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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 7/27/23 Eagle Materials Inc. 10-Q 6/30/23 89:11M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 2.63M
2: EX-10.3 Material Contract HTML 139K
3: EX-10.4 Material Contract HTML 170K
4: EX-10.5 Material Contract HTML 233K
9: EX-95 Mine-Safety Disclosure HTML 134K
5: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
6: EX-31.2 Certification -- §302 - SOA'02 HTML 29K
7: EX-32.1 Certification -- §906 - SOA'02 HTML 26K
8: EX-32.2 Certification -- §906 - SOA'02 HTML 26K
15: R1 Document and Entity Information HTML 77K
16: R2 Consolidated Statements of Earnings (Unaudited) HTML 91K
17: R3 Consolidated Statements of Comprehensive Earnings HTML 47K
(Unaudited)
18: R4 Consolidated Balance Sheets (Unaudited) HTML 129K
19: R5 Consolidated Balance Sheets (Unaudited) HTML 41K
(Parenthetical)
20: R6 Consolidated Statements of Cash Flows (Unaudited) HTML 101K
21: R7 Consolidated Statements of Stockholders' Equity HTML 60K
(Unaudited)
22: R8 Pay vs Performance Disclosure HTML 36K
23: R9 Insider Trading Arrangements HTML 30K
24: R10 Basis of Presentation HTML 30K
25: R11 Supplemental Cash Flow Information HTML 64K
26: R12 Acquisition HTML 67K
27: R13 Revenue HTML 35K
28: R14 Accounts and Notes Receivable HTML 27K
29: R15 Inventories HTML 68K
30: R16 Accrued Expenses HTML 80K
31: R17 Leases HTML 110K
32: R18 Share-Based Employee Compensation HTML 218K
33: R19 Computation of Earnings Per Share HTML 62K
34: R20 Pension and Employee Benefit Plans HTML 31K
35: R21 Income Taxes HTML 30K
36: R22 Long-Term Debt HTML 92K
37: R23 Segment Information HTML 362K
38: R24 Interest Expense HTML 51K
39: R25 Commitments and Contingencies HTML 30K
40: R26 Fair Value of Financial Instruments HTML 36K
41: R27 Basis of Presentation (Policies) HTML 26K
42: R28 Supplemental Cash Flow Information (Tables) HTML 63K
43: R29 Acquisition (Tables) HTML 63K
44: R30 Inventories (Tables) HTML 68K
45: R31 Accrued Expenses (Tables) HTML 79K
46: R32 Leases (Tables) HTML 111K
47: R33 Share-Based Employee Compensation (Tables) HTML 206K
48: R34 Computation of Earnings Per Share (Tables) HTML 60K
49: R35 Long-Term Debt (Tables) HTML 71K
50: R36 Segment Information (Tables) HTML 354K
51: R37 Interest Expense (Tables) HTML 49K
52: R38 Fair Value of Financial Instruments (Tables) HTML 32K
53: R39 Supplemental Cash Flow Information (Detail) HTML 36K
54: R40 Acquisition - Additional Information (Detail) HTML 42K
55: R41 Acquisition - Schedule of Recognized Fair Value of HTML 50K
Identified Assets Acquired and Liabilities Assumed
(Detail)
56: R42 Acquisition - Schedule of Revenue and Operating HTML 28K
Earnings Related to Business Acquisition (Detail)
57: R43 Revenue - Additional Information (Detail) HTML 30K
58: R44 Accounts and Notes Receivable - Additional HTML 26K
Information (Detail)
59: R45 Schedule of Inventories (Detail) HTML 40K
60: R46 Schedule of Accrued Expenses (Detail) HTML 47K
61: R47 Leases - Additional Information (Detail) HTML 29K
62: R48 Schedule of Lease Expense for Operating and HTML 30K
Short-Term Leases (Detail)
63: R49 Schedule of Balance Sheet Information Related to HTML 31K
Leases (Detail)
64: R50 Schedule of Future Payments for Operating Leases HTML 47K
(Detail)
65: R51 Share-Based Employee Compensation - Additional HTML 109K
Information (Detail)
66: R52 Schedule Of Period And Vesting Of Performance HTML 73K
Share (Detail)
67: R53 Weighted-Average Assumptions Used to Value Option HTML 43K
Awards (Detail)
68: R54 Stock Option Activity (Detail) HTML 48K
69: R55 Stock Options Outstanding (Detail) HTML 55K
70: R56 Summary of Activity for Nonvested Restricted HTML 54K
Shares (Detail)
71: R57 Calculation of Basic and Diluted Common Shares HTML 40K
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72: R58 Pension and Employee Benefit Plans - Additional HTML 26K
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73: R59 Income Taxes - Additional Information (Detail) HTML 28K
74: R60 Long-Term Debt (Detail) HTML 49K
75: R61 Long-Term Debt (Parenthetical) (Detail) HTML 35K
76: R62 Long-Term Debt - Additional Information (Detail) HTML 120K
77: R63 Segment Information - Additional Information HTML 39K
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78: R64 Financial Information Related to Operations by HTML 103K
Segment (Detail)
79: R65 Segment Breakdown of Goodwill (Detail) HTML 35K
80: R66 Summarized Financial Information for Joint Venture HTML 66K
Unconsolidated (Detail)
81: R67 Interest Expense, Net (Detail) HTML 33K
82: R68 Commitments and Contingencies - Additional HTML 29K
Information (Detail)
83: R69 Fair Value of Financial Instruments (Detail) HTML 27K
84: R70 Fair Value of Financial Instruments HTML 29K
(Parenthetical) (Detail)
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| 10-Q |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended
i June 30, 2023
Commission File Number i 1-12984
i EAGLE MATERIALS INC.
(Exact name of registrant as specified in its charter)
i Delaware (State of Incorporation)
i 75-2520779 (I.R.S. Employer Identification No.)
i 5960 Berkshire Lane, i Suite 900, i Dallas, i Texas i 75225 (Address of principal executive offices)
( i 214) i 432-2000 (Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
i Common Stock (par value $.01 per share) |
|
i EXP |
|
i New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
i Large accelerated filer |
|
☒ |
|
Accelerated filer |
|
☐ |
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
i ☐ |
Emerging growth company |
|
i ☐ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes ☐ No i ☒
As of July 24, 2023, the number of outstanding shares of common stock was:
Class |
|
Outstanding Shares |
Common Stock, $.01 Par Value |
|
i 35,431,981 |
PART I. FINANCIAL INFORMATION (unaudited)
|
|
|
|
Page |
Item 1. |
|
Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
Consolidated Statements of Earnings for the Three Months Ended June 30, 2023 and 2022 |
|
1 |
|
|
|
|
|
|
|
Consolidated Statements of Comprehensive Earnings for the Three Months Ended June 30, 2023 and 2022 |
|
2 |
|
|
|
|
|
|
|
Consolidated Balance Sheets as of June 30, 2023, and March 31, 2023 |
|
3 |
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2023 and 2022 |
|
4 |
|
|
|
|
|
|
|
Consolidated Statements of Stockholders' Equity for the Three Months Ended June 30, 2023 and 2022 |
|
5 |
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
20 |
|
|
|
|
|
Item 3. |
|
|
33 |
|
|
|
|
|
|
Item 4. |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
34 |
|
|
|
|
|
|
Item 1a. |
|
|
34 |
|
|
|
|
|
|
Item 2. |
|
|
34 |
|
|
|
|
|
|
Item 4. |
|
|
34 |
|
|
|
|
|
|
Item 5. |
|
|
34 |
|
|
|
|
|
|
Item 6. |
|
|
35 |
|
|
|
|
|
|
|
36 |
|||
EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands, except share and per share data) |
|
|||||
Revenue |
|
$ |
i 601,521 |
|
|
$ |
i 561,387 |
|
Cost of Goods Sold |
|
|
i 425,526 |
|
|
|
i 410,521 |
|
Gross Profit |
|
|
i 175,995 |
|
|
|
i 150,866 |
|
Equity in Earnings of Unconsolidated Joint Venture |
|
|
i 3,159 |
|
|
|
i 5,098 |
|
Corporate General and Administrative Expense |
|
|
( i 11,679 |
) |
|
|
( i 11,820 |
) |
Other Non-Operating Income (Expense) |
|
|
i 213 |
|
|
|
( i 635 |
) |
Interest Expense, net |
|
|
( i 12,239 |
) |
|
|
( i 7,330 |
) |
Earnings before Income Taxes |
|
|
i 155,449 |
|
|
|
i 136,179 |
|
Income Taxes |
|
|
( i 34,600 |
) |
|
|
( i 31,174 |
) |
Net Earnings |
|
$ |
i 120,849 |
|
|
$ |
i 105,005 |
|
|
|
|
|
|
|
|
||
EARNINGS PER SHARE |
|
|
|
|
|
|
||
Basic |
|
$ |
i 3.43 |
|
|
$ |
i 2.76 |
|
Diluted |
|
|
i 3.40 |
|
|
|
i 2.75 |
|
AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
||
Basic |
|
|
i 35,274,753 |
|
|
|
i 37,982,580 |
|
Diluted |
|
|
i 35,532,284 |
|
|
|
i 38,222,949 |
|
CASH DIVIDENDS PER SHARE |
|
$ |
i 0.25 |
|
|
$ |
i 0.25 |
|
See Notes to Unaudited Consolidated Financial Statements.
1
EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (unaudited)
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Net Earnings |
|
$ |
i 120,849 |
|
|
$ |
i 105,005 |
|
Net Actuarial Change in Defined Benefit Plans |
|
|
|
|
|
|
||
Amortization of Net Actuarial Loss |
|
|
i 63 |
|
|
|
i 30 |
|
Tax Expense |
|
|
( i 15 |
) |
|
|
( i 7 |
) |
Comprehensive Earnings |
|
$ |
i 120,897 |
|
|
$ |
i 105,028 |
|
See Notes to Unaudited Consolidated Financial Statements.
2
EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
ASSETS |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash and Cash Equivalents |
|
$ |
i 53,149 |
|
|
$ |
i 15,242 |
|
Accounts and Notes Receivable, net |
|
|
i 248,647 |
|
|
|
i 195,052 |
|
Inventories |
|
|
i 302,525 |
|
|
|
i 291,882 |
|
Income Tax Receivable |
|
|
i 1,410 |
|
|
|
i 16,267 |
|
Prepaid and Other Assets |
|
|
i 10,310 |
|
|
|
i 3,060 |
|
Total Current Assets |
|
|
i 616,041 |
|
|
|
i 521,503 |
|
Property, Plant, and Equipment, net |
|
|
i 1,679,919 |
|
|
|
i 1,662,061 |
|
Notes Receivable |
|
|
i — |
|
|
|
i 7,382 |
|
Investment in Joint Venture |
|
|
i 89,770 |
|
|
|
i 89,111 |
|
Operating Lease Right-of-Use Assets |
|
|
i 25,155 |
|
|
|
i 20,759 |
|
Goodwill and Intangible Assets, net |
|
|
i 490,828 |
|
|
|
i 466,043 |
|
Other Assets |
|
|
i 14,533 |
|
|
|
i 14,143 |
|
Total Assets |
|
$ |
i 2,916,246 |
|
|
$ |
i 2,781,002 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts Payable |
|
$ |
i 118,026 |
|
|
$ |
i 110,408 |
|
Accrued Liabilities |
|
|
i 75,186 |
|
|
|
i 86,472 |
|
Operating Lease Liabilities |
|
|
i 8,181 |
|
|
|
i 6,009 |
|
Income Tax Payable |
|
|
i 18,304 |
|
|
|
i — |
|
Current Portion of Long-term Debt |
|
|
i 10,000 |
|
|
|
i 10,000 |
|
Total Current Liabilities |
|
|
i 229,697 |
|
|
|
i 212,889 |
|
Long-term Debt |
|
|
i 1,141,848 |
|
|
|
i 1,079,032 |
|
Noncurrent Operating Lease Liabilities |
|
|
i 26,549 |
|
|
|
i 24,940 |
|
Other Long-term Liabilities |
|
|
i 40,585 |
|
|
|
i 41,603 |
|
Deferred Income Taxes |
|
|
i 239,156 |
|
|
|
i 236,844 |
|
Total Liabilities |
|
|
i 1,677,835 |
|
|
|
i 1,595,308 |
|
Stockholders’ Equity |
|
|
|
|
|
|
||
Preferred Stock, Par Value $ i i 0.01 / ; Authorized i i 5,000,000 / Shares; i i None / Issued |
|
|
i — |
|
|
|
i — |
|
Common Stock, Par Value $ i i 0.01 / ;
Authorized i i 100,000,000 / Shares; |
|
|
i 354 |
|
|
|
i 358 |
|
Capital in Excess of Par Value |
|
|
i — |
|
|
|
i — |
|
Accumulated Other Comprehensive Losses |
|
|
( i 3,499 |
) |
|
|
( i 3,547 |
) |
Retained Earnings |
|
|
i 1,241,556 |
|
|
|
i 1,188,883 |
|
Total Stockholders’ Equity |
|
|
i 1,238,411 |
|
|
|
i 1,185,694 |
|
|
|
$ |
i 2,916,246 |
|
|
$ |
i 2,781,002 |
|
See Notes to Unaudited Consolidated Financial Statements.
