Form 8-K EAGLE MATERIALS INC For: Oct 24

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

October 24, 2016

 

 

Eagle Materials Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		1-12984		75-2520779
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
3811 Turtle Creek Blvd., Suite 1100, Dallas, Texas				75219
(Address of principal executive offices)				(Zip code)

Registrant’s telephone number including area code: (214) 432-2000

Not Applicable

(Former name or former address if changed from last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

On October 24, 2016, Eagle Materials Inc., a Delaware corporation (“Eagle”), announced its results of operations for the quarter ended September 30, 2016. A copy of Eagle’s earnings press release announcing these results is being furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits

 

Exhibit Number		Description
99.1		Earnings Press Release dated October 24, 2016 issued by Eagle Materials Inc. (announcing quarterly operating results)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: October 24, 2016

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Earnings Press Release dated October 24, 2016 issued by Eagle Materials Inc. (announcing quarterly operating results)

Exhibit 99.1

 

				Contact at 214/432-2000 David B. Powers President & CEO D. Craig Kesler Executive Vice President & CFO Robert S. Stewart Executive Vice President

News For Immediate Release

EAGLE MATERIALS REPORTS SECOND QUARTER EPS UP 112% ON RECORD REVENUES

DALLAS, TX (October 24, 2016) – Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2017 ended September 30, 2016. Notable items for the quarter include (all comparisons, unless otherwise noted, are with the prior year’s second quarter):

Company Second Quarter Results    

 

•

Record revenues of $332.7 million, up 1%

 

•

Earnings before income taxes of $89.4 million, up 109%

 

•

Prior year results included certain charges of $37.8 million (pre-tax)

 

•

Net Earnings of $60.2 million, up 102%

 

•

Net Earnings per diluted share of $1.25, up 112%

Other Highlights

 

•

Eagle repurchased 263,800 shares of its common stock

 

•

Net debt-to-capitalization ratio of 27%

Eagle’s construction products and building materials businesses performed well during the quarter, with the Cement business reporting record second quarter operating earnings of $50.7 million. Second quarter cash flow from operations improved 22% and was used to fund capital improvements, pay dividends, reduce debt and repurchase shares.

As previously announced, on September 11, 2016, Eagle entered into a definitive agreement with a subsidiary of CEMEX S.A.B. de C.V. (“Cemex”) to purchase Cemex’s Fairborn, Ohio cement plant and related assets. The purchase price is $400 million, subject to customary post-closing adjustments. Eagle expects that the acquisition will increase its U.S. annual cement capacity by approximately 20% to nearly 6 million tons. The transaction is expected to close in the fourth quarter of calendar 2016, or shortly thereafter. Eagle intends to finance the acquisition through a combination of cash on hand and borrowings under its existing bank credit facility.

The prior year’s second quarter results include an impairment charge related to several intangible assets originally recorded in connection with our acquisition of CRS Proppants and a write-down of raw sand inventory values. The impairments and inventory revaluation charges totaled approximately $37.8 million (pre-tax) and were recorded in Cost of Goods Sold within our Oil and Gas Proppants segment.

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Cement, Concrete and Aggregates

Cement revenues for the second quarter, including joint venture and intersegment revenues, totaled $166.8 million, which was 1% higher than the same quarter last year. The average net sales price for this quarter was $99.95 per ton, 3% higher than the same quarter last year. Wholly-owned average net sales prices improved 5% from the second quarter last year. The average net cement sales price at our Joint Venture declined year-over-year reflecting the shift from oil well cement to construction-grade cement over the past year; however, profitability improved 4% at the Joint Venture. Total Cement sales volumes for the quarter were 1.4 million tons, 3% lower than the same quarter a year ago. Cement sales volumes were negatively impacted during the quarter by above average rainfall in our Midwestern markets.

Operating earnings from Cement for the second quarter were a record $50.7 million and 4% greater than the same quarter a year ago. The earnings improvement was driven primarily by improved average net cement sales prices.

