SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED).
For the fiscal year ended May 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
For the transition period from ___________________ to ____________________
Commission File Number 1-4887
TEXAS INDUSTRIES, INC.
(Exact name of registrant as specified in the charter)
Delaware 75-0832210
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1341 West Mockingbird Lane, #700W, Dallas, Texas 75247-6913
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214)647-6700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
--------------------------------- -----------------------------------------
Common Stock, Par Value $1.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
The aggregate market value of the Registrant's Common Stock, $1.00 par value,
held by non-affiliates of the Registrant as of June 30, 1995 was $413,124,353.
As of August 21, 1995, 11,035,129 shares of the Registrant's Common Stock, $1.00
par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Registrant's definitive proxy statement for the annual meeting
of shareholders to be held October 17, 1995, are incorporated by reference into
Part III.
TABLE OF CONTENTS
Page
PART I
Item 1. Business.............................................................................. 1
Item 2. Properties............................................................................ 5
Item 3. Legal Proceedings..................................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders................................... 5
Item 4a. Executive Officers of the Registrant.................................................. 6
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters.......... 7
Item 6. Selected Financial Data............................................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8
Item 8. Financial Statements and Supplementary Data........................................... 12
Item 9. Disagreements on Accounting and Financial Disclosure.................................. 26
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 27
Item 11. Executive Compensation................................................................ 27
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 27
Item 13. Certain Relationships and Related Transactions........................................ 27
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K..................... 27
PART I
ITEM 1. BUSINESS
--------
(a) General Development of Business
Texas Industries, Inc. (the "Registrant" or "Company"), incorporated April 19,
1951, directly and through subsidiaries, is a producer of steel and
cement/concrete products for the construction and manufacturing industries. In
November 1985, the Registrant purchased the remaining 50% interest in Chaparral
Steel Company ("Chaparral"). Chaparral sold 5,940,000 shares of its common
stock in a public offering for approximately $83 million in July 1988. A
wholly-owned subsidiary, Brookhollow Corporation ("Brookhollow") owns
commercially zoned land for investment, resale and other real estate activities.
(b) Financial Information about Industry Segments
The Registrant has two major industry segments: steel and cement/concrete.
Financial information for the Registrant's industry segments, is presented in
Part II, Item 7 "Management Discussion and Analysis of Financial Condition and
Results of Operations" on pages 9 and 10, incorporated herein by reference.
(c) Narrative Description of Business
STEEL
Chaparral, an 81 percent-owned subsidiary, has operated a steel mill at
Midlothian, Texas, since 1975. The steel operation follows a market mill
concept which entails the low cost production of a wide variety of products
ranging from reinforcing bar and specialty products to large-sized structural
beams. Chaparral operates two electric arc furnaces with continuous casters
which feed melted steel to a bar mill, a structural mill and a large beam mill
which together produce a broader array of steel products than a traditional
mini-mill. Finished (rolled) products produced include beams, merchant quality
rounds, special bar quality rounds, rebar and channels. In fiscal year 1992,
commissioning was completed on the large beam mill which produces structural
steel beams up to twenty-four inches wide. The mill's rolling capacity exceeds
400,000 tons per year resulting in excess rolling capacity over the production
capacity of the melting operation.
The rated annual capacity of the operating facilities are as follows:
Annual Rated Productive Approximate
Capacity (Tons) Facility Square Footage
----------------------- -----------------------
Melting 1,600,000 265,000
Rolling 1,900,000 560,000
Approximately 1.4 million tons of finished products were produced in 1995, 1994
and 1993.
Chaparral's primary raw material is scrap steel, which includes shredded steel
representing 32 percent of the raw material mix. A major portion of the shredded
steel requirements is produced by the shredder operation at the steel mill. The
shredded material is primarily composed of crushed auto bodies purchased on the
open market. Another grade of scrap steel, #1 Heavy, representing 29 percent of
the raw material requirements is also purchased on the open market. The purchase
price of scrap steel is subject to market forces largely beyond Chaparral's
control. The supply of scrap steel is expected to be adequate to meet future
requirements.
Chaparral's steel mill consumes large amounts of electricity and natural gas.
Electricity is obtained from a local electric utility under an interruptible
supply contract with six-month price adjustments which reflect increases or
decreases in the utility's fuel costs. Natural gas is obtained from a local gas
utility under a supply contract. Chaparral believes that adequate supplies of
both electricity and natural gas are readily available.
-1-
Chaparral's products are marketed throughout the United States and to a limited
extent in Canada, Mexico, Western Europe, China and Japan. Sales are primarily
to steel service centers and steel fabricators for use in the construction
industry, as well as, to cold finishers, forgers and original-equipment
manufacturers for use in the railroad, defense, automotive, mobile home and
energy industries. No single customer purchases ten percent or more of the sales
volume within any one year. Sales to affiliates are minimal. Orders are
generally filled within 45 days and are cancelable.
Delivery of finished products is accomplished by common-carrier, customer-owned
trucks, rail and barge. Chaparral also operates two distribution facilities.
Currently, Chaparral does not place heavy reliance on franchises, licenses or
concessions.
Chaparral competes with steel producers, including foreign producers, on the
basis of price, quality and service. Certain of the foreign and domestic
competitors, including both large integrated steel producers and mini-mills,
have substantially greater assets and larger sales organizations than Chaparral.
Intense sales competition exists for substantially all of Chaparral's products.
CEMENT/CONCRETE
The cement/concrete business segment includes the manufacture and sale of
cement, aggregates, ready-mix concrete, concrete pipe, block and brick.
Production and distribution facilities are concentrated in Texas and Louisiana
with markets extending into contiguous states. The Registrant also has certain
patented and unpatented mining claims in southern California which contain
deposits of limestone.
Cement production facilities are located at two sites in Texas: one at
Midlothian, approximately 25 miles south of Dallas/Fort Worth, which is the
largest cement plant in Texas, and the other at Hunter, approximately 40 miles
south of Austin. The limestone reserves used as the primary raw material are
located on fee-owned property which is adjacent to each of these plants. The
rated annual capacity and estimated minimum reserves of limestone for each of
these plants are as follows:
Annual Rated Productive Estimated Minimum
Plant Capacity - (Tons of Clinker) Reserves - Years
----- ---------------------------- -----------------
Midlothian, Texas 1,200,000 100
Hunter, Texas 830,000 100
The cement plants produced approximately 2.1 million tons of finished cement in
1995, 2.0 million tons in 1994 and 1.7 million tons in 1993. Annual shipments
of finished cement to outside trade customers were approximately 1.5 million
tons in 1995, 1.6 million tons in 1994 and 1.2 million tons in 1993. Additional
shipments of clinker were approximately 400,000 tons in 1994, and 600,000 tons
in 1993.
The Registrant's principal marketing area for cement includes Texas, Louisiana,
Colorado, Oklahoma, and New Mexico. Sales offices are maintained throughout the
marketing area and sales are made primarily for use in the construction industry
to numerous customers, no one of which would purchase ten percent or more of the
trade sales volume within any one year. The major volume of unit trade sales is
of standard portland cement, although the Registrant produces and markets a
variety of specialty cements.
The Registrant distributes cement from its plants by rail and truck to eight
distribution terminals located throughout the marketing area.
The Registrant's aggregate business, which includes sand, gravel, crushed
limestone and expanded shale and clay, is conducted from facilities primarily
serving Dallas/Fort Worth, Austin and Houston, Texas, and Alexandria, New
Orleans, Baton Rouge, and Monroe, Louisiana, areas. The following table
summarizes certain information about the Registrant's aggregate production
facilities:
-2-
Estimated Annual Estimated
Type of Number of Productive Minimum
General Location Facility Plants Capacity Reserves - Years
------------------ -------- --------- ---------------- ----------------
North Central Texas Sand & Gravel 3 3.0 million tons 11
North Central Texas Crushed
Limestone 1 4.5 million tons 32
North Central and Expanded Shale
South Texas & Clay 2 1.2 million cu. yds. 25
Louisiana Sand & Gravel 10 5.0 million tons 9
Central Texas Sand & Gravel 1 900,000 tons 18
South Central
Oklahoma Sand & Gravel 1 600,000 tons 14
Reserves identified with the facilities shown above and additional reserves
available to support future plant sites are contained on 34,910 acres of land,
14,712 acres of which are owned in fee by the Registrant and the remainder of
which are leased. The expanded shale and clay plants operated at 85 percent of
capacity for 1995 with sales of approximately 1.1 million cubic yards.
