Texas Industries, Inc.

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Texas Industries, Inc.

7610 Stemmons Freeway
Dallas, Texas 75247
(214) 647-6700
Fax: (214) 647-3878

Public Company
Employees: 2,700
Sales: $601 million
Stock Exchanges: New York
SICs: 3312 Blast Furnaces and Steel Mills; 3271 Concrete Block and Brick

Texas Industries, Inc. (TXI) is a major producer of steel and cement/concrete products for construction. In the steel segment, the companys products include reinforcing bar, structural beams, and merchant quality rounds. Texas Industries steel operations are carried out by Chaparral Steel Company, an 81 percent-owned subsidiary. Chaparrals raw materials consist largely of scrap steel, much of which is produced by shredder operations at its Midlothian, Texas, steel mill. A major source of the scrap steel for shredding is crushed auto bodies that are purchased on the open market. The bulk of Chaparrals customers are steel service centers, steel fabricators, forgers, and equipment manufacturers. The companys products are used primarily in the construction, railroad, defense, automotive, and energy industries.

TXIs cement/concrete operations produce a variety of construction materials, including cement and aggregates, ready-mix, pipe, block, and brick. The companys Midlothian cement facility is the largest cement plant in Texas, with a capacity of 1.2 million tons. Another cement facility is located in Hunter, Texas, near Austin. About one million tons of finished cement were shipped to outside trade customers by TXI in 1992. The principal marketing area for the companys cement products includes Texas, Louisiana, Colorado, Oklahoma, and New Mexico. TXIs aggregate facilities are located in Texas and Louisiana, where sand, gravel, crushed limestone, and light-weight aggregate are produced. Texas and Louisiana are also home to the companys 29 ready-mix concrete plants, which use a sizeable amount of the cement and aggregates produced at the companys other facilities in their own operations.

Texas Industries, Inc. was formed in 1951 as the successor to the Texas Lightweight Aggregate Company. Texas Lightweight Aggregate Company had been organized in 1946 to meet the increasing postwar demand for construction materials in the southwestern part of the United States. This company had a sales volume of $30,000 in 1947. In 1949, Texas Lightweight Aggregate attracted the attention of Ralph Rogers, the former president of Cummins Diesel Engine Corp., who had recently retired to the Dallas area. Texas Lightweight Aggregate was one of the first companies to burn shale and clay in special rotary kilns, producing a unique building material. Noting the potential of this product, Rogers decided to invest in the company. By 1950, the allegedly retired Rogers was elected company president. The following year, Texas Industries was formed, with Texas Lightweight Aggregate and another firm, Texcrete Co., as its core. Texcrete Co., also formed in 1946, was a maker of concrete products that included pipe, joists, and masonry units. In its first year, Texas Industries earned $35,000 on sales of $217,000.

By 1953, Texas Industries had grown explosively, reporting sales that year of $5.8 million. The company had four main product lines at that time: Haydite, the lightweight expanded clay and shale aggregate that had first interested Rogers; concrete products sold under the Texcrete trade name; ready-mixed concrete, sand, gravel, and crushed stone; and Sakrete, the trade name for its dry-mixed concrete. Haydite was the companys most important early product. Because it was as strong as conventional concrete while 40 percent lighter, Haydite quickly became popular in the building industry. By 1954, TXI had expanded to 28 plants. These included the newly acquired Fort Worth Sand & Gravel Co. and a new Haydite subsidiary, the Oklahoma Lightweight Aggregate Company in Choctaw, 12 miles from Oklahoma City. The companys total of six Haydite plants made it the nations largest expanded clay or shale lightweight aggregates producer. 1954 also marked the completion of a new research and testing laboratory at TXIs Dallas-facility.

TXI continued to grow at a rapid pace through the later part of the 1950s. A nine-month expansion and rebuilding program took place in 1955 and 1956 at the companys Texcrete plant in Dallas. In 1958, TXI acquired all outstanding shares of Texcrete Structural Products Company, which had just finished work on a modern new prestressed concrete plant. The plants initial output was bridge girders to be used in highway construction. Dallas Lightweight Aggregate Company became a wholly-owned subsidiary of Texas Industries the following year. In 1959, construction began on a new cement plant in Midlothian, Texas, equidistant from Dallas and Fort Worth. The plant, with a capacity of 1.4 million barrels annually, marked TXIs entry into the cement business. The construction of the cement plant provided TXI with its own source of cement, which up to that time had been its biggest expense, and therefore made the company less susceptible to cement shortages. Major improvements were made at other facilities as well before the decade ended. The companys Houston masonry products plant became one of the very first of its kind to be totally automated. In addition, new ready-mix concrete facilities were completed in Fort Worth, New Orleans, and Alexandria, Louisiana.

