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Press release from Business Wire

Eagle Materials Inc. Reports Continued Growth in Sales Volumes and Earnings in the Second Quarter

Monday, October 29, 2012

Eagle Materials Inc. Reports Continued Growth in Sales Volumes and Earnings in the Second Quarter16:15 EDT Monday, October 29, 2012 DALLAS (Business Wire) -- Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2013 which ended September 30, 2012. Notable items for the quarter include (all comparisons, unless noted, are with the prior-year's second quarter): Revenues of $164.7 million, up 22% Segment operating earnings of $41.3 million, up 146% Adjusted earnings per diluted share of $0.49, up 250% Adjusted earnings per share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 5 Total impact of non-routine items, including costs related to the pending acquisition of the Lafarge Target Business and litigation costs related to our lawsuit against the IRS, was $3.9 million, or $0.09 per diluted share Earnings per diluted share of $0.40, up 186% Second quarter sales volumes improved across all major business lines and wallboard net sales prices increased 30% as compared to the prior year's second quarter. Improved second quarter operating cash flow was used to fund capital expenditures, pay dividends and reduce debt which further strengthened our financial position. Eagle ended the quarter with a net debt-to-capitalization ratio of 29%. As previously announced on September 26, 2012, Eagle entered into a definitive agreement with Lafarge North America to purchase Lafarge's Sugar Creek, Missouri and Tulsa, Oklahoma cement plants, as well as related assets, which include six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business (the “Lafarge Target Business”). The purchase price is $446 million, subject to customary post-closing adjustments. Eagle expects that the acquisition will increase its U.S. annual cement capacity by approximately 60% to nearly 5 million tons. The acquisition is expected to close in November or December 2012, and is subject to receipt of required regulatory approvals, certain third-party consents and other customary conditions. On October 3, 2012, Eagle also completed the public offering of 3.45 million shares of its common stock, which includes 450,000 shares issued pursuant to the underwriters' exercise in full of their overallotment option, at a price to the public of $46.50 per share. Total gross proceeds from the equity offering were $160.4 million. Net proceeds from the offering were approximately $154.4 million, after deducting underwriting discounts, commissions and expenses related to the offering. The Company intends to use the net proceeds, together with borrowings under its bank credit facility, to fund the pending acquisition of the Lafarge Target Business. Cement, Concrete and Aggregates Operating earnings from Cement for the second quarter were $17.4 million, a 15% increase from the same quarter a year ago. Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $78.5 million, 8% greater than the same quarter last year. Cement sales volumes for the quarter were 864,000 tons, 6% above the same quarter a year ago. The average net sales price this quarter was $82.77 per ton, 2% higher than the same quarter last year. Concrete and Aggregates reported a $0.4 million operating loss for the second quarter, down from a slight operating profit for the same quarter a year ago, primarily due to lower concrete sales volumes and lower aggregates sales volumes in Northern California. Gypsum Wallboard and Paperboard Gypsum Wallboard and Paperboard's second quarter operating earnings of $24.2 million were up 1,513% compared to the same quarter last year. Higher wallboard average net sales prices, higher gypsum wallboard and gypsum paperboard sales volumes and lower recycled paper input costs were the primary driver of the quarterly earnings increase. Gypsum Wallboard and Paperboard revenues for the second quarter totaled $96.5 million, a 33% increase from the same quarter a year ago. The revenue increase reflects primarily higher wallboard average net sales prices and sales volumes. The average gypsum wallboard net sales price for the second quarter was $119.44 per MSF, 30% greater than the same quarter a year ago. Gypsum Wallboard sales volume for the quarter of 500 million square feet (MMSF) represents a 24% increase from the same quarter last year. The average Paperboard net sales price for this quarter was $512.12 per ton, 2% lower than the same quarter a year ago. Paperboard sales volumes for the quarter were 62,000 tons, 3% higher than the same quarter a year ago. Details of Financial Results Acquisition and Litigation Expense consists of direct costs related to our pending acquisition of the Lafarge Target Business and the write-off of deferred project costs associated with a greenfield cement project that will no longer be pursued due to the pending acquisition and legal fees related to our lawsuit against the IRS. Direct acquisition costs were approximately $3.5 million (pre-tax), greenfield write-off costs were approximately $1.0 million (pre-tax) and legal fees were approximately $1.2 million (pre-tax) during the quarter ended September 30, 2012. 