Production for the remaining aggregate facilities was 81 percent of practical
capacity and sales for the year totaled 11.2 million tons, of which
approximately 8.1 million tons were shipped to outside trade customers.
Sales of these various aggregates are generally related to the level of
construction activity within close proximity of the plant location. The cost of
transportation limits the marketing of these products to the areas relatively
close to the plant sites. These products are marketed by the Registrant's sales
organization located in the areas served by the plants and are sold to numerous
customers, no one of which would be considered significant to the Registrant's
business. The distribution of these products is provided to trade customers
principally by contract and customer-owned haulers, and a limited amount of
these products is distributed by rail for affiliated usage.
The Registrant's ready-mix concrete operations are situated in three areas in
Texas (Dallas/Fort Worth/Denton, East Texas and Houston), four areas in
Louisiana (New Orleans, Alexandria, Shreveport and Monroe) and at one location
in southern Arkansas. The following table summarizes various information
concerning these facilities:
Location Number of Plants Number of Trucks
-------- ---------------- ----------------
Texas 21 237
Louisiana 15 91
Arkansas 1 5
The plants listed above are located on sites owned or leased by the Registrant.
The Registrant manufactures and supplies a substantial amount of the cement and
aggregates used by the ready-mix plants with the remainder being purchased from
outside suppliers. Ready-mix concrete is sold to various contractors in the
construction industry, no one of which would be considered significant to the
Registrant's business.
-3-
The remainder of the major products manufactured and marketed by the Registrant
within the concrete products segment are summarized by location below:
Location Products Produced/Sold
-------- ----------------------
Dallas/Fort Worth, Texas Concrete block and brick
Sakrete and related products
Austin, Texas Sakrete and related products
Houston, Texas Sakrete and related products
Corpus Christi, Texas Concrete block and pipe
New Orleans, Louisiana Concrete pipe
Alexandria, Louisiana Concrete block and brick
Concrete pipe
Shreveport, Louisiana Concrete block and pipe
Sakrete and related products
Bridge Spans
Clay Brick
Athens, Texas Clay Brick
Mineral Wells, Texas Clay Brick
The plant sites for the above products (except for two that are leased) are
owned by the Registrant. The products are marketed by the Registrant's sales
force in each of these locations, and are primarily delivered by trucks owned by
the Registrant. Because the cost of delivery is significant to the overall cost
of most of these products, the market area is generally restricted to within
approximately one hundred miles of the plant locations. These products are sold
to various contractors, owners and distributors, none of which would be
considered significant to the Registrant's business.
Currently, Registrant does not place heavy reliance on patents, franchises,
licenses or concessions related to its cement/concrete segment. The
Registrant's cement plants and expanded shale and clay plants can burn either
coal, natural gas or other high BTU fossil fuels.
In most of the Registrant's principal markets for concrete products, the
Registrant competes vigorously with at least three other vertically integrated
concrete companies. The Registrant believes that it is a significant
participant in each of the Texas and Louisiana concrete products markets. The
principal methods of competition in concrete products markets are quality and
service at competitive prices.
The Registrant is involved in the development of its surplus real estate and
real estate acquired for development of high quality industrial, office and
multi-use parks in the metropolitan areas of Dallas/Fort Worth and Houston,
Texas and Richmond, Virginia.
ENVIRONMENTAL MATTERS
The operations of the Company and its subsidiaries are subject to various
federal and state environmental laws and regulations. Under these laws the U.S.
Environmental Protection Agency ("EPA") and agencies of state government have
the authority to promulgate regulations which could result in substantial
expenditures for pollution control and solid waste treatment. Three major areas
regulated by these authorities are air quality, water quality and hazardous
waste management. Pursuant to these laws and regulations, emission sources at
the Company's facilities are regulated by a combination of permit limitations
and emission standards of statewide application, and the Company believes that
it is in substantial compliance with its permit limitations and applicable laws
and regulations.
-4-
Chaparral's steel mill generates, in the same manner as other steel mills in the
industry, electric arc furnace ("EAF") dust that contains lead, chromium and
cadmium. The EPA has listed this EAF dust, which Chaparral collects in
baghouses, as a hazardous waste. Chaparral has contracts with reclamation
facilities in the United States and Mexico pursuant to which such facilities
receive the EAF dust generated by the steel mill and recover the metals from the
dust for reuse, thus rendering the dust non-hazardous. In addition, Chaparral
is continually investigating alternative reclamation technologies and has
implemented processes for diminishing the amount of EAF dust generated.
The Company intends to comply with all legal requirements regarding the
environment but since many of these requirements are not fixed, presently
determinable, or are likely to be affected by future legislation or rule making
by government agencies, it is not possible to accurately predict the aggregate
future costs or benefits of compliance and their effect on the Company's
operations, future net income or financial condition. Notwithstanding such
compliance, if damage to persons or property or contamination of the environment
has been or is caused by the conduct of the Company's business or by hazardous
substances or wastes used in, generated or disposed of by the Company, the
Company may be held liable for such damages and be required to pay the cost of
investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by or provide additional benefits to the Company.
OTHER ITEMS
The Registrant provides products for the construction industry. It is not
uncommon for the Registrant to report a loss from its cement/concrete operations
in the quarter ending February due to adverse weather conditions. Steel results
in the quarters ending August and February are effected by the normal, scheduled
two-week summer and one-week winter shut-downs to refurbish the production
facilities. The dollar amount of Registrant's backlog of orders is not
considered material to an understanding of the business of the Registrant.
The Registrant's enterprise employs approximately 2,800 persons, of whom 1,100
are engaged in steel operations and the balance in cement/concrete.
ITEM 2. PROPERTIES
----------
The information required by this item is included in the answer to Item 1.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no pending legal proceedings against the Registrant and subsidiaries
which in management's judgment (based upon the opinion of counsel) would have a
material adverse effect on the consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
-5-
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
Information on executive officers of the Registrant is presented below:
Positions with Registrant, Other
Name Age Employment During Last Five (5) Years
---- --- ------------------------------------------------
Robert D. Rogers 59 President and Chief Executive Officer and Director
Barry M. Bone 37 Vice President - Real Estate (since July 14,
1995); Director of Corporate Real Estate (1990 to
1995)
President, Brookhollow Corporation
Melvin G. Brekhus 46 Vice President - Cement (since 1995); Vice
President - Cement Production (1991 to 1995);
Divisional Vice President - Cement Production
(1990 to 1991)
Brooke E. Brewer 53 Vice President - Human Resources
Roman J. Figueroa 49 Vice President - Aggregates (since 1991);
Divisional Vice President - Texas Aggregates (1990
to 1991)
Richard M. Fowler 52 Vice President - Finance and Chief Financial
Officer
Senior Vice President - Finance and Treasurer,
Chaparral Steel Company
James R. McCraw 51 Vice President - Controller (since 1991);
Controller (1990 to 1991)
Robert C. Moore 61 Vice President - General Counsel and Secretary
Tommy A. Valenta 46 Vice President - Concrete (since 1995); Vice
President - North Texas Concrete/Cement
Marketing (1991 to 1995); Divisional Vice
President - North Texas Ready Mix (1990 to
1991)
Kenneth R. Allen 38 Treasurer (since 1991); Director of Investor
Relations (1990 to 1991); Corporate Financial
Manager (1990)
-6-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
-------------------------------------------------------------
HOLDER MATTERS
--------------
The shares of common stock, $1 par value, of the Registrant are traded on the
New York Stock Exchange (ticker symbol TXI). At May 31, 1995, the approximate
number of shareholders of common stock of the Registrant was 4,445. Common
stock market prices, dividends and certain other items are presented in the
Notes to Consolidated Financial Statements entitled "Quarterly Financial
Information" on page 23, incorporated herein by reference. The restriction on
the payment of dividends described in the Notes to Consolidated Financial
Statements entitled "Long-Term Debt" on pages 19 and 20 is incorporated herein
by reference. At the January 1995 Board of Directors' meeting, the Directors
voted to increase the quarterly cash dividend from five cents per share to ten
cents per share.
