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Texas Industries Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: September 24, 2010 03:13PM

Texas Industries Inc. (TXI) filed Quarterly Report for the period ended 2010-08-31. Texas Industries Inc. has a market cap of $858.9 million; its shares were traded at around $30.89 with and P/S ratio of 1.4. The dividend yield of Texas Industries Inc. stocks is 0.9%.

TXI is in the portfolios of John Keeley of Keeley Fund Management, Mason Hawkins of Southeastern Asset Management, Kenneth Fisher of Fisher Asset Management, LLC, Bruce Kovner of Caxton Associates, Mario Gabelli of GAMCO Investors, Chuck Royce of Royce& Associates, Pioneer Investments.

Highlight of Business Operations:

Consolidated sales for the three-month period ended August 31, 2010 were $172.1 million, a decrease of $11.8 million from the prior year period. Consolidated cost of products sold for the three-month period ended August 31, 2010 was $156.0 million, an increase of $6.2 million from the prior year period. Consolidated gross profit for the three-month period ended August 31, 2010 was $16.1 million, a decrease of $18.0 million from the prior year period. Lower sales prices offset in part by higher aggregate and ready-mix concrete shipments reduced consolidated gross profit approximately $16 million. In addition, higher energy costs increased manufacturing costs $2.5 million from the prior year period.

Consolidated selling, general and administrative expense for the three-month period ended August 31, 2010 was $16.1 million, a decrease of $4.1 million from the prior year period. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on the fair value of these awards decreased expense $1.3 million for the three-month period ended August 31, 2010 and increased expense $1.6 million for the three-month period ended August 31, 2009. We hold life insurance policies in connection with certain of our benefit plans. Proceeds received from the policies in the three-month period ended August 31, 2010 decreased expense $0.4 million from the prior year period. Our focus on reducing controllable costs lowered overall other expenses $0.8 million in the three-month period ended August 31, 2010 from the prior year period.

Consolidated other income for the three-month period ended August 31, 2010 was $4.9 million, an increase of $2.2 million from the prior year period. Routine sales of surplus operating assets and real estate resulted in gains of $1.6 million and $1.0 million in the three-month periods ended August 31, 2010 and August 31, 2009, respectively. In addition, other income includes a gain of $1.7 million from the sale of emissions credits associated with our Crestmore cement plant in Riverside, California in the three-month period ended August 31, 2010.

Selling, general and administrative expense for the three-month period ended August 31, 2010 decreased $4.1 million from the prior year period. The decrease was primarily the result of $3.0 million lower stock-based compensation. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on their fair value decreased stock-based compensation $1.3 million in the three-month period ended August 31, 2010 and increased stock-based compensation $1.6 million in the three-month period ended August 31, 2009. We hold life insurance policies in connection with certain of our benefit plans. Proceeds received from the policies in the three-month period ended August 31, 2010 decreased expense $0.4 million from the prior year period. Our focus on reducing controllable costs lowered overall other expenses $0.7 million in the three-month period ended August 31, 2010 from the prior year period.

On July 27, 2010, we commenced a cash tender offer for all of the outstanding $550 million aggregate principal amount of our 7.25% senior notes due 2013 and a solicitation of consents to amend the indenture governing the 7.25% notes. Pursuant to the tender offer and consent solicitation, we purchased $536.6 million aggregate principal amount of the 7.25% notes, and paid an aggregate of $547.7 million in purchase price and consent fees. On September 9, 2010, we redeemed the remaining $13.4 million aggregate principal amount of the 7.25% notes at a price of 101.813% of the principal amount thereof, plus accrued and unpaid interest on the 7.25% notes to the redemption date. We used the net proceeds from the issuance and sale of $650 million aggregate principal amount of our 9.25% senior notes to pay the purchase or redemption price of the 7.25% notes and the consent fees. As of August 31, 2010, we recognized a loss on debt retirement of $29.0 million representing $11.1 million in consent fees and transaction costs and a write-off of $17.9 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.

The amount that can be borrowed under the credit facility is limited to an amount based on the value of our consolidated accounts receivable, inventory and mobile equipment. This amount, called the borrowing base, may be less than the $200 million stated principal amount of the credit facility. The borrowing base under the agreement was $161.2 million as of August 31, 2010. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $40 million, in which case we must maintain a fixed charge coverage ratio of at least 1.1 to 1.0. At August 31, 2010, our fixed charge coverage ratio was .52 to 1.0. Given this ratio, we may use only $121.2 million of the borrowing base as of such date. No borrowings were outstanding at August 31, 2010; however, $31.1 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of August 31, 2010 was $90.1 million.

Read the The complete Report



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