EXHIBIT 13
The Registrant's complete annual report to security holders is furnished
under Item 14(a) of this report for convenience only where the financial
statements are incorporated by reference.
[FRONT COVER]
TEXAS INDUSTRIES, INC.
[CORPORATE LOGO]
1994 ANNUAL REPORT
[INSIDE FRONT COVER]
OUR MISSION:
We will be the most efficient,
high value supplier of cement and aggregate products
and will provide superior service in the markets we serve.
We will continue to grow in our industry
through innovation and geographic diversification.
[BACK COVER]
A New York Stock Exchange Company
Texas Industries, Inc.
7610 Stemmons Freeway
Dallas, Texas 75247
214-647-6700
FAX: 214-647-3878
CORPORATE PROFILE
Texas Industries, Inc. (TXI), a Fortune 500 company, is a leading producer of
steel and construction materials, including cement, aggregates and concrete.
Chaparral Steel Company, an 81 percent-owned subsidiary of TXI, produces a broad
range of carbon steel products and distributes them to markets in North America
and, under certain market conditions, to Europe and Asia.
TXI's cement, aggregate and concrete products operations are concentrated in
Texas and Louisiana. The Company is the largest producer of cement in Texas.
Throughout all operations, TXI strives to maintain its position as the highest
quality, low-cost producer in the marketplace.
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------
In thousands except per share 1994 1993
- - -------------------------------------------------------------------
RESULTS OF OPERATIONS
Net sales $707,147 $614,292
Net income 25,751 1,058
- - -------------------------------------------------------------------
PER SHARE INFORMATION
Net income 2.29 .11
Cash dividends .20 .20
- - -------------------------------------------------------------------
FOR THE YEAR
Cash from operations 51,372 49,361
Capital expenditures 23,305 17,212
- - -------------------------------------------------------------------
YEAR END POSITION
Total assets 749,120 757,300
Net working capital 161,383 159,408
Shareholders' equity 352,671 282,511
TO OUR SHAREHOLDERS:
Net income for Fiscal Year 1994 equalled $25.8 million or $2.29 per share, up
substantially from the prior year's income of $1.1 million or $.11 per share.
The cement, aggregate and concrete operations continued to improve for the
fourth consecutive year while Chaparral earnings increased from the previous
year in spite of a difficult market for structural steel beams.
In the coming year, the positive trend in earnings is expected to continue as
the cement, aggregate and concrete operations benefit from the recovery in
construction activity in the Texas region. Chaparral's earnings will largely be
determined by structural steel beam market conditions.
CEMENT, AGGREGATE AND CONCRETE OPERATIONS
Operating profit of $46.7 million for 1994 compared with a level of $31.7
million for the previous year. Revenues for the segment were $244.9 million, a
26% increase over last year. Revenues for all product groups were up for the
year.
Favorable trends in Texas construction activity were maintained during the year
due to both increased residential building and street and highway construction.
Some modest improvement in commercial building was apparent as well. While by no
means representing a construction boom, this level of building activity served
to bring demand and supply for cement into balance for the first time since the
mid-eighties. As a result, cement prices have risen from the extremely low
levels of four years ago to levels that are more representative of markets
outside the region. Construction activity in the region had a similar impact on
the aggregate, ready-mix and other product groups of the segment.
The general recovery of the Texas economy, together with the benefits from free
trade with Mexico, are expected to result in continued growth in construction
activity. As the largest cement producer in Texas and one of the largest
producers of aggregates in the region, the segment is well positioned to take
advantage of this further growth.
STEEL OPERATIONS
Operating profit for Chaparral Steel was $35.5 million, up from last year's
level of $12.9 million. The increase in profit was due to both improved cost
efficiencies and a concentration on more desirable market areas and products.
Shipments of 1.36 million tons were 2% lower than in the previous year. Average
prices were up 12% as more sales were made in home market areas and as scrap
cost increases were passed along. Demand for Chaparral's primary product,
structural steel beams, remained at a low level during the year. There are
indications that commercial construction activity in the United States is
beginning to improve somewhat; however, a quick recovery is not currently
expected.
During Fiscal Year 1995, Chaparral will continue to focus on improving its
production operations, expanding its presence in the market for special bar
quality products and working on new applications for lightweight structural
steel beams.
Empowered employees continue to enhance the Company's competitive position in
both production and marketing. Self-directed work teams are being successfully
implemented. Employees throughout the Company are establishing solid customer
bonds and developing new, value-added products to meet customer needs.
During 1994, $71 million of debt was replaced with lower interest rate
financing. In the spring, $47 million of subordinated debt was converted to
equity. Both of these events resulted in a significant improvement in financial
flexibility. These capital structure changes and the internal efforts discussed
above will give the Company the ability to expand in markets and products which
fit with our strengths as opportunities develop.
