United States
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended
December 31, 2017September 30, 2022
Commission File Number 1-12984
Eagle Materials Inc.EAGLE MATERIALS INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)Incorporation)
75-2520779
(I.R.S. Employer Identification No.)
3811 Turtle Creek Blvd.5960 Berkshire Lane, Suite 1100, 900, Dallas, Texas 75219
75225(Address of principal executive offices)
(214) (214) 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 | ||
Common Stock (par value $.01 per share) | EXP | 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.Yes☒ NO ☐
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes☒ NO ☐
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.
Large accelerated filer |
| ☒ |
| Accelerated filer |
| ☐ |
Non-accelerated filer |
| ☐ | Smaller reporting company | ☐ | ||
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| |||
Emerging growth company |
| ☐ |
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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 ☒
As of January 29, 2018,October 24, 2022, the number of outstanding shares of common stock was:
Class |
| Outstanding Shares |
Common Stock, $.01 Par Value |
|
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Eagle Materials Inc. and SubsidiariesTABLE OF CONTENTS
Form 10-Q
December 31, 2017
Table of Contents
PART I. FINANCIAL INFORMATION (unaudited)
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Item 1. |
| Consolidated Financial Statements |
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| Consolidated Statements of Earnings for the Three and |
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| Consolidated Statements of Comprehensive Earnings for theThree and |
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| Consolidated Balance Sheets as of |
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| Consolidated Statements of Cash Flows for the |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1a. |
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Item 2. |
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Item 4. |
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Eagle Materials Inc. and SubsidiariesEAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Consolidated Statements of Earnings
|
| For the Three Months Ended September 30, |
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| For the Six Months Ended September 30, |
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|
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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| (dollars in thousands, except share and per share data) |
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Revenue |
| $ | 605,068 |
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| $ | 509,694 |
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| $ | 1,166,455 |
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| $ | 985,464 |
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Cost of Goods Sold |
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| 410,829 |
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| 354,353 |
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| 821,350 |
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| 703,612 |
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Gross Profit |
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| 194,239 |
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| 155,341 |
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| 345,105 |
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| 281,852 |
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Equity in Earnings of Unconsolidated Joint Venture |
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| 7,156 |
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| 8,260 |
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| 12,254 |
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| 16,230 |
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Corporate General and Administrative Expense |
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| (13,627 | ) |
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| (10,667 | ) |
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| (25,447 | ) |
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| (20,135 | ) |
Loss on Early Retirement of Senior Notes |
|
| — |
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| (8,407 | ) |
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| — |
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| (8,407 | ) |
Other Non-Operating Income (Loss) |
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| (664 | ) |
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| (944 | ) |
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| (1,299 | ) |
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| 2,734 |
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Interest Expense, net |
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| (8,580 | ) |
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| (12,268 | ) |
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| (15,910 | ) |
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| (19,240 | ) |
Earnings before Income Taxes |
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| 178,524 |
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| 131,315 |
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| 314,703 |
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| 253,034 |
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Income Taxes |
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| (39,529 | ) |
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| (29,190 | ) |
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| (70,703 | ) |
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| (55,582 | ) |
Net Earnings |
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| 138,995 |
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| 102,125 |
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| 244,000 |
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| 197,452 |
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EARNINGS PER SHARE |
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Basic |
| $ | 3.74 |
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| $ | 2.48 |
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| $ | 6.50 |
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| $ | 4.74 |
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Diluted |
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| 3.72 |
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| 2.46 |
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| 6.46 |
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| 4.70 |
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AVERAGE SHARES OUTSTANDING |
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Basic |
|
| 37,140,197 |
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| 41,222,161 |
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| 37,559,087 |
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| 41,623,187 |
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Diluted |
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| 37,366,879 |
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| 41,594,733 |
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| 37,792,613 |
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| 42,013,847 |
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CASH DIVIDENDS PER SHARE |
| $ | 0.25 |
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| $ | 0.25 |
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| $ | 0.50 |
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| $ | 0.25 |
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(dollars in thousands, except share data)
(unaudited)
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| For the Three Months Ended December 31, |
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| For the Nine Months Ended December 31, |
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| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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Revenues |
| $ | 359,371 |
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| $ | 302,395 |
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| $ | 1,101,807 |
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| $ | 932,557 |
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Cost of Goods Sold |
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| 264,805 |
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| 215,015 |
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| 824,428 |
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| 682,012 |
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Gross Profit |
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| 94,566 |
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| 87,380 |
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| 277,379 |
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| 250,545 |
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Equity in Earnings of Unconsolidated Joint Venture |
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| 11,372 |
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| 11,244 |
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| 33,203 |
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| 31,371 |
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Corporate General and Administrative Expense |
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| (9,883 | ) |
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| (9,166 | ) |
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| (29,383 | ) |
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| (27,831 | ) |
Legal Settlement |
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| (39,098 | ) |
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| — |
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| (39,098 | ) |
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| — |
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Other Non-Operating Income |
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| 1,084 |
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| 429 |
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| 2,728 |
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| 2,008 |
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Interest Expense, Net |
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| (6,653 | ) |
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| (6,198 | ) |
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| (21,592 | ) |
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| (15,755 | ) |
Earnings Before Income Taxes |
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| 51,388 |
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| 83,689 |
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| 223,237 |
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| 240,338 |
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Income Tax Expense |
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| 49,992 |
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| (27,302 | ) |
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| (3,613 | ) |
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| (78,370 | ) |
Net Earnings |
| $ | 101,380 |
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| $ | 56,387 |
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| $ | 219,624 |
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| $ | 161,968 |
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EARNINGS PER SHARE: |
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Basic |
| $ | 2.10 |
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| $ | 1.18 |
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| $ | 4.56 |
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| $ | 3.38 |
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Diluted |
| $ | 2.08 |
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| $ | 1.17 |
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| $ | 4.52 |
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| $ | 3.35 |
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AVERAGE SHARES OUTSTANDING: |
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Basic |
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| 48,221,093 |
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| 47,881,662 |
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| 48,132,276 |
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| 47,901,369 |
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Diluted |
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| 48,757,762 |
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| 48,297,748 |
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| 48,641,430 |
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| 48,340,326 |
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CASH DIVIDENDS PER SHARE: |
| $ | 0.10 |
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| $ | 0.10 |
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| $ | 0.30 |
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| $ | 0.30 |
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See notes to unaudited consolidated financial statements.
Eagle Materials Inc. and Subsidiaries
Consolidated Statements of Comprehensive Earnings1
(unaudited – dollars in thousands)EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (unaudited)
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| For the Three Months Ended December 31, |
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| For the Nine Months Ended December 31, |
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| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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Net Earnings |
| $ | 101,380 |
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| $ | 56,387 |
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| $ | 219,624 |
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| $ | 161,968 |
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Change in Funded Status of Defined Benefit Plans: |
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Amortization of Net Actuarial Loss |
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| 314 |
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| 500 |
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| 942 |
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| 1,500 |
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Tax Expense |
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| (117 | ) |
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| (188 | ) |
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| (351 | ) |
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| (564 | ) |
Comprehensive Earnings |
| $ | 101,577 |
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| $ | 56,699 |
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| $ | 220,215 |
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| $ | 162,904 |
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| For the Three Months Ended September 30, |
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| For the Six Months Ended September 30, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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| (dollars in thousands) |
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Net Earnings |
| $ | 138,995 |
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| $ | 102,125 |
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| $ | 244,000 |
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| $ | 197,452 |
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Net Actuarial Change in Defined Benefit Plans |
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Amortization of Net Actuarial Loss |
|
| 30 |
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| 36 |
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| 60 |
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|
| 72 |
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Tax Expense |
|
| (6 | ) |
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| (9 | ) |
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| (13 | ) |
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| (18 | ) |
Comprehensive Earnings |
| $ | 139,019 |
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| $ | 102,152 |
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| $ | 244,047 |
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| $ | 197,506 |
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See notes to unaudited consolidated financial statements.
Eagle Materials Inc. and Subsidiaries
(dollars in thousands)EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
|
| September 30, |
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| March 31, |
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|
| December 31, 2017 |
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| March 31, 2017 |
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| 2022 |
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| 2022 |
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| (unaudited) |
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| (dollars in thousands) |
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ASSETS |
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Current Assets - |
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Current Assets |
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Cash and Cash Equivalents |
| $ | 21,676 |
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| $ | 6,561 |
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| $ | 84,140 |
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| $ | 19,416 |
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Accounts and Notes Receivable |
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| 143,662 |
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| 136,313 |
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Accounts and Notes Receivable, net |
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| 232,595 |
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| 176,276 |
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Inventories |
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| 239,628 |
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| 252,846 |
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| 225,835 |
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| 236,661 |
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Income Tax Receivable |
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| 4,371 |
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| 7,202 |
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Prepaid and Other Assets |
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| 20,378 |
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| 4,904 |
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| 5,933 |
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| 3,172 |
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Total Current Assets |
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| 425,344 |
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| 400,624 |
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| 552,874 |
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| 442,727 |
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Property, Plant and Equipment - |
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| 2,547,430 |
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| 2,439,438 |
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Less: Accumulated Depreciation |
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| (972,706 | ) |
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| (892,601 | ) | ||||||||
Property, Plant and Equipment, net |
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| 1,574,724 |
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| 1,546,837 |
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Property, Plant, and Equipment, net |
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| 1,655,616 |
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| 1,616,539 |
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Notes Receivable |
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| 296 |
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| 815 |
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| 8,501 |
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| 8,485 |
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Investment in Joint Venture |
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| 55,337 |
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| 48,620 |
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| 85,391 |
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| 80,637 |
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Operating Lease Right-of-Use Assets |
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| 22,126 |
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| 23,856 |
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Goodwill and Intangible Assets, net |
|
| 240,145 |
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| 235,505 |
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| 469,491 |
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| 387,898 |
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Other Assets |
|
| 12,197 |
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|
| 14,723 |
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|
| 15,150 |
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|
| 19,510 |
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| $ | 2,308,043 |
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| $ | 2,247,124 |
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Total Assets |
| $ | 2,809,149 |
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| $ | 2,579,652 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities - |
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Current Liabilities |
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Accounts Payable |
| $ | 73,203 |
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| $ | 92,193 |
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| $ | 113,722 |
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| $ | 113,679 |
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Accrued Liabilities |
|
| 101,432 |
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| 55,379 |
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| 91,515 |
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| 86,754 |
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Income Tax Payable |
|
| — |
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|
| 733 |
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Operating Lease Liabilities |
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| 6,736 |
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| 7,118 |
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Income Taxes Payable |
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| 1,348 |
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|
| — |
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Current Portion of Long-term Debt |
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| — |
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| 81,214 |
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| 10,000 |
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|
| — |
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Total Current Liabilities |
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| 174,635 |
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| 229,519 |
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| 223,321 |
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|
| 207,551 |
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Long-term Debt |
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| 565,755 |
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| 605,253 |
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|
| 1,126,398 |
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| 938,265 |
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Noncurrent Operating Lease Liabilities |
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| 26,736 |
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| 29,212 |
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Other Long-term Liabilities |
|
| 35,112 |
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| 42,878 |
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|
| 37,423 |
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|
| 38,699 |
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Deferred Income Taxes |
|
| 116,352 |
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|
| 166,024 |
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|
| 238,567 |
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|
| 232,369 |
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Total Liabilities |
|
| 891,854 |
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|
| 1,043,674 |
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|
| 1,652,445 |
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|
| 1,446,096 |
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Stockholders’ Equity - |
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Preferred Stock, Par Value $0.01; Authorized 5,000,000 Shares; None Issued |
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| — |
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| — |
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Common Stock, Par Value $0.01; Authorized 100,000,000 Shares; Issued and Outstanding 48,664,650 and 48,453,268 Shares, respectively |
|
| 487 |
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| 485 |
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Stockholders’ Equity |
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Preferred Stock, Par Value $0.01; Authorized 5,000,000 Shares; None Issued |
|
| — |
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| — |
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Common Stock, Par Value $0.01; Authorized 100,000,000 Shares; |
|
| 371 |
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|
| 387 |
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Capital in Excess of Par Value |
|
| 156,834 |
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| 149,014 |
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|
| — |
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| — |
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Accumulated Other Comprehensive Losses |
|
| (6,805 | ) |
|
| (7,396 | ) |
|
| (3,128 | ) |
|
| (3,175 | ) |
Retained Earnings |
|
| 1,265,673 |
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|
| 1,061,347 |
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|
| 1,159,461 |
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|
| 1,136,344 |
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Total Stockholders’ Equity |
|
| 1,416,189 |
|
|
| 1,203,450 |
|
|
| 1,156,704 |
|
|
| 1,133,556 |
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|
| $ | 2,308,043 |
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| $ | 2,247,124 |
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Total Liabilities and Stockholders’ Equity |
| $ | 2,809,149 |
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| $ | 2,579,652 |
|
See notes to the unaudited consolidated financial statements.
Eagle Materials Inc. and Subsidiaries3
Consolidated Statements of Cash FlowsEAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(unaudited – dollars in thousands)
|
| For the Six Months Ended September 30, |
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| 2022 |
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| 2021 |
| ||
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| (dollars in thousands) |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net Earnings |
| $ | 244,000 |
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| $ | 197,452 |
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Adjustments to Reconcile Net Earnings to Net Cash Provided |
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| ||
Depreciation, Depletion, and Amortization |
|
| 68,874 |
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|
| 64,284 |
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Write-off of Debt Issuance Costs |
|
| — |
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|
| 6,101 |
|
Deferred Income Tax Provision |
|
| 6,198 |
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|
| 8,295 |
|
Stock Compensation Expense |
|
| 9,548 |
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|
| 6,376 |
|
Equity in Earnings of Unconsolidated Joint Venture |
|
| (12,254 | ) |
|
| (16,230 | ) |
Distributions from Joint Venture |
|
| 7,500 |
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|
| 14,000 |
|
Changes in Operating Assets and Liabilities |
|
|
|
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|
| ||
Accounts and Notes Receivable |
|
| (50,697 | ) |
|
| (49,597 | ) |
Inventories |
|
| 18,101 |
|
|
| 32,004 |
|
Accounts Payable and Accrued Liabilities |
|
| 1,634 |
|
|
| 16,776 |
|
Other Assets |
|
| 4,589 |
|
|
| (2,883 | ) |
Income Taxes Payable (Receivable) |
|
| 2,952 |
|
|
| (15,116 | ) |
Net Cash Provided by Operating Activities |
|
| 300,445 |
|
|
| 261,462 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| ||
Additions to Property, Plant, and Equipment |
|
| (43,249 | ) |
|
| (26,777 | ) |
Acquisition Spending |
|
| (158,451 | ) |
|
| — |
|
Net Cash Used in Investing Activities |
|
| (201,700 | ) |
|
| (26,777 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
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|
| ||
Increase in Credit Facility |
|
| 200,000 |
|
|
| 75,000 |
|
Proceeds from 2.500% Senior Unsecured Notes |
|
| — |
|
|
| 743,692 |
|
Repayment of 4.500% Senior Unsecured Notes |
|
| — |
|
|
| (350,000 | ) |
Repayment of Term Loan and Term Loan Credit Agreement |
|
| (2,500 | ) |
|
| (665,000 | ) |
Dividends Paid to Stockholders |
|
| (19,149 | ) |
|
| (10,547 | ) |
Purchase and Retirement of Common Stock |
|
| (210,398 | ) |
|
| (247,845 | ) |
Proceeds from Stock Option Exercises |
|
| 735 |
|
|
| 14,460 |
|
Loss on Early Retirement of Senior Notes |
|
| — |
|
|
| (8,407 | ) |
Payment of Debt Issuance Costs |
|
| (903 | ) |
|
| (7,985 | ) |
Shares Redeemed to Settle Employee Taxes on Stock Compensation |
|
| (1,806 | ) |
|
| (1,359 | ) |
Net Cash Used in Financing Activities |
|
| (34,021 | ) |
|
| (457,991 | ) |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
| 64,724 |
|
|
| (223,306 | ) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
| 19,416 |
|
|
| 268,520 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | 84,140 |
|
| $ | 45,214 |
|
|
| For the Nine Months Ended December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net Earnings |
| $ | 219,624 |
|
| $ | 161,968 |
|
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities - |
|
|
|
|
|
|
|
|
Depreciation, Depletion and Amortization |
|
| 87,903 |
|
|
| 67,894 |
|
Inventory Adjustment to Net Realizable Value |
|
| — |
|
|
| 8,492 |
|
Deferred Income Tax Provision |
|
| (50,023 | ) |
|
| 2,751 |
|
Stock Compensation Expense |
|
| 10,890 |
|
|
| 9,067 |
|
Excess Tax Benefits from Share Based Payment Arrangements |
|
| — |
|
|
| (8,546 | ) |
Equity in Earnings of Unconsolidated Joint Venture |
|
| (33,203 | ) |
|
| (31,371 | ) |
Distributions from Joint Venture |
|
| 26,500 |
|
|
| 33,250 |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts and Notes Receivable |
|
| (4,718 | ) |
|
| 6,613 |
|
Inventories |
|
| 13,417 |
|
|
| 12,320 |
|
Accounts Payable and Accrued Liabilities |
|
| 17,372 |
|
|
| 6,633 |
|
Other Assets |
|
| (11,889 | ) |
|
| 413 |
|
Income Taxes Payable |
|
| (733 | ) |
|
| 19,384 |
|
Net Cash Provided by Operating Activities |
|
| 275,140 |
|
|
| 288,868 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Property, Plant and Equipment Additions |
|
| (83,698 | ) |
|
| (34,043 | ) |
Acquisition Spending |
|
| (36,761 | ) |
|
| — |
|
Net Cash Used in Investing Activities |
|
| (120,459 | ) |
|
| (34,043 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Decrease in Credit Facility |
|
| (40,000 | ) |
|
| (382,000 | ) |
Repayment of Senior Notes |
|
| (81,214 | ) |
|
| (8,000 | ) |
Issuance of Long-term Debt |
|
| — |
|
|
| 350,000 |
|
Payment of Debt Issuance Costs |
|
| — |
|
|
| (6,637 | ) |
Dividends Paid to Stockholders |
|
| (14,571 | ) |
|
| (14,500 | ) |
Shares Redeemed to Settle Employee Taxes on Stock Compensation |
|
| (2,607 | ) |
|
| (3,084 | ) |
Purchase and Retirement of Common Stock |
|
| (24,903 | ) |
|
| (60,013 | ) |
Proceeds from Stock Option Exercises |
|
| 23,729 |
|
|
| 20,137 |
|
Excess Tax Benefits from Share Based Payment Arrangements |
|
| — |
|
|
| 8,546 |
|
Net Cash Used in Financing Activities |
|
| (139,566 | ) |
|
| (95,551 | ) |
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
| 15,115 |
|
|
| 159,274 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
| 6,561 |
|
|
| 5,391 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | 21,676 |
|
| $ | 164,665 |
|
See notes to the unaudited consolidated financial statements.
EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
|
| Common |
|
| Capital in |
|
| Retained |
|
| Accumulated |
|
| Total |
| |||||
|
| (dollars in thousands) |
| |||||||||||||||||
Balance at March 31, 2021 |
| $ | 424 |
|
| $ | 62,497 |
|
| $ | 1,299,509 |
|
| $ | (3,440 | ) |
| $ | 1,358,990 |
|
Net Earnings |
|
| — |
|
|
| — |
|
|
| 95,327 |
|
|
| — |
|
|
| 95,327 |
|
Stock Compensation Expense |
|
| 1 |
|
|
| 2,455 |
|
|
| — |
|
|
| — |
|
|
| 2,456 |
|
Stock Option Exercises and Restricted Share Issuances |
|
| — |
|
|
| 8,222 |
|
|
| — |
|
|
| — |
|
|
| 8,222 |
|
Shares Redeemed to Settle Employee Taxes |
|
| — |
|
|
| (1,214 | ) |
|
| — |
|
|
| — |
|
|
| (1,214 | ) |
Purchase and Retirement of Common Stock |
|
| (4 | ) |
|
| (61,925 | ) |
|
| — |
|
|
| — |
|
|
| (61,929 | ) |
Dividends to Shareholders |
|
| — |
|
|
| — |
|
|
| (10,547 | ) |
|
| — |
|
|
| (10,547 | ) |
Unfunded Pension Liability, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27 |
|
|
| 27 |
|
Balance at June 30, 2021 |
| $ | 421 |
|
| $ | 10,035 |
|
| $ | 1,384,289 |
|
| $ | (3,413 | ) |
| $ | 1,391,332 |
|
Net Earnings |
|
| — |
|
|
| — |
|
|
| 102,125 |
|
|
| — |
|
|
| 102,125 |
|
Stock Compensation Expense |
|
| — |
|
|
| 3,920 |
|
|
| — |
|
|
| — |
|
|
| 3,920 |
|
Stock Option Exercise and Restricted Share Issuances |
|
| — |
|
|
| 6,238 |
|
|
| — |
|
|
| — |
|
|
| 6,238 |
|
Shares Redeemed to Settle Employee Taxes |
|
| — |
|
|
| (145 | ) |
|
| — |
|
|
| — |
|
|
| (145 | ) |
Purchase and Retirement of Common Stock |
|
| (12 | ) |
|
| (20,048 | ) |
|
| (165,856 | ) |
|
| — |
|
|
| (185,916 | ) |
Dividends to Shareholders |
|
| — |
|
|
| — |
|
|
| (10,272 | ) |
|
| — |
|
|
| (10,272 | ) |
Unfunded Pension Liability, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27 |
|
|
| 27 |
|
Balance at September 30, 2021 |
| $ | 409 |
|
| $ | — |
|
| $ | 1,310,286 |
|
| $ | (3,386 | ) |
| $ | 1,307,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Common |
|
| Capital in |
|
| Retained |
|
| Accumulated |
|
| Total |
| |||||
|
| (dollars in thousands) |
| |||||||||||||||||
Balance at March 31, 2022 |
| $ | 387 |
|
| $ | — |
|
| $ | 1,136,344 |
|
| $ | (3,175 | ) |
| $ | 1,133,556 |
|
Net Earnings |
|
| — |
|
|
| — |
|
|
| 105,005 |
|
|
| — |
|
|
| 105,005 |
|
Stock Compensation Expense |
|
| — |
|
|
| 5,146 |
|
|
| — |
|
|
| — |
|
|
| 5,146 |
|
Stock Option Exercises and Restricted Share Issuances |
|
| 1 |
|
|
| 666 |
|
|
| — |
|
|
| — |
|
|
| 667 |
|
Shares Redeemed to Settle Employee Taxes |
|
| — |
|
|
| (1,497 | ) |
|
| — |
|
|
| — |
|
|
| (1,497 | ) |
Purchase and Retirement of Common Stock |
|
| (8 | ) |
|
| (4,315 | ) |
|
| (105,289 | ) |
|
| — |
|
|
| (109,612 | ) |
Dividends to Shareholders |
|
| — |
|
|
| — |
|
|
| (9,507 | ) |
|
| — |
|
|
| (9,507 | ) |
Unfunded Pension Liability, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 23 |
|
|
| 23 |
|
Balance at June 30, 2022 |
| $ | 380 |
|
| $ | — |
|
| $ | 1,126,553 |
|
| $ | (3,152 | ) |
| $ | 1,123,781 |
|
Net Earnings |
|
| — |
|
|
| — |
|
|
| 138,995 |
|
|
| — |
|
|
| 138,995 |
|
Stock Compensation Expense |
|
| — |
|
|
| 4,402 |
|
|
| — |
|
|
| — |
|
|
| 4,402 |
|
Stock Option Exercise and Restricted Share Issuances |
|
| — |
|
|
| 68 |
|
|
| — |
|
|
| — |
|
|
| 68 |
|
Shares Redeemed to Settle Employee Taxes |
|
| — |
|
|
| (309 | ) |
|
| — |
|
|
| — |
|
|
| (309 | ) |
Purchase and Retirement of Common Stock |
|
| (9 | ) |
|
| (4,161 | ) |
|
| (96,616 | ) |
|
| — |
|
|
| (100,786 | ) |
Dividends to Shareholders |
|
| — |
|
|
| — |
|
|
| (9,471 | ) |
|
| — |
|
|
| (9,471 | ) |
Unfunded Pension Liability, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
|
| 24 |
|
Balance at September 30, 2022 |
| $ | 371 |
|
| $ | — |
|
| $ | 1,159,461 |
|
| $ | (3,128 | ) |
| $ | 1,156,704 |
|
See notes to the 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
December 31, 2017
(A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements as of and for the three and nine month periodssix months ended December 31, 2017September 30, 2022, include the accounts of Eagle Materials Inc. (“Eagle” or “Parent”) and its majority-owned subsidiaries (collectively, the “Company”, “us”Company, us, or “we”)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 statementsUnaudited 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 24, 2017.20, 2022.
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 statementsUnaudited 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 and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenuesrevenue and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In March 2016,There have been no recent accounting pronouncements that are expected to materially affect the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting,”Company.
(B) SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
|
| For the Six Months Ended September 30, |
| |||||
|
|
| 2022 |
|
|
| 2021 |
|
|
| (dollars in thousands) |
| |||||
Cash Payments |
|
|
|
|
|
| ||
Interest |
| $ | 12,940 |
|
| $ | 10,634 |
|
Income Taxes |
|
| 61,592 |
|
|
| 54,581 |
|
Operating Cash Flows Used for Operating Leases |
|
| 4,248 |
|
|
| 3,987 |
|
6
(C)ACQUISITIONS
ConAgg Acquisition
On April 22, 2022, we purchased the assets of a readymix concrete and aggregates business (the ConAgg Acquisition). The purchase price of the ConAgg Acquisition was approximately $121.2 million, which provides for simplification of certain aspects of employee share-based payment accounting, including income taxes, classification of awards as either equity or liabilities, and classification onwas paid in April 2022. During August 2022, we finalized the statement of cash flows. The Company adopted ASU 2016-09 on April 1, 2017. The new standard provides for changes to accounting for stock compensation including 1) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax benefit or expense in the reporting period in which they occur; 2) excess tax benefits will be classified as an operating activity in the statement of cash flow; 3) the option to elect to estimate forfeitures or account for them when they occur; and 4) an increase in the tax withholding requirements threshold to qualify for equity classification. The primary impact of adoption was the recognition of excess tax benefits for our stock awards in the provision for income taxes rather than additional paid-in capital. As provided by the new standard, the Company changed its method of accounting for forfeitures, and will now recognize forfeitures as they occur,working capital adjustment, which resulted in an approximately $0.7 milliona reduction to retained earnings. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings.
Adoption of the new standard resulted in the recognitionpurchase price of excess tax benefits in our provision for income taxes rather than paid-in capital of $2.5 millionapproximately $1.0 million. After this reduction, the purchase price for the nine months ended December 31, 2017. The presentation of excess tax benefits on stock-based compensation was adopted prospectively within the unaudited Condensed Consolidated Statements of Cash Flows. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact on any of the periods presented on the unaudited Condensed Consolidated Statements of Cash Flows as the Company has historically presented them as a financing activity.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to
recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The standard will be effective for us in the first quarter of fiscal 2019. We will adopt the new standard using the modified retrospective approach, which requires the standard be applied only to the most current period presented, with the cumulative effect of initially applying the standard recognized at the date of initial application.We performed an evaluation of all segments and do not expect the adoption of this standard to materially impact our consolidated financial statements, but we are still evaluating the impact on our financial statement disclosures.
In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which revises the accounting for periodic pension and postretirement expense. This ASU requires net periodic benefit cost, with the exception of service cost, to be presented retrospectively as nonoperating expense. Service cost will remain a component of cost of goods sold and represent the only cost of pension and postretirement expense eligible for capitalization. We will adopt the standard on April 1, 2018 using the retrospective method for presentation of service cost and other components in the income statement. We will prospectively adopt the requirement to limit the capitalization of benefit cost to the service cost component. The impact of adopting this standard will be a reduction to cost of goods sold and an increase in other expense. Had we adopted this standard on April 1, 2017, our gross profit for the nine months ended December 31, 2017 would have increased by approximately $0.3 million, and other income would have decreased by $0.3 million.
In February 2016, the FASB issued ASU 2016-02, “Leases”, which supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for us in the first quarter of fiscal 2020, and we will adopt using the modified retrospective approach. We are currently assessing the impact of the ASU on our consolidated financial statements and disclosures, as well as our internal lease accounting processes.
(B) ACQUISITION
Fairborn Acquisition
On February 10, 2017, we completed the acquisition (the “Fairborn Acquisition”) of certain assets of CEMEX Construction Materials Atlantic, LLC (the “Seller”). The assets acquired by the Company in the Fairborn Acquisition include a cement plant located in Fairborn, Ohio, a cement distribution terminal located in Columbus, Ohio, and certain other related assets.
Purchase Price: The purchase price (the “Fairborn Purchase Price”) of the FairbornConAgg Acquisition was approximately $400.5$120.2 million. We funded the payment of the Fairborn Purchase Price at closingThe purchase price and expenses incurred in connection with the FairbornConAgg Acquisition were funded through a combination of cash on hand and borrowings under our bankrevolving credit facility.
Recording of assets acquired and liabilities assumed: The transaction has been accounted for using Operations related to the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company engaged a third-party to perform a valuation to support the Company’s preliminary estimate of the fair value of certain assets acquiredConAgg Acquisition are included in the Fairborn Acquisition.
During the quarter ended December 31, 2017, we completedConcrete and Aggregates business in our mine plan, enabling us to finalize the asset retirement obligation at the date of purchase. Based on the updated mine plan, the asset retirement obligation and corresponding asset was revised to approximately $2.8 millionsegment reporting from $4.0 million.
