Eagle Materials Inc · NYSE:EXP
Eagle Materials — New York Society of Security Analysts Construction Materials Conference 2006
48 slides from Eagle Materials's conference presentation, Sep 26, 2006
Slide 1: New York Society of Security Analysts Construction Materials Conference
New York Society of Security Analysts Construction Materials Conference New York City z September 26, 2006 9/25/2006Inc. Eagle Materials NYSE: EXP 1 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 Inc.
Eagle Materials Inc. 1. Eagle Materials 2. Growth Initiatives 3. Conclusion 3
Slide 4: Eagle Materials Inc.
Eagle Materials Inc. Gypsum Cement Wallboard Concrete & Gypsum Aggregates Paperboard 4
Slide 5: Eagle Materials is comprised of a balanced portfolio
Eagle Materials is comprised of a balanced portfolio of … Building Materials and … Construction Products businesses *TTM including Joint Venture revenues, excludes other, net. 5
Slide 6: Steady top and bottom line growth
Steady top and bottom line growth ($ in millions) Revenues Operating Earnings 02-07E CAGR – 16% 02-07E CAGR – 26% $1,200 $400 $315-$345 $1,000 $950 $860 $300 $264 $800 $617 $600 $503 $200 $172 $429 $395 $400 $115 $102 $100 $79 $200 $0 $0 02 03 04 05 06 07E 02 03 04 05 06 07E For Fiscal Year Ending M
Slide 7: Eagle generates significant cash flow
Eagle generates significant cash flow ($ in millions) (L) Revenues (R) Operating Cash Flow * $1,000 $250 $225 $800 $200 $175 $600 $150 $125 $400 $100 $75 $200 $50 $25 $0 $0 95 96 97 98 99 00 01 02 03 04 05 06 7E FY FY FY FY FY FY FY FY FY FY FY FY 0 FY *Cash from operations including changes in work
Slide 8: A piercing focus on low-cost production
At Eagle Materials, we have a piercing focus on… Low-cost Production Safety Quality Low-cost Wallboard Production Low-cost Cement Production 8
Slide 9: A disciplined approach to capital investment
At Eagle Materials, we have a disciplined approach to… Capital Investment Illinois Cement Expansion and modernization Greenfield Wallboard plant in Georgetown, SC Nevada Cement Expansion and modernization Mountain Cement Expansion and modernization 9
Slide 10: Wallboard Overview
Wallboard Overview Demand dynamics returning to more moderate levels – Residential slowing across most of the country – Non-residential and repair and remodel demand remains strong Consolidated Industry – From 12 U.S. producers in 1997 to 8 currently, with approximately 37.2 BSF annual capacity Wall
Slide 11: U.S. Wallboard Industry Overview Capacity vs. Consumption
U.S. Wallboard Industry Overview Capacity vs. Consumption (Billions of Square Feet) 45 40 Consumption 35 Capacity 30 25 Manufactured 20 Housing, 2% Repair and 15 Remodel, 29% New Residential, 10 51% New Non- Residential, 5 18% 0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07E Calendar Years Gyps
Slide 12: New residential construction continues to decline
New residential construction continues to decline 10-year rates have recently trended downward (R) U.S. Treasury – (L) Single Family Starts-000’s Housing Starts 10 year Treasury 10 year constant maturity 2,000 7 1,800 6 1,600 1,400 5 1,200 4 1,000 3 800 600 2 400 1 200 0 0 1998 1999 2000 2001 2002 2
Slide 13: Repair and remodel construction has seen significant growth
Repair and remodel construction has seen significant growth Residential Repair and Remodel Construction 1998 – 2007E U.S. Billions 2000 $ $200 9% growth from 2005 to 2007 $150 $100 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Source: NAHB Remodeling Forecast, March 2006. 13
Slide 14: Non-residential recovering but still not at historic levels
Non-residential recovering but still not at historic levels Private non-residential construction output, 1998 – 2007E (U.S. billions 1996$) $220 $200 $180 Recent growth in non- residential construction is still short of historic levels. $160 $140 $120 $100 1998 1999 2000 2001 2002 2003 2004 2005 200
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 14.9 New Commercial (18% of Demand) 6.5 7.3 7.8 Repair & Remodel (29% of Demand) 10.5 10.8 11.3 Manufactured Housing (2% of Demand) 0.7 0.7 0.7 Tota
Slide 16: Eagle's Wallboard Quarterly Net Sales Price Trend
Eagle’s Wallboard Quarterly Net Sales Price Trend $/MSF Estimated September 2006 Price - $168/msf $180 $175 $168 $160 $155 $144 $140 $132 $119 $120 $115 $110 $109 $101 $100 $95 $86 $80 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 9/30/06E 16
Slide 17: Eagle's wallboard production and cost
Eagle’s wallboard production and cost Total BSF Produced Production Cost / MSF 3.0 Energy costs have $90 started to trend downward 2.5 $75 2.0 $60 ($ / MSF) (BSF) 1.5 $45 1.0 $30 0.5 $15 0.0 $0 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E 17
Slide 18: 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 grow
Slide 19: U.S. Cement Industry Overview Capacity vs. Consumption
U.S. Cement Industry Overview Capacity vs. Consumption (Millions of Short Tons) 150 Consumption 125 Capacity Imports 100 New Residential, Other, 3% 23% 75 Public Construction, 50% New Non- Residential, 24% 50 E E 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Slide 20: Public Construction
Public Construction The primary driver of U.S. Cement consumption remains strong Very positive current outlook as well as long-term outlook Public Construction put-in-place with cement consumption Public Construction Public Cement Consumption Billions of ’96 $ (L) Millions of Tons (R) $200.0 Increas
