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): June 26, 2014
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)) |
Item 7.01 Regulation FD Disclosure
Eagle Materials Inc., a Delaware corporation (“Eagle”), has prepared presentation materials that will be used by management in investor presentations beginning in June 2014. The presentation materials are being furnished with this report as Exhibit 99.1 and are incorporated herein by reference. Pursuant to the rules of the Securities and Exchange Commission, the information contained in this report (including the exhibits) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing by Eagle under such Act or the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits
| Exhibit Number |
Description | |
| 99.1 | Investor Presentation | |
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.
| EAGLE MATERIALS INC. | ||
| By: | /s/ James H. Graass | |
| James H. Graass | ||
| Executive Vice President, General Counsel and Secretary | ||
Date: June 26, 2014
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Investor Presentation | |
|
|
Exhibit 99.1
Low Cost Producer
Profitable Growth
Sound Strategic Investments
Cyclic Tailwind Benefits
Favorable Secular Trends
Healthy Balance Sheet
Unrivaled Track Record
|
|
Forward Looking Statement
Forward-Looking Statements. This presentation 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; 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; 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, 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. With respect to any acquisition, 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, the risk that we may not be able to integrate the acquired assets in an efficient and cost-effective manner with our other assets and operations, the possible inability to realize synergies or other expected benefits of the transaction, the possibility that we may incur significant costs relating to transition or integration activities or repair and maintenance of the acquired assets, the discovery of undisclosed liabilities associated with the business, theneed to repay the indebtedness incurred to fund the acquisition and the fact that increased debt may limit our ability to respond to any changes in general economic and business conditions that occur after the acquisition. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014 This report is 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.
2
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Eagle Materials Business Definition
Minerals-Based Commodity Products
Infrastructure and Related Construction Materials Energy Industry Materials Construction cement oil well cement Aggregates and concrete frac sand
Residential
and Commercial
Construction Materials
Gypsum
Wallboard
Gypsum
Paperboard
Strategy Emphasis Now Profitable, High-Returning Growth Asset Optimization
Key Demand Drivers Cyclical and Secular Growth Cyclical Growth
Competitive Advantage Cost Positions and Locations
Innovation Focus Extension of Low Cost Producer Positions
3
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Eagle Materials Business Definition
Minerals-Based Commodity Products
Infrastructure and Related Construction Materials Energy Industry Materials Construction cement oil well cement Aggregates and concrete frac sand
Residential and Commercial Construction Materials
Gypsum Wallboard
Gypsum Paperboard
Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Profitable, High-Returning Growth Asset Optimization Cyclical and Secular Growth Cyclical Growth
Cost Positions and Locations
Extension of Low Cost Producer Positions
4
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Multiple Sources of Cost Advantage
Lowest Cost Position is Important in a Commodity Industry
Operational Execution Process Management
Low-Cost Focused Innovation Smart Design and Scale
Technology and Engineering Sustained Maintenance
Sustained Innovation Focus on Cost Reduction Significant, Sustained and Across Every Aspect of the Business System Proven Cost Advantages
Inputs Processing Waste Overhead
Eagle Cost
Proximity of Mining Process Streamlined Advantages raw materials innovations control systems Industry
Unique Manufacturing Product line Low staffing technologies innovations focus requirements
EXP
Material and Logistics Maintenance No frills, only energy usage innovations disciplines necessities
5
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Our Low Cost Producer Strategy
Is Closely Aligned with Our Sustainability Objectives