April 22, 2022, through September 30, 2022.
The preparation of the valuation of the assets acquired and liabilities assumed in the Fairborn Acquisition requires the use of significant assumptions and estimates. Critical estimates include, but are not limited to, replacement value and condition of property and equipment, future expected cash flows, including projected revenues and expenses, and applicable discount rates for intangible and other assets. These estimates are based on assumptions that we believe to be reasonable. However, actual results may differ from these estimates.
The following table summarizes the allocation of the Fairborn Purchase Price to assets acquired and liabilities assumed as ofassumed:
|
|
|
| |
|
| Fair Value |
| |
Working Capital |
| $ | 10,780 |
|
Property, Plant, and Equipment |
|
| 39,489 |
|
Intangible Assets |
|
| 30,750 |
|
Goodwill |
|
| 39,135 |
|
Total Estimated Purchase Price |
| $ | 120,154 |
|
The estimated useful lives assigned to Property, Plant, and Equipment range from 5 to 30 years, while the acquisition date:
Purchase price allocation at acquisition date (in thousands) |
| As of February 10, 2017 |
| |
Inventories |
| $ | 11,106 |
|
Property and Equipment |
|
| 314,897 |
|
Intangible Assets |
|
| 10,000 |
|
Other Assets |
|
| 2,820 |
|
Asset Retirement Obligation |
|
| (2,820 | ) |
Total Net Assets |
|
| 336,003 |
|
Goodwill |
|
| 64,485 |
|
Total Purchase Price |
| $ | 400,488 |
|
Goodwill represents the excess purchase price over the fair values of assets acquired and liabilities assumed. The goodwill was generated by the availability of co-product sales and the opportunity associated with the expansion of our cement businessestimated useful lives assigned to the eastern region of the United States. All of the goodwill generated by the transaction will be deductible for income tax purposes.
Intangible Assets: The following table is a summary of the fair value estimates of the identifiable intangible assets (in thousands) and their weighted-average useful lives:
range from 2 to 15 years.
| Weighted Average Life |
|
| Estimated Fair Value |
| |||
Customer Relationships |
|
| 15 |
|
|
| 9,000 |
|
Permits |
|
| 40 |
|
|
| 1,000 |
|
Total Intangible Assets |
|
|
|
|
| $ | 10,000 |
|
Actual and pro forma impact of the Fairborn Acquisition: The following table presents the net salesRevenue and operating earningsOperating Earnings related to the FairbornConAgg Acquisition that havehas been included in our consolidated statementConsolidated Statement of earningsEarnings from April 22, 2022, through September 30, 2022.
|
|
|
|
|
|
| ||
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||
|
| September 30, 2022 |
| |||||
|
| (dollars in thousands) |
| |||||
Revenue |
| $ | 13,885 |
|
| $ | 24,915 |
|
Operating Earnings |
| $ | 1,750 |
|
| $ | 1,643 |
|
Operating Earnings shown above for the three and ninesix months ended December 31, 2017:
|
| For the Three Months |
|
| For the Nine Months |
| ||
| Ended December 31, |
|
| Ended December 31, |
| |||
|
| 2017 |
|
| 2017 |
| ||
|
| (dollars in thousands) |
| |||||
Revenues |
| $ | 21,699 |
|
| $ | 69,120 |
|
Operating Earnings |
| $ | 6,547 |
|
| $ | 20,380 |
|
Operating earnings shown above for the nine months ended December 31, 2017 have been impactedSeptember 30, 2022 were reduced by approximately $11.2$2.1 million and $0.6$4.1 million related to depreciation and amortization, respectively. Additionally, Operating Earnings for the three and six months ended September 30, 2022, were reduced by approximately $0.9 million and $2.1 million related to the recording of acquired inventoryinventories at fair value, respectively.
Terminal Acquisition
On September 16, 2022, we acquired a cement distribution terminal located in Nashville, Tennessee (the Terminal Acquisition). The unaudited pro forma results presented below include the effectspurchase price of the FairbornTerminal Acquisition as if it hadwas approximately $39.5 million. The purchase price allocation has not been consummated as of April 1, 2016.finalized. The pro forma results include the amortization associated with an estimate for acquired intangible assets and interest expense associated with debt used to fund the FairbornTerminal Acquisition and depreciation from the fair value adjustments for property and equipment. To better reflect the combined operating results, material nonrecurring charges directlywas funded through borrowings under our revolving credit facility. Operations related to the FairbornTerminal Acquisition of approximately $5.5 million have been excluded from pro forma net income for fiscal 2017.
|
| For the Three Months Ended December 31, 2016 |
|
| For the Nine Months Ended December 31, 2016 |
| ||
| (dollars in thousands) |
| ||||||
Revenues |
| $ | 321,378 |
|
| $ | 998,910 |
|
Net Income |
| $ | 58,294 |
|
| $ | 169,631 |
|
Earnings per share – basic |
| $ | 1.22 |
|
| $ | 3.54 |
|
Earnings per share - diluted |
| $ | 1.21 |
|
| $ | 3.51 |
|
The pro forma results do not include any anticipated synergies or other expected benefits of the Fairborn Acquisition. Accordingly, the unaudited pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the Fairborn Acquisition been consummated as of April 1, 2016.
Wildcat Acquisition
On July 27, 2017, we acquired all of the outstanding equity interests in Wildcat Minerals LLC (the “Wildcat Acquisition”). Wildcat Minerals LLC operates transload facilities serving the oil and gas industry in several oil and gas basins across the United States. The purchase price (the “Purchase Price”) of the Wildcat Acquisition was approximately $36.8 million, subject to adjustments for working capital and other customary post-closing adjustments. The Purchase Price was allocated as follows: approximately $3.1 million to current assets, $28.3 million to property and equipment, $1.4 million to intangible and other assets, $2.8 million to current liabilities and $6.8 million to goodwill. The Purchase Price and expenses incurred in connection with the Wildcat Acquisition were funded through operating cash flow and borrowings under our bank credit facility. Assets related to the Wildcat Acquisition will be included in the Corporate and Other segmentCement business in our segment reporting.reporting from September 16, 2022, through September 30, 2022.
(C) CASH FLOW INFORMATION—SUPPLEMENTAL
Cash payments made for interest were $19.8 million7
The following table summarizes the preliminary allocation of the purchase price of the Terminal Acquisition to the assets acquired and $10.7 millionliabilities assumed as of September 30, 2022:
|
|
|
| |
|
| Estimated Fair Value |
| |
Working Capital |
| $ | 1,116 |
|
Property, Plant, and Equipment |
|
| 23,301 |
|
Intangible Assets |
|
| 5,050 |
|
Goodwill |
|
| 9,978 |
|
Total Estimated Purchase Price |
| $ | 39,445 |
|
The estimated useful lives assigned to Property, Plant, and Equipment range from 5 to 25 years, while the estimated useful lives assigned to Intangible Assets range from 2 to 15 years.
(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 cement, concrete, aggregates, and gypsum wallboard is originated by purchase orders from our customers, who are mostly third-party contractors and suppliers. Revenue from our Recycled Paperboard segment is generated mainly through long-term supply agreements that mature in 2025. We invoice customers upon shipment, and our collection terms range from 30-75 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.
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 nine months ended December 31, 2017variable consideration using the most likely amount method based on past history and 2016, respectively. Net payments madeprojected volumes in the rebate and incentive period. Any amounts billed to customers for federaltaxes are excluded from Revenue.
The Company has elected to treat freight and statedelivery 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 that are 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, taxes duringasset 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 nine months ended December 31, 2017 and 2016, were $68.8 million and $55.6 million, respectively.Unaudited Consolidated Financial Statements for disaggregation of revenue by segment.
(D)
8
(E) ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable have beenReceivable are shown net of the allowance for doubtful accounts of $11.1totaling $6.8 million and $10.7$6.7 million at December 31, 2017September 30, 2022, and March 31, 2017,2022, 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.
We had notes receivableNotes Receivable totaling approximately $2.6$8.5 million at December 31, 2017,September 30, 2022, none of which approximately $2.3 million has beenwas classified as current and presented with accounts receivable on the balance sheet.current. We lend funds to certain companies in the ordinary course of business, and the notes bear interest on average, at LIBOR plus 3.5%. 3%, which was approximately 5.2% at September 30, 2022. Remaining unpaid amounts, plus accrued interest, mature in fiscal 2018 and 2021.2025. The notes are collateralized by certain assets of the borrowers, namely property and equipment, and are generally payable
monthly. We monitor the credit risk of each borrower by focusing onassessing the timeliness of payments, review of credit history, and credit metrics, and interactionour ongoing interactions with the borrowers.each borrower.
(E) STOCKHOLDERS’ EQUITY
A summary of changes in stockholders’ equity follows:
|
| For the Nine Months Ended December 31, 2017 |
| |
| (dollars in thousands) |
| ||
Common Stock – |
|
|
|
|
Balance at Beginning of Period |
| $ | 485 |
|
Issuance of Restricted Stock |
|
| 1 |
|
Purchase and Retirement of Common Stock |
|
| (1 | ) |
Stock Option Exercises |
|
| 2 |
|
Balance at End of Period |
|
| 487 |
|
Capital in Excess of Par Value – |
|
|
|
|
Balance at Beginning of Period |
|
| 149,014 |
|
Stock Compensation Expense |
|
| 10,890 |
|
Cumulative Impact of the Adoption of ASU 2016-09 |
|
| 713 |
|
Shares Redeemed to Settle Employee Taxes |
|
| (2,607 | ) |
Stock Option Exercises |
|
| 23,726 |
|
Purchase and Retirement of Common Stock |
|
| (24,902 | ) |
Balance at End of Period |
|
| 156,834 |
|
Retained Earnings – |
|
|
|
|
Balance at Beginning of Period |
|
| 1,061,347 |
|
Dividends Declared to Stockholders |
|
| (14,585 | ) |
Cumulative Impact of the Adoption of ASU 2016-09 |
|
| (713 | ) |
Net Earnings |
|
| 219,624 |
|
Balance at End of Period |
|
| 1,265,673 |
|
Accumulated Other Comprehensive Loss - |
|
|
|
|
Balance at Beginning of Period |
|
| (7,396 | ) |
Change in Funded Status of Pension Plan, net of tax |
|
| 591 |
|
Balance at End of Period |
|
| (6,805 | ) |
Total Stockholders’ Equity |
| $ | 1,416,189 |
|
During the nine months ended December 31, 2017, we repurchased 272,772 shares at an average price of $91.31. As of December 31, 2017, we have authorization to purchase an additional 4,544,428 shares.
Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or market,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. Inventories consist of the following:
|
| As of |
| |||||
| December 31, 2017 |
|
| March 31, 2017 |
| |||
|
| (dollars in thousands) |
| |||||
Raw Materials and Material-in-Progress |
| $ | 107,340 |
|
| $ | 122,736 |
|
Finished Cement |
|
| 24,313 |
|
|
| 24,428 |
|
Gypsum Wallboard |
|
| 8,305 |
|
|
| 7,951 |
|
Paperboard |
|
| 7,467 |
|
|
| 8,635 |
|
Frac Sand |
|
| 2,345 |
|
|
| 2,907 |
|
Aggregates |
|
| 7,268 |
|
|
| 7,686 |
|
Repair Parts and Supplies |
|
| 76,741 |
|
|
| 73,732 |
|
Fuel and Coal |
|
| 5,849 |
|
|
| 4,771 |
|
|
| $ | 239,628 |
|
| $ | 252,846 |
|
|
| September 30, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| (dollars in thousands) |
| |||||
Raw Materials and Materials-in-Progress |
| $ | 72,610 |
|
| $ | 81,308 |
|
Finished Cement |
|
| 26,671 |
|
|
| 38,769 |
|
Aggregates |
|
| 6,753 |
|
|
| 3,558 |
|
Gypsum Wallboard |
|
| 3,357 |
|
|
| 3,452 |
|
Paperboard |
|
| 5,371 |
|
|
| 7,462 |
|
Repair Parts and Supplies |
|
| 98,547 |
|
|
| 91,593 |
|
Fuel and Coal |
|
| 12,526 |
|
|
| 10,519 |
|
|
| $ | 225,835 |
|
| $ | 236,661 |
|
(G) ACCRUED EXPENSES
Accrued expensesExpenses consist of the following:
|
| As of |
|
| September 30, |
| March 31, |
| ||||||||
|
| December 31, 2017 |
|
| March 31, 2017 |
|
| 2022 |
|
| 2022 |
| ||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||
Payroll and Incentive Compensation |
| $ | 26,001 |
|
| $ | 22,850 |
|
| $ | 32,289 |
|
| $ | 37,262 |
|
Benefits |
|
| 14,204 |
|
|
| 11,503 |
|
|
| 15,832 |
|
|
| 14,894 |
|
Dividends |
|
| 9,482 |
|
|
| 9,756 |
| ||||||||
Interest |
|
| 7,196 |
|
|
| 5,992 |
|
|
| 7,167 |
|
|
| 5,052 |
|
Property Taxes |
|
| 3,817 |
|
|
| 4,759 |
|
|
| 10,399 |
|
|
| 6,514 |
|
Power and Fuel |
|
| 1,800 |
|
|
| 1,536 |
|
|
| 4,633 |
|
|
| 2,877 |
|
Freight |
|
| 2,485 |
|
|
| 1,172 |
| ||||||||
Legal and Professional |
|
| 1,608 |
|
|
| 989 |
| ||||||||
Sales and Use Tax |
|
| 486 |
|
|
| 2,459 |
|
|
| 2,291 |
|
|
| 1,509 |
|
Legal Settlement |
|
| 39,098 |
|
|
| — |
| ||||||||
Other Legal |
|
| 2,770 |
|
|
| 944 |
| ||||||||
Acquisition Related Expenses |
|
| — |
|
|
| 350 |
| ||||||||
Other |
|
| 6,060 |
|
|
| 4,986 |
|
|
| 5,329 |
|
|
| 6,729 |
|
|
| $ | 101,432 |
|
| $ | 55,379 |
|
| $ | 91,515 |
|
| $ | 86,754 |
|
9
(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 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 September 30, |
|
| For the Six Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Operating Lease Cost |
| $ | 1,671 |
|
| $ | 1,566 |
|
| $ | 3,398 |
|
| $ | 3,080 |
|
Short-term Lease Cost |
|
| 126 |
|
|
| 309 |
|
|
| 275 |
|
|
| 811 |
|
Total Lease Cost |
| $ | 1,797 |
|
| $ | 1,875 |
|
| $ | 3,673 |
|
| $ | 3,891 |
|
The Right-of-Use Assets and Lease Liabilities are reflected on our Balance Sheet as follows:
|
| September 30, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| (dollars in thousands) |
| |||||
Operating Leases |
|
|
|
|
|
| ||
Operating Lease Right-of-Use Assets |
| $ | 22,126 |
|
| $ | 23,856 |
|
|
|
|
|
|
|
| ||
Current Operating Lease Liabilities |
| $ | 6,736 |
|
| $ | 7,118 |
|
Noncurrent Operating Lease Liabilities |
|
| 26,736 |
|
|
| 29,212 |
|
Total Operating Lease Liabilities |
| $ | 33,472 |
|
| $ | 36,330 |
|
Future payments for operating leases are as follows (dollars in thousands):
Fiscal Year |
| Amount |
| |
2023 (remaining six months) |
| $ | 4,408 |
|
2024 |
|
| 6,363 |
|
2025 |
|
| 5,916 |
|
2026 |
|
| 4,279 |
|
2027 |
|
| 3,540 |
|
Thereafter |
|
| 16,934 |
|
Total Lease Payments |
| $ | 41,440 |
|
Less: Imputed Interest |
|
| (7,968 | ) |
Present Value of Lease Liabilities |
| $ | 33,472 |
|
|
|
|
| |
Weighted-Average Remaining Lease Term (in years) |
|
| 10.2 |
|
Weighted-Average Discount Rate |
|
| 3.73 | % |
(I) Share-BASED EMPLOYEE COMPENSATION
On August 7, 2013, our stockholders approved the Eagle Materials Inc. Amended and Restated Incentive Plan (the “Plan”)Plan), which increased the shares we are authorized to issue as awards by 3,000,000 (1,500,000 (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, (“RSUs”), restricted stock, and stock appreciation rights, to employees of the Company and members of the Board of Directors. Awards that were already outstanding prior to the approval of the Plan on August 7, 2013 remain outstanding. The Compensation Committee of our Board of Directors specifies thegrant terms for grants of equity awards under the Plan.
10
Long-Term Compensation Plans -
In May 2017,2022, the Compensation Committee of the Board of Directors approved the granting of an aggregate of 58,055 performance vesting stock options pursuant to the Plan to certain officers and key employees an aggregate of 25,192 performance-vesting stock options that will be earned only if certain performance conditions are satisfied (the “Fiscal 2018Fiscal 2023 Employee Performance Stock Option Grant”)Award). The performance criterioncriteria for the Fiscal 20182023 Employee Performance Stock Option Grant isAward are based upon the
achievement of certain levels of return on equity (as defined in the option agreements)agreement), ranging from 11.0%10.0% to 18.0%20.0%, for the fiscal year ending March 31, 2018.2023. All stock options will be earned if the return on equity is 18.0%20.0% or greater, and the percentage of shares earned will be reduced proportionately to approximately 66.7%66.7% if the return on equity is 11.0%10.0%. If the Company does not achieve a return on equity of at least 11.0%10.0%, all granted stock options granted will be forfeited. Following any such reduction, restrictions on the earned stock options will lapse and the earned options will vest ratably over four years, with the firstinitial fourth lapsingvesting promptly following the determination date on which the return on equity is determined, and the remaining restrictions lapsingoptions vesting on March 31, 20192024 through 2021.2026. The stock options have a term of ten10 years from the date of grant.grant date. The Compensation Committee also approved the granting of 48,379 time vesting20,994 time-vesting stock options to the same officers and key employees, which vest ratably over four years (the “Fiscal 2018Fiscal 2023 Employee Time VestingTime-Vesting Stock Option Grant)Award).
In August 2017,2022, we granted 6,0523,510 options to members of the Board of Directors (the “Fiscal 2018Fiscal 2023 Board of Directors Stock Option Grant”)Award). Options granted under the Fiscal 20182023 Board of Directors Stock Option GrantAward vest immediately and can be exercised from the grant date of grant until their expiration on the tenth anniversary of the date of the grant. grant date.
The Fiscal 20182023 Employee Performance Stock Option Grant,Award, the Fiscal 20182023 Employee Time VestingTime-Vesting Stock Option GrantAward, and the Fiscal 20182023 Board of Directors Stock Option GrantAward were valued at thetheir grant date using the Black-Scholes option pricing model.
The weighted-average assumptions used in the Black-Scholes model to value the option awards in fiscal 20182023 are as follows:
|
|
| ||
|
|
| % | |
Expected Volatility |
|
|
| % |
|
|
|
| % |
Expected Life |
| 6.0 years |
|
In addition to the stock options described above, from time to time we issue stock options to certain employees. Any options issued are valued using the Black-Scholes options pricing model on the grant date and are expensed over the vesting period.
Stock option expense for all outstanding stock option awards totaled approximately $1.1$1.1 million and $3.3$1.9 million for the three and ninesix months ended December 31, 2017,September 30, 2022, respectively, and approximately $1.2$1.0 million and $4.2$1.7 million for the three and ninesix months ended December 31, 2016,September 30, 2021, respectively. At December 31, 2017,September 30, 2022, there was approximately $7.8$4.8 million of unrecognized compensation cost related to outstanding stock options, which is expected to be recognized over a weighted-average period of 2.62.4 years.
11
The following table represents stock option activity for the ninesix months ended December 31, 2017:September 30, 2022:
|
| Number |
|
| Weighted- |
| ||
Outstanding Options at March 31, 2022 |
|
| 456,849 |
|
| $ | 83.81 |
|
Granted |
|
| 56,621 |
|
| $ | 125.90 |
|
Exercised |
|
| (17,841 | ) |
| $ | 125.36 |
|
Cancelled |
|
| (3,178 | ) |
| $ | 109.15 |
|
Outstanding Options at September 30, 2022 |
|
| 492,451 |
|
| $ | 89.09 |
|
Options Exercisable at September 30, 2022 |
|
| 301,348 |
|
|
|
| |
Weighted-Average Fair Value of Options Granted |
| $ | 48.36 |
|
|
|
|
|
| Number of Shares |
|
| Weighted- Average Exercise Price |
| ||
|
| 1,323,379 |
|
| $ | 66.07 |
| |
Granted |
|
| 119,986 |
|
| $ | 100.20 |
|
Exercised |
|
| (441,691 | ) |
| $ | 59.97 |
|
Cancelled |
|
| (16,742 | ) |
| $ | 78.05 |
|
Outstanding Options at End of Period |
|
| 984,932 |
|
| $ | 72.76 |
|
Options Exercisable at End of Period |
|
| 597,945 |
|
| $ | 65.18 |
|
Weighted-Average Fair Value of Options Granted during the Period |
| $ | 33.37 |
|
|
|
|
|
The following table summarizes information about stock options outstanding at December 31, 2017:September 30, 2022:
|
| Outstanding Options |
|
| Exercisable Options |
| ||||||||||||||
| Number of Shares Outstanding |
|
| Weighted - Average Remaining Contractual Life |
|
| Weighted - Average Exercise Price |
|
| Number of Shares Outstanding |
|
| Weighted - Average Exercise Price |
| ||||||
$23.17 – $ 29.84 |
|
| 65,912 |
|
|
| 3.60 |
|
| $ | 23.27 |
|
|
| 65,912 |
|
| $ | 23.47 |
|
$33.43 – $ 37.34 |
|
| 99,582 |
|
|
| 4.46 |
|
| $ | 33.94 |
|
|
| 99,582 |
|
| $ | 33.94 |
|
$53.22 – $ 77.67 |
|
| 308,924 |
|
|
| 7.24 |
|
| $ | 71.06 |
|
|
| 158,166 |
|
| $ | 69.19 |
|
$79.73 – $ 106.00 |
|
| 510,514 |
|
|
| 7.60 |
|
| $ | 87.76 |
|
|
| 274,285 |
|
| $ | 84.27 |
|
|
|
| 984,932 |
|
|
| 6.90 |
|
| $ | 72.76 |
|
|
| 597,945 |
|
| $ | 65.18 |
|
|
| Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||
Range of Exercise Prices |
| Number of |
|
| Weighted- |
|
| Weighted- |
|
| Number of |
|
| Weighted- |
| |||||
$59.32 - $81.56 |
|
| 172,395 |
|
|
| 6.82 |
|
| $ | 62.87 |
|
|
| 85,585 |
|
| $ | 64.96 |
|
$87.37 - $93.03 |
|
| 151,569 |
|
|
| 6.33 |
|
| $ | 91.57 |
|
|
| 109,241 |
|
| $ | 91.57 |
|
$99.37 - $143.09 |
|
| 168,487 |
|
|
| 6.98 |
|
| $ | 113.68 |
|
|
| 106,522 |
|
| $ | 106.90 |
|
|
|
| 492,451 |
|
|
| 6.72 |
|
| $ | 89.09 |
|
|
| 301,348 |
|
| $ | 89.43 |
|
At December 31, 2017,September 30, 2022, the aggregate intrinsic value for both the outstanding and exercisable options was approximately $39.9$10.3 million and $28.8$5.6 million, respectively. The total intrinsic value of options exercised during the ninesix months ended December 31, 2017September 30, 2022 was approximately $18.5$1.0 million.
Restricted Stock.RESTRICTED STOCK
In May 2017,2022, the Compensation Committee approved the granting of an aggregate of 52,646 shares of performance vesting restricted stock to certain officers and key employees an aggregate of 50,783 shares of performance-vesting restricted stock that will be earned only if certain performance conditions are satisfied (the “Fiscal 2018Fiscal 2023 Employee Restricted Stock Performance Award”)Award). The performance criterioncriteria for the Fiscal 20182023 Employee Restricted Stock Performance Award isare based upon the achievement of certain levels of return on equity (as defined in the award agreement), ranging from 11.0%10.0% to 18.0%20.0%, for the fiscal year ending March 31, 2018.2023. All restricted shares will be earned if the return on equity is 18.0%20.0% or greater, and the percentage of shares earned will be reduced proportionately to approximately 66.7%66.7% if the return on equity is 11.0%10.0%. If the Company does not achieve a return on equity of at least 11.0%10.0%, all awards will be forfeited. Following any such reduction, restrictions on the earned shares will lapse ratably over four years, with the firstinitial fourth lapsing promptly following the determination date on which the return on equity is determined, and the remaining restrictions lapsing on March 31, 20192024 through 2021.2026. The Compensation Committee also approved the granting of 43,87442,545 shares of time vestingtime-vesting restricted stock to the same officers and key employees, which vest ratably over four years (the “Fiscal 2018Fiscal 2023 Employee Restricted Stock Time Vesting Award”)Time-Vesting Award). The Fiscal 2023 Employee Restricted Stock Performance Award and the Fiscal 2023 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 four-year period.
In August 2017,2022, we awarded 11,444granted 14,482 shares of restricted stock to members of the Board of Directors (the “BoardFiscal 2023 Board of Directors Fiscal 2018 Restricted Stock Award”), which vest Award). Restrictions on these shares will lapse six months after the grant date. The Fiscal 2018 Employee2023 Board of Directors Restricted Stock Performance Award and the Fiscal 2018 Employee Restricted Stock Time Vesting Award werewas valued at the closing price of the stock on the grant date of grant, and areis being expensed over a four yearsix-month period. The Board of Director Fiscal 2018 Restricted Stock Awards were
12
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 of grant, and are being expensed over a six monththe vesting period.
The fair value of restricted stock is based on the stock price on the grant date. The following table summarizes the activity for nonvested restricted shares during the three months ended September 30, 2022:
|
| Number of Shares |
|
| Weighted-Average Grant Date Fair Value |
| ||
Nonvested Restricted Stock at March 31, 2022 |
|
| 258,779 |
|
| $ | 85.34 |
|
Granted |
|
| 111,230 |
|
| $ | 126.23 |
|
Vested |
|
| (55,467 | ) |
| $ | 127.05 |
|
Forfeited |
|
| (3,247 | ) |
| $ | 124.82 |
|
Nonvested Restricted Stock at September 30, 2022 |
|
| 311,295 |
|
| $ | 98.31 |
|
Expense related to restricted shares was approximately $2.6$3.3 million and $7.5$7.6 million for the three and ninesix months ended December 31, 2017,September 30, 2022, respectively, and approximately $1.8$2.9 million and $5.0$4.7 million for the three and ninesix months ended December 31, 2016,September 30, 2021, respectively. At December 31, 2017,September 30, 2022, there was approximately $19.4$23.7 million of unearned compensation from restricted stock, which will be recognized over a weighted-average period of 2.32.5 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 4,165,7063,260,318 at December 31, 2017.September 30, 2022.
(I)(J)COMPUTATION OF EARNINGS PER SHARE
The calculation of basic and diluted common shares outstanding is as follows:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||
Weighted-Average Shares of Common Stock Outstanding |
|
| 48,221,093 |
|
|
| 47,881,662 |
|
|
| 48,132,276 |
|
|
| 47,901,369 |
|
Common Equivalent Shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed Exercise of Outstanding Dilutive Options |
|
| 887,506 |
|
|
| 764,631 |
|
|
| 1,069,152 |
|
|
| 889,411 |
|
Less: Shares Repurchased from Assumed Proceeds of Assumed Exercised Options |
|
| (606,549 | ) |
|
| (523,194 | ) |
|
| (778,985 | ) |
|
| (612,885 | ) |
Restricted Shares |
|
| 255,712 |
|
|
| 174,649 |
|
|
| 218,987 |
|
|
| 162,431 |
|
Weighted-Average Common and Common Equivalent Shares Outstanding |
|
| 48,757,762 |
|
|
| 48,297,748 |
|
|
| 48,641,430 |
|
|
| 48,340,326 |
|
Shares Excluded Due to Anti-dilution Effects |
|
| 121,179 |
|
|
| 700,734 |
|
|
| 91,089 |
|
|
| 679,849 |
|
|
| For the Three Months Ended September 30, |
|
| For the Six Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Weighted-Average Shares of Common Stock Outstanding |
|
| 37,140,197 |
|
|
| 41,222,161 |
|
|
| 37,559,087 |
|
|
| 41,623,187 |
|
Effect of Dilutive Shares |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assumed Exercise of Outstanding Dilutive Options |
|
| 420,199 |
|
|
| 560,876 |
|
|
| 424,489 |
|
|
| 606,876 |
|
Less Shares Repurchased from Proceeds of Assumed Exercised Options |
|
| (310,956 | ) |
|
| (365,887 | ) |
|
| (311,373 | ) |
|
| (395,516 | ) |
Restricted Stock Units |
|
| 117,439 |
|
|
| 177,583 |
|
|
| 120,410 |
|
|
| 179,300 |
|
Weighted-Average Common Stock and Dilutive Securities Outstanding |
|
| 37,366,879 |
|
|
| 41,594,733 |
|
|
| 37,792,613 |
|
|
| 42,013,847 |
|
Shares Excluded Due to Anti-dilution Effects |
|
| 46,750 |
|
|
| 3,578 |
|
|
| 39,703 |
|
|
| 2,684 |
|
(J)(K) PENSION AND EMPLOYEE BENEFIT PLANS
We sponsor several single-employer defined benefit pension 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 arewere historically based on years of service and the employee’s qualifying compensation over the last few years of employment.
