's corporate staff.
We also have retained seasoned investment consultants to assist the growth of
CXP's Aggregates business.
During fiscal 2000, CXP's Board of Directors authorized the repurchase of a
total of 1,688,630 shares of stock. CXP purchased 1,224,600 shares of its stock
during the year, leaving approximately 594,800 shares remaining at March 31,
2000 under the Company's current authorization.
[Bar graph indicating [Bar graph indicating
growth in stockholders' growth in EBITDA
equity from 1995 from 1995 to 2000]
to 2000]
6
<PAGE> 9
To Our Shareholders
[Photograph of Larry Hirsch and Dick Jones]
Larry Hirsch and Dick Jones at CXP's Aggregates operation in Buda, Texas.
We want to recognize an exceptional individual, CXP's former Chairman and Chief
Executive Officer Greg Dagnan, whose leadership positioned CXP to achieve its
current level of success. After guiding CXP since 1990, including during the
Company's Initial Public Offering in 1994, Greg announced his retirement at
CXP's annual shareholders' meeting last July. Greg had an extremely successful
and productive career at CXP and, under his guidance, CXP's financial
performance reached the highest level in the industry. We salute Greg for his
extraordinary contributions to the CXP organization.
Dick Jones, who joined CXP as Executive Vice President and Chief Operating
Officer in 1990 and became President in fiscal 1998, was elected Chief Executive
Officer when Greg retired. Larry Hirsch, Chairman and CEO of Centex Corporation,
which is CXP's majority shareholder, became CXP's Chairman.
Many other people continue to demonstrate their dedication to helping CXP
achieve its goals. We are especially grateful to all of our employees whose
efforts have been instrumental in CXP's success. In addition, we appreciate our
relationships with our many long-time customers.
CXP enters the new millennium with seasoned management, excellent low-cost
facilities, and exciting prospects for growth. Although we face near-term
challenges, including the expansion of gypsum wallboard and cement capacity and
cement imports, we believe CXP is well-positioned to continue to grow and
prosper in fiscal 2001 and beyond.
/s/ RICHARD D. JONES JR. /s/ LAURENCE E. HIRSCH
Richard D. Jones, Jr. Laurence E. Hirsch
President and Chairman
Chief Executive Officer
May 31, 2000
7
<PAGE> 10
Operations
A CROSS SECTION OF
OPPORTUNITIES
Sustained, profitable growth. It's the standard by which all successful
companies are measured. At Centex Construction Products, the growth of our
operations is a dynamic process - the successful result of solid core
competencies complemented by the addition of new resources as we adapt to the
ever-changing business environment.
CXP has grown in careful, strategic steps. Our Cement operations, which provided
a solid business foundation for many years, remain at the heart of the Company.
Our Gypsum Wallboard operations, which were added in response to an expanding
construction market, in recent years have provided valuable growth for CXP.
As our Cement and Gypsum Wallboard operations mature, we continue to seek new
opportunities for expansion, the most promising of which are in the Aggregates
business. Dominated by small regional companies, this segment of the
construction market remains fragmented, creating significant opportunities for
targeted acquisitions.
Whatever the business climate, CXP's balanced mix of businesses and our
continued careful approach to sustainable growth leave our operations
well-positioned to flourish, both now and in the years to come.
Our balanced mix of businesses [Bar graph indicating growth
has produced impressive growth in operating earnings from
during the past six years. 1995 to 2000]
8
<PAGE> 11
Operations
CXP's growth is
the result of solid
core competencies
complemented
by the addition of
new resources.
[Graphic of a cross section of a tree
indicating CXP's three lines of business,
aggregates, cement and gypsum]
Aggregates Cement Gypsum
Aggregates will be Cement remains Wallboard has
a source of at the core of provided growth for
growth for CXP. CXP's businesses. CXP in recent years.
<PAGE> 12
Operations
[Three photographs of three separate views of CXP's Wyoming cement plant kiln]
The kiln at the
Wyoming cement
plant was upgraded.
CEMENT
CXP's Cement revenues rose 4% to $159.0 million in fiscal 2000 due to an
increase in Cement sales volume and slightly higher Cement pricing. Operating
earnings from Cement were $53.0 million, 7% less than last year's record level.
The gains in sales volume and pricing were more than offset by a 10% decline in
operating margins due to increased production costs at the Wyoming facility and
a greater percentage this year of lower-margin purchased Cement sales to total
sales.
CXP's Texas, Illinois and Nevada Cement plants all operated at capacity and were
sold out for the twelfth consecutive year. The largest kiln at the Wyoming plant
was down 35 days for major renovations, which included upgrading 300 feet of
kiln shell.
This year's total Cement sales volume of 2.3 million tons was 3% higher than
fiscal 1999's sales volume, primarily due to favorable weather and record cement
industry consumption. In order to meet increased market demands and replace lost
Wyoming manufactured Cement sales, CXP increased its purchased Cement sales by
85% to 281,000 tons.
10
<PAGE> 13
Operations
Although U.S. cement consumption reached a record high, CXP's fiscal 2000
average Cement net sales price rose to only $69.25 per ton, 1% higher than last
year, primarily due to the conservative pricing policies of major producers, the
increase in imported cement to 28% of U.S. consumption, and competition for
market share.
Early in fiscal 2000, the 4,000-horsepower finished cement grinding mill project
at the Illinois plant was completed on schedule and within budget. In addition,
we completed an addition to the Illinois plant that already has increased the
facility's annual clinker capacity by 12% and will allow for further capacity
expansion. During the year, the Illinois plant purchased 73,000 tons of imported
clinker and converted it to finished Cement, which helped offset lost production
volume at the Wyoming plant.
GYPSUM WALLBOARD
CXP's Gypsum Wallboard revenues increased 48% to $209.3 million in fiscal 2000
due to increased sales volume and higher net sale prices. Operating earnings
rose 90% to a record $107.6 million in fiscal 2000. The earnings gain resulted
from an 18%
[Three photographs of views of the board
line and warehouse area at the Eagle
Gypsum Wallboard plant]
The board line and
the warehouse area at
the Eagle Gypsum
Wallboard plant have
been expanded.
11
<PAGE> 14
Operations
improvement in sales volume to 1,363 million square feet (MMSF) and a 61%
increase in operating margins to $78.96 per thousand square feet (MSF). All
three of CXP's Gypsum Wallboard plants operated at capacity.
The average net sales price of $153.57 per MSF was 25% higher than fiscal 1999's
average price as the industry benefitted from record consumption and a tight
demand/supply situation during most of calendar 1999. Gypsum Wallboard prices
peaked in October 1999 and pricing began to soften during the fourth quarter of
fiscal 2000 as new industry capacity came on line.
The $18 million expansion of the Eagle plant was completed at the beginning of
the fiscal year. The project, which increased the plant's annual capacity by 60%
to 640 MMSF, was completed ahead of schedule and within budget. The plant is
currently operating at its rated capacity.
Both the Albuquerque and Bernalillo plants recorded all-time-high production
volume for fiscal 2000. Taking advantage of last year's upgrade project, the
Albuquerque plant increased its production of higher-margin specialty products
during fiscal 2000.
CONCRETE AND AGGREGATES
Fiscal 2000 Concrete and Aggregates revenues of $55.5 million increased 18% due
to higher sales volume and sales prices. Operating earnings from these
operations rose 26% to an all-time-high $9.3 million. The gain resulted from
increased sales volume and improved operating margins.
