Eagle Materials Inc · NYSE:EXP
Eagle Materials — Investor Presentation (March 2005)
38 slides from Eagle Materials's investor presentation, Mar 10, 2005
Slide 1: Investor Presentation March 10, 2005
Investor Presentation March 10, 2005
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: Gypsum Wallboard, Cement, Paperboard, Concrete & Aggregates
Gypsum Wallboard Cement Paperboard Concrete & Aggregates Aggregates Aggregates
Slide 4: Revenue and EBITDA by Segment - FY2005E
Wallboard Cement Paperboard Con/Agg Revenue 317.7 187.6 129.2 62.7 Wallboard Cement Paperboard Con/Agg EBITDA 93.4 67.3 32.9 11 GAAP Revenue by Segment - FY 2005 E EBITDA* by Segment - FY 2005 E Eagle Revenues $590 million Eagle EBITDA $195 million 54% 22% 13% 11% 48% 33% 17% 6% Eagle Materials Inc.
Slide 5: Eagle Materials: A Cash Flow Company
94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E Revenues Operating Cash Flow Eagle Materials A Cash Flow Company ($ Millions) Represents range from slide 36.
Slide 6: Why Eagle Materials?
Why Eagle Materials? Strong Cash Flow Very Good Operators of Modern Assets High-speed wallboard lines and dry process cement plants Maintained in "better than new" condition Operated significantly above rated capacity Low cost producer in all segments Strong Industry Dynamics Wallboard and cement de
Slide 7: Key Demand Indicators: Construction Spending
Key Demand Indicators Construction Spending 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05E 06E 07E 08E Residential 195 231.4 234.9 266.5 267.1 263.4 252.7 228.9 197.5 232.1 250.1 275.2 252.1 281.4 280.9 298.1 317.6 324.1 319.2 338.9 358.9 380 374.9 358.7 358 361 Non-Residentia
Slide 8: Positive Outlook for U.S. Construction Industry
Positive Outlook for U.S. Construction Industry Non-residential expected to turn up strongly from 2004 Total Construction Spending Expected to Increase 2.9% and 2.6% in CY05 and CY06, Respectively Source: PCA Fall 2004 forecast - November 04. CY 05E Public Construction 672.8 690.1 702.1 Non-Resident
Slide 9: Key Demand Indicators: New Residential Construction
Key Demand Indicators Gypsum Wallboard New Residential Construction Long Term Total number of homes built over the next ten years could exceed that of the last ten years (18.5 - 19.5 million units). Longer term trends for housing rely on demographic trends. Housing investments over the next ten year
Slide 10: Key Demand Indicators: Commercial Construction and Repair & Remodel
Key Demand Indicators Gypsum Wallboard Commercial Construction Construction spending on income properties (warehouses, offices and stores) is expected to rebound 9%. Construction spending on institutional buildings is expected to increase 7% bringing an end to 2 years of decline. Repair and Remodel
Slide 11: U.S. Population Expected to Grow by 50% through 2050
U.S. Population Expected to Grow by 50% through 2050 2000 2010 2020 2030 2040 2050 Population Growth 282 309 336 364 392 420 (Millions) Year Source: U.S. Census Bureau. 282 309 336 364 392 420
Slide 12: Projected Population Change Between 2005 and 2025 By Region
Projected Population Change Between 2005 and 2025 By Region Two of the four fastest growing regions encompass Eagle's primary markets. New England West North Central West South Central* East North Central East South Central South Atlantic Mid Atlantic Mountain* Pacific TX OK AR LA MS AL GA FL SC NC
Slide 13: Wallboard - Industry Overview
Wallboard - Industry Overview The Industry is Operating at 90+% Capacity Utilization Consumption is Expected to Grow at Historic Levels of 3%+ Driven by Population Increases and the Level of Repair and Remodel Spending Announced New Capacity is Limited Over the Next Few Years Few, if any restarts av
Slide 14: 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 15: Wallboard Demand Drivers
Wallboard Demand Drivers Consumption: 2005CY Projection % of WB Demand Change (bsf) New Residential -3% 47% -.49 Residential Repair/Remodel +3% 16% +.17 New Non-Residential +7% 12% +.29 Non-Residential Repair/Remodel +5% 19% +.33 Manufactured Housing/Other +7% 6% +.15 Capacity: Capacity Additions +.