With the opening of the Midlothian plant in October of 1960, TXI became a vertically-integrated, self sufficient company. By 1963, sales at Texas Industries had reached $27 million, with earnings of over $2 million. The company continued to grow through acquisitions during this period. In 1962, TXI acquired two Dallas area real estate properties, Brookhollow Industrial Park and the Empire Central office community. Two Detroit companies were purchased the following year. The two companies, Cooper Supply Co. and the Harris Concrete and Supply Co., were both in the ready-mix concrete business, a growing industry in Detroit at the time. Cooper was Detroits leading ready-mix producer, with nine plants. Harris had six plants. Combined, the companies employed 400 workers and added 130 trucks to TXFs fleet. In 1964, TXI launched its first European venture, when its French affiliate, Beton Service de France, acquired a significant interest in Frances largest distributor of bulk cement, Societe dApprovisionnement du Batiment et de Travaux Publics (SABTP). SABTP had recently begun operating its first ready-mix batching plant.

In May of 1967, the addition of a third kiln at the Midlothian cement plant made it the largest cement plant in Texas, with a yearly capacity of 5 million barrels of portland cement. The Athens Brick Company was acquired that year as well. Athens Brick, whose plants were also located in Texas and Louisiana, was a manufacturer of clay products sold throughout the Southwest. 1967 also saw the opening of several new facilities at TXI. Three new sand and gravel plants in Louisiana and Texas went into operation during the year, as did the companys new Span-Deck plant in Dallas, which produced prestressed, hollowcored concrete slabs through mechanized casting. Around the same time, TXI purchased a large limestone deposit in southern California, opening the door to future expansion in that area. Another lightweight aggregate plant was completed the following year, this one in Clodine, a town near Houston. In 1969, TXI entered the modular building construction business (modular buildings are easily assembled, low-cost units made of pre-constructed elements), with the formation of a wholly-owned subsidiary called Isocorp Inc.

By 1970, TXFs sales had reached $79 million. Contributing to this total was a further diversification, the acquisition of TXI Paper Products, a producer of paperboard from waste paper. 1970 also marked the end of Ralph Rogers tenure as company president, though he retained his position as board chair. The new president was Ralphs son, Robert Rogers. During the first part of the 1970s, concrete represented TXFs most important growth area. The construction of the huge new Dallas-Fort Worth airport was one important reason for the emphasis on concrete. Sales continued to climb steadily, reaching $88 million in 1971. This increase over the previous year took place in spite of a sluggish performance by the Brookhollow subsidiary and the usual start-up glitches at TXI Paper Products. The following year, TXI exercised its option to buy 35 percent of S.A.F.B., its French concrete affiliate. Two years later, TXI Paper Products was sold to Clevepak Corp. for about $11 million.

In 1973, TXI launched Chaparral Steel Co. as a joint venture with Co-Steel International Ltd., a Toronto-based steel company with facilities in Toronto, Minneapolis, and Sheerness, England. The Chaparral plant, located near Midlothian, was designed for the production of rolled steel products, such as reinforcing bars, made from scrap steel. The plant, with an initial production capacity of 220,000 tons, was to employ about 300 workers. Several other new facilities and new subsidiaries were created in the mid-1970s. One of these was the 375,000-ton cement plant at Artesia, Mississippi, built by TXFs United Cement Co. subsidiary, and completed in early 1974. Dolphin Construction, a general contracting company serving Louisiana, was formed that year as well. 1974 also brought the creation of Q/A Corporation, a construction company formed to supply concrete for nuclear power plants. Q/As first contract was the Waterford III nuclear power plant near New Orleans, a project that called for 250,000 cubic yards of ready-mix concrete over five years. TXFs ability to act as its own contractor in the construction of its new facilities enabled the company to keep costs and construction time to a minimum. In spite of this ongoing expansion, TXFs earnings declined for three straight years, from 1973 to 1975.

This trend was reversed during the second half of the decade, however. By 1977, TXI was producing over 1.5 million tons of cement per year at its five kilns, and was employing over 3,000 people. That year, about 70 percent of the companys revenue and 90 percent of its profits were generated by the cement and concrete business, including aggregates. Real estate activities, mainly the Brookhollow Corp. subsidiary, accounted for nearly 14 percent of net. Around two-thirds of TXFs revenues were coming from its home turf of Texas, with Louisiana and Mississippi contributing the bulk of the remainder. The companys most impressive improvement during the late 1970s came from Chaparral. In 1979, TXFs half interest in Chaparral produced 23 percent of its profit, after losing money only two years earlier. By 1980, the Midlothian cement plants capacity had been expanded to 1.2 million tons, making it the largest cement plant in its region. During this period, the companys two existing cement plants, Midlothian and Artesia, switched from gas and oil to coal, a less expensive energy source. One important reason for the switch was that half of the fuel needs of the two cement plants could be met by a coal mine in West Texas owned by TXI.

