<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TEXAS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5039 75-0832210
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
TEXAS INDUSTRIES, INC.
1341 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247-6913
(972) 647-6700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT C. MOORE
VICE PRESIDENT -- GENERAL COUNSEL AND SECRETARY
TEXAS INDUSTRIES, INC.
1341 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247-6913
(972) 647-6700
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
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Copies to:
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<S> <C>
DAN BUSBEE
VAN M. JOLAS
LOCKE PURNELL RAIN HARRELL STEVEN R. FINLEY
(A PROFESSIONAL CORPORATION) GIBSON, DUNN & CRUTCHER LLP
2200 ROSS AVENUE, SUITE 2200 200 PARK AVENUE
DALLAS, TEXAS 75201-6776 NEW YORK, NEW YORK 10166-0193
(214) 740-8000 (212) 351-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
- ------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=================================================================================================================================
PROPOSED
TITLE OF EACH CLASS OF SECURITIES MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
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<S> <C> <C>
Common Stock, $1.00 par value(1)..................... $225,000,000(2) $66,375
=================================================================================================================================
</TABLE>
(1) The registration statement also pertains to preferred share purchase rights
to purchase shares of Common Stock of the registrant. One right is attached
to and trades with each share of Common Stock of the registrant. Until the
occurrence of certain events, the rights are not exercisable and will not be
evidenced or transferred apart from the Common Stock.
(2) Estimated solely for purposes of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS Subject to Completion, Dated April 20, 1998
- --------------------------------------------------------------------------------
2,900,000 Shares
TEXAS INDUSTRIES, INC.
[TXI LOGO]
Common Stock
- --------------------------------------------------------------------------------
The 2,900,000 shares of common stock, par value $1.00 per share (the "Common
Stock"), are being offered hereby (the "Offering") by Texas Industries, Inc.
("TXI" or the "Company"). The Common Stock is listed on the New York Stock
Exchange ("NYSE") under the symbol "TXI". On April 17, 1998, the last reported
sales price of the Common Stock on the NYSE was $66.50 per share. See "Price
Range of Common Stock and Dividends."
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES OF
COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Per Share $ $ $
- ----------------------------------------------------------------------------------------------
Total(3) $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
435,000 additional shares of Common Stock on the same terms per share solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public will be $ , the total Underwriting Discounts
and Commissions will be $ and the total Proceeds to Company will be
$ . See "Underwriting."
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of the certificates
therefor will be made at the offices of SBC Warburg Dillon Read Inc., New York,
New York, on or about , 1998.
SBC WARBURG DILLON READ INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
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[PICTURE OF RIVERSIDE, ILLUSTRATION OF VIRGINIA STEEL FACILITY, PICTURE OF
CEMENT KILN, PICTURE OF BEAM BLANK AND WIDE FLANGE BEAM CROSS SECTIONS]
[TEXT READS: "RECENTLY, TXI ACQUIRED RIVERSIDE CEMENT COMPANY, INCREASING
THE COMPANY'S CEMENT PRODUCTION CAPACITY BY 60% AND PROVIDING ACCESS TO
CALIFORNIA, THE LARGEST CEMENT MARKET IN THE U.S. SHOWN ABOVE IS RIVERSIDE'S ORO
GRANDE CEMENT PLANT. SCHEDULED TO BEGIN PRODUCTION IN 1999, TXI'S VIRGINIA STEEL
FACILITY WILL SUPPLY A WIDE RANGE OF STRUCTURAL STEEL PRODUCTS TO NORTH AMERICAN
CONSTRUCTION MARKETS. THE FACILITY WILL EXPAND TXI'S STEEL PRODUCTION CAPACITY
BY APPROXIMATELY 60%. THE INTERIOR OF A CEMENT KILN (SHOWN ABOVE) REACHES
TEMPERATURES IN EXCESS OF 2800 degreesF. TXI DEVELOPED AND PATENTED THE
CEMSTAR(TM) PROCESS WHICH INTRODUCES SLAG, A CO-PRODUCT OF STEEL-MAKING, INTO
THE KILN IN ORDER TO INCREASE CEMENT PRODUCTION AT LITTLE ADDITIONAL COST.
STRUCTURAL PRODUCTS, LIKE WIDE FLANGE BEAMS (CROSS SECTION SHOWN ABOVE, MIDDLE),
ARE ROLLED FROM BEAM BLANKS CAST FROM MOLTEN STEEL. UNLIKE PROCESSES WHICH CAST
LARGE BEAM BLANKS (CROSS SECTION, TOP LEFT), TXI'S PATENTED NEAR NET SHAPE
PROCESS CASTS A BEAM BLANK THAT RESEMBLES THE FINISHED BEAM SHAPE (CROSS
SECTION, TOP RIGHT), SAVING ENERGY AND CAPITAL COSTS."]
TXI(TM), CemStar(TM), Bantam Beams(TM) and Diamond Pro(TM) are registered
trademarks of the Company.
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK AND THE IMPOSITION OF A PENALTY BID DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with (i) Management's Discussion and Analysis of Financial
Condition and Results of Operations and (ii) the Consolidated Financial
Statements and Notes thereto and the more detailed information appearing
elsewhere in this Prospectus or incorporated herein by reference. Unless the
context otherwise requires, references to the "Company" or "TXI" mean Texas
Industries, Inc. and its direct and indirect subsidiaries. Except as otherwise
indicated, all information in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised. All financial and share data in this
Prospectus have been adjusted to give effect to the two-for-one stock split
effected on February 3, 1997. All references to a particular fiscal year refer
to the 12 months ended on May 31 of the year referenced (e.g., fiscal 1997 means
the fiscal year ended May 31, 1997).
THE COMPANY
GENERAL
TXI is a leading supplier of construction materials through two business
segments: cement, aggregate and concrete products (the "CAC" segment); and
structural steel and specialty bar products (the "Steel" segment). The Company
is the largest producer of cement in Texas and the second largest supplier of
structural steel products in North America. Demand for structural steel, cement,
aggregate and concrete products is primarily driven by construction activity,
while specialty bar products supply the original equipment manufacturer, tool
and oil country goods markets. From fiscal 1994 to fiscal 1997, TXI's net sales
and net income have grown at a compound annual rate of 11% and 43%,
respectively. For the 12 months ended February 28, 1998, the Company generated
$1.1 billion in net sales and $94.3 million in net income.
The Company is the only major North American producer of both cement and
steel. TXI has derived significant benefits therefrom, primarily in lowering
production costs and enhancing productivity through the innovative recycling of
by-products of manufacturing.
The Company has extensive operating experience in both of its business
segments. Founded in 1951, the Company began its cement operations in 1960 with
the opening of its Midlothian, Texas facility and added its steel operations in
1975 with the construction of a plant in Midlothian.
BUSINESS STRATEGY
The Company's business strategy is to grow profitably in both of its
business segments by achieving and maintaining market leadership positions in
desirable markets, capitalizing on innovation in manufacturing processes and
products, being the low cost supplier, pursuing strategic growth opportunities
and preserving financial strength and flexibility in order to capitalize on
these opportunities when they arise.
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The key elements of the Company's strategy are:
Achieve and Maintain Market Leadership. The Company strives to be the
number one or two supplier in desirable markets. The Company is:
- The largest producer of cement in Texas and a major cement producer in
California, the two largest cement markets in the U.S.
- The second largest supplier of structural steel products in North
America.
- The largest supplier of light weight steel beams used in manufactured
housing in North America.
- The largest supplier of expanded shale and clay aggregate products west
of the Mississippi River.
- The largest supplier of stone, sand and gravel aggregate products and the
second largest supplier of ready-mix concrete in North Texas.
- The largest supplier of sand and gravel aggregate products and ready-mix
concrete in Louisiana.
Capitalize on Innovation in Manufacturing Processes and Products. The
Company emphasizes the development and improvement of manufacturing process
technologies and the design and marketing of new products. Research and
development of manufacturing processes and products is considered to be every
employee's responsibility at TXI. All employees are empowered to seek and
implement creative ideas to improve operations and results.
- TXI pioneered and is a leader in the manufacture of wide flange beams and
other structural steel products using recycled steel.
- TXI developed and patented near net shape casting, a process which
provides energy and capital cost savings in the making of wide flange
beams and other structural steel products.
- TXI developed and patented the CemStar process, which uses a co-product
from steel-making to increase cement production with little additional
cost. TXI continues to research and refine processes for the recovery and
recycling of waste and the by-products generated by manufacturing
processes.
- TXI continues to develop new, higher-margin products, such as Bantam
Beams and Diamond Pro professional groundskeeping products.
Be the Low Cost Supplier. The Company's focus on market leadership is
accompanied by its determination to drive down production and distribution costs
in order to be the low cost supplier to its customers.
- TXI operates the largest steel shredder in the world, currently supplying
42% of its total steel raw material needs. The shredder enables the
Company to access a continuous source of low cost, unprocessed scrap
steel in order to reduce costs and exposure to increasing prices for
higher grade recycled steel.
- TXI is a leader in substituting alternative fuels for the nonrenewable
fuels typically used in the energy intensive cement manufacturing
process. The Company lowers cement manufacturing costs both by reducing
expenditures for the nonrenewable fuels and by receiving income for the
management of alternative fuels received from third party generators of
such fuels.
Pursue Strategic Growth Opportunities. The Company pursues profitable
growth by building on its business and operational expertise in order to enter
new markets and introduce new products.
- A structural steel facility being constructed in Virginia will combine a
steel shredder, near net shape casting, state-of-the-art steel melting
technology and a proprietary rolling mill design to achieve low
production costs and the widest structural steel product range available
from a single facility.
- The acquisition of Riverside Cement Company ("Riverside") provides TXI
access to California, the largest cement market in the U.S. The Company
intends to implement its CemStar process at Riverside in the near term to
enhance productivity and increase capacity. The Company also intends to
upgrade and modernize Riverside's existing portland cement plant with
higher capacity and more cost efficient equipment in order to move into a
position of leadership in the California regional market.
- TXI intends to increase its Midlothian cement capacity from 1.3 million
to 2.8 million tons per year in order to maintain and enhance its
position as the largest producer of cement in Texas.
- TXI is upgrading its specialty bar products capability to further improve
product mix and increase the breadth of markets addressed.
- TXI has embarked on a program to license its CemStar process to cement
producers throughout the world.
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- TXI continues to pursue investments for internal growth and opportunistic
acquisitions in order to build on leadership positions in its stone, sand
and gravel, expanded shale and clay and concrete operations.
Preserve Financial Strength and Flexibility. The Company strives to be
financially positioned to pursue profitable growth opportunities as they arise.
TXI expects that the proceeds of this Offering will enable the Company to
maintain its commitment to a strong financial position and pursue its business
strategy on a sound financial basis.
RECENT DEVELOPMENTS
On December 31, 1997, the Company acquired the 15.7% separate public
ownership of Chaparral Steel Company ("Chaparral") consisting of approximately
4.5 million publicly traded shares. The Company agreed to pay approximately
$77.1 million in this transaction, including transaction expenses. With the
acquisition of these shares, TXI's net income will no longer be reduced by
minority interest.
On December 31, 1997, the Company acquired Riverside, the owner of a 1.3
million ton per year portland cement plant and a 100,000 ton per year specialty
white cement plant. The acquisition increased TXI's cement capacity by 60% and
opened the California regional cement market to the Company. With the
acquisition of Riverside, the Company ranks seventh among all domestic cement
producers and becomes the third largest publicly traded cement producing company
in the U.S.
TXI is constructing a structural steel facility in Virginia, scheduled to
begin operations in the summer of 1999, which will expand TXI's steel production
capacity by approximately 60%. In March 1998, TXI filed for a permit to expand
its Midlothian, Texas, cement plant's annual production from 1.3 million to 2.8
million tons, and the Company anticipates upgrading its portland cement plant in
California in the next several years.
The Company's principal executive offices are located at 1341 West
Mockingbird Lane, Dallas, Texas 75247-6913, and its telephone number is (972)
647-6700.
THE OFFERING
Common Stock being offered hereby..... 2,900,000 shares
Common Stock to be outstanding after
the Offering.......................... 24,042,986 shares(1)
Use of Proceeds....................... For general corporate purposes,
including the repayment of
outstanding indebtedness under the
Company's revolving credit facility.
See "Use of Proceeds."
New York Stock Exchange Symbol........ TXI
- ---------------
(1) Based on the number of outstanding shares at April 17, 1998. Excludes (i) an
aggregate of 1,865,657 shares of Common Stock issuable upon exercise of
stock options outstanding on that date at a weighed average exercise price
of $27.23 per share, of which options to purchase 478,907 shares were
exercisable as of such date, and (ii) 1,918,530 shares of Common Stock
available for the future grant of stock options under the Company's stock
option plans. See Notes to the annual Consolidated Financial Statements.
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SUMMARY CONSOLIDATED FINANCIAL DATA
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<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED MAY 31, FEBRUARY 28,
------------------------------ -------------------------
1995 1996 1997 1997 1998
-------- -------- -------- ---------- ------------
($ IN THOUSANDS EXCEPT PER COMMON SHARE)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.................................... $830,526 $967,449 $973,824 $ 696,936 $ 861,168
Costs and expenses (income)
Cost of products sold...................... 681,824 756,715 767,030 554,956 683,116
Selling, general and administrative........ 58,275 68,852 76,535 56,006 67,798
Interest................................... 20,117 19,960 18,885 14,165 14,418
Other income............................... (7,571) (13,119) (11,848) (7,169) (10,603)
-------- -------- -------- ---------- ----------
752,645 832,408 850,602 617,958 754,729
-------- -------- -------- ---------- ----------
Income before the following items............ 77,881 135,041 123,222 79,978 106,439
Income taxes................................. 25,700 47,256 41,189 26,767 35,252
-------- -------- -------- ---------- ----------
52,181 87,785 82,033 52,211 71,187
Minority interest in Chaparral(1)............ (4,164) (7,831) (6,559) (4,298) (4,400)
-------- -------- -------- ---------- ----------
Net income................................... $ 48,017 $ 79,954 $ 75,474 $ 47,913 $ 66,787
======== ======== ======== ========== ==========
PER SHARE DATA:
Basic
Average common shares...................... 24,567 22,203 21,751 22,012 21,066
Net income per common share................ $ 1.96 $ 3.61 $ 3.48 $ 2.18 $ 3.18
======== ======== ======== ========== ==========
Diluted
Average common shares...................... 24,817 22,682 22,163 22,457 21,717
Net income per common share................ $ 1.94 $ 3.53 $ 3.42 $ 2.14 $ 3.08
======== ======== ======== ========== ==========
Cash dividends per common share.............. $ 0.15 $ 0.20 $ 0.25 $ 0.18 $ 0.23
OTHER DATA:
EBITDA(2).................................. $147,340 $204,281 $196,016 $ 134,122 $ 165,858
Capital expenditures....................... 48,751 79,300 85,188 65,262 344,335
Long-term debt to total capitalization (at
end of
period)(3)............................... 35.1% 27.6% 28.0% 30.3% 41.6%
</TABLE>
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28, 1998
------------------------------ ---------------------------
1995 1996 1997 ACTUAL AS ADJUSTED(4)
-------- -------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Net working capital........................ $187,603 $219,345 $242,994 $ 221,532 $ 367,836
Total assets............................... 753,055 801,063 847,923 1,117,368 1,263,672
Long-term debt............................. 185,274 160,209 176,056 369,404 331,404
Shareholders' equity....................... 343,109 420,022 452,811 517,549 701,853
</TABLE>
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(1) On December 31, 1997, TXI acquired the 15.7% in Chaparral previously held by
public shareholders.
(2) EBITDA is earnings before interest, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to income
from operations or cash flow from operating activities (each determined in
accordance with generally accepted accounting principles).
(3) Long-term debt to total capitalization at February 28, 1998, as adjusted to
give effect to the Offering and the use of the net proceeds thereof, would
have been 32.1%.
(4) Gives effect to the Offering and the use of net proceeds thereof. See "Use
of Proceeds."
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Common
Stock offered by this Prospectus. Certain statements contained hereunder under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" or contained in
the documents incorporated herein by reference, including those concerning the
Company's strategy and growth plans, contain certain forward-looking statements
concerning the Company's operations, economic performance and financial
condition. Because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause such differences include,
but are not limited to, those discussed below.
COMPETITION
All of the markets in which the Company participates are highly
competitive. The Company competes in each of its cement, aggregate and concrete
products markets with several other suppliers of these products. The Company
competes in its steel markets with national and international producers of steel
products. Some of the Company's competitors are larger, have greater financial
resources and have less financial leverage than the Company. The Company
competes on the basis of, among other things, competitive prices, prompt
availability, customer service and quality products.
SENSITIVITY TO ECONOMIC CYCLES; SEASONALITY
A significant percentage of the Company's sales of both CAC and Steel
products is attributable to the level of construction activity, which is
affected by such cyclical factors as general economic conditions, interest
rates, inflation, consumer spending habits and employment. The Company's CAC
operating profit is generally lower in its fiscal quarter ended February 28 as
compared to the other three fiscal quarters due to the impact of winter weather
on construction activity. Steel results in the fiscal quarter ended August 31
are affected by the Company's scheduled summer shut-down to refurbish its steel
production facilities.
ACHIEVING GROWTH STRATEGY; ABILITY TO COMPLETE ACQUISITIONS
The Company's ability to implement its growth strategy successfully is
dependent on a number of factors including competition, the availability of
capital and general economic conditions. In addition, a significant element of
the Company's operating strategy is to pursue strategic acquisitions that either
expand or complement the Company's products or markets or to build new or expand
existing production facilities. There can be no assurance that the Company will
be able to identify and make acquisitions on acceptable terms, that the Company
will be able to obtain the permits necessary to build new or expand existing
production facilities, that the Company will be able to obtain financing for
such acquisitions or expansions on acceptable terms or that the Company will be
able successfully to integrate such acquisitions into existing operations.
AVAILABILITY AND PRICING OF RAW MATERIALS
The Company is dependent upon purchased scrap steel as a raw material and
upon energy sources, including electricity and fossil fuels. Accordingly, the
Company's results of operations and financial condition have in the past been,
and may again in the future be, adversely affected by increases in raw material
costs or energy costs, or their lack of availability.
STATUS OF CERTAIN TARIFFS
A group of domestic cement producers, including the Company, filed
antidumping petitions which have resulted in the imposition of significant
antidumping duty cash deposits on grey portland cement and clinker imported from
Mexico and Japan. In addition, the U.S. Department of Commerce has signed
agreements with the Venezuelan Government and Venezuelan cement producers, which
are designed to eliminate the dumping and illegal subsidization of grey portland
cement and clinker from Venezuela. On an annual basis, the antidumping
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duties are subject to review by the Department of Commerce to determine whether
the current antidumping duty deposit rates should be adjusted upward or
downward.
In 1995, the Antidumping Code of the General Agreement on Tariffs and Trade
was substantially altered pursuant to the Uruguay Round of multilateral trade
negotiations. U.S. legislation approving and implementing the Uruguay Round
agreements requires the Department of Commerce and the U.S. International Trade
Commission to conduct "sunset" reviews of all outstanding antidumping and
countervailing duty orders and suspension agreements, including the antidumping
orders against grey portland cement and clinker from Mexico and Japan and the
suspension agreements on grey portland cement and clinker from Venezuela, to
determine whether they should be terminated or remain in effect. The sunset
reviews of the cement orders and suspension agreements are scheduled to begin no
later than August 1999 and conclude within one year (i.e., August 2000), or, if
extended, to conclude not later than February 2001. There is no experience as
yet on sunset reviews; therefore, it is difficult to assess the likelihood that
the orders or suspension agreements will be terminated. A substantial reduction
or elimination of the existing antidumping duties could adversely affect the
Company's results of operations. The exact net impact, if any, on the Company is
impossible to determine at this time.
IMPACT OF ENVIRONMENTAL LAWS
The operations of the Company and its subsidiaries are subject to various
federal and state environmental laws and regulations ("Environmental Laws" or
"Laws"). Under these Laws, the U.S. Environmental Protection Agency ("EPA") and
agencies of state government have the authority to promulgate regulations which
could result in substantial expenditures for pollution control and solid waste
treatment and disposal. Three major areas regulated by these authorities are air
quality, waste management and water quality.
Emission sources at the Company's facilities are regulated by a combination
of permit limitations and emission standards of statewide application, and the
Company believes that it is in substantial compliance with its permit
limitations and laws and regulations applicable to its existing facilities.
There can be no assurance, however, that future changes in permit limitations
and emission standards will not adversely affect the Company's ability to build
new or expand existing production facilities.
Many of the raw materials, products and by-products associated with the
operation of any industrial facility, including those for the production of
steel, cement or concrete products, contain chemical elements or compounds that
can be designated as hazardous substances. Such raw materials, products and
by-products may also exhibit characteristics that result in their being
classified as a hazardous substance or waste. Some examples are the metals
present in cement kiln dust ("CKD"), the ignitability of the fuels derived from
solid waste which the Company uses as a primary or supplementary fuel
substitution for non-renewable coal and natural gas to fire its cement kilns and
the electric-arc furnace dust ("EAF dust") generated by the Company's steel
facility.
Currently, CKD is exempt from hazardous waste management standards under
the Resource Conservation and Recovery Act ("RCRA") if certain tests are
satisfied. TXI has demonstrated that the CKD it generates satisfies these tests.
However, the EPA plans to apply site-specific waste-management standards to CKD
under the Clean Air Act and RCRA to assure that the environment is protected.
The Company has established operating practices and is implementing waste
management programs which it believes will comply with these anticipated
standards, but there can be no assurances that such practices and programs will
continue to comply in the future.
The Company's utilization of hazardous materials such as gasoline, acids,
solvents and chemicals as well as the materials that have been designated or
characterized as hazardous waste by the EPA which the Company uses for energy
recovery, has necessitated that the Company familiarize its work force with the
more exacting requirements of applicable Environmental Laws and regulations with
respect to human health and the environment related to these activities. The
failure to observe these exacting requirements could jeopardize the Company's
hazardous waste management permits and, under certain circumstances, expose the
Company to significant liabilities and costs of cleaning up releases of
hazardous substances into the environment or claims by employees or others
alleging exposure to hazardous substances.
The Company's steel facility generates, in the same manner as other like
steel plants in the industry, EAF dust that contains lead, chromium and cadmium.
The EPA has listed this EAF dust, which is collected in
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<PAGE> 10
baghouses, as hazardous waste. The Company has contracts with reclamation
facilities in the United States and Mexico pursuant to which such facilities
receive the EAF dust generated by the Company and recover the metals from the
dust for reuse, thus rendering the dust non-hazardous. In addition, the Company
is continually investigating alternative reclamation technologies and has
implemented processes for diminishing the amount of EAF dust generated.
The Company intends to comply with all legal requirements regarding the
environment, but since many of these requirements are subjective and therefore
not quantifiable, presently not determinable, or are likely to be affected by
future legislation or rule making by government agencies, it is not possible to
accurately predict the aggregate future costs of compliance and their effect on
the Company's operations, future net income or financial condition.
Notwithstanding such compliance, if damage to persons or property or
contamination of the environment has been or is caused by the conduct of the
Company's business or by hazardous substances or wastes used in, generated or
disposed of by the Company, the Company may be liable for such damages and be
required to pay the cost of investigation and remediation of such contamination.
The amount of such liability could be material and there can be no assurance
that the Company will not incur material liability in connection with possible
claims related to the Company's operations and properties under Environmental
Laws.
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,900,000 shares of Common
Stock offered hereby are estimated to be approximately $184.3 million
(approximately $212.1 million if the Underwriters' over-allotment option is
exercised in full), based on an assumed public offering price of $66.50 per
share (the last reported sales price of the Common Stock on the NYSE Composite
Tape on April 17, 1998) and after deduction of the underwriting discounts and
commissions and estimated offering expenses. The net proceeds from the sale of
the shares of Common Stock will be used by the Company for general corporate
purposes, including repayment of outstanding indebtedness under the Company's
revolving credit facility. The revolving credit facility matures on December 18,
2002, and provides for a fluctuating interest rate per annum based upon LIBOR.
The average interest rate for the 12-month period ended February 28, 1998 was
6.55%. As of April 17, 1998, the Company had drawn approximately $59.5 million
under the revolving credit facility, the majority of which was used to fund
capital expenditures, including the construction of the Virginia steel facility.
Repayment of this indebtedness will not reduce the maximum amount that the
Company from time to time may borrow under the revolving credit facility.
10
<PAGE> 12
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded on the NYSE under the symbol "TXI".
The following table sets forth for the fiscal year periods indicated, the
intra-day high and low sale prices per share of the Common Stock on the NYSE,
and quarterly cash dividends paid:
<TABLE>
<CAPTION>
PRICE RANGE
------------- DIVIDENDS
HIGH LOW PAID
---- --- ---------
<S> <C> <C> <C>
FISCAL YEAR 1996
First Quarter (ended August 31, 1995).................. $24 7/8 $17 13/16 $.050
Second Quarter (ended November 30, 1995)............... 27 5/8 23 1/4 .050
Third Quarter (ended February 29, 1996)................ 31 1/8 25 1/8 .050
Fourth Quarter (ended May 31, 1996).................... 34 5/8 30 1/4 .050
FISCAL YEAR 1997
First Quarter (ended August 31, 1996).................. $34 5/16 $31 5/16 $.050
Second Quarter (ended November 30, 1996)............... 33 7/16 26 15/16 .050
Third Quarter (ended February 28, 1997)................ 29 5/16 24 1/8 .075
Fourth Quarter (ended May 31, 1997).................... 29 1/4 20 7/8 .075
FISCAL YEAR 1998
First Quarter (ended August 31, 1997).................. $34 11/16 $23 5/8 $.075
Second Quarter (ended November 30, 1997)............... 52 33 5/16 .075
Third Quarter (ended February 28, 1998)................ 58 42 1/2 .075
Fourth Quarter (through April 17, 1998)................ 67 1/4 50 3/4 .075(1)
</TABLE>
- ---------------
(1) On April 20, 1998, the Company's Board of Directors approved a dividend
payable May 29, 1998 to shareholders of record on May 1, 1998.
The last reported sales price per share of the Common Stock on the NYSE
Composite Tape on April 17, 1998 was $66.50. As of February 28, 1998, there were
approximately 3,650 holders of record of the Common Stock.
Certain of the Company's loan agreements contain covenants which provide
for restrictions on the payment of dividends on Common Stock. See Notes to the
Consolidated Financial Statements for the fiscal quarter ended February 28,
1998.
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 28, 1998 and as adjusted at such date to give effect to the receipt of
the net proceeds from the sale of 2,900,000 shares of Common Stock offered by
the Company hereby at an assumed offering price of $66.50 per share (the last
reported sale price of the Common Stock on the NYSE Composite Tape on April 17,
1998). This table should be read in conjunction with the Consolidated Financial
Statements of the Company and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 28, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt......................... $ 13,430 $ 13,430
======== ==========
Long-term debt:
Revolving credit facility(1).............................. $ 38,000 $ 0
Other long-term debt...................................... 331,404 331,404
-------- ----------
Total long-term debt...................................... 369,404 331,404
Stockholders' equity:
Common Stock, $1.00 par value per share; 40,000,000 shares
authorized; 25,067,226 shares issued; 27,967,226 shares
issued, as adjusted(2)................................. 25,067 27,967
Additional paid-in capital................................ 255,149 436,553
Treasury stock, 3,979,114 shares, at cost................. (87,272) (87,272)
Retained earnings......................................... 324,605 324,605
-------- ----------
Total stockholders' equity............................. 517,549 701,853
-------- ----------
Total capitalization................................... $886,953 $1,033,257
======== ==========
</TABLE>
- ---------------
(1) As of April 17, 1998, the Company had drawn approximately $59.5 million
under its revolving credit facility.
(2) Excludes an aggregate of 1,923,187 shares of Common Stock issuable upon the
exercise of options outstanding under the Company's stock option plans as
of February 28, 1998 at a weighted average exercise price of $26.97 per
share, of which options to purchase 536,437 shares were exercisable at such
date. See Notes to annual Consolidated Financial Statements.
12
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of income data and the selected
consolidated balance sheet data as of May 31, 1993, 1994, 1995, 1996 and 1997
and for the fiscal years then ended have been derived from the Company's audited
consolidated financial statements and should be read in conjunction with those
statements, which are included in this Prospectus or incorporated herein by
reference. The selected consolidated statement of income data for the nine month
periods ended February 28, 1997 and 1998 and the consolidated balance sheet data
as of February 28, 1998 were derived from the unaudited consolidated financial
statements included herein. In the opinion of management, the unaudited
information includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations of the Company at the dates and for the periods presented.
