United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly period Ended
December 31, 2000
or
[ ] TRANSITION REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to _______
Commission File Number 1-12984
Centex Construction Products, Inc.
A Delaware Corporation
IRS Employer Identification No. 75-2520779
2728 N. Harwood
Dallas, Texas 75201
(214) 981-5000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Centex Construction Products, Inc. and Subsidiaries
Form 10-Q Table of Contents
December 31, 2000
Page | |||||||
Part I. FINANCIAL INFORMATION (unaudited) | |||||||
Item 1. | Consolidated Financial Statements | 1 | |||||
Consolidated Statements of Earnings for the Three Months Ended December 31, 2000 and 1999 | 2 | ||||||
Consolidated Statements of Earnings for the Nine Months Ended December 31, 2000 and 1999 | 3 | ||||||
Consolidated Statements of Comprehensive Earnings for the Three Months and Nine Months Ended December 31, 2000 and 1999 | 4 | ||||||
Consolidated Balance Sheets as of December 31, 2000 and March 31, 2000 | 5 | ||||||
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2000 and 1999 | 6 | ||||||
Notes to Unaudited Consolidated Financial Statements | 7-11 | ||||||
Item 2. | Management’s Discussion and Analysis of Results of Operations and Financial Condition | 11-16 | |||||
Part II. OTHER INFORMATION | |||||||
Item 6. Exhibits and Reports on Form 8-K | 17 | ||||||
SIGNATURES | 18 |
Centex Construction Products, Inc. and Subsidiaries
Part I. Financial Information
Consolidated Financial Statements
Item 1.
The consolidated financial statements include the accounts of Centex Construction Products, Inc. and subsidiaries (“CXP” or the “Company”), and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The Company suggests that these unaudited consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. In the opinion of the Company, all adjustments necessary to present fairly the information in the following unaudited consolidated financial statements of the Company have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.
1
Centex Construction Products, Inc. and Subsidiaries
Consolidated Statements of Earnings
(dollars in thousands, except per share data)
(unaudited)
For the Three Months Ended | December 31, | ||||||||
REVENUES | 2000 | 1999 | |||||||
Cement | $ | 39,599 | $ | 38,982 | |||||
Gypsum Wallboard | 30,612 | 56,506 | |||||||
Paperboard | 8,872 | — | |||||||
Concrete and Aggregates | 14,359 | 14,017 | |||||||
Other, net | 2,743 | 320 | |||||||
Less: Intersegment Sales | (5,775 | ) | (1,455 | ) | |||||
90,410 | 108,370 | ||||||||
COSTS AND EXPENSES | |||||||||
Cement | 23,074 | 27,238 | |||||||
Gypsum Wallboard | 30,004 | 24,892 | |||||||
Paperboard | 9,057 | — | |||||||
Concrete and Aggregates | 13,220 | 11,843 | |||||||
Less: Intersegment Purchases | (5,775 | ) | (1,455 | ) | |||||
Corporate General & Administrative | 1,158 | 1,230 | |||||||
Interest Expense (Income), net | 1,533 | (1,123 | ) | ||||||
72,271 | 62,625 | ||||||||
EARNINGS BEFORE INCOME TAXES | 18,139 | 45,745 | |||||||
Income Taxes | 6,603 | 16,651 | |||||||
NET EARNINGS | $ | 11,536 | $ | 29,094 | |||||
EARNINGS PER SHARE: | |||||||||
Basic | $ | 0.63 | $ | 1.53 | |||||
Diluted | $ | 0.63 | $ | 1.52 | |||||
AVERAGE SHARES OUTSTANDING: | |||||||||
Basic | 18,325,677 | 19,014,622 | |||||||
Diluted | 18,386,906 | 19,093,019 | |||||||
CASH DIVIDENDS PER SHARE | $ | 0.05 | $ | 0.05 | |||||
See notes to unaudited consolidated financial statements.
2
Centex Construction Products, Inc. and Subsidiaries
Consolidated Statements of Earnings
(dollars in thousands, except per share data)
(unaudited)
For the Nine Months Ended | December 31, | ||||||||
REVENUES | 2000 | 1999 | |||||||
Cement | $ | 129,417 | $ | 128,047 | |||||
Gypsum Wallboard | 111,028 | 155,976 | |||||||
Paperboard | 8,872 | — | |||||||
Concrete and Aggregates | 46,655 | 43,296 | |||||||
Other, net | 3,935 | 820 | |||||||
Less: Intersegment Sales | (9,400 | ) | (4,748 | ) | |||||
290,507 | 323,391 | ||||||||
COSTS AND EXPENSES | |||||||||
Cement | 81,272 | 83,916 | |||||||
Gypsum Wallboard | 79,740 | 73,713 | |||||||
Paperboard | 9,057 | — | |||||||
Concrete and Aggregates | 40,814 | 35,667 | |||||||
Less: Intersegment Purchases | (9,400 | ) | (4,748 | ) | |||||
Corporate General & Administrative | 3,520 | 3,512 | |||||||
Interest Income, net | (2,196 | ) | (2,371 | ) | |||||
202,807 | 189,689 | ||||||||
EARNINGS BEFORE INCOME TAXES | 87,700 | 133,702 | |||||||
Income Taxes | 31,923 | 48,667 | |||||||
NET EARNINGS | $ | 55,777 | $ | 85,035 | |||||
EARNINGS PER SHARE: | |||||||||
Basic | $ | 3.03 | $ | 4.41 | |||||
Diluted | $ | 3.02 | $ | 4.39 | |||||
AVERAGE SHARES OUTSTANDING: | |||||||||
Basic | 18,428,547 | 19,285,458 | |||||||
Diluted | 18,485,855 | 19,375,700 | |||||||
CASH DIVIDENDS PER SHARE | $ | 0.15 | $ | 0.15 | |||||
See notes to unaudited consolidated financial statements.
