TXI Texas Industries Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2011

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                              to                             

Commission File Number 1-4887

TEXAS INDUSTRIES, INC.

(Exact name of Registrant as specified in its Charter)

 

Delaware				75-0832210
(State or other jurisdiction of				(IRS Employer Identification No.)
incorporation or organization)

1341 West Mockingbird Lane, Suite 700W, Dallas, Texas 75247-6913

(Address of principal executive offices)                              (Zip Code)

Registrant’s telephone number, including area code: (972) 647-6700

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 whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes   [X]     No   [    ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer   [X]				Accelerated Filer   [    ]
Non-accelerated Filer   [    ]				Smaller Reporting Company  [    ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes   [    ]     No  [X]

There were 27,906,265 shares of the Registrant’s Common Stock, $1.00 par value, outstanding as of January 3, 2012.

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INDEX

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

 

PART I. FINANCIAL INFORMATION					Page
Item 1.		Financial Statements
		Consolidated Balance Sheets – November 30, 2011 and May 31, 2011			3
		Consolidated Statements of Operations – three and six months ended November 30, 2011 and November 30, 2010			4
		Consolidated Statements of Cash Flows – six months ended November 30, 2011 and November 30, 2010			5
		Notes to Consolidated Financial Statements			6
		Report of Independent Registered Public Accounting Firm			25
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			38
Item 4.		Controls and Procedures			38
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings			39
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 5.		Other Information			39
Item 6.		Exhibits			39
SIGNATURES

 

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PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

 

		(Unaudited) November 30,				May 31,
In thousands		2011				2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	67,462			$	116,432
Receivables – net			82,378				85,817
Inventories			128,154				140,646
Deferred income taxes and prepaid expenses			20,529				22,040
TOTAL CURRENT ASSETS			298,523				364,935
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements			180,090				158,232
Buildings			57,330				59,320
Machinery and equipment			1,215,341				1,222,560
Construction in progress			400,275				357,638
			1,853,036				1,797,750
Less depreciation and depletion			662,186				642,329
			1,190,850				1,155,421
OTHER ASSETS
Goodwill			1,715				1,715
Real estate and investments			11,472				6,749
Deferred income taxes and other charges			22,481				22,191
			35,668				30,655
		$	1,525,041			$	1,551,011
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	57,389			$	56,787
Accrued interest, compensation and other			63,829				58,848
Current portion of long-term debt			499				73
TOTAL CURRENT LIABILITIES			121,717				115,708
LONG-TERM DEBT			654,138				652,403
OTHER CREDITS			80,919				87,318
SHAREHOLDERS’ EQUITY
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 27,894 and 27,887 shares, respectively			27,894				27,887
Additional paid-in capital			484,453				481,706
Retained earnings			168,203				198,751
Accumulated other comprehensive loss			(12,283	)			(12,762	)
			668,267				695,582
		$	1,525,041			$	1,551,011

See notes to consolidated financial statements.

 

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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

 

						Three months ended November 30,																Six months ended November 30,
In thousands except per share						2011								2010								2011								2010
NET SALES		$					156,071			$					148,111			$					337,811			$					320,233
Cost of products sold							153,325								136,044								321,240								292,058
GROSS PROFIT							2,746								12,067								16,571								28,175
Selling, general and administrative							13,877								18,543								31,681								34,684
Restructuring charges							3,216								--								3,216								--
Interest							8,838								13,886								18,298								28,297
Loss on debt retirements							--								613								--								29,619
Other income							(1,527	)							(1,929	)							(7,399	)							(6,819	)
							24,404								31,113								45,796								85,781
LOSS BEFORE INCOME TAXES							(21,658	)							(19,046	)							(29,225	)							(57,606	)
Income tax benefit							(621	)							(7,845	)							(768	)							(22,713	)
NET LOSS		$					(21,037	)		$					(11,201	)		$					(28,457	)		$					(34,893	)
Net loss per share
Basic		$					(.75	)		$					(.40	)		$					(1.02	)		$					(1.25	)
Diluted		$					(.75	)		$					(.40	)		$					(1.02	)		$					(1.25	)
Average shares outstanding
Basic							27,882								27,807								27,878								27,797
Diluted							27,882								27,807								27,878								27,797
Cash dividends declared per share		$					--			$					.075			$					.075			$					.15

See notes to consolidated financial statements.

 

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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

 

						Six months ended November 30,
In thousands						2011								2010
OPERATING ACTIVITIES
Net loss		$					(28,457	)		$					(34,893	)
Adjustments to reconcile net loss to cash provided by operating activities
Depreciation, depletion and amortization							31,385								31,991
Gains on asset disposals							(2,751	)							(1,555	)
Deferred income tax benefit							(945	)							(22,964	)
Stock-based compensation expense (credit)							(1,229	)							2,288
Loss on debt retirements							--								29,619
Other – net							(5,185	)							(2,855	)
Changes in operating assets and liabilities
Receivables – net							3,696								16,112
Inventories							12,189								(10,262	)
Prepaid expenses							2,854								1,232
Accounts payable and accrued liabilities							930								1,313
Net cash provided by operating activities							12,487								10,026
INVESTING ACTIVITIES
Capital expenditures – expansions							(35,966	)							(11,198	)
Capital expenditures – other							(26,300	)							(12,201	)
Proceeds from asset disposals							1,649								3,037
Investments in life insurance contracts							2,989								3,704
Other – net							(128	)							(859	)
Net cash used by investing activities							(57,756	)							(17,517	)
FINANCING ACTIVITIES
Long-term borrowings							--								650,000
Debt retirements							(36	)							(561,568	)
Debt issuance costs							(1,732	)							(12,426	)
Stock option exercises							158								464
Common dividends paid							(2,091	)							(4,172	)
Net cash provided (used) by financing activities							(3,701	)							72,298
Increase (decrease) in cash and cash equivalents							(48,970	)							64,807
Cash and cash equivalents at beginning of period							116,432								74,946
Cash and cash equivalents at end of period			$				67,462				$				139,753

See notes to consolidated financial statements.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Texas Industries, Inc. and subsidiaries is a leading supplier of heavy construction materials in the southwestern United States through our three business segments: cement, aggregates and consumer products. Our principal products are gray portland cement, produced and sold through our cement segment; stone, sand and gravel, produced and sold through our aggregates segment; and ready-mix concrete, produced and sold through our consumer products segment. Other products include expanded shale and clay lightweight aggregates, produced and sold through our aggregates segment, and packaged concrete mix, mortar, sand and related products, produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California. When used in these notes the terms “Company,” “we,” “us” or “our” mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.

1. Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended November 30, 2011, are not necessarily indicative of the results that may be expected for the year ended May 31, 2012. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Texas Industries, Inc. for the year ended May 31, 2011.

Principles of Consolidation . The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries except for a joint venture in which the Company has a 40% equity interest. The joint venture is accounted for using the equity method. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Estimates . The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

Fair Value of Financial Instruments. The estimated fair value of each class of financial instrument as of November 30, 2011 and May 31, 2011 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of November 30, 2011, the fair value of our long-term debt, including the current portion, was approximately $550.6 million compared to the carrying amount of $654.6 million. As of May 31, 2011, the fair value of our long-term debt, including the current portion, was approximately $691.5 million compared to the carrying amount of $652.5 million.

Cash and Cash Equivalents . Investments with maturities of less than 90 days when purchased are classified as cash equivalents and consist primarily of money market funds and investment grade commercial paper issued by major corporations and financial institutions.

Receivables. Management evaluates the ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is maintained based on the length of time receivables are past due or the status of a customer’s financial condition. If we are aware of a specific customer’s inability to make required payments, specific amounts are added to the reserve.

Environmental Liabilities. We are subject to environmental laws and regulations established by federal, state and local authorities, and make provision for the estimated costs related to compliance when it is probable that an estimable liability has been incurred.

Legal Contingencies. We are a defendant in lawsuits which arose in the normal course of business, and make provision for the estimated loss from any claim or legal proceeding when it is probable that an estimable liability has been incurred.

Inventories. Inventories are stated at the lower of cost or market. We used the last-in, first out (“LIFO”) method to value finished products, work in process and raw material inventories excluding natural aggregate inventories. Natural aggregate inventories and parts and supplies inventories are valued using the average cost method. Our natural aggregate inventory excludes volumes in excess of an average twelve-month period of actual sales.

 

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Long-lived Assets. Management reviews long-lived assets on a facility by facility basis for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset and are significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. Estimates of future cash flows reflect Management’s belief that it operates in a cyclical industry and that we are at a low point in the cycle.

In the fourth quarter of our prior fiscal year, management evaluated the Hunter, Texas cement plant, including the capitalized construction and interest costs associated with the expansion. We expect the Texas market to recover to pre-recession levels and to complete the expansion project. Based on historical margins, we believe the undiscounted cash flows over the remaining life of the Hunter plant after completion of the expansion will significantly exceed the current investment in the plant as well as the remaining costs of the expansion and future capital expenditures necessary to achieve these cash flows.

Property, plant and equipment is recorded at cost. Costs incurred to construct certain long-lived assets include capitalized interest which is amortized over the estimated useful life of the related asset. Interest is capitalized during the construction period of qualified assets based on the average amount of accumulated expenditures and the weighted average interest rate applicable to borrowings outstanding during the period. If accumulated expenditures exceed applicable borrowings outstanding during the period, capitalized interest is allocated to projects under construction on a pro rata basis. Provisions for depreciation are computed generally using the straight-line method. Useful lives for our primary operating facilities range from 10 to 25 years with certain cement facility structures having useful lives of 40 years. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. The costs of removing overburden and waste materials to access mineral deposits are referred to as stripping costs. All post-production stripping costs are recognized as costs of the inventory produced during the period the stripping costs are incurred. Maintenance and repairs are charged to expense as incurred.

Goodwill and Goodwill Impairment . Management tests goodwill for impairment annually by reporting unit in the fourth quarter of our fiscal year using a two-step process. The first step of the impairment test identifies potential impairment by comparing the fair value of a reporting unit to its carrying value including goodwill. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying value of the reporting unit goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

Goodwill resulting from the acquisition of ready-mix operations in Texas and Louisiana and identified with our consumer products operations has a carrying value of $1.7 million at both November 30, 2011 and May 31, 2011. Based on an impairment test performed as of March 31, 2011, the fair value of the reporting unit exceeds its carrying value, and therefore, no potential impairment was identified.

Income Taxes . Texas Industries, Inc. (the parent company) joins in filing a consolidated return with its subsidiaries based on federal and certain state tax filing requirements. Certain subsidiaries also file separate state income tax returns. 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. We recognize and classify deferred income taxes using an asset and liability method, whereby deferred tax assets and liabilities are recognized based on the tax effect of temporary differences between the financial statements and the tax basis of assets and liabilities, as measured by current enacted tax rates.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the year the tax returns are filed.

 

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The amount of income tax we pay is subject to ongoing audits by federal and state authorities which may result in proposed assessments. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We account for these uncertain tax issues using a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step determines if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step measures the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, refinement of estimates, or realization of earnings or deductions that differ from our estimates. To the extent that the final outcome of these matters differs from the amounts recorded, such differences generally will impact our provision for income taxes in the period in which such a determination is made. Our provisions for income taxes include the impact of reserve provisions and changes to reserves that are considered appropriate including related interest and penalties.

Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and would record a valuation allowance unless such deferred tax assets were deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets is dependent upon various factors including the generation of taxable income during future periods. In determining the need for a valuation allowance, we consider such factors as historical earnings, the reversal of existing temporary differences, prior taxable income (if carryback is permitted under the tax law), and prudent and feasible tax planning strategies. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to earnings at such time. See further discussion in note 8.

Real Estate and Investments. Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks totaled $6.1 million at November 30, 2011 and $6.0 million at May 31, 2011.

Investments include life insurance contracts purchased in connection with certain of our benefit plans. The contracts, recorded at their net cash surrender value, totaled $1.5 million (net of distributions of $94.4 million plus accrued interest and fees) at November 30, 2011 and $0.7 million (net of distributions of $87.7 million plus accrued interest and fees) at May 31, 2011. We can elect to receive distributions chargeable against the cash surrender value of the policies in the form of borrowings or withdrawals or we can elect to surrender the policies and receive their net cash surrender value. Proceeds received from the policies were $6.7 million and $7.2 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

In November 2011 we entered into a joint venture agreement with a ready-mix operator based in Waco, Texas to which we contributed seven of our central Texas ready-mix plants and certain related assets and guaranteed 50%, or $13.0 million, of the joint venture’s debt which matures November 18, 2013. In addition to our 50% guarantee of the joint venture’s debt, 100% of the debt is guaranteed by the other partner and secured by the underlying assets of the joint venture. The joint venture was in compliance with all the terms of the debt as of November 30, 2011. Subject to a final determination of the fair value, our 40% equity interest in the joint venture was recorded at the $3.9 million carrying amount of the assets contributed, and therefore no gain or loss was recognized in the three-month period ended November 30, 2011. Because the assets contributed were recently acquired any future gain or loss is not expected to be significant. The day to day business operations are managed by the 60% partner in the venture. The joint venture will operate a total of nineteen ready-mix and two sand and gravel plants serving the central Texas market. We will continue to supply cement to the joint venture.

Deferred Other Charges. Deferred other charges totaled $20.5 million at November 30, 2011 and $19.5 million at May 31, 2011 and are composed primarily of debt issuance costs that totaled $13.8 million at November 30, 2011 and $13.2 million at May 31, 2011. The costs are amortized over the term of the related debt.

Other Credits. Other credits totaled $80.9 million at November 30, 2011 and $87.3 million at May 31, 2011 and are composed primarily of liabilities related to our retirement plans, deferred compensation agreements and asset retirement obligations.

Asset Retirement Obligations. We record a liability for legal obligations associated with the retirement of our long-lived assets in the period in which it is incurred if an estimate of fair value of the obligation can be made. The discounted fair value of the obligations incurred in each period are added to the carrying amount of the associated assets and depreciated over the lives of the assets. The liability is accreted at the end of each period through a charge to operating expense. A gain or loss on settlement is recognized if the obligation is settled for other than the carrying amount of the liability.

 

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We incur legal obligations for asset retirement as part of our normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Determining the amount of an asset retirement liability requires estimating the future cost of contracting with third parties to perform the obligation. The estimate is significantly impacted by, among other considerations, management’s assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk premiums and closure dates.

Changes in asset retirement obligations are as follows:

 

						Six months ended November 30,
In thousands						2011								2010
Balance at beginning of period		$					4,455			$					4,474
Additions							287								9
Accretion expense							89								107
Settlements							(713	)							(169	)
Balance at end of period		$					4,118			$					4,421

Accumulated Other Comprehensive Loss. Amounts recognized in accumulated other comprehensive loss represent adjustments related to a defined benefit retirement plan and a postretirement health benefit plan covering approximately 600 employees and retirees of our California cement subsidiary. The amounts totaled $12.3 million (net of tax of $7.1 million) at November 30, 2011 and $12.8 million (net of tax of $7.4 million) at May 31, 2011.

Comprehensive income or loss consists of net income or loss and amounts in accumulated other comprehensive loss recognized in the period as components of the net periodic postretirement benefit cost, net of tax. Comprehensive loss for the three-month periods ended November 30, 2011 and November 30, 2010 was $20.8 million and $10.9 million, respectively. Comprehensive loss for the six-month periods ended November 30, 2011 and November 30, 2010 was $28.0 million and $34.3 million, respectively.

Net Sales. Sales are recognized when title has transferred and products are delivered. We include delivery fees in the amount we bill customers to the extent needed to recover our cost of freight and delivery. Net sales are presented as revenues and include these delivery fees.

Other Income. Routine sales of surplus operating assets and real estate resulted in gains of $0.4 million in the three-month period ended November 30, 2011, and gains of $0.7 million and $1.6 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. In addition, we have sold emissions credits associated with our Crestmore cement plant in Riverside, California resulting in gains of $2.5 million and $1.7 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

We have entered into various oil and gas lease agreements on property we own in north Texas. The terms of the agreements include the payment of a lease bonus and royalties on any oil and gas produced. Lease bonus payments and royalties on oil and gas produced resulted in income of $0.4 million and $1.3 million in the three-month periods ended November 30, 2011 and November 30, 2010, respectively, and income of $0.8 million and $2.1 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. We cannot predict what the level of future royalties, if any, will be.

In July 2011 we entered into an asset exchange transaction in which we acquired the ready-mix and aggregate operations of CEMEX USA that serve the Austin, Texas metropolitan market. In exchange for the three ready-mix plants and one sand and gravel plant, we transferred to CEMEX USA certain of our ready-mix operations in Houston, Texas. Based on the preliminary valuation of the respective assets, the exchange resulted in the recognition of a gain of $2.1 million and the acquisition of ready-mix and aggregate property, plant and equipment of $6.1 million. The operating results of the acquired ready-mix and sand and gravel operations are reported in our consumer products and aggregate segments, respectively.

Restructuring Charges. We recorded restructuring charges of $3.2 million in the three-month and six-month periods ended November 30, 2011, of which $1.6 million has been paid. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

 

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Stock-based Compensation. We have provided stock-based compensation to employees and non-employee directors in the form of non-qualified and incentive stock options, restricted stock, stock appreciation rights, deferred compensation agreements and stock awards. We use the Black-Scholes option-pricing model to determine the fair value of stock options granted as of the date of grant. Options with graded vesting are valued as single awards and the related compensation cost is recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. We use the average stock price on the date of grant to determine the fair value of restricted stock awards paid. A liability, which is included in other credits, is recorded for stock appreciation rights, deferred compensation agreements and stock awards expected to be settled in cash, based on their fair value at the end of each period until such awards are paid. See further discussion in note 6.

Earnings Per Share (“EPS”). Income or loss allocated to common shareholders adjusts net income or loss for the participation in earnings of unvested restricted shares outstanding.

Basic weighted-average number of common shares outstanding during the period includes contingently issuable shares and excludes outstanding unvested restricted shares. Contingently issuable shares relate to vested shares under our former stock awards program and to deferred compensation agreements in which directors elected to defer their fees. Vested stock award shares are issued in the year in which the employee reaches age 60. The deferred compensation is denominated in shares of our common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from us. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued.

Diluted weighted-average number of common shares outstanding during the period adjusts basic weighted-average shares for the dilutive effect of stock options, restricted shares and awards.

Basic and Diluted EPS are calculated as follows:

 

		Three months ended November 30,								Six months ended November 30,
In thousands except per share		2011				2010				2011				2010
Earnings
Net loss		$	(21,037	)		$	(11,201	)		$	(28,457	)		$	(34,893	)
Unvested restricted share participation			9				4				14				16
Loss allocated to common shareholders		$	(21,028	)		$	(11,197	)		$	(28,443	)		$	(34,877	)
Shares
Weighted-average shares outstanding			27,892				27,815				27,890				27,807
Contingently issuable shares			2				2				2				2
Unvested restricted shares			(12	)			(10	)			(14	)			(12	)
Basic weighted-average shares			27,882				27,807				27,878				27,797
Stock option, restricted share and award dilution			--				--				--				--
Diluted weighted-average shares (1)			27,882				27,807				27,878				27,797
Net loss per share
Basic		$	(.75	)		$	(.40	)		$	(1.02	)		$	(1.25	)
Diluted		$	(.75	)		$	(.40	)		$	(1.02	)		$	(1.25	)
(1)    Shares excluded due to antidilutive effect          Stock options, restricted shares and awards			1,514				1,246				1,359				1,230

Recently Issued Accounting Guidance. There is no recently issued accounting guidance that we expect will materially impact our financial statements during the current fiscal year.

 

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2. Working Capital

Working capital totaled $176.8 million at November 30, 2011 compared to $249.2 million at May 31, 2011. Selected components of working capital are summarized below.

Receivables consist of:

 

				November 30,								May 31,
In thousands				2011								2011
Trade notes and accounts receivable		$			81,616			$					84,406
Other					762								1,411
		$			82,378			$					85,817

Trade notes and accounts receivable are presented net of allowances for doubtful receivables of $3.9 million at November 30, 2011 and $3.9 million at May 31, 2011. Provisions for bad debts charged to expense were $0.2 million and $1.4 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. Uncollectible accounts written off totaled $0.2 million and $1.6 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

Inventories consist of:

 

						November 30,								May 31,
In thousands						2011								2011
Finished products		$					8,384			$					9,627
Work in process							35,579								44,391
Raw materials							12,888								15,215
Total inventories at LIFO cost							56,851								69,233
Finished products							22,445								23,427
Raw materials							114								272
Parts and supplies							48,744								47,714
Total inventories at average cost							71,303								71,413
Total inventories		$					128,154			$					140,646

All inventories are stated at the lower of cost or market. Finished products, work in process and raw material inventories, excluding natural aggregate inventories, are valued using the last-in, first-out (“LIFO”) method. Natural aggregate finished products and raw material inventories and parts and supplies inventories are valued using the average cost method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. If the average cost method (which approximates current replacement cost) had been used for all of these inventories, inventory values would have been higher by $42.9 million at November 30, 2011 and $44.6 million at May 31, 2011.

Accrued interest, compensation and other consist of:

 

						November 30,								May 31,
In thousands						2011								2011
Interest		$					17,796			$					17,827
Compensation and employee benefits							16,116								13,536
Casualty insurance claims							12,129								15,740
Income taxes							3,814								3,723
Property taxes and other							13,974								8,022
		$					63,829			$					58,848

 

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3. Long-Term Debt

Long-term debt consists of:

 

						November 30,								May 31,
In thousands						2011								2011
Senior secured revolving credit facility expiring in 2016			$				--				$				--
9.25% Senior notes due 2020 issued August 10, 2010 at par value							650,000								650,000
Other							2,196								--
							652,196								650,000
Capital lease obligations							2,173								2,208
Other contract obligations							268								268
							654,637								652,476
Less current portion							499								73
			$				654,138				$				652,403

Senior Secured Revolving Credit Facility . On August 25, 2011, we amended and restated our credit agreement and the associated security agreement. The credit agreement continues to provide for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit and a $15 million sub-limit for swing line loans. The credit facility matures on August 25, 2016. Amounts drawn under the credit facility bear annual interest either at the LIBOR rate plus a margin of 2.0% to 2.75% or at a base rate plus a margin of 1.0% to 1.75%. The base rate is the higher of the federal funds rate plus 0.5%, the prime rate established by Bank of America, N.A. or the one-month LIBOR rate plus 1.0%. The interest rate margins are determined based on the Company’s fixed charge coverage ratio. The commitment fee calculated on the unused portion of the credit facility ranges from 0.375% to 0.50% per year based on the Company’s average daily loan balance. We may terminate the credit facility at any time.

