United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 11-K

 

ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the year ended December 31, 2018

 

Commission file number 1-12984

 

PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

(Full title of the plan)

 

EAGLE MATERIALS INC.

 

5960 Berkshire Lane, Suite 900
Dallas, Texas 75225

 

(Name of issuer and address of principal executive office)

 

 

 

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

AT DECEMBER 31, 2018 AND 2017

AND FOR THE YEAR ENDED DECEMBER 31, 2018

 

PAGE NO.

 

report of independent AUDITORS1

 

audited Financial Statements:

 

 

 

 

 

Supplemental Schedule:

 

 

 

 

 

 

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Report of Independent Registered Public Accounting Firm

 

To the Administrative Committee

Profit Sharing and Retirement Plan of Eagle Materials Inc.

Dallas, Texas

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of net assets available for benefits of the Profit Sharing and Retirement Plan of Eagle Materials Inc. (Plan) as of December 31, 2018 and 2017, and the related statement of changes in net assets available for benefits for the year ended December 31, 2018, and the related notes (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2018 and 2017, and the changes in net assets available for benefits for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by the Plan’s management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ SUTTON FROST CARY LLP

We have served as the Plan’s auditor since 2008

Arlington, Texas

June 26, 2019

 

 

 

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

Statements of net assets available for benefits

AT December 31, 2018 and 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

Statement of changes in net assets available for benefits

year ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 1. Description of the Plan

 

The following description of the Profit Sharing and Retirement Plan of Eagle Materials Inc. (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General

The Plan, adopted April 1, 1994 and amended and restated January 1, 2014, is a defined contribution retirement plan covering eligible employees of Eagle Materials Inc. (the Company or Eagle Materials) and eligible employees of certain subsidiaries of the Company, which have adopted the Plan with the Company’s consent. The Company and certain subsidiaries collectively comprise the “Participating Employers”. The Plan is administered by an Administrative Committee (the Committee) appointed by the Board of Directors of the Company. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

 

Participants enter the Plan, for profit sharing purposes, on the first January 1 or July 1 after their date of hire. All salaried employees of Participating Employers are eligible to participate in the Plan provided the employee is not a member of a group or class of employees covered by a collective bargaining agreement, unless such agreement extends the Plan to such group or class of employees. There are no such employees at December 31, 2018.  Participants may also contribute amounts representing distributions from other qualified defined benefit and defined contribution plans.

 

Plan Termination

On August 1, 2018, the Plan administrator approved a resolution to merge the Plan into the Eagle Materials Inc. Hourly Profit Sharing Plan effective December 31, 2018.  The merger initiated a blackout period beginning December 24, 2018 through January 6, 2019. Assets totaling $98,222,927 are reflected as transfers from the Plan in the statement of changes in net assets available for benefits and represents participant balances transferred from this Plan.

 

Transfer of Assets from the Elements PEO Retirement Savings Plan

During 2017, Eagle Materials Inc. purchased all of the outstanding equity interests in Wildcat Minerals LLC.  During 2018, the retirement plan of Wildcat Minerals, which was held in the Elements PEO Retirement Savings Plan was terminated and the assets transferred to the Plan.

 

Contributions

The Plan permits participants to contribute pre-tax up to 70% of their compensation, up to a statutory limit, as defined by the Plan, to a 401(k) account upon the date of hire. The Plan also permits participant voluntary (after-tax) contributions of up to 10% of compensation, as defined by the Plan. Total contributions, including participants, Participating Employers’ and participant voluntary (after-tax) contributions are limited to the maximum amount permitted under the applicable Internal Revenue Code (the Code) regulations and Plan document.  

 

Employer discretionary profit sharing contributions are made by the Participating Employers as determined by the Company’s Boards of Directors. Profit sharing contributions are made to all qualifying participants employed on December 31 of each year, and are allocated to participant accounts on a pro rata basis determined by each participant’s annual compensation.

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 1. DESCRIPTION OF THE PLAN (continued)

 

The Participating Employers, at their sole discretion, may also make qualified non-elective contributions to the Plan. No such qualified non-elective contributions were made for the 2018 Plan year. Forfeitures may be used to reduce employer profit sharing contributions or administrative expenses of the Plan.  Accrued discretionary employer profit sharing contributions to the Plan were reduced by assumed forfeitures of $140,000 at December 31, 2018.

 

Participants direct the investment of their accounts into various registered investment company funds, a common/collective trust fund or the Eagle Materials Common Stock Fund (the EXPSF). The EXPSF is a unitized stock fund.

 

Participants may allocate up to 15% of employer and participant (before- and after-tax) contributions to the EXPSF, whereas up to 100% may be allocated to any other investment option offered by the Plan.