3
Centex Construction Products, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Earnings
(dollars in thousands)
(unaudited)
Three Months | |||||||||
Ended December 31, | |||||||||
2000 | 1999 | ||||||||
NET EARNINGS | $ | 11,536 | $ | 29,094 | |||||
OTHER COMPREHENSIVE EARNINGS BEFORE TAX: | |||||||||
Unrealized Gain on Investment in Securities | 570 | 0 | |||||||
COMPREHENSIVE EARNINGS BEFORE INCOME TAXES | 12,106 | 29,094 | |||||||
INCOME TAX RELATED TO OTHER ITEMS OF | |||||||||
COMPREHENSIVE EARNINGS | (200 | ) | 0 | ||||||
RECLASSIFICATION ADJUSTMENT, NET OF TAX | (1,268 | ) | 0 | ||||||
COMPREHENSIVE EARNINGS | $ | 10,638 | $ | 29,094 | |||||
Nine Months | |||||||||
Ended December 31, | |||||||||
2000 | 1999 | ||||||||
NET EARNINGS | $ | 55,777 | $ | 85,035 | |||||
OTHER COMPREHENSIVE EARNINGS BEFORE TAX: | |||||||||
Unrealized Gain on Investment in Securities | 4,703 | 0 | |||||||
COMPREHENSIVE EARNINGS BEFORE INCOME TAXES | 60,480 | 85,035 | |||||||
INCOME TAX RELATED TO OTHER ITEMS OF | |||||||||
COMPREHENSIVE EARNINGS | (1,646 | ) | 0 | ||||||
RECLASSIFICATION ADJUSTMENT, NET OF TAX | (1,268 | ) | 0 | ||||||
COMPREHENSIVE EARNINGS | $ | 57,566 | $ | 85,035 | |||||
See notes to unaudited consolidated financial statements.
4
Centex Construction Products, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
December 31, | March 31, | ||||||||||
2000 | 2000 | ||||||||||
ASSETS | (unaudited) | (*) | |||||||||
Current Assets - | |||||||||||
Cash and Cash Equivalents | $ | 11,755 | $ | 96,170 | |||||||
Accounts and Notes Receivable, net | 98,911 | 54,459 | |||||||||
Inventories | 52,401 | 38,582 | |||||||||
Total Current Assets | 163,067 | 189,211 | |||||||||
Property, Plant and Equipment - | 788,409 | 413,933 | |||||||||
Less Accumulated Depreciation | (191,117 | ) | (178,033 | ) | |||||||
Property, Plant & Equipment, net | 597,292 | 235,900 | |||||||||
Notes Receivable, net | 2,066 | 367 | |||||||||
Goodwill | 21,636 | 762 | |||||||||
Other Assets | 8,414 | 11,899 | |||||||||
$ | 792,475 | $ | 438,139 | ||||||||
CURRENT LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current Liabilities - | |||||||||||
Accounts Payable | $ | 38,351 | $ | 22,348 | |||||||
Accrued Liabilities | 51,420 | 49,112 | |||||||||
Current Portion of Long-term Debt | 80 | 80 | |||||||||
Income Taxes Payable | 3,143 | 1,447 | |||||||||
Total Current Liabilities | 92,994 | 72,987 | |||||||||
Long-term Debt | 272,928 | 400 | |||||||||
Deferred Income Taxes | 37,092 | 24,360 | |||||||||
Stockholders’ Equity - | |||||||||||
Common Stock, Par Value $0.01; Authorized 50,000,000 Shares; Issued and Outstanding 18,328,432 and 18,571,732 Shares, respectively | 183 | 186 | |||||||||
Capital in Excess of Par Value | 14,490 | 20,302 | |||||||||
Accumulated Other Comprehensive Earnings | — | (1,789 | ) | ||||||||
Retained Earnings | 374,788 | 321,773 | |||||||||
Total Stockholders’ Equity | 389,461 | 340,472 | |||||||||
$ | 792,475 | $ | 438,139 | ||||||||
(*) | From Audited Financial Statements. |
See notes to unaudited consolidated financial statements.
5
Centex Construction Products, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
For the Nine Months Ended | December 31, | ||||||||||
2000 | 1999 | ||||||||||
Cash Flows from Operating Activities | |||||||||||
Net Earnings | $ | 55,777 | $ | 85,035 | |||||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities, Net of Effect on Non-Cash Activity | |||||||||||
Depreciation, Depletion and Amortization | 15,310 | 13,928 | |||||||||
Deferred Income Tax Provision (Benefit) | 11,768 | (577 | ) | ||||||||
Decrease (Increase) in Accounts and Notes Receivable | 15,324 | (3,794 | ) | ||||||||
Decrease (Increase ) in Inventories | 802 | (278 | ) | ||||||||
(Decrease) Increase in Accounts Payable and Accrued Liabilities | (6,047 | ) | 8,488 | ||||||||
Decrease (Increase) in Other, net | 7,818 | (3,014 | ) | ||||||||
Increase in Income Taxes Payable | 1,696 | 2,863 | |||||||||
Net Cash Provided by Operating Activities | 102,448 | 102,651 | |||||||||
Cash Flows from Investing Activities | |||||||||||
Acquisition of Net Assets | (442,200 | ) | — | ||||||||
Property, Plant and Equipment Additions, net | (8,682 | ) | (21,898 | ) | |||||||
Net Cash Used in Investing Activities | (450,882 | ) | (21,898 | ) | |||||||
Cash Flows from Financing Activities | |||||||||||
Additions to Long-term Debt | 262,600 | — | |||||||||
Assumption of Subordinated Debt | 100,000 | — | |||||||||
Payment of Subordinated Debt | (89,992 | ) | — | ||||||||
Dividends Paid to Stockholders | (2,774 | ) | (2,918 | ) | |||||||
Retirement of Common Stock | (6,198 | ) | (31,234 | ) | |||||||
Proceeds from Stock Option Exercises | 383 | 764 | |||||||||
Net Cash Provided by (Used in) Financing Activities | 264,019 | (33,388 | ) | ||||||||
Net (Decrease) Increase in Cash and Cash Equivalents | (84,415 | ) | 47,365 | ||||||||
Cash at Beginning of Period | 96,170 | 49,646 | |||||||||
Cash at End of Period | $ | 11,755 | $ | 97,011 | |||||||
See notes to unaudited consolidated financial statements.
