<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 February 28, 1997
[_] 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 April 7, 1997, 20,887,742 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 Page
- -----------------------------
Item 1. Financial Statements
Consolidated Balance Sheets--February 28, 1997 and May 31, 1996..... 3
Consolidated Statements of Income -- three months and nine
months ended February 28, 1997 and February 29, 1996............... 4
Consolidated Statements of Cash Flows -- nine months ended
February 28, 1997 and February 29, 1996............................ 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 6. Exhibits and Reports on Form 8-K.................................... 14
SIGNATURES
- ----------
-2-
<PAGE>
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
February 28, May 31,
- -------------------------------------------------------------------------------
In thousands 1997 1996
- -------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 4,003 $ 28,055
Notes and accounts receivable 111,606 113,762
Inventories 173,244 150,526
Prepaid expenses 36,885 32,574
-------- --------
TOTAL CURRENT ASSETS 325,738 324,917
OTHER ASSETS
Real estate and other investments 17,009 19,751
Goodwill and other intangibles 63,293 60,377
Other 21,172 20,713
-------- --------
101,474 100,841
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 117,891 110,836
Buildings 63,514 60,610
Machinery and equipment 808,965 766,434
-------- --------
990,370 937,880
Less allowances for depreciation 593,298 562,575
-------- --------
397,072 375,305
-------- --------
$824,284 $801,063
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 52,286 $ 56,652
Accrued interest, wages and other items 34,193 35,446
Current portion of long-term debt 13,475 13,474
-------- --------
TOTAL CURRENT LIABILITIES 99,954 105,572
LONG-TERM DEBT 184,699 160,209
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS 79,185 80,139
MINORITY INTEREST 35,251 35,121
SHAREHOLDERS' EQUITY
Common stock, $1 par value 25,067 12,534
Additional paid-in capital 253,770 266,303
Retained earnings 236,794 193,929
Cost of common shares in treasury (90,436) (52,744)
-------- --------
425,195 420,022
-------- --------
$824,284 $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 Nine months ended
February February
- ----------------------------------------------------------------------------------
In thousands except per share 1997 1996 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $216,618 $235,040 $696,936 $711,405
COSTS AND EXPENSES (INCOME)
Cost of products sold 178,129 190,400 554,956 564,088
Selling, general and administrative 17,431 15,951 56,006 50,889
Interest 4,852 4,704 14,165 15,039
Other income (1,824) (3,573) (7,169) (11,745)
-------- -------- -------- --------
198,588 207,482 617,958 618,271
-------- -------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS 18,030 27,558 78,978 93,134
Income taxes 6,330 9,387 26,767 32,979
-------- -------- -------- --------
11,700 18,171 52,211 60,155
Minority interest in Chaparral (1,574) (2,167) (4,298) (5,568)
-------- -------- -------- --------
NET INCOME $ 10,126 $ 16,004 $ 47,913 $ 54,587
======== ======== ======== ========
Average common shares* 21,847 22,800 22,535 22,683
Net income per common share* $ .47 $ .70 $ 2.13 $ 2.41
======== ======== ======== ========
Cash dividends* $ .075 $ .05 $ .175 $ .15
======== ======== ======== ========
</TABLE>
* Adjusted for two-for-one stock split in February 1997.
See notes to consolidated financial statements.
