Energy, Automobile, EV, Renewable News | Eagle Materials Reports Record Second Quarter Results With 15% EPS Growth

Eagle Materials Reports Record Second Quarter Results With 15% EPS Growth

October 26, 2023

DALLAS–(BUSINESS WIRE)–Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2024 ended September 30, 2023. Notable items for the quarter are highlighted below (unless otherwise noted, all comparisons are with the prior year’s fiscal second quarter):

Second Quarter Fiscal 2024 Highlights

Record Revenue of $622.2 million, up 3%
Record Net Earnings of $150.6 million, up 8%
Record Net Earnings per diluted share of $4.26, up 15%
Adjusted net earnings per share (Adjusted EPS) of $4.28, up 14%
- Adjusted EPS is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 6
Adjusted EBITDA of $247.2 million, up 9%
- Adjusted EBITDA is a non-GAAP financial measure calculated by excluding non-routine items and certain non-cash expenses in the manner described in Attachment 6
Repurchased 432,500 shares of Eagle’s common stock for $77 million

Commenting on the second quarter results, Michael Haack, President and CEO, said, “Market conditions for our construction materials remained resilient during the quarter, even as the Fed continued to raise interest rates and tighten money supply to contain inflation. Several factors helped offset the higher rates and supported demand for wallboard and cement, including limited housing supply, strong homebuyer demand, increasing infrastructure awards and significant investment in domestic manufacturing facilities.

Against this backdrop, our businesses performed well. We generated record revenue of $622 million and record EPS of $4.26, and we expanded gross margins by 150 bps to 33.6%. Cash flow from operations was $172.4 million. We returned $86 million of cash to shareholders through share repurchases and dividends, while using our strong cashflow to strengthen our balance sheet: at September 30, 2023, Eagle’s net debt was $1.1 billion, and our net adjusted leverage ratio (net debt to Adjusted EBITDA) was 1.3x. We also made progress on our strategic initiatives. We increased production and sales of Portland Limestone Cement, to more than 60% across our system, and we continued the integration of our recently acquired cement import terminal in Stockton, California.

Mr. Haack continued, “In our Heavy Materials business, as demand remained strong and our operations remained nearly sold-out, we implemented a second round of cement price increases in early July across half our markets and announced the next round of price increases for early January 2024. In our Light Materials sector, the backlog of housing construction supported resilient wallboard shipments and orders, but we recognize the significant increase in interest rates may have an impact on residential construction activity in the future. Nonetheless, we expect that our portfolio of businesses will remain well-positioned for the second half of fiscal 2024.”

Segment Financial Results

Heavy Materials: Cement, Concrete and Aggregates

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, Joint Venture and intersegment Cement revenue, was $426.9 million, a 10% increase. Heavy Materials operating earnings were up 19% to $126.1 million. Both the increase in revenue and operating earnings were primarily attributable to higher Cement sales prices.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 13% to $360.8 million, and operating earnings were a record $121.4 million, up 23%. These increases reflect higher Cement net sales prices and the contribution of approximately $13 million of revenue from the recently acquired Stockton Terminal, which helped mitigate an overall decrease in sales volume. The increase in operating earnings was partially offset by the impact of the step-up in inventory values related to the acquisition of the Stockton Terminal. The average net sales price for the quarter was up 15% to $151.99 per ton, reflecting Cement price increases implemented in January 2023 and a second round of price increases implemented in early July 2023. Cement sales volume decreased 1% to 2.1 million tons. Excluding the recently acquired Stockton Terminal, Cement sales volume declined 5%, because of wet weather in several markets and extreme heat in our southern markets throughout the quarter.

Concrete and Aggregates revenue decreased 5% to $66.1 million, reflecting lower Concrete sales volume partially offset by higher Concrete pricing. Second quarter operating earnings declined 36% to $4.6 million, primarily reflecting lower Concrete sales volume and higher cost of materials.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard and Paperboard, decreased 8% to $233.5 million, reflecting lower Wallboard and Paperboard sales volume and lower Paperboard sales prices. Gypsum Wallboard sales volume declined 6% to 733 million square feet (MMSF), while the average Gypsum Wallboard net sales price was flat with the prior year at $233.69 per MSF.

