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TXI Reports Second Quarter Results

Texas Industries, Inc. Logo

DALLAS, Jan. 9, 2013 (GLOBE NEWSWIRE) -- Texas Industries, Inc. (NYSE:TXI) today reported financial results for the quarter ended November 30, 2012. Results for the quarter were a net loss of $11.1 million or $.40 per share. The results for the period included an after tax charge for variable stock based compensation of $1.5 million or $.05 per share. Results for the quarter ended November 30, 2011 were a net loss of $21.0 million or $.75 per share and included a one-time, pre-tax charge of $3.2 million ($.11 per share after-tax) relating to the Company's cost cutting and efficiency initiatives announced in September, 2011 and after tax income from variable stock based compensation of $1.6 million or $.06 per share.

General Comments

"Net sales for cement were up 20% compared to the same quarter a year ago and marks the sixth consecutive quarter that net cement sales exceeded the prior year," stated Mel Brekhus, Chief Executive Officer. "Aggregate and ready-mix net sales were up 32% and 18% respectively compared to a year ago."

"I am happy to announce that the commissioning of the second kiln at our central Texas plant began as scheduled and is on target to be completed this spring. With the rebound in Texas cement consumption well into its second year, the timing of our expansion appears to be very good. At an annual production capacity of 1.4 million tons, the second kiln increases TXI's total annual cement capacity by 26% to approximately 6.7 million tons," added Brekhus.

A teleconference will be held tomorrow, January 10, 2013 at 10:00 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.

Cement Operations
Three months ended
November 30,
Six months ended
November 30,
In thousands except per unit
2012 2011 2012 2011
Operating Results
Cement sales $ 82,584 $ 68,994 $ 169,897 $ 144,972
Other sales and delivery fees 8,858 8,240 18,750 17,899
Total segment sales 91,442 77,234 188,647 162,871
Cost of products sold 82,706 78,050 168,825 156,282
Gross profit 8,736 (816) 19,822 6,589
Selling, general and administrative (3,729) (4,165) (7,273) (8,243)
Restructuring charges (1,074) (1,074)
Other income 1,050 700 1,930 3,890
Operating Profits $ 6,057 $ (5,355) $ 14,479 $ 1,162
Cement
Shipments (tons) 1,034 884 2,153 1,853
Prices ($/ton) $ 79.82 $ 78.07 $ 78.91 $ 78.25
Cost of sales ($/ton) $ 72.56 $ 78.34 $ 70.47 $ 74.90

Three months ended November 30, 2012

Cement operating profit (loss) for the three-month periods ended November 30, 2012 and November 30, 2011 was $6.1 million and $(5.4) million, respectively.

Total segment sales for the three-month period ended November 30, 2012 were $91.4 million compared to $77.2 million for the prior year period. Cement sales increased $14.2 million from the prior year period. Our Texas market area accounted for approximately 69% of cement sales in the current period compared to 67% of cement sales in the prior year period. Average cement prices increased 3% in our Texas market from the prior year period. Average cement prices decreased less than 1% due to a change in product mix in our California market from the prior year period. Shipments increased 19% in our Texas market area and 13% in our California market area.

Cost of products sold for the three-month period ended November 30, 2012 increased $4.7 million from the prior year period primarily due to higher shipments. Cement unit cost of sales decreased 7% from prior year period primarily due to higher shipments and lower energy costs offset slightly by higher maintenance costs.

Selling, general and administrative expense for the three-month period ended November 30, 2012 decreased $0.5 million from the prior year period primarily due to our work force reduction initiatives.

Restructuring charges of $1.1 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the three-month period ended November 30, 2012 increased $0.3 million from the prior year period primarily due to higher royalties.

