Eagle Materials Inc · NYSE:EXP
Eagle Materials — Investor Presentation (February 2013)
57 slides from Eagle Materials's investor presentation, Feb 11, 2013
Slide 1: Low Cost Producer, Profitable Growth
Low Cost Producer Spring Profitable Growth Exhibit 99.1 • Smart Investments • Up-Cycle Tailwinds • Favorable Secular Trends • Low-Cost Foundation
Slide 2: Forward Looking Statement
Forward Looking Statement Forward-Looking Statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of and the Private Securities Litigation Reform Act of 1995. Forward-looking statem
Slide 3: Eagle Materials Business Definition
Eagle Materials Business Definition Minerals-Based Commodity Products Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Slide 4: Eagle Materials Business Definition
Eagle Materials Business Definition Minerals-Based Commodity Products Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Slide 5: Multiple Sources of Cost Advantage
Multiple Sources of Cost Advantage
Slide 6: Low Cost Producer Strategy Is Also Aligned with Sustainability
Strategy Objective Sustainability Result Our Low Cost Producer Strategy Is Also Aligned with Sustainability Less waste Reduced cost Responsible use of resources Less energy used Reduced cost Smaller environmental footprint Less mineral resource used Reduced cost Greater conservation Less water used
Slide 7: Track Record of Disciplined Investment
Track Record of Disciplined Investment Some Say “The Best Predictor of Grades is Grades” Source: Longnecker & Associates. All measures are based on last fiscal year end. Note: Direct Peers include: Martin Marietta, Texas Industries Inc., USG Corp., Vulcan Materials Note: Industry Peers include: Mart
Slide 8: Eagle Materials Business Definition
Eagle Materials Business Definition Minerals-Based Commodity Products Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Slide 9: Central US Cement System
A Central US Cement System New Cement Plants – Adjacent but Not Overlapping Market Reach • Heartland focus limits direct import threat • Sugar Creek and Tulsa acquisitions November 30, 2012 filled-in a key “missing piece of the puzzle”: links east to west and central to south Lafarge Cement Terminal
Slide 10: Scale and Value
Scale and Value Increased the Size of Our Cement Business by 60% Texas Lehigh (50%) Illinois Cement 1,100 Mountain Cement Nevada Cement Eagle Today 3,050 Sugar Creek 1,150 Tulsa Acquired Assets 1,850 Total Eagle Post-Closing 4,900 Cement Short Tons Capacity ~$225/ton acquisition price
Slide 11: US Cement Consumption Outlook
US Cement Consumption Outlook Million Metric Tons Source: Portland Cement Association and Eagle Materials analysis New capacity is constrained for the foreseeable future, some existing capacity may be closed in 2015 due to NESHAP compliance; imports will be required again to meet demand
Slide 12: EPA Regulatory Developments
EPA Regulatory Developments Final Rule Issued – Extension Granted On December 20, 2012 , the EPA issued a final rule amending the Existing Facilities New Facilities • National Emission Standards for Hazardous Air Pollutants (NESHAP) for the Portland Cement Manufacturing Industry • New Source Perform
Slide 13: EPA Regulatory Developments: Standards Tough to Meet
Pollutant Existing Source Standard New Source Standard EPA Regulatory Developments Standards Tough to Meet, Will Chill New Capacity Addition Particulate Matter 0.07 lb/ton clinker 0.02 lb/ton clinker Mercury 55 lb/MM tons clinker 21 lb/MM tons clinker Nitrogen Oxide 3.5 -10 lb/ton clinker (varies) 1
Slide 14: Concrete/Cement Value Proposition
Concrete/Cement Value Proposition In Relation to Asphalt, the Leading Substitute • Historically initial costs per construction mile have favored asphalt over concrete • Asphalt is used over 85% of the time in US highway and road construction, and this has been the case over many decades • Life cycle
Slide 15: Life Cycle Analysis Favors Concrete
Life Cycle Analysis Favors Concrete Pavement Life Expectancy (Before Reconstruction is Required) Source: PCA Highway Report
Slide 16: Asphalt Production Costs Linked to Oil/Bitumen
Asphalt Production Costs Linked to Oil/Bitumen Asphalt Costs Diverging from Historical Relationship with Concrete Sources: US Department of Labor, International Monetary Fund
Slide 17: Asphalt Total Cost Breakdown
Asphalt Total Cost Breakdown Bitumen Now Accounts for More Than Half the Cost (<5% the mass) "Bitumen" is naturally occurring solid petroleum, the heavy and viscous semi-solid petroleum found in oil sands, as well as refined bitumen generated in oil distillation. Source: Industry analysis