Concrete and Aggregates reported revenues for the second quarter of $38.8 million, an increase of 7%. Second quarter operating earnings were $4.8 million, a 25% improvement from the same quarter a year ago, reflecting improved aggregates sales volumes and improved concrete and aggregates sales prices.

Gypsum Wallboard and Paperboard

Gypsum Wallboard and Paperboard revenues for the second quarter totaled $151.9 million, which were 6% greater than the same quarter a year ago. The average Gypsum Wallboard net sales price this quarter was $154.41 per MSF, 2% less than the same quarter a year ago. Gypsum Wallboard sales volume for the quarter of 650 million square feet (MMSF) represents a 5% increase from the same quarter last year. Paperboard sales volumes for the quarter were a record 86,000 tons, 15% greater than the same quarter a year ago. The average Paperboard net sales price this quarter was $501.84 per ton, 1% less than the same quarter a year ago.

Gypsum Wallboard and Paperboard reported second quarter operating earnings of $51.9 million, up 8% from the same quarter last year. The earnings improvement primarily reflects improved Gypsum Wallboard and Paperboard sales volumes and lower operating costs primarily driven by lower energy and maintenance costs during the quarter.

Oil and Gas Proppants

Oil and Gas Proppants reported second quarter revenues of $6.6 million, a 64% decrease from the prior year primarily reflecting a 45% decline in frac sand sales volumes. The second quarter’s operating loss of $4.1 million includes depreciation, depletion and amortization of $4.3 million. Our frac sand business continues to be impacted by the significant slowdown in oil and gas drilling activity over the past two years.

 

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Details of Financial Results

We conduct one of our cement plant operations, Texas Lehigh Cement Company LP, 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 only, 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 within 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, and Oil and Gas Proppants from 40 facilities across the US. Eagle is headquartered 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 October 24, 2016. The conference call will be webcast simultaneously on the Eagle 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 Eagle at (214) 432-2000.

 

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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 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, 2016 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016. These reports are filed with the Securities and Exchange Commission. With respect to our proposed acquisition of certain assets from Cemex as described in this press release, factors, risks and uncertainties that may cause actual events and developments to vary materially from those anticipated in such forward-looking statements include, but are not limited to, the need to obtain antitrust clearance of the transaction under the Hart-Scott-Rodino Antitrust Improvements Act and other factors that may create obstacles for or interfere with our ability to complete the acquisition within the expected timeframe or at all, failure to realize any expected synergies from or other benefits of the transaction, possible negative effects of announcement or consummation of the transaction, significant transaction or ownership transition costs, unknown liabilities or other adverse developments affecting the assets to be acquired and the target business, including the results of operations of the target business prior and after the closing, the effect on the target business of the same or similar factors discussed above to which our business is subject, including changes in market conditions in the construction industry 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.

David B. Powers

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

Attachment 1    Statement of Consolidated Earnings

Attachment 2    Revenues and Earnings by Lines of Business (Quarter and Six Months)

Attachment 3    Sales Volume, Net Sales Prices and Intersegment and Cement Revenues

Attachment 4    Consolidated Balance Sheets

Attachment 5    Depreciation, Depletion and Amortization by Lines of Business

 

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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,
		2016				2015				2016				2015
Revenues		$	332,658			$	328,988			$	630,162			$	613,951
Cost of Goods Sold			241,448				284,694				466,997				508,560
Gross Profit			91,210				44,294				163,165				105,391
Equity in Earnings of Unconsolidated JV			12,147				11,680				20,127				19,510
Other, net			504				572				1,579				1,007
Acquisition and Litigation Expense			—				—				—				—
Corporate General and Administrative Expenses			(8,832	)			(9,364	)			(18,665	)			(18,355	)
Earnings before Interest and Income Taxes			95,029				47,182				166,206				107,553
Interest Expense, net			(5,656	)			(4,342	)			(9,557	)			(8,828	)
Earnings before Income Taxes			89,373				42,840				156,649				98,725
Income Tax Expense			(29,136	)			(13,021	)			(51,068	)			(31,144	)
Net Earnings		$	60,237			$	29,819			$	105,581			$	67,581
EARNINGS PER SHARE
Basic		$	1.26			$	0.60			$	2.20			$	1.36
Diluted		$	1.25			$	0.59			$	2.18			$	1.34
AVERAGE SHARES OUTSTANDING
Basic			47,809,476				49,828,189				47,911,276				49,797,972
Diluted			48,229,485				50,470,151				48,375,116				50,460,947

