Eagle Materials Inc. (NYSE: EXP) today reported financial
results for the third quarter of fiscal 2020 ended December 31,
2019. Notable items for the quarter are highlighted below (unless
otherwise noted, all comparisons are with the prior year’s fiscal
third quarter):
Third Quarter Fiscal 2020 Results
- Third quarter revenue of $350.2 million, up 5%
- Net loss per diluted share of $2.77, down 323%
- Asset impairments of $224.3 million related to the Oil and Gas
Proppants business were the principal factor contributing to the
net loss for the quarter
- Adjusted earnings per share of $1.51, up 22%
- Adjusted earnings per share is a non-GAAP financial measure
calculated by excluding non-routine items in the manner described
in Attachment 6
- Net loss of $114.6 million, down 299%
- Adjusted EBITDA of $118.7 million, up 6%
- Adjusted EBITDA is a non-GAAP financial measure calculated by
excluding non-routine items in the manner described in Attachment
6
Commenting on the third quarter results, Michael Haack,
President and CEO, said, “We are pleased that during the third
quarter of fiscal 2020 we capitalized on robust underlying demand
across our geographic footprint to achieve a 5% revenue
improvement. Notably, our Cement sales volume was up 7% to a record
1.4 million tons. Market demand for our Wallboard also remained
healthy, with shipments up 2%. Our operational cost-control
initiatives and continued strong operational execution also
contributed to the favorable third-quarter performance.”
Mr. Haack concluded, “The outlook for calendar 2020 is positive.
We expect demand for our building materials and construction
products will continue to be supported by several advantageous
market dynamics, including ongoing growth in jobs, high consumer
confidence and low interest rates.”
As previously announced, on November 25, 2019, Eagle entered
into a definitive agreement with Kosmos Cement Company (a joint
venture between CEMEX S.A.B. de C.V. and Buzzi Unicem S.p.A), to
purchase the Kosmos cement plant in Louisville, Kentucky, as well
as seven distribution terminals and substantial raw-material
reserves. The plant has the capacity to produce nearly 1.7 million
tons of cement annually. Eagle expects that the acquisition will
increase its U.S. annual cement capacity by approximately 25% to
more than 7.5 million tons. The purchase price is $665 million,
subject to customary post-closing adjustments. Eagle expects the
transaction to close in its fiscal 2020 fourth quarter following
the receipt of required regulatory approvals and other typical
closing conditions. Eagle intends to finance the acquisition
through a combination of cash on hand and borrowings under a new
syndicated term loan facility.
Segment Results
Heavy Materials: Cement, Concrete and Aggregates
Revenue in the Heavy Materials sector, which includes Cement,
Concrete and Aggregates, and Joint Venture and intersegment Cement
revenue, was $229.8 million, an 18% increase. Heavy Materials
operating earnings increased 19% to $57.5 million primarily because
of higher sales volume and net sales prices.
Cement revenue, including Joint Venture and intersegment
revenue, was up 12% to $183.0 million, reflecting improved net
sales prices and sales volume. The average net sales price for the
quarter increased 2% to $110.09 per ton. Cement sales volume for
the quarter was a record 1.4 million tons, up 7% versus the prior
year.
Operating earnings from Cement were $54.2 million, 15% above the
same quarter a year ago. The earnings improvement was primarily due
to higher sales volume and net sales prices.
Concrete and Aggregates revenue for the third quarter was $46.8
million, an increase of 53%. Third quarter operating earnings were
$3.3 million, a 222% increase, reflecting record Concrete sales
volume, improved Concrete and Aggregates sales prices and the
financial results of a small concrete and aggregates business that
Eagle acquired in August 2019.
Light Materials: Gypsum Wallboard and Paperboard
Revenue in the Light Materials sector, which includes Gypsum
Wallboard and Paperboard, declined 4% from the prior year, as
improved sales volume was offset by lower pricing. Gypsum Wallboard
sales volume was 669 million square feet (MMSF), up approximately
2%, while the average Gypsum Wallboard net sales price declined 8%
to $146.46 per MSF.
Paperboard sales volume for the quarter was up 8%. The average
Paperboard net sales price this quarter was $460.65 per ton, down
11%, primarily as a result of the pricing provisions in our
long-term sales agreements.