3
EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net Earnings |
|
$ |
i 120,849 |
|
|
$ |
i 105,005 |
|
Adjustments to Reconcile Net Earnings to Net Cash Provided |
|
|
|
|
|
|
||
Depreciation, Depletion, and Amortization |
|
|
i 36,682 |
|
|
|
i 34,229 |
|
Deferred Income Tax Provision |
|
|
i 2,312 |
|
|
|
i 2,547 |
|
Stock Compensation Expense |
|
|
i 6,457 |
|
|
|
i 5,146 |
|
Equity in Earnings of Unconsolidated Joint Venture |
|
|
( i 3,159 |
) |
|
|
( i 5,098 |
) |
Distributions from Joint Venture |
|
|
i 2,500 |
|
|
|
i 4,500 |
|
Changes in Operating Assets and Liabilities |
|
|
|
|
|
|
||
Accounts and Notes Receivable |
|
|
( i 46,213 |
) |
|
|
( i 51,478 |
) |
Inventories |
|
|
i 4,166 |
|
|
|
i 9,085 |
|
Accounts Payable and Accrued Liabilities |
|
|
( i 5,100 |
) |
|
|
( i 6,389 |
) |
Other Assets |
|
|
( i 9,577 |
) |
|
|
( i 1,109 |
) |
Income Taxes Payable (Receivable) |
|
|
i 31,570 |
|
|
|
i 28,364 |
|
Net Cash Provided by Operating Activities |
|
|
i 140,487 |
|
|
|
i 124,802 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Additions to Property, Plant, and Equipment |
|
|
( i 35,999 |
) |
|
|
( i 14,914 |
) |
Acquisition Spending |
|
|
( i 55,053 |
) |
|
|
( i 121,162 |
) |
Net Cash Used in Investing Activities |
|
|
( i 91,052 |
) |
|
|
( i 136,076 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Increase (Decrease) in Credit Facility |
|
|
i 65,000 |
|
|
|
( i 19,000 |
) |
Proceeds from Term Loan |
|
|
i — |
|
|
|
i 200,000 |
|
Repayment of Term Loan |
|
|
( i 2,500 |
) |
|
|
i — |
|
Dividends Paid to Stockholders |
|
|
( i 8,995 |
) |
|
|
( i 9,642 |
) |
Purchase and Retirement of Common Stock |
|
|
( i 74,058 |
) |
|
|
( i 109,612 |
) |
Proceeds from Stock Option Exercises |
|
|
i 10,385 |
|
|
|
i 667 |
|
Payment of Debt Issuance Costs |
|
|
i — |
|
|
|
( i 777 |
) |
Shares Redeemed to Settle Employee Taxes on Stock Compensation |
|
|
( i 1,360 |
) |
|
|
( i 1,497 |
) |
Net Cash Provided by (Used in) Financing Activities |
|
|
( i 11,528 |
) |
|
|
i 60,139 |
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
i 37,907 |
|
|
|
i 48,865 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
i 15,242 |
|
|
|
i 19,416 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
i 53,149 |
|
|
$ |
i 68,281 |
|
See Notes to Unaudited Consolidated Financial Statements.
4
EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
|
|
Common |
|
|
Capital in |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||
|
|
(dollars in thousands) |
|
|||||||||||||||||
Balance at March 31, 2022 |
|
$ |
i 387 |
|
|
$ |
— |
|
|
$ |
i 1,136,344 |
|
|
$ |
( i 3,175 |
) |
|
$ |
i 1,133,556 |
|
Net Earnings |
|
|
— |
|
|
|
— |
|
|
|
i 105,005 |
|
|
|
— |
|
|
|
i 105,005 |
|
Stock Compensation Expense |
|
|
— |
|
|
|
i 5,146 |
|
|
|
— |
|
|
|
— |
|
|
|
i 5,146 |
|
Stock Option Exercises and Restricted Share Issuances |
|
|
i 1 |
|
|
|
i 666 |
|
|
|
— |
|
|
|
— |
|
|
|
i 667 |
|
Shares Redeemed to Settle Employee Taxes |
|
|
— |
|
|
|
( i 1,497 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 1,497 |
) |
Purchase and Retirement of Common Stock |
|
|
( i 9 |
) |
|
|
( i 4,315 |
) |
|
|
( i 105,288 |
) |
|
|
— |
|
|
|
( i 109,612 |
) |
Dividends to Shareholders |
|
|
— |
|
|
|
— |
|
|
|
( i 9,507 |
) |
|
|
— |
|
|
|
( i 9,507 |
) |
Unfunded Pension Liability, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 23 |
|
|
|
i 23 |
|
Balance at June 30, 2022 |
|
$ |
i 379 |
|
|
$ |
— |
|
|
$ |
i 1,126,554 |
|
|
$ |
( i 3,152 |
) |
|
$ |
i 1,123,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Common |
|
|
Capital in |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||
|
|
(dollars in thousands) |
|
|||||||||||||||||
Balance at March 31, 2023 |
|
$ |
i 358 |
|
|
$ |
— |
|
|
$ |
i 1,188,883 |
|
|
$ |
( i 3,547 |
) |
|
$ |
i 1,185,694 |
|
Net Earnings |
|
|
— |
|
|
|
— |
|
|
|
i 120,849 |
|
|
|
— |
|
|
|
i 120,849 |
|
Stock Compensation Expense |
|
|
— |
|
|
|
i 6,457 |
|
|
|
— |
|
|
|
— |
|
|
|
i 6,457 |
|
Stock Option Exercises and Restricted Share Issuances |
|
|
i 2 |
|
|
|
i 10,383 |
|
|
|
— |
|
|
|
— |
|
|
|
i 10,385 |
|
Shares Redeemed to Settle Employee Taxes |
|
|
( i 1 |
) |
|
|
( i 1,359 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 1,360 |
) |
Purchase and Retirement of Common Stock |
|
|
( i 5 |
) |
|
|
( i 15,481 |
) |
|
|
( i 59,313 |
) |
|
|
— |
|
|
|
( i 74,799 |
) |
Dividends to Shareholders |
|
|
— |
|
|
|
— |
|
|
|
( i 8,863 |
) |
|
|
— |
|
|
|
( i 8,863 |
) |
Unfunded Pension Liability, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 48 |
|
|
|
i 48 |
|
Balance at June 30, 2023 |
|
$ |
i 354 |
|
|
$ |
— |
|
|
$ |
i 1,241,556 |
|
|
$ |
( i 3,499 |
) |
|
$ |
i 1,238,411 |
|
See Notes to Unaudited Consolidated Financial Statements.
5
Eagle Materials Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements as of and for the three-month period ended June 30, 2023, include the accounts of Eagle Materials Inc. and its majority-owned subsidiaries (collectively, the Company, us, or we) and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 19, 2023.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. In our opinion, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the information in the following unaudited consolidated financial statements of the Company have been included. The results of operations for interim periods are not necessarily indicative of the results for the full year.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements that are expected to materially affect the Company.
(B) SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2022 |
|
|
|
|
(dollars in thousands) |
|
|||||
Cash Payments |
|
|
|
|
|
|
||
Interest |
|
$ |
i 14,993 |
|
|
$ |
i 1,005 |
|
Income Taxes |
|
|
i 636 |
|
|
|
i 271 |
|
Operating Cash Flows Used for Operating Leases |
|
|
i 2,391 |
|
|
|
i 2,135 |
|
|
|
|
|
|
|
|
||
Noncash Financing Activities |
|
|
|
|
|
|
||
Excise Tax on Share Repurchases |
|
$ |
i 1,479 |
|
|
$ |
i — |
|
Right-of-Use Assets Acquired for Capitalized Operating Leases |
|
|
i 4,166 |
|
|
|
i — |
|
6
(C) ACQUISITION
On May 3, 2023, we purchased the assets of a cement import terminal in Stockton, California (the Stockton Terminal Acquisition), which was accounted for under the acquisition method. The purchase price of the Stockton Terminal Acquisition was approximately $ i 55.1 million. The purchase price allocation has not yet been finalized. The purchase price was funded through borrowings under our revolving credit facility. Operations related to the Stockton Terminal Acquisition are included in the Cement business in our segment reporting from May 3, 2023 through June 30, 2023.
The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed (based on Level 3 inputs) as of June 30, 2023:
|
|
|
|
|
|
|
Estimated Fair Value |
|
|
Inventory |
|
$ |
i 14,809 |
|
Prepaid and Other Current Assets |
|
|
i 179 |
|
Property, Plant, and Equipment |
|
|
i 14,099 |
|
Lease Right-of-Use Assets |
|
|
i 1,646 |
|
Intangible Assets |
|
|
i 12,550 |
|
Lease Obligations |
|
|
( i 1,646 |
) |
Other Long-term Liabilities |
|
|
( i 630 |
) |
Goodwill |
|
|
i 14,046 |
|
Total Estimated Purchase Price |
|
$ |
i 55,053 |
|
The estimated useful lives assigned to Property, Plant, and Equipment range from i 5 to i 30 years, while the estimated useful lives assigned to Intangible Assets range from i 2 to i 15 years. All goodwill generated from the Stockton Terminal Acquisition is deductible for income tax purposes.
The following table presents the Revenue and Operating Loss related to the Stockton Terminal Acquisition that has been included in our Consolidated Statement of Earnings from May 3, 2023 through June 30, 2023.
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Revenue |
|
$ |
i 6,468 |
|
Operating Loss |
|
$ |
( i 1,920 |
) |
Included in Operating Loss shown above is approximately $ i 0.5 million and $ i 2.8 million related to depreciation and amortization and the recording of acquired inventories at fair value, respectively.
/(D) REVENUE
We earn Revenue primarily from the sale of products, which include cement, concrete, aggregates, gypsum wallboard, and recycled paperboard. The vast majority of Revenue from the sale of concrete, aggregates, and gypsum wallboard is originated by purchase orders from our customers, who are mostly third-party contractors and suppliers. Revenue from the sale of cement is recognized at the point-of-sale to customers under sales orders. Revenue from our Recycled Paperboard segment is generated mainly through long-term supply agreements. These agreements do not have a stated maturity date, but may be terminated by either party with a two to i three-year notice period. We invoice customers upon shipment, and our collection terms range from i 30 to i 75 days. Revenue from the sale of cement, concrete, aggregates, and gypsum wallboard not related to long-term supply agreements is recognized upon shipment of the related products to customers, which is when title and ownership are transferred, and the customer is obligated to pay.
7
Revenue from sales under our long-term supply agreements is also recognized upon transfer of control to the customer, which generally occurs at the time the product is shipped from the production facility or terminal location. Our long-term supply agreements with customers define, among other commitments, the volume of product that we must provide and the volume that the customer must purchase by the end of the defined periods. Pricing structures under our agreements are generally market-based, but are subject to certain contractual adjustments. Shortfall amounts, if applicable under these arrangements, are constrained and not recognized as Revenue until an agreement is reached with the customer and, therefore, are not subject to the risk of reversal.