The amount that can be borrowed under the credit facility is limited to an amount called the borrowing base. The borrowing base may be less than the $200 million stated principal amount of the credit facility. The borrowing base is calculated based on the value of our accounts receivable, inventory and mobile equipment in which the lenders have a security interest. In addition, by mortgaging tracts of its real property to the lenders, the Company may increase the borrowing base by an amount beginning at $20 million and declining to $10.7 million at the maturity of the credit facility.

The borrowing base under the agreement was $137.0 million as of November 30, 2011. 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 $25 million, in which case we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. At November 30, 2011, our fixed charge coverage ratio was (.57) to 1.0. Given this ratio, we may use only $112.0 million of the borrowing base as of such date. No borrowings were outstanding at November 30, 2011; however, $25.5 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of November 30, 2011 was $86.5 million.

All of our consolidated subsidiaries have guaranteed our obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of our existing and future consolidated accounts, inventory, equipment, intellectual property and other personal property, and in all of our equity interests in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries, if any.

The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.0 to 1.0 and borrowing availability under the borrowing base is more than $40 million. When our fixed charge coverage ratio is less than 1.0 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of November 30, 2011.

 

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9.25% Senior Notes. On August 10, 2010, we sold $650 million aggregate principal amount of our 9.25% senior notes due 2020 at an offering price of 100%. The notes were issued under an indenture dated as of August 10, 2010. The net proceeds were used to purchase or redeem all of our outstanding 7.25% senior notes due 2013, with additional proceeds available for general corporate purposes.

At November 30, 2011, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

 

Year		Percentage
2015			104.625%
2016			103.083%
2017			101.542%
2018 and thereafter			100.000%

In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.250% of the principal amount thereof, plus accrued interest with the net cash proceeds from certain equity offerings. If we experience a change of control, we may be required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

All of our consolidated subsidiaries have unconditionally guaranteed the 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of November 30, 2011.

Refinancing . 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. As of November 30, 2010, we recognized a loss on debt retirement of $29.6 million representing $11.4 million in consent fees, redemption price premium and transaction costs and a write-off of $18.2 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.

Other. Principal payments due on long-term debt, excluding capital lease and other contract obligations, during each of the five years subsequent to November 30, 2011 are $0.4 million, $0.4 million, $0.4 million, $0.5 million and $0.5 million. The total amount of interest incurred was $17.1 million and $17.3 million in the three-month periods ended November 30, 2011 and November 30, 2010, respectively, of which $8.3 million and $3.4 million was capitalized. The total amount of interest incurred was $34.4 million and $31.7 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively, of which $16.1 million and $3.4 million was capitalized. The total amount of interest paid in cash was $35.4 million and $28.6 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

4. Commitments

During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that cement demand levels in Texas at that time would permit the new kiln to operate profitably if the project was completed as originally scheduled. We resumed construction in October 2010. The total capital cost of the project is expected to be between $365 million and $375 million, excluding capitalized interest, and commissioning is expected to begin within 24 months of the restart of construction. As of November 30, 2011, we have incurred approximately $335.0 million, excluding capitalized interest of approximately $51.1 million related to the project, of which $324.3 million has been paid.

 

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5. Shareholders’ Equity

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. An additional 40,000 shares are designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock unless the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. No shares of $5 Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of November 30, 2011.

6. Stock-Based Compensation Plans

The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the “2004 Plan”) provides that, in addition to other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to employees and non-employee directors at market prices at date of grant. In addition, non-qualified and incentive stock options remain outstanding under our 1993 Stock Option Plan.

Options become exercisable in installments beginning one year after the date of grant and expire ten years after the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Options with graded vesting are valued as single awards and the compensation cost recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. The following table sets forth the information about the weighted-average grant date fair value of options granted during the six-month periods ended November 30, 2011 and November 30, 2010.

 

						Six months ended November 30,
						2011								2010
Weighted average grant date fair value			$				19.72			$					17.61
Weighted average assumptions used:
Expected volatility							.411								.420
Expected term of the option in years							10								10
Risk-free interest rate							2.97	%							3.33	%
Expected dividend yield							.56	%							.86	%

Expected volatility is based on an analysis of historical volatility of our common stock. Expected term of option is the period of time that options granted are expected to be outstanding and is derived by analyzing the historical option exercise experience of our optionees. Risk-free interest rate is determined using the implied yield currently available for zero coupon U.S. treasury issues with a remaining term equal to the expected term of the options. Expected dividend yield is based on the approved annual dividend rate in effect and the market price of our common stock at the time of grant.

A summary of option transactions for the six-month period ended November 30, 2011, follows:

 

		Shares Under Option				Weighted-Average Option Price
Outstanding at May 31, 2011			1,972,441			$	39.58
Granted			16,000				38.40
Exercised			(6,853	)			23.10
Canceled			(49,144	)			39.31
Outstanding at November 30, 2011			1,932,444			$	39.63
Exercisable at November 30, 2011			1,030,584			$	41.39

 

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The following table summarizes information about stock options outstanding as of November 30, 2011.

 

		Range of Exercise Prices
		$16.04 - $27.39				$33.57 - $48.60				$50.63 - $70.18
Options outstanding
Shares outstanding			559,878				820,006				552,560
Weighted-average remaining term in years			4.26				7.25				4.47
Weighted-average exercise price		$	22.00			$	39.70			$	57.41
Options exercisable
Shares exercisable			356,058				230,926				443,600
Weighted-average remaining term in years			2.85				4.19				4.29
Weighted-average exercise price		$	20.51			$	42.55			$	57.54

Outstanding options expire on various dates to October 12, 2021. As of November 30, 2011, there were 652,612 shares available for future awards under the 2004 Plan.

As of November 30, 2011, the aggregate intrinsic value (the difference in the closing market price of our common stock of $25.33 and the exercise price to be paid by the optionee) of stock options outstanding was $1.9 million. The aggregate intrinsic value of exercisable stock options at that date was $1.8 million. The total intrinsic value for options exercised (the difference in the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) was less than $0.1 million and $0.2 million for the three-month periods ended November 30, 2011 and November 30, 2010, respectively, and $0.1 million and $0.3 million for the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

We have provided additional stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program. At November 30, 2011, outstanding stock appreciation rights totaled 133,315 shares, deferred compensation agreements to be settled in cash totaled 101,790 shares, deferred compensation agreements to be settled in common stock totaled 2,303 shares, unvested restricted stock payments totaled 8,834 shares and stock awards totaled 2,323 shares. Other credits include $3.0 million at November 30, 2011 and $6.8 million at May 31, 2011 representing accrued stock-based compensation which is accounted for as liabilities and expected to be settled in cash. Common stock totaling 2.6 million shares at November 30, 2011 and 2.6 million shares at May 31, 2011 have been reserved for the settlement of stock-based compensation.

Total stock-based compensation included in selling, general and administrative expense (credit) was $(1.3) million and $2.5 million in the three-month periods ended November 30, 2011 and November 30, 2010, respectively, and $(1.2) million and $2.3 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. The impact of changes in our company’s stock price on stock-based awards accounted for as liabilities reduced stock-based compensation $2.7 million in the three-month period ended November 30, 2011 and increased stock-based compensation $1.5 million in the three-month period ended November 30, 2010. The impact of changes in our company’s stock price on stock-based awards accounted for as liabilities reduced stock-based compensation $3.8 million in the six-month period ended November 30, 2011 and increased stock-based compensation $0.1 million in the six-month period ended November 30, 2010.

Total tax expense or benefit recognized in our statements of operations for stock-based compensation was an expense of less than $0.1 million and a benefit of $0.7 million in the three-month periods ended November 30, 2011 and November 30, 2010, respectively, and an expense of less than $0.1 million and a benefit of $0.4 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. No cash tax benefit was realized for stock-based compensation in the three-month and six-month periods ended November 30, 2011 and November 30, 2010.

As of November 30, 2011, $9.4 million of total unrecognized compensation cost related to stock options, restricted stock payments and stock awards is expected to be recognized in future periods. We currently expect to recognize in the years succeeding November 30, 2011 approximately $3.4 million of this stock-based compensation expense in 2012, $2.7 million in 2013, $2.0 million in 2014, $1.1 million in 2015 and $0.2 million in 2016.

 

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7. Retirement Plans

Riverside Defined Benefit Plans. Approximately 600 employees and retirees of our subsidiary, Riverside Cement Company, are covered by a defined benefit pension plan and a postretirement health benefit plan. Unrecognized prior service costs and actuarial gains or losses for these plans are recognized in a systematic manner over the remaining service periods of active employees expected to receive benefits under these plans. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses for the three-month and six-month periods ended November 30, 2011 and November 30, 2010, was as follows:

 

				Three months ended November 30,																Six months ended November 30,
In thousands				2011								2010								2011								2010
Defined benefit pension plan
Service cost		$			134			$					126			$					268			$					251
Interest cost					760								737								1,520								1,475
Expected return on plan assets					(777	)							(685	)							(1,554	)							(1,370	)
Amortization of net actuarial loss					430								517								861								1,034
		$			547			$					695			$					1,095			$					1,390
Postretirement health benefit plan
Service cost		$			25			$					29			$					50			$					57
Interest cost					104								106								208								212
Amortization of prior service cost					(194	)							(193	)							(388	)							(387	)
Amortization of net actuarial loss					141								153								282								307
		$			76			$					95			$					152			$					189

Financial Security Defined Benefit Plans. Substantially all of our executive and certain managerial employees are covered by a series of financial security plans that are non-qualified defined benefit plans. The financial security plans require deferral of a portion of a participant’s salary and provide retirement, death and disability benefits to participants. The financial security plans are unfunded and benefits are paid as they become due. Actuarial gains or losses are recognized when incurred. The amount of financial security plan benefit expense charged to costs and expenses for the three-month and six-month periods ended November 30, 2011 and November 30, 2010, was as follows:

 

						Three months ended November 30,																Six months ended November 30,
In thousands						2011								2010								2011								2010
Service cost		$					537			$					550			$					1,074			$					1,100
Interest cost							629								578								1,258								1,156
		$					1,166			$					1,128			$					2,332			$					2,256

8. Income Taxes

Income taxes for the interim periods ended November 30, 2011 and November 30, 2010 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate does not include the tax impact of the loss on debt retirements which was recognized as a discrete item in the six-month period ended November 30, 2010. The estimated annualized rate excluding this charge is 3.0% for fiscal year 2012 compared to 41.0% for fiscal year 2011. We received income tax refunds of less than $0.1 million and made income tax payments of $0.1 million in the six-month period ended November 30, 2011. We received income tax refunds of $0.2 million and made income tax payments of less than $0.1 million in the six-month period ended November 30, 2010.

 

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Net deferred tax assets totaled $15.7 million at November 30, 2011 and $15.0 million at May 31, 2011, of which $13.7 million at November 30, 2011 and $12.3 million at May 31, 2011 were classified as current. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and would record a valuation allowance unless such deferred tax assets were deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company’s deferred tax assets exceeded deferred tax liabilities as of November 30, 2011 primarily as a result of the recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of the increase in our net deferred tax assets expected during the year. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets.

The amount of income tax we pay is subject to ongoing audits by federal and state authorities which may result in proposed assessments. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, refinement of estimates, or realization of earnings or deductions that differ from our estimates. To the extent that the final outcome of a matter differs from the amount recorded, such difference generally will impact our provision for income taxes in the period that includes its final resolution. We have no significant reserves for uncertain tax positions including related interest and penalties.