Operating earnings were $47.5 million in the sector, a decline
of 7%, due primarily to lower net sales prices and increased costs
associated with the plant expansion partially offset by improved
sales volume and lower operating costs. Operating costs during the
quarter declined primarily due to lower energy and recycled fiber
costs. In connection with the planned expansion of our papermill,
we had an extended outage during the quarter to install new
operating equipment. This outage reduced production and led to
increased costs of approximately $1.5 million during the
quarter.
Oil and Gas Proppants
Revenue in the Oil and Gas Proppants segment was $7.3 million,
down 48%, primarily reflecting a 45% decrease in Frac Sand sales
volume. The operating loss of $6.8 million during the quarter
included $3.4 million of depreciation, depletion and
amortization.
During the second half of calendar year 2019, our Frac Sand
business has been increasingly affected by a combination of reduced
drilling and completion activity and increased use of local
in-basin sand by oil field service companies and other customers
instead of northern white frac sand. These trends are expected to
continue in the near term. Consequently, in connection with the
preparation of our financial statements for the third quarter of
fiscal 2020, we recorded impairments of $217 million for long-lived
assets and $7 million of other assets.
Planned Separation of Heavy Materials and Light Materials
Businesses
As previously announced on May 30, 2019, the Company plans to
separate its Heavy Materials and Light Materials businesses into
two independent, publicly traded corporations by means of a
tax-free spin-off to Eagle shareholders. We anticipate that the
separation will be completed in the summer of calendar 2020. The
Company also continues to pursue alternatives for its Oil and Gas
Proppants business.
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 use 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
revenue 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 revenue as a part of a segment’s total revenue.
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 Portland
Cement, Gypsum Wallboard and Recycled Gypsum Paperboard, and
Concrete, Sand and Aggregates from more than 75 facilities across
the US. Eagle’s corporate headquarters is 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
Tuesday, February 4, 2020. The conference call will be webcast
simultaneously on the EXP website, eaglematerials.com. A replay of
the webcast and the presentation will be archived on the website
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 or
changes in the nature of activity in the oil and gas industry,
including fluctuations in the level of fracturing activities and
the demand for frac sand and changes in processes or substitutions
in materials used in well fracturing; 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 revenue 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 proposed acquisition of
certain assets from Kosmos Cement Company 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, the inability to complete the acquisition within the
expected time frame, or at all, failure to realize expected
synergies from or other benefits of the transaction, possible
negative effects resulting from consummation of the transaction,
significant transaction or ownership transition costs, unknown
liabilities or other adverse developments affecting the assets to
be acquired and the target business, including the effect on the
target business of the same or similar factors discussed above to
which our Heavy Materials business is subject. Finally, the
proposed separation of our Heavy Materials and Light Materials
businesses into two independent, publicly traded corporations is
subject to various risks and uncertainties, and may not be
completed on the terms or timeline currently contemplated, or at
all. These and other factors are described in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2019 and
subsequent quarterly and annual reports upon filing. 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.
Attachment 1
Statement of Consolidated Earnings
Attachment 2
Revenue and Earnings by Lines of
Business
Attachment 3
Sales Volume, Average Net Sales Prices and
Intersegment and Cement Revenue
Attachment 4
Consolidated Balance Sheets
Attachment 5
Depreciation, Depletion and Amortization
by Lines of Business
Attachment 6
Reconciliation of Non-GAAP Financial
Measures
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,
2019
2018
2019
2018
Revenue
$
350,249
$
333,285
$
1,135,372
$
1,108,540
Cost of Goods Sold
262,735
252,864
868,023
838,554
Gross Profit
87,514
80,421
267,349
269,986
Equity in Earnings of Unconsolidated
JV
10,700
9,507
32,489
28,931
Corporate General and Administrative
Expenses
(13,794
)
(9,408
)
(48,506
)
(27,333
)
Litigation Settlements and Losses
-
-
-
(1,800
)
Impairment Losses
(224,267
)
-
(224,267
)
-
Other Non-Operating Income
825
1,292
1,967
2,291
(Loss) Earnings before Interest and Income
Taxes
(139,022
)
81,812
29,032
272,075
Interest Expense, net
(9,543
)
(7,294
)
(28,526
)
(20,743
)
(Loss) Earnings before Income Taxes
(148,565
)
74,518
506
251,332
Income Tax Benefit (Expense)
33,933
(16,803
)
(2,041
)
(54,675
)
Net (Loss) Earnings
$
(114,632
)
$
57,715
$
(1,535
)
$
196,657
(LOSS) EARNINGS PER SHARE
Basic
$
(2.77
)
$
1.25
$
(0.04
)
$
4.18
Diluted
$
(2.77
)
$
1.24
$
(0.04
)
$
4.15
AVERAGE SHARES OUTSTANDING
Basic
41,314,289
46,275,198
42,246,329
47,059,408
Diluted
41,314,289
46,495,994
42,246,329
47,403,271
Eagle Materials Inc.