ITEM 6. SELECTED FINANCIAL DATA
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------------------------------------------------------------
$ In thousands except per share 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net sales $830,526 $707,147 $614,292 $601,129 $619,827
Operating profit 112,635 82,130 44,572 47,207 40,876
Net income 48,017 25,751 1,058 1,920 22,086
Return on average common equity 13.8% 8.1% .4% .7% 8.5%
PER SHARE INFORMATION
Net income (primary) $ 3.88 $ 2.29 $ .11 $ .19 $ 1.97
Cash dividends .30 .20 .20 .20 .20
Book value 27.61 31.14 25.49 25.50 25.58
FOR THE YEAR
Cash from operations $115,864 $ 51,372 $ 49,361 $ 26,217 $ 37,478
Capital expenditures 48,751 23,305 17,212 21,621 98,386
YEAR END POSITION
Total assets $753,055 $749,120 $757,300 $776,738 $788,577
Net working capital 187,603 161,383 159,408 134,806 115,895
Long-term debt 185,274 171,263 267,243 289,390 293,136
Shareholders' equity 343,109 352,671 282,511 281,902 282,124
Long-term debt to total
capitalization 35.1% 32.7% 48.6% 50.7% 51.0%
OTHER INFORMATION
Average common shares
outstanding (in 000's) 12,426 11,327 11,085 11,056 11,030
Number of common stockholders 4,445 4,647 5,061 5,432 5,607
Number of employees 2,800 2,700 2,700 2,700 2,800
Wages, salaries and employee
benefits $114,366 $102,853 $ 96,891 $ 97,950 $101,386
Common stock prices
(high-low) 39 - 29 39 - 21 28 - 19 25 - 18 23 - 10
-7-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
GENERAL
The Company has two major business segments: steel and cement/concrete. The
steel operation produces beams, merchant quality rounds, special bar quality
rounds, reinforcing bars, and channels. The cement/concrete segment supplies
cement and aggregates, ready-mix, pipe, block and brick.
The steel plant follows a market mill concept which entails producing a wide
variety of products from steel scrap. Chaparral strives to be a low-cost
supplier and is able to modify its product mix to recognize changing market
conditions or customer requirements. Steel products are sold principally to
steel service centers, fabricators, cold finishers, forgers and original
equipment manufacturers. Chaparral distributes primarily to markets in North
America and, under certain market conditions, Europe and Asia.
The cement/concrete facilities are concentrated in Texas and Louisiana, with
markets extending into contiguous states. As a vertically integrated concrete
products supplier, TXI owns or leases some 50,000 acres of mineral-bearing land.
Both steel and cement/concrete operations require large amounts of capital
investment, energy, labor and maintenance.
Corporate resources, which are excluded from operating profit, include the
president's office as well as certain financial, legal, environmental, personnel
and public ownership expenses, none of which are allocated to operations.
Brookhollow's real estate activities are also included in corporate resources.
RESULTS OF OPERATIONS
NET SALES
Consolidated 1995 sales increased 17% to a record $830.5 million. Steel sales
climbed 15% to $531.8 million, propelled by an 11% increase in tons shipped,
while average unit selling prices grew 4%. Product mix based on dollar sales
leaned slightly more to the bar mill as sales of Special Bar Quality grew by $22
million on 21% higher shipments. Bar mill pricing overall averaged 8% higher
than 1994, while structural mill pricing was up 2%. Pricing in 1995 trended up
steadily each quarter, whereas 1994 by comparison was an up and down pricing
year. Demand for structural products improved throughout 1995. The 408,000
steel tons shipped in the fourth quarter surpassed the May 1989 record.
Cement/concrete sales of $298.7 million exceeded 1994 by 22%. Cement shipments
in 1995, although hampered by rain in March and April, increased 5%. Cement
trade pricing averaged 18% higher; ready-mix was up 5%; stone, sand and gravel
averaged 7% more, although product mix distorts a generally higher trend.
Ready-mix sales increased 33% due principally to capacity added in north Texas.
Capacity was added in north Louisiana in May. Cement demand in Texas continues
to be in balance with supply. Recent enhancements in the Company's cement
plants should permit 1996 production to slightly exceed 1995 totals. If that
occurs, profitability would improve through greater sales or elimination of
purchased tons with no profit.
Consolidated 1994 sales were $707.1 million, an increase of 15% over last year.
Steel sales were up 10% due to 12% higher average selling prices.
Cement/concrete sales increased 26% on improved volumes and selling prices of
all primary products. Steel shipments of 1.36 million tons were slightly lower
than 1993. Product mix between the bar mill and structural mills was
substantially unchanged compared to 1993. Bar mill prices averaged 9% higher,
while structurals were up 13%. Steel pricing overall had trended up until May,
when a $20 per ton decrease in certain wide flange beams was required. Wide
flange beams are generally used in commercial buildings for which demand had
been flat for the last few years.
Strong demand for cement/concrete products in 1994 permitted significantly
greater shipments of cement, aggregates and ready-mix, which comprised 82% of
segment sales. Cement prices averaged 6% higher, ready-mix was up 2% and, due
to product mix, average aggregate pricing was down 1%. Cement consumption in
Texas reached the in-state production capacity during 1994, increasing 13%
compared to the prior year.
-8-
BUSINESS SEGMENTS
Year ended May 31,
---------------------------------------------------------------------------------------
In thousands 1995 1994 1993
---------------------------------------------------------------------------------------
NET SALES
Bar mill $167,962 $138,353 $126,830
Structural mills 359,845 320,210 289,862
Transportation service 4,004 3,712 3,518
-------- -------- --------
TOTAL STEEL 531,811 462,275 420,210
Cement 115,531 93,181 71,240
Ready-mix 114,568 86,213 70,151
Stone, sand & gravel 64,285 56,736 47,890
Other products 58,615 50,239 40,918
Interplant (54,284) (41,497) (36,117)
-------- -------- --------
TOTAL CEMENT/CONCRETE 298,715 244,872 194,082
-------- -------- --------
TOTAL NET SALES $830,526 $707,147 $614,292
======== ======== ========
UNITS SHIPPED
Bar mill (tons) 475 424 422
Structural mills (tons) 1,036 938 962
-------- -------- --------
TOTAL STEEL TONS 1,511 1,362 1,384
Cement (tons) 2,226 2,120 1,720
Ready-mix (cubic yards) 2,415 1,913 1,586
Stone, sand & gravel (tons) 12,375 11,649 9,695
STEEL OPERATIONS
Gross profit $ 94,761 $ 81,777 $ 58,624
Less: Depreciation & amortization 33,887 33,756 33,814
Selling, general & administrative 20,362 15,937 13,992
Other income (3,116) (3,372) (2,072)
-------- -------- --------
OPERATING PROFIT 43,628 35,456 12,890
CEMENT/CONCRETE OPERATIONS
Gross profit 101,678 75,334 57,636
Less: Depreciation, depletion &
amortization 14,669 14,458 15,168
Selling, general & administrative 20,806 17,330 12,842
Other income (2,804) (3,128) (2,056)
-------- -------- --------
OPERATING PROFIT 69,007 46,674 31,682
-------- -------- --------
TOTAL OPERATING PROFIT $112,635 $ 82,130 $ 44,572
-9-
BUSINESS SEGMENTS--Continued
Year ended May 31,
-------------------------------------------------------------------------------
In thousands 1995 1994 1993
-------------------------------------------------------------------------------
CORPORATE RESOURCES
Other income $ 1,651 $ 2,114 $ 2,511
Less: Depreciation & amortization 786 748 817
Selling, general &
administrative 15,502 13,677 13,651
-------- -------- --------
(14,637) (12,311) (11,957)
INTEREST EXPENSE (20,117) (26,231) (32,596)
-------- -------- --------
INCOME BEFORE TAXES &
OTHER ITEMS $ 77,881 $ 43,588 $ 19
======== ======== ========
CAPITAL EXPENDITURES
Steel $ 16,234 $ 7,805 $ 7,426
Cement/concrete 27,781 15,252 9,121
Corporate 4,736 248 665
-------- -------- --------
$ 48,751 $ 23,305 $ 17,212
======== ======== ========
IDENTIFIABLE ASSETS
Steel $469,827 $488,307 $480,811
Cement/concrete 189,096 159,133 169,941
Corporate 94,132 101,680 106,548
-------- -------- --------
$753,055 $749,120 $757,300
======== ======== ========
See notes to consolidated financial statements.
