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, 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: 26,486,068 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of August 2, 1996.
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JUSTIN INDUSTRIES, INC.
Table of Contents
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet
June 30, 1996 and December 31, 1995 3
Consolidated Statement of Income
Three Months and Six Months Ended June 30, 1996 and 1995 4
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
Six Months Ended June 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 10
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
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
- ------
Current assets:
Cash $ 4,868 $ 2,180
Accounts receivable, less allowance for doubtful
accounts of $3,454 and $3,340, respectively 69,201 78,213
Inventories:
Finished goods 125,825 121,835
Work-in-process 4,155 6,068
Raw materials 25,393 30,427
----------- -----------
Total inventories 155,373 158,330
Income taxes 10,472 9,800
Prepaid expenses 1,337 2,155
----------- -----------
Total current assets 241,251 250,678
Other assets, at cost 25,126 24,195
Assets held for sale 3,032 4,879
Property, plant, and equipment, at cost:
Land 19,078 18,558
Buildings and equipment 241,284 222,576
Construction-in-progress 2,978 11,069
----------- -----------
263,340 252,203
Less accumulated depreciation 159,106 155,546
----------- -----------
Net property, plant, and equipment 104,234 96,657
----------- -----------
$ 373,643 $ 376,409
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------
Current liabilities:
Notes payable to banks $ 6,000 $ 10,000
Trade accounts payable 13,348 14,152
Other accrued items 39,246 38,705
Current portion of long-term debt 6,390 6,436
----------- -----------
Total current liabilities 64,984 69,293
Long-term debt, less current portion 53,125 57,137
Deferred income taxes 13,490 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 16,615 16,800
Retained earnings 169,256 161,932
Treasury stock, at cost, 1,350,670 and
1,234,585 shares, respectively (13,501) (11,917)
----------- -----------
Total shareholders' equity 242,044 236,489
----------- -----------
$ 373,643 $ 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 Six Months Ended
June 30, June 30,
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Net sales:
Building materials $ 70,797 $ 62,887 $ 128,655 $ 118,945
Footwear 39,875 47,031 86,356 104,627
--------- --------- --------- ---------
110,672 109,918 215,011 223,572
Costs and expenses:
Cost of goods sold 71,901 70,642 141,604 145,345
Selling, general, and
administrative expenses 28,942 28,508 56,610 58,058
Interest expense 920 1,266 1,910 2,371
--------- --------- --------- ---------
101,763 100,416 200,124 205,774
--------- --------- --------- ---------
Income before income taxes 8,909 9,502 14,887 17,798
Provision for income taxes 3,250 3,468 5,434 6,496
--------- --------- --------- ---------
Net income $ 5,659 $ 6,034 $ 9,453 $ 11,302
========= ========= ========= =========
Earnings per share $ .21 $ .22 $ .35 $ .41
========= ========= ======== =========
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Six Months Ended June 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 $(11,917)
Net income - - - 9,453 -
Purchase of 195,000 shares
of stock for treasury - - - - (2,349)
Exercise of stock options - - (185) - 765
Cash dividend declared
($.08 per share) - - - (2,129) -
------- -------- -------- -------- --------
Balance June 30, 1996 $ - $ 69,674 $ 16,615 $169,256 $(13,501)
======= ======== ======== ======== ========
Balance January 1, 1995 $ - $ 69,674 $ 16,959 $140,593 $ (5,326)
Net income - - - 11,302 -
Purchase of 399,500 shares
of stock for treasury - - - - (4,204)
Exercise of stock options - - (83) - 403
Cash dividend declared
($.08 per share) - - - (2,165) -
------- -------- -------- -------- --------
Balance June 30, 1995 $ - $ 69,674 $ 16,876 $149,730 $ (9,127)
======= ======== ======== ======== ========
See notes to consolidated financial statements.
(Page 4)
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JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands of Dollars
Six Months Ended
June 30, 1996
---------------------
1996 1995
---------------------
(Unaudited)
Cash flows from operating activities:
Net income $ 9,453 $ 11,302
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 7,321 7,317
Provision for losses on accounts receivable 1,024 533
(Gain) loss on sale of property, plant,
and equipment (108) 211
Changes in assets and liabilities:
Decrease in accounts receivable 7,988 3,218
(Increase) decrease in inventories 2,957 (6,561)
(Increase) decrease in other current assets 146 (3,046)
Decrease in accounts payable and
accrued expenses (255) (8,199)
-------- --------
Net cash provided from operating activities 28,526 4,775
Cash flows from investing activities:
Proceeds from the sale of property, plant,
and equipment 449 460
Capital expenditures (15,123) (10,216)
Decrease in other long-term assets 800 898
-------- --------
Net cash used in investing activities (13,874) (8,858)
Cash flows from financing activities:
Borrowings 8,000 19,000
Repayment of borrowings (16,058) (10,674)
Dividends paid (2,137) (2,177)
Purchase of treasury stock (2,349) (4,204)
Proceeds from exercise of stock options 580 320
-------- --------
Net cash provided by (used in)
financing activities (11,964) 2,265
-------- --------
Net increase (decrease) in cash 2,688 (1,818)
Cash at beginning of period 2,180 6,071
-------- --------
Cash at end of period $ 4,868 $ 4,253
======== ========
See notes to consolidated financial statements.