The Company offers certain of its customers, including those with long-term supply agreements, rebates and incentives, which we treat as variable consideration. We adjust the amount of Revenue recognized for the variable consideration using the most likely amount method based on past history and projected volumes in the rebate and incentive period. Any amounts billed to customers for taxes are excluded from Revenue.
The Company has elected to treat freight and delivery charges we pay for the delivery of goods to our customers as a fulfilment activity rather than a separate performance obligation. When we arrange for a third party to deliver products to customers, fees for shipping and handling billed to the customer are recorded as Revenue, while costs we incur for shipping and handling are recorded as expenses and included in Cost of Goods Sold.
Other Non-Operating Income includes lease and rental income, asset sale income, non-inventoried aggregates sales income, distribution center income, and trucking income, as well as other miscellaneous revenue items and costs that have not been allocated to a business segment.
/See Footnote (N) to the Unaudited Consolidated Financial Statements for disaggregation of revenue by segment.
(E) ACCOUNTS AND NOTES RECEIVABLE
Accounts Receivable are shown net of the allowance for doubtful accounts totaling $ i i 6.9 / million at both June 30, 2023, and March 31, 2023, respectively. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from our customers. The allowance for non-collection of receivables is based upon analysis of economic trends in the construction industry, detailed analysis of the expected collectability of accounts receivable that are past due, and the expected collectability of overall receivables. We have no significant credit risk concentration among our diversified customer base.
/(F) INVENTORIES
Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or net realizable value. Raw Materials and Materials-in-Progress include clinker, which is an intermediary product before it is ground into cement powder. Quantities of Raw Materials and Materials-in-Progress, Aggregates, and Coal inventories, are based on measured volumes, subject to estimation based on the size and location of the inventory piles, and are converted to tonnage using standard inventory density factors. i Inventories consist of the following:
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Raw Materials and Materials-in-Progress |
|
$ |
i 98,997 |
|
|
$ |
i 96,880 |
|
Finished Cement |
|
|
i 51,122 |
|
|
|
i 46,364 |
|
Aggregates |
|
|
i 10,933 |
|
|
|
i 8,309 |
|
Gypsum Wallboard |
|
|
i 5,200 |
|
|
|
i 4,244 |
|
Paperboard |
|
|
i 8,282 |
|
|
|
i 8,651 |
|
Repair Parts and Supplies |
|
|
i 110,962 |
|
|
|
i 112,885 |
|
Fuel and Coal |
|
|
i 17,029 |
|
|
|
i 14,549 |
|
|
|
$ |
i 302,525 |
|
|
$ |
i 291,882 |
|
8
(G) ACCRUED EXPENSES
Accrued Expenses consist of the following:
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Payroll and Incentive Compensation |
|
$ |
i 22,395 |
|
|
$ |
i 32,742 |
|
Benefits |
|
|
i 16,209 |
|
|
|
i 16,130 |
|
Dividends |
|
|
i 9,054 |
|
|
|
i 9,186 |
|
Interest |
|
|
i 4,092 |
|
|
|
i 7,163 |
|
Property Taxes |
|
|
i 8,479 |
|
|
|
i 6,671 |
|
Power and Fuel |
|
|
i 2,885 |
|
|
|
i 3,051 |
|
Freight |
|
|
i 3,455 |
|
|
|
i 1,663 |
|
Legal and Professional |
|
|
i 1,775 |
|
|
|
i 1,691 |
|
Sales, Use, and Excise Taxes |
|
|
i 3,123 |
|
|
|
i 1,452 |
|
Other |
|
|
i 3,719 |
|
|
|
i 6,723 |
|
|
|
$ |
i 75,186 |
|
|
$ |
i 86,472 |
|
(H) LEASES
We lease certain real estate, buildings, and equipment. Certain of these leases contain escalations of rent over the term of the lease, as well as options for us to extend the term of the lease at the end of the original term. These extensions range from periods of one to i 20 years. Our lease agreements do not contain material residual value guarantees or material restrictive covenants. In calculating the present value of future minimum lease payments, we use the rate implicit in the lease if it can be determined. Otherwise, we use our incremental borrowing rate in effect at the commencement of the lease to determine the present value of the future minimum lease payments. Additionally, we lease certain equipment under short-term leases with initial terms of less than 12 months, which are not recorded on the balance sheet.
Lease expense for our operating and short-term leases is as follows:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Operating Lease Cost |
|
$ |
i 2,274 |
|
|
$ |
i 1,727 |
|
Short-term Lease Cost |
|
|
i 223 |
|
|
|
i 149 |
|
Total Lease Cost |
|
$ |
i 2,497 |
|
|
$ |
i 1,876 |
|
The Right-of-Use Assets and Lease Liabilities are reflected on our Balance Sheet as follows:
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Operating Leases |
|
|
|
|
|
|
||
Operating Lease Right-of-Use Assets |
|
$ |
i 25,155 |
|
|
$ |
i 20,759 |
|
|
|
|
|
|
|
|
||
Current Operating Lease Liabilities |
|
$ |
i 8,181 |
|
|
$ |
i 6,009 |
|
Noncurrent Operating Lease Liabilities |
|
|
i 26,549 |
|
|
|
i 24,940 |
|
Total Operating Lease Liabilities |
|
$ |
i 34,730 |
|
|
$ |
i 30,949 |
|
9
Future payments for operating leases are as follows (dollars in thousands):
Fiscal Year |
|
Amount |
|
|
2023 (remaining nine months) |
|
$ |
i 6,941 |
|
2024 |
|
|
i 8,708 |
|
2025 |
|
|
i 4,834 |
|
2026 |
|
|
i 3,712 |
|
2027 |
|
|
i 2,877 |
|
Thereafter |
|
|
i 15,896 |
|
Total Lease Payments |
|
$ |
i 42,968 |
|
Less: Imputed Interest |
|
|
( i 8,238 |
) |
Present Value of Lease Liabilities |
|
$ |
i 34,730 |
|
|
|
|
|
|
Weighted-Average Remaining Lease Term (in years) |
|
|
i 9.5 |
|
Weighted-Average Discount Rate |
|
|
i 4.16 |
% |
/
(I) Share-BASED EMPLOYEE COMPENSATION
On August 7, 2013, our stockholders approved the Eagle Materials Inc. Amended and Restated Incentive Plan (the Plan), which increased the shares we are authorized to issue as awards by i 3,000,000 ( i 1,500,000 of which may be stock awards). Under the terms of the Plan, we can issue equity awards, including stock options, restricted stock units, restricted stock, and stock appreciation rights, to employees of the Company and members of the Board of Directors. The Compensation Committee of our Board of Directors specifies grant terms for awards under the Plan.
Long-Term Compensation Plans
OPTIONS
In May 2023, the Compensation Committee of the Board of Directors approved the granting to certain officers and key employees an aggregate of i 2,296 performance-vesting stock options that will be earned only if certain performance conditions are satisfied (the Fiscal 2024 Employee Performance Stock Option Grant). i The performance criteria for the Fiscal 2024 Employee Performance Stock Option Grant are based upon the achievement of certain levels of return on equity (as defined in the option agreements), ranging from i 10.0% to i 20.0%, for the fiscal years ending March 31, 2024, through March 31, 2026. All stock options in each performance period will be earned if the return on equity is i 20.0% or greater, and the percentage of stock options earned in such period will be reduced proportionately to approximately i 66.7% if the return on equity is 10.0%. If the Company does not achieve a return on equity of at least i 10.0% during the performance period, all stock option awards for that performance period will be forfeited. / i The stock option performance periods are as follows:
|
|
Options |
|
|
Performance Period |
|
Vesting Date |
|
One-Year Performance Shares |
|
|
i 574 |
|
|
i April 1, 2023 to i March 31, 2024 |
|
i May 2024 |
Two-Year Performance Shares |
|
|
i 574 |
|
|
i April 1, 2023 to i March 31, 2025 |
|
i May 2025 |
Three-Year Performance Shares |
|
|
i 1,148 |
|
|
i April 1, 2023 to i March 31, 2026 |
|
i May 2026 |
The stock options have a term of i 10 years from the grant date. The Compensation Committee also approved the granting of i 1,914 time-vesting stock options to the same officers and key employees, which vest ratably over i three years (the Fiscal 2024 Employee Time-Vesting Stock Option Grant).
10
The Fiscal 2024 Employee Performance Stock Option Grant and the Fiscal 2024 Employee Time-Vesting Stock Option Grant were valued at their grant date using the Black-Scholes option pricing model. i The weighted-average assumptions used in the Black-Scholes model to value the option awards for fiscal 2024 are as follows:
|
|
|
|
|
Dividend Yield |
|
|
i 0.8 |
% |
Expected Volatility |
|
|
i 38.8 |
% |
Risk-Free Interest Rate |
|
|
i 3.6 |
% |
Expected Life |
|
i 6.0 years |
|
|
In addition to the stock options described above, we issue stock options to certain employees from time to time. Any options issued are valued using the Black-Scholes options pricing model on the grant date, and expensed over the vesting period.
Stock option expense for all outstanding stock option awards totaled approximately $ i 0.5 million and $ i 0.8 million for the three months ended June 30, 2023 and 2022, respectively. At June 30, 2023, there was approximately $ i 3.1 million of unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted-average period of i 2.2 years.
The following table represents stock option activity for the three months ended June 30, 2023:
|
|
Number |
|
|
Weighted- |
|
||
Outstanding Options at March 31, 2023 |
|
|
i 436,949 |
|
|
$ |
i 89.69 |
|
Granted |
|
|
i 4,210 |
|
|
$ |
i 166.75 |
|
Exercised |
|
|
( i 117,715 |
) |
|
$ |
i 166.25 |
|
Cancelled |
|
|
( i 1,000 |
) |
|
$ |
i 73.37 |
|
Outstanding Options at June 30, 2023 |
|
|
i 322,444 |
|
|
$ |
i 91.28 |
|
Options Exercisable at June 30, 2023 |
|
|
i 228,808 |
|
|
|
|
|
Weighted-Average Fair Value of Options Granted |
|
$ |
i 67.01 |
|
|
|
|
|
The following table summarizes information about stock options outstanding at June 30, 2023:
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||||||||
Range of Exercise Prices |
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Number of |
|
|
Weighted- |
|
|||||
$ i 59.32 - $ i 81.28 |
|
|
i 118,049 |
|
|
|
i 6.28 |
|
|
$ |
i 62.64 |
|
|
|
i 75,645 |
|
|
$ |
i 63.83 |
|
$ i 87.37 - $ i 106.24 |
|
|
i 134,018 |
|
|
|
i 5.04 |
|
|
$ |
i 95.87 |
|
|
|
i 130,302 |
|
|
$ |
i 95.83 |
|
$ i 118.27 - $ i 166.75 |
|
|
i 70,377 |
|
|
|
i 8.82 |
|
|
$ |
i 130.59 |
|
|
|
i 22,861 |
|
|
$ |
i 130.82 |
|
|
|
|
i 322,444 |
|
|
|
i 6.32 |
|
|
$ |
i 91.28 |
|
|
|
i 228,808 |
|
|
$ |
i 88.74 |
|
At June 30, 2023, the aggregate intrinsic value for the outstanding and exercisable options was approximately $ i 30.7 million and $ i 22.3 million, respectively. The total intrinsic value of options exercised during the three months ended June 30, 2023, was approximately $ i 9.2 million.