-4-
<PAGE>
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine months ended
February
- -------------------------------------------------------------------------------
In thousands 1997 1996
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 47,913 $ 54,587
Loss on disposal of assets 186 330
Non-cash items
Depreciation, depletion and amortization 40,979 36,684
Deferred taxes (2,331) 6,660
Undistributed minority interest 3,643 4,744
Other - net 4,182 4,577
Changes in operating assets and liabilities
Notes and accounts receivable 2,226 (16,849)
Inventories and prepaid expenses (27,075) (9,662)
Accounts payable and accrued liabilities (4,002) (417)
Real estate and investments 2,742 9,640
-------- --------
Net cash provided by operations 68,463 90,294
INVESTING ACTIVITIES
Capital expenditures (65,262) (66,289)
Proceeds from disposition of assets 1,426 1,217
Cash surrender value - insurance (1,924) (2,303)
Other - net (392) (1,284)
-------- --------
Net cash used by investing (66,152) (68,659)
FINANCING ACTIVITIES
Proceeds of long-term borrowing 53,206 22,052
Debt retirements (28,726) (37,263)
Purchase of treasury shares (41,572) (339)
Purchase of Chaparral stock (3,770) (6,402)
Dividends paid (3,794) (3,337)
Other - net (1,707) 945
-------- --------
Net cash used by financing (26,363) (24,344)
-------- --------
Decrease in cash (24,052) (2,709)
Cash at beginning of period 28,055 25,988
-------- --------
Cash at end of period $ 4,003 $ 23,279
======== ========
</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. Certain amounts in the 1996 financial statements have been
reclassified to conform to the 1997 presentation. Operating results for the
nine-month period ended February 28, 1997 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, 15.5% at February 28, 1997 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. Earnings per share and
all other common share information for 1996 have been adjusted to give effect to
the two-for-one stock split in February 1997.
INTANGIBLE ASSETS: Goodwill and other intangibles is presented net of
accumulated amortization of $16.8 million at February 28, 1997 and $14.8 million
at May 31, 1996. Goodwill resulting from the acquisition of Chaparral of $57.7
million at February 28, 1997 and $59.2 million at May 31, 1996 (net of
accumulated amortization), is being amortized currently on a straight-line basis
over a 40-year period. Other intangibles consisting primarily of goodwill and
non-compete agreements are being amortized on a straight-line basis over periods
of 2 to 15 years. Management reviews remaining goodwill and other intangibles
with consideration toward recovery through future operating results
(undiscounted) at the current rates 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 substantially completed its large beam mill during the
third quarter of fiscal 1992. Deferred costs totaling $15.1 million were
amortized over a five year period. In the nine-month periods presented, the
amount of amortization charged to income was $2.0 million in 1997 and $2.3
million in 1996.
-6-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued
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.
WORKING CAPITAL
Working capital totaled $225.8 million at February 28, 1997, compared to $219.3
million at May 31, 1996.
Notes and accounts receivable of $111.6 million at February, compared with
$113.8 million at May, are presented net of allowances for doubtful receivables
of $3.0 million at February 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 $13.1 million at February and $14.2 million at May.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
In thousands February May
-------------------------------------------------------------------------
<S> <C> <C>
Finished products $ 84,664 $ 64,347
Work in process 26,477 23,345
Raw materials and supplies 62,103 62,834
-------- --------
$173,244 $150,526
======== ========
</TABLE>
LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
In thousands February May
-------------------------------------------------------------------------
<S> <C> <C>
Bank obligations, maturing through 2001, interest
rate 6.06% (.625% over LIBOR) $ 40,000 $ 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% 8,182 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% 2,717 2,748
-------- --------
198,174 173,683
Less current maturities 13,475 13,474
-------- --------
$184,699 $160,209
======== ========
</TABLE>
Annual maturities of long-term debt for each of the five succeeding years are
$13.5, $13.4, $9.0, $8.9 and $48.8 million.
The Company has available a bank-financed $100 million long-term line of credit.
In addition to the $40.0 million currently outstanding under the line, $8.9
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, 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 $46.4 million as of February 28, 1997. 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 $202.9 million at February 28, 1997 is mortgaged as
collateral for $10.0 million of secured debt.
The amount of interest paid for the nine-month periods presented was $12.2
million in 1997 and $14.0 million in 1996.
