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TXI Reports Second Quarter Results and Announces Delay of Central Texas Cement Plant Expansion

Posted on: Thursday, 8 January 2009, 07:46 CST

DALLAS, Jan 8 /PRNewswire-FirstCall/ -- Texas Industries, Inc. (NYSE: TXI) today reported financial results for the quarter ended November 30, 2008. Net income was $3.9 million ($.14 per share). Net income for the quarter ended November 30, 2007 was $29.3 million ($1.07 per share). TXI also announced the delay of its Central Texas cement plant expansion project, beginning in the May 2009 quarter.

(Logo: http://www.newscom.com/cgi-bin/prnh/20061018/DAW076LOGO)

General Comments

"The general economy caught up with the state of Texas this fall," stated Mel Brekhus, Chief Executive Officer. "In Texas, which accounts for approximately 80% of TXI's sales, cement consumption declined about 20% this Fall compared to last year. Cement prices in Texas improved 3% from a year ago and about 1% compared to the summer quarter. Cement consumption in California continued to decline and cement prices in that market were down 14% from a year ago and 5% compared to the summer quarter."

"We are in the midst of very challenging times," added Brekhus. "TXI is pursuing every opportunity to meet market demand as cost effectively as possible. The idling of the small kilns at our North Texas plant and the cement grinding operations at our Crestmore facility in California will reduce cash costs while still allowing us to meet the current demand. Similarly, we are striving to match production to sales throughout all operations. We have eliminated shifts and reduced overtime at our aggregate facilities and our ready-mix operations did an outstanding job of keeping labor efficiencies high on 27% lower shipments. All-in-all, the total number of employees has been reduced by 15% since December 2007."

"It just doesn't make sense to bring capacity on line at a time when the market clearly does not need it," Brekhus said about the delay of the Central Texas cement plant expansion. "We will resume the project once market conditions improve. The delay is expected to defer $40-60 million in cash payments that would have primarily been made during fiscal year 2010 to complete the project on schedule."

A teleconference will be held today, January 8, 2009 at 1:00 Central Standard Time to further discuss quarter results. A real-time webcast of the conference is available by logging on to TXI's website at www.txi.com.

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 Six months ended November 30, November 30, In thousands except per unit 2008 2007 2008 2007 Operating Results Total cement sales $98,407 $122,586 $209,811 $246,009 Total other sales and delivery fees 9,641 8,723 19,600 16,435 Total segment sales 108,048 131,309 229,411 262,444 Cost of products sold 94,206 93,572 198,763 202,679 Gross profit 13,842 37,737 30,648 59,765 Selling, general and administrative (5,338) (3,941) (10,042) (8,952) Other income 948 681 6,151 1,505 Operating Profit $9,452 $34,477 $26,757 $52,318 Cement Shipments (tons) 1,083 1,319 2,301 2,609 Prices ($/ton) $90.87 $92.88 $91.17 $94.27 Cost of sales ($/ton) $79.04 $64.41 $79.15 $71.80

Through the cement segment we produce and sell gray portland cement as our principal product, as well as specialty cements.

Operating profit for the three-month period ended November 30, 2008 was $9.5 million, a decrease of $25.0 million from the prior year period.

Total cement sales for the three-month period ended November 30, 2008 decreased $24.2 million from the prior year period as construction activity declined in both our Texas and California market areas. Our Texas market area accounted for approximately 70% of total cement sales in the current period compared to 68% of total cement sales in the prior year period. In our Texas market area cement shipments decreased 19% from the prior year period and average prices increased 3%. In our California market area cement shipments decreased 14% from the prior year period and average prices decreased 14%.

Cost of products sold for the three-month period ended November 30, 2008 increased $0.6 million from the prior year period. The effect of lower shipments was offset by higher unit costs. Cement unit costs increased 23% from the prior year period. In addition to higher energy costs, scheduled maintenance at our north Texas cement plant of $8.0 million and higher depreciation at our Oro Grande, California cement plant of $3.3 million contributed to increased costs.

Selling, general and administrative expense for the three-month period ended November 30, 2008 increased $1.4 million from the prior year period primarily due to higher legal and other professional expenses.

Other income for the three-month period ended November 30, 2008 increased $0.3 million from the prior year period primarily due to higher oil and gas royalty income.

Aggregate Operations Three months ended Six months ended November 30, November 30, In thousands except per unit 2008 2007 2008 2007 Operating Results Total stone, sand and gravel sales $35,667 $43,324 $76,346 $83,128 Total other sales and delivery fees 24,838 30,559 55,956 60,980 Total segment sales 60,505 73,883 132,302 144,108 Cost of products sold 50,769 59,610 110,214 114,652 Gross profit 9,736 14,273 22,088 29,456 Selling, general and administrative (3,506) (3,640) (7,329) (7,787) Other income 463 237 870 643 Operating Profit $6,693 $10,870 $15,629 $22,312 Stone, sand and gravel Shipments (tons) 4,605 5,863 9,806 11,414 Prices ($/ton) $7.74 $7.39 $7.79 $7.28 Cost of sales ($/ton) $6.38 $5.76 $6.33 $5.60

Through the aggregates segment we produce and sell stone, sand and gravel as our principal products, as well as expanded shale and clay lightweight aggregates.

