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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
COMMISSION FILE NO. 1-12984
CENTEX CONSTRUCTION PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OF INCORPORATION)
75-2520779
(I.R.S. EMPLOYER IDENTIFICATION NO.)
3710 RAWLINS, SUITE 1600, LB 78, DALLAS, TEXAS 75219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214) 559-6514
(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
------------------- ----------------------
COMMON STOCK NEW YORK STOCK
(PAR VALUE $.01 PER SHARE) EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934, during the preceding 12 months (or for such shorter period that
such registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to Form 10-K [ ].
Indicate the number of shares of the registrant's classes of common
stock (or other similar equity securities) outstanding as of the close of
business on June 17, 1998:
Common Stock 21,254,122 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Parts I,
II, and III, of this Report:
(a) 1998 Annual Report to Stockholders of Centex Construction
Products, Inc. for the fiscal year ended March 31, 1998.
(b) Proxy statement for the annual meeting of stockholders of Centex
Construction Products, Inc. to be held on July 16, 1998.
________________________________________________________________________________
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business:
General 1
Industry Segment Information 1
Employees 12
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 16
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17
SIGNATURES 18
INDEX TO EXHIBITS 19
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PART I
ITEM 1. BUSINESS
General
Centex Construction Products, Inc. ("CXP" or the "Company") is a
producer of a variety of basic construction products used in residential,
industrial, commercial and infrastructure applications. The Company produces
and sells cement, gypsum wallboard, aggregates and readymix concrete. The
Company is incorporated in the state of Delaware. Prior to April 19, 1994, the
Company was a wholly-owned subsidiary of Centex Corporation ("Centex"). On
April 19, 1994, the Company completed an Initial Public Offering ("IPO") of 51%
of its common stock. As a result of the IPO, Centex's ownership of the Company
was reduced to 49%. Unless the context indicates to the contrary, the terms
"CXP" and the "Company" as used herein, should be understood to include
subsidiaries of CXP and predecessor corporations. The Company's common stock,
par value $0.01 per share ("CXP Common Stock"), began trading publicly on April
19, 1994. As of June 17, 1998, 21,254,122 shares of CXP Common Stock, which
are traded on the New York Stock Exchange, were outstanding.
As previously disclosed, CXP's Board of Directors authorized CXP
management to repurchase up to three million shares of CXP Common Stock as
management determines advisable. As a result of repurchases during fiscal
years 1998 and 1997 by CXP of its common stock from the public and purchases
of CXP Common Stock by Centex, Centex now owns approximately 56.3% of the
outstanding shares of CXP Common Stock.
CXP's involvement in the construction products business dates to 1963,
when it began construction of its first cement plant. Since that time, the
Company's operations have been expanded to include additional cement production
and distribution facilities and the production, distribution and sale of
aggregates, readymix concrete and gypsum wallboard.
The Company operates four quarrying and manufacturing facilities and a
network of 11 terminals for the production and distribution of portland and
masonry cement. These facilities are located primarily in Texas, northern
Illinois, the Rocky Mountain area, Nevada and northern California. The Company
is also vertically integrated, to a limited extent, with readymix concrete
operations in the Austin, Texas area and a portion of northern California. The
Company extracts and produces aggregates from its deposits near Sacramento,
California (the largest single permitted sand and gravel deposit in northern
California) and Austin, Texas. The Company operates two quarries in close
proximity to its gypsum wallboard manufacturing facilities which are located in
Albuquerque and nearby Bernalillo, New Mexico and Gypsum, (near Vail) Colorado.
On February 26, 1997 the Company purchased the equity interest of a company
that owned a gypsum quarry, a gypsum wallboard plant and an associated
cogeneration power facility, all located at Gypsum, Colorado. The Company's
wallboard production is shipped by rail and truck to markets throughout the
continental United States. The Company's corporate office is in Dallas, Texas.
Industry Segment Information
The following table presents revenues and earnings before interest
expense (income) and income taxes contributed by each of the Company's industry
segments during the periods indicated. Identifiable assets, depreciation,
depletion and amortization and capital expenditures by segment are presented in
Note E of the Notes to the Consolidated Financial Statements of CXP on page 23
of CXP's Annual Report to Stockholders for the fiscal year ended March 31, 1998
(the "1998 CXP Annual Report").
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For The Fiscal Years Ended March 31,
----------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(In Millions)
Contribution to Revenues:
Cement $140.4 $133.3 $125.7 $109.9 $101.7
Gypsum Wallboard 118.7 72.2 58.3 51.7 32.8
Concrete and Aggregates 42.0 36.8 39.9 35.2 35.1
Other, net 1.9 1.8 2.8 1.6 1.2
------ ------ ------ ------ ------
303.0 244.1 226.7 198.4 170.8
Less Intersegment Sales (5.7) (4.7) (4.1) (4.1) (4.0)
------ ------ ------ ------ ------
Total Net Revenues $297.3 $239.4 $222.6 $194.3 $166.8
====== ====== ====== ====== ======
Contribution to Operating
Earnings (Loss):
Cement $ 48.1 $ 39.8 $ 35.3 $ 26.0 $ 15.9
Gypsum Wallboard 35.8 20.5 11.9 7.2 (0.1)
Concrete and Aggregates 4.5 4.8 5.6 2.6 1.7
Other, net 1.9 1.8 2.8 1.6 1.2
------ ------ ------ ------ ------
90.3 66.9 55.6 37.4 18.7
Corporate Overhead (3.8) (3.9) (2.5) (2.3) (1.8)
------ ------ ------ ------ ------
Total Earnings Before
Interest and Income Taxes $ 86.5 $ 63.0 $ 53.1 $ 35.1 $ 16.9
====== ====== ====== ====== ======
Revenues for the past three years from each of the Company's industry
segments, expressed as a percentage of total consolidated net revenues, were as
follows:
Percentage of Total
Consolidated Net Revenues
---------------------------
Segment: 1998 1997 1996
------ ------ ------
Cement 45.4% 53.8% 54.8%
Gypsum Wallboard 39.9 30.2 26.2
Concrete/Aggregates:
Readymix Concrete 10.7 11.8 12.9
Aggregates 3.3 3.4 4.8
----- ----- ----
14.0 15.2 17.7
Other, net 0.7 0.8 1.3
----- ----- -----
Total Consolidated Net Revenues 100.0% 100.0% 100.0%
===== ===== =====
CEMENT OPERATIONS
Company Operations. The Company's cement production facilities
are located in or near Buda, Texas; LaSalle, Illinois; Laramie, Wyoming; and
Fernley, Nevada. The Laramie, Wyoming and Fernley, Nevada facilities are
wholly-owned. The Buda, Texas plant is owned by Texas-Lehigh Cement Company, a
joint venture owned 50% by the Company and 50% by Lehigh Portland Cement
Company, a subsidiary of Heidelberger Zement AG. The LaSalle, Illinois plant is
owned by Illinois Cement Company, a joint venture owned 50% by CXP and 50% by
RAAM Limited Partnership, a partnership controlled by members of the Pritzker
family. The Company receives a management fee of $150,000 per year to manage
the Illinois joint venture. The Company's Laramie, Wyoming plant operates
under the name of Mountain Cement Company and the Fernley, Nevada plant under
the name of Nevada Cement Company.
