TXI Reports Second Quarter Results

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| Source: Texas Industries, Inc.

DALLAS, Jan. 8, 2014 (GLOBE NEWSWIRE) -- Texas Industries, Inc. (NYSE:TXI) today reported financial results for the quarter ended November 30, 2013. Results for the quarter were a net loss of $17.6 million or $0.62 per share. Results for the quarter ended November 30, 2012 were a net loss of $11.1 million or $0.40 per share.

EBITDA from continuing operations for the November quarter equaled $19.5 million and EBITDA from continuing operations for the prior year's November quarter equaled $10.6 million. EBITDA for discontinued operations equaled $1.2 million in last year's November quarter. Continuing operations' EBITDA as a percentage of net sales for the November quarter this year and last year equaled 9.3% and 6.3%, respectively.

General Comments

"We were able to restart the original kiln in central Texas two months ahead of our original schedule," stated Mel Brekhus, Chief Executive Officer. "The ability to supply an additional 900,000 tons annually from this kiln will increase our ability to take advantage of increased demand for cement in south and central Texas. This additional production capability and improving operational efficiencies associated with the new second kiln that started production last year places us in a strong position as we enter the spring shipping season. Further reflecting the increasing improvement in construction, we have announced cement price increases of $8 per ton in Texas for April 2014 and $3.50 per ton in California for January 2014 and $5 per ton in April 2014."

A number of non-recurring and short-term factors masked the improvement in both demand and pricing we are experiencing in our markets. Abnormal periods of inclement weather in Texas negatively impacted shipments in the quarter and product and geographic mix shifts reduced our reported average sales price. Normal inefficiencies associated with a new kiln operation along with repair and maintenance costs incurred to accelerate the resumption of production from our original kiln in central Texas combined to increase our costs. We believe the results for the quarter were negatively impacted by the following items:

($ millions)  
   
Hunter 1 refurbishment costs 4.0
Hunter 2 start-up costs 1.5
Environmental compliance costs 1.0
Non-operating legal costs 1.5
Inclement weather 4.0
   
Total 12.0

"The quality and value of our assets and the earnings potential we have previously discussed are as strong as ever and I look forward to capitalizing on current demand and pricing trends," added Brekhus.

A teleconference will be held January 9, 2014 at 10:00 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        
         
  Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands except per unit 2013 2012 2013 2012
Operating Results        
Cement sales  $ 94,856  $ 82,584  $ 199,282  $ 169,897
Other sales and delivery fees 7,507 8,859 17,829 18,751
Total segment sales 102,363 91,443 217,111 188,648
Cost of products sold 95,284 82,706 193,025 168,825
Gross profit 7,079 8,737 24,086 19,823
Selling, general and administrative (4,964) (3,730) (8,615) (7,274)
Other income, net 1,579 1,050 2,216 1,930
Operating profit  $ 3,694  $ 6,057  $ 17,687  $ 14,479
Cement        
Shipments (tons) 1,185 1,034 2,499 2,153
Prices ($/ton)  $ 80.10  $ 79.82  $ 79.75  $ 78.91
Cost of sales ($/ton)  $ 74.54  $ 72.56  $ 70.72  $ 70.47

Three months ended November 30, 2013

Cement operating profit for the three-month periods ended November 30, 2013 and 2012 was $3.7 million and $6.1 million, respectively.

Total segment sales for the three-month period ended November 30, 2013 were $102.4 million compared to $91.4 million for the prior year period. Cement sales increased $12.3 million from the prior year period. Our Texas market area accounted for approximately 69% of cement sales in the current period compared to 70% of cement sales in the prior year period. Average cement prices increased 0.8% in our Texas market from the prior year period. Average cement prices decreased 0.7% in our California market from the prior year period. Price increases on a same product and same market basis in both Texas and California were offset by changes in product, geographic and customer mix. Shipments increased 14.7% in our Texas market area and 14.4% in our California market area from prior year period. Shipments during the period were negatively impacted by more inclement weather in Texas compared to the prior year period.

