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UNITED STATES
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, 2009
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 1-4887
TEXAS INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 75-0832210 | |||
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) | |||
1341 West Mockingbird Lane, Suite 700W, Dallas, Texas 75247-6913 | ||||
(Address of Principal Executive Offices) (Zip Code) |
Registrants 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
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [X] |
Accelerated Filer [ ] | |
Non-accelerated Filer [ ] |
Smaller Reporting Company [ ] |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
There were 27,745,994 shares of the Registrants Common Stock, $1.00 par value, outstanding as of January 4, 2010.
Table of Contents
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION |
Page | |||
Item 1. |
||||
Consolidated Balance Sheets November 30, 2009 and May 31, 2009 |
3 | |||
4 | ||||
Consolidated Statements of Cash Flows six months ended November 30, 2009 and November 30, 2008 |
5 | |||
6 | ||||
25 | ||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
26 | ||
Item 3. |
36 | |||
Item 4. |
36 | |||
PART II. OTHER INFORMATION |
||||
Item 1. |
37 | |||
Item 2. |
37 | |||
Item 4. |
37 | |||
Item 6. |
38 | |||
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PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) November 30, |
May 31, | |||||||||||
In thousands | 2009 | 2009 | ||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS |
||||||||||||
Cash and cash equivalents |
$ | 56,794 | $ | 19,796 | ||||||||
Receivables net |
115,469 | 129,432 | ||||||||||
Inventories |
161,431 | 155,724 | ||||||||||
Deferred income taxes and prepaid expenses |
21,320 | 22,039 | ||||||||||
TOTAL CURRENT ASSETS |
355,014 | 326,991 | ||||||||||
OTHER ASSETS |
||||||||||||
Goodwill |
1,715 | 1,715 | ||||||||||
Real estate and investments |
7,827 | 10,001 | ||||||||||
Deferred charges and other |
15,787 | 14,486 | ||||||||||
25,329 | 26,202 | |||||||||||
PROPERTY, PLANT AND EQUIPMENT |
||||||||||||
Land and land improvements |
158,193 | 156,917 | ||||||||||
Buildings |
58,232 | 58,442 | ||||||||||
Machinery and equipment |
1,249,864 | 1,247,931 | ||||||||||
Construction in progress |
322,374 | 328,256 | ||||||||||
1,788,663 | 1,791,546 | |||||||||||
Less depreciation and depletion |
601,982 | 572,195 | ||||||||||
1,186,681 | 1,219,351 | |||||||||||
$ | 1,567,024 | $ | 1,572,544 | |||||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
CURRENT LIABILITIES |
||||||||||||
Accounts payable |
$ | 41,144 | $ | 55,749 | ||||||||
Accrued interest, compensation and other |
60,224 | 51,856 | ||||||||||
Current portion of long-term debt |
541 | 243 | ||||||||||
TOTAL CURRENT LIABILITIES |
101,909 | 107,848 | ||||||||||
LONG-TERM DEBT |
543,244 | 541,540 | ||||||||||
DEFERRED INCOME TAXES AND OTHER CREDITS |
121,591 | 120,011 | ||||||||||
SHAREHOLDERS EQUITY |
||||||||||||
Common stock, $1 par value |
27,746 | 27,718 | ||||||||||
Additional paid-in capital |
472,583 | 469,908 | ||||||||||
Retained earnings |
313,051 | 319,199 | ||||||||||
Accumulated other comprehensive loss |
(13,100 | ) | (13,680 | ) | ||||||||
800,280 | 803,145 | |||||||||||
$ | 1,567,024 | $ | 1,572,544 | |||||||||
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||||||
In thousands except per share | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
NET SALES |
$ | 142,935 | $ | 221,799 | $ | 326,892 | $ | 478,191 | ||||||||||||||||
Cost of products sold |
126,063 | 195,145 | 275,915 | 418,910 | ||||||||||||||||||||
GROSS PROFIT |
16,872 | 26,654 | 50,977 | 59,281 | ||||||||||||||||||||
Selling, general and administrative |
15,886 | 15,864 | 36,140 | 33,202 | ||||||||||||||||||||
Interest |
13,364 | 9,296 | 26,608 | 16,541 | ||||||||||||||||||||
Loss on debt retirements |
-- | -- | -- | 907 | ||||||||||||||||||||
Other income |
(5,728 | ) | (2,211 | ) | (8,380 | ) | (10,452 | ) | ||||||||||||||||
23,522 | 22,949 | 54,368 | 40,198 | |||||||||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
(6,650 | ) | 3,705 | (3,391 | ) | 19,083 | ||||||||||||||||||
Income taxes (benefit) |
(2,948 | ) | 571 | (1,404 | ) | 5,297 | ||||||||||||||||||
NET INCOME (LOSS) |
$ | (3,702 | ) | $ | 3,134 | $ | (1,987 | ) | $ | 13,786 | ||||||||||||||
Net income (loss) per share |
||||||||||||||||||||||||
Basic |
$ | (.13 | ) | $ | .11 | $ | (.07 | ) | $ | .50 | ||||||||||||||
Diluted |
$ | (.13 | ) | $ | .11 | $ | (.07 | ) | $ | .50 | ||||||||||||||
Average shares outstanding |
||||||||||||||||||||||||
Basic |
27,736 | 27,566 | 27,728 | 27,536 | ||||||||||||||||||||
Diluted |
27,736 | 27,782 | 27,728 | 27,806 | ||||||||||||||||||||
Cash dividends declared per share |
$ | .075 | $ | .075 | $ | .15 | $ | .15 | ||||||||||||||||
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Six months ended November 30, |
||||||||||||
In thousands | 2009 | 2008 | ||||||||||
OPERATING ACTIVITIES |
||||||||||||
Net income (loss) |
$ | (1,987 | ) | $ | 13,786 | |||||||
Adjustments to reconcile net income (loss) to cash provided by operating activities |
||||||||||||
Depreciation, depletion and amortization |
32,971 | 34,016 | ||||||||||
Gains on asset disposals |
(1,433 | ) | (427 | ) | ||||||||
Deferred income taxes |
756 | 3,627 | ||||||||||
Stock-based compensation expense (credit) |
2,143 | (7,829 | ) | |||||||||
Excess tax benefits from stock-based compensation |
(248 | ) | (1,766 | ) | ||||||||
Loss on debt retirements |
-- | 907 | ||||||||||
Other net |
609 | (1,067 | ) | |||||||||
Changes in operating assets and liabilities |
||||||||||||
Receivables net |
14,020 | 30,074 | ||||||||||
Inventories |
(3,843 | ) | (10,443 | ) | ||||||||
Prepaid expenses |
1,767 | 914 | ||||||||||
Accounts payable and accrued liabilities |
(4,823 | ) | (23,454 | ) | ||||||||
Net cash provided by operating activities |
39,932 | 38,338 | ||||||||||
INVESTING ACTIVITIES |
||||||||||||
Capital expenditures expansions |
(4,543 | ) | (123,420 | ) | ||||||||
Capital expenditures other |
(2,899 | ) | (51,911 | ) | ||||||||
Cash designated for property acquisitions |
-- | 28,733 | ||||||||||
Proceeds from asset disposals |
1,443 | 865 | ||||||||||
Investments in life insurance contracts |
6,726 | 2,263 | ||||||||||
Other net |
(2 | ) | 175 | |||||||||
Net cash provided (used) by investing activities |
725 | (143,295 | ) | |||||||||
FINANCING ACTIVITIES |
||||||||||||
Long-term borrowings |
-- | 327,250 | ||||||||||
Debt retirements |
(144 | ) | (197,610 | ) | ||||||||
Debt issuance costs |
(2,039 | ) | (3,476 | ) | ||||||||
Stock option exercises |
356 | 3,885 | ||||||||||
Excess tax benefits from stock-based compensation |
248 | 1,766 | ||||||||||
Common dividends paid |
(2,080 | ) | (4,131 | ) | ||||||||
Net cash provided (used) by financing activities |
(3,659 | ) | 127,684 | |||||||||
Increase in cash and cash equivalents |
36,998 | 22,727 | ||||||||||
Cash and cash equivalents at beginning of period |
19,796 | 39,527 | ||||||||||
Cash and cash equivalents at end of period |
$ | 56,794 | $ | 62,254 | ||||||||
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Texas Industries, Inc. and subsidiaries is a leading supplier of heavy construction materials in the United States through our three business segments: cement, aggregates and consumer products. Our principal products are gray portland cement, produced and sold through our cement segment; stone, sand and gravel, produced and sold through our aggregates segment; and ready-mix concrete, produced and sold through our consumer products segment. Other products include expanded shale and clay lightweight aggregates, produced and sold through our aggregates segment, and packaged concrete mix, mortar, sand and related products, produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California. When used in these notes the terms Company, we, us, or our mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.
1. 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 the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes 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, 2009, are not necessarily indicative of the results that may be expected for the year ended May 31, 2010. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Texas Industries, Inc. for the year ended May 31, 2009.
Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries. The consolidated financial statements also include the accounts of a former qualified intermediary trust, in which we were the primary beneficiary. The trust accounts were established in connection with our tax deferred like-kind-exchange property acquisition transactions under Section 1031 of the Internal Revenue Code. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation or adjusted to reflect changes we made to prior period interim financial information related to our aggregate inventory in conjunction with our audited financial statements for the year ended May 31, 2009. See Note 1 of Notes to Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the year ended May 31, 2009.
Subsequent Events. We evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q on January 7, 2010. We are not aware of any significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our consolidated financial statements.
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.
Fair Value of Financial Instruments. The estimated fair value of each class of financial instrument as of November 30, 2009 and May 31, 2009 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of November 30, 2009, the fair value of our long-term debt, including the current portion, was approximately $541.7 million compared to the carrying amount of $543.8 million. As of May 31, 2009, the fair value of our long-term debt, including the current portion, was approximately $476.8 million compared to the carrying amount of $541.8 million.
Cash and Cash Equivalents. Investments with maturities of less than 90 days when purchased are classified as cash equivalents and consist primarily of money market funds and investment grade commercial paper issued by major corporations and financial institutions.
Receivables. Management evaluates the ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is maintained based on the length of time receivables are past due or the status of a customers financial condition. If we are aware of a specific customers inability to make required payments, specific amounts are added to the reserve.
Environmental Liabilities. We are subject to environmental laws and regulations established by federal, state and local authorities, and make provision for the estimated costs related to compliance when it is probable that a reasonably estimable liability has been incurred.
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Legal Contingencies. We are a defendant in lawsuits which arose in the normal course of business, and make provision for the estimated loss from any claim or legal proceeding when it is probable that a reasonably estimable liability has been incurred.
Inventories. Inventories are stated at the lower of cost or market. We used the last-in, first out (LIFO) method to value finished products, work in process and raw material inventories excluding natural aggregate inventories. Natural aggregate inventories and parts and supplies inventories are valued using the average cost method. Our natural aggregate inventory excludes volumes in excess of an average twelve-month period of actual sales.
Long-lived Assets. Management reviews long-lived assets on a facility by facility basis for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset and are significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.
In the fourth quarter of our prior fiscal year, management evaluated the Hunter, Texas cement plant, including the capitalized construction and interest costs associated with the expansion that is currently suspended. We expect the Texas market to recover to pre-recession levels and to complete the expansion project. While the specific timing of the completion will be determined by the level of construction activity in the market, we anticipate completing the project within 2-4 years. Based on historical margins, we believe the undiscounted cash flows over the remaining life of the Hunter plant after completion of the expansion will significantly exceed the current investment in the plant as well as the remaining costs of the expansion and future capital expenditures necessary to achieve these cash flows.
Property, plant and equipment is recorded at cost. Costs incurred to construct certain long-lived assets include capitalized interest which is amortized over the estimated useful life of the related asset. Interest is capitalized during the construction period of qualified assets based on the average amount of accumulated expenditures and the weighted average interest rate applicable to borrowings outstanding during the period. If accumulated expenditures exceed applicable borrowings outstanding during the period, capitalized interest is allocated to projects under construction on a pro rata basis. Provisions for depreciation are computed generally using the straight-line method. Useful lives for our primary operating facilities range from 10 to 25 years with certain cement facility structures having useful lives of 40 years. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. The cost of all post-production stripping costs, which represents costs of removing overburden and waste materials to access mineral deposits, is recognized as a cost of the inventory produced during the period the stripping costs are incurred. Maintenance and repairs are charged to expense as incurred.
Goodwill. Management tests goodwill for impairment annually by reporting unit in the fourth quarter of our fiscal year using a two-step process. The first step of the impairment test identifies potential impairment by comparing the fair value of a reporting unit to its carrying value including goodwill. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying value of the reporting unit goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.
Based on an impairment test performed as of May 31, 2009, an impairment charge of $58.4 million was recognized with respect to goodwill resulting from the acquisition of Riverside Cement Company and identified with our California cement operations. The fair value of the reporting unit declined compared to prior evaluations, the most recent of which was as of November 30, 2008, due to a change in assumptions regarding the timing of cash flows expected to be derived from the reporting unit. The extreme depth of the recession in California was better understood at this time and resulted in the expected timing of a full recovery in the California cement market to be later than previously anticipated. The resulting present value of the projected cash flows did not support the carrying value of the goodwill and a full impairment charge was recognized.
Goodwill resulting from the acquisition of ready-mix operations in Texas and Louisiana and identified with our consumer products operations has a carrying value of $1.7 million at both November 30, 2009 and May 31, 2009. Based on an impairment test performed as of March 31, 2009, the fair value of the reporting unit exceeds its carrying value.
