Eagle Materials Inc. Reports Record Annual EPS up 34% on Record Revenues

DALLAS--()--Eagle Materials Inc. (NYSE: EXP) today reported financial results for fiscal year 2017 and the fiscal fourth quarter ended March 31, 2017. Notable items for the fiscal year and quarter include (all comparisons, unless otherwise noted, are with the prior fiscal year or prior year’s fiscal fourth quarter):

Company Annual Results

  • Record revenues of $1.2 billion, up 6%
  • Cash flow from operations of $331.6 million, up 25%
  • Record net earnings per diluted share of $4.10, up 34%

Company Fourth Quarter Results

  • Record revenues of $278.7 million, up 11%
  • Net earnings per diluted share of $0.75, down 6%
  • Eagle’s fourth quarter financial results include approximately $9.4 million (pre-tax), or $0.13 per share, of costs associated with completing the acquisition of the Fairborn Business. (Described further below.)

On February 10, 2017, Eagle completed its previously announced acquisition of Cemex S.A.B. de C.V.’s Fairborn, Ohio cement plant and related assets (the “Fairborn Business”). Eagle used cash on-hand, along with borrowings under its bank credit facility, to fund the purchase. The results of operations of the Fairborn Business are included in the results disclosed in this press release for the period from February 10 through March 31, 2017. For information regarding the results of operations of the Fairborn Business for certain periods prior to February 10, 2017, including pro forma financial information that combines the results of operations of the Company and the Fairborn Business, please see our Form 8-K/A filed with the SEC on March 27, 2017.

Our fourth quarter results were impacted by non-routine acquisition related expenses of approximately $4.4 million (pre-tax), or $0.06 per diluted share, directly associated with completing the acquisition of the Fairborn Business. Additionally, our fourth quarter cement earnings were impacted by expenses of approximately $5.0 million (pre-tax), or $0.07 per share, associated with annual maintenance costs at the Fairborn Business and the impact of purchase accounting on inventory costs.

Fiscal 2017 cash flow from operations improved 25% and was used to partially fund the acquisition of the Fairborn Business, invest in capital improvements, pay dividends and repurchase shares. Eagle ended the year with a net debt-to-capitalization ratio of 36%.

Cement, Concrete and Aggregates

Fiscal 2017 operating earnings from Cement were a record $153.5 million, an increase of 11% compared to fiscal 2016. Revenues from Cement, including joint venture and intersegment sales, were $566.3 million for fiscal 2017, 7% higher than last year.

Fourth quarter operating earnings from Cement were a record $25.9 million, a 19% increase from the same quarter a year ago. Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $116.7 million, 17% greater than the same quarter last year. Cement sales volumes for the quarter were 980,000 tons, 11% higher than the same quarter a year ago. The average net sales price for this quarter was $106.17 per ton, a 6% improvement from the same quarter last year. Like-for-like cement sales volumes and net sales prices both increased 5% versus the fourth quarter of fiscal 2016 (comparison excludes cement sales from the Fairborn Business since its acquisition date).

Concrete and Aggregates reported fiscal 2017 operating earnings of $18.1 million, up 84% compared to the prior year. Revenues from Concrete and Aggregates were $153.3 million for fiscal 2017, 21% higher than last year.

Concrete and Aggregates reported revenues for the fourth quarter of $39.5 million, an increase of 28%. Fourth quarter operating earnings were $5.0 million, a 99% improvement from the same quarter a year ago, reflecting record quarterly concrete sales volumes and record concrete and aggregates sales prices.

Gypsum Wallboard and Paperboard

Fiscal 2017 operating earnings from Gypsum Wallboard and Paperboard were $197.5 million, an increase of 3%. Revenues from Gypsum Wallboard and Paperboard were $578.6 million for fiscal 2017, 5% higher than last year’s revenues.

Gypsum Wallboard and Paperboard revenues for the fourth quarter totaled $138.3 million, a 2% decrease. The decline reflects lower wallboard and paperboard sales volumes partially offset by improved prices. The average Gypsum Wallboard net sales price for this quarter was $158.54 per MSF, 4% higher than the same quarter a year ago reflecting American Gypsum’s price increases implemented mid-quarter. Gypsum Wallboard sales volumes of 600 million square feet (MMSF) were down approximately 5%. The average Paperboard net sales price this quarter was $524.90 per ton, up 5%. Paperboard sales volumes for the quarter were 72,000 tons, 1% lower than the same quarter a year ago.