6
Centex Construction Products, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
December 31, 2000
(A) A summary of changes in stockholders’ equity is presented below.
Accumulated | ||||||||||||||||||||
Capital in | Other | |||||||||||||||||||
Common | Excess of | Retained | Comprehensive | |||||||||||||||||
Stock | Par Value | Earnings | Earnings | Total | ||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Balance March 31, 1999 | $ | 197 | $ | 62,376 | $ | 217,347 | $ | — | $ | 279,920 | ||||||||||
Net Earnings | — | — | 108,232 | — | 108,232 | |||||||||||||||
Stock Option Exercises | — | 1,148 | — | — | 1,148 | |||||||||||||||
Dividends to Stockholders | — | — | (3,806 | ) | — | (3,806 | ) | |||||||||||||
Other Comprehensive Earnings | — | — | — | (1,789 | ) | (1,789 | ) | |||||||||||||
Retirement of Common Stock | (11 | ) | (43,222 | ) | — | — | (43,233 | ) | ||||||||||||
Balance March 31, 2000 | 186 | 20,302 | 321,773 | (1,789 | ) | 340,472 | ||||||||||||||
Net Earnings | — | — | 55,777 | — | 55,777 | |||||||||||||||
Stock Option Exercises | — | 383 | — | — | 383 | |||||||||||||||
Dividends to Stockholders | — | — | (2,762 | ) | — | (2,762 | ) | |||||||||||||
Other Comprehensive Earnings | — | — | — | 1,789 | 1,789 | |||||||||||||||
Retirement of Common Stock | (3 | ) | (6,195 | ) | — | — | (6,198 | ) | ||||||||||||
Balance December 31, 2000 | $ | 183 | $ | 14,490 | $ | 374,788 | $ | -0- | $ | 389,461 | ||||||||||
(B) Inventories:
Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or market. Inventories consist of the following:
Unaudited | Audited | |||||||
December 31, | March 31, | |||||||
2000 | 2000 | |||||||
(dollars in thousands) | ||||||||
Raw Materials and Materials-in-Progress | $ | 13,347 | $ | 13,248 | ||||
Finished Cement | 5,189 | 5,523 | ||||||
Gypsum Wallboard | 5,683 | 1,913 | ||||||
Paperboard | 6,068 | — | ||||||
Aggregates | 1,745 | 2,071 | ||||||
Repair Parts and Supplies | 19,628 | 15,323 | ||||||
Fuel and Coal | 741 | 504 | ||||||
$ | 52,401 | $ | 38,582 | |||||
7
(C) Earnings Per Share:
The Company computes earnings per share in accordance with the provisions of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”). Basic earnings per share is computed using the average number of common shares outstanding in each of the three and nine month periods ended December 31, 2000 and 1999. Diluted earnings per share for the periods ended December 31, 2000 and 1999 assume the dilutive impact of stock options. Anti-dilutive options to purchase shares of common stock that were excluded from the computation of diluted earnings per share were 614,000 shares at an average price of $35.83 and 627,000 shares at an average price of $35.83 for the three months and nine months ended December 31, 2000, respectively. All anti-dilutive options have expiration dates ranging from April 2008 to January 2010.
(D) Segment Information:
The Company operates in four business segments: Cement, Gypsum Wallboard, Paperboard, and Concrete and Aggregates, with Cement and Gypsum Wallboard being the Company’s principal lines of business. These operations are conducted in the United States and include the following: the mining and extraction of limestone; the manufacture, production, distribution and sale of Portland cement (a basic construction material which is the essential binding ingredient in concrete); the mining and extraction of gypsum and the manufacture and sale of gypsum wallboard; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters; the sale of ready-mix concrete; and the mining, extraction and sale of aggregates (crushed stone, sand and gravel). These products are used primarily in commercial and residential construction, public construction projects and projects to build, expand and repair roads and highways. Intersegment sales are recorded at prices which approximate market prices. Segment operating earnings represent revenues less direct operating expenses, segment depreciation, and segment selling, general and administrative expenses. Corporate general and administrative expense includes corporate overhead and other administrative expenses.
