TXI Reports Third Quarter Results

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| Source: Texas Industries, Inc.

DALLAS, April 2, 2014 (GLOBE NEWSWIRE) -- Texas Industries, Inc. (NYSE:TXI) today reported financial results for the quarter ended February 28, 2014. Results for the quarter were a net loss of $21.8 million or $.76 per share. Several non-recurring and timing items (discussed below) negatively impacted net income for the quarter by $12.2 million or $.43 per share. Results for the quarter ended February 28, 2013 were a net loss of $5.8 million or $.21 per share inclusive of net income from discontinued operations of $2.7 million or $.09 per share.

General Comments

"Construction activity continues to improve, especially in Texas, our primary market," stated Mel Brekhus, Chief Executive Officer. "Cement, aggregate and ready mix concrete shipments in Texas increased 27%, 21% and 48% respectively compared to a year ago after adjusting for the ready mix operations we acquired last year and despite an unusually bad winter. California cement shipments increased 11.8% compared to a year ago."

EBITDA from continuing operations for the February quarter equaled $11.7 million and EBITDA from continuing operations for the prior year's February quarter equaled $11.5 million. EBITDA after adjusting for non-recurring items in the current quarter and outages that did not occur in the prior period detailed below was $24.8 million. Adjusted EBITDA for the prior period was $12.9 million. Adjusted EBITDA as a percentage of net sales for the February quarter this year and last year equaled 11.9% and 9.1%, respectively.

Non-recurring items and cement plant outages that did not occur in the prior period are detailed below:

($ millions)
 
Midlothian maintenance outage (direct costs plus production impact) 8.4
Hunter maintenance outage (originally anticipated in Q4) 2.5
Merger charges 2.9
Favorable litigation settlement  (.7)
   
Total 13.1

"The fact that shipment levels overcame a severe winter is indicative of the continued improvement in our markets. Positive construction trends are tightening the supply of building materials in many of our markets and should support continued price improvement," added Brekhus.

A teleconference will be held tomorrow, April 3, 2014 at 10:00 A.M. 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 Nine months ended
  February 28, February 28, February 28, February 28,
In thousands except per unit 2014 2013 2014 2013
Operating Results        
Cement sales  $ 93,356  $ 73,086  $ 292,638  $ 242,983
Other sales and delivery fees 7,381 7,480 25,210 26,230
Total segment sales 100,737 80,566 317,848 269,213
Cost of products sold 98,667 68,501 291,692 237,326
Gross profit 2,070 12,065 26,156 31,887
Selling, general and administrative  (3,088)  (3,247)  (11,703)  (10,520)
Other income, net  (596)  1,031  1,620 2,961
Operating profit  $ (1,614)  $ 9,849  $ 16,073  $ 24,328
Cement        
Shipments (tons) 1,141 933 3,640 3,086
Prices ($/ton)  $ 81.85  $ 78.39  $ 80.40  $ 78.75
Cost of sales ($/ton)  $ 80.61  $ 64.35  $ 73.82  $ 68.62

Three months ended February 28, 2014

Cement operating profit (loss) for the three-month periods ended February 28, 2014 and 2013 was $(1.6) million and $9.8 million, respectively.

Total segment sales for the three-month period ended February 28, 2014 were $100.7 million compared to $80.6 million for the prior year period. Cement sales increased $20.3 million from the prior year period. Our Texas market area accounted for approximately 74% of cement sales in the current period compared to 71% of cement sales in the prior year period. Average cement prices increased 5.1% in our Texas market from the prior year period. Average cement prices increased 1.6% 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 27.0% in our Texas market area and 11.8% 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 February 28, 2014 increased $30.2 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 25.3% from the prior year period as the impact of higher costs including depreciation, repair and maintenance that includes annual major outages at our Texas Plants, and emission allowance credits were partially offset by higher shipments.

Selling, general and administrative expense for the three-month period ended February 28, 2014 decreased $0.2 million from the prior year period on lower provisions for insurance claims related to a reallocation among operating units, which were offset by higher legal expenses related to the litigation matters associated with our facilities in California.

Other income for the three-month period ended February 28, 2014 decreased $1.6 million from the prior year period on lower royalty income and miscellaneous income.