COST OF PRODUCTS SOLD
Consolidated cost of products sold, including depreciation and amortization was
$681.8 million, reflecting increased shipments and modestly higher steel scrap
and melt shop conversion costs. Chaparral costs were $56.7 million higher at
$470.9 million. Purchased scrap costs were unchanged during 1995 and remain at
record high per ton rates. Cement/concrete costs of $210.9 million surpassed
1994 by $26.5 million. Cement costs were $11.7 million greater in 1995 due to
the absence of clinker sales which reduced 1994 costs. Sale of finished cement
is more profitable than clinker, however. Unit manufacturing cost of cement was
lower in 1995 due to improved fuel savings and higher volume efficiency.
The 1994 cost, $598.6 million, exceeded 1993 cost by $53.4 million. Steel scrap
costs increased $18 per ton. Cement/concrete costs were $34.6 million more as
cement shipments increased 23% and ready-mix climbed 21%. Unit costs of ready-
mix and aggregates were more efficient. Reduced cement clinker sales
contributed to higher cement cost compared to 1993.
-10-
OPERATING PROFIT
Record operating profit of $112.6 million surpassed the 1994 mark by 37%, or
$30.5 million, as both businesses improved dramatically. Steel profits jumped
$8.1 million as average price increases of $13 per ton exceeded unit cost
increases of $8. Cement/concrete added an additional $22.3 million to post a
record $69.0 million profit. Greater shipments with higher pricing lead to this
improvement. Cement prices rose more than $7 per ton during the year while unit
costs were level with 1994.
Operating profit in 1994 was $82.1 million, as steel profits climbed $22.6
million and cement/concrete increased $15.0 million. Steel shipments were down
slightly but on $36 per ton higher pricing. Cement/concrete shipments were
significantly improved and mostly higher priced.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES AND OTHER INCOME
Total SG&A including both operations and corporate was $58.3 million, an
increase of $11.0 million in 1995. Steel costs of $20.4 million gained $4.5
million on $2.9 million additional profit sharing and $.9 million more selling
expense. Cement/concrete division costs of $20.8 million grew $3.5 million
predominantly on incentive expense and added selling costs. Corporate resources
moved up $1.8 million to $15.5 million mostly due to provision for added
incentive pay. The 1994 SG&A expenses had increased 10% to $47.3 million on
additional profit sharing and expanded marketing costs.
Combined other income was $7.6 million in 1995, down somewhat from the prior
year as routine retirement of assets resulted in smaller gains than in 1994.
This account also includes Brookhollow land sales and state tax refunds.
INTEREST EXPENSE
Interest expense declined $6.1 million, $1.3 million from Chaparral and $4.8
million in TXI. This reduction was a result of debt retirement in both entities
during most of 1995 and a significant TXI debt refinancing and rate reduction in
1994.
FINANCIAL CONDITION
Net income was 86% better than 1994 and combined with improvement in working
capital to produce $115.9 million in operating cash--more than double the
previous record. With that additional $64.5 million cash, both operations
bolstered capital expenditures by $25.5 million, TXI purchased $54.7 million in
treasury shares (offset by $50.5 million borrowing) and retired approximately
$65 million in debt. Total borrowings, including short-term notes to banks in
1994, reduced approximately $15 million. Year-end debt to total capitalization
ratio was 35%, 2% higher than 1994, principally due to treasury share purchases
reducing 1995 equity. The 1.2 million treasury shares purchased in April 1995
effectively restores the outstanding common shares to the same level as before
the April 1994 conversion of $46.9 million debentures to common stock.
Working capital grew $26.2 million to $187.6 million. Notes and accounts
receivable grew to $99.4 million in support of expanded sales. Average days
outstanding increased as sales were up sharply (33%) in the month of May year-
over-year, due partly to drier weather. Inventories declined as planned at
Chaparral, while cement inventories grew by $5.7 million, as production
consistently exceeded shipments due to poor weather in the winter and spring.
Cement shipments should consume inventory this summer. Goodwill was reduced by
$11.7 million, $9.4 million in addition to the annual amortization. This
reduction related to an adjustment of a previously recorded tax liability.
-11-
FINANCIAL CONDITION--Continued
Capital expenditures totaled $48.8 million, $16.2 million in Chaparral and the
balance in TXI. The majority of this outlay was for replacement/enhancement
items, although the expansion of ready-mix operations accounted for
approximately $11 million in capital items. Capital budget plans for 1996
contemplate $100 million. Additional items of transportation and aggregate
handling equipment are expected to be leased. The growth in this number
reflects anticipated expansion projects in the cement/concrete segment.
Debt retirement, treasury share purchases and dividend payments consumed $74.6
million in cash. Chaparral retired $35.5 million in debt, while TXI added $19.9
million owing to the $50 million borrowed to finance the treasury share
purchase. TXI has a credit line of $150 million, $93 million of which has been
borrowed and $5.7 million has been utilized to support letters of credit. This
line is due to expire in November 1999. Chaparral has short-term facilities of
$20 million which are eligible for renewal in January 1996. TXI's quarterly
cash dividend was doubled in January 1995 to $.10 per common share, reflecting
the Board of Directors' confidence in the Company's future.
The Company generally maintains a policy of financing major capital expansion
projects with long-term borrowing. Working capital, investments and replacement
assets are funded out of cash flow from operations. The Company expects current
financial resources and cash from 1996 operations to be sufficient to provide
funds for planned capital expenditures, scheduled debt payments and other known
working capital needs for fiscal 1996. If additional funds are required to
accomplish long-term expansion of operations, management believes that funding
can be obtained through lending or equity sources to meet such requirements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Auditors............................................ 13
Consolidated Balance Sheets-May 31, 1995 and 1994......................... 14
Consolidated Statements of Income-Years ended
May 31, 1995, 1994 and 1993....................................... 15
Consolidated Statements of Cash Flows-Years
ended May 31, 1995, 1994 and 1993................................. 16
Consolidated Statements of Shareholders' Equity-
Years ended May 31, 1995, 1994 and 1993........................... 17
Notes to Consolidated Financial Statements................................ 18
-12-
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Texas Industries, Inc.
