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Table of Contents
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 August 31, 2010
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 | (IRS Employer Identification No.) | |||
Incorporation or Organization) |
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 [X] 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 27,808,142 shares of the Registrants Common Stock, $1.00 par value, outstanding as of September 20, 2010.
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TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
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Item 1. | Financial Statements |
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) August 31, |
May 31, | |||||||
In thousands | 2010 | 2010 | ||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 162,427 | $ | 74,946 | ||||
Receivables net |
107,217 | 112,184 | ||||||
Inventories |
148,741 | 142,419 | ||||||
Deferred income taxes and prepaid expenses |
22,673 | 23,426 | ||||||
TOTAL CURRENT ASSETS |
441,058 | 352,975 | ||||||
PROPERTY, PLANT AND EQUIPMENT |
||||||||
Land and land improvements |
158,094 | 158,367 | ||||||
Buildings |
58,371 | 58,351 | ||||||
Machinery and equipment |
1,217,852 | 1,220,021 | ||||||
Construction in progress |
324,760 | 322,039 | ||||||
1,759,077 | 1,758,778 | |||||||
Less depreciation and depletion |
618,706 | 604,269 | ||||||
1,140,371 | 1,154,509 | |||||||
OTHER ASSETS |
||||||||
Goodwill |
1,715 | 1,715 | ||||||
Real estate and investments |
6,223 | 6,774 | ||||||
Deferred charges and other |
22,398 | 15,774 | ||||||
30,336 | 24,263 | |||||||
$ | 1,611,765 | $ | 1,531,747 | |||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | 54,659 | $ | 56,214 | ||||
Accrued interest, compensation and other |
45,805 | 51,455 | ||||||
Current portion of long-term debt |
13,341 | 234 | ||||||
TOTAL CURRENT LIABILITIES |
113,805 | 107,903 | ||||||
LONG-TERM DEBT |
652,459 | 538,620 | ||||||
DEFERRED INCOME TAXES AND OTHER CREDITS |
108,400 | 123,976 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 27,807 and 27,796 shares, respectively |
27,807 | 27,796 | ||||||
Additional paid-in capital |
476,901 | 475,584 | ||||||
Retained earnings |
246,240 | 272,018 | ||||||
Accumulated other comprehensive loss |
(13,847 | ) | (14,150 | ) | ||||
737,101 | 761,248 | |||||||
$ | 1,611,765 | $ | 1,531,747 | |||||
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Three months ended August 31, |
||||||||||||
In thousands except per share |
2010 | 2009 | ||||||||||
NET SALES |
$ | 172,122 | $ | 183,957 | ||||||||
Cost of products sold |
156,014 | 149,852 | ||||||||||
GROSS PROFIT |
16,108 | 34,105 | ||||||||||
Selling, general and administrative |
16,141 | 20,254 | ||||||||||
Interest |
14,411 | 13,244 | ||||||||||
Loss on debt retirements |
29,006 | -- | ||||||||||
Other income |
(4,890 | ) | (2,652 | ) | ||||||||
54,668 | 30,846 | |||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
(38,560 | ) | 3,259 | |||||||||
Income taxes (benefit) |
(14,868 | ) | 1,544 | |||||||||
NET INCOME (LOSS) |
$ | (23,692 | ) | $ | 1,715 | |||||||
Net income (loss) per share |
||||||||||||
Basic |
$ | (.85 | ) | $ | .06 | |||||||
Diluted |
$ | (.85 | ) | $ | .06 | |||||||
Average shares outstanding |
||||||||||||
Basic |
27,787 | 27,720 | ||||||||||
Diluted |
27,787 | 27,940 | ||||||||||
Cash dividends declared per share |
$ | .075 | $ | .075 | ||||||||
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Three months ended August 31, |
||||||||||||
In thousands | 2010 | 2009 | ||||||||||
OPERATING ACTIVITIES |
||||||||||||
Net income (loss) |
$ | (23,692 | ) | $ | 1,715 | |||||||
Adjustments to reconcile net income (loss) to cash provided by operating activities |
||||||||||||
Depreciation, depletion and amortization |
15,861 | 16,594 | ||||||||||
Gains on asset disposals |
(1,613 | ) | (1,030 | ) | ||||||||
Deferred income taxes (benefit) |
(14,973 | ) | 743 | |||||||||
Stock-based compensation expense (credit) |
(230 | ) | 2,643 | |||||||||
Excess tax benefits from stock-based compensation |
-- | (211 | ) | |||||||||
Loss on debt retirements |
29,006 | -- | ||||||||||
Other net |
2,192 | (221 | ) | |||||||||
Changes in operating assets and liabilities |
||||||||||||
Receivables net |
4,413 | (888 | ) | |||||||||
Inventories |
(6,322 | ) | 757 | |||||||||
Prepaid expenses |
1,297 | 1,074 | ||||||||||
Accounts payable and accrued liabilities |
(7,284 | ) | (6,638 | ) | ||||||||
Net cash provided (used) by operating activities |
(1,345 | ) | 14,538 | |||||||||
INVESTING ACTIVITIES |
||||||||||||
Capital expenditures expansions |
(1,374 | ) | (4,569 | ) | ||||||||
Capital expenditures other |
(1,782 | ) | (804 | ) | ||||||||
Proceeds from asset disposals |
3,209 | 1,068 | ||||||||||
Investments in life insurance contracts |
327 | 5,802 | ||||||||||
Other net |
292 | (19 | ) | |||||||||
Net cash provided by investing activities |
672 | 1,478 | ||||||||||
FINANCING ACTIVITIES |
||||||||||||
Long-term borrowings |
650,000 | -- | ||||||||||
Debt retirements |
(547,736 | ) | (59 | ) | ||||||||
Debt issuance costs |
(12,250 | ) | (2,032 | ) | ||||||||
Stock option exercises |
225 | 331 | ||||||||||
Excess tax benefits from stock-based compensation |
-- | 211 | ||||||||||
Common dividends paid |
(2,085 | ) | (2,080 | ) | ||||||||
Net cash provided (used) by financing activities |
88,154 | (3,629 | ) | |||||||||
Increase in cash and cash equivalents |
87,481 | 12,387 | ||||||||||
Cash and cash equivalents at beginning of period |
74,946 | 19,796 | ||||||||||
Cash and cash equivalents at end of period |
$ | 162,427 | $ | 32,183 | ||||||||
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 three-month period ended August 31, 2010, are not necessarily indicative of the results that may be expected for the year ended May 31, 2011. 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, 2010.
Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.
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 August 31, 2010 and May 31, 2010 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 August 31, 2010, the fair value of our long-term debt, including the current portion, was approximately $666.3 million compared to the carrying amount of $665.8 million. As of May 31, 2010, the fair value of our long-term debt, including the current portion, was approximately $534.8 million compared to the carrying amount of $538.9 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. 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 and Goodwill Impairment. 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.
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 August 31, 2010 and May 31, 2010. Based on an impairment test performed as of March 31, 2010, the fair value of the reporting unit exceeds its carrying value, and therefore, no potential impairment was identified.
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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 $5.9 million at both August 31, 2010 and May 31, 2010.
Investments include life insurance contracts purchased in connection with certain of our benefit plans. The contracts, recorded at their net cash surrender value, totaled $0.2 million (net of distributions of $81.2 million plus accrued interest and fees) at August 31, 2010 and $0.8 million (net of distributions of $82.8 million plus accrued interest and fees) at May 31, 2010. 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. Proceeds received from the policies were $0.3 million and $8.1 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively.
Deferred Charges and Other. Deferred charges are composed primarily of debt issuance costs that totaled $15.2 million at August 31, 2010 and $8.8 million at May 31, 2010. The costs are amortized over the term of the related debt.
Other Credits. Other credits totaled $82.5 million at August 31, 2010 and $83.9 million at May 31, 2010 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:
Three months ended August 31, |
||||||||||||
In thousands | 2010 | 2009 | ||||||||||
Balance at beginning of period |
$ | 4,474 | $ | 4,415 | ||||||||
Additions |
9 | -- | ||||||||||
Accretion expense |
68 | 83 | ||||||||||
Settlements |
(38 | ) | (5 | ) | ||||||||
Balance at end of period |
$ | 4,513 | $ | 4,493 | ||||||||
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 $13.8 million (net of tax of $8.0 million) at August 31, 2010 and $14.2 million (net of tax of $8.2 million) at May 31, 2010.
