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Eagle Materials Reports Fourth Quarter and Fiscal Year 2020 Results

Eagle Materials Inc. (NYSE: EXP) today reported financial results for fiscal year 2020 and the fiscal fourth quarter ended March 31, 2020. Notable items for the fiscal year and quarter are highlighted below. (Unless otherwise noted, all comparisons are with the prior fiscal year or prior year’s fiscal fourth quarter, as applicable.)

Full Year Fiscal 2020 Results

  • Record revenue of $1.5 billion, up 4%
  • Net earnings per diluted share of $1.68, up 14%
    • Net earnings benefitted by $31.7 million from the carryback of net operating losses to prior years, as allowed under the CARES Act
  • Adjusted net earnings per diluted share of $5.57, up 10%
    • Adjusted net earnings per diluted share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 6
  • Net earnings of $70.9 million, up 3%
  • Adjusted EBITDA of $471.5 million, up 1%
    • Adjusted EBITDA is a non-GAAP financial measure calculated by excluding non-routine items and non-cash expenses in the manner described in Attachment 6

Fourth Quarter Fiscal 2020 Results

  • Record revenue of $315.4 million, up 11%
  • Net earnings per diluted share of $1.74, up from a loss of $2.82 in the prior year
    • Net earnings benefitted by $31.7 million from the carryback of net operating losses to prior years, as allowed under the CARES Act
  • Adjusted net earnings per diluted share of $1.28, up 45%
    • Adjusted net earnings per diluted share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 6
  • Net earnings of $72.4 million, up from a loss of $127.8 million in the prior year
  • Adjusted EBITDA of $103.4 million, up 14%
    • Adjusted EBITDA is a non-GAAP financial measure calculated by excluding non-routine items and non-cash expenses in the manner described in Attachment 6

On March 6, 2020, Eagle completed its acquisition of substantially all of the assets of Kosmos Cement Company (the "Kosmos Acquisition") (a joint venture between Cemex S.A.B. de C.V. and Buzzi Unicem S.p.A), which includes a cement plant in Louisville, Kentucky with annual capacity of 1.7 million tons, as well as seven distribution terminals and substantial raw-material reserves (the "Kosmos Cement Business"). The purchase price paid by Eagle in the Kosmos Acquisition was $665 million in cash, subject to a customary post-closing inventory adjustment. Eagle used cash on-hand, along with borrowings under a new term loan facility, to fund the purchase. The results of operations of the Kosmos Cement Business are included in the results disclosed in this press release for the period from March 6 through March 31, 2020. For information regarding the results of operations for the Kosmos Cement Business for certain periods prior to the Kosmos Acquisition, including pro forma financial information that combines the results of operations of the Company and Kosmos Cement Company, please see our Form 8-K/A filed with the SEC on May 12, 2020.

Michael Haack, President and Chief Executive Officer, commented, "In the face of the COVID-19 pandemic, our management team is focused first and foremost on protecting the safety and health of our employees, customers, and business partners. We’ve generally been deemed an essential business, and as we continue operations, we are enforcing health and safety protocols that meet or exceed CDC guidelines."

Commenting on the financial results, Mr. Haack said, "Having achieved record results in fiscal 2020, we entered this crisis period in a strong financial position, and we are taking prudent actions to sustain the financial health of our business. In light of the risks posed by the COVID-19 pandemic and its possible future effects on our business, we are managing our balance sheet and cash flow for stability today and in the future. We are limiting capital spending to critical projects only, managing inventory levels to improve working capital, and taking additional steps such as suspending share repurchases and future dividends to maximize free cashflow. The sale of our concrete and aggregates business in Northern California announced on April 17, coupled with the carryback treatment of our net operating loss, will increase our near-term liquidity considerably."

Mr. Haack concluded, "I want to thank our dedicated employees for their extraordinary efforts and focus during this unprecedented time. We have a long history of managing through challenging market conditions, and I am confident we will successfully navigate through this difficult period."

Segment Results

Heavy Materials: Cement, Concrete and Aggregates

Fiscal 2020 revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, and joint venture and intersegment Cement revenue, was $933.3 million, a 17% increase. Heavy Materials annual operating earnings increased 12% to $198.9 million, primarily because of higher sales volume and net sales prices.