The following table shows Over the components of net periodic cost for our plans:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months ended December 31, |
| ||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||
Service Cost – Benefits Earned During the Period |
| $ | 153 |
|
| $ | 222 |
|
| $ | 557 |
|
| $ | 665 |
|
Interest Cost of Benefit Obligations |
|
| 357 |
|
|
| 399 |
|
|
| 1,110 |
|
|
| 1,196 |
|
Expected Return on Plan Assets |
|
| (578 | ) |
|
| (416 | ) |
|
| (1,558 | ) |
|
| (1,247 | ) |
Recognized Net Actuarial Loss |
|
| 46 |
|
|
| 425 |
|
|
| 519 |
|
|
| 1,276 |
|
Amortization of Prior-Service Cost |
|
| 60 |
|
|
| 75 |
|
|
| 210 |
|
|
| 224 |
|
Net Periodic Pension Cost |
| $ | 38 |
|
| $ | 705 |
|
| $ | 838 |
|
| $ | 2,114 |
|
We contributed approximately $8.5 millionlast several years, these plans have been frozen to our pensionnew participants and new benefits, with the last plan becoming frozen during fiscal 2020. Our defined benefit plans during December 2017, which is expected to substantially decrease our unfunded pension liabilityare all fully funded, with plan assets exceeding the benefit obligation at March 31, 2018.2022. Due to the frozen status and current funding of the single-employer pension plans, our expected pension expense for fiscal 2023 is less than $0.1 million.
(K)13
(L) INCOME TAXES
On December 22, 2017, the United States (“U.S.”) enacted significant changes to U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”). Under the new law, beginning January 1, 2018, the U.S. corporate income tax rate is reduced from 35% to 21%, accordingly, our effective tax rate for fiscal 2018 is based on a blended statutory rate of 31.5%.
The effect on our net deferred tax liability for the change in tax rates is required to be recognized in the period the tax rate change was enacted. We estimated the impact of the reduction in the U.S. corporate income tax rate, as well as other aspects of the new law, which resulted in a one-time, non-cash decrease to income tax expense of approximately $61.0 million for the nine months ended December 31, 2017.
The Company will continue to assess the expected impacts of the new tax law, and will include any changes to the preliminary impacts noted above, in the Company’s Annual Report on Form 10-K for the year ended March 31, 2018.
Income taxesTaxes for the interim periodperiods 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, include certain items treated as discrete events to arrive at an estimated overall tax amount. The effective tax rate for the ninesix months ended December 31, 2017September 30, 2022, was approximately 2%22%, which was lower thanconsistent with the effective tax rate of 33%22% for the ninesix months ended December 31, 2016.September 30, 2021. The decline in theeffective tax rate was primarilyhigher than the U.S. Statutory rate of 21% mainly due to the discretestate income taxes, partially offset by a benefit recognized related to the change in corporate tax rates,percentage depletion.
(M) LONG-TERM DEBT
Long-term Debt at September 30, 2022 was as described above, which reduced deferred tax liabilities by approximately $61.0 million and the impact of the adoption of ASU 2016-09, which reduced income tax expense by approximately $2.5 million.follows:
(L) LONG-TERM DEBT
Long-term debt consists of the following:
|
| As of |
| |||||
|
| December 31, 2017 |
|
| March 31, 2017 |
| ||
|
| (dollars in thousands) |
| |||||
Credit Facility |
| $ | 185,000 |
|
| $ | 225,000 |
|
4.500% Senior Unsecured Notes Due 2026 |
|
| 350,000 |
|
|
| 350,000 |
|
Private Placement Senior Unsecured Notes |
|
| 36,500 |
|
|
| 117,714 |
|
Total Debt |
|
| 571,500 |
|
|
| 692,714 |
|
Less: Current Portion of Long-term Debt |
|
| — |
|
|
| (81,214 | ) |
Less: Debt Origination Costs |
|
| (5,745 | ) |
|
| (6,247 | ) |
Total Long-term Debt |
| $ | 565,755 |
|
| $ | 605,253 |
|
|
| September 30, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| (dollars in thousands) |
| |||||
Revolving Credit Facility |
| $ | 200,000 |
|
| $ | 200,000 |
|
2.500% Senior Unsecured Notes Due 2031 |
|
| 750,000 |
|
|
| 750,000 |
|
Term Loan |
|
| 197,500 |
|
|
| — |
|
Total Debt |
|
| 1,147,500 |
|
|
| 950,000 |
|
Less: Current Portion of Long-term Debt |
|
| (10,000 | ) |
|
| — |
|
Less: Unamortized Discounts and Debt Issuance Costs |
|
| (11,102 | ) |
|
| (11,735 | ) |
Long-term Debt |
| $ | 1,126,398 |
|
| $ | 938,265 |
|
Revolving Credit Facility –
We have a $500.0an unsecured $750.0 million revolving credit facility that was amended on May 5, 2022 (such facility, as amended, the Revolving Credit Facility). The Revolving Credit Facility includes a separate $200.0 million term loan facility (the “Credit Facility”)Term Loan) and also provides the Company the option to increase the revolving borrowing capacity by up to $375.0 million (for a total revolving borrowing capacity of $1,125.0 million, excluding the Term Loan), includingprovided that the existing lenders, or new lenders, agree to such increase. The Revolving Credit Facility includes a $40.0 million letter of credit facility and a swingline loan sublimitsub-facility of $25.0$25.0 million, which terminatesand expires on August 2, 2021. BorrowingsMay 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 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 2.50:1.00 (collectively, the Financial Covenants).
At the Company’s option, outstanding loans under the Credit Facility are guaranteed by substantially all of the Company’s subsidiaries. At the option of the Company, outstanding principal amounts on theRevolving Credit Facility bear interest, at a variable rate equal to either (i) The London Interbank Offered Rate (“LIBOR”) for the selected period,adjusted term SOFR rate (secured overnight financing rate), plus 10 bps, plus an applicableagreed spread (ranging from 100 to 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 Revolving Credit Facility) is replaced in accordance with the Revolving Credit Facility), the adjusted daily simple SOFR rate, plus 10 bps, plus an agreed spread (ranging from 100 to 225162.5 basis points)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 0to be62.5 basis points) which is established quarterly based upon the Company’s ratio of consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, to the Company’s consolidated indebtedness (the “Leverage Ratio”), or (ii) an alternative base rate which is the higher of (a) the prime rate or (b) the federal funds rate plus 1⁄2% per annum plus an applicable rate (ranging from 0 to 125 basis points). Interest payments are payable, in the case of loans bearing interest at a rate based on the federal funds rate, quarterly, or in the case of loans bearing interest at a rate based on LIBOR, at the end of the applicable interest period.Company's credit rating. The Company is also required to pay a commitmentfacility fee on unused available borrowings
14
under the Revolving Credit Facility ranging from 109 to 3522.5 basis points depending uponwhich is established based on the Leverage Ratio. 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 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 $200.0 million of outstanding borrowings under the Revolving Credit Facility, contains customary covenants that restrict our ability to incur additional debt, encumber our assets, sell assets, make or enter into certain investments, loans or guaranties and enter into sale and leaseback arrangements. The Credit Facility also requiresplus $6.4 million outstanding letters of credit as of September 30, 2022, leaving us to maintain a consolidated indebtedness ratio (calculated as consolidated indebtedness to consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions) of 3.5:1.0 or less and an interest coverage ratio (consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions to consolidated interest expense) of at least 2.5:1.0. We had $185.0 million of borrowings outstanding at December 31, 2017. Based on our Leverage Ratio, we had $305.6with $543.6 million of available borrowings under the Revolving Credit Facility, net of the outstanding letters of credit, at December 31, 2017.credit. We were in compliance with all Financial Covenants on September 30, 2022; therefore, all $543.6 million is available for future borrowings.
TheTerm Loan
On May 5, 2022, we borrowed the $200.0 million Term Loan under the Revolving Credit Facility, hasand used these proceeds to, among other things, pay down a $40.0portion of the Revolving Credit Facility. The Term Loan requires quarterly principal payments of $2.5 million, letterwith any unpaid amounts due upon maturity on 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 credit facility. Under the letter of credit facility, the Company pays a feedoubt, at a per annumdaily simple SOFR rate equal tounless and until such time as the applicable margin for Eurodollar loansthen-existing Benchmark (as defined in effect from time to time plus a one-time letter of credit feethe Revolving Credit Facility) is replaced in an amount equal to 0.125% ofaccordance with the initial stated amount. At December 31, 2017, we had $9.4 million of letters of credit outstanding.Revolving Credit Facility).
4.500%2.500% Senior Unsecured Notes Due 2026 –2031
On August 2, 2016, the CompanyJuly 1, 2021, we issued $350.0$750.0 million aggregate principal amount of 4.500%2.500% senior notes ("due July 2031 (the 2.500% Senior Unsecured Notes") due August 2026. Interest on theNotes). The 2.500% Senior Unsecured Notes is payable semiannually on February 1 and August 1 of each year until allare senior unsecured obligations of the outstanding notesCompany and are paid.not guaranteed by any of our subsidiaries. The 2.500% Senior Unsecured Notes rankwere issued net of original issue discount of $6.3 million and have an effective interest rate of approximately 2.6%. The original issue discount is being amortized by the effective interest method over the ten-year term of the notes. The 2.500% Senior Unsecured Notes are redeemable prior to April 1, 2031 at a redemption price equal to existing and future senior indebtedness, including the Credit Facility and the Private Placement Senior Unsecured Notes. Prior to August 1, 2019, we may redeem up to 40%100% of the original aggregate principal amount of the 2.500% Senior Unsecured Notes withbeing redeemed, plus the proceedspresent value of certain equity offeringsremaining 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 20 basis points. The 2.500% Senior Unsecured Notes are redeemable on or after April 1, 2031 at a redemption price of 104.5%equal to 100% of the aggregate principal amount of the notes. On or after August 1, 20192.500% Senior Unsecured Notes being redeemed, plus accrued and priorunpaid interest to, August 1, 2021,but excluding, the applicable redemption date. If we may redeem some or allexperience 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 100%101% of the aggregate principal amount plus a “make-whole” premium. Beginning on August 1, 2021, we may redeem some or all of the 2.500% Senior Unsecured Notes atbeing repurchased, plus accrued and unpaid interest to, but excluding, the applicable redemption prices set forth below (expressed as a percentage ofdate. The indenture governing the principal amount being redeemed):
The2.500% Senior Unsecured Notes containcontains certain covenants that limit our ability and/or our guarantor subsidiaries' 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. The Company’sassets, 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 are fullyto become or be declared due and unconditionally and jointly and severally guaranteed by eachpayable.
15
Retirement of our subsidiaries that is a guarantor underDebt
In connection with the Credit Facility and Private Placement Senior Unsecured Notes. See Footnote (Q) to the Unaudited Consolidated Financial Statements for more information on the guarantorsissuance of the Senior Public Notes.
Private Placement2.500% Senior Unsecured Notes -
We entered intoon July 1, 2021, we repaid all outstanding amounts under and terminated our $665.0 million term loan credit agreement (the Term Loan Credit Agreement). The Term Loan Credit Agreement was used to pay a Note Purchase Agreement on November 15, 2005portion of the purchase price for the Kosmos Acquisition and fees and expenses incurred in connection with our sale of $200.0 million of senior, unsecured notes, designated as Series 2005A Senior Notes (the “Series 2005A Senior Unsecured Notes”)the Kosmos Acquisition in a private placement transaction. The Series 2005A Senior Unsecured Notes, which were guaranteed by substantially all of our subsidiaries, were sold at parMarch 2020. Additionally, on July 19, 2021 (the first business day following the redemption date), we redeemed and issued in three tranches. During November 2017, all remaining notes were repaidpaid in full and cancelled.
We also entered into an additional Note Purchase Agreement on October 2, 2007 (the “2007 Note Purchase Agreement”) in connection with our sale of $200.0 million of senior unsecured notes, designated as Series 2007A Senior Notes (the “Series 2007A Senior Unsecured Notes”) in a private placement transaction. The Series 2007A Senior Unsecured Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in four tranches. At December 31, 2017, the amount outstanding for the remaining tranche is as follows:
Interest for each tranche of Notes is payable semi-annually April 2 and October 2 of each year until all principal is paid for the respective tranche. During October 2017, the $24.0 million outstanding under Tranche C of the Series 2007A Senior Unsecured Notes matured, and the related notes were repaid and cancelled at that time.
Our obligationsamounts due under the 2007 Note Purchase Agreement are equal in right of payment with all other senior, unsecured indebtedness of the Company, including our indebtedness under the Credit Facility and Senior Unsecured Notes. The 2007 Note Purchase Agreement contains customary restrictive covenants, including, but not limited to, covenants that place limits on our ability to encumber our assets, to incur additional debt, to sell assets, or to merge or consolidate with third parties.
The 2007 Note Purchase Agreement requires us to maintain a Consolidated Debt to Consolidated EBITDA (calculated as consolidated indebtedness to consolidated earnings before interest, taxes, depreciation, depletion, amortization, certain transaction related deductions and other non-cash charges) ratio of 3.50 to 1.00 or less, and to maintain an interest coverage ratio (Consolidated EBITDA to Consolidated Interest Expense (calculated as consolidated EBITDA, as defined above, to consolidated interest expense)) of at least 2.50:1.00. In addition, the 2007 Note Purchase Agreement requires the Company to ensure that at all times either (i) Consolidated Total Assets equal at least 80% of the consolidated total assets of the Company and its Subsidiaries, determined in accordance with GAAP, or (ii) consolidated total revenues of the Company and its Restricted Subsidiaries for the period of four consecutive fiscal quarters most recently ended equals at least 80% of the consolidated total revenues of the Company and its Subsidiaries during such period. We were in compliance with all financial ratios and tests at December 31, 2017.
Pursuant to a Subsidiary Guaranty Agreement, substantially all of our subsidiaries have guaranteed the punctual payment of all principal, interest, and Make-Whole Amounts (as defined in the 2007 Note Purchase Agreement) on the Series 2007A Senior Unsecured Notes and the other payment and performance obligations of the Company contained in the 2007 Note Purchase Agreement. We are permitted, at our option and without penalty, to prepay from time to time at least 10% of the original$350.0 million aggregate principal amount of 4.500% senior notes (4.500% Senior Unsecured Notes) due August 2026, using proceeds from the Series 2007A2.500% Senior Unsecured Notes, at 100% of the principal amount to be prepaid, together with interest accruedRevolving Credit Facility and cash on such amount to be prepaid to the date of payment, plus a Make-Whole Amount.hand. The Make-Whole Amount is computed by discounting the remaining scheduled payments of interest and principal of the Series 2007A4.500% Senior Unsecured Notes being prepaid at a discount rate equal to the sum of 50 basis points and the yield to maturity of U.S. treasury securities having a maturity equal to the remaining average life of the Series 2007A Senior Unsecured Notes being prepaid.
We lease one of our cement plants from the city of Sugar Creek, Missouri. The city of Sugar Creek issued industrial revenue bonds to partly finance improvements to the cement plant. The lease payments due to the city of Sugar Creek under the cement plant lease, which was entered into upon the sale of the industrial revenue bonds, are equal in amount to the payments required to be made by the city of Sugar Creek to the holders of the industrial revenue bonds. Because we are the holder ofredemption price included all of the outstanding industrial revenue bonds, no debt is reflected on our financial statements inprincipal and accrued interest through the redemption date of July 17, 2021, as well as an early termination premium of approximately $8.4 million. In connection with our leasethe termination and repayment of the cement plant. AtTerm Loan Facility and the conclusionredemption of the lease4.500% Senior Unsecured Notes, we expensed approximately $6.1 million of related debt issuance costs in fiscal 2021, we have the option to purchase the cement plant for a nominal amount.July 2021.
(M)(N) SEGMENT INFORMATION
Operating segments are defined as components of an enterprise that engage in business activities that earn revenues,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.
We operate in fiveOur business segments:is organized into two sectors within which there are four reportable business segments. The Heavy Materials sector includes the Cement Gypsum Wallboard, Recycled Paperboard, Oil and Gas Proppants and Concrete and Aggregates. TheseAggregates 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 andfor the manufacture, production, distribution, and sale of Portlandportland cement and slag (basic(a basic construction materials which arematerial that is the essential binding ingredient in concrete),; the grinding and sale of slag; the mining of gypsum andfor the manufacture and sale of gypsum wallboard,wallboard; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters,converters; the sale of readymix concreteconcrete; and the mining and sale of aggregates (crushed stone, sand, and gravel) and sand used in hydraulic fracturing (“frac sand”). The products that we manufacture, distribute and sell are basic materials used with broad application as construction products, building materials, and basic materials used for oil and natural gas extraction. Our construction products are used in residential, industrial, commercial and infrastructure construction and include cement, slag, concrete and aggregates. Our building materials are sold into similar markets and include gypsum wallboard. Our basic materials used for oil and natural gas extraction include frac sand and oil well cement.
We operate seveneight modern cement plants (one of which is operated through a joint venture located in Buda, Texas), one slag grinding facility, seventeenand 30 cement distribution terminals, 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, and Texas. We operate 30 readymix concrete batch plants and five aggregates processing plants in markets that are complementary to our cement network.
We operate five gypsum wallboard plants a gypsum wallboard distribution center,and a recycled paperboard mill, seventeen readymix concrete batch plant locations, four aggregates processing plant locations, two frac sand processing facilities, including the mine idled in Utica, Illinois, three frac sand drying facilities, including the facility idled in Corpus Christi, Texas, six frac sand trans-load locations and eleven frac sand distribution centers. The principal markets for our cement products are Texas, northern Illinois (including Chicago), the central plains, the Rocky Mountains, northern Nevada, Ohio and northern California. Gypsummill. We distribute gypsum wallboard and recycled paperboard are distributed throughout the continental U.S,U.S., with the exception of the northeast. Concrete and aggregates are sold to local readymix producers and paving contractors in the Austin, Texas area, north of Sacramento, California and the greater Kansas City, Missouri area, while frac sand is currently sold and distributed into shale deposit zones across the United States. Other segment operations that are not material to our business are included in Other.Northeast.
16
We conduct one of our seven cement plant operations, Texas Lehigh Cement Company LP in Buda, Texas, through a Joint Venture.account for intersegment sales at market prices. For segment reporting purposes only, we proportionately consolidate our 50%50% share of the Joint Venture’s revenuesVenture Revenue and operating earnings, which isOperating Earnings, consistent with the way management reports the segments within the Company for making operating decisions and assessing performance.
We account for intersegment sales at market prices. The following table sets forth certain financial information relating to our operations by segment: 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 |
|
| For the Nine Months |
| ||||||||||
| Ended December 31, |
|
| Ended December 31, |
| |||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement |
| $ | 161,601 |
|
| $ | 138,047 |
|
| $ | 536,186 |
|
| $ | 449,650 |
|
Gypsum Wallboard |
|
| 133,348 |
|
|
| 121,504 |
|
|
| 383,229 |
|
|
| 357,689 |
|
Paperboard |
|
| 48,389 |
|
|
| 41,254 |
|
|
| 138,161 |
|
|
| 128,528 |
|
Oil and Gas Proppants |
|
| 21,947 |
|
|
| 7,124 |
|
|
| 62,879 |
|
|
| 18,851 |
|
Concrete and Aggregates |
|
| 38,742 |
|
|
| 40,843 |
|
|
| 126,092 |
|
|
| 114,734 |
|
Other |
|
| 4,445 |
|
|
| — |
|
|
| 4,445 |
|
|
| — |
|
Sub-total |
|
| 408,472 |
|
|
| 348,772 |
|
|
| 1,250,992 |
|
|
| 1,069,452 |
|
Less: Intersegment Revenues |
|
| (23,575 | ) |
|
| (20,468 | ) |
|
| (69,489 | ) |
|
| (59,123 | ) |
Net Revenues, including Joint Venture |
|
| 384,897 |
|
|
| 328,304 |
|
|
| 1,181,503 |
|
|
| 1,010,329 |
|
Less: Joint Venture |
|
| (25,526 | ) |
|
| (25,909 | ) |
|
| (79,696 | ) |
|
| (77,772 | ) |
Net Revenues |
| $ | 359,371 |
|
| $ | 302,395 |
|
| $ | 1,101,807 |
|
| $ | 932,557 |
|
|
| For the Three Months Ended September 30, |
|
| For the Six Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cement |
| $ | 319,460 |
|
| $ | 288,324 |
|
| $ | 603,976 |
|
| $ | 558,579 |
|
Concrete and Aggregates |
|
| 69,613 |
|
|
| 52,750 |
|
|
| 131,231 |
|
|
| 97,504 |
|
Gypsum Wallboard |
|
| 224,638 |
|
|
| 172,985 |
|
|
| 440,965 |
|
|
| 339,252 |
|
Paperboard |
|
| 53,673 |
|
|
| 47,798 |
|
|
| 107,746 |
|
|
| 91,065 |
|
|
|
| 667,384 |
|
|
| 561,857 |
|
|
| 1,283,918 |
|
|
| 1,086,400 |
|
Less: Intersegment Revenue |
|
| (37,186 | ) |
|
| (25,237 | ) |
|
| (66,018 | ) |
|
| (51,319 | ) |
Less: Joint Venture Revenue |
|
| (25,130 | ) |
|
| (26,926 | ) |
|
| (51,445 | ) |
|
| (49,617 | ) |
|
| $ | 605,068 |
|
| $ | 509,694 |
|
| $ | 1,166,455 |
|
| $ | 985,464 |
|
|
| For the Three Months Ended September 30, |
|
| For the Six Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Intersegment Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cement |
| $ | 12,361 |
|
| $ | 5,223 |
|
| $ | 18,652 |
|
| $ | 13,056 |
|
Paperboard |
|
| 24,825 |
|
|
| 20,014 |
|
|
| 47,366 |
|
|
| 38,263 |
|
|
| $ | 37,186 |
|
| $ | 25,237 |
|
| $ | 66,018 |
|
| $ | 51,319 |
|
Cement Sales Volume (M tons) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Wholly Owned |
|
| 1,981 |
|
|
| 1,983 |
|
|
| 3,786 |
|
|
| 3,835 |
|
Joint Venture |
|
| 164 |
|
|
| 215 |
|
|
| 352 |
|
|
| 399 |
|
|
|
| 2,145 |
|
|
| 2,198 |
|
|
| 4,138 |
|
|
| 4,234 |
|
17
|
| For the Three Months Ended September 30, |
|
| For the Six Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||
Operating Earnings |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cement |
| $ | 98,779 |
|
| $ | 88,750 |
|
| $ | 161,127 |
|
| $ | 151,297 |
|
Concrete and Aggregates |
|
| 7,276 |
|
|
| 7,539 |
|
|
| 13,008 |
|
|
| 12,883 |
|
Gypsum Wallboard |
|
| 89,761 |
|
|
| 66,331 |
|
|
| 173,829 |
|
|
| 129,584 |
|
Paperboard |
|
| 5,579 |
|
|
| 981 |
|
|
| 9,395 |
|
|
| 4,318 |
|
Sub-Total |
|
| 201,395 |
|
|
| 163,601 |
|
|
| 357,359 |
|
|
| 298,082 |
|
Corporate General and Administrative Expense |
|
| (13,627 | ) |
|
| (10,667 | ) |
|
| (25,447 | ) |
|
| (20,135 | ) |
Loss on Early Retirement of Senior Notes |
|
| — |
|
|
| (8,407 | ) |
|
| — |
|
|
| (8,407 | ) |
Other Non-Operating Income (Loss) |
|
| (664 | ) |
|
| (944 | ) |
|
| (1,299 | ) |
|
| 2,734 |
|
Earnings Before Interest and Income Taxes |
|
| 187,104 |
|
|
| 143,583 |
|
|
| 330,613 |
|
|
| 272,274 |
|
Interest Expense, net |
|
| (8,580 | ) |
|
| (12,268 | ) |
|
| (15,910 | ) |
|
| (19,240 | ) |
Earnings Before Income Taxes |
| $ | 178,524 |
|
| $ | 131,315 |
|
| $ | 314,703 |
|
| $ | 253,034 |
|
Cement Operating Earnings |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Wholly Owned |
| $ | 91,623 |
|
| $ | 80,490 |
|
| $ | 148,873 |
|
| $ | 135,067 |
|
Joint Venture |
|
| 7,156 |
|
|
| 8,260 |
|
|
| 12,254 |
|
|
| 16,230 |
|
|
| $ | 98,779 |
|
| $ | 88,750 |
|
| $ | 161,127 |
|
| $ | 151,297 |
|
Capital Expenditures |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cement |
| $ | 4,893 |
|
| $ | 6,976 |
|
| $ | 13,879 |
|
| $ | 14,943 |
|
Concrete and Aggregates |
|
| 13,688 |
|
|
| 527 |
|
|
| 14,340 |
|
|
| 1,073 |
|
Gypsum Wallboard |
|
| 8,391 |
|
|
| 6,345 |
|
|
| 12,470 |
|
|
| 8,039 |
|
Paperboard |
|
| 1,018 |
|
|
| 375 |
|
|
| 1,855 |
|
|
| 1,492 |
|
Corporate and Other |
|
| 345 |
|
|
| 619 |
|
|
| 705 |
|
|
| 1,230 |
|
|
| $ | 28,335 |
|
| $ | 14,842 |
|
| $ | 43,249 |
|
| $ | 26,777 |
|
Depreciation, Depletion, and Amortization |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cement |
| $ | 20,258 |
|
| $ | 20,019 |
|
| $ | 40,311 |
|
| $ | 39,550 |
|
Concrete and Aggregates |
|
| 4,351 |
|
|
| 2,470 |
|
|
| 8,552 |
|
|
| 5,048 |
|
Gypsum Wallboard |
|
| 5,589 |
|
|
| 5,484 |
|
|
| 11,152 |
|
|
| 10,880 |
|
Paperboard |
|
| 3,742 |
|
|
| 3,663 |
|
|
| 7,459 |
|
|
| 7,331 |
|
Corporate and Other |
|
| 705 |
|
|
| 704 |
|
|
| 1,400 |
|
|
| 1,475 |
|
|
| $ | 34,645 |
|
| $ | 32,340 |
|
| $ | 68,874 |
|
| $ | 64,284 |
|
|
| September 30, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| (dollars in thousands) |
| |||||
Identifiable Assets |
|
|
|
|
|
| ||
Cement |
| $ | 1,903,575 |
|
| $ | 1,860,649 |
|
Concrete and Aggregates |
|
| 224,578 |
|
|
| 89,405 |
|
Gypsum Wallboard |
|
| 396,655 |
|
|
| 397,486 |
|
Paperboard |
|
| 174,261 |
|
|
| 180,025 |
|
Other, net |
|
| 110,080 |
|
|
| 52,087 |
|
|
| $ | 2,809,149 |
|
| $ | 2,579,652 |
|
|
| For the Three Months |
|
| For the Nine Months |
| ||||||||||
|
| Ended December 31, |
|
| Ended December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||
Intersegment Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement |
| $ | 4,160 |
|
| $ | 4,336 |
|
| $ | 13,743 |
|
| $ | 12,407 |
|
Paperboard |
|
| 19,127 |
|
|
| 15,887 |
|
|
| 54,643 |
|
|
| 45,845 |
|
Concrete and Aggregates |
|
| 288 |
|
|
| 245 |
|
|
| 1,103 |
|
|
| 871 |
|
|
| $ | 23,575 |
|
| $ | 20,468 |
|
| $ | 69,489 |
|
| $ | 59,123 |
|
Cement Sales Volume (in thousands of tons) - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly –owned Operations |
|
| 1,123 |
|
|
| 967 |
|
|
| 3,734 |
|
|
| 3,200 |
|
Joint Venture |
|
| 216 |
|
|
| 231 |
|
|
| 686 |
|
|
| 691 |
|
|
|
| 1,339 |
|
|
| 1,198 |
|
|
| 4,420 |
|
|
| 3,891 |
|
| For the Three Months |
|
| For the Nine Months |
| |||||||||||
|
| Ended December 31, |
|
| Ended December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||
Operating Earnings - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement |
| $ | 52,523 |
|
| $ | 45,307 |
|
| $ | 154,456 |
|
| $ | 127,623 |
|
Gypsum Wallboard |
|
| 39,841 |
|
|
| 41,075 |
|
|
| 123,237 |
|
|
| 122,109 |
|
Paperboard |
|
| 10,903 |
|
|
| 9,380 | �� |
|
| 22,358 |
|
|
| 30,827 |
|
Oil and Gas Proppants |
|
| (1,007 | ) |
|
| (1,726 | ) |
|
| (4,787 | ) |
|
| (11,728 | ) |
Concrete and Aggregates |
|
| 3,414 |
|
|
| 4,588 |
|
|
| 15,054 |
|
|
| 13,085 |
|
Other |
|
| 264 |
|
|
| — |
|
|
| 264 |
|
|
| — |
|
Sub-total |
|
| 105,938 |
|
|
| 98,624 |
|
|
| 310,582 |
|
|
| 281,916 |
|
Corporate General and Administrative |
|
| (9,883 | ) |
|
| (9,166 | ) |
|
| (29,383 | ) |
|
| (27,831 | ) |
Legal Settlement |
|
| (39,098 | ) |
|
| — |
|
|
| (39,098 | ) |
|
| — |
|
Other Non-Operating Income |
|
| 1,084 |
|
|
| 429 |
|
|
| 2,728 |
|
|
| 2,008 |
|
Earnings Before Interest and Income Taxes |
|
| 58,041 |
|
|
| 89,887 |
|
|
| 244,829 |
|
|
| 256,093 |
|
Interest Expense, net |
|
| (6,653 | ) |
|
| (6,198 | ) |
|
| (21,592 | ) |
|
| (15,755 | ) |
Earnings Before Income Taxes |
| $ | 51,388 |
|
| $ | 83,689 |
|
| $ | 223,237 |
|
| $ | 240,338 |
|
Cement Operating Earnings - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly–owned Operations |
| $ | 41,151 |
|
| $ | 34,063 |
|
| $ | 121,253 |
|
| $ | 96,252 |
|
Joint Venture |
|
| 11,372 |
|
|
| 11,244 |
|
|
| 33,203 |
|
|
| 31,371 |
|
|
| $ | 52,523 |
|
| $ | 45,307 |
|
| $ | 154,456 |
|
| $ | 127,623 |
|
Capital Expenditures - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement |
| $ | 11,012 |
|
| $ | 8,558 |
|
| $ | 31,744 |
|
| $ | 18,812 |
|
Gypsum Wallboard |
|
| 4,616 |
|
|
| 1,756 |
|
|
| 15,477 |
|
|
| 5,181 |
|
Paperboard |
|
| 1,490 |
|
|
| 634 |
|
|
| 2,913 |
|
|
| 2,338 |
|
Oil and Gas Proppants |
|
| 13,896 |
|
|
| 1,469 |
|
|
| 28,256 |
|
|
| 1,534 |
|
Concrete and Aggregates |
|
| 2,446 |
|
|
| 3,045 |
|
|
| 4,976 |
|
|
| 5,595 |
|
Corporate and Other |
|
| 147 |
|
|
| 350 |
|
|
| 332 |
|
|
| 583 |
|
|
| $ | 33,607 |
|
| $ | 15,812 |
|
| $ | 83,698 |
|
| $ | 34,043 |
|
Depreciation, Depletion and Amortization - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement |
| $ | 13,117 |
|
| $ | 8,763 |
|
| $ | 38,258 |
|
| $ | 26,158 |
|
Gypsum Wallboard |
|
| 4,599 |
|
|
| 4,636 |
|
|
| 13,514 |
|
|
| 14,166 |
|
Paperboard |
|
| 2,204 |
|
|
| 2,105 |
|
|
| 6,513 |
|
|
| 6,311 |
|
Oil and Gas Proppants |
|
| 5,820 |
|
|
| 4,987 |
|
|
| 21,944 |
|
|
| 14,432 |
|
Concrete and Aggregates |
|
| 2,007 |
|
|
| 1,805 |
|
|
| 5,851 |
|
|
| 5,474 |
|
Corporate and Other |
|
| 903 |
|
|
| 349 |
|
|
| 1,823 |
|
|
| 1,353 |
|
|
| $ | 28,650 |
|
| $ | 22,645 |
|
| $ | 87,903 |
|
| $ | 67,894 |
|
|
| As of |
| |||||
| December 31, 2017 |
|
| March 31, 2017 |
| |||
|
| (dollars in thousands) |
| |||||
Identifiable Assets - |
|
|
|
|
|
|
|
|
Cement |
| $ | 1,233,099 |
|
| $ | 1,234,617 |
|
Gypsum Wallboard |
|
| 376,731 |
|
|
| 379,414 |
|
Paperboard |
|
| 120,603 |
|
|
| 124,356 |
|
Oil and Gas Proppants |
|
| 385,719 |
|
|
| 376,306 |
|
Concrete and Aggregates |
|
| 103,631 |
|
|
| 110,413 |
|
Corporate and Other |
|
| 88,260 |
|
|
| 22,018 |
|
|
| $ | 2,308,043 |
|
| $ | 2,247,124 |
|
Segment operating earnings,Operating Earnings, including the proportionately consolidated 50% interest in the revenuesrevenue and expenses of the Joint Venture, represent revenues,Revenue, less direct operating expenses, segment depreciation,Depreciation, and segment selling, generalSelling, General, and administrativeAdministrative expenses. We account for intersegment sales at market prices. Corporate assets consist primarilymainly of cash and cash equivalents, general office assets, and miscellaneous other assets, unrecognized tax benefitsassets.