Comprehensive income (loss) for the three-month periods ending August 31, 2010 and August 31, 2009 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 $(23.4) million and $2.0 million in the three-month periods ended August 31, 2010 and August 31, 2009, 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 $1.6 million and $1.0 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. In addition, other income includes a gain of $1.7 million from the sale of emissions credits associated with our Crestmore cement plant in Riverside, California in the three-month period ended August 31, 2010.
Stock-based Compensation. We have provided stock-based compensation to employees and non-employee directors in the form of non-qualified and incentive stock options, restricted stock, stock appreciation rights, deferred compensation agreements and stock awards. 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 vested shares under our former stock awards program and to deferred compensation agreements in which directors elected to defer their fees. Vested stock award shares are issued in the year in which the employee reaches age 60. 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.
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 August 31, |
||||||||
In thousands except per share | 2010 | 2009 | ||||||
Basic earnings |
||||||||
Net income (loss) |
$ | (23,692 | ) | $ | 1,715 | |||
Unvested restricted share participation |
12 | (1 | ) | |||||
Basic income (loss) |
$ | (23,680 | ) | $ | 1,714 | |||
Diluted earnings |
||||||||
Net income (loss) |
$ | (23,692 | ) | $ | 1,715 | |||
Unvested restricted share participation |
12 | (1 | ) | |||||
Diluted income (loss) |
$ | (23,680 | ) | $ | 1,714 | |||
Shares |
||||||||
Weighted-average shares outstanding |
27,799 | 27,727 | ||||||
Contingently issuable shares |
2 | 11 | ||||||
Unvested restricted shares |
(14 | ) | (18 | ) | ||||
Basic weighted-average shares |
27,787 | 27,720 | ||||||
Stock option, restricted share and award dilution |
-- | 220 | ||||||
Diluted weighted-average shares* |
27,787 | 27,940 | ||||||
Net income (loss) per share |
||||||||
Basic |
$ | (.85 | ) | $ | .06 | |||
Diluted |
$ | (.85 | ) | $ | 06 | |||
* Shares excluded due to antidilutive effect |
1,215 | 761 | ||||||
Recently Issued Accounting Guidance. There is no recently issued accounting guidance that we expect will materially impact our financial statements during the current fiscal year.
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2. Working Capital
Working capital totaled $327.3 million at August 31, 2010 compared to $245.1 million at May 31, 2010. Selected components of working capital are summarized below.
Receivables consist of:
August 31, | May 31, | |||||||||
In thousands | 2010 | 2010 | ||||||||
Trade notes and accounts receivable |
$ | 92,361 | $ | 95,120 | ||||||
Income tax receivable |
13,253 | 13,253 | ||||||||
Other |
1,603 | 3,811 | ||||||||
$ | 107,217 | $ | 112,184 | |||||||
Trade notes and accounts receivable are presented net of allowances for doubtful receivables of $2.7 million at August 31, 2010 and $3.5 million at May 31, 2010. Provisions for bad debts charged to expense were $0.7 million and $0.9 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. Uncollectible accounts written off totaled $1.5 million and $0.2 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively.
Inventories consist of:
August 31, | May 31, | |||||||||
In thousands | 2010 | 2010 | ||||||||
Finished products |
$ | 10,306 | $ | 9,632 | ||||||
Work in process |
55,379 | 50,798 | ||||||||
Raw materials |
14,791 | 13,985 | ||||||||
Total inventories at LIFO cost |
80,476 | 74,415 | ||||||||
Finished products |
20,021 | 19,955 | ||||||||
Raw materials |
697 | 891 | ||||||||
Parts and supplies |
47,547 | 47,158 | ||||||||
Total inventories at average cost |
68,265 | 68,004 | ||||||||
Total inventories |
$ | 148,741 | $ | 142,419 | ||||||
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 $44.4 million at August 31, 2010 and $43.1 million at May 31, 2010.
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Accrued interest, compensation and other consist of:
August 31, | May 31, | |||||||||
In thousands | 2010 | 2010 | ||||||||
Interest |
$ | 3,756 | $ | 15,176 | ||||||
Compensation and employee benefits |
15,633 | 13,574 | ||||||||
Casualty insurance claims |
12,774 | 12,595 | ||||||||
Income taxes |
2,569 | 2,526 | ||||||||
Property taxes and other |
11,073 | 7,584 | ||||||||
$ | 45,805 | $ | 51,455 | |||||||
3. Long-Term Debt
Long-term debt consists of:
August 31, | May 31, | |||||||||||
In thousands | 2010 | 2010 | ||||||||||
Senior secured revolving credit facility expiring in 2012 |
$ | -- | $ | -- | ||||||||
9.25% Senior notes due 2020 issued August 10, 2010 at par value |
650,000 | -- | ||||||||||
7.25% Senior notes due 2013 |
||||||||||||
Notes issued July 6, 2005 at par value |
7,713 | 250,000 | ||||||||||
Additional notes issued August 18, 2008, net of unamortized discount of $0.2 million at August 31, 2010 and $13.9 million at May 31, 2010 (effective interest rate 8.98%) |
5,460 | 286,143 | ||||||||||
663,173 | 536,143 | |||||||||||
Capital lease obligations |
2,359 | 2,443 | ||||||||||
Other contract obligations |
268 | 268 | ||||||||||
665,800 | 538,854 | |||||||||||
Less current portion |
(13,341 | ) | (234 | ) | ||||||||
$ | 652,459 | $ | 538,620 | |||||||||
Senior Secured Revolving Credit Facility. The credit agreement provides for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit and a $15 million sub-limit for swing line loans. 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 rate for one-month LIBOR loans 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. The borrowing base under the agreement was $161.2 million as of August 31, 2010. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $40 million, in which case we must maintain a fixed charge coverage ratio of at least 1.1 to 1.0. At August 31, 2010, our fixed charge coverage ratio was .52 to 1.0. Given this ratio, we may use only $121.2 million of the borrowing base as of such date. No borrowings were outstanding at August 31, 2010; however, $31.1 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of August 31, 2010 was $90.1 million.
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 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. When our fixed charge coverage ratio is less than 1.1 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of August 31, 2010.
9.25% Senior Notes. On August 10, 2010, we sold $650 million aggregate principal amount of our 9.25% senior notes due 2020 at an offering price of 100%. The notes were issued under an indenture dated as of August 10, 2010. The net proceeds were used to purchase or redeem all of our outstanding 7.25% senior notes due 2013, with additional proceeds available for general corporate purposes.
At August 31, 2010, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:
Year | Percentage | |
2015 |
104.625% | |
2016 |
103.083% | |
2017 |
101.542% | |
2018 and thereafter |
100.000% |
In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.250% of the principal amount thereof, plus accrued interest with the net cash proceeds from certain equity offerings. 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 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of August 31, 2010.
Refinancing. On July 27, 2010, we commenced a cash tender offer for all of the outstanding $550 million aggregate principal amount of our 7.25% senior notes due 2013 and a solicitation of consents to amend the indenture governing the 7.25% notes. Pursuant to the tender offer and consent solicitation, we purchased $536.6 million aggregate principal amount of the 7.25% notes, and paid an aggregate of $547.7 million in purchase price and consent fees. On September 9, 2010, we redeemed the remaining $13.4 million aggregate principal amount of the 7.25% notes at a price of 101.813% of the principal amount thereof, plus accrued and unpaid interest on the 7.25% notes to the redemption date. As of August 31, 2010, we recognized a loss on debt retirement of $29.0 million representing $11.1 million in consent fees and transaction costs and a write-off of $17.9 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.
Other. Required principal payments on long-term debt, excluding the capital lease obligations, for each of the five years succeeding August 31, 2010 are $13.4 million for 2011 and none for 2012 through 2015. The total amount of interest paid was $23.2 million and $23.5 million during the three-month periods ended August 31, 2010 and August 31, 2009, respectively. The total amount of interest incurred was $14.4 million and $13.2 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively, of which none was capitalized.
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4. Commitments
During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that current cement demand levels in Texas would permit the new kiln to operate profitably if the project was completed as originally scheduled. We expect to resume construction by November 2010. We have not entered into a new construction contract to complete the construction, so no schedule for completion has yet been determined. As of August 31, 2010, we have incurred approximately $295.4 million, excluding capitalized interest of approximately $16.3 million related to the project, of which $290.8 million has been paid. Until we determine the period over which the construction will occur, we cannot accurately estimate the cost of completing the project.
5. Shareholders Equity
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 $5 Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of August 31, 2010. 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 Agreement was amended effective July 19, 2010 to change the final expiration date of the rights to December 31, 2010, unless the rights are earlier redeemed or exchanged by us pursuant to the Rights Agreement.
