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Eagle Materials Reports Record Second Quarter EPS Up 12% on Record Revenue Up 9%

DALLAS--(BUSINESS WIRE)--

Eagle Materials Inc. (EXP) today reported financial results for the second quarter of fiscal 2020 ended September 30, 2019. Notable items for the quarter are highlighted below (unless otherwise noted, all comparisons are with the prior year’s fiscal second quarter):

Second Quarter Fiscal 2020 Results

  • Record second quarter revenue of $414.5 million, up 9%
  • Record second quarter net earnings per diluted share of $1.72, up 12%
    • The second quarter impact of costs related to the Company’s planned separation of its businesses was $2.7 million (pre-tax), or $0.05 per diluted share

Commenting on the second quarter results, Michael Haack, President and CEO, said, “We are proud to have achieved record revenue and net earnings per share for the second quarter of our fiscal year 2020. Our second quarter performance was driven mostly by increased cement shipments, cost control initiatives and strong operational execution, as we capitalized on the robust underlying demand across our geographic footprint. Notably, our Cement sales volume was up 14% to a record 1.8 million tons. Market demand for our Wallboard also remained healthy when adjusted for buying activity ahead of our Wallboard price increase last year. The outlook for the remainder of the year continues to be positive. Demand for our building materials and construction products is supported by a number of favorable market dynamics including ongoing growth in jobs, high consumer confidence and low interest rates.”

Mr. Haack concluded, “Our low-cost operations continued to generate strong cash flow, which we are investing to further improve our operational efficiency and low-cost position, while at the same time we continued to repurchase shares in line with our capital allocation strategy. During the first half of our fiscal year, we purchased approximately 3.6 million shares, or 8% of our outstanding shares, and we returned more than $320 million to shareholders, through a combination of share repurchases and dividends.”

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 $282.6 million, a 22% increase from the second quarter of fiscal 2019. Heavy Materials operating earnings improved 20% to $73.8 million primarily because of increased sales volume and net sales prices.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 18% to $227.0 million, reflecting improved sales volume and net sales prices. Cement sales volume for the quarter was a record 1.8 million tons, up 14% versus the prior year. The average net sales price for the quarter improved 2% to $109.35 per ton.

Operating earnings from Cement were a record $66.5 million, 16% 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 second quarter was $55.6 million, an increase of 42%. Second quarter operating earnings were $7.3 million, a 77% increase, reflecting record Concrete sales volume, improved Concrete sales prices and the financial results of a recently acquired small concrete and aggregates business.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard and Paperboard, declined slightly from the prior year, as improved sales volume was offset by lower pricing. Gypsum Wallboard sales volume was 681 million square feet (MMSF), up approximately 8%, while the average Gypsum Wallboard net sales price declined 10% to $148.16 per MSF.

Paperboard sales volume for the quarter also increased, up 9% to a record 86,000 tons. The average Paperboard net sales price was $475.98 per ton, down 6% from the prior year, consistent with the pricing provisions in our long-term sales agreements.

Operating earnings were $48.6 million in the sector, a decline of 11%, reflecting improved Wallboard and Paperboard sales volume offset by lower net sales prices. Operating costs during the quarter declined primarily due to lower recycled fiber costs.

Oil and Gas Proppants

Revenue in the Oil and Gas Proppants segment was down 41% to $14.0 million. This decline resulted from a 34% decrease in average Frac Sand sales prices and an 11% decline in Frac Sand sales volume. The second quarter operating loss of $5.5 million included $3.8 million of depreciation, depletion and amortization.

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 continue to anticipate that the separation will be completed in the first half of calendar 2020. The Company also previously announced it is actively pursuing 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 the Company 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 Thursday, October 31, 2019. 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 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 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. 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

Eagle Materials Inc.

Attachment 1

Eagle Materials Inc.