/s/ Robert D. Rogers
- - -----------------------
Robert D. Rogers
President
July 15, 1994
SELECTED FINANCIAL DATA
Texas Industries, Inc. and Subsidiaries
- - --------------------------------------------------------------------------------------------
$ In thousands except per share 1994 1993 1992 1991 1990
- - --------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net sales $707,147 $614,292 $601,129 $619,827 $609,063
Operating profit 82,130 44,572 47,207 40,876 37,700
Net income (loss) 25,751 1,058 1,920 22,086 (7,342)
Return on average common equity 8.1% .4% .7% 8.5% N/A
- - --------------------------------------------------------------------------------------------
PER SHARE INFORMATION *
Net income (loss) (primary) $ 2.29 $ .11 $ .19 $ 1.97 $ (.84)
Cash dividends .20 .20 .20 .20 .80
Book value 31.14 25.49 25.50 25.58 21.67
- - --------------------------------------------------------------------------------------------
FOR THE YEAR
Cash from operations $ 51,372 $ 49,361 $ 26,217 $ 37,478 $ 32,810
Capital expenditures 23,305 17,212 21,621 98,386 51,305
- - --------------------------------------------------------------------------------------------
YEAR END POSITION
Total assets $749,120 $757,300 $776,738 $788,577 $703,323
Net working capital 161,383 159,408 134,806 115,895 152,818
Long-term debt 171,263 267,243 289,390 293,136 259,528
Shareholders' equity 352,671 282,511 281,902 282,124 239,654
Long-term debt to total
capitalization 32.7% 48.6% 50.7% 51.0% 52.0%
- - --------------------------------------------------------------------------------------------
OTHER INFORMATION
Average common shares
outstanding (in 000's) * 11,327 11,085 11,056 11,030 11,060
Number of common shareholders 4,647 5,061 5,432 5,607 6,009
Number of employees 2,700 2,700 2,700 2,800 2,900
Wages, salaries and employee
benefits $102,853 $ 96,891 $ 97,950 $101,386 $100,241
Common stock prices (high-low) * 39 - 21 28 - 19 25 - 18 23 - 10 36 - 18
* Adjusted for stock dividend in 1990.
DISCUSSION OF RESULTS OF OPERATIONS & FINANCIAL CONDITION
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 change 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, to 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 more than 25,000 acres of mineral-bearing
land. 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 1994 sales achieved a record $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 has been flat for the last few years.
Strong demand for cement/concrete products permitted significantly greater
shipments of cement, aggregates and ready-mix, which comprise 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 the year, increasing 13% compared to the
prior year. Prices for cement/concrete products are expected to improve further
over the next year if demand remains strong.
Consolidated 1993 sales of $614.3 million increased 2% over 1992. Steel sales
were up 1% as average prices trended up on similar volume. Cement tons increased
20% with slightly higher prices. Ready-mix volume was down as highway projects
in Houston and Louisiana tailed off, although average unit pricing gained 4%.
Aggregate sales were improved by 8% greater volume and 7% better average price.
BUSINESS SEGMENTS
Year ended May 31,
- - -------------------------------------------------------------------------
In thousands 1994 1993 1992
- - -------------------------------------------------------------------------
NET SALES
Bar mill $138,353 $126,830 $141,538
Structural mills 320,210 289,862 272,474
Transportation 3,712 3,518 2,598
- - -------------------------------------------------------------------------
TOTAL STEEL $462,275 $420,210 $416,610
Cement $ 93,181 $ 71,240 $ 58,407
Ready-mix 86,213 70,151 73,341
Stone, sand & gravel 56,736 47,890 41,529
Other products 50,239 40,918 45,545
Interplant (41,497) (36,117) (34,303)
- - -------------------------------------------------------------------------
TOTAL CEMENT/
CONCRETE $244,872 $194,082 $184,519
- - -------------------------------------------------------------------------
TOTAL NET SALES $707,147 $614,292 $601,129
====================================
UNITS SHIPPED
Bar mill (tons) 424 422 484
Structural mills (tons) 938 962 914
- - -------------------------------------------------------------------------
TOTAL STEEL TONS 1,362 1,384 1,398
Cement (tons) 2,120 1,720 1,439
Ready-mix (cubic yards) 1,913 1,586 1,733
Stone, sand & gravel (tons) 11,649 9,695 8,968
STEEL OPERATIONS
Gross profit $ 81,777 $ 58,624 $ 66,678
Less: Depreciation &
amortization 33,756 33,814 29,477
Selling, general &
administrative 15,937 13,992 17,437
Other income (3,372) (2,072) (5,217)
- - -------------------------------------------------------------------------
OPERATING PROFIT $ 35,456 $ 12,890 $ 24,981
CEMENT/CONCRETE OPERATIONS
Gross profit $ 75,334 $ 57,636 $ 38,894
Less: Depreciation, depletion &
amortization 14,458 15,168 17,321
Selling, general &
administrative 17,330 12,842 15,248