Cost of products sold for the three-month period ended November 30, 2013 increased $12.6 million from the prior year period primarily due to higher shipments, depreciation expense related to our new production line at our Hunter cement plant, repair and maintenance costs at our Texas plants, and emission allowance credits associated with our compliance with The California Global Warming Solutions Act of 2006, which took effect on January 1, 2013. Cement unit cost of sales increased 2.7% from the prior year period as the impact of higher costs including depreciation, repair and maintenance, and emission allowance credits were partially offset by higher shipments.

Selling, general and administrative expense for the three-month period ended November 30, 2013 increased $1.2 million from the prior year period primarily due to higher legal expenses related to the litigation matters associated with our facilities in California.

Other income for the three-month period ended November 30, 2013 increased $0.5 million from the prior year period on higher income from royalties.

Aggregates Operations    
         
  Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands except per unit 2013 2012 2013 2012
Operating Results        
Stone, sand and gravel sales  $ 31,923  $ 27,739  $ 67,593  $ 55,890
Delivery fees and other 10,637 12,473 24,125 25,303
Total segment sales 42,560 40,212 91,718 81,193
Cost of products sold 36,058 35,951 77,474 72,188
Gross profit 6,502 4,261 14,244 9,005
Selling, general and administrative (1,517) (856) (3,007) (1,865)
Other income, net 405 115 740 378
Operating profit  $ 5,390  $ 3,520  $ 11,977  $ 7,518
Stone, sand and gravel        
Shipments (tons) 3,840 3,808 8,287 7,722
Prices ($/ton)  $ 8.31  $ 7.28  $ 8.16  $ 7.24
Cost of sales ($/ton)  $ 6.57  $ 5.99  $ 6.44  $ 5.99

Previously, the aggregates segment included our expanded shale and clay lightweight aggregates operations which has been classified as discontinued operations in the prior period. Therefore, amounts for these operations are not included in the information presented.

Three months ended November 30, 2013

Aggregates operating profit for the three-month periods ended November 30, 2013 and 2012 was $5.4 million and $3.5 million, respectively.

Total segment sales for the three-month period ended November 30, 2013 were $42.6 million compared to $40.2 million for the prior year period. Stone, sand and gravel sales increased $4.2 million from the prior year period on 0.8% higher shipments and 14.1% higher average prices. Average selling prices increased primarily due to the impact of product and geographic mix associated with the aggregate terminals acquired in the asset exchange on March 22, 2013. Shipments during the period were negatively impacted by more inclement weather in Texas compared to the prior year period.

Delivery fees decreased $1.9 million due to the acquisition of aggregate terminals in our asset exchange on March 22, 2013. Delivery costs associated with shipments to the acquired terminals are not directly billed to our customers.

Cost of products sold for the three-month period ended November 30, 2013 increased $0.1 million compared to the prior year period. Stone, sand and gravel unit costs increased 9.7% from the prior year period primarily due to the impact of including delivery costs associated with shipments to the acquired terminals in unit costs of sales.

Selling, general and administrative expense for the three-month period ended November 30, 2013 increased $0.7 million from the prior year period primarily due to higher bad debt and compensation related expenses.

Other income for the three-month period ended November 30, 2013 increased $0.3 million from the prior year period on sale of surplus assets.

Concrete Operations      
         
  Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands except per unit 2013 2012 2013 2012
Operating Results        
Ready-mix concrete sales  $ 93,171  $ 52,764  $ 191,405  $ 104,682
Delivery fees -- 101 286 228
Total segment sales 93,171 52,865 191,691 104,910
Cost of products sold 92,591 54,111 185,180 106,784
Gross profit (loss) 580 (1,246) 6,511 (1,874)
Selling, general and administrative (3,120) (2,074) (6,284) (4,764)
Other income, net 1,036 713 4,387 2,123
Operating profit (loss)  $ (1,504)  $ (2,607)  $ 4,614  $ (4,515)
Ready-mix concrete        
Shipments (cubic yards) 1,079 643 2,214 1,292
Prices ($/cubic yard)  $ 86.32  $ 81.99  $ 86.60  $ 81.03
Cost of sales ($/cubic yard)  $ 85.78  $ 84.16  $ 83.66  $ 82.56

Three months ended November 30, 2013

Concrete operating loss for the three-month periods ended November 30, 2013 and 2012 was $1.5 million and $2.6 million, respectively.