We have audited the accompanying consolidated balance sheets of Texas
Industries, Inc. and subsidiaries as of May 31, 1995 and 1994, and the related
consolidated statements of income, cash flows and shareholders' equity for each
of the three years in the period ended May 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Texas Industries,
Inc. and subsidiaries at May 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended May 31, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Dallas, Texas
July 14, 1995
-13-
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
May 31,
--------------------------------------------------------------------------
In thousands 1995 1994
--------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and temporary investments $ 25,988 $ 31,766
Notes and accounts receivable 99,445 76,815
Inventories 125,384 135,851
Prepaid expenses 41,957 32,646
-------- --------
TOTAL CURRENT ASSETS 292,774 277,078
OTHER ASSETS
Real estate and other investments 29,392 30,523
Goodwill 61,217 72,916
Commissioning costs and other assets 22,533 23,710
-------- --------
113,142 127,149
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 105,874 90,685
Buildings 54,749 51,776
Machinery and equipment 737,222 727,818
-------- --------
897,845 870,279
Less allowances for depreciation 550,706 525,386
-------- --------
347,139 344,893
-------- --------
$753,055 $749,120
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ -- $ 15,000
Trade accounts payable 57,019 44,022
Accrued interest, wages and other items 30,675 25,546
Current portion of long-term debt 17,477 31,127
-------- --------
TOTAL CURRENT LIABILITIES 105,171 115,695
LONG-TERM DEBT 185,274 171,263
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS 80,178 73,196
MINORITY INTEREST 39,323 36,295
SHAREHOLDERS' EQUITY
Preferred stock 598 598
Common stock, $1 par value 12,534 12,534
Additional paid-in capital 266,045 265,790
Retained earnings 119,587 75,511
Cost of common shares in treasury (55,655) (1,762)
-------- --------
343,109 352,671
-------- --------
$753,055 $749,120
======== ========
See notes to consolidated financial statements.
-14-
CONSOLIDATED STATEMENTS OF INCOME
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended May 31,
-----------------------------------------------------------------------------
In thousands except per share 1995 1994 1993
-----------------------------------------------------------------------------
NET SALES $830,526 $707,147 $614,292
COSTS AND EXPENSES (INCOME)
Cost of products sold 681,824 598,601 545,200
Selling, general and administrative 58,275 47,341 43,116
Interest 20,117 26,231 32,596
Other income (7,571) (8,614) (6,639)
-------- -------- --------
752,645 663,559 614,273
-------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS 77,881 43,588 19
INCOME TAXES
Expense (benefit) 25,700 13,607 (646)
Change in statutory federal tax rate -- 1,949 --
-------- -------- --------
25,700 15,556 (646)
-------- -------- --------
52,181 28,032 665
Minority interest in Chaparral (4,164) (2,281) 393
-------- -------- --------
NET INCOME $ 48,017 $ 25,751 $ 1,058
======== ======== ========
Average common shares 12,426 11,327 11,085
Net income per common share $ 3.88 $ 2.29 $ .11
======== ======== ========
Cash dividends $ .30 $ .20 $ .20
======== ======== ========
See notes to consolidated financial statements.
-15-
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended May 31,
-------------------------------------------------------------------------------
In thousands 1995 1994 1993
-------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 48,017 $ 25,751 $ 1,058
Gain on disposal of assets (1,994) (2,535) (264)
Non-cash items
Depreciation, depletion and
amortization 49,342 48,962 49,799
Deferred taxes 5,434 3,790 (4,284)
Undistributed minority interest 3,028 1,186 (1,528)
Other - net 4,798 1,575 819
Changes in operating assets and
liabilities
Notes and accounts receivable (22,608) (937) (2,125)
Inventories and prepaid expenses 10,781 (18,468) 2,431
Accounts payable and accrued
liabilities 17,935 (7,980) 2,470
Real estate and investments 1,131 28 985
-------- -------- --------
Net cash provided by operations 115,864 51,372 49,361
INVESTING ACTIVITIES
Capital expenditures (48,751) (23,305) (17,212)
Proceeds from disposition of assets 3,132 2,880 497
Purchase of temporary investments -- (2,017) (4,660)
Proceeds from temporary investments -- 8,374 4,816
Cash surrender value - insurance (1,759) (821) 5,554
Commissioning costs and other - net 303 (315) (375)
-------- -------- --------
Net cash used by investing (47,075) (15,204) (11,380)
FINANCING ACTIVITIES
Proceeds of short-term borrowing -- 30,000 7,000
Repayments of short-term borrowing (15,000) (15,000) (7,000)
Proceeds of long-term borrowing 50,485 71,517 600
Debt retirements (50,127) (111,738) (22,290)
Purchase of treasury shares (54,688) (3,595) (29)
Dividends paid (3,618) (2,308) (2,228)
Other - net (1,619) (34) (1,410)
-------- -------- --------
Net cash used by financing (74,567) (31,158) (25,357)
-------- -------- --------
Increase (decrease) in cash (5,778) 5,010 12,624
Cash at beginning of year 31,766 26,756 14,132
-------- -------- --------
Cash at end of year 25,988 31,766 26,756
Temporary investments -- -- 6,333
-------- -------- --------
Cash and temporary investments at
end of year $ 25,988 $ 31,766 $ 33,089
======== ======== ========
See notes to consolidated financial statements.
-16-
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------------------------------------------------------------------------------------
Common
Stock Additional Treasury Total
Preferred $1 Par Paid-in Retained Common Shareholders'
In thousands Stock Value Capital Earnings Stock Equity
---------------------------------------------------------------------------------------------------------------------
May 31, 1992 $598 $11,100 $220,776 $ 55,544 $ (6,116) $281,902
Net income 1,058 1,058
Cash dividends
Preferred stock - $5 a share (30) (30)
Common stock - $.20 a share (2,198) (2,198)
Treasury stock issued for bonuses
and options - 96,451 shares (1,441) 3,249 1,808
Treasury stock purchased -
1,034 shares (29) (29)
---- ------- -------- -------- -------- --------
May 31, 1993 598 11,100 220,776 52,933 (2,896) 282,511
Net income 25,751 25,751
Cash dividends
Preferred stock - $5 a share (30) (30)
Common stock - $.20 a share (2,278) (2,278)
Common stock issued for bond
conversion - 1,432,296 shares 1,432 44,876 46,308
Common and treasury stock issued
for bonuses and options - 136,476 2 138 (865) 4,729 4,004
Treasury stock purchased -
94,978 shares (3,595) (3,595)
---- ------- -------- -------- -------- --------
May 31, 1994 598 12,534 265,790 75,511 (1,762) 352,671
Net income 48,017 48,017
Cash dividends
Preferred stock - $5 a share (30) (30)
Common stock - $.30 a share (3,588) (3,588)
Treasury stock issue for bonuses
and options - 20,254 shares 255 (323) 795 727
Treasury stock purchased -
1,498,478 shares (54,688) (54,688)
---- ------- -------- -------- -------- --------
May 31, 1995 $598 $12,534 $266,045 $119,587 $(55,655) $343,109
==== ======= ======== ======== ======== ========
At May 31, 1995, Common Stock and Additional Paid-in Capital include $127.8
million of accumulated transfers from Retained Earnings in connection with stock
dividends.
See notes to consolidated financial statements.
-17-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Texas Industries,
Inc. (the Company) and all subsidiaries. The minority interest represents the
19.1% separate public ownership of Chaparral Steel Company (Chaparral).
Property, plant and equipment is recorded at cost. Provisions for depreciation
are computed generally using the straight-line method. Provisions for depletion
of mineral deposits are computed on the basis of the estimated quantity of
recoverable raw materials.
For cash flow purposes, temporary investments which have maturities of less than
90 days when purchased are considered cash equivalents.
Earnings per share are computed by deducting preferred dividends from net income
and adjusting for amortization of additional goodwill in connection with the
contingent payment for the acquisition of Chaparral, then dividing this amount
by the weighted average number of common shares outstanding during the period,
including common stock equivalents.
Goodwill, currently being amortized on a straight-line basis over a 40-year
period, is net of accumulated amortization of $12.2 million at May 31, 1995 and
$9.9 million at May 31, 1994. A $9.4 million reduction in goodwill was
recognized as of May 31, 1995 due to the realization of certain tax benefits
arising from the acquisition of Chaparral. Management reviews remaining
goodwill with consideration toward recovery through future operating results
(undiscounted) at the current rate of amortization.
