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Press release from Business Wire

Eagle Materials Inc. Reports Third Quarter Results

Thursday, February 02, 2012

Eagle Materials Inc. Reports Third Quarter Results08:30 EST Thursday, February 02, 2012 DALLAS (Business Wire) -- Eagle Materials Inc. (NYSE: EXP) today reported financial results for the third quarter of fiscal 2012 ended December 31, 2011. Notable items for the quarter include (all comparisons, unless noted, are with the prior-year quarter): Revenues of $123.6 million, up 19% Cash flow from operations of $16.2 million, up 45% Adjusted earnings per diluted share of $0.20 and EPS of $0.07 (which includes Non-routine Items of $0.13) compared with $0.12 Adjusted earnings per share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in attachment 5 Total loss from non-routine items (including the after-tax effect of a loss on debt retirement, certain tax and interest benefits and loss on arbitration ruling) was $5.8 million Eagle's low cost operations continued to execute well during this challenging environment for U.S. construction activity. Segment operating earnings increased 30% reflecting improved sales volumes in our cement, wallboard and paperboard businesses and higher wallboard and paperboard net sales prices as compared to the prior year. Operating cash flow was strong during the quarter, further strengthening our financial position. Cement, Concrete and Aggregates Operating earnings from Cement for the third quarter were $15.5 million, a 2% increase from the same quarter a year ago. The earnings increase primarily reflects improved sales volumes offset by $2.5 million of additional maintenance costs incurred this quarter versus the prior year quarter. Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $61.5 million, 12% higher than the same quarter last year. Cement sales volumes for the quarter were 700,000 tons, 13% above the same quarter a year ago. The average net cement sales price this quarter was $80.02, generally flat with the same quarter last year. Concrete and Aggregates reported an operating loss of $0.6 million for the third quarter compared to operating earnings of $0.2 million from the same quarter a year ago, primarily due to reduced sales volumes. Gypsum Wallboard and Paperboard Gypsum Wallboard and Paperboard reported third quarter operating earnings of $5.4 million compared to an operating loss of $0.4 million in the same quarter last year. Gypsum Wallboard and Paperboard revenues for the third quarter totaled $73.5 million, a 24% increase from the same quarter a year ago. Higher wallboard and paperboard net sales prices combined with improved paperboard sales volumes were the primary drivers of the quarterly earnings and revenues increase. The average Gypsum Wallboard net sales price this quarter was $94.86 per MSF, 9% higher than the same quarter a year ago. Gypsum Wallboard sales volumes for the quarter of 421 million square feet (MMSF) increased 9% from the same quarter last year. The average Paperboard net sales price this quarter was $527.42 per ton, 10% higher than the same quarter a year ago. Paperboard sales volumes for the quarter were 57,000 tons, 21% greater than the same quarter a year ago. Other Corporate Items During the third quarter of fiscal 2012, Eagle repurchased approximately $88.1 million of its Series 2007A and Series 2005A Senior Notes at a slight premium. The loss on the debt retirement was approximately $2.1 million, or $0.04 per diluted share, and was expensed during the third quarter. The purchase of the senior notes was funded with cash and lower cost borrowings made under our revolving bank credit facility. As a result of the purchase, Eagle was able to modestly reduce its outstanding debt, reduce interest payments, and improve financial flexibility by replacing a portion of our fixed term debt with variable revolving debt, which can be repaid at any time, while still maintaining a significant amount of readily available liquidity. Also during the third quarter of fiscal 2012, income taxes and interest expense were positively affected by our participation in state amnesty programs with the states of Arizona, Colorado and California, as well as the expiration of the federal statute of limitations for certain items related to the 2004 through 2006 tax years. These events were treated as discrete items in the tax provision and interest calculation and a benefit totaling approximately $2.8 million, or $0.06 per diluted share, was recognized. Additionally, we received the previously recorded $9.1 million Federal Income Tax Receivable in early January 2012. On January 19, 2012, we received an adverse ruling in an arbitration proceeding involving a contract dispute between one of our subsidiaries and another mining company. The ruling involved a limited area within our California aggregates deposit and is not expected to have a material adverse impact on our continuing operations in future periods. While the ruling has not been finalized, the award, along with our legal expenses, was approximated to be $9.1 million, or $0.15 per diluted share, and has been classified as Loss on Arbitration Ruling in our Statement of Consolidated