In addition to our federal income tax return, we file income tax returns in various state jurisdictions. We are no longer subject to income tax examinations by federal or state tax authorities for years prior to 2007.

9. Legal Proceedings and Contingent Liabilities

We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. It is possible that we could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by us.

In March 2008, the South Coast Air Quality Management District, or SCAQMD, informed one of our subsidiaries, Riverside Cement Company (Riverside), that it believed that operations at the Crestmore cement plant in Riverside, California caused the level of hexavalent chromium, or chrome 6, in the air in the vicinity of the plant to be elevated above ambient air levels. Chrome 6 has been identified by the State of California as a carcinogen. Riverside immediately began taking steps, in addition to its normal dust control procedures, to reduce dust from plant operations and eliminate the use of open clinker stockpiles. In February 2008, the SCAQMD placed an air monitoring station at the downwind property line closest to the open clinker stockpiles. In the SCAQMD’s first public report of the results of its monitoring, over the period of February 12 to April 9, 2008, the average level of chrome 6 was 2.43 nanograms per cubic meter, or ng/m³. Since that time, the average level has decreased. The average levels of chrome 6 reported by the SCAQMD at all of the air monitoring stations in areas around the plant, including the station at the property line, are below 1.0 ng/m³ over the entire period of time it has operated the stations. The SCAQMD compared the level of exposure at the air monitor on our property line with the following employee exposure standards established by regulatory agencies:

 

Occupational Safety and Health Administration			5,000 ng/m³
National Institute for Occupational Safety and Health			1,000 ng/m³
California Environmental Protection Agency			200 ng/m³

In public meetings conducted by the SCAQMD, it stated that the risk of long term exposure immediately adjacent to the plant is similar to living close to a busy freeway or rail yard, and it estimated an increased risk of 250 to 500 cancers per one million people, assuming continuous exposure for 70 years. Riverside has not determined how this particular risk number was calculated by SCAQMD. However, the Riverside Press Enterprise reported in a May 30, 2008 story that “John Morgan, a public health and epidemiology professor at Loma Linda University, said he looked at cancer cases reported from 1996 to 2005 in the … census [tract] nearest the [plant] and found no excess cases. That includes lung cancer, which is associated with exposure to hexavalent chromium.”

 

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In late April 2008, a lawsuit was filed in Riverside County Superior Court of the State of California styled Virginia Shellman, et al. v. Riverside Cement Holdings Company, et al . The lawsuit against three of our subsidiaries purports to be a class action complaint for medical monitoring for a putative class defined as individuals who were allegedly exposed to chrome 6 emissions from our Crestmore cement plant. The complaint alleges an increased risk of future illness due to the exposure to chrome 6 and other toxic chemicals. The suit requests, among other things, establishment and funding of a medical testing and monitoring program for the class until their exposure to chrome 6 is no longer a threat to their health, as well as punitive and exemplary damages.

Since the Shellman lawsuit was filed, five additional putative class action lawsuits have been filed in the same court. The putative class in each of these cases is the same as or a subset of the putative class in the Shellman case, and the allegations and requests for relief are similar to those in the Shellman case. As a consequence, the court has stayed four of these lawsuits until the Shellman lawsuit is finally determined.

Since August 2008, additional lawsuits have been filed in the same court against Texas Industries, Inc. or one or more of our subsidiaries containing allegations of personal injury and wrongful death by approximately 3,000 individual plaintiffs who were allegedly exposed to chrome 6 and other toxic or harmful substances in the air, water and soil caused by emissions from the Crestmore plant. The court has dismissed Texas Industries, Inc. from the suits, and our subsidiaries operating in Texas have been dismissed by agreement with the plaintiffs. Most of our subsidiaries operating in California remain as defendants. The court has dismissed from these suits plaintiffs that failed to provide required information, leaving approximately 2,000 plaintiffs.

Since January 2009, additional lawsuits have been filed against Texas Industries, Inc. or one or more of our subsidiaries in the same court involving similar allegations, causes of action and requests for relief, but with respect to our Oro Grande, California cement plant instead of the Crestmore plant. The suits involve approximately 300 individual plaintiffs. Texas Industries, Inc. and our subsidiaries operating in Texas have been similarly dismissed from these suits. The court has dismissed from these suits plaintiffs that failed to provide required information, leaving approximately 250 plaintiffs. Prior to the filing of the lawsuits, the air quality management district in whose jurisdiction the plant lies conducted air sampling from locations around the plant. None of the samples contained chrome 6 levels above 1.0 ng/m³.

The plaintiffs allege causes of action that are similar from suit to suit. Following dismissal of certain causes of action by the court and amendments by the plaintiffs, the remaining causes of action typically include, among other things, negligence, intentional and negligent infliction of emotional distress, trespass, public and private nuisance, strict liability, willful misconduct, fraudulent concealment, unfair business practices, wrongful death and loss of consortium. The plaintiffs generally request, among other things, general and punitive damages, medical expenses, loss of earnings, property damages and medical monitoring costs. At the date of this report, none of the plaintiffs in these cases has alleged in their pleadings any specific amount or range of damages. Some of the suits include additional defendants, such as the owner of another cement plant located approximately four miles from the Crestmore plant or former owners of the Crestmore and Oro Grande plants. We will vigorously defend all of these suits but we cannot predict what liability, if any, could arise from them. We also cannot predict whether any other suits may be filed against us alleging damages due to injuries to persons or property caused by claimed exposure to chrome 6.

We are defendants in other lawsuits that arose in the ordinary course of business. In our judgment the ultimate liability, if any, from such legal proceedings will not have a material effect on our consolidated financial position or results of operations.

10. Business Segments

We have three business segments: cement, aggregates and consumer products. Our business segments are managed separately along product lines. Through the cement segment we produce and sell gray portland cement as our principal product, as well as specialty cements. Through the aggregates segment we produce and sell stone, sand and gravel as our principal products, as well as expanded shale and clay lightweight aggregates. Through the consumer products segment we produce and sell ready-mix concrete as our principal product, as well as packaged concrete mix, mortar, sand and related products. We account for intersegment sales at market prices. Segment operating profit consists of net sales less operating costs and expenses. Corporate includes those administrative, financial, legal, human resources, environmental and real estate activities which are not allocated to operations and are excluded from segment operating profit. Identifiable assets by segment are those assets that are used in each segment’s operation. Corporate assets consist primarily of cash and cash equivalents, real estate and other financial assets not identified with a business segment.

 

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The following is a summary of operating results and certain other financial data for our business segments.

 

						Three months ended November 30,																Six months ended November 30,
In thousands						2011								2010								2011								2010
Net sales
Cement
Sales to external customers		$					65,639			$					57,138			$					137,697			$					120,373
Intersegment sales							11,595								11,440								25,174								24,587
Aggregates
Sales to external customers							33,013								34,759								72,514								77,833
Intersegment sales							6,953								6,323								12,553								13,219
Consumer products
Sales to external customers							57,419								56,214								127,600								122,027
Intersegment sales							702								606								1,545								1,271
Eliminations							(19,250	)							(18,369	)							(39,272	)							(39,077	)
Total net sales		$					156,071			$					148,111			$					337,811			$					320,233
Segment operating profit (loss)
Cement		$					(5,355	)		$					1,948			$					1,162			$					5,912
Aggregates							2,100								3,323								6,015								8,457
Consumer products							(3,606	)							(2,383	)							(5,946	)							(1,632	)
Total segment operating profit (loss)							(6,861	)							2,888								1,231								12,737
Corporate							(5,959	)							(7,435	)							(12,158	)							(12,427	)
Interest							(8,838	)							(13,886	)							(18,298	)							(28,297	)
Loss on debt retirements							--								(613	)							--								(29,619	)
Loss before income taxes		$					(21,658	)		$					(19,046	)		$					(29,225	)		$					(57,606	)
Depreciation, depletion and amortization
Cement		$					8,897			$					9,181			$					17,824			$					18,330
Aggregates							3,868								4,956								8,063								9,728
Consumer products							2,326								1,709								4,890								3,365
Corporate							314								284								608								568
Total depreciation, depletion and amortization		$					15,405			$					16,130			$					31,385			$					31,991
Capital expenditures
Cement		$					14,193			$					10,832			$					39,889			$					12,579
Aggregates							1,237								3,727								19,542								4,904
Consumer products							611								5,271								2,042								5,467
Corporate							637								413								793								449
Total capital expenditures		$					16,678			$					20,243			$					62,266			$					23,399
Net sales by product
Cement		$					57,400			$					50,197			$					119,799			$					104,747
Stone, sand and gravel							15,257								17,577								32,532								38,054
Ready-mix concrete							44,578								43,347								100,801								95,431
Other products							21,120								21,242								46,735								47,122
Delivery fees							17,716								15,748								37,944								34,879
Total net sales		$					156,071			$					148,111			$					337,811			$					320,233

All sales were made in the United States during the periods presented with no single customer representing more than 10 percent of sales.

 

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Cement segment operating profit includes gains from sales of emission credits associated with our Crestmore cement plant in Riverside, California of $2.5 million and $1.7 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

Consumer products operating profit includes a gain from the exchange of certain ready-mix operations in Houston, Texas for ready-mix and aggregate operations that serve the Austin, Texas metropolitan market of $2.1 million in the six-month period ended November 30, 2011.

Operating profit includes $2.0 million in restructuring charges in the three-month and six-month periods ended November 30, 2011, including $1.1 million associated with our cement operations, $0.4 million associated with our aggregate operations, $0.5 million associated with our ready-mix concrete operations. An additional $1.2 million in restructuring charges in the periods is associated with our corporate activities.

Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $36.0 million and $11.2 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively, of which $15.5 million and $3.4 million was capitalized interest paid in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations were $26.3 million and $12.2 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively, of which $18.0 million was incurred to acquire aggregate reserves in the six-month period ended November 30, 2011.

The following is a summary of assets used in each of our business segments.

 

						November 30,								May 31,
In thousands						2011								2011
Identifiable assets
Cement		$					1,102,166			$					1,082,524
Aggregates							215,984								201,917
Consumer products							96,124								106,643
Corporate							110,767								159,927
Total assets		$					1,525,041			$					1,551,011

All of our identifiable assets are located in the United States.

11. Condensed Consolidating Financial Information

On August 10, 2010, Texas Industries, Inc. (the parent company) issued $650 million aggregate principal amount of its 9.25% senior notes due 2020. All existing consolidated subsidiaries of the parent company are 100% owned and provide a joint and several, full and unconditional guarantee of the securities. There are no significant restrictions on the parent company’s ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on a guarantor subsidiary’s ability to obtain funds from the parent company or its direct or indirect subsidiaries.

The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the parent company and guarantor subsidiaries. The information has been presented as if the parent company accounted for its ownership of the guarantor subsidiaries using the equity method of accounting. Prior period information has been reclassified to conform to the current period presentation.