Underlying demand fundamentals in wallboard continue to be strong. This quarter’s comparative of wallboard sales volumes was affected by a shift in the timing of pre-buying activity ahead of our mid-quarter price increase this winter compared with a late quarter effective date in 2016. When we adjust for the timing shift, we estimate that wallboard demand improved 6% to 8% in our core markets.

Gypsum Wallboard and Paperboard reported fourth quarter operating earnings of $44.5 million, down 13%. The decline in operating earnings was due to lower wallboard sales volumes and increased operating costs, which were partially offset by higher wallboard and paperboard net sales prices. The increased operating costs reflect an increase in recycled paper fibers costs during the quarter.

Oil and Gas Proppants

Eagle’s Oil and Gas Proppants business reported fiscal 2017 revenues of $34.6 million, a decline of 40%, primarily reflecting lower average net sales prices and a 15% decline in frac sand sales volumes from the prior year. The fiscal 2017 operating loss was $14.6 million versus an operating loss of $68.5 million in the prior year.

Eagle’s Oil and Gas Proppants business reported fourth quarter revenues of $15.8 million, an increase of 98%, primarily reflecting a 144% increase in frac sand sales volumes. The fourth quarter’s operating loss of $2.9 million includes depreciation, depletion and amortization of $3.8 million.

Details of Financial Results

We conduct one of our cement plant operations through a 50/50 joint venture, Texas Lehigh Cement Company LP (the “Joint Venture”). We utilize the equity method of accounting for our 50% interest in the Joint Venture. For segment reporting purposes only, 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 within Eagle 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 these amounts.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Cement, Aggregates, Concrete, Gypsum Wallboard, Recycled Paperboard and Frac Sand from over 40 facilities across the U.S. Eagle is headquartered in Dallas, Texas.

EXP’s senior management will conduct a conference call to discuss the financial results, forward-looking information and other matters at 8:30 a.m. Eastern Time (7:30 a.m. Central Time) on Thursday, May 18, 2017. The conference call will be webcast simultaneously on the EXP 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; material nonpayment or non-performance by any of our key customers; fluctuations in activity in the oil and gas industry, including the level of fracturing activities and the demand for frac sand; 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; a cyber-attack or data security breach; announced increases in capacity in the gypsum wallboard, cement and frac sand industries; changes in the demand for residential housing construction or commercial construction; risks related to pursuit of acquisitions, joint ventures and other transactions; 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. These and other factors are described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2016 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2016. These reports are filed with the Securities and Exchange Commission. With respect to our completed acquisition of the Fairborn Business as described in this press release, factors, risks and uncertainties that may cause actual events and developments to vary materially from those anticipated in such forward-looking statements include, but are not limited to, failure to realize any expected synergies from or other benefits of the transaction, possible negative effects of consummation of the transaction, significant transaction or ownership transition costs, unknown liabilities or other adverse developments affecting the Fairborn Business, including the results of operations of the Fairborn Business prior and after the closing, the effect on the Fairborn Business of the same or similar factors discussed above to which our business is subject, including changes in market conditions in the construction industry and general economic and business conditions that may affect us following the acquisition. 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.

Attachment 1   Statement of Consolidated Earnings
Attachment 2 Revenues and Earnings by Lines of Business (Quarter and Fiscal Year)
Attachment 3 Sales Volume, Net Sales Prices and Intersegment and Cement Revenues
Attachment 4 Consolidated Balance Sheets
Attachment 5 Depreciation, Depletion and Amortization by Lines of Business
   

Eagle Materials Inc.