The following table sets forth certain business segment information:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
2000 | 1999 | 2000 | 1999 | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||
Revenues (External Customers): | ||||||||||||||||||
Cement | $ | 38,125 | $ | 37,650 | $ | 124,618 | $ | 123,677 | ||||||||||
Gypsum Wallboard | 30,612 | 56,506 | 111,028 | 155,976 | ||||||||||||||
Paperboard | 4,711 | — | 4,711 | — | ||||||||||||||
Concrete and Aggregates | 14,219 | 13,894 | 46,215 | 42,918 | ||||||||||||||
Other, net | 2,743 | 320 | 3,935 | 820 | ||||||||||||||
$ | 90,410 | $ | 108,370 | $ | 290,507 | $ | 323,391 | |||||||||||
Intersegment Sales: | ||||||||||||||||||
Cement | $ | 1,474 | $ | 1,332 | $ | 4,799 | $ | 4,370 | ||||||||||
Paperboard | 4,161 | — | 4,161 | — | ||||||||||||||
Concrete and Aggregates | 140 | 123 | 440 | 378 | ||||||||||||||
$ | 5,775 | $ | 1,455 | $ | 9,400 | $ | 4,748 | |||||||||||
Operating Income: | ||||||||||||||||||
Cement | $ | 16,525 | $ | 11,744 | $ | 48,145 | $ | 44,131 | ||||||||||
Gypsum Wallboard | 608 | 31,614 | 31,288 | 82,263 | ||||||||||||||
Paperboard | (185 | ) | — | (185 | ) | — | ||||||||||||
Concrete and Aggregates | 1,139 | 2,174 | 5,841 | 7,629 | ||||||||||||||
Other, net | 2,743 | 320 | 3,935 | 820 | ||||||||||||||
Total | 20,830 | 45,852 | 89,024 | 134,843 | ||||||||||||||
Corporate General and Administrative | (1,158 | ) | (1,230 | ) | (3,520 | ) | (3,512 | ) | ||||||||||
Interest (Expense) Income, net | (1,533 | ) | 1,123 | 2,196 | 2,371 | |||||||||||||
Earnings Before Income Taxes | $ | 18,139 | $ | 45,745 | $ | 87,700 | $ | 133,702 | ||||||||||
8
Total assets by segment are as follows:
December 31, | March 31, | ||||||||
2000 | 2000 | ||||||||
Cement | $ | 142,090 | $ | 147,270 | |||||
Gypsum Wallboard | 314,421 | 159,780 | |||||||
Paperboard | 281,628 | — | |||||||
Concrete and Aggregates | 31,960 | 30,018 | |||||||
Corporate and Other | 22,376 | 101,071 | |||||||
$ | 792,475 | $ | 438,139 | ||||||
The increase in Gypsum Wallboard and Paperboard assets resulted primarily from the purchase of strategic assets on November 10, 2000 (see Note G). The decrease in Corporate and Other assets is due to utilization of cash on hand to fund the November 10, 2000 strategic assets purchase. Corporate and Other assets consist primarily of cash and cash equivalents, general office assets and miscellaneous Other assets.
(E) Comprehensive Earnings:
Comprehensive earnings as presented in the accompanying Consolidated Statements of Comprehensive Earnings is defined as the total of net income and all other non-owner changes in equity. Securities that are classified as available-for-sale are stated at market value as determined by the most recently traded price at the balance sheet date. The unrealized gains and losses, net of deferred tax, are excluded from earnings and reported in a separate component of stockholders’ equity as “Accumulated Other Comprehensive Earnings.”
(F) Risk Factors:
The majority of the Company’s business is seasonal with peak revenue and profits occurring primarily in the months of April through November. Bad weather conditions during this period could adversely affect operating income and cash flow and could therefore have a disproportionate impact on the Company’s results for the full year. Quarterly results have varied significantly in the past and are likely to vary significantly from quarter to quarter in the future.
A majority of the Company’s revenues are from customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions. In addition, since operations occur in a variety of geographic markets, the Company’s business is subject to the economic conditions in each such geographic market. General economic downturns or localized downturns in the regions where the Company has operations, including any downturns in the construction industry, could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’s operations are subject to and affected by federal, state and local laws and regulations including such matters as land usage, street and highway usage, noise level and health, safety and environmental matters. In many instances, various permits are required. Although management believes that the Company is in compliance with regulatory requirements, there can be no assurance that the Company will not incur material costs or liabilities in connection with regulatory requirements.
Certain of the Company’s operations may from time to time involve the use of substances that are classified as toxic or hazardous substances within the meaning of these laws and regulations. Risk of environmental liability is inherent in the operation of the Company’s business. As a result, it is possible that environmental liabilities could have a material adverse effect on the Company in the future.
9
(G) Acquisitions:
On November 10, 2000, the Company and a wholly owned subsidiary (together, the “Purchasers”) entered into a purchase agreement to acquire certain strategic assets summarized below (collectively, the “Strategic Assets”):
1. A 1.1 billion square foot gypsum wallboard plant located in Duke, Oklahoma; | |||
2. A short line railroad and railcars linking the Duke plant to adjacent railroads; | |||
3. A 220,000 ton-per-year lightweight paper mill in Lawton, Oklahoma; | |||
4. A 50,000 ton-per-year Commerce City (Denver), Colorado paper mill; and | |||
5. Three recycled paper fiber collection sites. |
Pursuant to the purchase agreement, the Purchasers paid aggregate consideration consisting of (1) $338,200,000 in cash, plus (2) the assumption by the subsidiary of $100,000,000 of 9.5% senior subordinated notes due 2008. In exchange for this consideration, the subsidiary acquired the assets described above and a $49,300,000 secured note receivable, which is expected to be retired within twelve months from the date of the acquisition.
