FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus ( TMF Boring)

Texas Industries
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1341 W. Mockingbird Lane
Dallas, TX 75247
(972) 647-6730

[email protected]
http://www.txi.com

ANN ARBOR, Mi. December 23, 1996/FOOLWIRE/--- Texas Industries is a large regional producer of cement, concrete, and aggregates. TXI's 85%-owned subsidiary, Chaparral Steel, manufactures high quality steel products from recycled steel for distribution throughout North America.

On December 19, TXI reported second quarter results for its 1997 fiscal year. The company earned net income of $17.9 million, or $1.57 per share, for the quarter ended November 30. Net income for the prior year's quarter equaled $21.5 million, or $1.89 per share. Revenues of $234.4 million were down from $244.3 million for Q2 in FY96. Per-share earnings were well below analysts' expectations. TXI held its teleconference with analysts on December 20.

THE STEEL SIDE OF THE BUSINESS

The Chaparral minimill operation shipped 375,000 tons in the quarter. Net steel sales totaled $143.6 million, down 7% from last year.

The company is increasingly focused on lightweight structural steel beam manufacture. These beams are used primarily in low-rise commercial construction, manufactured home construction, and related applications. Demand was down 14% as compared with last year, probably due to inventory draw-downs. Pricing for the company's structural steel was down sequentially, to $397/ton from $408/ton, but was above the $391/ton selling price of last fiscal year's second quarter. Beam prices are currently stable.

Pricing on bar mill products rose $10/ton sequentially, to $344/ton, principally due to shifting the production mix toward higher quality products. That remains $10/ton below last year's second quarter, however. Average gross profit/ton for combined structural and bar steel rose sequentially, to $81 from last quarter's $79. That compares with $83 for the second quarter of 1996.

Scrap prices have declined approximately $2-$3 per ton, which has helped lower cost of sales.

Cash flow from operations increased $2.5 million this year as compared with last year. The average number of CSM shares outstanding is 28.71 million as compared with 29.75 million in last year's second quarter. That is due to the company's share repurchase program, although additional shares were not repurchased in the November 1996 quarter.

CEMENT/AGGREGATES/CONCRETE AND CONSOLIDATED BUSINESS OPERATIONS

For the c/a/c business, quarterly sales of $90.7 million represented a slight decline from last year's $89.3 million. Operating profit of $22.6 million was 3% above last year's $21.9 million due to higher prices for cement and ready-mix. Average selling prices for aggregates was down, but that is due mostly to the addition of sales from recently acquired operations that yield lower-margin products, rather than due to any decline in prices for specific products. Prices are actually up slightly, by product.

Favorable trends in Texas construction markets continue, but construction suffered due to rainfall at twice the average level for October and November. Without that impact, sales would have exceeded last year's quarter, according to the company.

Real estate operations contributed $1.3 million in pretax income in the quarter, as compared with $4.9 million due to a single land sale in last year's second quarter. Income from real estate activities is always subject to quarter-to-quarter timing that cannot be predicted with accuracy.

Also, the exhaustion of tax-loss carryforwards last year affects comparisons of this year's quarterly earnings with last year's.

TXI continues its capital expansion and upgrade projects on both the steel and c/a/c sides of the business. There is sufficient cash to satisfy those projects as well as to repurchase shares when deemed to be in the interests of the company and shareholders. TXI repurchased 266,000 shares during November 1996; that will show up in next quarter's earnings report. The company's debt to capitalization ratio stood at 29% as of November 30, 1996.

FORWARD LOOKING STATEMENTS

On the steel side of the business, the manufactured home industry remains strong, inventory has been reduced, and imports appear to have diminished. Scrap prices are favorable, although they could move up in the next six months. The company said it expects to have a "strong" third quarter -- although last year's third quarter was especially strong, and the company may not equal that.

On the c/a/c side, the company expects to be down in total cement shipments for fiscal 1997 as compared with fiscal 1996 due to the weather-related impacts in the second and, to a degree, first fiscal quarters. That business probably cannot be made up fully in the second half of the year. No new licenses for TXI's patented CemStar process were signed in the quarter, but some agreements are close to being signed.

As for TXI over all, return on equity targets in the high-teens continue to be met. The market for construction products in the region remains strong but is not in an unsustainable boom. Sales in the current (i.e., third) quarter depend upon the weather to large degree. Last year's third quarter had good weather. With even normal weather, TXI should show an increase in earnings for this third quarter.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.