Attachment 1

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

March 31,

Fiscal Year Ended

March 31,

  2017       2016     2017       2016  
 
Revenues $ 278,663 $ 252,132 $ 1,211,220 $ 1,143,492
 
Cost of Goods Sold   217,163     194,771     899,175     911,875  
 
Gross Profit 61,500 57,361 312,045 231,617
 
Equity in Earnings of Unconsolidated JV 11,015 9,090 42,386 39,083
Corporate General and Administrative Expense (7,198 ) (10,534 ) (33,940 ) (37,193 )
Acquisition and Litigation Expense (4,391 ) - (5,480 ) -
Other Operating Income   131     158     2,139     2,328  
 
Earnings before Interest and Income Taxes 61,057 56,075 317,150 235,835
 
Interest Expense, Net   (6,876 )   (3,753 )   (22,631 )   (16,583 )
 
Earnings before Income Taxes 54,181 52,322 294,519 219,252
 
Income Tax Expense   (17,930 )   (13,159 )   (96,300 )   (66,660 )
 
Net Earnings $ 36,251   $ 39,163   $ 198,219   $ 152,592  

 

NET EARNINGS PER SHARE
Basic $ 0.75   $ 0.81   $ 4.14   $ 3.08  
Diluted $ 0.75   $ 0.80   $ 4.10   $ 3.05  
 
AVERAGE SHARES OUTSTANDING
Basic   48,023,641     48,556,830     47,931,518     49,471,157  
Diluted   48,472,916     49,050,937     48,361,286     50,070,829  
   

Eagle Materials Inc.

Attachment 2

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

March 31,

Fiscal Year Ended

March 31,

  2017       2016     2017       2016  
Revenues*
 
Gypsum Wallboard and Paperboard:
Gypsum Wallboard $ 115,962 $ 117,797 $ 473,651 $ 461,457
Gypsum Paperboard   22,309     23,122     104,992     90,191  
138,271 140,919 578,643 551,648
 
Cement (Wholly Owned) 85,153 72,344 444,624 407,102
 
Oil and Gas Proppants 15,772 7,983 34,623 57,591
 
Concrete and Aggregates   39,467     30,886     153,330     127,151  
 
Total Revenues $ 278,663   $ 252,132   $ 1,211,220   $ 1,143,492  

 

Segment Operating Earnings
 
Gypsum Wallboard and Paperboard:
Gypsum Wallboard $ 37,757 $ 41,167 $ 159,866 $ 159,352
Gypsum Paperboard   6,774     10,062     37,601     32,153  
44,531 51,229 197,467 191,505
 
Cement:
Wholly Owned 14,887 12,706 111,139 98,771
Joint Venture   11,015     9,090     42,386     39,083  
25,902 21,796 153,525 137,854
 
Oil and Gas Proppants (2,905 ) (9,077 ) (14,633 ) (68,466 )
 
Concrete and Aggregates 4,987 2,503 18,072 9,807
 
Other, net   131     158     2,139     2,328  
 
Sub-total 72,646 66,609 356,570 273,028
 
Corporate General and Administrative Expense (7,198 ) (10,534 ) (33,940 ) (37,193 )
Acquisition and Litigation Expense   (4,391 )   -     (5,480 )   -  
 
Earnings before Interest and Income Taxes $ 61,057   $ 56,075   $ 317,150   $ 235,835  

 

* 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 Cement Revenues
(unaudited)
 
Sales Volume
Quarter Ended

March 31,

  Fiscal Year Ended

March 31,

2017   2016   Change 2017   2016   Change
 
Gypsum Wallboard (MMSF’s) 600 630 -5 % 2,483 2,394 +4 %
 
Cement (M Tons):
Wholly Owned 734 665 +10 % 3,934 3,903 +1 %
Joint Venture 246 214 +15 % 937 875 +7 %
980 879 +11 % 4,871 4,778 +2 %
Paperboard (M Tons):
Internal 30 28 +7 % 118 113 +4 %
External 42 45 -7 % 199 175 +14 %
72 73 -1 % 317 288 +10 %
 
Concrete (M Cubic Yards) 310 262 +18 % 1,260 1,101 +14 %
 
Aggregates (M Tons) 772 786 -2 % 3,649 3,009 +21 %
 
Frac Sand (M Tons) 251 103 +144 % 550 644 -15 %
 
Average Net Sales Price*
Quarter Ended

March 31,

  Fiscal Year Ended

March 31,

  2017     2016   Change   2017     2016   Change
 
Gypsum Wallboard (MSF) $ 158.54 $ 152.80 +4 % $ 155.90 $ 157.91 -1 %
Cement (Ton) $ 106.17 $ 100.41 +6 % $ 101.60 $ 98.07 +4 %
Paperboard (Ton) $ 524.90 $ 502.21 +5 % $ 511.82 $ 505.35 +1 %
Concrete (Cubic Yard) $ 105.13 $ 93.22 +13 % $ 96.80 $ 92.70 +4 %
Aggregates (Ton) $ 9.22 $ 8.27 +11 % $ 8.65 $ 8.28 +4 %
 
*Net of freight and delivery costs billed to customers.
 