A summary of debt incurred in conjunction with the acquisition follows:
New Bank Borrowings | $ | 188,200 | |||
Cash Received for Disposition of Investment Securities | (10,830 | ) | |||
Loan Costs | 2,065 | ||||
New Borrowings | 179,435 | ||||
Assumption of Subordinated Debt | 100,000 | ||||
Net Debt at Closing | $ | 279,435 | |||
The acquisition has been accounted for as a purchase, and accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair market values at the date of acquisition. The results of operations of the Strategic Assets since November 10, 2000 are included in the Company’s financial statements. The fair value of tangible assets purchased, goodwill (amortized over a 20-year period) and other intangible assets are as follows:
Cash consideration Paid - | ||||||
CXP Cash | $ | 150,000 | ||||
Bank Borrowings | 188,200 | |||||
338,200 | ||||||
CXP Transaction Costs | 4,000 | |||||
Subordinated Debt Assumed | 100,000 | |||||
Total Consideration | 442,200 | |||||
Liabilities Assumed | 24,358 | |||||
466,558 | ||||||
Fair Value of Property, Plant, Equipment, Inventory, Receivables and Other Miscellaneous Assets | (445,560 | ) | ||||
Goodwill and Other Intangible Assets | $ | 20,998 | ||||
The unaudited proforma results for the nine months ended December 31, 2000 and December 31, 1999, assumes that the acquisition was completed on April 1, 1999:
10
Nine Months Ended December 31, | ||||||||
2000 | 1999 | |||||||
Revenues | $ | 357,691 | $ | 412,062 | ||||
Net Earnings | $ | 43,430 | $ | 99,587 | ||||
Net Earnings per Dilutive Share | $ | 2.35 | $ | 5.14 |
The proforma results have been prepared for comparative purposes only and include certain adjustments such as additional depreciation expense, goodwill amortization and interest expense on new bank borrowings and debt assumed. They do not purport to be indicative of the results of operations which actually would have resulted had the combination been in effect at April 1, 1999 or of future results of operations of the consolidated entities.
(H) The following components are included in interest income/expense, net:
Three Months Ended | Nine Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2000 | 1999 | 2000 | 1999 | ||||||||||||||
Interest Income | $ | 1,811 | $ | 1,148 | $ | 5,649 | $ | 2,435 | |||||||||
Interest (Expense) | (3,287 | ) | (25 | ) | (3,396 | ) | (64 | ) | |||||||||
Other Expenses | (57 | ) | 0 | (57 | ) | 0 | |||||||||||
Interest (Expense) Income, net | ($1,533 | ) | $ | 1,123 | $ | 2,196 | $ | 2,371 | |||||||||
Interest income includes interest on investments of excess cash and interest on notes receivable. Components of interest expense include interest associated with the assumed subordinated debt and the new bank credit facility and commitment fees based on the unused portion of the new bank credit facility. Other expenses include amortization of debt issue costs and bank credit facility costs.
(I) Certain 1999 balances were reclassified to conform with the 2000 presentation.
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
Results of Operations
Although sales volume during the quarter was strong, earnings declined due to higher fuel and energy costs, lower Gypsum Wallboard pricing, and increased interest expense. Late in the third quarter, each of CXP’s segments began to experience seasonal slowdowns, more so this year due to a colder winter. Gypsum Wallboard experienced a greater challenge due to an industry oversupply situation, decreased demand, and falling sales prices. Revenues for the third quarter of fiscal 2001 were $90,410,000, down 17% from revenues of $108,370,000 for the same quarter last year. CXP’s net earnings for the quarter ended December 31, 2000 were $11,536,000, a 60% decrease from $29,094,000 for the same quarter last year. Diluted earnings per share for this year’s third quarter of $0.63 decreased 59% from $1.52 per share for the same quarter in fiscal 2000. On November 10, 2000 the Company completed its acquisition of the Strategic Assets, which included the assumption by a subsidiary of $100 million of subordinated debt.
For the nine months ended December 31, 2000, CXP’s net earnings decreased 34% to $55,777,000 or $3.02 per diluted share from $85,035,000 or $4.39 per diluted share for the same period a year ago. Revenues for the current nine months declined 10% to $290,507,000 from $323,391,000 for the same period in the prior
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fiscal year. The earnings decline resulted from lower Cement and Gypsum Wallboard pricing and increased Aggregates cost of sales. Diluted earnings per share for the current quarter and nine months decreased less than net earnings due to fewer average shares outstanding in the current periods versus the same periods a year ago.
The following table compares sales volume, average unit sales prices and unit operating margins for the Company’s operations:
Gypsum | ||||||||||||||||||||||||||||||||||||||||
Cement | Wallboard | Concrete | Aggregates | Paperboard | ||||||||||||||||||||||||||||||||||||
(Ton) | (MSF) | (Cubic Yard) | (Ton) | (Ton) | ||||||||||||||||||||||||||||||||||||
Quarter Ended December 31, | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | ||||||||||||||||||||||||||||||
Sales Volume (M) | 587 | 568 | 392 | 341 | 175 | 186 | 1,160 | 964 | 24 | — | ||||||||||||||||||||||||||||||
Average Net Sales Price | $ | 67.46 | $ | 68.72 | $ | 78.08 | $ | 165.53 | $ | 55.08 | $ | 52.89 | $ | 4.07 | $ | 4.31 | $ | 374.91 | — | |||||||||||||||||||||
Operating Margin (1) | $ | 28.15 | $ | 20.70 | $ | 1.55 | $ | 92.61 | $ | 4.54 | $ | 6.73 | $ | 0.30 | $ | 0.95 | ($7.84 | ) | — |
Gypsum | ||||||||||||||||||||||||||||||||||||||||
Cement | Wallboard | Concrete | Aggregates | Paperboard | ||||||||||||||||||||||||||||||||||||
(Ton) | (MSF) | (Cubic Yard) | (Ton) | (Ton) | ||||||||||||||||||||||||||||||||||||
Nine Months Ended December 31, | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | ||||||||||||||||||||||||||||||
Sales Volume (M) | 1,901 | 1,837 | 1,098 | 994 | 622 | 611 | 3,194 | 2,651 | 24 | — | ||||||||||||||||||||||||||||||
Average Net Sales Price | $ | 68.07 | $ | 69.72 | $ | 101.13 | $ | 156.86 | $ | 53.60 | $ | 52.17 | $ | 4.16 | $ | 4.30 | $ | 374.91 | — | |||||||||||||||||||||
Operating Margin (1) | $ | 25.32 | $ | 24.03 | $ | 28.50 | $ | 82.73 | $ | 7.65 | $ | 7.94 | $ | 0.34 | $ | 1.05 | ($7.84 | ) | — |
(1) | Segment operating margins represent revenues less direct operating expenses, segment depreciation, and segment selling, general and administrative expenses. |
Cement revenues for the current quarter totaled $39,599,000, up 2% from $38,982,000 million for the same quarter in the prior year. Operating earnings for the current quarter were $16,525,000, a 41% increase over $11,744,000 for the same quarter last year. Increased sales volume and lower production costs offset by a decline in average sales prices accounted for the quarterly operating earnings gain. Sales volume of 587,000 tons for the quarter was 3% above the prior year’s quarter. The sales volume gain resulted mostly from increased sales at the Laramie, Wyoming plant. Demand continues to be strong in all of the Company’s cement markets, and the Company expects fiscal 2001 to be another “sold out” year. Total U.S. cement shipments through October, 2000 were 4% ahead of shipments for the same period last year. Average cement sales prices declined to $67.46 per ton from $68.72 per ton for the same quarter last year due to pricing pressures in the Houston, Texas market. Cost of sales decreased 18% to $39.31 per ton as a result of a 53% reduction this year in manufacturing costs at the Laramie plant because a kiln was down 35 days last year for major renovations.
