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 September 30, 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 (X) NO ( )
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date: 27,210,395 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of November 3,
1994.
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(Page 2)
JUSTIN INDUSTRIES, INC.
Index
Page No.
--------
PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheet
September 30, 1994 and December 31, 1993 3
Consolidated Statement of Income
Three Months and Nine Months Ended
September 30, 1994 and 1993 4
Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 1994 and 1993 4
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 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.
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<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
In Thousands of Dollars
<CAPTION>
September 30, December 31,
1994 1993
--------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
- - ------
Current assets:
Cash $ 4,483 $ 10,587
Accounts receivable, less allowance for doubtful
accounts of $3,759 and $3,014, respectively 91,217 76,966
Inventories:
Finished goods 130,760 103,261
Work-in-process 7,924 9,971
Raw materials 32,458 32,042
--------------- ---------------
Total inventories 171,142 145,274
Income taxes 8,962 5,750
Prepaid expenses 2,589 1,517
Total current assets 278,393 240,094
Assets held for sale 5,523 5,523
Other assets 24,305 20,793
Property, plant, and equipment, at cost:
Land 16,897 16,658
Buildings and equipment 203,809 196,575
Construction-in-progress 4,300 2,206
--------------- --------------
225,006 215,439
Less accumulated depreciation 142,221 135,169
--------------- --------------
Net property, plant, and equipment 82,785 80,270
--------------- --------------
$ 391,006 $ 346,680
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Notes payable to banks $ 9,000 $ -
Trade accounts payable 17,237 16,088
Accrued payroll items 12,829 7,702
Other accrued items 30,246 25,120
Dividends payable 1,088 1,086
Current portion of long-term debt 5,429 4,905
--------------- --------------
Total current liabilities 75,829 54,901
Long-term debt, less current portion 89,309 88,504
Deferred income taxes 14,429 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 17,016 17,047
Retained earnings 130,337 108,038
Treasury stock, at cost, 668,713 and 713,402 shares, respectively (5,588) (5,956)
--------------- --------------
Total shareholders' equity 211,439 188,803
--------------- --------------
$ 391,006 $ 346,680
=============== ==============
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
In Thousands of Dollars (Except Per Share Data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales:
Building materials $ 62,435 $ 49,338 $ 167,334 $ 135,198
Footwear 57,257 68,990 177,143 209,303
----------- ----------- ----------- -----------
119,692 118,328 344,477 344,501
Costs and expenses:
Cost of goods sold 76,519 76,588 223,160 229,717
Selling, general, and administrative expenses 27,342 25,002 78,277 74,339
Interest expense 1,167 1,043 2,787 2,992
----------- ----------- ----------- -----------
105,028 102,633 304,224 307,048
----------- ----------- ----------- -----------
Income before income taxes and cumulative effect on prior
years of change in accounting for income taxes 14,664 15,695 40,253 37,453
Provision for income taxes 5,224 5,889 14,692 14,157
----------- ----------- ----------- -----------
Income before cumulative effect on prior years of
change in accounting for income taxes 9,440 9,806 25,561 23,296
Cumulative effect on prior years of change in
accounting for income taxes - - - 1,106
----------- ----------- ----------- -----------
Net income $ 9,440 $ 9,806 $ 25,561 $ 24,402
=========== =========== =========== ===========
Earnings per share:
Before cumulative effect on prior years of change
in accounting for income taxes $ .34 $ .35 $ .92 $ .83
=========== =========== =========== ===========
Net income $ .34 $ .35 $ .92 $ .87
=========== =========== =========== ===========
</TABLE>
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Nine Months Ended September 30, 1994 and 1993
In Thousands of Dollars (Except Per Share Data)
<CAPTION>
Capital In
Preferred Common Excess of Retained Treasury ESOP Loan
Stock Stock Par Value Earnings Stock Guarantee
- - ---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994 $ - $ 69,674 $ 17,047 $ 108,038 $ (5,956) $ -
Net income - - - 25,561 - -
Exercise of stock options - - (31) - 368 -
Cash dividends declared ($.12 per share) - - - (3,262) - -
----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 1994 $ - $ 69,674 $ 17,016 $ 130,337 $ (5,588) $ -
=========== =========== =========== =========== =========== ===========
Balance January 1, 1993 $ - $ 34,837 $ 16,510 $ 110,072 $ (5,899) $ (250)
Net income - - - 24,402 - -
Issuance of 13,934,944 shares in connection
with a 2-for-1 stock split effected in the
form of a 100% stock dividend - 34,837 - (34,837) - -
Exercise of stock options - - 528 - (181) -