Attachment 2
Eagle Materials Inc.
Revenue and Earnings by Lines
of Business
(dollars in thousands)
(unaudited)
Quarter Ended
December 31,
Nine Months Ended
December 31,
2019
2018
2019
2018
Revenue*
Heavy Materials:
Cement (Wholly Owned)
$
148,475
$
134,845
$
502,452
$
453,800
Concrete and Aggregates
46,797
30,495
141,762
110,247
195,272
165,340
644,214
564,047
Light Materials:
Gypsum Wallboard
125,070
130,954
380,454
402,978
Gypsum Paperboard
22,562
22,891
74,170
76,249
147,632
153,845
454,624
479,227
Oil and Gas Proppants
7,345
14,100
36,534
65,266
Total Revenue
$
350,249
$
333,285
$
1,135,372
$
1,108,540
Segment Operating Earnings
Heavy Materials:
Cement (Wholly Owned)
$
43,480
$
37,690
$
124,338
$
113,147
Cement (Joint Venture)
10,700
9,507
32,489
28,931
Concrete and Aggregates
3,334
1,037
15,023
10,621
57,514
48,234
171,850
152,699
Light Materials:
Gypsum Wallboard
38,484
43,543
114,872
139,694
Gypsum Paperboard
9,021
7,475
29,060
26,078
47,505
51,018
143,932
165,772
Oil and Gas Proppants
(6,805
)
(9,324
)
(15,944
)
(19,554
)
Sub-total
98,214
89,928
299,838
298,917
Corporate General and Administrative
Expense
(13,794
)
(9,408
)
(48,506
)
(27,333
)
Litigation Settlements and Losses
-
-
-
(1,800
)
Impairment Losses
(224,267
)
(224,267
)
Other Non-Operating Income
825
1,292
1,967
2,291
(Loss) Earnings before Interest and Income
Taxes
$
(139,022
)
$
81,812
$
29,032
$
272,075
*Net of Intersegment and Joint Venture
Revenue listed on Attachment 3
Eagle Materials Inc.
Attachment 3
Eagle Materials Inc.
Sales Volume, Average Net
Sales Prices and Intersegment and Cement Revenue
(unaudited)
Sales Volume
Quarter Ended
December 31,
Nine Months Ended
December 31,
2019
2018
Change
2019
2018
Change
Cement (M Tons):
Wholly Owned
1,199
1,126
+6
%
4,046
3,740
+8
%
Joint Venture
240
218
+10
%
721
672
+7
%
1,439
1,344
+7
%
4,767
4,412
+8
%
Concrete (M Cubic Yards)
357
237
+51
%
1,095
846
+29
%
Aggregates (M Tons)
749
747
0
%
2,608
2,616
0
%
Gypsum Wallboard (MMSF)
669
653
+2
%
2,010
1,992
+1
%
Paperboard (M Tons):
Internal
33
32
+3
%
99
95
+4
%
External
47
42
+12
%
148
140
+6
%
80
74
+8
%
247
235
+5
%
Frac Sand (M Tons)
200
365
-45
%
963
1,129
-15
%
Average Net Sales
Price*
Quarter Ended
December 31,
Nine Months Ended
December 31,
2019
2018
Change
2019
2018
Change
Cement (Ton)
$
110.09
$
107.54
+2
%
$
109.69
$
107.94
+2
%
Concrete (Cubic Yard)
$
112.96
$
102.94
+10
%
$
108.17
$
102.72
+5
%
Aggregates (Ton)
$
9.20
$
8.68
+6
%
$
9.36
$
9.30
+1
%
Gypsum Wallboard (MSF)
$
146.46
$
159.38
-8
%
$
148.51
$
161.63
-8
%
Paperboard (Ton)
$
460.65
$
519.29
-11
%
$
482.34
$
520.02
-7
%
*Net of freight and delivery costs billed
to customers.