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock consists of:
--------------------------------------------------------------------
In thousands February May
--------------------------------------------------------------------
<S> <C> <C>
Shares authorized 40,000 40,000
Shares outstanding at end of period 20,880 22,200
Average shares outstanding including equivalents 22,535 22,742
Shares held in treasury 4,187 2,867
Shares reserved for stock options and other 2,179 2,422
</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 February 1997 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
two-thousandth of a share of the Series B Junior Participating Preferred Stock
at a price of $122.50 per one two-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 nine-month period ended February 28, 1997,
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
$ In thousands Shares Under Option Aggregate Option Price
--------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 1 1,232,598 $19,694
Granted 809,200 21,816
Exercised (217,974) (2,179)
Cancelled (10,600) (240)
--------- -------
Outstanding at February 28 1,813,224 $39,091
========= =======
</TABLE>
-8-
<PAGE>
STOCK OPTION PLANS-Continued
At February 28, 1997, there were 363,584 shares exercisable and 240,440 shares
available for future grants. Outstanding options expire on various dates to
January 15, 2007.
INCOME TAXES
Federal income taxes for the interim periods ended February 1997 and 1996, have
been included in the accompanying financial statements on the basis of an
estimated annual rate. The estimated annualized tax rate is 33.9% for 1997
compared with 35.4% for 1996. 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 $30.8
million in 1997 and $29.9 million in 1996.
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 February 28, 1997, and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended February 28, 1997 and February 29, 1996, respectively, and the
condensed consolidated statements of cash flows for the nine-month periods ended
February 28, 1997 and February 29, 1996. 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
------------------------------
March 20, 1997
-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 nine-
month periods ended February 28, 1997 to the three-month and nine-month periods
ended February 29, 1996.
RESULTS OF OPERATIONS
Consolidated net sales of $216.6 million for the quarter ended February 28, 1997
decreased 8% from the prior year period. Steel sales were $147.7 million, down
$11.2 million. Shipments decreased 22,000 tons with average selling prices 2%
lower. Structural mill shipments were 12% below the record levels of last year,
although 2% above those of the November 1996 quarter as U. S. nonresidential
construction activity continues to sustain demand for structural products.
Realized prices while comparable to the November 1996 quarter were slightly
lower than the prior year period. Bar mill shipments were up 11% over the prior
year quarter due to increased volumes of specialty steel products. Total bar
mill shipments were 5% above the November 1996 quarter. Realized prices remain
comparable to both the November 1996 and prior year quarters. Cement/concrete
sales for the quarter were $68.9 million, 9% below the prior year period.
Cement average pricing increased 6% with shipments down 59,000 tons. Shipments
during the current nine-month period were 14% below that of the prior year
period. Ready-mix pricing was 5% above the prior year quarter with volumes 22%
lower. Overall aggregate prices increased 5% with volumes 18% lower that the
February 1996 quarter. Unusually wet weather impacted construction activity in
Texas and Louisiana, as many areas experienced record rainfalls.
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Three months ended
February
---------------------------------------------------------
In thousands 1997 1996
---------------------------------------------------------
<S> <C> <C>
NET SALES
Bar mill $ 42,420 $ 38,059
Structural mills 103,897 119,320
Transportation service 1,398 1,575
-------- --------
TOTAL STEEL 147,715 158,954
Cement 26,256 28,286
Ready-mix 27,398 33,579
Stone, sand & gravel 13,844 15,974
Other products 16,798 15,882
Interplant (15,393) (17,635)
-------- --------
TOTAL CEMENT/CONCRETE 68,903 76,086
-------- --------
TOTAL NET SALES $216,618 $235,040
======== ========
UNITS SHIPPED
Bar mill (tons) 124 111
Structural mills (tons) 262 297
-------- --------
TOTAL STEEL TONS 386 408
Cement (tons) 413 472
Ready-mix (cubic yards) 516 664
Stone, sand & gravel (tons) 2,764 3,352
</TABLE>
-11-
<PAGE>
BUSINESS SEGMENTS-Continued