Concrete operating earnings of $5.9 million were 19% above prior year earnings.
A strong Austin, Texas construction market helped generate fiscal 2000 sales
volume of 788,000 cubic yards, 12% higher than last year. Our average Concrete
net sales price of $52.07 per cubic yard was 5% higher than the sales price in
fiscal 1999. During fiscal 2000, CXP increased its fleet of Readymix trucks by
12% in order to meet increased market demands in both Texas and California.
12
<PAGE> 15
Operations
Fiscal 2000's Aggregates operating earnings of $3.3 million were 41% higher than
last year's earnings due to increased sales volume and higher operating margins.
Aggregates sales volume of 3.4 million tons was 16% higher than last year,
primarily due to a 35% increase in sales volume at the northern California
plant. Both facilities recorded all-time-high production volume in fiscal 2000.
The Aggregates net sales price of $4.29 per ton this year was 7% higher than in
fiscal 1999, and the Aggregates per-ton operating margin of $0.99 this year was
a 22% improvement over last year's margin.
Late in fiscal 2000, first phase operations commenced at the new Aggregates
facility located in Georgetown, north of Austin, Texas. The plant is currently
capable of producing road construction aggregates only. Evaluations are under
way to add a second processing plant capable of producing concrete aggregates
and other products. The full impact of this operation will not be realized until
fiscal 2002.
[Three photographs of three separate views of CXP's Aggregates facility in
Georgetown Texas]
The Georgetown, Texas
Aggregates facility began
mining, crushing and
production operations.
13
<PAGE> 16
Strategic Locations
CXP's strategically located facilities in geographically diverse areas reduce
our dependence on any one market. Our Cement operation includes four plants, two
of which are 50%-owned with joint-venture partners, and 11 Cement distribution
terminals. CXP's Gypsum Wallboard operation consists of three Gypsum Wallboard
plants, four Gypsum Wallboard reload centers and one Gypsum Wallboard
distribution center. Our Concrete and Aggregates group includes 10 Readymix
Concrete batch plant locations and three Aggregates processing operations.
The principal markets for CXP's Cement products are Texas, northern Illinois
(including Chicago), the Rocky Mountain area, northern Nevada and northern
California. Our Gypsum Wallboard is distributed throughout the continental
United States. CXP's Concrete and Aggregates are sold to local readymix concrete
producers and paving contractors in the Austin, Texas market and in northern
California.
[Map of the United States depicting the locations of CXP's facilities]
MAJOR FACILITIES
Cement Plants
o Illinois Cement Company - LaSalle, Illinois*
o Mountain Cement Company - Laramie, Wyoming
o Nevada Cement Company - Fernley, Nevada
o Texas-Lehigh Cement Company - Buda, Texas*
Gypsum Wallboard Plants
o American Gypsum Company - Albuquerque and
Bernalillo, New Mexico and Gypsum, Colorado
Concrete and Aggregates Plants
o Centex Materials, Inc. - Austin and Buda, Texas
o Mathews Readymix, Inc. - Marysville, California
o Western Aggregates, Inc. - Marysville, California
* 50%-owned with joint-venture partners
14
<PAGE> 17
Financials
FINANCIAL
INFORMATION
<TABLE>
<S> <C>
Statements of Consolidated Earnings 16
Consolidated Balance Sheets 17
Statements of Consolidated Cash Flows 18
Statements of Comprehensive Earnings 19
Statements of Consolidated Stockholders' Equity 20
Notes to Consolidated Financial Statements 21
Report of Independent Public Accountants 33
Management's Discussion and Analysis of Results
of Operations and Financial Condition 34
Summary of Selected Financial Data 40
Quarterly Results 42
Board of Directors and Officers 43
Corporate Information 44
</TABLE>
15
<PAGE> 18
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,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Cement $ 158,966 $ 152,460 $ 140,326
Gypsum Wallboard 209,320 141,571 118,718
Concrete and Aggregates 55,490 46,860 42,004
Other, net 1,231 1,717 1,939
Less: Intersegment Sales (6,312) (6,535) (5,665)
---------- ---------- ----------
418,695 336,073 297,322
---------- ---------- ----------
COSTS AND EXPENSES
Cement 105,961 95,635 92,245
Gypsum Wallboard 101,696 85,001 82,905
Concrete and Aggregates 46,227 39,510 37,501
Less: Intersegment Purchases (6,312) (6,535) (5,665)
Corporate General and Administrative 4,683 4,380 3,825
Interest Income, net (3,737) (3,045) (1,822)
---------- ---------- ----------
248,518 214,946 208,989
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 170,177 121,127 88,333
Income Taxes 61,945 43,838 31,800
---------- ---------- ----------
NET EARNINGS $ 108,232 $ 77,289 $ 56,533
========== ========== ==========
EARNINGS PER SHARE
Basic $ 5.66 $ 3.73 $ 2.58
========== ========== ==========
Diluted $ 5.63 $ 3.71 $ 2.56
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 19
Centex Construction Products, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
March 31,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Current Assets -
Cash and Cash Equivalents $ 96,170 $ 49,646
Accounts and Notes Receivable, net 54,459 43,192
Inventories 38,582 33,030
---------- ----------
Total Current Assets 189,211 125,868
---------- ----------
Property, Plant and Equipment 413,933 392,302
Less: Accumulated Depreciation (178,033) (163,745)
---------- ----------
Property, Plant and Equipment, net 235,900 228,557
---------- ----------
Notes Receivable, net 367 664
Other Assets 12,661 9,594
---------- ----------
$ 438,139 $ 364,683
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities -
Accounts Payable $ 22,348 $ 18,276
Accrued Liabilities 49,112 40,849
Income Taxes Payable 1,447 --
Current Portion of Long-term Debt 80 80
---------- ----------
Total Current Liabilities 72,987 59,205
---------- ----------
Long-term Debt 320 400
Deferred Income Taxes 24,360 25,158
Stockholders' Equity -
Common Stock, Par Value $0.01;
Authorized 50,000,000 Shares; Issued and Outstanding
18,571,732 and 19,744,465 Shares, respectively 186 197
Capital in Excess of Par Value 20,302 62,376
Accumulated Other Comprehensive Loss (1,789) --
Retained Earnings 321,773 217,347
---------- ----------
Total Stockholders' Equity 340,472 279,920
---------- ----------
$ 438,139 $ 364,683
========== ==========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 20
Centex Construction Products, Inc. and Subsidiaries
Statements of Consolidated Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $ 108,232 $ 77,289 $ 56,533
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities -
Depreciation, Depletion and Amortization 18,589 16,187 15,880
Asset Disposition Provision -- 700 2,276
(Increase) Decrease in Accounts and Notes Receivable (10,970) (6,252) 2,503
Increase in Inventories (5,552) (493) (1,055)
Increase (Decrease) in Accounts Payable 4,072 (128) 1,956
Increase in Accrued Liabilities 8,263 5,754 6,841
Increase in Income Taxes Payable 1,447 -- --
Change in Deferred Income Tax Liability 166 2,909 3,415
Increase in Other Assets, net (5,620) (3,219) (234)
---------- ---------- ----------
Net Cash Provided by Operating Activities 118,627 92,747 88,115
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, Plant and Equipment Additions, net (28,019) (33,806) (13,092)
Proceeds from Asset Dispositions 1,946 960 5,525
---------- ---------- ----------
Net Cash Used in Investing Activities (26,073) (32,846) (7,567)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Reductions in Notes Payable -- -- (2,000)
Decrease in Other Long-term Debt (80) (80) (80)
Proceeds from Stock Option Exercises 1,148 3,806 6,727
Retirement of Common Stock (43,233) (71,861) (23,531)
Dividends Paid to Stockholders (3,865) (4,210) (4,386)
---------- ---------- ----------
Net Cash Used in Financing Activities (46,030) (72,345) (23,270)
