<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1996
[ ] 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 1-4887
TEXAS INDUSTRIES, INC.
(Exact name of registrant as specified in the charter)
Delaware 75-0832210
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1341 West Mockingbird Lane, Suite 700W, Dallas, Texas 75247-6913
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 647-6700
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
--- ---
As of January 6, 1997, 10,890,591 shares of Registrant's Common Stock, $1.00 par
value, were outstanding.
Page 1 of 18
<PAGE>
INDEX
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- -----------------------------
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
<S> <C>
Consolidated Balance Sheets - November 30, 1996 and May 31, 1996............ 3
Consolidated Statements of Income -- three months and six months ended
November 30, 1996 and November 30, 1995.................................. 4
Consolidated Statements of Cash Flows -- six months ended November 30, 1996
and November 30, 1995.................................................... 5
Notes to Consolidated Financial Statements.................................. 6
Independent Accountants' Review Report...................................... 10
Item 2. Management's Discussion and Analysis of Operating Results
and Financial Condition.................................................. 11
PART II. OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders......................... 14
Item 6. Exhibits and Reports on Form 8-K............................................ 14
SIGNATURES
- ----------
</TABLE>
-2-
<PAGE>
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
November 30, May 31,
- --------------------------------------------------------------------------------
In thousands 1996 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 16,715 $ 28,055
Notes and accounts receivable 115,262 113,762
Inventories 168,712 150,526
Prepaid expenses 37,386 32,574
--------- ---------
TOTAL CURRENT ASSETS 338,075 324,917
OTHER ASSETS
Real estate and other investments 17,223 19,751
Goodwill 58,206 59,210
Other 24,401 21,880
--------- ---------
99,830 100,841
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 115,539 110,836
Buildings 61,768 60,610
Machinery and equipment 802,588 766,434
--------- ---------
979,895 937,880
Less allowances for depreciation 582,871 562,575
--------- ---------
397,024 375,305
--------- ---------
$ 834,929 $ 801,063
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 48,344 $ 56,652
Accrued interest, wages and other items 41,880 35,446
Current portion of long-term debt 13,501 13,474
--------- ---------
TOTAL CURRENT LIABILITIES 103,725 105,572
LONG-TERM DEBT 176,498 160,209
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS 78,835 80,139
MINORITY INTEREST 33,689 35,121
SHAREHOLDERS' EQUITY
Common stock, $1 par value 12,534 12,534
Additional paid-in capital 266,303 266,303
Retained earnings 229,076 193,929
Cost of common shares in treasury (65,731) (52,744)
--------- ---------
442,182 420,022
--------- ---------
$ 834,929 $ 801,063
========= =========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
(Unaudited)
CONSOLIDATED STATEMENTS OF INCOME
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Six months ended
November 30, November 30,
- --------------------------------------------------------------------------------
In thousands except per share 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $234,376 $244,261 $480,318 $476,365
COSTS AND EXPENSES (INCOME)
Cost of products sold 184,136 190,593 376,827 373,688
Selling, general and administrative 20,044 18,459 38,575 34,938
Interest 4,615 5,124 9,313 10,335
Other income (3,247) (6,696) (5,345) (8,172)
-------- -------- -------- --------
205,548 207,480 419,370 410,789
-------- -------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS 28,828 36,781 60,948 65,576
Provision for income taxes 9,610 13,254 20,437 23,592
-------- -------- -------- --------
19,218 23,527 40,511 41,984
Minority interest in Chaparral (1,315) (2,075) (2,724) (3,401)
-------- -------- -------- --------
NET INCOME $ 17,903 $ 21,452 $ 37,787 $ 38,583
======== ======== ======== ========
Average common shares 11,396 11,358 11,440 11,312
Net income per common share $ 1.57 $ 1.89 $ 3.31 $ 3.42
======== ======== ======== ========
Cash dividends $ .10 $ .10 $ .20 $ .20
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six months ended
November 30,
- --------------------------------------------------------------------------------
In thousands 1996 1995
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 37,787 $ 38,583
Loss on disposal of assets 26 395
Non-cash items
Depreciation, depletion and amortization 27,109 24,120