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Real Estate and Investments. Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks totaled $6.0 million at both November 30, 2009 and May 31, 2009.
Investments include life insurance contracts purchased in connection with certain of our benefit plans. The contracts, recorded at their net cash surrender value, totaled $1.8 million (net of distributions of $82.5 million plus accrued interest and fees) at November 30, 2009 and $4.0 million (net of distributions of $89.5 million plus accrued interest and fees) at May 31, 2009. We can elect to receive distributions chargeable against the cash surrender value of the policies in the form of borrowings or withdrawals or we can elect to surrender the policies and receive their net cash surrender value. Distributions and policy surrenders totaling $10.1 million and $5.4 million were received in the six-month periods ended November 30, 2009 and November 30, 2008, respectively.
Deferred Charges and Other. Deferred charges are composed primarily of debt issuance costs that totaled $9.6 million at November 30, 2009 and $9.0 million at May 31, 2009. The costs are amortized over the term of the related debt.
Other Credits. Other credits totaled $71.9 million at November 30, 2009 and $72.3 million at May 31, 2009 and are composed primarily of liabilities related to our retirement plans, deferred compensation agreements and asset retirement obligations.
Asset Retirement Obligations. We record a liability for legal obligations associated with the retirement of our long-lived assets in the period in which it is incurred if a reasonable estimate of fair value of the obligation can be made. The discounted fair value of the obligation incurred in each period is added to the carrying amount of the associated assets and depreciated over the lives of the assets. The liability is accreted at the end of each period through a charge to operating expense. A gain or loss on settlement is recognized if the obligation is settled for other than the carrying amount of the liability.
We incur legal obligations for asset retirement as part of our normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Determining the amount of an asset retirement liability requires estimating the future cost of contracting with third parties to perform the obligation. The estimate is significantly impacted by, among other considerations, managements assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk premiums and closure dates.
Changes in asset retirement obligations are as follows:
Six months ended November 30, | |||||||||||
In thousands | 2009 | 2008 | |||||||||
Balance at beginning of period |
$ | 4,415 | $ | 3,961 | |||||||
Accretion expense |
161 | 161 | |||||||||
Settlements |
(189 | ) | -- | ||||||||
Balance at end of period |
$ | 4,387 | $ | 4,122 | |||||||
Accumulated Other Comprehensive Loss. Amounts recognized in accumulated other comprehensive loss represent adjustments related to a defined benefit retirement plan and a postretirement health benefit plan covering approximately 600 employees and retirees of our California cement subsidiary. The amounts totaled $13.1 million (net of tax of $7.6 million) at November 30, 2009 and $13.7 million (net of tax of $7.9 million) at May 31, 2009.
Comprehensive income (loss) for the three-month and six-month periods ending November 30, 2009 and November 30, 2008 consisted of net income (loss) and amounts in accumulated other comprehensive loss recognized in the periods as components of net periodic postretirement benefit cost, net of tax. Comprehensive income (loss) was $(3.4) million and $3.2 million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively, and $(1.4) million and $14.0 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively.
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Net Sales. Sales are recognized when title has transferred and products are delivered. We include delivery fees in the amount we bill customers to the extent needed to recover our cost of freight and delivery. Net sales are presented as revenues and include these delivery fees.
Other Income. Routine sales of surplus operating assets and real estate resulted in gains of $0.4 million and $0.1 million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively, and gains of $1.4 million and $0.4 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively. In addition, sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in gains of $3.4 million in the three-month and six-month periods ended November 30, 2009 and gains of $1.7 million in the six-month period ended November 30, 2008. We have entered into various oil and gas lease agreements on property we own in north Texas. The terms of the agreements include the payment of a lease bonus and royalties on any oil and gas produced. However, we cannot guaranty what the level of royalties, if any, will be. Lease bonus payments received resulted in income of $4.7 million in the six-month period ended November 30, 2008.
Stock-based Compensation. We use the Black-Scholes option-pricing model to determine the fair value of stock options granted as of the date of grant. Options with graded vesting are valued as single awards and the related compensation cost is recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. We use the average stock price on the date of grant to determine the fair value of restricted stock awards paid. A liability, which is included in other credits, is recorded for stock appreciation rights, deferred compensation agreements and stock awards expected to be settled in cash, based on their fair value at the end of each period until such awards are paid.
Income Taxes. Accounting for income taxes uses the liability method of recognizing and classifying deferred income taxes. Texas Industries, Inc. (the parent 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. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense.
Earnings Per Share (EPS). Basic EPS is computed by adjusting net income for the participation in earnings of unvested restricted shares outstanding, then dividing by the weighted-average number of common shares outstanding during the period including contingently issuable shares and excluding outstanding unvested restricted shares.
Contingently issuable shares relate to deferred compensation agreements in which directors elected to defer annual and meeting fees and vested shares under our former stock awards program. The deferred compensation is denominated in shares of our common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from us. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued. Vested stock award shares are issued in the year in which the employee reaches age 60.
Diluted EPS adjusts net income and the outstanding shares for the dilutive effect of stock options, restricted shares and awards.
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Basic and Diluted EPS are calculated as follows:
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||||||
In thousands except per share | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
Basic earnings |
||||||||||||||||||||||||
Net income (loss) |
$ | (3,702 | ) | $ | 3,134 | $ | (1,987 | ) | $ | 13,786 | ||||||||||||||
Unvested restricted share participation |
2 | (1 | ) | (1 | ) | (9 | ) | |||||||||||||||||
Basic income (loss) |
$ | (3,700 | ) | $ | 3,133 | $ | (1,986 | ) | $ | 13,777 | ||||||||||||||
Diluted earnings |
||||||||||||||||||||||||
Net income (loss) |
$ | (3,702 | ) | $ | 3,134 | $ | (1,987 | ) | $ | 13,786 | ||||||||||||||
Unvested restricted share participation |
2 | (1 | ) | (1 | ) | (9 | ) | |||||||||||||||||
Diluted income (loss) |
$ | (3,700 | ) | $ | 3,133 | $ | (1,986 | ) | $ | 13,777 | ||||||||||||||
Shares |
||||||||||||||||||||||||
Weighted-average shares outstanding |
27,740 | 27,570 | 27,734 | 27,543 | ||||||||||||||||||||
Contingently issuable shares |
8 | 9 | 9 | 9 | ||||||||||||||||||||
Unvested restricted shares |
(12 | ) | (13 | ) | (15 | ) | (16 | ) | ||||||||||||||||
Basic weighted-average shares |
27,736 | 27,566 | 27,728 | 27,536 | ||||||||||||||||||||
Stock option, restricted share and award dilution |
-- | 216 | -- | 270 | ||||||||||||||||||||
Diluted weighted-average shares* |
27,736 | 27,782 | 27,728 | 27,806 | ||||||||||||||||||||
Net income (loss) per share |
||||||||||||||||||||||||
Basic |
$ | (.13 | ) | $ | .11 | $ | (.07 | ) | $ | .50 | ||||||||||||||
Diluted |
$ | (.13 | ) | $ | .11 | $ | (.07 | ) | $ | .50 | ||||||||||||||
* Shares excluded due to antidilutive effect |
978 | 779 | 979 | 487 |
Recently Issued Accounting Guidance. In May 2009, the Financial Accounting Standards Board issued new accounting and disclosure guidance for recognized and non-recognized subsequent events that occur after the balance sheet date but before financial statements are issued. The new guidance also requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. This new accounting guidance was effective for our Company beginning with our Quarterly Report on Form 10-Q for the three-month period ended August 31, 2009, and is being applied prospectively. This change in accounting policy had no impact on our consolidated financial statements.
In September 2006, the Financial Accounting Standards Board issued new accounting guidance that defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. This accounting guidance was effective for our Company on June 1, 2008. However, in February 2008, the FASB delayed the effective date of the new guidance for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The new guidance became effective for all nonfinancial assets and nonfinancial liabilities on June 1, 2009. The adoption of this new accounting policy for our nonfinancial assets and nonfinancial liabilities has not had a current material impact on our consolidated financial statements.
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2. Working Capital
Working capital totaled $253.1 million at November 30, 2009 compared to $219.1 million at May 31, 2009. Selected components of working capital are summarized below.
Receivables consist of:
November 30, | May 31, | |||||||||
In thousands | 2009 | 2009 | ||||||||
Trade notes and accounts receivable |
$ | 75,356 | $ | 92,622 | ||||||
Other notes receivable including accrued interest |
19,847 | 19,197 | ||||||||
Income tax receivable |
14,913 | 13,579 | ||||||||
Refund claims and other |
5,353 | 4,034 | ||||||||
$ | 115,469 | $ | 129,432 | |||||||
Trade notes and accounts receivable are presented net of allowances for doubtful receivables of $2.9 million at November 30, 2009 and $2.1 million at May 31, 2009. Provisions for bad debts charged to expense were $1.0 million and $0.9 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively. Uncollectible accounts written off totaled $0.2 million and $0.2 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively.
Other notes receivable at November 30, 2009 represents a note received in connection with the sale of land associated with our expanded shale and clay operations in south Texas in 2006. The note, scheduled to mature May 31, 2010, was sold at par plus accrued interest on December 18, 2009.
Inventories consist of:
November 30, | May 31, | |||||||||
In thousands | 2009 | 2009 | ||||||||
Finished products |
$ | 9,863 | $ | 10,873 | ||||||
Work in process |
65,213 | 61,608 | ||||||||
Raw materials |
16,781 | 17,513 | ||||||||
Total inventories at LIFO cost |
91,857 | 89,994 | ||||||||
Finished products |
16,827 | 16,575 | ||||||||
Raw materials |
1,292 | 2,079 | ||||||||
Parts and supplies |
51,455 | 47,076 | ||||||||
Total inventories at average cost |
69,574 | 65,730 | ||||||||
Total inventories |
$ | 161,431 | $ | 155,724 | ||||||
All inventories are stated at the lower of cost or market. Finished products, work in process and raw material inventories excluding natural aggregate inventories are valued using the last-in, first-out (LIFO) method. Natural aggregate finished product and raw material inventories and parts and supplies inventories are valued using the average cost method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on managements estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. If the average cost method (which approximates current replacement cost) had been used for all of these inventories, inventory values would have been higher by $45.4 million at November 30, 2009 and $47.0 million at May 31, 2009.
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Accrued interest, compensation and other consist of:
November 30, | May 31, | |||||||||
In thousands | 2009 | 2009 | ||||||||
Interest |
$ | 15,194 | $ | 15,271 | ||||||
Compensation and employee benefits |
16,274 | 14,316 | ||||||||
Casualty insurance |
13,484 | 14,332 | ||||||||
Income taxes |
799 | 613 | ||||||||
Property taxes and other |
14,473 | 7,324 | ||||||||
$ | 60,224 | $ | 51,856 | |||||||
3. Long-Term Debt
Long-term debt consists of:
November 30, | May 31, | |||||||||||
In thousands | 2009 | 2009 | ||||||||||
Senior secured revolving credit facility expiring in 2012 |
$ | -- | $ | -- | ||||||||
7.25% Senior notes due 2013 |
||||||||||||
Notes issued July 6, 2005 at par value |
250,000 | 250,000 | ||||||||||
Additional notes issued August 18, 2008, net of unamortized discount of $15.7 million at November 30, 2009 and $17.6 million at May 31, 2009 (effective interest rate 8.98%) |
284,255 | 282,448 | ||||||||||
534,255 | 532,448 | |||||||||||
Capital lease obligations |
9,253 | 9,058 | ||||||||||
Other contract obligations |
277 | 277 | ||||||||||
543,785 | 541,783 | |||||||||||
Less current portion |
(541 | ) | (243 | ) | ||||||||
$ | 543,244 | $ | 541,540 | |||||||||
Senior Secured Revolving Credit Facility. On June 19, 2009, we amended and restated our credit agreement and the associated security agreement. The credit agreement continues to provide for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit. The credit facility matures on August 15, 2012. Amounts drawn under the credit facility bear annual interest either at the LIBOR rate plus a margin of 3.5% to 4.0% or at a base rate plus a margin of 2.5% to 3.0%. The base rate is the higher of the federal funds rate plus 0.5%, the prime rate established by Bank of America, N.A. or the one-month LIBOR rate plus 1.0%. The interest rate margins are determined based on our leverage ratio. The commitment fee calculated on the unused portion of the credit facility ranges from 0.50% to 0.75% per year based on our leverage ratio. We may terminate the credit facility at any time.
The amount that can be borrowed under the credit facility is limited to an amount based on the value of our consolidated accounts receivable, inventory and mobile equipment. This amount, called the borrowing base, may be less than the $200 million stated principal amount of the credit facility. Our current borrowing base under our amended agreement is $151.6 million. No borrowings were outstanding at November 30, 2009; however, $28.4 million of the borrowing base was utilized to support letters of credit.
All of our consolidated subsidiaries have guaranteed our obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of our existing and future consolidated accounts, inventory, equipment, intellectual property and other personal property, and in all of our equity interests in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries, if any.
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The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are not required to maintain any financial ratios or covenants unless an event of default occurs or borrowing availability under the borrowing base is less than $40 million, in which case we must comply with a fixed charge coverage ratio. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.1 to 1.0 and borrowing availability under the borrowing base is more than $50 million. We were in compliance with all of these loan covenants as of November 30, 2009.
7.25% Senior Notes. On August 18, 2008, we sold $300 million aggregate principal amount of additional 7.25% senior notes at an offering price of 93.25%. The additional notes were issued under our existing indenture dated July 6, 2005. The net proceeds were used to repay our $150 million senior term loan and borrowings outstanding under our senior secured revolving credit facility in the amount of $29.5 million, with additional proceeds available for general corporate purposes. We recognized a loss on debt retirement of $0.9 million representing a write-off of debt issuance costs associated with the mandatory prepayment of the term loan.