Paperboard sales volume for the quarter was down 6% from the prior year at 80,000 tons, in line with overall gypsum wallboard shipments. The average Paperboard net sales price was $542.28 per ton, down 10%, consistent with the pricing provisions in our long-term sales agreements that factor in changes to input costs.

Operating earnings in the sector were $93.3 million, a decrease of 2%, reflecting lower Wallboard sales volume, partially offset by lower raw material costs, namely recycled fiber and energy.

Details of Financial Results

We conduct one of our cement plant operations through a 50/50 joint venture, Texas Lehigh Cement Company LP (the Joint Venture). We use the equity method of accounting for our 50% interest in the Joint Venture. For segment reporting purposes only, we proportionately consolidate our 50% share of the Joint Venture’s revenue and operating earnings, which is consistent with the way management organizes the segments within the Company for making operating decisions and assessing performance.

In addition, for segment reporting purposes, we report intersegment revenue as a part of a segment’s total revenue. Intersegment sales are eliminated on the consolidated income statement. Refer to Attachment 3 for a reconciliation of these amounts.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Portland Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and Aggregates from more than 70 facilities across the US. Eagle’s corporate headquarters is in Dallas, Texas.

Eagle’s senior management will conduct a conference call to discuss the financial results, forward looking information and other matters at 8:30 a.m. Eastern Time (7:30 a.m. Central Time) on Thursday, October 26, 2023. The conference call will be webcast on the Eagle website, eaglematerials.com. A replay of the webcast and the presentation will be archived on the website for one year.

Forward-Looking Statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statements and generally arise when the Company is discussing its beliefs, estimates or expectations as to future events. These statements are not historical facts or guarantees of future performance but instead represent only the Company’s belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside the Company’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company’s actual performance include the following: the cyclical and seasonal nature of the Company’s businesses; fluctuations in public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; the availability and fluctuations in the cost of raw materials; changes in the costs of energy, including, without limitation, natural gas, coal and oil (including diesel), and the nature of our obligations to counterparties under energy supply contracts, such as those related to market conditions (for example, spot market prices), governmental orders and other matters; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; material nonpayment or non-performance by any of our key customers; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change and other environmental regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions or the nature or level of activity in any one or more of the markets or industries in which the Company or its customers are engaged; severe weather conditions (such as winter storms, tornados and hurricanes) and their effects on our facilities, operations and contractual arrangements with third parties; competition; cyber-attacks or data security breaches; increases in capacity in the gypsum wallboard and cement industries; changes in the demand for residential housing construction or commercial construction or construction projects undertaken by state or local governments; the availability of acquisitions or other growth opportunities that meet our financial return standards and fit our strategic focus; risks related to pursuit of acquisitions, joint ventures and other transactions or the execution or implementation of such transactions, including the integration of operations acquired by the Company; general economic conditions, including inflation and recessionary conditions; and changes in interest rates and the resulting effects on the Company and demand for our products. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) or the cost of our raw materials can be expected to adversely affect the revenue and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company’s result of operations. Finally, any forward-looking statements made by the Company are subject to the risks and impacts associated with natural disasters, the outbreak, escalation or resurgence of health emergencies, pandemics or other unforeseen events, including, without limitation, the COVID-19 pandemic and responses thereto designed to contain its spread and mitigate its public health effects, as well as their impact on our operations and on economic conditions, capital and financial markets. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and subsequent quarterly and annual reports upon filing. These reports are filed with the Securities and Exchange Commission. All forward-looking statements made herein are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. The Company undertakes no duty to update any forward-looking statement to reflect future events or changes in the Company’s expectations.

