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Eagle Materials Reports Record Second Quarter Results

Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2023 ended September 30, 2022. 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 2023 Highlights

  • Record Revenue of $605 million, up 19%
  • Record Net Earnings of $139 million, up 36%, and Net Earnings per share of $3.72, up 51%
    • Prior year’s Net Earnings were affected by a Loss on Early Retirement of Senior Notes and the write-off of related debt issuance costs of $11.2 million, or $0.27 per share
  • Adjusted EBITDA of $227 million, up 21%
    • Adjusted EBITDA is a non-GAAP financial measure calculated by excluding non-routine items and certain non-cash expenses in the manner described in Attachment 6
  • Repurchased 840,000 shares of Eagle’s common stock for $101 million

Commenting on the results, Michael Haack, President and CEO, said, “At this unique time in the US markets, we are pleased to report second quarter results that once again exceeded our expectations and set quarterly records, with price increases across each business line more than offsetting cost inflation pressures. We generated record revenue of $605 million and record EPS of $3.72, and we expanded gross margins by 160 bps to 32.1%. Construction activity remained healthy across our markets, and utilization rates remained high across our network. Cashflow from operations increased 18%, to $175.6 million.

“During the quarter, we continued to drive shareholder value by prudently investing in strategic growth and returning capital to shareholders. We completed two investments: a cement distribution terminal in Nashville, Tennessee, which expands and improves the resilience of our cement geographic footprint in a strong and growing southeastern market, and an aggregates asset contiguous with our existing northern Nevada operation. We also returned $110 million of cash to shareholders through share repurchases and dividends, bringing total cash returned to shareholders to $230 million in the first half of the year.”

Mr. Haack continued, “In our heavy materials business, as demand remained strong and our operations remained virtually sold-out, we implemented a second round of cement price increases in early July and announced the next round of price increases for early January 2023. In our light materials sector, the backlog of housing construction activity supported steady wallboard shipments and orders, but we recognize the significant increase in interest rates will likely have an impact on residential construction activity in the future. Despite actions taken by the federal reserve to increase interest rates and possible recessionary conditions, we believe we are well-positioned in our principal markets for the second half of fiscal 2023.”

Segment Financial Results

Heavy Materials: Cement, Concrete and Aggregates

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, Joint Venture and intersegment Cement revenue, was $389.1 million, a 14% increase. Heavy Materials operating earnings were up 10% to $106.1 million, primarily because of higher Cement sales prices.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 11% to $319.5 million, and operating earnings were a record $98.8 million, up 11%. These increases reflect higher Cement net sales prices partially offset by lower sales volume. The average net sales price for the quarter was up 12% to $132.50 per ton. Cement sales volume decreased 2% to 2.1 million tons. Cement sales volume and operating earnings at our Joint Venture both declined during the quarter primarily because of extended equipment downtime, which reduced cement production. While these equipment issues were mostly resolved during the quarter, they may continue to have an impact on the Joint Venture’s results during the third quarter.

Concrete and Aggregates revenue increased 32% to $69.6 million, reflecting higher sales volume and Concrete pricing as well as the contribution of approximately $14 million from a recently acquired business in northern Colorado. Second quarter operating earnings declined 3% to $7.3 million, primarily reflecting higher input costs.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard and Paperboard, increased 26% to $253.5 million, reflecting higher Wallboard sales volume and prices. Gypsum Wallboard sales volume increased 6% to 783 million square feet (MMSF), while the average Gypsum Wallboard net sales price increased 22% to $233.70 per MSF.

Paperboard sales volume for the quarter was down 2% from the prior year at 85,000 tons. The average Paperboard net sales price was $603.62 per ton, up 15%, consistent with the pricing provisions in our long-term sales agreements.

Operating earnings in the sector were $95.3 million, an increase of 42%, reflecting increased Wallboard sales volume and pricing, partially offset by higher raw material costs, namely recycled fiber and energy.