At November 30, 2009, we had $550 million aggregate principal amount of 7.25% senior notes outstanding. Under the indenture, we may redeem the notes at a premium of 101.813% in 2010 and 100% in 2011 and thereafter. If we experience a change of control, we may be required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued interest.
All of our consolidated subsidiaries have unconditionally guaranteed the 7.25% senior notes. The indenture governing the notes contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem our stock, make investments, sell assets, incur liens, enter into agreements restricting our subsidiaries ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of our assets. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of these loan covenants as of November 30, 2009.
Other. Required principal payments on long-term debt, excluding the capital lease obligations, for each of the five years succeeding November 30, 2009 are none for 2010 through 2012 and $550.0 million for 2013 and none for 2014. The total amount of interest paid was $25.5 million and $15.2 million during the six-month periods ended November 30, 2009 and November 30, 2008, respectively. The total amount of interest incurred was $13.4 million and $12.5 million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively, of which $3.2 million was capitalized in the three-month period ended November 30, 2008. The total amount of interest incurred was $26.6 million and $21.5 million in the six-month period ended November 30, 2009 and November 30, 2008, respectively, of which $5.0 million was capitalized in the six-month period ended November 30, 2008.
4. Commitments
During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In light of current economic and market conditions, we have delayed completion of the project. We believe it is likely that current cement demand levels in Texas would not permit the new kiln to operate profitably. We expect cement demand to rebound in the future and we will resume construction when future economic and market conditions indicate it is appropriate. The pause in construction began in May 2009. As of November 30, 2009, we have incurred approximately $293.3 million, excluding capitalized interest of approximately $16.3 million related to the project, of which $288.6 million has been expended. We estimate that the project is 85-90% complete. Until we determine the date that we will resume construction, we cannot accurately estimate the cost of completing the project.
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5. Shareholders Equity
Common stock consists of:
November 30, | May 31, | |||
In thousands | 2009 | 2009 | ||
Shares authorized |
100,000 | 100,000 | ||
Shares outstanding |
27,746 | 27,718 | ||
Shares reserved for stock options and other |
2,822 | 2,850 |
There are authorized 100,000 shares of Cumulative Preferred Stock, no par 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. An additional 40,000 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. No shares of Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of November 30, 2009. Pursuant to a Rights Agreement, in November 2006, we distributed a dividend of one preferred share purchase right for each outstanding share of our Common Stock. Each right entitles the holder to purchase from us one one-thousandth of a share of the Series B Junior Participating Preferred Stock at a price of $300, subject to adjustment. The rights will expire on November 1, 2016 unless the date is extended or the rights are earlier redeemed or exchanged by us pursuant to the Rights Agreement.
On November 18, 2009, our Board of Directors declared a cash dividend of $0.075 per share of our outstanding common stock payable on December 7, 2009 to shareholders of record as of November 27, 2009. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.
6. Stock-Based Compensation Plans
The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the 2004 Plan) provides that, in addition to other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to employees and non-employee directors at market prices at date of grant. In addition, non-qualified and incentive stock options remain outstanding under our 1993 Stock Option Plan.
Options become exercisable in installments beginning one year after the date of grant and expire ten years after the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Options with graded vesting are valued as single awards and the compensation cost recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. No options were granted during the six-month period ended November 30, 2009. The weighted-average grant date fair value of options granted during the six-month period ended November 30, 2008 was $23.95 based on weighted average assumptions for expected volatility of .360, expected lives of 10 years, risk-free interest rates of 4.00% and expected dividend yields of .62%.
Expected volatility is based on an analysis of historical volatility of our common stock. Expected lives of options are determined based on the historical share option exercise experience of our optionees. Risk-free interest rates are determined using the implied yield currently available for zero coupon U.S. treasury issues with a remaining term equal to the expected life of the options. Expected dividend yields are based on the approved annual dividend rate in effect and the market price of our common stock at the time of grant.
A summary of option transactions for the six-month period ended November 30, 2009, follows:
Shares Under Option |
Weighted-Average Option Price | |||||||
Outstanding at May 31, 2009 |
1,594,757 | $ | 38.03 | |||||
Exercised |
(19,209 | ) | 18.55 | |||||
Canceled |
(16,966 | ) | 38.91 | |||||
Outstanding at November 30, 2009 |
1,558,582 | $ | 38.26 | |||||
Exercisable at November 30, 2009 |
780,437 | $ | 35.83 | |||||
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The following table summarizes information about stock options outstanding as of November 30, 2009.
Range of Exercise Prices | ||||||||||||
$16.04 - $27.39 | $31.15 - $48.60 | $50.63 - $70.18 | ||||||||||
Options outstanding |
||||||||||||
Shares outstanding |
725,761 | 244,821 | 588,000 | |||||||||
Weighted-average remaining life in years |
6.07 | 3.65 | 6.79 | |||||||||
Weighted-average exercise price |
$21.92 | $41.03 | $57.28 | |||||||||
Options exercisable |
||||||||||||
Shares exercisable |
346,561 | 206,436 | 227,440 | |||||||||
Weighted-average remaining life in years |
2.84 | 3.31 | 6.50 | |||||||||
Weighted-average exercise price |
$18.98 | $40.06 | $57.66 |
Outstanding options expire on various dates to January 14, 2019. As of November 30, 2009, we have reserved 1,258,925 shares for future awards under the 2004 Plan.
As of November 30, 2009, the aggregate intrinsic value (the difference in the closing market price of our common stock of $34.74 and the exercise price to be paid by the optionee) of stock options outstanding was $9.6 million. The aggregate intrinsic value of exercisable stock options at that date was $5.7 million. The total intrinsic value for options exercised (the difference in the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) was less than $0.1 million and $1.1 million for the three-month periods ended November 30, 2009 and November 30, 2008, respectively, and $0.5 million and $1.9 million for the six-month periods ended November 30, 2009 and November 30, 2008, respectively.
We have provided additional stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program. At November 30, 2009, outstanding stock appreciation rights totaled 155,979 shares, deferred compensation agreements to be settled in cash totaled 100,341 shares, deferred compensation agreements to be settled in common stock totaled 1,121 shares, unvested restricted stock payments totaled 6,167 shares and stock awards totaled 3,499 shares. Deferred income taxes and other credits on the consolidated balance sheets include $5.6 million at November 30, 2009 and $6.0 million at May 31, 2009 representing accrued stock-based compensation which is expected to be settled in cash.
Total stock-based compensation included in selling, general and administrative expense (credit) was $(0.5) million and $(3.8) million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively, and $2.1 million and $(7.8) million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively. The impact of changes in our companys stock price on stock-based awards accounted for as liabilities reduced stock-based compensation $1.5 million and $4.6 million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively. The impact of changes in our companys stock price increased stock-based compensation $0.1 million in the six-month period ended November 30, 2009 and reduced stock-based compensation $9.7 million in the six-month period ended November 30, 2008. The total tax expense (benefit) recognized in our statements of operations for stock-based compensation was $0.4 million and $1.6 million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively, and $(0.4) million and $3.3 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively. The total tax benefit realized for stock-based compensation was less than $0.1 million and $0.6 million in the three-month periods ended November 30, 2009 and November 30, 2008, respectively, and $0.2 million and $1.8 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively.
As of November 30, 2009, $7.5 million of total unrecognized compensation cost related to stock options, restricted stock payments and stock awards is expected to be recognized. We currently expect to recognize in the years succeeding November 30, 2009 approximately $3.2 million of this stock-based compensation expense in 2010, $2.2 million in 2011, $1.3 million in 2012, $0.7 million in 2013 and $0.1 million in 2014.
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7. Retirement Plans
Riverside Defined Benefit Plans. Approximately 600 employees and retirees of our California cement subsidiary, Riverside Cement Company, are covered by a defined benefit pension plan and a postretirement health benefit plan. Unrecognized prior service costs and actuarial gains or losses for these plans are recognized in a systematic manner over the remaining service periods of active employees expected to receive benefits under these plans. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses for the three-month and six-month periods ended November 30, 2009 and November 30, 2008, was as follows:
Pension Benefit | Health Benefit | |||||||||||||||||||||||
In thousands | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
Three months ended November 30 |
||||||||||||||||||||||||
Service cost |
$ | 115 | $ | 179 | $ | 26 | $ | 22 | ||||||||||||||||
Interest cost |
792 | 791 | 117 | 110 | ||||||||||||||||||||
Expected return on plan assets |
(586 | ) | (812 | ) | -- | -- | ||||||||||||||||||
Amortization of prior service cost |
-- | -- | (193 | ) | (197 | ) | ||||||||||||||||||
Amortization of net actuarial loss |
500 | 174 | 151 | 168 | ||||||||||||||||||||
$ | 821 | $ | 332 | $ | 101 | $ | 103 | |||||||||||||||||
Six months ended November 30 |
||||||||||||||||||||||||
Service cost |
$ | 229 | $ | 359 | $ | 53 | $ | 44 | ||||||||||||||||
Interest cost |
1,583 | 1,583 | 233 | 219 | ||||||||||||||||||||
Expected return on plan assets |
(1,171 | ) | (1,626 | ) | -- | -- | ||||||||||||||||||
Amortization of prior service cost |
-- | -- | (387 | ) | (393 | ) | ||||||||||||||||||
Amortization of net actuarial loss |
1,000 | 349 | 302 | 336 | ||||||||||||||||||||
$ | 1,641 | $ | 665 | $ | 201 | $ | 206 | |||||||||||||||||
Financial Security Defined Benefit Plans. We have a series of financial security plans that are non-qualified defined benefit plans providing retirement and death benefits to substantially all of our executive and key managerial employees. The plans are contributory but not funded. The amount of financial security plan benefit expense charged to costs and expenses for the three-month and six-month periods ended November 30, 2009 and November 30, 2008, was as follows:
FSP Benefit | ||||||||||||
In thousands | 2009 | 2008 | ||||||||||
Three months ended November 30 |
||||||||||||
Service cost |
$ | 468 | $ | 399 | ||||||||
Interest cost |
562 | 546 | ||||||||||
Participant contributions |
(109 | ) | (90 | ) | ||||||||
$ | 921 | $ | 855 | |||||||||
Six months ended November 30 |
||||||||||||
Service cost |
$ | 937 | $ | 798 | ||||||||
Interest cost |
1,123 | 1,091 | ||||||||||
Participant contributions |
(204 | ) | (178 | ) | ||||||||
$ | 1,856 | $ | 1,711 | |||||||||
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8. Income Taxes
Income taxes for the interim periods ended November 30, 2009 and November 30, 2008 have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% federal statutory corporate rate is due to percentage depletion that is tax deductible, state income taxes and deductions for income from qualified domestic production activities. Our estimated effective tax rate for fiscal year 2010 is 41.4% compared to 28.3% for fiscal year 2009. We made income tax payments of less than $0.1 million and $2.1 million during the six-month periods ended November 30, 2009 and November 30, 2008, respectively, and received income tax refunds of $1.1 million and $0.3 million during the six-month periods ended November 30, 2009 and November 30, 2008, respectively.
In addition to our federal income tax return, we file income tax returns in various state jurisdictions. We are no longer subject to income tax examinations by federal tax authorities for years prior to 2007 and state tax authorities for years prior to 2006.
9. Legal Proceedings and Contingent Liabilities
We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. It is possible that we could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by us.
In March 2008, the South Coast Air Quality Management District, or SCAQMD, informed one of our subsidiaries, Riverside Cement Company (Riverside), that it believed that dust blowing from open stockpiles of gray clinker or other operations at our Crestmore cement plant in Riverside, California caused the level of hexavalent chromium, or chrome 6, in the vicinity of the plant to be elevated above ambient air levels. Chrome 6 has been identified by the State of California as a carcinogen. Riverside immediately began taking steps, in addition to its normal dust control procedures, to reduce dust from plant operations and eliminate the use of open clinker stockpiles. In February 2008, the SCAQMD placed an air monitoring station at the downwind property line closest to the open clinker stockpiles. In the SCAQMDs first public report of the results of its monitoring, over the period of February 12 to April 9, 2008, the average level of chrome 6 was 2.43 nanograms per cubic meter, or ng/m³. Since that time, the average level has decreased. The average levels of chrome 6 reported by the SCAQMD at all of the air monitoring stations in areas around the plant, including the station at the property line, are below 1.0 ng/m³ over the entire period of time it operated the stations. The SCAQMD compared the level of exposure at the air monitor on our property line with the following employee exposure standards established by regulatory agencies:
Occupational Safety and Health Administration |
5,000 ng/m³ | |||
National Institute for Occupational Safety and Health |
1,000 ng/m³ | |||
California Environmental Protection Agency |
200 ng/m³ |
In public meetings conducted by the SCAQMD, it stated that the risk of long term exposure immediately adjacent to the plant is similar to living close to a busy freeway or rail yard, and it estimated an increased risk of 250 to 500 cancers per one million people, assuming continuous exposure for 70 years. Riverside has not determined how this particular risk number was calculated by SCAQMD. However, the Riverside Press Enterprise reported in a May 30, 2008 story that John Morgan, a public health and epidemiology professor at Loma Linda University, said he looked at cancer cases reported from 1996 to 2005 in the census [tract] nearest the [plant] and found no excess cases. That includes lung cancer, which is associated with exposure to hexavalent chromium.