<TABLE>
<CAPTION>
Three months ended
February
--------------------------------------------------------
In thousands 1997 1996
--------------------------------------------------------
<S> <C> <C>
STEEL OPERATIONS
Gross profit $32,738 $34,900
Less: Depreciation & amortization 8,452 8,091
Selling, general &
administrative 6,919 7,116
Other income (494) (1,480)
------- -------
OPERATING PROFIT 17,861 21,173
CEMENT/CONCRETE OPERATIONS
Gross profit 18,742 21,589
Less: Depreciation, depletion &
amortization 4,932 3,981
Selling, general &
administrative 6,057 4,559
Other income (423) (636)
------- -------
OPERATING PROFIT 8,176 13,685
------- -------
TOTAL OPERATING PROFIT 26,037 34,858
CORPORATE RESOURCES
Other income 907 1,457
Less: Depreciation & amortization 199 186
Selling, general &
administrative 3,863 3,867
------- -------
(3,155) (2,596)
INTEREST EXPENSE (4,852) (4,704)
------- -------
INCOME BEFORE TAXES & OTHER ITEMS $18,030 $27,558
======= =======
</TABLE>
Consolidated cost of products sold including depreciation, depletion and
amortization was $178.1 million, a decrease of $12.3 million from the prior year
quarter. Steel costs of $123.4 million, decreased $8.7 million due primarily to
lower shipments. Cost of sales for the current nine-month period at $373.5
million decreased $8.5 million from the prior year as shipments decreased 25,000
tons and per ton costs were unchanged. Cement/concrete costs at $54.7 million
decreased $3.6 million from the prior year quarter but costs for the current
nine-month period at $181.5 million were only slightly below those of the prior
year period as higher ready-mix distribution costs and comparable aggregate
production levels offset the effect of lower cement volumes.
Operating profit of $26.0 million in the current quarter was 25% lower than the
prior year. Steel profits at $17.9 million, while higher than the November 1996
quarter were 16% below those of the prior year quarter due primarily to lower
structural shipments. Cement/concrete profits at $8.2 million were down from
$13.7 million for the prior year quarter. Unusually wet weather throughout the
quarter hindered construction activity resulting in a decline in shipments for
all major products.
-12-
<PAGE>
BUSINESS SEGMENTS-Continued
Selling, general and administrative expenses, including depreciation and
amortization, at $17.4 million increased $1.5 million over the prior year
quarter. Steel SG&A expense of $6.9 million for the February 1997 quarter was
slightly lower than the prior year quarter. Steel SG&A expense for the current
nine-month period was $1.9 million higher than the 1996 period primarily due to
increased employee incentive accruals. Cement/concrete SG&A expense at $6.4
million for the current quarter was $1.7 million higher than the prior year
period due in part to expanded operations, but lower than the November 1996
quarter as incentive accruals were reduced. Corporate resources SG&A expense at
$4.1 million was comparable to the prior year quarter. Other income for the
current nine-month period includes $2.1 million from property sales generated by
the Company's real estate operations, $3.7 million lower than the 1996 period.
Interest expense for the current nine-month period decreased $.9 million
compared to the prior year period due to a reduction in average outstanding
debt. Income tax expense was provided at a 1.5% lower estimated annualized tax
rate which anticipates lower net state income tax expense in 1997.
CASH FLOWS
Net cash provided by operations at $68.5 million in 1997 was $21.8 million
lower than in 1996 due to reduced net income, deferred income taxes and changes
in working capital items. Deferred income taxes decreased $6.7 million in 1996
due primarily from the utilization of the remaining tax credit carryforwards.
Receivables decreased $2.2 million in 1997 compared to a $16.8 million increase
in 1996. While Chaparral's receivables increased in 1997 due to changes in its
cash discount policy, cement/concrete receivables declined as the wet weather
reduced shipments. In addition, notes receivable of $6.9 million from 1996 real
estate sales were collected in 1997. Inventory increases were $17.4 million
higher in 1997. Chaparral's inventories grew due to record production in the
melt shop and shipments below the record levels of 1996. Cement/concrete
inventories grew $5.0 million more in 1997 than in 1996 due to reduced
shipments. Accounts payable and accrued expenses decreased $3.6 million more in
1997 than in 1996. Real estate and investments decreases were $6.9 million
lower in 1997 due primarily to reduced property sales.
