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, 1996
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: 26,448,298 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of November 8,
1996.
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JUSTIN INDUSTRIES, INC.
Index
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet
September 30, 1996 and December 31, 1995 3
Consolidated Statement of Income
Three Months and Nine Months Ended
September 30, 1996 and 1995 4
Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 9
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 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.
(Page 2)
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JUSTIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
In Thousands of Dollars
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 4,075 $ 2,180
Accounts receivable, less allowance for doubtful
accounts of $3,636 and $3,340, respectively 71,730 78,213
Inventories:
Finished goods 113,714 121,835
Work-in-process 4,706 6,068
Raw materials 28,186 30,427
------------ ------------
Total inventories 146,606 158,330
Income taxes 13,673 9,800
Prepaid expenses 1,508 2,155
------------ ------------
Total current assets 237,592 250,678
Other assets, at cost 25,588 24,195
Assets held for sale 2,817 4,879
Property, plant, and equipment, at cost:
Land 19,438 18,558
Buildings and equipment 243,945 222,576
Construction-in-progress 4,334 11,069
------------ ------------
267,717 252,203
Less accumulated depreciation 161,986 155,546
------------ ------------
Net property, plant, and equipment 105,731 96,657
------------ ------------
$ 371,728 $ 376,409
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 4,000 $ 10,000
Trade accounts payable 15,492 14,152
Other accrued items 41,456 38,705
Current portion of long-term debt 6,390 6,436
------------ ------------
Total current liabilities 67,338 69,293
Long-term debt, less current portion 45,125 57,137
Deferred income taxes 13,456 13,490
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 16,544 16,800
Retained earnings 174,139 161,932
Treasury stock, at cost, 1,435,069 and 1,234,585
shares, respectively (14,548) (11,917)
------------ ------------
Total shareholders' equity 245,809 236,489
------------ ------------
$ 371,728 $ 376,409
============ ============
See notes to consolidated financial statements.
(Page 3)
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JUSTIN INDUSTRIES, INC
CONSOLIDATED STATEMENT OF INCOME
In Thousands of Dollars (Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1996 1995 1996 1995
-------- -------- --------- ---------
(Unaudited) (Unaudited)
Net sales:
Building materials $ 68,622 $ 61,852 $ 197,277 $ 180,797
Footwear 41,757 50,569 128,113 155,196
-------- -------- --------- ---------
110,379 112,421 325,390 335,993
Costs and expenses:
Cost of goods sold 72,453 72,610 214,057 217,955
Selling, general, and
administrative expenses 27,774 29,368 84,384 87,426
Interest expense 798 1,345 2,708 3,716
-------- -------- --------- ---------
101,025 103,323 301,149 309,097
-------- -------- --------- ---------
Income before income taxes 9,354 9,098 24,241 26,896
Provision for income taxes 3,414 3,320 8,848 9,816
-------- -------- --------- ---------
Net income $ 5,940 $ 5,778 $ 15,393 $ 17,080
======== ======== ========= =========
Earnings per share $ .22 $ .21 $ .57 $ .62
======== ======== ========= =========
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Nine Months Ended September 30, 1996 and 1995
In Thousands of Dollars (Except Share and Per Share Data)
Capital in
Preferred Common Excess of Retained Treasury
Stock Stock Par Value Earnings Stock
- ----------------------- --------- -------- ---------- -------- --------
(Unaudited)
Balance January 1, 1996 $ - $ 69,674 $ 16,800 $161,932 $(11,917)
Net income - - - 15,393 -
Purchase of 323,000
shares of stock for
treasury - - - - (3,821)
Exercise of stock
options - - (256) - 1,190
Cash dividends declared
($.12 per share) - - - (3,186) -
-------- -------- -------- -------- --------
Balance September 30, 1996 $ - $ 69,674 $ 16,544 $174,139 $(14,548)
======== ======== ======== ======== ========
Balance January 1, 1995 $ - $ 69,674 $ 16,959 $140,593 $ (5,326)
Net income - - - 17,080 -
Purchase of 569,000 shares
of stock for treasury - - - - (6,082)
Exercise of stock options - - (118) - 537
Cash dividends declared
($.12 per share) - - - (3,241) -
-------- -------- -------- -------- --------
Balance September 30, 1995 $ - $ 69,674 $ 16,841 $154,432 $(10,871)
======== ======== ======== ======== ========
See notes to consolidated financial statements.