Aggregates Operations
Three months ended
November 30,
Six months ended
November 30,
In thousands except per unit
2012 2011 2012 2011
Operating Results
Stone, sand and gravel sales $ 27,739 $ 20,993 $ 55,890 $ 43,193
Delivery fees 12,473 7,854 25,302 15,971
Total segment sales 40,212 28,847 81,192 59,164
Cost of products sold 35,951 25,459 72,188 52,378
Gross profit 4,261 3,388 9,004 6,786
Selling, general and administrative (856) (1,226) (1,864) (3,102)
Restructuring charges (373) (373)
Other income 115 202 378 473
Operating Profit $ 3,520 $ 1,991 $ 7,518 $ 3,784
Stone, sand and gravel
Shipments (tons) 3,808 2,818 7,722 5,961
Prices ($/ton) $ 7.28 $ 7.45 $ 7.24 $ 7.25
Cost of sales ($/ton) $ 5.99 $ 6.35 $ 5.99 $ 6.28

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

On December 4, 2012, our subsidiaries entered into agreements to exchange their expanded shale and clay lightweight aggregates manufacturing business for the ready-mix concrete business of subsidiaries of Trinity Industries, Inc. in east Texas and southwest Arkansas. Pursuant to the agreements, we will transfer our expanded shale and clay manufacturing facilities in Streetman, Texas; Boulder, Colorado and Frazier Park, California; and our DiamondPro® product line in exchange for 42 ready-mix concrete plants stretching from Texarkana to Beaumont in east Texas and in southwestern Arkansas, as well as 2 aggregate distribution facilities in Beaumont and Port Arthur, Texas, and related assets. We anticipate recognizing a gain on the transaction, the amount of which will be determined after the transaction closes. Closing is subject to negotiations of ancillary agreements, satisfactory completion of due diligence, receipt of required consents, approvals and permit amendments and other customary conditions.

Three months ended November 30, 2012

Aggregates operating profit for the three-month periods ended November 30, 2012 and November 30, 2011 was $3.5 million and $2.0 million, respectively.

Total segment sales for the three-month period ended November 30, 2012 were $40.2 million compared to $28.8 million for the prior year period. Stone, sand and gravel sales increased $6.7 million from the prior year period on 35% higher shipments.

Cost of products sold for the three-month period ended November 30, 2012 increased $10.5 million from the prior year period primarily due to increased stone, sand and gravel shipments. Stone, sand and gravel unit costs decreased 6% from the prior year period primarily due to the effect of higher shipments on unit costs.

Selling, general and administrative expense for the three-month period ended November 30, 2012 decreased $0.4 million from the prior year period primarily due to our work force reduction initiatives.

Restructuring charges of $0.4 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Consumer Products Operations
Three months ended
November 30,
Six months ended
November 30,
In thousands except per unit
2012 2011 2012 2011
Operating Results
Ready-mix concrete sales $ 52,776 $ 44,579 $ 104,694 $ 100,807
Package products sales and delivery fees 101 13,542 228 28,338
Total segment sales 52,877 58,121 104,922 129,145
Cost of products sold 54,123 59,212 106,796 130,409
Gross loss (1,246) (1,091) (1,874) (1,264)
Selling, general and administrative (2,074) (2,436) (4,764) (6,810)
Restructuring charges (536) (536)
Other income 713 457 2,123 2,664
Operating Loss $ (2,607) $ (3,606) $ (4,515) $ (5,946)
Ready-mix concrete
Shipments (cubic yards) 643 587 1,292 1,328
Prices ($/cubic yard) $ 81.99 $ 75.85 $ 81.03 $ 75.89
Cost of sales ($/cubic yard) $ 84.16 $ 80.66 $ 82.56 $ 79.69

Three months ended November 30, 2012

Consumer products operating loss for the three-month periods ended November 30, 2012 and November 30, 2011 was $2.6 million and $3.6 million, respectively.

Total segment sales for the three-month period ended November 30, 2012 were $52.9 million compared to $58.1 million for the prior year period. Segment sales decreased $5.2 million from the prior year period due to the effect of exiting the Houston, Texas ready-mix market and the sale of our Texas-based package products operations. Ready-mix concrete sales from ongoing operations increased $8.2 million from the prior year period on 9% higher shipments and 8% higher average prices.

Cost of products sold for the three-month period ended November 30, 2012 decreased $5.1 million from the prior year period primarily due to the sale of our Texas-based package products operation and having exited the Houston ready-mix market. Ready-mix concrete unit costs increased 4% from the prior year period on higher maintenance, diesel and material costs.

