On Thursday, Texas Industries Inc (NYSE:TXI) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Garik Shmois – Longbow Research: First question is on cement costs, just looking at the costs sequentially, you had double-digit volume growth quarter-over-quarter, but the cost stepped up quarter-over-quarter, recognizing it was down year-over-year. I was just wondering if you could walk us through some of the puts and takes on cement as to why costs went up on a unit basis quarter-over-quarter?
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Kenneth R. Allen – VP, Finance, Treasurer and CFO: Garik, this is Ken, I’ll be happy to do that. Remember in the fourth quarter – and let me be sure, you’re talking about our fourth quarter that ended in May versus the quarter for August?
Garik Shmois – Longbow Research: Yes.
Kenneth R. Allen – VP, Finance, Treasurer and CFO: The big things there – and this is really why try to focus on year-over-year comparisons and not sequentially, but remember in the fourth quarter, we had no major maintenance and in the first quarter we had about $3.5 million of major maintenance expense split between our Hunter plants and the California plants. In addition, likely you’d expect, when you go from the spring to the summer time particularly in our markets in the South, you see a movement in electricity costs as they move up. Now, they came down year-over-year, but from the spring and the summer they were up. We did a good job of controlling those costs, but even so the total impact was probably in the neighborhood of $3 million there. Finally, we sold more cement than we did in the fourth quarter, but actually our production of clinker, and that’s the primary piece of work in process at the plant. Our clinker production was down and that probably accounted for about $2 million in cost as well. The clinker production costs we talked about sometime (sequentially running) better than others and that’s going to be more of a timing thing than a seasonal thing, but those three things make up the bulk of the change in cost I think, Garik.
Garik Shmois – Longbow Research: I guess just switching to Cement pricing in Texas, we’ve seen imports step up in Texas. So, you mentioned that you are tight down in Southern and Central Texas. Hence the increase in imports that had an impact on pricing at all in the market?
James B. (Jamie) Rogers – VP and COO: Garik, this is Jamie. Well, here’s how I would answer that question. We have seen like you have the increased demand in overall Texas and more specifically in Central and South Texas. As you mentioned, it’s trending above the PCA forecast which I believe they adjusted upward in the summer and we’re still trending above that. I think it’s a good time to be bringing on this capacity to meet that increased demand, and we’re working on matching price to the market conditions that we have.
Garik Shmois – Longbow Research: Okay, I guess just a follow-up, my last question would be on pricing in Texas. There is a price increase in October and actually we have a competitor who is out with the price increase every quarter from now until the middle of next year. Despite the increase in imports, can you just talk about your level of confidence and additional price increases sticking in the market?
James B. (Jamie) Rogers – VP and COO: I think as an overall comment, our optimism is – we do have optimism on pricing going forward for the next – for the near future and next year. These are micro-markets that we operate in, and so I think we’ll likely have more success in Central Texas maybe than we do in other places in California where we haven’t had as much success to places where we’ve had more successes in the northern part of the state, and not as much in the southern part of the state. So I’m getting a little bit into the weeds but I do agree with your implication that the pricing environment is improving.
Cement Demand in Texas
Kathryn Thompson – Thompson Research Group: First, what visibility do you have for cement demand in Texas, particularly as it relates to public construction projects and specifically can you talk a little bit more about (filing) the State DOT budget for State of Texas but also how it plays into – from the public-private partnerships we know of, but also additional enhanced federal funding bond programs?
James B. (Jamie) Rogers – VP and COO: Kathryn, this is Jamie. I’m going to kind of answer those all at once and say that we have a good current backlog in that arena, which as you characterized it as a combination of public funds as well as the public-private projects that are unique to Texas – are I think unique to Texas. Looking forward, there are a lot of projects, a lot of major projects that will be led in the near future and aren’t going to affect the next three to four years. I mean we’ve got – number one, we are doing significant highway projects here now, but looking forward we’ve got more significant projects and dollars associated with those projects, particularly in Dallas/Fort Worth and in Houston.
Kathryn Thompson – Thompson Research Group: You did a nice job of lowering inventories. I know that’s been a key focus for you. How much did the disposition of large clinker inventory that was really cleared up earlier this year helped overall margins in the quarter (indiscernible) year-over-year basis.
Kenneth R. Allen – VP, Finance, Treasurer and CFO: Kathryn, this is Ken. Certainly we removed and we reduced inventories this year partly because of the production shortfall that I talked about earlier. We had drawn down inventories dramatically over the last three years. Relative to a year ago, I’m trying to remember the accounting impact, because a lot of it is just (indiscernible), they had a small positive impact Kathryn versus a year ago.
Kathryn Thompson – Thompson Research Group: I guess I got the impression that maybe it was a little bit more, particularly clinker that was at your largest plant in North Texas?
Kenneth R. Allen – VP, Finance, Treasurer and CFO: We’ve been doing – that’s where most of the clinker inventory has been over the past three years or so. As we reduced that clinker amount and substituted for production, we’ve been able to increase our efficiencies and get better fuel and electricity cost and you see that in the numbers, you sure do.
Kathryn Thompson – Thompson Research Group: Could you give the capacity, I may have missed this, but the capacity utilization for each of your plants?
Kenneth R. Allen – VP, Finance, Treasurer and CFO: Yeah, Kathryn, in California we’re a little above 50%; that’s a little better than we’ve been talking about in previous teleconferences. (indiscernible) the increase in shipments. In Texas, because we’re really running both plants to serve our markets, we’re running in the 75% range I think. We average both of those out. It’s a little higher – it’s higher in Central Texas, lower in North Texas, but really we’re beginning to run both plants as almost one unit.
Kathryn Thompson – Thompson Research Group: So northern might be 70% to 75% and central could be 75% plus?
Kenneth R. Allen – VP, Finance, Treasurer and CFO: Could be.