Statement of Consolidated Earnings

(dollars in thousands, except per share data)

(unaudited)

 

 

Quarter Ended

September 30,

 

Six Months Ended

September 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

 

 

 

 

 

 

 

 

Revenue

$

414,526

 

 

$

381,499

 

 

$

785,123

 

 

$

775,255

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

310,020

 

 

 

283,568

 

 

 

605,288

 

 

 

585,690

 

 

 

 

 

 

 

 

 

Gross Profit

 

104,506

 

 

 

97,931

 

 

 

179,835

 

 

 

189,565

 

 

 

 

 

 

 

 

 

Equity in Earnings of Unconsolidated JV

 

12,357

 

 

 

10,173

 

 

 

21,789

 

 

 

19,424

 

Corporate General and Administrative Expenses

 

(13,458

)

 

 

(9,922

)

 

 

(34,712

)

 

 

(17,925

)

Litigation Settlements and Losses

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,800

)

Other Non-Operating Income

 

942

 

 

 

428

 

 

 

1,142

 

 

 

999

 

 

 

 

 

 

 

 

 

Earnings before Interest and Income Taxes

 

104,347

 

 

 

98,610

 

 

 

168,054

 

 

 

190,263

 

 

Interest Expense, net

 

(10,137

)

 

 

(6,817

)

 

 

(18,983

)

 

 

(13,449

)

 

 

 

 

 

 

 

 

Earnings before Income Taxes

 

94,210

 

 

 

91,793

 

 

 

149,071

 

 

 

176,814

 

 

Income Tax Expense

 

(22,417

)

 

 

(19,190

)

 

 

(35,974

)

 

 

(37,872

)

 

 

 

 

 

 

 

 

Net Earnings

$

71,793

 

 

$

72,603

 

 

$

113,097

 

 

$

138,942

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

Basic

$

1.73

 

 

$

1.54

 

 

$

2.65

 

 

$

2.93

 

Diluted

$

1.72

 

 

$

1.53

 

 

$

2.63

 

 

$

2.90

 

 

 

 

 

 

 

 

 

AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

Basic

 

41,572,127

 

 

 

47,219,532

 

 

 

42,714,896

 

 

 

47,453,655

 

Diluted

 

41,833,775

 

 

 

47,563,818

 

 

 

42,985,715

 

 

 

47,853,472

 

 

 

 

 

 

 

 

 

Eagle Materials Inc.

Attachment 2

Eagle Materials Inc.

Revenue and Earnings by Lines of Business

(dollars in thousands)

(unaudited)

 

 

Quarter Ended

September 30,

 

Six Months Ended

September 30,

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

 

Revenue*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

 

 

 

 

 

Cement (Wholly Owned)

$

190,422

 

 

$

163,609

 

 

$

353,977

 

 

$

318,955

 

 

Concrete and Aggregates

 

55,564

 

 

 

39,243

 

 

 

94,965

 

 

 

79,752

 

 

 

 

245,986

 

 

 

202,852

 

 

 

448,942

 

 

 

398,707

 

 

 

 

 

 

 

 

 

 

 

Light Materials:

 

 

 

 

 

 

 

 

Gypsum Wallboard

 

128,660

 

 

 

129,609

 

 

 

255,384

 

 

 

272,024

 

 

Gypsum Paperboard

 

25,923

 

 

 

25,572

 

 

 

51,608

 

 

 

53,358

 

 

 

 

154,583

 

 

 

155,181

 

 

 

306,992

 

 

 

325,382

 

 

 

 

 

 

 

 

 

 

 

Oil and Gas Proppants

 

13,957

 

 

 

23,466

 

 

 

29,189

 

 

 

51,166

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$

414,526

 

 

$

381,499

 

 

$

785,123

 

 

$

775,255

 

 

 

Segment Operating Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

 

 

 

 

 

Cement (Wholly Owned)

$

54,169

 

 

$

47,374

 

 

$

80,858

 

 

$

75,457

 

 

Cement (Joint Venture)

 

12,357

 

 

 

10,173

 

 

 

21,789

 

 

 

19,424

 

 

Concrete and Aggregates

 

7,255

 

 

 

4,100

 

 

 

11,689

 

 

 

9,584

 

 

 

 

73,781

 

 

 

61,647

 

 

 

114,336

 

 

 

104,465

 

 

 

 

 

 

 

 

 

 

 

Light Materials:

 

 

 

 

 

 

 

 

Gypsum Wallboard

 

38,456

 

 

 

45,671

 

 

 

76,388

 

 

 

96,151

 

 

Gypsum Paperboard

 

10,095

 

 