Cement is the basic binding agent for concrete, a primary construction
material. The manufacture of portland cement primarily involves the
extracting, crushing, grinding and blending of limestone and other raw
materials into a chemically proportioned mixture which is then burned in a
rotary kiln at extremely high
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temperatures to produce an intermediate product known as clinker. The clinker
is cooled and interground with a small amount of gypsum to the consistency of
face powder to produce finished cement. Clinker can be produced utilizing
either of two basic methods, a "wet" or a "dry" process. In the wet process,
the raw materials are mixed with water to the advantage of greater ease in the
handling and mixing of the raw materials. However, additional heat, and
therefore fuel, is required to evaporate the moisture before the raw materials
can react to form clinker. The dry process, a more fuel efficient technology,
excludes the addition of water into the process. Dry process plants are either
preheater plants, in which hot air is recycled from the rotary kiln to preheat
materials, or are precalciner plants, in which separate burners are added to
accomplish a significant portion of the chemical reaction prior to the
introduction of the raw materials into the kiln.
As fuel is a major component in the cost of producing clinker, most
modern cement plants, including all four of the plants operated by the Company,
incorporate the more fuel efficient dry process technology. At present,
approximately 85% of the Company's clinker capacity is from preheater or
preheater/precalciner kilns, compared to approximately one-half of U.S. cement
capacity manufactured from such kilns. Cement production is capital-intensive
and involves high fixed costs. As a result, plant capacity utilization levels
are an important measure of a plant's profitability, since incremental sales
volumes tend to generate increasing profit margins.
Rated Annual Estimated
Clinker Minimum
Capacity Number Limestone
(Thousand Manufacturing of Dedication Reserves
Location short tons)(1) Process Kilns Date (Years)
- -------- --------------- ------------- ------ ---------- ---------
Buda, Texas (2) 1,080 Dry - 4 Stage 1 1978 60
Preheater
Flash Calciner 1983
LaSalle, Illinois (2) 575 Dry - 4 Stage 1 1974 50
Preheater
Laramie, Wyoming 630 Dry - 2 Stage 1 1988 30
Preheater
Dry - Long Dry 1 1996
Kiln
Fernley, Nevada 480 Dry - Long Dry 1 1964 18
Kiln
Dry - 1 Stage 1 1969
Preheater
------
Total - Gross(3) 2,765
======
- Net(3) 1,938
======
- -------------------------
(1) One short ton equals 2,000 pounds.
(2) The amounts shown represent 100% of plant capacity and production.
These plants are owned by joint ventures in which the Company has a
50% interest.
(3) Generally, a plant's cement grinding production capacity is greater
than its clinker production capacity.
The Company's net cement production, excluding the joint venture
partners' 50% interest in the Buda and LaSalle plants, totaled 2.0 million tons
in fiscal 1998 and 1.9 million tons in fiscal 1997. Total net cement sales
were 2.1 million tons both in fiscal 1998 and in fiscal 1997, as all four
cement plants sold all of the product they produced. During the past two
years, the Company purchased minimal amounts of cement from others to be
resold. Purchased cement sales typically occur at lower gross profit margins.
In fiscal 1998, 6.0% of the cement sold by the Company was acquired from
outside sources, compared to 8.8% in fiscal 1997. In fiscal 1998, the Company
approved a capital project to expand the annual clinker capacity of the
LaSalle, Illinois plant by approximately 100,000 tons and add a new finish
mill. Planned completion of the project is the fall of 1999.
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Raw Materials and Fuel Supplies. The principal raw material used in
the production of portland cement is calcium carbonate in the form of
limestone. Limestone is obtained by mining and extracting from quarries owned
or leased by the Company (including its joint ventures) and located in close
proximity to its plants. The Company believes that the estimated recoverable
limestone reserves owned or leased by it (or its joint ventures) will permit
each of its plants to operate at its present production capacity for at least
30 years or, in the case of the Company's Nevada plant, at least 18 years. The
Company expects that additional limestone reserves for its Nevada plant will be
available when needed on an economically feasible basis, although they may be
more distant and more expensive to transport than the Company's existing
reserves. Other raw materials used in substantially smaller quantities than
limestone are sand, clay, iron ore and gypsum, which are either obtained from
Company-owned or leased reserves or are purchased from outside suppliers.
The Company's cement plants use coal and coke as their primary fuel,
but are equipped to burn natural gas as an alternative. The Company has not
used hazardous waste-derived fuels in its plants. The Company's LaSalle,
Illinois and Buda, Texas plants have been permitted to burn scrap tires as a
partial fuel alternative. Electric power is also a major cost component in
the manufacture of cement. The Company has sought to diminish overall power
costs by adopting interruptible power supply agreements which may expose the
Company to some production interruptions during periods of power curtailment.
Sales and Distribution. Demand for cement is highly cyclical and
derived from the demand for concrete products which, in turn, is derived from
demand for construction. According to estimates of the Portland Cement
Association (the "PCA"), the industry's primary trade organization, the three
construction sectors that are the major components of cement consumption are
(i) public works construction, including public buildings, (ii) commercial and
industrial construction and (iii) residential construction, which comprised
54%, 17% and 23%, respectively, of U.S. cement consumption in 1996, the most
recent period for which such data are available. Construction spending and
cement consumption have historically fluctuated widely. The construction
sector is affected by the general condition of the economy and can exhibit
substantial variations across the country as a result of the differing
structures of the regional economies. Regional cement markets experience peaks
and valleys correlated with regional construction cycles. Also, demand for
cement is seasonal, particularly in northern states where inclement weather
affects construction activity. While the impact on the Company of construction
cycles in individual regions may be mitigated to some degree by the geographic
diversification of the Company, profitability is very sensitive to shifts in
the balance between supply and demand. As a consequence, the Company's cement
segment sales and earnings follow a similar cyclical pattern.
The following table sets forth certain information regarding the
geographic area served by each of the Company's cement plants and the location
of the Company's distribution terminals in each area. The Company has a total
of 11 cement storage and distribution terminals, which are strategically
located to extend the sales areas of its plants.
Plant Location Principal Geographic Areas Distribution Terminals
-------------- -------------------------- ----------------------
Buda, Texas Texas and western Louisiana Corpus Christi, TX
Houston, TX
Orange, TX
Roanoke (DFW), TX
Waco, TX
LaSalle, Illinois Illinois and southern Wisconsin Hartland, WI
Laramie, Wyoming Wyoming, Utah, northern Rock Springs, WY
Colorado, western Nebraska Salt Lake City, UT
and eastern Nevada Denver, CO
North Platte, NE
Fernley, Nevada Nevada (except Las Vegas) and Sacramento, CA
northern California
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Cement is distributed directly to customers principally by common
carriers, customer pick-up and, to a lesser extent, trucks owned by the
Company. The Company transports cement principally by rail to its storage and
distribution terminals. Cement is distributed primarily in bulk, but also in
paper bags. No single customer accounted for as much as 10% of the Company's
cement sales during fiscal 1998.
Sales are made on the basis of competitive prices in each area. As is
customary in the industry, the Company does not typically enter into long-term
sales contracts, except with respect to major construction projects.
