Eagle Materials Inc · NYSE:EXP
Eagle Materials — Sidoti and Company, LLC Ninth Annual Emerging Growth Institutional Investor Forum (April 2005)
34 slides from Eagle Materials's conference presentation, Apr 5, 2005
Slide 1: Investor Presentation - Sidoti Emerging Growth Institutional Investor Forum
Investor Presentation Sidoti and Company, LLC Ninth Annual Emerging Growth Institutional Investor Forum New York City April 6, 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 - FY 2005E
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 Revenue by Segment - FY 2005 E EBITDA* by Segment - FY 2005 E Eagle Revenues $590 million Eagle EBITDA $195 million 54% 22% 13% 11% 48% 33% 17% 6% Eagle Materials Inc. *See
Slide 5: A Cash Flow Company
94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E Revenues Operating Cash Flow Eagle Materials A Cash Flow Company ($ Millions) Represents range from slide 31.
Slide 6: Why Eagle Materials?
Why Eagle Materials? Strong Cash Flow Excellent 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: 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 between 2.4% and 2.9% each year through CY 08 Source: PCA Fall 2004 forecast and NAHB February 2005 forecast. Single Family Starts CY 2005E CY 2006E
Slide 8: Primary Drivers of Gypsum Wallboard Demand: New Residential Construction
Primary Drivers of Gypsum Wallboard Demand New Residential Construction 30 Year fixed mortgage rates are expected to edge up to the range of 6.5% to 7.0%. Single family housing starts are expected to fall back from the 2004 record high. Source: Joint Center for Housing Studies of Harvard University
Slide 9: Primary Drivers of Gypsum Wallboard Demand: Commercial and Repair/Remodel
Primary Drivers of Gypsum Wallboard Demand Commercial Construction Construction spending on commercial projects are coming off a two year decline. Stronger overall economic conditions result in large labor gains which historically have driven commercial construction higher. Repair and Remodel With h
Slide 10: Projected Population Change 2005-2025 By Region
Projected Population Change Between 2005 and 2025 By Region Three 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 N
Slide 11: Wallboard - Capacity Announcements
Wallboard - Capacity Announcements New Capacity Announcements 4 greenfield plants and 2 modernization projects have been announced for the 2007/2008 timeframe: Greenfield Plants - American Gypsum - 750 mmsf (South Carolina) BPB - 700 mmsf (North Carolina) National - 750 mmsf (North Carolina) BPB - 7
Slide 12: 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 13: Current Wallboard Demand Drivers
Current 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 Addi
Slide 14: Wallboard: 18-Year History
18-Year History 2.7 Billion Sq. Ft. of Annual Capacity Georgetown, South Carolina will add 750 mmsf of capacity 8% U.S. Market Share (5th) Vertically Integrated with Light-Weight Paper Eagle's Strong Wallboard Operation (54% of FY 05E Revenue; 48% of FY 05E EBITDA) Reload/Distribution Yards Primary
Slide 15: 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 16: Eagle's Wallboard Sales Price Trend
Eagle's Wallboard Sales Price Trend 12/31/2003 3/31/2004 6/30/2004 9/30/2004 12/31/2004 3/31/05E FY 2006E Average Net Sales Price 86 95 101 110 109 113 110 (Quarter Ending) $/MSF $86 $95 $101 $110 $109 Average Net Sales Price $110 - $120 * 10% price increase announced for mid April 2005. $113 - $115
Slide 17: Eagle's Wallboard Performance
Eagle's Wallboard Performance Segment Operating Earnings FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E East Earnings Per msf 10.98 17.81 19.21 32.71 39.28 72.23 10.07 1.85 9.96 13.04 27.17 29.71 Segment Earnings 7 12 21 36 56 108 27.1 5 27 36 78 82 Operating Earnings/MSF of Capacity
Slide 18: Growing the Wallboard Business
Growing the Wallboard Business FY1995 FY2000 FY2005E FY2006E Target BSF Sold 0.6 1.4 2.5 2.7 3.4 Targeting Significant Volume Growth in Wallboard 0.6 1.4 2.5 4.1 (bsf ) Market Share 3% 5% 7% 8% 10% BSF Sold BSF Estimate Target 2.7
Slide 19: Georgetown Wallboard Expansion
Georgetown Wallboard Expansion Highlights: Located in Georgetown County, South Carolina $125 million investment Long-term supply agreement with Santee Cooper, a South Carolina service authority, for synthetic gypsum Construction to start in late 2005 Project completed in early 2007 Annual design cap
Slide 20: Cement Industry Overview
Cement Industry Overview High Barriers to Entry Capital intensive with 3-5 year lead-time for new capacity Regional markets are severely impacted by size of new plants Greenfield investments at current prices have marginal returns Favorable Supply/Demand Dynamics 20% - 25% imports needed to meet dom
Slide 21: Cement Industry Capacity vs. Consumption
Capacity Consumption 75 91 72 76 90 76 77 92.5 82 78 91.5 89 79 94 88 80 91 79 81 94 75 82 91 67 83 93 74 84 92 85 85 89.5 88 86 88.5 91 87 87.5 94 88 88 93 89 86 91 90 85 90 91 86 80 92 87 84 93 87 88 94 87.5 94 95 88.5 95 96 88 100 97 89 106 98 91 114 99 92.5 120 0 94 121 1 96 124 2 98 120 3 100.4
Slide 22: Cement: 40-Year History
40-Year History 2.65 Million Tons of Capacity (Net of Joint Venture) - Sold Out Each of Last 18 Years Announced plans to expand Illinois Cement by 430,000 tons 3% of U.S. Market Share (10th) Cement Plants Cement Terminals Markets Served Cement Plants Cement Terminals Markets Served Eagle's Strong Re
Slide 23: Cement Production & Cost
FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05E Total Net Tons Produced 1474 1800 1800 1800 1900 1900 2000 2050 2070 2250 2240 2270 2390 2431 Average Net Production Cost 40 37.5 38.5 39 38 38.77 37.48 39.16 41.82 39.77 40.8 42.01 43.95 46.66 (000's Tons) ($ per Ton) EXP has In
Slide 24: Eagle's Solid Cement Performance
Eagle's Solid 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 25: Growing the Cement Business
Growing the Cement Business FY1995 FY2000 FY2005E FY2006E Target West 1800 2100 2300 2650 3080 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 26: Illinois Cement Expansion
Illinois Cement Expansion Highlights: $65 million investment Expands plant by 65% to 1.1 million tons Includes cement dome for storage of finished cement (completed by Fall 2005) Plant expansion expected to be completed by December 2006 Reduces manufacturing cost per ton by approximately 20% Expande
Slide 27: 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 28: 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 29: 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 $1.20 Per Share Payout (2) Yield
Slide 30: Where Eagle is Going
Where Eagle is Going . . . . . . We have a balanced strategy focused on enhancing and improving our existing asset base We have demonstrated patience and a willingness to return cash to our shareholders when available growth opportunities are unattractive We remain focused on value creation through
Slide 31: Guidance
Guidance* ($ 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 assumes mid-cycle pricing.
Slide 32: Eagle's Commitment to Shareholders
Eagle's Commitment to Shareholders Protect the Value of Existing Assets Maximize Shareholders Returns with Industry Leading Low Cost Production Maintain a Steady and Disciplined Approach to Growth Pay an Attractive Annual Dividend Repurchase Shares When Appropriate Approximately 650,000 shares repur
Slide 33: 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 Kenneth M. Avery, Vice President - Controller Telephone: 214-432-2007 Email: kavery@eag
Slide 34: 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