Deferred taxes (1,717) 5,222
Undistributed minority interest 2,288 2,833
Other - net 2,526 3,309
Changes in operating assets and liabilities
Notes and accounts receivable (1,444) (8,955)
Inventories and prepaid expenses (23,045) (10,155)
Accounts payable and accrued liabilities (386) 4,303
Real estate and investments 2,528 8,426
-------- --------
Net cash provided by operations 45,672 68,081
INVESTING ACTIVITIES
Capital expenditures (47,741) (30,160)
Proceeds from disposition of assets 1,400 616
Cash surrender value - insurance (1,902) (2,106)
Other - net (2,096) (280)
-------- --------
Net cash used by investing (50,339) (31,930)
FINANCING ACTIVITIES
Proceeds of long-term borrowing 28,206 52
Debt retirements (11,900) (28,120)
Purchase of treasury shares (15,057) (281)
Purchase of Chaparral stock (3,770) (6,402)
Dividends paid (2,228) (2,223)
Other - net (1,924) 240
-------- --------
Net cash used by financing (6,673) (36,734)
-------- --------
Decrease in cash (11,340) (583)
Cash at beginning of period 28,055 25,988
-------- --------
Cash at end of period $ 16,715 $ 25,405
======== ========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Texas Industries, Inc. (the Company or TXI), directly or through subsidiaries,
is a producer of steel and cement/concrete products for the construction and
manufacturing industries. Chaparral Steel Company (Chaparral) produces beams,
merchant and special bar quality rounds, reinforcing bars and channels,
primarily for markets in North America and, under certain market conditions,
Europe and Asia. Cement/concrete operations supply cement and aggregates, ready-
mix, pipe, block and brick from facilities concentrated primarily in Texas and
Louisiana, with several products marketed throughout the U.S.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited 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 and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended November 30,
1996, are not necessarily indicative of the results that may be expected for the
year ended May 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended May 31, 1996.
Estimates: The preparation of financial statements and accompanying notes in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported. Actual results
could differ from those estimates.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and all subsidiaries. The minority interest
represents the separate public ownership of Chaparral, 15.4% at November 30,
1996 and 16.4% at May 31, 1996.
Property, Plant and Equipment: Property, plant and equipment is recorded at
cost. Provisions for depreciation are computed generally using the straight-line
method. Provisions for depletion of mineral deposits are computed on the basis
of the estimated quantity of recoverable raw materials.
Cash Equivalents: For cash flow purposes, temporary investments which have
maturities of less than 90 days when purchased are considered cash
equivalents.
Earnings per Share: Earnings per share are computed by deducting preferred
dividends from net income and adjusting for amortization of additional goodwill
in connection with the contingent payment for the acquisition of Chaparral, then
dividing this amount by the weighted average number of common shares outstanding
during the period, including common stock equivalents.
Goodwill: Goodwill, currently being amortized on a straight-line basis over a
40-year period, is net of accumulated amortization of $15.2 million at November
30, 1996 and $14.2 million at May 31, 1996. Management reviews remaining
goodwill with consideration toward recovery through future operating results
(undiscounted) at the current rate of amortization.
Commissioning Costs: The Company's policy for new facilities is to capitalize
certain costs until the facility is substantially complete and ready for its
intended use. Chaparral began the commissioning of the large beam mill in
February 1991. The mill was substantially complete and ready for its intended
use in the third quarter of fiscal 1992 with a total of $15.1 million of costs
deferred. The amount of amortization charged to income was $1.5 million in the
six-month periods ended November 30, 1996 and 1995, based on a five-year period.
Total accumulated amortization is $14.6 million.
Income Taxes: Accounting for income taxes uses the liability method of
recognizing and classifying deferred income taxes. The Company joins in filing a
consolidated return with its subsidiaries. Current and deferred tax expense is
allocated among the members of the group based on a stand-alone calculation of
the tax of the individual member.
-6-
<PAGE>
WORKING CAPITAL
Working capital totaled $234.3 million at November 30, 1996, compared to
$219.3 million at May 31, 1996.
