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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended

September 30, 2019

Commission File Number 1-12984

 

EAGLE MATERIALS INC.

(Exact name of registrant as specified in its charter)

 

Delaware (State of Incorporation)

75-2520779 (I.R.S. Employer Identification No.)

5960 Berkshire Lane, Suite 900, Dallas, Texas 75225 (Address of principal executive offices)

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock (par value $.01 per share)

 

EXP

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes      No  

As of October 26, 2019, the number of outstanding shares of common stock was:

 

Class

 

Outstanding Shares

Common Stock, $.01 Par Value

 

41,631,496

 

 

 

 


TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION (unaudited)

 

 

 

 

 

Page

Item 1.

 

Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Statements of Earnings for the Three and Six Months Ended September 30, 2019 and 2018

 

1

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Earnings for the Three and Six Months Ended September 30, 2019 and 2018

 

2

 

 

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2019, and March 31, 2019

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2019 and 2018

 

4

 

 

 

 

 

 

 

Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended September 30, 2019 and 2018

 

5

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

6

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

41

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

41

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

42

 

 

 

 

 

Item 1a.

 

Risk Factors

 

42

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

52

 

 

 

 

 

Item 4.

 

Mine Safety Information

 

52

 

 

 

 

 

Item 6.

 

Exhibits

 

52

 

 

 

 

 

SIGNATURES

 

53

 

 

  

 


 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Six Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(dollars in thousands, except share and per share data)

 

Revenue

 

$

414,526

 

 

$

381,499

 

 

$

785,123

 

 

$

775,255

 

Cost of Goods Sold

 

 

310,020

 

 

 

283,568

 

 

 

605,288

 

 

 

585,690

 

Gross Profit

 

 

104,506

 

 

 

97,931

 

 

 

179,835

 

 

 

189,565

 

Equity in Earnings of Unconsolidated Joint Venture

 

 

12,357

 

 

 

10,173

 

 

 

21,789

 

 

 

19,424

 

Corporate General and Administrative Expense

 

 

(13,458

)

 

 

(9,922

)

 

 

(34,712

)

 

 

(17,925

)

Litigation Settlements and Losses

 

 

 

 

 

 

 

 

 

 

 

(1,800

)

Other Non-Operating Income

 

 

942

 

 

 

428

 

 

 

1,142

 

 

 

999

 

Interest Expense, Net

 

 

(10,137

)

 

 

(6,817

)

 

 

(18,983

)

 

 

(13,449

)

Earnings before Income Taxes

 

 

94,210

 

 

 

91,793

 

 

 

149,071

 

 

 

176,814

 

Income Taxes

 

 

(22,417

)

 

 

(19,190

)

 

 

(35,974

)

 

 

(37,872

)

Net Earnings

 

 

71,793

 

 

 

72,603

 

 

 

113,097

 

 

 

138,942

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.73

 

 

$

1.54

 

 

$

2.65

 

 

$

2.93

 

Diluted

 

$

1.72

 

 

$

1.53

 

 

$

2.63

 

 

$

2.90

 

AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

41,572,127

 

 

 

47,219,532

 

 

 

42,714,896

 

 

 

47,453,655

 

Diluted

 

 

41,833,775

 

 

 

47,563,818

 

 

 

42,985,715

 

 

 

47,853,472

 

CASH DIVIDENDS PER SHARE

 

$

0.10

 

 

$

0.10

 

 

$

0.20

 

 

$

0.20

 

See notes to unaudited consolidated financial statements.


 

1


 

EAGLE MATERIALS INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (unaudited)

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Six Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(dollars in thousands)

 

Net Earnings

 

$

71,793

 

 

$

72,603

 

 

$

113,097

 

 

$

138,942

 

Net Actuarial Change in Defined Benefit Plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net actuarial loss

 

 

43

 

 

 

73

 

 

 

88

 

 

 

146

 

Tax expense

 

 

(10

)

 

 

(17

)

 

 

(20

)

 

 

(34

)

Comprehensive Earnings

 

$

71,826

 

 

$

72,659

 

 

$

113,165

 

 

$

139,054

 

See notes to unaudited consolidated financial statements.


