Eagle Materials Reports Record Third Quarter EPS up 78% on Record Revenues
DALLAS–(BUSINESS WIRE)–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
-
Eagle’s third quarter financial results include a tax benefit of
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 |
Nine Months Ended |
|||||||
| 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 |
Nine Months Ended |
|||||||
| 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 |
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|
Eagle Materials Inc. |
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| Attachment 3 | ||||||||
| Eagle Materials Inc. | ||||||||
|
Sales Volume, Net Sales Prices and Intersegment and Cement Revenues |
||||||||
| (unaudited) | ||||||||
| Sales Volume | ||||||||
|
Quarter Ended |
Nine Months Ended |
|||||||
| 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 |
Nine Months Ended |
|||||||||||
| 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 |
Nine Months Ended |
|||||||
| 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. |
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|
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 |
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. |
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|
Eagle Materials Inc. |
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| 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 ($ in thousands) |
||||
|
Quarter Ended |
||||
| 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
