Low Cost Producer. Sound Strategic Investments Cyclic Tailwind Benefits Healthy Balance Sheet Strong Cash Flow Exceptional Track Record

Transcription

1 Low Cost Producer Soud Strategic Ivestmets Cyclic Tailwid Beefits Healthy Balace Sheet Strog Cash Flow Exceptioal Track Record Summer 2018

2 Forward-Lookig Statemets Forward-Lookig Statemets. This presetatio cotais forward-lookig statemets withi the meaig of Sectio 27A of the Securities Act of 1933, Sectio 21E of the Securities Exchage Act of 1934 ad the Private Securities Litigatio Reform Act of Forward-lookig statemets may be idetified by the cotext of the statemet ad geerally arise whe the Compay is discussig its beliefs, estimates or expectatios. These statemets are ot historical facts or guaratees of future performace but istead represet oly the Compay's belief at the time the statemets were made regardig future evets which are subject to certai risks, ucertaities ad other factors, may of which are outside the Compay's cotrol. Actual results ad outcomes may differ materially from what is expressed or forecast i such forward-lookig statemets. The pricipal risks ad ucertaities that may affect the Compay's actual performace iclude the followig: the cyclical ad seasoal ature of the Compay's busiess; public ifrastructure expeditures; adverse weather coditios; the fact that our products are commodities ad that prices for our products are subject to material fluctuatio due to market coditios ad other factors beyod our cotrol; availability of raw materials; chages i eergy costs icludig, without limitatio, atural gas, coal ad oil; chages i the cost ad availability of trasportatio; uexpected operatioal difficulties, icludig uexpected maiteace costs, equipmet dowtime ad iterruptio of productio; material opaymet or o-performace by ay of our key customers; fluctuatios i activity i the oil ad gas idustry, icludig the level of fracturig activities ad the demad for frac sad; iability to timely execute aouced capacity expasios; difficulties ad delays i the developmet of ew busiess lies; govermetal regulatio ad chages i govermetal ad public policy (icludig, without limitatio, climate chage regulatio); possible outcomes of pedig or future litigatio or arbitratio proceedigs; chages i ecoomic coditios specific to ay oe or more of the Compay's markets; competitio; a cyber-attack or data security breach; aouced icreases i capacity i the gypsum wallboard, cemet ad frac sad idustries; chages i the demad for residetial housig costructio or commercial costructio; risks related to pursuit of acquisitios, joit vetures ad other trasactios; geeral ecoomic coditios; ad iterest rates. For example, icreases i iterest rates, decreases i demad for costructio materials or icreases i the cost of eergy (icludig, without limitatio, atural gas, coal ad oil) could affect the reveues ad operatig earigs of our operatios. I additio, chages i atioal or regioal ecoomic coditios ad levels of ifrastructure ad costructio spedig could also adversely affect the Compay's result of operatios. These ad other factors are described i the Compay's Aual Report o Form 10-K for the fiscal year eded March 31, 2018 ad the Compay s Quarterly Report o Form 10-Q for the fiscal quarter eded March 31, This report is filed with the Securities ad Exchage Commissio. With respect to our completed acquisitio of the Fairbor Busiess as described i this presetatio, factors, risks ad ucertaities that may cause actual evets ad developmets to vary materially from those aticipated i such forward-lookig statemets iclude, but are ot limited to, failure to realize ay expected syergies from or other beefits of the trasactio, possible egative effects of cosummatio of the trasactio, sigificat trasactio or owership trasitio costs, ukow liabilities or other adverse developmets affectig the Fairbor Busiess, icludig the results of operatios of the Fairbor Busiess prior ad after the closig, the effect o the Fairbor Busiess of the same or similar factors discussed above to which our busiess is subject, icludig chages i market coditios i the costructio idustry ad geeral ecoomic ad busiess coditios that may affect us followig the acquisitio. All forward-lookig statemets made herei are made as of the date hereof, ad the risk that actual results will differ materially from expectatios expressed herei will icrease with the passage of time. The Compay udertakes o duty to update ay forward-lookig statemet to reflect future evets or chages i the Compay's expectatios. 2