ESOP repayment of debt - - - - - 250
Cash dividends declared ($.12 per share) - - - (3,252) - -
----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 1993 $ - $ 69,674 $ 17,038 $ 96,385 $ (6,080) $ -
=========== =========== =========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands of Dollars
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1994 1993
---------- ----------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income $ 25,561 $ 24,402
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 10,324 10,101
Provision for losses on accounts receivable 2,326 3,703
Gain on sale of property, equipment, and other assets (11) (572)
Deferred federal income tax (43) 337
Cumulative effect of change in accounting principle - (1,106)
Changes in assets and liabilities:
Increase in accounts receivable (12,035) (16,132)
Increase in inventories (17,538) (28,974)
Increase in other current assets (4,020) (400)
Increase in accounts payable and accrued expenses 8,093 16,821
Net increase in long-term assets and liabilities
due to adoption of FAS 109 - 107
---------- ----------
Net cash provided from operating activities 12,657 8,287
Investing activities:
Proceeds from the sale of property, equipment, and other assets 556 2,441
Capital expenditures (11,307) (12,736)
Increase (decrease) in other assets (1,165) 469
Acquisition of American Tile Supply, net of cash acquired (14,251) -
---------- ----------
Cash used in investing activities (26,167) (9,826)
Financing activities:
Additions to debt 32,500 29,000
Repayment of debt (22,171) (26,570)
Dividends paid (3,260) (3,112)
Exercise of stock options 337 347
---------- ----------
Cash provided from (used in) financing activities 7,406 (335)
---------- ----------
Net decrease in cash (6,104) (1,874)
Cash at beginning of period 10,587 2,393
---------- ----------
Cash at end of period $ 4,483 $ 519
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
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(Page 6)
JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 and restrictions on redemption
of outstanding stock and change in control of the company. As of September 30,
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 27,810,000 in
1994 and 27,982,000 in 1993.
Acquisition
Effective August 1, 1994, the Company purchased American Tile Supply Company
and its related companies ("American Tile") for a total purchase price of
approximately $16 million. American Tile distributes floor and wall tile
primarily in Texas and has annual revenues of approximately $32,000,000. Eleven
million dollars of the purchase price was financed through the Company's
existing credit facilities. Subordinated notes were issued to the sellers for
the remaining $5 million.
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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 third quarter of 1994 were $119.7
million versus $118.3 million for the same quarter in 1993, an increase of 1%.
Consolidated net sales for the first nine months of 1994 of $344.5 million were
about the same amount as the nine months ended September 30, 1993.
Building Materials Segment Sales - Sales in the Building Materials
segment for 1994's third quarter increased 26.6% to $62.4 million
compared to the same quarter of 1993. For the nine months ended
September 30, 1994, net sales increased 23.8% to $167.3 million compared
to the same period in 1993. Each of the companies in the segment, Acme
Brick Company ("Acme"), Featherlite Building Products Corporation
("Featherlite"), and Tradewinds Technologies, Inc. ("Tradewinds"),
posted gains over the previous year. The acquisition of American Tile
Supply Company ("American Tile") by Acme effective August 1, 1994
contributed approximately $6 million to revenues. Acme's brick and
purchased products operations also realized increases in shipments and
average selling prices compared to the one year ago periods. The
planned expansion of American Tile's market area into Houston will
provide the opportunity for continued growth in purchased products
sales. Commercial construction activity in areas served by Featherlite
is still ahead of last year's pace as indicated by improved concrete
block and cut limestone sales levels. Tradewinds also posted increased
revenues for the 1994 nine month period compared to the nine months
ended September 30, 1993.
Footwear Segment Sales - Total Footwear sales for the quarter ended
September 30, 1994 declined 17% to $57.3 million from 1993's third
quarter of $69 million. For the nine months ended September 30, 1994,
revenues were 15.4% behind the same period a year ago. All three
operations, Justin Boot Company, Nocona Boot Company and Tony Lama
Company, Inc., experienced a slower third quarter in 1994. While the
core market men's western boot and Chippewa lines continue to do well,
sales in the fashion markets and women's lines have declined. The
recent introduction of a new product called the Sport Lace-R, an
athletic shoe constructed on a roper and lacer last, is expected to aid
the segment's sales efforts in the coming quarters.