Strategy Objective Sustainability Result
Less Responsible use of
Reduced cost
waste resources
Less energy Smaller
Reduced cost
used environmental footprint
Less mineral Greater
Reduced cost
resource used conservation
Less water Lower energy
Reduced cost
used requirements
More recycled Beneficial use of
Reduced cost
resource use waste streams
6
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Some Say the “Best Predictor of Grades is Grades”
Total Shareholder Return as of 3/31/2014
450%
Eagle Materials Performance 3000%
75th Percentile
Peer 2000%
50th Percentile Performance
25th Percentile 1000%
300% 0%
20-Yr
150%
0%
1-Yr 3-Yr 5-Yr 10-Yr
Source: Longnecker & Associates. Peer Group: Martin Marietta, Texas Industries Inc., USG Corp., Vulcan Materials, Titan Cement Co. S.A., CRH, Buzzi Unicem S.p.A., Holcim Ltd.,
HeidelbergCement AG, Lafarge S.A., Cementos Bio-Bio S.A., Cementos Portland Valderrivas, Cemex S.A.B. de C.V., Italcementi S.p.A., Cementos Argos S.A., Headwaters Incorporated
7
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Eagle Materials Business Definition
Minerals-Based Commodity Products
Infrastructure and Related Construction Materials Energy Industry Materials Construction Cement Oil Well Cement Aggregates and Concrete Frac Sand
Residential
and Commercial
Construction Materials
Gypsum
Wallboard
Gypsum
Paperboard
Strategy Emphasis Now Profitable, High-Returning Growth Asset Optimization
Key Demand Drivers Cyclical and Secular Growth Cyclical Growth
Competitive Advantage Cost Positions and Locations
Innovation Focus Extension of Low Cost Producer Positions
8
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Central US Cement System
Latest Acquisitions Are Now Fully Integrated
Kansas City and
Tulsa cement
plant acquisitions
(Nov. 30, 2012)
link east-to-west
and central-to- Nevada Mountain Kansas City, MO Illinois
Cement Cement Cement
south
Tulsa, OK
Eagle Cement Plants Texas
Lehigh
Acquired Cement Plants Cement Houston
(50/50 JV) Cement
Terminal
Eagle Cement Terminals
Acquired Cement Terminals
9
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System Scale
Acquisitions Increased Cement Capacity by 60%
Cement Short Tons Capacity (000)
Texas Lehigh(50%) 700 Illinois Cement 1,100 Mountain Cement 700 Nevada Cement 550
Central Plains Kansas City 1,150 Central Plains Tulsa 700
Total 4,900
10
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US Cement Consumption Outlook
Million Metric Tons
120
New capacity
and capacity
expansion — is
US Capacity constrained for
the foreseeable
90 future
Some existing
capacity may be
closed by 2015
due to NESHAP
60 compliance, but
imports will be
required again to
meet demand
regardless
30
Non-Residential
Residential
Governmental
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Portland Cement Association
11
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Texas Cement Consumption History and Outlook
Key States, Metric Tons, PCA
18,000,000
12,000,000
6,000,000
0
Texas is Forecast to Exceed 2007 Peak in 2015
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
12
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Cement Consumption History and Outlook
Key States, Metric Tons, PCA
Central Plains Forecast to Illinois Forecast to Nearly Regain 2005 Peak in 2017 Regain 2005 Peak in 2018
8,000,000 6,000,000 4,000,000 2,000,000 0
2000
2001
2002 2003 2004
2005
2006
2007 2008
2009 2010
2011
2012 2013 2014
2015
2016
2017 2018 2000 2001 2002 2003 2004 2005 2006 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Nebraska Kansas Oklahoma Missouri
Wisconsin
Illinois
13
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Cement Consumption History and Outlook
Key States, Metric Tons, PCA
Nevada Recovery Expected to Mountain Forecast to be Sustained but Slower Surpass 2005 Peak in 2018
3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0
2000
2001
2002
2003
2004
2005
2006
2007 2008 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Wyoming
Colorado
14
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Highway Spending Outlook and Composition
Millions of Real $, PCA
$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0
2000 2002 2004 2006 2008 2010 2012 2014 2016
ARR Act
State and Local
Federal
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EPA Regulatory Developments
Final Rule Issued – Extension Granted
On February 12, 2013 the EPA published the final rule amending
National Emission Standards for Hazardous Air Pollutants (NESHAP) for the Portland Cement Manufacturing Industry
New Source Performance Standards (NSPS) for Portland Cement Plants