Notes and accounts receivable of $115.3 million at November, compared with
$113.8 million at May, are presented net of allowances for doubtful receivables
of $2.5 million at November and $3.1 million at May.
Inventories are stated at cost (not in excess of market) generally using the
last-in, first-out method (LIFO). If the average cost method (which approximates
current replacement cost) had been used, inventory values would have been higher
by $13.5 million at November and $14.2 million at May.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In thousands November May
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished products $ 81,208 $ 64,347
Work in process 23,333 23,345
Raw materials and supplies 64,171 62,834
-------- --------
$168,712 $150,526
======== ========
</TABLE>
LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In thousands November May
- --------------------------------------------------------------------------------
<S> <C> <C>
Bank obligations, maturing through 2001, interest rates
from 5.75% to 5.94% (.625% over LIBOR) $ 25,500 $ 9,000
Senior notes due through 2008, interest rates
average 7.28% 75,000 75,000
Senior notes of Chaparral, due through 2004,
interest rates average 10.2% 64,000 64,000
First mortgage notes of Chaparral, due through 2000,
interest rate 14.2% 14,320 14,320
Pollution control bonds, due through 2007, interest rate
6.19% (75% of prime) 8,275 8,615
Other, maturing through 2005, interest rates
from 8% to 10% 2,904 2,748
-------- --------
189,999 173,683
Less current maturities 13,501 13,474
-------- --------
$176,498 $160,209
======== ========
</TABLE>
Annual maturities of long-term debt for each of the five succeeding years are
$13.5, $13.5, $13.2, $11.0 and $34.3 million.
The Company has available a bank-financed $100 million long-term line of credit.
In addition to the $25.5 million currently outstanding under the line, $8.5
million has been utilized to support letters of credit. Commitment fees at a
current annual rate of .22% are paid on the unused portion of this line. In
addition, effective January 1, 1997, Chaparral has available a bank-financed $10
million short-term line of credit which will expire December 31, 1997, if not
renewed. The interest rate charged on borrowings is .375% over LIBOR. Commitment
fees at an annual rate of .125% are paid on the unused portion of this line.
-7-
<PAGE>
LONG-TERM DEBT-Continued
Loan agreements contain covenants which provide for minimum working capital,
restrictions on purchases of treasury stock and payment of dividends on common
stock, and limitations on incurring certain indebtedness and making certain
investments. Under the most restrictive of these agreements, the aggregate
amount of annual cash dividends on common stock is limited based on the ratio,
excluding Chaparral, of earnings before interest, taxes, depreciation and
amortization plus dividends from Chaparral to fixed charges. Chaparral loan
agreements also restrict dividends and advances to its shareholders, including
the parent company, to $42.8 million as of November 30, 1996. The Company and
Chaparral are in compliance with all loan covenant restrictions.
Property, plant and equipment, principally Chaparral's, carried at a net amount
of approximately $197.4 million at November 30, 1996 is mortgaged as collateral
for $15.9 million of secured debt.
The amount of interest paid for the six-month periods presented was $10.5
million in 1996 and $11.1 million in 1995.
SHAREHOLDERS' EQUITY
Common stock consists of:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
In thousands November May
--------------------------------------------------------------------
<S> <C> <C>
Shares authorized 40,000 40,000
Shares outstanding at end of period 10,897 11,100
Average shares outstanding including equivalents 11,440 11,371
Shares held in treasury 1,636 1,434
Shares reserved for stock options and other 1,144 1,211
</TABLE>
There are authorized 100,000 shares of Cumulative Preferred Stock, no value, of
which 20,000 shares are designated $5 Cumulative Preferred Stock (Voting),
redeemable at $105 per share and entitled to $100 per share upon dissolution. No
shares of $5 Cumulative Preferred Stock were outstanding at November and May
1996.