 

8,609

 

 

 

20,039

 

 

 

18,603

 

 

 

 

48,551

 

 

 

54,280

 

 

 

96,427

 

 

 

114,754

 

 

 

 

 

 

 

 

 

 

 

Oil and Gas Proppants

 

(5,469

)

 

 

(7,823

)

 

 

(9,139

)

 

 

(10,230

)

 

 

 

 

 

 

 

 

 

 

Sub-total

 

116,863

 

 

 

108,104

 

 

 

201,624

 

 

 

208,989

 

 

 

 

 

 

 

 

 

 

 

Corporate General and Administrative Expense

 

(13,458

)

 

 

(9,922

)

 

 

(34,712

)

 

 

(17,925

)

 

Litigation Settlements and Losses

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,800

)

 

Other Non-Operating Income

 

942

 

 

 

428

 

 

 

1,142

 

 

 

999

 

 

 

 

 

 

 

 

 

 

 

Earnings before Interest and Income Taxes

$

104,347

 

 

$

98,610

 

 

$

168,054

 

 

$

190,263

 

 

 

* 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

September 30,

 

Six Months Ended

September 30,

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Cement (M Tons):

 

 

 

 

 

 

 

 

 

 

 

Wholly Owned

1,529

 

1,339

 

+14

%

 

2,847

 

2,614

 

+9

%

Joint Venture

249

 

218

 

+14

%

 

481

 

454

 

+6

%

 

1,778

 

1,557

 

+14

%

 

3,328

 

3,068

 

+8

%

 

 

 

 

 

 

 

 

 

 

 

 

Concrete (M Cubic Yards)

428

 

290

 

+48

%

 

738

 

609

 

+21

%

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates (M Tons)

1,060

 

1,013

 

+5

%

 

1,859

 

1,869

 

-1

%

 

 

 

 

 

 

 

 

 

 

 

 

Gypsum Wallboard (MMSF)

681

 

629

 

+8

%

 

1,341

 

1,339

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

Paperboard (M Tons):

 

 

 

 

 

 

 

 

 

 

 

Internal

33

 

31

 

+6

%

 

66

 

63

 

+5

%

External

53

 

48

 

+10

%

 

101

 

98

 

+3

%

 

86

 

79

 

+9

%

 

167

 

161

 

+4

%

 

 

 

 

 

 

 

 

 

 

 

 

Frac Sand (M Tons)

356

 

398

 

-11

%

 

763

 

764

 

0

%

 

Average Net Sales Price*

 

Quarter Ended

September 30,

 

Six Months Ended

September 30,

 

 

2019

 

 

2018

 

Change

 

 

2019

 

 

2018

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Cement (Ton)

$

109.35

 

$

107.56

 

+2

%

 

$

109.51

 

$

108.12

 

+1

%

Concrete (Cubic Yard)

$

107.69

 

$

103.72

 

+4

%

 

$

105.94

 

$

102.64

 

+3

%

Aggregates (Ton)

$

9.25

 

$

9.38

 

-1

%

 

$

9.42

 

$

9.55

 

-1

%

Gypsum Wallboard (MSF)

$

148.16

 

$

165.01

 

-10

%

 

$

149.53

 

$

162.73

 

-8

%

Paperboard (Ton)

$

475.98

 

$

508.17

 

-6

%

 

$

492.71

 

$

520.36

 

-5

%

*Net of freight and delivery costs billed to customers.

 

Intersegment and Cement Revenue

 

Quarter Ended

September 30,

 

Six Months Ended

September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

Intersegment Revenue:

 

 

 

 

 

 

 

Cement

$

6,703

 

$

4,073

 

$

10,956

 

$

8,251

Concrete and Aggregates

 

407

 

 

501

 

 

784

 

 

832

Paperboard

 

15,924

 

 

15,705

 

 

32,939

 

 

33,052

 

$

23,034

 

$

20,279

 

$

44,679

 

$

42,135

 

 

 

 

 

 

 

 

Cement Revenue:

 

 

 

 

 

 

 

Wholly Owned

$

190,422

 

$

163,609

 

$

353,977

 

$

318,955

Joint Venture

 

29,888

 

 

25,479

 

 

57,393

 

 

52,743

 

$

220,310

 

$

189,088

 

$

411,370

 

$

371,698

Eagle Materials Inc.