For the current nine months, Cement revenues were $129,417,000 million, up 1% from $128,047,000 for the same period a year ago. Operating earnings from Cement for the nine months ended December 31, 2000 were $48,145,000, up 9% over $44,131,000 for the similar period last year. The operating earnings gain resulted primarily from reduced production cost and increased manufactured sales volume at the Laramie plant. Cement sales volume of 1,901,000 tons for the current nine months was 4% greater than sales volume for the first nine months of fiscal 2000, mainly due to increased Laramie plant sales volume. Average net sales price of $68.07 per ton was down 2% mostly as a result of lower pricing in the Houston, Texas market.
Gypsum Wallboard revenues of $30,612,000 for the current quarter decreased 46% from last year’s same quarter revenues of $56,506,000. Operating earnings for the quarter were $608,000, down 98% from $31,614,000 for the same period last year. Increased sales volume offset by higher cost of sales and lower net sales price resulted in the quarterly earnings decline. Sales volume of 392 million square feet (“MMSF”) for this year’s quarter was 15% greater than 341 MMSF sold during the prior year’s quarter. All of the sales volume increase came from the recently acquired Duke, Oklahoma plant. U.S. wallboard consumption of 28.1 billion square feet for calendar 2000 was down over 3% from last year’s record level. New wallboard capacity additions
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continue to raise industry production capacity, resulting in an industry utilization rate in the low 80% range. The Company’s average net sales price for the third quarter of fiscal 2001 declined to $78.08 per thousand square feet (“MSF”), 53% below $165.53 per MSF for the same quarter last year. Cost of sales of $76.53 per MSF increased 5% over the prior year’s cost of sales due to higher fuel costs. Also, three of the Company’s four gypsum wallboard plants were idle during the last week of December 2000.
For the current nine month period, Gypsum Wallboard revenues were $111,028,000, down 29% from $155,976,000 for the same period a year ago. Operating earnings from Gypsum Wallboard declined 62% to $31,288,000 for the first nine months of this fiscal year from $82,263,000 for last year’s similar period. The decrease in operating earnings resulted from the combination of increased sales volume and decreased production costs being more than offset by a 35% reduction in average net sales prices. Gypsum Wallboard sales volume for the current nine months increased 11% to 1,098 MMSF due to increased production at all of the Company’s existing plants plus volume from the recently acquired Duke, Oklahoma plant. Average net sales price of $101.13 per MSF for the current nine months was $55.73 per MSF less than the prior year’s net sales price. Cost of sales of $72.63 per MSF for the current nine months was 2% below the prior year’s period despite higher gas costs.
Paperboard reported an operating loss of $185,000 for the third quarter. Earnings were adversely impacted by a large percentage of low-priced off grade paper sales volume to total sales. Paperboard sales volume of 23,665 tons for the quarter were low due to three of CXP’s four wallboard plants being down between Christmas and New Years along with curtailed production by a major paper customer. Average net sales price of $374.91 per ton was negatively impacted by the large percentage of low-priced off grade paper sales volume. Included in other income is $85,000 of recycle operating earnings from shipments of 32,315 tons of reclaimed paper.
Revenues from Concrete and Aggregates were $14,359,000 for the quarter, up 2% from $14,017,000 for the same quarter a year ago. Concrete and Aggregates reported operating earnings for the quarter of $1,139,000, down 48% from $2,174,000 for the same quarter last year. The earnings decline is attributable to reductions in both Concrete and Aggregates operating margins. Concrete operating earnings of $794,000 decreased 37% from last year’s comparable quarter mainly due to a 33% decline in operating margins. Concrete sales volume for the quarter was 175,000 cubic yards compared to 186,000 cubic yards for the same quarter last year. The decline was primarily attributable to reduced sales in the Texas market. The Company’s average Concrete net sales price of $55.08 per cubic yard for the quarter was 4% higher than $52.89 per cubic yard for the same quarter a year ago. Cost of sales increased 10% to $50.54 per cubic yard due to higher materials and delivery costs. Aggregates operating earnings of $345,000 for the current quarter declined 63% from the prior year’s quarter, as increased sales volume was more than offset by lower operating margins. The Company’s Aggregates operation reported sales volume of 1,160,000 tons for the quarter, 20% above sales volume of 964,000 tons for the same quarter last year. Most of the sales volume gain came from the Georgetown, Texas operation. A higher percentage this year of lower priced Georgetown road aggregate sales to total sales resulted in an Aggregates net sales price of $4.07 per ton, a 6% decrease from $4.31 per ton for the same quarter last year. Cost of sales for the current quarter increased $0.41 per ton or 12% to $3.77 per ton due to major quarry mobile equipment repairs and major plant maintenance.
