UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 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
JUSTIN INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 75-0102185
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2821 West 7th Street 76107
----------------------- -----------
(Address of principal (Zip Code)
executive office)
(817) 336-5125
----------------------------------------------------
(Registrant's telephone number including area code)
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 issuer's classes of
common stock, as of the latest practicable date: 26,617,163 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of April 30, 1996.
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JUSTIN INDUSTRIES, INC.
Table of Contents
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet
March 31, 1996 and December 31, 1995 3
Consolidated Statement of Income
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 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
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
In Thousands of Dollars
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
- -------
Current assets:
Cash $ 7,398 $ 2,180
Accounts receivable, less allowance for doubtful
accounts of $3,296 and $3,340, respectively 71,287 78,213
Inventories:
Finished goods 127,670 121,835
Work-in-process 5,274 6,068
Raw materials 29,195 30,427
----------- -----------
Total inventories 162,139 158,330
Income taxes 8,521 9,800
Prepaid expenses 1,459 2,155
----------- -----------
Total current assets 250,804 250,678
Other assets, at cost 24,350 24,195
Assets held for sale 4,756 4,879
Property, plant, and equipment, at cost:
Land 18,414 18,558
Buildings and equipment 222,773 222,576
Construction-in-progress 17,109 11,069
----------- -----------
258,296 252,203
Less accumulated depreciation 157,316 155,546
----------- -----------
Net property, plant, and equipment 100,980 96,657
----------- -----------
$ 380,890 $ 376,409
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable to banks $ 10,000 $ 10,000
Trade accounts payable 18,036 14,152
Other accrued items 37,779 38,705
Current portion of long-term debt 6,390 6,436
----------- -----------
Total current liabilities 72,205 69,293
Long-term debt, less current portion 56,125 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 16,689 16,800
Retained earnings 164,660 161,932
Treasury stock, at cost, 1,230,635 and 1,234,585
shares, respectively (11,953) (11,917)
----------- -----------
Total shareholders' equity 239,070 236,489
----------- -----------
$ 380,890 $ 376,409
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
(Page 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,
-------------------
1996 1995
-------- --------
(Unaudited)
Net sales:
Building materials $ 57,858 $ 56,058
Footwear 46,481 57,596
-------- --------
104,339 113,654
Costs and expenses:
Cost of goods sold 69,703 74,703
Selling, general, and administrative expenses 27,668 29,550
Interest expense 990 1,105
-------- --------
98,361 105,358
-------- --------
Income before income taxes 5,978 8,296
Provision for income taxes 2,184 3,028
-------- --------
Net income $ 3,794 $ 5,268
======== ========
Earnings per share $ .14 $ .19
======== ========
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 1996 and 1995
In Thousands of Dollars (Except Share and Per Share Data)
<CAPTION>
Capital
In
Excess
Preferred Common of Par Retained Treasury
Stock Stock Value Earnings Stock
- --------------------------------------- -------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance January 1, 1996 $ - $ 69,674 $ 16,800 $161,932 $(11,917)
Net income - - - 3,794 -
Purchase of 48,000 shares of
stock for treasury - - - - (538)
Exercise of stock options - - (111) - 502
Cash dividend declared ($.04 per share) - - - (1,066) -
-------- -------- -------- -------- --------
Balance March 31, 1996 $ - $ 69,674 $ 16,689 $164,660 $(11,953)
======== ======== ======== ======== ========
Balance January 1, 1995 $ - $ 69,674 $ 16,959 $140,593 $ (5,326)
Net income - - - 5,268 -
Purchase of 125,800 shares of
stock for treasury - - - - (1,385)
Exercise of stock options - - (53) - 329
Cash dividend declared ($.04 per share) - - - (1,088) -
-------- -------- -------- -------- --------
Balance March 31, 1995 $ - $ 69,674 $ 16,906 $144,773 $ (6,382)
======== ======== ======== ======== =========
<FN>
See notes to consolidated financial statements.