Aggregates Operations
  Three months ended Nine months ended
  February 28, February 28, February 28, February 28,
In thousands except per unit 2014 2013 2014 2013
Operating Results        
Stone, sand and gravel sales  $ 31,177  $ 22,021  $ 98,770  $ 77,911
Delivery fees and other  10,723  8,799  34,848  34,101
Total segment sales  41,900  30,820  133,618  112,012
Cost of products sold  37,666  28,106  115,140  100,294
Gross profit  4,234  2,714  18,478  11,718
Selling, general and administrative  (1,679)  (900)  (4,686)  (2,763)
Other income, net  831  295  1,571  674
Operating profit  $ 3,386  $ 2,109  $ 15,363  $ 9,629
Stone, sand and gravel        
Shipments (tons) 3,671 3,029 11,958 10,751
Prices ($/ton)  $ 8.49  $ 7.27  $ 8.26  $ 7.25
Cost of sales ($/ton)  $ 7.37  $ 6.46  $ 6.73  $ 6.12

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 February 28, 2014

Aggregates operating profit for the three-month periods ended February 28, 2014 and 2013 was $3.4 million and $2.1 million, respectively.

Total segment sales for the three-month period ended February 28, 2014 were $41.9 million compared to $30.8 million for the prior year period. Stone, sand and gravel sales increased $9.2 million from the prior year period on 21.2% higher shipments and 16.8% 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 increased $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 February 28, 2014 increased $9.6 million compared to the prior year period. Stone, sand and gravel unit costs increased 14.1% 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 February 28, 2014 increased $0.7 million from the prior year period primarily due to higher provisions for insurance claims related to a reallocation among operating units.

Other income for the three-month period ended February 28, 2014 increased $0.5 million from the prior year period primarily on the sale of surplus assets and higher royalties.

Concrete Operations
  Three months ended Nine months ended
  February 28, February 28, February 28, February 28,
In thousands except per unit 2014 2013 2014 2013
Operating Results        
Ready-mix concrete sales  $ 93,031  $ 44,582  $ 284,436  $ 149,276
Delivery fees  630  46  916  274
Total segment sales  93,661  44,628  285,352  149,550
Cost of products sold  88,013  47,081  273,193  153,877
Gross profit (loss)  5,648  (2,453)  12,159  (4,327)
Selling, general and administrative  (1,690)  (2,475)  (7,974)  (7,239)
Other income, net  892  666  5,279  2,789
Operating profit (loss)  $ 4,850  $ (4,262)  $ 9,464  $ (8,777)
Ready-mix concrete        
Shipments (cubic yards) 1,085 541 3,298 1,833
Prices ($/cubic yard)  $ 86.03  $ 82.49  $ 86.23  $ 81.46
Cost of sales ($/cubic yard)  $ 80.86  $ 87.04  $ 82.60  $ 83.88

Three months ended February 28, 2014

Concrete operating profit for the three-month period ended February 28, 2014 was $4.9 million compared to an operating loss of $4.3 million for the three-month period ended February 28, 2013.

Total segment sales for the three-month period ended February 28, 2014 were $93.7 million compared to $44.6 million for the prior year period. Segment sales increased $49.1 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 52% of the increase in shipments compared to the prior year period.   Price improvement in every market combined with market mix shifts attributable to the additional 42 ready-mix plants resulted in 4.3% higher average prices.

Cost of products sold for the three-month period ended February 28, 2014 increased $40.9 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 decreased 7.1% from the prior year period primarily due to higher shipments.

Selling, general and administrative expense for the three-month period ended February 28, 2014 decreased $0.8 million from the prior year period primarily due to lower provisions for insurance claims related to a reallocation among operating units, which were offset by 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 February 28, 2014 increased $0.2 million from prior year period on sale of surplus assets.

Corporate
  Three months ended Nine months ended
  February 28, February 28, February 28, February 28,
In thousands 2014 2013 2014 2013
Other income, net  $ 570  $ 98  $ 4,490  $ 190
Merger charges  (2,863)    (2,863)  
Selling, general and administrative  (11,766)  (10,437)  (32,086)  (31,157)
   $ (14,059)  $ (10,339)  $ (30,459)  $ (30,967)

Three months ended February 28, 2014

Other income for the three-month period ended February 28, 2014 contains a gain of $0.4 million from a routine sale of real estate.

Selling, general and administrative expense for the three-month period ended February 28, 2014 increased by $1.4 million compared to the prior year period primarily due to higher provisions for insurance claims related to a reallocation among operating units. 