For the current nine months, Concrete and Aggregates revenues were $46,655,000, up 8% from $43,296,000 for the same period last year. Operating earnings were $5,841,000 for the nine months this year, a 23% decline from $7,629,000 for the same period last year. Concrete earnings of $4,760,000 for the current nine months decreased 2% due to increased sales volume being offset by lower operating margins. Sales volume of 622,000 cubic yards for the first nine months of fiscal 2001 were 2% above the prior year’s nine month total due to increased demand in the northern California market. Concrete net sales price of $53.60 per cubic yard was 3% above the prior year’s nine month net sales price. Aggregates operating earnings of $1,081,000 for the nine months this year were 61% below $2,773,000 earnings for the same period last year.
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Increased sales volume offset by lower net sales prices and higher cost of sales resulted in the earnings decline. Sales volume of 3,194,000 tons for the current nine months improved 21% due to sales this year from the Georgetown facility. The average net sales price of $4.16 per ton for the current nine months was 3% lower than the same period for the prior year due to product mix (a greater percentage this year of lower-priced Georgetown road aggregates to total sales). Cost of sales increased 18% to $3.82 per ton for the current nine months due to increased maintenance and materials costs.
Included in other income for this year’s third quarter is a gain of $1.9 million arising from the disposition of investment securities owned by the Company. Other income includes clinker sales income, non-inventoried aggregates income, gypsum wallboard distribution center income, recycled waste paper income, trucking income, asset sales and other miscellaneous income and cost items.
Net interest expense of $1,533,000 and interest income of $2,196,000 for the current quarter and nine months, respectively, compares to interest income of $1,123,000 and $2,371,000 for last year’s quarter and nine months, respectively. On November 10, 2000 the Company utilized $150 million of cash on hand and incurred $280 million of new debt to complete the acquisition of the Strategic Assets.
Stock Repurchase Program
The Company’s Board of Directors previously approved the repurchase of up to 6,101,430 shares of the Company’s common stock. The Company repurchased from the public 264,300 shares since March 31, 2000. As a consequence of such stock repurchases, Centex Corporation now owns approximately 65.3% of the outstanding shares of CXP common stock. There are approximately 743,300 shares remaining under the Company’s current repurchase authorization.
Financial Condition
On November 10, 2000 the Company’s $35 million unsecured revolving credit facility used to finance its working capital and capital expenditures requirements was cancelled and replaced with a new $325 million senior revolving credit facility. The principal balance amount of the new credit facility matures on November 10, 2003. At December 31, 2000, the Company had $262,600,000 outstanding under the new revolving credit facility. The borrowings under the new credit facility are guaranteed by all major operating subsidiaries of the Company. Outstanding principal amounts on the credit facility bear interest at a variable rate equal to, at the election of the Company, (i) LIBOR, plus an agreed margin (ranging from 100 to 175 basis points), which is to be established quarterly based upon the Company’s ratio of EBITDA to total funded debt or (ii) an alternate base rate which is the higher of (a) prime rate or (b) the federal funds rate plus 1/2% per annum, plus an agreed range (from 0 to 75 basis points). Interest payments are payable monthly or at the end of the LIBOR advance periods, which can be up to a period of six months at the option of the Company. Under the new credit facility, the Company is required to adhere to a number of financial and other covenants, including covenants relating to the Company’s interest coverage ratio, consolidated funded indebtedness ratio, and minimum tangible net worth, and limitations on dividends and capital expenditures. Also, on November 10, 2000, a subsidiary of the Company assumed $100 million of 9.5% senior subordinated notes (the “Notes”) with a maturity date of July 15, 2008. Interest payments on the Notes are due on January 15 and July 15. The Notes are redeemable at the option of the subsidiary, in whole or in part, at any time after July 15, 2003. Upon the acquisition of the Strategic Assets on November 10, 2000, the subsidiary was required to commence a tender offer for the Notes at 101%. On December 20, 2000, $89,992,000 in principal amount of the Notes were tendered, leaving $10,008,000 outstanding. The Notes include financial and other covenants of the kind generally included in similar indebtedness.
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Based on its financial condition at December 31, 2000, CXP believes that its internally generated cash flow coupled with funds available under the new credit facility will enable CXP to provide adequately for its current operations and future growth.
Working capital at December 31, 2000 was $70.1 million as compared to $116.2 million at March 31, 2000. The decline resulted mainly from a $84.4 million decrease in cash and a $18.3 million increase in accounts payable partially offset by a $58.2 million increase in accounts and notes receivable and inventories.
Cash and cash equivalents decreased $84.4 million from March 31, 2000 to $11.8 million at December 31, 2000. The net cash used in or provided by the operating, investing, and financing activities for the nine months ended December 31, 2000 is summarized as follows.
For the Nine Months Ended | |||||||||
December 31, | |||||||||
2000 | 1999 | ||||||||
(dollars in thousands) | |||||||||
Net Cash (Used In) Provided by: | |||||||||
Operating Activities | $ | 102,448 | $ | 102,651 | |||||
Investing Activities | (450,882 | ) | (21,898 | ) | |||||
Financing Activities | 264,019 | (33,388 | ) | ||||||
Net (Decrease) Increase in Cash | $ | (84,415 | ) | $ | 47,365 | ||||
Cash provided by operating activities of $102.4 million for the current nine months decreased $203,000 from last year’s nine month period due to the combination of a $29.3 million reduction in net earnings, a $10.9 million decrease in accounts payable and accrued liabilities, a $19.1 million decrease in receivables, a $13.3 million increase in deferred income taxes payable, and a $5.3 million decline in inventories and other assets. Cash used for investing activities increased by $429.0 million over last year’s nine month period due to the $442.2 million purchase this year of the Strategic Assets partially offset by a $13.2 million decline in capital expenditures. Capital expenditures of $8.7 million for the nine months ended December 31, 2000 declined from $21.9 million for the prior year’s nine month period as a result of the completion last year of the Eagle gypsum wallboard and Illinois cement plant expansion projects. Cash provided by financing activities for the current nine months increased $297.4 million from last year’s nine month period due to a $25.0 million decrease in the amount of stock repurchased during this year’s nine month period and a $272.6 increase in long-term debt to fund the acquisition of the Strategic Assets.