</TABLE>
(Page 4)
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<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands of Dollars
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
-------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,794 $ 5,268
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 3,647 3,638
Provision for losses on accounts receivable 347 203
Gain on sale of property, plant, and equipment (133) (44)
Changes in assets and liabilities:
Decrease in accounts receivable 6,579 8,533
Increase in inventories (3,809) (6,524)
Decrease in other current assets 1,975 1,280
Increase (decrease) in accounts payable and accrued expenses 2,963 (1,785)
------- -------
Net cash provided from operating activities 15,363 10,569
Cash flows from investing activities:
Proceeds from the sale of property, plant, and equipment 299 51
Capital expenditures (8,136) (4,464)
(Increase) decrease in other long-term assets (32) 198
------- -------
Net cash used in investing activities (7,869) (4,215)
Cash flows from financing activities:
Borrowings 8,000 5,000
Repayment of borrowings (9,058) (10,414)
Dividends paid (1,071) (1,089)
Purchase of treasury stock (538) (1,385)
Proceeds from exercise of stock options 391 276
------- -------
Net cash used in financing activities (2,276) (7,612)
------- -------
Net increase (decrease) in cash 5,218 (1,258)
Cash at beginning of period 2,180 6,071
------- -------
Cash at end of period $ 7,398 $ 4,813
======= =======
<FN>
See notes to consolidated financial statements.
</TABLE>
(Page 5)
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JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
Summary of Significant Accounting Policies
- ------------------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Interim results are not necessarily indicative of results for a full year.
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, redemption of outstanding
stock, and change in control of the company. As of March 31, 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 27,117,000 in
1996 and 27,728,000 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 three months ended March 31, 1996, of
$104.3 million were 8.2% under the $113.7 million in 1995's first quarter.
Building Materials Segment Sales - Sales in the Building Materials
segment increased $1.8 million or 3.2% over the first quarter of 1995.
The entire increase in revenues was attributable to Acme Brick Company
("Acme") as brick shipments increased 6% over the same period of 1995.
American Tile Supply Company ("American Tile") and Tradewinds
Technologies, Inc. ("Tradewinds") each posted modest declines in sales
while Featherlite Building Products Corporation's ("Featherlite") sales
approximated the first quarter of 1995.
During the first quarter of 1996, housing starts in Acme's territory
improved over the prior year and produced the volume gains. Featherlite,
who relies more heavily on commercial construction, sold fewer concrete
block in 1996's first quarter as commercial construction levels in Texas
were lower than in 1995. Pricing gains, however, offset the volume
decline. Tradewinds' first quarter revenues suffered from unusually
cold weather in the first quarter of 1996 compared to the same period a
year ago.
Footwear Segment Sales - Total Footwear sales for the three months
ended March 31, 1996, declined 19.3% to $46.5 million from 1995's first
quarter. All three operations, Justin Boot Company, Nocona Boot Company
and Tony Lama Company, experienced a slower first quarter in 1996.
While pairs shipped declined 22.7% compared to the same quarter in 1995,
average pricing improved reflecting a sales mix more heavily weighted
toward higher priced footwear and a three percent pricing increase on
most lines. All product lines experienced sales declines due to
sluggish sales of footwear and apparel on a national level, in general,
and due to the continued contraction of fashion markets' appetite for
the companies' niche products.
Costs and Expenses - The consolidated ratio of cost of goods sold to sales
was 66.8% in the first quarter of 1996 versus 65.7% in the 1995 comparable
period. Building Materials' ratio of cost of sales to sales was 61.3% in the
first quarter of 1996, compared to 59.1% in the first quarter of 1995. The
primary reason for the increase was higher natural gas prices adversely affected
brick manufacturing costs. The ratio of cost of goods sold to sales in the
Footwear businesses was 73.6% versus 72.1% in 1995. Realignment of production
volumes, discounting of discontinued styles, and higher than normal returns are
the most significant factors in the decline.
Selling, general and administrative expenses increased to 26.5% of sales in
the first quarter of 1996 compared to 26% in the first quarter of 1995. While
the decrease in sales volume in the Footwear business caused the percentage
increase, the total of selling, general and administrative expenses declined
almost $2 million from 1995's first quarter. Approximately one-half of this
decline was due to cost savings realized from the 1995 consolidation of Footwear
administrative functions and expense reductions in that segment of business.