Competition. The cement industry is extremely competitive as a result
of multiple domestic suppliers and, beginning in the 1980's, the importation of
foreign cement through various terminal operations. Despite price inelasticity
of overall cement demand, competition among producers and suppliers of cement
is based primarily on price, with consistency of quality and service to
customers being important but of lesser significance. Price competition among
individual producers and suppliers of cement within a geographic area is
intense because of the fungible nature of the product. The U.S. cement
industry is fragmented into regional geographic areas rather than a single
national selling area. Because of cement's low value-to-weight ratio, the
relative cost of transporting cement is high and limits the geographic area in
which each company can market its products economically. No one cement company
has a distribution of plants extensive enough to serve all geographic areas.
The number of principal competitors of the Company's Texas, Illinois, Wyoming
and Nevada plants are seven, eight, four and six, respectively, operating in
these regional areas.
The United States cement industry comprises approximately 50 companies
which own 107 gray cement plants with approximately 83.5 million tons of
clinker manufacturing capacity (approximately 87.7 million tons of cement
manufacturing capacity assuming a 105% conversion ratio). The PCA estimates
that cement demand totaled approximately 106 million tons in 1997, with
approximately 18% of such demand being satisfied by imported cement. Based on
the level of demand, the Company estimates that the cement industry as a whole
operated in excess of 95% of its aggregate manufacturing capacity during 1997.
During 1997, several companies announced or began capital projects to enhance
the productivity and incrementally expand the capacity of existing cement
manufacturing facilities.
Cement imports into the United States occur primarily to supplement
domestic cement production during peak demand periods. Throughout most of the
1980's, however, competition from low-priced imported cement in most coastal
and border areas of the U.S. grew significantly, which included the company's
Fernley, Nevada and Buda, Texas plants' markets. According to the PCA, the
1980's was a period of relatively high cement imports. This high level of
imports depressed cement prices during a period of strong U.S. cement demand.
As a result of antidumping petitions filed by a group of domestic cement
producers, significant antidumping duty cash deposit requirements have been
imposed on cement imported from Mexico since 1990 and from Japan since 1991.
Venezuela signed a suspension agreement requiring it not to export to the U.S.
at dumped prices. The existing antidumping orders and suspension agreement
have contributed substantially to an improvement in the condition of the U.S.
cement industry.
In the case of Mexico, margins to calculate cash deposit rates and the
resulting antidumping duties are subject to annual review by the Department of
Commerce and appeal to the U.S. Court of International Trade and the U.S. Court
of Appeals for the Federal Circuit or to binational dispute panels under the
North American Free Trade Agreement ("NAFTA").
Pursuant to the Uruguay Round Agreement, the General Agreement on
Tariffs and Trade ("GATT") and the GATT Antidumping Code were superseded on
January 1, 1995, by a new GATT, which will be administered by the newly created
World Trade Organization. The antidumping orders outstanding against cement
and clinker from Mexico and Japan and the suspension agreement on cement and
clinker from Venezuela will remain in force. New legislation passed by
Congress in December 1994, however, requires the initiation of "sunset" reviews
of the antidumping orders against Mexico and Japan and the suspension agreement
with Venezuela prior to January 2000 to determine whether these antidumping
orders and the suspension agreement should terminate or remain in effect.
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NAFTA thus far has had no material adverse effect on the antidumping
duty cash deposit rates imposed on gray portland cement and clinker imported
from Mexico. The Company does not believe that NAFTA will have a material,
adverse effect on the foregoing antidumping duty cash deposit rates in the near
future. A substantial reduction or elimination of the existing antidumping
duties as a result of GATT, NAFTA or any other reason could adversely affect
the Company's results of operations.
Capital Expenditures. Capital expenditures during fiscal 1998,
amounted to $3.5 million for the cement segment compared with $2.9 million and
$13.1 million in fiscal 1997 and 1996, respectively. Capital outlays in fiscal
1999, have been budgeted at approximately $11.7 million. Approximately 6% of
the budgeted fiscal 1999 total is related to compliance with environmental
regulations. Approximately $9.0 million of the fiscal 1999 budget total is for
the LaSalle, Illinois plant clinker capacity increase and new finish mill
project.
Environmental Matters. The cement manufacturing industry, including
the operations of the Company, is regulated by federal, state and local laws
and regulations pertaining to several areas including human health and safety
and environmental compliance. The Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986, as well as analogous laws in
certain states, create joint and several liability for the cost of cleaning up
or correcting releases to the environment of designated hazardous substances.
Among those who may be held jointly and severally liable are those who
generated the waste, those who arranged for disposal, those who owned or
operated the disposal site or facility at the time of disposal, and current
owners. In general, this liability is imposed in a series of governmental
proceedings initiated by the identification of a site for initial listing as a
"Superfund site" on the National Priorities List or a similar state list and
the identification of potentially responsible parties who may be liable for
cleanup costs. None of the Company's sites are listed as a "Superfund site."
The Company's operations are also potentially affected by the Resource
Conservation and Recovery Act ("RCRA"), which is the primary federal statute
governing the management of solid waste and which includes stringent regulation
of solid waste that is considered hazardous waste. The Company's operations
generate nonhazardous solid waste which may include cement kiln dust ("CKD").
Because of a RCRA exemption, known as the Bevill Amendment, CKD generated in
the Company's operations is currently not considered a hazardous waste under
RCRA, pending completion of a study and recommendations to Congress by the U.S.
Environmental Protection Agency ("U.S. EPA"). Nevertheless, such CKD is still
considered a solid waste and is regulated primarily under state environmental
laws and regulations. The U.S. EPA completed its review of CKD and has decided
to promulgate regulations to govern the handling and disposal of CKD which will
supersede the Bevill Amendment. The Bevill Amendment will remain in effect
until those regulations are in place.
In the past, the Company collected and stored CKD on-site at its
cement plants. The Company continues to store such CKD at its Illinois, Nevada
and Wyoming cement plants and at a former plant site in Corpus Christi, Texas,
which is no longer in operation. The Company's cement kilns utilize coal,
coke, natural gas, minimal amounts of self-generated waste oil, and scrap tires
in the Illinois and Texas plants, as fuel. Currently, the Company recycles
substantially all CKD related to present operations at all of its cement
facilities. When the U.S. EPA removes the CKD exemption and develops
particular CKD management standards in the future, the Company might be
required to incur significant costs in connection with its CKD. CKD that comes
in contact with water might produce a leachate with an alkalinity high enough
to be classified as hazardous and might also leach certain hazardous trace
metals therein.