3 Eagle Materials Compay Overview Fouded i 1963 as a subsidiary of Cetex Corporatio I 2004, Cetex spu off Cetex Costructio Products which became Eagle Materials Ic. (NYSE: EXP) Reveue (FYE March 31, $ i millios) $1,143 $1,066 $898 $1,281 $1,387 Diversified producer of basic buildig products used i residetial, idustrial, commercial ad ifrastructure costructio Well-recogized as a low cost producer through cycles Five geographically diverse busiess segmets 40 productio facilities / plats 40 distributio facilities No oe customer accouts for 5% of reveue with top 10 customers represetig less tha 25% 100% of reveues are geerated withi the US Proforma EBITDA 1 & Margi (FYE March 31, $ i millios) $460 $464 $349 $384 $280 31% 33% 34% 36% 34% 1 Proforma EBITDA is a o-gaap measure; see appedix for recociliatio 3

4 Busiess Mix Overview Gross Reveue by Segmet for FYE Mar-18 ($ i millios) 1 Operatig Earigs + DD&A 2 by Segmet for FYE Mar-18 ($ i millios) Gypsum Wallboard $492 Cemet $652 31% 42% 12% 10% 5% Recycled Paperboard $182 Oil ad Gas Proppats $85 Cocrete ad Aggregates $157 Gypsum Wallboard $177 36% Cemet $230 47% 8% 4% 5% Recycled Paperboard $41 Oil ad Gas Proppats $19 Cocrete ad Aggregates $26 Cemet ad Gypsum Wallboard drives majority of performace 1 Icludes itersegmet reveue ad our proportioate share of JV reveue 2 DD&A: Depreciatio, Depletio ad Amortizatio 4

5 Cemet 42% Note: Pie chart represets FYE Mar-18 Gross Reveue 5

6 Geographic Footprit Cemet Cotiguous System Largely Isulated from Coastal Imports Plats ad Capacities 1 (ST 2 thousads) Texas Lehigh (50%) 720 Illiois Cemet 1,100 Moutai Cemet 800 Nevada Cemet 550 Cetral Plais Kasas City 1,100 Cetral Plais Tulsa 900 Fairbor Cemet 980 (Acquired February 2017) Eagle Cemet Plats Eagle Cemet Termials 1 Represets cemet gridig productio capacity; geerally, a plat s cemet gridig productio capacity is greater tha its cliker productio capacity; 2 Oe short to equals 2,000 pouds 6

7 Segmet Overview Cemet Seve cemet plats ad oe slag gridig facility Sales Volume (M Tos) 1 Over 24 cemet/slag distributio termials 4,593 4,799 4,778 4,871 5,365 Broad geographic reach High quality cemet plats are largely isulated from coastal imports Markets typically limited to a 150 mile radius for shipmets by truck ad a 300 mile radius for shipmets by rail Gross Reveue ($ i millios) 1 High barriers to etry due to resource availability, permittig ad capital requiremets $438 $489 $528 $566 $652 Miimum 25+ years of limestoe reserves at each site Pricipal sources of demad are ifrastructure, commercial costructio ad residetial costructio Plat Overview Miimum limestoe reserves Plat ame Plat locatio Capacity 2 (M short tos) (years) Texas Lehigh 3 Buda, TX Illiois Cemet LaSalle, IL 1, Cetral Plais Kasas City Sugar Creek, MO 1, Moutai Cemet Laramie, WY Cetral Plais Tulsa Tulsa, OK Fairbor Cemet Fairbor, OH Nevada Cemet Ferley, NV Total Net 6,150 Oper. Icome + DD&A & Margi ($ i millios) $121 $149 $171 $190 $230 28% 31% 32% 34% 35% Note: Fiscal Year edig March 31; 1 Icludes the proportioate share of Texas Lehigh joit veture; 2 Represets cemet gridig productio capacity; geerally, a plat s cemet gridig productio capacity is greater tha its cliker productio capacity; 3 Net of parter s 50% iterest i the Buda, Texas plat 7