The Company's policy for new facilities is to capitalize certain costs until the
facility is substantially complete and ready for its intended use. Chaparral
began the commissioning of the large beam mill in February 1991. The mill was
substantially complete and ready for its intended use in the third quarter of
fiscal 1992 with a total of $15.1 million of costs deferred. The annual amount
of amortization charged to income was $3 million in 1995, 1994 and 1993, based
on a five-year period. Total accumulated amortization is $10 million.
Accounting for income taxes uses the liability method of recognizing and
classifying deferred income taxes. The Company joins in filing a consolidated
return with its subsidiaries. Current and deferred tax expense is allocated
among the members of the group based on a stand-alone calculation of the tax of
the individual member.
The estimated fair value of each class of financial instrument as of May 31,
1995 approximates carrying value except for Chaparral's long-term debt. The
fair value of long-term debt at May 31, 1995, estimated by applying discounted
cash flow analysis based on interest rates currently available to the Company
for such debt with similar terms and remaining maturities, is approximately
$218.1 million compared to the carrying amount of $202.8 million.
Certain amounts in the 1993 and 1994 financial statements have been reclassified
to conform to the 1995 presentation.
WORKING CAPITAL
Working capital totaled $187.6 million at May 31, 1995, compared to $161.4
million at the prior year-end.
Notes and accounts receivable of $99.4 million at May 31, 1995, compared with
$76.8 million in 1994, are presented net of allowances for doubtful receivables
of $3.2 million in 1995 and $4.6 million in 1994.
Inventories are stated at cost (not in excess of market) generally using the
last-in, first-out method (LIFO). If the average cost method (which
approximates current replacement cost) had been used, inventory values would
have been higher by $11.6 million in 1995 and $12.0 million in 1994.
-18-
WORKING CAPITAL-Continued
Inventories are summarized as follows:
-----------------------------------------------------------------------
In thousands 1995 1994
-----------------------------------------------------------------------
Finished products $ 55,874 $ 72,583
Work in process 19,148 21,708
Raw materials and supplies 50,362 41,560
-------- --------
$125,384 $135,851
======== ========
LONG-TERM DEBT
Long-term debt is comprised of the following:
-----------------------------------------------------------------------
In thousands 1995 1994
-----------------------------------------------------------------------
Bank obligations, maturing through 1999,
interest rates from 6.81% to 6.94%
(.75% over LIBOR) $ 93,000 $ 71,000
Senior notes of Chaparral, due through 2004,
interest rates average 10.2% 72,000 80,000
First mortgage notes of Chaparral,
due through 2000, interest rate 14.2% 20,458 26,595
First mortgage notes of Chaparral,
due through 1995, interest rate 9%
(2% over LIBOR) 1,248 7,256
Pollution control bonds, due through 2007,
interest rates from 6.75% to 10% 10,350 11,366
Other, maturing through 2005, interest rates
from 7% to 10.75% 5,696 6,173
-------- --------
202,752 202,390
Less current maturities 17,477 31,127
-------- --------
$185,275 $171,263
======== ========
Annual maturities of long-term debt for each of the five succeeding years are
$17.5, $13.9, $16.7, $33.2 and $82.9 million.
In October 1994, the Company replaced its bank-financed $71 million Senior note
and $25 million credit line with a $150 million long-term line of credit
provided by the same bank group. In addition to the $93.0 million currently
outstanding under this line, $5.7 million has been utilized to support letters
of credit. The available borrowings began reducing in February 1995 at
quarterly rates of $3.8 million through November 1996 and $5 million thereafter
until expiration in November 1999. Commitment fees at an annual rate of 1/4 of
1% are paid on the unused portion of this line.
Chaparral has available bank lines of credit of $20 million, which are due to
expire in January 1996, if not renewed. The interest rate charged on borrowings
is .45% over LIBOR (6% at May 1995). Commitment fees at an annual rate of 1/4
of 1% are paid on the unused portions of these lines. The weighted average
interest rate on borrowings outstanding at May 31, 1994 was 4.77%.
The loan agreements contain covenants which provide for minimum working capital,
restrictions on purchases of treasury stock and payment of dividends on common
stock, and limitations on incurring certain indebtedness and making certain
investments. Under the most restrictive of these agreements, the aggregate
amount of annual cash dividends on common stock is limited based on the ratio,
excluding Chaparral, of earnings before interest, taxes, depreciation and
amortization plus dividends from Chaparral to fixed charges. Chaparral loan
agreements also restrict dividends and advances to its shareholders, including
the parent company, to $37.0 million as of May 31, 1995. The Company and
Chaparral are in compliance with all loan covenant restrictions.
-19-
LONG-TERM DEBT-Continued
Property, plant and equipment, principally Chaparral's, carried at a net amount
of approximately $214.5 million at May 31, 1995 is mortgaged as collateral for
$25.4 million of secured debt.
The amount of interest paid was $18.4 million in 1995, $31.6 million in 1994 and
$33.4 million in 1993.
SHAREHOLDERS' EQUITY
Common stock consists of:
------------------------------------------------------------------
In thousands 1995 1994
------------------------------------------------------------------
Shares authorized 15,000 15,000
Shares outstanding at May 31 11,011 12,489
Average shares outstanding including equivalents 12,426 11,327
Shares held in treasury 1,523 45
Shares reserved for stock options and other 1,304 1,334
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.
There were 5,976 shares of $5 Cumulative Preferred Stock outstanding at May 31,
1995 and 1994.
An additional 50,000 shares are designated Series A Junior Participating
Preferred Stock, redeemable under certain conditions at a redemption price,
subject to adjustment, equal to 200 times the aggregate amount to be distributed
per share to holders of Common Stock but not less than $100. There are
outstanding rights, issued to common shareholders under the Company's
Shareholders Protection Plan, to purchase 48,484 shares of Series A Junior
Participating Preferred Shares, none of which were outstanding. Under certain
conditions, each right may be exercised to purchase one two-hundredth of a share
for $100. The rights, which are non-voting, expire in 1996 and may be redeemed
by the Company at a price of five cents per right at any time.
STOCK OPTION PLANS
The Company's stock option plans provide that non-qualified and incentive stock
options to purchase Common Stock may be granted to directors, officers and key
employees at market prices at date of grant. Generally, options become
exercisable in installments beginning one or two years after date of grant and
expire six or ten years later depending on the initial date of grant. A summary
of option transactions for the two years ended May 31, 1995, follows:
Shares Under Option Aggregate Option Price
---------------------------------------------------------------------
$ In thousands 1995 1994 1995 1994
---------------------------------------------------------------------
Outstanding at June 1 360,004 429,874 $ 7,783 $10,129
Granted 219,500 87,450 7,002 2,108
Exercised (19,029) (134,492) (432) (3,856)
Cancelled (12,034) (22,828) (425) (598)
------- -------- ------- -------
Outstanding at May 31 548,441 360,004 $13,928 $ 7,783
======= ======= ======= ========
At May 31, 1995, there were 116,211 shares exercisable and 697,050 shares
available for future grants. Outstanding options expire on various dates to
January 18, 2005.
-20-
INCOME TAXES
The Company made income tax payments of $19.7 million, $9.7 million and $.4
million in 1995, 1994 and 1993, respectively. An additional income tax
provision of $1,949,000 was recognized in 1994 due to federal tax legislation
enacted on August 10, 1993 which increased the corporate tax rate to 35%.