Slide 16: Wallboard Utilization and Pricing
Fiscal Years Capacity Utilization AGC Net Sales 86 0.95 140.69 87 0.88 114.31 88 0.82 94.89 89 0.87 96.11 90 0.85 76.07 91 0.75 74.36 92 0.84 67.34 93 0.88 80 94 0.94 103.53 95 0.92 101.23 96 0.96 111.07 97 0.98 121.33 98 1 137.5 99 1.01 169.26 00 0.89 96.75 01 0.83 75.96 02 0.81 91.89 03 0.87 88.88
Slide 17: Wallboard: 18-Year History
18-Year History 2.7 Billion Sq. Ft. of Capacity 8% U.S. Market Share (5th) Vertically Integrated with Light-Weight Paper Strong Wallboard Western U.S. Operation (54% of FY 05E Revenue; 48% of FY 05E EBITDA) Wallboard Plants Reload/Distribution Yards Markets Served Wallboard Plants Reload/Distributio
Slide 18: Wallboard Production & Cost
Wallboard Production & Cost FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E 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 2.6 Production Cost / MSF 61.92 53.3 56.43 65 59.74 61.42 64.58 64.02 63.02 65.95 61.38 63.69 63.85 67.01
Slide 19: EXP Wallboard Sales Price Trend
EXP Wallboard Sales Price Trend 12/31/2003 3/31/2004 6/30/2004 9/30/2004 12/31/2004 Average Net Sales Price 86 95 101 110 109 (Quarter Ending) $/MSF $86 $95 $101 $110 $109 Average Net Sales Price
Slide 20: Eagle Wallboard Performance: Segment Operating Earnings
Eagle Wallboard Performance Segment Operating Earnings (in millions) FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E East 7 12 22 36 56 108 27.1 5 27 36 78 82 West North
Slide 21: Eagle Wallboard Performance: Operating Earnings/MSF of Capacity
Eagle Wallboard Performance Operating Earnings/MSF of Capacity FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E East West 88.53 88.21 99.39 109.01 122.55 153.57 91.12 72.97 87.12 86.97 108 110 North 10.98 17.08 19.21 32.71 39.28 72.23 10.07 1.85 9.96 13.04 27.17 30.8 Operating Earnings
Slide 22: Growing the Wallboard Business
Growing the Wallboard Business FY1995 FY2000 FY2005E FY2006E Target BSF Sold 0.6 1.4 2.5 2.7 4.1 Targeting Significant Volume Growth in Wallboard 0.6 1.4 2.5 4.1 (bsf ) Market Share 3% 5% 8% 8% 11% BSF Sold BSF Estimate Target 2.7
Slide 23: Cement Industry Overview
Cement Industry Overview High Barriers to Entry Capital intensive with 3-5 year lead-time for new capacity Regional markets are severely impacted by size of new plants Greenfield investments at current prices have marginal returns Favorable Supply/Demand Dynamics 20% - 25% imports needed to meet dom
Slide 24: Cement Industry Capacity vs. Consumption
Capacity Consumption 75 91 72 76 90 76 77 92.5 82 78 91.5 89 79 94 88 80 91 79 81 94 75 82 91 67 83 93 74 84 92 85 85 89.5 88 86 88.5 91 87 87.5 94 88 88 93 89 86 91 90 85 90 91 86 80 92 87 84 93 87 88 94 87.5 94 95 88.5 95 96 88 100 97 89 106 98 91 114 99 92.5 120 0 94 121 1 96 124 2 98 120 3 100.4
Slide 25: Six-Year Federal Highway Funding Proposal
Six-Year Federal Highway Funding Proposal TEA-21 Bush Senate House Funding 217 284 318 275 ($ in billions) $217 $275 $318 $284
Slide 26: Cement: 40-Year History
40-Year History 2.65 Million Tons of Capacity (Net of Joint Venture) - Sold Out Each of Last 18 Years 3% of U.S. Market Share (10th) Cement Plants Cement Terminals Markets Served Cement Plants Cement Terminals Markets Served Strong Cement Regional Positions (22% of FY 05E Revenue; 33% of FY 05E EBIT
Slide 27: Cement Production & Cost
FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E Total Net Tons Produced 1474 1800 1800 1800 1900 1900 2000 2050 2070 2250 2240 2270 2390 2431 Average Net Production Cost 40 37.5 38.5 39 38 38.77 37.48 39.16 41.82 39.77 40.8 42.01 43.95 46.66 (000's Tons) ($ per Ton) EXP has In
Slide 28: Eagle's Stable Cement Performance
Eagle's Stable Cement Performance FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E* Cement Earnings 26 35 40 48 57 53 59.6 60 54 50 57 72 Operating Earnings ($ in millions) *Incremental impact of fully consolidating Illinois Cement is approximately $8-$10 million.