In April 1992, one of the Company's subsidiaries, Nevada Cement
Company ("NCC"), was identified as a potentially responsible party under CERCLA
by the U.S. EPA at the North American Environmental, Inc. storage facility in
Clearfield, Utah ("North American Environmental Site") because of allegations
that NCC arranged for the disposal of hazardous substances at that site. The
Company has records indicating that all of the hazardous substances originating
from NCC that were temporarily stored at the North American Environmental Site
were removed from the storage facility and destroyed in accordance with
applicable laws. The Company is aware of no current estimates of the total
remediation costs or the total volume of waste
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associated with this site. The U.S. EPA has identified the NCC cement plant
site in Fernley, Nevada, as a potential hazardous waste site and entered it
into the Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLIS") data base in January 1992. U.S. EPA performed
an assessment in 1992, under CERCLA at the NCC plant because of concerns over
an unlined disposal pond and a citizen complaint about disposal of wastes. NCC
cleaned up the contaminated soil in the vicinity of this pond under the
jurisdiction of the Nevada Department of Conservation and Natural Resources,
Division of Environmental Protection at an immaterial cost to NCC. There is no
assurance that the Company will not incur material liability in connection with
the North American Environmental Site or the contamination concerns at the
Fernley, Nevada plant site.
Another RCRA concern in the cement industry involves the historical
disposal of refractory brick containing chromium. Such refractory brick was
formerly widely used in the cement industry to line cement kilns. The Company
currently crushes spent refractory brick and uses it as raw feed, but such
brick does not contain chromium.
The Clean Air Act Amendments of 1990 (the "Amendments") provided
comprehensive federal regulation of all sources of air pollution and
established a new federal operating permit and fee program for virtually all
manufacturing operations. The Amendments will likely result in increased
capital and operational expenses for the Company in the future, the amounts of
which are not presently determinable. The Company's U.S. operations have
submitted detailed permit applications and will pay increased recurring permit
fees. In addition, the U.S. EPA is developing regulations for toxic air
pollutants under these Amendments for a broad spectrum of industrial sectors,
including portland cement manufacturing. The U.S. EPA has indicated that the
new maximum available control technology standards could require significant
reduction of air pollutants below existing levels prevalent in the industry.
Management has no reason to believe, however, that these new standards would
place the Company at a competitive disadvantage.
The Federal Water Pollution Control Act, commonly known as the Clean
Water Act ("Clean Water Act"), provides comprehensive federal regulation of all
sources of water pollution. In September 1992, the Company filed a number of
applications under the Clean Water Act for National Pollutant Discharge
Elimination System ("NPDES") stormwater permits.
Management believes that the Company's current procedures and
practices in its operations, including those for handling and managing
materials, are consistent with industry standards. Nevertheless, because of
the complexity of operations and compliance with environmental laws, there can
be no assurance that past or future operations will not result in operational
errors, violations, remediation or other liabilities or claims. Moreover, the
Company cannot predict what environmental laws will be enacted or adopted in
the future or how such future environmental laws will be administered or
interpreted. Compliance with more stringent environmental laws, as well as
potentially more vigorous enforcement policies of regulatory agencies or
stricter interpretation of existing environmental laws, could necessitate
significant capital outlays.
With respect to some of the Company's quarries used for the extraction
of raw materials for its cement and gypsum wallboard operations and for the
mining of aggregates for its aggregate operations, the Company is obligated
under certain of its permits and certain regulations to engage in reclamation
of land within the quarries upon completion of extraction and mining. The
Company generally accrues the reclamation costs for a specific quarry over the
life of the quarry.
Gypsum Wallboard Operations
Company Operations. The Company owns and operates three gypsum
wallboard manufacturing facilities, two located in Albuquerque and nearby
Bernalillo, New Mexico and one located at Gypsum, Colorado. The Company mines
and extracts gypsum and then manufactures gypsum wallboard by first pulverizing
quarried gypsum, then placing it in a calciner for conversion into plaster.
The plaster is mixed with various chemicals and water to produce a mixture
known as slurry, which is inserted between two continuous sheets of recycled
paperboard on a high-speed production line and allowed to harden. The
resulting sheets of gypsum wallboard are then cut to appropriate lengths, dried
and bundled for sale.
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The Albuquerque plant was acquired in 1985, and was operated until
early 1991. Following the start-up of the new Bernalillo plant in the spring
of 1990, the Company elected to discontinue operations at the Albuquerque plant
due to weak market conditions. Operations at the Albuquerque plant were
recommenced in May 1993, due to improvements in wallboard demand and prices.
The Gypsum, Colorado gypsum wallboard plant and accompanying electric power
cogeneration facility were purchased on February 26, 1997. The plant
originally commenced production in early 1990 and had been operated by an
independent producer until the acquisition by CXP.
The following table sets forth certain information regarding these
plants:
Rated Annual Gypsum Estimated Minimum
Wallboard Capacity Gypsum Rock
Location (MMSF)(1) Reserves (years)
-------- ------------------- -----------------
Albuquerque, New Mexico 270 80 (2)
Bernalillo, New Mexico 445 80 (2)
Gypsum, Colorado 380 17 (3)
------
Total 1,095
======
-------------------------
(1) Million Square Feet ("MMSF")
(2) The same reserves serve both plants.
(3) Proven reserves only. See Raw Materials and Fuel
Supplies section for additional reserves.
The Company's net gypsum wallboard production totaled 1,090 MMSF in
fiscal 1998 and 715 MMSF in fiscal 1997. Total gypsum wallboard sales were
1,089 MMSF in fiscal 1998 and 726 MMSF in fiscal 1997.
In fiscal 1998, the Company commenced a major capital project to
modernize, upgrade and expand its Albuquerque, New Mexico plant which will
increase the plant's annual productive capacity by 60 MMSF, allow for the
production of 54" gypsum wallboard and significantly reduce fuel cost.
Completion of the project is estimated for the fall of 1998. The Company also
initiated a major capital project during fiscal 1998 to expand the annual
productive capacity of the Gypsum, Colorado plant by approximately 60% or 240
MMSF. Completion of the project is estimated for the fall of 1999.
Raw Materials and Fuel Supplies. The Company mines and extracts
gypsum rock, the principal raw material used in the manufacture of gypsum
wallboard, from mines and quarries owned, leased or subject to claims owned by
the Company and located near its plants. The New Mexico and Colorado mines and
quarries are estimated to contain approximately 50 million tons and 10 million
tons of proven and probable gypsum reserves, respectively. Based on its
current production capacity, the Company estimates that the life of its
existing gypsum rock reserves is approximately 80 years and 17 years,
respectively.
The Colorado plant controls 99 unpatented placer mining claims on
1,980 acres of land under the jurisdiction of the U.S. Bureau of Land
Management. The land, which is adjacent to the present quarry, has not been
drilled, and therefore the reserves cannot be classified as proven or probable.
Management believes that these claims contain substantial quantities of gypsum
rock.
Paper used in manufacturing gypsum wallboard is purchased by the
Company from third-party suppliers. Approximately 65% of the Company's paper
requirements are under two evergreen paper contracts with one contract having a
six-month notice provision for termination and the other a twelve-month notice
provision for termination. The remainder of the Company's paper requirements
are purchased on the open market from various suppliers. The Company does not
believe that the loss of a supplier would have a material, adverse effect on
its business.
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11
The Company's gypsum wallboard manufacturing operations use large
quantities of natural gas and electrical power. Substantially all of the
Company's natural gas requirements for its gypsum wallboard plants are
currently provided by two gas producers under gas supply agreements expiring in
May, 1999 for both the New Mexico and Colorado plants. If the agreements are
not renewed, the Company expects to obtain its gas supplies from other local
gas producers at competitive prices. Electrical power is supplied to the
Company's New Mexico plants at standard industrial rates by a local utility.