Results for the nine month period ended February 28, 1998 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED MAY 31, FEBRUARY 28,
---------------------------------------------------- ---------------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ---------- --------------
($ IN THOUSANDS EXCEPT PER COMMON SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales..................... $614,292 $707,147 $830,526 $967,449 $973,824 $ 696,936 $ 861,168
Costs and expenses (income)
Cost of products sold....... 545,200 598,601 681,824 756,715 767,030 554,956 683,116
Selling, general and
administrative............ 43,116 47,341 58,275 68,852 76,535 56,006 67,798
Interest.................... 32,596 26,231 20,117 19,960 18,885 14,165 14,418
Other income................ (6,639) (8,614) (7,571) (13,119) (11,848) (7,169) (10,603)
-------- -------- -------- -------- -------- ---------- ----------
614,273 663,559 752,645 832,408 850,602 617,958 754,729
-------- -------- -------- -------- -------- ---------- ----------
Income before the following
items....................... 19 43,588 77,881 135,041 123,222 78,978 106,439
Income taxes.................. (646) 15,556 25,700 47,256 41,189 26,767 35,252
-------- -------- -------- -------- -------- ---------- ----------
665 28,032 52,181 87,785 82,033 52,211 71,187
Minority interest in
Chaparral(1)................ 393 (2,281) (4,164) (7,831) (6,559) (4,298) (4,400)
-------- -------- -------- -------- -------- ---------- ----------
Net income.................... $ 1,058 $ 25,751 $ 48,017 $ 79,954 $ 75,474 $ 47,913 $ 66,787
======== ======== ======== ======== ======== ========== ==========
PER SHARE DATA:
Basic
Average common shares....... 22,076 22,473 24,567 22,203 21,751 22,012 21,066
Net income per common
share..................... $ 0.06 $ 1.15 $ 1.96 $ 3.61 $ 3.48 $ 2.18 $ 3.18
======== ======== ======== ======== ======== ========== ==========
Diluted
Average common shares....... 25,201 25,273 24,817 22,682 22,163 22,457 21,717
Net income per common
share..................... $ 0.05 $ 1.03 $ 1.94 $ 3.53 $ 3.42 $ 2.14 $ 3.08
======== ======== ======== ======== ======== ========== ==========
Cash dividends per common
share....................... $ 0.10 $ 0.10 $ 0.15 $ 0.20 $ 0.25 $ 0.18 $ 0.23
OTHER DATA:
EBITDA(2)................... $ 82,414 $118,781 $147,340 $204,281 $196,016 $ 134,122 $ 165,858
Capital expenditures........ 17,212 23,305 48,751 79,300 85,188 65,262 344,335
Long-term debt to total
capitalization (at end of
period)(3)................ 48.6% 32.7% 35.1% 27.6% 28.0% 30.3% 41.6%
</TABLE>
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28, 1998
---------------------------------------------------- ---------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(4)
-------- -------- -------- -------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Net working capital......... $159,408 $161,383 $187,603 $219,345 $242,994 $ 221,532 $ 367,836
Total assets................ 757,300 749,120 753,055 801,063 847,923 1,117,368 1,263,672
Long-term debt.............. 267,243 171,263 185,274 160,209 176,056 369,404 331,404
Shareholders' equity........ 282,511 352,671 343,109 420,022 452,811 517,549 701,853
</TABLE>
- ---------------
(1) On December 31, 1997, TXI acquired the 15.7% in Chaparral previously held
by public shareholders.
(2) EBITDA is earnings before interest, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to income
from operations or cash flow from operating activities (each determined in
accordance with generally accepted accounting principals).
(3) Long-term debt to total capitalization at February 28, 1998, as adjusted to
give effect to the Offering and the use of the net proceeds thereof, would
have been 32.1%.
(4) Gives effect to the Offering and the use of net proceeds thereof. See "Use
of Proceeds."
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in connection with the Company's
audited and unaudited consolidated financial statements and notes thereto
included elsewhere in this Prospectus.
GENERAL
The Company is a leading supplier of construction materials through two
business segments: cement, aggregate and concrete products (the "CAC" segment)
and steel (the "Steel" segment). Through the CAC segment, the Company produces
and sells cement, stone, sand and gravel, expanded shale and clay aggregate and
concrete products. Through its Steel segment, the Company produces and sells
structural steel, specialty bar products, merchant bar-quality rounds,
reinforcing bar and channels.
The Company owns long-term reserves of limestone, the primary raw material
for the production of cement. The primary raw material for the Company's Steel
operations is recycled steel obtained from crushed automobiles and other
sources. Both the CAC and Steel businesses require large amounts of capital
investment, maintenance and energy.
Corporate resources include administration, financial, legal,
environmental, personnel and real estate activities which are not allocated to
operations and are excluded from operating profit.
A significant percentage of the Company's sales of both CAC and Steel
products is attributable to the level of construction activity, which is
affected by general economic conditions and seasonal weather conditions. The
Company's CAC operating profit is generally lower in the fiscal quarter ended
February 28 as compared to the other three fiscal quarters due to the impact of
winter weather conditions on construction activity. Steel results in the fiscal
quarter ended August 31 are affected by the Company's scheduled summer shut-down
to refurbish the production facilities.
14
<PAGE> 16
RESULTS OF OPERATIONS
The following table sets forth certain operating information about the
Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED MAY 31, FEBRUARY 28,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
NET SALES
Cement................................................. $115,531 $137,773 $133,256 $ 95,636 $128,190
Ready-mix.............................................. 114,568 154,105 148,861 106,946 140,888
Stone, sand and gravel................................. 64,285 78,198 76,070 55,172 60,463
Other products......................................... 58,615 70,690 79,783 57,284 73,037
Interplant............................................. (54,284) (80,973) (80,822) (58,981) (70,354)
-------- -------- -------- -------- --------
Total CAC.............................................. 298,715 359,793 357,148 256,057 332,224
Structural mills....................................... 359,845 447,115 435,242 308,987 396,529
Bar mill............................................... 167,962 157,130 178,227 128,107 125,389
Other.................................................. 4,004 3,411 3,207 3,785 7,026
-------- -------- -------- -------- --------
Total Steel............................................ 531,811 607,656 616,676 440,879 528,944
-------- -------- -------- -------- --------
Total net sales........................................ 830,526 967,449 973,824 696,936 861,168
OPERATING COST
Operating cost -- CAC.................................. 229,708 269,665 274,100 199,821 257,330
Operating cost -- Steel................................ 488,183 531,880 545,189 392,756 469,431
-------- -------- -------- -------- --------
Total operating cost................................... 717,891 801,545 819,289 592,577 726,761
OPERATING PROFIT
Operating profit -- CAC................................ 69,007 90,128 83,048 56,246 74,894
Operating profit -- Steel.............................. 43,628 75,776 71,487 48,123 59,513
-------- -------- -------- -------- --------
Total operating profit................................. 112,635 165,904 154,535 104,369 134,407
CORPORATE RESOURCES
Selling, general & administrative...................... 15,502 17,168 19,270 13,885 17,683
Depreciation & amortization............................ 786 823 838 606 684
Other income........................................... (1,651) (7,088) (7,680) (3,265) (4,817)
-------- -------- -------- -------- --------
14,637 10,903 12,428 11,226 13,550
Interest expense....................................... 20,117 19,960 18,885 14,165 14,418
-------- -------- -------- -------- --------
Income before income taxes & minority interest......... $ 77,881 $135,041 $123,222 $ 78,978 $106,439
======== ======== ======== ======== ========
OTHER DATA:
Depreciation & amortization -- CAC..................... $ 14,669 $ 15,964 $ 19,918 $ 14,170 $ 18,974
Depreciation & amortization -- Steel................... 33,887 32,493 33,153 26,203 25,343
Capital expenditures -- CAC............................ 27,781 57,628 49,327 38,014 155,653
Capital expenditures -- Steel.......................... 16,234 20,630 33,776 25,590 187,001
Capital expenditures -- corporate resources............ 4,736 1,042 2,085 1,658 1,681
OPERATING DATA:
Units shipped
Cement (tons)........................................ 2,226 2,363 2,082 1,500 1,943
Ready-mix (cubic yds)................................ 2,415 3,088 2,813 2,024 2,617
Stone, sand and gravel (tons)........................ 12,375 15,706 15,501 11,110 12,438
Structural mills (tons).............................. 1,036 1,137 1,095 772 986
Bar mill (tons)...................................... 475 453 525 377 352
Weighted average sales price per unit
Cement (ton)......................................... $ 51.90 $ 58.30 $ 64.00 $ 63.76 $ 65.98
Ready-mix (cubic yd)................................. 47.44 49.90 52.92 52.84 53.84
Stone, sand and gravel (ton)......................... 5.19 4.98 4.91 4.97 4.86
Structural mills (ton)............................... 347.34 393.24 397.48 400.24 402.16
Bars mill (ton)...................................... 353.58 346.87 339.48 339.81 356.22
</TABLE>
NINE-MONTH PERIOD ENDED FEBRUARY 28, 1998 (THE "1998 PERIOD") COMPARED TO
NINE-MONTH PERIOD ENDED FEBRUARY 28, 1997 (THE "1997 PERIOD")
Net sales. Net sales were $861.2 million for the 1998 Period, an increase
of $164.2 million from the 1997 Period.
CAC sales. CAC sales were $332.2 million for the 1998 Period, an increase
of $76.2 million from the 1997 Period, of which $12.0 million was attributable
to Riverside, which was acquired on December 31, 1997. Higher cement sales
resulted from an increase of 19% in shipments from the Company's Texas
operations. The Company's entry into the California regional market through the
acquisition of Riverside contributed to an overall increase in total cement
shipments of 30%. Increased sales in ready-mix and stone, sand and gravel can be
attributed primarily to a return to more favorable weather conditions. Ready-mix
shipments increased 29% in the
15
<PAGE> 17
1998 Period over the 1997 Period. Stone, sand and gravel shipments increased by
12% during the 1998 Period compared to the 1997 Period, while average prices for
these products decreased due to a change in the mix of products sold.
Steel sales. Steel sales were $528.9 million for the 1998 Period, an
increase of $88.1 million from the 1997 Period. Structural steel shipments
increased 28% in the 1998 Period, reflecting sustained demand for structural
products due to the strength in construction activity. Prices for bar mill
products increased 5% in the 1998 Period as a result of an improved product mix
and higher reinforcing bar and specialty bar product prices; these improvements
were somewhat offset by a 7% decrease in shipments.
Operating costs. Cost of products sold, including depreciation, depletion
and amortization, was $683.1 million for the 1998 Period, an increase of $128.2
million from the 1997 Period. CAC costs were $235.4 million, an increase of
$53.9 million compared to the 1997 Period, as a result of increased shipments
and higher maintenance costs at the Texas cement plants and the addition of the
higher operating costs of the Riverside plants. Steel costs were $447.7 million,
an increase of $74.2 million compared to the 1997 Period, resulting from
increased shipments and higher melt shop unit costs.
CAC selling, general and administrative expenses were $23.5 million in the
1998 Period, an increase of $3.6 million from the 1997 Period due primarily to
expanded operations and higher incentive compensation. Steel selling, general
and administration expenses were $25.9 million in the 1998 Period, an increase
of $4.3 million from the 1997 Period, due primarily to increased incentive
compensation.
Operating profit. Operating profit was $134.4 million in the 1998 Period,
an increase of $30.0 million from the 1997 Period. CAC profit was $74.9 million,
an increase of $18.6 million over the 1997 Period due to increased shipments.
Steel profit was $59.5 million, an increase of $11.4 million over the 1997
Period, due primarily to increased structural steel shipments and higher average
selling prices for specialty bar products.
Corporate resources. Selling, general and administrative expenses,
including depreciation and amortization, were $18.4 million for the 1998 Period,
an increase of $3.9 million from the 1997 Period due primarily to increased
incentive compensation expenses and general expenses not allocated to
operations. Other income of $4.8 million for the 1998 Period included $3.3
million from property sales generated by the Company's real estate operations,
an increase of $2.1 million from the 1997 Period property sales.
Interest expense. Interest expense was $14.4 million for the 1998 Period,
net of $2.1 million of capitalized interest.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales. Net sales for fiscal 1997 were $973.8 million, an increase of
$6.4 million from fiscal 1996.
CAC sales. CAC sales were $357.1 million in fiscal 1997, a decrease of $2.6
million from fiscal 1996 due to lower shipments caused by unusually wet weather.
Average cement pricing increased by 10% in fiscal 1997 over fiscal 1996, while
shipments decreased by 12%. The decrease in ready-mix sales reflected price
increases of 6% in fiscal 1997, offset by a 9% decrease in shipments. The
increase in sales of other products reflected the Company's acquisition of
expanded shale and clay aggregate facilities in California in fiscal 1996.
Steel sales. Steel sales were $616.7 million for fiscal 1997, an increase
of $9.0 million from fiscal 1996, due to higher bar mill shipments which were
partially offset by a decline in structural steel shipments. Bar mill shipments
were 16% higher in fiscal 1997 than fiscal 1996. Specialty bar products
shipments increased 6% in fiscal 1997.
Operating costs. Cost of products sold, including depreciation, depletion
and amortization, was $767.0 million in fiscal 1997, a $10.3 million increase
from fiscal 1996. CAC costs were $249.6 million for fiscal 1997, an increase of
$2.9 million from fiscal 1996, due to higher unit costs for cement manufacturing
and ready-mix distribution, offset by the effect of lower cement shipments.
Steel costs were $517.4 million, an increase of $7.4 million from fiscal 1996
due primarily to increased shipments offset by slightly lower steel rolling
costs per ton.
16
<PAGE> 18
CAC selling, general and administrative expenses were $27.1 million for
fiscal 1997, an increase of $2.5 million from fiscal 1996. Steel selling,
general and administrative expenses were $29.3 million for fiscal 1997, an
increase of $3.1 million from fiscal 1996, primarily due to higher incentive
compensation.
Operating profit. Operating profit was $154.5 million in fiscal 1997, a
decrease of $11.4 million from fiscal 1996. CAC profit was $83.0 million for
fiscal 1997, a decrease of $7.1 million from fiscal 1996, primarily due to
reduced shipments caused by unusually wet weather. Steel profit was $71.5
million in fiscal 1997, a decrease of $4.3 million from fiscal 1996 as improved
margins from increased shipments were offset by higher selling, general and
administrative expenses.
Corporate resources. Selling, general and administrative expenses,
including depreciation and amortization, were $20.1 million for fiscal 1997, an
increase of $2.1 million from fiscal 1996 due to expanded operations, offset by
reduced incentive compensation at the corporate resources level. Other income of
$7.7 million included $6.3 million generated by the Company's real estate
operations during fiscal 1997.
Interest Expense. Interest expense was $18.9 million in fiscal 1997, a
decrease of $1.1 million from fiscal 1996, due to a reduction in the average
outstanding debt.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales. Net sales for fiscal 1996 were $967.4 million, an increase of
$136.9 million from fiscal 1995.
CAC sales. CAC sales were $359.8 million in fiscal 1996, an increase of
$61.1 million from fiscal 1995 due to continued price improvements and increased
shipments. Average cement pricing increased by 12% in fiscal 1996 and cement
shipments increased by 6%. The increase in ready-mix sales in fiscal 1996
reflected a 28% increase in shipments due to expanded capacity and a 5% increase
in average prices. Stone, sand and gravel sales improved 22% in fiscal 1996,
with an increase in shipments of 27%, while overall average prices decreased 4%
due to a change in the mix of products sold.
Steel sales. Steel sales were $607.7 million in fiscal 1996, an increase of
$75.8 million from fiscal 1995, due to a 9% increase in average selling prices
and an increase in structural steel shipments. Prices for structural steel
products increased 13% in fiscal 1996 compared to fiscal 1995. Bar mill
shipments decreased by 5% in this period with somewhat lower average selling
prices.
Operating costs. Cost of products sold, including depreciation, depletion
and amortization, was $756.7 million in fiscal 1996, an increase of $74.9
million from fiscal 1995. CAC costs were $246.7 million for fiscal 1996, an
increase of $35.7 million from the prior year due to higher shipments. Steel
costs were $510.0 million in fiscal 1996, an increase of $40.6 million over
fiscal 1995, due to higher shipments. Higher scrap, melt shop and steel rolling
costs resulted in a 4% increase in average cost per ton.
CAC selling, general and administrative expenses were $24.7 million for
fiscal 1996, an increase of $3.1 million from fiscal 1995, due to higher
incentive compensation. Steel selling, general and administrative expenses were
$26.2 million for fiscal 1996, an increase of $5.8 million from fiscal 1995,
primarily due to higher incentive compensation.
Operating profit. Operating profit was $165.9 million in fiscal 1996, an
increase of $53.3 million from fiscal 1995. CAC profit was $90.1 million, an
increase of $21.1 million from fiscal 1995 due to increased shipments and higher
prices. Steel profit was $75.8 million in fiscal 1996, an increase of $32.1
million from fiscal 1995, due to increased prices outpacing increased costs.
Corporate resources. Selling, general and administrative expenses were
$18.0 million for fiscal 1996, an increase of $1.7 million from fiscal 1995.
Interest expense. Interest expense was $20.1 million in fiscal 1996, a
decrease of $100,000 from fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally finances its major capital expansion projects with
long-term borrowing. Maintenance capital expenditures and working capital are
funded by cash flow from operations. As a result of the
17
<PAGE> 19
acquisition of Riverside, the acquisition of the minority interest in Chaparral
and the construction of the Virginia steel facility, the Company has spent or
committed to spend approximately $650 million. The Company expects cash from
operations, the net proceeds from this Offering and borrowings under its
revolving credit facility to be sufficient to provide funds for capital
expenditure commitments, scheduled debt repayments and working capital needs
during the next two years.
Net cash provided by operating activities for the 1998 Period was $144.4
million, an increase of $75.9 million over the 1997 Period due to higher net
income, increased depreciation, depletion and amortization expense and changes
in working capital items. During fiscal years 1997, 1996 and 1995, net cash
provided by operating activities was $109.9 million, $127.5 million and $115.9
million, respectively.
Net cash used by investing activities for the 1998 Period was $346.4
million compared to $83.6 million in fiscal 1997, consisting principally of
capital expenditure items. Historically, capital expenditures have consisted of
normal replacement and technological upgrades of existing equipment and
expansion of the Company's operations. The fiscal year 1998 capital expenditure
budget for these activities is estimated to reach $160 million, of which $113.6
million has been incurred during the 1998 Period. Expenditures included the
purchase of expanded shale and clay facilities in Colorado, additional ready-mix
plants in Texas and Louisiana and bar mill upgrades at the Texas steel facility.
Additionally, capital expenditures for the construction of the Company's
Virginia steel facility were $47.9 million for the 1998 Period. Production at
this facility is scheduled to begin in 1999, with total costs for the site,
utilities, equipment and installation estimated to be $450 million, although
there can be no assurance that the facility will commence production on schedule
or that the total cost will not increase. Effective December 31, 1997, the
Company purchased Riverside for $115.4 million, of which $110.9 million had been
paid through February 28, 1998. On December 31, 1997, the Company acquired the
minority interest in Chaparral for an estimated $77.1 million, including
transaction expenses, of which $72.0 million had been paid through February 28,
1998.
Net cash provided by financing activities for the 1998 Period was $186.6
million compared to $34.5 million used in fiscal 1997. Borrowings, net of debt
retirements, increased $193.3 million in the 1998 Period. On December 18, 1997,
the Company concluded the private placement of $200 million in fixed-rate senior
notes having an average maturity of 12 years and average interest rate of 7.28%.
This financing and cash provided by operations funded the Company's increased
capital expenditures for the 1998 Period. In December 1997, the Company
increased the maximum borrowing limit on its revolving credit facility from $100
million to $350 million and extended its term until December 2002. At February
28, 1998, $302.6 million was available for future borrowings thereunder. During
1997, cash provided by operations funded the Company's purchase of $41.6 million
of its Common Stock and Chaparral's purchase of $3.8 million of its common
stock. Effective February 1997, the Company declared a two-for-one stock split
and increased the quarterly cash dividend rate to $.075 per share.
YEAR 2000 COMPLIANCE
The Company is aware of the issues that users of many computer systems will
face as the year 2000 approaches and is in the process of determining Year 2000
compliance in its operating, financial and management information systems. The
Company does not anticipate any material disruption in its operations or
incurrence of material costs as a result of any failure by the Company to be in
compliance.
INFLATION
Management believes that inflation has not had a material effect on the
Company's operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement establishes new standards for computing and presenting
earnings per share and became effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and requires
that all prior-period earnings per share data be restated. The Company adopted
SFAS No. 128 for its fiscal quarter ended February 28, 1998.
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<PAGE> 20
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." These statements are effective for fiscal years beginning
after December 15, 1997, although earlier adoption is permitted. SFAS No. 130
requires the presentation of comprehensive income and its components in a full
set of general purpose financial statements. SFAS No. 131 requires the
disclosure of financial and descriptive information about reportable operating
segments. Both SFAS No. 130 and 131 are modifications of existing disclosure
requirements which will have no effect on the results of operations or financial
condition of the Company.
19
<PAGE> 21
BUSINESS
GENERAL
TXI is a leading supplier of construction materials through two business
segments: cement, aggregate and concrete products; and structural steel and
specialty bar products. The Company is the largest producer of cement in Texas
and the second largest supplier of structural steel products in North America.
Demand for structural steel, cement, aggregate and concrete products is
primarily driven by construction activity, while specialty bar products supply
the original equipment manufacturer ("OEM"), tool and oil country goods markets.
From fiscal 1994 to fiscal 1997, TXI's net sales and net income have grown at a
compound annual rate of 11% and 43%, respectively. For the 12 months ended
February 28, 1998, the Company generated $1.1 billion in net sales and $94.3
million in net income.
The Company is the only major North American producer of both cement and
steel. TXI has derived significant benefits therefrom, primarily in lowering
production costs and enhancing productivity through the innovative recycling of
by-products of manufacturing.
The Company has extensive operating experience in both of its business
segments. Founded in 1951, the Company began its cement operations in 1960 with
the opening of its Midlothian, Texas facility and added its steel operations in
1975 with the construction of a plant in Midlothian.
In January 1998, the Company acquired Riverside, the owner of a 1.3 million
ton per year portland cement plant and a 100,000 ton per year specialty white
cement plant. The acquisition increased TXI's cement capacity by 60% and opened
the California regional cement market to the Company. TXI is constructing a
structural steel facility in Virginia, scheduled to begin operations in the
summer of 1999, which will expand TXI's steel capacity by approximately 60%. In
March 1998, TXI filed for a permit to expand its Midlothian, Texas, cement plant
from 1.3 to 2.8 million tons per year. The Company is in the planning stages of
modernizing and upgrading its portland cement plant in California.
BUSINESS STRATEGY
The Company's business strategy is to grow profitably in both of its
business segments by achieving and maintaining market leadership positions in
desirable markets, capitalizing on innovation in manufacturing processes and
products, being the low cost supplier, pursuing strategic growth opportunities
and preserving financial strength and flexibility in order to capitalize on
these opportunities when they arise.
The key elements of the Company's strategy are:
Achieve and Maintain Market Leadership. The Company strives to be the
number one or two supplier in desirable markets. The Company is:
- The largest producer of cement in Texas and a major cement producer in
California, the two largest cement markets in the U.S.
- The second largest supplier of structural steel products in North
America.
- The largest supplier of light weight steel beams used in manufactured
housing in North America.
- The largest supplier of expanded shale and clay aggregate products west
of the Mississippi River.
- The largest supplier of stone, sand and gravel aggregate products and the
second largest supplier of ready-mix concrete in North Texas.
- The largest supplier of sand and gravel aggregate products and ready-mix
concrete in Louisiana.
Capitalize on Innovation in Manufacturing Processes and Products. The
Company emphasizes the development and improvement of manufacturing process
technologies and the design and marketing of new products. Research and
development of manufacturing processes and products is considered to be every
20
<PAGE> 22
employee's responsibility at TXI. All employees are empowered to seek and
implement creative ideas to improve operations and results.
- TXI pioneered and is a leader in the manufacture of wide flange beams and
other structural steel products using recycled steel.
- TXI developed and patented near net shape casting, a process which
provides energy and capital cost savings in the making of wide flange
beams and other structural steel products.
- TXI developed and patented the CemStar process, which uses a co-product
from steel-making to increase cement production with little additional
cost. TXI continues to research and refine processes for the recovery and
recycling of waste and the by-products generated by manufacturing
processes.
- TXI continues to develop new, higher-margin products, such as Bantam
Beams and Diamond Pro professional groundskeeping products.
Be the Low Cost Supplier. The Company's focus on market leadership is
accompanied by its determination to drive down production and distribution costs
in order to be the low cost supplier to its customers.
- TXI operates the largest steel shredder in the world, currently supplying
42% of its total steel raw material needs. The shredder enables the
Company to access a continuous source of low cost, unprocessed scrap
steel in order to reduce costs and exposure to increasing prices for
higher grade recycled steel.
- TXI is a leader in substituting alternative fuels for the nonrenewable
fuels typically used in the energy intensive cement manufacturing
process. The Company lowers cement manufacturing costs both by reducing
expenditures for the nonrenewable fuels and by receiving income for the
management of alternative fuels received from third party generators of
such fuels.
Pursue Strategic Growth Opportunities. The Company pursues profitable
growth by building on its business and operational expertise in order to enter
new markets and introduce new products.
- A structural steel facility being constructed in Virginia will combine a
steel shredder, near net shape casting, state-of-the-art steel melting
technology and a proprietary rolling mill design to achieve low
production costs and the widest structural steel product range available
from a single facility.
- The acquisition of Riverside provides TXI access to California, the
largest cement market in the U.S. The Company intends to implement its
CemStar process at Riverside in the near term to enhance productivity and
increase capacity. The Company also intends to upgrade and modernize
Riverside's existing portland cement plant with higher capacity and more
cost efficient equipment in order to move into a position of leadership
in the California regional market.
- TXI intends to increase its Midlothian cement capacity from 1.3 million
to 2.8 million tons per year in order to maintain and enhance its
position as the largest producer of cement in Texas.
- TXI is upgrading its specialty bar products capability to further improve
product mix and increase the breadth of markets addressed.
- TXI has embarked on a program to license its CemStar process to cement
producers throughout the world.
- TXI continues to pursue investments for internal growth and opportunistic
acquisitions in order to build on leadership positions in its stone, sand
and gravel, expanded shale and clay and concrete operations.
Preserve Financial Strength and Flexibility. The Company strives to be
financially positioned to pursue profitable growth opportunities as they arise.
TXI expects that the proceeds of this Offering will enable the Company to
maintain its commitment to a strong financial position and pursue its business
strategy on a sound financial basis.
CEMENT
Industry Overview. Cement is the essential binding material used in making
concrete, which is widely used in residential, non-residential and public works
construction activity. Given the high transportation costs of
21
<PAGE> 23
cement relative to its value, it is typically sold within a 200 mile radius from
the producing plant, with those producers on or near waterways able to transport
their product over substantially greater distances on a cost-effective basis.
Consequently, even cement producers with global operations compete on a regional
basis in each market in which that company manufactures and distributes product.
No single cement company in the U.S. has a production and distribution system
extensive enough to serve all U.S. markets. The ability of a company to compete
in a given market depends largely on the location and operating costs of its
plants and associated distribution terminals and price and service in that
market.
Demand for cement is dependent on levels of construction activity specific
to a region or market. Current demand for cement in the Texas and California
regions, as in the rest of the country as a whole, is in excess of current
domestic cement capacity. The Company believes that a continuation of the
current low interest rate environment and increased government spending on
infrastructure improvement, including the enactment of the Intermodal Surface
Transportation Efficiency Act of 1998 ("ISTEA II"), could have a favorable
impact on future demand in its markets. In Texas and California alone, ISTEA II
authorizes the appropriation of approximately 40% greater federal funding over
the next six years for the construction and improvement of highways, bridges and
mass transit systems over the Intermodal Surface Transportation Efficiency Act
of 1992.
TXI's Products. TXI's principal product is portland cement. The Company
also produces specialty cements such as white, masonry, adobe and oil well.
Manufacturing. TXI's cement production facilities are located at four sites
in Texas and California: Midlothian, Texas, south of Dallas/Fort Worth, the
largest cement plant in Texas; Hunter, Texas, south of Austin; and Oro Grande
and Crestmore, California, both near Los Angeles. The limestone reserves used as
the primary raw material are owned by the Company, except for the Crestmore
facility. Raw material for the Crestmore facility are purchased from outside
suppliers. Information regarding each of the Company's facilities is as follows:
<TABLE>
<CAPTION>
ANNUAL RATED
PRODUCTIVE ESTIMATED
CAPACITY -- (TONS MANUFACTURING MINIMUM
PLANT OF CLINKER) PROCESS SERVICE DATE RESERVES -- YEARS
----- ----------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C>
Midlothian, TX............... 1,200,000 Wet 1960 100
Hunter, TX................... 800,000 Dry 1979 100
Oro Grande, CA............... 1,300,000 Dry 1948 90
Crestmore, CA................ 100,000 Dry 1962 N/A
</TABLE>
The Company uses its patented CemStar process in both of its Texas
facilities, which has increased combined annual production by approximately 10%.
The Company intends to add this process to its Oro Grande facility in the near
future. The CemStar process adds "slag," a co-product of steel-making, into a
cement kiln along with the regular raw material feed. The slag serves to
increase the production of clinker which is then ground to make cement. The
primary fuel source for all of the Company's facilities is coal; however, the
Company displaces approximately 35% of its coal needs at its Midlothian plant
and approximately 10% of its coal needs at its Hunter plant by utilizing
alternative fuels.
Raw Materials. The principal raw material used in the production of
portland cement is calcium carbonate in the form of limestone. Limestone is
obtained principally by mining and extracting from the Company's quarries
located in close proximity to its plants.
Marketing and Distribution. The Company markets its products throughout the
southwestern U.S. Its principal marketing area includes the states of Texas,
Louisiana, Oklahoma, California, Nevada, Arizona and Utah. Sales offices are
maintained throughout the marketing area and sales are made primarily to
numerous customers in the construction industry, none of which accounted for
more than 10% of the Company's sales during fiscal 1997.
The Company distributes cement from its plants by rail or truck to eight
distribution terminals located throughout its marketing area.
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<PAGE> 24
Competition. The cement industry is highly competitive with suppliers
differentiating themselves based on price, service and quality.
AGGREGATE, CONCRETE AND OTHER PRODUCTS
Industry Overview. The construction aggregates business consists of the
mining, extraction, production and sale of stone, sand, gravel and lightweight
aggregates such as expanded shale and clay. Construction aggregates are employed
in virtually all types of construction, including highway construction and
maintenance. The concrete business involves the mixing of cement, sand, gravel,
crushed stone and water to form concrete which is subsequently marketed and
distributed to numerous construction contractors.
Demand for aggregate and concrete products largely depends on regional
levels of construction activity, and therefore tends to follow cycles similar to
those of cement. Both the aggregates and concrete industries are highly
fragmented, with numerous participants operating in localized markets. The cost
of transportation of both aggregate and concrete products is high relative to
their value, and consequently, producers are typically limited to a market area
within 100 miles of their production facilities. Similar to the market for
cement, the Company believes that the current favorable conditions, including
low interest rates, strong regional economies in Texas and California, as well
as the impact of ISTEA II, could lead to increased residential, non-residential
and public works construction activity, fueling the demand for aggregates and
concrete.
TXI's Products. TXI's principal products supplied by these businesses
include stone, sand and gravel, expanded shale and clay, ready-mix concrete,
concrete block and pipe and clay brick.
Manufacturing
Aggregates and Expanded Shale and Clay. The Company's aggregate business,
which includes stone, sand and gravel, and expanded shale and clay, is conducted
from facilities primarily serving the Dallas/Fort Worth, Austin and Houston
areas in Texas, the Alexandria, New Orleans, Baton Rouge and Monroe areas in
Louisiana, the Oakland/San Francisco and Los Angeles areas in California and the
Denver area in Colorado.
