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Texas Industries, Inc. (TXI)
F1Q10 Earnings Call
September 24, 2009 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
Garick Shmois – Longbow Research
Katherine Thompson – Thompson Research
Analyst for Trey Grooms - Stephens, Inc.
Glenn Wortman - Sidoti & Company
Fritz Von Carp – Sage Asset Management
Todd Vencil – Davenport & Co.
Chris Olin – Cleveland Research
Robert [Rosington] – No Company Listed
Jay Van Sciver – Bishop & Carroll Capital Partners
Previous Statements by TXI
» Texas Industries, Inc. F2Q09 (Qrtr End 11/30/08) 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
Thanks. Before we begin, Linda English would like to make some introductions. Linda please go ahead.
Thank you Ken. Good afternoon and thank you for joining us today for TXI’s first quarter results conference call and webcast. We appreciate your time and interest in TXI. I am Linda English, Manager of Investor Communications. Joining me today are President and CEO, Mel Brekhus and CFO, Ken Allen. Gentlemen, thank you.
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 would like to remind you that certain statements contained in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 competitive pressures and changing economic and financial conditions on our business, the cyclical and seasonal nature of our business, the level of construction activity in our markets at normal periods of inclement weather, unexpected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in the cost or availability of transportation, changes in interest rates, the timing and amount of federal, state and local funding for infrastructure, delays in announced capacity expansions, ongoing volatility and uncertainty in the capital or credit markets, the impact of environmental laws and 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.
Forward-looking statements speak only as of the date hereof and we assume no obligation to publicly update these statements. Now, for opening comments, Mel please go ahead.
Thank you Linda. Good afternoon from Dallas, Texas. I am very pleased to be here today discussing the positive earnings we reported this morning. While meager from a historical perspective, our results are impressive in light of the current market conditions and directly attributable to the actions we began to take a year ago.
Recall that a year ago Lehman had collapsed, the depth of the credit crisis was not yet known and we were recognizing the reality of a recession in California and had not had seen much impact in Texas. In light of this uncertainty, we had already begun an aggressive process of thoroughly reviewing our businesses to ensure that we operated as cost effectively as possible.
At the same time, we were focused on our liquidity and took a number of steps to generate cash and to preserve and strengthen our financial position. Through the past 12 months we have reported our actions to you. We idled our less efficient small kilns at our Midlothian cement plant in order to maximize the efficiencies inherent in our large, modern kiln and to manage our clinker inventory levels.
We idled our cement grinding operations at our Crestmore plant because we were able to meet demand with the grinding capacity at our Oro Grand cement plant. We decided to operate our Oro Grand plant in California at high production rates in order to maximize our cost efficiencies by building inventory and then taking the kiln down for extended times while selling out of inventory. We suspended operations at two central Texas aggregate plants. We adjusted shifts and reduced overtime hours to match production to demand. We improved our maintenance practices on mobile equipment in order to expand major component rebuilds.
During the summer we shifted our zone production to off-peak hours in order to avoid force production interruptions during peak power consumption. Our Ready Mix operations which are particularly susceptible to inefficiencies related to volume declines, have idled trucks, reduced headcount and made a number of other operational changes to preserve margins and remain profitable. All of our operations have made dramatic changes and significantly reduced their headcount over the past year.
Our headcount is down 28% compared to the beginning of calendar year 2008. These and other actions are the reason our consolidated cash gross margins actually improved compared to a year ago despite shipments being off 25-35% for our major products. Ken will provide additional details with his comments.
On the fiscal front, we have also taken a number of actions to proactively manage our financial condition. In August 2008 we issued senior notes to add over $100 million of cash. In November 2008 we modified our debt terms to give us more room on our covenants. In June 2009 we converted our credit facility to an asset backed loan to secure by the value of our accounts receivable, our inventory and our mobile equipment; all of this in order to give us further flexibility.