Other income (3,128) (2,056) (15,901)
- - -------------------------------------------------------------------------
OPERATING PROFIT $ 46,674 $ 31,682 $ 22,226
- - -------------------------------------------------------------------------
TOTAL OPERATING PROFIT $ 82,130 $ 44,572 $ 47,207
====================================
CORPORATE RESOURCES
Other income $ 2,114 $ 2,511 $ 2,892
Less: Depreciation &
amortization 748 817 697
Selling, general &
administrative 13,677 13,651 13,240
- - -------------------------------------------------------------------------
(12,311) (11,957) (11,045)
INTEREST EXPENSE (26,231) (32,596) (31,149)
- - -------------------------------------------------------------------------
Income before taxes & other
items $ 43,588 $ 19 $ 5,013
====================================
CAPITAL EXPENDITURES
Steel $ 7,805 $ 7,426 $ 12,616
Cement/concrete 15,252 9,121 8,021
Corporate 248 665 984
- - -------------------------------------------------------------------------
$ 23,305 $ 17,212 $ 21,621
====================================
IDENTIFIABLE ASSETS
Steel $488,307 $480,811 $504,905
Cement/concrete 159,133 169,941 195,221
Corporate 101,680 106,548 76,612
- - -------------------------------------------------------------------------
$749,120 $757,300 $776,738
====================================
COST OF PRODUCTS SOLD
Consolidated cost of products sold, including depreciation and amortization, was
$598.6 million on increased shipments of cement/concrete and higher steel scrap
costs. Chaparral's costs were $18.9 million higher at $414.2 million. Scrap
costs increased $18 per ton during the year. Cement costs were $5.8 million
higher in 1994 due to lower clinker sales than in 1993 (the profit from clinker
sales is credited as a reduction of costs). The 23% increase in cement tons and
21% increase in ready-mix volume account for the majority of the $34.6 million
increase in cement/concrete cost of products sold, which total $184.4 million
for the year. Unit production costs of ready-mix and aggregates were lower due
to higher production volumes and continuing operating efficiency improvements.
The 1993 cost, totaling $545.2 million, increased $2.8 million from 1992.
Chaparral depreciation and amortization added $5.3 million for the large beam
mill. Steel costs per ton were somewhat higher as a result of upgrading the
product mix with large beam products. Cement/concrete costs of sales declined
$13.1 million or 8%, due largely to the absence of Dolphin Construction
activities. Cement unit costs were lower due to higher production volumes and
added savings from resource recovery activities. These activities use waste
products to displace coal which would otherwise be consumed at the Midlothian
cement plant.
OPERATING PROFIT
Near record operating profit of $82.1 million resulted from steel operations
increasing by $22.6 million and cement/concrete improving by $15.0 million,
both compared to the prior year's level. Steel prices per ton averaged $36
higher against unit cost increases of $19. Operational selling, general and
administrative costs included $1.9 million additional for steel profit sharing.
Cement/concrete profits were enhanced by added shipments of all products in
combination with improved pricing. Operational SG&A was up $4.5 million in this
segment due to increased selling and technical support for resource recovery
activities.
Operating profit in 1993 was $44.6 million as steel profits declined by $12.1
million and cement/concrete advanced $9.5 million. The 1992 profit included an
$11 million land gain from disposing of a ready-mix plant site. Steel profits
in 1993 were decreased by $5.3 million additional depreciation expense of the
large beam mill, as well as higher costs of producing large beam products, which
in that year sold at depressed prices. Cement/concrete profits rose on greater
shipments of cement and aggregates, which both had improved unit costs.
SELLING, ADMINISTRATIVE EXPENSE AND OTHER INCOME
Total selling, general and administrative expense, including both operations and
corporate, increased 10% to $47.3 million. Steel costs of $15.9 million
included $1.9 million in additional profit sharing and $1.6 million in severance
pay. These increases were offset by reductions in compensation and other
expenses following the 1993 restructuring. Cement/concrete costs increased $4.5
million due to expanded marketing for products and technical support for
resource recovery activities.
Consolidated other income increased $2 million to $8.6 million. Chaparral's
other income, at $3.4 million, was $1.3 million greater due in part to disposal
of certain assets. Cement/concrete other income of $3.1 million is comprised
largely of gains from the sale of retired transportation equipment. Corporate
other income of $2.1 million is comprised primarily of $1.5 million in
Brookhollow land gains and $1.3 million in investment income.