(Page 4)
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JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands of Dollars
Nine Months Ended
September 30,
--------------------
1996 1995
--------------------
(Unaudited)
Cash flows from operating activities:
Net income $15,393 $17,080
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 11,010 11,019
Provision for losses on accounts receivable 1,662 1,045
(Gain) loss on sale of property, plant,
and equipment (198) 177
Deferred federal income tax (34) (10)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 4,821 (7,744)
(Increase) decrease in inventories 11,724 (9,419)
Increase in other current assets (3,226) (3,277)
Increase in accounts payable and
accrued expenses 4,105 3,429
------- -------
Net cash provided from operating activities 45,257 12,300
Cash flows from investing activities:
Proceeds from the sale of property, plant,
and equipment 562 500
Capital expenditures (20,113) (18,338)
Decrease in other long-term assets 334 720
------- -------
Net cash used in investing activities (19,217) (17,118)
Cash flows from financing activities:
Borrowings 12,000 35,000
Repayment of borrowings (30,058) (23,947)
Dividends paid (3,200) (3,254)
Purchase of treasury stock (3,821) (6,082)
Proceeds from exercise of stock options 934 419
------- -------
Net cash provided by (used in) financing
activities (24,145) 2,136
------- -------
Net increase (decrease) in cash 1,895 (2,682)
Cash at beginning of period 2,180 6,071
------- -------
Cash at end of period $ 4,075 $ 3,389
======= =======
See notes to consolidated financial statements.
(Page 5)
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JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
Summary of Significant Accounting Policies
A summary of the company's significant accounting policies is presented on
page 21 of its 1995 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 1996.
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,
1996, 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 27,029,000 in
1996 and 27,494,000 in 1995.
(Page 6)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Sales - Consolidated net sales for the third quarter of 1996 were $110.4
million versus $112.4 million for the same quarter in 1995, a decrease of 1.8%.
Consolidated net sales for the first nine months of 1996 were $325.4 million
compared to $336 million for the nine months ended September 30, 1995.
Building Materials Segment Sales - Sales in the Building Materials
segment for 1996's third quarter increased 11% to $68.6 million compared
to the same quarter of 1995. For the nine months ended September 30,
1996, net sales increased 9.1% to $197.3 million compared to the same
period in 1995. Sales for Acme Brick Company ("Acme") improved
approximately 13.4% in the third quarter and 12.2% for the nine month
period of 1996, compared to the same periods a year ago. Increased
brick shipments produced most of the gains, while floor and wall tile
sales at both Acme and American Tile Supply Company posted good
improvements over 1995's third quarter and nine month periods.
Featherlite Building Products Corporation's sales for the third quarter
and year-to-date are comparable to last year's pace. Although the
number of block units shipped is down about 7% in 1996, primarily due to
a decrease in commercial construction activity in certain markets,
improved average pricing and gains in cut limestone products have offset
the block volume shrinkage. Tradewinds Technologies, Inc., manufacturer
of evaporative cooling units, posted declines in revenues for the 1996
periods compared to a year ago. This company, which contributes
approximately 1% of consolidated revenues, is retooling its plant in
1996 to provide additional product enhancements.
Footwear Segment Sales - Total Footwear sales for the quarter ended
September 30, 1996, declined 17.4% to $41.8 million from 1995's third
quarter of $50.6 million. For the nine month period ended September 30,
1996, revenues were 17.5% behind the same period a year ago. Justin
Boot Company, Nocona Boot Company and Tony Lama Company experienced a
slower third quarter in 1996, while sales in the Chippewa product line
increased during the quarter. Changes in fashion trends have affected
the western apparel industry.