An additional 25,000 shares are designated Series B Junior Participating
Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with
respect to the payment of dividends and the distribution of assets, junior to
(i) all other series of the Preferred Stock unless the terms of any other series
shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. Pursuant to
a Rights Agreement, in November 1996, the Company distributed a dividend of one
preferred share purchase right for each outstanding share of the Company's
Common Stock. Each right entitles the holder to purchase from the Company one
one-thousandth of a share of the Series B Junior Participating Preferred Stock
at a price of $245 per one one-thousandth share of Series B Preferred Stock,
subject to adjustment. The rights will expire on November 1, 2006 unless said
date is extended or unless the rights are earlier redeemed or exchanged by the
Company pursuant to the Rights Agreement.
STOCK OPTION PLANS
The Company's stock option plans provide that non-qualified and incentive stock
options to purchase Common Stock may be granted to directors, officers and key
employees at market prices at date of grant. Generally, options become
exercisable in installments beginning one or two years after date of grant and
expire six or ten years later depending on the initial date of grant. A summary
of option transactions for the six-month period ended November 30, 1996,
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
$ In thousands Shares Under Option Aggregate Option Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 1 616,299 $19,694
Granted 127,050 7,991
Exercised (54,387) (1,348)
Cancelled (5,300) (240)
------- -------
Outstanding at November 30 683,662 $26,097
======= =======
</TABLE>
-8-
<PAGE>
STOCK OPTION PLANS-Continued
At November 30, 1996, there were 187,512 shares exercisable and 397,770 shares
available for future grants. Outstanding options expire on various dates to
October 15, 2006.
INCOME TAXES
Federal income taxes for the interim periods ended November 30, 1996 and 1995,
have been included in the accompanying financial statements on the basis of an
estimated annual rate. The estimated annualized tax rate is 33.5% for 1996
compared with 36.0% for 1995. The primary reason that these respective tax rates
differ from the 35% statutory corporate rate is due to goodwill expense which is
not tax deductible, percentage depletion which is tax deductible and the net
state income tax expense. The Company made income tax payments of $18.6 million
in 1996 and $17.7 million in 1995.
LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or by
hazardous substances or wastes used in, generated or disposed of by the Company,
the Company may be held liable for such damages and be required to pay the cost
of investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by the Company.
The Company and subsidiaries are defendants in lawsuits which arose in the
normal course of business. In management's judgment (based on the opinion of
counsel) the ultimate liability, if any, from such legal proceedings will not
have a material effect on the consolidated financial position of the Company.
-9-
<PAGE>
EXHIBIT A
---------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors
Texas Industries, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Texas
Industries, Inc. and subsidiaries as of November 30, 1996, and the related
condensed consolidated statements of income for the three-month and six-month
periods ended November 30, 1996 and 1995, and the condensed consolidated
statements of cash flows for the six-month periods ended November 30, 1996 and
1995. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Texas Industries, Inc. and
subsidiaries as of May 31, 1996, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then ended [not
presented herein] and in our report dated July 12, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of May 31, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
----------------------
December 18, 1996
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of operations and financial condition for the three-month and six-
month periods ended November 30, 1996 to the three-month and six-month periods
ended November 30, 1995.
RESULTS OF OPERATIONS
Consolidated net sales of $234.4 million for the quarter ended November 30, 1996
decreased 4% from the prior year period. Steel sales were $143.6 million, down
$11.4 million. Shipments decreased 28,000 tons. Net sales for the current six-
month period at $293.2 million were at 1995 levels with comparable average
selling prices and shipments. Structural mill pricing, 2% higher than the prior
year quarter was 3% lower than the August 1996 quarter as a result of price
changes announced in September. Although structural shipments declined 14% from
those of the November 1995 quarter, U. S. nonresidential construction activity
has sustained demand for structural products. Realized prices for bar mill
products in the current quarter were 3% lower than the prior year, but 3% higher
than the August 1996 quarter as a result of improved product mix and slightly
higher rebar prices. Shipments increased 12% over the prior November quarter on
increased demand from fabricators. Cement/concrete sales for the quarter were
$90.7 million, somewhat higher than the prior year period. Cement average
pricing increased 13% with shipments down 93,000 tons. Shipments during the
current six-month period were 14% lower than those of the prior year. Ready-mix
pricing remained 7% above the prior year with volumes 3% lower, but above those
of the August 1996 quarter. Overall aggregate prices declined 9% due to product
mix on higher volumes. Unusually wet weather during the summer and fall impacted
construction activity in Texas and Louisiana.