Prior year's consolidated other income of $6.6 million is similarly constituted
of gains from routine asset retirement, land gains and investment income. The
$24 million 1992 amount contained an $11 million land gain from disposal of a
downtown Dallas plant site.
INTEREST EXPENSE
Interest expense reduced $6.4 million to $26.2 million; $5.1 million of
reduction came from TXI and $1.3 million from Chaparral. A major TXI refinancing
was completed in two phases during the year as $71 million in notes payable
were replaced in September with lower interest rate obligations. Additionally,
$40 million in consolidated notes were repaid during the year. In April, $46.9
million in convertible debentures were exchanged for common stock. Interest
expense on these debentures terminated in January. The Chaparral expense
reduction reflects continued, scheduled repayment of debt. The $1.5 million
increase in 1993 over 1992 was due to Chaparral capitalizing $3.4 million in
interest charges during 1992.
FINANCIAL CONDITION
With 1994 yielding the best operating cash and net income results in the last
several years, the Company's financial condition has continued to improve.
Shareholders' equity grew $70 million to $353 million while long-term debt
decreased by $96 million. The year end debt-to-total capitalization ratio of 33%
is the lowest in Company history. While working capital and cash balances were
about the same as last year, significant progress was made on accounts
receivable, considering that the same $77 million balance supports $93 million,
or 15%, more sales volume. Inventory increased by $18 million as steel
production outpaced shipments during the second half of the year.
Capital expenditures increased $6 million to $23 million, spent largely on
replacement items. An additional $18 million in capital items were added to
lease commitments in the cement/concrete segment. Capital expenditure plans for
1995 contemplate $50 million as each business segment envisions doubling the
pace of recent expenditures. An additional $12 million in upgrade projects and
replacement mobile equipment is projected to be leased.
Net debt retirement of $40 million, excluding the converted debentures,
represented the greatest use of cash. Repayment flexibility was achieved through
TXI's refinancing as maturities previously scheduled for 1995 and 1996 were
replaced with a six-year amortization. A credit line of $25 million was arranged
for TXI as a part of the refinancing, $4.4 million of which has been utilized to
support letters of credit. This line is due to expire in November 1996.
Chaparral has short-term credit facilities of $20 million, $15 million of which
was outstanding at May. This credit line is eligible to be renewed in January
1995.
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 1995 operations to be sufficient to provide
funds for planned capital expenditures, scheduled debt payments and other known
working capital needs for fiscal 1995. 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.
CONSOLIDATED BALANCE SHEETS
Texas Industries, Inc. and Subsidiaries
May 31,
- - ---------------------------------------------------------------------------
In thousands 1994 1993
- - ---------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and temporary investments $ 31,766 $ 33,089
Notes and accounts receivable 76,815 76,711
Inventories 135,851 117,987
Prepaid expenses 32,646 32,745
- - ---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 277,078 260,532
OTHER ASSETS
Real estate and other investments 30,523 30,188
Goodwill 72,916 75,234
Commissioning costs and other assets 23,710 25,788
- - ---------------------------------------------------------------------------
127,149 131,210
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 90,685 86,697
Buildings 51,776 51,533
Machinery and equipment 727,818 720,526
- - ---------------------------------------------------------------------------
870,279 858,756
Less allowances for depreciation 525,386 493,198
- - ---------------------------------------------------------------------------
344,893 365,558
--------------------------
$749,120 $757,300
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 15,000 $ --
Trade accounts payable 44,022 48,662
Accrued interest, wages and other items 25,546 29,668
Current portion of long-term debt 31,127 22,794
- - ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 115,695 101,124
LONG-TERM DEBT 171,263 267,243
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS 73,196 71,313
MINORITY INTEREST 36,295 35,109
SHAREHOLDERS' EQUITY
Preferred stock 598 598
Common stock, $1 par value 12,534 11,100
Additional paid-in capital 265,790 220,776
Retained earnings 75,511 52,933
Cost of common shares in treasury (1,762) (2,896)
- - ---------------------------------------------------------------------------
352,671 282,511
--------------------------
$749,120 $757,300
==========================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
Texas Industries, Inc. and Subsidiaries
Year Ended May 31,
- - -----------------------------------------------------------------------------
In thousands except per share 1994 1993 1992
- - -----------------------------------------------------------------------------
NET SALES $707,147 $614,292 $601,129
COSTS AND EXPENSES (INCOME)