Earnings. Details of Financial Results The nine-month financial information included in this press release includes a previously disclosed $3 million reversal of an accrual that reduced wallboard costs of goods sold during the first quarter of fiscal 2012. The $3 million relates to a reserve established in fiscal 2001 for expected costs to repair certain manufacturing equipment at one of our wallboard facilities. The equipment was subsequently purchased and fully depreciated without relieving the reserve. The reversal of the reserve represents the correction of a prior year error, which we concluded was immaterial to both current and previously issued financial statements; however, the reversal of the accrual is currently under review by the Securities and Exchange Commission and it is possible it may be adjusted back to beginning retained earnings. In this case, there would be no impact to Eagle's third quarter results or cash flow from operations. Texas Lehigh Cement Company LP, one of our cement plant operations, is conducted 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 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 in 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 from 25 facilities across the US. The Company is headquartered in Dallas, Texas. EXP's senior management will conduct a conference call to discuss the financial results, forward looking information and other matters at 2:00 p.m. Eastern Time (1:00 p.m. Central Time) on Thursday, February 2, 2012.The conference call will be webcast simultaneously on the EXP 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 EXP 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; availability of raw materials; changes in energy costs including, without limitation, natural gas and oil; changes in the cost and availability of transportation; unexpected operational difficulties; inability to timely execute announced capacity expansions; 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; announced increases in capacity in the gypsum wallboard and cement industries; changes in the demand for residential housing construction or commercial construction; 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 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, 2011 and in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2011.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.   (1)       Summary of Consolidated Earnings (2) Revenues and Earnings by Lines of Business (Quarter and Nine Months) (3) Sales Volume, Net Sales Prices and Intersegment and Cement Revenues (4) Consolidated Balance Sheets (5) 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 EndedDecember 31,   Nine Months EndedDecember 31,2011   20102011   2010   Revenues $ 123,596 $ 103,870 $ 378,222 $ 366,799   Cost of Goods Sold   111,125     96,030     349,661     328,979     Gross Profit 12,471 7,840 28,561 37,820   Equity in Earnings of Unconsolidated JV 7,776 7,196 21,160 17,868 Corporate General and Administrative Expense (3,873 ) (3,942 ) (12,463 ) (12,060 ) Other Operating Income (464 ) 192 (428 ) 1,084 Loss on Arbitration Ruling   (9,117 )   -     (9,117 )   -     Earnings before Interest and Income Taxes 6,793 11,286 27,713 44,712 Interest Expense, Net (4,210 ) (4,666 ) (13,352 ) (13,104 ) Loss on Debt Retirement   (2,094 )   -     (2,094 )   -     Earnings before Income Taxes 489 6,620 12,267 31,608   Income Tax Benefit (Expense)   2,408     (1,124 )   (288 )   (5,955 )   Net Earnings $ 2,897   $ 5,496   $ 11,979   $ 25,653         EARNINGS PER SHARE   Basic $ 0.07   $ 0.13   $ 0.27   $ 0.58   Diluted $ 0.07   $ 0.12   $ 0.27   $ 0.58     AVERAGE SHARES OUTSTANDING Basic   44,212,098     43,887,833     44,197,540     43,858,606   Diluted   44,395,982     44,199,121     44,423,467     44,200,558     Eagle Materials Inc. Attachment 2   Eagle Materials Inc.Revenues and Earnings by Lines of Business(dollars in thousands)(unaudited)     Quarter EndedDecember 31,   Nine Months EndedDecember 31,2011   20102011   2010Revenues*   Gypsum Wallboard and Paperboard: Gypsum Wallboard $ 54,063 $ 45,389 $ 156,386 $ 153,903 Gypsum Paperboard   19,407     13,890     59,686     52,998   73,470 59,279 216,072 206,901   Cement (Wholly Owned) 40,074 34,301 126,677 125,652   Concrete and Aggregates   10,052     10,290     35,473     34,246     Total Revenues $ 123,596   $ 103,870   $ 378,222   $ 366,799     Segment Operating Earnings   Gypsum Wallboard and Paperboard: Gypsum Wallboard $ 228 $ (2,535 ) $ (1,074 ) $ 3,961 Gypsum Paperboard   5,146     2,160     12,214     9,787   5,374 (375 ) 11,140 13,748   Cement: Wholly Owned 7,717 8,061 18,232 23,149 Joint Venture   7,776     7,196     21,160     17,868   15,493 15,257 39,392 41,017   Concrete and Aggregates (620 ) 154 (811 ) 923   Other, net   (464 )   192     (428 )   1,084     Sub-total 19,783 15,228 49,293 56,772 Corporate General and Administrative Expenses (3,873 ) (3,942 ) (12,463 ) (12,060 ) Loss on Arbitration Ruling   (9,117 )   -     (9,117 )   -     Earnings before Interest and Income Taxes   6,793     11,286     27,713     44,712       * 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 Joint Venture Revenues(unaudited)     Sales Volume Quarter Ended December 