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Three months ended
November 30,
-----------------------------------------------------
In thousands 1996 1995
-----------------------------------------------------
<S> <C> <C>
NET SALES
Bar mill $ 40,781 $ 37,564
Structural mills 101,765 116,104
Transportation service 1,091 1,322
-------- --------
TOTAL STEEL 143,637 154,990
Cement 34,150 35,588
Ready-mix 40,276 38,802
Stone, sand & gravel 19,125 19,354
Other products 19,002 15,224
Interplant (21,814) (19,697)
-------- --------
TOTAL CEMENT/CONCRETE 90,739 89,271
-------- --------
TOTAL NET SALES $234,376 $244,261
======== ========
UNITS SHIPPED
Bar mill (tons) 119 106
Structural mills (tons) 256 297
-------- -------
TOTAL STEEL TONS 375 403
Cement (tons) 534 627
Ready-mix (cubic yards) 759 781
Stone, sand & gravel (tons) 3,993 3,838
</TABLE>
-11-
<PAGE>
BUSINESS SEGMENTS-Continued
<TABLE>
<CAPTION>
Three months ended
November 30,
----------------------------------------------------------------------
In thousands 1996 1995
----------------------------------------------------------------------
<S> <C> <C>
STEEL OPERATIONS
Gross profit $ 30,140 $ 33,623
Less: Depreciation & amortization 8,879 8,090
Selling, general & administrative 7,259 6,778
Other income (752) (1,137)
------ ------
OPERATING PROFIT 14,754 19,892
CEMENT/CONCRETE OPERATIONS
Gross profit 33,334 31,761
Less: Depreciation, depletion &
amortization 4,584 3,845
Selling, general & administrative 6,962 6,417
Other income (769) (404)
------ ------
OPERATING PROFIT 22,557 21,903
------- ------
TOTAL OPERATING PROFIT 37,311 41,795
CORPORATE RESOURCES
Other income 1,726 5,155
Less: Depreciation & amortization 202 207
Selling, general & administrative 5,392 4,838
------ ------
(3,868) 110
INTEREST EXPENSE (4,615) (5,124)
------ ------
INCOME BEFORE TAXES & OTHER ITEMS $ 28,828 $ 36,781
======== ========
</TABLE>
Consolidated cost of products sold including depreciation, depletion and
amortization was $184.1 million, a decrease of $6.5 million from the prior year
quarter. Steel costs of $122.3 million, decreased $7.1 million due primarily to
lower shipments. Cost of sales for the current six-month period at $250.1
million increased slightly from the prior year as a 3,000 ton decrease in
shipments was offset by somewhat higher raw material costs and depreciation
expense resulting from increased levels of capital expenditures. Cement/concrete
costs at $61.8 million increased $.6 million over the prior year quarter as
higher ready-mix distribution costs offset the effect of lower cement volumes.
Operating profit of $37.3 million in the current quarter was 11% lower than the
prior year. Steel profits at $14.8 million were $5.1 million lower due primarily
to the decline in structural shipments. Cement/concrete profits were up 3% over
the prior year on increased prices. Volumes declined as wet weather hindered
construction activity.
Selling, general and administrative expenses including depreciation and
amortization at $20.0 million increased $1.6 million over the prior year. Steel
SG&A expense increased $.5 million to $7.3 million primarily due to increased
employee incentive accruals. Cement/concrete SG&A expense at $7.2 million was
$.6 million higher than the prior year period. Corporate resources SG&A
increased $.5 million to $5.6 million. Corporate resources other income includes
$1.4 million from property sales generated by the Company's real estate
operations, $3.5 million lower than the November 1995 quarter. Although real
estate activities remain strong, timing of income is subject to variation.
