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 June 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: 27,176,075 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of July 31, 1994.
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JUSTIN INDUSTRIES, INC.
Index
Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheet
June 30, 1994 and December 31, 1993 3
Consolidated Statement of Income
Three Months and Six Months Ended June 30, 1994 and 1993 4
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 1994 and 1993 4
Consolidated Statement of Cash Flows
Six Months Ended June 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>
June 30, December 31,
1994 1993
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
- - ------
Current assets:
Cash $1,640 $10,587
Accounts receivable, less allowance for doubtful
accounts of $3,284 and $3,014, respectively 80,485 76,966
Inventories:
Finished goods 114,490 103,261
Work-in-process 8,719 9,971
Raw materials 31,605 32,042
------------ ------------
Total inventories 154,814 145,274
Income taxes 7,990 5,750
Prepaid expenses 2,083 1,517
------------ ------------
Total current assets 247,012 240,094
Assets held for sale 5,523 5,523
Investments and other assets, at cost 20,576 20,793
Property, plant, and equipment, at cost:
Land 16,676 16,658
Buildings and equipment 200,097 196,575
Construction-in-progress 3,443 2,206
------------ ------------
220,216 215,439
Less accumulated depreciation 139,546 135,169
------------ ------------
Net property, plant, and equipment 80,670 80,270
------------ ------------
$353,781 $346,680
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Trade accounts payable $13,888 $16,088
Accrued payroll items 9,000 7,702
Other accrued items 29,701 25,120
Dividends payable 1,087 1,086
Current portion of long-term debt 4,433 4,905
------------ ------------
Total current liabilities 58,109 54,901
Long-term debt, less current portion 78,319 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 17,039 17,047
Retained earnings 121,985 108,038
Treasury stock, at cost, 695,313 and 713,402 shares, respectively (5,817) (5,956)
------------ ------------
Total shareholders' equity 202,881 188,803
------------ ------------
$353,781 $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 Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales:
Building materials $58,042 $48,045 $104,899 $85,860
Footwear 56,852 68,023 119,886 140,313
--------- --------- --------- ---------
114,894 116,068 224,785 226,173
Costs and expenses:
Cost of goods sold 73,745 77,200 146,641 153,129
Selling, general, and administrative expenses 25,326 25,196 50,935 49,337
Interest expense 819 989 1,620 1,949
--------- --------- --------- ---------
99,890 103,385 199,196 204,415
--------- --------- --------- ---------
Income before income taxes and cumulative effect on prior
years of change in accounting for income taxes 15,004 12,683 25,589 21,758
Provision for income taxes 5,552 4,819 9,468 8,268
--------- --------- --------- ---------
Income before cumulative effect on prior years of
change in accounting for income taxes 9,452 7,864 16,121 13,490
Cumulative effect on prior years of change in
accounting for income taxes - - - 1,106
--------- --------- --------- ---------
Net income $9,452 $7,864 $16,121 $14,596
========= ========= ========= =========
Earnings per share:
Before cumulative effect on prior years of change
in accounting for income taxes $.34 $.28 $.58 $.48
========= ========= ========= =========
Net income $.34 $.28 $.58 $.52
========= ========= ========= =========
</TABLE>
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Six Months Ended June 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 - - - 16,121 - -
Exercise of stock options - - (8) - 139 -
Cash dividends declared ($.08 per share) - - - (2,174) - -
--------- --------- --------- --------- --------- ---------
Balance June 30, 1994 $ - $69,674 $17,039 $121,985 $(5,817) $ -
========= ========= ========= ========= ========= =========
Balance January 1, 1993 $ - $34,837 $16,510 $110,072 $(5,899) $(250)
Net income - - - 14,596 - -
Issuance of 13,934,944 shares in connection
with a 2-for-1 stock split effected in the
form of a 100% stock dividend - 34,837 - (34,837) - -
Exercise of stock options - - 482 - (196) -
ESOP repayment of debt - - - - - 125
Cash dividends declared ($.08 per share) - - - (2,167) - -
--------- --------- --------- --------- --------- ---------
Balance June 30, 1993 $ - $69,674 $16,992 $87,664 $(6,095) $(125)
========= ========= ========= ========= ========= =========
<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>
Six Months Ended
June 30,
----------------------
1994 1993
--------- ---------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income $16,121 $14,596
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 6,749 6,662
Provision for losses on accounts receivable 431 1,476
(Gain) loss on sale of property, equipment, and other assets 22 (174)
Cumulative effect of change in accounting principle - (1,106)
Changes in assets and liabilities:
Increase in accounts receivable (3,950) (2,622)
Increase in inventories (9,540) (17,467)
Increase in other current assets (2,806) (1,556)
Increase in accounts payable and accrued expenses 3,679 7,436
Net increase in long-term assets and liabilities
due to adoption of FAS 109 - 107
--------- ---------
Net cash provided from operating activities 10,706 7,352
Investing activities:
Proceeds from the sale of property, equipment, and other assets 415 556
Capital expenditures (7,616) (8,198)
Increase in investments and other assets, including reclassifications 247 625
--------- ---------
Cash used in investing activities (6,954) (7,017)
Financing activities:
Additions to debt 9,500 22,000
Repayment of debt (20,157) (20,065)
Dividends paid (2,173) (2,027)
Exercise of stock options 131 286
--------- ---------
Cash provided from (used in) financing activities (12,699) 194
--------- ---------
Net increase (decrease) in cash (8,947) 529
Cash at beginning of period 10,587 2,393
--------- ---------
Cash at end of period $1,640 $2,922
========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
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JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 June 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 27,826,000 in
1994 and 28,005,000 in 1993.