Existing Facilities
Compliance deadlines extended until September 2015
New Facilities
Standards continue to apply to all sources which commenced construction or reconstruction after May 6, 2009
16
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EPA Regulatory Developments
Standards Tough to Meet, Will Chill New Capacity Addition
Existing Source New Source
Pollutant Standard Standard
Standards for Particulate Matter 0.07 lb/ton clinker 0.02 lb/ton clinker
new sources
are challenging Mercury 55 lb/MM tons 21 lb/MM tons clinker
to meet clinker
individually — 3.5 -10 lb/ton clinker
and as a set of Nitrogen Oxide (varies) 1.5 lb/ton clinker
standards
compliance Sulfur Oxide 1.2-5.0 lb/ton clinker 0.4 lb/ton clinker
may be not be (varies)
economically
or even Total Hydrocarbons 24 ppm 24 ppm
technologically
feasible Hydrogen Chloride 3 ppm 3 ppm
Organic Air Pollutants 12 ppm 12 ppm
17
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Concrete/Cement Value Proposition
In Relation to Asphalt, the Leading Substitute
Historically initial costs per construction mile have favored asphalt over concrete
Asphalt is used over 85% of the time in US highway and road construction, and this has been the case over many decades
Life cycle costs have always favored concrete over asphalt
Now initial costs per mile as well as life cycle costs favor concrete, driven by escalation in asphalt bitumen input costs (oil driven)
The cost cross-over point favoring concrete over asphalt occurred in 2008 but has been masked by the recession and long-standing historical practices
Concrete has, in fact, been gaining share over asphalt since 2008
Outlook is for a further strengthening of the concrete/cement value proposition
More rapid share gains for concrete are expected as the cost and performance advantages of concrete increase, as cost benefits are broadly understood, and as use adaptations occur
18
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Life Cycle Analysis Favors Concrete
Pavement Life Expectancy (Before Reconstruction is Required)
Concrete
25 Average:
29.3 Years
20 Asphalt
Average:
13.6 Years
15
Asphalt
10 Concrete
Number of State DOTs Reporting 5 0
1-5 Years 6-10 Years 11-15 16-20 21-30 31-50
Years Years Years Years Source: PCA Highway Report
19
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Asphalt Costs Have Diverged Higher
Costs Linked to Oil/Bitumen
250
Asphalt PPI
200
150
Concrete/Cement PPI
100
50
0
12/1/2003 12/1/2005 12/1/2007 12/1/2009 12/1/2011 12/1/2013
US Department of Labor (BLS) 12/2003=100 Ppi, Mfg, Nsa, Asphalt
Paving and Roofing Materials; Cement and Concrete Product
20
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Concrete Share Has, In Fact, Been Growing
Growth Since 2008 Has Been Masked by the Recession
Concrete Share of Highway Paving Volume
18% 17.5%
16.2%
15.5%
Long-Term Average 14.4%
13.3%
13%
12.1%
8%
2007 2008 2009 2010 2011
Source: PCA June 2012, Oman Data Systems
21
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Outlook and Strategic Implications
A Game Changer for Cement and Asphalt
The price of asphalt is expected to continue to diverge from the price of concrete as oil price inflation remains higher than the cost inflation of the fuels used in producing cement (e.g., petcoke, shale gas)
High oil prices have also driven refineries to invest in cokers to extract more high grade products from crude — this has meant less production of bitumen and more production of petcoke, further extending the gap
Petroleum coke is a low-value solid by-product of the oil refining industry and this is reflected in pricing — decisions about production levels tend not to be made on the markets for petroleum coke; it is a waste recovery by-product “priced to move” rather than to store
Competition from concrete will limit asphalt’s ability to pass on costs
Well-positioned cement producers should enjoy increasing advantages
22
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PCA Projected Initial Bid Paving Costs
Dollars Per Two Lane Road Mile—Urban
$1,400,000
Asphalt
$1,200,000
$1,000,000
$800,000
$600,000
Concrete
$400,000
$200,000
$-
2003 2007 2011 2015 2019
23
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Eagle Materials Business Definition
Minerals-Based Commodity Products
Infrastructure and Related Construction Materials Energy Industry Materials Construction Cement Oil Well Cement Aggregates and Concrete Frac Sand
Residential
and Commercial
Construction Materials
Gypsum
Wallboard
Gypsum
Paperboard
