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Dallas, TX - March 26, 2009 - Texas Industries, Inc. (NYSE-TXI) today reported financial results for the quarter ended February 28, 2009. Net income was $10.3 million or $.37 per share and included after tax gain of $3.2 million or $.12 per share from the sale of real estate associated with our north Texas aggregate operations. Net income for the quarter ended February 29, 2008 was $14.6 million or $.53 per share.
General Comments
"Our results reflect the exemplary work of our employees and the benefits of their operating decisions during the last six months," stated Mel Brekhus, Chief Executive Officer. "We have suspended the operation of some of our plants, adjusted shifts, reduced overtime, trimmed head count and otherwise altered the way we operate our facilities, and it is paying off."
"TXI remains focused on pursuing every opportunity to meet market demand as cost effectively as possible," added Brekhus. "Our unit costs only increased 2%, 4% and 10% in our consumer products, aggregate and cement segments respectively despite a decline in shipments of approximately 30% for all major products. A specific example of our results is the fact that our ready-mix volumes are down 28% and our yards per man hour metric is down only 6%. Additionally, we recently announced internally a wage and salary freeze beginning June 1st and the board of directors, executive officers and I have voluntarily chosen to reduce our compensation in fiscal year 2010."
"We are on track to stop construction in early May," Brekhus said about the delay of the central Texas cement plant expansion announced this past January. "We will resume the project once market conditions improve. The delay is still 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, March 26, 2009 at 1:00 Central Daylight 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
Operating profit for the three-month period ended February 28, 2009 was $12.1 million, a decrease of $12.6 million from the prior year period.
Total cement sales for the three-month period ended February 28, 2009 decreased $28.3 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 74% of total cement sales in the current period compared to 71% of total cement sales in the prior year period. In our Texas market area, cement shipments decreased 28% from the prior year period and average prices increased 4%. In our California market area, cement shipments decreased 24% from the prior year period and average prices decreased 14%.
Cost of products sold for the three-month period ended February 28, 2009 decreased $18.1 million from the prior year period. The effect of lower shipments and lower labor, supply and maintenance costs was partially offset by higher depreciation at our Oro Grande, California cement plant and higher coal costs. Cement unit costs increased 10% from the prior year period primarily due to lower production levels.
Selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $0.4 million from the prior year period primarily due to lower insurance expense offset in part by higher legal and other professional expenses.
Other income for the three-month period ended February 28, 2009 was comparable to the prior year period.
Aggregate Operations
Operating profit for the three-month period ended February 28, 2009 was $12.2 million, an increase of $7.2 million from the prior year period.
Total segment sales for the three-month period ended February 28, 2009 decreased $13.1 million from the prior year period as total stone, sand and gravel sales were down $10.8 million. Total stone, sand and gravel shipments decreased 35% from the prior year period and average prices increased 9%.
Cost of products sold for the three-month period ended February 28, 2009 decreased $13.4 million from the prior year period as labor hours were reduced in response to lower shipments and supplies and maintenance costs declined. Stone, sand and gravel unit costs increased 4% and shipments declined 35% from the prior year period.
Selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $1.4 million from the prior year period primarily due to lower insurance expense and incentive compensation expense.
Other income for the three-month period ended February 28, 2009 increased $5.4 million from the prior year period. Other income in the current period includes a gain of $5.0 million from the sale of real estate associated with our north Texas aggregate operations.
Consumer Products Operations
Operating profit for the three-month period ended February 28, 2009 was $4.5 million, an increase of $5.0 million from the prior year period.
Total segment sales for the three-month period ended February 28, 2009 decreased $15.5 million as total ready-mix concrete sales were down $16.4 million. Total ready-mix concrete volumes decreased 28% from the prior year period and average prices increased 7%.
Cost of products sold for the three-month period ended February 28, 2009 decreased $17.8 million from the prior year period as labor hours were reduced in response to lower shipments and supplies, maintenance and diesel costs declined. Overall ready-mix concrete unit costs increased 2% and volumes declined 28% from the prior year period.
Selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $2.6 million from the prior year period primarily due to lower insurance expense and incentive compensation expense.
Other income for the three-month period ended February 28, 2009 was comparable to the prior year period.
Unallocated Overhead and Other Income
Unallocated overhead and other income relate primarily to certain environmental, engineering and other administrative operating activities not attributable to a specific segment. Unallocated selling, general and administration expense for the three-month and nine-month periods ended February 28, 2009 increased from the prior year periods $2.0 million and $2.4 million, respectively, primarily due to increased insurance expense for undeveloped claims.
Corporate
Other income for the three-month period ended February 28, 2009 was comparable to the prior year period.
Corporate selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $2.3 million from the prior year period. The decrease was primarily the result of $1.7 million lower incentive compensation expense and $0.8 million lower retirement expense. Stock-based compensation was comparable to the prior year period. 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 $2.4 million and $2.8 million during three-month periods ended February 28, 2009 and February 29, 2008, respectively.
Interest
Interest expense incurred for the three-month period ended February 28, 2009 was $13.0 million, of which $4.7 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $8.3 million was expensed. Interest expense incurred for the three-month period ended February 29, 2008 was $7.5 million, all of which was capitalized in connection with our Hunter, Texas and Oro Grande, California cement plant expansion projects. The $5.5 million increase was due to higher average outstanding debt and borrowings on life insurance contracts.
Income Taxes
Income taxes for the interim periods ended February 28, 2009 and February 29, 2008 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 benefit of separately stated items in the amount of $0.6 million in the interim periods ended February 28, 2009. 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 25.5% compared to 31.1% 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