The Company's Albuquerque plant adopted an interruptible power supply agreement
which may expose it to some production interruptions during periods of power
curtailment. Power for the Gypsum, Colorado plant is supplied by the
cogeneration power facility acquired along with the gypsum wallboard plant in
February 1997. Currently, the cogeneration power facility supplies only the
power needs of the gypsum wallboard plant and does not sell any power to third
parties.
Sales and Distribution. The principal sources of demand for gypsum
wallboard are (i) residential construction, (ii) repair and remodeling and
(iii) non-residential construction, which the Company estimates accounted for
approximately 45%, 37% and 18%, respectively, of historical industry sales.
While the gypsum wallboard industry remains highly cyclical, recent growth in
the repair and remodeling segment, together with certain trends in new
residential construction activity, have partially mitigated the impact of
fluctuations in overall levels of new construction.
Although the percentage of gypsum wallboard shipments accounted for by
new residential construction has declined in recent years, new residential
construction remains the largest single source of gypsum wallboard demand. In
recent years, demand has been favorably impacted by a shift toward more single-
family detached housing within the new residential construction segment and by
an increase in the size of the average single-family detached home.
The size of the total residential repair and remodel market grew to an
estimated record $121 billion in 1997, up from $46 billion in 1980. Although
data on commercial repair and remodel activity is not readily available, the
Company believes that this segment has also grown significantly in recent
years. The growth of the repair and remodeling market is primarily due to the
aging of housing stock, remodeling of existing buildings and tenant turnover in
commercial space. In addition, repair and remodeling activity has benefitted
from the fact that it has increasingly come to be viewed by the homeowner,
particularly in recessionary periods, as a low cost alternative to purchasing a
new house.
The Company sells gypsum wallboard to numerous building materials
dealers, gypsum wallboard specialty distributors, home center chains and other
customers located throughout the United States. One customer with multiple
shipping locations accounted for approximately 15% of the Company's total
gypsum wallboard sales during fiscal 1998.
During fiscal 1998, the principal states in which the Company had
gypsum wallboard sales were Colorado, Florida, Texas, New Mexico, Georgia and
Illinois. Prior to fiscal 1992, most of the Company's gypsum wallboard sales
were made in the western United States, with significant sales in California.
However, due to the sharp decline in construction activity in California during
the early 1990's, the Company has focused the distribution of its gypsum
wallboard in various other areas of the country.
Although gypsum wallboard is distributed principally in regional
areas, the Company and certain other producers have the ability to ship gypsum
wallboard by rail outside their usual regional distribution area to take
advantage of these other regional increases in demand. The Company owns or
leases 168 railcars for transporting gypsum wallboard. In addition, in order
to facilitate distribution in certain strategic areas, the Company maintains a
distribution center in Albuquerque, New Mexico and four reload yards in
Florida, Alabama and Illinois. The Company's rail distribution capabilities
permit it to reach customers in all states west of the Mississippi River and
many eastern states. During fiscal 1998, approximately 28% of the Company's
sales volume of gypsum wallboard was transported by rail.
Competition. There are nine principal manufacturers of gypsum
wallboard operating a total of 73 plants. The Company estimates that the three
largest producers - USG Corporation, National Gypsum Company and
Georgia-Pacific Corporation - account for over 80% of gypsum wallboard sales in
the United
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States. In 1996 and early 1997, the industry experienced some consolidation,
the largest being Georgia-Pacific Corporation's purchase of the gypsum
wallboard business of Domtar, Inc. In general, a number of the Company's
competitors in the gypsum wallboard industry have greater financial,
manufacturing, marketing and distribution resources than the Company.
Furthermore, certain of its competitors have vertically integrated operations
consisting of gypsum wallboard manufacturing plants, paper mills and
distribution centers, which may provide them with certain cost advantages over
the Company.
Competition among gypsum wallboard producers is primarily on a
regional basis, with local producers benefitting from lower transportation
costs, and to a lesser extent on a national basis. Because of the commodity
nature of the product, competition is based principally on price and, to a
lesser extent, on product quality and customer service.
Total United States gypsum wallboard production capacity is estimated
currently at 27.5 billion square feet per year. The Gypsum Association, an
industry trade group, estimates that total 1997 gypsum wallboard shipments were
approximately 26.5 billion square feet, resulting in industry capacity
utilization of over 95%. Imports are not a major factor in the gypsum
wallboard industry.
During 1997, some of the Company's competitors in the gypsum wallboard
industry commenced, or announced an intention to commence, capital expansion
projects to construct new gypsum wallboard manufacturing facilities or to
expand existing facilities. The completion of these projects, if all of them
are actually started and carried through to completion, could increase domestic
industry capacity over the next three or four years by up to 24%. However,
some or all of this additional capacity could be absorbed if there is an
increase in domestic demand (over the past 25 years demand for gypsum wallboard
in the United States has increased at an average annual rate of 3 1/2%) and/or
if less efficient plants are shut down. If during the next three or four years
there is no corresponding increase in domestic demand for gypsum wallboard
and/or no corresponding shut down of inefficient or marginally efficient gypsum
wallboard plants, it is possible that gypsum wallboard prices could decline,
thus impacting future results in the Company's Gypsum Wallboard group.
Capital Expenditures. Capital expenditures during fiscal 1998 for the
gypsum wallboard segment amounted to $7.9 million; $52.8 million (including
$52 million for the Eagle acquisition) in fiscal year 1997; and $889,000 in
fiscal year 1996. Capital outlays in fiscal 1999 have been budgeted at
approximately $9.4 million with no expenditures related to compliance with
environmental regulation. The majority of the fiscal 1998 and budgeted fiscal
1999 expenditures are for the Albuquerque and Eagle plant upgrade projects.
Environmental Matters. The gypsum wallboard industry is subject to
environmental regulations similar to those governing the Company's cement
operations. None of the Company's gypsum wallboard operations are presently
the subject of any local, state or federal environmental proceedings or
inquiries. The Company does not, and has not used asbestos in any of its
gypsum wallboard products.
In the fiscal year ended March 31, 1996, one of the Company's gypsum
wallboard subsidiaries entered into a consent order with the U.S. EPA to settle
claims of the U.S. EPA against potentially responsible parties with respect to
a waste disposal facility in Broomfield, Colorado. The Company's subsidiary
contracted with the facility for the disposal of a small amount of liquid
waste. The facility was eventually closed by governmental agencies. The
Company's subsidiary settled this matter by entering into the consent order and
paying approximately $50 into a settlement fund.
CONCRETE AND AGGREGATES OPERATIONS
Company Operations. Readymix concrete, a versatile, low-cost building
material used in almost all construction, involves the mixing of cement, sand,
gravel, crushed stone and water to form concrete which is then sold and
distributed to numerous construction contractors. Concrete is produced in
batch plants and transported to the customer's job site in mixer trucks.
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13
The construction aggregates business consists of the mining,
extraction, production and sale of crushed stone, sand, gravel and lightweight
aggregates such as expanded clays and shales. Construction aggregates of
suitable characteristics are employed in virtually all types of construction,
including the production of portland and asphaltic cement concrete mixes and in
highway construction and maintenance.