Strategy Emphasis Now Profitable, High-Returning Growth Asset Optimization Key Demand Drivers Cyclical and Secular Growth Cyclical Growth Competitive Advantage Cost Positions and Locations Innovation Focus Extension of Low Cost Producer Positions
24
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Close Relationship of End-Uses
Oil Well Cement and Now Frac Sand
Important elements for unlocking energy in the shale plays
Specialty oil well cement for casing wells
Special purpose frac sand to keep the fractures “propped open”
25
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Premium Well-Casing Cement Solutions
Desirable at 250 Degrees, Required at 350 Degrees and Up
Temperatures generally increase with drilling depths, but at different rates for different regions
Desirable Required
Conventional Cement Specialty
Performance
Grades Perform to Solutions Only,
Degradation
Specification e.g. “Class H”
Low Drilling Depth Much of the Some of the
Shale Plays Eagle Ford Eagle Ford
0° 50° 100° 150° 200° 250° 300° 350° 400° 450° 500°
Fahrenheit
26
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Shifting the Cement Product Mix to Oil Well Cement
A Company Priority
Eagle has been the pre-eminent US producer of oil well cement for decades
Strong value proposition for Eagle and a key profit growth opportunity
Eagle has the capability, know-how, permits and customer relationships required to effectively produce and market specialty oil-well cement, especially Class H, the grade used in the most demanding applications
The alternative for oil services companies is to apply additives to more conventional grade cement to achieve similar results – this can be more costly and less predictable
27
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Oil Well Cement Strategic Directions
A Mutually Reinforcing Growth Opportunity with Frac Sand
Current Target Key Target Plant
Eagle Production Production Cement Shale Capability
Plant Proportion Proportion Grades Plays Status
Texas Mature
~ 50% > 50% Class H Eagle Ford
Lehigh capability
Mature
Mountain ~ 25% > 25% Class G Niobrara capability
Class H Mid- Acquisition,
Tulsa 4% > 50% and C Continent proven
Kansas Class G Acquisition,
0% > 25% Bakken
City and H feasible
Proven
Illinois 0% TBD Class G Utica capability
28
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Eagle Ford Cement Consumption Outlook
Continued Growth is Expected
Increasing drilling activity and newer drilling technologies (e.g., cemented liners) should continue to drive growth in cement consumption
South Texas represents ~15-20% of US oil well cement spend
Estimated Annual Oil Well Cement Demand and Outlook
2011 2012 2013 2014 2015
29
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Eagle Materials Business Definition
Minerals-Based Commodity Products
Infrastructure and Related Construction Materials Energy Industry Materials Construction Cement Oil Well Cement Aggregates and Concrete Frac Sand
Residential and Commercial Construction Materials
Gypsum Wallboard
Gypsum Paperboard
Strategy Emphasis Now Profitable, High-Returning Growth Asset Optimization
Key Demand Drivers Cyclical and Secular Growth Cyclical Growth
Competitive Advantage Cost Positions and Locations
Innovation Focus Extension of Low Cost Producer Positions
30
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Frac Sand is a Natural, Close Adjacency for Eagle
Key Growth Opportunity and a Top Eagle Priority
Frac sand entry leverages Eagle’s existing
Customer base (oil well cement)
Owned distribution infrastructure that we have repurposed (Corpus Christi port terminal, proximate to Eagle Ford)
Processing expertise (aggregates)
Advantaged access to scarce northern white sand resource
Long-standing relationships (at Illinois Cement) enabled acquisition of a 50-year scale reserve deposit in Illinois
Northern white sand is the preferred proppant in oily plays — and increasingly so
Northern white sand deposits are not near any shale plays, so logistics is a key
Opportunity to create a low-cost system
31
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Geology is Destiny – Quality Scarcity
Dark Red Represents the Outcroppings of Quartz Sand ~ 500 Million Years Old
Small Universe of Areas in North America (and in the World)
Studies have shown geologic conditions creating these deposits are rare across the globe. England deposits are played out, limited quality deposits in Poland, Asia/Pacific and Arabia have lower crush strengths – implies a relatively low sand import threat (and long-term potential export possibilities).
