Eagle Materials Inc · NYSE:EXP
Eagle Materials — J.P. Morgan 4th Annual Diversified Industries Conference (September 2009)
48 slides from Eagle Materials's conference presentation, Sep 15, 2009
Slide 1: J.P. Morgan 4th Annual Diversified Industries Conference
J.P. Morgan 4th Annual Diversified Industries Conference September 2009 Low Cost Producer Exhibit 99.1
Slide 2: Forward Looking Statement
Forward Looking Statement 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 b
Slide 3: Agenda
Agenda • Who We Are • Industry Outlook • Eagle Materials Outlook
Slide 4: Eagle Materials
Eagle Materials • Major North American cement producer • Four geographically diversified plants, supported by 10 cement terminals • Lowest cost producer -- profitable through the cycle • Complimenting the cement business are concrete and aggregates operations, which enjoy strong competitive position
Slide 5: Ten Hallmarks of How We Operate
Ten Hallmarks of How We Operate • Decentralized, profit center model with low overhead -- no frills • Intense focus on operating metrics • Provide the most demanded commodity products with consistent high quality • Focus of innovation on operating efficiency improvement – to maintain and extend low
Slide 6: Criteria for Major New Investment
Criteria for Major New Investment • Strengthens core business position in gypsum wallboard, cement or aggregates • Improves low-cost producer positions • Improves regional market diversification • Provides superior return on investment • Preserves balance sheet health and financial flexibility Track
Slide 7: Cyclic Trough Up-Cycle
Endize, Materials Cyclic Trough Up-Cycle (Today) (Ahead)
Slide 8: Agenda
Agenda • Who We Are • Industry Outlook • Eagle Materials Outlook
Slide 9: Cement
Cement
Slide 10: U.S. Cement Industry Update
U.S. Cement Industry Update Current Supply/Demand Dynamics • Demand is anticipated to decline approximately 22% in calendar 2009 • Several plant closures and delays of expansion projects have been announced • Landed cost of imported cement has been reduced • Imports of foreign cement have been drama
Slide 11: SUL HOYs YONI
| > 160 SUL HOYs YONI 360, 80, £0, 90, SO, v0, £0, 20, T0, 00, 66, 86, L6, 96, S6, v6, £6, C6, T6, 06, 68, 88, £8, 98, S8, v8, €8, C8, T8, 08, Calendar Year
Slide 12: Real Public Construction
Real Public Construction Source: Portland Cement Association (YOY% Change)
Slide 13: Real Non-Residential Construction
Real Non-Residential Construction (YOY % Change) Source: Portland Cement Association • Commercial construction cycles typically lag residential cycles • However not all sectors of commercial are down this year
Slide 14: Architectural Billings Index
Architectural Billings Index July 2009 Commercial/Industrial Institutional Mixed Use Source: American Institute of Architects As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag between architectural billings and construction spending.
Slide 15: Infrastructure Update and Outlook
Infrastructure Update and Outlook Silver lining: Sustained gains in cement consumption in 2011-2014 as projects are pushed forward Note: Only 2.5% of all AARA highway stimulus dollars have been spent through July (most of this, in fact, the last two weeks of July)
Slide 16: Cement Consumption Outlook
Cement Consumption Outlook Public Construction Non-Residential Residential 000 Short Tons Source: Portland Cement Association, company analysis
Slide 17: Gypsum Wallboard
Gypsum Wallboard
Slide 18: Gypsum Wallboard Industry Update
Gypsum Wallboard Industry Update Demand • Demand is half of what it was at the peak • We anticipate the start of a cyclic recovery next year, with 2010 being relatively flat Supply • Capacity has not dropped materially from the 2005 peak What’s Needed for Higher Industry Profitability • Demand needs
Slide 19: Wallboard Industry Utilization Outlook
Wallboard Industry Utilization Outlook 2009E Consumption Estimates New Single Family Residential 17.0 15.0 10.8 6.6 4.4 New Multi-Family Residential 1.5 1.4 1.4 1.2 1.0 New Commercial 6.5 7.6 7.2 7.0 4.9 Repair and Remodel 10.5 10.6 10.5 9.7 7.4 Manufactured Housing 0.7 0.4 0.3 0.3 0.3 Total 36.2 35
Slide 20: U.S. Demand for Gypsum Wallboard
U.S. Demand for Gypsum Wallboard New Home Sales (000) BSF
Slide 21: Drivers of Residential Demand
Drivers of Residential Demand • What drives residential demand? Job growth Mortgage rates Consumer confidence New home affordability Existing home inventory Existing home prices (ability to sell and buy new) Foreclosures and foreclosure outlook • These factors represent a mixed bag -- the net sugges
Slide 22: Employment
Employment Source: Portland Cement Association
Slide 23: Mortgage Rates
Mortgage Rates Sources : FreddieMac and bankrate.com (Jumbo) Rates are important but the key issue today is also qualification standards
Slide 24: Consumer Confidence
Consumer Confidence Sources: Conference Board (Left Axis) (Right Axis)
Slide 25: Affordability
Affordability Percent of Median House Price that a Median Income Family can Afford 20-Year Average Source: National Association of Realtors
Slide 26: New and Existing Home Inventories
New and Existing Home Inventories Millions of Homes (Left Axis) (Right Axis) Sources: US Census Bureau & National Association of Realtors