Selling, general and administrative expense for the three-month period ended November 30, 2012 decreased $0.3 million from the prior year period primarily due to the effect of the sale of our Texas-based package products operations and our work force reduction initiatives.

Restructuring charges of $0.5 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the three-month period ended November 30, 2012 increased $0.3 million from the prior year period primarily due to earnings from joint venture of $0.7 million.

Corporate
Three months ended
November 30,
Six months ended
November 30,
In thousands
2012 2011 2012 2011
Other income $ 46 $ 163 $ 92 $ 366
Selling, general and administrative (10,405) (4,953) (20,718) (11,355)
Restructuring charges (1,169) (1,169)
$ (10,359) $ (5,959) $ (20,626) $ (12,158)

Three months ended November 30, 2012

Other income for the three-month period ended November 30, 2012 decreased $0.1 million from the prior year period primarily due to lower oil and gas royalty payments.

Selling, general and administrative expense for the three-month period ended November 30, 2012 increased $5.5 million from the prior year period. 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 the fair value of these awards increased expense $4.3 million for the three-month period ended November 30, 2012 and the realignment of administration functions resulted in approximately $1.0 million higher expense, which was more than offset by the savings from the work force reduction in the operating segments.

Restructuring charges of $1.2 million were recorded for the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Interest

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. Interest expense incurred for the three-month period ended November 30, 2011 was $17.1 million, of which $8.3 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $8.8 million was expensed.

Interest expense to be capitalized in connection with our Hunter, Texas cement plant expansion project during the remainder of our current fiscal year is expected to be between $11 million and $17 million.

Income Taxes

Income taxes for the interim periods ended November 30, 2012 and November 30, 2011 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 4.3% for fiscal year 2013 compared to 4.6% for fiscal year 2012. We made no income tax payments in the six-month periods ended November 30, 2012 and November 30, 2011. We received income tax refunds of less than $0.1 million in the six-month period ended November 30, 2011.

Net deferred tax assets totaled $12.5 million at November 30, 2012 and $13.7 million at May 31, 2012, of which $10.0 million at November 30, 2012 and $10.7 million at May 31, 2012 were classified as current. 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, 2012 and May 31, 2012 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 recorded a valuation allowance of $5.2 million in fiscal year 2012 through a charge to other comprehensive loss given the increase in actuarial losses in our retirement plans in 2012. We will continue to record additional valuation allowance against additions to our net deferred tax assets for fiscal year 2013 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 a major cement producer in California. TXI is also a major supplier of construction aggregate, ready-mix concrete and concrete products.