Attachment 1 Statement of Consolidated Earnings

Attachment 2 Revenue and Earnings by Lines of Business

Attachment 3 Sales Volume, Average Net Sales Prices and Intersegment and Cement Revenue

Attachment 4 Consolidated Balance Sheets

Attachment 5 Depreciation, Depletion and Amortization by Lines of Business

Attachment 6 Reconciliation of Non-GAAP Financial Measures

Attachment 7 Reconciliation of Net Debt to Adjusted EBITDA


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,
		2023			2022			2023			2022

Revenue	$	622,236		$	605,068		$	1,223,757		$	1,166,455

Cost of Goods Sold		413,218			410,829			838,744			821,350

Gross Profit		209,018			194,239			385,013			345,105

Equity in Earnings of Unconsolidated JV		10,346			7,156			13,505			12,254
Corporate General and Administrative Expenses		(16,576	)		(13,627	)		(28,255	)		(25,447	)
Other Non-Operating (Loss) Income		1,605			(664	)		1,818			(1,299	)

Earnings before Interest and Income Taxes		204,393			187,104			372,081			330,613
Interest Expense, net		(10,204	)		(8,580	)		(22,443	)		(15,910	)

Earnings before Income Taxes		194,189			178,524			349,638			314,703
Income Tax Expense		(43,636	)		(39,529	)		(78,236	)		(70,703	)

Net Earnings	$	150,553		$	138,995		$	271,402		$	244,000

NET EARNINGS PER SHARE
Basic	$	4.29		$	3.74		$	7.72		$	6.50
Diluted	$	4.26		$	3.72		$	7.66		$	6.46


AVERAGE SHARES OUTSTANDING
Basic		35,056,973			37,140,197			35,165,268			37,559,087
Diluted		35,336,966			37,366,879			35,433,837			37,792,613


Attachment 2

Eagle Materials Inc. Revenue and Earnings by Lines of Business (dollars in thousands) (unaudited)

	Quarter Ended September 30,						Six Months Ended September 30,
		2023			2022			2023			2022
Revenue*

Heavy Materials:
Cement (Wholly Owned)	$	322,593		$	281,969		$	614,365		$	533,879
Concrete and Aggregates		66,104			69,613			133,519			131,231
		388,697			351,582			747,884			665,110

Light Materials:
Gypsum Wallboard		209,233			224,638			428,330			440,965
Recycled Paperboard		24,306			28,848			47,543			60,380
		233,539			253,486			475,873			501,345

Total Revenue	$	622,236		$	605,068		$	1,223,757		$	1,166,455

Segment Operating Earnings

Heavy Materials:
Cement (Wholly Owned)	$	111,083		$	91,623		$	181,985		$	148,873
Cement (Joint Venture)		10,346			7,156			13,505			12,254
Concrete and Aggregates		4,640			7,276			11,674			13,008
		126,069			106,055			207,164			174,135

Light Materials:
Gypsum Wallboard		85,705			89,761			176,562			173,829
Recycled Paperboard		7,590			5,579			14,792			9,395
		93,295			95,340			191,354			183,224

Sub-total		219,364			201,395			398,518			357,359

Corporate General and Administrative Expense		(16,576	)		(13,627	)		(28,255	)		(25,447	)
Other Non-Operating (Loss) Income		1,605			(664	)		1,818			(1,299	)

Earnings before Interest and Income Taxes	$	204,393		$	187,104		$	372,081		$	330,613
* Excluding Intersegment and Joint Venture Revenue listed on Attachment 3


Attachment 3

Eagle Materials Inc. Sales Volume, Average Net Sales Prices and Intersegment and Cement Revenue (dollars in thousands, except per unit data) (unaudited)

	Sales Volume
	Quarter Ended September 30,				Six Months Ended September 30,
	2023	2022	Change		2023	2022	Change

Cement (M Tons):
Wholly Owned	1,959	1,981	-1	%	3,807	3,786	+1	%
Joint Venture	170	164	+4	%	335	352	-5	%
	2,129	2,145	-1	%	4,142	4,138	0	%