The provisions for income taxes are composed of:
----------------------------------------------
In thousands 1995 1994 1993
----------------------------------------------
Current $20,266 $11,766 $ 3,637
Deferred 5,434 3,790 (4,283)
------- ------- -------
Expense (benefit) $25,700 $15,556 $ (646)
======= ======= =======
A reconcilement from statutory federal taxes to the above provisions follows:
---------------------------------------------------------------------------------------------
In thousands 1995 1994 1993
----------------------------------------------------------------------------------------------
Taxes at statutory rate $ 27,258 $ 15,256 $ 6
Change in statutory federal tax rate -- 1,949 --
Tax credit carryforwards (333) (36) 653
Additional depletion (2,352) (2,107) (1,831)
Goodwill 809 811 788
State income tax 552 242 220
Non taxable insurance benefits (502) (528) (481)
Other - net 268 (31) (1)
-------- -------- -------
$ 25,700 $ 15,556 $ (646)
======== ======== =======
The components of the net deferred tax liability at May 31 are summarized below:
-----------------------------------------------------------------------------------------------
In thousands 1995 1994
-----------------------------------------------------------------------------------------------
Deferred tax assets
Deferred compensation $ 3,711 $ 3,317
Expenses not currently tax deductible 9,929 9,154
Tax cost in inventory 3,437 3,516
Net operating loss carryforwards 14 2,129
Tax credit carryforwards -- 2,486
Alternative minimum tax credit carryforwards 11,713 18,446
-------- --------
Total deferred tax assets 28,804 39,048
Deferred tax liabilities
Accelerated tax depreciation 68,172 72,800
Deferred real estate gains 5,663 5,488
Deferred acquisition expense -- 9,381
Commissioning costs 1,760 2,817
Other 2,127 1,427
-------- --------
Total deferred tax liabilities 77,722 91,913
-------- --------
Net tax liability 48,918 52,865
Less current portion (asset) (20,316) (10,691)
-------- --------
Net deferred tax liability $ 69,234 $ 63,556
======== ========
-21-
LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or by
hazardous substances or wastes used in, generated or disposed of by the Company,
the Company may be held liable for such damages and be required to pay the cost
of investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by the Company.
The Company and subsidiaries are defendants in lawsuits which arose in the
normal course of business. In management's judgment (based on the opinion of
counsel) the ultimate liability, if any, from such legal proceedings will not
have a material effect on the consolidated financial position.
RETIREMENT PLANS
Substantially all employees of the Company are covered by a series of defined
contribution retirement plans. The amount of pension expense charged to costs
and expenses for the above plans was $2.6 million in 1995, $1.5 million in 1994
and $1.8 million in 1993. It is the Company's policy to fund the plans to the
extent of charges to income.
INCENTIVE PLANS
All personnel employed as of May 31 share in the pretax income of the Company
for the year then ended based on predetermined formulas. The duration of most
of the plans is one year; certain executives are additionally covered under a
three-year plan. All plans are subject to annual review by the Company's Board
of Directors. The expense for these plans, included in selling, general and
administrative, was $8.9 million, $4.1 million and $1.8 million for 1995, 1994
and 1993, respectively.
Certain executives of Chaparral participate in a deferred compensation plan
based on a five-year average of earnings. Amounts recorded as expense
(reduction) under the plan were $(.1) million, $(2.0) million and $(2.4) million
for 1995, 1994 and 1993, respectively.
OPERATING LEASES
Total expense for operating leases for mobile equipment, office space and other
items (other than for mineral rights) amounted to $12.0 million in 1995, $10.0
million in 1994 and $9.6 million in 1993. Non-cancelable operating leases with
an initial or remaining term of more than one year totaled $60.1 million at May
31, 1995. Annual lease payments for the five succeeding years are $12.3 million,
$9.7 million, $9.5 million, $6.2 million and $6.7 million.
BUSINESS SEGMENTS
Business segment information is presented on pages 9 and 10. Intersegment
sales, which are not material, are accounted for at prices comparable to normal
trade customer sales. Operating profit is total sales and revenue less operating
costs and expenses, excluding general corporate expenses and interest expense.
Identifiable assets by segment are those assets that are used in the Company's
operation in each segment. Corporate assets consist primarily of cash and
temporary investments, real estate subsidiaries and other financial assets not
identified with a major business segment.
-22-
QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following is a summary of quarterly financial information (in thousands
except per share):
-----------------------------------------------------------------------------------------
1995 Aug. Nov. Feb. May
-----------------------------------------------------------------------------------------
Net sales
Steel $124,382 $126,273 $132,388 $148,768
Cement/concrete 76,585 74,822 66,603 80,705
-------- -------- -------- --------
200,967 201,095 198,991 229,473
======== ======== ======== ========
Operating profit
Steel 6,249 11,005 11,143 15,231
Cement/concrete 18,845 16,502 10,105 23,555
-------- -------- -------- --------
25,094 27,507 21,248 38,786
======== ======== ======== ========
Net income 10,766 12,010 6,876 18,365
Per share
Net income* .85 .96 .55 1.56
Dividends .05 .05 .10 .10
Stock prices
High 36 3/4 38 7/8 35 1/4 39 1/2
Low 31 7/8 30 29 1/2 31
----------------------------------------------------------------------------------------
1994 Aug. Nov. Feb. May
----------------------------------------------------------------------------------------
Net sales
Steel $101,896 $117,225 $118,687 $124,467
Cement/concrete 66,852 55,898 51,414 70,708
-------- -------- -------- --------
168,748 173,123 170,101 195,175
======== ======== ======== ========
Operating profit
Steel 4,353 10,741 10,697 9,665
Cement/concrete 11,568 8,309 5,588 21,209
-------- -------- -------- --------
15,921 19,050 16,285 30,874
======== ======== ======== ========
Net income 1,426 5,585 2,866 15,874
Per share
Net income* .13 .51 .26 1.33
Dividends .05 .05 .05 .05
Stock prices
High 24 7/8 26 36 39 3/4
Low 21 7/8 23 1/8 26 30 7/8
* The sum of these amounts does not equal the annual amount because of changes
in the average number of common equity shares outstanding during the year.
-23-
FINANCIAL INFORMATION OF REGISTRANT (Unaudited)
The following condensed balance sheets of the Registrant only (solely parent
company) with subsidiaries carried on the equity method as of May 31, 1995 and
1994 and the related statements of income and cash flows for each of the three
years in the period ended May 31, 1995, are furnished to satisfy disclosure
requirements due to the percentage of consolidated net assets which reside in
subsidiary companies and which are subject to third party restrictions.