Merger related expenses for the three-month period ended February 28, 2014 was $2.9 million. These costs relate to the proposed business combination with Martin Marietta Materials, Inc.

Interest

Interest expense incurred for the three-month period ended February 28, 2014 was $17.4 million. Interest expense incurred for the three-month period ended February 28, 2013 was $17.4 million, of which $10.2 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $7.2 million was expensed.

Income Taxes

Income taxes for the interim periods ended February 28, 2014 and 2013 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 5.4% for fiscal year 2014 compared to 7.9% for fiscal year 2013. We received income tax refunds of $0.4 million in the nine-month period ended February 28, 2014 and none in the nine-month period ended February 28, 2013. We made no income tax payments in the nine-month periods ended February 28, 2014 and 2013.

Net deferred tax assets totaled $5.0 million at February 28, 2014 and $6.7 million at May 31, 2013. Net deferred tax assets classified as current were $14.2 million at February 28, 2014 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 February 28, 2014 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 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 Nine months ended
  February 28, February 28, February 28, February 28,
In thousands 2014 2013 2014 2013
Income before income taxes from continuing operations  $ (24,847)  $ (9,869)  $ (41,762)  $ (28,248)
Depreciation  19,123  14,096  58,556  41,956
Interest expense  17,409  7,227  52,203  22,462
EBITDA from continuing operations  $ 11,685  $ 11,454  $ 68,997  $ 36,170
EBITDA from discontinued operations** -- $ 4,534 -- $ 11,079
Total EBITDA  $ 11,685  $ 15,988  $ 68,997  $ 47,249
         
EBITDA MARGIN        
EBITDA from continuing operations $ 11,685 $ 11,454 $ 68,997 $ 36,170
Net Sales from continuing operations $ 207,828 $ 141,359 $ 649,802 $ 483,575
EBITDA Margin 5.6% 8.1% 10.6% 7.5%
         
*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 nine month periods ended February 28, 2014 and 2013 of $4.2 million plus depreciation expense of $0.3 million and $10.1 million plus depreciation expense of $1.0 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
  February 28, February 28,
In millions 2014 2013
Net Sales $ 207.8 $ 141.4
     
EBITDA from continuing operations $ 11.7 $ 11.5
     
Operating Adjustments:    
Midlothian Maintenance outage $ 8.4 --
Hunter Kiln 2 Maintenance Outage 2.5 --
Total operating adjustments $ 10.9 --
     
Non-operating adjustments:    
Variable stock-based compensation   $ 1.4
Merger charges $ 2.9  --
Coal settlement gain  (0.7) --
Total non-operating adjustments  $ 2.2  $ 1.5
     
Adjusted EBITDA from continuing operations  $ 24.8  $ 12.9
     
Adjusted EBITDA Margin 11.9% 9.1%

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 Nine months ended
  February 28, February 28, February 28, February 28,
In thousands except per share 2014 2013 2014 2013
NET SALES  $ 207,828  $ 141,359  $ 649,802  $ 483,575
Cost of products sold 195,835 129,035 592,986 444,297
GROSS PROFIT 11,993 12,324 56,816 39,278
Selling, general and administrative 18,264 17,056 56,471 51,679
Merger charges 2,863 2,863
Interest expense 17,409 7,227 52,203 22,462
Other income, net  (1,696)  (2,091)  (12,959) (6,614)
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS  (24,847)  (9,868)  (41,762)  (28,249)
Income taxes (benefit)  (3,078)  (1,355)  (2,783)  (2,151)
NET LOSS FROM CONTINUING OPERATIONS  $ (21,769)  $ (8,513)  $ (38,979)  $ (26,098)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS 2,699 6,504
NET LOSS  $ (21,769)  $ (5,814)  $ (38,979)  $ (19,594)
NET LOSS PER SHARE FROM CONTINUING OPERATIONS:        
Basic  $ (0.76)  $ (0.30)  $ (1.36)  $ (0.93)
Diluted  $ (0.76)  $ (0.30)  $ (1.36)  $ (0.93)
NET INCOME (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS:        
Basic $ —  $ 0.09 $ —  $ 0.23
Diluted $ —  $ 0.09 $ —  $ 0.23
NET LOSS PER SHARE:        
Basic  $ (0.76)  $ (0.21)  $ (1.36)  $ (0.70)
Diluted  $ (0.76)  $ (0.21)  $ (1.36)  $ (0.70)
AVERAGE SHARES OUTSTANDING        
Basic 28,696 28,190 28,629 28,073
Diluted 28,696 28,190 28,629 28,073