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. The weighted-average grant date fair value of options granted during the three-month period ended August 31, 2010 was $18.13 based on weighted average assumptions for expected volatility of .420, expected lives of 10 years, risk-free interest rates of 3.68% and expected dividend yields of .85%. No options were granted during the three-month period ended August 31, 2009.
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.
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A summary of option transactions for the three-month period ended August 31, 2010, follows:
Shares Under Option |
Weighted-Average | |||||
Outstanding at May 31, 2010 |
1,764,516 | $ | 38.54 | |||
Granted |
8,000 | 35.10 | ||||
Exercised |
(13,180 | ) | 20.33 | |||
Canceled |
(6,450 | ) | 43.42 | |||
Outstanding at August 31, 2010 |
1,752,886 | $ | 38.65 | |||
Exercisable at August 31, 2010 |
890,386 | $ | 39.34 | |||
The following table summarizes information about stock options outstanding as of August 31, 2010.
Range of Exercise Prices | ||||||||||||
$16.04 - $27.39 | $35.10 - $48.60 | $50.63 - $70.18 | ||||||||||
Options outstanding |
||||||||||||
Shares outstanding |
674,788 | 497,148 | 580,950 | |||||||||
Weighted-average remaining life in years |
5.37 | 7.50 | 5.97 | |||||||||
Weighted-average exercise price |
$22.15 | $39.24 | $57.30 | |||||||||
Options exercisable |
||||||||||||
Shares exercisable |
376,068 | 170,698 | 343,620 | |||||||||
Weighted-average remaining life in years |
3.19 | 4.24 | 5.78 | |||||||||
Weighted-average exercise price |
$20.20 | $44.94 | $57.51 |
Outstanding options expire on various dates to June 1, 2020. As of August 31, 2010, we have reserved 938,650 shares for future awards under the 2004 Plan.
As of August 31, 2010, the aggregate intrinsic value (the difference in the closing market price of our common stock of $30.24 and the exercise price to be paid by the optionee) of stock options outstanding was $5.5 million. The aggregate intrinsic value of exercisable stock options at that date was $3.8 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 $0.2 million and $0.5 million for the three-month periods ended August 31, 2010 and August 31, 2009, 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 August 31, 2010, outstanding stock appreciation rights totaled 133,315 shares, deferred compensation agreements to be settled in cash totaled 101,007 shares, deferred compensation agreements to be settled in common stock totaled 1,798 shares, unvested restricted stock payments totaled 13,667 shares and stock awards totaled 2,323 shares. Other credits include $4.7 million at August 31, 2010 and $6.0 million at May 31, 2010 representing accrued stock-based compensation which is accounted for as liabilities and expected to be settled in cash. Common stock totaling 2.7 million shares at both August 31, 2010 and May 31, 2010 have been reserved for the settlement of stock-based compensation.
Total stock-based compensation included in selling, general and administrative expense (credit) was $(0.2) million and $2.6 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. The impact of changes in our companys stock price on stock-based awards accounted for as liabilities reduced stock-based compensation $1.3 million in the three-month period ended August 31, 2010 and increased stock-based compensation $1.6 million in the three-month period ended August 31, 2009.
Total tax expense (benefit) recognized in our statements of operations for stock-based compensation was $0.3 million and $(0.8) million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. No tax benefit was realized for stock-based compensation in the three-month period ended August 31, 2010. Total tax benefit realized for stock-based compensation was $0.2 million in the three-month period ended August 31, 2009.
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As of August 31, 2010, $9.5 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 August 31, 2010 approximately $3.6 million of this stock-based compensation expense in 2011, $2.7 million in 2012, $1.8 million in 2013, $1.1 million in 2014 and $0.3 million in 2015.
7. Retirement Plans
Riverside Defined Benefit Plans. Approximately 600 employees and retirees of our 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 periods ended August 31, 2010 and August 31, 2009, was as follows:
Pension Benefit | Health Benefit | |||||||||||||||||||||||
In thousands | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||
Service cost |
$ | 125 | $ | 114 | $ | 28 | $ | 27 | ||||||||||||||||
Interest cost |
738 | 791 | 106 | 116 | ||||||||||||||||||||
Expected return on plan assets |
(685 | ) | (585 | ) | -- | -- | ||||||||||||||||||
Amortization of prior service cost |
-- | -- | (194 | ) | (194 | ) | ||||||||||||||||||
Amortization of net actuarial loss |
517 | 500 | 154 | 151 | ||||||||||||||||||||
$ | 695 | $ | 820 | $ | 94 | $ | 100 | |||||||||||||||||
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. Actuarial gains or losses are recognized when incurred. The amount of financial security plan benefit expense charged to costs and expenses for the three-month periods ended August 31, 2010 and August 31, 2009, was as follows:
FSP Benefit | ||||||||||||
In thousands | 2010 | 2009 | ||||||||||
Service cost |
$ | 472 | $ | 469 | ||||||||
Interest cost |
525 | 561 | ||||||||||
Recognized actuarial loss adjustment |
131 | -- | ||||||||||
Participant contributions |
(92 | ) | (95 | ) | ||||||||
$ | 1,036 | $ | 935 | |||||||||
8. Income Taxes
Income taxes for the interim periods ended August 31, 2010 and August 31, 2009 have been included in the accompanying financial statements on the basis of an estimated annual rate. The estimated annualized rate does not include the tax impact of the loss on debt retirements which has been recognized as a discrete item in the three-month period ended August 31, 2010. The estimated annualized rate excluding this charge is 40.6% for fiscal year 2011 compared to 47.4% for fiscal year 2010. 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. We made income tax payments and received income tax refunds of less than $0.1 million in each of the three-month periods ended August 31, 2010 and August 31, 2009.
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 and state tax authorities for years prior to 2007.
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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 operations at the Crestmore cement plant in Riverside, California caused the level of hexavalent chromium, or chrome 6, in the air 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 has 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.
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, 28 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 over 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 the owner of another cement plant located approximately four miles from the Crestmore plant or former owners of the Crestmore plant.
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Since January 2009, eight 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 300 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 the date of this report, none of the plaintiffs in these cases has alleged in their pleadings 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 that arose in the ordinary course of business. In our judgment the ultimate liability, if any, from such legal proceedings will not have a material effect 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.
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The following is a summary of operating results and certain other financial data for our business segments.
Three months ended August 31, |
||||||||||||
In thousands | 2010 | 2009 | ||||||||||
Net sales |
||||||||||||
Cement |
||||||||||||
Sales to external customers |
$ | 63,235 | $ | 72,037 | ||||||||
Intersegment sales |
13,147 | 13,159 | ||||||||||
Aggregates |
||||||||||||
Sales to external customers |
43,074 | 43,240 | ||||||||||
Intersegment sales |
6,896 | 6,861 | ||||||||||
Consumer products |
||||||||||||
Sales to external customers |
65,813 | 68,680 | ||||||||||
Intersegment sales |
665 | 858 | ||||||||||
Eliminations |
(20,708 | ) | (20,878 | ) | ||||||||
Total net sales |
$ | 172,122 | $ | 183,957 | ||||||||
Segment operating profit |
||||||||||||
Cement |
$ | 3,964 | $ | 12,406 | ||||||||
Aggregates |
5,134 | 8,639 | ||||||||||
Consumer products |
751 | 4,751 | ||||||||||
Total segment operating profit |
9,849 | 25,796 | ||||||||||
Corporate |
(4,992 | ) | (9,293 | ) | ||||||||
Interest |
(14,411 | ) | (13,244 | ) | ||||||||
Loss on debt retirements |
(29,006 | ) | -- | |||||||||
Income (loss) before income taxes |
$ | (38,560 | ) | $ | 3,259 | |||||||
Depreciation, depletion and amortization |
||||||||||||
Cement |
$ | 9,149 | $ | 9,341 | ||||||||
Aggregates |
4,772 | 5,067 | ||||||||||
Consumer products |
1,656 | 1,896 | ||||||||||
Corporate |
284 | 290 | ||||||||||
Total depreciation, depletion and amortization |
$ | 15,861 | $ | 16,594 | ||||||||
Capital expenditures |
||||||||||||
Cement |
$ | 1,747 | $ | 4,718 | ||||||||
Aggregates |
1,177 | 480 | ||||||||||
Consumer products |
196 | 151 | ||||||||||
Corporate |
36 | 24 | ||||||||||
Total capital expenditures |
$ | 3,156 | $ | 5,373 | ||||||||
Net sales by product |
||||||||||||
Cement |
$ | 54,550 | $ | 65,331 | ||||||||
Stone, sand and gravel |
20,477 | 21,649 | ||||||||||
Ready-mix concrete |
52,084 | 54,019 | ||||||||||
Other products |
25,880 | 27,369 | ||||||||||
Delivery fees |
19,131 | 15,589 | ||||||||||
Total net sales |
$ | 172,122 | $ | 183,957 | ||||||||
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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Cement segment operating profit includes $1.7 million in the three-month period ended August 31, 2010 from the sale of emission credits associated with our Crestmore cement plant in Riverside, California.
