Texas Industries, Inc. (TXI) on Sept. 23 reported financial results for the quarter ended Aug. 31, 2010. Results for the quarter were a net loss of $23.7 million or $.85 per share and included an after-tax charge of $18.0 million or $.65 per share with respect to the company’s refinancing. Net income for the quarter ended August 31, 2009 was $1.7 million or $.06 per share.
The TXI first-quarter earnings report follows:
(For a downloadble PDF of TXI’s first-quarter results, unedited, click here.)
General Comments
“Conditions in our markets remain challenging,” stated Mel Brekhus, CEO. “We continue to focus on meeting market demand as cost effectively as possible. More strategically, we look forward to resuming construction of TXI’s central Texas cement plant expansion later this fall.”
“The company’s recent refinancing enhances our financial flexibility by improving our liquidity and extending the maturity of our long-term debt. We ended the quarter with $162.4 million cash and the ability to borrow $90 million on our credit facility without incurring any maintenance covenants,” added Brekhus.
The following is a summary of operating results for our business segments and certain other operating information related to our principal products.
Cement Operations
| Three months ended August 31, |
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| In thousands except per unit | 2010 | 2009 |
| Operating Results | ||
| Total cement sales | $ 67,690 | $ 78,460 |
| Total other sales and delivery fees | 8,692 | 6,736 |
| Total segment sales | 76,382 | 85,196 |
| Cost of products sold | 70,063 | 69,859 |
| Gross profit | 6,319 | 15,337 |
| Selling, general and administrative | (4,793) | (4,674) |
| Other income | 2,438 | 1,743 |
| Operating Profit | $ 3,964 | $ 12,406 |
| Cement | ||
| Shipments (tons) | 873 | 915 |
| Prices ($/ton) | $77.59 | $85.70 |
| Cost of sales ($/ton) | $71.23 | $68.70 |
Cement operating profit for the three-month period ended August 31, 2010 was $4.0 million, a decrease of $8.4 million from the prior year period. Lower shipments and sales prices reduced operating profit approximately $8 million.
Total segment sales for the three-month period ended August 31, 2010 were $76.4 million compared to $85.2 million for the prior year period. Cement sales decreased $10.8 million from the prior year period as construction activity has remained at low levels in both our Texas and California market areas. Our Texas market area accounted for approximately 70% of cement sales in the current period compared to 71% of cement sales in the prior year period. Shipments decreased 8% in our Texas market area and increased 4% in our California market area. Average cement prices decreased 8% in our Texas market area and 13% in our California market area.
Cost of products sold for the three-month period ended August 31, 2010 increased $0.2 million from the prior year period. Cement unit costs increased 4% from the prior year period primarily due to the effect of lower shipments and higher energy costs.
Selling, general and administrative expense for the three-month period ended August 31, 2010 increased $0.1 million from the prior year period. The increase was primarily due to higher engineering and maintenance expense which was offset in part by lower provisions for bad debts and defined benefit plan expense.
Other income for the three-month period ended August 31, 2010 increased $0.7 million from the prior year period. Other income includes a gain of $1.7 million in the three-month period ended August 31, 2010 from the sale of emissions credits associated with our Crestmore cement plant in Riverside, California which was offset in part by lower gains from routine sales of surplus operating assets.
Aggregate Operations
| Three months ended August 31, |
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| In thousands except per unit | 2010 | 2009 |
| Operating Results | ||
| Total stone, sand and gravel sales | $ 26,593 | $ 27,794 |
| Total other sales and delivery fees | 23,377 | 22,307 |
| Total segment sales | 49,970 | 50,101 |
| Cost of products sold | 43,410 | 39,155 |
| Gross profit | 6,560 | 10,946 |
| Selling, general and administrative | (3,059) | (2,705) |
| Other income | 1,633 | 398 |
| Operating Profit | $ 5,134 | $ 8,639 |
| Stone, sand and gravel | ||
| Shipments (tons) | 3,584 | 3,423 |
| Prices ($/ton) | $7.42 | $8.12 |
| Cost of sales ($/ton) | $6.45 | $6.28 |
Aggregate operating profit for the three-month period ended August 31, 2010 was $5.1 million, a decrease of $3.5 million from the prior year period. Lower sales prices offset in part by higher shipments reduced operating profit approximately $2 million.