Cost of products sold 598,601 545,200 542,355
Selling, general and administrative 47,341 43,116 46,622
Interest 26,231 32,596 31,149
Other income (8,614) (6,639) (24,010)
- - -----------------------------------------------------------------------------
663,559 614,273 596,116
- - -----------------------------------------------------------------------------
INCOME BEFORE THE FOLLOWING ITEMS 43,588 19 5,013
INCOME TAXES
Expense (benefit) 13,607 (646) 1,737
Change in statutory federal tax rate 1,949 -- --
- - -----------------------------------------------------------------------------
15,556 (646) 1,737
- - -----------------------------------------------------------------------------
28,032 665 3,276
Minority interest in Chaparral (2,281) 393 (1,356)
- - -----------------------------------------------------------------------------
NET INCOME $ 25,751 $ 1,058 $ 1,920
================================
Average common shares 11,327 11,085 11,056
================================
Net income per common share $ 2.29 $ .11 $ .19
================================
Cash dividends $ .20 $ .20 $ .20
================================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Texas Industries, Inc. and Subsidiaries
Year Ended May 31,
- - ----------------------------------------------------------------------------------
In thousands 1994 1993 1992
- - ----------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 25,751 $ 1,058 $ 1,920
Gain on disposal of assets (2,535) (264) (13,805)
Non-cash items
Depreciation, depletion and amortization 48,962 49,799 47,495
Deferred taxes 3,790 (4,284) 432
Undistributed minority interest 1,186 (1,528) 206
Other -- net 1,575 819 880
Changes in operating assets and liabilities
Notes and accounts receivable (937) (2,125) (3,645)
Inventories and prepaid expenses (18,468) 2,431 (12,719)
Accounts payable and accrued liabilities (7,980) 2,470 4,575
Real estate and investments 28 985 878
- - ----------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 51,372 49,361 26,217
INVESTING ACTIVITIES
Capital expenditures (23,305) (17,212) (21,621)
Proceeds from disposition of assets 2,880 497 21,794
Purchase of temporary investments (2,017) (4,660) (6,528)
Proceeds from temporary investments 8,374 4,816 --
Cash surrender value -- insurance (821) 5,554 (1,840)
Commissioning costs and other -- net (315) (375) (8,412)
- - ----------------------------------------------------------------------------------
NET CASH USED BY INVESTING (15,204) (11,380) (16,607)
FINANCING ACTIVITIES
Proceeds of short-term borrowing 30,000 7,000 18,000
Repayments of short-term borrowing (15,000) (7,000) (28,000)
Proceeds of long-term borrowing 71,517 600 20,337
Debt retirements (111,738) (22,290) (25,351)
Dividends paid (2,308) (2,228) (2,213)
Other -- net (3,629) (1,439) (1,451)
- - ----------------------------------------------------------------------------------
NET CASH USED BY FINANCING (31,158) (25,357) (18,678)
- - ----------------------------------------------------------------------------------
Increase (decrease) in cash 5,010 12,624 (9,068)
Cash at beginning of year 26,756 14,132 23,200
- - ----------------------------------------------------------------------------------
Cash at end of year 31,766 26,756 14,132
Temporary investments -- 6,333 6,528
- - ----------------------------------------------------------------------------------
CASH AND TEMPORARY INVESTMENTS AT END OF YEAR $31,766 $33,089 $20,660
=============================
See notes to consolidated financial statements.
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, 1991 $598 $11,100 $220,776 $55,875 $(6,225) $282,124
Net income 1,920 1,920
Cash dividends
Preferred stock -- $5 a share (30) (30)
Common stock -- $.20 a share (2,183) (2,183)
Treasury stock issued for bonuses
and options -- 3,250 shares (38) 109 71
- - ---------------------------------------------------------------------------------------------------------------------------------
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 shares 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
============================================================================
At May 31, 1994, 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.
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. Temporary investments
of $6.3 million at May 31, 1993, which are included in cash on the balance
sheets, exceed 90-day maturity.
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 $9.9 million at May 31, 1994 and
$7.6 million at May 31, 1993. Management regularly 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 amounts of
amortization charged to income were $3 million, $3 million and $1 million in
1994, 1993 and 1992, respectively, based on a five-year period.
The estimated fair value of each class of financial instrument as of May 31,
1994 approximates carrying value except for Chaparral's long-term debt. The fair
value of all long-term debt at May 31, 1994, 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
$218.2 million compared to the carrying amount of $202.4 million.
Certain amounts in the 1992 and 1993 financial statements have been reclassified
to conform to the 1994 presentation.
WORKING CAPITAL
Working capital totaled $161.4 million at May 31, 1994, compared to $159.4
million at the prior year-end.