Fiscal 2020 Cement revenue, including joint venture and intersegment revenue, was up 15% to $752.0 million, and Cement operating earnings increased 10% to $181.3 million. The annual revenue and earnings improvement reflect higher net sales prices and sales volume partially offset by expenses related to the Kosmos Acquisition. The Kosmos Cement Business contributed $7.9 million to revenue since the closing of the acquisition on March 6, 2020. The average annual net sales price improved 2% to $109.96 per ton. The inclusion of the Kosmos Cement Business did not materially impact our annual average price per ton. Cement sales volume for the year was up 11% to a record 5.9 million tons. Excluding sales volume from the Kosmos Cement Business, annual Cement sales volume increased 10%. Cement operating earnings were negatively impacted by expenses of approximately $6.8 million associated with the annual maintenance outage at the Kosmos Cement Business and the impact of purchase accounting on inventory costs.

Cement revenue for the quarter, including joint venture and intersegment revenue, was up 30% to $146.6 million. Operating earnings increased 8% to $24.5 million. The quarterly revenue and earnings improvements were primarily due to higher sales volume and net sales prices, partially offset by expenses related to the Kosmos Acquisition. The Kosmos Cement Business contributed $7.9 million to fourth quarter revenue. The average net sales price for the quarter increased 2% to $111.09 per ton. The inclusion of the Kosmos Cement Business did not materially impact our quarterly average price per ton. Cement sales volume for the quarter was up 25% to a record 1.2 million tons. Excluding sales volume from the Kosmos Cement Business, quarterly cement sales volume improved 18% to 1.1 million tons. Cement operating earnings were affected by expenses of approximately $6.8 million associated with the annual maintenance outage at the Kosmos Cement Business and the impact of purchase accounting on inventory costs.

Fiscal 2020 revenue from Concrete and Aggregates increased 31% to $181.3 million. Concrete and Aggregates reported fiscal 2020 operating earnings of $17.6 million, up 36%, reflecting improved sales volume and pricing as well as the financial results of a concrete and aggregates business Eagle acquired in August 2019.

Concrete and Aggregates revenue for the quarter was $39.5 million, an increase of 39%. Fourth quarter operating earnings were $2.5 million, a 13% increase, reflecting improved sales volume and pricing as well as the financial results of a concrete and aggregates business 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% to $605.8 million for fiscal 2020. Operating earnings were $189.6 million, a decrease of 12%, as improved sales volume was offset by lower pricing.

Gypsum Wallboard and Paperboard revenue for the fourth quarter totaled $151.2 million, a 2% decrease. Gypsum Wallboard sales volume of 684 million square feet (MMSF) improved by approximately 4%, but this improvement was offset by a 6% decline in the average net sales price in the quarter to $146.62 per MSF.

The average Paperboard net sales price for the fourth quarter was $457.13 per ton, down 14%, primarily because of the pricing provisions in our long-term sales agreements. Paperboard sales volume for the quarter increased 4% to 79,000 tons.

Gypsum Wallboard and Paperboard reported fourth quarter operating earnings of $45.7 million, a decline of 9%, due primarily to lower net sales prices and increased costs associated with the papermill expansion, partially offset by improved sales volume and lower operating costs. In connection with the 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 $3 million during the quarter.

Oil and Gas Proppants

Eagle’s Oil and Gas Proppants segment reported fiscal 2020 revenue of $46.8 million, down 44%, primarily reflecting a 20% decline in sales volume. The fiscal 2020 operating loss was $14.6 million compared with an operating loss of $28.7 million in the prior year.

Revenue for this segment in the fourth quarter was down 42% to $10.2 million, reflecting a 32% decline in sales volume. Market conditions in this segment deteriorated in the latter part of March and into April, given the pronounced decline in oil and gas prices beginning in March 2020 and the resulting slowdown in drilling and fracturing activity.

In the fourth quarter of fiscal 2020, the Company completed the disposition of its Wildcat Minerals distribution business, and we continue to pursue alternatives for the remaining Oil and Gas Proppants business.

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 remain committed to the separation, although the timing is uncertain. We continue preparations to ensure that the two businesses are well-positioned for the separation when the markets recover from the effects of the COVID-19 pandemic.

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.

