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

Transcription

1 Low Cost Producer Soud Strategic Ivestmets Cyclic Tailwid Beefits Healthy Balace Sheet Strog Cash Flow Urivaled Track Record September 2017

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, 2017 ad the Compay s Quarterly Report o Form 10-Q for the fiscal quarter eded Jue 30, These reports are filed with the Securities ad Exchage Commissio. With respect to our completed acquisitio of the Fairbor Busiess ad Wildcat Mierals 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 ad Wildcat Mierals, icludig the results of operatios of the Fairbor Busiess ad Wildcat Mierals prior to ad after the closig, the effect o the Fairbor Busiess ad Wildcat Mierals 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

3 Busiess Profile ad Idustry Outlook 3

4 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) $1,066 $898 $643 $495 $1,143 $1,211 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% FY12 FY13 FY14 FY15 FY16 FY17 Proforma EBITDA 1 & Margi (FYE March 31, $ i millios) $460 $384 $349 $280 $162 $91 25% 31% 33% 34% 37% 18% FY12 FY13 FY14 FY15 FY16 FY17 100% of reveues are geerated withi the US 1 Proforma EBITDA is a o-gaap measure; see appedix for recociliatio 4

5 Busiess Mix Overview (cot d) Gross Reveue by Segmet for FYE Mar-17 ($ i millios) 1 Operatig Earigs + DD&A 2 by Segmet for FYE Mar-17 ($ i millios) Gypsum Wallboard $474 34% 12% 2% Recycled Paperboard $167 Oil ad Gas Proppats $35 Gypsum Wallboard $179 40% 10% Recycled Paperboard $46 Cemet $566 41% 11% Cocrete ad Aggregates $155 Cemet $190 43% 6% 1% Cocrete ad Aggregates $26 Oil ad Gas Proppats $4 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; 5

6 Busiess Mix Overview Ifrastructure ad Related Costructio Materials (Heavy Side) Segmets Cemet (icludig Slag) $566 FY17 Reveue ($ i millios) Geographic Ed Markets $721 Norther Nevada Norther Califoria Greater Chicago area Greater Midwest area Rocky Moutai regio Cetral Plais regio Ohio Texas Cocrete ad Aggregates $155 Austi, TX area Greater Kasas City area Ilad Norther Califoria Residetial ad Commercial Costructio Materials (Light Side) Gypsum Wallboard $474 Natioally (except ortheast) $641 Recycled Paperboard $167 Natioally Eergy Related Materials Oil ad Gas Proppats $35 Natioally Diversified ad balaced product portfolio across Heavy ad Light Side buildig materials Note: Fiscal Year edig March 31 6

7 Cemet 41% Note: Pie chart represets FYE Mar-16 Gross Reveue 7

8 Geographic Footprit Cemet Itercoected, Cotiguous System 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 8

9 Segmet Overview Cemet Seve cemet plats ad oe slag gridig facility Sales Volume (M Tos) 1 24 cemet/slag distributio termials 4,593 4,799 4,778 4,871 Broad geographic reach 2,723 3,303 High quality cemet plats are 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 High barriers to etry due to resource availability, permittig ad capital requiremets Miimum 30+ years of limestoes reserves at each site Pricipal sources of demad are ifrastructure, commercial costructio ad residetial costructio FY12 FY13 FY14 FY15 FY16 FY17 Gross Reveue ($ i millios) 1 $489 $528 $566 $438 $244 $304 FY12 FY13 FY14 FY15 FY16 FY17 Plat Overview Miimum limestoe reserves Plat ame Plat locatio Capacity 2 (M short tos) (years) Texas Lehigh 3 Buda, TX Illiois Cemet LaSalle, IL 1, Cetral Plais Kasas City Sugar Creek, MO 1, Moutai Cemet Laramie, WY Cetral Plais Tulsa Tulsa, OK Fairbor Cemet Fairbor, OH Nevada Cemet Ferley, NV Total Net 6,150 Oper. Icome + DD&A & Margi ($ i millios) $171 $190 $149 $121 $62 $67 26% 22% 28% 31% 32% 34% FY12 FY13 FY14 FY15 FY16 FY17 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 9

10 Idustry Backdrop Cemet US Demad Projected to Exceed Domestic Supply Capacity US Portlad Cemet Cosumptio, Millio Metric Tos US Capacity 60 No-Residetial 30 Residetial Govermetal New capacity is costraied due to regulatio i the foreseeable future (NESHAP) Source: PCA, Compay estimates 10

11 Idustry Backdrop Cemet (cot d) Ifrastructure Costructio Expected to Accelerate Public Govermetal Ifrastructure Authorizatio Ifrastructure Costructio Expeditures ($ i billios) FAST Act is expected to icrease cemet demad over the five-year program A average aual additio of 835,000 metric tos to the cemet idustry, accordig to the PCA Likely smaller icreases i the ear term 370,000 tos for 2016 Larger et icreases i the out years 1,400,000 tos for 2020 FAST is see as a improvemet over the previous MAP-21 It also represets a multi-year commitmet that supports state egagemet i multi-year projects A 2003A 2004A A A A A 09A 15A CAGR: 0% 2009A 2010A A A 2013A 2014A 2015A 2016P 2017P P P P Trasportatio bill adds additioal demad visibility Source: FMI as of Q