Slide 21: Improved highway spending
Improved highway spending SAFETEA provides a six-year $286 billion federal highway bill, 42% greater than previous bill TEA-21 SAFETEA-LU 45.0 40.0 35.0 30.0 25.0 $bn 20.0 15.0 10.0 5.0 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E Annual spending levels Source: U.S. Census, AR
Slide 22: Eagle's Cement Quarterly Net Sales Price Trend
Eagle’s Cement Quarterly Net Sales Price Trend Estimated September 2006 Price - $93/ton $/Ton $100 $93 $90 $91 $90 $83 $83 $80 $79 $74 $70 $72 $70 $68 $66 $65 $60 $50 04 04 04 05 05 05 06 06 6E 3 4 /05 /0 /0 / / / / / / / / /0 1 31 30 30 1 31 30 30 1 31 30 /3 /3 /3 30 3/ 6/ 9/ 3/ 6/ 9/ 3/ 6/ 12 12 1
Slide 23: Eagle's cement production and cost
Eagle’s cement production and cost (L) Total Manufactured Tons Produced (R) Average Manufactured Production Cost per Ton $80 2,900 Power and energy 2,700 costs responsible for cost increases $60 Thousand Tons 2,500 $ per ton 2,300 $40 2,100 1,900 1,700 $20 1,500 1,300 $0 FY98 FY99 FY00 FY01 FY02 FY0
Slide 24: Gypsum Paperboard Overview
Gypsum Paperboard Overview A natural companion to our wallboard business 7 out of 8 wallboard producers are vertically integrated Eagle’s papermill produces low-cost paper – Economies of scale • Our Lawton mill has an annual capacity of approximately 320,000 tons per year compared to the average com
Slide 25: Concrete and Aggregates Overview
Concrete and Aggregates Overview Complementary to our Cement business We operate in two local markets – Austin, Texas • Low-cost strategic central Texas aggregate operation • Low-cost, geographically diverse readymix position in the Austin area – Northern California • Rural readymix operations • Low
Slide 26: Eagle Materials Inc.
Eagle Materials Inc. 1. Eagle Materials 2. Growth Initiatives 3. Conclusion 26
Slide 27: Current growth initiatives
Current growth initiatives ($ in millions) Estimated Approximate Completion Cost Date Wallboard Greenfield Plant in South Carolina Late Calendar $150 2007 Cement Modernization and Expansion of Illinois Cement Late Calendar $65 2006 Modernization and Expansion of Nevada Cement Late Calendar $200 2008
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 approxi
Slide 29: Georgetown, South Carolina - Site
Georgetown, South Carolina - Site 29
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 by approximately 20% – Expanded market share has already been established through imports Project Status – Project is on schedul
Slide 32: Illinois Cement Company Expansion Project
Illinois Cement Company Expansion Project 32
Slide 33: Nevada Cement Modernization
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 ope
Slide 34: Mountain Cement Modernization
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 Pro
Slide 35: 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 performance – Modernization and expansion projects will lower operati
Slide 36: The Nation's Highest Margin Construction Products Company
The Nation’s Highest Margin Construction Products Company* American Gypsum Company Cement – Duke – Illinois Cement Company – High speed board line – 5 stage preheater/precalciner – Modern dryers – Eagle – Texas Lehigh Cement Company – High speed board line – 4 stage preheater/precalciner – Modern dr
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 After Ex
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 pr
Slide 39: Eagle Materials Inc.
Eagle Materials Inc. 1. Eagle Materials 2. Growth Initiatives 3. Conclusion 39
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 1.4 million shares repurchased in FY 2007, year-to- date – Approximately 1.6 million shares remain availab
Slide 41: Eagle Materials has the highest operating margins of the group
Eagle Materials has the highest operating margins of the group 40% EBIT Margins (TTM) 31.4% 30% 23.3% 20% 18.1% 17.5% 17.9% 15.4% 15.8% 13.4% 10.4% 9.4% 10% 6.6% 0% US Concrete TXI CRH Hanson Cemex LaFarge SA USG Martin Marietta Vulcan Florida Rock Eagle Source: EBIT margins represent earnings befor
Slide 42: Dividend yield and payout ratio
Dividend yield and payout ratio Eagle’s annual dividend is $0.70 per share Yield Payout 2.0% 38.4% 1.6% 19.8% Eagle's Industry Eagle's TTM Industry Dividend (1) Average * TTM * (1) Based on $35 per share stock price *Industry average includes Vulcan Materials, Rinker Group, Florida Rock, Martin Mari
Slide 43: FY 2007 Updated Guidance
FY 2007 Updated Guidance ($ in Millions, except per share data) 2nd Qtr FY 2007 FY 2007 Net Earnings $66 - $71 $192 - $212 Diluted EPS $1.30 - $1.40 $3.80 - $4.20 43
Slide 44: Question & Answer
Eagle Materials Inc. Question & Answer 44
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
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Slide 47: Mapping a Strong Future
MAPPING A STRONG FUTURE MAJOR FACILITIES ILLINOIS CEMENT COMPANY LLC -LaSal nie MOUNTAIN CEMENT COMPANY Laramie, Wyoming CNEVROK CEMENT COMPANY Ferley.Noveas | TEEASLEAIGH CENENT COMPANY LP Bus, Txas50%6Jont entre) “AMERICAN GYPSUM COMPANY Albuguerque and Berea, New ecco: Gyesum. Colorado: ané Duke
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