Slide 27: Existing Home Prices
Existing Home Prices FHFA CSW Existing Home Price Indices (1991=100) Year/Year % Change in Price Index FHFA CSW Sources: CSW-Standard & Poors , FHFA-Federal Housing Finance Agency Both indices measure resale price trends for a “constant quality” mix of homes. FHFA index includes homes with conformin
Slide 28: Foreclosures
Foreclosures Foreclosure Inventory Percent of Mortgage Loans in Foreclosure, Seasonally Adjusted Annual Rate New Foreclosures New Foreclosures Started, as % of Loans, Seasonally Adjusted Annual Rate Source: Mortgage Bankers Association
Slide 29: Adjustable Mortgage Reset Schedule
Adjustable Mortgage Reset Schedule Sources: The Norris Group; Credit Suisse Today J F M A M J J A S O N D J FM A M J J A S O N D J FM A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Slide 30: Wallboard industry capacity ranking by producer
| > a 2 10.0 2 National Gypsum 1S 20% 3 Koch Industries (formerly Georgia Pacific) 4.8 13% 4 CertainTeed 41 11% 5 American Gypsum (Eagle Materials) 4.0 11% Subtotal 30.4 82% 6 LaFarge 3.1 9% 7 Temple Inland a9 5% 8 Pabco 14 4% Subtotal 6.4 18% |). Grand Total 368 100%
Slide 31: Wallboard Industry Capacity Expansions/Closures
Wallboard Industry Capacity Expansions/Closures INDUSTRY CAPACITY ADDITIONS CAPACITY CLOSURES EAGLE PLANTS Capacity Summary (in BSF) 1/1/07 37.9 Additions 5.7 Closures (6.8) Current 36.8
Slide 32: Capacity Balancing at the Trough
Capacity Balancing at the Trough Supply Supply Demand On On Off On On Off On On Off
Slide 33: | >
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Slide 34: Agenda
Agenda • Who We Are • Industry Outlook • Eagle Materials Outlook
Slide 35: Financial Highlights
Financial Highlights $ in millions, For Fiscal Years Ending March 31 * Before Corporate G&A Revenues Operating Earnings* $429 $503 $617 $860 $922 $750 $602 $0 $200 $400 $600 $800 $1,000 $102 $115 $172 $264 $330 $184 $108 $0 $100 $200 $300 $400
Slide 36: We Continue to Outperform the Group
We Continue to Outperform the Group Note: This is based on comparison of EBITDA Margins (TTM) for each of the listed companies for the most recently reported period. EBITDA margins represent earnings before interest, taxes, depreciation and amortization / revenues. EBITDA is a non-GAAP measure. See
Slide 37: The Song Was the Same in 2007 (Peak)
The Song Was the Same in 2007 (Peak) Note: This is based on comparison of EBITDA Margins (TTM) for each of the listed companies for the most recently reported period. EBITDA margins represent earnings before interest, taxes, depreciation and amortization / revenues. EBITDA is a non-GAAP measure. See
Slide 38: Capital Structure
Net Debt-to-Cap 48% 44% 43% Net Debt-to-Equity 94% 79% 74% Capital Structure $406 $428 $437 $381 $337 $324 $0 $100 $200 $300 $400 $500 3/31/2008 3/31/2009 6/30/2009 Equity Net Debt
Slide 39: Debt Maturity Profile
Eagle’s balanced debt maturity profile with no near term maturities provides significant financial flexibility Debt Maturity Profile
Slide 40: Resilience and Performance
Resilience and Performance Eagle’s ability to perform through down-cycles and thrive in the up-cycles is due to the company’s • Low cost producer position • Strong cash flow from low-cost operations • Low overhead • Consistent quality products • Exceptional customer service and long-term relationshi
Slide 41: Questions and Answers
Questions and Answers
Slide 42: Contact Information
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@eaglem
Slide 43: Major Facilities
MAJOR FACILITIES CONCRETE GYPSUM WALLBOARD PLANTS CEMENT PLANTS. PAPERBOARD MILL AND AGGREGATES PLANTS AMERICAN GYPSUM COMPANY ILLINOIS CEMENT COMPANY LLC REPUBLIC PAPERBOARD CENTEX MATERIALS LLC ‘Abuguerque, New Mexico COMPANY LLC Austin and Buda, Texas eran, etic MOUNTAIN CEMENT COMPANY —-_‘L2ton,
Slide 44: Eagle's Wallboard Operations at a Glance
Eagle’s Wallboard Operations at a Glance American Gypsum • 18-year history • Nearly 4.0 bsf of capacity • 11% market share (Top 5 in US) • Lowest cost producer • Consistent quality • Exceptional customer service Wallboard Plants Reload/Distribution Yards Core Markets Served
Slide 45: Eagle's Gypsum Paperboard at a Glance
Eagle’s Gypsum Paperboard at a Glance • Original design capacity of 220,000 tons has been increased to 320,000 tons • Republic produces light-weight gypsum paperboard • 15% lighter than gypsum industry average • Superior wallboard conversion characteristics • Produces uniform cross-directional stren
Slide 46: Slide 46
Slide 47: Eagle's Concrete and Aggregates Operations at a Glance
Eagle’s Concrete and Aggregates Operations at a Glance • Strong competitive position in local markets • Capacities • Aggregates – 5.5 mil tons • Concrete – 850,000 cu yds • Complimentary to Eagle’s Cement business • Vast aggregates reserves: over 1 billion tons in No. CA • Exceptional quality and cu
Slide 48: Explanation of Non-GAAP Items
Explanation of Non-GAAP Items EBITDA represents net income, plus interest expense (less interest income), provisions for income taxes and depreciation and amortization expense. EBITDA is a non-GAAP measure that provides supplemental information regarding the operating performance of our business wit
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