In late April 2008, a lawsuit was filed in Riverside County Superior Court of the State of California styled Virginia Shellman, et al. v. Riverside Cement Holdings Company, et al. The lawsuit against three of our subsidiaries purports to be a class action complaint for medical monitoring for a putative class defined as individuals who were allegedly exposed to chrome 6 emissions from our Crestmore cement plant. The complaint alleges an increased risk of future illness due to the exposure to chrome 6 and other toxic chemicals. The suit requests, among other things, establishment and funding of a medical testing and monitoring program for the class until their exposure to chrome 6 is no longer a threat to their health, as well as punitive and exemplary damages.
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Since the Shellman lawsuit was filed, five additional putative class action lawsuits have been filed in the same court. The putative class in each of these cases is the same as or a subset of the putative class in the Shellman case, and the allegations and requests for relief are similar to those in the Shellman case. As a consequence, the court has stayed four of these lawsuits until the Shellman lawsuit is finally determined.
Since August 2008, twenty-one additional lawsuits have been filed in the same court against us or one or more of our subsidiaries containing allegations of personal injury and wrongful death by approximately 2,800 individual plaintiffs who were allegedly exposed to chrome 6 and other toxic or harmful substances in the air, water and soil caused by emissions from the Crestmore plant. The plaintiffs allege causes of action that vary somewhat from suit to suit, but typically include, among other things, negligence, intentional and negligent infliction of emotional distress, trespass, public and private nuisance, strict liability, willful misconduct, fraudulent concealment, wrongful death and loss of consortium. The plaintiffs generally request, among other things, general and punitive damages, medical expenses, loss of earnings, property damages and medical monitoring costs. Some of the suits include additional defendants, such as predecessor owners of Riverside and the owner of another cement plant located approximately four miles from the Crestmore plant.
Since January 2009, six lawsuits have been filed against us or one or more of our subsidiaries in the same court involving similar allegations, causes of action and requests for relief, but with respect to our Oro Grande, California cement plant instead of the Crestmore plant. The suits involve approximately 280 individual plaintiffs. Prior to the filing of the lawsuits, the air quality management district in whose jurisdiction the plant lies conducted air sampling from locations around the plant. None of the samples contained chrome 6 levels above 1.0 ng/m³.
At this time, none of the plaintiffs in these cases has alleged any specific amount or range of damages. We will vigorously defend all of these suits but we cannot predict what liability, if any, could arise from them. We also cannot predict whether any other suits may be filed against us alleging damages due to injuries to persons or property caused by claimed exposure to chrome 6.
We are defendants in other lawsuits which arose in the normal course of business. In managements judgment the ultimate liability, if any, from such other legal proceedings will not have a material affect on our consolidated financial position or results of operations.
10. Business Segments
We have three business segments: cement, aggregates and consumer products. Our business segments are managed separately along product lines. Through the cement segment we produce and sell gray portland cement as our principal product, as well as specialty cements. Through the aggregates segment we produce and sell stone, sand and gravel as our principal products, as well as expanded shale and clay lightweight aggregates. Through the consumer products segment we produce and sell ready-mix concrete as our principal product, as well as packaged concrete mix, mortar, sand and related products. We account for intersegment sales at market prices. Segment operating profit consists of net sales less operating costs and expenses. Corporate includes those administrative, financial, legal, human resources, environmental and real estate activities which are not allocated to operations and are excluded from segment operating profit. Identifiable assets by segment are those assets that are used in each segments operation. Corporate assets consist primarily of cash and cash equivalents, real estate and other financial assets not identified with a business segment. We no longer report Unallocated overhead and other incomenet as a separate part of total segment operating profit. Engineering and other income items previously reported in Unallocated overhead and other incomenet are reported in our cement segment. Environmental and other remaining overhead items previously reported in Unallocated overhead and other incomenet are reported in corporate. Prior period information has been reclassified to conform to the current period presentation.
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The following is a summary of operating results and certain other financial data for our business segments.
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||||||
In thousands | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
Net sales |
||||||||||||||||||||||||
Cement |
||||||||||||||||||||||||
Sales to external customers |
$ | 57,594 | $ | 91,541 | $ | 129,631 | $ | 193,398 | ||||||||||||||||
Intersegment sales |
10,589 | 16,507 | 23,748 | 36,013 | ||||||||||||||||||||
Aggregates |
||||||||||||||||||||||||
Sales to external customers |
31,480 | 50,624 | 74,720 | 110,923 | ||||||||||||||||||||
Intersegment sales |
4,807 | 9,881 | 11,668 | 21,379 | ||||||||||||||||||||
Consumer products |
||||||||||||||||||||||||
Sales to external customers |
53,861 | 79,634 | 122,541 | 173,870 | ||||||||||||||||||||
Intersegment sales |
592 | 1,010 | 1,450 | 1,998 | ||||||||||||||||||||
Eliminations |
(15,988 | ) | (27,398 | ) | (36,866 | ) | (59,390 | ) | ||||||||||||||||
Total net sales |
$ | 142,935 | $ | 221,799 | $ | 326,892 | $ | 478,191 | ||||||||||||||||
Segment operating profit |
||||||||||||||||||||||||
Cement |
$ | 10,135 | $ | 8,768 | $ | 22,541 | $ | 25,433 | ||||||||||||||||
Aggregates |
2,229 | 5,554 | 10,868 | 14,479 | ||||||||||||||||||||
Consumer products |
281 | 679 | 5,032 | 229 | ||||||||||||||||||||
Total segment operating profit |
12,645 | 15,001 | 38,441 | 40,141 | ||||||||||||||||||||
Corporate |
(5,931 | ) | (2,000 | ) | (15,224 | ) | (3,610 | ) | ||||||||||||||||
Interest |
(13,364 | ) | (9,296 | ) | (26,608 | ) | (16,541 | ) | ||||||||||||||||
Loss on debt retirements |
-- | -- | -- | (907 | ) | |||||||||||||||||||
Income (loss) before income taxes |
$ | (6,650 | ) | $ | 3,705 | $ | (3,391 | ) | $ | 19,083 | ||||||||||||||
Depreciation, depletion and amortization |
||||||||||||||||||||||||
Cement |
$ | 9,286 |
$ |
|
9,393 | $ | 18,627 | $ | 18,726 | |||||||||||||||
Aggregates |
4,994 | 5,651 | 10,061 | 11,072 | ||||||||||||||||||||
Consumer products |
1,807 | 1,856 | 3,703 | 3,729 | ||||||||||||||||||||
Corporate |
290 | 251 | 580 | 489 | ||||||||||||||||||||
Total depreciation, depletion and amortization |
$ | 16,377 | $ | 17,151 | $ | 32,971 | $ | 34,016 | ||||||||||||||||
Capital expenditures |
||||||||||||||||||||||||
Cement |
$ | 73 |
$ |
|
81,658 | $ | 4,791 | $ | 136,010 | |||||||||||||||
Aggregates |
1,928 | 2,845 | 2,408 | 35,362 | ||||||||||||||||||||
Consumer products |
17 | 1,885 | 168 | 3,473 | ||||||||||||||||||||
Corporate |
51 | 207 | 75 | 486 | ||||||||||||||||||||
Total capital expenditures |
$ | 2,069 | $ | 86,595 | $ | 7,442 | $ | 175,331 | ||||||||||||||||
Net sales by product |
||||||||||||||||||||||||
Cement |
$ | 51,141 |
$ |
|
81,915 | $ | 116,472 | $ | 173,812 | |||||||||||||||
Stone, sand and gravel |
15,887 | 27,298 | 37,536 | 57,626 | ||||||||||||||||||||
Ready-mix concrete |
41,702 | 64,743 | 95,721 | 143,586 | ||||||||||||||||||||
Other products |
21,189 | 26,050 | 48,558 | 56,242 | ||||||||||||||||||||
Delivery fees |
13,016 | 21,793 | 28,605 | 46,925 | ||||||||||||||||||||
Total net sales |
$ | 142,935 | $ | 221,799 | $ | 326,892 | $ | 478,191 | ||||||||||||||||
All sales were made in the United States during the periods presented with no single customer representing more than 10 percent of sales.
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Other income includes gains from sales of emission credits associated with our Crestmore cement plant in Riverside, California of $3.4 million in the three-month and six-month periods ended November 30, 2009 and $1.7 million in the six-month period ended November 30, 2008. In addition, other income in the six-month period ended November 30, 2008 includes $4.7 million in lease bonus payments received upon the execution of oil and gas lease agreements on property we own in north Texas, including $2.8 million associated with our cement operations, $0.1 million associated with our aggregate operations, $0.2 million associated with our ready-mix concrete operations and $1.6 million associated with our corporate real estate activities.
Cement capital expenditures, including capitalized interest, incurred in connection with the expansion of our Hunter, Texas cement plant was $4.5 million and $122.1 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively. In addition, cement capital expenditures, including capitalized interest, incurred in connection with the expansion and modernization of our Oro Grande, California cement plant were $1.3 million in the six-month period ended November 30, 2008. Aggregate capital expenditures include $25.3 million in the six-month period ended November 30, 2008 incurred to acquire aggregate operations in central Texas through a tax deferred like-kind-exchange transaction. Other capital expenditures incurred represent normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations in each segment.
The following is a summary of assets used in each of our business segments.
November 30, | May 31, | |||||||||
In thousands | 2009 | 2009 | ||||||||
Identifiable assets |
||||||||||
Cement |
$ | 1,129,061 | $ | 1,149,320 | ||||||
Aggregates |
225,353 | 236,727 | ||||||||
Consumer products |
86,606 | 95,310 | ||||||||
Corporate |
126,004 | 91,187 | ||||||||
Total assets |
$ | 1,567,024 | $ | 1,572,544 | ||||||
All of our identifiable assets are located in the United States.
11. Condensed Consolidating Financial Information
On July 6, 2005 and August 18, 2008, Texas Industries, Inc. (the parent company) issued $250 million and $300 million aggregate principal amounts of its 7.25% Senior Notes, respectively. All existing consolidated subsidiaries of the parent company are 100% owned and provide a joint and several, full and unconditional guarantee of the securities. There are no significant restrictions on the parent companys ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on a guarantor subsidiarys ability to obtain funds from the parent company or its direct or indirect subsidiaries.
The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the parent company and guarantor subsidiaries. The information has been presented as if the parent company accounted for its ownership of the guarantor subsidiaries using the equity method of accounting.