As in the cement industry, the demand for readymix concrete and
aggregates largely depends on regional levels of construction activity. The
construction sector is subject to the vagaries of weather conditions, the
availability of financing at reasonable rates and overall fluctuations in
regional economies, and therefore tends to be cyclical. Both the concrete and
aggregates industries are highly fragmented, with numerous participants
operating in local areas. Because the cost of transporting concrete and
aggregates is very high relative to product values, producers of concrete and
aggregates typically can sell their products only in areas within 100 miles of
their production facilities. Barriers to entry in each industry are low,
except with respect to environmental permitting requirements for new aggregate
production facilities and zoning of land to permit mining and extraction of
aggregates.
The Company produces and distributes readymix concrete north of
Sacramento, California and in Austin, Texas. The following table sets forth
certain information regarding these operations:
Location Number of Plants Number of Trucks
-------- ---------------- ----------------
Northern California 5 40
Austin, Texas 5 57
--- ---
Total 10 97
=== ===
The Company's production of readymix concrete reached a ten-year peak
of 992,000 cubic yards in 1986. In response to decreased demand in the northern
California and Austin areas, production declined to 430,000 cubic yards in
fiscal 1990. Since such date, production has increased each successive year as
market conditions continue to improve. The Company believes that it has the
capacity to increase its concrete production from existing levels by adding to
its fleet of trucks. The Company's net readymix concrete production was
672,000 cubic yards is fiscal 1998 and 603,000 cubic yards in fiscal 1997.
The Company conducts aggregate operations near its concrete facilities
in northern California and Austin, Texas. Aggregates are obtained principally
by mining and extracting from quarries owned or leased by the Company and
located in close proximity to its plants. The following table sets forth
certain information regarding these operations:
Estimated Annual
Production Capacity Estimated Minimum
Location Types of Aggregates (Thousand tons)(1) Reserves (Years)
- -------- ------------------- ----------------- ---------------------
Northern California Sand and Gravel 1,285 100
Austin, Texas Limestone 1,020 70
-----
Total 2,305
=====
- --------------------------------------
(1) Based on single-shift operation.
The Company's total net aggregate sales were 2.6 million tons in
fiscal 1998 and 2.1 million tons in fiscal 1997. Total aggregates production
was 2.8 million tons in fiscal 1998 and 2.3 million tons in fiscal 1997. A
portion of the company's total aggregates production is used internally by the
company's readymix concrete operations.
Raw Materials. The Company supplies 100% and 89% of its cement
requirements for its Austin and northern California concrete operations,
respectively. The Company supplies approximately 31% and 28%, respectively, of
its aggregates requirements for its Austin and northern California concrete
operations. The Company obtains the balance of its cement and aggregates
requirements from multiple sources in each of these areas.
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14
The Company is engaged in a dispute with two federal government
agencies over title to a portion of its principal aggregates deposit in
northern California. Of the property's 10,000 acres and estimated two billion
tons of aggregates, approximately 6,500 acres containing reserves which the
Company estimates at over one billion tons are not in dispute. See "Item 3,
Legal Proceedings."
Sales and Distribution. The Company sells readymix concrete to
numerous contractors and other customers in each plant's selling area. The
Company's batch plants in Austin and northern California are strategically
located to serve each selling area. Concrete is delivered from batch plants by
trucks owned by the Company.
The Company sells aggregates to building contractors and other
customers engaged in a wide variety of construction activities. Aggregates are
delivered from the Company's aggregate plants by common carriers, customer
pick-up and, to a lesser extent, trucks owned by the Company. No single
customer accounted for as much as 10% of the Company's concrete and aggregates
sales during fiscal 1998.
During the past several years, the Company has been engaged in
negotiations with U.S. government officials to obtain the rights to build a
rail line across Beale Air Force Base that would permit the Company to
transport aggregates from its principal deposit north of Sacramento, California
to the San Francisco Bay Area. The north Bay Area, in particular, is expected
to experience a shortage of sand and gravel within the next ten years. In
fiscal 1998, the Company received a letter from the United States Department of
the Air Force ("USAF") indicating that the USAF is terminating the lease
negotiations for the proposed right-of-way for the rail line due to the
changing mission of Beale Air Force Base. The Company is attempting to secure
an alternative rail link to its aggregates deposit.
Competition. Competition among concrete producers within the
Company's northern California and Austin selling areas is strong. The
Company's competitors include five small and four large concrete producers in
the northern California and Austin areas, respectively.
Both concrete and aggregates are commodity products. Each type of
aggregate is sold in competition with other types of aggregates and in
competition with other producers of the same type of aggregates. Accordingly,
competition in both the concrete and aggregates businesses is based principally
on price and, to a lesser extent, on product quality and customer service.
Capital Expenditures. Capital expenditures during fiscal 1998,
amounted to $2.0 million for the concrete and aggregates segment compared with
$2.6 million and $1.7 million in fiscal 1997 and 1996, respectively. Capital
outlays in fiscal 1999, have been budgeted at approximately $506,000.
Approximately 19% of the budgeted fiscal 1999 total is related to compliance
with environmental regulations.
Environmental matters. The concrete and aggregates industry is
subject to environmental regulations similar to those governing the Company's
cement operations. None of the Company's concrete or aggregates operations are
presently the subject of any local, state or federal environmental proceeding
or inquiries.
EMPLOYEES
The Company and its subsidiaries had approximately 1,076 employees at
March 31, 1998. Approximately 19% of the Employees are represented by
collective bargaining units. The number of employees of the Company as opposed
to its subsidiaries is 11.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations (incorporated by reference herein from the 1998 CXP
Annual Report) and other sections of the 1998 CXP Annual Report and this Annual
Report on Form 10-K contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are based on current
expectations, estimates and projections concerning the
12
15
general state of the economy and the industry and market conditions in certain
geographic locations in which the Company operates. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual results and
outcomes may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements as a result of new information, future
events or other factors.
The Company's business is cyclical and seasonal, the effects of which
cannot be accurately predicted. Risks and uncertainties include changes in
general economic and market conditions such as changes in interest rates,
adverse weather, unexpected operational difficulties, changes in governmental
and public policy including increased environmental regulation, public
infrasture expenditures, competition, and the availability of raw materials.
Other risks and uncertainties could also affect the outcome of the
forward-looking statements.
ITEM 2. PROPERTIES
The Company operates cement plants, quarries and related facilities at
Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The Buda
and LaSalle plants are each owned by separate joint ventures in which CXP has a
50% interest. The Company's principal aggregate plants and quarries are
located in Austin, Texas and Marysville, California. In addition, the Company
operates gypsum wallboard plants in Albuquerque and nearby Bernalillo, New
Mexico and Gypsum, Colorado. None of the Company's facilities are pledged as
security for any debts.
See "Item 1. Business" on pages 1-13 of this Report for additional
information relating to the Company's properties.