Total segment sales for the three-month period ended August 31, 2010 were $50.0 million compared to $50.1 million for the prior year period. Stone, sand and gravel sales decreased $1.2 million from the prior year period on 9% lower average prices and 5% higher shipments.
Cost of products sold for the three-month period ended August 31, 2010 increased $4.3 million from the prior year period primarily due to higher shipments. Overall stone, sand and gravel unit costs increased 3% from the prior year period primarily due to higher repair and maintenance costs.
Selling, general and administrative expense for the three-month period ended August 31, 2010 increased $0.4 million from the prior year period primarily due to higher provisions for bad debts.
Other income for the three-month period ended August 31, 2010 increased $1.2 million from the prior year period primarily due to higher gains from routine sales of surplus operating assets.
Consumer Products Operations
| Three months ended August 31, |
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| In thousands except per unit | 2010 | 2009 |
| Operating Results | ||
| Total ready-mix concrete sales | $ 52,106 | $ 54,053 |
| Total other sales and delivery fees | 14,372 | 15,485 |
| Total segment sales | 66,478 | 69,538 |
| Cost of products sold | 63,249 | 61,716 |
| Gross profit | 3,229 | 7,822 |
| Selling, general and administrative | (2,676) | (3,204) |
| Other income | 198 | 133 |
| Operating Profit | $ 751 | $ 4,751 |
| Ready-mix concrete | ||
| Shipments (cubic yards) | 669 | 612 |
| Prices ($/cubic yard) | $77.83 | $88.46 |
| Cost of sales ($/cubic yard) | $76.20 | $79.91 |
Consumer products operating profit for the three-month period ended August 31, 2010 was $0.8 million, a decrease of $4.0 million from the prior year period. Lower sales prices offset in part by higher shipments reduced operating profit approximately $6 million.
Total segment sales for the three-month period ended August 31, 2010 were $66.5 million compared to $69.5 million for the prior year period. Ready-mix concrete sales for the three-month period ended August 31, 2010 decreased $1.9 million from the prior year period on 12% lower average prices and 9% higher shipments.
Cost of products sold for the three-month period ended August 31, 2010 increased $1.5 million from the prior year period primarily due to higher shipments. Overall ready-mix concrete unit costs decreased 5% from the prior year period primarily due to the effect of higher shipments and lower raw material costs.
Selling, general and administrative expense for the three-month period ended August 31, 2010 decreased $0.5 million from the prior year period primarily due to lower provisions for bad debts.
Other income for the three-month period ended August 31, 2010 increased $0.1 million from the prior year period primarily due to higher gains from routine sales of surplus operating assets.
Corporate
| Three months ended August 31, |
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| In thousands | 2010 | 2009 |
| Other income | $ 621 | $ 378 |
| Selling, general and administrative | (5,613) | (9,671) |
| $ (4,992) | $ (9,293) | |
Other income for the three-month period ended August 31, 2010 increased $0.2 million from the prior year period primarily due to higher oil and gas royalties offset in part by lower interest income.
Selling, general and administrative expense for the three-month period ended August 31, 2010 decreased $4.1 million from the prior year period. The decrease was primarily the result of $3.0 million lower stock-based compensation. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on their fair value decreased stock-based compensation $1.3 million in the three-month period ended August 31, 2010 and increased stock-based compensation $1.6 million in the three-month period ended August 31, 2009. We hold life insurance policies in connection with certain of our benefit plans. Proceeds received from the policies in the three-month period ended August 31, 2010 decreased expense $0.4 million from the prior year period. Our focus on reducing controllable costs lowered overall other expenses $0.7 million in the three-month period ended August 31, 2010 from the prior year period.
