Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation – |
The consolidated financial statements include the accounts of Eagle Materials Inc. and its majority-owned subsidiaries (“EXP” or the “Company”), which may be referred to as “our”, “we”, or “us”. All intercompany balances and transactions have been eliminated. EXP is a holding company whose assets consist of its investments in its subsidiaries, joint venture, intercompany balances and holdings of cash and cash equivalents. The businesses of the consolidated group are conducted through EXP’s subsidiaries. The Company conducts one of its cement plant operations through a joint venture, Texas Lehigh Cement Company L.P., which is located in Buda, Texas (the “Joint Venture”). Investments in the Joint Venture and affiliated companies owned 50% or less are accounted for using the equity method of accounting. The Equity in Earnings of Unconsolidated Joint Venture has been included for the same period as our March 31 year end. |
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reclassifications | Reclassifications – Certain reclassifications have been made to the prior year to conform to the current year presentation. |
Cash and Cash Equivalents | Cash and Cash Equivalents – |
Cash equivalents include short-term, highly liquid investments with original maturities of three months or less and are recorded at cost, which approximates market value. |
Accounts and Notes Receivable | Accounts and Notes Receivable – |
Accounts and notes receivable have been shown net of the allowance for doubtful accounts of $7.1 million and $5.8 million at March 31, 2015 and 2014, 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 and oil and gas industries, 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 receivable totaling approximately $3.3 million at March 31, 2015, of which approximately $0.5 million has been classified as current and presented with accounts receivable on the balance sheet. We lend funds to certain companies in the ordinary course of business, and the notes bear interest, on average, at 3.9%, which will vary based on changes to LIBOR. Remaining unpaid amounts, plus accrued interest, mature on various dates between 2015 and 2017. The notes are collateralized by certain assets of the borrowers, namely property and equipment. We monitor the credit risk of each borrower by focusing on the timeliness of payments, review of credit history and credit metrics and interaction with the borrowers. At March 31, 2015 and 2014, approximately $0.3 million of our allowance for doubtful accounts is related to our notes receivable. |
Inventories | Inventories – |
Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or market. Inventories consist of the following: |
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| | March 31, | | | | | | | | | |
| | 2015 | | | 2014 | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | |
Raw Materials and Materials-in-Progress | | $ | 115,345 | | | $ | 82,319 | | | | | | | | | |
Finished Cement | | | 20,508 | | | | 19,173 | | | | | | | | | |
Gypsum Wallboard | | | 7,741 | | | | 7,144 | | | | | | | | | |
Paperboard | | | 8,493 | | | | 4,102 | | | | | | | | | |
Frac Sand | | | 4,928 | | | | 275 | | | | | | | | | |
Aggregates | | | 11,131 | | | | 11,815 | | | | | | | | | |
Repair Parts and Supplies | | | 62,121 | | | | 56,119 | | | | | | | | | |
Fuel and Coal | | | 5,197 | | | | 6,149 | | | | | | | | | |
| | $ | 235,464 | | | $ | 187,096 | | | | | | | | | |
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Property, Plant and Equipment | Property, Plant and Equipment – |
Property, plant and equipment are stated at cost. Major renewals and improvements are capitalized and depreciated. Annual maintenance is expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of depreciable assets and totaled $69.7 million, $67.3 million and $55.1 million for the years ended March 31, 2015, 2014 and 2013, respectively. Raw material deposits are depleted as such deposits are extracted for production utilizing the units-of-production method. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time. The estimated lives of the related assets are as follows: |
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Plants | | | 20 to 30 years | | | | | | | | | | | | | |
Buildings | | | 20 to 40 years | | | | | | | | | | | | | |
Machinery and Equipment | | | 3 to 25 years | | | | | | | | | | | | | |
We periodically evaluate whether current events or circumstances indicate that the carrying value of our depreciable assets may not be recoverable. At March 31, 2015 and 2014, management believes no events or circumstances indicate that the carrying value may not be recoverable. |
We idled our gypsum manufacturing facility in Bernalillo, N.M. in December 2009, due to cyclical low gypsum wallboard demand. The carrying value of the Bernalillo plant and equipment at March 31, 2015 was $2.7 million and $0.4 million, respectively, and we continue to depreciate the assets over their estimated useful life. We currently have a strong market position in New Mexico, and our Albuquerque gypsum wallboard facility is operating at close to capacity. We plan on resuming manufacturing at the Bernalillo facility in the future when additional capacity is needed to meet demand for our products. Costs of maintaining the facility during the idling are not significant, and the facility was generating positive cash flow prior to being idled; therefore, we have determined that the value of the plant and equipment is not impaired. We are not currently considering the permanent closure of the Bernalillo facility. Any decision to permanently close Bernalillo would be the result of future changes in the building materials industry in the southwest United States and Rocky Mountain region, including changes in the production capacity or operations of our competitors, demand for gypsum wallboard or general macro-economic conditions, which we do not foresee at the present time. If we were to permanently close the Bernalillo facility, or if our expectations as to its use changed such that we project the future undiscounted cash flows from its operations would be insufficient to recover its carrying value due to the factors described above, or for any other reason, we would recognize impairment at that time. |