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In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated | ||||||||||||||||||||
Condensed consolidating balance sheet at November 30, 2009 |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 56,794 | $ | -- | $ | -- | $ | 56,794 | ||||||||||||||||
Receivables - net |
14,913 | 100,556 | -- | 115,469 | ||||||||||||||||||||
Intercompany receivables |
279,368 | 18,753 | (298,121 | ) | -- | |||||||||||||||||||
Inventories |
-- | 161,431 | -- | 161,431 | ||||||||||||||||||||
Deferred income taxes and prepaid expenses |
122 | 21,198 | -- | 21,320 | ||||||||||||||||||||
Total current assets |
351,197 | 301,938 | (298,121 | ) | 355,014 | |||||||||||||||||||
Goodwill |
-- | 1,715 | -- | 1,715 | ||||||||||||||||||||
Real estate and investments |
1,790 | 6,037 | -- | 7,827 | ||||||||||||||||||||
Deferred charges and other |
9,586 | 6,201 | -- | 15,787 | ||||||||||||||||||||
Investment in subsidiaries |
956,471 | -- | (956,471 | ) | -- | |||||||||||||||||||
Long-term intercompany receivables |
50,000 | -- | (50,000 | ) | -- | |||||||||||||||||||
Property, plant and equipment - net |
-- | 1,186,681 | -- | 1,186,681 | ||||||||||||||||||||
Total assets |
$ | 1,369,044 | $ | 1,502,572 | $ | (1,304,592 | ) | $ | 1,567,024 | |||||||||||||||
Accounts payable |
$ | 2,136 | $ | 39,008 | $ | -- | $ | 41,144 | ||||||||||||||||
Intercompany payables |
18,753 | 279,368 | (298,121 | ) | -- | |||||||||||||||||||
Accrued interest, compensation and other |
20,039 | 40,185 | -- | 60,224 | ||||||||||||||||||||
Current portion of long-term debt |
-- | 541 | -- | 541 | ||||||||||||||||||||
Total current liabilities |
40,928 | 359,102 | (298,121 | ) | 101,909 | |||||||||||||||||||
Long-term debt |
534,532 | 8,712 | -- | 543,244 | ||||||||||||||||||||
Long-term intercompany payables |
-- | 50,000 | (50,000 | ) | -- | |||||||||||||||||||
Deferred income taxes and other credits |
(6,696 | ) | 128,287 | -- | 121,591 | |||||||||||||||||||
Shareholders equity |
800,280 | 956,471 | (956,471 | ) | 800,280 | |||||||||||||||||||
Total liabilities and shareholders equity |
$ | 1,369,044 | $ | 1,502,572 | $ | (1,304,592 | ) | $ | 1,567,024 | |||||||||||||||
Condensed consolidating balance sheet at May 31, 2009 |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 17,226 | $ | 2,570 | $ | -- | $ | 19,796 | ||||||||||||||||
Receivables - net |
14,707 | 114,725 | -- | 129,432 | ||||||||||||||||||||
Intercompany receivables |
333,886 | 18,759 | (352,645 | ) | -- | |||||||||||||||||||
Inventories |
-- | 155,724 | -- | 155,724 | ||||||||||||||||||||
Deferred income taxes and prepaid expenses |
426 | 21,613 | -- | 22,039 | ||||||||||||||||||||
Total current assets |
366,245 | 313,391 | (352,645 | ) | 326,991 | |||||||||||||||||||
Goodwill |
-- | 1,715 | -- | 1,715 | ||||||||||||||||||||
Real estate and investments |
3,965 | 6,036 | -- | 10,001 | ||||||||||||||||||||
Deferred charges and other |
8,997 | 5,489 | -- | 14,486 | ||||||||||||||||||||
Investment in subsidiaries |
940,982 | -- | (940,982 | ) | -- | |||||||||||||||||||
Long-term intercompany receivables |
50,000 | -- | (50,000 | ) | -- | |||||||||||||||||||
Property, plant and equipment - net |
-- | 1,219,351 | -- | 1,219,351 | ||||||||||||||||||||
Total assets |
$ | 1,370,189 | $ | 1,545,982 | $ | (1,343,627 | ) | $ | 1,572,544 | |||||||||||||||
Accounts payable |
$ | 74 | $ | 55,675 | $ | -- | $ | 55,749 | ||||||||||||||||
Intercompany payables |
18,759 | 333,886 | (352,645 | ) | -- | |||||||||||||||||||
Accrued interest, compensation and other |
19,773 | 32,083 | -- | 51,856 | ||||||||||||||||||||
Current portion of long-term debt |
-- | 243 | -- | 243 | ||||||||||||||||||||
Total current liabilities |
38,606 | 421,887 | (352,645 | ) | 107,848 | |||||||||||||||||||
Long-term debt |
532,725 | 8,815 | -- | 541,540 | ||||||||||||||||||||
Long-term intercompany payables |
-- | 50,000 | (50,000 | ) | -- | |||||||||||||||||||
Deferred income taxes and other credits |
(4,287 | ) | 124,298 | -- | 120,011 | |||||||||||||||||||
Shareholders equity |
803,145 | 940,982 | (940,982 | ) | 803,145 | |||||||||||||||||||
Total liabilities and shareholders equity |
$ | 1,370,189 | $ | 1,545,982 | $ | (1,343,627 | ) | $ | 1,572,544 | |||||||||||||||
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In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated | ||||||||||||||||||||
Condensed consolidating statement of operations for the three months ended November 30, 2009 |
| |||||||||||||||||||||||
Net sales |
$ | -- | $ | 142,935 | $ | -- | $ | 142,935 | ||||||||||||||||
Cost of products sold |
-- | 126,063 | -- | 126,063 | ||||||||||||||||||||
Gross profit |
-- | 16,872 | -- | 16,872 | ||||||||||||||||||||
Selling, general and administrative |
500 | 15,386 | -- | 15,886 | ||||||||||||||||||||
Interest |
13,191 | 1,046 | (873 | ) | 13,364 | |||||||||||||||||||
Loss on debt retirements |
-- | -- | -- | -- | ||||||||||||||||||||
Other income |
(14 | ) | (5,714 | ) | -- | (5,728 | ) | |||||||||||||||||
Intercompany other income |
(873 | ) | -- | 873 | -- | |||||||||||||||||||
12,804 | 10,718 | -- | 23,522 | |||||||||||||||||||||
Income (loss) before the following items |
(12,804 | ) | 6,154 | -- | (6,650 | ) | ||||||||||||||||||
Income taxes (benefit) |
(5,368 | ) | 2,420 | -- | (2,948 | ) | ||||||||||||||||||
(7,436 | ) | 3,734 | -- | (3,702 | ) | |||||||||||||||||||
Equity in earnings of subsidiaries |
3,734 | -- | (3,734 | ) | -- | |||||||||||||||||||
Net income (loss) |
$ | (3,702 | ) | $ | 3,734 | $ | (3,734 | ) | $ | (3,702 | ) | |||||||||||||
Condensed consolidating statement of operations for the three months ended November 30, 2008 |
| |||||||||||||||||||||||
Net sales |
$ | -- | $ | 221,799 | $ | -- | $ | 221,799 | ||||||||||||||||
Cost of products sold |
-- | 195,145 | -- | 195,145 | ||||||||||||||||||||
Gross profit |
-- | 26,654 | -- | 26,654 | ||||||||||||||||||||
Selling, general and administrative |
(989 | ) | 16,853 | -- | 15,864 | |||||||||||||||||||
Interest |
12,306 | -- | (3,010 | ) | 9,296 | |||||||||||||||||||
Loss on debt retirements |
-- | -- | -- | -- | ||||||||||||||||||||
Other income |
(202 | ) | (2,009 | ) | -- | (2,211 | ) | |||||||||||||||||
Intercompany other income |
(873 | ) | (2,137 | ) | 3,010 | -- | ||||||||||||||||||
10,242 | 12,707 | -- | 22,949 | |||||||||||||||||||||
Income (loss) before the following items |
(10,242 | ) | 13,947 | -- | 3,705 | |||||||||||||||||||
Income taxes (benefit) |
(3,034 | ) | 3,605 | -- | 571 | |||||||||||||||||||
(7,208 | ) | 10,342 | -- | 3,134 | ||||||||||||||||||||
Equity in earnings of subsidiaries |
10,342 | -- | (10,342 | ) | -- | |||||||||||||||||||
Net income (loss) |
$ | 3,134 | $ | 10,342 | $ | (10,342 | ) | $ | 3,134 | |||||||||||||||
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In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated |
||||||||||||||||
Condensed consolidating statement of operations for the six months ended November 30, 2009 | ||||||||||||||||||||
Net sales |
$ | -- | $ | 326,892 | $ | -- | $ | 326,892 | ||||||||||||
Cost of products sold |
-- | 275,915 | -- | 275,915 | ||||||||||||||||
Gross profit |
-- | 50,977 | -- | 50,977 | ||||||||||||||||
Selling, general and administrative |
3,338 | 32,802 | -- | 36,140 | ||||||||||||||||
Interest |
26,262 | 2,101 | (1,755 | ) | 26,608 | |||||||||||||||
Loss on debt retirements |
-- | -- | -- | -- | ||||||||||||||||
Other income |
(26 | ) | (8,354 | ) | -- | (8,380 | ) | |||||||||||||
Intercompany other income |
(1,755 | ) | -- | 1,755 | -- | |||||||||||||||
27,819 | 26,549 | -- | 54,368 | |||||||||||||||||
Income (loss) before the following items |
(27,819 | ) | 24,428 | -- | (3,391 | ) | ||||||||||||||
Income taxes (benefit) |
(10,924 | ) | 9,520 | -- | (1,404 | ) | ||||||||||||||
(16,895 | ) | 14,908 | -- | (1,987 | ) | |||||||||||||||
Equity in earnings of subsidiaries |
14,908 | -- | (14,908 | ) | -- | |||||||||||||||
Net income (loss) |
$ | (1,987 | ) | $ | 14,908 | $ | (14,908 | ) | $ | (1,987 | ) | |||||||||
Condensed consolidating statement of operations for the six months ended November 30, 2008 | ||||||||||||||||||||
Net sales |
$ | -- | $ | 478,191 | $ | -- | $ | 478,191 | ||||||||||||
Cost of products sold |
-- | 418,910 | -- | 418,910 | ||||||||||||||||
Gross profit |
-- | 59,281 | -- | 59,281 | ||||||||||||||||
Selling, general and administrative |
(2,519 | ) | 35,721 | -- | 33,202 | |||||||||||||||
Interest |
21,151 | -- | (4,610 | ) | 16,541 | |||||||||||||||
Loss on debt retirements |
907 | -- | -- | 907 | ||||||||||||||||
Other income |
(334 | ) | (10,118 | ) | -- | (10,452 | ) | |||||||||||||
Intercompany other income |
(1,755 | ) | (2,855 | ) | 4,610 | -- | ||||||||||||||
17,450 | 22,748 | -- | 40,198 | |||||||||||||||||
Income (loss) before the following items |
(17,450 | ) | 36,533 | -- | 19,083 | |||||||||||||||
Income taxes (benefit) |
(5,685 | ) | 10,982 | -- | 5,297 | |||||||||||||||
(11,765 | ) | 25,551 | -- | 13,786 | ||||||||||||||||
Equity in earnings of subsidiaries |
25,551 | -- | (25,551 | ) | -- | |||||||||||||||
Net income (loss) |
$ | 13,786 | $ | 25,551 | $ | (25,551 | ) | $ | 13,786 | |||||||||||
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In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated | |||||||||||||||
Condensed consolidating statement of cash flows for the six months ended November 30, 2009 | |||||||||||||||||||
Net cash provided by operating activities |
$ | 36,357 | $ | 3,575 | $ | -- | $ | 39,932 | |||||||||||
Investing activities |
|||||||||||||||||||
Capital expenditures - expansions |
-- | (4,543 | ) | -- | (4,543 | ) | |||||||||||||
Capital expenditures - other |
-- | (2,899 | ) | -- | (2,899 | ) | |||||||||||||
Cash designated for property acquisitions |
-- | -- | -- | -- | |||||||||||||||
Proceeds from asset disposals |
-- | 1,443 | -- | 1,443 | |||||||||||||||
Investments in life insurance contracts |
6,726 | -- | -- | 6,726 | |||||||||||||||
Other - net |
-- | (2 | ) | -- | (2 | ) | |||||||||||||
Net cash provided (used) by investing activities |
6,726 | (6,001 | ) | -- | 725 | ||||||||||||||
Financing activities |
|||||||||||||||||||
Long-term borrowings |
-- | -- | -- | -- | |||||||||||||||
Debt retirements |
-- | (144 | ) | -- | (144 | ) | |||||||||||||
Debt issuance costs |
(2,039 | ) | -- | -- | (2,039 | ) | |||||||||||||
Stock option exercises |
356 | -- | -- | 356 | |||||||||||||||
Excess tax benefits from stock-based compensation |
248 | -- | -- | 248 | |||||||||||||||
Common dividends paid |
(2,080 | ) | -- | -- | (2,080 | ) | |||||||||||||
Net cash provided (used) by financing activities |
(3,515 | ) | (144 | ) | -- | (3,659 | ) | ||||||||||||
Increase in cash and cash equivalents |
39,568 | (2,570 | ) | -- | 36,998 | ||||||||||||||
Cash and cash equivalents at beginning of period |
17,226 | 2,570 | -- | 19,796 | |||||||||||||||
Cash and cash equivalents at end of period |
$ | 56,794 | $ | -- | $ | -- | $ | 56,794 | |||||||||||
Condensed consolidating statement of cash flows for the six months ended November 30, 2008 | |||||||||||||||||||
Net cash provided by operating activities |
$ | (106,746 | ) | $ | 145,084 | $ | -- | $ | 38,338 | ||||||||||
Investing activities |
|||||||||||||||||||
Capital expenditures - expansions |
-- | (123,420 | ) | -- | (123,420 | ) | |||||||||||||
Capital expenditures - other |
-- | (51,911 | ) | -- | (51,911 | ) | |||||||||||||
Cash designated for property acquisitions |
-- | 28,733 | -- | 28,733 | |||||||||||||||
Proceeds from asset disposals |
-- | 865 | -- | 865 | |||||||||||||||
Investments in life insurance contracts |
2,263 | -- | -- | 2,263 | |||||||||||||||
Other - net |
-- | 175 | -- | 175 | |||||||||||||||
Net cash provided (used) by investing activities |
2,263 | (145,558 | ) | -- | (143,295 | ) | |||||||||||||
Financing activities |
|||||||||||||||||||
Long-term borrowings |
327,250 | -- | -- | 327,250 | |||||||||||||||
Debt retirements |
(197,500 | ) | (110 | ) | -- | (197,610 | ) | ||||||||||||
Debt issuance costs |
(3,476 | ) | -- | -- | (3,476 | ) | |||||||||||||
Stock option exercises |
3,885 | -- | -- | 3,885 | |||||||||||||||
Excess tax benefits from stock-based compensation |
1,766 | -- | -- | 1,766 | |||||||||||||||
Common dividends paid |
(4,131 | ) | -- | -- | (4,131 | ) | |||||||||||||
Net cash provided (used) by financing activities |
127,794 | (110 | ) | -- | 127,684 | ||||||||||||||
Increase in cash and cash equivalents |
23,311 | (584 | ) | -- | 22,727 | ||||||||||||||
Cash and cash equivalents at beginning of period |
34,675 | 4,852 | -- | 39,527 | |||||||||||||||
Cash and cash equivalents at end of period |
$ | 57,986 | $ | 4,268 | $ | -- | $ | 62,254 | |||||||||||
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Texas Industries, Inc.
We have reviewed the accompanying consolidated balance sheet of Texas Industries, Inc. and subsidiaries (the Company) as of November 30, 2009, and the related consolidated statements of operations for the three- and six-month periods ended November 30, 2009 and 2008 and cash flows for the six-month periods ended November 30, 2009 and 2008. These financial statements are the responsibility of the Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2009, and the related consolidated statements of operations, shareholders equity, and cash flows for the year then ended [not presented herein], and in our report dated July 15, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of May 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP |
Fort Worth, Texas
January 7, 2010
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
When used in this report the terms Company, we, us, or our mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.
RESULTS OF OPERATIONS
We are a leading supplier of heavy construction materials in the United States through our three business segments: cement, aggregates and consumer products. Our principal products are gray portland cement, produced and sold through our cement segment; stone, sand and gravel, produced and sold through our aggregates segment; and ready-mix concrete, produced and sold through our consumer products segment. Other products include expanded shale and clay lightweight aggregates, produced and sold through our aggregates segment, and packaged concrete mix, mortar, sand and related products, produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California.