 

Excess Contributions Payable

The Plan passed the discrimination test for the years ended December 31, 2018 and 2017; therefore, there were no refunds of excess contributions.  

 

Vesting

Employer Profit Sharing Contributions to the Plan vest as follows:

 

 

If a participant terminates service when the participant’s vested accrued benefit is zero, the participant is deemed to have received a distribution of such vested benefit as of the last day of the Plan year in which he/she incurs a break in service.

 

Participants are always fully vested in their participant and voluntary contributions, related earnings, and participant rollovers, as well as being fully vested in the event of full and permanent disability or death, as defined by the Plan.

 

The Plan provides for distributions when a participant terminates employment and the fair value of the participant’s vested accrued benefit is equal to or less than $5,000.  A summary of such provisions follows:

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 1. DESCRIPTION OF THE PLAN (continued)

 

 

Notes Receivable from Participants

Notes receivable from participants represent loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest.  Plan participants may borrow from their accounts an amount generally not to exceed the lesser of $50,000 or 50% of their vested account balance. The repayment terms of loans may not exceed five years except for loans used to acquire a principal residence. Each loan bears interest at the Wall Street Journal prime rate plus one percent. Principal and interest are paid ratably through automatic payroll deductions. No allowance for credit losses has been recorded as of December 31, 2018 or 2017. If a participant ceases to make loan repayments and the Plan administrator deems the loan to be a distribution, notes receivable from participants is reduced and a benefit payment is recorded.

 

Administrative Expenses

Certain administrative expenses of the Plan are paid by the Company. The Plan is not required to reimburse the Company for any administrative expenses paid by the Company. Expenses not paid by the Company are paid by the Plan.

 

Distributions

In accordance with the Plan document, distribution of a participant’s vested account is available upon the participant’s retirement, death, disability, termination of employment, or attainment of age 59½; or distribution is available to satisfy a financial hardship meeting the requirements of the Internal Revenue Service (IRS) regulations. Distributions are made in a lump-sum payment, a direct rollover distribution, or a combination thereof.

 

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accompanying financial statements have been prepared on the accrual basis of accounting.  Distributions to participants are recorded when paid.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Valuation of Investments

All of the Plan’s investments, except for notes receivable from participants are commingled with the investments of the Eagle Hourly Plan in the Eagle Materials Inc. Plans Master Trust (the Master Trust). The Master Trust is governed by a trust agreement with the Trustee which is held accountable by and reports to the Committee.

 

 

 

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Investments included in the Master Trust are valued at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Plan presents the net change in fair value of common stock, mutual funds and collective trust, which consists of realized gains or losses, unrealized appreciation (depreciation), and any income or capital gain distributions from such investments, in the accompanying statement of changes in net assets available for benefits.

 

Under the Fair Value Measurements and Disclosures topic of the Codification, ASC 820, disclosures are required about how fair value is determined for assets and liabilities and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs as follows:

 

 

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

 

Common Stock

Common stock is valued at the closing price reported on the New York Stock Exchange Composite Listing and is classified within level 1 of the valuation hierarchy.

 

Mutual Funds

These investments are public investment vehicles valued using the Net Asset Value (“NAV”) provided by the administrator of the fund.  The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding.  The NAV is a quoted price in an active market and classified within level 1 of the valuation hierarchy.

 

Collective Trust

The Master Trust holds an investment in the Fidelity Managed Income Portfolio (“Fund”), which is managed by Fidelity Management Trust Company and invests in assets (typically fixed-income securities or bond funds and may include derivative instruments such as futures contracts and swap agreements), enters into wrap contracts (“Wrap”) issued by

third parties and invests in cash equivalents represented by shares in money market funds. A Wrap is a contract with an insurance company or bank, which absorbs any gains or losses caused by market fluctuations.  The Wrap allows investors to hold their investments at the original par or book value plus accrued interest, resulting in stable rates of return.  The fair value of the units of this investment is based on the fair value of the underlying investments, and a NAV can be calculated for this Fund.  Audited financial statements are available for this investment.  The Fund intends to hold only assets whose fair market value is the contract value of the investment.  Income is calculated daily and the

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

amount of income is dependent on contract interest rates, contract maturities, and new investments in the Fund.  This investment is a fully benefit-responsive fund; however, it does contain several redemption restrictions: redemptions by Plan participants to reinvest in options that compete with the Fund may be delayed for up to 90 days, and full or partial Plan sponsor directed redemptions or terminations may be delayed for up to 365 days.  

 

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

Below is the Plan’s share of Master Trust investments carried at fair value on a recurring basis by the fair value hierarchy levels described above:

 

 

* Certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.  The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of net assets available for benefits.