Impairment or Disposal of Long-Lived and Intangible Assets | Impairment or Disposal of Long-Lived and Intangible Assets – |
We evaluate the recoverability of our long-lived assets and certain identifiable intangibles, such as permits and customer contracts, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets, such as plants, buildings and machinery and equipment, including mining assets, is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Such evaluations for impairment are significantly impacted by estimates of future prices for our products, capital needs, economic trends in the construction sector and other factors. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of by sale are reflected at the lower of their carrying amount or fair value less cost to sell. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets – |
Goodwill: Goodwill is subject to at least an annual assessment for impairment by applying a fair-value-based test. We have elected to test for goodwill impairment in the fourth quarter of each fiscal year. The goodwill impairment test is a two-step process, which requires us to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit based on a discounted cash flow model using revenues and profit forecasts and comparing those estimated fair values with the carrying value; a second step is performed, if necessary, to compute the amount of the impairment by determining an “implied fair value” of goodwill. Similar to the review for impairment of other long-lived assets, evaluations for impairment are significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. |
Intangible Assets: Intangible assets at March 31, 2015 and 2014 consist of the following: |
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| | March 31, 2015 | |
| | Amortization | | | Cost | | | Accumulated | | | Net | |
Period | Amortization |
| | (dollars in thousands) | |
Intangible Assets and Goodwill: | | | | | | | | | | | | | | | | |
Customer contracts and relationships | | | 5-15 years | | | $ | 62,060 | | | $ | (5,994 | ) | | $ | 56,066 | |
Sales contracts | | | 4 years | | | | 2,500 | | | | (1,458 | ) | | | 1,042 | |
Permits | | | 40 years | | | | 27,440 | | | | (5,896 | ) | | | 21,544 | |
Goodwill | | | | | | | 132,515 | | | | — | | | | 132,515 | |
Total intangible assets and goodwill | | | | | | $ | 224,515 | | | $ | (13,348 | ) | | $ | 211,167 | |
| | | |
| | March 31, 2014 | |
| | Amortization | | | Cost | | | Accumulated | | | Net | |
Period | Amortization |
| | (dollars in thousands) | |
Intangible Assets and Goodwill: | | | | | | | | | | | | | | | | |
Customer contracts and relationships | | | 15 years | | | $ | 6,060 | | | $ | (1,580 | ) | | $ | 4,480 | |
Sales contracts | | | 4 years | | | | 2,500 | | | | (833 | ) | | | 1,667 | |
Permits | | | 40 years | | | | 27,240 | | | | (5,212 | ) | | | 22,028 | |
Goodwill | | | | | | | 132,515 | | | | — | | | | 132,515 | |
Total intangible assets and goodwill | | | | | | $ | 168,315 | | | $ | (7,625 | ) | | $ | 160,690 | |
Amortization expense of intangibles was $5.7 million, $1.7 million and $1.0 million for the years ended March 31, 2015, 2014 and 2013, respectively. Amortization expense is expected to be approximately $13.4 million per year for fiscal year 2016, $13.2 million for fiscal year 2017, $12.7 million for fiscal year 2018, $12.6 million for fiscal year 2019 and $6.2 million for fiscal year 2020. |
Other Assets | Other Assets – |
Other assets are primarily composed of loan fees and financing costs, deferred expenses, and deposits. |
Income Taxes | Income Taxes – |
Income taxes are accounted for using the asset and liability method. Deferred taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in earnings in the period that includes the enactment date. In addition, we recognize future tax benefits to the extent that such benefits are more likely than not to be realized. |
Stock Repurchases | Stock Repurchases – |
Our Board of Directors has approved the repurchase of a cumulative total of 31,610,605 shares, of which approximately 717,300 shares remain available for repurchase at March 31, 2015. We did not repurchase any shares in the open market during the years ended March 31, 2015, 2014 and 2013. |
Revenue Recognition | Revenue Recognition – |
Revenue from the sale of cement, gypsum wallboard, paperboard, frac sand, concrete and aggregates is recognized when title and ownership are transferred upon shipment to the customer. Fees for shipping and handling are recorded as revenue, while costs incurred for shipping and handling are recorded as expenses. |
We classify amounts billed to customers for freight as revenues and freight costs as cost of goods sold, respectively, in the Consolidated Statements of Earnings. Approximately $124.0 million, $113.1 million and $83.2 million were classified as cost of goods sold in the years ended March 31, 2015, 2014 and 2013, respectively. |