In 1981, a new dry process plant at Hunter, Texas, between Austin and San Antonio, was dedicated. The addition of the Hunter plant brought the companys total cement capacity up to 2.2 million tons. A year later, a new sand and gravel plant in Austin began operations, coinciding with a construction boom in the area. This brought to seven the number of sand and gravel plants operated in Texas by TXI, with a yearly output of 8 million tons of aggregates. 1982 also saw the completion of an expansion project at the Chaparral mill, increasing annual production capacity to one million tons. Brookhollow Corporation, TXFs real estate subsidiary, continued to thrive in the first half of the 1980s, generating record earnings for three years in a row in 1983 through 1985. Production records were set in fiscal 1985 at the companys Hunter and Artesia cement plants as well, reflecting the regions growth in cement consumption during that time.

Late in 1985, TXI purchased Co-Steels share of Chaparral Steel Co., thereby becoming full owner of that subsidiary. Co-Steels half interest was purchased for $42 million cash, plus a further payment due in 1990 to be determined based on Chaparrals performance in the interim. With Chaparral in hand, TXIs sales and net earnings soared for the fiscal year ending in May 1986. With Chaparral shipping record quantities (in excess of 1 million tons for the first time), TXIs sales leaped from $344 million in 1985 to $648 million in 1986. Net income grew by 26 percent in that period, from less than $18 million to over $22 million. Much emphasis was placed on cost reduction and efficiency during this time. For example, between 1977 and 1987, the amount of labor required to produce a ton of steel at Chaparral was reduced from 3.3 man-hours to less than 1.5. In the cement/concrete business, the company focused on reducing its fuel costs, the largest expense in cement production. The Midlothian plant started burning fuel derived from waste in November of 1987, saving 20 percent on fuel costs by the following year. Between 1981 and 1988, the companys three cement plants reduced their production costs by 15 percent, while boosting production capacities by 14 percent.

In 1987, Co-Steel purchased 6.3 percent of the outstanding TXI common shares. Shortly thereafter, John Shields, Co-Steels president and CEO, was named to Chaparrals board of directors. This share was increased to 8.7 percent early in 1988. For fiscal 1988, during exceptionally tough market conditions, TXI turned a modest profit of $11 million on sales of $606 million. By this time Chaparral ranked tenth in size among U.S. steel producers, and was generating a very large portion of TXIs revenue and earnings. In 1990, TXI completed the Chaparral buyout, paying Co-Steel $50 million in cash and an additional 1.2 million shares of stock. The payout brought Co-Steels holding in TXI up to 22 percent, making it TXIs largest shareholder by a sizeable margin.

With the state of Texas mired deeply in recession, the companys cement/concrete operations lost over $11 million in fiscal 1990. In August of 1990, TXI sold its United Cement Company subsidiary for $43 million. The sale of United Cement was the only thing that kept the company from operating at a loss for fiscal 1991. Dolphin Construction Company was sold off in the first quarter of fiscal 1992. For 1992, TXI returned to profitability, earning $1.9 million on sales of just over $600 million. About two-thirds of the revenue was generated by Chaparral, which started up the new Large Beam Mill during the year. The management of Texas Industries hopes that a continuing emphasis on cost reduction, coupled with a significant economic recovery in the southwestern part of the United States, will help return the company to a more consistently profitable state.

Principal Subsidiaries

Athens Brick Company; Brookhollow Corporation; Creole Corporation; Louisiana Industries, Inc.; Southwestern Financial Corporation; Crestview Corporation; TXI Aggregate Transportation Company; TXI Aviation, Inc.; TXI Cement Company; TXI Structural Productsjnc.; TXI Transportation Company; Chaparral Steel Company (81%).

Further Reading

Balcerek, Tom, Co-Steel Gets Payout from Pact, American Metal Market, September 6, 1990, p. 2.

Chaparral Aids Net Gain, Texas Industries Says, American Metal Market, July 22, 1986, p. 4.

Gordon, Mitchell, Solid Footings, Barrons, March 17, 1980, p. 47.

Gordon, Mitchell, Texas Industries Racks Up Solid Advance in Profits, Barrens, March 13, 1978, pp. 2526.

Levine, Sid, More Construction Aggregate for Austin, Texas, Pit & Quarry, April 1984, pp. 3033.

Plan Unveiled for New Steel Plant in Texas, Journal of Commerce, July 26, 1973, p. 9.

Sapino, Brenda, Texas Industries Becomes Full Owner, American Metal Market, December 3, 1985, p. 4.

Texas Industries, Inc. 1992 Annual Report, Dallas: Texas Industries, Inc., 1992.

Texas Industries Fairly Valued on Earnings, Financial World, October 13, 1971, p. 18.

Texas Industries: 40 Years of Production and Progress, Dallas: Texas Industries, Inc., 1991.

Texas Industries Spurred by Demand for Lightweight Building Materials, Barrons, March 1, 1954, p. 22.

Robert R. Jacobson

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Texas Industries, Inc.

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