12 Gypsum Wallboard ad Recycled Paperboard 34% 12% Note: Pie chart represets FYE Mar-16 Gross Reveue 12

13 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 350,000 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 ). 13

14 Segmet Overview Gypsum Wallboard Five gypsum wallboard plats Sales Volume (MMSF) Efficiet, techologically advaced facilities Natioal distributio (except the ortheast) 1,633 1,909 2,112 2,210 2,394 2,483 Sell ito 38 of the 48 states i the cotietal US Ample gypsum reserves Pricipal sources of demad for gypsum wallboard: Repair ad remodelig ad residetial costructio (~90% of idustry sales) No-residetial costructio ad other (~10%) FY12 FY13 FY14 FY15 FY Gross Reveue ($ i millios) $438 $461 $474 $387 $307 $218 FY12 FY13 FY14 FY15 FY16 FY17 Plat Overview Locatio Approx. Aual Gypsum Wallboard Desig Capacity (MMSF) 1 Miimum Gypsum Reserves (Years) 2 Albuquerque, NM Beralillo, NM (idled) Gypsum, CO Duke, OK 1, Georgetow, SC Total 3,875 Oper. Icome + DD&A & Margi ($ i millios) $166 $179 $179 $136 $91 $27 30% 35% 38% 39% 38% 12% FY12 FY13 FY14 FY15 FY16 FY17 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

15 Idustry Backdrop Gypsum US Demad for Gypsum Wallboard is Closely Liked with Housig 1,400 1,200 1, New Home Sales (000) Wallboard Shipmets (BSF) Source: Cesus Bureau 15

16 Segmet Overview Recycled Paperboard Differetiated Asset Supportig Wallboard Segmet Plat located i Lawto, Oklahoma Sales Volume (M Tos) Vertically itegrated with Gypsum Wallboard segmet Techologically advaced facility that maufactures highstregth gypsum lier ~10-15% lighter i basis-weight tha other liers available i the US FY12 FY13 FY14 FY15 FY16 FY17 Gross Reveue ($ i millios) 1 Low-basis weight paper provides competitive advatages: Less eergy required to evaporate moisture i the $119 $122 $130 $143 $149 $167 gypsum wallboard maufacturig process Less OCC fiber iput per MSF Superior lateral stregth eables wallboard lies to ru at fast speeds with less waste ad delay Lower iput trasportatio costs FY12 FY13 FY14 FY15 FY16 FY17 Oper. Icome + DD&A & Margi ($ i millios) $46 $40 $40 $34 $32 $26 ~60% sold to third party maufacturers, ~40% cosumed iterally 22% 28% 25% 28% 27% 28% FY12 FY13 FY14 FY15 FY16 FY17 Note: Fiscal Year edig March 31; 1 Icludes itersegmet reveue 16

17 Cocrete ad Aggregates 11% Note: Pie chart represets FYE Mar-16 Gross Reveue 17

18 Segmet Overview Cocrete ad Aggregates 10% 17 cocrete batchig plats ad four aggregates facilities Gross Reveue ($ i millios) 1 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 $46 $56 $97 $108 $128 $155 cocrete ad aggregates Costructio aggregates are used i virtually all types of FY12 FY13 FY14 FY15 FY16 FY17 Cocrete Sales Volume (M Yards) costructio, icludig highway costructio ad maiteace Ready mix cocrete is a versatile, low-cost buildig material ,101 1,260 used i almost all costructio FY12 FY13 FY14 FY15 FY16 FY17 Plat Overview Aggregates Sales Volume (M Tos) Locatio Types of Aggregates Aggregates Aual Productio Capacity (Thousad tos) Miimum Reserves (Years) Number of Plats Cocrete Number of Trucks Norther Califoria Sad ad Gravel 4, ,221 2,631 3,228 3,026 3,009 3,649 Austi, TX Limestoe 3, Kasas City Area Limestoe FY12 FY13 FY14 FY15 FY16 FY17 Note: Fiscal Year edig March 31; 1 Icludes itersegmet reveue 18

19 Oil ad Gas Proppats 2% Note: Pie chart represets FYE Mar-16 Gross Reveue 19

20 Segmet Overview Oil ad Gas Proppats Well-Positioed for Evetual Upside Two frac sad processig facilities, three frac sad dryig facilities Approximately 75% of reveues for FY17 were geerated from cotract sales Close Relatioship Betwee Oil Well Cemet ad Frac Sad Ed Uses Gross Reveue ($ i millios) $81 $58 $20 $35 FY14 FY15 FY16 FY17 Wet Plat Overview Dry Plat Overview Locatio Estimated Aual Wet Productio Capacity (Thousads Tos) 1 Estimated Miimum Reserves (Years) New Aubur, WI 2,800 9 Utica, IL 2, Total 5,000 Locatio Dryig Capacity (Thousad Tos) New Aubur, WI (two lies) 1,900 Corpus Christi, TX 1,500 Total 3,400 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 Wildcat Trasload NWS Trasload 21