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 Tuesday, May 19, 2020. The conference call will be webcast simultaneously on the Eagle Web site eaglematerials.com. A replay of the webcast and the presentation will be archived on the 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 businesses; 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; cyber-attacks or data security breaches; announced increases in capacity in the gypsum wallboard and cement 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 acquisition of certain assets from Kosmos Cement Company, factors, risks and uncertainties that may cause actual future events and developments to vary materially from those anticipated in such forward-looking statements include, but are not limited to, failure to realize expected synergies from or other benefits of the transaction, significant difficulties encountered in integration or unexpected ownership transition costs, unknown liabilities or other adverse developments affecting the assets acquired and the target business, including the effect on the acquired business of the same or similar factors discussed above to which our Heavy Materials business is subject. Additionally, the proposed separation of our Heavy Materials and Light Materials businesses into two independent, publicly traded corporations is subject to various risks and uncertainties, including risks related to conditions in debt and equity markets, and may not be completed on the terms or timeline currently contemplated, or at all. Finally, regarding any forward-looking statements made by the Company, the risks and impacts associated with the disruption of business resulting from natural disasters or other unforeseen events, including, without limitation, impacts related to the COVID-19 pandemic and its impact on economic conditions, capital and financial markets, and the Company’s operations, must be considered. The COVID-19 pandemic has had and may continue to have a material adverse effect on general economic conditions, and could materially and adversely affect construction spending and demand for our products and our ability to continue to operate our facilities in an efficient manner. 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 (Quarter and Fiscal Year)

Attachment 3

Sales Volume, 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

 

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,

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

 

 

 

 

 

 

 

Revenue

$

315,442

 

 

$

284,701

 

 

$

1,450,814

 

 

$

1,393,241

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

251,529

 

 

 

228,119

 

 

 

1,119,552

 

 

 

1,066,673

 

 

 

 

 

 

 

 

 

Gross Profit

 

63,913

 

 

 

56,582

 

 

 

331,262

 

 

 

326,568

 

 

 

 

 

 

 

 

 

Equity in Earnings of Unconsolidated JV

 

10,096

 

 

 

9,634

 

 

 

42,585

 

 

 

38,565

 

Corporate General and Administrative Expense

 

(16,904

)

 

 

(10,038

)

 

 

(65,410

)

 

 

(37,371

)

Litigation Settlement Expense

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,800

)

Impairment Losses

 

-

 

 

 

(220,265

)

 

 

(224,267

)

 

 

(220,265

)

Other Non-Operating (Expense) Income

 

(1,992

)

 

 

121

 

 

 

(25

)

 

 

2,412

 

 

 

 

 

 

 

 

 

Earnings (Loss) before Interest and Income Taxes

 

55,113

 

 

 

(163,966

)

 

 

84,145

 

 

 

108,109

 

 

 

 

 

 

 

 

 

Interest Expense, Net

 

(9,895

)

 

 

(7,631

)

 

 

(38,421

)

 

 

(28,374

)

 

 

 

 

 

 

 

 

Earnings (Loss) before Income Taxes

 

45,218

 

 

 

(171,597

)

 

 

45,724

 

 

 

79,735

 

 

 

 

 

 

 

 

 

Income Tax Benefit (Expense)

 

27,211

 

 

 

43,800

 

 

 

25,170

 

 

 

(10,875

)

 

 

 

 

 

 

 

 

Net Earnings (Loss)

$

72,429

 

 

$

(127,797

)

 

$

70,894

 

 

$

68,860

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS (LOSS) PER SHARE

 

 

 

 

 

 

 

Basic

$

1.75

 

 

$

(2.82

)

 

$

1.69

 

 

$

1.48

 

Diluted

$

1.74

 

 

$

(2.82

)

 

$

1.68

 

 

$

1.47

 

 

 

 

 

 

 

 

 

AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

Basic

 

41,343,649

 

 

 

45,280,991

 

 

 

42,021,892

 

 

 

46,620,894

 

Diluted

 

41,554,357

 

 

 

45,280,991

 

 

 

42,285,343

 

 

 

46,932,380

 

 

 

 

 

 

 

 

 

Attachment 2

Eagle Materials Inc.