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 consolidated 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, Recycled Paperboard and Concrete and Aggregates from more than 70 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 Wednesday, October 26, 2022. The conference call will be webcast on the Eagle 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 as to future events. 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, and 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; fluctuations in 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; the availability and fluctuations in the cost of raw materials; changes in the costs of energy, including, without limitation, natural gas, coal and oil, and the nature of our obligations to counterparties under energy supply contracts, such as those related to market conditions (for example, spot market prices), governmental orders and other matters; 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; 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 and other environmental regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions or the nature or level of activity in any one or more of the markets or industries in which the Company or its customers are engaged; severe weather conditions (such as winter storms, tornados and hurricanes) and their effects on our facilities, operations and contractual arrangements with third parties; 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 or construction projects undertaken by state or local governments; the availability of acquisitions or other growth opportunities that meet our financial return standards and fit our strategic focus; risks related to pursuit of acquisitions, joint ventures and other transactions or the execution or implementation of such transactions, including the integration of operations acquired by the Company; general economic conditions, including inflation and recessionary conditions; and changes in interest rates and the resulting effects on the Company and demand for our products. 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) or the cost of our raw materials 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, any forward-looking statements made by the Company are subject to the risks and impacts associated with natural disasters, pandemics or other unforeseen events, including, without limitation, the COVID-19 pandemic and responses thereto designed to contain its spread and mitigate its public health effects, as well as their impact on economic conditions, capital and financial markets. Any resurgence of the COVID-19 pandemic and responses thereto may disrupt our business operations or have an adverse effect on demand for our products. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 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

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,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

Revenue

$

605,068

 

$

509,694

 

$

1,166,455

 

$

985,464

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

410,829

 

 

354,353

 

 

821,350

 

 

703,612

 

 

 

 

 

 

 

 

Gross Profit

 

194,239

 

 

155,341

 

 

345,105

 

 

281,852

 

 

 

 

 

 

 

 

Equity in Earnings of Unconsolidated JV

 

7,156

 

 

8,260

 

 

12,254

 

 

16,230

Corporate General and Administrative Expenses

 

(13,627)

 

 

(10,667)

 

 

(25,447)

 

 

(20,135)

Loss on Early Retirement of Senior Notes

 

-

 

 

(8,407)

 

 

-

 

 

(8,407)

Other Non-Operating (Loss) Income

 

(664)

 

 

(944)

 

 

(1,299)

 

 

2,734

 

 

 

 

 

 

 

 

Earnings before Interest and Income Taxes

 

187,104

 

 

143,583

 

 

330,613

 

 

272,274

 

Interest Expense, net

 

(8,580)

 

 

(12,268)

 

 

(15,910)

 

 

(19,240)

 

 

 

 

 

 

 

 

Earnings before Income Taxes

 

178,524

 

 

131,315

 

 

314,703

 

 

253,034

 

Income Tax Expense

 

(39,529)

 

 

(29,190)

 

 

(70,703)

 

 

(55,582)

 

 

 

 

 

 

 

 

Net Earnings

$

138,995

 

$

102,125

 

$

244,000

 

$

197,452

 

 

 

 

 

 

 

NET EARNINGS PER SHARE

 

 

 

 

 

 

 

Basic

$

3.74

 

$

2.48

 

$

6.50

 

$

4.74

Diluted

$

3.72

 

$

2.46

 

$

6.46

 

$

4.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

Basic

 

37,140,197

 

 

41,222,161

 

 

37,559,087

 

 

41,623,187

Diluted

 

37,366,879

 

 

41,594,733

 

 

37,792,613

 

 

42,013,847

 

 

 

 

 

 

 

 

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,

 

2022

 

2021

 

2022

 

2021

Revenue*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

 

 

 

 

Cement (Wholly Owned)

$

281,969

 

$

256,175

 

$

533,879

 

$

495,906

Concrete and Aggregates

 

69,613

 

 

52,750

 

 

131,231

 

 

97,504

 

 

351,582

 

 

308,925

 

 

665,110

 

 

593,410

 

 

 

 

 

 

 

 

Light Materials:

 

 

 

 

 

 

 

Gypsum Wallboard

 

224,638

 

 

172,985

 

 

440,965

 

 

339,252

Gypsum Paperboard

 

28,848

 

 

27,784

 

 

60,380

 

 

52,802

 

 

253,486

 

 

200,769

 

 

501,345

 

 

392,054

 

 

 

 

 

 

 

 

Total Revenue

$

605,068

 

$

509,694

 

$

1,166,455

 

$

985,464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Operating Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

 

 

 

 

Cement (Wholly Owned)

$

91,623

 

$

80,490

 

$

148,873

 

$

135,067

Cement (Joint Venture)

 

7,156

 

 

8,260

 

 

12,254

 

 

16,230

Concrete and Aggregates

 

7,276

 

 

7,539

 

 

13,008

 

 

12,883

 

 

106,055

 

 

96,289

 

 

174,135

 

 

164,180

 

 

 

 

 

 

 

 

Light Materials:

 

 

 

 

 

