Eagle Materials Inc. Reports Continued Strong Growth in Sales Volumes and Earnings in the Third Quarter

EXP

Eagle Materials Inc. (NYSE:EXP) today reported financial results for the third quarter of fiscal 2014 which ended December 31, 2013. Notable items for the quarter in relation to the prior-year’s third quarter include:

  • Record third quarter Revenues of $228.8 million, up 39%
  • Earnings before interest and income taxes of $53.3 million, up 71%
  • Earnings per diluted share of $0.63, up 70%
  • Reduced outstanding debt by 20%

Sales volumes improved across all business lines, with cement volumes setting a third quarter record of over 1.1 million tons sold. Net sales prices also strengthened across all businesses, with wallboard sales prices increasing 19% over the prior year’s third quarter. Quarterly revenue and earnings improvement also reflects the acquisition of assets, primarily two cement plants in Missouri and Oklahoma (the Acquired Assets) on November 30, 2012.

Cement, Concrete and Aggregates

Operating earnings from Cement for the third quarter were $26.0 million, a 57% increase from the same quarter a year ago. The earnings increase resulted from increased sales volumes and average net cement sales prices.

Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $105.6 million, 41% greater than the same quarter last year. The revenue improvement reflects a 36% increase in our third quarter Cement sales volume, including sales volumes attributable to the Acquired Assets. Our average net cement sales price this quarter was $87.01 per ton, 5% higher than the same quarter last year.

Concrete and Aggregates reported a $3.7 million operating loss for the third quarter. The quarterly loss was impacted by start-up costs associated with our new frac sand business of approximately $2.1 million and the settlement of a litigation matter in California for $0.5 million.

Gypsum Wallboard and Paperboard

Gypsum Wallboard and Paperboard’s third quarter operating earnings of $37.4 million were up 51% compared to the same quarter last year. Improved Gypsum Wallboard net sales prices and sales volumes were the primary drivers of the quarterly earnings increase.

Gypsum Wallboard and Paperboard revenues for the third quarter totaled $123.9 million, a 24% increase from the same quarter a year ago. The revenue increase reflects primarily higher wallboard average net sales prices and improved gypsum wallboard and paperboard sales volumes.

The average gypsum wallboard net sales price for the third quarter was $143.40 per MSF, 19% greater than the same quarter a year ago. Gypsum Wallboard sales volume for the quarter of 584 million square feet (MMSF) represents a 13% increase from the same quarter last year. The average Paperboard net sales price for this quarter was $504.08 per ton, 5% greater than the same quarter a year ago. Paperboard sales volumes for the quarter were 66,000 tons, 2% higher than the same quarter a year ago.

Details of Financial Results

For information regarding the results of operations for the Acquired Assets for certain periods prior to November 30, 2012, including pro forma financial information that combines the results of operations for Eagle and the Acquired Assets, please see our Form 8-K/A filed on April 26, 2013.

The prior year’s third quarter results include Acquisition and Litigation Expenses related primarily to the acquisition of the Acquired Assets and litigation costs related to our lawsuit against the IRS. The total impact from these non-routine items was $2.8 million (pre-tax), or $0.06 per diluted share (after-tax).

Texas Lehigh Cement Company LP, one of our cement plant operations, is conducted through a 50/50 joint venture (the “Joint Venture”). We utilize the equity method of accounting for our 50% interest in the Joint Venture. For segment reporting purposes we proportionately consolidate our 50% share of the Joint Venture’s revenues and operating earnings, which is consistent with the way management organizes the segments in the Company for making operating decisions and assessing performance.

In addition, for segment reporting purposes, we report intersegment revenues as a part of a segment’s total revenues. Intersegment sales are eliminated on the income statement. Refer to Attachment 3 for a reconciliation of the amounts referred to above.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Cement, Gypsum Wallboard, Recycled Paperboard, Concrete and Aggregates from 25 facilities across the US. The company is headquartered in Dallas, Texas.

Eagle’s senior management will conduct a conference call to discuss the financial results, forward looking information and other matters at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Wednesday, February 5, 2014. The conference call will be webcast simultaneously on the Eagle Web site http://www.eaglematerials.com. A replay of the webcast and the presentation will be archived on that site for one year.