Other income (loss) includes lease and rental income, asset sale income, non-inventoried aggregates sales income, distribution center income and trucking income as well as other miscellaneous revenue items and costs which have not been allocated to a business segment. |
Comprehensive Income/Losses | Comprehensive Income/Losses – |
As of March 31, 2015, we have an accumulated other comprehensive loss of $12.1 million, which is net of income taxes of $7.1 million, in connection with recognizing the difference between the fair value of the pension assets and the projected benefit obligation. |
Consolidated Cash Flows - Supplemental Disclosures | Consolidated Cash Flows – Supplemental Disclosures – |
Interest payments made during the years ended March 31, 2015, 2014 and 2013 were $15.1 million, $17.0 million and $14.6 million, respectively. |
Statements of Consolidated Earnings - Supplemental Disclosures | Statements of Consolidated Earnings – Supplemental Disclosures – |
Maintenance and repair expenses are included in each segment’s costs and expenses. We incurred $86.7 million, $77.4 million and $61.3 million in the years ended March 31, 2015, 2014 and 2013, respectively, which is included in Cost of Goods Sold on the Consolidated Statement of Earnings. |
Selling, general and administrative expenses of the operating units are included in Cost of Goods Sold on the Consolidated Statements of Earnings. Corporate general and administrative (“G&A”) expenses include administration, financial, legal, employee benefits and other corporate activities and are shown separately in the consolidated statements of earnings. Corporate G&A also includes stock compensation expense. See Note (J), Stock Option Plans, for more information. |
Total selling, general and administrative expenses for each of the periods are summarized as follows: |
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| | For the Years Ended March 31, | | | | | |
| | 2015 | | | 2014 | | | 2013 | | | | | |
| | (dollars in thousands) | | | | | |
Operating Units Selling, G&A | | $ | 49,326 | | | $ | 50,175 | | | $ | 39,133 | | | | | |
Corporate G&A | | | 30,751 | | | | 24,552 | | | | 23,918 | | | | | |
| | $ | 80,077 | | | $ | 74,727 | | | $ | 63,051 | | | | | |
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Earnings Per Share | Earnings Per Share – |
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| | For the Years Ended March 31, | | | | | |
| | 2015 | | | 2014 | | | 2013 | | | | | |
Weighted-Average Shares of Common Stock Outstanding | | | | | | | 49,090,750 | | | | 46,622,646 | | | | | |
49,604,249 | | | | |
Effect of Dilutive Shares: | | | | | | | | | | | | | | | | |
Assumed Exercise of Outstanding Dilutive Options | | | 1,350,556 | | | | 1,574,491 | | | | 1,984,563 | | | | | |
Less Shares Repurchased from Proceeds of Assumed Exercised Options | | | (868,636 | ) | | | (1,032,359 | ) | | | (1,568,604 | ) | | | | |
Restricted Stock Units | | | 286,074 | | | | 306,283 | | | | 301,845 | | | | | |
Weighted-Average Common Stock and Dilutive Securities Outstanding | | | 50,372,243 | | | | 49,939,165 | | | | 47,340,450 | | | | | |
The “Less Shares Repurchased from Proceeds of Assumed Exercised Options” line includes unearned compensation related to outstanding stock options. |
There were 285,267, 146,696 and 1,082,380 stock options at an average exercise price of $82.72 per share, $65.12 per share and $39.65 per share that were excluded from the computation of diluted earnings per share for the years ended March 31, 2015, 2014 and 2013, respectively, because such inclusion would have been anti-dilutive. |
Fair Value Measures | Fair Value Measures – |
Certain assets and liabilities are required to be recorded or disclosed at fair value. The estimated fair values of those assets and liabilities have been determined using market information and valuation methodologies. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. There are three levels of inputs that may be used to measure fair value: |
Level 1 – Quoted prices for identical assets and liabilities in active markets; |
Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and |
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
New Accounting Standards | New Accounting Standards – |
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“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 2018, with early adoption not permitted. There are two transition methods available under the new standard, either cumulative effect or retrospective. We are currently evaluating the impact of this ASU and have not yet selected a transition method. |
In April 2015, The Financial Accounting Standards Board issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 830-30). This standard requires that discounts, premiums or debt issue costs related to borrowings be reported in the balance sheet as a direct reduction of the associated borrowing. The standard will be effective for us in the first quarter of fiscal 2017, and earlier application is permitted for financial statements that have not been previously issued. The impact of adopting this ASU is not expected to be material. |
Acquisition and Litigation Expense | Acquisition and Litigation Expense |
Acquisition and litigation expense consists primarily of expenses incurred during our acquisition, as discussed in Note (B), CRS Acquisition, and significant legal expenses incurred during litigation primarily involving the lawsuit against the Internal Revenue Service (“IRS”). See Note (H), Income Taxes, for more information about the outstanding lawsuit with the IRS. |