Intersegment and Cement
Revenue
Quarter Ended
December 31,
Nine Months Ended
December 31,
2019
2018
2019
2018
Intersegment Revenue:
Cement
$
6,174
$
3,518
$
17,130
$
11,769
Concrete and Aggregates
350
346
1,134
1,178
Paperboard
15,251
16,747
48,190
49,799
$
21,775
$
20,611
$
66,454
$
62,746
Cement Revenue:
Wholly Owned
$
148,475
$
134,845
$
502,452
$
453,800
Joint Venture
28,382
25,369
85,775
78,112
$
176,857
$
160,214
$
588,227
$
531,912
Eagle Materials Inc.
Attachment 4
Eagle Materials Inc.
Consolidated Balance
Sheets
(dollars in thousands)
(unaudited)
December 31,
March 31,
2019
2018
2019*
ASSETS
Current Assets –
Cash and Cash Equivalents
$
126,255
$
17,060
$
8,601
Accounts and Notes Receivable, net
140,283
133,873
128,722
Inventories
234,264
251,260
275,194
Federal Income Tax Receivable
-
314
5,480
Prepaid and Other Assets
6,997
6,966
9,624
Total Current Assets
507,799
409,473
427,621
Property, Plant and Equipment, net
1,269,733
1,627,152
1,426,939
Investments in Joint Venture
71,862
61,988
64,873
Operating Lease Right of Use Asset
29,346
-
-
Notes Receivable
9,192
3,022
2,898
Goodwill and Intangibles
230,099
236,936
229,115
Other Assets
12,194
16,845
17,717
$
2,130,225
$
2,355,416
$
2,169,163
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current Liabilities –
Accounts Payable
$
65,035
$
77,611
$
80,884
Accrued Liabilities
87,690
66,921
61,949
Operating Lease Liabilities
10,601
-
-
Current Portion of Senior Notes
-
36,500
36,500
Total Current Liabilities
163,326
181,032
179,333
Long-term Liabilities
36,648
30,554
34,492
Non-current Lease Liabilities
51,939
-
-
Bank Credit Facility
585,000
245,000
310,000
4.500% Senior Unsecured Notes due 2026
345,594
344,924
345,092
Deferred Income Taxes
50,391
133,569
90,759
Stockholders’ Equity –
Preferred Stock, Par Value $0.01; None
issued
-
-
-
Common Stock, Par Value $0.01; Authorized
100,000,000 Shares; Issued and Outstanding 41,643,970; 46,238,591
and 45,117,393 Shares, respectively
416
462
451
Capital in Excess of Par Value
8,325
-
-
Accumulated Other Comprehensive Losses
(3,215
)
(3,844
)
(3,316
)
Retained Earnings
891,801
1,423,719
1,212,352
Total Stockholders’ Equity
897,327
1,420,337
1,209,487
$
2,130,225
$
2,355,416
$
2,169,163
*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 table presents
depreciation, depletion and amortization by lines of business for
the quarter and nine months ended December 31, 2019 and
2018:
Depreciation, Depletion and
Amortization
Quarter Ended
December 31,
Nine Months Ended
December 31,
2019
2018
2019
2018
Cement
$
14,189
$
13,242
$
42,275
$
38,909
Concrete and Aggregates
3,105
2,049
8,050
6,154
Gypsum Wallboard
5,050
4,978
15,149
15,009
Paperboard
2,244
2,150
6,610
6,387
Oil and Gas Proppants
3,445
6,964
11,087
24,403
Corporate and Other
578
402
1,773
1,099
$
28,611
$
29,785
$
84,944
$
91,961
Eagle Materials Inc.
Attachment 6
Eagle Materials Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited)
(Dollars in thousands, other
than earnings per share amounts, and number of shares in
millions)
Adjusted Earnings per Diluted Share
(Adjusted EPS)
Adjusted EPS is a non-GAAP financial
measure and represents earnings per diluted share excluding the
impacts from non-routine items, such as impairment losses and
business development costs (Non-routine Items). Management uses
measures of earnings excluding the impact of Non-routine Items as a
basis for comparing operating results of the Company from period to
period and for purposes of its budgeting and planning processes.