SUBSEQUENT EVENT
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 second quarter of 1994 were $114.9
million versus $116.1 million for the same quarter in 1993, a decrease of about
1%. Consolidated net sales were $224.8 million for the six months ended June
30, 1994, .6% below the record high of $226.1 million in 1993's first six
months.
Building Materials Segment Sales - Sales in the Building Materials
segment for 1994's second quarter increased 20.8% or $10 million over
the same quarter of 1993. For the six months ended June 30, 1994, net
sales increased 22.2% or $19 million over the same period in 1993. All
three companies in the segment, 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 dry weather enabled Acme to continue record breaking levels
of shipments. Revenues were also positively affected by higher average
brick prices compared to one year ago due to selling price increases in
selected markets going into effect over the past twelve months. Acme's
sales of purchased products also reached a new second quarter record.
Commercial construction activity in areas served by Featherlite is also
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 six month period compared to the six months ended June 30,
1993.
Footwear Segment Sales - Total Footwear sales for the quarter ended
June 30, 1994 declined 16.4% to $56.9 million from 1993's second quarter
of $68 million. For the six months ended June 30, 1994, revenues were
14.6% behind the same period a year ago. All three operations, Justin
Boot Company, Nocona Boot Company and Tony Lama Company, Inc.,
experienced a slower second quarter in 1994. While the core market
men's western boot business and Chippewa line continue to do well, sales
in the fashion markets and women's lines have declined.
Costs and Expenses - The consolidated ratio of cost of goods sold to sales
improved to 64.2% in the second quarter of 1994 versus 66.5% in the same quarter
of 1993. For the six month periods ended June 30, 1993 and 1994, cost of goods
sold to sales improved from 67.7% to 65.2%, respectively. Building Materials'
ratio improved from 60.4% in 1993's second quarter to 58.2% in the second
quarter of 1994. During the first six months of 1994, the ratio for Building
Materials improved to 58.7% from 63.3% for the same period in 1993. The primary
reasons for these improvements 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 businesses were 70.3% for the second quarter of 1994 versus
70.8% for the second quarter of 1993. For the six month periods ended June 30,
the ratios were 71% in 1994 and 70.4% in 1993. Improvement in the second
quarter over the same period in 1993 was primarily due to overhead expense
reductions.
Selling, general and administrative expenses increased to 22% of sales in the
second quarter of 1994 compared to 21.7% in the second quarter of 1993. For the
first six months of 1994, such expenses were 22.7% of sales compared to 21.8%
during the first six months of 1993. The increases are primarily due to greater
selling expenditures, including advertising and promotion in the brick
operations.
Interest expense declined 17.2% in the second quarter to $819,000 from
$989,000 in the second three month period of 1993. During the six months ended
June 30, 1994 compared to the same period in 1993, interest expense decreased
$329,000 or 16.9%. The reductions are attributable to lower average debt levels
during the period as the average effective rates were slightly higher.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Provision for Income Taxes - The Company's provision for income tax was 37%
of pre-tax income in the second quarter and for the first six months of 1994,
which is the current estimated effective rate for the full year. During the
same periods in 1993, a rate of 38% was used.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1994, working capital amounted to $188.9 million versus $185.2
million at December 31, 1993. Cash decreased from $10.6 million at year-end
1993 to $1.6 million at the end of 1994's second quarter. During the first six
months of 1994, net cash of $10.7 million was provided from operations after
usage for the seasonal increase in accounts receivable and inventories.
Remaining cash was used to pay down debt, purchase capital equipment, and pay
cash dividends to shareholders.
Total interest-bearing debt declined to $82.8 million from $93.4 million at
year end 1993. This reduction lowered the ratio of long-term debt-to-equity to
.39 to 1 from .47 to 1 at year end. Borrowings should increase during the next
quarter to finance seasonal working capital needs. At June 30, 1994, unused
credit facilities totaled $52 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 will be financed through
the Company's existing credit facilities, while subordinated notes will be
issued to the sellers for the remaining $5 million.
Cash dividends declared in the second quarter of 1994 and 1993 amounted to
$.04 a share. During each of the six month periods ended June 30 in 1994 and
1993, dividends were declared amounting to $.08 a share.
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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 9th day of August 1994.