---------- ---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 46,524 (12,444) 57,278
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 49,646 62,090 4,812
---------- ---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 96,170 $ 49,646 $ 62,090
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 21
Centex Construction Products, Inc. and Subsidiaries
Statements of Comprehensive Earnings
(dollars in thousands)
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
NET EARNINGS $ 108,232 $ 77,289 $ 56,533
OTHER COMPREHENSIVE EARNINGS
BEFORE TAX:
Unrealized (Loss) on Investment in Securities
Available-for-Sale, Before Income Taxes (2,753) -- --
---------- ---------- ----------
COMPREHENSIVE EARNINGS,
BEFORE INCOME TAXES 105,479 77,289 56,533
INCOME TAX BENEFIT RELATED
TO OTHER ITEMS OF
COMPREHENSIVE EARNINGS 964 -- --
---------- ---------- ----------
COMPREHENSIVE EARNINGS $ 106,443 $ 77,289 $ 56,533
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 22
Centex Construction Products, Inc. and Subsidiaries
Statements of Consolidated Stockholders' Equity
(dollars in thousands)
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
COMMON STOCK
Balance at Beginning of Period $ 197 $ 215 $ 220
Retirement of Common Stock (11) (18) (5)
---------- ---------- ----------
Balance at End of Period 186 197 215
---------- ---------- ----------
CAPITAL IN EXCESS OF PAR VALUE
Balance at Beginning of Period 62,376 130,413 147,212
Retirement of Common Stock (43,222) (71,843) (23,526)
Stock Option Exercises 1,148 3,806 6,727
---------- ---------- ----------
Balance at End of Period 20,302 62,376 130,413
---------- ---------- ----------
RETAINED EARNINGS
Balance at Beginning of Period 217,347 144,175 92,004
Dividends to Stockholders (3,806) (4,117) (4,362)
Net Earnings 108,232 77,289 56,533
---------- ---------- ----------
Balance at End of Period 321,773 217,347 144,175
---------- ---------- ----------
ACCUMULATED OTHER
COMPREHENSIVE LOSS
Balance at Beginning of Period -- -- --
Other Comprehensive Loss (1,789) -- --
---------- ---------- ----------
Balance at End of Period (1,789) -- --
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY $ 340,472 $ 279,920 $ 274,803
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
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.
CASH AND CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid investments with original
maturities of three months or less, and are recorded at cost, which approximates
market value.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable have been shown net of the allowance for doubtful
accounts of $4.1 million and $2.3 million at March 31, 2000 and 1999,
respectively. The Company has no significant credit risk concentration among its
diversified customer base.
Notes receivable at March 31, 2000 are collectible primarily over three
years. The weighted average interest rate at March 31, 2000 and 1999 was 8.4%
and 8.6%, respectively.
INVENTORIES
Inventories are stated at the lower of average cost (including applicable
material, labor, depreciation, and plant overhead) or market. Inventories
consist of the following:
<TABLE>
<CAPTION>
March 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Raw Materials and Materials-in-Progress $ 13,248 $ 9,124
Finished Cement 5,523 5,601
Aggregates 2,071 1,577
Gypsum Wallboard 1,913 1,289
Repair Parts and Supplies 15,323 14,770
Fuel and Coal 504 669
-------- --------
$ 38,582 $ 33,030
======== ========
</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 for production utilizing the units-of-production
method.
21
<PAGE> 24
Centex Construction Products, Inc. and Subsidiaries
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.
STOCK REPURCHASES
The Company Board of Directors has authorized the repurchase of a cumulative
total of 5,688,630 shares of CXP's common stock. The Company repurchased
1,224,600 shares at a cost of $43.2 million in fiscal 2000 and 1,954,100 shares
at a cost of $71.9 million in fiscal 1999. Cumulative shares repurchased at
March 31, 2000 were 5,093,830, leaving approximately 594,800 shares remaining
under the Company's current authorization. Centex Corporation owned 64.4% of
CXP's outstanding common stock at March 31, 2000.
COMPREHENSIVE EARNINGS
Comprehensive earnings as presented in the accompanying Consolidated Statements
of Comprehensive Earnings is defined as the total of net income and all other
non-owner changes in equity. Securities that are classified as
available-for-sale are stated at market value as determined by the most recently
traded price at the balance sheet date. The unrealized gains and losses, net of
deferred tax, are excluded from earnings and reported in a separate component of
stockholders' equity as "Accumulated Other Comprehensive Loss."
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,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Operating Units Selling, General and Administrative $ 17,625 $ 14,425 $ 15,979
Corporate General & Administrative 4,683 4,380 3,825
-------- -------- --------
$ 22,308 $ 18,805 $ 19,804
======== ======== ========
</TABLE>
Maintenance and repair expenses are included in each segment's costs and
expenses. The Company incurred expenses of $38.4 million, $32.0 million and
$28.9 million in the years ended March 31, 2000, 1999 and 1998, 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.
22
<PAGE> 25
Centex Construction Products, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS - SUPPLEMENTAL DISCLOSURES
Interest payments made during the years ended March 31, 2000, 1999 and 1998 were
$0.1 million, $0.1 million and $0.2 million, respectively.
Net payments made for federal and state income taxes during the years ended
March 31, 2000, 1999 and 1998 were $57.1 million, $40.8 million and $26.4
million, respectively. Included in the March 31, 1999 payments was a payment to
Centex for $0.16 million made under the tax separation agreement.
POSTRETIREMENT BENEFITS
Statement of Financial Accounting Standards No. 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions," specifies certain required methods
of accounting for postretirement benefits other than pensions. This
pronouncement has no impact on the Company's financial statements as the Company
has no other postretirement obligations.
EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128).
This statement established new standards for computing and presenting earnings
per share (EPS). SFAS No. 128 replaced 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 2000, 1999 and 1998 of 19,130,084; 20,710,174 and
21,895,312, 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 19,211,324; 20,832,451 and 22,062,656 in 2000, 1999 and 1998,
respectively. Anti-dilutive options to purchase shares of common stock that were
excluded from the computation of diluted earnings per share were 331,000 shares
at an average price of $36.32 for the year ended March 31, 2000. All
anti-dilutive options have expiration dates ranging from April 2008 to January
2010.
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.
23
<PAGE> 26
Centex Construction Products, Inc. and Subsidiaries
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This standard is effective for fiscal years beginning
after June 15, 2000 and will be adopted effective April 1, 2001. The standard
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of the derivatives are recorded each
period in current earnings or other comprehensive income depending on whether a
derivative is designated as part of a hedge transaction, and if it is, the type
of hedge transaction. The impact on the Company's results of operations,
financial position or cash flows will be dependent on the level and types of
derivative instruments the Company will have entered into, if any, at the time
the standard is implemented. The Company had no derivative instruments at March
31, 2000.