Ready-Mix Concrete and Concrete Products. The Company currently operates
46 ready-mix concrete plants and 447 ready-mix trucks in three areas in Texas
(Dallas/Fort Worth/Denton, East Texas and Houston), in northwest, northeast and
central Louisiana and at one location in southern Arkansas.
Raw Materials. Aggregates and expanded shale and clay reserves are either
owned or leased by the Company. The Company manufactures and supplies a
substantial amount of the cement and aggregates used by the ready-mix plants
with the remainder being purchased from outside suppliers.
Marketing and Distribution. Sales of these various products are generally
related to the level of construction activity within close proximity of the
plant location. The cost of transportation limits the marketing of these
products to the areas relatively close to the plant sites. Consequently, sales
of these products are related to the level of construction activity near these
plants. These products are marketed by the Company's sales organization located
in the areas served by the plants and are sold to numerous customers, none of
which would be considered significant to the Company's business. In aggregates
and expanded shale and clay products, the distribution of these products is
provided principally by contract or customer-owned haulers, and a limited amount
of these products is distributed by rail.
Competition. The Company competes with numerous suppliers of aggregate and
concrete products. In most of the Company's markets for these products, the
Company competes with a number of vertically integrated companies. The Company
believes that it is a significant competitor in each of the Texas and Louisiana
aggregate and concrete products markets.
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<PAGE> 25
STEEL
Industry Overview
Production. There are currently two manufacturing processes utilized in the
production of steel. One process uses recycled steel as its principal raw
material. Companies with this process are generally referred to as recycled
steel-based producers and the steel plants are sometimes referred to as
"mini-mills." The other manufacturing process utilizes the traditional basic
oxygen furnace to make steel from iron ore, and companies with this process are
generally referred to as integrated producers. Recycled steel-based producers
employ electric-arc furnaces to melt recycled steel and typically experience
lower costs of production and higher productivity than integrated producers. As
a result, recycled steel producers have been able to capture large segments of
the steel market from integrated producers.
Structural Products. Structural products include wide flange beams,
standard beams, channels and other shapes that are primarily used in commercial,
retail, industrial, institutional and warehouse construction. Additional markets
include manufactured housing and public works construction. Annual consumption
of structural products in North America is approximately 8.0 million tons. Wide
flange beams, TXI's primary steel product, account for approximately 4.5 million
tons of the total structural products market. Wide flange beam capacity in North
America is currently 3.0 million tons, leaving a capacity shortfall of
approximately 1.5 million tons currently supplied by imports.
Bar Products. Bar products consist of reinforcing bar, a commodity product,
and specialty bar products. Specialty bar products serve many applications
including OEM applications, tools and oil country goods. When combined,
specialty bar products currently account for approximately 8.0 million tons of
shipments in the U.S. Tight quality control, particularly when using recycled
steel as a raw material, is required to make these products. As a result,
relatively few recycled steel-based producers specialize in these products and
integrated producers still have a considerable market share.
Reinforcing bar goes into any type of construction that uses concrete. It
is the commodity product of the steel industry and many recycled steel-based
producers make the product. As a result, the market for reinforcing bar is very
regional.
TXI's Products. The Company's structural and bar products include beams
ranging from 4 to 24 inches in width, specialty bar products, reinforcing bar,
channels and merchant bar-quality rounds. The Company's Bantam Beams supply the
manufactured housing industry. On completion of its Virginia steel facility, the
Company's range of beams will increase to 36 inches in width. In addition, North
American and European sheet pile sections, products which are used in
excavation, waterway construction and foundation applications, will be made at
the Virginia facility.
Manufacturing. The Company operates a steel facility at Midlothian, Texas.
The Texas facility has two electric-arc furnaces with continuous casters which
feed two structural rolling mills and one bar rolling mill. The rated annual
capacity of the Texas steel facility is 1.8 million tons of melting and 1.9
million tons of rolling.
The Company has begun construction of a steel manufacturing facility near
Richmond, Virginia with a rated capacity of 1.2 million tons per year. The new
facility will be the first to combine near net shape casting technology with
state-of-the-art melting and rolling technology, providing the widest range of
structural steel products at the lowest cost.
Raw Materials. TXI's primary raw material is recycled steel, with steel
shredded by the Company's shredder currently representing 42% of the raw
material mix. The shredded material is primarily composed of crushed automobile
bodies purchased in the open market. Recycled steel that is not shredded by TXI
is purchased from numerous outside suppliers.
The Company's steel facility consumes large amounts of electricity and
natural gas. Electricity is currently obtained from a local electric utility
under an interruptible supply contract with price adjustments based on the
timing of electricity consumption. Natural gas is obtained from a local gas
utility under a supply contract. The Company believes that adequate supplies of
both electricity and natural gas are readily available.
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<PAGE> 26
Marketing and Distribution. The Company's products are marketed throughout
the United States and to a limited extent in Canada and Mexico. Sales are
primarily to steel service centers and steel fabricators for use in the
construction industry, as well as to cold finishers, forgers and OEMs for use in
the railroad, defense, automotive, mobile home and energy industries. Finished
products are delivered by Company-owned trucks, common carriers, customer-owned
trucks, rail and barge.
Competition. The Company competes with steel producers, including foreign
producers, on the basis of price, quality and service. Certain of the Company's
foreign and domestic competitors, including both large integrated steel
producers and other recycled steel-based producers, have substantially greater
assets and larger sales organizations.
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<PAGE> 27
UNDERWRITING
The names of the Underwriters of the shares of Common Stock offered hereby
and the aggregate number of shares which each severally has agreed to purchase
from the Company, subject to the terms and conditions specified in the
Underwriting Agreement, are as follows:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
SBC Warburg Dillon Read Inc.................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Morgan Stanley & Co. Incorporated...........................
---------
Total....................................................... 2,900,000
=========
</TABLE>
The Managing Underwriters are SBC Warburg Dillon Read Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated.
If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby, if any Underwriter defaults in its
obligation to purchase such shares, and the aggregate obligations of the
Underwriters so defaulting do not exceed 10% of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.
The shares of Common Stock offered hereby are being initially offered
severally by the Underwriters for sale at the price set forth on the cover page
hereof or at such price less a concession not in excess of $0. per share on
sales to certain dealers. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0. per share on sales to certain
other dealers. The Offering of the shares is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares. After the
public offering, the public offering price, the concession and the reallowance
may be changed by the Managing Underwriters.
The Company has granted to the Underwriters an option, which may be
exercised within 30 days after the date of this Prospectus, to purchase up to an
additional 435,000 shares of Common Stock to cover over-allotments, if any, on
the same terms per share. To the extent the Underwriters exercise this option,
each of the Underwriters will be obligated, subject to certain conditions, to
purchase the number of additional shares of Common Stock proportionate to such
Underwriter's initial commitment.
The Company, and certain of the directors and executive officers of the
Company (who in the aggregate beneficially own 791,590 shares of Common Stock)
have agreed, subject to certain exceptions, that they will not offer, sell,
contract to sell, transfer or otherwise encumber or dispose of any shares of
Common Stock, or securities convertible or exchangeable for shares of Common
Stock, for a period of 90 days after the date of this Prospectus without the
prior written consent of SBC Warburg Dillon Read Inc.
The Managing Underwriters, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Managing Underwriters to reclaim a selling concession
from a syndicate member when the Common Stock originally sold by such syndicate
member is purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Common Stock to be
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<PAGE> 28
higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on the NYSE or otherwise and, if commenced, may be
discontinued at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
From time to time in the ordinary course of their respective businesses,
certain of the Underwriters and/or their affiliates have provided, and may
provide in the future, various investment banking, general financing and banking
and other services to the Company for which they have received and may receive
customary fees and commissions.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Locke Purnell Rain Harrell (A Professional
Corporation), Dallas, Texas. Certain legal matters will be passed upon for the
Underwriters by Gibson, Dunn & Crutcher LLP, New York, New York.
EXPERTS
The Consolidated Financial Statements of Texas Industries, Inc. as of May
31, 1995, 1996 and 1997, and for each of the three fiscal years then ended,
appearing in this Prospectus and the registration statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), through the Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR"), a registration statement on Form S-3 under the Securities Act
with respect to the Common Stock offered hereby (the "Registration Statement").
This Prospectus, filed as part of the Registration Statement, does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto, certain portions of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is hereby
made to the Registration Statement and the exhibits and schedules filed
therewith or incorporated by reference thereto. Statements contained in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete and in each such instance, reference is made to the
copy of such contract, agreement or other document filed as an exhibit to the
Registration Statement, including documents incorporated by reference, for a
more complete description of the matters involved and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge and copied at the offices of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained at the
prescribed rates from the Commission's Public Reference Section at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic
registration statements filed through EDGAR may also be accessed electronically
through the Commission's home page on the World Wide Web at http://www.sec.gov.
The Company is subject to the periodic reporting requirements of the
Exchange Act, and in accordance therewith, it files reports, proxy statements
and other information required thereby with the Commission via EDGAR. Copies of
such material may be inspected and copied at the offices of the Commission and
accessed electronically through the Commission's home page on the World Wide
Web. Reports, proxy statements, other
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<PAGE> 29
required information statements and other information concerning the Company may
also be inspected at the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended May 31, 1997.
2. Quarterly Report on Form 10-Q for the quarter ended August 31, 1997.
3. Quarterly Report on Form 10-Q for the quarter ended November 30, 1997.
4. Quarterly Report on Form 10-Q for the quarter ended February 28, 1998.
5. Current Report on Form 8-K dated July 30, 1997.
6. Current Report on Form 8-K dated September 16, 1997.
7. Current Report on Form 8-K dated January 26, 1998.
8. Proxy Statement for the Annual Meeting of Stockholders held on October
21, 1997.
9. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form S-3 No. 2-80855) dated January 13, 1973.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering of the Common Stock hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to the Director-Investor
Relations, of the Company at Texas Industries, Inc., 1341 West Mockingbird Lane,
Dallas, Texas 75247-6913.
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<PAGE> 30
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets at May 31, 1997 and 1996........ F-3
Consolidated Statements of Income for the years ended May
31, 1997, 1996 and 1995................................... F-4
Consolidated Statements of Cash Flows for the years ended
May 31, 1997, 1996 and 1995............................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended May 31, 1997, 1996, 1995 and 1994............. F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Balance Sheets at February 28, 1998 (Unaudited)
and May 31, 1997.......................................... F-14
Consolidated Statements of Income (Unaudited) for the three
months ended February 28, 1998 and 1997 and the nine
months ended February 28, 1998 and 1997................... F-15
Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended February 28, 1998 and 1997.............. F-16
Notes to Consolidated Financial Statements (Unaudited)...... F-17
</TABLE>
F-1
<PAGE> 31
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Texas Industries, Inc.
We have audited the accompanying consolidated balance sheets of Texas
Industries, Inc. and subsidiaries as of May 31, 1997 and 1996, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the three years in the period ended May 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Texas
Industries, Inc. and subsidiaries at May 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended May 31, 1997, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Dallas, Texas
July 8, 1997
F-2
<PAGE> 32
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 19,834 $ 28,055
Notes and accounts receivable............................. 122,783 113,762
Inventories............................................... 167,146 150,526
Prepaid expenses.......................................... 34,613 32,574
-------- --------
TOTAL CURRENT ASSETS.............................. 344,376 324,917
OTHER ASSETS
Real estate and other investments......................... 14,920 19,751
Goodwill and other intangibles............................ 63,297 60,377
Other..................................................... 26,553 20,713
-------- --------
104,770 100,841
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements................................ 118,248 110,836
Buildings................................................. 66,156 60,610
Machinery and equipment................................... 815,019 766,434
-------- --------
999,423 937,880
Less allowances for depreciation.......................... 600,646 562,575
-------- --------
398,777 375,305
-------- --------
$847,923 $801,063
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable.................................... $ 51,021 $ 56,652
Accrued interest, wages and other items................... 36,909 35,446
Current portion of long-term debt......................... 13,452 13,474
-------- --------
TOTAL CURRENT LIABILITIES......................... 101,382 105,572
LONG-TERM DEBT.............................................. 176,056 160,209
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS............. 80,080 80,139
MINORITY INTEREST........................................... 37,594 35,121
SHAREHOLDERS' EQUITY
Common stock, $1 par value................................ 25,067 12,534
Additional paid-in capital................................ 255,149 266,303
Retained earnings......................................... 262,774 193,929
Cost of common shares in treasury......................... (90,179) (52,744)
-------- --------
452,811 420,022
-------- --------
$847,923 $801,063
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 33
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C>
NET SALES................................................... $973,824 $967,449 $830,526
COSTS AND EXPENSES (INCOME)
Cost of products sold..................................... 767,030 756,715 681,824
Selling, general and administrative....................... 76,535 68,852 58,275
Interest.................................................. 18,885 19,960 20,117
Other income.............................................. (11,848) (13,119) (7,571)
-------- -------- --------
850,602 832,408 752,645
-------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS.................... 123,222 135,041 77,881
Income taxes................................................ 41,189 47,256 25,700
-------- -------- --------
82,033 87,785 52,181
Minority interest in Chaparral.............................. (6,559) (7,831) (4,164)
-------- -------- --------
NET INCOME........................................ $ 75,474 $ 79,954 $ 48,017
======== ======== ========
Average common shares....................................... 22,243 22,742 24,851
Net income per common share................................. $ 3.40 $ 3.52 $ 1.94
======== ======== ========
Cash dividends.............................................. $ .25 $ .20 $ .15
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 34
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------
1997 1996 1995
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 75,474 $ 79,954 $ 48,017
Loss (gain) on disposal of assets........................ 2,131 977 (1,994)
Non-cash items
Depreciation, depletion and amortization.............. 53,909 49,280 49,342
Deferred taxes........................................ 683 6,822 5,434
Undistributed minority interest....................... 5,684 6,771 3,028
Other -- net.......................................... 6,367 6,454 4,798
Changes in operating assets and liabilities
Notes and accounts receivable......................... (12,570) (13,417) (22,608)
Inventories and prepaid expenses...................... (22,607) (22,921) 10,781
Accounts payable and accrued liabilities.............. (3,552) 3,637 17,935
Real estate and investments........................... 4,380 9,906 1,131
-------- --------- --------
Net cash provided by operations.................. 109,899 127,463 115,864
INVESTING ACTIVITIES
Capital expenditures..................................... (85,188) (79,300) (48,751)
Proceeds from disposition of assets...................... 5,281 1,799 3,132
Other -- net............................................. (3,733) (3,154) (1,456)
-------- --------- --------
Net cash used by investing....................... (83,640) (80,655) (47,075)
FINANCING ACTIVITIES
Repayments of short-term borrowing....................... -- -- (15,000)
Proceeds of long-term borrowing.......................... 69,206 97,552 50,485
Debt retirements......................................... (53,392) (126,593) (50,127)
Purchase of treasury shares.............................. (41,572) (417) (54,688)
Purchase of Chaparral stock.............................. (3,770) (12,506) --
Dividends paid........................................... (5,361) (4,451) (3,618)
Other -- net............................................. 409 1,674 (1,619)
-------- --------- --------
Net cash used by financing....................... (34,480) (44,741) (74,567)
-------- --------- --------
Increase (decrease) in cash................................ (8,221) 2,067 (5,778)
Cash at beginning of year.................................. 28,055 25,988 31,766
-------- --------- --------
Cash at end of year........................................ $ 19,834 $ 28,055 $ 25,988
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 35
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
STOCK ADDITIONAL TREASURY TOTAL
PREFERRED $1 PAR PAID-IN RETAINED COMMON SHAREHOLDERS'
STOCK VALUE CAPITAL EARNINGS STOCK EQUITY
--------- ------- ---------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
May 31, 1994............................ $ 598 $12,534 $265,790 $ 75,511 $ (1,762) $352,671
Net income............................ 48,017 48,017
Cash dividends
Preferred stock -- $5 a share...... (30) (30)
Common stock -- $.15 a share....... (3,588) (3,588)
Treasury stock issued for bonuses and
options -- 40,508 shares........... 255 (323) 795 727
Treasury stock purchased -- 2,996,956
shares............................. (54,688) (54,688)
----- ------- -------- -------- -------- --------
May 31, 1995............................ 598 12,534 266,045 119,587 (55,655) 343,109
Net income............................ 79,954 79,954
Cash dividends
Preferred stock -- $4.72 a share... (28) (28)
Common stock -- $.20 a share....... (4,423) (4,423)
Treasury stock issued for bonuses and
options -- 194,628 shares.......... 288 (1,161) 3,328 2,455
Treasury stock purchased -- 15,696
shares............................. (417) (417)
Retirement of preferred stock......... (598) (30) (628)
----- ------- -------- -------- -------- --------
May 31, 1996............................ -- 12,534 266,303 193,929 (52,744) 420,022
Net income............................ 75,474 75,474
Cash dividends
Common stock -- $.25 a share....... (5,361) (5,361)
Shares issued under two-for-one
stock split........................ 12,533 (12,533) --
Treasury stock issued for bonuses and
options -- 262,497 shares.......... 1,379 (1,268) 4,137 4,248
Treasury stock purchased -- 1,566,554
shares............................. (41,572) (41,572)
----- ------- -------- -------- -------- --------
May 31, 1997............................ $ -- $25,067 $255,149 $262,774 $(90,179) $452,811
===== ======= ======== ======== ======== ========
</TABLE>
At May 31, 1997, Common Stock and Additional Paid-in Capital include $127.8
million of accumulated transfers from Retained Earnings in connection with stock
dividends.
See notes to consolidated financial statements.
F-6
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Texas Industries, Inc. (the Company or TXI), through its subsidiaries, is a
producer of steel and cement/concrete products for the construction and
manufacturing industries. Chaparral Steel Company (Chaparral) produces beam,
merchant and special bar quality rounds, reinforcing bars and channels,
primarily for markets in North America and, under certain market conditions,
Europe and Asia. Cement/concrete operations supply cement and aggregates,
ready-mix, pipe, block and brick from facilities concentrated primarily in Texas
and Louisiana, with several products marketed throughout the U.S.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates: The preparation of financial statements and accompanying notes
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported. Actual
results could differ from those estimates.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and all subsidiaries. The minority interest
represents the separate public ownership of Chaparral, 15.5% at May 31, 1997 and
16.4% at May 31, 1996.
Property, Plant and Equipment: Property, plant and equipment is recorded at
cost. Provisions for depreciation are computed generally using the straight-line
method. Provisions for depletion of mineral deposits are computed on the basis
of the estimated quantity of recoverable raw materials.
Cash Equivalents: For cash flow purposes, temporary investments which have
maturities of less than 90 days when purchased are considered cash equivalents.
Earnings Per Share: Earnings per share are computed by deducting preferred
dividends from net income and adjusting for amortization of additional goodwill
in connection with the contingent payment for the acquisition of Chaparral, then
dividing this amount by the weighted average number of common shares outstanding
during the period, including common stock equivalents. Earnings per share and
all other common share information have been adjusted to give effect to the
two-for-one stock split in February 1997.
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
(SFAS 128), which is not effective until December 15, 1997, will change the
method currently used to compute earnings per share and require the restatement
of all prior periods. The impact is expected to result in an increase in basic
earnings per share over primary earnings per share of $.08, $.09 and $.02, for
the fiscal years ended 1997, 1996 and 1995, respectively.
Intangible Assets: Goodwill and other intangibles is presented net of
accumulated amortization of $17.9 million at May 31, 1997 and $15.0 million at
May 31, 1996. Goodwill resulting from the acquisition of Chaparral of $57.2
million at May 31, 1997 and $59.2 million at May 31, 1996 (net of accumulated
amortization), is being amortized currently on a straight-line basis over a
40-year period. Other intangibles consisting primarily of goodwill and
non-compete agreements are being amortized on a straight-line basis over periods
of 2 to 15 years. Management reviews remaining goodwill and other intangibles
with consideration toward recovery through future operating results
(undiscounted) at the current rates of amortization.
Commissioning Costs: The Company's policy for new facilities is to
capitalize certain costs until the facility is substantially complete and ready
for its intended use. Chaparral substantially completed its large beam mill
during the third quarter of fiscal 1992. Deferred costs totaling $15.1 million
were amortized over a five-year period. The annual amount of amortization
charged to income was $2.0 million in 1997 and $3.0 million in 1996 and 1995.
Income Taxes: Accounting for income taxes uses the liability method of
recognizing and classifying deferred income taxes. The Company joins in filing a
consolidated return with its subsidiaries. Current and deferred tax expense is
allocated among the members of the group based on a stand-alone calculation of
the tax of the individual member.
F-7
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial Instruments: The estimated fair value of each class of financial
instrument as of May 31, 1997 approximates carrying value except for Chaparral's
long-term debt. The fair value of long-term debt at May 31, 1997, estimated by
applying discounted cash flow analysis based on interest rates currently
available to the Company for such debt with similar terms and remaining
maturities, is approximately $198.2 million compared to the carrying amount of
$189.5 million.
Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform to the 1997 presentation.
WORKING CAPITAL
Working capital totaled $243.0 million at May 31, 1997, compared to $219.3
million at the prior year-end.
Notes and accounts receivable of $122.8 million at May 31, 1997, compared
with $113.8 million in 1996, are presented net of allowances for doubtful
receivables of $2.5 million in 1997 and $3.1 million in 1996.
Inventories are stated at cost (not in excess of market) generally using
the last-in, first-out method (LIFO). If the average cost method (which
approximates current replacement cost) had been used, inventory values would
have been higher by $11.7 million in 1997 and $14.2 million in 1996.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products........................................... $ 77,021 $ 64,347
Work in process............................................. 27,162 23,345
Raw materials and supplies.................................. 62,963 62,834
-------- --------
$167,146 $150,526
======== ========
</TABLE>
LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank obligations, maturing through 2001, interest rates from $ 40,000 $ 9,000
6.31% to 6.38% (.625% over LIBOR).........................
Senior notes due through 2008, interest rates average 75,000 75,000
7.28%.....................................................
Senior notes of Chaparral, due through 2004, interest rates 56,000 64,000
average 10.2%.............................................
First mortgage notes of Chaparral, due through 1999, 8,182 14,320
interest rate 14.2%.......................................
Pollution control bonds, due through 2007, interest rate 7,935 8,615
6.38% (75% of prime)......................................
Other, maturing through 2005, interest rates from 8% to 2,391 2,748
10%.......................................................
-------- --------
189,508 173,683
Less current maturities..................................... 13,452 13,474
-------- --------
$176,056 $160,209
======== ========
</TABLE>
Annual maturities of long-term debt for each of the five succeeding years
are $13.5, $13.3, $9.0, $8.9 and $48.7 million.
The Company has available a bank-financed $100 million long-term line of
credit. In addition to the $40 million currently outstanding under this line,
$8.9 million has been utilized to support letters of credit. Commitment fees at
a current annual rate of .22% are paid on the unused portion of this line. In
addition, Chaparral has available a bank-financed $10 million short-term line of
credit which will expire December 31,
F-8
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997, if not renewed. The interest chargeable on borrowings under this line is
.375% over LIBOR. Commitment fees at an annual rate of .125% are paid on the
unused portion of this line.
Loan agreements contain covenants which provide for minimum working
capital, restrictions on purchases of treasury stock and payment of dividends on
common stock, and limitations on incurring certain indebtedness and making
certain investments. Under the most restrictive of these agreements, the
aggregate amount of annual cash dividends on common stock is limited based on
the ratio, excluding Chaparral, of earnings before interest, taxes, depreciation
and amortization plus dividends from Chaparral to fixed charges. In addition,
Chaparral loan agreements restrict dividends and advances to its shareholders,
including the parent company, to $52 million as of May 31, 1997. The Company and
Chaparral are in compliance with all loan covenant restrictions.
Property, plant and equipment, principally Chaparral's, carried at a net
amount of approximately $215.4 million at May 31, 1997 is mortgaged as
collateral for $9.4 million of secured debt.
The amount of interest paid was $19.3 million in 1997, $18.9 million in
1996 and $18.4 million in 1995. Interest capitalized totalled $190,000 in 1997.
SHAREHOLDERS' EQUITY
Common stock consists of:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Shares authorized........................................... 40,000 40,000
Shares outstanding at May 31................................ 20,896 22,200
Average shares outstanding including equivalents............ 22,243 22,742
Shares held in treasury..................................... 4,171 2,867
Shares reserved for stock options and other................. 2,163 2,422
</TABLE>
There are authorized 100,000 shares of Cumulative Preferred Stock, no par
value, of which 20,000 shares are designated $5 Cumulative Preferred Stock
(Voting), redeemable at $105 per share and entitled to $100 per share upon
dissolution. On March 29, 1996 the Company redeemed and retired all outstanding
shares of such $5 Cumulative Preferred Stock. An additional 25,000 shares are
designated Series B Junior Participating Preferred Stock. The Series B Preferred
Stock is not redeemable and ranks, with respect to the payment of dividends and
the distribution of assets, junior to (i) all other series of the Preferred
Stock unless the terms of any other series shall provide otherwise and (ii) the
$5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996,
the Company distributed a dividend of one preferred share purchase right for
each outstanding share of the Company's Common Stock. Each right entitles the
holder to purchase from the Company one two-thousandth of a share of the Series
B Junior Participating Preferred Stock at a price of $122.50 per one
two-thousandth share of Series B Preferred Stock, subject to adjustment. The
rights will expire on November 1, 2006 unless the date is extended or the rights
are earlier redeemed or exchanged by the Company pursuant to the Rights
Agreement.
STOCK OPTION PLANS
The Company's stock option plans provide that non-qualified and incentive
stock options to purchase Common Stock may be granted to directors, officers and
key employees at market prices at date of grant. Generally, options become
exercisable in installments beginning one or two years after date of grant and
expire six or ten years later depending on the initial date of grant. The
Company has elected to continue utilizing the accounting prescribed by APB No.
25 for stock issued under these plans and therefore no compensation cost has
been recognized. If compensation cost had been determined based on the fair
value at the date of grant consistent with the method prescribed by Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-
F-9
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based Compensation" (SFAS No. 123), the Company's net income and earnings per
share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Net income
As reported............................................... 75,474 79,954
Pro forma................................................. 74,272 79,548
Primary earnings per share
As reported............................................... 3.40 3.52
Pro forma................................................. 3.36 3.51
</TABLE>
Because the method of accounting under SFAS No. 123 has not been applied to
options granted prior to June 1, 1995 the pro forma compensation cost may not be
representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant for
purposes of the pro forma disclosures using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants made in
1997 and 1996, respectively: dividend yield of 1.05% and .89%, expected
volatility of 24% and 24%; risk-free interest rates of 6.38% and 6.15% and
expected lives of 6.4 and 6.4 years.
A summary of option transactions for the two years ended May 31, 1997
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES UNDER OPTION OPTION PRICE
---------------------- ----------------
1997 1996 1997 1996
--------- --------- ------ ------
<S> <C> <C> <C> <C>
Outstanding at June 1.............................. 1,232,598 1,096,882 $15.98 $12.70
Granted.......................................... 809,200 374,400 26.96 22.74
Exercised........................................ (234,067) (192,444) 10.35 11.05
Cancelled........................................ (10,600) (46,240) 22.66 13.45
--------- --------- ------ ------
Outstanding at May 31.............................. 1,797,131 1,232,598 $21.62 $15.98
Options exercisable at May 31...................... 347,491 329,918 $15.18 $11.04
Weighted-average fair value of options granted
during the year.................................. $ 9.46 $ 7.98
</TABLE>
As of May 31, 1997, the 1.8 million option shares outstanding have an
exercise price between $10.19 and $32.54 and a weighted-average remaining life
of 8.0 years. In addition, 240,440 shares were available for future grants.
INCOME TAXES
The Company made income tax payments of $39.5 million, $38.7 million, and
$19.7 million in 1997, 1996 and 1995, respectively.
The provisions for income taxes are composed of:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current..................................................... $40,506 $40,434 $20,266
Deferred.................................................... 683 6,822 5,434
------- ------- -------
Expense..................................................... $41,189 $47,256 $25,700
======= ======= =======
</TABLE>
F-10
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconcilement from statutory federal taxes to the above provisions
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes at statutory rate............................... $43,127 $47,267 $27,258
Tax credit carryforwards.............................. -- -- (333)
Additional depletion.................................. (2,984) (2,707) (2,352)
Goodwill.............................................. 702 702 809
State income tax...................................... 912 1,905 552
Non taxable insurance benefits........................ (664) (561) (502)
Other -- net.......................................... 96 653 268
------- ------- -------
$41,189 $47,256 $25,700
======= ======= =======
</TABLE>
The components of the net deferred tax liability at May 31 are summarized
below:
<TABLE>
<CAPTION>
1997 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Deferred compensation..................................... $ 5,523 $ 4,732
Expenses not currently tax deductible..................... 8,332 9,496
Tax cost in inventory..................................... 586 3,698
------- --------
Total deferred tax assets......................... 14,441 17,926
Deferred tax liabilities
Accelerated tax depreciation.............................. 64,154 65,481
Deferred real estate gains................................ 5,178 5,672
Commissioning costs....................................... -- 704
Other..................................................... 1,526 1,803
------- --------
Total deferred tax liabilities.................... 70,858 73,660
------- --------
Net tax liability........................................... 56,417 55,734
Less current portion (asset)................................ (6,236) (10,175)
------- --------
Net deferred tax liability.................................. $62,653 $ 65,909
======= ========
</TABLE>
LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or by
hazardous substances or wastes used in, generated or disposed of by the Company,
the Company may be held liable for such damages and be required to pay the cost
of investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by the Company.
The Company and subsidiaries are defendants in lawsuits which arose in the
normal course of business. In management's judgment (based on the opinion of
counsel) the ultimate liability, if any, from such legal proceedings will not
have a material effect on the consolidated financial position.
RETIREMENT PLANS
Substantially all employees of the Company are covered by a series of
defined contribution retirement plans. The amount of pension expense charged to
costs and expenses for the above plans was $3.4 million in 1997,
F-11
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$2.9 million in 1996 and $2.6 million in 1995. It is the Company's policy to
fund the plans to the extent of charges to income.