Investing activities used $66.2 million compared to $68.7 million in 1996.
Capital expenditures at $65.3 million, were comparable to those of the prior
year period. Capital budget plans for the current fiscal year, estimated at
$100 million, include anticipated expansion projects, as well as, normal
replacement and technological upgrades of existing equipment.
Financing activities used $2.0 million more cash in 1997 as long-term borrowings
net of retirements increased $39.7 million. The Company purchased $41.6 million
of its common stock in 1997 pursuant to a decision announced in October 1996
authorizing the repurchase of shares for general corporate purposes. In January
1997, a two-for-one stock split and 50% increase in the cash dividend rate were
declared. The quarterly dividend increase to $.075 per common share was offset
by the approximately 6% fewer shares outstanding at February 1997 as compared to
the prior year due to the treasury share purchases.
FINANCIAL CONDITION
TXI has a $100 million long-term bank line of credit which expires in September
2001. At February 28, 1997, $51.1 million was available for future borrowings.
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 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 February 28, 1997 Consolidated Financial Statements and
is qualified in its entirety by reference to such financial statements.
The Registrant did not file any reports on Form 8-K during the three months
ended February 28, 1997.
-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.
April 9, 1997 /s/ Richard M. Fowler
- ------------- ----------------------
Richard M. Fowler
Vice President &
Chief Financial Officer
April 9, 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 Nine months ended
February February
- --------------------------------------------------------------------------------------------
In thousands except per share 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
Primary
Average shares outstanding 21,337 22,127 21,923 22,089
Stock options and other equivalents -
treasury stock method using
average market prices 510 673 612 594
------- ------- ------- -------
TOTAL 21,847 22,800 22,535 22,683
======= ======= ======= =======
Fully diluted
Average common shares outstanding 21,337 22,127 21,923 22,089
Stock options and other equivalents -
treasury stock method using end of
quarter market price if higher than
average 590 752 623 675
------- ------- ------- -------
TOTAL 21,927 22,879 22,546 22,764
======= ======= ======= =======
NET INCOME APPLICABLE TO COMMON STOCK
Primary
Net income $10,126 $16,004 $47,913 $54,587
Adjustments
Dividend on preferred stock -- (7) -- (22)
Contingent price amortization 58 58 174 174
------- ------- ------- -------
TOTAL $10,184 $16,055 $48,087 $54,739
======= ======= ======= =======
Fully diluted
Net income $10,126 $16,004 $47,913 $54,587
Adjustments
Dividend on preferred stock -- (7) -- (22)
Contingent price amortization 58 58 174 174
------- ------- ------- -------
TOTAL $10,184 $16,055 $48,087 $54,739
======= ======= ======= =======
PER SHARE
Primary
Net income per common share
and common equivalent share $ .47 $ .70 $ 2.13 $ 2.41
======= ======= ======= =======
Fully diluted
Net income per common share and
dilutive common equivalent share $ .47 $ .70 $ 2.13 $ 2.40
======= ======= ======= =======
</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 March 20, 1997, 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 February 28, 1997.
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
--------------------------------
April 8, 1997
Dallas, Texas
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED FEBRUARY 28, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 4,003
<SECURITIES> 0
<RECEIVABLES> 114,581
<ALLOWANCES> 2,975
<INVENTORY> 173,244
<CURRENT-ASSETS> 325,738
<PP&E> 990,370
<DEPRECIATION> 593,298
<TOTAL-ASSETS> 824,284
<CURRENT-LIABILITIES> 99,954
<BONDS> 184,699
0
0
<COMMON> 25,067
<OTHER-SE> 400,128
<TOTAL-LIABILITY-AND-EQUITY> 824,284
<SALES> 696,936
<TOTAL-REVENUES> 696,936
<CGS> 554,956
<TOTAL-COSTS> 554,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 954
<INTEREST-EXPENSE> 14,165
<INCOME-PRETAX> 78,978
<INCOME-TAX> 26,767
<INCOME-CONTINUING> 47,913
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,913
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 2.13
</TABLE>
