Eagle Materials Inc · NYSE:EXP
Eagle Materials — Beacon Street Group 4th Annual Southwestern Showcase (November 2006)
48 slides from Eagle Materials's conference presentation, Nov 15, 2006
Slide 1: Beacon Street Group 4th Annual Southwestern Showcase
Beacon Street Group 4th Annual Southwestern Showcase Dallas, Texas November 15, 2006 Eagle Materials Inc. NYSE: EXP 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, Gypsum Paperboard, Concrete & Aggregates
Gypsum Wallboard Cement Gypsum Paperboard Concrete & Aggregates Eagle Materials Inc.
Slide 5: Balanced portfolio of Building Materials and Construction Products businesses
Eagle Materials is comprised of a balanced portfolio of ... Building Materials and ... Construction Products businesses Wallboard 57% Cement 29% Wallboard Cement Paperboard Con/Agg Revenues 57 25 8 10 Revenue by Segment* Concrete/Aggregates 10% Cement 25% Paper 8% Wallboard Cement Paperboard Con/Agg
Slide 6: Steady top and bottom line growth
Steady top and bottom line growth ($ in millions) 02 03 04 05 06 07E Revenues 395 429 503 617 860 950 Revenues 02-07E CAGR - 16% For Fiscal Year Ending March 31 02 03 04 05 06 07E Op Income 79 102 115 172 264 375 Operating Earnings 02-07E CAGR - 26% $79 $102 $115 $172 $264 $315-$345 $950
Slide 7: Eagle generates significant cash flow
94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Eagle generates significant cash flow ($ in millions) (L) Revenues (R) Operating Cash Flow * *Cash from operations including changes in working capital
Slide 8: Piercing focus on low-cost production, safety, quality
At Eagle Materials, we have a piercing focus on... Low-cost Production Safety Quality Low-cost Wallboard Production
Slide 9: Piercing focus on low-cost production, safety, quality
At Eagle Materials, we have a piercing focus on... Low-cost Production Safety Quality Low-cost Wallboard Production Low-cost Cement Production
Slide 10: Disciplined approach to capital investment
At Eagle Materials, we have a disciplined approach to... Capital Investment Illinois Cement Expansion and modernization Mountain Cement Expansion and modernization Greenfield Wallboard plant in Georgetown, SC Nevada Cement Expansion and modernization
Slide 11: Wallboard Overview
Wallboard Overview Demand dynamics moderating Residential construction slowing across most of the country Non-residential construction remains strong Repair and remodel construction flattening Consolidated Industry From 12 U.S. producers in 1997 to 8 currently, with approximately 37 BSF annual capac
Slide 12: New residential construction continues to decline
1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Single Family Housing Starts 1271.4 1302.4 1230.9 1273.3 1358.6 1499 1610.5 1716 1500 1300 10 year Treasury 5.26 5.65 6.03 5.02 4.61 4.01 4.27 4.29 4.96 4.65 New residential construction continues to decline (L) Single Family Starts-000's (R) U.S.
