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Dallas, TX - September 24, 2009 - Texas Industries, Inc. (NYSE-TXI) today reported financial results for the quarter ended August 31, 2009. Net income was $1.7 million ($.06 per share). Net income for the quarter ended August 31, 2008 was $10.7 million ($.38 per share) and included after-tax income of $2.9 million ($.10 per share) related to oil and gas lease bonus payments received during the quarter.
General Comments
"I am very pleased with our results in light of the fact that the markets for all of our products continue to be challenging," stated Mel Brekhus, Chief Executive Officer. "Cash gross margins actually improved in spite of the fact that shipments for the quarter are down year over year 25-35% for our major products, reflecting the excellent work of our employees. I believe TXI is well positioned to get through the remainder of this recession and to take full advantage of the recovery when it comes."
A teleconference will be held today, September 24, 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. A replay of the call will be available through midnight on Friday, October 9, 2009.
The following is a summary of operating results for our business segments and certain other operating information related to our principal products.
Cement Operations
Cement operating profit for the three-month period ended August 31, 2009 was $12.0 million, a decrease of $4.3 million from the prior year period.
Total segment sales for the three-month period ended August 31, 2009 were $85.2 million compared to $121.4 million for the prior year period. Cement sales decreased $32.9 million as construction activity declined in both our Texas and California market areas. Our Texas market area accounted for approximately 71% of cement sales in the current period compared to 69% of cement sales in the prior year period. Shipments in both our market areas decreased 25% from the prior year period. Average cement prices declined 3% in our Texas market area and 13% in our California market area.
Cost of products sold for the three-month period ended August 31, 2009 decreased $34.7 million from the prior year period primarily due to lower shipments. Cement unit costs decreased 13% from the prior year period on lower variable costs, including labor, energy, supplies and maintenance costs. In addition, scheduled shutdowns for maintenance at our California and central Texas cement plants increased unit costs in the prior year period.
Selling, general and administrative expense for the three-month period ended August 31, 2009 decreased $0.7 million from the prior year period. Lower overall selling and administrative expenses, including wages and benefits, marketing, travel and outside service expenses as a result of our focus on cost reduction initiatives were offset in part by $0.6 million higher provisions for bad debts and $0.5 million higher defined benefit plan expense.
Other income for the three-month period ended August 31, 2009 decreased $3.5 million from the prior year period. Other income in the prior period included a lease bonus payment of $2.8 million received upon the execution of an oil and gas lease on property we own in north Texas and a gain of $1.7 million from the sale of emission credits associated with our California cement operations.
Aggregate Operations
Aggregate operating profit for the three-month period ended August 31, 2009 was 8.6 million, a decrease of $0.3 million from the prior year period. Improvements in average prices for our stone, sand and gravel were offset by lower shipments.
Total segment sales for the three-month period ended August 31, 2009 decreased $21.7 million from the prior year period. Stone, sand and gravel sales decreased $12.9 million on 4% higher average prices and 34% lower shipments.
Cost of products sold for the three-month period ended August 31, 2009 decreased $20.3 million from the prior year period primarily due to lower shipments. Overall stone, sand and gravel unit costs were comparable to the prior year period.
Selling, general and administrative expense for the three-month period ended August 31, 2009 decreased $1.1 million from the prior year period primarily due to lower overall selling and administrative expenses, including wages and benefits, marketing, travel and outside service expenses as a result of our focus on cost reduction initiatives.
Other income for the three-month period ended August 31, 2009 was comparable to the prior year period.
Consumer Products Operations
Consumer products operating profit for the three-month period ended August 31, 2009 was $4.8 million, an increase of $5.2 million from the prior year period. Improvements in ready-mix concrete average prices and lower raw material costs were offset in part by lower shipments.
Total segment sales for the three-month period ended August 31, 2009 were $69.5 million compared to $95.2 million for the prior year period. Ready-mix concrete sales for the three-month period ended August 31, 2009 decreased $24.8 million on 6% higher average prices and 35% lower shipments.
Cost of products sold for the three-month period ended August 31, 2009 decreased $30.0 million from the prior year period. Overall ready-mix concrete unit costs decreased 2% from the prior year period primarily due to lower raw material costs. Our raw material unit costs including the cost of transportation decreased approximately 8% from the prior year period.
Selling, general and administrative expense for the three-month period ended August 31, 2009 decreased $1.1 million from the prior year period primarily due to lower overall selling and administrative expenses, including wages and benefits, marketing, travel and outside service expenses as a result of our focus on cost reduction initiatives.
Other income for the three-month period ended August 31, 2009 decreased $0.3 million from the prior year period. Other income in the prior year period included lease bonus payments of $0.2 million received upon the execution of oil and gas lease agreements on property we own in north Texas.
Corporate
Other income for the three-month period ended August 31, 2009 decreased $1.8 million from the prior year period. Other income in the prior year period includes a lease bonus payment of $1.6 million received upon the execution of an oil and gas lease agreement on property we own in north Texas that is not associated with any business segment.
Selling, general and administrative expense for the three-month period ended August 31, 2009 increased $5.9 million from the prior year period. The increase was primarily the result of $6.6 million higher stock-based compensation offset in part by $0.4 million lower wages and benefits and $0.3 million lower insurance expense. 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 increased stock-based compensation $1.6 million in the three-month period ended August 31, 2009 and reduced stock-based compensation $5.1 million in the three-month period ended August 31, 2008.
Interest
Interest expense incurred for the three-month period ended August 31, 2009 was $13.2 million, all of which was expensed. Interest expense incurred for the three-month period ended August 31, 2008 was $9.0 million, of which $1.8 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $7.2 million was expensed.
Interest expense incurred for the three-month period ended August 31, 2009 increased $4.2 million from the prior year period primarily as a result of higher average outstanding debt due to the sale of $300 million aggregate principal amount of additional 7.25% senior notes on August 18, 2008. We have delayed completion of the Hunter, Texas cement plant expansion and do not expect to capitalize any interest in connection with the project during the remainder of fiscal year 2010.
Loss on Debt Retirements
On August 18, 2008, we sold $300 million aggregate principal amount of additional 7.25% senior notes due in 2013 at an offering price of $93.25. The net proceeds were used to repay our $150 million senior term loan and borrowings outstanding under our senior revolving credit facility in the amount of $29.5 million. We recognized a loss on debt retirement of $0.9 million representing a write-off of debt issuance costs associated with the mandatory prepayment of the term loan.
Income Taxes
Income taxes for the interim periods ended August 31, 2009 and August 31, 2008 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 2010 is 47.4% compared to 30.7% for fiscal year 2009.
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.
Kenneth R. Allen
Vice President-Finance and Chief Financial Officer
972.647.6730
Email: kallen@txi.com