(B) PROPERTY, PLANT AND EQUIPMENT
Cost by major category and accumulated depreciation are summarized below:
<TABLE>
<CAPTION>
March 31,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
Land and Quarries $ 32,303 $ 33,237
Plants 336,729 316,567
Buildings, Machinery and Equipment 44,901 42,498
---------- ----------
413,933 392,302
Accumulated Depreciation (178,033) (163,745)
---------- ----------
$ 235,900 $ 228,557
========== ==========
</TABLE>
The Company recorded asset write down provisions of $700 in connection with
the Eagle expansion project in fiscal 1999. The Company completed two expansion
projects during fiscal 2000: (i) an $18 million expansion of the Eagle gypsum
wallboard plant; and (ii) a $20 million expansion of the 50% owned LaSalle
cement plant.
(C) INDEBTEDNESS
LONG-TERM DEBT
Long-term debt is set forth below:
<TABLE>
<CAPTION>
March 31,
----------------
2000 1999
------ ------
<S> <C> <C>
Property Note, Interest at 7%, Due March 2005, Secured $ 400 $ 480
Less: Current Maturities (80) (80)
------ ------
$ 320 $ 400
====== ======
</TABLE>
CREDIT FACILITY
The Company has a $35 million unsecured long-term revolving credit line (the
"Bank Revolver") that expires on March 31, 2001. 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 of the federal funds rate plus 0.5%. Under the Bank Revolver, the
Company is obligated to pay certain fees, including an annual commitment fee on
the unused portion of the commitment. The Bank Revolver contains certain
customary restrictive covenants (including restrictions on the consummation of
mergers or asset sales, the payment of dividends, the creation of liens and the
incurrence of additional indebtedness and requires the Company to maintain or
meet certain financial ratios or
24
<PAGE> 27
Centex Construction Products, Inc. and Subsidiaries
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 the 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, 2000, and throughout the fiscal year then ended. The Company had no
borrowings outstanding at any time under the Bank Revolver during fiscal years
2000 and 1999.
(D) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Current Provision
Federal $ 56,034 $ 36,547 $ 25,701
State 5,745 4,382 2,684
-------- -------- --------
61,779 40,929 28,385
-------- -------- --------
Deferred Provision (Benefit)
Federal (1,045) 1,951 2,185
State 1,211 958 1,230
-------- -------- --------
166 2,909 3,415
-------- -------- --------
Provision for Income Taxes $ 61,945 $ 43,838 $ 31,800
======== ======== ========
</TABLE>
The effective tax rates vary from the federal statutory rates due to the
following items:
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Earnings Before Income Taxes $ 170,177 $ 121,127 $ 88,333
========== ========== ==========
Income Taxes at Statutory Rate $ 59,562 $ 42,394 $ 30,917
Increases (Decreases) in Tax Resulting from -
State Income Taxes, net 4,522 3,469 2,526
Statutory Depletion in Excess of Cost (2,413) (2,297) (2,225)
Other 274 272 582
---------- ---------- ----------
Provision for Income Taxes $ 61,945 $ 43,838 $ 31,800
========== ========== ==========
Effective Tax Rate 36% 36% 36%
</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,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Excess Tax Depreciation and Amortization $ 3,391 $ 4,347 $ 6,544
Bad Debts (305) 6 (29)
Uniform Capitalization 10 106 36
Accrual Changes (2,971) (1,259) (3,611)
Other 41 (291) 475
-------- -------- --------
$ 166 $ 2,909 $ 3,415
======== ======== ========
</TABLE>
25
<PAGE> 28
Centex Construction Products, Inc. and Subsidiaries
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
March 31,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Items Giving Rise to Deferred Taxes
Excess Tax Depreciation and Amortization $ 33,288 $ 29,897
Other 4,187 4,145
-------- --------
37,475 34,042
-------- --------
Items Giving Rise to Prepaid Taxes
Accrual Changes (12,080) (8,145)
Bad Debts (1,023) (717)
Uniform Capitalization (12) (22)
-------- --------
(13,115) (8,884)
-------- --------
Net Deferred Income Tax Liability $ 24,360 $ 25,158
======== ========
</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 three aggregates 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.
26
<PAGE> 29
Centex Construction Products, Inc. and Subsidiaries
The following table sets forth certain financial information relating to the
Company's operations by segment:
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Cement $ 158,966 $ 152,460 $ 140,326
Gypsum Wallboard 209,320 141,571 118,718
Concrete and Aggregates 55,490 46,860 42,004
Other, net 1,231 1,717 1,939
---------- ---------- ----------
425,007 342,608 302,987
Less: Intersegment Sales (6,312) (6,535) (5,665)
---------- ---------- ----------
$ 418,695 $ 336,073 $ 297,322
========== ========== ==========
Segment Operating Earnings
Cement $ 53,005 $ 56,825 $ 48,081
Gypsum Wallboard 107,624 56,570 35,813
Concrete and Aggregates 9,263 7,350 4,503
Other, net 1,231 1,717 1,939
---------- ---------- ----------
$ 171,123 $ 122,462 $ 90,336
========== ========== ==========
Identifiable Assets
Cement $ 147,270 $ 139,183 $ 141,462
Gypsum Wallboard 159,780 143,464 123,997
Concrete and Aggregates 30,018 23,634 22,922
Corporate and Other 101,071 58,402 62,731
---------- ---------- ----------
$ 438,139 $ 364,683 $ 351,112
========== ========== ==========
Capital Expenditures
Cement $ 10,306 $ 7,536 $ 3,513
Gypsum Wallboard 10,783 24,204 7,982
Concrete and Aggregates 6,890 2,050 2,027
Corporate and Other 40 24 27
---------- ---------- ----------
$ 28,019 $ 33,814 $ 13,549
========== ========== ==========
Depreciation, Depletion and Amortization
Cement $ 8,742 $ 7,768 $ 7,860
Gypsum Wallboard 7,210 6,005 5,552
Concrete and Aggregates 2,465 2,190 2,194
Corporate and Other 172 224 274
---------- ---------- ----------
$ 18,589 $ 16,187 $ 15,880
========== ========== ==========
</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.
27
<PAGE> 30
Centex Construction Products, Inc. and Subsidiaries
(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.
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 2000, 1999, and 1998 totaled $3.2 million, $3.1 million and
$3.0 million, respectively. Minimum annual rental commitments as of March 31,
2000, under noncancelable leases are set forth as follows:
<TABLE>
<CAPTION>
Fiscal Year Total
---------------------------------------------------------------
<S> <C>
2001 $2,533
2002 $1,744
2003 $1,140
2004 $1,140
2005 $ 853
Thereafter $1,900
</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
28
<PAGE> 31
Centex Construction Products, Inc. and Subsidiaries
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,
------------------------------------------------------------------------------------------
2000 1999 1998
---------------------------- ---------------------------- ----------------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding Options at
Beginning of Year 528,552 $ 27.82 362,699 $ 12.64 736,950 $ 12.25
Granted 370,000 $ 35.34 370,000 $ 36.40 6,300 $ 24.73
Exercised (51,867) $ 14.04 (173,147) $ 12.81 (378,438) $ 12.08
Forfeited/Expired (43,477) $ 36.22 (31,000) $ 36.56 (2,113) $ 12.00
------------ ------------ ------------
Outstanding Options
at End of Year 803,208 $ 31.72 528,552 $ 27.82 362,699 $ 12.64
============ ============ ============
Options Exercisable
at End of Year 218,139 183,252 356,399
============ ============ ============
Weighted Average Fair
Value of Options Granted
during the Year $ 18.52 $ 19.57 $ 13.58
</TABLE>
The following table summarizes information about stock options outstanding at
March 31, 2000:
<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
--------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$12.00 to $22.25 139,329 4.5 years $ 12.20 139,329 $ 12.20
$33.31 to $34.91 322,000 9.0 years $ 34.81 -- --
$35.19 to $39.53 341,879 8.3 years $ 36.76 78,810 $ 36.56
------------ ------------
803,208 7.9 years $ 31.72 218,139 $ 21.00
============ ============
</TABLE>
Shares available for future stock option grants were 531,230 at March 31,
2000.