INCENTIVE PLANS
All personnel employed as of May 31 share in the pretax income of the
Company for the year then ended based on predetermined formulas. The duration of
most of the plans is one year; certain executives are additionally covered under
a three-year plan. All plans are subject to annual review by the Company's Board
of Directors. The expense for these plans, included in selling, general and
administrative, was $14.8 million, $15.1 million and $8.9 million for 1997, 1996
and 1995, respectively.
Certain executives of Chaparral participate in a deferred compensation plan
based on a five-year average of earnings. Amounts recorded as expense
(reduction) under the plan were $1.9 million, $.7 million and $(.1) million for
1997, 1996 and 1995, respectively.
OPERATING LEASES
Total expense for operating leases for mobile equipment, office space and
other items (other than for mineral rights) amounted to $17.2 million in 1997,
$16.4 million in 1996 and $12.0 million in 1995. Non-cancelable operating leases
with an initial or remaining term of more than one year totaled $61.2 million at
May 31, 1997. Annual lease payments for the five succeeding years are $15.2
million, $8.8 million, $8.6 million, $8.0 million and $6.6 million.
BUSINESS SEGMENTS
Business segment information is presented on pages 9 and 10. Intersegment
sales, which are not material, are accounted for at prices comparable to normal
trade customer sales. Operating profit is net sales less operating costs and
expenses, excluding general corporate expenses and interest expense.
Identifiable assets by segment are those assets that are used in the Company's
operation in each segment. Corporate assets consist primarily of cash, real
estate subsidiaries and other financial assets not identified with a major
business segment.
F-12
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of quarterly financial information (in thousands
except per share):
<TABLE>
<CAPTION>
AUGUST NOVEMBER FEBRUARY MAY
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1997
- ------------------------------------------------
Net Sales
Steel......................................... $149,527 $143,637 $147,715 $175,797
Cement/concrete............................... 96,415 90,739 68,903 101,091
-------- -------- -------- --------
245,942 234,376 216,618 276,888
======== ======== ======== ========
Operating profit
Steel......................................... 15,508 14,754 17,861 23,364
Cement/concrete............................... 25,513 22,557 8,176 26,802
-------- -------- -------- --------
41,021 37,311 26,037 50,166
======== ======== ======== ========
Net income...................................... 19,884 17,903 10,126 27,561
Per share
Net income*................................... .87 .79 .47 1.29
Dividends..................................... .05 .05 .075 .075
Stock price
High....................................... 34 5/16 33 7/16 29 5/16 29 1/4
Low........................................ 31 5/16 26 15/16 24 1/8 20 7/8
1996
- ------------------------------------------------
Net Sales
Steel......................................... $138,141 $154,990 $158,954 $155,571
Cement/concrete............................... 93,963 89,271 76,086 100,473
-------- -------- -------- --------
232,104 244,261 235,040 256,044
======== ======== ======== ========
Operating profit
Steel......................................... 13,346 19,892 21,173 21,365
Cement/concrete............................... 24,844 21,903 13,685 29,696
-------- -------- -------- --------
38,190 41,795 34,858 51,061
======== ======== ======== ========
Net income...................................... 17,131 21,452 16,004 25,367
Per share
Net income.................................... .76 .95 .70 1.11
Dividends..................................... .05 .05 .05 .05
Stock price
High....................................... 24 7/8 27 5/8 31 1/8 34 5/8
Low........................................ 17 13/16 23 1/4 25 1/8 30 1/4
</TABLE>
- ---------------
* The sum of these amounts does not equal the annual amount because of changes
in the average number of common equity shares outstanding during the year.
MERGER PROPOSAL
On May 22, 1997, the Company made an offer to merge with Chaparral Steel
Company. Of the approximately 28.4 million shares of Chaparral outstanding at
May 31, 1997, the Company owns 24.0 million shares with the balance of the
outstanding shares publicly traded on the New York Stock Exchange. Under the
terms of the offer, owners of the publicly traded shares of Chaparral would
receive consideration of $14.25 per share.
F-13
<PAGE> 43
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31,
1998 1997
------------ --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 4,428 $ 19,834
Notes and accounts receivable............................. 152,079 122,783
Inventories............................................... 166,571 167,146
Prepaid expenses.......................................... 45,467 34,613
---------- --------
TOTAL CURRENT ASSETS.............................. 368,545 344,376
OTHER ASSETS
Real estate and other investments......................... 13,301 14,920
Goodwill and other intangibles............................ 155,081 63,297
Other..................................................... 33,110 26,553
---------- --------
201,492 104,770
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements................................ 133,298 118,248
Buildings................................................. 68,199 66,156
Machinery and equipment................................... 979,092 815,019
---------- --------
1,180,589 999,423
Less allowances for depreciation.......................... 633,258 600,646
---------- --------
547,331 398,777
---------- --------
$1,117,368 $847,923
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable.................................... $ 90,010 $ 51,021
Accrued interest, wages and other items................... 43,573 36,909
Current portion of long-term debt......................... 13,430 13,452
---------- --------
TOTAL CURRENT LIABILITIES......................... 147,013 101,382
LONG-TERM DEBT.............................................. 369,404 176,056
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS............. 83,402 80,080
MINORITY INTEREST........................................... -- 37,594
SHAREHOLDERS' EQUITY
Common stock, $1 par value................................ 25,067 25,067
Additional paid-in capital................................ 255,149 255,149
Retained earnings......................................... 324,605 262,774
Cost of common shares in treasury......................... (87,272) (90,179)
---------- --------
517,549 452,811
---------- --------
$1,117,368 $847,923
========== ========
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE> 44
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
NET SALES.......................................... $281,421 $216,618 $861,168 $696,936
COSTS AND EXPENSES (INCOME)
Cost of products sold............................ 228,074 178,129 683,116 554,956
Selling, general and administrative.............. 23,752 17,431 67,798 56,006
Interest......................................... 6,205 4,852 14,418 14,165
Other income..................................... (5,059) (1,824) (10,603) (7,169)
-------- -------- -------- --------
252,972 198,588 754,729 617,958
-------- -------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS........ 28,449 18,030 106,439 78,978
Income taxes....................................... 9,201 6,330 35,252 26,767
-------- -------- -------- --------
19,248 11,700 71,187 52,211
Minority interest in Chaparral..................... (620) (1,574) (4,400) (4,298)
-------- -------- -------- --------
NET INCOME............................... $ 18,628 $ 10,126 $ 66,787 $ 47,913
======== ======== ======== ========
BASIC
Average shares................................... 21,135 21,418 21,066 22,012
Earnings per share............................... $ .88 $ .48 $ 3.18 $ 2.18
======== ======== ======== ========
DILUTED
Average shares................................... 21,912 21,786 21,717 22,457
Earnings per share............................... $ .85 $ .47 $ 3.08 $ 2.14
======== ======== ======== ========
Cash dividends..................................... $ .075 $ .075 $ .225 $ .175
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE> 45
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
---------------------
1998 1997
--------- --------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 66,787 $ 47,913
Loss on disposal of assets................................ 611 186
Non-cash items
Depreciation, depletion and amortization............... 45,001 40,979
Deferred taxes......................................... (1,538) (2,331)
Undistributed minority interest........................ 4,177 3,643
Other -- net........................................... 5,601 4,182
Changes in operating assets and liabilities
Notes and accounts receivable.......................... (12,537) 2,226
Inventories and prepaid expenses....................... 6,305 (27,075)
Accounts payable and accrued liabilities............... 28,126 (4,002)
Real estate and investments............................ 1,834 2,742
--------- --------
Net cash provided by operations................... 144,367 68,463
INVESTING ACTIVITIES
Purchase of Riverside Cement Company...................... (110,916) --
Chaparral merger.......................................... (71,970) --
Capital expenditures -- Virginia steel facility........... (47,881) --
Capital expenditures -- other............................. (113,568) (65,262)
Proceeds from disposal of assets.......................... 2,282 1,426
Other -- net.............................................. (4,300) (2,316)
--------- --------
Net cash used by investing........................ (346,353) (66,152)
FINANCING ACTIVITIES
Proceeds from long-term borrowing......................... 267,639 53,206
Debt retirements.......................................... (74,324) (28,726)
Purchase of treasury shares............................... (558) (41,572)
Purchase of Chaparral stock............................... -- (3,770)
Dividends paid............................................ (4,721) (3,794)
Other -- net.............................................. (1,456) (1,707)
--------- --------
Net cash provided (used) by financing............. 186,580 (26,363)
--------- --------
Decrease in cash............................................ (15,406) (24,052)
Cash at beginning of period................................. 19,834 28,055
--------- --------
Cash at end of period....................................... $ 4,428 $ 4,003
========= ========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Texas Industries, Inc. (the Company or TXI), through its subsidiaries, is a
producer of steel and cement, aggregate and concrete products for the
construction and manufacturing industries. Chaparral Steel Company (Chaparral)
produces beams, merchant and special bar quality rounds, reinforcing bars and
channels, primarily for markets in North America and, under certain market
conditions, Europe and Asia. Cement, aggregate and concrete operations supply
cement and aggregates, ready-mix, pipe, block and brick from facilities
concentrated primarily in Texas, Louisiana, and California with several products
marketed throughout the U.S.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended February 28,
1998, are not necessarily indicative of the results that may be expected for the
year ended May 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended May 31, 1997.
Estimates: The preparation of financial statements and accompanying notes
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported. Actual
results could differ from those estimates.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and all subsidiaries. The minority interest
represents the separate public ownership of Chaparral which was acquired by the
Company on December 31, 1997. Certain amounts in the prior period financial
statements have been reclassified to conform to the current period presentation.
Property, Plant and Equipment: Property, plant and equipment is recorded at
cost. Provisions for depreciation are computed generally using the straight-line
method. Provisions for depletion of mineral deposits are computed on the basis
of the estimated quantity of recoverable raw materials.
Cash Equivalents: For cash flow purposes, temporary investments which have
maturities of less than 90 days when purchased are considered cash equivalents.
Earnings Per Share: Effective February 28, 1998, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS
128). SFAS 128 prescribes new calculations for Basic and Diluted Earnings Per
Share (EPS) which replaces the former calculations for Primary and Fully Diluted
EPS and requires the restatement of prior period EPS data.
Basic EPS is computed by adjusting net income for the amortization of
additional goodwill in connection with a contingent payment for the acquisition
of Chaparral, then dividing by the weighted average number of common shares
outstanding during the period including contingently issuable shares. Diluted
EPS also adjusts the outstanding shares for the dilutive effect of stock options
and awards.
F-17
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Basic and Diluted EPS are calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
Earnings:
Net income........................................ $18,628 $10,126 $66,787 $47,913
Contingent price amortization..................... 58 58 174 174
------- ------- ------- -------
$18,686 $10,184 $66,961 $48,087
======= ======= ======= =======
Shares:
Weighted average shares outstanding............... 21,034 21,337 20,969 21,923
Contingently issuable shares...................... 101 81 97 89
------- ------- ------- -------
21,135 21,418 21,066 22,012
Stock option and award dilution................... 777 368 651 445
------- ------- ------- -------
21,912 21,786 21,717 22,457
======= ======= ======= =======
Basic earnings per share............................ $ .88 $ .48 $ 3.18 $ 2.18
======= ======= ======= =======
Diluted earnings per share.......................... $ .85 $ .47 $ 3.08 $ 2.14
======= ======= ======= =======
</TABLE>
Intangible Assets: Goodwill and other intangibles is presented net of
accumulated amortization of $20.8 million at February 28, 1998 and $17.9 million
at May 31, 1997. Goodwill resulting from the acquisitions of Chaparral Steel
Company and Riverside Cement Company, totalling $148.8 million at February 28,
1998 and $57.2 million at May 31, 1997 (net of accumulated amortization) are
being amortized currently on a straight-line basis over 40-year periods. Other
intangibles consisting primarily of goodwill and non-compete agreements are
being amortized on a straight-line basis over periods of 2 to 15 years.
Management reviews remaining goodwill and other intangibles with consideration
toward recovery through future operating results (undiscounted) at the current
rates of amortization.
Income Taxes: Accounting for income taxes uses the liability method of
recognizing and classifying deferred income taxes. The Company joins in filing a
consolidated return with its subsidiaries. Current and deferred tax expense is
allocated among the members of the group based on a stand-alone calculation of
the tax of the individual member.
WORKING CAPITAL
Working capital totaled $221.5 million at February 28, 1998, compared to
$243.0 million at May 31, 1997.
Notes and accounts receivable of $152.1 million at February, compared with
$122.8 million at May, are presented net of allowances for doubtful receivables
of $7.2 million at February and $2.5 million at May.
Inventories are stated at cost (not in excess of market) generally using
the last-in, first-out method (LIFO). If the average cost method (which
approximates current replacement cost) had been used, inventory values would
have been higher by $12.7 million at February and $11.7 million at May.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY MAY
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products........................................... $ 61,739 $ 77,021
Work in process............................................. 35,739 27,162
Raw materials and supplies.................................. 69,093 62,963
-------- --------
$166,571 $167,146
======== ========
</TABLE>
F-18
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY MAY
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank obligations, maturing through 2002, interest rate 6.03%
(.4% over LIBOR).......................................... $ 38,000 $ 40,000
Senior notes due through 2017, interest rates average
7.28%..................................................... 200,000 --
Senior notes due through 2008, interest rates average
7.28%..................................................... 75,000 75,000
Senior notes due through 2004, interest rates average
10.2%..................................................... 56,000 --
Senior notes due through 1999, interest rate 14.2%.......... 4,091 --
Pollution control bonds, due through 2007, interest rate
6.38% (75% of prime)...................................... 7,595 7,935
Replaced Chaparral debt..................................... -- 64,182
Other, maturing through 2005, interest rates from 8% to
10%....................................................... 2,148 2,391
-------- --------
382,834 189,508
Less current maturities..................................... 13,430 13,452
-------- --------
$369,404 $176,056
======== ========
</TABLE>
Annual maturities of long-term debt for each of the five succeeding years
are $13.4, $9.1, $8.9, $8.9 and $46.7 million.
The Company has available a bank-financed $350 million long-term revolving
credit facility. In addition to the $38.0 million currently outstanding under
this facility, $9.4 million has been utilized to support letters of credit.
Commitment fees at a current annual rate of .125% are paid on the unused portion
of this facility.
On December 31, 1997, Chaparral's senior and first mortgage notes, which
restricted dividends and advances to its shareholders including the parent
company were replaced with senior notes of the Company having the same interest
rate and maturities as the Chaparral notes but with the same loan covenants as
the Company's other senior notes.
Loan agreements contain covenants which provide for minimum working
capital, restrictions on purchases of treasury stock and payment of dividends on
common stock, and limitations on incurring certain indebtedness and making
certain investments. Under the most restrictive of these agreements, the
aggregate amount of annual cash dividends on common stock is limited based on
the ratio of earnings before interest, taxes, depreciation and amortization to
fixed charges. The Company is in compliance with all loan covenant restrictions.
The amount of interest paid for the nine-month periods presented was $12.3
million in 1998 and $12.2 million in 1997. Interest capitalized totaled $2.1
million in the 1998 period.
SHAREHOLDERS' EQUITY
Common stock consists of:
<TABLE>
<CAPTION>
FEBRUARY MAY
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Shares authorized........................................... 40,000 40,000
Shares outstanding at end of period......................... 21,088 20,896
Weighted average shares outstanding assuming dilution....... 21,717 22,163
Shares held in treasury..................................... 3,979 4,171
Shares reserved for stock options and other................. 3,979 2,163
</TABLE>
F-19
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
There are authorized 100,000 shares of Cumulative Preferred Stock, no par
value, of which 20,000 shares are designated $5 Cumulative Preferred Stock
(Voting), redeemable at $105 per share and entitled to $100 per share upon
dissolution. On March 29, 1996, the Company redeemed and retired all outstanding
shares of such $5 Cumulative Preferred Stock. An additional 25,000 shares are
designated Series B Junior Participating Preferred Stock. The Series B Preferred
Stock is not redeemable and ranks, with respect to the payment of dividends and
the distribution of assets, junior to (i) all other series of the Preferred
Stock unless the terms of any other series shall provide otherwise and (ii) the
$5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996,
the Company distributed a dividend of one preferred share purchase right for
each outstanding share of the Company's Common Stock. Each right entitles the
holder to purchase from the Company one two-thousandth of a share of the Series
B Junior Participating Preferred Stock at a price of $122.50 per one
two-thousandth share of Series B Preferred Stock, subject to adjustment. The
rights will expire on November 1, 2006 unless the date is extended or the rights
are earlier redeemed or exchanged by the Company pursuant to the Rights
Agreement.
STOCK OPTION PLANS
The Company's stock option plans provide that non-qualified and incentive
stock options to purchase Common Stock may be granted to directors, officers and
key employees at market prices at date of grant. Generally, options become
exercisable in installments beginning one or two years after date of grant and
expire six or ten years later depending on the initial date of grant. A summary
of option transactions for the nine-month period ended February 28, 1998,
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES UNDER OPTION OPTION PRICE
------------------- ----------------
<S> <C> <C>
Outstanding at June 1........................... 1,797,131 $21.62
Granted....................................... 365,550 46.27
Exercised..................................... (195,454) 15.15
Canceled...................................... (44,040) 21.35
--------------- -----------
Outstanding at February 28...................... 1,923,187 $26.97
=============== ===========
</TABLE>
At February 28, 1998, there were 536,437 shares exercisable and 1,918,530
shares available for future grants. Outstanding options expire on various dates
to January 14, 2008.
INCOME TAXES
Federal income taxes for the interim periods ended February 28, 1998 and
1997, have been included in the accompanying financial statements on the basis
of an estimated annual rate. The estimated annualized tax rate is 33.1% for 1998
compared with 33.9% for 1997. The primary reason that these respective tax rates
differ from the 35% statutory corporate rate is due to goodwill expense which is
not tax deductible, percentage depletion which is tax deductible and the net
state income tax expense. The Company made income tax payments of $37.2 million
and $30.8 million in the nine-month periods ended February 28, 1998 and 1997,
respectively.
LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or by
hazardous substances or wastes used in, generated or disposed of by the Company,
the Company may be held liable for such damages and be required to pay the cost
of investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by the Company.
F-20
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The Company and subsidiaries are defendants in lawsuits which arose in the
normal course of business. In management's judgment (based on the opinion of
counsel) the ultimate liability, if any, from such legal proceedings will not
have a material effect on the consolidated financial position of the Company.
ACQUISITIONS
On December 31, 1997, the Company acquired the 15.7% separate public
ownership of Chaparral Steel Company. Pursuant to the merger agreement, the
owners of the approximately 4.5 million publicly traded shares received cash
consideration of $15.50 per share. As of February 28, 1998, $72.0 million of the
estimated $77.1 million total acquisition cost including transaction expenses
had been paid. The excess of the acquisition costs over the fair value of the
net assets acquired, approximately $34.9 million, was recorded as goodwill and
is being amortized over a 40-year period.
Effective December 31, 1997, the Company acquired Riverside Cement Company
for an estimated $115.4 million in cash and the assumption of certain
liabilities. An initial cash payment of $110.9 million was made on January 15,
1998 with the balance payable within 60 days. The estimated purchase price was
allocated to the net assets acquired based on their estimated fair values. The
fair value of tangible assets acquired and liabilities assumed was $65.8 million
and $9.1 million, respectively. The balance of the purchase price, $58.7
million, was recorded as goodwill and is being amortized over a 40-year period.
Riverside Cement Company owns and operates cement plants in Crestmore and Oro
Grande, California with distribution terminals in the northern and southern
parts of the state. The purchased manufacturing facilities are planned to be
upgraded and expanded with modern technology within existing permit limitations
and limestone reserves. The purchase is expected to increase the Company's
cement capacity by 60%.
F-21
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
No dealer, salesperson or other individual has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the Offering. If given or made, such information or
representation must not be relied upon as having been authorized by the Company
or any of the Underwriters. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the Common Stock in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of the Company since the date hereof.
TABLE OF CONTENTS
- ------------------------------------------------------
<TABLE>
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 9
Price Range of Common Stock and
Dividends........................... 10
Capitalization........................ 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 19
Underwriting.......................... 24
Legal Matters......................... 25
Experts............................... 25
Additional Information................ 25
Incorporation of Certain Documents by
Reference........................... 26
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
PROSPECTUS , 1998
[TXI LOGO]
2,900,000 Shares
TEXAS INDUSTRIES, INC.
Common Stock
SBC WARBURG DILLON READ INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
<PAGE> 52
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses expected to be incurred in
connection with the Offering described in this Registration Statement, all of
which will be paid by the Company:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 66,375
New York Stock Exchange Listing Fee......................... 10,150
NASD Filing Fee............................................. 23,000
Transfer Agent and Registrar Fees........................... 5,000
Blue Sky Fees (including counsel fees)...................... 4,000
Accountants' Services and Expenses.......................... 30,000
Legal Services and Expenses................................. 60,000
Printing and Engraving Fees................................. 125,000
Miscellaneous............................................... 26,475
--------
TOTAL............................................. $350,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
II-1
<PAGE> 53
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or to its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
Article Eleventh of the Company's Certificate of Incorporation, as amended,
provides that, to the fullest extent permitted by the Delaware General
Corporation Law, as amended from time to time, no director or former director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of fiduciary duty as a director.
In addition, Section 27 of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors, employees and agents to the
fullest extent permitted by law.
Under Section 8 of the Underwriting Agreement filed as Exhibit 1 to this
Registration Statement, the Underwriters have agreed to indemnify, under certain
conditions, the Company, its officers and directors, and persons who control the
Company within the meaning of the Securities Act of 1933, as amended, against
certain liabilities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. -- Form of Underwriting Agreement between the Company and
the Underwriters.
2. -- Agreement and Plan of Merger dated as of July 30, 1997
among Chaparral Steel Company, the Company and TXI
Acquisition Inc. (incorporated by reference to Exhibit
(c) of the Company's Schedule 13E-3/A Transaction
Statement dated November 28, 1997).
4.1 -- Certificate of Incorporation of the Company, as amended.
4.2 -- Bylaws of the Company.
4.3 -- Form of Rights Agreement dated as of November 1, 1996,
between Texas Industries, Inc. and ChaseMellon
Shareholder Services, L.L.C. (incorporated by reference
to Exhibit (4) of the Company's Form 8-K dated November
1, 1996).
5. -- Opinion of Locke Purnell Rain Harrell (A Professional
Corporation).
15. -- Letter Re: Unaudited Interim Financial Information
(incorporated by reference to Exhibit (15) of the
Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1998).
23. -- Consent of Ernst & Young LLP.
24. -- Powers of Attorney (included on signature page).
</TABLE>
(b) Financial Statement Schedule.
II-2
<PAGE> 54
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of Prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(5) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 55
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on April 20, 1998.
TEXAS INDUSTRIES, INC.
By: /s/ ROBERT D. ROGERS
----------------------------------
Robert D. Rogers
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert D. Rogers and Richard M. Fowler,
and each of them, such individual's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such individual
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and any registration statement related to the offering contemplated by
this registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
hereto, and all documents in connection therewith, with the Securities and
Exchange Commission and any state or other securities authority, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises as fully and to intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GERALD R. HEFFERNAN Chairman of the Board April 20, 1998
- -----------------------------------------------------
Gerald R. Heffernan
/s/ ROBERT D. ROGERS President and Chief Executive April 20, 1998
- ----------------------------------------------------- Officer
Robert D. Rogers
/s/ RICHARD M. FOWLER Vice President and Chief Financial April 20, 1998
- ----------------------------------------------------- Officer
Richard M. Fowler
/s/ GORDON E. FORWARD President of Chaparral Steel April 20, 1998
- ----------------------------------------------------- Company and Director
Gordon E. Forward
/s/ ROBERT ALPERT Director April 20, 1998
- -----------------------------------------------------
Robert Alpert
/s/ JOHN M. BELK Director April 20, 1998
- -----------------------------------------------------
John M. Belk
</TABLE>
II-5
<PAGE> 57
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD I. GALLAND Director April 20, 1998
- -----------------------------------------------------
Richard I. Galland
/s/ JAMES M. HOAK Director April 20, 1998
- -----------------------------------------------------
James M. Hoak
Director April , 1998
- -----------------------------------------------------
Eugenio Clariond Reyes
/s/ IAN WACHTMEISTER Director April 20, 1998
- -----------------------------------------------------
Ian Wachtmeister
/s/ ELIZABETH C. WILLIAMS Director April 20, 1998
- -----------------------------------------------------
Elizabeth C. Williams
</TABLE>
II-6
<PAGE> 58
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. -- Form of Underwriting Agreement between the Company and
the Underwriters.
2. -- Agreement and Plan of Merger dated as of July 30, 1997
among Chaparral Steel Company, the Company and TXI
Acquisition Inc. (incorporated by reference to Exhibit
(c) of the Company's Schedule 13E-3/A Transaction
Statement dated November 28, 1997).
4.1 -- Certificate of Incorporation of the Company, as amended.
4.2 -- Bylaws of the Company.
4.3 -- Form of Rights Agreement dated as of November 1, 1996,
between Texas Industries, Inc. and ChaseMellon
Shareholder Services, L.L.C. (incorporated by reference
to Exhibit (4) of the Company's Form 8-K dated November
1, 1996).
5. -- Opinion of Locke Purnell Rain Harrell (A Professional
Corporation).
15. -- Letter Re: Unaudited Interim Financial Information
(incorporated by reference to Exhibit (15) of the
Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1998).
23. -- Consent of Ernst & Young LLP.
24. -- Powers of Attorney (included on signature page).
</TABLE>
<PAGE> 1
EXHIBIT 1
TEXAS INDUSTRIES, INC.
COMMON STOCK
($1.OO Par Value)
UNDERWRITING AGREEMENT
____________, 1998
<PAGE> 2
UNDERWRITING AGREEMENT
May __, 1998
SBC Warburg Dillon Read Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
C/o SBC Warburg Dillon Read Inc.
535 Madison Avenue
New York, New York 10022
as Managing Underwriters
Dear Sirs:
Texas Industries, Inc, a Delaware corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule A (the
"Underwriters") ____________ shares (the "Firm Shares") of Common Stock, par
value $ 1.00 per share (the "Common Stock"), of the Company. In addition, solely
for the purpose of covering overallotments, the Company proposes to issue and
sell, at the Underwriters' option, up to ____________ additional shares of the
Common Stock (the "Additional Shares"). The Additional Shares and the Firm
Shares are collectively referred to as the "Shares". The Shares are described in
the Prospectus which is referred to below.
The Company has filed, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "Act"), with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3, including a prospectus,
relating to the Shares, which incorporates by reference documents that the
Company has filed in accordance with the provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (collectively,
the "Exchange Act"). The Company has furnished to you, for use by the
Underwriters and by dealers, copies of one or more preliminary prospectuses and
all documents incorporated by reference therein (collectively, the "Preliminary
Prospectus") relating to the Shares. Except where the context otherwise
requires, the registration statement as in effect at the time of execution of
this Agreement or, if the
<PAGE> 3
registration statement is not yet effective, as amended when it becomes
effective, including all documents filed as a part thereof or incorporated by
reference therein, and including any registration statement filed pursuant to
Rule 462(b) under the Act increasing the size of the offering registered under
the Act and any information contained in a prospectus subsequently filed with
the Commission pursuant to Rule 424(b) under the Act and deemed to be part of
the registration statement at the time of effectiveness pursuant to Rule 430A
under the Act, is herein called the "Registration Statement", and the
prospectus, including all documents incorporated therein by reference, in the
form filed by the Company with the Commission pursuant to Rule 424(b) under the
Act or, if no such filing is required, in the form of final prospectus included
in the Registration Statement at the time it became effective, is herein called
the "Prospectus".
The Company and the Underwriters agree as follows:
1. Sale and Purchase. On the basis of the representations and
warranties and the other terms and conditions herein set forth, the Company
agrees to sell to the respective Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company the number of
Firm Shares set forth opposite the name of such Underwriter on Schedule A, at a
purchase price of $____ per Share. You may release the Firm Shares for public
sale promptly after this Agreement becomes effective. You may from time to time
increase or decrease the public offering price after the initial public offering
to such extent as you may determine.
In addition, on the basis of the representations and
warranties and the other terms and conditions herein set forth, the Company
hereby grants to the several Underwriters an option to purchase, and the
Underwriters shall have the right to purchase, severally and not jointly, from
the Company all or a portion of the Additional Shares as may be necessary to
cover overallotments made in connection with the offering of the Firm Shares, at
the same purchase price per share to be paid by the several Underwriters to the
Company for the Firm Shares. This option may be exercised in whole or in part
from time to time on or before the thirtieth day following the date hereof, by
written notice to the Company. Any such notice shall set forth the aggregate
number of Additional Shares as to which the option is being exercised, and the
date and time when the Additional Shares are to be delivered (any such date and
time being herein referred to as an "additional time of
2
<PAGE> 4
purchase"); provided, however, that no additional time of purchase shall occur
earlier than the time of purchase (as defined below) nor earlier than the second
business day* after the date on which the option shall have been exercised nor
later than the eighth business day after the date on which the option shall have
been exercised. The number of Additional Shares to be sold to each Underwriter
at an additional time of purchase shall be the number which bears the same
proportion to the aggregate number of Additional Shares being purchased at such
additional time of purchase as the number of Firm Shares set forth opposite the
name of such Underwriter on Schedule A bears to the total number of Firm Shares
(subject, in each case, to such adjustment as you may determine to eliminate
fractional shares).
2. Payment and Delivery. Payment of the purchase price for the
Firm Shares shall be made to the Company by certified or official bank check, in
immediately available funds, at the office of SBC Warburg Dillon Read Inc. in
New York City, against delivery of the certificates for the Firm Shares to you
for the respective accounts of the Underwriters. Such payment and delivery shall
be made at 9:30 A.M., New York City time, on May __, 1998 (unless another time
shall be agreed to by you and the Company or unless postponed in accordance with
the provisions of Section 8). The time at which such payment and delivery are
actually made is called the "time of purchase". Certificates for the Firm Shares
shall be delivered to you in definitive form in such names and in such
denominations as you shall specify on the second business day preceding the time
of purchase. For the purpose of expediting the checking of the certificates for
the Firm Shares by you, the Company agrees to make such certificates available
to you for such purpose at least one full business day preceding the time of
purchase.