Operating profit for the three-month period ended November 30, 2008 was $6.7 million, a decrease of $4.2 million from the prior year period as construction activity declined in our market areas.

Total segment sales for the three-month period ended November 30, 2008 decreased $13.4 million from the prior year period as total stone, sand and gravel sales were down $7.7 million. Total stone, sand and gravel shipments decreased 21% from the prior year period and average prices increased 5%.

Cost of products sold for the three-month period ended November 30, 2008 decreased $8.8 million from the prior year period primarily due to lower shipments. Stone, sand and gravel unit costs increased primarily due to the impact of production levels on unit costs.

Selling, general and administrative expense for the three-month period ended November 30, 2008 decreased $0.1 million from the prior year period primarily due to lower incentive compensation expense.

Other income for the three-month period ended November 30, 2008 increased $0.2 million from the prior year period primarily due to higher oil and gas income.

Consumer Products Operations Three months ended Six months ended November 30, November 30, In thousands except per unit 2008 2007 2008 2007 Operating Results Total ready-mix concrete sales $64,832 $84,233 $143,726 $164,223 Total other sales and delivery fees 15,812 13,798 32,142 28,334 Total segment sales 80,644 98,031 175,868 192,557 Cost of products sold 76,429 89,839 168,173 175,559 Gross profit 4,215 8,192 7,695 16,998 Selling, general and administrative (3,716) (3,931) (8,031) (8,836) Other income 180 346 565 522 Operating Profit (Loss) $679 $4,607 $229 $8,684 Ready-mix concrete Shipments (cubic yards) 769 1,050 1,716 2,048 Prices ($/cubic yard) $84.37 $80.19 $83.78 $80.18 Cost of sales ($/cubic yard) $81.96 $75.18 $81.52 $74.55

Through the consumer products segment we produce and sell ready-mix concrete as our principal product, as well as packaged concrete mix, mortar, sand and related products.

Operating profit for the three-month period ended November 30, 2008 was $0.7 million, a decrease of $3.9 million from the prior year period as construction activity declined in our market areas.

Total segment sales for the three-month period ended November 30, 2008 decreased $17.4 million as total ready-mix concrete sales were down $19.4 million. Total ready-mix concrete volumes decreased 27% from the prior year period and average prices increased 5%.

Cost of products sold for the three-month period ended November 30, 2008 decreased $13.4 million from the prior year period primarily due to lower shipments. Overall ready-mix concrete unit costs increased 9% from the prior year period primarily due to higher raw material costs, as well as higher distribution and transportation costs. Our raw material unit costs in the current period increased approximately 7% from the prior year period. Our cost of diesel fuel per gallon in the current period increased approximately 33% from the prior year period.

Selling, general and administrative expense for the three-month period ended November 30, 2008 decreased $0.2 million from the prior year period primarily due to lower incentive compensation expense.

Other income for the three-month period ended November 30, 2008 decreased $0.2 million from the prior year period as a result of lower gains from the routine sale of surplus operating assets.

Unallocated Overhead and Other Income Three months ended Six months ended November 30, November 30, In thousands 2008 2007 2008 2007 Other income $60 $115 $121 $287 Selling, general and Administrative (2,253) (2,173) (4,799) (4,484) $(2,193) $(2,058) $(4,678) $(4,197)

Unallocated overhead and other income relate primarily to certain environmental, engineering and other administrative operating activities not attributable to a specific segment.

Corporate Three months ended Six months ended November 30, November 30, In thousands 2008 2007 2008 2007 Other income $560 $2,063 $2,745 $2,738 Selling, general and Administrative (1,051) (7,379) (3,001) (13,188) $(491) $(5,316) $(256) $(10,450)

Other income for the three-month period ended November 30, 2008 decreased $1.5 million from the prior year period. The prior year period includes a gain of $0.8 million from the sale of corporate real estate and a bonus payment of $0.7 million received upon the execution of an oil and gas lease agreement on property formerly owned by us that was not associated with any business segment.

Selling, general and administrative expense for the three-month period ended November 30, 2008 decreased $6.3 million from the prior year period. The decrease was primarily the result of $1.4 million lower incentive compensation expense and $4.1 million lower stock-based compensation. Our incentive plans are based on financial performance. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on the average stock price at the end of each period until the awards are paid. The impact of changes in our stock price reduced stock-based compensation $4.6 million and $0.8 million during three-month periods ended November 30, 2008 and November 30, 2007, respectively.

Interest

Interest expense incurred for the three-month period ended November 30, 2008 was $12.5 million, of which $3.2 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $9.3 million was expensed. Interest expense incurred for the three-month period ended November 30, 2007 was $7.2 million, all of which was capitalized in connection with our Hunter, Texas and Oro Grande, California cement plant expansion projects.