Intersegment and Cement Revenues
Quarter Ended

March 31,

  Fiscal Year Ended

March 31,

  2017     2016   2017     2016
Intersegment Revenues:
Cement $ 3,374 $ 2,867 $ 15,781 $ 13,939
Paperboard 16,228 14,785 62,073 59,001
Concrete and Aggregates   391   205   1,262   922
$ 19,993 $ 17,857 $ 79,116 $ 73,862
 
Cement Revenues:
Wholly Owned $ 85,153 $ 72,344 $ 444,624 $ 407,102
Joint Venture   28,144   24,903   105,916   107,458
$ 113,297 $ 97,247 $ 550,540 $ 514,560
 

Eagle Materials Inc.

Attachment 4

 
Eagle Materials Inc.
Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
 
March 31,
  2017       2016  

ASSETS

Current Assets –
Cash and Cash Equivalents $ 6,561 $ 5,391
Accounts and Notes Receivable, net 136,313 120,221
Inventories 252,846 243,595
Federal Income Tax Receivable - 5,623
Prepaid and Other Assets   4,904     5,173  
Total Current Assets   400,624     380,003  
Property, Plant and Equipment – 2,439,438 2,072,776
Less: Accumulated Depreciation   (892,601 )   (817,465 )
Property, Plant and Equipment, net 1,546,837 1,255,311
Investments in Joint Venture 48,620 49,465
Notes Receivable 815 2,672
Goodwill and Intangibles 235,505 165,827
Other Assets   14,723     30,357  
$ 2,247,124   $ 1,883,635  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities –
Accounts Payable $ 92,193 $ 66,614
Accrued Liabilities 56,112 45,975
Current Portion of Senior Notes   81,214     8,000  
Total Current Liabilities   229,519     120,589  
Long-term Liabilities 42,878 61,122
Bank Credit Facility 225,000 382,000
Private Placement Senior Unsecured Notes 36,500 117,714
4.500% Senior Unsecured Notes due 2026 343,753 -
Deferred Income Taxes 166,024 161,679
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 48,453,268 and 48,526,843 Shares,

respectively.

485 485
Capital in Excess of Par Value 149,014 168,969
Accumulated Other Comprehensive Losses (7,396 ) (11,409 )
Retained Earnings   1,061,347     882,486  
Total Stockholders’ Equity   1,203,450     1,040,531  
$ 2,247,124   $ 1,883,635  
 

Eagle Materials Inc.

Attachment 5

 
Eagle Materials Inc.
Depreciation, Depletion and Amortization by Lines of Business
(unaudited)
 
 
The following table presents depreciation, depletion and amortization by lines of business for the
quarter and fiscal year ended March 31, 2017 and 2016:
 
Depreciation, Depletion and Amortization

($ in thousands)

Quarter Ended

March 31,

  Fiscal Year Ended

March 31,

  2017     2016   2017     2016
 
Cement $ 10,569 $ 8,515 $ 36,727 $ 33,400
Gypsum Wallboard 4,562 4,938 18,728 19,988
Paperboard 2,114 2,103 8,425 8,312
Oil and Gas Proppants 3,823 5,253 18,255 27,227
Concrete and Aggregates 2,457 1,593 7,931 6,260
Other   372   458   1,725   1,918
$ 23,897 $ 22,860 $ 91,791 $ 97,105

Contacts

Eagle Materials Inc.
David B. Powers, 214-432-2000
President and Chief Executive Officer
or
D. Craig Kesler, 214-432-2000
Executive Vice President and Chief Financial Officer
or
Robert S. Stewart, 214-432-2000
Executive Vice President, Strategy, Corporate Development and Communications

Contacts

Eagle Materials Inc.
David B. Powers, 214-432-2000
President and Chief Executive Officer
or
D. Craig Kesler, 214-432-2000
Executive Vice President and Chief Financial Officer
or
Robert S. Stewart, 214-432-2000
Executive Vice President, Strategy, Corporate Development and Communications