Eagle Materials Inc · NYSE:EXP
Eagle Materials — Investor Conference February 23, 2006
70 slides from Eagle Materials's conference presentation, Feb 23, 2006
Slide 1: Mapping a Strong Future Investor Conference
Mapping a Strong Future Investor Conference February 23, 2006 Eagle Materials Inc. NYSE: EXP and EXP.B www.eaglematerials.com
Slide 2: Forward Looking Statements
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
Slide 3: Eagle Materials, Growth Initiatives, Conclusion
Eagle Materials Growth Initiatives Conclusion Eagle Materials Inc.
Slide 4: Gypsum Wallboard, Cement, Paperboard, Concrete & Aggregates
Gypsum Wallboard Cement Paperboard Concrete & Aggregates Eagle Materials Inc.
Slide 5: Eagle Materials' operations are well positioned
Eagle Materials Eagle Materials' operations are well positioned Excellent Operators Maintained in excellent condition Operated significantly above rated capacity Low cost producer in all segments Cement Illinois Cement Company 4 stage preheater Texas Lehigh Cement Company 4 stage preheater/precalcin
Slide 6: A disciplined approach to capital investment
Eagle Materials A disciplined approach to capital investment Eagle's growth strategy is straightforward Invest in high return modernizations of our current plants 50% increase in cement capacity Reduce exposure to rising energy costs Add low cost greenfield production capacity in growing markets 30%
Slide 7: Eagle's portfolio of building materials and construction products businesses
Eagle's portfolio of building materials and construction products businesses Wallboard 50% Cement 33% Wallboard Cement Paperboard Con/Agg Revenues 50 31 9 10 Revenue by Segment* Concrete/Aggregates 10% Cement 31% Paper 9% Wallboard Cement Paperboard Con/Agg Operating Earnings 52 33 12 5 Operating Ea
Slide 8: Steady top and bottom line growth
Steady top and bottom line growth ($ in millions) 02 03 04 05 06E 07E Revenues 395 429 503 617 820 950 Revenues 02-07E CAGR - 16% For Fiscal Year Ending March 31 02 03 04 05 06E 07E Op Income 79 102 115 172 250 350 Operating Earnings 02-07E CAGR - 30% $800-$820 $900-$950 $230-$250 $300-$340
Slide 9: Eagle generates significant cash flow
94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06E FY07E Eagle generates significant cash flow ($ in millions) (L) Revenues (R) Operating Cash Flow * *Cash from operations including changes in working capital
Slide 10: Macro market dynamics of Eagle as a whole
Macro market dynamics of Eagle as a whole Public Construction New Non-Residential Construction New Residential Repair and Remodel Manufactured Housing Cement 19 21 41 18 1 Public Construction 19% New Residential Construction 41% Repair and Remodel 18% Other 1% New Non- Residential Construction 21%
Slide 11: New residential construction has remained strong
New residential construction has remained strong Residential construction expected to slow moderately in the near term as interest rates edge up. (L) Single Family Starts-000's (R) 30 Yr. Rates Source: U.S. Department of Commerce and NAHB.
