QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
________________________
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
________________________
Commission file number 0-3041
IRS Employer Identification Number 75-0102185
JUSTIN INDUSTRIES, INC.
(a Texas Corporation)
2821 West 7th Street
Fort Worth, Texas 76107
Telephone: (817) 336-5125
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES (XX) NO ( )
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 27,174,075 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of April 30, 1994.
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JUSTIN INDUSTRIES, INC.
Index
Page No.
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PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheet
March 31, 1994 and December 31, 1993 3
Consolidated Statement of Income
Three Months Ended March 31, 1994 and 1993 4
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1994 and 1993 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 9
SIGNATURE 9
All other schedules and compliance information called for by the instructions to
Form 10-Q have been omitted since the required information is not present or not
present in amounts sufficient to require submission.
2
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JUSTIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
In Thousands of Dollars
March 31, December 31,
1994 1993
------------ ------------
(Unaudited)
ASSETS
- - ------
Current assets:
Cash $ 1,591 $ 10,587
Accounts receivable, less allowance for
doubtful accounts of $3,102 and $3,014,
respectively 73,919 76,966
Inventories:
Finished goods 109,996 103,261
Work-in-process 8,961 9,971
Raw materials 33,998 32,042
------------ ------------
Total inventories 152,955 145,274
Income taxes 5,416 5,750
Prepaid expenses 2,122 1,517
------------ ------------
Total current assets 236,003 240,094
Assets held for sale 5,523 5,523
Investments and other assets, at cost 20,722 20,793
Property, plant, and equipment, at cost:
Land 16,658 16,658
Buildings and equipment 197,224 196,575
Construction-in-progress 3,457 2,206
------------ ------------
217,339 215,439
Less accumulated depreciation 137,298 135,169
------------ ------------
Net property, plant, and equipment 80,041 80,270
------------ ------------
$342,289 $346,680
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 2,000 $ -
Trade accounts payable 15,935 16,088
Accrued payroll items 8,818 7,702
Other accrued items 28,697 25,120
Dividends payable 1,087 1,086
Current portion of long-term debt 4,438 4,905
------------ ------------
Total current liabilities 60,975 54,901
Long-term debt, less current portion 72,330 88,504
Deferred income taxes 14,472 14,472
Shareholders' equity:
Voting preferred stock, $2.50 par value;
1,000,000 shares authorized - Series Two
convertible, 100 shares issued and outstanding - -
Common stock, $2.50 par value; 100,000,000
shares authorized, 27,869,888 shares issued 69,674 69,674
Capital in excess of par value 17,040 17,047
Retained earnings 113,620 108,038
Treasury stock, at cost, 695,813 and 713,402
shares, respectively (5,822) (5,956)
------------ ------------
Total shareholders' equity 194,512 188,803
------------ ------------
$342,289 $346,680
============ ============
See notes to consolidated financial statements.
3
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JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
In Thousands of Dollars (Except Per Share Data)
Three Months Ended
March 31,
-------------------
1994 1993
------- -------
(Unaudited)
Net sales:
Building materials $46,857 $37,815
Footwear 63,034 72,290
------- -------
109,891 110,105
Costs and expenses:
Cost of goods sold 72,896 75,929
Selling, general, and administrative expenses 25,609 24,141
Interest expense 801 960
------- -------
99,306 101,030
------- -------
Income before income taxes and cumulative effect on prior
years of change in accounting for income taxes 10,585 9,075
Provision for income taxes 3,916 3,449
------- -------
Income before cumulative effect on prior years of change
in accounting for income taxes 6,669 5,626
Cumulative effect on prior years of change in accounting
for income taxes - 1,106
------- -------
Net income $6,669 $6,732
======= =======
Earnings per share:
Before cumulative effect on prior years of change in
accounting for income taxes $ .24 $ .20
======= =======
Net income $ .24 $ .24
======= =======
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 1994 and 1993
In Thousands of Dollars (Except Per Share Data)
Capital
In
Excess ESOP
Pre- of Loan
ferred Common Par Retained Treasury Guaran-
Stock Stock Value Earnings Stock tee
- - ------------------- ------ ------- ------- -------- -------- -------
(Unaudited)
Balance January 1,
1994 $ - $69,674 $17,047 $108,038 $ (5,956) $ -
Net income - - - 6,669 - -
Purchase of 2,046
shares of stock
for treasury - - - - (30) -
Exercise of stock
options - - (7) - 164 -
Cash dividend
declared
($.04 per share) - - - (1,087) - -
------ ------- ------- -------- -------- -------
Balance March 31,
1994 $ - $69,674 $17,040 $113,620 $ (5,822) $ -
====== ======= ======= ======== ======== =======
Balance January 1,
1993 $ - $34,837 $16,510 $110,072 $ (5,899) $ (250)
Net income - - - 6,732 - -
Purchase of 4,755
shares of stock
for treasury - - - - (213) -
Exercise of stock
options - - 157 - 332 -
ESOP repayment of
debt - - - - - 125
Cash dividend
declared
($.04 per share) - - - (1,082) - -
------ ------- ------- -------- -------- -------
Balance March 31,
1993 $ - $34,837 $16,667 $115,722 $ (5,780) $ (125)
====== ======= ======= ======== ======== =======
See notes to consolidated financial statements.
