Eagle Materials Reports Second Quarter EPS up 17% on Record Revenue

Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2019 ended September 30, 2018. 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 2019 Results

• Record second quarter revenue of $381.5 million, up 1%
• Net earnings per diluted share of $1.53, up 17%
• Approximately 740,000 shares repurchased for $70 million

Commenting on the second quarter results, Dave Powers, Chief Executive Officer, said, "We are happy to have delivered strong second quarter results despite unusually wet weather that limited our sales opportunities in many markets. Our Texas cement market experienced one of the wettest Septembers on record, while our southeastern wallboard markets dealt with the impact of Hurricane Florence. Fortunately, our employees and our facilities were unharmed. And we continued to generate meaningful cashflow which was used primarily to repurchase our shares.”

Mr. Powers concluded, "Looking ahead, we continue to believe the prospects for our businesses remain favorable, and we anticipate a good second half.”

Segment Results

Heavy Materials: Cement, Concrete and Aggregates

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates and Joint Venture and intersegment Cement revenue, was $232.4 million, a 1% decline from the second quarter of fiscal 2018. Heavy Materials operating earnings decreased 4% to $61.6 million primarily because of lower profits at our Texas cement facility and our Concrete and Aggregates business, both of which were affected by the unusually wet weather during the quarter.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 1% to $193.2 million, reflecting improved net sales prices partially offset by lower sales volume. The average net sales price for the quarter improved 1% to $107.56 per ton. Higher freight costs affected net cement prices by approximately $1.50 per ton during the quarter. Cement sales volume for the quarter was 1.6 million tons, down 1% versus the prior year.

Operating earnings from Cement for the second quarter were $57.5 million, 2% below the same quarter a year ago. The earnings decline was primarily due to lower sales volume at our Texas cement facility and higher freight costs.

Concrete and Aggregates revenue for the second quarter was $39.2 million, a decrease of 9%. Second quarter operating earnings were $4.1 million, a 27% decline, reflecting lower sales volume partially offset by improved pricing. Our primary concrete and aggregates markets experienced heavier rainfall than typical during the quarter which hampered their ability to move product.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard and Paperboard, increased 3% to $155.2 million. The improvement reflects higher wallboard net sales prices partially offset by lower wallboard sales volume. The average Gypsum Wallboard net sales price for the second quarter of fiscal 2019 was $165.01 per MSF, a 7% improvement. Sequentially, higher freight costs during the quarter affected the net sales price by nearly $1 per MSF. Gypsum Wallboard sales volume was 629 million square feet (MMSF), down approximately 3%, reflecting the disruption from Hurricane Florence in our southeastern markets as well as the timing of pre-buy activity prior to our mid-July price increase that pulled shipments forward into the first quarter of the fiscal year.

The average Paperboard net sales price this quarter was $508.17 per ton, down 9%. Paperboard sales volume for the quarter was flat with the prior year as the papermill remains in a sold-out position.

Operating earnings were $54.3 million in the sector, an increase of 18%, reflecting improved wallboard net sales prices and lower operating costs. The reduced operating costs primarily reflected lower recycled fiber costs during the quarter.

Oil and Gas Proppants

Revenue in the Oil and Gas Proppants segment was $19.1 million, a decline of 13%, reflecting lower net sales prices partially offset by a 2% increase in frac sand sales volume. Our improved sales volume reflected sales activity from our new drying plant in Illinois, which was operational for the full quarter. During the quarter, pricing for our frac sand came under pressure as overall frac sand demand declined, primarily in the Permian Basin, where oil pipeline capacity limitations have reduced completion activity leading to excess frac sand in the marketplace. It is unclear how long these market conditions will persist. The second quarter’s operating loss of $7.9 million included $9.4 million of depreciation, depletion and amortization.

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 Eagle 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 income statement. Refer to Attachment 3 for a reconciliation of these amounts.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Cement, Aggregates, Concrete, Gypsum Wallboard, Recycled Paperboard and Frac Sand from over 75 facilities across the U.S. Eagle is headquartered in Dallas, Texas.

EXP’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 Tuesday, October 30, 2018. The conference call will be webcast simultaneously on the EXP 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 statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not historical facts or guarantees of future performance but instead represent only the Company's belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside the Company's control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company's actual performance include the following: the cyclical and seasonal nature of the Company's business; public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; availability of raw materials; changes in energy costs including, without limitation, natural gas, coal and oil; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; material nonpayment or non-performance by any of our key customers; fluctuations in activity in the oil and gas industry, including the level of fracturing activities and the demand for frac sand; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions specific to any one or more of the Company's markets; competition; a cyber-attack or data security breach; announced increases in capacity in the gypsum wallboard, cement and frac sand industries; changes in the demand for residential housing construction or commercial construction; risks related to pursuit of acquisitions, joint ventures and other transactions; general economic conditions; and interest rates. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) could affect the revenues and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company's result of operations. These and other factors are described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018. 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.

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