Revenue and Earnings by Lines of Business

(dollars in thousands)

(unaudited)

 

Quarter Ended

March 31,

 

Fiscal Year Ended

March 31,

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Revenue*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

 

 

 

 

Cement (Wholly Owned)

$

114,515

 

 

$

84,058

 

 

$

616,967

 

 

$

537,858

 

Concrete and Aggregates

 

39,511

 

 

 

28,504

 

 

 

181,273

 

 

 

138,751

 

 

 

154,026

 

 

 

112,562

 

 

 

798,240

 

 

 

676,609

 

 

 

 

 

 

 

 

 

Light Materials:

 

 

 

 

 

 

 

Gypsum Wallboard

$

127,691

 

 

$

129,734

 

 

$

508,145

 

 

$

532,712

 

Gypsum Paperboard

 

23,478

 

 

 

24,684

 

 

 

97,648

 

 

 

100,933

 

 

 

151,169

 

 

 

154,418

 

 

 

605,793

 

 

 

633,645

 

 

 

 

 

 

 

 

 

Oil and Gas Proppants

 

10,247

 

 

 

17,721

 

 

 

46,781

 

 

 

82,987

 

 

 

 

 

 

 

 

 

Total Revenue

$

315,442

 

 

$

284,701

 

 

$

1,450,814

 

 

$

1,393,241

 

 

 

 

 

 

 

 

 

 

Segment Operating Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

 

 

 

 

Cement (Wholly Owned)

$

14,407

 

 

$

13,070

 

 

$

138,745

 

 

$

126,217

 

Cement (Joint Venture)

 

10,096

 

 

 

9,634

 

 

 

42,585

 

 

 

38,565

 

Concrete and Aggregates

 

2,535

 

 

 

2,245

 

 

 

17,558

 

 

 

12,866

 

 

$

27,038

 

 

$

24,949

 

 

$

198,888

 

 

$

177,648

 

 

 

 

 

 

 

 

 

Light Materials:

 

 

 

 

 

 

 

Gypsum Wallboard

$

39,742

 

 

$

41,137

 

 

$

154,614

 

 

$

180,831

 

Gypsum Paperboard

 

5,919

 

 

 

9,271

 

 

 

34,979

 

 

 

35,349

 

 

 

45,661

 

 

 

50,408

 

 

 

189,593

 

 

 

216,180

 

 

 

 

 

 

 

 

 

Oil and Gas Proppants

 

1,310

 

 

 

(9,141

)

 

 

(14,634

)

 

 

(28,695

)

 

 

 

 

 

 

 

 

Sub-total

 

74,009

 

 

 

66,216

 

 

 

373,847

 

 

 

365,133

 

 

 

 

 

 

 

 

 

Corporate General and Administrative Expense

 

(16,904

)

 

 

(10,038

)

 

 

(65,410

)

 

 

(37,371

)

Litigation Settlement Expense

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,800

)

Impairment Losses

 

-

 

 

 

(220,265

)

 

 

(224,267

)

 

 

(220,265

)

Other Non-Operating (Expense) Income

 

(1,992

)

 

 

121

 

 

 

(25

)

 

 

2,412

 

 

 

 

 

 

 

 

 

Earnings before Interest and Income Taxes

$

55,113

 

 

$

(163,966

)

 

$

84,145

 

 

$

108,109

 

 

* Net of Intersegment and Joint Venture Revenue listed on Attachment 3.

...

Attachment 3

Eagle Materials Inc.

Sales Volume, Net Sales Prices and Intersegment and Cement Revenue

(unaudited)

 

Sales Volume

 

Quarter Ended
March 31,

 

Fiscal Year Ended
March 31,

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Cement (M Tons):

 

 

 

 

 

 

 

 

 

 

 

Wholly Owned

929

 

701

 

+33

%

 

4,975

 

4,441

 

+12

%

Joint Venture

235

 

227

 

+4

%

 

956

 

899

 

+6

%

 

1,164

 

928

 

+25

%

 

5,931

 

5,340

 

+11

%

 

 

 

 

 

 

 

 

 

 

 

 

Concrete (M Cubic Yards)

293

 

228

 

+29

%

 

1,388

 

1,074

 

+29

%

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates (M Tons)

705

 

552

 

+28

%

 

3,313

 

3,168

 

+5

%

 

 

 

 

 

 

 

 

 

 

 

 

Gypsum Wallboard (MMSFs)

684

 

659

 

+4

%

 

2,694

 

2,651

 

+2

%

 

 

 

 

 

 

 

 

 

 

 

 

Paperboard (M Tons):

 

 

 

 

 

 

 

 

 

 

 

Internal

30

 

31

 

-3

%