Interest expense decreased 10.4% in the first quarter to $990,000 from
$1,105,000 in the first three months of 1995. The average debt level declined
during 1996's first quarter compared to a year ago, and the average effective
interest rate for the quarter was slightly lower than the same period a year
ago.
Provision for Income Taxes - The Company's provision for income tax was 36.5%
of pre-tax income in the first quarter of 1996 and 1995, which is the current
estimated effective rate for the full year.
(Page 7)
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FINANCIAL CONDITION AND LIQUIDITY
At March 31, 1996, working capital amounted to $178.6 million versus $181.4
million at December 31, 1995. Cash increased from $2.2 million at year end to
$7.4 million at the end of 1996's first quarter. Normal seasonal changes
occurred between year-end 1995 and the end of the first quarter of 1996 with a
reduction in accounts receivable, primarily due to payments by Footwear
customers early in the year, and an increase in inventories caused by the
seasonal build-up of Building Materials inventories.
Cash provided by operating activities in the first quarter of 1996 totaled
$15.4 million. These funds were used primarily to fund the continued
construction of a new brick plant, reduce debt, pay dividends, and purchase
48,000 shares of treasury stock. The new brick plant is scheduled for
completion in the second quarter of 1996. An additional $6 million will be
expended in 1996 to complete this facility.
In the first quarter of 1996, total interest-bearing debt declined to $72.5
million from $73.6 million at year-end 1995, and the ratio of long-term debt-to-
equity was reduced to .23 to 1 from .24 to 1 at year end. Borrowings may
increase over the next two quarters to finance the seasonal working capital
needs. At March 31, 1996, unused credit facilities approximated $50 million, an
amount well above the company's estimated requirements.
Cash dividends declared in the first quarter of 1996 and 1995 amounted to
$.04 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
(a) The Annual Meeting of Shareholders was held on April 11, 1996.
(b) Each of the persons named in the Proxy Statement as a nominee for
director was elected and the proposal listed below was approved. The following
are the voting results on each of the proposals:
Proposal I
--------------------------------------------------
Votes Votes
Election of Directors For Withheld
--------------------------------------------------
John Justin 23,565,729 108,237
J. T. Dickenson 23,531,502 142,464
Bayard H. Friedman 23,566,866 107,100
Marvin Gearhart 23,569,466 104,500
Robert E. Glaze 23,518,577 155,389
Dee J. Kelly 23,463,888 210,078
Joseph R. Musolino 23,567,694 106,272
John V. Roach 23,533,064 140,902
Dr. William E. Tucker 23,523,262 150,704
--------------------------------------------------
Proposal II
----------------------------------------------------------------------------
Approval of the Justin
Industries, Inc. 1996 Non- Votes Votes Broker
Employee Director Stock Option For Against Abstain Non-Votes
--------------------------------------------
22,124,500 1,077,087 332,898 139,381
----------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule for the period ended March 31, 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 3rd day of May 1996.
(Page 10)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the March
31, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7398
<SECURITIES> 0
<RECEIVABLES> 74583
<ALLOWANCES> 3296
<INVENTORY> 162139
<CURRENT-ASSETS> 250804
<PP&E> 258296
<DEPRECIATION> 157316
<TOTAL-ASSETS> 380890
<CURRENT-LIABILITIES> 72205
<BONDS> 0
0
0
<COMMON> 69674
<OTHER-SE> 169396
<TOTAL-LIABILITY-AND-EQUITY> 380890
<SALES> 104339
<TOTAL-REVENUES> 104339
<CGS> 69703
<TOTAL-COSTS> 69703
<OTHER-EXPENSES> 27668
<LOSS-PROVISION> 347
<INTEREST-EXPENSE> 990
<INCOME-PRETAX> 5978
<INCOME-TAX> 2184
<INCOME-CONTINUING> 3794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3794
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