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
         
  Three months ended Nine months ended
  February 28, February 28, February 28, February 28,
In thousands 2014 2013 2014 2013
Net loss  $ (21,769)  $ (5,814)  $ (38,979)  $ (19,594)
Other comprehensive income:        
Unrealized actuarial gain (loss) of defined benefit plans, net of tax expense (benefit) of $1,813, $0, $1,813 and $(32), respectively 3,144 3,144  (55)
Reclassification of actuarial loss of defined benefit plans, net of tax benefit of $(6), $(55), $(19) and $(355), respectively  13  96  33  616
Total other comprehensive income 3,157 96 3,177 561
Comprehensive loss  $ (18,612)  $ (5,718)  $ (35,802)  $ (19,033)

See notes to consolidated financial statements.

 
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
 
 
  (Unaudited)  
In thousands except per share February 28,
 2014
May 31,
 2013
ASSETS    
CURRENT ASSETS    
Cash and cash equivalents $ 47,833 $ 61,296
Receivables – net 126,811 126,922
Inventories 107,910 105,054
Deferred income taxes and prepaid expenses 20,057 27,294
TOTAL CURRENT ASSETS 302,611 320,566
PROPERTY, PLANT AND EQUIPMENT    
Land and land improvements 174,781 172,780
Buildings 51,549 50,968
Machinery and equipment 1,651,573 1,647,460
Construction in progress 25,854 16,642
  1,903,757 1,887,850
Less depreciation and depletion 710,902 661,454
  1,192,855 1,226,396
OTHER ASSETS    
Goodwill 40,072 40,575
Real estate and investments 31,780 29,471
Deferred other charges 19,712 18,817
  91,564 88,863
  $ 1,587,030 $ 1,635,825
LIABILITIES AND SHAREHOLDERS' EQUITY    
CURRENT LIABILITIES    
Accounts payable $ 71,584 $ 69,061
Accrued interest, compensation and other 43,237 62,336
Current portion of long-term debt 2,036 1,872
TOTAL CURRENT LIABILITIES 116,857 133,269
LONG-TERM DEBT 656,797 657,935
DEFERRED INCOME TAXES AND OTHER CREDITS 81,288 91,157
SHAREHOLDERS' EQUITY    
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 28,623 and 28,572 shares, respectively 28,804 28,572
Additional paid-in capital 528,754 514,560
Retained earnings 189,707 228,686
Accumulated other comprehensive loss (15,177) (18,354)
  732,088 753,464
  $ 1,587,030 $ 1,635,825

See notes to consolidated financial statements.

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
 
  Nine months ended
  February 28, February 28,
In thousands 2014 2013
OPERATING ACTIVITIES    
Net loss $ (38,979) $ (19,594)
Adjustments to reconcile net loss to cash provided by operating activities    
Depreciation, depletion and amortization 58,556 42,968
Gain on asset disposals (6,133) (4,822)
Deferred income tax expense (benefit) 1,755 1,025
Stock-based compensation expense 5,349 7,015
Other – net (9,942) (7,555)
Changes in operating assets and liabilities    
Receivables – net (1,381) 830
Inventories (3,072) (710)
Prepaid expenses 2,632 (2,158)
Accounts payable and accrued liabilities (9,450) (7,228)
Net cash provided by operating activities (665) 9,771
INVESTING ACTIVITIES    
Capital expenditures – expansions (7,125) (61,344)
Capital expenditures – other (26,152) (17,752)
Proceeds from asset disposals 8,390 5,783
Investments in life insurance contracts 4,386 2,366
Other – net (67)
Net cash used by investing activities (20,501) (71,014)
FINANCING ACTIVITIES    
Debt payments (1,373) (2,236)
Stock option exercises 9,076 7,116
Net cash provided (used) by financing activities 7,703 4,880
Increase (decrease) in cash and cash equivalents (13,463) (56,363)
Cash and cash equivalents at beginning of period 61,296 88,027
Cash and cash equivalents at end of period $ 47,833 $ 31,664

See notes to consolidated financial statements.

T. Lesley Vines, Jr.
Corporate Controller & Treasurer
Direct 972.647.6722 E-mail