Interest expense decreased $.5 million compared to the prior year due to a
reduction in average outstanding debt. Income tax expense was provided at a 2.5%
lower estimated annualized tax rate which anticipates lower net state income tax
expense in 1996.
-12-
<PAGE>
CASH FLOWS
Net cash provided by operations at $45.7 million in 1996 was $22.4 million lower
than in 1995 due to deferred income taxes and changes in working capital items.
Deferred income taxes decreased $5.2 million in 1995 primarily due to the
utilization of the remaining tax credit carryforwards. Receivable increases were
$7.5 million lower overall in 1996. While Chaparral's receivables increased in
1996 due to changes in its cash discount policy, cement/concrete receivables
declined as the wet weather reduced shipments. Inventory increases were $12.6
million higher in 1996. Chaparral's inventories grew due to record production in
the melt shop and reduced shipments as steel service centers reduced their
inventories. Cement/concrete inventories, which had only increased slightly in
1995, grew $4.5 million in 1996 due to reduced shipments. Accounts payable and
accrued expenses decreased $.4 million in 1996 compared to an increase of $4.3
million in 1995. Real estate and investments decreases were $5.9 million lower
in 1996 due to reduced property sales.
Investing activities used $50.3 million compared to $31.9 million in 1995.
Capital expenditures at $47.7 million, increased $17.6 million over the prior
year period. Capital budget plans for the current fiscal year, estimated at $100
million, include anticipated expansion projects in the cement/concrete
operations, as well as, normal replacement and technological upgrades of
existing equipment.
Financing activities used $30.1 million less cash in 1996 as long-term
borrowings increased $28.2 million. Debt retirements in 1996 were $16.2 million
lower than in 1995. The Company purchased $15.1 million of its common stock in
1996 pursuant to a decision announced in October 1996 authorizing the repurchase
of shares for general corporate purposes. TXI's quarterly cash dividend at $.10
per common share remained unchanged from 1995.
FINANCIAL CONDITION
TXI has a $100 million long-term bank line of credit which expires in September
2001. At November 30, 1996, $66.0 million was available for future borrowings.
Effective January 1, 1997, Chaparral has available a short-term credit facility
of $10 million which will expire December 31, 1997, if not renewed. The Company
expects that with these or similar credit facilities and anticipated cash from
operations, funds will be adequate to provide for capital expenditures,
scheduled debt repayments and other known working capital needs.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the Shareholders held October 15, 1996, shareholders
voted on the following matters:
1. To elect as Directors of the Company, Robert Alpert, Richard I.
Galland and Elizabeth C. Williams to terms expiring in 1999. Votes
cast to elect Robert Alpert were 8,757,665 affirmative, 189,003
opposed and 2,204,212 abstained or non-voted. Votes cast to elect
Richard I. Galland were 8,809,138 affirmative, 137,530 opposed and
2,204,212 abstained or non-voted. Votes cast to elect Elizabeth C.
Williams were 8,809,805 affirmative, 136,863 opposed and 2,204,212
abstained or non-voted. Terms of office expire for the continuing
directors, Gordon E. Forward, James M. Hoak, Jr. and Ralph B. Rogers
in 1997 and for the continuing directors Robert D. Rogers, Ian
Wachtmeister and Gerald R. Heffernan in 1998.
2. To approve the performance-based incentive compensation provision of
the employment contract of the Company's Chief Executive Officer.
Votes cast were 8,633,047 affirmative, 217,618 opposed and 2,300,215
abstained or non-voted.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(11) Statement re: Computation of earnings per share
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
This schedule contains summary financial information extracted from the
Registrant's Unaudited November 30, 1996 Consolidated Financial Statements and
is qualified in its entirety by reference to such financial statements.
The Registrant filed the following reports on Form 8-K during the three-month
period ended November 30, 1996:
1. October 15, 1996, reporting the distribution of Rights to purchase
one one-thousandth of a share of Series B Junior Preferred Stock
pursuant to the terms of a Rights Agreement between the Registrant
and ChaseMellon Shareholder Services, L.L.C.
2. October 23, 1996, reporting the Registrant's Board of Directors
approval to repurchase, from time to time, the Registrant's Common
Stock for general corporate purposes.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
TEXAS INDUSTRIES, INC.