The basis used to disclose Identifiable Assets; Capital Expenditures; and assets acquiredDepreciation, Depletion, and Amortization conforms with the equity method, and is similar to how we disclose these accounts in the Wildcat Acquisition. our Unaudited Consolidated Balance Sheets and Unaudited Consolidated Statements of Earnings.
18
The segment breakdown of goodwillGoodwill is as follows:
|
| September 30, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| (dollars in thousands) |
| |||||
Cement |
| $ | 213,320 |
|
| $ | 203,342 |
|
Concrete and Aggregates |
|
| 40,774 |
|
|
| 1,639 |
|
Gypsum Wallboard |
|
| 116,618 |
|
|
| 116,618 |
|
Paperboard |
|
| 7,538 |
|
|
| 7,538 |
|
|
| $ | 378,250 |
|
| $ | 329,137 |
|
The increase in Goodwill in the Cement and Concrete and Aggregates segments is related to the Terminal Acquisition and ConAgg Acquisition, respectively. The purchase price allocation for the Terminal Acquisition still in progress, and may affect the recorded balance of Goodwill when completed.
|
| As of |
| |||||
|
| December 31, 2017 |
|
| March 31, 2017 |
| ||
|
| (dollars in thousands) |
| |||||
Cement |
| $ | 74,214 |
|
| $ | 74,214 |
|
Gypsum Wallboard |
|
| 116,618 |
|
|
| 116,618 |
|
Paperboard |
|
| 7,538 |
|
|
| 7,538 |
|
Corporate and Other |
|
| 6,841 |
|
|
| — |
|
|
| $ | 205,211 |
|
| $ | 198,370 |
|
Summarized financial information for the Joint Venture that is not consolidated is set out below (thisbelow. This summarized financial information includes the total amount for the Joint Venture and not our 50% interest in those amounts):amounts:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| For the Three Months Ended September 30, |
|
| For the Six Months Ended September 30, |
| |||||||||||||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||
Revenues |
| $ | 51,311 |
|
| $ | 53,018 |
|
| $ | 163,128 |
|
| $ | 158,351 |
| ||||||||||||||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||||||||||||||||||
Revenue |
| $ | 50,259 |
|
| $ | 53,852 |
|
| $ | 102,889 |
|
| $ | 99,234 |
| ||||||||||||||||
Gross Margin |
| $ | 23,421 |
|
| $ | 23,887 |
|
| $ | 69,672 |
|
| $ | 66,812 |
|
| $ | 15,977 |
|
| $ | 17,776 |
|
| $ | 28,003 |
|
| $ | 34,609 |
|
Earnings Before Income Taxes |
| $ | 22,745 |
|
| $ | 22,488 |
|
| $ | 66,407 |
|
| $ | 62,742 |
|
| $ | 14,312 |
|
| $ | 16,519 |
|
| $ | 24,508 |
|
| $ | 32,459 |
|
|
| September 30, |
|
| March 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| (dollars in thousands) |
| |||||
Current Assets |
| $ | 84,701 |
|
| $ | 69,492 |
|
Noncurrent Assets |
| $ | 114,764 |
|
| $ | 112,926 |
|
Current Liabilities |
| $ | 23,152 |
|
| $ | 18,276 |
|
|
| As of |
| |||||
| December 31, 2017 |
|
| March 31, 2017 |
| |||
|
| (dollars in thousands) |
| |||||
Current Assets |
| $ | 67,380 |
|
| $ | 73,767 |
|
Non-Current Assets |
| $ | 66,836 |
|
| $ | 42,337 |
|
Current Liabilities |
| $ | 27,501 |
|
| $ | 22,293 |
|
(N)(O) INTEREST EXPENSE
The following components are included in interest expense,Interest Expense, net:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| For the Three Months Ended September 30, |
|
| For the Six Months Ended September 30, |
| ||||||||||||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
| ||||||||||||||||
Interest (Income) |
| $ | (4 | ) |
| $ | (19 | ) |
| $ | (10 | ) |
| $ | (23 | ) | ||||||||||||||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||||||||||||||||||
Interest Income |
| $ | (70 | ) |
| $ | (13 | ) |
| $ | (82 | ) |
| $ | (38 | ) | ||||||||||||||||
Interest Expense |
|
| 6,363 |
|
|
| 5,982 |
|
|
| 20,692 |
|
|
| 15,078 |
|
|
| 8,176 |
|
|
| 5,425 |
|
|
| 15,055 |
|
|
| 11,551 |
|
Other Expenses |
|
| 294 |
|
|
| 235 |
|
|
| 910 |
|
|
| 700 |
|
|
| 474 |
|
|
| 6,856 |
|
|
| 937 |
|
|
| 7,727 |
|
Interest Expense, net |
| $ | 6,653 |
|
| $ | 6,198 |
|
| $ | 21,592 |
|
| $ | 15,755 |
|
| $ | 8,580 |
|
| $ | 12,268 |
|
| $ | 15,910 |
|
| $ | 19,240 |
|
Interest incomeIncome includes interest earned on investments of excess cash. Components of interest expenseInterest Expense include interest associated with the Private Placement Senior Unsecured Notes, theRevolving Credit Facility, theTerm Loan, Senior Unsecured Notes, and commitment fees based on the unused portion of the Revolving Credit Facility. Other expensesExpenses include amortization of debt issuance costs and credit facilityRevolving Credit Facility costs.
19
(O)(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, and auto, and general liability self-insurance. At December 31, 2017,September 30, 2022, we had contingent liabilities under these outstanding letters of credit of approximately $9.4$6.4 million.
In the ordinary course of business, we execute contracts involving indemnifications that are both standard in the industry and indemnifications 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, it is the opinion of management thatbelieves these indemnifications arewill not expected to have a material adverse effect on our consolidated financial position, results of operations, or cash flows. We currently have no outstanding guarantees.
We are currently contingently liable for performance under $25.6$26.8 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.
Domestic Wallboard Antitrust Litigation
Since late December 2012, several purported class action lawsuits were filed in various United States District Courts, including the Eastern District of Pennsylvania, Western District of North Carolina and the Northern District of Illinois, against the Company’s subsidiary, American Gypsum Company LLC (“American Gypsum”), alleging that the defendant wallboard manufacturers conspired to fix the price for drywall sold in the United States in violation of federal antitrust laws and, in some cases related provisions of state law. The complaints alleged that the defendant wallboard manufacturers conspired to increase prices through the announcement and implementation of coordinated price increases, output restrictions, and other restraints of trade, including the elimination of individual “job quote” pricing. In addition to American Gypsum, the defendants in these lawsuits included CertainTeed Corp. (“CertainTeed”), USG Corporation and United States Gypsum (together “USG”), New NGC, Inc. (“New NGC”), Lafarge North America (“Lafarge”), Temple Inland Inc. (“TIN”) and PABCO Building Products LLC (“PABCO”). On April 8, 2013, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred and consolidated all related cases to the Eastern District of Pennsylvania for coordinated pretrial proceedings.
On June 24, 2013, the direct and indirect purchaser plaintiffs filed consolidated amended class action complaints. The direct purchasers’ complaint added the Company as a defendant. The plaintiffs in the consolidated class action complaints assert claims on behalf of purported classes of direct purchasers or end users of wallboard from January 1, 2012 to the present for unspecified monetary damages (including treble damages) and in some cases injunctive relief. On July 29, 2013, the Company and American Gypsum answered the complaints, denying all allegations that they conspired to increase the price of drywall and asserting affirmative defenses to the plaintiffs’ claims.
In 2014, USG and TIN entered into agreements with counsel representing the direct and indirect purchaser classes pursuant to which they agreed to settle all claims against them. Under the terms of its settlement agreement, USG agreed to pay $48.0 million to resolve the direct and indirect purchaser class actions. In its settlement agreement, TIN agreed to pay $7.0 million to resolve the direct and indirect purchaser class actions. On August 20, 2015, the court entered orders finally approving USG and TIN’s settlements with the direct and indirect purchaser plaintiffs. Following completion of the initial discovery, the Company and remaining co-
defendants moved for summary judgment. On February 18, 2016, the court denied the Company’s motion for summary judgment and granted judgment in favor of CertainTeed. On June 16, 2016, Lafarge entered into an agreement with counsel for the direct purchaser class under which it agreed to settle all claims against it for $23.0 million. The court entered an order finally approving this settlement on December 7, 2016. On July 28, 2016, Lafarge entered into an agreement with counsel representing the indirect purchaser class under which it agreed to settle all claims against it for $5.2 million, which was approved by the court on February 28, 2017. On July 14, 2016, the Company’s motion for permission to appeal the summary judgment decision to the U.S. Court of Appeals for the Third Circuit was denied.
Direct purchaser plaintiffs and indirect purchaser plaintiffs filed their motions for class certification on August 3, 2016 and October 12, 2016, respectively. On August 23, 2017, the court granted the direct purchaser plaintiffs’ motion for class certification and certified a class consisting of all persons or entities that purchased paper-backed gypsum wallboard in the United States from January 1, 2012 through January 31, 2013 directly from American Gypsum, the Company, Lafarge, New NGC, PABCO, USG, and/or L&W Supply Corporation (which was a subsidiary of USG Corporation during the class period). On September 6, 2017, American Gypsum, the Company, New NGC, and PABCO filed a petition with the U.S. Court of Appeals for the Third Circuit seeking interlocutory appeal of the district court’s decision granting the direct purchaser plaintiffs’ motion for class certification under Federal Rule of Civil Procedure 23(f). The Third Circuit denied the Defendant’s petition on October 27, 2017. On August 24, 2017, the court denied the indirect purchaser plaintiffs’ motion for class certification. On September 7, 2017, the indirect purchaser plaintiffs filed a petition with the Third Circuit appealing the district court’s denial of their motion for class certification. The Third Circuit denied the indirect purchaser plaintiff’s petition on October 12, 2017.
On December 29, 2017 American Gypsum and the Company, as well as New NGC, Inc. (“New NGC”), and PABCO Building Products, LLC (“PABCO”), which are not affiliated with the Company, entered into a settlement agreement (the “Direct Purchaser Settlement Agreement”) with counsel representing the direct purchaser class to settle all claims made against the Company, American, New NGC and PABCO in the direct purchaser class action. The Direct Purchaser Settlement Agreement, in which the Company and American deny all wrongdoing, also includes releases by the participating class members of the Company and American as well as their subsidiaries, affiliates, and other related parties, for the time period from January 1, 2012 through the date of execution of the Direct Purchaser Settlement Agreement. The Direct Purchaser Settlement Agreement grants the Company, American, New NGC, and PABCO the right to terminate the Direct Purchaser Settlement Agreement in the event an agreed upon percentage of potential class members opt-out of the Direct Purchaser Settlement Agreement. Additionally, the Direct Purchaser Settlement Agreement is conditioned on final approval of the District Court. On January 5, 2018 American Gypsum, New NGC, and PABCO entered into a settlement agreement (the “Indirect Purchaser Settlement Agreement) with counsel representing the indirect purchaser class to settle all claims against American Gypsum, New NGC and PABCO in the indirect purchaser class action. The Indirect Purchaser Settlement Agreement is conditioned on final approval of the District Court. Under the Direct and Indirect Purchaser Settlement Agreements, the Company and American agreed to pay a total of approximately $39.1 million in cash to settle the claims against them. At December 31, 2017 we accrued the total amount of these two settlements and these amounts are expected to be paid in the next twelve months.
On March 17, 2015, a group of homebuilders filed a complaint against the defendants, including American Gypsum, based upon the same conduct alleged in the consolidated class action complaints. On March 24, 2015, the JPML transferred this action to the multidistrict litigation already pending in the Eastern District of Pennsylvania. Following the transfer, the homebuilder plaintiffs filed two amended complaints, on December 14, 2015 and March 25, 2016. As a result of settlements reached with TIN and Lafarge, the homebuilder plaintiffs voluntarily dismissed their claims against TIN and Lafarge on June 6 and June 24, 2016, respectively. On January 31, 2017, the plaintiffs voluntarily dismissed their claims against CertainTeed. Discovery in this lawsuit is ongoing. At this stage, we are unable to estimate the amount of any reasonably possible loss or range of reasonably possible losses for this claim.
In June 2015, American Gypsum and an employee received grand jury subpoenas from the United States District Court for the Western District of North Carolina seeking information regarding an investigation of the gypsum drywall industry by the Antitrust Division of the Department of Justice. We believe the investigation, although a separate proceeding, is related to the same subject matter at issue in the litigation described above and we intend to fully cooperate with government officials. Given its preliminary nature, we are currently unable to determine the ultimate outcome of such investigation.
(P)(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 Senior Unsecured Notes and Private Placement2.500% Senior Unsecured Notes at December 31, 2017September 30, 2022, is as follows:
| ||||
| ||||
|
| |||
|
|
|
| Fair Value |
| |
|
| (dollars in thousands) |
| |
2.500% Senior Unsecured Notes Due 2031 |
| $ | 550,193 |
|
The estimated fair values werevalue of our long-term debt was based on quoted prices of similar debt instruments with similar terms that are publicly traded (level 21 input). The carrying values of cashCash and cash equivalents, accountsCash Equivalents, Accounts Receivable, Notes Receivable, Accounts Payable, and notes receivable, accounts payable and accrued liabilitiesAccrued Liabilities approximate their fair values at December 31, 2017September 30, 2022, due to the short-term maturities of these assets and liabilities. The fair value of our Revolving Credit Facility and Term Loan also approximates itsthe carrying value at December 31, 2017.September 30, 2022.
(Q) FINANCIAL STATEMENTS FOR GUARANTORS OF THE 4.500% SENIOR UNSECURED NOTES20
On August 2, 2016, the Company completed a public offering of its Senior Unsecured Notes. The Senior Unsecured Notes are senior unsecured obligations of the Company and were offered under the Company’s existing shelf registration statement filed with the Securities and Exchange Commission.
The Senior Unsecured Notes are guaranteed by all of the Company’s wholly-owned subsidiaries, and all guarantees are full and unconditional and are joint and several. The following unaudited condensed consolidating financial statements present separately the earnings and comprehensive earnings, financial position and cash flows of the parent issuer (Eagle Materials Inc.) and the guarantors (all wholly-owned subsidiaries of Eagle Materials Inc.) on a combined basis with eliminating entries (dollars in thousands).
Condensed Consolidating Statement of Earnings and Comprehensive Earnings For the Three Months Ended December 31, 2017 |
| Parent |
|
| Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| ||||
Revenues |
| $ | — |
|
| $ | 359,371 |
|
| $ | — |
|
| $ | 359,371 |
|
Cost of Goods Sold |
|
| — |
|
|
| 264,805 |
|
|
| — |
|
|
| 264,805 |
|
Gross Profit |
|
| — |
|
|
| 94,566 |
|
|
| — |
|
|
| 94,566 |
|
Equity in Earnings of Unconsolidated Joint Venture |
|
| 11,372 |
|
|
| 11,372 |
|
|
| (11,372 | ) |
|
| 11,372 |
|
Equity in Earnings of Subsidiaries |
|
| 138,597 |
|
|
| — |
|
|
| (138,597 | ) |
|
| — |
|
Corporate General and Administrative Expenses |
|
| (9,035 | ) |
|
| (848 | ) |
|
| — |
|
|
| (9,883 | ) |
Legal Settlement |
|
| (39,098 | ) |
|
| — |
|
|
| — |
|
|
| (39,098 | ) |
Other Non-Operating Income |
|
| 262 |
|
|
| 822 |
|
|
| — |
|
|
| 1,084 |
|
Interest Expense, net |
|
| (17,005 | ) |
|
| 10,352 |
|
|
| — |
|
|
| (6,653 | ) |
Earnings before Income Taxes |
|
| 85,093 |
|
|
| 116,264 |
|
|
| (149,969 | ) |
|
| 51,388 |
|
Income Tax Expense |
|
| 16,287 |
|
|
| 33,705 |
|
|
| — |
|
|
| 49,992 |
|
Net Earnings |
| $ | 101,380 |
|
| $ | 149,969 |
|
| $ | (149,969 | ) |
| $ | 101,380 |
|
Net Earnings |
| $ | 101,380 |
|
| $ | 149,969 |
|
| $ | (149,969 | ) |
| $ | 101,380 |
|
Net Actuarial Change in Benefit Plans, net of tax |
|
| 197 |
|
|
| 197 |
|
|
| (197 | ) |
|
| 197 |
|
Comprehensive Earnings |
| $ | 101,577 |
|
| $ | 150,166 |
|
| $ | (150,166 | ) |
| $ | 101,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Earnings and Comprehensive Earnings For the Three Months Ended December 31, 2016 |
| Parent |
|
| Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| ||||
Revenues |
| $ | — |
|
| $ | 302,395 |
|
| $ | — |
|
| $ | 302,395 |
|
Cost of Goods Sold |
|
| — |
|
|
| 215,015 |
|
|
| — |
|
|
| 215,015 |
|
Gross Profit |
|
| — |
|
|
| 87,380 |
|
|
| — |
|
|
| 87,380 |
|
Equity in Earnings of Unconsolidated Joint Venture |
|
| 11,244 |
|
|
| 11,244 |
|
|
| (11,244 | ) |
|
| 11,244 |
|
Equity in Earnings of Subsidiaries |
|
| 60,294 |
|
|
| — |
|
|
| (60,294 | ) |
|
| — |
|
Corporate General and Administrative Expenses |
|
| (7,942 | ) |
|
| (1,224 | ) |
|
| — |
|
|
| (9,166 | ) |
Other Non-Operating Income (Loss) |
|
| (264 | ) |
|
| 693 |
|
|
| — |
|
|
| 429 |
|
Interest Expense, net |
|
| (14,413 | ) |
|
| 8,215 |
|
|
| — |
|
|
| (6,198 | ) |
Earnings before Income Taxes |
|
| 48,919 |
|
|
| 106,308 |
|
|
| (71,538 | ) |
|
| 83,689 |
|
Income Tax Expense |
|
| 7,468 |
|
|
| (34,770 | ) |
|
| — |
|
|
| (27,302 | ) |
Net Earnings |
| $ | 56,387 |
|
| $ | 71,538 |
|
| $ | (71,538 | ) |
|
| 56,387 |
|
Net Earnings |
| $ | 56,387 |
|
| $ | 71,538 |
|
| $ | (71,538 | ) |
|
| 56,387 |
|
Net Actuarial Change in Benefit Plans, net of tax |
|
| 312 |
|
|
| 312 |
|
|
| (312 | ) |
|
| 312 |
|
Comprehensive Earnings |
| $ | 56,699 |
|
| $ | 71,850 |
|
| $ | (71,850 | ) |
| $ | 56,699 |
|
Condensed Consolidating Statement of Cash Flows Nine Months ended December 31, 2016 |
| Parent |
|
| Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net Cash Provided by (Used in) Operating Activities |
| $ | (53,877 | ) |
| $ | 342,745 |
|
| $ | — |
|
| $ | 288,868 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment Additions |
|
| (271 | ) |
|
| (33,772 | ) |
|
| — |
|
|
| (34,043 | ) |
Net Cash Used in Investing Activities |
|
| (271 | ) |
|
| (33,772 | ) |
|
| — |
|
|
| (34,043 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in Credit Facility |
|
| (382,000 | ) |
|
| — |
|
|
| — |
|
|
| (382,000 | ) |
Repayment of Senior Notes |
|
| (8,000 | ) |
|
| — |
|
|
| — |
|
|
| (8,000 | ) |
Issuance of Long-term Debt |
|
| 350,000 |
|
|
| — |
|
|
| — |
|
|
| 350,000 |
|
Payment of Debt Issuance Costs |
|
| (6,637 | ) |
|
| — |
|
|
| — |
|
|
| (6,637 | ) |
Dividends Paid to Stockholders |
|
| (14,500 | ) |
|
| — |
|
|
| — |
|
|
| (14,500 | ) |
Shares Redeemed to Settle Employee Taxes on Stock Compensation |
|
| (3,084 | ) |
|
| — |
|
|
| — |
|
|
| (3,084 | ) |
Purchase and Retirement of Common Stock |
|
| (60,013 | ) |
|
| — |
|
|
| — |
|
|
| (60,013 | ) |
Proceed from Stock Option Exercises |
|
| 20,137 |
|
|
| — |
|
|
| — |
|
|
| 20,137 |
|
Excess Tax Benefits from Share Based Payment Arrangements |
|
| 8,546 |
|
|
| — |
|
|
| — |
|
|
| 8,546 |
|
Intra-entity Activity, net |
|
| 308,984 |
|
|
| (308,984 | ) |
|
| — |
|
|
| — |
|
Net Cash Provided by (Used in) Financing Activities |
|
| 213,433 |
|
|
| (308,984 | ) |
|
| — |
|
|
| (95,551 | ) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
| 159,285 |
|
|
| (11 | ) |
|
| — |
|
|
| 159,274 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
| 3,507 |
|
|
| 1,884 |
|
|
| — |
|
|
| 5,391 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | 162,792 |
|
| $ | 1,873 |
|
| $ | — |
|
| $ | 164,665 |
|
ItemITEM 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 Financial Condition
EXECUTIVE SUMMARY
Eagle Materials Inc. is a diversified producer of basiclight building materials and construction products used in residential, industrial, commercial and infrastructure construction. Information presented for the three and nine months ended December 31, 2017 and 2016, respectively, reflects the Company’s business segments, consisting of Cement, Gypsum Wallboard, Recycled Paperboard, Oil and Gas Proppants and Concrete and Aggregates. These operations are conducted in the U.S. and include the mining of limestone and the manufacture, production, distribution and sale of Portland cement (a basic construction material which is the essential binding ingredient in concrete) and specialty oil well cement; the grinding of slag; the mining of gypsum and 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, the mining and sale of aggregates (crushed stone, sand and gravel), the mining and sale of sand used in hydraulic fracturing (“frac sand”) and the distribution of frac sand into shale basins across the United States. TheOur primary products, Portland Cement and Gypsum Wallboard, are commodities that we manufacture, distribute and sell are basic materials with broad application as construction products, building materials and basic materials used for oil and natural gas extraction. Our construction products are usedessential in residential, industrial, commercial and infrastructureresidential construction; public construction projects; and include cement, concreteprojects to build, expand, and aggregates. Our building materials are sold into similar marketsrepair roads and include gypsum wallboard. Our basic materials usedhighways. Demand for oilour products is generally cyclical and gas extraction include frac sand and oil well cement. Certain information for each of Concrete and Aggregates is broken out separately in the segment discussions.
We operate in cyclical commodity businesses that are affected by changes in market conditions and the overall construction environment. Our operations,seasonal, depending on economic and geographic conditions. We distribute our products throughout most of the business segment, range from local to national businesses. We have operations in a diverse set of geographic markets,United States, except the Northeast, which subjectprovides us to thewith regional economic conditions in those geographic markets as well as economic conditions in the national market. Generaldiversification. 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.
On February 10, 2017,Our business is organized into two sectors: Heavy Materials, which includes the Company completedCement and Concrete and Aggregates segments; and Light Materials, which includes the acquisition of the following assets (the “Fairborn Acquisition”) of CEMEX Construction Materials Atlantic LLC (“the Seller”), (i) a cement plant in located in Fairborn, Ohio (ii) a cement distribution terminal located in Columbus, Ohio,Gypsum Wallboard and (iii) certain other properties and assets used by the Seller in connection with the foregoing (collectively, the “Fairborn Business”). The purchase price (the “Fairborn Purchase Price”) in the Fairborn Acquisition was approximately $400.5 million. In addition, the Company assumed certain liabilities and obligations of the Seller relating to the Fairborn Business, including contractual obligations, reclamation obligations and various other liabilities and obligations arising out of or relating to the Fairborn Business. The Company funded the payment of the Fairborn Purchase Price and expenses incurred in connection with the Fairborn Acquisition through a combination of cash on hand and borrowings under the Company’s existing bank credit facility.
On July 27, 2017, we acquired all of the outstanding equity interests in Wildcat Minerals LLC (the “Wildcat Acquisition”). Wildcat Minerals LLC operates transload facilities serving the oil and gas industry in several oil and gas basins across the United States. The purchase price (the “Purchase Price”) of the Wildcat Acquisition was approximately $36.8 million, subject to adjustments for working capitalRecycled Paperboard segments. Financial results and other customary post-closing adjustments. The Purchase Priceinformation for the three and expenses incurred in connection with the Wildcat Acquisition were funded through operating cash flowsix months ended September 30, 2022 and borrowings under our bank credit facility.2021, 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”)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 revenuesRevenue and operating earningsOperating Earnings in the presentation of our cementCement 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 (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).
GENERALOn April 22, 2022, we completed the ConAgg Acquisition. The Purchase Price of the ConAgg Acquisition was approximately $120.2 million. The ConAgg Acquisition is included in our Heavy Materials sector, in the Concrete and Aggregates business segment.
On September 16, 2022, we acquired a cement distribution terminal located in Nashville, Tennessee (the Terminal Acquisition). The purchase price of the Terminal Acquisition was approximately $39.5 million. The 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 ConAgg Acquisition and the Terminal Acquisition.
MARKET CONDITIONS AND OUTLOOK
Fundamental construction products demand trends continueDuring the first half of fiscal 2023, our end markets generally remained resilient despite external challenges, such as transportation disruptions, supply chain constraints, and increasing interest rates and inflation. Construction activity in most of our regional markets continued to be promising.outpace the national average, and sales volume in our largest business lines remained strong during the three months ended September 30, 2022 – our Gypsum Wallboard shipments were up 6%, and although our Cement sales volume decreased 2%, it remains historically high.