Cement capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant was $1.4 million and $4.6 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. 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.
August 31, | May 31, | |||||||||
In thousands | 2010 | 2010 | ||||||||
Identifiable assets |
||||||||||
Cement |
$ | 1,084,884 | $ | 1,093,301 | ||||||
Aggregates |
220,507 | 229,084 | ||||||||
Consumer products |
89,016 | 85,641 | ||||||||
Corporate |
217,358 | 123,721 | ||||||||
Total assets |
$ | 1,611,765 | $ | 1,531,747 | ||||||
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 due 2013, respectively. On August 10, 2010, Texas Industries, Inc. (the parent company) issued $650 million aggregate principal amount of its 9.25% senior notes due 2020. The net proceeds were used to purchase $536.6 million aggregate principal amount of the 7.25% notes. On September 9, 2010, we redeemed the remaining $13.4 million aggregate principal amount of the 7.25% notes. 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. Prior period information has been reclassified to conform to the current period presentation.
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In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated | ||||||||||||||||||||||
Condensed consolidating balance sheet at August 31, 2010 |
|
|||||||||||||||||||||||||
Cash and cash equivalents |
$ | 161,672 | $ | 755 | $ | -- | $ | 162,427 | ||||||||||||||||||
Receivables - net |
13,253 | 93,964 | -- | 107,217 | ||||||||||||||||||||||
Inventories |
-- | 148,741 | -- | 148,741 | ||||||||||||||||||||||
Deferred income taxes and prepaid expenses |
(29 | ) | 22,702 | -- | 22,673 | |||||||||||||||||||||
Total current assets |
174,896 | 266,162 | -- | 441,058 | ||||||||||||||||||||||
Property, plant and equipment - net |
-- | 1,140,371 | -- | 1,140,371 | ||||||||||||||||||||||
Goodwill |
-- | 1,715 | -- | 1,715 | ||||||||||||||||||||||
Real estate and investments |
216 | 6,007 | -- | 6,223 | ||||||||||||||||||||||
Deferred charges and other |
15,247 | 7,151 | -- | 22,398 | ||||||||||||||||||||||
Investment in subsidiaries |
948,766 | -- | (948,766 | ) | -- | |||||||||||||||||||||
Long-term intercompany receivables |
265,640 | 18,749 | (284,389 | ) | -- | |||||||||||||||||||||
Total assets |
$ | 1,404,765 | $ | 1,440,155 | $ | (1,233,155 | ) | $ | 1,611,765 | |||||||||||||||||
Accounts payable |
$ | 142 | $ | 54,517 | $ | -- | $ | 54,659 | ||||||||||||||||||
Accrued interest, compensation and other |
7,188 | 38,617 | -- | 45,805 | ||||||||||||||||||||||
Current portion of long-term debt |
13,173 | 168 | -- | 13,341 | ||||||||||||||||||||||
Total current liabilities |
20,503 | 93,302 | -- | 113,805 | ||||||||||||||||||||||
Long-term debt |
650,268 | 2,191 | -- | 652,459 | ||||||||||||||||||||||
Long-term intercompany payables |
18,749 | 265,640 | (284,389 | ) | -- | |||||||||||||||||||||
Deferred income taxes and other credits |
(21,856 | ) | 130,256 | -- | 108,400 | |||||||||||||||||||||
Shareholders equity |
737,101 | 948,766 | (948,766 | ) | 737,101 | |||||||||||||||||||||
Total liabilities and shareholders equity |
$ | 1,404,765 | $ | 1,440,155 | $ | (1,233,155 | ) | $ | 1,611,765 | |||||||||||||||||
Condensed consolidating balance sheet at May 31, 2010 |
|
|||||||||||||||||||||||||
Cash and cash equivalents |
$ | 72,492 | $ | 2,454 | $ | -- | $ | 74,946 | ||||||||||||||||||
Receivables - net |
13,253 | 98,931 | -- | 112,184 | ||||||||||||||||||||||
Inventories |
-- | 142,419 | -- | 142,419 | ||||||||||||||||||||||
Deferred income taxes and prepaid expenses |
152 | 23,274 | -- | 23,426 | ||||||||||||||||||||||
Total current assets |
85,897 | 267,078 | -- | 352,975 | ||||||||||||||||||||||
Property, plant and equipment - net |
-- | 1,154,509 | -- | 1,154,509 | ||||||||||||||||||||||
Goodwill |
-- | 1,715 | -- | 1,715 | ||||||||||||||||||||||
Real estate and investments |
767 | 6,007 | -- | 6,774 | ||||||||||||||||||||||
Deferred charges and other |
8,805 | 6,969 | -- | 15,774 | ||||||||||||||||||||||
Investment in subsidiaries |
945,210 | -- | (945,210 | ) | -- | |||||||||||||||||||||
Long-term intercompany receivables |
288,174 | 18,755 | (306,929 | ) | -- | |||||||||||||||||||||
Total assets |
$ | 1,328,853 | $ | 1,455,033 | $ | (1,252,139 | ) | $ | 1,531,747 | |||||||||||||||||
Accounts payable |
$ | 84 | $ | 56,130 | $ | -- | $ | 56,214 | ||||||||||||||||||
Accrued interest, compensation and other |
18,725 | 32,730 | -- | 51,455 | ||||||||||||||||||||||
Current portion of long-term debt |
-- | 234 | -- | 234 | ||||||||||||||||||||||
Total current liabilities |
18,809 | 89,094 | -- | 107,903 | ||||||||||||||||||||||
Long-term debt |
536,411 | 2,209 | -- | 538,620 | ||||||||||||||||||||||
Long-term intercompany payables |
18,755 | 288,174 | (306,929 | ) | -- | |||||||||||||||||||||
Deferred income taxes and other credits |
(6,370 | ) | 130,346 | -- | 123,976 | |||||||||||||||||||||
Shareholders equity |
761,248 | 945,210 | (945,210 | ) | 761,248 | |||||||||||||||||||||
Total liabilities and shareholders equity |
$ | 1,328,853 | $ | 1,455,033 | $ | (1,252,139 | ) | $ | 1,531,747 | |||||||||||||||||
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Table of Contents
In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated | ||||||||||||||||||||||
Condensed consolidating statement of operations for the three months ended August 31, 2010 |
|
|||||||||||||||||||||||||
Net sales |
$ | -- | $ | 172,122 | $ | -- | $ | 172,122 | ||||||||||||||||||
Cost of products sold |
-- | 156,014 | -- | 156,014 | ||||||||||||||||||||||
Gross profit |
-- | 16,108 | -- | 16,108 | ||||||||||||||||||||||
Selling, general and administrative |
660 | 15,481 | -- | 16,141 | ||||||||||||||||||||||
Interest |
14,365 | 928 | (882 | ) | 14,411 | |||||||||||||||||||||
Loss on debt retirements |
29,006 | -- | -- | 29,006 | ||||||||||||||||||||||
Other income |
(43 | ) | (4,847 | ) | -- | (4,890 | ) | |||||||||||||||||||
Intercompany other income |
(882 | ) | -- | 882 | -- | |||||||||||||||||||||
43,106 | 11,562 | -- | 54,668 | |||||||||||||||||||||||
Income (loss) before the following items |
(43,106 | ) | 4,546 | -- | (38,560 | ) | ||||||||||||||||||||
Income taxes (benefit) |
(16,160 | ) | 1,292 | -- | (14,868 | ) | ||||||||||||||||||||
(26,946 | ) | 3,254 | -- | (23,692 | ) | |||||||||||||||||||||
Equity in earnings of subsidiaries |
3,254 | -- | (3,254 | ) | -- | |||||||||||||||||||||
Net income (loss) |
$ | (23,692 | ) | $ | 3,254 | $ | (3,254 | ) | $ | (23,692 | ) | |||||||||||||||
Condensed consolidating statement of operations for the three months ended August 31, 2009 |
|
|||||||||||||||||||||||||
Net sales |
$ | -- | $ | 183,957 | $ | -- | $ | 183,957 | ||||||||||||||||||
Cost of products sold |
-- | 149,852 | -- | 149,852 | ||||||||||||||||||||||
Gross profit |
-- | 34,105 | -- | 34,105 | ||||||||||||||||||||||
Selling, general and administrative |
2,838 | 17,416 | -- | 20,254 | ||||||||||||||||||||||
Interest |
13,071 | 1,055 | (882 | ) | 13,244 | |||||||||||||||||||||
Loss on debt retirements |
-- | -- | -- | -- | ||||||||||||||||||||||
Other income |
(12 | ) | (2,640 | ) | -- | (2,652 | ) | |||||||||||||||||||
Intercompany other income |
(882 | ) | -- | 882 | -- | |||||||||||||||||||||
15,015 | 15,831 | -- | 30,846 | |||||||||||||||||||||||
Income (loss) before the following items |
(15,015 | ) | 18,274 | -- | 3,259 | |||||||||||||||||||||