32
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Sandstone Formation Section View
Sandstone Closest to the Surface is Even Less Common
Eagle Northern White Frac Sand Mine
33
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Eagle’s Illinois Mine
Northern White Frac Sand
Mine Entrance
34
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Frac Sand at Corpus Christi
Destined for the Eagle Ford
35
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Corpus Christi Site Repurposed, Now Operational
Third-Party Sand Used to Initialize Processing/Logistics Systems
36
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Frac Sand Demand Drivers
Positive Trends Across Multiple Drivers
Horizontal Rig count x Wells Per Rig x Lateral Lengths x Stages Per Lateral x Proppant Per Stage = Propant Demand
37
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Eagle Ford and Mid-Continent Lead Growth
Proppant Use
Year-on-Year Growth in Proppant Consumption (2012 vs. 2013)
Mid-Continent
Eagle Ford
Source: PacWest Sample Analysis
38
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Frac Sand Supply and Demand
Growth in Both
Acute
Shortage
Price Pressure for Most Desirable Grades
Generally in Balance for Most Desirable Grades
Slower Rate of Capacity Growth —Back to 2012 Pricing Conditions?
Consumption
Brown and Fit-for-Purpose Sand 100 M
40-70
30-50
20-40 and Coarser
2011 Capacity
2012 Capacity
2013 Capacity
2014 Capacity
80 70 60 50 40 30 20 10 -
39
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Eagle Materials Business Definition
Minerals-Based Commodity Products
Infrastructure and Related Construction Materials
Construction Cement
Aggregates and Concrete
Energy Industry Materials
Oil Well Cement
Frac Sand
Residential and Commercial Construction Materials
Gypsum Wallboard
Gypsum Paperboard
Strategy Emphasis Now Profitable, High-Returning Growth Asset Optimization
Key Demand Drivers Secular and Cyclical Growth Cyclical Recovery
Competitive Advantage Cost Position Scarcity Cost Position
Innovation Focus Extension of Low Cost Producer Positions
40
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Eagle’s US Market and Production Locations
Gypsum, CO 700 MMSF
Albuquerque, NM 425 MMSF
Bernalillo, NM 550 MMSF
Currently idled
Duke, OK 1,300 MMSF
Lawton, OK 350,000 tons paperboard
Georgetown, SC 900 MMSF
Wallboard
Paperboard
Total Wallboard
| 4 |
|
Billion SF |
Note: Design capacities here do not necessarily represent current operating rates (“effective capacity”).
41
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US Demand for Gypsum Wallboard
Closely Linked with Housing
New Home Sales (000)
Wallboard Shipments (BSF)
1,400 1,200 1,000 800 600 400 200 0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
45 40 35 30 25 20 15 10 5 0
42
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Industry Wallboard Shipment Volumes
Gypsum Association, Square Feet, Calendar Years
6,000,000 5,000,000 4,000,000
Back to 60% of prior peak
volume (2005) by 2014?
Annual Volume
2014 ~ 22 BSF?
2013 20.5 BSF 2012 18.9 BSF 2011 17.2 BSF
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
43
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Single-Family Housing Starts Outlook
Moody’s Analytics, SAAR in Millions, May 2014
2.0
1.5
1.0
0.5
0.0
Census Bureau’s population projections imply 1.28 million annual average growth in net new households between 2013 and 2020 (Harvard’s Joint Center for Housing Studies)
Severe Decline
Extended Trough
Moody’s Scenario
2005Q1
2008Q1
2011Q1
2014Q1
2017Q1
44
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Latest Regional Recovery Outlooks — Wallboard
Indexed Single Family Housing Starts, 2013Q4=100%
300% 250% 200% 150% 100%
2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
Albuquerque, NM
(Albuquerque, NM, Santa Fe, NM, Phoenix, AZ MSA’s)
Eagle, CO
(Denver, Co, Boulder, Co, Cheyenne, WY, Salt Lake, UT MSA’s)
Duke, OK
(DFW-Arlington, Oklahoma City, OK, Little Rock, AR, Wichita Falls, TX, Wichita, KS MSA’s)
Georgetown, SC
(Charleston, SC, Columbia, SC, Wilmington, NC, Raleigh, NC, Charlotte, NC, Atlanta, Jacksonville, FL, Savannah, GA MSA’s)
Current Relative MSA Scale in Starts
Source: Moody’s Economy.com, Company analysis
45
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Repair and Remodeling Outlook
Harvard University, 2014 Four-Quarter Outlook
46
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Financial Discipline is a Key Enabler of Success
An Eagle Hallmark
Capital Structure
Funding Strategy
Use of Cash
47
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Financial Summary
Profitable Performance Throughout the Cycle
$1,200 $1,000 $800 $600 $400 $200 $0
$501
$579
$699
$925
$994
$845
$695
$533 $537
$581
$739
$1,009
Adjusted Revenues (1)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$400 $300 $200 $100 $0
Adjusted EBITDA (2)
$131
$141
$201
$289
$351
$220
$152
$123
$100 $105
$171
$282
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: Dollars in millions. For fiscal years ending March 31.