21
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 continueremain strong as the Infrastructure Investment and Jobs Act accelerates federal funding of infrastructure construction and repair projects during the latter half of this fiscal year and throughout calendar 2023. However, despite underlying demand growth, our ability to benefitachieve further Cement sales volume growth from an expanding U.S. economic cycle, as it relates to our businesses. In addition, increased infrastructure spending would positively impact bothexisting facilities is limited, because our cement and concrete and aggregates businesses.
Ourintegrated cement sales network stretches across the central U.S., both east to west and north to south. While we anticipate construction grade cement consumption to continue to increase during calendar 2018, each region will increaseis operating at a different pace. Cement, concrete and aggregates markets are affected by infrastructure spending, residential home building and industrial construction activity. We expect volume and pricing improvements to vary in each of our cement markets. high utilization levels.
Wallboard demandThe principal end use for gypsum wallboard is heavily influenced by new residential housing, consisting of new construction (both single-family and multi-family homes) as well as repair and remodeling. Most forecasts pointremodel. The construction of single-family homes tend to a continued pick-upbe more wallboard-intensive than multi-family homes. Gypsum Wallboard shipments and orders currently remain steady, and we expect home construction backlogs to support product demand throughout the remainder of our fiscal year. However, we recognize tighter U.S. fiscal policy, which has resulted in demandthe highest mortgage rates in both of these areas for calendar 2018. Industry shipments ofthe last 20 years, will likely have an adverse impact on residential construction activity in the future. Our Recycled Paperboard business sells paper primarily into the gypsum wallboard were approximately 25.3 billion square feetmarket, 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 remainder of the fiscal year, despite rising inflation and increased transportation costs. 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 our business segments.
Energy and freight costs increased in calendar 2017all our businesses during fiscal 2022, as well as the first half of fiscal 2023, and we anticipate further increases into fiscal 2024. The increases in energy costs are expecting shipmentsrelated to rising demand and disruption in the global supply of natural gas and solid fuels. We have forward purchase contracts for approximately 50% of our natural gas needs at $5.53 per mmbtu across all our businesses for the remainder of fiscal 2023. For freight, several factors are contributing to higher costs, including limited availability of trucking and rail service, congestion on the shipping routes, and the increase in price of diesel fuel, all of which have constrained freight capacity. We do not expect these factors to improve in the near term.
The primary raw material used to produce paperboard is OCC. Prices for calendar 2018. We recommissioned our Bernalillo plantOCC significantly increased during the second quarterprior year, but have recently declined. We expect OCC prices to remain relatively level for the remainder of fiscal 2018, and anticipate running this plant as necessary2023. 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, material costs in our Gypsum Wallboard segment are likely to meet customer demand.
We expect our recycled paperboard sales volumes to remain consistent as we are close to our current production capacity. Recycled fiber prices have receded from historical highs experienced during the second quarter of fiscal 2018, but the cost of recycled fiber may remain greater in fiscal 2018 than fiscal 2017. We currently have sales contracts that have a mechanism to adjust sales prices for increasesbe lower in the cost of fiber and energy, butperiod that these price increasesadjustments are only allowed at specified times, so increases in the cost of fiber may have an effect on our operating earnings in the interval before the sales price of finished paper adjusts.realized.
Demand for frac sand has recently been improving. The improved demand is due to several factors, notably increased horizontal drilling and increased sand intensity per well. We expect these trends to continue throughout calendar 2018, which should result in increased demand for frac sand. We are in the process of building out our Utica, Illinois facility. This build out will include the addition of a dry plant and development of our distribution system. We estimate that this build out will cost approximately $70.0 million and will be completed in the summer of 2018.
22
RESULTS OF OPERATIONS
Consolidated ResultsTHREE MONTHS ENDED SEPTEMBER 30, 2022, Compared WITH THREE MONTHS ENDED SEPTEMBER 30, 2021
|
| For the Three Months Ended December 31, |
|
|
|
|
|
| For the Nine Months Ended December 31, |
|
|
|
|
| ||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| Change |
|
| 2017 |
|
| 2016 |
|
| Change |
|
| For the Three Months Ended September 30, |
|
|
|
| ||||||||||||
|
| (In thousands except per share) |
|
|
|
|
|
| (In thousands except per share) |
|
|
|
|
|
| 2022 |
|
| 2021 |
|
| Change |
| |||||||||||||
Revenues |
| $ | 359,371 |
|
| $ | 302,395 |
|
|
| 19 | % |
| $ | 1,101,807 |
|
| $ | 932,557 |
|
| 18% |
| |||||||||||||
|
| (dollars in thousands, except per share) |
|
|
|
| ||||||||||||||||||||||||||||||
Revenue |
| $ | 605,068 |
|
| $ | 509,694 |
|
|
| 19 | % | ||||||||||||||||||||||||
Cost of Goods Sold |
|
| (264,805 | ) |
|
| (215,015 | ) |
|
| 23 | % |
|
| (824,428 | ) |
|
| (682,012 | ) |
| 21% |
|
|
| (410,829 | ) |
|
| (354,353 | ) |
|
| 16 | % | |
Gross Profit |
|
| 94,566 |
|
|
| 87,380 |
|
|
| 8 | % |
|
| 277,379 |
|
|
| 250,545 |
|
| 11% |
|
|
| 194,239 |
|
|
| 155,341 |
|
|
| 25 | % | |
Equity in Earnings of Unconsolidated Joint Venture |
|
| 11,372 |
|
|
| 11,244 |
|
|
| 1 | % |
|
| 33,203 |
|
|
| 31,371 |
|
| 6% |
|
|
| 7,156 |
|
|
| 8,260 |
|
|
| (13 | )% | |
Corporate General and Administrative Expense |
|
| (9,883 | ) |
|
| (9,166 | ) |
|
| 8 | % |
|
| (29,383 | ) |
|
| (27,831 | ) |
| 6% |
|
|
| (13,627 | ) |
|
| (10,667 | ) |
|
| 28 | % | |
Legal Settlement |
|
| (39,098 | ) |
|
| — |
|
|
| — |
|
|
| (39,098 | ) |
|
| — |
|
| — |
| |||||||||||||
Other Non-Operating Income |
|
| 1,084 |
|
|
| 429 |
|
|
| 153 | % |
|
| 2,728 |
|
|
| 2,008 |
|
| 36% |
| |||||||||||||
Loss on Early Retirement of Senior Notes |
|
| — |
|
|
| (8,407 | ) |
|
| (100 | )% | ||||||||||||||||||||||||
Other Non-Operating Loss |
|
| (664 | ) |
|
| (944 | ) |
|
| (30 | )% | ||||||||||||||||||||||||
Interest Expense, net |
|
| (6,653 | ) |
|
| (6,198 | ) |
|
| 7 | % |
|
| (21,592 | ) |
|
| (15,755 | ) |
| 37% |
|
|
| (8,580 | ) |
|
| (12,268 | ) |
|
| (30 | )% | |
Earnings Before Income Taxes |
|
| 51,388 |
|
|
| 83,689 |
|
|
| (39 | )% |
|
| 223,237 |
|
|
| 240,338 |
|
| (7)% |
|
|
| 178,524 |
|
|
| 131,315 |
|
|
| 36 | % | |
Income Tax Benefit (Expense) |
|
| 49,992 |
|
|
| (27,302 | ) |
|
| (283 | )% |
|
| (3,613 | ) |
|
| (78,370 | ) |
| (95)% |
| |||||||||||||
Income Tax Expense |
|
| (39,529 | ) |
|
| (29,190 | ) |
|
| 35 | % | ||||||||||||||||||||||||
Net Earnings |
| $ | 101,380 |
|
| $ | 56,387 |
|
|
| 80 | % |
| $ | 219,624 |
|
| $ | 161,968 |
|
| 36% |
|
| $ | 138,995 |
|
| $ | 102,125 |
|
|
| 36 | % | |
Diluted Earnings per Share |
| $ | 2.08 |
|
| $ | 1.17 |
|
|
| 78 | % |
| $ | 4.52 |
|
| $ | 3.35 |
|
| 35% |
|
| $ | 3.72 |
|
| $ | 2.46 |
|
|
| 51 | % |
Revenues. Revenues were $359.4Revenue increased by $95.4 million, and $302.4or 19%, to $605.1 million for the three months ended December 31, 2017 and 2016, respectively. Revenues fromSeptember 30, 2022. The ConAgg Acquisition contributed $13.9 million of Revenue during the Fairborn and Wildcat Acquisitions positively impacted revenuesthree months ended September 30, 2022. Excluding the ConAgg Acquisition, Revenue improved by approximately $26.1 million. Excluding revenues from the Fairborn and Wildcat Acquisition, revenues from our legacy businesses increased$81.5 million, or 16%, largely because of increases in all of our segments except concrete and aggregates. The increases were due primarily to improved average net sales prices in all segments except gypsum wallboard, which declined 1%, and increased sales volumes in all segments except concrete and aggregates, which declined approximately 13% and 9%, respectively. The increase in average netboth gross sales prices and Sales Volume. The increases in gross sales volumesprices and Sales Volume positively impacted net revenueaffected Revenue by approximately $8.2$75.3 million and $22.7$6.2 million, respectively.
COST OF GOODS SOLD
Revenues were $1,101.8Cost of Goods Sold increased by $56.4 million, and $932.6or 16%, to $410.8 million for the ninethree months ended December 31, 2017 and 2016, respectively. Revenues from the Fairborn and Wildcat Acquisitions positively impacted revenues by approximately $73.5 million. Excluding revenues from the Fairborn and Wildcat Acquisitions, revenues from our legacy businesses increased in allSeptember 30, 2022. The ConAgg Acquisition contributed $12.1 million of our segments. The increases were due primarily to improved average net sales prices in all segments except gypsum wallboard, which was flat, and increased sales volumes in all segments except recycled paperboard and aggregates, which declined approximately 2% and 4%, respectively. The increase in average net sales prices and sales volumes positively impacted net revenue by approximately $32.6 million and $63.1 million, respectively.
Cost of Goods Sold. Sold during the three months ended September 30, 2022. Excluding the ConAgg Acquisition, Cost of goods soldGoods Sold increased by $44.3 million, or 13%. The increase was $264.8due to higher Sales Volume and operating costs of $2.5 million and $215.0$41.8 million, respectively. Higher operating costs were primarily related to our Cement, Gypsum Wallboard, and Recycled Paperboard segments, which are discussed further in the segment analysis.
GROSS PROFIT
Gross Profit increased 25% to $194.2 million during the three months ended December 31, 2017 and 2016, respectively. Approximately $19.3 million of the increase in cost of goods soldSeptember 30, 2022. The improvement was primarily related to higher gross sales prices and Sales Volume, partially offset by increased operating costs. The gross margin increased to 32%, with higher gross sales prices being partially offset by higher operating costs.
23
EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE
Equity in Earnings of our Unconsolidated Joint Venture declined $1.1 million, or 13%, for the Fairbornthree months ended September 30, 2022. The decrease was primarily due to lower Sales Volume and Wildcat Acquisitions. The remaining increase in cost of goods sold was related to increased sales volumes and operating costs, which increased cost of goods soldadversely affected earnings by approximately $16.8$2.0 million and $13.7$3.5 million, respectively. This was partially offset by higher gross sales prices which positively affected earnings by $4.4 million. The decline in Sales Volume was mostly due to extended equipment downtime that reduced production during the quarter. The increase in operating costs was primarily related to higher energy and purchased cement costs, which reduced operating earnings by $1.0 million and $2.4 million, respectively.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE
Corporate General and Administrative Expense increased by approximately $2.9 million, or 28%, for the three months ended September 30, 2022. The increase was primarily due to higher salary and incentive compensation, information and technology upgrades, and legal and professional expenses of $0.8 million, $0.6 million, and $0.5 million, respectively. The increase in operatingsalary and incentive compensation was due to higher earnings in the second quarter of fiscal 2023, while the increase in legal and professional expenses was primarily related to the Terminal Acquisition.
LOSS ON EARLY RETIREMENT OF SENIOR NOTES
In July 2021, the Company redeemed and retired its 4.500% Senior Unsecured Notes due in 2026 prior to the maturity date. As a result of the early retirement, the Company paid a premium of $8.4 million. See Footnote (M) to the Unaudited Consolidated Financial Statements for more information.
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 decreased by approximately $3.7 million, or 30%, during the three months ended September 30, 2022. This was primarily due to the write off of approximately $6.1 million of debt issue costs is related to our cement, gypsum wallboard4.500% Unsecured Senior Notes due in 2026 and recycled paperboard segments and are discussed further on pages 33-36.
Cost of goods sold was $824.4 million and $682.0 millionthe Term Loan Credit Agreement during the ninethree months ended December 31, 2017 and 2016, respectively. Approximately $52.9September 30, 2021. This was partially offset by $2.7 million of increased interest expense in the increase in cost of goods sold relatedcurrent-year quarter due to higher interest rates and average balance outstanding under our Revolving Credit Facility. See Footnote (M) to the Fairborn Acquisition. The remaining increase in cost of goods sold was relatedUnaudited Consolidated Financial Statements for more information.
EARNINGS BEFORE INCOME TAXES
Earnings Before Income Taxes increased to increased sales volumes and operating costs, which increased cost of goods sold by approximately $50.8 million and $38.7 million, respectively. The increase in operating costs primarily related to our cement and recycled paperboard segments and are discussed further on pages 33-36.
Gross Profit. Gross profit was $94.6 million and $87.4$178.5 million during the three months ended December 31, 2017September 30, 2022, primarily as because of higher Gross Profit and 2016, respectively. Approximately $6.8 million of the increase in gross profit is attributable to the Fairborn and Wildcat Acquisitions, while the remaining increase is primarily related to increased average net sales prices and sales volumes, as noted above. The gross margin declined to 26% from 29%, due primarily to increased operating costs,lower Interest Expense, net. This was partially offset by the increase in average net sales prices.
Gross profit was $277.4 millionhigher Corporate General and $250.5 million during the nine months ended December 31, 2017 and 2016, respectively. Approximately $20.6 million of the increase in gross profit is attributable to the Fairborn and Wildcat Acquisitions, while the remaining increase is primarily related to increased average net sales prices and sales volumes,Administrative Expenses, as noted above. The gross margin declined to 25% from 27%, due primarily to increased operating costs, partially offset by the increase in average net sales prices.
well as lower Equity in Earnings of Unconsolidated Joint Venture.Equity in earnings of our unconsolidated joint venture increased $0.1
INCOME TAX EXPENSE
Income Tax Expense was $39.5 million or 1%, for the three months ended December 31, 2017.September 30, 2022, compared with $29.2 million for the three months ended September 30, 2021. The effective tax rate remained flat at 22%.
NET EARNINGS
Net Earnings increased 36% to $139.0 million for the three months ended September 30, 2022, as shown in the table above.
24
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2022, Compared WITH Six MONTHS ENDED SEPTEMBER 30, 2021
|
| For the Six Months Ended September 30, |
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||
|
| (dollars in thousands, except per share) |
|
|
|
| ||||||
Revenue |
| $ | 1,166,455 |
|
| $ | 985,464 |
|
|
| 18 | % |
Cost of Goods Sold |
|
| (821,350 | ) |
|
| (703,612 | ) |
|
| 17 | % |
Gross Profit |
|
| 345,105 |
|
|
| 281,852 |
|
|
| 22 | % |
Equity in Earnings of Unconsolidated Joint Venture |
|
| 12,254 |
|
|
| 16,230 |
|
|
| (24 | )% |
Corporate General and Administrative Expense |
|
| (25,447 | ) |
|
| (20,135 | ) |
|
| 26 | % |
Loss on Early Retirement of Senior Notes |
|
| — |
|
|
| (8,407 | ) |
|
| (100 | )% |
Other Non-Operating Income (Loss) |
|
| (1,299 | ) |
|
| 2,734 |
|
|
| (148 | )% |
Interest Expense, net |
|
| (15,910 | ) |
|
| (19,240 | ) |
|
| (17 | )% |
Earnings Before Income Taxes |
|
| 314,703 |
|
|
| 253,034 |
|
|
| 24 | % |
Income Tax Expense |
|
| (70,703 | ) |
|
| (55,582 | ) |
|
| 27 | % |
Net Earnings |
| $ | 244,000 |
|
| $ | 197,452 |
|
|
| 24 | % |
Diluted Earnings per Share |
| $ | 6.46 |
|
| $ | 4.70 |
|
|
| 37 | % |
REVENUE
Revenue increased by $181.0 million, or 18%, to $1,166.5 million for the six months ended September 30, 2022. The ConAgg Acquisition contributed $24.9 million of Revenue during the six months ended September 30, 2022. Excluding the ConAgg Acquisition, Revenue improved by $156.1 million, or 16%, largely because of increases in both gross sales prices and Sales Volume. The increases in gross sales prices and Sales Volume positively affected Revenue by approximately $146.9 million and $9.2 million, respectively.
COST OF GOODS SOLD
Cost of Goods Sold increased by $117.8 million, or 17%, to $821.4 million for the six months ended September 30, 2022. The ConAgg Acquisition contributed $23.3 million of Cost of Goods Sold during the six months ended September 30, 2022. Excluding the ConAgg Acquisition, Cost of Goods Sold increased by $94.5 million, or 13%. The increase is primarilywas due to 3% increasehigher operating costs and Sales Volume of $90.5 million and $4.0 million, respectively. Higher operating costs were primarily related to our Cement and Gypsum Wallboard segments, which are discussed further in average netthe segment analysis.
GROSS PROFIT
Gross Profit increased 22% to $345.1 million during the six months ended September 30, 2022. The improvement was primarily related to higher gross sales prices and Sales Volume, partially offset by decreased sales volumes and increased operating costs. The impactgross margin increased to 30%, with higher gross sales prices being partially offset by an increase in operating costs.
EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE
Equity in Earnings of our Unconsolidated Joint Venture declined $3.9 million, or 24%, for the six months ended September 30, 2022. The decrease was primarily due to lower Sales Volume and increased operating costs, which adversely affected earnings by approximately $1.9 million and $9.7 million, respectively. This was partially offset by higher gross sales prices which positively affected earnings by $7.7 million. The increase in operating costs was primarily related to extended equipment downtime that reduced cement production, energy, and higher purchased cement costs, which reduced operating earnings by $2.3 million, $1.0 million, and $5.4 million, respectively.
25
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE
Corporate General and Administrative Expense increased by approximately $5.3 million, or 26%, for the six months ended September 30, 2022. The increase was primarily due to higher incentive compensation, information and technology upgrades, and legal and professional expenses of $3.2 million, $0.9 million, and $0.6 million, respectively. The increase in incentive compensation was mostly due to executive retirements during the first quarter of fiscal 2023, while the increase in legal and professional expenses was primarily related to the Terminal Acquisition.
LOSS ON EARLY RETIREMENT OF SENIOR NOTES
In July 2021, the Company redeemed and retired its 4.500% Senior Unsecured Notes due in 2026 prior to the maturity date. As a result of the early retirement, the Company paid a premium of $8.4 million. See Footnote (M) to the Unaudited Consolidated Financial Statements for more information.
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 decreased by approximately $3.3 million, or 17%, during the six months ended September 30, 2022. This was primarily due to the write off of approximately $6.1 million of debt issue costs related to our 4.500% Unsecured Senior Notes due in 2026 and the Term Loan Credit Agreement during the six months ended September 30, 2021. This was partially offset by $3.3 million of increased interest expense in the current-year due to higher interest rates and average netbalance outstanding under our Revolving Credit Facility. See Footnote (M) to the Unaudited Consolidated Financial Statements for more information.
EARNINGS BEFORE INCOME TAXES
Earnings Before Income Taxes increased to $314.7 million during the six months ended September 30, 2022, primarily because of higher Gross Profit and lower Interest Expense, net. This was partially offset by higher Corporate General and Administrative Expense and lower Equity in Earnings of Unconsolidated Joint Venture.
INCOME TAX EXPENSE
Income Tax Expense was $70.7 million for the six months ended September 30, 2022, compared with $55.6 million for the six months ended September 30, 2021. The effective tax rate remained consistent with the prior-year period at 22%.
NET EARNINGS
Net Earnings increased 24% to $244.0 million for the six months ended September 30, 2022, as shown in the table above.
26
Three AND SIX MONTHS ENDED SEPTEMBER 30, 2022 vs. three AND SIX MONTHS ENDED SEPTEMBER 30, 2021 BY SEGMENT
The following presents results within our two business sectors for the three and six months ended September 30, 2022, and 2021. Revenue and operating results are organized by sector and discussed by individual business segment within each respective business sector.
Heavy Materials
CEMENT (1)
|
| For the Three Months Ended September 30, |
|
|
|
|
| For the Six Months Ended September 30, |
|
|
|
| ||||||||||||
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
| ||||||
|
| (in thousands, except per ton information) |
|
|
|
|
| (in thousands, except per ton information) |
|
|
|
| ||||||||||||
Gross Revenue, including Intersegment and Joint Venture |
| $ | 319,460 |
|
| $ | 288,324 |
|
|
| 11 | % |
| $ | 603,976 |
|
| $ | 558,579 |
|
|
| 8 | % |
Less Intersegment Revenue |
|
| (12,361 | ) |
|
| (5,223 | ) |
|
| 137 | % |
|
| (18,652 | ) |
|
| (13,056 | ) |
|
| 43 | % |
Less Joint Venture Revenue |
|
| (25,130 | ) |
|
| (26,926 | ) |
|
| (7 | )% |
|
| (51,445 | ) |
|
| (49,617 | ) |
|
| 4 | % |
Gross Revenue, as reported |
| $ | 281,969 |
|
| $ | 256,175 |
|
|
| 10 | % |
| $ | 533,879 |
|
| $ | 495,906 |
|
|
| 8 | % |
Freight and Delivery Costs billed to Customers |
|
| (18,737 | ) |
|
| (19,610 | ) |
|
| (4 | )% |
|
| (36,012 | ) |
|
| (38,652 | ) |
|
| (7 | )% |
Net Revenue |
| $ | 263,232 |
|
| $ | 236,565 |
|
|
| 11 | % |
| $ | 497,867 |
|
| $ | 457,254 |
|
|
| 9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Sales Volume (M Tons) |
|
| 2,145 |
|
|
| 2,198 |
|
|
| (2 | )% |
|
| 4,138 |
|
|
| 4,234 |
|
|
| (2 | )% |
Average Net Sales Price, per ton (2) |
| $ | 132.50 |
|
| $ | 117.78 |
|
|
| 12 | % |
| $ | 130.24 |
|
| $ | 117.09 |
|
|
| 11 | % |
Operating Margin, per ton |
| $ | 46.05 |
|
| $ | 40.38 |
|
|
| 14 | % |
| $ | 38.94 |
|
| $ | 35.73 |
|
|
| 9 | % |
Operating Earnings |
| $ | 98,779 |
|
| $ | 88,750 |
|
|
| 11 | % |
| $ | 161,127 |
|
| $ | 151,297 |
|
|
| 6 | % |
(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.
Three months ended September 30, 2022
Cement Revenue was $319.5 million, an 11% increase, for the three months ended September 30, 2022. The increase was primarily due to higher gross sales prices, waswhich improved Cement Revenue by approximately $1.2$32.6 million, partially offset by decreasedlower Sales Volume, which reduced Revenue by $1.4 million.
Cement Operating Earnings increased $10.0 million to $98.8 million for the three months ended September 30, 2022. The increase was due to higher gross sales volumesprices of $32.6 million. This was partially offset by lower Sales Volume of $0.8 million and increasedhigher operating costs of approximately $0.7 million and $0.4 million, respectively.$21.8 million. The increase in operating costs was primarily due to higher energy and maintenance and purchased raw materials, which increased bycosts of approximately $0.3$16.4 million and $0.1$5.9 million, respectively. Operating Margin remained consistent at 31% primarily because higher gross sales prices were offset by increased operating costs.
Six months ended September 30, 2022
Equity in earnings of our unconsolidated joint venture increased $1.8Cement Revenue was $604.0 million, or 6%,an 8% increase, for the ninesix months ended December 31, 2017.September 30, 2022. The increase iswas primarily due to a 3% increase in average nethigher gross sales prices, partially offsetwhich improved Cement Revenue by decreased sales volumes and increased operating costs. The impact of the increase average net sales prices was approximately $2.5$52.0 million, partially offset by decreasedlower Sales Volume, which reduced Revenue by $6.6 million.
Cement Operating Earnings increased $9.8 million to $161.1 million for the six months ended September 30, 2022. The increase was due to higher gross sales volumesprices of $52.0 million. This was partially offset by lower Sales Volume of $3.7 million and increasedhigher operating costs of approximately $0.2 million and $0.4 million, respectively.$38.5 million. The increase in operating costs was primarily due to higher energy and purchased raw materials, which both increased by approximately $0.4 million, partially offset by decreased maintenance costs of approximately $0.5 million. Sales volumes were adversely impacted during the fiscal second quarter by wet weather and hurricane flooding along the Texas Gulf coast.
Corporate General and Administrative. Corporate general and administrative expenses increased 8% for the three months ended December 31, 2017. The increase in corporate general and administrative expenses is due primarily to increases of approximately $1.1 and $0.2 million in incentive compensation and legal, respectively, partially offset by a decrease in acquisition and business development costs of approximately $0.5 million.
Corporate general and administrative expenses increased 6% for the nine months ended December 31, 2017. The increase in corporate general and administrative expenses is due primarily to increases of approximately $1.9 million in incentive compensation costs, partially offset by acquisition and business development costs of approximately $0.3 million.
Legal Settlement. The legal settlement is related to the settlement of the domestic wallboard anti-trust class action cases. During December 2017 and January 2018, we entered into the Direct Purchaser and Indirect Purchaser Settlement Agreements, respectively, under which we agreed to pay a total of approximately $39.1 million to settle all outstanding claims under these class action cases. At December 31, 2017 we accrued the total amount of the two settlements and these amounts are expected to be paid in the next twelve months.
Other Non-Operating Income. Other income consists of a variety of items that are non-segment operating in nature and includes non-inventoried aggregates income, gypsum wallboard distribution center income, asset sales and other miscellaneous income and cost items.
Interest Expense, Net. Interest expense, net, increased approximately $0.5 million during the three months ended December 31, 2017. The increase in interest expense, net is due primarily to increased borrowings under our Credit Facility, which increased interest expense by approximately $1.2 million, partially offset by lower interest on our Private Placement Senior Unsecured Notes, which declined by approximately $0.8 million. The decrease in interest related to the Private Placement Senior Unsecured Notes is due to the maturing of approximately $81.2 million during the fiscal third quarter. The increase in the Credit Facility is due primarily to the funding of the Fairborn and Wildcat Acquisitions, and the payment of the maturing Private Placement Senior Unsecured Notes.
Interest expense, net, increased approximately $5.8 million during the nine months ended December 31, 2017. The increase in interest expense, net is due primarily to our issuance of $350.0 million of 4.5% senior notes during August 2016, which increased interest expense by approximately $5.2 million. The remaining increase is due to an increase of approximately $1.5 million in interest from our Credit Facility, partially offset be a decrease of approximately $1.0 million in interest from our Private Placement Senior Unsecured Notes. The decrease in interest related to the Private Placement Senior Unsecured Notes is due to notes maturing, while the increase in the Credit Facility is due primarily to the funding of the Fairborn and Wildcat Acquisitions, and the payment of the maturing Private Placement Senior Unsecured Notes.
Earnings Before Income Taxes. Earnings before income taxes were $51.4$24.4 million and $83.7$14.8 million, during the three months ended December 31, 2017 and 2016, respectively. The decrease wasOperating Margin remained consistent at 27%, primarily due to a legal settlement of approximately $39.1 million, partiallybecause higher operating costs were offset by increased gross profit of approximately $7.2 million.sales prices.
Earnings before income taxes were $223.2 million and $240.3 million during the nine
27
CONCRETE AND AGGREGATES
|
| For the Three Months Ended September 30, |
|
|
|
|
| For the Six Months Ended September 30, |
|
|
|
| ||||||||||||
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
| ||||||
|
| (in thousands, except net sales prices) |
|
|
|
|
| (in thousands, except net sales prices) |
|
|
|
| ||||||||||||
Gross Revenue, as reported |
| $ | 69,613 |
|
| $ | 52,750 |
|
|
| 32 | % |
| $ | 131,231 |
|
| $ | 97,504 |
|
|
| 35 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Sales Volume |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
M Cubic Yards of Concrete |
|
| 451 |
|
|
| 398 |
|
|
| 13 | % |
|
| 857 |
|
|
| 746 |
|
|
| 15 | % |
M Tons of Aggregate |
|
| 912 |
|
|
| 481 |
|
|
| 90 | % |
|
| 1,707 |
|
|
| 842 |
|
|
| 103 | % |
Average Net Sales Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Concrete - Per Cubic Yard |
| $ | 134.28 |
|
| $ | 120.15 |
|
|
| 12 | % |
| $ | 131.65 |
|
| $ | 119.23 |
|
|
| 10 | % |
Aggregates - Per Ton |
| $ | 10.87 |
|
| $ | 10.40 |
|
|
| 5 | % |
| $ | 11.05 |
|
| $ | 10.20 |
|
|
| 8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Earnings |
| $ | 7,276 |
|
| $ | 7,539 |
|
|
| (3 | )% |
| $ | 13,008 |
|
| $ | 12,883 |
|
|
| 1 | % |
Three months ended December 31, 2017September 30, 2022
Concrete and 2016, respectively. The decrease was primarily dueAggregates Revenue increased 32% to a legal settlement of approximately $39.1 million and increased corporate general and administrative and interest expenses of approximately $1.6 million and $5.8 million, respectively, partially offset by increased gross profit and equity in earnings of joint venture of approximately $26.9 million and $1.8 million, respectively.