 

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In thousands						Texas Industries, Inc.								Guarantor Subsidiaries								Consolidating Adjustments								Consolidated
Condensed consolidating balance sheet at November 30, 2011
Cash and cash equivalents		$					65,744			$					1,718			$					--			$					67,462
Receivables – net							--								82,378								--								82,378
Inventories							--								128,154								--								128,154
Deferred income taxes and prepaid expenses							119								20,645								(235	)							20,529
Total current assets							65,863								232,895								(235	)							298,523
Property, plant and equipment – net							--								1,190,850								--								1,190,850
Goodwill							--								1,715								--								1,715
Real estate and investments							1,463								10,009								--								11,472
Deferred income taxes and other charges							114,445								6,622								(98,586	)							22,481
Investment in subsidiaries							947,264								--								(947,264	)							--
Long-term intercompany receivables							277,334								18,745								(296,079	)							--
Total assets		$					1,406,369			$					1,460,836			$					(1,342,164	)		$					1,525,041
Accounts payable		$					34			$					57,355			$					--			$					57,389
Accrued interest, compensation and other							22,349								41,715								(235	)							63,829
Current portion of long-term debt							19								480								--								499
Total current liabilities							22,402								99,550								(235	)							121,717
Long-term debt							650,249								3,889								--								654,138
Long-term intercompany payables							18,745								277,334								(296,079	)							--
Deferred income taxes							--								98,586								(98,586	)							--
Other credits							46,706								34,213								--								80,919
Shareholders’ equity							668,267								947,264								(947,264	)							668,267
Total liabilities and shareholders’ equity		$					1,406,369			$					1,460,836			$					(1,342,164	)		$					1,525,041
Condensed consolidating balance sheet at May 31, 2011
Cash and cash equivalents		$					113,898			$					2,534			$					--			$					116,432
Receivables – net							--								85,817								--								85,817
Inventories							--								140,646								--								140,646
Deferred income taxes and prepaid expenses							77								21,963								--								22,040
Total current assets							113,975								250,960								--								364,935
Property, plant and equipment – net							--								1,155,421								--								1,155,421
Goodwill							--								1,715								--								1,715
Real estate and investments							677								6,072								--								6,749
Deferred income taxes and other charges							110,305								6,242								(94,356	)							22,191
Investment in subsidiaries							945,039								--								(945,039	)							--
Long-term intercompany receivables							264,779								18,751								(283,530	)							--
Total assets		$					1,434,775			$					1,439,161			$					(1,322,925	)		$					1,551,011
Accounts payable		$					34			$					56,753			$					--			$					56,787
Accrued interest, compensation and other							22,146								36,702								--								58,848
Current portion of long-term debt							--								73								--								73
Total current liabilities							22,180								93,528								--								115,708
Long-term debt							650,268								2,135								--								652,403
Long-term intercompany payables							18,751								264,779								(283,530	)							--
Deferred income taxes							--								94,356								(94,356	)							--
Other credits							47,994								39,324								--								87,318
Shareholders’ equity							695,582								945,039								(945,039	)							695,582
Total liabilities and shareholders’ equity		$					1,434,775			$					1,439,161			$					(1,322,925	)		$					1,551,011

 

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In thousands						Texas Industries, Inc.								Guarantor Subsidiaries								Consolidating Adjustments								Consolidated
Condensed consolidating statement of operations for the three months ended November 30, 2011
Net sales		$					--			$					156,071			$					--			$					156,071
Cost of products sold							--								153,325								--								153,325
Gross profit							--								2,746								--								2,746
Selling, general and administrative							228								13,649								--								13,877
Restructuring charges							--								3,216								--								3,216
Interest							17,008								--								(8,170	)							8,838
Loss on debt retirements							--								--								--								--
Other income							(14	)							(1,513	)							--								(1,527	)
Intercompany other income							(873	)							(7,297	)							8,170								--
							16,349								8,055								--								24,404
Income (loss) before the following items							(16,349	)							(5,309	)							--								(21,658	)
Income taxes (benefit)							(1,404	)							783								--								(621	)
							(14,945	)							(6,092	)							--								(21,037	)
Equity in earnings (loss) of subsidiaries							(6,092	)							--								6,092								--
Net income (loss)		$					(21,037	)		$					(6,092	)		$					6,092			$					(21,037	)
Condensed consolidating statement of operations for the three months ended November 30, 2010
Net sales		$					--			$					148,111			$					--			$					148,111
Cost of products sold							--								136,044								--								136,044
Gross profit							--								12,067								--								12,067
Selling, general and administrative							2,107								16,436								--								18,543
Restructuring charges							--								--								--								--
Interest							17,269								--								(3,383	)							13,886
Loss on debt retirements							613								--								--								613
Other income							(83	)							(1,846	)							--								(1,929	)
Intercompany other income							(873	)							(2,510	)							3,383								--
							19,033								12,080								--								31,113
Income (loss) before the following items							(19,033	)							(13	)							--								(19,046	)
Income taxes (benefit)							(6,749	)							(1,096	)							--								(7,845	)
							(12,284	)							1,083								--								(11,201	)
Equity in earnings (loss) of subsidiaries							1,083								--								(1,083	)							--
Net income (loss)		$					(11,201	)		$					1,083			$					(1,083	)		$					(11,201	)

 

 

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In thousands						Texas Industries, Inc.								Guarantor Subsidiaries								Consolidating Adjustments								Consolidated
Condensed consolidating statement of operations for the six months ended November 30, 2011
Net sales		$					--			$					337,811			$					--			$					337,811
Cost of products sold							--								321,240								--								321,240
Gross profit							--								16,571								--								16,571
Selling, general and administrative							1,253								30,428								--								31,681
Restructuring charges							--								3,216								--								3,216
Interest							34,265								--								(15,967	)							18,298
Loss on debt retirements							--								--								--								--
Other income							(27	)							(7,372	)							--								(7,399	)
Intercompany other income							(1,755	)							(14,212	)							15,967								--
							33,736								12,060								--								45,796
Income (loss) before the following items							(33,736	)							4,511								--								(29,225	)
Income taxes (benefit)							(3,534	)							2,766								--								(768	)
							(30,202	)							1,745								--								(28,457	)
Equity in earnings (loss) of subsidiaries							1,745								--								(1,745	)							--
Net income (loss)		$					(28,457	)		$					1,745			$					(1,745	)		$					(28,457	)
Condensed consolidating statement of operations for the six months ended November 30, 2010
Net sales		$					--			$					320,233			$					--			$					320,233
Cost of products sold							--								292,058								--								292,058
Gross profit							--								28,175								--								28,175
Selling, general and administrative							2,767								31,917								--								34,684
Restructuring charges							--								--								--								--
Interest							31,634								--								(3,337	)							28,297
Loss on debt retirements							29,619								--								--								29,619
Other income							(126	)							(6,693	)							--								(6,819	)
Intercompany other income							(1,755	)							(1,582	)							3,337								--
							62,139								23,642								--								85,781
Income (loss) before the following items							(62,139	)							4,533								--								(57,606	)
Income taxes (benefit)							(22,909	)							196								--								(22,713	)
							(39,230	)							4,337								--								(34,893	)
Equity in earnings (loss) of subsidiaries							4,337								--								(4,337	)							--
Net income (loss)		$					(34,893	)		$					4,337			$					(4,337	)		$					(34,893	)

 

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In thousands						Texas Industries, Inc.								Guarantor Subsidiaries								Consolidating Adjustments								Consolidated
Condensed consolidating statement of cash flows for the six months ended November 30, 2011
Net cash provided (used) by operating activities		$					(34,917	)		$					47,404			$					--			$					12,487
Investing activities
Capital expenditures – expansions							--								(35,966	)							--								(35,966	)
Capital expenditures – other							--								(26,300	)							--								(26,300	)
Proceeds from asset disposals							--								1,649								--								1,649
Investments in life insurance contracts							2,989								--								--								2,989
Other – net							--								(128	)							--								(128	)
Net cash provided (used) by investing activities							2,989								(60,745	)							--								(57,756	)
Financing activities
Long-term borrowings							--								--								--								--
Debt retirements							--								(36	)							--								(36	)
Debt issuance costs							(1,732	)							--								--								(1,732	)
Stock option exercises							158								--								--								158
Common dividends paid							(2,091	)							--								--								(2,091	)
Net intercompany financing activities							(12,561	)							12,561								--								--
Net cash provided (used) by financing activities							(16,226	)							12,525								--								(3,701	)
Increase (decrease) in cash and cash equivalents							(48,154	)							(816	)							--								(48,970	)
Cash and cash equivalents at beginning of period							113,898								2,534								--								116,432
Cash and cash equivalents at end of period		$					65,744			$					1,718			$					--			$					67,462
Condensed consolidating statement of cash flows for the six months ended November 30, 2010
Net cash provided (used) by operating activities		$					(25,335	)		$					35,361			$					--			$					10,026
Investing activities
Capital expenditures – expansions							--								(11,198	)							--								(11,198	)
Capital expenditures – other							--								(12,201	)							--								(12,201	)
Proceeds from asset disposals							--								3,037								--								3,037
Investments in life insurance contracts							3,704								--								--								3,704
Other – net							--								(859	)							--								(859	)
Net cash provided (used) by investing activities							3,704								(21,221	)							--								(17,517	)
Financing activities
Long-term borrowings							650,000								--								--								650,000
Debt retirements							(561,394	)							(174	)							--								(561,568	)
Debt issuance costs							(12,426	)							--								--								(12,426	)
Stock option exercises							464								--								--								464
Common dividends paid							(4,172	)							--								--								(4,172	)
Net intercompany financing activities							15,384								(15,384	)							--								--
Net cash provided (used) by financing activities							87,856								(15,558	)							--								72,298
Increase (decrease) in cash and cash equivalents							66,225								(1,418	)							--								64,807
Cash and cash equivalents at beginning of period							72,492								2,454								--								74,946
Cash and cash equivalents at end of period		$					138,717			$					1,036			$					--			$					139,753

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Texas Industries, Inc.

We have reviewed the accompanying consolidated balance sheet of Texas Industries, Inc. and subsidiaries (the Company) as of November 30, 2011, and the related consolidated statements of operations for the three- and six-month periods ended November 30, 2011 and 2010 and cash flows for the six-month periods ended November 30, 2011 and 2010. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended [not presented herein], and in our report dated July 15, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of May 31, 2011, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

				/s/ Ernst & Young LLP

Fort Worth, Texas

January 6, 2012

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

When used in this report the terms “Company,” “we,” “us” or “our” mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.

RESULTS OF OPERATIONS

We are a leading supplier of heavy construction materials in the southwestern United States through our three business segments: cement, aggregates and consumer products. Our principal products are gray portland cement, produced and sold through our cement segment; stone, sand and gravel, produced and sold through our aggregates segment; and ready-mix concrete, produced and sold through our consumer products segment. Other products include expanded shale and clay lightweight aggregates, produced and sold through our aggregates segment, and packaged concrete mix, mortar, sand and related products, produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California.

Management uses segment operating profit as its principal measure to assess performance and to allocate resources. Business segment operating profit consists of net sales less operating costs and expenses that are directly attributable to the segment. Corporate includes non-operating income and expenses related to administrative, financial, legal, human resources, environmental and real estate activities.

During the three-month and six-month periods ended November 30, 2011, construction activity remained at low levels in both our California and Texas market areas. We have continued to focus on cost reduction, management of our cash position and management of production levels, which we believe has had a significant positive impact on our operating results.

In April 2011 we entered into an asset exchange transaction in which we acquired the ready-mix operations of Transit Mix Concrete and Materials Company, a subsidiary of Trinity Industries, Inc., that serve the central Texas market from north of San Antonio to Hillsboro, Texas. In exchange for the ready-mix facilities, we transferred to Trinity Materials, Inc., also a subsidiary of Trinity Industries, Inc., our aggregate operations at the Anacoco sand and gravel plant, which serves the southwest Louisiana and southeast Texas markets, and the Paradise and Beckett sand and gravel plants, which both serve the north Texas market. In July 2011 we entered into an asset exchange transaction in which we acquired the ready-mix and aggregate operations of CEMEX USA that serve the Austin, Texas metropolitan market. In exchange for the three ready-mix plants and one sand and gravel plant, we transferred to CEMEX USA certain of our ready-mix operations in Houston, Texas. With the completion of this transaction we have exited the Houston, Texas ready-mix market. The operating results of the acquired ready-mix and sand and gravel operations are reported in our consumer products and aggregate segments, respectively.