ITEM 3. LEGAL PROCEEDINGS
The Company's Western Aggregates, Inc. subsidiary ("WAI") has received
notices of possible claims against WAI in a title dispute relating to WAI's
leasehold interest under a 99-year mineral lease on the aggregates in 10,000
acres of property north of Sacramento, California commonly known as the Yuba
Goldfields. WAI is currently negotiating with the State Lands Commission of
the State of California to resolve title problems in the Yuba Goldfields
involving the historic and current riverbeds of the Yuba River. Additionally,
the Company has received preliminary indications that the U.S. Bureau of Land
Management and U.S. Army Corps of Engineers will assert claims to property
interests affecting the aggregates in approximately 3,500 acres in the Yuba
Goldfields. The United States has also indicated that it may have certain
other property interests in an additional 1,300 acres in the Yuba Goldfields
that may affect WAI's ability to mine aggregates from this property and WAI has
requested further clarification from the United States regarding the effect of
these other property interests. WAI has also been involved in negotiations
with the United States in an attempt to negotiate a land exchange in an effort
to resolve the federal claims to lands within the Yuba Goldfields, although the
United States indicated in late fiscal 1998 that the United States desired to
terminate negotiations with WAI regarding a land exchange.
WAI notified its lessor, Yuba WestGold, Inc. ("Yuba"), and the
lessor's successor-in-interest, Western Water Company ("Western Water"), of
WAI's claims against both parties for title defects in the Yuba Goldfields.
Yuba filed for protection under Chapter 11 of the United States Bankruptcy Code
in September 1992, and subsequent to the April 1994 confirmation of Yuba's plan
of reorganization, WAI received payments in cash from Yuba's bankruptcy estate
amounting to approximately $1.05 million in satisfaction of the claims filed by
WAI in such bankruptcy proceedings. In April 1994, WAI completed a transaction
with Western Water to settle WAI's claims that Western Water breached its
obligations to cure the Yuba Goldfields title defects. As a part of the
settlement, Western Water released WAI from its obligation under the mineral
lease to pay annual production royalties to Western Water for the remainder of
the lease term.
At the time WAI entered into its mineral lease in 1987, WAI obtained a
$5.525 million policy of title insurance from Western Title Insurance Company
to insure a significant majority of its leasehold estate in
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the Yuba Goldfields. WAI notified Western Title Insurance Company's successor,
Fidelity National Title Insurance Company ("Fidelity"), of possible insured
claims of the United States to lands within the Yuba Goldfields and made
demands upon Fidelity to take action to cure the title claims of the United
States that encumbered WAI's leasehold estate. Because WAI believed that
Fidelity breached its obligation under the title policy and acted in bad faith,
in October 1996, WAI filed a civil action against Fidelity in Superior Court
in Orange County, California seeking compensatory and punitive damages. In
March 1998, WAI and Fidelity entered into a settlement agreement and settled
the claims of WAI against Fidelity. While the amount of the settlement payment
from Fidelity to WAI is confidential pursuant to the terms of the settlement
agreement, the Company believes that, after taking into account funds received
by WAI from Yuba, Western Water, and Fidelity as described above, the
additional funds, if any, required to be paid by WAI to resolve the title
claims of the United States and the State of California to lands in the Yuba
Goldfields will not have a material adverse effect on the financial condition
or the results of operations of the Company.
The Company cannot predict the outcome of negotiations with the United
States or the State of California. However, even if such negotiations are
unsuccessful in resolving the adverse title claims to lands in the Yuba
Goldfields, the portion of WAI's mineral lease which is not in dispute contains
sufficient estimated reserves to meet WAI's current mining requirements for
aggregates for a period of more than 100 years.
In addition to the proceedings described above, the Company is a party
to certain other ordinary legal proceedings incidental to its business. In
general, although the outcome of litigation is inherently uncertain, the
Company believes that none of the litigation matters in which the Company or
any subsidiary is involved, if determined unfavorably to the Company or any
subsidiary, would have a material, adverse effect on the consolidated financial
condition or operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF CXP (SEE ITEM 10 OF PART III)
The following is an alphabetical listing of the Company's executive
officers, as such term is defined under the rules and regulations of the
Securities and Exchange Commission. All of these executive officers, except
for Mr. House, have been employed by the Company and/or one or more
subsidiaries of the Company for the past five years. All executive officers
were elected by the Board of Directors of the Company on July 17, 1997, except
for Mr. House and Mr. Rowley who were appointed by the Chairman and Chief
Executive Officer, pursuant to the By Laws of the Company in January 1998, to
serve until the next Annual Meeting of Directors or until their respective
successors are duly elected and qualified or appointed as the case may be.
There is no family relationship between any of these officers.
Name Age Positions with CXP
-------- ------- ------------------------------------------
O. G. (Greg) Dagnan 58 Chairman and Chief Executive Officer
(Chairman since January 1998; Chief Executive
Officer since January 1990; President from
January 1990 through December 1997;
Senior Vice President - Operations from
August 1989 to January 1990).
Richard D. Jones, Jr. 52 President and Chief Operating Officer
(President since January 1998; Chief Operating
Officer since January 1990; Executive Vice President
from January 1990 through December 1997).
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17
Name Age Positions with CXP
-------- ------- -----------------------------------------------------
Arthur R. Zunker, Jr. 54 Senior Vice President - Finance and Treasurer
(Senior Vice President - Finance and Treasurer since
January 1994; Senior Vice President - Administration
from August 1984 to January 1994).
H. David House 56 Executive Vice President - Gypsum
(Executive Vice President - Gypsum since January 1998;
President of American Gypsum Company since June
1997; President of James Hardie Gypsum Division from
August 1993 through May 1996).
Steven R. Rowley 45 Executive Vice President - Cement
(Executive Vice President - Cement since January 1998;
Executive V.P. of Illinois Cement Company from June
1995 through December 1997; Plant Manager at Nevada
Cement Company from April 1991 through May 1995).
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(See Item 7 below.)
ITEM 6. SELECTED FINANCIAL DATA
(See Item 7 below.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information called for by Items 5, 6 and 7 is incorporated herein
by reference to the information set forth under the following captions (on the
page or pages indicated) in the 1998 CXP Annual Report:
Items Caption in the 1998 CXP Annual Report Pages
----- ------------------------------------- -----
5 Stock Prices and Dividends 37
5 Indebtedness (Note C to Consolidated Financial Statements
of CXP) 21
6 Summary of Selected Financial Data 34-35
7 Short-term Borrowings and Long-term Debt (Note C to Consolidated
Financial Statements of CXP) 21
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 29-32
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18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for in this Item 8 is incorporated herein by
reference to the 1998 CXP Annual Report as set forth in the index to
consolidated financial statements and schedules on page 17 of this Report (see
Item 14).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(See Item 11 below.)
ITEM 11. EXECUTIVE COMPENSATION
Except for the information relating to the executive officers of the
Company, which follows Item 4 of Part I of this Report, the information called
for by Items 10, 11, 12 and 13 is incorporated herein by reference to the
information included and referenced under the following captions (on the page
or pages indicated) in the Company's Proxy Statement dated June 18, 1998, for
the Company's July 16, 1998 Annual Meeting of Stockholders (the "1998 CXP Proxy
Statement"):
Items Caption in the 1998 CXP Proxy Statement Pages
----- --------------------------------------- -----
10 Election of Directors 2
10 Section 16(a) Compliance 11
11 Executive Compensation 6
12 Security Ownership of Management and
Certain Beneficial Owners 4
13 Certain Transactions 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(See Item 11 above.)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(See Item 11 above.)