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, pro forma net
earnings would have been $106,917, $76,085 and $56,462 for the fiscal years
ended March 31, 2000, 1999 and 1998, respectively. Basic and diluted earnings
per share for fiscal year ended March 31, 2000 would have been $5.59 and $5.57,
respectively, and for fiscal year ended March 31, 1999 would have been $3.67 and
$3.65, respectively, and for fiscal year ended March 31, 1998 would have
remained unchanged.
29
<PAGE> 32
Centex Construction Products, Inc. and Subsidiaries
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,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Expected Volatility 33.6% 35.3% 36.1%
Risk-free Interest Rate 5.8% 5.8% 6.4%
Dividend Yield .6% .6% .8%
Expected Life (Years) 10 10 10
</TABLE>
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's long-term debt is 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 long-term debt approximates fair value. The fair value of
available-for-sale securities approximates their carrying value at March 31,
2000 and 1999.
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) AGREEMENTS WITH CENTEX CORPORATION
On April 19, 1994 ("Closing Date") the Company completed the sale of 11,730,000
shares or 51% of its common stock through an Initial Public Offering. Prior to
that time, the Company was a wholly owned subsidiary of Centex Corporation
("Centex"). On the Closing Date the Company entered into certain agreements with
Centex to define the Company's ongoing relationship with Centex. The major
agreements are:
Indemnification Agreement: The Company and Centex entered into an
Indemnification Agreement, pursuant to which 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 is renewable annually with the administrative fee determined
on an annual basis. The Company paid CSC an administrative fee of $198 in fiscal
2000 and $95 in fiscal 1999 and will pay $220 per year in fiscal 2001. In
addition, the Company reimburses CSC for its out-of-pocket expenses incurred in
connection with the performance of such services.
30
<PAGE> 33
Centex Construction Products, Inc. and Subsidiaries
(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.
(K) PENSION AND PROFIT SHARING PLANS
The Company has several defined benefit and defined contribution retirement
plans covering substantially all of its employees. Benefits paid under the
defined benefit plans are based on years of service and the employee's
qualifying compensation over the last few years of employment. The Company's
funding policy is to contribute amounts that are deductible for income tax
purposes.
The following table provides a reconciliation of the defined benefit plan
obligations and fair value of plan assets over the two year period ended March
31, 2000 and a statement of the funded status as of March 31, 2000 and 1999:
<TABLE>
<CAPTION>
-------- --------
2000 1999
-------- --------
<S> <C> <C>
Reconciliation of Benefit Obligations:
Benefit Obligation at April 1 $ 4,539 $ 4,274
Service Cost - Benefits Earned During the Period 192 200
Interest Cost on Projected Benefit Obligation 306 287
Actuarial (Gain) Loss (661) (86)
Benefits Paid (148) (136)
-------- --------
Benefit Obligation at March 31 4,228 4,539
Reconciliation of Fair Value of Plan Assets:
Fair Value of Plan Assets at April 1 5,264 5,279
Actual Return on Plan Assets 756 104
Employer Contributions 0 17
Benefits Paid (148) (136)
-------- --------
Fair Value of Plans at March 31 5,872 5,264
-------- --------
Funded Status:
Funded Status at March 31 1,644 725
Unrecognized Loss (Gain) from Past Experience Different than
that Assumed and Effects of Changes in Assumptions (663) 247
Unrecognized Prior-Service Cost 107 214
-------- --------
Net Amount Recognized (Prepaid Pension Cost Included in Other Assets) $ 1,088 $ 1,186
======== ========
</TABLE>
31
<PAGE> 34
Centex Construction Products, Inc. and Subsidiaries
Net periodic pension cost for the fiscal years ended March 31, 2000, 1999 and
1998, included the following components:
<TABLE>
<CAPTION>
------ ------ ------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Service Cost - Benefits Earned During the Period $ 192 $ 200 $ 184
Interest Cost of Projected Benefit Obligation 306 287 259
Expected Return on Plan Assets (401) (417) (338)
Amortization of Transition Asset (53) (44) (9)
Amortization of Prior-Service Cost 54 57 57
------ ------ ------
Net Periodic Pension Cost $ 98 $ 83 $ 153
====== ====== ======
</TABLE>
The following table sets forth the rates used in the actuarial calculations
of the present value of benefit obligations and the rate of return on plan
assets:
<TABLE>
<CAPTION>
------ ------ ------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Weighted Average Discount Rate 7.8% 7.0% 6.8%
Rate of Increase in Future Compensation Levels 3.5% 3.5% 3.5%
Expected Long-term Rate of Return on Assets 8.0% 8.0% 9.0%
</TABLE>
The Company also provides a profit sharing plan, which covers substantially
all salaried and certain hourly employees. The profit sharing plan is a defined
contribution plan funded by employer discretionary contributions and also allows
employees to contribute on an after tax basis up to 10% of their base annual
salary. Employees are fully vested to the extent of their contributions and
become fully vested in the Company's contributions over a seven-year period.
Costs relating to the employer discretionary contributions for the Company's
defined contribution plan totaled $1,369, $991 and $1,224, in fiscal years 2000,
1999 and 1998, respectively.
32
<PAGE> 35
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, 2000 and 1999, and the related consolidated statements of earnings,
cash flows, stockholders' equity and comprehensive earnings for each of the
three years in the period ended March 31, 2000. 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 auditing standards generally
accepted in the United States. 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, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 15, 2000
33
<PAGE> 36
Centex Construction Products, Inc. and Subsidiaries
Management's Discussion and Analysis of Results of
Operations and Financial Condition
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
Record results from its gypsum wallboard and concrete and aggregates business
segments resulted in Centex Construction Products, Inc. reporting the highest
revenues, net earnings and earnings per share in its history for the fiscal year
ending March 31, 2000, the sixth consecutive fiscal year of record results.
Consolidated. Consolidated net revenues for fiscal 2000 totaled $418.7
million, a 25% gain over $336.1 million in fiscal 1999. Increased sales volume
and higher average net sales prices in all business segments generated the
revenue gain. Benefitting from increased operating margins in each of its
product lines, except cement, operating earnings of $171.1 million improved 40%
over fiscal 1999 operating earnings of $122.5 million. Corporate overhead of
$4.7 million increased 7% over fiscal 1999 mainly due to additional incentive
compensation. Higher invested cash balances resulted in $3.7 million of net
interest income in fiscal 2000 versus $3.0 million in fiscal 1999. The Company's
effective fiscal 2000 tax rate of 36.4% increased from 36.2% in fiscal 1999 due
to higher state income taxes. As a result of the foregoing, fiscal 2000 net
earnings of $108.2 million increased 40% over $77.3 million in fiscal 1999.
Diluted fiscal 2000 earnings per share of $5.63 were 52% greater than $3.71 for
fiscal 1999. Diluted earnings per share for fiscal 2000 increased more than net
earnings due to fewer average shares outstanding in fiscal 2000.
