Eagle Materials Reports Record Third Quarter EPS up 78% on Record Revenues

DALLAS--()--Eagle Materials Inc. (NYSE: EXP) today reported financial results for the third quarter of fiscal 2018 ended December 31, 2017. Notable items for the quarter include (all comparisons, unless otherwise noted, are with the prior year’s third quarter):

Company Third Quarter Results

  • Record Revenues of $359.4 million, up 19%
  • Record Net Earnings per diluted share of $2.08, up 78%
    • Eagle’s third quarter financial results include a tax benefit of approximately $61 million, or $1.25 per share, primarily due to the remeasurement of our deferred tax liabilities to lower statutory rates as a result of the Tax Cuts and Jobs Act enacted on December 22, 2017
    • Eagle’s third quarter financial results also include a $39 million pre-tax charge related to the settlement of its class action wallboard antitrust litigation

Third quarter gross profit improved 8%, reflecting the financial results of the recently acquired cement plant in Fairborn, Ohio and related assets (the Fairborn Business) and improved net sales prices across most businesses.

Cement, Concrete and Aggregates

Cement revenues for the third quarter, including joint venture and intersegment revenues, totaled $161.6 million, which was 17% higher than the same quarter last year. The average net sales price for this quarter was $106.83 per ton, 6% higher than the same quarter last year. Total Cement sales volumes for the quarter were 1.3 million tons, 12% greater than the same quarter a year ago. Like-for-like average net cement sales prices increased 4% and sales volumes declined 2%, respectively, versus the third quarter of fiscal 2017 (comparison excludes cement sales from the Fairborn Business since its acquisition date).

Operating earnings from Cement for the third quarter were a record $52.5 million and 16% greater than the same quarter a year ago. The earnings improvement was driven primarily by earnings from the Fairborn Business and improved average net cement sales prices offset by lower sales volumes from our legacy facilities.

Concrete and Aggregates reported revenues for the third quarter of $38.5 million, a decline of 5%. Third quarter operating earnings were $3.4 million, 26% below the same quarter a year ago, reflecting lower concrete and aggregates sales volumes partially offset by record third quarter concrete and aggregates sales prices. Sales volumes in our Austin concrete and aggregates business were impacted by wet weather in the latter portion of the quarter.

Gypsum Wallboard and Paperboard

Gypsum Wallboard and Paperboard revenues for the third quarter totaled $162.6 million, which were 11% greater than the same quarter a year ago. The average Gypsum Wallboard net sales price this quarter was $151.13 per MSF, 1% less than the same quarter a year ago. Gypsum Wallboard sales volumes were a third quarter record 709 million square feet (MMSF), a 10% increase from the same quarter last year. Paperboard sales volumes for the quarter were also a record and 7% greater than the same quarter a year ago. The average Paperboard net sales price this quarter was $581.95 per ton, 11% greater than the same quarter a year ago.

Gypsum Wallboard and Paperboard reported third quarter operating earnings of $50.7 million, up 1% from the same quarter last year. The earnings improvement primarily reflects improved Gypsum Wallboard and Paperboard sales volumes and higher average Paperboard net sales prices.

During the third quarter, Eagle and its subsidiary, American Gypsum, entered into settlement agreements with counsel representing the direct and indirect purchaser classes to settle all claims made against the Company and American Gypsum. Pursuant to the settlement agreements, which remain subject to court approval, the Company and American agreed to make payments totaling approximately $39 million. Eagle and American Gypsum continue to deny all wrongdoing but settled to avoid further litigation expense, distraction of management, and the risk of litigation. We expect to make this cash payment in the next twelve months.

Oil and Gas Proppants

Oil and Gas Proppants reported third quarter revenues of $21.9 million, a 208% increase from the prior year reflecting improved frac sand sales volumes and net sales prices. The third quarter’s operating loss of $1.0 million includes depreciation, depletion and amortization of $5.8 million.

Details of Financial Results

We conduct one of our cement plant operations, Texas Lehigh Cement Company LP, 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 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 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, and Oil and Gas Proppants from over 75 facilities across the US. Eagle 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 8:30 a.m. Eastern Time (7:30 a.m. Central Time) on January 31, 2018. 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. For more information, contact Eagle at (214) 432-2000.

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, 2017 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2017. 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.