 

2


 

EAGLE MATERIALS INC. AND SUBSDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)

 

 

 

September 30,

 

 

March 31,

 

 

 

2019

 

 

2019

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets -

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

53,684

 

 

$

8,601

 

Accounts and Notes Receivable, net

 

 

182,689

 

 

 

128,722

 

Inventories

 

 

241,599

 

 

 

275,194

 

Income Tax Receivable

 

 

 

 

 

5,480

 

Prepaid and Other Assets

 

 

9,083

 

 

 

9,624

 

Total Current Assets

 

 

487,055

 

 

 

427,621

 

Property, Plant, and Equipment, net

 

 

1,456,059

 

 

 

1,426,939

 

Notes Receivable

 

 

6,436

 

 

 

2,898

 

Investment in Joint Venture

 

 

71,662

 

 

 

64,873

 

Operating Lease Right of Use Assets

 

 

63,526

 

 

 

 

Goodwill and Intangible Assets, net

 

 

230,770

 

 

 

229,115

 

Other Assets

 

 

10,703

 

 

 

17,717

 

 

 

$

2,326,211

 

 

$

2,169,163

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities -

 

 

 

 

 

 

 

 

Accounts Payable

 

$

77,656

 

 

$

80,884

 

Accrued Liabilities

 

 

66,373

 

 

 

61,949

 

Income Taxes Payable

 

 

2,931

 

 

 

 

Operating Lease Liabilities

 

 

11,315

 

 

 

 

Current Portion of Long-term Debt

 

 

36,500

 

 

 

36,500

 

Total Current Liabilities

 

 

194,775

 

 

 

179,333

 

Long-term Debt

 

 

930,426

 

 

 

655,092

 

Noncurrent Operating Lease Liabilities

 

 

56,586

 

 

 

 

Other Long-term Liabilities

 

 

35,371

 

 

 

34,492

 

Deferred Income Taxes

 

 

98,298

 

 

 

90,759

 

Total Liabilities

 

 

1,315,456

 

 

 

959,676

 

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 41,625,996 and 45,117,393 Shares, respectively

 

 

416

 

 

 

451

 

Capital in Excess of Par Value

 

 

2,990

 

 

 

 

Accumulated Other Comprehensive Losses

 

 

(3,248

)

 

 

(3,316

)

Retained Earnings

 

 

1,010,597

 

 

 

1,212,352

 

Total Stockholders’ Equity

 

 

1,010,755

 

 

 

1,209,487

 

 

 

$

2,326,211

 

 

$

2,169,163

 

See notes to the unaudited consolidated financial statements.

 

3


 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

For the Six Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

(dollars in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net Earnings

 

$

113,097

 

 

$

138,942

 

Adjustments to Reconcile Net Earnings to Net Cash Provided

by Operating Activities, Net of Effect of Non-Cash Activity -

 

 

 

 

 

 

 

 

Depreciation, Depletion, and Amortization

 

 

56,333

 

 

 

62,176

 

Deferred Income Tax Provision

 

 

7,520

 

 

 

10,851

 

Stock Compensation Expense

 

 

12,137

 

 

 

7,559

 

Equity in Earnings of Unconsolidated Joint Venture

 

 

(21,789

)

 

 

(19,424

)

Distributions from Joint Venture

 

 

15,000

 

 

 

19,500

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts and Notes Receivable

 

 

(51,242

)

 

 

(35,894

)

Inventories

 

 

35,562

 

 

 

19,290

 

Accounts Payable and Accrued Liabilities

 

 

423

 

 

 

(24,399

)

Other Assets

 

 

9,244

 

 

 

(3,551

)

Income Taxes Payable (Receivable)

 

 

8,411

 

 

 

(174

)

Net Cash Provided by Operating Activities

 

 

184,696

 

 

 

174,876

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Additions to Property, Plant, and Equipment

 

 

(60,007

)

 

 

(93,444

)

Acquisition Spending

 

 

(30,872

)

 

 

 

Proceeds from Sale of Property, Plant, and Equipment

 

 

 

 

 

2,281

 

Net Cash Used in Investing Activities

 

 

(90,879

)

 

 

(91,163

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Increase in Credit Facility

 

 

275,000

 

 

 

10,000

 

Dividends Paid to Stockholders

 

 

(8,815

)

 

 

(9,582

)

Purchase and Retirement of Common Stock

 

 

(313,887

)

 

 

(122,404

)

Proceeds from Stock Option Exercises

 

 

1,767

 

 

 

1,992

 

Shares Redeemed to Settle Employee Taxes on Stock Compensation

 

 

(2,799

)

 

 

(1,785

)

Net Cash Used in Financing Activities

 

 

(48,734

)

 

 

(121,779

)

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

45,083

 

 

 

(38,066

)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

 

8,601

 

 

 

48,068

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

53,684

 

 

$

10,002

 

 

See notes to the unaudited consolidated financial statements.