 

 

Gypsum Wallboard

 

89,761

 

 

66,331

 

 

173,829

 

 

129,584

Gypsum Paperboard

 

5,579

 

 

981

 

 

9,395

 

 

4,318

 

 

95,340

 

 

67,312

 

 

183,224

 

 

133,902

 

 

 

 

 

 

 

 

Sub-total

 

201,395

 

 

163,601

 

 

357,359

 

 

298,082

 

 

 

 

 

 

 

 

Corporate General and Administrative Expense

 

(13,627)

 

 

(10,667)

 

 

(25,447)

 

 

(20,135)

Loss on Early Retirement of Senior Notes

 

-

 

 

(8,407)

 

 

-

 

 

(8,407)

Other Non-Operating (Loss) Income

 

(664)

 

 

(944)

 

 

(1,299)

 

 

2,734

 

 

 

 

 

 

 

 

Earnings before Interest and Income Taxes

$

187,104

 

$

143,583

 

$

330,613

 

$

272,274

 

 

* Excluding Intersegment and Joint Venture Revenue listed on Attachment 3

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,

 

2022

 

2021

 

Change

 

2022

 

2021

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Cement (M Tons):

 

 

 

 

 

 

 

 

 

 

 

Wholly Owned

1,981

 

1,983

 

0%

 

3,786

 

3,835

 

-1%

Joint Venture

164

 

215

 

-24%

 

352

 

399

 

-12%

 

2,145

 

2,198

 

-2%

 

4,138

 

4,234

 

-2%

 

 

 

 

 

 

 

 

 

 

 

 

Concrete (M Cubic Yards)

451

 

398

 

+13%

 

857

 

746

 

+15%

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates (M Tons)

912

 

481

 

+90%

 

1,707

 

842

 

+103%

 

 

 

 

 

 

 

 

 

 

 

 

Gypsum Wallboard (MMSFs)

783

 

736

 

+6%

 

1,581

 

1,499

 

+5%

 

 

 

 

 

 

 

 

 

 

 

 

Paperboard (M Tons):

 

 

 

 

 

 

 

 

 

 

 

Internal

40

 

37

 

+8%

 

76

 

73

 

+4%

External

45

 

50

 

-10%

 

93

 

98

 

-5%

 

85

 

87

 

-2%

 

169

 

171

 

-1%

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Net Sales Price*

 

Quarter Ended

September 30,

 

Six Months Ended

September 30,

 

2022

 

2021

 

Change

 

2022

 

2021

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Cement (Ton)

$

132.50

 

$

117.78

 

+12%

 

$

130.24

 

$

117.09

 

+11%

Concrete (Cubic Yard)

$

134.28

 

$

120.15

 

+12%

 

$

131.65

 

$

119.23

 

+10%

Aggregates (Ton)

$

10.87

 

$

10.40

 

+5%

 

$

11.05

 

$

10.20

 

+8%

Gypsum Wallboard (MSF)

$

233.70

 

$

190.93

 

+22%

 

$

226.07

 

$

183.73

 

+23%

Paperboard (Ton)

$

603.62

 

$

524.54

 

+15%

 

$

607.73

 

$

511.76

 

+19%

 
 

*Net of freight and delivery costs billed to customers.

 

Intersegment and Cement Revenue

 

Quarter Ended

September 30,

 

Six Months Ended

September 30,

 

2022

 

2021

 

2022

 

2021

Intersegment Revenue:

 

 

 

 

 

 

 

Cement

$

12,361

 

$

5,223

 

$

18,652

 

$

13,056

Paperboard

 

24,825

 

 

20,014

 

 

47,366

 

 

38,263

 

$

37,186

 

$

25,237

 

$

66,018

 

$

51,319

 

 

 

 

 

 

 

 

Cement Revenue:

 

 

 

 

 

 

 

Wholly Owned

$

281,969

 

$

256,175

 

$

533,879

 

$

495,906

Joint Venture

 

25,130

 

 

26,926

 

 

51,445

 

 

49,617

 

$

307,099

 

$

283,101

 

$

585,324

 

$

545,523

Attachment 4

Eagle Materials Inc.