David B. Powers
President and Chief Executive Officer

D. Craig Kesler
Executive Vice President and Chief Financial Officer

Robert S. Stewart
Executive Vice President, Strategy, Corporate Development and Communications

Attachment 1 Statement of Consolidated Earnings
Attachment 2 Revenues and Earnings by Lines of Business (Quarter and Nine Months)
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
December 31,

   

Nine Months Ended
December 31,

2017     2016 2017     2016
 
Revenues $ 359,371 $ 302,395 $ 1,101,807 $ 932,557
 
Cost of Goods Sold   264,805     215,015     824,428     682,012  
 
Gross Profit 94,566 87,380 277,379 250,545
 
Equity in Earnings of Unconsolidated JV 11,372 11,244 33,203 31,371
Other Non-Operating Income 1,084 429 2,728 2,008
Litigation Settlements (39,098 ) - (39,098 ) -
Corporate General and Administrative Expenses   (9,883 )   (9,166 )   (29,383 )   (27,831 )
 
Earnings before Interest and Income Taxes 58,041 89,887 244,829 256,093
 

Interest Expense, net

  (6,653 )   (6,198 )   (21,592 )   (15,755 )
 
Earnings before Income Taxes 51,388 83,689 223,237 240,338
 

Income Tax Benefit (Expense)

  49,992     (27,302 )   (3,613 )   (78,370 )
 
Net Earnings $ 101,380   $ 56,387   $ 219,624   $ 161,968  

 

EARNINGS PER SHARE
Basic $ 2.10   $ 1.18   $ 4.56   $ 3.38  
Diluted $ 2.08   $ 1.17   $ 4.52   $ 3.35  
 
AVERAGE SHARES OUTSTANDING
Basic   48,221,093     47,881,662     48,132,276     47,901,369  
Diluted   48,757,762     48,297,748     48,641,430     48,340,326  
 
 

Eagle Materials Inc.

Attachment 2
 
Eagle Materials Inc.
Revenues and Earnings by Lines of Business
(dollars in thousands)
(unaudited)
 
     

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2017     2016 2017     2016
Revenues*
 
Gypsum Wallboard and Paperboard:
Gypsum Wallboard $ 133,348 $ 121,504 $ 383,229 $ 357,689
Gypsum Paperboard   29,262     25,367     83,518     82,683  
162,610 146,871 466,747 440,372
 
Cement (Wholly Owned) 131,915 107,802 442,747 359,471
 
Oil and Gas Proppants 21,947 7,124 62,879 18,851
 
Concrete and Aggregates 38,454 40,598 124,989 113,863
 
Other   4,445     -     4,445     -  
 
Total $ 359,371   $ 302,395   $ 1,101,807   $ 932,557  

 

Segment Operating Earnings
 
Gypsum Wallboard and Paperboard:
Gypsum Wallboard $ 39,841 $ 41,075 $ 123,237 $ 122,109
Gypsum Paperboard   10,903     9,380     22,358     30,827  
50,744 50,455 145,595 152,936
 
Cement:
Wholly Owned 41,151 34,063 121,253 96,252
Joint Venture   11,372     11,244     33,203     31,371  
52,523 45,307 154,456 127,623
 
Oil and Gas Proppants (1,007 ) (1,726 ) (4,787 ) (11,728 )
 
Concrete and Aggregates 3,414 4,588 15,054 13,085
 
Other   264     -     264     -  
 
Sub-total 105,938 98,624 310,582 281,916
Litigation Settlements (39,098 ) - (39,098 ) -
Other Non-Operating Income 1,084 429 2,728 2,008
Corporate General and Administrative Expenses   (9,883 )   (9,166 )   (29,383 )   (27,831 )
 
Earnings Before Interest and Income Taxes $ 58,041   $ 89,887   $ 244,829   $ 256,093  

 

* 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
December 31,

   

Nine Months Ended
December 31,

2017     2016     Change 2017     2016     Change
 
Gypsum Wallboard (MMSF’s) 709 646 +10 % 2,014 1,883 +7 %
 
Cement (M Tons):
Wholly Owned 1,123 967 +16 % 3,734 3,200 +17 %
Joint Venture 216 231 -6 % 686 691 -1 %
1,339 1,198 +12 % 4,420 3,891 +14 %
Paperboard (M Tons):
Internal 33 30 +10 % 96 88 +9 %
External 48 46 +4 % 143 157 -9 %
81 76 +7 % 239 245 -2 %
 
Concrete (M Cubic Yards) 303 348 -13 % 993 950 +5 %
 
Aggregates (M Tons) 820 906 -9 % 2,764 2,877 -4 %
 
Frac Sand (M Tons) 379 115 +230 % 1,083 299 +262 %
 
     
Average Net Sales Price*

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2017     2016     Change 2017     2016     Change
 
Gypsum Wallboard (MSF) $ 151.13 $ 153.34 -1 % $ 154.52 $ 155.06 0 %
Cement (Ton) $ 106.83 $ 100.88 +6 % $ 106.91 $ 100.45 +6 %
Paperboard (Ton) $ 581.95 $ 524.75 +11 % $ 564.46 $ 508.00 +11 %
Concrete (Cubic Yard) $ 100.71 $ 94.38 +7 % $ 100.06 $ 94.08 +6 %
Aggregates (Ton) $ 9.68 $ 8.52 +14 % $ 9.37 $ 8.49 +10 %
 

*Net of freight and delivery costs billed to customers.