RESTRICTED STOCK
In May 2023, the Compensation Committee approved the granting to certain officers and key employees an aggregate of i 45,693 shares of performance-vesting restricted stock that will be earned if certain performance conditions are satisfied (the Fiscal 2024 Employee Restricted Stock Performance Award). i The performance criteria for the Fiscal 2024 Employee Restricted Stock Performance Award are based upon the achievement of certain levels of return on equity (as defined in the award agreement), ranging from i 10.0% to i 20.0%, for the fiscal /
11
years ending March 31, 2024, through March 31, 2026. All restricted shares in each performance period will be earned if the return on equity is i 20.0% or greater, and the percentage of shares earned in such period will be reduced proportionately to approximately i 66.7% if the return on equity is 10.0%. If the Company does not achieve a return on equity of at least i 10.0% during the performance period, all awards for that performance period will be forfeited. i The restricted share performance periods as follows:
|
|
Shares |
|
|
Performance Period |
|
Vesting Date |
|
One-Year Performance Shares |
|
|
i 11,424 |
|
|
i April 1, 2023 to i March 31, 2024 |
|
i May 2024 |
Two-Year Performance Shares |
|
|
i 11,424 |
|
|
i April 1, 2023 to i March 31, 2025 |
|
i May 2025 |
Three-Year Performance Shares |
|
|
i 22,845 |
|
|
i April 1, 2023 to i March 31, 2026 |
|
i May 2026 |
The Compensation Committee also approved the granting of i 38,072 shares of time-vesting restricted stock to the same officers and key employees, which vest ratably over i four years (the Fiscal 2024 Employee Restricted Stock Time-Vesting Award). The Fiscal 2024 Employee Restricted Stock Performance Award and the Fiscal 2024 Employee Restricted Stock Time-Vesting Award were valued at the closing price of the stock on the grant date and are being expensed over a i three year period.
In addition to the restricted stock described above, from time to time we issue restricted stock to certain employees. These awards are valued at the closing price of the stock on the grant date, and expensed over the vesting period.
The fair value of restricted stock is based on the stock price on the grant date. i The following table summarizes the activity for nonvested restricted shares during the three months ended June 30, 2023:
|
|
Number of Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Nonvested Restricted Stock at March 31, 2023 |
|
|
i 219,084 |
|
|
$ |
i 96.54 |
|
Granted |
|
|
i 85,415 |
|
|
$ |
i 166.75 |
|
Vested |
|
|
( i 22,257 |
) |
|
$ |
i 160.48 |
|
Forfeited |
|
|
( i 3,000 |
) |
|
$ |
i 139.03 |
|
Nonvested Restricted Stock at June 30, 2023 |
|
|
i 279,242 |
|
|
$ |
i 116.92 |
|
Expense related to restricted shares was approximately $ i 6.0 million and $ i 4.3 million for the three months ended June 30, 2023, and 2022, respectively. At June 30, 2023, there was approximately $ i 27.1 million of unearned compensation from restricted stock, which will be recognized over a weighted-average period of i 2.2 years.
The number of shares available for future grants of stock options, restricted stock units, stock appreciation rights, and restricted stock under the Plan was i 3,211,864 at June 30, 2023.
The Plan expires on i August 7, 2023. On May 17, 2023, the Board approved the Eagle Materials Inc. 2023 Equity Incentive Plan (2023 Plan), subject to stockholder approval at the annual meeting of stockholders, which is scheduled to occur on August 3, 2023. If approved, the 2023 Plan will reserve i 1,425,000 shares for future grants of stock options, restricted stock units, stock appreciation rights, and restricted stock under the 2023 Plan.
/(J) COMPUTATION OF EARNINGS PER SHARE
The calculation of basic and diluted common shares outstanding is as follows:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
Weighted-Average Shares of Common Stock Outstanding |
|
|
i 35,274,753 |
|
|
|
i 37,982,580 |
|
Effect of Dilutive Shares |
|
|
|
|
|
|
||
Assumed Exercise of Outstanding Dilutive Options |
|
|
i 320,261 |
|
|
|
i 428,779 |
|
Less Shares Repurchased from Proceeds of Assumed Exercised Options |
|
|
( i 173,894 |
) |
|
|
( i 311,790 |
) |
Restricted Stock |
|
|
i 111,164 |
|
|
|
i 123,380 |
|
Weighted-Average Common Stock and Dilutive Securities Outstanding |
|
|
i 35,532,284 |
|
|
|
i 38,222,949 |
|
Shares Excluded Due to Anti-Dilution Effects |
|
|
i 58,288 |
|
|
|
i 32,656 |
|
12
/
(K) PENSION AND EMPLOYEE BENEFIT PLANS
We sponsor several single-employer defined benefit plans and defined contribution plans, which together cover substantially all our employees. Benefits paid under the single-employer defined benefit plans covering certain hourly employees were historically based on years of service and the employee’s qualifying compensation over the last few years of employment. Over the last several years, these plans have been frozen to new participants and new benefits, with the last plan becoming frozen during fiscal 2020. Our defined benefit plans are all fully funded, with plan assets exceeding the benefit obligation at March 31, 2023. Due to the frozen status and current funding of the single-employer pension plans, our expected pension expense for fiscal 2024 is less than $ i 0.2 million.
/(L) INCOME TAXES
Income Taxes for the interim periods presented have been included in the accompanying financial statements on the basis of an estimated annual effective tax rate. In addition to the amount of tax resulting from applying the estimated annual effective tax rate to pre-tax income, we will include, when appropriate, certain items treated as discrete events to arrive at an estimated overall tax amount. The effective tax rate for the three months ended June 30, 2023 was approximately i 22%, which was lower than the effective tax rate of i 23% for the three months ended June 30, 2022. The effective tax rate was higher than the U.S. Statutory rate of i 21% mainly due to state income taxes, partially offset by a benefit recognized related to percentage depletion.
/(M) LONG-TERM DEBT
Long-term Debt at June 30, 2023 was as follows:
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Revolving Credit Facility |
|
$ |
i 222,000 |
|
|
$ |
i 157,000 |
|
i 2.500% Senior Unsecured Notes Due i 2031 |
|
|
i 750,000 |
|
|
|
i 750,000 |
|
Term Loan |
|
|
i 190,000 |
|
|
|
i 192,500 |
|
Total Debt |
|
|
i 1,162,000 |
|
|
|
i 1,099,500 |
|
Less: Current Portion of Long-term Debt |
|
|
( i 10,000 |
) |
|
|
( i 10,000 |
) |
Less: Unamortized Discounts and Debt Issuance Costs |
|
|
( i 10,152 |
) |
|
|
( i 10,468 |
) |
Long-term Debt |
|
$ |
i 1,141,848 |
|
|
$ |
i 1,079,032 |
|
Revolving Credit Facility
We have an unsecured $ i 750.0 million revolving credit facility (the Revolving Credit Facility). The Revolving Credit Facility includes a separate $ i 200.0 million term loan facility (the Term Loan) and also provides the Company the option to increase the borrowing capacity by up to $ i 375.0 million (for a total borrowing capacity of $ i 1,125 million), provided the existing lenders, or new lenders, agree to such increase. The Revolving Credit Facility includes a $ i 40.0 million letter of credit facility and a swingline loan sub-facility of $ i 25.0 million, and expires on May 5, 2027.
The Revolving Credit Facility contains customary covenants for an unsecured investment-grade facility, including covenants that restrict the Company’s and/or its subsidiaries’ ability to incur additional debt; encumber assets; merge with or transfer or sell assets to other persons; and enter into certain affiliate transactions. The Revolving Credit Facility also requires the Company to maintain at the end of each fiscal quarter a Leverage Ratio of i 3.50:1.00 or less and an Interest Coverage Ratio (both ratios, as defined in the Revolving Credit Facility) equal to or greater than i 2.50 to 1.00 (collectively, the Financial Covenants).
At the Company’s option, outstanding loans under the Revolving Credit Facility bear interest, at a variable rate equal to either (i) the adjusted term SOFR rate (secured overnight financing rate), plus 10 basis points, plus an agreed spread (ranging from i 100 to i 162.5 basis points, which is established based on the Company's credit rating); (ii) in respect of any Revolving Loans (until such time as the then-existing Benchmark (as defined in the
13
Revolving Credit Facility) is replaced in accordance with the Revolving Credit Facility), the adjusted daily simple SOFR rate, plus 10 basis points, plus an agreed spread (ranging from 100 to 162.5 basis points, which is established based on the Company's credit rating) or (iii) an Alternate Base Rate (as defined in the Revolving Credit Facility), which is the highest of (a) the Prime Rate (as defined in the Revolving Credit Facility) in effect on any applicable day, (b) the NYFRB Rate (as defined in the Revolving Credit Facility) in effect on any applicable day, plus ½ of 1%, and (c) the Adjusted Term SOFR (as defined in the Revolving Credit Facility) for a one-month interest period on any applicable day, or if such day is not a business day, the immediately preceding business day, plus 1.0%, in each case plus an agreed upon spread (ranging from i 0 to i 62.5 basis points), which is established quarterly based on the Company's credit rating. The Company is also required to pay a facility fee on unused available borrowings under the Revolving Credit Facility ranging from i 9 to i 22.5 basis points, which is established based on the Company's then credit rating.
The Company pays each lender a participation fee with respect to such lender’s participations in letters of credit, which fee accrues at the same Applicable Rate (as defined in the Revolving Credit Facility) used to determine the interest rate applicable to Eurodollar Revolving Loans (as defined in the Revolving Credit Facility), plus a fronting fee for each letter of credit issued by the issuing bank in an amount equal to i 12.5 basis points per annum on the daily maximum amount then available to be drawn under such letter of credit. The Company also pays each issuing bank such bank’s standard fees with respect to issuance, amendment or extensions of letters of credit and other processing fees, and other standard costs and charges relating to such issuing bank’s letters of credit from time to time.
There was $ i 222.0 million of outstanding borrowings under the Revolving Credit Facility, plus $ i 8.3 million outstanding letters of credit as of June 30, 2023, leaving us with $ i 519.7 million of available borrowings under the Revolving Credit Facility, net of the outstanding letters of credit. We were in compliance with all Financial Covenants on June 30, 2023; therefore, the entire $ i 519.7 million is available for future borrowings.
Term Loan
On May 5, 2022, we borrowed the $ i 200.0 million Term Loan under the Revolving Credit Facility, and used these proceeds to, among other things, pay down a portion of the Revolving Credit Facility. The Term Loan requires quarterly principal payments of $ i 2.5 million, with any unpaid amounts due upon maturity on i May 5, 2027. At the Company’s option, principal amounts outstanding under the Term Loan bear interest as set forth in the Revolving Credit Facility (but not, for the avoidance of doubt, at a daily simple SOFR rate unless and until such time as the then-existing Benchmark (as defined in the Revolving Credit Facility) is replaced in accordance with the Revolving Credit Facility).
2.500% Senior Unsecured Notes Due 2031
On July 1, 2021, we issued $ i 750.0 million aggregate principal amount of 2.500% senior notes due i July 2031 (the i 2.500% Senior Unsecured Notes). The 2.500% Senior Unsecured Notes are senior unsecured obligations of the Company and are not guaranteed by any of our subsidiaries. The 2.500% Senior Unsecured Notes were issued net of original issue discount of $ i 6.3 million and have an effective interest rate of approximately i 2.6%. The original issue discount is being amortized by the effective interest method over the i 10-year term of the notes. The 2.500% Senior Unsecured Notes are redeemable prior to April 1, 2031, at a redemption price equal to i 100% of the aggregate principal amount of the 2.500% Senior Unsecured Notes being redeemed, plus the present value of remaining scheduled payments of principal and interest from the applicable redemption date to April 1, 2031, discounted to the redemption date on a semi-annual basis at the Treasury rate plus i 20 basis points. The 2.500% Senior Unsecured Notes are redeemable on or after April 1, 2031, at a redemption price equal to i 100% of the aggregate principal amount of the i 2.500% Senior Unsecured Notes being redeemed, plus accrued and unpaid interest to, but excluding, the applicable redemption date. If we experience certain change of control triggering events, we would be required to offer to repurchase the 2.500% Senior Unsecured Notes at a purchase price equal to i 101% of the aggregate principal amount of the 2.500% Senior Unsecured Notes being repurchased, plus accrued and unpaid interest to, but excluding, the applicable redemption date. The indenture governing the
14
2.500% Senior Unsecured Notes contains certain covenants that limit our ability to create or permit to exist certain liens; enter into sale and leaseback transactions; and consolidate, merge, or transfer all or substantially all of our assets, and provides for certain events of default that, if any occurred, would permit or require the principal of and accrued interest on the 2.500% Senior Unsecured Notes to become or be declared due and payable.
/
(N) SEGMENT INFORMATION
Operating segments are defined as components of an enterprise that engage in business activities that earn revenue, incur expenses, and prepare separate financial information that is evaluated regularly by our chief operating decision maker in order to allocate resources and assess performance.