31,   Nine Months Ended December 31, 2011   2010   Change 2011   2010   Change   Gypsum Wallboard (MMSF's) 421 386 +9 % 1,236 1,237 0 %   Cement (M Tons): Wholly Owned 497 408 +22 % 1,534 1,482 +4 % Joint Venture 203 211 -4 % 657 614 +7 % 700 619 +13 % 2,191 2,096 +5 % Paperboard (M Tons): Internal 19 17 +12 % 54 53 +2 % External 38 30 +27 % 120 115 +4 % 57 47 +21 % 174 168 +4 %   Concrete (M Cubic Yards) 112 113 -1 % 391 353 +11 %   Aggregates (M Tons) 463 677 -32 % 1,846 2,098 -12 %     Average Net Sales Price* Quarter Ended December 31,   Nine Months Ended December 31, 2011   2010   Change 2011   2010   Change   Gypsum Wallboard (MSF) $ 94.86 $ 86.65 +9 % $ 92.35 $ 93.90 -2 % Cement (Ton) $ 80.02 $ 80.11 0 % $ 80.77 $ 80.51 0 % Paperboard (Ton) $ 527.42 $ 477.75 +10 % $ 519.20 $ 477.80 +9 % Concrete (Cubic Yard) $ 67.11 $ 62.72 +7 % $ 63.98 $ 64.64 -1 % Aggregates (Ton) $ 5.99 $ 5.02 +19 % $ 5.95 $ 5.66 +5 %   *Net of freight and delivery costs billed to customers.     Intersegment and Cement Revenues Quarter Ended December 31,   Nine Months Ended December 31, 2011   2010 2011   2010 Intersegment Revenues: Cement $ 803 $ 1,394 $ 3,044 $ 3,550 Paperboard 10,594 8,491 30,728 27,311 Concrete and Aggregates   198   153   559   460 $ 11,595 $ 10,038 $ 34,331 $ 31,321   Cement Revenues: Wholly Owned $ 40,074 $ 34,301 $ 126,677 $ 125,652 Joint Venture   20,633   19,181   64,487   55,949 $ 60,707 $ 53,482 $ 191,164 $ 181,601     Eagle Materials Inc. Attachment 4   Eagle Materials Inc.Consolidated Balance Sheets(dollars in thousands)(unaudited)   December 31,   March 31, 2011   2010 2011* ASSETS Current Assets – Cash and Cash Equivalents $ 3,679 $ 4,053 $ 1,874 Accounts and Notes Receivable, net 54,491 42,254 43,855 Inventories 113,613 111,012 115,237 Federal Income Tax Receivable 9,109 - 9,088 Prepaid and Other Assets   3,045     2,464     4,572   Total Current Assets   183,937     159,783     174,626   Property, Plant and Equipment – 1,138,261 1,110,787 1,112,058 Less: Accumulated Depreciation   (548,284 )   (503,063 )   (512,228 ) Property, Plant and Equipment, net 589,977 607,724 599,830 Notes Receivable 3,448 13,150 5,326 Investments in Joint Venture 37,571 31,546 33,661 Goodwill and Intangibles 151,061 151,698 151,539 Other Assets   19,155     26,542     17,828   $ 985,149   $ 990,443   $ 982,810     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities – Accounts Payable $ 33,344 $ 30,464 $ 30,339 Current Portion of Senior Notes 4,677 - - Accrued Liabilities   46,598     35,919     40,011   Total Current Liabilities   84,619     66,383     70,350   Senior Notes 192,259 285,000 285,000 Bank Credit Facility 84,000 5,000 2,000 Long-Term Liabilities 35,268 40,778 37,807 Deferred Income Taxes 126,512 124,503 128,089 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 44,944,310; 44,196,759 and 44,447,428 Shares, respectively. 449 442 444 Capital in Excess of Par Value 29,235 19,450 24,859 Accumulated Other Comprehensive Losses (2,893 ) (3,518 ) (2,893 ) Retained Earnings   435,700     452,405     437,154   Total Stockholders' Equity   462,491     468,779     459,564   $ 985,149   $ 990,443   $ 982,810   *From audited financial statements.   Eagle Materials Inc. Attachment 5   Eagle Materials Inc.Non-GAAP Financial Measures(unaudited)(Dollars, other than earnings per share amounts, and number of shares in millions)   Adjusted earnings per diluted share (Adjusted EPS), the earnings per diluted share excluding the impacts from non-routine items including the loss on debt retirement, discrete tax benefits and loss on arbitration ruling (Non-routine Items), represents a non-GAAP financial measure.  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 these financial measures are 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 the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.  Management presents these measures as it believes Adjusted EPS represents the most comparable operating performance measure to the prior year and analysts' expectations for the three months ended December 31, 2011.  Analysts have not factored the impact of the non-routine items in their estimates for the quarter.   The following shows the calculation of the earnings per share impact of the Non-routine Items and reconciles earnings per diluted share in accordance with generally accepted accounting principles for the three months ended December 31, 2011 to Adjusted EPS:     Three Months Ended December 31, 2011   After tax impact of loss on debt retirement $ (1.6 ) After tax impact of tax and interest benefits 2.8 After tax impact of loss on arbitration ruling (7.0 ) Total Non-routine Items loss, net $ (5.8 ) Diluted average number of shares outstanding for the three months ended December 31, 2011 44.4 Diluted earnings per share loss from Non-routine Items $ (0.13 )   Three Months Ended December 31, 2011   Earnings per diluted share in accordance with generally accepted accounting principles $ 0.07 Add back: Earnings per diluted share loss from Non-routine Items 0.13 Adjusted EPS 0.20 Eagle Materials Inc.Steven R. Rowley, 214-432-2000President & CEOorD. Craig Kesler, 214-432-2000Executive Vice President & CFOorRobert S. Stewart, 214-432-2000Executive Vice President