Slide 18: Concrete Share Has, In Fact, Been Growing
Concrete Share Has, In Fact, Been Growing Growth Since 2008 Has Been Masked by the Recession Concrete Share of Highway Paving Volume Source: PCA June 2012, Oman Data Systems
Slide 19: Outlook and Strategic Implications
Outlook and Strategic Implications A Game Changer for Cement and Asphalt • The price of asphalt is expected to continue to diverge from the price of concrete as oil price inflation remains higher than the cost inflation of the fuels used in producing cement (e.g., petcoke, shale gas) • High oil pric
Slide 20: Projected Initial Bid Paving Costs
PCA Projected Initial Bid Paving Costs Per Two Lane Road Mile - Urban Parity achieved in Fiscal 2009 – asphalt is an oil-based material Bid costs do not consider life-cycle costs – which further favors concrete
Slide 21: Eagle Materials Business Definition
Eagle Materials Business Definition Minerals-Based Commodity Products Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Slide 22: Close Relationship of End-Uses
Close Relationship of End-Uses Oil Well Cement and Frac Sand • Specialty oil well cement for casing wells • Special purpose frac sand to keep the fractures “propped open” Important elements for unlocking energy in the shale plays
Slide 23: Shifting the Cement Product Mix to Oil Well Cement
Shifting the Cement Product Mix to Oil Well Cement A Top Company Priority • Very few US cement producers have the capability, know-how, permits or customer relationships required to effectively produce and market specialty oil-well cement, especially Class H, the grade used in the most demanding cas
Slide 24: Frac Sand a Key Companion with Oil Well Cement
Eagle Plant Current Production Proportion Target Production Proportion Key Cement Grades Target Shale Capability Plays Plant Status Frac Sand a Key Companion with Oil Well Cement Both are Mutually Reinforcing Growth Opportunities Texas Lehigh ~ 50% > 50% Class H Eagle Ford Mature capability Mountain
Slide 25: Eagle Materials Business Definition
Eagle Materials Business Definition Minerals-Based Commodity Products Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Slide 26: Frac Sand is a Natural, Close Adjacency for Eagle
Frac Sand is a Natural, Close Adjacency for Eagle Key Growth Opportunity and a Top Eagle Priority Leverages existing • Customer base (oil well cement) • Prime distribution infrastructure that can be readily repurposed (Corpus Christi terminal, proximate to Eagle Ford) • Processing expertise (aggrega
Slide 27: Slide 27
Slide 28: Sandstone Formation Section View
Sandstone Formation Section View Moreover, Sandstone Closest to the Surface is Even Less Common
Slide 29: State Perspective and Top Players
Edi... State Perspective and Top Players Wisconsin (Top Quality) 10 million tons capacity 1. Badger Mining 2. Unimin 3. Fairmount 4. EOG Resources } @ Michigan (#2 Quality) 1 million tons capacity * Sergeant Sand Minnesota (Top Quality) 4 million ton capacity + Unimin Illinois (Top Quality) 6 millio
Slide 30: Completed Entrance to Illinois Sand
Completed Entrance to Illinois Sand Good Neighbor Landscaping Quarry Preparation
Slide 31: Corpus Christi Site Repurposing Underway
Corpus Christi Site Repurposing Underway Nearly Complete
Slide 32: Oil Directed Rig Count History and Forecasts
Oil Directed Rig Count History and Forecasts Simmons and Energy Information Agency
Slide 33: Drilling Activity Forecasts by Type
Drilling Activity Forecasts by Type Baker Hughes and Spears, January 2013
Slide 34: Unconventional Oil/Liquids Rig Count Forecast
Unconventional Oil/Liquids Rig Count Forecast Eagle Ford Remains the Most Important, Miss and Utica Fastest Growing
Slide 35: North American Proppant Annual Demand Outlook
North American Proppant Annual Demand Outlook Simmons and Company, December 2012, annual million tons
Slide 36: Estimated Available Supply and Demand
Estimated Available Supply and Demand Million Tons The industry may need to continue to rely on lower quality but more proximate sand types (as well as ceramics) to close the supply gap until new sources can be developed
Slide 37: Eagle Materials Business Definition
Eagle Materials Business Definition Minerals-Based Commodity Products Strategy Emphasis Now Key Demand Drivers Competitive Advantage Innovation Focus
Slide 38: Eagle’s US Market and Production Locations
Eagle’s US Market and Production Locations Note: Design capacities here do not necessarily represent current operating rates (“effective capacity”). Gypsum Wallboard (National-Scope) Paper Gypsum, CO 725 MMSF Albuquerque, NM 450 MMSF Duke, OK 1,300 MMSF Georgetown, SC 900 MMSF Lawton, OK 350,000 ton