Our business is organized into i two sectors within which there are i four reportable business segments. The Heavy Materials sector includes the Cement and Concrete and Aggregates segments. The Light Materials sector includes the Gypsum Wallboard and Recycled Paperboard segments.
Our primary products are commodities that are essential in commercial and residential construction; public construction projects; and projects to build, expand, and repair roads and highways. Demand for our products is generally cyclical and seasonal, depending on economic and geographic conditions. We distribute our products throughout most of the United States, except the Northeast, which provides us with regional economic diversification. Our operations are conducted in the U.S. and include the mining of limestone for the manufacture, production, distribution, and sale of portland cement (a basic construction material that is the essential binding ingredient in concrete); the grinding and sale of slag; the mining of gypsum for the manufacture and sale of gypsum wallboard; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters; the sale of readymix concrete; and the mining and sale of aggregates (crushed stone, sand, and gravel).
We operate i eight modern cement plants (one of which is operated through a joint venture located in Buda, Texas), i one slag grinding facility, and over i 30 cement distribution terminals. Our cement companies focus on the U.S. heartland and operate as an integrated network selling product primarily in California, Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, Nevada, Ohio, Oklahoma, Tennessee, and Texas. We operate i 30 readymix concrete batch plants and i five aggregates processing plants in markets that are complementary to our cement network.
We operate i five gypsum wallboard plants and a recycled paperboard mill. We distribute gypsum wallboard and recycled paperboard throughout the continental U.S., with the exception of the Northeast.
We account for intersegment sales at market prices. For segment reporting purposes only, we proportionately consolidate our i 50% share of the Joint Venture Revenue and Operating Earnings, consistent with the way management reports the segments within the Company for making operating decisions and assessing performance.
15
The following table sets forth certain financial information relating to our operations by segment. We do not allocate interest or taxes at the segment level; these costs are disclosed at the consolidated company level.
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Revenue |
|
|
|
|
|
|
||
Cement |
|
$ |
i 329,032 |
|
|
$ |
i 284,516 |
|
Concrete and Aggregates |
|
|
i 70,453 |
|
|
|
i 61,618 |
|
Gypsum Wallboard |
|
|
i 219,097 |
|
|
|
i 216,327 |
|
Paperboard |
|
|
i 45,328 |
|
|
|
i 54,073 |
|
|
|
|
i 663,910 |
|
|
|
i 616,534 |
|
Less: Intersegment Revenue |
|
|
( i 35,266 |
) |
|
|
( i 28,832 |
) |
Less: Joint Venture Revenue |
|
|
( i 27,123 |
) |
|
|
( i 26,315 |
) |
|
|
$ |
i 601,521 |
|
|
$ |
i 561,387 |
|
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Intersegment Revenue |
|
|
|
|
|
|
||
Cement |
|
$ |
i 10,137 |
|
|
$ |
i 6,291 |
|
Concrete and Aggregates |
|
|
i 3,038 |
|
|
|
i — |
|
Paperboard |
|
|
i 22,091 |
|
|
|
i 22,541 |
|
|
|
$ |
i 35,266 |
|
|
$ |
i 28,832 |
|
Cement Sales Volume (M tons) |
|
|
|
|
|
|
||
Wholly Owned |
|
|
i 1,848 |
|
|
|
i 1,805 |
|
Joint Venture |
|
|
i 165 |
|
|
|
i 188 |
|
|
|
|
i 2,013 |
|
|
|
i 1,993 |
|
16
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Operating Earnings |
|
|
|
|
|
|
||
Cement |
|
$ |
i 74,061 |
|
|
$ |
i 62,348 |
|
Concrete and Aggregates |
|
|
i 7,034 |
|
|
|
i 5,732 |
|
Gypsum Wallboard |
|
|
i 90,857 |
|
|
|
i 84,068 |
|
Paperboard |
|
|
i 7,202 |
|
|
|
i 3,816 |
|
Sub-Total |
|
|
i 179,154 |
|
|
|
i 155,964 |
|
Corporate General and Administrative Expense |
|
|
( i 11,679 |
) |
|
|
( i 11,820 |
) |
Other Non-Operating Income (Loss) |
|
|
i 213 |
|
|
|
( i 635 |
) |
Earnings Before Interest and Income Taxes |
|
|
i 167,688 |
|
|
|
i 143,509 |
|
Interest Expense, net |
|
|
( i 12,239 |
) |
|
|
( i 7,330 |
) |
Earnings Before Income Taxes |
|
$ |
i 155,449 |
|
|
$ |
i 136,179 |
|
Cement Operating Earnings |
|
|
|
|
|
|
||
Wholly Owned |
|
$ |
i 70,902 |
|
|
$ |
i 57,250 |
|
Joint Venture |
|
|
i 3,159 |
|
|
|
i 5,098 |
|
|
|
$ |
i 74,061 |
|
|
$ |
i 62,348 |
|
Capital Expenditures |
|
|
|
|
|
|
||
Cement |
|
$ |
i 18,368 |
|
|
$ |
i 8,986 |
|
Concrete and Aggregates |
|
|
i 3,220 |
|
|
|
i 652 |
|
Gypsum Wallboard |
|
|
i 11,028 |
|
|
|
i 4,079 |
|
Paperboard |
|
|
i 3,268 |
|
|
|
i 837 |
|
Corporate and Other |
|
|
i 115 |
|
|
|
i 360 |
|
|
|
$ |
i 35,999 |
|
|
$ |
i 14,914 |
|
Depreciation, Depletion, and Amortization |
|
|
|
|
|
|
||
Cement |
|
$ |
i 21,679 |
|
|
$ |
i 20,053 |
|
Concrete and Aggregates |
|
|
i 5,031 |
|
|
|
i 4,201 |
|
Gypsum Wallboard |
|
|
i 5,461 |
|
|
|
i 5,563 |
|
Paperboard |
|
|
i 3,719 |
|
|
|
i 3,717 |
|
Corporate and Other |
|
|
i 792 |
|
|
|
i 695 |
|
|
|
$ |
i 36,682 |
|
|
$ |
i 34,229 |
|
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Identifiable Assets |
|
|
|
|
|
|
||
Cement |
|
$ |
i 2,006,915 |
|
|
$ |
i 1,905,227 |
|
Concrete and Aggregates |
|
|
i 241,746 |
|
|
|
i 234,767 |
|
Gypsum Wallboard |
|
|
i 428,240 |
|
|
|
i 421,425 |
|
Paperboard |
|
|
i 165,649 |
|
|
|
i 163,797 |
|
Other, net |
|
|
i 73,696 |
|
|
|
i 55,786 |
|
|
|
$ |
i 2,916,246 |
|
|
$ |
i 2,781,002 |
|
Segment Operating Earnings, including the proportionately consolidated 50% interest in the revenue and expenses of the Joint Venture, represent Revenue, less direct operating expenses, segment Depreciation, and segment Selling, General, and Administrative expenses. We account for intersegment sales at market prices. Corporate assets consist mainly of cash and cash equivalents, general office assets, and miscellaneous other assets.
The basis used to disclose Identifiable Assets; Capital Expenditures; and Depreciation, Depletion, and Amortization conforms with the equity method, and is similar to how we disclose these accounts in our Unaudited Consolidated Balance Sheets and Unaudited Consolidated Statements of Earnings.
17
The segment breakdown of Goodwill is as follows:
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Cement |
|
$ |
i 229,857 |
|
|
$ |
i 215,781 |
|
Concrete and Aggregates |
|
|
i 40,774 |
|
|
|
i 40,774 |
|
Gypsum Wallboard |
|
|
i 116,618 |
|
|
|
i 116,618 |
|
Paperboard |
|
|
i 7,538 |
|
|
|
i 7,538 |
|
|
|
$ |
i 394,787 |
|
|
$ |
i 380,711 |
|
The increase in Goodwill in the Cement segment is related to the Stockton Terminal Acquisition. The purchase price allocation is still in progress, and may affect the recorded balance of Goodwill when completed.
Summarized financial information for the Joint Venture that is not consolidated is set out below. This summarized financial information includes the total amount for the Joint Venture and not our 50% interest in those amounts:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Revenue |
|
$ |
i 54,246 |
|
|
$ |
i 52,630 |
|
Gross Margin |
|
$ |
i 8,538 |
|
|
$ |
i 12,026 |
|
Earnings Before Income Taxes |
|
$ |
i 6,364 |
|
|
$ |
i 10,272 |
|
|
|
June 30, |
|
|
|
|||
|
|
|
|
2023 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Current Assets |
|
$ |
i 90,831 |
|
|
$ |
i 88,562 |
|
Noncurrent Assets |
|
$ |
i 127,081 |
|
|
$ |
i 124,503 |
|
Current Liabilities |
|
$ |
i 32,811 |
|
|
$ |
i 29,434 |
|
(O) INTEREST EXPENSE
The following components are included in Interest Expense, net:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Interest Income |
|
$ |
( i 158 |
) |
|
$ |
( i 15 |
) |
Interest Expense |
|
|
i 11,923 |
|
|
|
i 6,882 |
|
Other Expenses |
|
|
i 474 |
|
|
|
i 463 |
|
Interest Expense, net |
|
$ |
i 12,239 |
|
|
$ |
i 7,330 |
|
Interest Income includes interest earned on investments of excess cash. Components of Interest Expense include interest associated with the Revolving Credit Facility, Term Loan, Senior Unsecured Notes, and commitment fees based on the unused portion of the Revolving Credit Facility. Other Expenses include amortization of debt issuance costs and Revolving Credit Facility costs.
/
18
(P) COMMITMENTS AND CONTINGENCIES
We have certain deductible limits under our workers’ compensation and liability insurance policies for which reserves are established based on the undiscounted estimated costs of known and anticipated claims. We have entered into standby letter of credit agreements relating to workers’ compensation, auto, and general liability self-insurance. At June 30, 2023, we had contingent liabilities under these outstanding letters of credit of approximately $ i 8.3 million.
In the ordinary course of business, we execute contracts involving indemnifications that are both standard in the industry and specific to a transaction, such as the sale of a business. These indemnifications may include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; and construction contracts and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, management believes these indemnifications will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. We currently have i no outstanding guarantees.
We are currently contingently liable for performance under $ i 28.2 million in performance bonds required by certain states and municipalities, and their related agencies. The bonds are principally for certain reclamation obligations and mining permits. We have indemnified the underwriting insurance company against any exposure under the performance bonds. In our past experience, no material claims have been made against these financial instruments.
/(Q) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of our long-term debt has been estimated based upon our current incremental borrowing rates for similar types of borrowing arrangements. The fair value of our 2.500% Senior Unsecured Notes at June 30, 2023, is as follows:
|
|
Fair Value |
|
|
|
|
(dollars in thousands) |
|
|
i 2.500% Senior Unsecured Notes Due i 2031 |
|
$ |
i 612,416 |
|
The estimated fair value of our long-term debt was based on quoted prices of similar debt instruments with similar terms that are publicly traded (level 1 input). The carrying values of Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, and Accrued Liabilities approximate their fair values at June 30, 2023, due to the short-term maturities of these assets and liabilities. The fair value of our Revolving Credit Facility and Term Loan also approximates the carrying value at June 30, 2023.
/
19
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXECUTIVE SUMMARY
We are a leading manufacturer of heavy construction materials and light building materials in the United States. Our primary products, Portland Cement and Gypsum Wallboard, are commodities that are essential in commercial and residential construction; public construction projects; and projects to build, expand, and repair roads and highways. Demand for our products is generally cyclical and seasonal, depending on economic and geographic conditions. We distribute our products throughout most of the United States, except the Northeast, which provides us with regional economic diversification. However, general economic downturns or localized downturns in the regions where we have operations may have a material adverse effect on our business, financial condition, and results of operations.
Our business is organized into two sectors: Heavy Materials, which includes the Cement and Concrete and Aggregates segments; and Light Materials, which includes the Gypsum Wallboard and Recycled Paperboard segments. Financial results and other information for the three months ended June 30, 2023 and 2022, are presented on a consolidated basis and by these business segments – Cement, Concrete and Aggregates, Gypsum Wallboard, and Recycled Paperboard.