Slide 12: Non-residential recovering from a severe recession
Non-residential recovering from a severe recession Non-residential construction has been on an upward trend since late 2004. Office vacancy rates have been falling. Hotels, education and retail should lead the way. Source: PCA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E Constr
Slide 13: Public construction is expected to remain strong
Public construction is expected to remain strong 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E Public Construction 97.2 103.8 109.2 114.5 115.8 116 123.8 125.5 131.8 130.4 129.6 134.3 140.8 148.2 145.3 154.5 160.3 168.1 177.1 175
Slide 14: Improved highway spending
Improved highway spending SAFETEA provides a six-year $286 billion federal highway bill 42% greater than previous bill Source: U.S. Census, ARTBA 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E Annual spending levels 18.4 18.2 21.3 20.9 20 21.8 21.5 25.5
Slide 15: Repair and remodel construction has seen significant growth
Repair and remodel construction has seen significant growth Source: Harvard University Joint Center for Housing Studies and U.S. Federal Reserve 1998 1999 2000 2001 2002 2003 2004 2005 Repair and Remodel Spending 167 180 195 212 223.4 233 245 275 % Equity in Homes 0.576 0.576 0.582 0.582 0.573 0.564
Slide 16: Existing homes in need of repair or replacement
Existing homes in need of repair or replacement Approximately 125 million homes exist today Over 50% of homes in the United States today were built more than 30 years ago. Over the past decade, repair and remodeling spending has increased 5% each year. Over the next decade approximately 15% of exist
Slide 17: Positive fiscal 2007 outlook for Eagle
Positive fiscal 2007 outlook for Eagle For fiscal 2007, we expect high capacity utilization of the U.S. wallboard industry (>95%) Eagle Materials expected to sell out its cement capacity for the 21st consecutive year and the U.S. Cement Industry will have another record cement consumption year New r
Slide 18: Eagle's Wallboard Operations
Eagle's Wallboard Operations Eagle's Wallboard Operations Wallboard Industry Overview 37 BSF of capacity Industry operating at 95%+ capacity 15% capacity additions announced for 2007 - 2009 timeframe National market supplied by regional plant network Historic growth levels of 3%+ Eagle Operations Ov
Slide 19: Eagle's Wallboard Performance
Eagle's Wallboard Performance FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06E Segment Earnings 7 12 21 36 56 108 27.1 5 27 36 81.6 150 Operating earnings (real $ in millions) Operating margins per msf sold (Real $) $12.41 $18.05 $28.33 $32.86 $48.98 $78.96 $17.11 $2.59 $13.97 $14.77 $29
Slide 20: Wallboard industry market dynamics
Wallboard industry market dynamics New Residential New Non-Residential Repair and Remodel Manufactured Housing Wallboard 0.51 0.18 0.29 0.02 Source: Eagle estimates
Slide 21: Wallboard utilization outlook
Wallboard utilization outlook (numbers in billion square feet) Calendar 2005 Calendar 2006 Consumption Estimates: New Residential (51% of Demand) 18.5 17.4 New Commercial (18% of Demand) 6.5 6.9 Repair & Remodel (29% of Demand) 10.5 10.8 Manufactured Housing (2% of Demand) 0.7 0.7 Total 36.2 35.8 Av
Slide 22: Wallboard Supply / Demand
Consumption Capacity 74 12.91 16.22 75 10.74 15.96 76 13.12 15.22 77 15.37 16.5 78 16.41 17 79 16.74 17.5 80 14.13 18.25 81 13.76 18.67 82 13.09 19.14 83 16.82 18.5 84 18.32 20 85 19.43 20.87 86 20.42 21.63 87 20.63 23.37 88 20.61 25.11 89 20.87 24.08 90 20.45 24.04 91 18.32 24.35 92 20.18 24.11 93
Slide 23: Eagle's Wallboard Quarterly Net Sales Price Trend
Eagle's Wallboard Quarterly Net Sales Price Trend 12/31/03 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 Current Price 86 95 101 110 109 115 119 132 144 157 $/MSF Operating margins per msf sold (Real $) $16.07 $20.82 $26.51 $34.44 $32.04 $35.23 $39.95 $52.09 $55.59 $70.00
Slide 24: Industry Wallboard Shipments
Industry Wallboard Shipments 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Industry Shipments in January 1.9 2.1 2.2 2.1 2 2.4 2.5 2.6 2.6 2.6 3.1 Month of January (BSF) January 2006 wallboard shipments were 16% greater than the January 2005 shipments.
Slide 25: Eagle's wallboard production and cost
Eagle's wallboard production and cost FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06E Total BSF Produced 0.323 0.376 0.487 0.586 0.672 0.714 1.091 1.151 1.374 1.649 1.89 1.956 2.496 2.547 2.768 Production Cost / MSF 61.92 53.3 56.43 65 59.74 61.42 64.58 64.02 63.02 65.95
Slide 26: Natural gas rates
Natural gas rates 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Annual Average NYMEX Settlement Prices 2.141 1.901 1.636 2.591 2.587 2.108 2.268 3.886 4.273 3.221 5.388 6.138 8.616 7.18 7.52 7.86 8.91 10.29 Annual Average American Gypsum Price 2.27 2.