Payment of the purchase price for the Additional Shares shall
be made at the additional time of purchase in the same manner and at the same
office as the payment for the Firm Shares. Certificates for the Additional
Shares shall be delivered to you in definitive form in such names and in such
denominations as you shall specify on the second business day preceding the
additional time of purchase. For the purpose of expediting the checking of the
certificates for the Additional Shares by you, the Company agrees to make such
certificates available to you for such purpose at least
- --------------------------
* As used herein, "business day" shall mean a day on which the New York
Stock Exchange is open for trading.
3
<PAGE> 5
one full business day preceding the additional time of purchase.
3. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters that:
(a) Each Preliminary Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the Act; when the Registration
Statement becomes or became effective and at all times subsequent
thereto up to the time of purchase and the additional time of purchase,
the Registration Statement and the Prospectus, and any supplements or
amendments thereto, complied and will comply in all material respects
with the provisions of the Act; and the Registration Statement at all
such times did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
the Prospectus at all such times did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representation or warranty
with respect to any statement contained in the Registration Statement
or the Prospectus in reliance upon and in conformity with information
concerning the Underwriters and furnished in writing by or on behalf of
any Underwriter through you to the Company expressly for use in the
Registration Statement or the Prospectus and set forth in the section
of the Registration Statement and the Prospectus entitled
"Underwriting"; the documents incorporated by reference in the
Prospectus, at the time they were filed with the Commission, complied
in all material respects with the requirements of the Exchange Act, and
do not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) As of the date of this Agreement, the Company has an
authorized capitalization as set forth under the column entitled
"February 28, 1998 Actual" in the section of the Registration Statement
and the Prospectus entitled "Capitalization" and, as of the time of
purchase, the capitalization of the Company
4
<PAGE> 6
will be as set forth under the column entitled " February 28, 1998 As
Adjusted" in the section of the Registration Statement and the
Prospectus entitled "Capitalization"; all of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and
are free of statutory and contractual preemptive rights.
(c) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full power and authority to (i) own its properties and
conduct its business as described in the Registration Statement and the
Prospectus and (ii) execute and deliver this Agreement and to issue,
sell and deliver the Shares as herein contemplated.
(d) All of the issued and outstanding shares of capital stock
of each of the subsidiaries of the Company and all of the outstanding
partnership interests of each partnership operated by the Company
(collectively referred to as the "Subsidiaries") are owned directly by
the Company; all of such shares have been duly authorized and validly
issued and are fully paid and (except for general partnership
interests) nonassessable and, except as described in the Prospectus,
are owned free and clear of any pledge, lien, encumbrance, security
interest or other claim; there are no outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other
agreements of any kind with respect to the capital stock of any of the
Subsidiaries].
(e) Each of the Subsidiaries has been duly formed and is
validly existing as a corporation or partnership, as the case may be,
in good standing under the laws of its respective jurisdiction of
incorporation or organization, with full power and authority to own its
respective properties and to conduct its respective businesses.
(f) Each of the Company and each of the Subsidiaries is duly
qualified or licensed by and is in good standing in each jurisdiction
in which it owns or leases property or conducts its business and in
each other jurisdiction in which the failure, individually or in the
aggregate, to be so qualified or licensed could have a material adverse
effect on the properties, assets, operations, business, business
prospects or condition (financial or other) of the Company and the
Subsidiaries taken as a whole; each of the Company and each of the
Subsidiaries is in compliance in all material respects with the laws,
orders, rules,
5
<PAGE> 7
regulations and directives issued or administered by each such
jurisdiction.
(g) Neither the Company nor any of the Subsidiaries is in
breach of, or in default under (nor has any event occurred which with
notice, lapse of time or both would constitute a breach of, or default
under), its charter or bylaws, or in the performance or observance of
any obligation, agreement, covenant or condition contained in any
license, indenture, lease, mortgage, deed of trust, bank loan or credit
agreement, material supply agreement or other agreement or instrument
to which the Company or any of the Subsidiaries is a party or by which
any of them may be bound or affected. The execution, delivery and
performance of this Agreement, the issuance and sale of the Shares, the
application of the net proceeds thereof as described in the Prospectus
and the consummation of the transactions contemplated hereby will not
conflict with, or result in any breach of or constitute a default under
(nor constitute any event which with notice, lapse of time or both
would constitute a breach of, or default under), the charter or bylaws
of the Company or any of the Subsidiaries or under any provision of any
license, indenture, lease, mortgage, deed of trust, bank loan or credit
agreement, material supply agreement or other agreement or instrument
to which the Company or any of the Subsidiaries is a party or by which
any of them or their properties may be bound or affected, or under any
federal, state, local or foreign law, regulation or rule or any decree,
judgment or order applicable to the Company or any of the Subsidiaries.
(h) The Firm Shares and the Additional Shares, when issued and
delivered to and paid for by the Underwriters as contemplated hereby,
will be duly authorized and validly issued and fully paid and
nonassessable, free and clear of any pledge, lien, encumbrance,
security interest, preemptive right or other claim.
(i) This Agreement has been duly authorized, executed and
delivered by the Company.
(j) The capital stock of the Company, including the Shares,
conforms in all material respects to the description thereof contained
in the Registration Statement and the Prospectus; and the certificates
for the Shares are in due and proper form and the holders of the Shares
after making payment therefor will not be subject to personal liability
by reason of being such holders.
6
<PAGE> 8
(k) No approval, authorization, consent or order of or filing
with any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency is required in connection
with the issuance and sale of the Shares as contemplated hereby, other
than registration of the Shares under the Act, clearance of the
offering of the Shares with the National Association of Securities
Dealers, Inc. (the "NASD") and any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters.
(l) No person has the right, contractual or otherwise, to
cause the Company to issue to it, or register pursuant to the Act, any
securities of the Company in consequence of the issue and sale of the
Shares to the Underwriters hereunder.
(m) Ernst & Young LLP, whose reports on the consolidated
financial statements of the Company and the Subsidiaries are included
or incorporated by reference in the Registration Statement and the
Prospectus, are independent public accountants with respect to the
Company as required by the Act and the applicable published rules and
regulations thereunder.
(n) All legal or governmental proceedings, contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed as required.
(o) There is no action, suit or proceeding pending or
threatened against the Company or any of the Subsidiaries or any of
their properties, at law or in equity, or before or by any federal,
state, local or foreign governmental or regulatory commission, board,
body, authority or agency that could result in a judgment, decree or
order having a material adverse effect on the properties, assets,
operations, business, business prospects or condition (financial or
other) of the Company and the Subsidiaries taken as a whole.
(p) The audited and unaudited financial statements included in
the Registration Statement and the Prospectus present fairly the
consolidated financial condition of the Company and the Subsidiaries as
of the dates indicated and the consolidated results of operations and
cash flows of the Company and the Subsidiaries for the periods
specified; such financial statements have been prepared in conformity
with
7
<PAGE> 9
generally accepted accounting principles applied on a consistent
basis during the periods involved.
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as may be otherwise stated in the Registration Statement or the
Prospectus, there has not been: (A) any material adverse change in the
properties, assets, operations, business, business prospects or
condition (financial or other), present or prospective, of the Company
and the Subsidiaries taken as a whole; (B) any transaction, that is
material to the Company and the Subsidiaries taken as a whole,
contemplated or entered into by the Company or any of the Subsidiaries;
or (C) any obligation, contingent or otherwise, directly or indirectly
incurred by the Company or any of the Subsidiaries that is material to
the Company and the Subsidiaries taken as a whole.
[(r) The Company has obtained the agreement of the
shareholders listed on Schedule B not to sell, contract to sell, grant
any option to sell, transfer or otherwise dispose of, directly or
indirectly, any shares of Common Stock, or securities convertible into
or exchangeable for Common Stock or warrants or other rights to
purchase Common Stock, for a period of 90 days from the date of the
Prospectus without the prior written consent of SBC Warburg Dillon Read
Inc.--TO BE DISCUSSED]
(s) Neither the Company nor any of the Subsidiaries has
violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, nor any provisions of
the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in
any material adverse effect on the properties, assets, operations,
business, business prospects or condition (financial or other) of the
Company and the Subsidiaries taken as a whole.
(t) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including without limitation under any
applicable Environmental Laws, as are necessary to own, lease and
8
<PAGE> 10
operate its respective properties and to conduct its business; the
Company and each of the Subsidiaries has fulfilled and performed all of
its material obligations with respect to such permits and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit; and, except
as described in the Prospectus, such permits contain no restrictions
that are materially burdensome to the Company or any of the
Subsidiaries.
(u) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and the
Subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including without limitation any
capital or operating expenditure required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review,
the Company reasonably has concluded that such associated costs and
liabilities, singly or in the aggregate, would not have a material
adverse effect on the properties, assets, operations, business,
business prospects or condition (financial or other) of the Company and
the Subsidiaries taken as a whole.
(v) Neither the Company nor any of the Subsidiaries, nor any
employee of the Company or any of the Subsidiaries, has made any
payment of funds of the Company or any of the Subsidiaries prohibited
by law, and no funds of the Company or any of the Subsidiaries have
been set aside to be used for any payment prohibited by law.
(w) The Company and the Subsidiaries have filed all federal or
state income or franchise tax returns required to be filed and have
paid all taxes shown thereon as due, and there is no material tax
deficiency which has been or might be asserted against the Company or
any of the Subsidiaries; all material tax liabilities are adequately
provided for on the books of the Company and the Subsidiaries.
(x) The Company and the Subsidiaries have good title to all
properties and assets owned or leased by them, in each case free and
clear of all liens, security interests, pledges, charges, encumbrances,
mortgages and defects (except such as are described or referred to in
the Prospectus and the financial statements and the notes thereto
contained therein or
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<PAGE> 11
such as do not interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries).
(y) Neither the Company nor any of the Subsidiaries is an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, or is subject to regulation under such Act.
4. Certain Covenants of the Company. The Company hereby
agrees:
(a) to furnish such information as may be required and
otherwise to cooperate in qualifying the Shares for offering and sale
under the securities or blue sky laws of such states as you may
designate and to maintain such qualifications in effect as long as
required for the distribution of the Shares, provided that the Company
shall not be required to qualify as a foreign corporation or to consent
to the service of process under the laws of any such state (except
service of process with respect to the offering and sale of the
Shares); promptly to advise you of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and to use its best efforts to obtain
the withdrawal of any order of suspension at the earliest practicable
moment;
(b) to make available to you in New York City, as soon as
practicable after the Registration Statement becomes effective, and
thereafter from time to time to furnish to the Underwriters, as many
copies of the Prospectus (or of the Prospectus as amended or
supplemented if the Company shall have made any amendment or supplement
thereto after the effective date of the Registration Statement) as the
Underwriters may request for the purposes contemplated by the Act;
(c) to advise you promptly and if requested by you to confirm
such advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes
effective and (ii) when the Prospectus is filed with the Commission
pursuant to Rule 424(b) under the Act, if required under the Act (which
the Company agrees to file in a timely manner under such Rule);
(d) to advise you promptly, confirming such advice in writing,
of any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information
with respect thereto, or of notice of institution of
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<PAGE> 12
proceedings for or the entry of a stop order suspending the
effectiveness of the Registration Statement and, if the Commission
should enter a stop order suspending the effectiveness of the
Registration Statement, to use its best efforts to obtain the lifting
or removal of such order as soon as possible; to advise you promptly
of any proposal to amend or supplement the Registration Statement or
the Prospectus, including by filing any document that would be
incorporated therein by reference, and to file no such amendment or
supplement to which you shall object in writing;
(e) to furnish to you and, upon request to each of the other
Underwriters, for a period of five years from the date of this
Agreement (i) copies of all reports or other communications that the
Company shall send to its shareholders or from time to time shall
publish or publicly disseminate and (ii) copies of all annual,
quarterly and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar form as may be designated by the
Commission, and any other document filed by the Company pursuant to
Section 12, 13, 14 or 15(d) of the Exchange Act;
(f) to advise the Underwriters promptly of the happening of
any event known to the Company within the time during which a
prospectus relating to the Shares is required to be delivered under the
Act that, in the reasonable judgment of the Company, would require the
making of any change in the Prospectus then being used, or in the
information incorporated therein by reference, so that the Prospectus,
as then supplemented, would not include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
are made, not misleading and, during such time, promptly to prepare and
furnish, at the Company's expense, to the Underwriters such amendments
or supplements to such Prospectus as may be necessary to reflect any
such change in such quantities as requested by the Underwriters, and to
furnish to you a copy of such proposed amendment or supplement before
filing any such amendment or supplement with the Commission;
(g) to make generally available to its security holders, and
to deliver to you, an earnings statement of the Company (which need not
be audited and which will satisfy the provisions of Section 11(a) of
the Act including, at the option of the Company, Rule 158) covering a
period of 12 months beginning after the effective date of the
Registration Statement but ending not later than 15 months after the
date of the Registration Statement, as soon as is reasonably
11
<PAGE> 13
practicable after the termination of such 12-month period;
(h) to furnish to you four signed copies of the Registration
Statement, as initially filed with the Commission, and of all
amendments thereto (including all exhibits thereto and documents
incorporated by reference therein) and sufficient conformed copies of
the foregoing (other than exhibits) for distribution of a copy to each
of the other Underwriters;
(i) to furnish to you as early as practicable prior to the
time of purchase and the additional time of purchase, as the case may
be, but not later than two business days prior thereto, a copy of the
latest available unaudited interim consolidated financial statements,
if any, of the Company and the Subsidiaries that have been read by the
Company's independent certified public accountants as stated in their
letter to be furnished pursuant to Section 6(b);
(j) to apply the net proceeds from the sale of the Shares in
the manner set forth under the caption "Use of Proceeds" in the
Registration Statement and the Prospectus;
(k) to use its best efforts to cause the Shares to be
included in the Nasdaq National Market;
(l) whether or not the transactions contemplated in this
Agreement are consummated or this Agreement otherwise becomes effective
or is terminated, to pay all expenses, fees and taxes (other than (x)
any transfer taxes and (y) fees and disbursements of your counsel
except as set forth under Section 5 and clauses (iii) and (iv) below)
in connection with (i) the preparation and filing of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any
amendment or supplement thereto, and the printing and furnishing of
copies of each thereof to you and to dealers (including costs of
mailing and shipment), (ii) the issuance, sale and delivery of the
Shares, (iii) the word processing or printing of this Agreement and any
dealer agreements, and the reproduction or printing and furnishing of
copies of each thereof to you and to dealers (including costs of
mailing and shipment), (iv) the qualification of the Shares for
offering and sale under state laws as aforesaid (including legal fees
and filing fees and other disbursements of your counsel) and the
printing and furnishing of copies of any blue sky surveys to you and to
dealers, (v) any listing of the Shares on any securities exchange or
qualification of the Shares for inclusion in the Nasdaq National Market
and any
12
<PAGE> 14
registration thereof under the Exchange Act, (vi) any filing
for review of the public offering of the Shares by the NASD and (viii)
the performance of the Company's other obligations hereunder;
[(m) not to sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly, any shares of
Common Stock or securities convertible into or exchangeable for Common
Stock or warrants or other rights to purchase Common Stock or permit
the registration under the Act of any shares of Common Stock, except
for the registration of the Shares and the sales to you pursuant to
this Agreement for a period commencing on the date hereof and
continuing for 90 days after the date of the Prospectus, without the
prior written consent of SBC Warburg Dillon Read Inc.;--TO BE
DISCUSSED] and
(n) to refrain from investing the proceeds from the sale of
the Shares in a manner to cause the Company or any of the Subsidiaries
to become an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
5. Reimbursement of Underwriters' Expenses. If the Firm Shares
or the Additional Shares are not delivered for any reason, other than the
failure of the Underwriters to purchase the Firm Shares or the Additional Shares
as provided herein (unless such failure is permitted under the provisions of
Section 6 or Section 7(b) of this Agreement), the Company will reimburse the
Underwriters for all of their out-of-pocket expenses, including the fees and
disbursements of their counsel.
6. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties on the part of the Company on the date hereof and
at the time of purchase (and the several obligations of the Underwriters at any
additional time of purchase are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the time of
purchase and at such additional time of purchase, as the case may be), the
performance by the Company of its obligations hereunder and to the following
conditions:
(a) The Company shall furnish to you at the time of purchase
and at such additional time of purchase, as the case may be, an opinion
of Locke Purnell Rain Harrell (A Professional Corporation), counsel for
the Company, addressed to the Underwriters and dated the time of
purchase or such additional time of purchase, as the case may be, with
reproduced copies for each of
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<PAGE> 15
the other Underwriters and in form satisfactory to Gibson, Dunn &
Crutcher LLP, counsel for the Underwriters, stating that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with full corporate power and
authority (A) to own its properties and conduct its business
as described in the Registration Statement and the Prospectus
and (B) to execute and deliver this Agreement and to issue,
sell and deliver the Shares as herein contemplated;
(ii) each of the Subsidiaries has been duly formed
and is validly existing as a corporation or partnership, as
the case may be, in good standing under the laws of the state
in which such Subsidiary is incorporated or organized, with
full power and authority to own its properties and to conduct
its business as described in the Registration Statement and
the Prospectus];
(iii) each of the Company and each of the Subsidiaries
is duly qualified or licensed to do business by and is in good
standing as a foreign corporation in each jurisdiction in
which it conducts business or owns property and in which the
failure, individually or in the aggregate, to be so licensed
or qualified could have a material adverse effect on the
properties, assets, operations, business, business prospects
or condition (financial or other) of the Company and the
Subsidiaries taken as a whole;
(iv) all of the issued and outstanding shares of
capital stock of each Subsidiary have been duly authorized and
validly issued and are fully paid and nonassessable and,
except as set forth in the Prospectus, are owned, directly or
indirectly, by the Company free and clear of any pledge, lien,
encumbrance, security interest, preemptive right or other
claim, and there are no rights, warrants, options or other
agreements to acquire or instruments convertible into or
exchangeable for any shares of capital stock or other equity
interest of any Subsidiary, except as set forth in the
Prospectus;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) (a) the Shares, when issued and delivered to and
paid for by the Underwriters,
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<PAGE> 16
will be duly authorized, validly issued, fully paid
and nonassessable, and will be free of any pledge, lien,
encumbrance, claim or preemptive right; and (b) the
certificates for the Shares are in due and proper form and
the holders of the Shares will not be subject to personal
liability by reason of being such holders;
(vii) (a) the Company has an authorized capitalization
as set forth under the heading "Capitalization" in the
Registration Statement and the Prospectus, and (b) the
outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid,
nonassessable and free of statutory and contractual preemptive
rights;
(viii) the capital stock of the Company, including the
Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and the
Prospectus;
(ix) the Registration Statement and the Prospectus
(except as to the financial statements and schedules contained
or incorporated by reference therein as to which such counsel
need express no opinion) comply as to form in all material
respects with the requirements of the Act;
(x) the Registration Statement has become effective
under the Act and, to the best of such counsel's knowledge, no
stop order proceedings with respect thereto are pending or
threatened under the Act;
(xi) no approval, authorization, consent or order of
or filing with any federal, state, local or foreign
governmental or regulatory commission, board, body, authority
or agency is required in connection with the issuance or sale
of the Shares as contemplated hereby other than registration
of the Shares under the Act (except such counsel need express
no opinion as to any necessary qualification under the state
securities or blue sky laws of the various jurisdictions in
which the Shares are being offered by the Underwriters);
(xii) the execution, delivery and performance of this
Agreement by the Company, the issuance and sale of the Shares,
the application of the net proceeds thereof as described in
the Prospectus and the consummation by the Company of the
transactions contemplated hereby do not and will
15
<PAGE> 17
not conflict with, or result in any breach of, or constitute a
default under (nor constitute any event which with notice,
lapse of time or both would constitute a breach of or default
under), the charter or bylaws of the Company or any of the
Subsidiaries, or any provision of any license, indenture,
lease, mortgage, deed of trust, bank loan or credit agreement
or other agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries or their properties are bound or affected,
or under any federal, state, local or foreign law, regulation
or rule or any decree, judgment or order applicable to the
Company or any of the Subsidiaries;
(xiii) to the best of such counsel's knowledge, neither
the Company nor any of the Subsidiaries is in breach of or in
default under (nor has any event occurred which with notice,
lapse of time or both would constitute a breach of or default
under) any license, indenture, lease, mortgage, deed of trust,
bank loan or credit agreement or any other agreement or
instrument to which the Company or any of the Subsidiaries is
a party or by which the Company or any of the Subsidiaries or
their properties are bound or affected or under any law,
regulation or rule or any decree, judgment or order applicable
to the Company or any of the Subsidiaries, except for such
matters as could not, individually or in the aggregate, have a
material adverse effect on the properties, assets, operations,
business, business prospects or condition (financial or other)
of the Company and the Subsidiaries taken as a whole;
(xiv) to the best of such counsel's knowledge, after
due inquiry, neither the Company nor any of the Subsidiaries
has violated any Environmental Laws, nor any federal or state
law relating to discrimination in the hiring, promotion or pay
of employees nor any applicable federal or state wages and
hours laws, nor any provisions of the Employee Retirement
Income Security Act or the rules and regulations promulgated
thereunder, which in each case might result in any material
adverse effect on the properties, assets, operations,
business, business prospects or condition (financial or other)
of the Company and the Subsidiaries taken as a whole;
(xv) the Company and each of the Subsidiaries has
such permits, licenses, franchises and authorizations of
governmental or regulatory
16
<PAGE> 18
authorities ("permits"), including without limitation under
any applicable Environmental Laws, as are necessary to own,
lease and operate its respective properties and to conduct its
business in the manner described in the Prospectus; to the
best of such counsel's knowledge, after due inquiry, the
Company and each of the Subsidiaries has fulfilled and
performed all of its material obligations with respect to such
permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the
rights of the holder of any such permit, subject in each case
to such qualification as may be set forth in the Prospectus;
and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the
Company or any of the Subsidiaries;
(xvi) all contracts or documents of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration
Statement have been so described or filed;
(xvii) except as described in the Registration
Statement and the Prospectus, there are no actions, suits or
proceedings of which such counsel has knowledge pending or
threatened against the Company or any of the Subsidiaries, or
any of their respective properties, at law or in equity, or
before or by any federal, state, local or foreign governmental
or regulatory commission, board, body, authority or agency
that individually or in the aggregate could result in a
judgment, decree or order having a material adverse effect on
the properties, assets, operations, business, business
prospects or condition (financial or other) of the Company and
the Subsidiaries taken as a whole;
(xviii) the documents incorporated by reference in the
Registration Statement and Prospectus, when they were filed
(or, if an amendment with respect to any such document was
filed, when such amendment was filed), complied as to form in
all material respects with the Exchange Act (except as to the
financial statements and schedules and other financial and
statistical data contained or incorporated by reference
therein, as to which such counsel need express no opinion);
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<PAGE> 19
(xix) to the best of such counsel's knowledge, no
person has the right, contractual or otherwise, to cause the
Company to issue to it, or register pursuant to the Act, any
securities of the Company in consequence of the issue and sale
of the Shares to the Underwriters hereunder;
(xx) the statements in the Registration Statement and
the Prospectus under the captions "Business -Regulation",
"Description of Capital Stock" and "Shares Eligible For Future
Sale", insofar as they are descriptions of laws, regulations
and rules, of legal and governmental proceedings or of
contracts, agreements, leases and other legal documents, or
refer to statements of law or legal conclusions, have been
reviewed by such counsel and are accurate in all material
respects;
(xxi) neither the Company nor any of the Subsidiaries
is an "investment company" or a person "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended; and
(xxii) nothing has come to the attention of such
counsel that causes them to believe that the Registration
Statement or any amendment thereto at the time such
Registration Statement or amendment became effective contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the
Prospectus or any supplement thereto at the date of such
Prospectus or such supplement, and at all times up to and
including the time of purchase contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such
counsel need express no opinion with respect to the financial
statements and schedules included in the Registration
Statement or Prospectus).
(b) You shall have received from Ernst & Young LLP letters
dated, respectively, the date of this Agreement and the time of
purchase and additional time of purchase, as the case may be, and
addressed to the Underwriters (with reproduced copies for each of the
Underwriters) in form and substance satisfactory to you.
18
<PAGE> 20
(c) You shall have received at the time of purchase and at the
additional time of purchase, as the case may be, opinions from Gibson,
Dunn & Crutcher LLP in form and substance satisfactory to you.
(d) No amendment or supplement to the Registration Statement
or the Prospectus, including documents deemed to be incorporated by
reference therein, shall be filed prior to the time the Registration
Statement becomes effective to which you shall have objected in
writing.
(e) The Registration Statement shall become effective at or
before 5:00 P.M., New York City time, on the date of this Agreement
and, if Rule 430A under the Act is used, the Prospectus shall have been
filed with the Commission pursuant to Rule 424(b) under the Act at or
before 5:00 P.M., New York City time, on the second full business day
after the date of this Agreement; provided, however, that the Company
and you and any group of Underwriters, including you, who have agreed
hereunder to purchase in the aggregate at least 50% of the Firm Shares
from time to time may agree in writing or by telephone, confirmed in
writing, on a later date.
(f) Prior to the time of purchase or the additional time of
purchase, as the case may be: (i) no stop order with respect to the
effectiveness of the Registration Statement shall have been issued
under the Act or proceedings initiated under Section 8(d) or 8(e) of
the Act; (ii) the Registration Statement and all amendments thereto, or
modifications thereof, if any, shall not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and
(iii) the Prospectus and all amendments or supplements thereto, or
modifications thereof, if any, shall not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Between the time of execution of this Agreement and the
time of purchase or the additional time of purchase, as the case may
be, there has not been: (i) any material and adverse change, present or
prospective, in the properties, assets, operations, business, business
prospects or condition (financial or other) of the Company and the
Subsidiaries taken as a whole, other than as described in the
Registration Statement and the Prospectus; (ii) any transaction that is
material to the Company and the Subsidiaries taken as a whole
contemplated or entered into by the Company or any of the Subsidiaries,
other than as described in the Registration
19
<PAGE> 21
Statement and the Prospectus; or (iii) any obligation, contingent or
otherwise, directly or indirectly, incurred by the Company or any of
the Subsidiaries that is material to the Company and the Subsidiaries
taken as a whole, other than as described in the Registration Statement
and the Prospectus.
(h) The Company, at the time of purchase or additional time of
purchase, as the case may be, will deliver to you a certificate of two
of its executive officers to the effect that the representations and
warranties of the Company as set forth in this Agreement are true and
correct as of each such date and the conditions set forth in Section
6(f) and Section 6(g) have been met.
(i) You shall have received a signed letter, dated the date of
this Agreement, from each of the shareholders listed in Schedule B to
the effect that such persons shall not sell, contract to sell, grant
any option to sell, transfer or otherwise dispose of, directly or
indirectly, any shares of Common Stock or securities convertible into
or exchangeable for Common Stock or warrants or other rights to
purchase Common Stock for a period of [180] days from the date of the
Prospectus without the prior written consent of SBC Warburg Dillon Read
Inc.
(j) The Company shall have furnished to you such other
documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement or the Prospectus as of the
time of purchase and the additional time of purchase, as the case may
be, as you reasonably may request.
(k) The Company shall have performed such of its obligations
under this Agreement as are to be performed by the terms hereof at or
before the time of purchase and at or before the additional time of
purchase, as the case may be.
(l) The Shares shall have been approved for quotation through
the Nasdaq National Market.
7. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective (i) if Rule 430A
under the Act is not used, when you shall have received notification of
the effectiveness of the
20
<PAGE> 22
Registration Statement, or (ii) if Rule 430A under the Act is used,
when the parties hereto have executed and delivered this Agreement.
(b) The obligations of the several Underwriters hereunder
shall be subject to termination in the absolute discretion of you or
any group of Underwriters (which may include you) which has agreed to
purchase in the aggregate at least 50% of the Firm Shares if, at any
time prior to the time of purchase or, with respect to the purchase of
any Additional Shares, the additional time of purchase, as the case may
be, trading in securities on the New York Stock Exchange shall have
been suspended or minimum prices shall have been established on the New
York Stock Exchange or if a banking moratorium shall have been declared
either by the United States or New York State authorities, or if the
United States shall have declared war in accordance with its
constitutional processes or there shall have occurred any material
outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each
case, in your judgment or in the judgment of such group of
Underwriters, makes it impracticable to market the Shares. If you or
any group of Underwriters elect to terminate this Agreement as provided
in this Section 7(b), the Company and each other Underwriter shall be
notified promptly by letter or telegram.
(c) If any Underwriter shall default in its obligation to take
up and pay for the Firm Shares to be purchased by it hereunder and if
the number of Firm Shares which all Underwriters so defaulting shall
have agreed but failed to take up and pay for does not exceed 10% of
the total number of Firm Shares, the non-defaulting Underwriters shall
take up and pay for (in addition to the aggregate principal amount of
Firm Shares they are obligated to purchase pursuant to Section 1) the
number of Firm Shares agreed to be purchased by all such defaulting
Underwriters as hereinafter provided. Such Shares shall be taken up and
paid for by such non-defaulting Underwriter or Underwriters in such
amount or amounts as you may designate with the consent of each
Underwriter so designated or, in the event no such designation is made,
such Shares shall be taken up and paid for by all non-defaulting
Underwriters pro rata in proportion to the aggregate number of Firm
Shares set opposite the names of such non-defaulting Underwriters in
Schedule A.
(d) If any Underwriter shall default in its obligation to take
up and pay for the Firm Shares to be
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<PAGE> 23
purchased by it hereunder and if the number of Firm Shares which all
Underwriters so defaulting shall have agreed but failed to take up and
pay for exceeds 10% of the total number of Firm Shares, and
arrangements satisfactory to you and the Company are not made within 48
hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter.
(e) Without relieving any defaulting Underwriter from its
obligations hereunder, the Company agrees with the non-defaulting
Underwriters that it will not sell any Firm Shares hereunder unless all
of the Firm Shares are purchased by the Underwriters (or by substituted
underwriters selected by you with the approval of the Company or
selected by the Company with your approval pursuant to Section 7(d)).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter or Underwriters in accordance with Section 7(d), the
Company or you shall have the right to postpone the time of purchase
for a period not exceeding five business days in order that any
necessary change in the Registration Statement and the Prospectus and
other documents may be effected. The term Underwriter as used in this
Agreement shall refer to and include any Underwriter substituted under
this Section 7 with like effect as if such substituted Underwriter had
originally been named in Schedule A.