January 10, 1997 /s/ Richard M. Fowler
---------------- ----------------------
Richard M. Fowler
Vice President & Chief Financial Officer
January 10, 1997 /s/ James R. McCraw
---------------- --------------------
James R. McCraw
Vice President - Controller
-15-
<PAGE>
INDEX TO EXHIBITS
Exhibits Page
11. Statement re: computation of per share earnings......... 17
15. Letter re: Unaudited Interim Financial Information...... 18
27. Financial Data Schedule.................................. **
** Electronically filed only.
-16-
<PAGE>
EXHIBIT 11
(Unaudited)
COMPUTATION OF EARNINGS PER SHARE
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Six months ended
November 30, November 30,
- --------------------------------------------------------------------------------------------------
In thousands except per share 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
Primary
Average shares outstanding 11,087 11,047 11,108 11,035
Stock options and other equivalents -
treasury stock method using
average market prices 309 311 332 277
------- ------- ------- -------
TOTAL 11,396 11,358 11,440 11,312
======= ======= ======= =======
Fully diluted
Average common shares outstanding 11,087 11,047 11,108 11,035
Stock options and other equivalents -
treasury stock method using end of
quarter market price if higher than
average 309 319 332 318
------- ------- ------- -------
TOTAL 11,396 11,366 11,440 11,353
======= ======= ======= =======
NET INCOME APPLICABLE TO COMMON STOCK
Primary
Net income $17,903 $21,452 $37,787 $38,583
Adjustments
Dividend on preferred stock -- (7) -- (15)
Contingent price amortization 58 58 116 116
------- ------- ------- -------
TOTAL $17,961 $21,503 $37,903 $38,684
======= ======= ======= =======
Fully diluted
Net income $17,903 $21,452 $37,787 $38,583
Adjustments
Dividend on preferred stock -- (7) -- (15)
Contingent price amortization 58 58 116 116
------- ------- ------- -------
TOTAL $17,961 $21,503 $37,903 $38,684
======= ======= ======= =======
PER SHARE
Primary
Net income per common share
and common equivalent share $ 1.57 $ 1.89 $ 3.31 $ 3.42
======= ======= ======= =======
Fully diluted
Net income per common share and
dilutive common equivalent share $ 1.57 $ 1.89 $ 3.31 $ 3.41
======= ======= ======= =======
</TABLE>
-17-
<PAGE>
EXHIBIT 15
Board of Directors
Texas Industries, Inc.
We are aware of the incorporation by reference in the Registration Statement
Number 2-95879 on Form S-8, Post-Effective Amendment Number 9 to Registration
Statement Number 2-48986 on Form S-8, and Registration Statement Number 33-53715
on Form S-8 of Texas Industries, Inc., and in the related Prospectuses of our
report dated December 18, 1996, relating to the unaudited condensed consolidated
interim financial statements of Texas Industries, Inc., which are included in
its Form 10-Q for the quarter ended November 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the Registration Statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
----------------------
January 9, 1997
Dallas, Texas
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED NOVEMBER 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 16,715
<SECURITIES> 0
<RECEIVABLES> 117,784
<ALLOWANCES> 2,522
<INVENTORY> 168,712
<CURRENT-ASSETS> 338,075
<PP&E> 979,895
<DEPRECIATION> 582,871
<TOTAL-ASSETS> 834,929
<CURRENT-LIABILITIES> 103,725
<BONDS> 176,498
0
0
<COMMON> 12,534
<OTHER-SE> 429,648
<TOTAL-LIABILITY-AND-EQUITY> 834,929
<SALES> 480,318
<TOTAL-REVENUES> 480,318
<CGS> 376,827
<TOTAL-COSTS> 376,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 519
<INTEREST-EXPENSE> 9,313
<INCOME-PRETAX> 60,948
<INCOME-TAX> 20,437
<INCOME-CONTINUING> 37,787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,787
<EPS-PRIMARY> 3.31
<EPS-DILUTED> 3.31
</TABLE>