Slide 27: Eagle's Cement Operations
Eagle's Cement Operations Eagle's Cement Operations Cement Industry Overview Capital intensive with 3-5 year lead-time for greenfield capacity 25%+ imports needed to satisfy domestic demand High import costs due to Asian economic strength and high ocean freight rates Eagle Operations Overview Approx
Slide 28: Eagle's Cement Performance
Eagle's Cement Performance FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06E Cement Earnings 26 35 40 48 57 53 59.6 60 54 50 58 Cement Earnings 78 Operating Earnings ($ in millions) Operating margins per ton sold $13.00 $17.00 $19.00 $22.00 $26.00 $23.00 $25.00 $25.00 $23.00 $20.00 $21.00
Slide 29: Eagle's Cement Quarterly Net Sales Price Trend
Eagle's Cement Quarterly Net Sales Price Trend 12/31/03 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 Current Price 65.72 64.79 68.34 70.05 71.75 73.59 78.55 82.55 83.24 88 $/Ton
Slide 30: Eagle's cement production and cost
Eagle's cement production and cost Power and Energy cost components have recently been hard to control FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06E (L) Total Manufactured Tons Produced 1800 1800 1800 1900 1900 2000 2050 2070 2250 2240 2270 2390 2351 2451 (R) Average Manufac
Slide 31: Rising coal and electricity costs
Rising coal and electricity costs Our coal and electricity rates have increased nearly 50% each over the past decade 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E Coal Cost per MMBTU 1.453 1.499 1.499 1.563 1.591 1.547 1.551 1.683 1.738 2.054 2.364 Electricity Cost per KWH 0.0398 0.0403 0.
Slide 32: U.S. Cement Industry Overview: Capacity vs. Consumption
Capacity Consumption 75 91 72 76 90 76 77 92.5 82 78 91.5 89 79 94 88 80 91 79 81 94 75 82 91 67 83 93 74 84 92 85 85 89.5 88 86 88.5 91 87 87.5 94 88 88 93 89 86 91 90 85 90 91 86 80 92 87 84 93 87 88 94 87.5 94 95 88.5 95 96 88 100 97 89 106 98 91 114 99 92.5 120 0 94 121 1 96 124 2 98 120 3 100.4
Slide 33: Eagle's Gypsum Paperboard
Gypsum Paper Industry Overview 7 out of 8 wallboard producers are vertically integrated Non-gypsum paper markets are struggling Eagle's Operations Overview Original design capacity of 220,000 tons has been increased to 320,000 tons Increased paperboard capacity is expected to be absorbed by Eagle's
Slide 34: Eagle's Concrete and Aggregates Operations
Concrete/Aggregates Industry Overview Both industries are highly fragmented Over 7,000 independently operated quarries Top 2 aggregates producers control 13% of the market 2,700 concrete companies owning 6,000 plants Eagle's Operations Overview Strong competitive position in local markets Capacity A
Slide 35: The Eagle Story, Growth Initiatives, Conclusion
The Eagle Story Growth Initiatives Conclusion Eagle Materials Inc.
Slide 36: Illinois Expansion Update
Illinois Expansion Update Project Background $65 million expansion Increases capacity by approximately 65% to 1.1 million tons Expansion expected to be complete in winter of 2006 Expected to reduce manufacturing costs by approximately 20% Expanded market share has already been established through im
Slide 37: New Dome at Illinois Cement
New Dome at Illinois Cement a
Slide 38: Construction of new pre-heat tower
Construction of new pre-heat tower
Slide 39: Nevada Cement Modernization Highlights
Nevada Cement Modernization Highlights Plant located just west of Reno, Nevada Serves the Northern Nevada and Northern California cement markets Eagle's oldest plant (circa early 1960's) Approximately $200 million investment Modernization includes: Expanding capacity by approximately 100% to 1.1 mil
Slide 40: Mountain Cement Modernization Highlights
Mountain Cement Modernization Highlights Plant located in Laramie, Wyoming (serves primarily Wyoming and Denver) Approximately $120 million investment Modernization includes: Expanding capacity by approximately 60% to 1.1 million tons Reducing heat consumption by approximately 40% to 2.6 mmbtu per t
Slide 41: Growing our Cement Business
Growing our Cement Business FY1995 FY2000 FY2006E FY2008E FY2010E Tons of capacity 1.8 2.1 2.65 3.1 Tons of capacity after expansion 4 Approximately 50% growth in manufactured Cement capacity Market Share 2% 2% 2.6% 3.0% 3.4%
Slide 42: Modernization to reduce fuel consumption
These three modernization projects will reduce Eagle's Cement plant fuel consumption significantly 4.0/mmbtu/ton 2.7/mmbtu/ton - -35% Eagle's current fuel consumption rate Eagle's fuel consumption rate after modernization projects
Slide 43: Modernization to reduce electricity usage