 

4


 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

 

 

 

Common

Stock

 

 

Capital in

Excess of

Par Value

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Losses

 

 

Total

 

 

 

(dollars in thousands)

 

Balance at March 31, 2018

 

$

483

 

 

$

122,379

 

 

$

1,298,840

 

 

$

(4,012

)

 

$

1,417,690

 

Net Earnings

 

 

 

 

 

 

 

 

66,339

 

 

 

 

 

 

66,339

 

Stock Option Exercises and Restricted Share Vesting

 

 

 

 

 

1,992

 

 

 

 

 

 

 

 

 

1,992

 

Purchase and Retirement of Common Stock

 

 

(5

)

 

 

(52,339

)

 

 

 

 

 

 

 

 

(52,344

)

Dividends to Stockholders

 

 

 

 

 

 

 

 

(4,791

)

 

 

 

 

 

(4,791

)

Stock Compensation Expense

 

 

1

 

 

 

3,492

 

 

 

 

 

 

 

 

 

3,493

 

Shares Redeemed to Settle Employee Taxes

 

 

 

 

 

(956

)

 

 

 

 

 

 

 

 

(956

)

Unfunded Pension Liability, net of tax

 

 

 

 

 

 

 

 

 

 

 

56

 

 

 

56

 

Balance at June 30, 2018

 

$

479

 

 

$

74,568

 

 

$

1,360,388

 

 

$

(3,956

)

 

$

1,431,479

 

Net Earnings

 

 

 

 

 

 

 

 

72,603

 

 

 

 

 

 

72,603

 

Stock Option Exercises and Restricted Share Vesting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase and Retirement of Common Stock

 

 

(7

)

 

 

(70,053

)

 

 

 

 

 

 

 

 

(70,060

)

Dividends to Stockholders

 

 

 

 

 

 

 

 

(4,712

)

 

 

 

 

 

(4,712

)

Stock Compensation Expense

 

 

 

 

 

4,066

 

 

 

 

 

 

 

 

 

4,066

 

Shares Redeemed to Settle Employee Taxes

 

 

 

 

 

(829

)

 

 

 

 

 

 

 

 

(829

)

Unfunded Pension Liability, net of tax

 

 

 

 

 

 

 

 

 

 

 

56

 

 

 

56

 

Balance at September 30, 2018

 

$

472

 

 

$

7,752

 

 

$

1,428,279

 

 

$

(3,900

)

 

$

1,432,603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

Stock

 

 

Capital in

Excess of

Par Value

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Losses

 

 

Total

 

 

 

(dollars in thousands)

 

Balance at March 31, 2019

 

$

451

 

 

$

 

 

$

1,212,352

 

 

$

(3,316

)

 

$

1,209,487

 

Net Earnings

 

 

 

 

 

 

 

 

41,304

 

 

 

 

 

 

41,304

 

Stock Option Exercises and Restricted Share Vesting

 

 

 

 

 

396

 

 

 

 

 

 

 

 

 

396

 

Purchase and Retirement of Common Stock

 

 

(23

)

 

 

(7,748

)

 

 

(190,584

)

 

 

 

 

 

(198,355

)

Dividends to Stockholders

 

 

 

 

 

 

 

 

(4,316

)

 

 

 

 

 

(4,316

)

Stock Compensation Expense

 

 

1

 

 

 

8,218

 

 

 

 

 

 

 

 

 

8,219

 

Shares Redeemed to Settle Employee Taxes

 

 

 

 

 

(866

)

 

 

 

 

 

 

 

 

(866

)

Cumulative Effect of Change in Accounting for Leases

 

 

 

 

 

 

 

 

(636

)

 

 

 

 

 

(636

)

Unfunded Pension Liability, net of tax

 

 

 

 

 

 

 

 

 

 

 

33

 

 

 

33

 

Balance at June 30, 2019

 

$

429

 

 

$