The following table compares sales volumes, average unit sales prices and
unit operating margins for the Company's operations:
<TABLE>
<CAPTION>
Cement Gypsum Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
----------------------- ----------------------- ----------------------- -----------------------
2000 1999 2000 1999 2000 1999 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (Thousands) 2,295 2,218 1,363 1,155 788 706 3,368 2,916
Average Net Sales Price $ 69.25 $ 68.75 $ 153.57 $ 122.55 $ 52.07 $ 49.78 $ 4.29 $ 4.02
Operating Margin $ 23.09 $ 25.62 $ 78.96 $ 48.97 $ 7.53 $ 7.08 $ 0.99 $ 0.81
</TABLE>
Cement. Cement revenues of $159.0 million for fiscal 2000 were 4% higher than
$152.5 million for the prior fiscal year due to increased sales volume and
slightly higher average sales price. Operating earnings fell 7% to $53.0 million
from $56.8 million in fiscal 1999 due to a 3% increase in sales volume that was
more than offset by a 7% increase in cost of sales. Sales volume of 2.3 million
tons was 77,000 tons higher than last fiscal year's record high sales volume
primarily due to favorable weather conditions in all markets and increased
purchased cement sales volume. All plants operated at capacity and were again
"sold out". The Company purchased 281,000 tons of cement in fiscal 2000, up 85%
from last fiscal year, to supplement its manufactured cement shipments. Although
U.S. cement consumption was at a record high, average net pricing of $69.25 per
ton increased only $0.50 per ton over $68.75 per ton in fiscal 1999. Cement
pricing in the Texas and northern California markets softened due to additional
cement imports and competitors' efforts to increase market share. Operating
margins declined $2.53 per ton mainly due to increased cost of sales. The cost
of sales increase
34
<PAGE> 37
Centex Construction Products, Inc. and Subsidiaries
resulted from the Laramie plant having one of its kilns down 35 days for a major
rebuild and the increased percentage this year of higher costing purchased
cement sales to total sales.
Gypsum Wallboard. Gypsum wallboard revenues of $209.3 million for fiscal 2000
increased 48% over fiscal 1999 revenues of $141.6 million due to increased sales
volume and higher average sales prices. Segment operating earnings totaled
$107.6 million for fiscal 2000, a 90% increase over $56.6 million for fiscal
1999. The operating earnings gain resulted from higher sales volume and a 61%
improvement in operating margins. Gypsum wallboard fiscal 2000 sales volume of
1,363 million square feet ("MMSF") increased 18% over fiscal 1999 due to higher
utilization rates at all three plants and increased production capacity at the
Albuquerque and Eagle plants. The Company's plants operated at capacity during
the fiscal year. The operating margin gain resulted from higher average sales
prices being partially offset by increased cost of sales. Gypsum wallboard
fiscal 2000 average sales price of $153.57 per thousand square feet ("MSF")
increased 25% over $122.55 per MSF in fiscal 1999 as a result of record high
industry consumption. Although gypsum wallboard prices peaked during October
1999, demand softened during December 1999 and January 2000. This, along with
new industry capacity coming on line, lowered the Company's average gypsum
wallboard sales prices to $145.00 per MSF for the March 2000 quarter. Although
the Eagle plant was down for a period of time early in the fiscal year to tie-in
the plant upgrade project, unit cost of sales increased only one percent in
fiscal 2000 to $74.61 per MSF.
Concrete and Aggregates. Revenues from concrete and aggregates were $55.5
million, up 18% from $46.9 million in fiscal year 1999. The revenue gain
resulted from increased sales volume and higher average sales prices. Segment
operating earnings of $9.3 million in fiscal 2000 increased 26% from $7.4
million in the prior fiscal year. Increased sales volume and higher operating
margins generated the operating earnings gain. Concrete operating earnings of
$5.9 million in fiscal 2000 were 19% greater than last fiscal year's earnings
due to increased operating margins and higher sales volume. The operating margin
gain resulted from a 5% increase in average concrete sale prices being partially
offset by higher materials and operating costs. Concrete sales volume of 788,000
cubic yards in fiscal 2000 increased 12% over fiscal 1999 due to strong demand
in the Austin, Texas market. Aggregates operating earnings of $3.3 million for
fiscal 2000 increased 41% over fiscal 1999 operating earnings of $2.4 million
due to increased sales volume and higher operating margins. Aggregates sales
volume of 3.4 million tons increased 16% over fiscal 1999 sales volume mainly
due to strong California sales volume. Product mix and higher net sales prices
raised the aggregates net sale price to $4.29 per ton, an increase of 7% over
$4.02 per ton for last year. Operating margins increased 22% over the prior
fiscal year to $0.99 per ton due to higher net sales prices being partially
offset by increased cost of sales, primarily from product mix and higher related
administrative expenses.
Corporate Overhead. Corporate Overhead of $4.7 million increased $303,000
over last fiscal year due to additional corporate personnel and higher incentive
compensation.
Interest Income. Net interest income of $3.7 million for fiscal year 2000
increased $692,000 over last fiscal year due to higher average invested cash
balances during fiscal 2000.
35
<PAGE> 38
Centex Construction Products, Inc. and Subsidiaries
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Record earnings in each of its product lines, particularly gypsum wallboard,
resulted in Centex Construction Products, Inc. reporting the highest net
earnings in its history for fiscal 1999.
Consolidated revenues for fiscal 1999 totaled $336.1 million, a 13% gain over
$297.3 million in fiscal 1998. Increased sales volume and higher sales prices in
all segments generated the revenue gain. Benefitting from increased sales volume
and higher operating margins in each of its product lines, operating earnings of
$122.5 million improved 36% over fiscal 1998 operating earnings of $90.3
million. Corporate overhead of $4.4 million increased 15% over fiscal 1998
mainly due to higher incentive compensation. Higher invested cash balances
resulted in $3.0 million of net interest income in fiscal 1999, increasing $1.2
million over fiscal 1998. The company's effective fiscal 1999 tax rate of 36.2%
increased from 36.0% in fiscal 1998 due to higher state income taxes. As a
result the foregoing, fiscal 1999 net earnings of $77.3 million increased 37%
over $56.5 million in fiscal 1998, the fifth consecutive year of record net
earnings. Diluted fiscal 1999 earnings per share of $3.71 increased 45% from
$2.56 for fiscal 1998. Diluted earnings per share for fiscal 1999 increased more
than net earnings due to fewer average shares outstanding in fiscal 1999.
The following table compares sales volumes, average unit sales prices and
unit operating margins for the Company's operations:
<TABLE>
<CAPTION>
Cement Gypsum Wallboard Concrete Aggregates
(Ton) (MSF) (Cubic Yard) (Ton)
----------------------- ----------------------- ----------------------- -----------------------
1999 1998 1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Volume (Thousands) 2,218 2,153 1,155 1,089 706 672 2,916 2,592
Average Net Sales Price $ 68.75 $ 65.19 $ 122.55 $ 109.01 $ 49.78 $ 47.33 $ 4.02 $ 3.93
Operating Margin $ 25.62 $ 22.34 $ 48.97 $ 32.88 $ 7.08 $ 5.12 $ 0.81 $ 0.41
</TABLE>
Cement. Cement revenues of $152.5 million for fiscal 1999 were 9% higher than
$140.3 million for the prior fiscal year. Operating earnings increased 18% to
$56.8 million from $48.1 million in fiscal 1998 due to a 3% increase in sales
volume and a 15% gain in operating margins. Sales volume of 2.22 million tons
was 65,000 tons higher than last fiscal year's record high sales volume
primarily due to favorable weather and strong sales volume at the western cement
plants. All plants operated at capacity and were again "sold out". The Company
purchased 152,000 tons of cement in fiscal 1999, up 23,000 tons from fiscal
1998, to supplement its manufactured cement shipments. Record U.S. cement
consumption resulted in average net pricing of $68.75 per ton, increasing 5.5%
over $65.19 per ton in fiscal 1998.