Income Taxes. Income tax expense was $3.6 million and $78.4 million for the nine months ended December 31, 2017 and 2016, respectively. The tax rate for fiscal 2018 was approximately 2%, which is less than the 33% tax rate for fiscal 2017. The reduction in the rate was primarily due to the discrete income tax benefit related to the change in corporate tax rates which reduced deferred tax liabilities by approximately $61.0 million and $2.5 million realized during fiscal 2018 related to share-based compensation. See Footnote (K) to the Unaudited Consolidated Financial Statements for more information on the change in corporate tax rates.
Net Earnings and Diluted Earnings per Share. Net earnings for the quarter ended December 31, 2017 of approximately $101.4 million increased 80%. Diluted earnings per share for the three months ended December 31, 2017 were $2.08, compared to diluted earnings per share of $1.17 for the three months ended December 31, 2016.
Net earnings for the nine months ended December 31, 2017 of approximately $219.6 million increased 36%. Diluted earnings per share for the nine months ended December 31, 2017 were $4.52, compared to diluted earnings per share of $3.35 for the nine months ended December 31, 2016.
The following table highlights certain operating information related to our five business segments:
|
| For the Three Months Ended December 31, |
|
|
|
|
|
| For the Nine Months Ended December 31, |
|
|
|
|
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| Percentage |
|
| 2017 |
|
| 2016 |
|
| Percentage |
| ||||||
|
| (In thousands except per unit) |
|
| Change |
|
| (In thousands except per unit) |
|
| Change |
| ||||||||||||
Revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement (2) |
| $ | 161,601 |
|
| $ | 138,047 |
|
|
| 17 | % |
| $ | 536,186 |
|
| $ | 449,650 |
|
| 19% |
| |
Gypsum Wallboard |
|
| 133,348 |
|
|
| 121,504 |
|
|
| 10 | % |
|
| 383,229 |
|
|
| 357,689 |
|
| 7% |
| |
Recycled Paperboard |
|
| 48,389 |
|
|
| 41,254 |
|
|
| 17 | % |
|
| 138,161 |
|
|
| 128,528 |
|
| 7% |
| |
Oil and Gas Proppants |
|
| 21,947 |
|
|
| 7,124 |
|
|
| 208 | % |
|
| 62,879 |
|
|
| 18,851 |
|
| 234% |
| |
Concrete and Aggregates |
|
| 38,742 |
|
|
| 40,843 |
|
|
| (5 | %) |
|
| 126,092 |
|
|
| 114,734 |
|
| 10% |
| |
Other |
|
| 4,445 |
|
|
| — |
|
|
| — |
|
|
| 4,445 |
|
|
| — |
|
| — |
| |
Gross Revenues |
|
| 408,472 |
|
|
| 348,772 |
|
|
| 17 | % |
|
| 1,250,992 |
|
|
| 1,069,452 |
|
| 17% |
| |
Less: Intersegment Revenues |
|
| (23,575 | ) |
|
| (20,468 | ) |
|
| 15 | % |
|
| (69,489 | ) |
|
| (59,123 | ) |
| 18% |
| |
Less: Joint Venture Revenues |
|
| (25,526 | ) |
|
| (25,909 | ) |
|
| (1 | %) |
|
| (79,696 | ) |
|
| (77,772 | ) |
| 2% |
| |
|
| $ | 359,371 |
|
| $ | 302,395 |
|
|
| 19 | % |
| $ | 1,101,807 |
|
| $ | 932,557 |
|
| 18% |
| |
Sales Volume |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement (M Tons) (2) |
|
| 1,339 |
|
|
| 1,198 |
|
|
| 12 | % |
|
| 4,420 |
|
|
| 3,891 |
|
| 14% |
| |
Gypsum Wallboard (MMSF) |
|
| 709 |
|
|
| 646 |
|
|
| 10 | % |
|
| 2,014 |
|
|
| 1,883 |
|
| 7% |
| |
Recycled Paperboard (M Tons) |
|
| 81 |
|
|
| 76 |
|
|
| 7 | % |
|
| 239 |
|
|
| 245 |
|
| (2%) |
| |
Concrete (M Yards) |
|
| 303 |
|
|
| 348 |
|
|
| (13 | %) |
|
| 993 |
|
|
| 950 |
|
| 5% |
| |
Aggregates (M Tons) |
|
| 820 |
|
|
| 906 |
|
|
| (9 | %) |
|
| 2,764 |
|
|
| 2,877 |
|
| (4%) |
| |
Frac Sand (M Tons) |
|
| 379 |
|
|
| 115 |
|
|
| 230 | % |
|
| 1,083 |
|
|
| 299 |
|
| 262% |
| |
Average Net Sales Prices (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement (2) |
| $ | 106.83 |
|
| $ | 100.88 |
|
|
| 6 | % |
| $ | 106.91 |
|
| $ | 100.45 |
|
| 6% |
| |
Gypsum Wallboard |
|
| 151.13 |
|
|
| 153.34 |
|
|
| (1 | %) |
|
| 154.52 |
|
|
| 155.06 |
|
| (0)% |
| |
Recycled Paperboard |
|
| 581.95 |
|
|
| 524.75 |
|
|
| 11 | % |
|
| 564.46 |
|
|
| 508.00 |
|
| 11% |
| |
Concrete |
|
| 100.71 |
|
|
| 94.38 |
|
|
| 7 | % |
|
| 100.06 |
|
|
| 94.08 |
|
| 6% |
| |
Aggregates |
|
| 9.68 |
|
|
| 8.52 |
|
|
| 14 | % |
|
| 9.37 |
|
|
| 8.49 |
|
| 10% |
| |
Operating Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement (2) |
| $ | 52,523 |
|
| $ | 45,307 |
|
|
| 16 | % |
| $ | 154,456 |
|
| $ | 127,623 |
|
| 21% |
| |
Gypsum Wallboard |
|
| 39,841 |
|
|
| 41,075 |
|
|
| (3 | %) |
|
| 123,237 |
|
|
| 122,109 |
|
| 1% |
| |
Recycled Paperboard |
|
| 10,903 |
|
|
| 9,380 |
|
|
| 16 | % |
|
| 22,358 |
|
|
| 30,827 |
|
| (27%) |
| |
Oil and Gas Proppants |
|
| (1,007 | ) |
|
| (1,726 | ) |
|
| 42 | % |
|
| (4,787 | ) |
|
| (11,728 | ) |
| 59% |
| |
Concrete and Aggregates |
|
| 3,414 |
|
|
| 4,588 |
|
|
| (26 | %) |
|
| 15,054 |
|
|
| 13,085 |
|
| 15% |
| |
Other |
|
| 264 |
|
|
| — |
|
|
| — |
|
|
| 264 |
|
|
| — |
|
| — |
| |
Net Operating Earnings |
| $ | 105,938 |
|
| $ | 98,624 |
|
|
| 7 | % |
| $ | 310,582 |
|
| $ | 281,916 |
|
| 10% |
|
|
|
|
|
|
|
Cement Operations. Cement revenues increased 17% to $161.6$69.6 million for the three months ended December 31, 2017. Approximately $21.7September 30, 2022. The ConAgg Acquisition contributed $13.9 million of Revenue during the three months ended September 30, 2022. Excluding the ConAgg Acquisition, Revenue increased by $2.9 million, or 5%. The increase in revenues was related to the Fairborn Acquisition. The remaining increase is due to increased average nethigher gross sales prices, which positively impacted revenuesimproved Revenue by approximately $5.4$5.3 million, partially offset by lower Sales Volume, primarily in Concrete, of $2.4 million.
Operating Earnings decreased 3% to approximately $7.3 million. Excluding the ConAgg Acquisition, Operating Earnings decreased by $2.0 million to $5.5 million. The decrease in Operating Earnings was due to increased operating costs and lower Sales Volume of $7.0 million and $0.3 million, respectively. This was partially offset by higher gross sales volumes,prices of $5.3 million. The increase in operating costs was primarily due to higher materials and delivery expenses of approximately $3.6 million and $2.3 million, respectively.
Sixmonths ended September 30, 2022
Concrete and Aggregates Revenue increased 35% to $131.2 million for the six months ended September 30, 2022. The ConAgg Acquisition contributed $24.9 million of Revenue during the six months ended September 30, 2022. Excluding the ConAgg Acquisition, Revenue was up 9% to $8.8 million. The increase was due to higher gross sales prices and Sales Volume in Aggregates, which adversely impacted revenuesincreased Revenue by $9.1 million and $1.1 million, respectively, partially offset by lower Sales Volume in Concrete of $1.4 million.
Operating Earnings decreased 1% to approximately $3.5$13.0 million. Excluding the ConAgg Acquisition, Operating Earnings decreased by $1.5 million to $11.4 million. The decline in Operating Earnings was due to increased operating costs of $10.6 million. This was partially offset by higher gross sales prices of $9.1 million. The increase in operating costs was primarily due to higher materials and delivery expenses of approximately $6.1 million and $3.7 million, respectively.
Cement operating earnings increased 16%
28
Light Materials
GYPSUM WALLBOARD
|
| For the Three Months Ended September 30, |
|
|
|
|
| For the Six Months Ended September 30, |
|
|
|
| ||||||||||||
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
| ||||||
|
| (in thousands, except per MSF information) |
|
|
|
|
| (in thousands, except per MSF information) |
|
|
|
| ||||||||||||
Gross Revenue, as reported |
| $ | 224,638 |
|
| $ | 172,985 |
|
|
| 30 | % |
| $ | 440,965 |
|
| $ | 339,252 |
|
|
| 30 | % |
Freight and Delivery Costs billed to Customers |
|
| (41,535 | ) |
|
| (32,463 | ) |
|
| 28 | % |
|
| (83,540 | ) |
|
| (63,785 | ) |
|
| 31 | % |
Net Revenue |
| $ | 183,103 |
|
| $ | 140,522 |
|
|
| 30 | % |
| $ | 357,425 |
|
| $ | 275,467 |
|
|
| 30 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Sales Volume (MMSF) |
|
| 783 |
|
|
| 736 |
|
|
| 6 | % |
|
| 1,581 |
|
|
| 1,499 |
|
|
| 5 | % |
Average Net Sales Price, per MSF (1) |
| $ | 233.70 |
|
| $ | 190.93 |
|
|
| 22 | % |
| $ | 226.07 |
|
| $ | 183.73 |
|
|
| 23 | % |
Freight, per MSF |
| $ | 53.05 |
|
| $ | 44.11 |
|
|
| 20 | % |
| $ | 52.84 |
|
| $ | 42.55 |
|
|
| 24 | % |
Operating Margin, per MSF |
| $ | 114.64 |
|
| $ | 90.12 |
|
|
| 27 | % |
| $ | 109.95 |
|
| $ | 86.45 |
|
|
| 27 | % |
Operating Earnings |
| $ | 89,761 |
|
| $ | 66,331 |
|
|
| 35 | % |
| $ | 173,829 |
|
| $ | 129,584 |
|
|
| 34 | % |
(1) Net of freight per MSF.
Three months ended September 30, 2022
Gypsum Wallboard Revenue was up 30% to $52.5$224.6 million for the three months ended December 31, 2017. Approximately $6.5 million of the increase in operating earnings was related to the Fairborn Acquisition.September 30, 2022. The remaining increase in operating earningsgain was due primarily to increased average nethigher gross sales prices and Sales Volume, which positively impacted operating earningsincreased Revenue by approximately $5.4 million, partially offset by lower sales volumes and increased operating costs of approximately $1.3$40.6 million and $3.4$11.0 million, respectively. The increase in operating costs is
due primarily to increased energy and purchased raw materials costs of approximately $1.6 million and $0.9 million, respectively. The operating margin wasOur market share remained relatively flat at approximately 33%consistent during the three months ended December 31, 2017.September 30, 2022.
Cement revenuesOperating Earnings increased 19%35% to $536.2$89.8 million, for the nine months ended December 31, 2017. Approximately $69.1 millionprimarily because of thehigher gross sales prices and Sales Volume. The increase in revenues was related to the Fairborn Acquisition. The remaining increase in revenue is primarily due to increased average netgross sales prices whichand Sales Volume positively impacted revenuesaffected Operating Earnings by approximately $15.4$40.6 million partially offset be a decline in sales volumes which adversely impacted revenues by $1.2and $4.2 million, respectively.
Cement operating earnings increased 21% to $154.5 million for the nine months ended December 31, 2017. Approximately $20.4 million of the increase in operating earningsThis was related to the Fairborn Acquisition. The remaining increase in operating earnings was due primarily to increased average net sales prices, which positively impacted operating earnings by approximately $17.9 million, partially offset by decreased sales volumes and increasedhigher operating costs, which adversely impacted operating earningsaffected Operating Earnings by approximately $0.6$21.3 million. The higher operating costs were primarily related to freight, energy, and raw materials, which reduced Operating Earnings by approximately $6.9 million, $3.8 million, and $10.9$7.5 million, respectively. Approximately $3.5 million of the increase in operating cost was due to an outage at our Nevada Cement plant in connection with the installation of certain pollution control equipment. During the installation, kiln 1 was down for most of the first six months of fiscal 2018, while kiln 2 was down during the fiscal second quarter. The remaining increase is due to increased purchased cement and energy costs of approximately $5.7 million and $1.5 million, respectively. The operating marginOperating Margin increased to 29% from 28% during the nine months ended December 31, 2017, primarily due to increased sales average net sales prices, partially offset by increased operating costs.
Gypsum Wallboard Operations. Sales revenues increased 10% to $133.3 million40% for the three months ended December 31, 2017,September 30, 2022, primarily due to a 10% increase inbecause of higher gross sales volumes, partiallyprices, partly offset by a 1% decrease in average net sales prices. The increase in sales volumes positively impacted revenue by approximately $11.9 million, partially offset by a $0.1 million decrease in sales revenue due to lower average net sales prices. The increased sales volumes are primarily due to increased construction activity in fiscal 2018. Our market share was essentially unchanged during the last year.
Operating earnings decreased to $39.8 million for the three months ended December 31, 2017, primarily due to the increase inhigher operating costs, which adversely impacted operating earnings by approximately $5.2 million. The increase in operating costs is primarily related to freight, paper and maintenance costs, which adversely impacted operating earnings by approximately $1.8 million, $1.9 million and $0.8 million, respectively. The increase in operating costs was the primary reason our operating margin for the fiscal quarter declined to 30%, compared to 34% in the prior year.costs. Fixed costs are not a significant partportion of the overall cost of wallboard; therefore, changes in utilization have a relatively minor impact on our operating cost per unit.
Sales revenuesSix months ended September 30, 2022
Gypsum Wallboard Revenue increased 7%30% to $383.2$441.0 million for the ninesix months ended December 31, 2017.September 30, 2022. The increasegain was primarily due to a 7% increase in sales volumes, as average nethigher gross sales prices wereand Sales Volume, which increased Revenue by approximately $83.1 million and $18.6 million, respectively. Our market share remained relatively flat.consistent during the six months ended September 30, 2022.
Operating Earnings increased 34% to $173.8 million, primarily because of higher gross sales prices and Sales Volume. The increase in gross sales volumesprices and Sales Volume positively impacted revenuesaffected Operating Earnings by approximately $25.5 million. The increased sales volumes are primarily due to increased construction activity in fiscal 2018. Our market share$83.2 million and $7.1 million, respectively. This was essentially unchanged during the last year.
Operating earnings increased to $123.2 million for the nine months ended December 31, 2017, primarily due to the increase in our sales volumes, which positively impacted operating earnings by approximately $9.5 million, partially offset by increasedhigher operating costs, which adversely impacted operating earningsaffected Operating Earnings by approximately $8.0$46.0 million. The increase inhigher operating costs waswere primarily duerelated to costs incurred in the start-up of our Bernalillo facility, freight, paperenergy, and energy expenses,raw materials, which adversely impacted operating earningsreduced Operating Earnings by approximately $2.5$16.3 million, $1.8 million, $4.9$9.7 million, and $1.7 million. The increase in operating costs was the primary reason our operating margin$16.7 million, respectively. Operating Margin increased to 39% for the fiscal quarter declined to 32%, compared to 34% in the prior year.six months ended September 30, 2022, primarily because of higher gross sales prices, partly offset by higher operating costs. Fixed costs are not a significant partportion of the overall cost of wallboard; therefore, changes in utilization have a relatively minor impact on our operating cost per unit.
29
RECYCLED PAPERBOARD
|
| For the Three Months Ended September 30, |
|
|
|
|
| For the Six Months Ended September 30, |
|
|
|
| ||||||||||||
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
|
| 2022 |
|
| 2021 |
|
| Percentage Change |
| ||||||
|
| (in thousands, except per ton information) |
|
|
|
|
| (in thousands, except per ton information) |
|
|
|
| ||||||||||||
Gross Revenue, including intersegment |
| $ | 53,673 |
|
| $ | 47,798 |
|
|
| 12 | % |
| $ | 107,746 |
|
| $ | 91,065 |
|
|
| 18 | % |
Less intersegment Revenue |
|
| (24,825 | ) |
|
| (20,014 | ) |
|
| 24 | % |
|
| (47,366 | ) |
|
| (38,263 | ) |
|
| 24 | % |
Gross Revenue, as reported |
| $ | 28,848 |
|
| $ | 27,784 |
|
|
| 4 | % |
| $ | 60,380 |
|
| $ | 52,802 |
|
|
| 14 | % |
Freight and Delivery Costs billed to Customers |
|
| (2,469 | ) |
|
| (2,123 | ) |
|
| 16 | % |
|
| (5,018 | ) |
|
| (3,571 | ) |
|
| 41 | % |
Net Revenue |
| $ | 26,379 |
|
| $ | 25,661 |
|
|
| 3 | % |
| $ | 55,362 |
|
| $ | 49,231 |
|
|
| 12 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Sales Volume (M Tons) |
|
| 85 |
|
|
| 87 |
|
|
| (2 | )% |
|
| 169 |
|
|
| 171 |
|
|
| (1 | )% |
Average Net Sales Price, per ton (1) |
| $ | 603.62 |
|
| $ | 524.54 |
|
|
| 15 | % |
| $ | 607.73 |
|
| $ | 511.76 |
|
|
| 19 | % |
Freight, per ton |
| $ | 29.05 |
|
| $ | 24.40 |
|
|
| 19 | % |
| $ | 29.69 |
|
| $ | 20.88 |
|
|
| 42 | % |
Operating Margin, per ton |
| $ | 65.64 |
|
| $ | 11.28 |
|
|
| 482 | % |
| $ | 55.59 |
|
| $ | 25.25 |
|
|
| 120 | % |
Operating Earnings |
| $ | 5,579 |
|
| $ | 981 |
|
|
| 469 | % |
| $ | 9,395 |
|
| $ | 4,318 |
|
|
| 118 | % |
(1) Net of freight per ton.
Three months ended September 30, 2022
Recycled Paperboard Operations. RevenuesRevenue increased 17%12% to $48.4$53.7 million during the three months ended December 31, 2017.September 30, 2022. The increase in revenues is due primarily to the 11% increase in average net sales prices and 7% increase in sales volume. The increase in average net sales prices and sales volumes positively impacted revenues by approximately $4.6 million and $2.5 million, respectively.
Operating earnings increased 16% to $10.9 million for the third quarter of fiscal 2018. The increase in operating earnings is primarily due to increased average nets sales prices and sales volumes, which positively impacted operating earnings by approximately $4.6 million and $0.6 million, respectively, partially offset by increased operating costs, which adversely impacted operating earnings by approximately $3.7 million. The increase in operating costs is primarily related to higher input costs, which adversely impacted operating earnings by approximately $3.5 million. Our operating margin for the quarter remained consistent at 23%.
Revenues increased 7% to $138.2 million during the nine months ended December 31, 2017. The increase in revenues is due primarily to the 11% increase in average net sales prices, partially offset by a 2% reduction in sales volume. The increase in average net sales prices positively impacted revenues by approximately $12.8 million, partially offset by a $3.1 million decrease in sales revenues due to lower sales volumes. The decrease in sales volumes is primarily due to a change in timing of third-party purchases.
Operating earnings decreased 27% to $22.4 million for the nine months ended December 31, 2017. The decrease in operating earnings is primarily due to decreased sales volumes and increased operating costs, which adversely impacted operating earnings by approximately $0.8 million and $20.5 million, respectively, partially offset by increased average net sales price, which positively impacted operating earnings by approximately $12.8 million. The increase in operating costs is primarily related to higher input costs, which adversely impacted operating earnings by approximately $18.8 million. The increase in operating costs was the primary reason operating margin decreased during fiscal 2018 to 16% from 24%.
Oil and Gas Proppants. Revenues for our oil and gas proppants segment increased 208% to approximately $21.9 million during the three months ended December 31, 2017. The increase in sales revenue was primarily due to an increase in sales volumes, which positively impacted revenues by approximately $16.4 million, partially offset by decreasedhigher gross sales prices, that adversely impacted revenues by approximately $1.5 million. The decrease in gross sales prices was offset by decreased freight expenses, which resulted in an increase in average net sales prices for the quarter.
Operating loss for the three months ended December 31, 2017 decreased 42% to approximately $1.0 million. Operating loss in the three months ended December 31, 2016 was positively impacted by a $4.1 million gain on settlement associated with one of our long-term customer contracts. Excluding this gain, operating loss declined in the current quarter by approximately $4.8 million. The reduction in operating loss was primarily due to increased sales volumes and lower operating costs, which positively impacted earningsaffected Revenue by $2.1 million and $4.2 million, respectively,$7.1 million. This was partially offset by lower averageSales Volume, which reduced Revenue by $1.2 million. Higher gross sales prices were related to the pricing provisions in our long-term sales agreements.
Operating Earnings increased 469% to $5.6 million, primarily because of higher gross sales prices, which adversely impacted earningsincreased Operating Earnings by approximately $1.5$7.1 million. The increase in sales volume is due to increased demand for frac sand, and the decrease in operating costs is due primarily to lower freight expense, which positively impacted operating earnings by approximately $3.5 million.
Revenues for our oil and gas proppants segment increased 234% to approximately $62.9 million during the nine months ended December 31, 2017. The increase in sales revenueThis was due to an increase in sales volumes and average net sales prices, which positively impacted revenues by approximately $43.8 million and $0.3 million, respectively.
Operating loss for the nine months ended December 31, 2017 decreased 59% to approximately $4.8 million. Operating loss in the nine months ended December 31, 2016 was positively impacted by a $12.9 million gain on settlements associated with our long-term customer contracts and a $2.0 million gain on the forfeiture of a customer prepayment. These gains were offset by a $1.3 million write-off of a customer contract and an $8.5 million write-down of finished and raw sand inventories at our Corpus Christi location. Excluding the net gain
related to these transactions, operating loss for the current nine months declined by approximately $12.1 million The reduction in operating loss was primarily due to increased sales volume and average net sales prices and lower operating costs, which positively impacted earnings by $0.8 million, $0.3 million and $11.0 million, respectively. The increase in sales volume is due to increased demand for frac sand and the decrease in operating costs is due primarily to lower freight expense, which positively impacted operating earnings by approximately $10.1 million.
Concrete and Aggregates Operations. Concrete and aggregates revenues decreased 5% to $38.7 million for the three months ended December 31, 2017. The primary reason for the decrease in revenue was the 13% and 9% decrease in sales volumes for concrete and aggregates, respectively, which adversely impacted revenues by approximately $4.9 million, partially offset by the 7%higher operating costs and 14% increase in average net sales prices for concrete and aggregates, respectively,lower Sales Volume, which positively impacted revenuesreduced Operating Earnings by approximately $2.8 million. Wet weather in our Austin region were negatively impacted sales volumes during the quarter.
Operating earnings decreased 26% to approximately $3.4 million for the three months ended December 31, 2017. Operating earnings were adversely impacted by decreased sales volumes and increased operating costs, which negatively impacted operating earnings by approximately $0.6$2.4 million and $3.5$0.1 million, respectively, partially offset by an increase in average net sales prices of approximately $2.8 million.respectively. The increase in operating costs was primarily duerelated to increased purchased materials, deliveryhigher input costs, namely energy, chemicals, and fixed costs,freight, which adversely impacted operating earningslowered Operating Earnings by approximately $0.2$1.8 million, $1.0$0.7 million, and $1.5$1.9 million, respectively.
Concrete and aggregates revenues increased 10% to $126.1 million for the nine months ended December 31, 2017. The primary reason for the increase in revenueThis was the 6% and 10% increase in average net sales prices for concrete and aggregates, respectively, which positively impacted revenues by approximately $8.0 million. Sales revenue was also positively impacted by the 5% increase in concrete sales volumes, partially offset by a 4% decline in aggregateslower fiber costs, which reduced operating costs by $2.0 million. Operating Margin increased to 10% because of higher gross sales volumes, of approximately $3.0 million.
Operating earnings increased 15% to approximately $15.1 million for the nine months ended December 31, 2017. Operating earnings were positively impacted by increased average net sales prices, and sales volumes, which positively impacted operating earnings by approximately $8.0 million and $0.2 million, respectively, partially offset by anhigher operating costs. 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.
Six months ended September 30, 2022
Recycled Paperboard Revenue increased 18% to $107.7 million during the six months ended September 30, 2022. The increase was primarily due to higher gross sales prices, which positively affected Revenue by $17.7 million, partially offset by lower Sales Volume of $0.9 million. Higher gross sales prices were related to the pricing provisions in our long-term sales agreements.
Operating Earnings increased 118% to $9.4 million, primarily because of higher gross sales prices, which increased Operating Earnings by $17.7 million. This was partially offset by higher operating costs ofand lower Sales Volume, which reduced Operating Earnings by approximately $6.3 million.$12.5 million and $0.1 million, respectively. The increase in operating costs was primarily duerelated to increased purchased materials, deliveryhigher input costs, namely fiber, energy, and maintenance costs,freight, which adversely impacted operating earningslowered Operating Earnings by approximately $1.7$3.3 million, $2.0$3.9 million, and $1.5$4.0 million, respectively. Operating Margin increased to 9% because of increased gross sales prices, partially offset by higher operating costs. 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.
30
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 reflected and 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 “CriticalCritical Accounting Policies and Estimates” can be found in our Annual Report. The five critical accounting policiesthree 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 relatingrelated to long-lived assets, goodwill, environmental liabilities, accounts receivable and income taxes.business combinations. Management has discussed the development and selection of these critical accounting policiesCritical 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 thethis 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.
31
Cash Flow.Flow
The following table provides a summary of our cash flows:
|
| For the Nine Months Ended December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
|
| (dollars in thousands) |
| |||||
Net Cash Provided by Operating Activities |
| $ | 275,140 |
|
| $ | 288,868 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
Capital Expenditures |
|
| (83,698 | ) |
|
| (34,043 | ) |
Acquisition Spending |
|
| (36,761 | ) |
|
| — |
|
Net Cash Used in Investing Activities |
|
| (120,459 | ) |
|
| (34,043 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
Decrease in Credit Facility |
|
| (40,000 | ) |
|
| (382,000 | ) |
Repayment of Senior Notes |
|
| (81,214 | ) |
|
| (8,000 | ) |
Issuance of Long-term Debt |
|
| — |
|
|
| 350,000 |
|
Payment of Debt Issuance Costs |
|
| — |
|
|
| (6,637 | ) |
Dividends Paid |
|
| (14,571 | ) |
|
| (14,500 | ) |
Shares Repurchased to Settle Employee Taxes on Stock Compensation |
|
| (2,607 | ) |
|
| (3,084 | ) |
Purchase and Retirement of Common Stock |
|
| (24,903 | ) |
|
| (60,013 | ) |
Proceeds from Stock Option Exercises |
|
| 23,729 |
|
|
| 20,137 |
|
Excess Tax Benefits from Share Based Payment Arrangements |
|
| — |
|
|
| 8,546 |
|
Net Cash Used in Financing Activities |
|
| (139,566 | ) |
|
| (95,551 | ) |
Net Increase in Cash |
| $ | 15,115 |
|
| $ | 159,274 |
|
|
| For the Six Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (dollars in thousands) |
| |||||
Net Cash Provided by Operating Activities |
| $ | 300,445 |
|
| $ | 261,462 |
|
Investing Activities |
|
|
|
|
|
| ||
Additions to Property, Plant, and Equipment |
|
| (43,249 | ) |
|
| (26,777 | ) |
Acquisition Spending |
|
| (158,451 | ) |
|
| — |
|
Net Cash Used in Investing Activities |
|
| (201,700 | ) |
|
| (26,777 | ) |
Financing Activities |
|
|
|
|
|
| ||
Increase in Credit Facility |
|
| 200,000 |
|
|
| 75,000 |
|
Proceeds from 2.500% Senior Unsecured Notes |
|
| — |
|
|
| 743,692 |
|
Repayment of 4.500% Senior Unsecured Notes |
|
| — |
|
|
| (350,000 | ) |
Repayment of Term Loan and Term Loan Credit Agreement |
|
| (2,500 | ) |
|
| (665,000 | ) |
Dividends Paid to Stockholders |
|
| (19,149 | ) |
|
| (10,547 | ) |
Purchase and Retirement of Common Stock |
|
| (210,398 | ) |
|
| (247,845 | ) |
Proceeds from Stock Option Exercises |
|
| 735 |
|
|
| 14,460 |
|
Loss on Early Retirement of Senior Notes |
|
| — |
|
|
| (8,407 | ) |
Payment of Debt Issuance Costs |
|
| (903 | ) |
|
| (7,985 | ) |
Shares Redeemed to Settle Employee Taxes on Stock Compensation |
|
| (1,806 | ) |
|
| (1,359 | ) |
Net Cash Used in Financing Activities |
|
| (34,021 | ) |
|
| (457,991 | ) |
Net Increase (Decrease) in Cash and Cash Equivalents |
| $ | 64,724 |
|
| $ | (223,306 | ) |
Net Cash flows from operating activities decreasedProvided by Operating Activities increased by $38.9 million to $275.1 million during nine months ended December 31, 2017, compared to $288.9$300.4 million during the similar period in 2016.six months ended September 30, 2022. This decreaseincrease was primarily attributable to higher Net Earnings, adjusted for non-cash charges, of approximately $50.0 million. This was partially offset by changes in working capital of $4.6 million and lower dividends from our Unconsolidated Joint Venture a decrease in cash from changes in workingof $6.5 million.