Although management believes that Adjusted EPS is useful in
evaluating the Company’s business, this information should be
considered as supplemental in nature and is not meant to be
considered in isolation, or as a substitute for, earnings per
diluted share and the related financial information prepared in
accordance with GAAP. In addition, our presentation of Adjusted EPS
may not be the same as similarly titled measures reported by other
companies, limiting its usefulness as a comparative measure.
The following shows the calculation of
Adjusted EPS and reconciles Adjusted EPS to earnings per diluted
share in accordance with GAAP for the three months ended December
31, 2019:
Three Months Ended
December 31, 2019
Impairment Losses 1
$
224,267
Business Development Costs 2
3,367
Plant Expansion Costs 3
1,500
Non-routine Items
$
229,134
Tax Impact
(50,868
)
After-tax Impact of Non-routine Items
178,266
Diluted average shares outstanding 4
41.6
Diluted earnings per share impact from
Non-routine Items
$
4.28
1 Represents asset impairment losses
related to the Frac Sand business
2 Represents non-routine charges
associated with acquisitions and separation costs
3 Represents the impact of an outage at
the Republic Paperboard papermill associated with the planned
expansion
4 As reported diluted average shares
outstanding for the three months ended December 31, 2019 excludes
approximately 300,000 equity instruments to purchase share of
common stock as their impact would be antidilutive because Eagle’s
reported income was in a loss position during the period. When
adjusting income to the company in the period for the adjustments
described above, these shares become dilutive.
Three Months Ended December 31,
2019
Diluted EPS in accordance with generally
accepted accounting principles
$
(2.77
)
Add back: Earnings per diluted share
impact from Non-routine Items
$
4.28
Adjusted EPS
$
1.51
Eagle Materials Inc.
Attachment 6 (Continued)
EBITDA and Adjusted EBITDA
Similar to the presentation of Adjusted
EPS, we present Earnings before Interest, Taxes, Depreciation and
Amortization (EBITDA) and Adjusted EBITDA to provide more
consistent comparison of operating performance from period to
period. EBITDA is a non-GAAP financial measure that provides
supplemental information regarding the operating performance of our
business without regard to financing methods, capital structures or
historical cost basis. Adjusted EBITDA is also a non-GAAP financial
measure that further excludes the same non-routine items excluded
in the calculation of Adjusted Earnings per Diluted Share as
described above. Management uses EBITDA and Adjusted EBITDA as
alternative bases for comparing the operating performance of Eagle
from period to period, for purposes of its budgeting and planning
processes, and for purposes of monitoring compliance with specific
requirements of its credit agreement and other debt instruments.
Adjusted EBITDA may not be comparable to similarly titled measures
of other companies because other companies may not calculate
Adjusted EBITDA in the same manner. Neither EBITDA nor Adjusted
EBITDA should be considered in isolation or as an alternative to
net income, cash flow from operations or any other measure of
financial performance in accordance with GAAP.
The following shows the calculation of
EBITDA and Adjusted EBITDA and reconciles them to net (loss)
earnings in accordance with GAAP for the three months ended
December 31, 2019 and 2018.
Three Months Ended
December 31,
2019
2018
Net (Loss) Earnings
$
(114,632
)
$
57,715
Income Tax (Benefit) Expense
(33,933
)
16,803
Interest Expense
9,543
7,294
Depreciation, Depletion and
Amortization
28,611
29,785
EBITDA
(110,411
)
111,597
Impairment Losses
224,267
-
Business Development Costs
3,367
-
Plant Expansion Costs
1,500
-
Adjusted EBITDA
$
118,723
$
111,597
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200204005115/en/
For additional information, contact at
214-432-2000 Michael R. Haack Chief Executive
Officer
D. Craig Kesler Executive Vice President and Chief
Financial Officer
Robert S. Stewart Executive Vice President, Strategy,
Corporate Development and Communications
Eagle Materials (NYSE:EXP)
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From Mar 2024 to Apr 2024
Eagle Materials (NYSE:EXP)
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From Apr 2023 to Apr 2024