Concrete (M Cubic Yards)	362	451	-20	%	747	857	-13	%

Aggregates (M Tons)	1,171	912	+28	%	2,328	1,707	+36	%

Gypsum Wallboard (MMSFs)	733	783	-6	%	1,496	1,581	-5	%

Recycled Paperboard (M Tons):
Internal	33	40	-18	%	73	76	-4	%
External	47	45	+4	%	90	93	-3	%
	80	85	-6	%	163	169	-4	%

	Average Net Sales Price*
	Quarter Ended September 30,						Six Months Ended September 30,
	2023		2022		Change		2023		2022		Change

Cement (Ton)	$	151.99	$	132.50	+15	%	$	149.70	$	130.24	+15	%
Concrete (Cubic Yard)	$	145.39	$	134.28	+8	%	$	143.55	$	131.65	+9	%
Aggregates (Ton)	$	11.15	$	10.87	+3	%	$	11.21	$	11.05	+1	%
Gypsum Wallboard (MSF)	$	233.69	$	233.70	0	%	$	235.20	$	226.07	+4	%
Recycled Paperboard (Ton)	$	542.28	$	603.62	-10	%	$	539.35	$	607.73	-11	%

*Net of freight and delivery costs billed to customers.

	Intersegment and Cement Revenue
	Quarter Ended September 30,				Six Months Ended September 30,
	2023		2022		2023		2022
Intersegment Revenue:
Cement	$	9,251	$	12,361	$	19,388	$	18,652
Concrete and Aggregates		3,783		–		6,821		–
Recycled Paperboard		18,710		24,825		40,801		47,366
	$	31,744	$	37,186	$	67,010	$	66,018

Cement Revenue:
Wholly Owned	$	322,593	$	281,969	$	614,365	$	533,879
Joint Venture		28,907		25,130		56,030		51,445
	$	351,500	$	307,099	$	670,395	$	585,324


Attachment 4

Eagle Materials Inc. Consolidated Balance Sheets (dollars in thousands) (unaudited)

	September 30,						March 31,
		2023			2022		2023*
ASSETS
Current Assets –
Cash and Cash Equivalents	$	47,321		$	84,140		$	15,242
Accounts and Notes Receivable, net		244,832			232,595			195,052
Inventories		301,374			225,835			291,882
Federal Income Tax Receivable		8,144			4,371			16,267
Prepaid and Other Assets		10,135			5,933			3,060
Total Current Assets		611,806			552,874			521,503

Property, Plant and Equipment, net		1,676,738			1,655,616			1,662,061
Investments in Joint Venture		100,115			85,391			89,111
Operating Lease Right of Use Asset		22,068			22,126			20,759
Notes Receivable		–			8,501			7,382
Goodwill and Intangibles		490,180			469,491			466,043
Other Assets		16,187			15,150			14,143
	$	2,917,094		$	2,809,149		$	2,781,002

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities –
Accounts Payable	$	113,737		$	113,722		$	110,408
Accrued Liabilities		90,815			92,863			86,472
Income Taxes Payable		1,778			–			–
Current Portion of Long-Term Debt		10,000			10,000			10,000
Operating Lease Liabilities		8,205			6,736			6,009
Total Current Liabilities		224,535			223,321			212,889
Long-term Liabilities		62,590			64,159			66,543
Bank Credit Facility		162,000			200,000			157,000
Bank Term Loan		177,500			187,500			182,500
2.500% Senior Unsecured Notes due 2031		740,165			738,898			739,532
Deferred Income Taxes		243,670			238,567			236,844
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 35,031,889; 37,064,662 and 35,768,376 Shares, respectively		350			371			358
Capital in Excess of Par Value		–			–			–
Accumulated Other Comprehensive Losses		(3,451	)		(3,128	)		(3,547	)
Retained Earnings		1,309,735			1,159,461			1,188,883
Total Stockholders’ Equity		1,306,634			1,156,704			1,185,694
	$	2,917,094		$	2,809,149		$	2,781,002

*From audited financial statements


Attachment 5

Eagle Materials Inc. Depreciation, Depletion and Amortization by Lines of Business (dollars in thousands) (unaudited)

The following table presents Depreciation, Depletion and Amortization by lines of business for the quarters ended September 30, 2023 and 2022:

	Depreciation, Depletion and Amortization
	Quarter Ended September 30,
	2023		2022

Cement	$	22,187	$	20,258
Concrete and Aggregates		4,962		4,351
Gypsum Wallboard		5,548		5,589
Recycled Paperboard		3,708		3,742
Corporate and Other		792		705
	$	37,197	$	34,645


Attachment 6

Eagle Materials Inc. Reconciliation of Non-GAAP Financial Measures (unaudited) (dollars in thousands, other than earnings per share amounts, and number of shares in thousands)

Adjusted Earnings per Diluted Share (Adjusted EPS) Adjusted EPS is a non-GAAP financial measure and represents net earnings per diluted share excluding the impacts from non-routine items, such as purchase accounting (Non-routine Items). Management uses measures of earnings excluding the impact of Non-routine Items as a performance measure in order to compare operating results of the Company from period to period and for purposes of its budgeting and planning processes. Although management believes that Adjusted EPS is useful in evaluating the Company’s business, this information should be considered as supplemental in nature and is not meant to be considered in isolation, or as a substitute for, earnings per diluted share and the related financial information prepared in accordance with GAAP. In addition, our presentation of Adjusted EPS may not be the same as similarly titled measures reported by other companies, limiting its usefulness as a comparative measure. The following shows the calculation of Adjusted EPS and reconciles Adjusted EPS to net earnings per diluted share in accordance with GAAP for the quarters ended September 30, 2023 and 2022:

	Quarter Ended September 30,
		2023			2022

Net Earnings, as reported	$	150,553		$	138,995

Non-routine Items:
Purchase accounting ¹	$	1,107		$	867
Total Non-routine Items before Taxes	$	1,107		$	867
Tax Impact on Non-routine Items		(249	)		(192	)
After-tax Impact of Non-routine Items	$	858		$	675

Adjusted Net Earnings	$	151,411		$	139,670

Diluted Average Shares Outstanding		35,337			37,367


Net earnings per diluted share, as reported	$	4.26		$	3.72
Adjusted net earnings per diluted share (Adjusted EPS)	$	4.28		$	3.74

¹ Represents the impact of purchase accounting on inventory costs and related business development costs


Attachment 6, continued

Eagle Materials Inc. Reconciliation of Non-GAAP Financial Measures (dollars in thousands) (unaudited)

EBITDA and Adjusted EBITDA We present Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA to provide additional measures of operating performance and allow for more consistent comparison of operating performance from period to period. EBITDA is a non-GAAP financial measure that provides supplemental information regarding the operating performance of our business without regard to financing methods, capital structures or historical cost basis. Adjusted EBITDA is also a non-GAAP financial measure that further excludes the impact from non-routine items and stock-based compensation. Management uses EBITDA and Adjusted EBITDA as alternative bases for comparing the operating performance of Eagle from period to period and for purposes of its budgeting and planning processes. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate Adjusted EBITDA in the same manner. Neither EBITDA nor Adjusted EBITDA should be considered in isolation or as an alternative to net income, cash flow from operations or any other measure of financial performance or liquidity in accordance with GAAP. The following shows the calculation of EBITDA and Adjusted EBITDA and reconciles them to net earnings in accordance with GAAP for the quarters ended September 30, 2023 and 2022, and the trailing twelve months ended September 30, 2023 and March 31, 2023:

	Quarter Ended				Six Months Ended
	September 30,				September 30,
	2023		2022		2023		2022

Net Earnings, as reported	$	150,553	$	138,995	$	271,402	$	244,000
Income Tax Expense		43,636		39,529		78,236		70,703
Interest Expense		10,204		8,580		22,443		15,910
Depreciation, Depletion and Amortization		37,197		34,645		73,879		68,874
EBITDA	$	241,590	$	221,749	$	445,960	$	399,487
Purchase accounting ¹		1,107		867		4,568		2,067
Stock-based Compensation		4,542		4,402		10,999		9,548
Adjusted EBITDA	$	247,239	$	227,018	$	461,527	$	411,102