Working capital increased by $94.5 million to $329.6 million at September 30, 2022, compared with March 31, 2022. The increase was due to higher Cash and a decrease in adjustments from noncash activity, which adversely impacted cash flows byCash Equivalents of approximately $6.8 million, $31.9$64.7 million and $32.8 million, respectively,higher Accounts and Notes Receivable, net of approximately $56.3 million. This was partially offset by an increase in net income, which positively impacted cash flows by approximately $57.6 million. The decrease in cash flows from changes in working capital are primarily due to changes in accountslower Inventories and notes receivable, other assets and income taxes payable, which decreased cash flows by approximately $11.3 million, $12.3Income Tax Receivables of $10.9 million and $20.1$2.8 million, respectively, partially offset by increased cashflows from changes in accounts payableas well as higher Accounts Payable and accrued liabilitiesAccrued Liabilities, and inventoriesCurrent Portion of approximately $10.7Long-term Debt of $4.8 million and $1.1 million.
Working capital increased to $250.7 million at December 31, 2017, compared to $171.1 million at March 31, 2017, primarily due to the increased cash, accounts receivable and prepaid and other assets, and decreased accounts payable and current portion of long-term debt of approximately $15.1 million, $7.4 million, $15.5 million, $19.0 million and $81.2 million, respectively, partially offset by increased accrued liabilities and decreased inventory of approximately $46.0 million and $13.2$10.0 million, respectively. The increase in accounts and notes receivable is due primarily to increased revenues during the quarter. The decreasereduction in inventory iswas due to our normal sales cycle in which we build inventory in the winter months to meet demand in the spring and summer. The ConAgg Acquisition in April 2022 increased revenues and the installation of certain pollution control equipmentworking capital by approximately $9.0 million at our Nevada Cement facility during the first two quarters of fiscal 2018. September 30, 2022.
The increase in prepaid assets is dueAccounts Receivable at September 30, 2022, was primarily related to the changes in tax rates which resulted in an overpayment of quarterly taxes of approximately $14.5 million during the first nine months of fiscal
2018. The increase in accrued liabilities is due primarily to the $39.1 million settlement of the domestic wallboard anti-trust case.
The increase in accounts and notes receivable at December 31, 2017, is primarily due to the increase in sales revenuehigher Revenue during the three months ended December 31, 2017 asSeptember 30, 2022, compared towith the three months ended March 31, 2017.2022. As a percentage of quarterly sales generated infor the respective quarter, then ended, accounts receivableAccounts Receivable was approximately 40%38% at December 31, 2017September 30, 2022, and 49%43% at March 31, 2017.2022. Accounts Receivable related to the ConAgg Acquisition at September 30, 2022, was approximately $6.9 million. Management measures the change in accounts receivableAccounts 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.Accounts Receivable. No significant deterioration in the collectability of our accounts receivable in our construction products and building materials businessesAccounts Receivable was identified at December 31, 2017.September 30, 2022. Notes receivableReceivable are monitored on an individual basis, and no significant deterioration in the collectability of notes receivableour Notes Receivable was identified at December 31, 2017.September 30, 2022.
32
Our inventoryInventory balance at December 31, 2017September 30, 2022, declined by approximately $13.2$10.9 million from our inventory balance at March 31, 2017.2022. Excluding the ConAgg Acquisition, whose inventory consists mostly of Aggregates, our Inventory balance declined by $14.6 million. Within our inventory,Inventory, raw materials and materials-in-progress decreased by approximately $15.4$8.7 million and finished cement decreased by approximately $12.1 million. These declines were partially offset by an increaseincreases in repair partsRepair Parts and suppliesSupplies of $3.0$6.9 million and Fuel and Coal $2.0 million. The decline in raw materials and materials-in-progress and 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 increase in repair parts inventory was primarily due primarily to the decline in clinker production atbuild-up of inventory necessary for our Nevada Cement facility, in which both kilns were down for extended periods duringscheduled outages over the first two quarters of fiscal 2018 in connection with the installation of certain pollution control equipment.next several months. The largest individual balance in our inventoryInventory 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 due tobecause our products beingare basic construction materials.
Net cash usedCash Used in investing activitiesInvesting Activities during the ninesix months ended December 31, 2017September 30, 2022, was approximately $120.5$201.7 million, compared to net cash used in investing activities of approximately $34.1with $26.8 million during the similarsame period in 2016,2021, an increase of $86.4approximately $174.9 million. The increase was primarily related to the Acquisition Spending of $158.5 million for the ConAgg Acquisition and the Terminal Acquisitions in cash used in investing activities is primarilyfiscal 2023. The remaining increase was due to the Wildcat Acquisitionpurchase of reserves for our Concrete and capital expenditures in our oil and gas proppants, cement and gypsum wallboard segments, which increased cash used in investing activities by approximately $34.1 million, $26.8 million, $12.9 million and $10.3 million, respectively. The increase in capital expenditures in the oil and gas proppants segment was related to the start-up of the build out of our Utica, Illinois facility, which will include the addition of a dry plant and distribution system. The total cost of the buildout is estimated at approximately $70.0 million, and is expected to be competed in the summer of 2018. The increase in capital expenditures in our gypsum wallboard segment is primarily due to the recommissioning of our Bernalillo, New Mexico wallboard manufacturing facility, which began production in September 2017. We anticipate spending between $30.0 million and $35.0 million on sustaining capital expenditures for all of our businesses during fiscal 2018. Aggregates business.
Net cash used in financing activitiesCash Used In Financing Activities was approximately $139.6$34.0 million during the ninesix months ended December 31, 2017,September 30, 2022, compared to net cash used in financing activities of approximately $95.6with $458.0 million during the similar period in 2016.six months ended September 30, 2021. The $424.0 million decrease was primarily related to higher borrowings, net of repayments, of $393.8 million and lower amounts paid for early termination of debt, debt issuance costs, and share repurchases of $8.4 million, $7.1 million, and $37.4 million, respectively. This $44.0 million increase in net cash used in financing activities is primarily due to the $74.6 million increase in the repayment of long-term debt,was partially offset by a $35.1increases in Dividends Paid to Shareholders of $8.6 million reduction in the repurchase and retirement of common stock and increasedlower proceeds from exercise of stock options of approximately $3.7$13.7 million.
Our debt-to-capitalization ratio and net-debt-to-capitalization ratio was 28.5%were 49.7% and 27.8%47.8%, respectively, at December 31, 2017,September 30, 2022, compared to 36.3%with 45.6% and 36.1%45.1%, respectively, at March 31, 2017.2022.
Debt Financing Activities.Activities
Below is a summary of the Company’s outstanding debt facilities at September 30, 2022:
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 borrowing capacity of our Revolving Credit Facility
We have a $500.0 is $750.0 million revolving credit facility (the “Credit Facility”), includinguntil May 5, 2027. The Revolving Credit Facility also includes a swingline loan sublimit of $25.0 million, which terminates on August 2, 2021. Borrowings under the Credit Facility are guaranteed by substantially all of the Company’s subsidiaries. At the option of the Company, outstanding principal amounts on the Credit Facility bear interest at a variable rate equal to (i) The London Interbank Offered
Rate (“LIBOR”) for the selected period, plus an applicable rate (ranging from 100 to 225 basis points), which is to be established quarterly based upon the Company’s ratio of consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, to the Company’s consolidated indebtedness (the “Leverage Ratio”), or (ii) an alternative base rate which is the higher of (a) the prime rate or (b) the federal funds rate plus 1⁄2% per annum plus an applicable rate (ranging from 0 to 125 basis points). Interest payments are payable, in the case of loans bearing interest at a rate based on the federal funds rate, quarterly, or in the case of loans bearing interest at a rate based on LIBOR, at the end of the applicable interest period. The Company is also required to pay a commitment fee on unused available borrowings under the Credit Facility ranging from 10 to 35 basis points depending upon the Leverage Ratio. The Credit Facility contains customary covenants that restrict our ability to incur additional debt, encumber our assets, sell assets, make or enter into certain investments, loans or guaranties and enter into sale and leaseback arrangements. The Credit Facility also requires us to maintain a consolidated indebtedness ratio (calculated as consolidated indebtedness to consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions) of 3.5:1.0 or less and an interest coverage ratio (consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions to consolidated interest expense) of at least 2.5:1.0. We had $185.0 million of borrowings outstanding at December 31, 2017. Based on our Leverage Ratio, we had $305.6 million of available borrowings, net of the outstanding letters of credit, at December 31, 2017.
The Credit Facility has a $40.0 million letter of credit facility. Under the letter of credit facility, the Company pays a fee at a per annum rate equal to the applicable margin for Eurodollar loans in effect from time to time plus a one-time letter of credit fee in an amount equal to 0.125% of the initial stated amount. At December 31, 2017,September 30, 2022, we had $9.4$200.0 million outstanding under the Revolving Credit Facility and $6.4 million of outstanding letters of credit, outstanding.
4.500% Senior Unsecured Notes Due 2026 –
On August 2, 2016,leaving us with $543.6 million of available borrowings under the Company issued $350.0 million aggregate principal amount of 4.500% senior notes ("Senior Unsecured Notes") due August 2026. Interest on the Senior Unsecured Notes is payable semiannually on February 1 and August 1 of each year until allRevolving Credit Facility, net of the outstanding notes are paid. The Senior Unsecured Notes rank equal to existing and future senior indebtedness, including the Credit Facility and the Private Placement Senior Unsecured Notes. Prior to August 1, 2019, we may redeem up to 40%letters of the original aggregate principal amount of the Senior Unsecured Notes with the proceeds of certain equity offerings at a redemption price of 104.5% of the principal amount of the notes. On or after August 1, 2019, and prior to August 1, 2021, we may redeem some or all of the Senior Unsecured Notes at a price equal to 100% of the principal amount, plus a “make-whole” premium. Beginning on August 1, 2021, we may redeem some or all of the Senior Unsecured Notes at the redemption prices set forth below (expressed as a percentage of the principal amount being redeemed):
The Senior Unsecured Notes contain covenants that limit our ability and/or our guarantor subsidiaries' 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. The Company’s Senior Unsecured Notes are fully and unconditionally and jointly and severally guaranteed by each of our subsidiaries that is a guarantor under the Credit Facility and Private Placement Senior Unsecured Notes. See Footnote (Q) to the Unaudited Consolidated Financial Statements for more information on the guarantors of the Senior Public Notes.
Private Placement Senior Unsecured Notes –
We entered into a Note Purchase Agreement on November 15, 2005 in connection with our sale of $200.0 million of senior unsecured notes, designated as Series 2005A Senior Notes (the “Series 2005A Senior Unsecured
Notes”) in a private placement transaction. The Series 2005A Senior Unsecured Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in three tranches. During November 2017, all remaining notes were repaid in full and cancelled.
We also entered into an additional Note Purchase Agreement on October 2, 2007 (the “2007 Note Purchase Agreement”) in connection with our sale of $200.0 million of senior unsecured notes, designated as Series 2007A Senior Notes (the “Series 2007A Senior Unsecured Notes” and together with the Series 2005A Senior Unsecured Notes, the “Private Placement Senior Unsecured Notes”) in a private placement transaction. The Series 2007A Senior Unsecured Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in four tranches on October 2, 2007. At December 31, 2017, the amounts outstanding for each of the remaining tranches are as follows:
|
|
| ||||||
|
|
|
|
Interest for each tranche of Series 2007A Senior Unsecured Notes is payable semi-annually on April 2 and October 2 of each year until all principal is paid for the respective tranche. During October 2017, the $24.0 million outstanding under Tranche C of the Series 2007A Senior Unsecured Notes matured, and the related notes were repaid and cancelled at that time.
Our obligations under the 2007 Note Purchase Agreement are equal in right of payment with all other senior, unsecured indebtedness of the Company, including our indebtedness under the Credit Facility and Senior Unsecured Notes. The 2007 Note Purchase Agreement contains customary restrictive covenants, including, but not limited to, covenants that place limits on our ability to encumber our assets, to incur additional debt, to sell assets, or to merge or consolidate with third parties.
The 2007 Note Purchase Agreement requires us to maintain a Consolidated Debt to Consolidated EBITDA (calculated as consolidated indebtedness to consolidated earnings before interest, taxes, depreciation, depletion, amortization, certain transaction related deductions and other non-cash charges) ratio of 3.50 to 1.00 or less, and to maintain an interest coverage ratio (Consolidated EBITDA to Consolidated Interest Expense (calculated as consolidated EBITDA, as defined above, to consolidated interest expense)) of at least 2.50:1.00. In addition, the 2007 Note Purchase Agreement requires the Company to ensure that at all times either (i) Consolidated Total Assets equal at least 80% of the consolidated total assets of the Company and its Subsidiaries, determined in accordance with GAAP, or (ii) consolidated total revenues of the Company and its Restricted Subsidiaries for the period of four consecutive fiscal quarters most recently ended equals at least 80% of the consolidated total revenues of the Company and its Subsidiaries during such period. We were in compliance with all financial ratios and tests at December 31, 2017.
Pursuant to a Subsidiary Guaranty Agreement, substantially all of our subsidiaries have guaranteed the punctual payment of all principal, interest, and Make-Whole Amounts (as defined in the 2007 Note Purchase Agreement) on the Series 2007A Senior Unsecured Notes and the other payment and performance obligations of the Company contained in the 2007 Note Purchase Agreement.credit. We are permitted, atcontingently liable for performance under $26.8 million in performance bonds relating primarily to our option and without penalty, to prepay from time to time at least 10% of the original aggregate principal amount of the Series 2007A Senior Unsecured Notes at 100% of the principal amount to be prepaid, together with interest accrued on such amount to be prepaid to the date of payment, plus a Make-Whole Amount. The Make-Whole Amount is computed by discounting the remaining scheduled payments of interest and principal of the Series 2007A Senior Unsecured Notes being prepaid at a discount rate equal to the sum of 50 basis points and the yield to maturity of U.S. treasury securities having a maturity equal to the remaining average life of the Series 2007A Senior Unsecured Notes being prepaid.mining operations. We do not have any off-balance sheet debt, or any outstanding debt guarantees.
We lease one of our cement plants from the city of Sugar Creek, Missouri. The city of Sugar Creek issued industrial revenue bonds to partly finance improvements to the cement plant. The lease payments due to the city of Sugar Creek under the cement plant lease, which was entered into upon the sale of the industrial revenue
bonds, are equal in amount to the payments required to be made by the city of Sugar Creek to the holders of the industrial revenue bonds. Because we are the holder of all of the outstanding industrial revenue bonds, no debt is reflected on our financial statements in connection with our lease of the cement plant. At the conclusion of the lease in fiscal 2021, we have the option to purchase the cement plant for a nominal amount.
Other than the Revolving Credit Facility, we have no otheradditional source of committed external financing in place. InShould the event theRevolving Credit Facility should be terminated;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
33
termination, and an alternative source of financing could not be secured;secured, it would have a material adverse impact on us. None of our debt is rated by the rating agencies.business.
We do not have any off-balance sheet debt, except for approximately $40.0 million of operating leases, which have an average remaining term of approximately fifteen years. Also, we have no outstanding debt guarantees. We have available under the Credit Facility a $40.0 million Letter of Credit Facility. At December 31, 2017, we had $9.4 million of letters of credit outstanding that renew annually. We are contingently liable for performance under $25.6 million in performance bonds relating primarily to our mining operations.
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 twelve12 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.control, such as COVID-19 or similar pandemics. 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.
As market conditions warrant, the Company may from time to time seek to purchase or repay its outstanding debt securities or loans, including the Private Placement2.500% Senior Unsecured Notes, Senior Unsecured NotesTerm 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 uswe make 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 the aggregate, may be material. Any such purchases
We had approximately $33.5 million of the notes offered hereby may be with respect to a substantial amountlease liabilities at September 30, 2022, that have an average remaining life of such notes, with an attendant reduction in the trading liquidity of such notes.approximately 10.2 years.
Dividends.Dividends
Dividends paid were $14.6$19.1 million and $14.5$10.5 million for the ninesix months ended December 31, 2017September 30, 2022 and 2016,2021, respectively. On May 19, 2021, we announced the reinstatement of our quarterly dividend which had been suspended in fiscal 2021. 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.
|
| Common Stock |
| |||||
| Shares Purchased |
|
| Average Price Paid Per Share |
| |||
April 1 through April 30, 2017 |
|
| — |
|
| $ | — |
|
May 1 through May 31, 2017 |
|
| — |
|
| $ | — |
|
June 1 through June 30, 2017 |
|
| 20,000 |
|
| $ | 94.03 |
|
Quarter 1 Totals |
|
| 20,000 |
|
| $ | 94.03 |
|
July 1 through July 31, 2017 |
|
| 90,000 |
|
| $ | 92.75 |
|
August 1 through August 31, 2017 |
|
| 157,572 |
|
| $ | 90.13 |
|
September 1 through September 30, 2017 |
|
| 5,200 |
|
| $ | 91.92 |
|
Quarter 2 Totals |
|
| 252,772 |
|
|
|
|
|
October 1 through October 31, 2017 |
|
| — |
|
| $ | — |
|
November 1 through November 30, 2017 |
|
| — |
|
| $ | — |
|
December 1 through December 31 2017 |
|
| — |
|
| $ | — |
|
Year-to-Date Totals |
|
| 272,772 |
|
| $ | 91.31 |
|
Repurchases
During the three and six months ended September 30, 2022, our share repurchases were as follows:
Period |
| Total Number of |
|
| Average Price Paid |
|
| Total Number of |
|
| Maximum Number |
| ||||
April 1 through April 30, 2022 |
|
| 296,000 |
|
| $ | 124.41 |
|
|
| 296,000 |
|
|
|
| |
May 1 through May 31, 2022 |
|
| 294,000 |
|
|
| 124.72 |
|
|
| 294,000 |
|
|
|
| |
June 1 through June 30, 2022 |
|
| 294,000 |
|
|
| 121.86 |
|
|
| 294,000 |
|
|
|
| |
Quarter 1 Totals |
|
| 884,000 |
|
| $ | 124.00 |
|
|
| 884,000 |
|
|
|
| |
July 1 through July 31, 2022 |
|
| 280,000 |
|
| $ | 115.46 |
|
|
| 280,000 |
|
|
|
| |
August 1 through August 31, 2022 |
|
| 308,000 |
|
|
| 128.93 |
|
|
| 308,000 |
|
|
|
| |
September 1 through September 30, 2022 |
|
| 252,000 |
|
|
| 114.08 |
|
|
| 252,000 |
|
|
|
| |
Quarter 2 Totals |
|
| 840,000 |
|
| $ | 119.98 |
|
|
| 840,000 |
|
|
|
| |
Year-to-Date Totals |
|
| 1,724,000 |
|
| $ | 122.04 |
|
|
| 1,724,000 |
|
|
| 9,098,992 |
|
On August 10, 2015,May 17, 2022, the Board of Directors authorized the Companyus to repurchase up to an additional 6,782,7007.5 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 for a total outstanding authorization of 7,500,000 shares. During the nine months ended December 31, 2017,since we repurchased 272,772 shares at an average price of $91.31. As of December 31, 2017,became publicly held in April 1994. Through September 30, 2022, we have authorization to purchase an additional 4,544,428repurchased approximately 46.8 million shares.
Share repurchases may be made from time-to-timetime to time in the open market or in privately negotiated transactions. The timing and amount of any share repurchases of shares will beare 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.
34
During the ninesix months ended December 31, 2017, 26,921September 30, 2022, the Company withheld from employees 13,317 shares of stock were withheld from employees upon the vesting of Restricted Shares that were granted under the Plan. TheseWe withheld these shares were withheld by us to satisfy the employees’ statutory tax withholding requirements, which is required once the Restricted Shares or Restricted SharesShare Units are vested.
Capital Expenditures.Expenditures
The following table compares capital expenditures:
|
|
|
|
|
| For the Nine Months Ended December 31, 2017 |
| |||||
|
| Acquisition |
|
| 2017 |
|
| 2016 |
| |||
|
|
|
|
|
| (dollars in thousands) |
| |||||
Land and Quarries |
| $ | 2,750 |
|
| $ | 5,147 |
|
| $ | 2,973 |
|
Plants |
|
| 6,456 |
|
|
| 60,538 |
|
|
| 17,477 |
|
Buildings, Machinery and Equipment |
|
| 18,986 |
|
|
| 18,013 |
|
|
| 13,593 |
|
Total Capital Expenditures |
| $ | 28,192 |
|
| $ | 83,698 |
|
| $ | 34,043 |
|
We anticipate maintenancedetails capital expenditures will be approximately $30.0 to $35.0 millionby category:
|
| For the Six Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (dollars in thousands) |
| |||||
Land and Quarries |
| $ | 10,157 |
|
| $ | 1,378 |
|
Plants |
|
| 21,944 |
|
|
| 22,480 |
|
Buildings, Machinery, and Equipment |
|
| 11,148 |
|
|
| 2,919 |
|
Total Capital Expenditures |
| $ | 43,249 |
|
| $ | 26,777 |
|
Capital expenditures for fiscal 2018. Historically, we have financed such expenditures with cash2023 are expected to range from operations and borrowings under our revolving credit facility. We have begun the build out of our Utica, Illinois facility. This build out will include the addition of a dry plant and distribution system. We estimate that this build out will cost approximately $70.0$110.0 million to $120.0 million and will be completedallocated 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.
35
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 summercosts of 2018.energy, including, without limitation, electricity, 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; 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) on our facilities, operations and contractual arrangements with third parties; 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; the availability of acquisitions or other growth opportunities that meet our financial return standards and fit our strategic focus; 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, electricity, 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, pandemics or other unforeseen events, including, without limitation, any resurgence of the COVID-19 pandemic and responses thereto designed to contain its spread and mitigate its public health effects, as well as their impact 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, 2022. 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.
36
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. From time-to-time weWe 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 havehad a $500.0$750.0 million Revolving Credit Facility available at December 31, 2017,September 30, 2022, under which borrowings bear interest at a variable rate. A hypothetical 100 basis point increase in interest rates on the $185.0$200.0 million of borrowings outstandingunder the Revolving Credit Facility and the $197.5 million of borrowings under the Term Loan at December 31, 2017September 30, 2022, would increase interest expense by approximately $1.9$4.0 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”)(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.
37
PART II. OTHER INFORMATION
Domestic Wallboard Antitrust Litigation
Since late December 2012, several purported class action lawsuits were filed in various United States District Courts, including the Eastern District of Pennsylvania, Western District of North CarolinaFrom time to time, we have been and the Northern District of Illinois, against the Company’s subsidiary, American Gypsum Company LLC (“American Gypsum”), alleging that the defendant wallboard manufacturers conspired to fix the price for drywall soldmay in the United Statesfuture become involved in violation of federal antitrust laws and, in some cases related provisions of state law. The complaints alleged that the defendant wallboard manufacturers conspired to increase prices through the announcement and implementation of coordinated price increases, output restrictions, andlitigation or other restraints of trade, including the elimination of individual “job quote” pricing. In addition to American Gypsum, the defendants in these lawsuits include CertainTeed Corp. (“CertainTeed”), USG Corporation and United States Gypsum (together “USG”), New NGC, Inc. (“New NGC”), Lafarge North America (“Lafarge”), Temple Inland Inc. (“TIN”) and PABCO Building Products LLC (“PABCO”). On April 8, 2013, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred and consolidated all related cases to the Eastern District of Pennsylvania for coordinated pretrial proceedings.
On June 24, 2013, the direct and indirect purchaser plaintiffs filed consolidated amended class action complaints. The direct purchasers’ complaint added the Company as a defendant. The plaintiffslegal proceedings in the consolidated class action complaints assertordinary course of our business activities or in connection with transactions or activities undertaken by us, including claims on behalfrelated to worker safety, worker health, environmental matters, commercial contracts, land use rights, taxes, and permits. While the outcome of purported classes of direct or indirect purchasers of wallboard from January 1, 2012 to the present for unspecified monetary damages (including treble damages) and in some cases injunctive relief. On July 29, 2013, the Company and American Gypsum answered the complaints, denying all allegations that they conspired to increase the price of drywall and asserting affirmative defenses to the plaintiffs’ claims.
In 2014, USG and TIN entered into agreementsthese proceedings cannot be predicted with counsel representing the direct and indirect purchaser classes pursuant to which they agreed to settle all claims against them. Under the terms of its settlement agreement, USG agreed to pay $48.0 million to resolve the direct and indirect purchaser class actions. In its settlement agreement, TIN agreed to pay $7.0 million to resolve the direct and indirect purchaser class actions. On August 20, 2015, the court entered orders finally approving USG and TIN’s settlements with the direct and indirect purchaser plaintiffs. Following completion of the initial discovery, the Company and remaining co-defendants moved for summary judgment. On February 18, 2016, the court denied the Company’s motion for summary judgment, and granted summary judgment in favor of CertainTeed. On June 16, 2016, Lafarge entered into an agreement with counsel for the direct purchaser class under which it agreed to settle all claims against it for $23.0 million. The court entered an order finally approving this settlement on December 7, 2016. On July 28, 2016, Lafarge entered into an agreement with counsel representing the indirect purchaser class under which it agreed to settle all claims against it for $5.2 million, which was approved by the court on February 28, 2017. On July 14, 2016, the Company’s motion for permission to appeal the summary judgment decision to the U.S. Court of Appeals for the Third Circuit was denied.
Direct purchaser plaintiffs and indirect purchaser plaintiffs filed their motions for class certification on August 3, 2016 and October 12, 2016, respectively. On August 23, 2017, the court granted the direct purchaser plaintiffs’ motion for class certification and certified a class consisting of all persons or entities that purchased paper-backed gypsum wallboardcertainty, in the United States from January 1, 2012 through January 31, 2013 directly from American Gypsum, the Company, Lafarge, New NGC, PABCO, USG, and/or L&W Supply Corporation (which was a subsidiaryopinion of USG Corporation during the class period). On September 6, 2017, American Gypsum, the Company, New NGC, and PABCO filed a petition with the U.S. Court of Appeals for the Third Circuit seeking interlocutory appeal of the district court’s decision granting the direct purchaser plaintiffs’ motion for class certification under Federal Rule of Civil Procedure 23(f). The Third Circuit denied the Defendant’s petitionmanagement (based on October 27, 2017. On August 24, 2017, the court denied the indirect purchaser plaintiffs’ motion for class certification. On September 7, 2017, the indirect purchaser plaintiffs filed a petition with the Third Circuit appealing the district court’s denial of their motion for class certification. The Third Circuit denied the indirect purchaser plaintiffs’ petition on October 12, 2017.
On December 29, 2017 American Gypsum and the Company, as well as New NGC, Inc. (“New NGC”)currently available facts), and PABCO Building Products, LLC (“PABCO”), which arewe do not affiliated with the Company, entered into a settlement agreement (the “Direct Purchaser Settlement Agreement”) with counsel representing the direct purchaser class to settle all claims made against the Company, American, New NGC and PABCO in the direct purchaser class action. The Direct Purchaser Settlement Agreement, in which the Company and American deny all wrongdoing, also includes releases by the participating class members of the Company and American as well as their subsidiaries, affiliates, and other related parties, for the time period from January 1, 2012 through the date of execution of the Direct Purchaser Settlement Agreement. The Direct Purchaser Settlement Agreement grants the Company, American, New NGC, and PABCO the right to terminate the Direct Purchaser Settlement Agreement in the event an agreed upon percentage of potential class members opt-out of the Direct Purchaser Settlement Agreement. Additionally, the Direct Purchaser Settlement Agreement is conditioned on final approval of the District Court. On January 5, 2018 American Gypsum, New NGC, and PABCO entered into a settlement agreement (the “Indirect Purchaser Settlement Agreement) with counsel representing the indirect purchaser class to settle all claims against American Gypsum, New NGC and PABCO in the indirect purchaser class action. The Indirect Purchaser Settlement Agreement is conditioned on final approval of the District Court. Under the Direct and Indirect Purchaser Settlement Agreements, the Company and American agreed to pay a total of approximately $39.1 million in cash to settle the claims against them. At December 31, 2017 we accrued the total amount of the two settlements and these amounts are expected to be paid in the next twelve months.
On March 17, 2015, a group of homebuilders filed a complaint against the defendants, including American Gypsum, based upon the same conduct alleged in the consolidated class action complaints. On March 24, 2015, the JPML transferred this action to the multidistrict litigation already pending in the Eastern District of Pennsylvania. Following the transfer, the homebuilder plaintiffs filed two amended complaints, on December 14, 2015 and March 25, 2016. As a result of settlements reached with TIN and Lafarge, the homebuilder plaintiffs
voluntarily dismissed their claims against TIN and Lafarge on June 6 and June 24, 2016, respectively. On January 31, 2017, the plaintiffs voluntarily dismissed their claims against CertainTeed. Discovery in this lawsuit is ongoing.