In November 2011 we entered into a joint venture agreement with a ready-mix operator based in Waco, Texas to which we contributed seven of our central Texas ready-mix plants and certain related assets and guaranteed 50%, or $13.0 million, of the joint venture’s debt which matures November 18, 2013. In addition to our 50% guarantee of the joint venture’s debt, 100% of the debt is guaranteed by the other partner and secured by the underlying assets of the joint venture. The joint venture was in compliance with all the terms of the debt as of November 30, 2011. Subject to a final determination of the fair value, our 40% equity interest in the joint venture was recorded at the $3.9 million carrying amount of the assets contributed, and therefore no gain or loss was recognized in the three-month period ended November 30, 2011. Because the assets contributed were recently acquired any future gain or loss is not expected to be significant. The day to day business operations are managed by the 60% partner in the venture. The joint venture will operate a total of nineteen ready-mix and two sand and gravel plants serving the central Texas market. We will continue to supply cement to the joint venture. The joint venture operations are reported in our consumer products segment using the equity method of accounting.

Consolidated sales for the three-month period ended November 30, 2011 were $156.1 million, an increase of $8.0 million from the prior year period. Consolidated cost of products sold for the three-month period ended November 30, 2011 was $153.3 million, an increase of $17.3 million from the prior year period. Sales increased $1.3 million and cost of products sold increased $1.5 million due to the net effect of the exchanges of ready-mix concrete and aggregate operating assets completed in April and July 2011. Sales increased $6.7 million, excluding the effect of the exchanges, primarily due to higher cement shipments. Cost of products sold, excluding the effect of the asset exchanges, increased $15.8 million primarily due to higher cement shipments, lower cement clinker production, and higher repair and maintenance costs as a result of scheduled maintenance downtime at our north Texas cement plant. Consolidated gross profit for the three-month periods ended November 30, 2011 and November 30, 2010 was $2.7 million and $12.1 million, respectively.

 

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Consolidated sales for the six-month period ended November 30, 2011 were $337.8 million, an increase of $17.6 million from the prior year period. Consolidated cost of products sold for the six-month period ended November 30, 2011 was $321.2 million, an increase of $29.2 million from the prior year period. Sales increased $7.9 million and cost of products sold increased $8.1 million due to the net effect of the exchanges of ready-mix concrete and aggregate operating assets completed in April and July 2011. Sales increased $9.7 million, excluding the effect of the exchanges, primarily due to higher cement sales prices and shipments offset in part by lower aggregate and ready-mix concrete shipments. Cost of products sold, excluding the effect of the asset exchanges, increased $21.1 million primarily due to higher cement shipments, lower cement clinker production, and higher repair and maintenance costs as a result of scheduled maintenance downtime at our north Texas cement plant. Consolidated gross profit for the six-month periods ended November 30, 2011 and November 30, 2010 was $16.6 million and $28.2 million, respectively.

Consolidated selling, general and administrative expense for the three-month period ended November 30, 2011 was $13.9 million, a decrease of $4.7 million from the prior year period primarily due to lower stock-based compensation expense. 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 $2.7 million for the three-month period ended November 30, 2011 and increased expense $1.5 million for the three-month period ended November 30, 2010.

Consolidated selling, general and administrative expense for the six-month period ended November 30, 2011 was $31.7 million, a decrease of $3.0 million from the prior year period primarily due to lower stock-based compensation expense offset in part by $1.2 million higher provisions for insurance claims. 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 $3.8 million for the six-month period ended November 30, 2011 and increased expense $0.1 million for the six-month period ended November 30, 2010.

Consolidated restructuring charges of $3.2 million were recorded in the three-month and six-month periods ended November 30, 2011, of which $1.6 million has been paid. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Consolidated other income for the three-month period ended November 30, 2011 was $1.5 million, a decrease of $0.4 million from the prior year period. The decrease resulted primarily from $0.9 million lower oil and gas royalties and lease bonus payments offset in part by $0.4 million higher gains from routine sales of surplus operating assets.

Consolidated other income for the six-month period ended November 30, 2011 was $7.4 million, an increase of $0.6 million from the prior year period. The July 2011 asset exchange resulted in the recognition of a gain of $2.1 million in the six-month period ended November 30, 2011. Sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in gains of $2.5 million and $1.7 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. These gains were offset in part by $1.3 million lower oil and gas royalties and lease bonus payments and $0.9 million lower gains from routine sales of surplus operating assets.

Total segment operating loss for the three-month period ended November 30, 2011 was $6.9 million. Total segment operating profit for the three-month period ended November 30, 2010 was $2.9 million. Total operating profit for the six-month periods ended November 30, 2011 and November 30, 2010 was $1.2 million and $12.7 million, respectively. The following is a summary of operating results for our business segments and certain other information related to our principal products and non-operating income and expenses.

 

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Cement Operations

 

		Three months ended November 30,								Six months ended November 30,
In thousands except per unit		2011				2010				2011				2010
Operating Results
Total cement sales		$	68,994			$	61,599			$	144,972			$	129,289
Total other sales and delivery fees			8,240				6,979				17,899				15,671
Total segment sales			77,234				68,578				162,871				144,960
Cost of products sold			78,050				63,121				156,282				133,184
Gross profit (loss)			(816	)			5,457				6,589				11,776
Selling, general and administrative			(4,165	)			(4,018	)			(8,243	)			(8,811	)
Restructuring charges			(1,074	)			--				(1,074	)			--
Other income			700				509				3,890				2,947
Operating Profit (Loss)		$	(5,355	)		$	1,948			$	1,162			$	5,912
Cement
Shipments (tons)			884				784				1,853				1,657
Prices ($/ton)		$	78.07			$	78.49			$	78.25			$	78.02
Cost of sales ($/ton)		$	78.34			$	73.39			$	74.90			$	72.25

Three months ended November 30, 2011

Cement operating loss for the three-month period ended November 30, 2011 was $5.4 million. Cement operating profit for the three-month period ended November 30, 2010 was $1.9 million. The operating results in the current period were impacted by the recognition of restructuring charges and an increase in cost of products sold due to lower cement clinker production and to higher repair and maintenance costs as a result of scheduled maintenance downtime at our north Texas cement plant.

Total segment sales for the three-month period ended November 30, 2011 were $77.2 million compared to $68.6 million for the prior year period. Cement sales increased $7.4 million from the prior year period. Our Texas market area accounted for approximately 67% of cement sales in the current period compared to 73% of cement sales in the prior year period. Average cement prices increased 2% in our Texas market area and decreased 5% in our California market area. Shipments increased 1% in our Texas market area and 44% in our California market area.

Cost of products sold for the three-month period ended November 30, 2011 increased $14.9 million from the prior year period primarily due to higher shipments and a 7% increase in cement unit costs. Cement unit costs were impacted by 21% lower cement clinker production and higher repair and maintenance costs due to scheduled maintenance downtime at our north Texas cement plant.

Selling, general and administrative expense for the three-month period ended November 30, 2011 increased $0.1 million from the prior year period primarily due to higher compensation expense.

Restructuring charges of $1.1 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the three-month period ended November 30, 2011 increased $0.2 million from the prior year period primarily due to higher royalty income.

 

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Six months ended November 30, 2011

Cement operating profit for the six-month period ended November 30, 2011 was $1.2 million, a decrease of $4.8 million from the prior year period. The operating results in the current period were impacted by the recognition of restructuring charges and an increase in cost of products sold due to lower cement clinker production and to higher repair and maintenance costs as a result of scheduled maintenance downtime at our north Texas cement plant.

Total segment sales for the six-month period ended November 30, 2011 were $162.9 million compared to $145.0 million for the prior year period. Cement sales increased $15.7 million from the prior year period. Our Texas market area accounted for approximately 67% of cement sales in the current period compared to 71% of cement sales in the prior year period. Average cement prices increased 1% in our Texas market area and decreased 1% in our California market area. Shipments increased 5% in our Texas market area and 29% in our California market area.

Cost of products sold for the six-month period ended November 30, 2011 increased $23.1 million from the prior year period primarily due to higher shipments and a 4% increase in cement unit costs. Cement unit costs were impacted by 6% lower cement clinker production and higher repair and maintenance costs due to scheduled maintenance downtime at our north Texas cement plant.

Selling, general and administrative expense for the six-month period ended November 30, 2011 decreased $0.6 million from the prior year period. The decrease was primarily due to lower provisions for bad debts and legal and other professional expenses.

Restructuring charges of $1.1 million were recorded in the six-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the six-month period ended November 30, 2011 increased $0.9 million from the prior year period. Sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in gains of $2.5 million and $1.7 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively.

Aggregate Operations

 

		Three months ended November 30,								Six months ended November 30,
In thousands except per unit		2011				2010				2011				2010
Operating Results
Total stone, sand and gravel sales		$	20,993			$	22,644			$	43,193			$	49,237
Expanded shale and clay sales and delivery fees			18,973				18,438				41,874				41,815
Total segment sales			39,966				41,082				85,067				91,052
Cost of products sold			35,313				35,002				73,821				78,412
Gross profit			4,653				6,080				11,246				12,640
Selling, general and administrative			(2,323	)			(2,814	)			(5,273	)			(5,873	)
Restructuring charges			(437	)			--				(437	)			--
Other income			207				57				479				1,690
Operating Profit		$	2,100			$	3,323			$	6,015			$	8,457
Stone, sand and gravel
Shipments (tons)			2,818				3,026				5,961				6,610
Prices ($/ton)		$	7.45			$	7.48			$	7.25			$	7.45
Cost of sales ($/ton)		$	6.35			$	6.53			$	6.28			$	6.48

 

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Three months ended November 30, 2011

Aggregate operating profit for the three-month periods ended November 30, 2011 and November 30, 2010 was $2.1 million and $3.3 million, respectively.

Total segment sales for the three-month period ended November 30, 2011 were $40.0 million compared to $41.1 million for the prior year period. Stone, sand and gravel sales decreased $1.7 million from the prior year period. The effect of the disposition of aggregate operating assets through the asset exchange transaction completed in April 2011 decreased sales $2.2 million, shipments 8% and average prices 2% from the prior year period. Stone, sand and gravel sales from current operations increased $0.5 million from the prior year period on 1% higher shipments and 2% higher average prices.

Cost of products sold for the three-month period ended November 30, 2011 increased $0.3 million from the prior year period. Stone, sand and gravel unit costs decreased 3% from the prior year period primarily due to the effect of the disposition of aggregate operating assets through the asset exchange transaction completed in April 2011.

Selling, general and administrative expense for the three-month period ended November 30, 2011 decreased $0.5 million from the prior year period primarily due to lower provisions for bad debts and legal and other professional expenses.

Restructuring charges of $0.4 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the three-month period ended November 30, 2011 increased $0.2 million from the prior year period primarily due to higher gains from routine sales of surplus operating assets and oil and gas royalties and lease bonus payments.

Six months ended November 30, 2011

Aggregate operating profit for the six-month periods ended November 30, 2011 and November 30, 2010 was $6.0 million and $8.5 million, respectively.