8 US Cemet Cosumptio Outlook ad Capacity PCA, Millio Metric Tos US Capacity NESHAP Era 120,000 New capacity -- ad capacity 100,000 expasio -- is costraied due to regulatio 80,000 (NESHAP) 60 Imports will be 60,000 required agai to meet demad 40 40,000 Cosumptio No-Res 20,000 Residetial Ifrastructure - 8

9 US Cliker Capacity Growth Eded i 2011 Both New Builds ad Expasio of Existig 250 Idustry-Drive Moderizatio Era NESHAP Era 120, , ,000 60, Aual Cliker Capacity (MT) US Cemet Kils 40,000 20,

10 Gypsum Wallboard ad Recycled Paperboard 31% 12% Note: Pie chart represets FYE Mar-18 Gross Reveue 10

11 Eagle s US Market ad Productio Locatios Gypsum, CO 700 MMSF Albuquerque, NM 425 MMSF Beralillo, NM 550 MMSF Duke, OK 1,300 MMSF Lawto, OK 320,000 tos paperboard Georgetow, SC 900 MMSF Wallboard Paperboard Total Wallboard Desig Capacity ~ 4 Billio SF Note: Desig capacities here do ot ecessarily represet curret operatig rates ( effective capacity ). 11

12 Segmet Overview Gypsum Wallboard Five gypsum wallboard plats Sales Volume (MMSF) Efficiet, techologically advaced facilities 2,112 2,210 2,394 2,483 2,555 Natioal distributio (except the ortheast) Sell ito 38 of the 48 states i the cotietal US Ample gypsum reserves Gross Reveue ($ i millios) Pricipal sources of demad for gypsum wallboard: $387 $438 $461 $474 $492 Repair ad remodelig, ad residetial costructio (~85% of idustry sales) Plat Overview No-residetial costructio ad other (~15%) Oper. Icome + DD&A & Margi ($ i millios) Locatio Approx. Aual Gypsum Wallboard Desig Capacity (MMSF) 1 Miimum Gypsum Reserves (Years) 2 Albuquerque, NM $136 $166 $179 $179 $177 Beralillo, NM (partially idled) Gypsum, CO Duke, OK 1, % 38% 39% 38% 36% Georgetow, SC Total 3,875 Note: Fiscal Year edig March 31; 1 Millio Square Feet ( MMSF ), based o aticipated product mix; 2 At 100% capacity utilizatio; 3 The same reserves serve both New Mexico plats; 4 We have a 60 year supply agreemet with Satee Cooper for sythetic gypsum that expires i

13 Idustry Backdrop Gypsum Wallboard US Demad is Closely Liked with Housig 1,400 1,200 1, New Home Sales (000) Wallboard Shipmets (BSF) Source: Cesus Bureau, Gypsum Associatio 13

14 Growth Expected i Repair ad Remodelig Harvard LIRA Model 14

15 Idustry Wallboard Shipmets Are Improvig Gypsum Associatio, Square Feet, Caledar Years Year- Ed Idustry Effective Capacity Utilizatio is Likely Approachig 100% (Nameplate ~80%) 7,000, BSF BSF 6,000, BSF BSF BSF 5,000, BSF 4,000,000 1st Quarter 2d Quarter 3rd Quarter 4th Quarter Aual Volume 15