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 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Tuesday, October 30, 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); 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, 2012 and in its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012.These reports are filed with the Securities and Exchange Commission. With respect to our proposed acquisition of certain assets from Lafarge as described in this press release, factors, risks and uncertainties that may cause actual events and developments to vary materially from those anticipated in forward-looking statements include, but are not limited to, our ability to complete the acquisition within the expected timeframe or at all, failure to realize the expected benefits of the transaction, possible negative effects of announcement or consummation of the transaction, significant transaction costs or unknown liabilities, and general economic and business conditions that may affect us following 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. (1) Statement of Consolidated Earnings(2) Revenues and Earnings by Lines of Business (Quarter and Six 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 EndedSeptember 30,Six Months EndedSeptember 30,   2012       2011     2012       2011     Revenues $ 164,659 $ 134,819 $ 318,701 $ 254,626   Cost of Goods Sold   132,170     126,102     263,315     241,536     Gross Profit 32,489 8,717 55,386 13,090   Equity in Earnings of Unconsolidated JV 8,750 7,936 15,218 13,384 Other Operating Income (Expense) 66 115 (204 ) 36 Acquisition and Litigation Expense (5,713 ) - (6,374 ) - Corporate General and Administrative Expense   (5,919 )   (4,472 )   (10,674 )   (8,590 )   Earnings before Interest and Income Taxes 29,673 12,296 53,352 17,920 Interest Expense, Net   (3,548 )   (4,557 )   (7,313 )   (9,142 )   Earnings before Income Taxes 26,125 7,739 46,039 8,778 Income Tax Expense   (8,172 )   (1,714 )   (14,108 )   (1,946 )   Net Earnings $ 17,953   $ 6,025   $ 31,931   $ 6,832     EARNINGS PER SHARE Basic $ 0.40   $ 0.14   $ 0.71   $ 0.15   Diluted $ 0.40   $ 0.14   $ 0.71   $ 0.15     AVERAGE SHARES OUTSTANDING Basic   44,746,225     44,200,291     44,708,499     44,190,220   Diluted   45,353,778     44,325,277     45,219,224     44,433,809       Eagle Materials Inc. Attachment 2   Eagle Materials Inc.Revenues and Segment Operating Earningsby Lines of Business(dollars in thousands)(unaudited)   Quarter EndedSeptember 30,Six Months EndedSeptember 30,   2012       2011   2012     2011   Revenues*   Gypsum Wallboard and Paperboard: Gypsum Wallboard $ 77,327 $ 50,981 $ 147,547 $ 102,323 Gypsum Paperboard   19,215     21,285   38,622     40,279   96,542 72,266 186,169 142,602   Cement (Wholly Owned) 54,105 48,892 105,855 86,603   Concrete and Aggregates   14,012     13,661   26,677     25,421     Total $ 164,659   $ 134,819   $ 318,701   $ 254,626     Segment Operating Earnings   Gypsum Wallboard and Paperboard: Gypsum Wallboard $ 16,464 $ (2,540 ) $ 30,486 $ (4,302 ) Gypsum Paperboard   7,695     4,038   12,971     7,068   24,159 1,498 43,457 2,766   Cement: Wholly Owned 8,692 7,175 12,090 10,515 Joint Venture   8,750     7,936   15,218     13,384   17,442 15,111 27,308 23,899   Concrete and Aggregates (362 ) 44 (161 ) (191 )   Other, net   66     115   (204 )   36     Sub-total 41,305 16,768 70,400 26,510 Acquisition and Litigation Expense (5,713 ) - (6,374 ) - Corporate General and Administrative Expense   (5,919 )   (4,472 ) (10,674 )   (8,590 )   Earnings Before Interest and Income Taxes $ 29,673   $ 12,296   $ 53,352   $ 17,920       * 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 September 30,   Six Months Ended September 30, 2012   2011   Change 2012   2011   Change   Gypsum Wallboard (MMSF's) 500 403 +24 % 957 815 +17 %   Cement (M Tons): Wholly Owned 639 588 +9 % 1,260 1,037 +22 % Joint Venture 225 229 -2 % 452 454 0 % 864 817 +6 % 1,712 1,491 +15 % Paperboard (M Tons): Internal 23 18 +28 % 43 35 +23 % External 39 42 -7 % 79 82 -4 % 62 60 +3 % 122 117 +4 %   Concrete (M Cubic Yards) 141 144 -2 % 278 280 -1 %   Aggregates (M Tons) 810 771 +5 % 1,462 1,383 +6 %     Average Net Sales Price* Quarter Ended September 30,     Six Months Ended September 30,   2012       2011     Change   2012       2011     Change   Gypsum Wallboard (MSF) $ 119.44 $ 92.09 +30 % $ 119.09 $ 91.05 +31 % Cement (Ton) $ 82.77 $ 81.23 +2 % $ 81.92 $ 81.24 +1 % Paperboard (Ton) $ 512.12 $ 524.20 -2 % $ 507.57 $ 515.21 -1 % Concrete (Cubic Yard) $ 66.83 $ 64.33 +4 % $ 66.07 $ 62.73 +5 % Aggregates (Ton) $ 6.01 $ 5.98 +1 % $ 6.00 $ 5.94 +1 % *Net of freight and delivery costs billed to customers.     Intersegment and Cement Revenues Quarter Ended September 30,     Six Months Ended September 30,   2012       2011   2012       2011 Intersegment Revenues: Cement $ 512 $ 1,202 $ 1,079 $ 2,241 Paperboard 12,515 10,452 23,437 20,134 Concrete and Aggregates   245   221   457   361 $ 13,272 $ 11,875 $ 24,973 $ 22,736   Cement Revenues: Wholly Owned $ 54,105 $ 48,892 $ 105,855 $ 86,603 Joint Venture   23,916   22,460   47,623   43,854 $ 78,021 $ 71,352 $ 153,478 $ 130,457 Eagle Materials Inc.       Attachment 4   Eagle Materials Inc.Consolidated Balance Sheets(dollars in thousands)(unaudited)   September 30,March 31,   2012     2011   2012*ASSETS Current Assets – Cash and Cash Equivalents $ 8,149 $ 10,692 $ 6,481 Accounts and Notes Receivable, net 74,066 64,447 56,197 Inventories 109,004 108,156 123,606 Federal Income Tax Receivable - 6,688 1,133 Prepaid and Other Assets   2,588     2,856     4,424     Total Current Assets   193,807     192,839     191,841   Property, Plant and Equipment – 1,149,075 1,122,895 1,140,744 Less: Accumulated Depreciation   (584,773 )   (536,057 )   (560,236 )   Property, Plant and Equipment, net 564,302 586,838 580,508 Investments in Joint Venture 39,908 35,545 38,939 Notes Receivable 3,316 5,005 3,436 Goodwill and Intangibles 150,584 151,221 150,902 Other Assets   22,971     18,685     19,519   $ 974,888   $ 990,133   $ 985,145     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities – Accounts Payable $ 34,730 $ 35,285 $ 38,747 Accrued Liabilities 42,602 42,189 33,619 Federal Income Tax Payable 11,455 - - Current Portion of Long-term Debt   4,677     -     4,677   Total Current Liabilities   93,464     77,474     77,043   Long-term Liabilities 39,747 38,097 39,467 Bank Credit Facility 20,000 - 70,000 Senior Notes 192,259 285,000 192,259 Deferred Income Taxes 127,307 128,127 133,865 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 45,438,711; 44,899,310 and 45,269,493 Shares, respectively. 454 449 453   Capital in Excess of Par Value 44,208 26,882 37,692 Accumulated Other Comprehensive Losses (5,284 ) (2,893 ) (5,516 ) Retained Earnings   462,733     436,997     439,882   Total Stockholders' Equity   502,111     461,435     472,511   $ 974,888   $ 990,133   $ 985,145   *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) is a non-GAAP financial measure and represents earnings per diluted share excluding the impacts from non-routine items, including costs related to our pending acquisition of the Lafarge Target Business and litigation costs related to our lawsuit against the IRS (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. Management believes Adjusted EPS represents the most comparable operating performance measure to compare the three months ended September 30, 2012 to the same period during the prior year. 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 September 30, 2012:   Three Months Ended September 30,   After tax impact of costs associated with the pending Lafarge acquisition $ (3.1 ) After tax impact of litigation costs associated with our lawsuit against the IRS   (0.8) Total Non-routine Items impact, net $ (3.9 ) Diluted average shares outstanding for the three months ended September 30, 2012 45.4 Diluted earnings per share impact from Non-routine Items $ (0.09 )   Three Months Ended September 30,   Earnings per diluted share in accordance with generally accepted accounting principles $ 0.40 Add back: Earnings per diluted share impact from Non-routine Items   0.09   Adjusted EPS $ 0.49 Eagle Materials Inc.Steven R. Rowley, 214-432-2000President and Chief Executive OfficerorD. Craig Kesler, 214-432-2000Executive Vice President and Chief Financial OfficerorRobert S. Stewart, 214-432-2000Executive Vice President, Strategy, Corporate Development and Communications