Management uses segment operating profit as its principal measure to assess performance and to allocate resources. Business segment operating profit consists of net sales less operating costs and expenses that are directly attributable to the segment. Corporate includes non-operating income and expenses related to administrative, financial, legal, human resources environmental and real estate activities. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation or adjusted to reflect changes we made to prior period interim financial information related to our aggregate inventory in conjunction with our audited financial statements for the year ended May 31, 2009. See Note 1 of Notes to Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the year ended May 31, 2009.
During the three-month and six-month periods ended November 30, 2009, the economy in both our California and Texas market areas continued to be challenging. In addition, during the three-month period ended November 30, 2009, abnormally inclement weather in our Texas market area further impacted already depressed construction activity. We have continued to manage our production to more closely match market demand, reduce costs and manage our cash position. We believe these steps have had a significant positive impact on our operating results and cash flows in the current periods.
Consolidated sales for the three-month period ended November 30, 2009 were $142.9 million, a decrease of $78.9 million from the prior year period. Consolidated cost of products sold for the three-month period ended November 30, 2009 was $126.1 million, a decrease of $69.1 million from the prior year period. Gross profit as a percentage of sales was unchanged. Consolidated sales for the six-month period ended November 30, 2009 were $326.9 million, a decrease of $151.3 million from the prior year period. Consolidated cost of products sold for the six-month period ended November 30, 2009 was $275.9 million, a decrease of $143.0 million from the prior year period. Gross profit as a percentage of sales increased to 16% from 12%.
The effect of lower shipments for all of our major products in the three-month and six-month periods ended November 30, 2009 was offset in part by our efforts to manage costs. Raw material, energy and supplies and maintenance costs decreased in both periods compared to the prior year periods.
Consolidated selling, general and administrative expense for the three-month period ended November 30, 2009 was $15.9 million, unchanged from the prior year period. Consolidated selling, general and administrative expense for the six-month period ended November 30, 2009 was $36.1 million, an increase of $2.9 million from the prior year period. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on the fair value of these awards increased expense $3.1 million for the three-month period ended November 30, 2009 and $9.8 million for the six-month period ended November 30, 2009 from the prior year periods. Our focus on reducing controllable costs lowered overall other expenses $3.1 million in the three-month period ended November 30, 2009 and $6.9 million in the six-month period ended November 30, 2009 from the prior year periods.
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Consolidated other income for the three-month period ended November 30, 2009 was $5.7 million, an increase of $3.5 million from the prior year period. Consolidated other income for the six-month period ended November 30, 2009 was $8.4 million, a decrease of $2.1 million from the prior year period. Sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in gains of $3.4 million in the three-month and six-month periods ended November 30, 2009 and gains of $1.7 million in the six-month period ended November 30, 2008. We have entered into various oil and gas lease agreements on property we own in north Texas. The terms of the agreements include the payment of a lease bonus and royalties on any oil and gas produced. Lease bonus payments received resulted in income of $4.7 million in the six-month period ended November 30, 2008.
Consolidated operating profit for the three-month periods ended November 30, 2009 and November 30, 2008 was $12.6 million and $15.0 million, respectively. Consolidated operating profit for the six-month periods ended November 30, 2009 and November 30, 2008 was $38.4 million and $40.1 million, respectively. The following is a summary of operating results for our business segments and certain other information related to our principal products and non-operating income and expenses.
Cement Operations
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||
In thousands except per unit | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||
Operating Results |
||||||||||||||||||||
Total cement sales |
$ | 61,726 | $ | 98,407 | $ | 140,186 | $ | 209,811 | ||||||||||||
Total other sales and delivery fees |
6,457 | 9,641 | 13,193 | 19,600 | ||||||||||||||||
Total segment sales |
68,183 | 108,048 | 153,379 | 229,411 | ||||||||||||||||
Cost of products sold |
58,359 | 94,206 | 128,218 | 198,763 | ||||||||||||||||
Gross profit |
9,824 | 13,842 | 25,161 | 30,648 | ||||||||||||||||
Selling, general and administrative |
(4,359 | ) | (6,082 | ) | (9,033 | ) | (11,487 | ) | ||||||||||||
Other income |
4,670 | 1,008 | 6,413 | 6,272 | ||||||||||||||||
Operating Profit |
$ | 10,135 | $ | 8,768 | $ | 22,541 | $ | 25,433 | ||||||||||||
Cement |
||||||||||||||||||||
Shipments (tons) |
738 | 1,083 | 1,653 | 2,301 | ||||||||||||||||
Prices ($/ton) |
$ | 83.64 | $ | 90.87 | $ | 84.78 | $ | 91.17 | ||||||||||||
Cost of sales ($/ton) |
$ | 71.98 | $ | 79.04 | $ | 70.16 | $ | 79.15 |
Three months ended November 30, 2009
Cement operating profit for the three-month period ended November 30, 2009 was $10.1 million, an increase of $1.4 million from the prior year period.
Total segment sales for the three-month period ended November 30, 2009 were $68.2 million compared to $108.0 million for the prior year period. Cement sales decreased $36.7 million as construction activity continued to decline in both our Texas and California market areas. Abnormally inclement weather in our Texas market area also contributed to the decline in construction activity during the current period. Our Texas market area accounted for approximately 69% of cement sales in the current period compared to 70% of cement sales in the prior year period. Shipments decreased 34% in our Texas market area and 26% in our California market area. Average cement prices decreased 6% in our Texas market area and 12% in our California market area.
Cost of products sold for the three-month period ended November 30, 2009 decreased $35.8 million from the prior year period primarily due to lower shipments and our efforts to manage costs. Cement unit costs decreased 9% from the prior year period on lower raw materials and supplies and maintenance costs. Supplies and maintenance costs in the prior year period included approximately $8 million related to scheduled maintenance at our north Texas cement plant.
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Selling, general and administrative expense for the three-month period ended November 30, 2009 decreased $1.7 million from the prior year period. Lower overall expenses, including wages and benefits, marketing, travel, and legal, professional and other outside service expenses, as a result of our focus on reducing costs were offset in part by $0.5 million higher defined benefit plan expense.
Other income for the three-month period ended November 30, 2009 increased $3.7 million from the prior year period. In addition to increased royalty income of $0.3 million, other income in the current period includes gains of $3.4 million from sales of emission credits associated with our Crestmore cement plant in Riverside, California.
Six months ended November 30, 2009
Cement operating profit for the six-month period ended November 30, 2009 was $22.5 million, a decrease of $2.9 million from the prior year period.
Total segment sales for the six-month period ended November 30, 2009 were $153.4 million compared to $229.4 million for the prior year period. Cement sales decreased $69.6 million as construction activity continued to decline in both our Texas and California market areas. Abnormally inclement weather in our Texas market area also contributed to the decline in construction activity during the last three months of the current period. Our Texas market area accounted for approximately 70% of cement sales in both the current and prior periods. Shipments decreased 29% in our Texas market area and 25% in our California market area. Average cement prices decreased 5% in our Texas market area and 13% in our California market area.
Cost of products sold for the six-month period ended November 30, 2009 decreased $70.5 million from the prior year period primarily due to lower shipments and our efforts to manage costs. Cement unit costs decreased 11% from the prior year period on lower raw materials and supplies and maintenance costs. Supplies and maintenance costs in the prior year period included approximately $8 million, $6 million and $3 million related to scheduled maintenance at our north Texas, central Texas and Oro Grande, California cement plants, respectively.
Selling, general and administrative expense for the six-month period ended November 30, 2009 decreased $2.5 million from the prior year period. Lower overall expenses, including wages and benefits, marketing, travel, and legal, professional and other outside service expenses, as a result of our focus on reducing costs were offset in part by $0.4 million higher provisions for bad debts and $1.0 million higher defined benefit plan expense.
Other income for the six-month period ended November 30, 2009 increased $0.1 million from the prior year period. In addition to increased gains from routine sales of surplus operating assets of $0.8 million and royalty income of $0.4 million, other income in the current period includes gains of $3.4 million from sales of emission credits associated with our Crestmore cement plant in Riverside, California. Other income in the prior period included a lease bonus payment of $2.8 million received upon the execution of an oil and gas lease agreement on property we own in north Texas and a gain of $1.7 million from the sale of emission credits associated with our Crestmore cement plant in Riverside, California.
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Aggregate Operations
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||||||
In thousands except per unit | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
Operating Results |
||||||||||||||||||||||||
Total stone, sand and gravel sales |
$ | 20,217 | $ | 35,667 | $ | 48,011 | $ | 76,346 | ||||||||||||||||
Total other sales and delivery fees |
16,070 | 24,838 | 38,377 | 55,956 | ||||||||||||||||||||
Total segment sales |
36,287 | 60,505 | 86,388 | 132,302 | ||||||||||||||||||||
Cost of products sold |
32,001 | 51,908 | 71,156 | 111,364 | ||||||||||||||||||||
Gross profit |
4,286 | 8,597 | 15,232 | 20,938 | ||||||||||||||||||||
Selling, general and administrative |
(2,489 | ) | (3,506 | ) | (5,194 | ) | (7,329 | ) | ||||||||||||||||
Other income |
432 | 463 | 830 | 870 | ||||||||||||||||||||
Operating Profit |
$ | 2,229 | $ | 5,554 | $ | 10,868 | $ | 14,479 | ||||||||||||||||
Stone, sand and gravel |
||||||||||||||||||||||||
Shipments (tons) |
2,642 | 4,605 | 6,065 | 9,806 | ||||||||||||||||||||
Prices ($/ton) |
$ | 7.65 | $ | 7.74 | $ | 7.92 | $ | 7.79 | ||||||||||||||||
Cost of sales ($/ton) |
$ | 7.03 | $ | 6.62 | $ | 6.61 | $ | 6.44 |
Three months ended November 30, 2009
Aggregate operating profit for the three-month period ended November 30, 2009 was $2.2 million, a decrease of $3.3 million from the prior year period.
Total segment sales for the three-month period ended November 30, 2009 were $36.3 million compared to $60.5 million for the prior year period. Stone, sand and gravel sales decreased $15.5 million on 1% lower average prices and 43% lower shipments as construction activity continued to decline in our Texas market area. Abnormally inclement weather also contributed to the decline in construction activity during the current period.
Cost of products sold for the three-month period ended November 30, 2009 decreased $19.9 million from the prior year period primarily due to lower shipments. Overall stone, sand and gravel unit costs increased 6% from the prior year period.
Selling, general and administrative expense for the three-month period ended November 30, 2009 decreased $1.0 million from the prior year period primarily due to lower overall expenses, including wages and benefits, marketing, travel and outside service expenses, as a result of our focus on reducing costs.
Other income for the three-month period ended November 30, 2009 was comparable to the prior year period.
Six months ended November 30, 2009
Aggregate operating profit for the six-month period ended November 30, 2009 was $10.9 million, a decrease of $3.6 million from the prior year period.
Total segment sales for the six-month period ended November 30, 2009 were $86.4 million compared to $132.3 million for the prior year period. Stone, sand and gravel sales decreased $28.3 million on 2% higher average prices and 38% lower shipments as construction activity continued to decline in our Texas market area. Abnormally inclement weather also contributed to the decline in construction activity during the last three months of the current period.
Cost of products sold for the six-month period ended November 30, 2009 decreased $40.2 million from the prior year period primarily due to lower shipments. Overall stone, sand and gravel unit costs increased 3% from the prior year period.
Selling, general and administrative expense for the six-month period ended November 30, 2009 decreased $2.1 million from the prior year period primarily due to lower overall expenses, including wages and benefits, marketing, travel and outside service expenses, as a result of our focus on reducing costs.
Other income for the six-month period ended November 30, 2009 was comparable to the prior year period.
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Consumer Products Operations
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||||||
In thousands except per unit | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
Operating Results |
||||||||||||||||||||||||
Total ready-mix concrete sales |
$ | 41,720 | $ | 64,832 | $ | 95,773 | $ | 143,726 | ||||||||||||||||
Total other sales and delivery fees |
12,733 | 15,812 | 28,218 | 32,142 | ||||||||||||||||||||
Total segment sales |
54,453 | 80,644 | 123,991 | 175,868 | ||||||||||||||||||||
Cost of products sold |
51,691 | 76,429 | 113,407 | 168,173 | ||||||||||||||||||||
Gross profit |
2,762 | 4,215 | 10,584 | 7,695 | ||||||||||||||||||||
Selling, general and administrative |
(2,749 | ) | (3,716 | ) | (5,953 | ) | (8,031 | ) | ||||||||||||||||
Other income |
268 | 180 | 401 | 565 | ||||||||||||||||||||
Operating Profit (Loss) |
$ | 281 | $ | 679 | $ | 5,032 | $ | 229 | ||||||||||||||||
Ready-mix concrete |
||||||||||||||||||||||||
Shipments (cubic yards) |
501 | 769 | 1,113 | 1,716 | ||||||||||||||||||||
Prices ($/cubic yard) |
$ | 83.02 | $ | 84.37 | $ | 86.01 | $ | 83.78 | ||||||||||||||||
Cost of sales ($/cubic yard) |
$ | 80.98 | $ | 81.96 | $ | 80.39 | $ | 81.52 |
Three months ended November 30, 2009
Consumer products operating profit for the three-month period ended November 30, 2009 was $0.3 million, a decrease of $0.4 million from the prior year period.
Total segment sales for the three-month period ended November 30, 2009 were $54.5 million compared to $80.6 million for the prior year period. Ready-mix concrete sales for the three-month period ended November 30, 2009 decreased $23.1 million on 2% lower average prices and 35% lower shipments as construction activity continued to decline in our Texas market area. Abnormally inclement weather also contributed to the decline in construction activity during the current period.