(f) If the purchase of the Shares by the Underwriters, as
contemplated by this Agreement, is not consummated for any reason
permitted under this Agreement or if such purchase is not consummated
because the Company shall be unable to comply with any of the terms of
this Agreement, the Company shall not be under any obligation or
liability under this Agreement (except to the extent provided in
Sections 4(l), 5 and 8), and the Underwriters shall be under no
obligation or liability to the Company under this Agreement (except to
the extent provided in Section 8).
8. Indemnity by the Company and the Underwriters.
(a) The Company agrees to indemnify, defend and hold harmless
each Underwriter, each person that controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and
each Underwriter's agents, employees, officers and directors and the
agents, employees, officers and directors of any such controlling
person (collectively, the "Underwriter indemnified parties") from and
against any and all losses, claims, damages, judgments,
22
<PAGE> 24
liabilities and expenses (including the fees and expenses of counsel
and other expenses in connection with investigating, defending or
settling any such action or claim) which, jointly or severally, any
Underwriter indemnified party may incur as they are incurred (and
regardless of whether such Underwriter indemnified party is a party to
the litigation, if any) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in
the registration statement relating to the Shares or the Prospectus or
any Preliminary Prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, judgments,
liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or alleged untrue statement or omission
based upon and in conformity with information with respect to any
Underwriter furnished in writing by any Underwriter through you to the
Company expressly for use therein with reference to such Underwriter.
This indemnity agreement will be in addition to any liability the
Company otherwise may have.
(b) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any Underwriter indemnified party, with respect to which
indemnity may be sought against the Company pursuant to this Section 8,
such Underwriter indemnified party shall promptly notify the Company in
writing, and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Underwriter
indemnified party and payment of all fees and expenses; provided that
the omission so to notify the Company shall not relieve it from any
liability that it may have to any Underwriter indemnified party. An
Underwriter indemnified party shall have the right to employ separate
counsel in any such action or proceeding and to assume the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter indemnified party unless (i) the employment
of such counsel has been authorized in writing by the Company, (ii) the
Company has failed promptly to assume the defense and employ counsel
satisfactory to the Underwriter indemnified party or (iii) the named
parties to any such action or proceeding (including any impleaded
parties) include both the Underwriter indemnified party and the Company
and such Underwriter indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it that are
different from
23
<PAGE> 25
or additional to those available to the Company (in which case the
Company shall not have the right to assume the defense of such action
on behalf of such Underwriter indemnified party), in any of which
events such fees and expenses shall be borne by the Company and
reimbursed as they are incurred. It is understood, however, that the
Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) at any time for all such Underwriter
indemnified parties, which firm shall be designated in writing by SBC
Warburg Dillon Read Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The Company shall not be liable for
any settlement of any such action effected without the written consent
of the Company (which consent shall not be unreasonably withheld or
delayed), but if settled with the written consent of the Company, or if
there is a final judgment with respect thereto, the Company agrees to
indemnify and hold harmless each Underwriter indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(c) Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, its officers who sign the
Registration Statement, and any person that controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the "Company indemnified parties") to the same extent as
the foregoing indemnity from the Company to the Underwriter indemnified
parties, but only with respect to information concerning such
Underwriter furnished in writing by or on behalf of such Underwriter
through you to the Company expressly for use with respect to such
Underwriter in the Registration Statement, any Preliminary Prospectus
or the Prospectus. In case any action shall be brought against any
Company indemnified party based on the Registration Statement, any
Preliminary Prospectus or the Prospectus and in respect of which
indemnity may be sought against any Underwriter pursuant to this
Section 8(c), such Underwriter shall have the rights and duties given
to the Company by Section 8(b) (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to
do so, but may employ separate counsel therein and participate in the
defense thereof, provided that the fees and expenses of such separate
counsel shall be at the expense of such Underwriter), and the Company
indemnified parties shall have the rights and duties
24
<PAGE> 26
given to the Underwriter indemnified parties by Section 8(b).
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless any Underwriter
indemnified party or any Company indemnified party, then the party
required to indemnify such indemnified party under this Section 8, in
lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, judgments, liabilities and expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriters on the other hand
shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue statement or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or
by the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
losses, claims, damages, judgments, liabilities and expenses referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any claim or action.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation
25
<PAGE> 27
(even if the Underwriters were treated as one entity for such purpose)
that does not take account of the equitable considerations referred to
in this Section 8(d). Notwithstanding the provisions of this Section
8(d), no Underwriter indemnified party shall be required to contribute
any amount in excess of the amount by which the total price at which
the Shares underwritten by such Underwriter indemnified party and
distributed to the public were offered to the public exceeds the amount
of any damages which such Underwriter indemnified party otherwise has
been required to pay by reason of such untrue statement or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 8 are several in
proportion to their respective underwriting commitments and are not
joint.
The statements under the caption "Underwriting" in the
Prospectus (to the extent such statements relate to an Underwriter)
constitute the only information furnished to the Company in writing by
such Underwriter expressly for use in the Registration Statement, any
Preliminary Prospectus or the Prospectus.
(e) The indemnity and contribution agreements contained in
this Section 8 and the representations, warranties and covenants of the
Company contained in this Agreement shall remain in full force and
effect, regardless of any investigation made by or on behalf of any
Underwriter indemnified party or by or on behalf of any Company
indemnified party, and shall survive any termination of this Agreement
or the issuance and delivery of the Shares. Subject to the provisions
of Section 8(b) and Section 8(c), the Company and each Underwriter
agree promptly to notify the other of the commencement of any
litigation or proceeding against it in connection with the issuance and
sale of the Shares or in connection with the Registration Statement or
the Prospectus.
9. Notices. Except as otherwise herein provided, all
statements, requests, notices and agreements shall be in writing or by telegram
and, if to the Underwriters, shall be sufficient in all respects if delivered or
sent to SBC Warburg Dillon Read Inc., 535 Madison Avenue, New York, New York
10022, Attention: Syndicate Department; and if to the Company, shall be
sufficient in all respects if delivered or sent to the Company at the offices of
the Company at 1341
26
<PAGE> 28
West Mockingbird Lane, Dallas, Texas 75247-6700, Attention:
Robert C. Moore.
10. Construction. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. THE SECTION HEADINGS IN THIS AGREEMENT HAVE
BEEN INSERTED AS A MATTER OF CONVENIENCE OF REFERENCE AND ARE NOT A PART OF THIS
AGREEMENT.
11. Parties at Interest. The Agreement herein set forth has
been and is made solely for the benefit of the Underwriters, the Company, the
Underwriter indemnified parties and the Company indemnified parties, and their
respective successors, assigns, executors and administrators. No other person,
partnership, association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have any right under
or by virtue of this Agreement.
12. Counterparts. This Agreement may be signed by the parties
in counterparts which together shall constitute one and the same agreement among
the parties.
27
<PAGE> 29
If the foregoing correctly sets forth the understanding among
the Company and the Underwriters, please so indicate in the space provided below
for such purpose, whereupon this letter and your acceptance shall constitute a
binding agreement among the Company and the Underwriters, severally.
Very truly yours,
TEXAS INDUSTRIES, INC.
By:
------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written,
on behalf of themselves,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated
and the other several
Underwriters named in
Schedule A
SBC WARBURG DILLON READ INC., as
Managing Underwriter
By:
--------------------------------
Name:
Title:
28
<PAGE> 30
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Underwriter Firm Shares
- ----------- -----------
<S> <C>
Dillon, Read & Co. Inc . . . . . . . . . . .
Merrill Lynch, Pierce, Fenner & Smith Incorporated. . .
Morgan Stanley & Co. Incorporated
-----------
Total ____________
</TABLE>
<PAGE> 31
SCHEDULE B
SHAREHOLDERS WHO HAVE EXECUTED LOCK-UP AGREEMENTS
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
TEXAS INDUSTRIES, INC.
First. The name of this corporation is TEXAS INDUSTRIES, INC.
Second. Its principal office in the State of Delaware is to be located at
900 Market Street, in the City of Wilmington, County of New Castle, and its
resident agent is Corporation Service Company, 900 Market Street, Wilmington,
Delaware.
Third. The nature of the business of the corporation and the objects and
purposes to be transacted, promoted and carried on are as follows:
1. To transact any manufacturing or mining business and to purchase and
sell goods, wares and merchandise used for such business; to engage in the
business of producing, mining, manufacturing, buying and selling of building
materials of all kinds; to establish and maintain an oil business with
authority to contract for the lease and purchase of the right to prospect for,
develop and use coal and other minerals, petroleum and gas; also the right to
erect, build and own all necessary oil tanks, cars and pipes necessary for the
operation of the business of the same; to establish and maintain a drilling
business with authority to own and operate drilling rigs, machinery, tools and
apparatus necessary in the boring or otherwise sinking of wells in the
production of oil, gas or water, or either, and the purchase and sale of such
goods, wares and merchandise used for such business; to engage in the business
of storing, transporting, buying and selling oil, gas, salt, brine and other
mineral solutions and liquefied minerals; also sand and clay for the
manufacture and sale of clay products; to purchase and sell goods, wares and
merchandise and agricultural and farm products; to contract for the erection,
construction or repair of any building, structure or improvement, public or
private, and erect, construct or repair same or any part thereof,
-1-
<PAGE> 2
and to acquire, own, prepare for use, any materials for such purposes.
2. To purchase or otherwise acquire and to hold, own, mortgage, or
otherwise lien, pledge, lease, sell, assign, exchange, transfer or in any
manner dispose of, and to invest, deal and trade in and with goods, wares,
merchandise and personal property of any and every class and description within
or without the State of Delaware.
3. To purchase, take, own, hold, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, convey, transfer, or in any manner whatever,
dispose of real property, within or without the State of Delaware.
4. To acquire by purchase, subscription, or otherwise, and to own, hold
for investment, or otherwise, and to use, sell, assign, transfer, mortgage,
pledge, exchange, or otherwise dispose of stock, bonds, debentures, notes,
script, securities, evidences of indebtedness, contracts or obligations of any
corporations, associations or trust estates, domestic or foreign, or of any
firm or individual, or of the United States, or any state, territory, or
dependency of the United States, or any foreign country, or any municipality,
or local authority, within or without the United States, and also to issue in
exchange therefor, stocks, bonds or other securities or evidences of
indebtedness of the corporation, and while the owner or holder of any such
property, to receive, collect and dispose of the interest, dividends and income
on or from such property, and to posses and exercise in respect thereto, all of
the rights, powers and privileges of ownership, including all voting power
thereon.
5. To aid in any manner, any corporation, association or trust estate,
domestic or foreign, or any firm or individual, any shares of stock in which,
or any bonds, debentures, notes, securities, evidences of indebtedness,
contracts, or obligations of which are held by or for it, directly or
indirectly, or in which or in the welfare of which it shall have any interest,
public or private, and erect, construct or repair same or any part thereof.
-2-
<PAGE> 3
and to do any acts designed to protect, preserve, improve, or enhance the value
of any property at any time held or controlled by it, or in which it may be at
any time interested, directly or indirectly, or through other corporations, or
otherwise; and to organize or promote or facilitate the organization of
subsidiary companies.
6. To acquire the good will, rights and property, and to undertake the
whole, or any part of the assets and liabilities of any firm, person,
association or corporation; to pay for the same in cash, the stock of this
company, bonds, or otherwise; to hold or in any manner to dispose of the whole
or any part of the property so purchased; to conduct in any lawful manner the
whole or any part of any business so acquired, and to exercise all the powers
necessary or convenient in and about the conduct and management of such
business.
7. To borrow money for any of the purposes of the corporation, and to
draw, make, accept, endorse, discount, execute, issue, sell, pledge, or
otherwise dispose of promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable, transferrable or
non-transferrable instruments and evidences of indebtedness, and to secure the
payment thereof and the interest thereon by mortgage or pledge, conveyance or
assignment, in trust of the whole or any part of the property of the
corporation at the time owned, or thereafter acquired.
8. To guarantee the payment of dividends upon any capital stock, and to
endorse or otherwise guarantee the principal or interest or both of any bonds,
debentures, notes, script, or other obligations, or evidences of indebtedness,
or the performance of any contract or obligations of any other corporation,
trust estate of association, domestic or foreign, or of any firm or individual
in which it may have a lawful interest, and in so far and to the
-3-
<PAGE> 4
extent that such guaranty may be permitted by law.
9. To own, purchase, lease, or otherwise acquire lands and/or coal,
oil, gas, mineral and timber rights in land, and to produce therefrom coal, oil,
gas, minerals and other substances, to develop such lands or rights in lands by
operating coal and other mines, and gas, oil and other wells thereon, and to
market and sell products therefrom.
10. To purchase or otherwise acquire, apply for, register, hold, use,
sell, or in any manner dispose of and to grant licenses or other rights in and
in any manner dispose of and to grant licenses or other rights in and in any
manner deal with patents, inventions, improvements, processes, formulas, trade
marks, trade names, rights and licenses secured under letters, patents,
copyrights, or otherwise.
11. To purchase or otherwise acquire shares of its own stock and
options to purchase shares of its own stock (so far as may be permitted by law),
and its bonds, debentures, notes, script, or other securities, or evidences of
indebtedness, and to cancel or to hold, transfer, or reissue the same to such
persons, firms, corporations, or associations, and upon such terms and
conditions as the Board of Directors may, in its discretion, determine, without
offering any thereof on the same terms, or on any terms, to the stockholders
then of record, or to any class of stockholders.
12. To acquire, buy, hold, own, sell, lease, exchange, trade and
otherwise deal in any and all kinds of manufactured articles, raw materials,
minerals, oils, gases, liquids, animal and plant products, and any other goods,
wares and merchandise, articles, substances and things whatsoever, and generally
to carry on the business of storekeepers, merchants, factors, traders, importers
and exporters.
13. To manufacture, improve, repair and work upon minerals, metals,
wood, oils and other liquids, gases, chemicals, animal and plant products, or
any of the products and by-products thereof, or any article or thing into the
manufacture of which any of the foregoing may enter.
14. To do any and all things necessary and proper for the
accomplishment of the objects herein enumerated or necessary or incidental
-4-
<PAGE> 5
to the protection and benefit of the corporation, and in general to carry on
any lawful business necessary or incidental to the attainment of the purposes
of the corporation, whether such business is similar in nature to the objects
and powers hereinabove set forth or otherwise.
15. To do any and all of the things herein set forth as principal agent,
contractor, trustee, or otherwise, alone or in company with others.
16. To have one or more offices and to conduct any or all of its
operations and business and to promote its objects, within or without the State
of Delaware, without restriction as to place or amount.
The objects and purposes specified hereinabove shall be regarded as
independent objects and purposes, and except where otherwise expressed, shall
be in no way limited, nor restricted by reference to, or inference from the
terms of any other clause or paragraph of this Certificate of Incorporation.
The foregoing shall be construed both as objects and powers and the
enumeration thereof shall not be held to limit or restrict in any manner the
general powers conferred on this corporation by the laws of the State of
Delaware.
Fourth. The total number of shares of stock which this corporation is
authorized to issue is One Million Fifty Thousand (1,050,000) shares of which
Fifty Thousand (50,000) shares of the par value of Ten Dollars ($10.00) each,
amounting to Five Hundred Thousand and No/100 ($500,000.00) Dollars, are
preferred stock, and One Million (1,000,000) shares of the par value of One
Dollar ($1.00) each, amounting to One Million and No/100 ($1,000,000.00)
Dollars are common stock.
The holders of preferred and common stock and the preferred and common
stock itself shall be subject to and have the following preferences, rights,
privileges, powers, restrictions, limitations and qualifications:
-5-
<PAGE> 6
(Superseded
by Oct. 1955
Amendment)
PREFERRED STOCK
1. The holders of Preferred Stock shall be entitled to receive in
preference to the holders of the Common Stock, and the Corporation shall be
bound to pay, as and when declared by the Board of Directors and out of funds
legally available for the payment of dividends, cumulative dividends at the
annual rate of $.50 per share and no more, payable in cash, quarterly on the 1st
days of March, June, September and December of each year. If the dividends on
any shares of Preferred Stock shall be in arrears, the holders thereof shall not
be entitled to any interest, or sum of money in lieu of interest, thereon.
2. Subject to the provisions of paragraph (b) of Subdivision 6
hereof, the Corporation, at the option of the Board of Directors, may redeem the
Preferred Stock in whole at any time, or in part from time to time, at an amount
equal to $11.00 per share, plus full cumulative dividends accrued thereon to the
date fixed for redemption (the total amount per share so payable upon any
redemption of Preferred Stock being herein referred to as the "redemption
price"); provided, however, that not less than thirty (30) days previous to the
date fixed for redemption a notice of the time and place thereof shall be given
to the holders of record of the shares of Preferred Stock so to be redeemed, by
mailing a copy of such notice to such holders at their respective addresses as
the same appear upon the books of the Corporation. In case of redemption of less
than all of the outstanding Preferred Stock, such redemption shall be chosen by
lot, in such manner as the Board of Directors may determine.
At any time after notice of redemption has been given in the manner
herein prescribed, or in the case of redemption of all of the outstanding shares
of Preferred Stock, after the Corporation shall have delivered to any bank or
trust company having its principal office in the City of Dallas, State of Texas,
and having a capital, surplus and undivided profits of at least $2,000,000, an
instrument in writing irrevocably authorizing such bank or trust company to give
notice of redemption of such shares in the name of the Corporation and in the
manner herein prescribed, the Corporation may deposit the amount of the
aggregate redemption price of the shares to be redeemed with such bank or trust
company named in such notice, in trust for the holders of the shares so to be
redeemed, payable on or before the date fixed for redemption as aforesaid and in
the amounts aforesaid to the respective order of such holders, upon endorsement
to the Corporation or otherwise, as may be required, and upon surrender of the
certificates for such shares. Upon deposit of the aggregate redemption price as
aforesaid, or, if no such deposit is made, upon said date fixed for redemption
(unless the Corporation shall default in making payment of the redemption price
as set forth in said notice), such holders shall cease to be stockholders with
respect to said shares and shall be entitled only to receive the redemption
price as aforesaid from such bank or trust company or from the Corporation,
without interest thereon, upon endorsement, if required, and the surrender of
the certificates for such shares, as aforesaid; provided that any funds so
deposited by the Corporation and unclaimed at the end of six (6) years from the
date fixed for such redemption shall be repaid to the Corporation upon its
request, after which repayment the holders of such shares so called for
redemption shall look only to the Corporation for payment of the redemption
price thereof. Any funds so deposited which shall not be required for such
redemption because of the exercise, subsequent to the date of such deposit, of
any right of exchange or otherwise shall be returned to the Corporation
-6-
<PAGE> 7
forthwith. Any interest accrued on any funds so deposited shall belong to the
Corporation and shall be paid to it from time to time.
Subject to the provisions hereof, the Board of Directors shall have
authority to prescribe the manner in which Preferred Stock shall be redeemed
from time to time. Preferred Stock which shall have been redeemed shall be
cancelled and shall not thereafter be reissued.
3. Upon any dissolution, liquidation or winding up of the
Corporation, the holders of Preferred Stock shall be entitled, before any
distribution or payment is made to the holders of any class of stock ranking
junior to the Preferred Stock, to be paid in cash an amount equal to $10.00
per share, plus full cumulative dividends accrued thereon to the date fixed for
such payment; and such holders of Preferred Stock shall not be entitled to any
further payment. In case the net assets of the Company are insufficient to pay
the holders of all outstanding shares of Preferred Stock the full amounts to
which they are entitled upon any dissolution, liquidation or winding up of the
Corporation, the entire net assets of the Corporation shall be distributed
ratably to the holders of all outstanding shares of Preferred Stock in
proportion to the amounts to which they are respectively entitled.
4. Except as otherwise required by law and subject to the
provisions of Section 5 hereof, no holder of Preferred Stock shall have any
right to vote for the election of directors or for any other purpose; provided,
however, that if at any time dividends on the Preferred Stock shall be in
arrears in an aggregate amount at least equal to eight (8) full quarterly
dividends, then and in such event the holders of the outstanding Preferred
Stock shall be entitled thereafter to vote in conjunction with the holders of
the outstanding Common Stock for the election of directors. Such right of the
holders of the outstanding Preferred Stock to vote for the election of
directors shall continue until such time as all arrears in dividends on the
Preferred Stock, and dividends thereon for the then current dividend period,
shall have been paid or declared and set apart for payment, in which event such
right shall terminate at the next ensuing annual meeting of stockholders,
subject to revesting in the case of any subsequent arrearage as above set forth.
In any case in which the holders of Preferred Stock shall be entitled
to vote pursuant to the provisions of this Section 4 or of Section 5 hereof or
pursuant to law, each holder of Preferred Stock shall be entitled to one vote
for each share thereof held.
5. So long as any shares of Preferred Stock are outstanding, the
consent of the holders of at least a majority of the outstanding shares of
Preferred Stock, given in person or by proxy, either in writing or at a meeting
called for that purpose at which the holders of Preferred Stock shall vote
separately as a class, shall be necessary for effecting or validating any one
or more of the following:
(a) The authorization or increase in the authorized amount of (1)
any class of stock ranking prior to the Preferred Stock, or (2) any
class of stock or obligation convertible into or evidencing the right
to purchase any stock of any class ranking prior to the Preferred
Stock.
(b) The amendment, alteration or repeal of any of the provisions
of the Charter or By-laws of the Corporation or any other certificate
filed pursuant to law so as to
-7-
<PAGE> 8
affect adversely any of the rights or preferences of outstanding
shares of Preferred Stock.
6. (a) In no event, so long as any shares of Preferred Stock are
outstanding, shall any dividend whatsoever, whether in cash, stock or
otherwise, be declared or paid, or any distribution made, on any stock of the
Corporation of a class ranking junior to the Preferred Stock, nor shall any
shares of any such junior class of stock be purchased by the Corporation or by
a Subsidiary or be redeemed by the Corporation, nor shall any moneys be paid to
or set aside or made available for a sinking fund for the purchase or
redemption of any shares of any such junior class of stock, unless all dividends
on all outstanding shares of Preferred Stock for all past dividend periods and
for the then current dividend period shall have been paid or declared and set
apart for payment.
(b) In no event, so long as any shares of Preferred Stock are
outstanding, unless all dividends on all outstanding shares of Preferred Stock
for all past dividend periods and for the then current dividend period shall
have been paid or declared and set apart for payment, shall the Corporation or
any Subsidiary purchase or redeem any shares of Preferred Stock, except for (1)
the redemption at one time of all of the outstanding shares of Preferred Stock,
or (2) such purchases which shall result from a call for tenders addressed to
holders of all of the outstanding shares of Preferred Stock.
COMMON STOCK
1. Subject to all of the rights of the Preferred Stock, dividends
may be paid upon the Common Stock as and when declared by the Board of
Directors out of any funds legally available therefor.
2. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock shall have been paid in full the amounts to which they shall
be entitled or an amount sufficient to pay the aggregate amount to which they
shall be entitled shall have been deposited with a bank or trust company having
its principal office in the City of Dallas, State of Texas, and having a
capital, surplus and undivided profits of at least $2,000,000, as a trust fund
for the benefit of the holders of such Preferred Stock, the remaining net
assets of the Corporation shall be distributed pro rata to the holders of the
Common Stock.
3. Except as otherwise expressly provided in Section 4 and 5 hereof
with respect to the Preferred Stock and except as otherwise may be required by
law, the holders of the Common Stock shall have the exclusive right to vote for
the election of directors and for all other purposes, each holder of Common
Stock being entitled to one vote for each share thereof held. The holders of a
majority of the stock of the Corporation entitled to vote must be present in
person or by proxy at each meeting of the stockholders to constitute a quorum,
less than a quorum, however, having power to adjourn.
GENERAL
For the purposes hereof:
1. The term "accrued dividends", "dividends accrued", "dividends
-8-
<PAGE> 9
in arrears' and similar terms shall mean, in respect of each share of Preferred
Stock, an amount equal to $.50 per annum from the date from which dividends on
such shares became cumulative to the date to which dividends are stated to be
accrued, less the aggregate amount of dividends paid thereon.
2. The term "dividend period" shall mean the period commencing the day
after any date on which dividends on the Preferred Stock shall be payable as
provided above and ending on the next succeeding such dividend payment date.
3. The term "outstanding", when used in reference to shares of stock,
shall mean issued shares, excluding shares held by the issuer thereof or by
any subsidiary of the issuer thereof.
4. The term "subsidiary" of any corporation shall mean any corporation
of which such first corporation and/or one or more of its subsidiaries own or
control, directly or indirectly, more than 50% of the outstanding stock having
by its terms ordinary voting power to elect a majority of the Board of
Directors thereof, irrespective of whether or not at the time stock of any
other class or classes thereof shall have or might have voting power by reason
of the happening of any contingency.
5. The term "subsidiary" shall mean a subsidiary of the Corporation.
6. Any class or classes of stock of any corporation shall be deemed to
rank.
(a) Prior to any other class of stock of such corporation if the holders
of such class or classes shall be entitled to the receipt of dividends or
of amounts distributable upon any dissolution, liquidation or winding up
in preference to or with priority over the holders of such other class.
(b) Junior to any other class of stock of such corporation if the rights
of the holders of such class or classes shall be subject or subordinate to
the rights of the holders of such other class in respect of the receipt of
dividends or of amounts distributable upon any dissolution, liquidation or
winding up.
No holder of any stock of the corporation shall be entitled as of right to
purchase or subscribe for any part of any stock of the corporation, authorized
by this certificate, or of any additional stock of any class to be issued by
reason of any increase of the authorized stock of the corporation, or of any
bonds, certificates of indebtedness, debentures or other securities convertible
into stock of the corporation, but any stock authorized by this certificate or
any such additional authorized issue of new stock or of securities convertible
into stock may be issued and disposed of by the Board of
-9-
<PAGE> 10
Directors to such persons, firms, corporations or associations for such
consideration and upon such terms and in such manner as the Board of Directors
may in their discretion determine without offering any thereof on the same
terms or on any terms to the stockholders then of record or to any class of
stockholders.
The corporation shall be entitled to treat the person in whose name any
share, right or option is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such share, right or option on the part of any person, whether or not the
corporation shall have notice thereof, save as may be expressly provided by the
laws of the State of Delaware.
A director shall be fully protected in relying in good faith upon the
books of account of the corporation or statements prepared by any of its
officials as to the value and amount of the assets, liabilities and/or net
profits of the corporation, or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might properly be
declared and paid.
Without action by the stockholders, the shares of stock may be issued by
the corporation from time to time for such consideration as may be fixed from
time to time by the Board of Directors thereof, and any and all such shares so
issued, the full consideration for which has been paid or delivered, shall be
deemed fully paid stock and not liable to any further call or assessment
thereon, and the holder of such shares shall not be liable for any further call
or assessment thereon, or for any other payment thereon.
Fifth. The minimum amount of capital with which it will commence business
is One Thousand and No/100 ($1,000) Dollars.
Sixth. The name and place of residence of each of the incorporators are as
follows:
-10-
<PAGE> 11
<TABLE>
<CAPTION>
NAME RESIDENCE
---- ---------
<S> <C>
S. L. Mackoy Wilmington, Delaware
K. D. Rau Wilmington, Delaware
R. Kennedy Wilmington, Delaware
</TABLE>
Seventh. This corporation is to have perpetual existence.
Eighth. The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
Ninth. All corporate powers shall be exercised by the Board of Directors,
except as otherwise provided by statute or by this Certificate of Incorporation.
The directors of the corporation shall be elected by the stockholders of
the corporation at the time and in the manner specified in the By-laws of the
corporation; such election of directors need not be by ballot.
Tenth. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized:
1. To fix, determine and vary from time to time the amount to be
maintained as surplus and the amount or amounts to be set apart as working
capital.
2. To set apart out of any of the funds of the corporation available for
dividends, a reserve or reserves for any proper purposes and/or to abolish any
such reserve in the manner in which it was created.
3. To make, amend, alter, change, add to, or repeal By-laws for the
corporation without any action on the part of the stockholders. The
-11-
<PAGE> 12
By-laws made by the directors may be amended, altered, changed, added to or
repealed by the stockholders.
4. To authorize and cause to be executed mortgages and liens without limit
as to amount upon the real and personal property of the corporation, including
after acquired property.
5. From time to time to determine whether and to what extent and at what
times and places and under what conditions and regulations the books and
accounts of this corporation or any of them other than the stock ledger, shall
be open to inspection of the stockholders, and no stockholder shall have any
right to inspect any account or book or document of the corporation, except as
conferred by law or authorized by resolution of the directors or of the
stockholders.
6. To authorize the payment of compensation to the directors for services
to the corporation, including fees for attendance at meetings of the Board of
Directors, of the Executive Committee, and other Committees, and to determine
the amount of such compensation and fees.
7. To sell, lease or exchange all of its property and assets, including
its good will and its corporate franchises upon such terms and conditions and
for such consideration which may be in whole or in part shares of stock in
and/or other securities of any other corporation or corporations when and as
authorized by the affirmative vote of the holders of a majority of the stock
issued and outstanding having voting power given at a stockholders' meeting
duly called for that purpose or when authorized by the written consent of the
holders of a majority of the voting stock issued and outstanding.
8. This corporation may in its By-laws, confer powers additional to the
foregoing upon the directors, in addition to the powers and authorities
expressly conferred upon them by law.
Eleventh. A director of the corporation shall not be disqualified by his
office from dealing or contracting with the corporation, either as a
-12-
<PAGE> 13
vendor, purchaser or otherwise, nor shall any transaction or contract of the
corporation be void or voidable by reason of the fact that any director or any
firm of which any director is a member or any corporation of which any director
is a share holder, officer or director is in any way interested in such
transaction or contract, provided that such transaction or contract is or shall
be authorized, ratified or approved either (1) by a vote of a majority of a
quorum of the Board of Directors or the Executive Committee without counting in
such majority or quorum any director so interested, or member of a firm so
interested, or a share holder, officer or director of a corporation so
interested, or (2) by the written consent or by the vote at any stockholders'
meeting of the holders of record of a majority of all the outstanding shares of
stock of the corporation entitled to vote, nor shall any director be liable to
account to the corporation for any profits realized by or from or through any
such transaction or contract of the corporation authorized, ratified or approved
as aforesaid by reason of the fact that he or any firm of which he is a member,
or any corporation of which he is a share holder, officer or director was
interested in such transaction or contract. Nothing herein contained shall
create liability in the events above described or prevent the authorization,
ratification or approval of such transactions or contracts in any other manner
permitted by law.
