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Dallas, TX - January 8, 2009 - 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.
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.
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.
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.
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 relate primarily to certain environmental, engineering and other administrative operating activities not attributable to a specific segment.
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.
CONTACT INFORMATION:
Kenneth R. Allen
Vice President-Finance and Chief Financial Officer
972.647.6730
kallen@txi.com