16 Segmet Overview Recycled Paperboard Differetiated Asset Supportig the Wallboard Segmet Sales Volume (M Tos) Plat located i Lawto, Oklahoma Vertically itegrated with Gypsum Wallboard segmet Techologically advaced facility that maufactures high-stregth gypsum lier Lower-basis weight paper provides competitive advatages: Less eergy required to evaporate moisture i the gypsum wallboard maufacturig process Gross Reveue ($ i millios) 1 $167 $182 $130 $143 $149 Less OCC fiber iput per MSF Superior lateral stregth eables wallboard lies to ru at fast speeds with less waste ad delay Lower iput trasportatio costs Oper. Icome + DD&A & Margi ($ i millios) $32 $40 $40 $46 $41 ~60% sold to third party maufacturers, ~40% cosumed iterally 25% 28% 27% 28% 23% Note: Fiscal Year edig March 31; 1 Icludes itersegmet reveue 16

17 Cocrete ad Aggregates 10% Note: Pie chart represets FYE Mar-18 Gross Reveue 17

18 Segmet Overview Cocrete ad Aggregates 10 % 17 cocrete batchig plats ad four aggregates facilities strategically located to serve key marketig areas Producers typically ca oly sell products profitably withi 50 miles of productio facilities due to the high cost of trasportig cocrete ad aggregates Gross Reveue ($ i millios) 1 $155 $157 $128 $108 $97 Costructio aggregates are used i virtually all types of costructio, icludig highway costructio ad maiteace Ready mix cocrete is a versatile, low-cost buildig material used i almost all costructio Cocrete Sales Volume (M Yards) 1,260 1,228 1, Plat Overview Locatio Norther Califoria Types of Aggregates Sad ad Gravel Aggregates Aual Productio Capacity (Thousad tos) Miimum Reserves (Years) Number of Plats Cocrete Number of Trucks 4, Austi, TX Limestoe 3, Kasas City Area Limestoe Note: Fiscal Year edig March 31; 1 Icludes itersegmet reveue Aggregates Sales Volume (M Tos) 3,228 3,026 3,009 3,649 3,503 18

19 Oil ad Gas Proppats 5% Note: Pie chart represets FYE Mar-16 Gross Reveue 19

20 Segmet Overview Oil ad Gas Proppats Well-Positioed to Capture Opportuities Two frac sad processig facilities, three frac sad dryig facilities Most of reveues for FY18 were geerated from cotract sales Close Relatioship Betwee Oil Well Cemet ad Frac Sad Ed Uses Gross Reveue ($ i millios) $81 $85 $58 $20 $35 Wet Plat Overview Dry Plat Overview Locatio Estimated Aual Wet Productio Capacity (Thousads Tos) 1 New Aubur, WI 2,800 Utica, IL 2,200 Total 5,000 Estimated Miimum Reserves (Years) Dryig Capacity Locatio (Thousad Tos) New Aubur, WI (two lies) Utica,IL, with Build-Out Summer ,900 ~1,600 Corpus Christi, TX 1,500 Total 5,000 Note: Fiscal Year edig March 31; 1 Represets throughput capacity 20

21 Recet Wildcat Mierals Logistics Acquisitio Exteds Our Distributio Network East ad West Supports our dryig capacity expasio project curretly uderway at our mie i Illiois, ad will eable balaced participatio i the spot market Mies 21

22 Eagle is a Low Cost Producer Usig Less Resources to Make Commodity Products ü Operatioal Executio ü Low-Cost Focused Iovatio ü Techology ad Egieerig ü Process Maagemet ü Smart Desig ad Scale ü Sustaied Maiteace Sustaied Iovatio Focus o Cost Reductio Across Every Aspect of the Busiess System Sigificat, Sustaied ad Prove Cost Advatages Iputs Processig Waste Overhead Proximity of raw materials Miig iovatios Process cotrol Streamlied systems Eagle Cost Advatages Idustry Uique techologies Maufacturig iovatios Product lie focus Low staffig requiremets EXP Material ad eergy usage Logistics iovatios Maiteace disciplies No frills, oly ecessities Chart above is for illustrative purposes oly, ot to scale 22