Any contract, transaction or act of the corporation or of the Board of
Directors which shall be ratified by a quorum of the stockholders entitled to
vote at any annual meeting or at any special meeting called for that purpose
shall be as valid and binding as though ratified by every stockholder of the
corporation; provided, however, that any failure of the stockholders to approve
or ratify such contract, transaction or act when and if submitted, shall not be
deemed in any way to invalidate the same or to deprive the corporation, its
directors or officers of their right to proceed with such contract, transaction
or action.
-13-
<PAGE> 14
It is hereby expressly provided that the directors and officers and former
directors and officers of the corporation shall be fully protected and
indemnified against any personal liability to others that may arise by reason
of any of their actions taken in good faith on behalf or for the benefit of the
corporation to the full extent permitted by the laws of the State of Delaware.
Twelfth. Upon the written consent or vote of the holders of a majority in
aggregate number of the shares of stock of the corporation then outstanding and
entitled to vote, every statute of the State of Delaware (a) increasing,
diminishing or in any way affecting the rights, powers or privileges of
stockholders of corporations organized under the general laws of said State, or
(b) giving effect to the action taken by any part, less than all, of the
stockholders of any such corporation; shall be binding upon the corporation and
every stockholder thereof to the same extent as if such statute had been in
force at the date of the making, filing and recording of this Certificate of
Incorporation of the corporation.
Thirteenth. If the By-laws so provide, the stockholders and directors
shall have power to hold their meetings, to have an office or offices and to
keep the books of this corporation (subject to the provisions of the statute),
outside the State of Delaware, at such places as may from time to time be
designated by the By-laws or by resolution of the directors.
Fourteenth. This corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights conferred on officers,
directors and stockholders herein are granted, subject to this reservation.
We, the undersigned, being all of the incorporators for the purpose of
forming a corporation in pursuance of an act of the Legislature of the State of
Delaware, entitled "An Act Providing a General Corporation Law", (ap-
-14-
<PAGE> 15
proved March 10, 1899), and the acts amendatory thereof and supplemental
thereto, do make and file this Certificate of Incorporation, hereby declaring
and certifying that the facts herein stated are true, and accordingly hereunto
have set our respective hands and seals this 17th day of April A.D. 1951.
/s/ S. L. MACKEY (SEAL)
-------------------------
/s/ K. D. RAU (SEAL)
-------------------------
/s/ H. KENNEDY (SEAL)
-------------------------
THE STATE OF DELAWARE )
) s.s.
COUNTY OF NEW CASTLE )
BE IT REMEMBERED that on this 17th day of April, 1951, personally appeared
before me the subscriber, a Notary Public for the State and County aforesaid,
S.L. Mackey, K.D. Rau and H. Kennedy, all the parties to the foregoing
Certificate of Incorporation, known to me personally to be such and severally
acknowledged the said Certificate to be their act and deed respectively, and
that the facts therein stated were truly set forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE the day and year aforesaid.
/s/ [ILLEGIBLE]
-------------------------
Notary Public in and for
New Castle County,
Delaware
[SEAL]
-15-
<PAGE> 16
STATE
OF
DELAWARE
Office of SECRETARY OF STATE
I, Robert H. Reed, Secretary of State of the State of Delaware, do hereby
certify that the above and foregoing is a true and correct copy of Certificate
of Incorporation of the "TEXAS INDUSTRIES, INC.", as received and filed in this
office the nineteenth day of April, A.D. 1951, at 9 o'clock A.M.
In Testimony Whereof, I have hereunto set my hand
and official seal at Dover this thirtieth day
of November in the year of our Lord one
thousand nine hundred and seventy-six.
[SEAL]
/s/ ROBERT H. REED
-------------------------------------
Robert H. Reed Secretary of State
/s/ GROVER A. BIDDLE
-------------------------------------
Grover A. Biddle Assistant Secretary
of State
<PAGE> 17
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
TEXAS INDUSTRIES, INC., a corporation organized and existing under and by
virtue of the Delaware Code.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of said TEXAS
INDUSTRIES, INC. duly held and convened, resolutions were duly adopted setting
forth a proposed amendment to the certificate of incorporation of said
corporation and declaring said amendment advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, That the certificate of incorporation of this corporation be and
it hereby is amended by changing the first paragraph of the article thereof
numbered "FOURTH" to be read as follows:
"FOURTH. The total number of shares of stock which this corporation
is authorized to issue is Five Million Fifty Thousand (5,050,000) shares
of which Fifty Thousand (50,000) shares of the par value of Ten Dollars
($10.00) each, amounting to Five Hundred Thousand and No/100
($500,000.00) Dollars, are preferred stock, and Five Million (5,000,000)
shares of the par value of One Dollar ($1.00) each, amounting to Five
Million and No/100 ($5,000,000.00) Dollars are common stock".
<PAGE> 18
SECOND: That thereafter, pursuant to resolution of its board of
directors, a special meeting of the stockholders of said corporation was duly
called and held, at which meeting the necessary number of stockholders as
required by statute voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of section 242 of Title 8 of the Delaware Code of 1953.
FOURTH: That said amendment does not effect any change in the issued
shares of said corporation.
IN WITNESS WHEREOF, said TEXAS INDUSTRIES, INC. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Ralph B. Rogers, its President and Harold B. Pressley, Jr. its Secretary this
25th day of April, 1955.
TEXAS INDUSTRIES, INC.
By /s/ RALPH B. ROGERS
-----------------------------
President
By /s/ HAROLD B. PRESSLEY, JR.
-----------------------------
Secretary
(CORPORATE SEAL)
-2-
<PAGE> 19
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
BE IT REMEMBERED that on this 25th day of April, A. D. 1955,
personally came before me a Notary Public in and for the County and State
aforesaid, Ralph B. Rogers, President of TEXAS INDUSTRIES, INC., a corporation
of the State of Delaware, the corporation described in and which executed the
foregoing certificate, known to be personally to be such, and he, the said
Ralph B. Rogers as such President, duly executed said certificate before me and
acknowledged the said certificate to be his act and deed and the act and deed
of said corporation; that the signatures of the said President and of the
Secretary of said corporation to said foregoing certificate are in the
handwriting of the said President and Secretary of said corporation
respectively, and that the seal affixed to said certificate is the common or
corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office
the day and year aforesaid.
[ILLEGIBLE]
-----------------------------
Notary Public
[SEAL]
-3-
<PAGE> 20
STATE
OF
DELAWARE
Office of SECRETARY OF STATE
I, Robert H. Reed, Secretary of State of the State of Delaware, do hereby
certify that the above and foregoing is a true and correct copy of Certificate
of Amendment of the "TEXAS INDUSTRIES, INC.", as received and filed in this
office the twenty-eighth day of April, A.D. 1955, at 10 o'clock A.M.
In Testimony Whereof, I have hereunto set my hand
and official seal at Dover this thirtieth day
of November in the year of our Lord one
thousand nine hundred and seventy-six.
[SEAL]
/s/ ROBERT H. REED
-------------------------------------
Robert H. Reed Secretary of State
/s/ GROVER A. BIDDLE
-------------------------------------
Grover A. Biddle Assistant Secretary
of State
<PAGE> 21
CERTIFICATE OF AMENDMENT
-of-
CERTIFICATE OF INCORPORATION
-of-
TEXAS INDUSTRIES, INC.
We, the undersigned, Ralph B. Rogers and James R. Kinzer,
respectively President and Assistant Secretary of TEXAS INDUSTRIES, INC., a
corporation of the State of Delaware, DO HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of TEXAS
INDUSTRIES, INC., duly convened and held on September 13, 1955, resolutions were
duly adopted setting forth the following proposed amendments, to the Certificate
of Incorporation of TEXAS INDUSTRIES, INC. and declaring said amendments
advisable.
SECOND: That thereafter, pursuant to Section 242 of Title 8 of the
Delaware Code of 1953, a meeting of the stockholders entitled to vote in respect
thereof for the consideration of such amendments was duly held on October 11,
1955.
THIRD: That at such stockholders' meeting the following resolutions
in respect to such amendments were duly adopted in accordance with the
provisions of said Section 242 of Title 8 of the Delaware Code of 1953:
"RESOLVED that the provisions of Article FOURTH of the Certificate of
Incorporation, as heretofore amended, be and they hereby are further
amended so that the same shall be and read as follows:
'FOURTH. The total number of shares of all
classes of stock which this corporation is
authorized to issue is Five Million Thirty Thousand
(5,030,000) shares of which Five Million
(5,000,000) shares are Common Stock of the par Nov. 1978:
value of One Dollar ($1.00) each and Thirty 15,000,000 Common
Thousand (30,000) shares are Cumulative Preferred 100,000 Cum. P/d
Stock (hereinafter sometimes referred to as the
Preferred Stock) without par value. The
designations and the powers, preferences and
rights, and the qualifications, limitations or
restrictions of the shares of each class of stock
are as follows:
-1-
<PAGE> 22
TXI Certif. of Inc.
Oct. 13, 1955
PREFERRED STOCK
1. The Preferred Stock may be issued from time to time in one or more
series, each of such series to have such voting powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as are stated and
expressed herein or in a resolution or resolutions, providing for the issue of
such series, adopted by the Board of Directors as hereinafter provided.
2. Authority is hereby expressly granted to the Board of Directors,
subject to the provisions hereof, to authorize one or more series of Preferred
Stock and with respect to each series (except the series hereinafter designated
as $5 Cumulative Preferred Stock), to fix by resolution or resolutions
providing for the issue of such series:
(a) The number of shares to constitute such series and the
distinctive designation thereof;
(b) The dividend rate on the shares of such series, and the date or
dates from which dividends shall accumulate;
(c) Whether or not the shares of such series shall be redeemable,
and, if redeemable, the price which the shares of such series shall be
entitled to receive upon the redemption thereof;
(d) Whether or not the shares of such series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement and, if such retirement or
sinking fund or funds be established, the annual amount thereof and the
terms and provisions relative to the operation thereof;
(e) Whether or not the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or of any
other series of the same or any other class or classes of stock of the
corporation and the conversion price or prices or the rate or rates at
which such exchange may be made, with such adjustments, if any, as shall
be stated and expressed or provided in such resolution or resolutions;
(f) The amount which the shares of such series shall be entitled to
receive upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation;
(g) The voting power, if any, of the shares of such series; and
-2-
<PAGE> 23
(h) Such other special rights and protective provisions as to the
Board of Directors may seem advisable.
3. Holders of Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative dividends at the annual rates fixed therefor as
herein provided, and no more, payable quarterly on January 31, April 30, July 31
and October 31 in each year, in preference to dividends on any other class of
stock of the corporation. No dividend shall be declared and set apart for
payment on any series of Preferred Stock in respect of any quarterly dividend
period unless there shall likewise be or have been declared and set apart for
payment on all shares of Preferred Stock of each other series at the time
outstanding dividends ratably in accordance with the sums which would be payable
on the paid shares if all dividends were declared and paid in full.
So long as any Preferred Stock shall remain outstanding, unless dividends
on all outstanding shares of the Preferred Stock, at the annual rate and from
the dates fixed for the accumulation thereof, shall have been paid, or declared
and set apart for payment, no dividends (other than dividends payable in Common
Stock) shall be paid upon, nor shall any distribution be made on the Common
Stock, and no Common Stock shall be purchased or otherwise acquired for value
by the corporation.
4. The corporation, by action of its Board of Directors, may redeem the
whole or any part of any series of the Preferred Stock, at any time or from time
to time, by paying in cash the redemption price of the shares of the particular
series, fixed therefor as herein provided, together with a sum in the case of
each share of each series so to be redeemed, computed at the annual dividend
rate for the series of which the particular share is a part, from the date from
which dividends on such share became cumulative to the date fixed for such
redemption, less the aggregate of the dividends theretofore or on such
redemption date paid thereon. At least thirty (30) days and not more than sixty
(60) days previous notice of every such redemption shall be given by publication
or by mailing, as determined by the Board of Directors, to the holders of record
of the shares of the Preferred Stock so to be redeemed, at their respective
addresses as the same shall appear on the books of the corporation. In case of
the redemption of a part only of any series of the Preferred Stock at the time
outstanding, the corporation shall select by lot the shares so to be redeemed.
The Board of Directors shall have full power and authority, subject to the
limitations and provisions herein contained, to prescribe the manner in which,
and the terms and conditions upon which, the shares of the Preferred Stock shall
be redeemed from time to time. At any time after notice of redemption shall
-3-
<PAGE> 24
have been published or mailed as above provided to the holders of shares of the
Preferred Stock so to be redeemed, the corporation may deposit all funds
necessary for such redemption, in trust, with a bank or trust company having
capital, surplus and undivided profits of at least $2,000,000 named in such
notice, for payment, on or before the date fixed for redemption, to the holders
of shares called for redemption. Upon the making of such deposit, or if no such
deposit is made then upon such redemption date (unless the corporation shall
default in making payment of the amount payable upon redemption), holders of
the shares of Preferred Stock called for redemption shall cease to be
stockholders with respect to such shares notwithstanding that any certificate
for such shares shall not have been surrendered, and thereafter such shares
shall no longer be transferable on the books of the corporation and such
holders shall have no interest in or claim against the corporation with respect
to said shares, except the right (a) to receive payment of the amount payable
upon redemption and no more upon surrender of their certificates, or (b) to
exercise on or before the date fixed for redemption the rights, if any, not
theretofore expiring, which the holder shall have to convert the shares so
called for redemption into, or to exchange such shares for, shares of stock of
any other class or classes or of any other series of the same class or any
other class or classes of stock of the corporation. Any funds deposited in
trust as aforesaid which shall not be required for such redemption, because of
the exercise of any right of conversion or otherwise, subsequent to the date of
such deposit, shall be returned to the corporation forthwith. Any interest
accrued on any funds so deposited shall belong to the corporation and be paid
to it from time to time. Any funds so deposited by the corporation and
unclaimed at the end of five years from the date fixed for such redemption
shall be repaid to the corporation upon its request, after which repayment the
holders of such shares so called for redemption shall look only to the
corporation for payment of the redemption price. Nothing herein contained shall
limit any right of the corporation to purchase or otherwise acquire any shares
of the Preferred Stock.
5. Before any amount shall be paid to, or any assets distributed among,
the holders of the Common Stock upon any liquidation, dissolution or winding up
of the corporation, and after paying or providing for the payment of all
creditors of the corporation, the holders of each series of the Preferred Stock
at the time outstanding shall be entitled to be paid in cash the amount for the
particular series fixed therefor as herein provided, together with a sum in the
case of each share of each series, computed at the annual dividend rate for the
series of which the particular share is a part, from the date from which the
dividends on such
-4-
<PAGE> 25
share become cumulative to the date fixed for the payment of such
distributive amount, less the aggregate of the dividends theretofore or on
such date paid thereon; but no payments on account of such distributive
amounts shall be made to the holders of any series of the Preferred Stock
unless there shall likewise be paid at the same time to the holders of each
other series of the Preferred Stock at the time outstanding like
proportionate distributive amounts, ratably, in proportion to the full
distributive amounts to which they are respectively entitled as herein
provided. The holders of the Preferred Stock of any series shall not be
entitled to receive any amounts with respect thereto upon any liquidation,
dissolution or winding up of the corporation other than the amounts
referred to in this paragraph. Neither the consolidation or merger of the
corporation with any other corporation or corporations, nor the sale or
transfer by the corporation of all or any part of its assets, shall be
deemed to be a liquidation, dissolution or winding up of the corporation.
6. An initial series of the Preferred Stock may be issued from time
to time as the Board of Directors may deem advisable with the following
voting powers, designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions:
(a) The number of shares to constitute such series shall be Ten
Thousand (10,000) and the distinctive designation of such series shall
be "$5 Cumulative Preferred Stock".
(b) The dividend rate on the shares of such series shall be Five
Dollars ($5.00) per annum, and the date or dates from and after which
dividends shall accumulate on any issued share of such series shall be
the date of the first day following the quarterly payment date next
succeeding the date upon which such share was issued.
(c) The shares of such series shall be redeemable and the price
which the shares of such series shall be entitled to receive upon the
redemption thereof shall be One Hundred Five Dollars ($105.00) per
share.
(d) The shares of such series shall not be subject to the operation
of any retirement or sinking fund to be applied to the purchase or
redemption of such shares for retirement.
(e) The shares of such series shall not, as a matter of right, be
convertible into nor exchangeable for any shares of any other class or
classes or of any other series of the same or any other class or
classes of stock of the corporation.
-5-
<PAGE> 26
(f) The preferential amount to which the holders of shares of such
series shall be entitled upon any liquidation, dissolution or winding
up of the corporation shall be One Hundred Dollars ($100.00) per share.
(g) Each share of the $5 Cumulative Preferred Stock, shall entitle
the holder thereof to one vote per share upon any question presented to
any stockholders meeting and shall be equal in voting power in all
respects to each share of Common Stock of the corporation.
COMMON STOCK
1. Subject to all of the rights of the Preferred Stock, dividends may
be paid upon the Common Stock as and when declared by the Board of Directors out
of any funds legally available therefor.
2. Upon any liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, and after paying or providing for
the payment to the holders of shares of all series of the Preferred Stock of the
full distributive amounts to which they are respectively entitled as herein
provided, the remaining net assets of the corporation shall be distributed pro
rata to the holders of the Common Stock.
3. Except as otherwise expressly provided herein or as fixed in any
resolution or resolutions adopted by the Board of Directors as provided herein
with respect to any series of the Preferred Stock and except as otherwise may be
required by law, the holders of the Common Stock shall have the exclusive right
to vote for the election of directors and for all other purposes, each holder of
Common Stock being entitled to one vote for each share thereof held. The holders
of a majority of the stock of the corporation entitled to vote must be present
in person or by proxy at each meeting of the stockholders to constitute a
quorum, less than a quorum, however, having power to adjourn.
GENERAL
1. No holder of any stock of the corporation shall be entitled as a
matter of right to purchase or subscribe for any part of any stock of the
corporation, authorized by this certificate, or of any additional stock of any
class to be issued by reason of any increase of the authorized stock of the
corporation, or of any bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the corporation, but any stock authorized
by this certificate or any such additional authorized issue of new stock or of
securities convertible into
-6-
<PAGE> 27
stock may be issued and disposed of by the Board of Directors to such
persons, firms, corporations or associations for such consideration and
upon such terms and in such manner as the Board of Directors may in
their discretion determine without offering any thereof on the same
terms or on any terms to the stockholders then of record or to any
class of stockholders.
2. The corporation shall be entitled to treat the
person in whose name they share, right or option is registered as the
owner thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such share, right or option
on the part of any other person, whether or not the corporation shall
have notice thereof, save as may be expressly provided by the laws of
the State of Delaware.
3. A director shall be fully protected in relying in
good faith upon the books of account of the corporation or statements
prepared by any of its officials as to the value and amount of the
assets, liabilities and/or net profits of the corporation, or any other
facts pertinent to the existence and amount of surplus or other funds
from which dividends might properly be declared and paid.
4. Without action taken by the stockholders, the shares
of stock may be issued by the corporation from time to time for such
consideration as may be fixed from time to time by the Board of
Directors thereof, and any and all such shares so issued, the full
consideration for which has been paid or delivered, shall be deemed
fully paid stock and not liable to any further call or assessment
thereon, and the holder of such shares shall not be liable for any
further call or assessment thereon, or for any other payment thereon."
FOURTH: That the proposed amendments received the votes of the
holders of at least a majority of the Common Stock in favor thereof being the
only class of stock issued and outstanding and entitled to vote thereon.
FIFTH: That the proposed amendments to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC. have been duly adopted in accordance
with Section 242 of Title 8 of the Delaware Code of 1953 and that the capital
will not be reduced under or by reason of said amendments.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC. has caused its corporate
seal to be hereunto affixed and this certificate
-7-
<PAGE> 28
to be signed by Ralph B. Rogers, its President, and James R. Kinzer, its
Assistant Secretary, this 11th day of October, 1955.
TEXAS INDUSTRIES, INC.
By /s/ RALPH B. ROGERS
-----------------------
President
[SEAL]
/s/ JAMES R. KINZER
- ----------------------------
Assistant Secretary
STATE OF TEXAS )
: ss.:
COUNTY OF DALLAS )
BE IT REMEMBERED that on this 11th day of October, A.D., 1955, personally
came before me, a notary public in and for the county aforesaid, Ralph B.
Rogers, President of TEXAS INDUSTRIES, INC., a corporation of the State of
Delaware, a party to the foregoing certificate, known to me personally to be
such and he, the said Ralph B. Rogers, acknowledged said certificate to be his
act and deed and the act and deed of said corporation; that the signature of
said President and Assistant Secretary of said corporation to said certificate
are in their own proper handwritings, respectively, and that the seal affixed
to said certificate is the common or corporate seal of said corporation and
that the signing, sealing and acknowledgment of said certificate was duly
authorized by a resolution of its Board of Directors.
IN WITNESS WHEREOF I have hereunto set my hand and seal the day and year
aforesaid.
/s/ [ILLEGIBLE]
-----------------------------
Notary Public, Dallas County,
Texas
[SEAL]
-8-
<PAGE> 29
STATE
OF
DELAWARE
Office of SECRETARY OF STATE
I, Robert H. Reed, Secretary of State of the State of Delaware, do hereby
certify that the above and foregoing is a true and correct copy of Certificate
of Amendment of the "TEXAS INDUSTRIES, INC.", as received and filed in this
office the thirteenth day of October, A.D. 1955, at 10 o'clock A.M.
In Testimony Whereof, I have hereunto set my hand
and official seal at Dover this thirtieth day
of November in the year of our Lord one
thousand nine hundred and seventy-six.
[SEAL]
/s/ ROBERT H. REED
-------------------------------------
Robert H. Reed Secretary of State
/s/ GROVER A. BIDDLE
-------------------------------------
Grover A. Biddle Assistant Secretary
of State
<PAGE> 30
CERTIFICATE OF AMENDMENT
-of-
CERTIFICATE OF INCORPORATION
-of-
TEXAS INDUSTRIES, INC.
We, the undersigned, Ralph B. Rogers and E. McIntosh Cover,
respectively President and Assistant Secretary of TEXAS INDUSTRIES, INC., a
corporation of the State of Delaware, DO HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of TEXAS
INDUSTRIES, INC., duly convened and held on November 5, 1964, resolutions were
duly adopted setting forth the following proposed amendment to the Certificate
of Incorporation of TEXAS INDUSTRIES, INC. and declaring said amendment
advisable.
SECOND: That thereafter, pursuant to Section 242 of Title 8 of the
Delaware Code of 1953, a meeting of the stockholders entitled to vote in
respect thereof for the consideration of such amendment was duly held on
December 17, 1964.
THIRD: That at such stockholders' meeting the following resolution in
respect to such amendment was duly adopted in accordance with the provisions of
said Section 242 of Title 8 of the Delaware Code of 1953:
"RESOLVED, that the first paragraph of Article FOURTH of the
Certificate of Incorporation, as heretofore amended, be and said first
paragraph of Article FOURTH hereby is, further amended so that the same
shall be and read as follows:
'FOURTH. The total number of shares of all classes of stock which this
Corporation is authorized to issue is Five Million One Hundred Thousand
(5,1000,000) shares, of
<PAGE> 31
which Five Million (5,000,000) shares are Common Stock of the par value of
One Dollar ($1.00) each and One Hundred Thousand (100,000) shares are
Cumulative Preferred Stock (hereinafter sometimes referred to as the
Preferred Stock) without par value. The designations and powers,
preferences and rights, and the qualifications, limitations or restrictions
of the shares of each class of stock are as follows;'"
FOURTH: That the proposed amendment received in favor thereof the votes of
the persons or bodies corporate holding at least a majority of the aggregate
number of outstanding shares of Common Stock and $5 Cumulative Preferred Stock,
and the votes of the persons or bodies corporate holding at least a majority of
the outstanding shares of $5 Cumulative Preferred Stock voting as a class, said
Common Stock and $5 Cumulative Preferred Stock being all of the stock issued
and outstanding and entitled to vote on said amendment.
FIFTH: That the proposed amendment to the Certificate of Incorporation of
TEXAS INDUSTRIES, INC. has been duly adopted in accordance with Section 242 of
Title 8 of the Delaware Code of 1953 and that the capital will not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Ralph B. Rogers,
its President, and E. McIntosh Cover, its Assistant Secretary, this 17th day of
December, 1964.
TEXAS INDUSTRIES, INC.
By: /s/ RALPH B. ROGERS
--------------------------
President
[SEAL]
By: /s/ E. MCINTOSH COVER
--------------------------
Assistant Secretary
<PAGE> 32
STATE OF TEXAS )
: ss:
COUNTY OF DALLAS )
BE IT REMEMBERED that on this 17th day of December, A.D., 1964,
personally came before me, a notary public in and for the county aforesaid,
Ralph B. Rogers, President of TEXAS INDUSTRIES, INC., a corporation of the
State of Delaware, the corporation described in and which executed the
foregoing certificate, known to me personally to be such, and he, the said
Ralph B. Rogers, as such President, duly executed said certificate before me
and acknowledged said certificate to be his act and deed and the act and deed
of said corporation; that the signatures of said President and Assistant
Secretary of said corporation to said certificate are in the handwriting of the
said President and Assistant Secretary, respectively, and that the seal affixed
to said certificate is the common or corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and seal the day and
year aforesaid.
[SEAL] /s/ [ILLEGIBLE]
-----------------------------
Notary Public, Dallas County,
Texas
<PAGE> 33
STATE
OF
DELAWARE
Office of SECRETARY OF STATE
I, Robert H. Reed, Secretary of State of the State of Delaware, do hereby
certify that the above and foregoing is a true and correct copy of Certificate
of Amendment of the "TEXAS INDUSTRIES, INC.", as received and filed in this
office the twenty-third day of December, A.D. 1964, at 10 o'clock A.M.
In Testimony Whereof, I have hereunto set my hand
and official seal at Dover this thirtieth day
of November in the year of our Lord one
thousand nine hundred and seventy-six.
[SEAL]
/s/ ROBERT H. REED
-------------------------------------
Robert H. Reed Secretary of State
/s/ GROVER A. BIDDLE
-------------------------------------
Grover A. Biddle Assistant Secretary
of State
<PAGE> 34
November 1, 1976 9 A.M.
CERTIFICATE OF AMENDMENT
-of-
CERTIFICATE OF INCORPORATION
-of-
TEXAS INDUSTRIES, INC.
We, the undersigned, Glen Adams and Thomas M. Lawty, respectively Vice
President and Assistant Secretary of TEXAS INDUSTRIES, INC., a corporation of
the State of Delaware, DO HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of TEXAS INDUSTRIES,
INC., duly convened and held on July 20, 1976, resolutions were duly adopted
setting forth the following proposed amendment to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC., and declaring said amendment advisable.
SECOND: That thereafter, pursuant to Section 242 of the 1967 Delaware
Business Corporation Law, as amended, a meeting of the stockholders entitled to
vote in respect thereof for the consideration of such amendment was duly held
on October 19, 1976.
THIRD: That at such stockholders' meeting the following resolutions in
respect to such amendment were duly adopted in accordance with the provisions
of said Section 242 of the 1967 Delaware Business Corporation Law, as amended:
"RESOLVED, that the Certificate of Incorporation of the Company be,
and it hereby is, amended by adding a new Article FIFTEENTH, which shall
read as follows:
'FIFTEENTH. A. Except as set forth in Paragraph B. of this Article
FIFTEENTH, the affirmative vote of the holders of eighty percent (80%) of
the outstanding stock of the Company entitled to vote shall be required
for:
(i) any merger or consolidation to which the Company or any of its
subsidiaries and an Interested Person (as hereinafter defined) are
parties;
(ii) any sale or other disposition by the Company, or any of its
subsidiaries, of all or any substantial part of its assets to an
Interested Person;
(iii) any purchase or other acquisition by the Company, or any of its
subsidiaries, of all or any substantial part of the assets of an
Interested Person; and
(iv) any other transaction with an Interested Person which requires
the approval of the Shareholders of the Company under the Delaware
Business Corporation Law, as in effect from time to time.
<PAGE> 35
'B. The provisions of Paragraph A, shall not be applicable to any
transaction approved by vote of eighty percent (80%) of the Board of
Directors if, at the time of the Board's approval of such transaction, the
Board included no director whose election had been effected by the vote of
an Interested Person in opposition to the recommendation of Management,
and the transaction provides that the Shareholders receive for their
shares cash or other consideration equal to, or greater than, the highest
price paid by an Interested Person for any shares of the Company
(including brokerage commissions and/or soliciting dealers' fees).
'C. As used in this Article FIFTEENTH the term "Interested Person"
shall mean any person, firm or corporation, or any group thereof acting or
intending to act in concert, including any person directly or indirectly
controlling or controlled by or under direct or indirect common control
with such person, firm or corporation or group, which owns of record or
beneficially, directly or indirectly, five percent (5%) or more of any
class of voting securities of the Company.
'D. The Board of Directors of the Company shall have full power and
authority to interpret, construe and apply the provisions of this Article
FIFTEENTH.
'E. The affirmative vote of the holders of eighty percent (80%) of
the outstanding stock of the Company entitled to vote shall be required to
amend, alter or repeal this Article FIFTEENTH.
'F. For purposes of any vote required by this Article FIFTEENTH, all
classes of voting stock of the Company shall be considered as one class.'"
FOURTH: That the proposed amendment received in favor thereof the votes of
the persons or bodies corporate holding at least a majority of the aggregate
number of outstanding shares of Common Stock and $5 Cumulative Preferred Stock,
said Common Stock and $5 Cumulative Preferred Stock being all of the stock
issued and outstanding and entitled to vote on said amendment.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC., has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Glen Adams, its
Vice President, and Thomas M. Lawty, its Assistant Secretary, this 22nd day of
October 1976.
TEXAS INDUSTRIES, INC.