 

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Eagle Materials Inc.

Attachment 2

Eagle Materials Inc.

Revenues and Earnings by Lines of Business

(dollars in thousands)

(unaudited)

 

		Quarter Ended September 30,								Six Months Ended September 30,
		2016				2015				2016				2015
Revenues*
Gypsum Wallboard and Paperboard:
Gypsum Wallboard		$	122,923			$	119,701			$	236,185			$	234,753
Gypsum Paperboard			29,007				23,549				57,316				44,316
			151,930				143,250				293,501				279,069
Cement (Wholly Owned)			135,300				131,022				251,669				229,061
Oil and Gas Proppants			6,631				18,307				11,727				41,132
Concrete and Aggregates			38,797				36,409				73,265				64,689
Total		$	332,658			$	328,988			$	630,162			$	613,951
Segment Operating Earnings
Gypsum Wallboard and Paperboard:
Gypsum Wallboard		$	41,698			$	40,002			$	81,034			$	80,896
Gypsum Paperboard			10,220				8,138				21,447				14,168
			51,918				48,140				102,481				95,064
Cement:
Wholly Owned			38,569				36,897				62,189				54,780
Joint Venture			12,147				11,680				20,127				19,510
			50,716				48,577				82,316				74,290
Oil and Gas Proppants			(4,090	)			(44,600	)			(10,002	)			(50,236	)
Concrete and Aggregates			4,813				3,857				8,497				5,783
Other, net			504				572				1,579				1,007
Sub-total			103,861				56,546				184,871				125,908
Acquisition and Litigation Expenses			—				—				—				—
Corporate General and Administrative Expenses			(8,832	)			(9,364	)			(18,665	)			(18,355	)
Earnings Before Interest and Income Taxes		$	95,029			$	47,182			$	166,206			$	107,553

 

*	Net of Intersegment and Joint Venture Revenues listed on Attachment 3

 

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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,
		2016				2015				Change				2016				2015				Change
Gypsum Wallboard (MMSF’s)			650				619				+5	%			1,237				1,196				+3	%
Cement (M Tons):
Wholly Owned			1,200				1,248				-4	%			2,233				2,239				0	%
Joint Venture			242				236				+3	%			460				448				+3	%
			1,442				1,484				-3	%			2,693				2,687				0	%
Paperboard (M Tons):
Internal			30				30				0	%			58				58				0	%
External			56				45				+24	%			111				86				+29	%
			86				75				+15	%			169				144				+17	%
Concrete (M Cubic Yards)			315				324				-3	%			602				573				+5	%
Aggregates (M Tons)			1,027				764				+34	%			1,971				1,431				+38	%
Frac Sand (M Tons)			111				203				-45	%			185				434				-57	%

 

		Average Net Sales Price*
		Quarter Ended September 30,												Six Months Ended September 30,
		2016				2015				Change				2016				2015				Change
Gypsum Wallboard (MSF)		$	154.41			$	157.88				-2	%		$	155.97			$	160.57				-3	%
Cement (Ton)		$	99.95			$	97.21				+3	%		$	100.27			$	97.74				+3	%
Paperboard (Ton)		$	501.84			$	505.12				-1	%		$	500.41			$	504.49				-1	%
Concrete (Cubic Yard)		$	95.00			$	92.07				+3	%		$	93.92			$	92.06				+2	%
Aggregates (Ton)		$	8.64			$	8.50				+2	%		$	8.48			$	8.24				+3	%

 

*	Net of freight and delivery costs billed to customers.

