Eagle Materials Inc · NYSE:EXP
Eagle Materials — Non-Deal Roadshow (May 2004)
32 slides from Eagle Materials's roadshow presentation, May 2004
Slide 1: Investor Presentation May 2004
Investor Presentation May 2004
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: Investment Highlights
Investment Highlights The Nation’s Highest Margin Construction Products Company* ► Low-cost producer of cement and wallboard ► Stable earnings and cash flow from cement business ► Strong earnings and cash flow upside from wallboard business ► Strong balance sheet and cash flow supports growth, divid
Slide 4: Product Lines
Product Lines Gypsum Cement Wallboard Concrete & Paperboard Aggregates 4
Slide 5: Eagle Materials' Portfolio of Construction Products Businesses
Eagle Materials’ Portfolio of Construction Products Businesses FY 2004 Revenue by Segment* FY 2004 EBITDA** by Segment* Concrete & Concrete & Aggregates Aggregates 6% 11% Wallboard 35% Cement Cement Wallboard 31% 47% 38% EXP FY 2004 Paperboard Paperboard Revenues $ 503 million 20% 11% EBITDA** $ 139
Slide 6: Financial History
Financial History Fiscal Years Ended March 31st ($ Millions) Revenues* Free Cash Flow** $700 $120 $600 $100 $500 $80 $400 $60 $300 $40 $200 $100 $20 $0 $0 95 96 97 98 99 00 01 02 03 04 EPS ($) 0.95 1.47 1.89 2.56 3.71 5.63 3.22 2.15 3.11 3.57 * Total of Segment Revenues ** “Net Cash Provided by Oper
Slide 7: Value Creation at Eagle Materials
Value Creation at Eagle Materials Maximize Production While Minimizing Capital Investment ► Acquire assets at attractive prices ► Maintain assets in “better than new” condition ► Optimize the interaction between people, complex machinery, and raw materials ► Enhance assets through efficient investme
Slide 8: Cement Demand Drivers
Cement Demand Drivers Flat housing, but growth from public and Consumption is balanced between non-residential construction. public and private construction. Construction Put in Place ($ in billions) Cement End Use (2003) $1,000 Other 6% $800 Residential Buildings 28% $600 $400 $200 $0 2001 2002 200
Slide 9: Cement Industry Overview
Cement Industry Overview ► High Barriers to Entry z Capital intensive with 3-5 year lead-time for new capacity z Lengthy environmental permitting process z Regional markets are severely impacted by size of new plants z Increased U.S. capacity not justified at current price level ► Favorable Growth P
Slide 10: Cement Industry Overview Capacity vs. Consumption
Cement Industry Overview Capacity vs. Consumption Millions of Short Tons 150 125 Imports 100 75 50 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 Forecast Capacity Consumption Source: PCA Data and EXP Forecast. 10
Slide 11: Cement: Strong Regional Operations
Cement Strong Regional Operations (31% of FY04 Revenue) • 40-year history • 2.3 million tons of capacity (net of joint ventures) – sold out each of last 18 years • 2% of U.S. market share (11th) Cement Plants Cement Terminals Markets Served 11
Slide 12: Cement Production & Cost
Cement Production & Cost Fiscal Year Ended March 31st EXP has Increased Same-Site Production Capacity by Approximately 60% While Maintaining Essentially Flat Costs (000’s Tons) ($ per Ton) $60 2,300 $55 2,100 $50 1,900 $45 1,700 $40 1,500 $35 1,300 $30 1992 1993 1994 1995 1996 1997 1998 1999 2000 20
Slide 13: Cement Low-Cost Production
Cement Low-Cost Production ($/Ton) Industry Average* EXP** Gross Sales $78.5 $75.5 Regional price differences Freight 5.0 6.5 Market proximity Plant Costs 52.5 41.5 3 of 4 plants in top quartile Gross Margin 21.0 27.5 SG&A (Segment) 4.5 2.5 Lean, decentralized Operating Earnings $16.5 $25.0 Margin A
Slide 14: Concrete & Aggregates
Concrete & Aggregates ► Both Industries are Highly Fragmented z Over 7,000 independent quarries with top two aggregates producers controlling 13% of the market z 2,700 concrete companies owning approximately 6,000 plants ► Concrete and Aggregates Represent a Very Small Part of EXP z Strong competiti
Slide 15: Wallboard Demand Drivers
Wallboard Demand Drivers Housing expectations are flat, however Approximately ½ of wallboard non-residential should pick-up. goes to new residential. Construction Put in Place ($ in billions) $1,000 Manufacturing Non-Residential Housing & Export Repair & Remodel 6% $800 19% $600 $400 New Non-Residen
Slide 16: Wallboard - Industry Overview
Wallboard - Industry Overview ► Consolidating Industry z 8 U.S. producers - down from 13 ten years ago z Top 5 producers represent approximately 87% of capacity ► Production Capacity Returning to Equilibrium z Broad-based demand directly linked to construction industry z Consumption has grown at a 3
Slide 17: Wallboard Supply / Demand