23 Margi Performace Reflects Low Cost Positio Cyclic Commodity Idustries Source: Eagle Materials Ic. public filigs, Marti Marietta Corporatio public filigs, USG Corporatio public filigs; 1 Defied as earigs before icome taxes divided by reveue 23

24 Retur o Equity Average of Last Five Fiscal Years Our ROE has averaged more tha double the level of top competitive performace EXP CBPX MLM VMC USCR SUM USG Source FactSet, Jauary

25 Capital Structure I Millios Net Debt-to-Cap 36% 30% $1,203 $1,418 $686 $621 3/31/2017 3/31/2018 Equity Debt 25

26 Historical Credit Ratios $ i millios, Fiscal Year Edig March 31 Total Leverage Adj. EBITDA 1 / Cash Iterest 23.1x 22.7x 1.4x 1.5x 1.3x 1.5x 1.3x 16.5x 19.4x 16.6x (Adj. EBITDA 1 Capex) / Cash Iterest Free Cash Flow 2 / Total debt 13.0x 15.8x 17.4x 17.9x 11.9x 29% 24% 35% 40% 33% 1 Adjusted EBITDA is a o-gaap measure; see appedix for recociliatio; 2 Net cash from operatios less capital expeditures 26

27 Eagle Evolutio Sice 2007 Oe-third more productio capacity i place today Cemet: Illiois expasio (additioal 470,000 tos) Wallboard: Ultra-efficiet plat built i Georgetow, SC (900 MMSF) Paper: 350,000 tos capacity today (270,000 tos last peak) Cemet acquisitios doubled capacity Three cemet plats ad related assets (3 millio tos) Slag cemet plat acquisitio completed i Chicago (600,000 tos) Frac sad etry provides a additioal growth platform Two mies, processig ceters ad i-basi distributio 27

28 Cotact Iformatio Craig Kesler Executive Vice Presidet ad CFO (214) Bob Stewart Executive Vice Presidet, Strategy, Corporate Developmet ad Commuicatios (214) Eagle Materials Ic. NYSE: EXP 28

29 Appedix 29

30 Adjusted EBITDA Recociliatio $ Millios, Fiscal Year Edig March 31 Adjusted EBITDA Recociliatio Net Icome $124 $187 $153 $198 $257 Icome Taxes Iterest Expese, Net Depreciatio, Depletio ad Amortizatio EBITDA $270 $341 $333 $409 $414 Impairmet of Itagible Assets Acquired EBITDA (d) Write-dow of Raw Sad Ivetory (a) Reductio of Prepaid Sad Liability (b) 0 0 (11) (2) 0 Equity i Earigs of Ucosolidated JV (c) (38) (45) (39) (42) (43) Distributios from JV (c) Litigatio Settlemets Stock Based Compesatio Expese Adjusted EBITDA $280 $349 $384 $460 $464 (a) (b) (c) (d) Relatig to values associated primarily with a dowward revaluatio of (i) raw sad ivetory that CRS Proppats purchased from a third party pursuat to a purchase cotract etered ito i coectio with plat expasio; ad (ii) ivetory at our idled Corpus Christi facility Reflects the forfeiture by a customer of its prepaymet of $15.0 millio for sad to be purchased at CRS Proppats. Pursuat to the uderlyig agreemet, this prepaymet was to be credited to the customer based o future purchases. Because the customer did ot make the required purchases i accordace with the terms of the cotract, it has forfeited approximately $10.7 millio of the prepaid balace as of March 31, The reversal of the $10.7 millio was recorded as a reductio to cost of goods sold i our oil ad gas proppats segmet durig fiscal The remaider was reversed i fiscal Reflects our 50% iterest i the JV (Texas Lehigh Cemet Compay LP) usig the equity method of accoutig Reflects the purchase of the Fairbor Busiess i Ohio from Cemex. The trasactio closed o February 10, Icludes the Wildcat Mierals acquisitio which closed o July 10,