We conduct one of our cement operations through a joint venture, Texas Lehigh Cement Company LP, which is located in Buda, Texas (the Joint Venture). We own a 50% interest in the Joint Venture and account for our interest under the equity method of accounting. We proportionately consolidate our 50% share of the Joint Venture’s Revenue and Operating Earnings in the presentation of our Cement segment, which is the way management organizes the segments within the Company for making operating decisions and assessing performance.
All our business activities are conducted in the United States. These activities include the mining of limestone for the manufacture, production, distribution, and sale of portland cement, including portland limestone cement (a basic construction material that is the essential binding ingredient in concrete); the grinding and sale of slag; the mining of gypsum for the manufacture and sale of gypsum wallboard; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters; the sale of readymix concrete; and the mining and sale of aggregates (crushed stone, sand, and gravel).
In April 2023, we assumed operation of our quarry in Battletown, Kentucky (Battletown Aggregates). Our Battletown quarry is primarily used to supply our Kosmos Cement plant with limestone; however, beginning in April 2023 we also began selling a portion of the mined materials as aggregates. Battletown Aggregates is included in our Heavy Materials sector, in the Concrete and Aggregates business segment.
On May 3, 2023, we finalized the Stockton Terminal Acquisition. The purchase price of the Stockton Terminal Acquisition was approximately $55.1 million. The Stockton Terminal Acquisition is included in our Heavy Materials sector, in the Cement business segment. See Footnote (B) in the Unaudited Consolidated Financial Statements for more information regarding the Stockton Terminal Acquisition.
MARKET CONDITIONS AND OUTLOOK
During the first quarter of fiscal 2024, our end markets generally remained resilient despite higher interest rates and persistent inflation. Construction activity in most of our regional markets continued to outpace the national average. Sales Volume in our Cement business increased 1%, and although Sales Volume in our Gypsum Wallboard business declined 4%, our overall sales volume remains historically strong.
20
Demand Outlook
The principal end-use market of Cement is public infrastructure (i.e. roads, bridges, and highways). Our Cement business remains in a near sold-out position. We expect demand for cement to remain strong with infrastructure investment increasing given increased federal funding from the Infrastructure Investments and Jobs Act for public construction and repair projects; continued high allocations from state budgets for additional infrastructure projects; and growth in heavy industrial projects. Despite underlying demand growth, our ability to achieve further Cement sales volume growth from our existing facilities is limited, because our integrated cement sales network, which stretches across the U.S. heartland, is operating at high utilization levels.
The principal end use for Gypsum Wallboard is residential housing, consisting of new construction (both single-family and multi-family homes) as well as repair and remodel. Our Gypsum Wallboard shipments and orders, while down 4% from the prior year, remain historically strong. Residential construction activity remains resilient as the market balances interest rate-related affordability challenges with chronic supply shortages and strong demand. Our Recycled Paperboard business sells paper primarily into the gypsum wallboard market, and demand for our paper generally follows the demand for gypsum wallboard.
Cost Outlook
We are well positioned to manage our cost structure and meet our customers’ needs during the fiscal year. Our substantial raw material reserves for our Cement, Aggregates, and Gypsum Wallboard businesses, and their proximity to our respective manufacturing facilities, support our low-cost producer position across all of our business segments.
Energy and freight costs increased in all of our businesses during fiscal 2023. While natural gas costs have recently declined and freight costs have stabilized, we expect solid fuel costs, which are the primary energy costs in manufacturing cement, to increase in fiscal 2024. We continue to see inflationary pressure in maintenance costs, and we expect this to continue into fiscal 2025.
The primary raw material used to produce paperboard is old corrugated containers (OCC). Prices for OCC stabilized toward the end of fiscal 2023. OCC prices increased slightly during the first quarter of fiscal 2024, and we anticipate OCC pricing to remain relatively flat in the near term. Our current customer contracts for gypsum liner include price adjustments that partially compensate for changes in raw material fiber prices. However, because these price adjustments are not realized until future quarters, costs in our Gypsum Wallboard segment are likely to be adjusted in the period that these price changes are realized.
21
RESULTS OF OPERATIONS
THREE MONTHS ENDED June 30, 2023 Compared WITH THREE MONTHS ENDED June 30, 2022
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
|
|
2022 |
|
|
Change |
|
||||
|
|
(dollars in thousands, except per share) |
|
|
|
|
||||||
Revenue |
|
$ |
601,521 |
|
|
$ |
561,387 |
|
|
|
7 |
% |
Cost of Goods Sold |
|
|
(425,526 |
) |
|
|
(410,521 |
) |
|
|
4 |
% |
Gross Profit |
|
|
175,995 |
|
|
|
150,866 |
|
|
|
17 |
% |
Equity in Earnings of Unconsolidated Joint Venture |
|
|
3,159 |
|
|
|
5,098 |
|
|
|
(38 |
)% |
Corporate General and Administrative |
|
|
(11,679 |
) |
|
|
(11,820 |
) |
|
|
(1 |
)% |
Other Non-Operating Income |
|
|
213 |
|
|
|
(635 |
) |
|
|
(134 |
)% |
Interest Expense, net |
|
|
(12,239 |
) |
|
|
(7,330 |
) |
|
|
67 |
% |
Earnings Before Income Taxes |
|
|
155,449 |
|
|
|
136,179 |
|
|
|
14 |
% |
Income Tax Expense |
|
|
(34,600 |
) |
|
|
(31,174 |
) |
|
|
11 |
% |
Net Earnings |
|
$ |
120,849 |
|
|
$ |
105,005 |
|
|
|
15 |
% |
Diluted Earnings per Share |
|
$ |
3.40 |
|
|
$ |
2.75 |
|
|
|
24 |
% |
REVENUE
Revenue increased by $40.1 million, or 7%, to $601.5 million for the three months ended June 30, 2023. Battletown Aggregates and the Stockton Terminal Acquisition contributed $1.8 million and $6.5 million of Revenue, respectively, during the three months ended June 30, 2023. Excluding Battletown Aggregates and the Stockton Terminal Acquisition, Revenue improved by $31.8 million, or 6%. This was due to increases in gross sales prices, which positively affected Revenue by $46.3 million, partially offset by lower Sales Volume, which adversely affected Revenue by approximately $14.5 million.
COST OF GOODS SOLD
Cost of Goods Sold increased by $15.0 million, or 4%, to $425.5 million for the three months ended June 30, 2023. Battletown Aggregates and the Stockton Terminal Acquisition contributed $1.6 million and $8.4 million of Cost of Goods Sold, respectively, during the three months ended June 30, 2023. Excluding Battletown Aggregates and the Stockton Terminal Acquisition, Cost of Goods Sold increased by $5.0 million, or 1%. The increase was due to operating costs of $15.4 million, partially offset by lower Sale Volume of $10.4 million. Higher operating costs were primarily related to our Cement and Concrete and Aggregates businesses and are discussed further in the segment analysis.
GROSS PROFIT
Gross Profit increased 17% to $176.0 million during the three months ended June 30, 2023. The increase was primarily related to higher gross sales prices, partially offset by lower Sales Volume and increased operating costs. The gross margin expanded to 29%, with higher gross sales prices being partially offset by a rise in operating costs.
EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE
Equity in Earnings of our Unconsolidated Joint Venture declined $1.9 million, or 38%, for the three months ended June 30, 2023. The decrease was primarily due to higher operating costs and lower Sales Volume, which adversely affected earnings by approximately $5.4 million and $0.7 million, respectively. This was partially offset by higher gross sales prices of $4.2 million. The rise in operating costs was primarily related to an extended maintenance outage during the quarter that reduced production and resulted in higher maintenance expenses of approximately $2.8 million, as well as higher energy and purchased cement costs reduced operating earnings by $0.5 million and $0.9 million, respectively. The extended outage addressed ongoing equipment issues at the facility over the past year.
22
CORPORATE GENERAL AND ADMINISTRATIVE
Corporate General and Administrative expenses decreased by approximately $0.1 million, or 1%, for the three months ended June 30, 2023.
OTHER NON-OPERATING INCOME
Other Non-Operating Income consists of a variety of items that are unrelated to segment operations and include non-inventoried Aggregates income, asset sales, and other miscellaneous income and cost items.
INTEREST EXPENSE, NET
Interest Expense, net increased by approximately $4.9 million, or 67%, during the three months ended June 30, 2023. This was primarily due to approximately $5.0 million of higher interest on our revolving credit facility, which was related to increased average outstanding borrowings and higher interest rates.
EARNINGS BEFORE INCOME TAXES
Earnings Before Income Taxes increased to $155.5 million during the three months ended June 30, 2023, primarily as a result of higher Gross Profit. This was partially offset by higher Interest Expense, as well as lower Equity in Earnings of Unconsolidated Joint Venture.
INCOME TAX EXPENSE
Income Tax Expense was $34.6 million for the three months ended June 30, 2023, compared with $31.2 million for the three months ended June 30, 2022. The effective tax rate decreased to 22% from 23% in the prior-year period. The decrease was primarily due to the benefit received from the vesting and exercise of employee stock awards during the quarter in fiscal 2024.
NET EARNINGS
Net Earnings increased 15% to $120.9 million for the three months ended June 30, 2023, as discussed above.
23
Three MONTHS ENDED June 30, 2023 vs. three MONTHS ENDED June 30, 2022 BY SEGMENT
The following presents results within our two business sectors for the three months ended June 30, 2023, and 2022. Revenue and operating results are organized by sector and discussed by individual business segments.
Heavy Materials
CEMENT (1)
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
|
|
2022 |
|
|
Percentage Change |
|
||||
|
|
(in thousands, except per ton information) |
|
|
|
|
||||||
Revenue, including Intersegment and Joint Venture |
|
$ |
329,032 |
|
|
$ |
284,516 |
|
|
|
16 |
% |
Less Intersegment Revenue |
|
|
(10,137 |
) |
|
|
(6,291 |
) |
|
|
61 |
% |
Less Joint Venture Revenue |
|
|
(27,123 |
) |
|
|
(26,315 |
) |
|
|
3 |
% |
Revenue |
|
$ |
291,772 |
|
|
$ |
251,910 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Sales Volume (M Tons) |
|
|
2,013 |
|
|
|
1,993 |
|
|
|
1 |
% |
Freight and Delivery Costs billed to Customers |
|
$ |
(17,528 |
) |
|
$ |
(15,970 |
) |
|
|
10 |
% |
Average Net Sales Price, per ton (2) |
|
$ |
147.27 |
|
|
$ |
127.82 |
|
|
|
15 |
% |
Operating Margin, per ton |
|
$ |
36.79 |
|
|
$ |
31.28 |
|
|
|
18 |
% |
Operating Earnings |
|
$ |
74,061 |
|
|
$ |
62,348 |
|
|
|
19 |
% |
(1) Total of wholly owned subsidiaries and proportionately consolidated 50% interest of the Joint Venture’s results.
(2) Net of freight per ton, including Joint Venture.
Cement Revenue was $329.0 million, a 16% increase, for the three months ended June 30, 2023. Excluding Intersegment Revenue and the Stockton Terminal Acquisition, Revenue increased $34.2 million, or 12%, for the three months ended June 30, 2023. The increase was primarily due to higher gross sales prices, which improved Cement Revenue by approximately $37.6 million, partially offset by lower Sales Volume from legacy cement plants of $3.4 million.
Cement Operating Earnings increased by $11.8 million to $74.1 million for the three months ended June 30, 2023. Excluding the Stockton Terminal Acquisition, Operating Earnings increased by $13.7 million, or 22%. The increase was due to higher gross sales prices of $37.6 million. This was partially offset by lower Sales Volume and higher operating costs $0.7 million and $23.2 million, respectively. Higher operating costs were primarily due to higher maintenance and energy costs of approximately $18.1 million and $4.2 million, respectively. The Operating Margin increased to 23% from 22%, as a result of higher gross sales prices, partially offset by the increase in operating expenses.