Total segment sales for the three-month period ended November 30, 2013 were $93.1 million compared to $52.9 million for the prior year period. Segment sales increased $40.3 million from the prior year period primarily due to the addition of the 42 ready-mix concrete plants acquired through an asset exchange on March 22, 2013, which accounted for 66% of the increase in shipments compared to the prior year period.   Shipments during the period were negatively impacted by more inclement weather in Texas compared to the prior year period. Price improvement in every market combined with the effect geographic market mix shifts attributable to the additional 42 ready-mix plants resulted in 5.3% higher average prices.

Cost of products sold for the three-month period ended November 30, 2013 increased $38.5 million from the prior year period as a result of the 42 additional ready-mix concrete plants acquired through an asset exchange on March 22, 2013, along with increased shipments from existing locations. Ready-mix concrete unit costs increased 1.9% from the prior year period primarily due to increased material and delivery costs partially offset by the effects of higher shipments.

Selling, general and administrative expense for the three-month period ended November 30, 2013 increased $1.0 million from the prior year period primarily attributable to higher compensation costs resulting from an increase in head count due to the addition of the 42 ready-mix concrete plants acquired through an asset exchange on March 22, 2013.

Other income for the three-month period ended November 30, 2013 increased $0.3 million from the prior year period primarily due to higher earnings from our joint venture of $0.2 million.

Corporate        
         
  Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands 2013 2012 2013 2012
Other income, net  $ 2,386  $ 46  $ 3,920  $ 92
Selling, general and administrative (10,057) (10,405) (20,319) (20,718)
   $ (7,671)  $ (10,359)  $ (16,399)  $ (20,626)

Three months ended November 30, 2013

Other income for the three-month period ended November 30, 2013 contains a gain of $2.1 million for a routine sale of real estate.

Selling, general and administrative expense for the three-month period ended November 30, 2013 decreased by $0.3 million compared to the prior year period primarily due to lower stock based compensation associated with the Company's stock appreciation rights and deferred compensation agreements. Previously, these agreements were accounted for as liabilities that impacted stock-based compensation expense based on changes in our company's stock price. On January 4, 2013 these agreements were amended, and changes in our stock price no longer impact stock -based compensation expense.

Interest

Interest expense incurred for the three-month period ended November 30, 2013 was $17.4 million. Interest expense incurred for the three-month period ended November 30, 2012 was $17.4 million, of which $9.9 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $7.5 million was expensed.

Income Taxes

Income taxes for the interim periods ended November 30, 2013 and 2012 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate for continuing operations is (1.8)% for fiscal year 2014 compared to (4.3)% for fiscal year 2013. We received income tax refunds of $0.4 million in the six-month period ended November 30, 2013 and none in the six-month period ended November 30, 2012. We made no income tax payments in the six-month periods ended November 30, 2013 and 2012.

Net deferred tax assets totaled $6.7 million at November 30, 2013 and May 31, 2013. Net deferred tax assets classified as current were $15.4 million at November 30, 2013 and $18.8 million at May 31, 2013. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and records a valuation allowance unless such deferred tax assets are deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company's deferred tax assets exceeded deferred tax liabilities as of November 30, 2013 and May 31, 2013 primarily as a result of recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of our net deferred tax assets. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets. We released valuation allowance of $1.5 million in fiscal year 2013 through a benefit related to gains in discontinued operations. We will continue to record additional valuation allowance against additions to our net deferred tax assets for fiscal year 2014 until Management believes it is more likely than not the deferred tax assets will be realized.

Certain statements contained in this quarterly report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect," "plan," "anticipate," and other similar words. 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 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, 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 major cement producer in California. TXI is also a major supplier of construction aggregate, ready-mix concrete and concrete products.