Income taxes (benefit) |
(5,556 | ) | 7,100 | -- | 1,544 | |||||||||||||||||||||
(9,459 | ) | 11,174 | -- | 1,715 | ||||||||||||||||||||||
Equity in earnings of subsidiaries |
11,174 | -- | (11,174 | ) | -- | |||||||||||||||||||||
Net income (loss) |
$ | 1,715 | $ | 11,174 | $ | (11,174 | ) | $ | 1,715 | |||||||||||||||||
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Table of Contents
In thousands | Texas Industries, Inc. |
Guarantor Subsidiaries |
Eliminating Entries |
Consolidated | ||||||||||||||||||||||
Condensed consolidating statement of cash flows for the three months ended August 31, 2010 |
|
|||||||||||||||||||||||||
Net cash provided (used) by operating activities |
$ | (21,913 | ) | $ | 20,568 | $ | -- | $ | (1,345 | ) | ||||||||||||||||
Investing activities |
||||||||||||||||||||||||||
Capital expenditures - expansions |
-- | (1,374 | ) | -- | (1,374 | ) | ||||||||||||||||||||
Capital expenditures - other |
-- | (1,782 | ) | -- | (1,782 | ) | ||||||||||||||||||||
Proceeds from asset disposals |
-- | 3,209 | -- | 3,209 | ||||||||||||||||||||||
Investments in life insurance contracts |
327 | -- | -- | 327 | ||||||||||||||||||||||
Other - net |
-- | 292 | -- | 292 | ||||||||||||||||||||||
Net cash provided by investing activities |
327 | 345 | -- | 672 | ||||||||||||||||||||||
Financing activities |
||||||||||||||||||||||||||
Long-term borrowings |
650,000 | -- | -- | 650,000 | ||||||||||||||||||||||
Debt retirements |
(547,652 | ) | (84 | ) | -- | (547,736 | ) | |||||||||||||||||||
Debt issuance costs |
(12,250 | ) | -- | -- | (12,250 | ) | ||||||||||||||||||||
Stock option exercises |
225 | -- | -- | 225 | ||||||||||||||||||||||
Excess tax benefits from stock-based compensation |
-- | -- | -- | -- | ||||||||||||||||||||||
Common dividends paid |
(2,085 | ) | -- | -- | (2,085 | ) | ||||||||||||||||||||
Net intercompany financing activities |
22,528 | (22,528 | ) | -- | -- | |||||||||||||||||||||
Net cash provided (used) by financing activities |
110,766 | (22,612 | ) | -- | 88,154 | |||||||||||||||||||||
Increase in cash and cash equivalents |
89,180 | (1,699 | ) | -- | 87,481 | |||||||||||||||||||||
Cash and cash equivalents at beginning of period |
72,492 | 2,454 | -- | 74,946 | ||||||||||||||||||||||
Cash and cash equivalents at end of period |
$ | 161,672 | $ | 755 | $ | -- | $ | 162,427 | ||||||||||||||||||
Condensed consolidating statement of cash flows for the three months ended August 31, 2009 |
|
|||||||||||||||||||||||||
Net cash provided (used) by operating activities |
$ | (18,171 | ) | $ | 32,709 | $ | -- | $ | 14,538 | |||||||||||||||||
Investing activities |
||||||||||||||||||||||||||
Capital expenditures - expansions |
-- | (4,569 | ) | -- | (4,569 | ) | ||||||||||||||||||||
Capital expenditures - other |
-- | (804 | ) | -- | (804 | ) | ||||||||||||||||||||
Proceeds from asset disposals |
-- | 1,068 | -- | 1,068 | ||||||||||||||||||||||
Investments in life insurance contracts |
5,802 | -- | -- | 5,802 | ||||||||||||||||||||||
Other - net |
-- | (19 | ) | -- | (19 | ) | ||||||||||||||||||||
Net cash provided by investing activities |
5,802 | (4,324 | ) | -- | 1,478 | |||||||||||||||||||||
Financing activities |
||||||||||||||||||||||||||
Long-term borrowings |
-- | -- | -- | -- | ||||||||||||||||||||||
Debt retirements |
-- | (59 | ) | -- | (59 | ) | ||||||||||||||||||||
Debt issuance costs |
(2,032 | ) | -- | -- | (2,032 | ) | ||||||||||||||||||||
Stock option exercises |
331 | -- | -- | 331 | ||||||||||||||||||||||
Excess tax benefits from stock-based compensation |
211 | -- | -- | 211 | ||||||||||||||||||||||
Common dividends paid |
(2,080 | ) | -- | -- | (2,080 | ) | ||||||||||||||||||||
Net intercompany financing activities |
29,831 | (29,831 | ) | -- | -- | |||||||||||||||||||||
Net cash provided (used) by financing activities |
26,261 | (29,890 | ) | -- | (3,629 | ) | ||||||||||||||||||||
Increase in cash and cash equivalents |
13,892 | (1,505 | ) | -- | 12,387 | |||||||||||||||||||||
Cash and cash equivalents at beginning of period |
17,226 | 2,570 | -- | 19,796 | ||||||||||||||||||||||
Cash and cash equivalents at end of period |
$ | 31,118 | $ | 1,065 | $ | -- | $ | 32,183 | ||||||||||||||||||
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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 August 31, 2010, and the related consolidated statements of operations and cash flows for the three-month periods ended August 31, 2010 and 2009. 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, 2010, 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 21, 2010, 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, 2010, 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
September 24, 2010
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Table of Contents
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.
During the three-month period ended August 31, 2010, construction activity has remained at low levels in both our California and Texas market areas. We have continued to focus on cost reduction, management of our cash position and management of production levels, which we believe has had a significant positive impact on our operating results.
Consolidated sales for the three-month period ended August 31, 2010 were $172.1 million, a decrease of $11.8 million from the prior year period. Consolidated cost of products sold for the three-month period ended August 31, 2010 was $156.0 million, an increase of $6.2 million from the prior year period. Consolidated gross profit for the three-month period ended August 31, 2010 was $16.1 million, a decrease of $18.0 million from the prior year period. Lower sales prices offset in part by higher aggregate and ready-mix concrete shipments reduced consolidated gross profit approximately $16 million. In addition, higher energy costs increased manufacturing costs $2.5 million from the prior year period.
Consolidated selling, general and administrative expense for the three-month period ended August 31, 2010 was $16.1 million, a decrease of $4.1 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 decreased expense $1.3 million for the three-month period ended August 31, 2010 and increased expense $1.6 million for the three-month period ended August 31, 2009. We hold life insurance policies in connection with certain of our benefit plans. Proceeds received from the policies in the three-month period ended August 31, 2010 decreased expense $0.4 million from the prior year period. Our focus on reducing controllable costs lowered overall other expenses $0.8 million in the three-month period ended August 31, 2010 from the prior year period.
Consolidated other income for the three-month period ended August 31, 2010 was $4.9 million, an increase of $2.2 million from the prior year period. Routine sales of surplus operating assets and real estate resulted in gains of $1.6 million and $1.0 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. In addition, other income includes a gain of $1.7 million from the sale of emissions credits associated with our Crestmore cement plant in Riverside, California in the three-month period ended August 31, 2010.
Consolidated operating profit for the three-month period ended August 31, 2010 was $9.8 million. Consolidated operating profit for the three-month period ended August 31, 2009 was $25.8 million. 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.