24
CONCRETE AND AGGREGATES
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
|
|
2022 |
|
|
Percentage Change |
|
||||
|
|
(in thousands, except net sales prices) |
|
|
|
|
||||||
Revenue, including Intersegment |
|
$ |
70,453 |
|
|
$ |
61,618 |
|
|
|
14 |
% |
Less Intersegment Revenue |
|
$ |
(3,038 |
) |
|
$ |
— |
|
|
|
— |
|
Revenue |
|
$ |
67,415 |
|
|
$ |
61,618 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Sales Volume |
|
|
|
|
|
|
|
|
|
|||
M Cubic Yards of Concrete |
|
|
385 |
|
|
|
406 |
|
|
|
(5 |
)% |
M Tons of Aggregate |
|
|
1,157 |
|
|
|
795 |
|
|
|
46 |
% |
Average Net Sales Price |
|
|
|
|
|
|
|
|
|
|||
Concrete - Per Cubic Yard |
|
$ |
141.80 |
|
|
$ |
128.73 |
|
|
|
10 |
% |
Aggregates - Per Ton |
|
$ |
11.30 |
|
|
$ |
11.22 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Operating Earnings |
|
$ |
7,034 |
|
|
$ |
5,732 |
|
|
|
23 |
% |
Concrete and Aggregates Revenue increased 14% to $70.5 million for the three months ended June 30, 2023. Excluding Intersegment Revenue and Battletown Aggregates, Revenue increased $4.0 million. The increase was due to higher gross sales price and Aggregates Sales Volume, which improved Revenue by $5.6 million and $1.1 million, respectively. This was offset by lower Concrete Sales Volume of $2.7 million.
Operating Earnings were approximately $7.0 million, a 23% increase. Excluding Battletown Aggregates, Operating Earnings increased to $6.8 million. The increase in Operating Earnings was due to higher gross sales prices of $5.6 million. This was partially offset by higher operating costs of $4.5 million. The increase in operating costs was primarily due to higher materials, maintenance and batch plant expenses of approximately $3.6 million, $1.5 million, and $1.3 million, respectively. This was partially offset by lower delivery expense of approximately $0.9 million, and the impact of the recording acquired inventories at fair value in the first quarter of fiscal 2022 of $1.2 million.
25
Light Materials
GYPSUM WALLBOARD
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
|
|
2022 |
|
|
Percentage Change |
|
||||
|
|
(in thousands, except per MSF information) |
|
|
|
|
||||||
Gross Revenue |
|
$ |
219,097 |
|
|
$ |
216,327 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|||
Sales Volume (MMSF) |
|
|
763 |
|
|
|
798 |
|
|
|
(4 |
)% |
Freight and Delivery Costs billed to Customers |
|
$ |
(38,608 |
) |
|
$ |
(42,006 |
) |
|
|
(8 |
)% |
Average Net Sales Price, per MSF (1) |
|
$ |
236.66 |
|
|
$ |
218.57 |
|
|
|
8 |
% |
Freight, per MSF |
|
$ |
50.60 |
|
|
$ |
52.64 |
|
|
|
(4 |
)% |
Operating Margin, per MSF |
|
$ |
119.08 |
|
|
$ |
105.35 |
|
|
|
13 |
% |
Operating Earnings |
|
$ |
90,857 |
|
|
$ |
84,068 |
|
|
|
8 |
% |
(1) Net of freight per MSF.
Gypsum Wallboard Revenue was $219.1 million, a 1% increase for the three months ended June 30, 2023. Higher gross sales prices increased Revenue by approximately $12.3 million, partially offset by lower Sales Volume of $9.5 million. Our market share remained relatively consistent during the three months ended June 30, 2023.
Operating Earnings increased 8% to $90.9 million, primarily because of higher gross sales prices. The increase in gross sales prices positively affected Operating Earnings by approximately $12.3 million. This was partially offset by lower Sales Volume and higher operating costs, which adversely affected Operating Earnings by approximately $3.7 million and $1.8 million, respectively. Higher operating costs were primarily related to maintenance and fixed costs, which reduced Operating Earnings by approximately $1.6 million and $2.2 million, respectively, partially offset by lower freight costs of $1.6 million. Operating Margin increased to 41% for the three months ended June 30, 2023, primarily because of higher gross sales prices, partly offset by increased operating costs. Fixed costs are not a significant portion of the overall cost of wallboard; therefore, changes in utilization have a relatively minor impact on our operating cost per unit.
26
RECYCLED PAPERBOARD
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
|
|
2022 |
|
|
Percentage Change |
|
||||
|
|
(in thousands, except per ton information) |
|
|
|
|
||||||
Revenue, including Intersegment |
|
$ |
45,328 |
|
|
$ |
54,073 |
|
|
|
(16 |
)% |
Less Intersegment Revenue |
|
|
(22,091 |
) |
|
|
(22,541 |
) |
|
|
(2 |
)% |
Revenue |
|
$ |
23,237 |
|
|
$ |
31,532 |
|
|
|
(26 |
)% |
|
|
|
|
|
|
|
|
|
|
|||
Sales Volume (M Tons) |
|
|
83 |
|
|
|
84 |
|
|
|
(1 |
)% |
Freight and Delivery Costs billed to Customers |
|
$ |
(599 |
) |
|
$ |
(2,549 |
) |
|
|
(77 |
)% |
Average Net Sales Price, per ton (1) |
|
$ |
536.56 |
|
|
$ |
611.87 |
|
|
|
(12 |
)% |
Freight, per ton |
|
$ |
7.22 |
|
|
$ |
30.35 |
|
|
|
(76 |
)% |
Operating Margin, per ton |
|
$ |
86.77 |
|
|
$ |
45.43 |
|
|
|
91 |
% |
Operating Earnings |
|
$ |
7,202 |
|
|
$ |
3,816 |
|
|
|
89 |
% |
(1) Net of freight per ton.
Recycled Paperboard Revenue decreased 16% to $45.3 million during the three months ended June 30, 2023. The decrease was primarily due to lower gross sales prices and Sales Volume, which reduced Revenue by $8.2 million and $0.6 million, respectively. Lower gross sales prices were related to the pricing provisions in our long-term sales agreements.
Operating Earnings increased 89% to $7.2 million, primarily because of lower operating expenses, which increased Operating Earnings by $11.6 million. This was partially offset by lower gross sales prices, which reduced Operating Earnings by approximately $8.2 million. The decrease in operating costs was primarily related to lower input costs, namely fiber and freight, which lowered Operating Earnings by approximately $9.5 million, and $3.2 million, respectively. This was partially offset by higher energy and fixed costs of $0.6 million and $0.5 million, respectively. The Operating Margin increased to 16% because of lower operating costs, partially offset by lower gross sales prices. Although the Company has certain pricing provisions in its long-term sales agreements, prices are only adjusted at certain times throughout the year, so price adjustments are not always reflected in the same period as the change in costs.
27
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to adopt accounting policies and make significant judgments and estimates to develop amounts disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare our financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.
Information regarding our Critical Accounting Policies can be found in our Annual Report. The three Critical Accounting Policies that we believe either require the use of the most judgment, or the selection or application of alternative accounting policies, and are material to our financial statements, are those related to long-lived assets, goodwill, and business combinations. Management has discussed the development and selection of these Critical Accounting Policies and estimates with the Audit Committee of our Board of Directors and with our independent registered public accounting firm. In addition, Note (A) to the financial statements in our Annual Report contains a summary of our significant accounting policies.
Recent Accounting Pronouncements
Refer to Footnote (A) in the Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for information regarding recently issued accounting pronouncements that may affect our financial statements.
LIQUIDITY AND CAPITAL RESOURCES
We believe at this time that we have access to sufficient financial resources from our liquidity sources to fund our business and operations, including contractual obligations, capital expenditures, and debt service obligations for at least the next twelve months. We regularly monitor any potential disruptions to the economy, and to our operations, particularly changing fiscal policy or economic conditions affecting our industries. Please see the Debt Financing Activities section below for a discussion of our revolving credit facility and the amount of borrowings available to us in the next twelve-month period.
Cash Flow
The following table provides a summary of our cash flows:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Net Cash Provided by Operating Activities |
|
$ |
140,487 |
|
|
$ |
124,802 |
|
Investing Activities |
|
|
|
|
|
|
||
Additions to Property, Plant, and Equipment |
|
|
(35,999 |
) |
|
|
(14,914 |
) |
Acquisition Spending |
|
|
(55,053 |
) |
|
|
(121,162 |
) |
Net Cash Used in Investing Activities |
|
|
(91,052 |
) |
|
|
(136,076 |
) |
Financing Activities |
|
|
|
|
|
|
||
Increase (Decrease) in Credit Facility |
|
|
65,000 |
|
|
|
(19,000 |
) |
Proceeds from Term Loan |
|
|
— |
|
|
|
200,000 |
|
Repayment of Term Loan |
|
|
(2,500 |
) |
|
|
— |
|
Dividends Paid to Stockholders |
|
|
(8,995 |
) |
|
|
(9,642 |
) |
Purchase and Retirement of Common Stock |
|
|
(74,058 |
) |
|
|
(109,612 |
) |
Proceeds from Stock Option Exercises |
|
|
10,385 |
|
|
|
667 |
|
Payment of Debt Issuance Costs |
|
|
— |
|
|
|
(777 |
) |
Shares Redeemed to Settle Employee Taxes on Stock Compensation |
|
|
(1,360 |
) |
|
|
(1,497 |
) |
Net Cash Provided by (Used in) Financing Activities |
|
|
(11,528 |
) |
|
|
60,139 |
|
Net Increase in Cash and Cash Equivalents |
|
$ |
37,907 |
|
|
$ |
48,865 |
|
28
Net Cash Provided by Operating Activities increased by $15.7 million to $140.5 million during the three months ended June 30, 2023. This increase was primarily attributable to higher Net Earnings, adjusted for non-cash charges of approximately $21.3 million. This was partially offset by changes in working capital of $3.6 million and lower dividends from our Unconsolidated Joint Venture of $2.5 million.
Working capital increased by $77.7 million to $386.3 million at June 30, 2023, compared with March 31, 2023. The increase was due to higher Cash, Accounts and Notes Receivable, net, Inventories, Prepaid and Other Assets of $37.9 million, $53.5 million, $10.6 million, and $7.2 million, respectively. This was partially offset by lower Income Tax Receivable of $14.9 million and higher Income Tax Payable of $18.3 million. The increase in inventory was due primarily to the Stockton Terminal Acquisition. The Stockton Terminal Acquisition in May 2023 increased working capital by approximately $7.2 million at June 30, 2023.
The increase in Accounts Receivable at June 30, 2023, was primarily related to higher Revenue during the three months ended June 30, 2023, compared with the three months ended March 31, 2023. As a percentage of quarterly sales generated for the respective quarter, Accounts Receivable was approximately 41% at both June 30, 2023 and March 31, 2023. Management measures the change in Accounts Receivable by monitoring the days sales outstanding on a monthly basis to determine if any deterioration has occurred in the collectability of the Accounts Receivable. No significant deterioration in the collectability of our Accounts Receivable was identified at June 30, 2023.
Our Inventory balance at June 30, 2023, increased by approximately $10.6 million from our balance at March 31, 2023. Excluding the Stockton Terminal Acquisition, our Inventory balance increased by $1.9 million. Within Inventory, raw materials and materials-in-progress and finished cement increased by approximately $2.1 million and $4.7 million, respectively. However, excluding the Stockton Terminal Acquisition, finished cement declined by $3.7 million. The relatively flat balance in raw materials and materials-in-progress and decline in finished cement is consistent with our business cycle; we generally build up clinker inventory over the winter months to meet the demand for cement in the spring and summer. The decrease in repair parts inventory was primarily due to the completion of most of our scheduled outages during the quarter. The largest individual balance in our Inventory is our repair parts. These parts are necessary given the size and complexity of our manufacturing plants, as well as the age of certain of our plants, which creates the need to stock a high level of repair parts inventory. We believe all of these repair parts are necessary, and we perform semi-annual analyses to identify obsolete parts. We have less than one year’s sales of all product inventories, and our inventories have a low risk of obsolescence because our products are basic construction materials.
Net Cash Used in Investing Activities during the three months ended June 30, 2023, was approximately $91.1 million, compared with $136.1 million during the same period in 2022. The $45.0 million decrease was primarily related to the lower purchase price for the Stockton Terminal Acquisition in May 2023, compared with the acquisition completed in the three months ended June 30, 2022.