Earnings before Interest, Taxes, Depreciation and Amortization* Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands 2013 2012 2013 2012
Income before income taxes from continuing operations  $ (17,515)  $ (10,846)  $ (16,915)  $ (18,379)
Depreciation 19,571 13,986 39,433 27,860
Interest expense 17,423 7,457 34,794 15,234
EBITDA from continuing operations  $ 19,479  $ 10,597  $ 57,312  $ 24,715
EBITDA from discontinued operations**  --   $ 1,184  --   $ 6,545
Total EBITDA  $ 19,479  $ 11,781  $ 57,312  $ 31,260
         
         
EBITDA MARGIN        
EBITDA from continuing operations  $ 19,479  $ 10,597  $ 57,312  $ 24,715
Net Sales from continuing operations  $ 208,892  $ 167,693  $ 441,974  $ 342,216
EBITDA Margin 9.3% 6.3% 13.0% 7.2%
         
*A full reconciliation of EBITDA is continued on our website at www.txi.com.
         
** Expanded shale and clay operation's profit for the three month and six month periods ended November 30, 2012 of $0.8 million plus depreciation expense of $0.3 million and $5.9 million plus depreciation expense of $0.6 million, respectively. 

EBITDA represents income before interest, income taxes, depreciation and amortization and is presented because we believe it is a useful indicator of our performance and our ability to meet debt service and capital expenditure requirements. It is not, however, intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles. EBITDA is not necessarily comparable to similarly titled measures used by other companies.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization Three months ended
  November 30, November 30,
In millions 2013 2012
Net Sales  $ 208.9  $ 167.7
     
EBITDA from continuing operations  $ 19.5  $ 10.6
     
Operating Adjustments:    
Inclement weather  $ 4.0 --
Hunter 1 refurbishment costs 4.0 --
Environmental compliance costs 1.0 --
Major cement plant maintenance 2.5 5.5
Total operating adjustments  $ 11.5  $ 5.5
     
Non-operating adjustments:    
Variable stock-based compensation $ --  $ 1.5
Legal costs 1.5 --
Total non-operating adjustments  $ 1.5  $ 1.5
     
Adjusted EBITDA from continuing operations  $ 32.5  $ 17.6
     
Adjusted EBITDA Margin 15.5% 10.5%

Adjusted EBITDA represents income before interest, income taxes, depreciation and amortization adjusted for certain operating and non-operating costs, which we believe provides a more meaningful comparison of the results for the current and prior year periods. It is not, however, intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles. Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies.

CONSOLIDATED STATEMENTS OF OPERATIONS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
         
  Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands except per share 2013 2012 2013 2012
NET SALES  $ 208,892  $ 167,693  $ 441,974  $ 342,216
Cost of products sold 194,735 155,939 397,151 315,262
GROSS PROFIT 14,157 11,754 44,823 26,954
Selling, general and administrative 19,655 17,067 38,207 34,623
Interest expense 17,423 7,457 34,794 15,235
Other income, net (5,406) (1,924) (11,263) (4,525)
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (17,515) (10,846) (16,915) (18,379)
Income taxes (benefit) 125 (657) 295 (796)
NET LOSS FROM CONTINUING OPERATIONS  $ (17,640)  $ (10,189)  $ (17,210)  $ (17,583)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS -- (933) -- 3,805
NET LOSS  $ (17,640)  $ (11,122)  $ (17,210)  $ (13,778)
NET LOSS PER SHARE FROM CONTINUING OPERATIONS:        
Basic  $ (0.62)  $ (0.36)  $ (0.60)  $ (0.63)
Diluted  $ (0.62)  $ (0.36)  $ (0.60)  $ (0.63)
NET INCOME (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS:        
Basic $ --  $ (0.04)  $ --   $ 0.14
Diluted $ --  $ (0.04)  $ --   $ 0.14
NET LOSS PER SHARE:        
Basic  $ (0.62)  $ (0.40)  $ (0.60)  $ (0.49)
Diluted  $ (0.62)  $ (0.40)  $ (0.60)  $ (0.49)
AVERAGE SHARES OUTSTANDING        
Basic 28,614 28,030 28,596 28,014
Diluted 28,614 28,030 28,596 28,014
         