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

 

 

September 30,

 

March 31,

 

2022

 

2021

 

2022*

ASSETS

 

 

 

 

 

 

Current Assets –

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

84,140

 

$

45,214

 

$

19,416

Accounts and Notes Receivable, net

 

 

232,595

 

 

196,664

 

 

176,276

Inventories

 

 

225,835

 

 

203,745

 

 

236,661

Federal Income Tax Receivable

 

 

4,371

 

 

17,954

 

 

7,202

Prepaid and Other Assets

 

 

5,933

 

 

8,534

 

 

3,172

Total Current Assets

 

 

552,874

 

 

472,111

 

 

442,727

 

 

 

 

 

 

 

Property, Plant and Equipment, net

 

 

1,655,616

 

 

1,629,133

 

 

1,616,539

Investments in Joint Venture

 

 

85,391

 

 

77,628

 

 

80,637

Operating Lease Right of Use Asset

 

 

22,126

 

 

25,127

 

 

23,856

Notes Receivable

 

 

8,501

 

 

8,485

 

 

8,485

Goodwill and Intangibles

 

 

469,491

 

 

390,107

 

 

387,898

Other Assets

 

 

15,150

 

 

17,237

 

 

19,510

 

 

$

2,809,149

 

$

2,619,828

 

$

2,579,652

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities –

 

 

 

 

 

 

Accounts Payable

 

$

113,722

 

$

101,293

 

$

113,679

Accrued Liabilities

 

 

92,863

 

 

80,324

 

 

86,754

Current Portion of Long-Term Debt

 

 

10,000

 

 

-

 

 

-

Operating Lease Liabilities

 

 

6,736

 

 

7,028

 

 

7,118

Total Current Liabilities

 

 

223,321

 

 

188,645

 

 

207,551

Long-term Liabilities

 

 

64,159

 

 

76,961

 

 

67,911

Bank Credit Facility

 

 

200,000

 

 

75,000

 

 

200,000

Bank Term Loan

 

 

187,500

 

 

-

 

 

-

2.500% Senior Unsecured Notes due 2031

 

 

738,898

 

 

737,632

 

 

738,265

Deferred Income Taxes

 

 

238,567

 

 

234,281

 

 

232,369

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 37,064,662; 40,913,931 and 38,710,929 Shares, respectively

371

409

387

Capital in Excess of Par Value

 

 

-

 

 

-

 

 

-

Accumulated Other Comprehensive Losses

 

 

(3,128)

 

 

(3,386)

 

 

(3,175)

Retained Earnings

 

 

1,159,461

 

 

1,310,286

 

 

1,136,344

Total Stockholders’ Equity

 

 

1,156,704

 

 

1,307,309

 

 

1,133,556

 

 

$

2,809,149

 

$

2,619,828

 

$

2,579,652

 
 

*From audited financial statements

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, 2022 and 2021:

 

 

Depreciation, Depletion and Amortization

 

Quarter Ended

September 30,

 

2022

 

2021

 

 

 

 

Cement

$

20,258

 

$

20,019

Concrete and Aggregates

 

4,351

 

 

2,470

Gypsum Wallboard

 

5,589

 

 

5,484

Paperboard

 

3,742

 

 

3,663

Corporate and Other

 

705

 

 

704

 

$

34,645

 

$

32,340

 

 

 

 

Attachment 6

Eagle Materials Inc.

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

(unaudited)

 

EBITDA and Adjusted EBITDA

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 impact from non-routine items. Management uses EBITDA and Adjusted EBITDA as alternative bases for comparing the operating performance of Eagle from period to period and for purposes of its budgeting and planning processes. 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 or liquidity in accordance with GAAP. The following shows the calculations of EBITDA and Adjusted EBITDA and reconciles them to net earnings in accordance with GAAP for the quarters ended September 30, 2022 and 2021:

 

 

Quarter Ended

September 30,

 

2022

2021

 

 

 

Net Earnings, as reported

$

138,995

$

102,125

Income Tax Expense

 

39,529

 

29,190

Interest Expense

 

8,580

 

12,268

Depreciation, Depletion and Amortization

 

34,645

 

32,340

EBITDA

$

221,749

$

175,923

Northern Colorado purchase accounting 1

 

867

 

-

Stock-based Compensation

 

4,402

 

3,920

Loss on Early Retirement of Senior Notes 2

 

-

 

8,407

Adjusted EBITDA

$

227,018

$

188,250

 
 

1 Represents the impact of purchase accounting on inventory costs

2 Represents the loss on the early redemption of our 4.50% senior notes due 2026

 

Contacts

For additional information, contact at 214-432-2000.

Michael R. Haack

President and Chief Executive Officer

D. Craig Kesler

Executive Vice President and Chief Financial Officer

Robert S. Stewart

Executive Vice President, Strategy, Corporate Development and Communications

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