Gypsum Wallboard. Gypsum wallboard revenues of $141.6 million for fiscal 1999
increased 19% over fiscal 1998 revenues of $118.7 million due to increased sales
volume and higher average sales prices. Segment operating earnings totaled $56.6
million for fiscal 1999, a 58% increase over $35.8 million for fiscal 1998. The
operating earnings gain resulted from higher sales volume and a 49% improvement
in operating margins. Gypsum wallboard fiscal 1999 sales volume of 1,155 million
square feet ("MMSF") increased 6% over fiscal 1998 due to higher utilization
rates at all three plants. The operating margin gain resulted from the
combination of higher average sales prices and lower cost of sales. Gypsum
wallboard fiscal 1999 average sales prices of $122.55 per thousand square feet
("MSF") increased 12.4% over $109.01 per MSF in fiscal 1998 as a result of
record high industry
36
<PAGE> 39
Centex Construction Products, Inc. and Subsidiaries
consumption. The Company's plants operated at capacity during fiscal 1999 and
ended the year with lower than normal inventory levels. Although the Albuquerque
plant was down for a period of time during the year to tie-in the plant upgrade
project, unit cost of sales declined 3% in fiscal 1999 to $73.58 per MSF
primarily due to the $2.3 million asset write down provision in fiscal 1998
relating to the Albuquerque plant upgrade project.
Concrete and Aggregates. Revenues from concrete and aggregates were $46.9
million for fiscal 1999, up 12% from $42.0 million in fiscal year 1998. The
revenue gain resulted from increased sales volume and higher average sales
prices. Segment operating earnings of $7.4 million in fiscal 1999 increased 63%
from $4.5 million in the prior fiscal year. Increased sales volume and higher
operating margins generated the operating earnings gain. Concrete operating
earnings of $5.0 million in fiscal 1999 were 45% greater than last fiscal year's
earnings due to increased operating margins and higher sales volume. The
operating margin gain resulted from the 5% increase in average concrete sale
prices being partially offset by higher materials and operating costs. Concrete
sales volume of 706,000 cubic yards in fiscal 1999 increased 5% over fiscal 1998
due to a strong Austin, Texas construction market. Aggregates operating earnings
of $2.4 million for fiscal 1999 more than doubled the $1.1 million fiscal 1998
operating earnings due to increased sales volume and higher operating margins.
Aggregates sales volume of 2.9 million tons increased 12 1/2% over fiscal 1998
sales volume due to higher Austin, Texas road construction aggregates sales.
Operating margins increased 98% to $0.81 per ton due to higher net sales prices
and reduced cost of sales, primarily due to a significant decrease in legal
costs resulting from the settlement of the Yuba Goldfields title dispute in
fiscal 1998.
Corporate Overhead. Corporate Overhead of $4.4 million for fiscal 1999
increased $555,000 over fiscal 1998 due to additional corporate personnel and
higher incentive compensation.
Interest Income. Net interest income of $3.0 million for fiscal year 1999
increased $1.2 million over fiscal 1998 due to higher average invested cash
balances during fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Each of the Company's business segments operates in capital-intensive
industries. The Company at March 31, 2000 is virtually debt-free, has a cash
balance of $96 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, 2000 was $116.2 million, an increase of $49.6
million from March 31, 1999, principally due to a $46.5 million increase in
cash. Earnings from operations before interest and taxes ("EBITDA") was $185.0
million in fiscal 2000, up $50.7 million or 38% from fiscal 1999. Fiscal 2000
capital expenditures and stock repurchases totaled $71.3 million. Capital
expenditures for fiscal 2000 were $28.0 million, down from $33.8 million in
fiscal 1999. During fiscal year 2000, the Company completed the $2.6 million
Georgetown aggregates facility and two expansion projects that commenced during
fiscal 1999: (i) an $18 million expansion of the Company's Eagle gypsum
wallboard plant in Gypsum, Colorado that added 240 MMSF to the plant's current
annual capacity; and (ii) a $20 million expansion of the 50% owned LaSalle,
Illinois cement plant that increased its annual clinker capacity by 75,000 tons
and added a new 4,000 horsepower finish mill. The Eagle project was completed
early in the first quarter of fiscal 2000, and the Illinois project was
completed during the second quarter of fiscal 2000. Stock repurchases during
fiscal 2000 totaled $43.2 million compared to $71.9 million in fiscal 1999.
Based on its financial condition and low debt levels at March 31, 2000, 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.
37
<PAGE> 40
Centex Construction Products, Inc. and Subsidiaries
STOCK REPURCHASE PROGRAM
Reflecting the Company's continuing confidence in its future performance, during
fiscal 2000, CXP's Board of Directors authorized the repurchase of an additional
1,688,630 shares of the Company's stock. A cumulative total of 5,688,630 shares
have been authorized for repurchase since the Company became publicly held in
April 1994. The Company repurchased 1,224,600 shares from the public during
fiscal 2000, bringing total shares repurchased from the public to 5,093,800.
Centex Corporation owned 64.4% of the outstanding shares of CXP common stock at
March 31, 2000. There were approximately 594,800 shares remaining under the
Company's current authorization at March 31, 2000.
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 approximately 2.7% in calendar 1999, 1.6% in 1998, and 1.7% in 1997. 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, 2000. These factors have enabled the Company to increase per
unit profit margins for its products in each successive year.
YEAR 2000
Beginning in fiscal year 1997, the Company evaluated and implemented changes to
its systems in order to ensure Year 2000 compliance. As a result of this
process, a small number of non-critical systems were identified as not being
Year 2000 compliant and were upgraded or replaced accordingly during 1999. The
cost of replacing, upgrading or otherwise changing non-compliant systems was not
material to the Company as a whole, or to the Company's individual subsidiaries.
The Company used internally generated cash to fund the correction of
non-compliant systems. The Company's Year 2000 compliance preparation included
the completion of a contingency plan, the hiring of a third party consultant and
the surveying of material vendors and suppliers.
To date, the Company has not experienced an adverse effect on the Company's
operations or financial condition or the operations or financial condition of
any of its individual subsidiaries, either directly or indirectly through its
vendors or subcontractors, related to Year 2000 compliance issues.
Although the Company has not been affected to date by the change from
December 31, 1999 to January 1, 2000, Year 2000 issues could arise subsequent to
the filing of this report. The Company believes that such circumstances are
highly unlikely to occur and that, even if they were to occur, it is highly
unlikely that the Company's operations or financial condition would be
materially adversely affected. Nevertheless, the Company intends to continue to
monitor Year 2000 related issues and immediately address any effects that may
arise.
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.
38
<PAGE> 41
Centex Construction Products, Inc. and Subsidiaries
GENERAL OUTLOOK
The general outlook for the Company's Cement, Concrete and Aggregates segments
in fiscal 2001 is favorable. TEA-21, the federal program authorizing $217
billion of highway and mass transit money over a six-year period, is expected to
have an increasing positive impact on these businesses. Several issues that held
back activity in calendar 1999, the programs' first full year, apparently are
being resolved at the state level and infrastructure-related construction should
steadily ramp up from this point forward. Although rising mortgage rates could
slow residential building activity in calendar 2000, increased public works
construction should offset an expected modest slowdown in housing. However,
cement pricing in the company's Texas and northern California markets are
expected to continue "under pressure" due to additional cement imports and
competitors' efforts to increase market share.