By /s/ GLEN ADAMS
----------------------------------------
Vice President
[SEAL]
Attest By /s/ [ILLEGIBLE]
----------------------------------------
Assistant Secretary
-2-
<PAGE> 36
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BE IT REMEMBERED that on this 22nd day of October, 1976, personally
came before me, a notary public in and for the county aforesaid, Glen Adams,
Vice President of TEXAS INDUSTRIES, INC., a corporation of the State of
Delaware, the corporation described in and which executed the foregoing
certificate, known to me personally to be such, and he, the said Glen Adams, as
such Vice President, duly executed said certificate before me and acknowledged
said certificate to be his act and deed and the act and deed of said
corporation; that the signatures of said Vice President and Assistant Secretary
of said corporation to said certificate are in the handwriting of the said Vice
President and Assistant Secretary, respectively, and that the seal affixed to
said certificate is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the and year
aforesaid.
[SEAL] /s/ [ILLEGIBLE]
-----------------------------------------
Notary Public, Dallas County, Texas
-3-
<PAGE> 37
CERTIFICATE OF AMENDMENT
-of-
CERTIFICATE OF INCORPORATION
-of-
TEXAS INDUSTRIES, INC.
We, the undersigned, Fergus J. Walker, Jr. and Glen Adams, respectively
Senior Vice President and Secretary of TEXAS INDUSTRIES, INC., a corporation of
the State of Delaware, DO HEREBY CERTIFY:
FIRST: That at a Meeting of the Board of Directors of TEXAS INDUSTRIES,
INC., duly convened and held on October 17, 1978, resolutions were duly adopted
setting forth the following proposed amendment to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC. and declaring said amendment advisable.
SECOND: That thereafter, pursuant to Section 242 of Subchapter VIII of
the Delaware Corporation Law, a Special Meeting of the Shareholders entitled to
vote in respect thereof for the consideration of such amendment was duly held
on November 28, 1978.
THIRD: That at such Shareholders' Special Meeting the following resolution
in respect to such amendment was duly adopted in accordance with the provisions
of said Section 242 of Subchapter VIII of the Delaware Corporation Law:
"RESOLVED, that the first paragraph of Article FOURTH of the
Certificate of Incorporation, as heretofore amended, be and said first
paragraph of Article FOURTH hereby is, further amended so that the same
shall be and read as follows:
'FOURTH. The total number of shares of all classes of stock which this
Corporation is authorized to issue is Fifteen Million One Hundred
Thousand (15,100,000) shares, of which Fifteen Million (15,000,000)
shares are Common Stock of the par value of One Dollar ($1.00) each and
One Hundred Thousand (100,000) shares are cumulative Preferred Stock
(hereinafter sometimes referred to as the Preferred Stock) without par
value. The designations and powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of each class
of stock are as follows:'"--
<PAGE> 38
FOURTH: That the proposed amendment received in favor thereof the votes of
the persons or bodies corporate holding at least a majority of the aggregate
number of outstanding shares of Common Stock and $5 Cumulative Preferred Stock,
and the votes of the persons or bodies corporate holding at least a majority of
the outstanding shares of $5 Cumulative Preferred Stock voting as a class, said
Common Stock and $5 Cumulative Preferred Stock being all of the stock issued
and outstanding and entitled to vote on said amendment.
FIFTH: That the proposed amendment to the Certificate of Incorporation of
TEXAS INDUSTRIES, INC. has been duly adopted in accordance with Section 242 of
Subchapter VIII of the Delaware Corporation Law and the capital will not be
reduced under or by reason of said amendment.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Fergus J. Walker,
Jr., its Senior Vice President, and Glen Adams, its Secretary, this 28th day of
November, 1978.
TEXAS INDUSTRIES, INC.
By /s/ FERGUS J. WALKER, JR.
----------------------------------------
Senior Vice President
CORPORATE SEAL
Attest: By /s/ GLEN ADAMS
----------------------------------------
Secretary
<PAGE> 39
736073054 BODY 346 PAGE 500
FILED
CERTIFICATE OF AMENDMENT
OF MAR 14 1988 10 AM
CERTIFICATE OF INCORPORATION
OF /s/ [ILLEGIBLE]
TEXAS INDUSTRIES, INC.
We, the undersigned, Robert C. Moore and Thomas M. Lawty, respectively
Vice President and Assistant Secretary of TEXAS INDUSTRIES, INC., a Delaware
corporation, DO HEREBY CERTIFY:
FIRST: That at a Meeting of the Board of Directors of TEXAS
INDUSTRIES, INC., duly convened and held on July 18, 1985, resolutions were
duly adopted setting forth the following proposed amendments to the Certificate
of Incorporation of TEXAS INDUSTRIES, INC. and declaring said amendments
advisable.
SECOND: That thereafter, pursuant to Section 242 of Subchapter VIII
of the General Corporation Law of the State of Delaware, the proposed
amendments were submitted to the stockholders of TEXAS INDUSTRIES, INC. for
their approval or disapproval thereof at the annual meeting of said
stockholders held on October 15, 1985.
THIRD: That at such annual meeting of stockholders, the following
resolutions in respect to such amendments were duly adopted in accordance with
the provisions of said Section 242 of Subchapter VIII of the General
Corporation Law of the State of Delaware:
Article Tenth of the Certificate of Incorporation of the corporation,
which confers certain powers on the Board of Directors of the corporation, is
hereby amended by amending Section 3 thereof to read as follows:
"3. By resolutions adopted by the majority of the entire
Board of Directors, to make, amend, alter, change, add to or repeal
By-laws for the corporation without any action on the part of
stockholders. The stockholders of the corporation shall not make,
amend, alter, change, add to or repeal By-laws of the corporation,
either directly or by way of amending the Certificate of Incorporation
of this corporation, except by the affirmative vote of the holders of
75 percent or more of the combined voting power of the then outstanding
shares of stock of all classes and series of the corporation entitled
to vote generally in the election of directors, voting together as a
single class, at a duly called meeting of the stockholders, provided
that notice of the proposed change in the By-laws is contained in the
notice of the meeting. In addition to any requirement of law or any
other provision of this Certificate of Incorporation or of the By-laws
of this corporation, the affirmative vote of the holders of 75 percent
or more of the combined voting power of the then outstanding shares of
stock of all classes and series of the corporation entitled to vote
generally in the election of directors, voting together as a single
class, shall be required to amend, alter or repeal, or adopt any
provision inconsistent with, this Section 3 of this Article Tenth."
Article Twelfth of the Certificate of Incorporation of the corporation
is hereby amended to read as follows:
"Twelfth. Any action required or permitted to be taken by the
stockholders of the corporation must be
<PAGE> 40
BODY 346 PAGE 501
effected at a duly called annual or special meeting of stockholders of the
corporation and may not be effected by any consent in writing by such
stockholders. In addition to any requirement of law or any other provision
of this Certificate of Incorporation or of the By-laws of this corporation,
the affirmative vote of the holders of 75 percent or more of the combined
voting power of the then outstanding shares of stock of all classes and
series of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend,
alter or repeal, or adopt any provision inconsistent with, this Article
Twelfth."
FOURTH: That the proposed amendments received in favor thereof the
votes of at least a majority of the outstanding stock entitled to vote thereon,
and a majority of the outstanding stock of each class entitled to vote thereon
as a class.
FIFTH: That the proposed amendments to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC. have been duly adopted in accordance
with Section 242 of Subchapter VIII of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Robert C.
Moore, its Vice President, and Thomas M. Lawty, its Assistant Secretary this
9th day of January, 1986.
TEXAS INDUSTRIES, INC.
ATTEST:
By /s/ THOMAS M. LAWTY By /s/ ROBERT C. MOORE
---------------------------- -----------------------------
Assistant Secretary Vice President
STATE OF TEXAS ) RECEIVED FOR RECORD
) MAR 18 1986
COUNTY OF DALLAS ) LEO J. DUGAN, Jr., Recorder
BEFORE ME, the undersigned, a Notary Public in and for said County
and State, on this day personally appeared ROBERT C. MOORE, known to me to be
the person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of the said TEXAS INDUSTRIES, INC.,
a corporation, and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of January, 1986.
/s/ GWYNN E. HERRICK
----------------------------------------
Notary Public in and for
the State of Texas
GWYNN E. HERRICK
Notary Public in and for
the State of Texas
My Commission Expires 9-2-88
<PAGE> 41
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TEXAS INDUSTRIES, INC.
We, the undersigned, Robert C. Moore and Thomas M. Lawty, respectively
Vice President and Assistant Secretary of TEXAS INDUSTRIES, INC., a Delaware
corporation, DO HEREBY CERTIFY:
FIRST: That at a Meeting of the Board of Directors of TEXAS
INDUSTRIES, INC., duly convened and held on July 17, 1986, a resolution was duly
adopted setting forth the following proposed amendment to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC. and declaring said amendment advisable.
SECOND: That thereafter, pursuant to Section 242 of Subchapter VIII
of the General Corporation Law of the State of Delaware, the proposed amendment
was submitted to the stockholders of TEXAS INDUSTRIES, INC. for their approval
or disapproval thereof at the annual meeting of said stockholders held on
October 21, 1986.
THIRD: That at such annual meeting of stockholders, the following
resolution in respect to such amendment was duly adopted in accordance with the
provisions of said Section 242 of Subchapter VIII of the General Corporation Law
of the State of Delaware:
Article Eleventh of the Certificate of Incorporation of the
corporation, which covers certain relationships between the Company and its
directors, is hereby amended, subject to stockholders' approval, by adding a new
paragraph to read as follows:
"To the fullest extent permitted by the Delaware General Corporation
Law as amended from time to time, Directors and former directors of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director."
FOURTH: That the proposed amendment received in favor thereof the
votes of at least a majority of the outstanding stock entitled to vote thereon,
and a majority of the outstanding stock of each class entitled to vote thereon
as a class.
<PAGE> 42
FIFTH: That the proposed amendment to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC. has been duly adopted in accordance
with Section 242 of Subchapter VIII of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Robert C.
Moore, its Vice President, and Thomas M. Lawty, its Assistant Secretary this
22nd day of October, 1986.
TEXAS INDUSTRIES, INC.
ATTEST:
By /s/ THOMAS M. LAWTY By /s/ ROBERT C. MOORE
---------------------------- -----------------------------
Assistant Secretary Vice President
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared ROBERT C. MOORE, known to me to be the
person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of the said TEXAS INDUSTRIES,
INC., a corporation, and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 22nd day of October,
1986.
/s/ GWYNN E. HERRICK
----------------------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 9-2-88
----------
<PAGE> 43
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TEXAS INDUSTRIES, INC.
We, the undersigned, Richard M. Fowler and Robert C. Moore, respectively
Vice President and Secretary of TEXAS INDUSTRIES, INC., a Delaware corporation,
DO HEREBY CERTIFY:
FIRST: That, at a meeting of the Board of Directors of TEXAS INDUSTRIES,
INC., duly convened and held on July 14, 1995, a resolution was duly adopted
setting forth the following proposed amendment to the Certificate of
Incorporation of TEXAS INDUSTRIES, INC. and declaring said amendment advisable:
"RESOLVED, that the Certificate of Incorporation of [TEXAS INDUSTRIES,
INC.] be amended by striking the first sentence of the first paragraph of
Article Fourth in its entirety and replacing the following therefor:
'FOURTH. The total number of shares of all classes of stock which this
Corporation is authorized to issue is Forty Million (40,000,000)
shares of Common Stock of the par value of One Dollar ($1.00) each
and One Hundred Thousand (100,000) shares of Cumulative Preferred
Stock (hereinafter sometimes referred to as the Preferred Stock)
without par value.'
SECOND: That thereafter, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, a summary of the proposed amendment
was submitted to the stockholders of TEXAS INDUSTRIES, INC. for their approval
or disapproval thereof at the annual meeting of said stockholders held on
October 17, 1995.
THIRD: That at such annual meeting of stockholders, such amendment was
adopted in accordance with the provision of said Section 242 of the General
Corporation Law of the State of Delaware.
FOURTH: That the proposed amendment received in favor thereof the votes of
at least a majority of the outstanding stock entitled to vote thereon, and a
majority of the outstanding stock of each class entitled to vote thereon as a
class.
Certificate of Amendment of Certificate of Incorporation Page 1 of 2
<PAGE> 44
FIFTH: That the proposed amendment to the Certificate of Incorporation of
TEXAS INDUSTRIES, INC. has been duly adopted in accordance with Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, TEXAS INDUSTRIES, INC. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Richard M. Fowler,
a Vice President, and Robert C. Moore, its Secretary, this 21st day of
November, 1995.
TEXAS INDUSTRIES, INC.
ATTEST:
By: /s/ ROBERT C. MOORE By: /s/ RICHARD M. FOWLER
---------------------------- ---------------------------------
Robert C. Moore, Secretary Richard M. Fowler, Vice President
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
Richard M. Fowler, Vice President of Texas Industries, Inc., a corporation,
known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he executed the same for the purposes
and consideration therein expressed, in the capacity stated, and as the act and
deed of said corporation.
Given under my hand and seal of office this 21st day of November, 1995.
/s/ DEBRA A. LUBBERT
-------------------------------
Notary Public in and for
The State of Texas
My Commission expires: 7-16-97
---------
[SEAL]
Certificate of Amendment of Certificate of Incorporation Page 2 of 2
<PAGE> 1
EXHIBIT 4.2
BYLAWS
OF
TEXAS INDUSTRIES, INC.
As Adopted January 15, 1957,
Amended July 15, 1965,
Amended October 17, 1967
Amended October 21, 1969
Amended October 15, 1974
Amended July 20, 1976
Classified Board Approved by Shareholders October 19, 1976,
Amended July 18, 1985
Amended July 17, 1986
SECTION 1. In addition to its principal office in the State of
Delaware, the Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors shall from
time to time determine.
SECTION 2. All meetings of the stockholders for the election of
Directors shall be held in the City of Dallas, State of Texas, at such place
within such city as the Board of Directors may determine and which shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof. Meetings of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 3. An annual meeting of the stockholders of the
Corporation shall be held on the third Tuesday of
1
<PAGE> 2
October in each year, at 9:30 o'clock in the forenoon, unless such day is a
legal holiday, in which case such meeting shall be held on the first day
thereafter which is not a legal holiday. At such meeting the stockholders
entitled to vote thereat shall elect by a plurality vote a Board of Directors,
and may transact such other business as may properly be brought before the
meeting.
SECTION 4. Special meetings of the stockholders of the
Corporation may be held only upon the call of the Chairman of the Board, the
President or a majority of the members of the Board of Directors. Such call
shall state the time, place and purposes of the meeting.
SECTION 5. Notice of the time and place of every Meeting of
stockholders and of the business to be acted on at such meeting shall be mailed
by the Secretary or the officer performing his duties, at least ten days before
the meeting, to each stockholder of record having voting power and entitled to
such notice at his last known post office address; provided, however, that if a
stockholder be present at a meeting, or in writing waives notice thereof before
or after the meeting, notice of the meeting to such stockholder shall be
unnecessary.
SECTION 6. At least ten days before every election of Directors,
a complete list of the stockholders entitled to vote at said election, arranged
in alphabetical order, with the residence of each and the number of voting
shares held by each, shall be prepared by the Secretary. Such list
2
<PAGE> 3
shall be open at the office of the Corporation in the City of Dallas, Texas,
for said ten days, to the examination of any stockholder, and shall be produced
and kept at the time and place of election during the whole time thereof, and
subject to the inspection of any stockholder who may be present.
SECTION 7. The holders of a majority of the stock of the
Corporation issued and outstanding and having voting power present in person or
represented by proxy shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute, by the Certificate of Incorporation, or by these Bylaws, but less than
a quorum shall have power to adjourn any meeting from time to time without
notice other than announcement at the meeting. The holders of a majority of the
stock present and entitled to vote at a duly qualified meeting of stockholders
shall have power to act, unless the question is one upon which by express
provision of the statutes or of the Certificate of Incorporation or of these
Bylaws a different vote is required, in which case such express provision shall
govern and control the decision of such question.
At any meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before such meeting. To be
properly brought before any meeting of stockholders, business must be (a)
specified in the notice of meeting (or any supplement thereto) given
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by or at the direction of the Board of Directors of the Corporation, (b)
otherwise properly brought before such meeting by or at the direction of the
Board of Directors of the Corporation, or (c) otherwise properly brought before
such meeting by a stockholder. For business to be properly brought before such
meeting by a stockholder, the Secretary of the Corporation must have received
written notice from the stockholder (i) in the case of an annual meeting, not
less than 45 days nor more than 60 days prior to such meeting, and (ii) in the
case of a special meeting, not later than the close of business on the seventh
day following the day on which notice of the date of such special meeting is
mailed to stockholders. Such stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before such meeting
(a) a brief description of the business desired to be brought before such
meeting and the reasons for conducting such business at such meeting, (b) the
name and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the securities
of the Corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in these Bylaws to the contrary, no business shall be conducted at any meeting
of the stockholders except in accordance with the procedures set forth in this
Section 7.
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SECTION 8. At every meeting of stockholders each stockholder
entitled to vote thereat shall be entitled to one vote for each share of stock
having voting power registered in his name on the books of the Corporation, and
may vote and otherwise act in person or by proxy appointed by an instrument in
writing subscribed by such stockholder; but no proxy shall be voted upon more
than three (3) years after its date unless such proxy provides for a longer
period.
The order of business at each meeting of the shareholders of the
Corporation shall be determined by the chairman of the meeting. The chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including, without being
limited to, the dismissal of business not properly presented, the maintenance
of order and safety, the establishing of limitations on the time allotted to
questions or comments on matters before the meeting and on the affairs of the
Corporation, the establishing of restrictions on entry to the meeting after the
time prescribed for the commencement thereof and the declaring of the opening
and closing of the voting polls.
SECTION 9. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of the stockholders of the Corporation and may not be effected
by any consent in writing by such stockholders.
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SECTION 10. The property and business of the Corporation shall be
managed by a Board of not less than three, nor more than 21 Directors. At the
annual meeting of the shareholders in October 1976, the Board of Directors
shall be divided into three classes, each class being as nearly equal in number
as possible. The members of the first class shall hold office for a term of one
year; the members of the second class shall hold office for a term of two
years; the members of the third class shall hold office for a term of three
years. At all annual elections thereafter directors shall be elected by the
shareholders for a term of three years to succeed the directors whose term then
expires; provided that nothing herein shall be construed to prevent the
election of a director to succeed himself. Thereafter, within the limits
herein specified, the number of Directors shall be fixed and may be changed,
from time to time, by resolution of the Board of Directors. The Directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 11 of these Bylaws, and each Director elected shall hold office until
his successor shall be elected and shall qualify. Directors need not be
stockholders.
Only persons who are nominated in accordance with the procedures set
forth in this Section 10 shall be eligible for election as Directors of the
Corporation. Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of
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stockholders (a) by or at the direction of the Board of Directors of the
Corporation or (b) by any stockholder of the Corporation entitled to vote for
the election of Directors at such meeting who complies with the notice
procedures set forth in this Section 10. Such nominations made by a stockholder
shall be made pursuant to a written notice received by the Secretary of the
Corporation (i) in the case of an annual meeting, not less than 45 days nor more
than 60 days prior to such meeting, and (ii) in the case of a special meeting,
not later than the close of business on the seventh day following the day on
which notice of the date of such special meeting is mailed to stockholders.
Such stockholder's notice to the Secretary shall set forth (a) the name and
address, as they appear on the Corporation's books, of the stockholder who
intends to make the nomination, (b) the name, occupation and business and
residence addresses of each person whom the stockholder intends to nominate,
(c) the class and number of shares of the securities of the Corporation which
are beneficially owned by the stockholder, (d) a description of all
arrangements and understandings between the stockholder and each person the
stockholder intends to nominate and each other person or persons, if any,
(naming such person or persons and stating the beneficial ownership of
securities of the Corporation of each such person) pursuant to which the
nomination or nominations will be made by the stockholder, (e) such additional
information with respect to each nominee proposed by the
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stockholder as would have been required to be included in a proxy statement
pursuant to the then effective proxy rules of the Securities and Exchange
Commission had each such proposed nominee been nominated by the Board of
Directors of the Corporation, (f) the stockholders' representation that he or
she intends to appear in person or by proxy at the meeting to nominate each
such proposed nominee, and (g) the signed consent of each such proposed nominee
to being nominated and to serving as a Director if elected. No person shall be
eligible for election as a Director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 10.
SECTION 11. If any vacancies occur in the Board of Directors
caused by death, resignation, retirement, disqualification or removal from
office of any Director or otherwise, or any new directorship is created by any
increase in the authorized number of Directors, a majority of the Directors
then in office, though less than a quorum, may choose a successor or
successors, or fill the newly created directorship, and the Director so chosen
shall hold office only until the expiration of the term of his predecessor or,
as to any new directorship, until the end of the term to which he is so chosen
and until his successor shall be duly elected and qualified, unless sooner
displaced.
SECTION 12. Meetings of the Board of Directors shall be held at
the times fixed by resolutions of the Board or upon call of the Chairman of the
Board or any two
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Directors and such meetings, whether regular or special, may be held either
within or without the State of Delaware. The Secretary or officer performing
his duties shall give reasonable notice (which need not in any event exceed two
[2] days) of all meetings of Directors, provided that a meeting may be held
without notice immediately after the annual election, and notice need not be
given of regular meetings held at times fixed by resolution of the Board.
Meetings may be held at any time without notice if all the directors are
present or if those not present waive notice either before or after the
meeting. Notice by mail or telegraph to the usual business or residence address
of the Directors not less than the time above specified before the meeting
shall be sufficient. One-third of the Directors, but in no case less than two
Directors, shall constitute a quorum for the transaction of business, and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation or by
these Bylaws.
SECTION 13. The Board of Directors shall have power to authorize
the payment of compensation to the Directors for services to the Corporation,
including fees for attendance at meetings of the Board of Directors, of the
Executive Committee and of other committees and to determine the amount of such
compensation and fees.
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SECTION 14. The Board of Directors, as soon as may be after the
election of Directors in each year, shall appoint a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer, and may
from time to time appoint other Vice Presidents and such other officers as they
may deem proper. None of such officers (except for the Chairman of the Board)
need be a member of the Board of Directors. The Board of Directors may appoint
from the members of the Executive Committee, a Chairman of the Executive
Committee, if they shall have established an Executive Committee pursuant to
Section 17 of these Bylaws. Two or more offices, including offices of Chairman
of the Board and President, may be held by the same person, except that where
the offices of President and Secretary are held by the same person, such
person shall not hold any other office.
SECTION 15. The term of office of all officers shall be until the
next election of Directors and until their respective successors are chosen and
qualified, or until they shall die or resign but any officer may be removed
from office at any time by the Board of Directors. Vacancies in any office may
be filled by the Board at the meeting.
SECTION 16. Except as otherwise provided by the Board of
Directors: the President of the Corporation shall be the chief executive
officer of the Corporation; provided that the Chairman of the Board shall
preside at all meetings of the stockholders and Directors, including meetings
of the
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Executive Committee, at which such officer is present; the chairman of the
Executive Committee, if such office shall have been filled by the Board,
shall, in the absence of the Chairman of the Board, preside at all meetings of
the stockholders and Directors, and shall have such other powers and duties as
the Chairman of the Board shall delegate to him or the Board of Directors shall
prescribe; and the President shall be the chief administrative officer of the
Corporation. The other officers of the Corporation shall have such powers and
duties as usually pertain to their offices, except as modified by the Board of
Directors, and shall also have such powers and duties as may from time to time
be conferred upon them by the Board of Directors.
SECTION 17. The Board of Directors may, by a resolution passed by
a majority of the whole Board, appoint an Executive Committee, to consist of
the Chairman of the Board and such number of the Directors as the Board may
from time to time determine, which shall have and may exercise during the
intervals between the meetings of the Board all the powers vested in the Board
except the power to fill vacancies in the Board, the power to change the
membership of or fill vacancies in said Committee and the power to change the
Bylaws. Such Committee shall continue in existence until the next annual
election of Directors, unless sooner terminated by a resolution passed by a
majority of the whole Board. The Board shall have the power at any time to
change the membership of such Committee and
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to fill vacancies in it. The Executive Committee may make rules for the conduct
of its business and may appoint such committees and assistants as it may deem
necessary. A majority of the members of said Committee shall constitute a
quorum.
SECTION 18. In addition to the Executive Committee, the Board of
Directors may, by resolution passed by a majority of the whole Board, designate
one or more other committees, each committee to consist of two or more of the
Directors of the Corporation, which to the extent provided in said resolution,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and may have power
to authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of
Directors.
SECTION 19. Whenever under the provisions of the statutes or of
the Certificate of Incorporation or of these Bylaws, notice is required to be
given to any Director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed
to such Director or stockholder at such address as appears on the books of the
Corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed. Whenever notice is required to be given, a
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waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
SECTION 20. Certificates of stock shall be of such form and
device as the Board of Directors may elect and shall be signed by the Chairman
of the Board of Directors, the President, or a Vice President and the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary, but where
any such certificate is signed (1) by a transfer agent or an assistant transfer
agent or (2) by a transfer clerk acting on behalf of the Corporation and by a
registrar, the signatures of any such officers of the Corporation may be
facsimiles, engraved or printed.
SECTION 21. The stock of the Corporation shall be transferable or
assignable only on the books of the Corporation by the holders in person, or by
attorney, on the surrender of the certificates therefor. The Board of Directors
may appoint one or more transfer agents and registrars of the stock.
SECTION 22. The Corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
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SECTION 23. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its sole
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
SECTION 24. The Board of Directors shall have the power to close
the stock transfer books of the Corporation for a period not exceeding fifty
(50) days preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into
effect. In lieu of closing the stock transfer books as aforesaid, the Board of
Directors is hereby authorized to fix in advance a date, not exceeding fifty
(50) days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or
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the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of and to vote at, any
such meeting and any adjournment thereof, or entitled to receive payment of any
such dividends, or to any such allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights,
as the case may be, notwithstanding any transfer of any stock on the books of
the Corporation after any such record date fixed as aforesaid.
SECTION 25. The Board of Directors are authorized to select such
depositaries as they shall deem proper for the funds of the Corporation. All
checks and drafts against such deposited funds shall be signed and
countersigned by persons to be specified by the Board of Directors.
SECTION 26. The corporate seal of the Corporation shall be in
such form as the Board of Directors shall prescribe. Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
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SECTION 27. The Corporation shall indemnify every person who has
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, including an action by or in the right of the Corporation, by
reason of the fact that said person is or was a director, officer, employee, or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred by said person in connection with such action, suit or proceeding, to
the full extent permitted by the Delaware General Corporation Law or any other
applicable law in effect from time to time. Expenses (including attorneys'
fees) incurred by an officer or director in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer or director to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified as authorized in this Section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate. The indemnification provided in this
Section shall not be deemed exclusive of any other right to which a person
seeking
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indemnity may be entitled under any law (common or statutory), agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
said person's official capacity and as to action in another capacity while
holding office or while employed by or acting as agent for the Corporation, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent, and shall inure to the benefit of the estate, heirs,
executors and administrators of said person. All rights to indemnification
under this Section shall be deemed to be a contract between the Corporation and
each director, officer, employee or agent of the Corporation who serves or
served in such capacity at any time while this Section is in effect. Any repeal
or modification of this Section or any repeal or modification of relevant
provisions of the Delaware General Corporation Law or any other applicable laws
shall not in any way diminish any rights to indemnification of such director,
officer, employee or agent of the Corporation hereunder. The Corporation shall
purchase and maintain insurance in such principal amounts as shall be approved
by resolution of the Board of Directors of the Corporation from time to time on
behalf of each said person against any liability asserted against and incurred
by said person in any such aforesaid capacity, or arising out of said person's
status as such, to the full extent permitted by the Delaware General
Corporation Law or any other applicable law in effect from time to time. If
this Section or any portion
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thereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each director,
officer, employee and agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the full extent permitted by any applicable
portion of this Section that shall not have been invalidated and to the full
extent permitted by applicable law.
SECTION 28. These Bylaws may be amended, altered, changed, added
to or repealed by resolutions adopted by a majority of the entire Board of
Directors or by resolutions adopted by the affirmative vote of the holders of
75 percent or more of the combined voting power of the then outstanding shares
of stock of all classes and series of the corporation entitled to vote
generally in the election of directors, voting together as a single class, at a
duly called meeting of the stockholders, provided that notice of the proposed
change in the Bylaws is contained in the notice of the meeting.
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[LOCKE PURNELL RAIN HARRELL LETTERHEAD]
EXHIBIT 5
April 20, 1998
Texas Industries, Inc.
1341 West Mockingbird Lane
Dallas, Texas 75247-6913
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel for Texas Industries, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of an aggregate of 2,900,000
shares of the Company's Common Stock, $1.00 par value per share (such shares or
such different number of shares as may be registered pursuant to the referenced
Registration Statement, the "Securities"). We have examined such documents and
questions of law as we have deemed necessary or advisable for purposes of this
opinion.
Based upon the foregoing, we are of the opinion that the Securities, when
issued and delivered against payment of the purchase price therefor as
described in the above referenced Registration Statement (as amended, the
"Registration Statement"), will be legally issued, fully paid and
nonassessable.
The opinion expressed above is limited in all respects to the laws of the
State of Texas, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America, each as presently in effect.
This letter is furnished by us as counsel to you in connection with the
above referenced public offering and is solely for your benefit and not for the
benefit of any other person. This letter may not be relied upon by you for any
other purpose or relied upon or furnished to any other person without our prior
written consent.
<PAGE> 2
Texas Industries, Inc.
April 20, 1998
Page 2
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm in the prospectus contained therein
under the caption "Legal Matters." In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Respectfully submitted,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ DAN BUSBEE
-------------------------
Dan Busbee
<PAGE> 1
EXHIBIT 15
We are aware of the incorporation by reference in the Registration Statement of
Texas Industries, Inc. for the registration of 2,900,000 shares of its common
stock of our reports dated September 16, 1997, December 15, 1997, and March 20,
1998 relating to the unaudited condensed consolidated interim financial
statements of Texas Industries, Inc. that are included in its Forms 10-Q for the
quarters ended August 31, 1997, November 30, 1997, and February 28, 1998.
/s/ ERNST & YOUNG LLP
Dallas, Texas
April 17, 1998
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement and related Prospectus of Texas Industries, Inc. for the
registration of 2,900,000 shares of its common stock and to the inclusion of
our report dated July 8, 1997, with respect to the consolidated financial
statements of Texas Industries, Inc. included in its Annual Report (Form 10-K)
for the year ended May 31, 1997, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
-------------------------------
Ernst & Young LLP
Dallas, Texas
April 17, 1998