22 Credit Highlights 22

23 Credit Highlights 1 Low Cost Producer 2 Balaced Product Portfolio ad Geographic Diversificatio Drives Low Volatility 3 Favorable Demad Treds Supported by Recovery Across Ed Markets 4 Track Record of Strog Cash Flow Geeratio ad Credit Metrics 5 Disciplied Fiacial Policy 6 Experieced, Prove Maagemet Team 23

24 1 Eagle is a Low Cost Producer 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 24

25 2 Balaced Product Portfolio ad Geographic Diversificatio Drives Low Volatility 20-year Historical Pre-Tax Margis (% of reveue) 50% EXP Pretax Margi MLM Pretax Margi USG Pretax Margi 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 20 Years 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 25

26 3 Recovery Across Ed Markets is Uderway Total Housig Starts (I Thousads) No-Residetial Buildig Costructio Expeditures ($ i billios) ~1,500 2,068 FY18E forecasted housig starts are ow ~170K below ormalized starts Normalized ~1.5 millio housig starts 1,110 1,176 1,240 1,001 1, Average Prior peak Prior trough 2014A 2015A 2016A 2017E 2018E P 2018P 2019P 2020P 2021P US Residetial Improvemet Expeditures ($ i billios) Ifrastructure Costructio Expeditures ($ i billios) Homeower improvemets ad repairs ($b) Historical estimistes LIRA projectios % 10% 5% 0% (5)% (10)% Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q (p) Q (p) 4Q (p) 1Q (p) 2018 (15)% Sources: Joit Ceter for Housig Studies of Harvard Uiversity, LIRA ad US Cesus Bureau as of March 2017, FMI as of Q

27 4 Track Record of Strog Cash Flow Geeratio ad Credit Metrics Net Debt-to-Total Capitalizatio 31% 33% 33% 36% $1,500 ($ Millios) $1,200 $900 $831 $1,011 $1,041 $1,203 $686 $600 $375 $505 $502 $300 $- 3/31/14 3/31/15 3/31/16 3/31/17 Equity Net Debt 27

28 4 Historical Credit Ratios $ i millios, Fiscal Year Edig March 31 Total Leverage Adj. EBITDA 1 / Cash Iterest 23.1x 22.7x 2.9x 3.0x 16.5x 19.4x 1.4x 1.5x 1.3x 1.5x 11.1x 4.8x FY12 FY13 FY14 FY15 FY16 FY17 FY12 FY13 FY14 FY15 FY16 FY17 (Adj. EBITDA 1 Capex) / Cash Iterest Free Cash Flow 2 / Total debt 15.8x 17.4x 17.9x 35% 40% 13.0x 29% 24% 7.4x 13% 15% 3.5x FY12 FY13 FY14 FY15 FY16 FY17 FY12 FY13 FY14 FY15 FY16 FY17 1 Adjusted EBITDA is a o-gaap measure; see appedix for recociliatio; 2 Net cash from operatios less capital expeditures 28

29 4 Track Record of Strog Cash Flow Geeratio ad Credit Metrics $400 Eagle s maturity profile provides flexibility ad liquidity $350 $300 $ I Millios $200 $225 $100 $81 $37 $ Usecured Seior Notes 2007 Usecured Seior Notes Seior Usecured Notes Due 2026 $500M Usecured Bak Facility Fiscal Year 29

30 4 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 i July 2015 (600,000 tos) Ulocked through the closig of Lafarge-Holcim merger Frac sad provides potetial future growth opportuities Curretly approximately 3,500,000 millio tos of dryig capacity 30

31 5 History of Disciplied Fiacial Policy $ i Millios, Fiscal Year Edig March Maiteace Growth ad Improvemet Share Repurchases Divideds Issued $155 millio of Equity to Maitai Coservative Balace Sheet ad fud acquisitio of LaFarge assets FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY 14 FY15 FY16 FY17 Through the recessio we demostrated willigess to cut discretioary expeses ad have reivested i the busiess as market coditios have improved

32 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 32

33 Appedix 33

34 Adjusted EBITDA Recociliatio $ i millios, Fiscal Year Edig March 31 Adjusted EBITDA Recociliatio FY13 FY14 FY15 FY16 FY17 Net Icome $58 $124 $187 $153 $198 Icome Taxes Iterest Expese, Net Depreciatio, Depletio ad Amortizatio EBITDA $157 $270 $341 $333 $409 Imparimet of Itagible Assets Acquired EBITDA (d) Write-dow of Raw Sad Ivetory (a) Reductio of Prepaid Sad Liability (b) (11) (2) Equity i Earigs of Ucosolidated JV (c) (33) (38) (45) (39) (42) Distributios from JV (c) Stock Based Compesatio Expese Adjusted EBITDA $162 $280 $349 $384 $460 (a) 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 (b) 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 (c) Reflects our 50% iterest i the JV (Texas Lehigh Cemet Compay LP) usig the equity method of accoutig (d) Reflects the purchase of the Fairbor Busiess i Ohio from Cemex. The trasactio closed o February 10,