Forward-Looking Statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not historical facts or guarantees of future performance but instead represent only the Company's belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors many of which are outside the Company's control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company’s actual performance include the following: the cyclical and seasonal nature of the Company’s business; public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; availability of raw materials; changes in energy costs including, without limitation, natural gas, coal and oil; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change regulation);possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions specific to any one or more of the Company’s markets; competition; announced increases in capacity in the gypsum wallboard and cement industries; changes in the demand for residential housing construction or commercial construction; general economic conditions; and interest rates. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) could affect the revenues and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company's result of operations. With respect to our acquisition of the Acquired Assets as described in this press release, factors, risks and uncertainties that may cause actual events and developments to vary materially from those anticipated in forward-looking statements include, but are not limited to, the risk that we may not be able to integrate the Acquired Assets in an efficient and cost-effective manner with our other assets and operations, the possible inability to realize synergies or other expected benefits of the transaction, the possibility that we may incur significant costs relating to transition or integration activities or repair and maintenance of the Acquired Assets, the discovery of undisclosed liabilities associated with the business, the need to repay the indebtedness incurred to fund the acquisition and the fact that increased debt may limit our ability to respond to any changes in general economic and business conditions that occur after the acquisition. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013 and in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013. These reports are filed with the Securities and Exchange Commission. All forward-looking statements made herein are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. The Company undertakes no duty to update any forward-looking statement to reflect future events or changes in the Company's expectations.

 
(1)         Statement of Consolidated Earnings
(2) Revenues and Earnings by Lines of Business (Quarter and Nine Months)
(3) Sales Volume, Net Sales Prices and Intersegment and Cement Revenues
(4) Consolidated Balance Sheets
 
 

Eagle Materials Inc.
Attachment 1

 

Eagle Materials Inc.
Statement of Consolidated Earnings
(dollars in thousands, except per share data)
(unaudited)

 
     

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
 
Revenues $ 228,812 $ 164,743 $ 708,502 $ 483,444
 
Cost of Goods Sold   178,964     133,482     552,571     396,797  
 
Gross Profit 49,848 31,261 155,931 86,647
 
Equity in Earnings of Unconsolidated JV 9,856 8,852 27,481 24,070
Other Operating (Expense) Income 400 (223 ) 1,300 (427 )
Acquisition and Litigation Expense - (2,485 ) - (8,859 )
Corporate General and Administrative Expense   (6,796 )   (6,268 )   (18,450 )   (16,942 )
 
Earnings before Interest and Income Taxes 53,308 31,137 166,262 84,489
 
Interest Expense, Net   (4,475 )   (3,836 )   (14,225 )   (11,149 )
 
Earnings before Income Taxes 48,833 27,301 152,037 73,340
 
Income Tax Expense   (17,212 )   (9,321 )   (50,412 )   (23,429 )
 
Net Earnings $ 31,621   $ 17,980   $ 101,625   $ 49,911  
 
EARNINGS PER SHARE
Basic $ 0.64   $ 0.37   $ 2.07   $ 1.09  
Diluted $ 0.63   $ 0.37   $ 2.03   $ 1.07  
 
AVERAGE SHARES OUTSTANDING
Basic   49,294,010     48,331,185     49,091,476     45,920,452  
Diluted   50,162,962     49,249,547     49,948,178     46,574,724  
 
 

Eagle Materials Inc.
Attachment 2

 

Eagle Materials Inc.
Revenues and Segment Operating Earnings by Lines of Business
(dollars in thousands)
(unaudited)

 
     

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
Revenues*
 
Gypsum Wallboard and Paperboard:
Gypsum Wallboard $ 104,158 $ 80,737 $ 299,099 $ 228,284
Gypsum Paperboard   19,703     19,551     59,646     58,173  
123,861 100,288 358,745 286,457
 
Cement (Wholly Owned) 76,832 50,400 267,007 156,255
 
Concrete and Aggregates   28,119     14,055     82,750     40,732  
 
Total $ 228,812   $ 164,743   $ 708,502   $ 483,444  

 

Segment Operating Earnings
 
Gypsum Wallboard and Paperboard:
Gypsum Wallboard $ 30,730 $ 16,870 $ 90,234 $ 47,356
Gypsum Paperboard   6,661     7,963     19,277     20,934  
37,391 24,833 109,511 68,290
 
Cement:
Wholly Owned 16,155 7,763 49,970 19,853
Joint Venture   9,856     8,852     27,481     24,070  
26,011 16,615 77,451 43,923
 
Concrete and Aggregates (3,698 ) (1,335 ) (3,550 ) (1,496 )
 
Other Operating (Expense) Income   400     (223 )   1,300     (427 )
 
Sub-total 60,104 39,890 184,712 110,290
Acquisition and Litigation Expense - (2,485 ) - (8,859 )
Corporate General and Administrative Expense   (6,796 )   (6,268 )   (18,450 )   (16,942 )
 
Earnings Before Interest and Income Taxes $ 53,308   $ 31,137   $ 166,262   $ 84,489  

 