In June 2015, American Gypsum and an employee received grand jury subpoenas from the United States District Court for the Western District of North Carolina seeking information regarding an investigation of the gypsum drywall industry by the Antitrust Division of the Department of Justice. We believe the investigation, although a separate proceeding, is related to the same subject matter at issue in the litigation described above and we intend to fully cooperate with government officials. We are currently unable to determinethat the ultimate outcome of such investigation.
We are affected by the level of demand in the construction industry.
Demand for our construction products and building materials is directly related to the level of activity in the construction industry, which includes residential, commercial and infrastructure construction. While the most recent downturn in residential and commercial construction, which began in calendar 2007, materially impacted our business, certain economic fundamentals began improving in calendar 2012, and have continued to improve through calendar 2017; however, the rate and sustainability of such improvement remains uncertain. Infrastructure spending continues to be adversely impacted by a number of factors, including the budget constraintsany currently being experienced by federal, state and local governments. Any decrease in the amount of government funds available for such projects or any decrease in construction activity in general (including any weakness in residential construction or commercial construction) couldpending legal proceeding will have a material adverse effect on our business, financial condition and results of operations.
Our business is seasonal in nature, and this causes our quarterly results to vary significantly.
A majority of our business is seasonal with peak revenues and profits occurring primarily in the months of April through November when the weather in our markets is more suitable for construction activity. Quarterly results have varied significantly in the past and are likely to vary significantly in the future. Such variations could have a negative impact on the price of our common stock.
We are subject to the risk of unfavorable weather conditions, particularly during peak construction periods, as well as other unexpected operational difficulties.
Unfavorable weather conditions, such as snow, cold weather, hurricanes, tropical storms and heavy or sustained rainfall, can reduce construction activity and adversely affect demand for construction products. Such weather conditions can also increase our costs, reduce our production or impede our ability to transport our products in an efficient and cost-effective manner. Similarly, operational difficulties, such as business interruption due to required maintenance, capital improvement projects or loss of power, can increase our costs and reduce our production. In particular, the occurrence of unfavorable weather conditions and other unexpected operational difficulties during peak construction periods could adversely affect operating income and cash flow and could have a disproportionate impact on our results of operations for the full year.
We and our customers participate in cyclical industries and regional markets, which are subject to industry downturns.
A majority of our revenues are from customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions. For example, many of our customers operate in the construction industry, which is affected by a variety of factors, such as general economic conditions, changes in interest rates, demographic and population shifts, levels of infrastructure spending and other factors beyond our control. In addition, since our operations are in a variety of geographic markets, our businesses are subject to differing economic conditions in each such geographic market. Economic downturns in the industries to which we sell our products or localized downturns in the regions where we have operations generally have an adverse effect
on demand for our products and adversely affect the collectability of our receivables. In general, any downturns in these industries or regions could have a material adverse effect on our business, financial condition and results of operations.
Many of our products are commodities, which are subject to significant changes in supply and demand and price fluctuations.
Many of the products sold by us are commodities and competition among manufacturers is based largely on price. Prices are often subject to material changes in response to relatively minor fluctuations in supply and demand, general economic conditions and other market conditions beyond our control. Increases in the production capacity of industry participants for products such as gypsum wallboard or cement or increases in cement imports tend to create an oversupply of such products leading to an imbalance between supply and demand, which can have a negative impact on product prices. Currently, there continues to be significant excess nameplate capacity in the gypsum wallboard industry in the United States. There can be no assurance that prices for products sold by us will not decline in the future or that such declines will not have a material adverse effect on our business, financial condition and results of operations.
Our Cement business is capital intensive, resulting in significant fixed and semi-fixed costs. Therefore, our earnings are sensitive to changes in volume.
Due to the high levels of fixed capital required to produce cement, our profitability is susceptible to significant changes in volume. Although we believe that our current cash balance, along with our projected internal cash flows and our available financing resources, will provide sufficient cash to support our currently anticipated operating and capital needs, if we are unable to generate sufficient cash to purchase and maintain the property and machinery necessary to operate our cement business, we may be required to reduce or delay planned capital expenditures or incur additional debt. In addition, given the level of fixed and semi-fixed costs within our cement business and at our cement production facilities, decreases in volumes could have an adverse effect on ourconsolidated financial condition, results of operations, andor liquidity.
Our Oil and Gas Proppants business and financial performance depends on the level of activity in the oil and natural gas industries.
Our operations that produce frac sand are materially dependent on the levels of activity in natural gas and oil exploration, development and production. More specifically, the demand for the frac sand we produce is closely related to the number of natural gas and oil wells completed in geological formations where sand-based proppants are used in fracture treatments. These activity levels are affected by both short- and long-term trends in natural gas and oil prices. In recent years, natural gas and oil prices and, therefore, the level of exploration, development and production activity, have experienced significant fluctuations. Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by the Organization of the Petroleum Exporting Countries, have contributed, and are likely to continue to contribute, to price volatility. Additionally, warmer than normal winters in North AmericaFor additional information regarding claims and other weather patterns may adversely impact the short-term demand for natural gas and, therefore, demand for our products. Reduction in demand for natural gascontingent liabilities to generate electricity could also adversely impact the demand for frac sand. A prolonged reduction in natural gas and oil prices would generally depress the level of natural gas and oil exploration, development, production and well completion activity and result in a corresponding decline in the demand for the frac sand we produce. In addition, any future decreases in the rate at which oil and natural gas reserves are discovered or developed, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could have material adverse effect on our oil and gas proppants business, even in a stronger natural gas and oil price environment.
Any material nonpayment or nonperformance by any of our key customers could have a material adverse effect on our business and results of operations.
Any material nonpayment or nonperformance by any of our key customers could have a material adverse effect on our revenue and cash flows, in particular with respect to our Oil and Gas Proppants business. Our
contracts with our customers provide for different potential remedies to us in the event a customer fails to purchase the minimum contracted amount of product in a given period. If we were to pursue legal remedies in the event a customer failed to purchase the minimum contracted amount of product under a fixed-volume contract or failed to satisfy the take-or-pay commitment under a take-or-pay contract, we may receive significantly less in a judgment or settlement of any claimed breach than we would have received had the customer fully performed under the contract. In the event of any customer’s breach, we may also choose to renegotiate any disputed contract on less favorable terms (including with respect to price and volumes) to us to preserve the relationship with that customer. Accordingly, any material nonpayment or performance by our customers could have a material adverse effect on our revenue and cash flows.
Volatility and disruption of financial markets could affect access to credit.
Difficult economic conditions can cause a contraction in the availability, and increase the cost, of credit in the marketplace. A number of our customers or suppliers have been and may continue to be adversely affected by unsettled conditions in capital and credit markets, which in some cases have made it more difficult or costly for them to finance their business operations. These unsettled conditions have the potential to reduce the sources of liquidity for the Company and our customers.
Our and our customers’ operations are subject to extensive governmental regulation, including environmental laws, which can be costly and burdensome.
Our operations and those of our customers are subject to and affected by federal, state and local laws and regulations with respect to such matters as land usage, street and highway usage, noise level and health and safety and environmental matters. In many instances, various certificates, permits or licenses are required in order for us or our customers to conduct business or carry out construction and related operations. Although we believe that we are in compliance in all material respects with applicable regulatory requirements, there can be no assurance that we will not incur material costs or liabilities in connection with regulatory requirements or that demand for our products will not be adversely affected by regulatory issues affecting our customers. In addition, future developments, such as the discovery of new facts or conditions, the enactment or adoption of new or stricter laws or regulations or stricter interpretations of existing laws or regulations, may impose new liabilities on us, require additional investment by us or prevent us from opening, expanding or modifying plants or facilities, any of which could have a material adverse effect on our financial condition or results of operations.
For example, greenhouse gasses (“GHGs”) currently are regulated as pollutants under the CAA and subject to reporting and permitting requirements. Future consequences of GHG permitting requirements and potential emission reduction measures for our operations may be significant because (1) the cement manufacturing process requires the combustion of large amounts of fuel, (2) in our cement manufacturing process, the production of carbon dioxide is a byproduct of the calcination process, whereby carbon dioxide is removed from calcium carbonate to produce calcium oxide, and (3) our gypsum wallboard manufacturing process combusts a significant amount of fossil fuel, especially natural gas. In addition, the EPA has proposed to regulate GHG emissions from existing fossil fuel-fired power plants as a result of the EPA’s promulgation of new source performance standards for the same sources. In the future, the EPA is expected to propose new source performance standards for cement manufacturing, which similarly will trigger a requirement for the EPA to promulgate regulations relating to existing cement manufacturing facilities. The timing of such regulation is uncertain.
On September 9, 2010, the EPA finalized National Emissions Standards for Hazardous Air Pollutants, or NESHAP, for Portland cement plants (“PC NESHAP”). The PC NESHAP requires a significant reduction in emissions of certain hazardous air pollutants from Portland cement kilns. The PC NESHAP sets limits on mercury emissions from existing Portland cement kilns and increases the stringency of emission limits for new kilns. The PC NESHAP also sets emission limits for total hydrocarbons, particulate matter (as a surrogate for metal pollutants) and acid gases from cement kilns of all sizes. The PC NESHAP was scheduled to take full effect in September 2013; however, as a result of a decision by the U.S. Court of Appeals for the District of Columbia Circuit in Portland Cement Ass’n. v. EPA, 665 F.3d 177 (D.C. Cir.) arising from industry challenges to the PC NESHAP, the EPA proposed a settlement agreement with industry petitioners in May 2012. In February 2013, the
EPA published the final revised rule to the PC NESHAP which extended the compliance date until September 9, 2015 for existing cement kilns and made certain changes to the rules governing particulate matter monitoring methods and emissions limits, among other revisions. The 2013 revised rule was challenged in the U.S. Court of Appeals for the D.C. Circuit and on April 18, 2014, the court vacated the affirmative defense provision. The court upheld the EPA’s particulate matter emission standards and extended compliance date. On November 19, 2014, the EPA proposed a rule removing the affirmative defense provision and making minor technical corrections to the regulations.
On March 21, 2011, the EPA proposed revised Standards of Performance for New Sources and Emissions Guidelines for Existing Sources for Commercial/Industrial Solid Waste Incinerators (the “CISWI Rule”) per Section 129 of the CAA, which created emission standards for 4 subcategories of industrial facilities, one of which is “Waste Burning Kilns.” The EPA simultaneously stayed the CISWI Rule for further reconsideration. Effective as of February 13, 2013, the EPA finalized revisions to the CISWI Rule. For those cement kilns that utilize non-hazardous secondary materials (“NHSM”) as defined in a rule first finalized on March 21, 2011 (and slightly revised effective on February 13, 2013), the CISWI Rule will require significant reductions in emissions of certain pollutants from applicable cement kilns. The CISWI Rule sets forth emission standards for mercury, carbon monoxide, acid gases, nitrogen oxides, sulfur dioxide, certain metals (lead and cadmium), particulate matter and more stringent standards than PC NESHAP for dioxin/furans. The CISWI Rule as currently promulgated may materially increase capital costs and costs for production but only for those facilities that will be using applicable solid wastes as fuel. The compliance date for this rule is February 7, 2018 (either 3 years after State CISWI plan approval, or 5 years from the date of the final CISWI Rule, whichever is sooner). It is anticipated that the CISWI Rule may materially increase capital costs and costs of production for the Company and the industry as a whole.
On April 17, 2015, the EPA published its final rule addressing the storage, reuse and disposal of coal combustion products, which include fly ash and flue gas desulfurization gypsum (“synthetic gypsum”). We use synthetic gypsum in wallboard manufactured at our Georgetown, South Carolina plant. The rule, which applies only to electric utilities and independent power producers, establishes standards for the management of coal combustion residuals (CCRs) under Subtitle D of the Resource Conservation and Recovery Act, or RCRA, which is the Subtitle that regulates non-hazardous wastes. The rule imposes requirements addressing CCR surface impoundments and landfills, including location restrictions, design and operating specifications, groundwater monitoring requirements, corrective action requirements, recordkeeping and reporting obligations, and closure requirements. Beneficial encapsulated uses of CCRs, including synthetic gypsum, are exempt from regulation. The rule became effective on October 14, 2015, with many of the requirements phased in months or years after the effective date. Given the EPA’s decision to continue to allow CCR to be used in synthetic gypsum and to regulate CCR under the non-hazardous waste sections of RCRA, we do not expect the rule to materially affect our business, financial condition and results of operations.
On October 1, 2015, the EPA lowered the primary and secondary ozone standards from the current 8-hour standard of 75 parts per billion (“ppb”) to 70 ppb. The EPA also strengthened the secondary ozone standard to improve protection for trees, plants and ecosystems. Like the primary standard, an area will meet the secondary standard if the fourth-highest maximum daily 8-hour ozone concentration per year, averaged over three years, is equal to or less than 70 ppb. The EPA based the secondary standard on the “W126 metric,” an index designed to show the cumulative impact of ozone on plants and trees seasonally. The EPA has issued an implementation memo describing how it will determine whether the ozone levels in areas across the country, typically on a county level, are above the new standards. Areas above the new standards will be designated as “nonattainment;” areas at or below the new standards will be designated “attainment.” In states with major emitting sources located in or near designated nonattainment areas, States will impose new and costly regulatory requirements. For areas that are determined to be in non-attainment, states will be required to develop plans to bring the areas into attainment by as early as 2020. At this time, it is not possible to determine whether any area in which we operate will be designated nonattainment. However, if that occurs, we may be required to meet new control requirements requiring significant capital expenditures for compliance.subject, see Footnote (P) in the Unaudited Consolidated Financial Statements.
Our cement plants located in Kansas City, Missouri and Tulsa, Oklahoma are subject to certain obligations under a consent decree with the United States requiring the establishment of facility-specific emissions limitations for certain air pollutants. Limitations that significantly restrict emissions levels beyond current operating levels may require additional investments by us or place limitations on operations, any of which could have a material adverse effect on our financial condition or results of operations.Item 1A. Risk Factors
Our cement plant in Tulsa, Oklahoma is subject to NESHAP for hazardous waste combustors (the “HWC MACT”), which imposes emission limitations and operating limits on cement kilns that are fueled by hazardous wastes. Compliance with the HWC MACT could impose additional liabilities on us or require additional investment by us, which could have a material adverse effect on our financial condition or results of operations. In addition, new developments, such as new laws or regulations, may impose new liabilities on us, require additional investment by us or prevent us from operating or expanding plants or facilities, any of which could have a material adverse effect on our financial condition or results of operations. For example, while the HWC MACT has not been updated since 2008, 73 Fed. Reg. 64068 (Oct. 28, 2008), future revisions to the HWC MACT regulations would apply to both of the cement kilns used at the cement plant in Tulsa, Oklahoma. Such revision could require new control requirements and significant capital expenditure for compliance. In 2013, the EPA adopted the final CISWI Rule (as discussed above) that likely will apply to the cement kiln used by the cement plant in Sugar Creek, Missouri and the two cement kilns at Nevada Cement Company, and may impose new control requirements requiring significant capital expenditures for compliance. Existing CISWI units will need to comply with the CISWI Rule when it becomes effective, which is expected to occur in early 2018.
We may incur significant costs in connection with pending and future litigation.
We are, or may become, party to various lawsuits, claims, investigations and proceedings, including but not limited to personal injury, environmental, antitrust (including the wallboard antitrust class actions, the homebuilder suit and the DOJ investigation), tax, asbestos, property entitlements and land use, intellectual property, commercial, contract, product liability, health and safety, and employment matters. The outcome of pending or future lawsuits, claims, investigations or proceedings is often difficult to predict and could be adverse and material in amount. Development in these proceedings can lead to changes in management’s estimates of liabilities associated with these proceedings including the judge’s rulings or judgments, settlements or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in chargesinformation regarding factors that could have a material adverse effect onimpact our results of operations, and cash flows in a particular period. In addition, the defense of these lawsuits, claims, investigations and proceedings may divert our management’s attention and we may incur significant costs in defending these matters. See Part II Item 1. Legal Proceedings of this report.
Our results of operations are subject to significant changes in the cost and availability of fuel, energy and other raw materials.
Major cost components in each of our businesses are the costs of fuel, energy and raw materials. Significant increases in the costs of fuel, energy or raw materials or substantial decreases in their availability could materially and adversely affect our sales and operating profits. Prices for fuel, energy or raw materials used in connection with our businesses could change significantly in a short period of time for reasons outside our control. Prices for fuel and electrical power, which are significant components of the costs associated with our gypsum wallboard and cement businesses, have fluctuated significantly in recent years and may increase in the future. In the event of large or rapid increases in prices, we may not be able to pass the increases through to our customers in full, which would reduce our operating margin.
Changes in the cost or availability of raw materials supplied by third parties may adversely affect our operating and financial performance.
We generally maintain our own reserves of limestone, gypsum, aggregates and other materials that we use to manufacture our products. However, we obtain certain raw materials used to manufacture our products, such as synthetic gypsum and slag granules, from third parties who produce such materials as by-products of industrial processes. While we try to secure our needed supply of such materials through long-term contracts, those contracts may not be sufficient to meet our needs or we may be unable to renew or replace existing contracts
when they expire or are terminated in the future. Should our existing suppliers cease operations or reduce or eliminate production of these by-products, our costs to procure these materials may increase significantly or we may be obliged to procure alternatives to replace these materials, which may not be available on commercially reasonable terms or at all. Any such development may adversely affect our operations and financial condition.
We may become subject to significant clean-up, remediation and other liabilities under applicable environmental laws.
Our operations are subject to state, federal and local environmental laws and regulations, which impose liability for cleanup or remediation of environmental pollution and hazardous waste arising from past acts. These laws and regulations also require pollution control and prevention, site restoration and operating permits and/or approvals to conduct certain of our operations or expand or modify our facilities. Certain of our operations may from time-to-time involve the use of substances that are classified as toxic or hazardous substances within the meaning of these laws and regulations. Additionally, any future laws or regulations addressing GHG emissions would likely have a negative impact on our business or results of operations, whether through the imposition of raw material or production limitations, fuel-use or carbon taxes emission limitations or reductions or otherwise. We are unable to estimate accurately the impact on our business or results of operations of any such law or regulation at this time. Risk of environmental liability (including the incurrence of fines, penalties or other sanctions or litigation liability) is inherent in the operation of our businesses. As a result, it is possible that environmental liabilities and compliance with environmental regulations could have a material adverse effect on our operations in the future.
Significant changes in the cost and availability of transportation could adversely affect our business, financial condition, and results of operations.
Some of the raw materials usedliquidity, see Part 1. Item 1A. Risk Factors in our manufacturing processes, such as coal or coke, are transported to our facilities by truck or rail. In addition, transportation logistics play an important part in allowing us to supply products to our customers, whether by truck, rail or barge. For example, we deliver gypsum wallboard to many areas ofForm 10-K for the United States and the transportation costs associatedfiscal year ended March 31, 2022, filed with the delivery of our wallboard products represent a significant portion of the variable cost of our gypsum wallboard segment. Significant increases in the cost of fuel or energy can result in material increases in the cost of transportation, which could materiallySecurities and adversely affect our operating profits. In addition, reductions in the availability of certain modes of transportation such as rail or trucking could limit our ability to deliver product and therefore materially and adversely affect our operating profits.Exchange Commission on May 20, 2022.
Our debt agreements contain restrictive covenants and require us to meet certain financial ratios and tests, which limit our flexibility and could give rise to a default if we are unable to remain in compliance.
Our Credit Facility, Senior Unsecured Notes and Private Placement Note Purchase Agreements governing our Private Placement Senior Unsecured Notes contain, among other things, covenants that limit our ability to finance future operations or capital needs or to engage in other business activities, including but not limited to our ability to:
Incur additional indebtedness;
Sell assets or make other fundamental changes;
Engage in mergers and acquisitions;
Pay dividends and make other restricted payments;
Make investments, loans, advances or guarantees;
Encumber our assets or those of our restricted subsidiaries;
Enter into transactions with our affiliates.
In addition, these agreements require us to meet and maintain certain financial ratios and tests, which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. Events beyond our control, including the changes in general business and economic conditions, may impair our ability to comply with these covenants or meet those financial ratios and tests. A breach of any of these covenants or failure to maintain the required ratios and meet the required tests may result in an event of default under these agreements. This may allow the lenders under these agreements to declare all amounts outstanding to be immediately due and payable, terminate any commitments to extend further credit to us and pursue other remedies available to them under the applicable agreements. If this occurs, our indebtedness may be accelerated and we may not be able to refinance the accelerated indebtedness on favorable terms, or at all, or repay the accelerated indebtedness. In general, the occurrence of any event of default under these agreements could have a material adverse effect on our financial condition or results of operations.
We have incurred substantial indebtedness, which could adversely affect our business, limit our ability to plan for or respond to changes in our business and reduce our profitability.
Our future ability to satisfy our debt obligations is subject, to some extent, to financial, market, competitive, legislative, regulatory and other factors that are beyond our control. Our substantial debt obligations could have negative consequences to our business, and in particular could impede, restrict or delay the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. For example:
we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flow for other purposes, including business development efforts, capital expenditures or strategic acquisitions;
we may not be able to generate sufficient cash flow to meet our substantial debt service obligations or to fund our other liquidity needs. If this occurs, we may have to take actions such as selling assets, selling equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures or restructuring our debt;
as a result of the amount of our outstanding indebtedness and the restrictive covenants to which we are subject, if we determine that we require additional financing to fund future working capital, capital investments or other business activities, we may not be able to obtain such financing on commercially reasonable terms, or at all; and
our flexibility in planning for, or reacting to, changes in our business and industry may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.
Our production facilities may experience unexpected equipment failures, catastrophic events and scheduled maintenance.
Interruptions in our production capabilities may cause our productivity and results of operations to decline significantly during the affected period. Our manufacturing processes are dependent upon critical pieces of equipment. Such equipment may, on occasion, be out of service as a result of unanticipated events such as fires, explosions, violent weather conditions or unexpected operational difficulties. We also have periodic scheduled shut-downs to perform maintenance on our facilities. Any significant interruption in production capability may require us to make significant capital expenditures to remedy problems or damage as well as cause us to lose revenue and profits due to lost production time, which could have a material adverse effect on our results of operations and financial condition.
Increases in interest rates and inflation could adversely affect our business and demand for our products, which would have an adverse effect on our results of operations.
Our business is significantly affected by the movement of interest rates. Interest rates have a direct impact on the level of residential, commercial and infrastructure construction activity by impacting the cost of borrowed
funds to builders. Higher interest rates could result in decreased demand for our products, which would have a material adverse effect on our business and results of operations. In addition, increases in interest rates could result in higher interest expense related to borrowings under our Credit Facility. Inflation can result in higher interest rates. With inflation, the costs of capital increase, and the purchasing power of our cash resources can decline. Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation, which could have a direct and indirect adverse impact on our business and results of operations.
Any new business opportunities we may elect to pursue will be subject to the risks typically associated with the early stages of business development or product line expansion.
We are continuing to pursue opportunities which are natural extensions of our existing core businesses and which allow us to leverage our core competencies, existing infrastructure and customer relationships. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Executive Summary.” Our likelihood of success in pursuing and realizing these opportunities must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the early phases of business development or product line expansion, including the difficulties involved in obtaining permits; planning and constructing new facilities; transporting and storing products; establishing, maintaining or expanding customer relationships; as well as navigating the regulatory environment in which we operate. There can be no assurance that we will be successful in the pursuit and realization of these opportunities.
We may be adversely affected by decreased demand for frac sand or the development of either effective alternative proppants or new processes to replace hydraulic fracturing.
Frac sand is a proppant used in the completion and re-completion of natural gas and oil wells through hydraulic fracturing. Frac sand is the most commonly used proppant and is less expensive than ceramic proppant, which is also used in hydraulic fracturing to stimulate and maintain oil and natural gas production. A significant shift in demand from frac sand to other proppants, such as ceramic proppants, could have a material adverse effect on our oil and gas proppants business. The development and use of other effective alternative proppants or the development of new processes to replace hydraulic fracturing altogether, could also cause a decline in demand for the frac sand we produce and could have a material adverse effect on our oil and gas proppants business.
Our operations are dependent on our rights and ability to mine our properties and on our having renewed or received the required permits and approvals from governmental authorities and other third parties.
We hold numerous governmental, environmental, mining and other permits, water rights and approvals authorizing operations at many of our facilities. A decision by a governmental agency or other third party to deny or delay issuing a new or renewed permit or approval, or to revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue operations at the affected facility. Expansion of our existing operations is also predicated on securing the necessary environmental or other permits, water rights or approvals, which we may not receive in a timely manner or at all.
Title to, and the area of, mineral properties and water rights may also be disputed. Mineral properties sometimes contain claims or transfer histories that examiners cannot verify. A successful claim that we do not have title to one or more of our properties or lack appropriate water rights could cause us to lose any rights to explore, develop and extract any minerals on that property, without compensation for our prior expenditures relating to such property. Our business may suffer a material adverse effect in the event one or more of our properties are determined to have title deficiencies.
In some instances, we have received access rights or easements from third parties, which allow for a more efficient operation than would exist without the access or easement. A third party could take action to suspend the access or easement, and any such action could be materially averse to or results of operations or financial conditions.
A cyber-attack or data security breach affecting our information technology systems may negatively affect our businesses, financial condition and operating results.
We use information technology systems to collect, store and transmit the data needed to operate our businesses, including our confidential and proprietary information. Although we have implemented industry-standard security safeguards and policies to prevent unauthorized access or disclosure of such information, we cannot prevent all cyber-attacks or data security breaches. If such an attack or breach occurs, our businesses could be negatively affected, and we could incur additional costs in remediating the attack or breach and suffer reputational harm due to the theft or disclosure of our confidential information.
We may pursue acquisitions, joint ventures and other transactions that are intended to complement or expand our businesses. We may not be able to complete proposed transactions, and even if completed, the transactions may involve a number of risks that may result in a material adverse effect on our business, financial condition, operating results and cash flows.
As business conditions warrant and our financial resources permit, we may pursue opportunities to acquire businesses or technologies and to form joint ventures that we believe could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities. We may have difficulty identifying appropriate opportunities, or if we do identify opportunities, we may not be successful in completing transactions for a number of reasons. Any transactions that we are able to identify and complete may involve one or more of a number of risks, including:
the diversion of management’s attention from our existing businesses to integrate the operations and personnel of the acquired business or joint venture;
possible adverse effects on our operating results during the integration process;
failure of the acquired business or joint venture to achieve expected operational, profitability and investment return objectives;
the incurrence of significant charges, such as impairment of goodwill or intangible assets, asset devaluation or restructuring charges;
the assumption of unanticipated liabilities and costs for which indemnification is unavailable or inadequate;
unforeseen difficulties encountered in operating in new geographic areas; and
the inability to achieve other intended objectives of the transaction
In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or their employees. We may not be able to maintain uniform standards, controls, procedures and policies, which may lead to operational inefficiencies. In addition, future acquisitions may result in dilutive issuances of equity securities or the incurrence of additional indebtedness.
Our bylaws include a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any internal corporate claims within the meaning of the Delaware General Corporation Law (“DGCL”), (ii) any derivative action or proceeding brought on our behalf, (iii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to our stockholders, or (iv) any action asserting a claim arising pursuant to any provision of the DGCL, will be a state or federal court located within the State
of Delaware in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our bylaws, a court could rule that such a provision is inapplicable or unenforceable.
This report includes various forward-looking statements, which are not facts or guarantees of future performance and which are subject to significant risks and uncertainties.
This report and other materials we have filed or will file with the SEC, as well as information included in oral statements or other written statements made or to be made by us, contain or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, plans and objectives of management, future developments or conditions in the industries in which we participate, including future prices for our products, audits and legal proceedings to which we are a party and other trends, developments and uncertainties that may affect our business in the future.
Forward-looking statements are not historical facts or guarantees of future performance but instead represent only our beliefs at the time the statements were made regarding future events, which are subject to significant risks, uncertainties, and other factors, many of which are outside of our control. Any or all of the forward-looking statements made by us may turn out to be materially inaccurate. This can occur as a result of incorrect assumptions, changes in facts and circumstances or the effects of known risks and uncertainties. Many of the risks and uncertainties mentioned in this report or other reports filed by us with the SEC, including those discussed in the risk factor section of this report, will be important in determining whether these forward-looking statements prove to be accurate. Consequently, neither our stockholders nor any other person should place undue reliance on our forward-looking statements and should recognize that actual results may differ materially from those that may be anticipated by us.
All forward-looking statements made in this report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise.
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.
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101.INS* |
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101.SCH* | ||
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101.CAL* | ||
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101.DEF* | ||
| Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB* | ||
| Inline XBRL Taxonomy Extension Label Linkbase Document. | |
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104 | Cover Page Interactive Data File – (formatted as Inline XBRL and Contained in Exhibit 101). |
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(1) Management contract, compensatory plan, or arrangement.
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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.
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| EAGLE MATERIALS INC. |
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| Registrant |
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President and Chief Executive Officer (principal executive officer) |
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| /s/ D. CRAIG KESLER |
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| D. Craig Kesler Executive Vice President – Finance and Administration and Chief Financial Officer (principal financial officer) |
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| /s/ WILLIAM R. DEVLIN |
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| William R. Devlin Senior Vice President – Controller and Chief Accounting Officer (principal accounting officer) |
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