 
     
Intersegment and Cement Revenues

Quarter Ended
December 31,

   

Nine Months Ended
December 31,

2017     2016 2017     2016
Intersegment Revenues:
Cement $ 4,160 $ 4,336 $ 13,743 $ 12,407
Paperboard 19,127 15,887 54,643 45,845
Concrete and Aggregates   288   245   1,103   871
$ 23,575 $ 20,468 $ 69,489 $ 59,123
 
Cement Revenues:
Wholly Owned $ 131,915 $ 107,802 $ 442,747 $ 359,471
Joint Venture   25,526   25,909   79,696   77,772
$ 157,441 $ 133,711 $ 522,443 $ 437,243
 
 

Eagle Materials Inc.

Attachment 4

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

ASSETS

Current Assets –
Cash and Cash Equivalents $ 21,676 $ 164,665 $ 6,561
Accounts and Notes Receivable, net 143,662 115,278 136,313
Inventories 239,628 222,783 252,846
Federal Income Tax Receivable - - -
Prepaid and Other Assets   20,378     5,959     4,904  
Total Current Assets   425,344     508,685     400,624  
Property, Plant and Equipment – 2,547,430 2,098,695 2,439,438
Less: Accumulated Depreciation   (972,706 )   (870,859 )   (892,601 )
Property, Plant and Equipment, net 1,574,724 1,227,836 1,546,837
Investments in Joint Venture 55,337 47,600 48,620
Notes Receivable 296 1,002 815
Goodwill and Intangibles 240,145 161,765 235,505
Other Assets   12,197     27,101     14,723  
$ 2,308,043   $ 1,973,989   $ 2,247,124  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities –
Accounts Payable $ 73,203 $ 63,847 $ 92,193
Accrued Liabilities 101,432 57,649 55,379
Federal Income Tax Payable - 5,215 733
Current Portion of Senior Notes   -     81,214     81,214  
Total Current Liabilities   174,635     207,925     229,519  
Long-term Liabilities 35,112 57,514 42,878
Bank Credit Facility 185,000 - 225,000
Private Placement Senior Unsecured Notes 36,500 36,500 36,500
4.500% Senior Unsecured Notes due 2026 344,255 343,634 343,753
Deferred Income Taxes 116,352 164,841 166,024
Stockholders’ Equity –
Preferred Stock, Par Value $0.01; None Issued - - -

Common Stock, Par Value $0.01; Authorized 100,000,000
Shares; Issued and Outstanding 48,664,650; 48,409,454 and
48,453,268 Shares, respectively

487 484 485
Capital in Excess of Par Value 156,834 143,623 149,014
Accumulated Other Comprehensive Losses (6,805 ) (10,473 ) (7,396 )
Retained Earnings   1,265,673     1,029,941     1,061,347  
Total Stockholders’ Equity   1,416,189     1,163,575     1,203,450  
$ 2,308,043   $ 1,973,989   $ 2,247,124  
 

*From audited financial statements.

 
 

Eagle Materials Inc.

Attachment 5
 
Eagle Materials Inc.
Depreciation, Depletion and Amortization by Lines of Business
(dollars in thousands)
(unaudited)
 
The following presents depreciation, depletion and amortization by segment for the quarters ended December 31, 2017 and 2016:
 
     

Depreciation, Depletion and
Amortization

($ in thousands)

Quarter Ended
December 31,

2017     2016
 
Cement $ 13,117 $ 8,763
Gypsum Wallboard 4,599 4,636
Paperboard 2,204 2,105
Oil and Gas Proppants 5,820 4,987
Concrete and Aggregates 2,007 1,805
Corporate and Other   903   349
$ 28,650 $ 22,645
 

Contacts

Eagle Materials Inc.
David B. Powers, 214-432-2000
President & CEO
or
D. Craig Kesler, 214-432-2000
Executive Vice President & CFO
or
Robert S. Stewart, 214-432-2000
Executive Vice President

Contacts

Eagle Materials Inc.
David B. Powers, 214-432-2000
President & CEO
or
D. Craig Kesler, 214-432-2000
Executive Vice President & CFO
or
Robert S. Stewart, 214-432-2000
Executive Vice President