Slide 29: Growing the Cement Business
Growing the Cement Business FY1995 FY2000 FY2005E FY2006E Target West 1800 2100 2300 2650 3600 Targeting 35% Volume Growth in Cement (tons in 000's) 1,800 2,100 2,650 3,600 Domestic Clinker Capacity 2% 2% 3% 3% 4% Tons of Capacity Tons of Capacity Estimated Tons of Capacity Target 2,300
Slide 30: Gypsum Paperboard Industry
Gypsum Paperboard Industry 7 Out of 8 U.S. Wallboard Producers Own Integrated Paper Assets Market Dynamics are Improving Increased wallboard demand is causing shortages of gypsum paper Non-integrated paperboard producers are shifting production to non-gypsum products as those related markets improve
Slide 31: Paperboard Profitability Drivers
FY01 FY02 FY03 FY04 FY05E FY06E Total Net Tons Produced 160 196.7 231.7 251.2 277.8 290 Average Net Production Cost 368.17 350.64 330.16 337.44 344.45 354 (000's Tons) ($ per Ton) High Productivity and Low Cost Production Paperboard Profitability Drivers
Slide 32: Concrete & Aggregates
Concrete & Aggregates Both Industries are Highly Fragmented Over 7,000 independent quarries with top two aggregates producers controlling 13% of the market 2,700 concrete companies owning approximately 6,000 plants Concrete and Aggregates Represent a Very Small Part of EXP Strong competitive positio
Slide 33: Shareholder Return Through Dividend
Shareholder Return Through Dividend 19% 28% *Industry average includes Vulcan Materials, Rinker Group, Florida Rock, Martin Marietta, Lafarge NA, and Texas Industries. (1) Based on $80 per share stock price (2) Based on TTM reported earnings EXP's Annual Dividend of $1.20 Per Share Payout (2) Yield
Slide 34: Where Eagle is Going
Where Eagle is Going . . . . . . We have a balanced strategy focused on enhancing and improving our existing asset base and pursuing growth opportunities in both cement and wallboard We have demonstrated patience and a willingness to return cash to our shareholders when available growth opportunitie
Slide 35: Guidance
Guidance* ($ in millions) EXP FY05E EXP FY06E Target Year Revenue $575 - $600 $675 - $700 $960 Net Income $101 - $106 $115 - $125 $200 EPS $5.40 - $5.65 $6.40 - $6.90 $12.50 Employees 1,475 1,500 1,750 *Target year defined as mid-cycle.
Slide 36: Eagle's Commitment to Shareholders
Eagle's Commitment to Shareholders Protect the Value of Existing Assets Maximize Shareholders Returns with World Class Operational Excellence Maintain a Steady and Disciplined Approach to Growth Pay an Attractive Annual Dividend Repurchase Shares When Appropriate
Slide 37: 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 Craig Kesler, Director - Strategic Planning / Investor Relations Telephone: 214-432-201
Slide 38: 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