These three modernization projects will reduce Eagle's Cement plant electricity usage significantly 150/kwh/ton 110/kwh/ton - -25% Eagle's current electricity consumption rate Eagle's electricity consumption rate after modernization projects
Slide 44: Modernization to reduce maintenance costs
These three modernization projects will reduce Eagle's Cement plant maintenance costs significantly $12.50/ton $9.00ton - -30% Eagle's current maintenance costs per ton Eagle's maintenance costs per ton after the modernization projects
Slide 45: Modernization to reduce manpower and SG&A costs
These three modernization projects will reduce Eagle's Cement plant manpower and SG&A costs significantly $15.00/ton $12.00/ton - -20% Eagle's current manpower and SG&A costs per ton Eagle's manpower and SG&A costs per ton after the modernization projects
Slide 46: Modern, Low-cost Cement plants
Modern, Low-cost Cement plants All of Eagle's cement plants will be "state of the art" and "ultra modern" Very low fuel consumption per ton Very low energy consumption per ton Very low annual repair costs per ton Very low manpower costs per ton Lowest cost producer in all of Eagle's markets Put capa
Slide 47: Growing the wallboard business
Growing the wallboard business EXISTING PLANTS We have announced plans for growth in the Southeast and are in the process of locating additional sources of gypsum for future growth GEORGETOWN, SC
Slide 48: Georgetown, South Carolina Project Update
Georgetown, South Carolina Project Update Project Background New gypsum wallboard plant with annual design capacity of 750 mmsf Long-term supply agreement for synthetic gypsum with Santee Cooper, a South Carolina service authority Construction expected to be completed by late 2007 Increases Eagle's
Slide 49: Growing the Wallboard business
Growing the Wallboard business FY1995 FY2000 FY2006E FY2007E FY2009E BSF Capacity 0.6 1.4 2.8 2.8 BSF Capacity after Georgetown, SC 3.7 (tons in 000's) 30% growth in Wallboard Market Share 3% 5% 7.5% 7.5% 9%
Slide 50: Nothing but 1st Class Assets at Eagle Materials
Nothing but 1st Class Assets at Eagle Materials Cement Illinois Cement Company 5 stage preheater/precalciner Texas Lehigh Cement Company 4 stage preheater/precalciner Mountain Cement Company 5 stage preheater/precalciner Nevada Cement Company 5 stage preheater/precalciner Concrete/Aggregate Dominant
Slide 51: The Eagle Story, Growth Initiatives, Conclusion
The Eagle Story Growth Initiatives Conclusion Eagle Materials Inc.
Slide 52: Recombination and Stock Split
Recombination and Stock Split On January 25, 2006, Eagle announced plans to eliminate its dual class structure resulting in a single class of common stock and Eagle announced plans for a 3-for-1 stock split Key Dates Record date for stock split - February 10, 2006 Stock split effective date - Februa
Slide 53: Eagle Materials Growth
Eagle Materials Growth Clear line of sight Sensible and well-defined plans Balance and discipline "Smart sized" cement plants Energy efficient Modern and efficient wallboard plants Improved logistics Improved operational excellence Simple operations Lower costs to operate Very low energy costs per t
Slide 54: Dividend yield and payout ratio
Dividend yield and payout ratio Eagle's Increased Dividend (1) Industry Average* Yield 0.014 0.014 EXP TTM Industry TTM * Payout 0.26 0.27 *Industry average includes Vulcan Materials, Rinker Group, Florida Rock, Martin Marietta, LaFarge NA and TXI. (1) Based on $155 per share stock price (pre-split)
Slide 55: Eagle has the highest operating margins of the group
Currently, Eagle has the highest operating margins of the group Georgia Pacific US Concrete TXI CRH Hanson USG LaFarge NA BPB Martin Marietta Cemex LaFarge SA Vulcan Florida Rock Eagle East 0.0456 0.0539 0.077 0.103 0.124 0.124 0.131 0.131 0.132 0.154 0.155 0.1707 0.196 0.2639 Source: Multex. EBIT M
Slide 56: Guidance: 4th Qtr FY2006, FY2006, FY2007
Next Year 4th Qtr FY 2006 FY 2006 FY 2007 Revenues $187 - $197 $825 - $835 $900 - $950 Net Earnings $34.0 - $37.5 $151 - $155 $180 - $200 Diluted EPS $2.00 - $2.20 $8.50 - $8.70 $11.00 - $12.00 ($ in Millions, except per share data)
Slide 57: Question & Answer
Eagle Materials Inc. Question & Answer
Slide 58: Contact Information
Contact Information Steve Rowley, President and CEO Telephone: 214-432-2020 Email: srowley@eaglematerials.com Arthur Zunker, Senior Vice President and CFO Telephone: 214-432-2010 Email: azunker@eaglematerials.com Bill Devlin, Vice President - Controller Telephone: 214-432-2014 Email: bdevlin@eaglema
Slide 59: Thank you for participating
Eagle Materials Inc. Thank you for participating in today's investor conference. An archive of this webcast will be available at http://www.eaglematerials.com later today.