Total segment sales for the six-month period ended November 30, 2011 were $85.1 million compared to $91.1 million for the prior year period. Stone, sand and gravel sales decreased $6.0 million from the prior year period. The effect of the disposition of aggregate operating assets through the asset exchange transaction completed in April 2011 decreased sales $4.5 million, shipments 8% and average prices 2% from the prior year period. Stone, sand and gravel sales from current operations decreased $1.5 million from the prior year period on 2% lower shipments and 1% lower average prices.

Cost of products sold for the six-month period ended November 30, 2011 decreased $4.6 million from the prior year period primarily due to lower stone, sand and gravel shipments. Stone, sand and gravel unit costs decreased 3% from the prior year period primarily due to the effect of the disposition of aggregate operating assets through the asset exchange transaction completed in April 2011.

Selling, general and administrative expense for the six-month period ended November 30, 2011 decreased $0.6 million from the prior year period primarily due to lower provisions for bad debts and legal and other professional expenses.

Restructuring charges of $0.4 million were recorded in the six-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the six-month period ended November 30, 2011 decreased $1.2 million from the prior year period primarily due to lower gains from routine sales of surplus operating assets.

 

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Consumer Products Operations

 

		Three months ended November 30,								Six months ended November 30,
In thousands except per unit		2011				2010				2011				2010
Operating Results
Total ready-mix concrete sales		$	44,579			$	43,377			$	100,807			$	95,483
Package products sales and delivery fees			13,542				13,443				28,338				27,815
Total segment sales			58,121				56,820				129,145				123,298
Cost of products sold			59,212				56,290				130,409				119,539
Gross profit (loss)			(1,091	)			530				(1,264	)			3,759
Selling, general and administrative			(2,436	)			(3,047	)			(6,810	)			(5,723	)
Restructuring charges			(536	)			--				(536	)			--
Other income			457				134				2,664				332
Operating Loss		$	(3,606	)		$	(2,383	)		$	(5,946	)		$	(1,632	)
Ready-mix concrete
Shipments (cubic yards)			587				575				1,328				1,244
Prices ($/cubic yard)		$	75.85			$	75.45			$	75.89			$	76.73
Cost of sales ($/cubic yard)		$	80.66			$	77.79			$	79.69			$	76.94

Three months ended November 30, 2011

Consumer products operating loss for the three-month periods ended November 30, 2011 and November 30, 2010 was $3.6 million and $2.4 million, respectively.

Total segment sales for the three-month period ended November 30, 2011 were $58.1 million compared to $56.8 million for the prior year period. Ready-mix concrete sales increased $1.2 million from the prior year. Sales increased $3.4 million and shipments increased 8% due to the net effect of the asset exchange transactions completed in April and July 2011. Ready-mix concrete sales excluding the net effect of the asset exchange transactions decreased $2.2 million from the prior year period on 6% lower shipments and 1% higher average prices.

Cost of products sold for the three-month period ended November 30, 2011 increased $2.9 million from the prior year period. Cost of products sold increased $3.7 million due to the net effect of the asset exchange transactions completed in April and July 2011. Cost of products sold excluding the net effect of the asset exchange transactions decreased $0.8 million. Ready-mix concrete unit costs increased 4% from the prior year period primarily due to higher diesel costs.

Selling, general and administrative expense for the three-month period ended November 30, 2011 decreased $0.6 million from the prior year period primarily due to lower provisions for bad debts.

Restructuring charges of $0.5 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the three-month period ended November 30, 2011 increased $0.3 million from the prior year period primarily due to higher gains from routine sales of surplus operating assets.

 

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Six months ended November 30, 2011

Consumer products operating loss for the six-month periods ended November 30, 2011 and November 30, 2010 was $5.9 million and $1.6 million, respectively.

Total segment sales for the six-month period ended November 30, 2011 were $129.1 million compared to $123.3 million for the prior year period. Ready-mix concrete sales increased $5.3 million from the prior year period. Sales increased $12.4 million and shipments increased 13% due to the net effect of the asset exchange transactions completed in April and July 2011. Ready-mix concrete sales excluding the net effect of the asset exchange transactions decreased $7.1 million from the prior year period on 6% lower shipments and 1% lower average prices.

Cost of products sold for the six-month period ended November 30, 2011 increased $10.9 million from the prior year period. Cost of products sold increased $12.7 million due to the net effect of the asset exchange transactions completed in April and July 2011. Cost of products sold excluding the net effect of the asset exchange transactions decreased $1.8 million. Ready-mix concrete unit costs increased 4% from the prior year period primarily due to higher diesel costs.

Selling, general and administrative expense for the six-month period ended November 30, 2011 increased $1.1 million from the prior year period primarily due to higher provisions for insurance claims.

Restructuring charges of $0.5 million were recorded in the six-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the six-month period ended November 30, 2011 increased $2.3 million from the prior year period primarily due to the recognition of a gain of $2.1 million as a result of the disposition of ready-mix operations in Houston, Texas through the asset exchange transaction completed in July 2011.

Corporate

 

			0000000000				0000000000				0000000000				0000000000
		Three months ended November 30,								Six months ended November 30,
In thousands		2011				2010				2011				2010
Other income		$	163			$	1,229			$	366			$	1,850
Selling, general and administrative			(4,953	)			(8,664	)			(11,355	)			(14,277	)
Restructuring charges			(1,169	)			--				(1,169	)			--
		$	(5,959	)		$	(7,435	)		$	(12,158	)		$	(12,427	)

Three months ended November 30, 2011

Other income for the three-month period ended November 30, 2011 decreased $1.1 million from the prior year period primarily due to lower oil and gas royalty payments.

Selling, general and administrative expense for the three-month period ended November 30, 2011 decreased $3.7 million from the prior year period primarily due to lower stock-based compensation expense. 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 $2.7 million for the three-month period ended November 30, 2011 and increased expense $1.5 million for the three-month period ended November 30, 2010.

Restructuring charges of $1.2 million were recorded in the three-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

 

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Six months ended November 30, 2011

Other income for the six-month period ended November 30, 2011 decreased $1.5 million from the prior year period primarily due to lower oil and gas lease bonus and royalty payments.

Selling, general and administrative expense for the six-month period ended November 30, 2011 decreased $2.9 million from the prior year period primarily due to lower stock-based compensation expense. 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 $3.8 million for the six-month period ended November 30, 2011 and increased expense $0.1 million for the six-month period ended November 30, 2010.

Restructuring charges of $1.2 million were recorded in the six-month period ended November 30, 2011. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Interest

Interest expense incurred for the three-month period ended November 30, 2011 was $17.1 million, of which $8.3 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $8.8 million was expensed. Interest expense incurred for the three-month period ended November 30, 2010 was $17.3 million, of which $3.4 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $13.9 million was expensed.

Interest expense incurred for the six-month period ended November 30, 2011 was $34.4 million, of which $16.1 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $18.3 million was expensed. Interest expense incurred for the six-month period ended November 30, 2010 was $31.7 million, of which $3.4 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $28.3 million was expensed.

Interest expense incurred for the three-month period ended November 30, 2011 decreased $0.2 million from the prior year period primarily as a result of lower credit facility fees. Interest expense incurred for the six-month period ended November 30, 2011 increased $2.7 million from the prior year period primarily as a result of higher average outstanding debt at higher interest rates due to the August 2010 refinancing of our senior notes.

An additional $19 million of interest expense is estimated to be capitalized in connection with our Hunter, Texas cement plant expansion project during the remainder of our current fiscal year.

Loss on Debt Retirements

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 and to increase working capital. As of November 30, 2010, we recognized a loss on debt retirement of $29.6 million representing $11.4 million in consent fees, redemption price premium and transaction costs and a write-off of $18.2 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.

 

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Income Taxes

Income taxes for the interim periods ended November 30, 2011 and November 30, 2010 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate does not include the tax impact of the loss on debt retirements which was recognized as a discrete item in the six-month period ended November 30, 2010. The estimated annualized rate excluding this charge is 3.0% for fiscal year 2012 compared to 41.0% for fiscal year 2011. We received income tax refunds of less than $0.1 million and made income tax payments of $0.1 million in the six-month period ended November 30, 2011. We received income tax refunds of $0.2 million and made income tax payments of less than $0.1 million in the six-month period ended November 30, 2010.

Net deferred tax assets totaled $15.7 million at November 30, 2011 and $15.0 million at May 31, 2011, of which $13.7 million at November 30, 2011 and $12.3 million at May 31, 2011 were classified as current. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and would record a valuation allowance unless such deferred tax assets were deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company’s deferred tax assets exceeded deferred tax liabilities as of November 30, 2011 primarily as a result of the recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of the increase in our net deferred tax assets expected during the year. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

In addition to cash and cash equivalents of $67.5 million at November 30, 2011, our sources of liquidity include cash from operations and borrowings available under our senior secured revolving credit facility.

Senior Secured Revolving Credit Facility . On August 25, 2011, we amended and restated our credit agreement and the associated security agreement. The credit agreement continues to provide for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit and a $15 million sub-limit for swing line loans. The credit facility matures on August 25, 2016. Amounts drawn under the credit facility bear annual interest either at the LIBOR rate plus a margin of 2.0% to 2.75% or at a base rate plus a margin of 1.0% to 1.75%. The base rate is the higher of the federal funds rate plus 0.5%, the prime rate established by Bank of America, N.A. or the one-month LIBOR rate plus 1.0%. The interest rate margins are determined based on the Company’s fixed charge coverage ratio. The commitment fee calculated on the unused portion of the credit facility ranges from 0.375% to 0.50% per year based on the Company’s average daily loan balance. We may terminate the credit facility at any time.

The amount that can be borrowed under the credit facility is limited to an amount called the borrowing base. The borrowing base may be less than the $200 million stated principal amount of the credit facility. The borrowing base is calculated based on the value of our accounts receivable, inventory and mobile equipment in which the lenders have a security interest. In addition, by mortgaging tracts of its real property to the lenders, the Company may increase the borrowing base by an amount beginning at $20 million and declining to $10.7 million at the maturity of the credit facility.

The borrowing base under the agreement was $137.0 million as of November 30, 2011. 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 $25 million, in which case we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. At November 30, 2011, our fixed charge coverage ratio was (.57) to 1.0. Given this ratio, we may use only $112.0 million of the borrowing base as of such date. No borrowings were outstanding at November 30, 2011; however, $25.5 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of November 30, 2011 was $86.5 million.

All of our consolidated subsidiaries have guaranteed our obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of our existing and future consolidated accounts, inventory, equipment, intellectual property and other personal property, and in all of our equity interests in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries, if any.

 

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The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.0 to 1.0 and borrowing availability under the borrowing base is more than $40 million. When our fixed charge coverage ratio is less than 1.0 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of November 30, 2011.

9.25% Senior Notes. On August 10, 2010, we sold $650 million aggregate principal amount of our 9.25% senior notes due 2020 at an offering price of 100%. The notes were issued under an indenture dated as of August 10, 2010. The net proceeds were used to purchase or redeem all of our outstanding 7.25% senior notes due 2013, with additional proceeds available for general corporate purposes.

At November 30, 2011, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

 

Year		Percentage
2015			104.625%
2016			103.083%
2017			101.542%
2018 and thereafter			100.000%

In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.250% of the principal amount thereof, plus accrued interest with the net cash proceeds from certain equity offerings. If we experience a change of control, we may be required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

All of our consolidated subsidiaries have unconditionally guaranteed the 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of November 30, 2011.

Contractual Obligations. As of November 30, 2011, there have been no material changes to our material contractual obligations described in our Annual Report on Form 10-K for the year ended May 31, 2011.