Cost of products sold for the three-month period ended November 30, 2009 decreased $24.7 million from the prior year period. Overall ready-mix concrete unit costs decreased 1% from the prior year period primarily due to lower raw material costs offset in part by the effect of lower shipments. Our raw material unit costs including the cost of transportation decreased approximately 11% from the prior year period.
Selling, general and administrative expense for the three-month period ended November 30, 2009 decreased $1.0 million from the prior year period primarily due to lower overall expenses, including wages and benefits, marketing, travel and outside service expenses, as a result of our focus on reducing costs.
Other income for the three-month period ended November 30, 2009 increased $0.1 million from the prior year period. Other income in the current period includes gains of $0.2 million from routine sales of surplus operating assets.
Six months ended November 30, 2009
Consumer products operating profit for the six-month period ended November 30, 2009 was $5.0 million, an increase of $4.8 million from the prior year period.
Total segment sales for the six-month period ended November 30, 2009 were $124.0 million compared to $175.9 million for the prior year period. Ready-mix concrete sales for the six-month period ended November 30, 2009 decreased $48.0 million on 3% higher average prices and 35% lower shipments as construction activity continued to decline in our Texas market area. Abnormally inclement weather also contributed to the decline in construction activity during the last three months of the current period.
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Cost of products sold for the six-month period ended November 30, 2009 decreased $54.8 million from the prior year period. Overall ready-mix concrete unit costs decreased 1% from the prior year period primarily due to lower raw material and supplies and maintenance costs offset in part by the effect of lower shipments. Our raw material unit costs including the cost of transportation decreased approximately 9% from the prior year period.
Selling, general and administrative expense for the six-month period ended November 30, 2009 decreased $2.1 million from the prior year period primarily due to lower overall expenses, including wages and benefits, marketing, travel and outside service expenses, as a result of our focus on reducing costs.
Other income for the six-month period ended November 30, 2009 decreased $0.2 million from the prior year period. Other income in the prior year period included lease bonus payments of $0.2 million received upon the execution of oil and gas lease agreements on property we own in north Texas.
Corporate
Three months ended November 30, |
Six months ended November 30, |
|||||||||||||||||||
In thousands | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||
Other income |
$ | 358 | $ | 560 | $ | 736 | $ | 2,745 | ||||||||||||
Selling, general and administrative |
(6,289 | ) | (2,560 | ) | (15,960 | ) | (6,355 | ) | ||||||||||||
$ | (5,931 | ) | $ | (2,000 | ) | $ | (15,224 | ) | $ | (3,610 | ) | |||||||||
Three months ended November 30, 2009
Other income for the three-month period ended November 30, 2009 decreased $0.2 million from the prior year period on lower interest income.
Selling, general and administrative expense for the three-month period ended November 30, 2009 increased $3.7 million from the prior year period. The increase was primarily the result of $3.2 million higher stock-based compensation. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on their fair value reduced stock-based compensation $1.5 million in the three-month period ended November 30, 2009 and reduced stock-based compensation $4.6 million in the three-month period ended November 30, 2008.
Six months ended November 30, 2009
Other income for the six-month period ended November 30, 2009 decreased $2.0 million from the prior year period. In addition to lower interest income of $0.4 million, other income in the prior year period included a lease bonus payment of $1.6 million received upon the execution of an oil and gas lease agreement on property we own in north Texas that is not associated with any business segment.
Selling, general and administrative expense for the six-month period ended November 30, 2009 increased $9.6 million from the prior year period. The increase was primarily the result of $9.8 million higher stock-based compensation. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on their fair value increased stock-based compensation $0.1 million in the six-month period ended November 30, 2009 and reduced stock-based compensation $9.7 million in the six-month period ended November 30, 2008.
Interest
Interest expense incurred for the three-month period ended November 30, 2009 was $13.4 million, all of which was expensed. Interest expense incurred for the three-month period ended November 30, 2008 was $12.5 million, of which $3.2 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $9.3 million was expensed.
Interest expense incurred for the six-month period ended November 30, 2009 was $26.6 million, all of which was expensed. Interest expense incurred for the six-month period ended November 30, 2008 was $21.5 million, of which $5.0 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $16.5 million was expensed.
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Interest expense incurred for the three-month period ended November 30, 2009 increased $0.9 million primarily as a result of higher interest on life insurance policies and debt amortization expense. Interest expense incurred for the six-month period ended November 30, 2009 increased $5.1 million from the prior year period primarily as a result of higher average outstanding debt due to the sale of $300 million aggregate principal amount of additional 7.25% senior notes on August 18, 2008. We have delayed completion of the Hunter, Texas cement plant expansion and do not expect to capitalize any interest in connection with the project during the remainder of fiscal year 2010.
Loss on Debt Retirements
On August 18, 2008, we sold $300 million aggregate principal amount of additional 7.25% senior notes due in 2013 at an offering price of $93.25. The net proceeds were used in part to repay our $150 million senior term loan and borrowings outstanding under our senior revolving credit facility in the amount of $29.5 million. We recognized a loss on debt retirement of $0.9 million representing a write-off of debt issuance costs associated with the mandatory prepayment of the term loan.
Income Taxes
Income taxes for the interim periods ended November 30, 2009 and November 30, 2008 have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% federal statutory corporate rate is due to percentage depletion that is tax deductible, state income taxes and deductions for income from qualified domestic production activities. Our estimated effective tax rate for fiscal year 2010 is 41.4% compared to 28.3% for fiscal year 2009.
LIQUIDITY AND CAPITAL RESOURCES
In addition to cash and cash equivalents of $56.8 million at November 30, 2009, our sources of liquidity include cash from operations and borrowings available under our senior secured revolving credit facility.
Senior Secured Revolving Credit Facility. On June 19, 2009, we amended and restated our credit agreement and the associated security agreement. The credit agreement continues to provide for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit. The credit facility matures on August 15, 2012. Amounts drawn under the credit facility bear annual interest either at the LIBOR rate plus a margin of 3.5% to 4.0% or at a base rate plus a margin of 2.5% to 3.0%. The base rate is the higher of the federal funds rate plus 0.5%, the prime rate established by Bank of America, N.A. or the one-month LIBOR rate plus 1.0%. The interest rate margins are determined based on our leverage ratio. The commitment fee calculated on the unused portion of the credit facility ranges from 0.50% to 0.75% per year based on our leverage ratio. We may terminate the credit facility at any time.
The amount that can be borrowed under the credit facility is limited to an amount based on the value of our consolidated accounts receivable, inventory and mobile equipment. This amount, called the borrowing base, may be less than the $200 million stated principal amount of the credit facility. Our current borrowing base under our amended agreement is $151.6 million. No borrowings were outstanding at November 30, 2009; however, $28.4 million of the borrowing base was utilized to support letters of credit.
All of our consolidated subsidiaries have guaranteed our obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of our existing and future consolidated accounts, inventory, equipment, intellectual property and other personal property, and in all of our equity interests in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries, if any.
The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are not required to maintain any financial ratios or covenants unless an event of default occurs or borrowing availability under the borrowing base is less than $40 million, in which case we must comply with a fixed charge coverage ratio. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.1 to 1.0 and borrowing availability under the borrowing base is more than $50 million. We were in compliance with all of these loan covenants as of November 30, 2009.
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As of November 30, 2009, there have been no material changes to our material contractual obligations described in our Annual Report on Form 10-K for the year ended May 31, 2009.
During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In light of current economic and market conditions, we have delayed completion of the project. We believe it is likely that current cement demand levels in Texas would not permit the new kiln to operate profitably. We expect cement demand to rebound in the future and we will resume construction when future economic and market conditions indicate it is appropriate. The pause in construction began in May 2009. As of November 30, 2009, we have incurred approximately $293.3 million, excluding capitalized interest of approximately $16.3 million related to the project, of which $288.6 million has been expended. We estimate that the project is 85-90% complete. Until we determine the date that we will resume construction, we cannot accurately estimate the cost of completing the project.
On December 18, 2009, we sold a note receivable for $19.9 million representing the outstanding principal amount plus accrued interest. The note was received in connection with the sale of land associated with our expanded shale and clay operations in south Texas in 2006 and had been scheduled to mature May 31, 2010.
We expect cash and cash equivalents, cash from operations and available borrowings under our senior secured revolving credit facility to be sufficient to provide funds for capital expenditure commitments currently estimated at $15 million to $25 million for fiscal year 2010, scheduled debt payments, working capital needs and other general corporate purposes for at least the next year.
Cash Flows
Net cash provided by operating activities for the six-month periods ended November 30, 2009 and November 30, 2008 was $39.9 million and $38.3 million, respectively. The increase was primarily the result of changes in working capital items which offset lower income from operations.
Net cash provided by investing activities for the six-month period ended November 30, 2009 was $0.7 million. Net cash used by investing activities for the six-month period ended November 30, 2008 was $143.3 million.
Capital expenditures, including capitalized interest, incurred in connection with the expansion of our Hunter, Texas cement plant were $4.5 million and $122.1 million for the six-month periods ended November 30, 2009 and November 30, 2008, respectively. Capital expenditures, including capitalized interest, incurred in connection with the expansion and modernization of our Oro Grande, California cement plant were $1.3 million for the six-month period ended November 30, 2008. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain our existing operations were $2.9 million and $51.9 million for the six-month periods ended November 30, 2009 and November 30, 2008, respectively. Capital expenditures in the prior year period include $25.3 million incurred to acquire aggregate operations in central Texas through a tax deferred like-kind-exchange transaction. Completion of our tax deferred like-kind-exchange transactions reduced the cash designated for property acquisitions held by a qualified intermediary trust by $28.7 million.
We elected to receive distributions and policy surrenders from life insurance contracts purchased in connection with certain of our benefit plans totaling $10.1 million and $5.4 million in the six-month periods ended November 30, 2009 and November 30, 2008, respectively. These distributions were offset in part by premiums and fees paid to maintain the policies.
Net cash used by financing activities for the six-month period ended November 30, 2009 was $3.7 million. Net cash provided by financing activities for the six-month period ended November 30, 2008 was $127.7 million.
We sold $300 million aggregate principal amount of additional 7.25% senior notes due in 2013 at an offering price of 93.25% in the six-month period ended November 30, 2008. The net proceeds were used in part to repay our $150 million senior term loan and borrowings outstanding under our senior revolving credit facility in the amount of $29.5 million.
Common dividends paid for the six-month period ended November 30, 2009 does not include our second quarterly cash dividend of $0.075 per share declared on November 18, 2009 but not payable until December 7, 2009.
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OTHER ITEMS
Environmental Matters
We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. See Note 9 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report for a description of certain claims. It is possible that we could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by us.
Market Risk
Historically, we have not entered into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration of our investments, changes in market interest rates would not have a significant impact on their fair value. The fair value of fixed rate debt will vary as interest rates change.
The estimated fair value of each class of financial instrument as of November 30, 2009 and May 31, 2009 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of November 30, 2009, the fair value of our long-term debt, including the current portion, was approximately $541.7 million compared to the carrying amount of $543.8 million. As of May 31, 2009, the fair value of our long-term debt, including the current portion, was approximately $476.8 million compared to the carrying amount of $541.8 million.
Our operations require large amounts of energy and are dependent upon energy sources, including electricity and fossil fuels. Prices for energy are subject to market forces largely beyond our control. We have generally not entered into any long-term contracts to satisfy our fuel and electricity needs, with the exception of coal which we purchase from specific mines pursuant to long-term contracts. However, we continually monitor these markets and we may decide in the future to enter into long-term contracts. If we are unable to meet our requirements for fuel and electricity, we may experience interruptions in our production. Price increases or disruption of the uninterrupted supply of these products could adversely affect our results of operations.
Critical Accounting Policies
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. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting policies that affect the more complex judgments and estimates are described in our Annual Report on Form 10-K for the year ended May 31, 2009.
Management reviews long-lived assets on a facility by facility basis for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset and are significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.
In the fourth quarter of our prior fiscal year, management evaluated the Hunter, Texas cement plant, including the capitalized construction and interest costs associated with the expansion that is currently suspended. We expect the Texas market to recover to pre-recession levels and to complete the expansion project. While the specific timing of the completion will be determined by the level of construction activity in the market, we anticipate completing the project within 2-4 years. Based on historical margins, we believe the undiscounted cash flows over the remaining life of the Hunter plant after completion of the expansion will significantly exceed the current investment in the plant as well as the remaining costs of the expansion and future capital expenditures necessary to achieve these cash flows.
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Management tests goodwill for impairment annually by reporting unit in the fourth quarter of our fiscal year using a two-step process. The first step of the impairment test identifies potential impairment by comparing the fair value of a reporting unit to its carrying value including goodwill. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying value of the reporting unit goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.
Based on an impairment test performed as of May 31, 2009, an impairment charge of $58.4 million was recognized with respect to goodwill resulting from the acquisition of Riverside Cement Company and identified with our California cement operations. The fair value of the reporting unit declined compared to prior evaluations, the most recent of which was as of November 30, 2008, due to a change in assumptions regarding the timing of cash flows expected to be derived from the reporting unit. The extreme depth of the recession in California was better understood at this time and resulted in the expected timing of a full recovery in the California cement market to be later than previously anticipated. The resulting present value of the projected cash flows did not support the carrying value of the goodwill and a full impairment charge was recognized.
Goodwill resulting from the acquisition of ready-mix operations in Texas and Louisiana and identified with our consumer products operations has a carrying value of $1.7 million at both November 30, 2009 and May 31, 2009. Based on an impairment test performed as of March 31, 2009, the fair value of the reporting unit exceeds its carrying value.