Slide 60: Exhibits
Exhibits
Slide 61: Sk OL
ed 1 i = Sk OL a
Slide 62: Wallboard - Capacity Announcements
Wallboard - Capacity Announcements New Capacity Announcements 5 greenfield plants and 3 modernization projects have been announced for the 2007- 2009 timeframe: Greenfield Plants - American Gypsum - 750 mmsf (South Carolina) BPB - 700 mmsf (North Carolina) National - 1 bsf (North Carolina) BPB - 700
Slide 63: Eagle's wallboard utilization and pricing
Eagle's wallboard utilization and pricing Fiscal Years Capacity Utilization AGC Net Sales (in 2004$) 86 0.931 137.57 87 0.944 137.93 88 0.883 112.07 89 0.821 93.03 90 0.867 94.23 91 0.85 74.58 92 0.752 72.9 93 0.837 68.16 94 0.884 80.98 95 0.942 104.75 96 0.916 102.42 97 0.955 112.41 98 0.975 122.82
Slide 64: Growing wallboard consumption
Growing wallboard consumption 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sq Ft per person 83.17 87.18 86.83 92.27 95.22 99.93 106.35 100.07 105.5 106.67 112.48 120.58 126.55 The U.S. has the highest per capita consumption in the world, growing to currently over 120 square feet
Slide 65: Cement - Capacity Announcements
Cement - Capacity Announcements New Capacity Announcements (in clinker short tons) The following capacity increases have been announced for the calendar 2006-2008 timeframe Greenfield Plants - GCC America - 1.1 million tons (Pueblo, CO) Ash Grove - 2.0 million tons (Las Vegas, NV) Holcim - 4.8 milli
Slide 66: Cement industry market dynamics
Cement industry market dynamics Public Construction Commercial Construction New Residential Other Cement 50 24 23 3 Public Construction 50% Commercial Construction 24% New Residential 23% Other 3% We currently produce 2.65 million tons of cement annually Source: PCA and Eagle Materials
Slide 67: Continued high ocean freight rates
Continued high ocean freight rates Average Annual Baltic Exchange Panamax Index 1998 1999 2000 2001 2002 2003 2004 2005 Average Annual Baltix Panamax Inded 903 1043 1515 1267 1097 2442 4398 3146 Source: Datastream
Slide 68: River system barge costs have also risen
River system barge costs have also risen 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Annual Average Spot Dry Bulk Barge Rates 7.04 10.81 8.89 7.48 7.94 8.15 8.88 7.67 6.95 6.95 10.26 18.13 Source: River Transport News
Slide 69: Eagle announced it will combine its two classes of stock
Eagle announced it will combine its two classes of stock Current structure 2 class structure created during January 2004 spin-off from Centex 8.7 million A shares outstanding at December 31, 2005 8.1 million B shares outstanding at December 31, 2005 B shares have right to elect 85% of the Board of D
Slide 70: Total capital returned to shareholders
Total capital returned to shareholders Total capital returned as a percentage of average market capitalization Source: Company filings; TTM as of September 30, 2005. Includes dividends and share repurchases. * - Eagle's TTM data was updated through December 31, 2005 Eagle* MLM VMC RIN CX LAF FRK TXI
Eagle Materials — Investor Conference February 23, 2006 on 6ix