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Table of Contents
Cement Operations
Three months ended August 31, |
||||||||||||
In thousands except per unit | 2010 | 2009 | ||||||||||
Operating Results |
||||||||||||
Total cement sales |
$ | 67,690 | $ | 78,460 | ||||||||
Total other sales and delivery fees |
8,692 | 6,736 | ||||||||||
Total segment sales |
76,382 | 85,196 | ||||||||||
Cost of products sold |
70,063 | 69,859 | ||||||||||
Gross profit |
6,319 | 15,337 | ||||||||||
Selling, general and administrative |
(4,793 | ) | (4,674 | ) | ||||||||
Other income |
2,438 | 1,743 | ||||||||||
Operating Profit |
$ | 3,964 | $ | 12,406 | ||||||||
Cement |
||||||||||||
Shipments (tons) |
873 | 915 | ||||||||||
Prices ($/ton) |
$ | 77.59 | $ | 85.70 | ||||||||
Cost of sales ($/ton) |
$ | 71.23 | $ | 68.70 |
Cement operating profit for the three-month period ended August 31, 2010 was $4.0 million, a decrease of $8.4 million from the prior year period. Lower shipments and sales prices reduced operating profit approximately $8 million.
Total segment sales for the three-month period ended August 31, 2010 were $76.4 million compared to $85.2 million for the prior year period. Cement sales decreased $10.8 million from the prior year period as construction activity has remained at low levels in both our Texas and California market areas. Our Texas market area accounted for approximately 70% of cement sales in the current period compared to 71% of cement sales in the prior year period. Shipments decreased 8% in our Texas market area and increased 4% in our California market area. Average cement prices decreased 8% in our Texas market area and 13% in our California market area.
Cost of products sold for the three-month period ended August 31, 2010 increased $0.2 million from the prior year period. Cement unit costs increased 4% from the prior year period primarily due to the effect of lower shipments and higher energy costs.
Selling, general and administrative expense for the three-month period ended August 31, 2010 increased $0.1 million from the prior year period. The increase was primarily due to higher engineering and maintenance expense which was offset in part by lower provisions for bad debts and defined benefit plan expense.
Other income for the three-month period ended August 31, 2010 increased $0.7 million from the prior year period. Other income includes a gain of $1.7 million in the three-month period ended August 31, 2010 from the sale of emissions credits associated with our Crestmore cement plant in Riverside, California which was offset in part by lower gains from routine sales of surplus operating assets.
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Table of Contents
Aggregate Operations
Three months ended August 31, |
||||||||||||
In thousands except per unit | 2010 | 2009 | ||||||||||
Operating Results |
||||||||||||
Total stone, sand and gravel sales |
$ | 26,593 | $ | 27,794 | ||||||||
Total other sales and delivery fees |
23,377 | 22,307 | ||||||||||
Total segment sales |
49,970 | 50,101 | ||||||||||
Cost of products sold |
43,410 | 39,155 | ||||||||||
Gross profit |
6,560 | 10,946 | ||||||||||
Selling, general and administrative |
(3,059 | ) | (2,705 | ) | ||||||||
Other income |
1,633 | 398 | ||||||||||
Operating Profit |
$ | 5,134 | $ | 8,639 | ||||||||
Stone, sand and gravel |
||||||||||||
Shipments (tons) |
3,584 | 3,423 | ||||||||||
Prices ($/ton) |
$ | 7.42 | $ | 8.12 | ||||||||
Cost of sales ($/ton) |
$ | 6.45 | $ | 6.28 |
Aggregate operating profit for the three-month period ended August 31, 2010 was $5.1 million, a decrease of $3.5 million from the prior year period. Lower sales prices offset in part by higher shipments reduced operating profit approximately $2 million.
Total segment sales for the three-month period ended August 31, 2010 were $50.0 million compared to $50.1 million for the prior year period. Stone, sand and gravel sales decreased $1.2 million from the prior year period on 9% lower average prices and 5% higher shipments.
Cost of products sold for the three-month period ended August 31, 2010 increased $4.3 million from the prior year period primarily due to higher shipments. Overall stone, sand and gravel unit costs increased 3% from the prior year period primarily due to higher repair and maintenance costs.
Selling, general and administrative expense for the three-month period ended August 31, 2010 increased $0.4 million from the prior year period primarily due to higher provisions for bad debts.
Other income for the three-month period ended August 31, 2010 increased $1.2 million from the prior year period primarily due to higher gains from routine sales of surplus operating assets.
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Table of Contents
Consumer Products Operations
Three months ended August 31, |
||||||||||||
In thousands except per unit | 2010 | 2009 | ||||||||||
Operating Results |
||||||||||||
Total ready-mix concrete sales |
$ | 52,106 | $ | 54,053 | ||||||||
Total other sales and delivery fees |
14,372 | 15,485 | ||||||||||
Total segment sales |
66,478 | 69,538 | ||||||||||
Cost of products sold |
63,249 | 61,716 | ||||||||||
Gross profit |
3,229 | 7,822 | ||||||||||
Selling, general and administrative |
(2,676 | ) | (3,204 | ) | ||||||||
Other income |
198 | 133 | ||||||||||
Operating Profit |
$ | 751 | $ | 4,751 | ||||||||
Ready-mix concrete |
||||||||||||
Shipments (cubic yards) |
669 | 612 | ||||||||||
Prices ($/cubic yard) |
$ | 77.83 | $ | 88.46 | ||||||||
Cost of sales ($/cubic yard) |
$ | 76.20 | $ | 79.91 |
Consumer products operating profit for the three-month period ended August 31, 2010 was $0.8 million, a decrease of $4.0 million from the prior year period. Lower sales prices offset in part by higher shipments reduced operating profit approximately $6 million.
Total segment sales for the three-month period ended August 31, 2010 were $66.5 million compared to $69.5 million for the prior year period. Ready-mix concrete sales for the three-month period ended August 31, 2010 decreased $1.9 million from the prior year period on 12% lower average prices and 9% higher shipments.
Cost of products sold for the three-month period ended August 31, 2010 increased $1.5 million from the prior year period primarily due to higher shipments. Overall ready-mix concrete unit costs decreased 5% from the prior year period primarily due to the effect of higher shipments and lower raw material costs.
Selling, general and administrative expense for the three-month period ended August 31, 2010 decreased $0.5 million from the prior year period primarily due to lower provisions for bad debts.
Other income for the three-month period ended August 31, 2010 increased $0.1 million from the prior year period primarily due to higher gains from routine sales of surplus operating assets.
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Table of Contents
Corporate
Three months ended August 31, |
||||||||||||
In thousands | 2010 | 2009 | ||||||||||
Other income |
$ | 621 | $ | 378 | ||||||||
Selling, general and administrative |
(5,613 | ) | (9,671 | ) | ||||||||
$ | (4,992 | ) | $ | (9,293 | ) | |||||||
Other income for the three-month period ended August 31, 2010 increased $0.2 million from the prior year period primarily due to higher oil and gas royalties offset in part by lower interest income.
Selling, general and administrative expense for the three-month period ended August 31, 2010 decreased $4.1 million from the prior year period. The decrease was primarily the result of $3.0 million lower 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 decreased stock-based compensation $1.3 million in the three-month period ended August 31, 2010 and increased stock-based compensation $1.6 million in the three-month period ended August 31, 2009. We hold life insurance policies in connection with certain of our benefit plans. Proceeds received from the policies in the three-month period ended August 31, 2010 decreased expense $0.4 million from the prior year period. Our focus on reducing controllable costs lowered overall other expenses $0.7 million in the three-month period ended August 31, 2010 from the prior year period.
Interest
Interest expense incurred was $14.4 million and $13.2 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively, of which none was capitalized. Interest expense incurred for the three-month period ended August 31, 2010 increased $1.2 million from the prior year period primarily as a result of higher average outstanding debt at higher interest rates due to the refinancing of our 7.25% senior notes.
Loss on Debt Retirements
On July 27, 2010, we commenced a cash tender offer for all of the outstanding $550 million aggregate principal amount of our 7.25% senior notes due 2013 and a solicitation of consents to amend the indenture governing the 7.25% notes. Pursuant to the tender offer and consent solicitation, we purchased $536.6 million aggregate principal amount of the 7.25% notes, and paid an aggregate of $547.7 million in purchase price and consent fees. On September 9, 2010, we redeemed the remaining $13.4 million aggregate principal amount of the 7.25% notes at a price of 101.813% of the principal amount thereof, plus accrued and unpaid interest on the 7.25% notes to the redemption date. We used the net proceeds from the issuance and sale of $650 million aggregate principal amount of our 9.25% senior notes to pay the purchase or redemption price of the 7.25% notes and the consent fees. As of August 31, 2010, we recognized a loss on debt retirement of $29.0 million representing $11.1 million in consent fees and transaction costs and a write-off of $17.9 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.