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JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands of Dollars
Three Months Ended
March 31,
--------------------
1994 1993
-------- --------
(Unaudited)
Operating activities:
Net income $ 6,669 $ 6,732
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 3,340 3,273
Provision for losses on accounts receivable 230 323
Gain on sale of property, equipment and other
assets (50) (37)
Cumulative effect of change in accounting
principle - (1,106)
Changes in assets and liabilities:
Decrease in accounts receivable 2,817 8,100
Increase in inventories (7,681) (11,390)
(Increase) decrease in other current assets (271) 2,387
Increase in accounts payable and accrued
expenses 4,540 9,989
Net increase in long-term assets and liabilities
due to adoption of FAS 109 - 107
-------- --------
Net cash provided from operating
activities 9,594 18,378
Investing activities:
Proceeds from the sale of property, equipment and
other assets 66 64
Capital expenditures (3,136) (3,155)
Decrease in investments and other assets, including
reclassifications 80 331
-------- --------
Cash used in investing activities (2,990) (2,760)
Financing activities:
Additions to debt 2,000 2,000
Repayment of debt (16,641) (17,051)
Dividends paid (1,086) (945)
Purchases of treasury stock (30) (213)
Exercise of stock options 157 489
-------- --------
Cash used in financing activities (15,600) (15,720)
-------- --------
Net decrease in cash (8,996) (102)
Cash at beginning of period 10,587 2,393
-------- --------
Cash at end of period $ 1,591 $ 2,291
======== ========
See notes to consolidated financial statements.
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JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the company's significant accounting policies is presented on
page 21 of its 1993 Annual Report to Shareholders. Users of financial
information produced for interim periods are encouraged to refer to the
footnotes contained in the Annual Report to Shareholders when reviewing interim
financial results. There has been no material change in the accounting policies
followed by the company during 1994.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations, cash flows, and shareholders' equity of Justin
Industries, Inc. for interim periods.
LONG-TERM DEBT
Certain loan agreements contain minimum requirements as to working capital,
cash flow from operations, and tangible net worth, redemption of outstanding
stock, and change in control of the company. As of March 31, 1994, the company
was in compliance with all such requirements and restrictions.
EARNINGS PER SHARE
Earnings per share are based on the average number of shares of common stock
outstanding during each period and such shares issuable upon assumed exercise of
stock options, using the treasury stock method, adjusted for stock splits. The
number of shares used in the calculation of earnings per share was 27,864,000 in
1994 and 28,032,000 in 1993. Earnings and dividends per share for 1993 have
been restated to reflect a 2-for-1 stock split effective May 18, 1993.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES - Consolidated net sales for the three months ended March 31, 1994 of
$109.9 million were .2% below the record high of $110.1 million in 1993's first
quarter.
BUILDING MATERIALS SEGMENT SALES - Sales in the Building Materials
segment increased $9 million or 23.9% over the first quarter of 1993 as
each of the businesses, Acme Brick Company ("Acme"), Featherlite
Building Products Corporation ("Featherlite") and Tradewinds
Technologies, Inc. (Tradewinds), posted significant increases.