Cash payments for income taxes totaled $15.8 million and $43.1 million for the first nine months of fiscal 2001 and 2000, respectively.
Outlook
While demand for CXP’s products remains strong, Gypsum Wallboard prices have fallen dramatically, mainly as a result of new production capacity coming on stream. CXP’s earnings from Gypsum Wallboard, Cement, Paperboard and Aggregates have been negatively impacted by higher fuel and power costs. Although CXP implemented Gypsum Wallboard price increases totalling approximately 20% in late December 2000 and early January 2001, these price increases have significantly eroded. Cement price increases also have been announced in certain of CXP’s markets. Despite the cement price increases, CXP expects to report lower earnings for both its fourth quarter and fiscal 2001.
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Purchase of Strategic Assets
On November 10, 2000 the Company acquired selected strategic assets. The purchase price was $392 million (which included the assumption by a subsidiary of $100 million of subordinated debt plus accrued interest). In addition, the Company acquired a $49,300,000 secured note receivable which is expected to be retired within twelve months from the date of the acquisition. Funding came from cash on hand and borrowings under a new $325 million senior credit facility entered into during November 2000.
The principal strategic assets acquired were: a 1.1 billion square foot gypsum wallboard plant located at Duke, Oklahoma; a short line railroad and railcars linking the Duke plant to adjacent railroads; a recently completed 220,000 ton-per-year lightweight paper mill in Lawton, Oklahoma; a 50,000 ton-per-year Commerce City (Denver), Colorado paper mill; and three recycled paper fiber collection sites. The gypsum wallboard operations will be operated by CXP’s American Gypsum Company located in Albuquerque, New Mexico. The paper operations will be located in Lawton, Oklahoma and will focus primarily on the gypsum paper business.
As required by the terms of the subordinated debt, upon the acquisition of the strategic assets, the Company commenced a tender offer for the subordinated debt at a price of 101% of the par value of the debt plus accrued but unpaid interest. On December 20, 2000, $89,992,000 in principal amount of the subordinated debt was tendered, leaving $10,008,000 outstanding. Payment was funded from the new senior revolving credit facility.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”. The impact on the Company’s results of operations, financial position or cash flows will be dependent on the level and types of derivative instruments the Company will have entered into, if any, as of April 1, 2001 the time when the Company must adopt this new standard. The Company had no derivative instruments at December 31, 2000.
Forward-Looking Statements
The Management’s Discussion and Analysis of Financial Condition and Results of Operations, Outlook and other sections of this report on Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not guarantees of future performance and involve known and unknown risks and uncertainties that may cause the Company’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, the cyclical and seasonal nature of the Company’s business, public infrastructure expenditures, adverse weather, availability of raw materials, unexpected operational difficulties, governmental regulation and changes in governmental and public policy, changes in economic conditions specific to any one or more of the Company’s markets, competition, announced increases in capacity in the gypsum wallboard, paperboard and cement industries, general economic conditions and interest rates. Investors should take such risks and uncertainties into account when making investment decisions. These and other factors are described in the Annual Report on Form 10-K for Centex Construction Products, Inc. for the fiscal year ended March 31, 2000. The report is filed with the Securities and Exchange Commission. The Company undertakes no obligation to update publicly any forward-looking statement as a result of new information, future events or other factors.
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Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) | Exhibits | ||
2.1 | Securities Purchase Agreement, entered into as of November 10, 2000 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 16, 2000 (File No. 1-12984), as amended by the Company’s current report on Form 8-K/A filed on January 22, 2001 (File No. 1-12984) and incorporated herein by reference). | ||
4.1 | Credit Agreement dated as of November 10, 2000 (filed herewith). Upon request from the Securities and Exchange Commission, the registrant will furnish supplementally a copy of any omitted exhibit or schedule. | ||
4.2 | First Amendment to Credit Agreement entered into as of December 20, 2000 (filed herewith). | ||
(b) | Reports on Form 8-K |
On November 16, 2000, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K in connection with its acquisition of certain strategic assets. On January 22, 2001, the Company filed a Current Report on Form 8-K/A, which amended the original Form 8-K to include the audited financial statements of the businesses acquired and proforma financial information.
All other items required under Part II are omitted because they are not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CENTEX CONSTRUCTION PRODUCTS, INC. | ||
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Registrant | ||
February 12, 2001 | /s/ RICHARD D. JONES, JR. | |
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Richard D. Jones, Jr. President and Chief Executive Officer (principal executive officer) |
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February 12, 2001 | /s/ ARTHUR R. ZUNKER, JR. | |
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Arthur R. Zunker, Jr. Senior Vice President-Finance and Treasurer (principal financial and chief accounting officer) |
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INDEX TO EXHIBITS
EXHIBIT NUMBER |
DESCRIPTION | |
2.1 | Securities Purchase Agreement, entered into as of November 10, 2000 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 16, 2000 (File No. 1-12984), as amended by the Company’s current report on Form 8-K/A filed on January 22, 2001 (File No. 1-12984) and incorporated herein by reference). | |
4.1 | Credit Agreement dated as of November 10, 2000 (filed herewith). Upon request from the Securities and Exchange Commission the registrant will furnish supplementally a copy of any omitted exhibit or schedule. | |
4.2 | First Amendment to Credit Agreement entered into as of December 20, 2000 (filed herewith). |