Attachment 4

Eagle Materials Inc.

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

 

 

 

September 30,

 

March 31,

 

 

 

2019

 

 

 

2018

 

 

2019*

ASSETS

 

 

 

 

 

 

Current Assets –

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

53,684

 

 

$

10,002

 

 

$

8,601

 

 

Accounts and Notes Receivable, net

 

 

182,689

 

 

 

174,550

 

 

 

128,722

 

 

Inventories

 

 

241,599

 

 

 

238,869

 

 

 

275,194

 

 

Federal Income Tax Receivable

 

 

-

 

 

 

5,924

 

 

 

5,480

 

 

Prepaid and Other Assets

 

 

9,083

 

 

 

7,751

 

 

 

9,624

 

 

Total Current Assets

 

 

487,055

 

 

 

437,096

 

 

 

427,621

 

 

 

 

 

 

 

 

Property, Plant and Equipment, net

 

 

1,456,059

 

 

 

1,624,738

 

 

 

1,426,939

 

 

 

 

 

 

 

 

Investments in Joint Venture

 

 

71,662

 

 

 

60,482

 

 

 

64,873

 

Operating Lease Right of Use Asset

 

 

63,526

 

 

 

-

 

 

 

-

 

Notes Receivable

 

 

6,436

 

 

 

3,144

 

 

 

2,898

 

Goodwill and Intangibles

 

 

230,770

 

 

 

237,738

 

 

 

229,115

 

Other Assets

 

 

10,703

 

 

 

16,314

 

 

 

17,717

 

 

 

$

2,326,211

 

 

$

2,379,512

 

 

$

2,169,163

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities –

 

 

 

 

 

 

 

Accounts Payable

 

$

77,656

 

 

$

92,479

 

 

$

80,884

 

 

Accrued Liabilities

 

 

69,304

 

 

 

62,223

 

 

 

61,949

 

 

Operating Lease Liabilities

 

 

11,315

 

 

 

-

 

 

 

-

 

 

Current Portion of Senior Notes

 

 

36,500

 

 

 

-

 

 

 

36,500

 

 

Total Current Liabilities

 

 

194,775

 

 

 

154,702

 

 

 

179,333

 

Long-term Liabilities

 

 

35,371

 

 

 

31,099

 

 

 

34,492

 

Non-current Lease Liabilities

 

 

56,586

 

 

 

-

 

 

 

-

 

Bank Credit Facility

 

 

585,000

 

 

 

250,000

 

 

 

310,000

 

Private Placement Senior Unsecured Notes

 

 

-

 

 

 

36,500

 

 

 

-

 

4.500% Senior Unsecured Notes due 2026

 

 

345,426

 

 

 

344,757

 

 

 

345,092

 

Deferred Income Taxes

 

 

98,298

 

 

 

129,851

 

 

 

90,759

 

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 41,625,996; 47,189,378 and

45,117,393 Shares, respectively

 

 

416

 

 

 

472

 

 

 

451

 

Capital in Excess of Par Value

 

 

2,990

 

 

 

7,752

 

 

 

-

 

Accumulated Other Comprehensive Losses

 

 

(3,248

)

 

 

(3,900

)

 

 

(3,316

)

Retained Earnings

 

 

1,010,597

 

 

 

1,428,279

 

 

 

1,212,352

 

 

Total Stockholders’ Equity

 

 

1,010,755

 

 

 

1,432,603

 

 

 

1,209,487

 

 

 

$

2,326,211

 

 

$

2,379,512

 

 

$

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 quarters ended September 30, 2019 and 2018:

 

 

Depreciation, Depletion and Amortization

 

Quarter Ended

September 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

Cement

$

13,868

 

$

12,746

 

Concrete and Aggregates

 

2,754

 

 

2,052

 

Gypsum Wallboard

 

5,147

 

 

5,201

 

Paperboard

 

2,203

 

 

2,128

 

Oil and Gas Proppants

 

3,803

 

 

9,851

 

Corporate and Other

 

598

 

 

348

 

 

$

28,373

 

$

32,326

 

 

 

 

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191031005041/en/