Notes and accounts receivable of $76.8 million at May 31, 1994, compared with
$76.7 million in 1993, are presented net of allowances for doubtful receivables
of $4.6 million in 1994 and $4.2 million in 1993.
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 $12.0 million in 1994 and $6.6 million in 1993.
Inventories are summarized as follows:
- - ----------------------------------------------
In thousands 1994 1993
- - ----------------------------------------------
Finished products $ 72,583 $ 54,049
Work in process 21,708 21,279
Raw materials and supplies 41,560 42,659
- - ----------------------------------------------
$135,851 $117,987
=================
LONG-TERM DEBT
Long-term debt is comprised of the following:
- - ---------------------------------------------------------------------------------------------------
In thousands 1994 1993
- - ---------------------------------------------------------------------------------------------------
Secured Debt
Senior note due through 1999, interest rate at 6.69% (2% over LIBOR) $71,000 $ --
First mortgage notes of Chaparral, due through 1995, interest rates
from 5% to 5.5% (up to 2% over LIBOR) 7,256 15,759
First mortgage notes of Chaparral, due through 2001, interest rate
14.2% 26,595 30,687
Purchase money obligations, maturing through 1999, interest rates
from 7% to 11.5% 3,727 3,867
Unsecured Debt
Senior notes of Chaparral, due through 2004, interest rates to 10.85% 80,000 80,000
Pollution control bonds, due through 2007, interest rates from 4.5%
to 10% 11,366 12,719
Refinanced debt -- 92,674
Converted debt -- 49,965
Other, maturing through 2005, interest rates from 7.5% to 10% 2,446 4,366
- - ---------------------------------------------------------------------------------------------------
202,390 290,037
Less current maturities 31,127 22,794
- - ---------------------------------------------------------------------------------------------------
$171,263 $267,243
======================
Annual maturities of long-term debt for each of the five succeeding years are
$31.1, $32.6, $28.6, $28.5 and $28.0 million.
The Company has available a bank line of credit of $25 million of which $4.4
million has been utilized to support letters of credit. This line is due to
expire in November 1996. The interest rate charged on borrowings is 1.75% over
LIBOR. Commitment fees at an annual rate of 1/2 of 1% are paid on the unused
portion of this line.
Chaparral has utilized $15 million of its $20 million available bank lines of
credit, which are due to expire in January 1995, if not renewed. Interest rates
on borrowings currently range from 4.69% to 4.88%. Commitment fees at an annual
rate of 3/8 of 1% are paid on the unused portions of these lines.
The loan agreements contain covenants which provide for minimum working capital,
restrictions on purchases of treasury stock, payment of dividends on common
stock, 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 $33.0 million as of May 31, 1994. The Company and
Chaparral are in compliance with all loan covenant restrictions.
As a result of a sinking fund payment and a notice of redemption issued by the
Company, holders of $46.9 million of the Company's outstanding 9% convertible
subordinated debentures due in 2008 converted such debentures into 1,432,296
shares of the Company's common stock at $32.74 per share. Assuming these
convertible debentures had been converted as of June 1, 1993, supplemental
earnings per share for fiscal year 1994 would have been $2.20.
Property, plant and equipment, principally Chaparral's, carried at a net amount
of approximately $231.0 million at May 31, 1994 is mortgaged as collateral for
$37.6 million of secured debt. The Company's Chaparral stock is pledged as
collateral for the $71 million Senior note and the $25 million line of credit.
The amount of interest paid was $31.6 million in 1994, $33.4 million in 1993 and
$34.7 million in 1992. Interest capitalized totaled $3.4 million in 1992.
SHAREHOLDERS' EQUITY
Common stock consists of:
- - -------------------------------------------------------------------
In thousands 1994 1993
- - -------------------------------------------------------------------
Shares authorized 15,000 15,000
Shares outstanding at May 31 12,489 11,015
Average shares outstanding including equivalents 11,327 11,085
Shares held in treasury 45 85
Shares reserved for:
Convertible subordinated debentures -- 1,526
Stock options and other 1,334 640
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,
1994 and 1993.
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 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, 1994, follows:
Shares Under Aggregate
Option Option Price
- - -----------------------------------------------------------------------
$ In thousands 1994 1993 1994 1993
- - -----------------------------------------------------------------------
Outstanding at June 1 429,874 471,068 $10,129 $11,105
Granted 87,450 60,500 2,108 1,388
Exercised (134,492) (14,508) (3,856) (320)
Cancelled (22,828) (87,186) (598) (2,044)
- - -----------------------------------------------------------------------
Outstanding at May 31 360,004 429,874 $ 7,783 $10,129
======================================
Shares at May 31
Exercisable 71,644
Available for future grants 914,550
The options outstanding at May 31, 1994, expire on various dates to October 19,
2003.