Slide 39: US Demand for Gypsum Wallboard
US Demand for Gypsum Wallboard Source: US Census Bureau, company analysis
Slide 40: Latest Single-Family Housing Starts Forecasts
Latest Single-Family Housing Starts Forecasts SAAR in Millions
Slide 41: Proportion of Improving Metro Markets
Proportion of Improving Metro Markets Percentage of 385 Metro Areas as Surveyed by NAHB
Slide 42: Repair and Remodeling Outlook
Repair and Remodeling Outlook Harvard’s Outlook Suggests Growing Strength into 2013
Slide 43: Comparative Regional Recovery Outlooks
Source: Moody’s Economy.com Comparative Regional Recovery Outlooks Single Family Starts, Moody’s Base Case, 2011Q2 = 1
Slide 44: Financial Discipline is a Key Enabler of Success
Financial Discipline is a Key Enabler of Success An Eagle Hallmark
Slide 45: Financial Summary
Financial Summary Profitable Performance Throughout the Cycle Adjusted Revenues (1) Adjusted EBITDA (2) Note: Dollars in millions. For fiscal years ending March 31, except LTM as of December 31, 2012. Pro forma LTM periods include Target Assets. (1) Includes our proportionate share of our JV’s reven
Slide 46: Eagle Evolution Since Peak of Last Cycle
Eagle Evolution Since Peak of Last Cycle Long-Standing Goal of Doubling Our Peak to Peak Earnings Power 1. One-third more productive capacity in place • Cement: Illinois expansion completed • Wallboard: Ultra-efficient new plant built in Georgetown • Paper: 350,000 ton capacity today (220,000 ton or
Slide 47: Net Debt-to-Cap
Net Debt-to-Cap Net Debt-to-Equity ($ Millions) $800 $700 $600 $500 $400 $300 $200 $100 $- | | { | if { | | 40% 67% $452 $302 3/31/10 38% 62% $460 $285 3/31/11 = Equity 35% 55% $473 $260 3/31/12 Net Debt | > | A1% 69% $688 $474 12/31/12
Slide 48: Debt Maturities by Fiscal Year
Editi. $100.0 $81.2 $80.0 & $60.0 $57.0 2 FS = $36.5 = saoo ; $20.0 $4.7 oe $5.0 soo | | = = 2013 2014 2015 2016 2017 2018 2019 2020 Fiscal Years ™ 2005 Senior Notes 2007 Senior Notes
Slide 49: Disciplined Use of Cash
Disciplined Use of Cash Note: Issued 3.5 million shares in FY 13 pursuant to the acquisition of Lafarge assets.
Slide 50: Investment Summary
Investment Summary Eagle Materials • Low cost producer • Leading positions in attractive markets • Strong earnings growth in up-cycle, and now in early innings • Favorable secular demand trends, especially for cement and frac sand • Recently acquired assets from Lafarge are highly complementary and
Slide 51: Non-GAAP Reconciliation
Non-GAAP Reconciliation
Slide 52: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation Adjusted EBITDA $ million 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 3/31/09 3/31/10 3/31/11 3/31/12 Net Income $ 57.6 $ 66.9 $ 106.7 $ 161.0 $ 202.7 $ 97.8 $ 41.8 $ 29.0 $ 14.8 $ 18.7 $ 58.9 Plus: Taxes 29.0 35.2 51.4 80.1 101.6 46.6 20.4 10.3 1.9 3.2 27.1 Interest 9.6
Slide 53: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation Adjusted EBITDA $ million Year ended 12/31/11 9 months ended 9/30/11 9 months ended 9/30/12 LTM 9/30/12 Dec. (Eagle owned) months Lafarge Target Business Net Earnings $ (11) $ 9 $ (2) $ (4) Plus: Taxes (8) (2) (3) Interest (2) DD&A (16) Overhead Allocation Adjustment (21) Laf
Slide 54: Non-GAAP Reconciliation: Adjusted Revenue
Non-GAAP Reconciliation Adjusted Revenue $ million 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 3/31/09 3/31/10 3/31/11 3/31/12 LTM 12/31/12 Eagle $ 429 $ 503 $ 617 $ 860 $ 918 $ 748 $ 599 $ 468 $ 462 $ 495 $ 600 Joint Venture (50%) Total $ 501 $ 579 $ 699 $ 925 $ 994 $ 845 $ 695 $ 533 $ 537 $ 58
Slide 55: Non-GAAP Reconciliation: Adjusted Revenue
Non-GAAP Reconciliation Adjusted Revenue $ million Year ended 12/31/11 9 months ended 9/30/11 9 months ended 9/30/12 LTM 9/30/12 Dec. 2012 (Eagle owned) 11 months Lafarge Target Business Revenue $ 165 $ (121) $ 138 $ 182 $ (8) $ 174 The following provides a reconciliation of the Lafarge Target Busin
Slide 56: Major Facilities
MAJOR FACILITIES GYPSUM WALLBOARD PLANTS AMERICAN GYPSUM COMPANY LLC Albuquerque, New Mexico Bernalillo, New Mexico Gypsum, Colorado Duke, Oklahoma Georgetown, South Carolina PAPERBOARD MILL REPUBLIC PAPERBOARD COMPANY LLC Lawton, Oklahoma CONCRETE AND AGGREGATES PLANTS CENTEX MATERIALS LLC Austin a
Slide 57: Contact Information
Contact Information Steve Rowley President and CEO (214) 432-2020 srowley@eaglematerials.com Craig Kesler Executive Vice President and CFO (214) 432-2013 ckesler@eaglematerials.com Bob Stewart Executive Vice President, Strategy, Corporate Development and Communications (214) 432-2040 bstewart@eaglem
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