Texas Industries, Inc. (TXI)
F2Q09 Earnings Call
January 8, 2008 2:00 pm ET
Linda English - Manager of Investor Communications
Melvin G. Brekhus - President, Chief Executive Officer, Director
Kenneth R. Allen - Chief Financial Officer, Vice President - Finance
John Kasprzak – BB&T Capital Markets
Derrick [Schmoist] – Longbow Research
Analyst for Christopher Manuel - Keybanc Capital Markets
Trey Grooms - Stephens, Inc.
Katherine Thompson - Avondale Partners
[Glenn Wartman] - Sidoti & Company
Brett Levy – Jefferies & Company
[Mike Detz] - J.P. Morgan
[Kevin Bennett – Davenport & Company]
Elizabeth Barney – Eagle Capital
[Andrew Root – Alicone Capital]
Seth Yeager – Jeffries & Company
Previous Statements by TXI
» Texas Industries, Inc. F1Q10 (Qtr End 08/31/09) Earnings Call Transcript
» Texas Industries, Inc. F1Q09 (Qtr End 08/31/08) Earnings Call Transcript
» Texas Industries, Inc. F4Q08 (Qtr End 05/31/08) Earnings Call Transcript
Thank you all for joining us today for TXI’s second quarter results conference call and webcast. We appreciate your time and interest in TXI. I’m Linda English, Manager of Investor Communications. Joining me today are President and CEO Mel Brekhus and CFO Ken Allen. We will follow a similar format as in previous presentations. Mel and Ken will first provide comments for the quarter and follow with Q&A.
Before I turn the call over to our speakers, I’d like to remind you that certain statements contained in this conference call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date hereof and we assume no obligation to publicly update such statements.
Such statements are subject to risk, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.
Potential risk and uncertainties include but are not limited to the impact of competitor pressures and changing economic and financial conditions on our business, the cyclical and seasonal nature of our business, the level of construction activity in our markets at normal periods of inclement weather and expected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in interest rates, the timing and amount of federal, state and local funding for infrastructure, delays in announced capacity expansions, ongoing volatility and uncertainty in the capital or credit markets, the impact of environment laws, regulations and claims and changes in governmental and public policy and the risk and uncertainties described in our reports on Forms 10K, 10Q and 8K.
Now, for opening comments Mel, please go ahead.
Melvin G. Brekhus
Welcome to our second quarter teleconference call. I hope everyone enjoyed the holiday season and I know you join me in hoping that 2009 will return us to more stable conditions and set the stage for the economic recovery that will inevitably occur. On our call last September I reported that construction activity in Texas had begun to slowdown.
The pace of the slowdown accelerated during the fall as we began to feel the impact of frozen credit markets, declining oil and gas exploration due to the dramatically lower oil prices and the general economic downturn and uncertainty that seems to be the trademark of these times. Cement consumption in Texas this fall was off approximately 20% from a year ago. Cement prices in Texas continue to be stable with realized prices up 3% in the November quarter compared to a year ago and up 1% compared to the recent August quarter.
California continues to be a difficult market. While we are hopeful that the bottom of the market is near, we are not yet able to call the bottom or forecast the future with a significant degree of certainty. Given the uncertain conditions, the announced cement price increase effective January 1st in California will likely not be successful but we do expect pricing to be relatively stable in the near term.
We have done and will be doing a number of things to respond to the recession while at the same time keeping our overall strategy intact. During the second quarter we suspended the operation of our smaller kilns at our Midlothian cement plant in order to maximize the efficiencies inherent in our large modern kiln and manage our clinker inventory levels. In December, we suspended the operation of our cement and grinding operation at our Crestmore facility in California.
We were able to meet demand with grinding capacity at our new Oro Grande facility. We have limited the run time at our aggregate facilities in order to avoid building inventories and to reduce costs. We have adjusted shifts and reduced overtime. Likewise, our ready mix operations have trimmed their headcount in response to lower demand in the markets we serve. Compared to the end of December in 2007, total headcount at TXI as of December 31, 2008 has declined 15%.
Finally, we have recently decided to delay the expansion of our Central Texas cement plant beginning in our fourth quarter. We do not believe the market will require additional cement during the near term or afford us incremental earnings from that additional production. It is therefore prudent to conserve cash and delay construction until conditions improve. We also paired back our regular cap ex spending significantly to only spend on those projects which are absolutely necessary. Our regular cap ex spending for the year has been trimmed by approximately $20 million.