Recently Issued Accounting Guidance
In May 2009, the Financial Accounting Standards Board issued new accounting and disclosure guidance for recognized and non-recognized subsequent events that occur after the balance sheet date but before financial statements are issued. The new guidance also requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. This new accounting guidance was effective for our Company beginning with our Quarterly Report on Form 10-Q for the three-month period ended August 31, 2009, and is being applied prospectively. This change in accounting policy had no impact on our consolidated financial statements.
In September 2006, the Financial Accounting Standards Board issued new accounting guidance that defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. This accounting guidance was effective for our Company on June 1, 2008. However, in February 2008, the FASB delayed the effective date of the new guidance for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The new guidance became effective for all nonfinancial assets and nonfinancial liabilities on June 1, 2009. The adoption of this new accounting policy for our nonfinancial assets and nonfinancial liabilities has not had a current material impact on our consolidated financial statements.
Cautionary Statement for Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
Certain statements contained in this quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on our business, the cyclical and seasonal nature of our business, the level of construction activity in our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in the cost or availability of transportation, changes in interest rates, the timing and amount of federal, state and local funding for infrastructure, delays in announced capacity expansions, ongoing volatility and uncertainty in the capital or credit markets, the impact of environmental laws, regulations and claims and changes in governmental and public policy, and the risks and uncertainties described in our reports on Forms 10-K, 10-Q and 8-K. Forward-looking statements speak only as of the date hereof, and we assume no obligation to publicly update such statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of November 30, 2009, there were no material changes to the information about market risk contained in our Annual Report on Form 10-K for the year ended May 31, 2009.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of November 30, 2009.
There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II. OTHER INFORMATION
The information required by this item is included in Note 9 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Shares of our common stock, $1 par value, are traded on the New York Stock Exchange (ticker symbol TXI). The restriction on the payment of dividends is included in Note 3 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
The following provides information concerning matters submitted to a vote at the Annual Meeting of Shareholders on October 22, 2009.
Proposal No. 1. Shareholders elected Marjorie L. Bowen, Dennis A. Johnson and Gary L. Pechota as directors to terms expiring in 2012. Votes regarding the election of directors were as follows:
For | Withheld | |||
Marjorie L. Bowen |
16,661,435 | 1,495,615 | ||
Dennis A. Johnson |
17,873,052 | 283,998 | ||
Gary L. Pechota |
18,120,387 | 36,663 | ||
Gordon E. Forward |
3,897,076 | 371,311 | ||
Keith W. Hughes |
3,912,353 | 356,034 | ||
Henry H. Mauz, Jr. |
3,909,018 | 359,369 |
Proposal No. 2. Shareholders approved the selection of Ernst & Young LLP as independent auditors of the Company to audit its consolidated financial statements for fiscal year 2010 with 22,078,930 shares for, 45,319 shares against and 336,308 shares abstained.
Proposal No. 3. Shareholders approved a shareholder proposal regarding declassifying the Board of Directors with 20,560,040 shares for, 1,864,650 shares against and 35,864 shares abstained.
Proposal No. 4. Shareholders approved a shareholder proposal regarding majority vote for directors with 19,757,547 shares for, 2,668,274 shares against and 34,733 shares abstained.
Proposal No. 5. Shareholders approved a shareholder proposal regarding submitting the shareholder rights agreement to a vote of the shareholders with 20,617,794 shares for, 1,805,944 shares against and 36,816 shares abstained.
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The following exhibits are included herein:
3.1 | Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K dated August 28, 1996) | |
3.2 | By-laws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed January 16, 2009) | |
3.3 | Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006) | |
4.1 | Form of Rights Agreement dated as of November 1, 2006, between Texas Industries, Inc. and Mellon Investor Services, LLC (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on October 20, 2006) | |
4.2 | Form of the Companys 7 1/4% Senior Note due 2013 (CUSIP 882491 AK9) (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K dated June 29, 2005) | |
4.3 | Form of the Companys Notation of Guarantee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated June 29, 2005) | |
4.4 | Form of the Companys 7 1/4% Senior Note due 2013 (CUSIP 882491 AM5) and Notation of Guarantee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed August 19, 2008) | |
4.5 | Form of the Companys 7 1/4% Senior Note due 2013 (CUSIP U88244 AC9) and Notation of Guarantee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed August 19, 2008) | |
4.6 | Registration Rights Agreement, dated July 6, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated June 29, 2005) | |
4.7 | Registration Rights Agreement, dated August 18, 2008, among the Company, the Guarantors and the Initial Purchasers (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed August 19, 2008) | |
4.8 | Indenture, dated July 6, 2005, among the Company, the Guarantors and Wells Fargo, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated June 29, 2005) | |
4.9 | First Supplemental Indenture dated August 18, 2008 among the Company, the Guarantors and the Trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed August 19, 2008) | |
4.10 | Second Supplemental Indenture dated August 18, 2008 among the Company, the Guarantors and the Trustee (incorporated by reference to Exhibit 4.5 to Current Report on Form 8-K filed August 19, 2008) | |
10.1 | Purchase Agreement, dated June 29, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated June 29, 2005) | |
10.2 | Purchase Agreement, dated August 7, 2008, among the Company, the Guarantors and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 13, 2008) | |
10.3 | Second Amended and Restated Credit Agreement, dated June 19, 2009, among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the lenders that are parties thereto | |
10.4 | First Amendment to Second Amended and Restated Credit Agreement, dated June 19, 2009, among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the lenders that are parties thereto (incorporated by reference to Exhibit 10.2 to Report on Form 8-K filed on June 25, 2009) | |
10.5 | Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent | |
10.6 | Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated June 29, 2005) |
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10.7 | Amendment No. 1 to Separation and Distribution Agreement dated as of July 27, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated July 27, 2005) | |
10.8 | Tax Sharing and Indemnification Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K dated June 29, 2005) | |
10.9 | Employment Agreement of Mel G. Brekhus (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 22, 2007) | |
10.10 | Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 as filed May 19, 1994, File No. 033-53715) | |
10.11 | Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007) | |
10.12 | Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006) | |
10.13 | Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009) | |
10.14 | TXI Annual Incentive Plans-Fiscal Year 2010 (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed on July 17, 2009) | |
10.15 | TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2010 (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on July 13, 2007) | |
10.16 | TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2011 (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed on July 11, 2008) | |
10.17 | TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2012 (incorporated by reference to Exhibit 10.17 to Annual Report on Form 10-K filed on July 17, 2009) | |
10.18 | Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006) | |
10.19 | Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005) | |
10.20 | Form of SAR Agreement for Non-Employee Directors under Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on August 12, 2005) | |
10.21 | Form of Amendment No. 1 to SAR Agreement for Non-Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K dated April 19, 2006) | |
10.22 | SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan between Texas Industries, Inc. and Mel G. Brekhus, dated June 1, 2004 (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K filed on July 25, 2006) | |
10.23 | Amendment No. 1 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated April 24, 2006 (incorporated by reference to Exhibit 10.23 to Annual Report on Form 10-K filed on July 25, 2006) | |
10.24 | Contract, dated September 27, 2005, between Riverside Cement Company and Oro Grande Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated September 27, 2005, noting that portions of the exhibit were omitted pursuant to a request for confidential treatment) | |
10.25 | Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated January 18, 2006) |
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10.26 | Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended | |
10.27 | Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended | |
10.28 | Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated April 19, 2006) | |
10.29 | Amendment No. 2 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, between Texas Industries, Inc. and Mel G. Brekhus dated July 11, 2007 (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K filed on July 13, 2007) | |
10.30 | Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment) | |
10.31 | Amendment No. 1 to Employment Agreement of Mel G. Brekhus dated March 26, 2009 (incorporated by reference to Exhibit 10.33 in Quarterly Report on Form 10-Q filed on March 27, 2009) | |
10.32 | Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009) | |
12.1 | Computation of Ratios of Earnings to Fixed Charges | |
15.1 | Letter re: Unaudited Interim Financial Information | |
31.1 | Certification of Chief Executive Officer | |
31.2 | Certification of Chief Financial Officer | |
32.1 | Section 1350 Certification of Chief Executive Officer | |
32.2 | Section 1350 Certification of Chief Financial Officer |
The remaining exhibits have been omitted because they are not applicable or the information required therein is included elsewhere in the financial statements or notes thereto.
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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.
TEXAS INDUSTRIES, INC. | ||
January 7, 2010 | /s/ Kenneth R. Allen | |
Kenneth R. Allen | ||
Vice President Finance, Chief Financial Officer and Treasurer | ||
(Principal Financial Officer) | ||
January 7, 2010 | /s/ T. Lesley Vines | |
T. Lesley Vines | ||
Vice President Corporate Controller and Assistant Treasurer | ||
(Principal Accounting Officer) |
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INDEX TO EXHIBITS
Exhibit Number |
||
3.1 |
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K dated August 28, 1996) | |
3.2 |
By-laws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed January 16, 2009) | |
3.3 |
Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006) | |
4.1 |
Form of Rights Agreement dated as of November 1, 2006, between Texas Industries, Inc. and Mellon Investor Services, LLC (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on October 20, 2006) | |
4.2 |
Form of the Companys 7 1/4% Senior Note due 2013 (CUSIP 882491 AK9) (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K dated June 29, 2005) | |
4.3 |
Form of the Companys Notation of Guarantee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated June 29, 2005) | |
4.4 |
Form of the Companys 7 1/4% Senior Note due 2013 (CUSIP 882491 AM5) and Notation of Guarantee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed August 19, 2008) | |
4.5 |
Form of the Companys 7 1/4% Senior Note due 2013 (CUSIP U88244 AC9) and Notation of Guarantee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed August 19, 2008) | |
4.6 |
Registration Rights Agreement, dated July 6, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated June 29, 2005) | |
4.7 |
Registration Rights Agreement, dated August 18, 2008, among the Company, the Guarantors and the Initial Purchasers (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed August 19, 2008) | |
4.8 |
Indenture, dated July 6, 2005, among the Company, the Guarantors and Wells Fargo, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated June 29, 2005) | |
4.9 |
First Supplemental Indenture dated August 18, 2008 among the Company, the Guarantors and the Trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed August 19, 2008) | |
4.10 |
Second Supplemental Indenture dated August 18, 2008 among the Company, the Guarantors and the Trustee (incorporated by reference to Exhibit 4.5 to Current Report on Form 8-K filed August 19, 2008) | |
10.1 |
Purchase Agreement, dated June 29, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated June 29, 2005) | |
10.2 |
Purchase Agreement, dated August 7, 2008, among the Company, the Guarantors and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 13, 2008) | |
10.3 |
Second Amended and Restated Credit Agreement, dated June 19, 2009, among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the lenders that are parties thereto | |
10.4 |
First Amendment to Second Amended and Restated Credit Agreement, dated June 19, 2009, among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the lenders that are parties thereto (incorporated by reference to Exhibit 10.2 to Report on Form 8-K filed on June 25, 2009) | |
10.5 |
Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent |
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Index to Exhibits-(Continued)
Exhibit Number |
||
10.6 |
Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated June 29, 2005) | |
10.7 |
Amendment No. 1 to Separation and Distribution Agreement dated as of July 27, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated July 27, 2005) | |
10.8 |
Tax Sharing and Indemnification Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K dated June 29, 2005) | |
10.9 |
Employment Agreement of Mel G. Brekhus (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 22, 2007) | |
10.10 |
Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 as filed May 19, 1994, File No. 033-53715) | |
10.11 |
Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007) | |
10.12 |
Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006) | |
10.13 |
Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009) | |
10.14 |
TXI Annual Incentive Plans-Fiscal Year 2010 (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed on July 17, 2009) | |
10.15 |
TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2010 (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on July 13, 2007) | |
10.16 |
TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2011 (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed on July 11, 2008) | |
10.17 |
TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2012 (incorporated by reference to Exhibit 10.17 to Annual Report on Form 10-K filed on July 17, 2009) | |
10.18 |
Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006) | |
10.19 |
Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005) | |
10.20 |
Form of SAR Agreement for Non-Employee Directors under Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on August 12, 2005) | |
10.21 |
Form of Amendment No. 1 to SAR Agreement for Non-Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K dated April 19, 2006) | |
10.22 |
SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan between Texas Industries, Inc. and Mel G. Brekhus, dated June 1, 2004 (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K filed on July 25, 2006) |
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Index to Exhibits-(Continued)
Exhibit Number |
||
10.23 |
Amendment No. 1 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated April 24, 2006 (incorporated by reference to Exhibit 10.23 to Annual Report on Form 10-K filed on July 25, 2006) | |
10.24 |
Contract, dated September 27, 2005, between Riverside Cement Company and Oro Grande Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated September 27, 2005, noting that portions of the exhibit were omitted pursuant to a request for confidential treatment) | |
10.25 |
Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated January 18, 2006) | |
10.26 |
Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended | |
10.27 |
Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended | |
10.28 |
Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated April 19, 2006) | |
10.29 |
Amendment No. 2 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, between Texas Industries, Inc. and Mel G. Brekhus dated July 11, 2007 (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K filed on July 13, 2007) | |
10.30 |
Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment) | |
10.31 |
Amendment No. 1 to Employment Agreement of Mel G. Brekhus dated March 26, 2009 (incorporated by reference to Exhibit 10.33 in Quarterly Report on Form 10-Q filed on March 27, 2009) | |
10.32 |
Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009) | |
12.1 |
Computation of Ratios of Earnings to Fixed Charges | |
15.1 |
Letter re: Unaudited Interim Financial Information | |
31.1 |
Certification of Chief Executive Officer | |
31.2 |
Certification of Chief Financial Officer | |
32.1 |
Section 1350 Certification of Chief Executive Officer | |
32.2 |
Section 1350 Certification of Chief Financial Officer |
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