Income Taxes
Income taxes for the interim periods ended August 31, 2010 and August 31, 2009 have been included in the accompanying financial statements on the basis of an estimated annual rate. The estimated annualized rate does not include the tax impact of the loss on debt retirements which has been recognized as a discrete item in the three-month period ended August 31, 2010. The estimated annualized rate excluding this charge is 40.6% for fiscal year 2011 compared to 47.4% for fiscal year 2010. 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.
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Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
In addition to cash and cash equivalents of $162.4 million at August 31, 2010, our sources of liquidity include cash from operations and borrowings available under our senior secured revolving credit facility.
Senior Secured Revolving Credit Facility. The credit agreement provides for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit and a $15 million sub-limit for swing line loans. 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 rate for one-month LIBOR loans 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. The borrowing base under the agreement was $161.2 million as of August 31, 2010. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $40 million, in which case we must maintain a fixed charge coverage ratio of at least 1.1 to 1.0. At August 31, 2010, our fixed charge coverage ratio was .52 to 1.0. Given this ratio, we may use only $121.2 million of the borrowing base as of such date. No borrowings were outstanding at August 31, 2010; however, $31.1 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of August 31, 2010 was $90.1 million.
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 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. When our fixed charge coverage ratio is less than 1.1 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of August 31, 2010.
9.25% Senior Notes. On August 10, 2010, we sold $650 million aggregate principal amount of our 9.25% senior notes due 2020 at an offering price of 100%. The notes were issued under an indenture dated as of August 10, 2010. The net proceeds were used to purchase or redeem all of our outstanding 7.25% senior notes due 2013, with additional proceeds available for general corporate purposes.
At August 31, 2010, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:
Year | Percentage | |
2015 |
104.625% | |
2016 |
103.083% | |
2017 |
101.542% | |
2018 and thereafter |
100.000% |
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In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.250% of the principal amount thereof, plus accrued interest with the net cash proceeds from certain equity offerings. 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 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of August 31, 2010.
Refinancing. On July 27, 2010, we commenced a cash tender offer for all of the outstanding $550 million aggregate principal amount of our 7.25% senior notes due 2013 and a solicitation of consents to amend the indenture governing the 7.25% notes. Pursuant to the tender offer and consent solicitation, we purchased $536.6 million aggregate principal amount of the 7.25% notes, and paid an aggregate of $547.7 million in purchase price and consent fees. On September 9, 2010, we redeemed the remaining $13.4 million aggregate principal amount of the 7.25% notes at a price of 101.813% of the principal amount thereof, plus accrued and unpaid interest on the 7.25% notes to the redemption date. As of August 31, 2010, we recognized a loss on debt retirement of $29.0 million representing $11.1 million in consent fees and transaction costs and a write-off of $17.9 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.
Contractual Obligations. On August 10, 2010, we sold $650 million aggregate principal amount of 9.25% senior notes due in 2020. The following is a summary of our estimated additional future payments as a result of this new commitment, net of obligations prepaid out of the proceeds of the sale, for fiscal year periods subsequent to May 31, 2010.
Future Payments by Period | |||||||||||||||||||||||
In thousands | Total | 2011 | 2012 | 2013 | 2014 - 2015 | After 2015 | |||||||||||||||||
Borrowings |
|||||||||||||||||||||||
New long-term debt |
$ | 650,000 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 650,000 | |||||||||||
Interest |
602,085 | 30,898 | 60,125 | 60,125 | 120,250 | 330,687 | |||||||||||||||||
Effect of Prepayments |
|||||||||||||||||||||||
Long-term debt |
(550,000 | ) | -- | -- | -- | (550,000 | ) | -- | |||||||||||||||
Interest |
(116,778 | ) | (17,090 | ) | (39,875 | ) | (39,875 | ) | (19,938 | ) | -- | ||||||||||||
$ | 585,307 | $ | 13,808 | $ | 20,250 | $ | 20,250 | $ | (449,688 | ) | $ | 980,687 | |||||||||||
During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that current cement demand levels in Texas would permit the new kiln to operate profitably if the project was completed as originally scheduled. We expect to resume construction by November 2010. We have not entered into a new construction contract to complete the construction, so no schedule for completion has yet been determined. As of August 31, 2010, we have incurred approximately $295.4 million, excluding capitalized interest of approximately $16.3 million related to the project, of which $290.8 million has been paid. Until we determine the period over which the construction will occur, we cannot accurately estimate the cost of completing the project.
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 2011, capital expenditures for the Hunter plant expansion, scheduled debt payments, working capital needs and other general corporate purposes for at least the next year.
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Cash Flows
Net cash used by operating activities for the three-month period ended August 31, 2010 was $1.4 million. Net cash provided by operating activities for the three-month period ended August 31, 2009 was $14.5 million. The decrease was primarily the result of lower income from operations and changes in working capital items.
Net cash provided by investing activities for the three-month periods ended August 31, 2010 and August 31, 2009 was $0.7 million and $1.5 million, respectively.
Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $1.4 million and $4.7 million for the three-month periods ended August 31, 2010 and August 31, 2009, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain our existing operations were $1.8 million and $0.8 million for the three-month periods ended August 31, 2010 and August 31, 2009, respectively.
We elected to receive distributions and policy surrenders proceeds from life insurance contracts purchased in connection with certain of our benefit plans. The distributions and proceeds for the three-month periods ended August 31, 2010 and August 31, 2009 were $0.3 million and $8.1 million, respectively, which were offset in part by premiums and fees paid to maintain the policies.
Net cash provided by financing activities for the three-month period ended August 31, 2010 was $88.2 million. Net cash used by financing activities for the three-month period ended August 31, 2009 was $3.7 million.
On July 27, 2010, we commenced a cash tender offer for all of the outstanding $550 million aggregate principal amount of our 7.25% senior notes due 2013 and a solicitation of consents to amend the indenture governing the 7.25% notes. Pursuant to the tender offer and consent solicitation, we purchased $536.6 million aggregate principal amount of the 7.25% notes, and paid an aggregate of $547.7 million in purchase price and consent fees. We used the net proceeds from the issuance and sale of $650 million aggregate principal amount of our 9.25% senior notes to pay the purchase or redemption price of the 7.25% notes and the consent fees.
Dividends paid on our common stock for each of the three-month periods ended August 31, 2010 and August 31, 2009 were $2.1 million.
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. See Part II, Item 1A, Risk Factors, in this report.
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 August 31, 2010 and May 31, 2010 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 August 31, 2010, the fair value of our long-term debt, including the current portion, was approximately $666.3 million compared to the carrying amount of $665.8 million. As of May 31, 2010, the fair value of our long-term debt, including the current portion, was approximately $534.8 million compared to the carrying amount of $538.9 million.
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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 additional 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, 2010.
Recently Issued Accounting Guidance
There is no recently issued accounting guidance that we expect will materially impact our financial statements during the current fiscal year.
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. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements may include the words may, will, estimate, intend, continue, believe, expect, plan, anticipate, and other similar words. 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 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, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information regarding the fair value of our fixed rate debt is included under Market Risk in Part I, Item 2 of this report and incorporated herein by reference.
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, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of August 31, 2010.
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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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.
We may incur substantial expenditures to comply with changes in environmental laws and regulations.
In August 2010, the EPA issued a final rule amendment that dramatically reduces the permitted levels of emissions of mercury, total hydrocarbons, particulate matter and hydrochloric acid from cement plants. The amendments are scheduled to take full effect in September 2013. We expect that the Portland Cement Association will challenge the validity of the rule amendment in court. We cannot predict whether the challenge will be successful or whether it will delay the effective date of the rule.
Determining the current level of compliance of our cement plants with the new standards will require a significant amount of additional testing and analysis. Until this process is complete, we will not be able to determine with certainty the areas in which one or more of our plants do not currently meet these standards. Based on information currently available to us, we believe that our plant in Oro Grande, California may not meet the mercury emission standard, and the existing kiln at our plant in Hunter, Texas will not meet the particulate matter standard. We expect that the new kiln that is under construction at the Hunter plant, when it is completed, will meet the new particulate matter standard. We cannot assure you that these are the only cases in which one of our plants will not meet the new standards.
We have begun the process of identifying and analyzing mercury monitoring and control equipment. We are not aware of any control equipment that is presently operating in and has been proven effective in meeting the new standard in cement plant applications. Therefore, we cannot currently predict the total cost or schedule for installing such equipment at the Oro Grande plant. We expect the existing kiln at the Hunter plant will require a new bag house to bring it into compliance with the new particulate matter standard. The cost and schedule for installing such equipment have not yet been determined. At this time, we cannot assure you that new monitoring and control equipment will be available and installed before the new standards take effect, or that such equipment, when installed, will reduce emissions sufficiently to meet the new standards.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Market and Shareholders Information. 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.