Balance Sheets
--------------
May 31,
---------------------------------------------------------------------------
In thousands 1995 1994
---------------------------------------------------------------------------
Assets
Current assets
Cash and temporary investments $ 6,537 $ 28,197
Notes and accounts receivable 44,831 33,369
Inventories 23,241 17,949
Prepaid expenses 27,923 18,766
-------- --------
TOTAL CURRENT ASSETS 102,532 98,281
Other assets
Investment in and net advances to
subsidiaries 267,394 265,456
Other assets 20,844 18,138
-------- --------
288,238 283,594
Property, plant and equipment
Land and land improvements 72,989 58,576
Buildings 25,842 24,097
Machinery and equipment 275,192 279,670
-------- --------
374,023 362,343
Less allowances for depreciation and depletion 258,466 260,545
-------- --------
115,557 101,798
-------- --------
$506,327 $483,673
======== ========
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 15,986 $ 13,902
Accrued interest, wages and other items 14,407 10,100
Current portion of long-term debt 1,625 12,820
-------- --------
TOTAL CURRENT LIABILITIES 32,018 36,822
Long-term debt 104,208 72,834
Deferred federal income taxes and other credits 26,992 21,346
Shareholders' equity
Preferred stock 598 598
Common stock, $1 par value 12,534 12,534
Additional paid-in capital 266,045 265,790
Retained earnings 119,587 75,511
Cost of common shares in treasury (55,655) (1,762)
-------- --------
343,109 352,671
-------- --------
$506,327 $483,673
======== ========
-24-
FINANCIAL INFORMATION OF REGISTRANT-Continued
Statements of Income
--------------------
Year Ended May 31,
--------------------------------------------------------------------------------
In thousands 1995 1994 1993
--------------------------------------------------------------------------------
Net sales $290,592 $248,325 $197,829
Costs and expenses (income)
Cost of products sold 209,622 198,163 162,022
Selling, general and administrative 34,264 26,569 24,052
Interest 8,192 12,980 16,621
Other income (7,538) (8,613) (7,081)
-------- -------- -------
244,540 229,099 195,614
-------- -------- --------
Income before the following items 46,052 19,226 2,215
Income taxes
Expense 13,566 3,872 657
Change in statutory federal tax rate -- 268 --
-------- ------- --------
13,566 4,140 657
-------- ------- --------
Income from operations 32,486 15,086 1,558
Equity in earnings of subsidiaries
Income (loss) from continuing operations
of subsidiaries 15,531 10,665 (500)
-------- ------- --------
NET INCOME $ 48,017 $ 25,751 $ 1,058
======== ======== ========
Statements of Cash Flows
------------------------
Year ended May 31,
--------------------------------------------------------------------------------
In thousands 1995 1994 1993
--------------------------------------------------------------------------------
Net cash provided by operations $ 48,606 $ 39,178 $ 21,609
Investing activities
Capital expenditures (30,154) (14,814) (7,591)
Proceeds from disposition of assets 1,899 2,454 377
Purchase of investments -- (2,017) (4,660)
Proceeds from investments -- 8,374 2,084
Cash surrender value-insurance (1,515) (820) 5,555
Other - net (747) (7,417) (2,151)
-------- ------- --------
Net cash used by investing (30,517) (14,240) (6,386)
Financing activities
Proceeds of long-term borrowing 49,500 71,257 600
Debt retirements (29,324) (73,505) (6,146)
Purchase of treasury shares (54,688) (3,595) (29)
Dividends paid (3,618) (2,308) (2,228)
Other - net (1,619) (34) (1,410)
-------- ------- --------
Net cash used by financing (39,749) (8,185) (9,213)
-------- ------- --------
Increase (decrease) in cash (21,660) 16,753 6,010
Cash at beginning of year 28,197 11,444 5,434
-------- ------- --------
Cash at end of year 6,537 28,197 11,444
Temporary investments -- -- 6,333
-------- ------- --------
Cash and temporary investments at end of year $ 6,537 $ 28,197 $ 17,777
======== ======== ========
-25-
FINANCIAL INFORMATION OF REGISTRANT-Continued
Notes to Financial Information of Registrant
--------------------------------------------
Long-term Debt
Annual maturities of long-term debt for each of the five succeeding years are
$1.6, $1.5, $4.3, $20.9, and $70.8 million. Long-term debt is comprised of the
following:
--------------------------------------------------------------------------------
In thousands 1995 1994
--------------------------------------------------------------------------------
Bank obligations, maturing through 1999, interest rates
from 6.81% to 6.94% (.75% over LIBOR) $ 93,000 $71,000
Pollution control bonds, due through 2007, interest rates
from 6.75% to 10% 10,350 11,366
Other, interest rates from 7% to 10% 2,483 3,288
-------- -------
105,833 85,654
Less current maturities 1,625 12,820
-------- -------
$104,208 $72,834
======== =======
In October 1994, the Company replaced its bank-financed $71 million Senior note
and $25 million credit line with a $150 million long-term line of credit
provided by the same bank group. In addition to the $93.0 million currently
outstanding under this line, $5.7 million has been utilized to support letters
of credit. The available borrowings began reducing in February 1995 at
quarterly rates of $3.8 million through November 1996 and $5 million thereafter
until expiration in November 1999. Commitment fees at an annual rate of 1/4 of
1% are paid on the unused portion of this line.
Dividends from Subsidiaries
The Company received cash dividends from subsidiaries of $4.8 million in 1995,
$6.4 million in 1994, and $4.8 million in 1993.
Restricted Transfer of Assets from Subsidiaries
Chaparral has loan covenants that restrict the transfer of assets by loans,
advances or dividends to the parent. These covenants require that Chaparral
maintain minimum levels of working capital, restrict loans and the percentage of
net income that can be distributed as dividends. The restricted net assets were
$188.3 million and the restricted retained earnings were $43.5 million at May
31, 1995. The retained earnings of subsidiaries included in the consolidated
retained earnings at May 31, 1995, were $31.8 million.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
-----------------------------------------------------
None
-26-
PART III
In accordance with paragraph (3) of General Instruction G to Form 10-K, Part III
of this report is omitted because the Registrant will file with the Securities
Exchange Commission, not later than 120 days after May 31, 1995, a definitive
proxy statement pursuant to Regulation 14A involving the election of Directors.
Reference is made to the sections of such proxy statement entitled "Security
Ownership of Certain Beneficial Owners", "Election of Directors", "Executive
Compensation", "Report of the Compensation Committee on Executive Compensation"
and "Security Ownership of Management", which sections of such proxy statement
are incorporated herein by reference. Information concerning the Registrant's
executive officers is set forth under Part I, Item 4a of this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) Documents filed as a part of this report.
(1) Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets - May 31, 1995 and 1994
Consolidated Statements of Income - Years ended May 31, 1995, 1994
and 1993
Consolidated Statements of Cash Flows - Years ended May 31, 1995,
1994 and 1993
Consolidated Statements of Shareholders' Equity - Years ended May 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Financial statement schedules have been omitted because they are not applicable
or the information required therein is included elsewhere in the financial
statements or notes thereto.
(3) Listing of Exhibits
3. Articles of Incorporation (previously filed and incorporated
herein by reference)
4. Instruments defining rights of security holders (previously filed
and incorporated by reference)
The Registrant agrees to furnish to the Commission, upon request, copies of all
instruments with respect to long-term debt not being registered where the total
amount of securities authorized thereunder does not exceed 10% of the total
assets of Registrant and its subsidiaries on a consolidated basis.
11. Statement re: computation of per share earnings
21. Subsidiaries of the Registrant
23. Consent of Independent Auditors
24. Power of Attorney for certain members of the Board of Directors
27. Financial Data Schedule (electronically filed only)
This schedule contains summary financial information extracted from the
Registrant's May 31, 1995 Consolidated Financial Statements and is qualified in
its entirety by reference to such financial statements.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended May 31, 1995.
-27-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the issuer has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 24th day of August, 1995.
TEXAS INDUSTRIES, INC.
By /s/ Robert D. Rogers
--------------------------------
Robert D. Rogers, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert D. Rogers President and Chief Executive August 24, 1995
--------------------------- Officer (Principal Executive
Robert D. Rogers Officer)
/s/ Richard M. Fowler Vice President - Finance and August 24, 1995
--------------------------- Chief Financial Officer
Richard M. Fowler (Principal Financial Officer)
/s/ James R. McCraw Vice President - Controller August 24, 1995
--------------------------- (Principal Accounting Officer)
James R. McCraw
Director August 24, 1995
---------------------------
Robert Alpert
/s/ Gordon E. Forward* Director August 24, 1995
---------------------------
Gordon E. Forward
/s/ Richard I. Galland* Director August 24, 1995
---------------------------
Richard I. Galland
/s/ Gerald R. Heffernan* Director August 24, 1995
---------------------------
Gerald R. Heffernan
/s/ James M. Hoak* Director August 24, 1995
---------------------------
James M. Hoak
/s/ Ralph B. Rogers* Director August 24, 1995
---------------------------
Ralph B. Rogers
/s/ Robert D. Rogers Director August 24, 1995
---------------------------
Robert D. Rogers
--------------------------- Director August 24, 1995
Ian Wachtmeister
/s/ Elizabeth C. Williams* Director August 24, 1995
---------------------------
Elizabeth C. Williams
* BY /s/ James R. McCraw Vice President - Controller August 24, 1995
---------------------
James R. McCraw
-28-
INDEX TO EXHIBITS
Exhibits Page
3. Articles of Incorporation............................................ *
4. Instruments defining rights of security holders...................... *
11. Statement re: computation of per share earnings.....................30
21. Subsidiaries of the Registrant.......................................31
23. Consent of Independent Auditors......................................32
24. Power of Attorney for certain members of the Board of Directors......33
27. Financial Data Schedule..............................................**
* Previously filed and incorporated herein by reference.
** Electronically filed only.
-29-