Interest
Interest expense incurred was $14.4 million and $13.2 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively, of which none was capitalized. Interest expense incurred for the three-month period ended August 31, 2010 increased $1.2 million from the prior year period primarily as a result of higher average outstanding debt at higher interest rates due to the refinancing of our 7.25% senior notes.
Loss on Debt Retirements
On July 27, 2010, we commenced a cash tender offer for all of the outstanding $550 million aggregate principal amount of our 7.25% senior notes due 2013 and a solicitation of consents to amend the indenture governing the 7.25% notes. Pursuant to the tender offer and consent solicitation, we purchased $536.6 million aggregate principal amount of the 7.25% notes, and paid an aggregate of $547.7 million in purchase price and consent fees. On September 9, 2010, we redeemed the remaining $13.4 million aggregate principal amount of the 7.25% notes at a price of 101.813% of the principal amount thereof, plus accrued and unpaid interest on the 7.25% notes to the redemption date. We used the net proceeds from the issuance and sale of $650 million aggregate principal amount of our 9.25% senior notes to pay the purchase or redemption price of the 7.25% notes and the consent fees. As of August 31, 2010, we recognized a loss on debt retirement of $29.0 million representing $11.1 million in consent fees and transaction costs and a write-off of $17.9 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.
Income Taxes
Income taxes for the interim periods ended August 31, 2010 and August 31, 2009 have been included in the accompanying financial statements on the basis of an estimated annual rate. The estimated annualized rate does not include the tax impact of the loss on debt retirements which has been recognized as a discrete item in the three-month period ended August 31, 2010. The estimated annualized rate excluding this charge is 40.6% for fiscal year 2011 compared to 47.4% for fiscal year 2010. The primary reason that the tax rate differs from the 35% federal statutory corporate rate is due to percentage depletion that is tax deductible, state income taxes and deductions for income from qualified domestic production activities.
Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on our business, the cyclical and seasonal nature of our business, the level of construction activity in our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in the cost or availability of transportation, changes in interest rates, the timing and amount of federal, state and local funding for infrastructure, delays in announced capacity expansions, ongoing volatility and uncertainty in the capital or credit markets, the impact of environmental laws, regulations and claims and changes in governmental and public policy, and the risks and uncertainties described in our reports on Forms 10-K, 10-Q and 8-K. Forward-looking statements speak only as of the date hereof, and we assume no obligation to publicly update such statements.
TXI is the largest producer of cement in Texas and a major cement producer in California. TXI is also a major supplier of construction aggregate, ready-mix concrete and concrete products.
The Texas Industries, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6602
| (Unaudited) | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| TEXAS INDUSTRIES, INC. AND SUBSIDIARIES | ||
| Three months ended August 31, |
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| In thousands except per share | 2010 | 2009 |
| NET SALES | $ 172,122 | $ 183,957 |
| Cost of products sold | 156,014 | 149,852 |
| GROSS PROFIT | 16,108 | 34,105 |
| Selling, general and administrative | 16,141 | 20,254 |
| Interest | 14,411 | 13,244 |
| Loss on debt retirements | 29,006 | — |
| Other income | (4,890) | (2,652) |
| 54,668 | 30,846 | |
| INCOME (LOSS) BEFORE INCOME TAXES | (38,560) | 3,259 |