Issuer Purchases of Equity Securities. We are restricted by our loan covenants from purchasing our Common Stock on the open market. However, in connection with the forfeiture of unvested restricted stock, shares are surrendered to the Company at no cost. The following table presents information with respect to such transactions which occurred during the three-month period ended August 31, 2010.
Period | (a) Total of Shares Purchased |
(b) Average Price Paid per Share |
(c) Total Number of Shares Purchased or Programs |
(d) Maximum Number or Programs | |||||||
June 1, 2010 June 30, 2010 |
-- | $ | -- | -- | -- | ||||||
July 1, 2010 July 31, 2010 |
1,000 | -- | -- | -- | |||||||
August 1, 2010 August 31, 2010 |
-- | -- | -- | -- | |||||||
Total |
1,000 | $ | -- | -- | -- | ||||||
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On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Financial Reform Act) was enacted. Section 1503 of the Financial Reform Act requires that we disclose in this report certain information about each of our quarries, such as the number of certain types of violations and orders issued under the Federal Mine Safety and Health Act of 1977 (the Mine Act) by the federal Mine Safety and Health Administration (MSHA).
The following table provides the required information for our quarries for which there is reportable information for the three-month period ended August 31, 2010. Our remaining 15 quarries did not have any reportable information.
Quarry Site (MSHA ID) |
Total # of S&S violations under Mine Act §104 |
Total # of orders under Mine Act §104(b) |
Total # of unwarrantable |
Total # of violations under Mine Act §110(b)(2) |
Total # of orders under Mine Act §107(a) |
Total dollar ($ in thousands) |
Total # of mining related fatalities |
Received written notice under Mine Act §104(e) (yes/no)? |
Pending legal action before the Federal Mine Safety and Health Review Commission (yes/no)? | |||||||||
Hunter, TX (4102820) |
1 | 0 | 0 | 0 | 0 | * | 0 | no | no | |||||||||
Oro Grande, CA (0400011) |
4 | 0 | 0 | 0 | 0 | * | 0 | no | no | |||||||||
Streetman, TX (4101628) |
4 | 0 | 0 | 0 | 0 | 0.600 | 0 | no | no | |||||||||
Boulder, CO (0504415) |
1 | 0 | 0 | 0 | 0 | 0.150 | 0 | no | no | |||||||||
Olancha, CA (0404783) |
3 | 0 | 0 | 0 | 0 | 5.392 | 0 | no | no |
*MSHA had not proposed any assessment at the time of filing of this report.
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The following exhibits are included herein:
3.1 | Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010) | |
3.2 | Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010) | |
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 | Amendment No. 1 to Rights Agreement executed on February 2, 2010 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on February 8, 2010) | |
4.3 | Amendment No. 2 to Rights Agreement dated July 19, 2010 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on July 20, 2010) | |
4.4 | Form of the Companys 9 1/4% Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010) | |
4.5 | Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010) | |
4.6 | Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010) | |
10.1 | Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010) | |
10.2 | 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 10.3 to Quarterly Report on Form 10-Q filed on January 7, 2010) | |
10.3 | 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) | |
10.4 | Second Amendment to Second Amended and Restated Credit Agreement, dated March 24, 2010, 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 10.33 to Quarterly Report on Form 10-Q filed on March 26, 2010) | |
10.5 | Third Amendment to Second Amended and Restated Credit Agreement, dated April 12, 2010, 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 10.1 to Report on Form 8-K filed on April 23, 2010) | |
10.6 | Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010) | |
10.7 | 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 filed on July 8, 2005) |
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10.8 | 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 filed on August 1, 2005) | |
10.9 | 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 filed on July 8, 2005) | |
10.10 | Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010) | |
10.11 | Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994) | |
10.12 | 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) | |
10.13 | 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) | |
10.14 | 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) | |
10.15 | TXI Annual Incentive Plans-Fiscal Year 2011 (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on July 21, 2010) | |
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 | TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010) | |
10.19 | Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006) | |
10.20 | 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) | |
10.21 | 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) | |
10.22 | 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 filed on April 25, 2006) | |
10.23 | 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) | |
10.24 | 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) |
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10.25 | 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 filed on September 30, 2005) | |
10.26 | Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006) | |
10.27 | Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010) | |
10.28 | Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010) | |
10.29 | Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006) | |
10.30 | 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) | |
10.31 | 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) | |
10.32 | 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) | |
10.33 | Standstill Agreement dated July 16, 2010 among the Company, NNS Holding and Mr. Nassef Sawiris (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 20, 2010) | |
12.1 | Computation of Ratios of Earnings to Fixed Charges | |
15.1 | Letter re: unaudited Interim Financial Information | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |
32.1 | Section 1350 Certification of Chief Executive Officer | |
32.2 | Section 1350 Certification of Chief Financial Officer | |
101 | The following financial information from Texas Industries, Inc.s Quarterly Report on Form 10-Q for the quarter ended August 31, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of August 31, 2010 and May 31, 2010, (ii) Consolidated Statements of Operations for the three months ended August 31, 2010 and August 31, 2009, (iii) Consolidated Statements of Cash Flows for the three months ended August 31, 2010 and August 31, 2009, and (iv) the Notes to Consolidated Financial Statements. |
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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. | ||
September 24, 2010 | /s/ Kenneth R. Allen | |
Kenneth R. Allen | ||
Vice President Finance, Chief Financial Officer and Treasurer | ||
(Principal Financial Officer) | ||
September 24, 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 |
Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010) | |
3.2 |
Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010) | |
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 |
Amendment No. 1 to Rights Agreement executed on February 2, 2010 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on February 8, 2010) | |
4.3 |
Amendment No. 2 to Rights Agreement dated July 19, 2010 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on July 20, 2010) | |
4.4 |
Form of the Companys 9 1/4% Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010) | |
4.5 |
Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010) | |
4.6 |
Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010) | |
10.1 |
Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010) | |
10.2 |
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 10.3 to Quarterly Report on Form 10-Q filed on January 7, 2010) | |
10.3 |
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) | |
10.4 |
Second Amendment to Second Amended and Restated Credit Agreement, dated March 24, 2010, 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 10.33 to Quarterly Report on Form 10-Q filed on March 26, 2010) | |
10.5 |
Third Amendment to Second Amended and Restated Credit Agreement, dated April 12, 2010, 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 10.1 to Report on Form 8-K filed on April 23, 2010) | |
10.6 |
Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010) | |
10.7 |
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 filed on July 8, 2005) |
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Table of Contents
Index to Exhibits-(Continued)
Exhibit Number |
||
10.8 |
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 filed on August 1, 2005) | |
10.9 |
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 filed on July 8, 2005) | |
10.10 |
Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010) | |
10.11 |
Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994) | |
10.12 |
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) | |
10.13 |
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) | |
10.14 |
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) | |
10.15 |
TXI Annual Incentive Plans-Fiscal Year 2011 (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on July 21, 2010) | |
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 |
TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010) | |
10.19 |
Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006) | |
10.20 |
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) | |
10.21 |
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) | |
10.22 |
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 filed on April 25, 2006) | |
10.23 |
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) | |
10.24 |
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) |
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Table of Contents
Index to Exhibits-(Continued)
Exhibit Number |
||
10.25 |
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 filed on September 30, 2005) | |
10.26 |
Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006) | |
10.27 |
Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010) | |
10.28 |
Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010) | |
10.29 |
Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006) | |
10.30 |
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) | |
10.31 |
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) | |
10.32 |
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) | |
10.33 |
Standstill Agreement dated July 16, 2010 among the Company, NNS Holding and Mr. Nassef Sawiris (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 20, 2010) | |
12.1 |
Computation of Ratios of Earnings to Fixed Charges | |
15.1 |
Letter re: unaudited Interim Financial Information | |
31.1 |
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |
31.2 |
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |
32.1 |
Section 1350 Certification of Chief Executive Officer | |
32.2 |
Section 1350 Certification of Chief Financial Officer | |
101 |
The following financial information from Texas Industries, Inc.s Quarterly Report on Form 10-Q for the quarter ended August 31, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of August 31, 2010 and May 31, 2010, (ii) Consolidated Statements of Operations for the three months ended August 31, 2010 and August 31, 2009, (iii) Consolidated Statements of Cash Flows for the three months ended August 31, 2010 and August 31, 2009, and (iv) the Notes to Consolidated Financial Statements. |
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