(Page 5)
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JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 June 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 27,089,000 in
1996 and 27,575,000 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 second quarter of 1996 were $110.7
million versus $109.9 million for the same quarter in 1995, an increase of .7%.
Consolidated net sales were $215 million for the six months ended June 30, 1996,
3.8% below the $223.6 million posted in 1995's first six months.
Building Materials Segment Sales - Sales for the second quarter of
1996 in the Building Materials segment increased 12.6% over the same
quarter of 1995 to $70.8 million. For the six months ended June 30,
1996, net sales increased to $128.7 million, 8.2% over the same period
last year.
The overall increase in sales is attributable to operations of Acme
Brick Company ("Acme") and American Tile Supply ("ATS"), as residential
construction in Acme's and ATS's market areas continues to be strong.
Featherlite Building Products Corporation's ("Featherlite") sales,
consisting primarily of commercial building products such as concrete
block and cut limestone, declined a modest 1% during 1996's three and
six month periods. Compared to the same periods a year ago, commercial
construction activity has declined in Featherlite's markets. Cooler
weather than normal and retooling of the manufacturing operations during
the Spring selling season caused Tradewinds Technologies, Inc.'s sales
to decline during the three and six month periods ended June 30, 1996,
compared to the same periods in 1995.
Footwear Segment Sales - Total Footwear sales for the quarter ended
June 30, 1996, declined 15.2% to $39.9 million from 1995's second
quarter of $47 million. For the six months ended June 30, 1996,
revenues were 17.5% behind the same period a year ago. Justin Boot
Company, Nocona Boot Company and Tony Lama Company, Inc. each
experienced a slower second quarter and six months in 1996. All lines
of footwear products experienced declines compared to 1995's periods due
to soft footwear sales nationwide and changes in fashion trends.
Costs and Expenses - The consolidated ratio of cost of goods sold to sales
was 65% in the second quarter of 1996 versus 64.3% in the same quarter of 1995.
For the six month periods ended June 30, 1996 and 1995, cost of goods sold to
sales percentage was 65.9% and 65%, respectively.
Building Materials' ratio was 59.9% in the second quarter of 1996 compared to
58.5% in 1995's second quarter. During the first six months of 1996 and 1995,
the ratio for Building Materials was 60.6% and 58.8%, respectively. Despite an
increase in units shipped of almost 14% in 1996 and stable average brick
pricing, Acme's cost of goods sold ratio was negatively impacted by higher gas
prices and start-up costs associated with the new Bennett brick plant. The new
brick plant will be fully operational and producing close to capacity by the end
of August. The ratios of cost of goods sold to sales in the Footwear businesses
were 73.9% for the second quarter of 1996 versus 72% for the second quarter of
1995. For the six month periods ended June 30, the ratios were 73.8% in 1996
and 72.1% in 1995. The increased ratios in the second quarter of 1996 over
1995's second quarter are mainly attributable to reduced sales and production
levels in 1996.
Selling, general and administrative expenses increased to 26.2% of sales in
the second quarter of 1996 compared to 25.9% in the second quarter of 1995. For
the first six months of 1996, these expenses were 26.3% of sales compared to 26%
during the first six months of 1995. The increases are primarily due to
Footwear's lower sales volume, costs accrued to close its European sales
operation, and severance payments to employees terminated in connection with
personnel changes and cost reduction programs.
Interest expense decreased 27.3% in the second quarter to $920,000 from
$1,266,000 in the second three month period of 1995. During the six months
ended June 30, 1996, compared to the same period in 1995, interest expense
decreased $461,000 or 19.4%. The decreases are attributable to lower average
effective interest rates and lower average debt levels during the periods.
(Page 7)
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Provision for Income Taxes - The Company's provision for income tax was 36.5%
of pre-tax income in the second quarter and for the first six months of 1996 and
1995, which is the current estimated effective rate for the full year.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1996, working capital increased to $176.3 million versus $185.7
million at December 31, 1995. Cash decreased from $6.1 million at year-end 1995
to $4.8 million at the end of 1996's second quarter. During the first six
months of 1996, net cash of $28.5 million was provided from operations due to
aggressive management of inventories and receivables. Cash from operating
activities was used primarily to repay bank debt by approximately $8 million,
purchase $15.1 million of capital equipment, buy $2.3 million of treasury stock,
and pay cash dividends to shareholders of $2.1 million.
Total interest-bearing debt decreased to $65.5 million from $79.3 million at
year end 1995. This decrease reduced the ratio of long-term debt-to-equity to
.22 to 1 from .24 to 1 at year end. Borrowings may increase during the next
quarter to finance additional seasonal working capital needs. At June 30, 1996,
unused credit facilities approximated $63 million, an amount well above the
company's estimated requirements.
Cash dividends of $.04 a share were declared in the second quarter of 1996
and 1995. During each of the six month periods ended June 30 in 1996 and 1995,
dividends were declared amounting to $.08 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 Form
10-Q for the quarter ended March 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule for the period ended June 30, 1996.
(b) Reports on Form 8-K
None.
(Page 9)
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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 7th day of August 1996.
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