(1) Includes our proportionate share of our JV’s revenues. Adjusted Revenues is a non-GAAP measure. See slides titled “Non-GAAP Reconciliation” in the Appendix.
(2) Adjusted EBITDA represents earnings before: (i) interest, taxes, depreciation and amortization and (ii) certain other non-cash or non-routine items. Adjusted EBITDA is a non-GAAP measure. See slides titled “Non-GAAP Reconciliation” in the Appendix.
48
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Eagle Evolution Since Peak of Last Cycle
Long-Standing Goal of Doubling Peak-to-Peak Earnings Power
1. One-third more productive capacity in place
| • |
|
Cement: Illinois expansion (additional 470,000 tons) |
| • |
|
Wallboard: Ultra-efficient plant built in Georgetown, SC |
| • |
|
Paper: 350,000 ton capacity today (270,000 tons last peak) |
2. Cement acquisitions increased capacity by 60% November 30, 2012
| • |
|
Two cement plants and related assets |
3. Shift of cement product mix toward oil well and other specialties
| • |
|
Class H at Texas Lehigh was ~25% now over 50% of manufactured |
4. We believe that over time our frac sand opportunity has as much earnings contribution potential as does cement or wallboard
49
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Capital Structure
$ Million
$1,000 $800 $600 $400 $200 $-
Equity Net Debt
$462
$285
$473
$260
$696
$831
$485
$375
3/31/11 3/31/12 3/31/13 3/31/14
Net Debt-to-Cap 38% 35% 41% 31%
Net Debt-to-Equity 62% 55% 70% 45%
50
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Debt Maturity Profile
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
$ In Millions
$9.5
$57.0
$8.0
$81.2
$36.5
2015 2016 2017 2018 2019 2020
Fiscal Years
2005 Senior Notes
2007 Senior Notes
51
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Disciplined Use of Cash
$ Millions
$600 $500 $400 $300 $200 $100 $0
Share Repurchases
Dividends
Growth and Improvement
Maintenance
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY 14
Note: Issued 3.5 million shares in FY 13 pursuant to the Lafarge Acquisition Assets.
52
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Investment Summary
Eagle Materials
| • |
|
Low cost producer |
| • |
|
Leading positions in attractive markets |
| • |
|
Now in early innings of the up-cycle |
| • |
|
Favorable secular demand trends, especially for cement and frac-sand |
| • |
|
Recently acquired assets have increased Eagle’s cement capacity by 60% |
| • |
|
Track record of sound strategic choices and superior operational execution |
| • |
|
Healthy capital structure and increasing capacity to fund growth |
53
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Non-GAAP Reconciliation
54
|
|
Non-GAAP Reconciliation
Adjusted EBITDA
Adjusted EBITDA represents earnings before (i) interest, taxes, depreciation and amortization, and (ii) certain other non-cash or non-routine items. Adjusted EBITDA is a non-GAAP measure that provides supplemental information regarding the operating performance of our business without regard to financing methods, capital structures or historical cost bases and is used as a benchmark for evaluating the creditworthiness of particular issuers. Adjusted EBITDA should not, however, be considered as an alternative to net income, operating income, cash flow from operations or any other measure of financial performance in accordance with GAAP.