INCOME TAXES
The provisions for income taxes are composed of:
- - ----------------------------------------------------------------------
In thousands 1994 1993 1992
- - ----------------------------------------------------------------------
Current $11,766 $ 3,637 $1,305
Deferred 3,790 (4,283) 432
- - ----------------------------------------------------------------------
Expense (benefit) $15,556 $ (646) $1,737
==========================
A reconcilement from statutory federal taxes to the above provisions follows:
- - ----------------------------------------------------------------------
In thousands 1994 1993 1992
- - ----------------------------------------------------------------------
Taxes at statutory rate $15,256 $ 6 $ 1,704
Change in statutory federal tax rate 1,949 -- --
Tax credit carryforwards (36) 653 546
Additional depletion (2,107) (1,831) (1,213)
Goodwill 811 788 788
State income tax 242 220 276
Non taxable insurance benefits (528) (481) (377)
Other -- net (31) (1) 13
- - ----------------------------------------------------------------------
$15,556 $ (646) $ 1,737
==========================
Effective June 1, 1992, the Company adopted Statement of Financial Accounting
Standards 109, "Accounting for Income Taxes" (SFAS 109). 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 provision for 1992 deferred income taxes (prior to the adoption of SFAS 109)
was principally comprised of the tax effects of temporary differences as
follows: $3.2 million commissioning costs, $4.6 million real estate gains and
($7.0 million) net operating loss utilization.
The Company joins in filing a consolidated tax return with its subsidiaries.
Current and deferred tax expense is allocated among the members of the group
based on the net taxable income or loss of the individual member.
As of May 31, 1994, for tax purposes, the Company has net operating loss
carryforwards available for offset against both regular taxable income and
alternative minimum taxable income of approximately $6.1 million, which expire
in the years 1997 through 2000. The Company has general business tax credit
carryforwards of approximately $2.5 million which expire in the years 1995
through 2009. The Company made income tax payments of $9.7 million, $.4 million,
and $2.5 million in 1994, 1993 and 1992, respectively.
The components of the net deferred tax liability at May 31 are summarized below:
- - ----------------------------------------------------------------------
In thousands 1994 1993
- - ----------------------------------------------------------------------
Deferred tax assets
Deferred compensation $ 3,317 $ 3,360
Expenses not currently tax deductible 9,154 9,924
Tax cost in inventory 3,516 3,148
Net operating loss carryforwards 2,129 8,772
Tax credit carryforwards 2,486 4,403
Alternative minimum tax credit carryforwards 18,446 14,232
Other -- 826
- - ----------------------------------------------------------------------
Total deferred tax assets 39,048 44,665
Deferred tax liabilities
Accelerated tax depreciation 72,800 73,952
Deferred real estate gains 5,488 5,331
Deferred acquisition expense 9,381 9,113
Commissioning costs 2,817 3,762
Other 1,427 1,583
- - ----------------------------------------------------------------------
Total deferred tax liabilities 91,913 93,741
Net tax liability 52,865 49,076
Less current portion (asset) (10,691) (11,392)
- - ----------------------------------------------------------------------
Net deferred tax liability $ 63,556 $ 60,468
===================
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 $1.5 million in 1994, $1.8 million in 1993,
and $1.7 million in 1992. 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 the
plans is one year and is subject to annual renewal by the Company's Board of
Directors. The expense for these plans, included in selling, general and
administrative, was $4.1 million, $1.8 million and $1.4 million for 1994, 1993,
and 1992, 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 $(2.0) million, $(2.4) million and $(.6) million
for 1994, 1993, and 1992, respectively.
OPERATING LEASES
Total expense for operating leases for mobile equipment, office space and other
items (other than for mineral rights) amounted to $10.0 million in 1994, $9.6
million in 1993 and $9.9 million in 1992. Non-cancelable operating leases with
an initial or remaining term of more than one year totaled $20.8 million at May
31, 1994. Annual lease payments for the five succeeding years are $5.3 million,
$4.4 million, $3.1 million, $4.1 million and $.6 million.
BUSINESS SEGMENTS
Business segment information is on pages 4 and 5. 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
operations 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.
QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following is a summary of quarterly financial information for the two years
ended May 31, 1994 (in thousands except per share):
Three months ended
- - ------------------------------------------------------------------------
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 price
High 24 7/8 26 36 39 3/4
Low 21 7/8 23 1/8 26 30 7/8
- - ------------------------------------------------------------------------
1993 Aug. Nov. Feb. May
- - ------------------------------------------------------------------------
Net sales
Steel $101,558 $106,568 $103,396 $108,688
Cement/concrete 53,948 46,843 38,884 54,407
- - ------------------------------------------------------------------------
155,506 153,411 142,280 163,095
======================================
Operating profit
Steel (682) 4,913 4,371 4,288
Cement/concrete 9,365 7,036 730 14,551
- - ------------------------------------------------------------------------
8,683 11,949 5,101 18,839
======================================
Net income (loss) (943) 264 (4,465) 6,202
Per share
Net income (loss) (.08) .03 (.40) .56
Dividends .05 .05 .05 .05
Stock prices
High 24 1/4 21 3/4 28 3/4 28 1/2
Low 20 1/2 19 1/4 20 5/8 21 1/4
*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.
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, 1994 and 1993, and the related
consolidated statements of income, cash flows and shareholders' equity for each
of the three years in the period ended May 31, 1994. 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, 1994 and 1993, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended May 31, 1994, in conformity with generally accepted accounting principles.
/s/ Ernst & Young, LLP
-------------------------------
Dallas, Texas
July 15, 1994
FORM 10-K REQUESTS
Shareholders may obtain, without charge, a copy of the Company's Form 10-K for
the year ended May 31, 1994, as filed with the Securities and Exchange
Commission. Written requests should be addressed to Investor Relations.
The information contained herein is not given in connection with any sale or
offer of, or solicitation of any offer to buy, any securities.
TRANSFER AGENT AND REGISTRAR
Chemical Bank
Common Stock
Shareholder Inquiries 1-800-635-9270
STOCK EXCHANGE LISTING
New York Stock Exchange (ticker symbol TXI)
ANNUAL MEETING
The Annual Meeting of Shareholders of Texas Industries, Inc. will be held
Tuesday, October 18, 1994, at 9:30 a.m. CDT, at The Ballpark in Arlington, 1000
Ballpark Way, Arlington, Texas. Proxies for this Meeting will be requested by
Management. All Shareholders are cordially urged to attend in order to comment
and advise on matters concerning the Company.
TEXAS INDUSTRIES, INC.
DIRECTORS
Ralph B. Rogers
Chairman of the Board
Robert D. Rogers
President and Chief Executive Officer
Robert Alpert, Chairman of the Board
Alpert Companies
Dallas, Texas
Gordon E. Forward, President and Chief Executive Officer
Chaparral Steel Company
Midlothian, Texas
Richard I. Galland
Attorney at Law
Dallas, Texas
Gerald R. Heffernan, President
G. R. Heffernan & Associates, Ltd.
Toronto, Ontario
Ian Wachtmeister, Chairman and Chief Executive Officer
The Empire AB
Stockholm
CORPORATE OFFICERS
Robert D. Rogers
President and Chief Executive Officer
Melvin G. Brekhus
Vice President -- Cement Production
Brooke E. Brewer
Vice President -- Human Resources
Roman J. Figueroa
Vice President -- Aggregates
Richard M. Fowler
Vice President -- Finance
James R. McCraw
Vice President -- Controller
Robert C. Moore
Vice President -- General Counsel and Secretary
Burl W. Ruth
Vice President -- Concrete
Tommy A. Valenta
Vice President -- North Texas Concrete/Cement Marketing
Kenneth R. Allen
Treasurer
E. Leo Faciane
Environmental Affairs
Julia P. Fuller
Assistant Treasurer
CHAPARRAL STEEL COMPANY
DIRECTORS
Robert D. Rogers
Chairman of the Board
Gordon E. Forward
President and Chief Executive Officer
Robert Alpert, Chairman of the Board
Alpert Companies
Dallas, Texas
John M. Belk, Chairman of the Board
Belk Stores Services, Inc.
Charlotte, North Carolina
Lic. Eugenio Clariond Reyes
Director General and Chief Executive Officer
Grupo IMSA, S.A.
Monterrey
Gerald R. Heffernan, President
G. R. Heffernan & Associates, Ltd.
Toronto, Ontario
Dr. Gerhard Liener, Chief Financial Officer
Daimler - Benz AG
Stuttgart
OFFICERS
Gordon E. Forward
President and Chief Executive Officer
Kenneth R. Allen
Director -- Investor Relations
Dennis E. Beach
Vice President -- Administration
Larry L. Clark
Vice President -- Controller and Assistant Treasurer
David A. Fournie
Vice President -- Operations
Richard M. Fowler
Senior Vice President -- Finance
Richard T. Jaffre
Vice President -- Raw Materials
Robert C. Moore
Vice President -- General Counsel and Secretary
Libor F. Rostik
Senior Vice President -- Engineering
Jeffry A. Werner
Senior Vice President -- Commercial
Peter H. Wright
Vice President -- Quality Control and SBQ Sales