Net Cash Used in Financing Activities was approximately $11.5 million during the three months ended June 30, 2023, compared with Net Cash Provided by Financing Activities of $60.1 million during the three months ended June 30, 2022. The $71.6 million decrease was primarily related to reduced borrowings of $118.5 million, partially offset by lower Purchase and Retirement of Common Stock of $35.5 million and increased Proceeds from Stock Option Exercises of $9.7 million.
Our debt-to-capitalization ratio and net-debt-to-capitalization ratio were 48.4% and 47.2%, respectively, at June 30, 2023, compared with 48.1% and 47.8%, respectively, at March 31, 2023.
29
Debt Financing Activities
Below is a summary of the Company’s outstanding debt facilities at June 30, 2023:
|
Maturity |
|
Revolving Credit Facility |
|
May 2027 |
Term Loan |
|
May 2027 |
2.500% Senior Unsecured Notes |
|
July 2031 |
See Footnote (M) to the Unaudited Consolidated Financial Statements for further details on the Company’s debt facilities, including interest rate, and financial and other covenants and restrictions.
The revolving borrowing capacity of our Revolving Credit Facility is $750.0 million (any revolving loans borrowed under the Revolving Credit Facility, as applicable, the Revolving Loans). The Revolving Credit Facility also includes a swingline loan sublimit of $25.0 million, and a $40.0 million letter of credit facility. At June 30, 2023 we had $222.0 million outstanding of Revolving Loans under the Revolving Credit Facility and $8.3 million of outstanding letters of credit, leaving us with $519.7 million of available borrowings under the Revolving Credit Facility, net of the outstanding letters of credit. We are contingently liable for performance under $28.2 million in performance bonds relating primarily to our mining operations. We do not have any off-balance sheet debt, or any outstanding debt guarantees.
Other than the Revolving Credit Facility, we have no additional source of committed external financing in place. Should the Revolving Credit Facility be terminated, no assurance can be given as to our ability to secure a new source of financing. Consequently, if any balance were outstanding on the Revolving Credit Facility at the time of termination, and an alternative source of financing could not be secured, it would have a material adverse impact on our business.
We believe that our cash flow from operations and available borrowings under our Revolving Credit Facility, as well as cash on hand, should be sufficient to meet our currently anticipated operating needs, capital expenditures, and dividend and debt service requirements for at least the next 12 months. However, our future liquidity and capital requirements may vary depending on a number of factors, including market conditions in the construction industry, our ability to maintain compliance with covenants in our Revolving Credit Facility, the level of competition, and general and economic factors beyond our control, such as supply chain constraints and inflation. These and other developments could reduce our cash flow or require that we seek additional sources of funding. We cannot predict what effect these factors will have on our future liquidity. See Market Conditions and Outlook section above for further discussion of the possible effects on our business.
As market conditions warrant, the Company may from time to time seek to purchase or repay its outstanding debt securities or loans, including the 2.500% Senior Unsecured Notes, Term Loan, and borrowings under the Revolving Credit Facility, in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any purchases made by us may be funded by the use of cash on our balance sheet or the incurrence of new debt. The amounts involved in any such purchase transactions, individually or in aggregate, may be material.
We have approximately $34.7 million of lease liabilities at June 30, 2023, that have an average remaining life of approximately 9.5 years.
Dividends
Dividends paid were $9.0 million and $9.6 million for the three months ended June 30, 2023 and 2022, respectively. Each quarterly dividend payment is subject to review and approval by our Board of Directors, who will continue to evaluate our dividend payment amount on a quarterly basis.
30
Share Repurchases
During the three months ended June 30, 2023, our share repurchases were as follows:
Period |
|
Total Number of |
|
|
Average Price Paid |
|
|
Total Number of |
|
|
Maximum Number |
|
||||
April 1 through April 30, 2023 |
|
|
234,000 |
|
|
$ |
143.73 |
|
|
|
234,000 |
|
|
|
|
|
May 1 through May 31, 2023 |
|
|
145,000 |
|
|
|
155.99 |
|
|
|
145,000 |
|
|
|
|
|
June 1 through June 30, 2023 |
|
|
105,000 |
|
|
|
161.65 |
|
|
|
105,000 |
|
|
|
|
|
Quarter 1 Totals |
|
|
484,000 |
|
|
$ |
153.01 |
|
|
|
484,000 |
|
|
|
|
|
Year-to-Date Totals |
|
|
484,000 |
|
|
$ |
153.01 |
|
|
|
484,000 |
|
|
|
7,263,204 |
|
On May 17, 2022, the Board of Directors authorized us to repurchase an additional 7.5 million shares. This authorization brought the cumulative total of Common Stock our Board has approved for repurchase in the open market to 55.9 million shares since we became publicly held in April 1994. Through June 30, 2023, we have repurchased approximately 48.6 million shares.
Share repurchases may be made from time to time in the open market or in privately negotiated transactions. The timing and amount of any share repurchases are determined by management, based on its evaluation of market and economic conditions and other factors. In some cases, repurchases may be made pursuant to plans, programs, or directions established from time to time by the Company’s management, including plans intended to comply with the safe-harbor provided by Rule 10b5-1.
During the three months ended June 30, 2023, the Company withheld from employees 8,469 shares of stock upon the vesting of Restricted Shares that were granted under the Plan. We withheld these shares to satisfy the employees’ statutory tax withholding requirements, which is necessary once the Restricted Shares or Restricted Share Units are vested.
Capital Expenditures
The following table details capital expenditures by category:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(dollars in thousands) |
|
|||||
Land and Quarries |
|
$ |
548 |
|
|
$ |
1,352 |
|
Plants |
|
|
16,272 |
|
|
|
8,814 |
|
Buildings, Machinery, and Equipment |
|
|
19,179 |
|
|
|
4,748 |
|
Total Capital Expenditures |
|
$ |
35,999 |
|
|
$ |
14,914 |
|
Capital expenditures for fiscal 2024 are expected to range from $145.0 million to $165.0 million and will be allocated across both Heavy Materials and Light Materials sectors. These estimated capital expenditures will include maintenance capital expenditures and improvements, as well as other safety and regulatory projects.
31
FORWARD LOOKING STATEMENTS
Certain matters discussed in this report contain 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 by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not historical facts or guarantees of future performance but instead represent only the Company’s belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside the Company’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company’s actual performance include the following: the cyclical and seasonal nature of the Company’s businesses; public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; availability of raw materials; changes in the costs of energy, including, without limitation, natural gas, coal and oil, and the nature of our obligations to counterparties under energy supply contracts, such as those related to market conditions (such as fluctuations in spot market prices), governmental orders and other matters; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; material nonpayment or non-performance by any of our key customers; fluctuations in or changes in the nature of activity in the oil and gas industry; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change and other environmental regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions specific to any one or more of the Company’s markets; adverse impact of severe weather conditions (such as winter storms, tornados and hurricanes) and their effects on our facilities, operations and contractual arrangements with third parties; competition; cyber-attacks or data security breaches; announced increases in capacity in the gypsum wallboard and cement industries; changes in the demand for residential housing construction or commercial construction or construction projects undertaken by state or local governments; risks related to pursuit of acquisitions, joint ventures and other transactions or the execution or implementation of such transactions, including the integration of operations acquired by the Company; general economic conditions; and interest rates. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) and the cost of our raw materials could affect the revenue and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company’s result of operations. Finally, any forward-looking statements made by the Company are subject to the risks and impacts associated with natural disasters, the outbreak, escalation, or resurgence of health emergencies, pandemics or other unforeseen events, including, without limitation, the COVID-19 pandemic and responses thereto designed to contain its spread and mitigate its public health effects, as well as their impact on our operations or on economic conditions, capital and financial markets. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023. All forward-looking statements made herein are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. The Company undertakes no duty to update any forward-looking statement to reflect future events or changes in the Company’s expectations.
32
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks related to fluctuations in interest rates on our Revolving Credit Facility. We have occasionally utilized derivative instruments, including interest rate swaps, in conjunction with our overall strategy to manage the debt outstanding that is subject to changes in interest rates. We had a $750.0 million Revolving Credit Facility at June 30, 2023, under which borrowings bear interest at a variable rate. A hypothetical 100 basis point increase in interest rates on the $222.0 million of borrowings under the Revolving Credit Facility and the $190.0 million of borrowings under the Term Loan at June 30, 2023, would increase interest expense by approximately $4.1 million on an annual basis. At present, we do not utilize derivative financial instruments.
We are subject to commodity risk with respect to price changes principally in coal, coke, natural gas, and power. We attempt to limit our exposure to changes in commodity prices by entering into contracts or increasing our use of alternative fuels.
Item 4. Controls and Procedures
We have established a system of disclosure controls and procedures that are designed to ensure that information relating to the Company, which is required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (Exchange Act), is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), in a timely fashion. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed as of the end of the period covered by this quarterly report. This evaluation was performed under the supervision and with the participation of management, including our CEO and CFO. Based upon that evaluation, our CEO and CFO have concluded that these disclosure controls and procedures were effective.
33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we have been and may in the future become involved in litigation or other legal proceedings in the ordinary course of our business activities or in connection with transactions or activities undertaken by us, including claims related to worker safety, worker health, environmental matters, commercial contracts, land use rights, taxes, and permits. While the outcome of these proceedings cannot be predicted with certainty, in the opinion of management (based on currently available facts), we do not believe that the ultimate outcome of any currently pending legal proceeding will have a material effect on our consolidated financial condition, results of operations, or liquidity.
For additional information regarding claims and other contingent liabilities to which we may be subject, see Footnote (P) in the Unaudited Consolidated Financial Statements.
Item 1A. Risk Factors
For information regarding factors that could impact our results of operations, financial condition, and liquidity, see Part 1. Item 1A. Risk Factors in our Form 10-K for the fiscal year ended March 31, 2023, filed with the Securities and Exchange Commission on May 19, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The disclosure required under this Item is included in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Quarterly Report on Form 10-Q under the heading “Share Repurchases” and is incorporated herein by reference.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503 (a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-Q.
Item 5. Other Information
None of the Company's directors or officers i i adopted / , modified, or i i terminated / a Rule 10b5-1 trading arrangement, or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended June 30, 2023.
34
Item 6. Exhibits
10.1 |
|
|
10.2 |
|
|
10.3* |
|
|
10.4* |
|
Form of Management Restricted Stock Agreement (Performance). (1) |
10.5* |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
95* |
|
|
101.INS* |
|
Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
|
Cover Page Interactive Data File – (formatted as Inline XBRL and Contained in Exhibit 101). |
(1) Management contract, compensatory plan, or arrangement.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
EAGLE MATERIALS INC. |
|
|
Registrant |
|
|
|
|
/s/ MICHAEL R. HAACK |
|
|
|
President and Chief Executive Officer (principal executive officer) |
|
|
|
|
/s/ D. CRAIG KESLER |
|
|
|
Executive Vice President – Finance and Administration and Chief Financial Officer (principal financial officer) |
|
||
|
|
Senior Vice President – Controller and Chief Accounting Officer (principal accounting officer) |
36
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 4/1/31 | ||||
| 5/5/27 | ||||
| 3/31/26 | ||||
| 3/31/25 | ||||
| 3/31/24 | ||||
| 8/7/23 | ||||
| 8/3/23 | DEF 14A | |||
| Filed on: | 7/27/23 | 8-K | ||
| 7/24/23 | ||||
| For Period end: | 6/30/23 | |||
| 5/31/23 | ||||
| 5/19/23 | 10-K, 144, 4 | |||
| 5/17/23 | 4, 8-K | |||
| 5/3/23 | 8-K | |||
| 4/30/23 | ||||
| 4/1/23 | ||||
| 3/31/23 | 10-K, 4, ARS | |||
| 6/30/22 | 10-Q | |||
| 5/17/22 | 4, 8-K | |||
| 5/5/22 | 8-K | |||
| 3/31/22 | 10-K, 4 | |||
| 7/1/21 | 8-K | |||
| 8/7/13 | 8-K, DEF 14A | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/04/23 Eagle Materials Inc. S-8 8/04/23 5:178K Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 5/23/23 Eagle Materials Inc. 8-K:5,9 5/17/23 12:166K Donnelley … Solutions/FA |