$ million
Net Income
Plus:
Taxes
Interest
DD&A
Other Charges
Adjusted EBITDA
3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 3/31/09 3/31/10 3/31/11 3/31/12 3/31/13 3/31/14
$ 57.6 $ 66.9 $ 106.7 $ 161.0 $ 202.7 $ 97.8 $ 41.8 $ 29.0 $ 14.8 $ 18.7 $ 57.7 $ 124.2
29.0 35.2 51.4 80.1 101.6 46.6 20.4 10.3 1.9 3.2 26.4 57.6
9.6 3.8 3.3 6.3 5.4 21.1 28.9 21.5 16.5 16.6 15.8 18.2
33.2 33.0 34.5 38.6 40.0 44.9 51.2 50.8 49.2 50.1 56.9 70.0
1.4 2.2 5.5 3.2 1.8 9.7 9.8 11.0 17.9 15.9 14.9 11.8
$ 131 $ 141 $ 201 $ 289 $ 351 $ 220 $ 152 $ 123 $ 100 $ 105 $ 171 $ 281.8
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Non-GAAP Reconciliation
Adjusted Revenue
$ million
Eagle
Joint Venture (50%)
Total
3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 3/31/09 3/31/10 3/31/11 3/31/12 3/31/13 3/31/14
$ 429 $ 503 $ 617 $ 860 $ 918 $ 748 $ 599 $ 468 $ 462 $ 495 $ 643 $ 898
72 76 82 65 76 97 96 65 75 86 96 111
$ 501 $ 579 $ 699 $ 925 $ 994 $ 845 $ 695 $ 533 $ 537 $ 581 $ 739 $ 1,009
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M A J O R FA C I L I T I E S
CEMENT PLANTS
CENTRAL PLAINS CEMENT COMPANY LLC
Sugar Creek, Missouri Tulsa, Oklahoma
ILLINOIS CEMENT COMPANY LLC LaSalle, Illinois MOUNTAIN CEMENT COMPANY Laramie, Wyoming NEVADA CEMENT COMPANY Fernley, Nevada TEXAS LEHIGH CEMENT
COMPANY LP Buda, Texas (50% joint venture)
CONCRETE, AGGREGATES, SAND PLANTS
CENTEX MATERIALS LLC Austin and Buda, Texas MATHEWS READYMIX LLC Marysville, California
TALON CONCRETE AND AGGREGATES LLC Kansas & Missouri – 10 locations WESTERN AGGREGATES LLC
Marysville, California
NORTHERN WHITE SAND COMPANY LLC Corpus Christi, Texas
GYPSUM WALLBOARD PLANTS
AMERICAN GYPSUM COMPANY LLC Albuquerque, New Mexico Bernalillo, New Mexico Gypsum, Colorado Duke, Oklahoma Georgetown, South Carolina
PAPERBOARD MILL
REPUBLIC PAPERBOARD COMPANY LLC
Lawton, Oklahoma
L E G E N D
CEMENT PLANTS CEMENT TERMINALS WALLBOARD PLANTS
WALLBOARD DISTRIBUTION YARDS CONCRETE OPERATIONS
AGGREGATES OPERATIONS SAND PLANT
PAPERBOARD MILL
DALLAS HEADQUARTERS
MARYSVILLE
RENO (FERNLEY)
LARAMIE
GYPSUM
BERNALILLO
ALBUQUERQUE
LASALLE
KANSAS CITY, KS & MO
TULSA
DUKE LAWTON
DALLAS
AUSTIN (BUDA)
GEORGETOWN
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Contact Information
Steve Rowley
President and CEO
(214) 432-2020
srowley@eaglematerials.com
Craig Kesler
Executive Vice President and CFO
(214) 432-2013
ckesler@eaglematerials.com
Bob Stewart
Executive Vice President, Strategy, Corporate Development and Communications
(214) 432-2040
bstewart@eaglematerials.com
Eagle Materials Inc.
NYSE: EXP
www.eaglematerials.com
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