Continuing increases in the level of residential construction and
relatively mild winter weather enabled Acme to ship more brick than in
any previous first quarter in history. Revenues were also positively
affected by overall higher brick prices than one year ago due to pricing
increases throughout 1993. Acme's sales of purchased products also
reached a new first quarter record. Commercial construction activity in
areas served by Featherlite is also ahead of last year's pace. This
market growth provided the impetus for improved concrete block and cut
limestone sales levels. Tradewinds' first quarter revenues were also an
all-time high. Sales were boosted by favorable weather and new
products.
FOOTWEAR SEGMENT SALES - Total Footwear sales for the three months
ended March 31, 1994 declined 12.8% to $63 million from 1993's first
quarter record high of $72.3 million. All three operations, Justin Boot
Company, Nocona Boot Company and Tony Lama Company, Inc., experienced a
slower first quarter in 1994. While the expected strength of the core
market western boot business and continued growth in the Chippewa
product line have materialized, sales in the fashion market declined.
This slowdown was exacerbated by the severe weather conditions in the
Northeast and the Southern California earthquake.
COSTS AND EXPENSES - The consolidated ratio of cost of goods sold to sales
was 66.3% in the first quarter of 1994 versus 69% in the 1993 comparable period.
Building Materials' ratio of cost of sales to sales was 59.3% in the first
quarter of 1994, compared to 67% in the first quarter of 1993. The primary
reason for this improvement was higher average brick prices and greater unit
sales and production volume at Acme. The ratio of cost of goods sold to sales
in the Footwear businesses was 71.6% versus 70% in 1993. The most significant
factor affecting the margin decline was the reduction in sales volume.
Selling, general and administrative expenses increased to 23.3% of sales in
the first quarter of 1994 compared to 21.9% in the first quarter of 1993.
Approximately one-half of the increase was due to general inflation, with the
remainder attributable to higher costs in the Building Materials operations
necessary to support increased levels of business.
Interest expense declined 16.6% in the first quarter to $801,000 from
$960,000 in the first three months of 1993. The reduction is attributable to
lower average debt levels during the period as the average effective rates were
virtually the same.
PROVISION FOR INCOME TAXES - The Company's provision for income tax was 37%
of pre-tax income in the first quarter of 1994, which is the current estimated
effective rate for the full year. In 1993's first quarter, a rate of 38% was
used.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION AND LIQUIDITY
At March 31, 1994, working capital amounted to $175 million versus $185.2
million at December 31, 1993. Cash decreased from $10.6 million at year end to
$1.6 million at the end of 1994's first quarter. These funds were used to pay
down debt. Other components of working capital experienced normal seasonal
changes. Accounts receivable declined due to significant payments by Footwear
customers early in the year, and inventories increased from the seasonal lows at
year end.
Cash provided by operating activities in the first quarter of 1994 totalled
$9.6 million. These funds were used primarily to reduce debt, acquire fixed
assets and pay dividends.
In the first quarter of 1994, total interest-bearing debt declined to $78.8
million from $93.4 million at year end 1993. This reduction lowered the ratio
of long-term debt-to-equity to .37 to 1 from .47 to 1 at year end. Borrowings
should increase over the next two quarters to finance the seasonal working
capital needs. At March 31, 1994, unused credit facilities totalled $58
million, an amount well above the company's estimated requirements.
Cash dividends declared in the first quarter of 1994 and 1993 amounted to
$.04 a share.
8
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JUSTIN INDUSTRIES, INC.
PART II: OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The company is not presently involved in any lawsuits seeking damages
relating to the normal conduct of its business that if adversely determined
would have a material effect on the consolidated financial statements.
ITEM 4 RESULTS OF VOTES OF SECURITY HOLDERS
The information required by this item has been provided in the company's
definitive proxy statement for its annual meeting of shareholders held March 18,
1994.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JUSTIN INDUSTRIES, INC.
/S/ RICHARD J. SAVITZ
Richard J. Savitz
Vice President-Finance/
Chief Financial Officer
Dated this 6th day of May 1994.
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