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19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report.
(1) and (2) See the Index to Consolidated Financial Statements and Schedules
below for a list of the Financial Statements and Financial Statement schedules
filed herewith.
Index to Consolidated Financial Statements and Schedules
Reference
------------------
1998 CXP
Centex Construction Products, Inc. Annual Report Page
------------------
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Statements of Consolidated Earnings for the years ended March 31, 1998, 1997 & 1996 . . . . . . . . . . 14
Consolidated Balance Sheets as of March 31, 1998 & 1997 . . . . . . . . . . . . . . . . . . . . . . . . 15
Statements of Consolidated Cash Flows for the years ended March 31, 1998, 1997 & 1996 . . . . . . . . . 16
Statements of Consolidated Stockholders' Equity for the years ended March 31, 1998, 1997 & 1996 . . . . 17
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-27
Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Consolidated supporting schedules have been omitted either because the
required information is contained in notes to the consolidated financial
statements or because such schedules are not required or are not applicable.
(3) Exhibits
The information on exhibits required by this Item 14 is set forth in
the CXP Index to Exhibits appearing on page 19, 20 and 21 of this Report.
(b) Reports on Form 8-K:
None
17
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
June 19, 1998 /s/ O. G. DAGNAN
----------------------------------------
O. G. Dagnan, Director, Chairman of the
Board and Chief Executive Officer
(principal executive officer)
June 19, 1998 /s/ ARTHUR R. ZUNKER, JR.
----------------------------------------
Arthur R. Zunker, Jr., Senior Vice
President - Finance and Treasurer
(principal financial and
accounting officer)
June 19, 1998 /s/ ROBERT L. CLARKE
----------------------------------------
Robert L. Clarke, Director
June 19, 1998 /s/ LAURENCE E. HIRSCH
----------------------------------------
Laurence E. Hirsch, Director
June 19, 1998 /s/ DAVID W. QUINN
----------------------------------------
David W. Quinn, Director
June 19, 1998 /s/ HAROLD K. WORK
---------------------------------------
Harold K. Work, Director
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21
INDEX TO EXHIBITS
CENTEX CONSTRUCTION PRODUCTS, INC.
AND SUBSIDIARIES
Exhibit
Number Description of Exhibits
- ------- -----------------------
3.1 Restated Certificate of Incorporation of Centex
Construction Products, Inc. (the "Company")(filed
as Exhibit 3.1 to the Form S-8 Registration Statement
of the Company (No. 33-82928)(the "S-8 Registration
Statement"), filed on August 16, 1994, and incorporated
herein by reference)
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the S-8 Registration Statement and
incorporated herein by reference)
4.1 Form of Certificate evidencing Common Stock (filed as
Exhibit 4.1 to Amendment No. 3 to the Form S-1
Registration Statement of the Company (No. 33-74816),
filed on April 4, 1994, ("Amendment No. 3"), and
incorporated by reference herein)
4.2 Credit Agreement dated as of April 18, 1994, among the
Company, The First National Bank of Chicago,
individually and as agent, and the other lenders named
therein (filed as Exhibit 4.2 to the Annual Report on Form
10-K of the Company (File No. 1-12984) for the fiscal
year ended March 31, 1995 (the "Form 10-K") and
incorporated herein by reference)
4.3 Amendment No. 1 to the Credit Agreement, dated as of
March 20, 1996, among the Company, the First National
Bank of Chicago, individually and as agent, and the other
lenders named therein (filed as Exhibit 4.3 to the Annual
Report on Form 10-K of the Company (File No. 1-12984)
for the fiscal year ended March 31, 1996 and incorporated
herein by reference)
4.4* Amendment No. 2 to the Credit Agreement, dated as of
March 27, 1998, among the Company, the First National
Bank of Chicago, individually and as agent, and the other
lenders named therein
10.1 Joint Venture Agreement between Ilce, Inc. (f/k/a
Illinois Cement Company, Inc.) and RAAM Limited
Partnership, dated April 1, 1972, as amended (filed
as Exhibit 10.1 to the Form S-1 Registration
Statement (No. 33-74816) of the Company, filed on
February 4, 1994, (the "S-1 Registration Statement")
and incorporated herein by reference)
10.2 Joint Venture Agreement by and among Texas Cement
Company, the Company, and Lehigh Portland Cement
Company, dated March 25, 1986, as amended (filed as
Exhibit 10.2 to the S-1 Registration Statement) and
incorporated herein by reference)
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10.3 The Centex Construction Products, Inc. amended and restated
Stock Option Plan (filed as Exhibit 10.3 to the Annual Report
on Form 10-K of the Company (File No. 1-12984) for the fiscal
year ended March 31, 1997 and incorporated herein by
reference)(1)
10.4 Supplemental Executive Retirement Plan of Centex
Construction Products, Inc. (filed as Exhibit 10.4 to the
1995 Form 10-K and incorporated herein by reference)(1)
10.5 Indemnification Agreement dated as of April 19, 1994,
between the Company and Centex Corporation ("Centex")
(filed as Exhibit 10.5 to the 1995 Form 10-K
and incorporated herein by reference)
10.6 Tax Separation Agreement dated as of April 1, 1994,
among Centex, the Company and its subsidiaries
(filed as Exhibit 10.6 to the 1995 Form 10-K
and incorporated herein by reference)
10.7 Administrative Services Agreement dated as of
April 1, 1994, between the Company and Centex
Service Company (filed as Exhibit 10.7 to the 1995
Form 10-K and incorporated herein by reference)
10.8 Trademark License Agreement dated as of April 19, 1994,
between the Company and Centex (filed as Exhibit 10.8 to the
1995 Form 10-K and incorporated herein by reference)
10.9 Form of Indemnification Agreement between the
Company and each of its directors (filed as Exhibit
10.9 to Amendment No. 3 and incorporated herein by
reference)(1)
10.10 Limited Liability Company Unit Purchase Agreement (EGP),
dated as of December 5, 1997, among Centex American Gypsum
Company, Centex Eagle Gypsum Company, and Eagle-Gypsum
Products (filed as Exhibit 2.1 to the Company's Current Report
on Form 8-K (File No. 1-12984), filed on March 12, 1997,
(the "Form 8-K") and incorporated herein by reference)
10.11 Limited Liability Company Unit Purchase Agreement (NES),
dated as of December 5, 1997, among Centex American Gypsum
Company, CEGC Holding Company, and National Energy Systems,
Inc. (filed as Exhibit 2.2 to the Form 8-K and incorporated
herein by reference)
13** Annual Report to Stockholders of the Company for fiscal
year ended March 31, 1998 (the "Annual Report to Stockholders")
21* Subsidiaries of the Company
23* Consent of Independent Public Accountants
27* Financial Data Schedule
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* Filed herewith.
** With the exception of the information expressly incorporated by reference
in this Annual Report on Form 10-K from the Annual Report to Stockholders,
the Annual Report to Stockholders is not deemed filed with the Commission
as a part of this Annual Report on Form 10-K.
(1) Required to be identified as a management contract or a compensatory
plan or arrangement pursuant to Item 14(a)(3) of Form 10-K.
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