Slide 13: Residential Repair and Remodel Construction 1998-2007E
1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Residential Remodeling 144.42 149 153 152 163 160 168 167 176.81 182.2 Residential Repair and Remodel Construction 1998 - 2007E Repair and remodel construction to flatten Source: NAHB Remodeling Forecast, March 2006. U.S. Billions 2000 $
Slide 14: Non-residential recovering but still not at historic levels
Non-residential recovering but still not at historic levels Source: PCA, Fall 2006 Forecast 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Construction Output 179.7 174.7 178.7 165.1 133.5 123 127.6 129.5 146.7 158.1 Private non-residential construction output, 1998 - 2007E (U.S. billions 1996$
Slide 15: Wallboard utilization outlook
Wallboard utilization outlook (numbers in billion square feet) CY 2005 CY 2006 CY 2007 Consumption Estimates: New Residential (51% of Demand) 18.5 16.2 13.5 New Commercial (18% of Demand) 6.5 7.3 7.8 Repair & Remodel (29% of Demand) 10.5 10.8 11.1 Manufactured Housing (2% of Demand) 0.7 0.7 0.6 Tota
Slide 16: U.S. Wallboard Industry Overview Capacity vs. Consumption
Consumption Capacity 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 21.38 24.19 94 23.21 24.64 95 23.07 25.18 96 24.72 25.9 97 25.48 26.13
Slide 17: 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 3/31/06 6/30/06 9/30/06 Price 86 95 101 110 109 115 119 132 144 155 168 176 $/MSF Actual October 2006 Price - $167/msf
Slide 18: Eagle's wallboard production and cost
Eagle's wallboard production and cost FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Total BSF Produced 1.091 1.151 1.374 1.649 1.89 1.956 2.496 2.547 2.83 2.9 Production Cost / MSF 64.58 64.02 63.02 65.95 61.38 63.69 63.85 67.536 73 70.5 Energy costs have started to trend downward
Slide 19: Cement Overview
Cement Overview High Barriers to entry Lengthy environmental permitting process Extremely capital intensive with economies of scale Regional markets are impacted by size of new plants Favorable Growth Dynamics Broad-based demand directly linked to construction industry Consumption has grown at 2% CA
Slide 20: U.S. Cement Industry Overview Capacity vs. Consumption
U.S. Cement Industry Overview Capacity vs. Consumption Consumption Capacity 75 72 91 76 76 90 77 82 92.5 78 89 91.5 79 88 94 80 79 91 81 75 94 82 67 91 83 74 93 84 85 92 85 88 89.5 86 91 88.5 87 94 87.5 88 93 88 89 91 86 90 90 85 91 80 86 92 84 87 93 88 87 94 94 87.5 95 95 88.5 96 100 88 97 106 89 9
Slide 21: Public Construction
Public Construction Source: Portland Cement Association (Fall 2006 Forecast). Public Construction put-in-place with cement consumption 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Public Construction 97.2 103.8 109.2 114.5
Slide 22: 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 3/31/06 6/30/06 9/30/06 Price 65.72 64.79 68.34 70.05 71.75 73.59 78.55 82.55 83.24 90 91 93 $/Ton Actual October 2006 Price - $94/ton
Slide 23: Eagle's cement production and cost
Eagle's cement production and cost FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E (L) Total Manufactured Tons Produced 2000 2050 2070 2250 2240 2270 2390 2351 2800 2850 (R) Average Manufactured Production Cost per Ton 37.48 39.16 41.82 39.77 40.8 42.01 43.95 46.86 54 57.72 Power and energy costs
Slide 24: Gypsum Paperboard Overview
Gypsum Paperboard Overview 7 out of 8 wallboard producers are vertically integrated Eagle's papermill produces low-cost paper Economies of scale Our Lawton mill has an annual capacity of approximately 320,000 tons per year compared to the average size of our competitor's papermills of 65,000 tons pe
Slide 25: Concrete and Aggregates Overview
Concrete and Aggregates Overview We operate in two local markets Austin, Texas Low-cost strategic central Texas aggregate operation Low-cost, geographically diverse readymix position in the Austin area Northern California Rural readymix operations Low-cost aggregates operation Our aggregates deposit
Slide 26: Eagle Materials Growth Initiatives Conclusion
Eagle Materials Growth Initiatives Conclusion Eagle Materials Inc.