Costs and Expenses - The consolidated ratio of cost of goods sold to sales
improved to 63.9% in the third quarter of 1994 versus 64.7% in the same quarter
of 1993. For the nine month periods ended September 30, 1993 and 1994, cost of
goods sold to sales improved from 66.7% to 64.8%, respectively. Building
Materials' ratio increased slightly from 57.4% in 1993's third quarter to 57.5%
in the third quarter of 1994. While brick margins exceeded those of last year,
American Tile's lower margins for purchased products contributed to the
comparatively flat ratios for the quarter. During the first nine months of
1994, the ratio for Building Materials improved to 58.2% from 61.2% for the same
period in 1993. The primary reasons for this improvement were higher average
brick prices and greater unit sales and production volume at Acme. The ratios
of cost of goods sold to sales in the Footwear business were 71% for the third
quarter of 1994 versus 69.9% for the third quarter of 1993 and 71% for the nine
month period in 1994 versus 70.2% for the nine months ended September 1993.
Despite reduced sales levels in the Footwear segment, cost reduction measures
have helped to support these ratios in 1994.
Selling, general and administrative expenses increased to 22.8% of sales in
the third quarter of 1994 compared to 21.1% in the third quarter of 1993. For
the first nine months of 1994, such expenses were 22.7% of sales compared to
21.6% during the first nine months of 1993. The increases are primarily due to
lower sales volumes in the Footwear segment. Beginning in the third quarter of
1994, programs to reduce general and administrative costs in the Footwear
segment were initiated which include consolidation of various administrative and
accounting functions. Completion of the consolidation process is expected to
occur in late 1995.
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(Page 8)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Interest expense increased 11.9% in the third quarter to $1,167,000 from
$1,043,000 in the same three month period of 1993. The increase is attributable
to higher average effective rates during the period. During the nine months
ended September 30, 1994 compared to the same period in 1993, interest expense
decreased $205,000 or 6.9%. This reduction is due to lower average debt levels
during the 1994 nine month period compared to the same period in 1993. Debt
increased in August 1994 due to the acquisition of American Tile.
Provision for Income Taxes - The Company's provision for income tax was 35.6%
of pre-tax income in the third quarter and 36.5% for the first nine months of
1994, which is the current estimated effective rate for the full year. During
the same periods in 1993, rates of 37.5% and 37.8%, respectively, were
estimated.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1994, working capital amounted to $202.6 million versus
$185.2 million at December 31, 1993. Cash decreased from $10.6 million at year-
end 1993 to $4.5 million at the end of 1994's third quarter. During the first
nine months of 1994, net cash of $12.7 million was provided from operations
after usage for the seasonal increase in accounts receivable and inventories.
Net cash advances of $10.3 million were provided under the company's credit
facilities. Uses of cash during the 1994 nine month period include the
acquisition of American Tile, purchase of capital equipment, and payment of cash
dividends to shareholders.
Total interest-bearing debt increased to $103.7 million from $93.4 million at
year end 1993. However, the ratio of long-term debt-to-equity improved to .42
to 1 from .47 to 1 at year end. Borrowings should decrease during the next
quarter as the height of the Footwear selling season comes into play. At
September 30, 1994, unused credit facilities totaled $36 million, an amount well
above the company's estimated requirements. Effective August 1, 1994, the
Company purchased American Tile Supply and its related companies for a total
purchase price of $16 million. Eleven million dollars of the purchase price was
financed through the Company's existing credit facilities, while subordinated
notes were issued to the sellers for the remaining $5 million.
Cash dividends declared in the third quarter of 1994 and 1993 amounted to
$.04 a share. During each of the nine month periods ended September 30 in 1994
and 1993, dividends were declared amounting to $.12 a share.
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(Page 9)
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 10th day of November 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1994 Financial Statements included in the Company's Form 10-Q and
is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 4483
<SECURITIES> 0
<RECEIVABLES> 94976
<ALLOWANCES> 3759
<INVENTORY> 171142
<CURRENT-ASSETS> 278393
<PP&E> 225006
<DEPRECIATION> 142221
<TOTAL-ASSETS> 391006
<CURRENT-LIABILITIES> 75829
<BONDS> 0
<COMMON> 69674
0
0
<OTHER-SE> 141765
<TOTAL-LIABILITY-AND-EQUITY> 391006
<SALES> 344477
<TOTAL-REVENUES> 344477
<CGS> 223160
<TOTAL-COSTS> 223160
<OTHER-EXPENSES> 78277
<LOSS-PROVISION> 768
<INTEREST-EXPENSE> 2787
<INCOME-PRETAX> 40253
<INCOME-TAX> 14692
<INCOME-CONTINUING> 25561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25561
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