The outlook for the Company's Gypsum Wallboard operation is mixed. Escalating
interest rates may slow housing sales, which, combined with new production
capacity, could increase competitive pressures on pricing. Repair and remodel
activity, however, increased approximately 10% in calendar 1999 and should be
healthy over the next several years.
Despite these concerns, fiscal 2001 should be another excellent year for the
Company.
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.
39
<PAGE> 42
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,
--------------------------------------------
2000 1999 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $418,695 $336,073 $297,322 $239,380
Net Earnings $108,232 $ 77,289 $ 56,533 $ 41,799
Total Assets $438,139 $364,683 $351,112 $305,637
Total Long-term Debt $ 400 $ 480 $ 560 $ 640
Total Debt $ 400 $ 480 $ 560 $ 2,640
Deferred Income Taxes $ 24,360 $ 25,158 $ 22,250 $ 18,835
Stockholders' Equity $340,472 $279,920 $274,803 $239,436
Total Debt as a Percent of Total Capitalization
(Total Debt, Deferred Income Taxes
and Stockholders' Equity) 0.1% 0.2% 0.2% 1.0%
Net Earnings as a Percent of
Beginning Stockholders' Equity 38.7% 28.1% 23.6% 19.3%
Per Common Share -
Diluted Net Earnings(1) $ 5.63 $ 3.71 $ 2.56 $ 1.89
Cash Dividends(2) $ 0.20 $ 0.20 $ 0.20 $ 0.20
Book Value Based on Shares
Outstanding at Year End(1) $ 18.33 $ 14.18 $ 12.77 $ 10.89
Stock Prices(1) -
High $41 13/16 $ 45 1/8 $ 39 $ 20
Low $22 5/8 $ 31 1/4 $ 18 $ 12 1/2
</TABLE>
(1) Prior to April 1994, CXP was a wholly-owned subsidiary of Centex Corporation
and accordingly did not report per share information.
(2) Declared initial quarterly cash dividend of five cents per share on March
12, 1996.
40
<PAGE> 43
Centex Construction Products, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $222,594 $194,313 $166,826 $136,526 $129,832 $142,188
Net Earnings $ 33,944 $ 21,820 $ 10,240 $ 3,112 $ 713 $ 1,118
Total Assets $269,575 $250,103 $257,315 $258,994 $267,303 $267,654
Total Long-term Debt $ 720 $ 24,500 $ 15,585 $ 34,519 $ 37,713 $ 47,094
Total Debt $ 720 $ 24,500 $ 16,200 $ 38,943 $ 49,308 $ 52,322
Deferred Income Taxes $ 14,344 $ 6,705 $ 37,925 $ 36,224 $ 35,881 $ 31,553
Stockholders' Equity $216,462 $183,405 $170,839 $160,599 $157,487 $156,774
Total Debt as a Percent of Total Capitalization
(Total Debt, Deferred Income Taxes
and Stockholders' Equity) 0.3% 11.4% 7.2% 16.5% 20.3% 21.7%
Net Earnings as a Percent of
Beginning Stockholders' Equity 18.5% 12.8% 6.4% 2.0% 0.5% 0.7%
Per Common Share -
Diluted Net Earnings(1) $ 1.47 $ 0.95 $ 0.45 $ 0.14 $ 0.03 $ 0.05
Cash Dividends(2) $ 0.05 -- -- -- -- --
Book Value Based on Shares
Outstanding at Year End(1) $ 9.42 $ 7.99 $ 7.43 $ 6.98 $ 6.85 $ 6.82
Stock Prices(1) -
High $ 15 1/2 $ 14 3/8 -- -- -- --
Low $ 11 3/8 $ 8 7/8 -- -- -- --
</TABLE>
To facilitate comparisons between periods, per share data for 1994 has been
presented using the 23,000,000 shares outstanding immediately after the Initial
Public Offering.
41
<PAGE> 44
Centex Construction Products, Inc. and Subsidiaries
Quarterly Results
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
March 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
FIRST QUARTER
Revenues $ 97,180 $ 79,846
Earnings Before Income Taxes $ 35,669 $ 26,961
Net Earnings $ 22,757 $ 17,255
Diluted Earnings Per Share $ 1.16 $ 0.80
SECOND QUARTER
Revenues $117,842 $ 91,776
Earnings Before Income Taxes $ 52,288 $ 34,968
Net Earnings $ 33,184 $ 22,378
Diluted Earnings Per Share $ 1.71 $ 1.05
THIRD QUARTER
Revenues $108,370 $ 84,863
Earnings Before Income Taxes $ 45,745 $ 32,037
Net Earnings $ 29,094 $ 20,317
Diluted Earnings Per Share $ 1.52 $ 0.99
FOURTH QUARTER
Revenues $ 95,303 $ 79,588
Earnings Before Income Taxes $ 36,475 $ 27,161
Net Earnings $ 23,197 $ 17,339
Diluted Earnings Per Share $ 1.24 $ 0.87
</TABLE>
42
<PAGE> 45
Centex Construction Products, Inc. and Subsidiaries
BOARD OF
DIRECTORS
Robert L. Clarke(2,3)
Partner
Bracewell & Patterson, L.L.P.
Laurence E. Hirsch(1,2,4)
Chairman and
Chief Executive Officer,
Centex Corporation
Richard D. Jones, Jr.(1)
President and
Chief Executive Officer
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.
Richard D. Jones, Jr.
President and
Chief Executive Officer
H.D. House
Executive Vice President-
Gypsum
Steven R. Rowley
Executive Vice President-
Cement
Robert A. Sells
Executive Vice President-
Concrete and Aggregates
Arthur R. Zunker, Jr.
Senior Vice President-
Finance, Treasurer and
Chief Financial Officer
David A. Greenblatt
Senior Vice President-
Mergers and Acquisitions
Rodney E. Cummickel
Vice President
Hubert L. Smith, Jr.
Vice President
Walter W. Rowe
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
Wayne W. Emmer
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
Bruce E. Ballinger
President
George B. Coates
Vice President
NEVADA
CEMENT
COMPANY
John R. Bremner
Vice President
Gary J. Roma
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 of three Board of Directors, from left: standing -
men standing and two Robert L. Clarke, Harold K. Work, David W. Quinn;
men sitting] seated - Laurence E. Hirsch, Richard D. Jones, Jr.
Executive Officers, from left: standing - [Photograph of three
Steven R. Rowley, Robert A. Sells, H.D. House; men standing and two
seated - Arthur R. Zunker, Jr., Richard D. Jones, Jr. men sitting]
43
<PAGE> 46
Centex Construction Products, Inc. and Subsidiaries
CORPORATE HEADQUARTERS
3710 Rawlins Street
Suite 1600, LB 78
Dallas, Texas 75219
(214) 559-6514 (Telephone)
(214) 559-6554 (Fax)
CORPORATE HEADQUARTERS
(After September 1, 2000)
2728 N. Harwood, Suite 600
Dallas, Texas 75201-1516
(214) 981-5000 (Telephone)
Mailing Address:
P.O. Box 199000
Dallas, Texas 75219-9000
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 20, 2000 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.
44
<PAGE> 47
[CXP's corporate logo]