Slide 27: Current growth initiatives
Current growth initiatives Estimated Completion Date Approximate Cost Wallboard Greenfield Plant in South Carolina Late Calendar 2007 $150 Cement Modernization and Expansion of Illinois Cement Late Calendar 2006 $65 Modernization and Expansion of Nevada Cement Late Calendar 2008 $200 Modernization a
Slide 28: Georgetown, South Carolina Wallboard Project
Georgetown, South Carolina Wallboard Project Project Background New gypsum wallboard plant with annual design capacity of 750 mmsf Long-term supply agreement for synthetic gypsum with Santee Cooper (South Carolina Public Service Authority) Increases Eagle's annual wallboard capacity by approximately
Slide 29: Georgetown, South Carolina - Site
Georgetown, South Carolina - Site
Slide 30: Growing the wallboard business
Growing the wallboard business Eagle's wallboard operations are geographically located to take advantage of the ongoing population shift to the sunbelt and the new Georgetown wallboard plant improves our distribution network allowing us to better serve our customers EAGLE PLANTS EAGLE PRIMARY MARKET
Slide 31: Illinois Expansion Update
Illinois Expansion Update Project Background $65 million expansion Increases capacity by approximately 65% to 1.1 million tons Expected to reduce manufacturing costs per unit by approximately 20% Expanded market share has already been established through imports Project Status Project is on schedule
Slide 32: Illinois Cement Company Expansion Project
Illinois Cement Company Expansion Project
Slide 33: Nevada Cement Modernization Project
Nevada Cement Modernization Project Background Plant located just east of Reno, Nevada Serves the Northern Nevada and Northern California cement markets Approximately $200 million investment Modernization includes: Expanding capacity by approximately 100% to 1.1 million tons Reducing operating costs
Slide 34: Mountain Cement Modernization Project
Mountain Cement Modernization Project Background Plant located in Laramie, Wyoming (serves the Mountain States region) Approximately $120 million investment Modernization includes: Expanding annual capacity by approximately 30% to 0.9 million tons Reducing operating costs significantly Project Statu
Slide 35: Eagle Materials Growth: Clear line of sight
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 performance Modernization and expansion projects will lower operating costs Ver
Slide 36: The Nation's Highest Margin Construction Products Company
The Nation's Highest Margin Construction Products Company* 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/Aggrega
Slide 37: Eagle's Growing Manufacturing Capacities
Eagle's Growing Manufacturing Capacities... Before Expansions After Expansions Increase Wallboard (BSF) 2.8 3.7 +30% Cement (million tons) 2.7 3.8 +41% Paper (000 tons) 285 320 +12% Aggregates (million tons) 5.5 7.5 +35% Concrete (000 cubic yards) 850 1,000 +20% .... and Reduced Production Costs per
Slide 38: Increased Shareholder Value Through Growth and Cost Reductions
Increased Shareholder Value Through Growth and Cost Reductions These projects are expected to increase Eagle Materials' operating earnings significantly $100 million assuming bottom-of-the-cycle pricing $125 million assuming middle-of-the-cycle pricing $170 million assuming top-of-the-cycle pricing
Slide 39: Eagle Materials Growth Initiatives Conclusion
Eagle Materials Growth Initiatives Conclusion Eagle Materials Inc.
Slide 40: Creating Shareholder Value
Creating Shareholder Value Balanced growth strategy focused on cement and wallboard Strong cash flow from low-cost operations Attractive annual dividend Share repurchase program Approximately 2.2 million shares repurchased in FY 2007, year-to- date Recently, our repurchase authorization was increase
Slide 41: Eagle Materials has the highest operating margins of the group
Eagle Materials has the highest operating margins of the group US Concrete TXI CRH Hanson Cemex LaFarge SA USG Martin Marietta Vulcan Florida Rock Eagle East 0.066 0.094 0.104 0.134 0.154 0.158 0.175 0.179 0.181 0.233 0.338 Source: EBIT margins represent earnings before interest and taxes / revenues
Slide 42: Dividend yield and payout ratio
Dividend yield and payout ratio Eagle's TTM Industry TTM * Payout 0.172 0.227 *Industry average includes Vulcan Materials, Rinker Group, Florida Rock, Martin Marietta and TXI. (1) Based on $40 per share stock price Eagle's annual dividend is $0.70 per share Eagle's Dividend (1) Industry Average * Pa
Slide 43: FY 2007 Guidance
FY 2007 Guidance 3rd Qtr FY 2007 FY 2007 Net Earnings $37 - $42 $192 - $212 Diluted EPS $0.75 - $0.85 $3.80 - $4.20 ($ in Millions, except per share data)
Slide 44: Question & Answer
Eagle Materials Inc. Question & Answer
Slide 45: 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 46: Appendix
Appendix
Slide 47: oe mince,
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Slide 48: Explanation of Non-GAAP Items
Explanation of Non-GAAP Items EBIT represents net income, plus interest expense (less interest income) and provisions for income taxes. EBIT is a non-GAAP measure that provides supplemental information regarding the operating performance of our business without regard to financing methods or capital
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