 
* Net of Intersegment and Joint Venture Revenues listed on Attachment 3
 
 

Eagle Materials Inc.
Attachment 3

 

Eagle Materials Inc.
Sales Volume, Net Sales Prices and Intersegment and Joint Venture Revenues
(unaudited)

 
      Sales Volume

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012     Change 2013     2012     Change
 
Gypsum Wallboard (MMSF’s) 584 519 +13% 1,670 1,476 +13%
 
Cement (M Tons):
Wholly Owned 876 592 +48% 3,037 1,852 +64%
Joint Venture 239 226 +6% 753 678 +11%
1,115 818 +36% 3,790 2,530 +50%
Paperboard (M Tons):
Internal 27 23 +17% 79 66 +20%
External 39 42 -7% 118 121 -2%
66 65 +2% 197 187 +5%
 
Concrete (M Cubic Yards) 231 143 +62% 723 421 +72%
 
Aggregates (M Tons) 748 639 +17% 2,663 2,101 +27%
 
 
      Average Net Sales Price*

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012     Change 2013     2012     Change
 
Gypsum Wallboard (MSF) $ 143.40 $ 120.55 +19 % $ 144.54 $ 119.60 +21 %
Cement (Ton) $ 87.01 $ 82.68 +5 % $ 86.10 $ 82.17 +5 %
Paperboard (Ton) $ 504.08 $ 480.51 +5 % $ 504.64 $ 498.16 +1 %
Concrete (Cubic Yard) $ 84.88 $ 71.55 +19 % $ 82.02 $ 67.94 +21 %
Aggregates (Ton) $ 11.44 $ 6.13 +87 % $ 8.86 $ 6.04 +47 %
 

*Net of freight and delivery costs billed to customers.

 
 
      Intersegment and Cement Revenues

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
Intersegment Revenues:
Cement $ 2,556 $ 535 $ 7,503 $ 1,614
Paperboard 13,993 11,780 40,855 35,217
Concrete and Aggregates   217   146   889   603
$ 16,766 $ 12,461 $ 49,247 $ 37,434
 
Cement Revenues:
Wholly Owned $ 76,832 $ 50,400 $ 267,007 $ 156,255
Joint Venture   26,190   24,000   81,972   71,623
$ 103,022 $ 74,400 $ 348,979 $ 227,878
 
 

Eagle Materials Inc.
Attachment 4

 

Eagle Materials Inc.
Consolidated Balance Sheets
(dollars in thousands)
(unaudited)

 
      December 31,     March 31,
2013     2012 2013*

ASSETS

Current Assets –
Cash and Cash Equivalents $ 7,424 $ 9,247 $ 3,897
Accounts and Notes Receivable, net 96,357 86,588 87,543
Inventories 173,871 134,473 156,380
Federal Income Tax Receivable -

-

2,443

Prepaid and Other Assets   5,074   13,015   11,008
Total Current Assets   282,726   243,323   261,271
Property, Plant and Equipment – 1,647,138 1,581,468 1,599,992
Less: Accumulated Depreciation   (662,734)   (598,396)   (614,268)
Property, Plant and Equipment, net 984,404 983,072 985,724
Investments in Joint Venture 41,178 41,760 42,946
Notes Receivable 3,208 3,273 3,893
Goodwill and Intangibles 161,117 163,802 162,400
Other Assets   14,631   21,590   19,999
$ 1,487,264 $ 1,456,820 $ 1,476,233
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities –
Accounts Payable $ 47,586 $ 47,460 $ 58,880
Accrued Liabilities

39,622

57,460

41,349
Federal Income Tax Payable

6,835

5,532

-

Current Portion of Long-term Debt  

9,500

-

-

Total Current Liabilities

  103,543   110,452   100,229
Long-term Liabilities

52,317

41,104

51,547

Bank Credit Facility

200,000

291,000

297,000

Senior Notes

182,759

192,259

192,259

Deferred Income Taxes

143,217

134,458

139,028

Stockholders’ Equity –
Preferred Stock, Par Value $0.01; Authorized 5,000,000
Shares; None Issued -

-

-

Common Stock, Par Value $0.01; Authorized 100,000,000

Shares; Issued and Outstanding 49,964,881; 49,351,952 and

49,503,496 Shares, respectively. 500 494 495
 
Capital in Excess of Par Value 246,161 216,440 224,053
Accumulated Other Comprehensive Losses (6,577) (5,168) (7,042)
Retained Earnings   565,344   475,781   478,664
Total Stockholders’ Equity   805,428   687,547   696,170
$ 1,487,264 $ 1,456,820 $ 1,476,233
 

*From audited financial statements.

 


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