 

		Intersegment and Cement Revenues
		Quarter Ended September 30,								Six Months Ended September 30,
		2016				2015				2016				2015
Intersegment Revenues:
Cement		$	4,536			$	4,232			$	8,071			$	7,358
Paperboard			15,452				15,596				29,958				30,147
Concrete and Aggregates			343				262				626				514
		$	20,331			$	20,090			$	38,655			$	38,019
Cement Revenues:
Wholly Owned		$	135,300			$	131,022			$	251,669			$	229,061
Joint Venture			26,975				29,536				51,863				56,547
		$	162,275			$	160,558			$	303,532			$	285,608

 

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Eagle Materials Inc.

Attachment 4

Eagle Materials Inc.

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

 

		September 30,								March 31,
		2016				2015				2016*
ASSETS
Current Assets –
Cash and Cash Equivalents		$	54,506			$	6,348			$	5,391
Accounts and Notes Receivable, net			155,241				154,959				120,221
Inventories			217,582				224,667				243,595
Federal Income Tax Receivable			1,046				—				5,623
Prepaid and Other Assets			6,761				9,026				5,173
Total Current Assets			435,136				395,000				380,003
Property, Plant and Equipment –			2,089,499				2,041,242				2,072,776
Less: Accumulated Depreciation			(855,148	)			(779,010	)			(817,465	)
Property, Plant and Equipment, net			1,234,351				1,262,232				1,255,311
Investments in Joint Venture			47,852				49,883				49,465
Notes Receivable			1,158				2,760				2,672
Goodwill and Intangibles			162,506				177,069				165,827
Other Assets			27,132				33,306				30,357
		$	1,908,135			$	1,920,250			$	1,883,635
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities –
Accounts Payable		$	62,481			$	70,584			$	66,614
Accrued Liabilities			53,793				50,066				45,975
Federal Income Tax Payable			—				5,108				—
Current Portion of Senior Notes			8,000				57,045				8,000
Total Current Liabilities			124,274				182,803				120,589
Long-term Liabilities			59,922				70,425				61,122
Bank Credit Facility			—				327,000				382,000
Private Placement Senior Unsecured Notes			117,714				125,714				117,714
4.500% Senior Unsecured Notes due 2026			343,468				—				—
Deferred Income Taxes			164,027				144,617				161,679
Stockholders’ Equity –
Preferred Stock, Par Value $0.01; None Issued			—				—				—
Common Stock, Par Value $0.01; Authorized 100,000,000 Shares; Issued and Outstanding 48,223,617; 50,286,652 and 48,526,843 Shares, respectively			482				503				485
Capital in Excess of Par Value			130,638				273,372				168,969
Accumulated Other Comprehensive Losses			(10,785	)			(11,428	)			(11,409	)
Retained Earnings			978,395				807,244				882,486
Total Stockholders’ Equity			1,098,730				1,069,691				1,040,531
		$	1,908,135			$	1,920,250			$	1,883,635

 

*	From audited financial statements.

 

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Eagle Materials Inc.

Attachment 5

Eagle Materials Inc.

Depreciation, Depletion and Amortization by Lines of Business

(dollars in thousands)

(unaudited)

The following presents depreciation, depletion and amortization by segment for the quarters ended September 30, 2016 and 2015:

 

		Depreciation, Depletion and Amortization ($ in thousands)
		Quarter Ended September 30,
		2016				2015
Cement		$	8,784			$	8,629
Gypsum Wallboard			4,768				4,819
Paperboard			2,106				2,063
Oil and Gas Proppants			4,261				7,205
Concrete and Aggregates			1,920				1,565
Other			547				489
		$	22,386			$	24,770

 

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