| Income taxes (benefit) | (14,868) | 1,544 |
| NET INCOME (LOSS) | $ (23,692) | $ 1,715 |
| Net income (loss) per share | ||
| Basic | $ (.85) | $ .06 |
| Diluted | $ (.85) | $ .06 |
| Average shares outstanding | ||
| Basic | 27,787 | 27,720 |
| Diluted | 27,787 | 27,940 |
| Cash dividends declared per share | $ .075 | $ .075 |
| CONSOLIDATED BALANCE SHEETS | ||
| TEXAS INDUSTRIES, INC. AND SUBSIDIARIES | ||
| (Unaudited) August 31, |
May 31, |
|
| In thousands | 2010 | 2010 |
| ASSETS | ||
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 162,427 | $ 74,946 |
| Receivables – net | 107,217 | 112,184 |
| Inventories | 148,741 | 142,419 |
| Deferred income taxes and prepaid expenses | 22,673 | 23,426 |
| TOTAL CURRENT ASSETS | 441,058 | 352,975 |
| PROPERTY, PLANT AND EQUIPMENT | ||
| Land and land improvements | 158,094 | 158,367 |
| Buildings | 58,371 | 58,351 |
| Machinery and equipment | 1,217,852 | 1,220,021 |
| Construction in progress | 324,760 | 322,039 |
| 1,759,077 | 1,758,778 | |
| Less depreciation and depletion | 618,706 | 604,269 |
| 1,140,371 | 1,154,509 | |
| OTHER ASSETS | ||
| Goodwill | 1,715 | 1,715 |
| Real estate and investments | 6,223 | 6,774 |
| Deferred charges and other | 22,398 | 15,774 |
| 30,336 | 24,263 | |
| $ 1,611,765 | $ 1,531,747 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
| CURRENT LIABILITIES | ||
| Accounts payable | $ 54,659 | $ 56,214 |
| Accrued interest, compensation and other | 45,805 | 51,455 |
| Current portion of long-term debt | 13,341 | 234 |
| TOTAL CURRENT LIABILITIES | 113,805 | 107,903 |
| LONG-TERM DEBT | 652,459 | 538,620 |
| DEFERRED INCOME TAXES AND OTHER CREDITS | 108,400 | 123,976 |
| SHAREHOLDERS’ EQUITY | ||
| Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 27,807 and 27,796 shares, respectively |
27,807 | 27,796 |
| Additional paid-in capital | 476,901 | 475,584 |
| Retained earnings | 246,240 | 272,018 |
| Accumulated other comprehensive loss | (13,847) | (14,150) |
| 737,101 | 761,248 | |
| $ 1,611,765 | $ 1,531,747 | |
| (Unaudited) | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| TEXAS INDUSTRIES, INC. AND SUBSIDIARIES | ||
| Three months ended August 31, |
||
| In thousands | 2010 | 2009 |
| OPERATING ACTIVITIES | ||
| Net income (loss) | $ (23,692) | $ 1,715 |
| Adjustments to reconcile net income (loss) to cash provided by operating activities |
||
| Depreciation, depletion and amortization | 15,861 | 16,594 |
| Gains on asset disposals | (1,613) | (1,030) |
| Deferred income taxes (benefit) | (14,973) | 743 |
| Stock-based compensation expense (credit) | (230) | 2,643 |
| Excess tax benefits from stock-based compensation | — | (211) |
| Loss on debt retirements | 29,006 | — |
| Other – net | 2,192 | (221) |
| Changes in operating assets and liabilities | ||
| Receivables – net | 4,413 | (888) |
| Inventories | (6,322) | 757 |
| Prepaid expenses | 1,297 | 1,074 |
| Accounts payable and accrued liabilities | (7,284) | (6,638) |
| Net cash provided (used) by operating activities | (1,345) | 14,538 |
| INVESTING ACTIVITIES | ||
| Capital expenditures – expansions | (1,374) | (4,569) |
| Capital expenditures – other | (1,782) | (804) |
| Proceeds from asset disposals | 3,209 | 1,068 |
| Investments in life insurance contracts | 327 | 5,802 |
| Other – net | 292 | (19) |
| Net cash provided by investing activities | 672 | 1,478 |
| FINANCING ACTIVITIES | ||
| Long-term borrowings | 650,000 | — |
| Debt retirements | (547,736) | (59) |
| Debt issuance costs | (12,250) | (2,032) |
| Stock option exercises | 225 | 331 |
| Excess tax benefits from stock-based compensation | — | 211 |
| Common dividends paid | (2,085) | (2,080) |
| Net cash provided (used) by financing activities | 88,154 | (3,629) |
| Increase in cash and cash equivalents | 87,481 | 12,387 |
| Cash and cash equivalents at beginning of period | 74,946 | 19,796 |
| Cash and cash equivalents at end of period | $ 162,427 | $ 32,183 |