Costs and Expenses - The consolidated gross profit margin declined in the
third quarter of 1996 to 34.4% compared to 35.4% in the same quarter of 1995.
For the nine month periods ended September 30, 1995 and 1996, the gross profit
margins declined from 35.1% in 1995 to 34.2% in 1996. Building Materials'
margins decreased slightly from 41.5% in 1995's third quarter to 41% in the
third quarter of 1996. During the first nine months of 1996, the ratio for
Building Materials declined to 40% from 41.3% for the same period in 1995.
Brick margins continue to be lower than comparable periods in 1995 due to higher
natural gas prices in 1996 and start-up costs incurred from a new plant. Gross
margins in the Footwear business were 23.5% for the third quarter and 25.4% for
the first nine months of 1996, versus 27.9% for the third quarter and the first
nine months of 1995. Reduced Footwear sales and special inventory reduction
programs have negatively impacted margins. At the same time, however, the
inventory reduction programs have significantly improved working capital
requirements.
Selling, general and administrative expenses decreased to 25.2% of sales in
the third quarter of 1996 compared to 26.1% in the third quarter of 1995. For
the first nine months of 1996, such expenses were 25.9% of sales compared to 26%
during the first nine months of 1995. The improvements are primarily due to
higher sales in the Building Materials segment and reduced general and
administrative expenses in Footwear. Beginning in the third quarter of 1995, a
program was initiated in the Footwear segment to reduce general and
administrative costs on a long-term basis. Costs associated with this
reorganization were incurred throughout 1995. The program, which included
consolidation of various administrative and accounting functions, was completed
in early 1996.
(Page 7)
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Interest expense decreased 40.7% in 1996's third quarter to $798,000 from
$1,345,000 in the same three month period of 1995. During the nine months ended
September 30, 1996, compared to the same period in 1995, interest expense
decreased $1,008,000 or 27.1%. These decreases are primarily attributable to
significantly lower debt levels due to Footwear's aggressive inventory reduction
strategies, combined with lower average effective interest rates.
Provision for Income Taxes - The Company's provision for income tax was 36.5%
of pre-tax income in the third quarter and for the first nine months of 1996 and
1995, which is the current estimated effective rate for the full year.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1996, working capital amounted to $170.3 million versus
$181.4 million at December 31, 1995. Cash increased from $2.2 million at year-
end 1995 to $4.1 million at the end of 1996's third quarter. During the first
nine months of 1996, net cash of $45.3 million was provided from operations. As
such, the company was able to reduce debt levels by $18.1 million during the
1996 nine month period. Other uses of cash during the nine month period include
the purchase of 323,000 shares of treasury stock at a cost of $3.8 million,
concluding the company's stock repurchase program that began in late 1994;
purchase of capital equipment, primarily the new Bennett brick plant; and
payment of cash dividends to shareholders.
Total interest-bearing debt decreased to $55.5 million from $73.6 million at
year-end 1995. The ratio of long-term debt-to-equity was .18 to 1 at September
30, 1996, compared to .24 to 1 at year-end 1995. Borrowings should decrease
further during the next quarter as receivables from Footwear's seasonal sales
become due. At September 30, 1996, unused credit facilities totaled $68
million, an amount well above the company's estimated requirements.
Cash dividends declared in the third quarter of 1996 and 1995 amounted to
$.04 a share. During each of the nine month periods ended September 30 in 1996
and 1995, dividends were declared amounting to $.12 a share.
(Page 8)
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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. SUBMISSION OF MATTERS TO A VOTE 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 April 11,
1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule for the period ended September 30, 1996.
(b) 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 12th day of November 1996.
(Page 9)
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This schedule contains summary financial information extracted from the
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