The Texas Industries, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6602

(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Three months ended
November 30,
Six months ended
November 30,
In thousands except per share 2012 2011 2012 2011
NET SALES $ 167,693 $ 146,172 $ 342,216 $ 313,802
Cost of products sold 155,939 144,689 315,262 301,690
GROSS PROFIT 11,754 1,483 26,954 12,112
Selling, general and administrative 17,067 12,781 34,623 29,511
Restructuring charges 3,153 3,153
Interest 7,457 8,838 15,235 18,298
Loss on debt retirements
Other income (1,924) (1,522) (4,525) (7,393)
22,600 23,250 45,333 43,569
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (10,846) (21,767) (18,379) (31,457)
Income taxes (benefit) (657) (1,144) (796) (1,453)
NET LOSS FROM CONTINUING OPERATIONS $ (10,189) $ (20,623) $ (17,583) $ (30,004)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX (933) (414) 3,805 1,547
NET LOSS $ (11,122) $ (21,037) $ (13,778) $ (28,457)
NET LOSS PER SHARE FROM CONTINUING OPERATIONS:
Basic $ (0.36) $ (0.73) $ (0.63) $ (1.08)
Diluted $ (0.36) $ (0.73) $ (0.63) $ (1.08)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
Basic $ (0.04) $ (0.02) $ 0.14 $ 0.06
Diluted $ (0.04) $ (0.02) $ 0.14 $ 0.06
NET LOSS PER SHARE:
Basic $ (0.40) $ (0.75) $ (0.49) $ (1.02)
Diluted $ (0.40) $ (0.75) $ (0.49) $ (1.02)
AVERAGE SHARES OUTSTANDING
Basic 28,030 27,882 28,014 27,878
Diluted 28,030 27,882 28,014 27,878
CASH DIVIDENDS DECLARED PER SHARE $ — $ — $ — $ 0.075
See notes to consolidated financial statements.
(Unaudited)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Three months ended
November 30,
Six months ended
November 30,
In thousands 2012 2011 2012 2011
Net loss $ (11,122) $ (21,037) $ (13,778) $ (28,457)
Other comprehensive income
Net actuarial gains (losses) of defined postretirement benefit plans
Reclassification of recognized transactions, net of tax 20 363 565 725
Adjustment, net of tax (55)
Prior service cost of defined postretirement benefit plans
Reclassification of recognized transactions, net of taxes 77 (123) (45) (246)
Total other comprehensive income 97 240 465 479
Comprehensive loss $ (11,025) $ (20,797) $ (13,313) $ (27,978)
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
November 30,
2012
May 31,
2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 71,782 $ 88,027
Receivables – net 107,760 98,836
Inventories 85,530 99,441
Deferred income taxes and prepaid expenses 16,672 19,007
Discontinued Operations Held for Sale 39,360 40,344
TOTAL CURRENT ASSETS 321,104 345,655
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 169,925 168,173
Buildings 49,608 49,567
Machinery and equipment 1,146,301 1,142,439
Construction in progress 472,185 436,552
1,838,019 1,796,731
Less depreciation and depletion 633,973 611,406
1,204,046 1,185,325
OTHER ASSETS
Goodwill 1,715 1,715
Real estate and investments 23,168 20,865
Deferred income taxes and other charges 23,234 23,368
48,117 45,948
$ 1,573,267 $ 1,576,928
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 64,520 $ 64,825
Accrued interest, compensation and other 67,712 61,317
Current portion of long-term debt 1,432 1,214
TOTAL CURRENT LIABILITIES 133,664 127,356
LONG-TERM DEBT 657,269 656,949
OTHER CREDITS 95,995 96,352
SHAREHOLDERS' EQUITY
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 28,056 and 27,996 shares, respectively 28,056 27,996
Additional paid-in capital 491,959 488,637
Retained earnings 190,357 204,136
Accumulated other comprehensive loss (24,033) (24,498)
686,339 696,271
$ 1,573,267 $ 1,576,928
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Six months ended
November 30,
In thousands 2012 2011
OPERATING ACTIVITIES
Net loss $ (13,778) $ (28,457)
Adjustments to reconcile net loss to cash provided by operating activities
Depreciation, depletion and amortization 28,543 31,385
Gains on asset disposals (2,879) (2,751)
Deferred income tax (benefit) expense 957 (945)
Stock-based compensation expense 5,505 (1,229)
Other – net (8,469) (5,185)
Changes in operating assets and liabilities
Receivables – net (8,488) 3,696
Inventories 13,967 12,189
Prepaid expenses 1,687 2,854
Accounts payable and accrued liabilities 7,933 930
Net cash provided by operating activities 24,978 12,487
INVESTING ACTIVITIES
Capital expenditures – expansions (36,118) (35,966)
Capital expenditures – other (10,845) (26,300)
Proceeds from asset disposals 3,958 1,649
Investments in life insurance contracts 2,366 2,989
Other – net (88) (128)
Net cash used by investing activities (40,727) (57,756)
FINANCING ACTIVITIES
Debt payments (1,585) (36)
Debt issuance costs (1,732)
Stock option exercises 1,089 158
Common dividends paid (2,091)
Net cash used by financing activities (496) (3,701)
Decrease in cash and cash equivalents (16,245) (48,970)
Cash and cash equivalents at beginning of period 88,027 116,432
Cash and cash equivalents at end of period $ 71,782 $ 67,462

CONTACT: T. Lesley Vines, Jr. Vice President Corporate Controller & Treasurer 972.647.6722 Email: lvines@txi.com

Source:Texas Industries, Inc.