 

All security transactions are recorded on the trade date. Gains and losses on the disposals of investments are determined based on the average cost of all securities. Dividend income is recorded on the effective date of a declared dividend. Income from other investments is recorded as earned on an accrual basis.

 

The Master Trust allocates net investment income/(loss) to the Plan based on the ratio of fair values of the Plan’s investment in each Master Trust account. Net investment income is then allocated to participants on a pro rata basis.  Administrative expenses for the year ended December 31, 2018 include Trustee and record keeper fees.  Fund management fees are charged directly to the Master Trust and therefore are included in the net change in fair value of investments for the Master Trust.  Administrative expenses are allocated pro rata to the Plan and the Eagle Hourly Plan.

 

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements

In February 2017, the FASB issued ASU 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Master Trust Reporting.  The amendments in ASU 2017-06 clarify presentation requirements for a plan’s interest in a master trust.  This guidance is effective for fiscal years beginning after December 15, 2018.  We are currently evaluating the impact the adoption of this guidance will have on the financial statements and related disclosures.

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 3. INTEREST IN THE MASTER TRUST

 

The fair value of the commingled investments of the participating plans in the Master Trust accounts at December 31, 2017, and the undivided percentage interests the Plan holds in each of the Master Trust accounts are summarized as follows:

 

 

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 3. INTEREST IN THE MASTER TRUST (continued)

 

Net investment income/(loss) of the Master Trust accounts for the year ended December 31, 2018, and the Plan’s share of net investment income/(loss) of each Master Trust account is summarized as follows:

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 3. INTEREST IN THE MASTER TRUST (continued)

 

The Plan invests in various investment securities.  Investment securities are exposed to various risks, such as interest rate, market and credit risks.  Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

 

NOTE 4. INCOME TAX STATUS

 

The Plan has received a determination letter from the IRS dated July 21, 2010, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended.  On April 28, 2015, the Plan received an updated determination letter from the IRS stating that the Plan is qualified under Section 401(a) of the Code reaffirming that the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification.

 

The Plan had no significant uncertain tax positions for the year ended December 31, 2018.  The Plan’s Annual Return/Report of Employee Benefit Plan is subject to examination by the IRS for three years from the date of filing.

 

NOTE 5. Related Party Transactions and party-in-interest transactions

 

Certain Plan investments are shares of mutual funds and a collective trust managed by the Trustee and, therefore, these transactions qualify as party-in-interest transactions. Fees incurred by the Plan for the investment management services are included as a reduction of the return earned on each fund.

 

The Trustee provides certain administrative services to the Plan pursuant to an agreement between the Company and the Trustee. The Trustee receives revenue from mutual fund and collective trust service providers for services the Trustee provides to the funds. This revenue is used to offset certain amounts owed to the Trustee for its administrative services to the Plan.

 

If the revenue received by the Trustee from such mutual fund or collective trust fund service providers exceeds the amount owed under the agreement between the Trustee and the Company, the Trustee remits the excess to the Plan’s trust. Such amounts may be applied to pay Plan administrative expenses.

 

The Plan invests in common stock of Eagle Materials Inc. (Eagle Common Stock). During the year ended December 31, 2018, the Plan purchased and sold shares of Eagle Common Stock for $409,978 and $672,283, respectively, and experienced net depreciation of approximately $3,280,000.

 

 

 

 

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

NOTE 6. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

 

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

 

 

Additionally, the Form 5500 has certain income and expense items that differ from amounts shown on the accompanying financial statements. These differences relate to classification only and have no effect upon the net assets available for benefits as of December 31, 2018 or 2017.

 

NOTE 7. SUBSEQUENT EVENTS

 

Subsequent events have been evaluated through the date the financial statements were issued and all necessary disclosures have been included.

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

INDEX TO EXHIBIT

 

Profit Sharing and Retirement Plan of Eagle Materials Inc.

 

 

 

 

 

 

 

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PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

notes to financial statements

DECEMBER 31, 2018

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee which administers the Profit Sharing and Retirement Plan of Eagle Materials Inc. has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PROFIT SHARING AND RETIREMENT PLAN OF EAGLE MATERIALS INC.

 

 

 

 

 

 

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Exhibit 23

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-82928) pertaining to the Profit Sharing and Retirement Plan of Eagle Materials Inc. of our report dated June 26, 2019, with respect to the financial statements and schedule of the Profit Sharing and Retirement Plan of Eagle Materials Inc. included in this Annual Report (Form 11-K) for the year ended December 31, 2018.

 

/s/ SUTTON FROST CARY LLP

Arlington, Texas

June 26, 2019