See notes to consolidated financial statements.
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
         
  Three months ended Six months ended
  November 30, November 30, November 30, November 30,
In thousands 2013 2012 2013 2012
Net loss  $ (17,640)  $ (11,122)  $ (17,210)  $ (13,778)
Other comprehensive income:        
Unrealized actuarial loss of defined benefit plans, net of tax benefit of $0, $0, $0 and $(32), respectively -- -- -- (55)
Reclassification of actuarial loss of defined benefit plans, net of tax benefit of $(8), $(55), $(12) and $(298), respectively 9 97 20 520
Total other comprehensive income 9 97 20 465
Comprehensive loss  $ (17,631)  $ (11,025)  $ (17,190)  $ (13,313)
         
See notes to consolidated financial statements.
 
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
     
  (Unaudited)  
In thousands except per share November 30, May 31,
  2013 2013
ASSETS    
CURRENT ASSETS    
Cash and cash equivalents  $ 82,362  $ 61,296
Receivables – net 122,382 126,922
Inventories 112,557 105,054
Deferred income taxes and prepaid expenses 21,929 27,294
TOTAL CURRENT ASSETS 339,230 320,566
PROPERTY, PLANT AND EQUIPMENT    
Land and land improvements 172,678 172,780
Buildings 51,461 50,968
Machinery and equipment 1,649,518 1,647,460
Construction in progress 27,714 16,642
  1,901,371 1,887,850
Less depreciation and depletion 697,717 661,454
  1,203,654 1,226,396
OTHER ASSETS    
Goodwill 40,575 40,575
Real estate and investments 31,582 29,471
Deferred other charges 18,050 18,817
  90,207 88,863
   $ 1,633,091  $ 1,635,825
LIABILITIES AND SHAREHOLDERS' EQUITY    
CURRENT LIABILITIES    
Accounts payable  $ 73,943  $ 69,061
Accrued interest, compensation and other 72,197 62,336
Current portion of long-term debt 2,229 1,872
TOTAL CURRENT LIABILITIES 148,369 133,269
LONG-TERM DEBT 657,068 657,935
DEFERRED INCOME TAXES AND OTHER CREDITS 85,967 91,157
SHAREHOLDERS' EQUITY    
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 28,623 and 28,572 shares, respectively 28,623 28,572
Additional paid-in capital 519,922 514,560
Retained earnings 211,476 228,686
Accumulated other comprehensive loss (18,334) (18,354)
  741,687 753,464
   $ 1,633,091  $ 1,635,825
See notes to consolidated financial statements.    
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
     
  Six months ended
  November 30, November 30,
In thousands 2013 2012
OPERATING ACTIVITIES    
Net loss  $ (17,210)  $ (13,778)
Adjustments to reconcile net loss to cash provided by operating activities    
Depreciation, depletion and amortization 39,433 28,543
Gain on asset disposals (5,766) (2,879)
Deferred income tax expense (benefit) (9) 957
Stock-based compensation expense 3,962 5,505
Other – net (7,703) (8,469)
Changes in operating assets and liabilities    
Receivables – net 4,401 (8,488)
Inventories (7,720) 13,967
Prepaid expenses 1,949 1,687
Accounts payable and accrued liabilities 21,868 7,933
Net cash provided by operating activities 33,205 24,978
INVESTING ACTIVITIES    
Capital expenditures – expansions (7,125) (36,118)
Capital expenditures – other (17,295) (10,845)
Proceeds from asset disposals 7,682 3,958
Investments in life insurance contracts 4,059 2,366
Other – net -- (88)
Net cash used by investing activities (12,679) (40,727)
FINANCING ACTIVITIES    
Debt payments (910) (1,585)
Stock option exercises 1,450 1,089
Net cash provided (used) by financing activities 540 (496)
Increase (decrease) in cash and cash equivalents 21,066 (16,245)
Cash and cash equivalents at beginning of period 61,296 88,027
Cash and cash equivalents at end of period  $ 82,362  $ 71,782
T. Lesley Vines, Jr.
Corporate Controller & Treasurer
Direct 972.647.6722 E-mail