Interest expense incurred for the three-months ended November 30, 2008 increased from the prior year period $5.3 million. The increase was due to higher average outstanding debt and borrowings on life insurance contracts.

Income Taxes

Income taxes for the interim periods ended November 30, 2008 and November 30, 2007 have been included in the accompanying financial statements on the basis of an estimated annual rate. 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. Our estimated effective tax rate for fiscal year 2009 is 28.3% compared to 31.2% for fiscal year 2008.

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 interest rates, the timing and amount of federal, state and local funding for infrastructure, inability to timely execute 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.

CONSOLIDATED BALANCE SHEETS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES (Unaudited) November 30, May 31, In thousands 2008 2008 ASSETS CURRENT ASSETS Cash and cash equivalents $62,254 $39,527 Receivables - net 124,867 155,676 Inventories 141,774 130,181 Deferred income taxes and prepaid expenses 30,116 30,398 TOTAL CURRENT ASSETS 359,011 355,782 OTHER ASSETS Goodwill 60,110 60,110 Real estate and investments 33,478 59,971 Deferred charges and other 15,241 11,332 108,829 131,413 PROPERTY, PLANT AND EQUIPMENT Land and land improvements 154,692 139,544 Buildings 57,032 56,976 Machinery and equipment 1,233,454 1,208,905 Construction in progress 273,654 137,083 1,718,832 1,542,508 Less depreciation and depletion 543,043 514,744 1,175,789 1,027,764 $1,643,629 $1,514,959 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $112,634 $128,497 Accrued interest, wages and other 47,626 47,846 Current portion of long-term debt 234 7,725 TOTAL CURRENT LIABILITIES 160,494 184,068 LONG-TERM DEBT 539,978 401,880 DEFERRED INCOME TAXES AND OTHER CREDITS 108,536 112,498 SHAREHOLDERS' EQUITY Common stock, $1 par value 27,663 27,493 Additional paid-in capital 467,250 459,877 Retained earnings 346,659 336,279 Accumulated other comprehensive loss (6,951) (7,136) 834,621 816,513 $1,643,629 $1,514,959

(Unaudited) CONSOLIDATED STATEMENTS OF OPERATIONS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES Three months ended Six months ended November 30, November 30, In thousands except per share 2008 2007 2008 2007 NET SALES $221,799 $268,473 $478,191 $531,927 Cost of products sold 194,006 208,271 417,760 425,708 GROSS PROFIT 27,793 60,202 60,431 106,219 Selling, general and administrative 15,864 21,064 33,202 43,247 Interest 9,296 -- 16,541 -- Loss on debt retirements -- -- 907 -- Other income (2,211) (3,442) (10,452) (5,695) 22,949 17,622 40,198 37,552 INCOME BEFORE INCOME TAXES 4,844 42,580 20,233 68,667 Income taxes 991 13,265 5,722 21,438 NET INCOME $3,853 $29,315 $14,511 $47,229 Net income per share Basic $.14 $1.07 $.53 $1.73 Diluted $.14 $1.05 $.52 $1.69 Average shares outstanding Basic 27,566 27,348 27,536 27,340 Diluted 27,782 27,849 27,806 27,873 Cash dividends per share $.075 $.075 $.15 $.15

(Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES Six months ended November 30, In thousands 2008 2007 OPERATING ACTIVITIES Net income $14,511 $47,229 Adjustments to reconcile net income to cash provided by operating activities Depreciation, depletion and amortization 34,016 27,164 Gains on asset disposals (427) (917) Deferred income taxes 4,052 1,127 Stock-based compensation expense (credit) (7,829) (1,325) Excess tax benefits from stock-based compensation (1,766) (3,383) Loss on debt retirements 907 -- Other - net (1,067) (945) Changes in operating assets and liabilities Receivables - net 30,074 (21,357) Inventories (11,593) 8,643 Prepaid expenses 914 1,920 Accounts payable and accrued liabilities (23,454) 2,320 Net cash provided by operating activities 38,338 60,476 INVESTING ACTIVITIES Capital expenditures - expansions (123,420) (138,364) Capital expenditures - other (51,911) (36,724) Cash designated for property acquisitions 28,733 -- Proceeds from asset disposals 865 2,366 Investments in life insurance contracts 2,263 65,529 Other - net 175 55 Net cash used by investing activities (143,295) (107,138) FINANCING ACTIVITIES Long-term borrowings 327,250 189,000 Debt retirements (197,610) (130,237) Debt issuance costs (3,476) (1,033) Stock option exercises 3,885 730 Excess tax benefits from stock-based compensation 1,766 3,383 Common dividends paid (4,131) (4,103) Net cash provided by financing activities 127,684 57,740 Increase in cash and cash equivalents 22,727 11,078 Cash and cash equivalents at beginning of period 39,527 15,138 Cash and cash equivalents at end of period $62,254 $26,216

SOURCE Texas Industries, Inc.

Source: PR Newswire

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