During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that cement demand levels in Texas at that time would permit the new kiln to operate profitably if the project was completed as originally scheduled. We resumed construction in October 2010. The total capital cost of the project is expected to be between $365 million and $375 million, excluding capitalized interest, and commissioning is expected to begin within 24 months of the restart of construction. As of November 30, 2011, we have incurred approximately $335.0 million, excluding capitalized interest of approximately $51.1 million related to the project, of which $324.3 million has been paid.

For the next year, we expect cash and cash equivalents, cash from operations and available borrowings under our senior secured revolving credit facility to be sufficient to provide funds for capital expenditure commitments currently estimated at $35 million to $45 million, capital expenditures for the Hunter plant expansion, scheduled debt payments, working capital needs and other general corporate purposes.

 

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Cash Flows

Net cash provided by operating activities for the six-month periods ended November 30, 2011 and November 30, 2010 was $12.5 million and $10.0 million, respectively. The increase was primarily the result of changes in working capital items.

Net cash used by investing activities for the six-month periods ended November 30, 2011 and November 30, 2010 was $57.8 million and $17.5 million, respectively.

Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $36.0 million and $11.2 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively, of which $15.5 million and $3.4 million was capitalized interest paid in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations were $26.3 million and $12.2 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively, of which $18.0 million was incurred to acquire aggregate reserves in the six-month period ended November 30, 2011.

We have elected to receive distributions from life insurance contracts purchased in connection with certain of our benefit plans. Proceeds from distributions and policy settlements for the six-month periods ended November 30, 2011 and November 30, 2010 were $6.7 million and $7.2 million, respectively, which were offset in part by premiums and fees paid to maintain the policies.

Net cash used by financing activities for the six-month period ended November 30, 2011 was $3.7 million. Net cash provided by financing activities for the six-month period ended November 30, 2010 was $72.3 million.

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 and to increase working capital. As of November 30, 2010, we recognized a loss on debt retirement of $29.6 million representing $11.4 million in consent fees, redemption price premium and transaction costs and a write-off of $18.2 million of unamortized debt discount and original issuance costs associated with the 7.25% notes.

Dividends paid on our common stock were $2.1 million and $4.2 million in the six-month periods ended November 30, 2011 and November 30, 2010, respectively. On October 12, 2011, the Company suspended payment of its quarterly cash dividend.

OTHER ITEMS

Environmental Matters

We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. See Note 9 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report for a description of certain claims. It is possible that we could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by us.

 

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Market Risk

Historically, we have not entered into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration of our investments, changes in market interest rates would not have a significant impact on their fair value. The fair value of fixed rate debt will vary as interest rates change.

The estimated fair value of each class of financial instrument as of November 30, 2011 and May 31, 2011 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of November 30, 2011, the fair value of our long-term debt, including the current portion, was approximately $550.6 million compared to the carrying amount of $654.6 million. As of May 31, 2011, the fair value of our long-term debt, including the current portion, was approximately $691.5 million compared to the carrying amount of $652.5 million.

Our operations require large amounts of energy and are dependent upon energy sources, including electricity and fossil fuels. Prices for energy are subject to market forces largely beyond our control. We have generally not entered into any long-term contracts to satisfy our fuel and electricity needs, with the exception of coal which we purchase from specific mines pursuant to long-term contracts. However, we continually monitor these markets and we may decide in the future to enter into additional long-term contracts. If we are unable to meet our requirements for fuel and electricity, we may experience interruptions in our production. Price increases or disruption of the uninterrupted supply of these products could adversely affect our results of operations.

Critical Accounting Policies

The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting policies that affect the more complex judgments and estimates are described in our Annual Report on Form 10-K for the year ended May 31, 2011.

Recently Issued Accounting Guidance

There is no recently issued accounting guidance that we expect will materially impact our financial statements during the current fiscal year.

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the

Private Securities Litigation Reform Act of 1995

Certain statements contained in this quarterly report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “anticipate,” and other similar words. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks 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, abnormal periods of inclement weather, unexpected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in 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, regulations and claims, changes in governmental and public policy, and the risks and uncertainties described in our reports on Forms 10-K, 10-Q and 8-K. Forward-looking statements speak only as of the date hereof, and we assume no obligation to publicly update such statements.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information regarding the fair value of our fixed rate debt is included under Market Risk in Part I, Item 2 of this report and incorporated herein by reference.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of November 30, 2011.

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this item is included in Note 9 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Market and Shareholders Information. Shares of our common stock, $1 par value, are traded on the New York Stock Exchange (ticker symbol TXI). The restriction on the payment of dividends is included in Note 3 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference. On October 12, 2011, the Company suspended payment of its quarterly cash dividend.

Item 5. Other Information

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in exhibit 99.1 to this report.

Item 6. Exhibits

The following exhibits are included herein:

 

3.1	Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010)

 

3.2	Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010)

 

3.3	Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006)

 

4.1	Form of the Company’s 9  1 / 4 % Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010)

 

4.2	Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010)

 

4.3	Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010)

 

10.1	Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010)

 

10.2

Third Amended and Restated Credit Agreement, dated as of August 25, 2011, among the Company, Bank of America, N.A., as Administrative Agent, Lead Collateral Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 31, 2011)

 

10.3	Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010)

 

10.4	First Amendment to Amended and Restated Security Agreement, dated as of August 25, 2011, among the Company, the Subsidiary Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 31, 2011)

 

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10.7	Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on July 8, 2005)

 

10.8	Amendment No. 1 to Separation and Distribution Agreement dated as of July 27, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 1, 2005)

 

10.9	Tax Sharing and Indemnification Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed on July 8, 2005)

 

10.10

Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010)

 

10.11

Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994)

 

10.12

Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007)

 

10.13

Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006)

 

10.14

Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009)

 

10.15

TXI Annual Incentive Plans-Fiscal Year 2012 (incorporated by reference to exhibit 10.15 to Annual Report on Form 10-K filed on July 15, 2011)

 

10.16

TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2012 (incorporated by reference to exhibit 10.17 to Annual Report on Form 10-K filed on July 17, 2009)

 

10.17

TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010)

 

10.18

TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2014 (incorporated by reference to exhibit 10.18 to Annual Report on Form 10-K filed on July 15, 2011)

 

10.19

Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)

 

10.20

Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005)

 

10.21

Form of SAR Agreement for Non-Employee Directors under Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on August 12, 2005)

 

10.22

Form of Amendment No. 1 to SAR Agreement for Non-Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed on April 25, 2006)

 

10.23

SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan between Texas Industries, Inc. and Mel G. Brekhus, dated June 1, 2004 (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K filed on July 25, 2006)

 

10.24

Amendment No. 1 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated April 24, 2006 (incorporated by reference to Exhibit 10.23 to Annual Report on Form 10-K filed on July 25, 2006)

 

10.25

Contract, dated September 27, 2005, between Riverside Cement Company and Oro Grande Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 30, 2005)

 

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10.26

Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006)

 

10.27

Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010)

 

10.28

Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010)

 

10.29

Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006)

 

10.30

Amendment No. 2 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, between Texas Industries, Inc. and Mel G. Brekhus dated July 11, 2007 (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K filed on July 13, 2007)

 

10.31

Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment)

 

10.32

Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009)

 

12.1	Computation of Ratios of Earnings to Fixed Charges

 

15.1	Letter re unaudited Interim Financial Information

 

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

 

31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

 

32.1	Section 1350 Certification of Chief Executive Officer

 

32.2	Section 1350 Certification of Chief Financial Officer

 

99.1	Mine Safety Disclosure Exhibit

 

101

The following financial information from Texas Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of November 30, 2011 and May 31, 2011, (ii) Consolidated Statements of Operations for the three months and six months ended November 30, 2011 and November 30, 2010, (iii) Consolidated Statements of Cash Flows for the six months ended November 30, 2011 and November 30, 2010, and (iv) the Notes to Consolidated Financial Statements.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TEXAS INDUSTRIES, INC.
January 6, 2012		/s/ Kenneth R. Allen
		Kenneth R. Allen
		Vice President – Finance and Chief Financial Officer (Principal Financial Officer)
January 6, 2012		/s/ T. Lesley Vines
		T. Lesley Vines
		Vice President – Corporate Controller and Treasurer (Principal Accounting Officer)

 

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INDEX TO EXHIBITS

  Exhibit

  Number

 

3.1	Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010)

 

3.2	Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010)

 

3.3	Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006)

 

4.1	Form of the Company’s 9  1 / 4 % Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010)

 

4.2	Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010)

 

4.3	Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010)

 

10.1	Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010)

 

10.2

Third Amended and Restated Credit Agreement, dated as of August 25, 2011, among the Company, Bank of America, N.A., as Administrative Agent, Lead Collateral Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 31, 2011)

 

10.3	Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010)

 

10.4	First Amendment to Amended and Restated Security Agreement, dated as of August 25, 2011, among the Company, the Subsidiary Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 31, 2011)

 

10.7	Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on July 8, 2005)

 

10.8	Amendment No. 1 to Separation and Distribution Agreement dated as of July 27, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 1, 2005)

 

10.9	Tax Sharing and Indemnification Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed on July 8, 2005)

 

10.10

Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010)

 

10.11

Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994)

 

10.12

Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007)

 

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Index to Exhibits-(Continued)

    Exhibit

    Number

 

10.13

Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006)

 

10.14

Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009)

 

10.15

TXI Annual Incentive Plans-Fiscal Year 2012 (incorporated by reference to exhibit 10.15 to Annual Report on Form 10-K filed on July 15, 2011)

 

10.16

TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2012 (incorporated by reference to exhibit 10.17 to Annual Report on Form 10-K filed on July 17, 2009)

 

10.17

TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010)

 

10.18

TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2014 (incorporated by reference to exhibit 10.18 to Annual Report on Form 10-K filed on July 15, 2011)

 

10.19

Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)

 

10.20

Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005)

 

10.21

Form of SAR Agreement for Non-Employee Directors under Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on August 12, 2005)

 

10.22

Form of Amendment No. 1 to SAR Agreement for Non-Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed on April 25, 2006)

 

10.23

SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan between Texas Industries, Inc. and Mel G. Brekhus, dated June 1, 2004 (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K filed on July 25, 2006)

 

10.24

Amendment No. 1 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated April 24, 2006 (incorporated by reference to Exhibit 10.23 to Annual Report on Form 10-K filed on July 25, 2006)

 

10.25

Contract, dated September 27, 2005, between Riverside Cement Company and Oro Grande Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 30, 2005)

 

10.26

Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006)

 

10.27

Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010)

 

10.28

Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010)

 

10.29

Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006)

 

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Index to Exhibits-(Continued)

   Exhibit

   Number

 

10.30

Amendment No. 2 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, between Texas Industries, Inc. and Mel G. Brekhus dated July 11, 2007 (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K filed on July 13, 2007)

 

10.31

Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment)

 

10.32

Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009)

 

12.1	Computation of Ratios of Earnings to Fixed Charges

 

15.1	Letter re unaudited Interim Financial Information

 

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

 

31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

 

32.1	Section 1350 Certification of Chief Executive Officer

 

32.2	Section 1350 Certification of Chief Financial Officer

 

99.1	Mine Safety Disclosure Exhibit

 

101

The following financial information from Texas Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of November 30, 2011 and May 31, 2011, (ii) Consolidated Statements of Operations for the three months and six months ended November 30, 2011 and November 30, 2010, (iii) Consolidated Statements of Cash Flows for the six months ended November 30, 2011 and November 30, 2010, and (iv) the Notes to Consolidated Financial Statements.

 

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