Wallboard Supply / Demand Billions of Square Feet 40 Consumption 35 Capacity 30 25 20 15 10 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 Calendar Years Gypsum Association Historical Data and EXP Projections. 17
Slide 18: Wallboard Utilization and Pricing
Wallboard Utilization Industry Capacity and Pricing* EXP Net Price Utilization (2004 $/msf) 160 100% Average 140 Utilization & Price 120 90% 100 80 80% 60 40 70% 20 60% 0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Fiscal Years * Based on Gypsum Association historical data and EXP pr
Slide 19: Wallboard Sales Price Trend
Wallboard Sales Price Trend (Quarter Ending) $/MSF $105 $105 $100 $95 $94.67 $90 $86.41 $85 $82.72 $83.67 $80 $79.00 $75 $70 3/31/03 6/30/03 9/30/03 12/31/03 3/31/04 6/30/04 Projection 19
Slide 20: Wallboard: Strong Western U.S. Operations
Wallboard Strong Western U.S. Operations (47% of FY04 Revenue) • 18-year history • 2.7 billion sq. ft. of capacity • 8% U.S. market share (5th) • Vertically integrated with light-weight paper Wallboard Plants Reload/Distribution Yards Markets Served 20
Slide 21: Wallboard Production & Cost
Wallboard Production & Cost EXP‘s Current Production Capacity of 2.7 BSF Has Come Through Internal Expansions and Major Acquisitions (BSF) Total BSF Produced Production Cost / MSF ($/MSF) 2.5 $80 $75 2.0 $70 1.5 $65 1.0 $60 0.5 $55 0.0 $50 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Slide 22: Wallboard Low-Cost Production (1/2" Basis)
Wallboard Low-Cost Production (1/2” Basis) ($/msf) Industry Average* EXP** Gross Sales $116 $110 Regional / mix differences Freight 20 22 Market proximity Plant Costs 76 62 3 of 4 plants in top quartile Gross Margin 20 26 SG&A 9 5 Lean organization Operating Earnings $11 $21 Margin Analysis Gross Ma
Slide 23: Paperboard
Paperboard ► Lawton is a low-cost producer ► Capacity has increased from 180,000 tpy to 270,000 tpy in three years ► Product mix improvements are under way ► Low capital capacity improvements exist ► 7 out of 8 U.S. wallboard producers own integrated paper assets ► Market dynamics are improving z Tw
Slide 24: EXP Estimates
EXP Estimates* ($ millions) ($ per share) 200 EBITDA** 6.00 EPS $175-190 $4.75-5.25 175 5.00 150 $139 $129 4.00 125 31% $3.57 $3.11 % 100 3.00 40 75 2.00 50 1.00 25 0 0.00 FY 2003 FY 2004 FY 2005E FY 2003 FY 2004 FY 2005E FY 2003 FY 2004 FY 2005E Revenue $429 $503 $547-562 Net Income $58 $67 $90-100
Slide 25: Eagle Materials Inc. Debt vs. Capitalization
Eagle Materials Inc. Debt vs. Capitalization ($ Millions) Ratio 14% 16% 600 $480 $439 500 400 300 200 $81 $83 100 0 3/31/03 3/31/04 Debt Equity - Debt-free prior to $113 million special dividend paid January 29, 2004. - Purchased approximately 60,000 shares of Eagle Materials in the 4th quarter of F
Slide 26: Shareholder Value Creation
Shareholder Value Creation ► Increasing Value Through Growth z Focused on operational excellence to enhance existing operations and rapidly integrate new acquisitions ► Share Repurchases ► Return Through Dividends 26
Slide 27: Shareholder Return Through Dividends
Shareholder Return Through Dividends EXP Recently Increased its Annual Dividend from $0.20 Per Share to $1.20 Yield (1) Payout (2) 1.9% 34% 34% 1.6% EXP’s Increased Dividend Industry Average* (1) Based on $62 per share stock price (2) Based on TTM reported earnings * Industry average includes Vulcan
Slide 28: Increased Shareholder Value Through Growth
Increased Shareholder Value Through Growth ► $750 Million Projected to be Available (Cash & Debt Capacity) Over the Next 5 Years with 40% Debt-to-Capital as the Upper Target z Focused on cement and wallboard growth Project returns above cost-of-capital Projects consistent with strategic plan ► G
Slide 29: A Solid Foundation with a Bright Future
A Solid Foundation with a Bright Future The Nation’s Highest Margin Construction Products Company* ► Balanced Strategy Focused on Cement and Wallboard z Disciplined Asset Management z Strategic Expansion ► Strong Cash Flow from Low-Cost Operations ► Strong Pricing Upside in Wallboard Operations ► At
Slide 30: 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 Boor, Senior Vice President-Corporate Development / Investor Relations Telephone:
Slide 31: Explanation of Non-GAAP Items
Explanation of Non-GAAP Items EBITDA represents net income, plus interest expense (less interest income), provision 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 with
Slide 32: Explanation of Non-GAAP Items
Explanation of Non-GAAP Items “Free Cash Flow” as used on slide 6 represents “Net Cash Provided by Operating Activities” plus “New Cash Used in Investing Activities” (excluding acquisitions). Free Cash Flow is a non-GAAP measure that provides supplemental information regarding the operating performa