Eagle Materials Inc. reported financial results for the second quarter of fiscal 2013, which ended September 30, 2012. Notable items for the quarter include (all comparisons, unless noted, are with the prior-year's second quarter):
- Revenues of $164.7 million, up 22 percent
- Segment operating earnings of $41.3 million, up 146 percent
Adjusted earnings per diluted share of $0.49, up 250 percent
- Adjusted earnings per share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 5
- Total impact of non-routine items, including costs related to the pending acquisition of the Lafarge Target Business and litigation costs related to its lawsuit against the IRS, was $3.9 million, or $0.09 per diluted share
Second quarter sales volumes improved across all major business lines and wallboard net sales prices increased 30 percent, as compared to the prior year's second quarter. Improved second quarter operating cash flow was used to fund capital expenditures, pay dividends and reduce debt which further strengthened our financial position. Eagle ended the quarter with a net debt-to-capitalization ratio of 29 percent.
As previously announced on September 26, Eagle entered into a definitive agreement with Lafarge North America to purchase Lafarge's Sugar Creek, Mo., and Tulsa, Okla., cement plants, as well as related assets, which include six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business (the "Lafarge Target Business").
The purchase price is $446 million, subject to customary post-closing adjustments. Eagle expects that the acquisition will increase its U.S. annual cement capacity by approximately 60 percent to nearly 5 million tons. The acquisition is expected to close in November or December 2012, and is subject to receipt of required regulatory approvals, certain third-party consents and other customary conditions.
On October 3, Eagle also completed the public offering of 3.45 million shares of its common stock, which includes 450,000 shares issued pursuant to the underwriters' exercise in full of their overallotment option, at a price to the public of $46.50 per share. Total gross proceeds from the equity offering were $160.4 million. Net proceeds from the offering were approximately $154.4 million, after deducting underwriting discounts, commissions and expenses related to the offering. The company intends to use the net proceeds, together with borrowings under its bank credit facility, to fund the pending acquisition of the Lafarge Target Business.
Cement, Concrete and Aggregates
Operating earnings from Cement for the second quarter were $17.4 million, a 15 percent increase from the same quarter a year ago. Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $78.5 million, 8 percent greater than the same quarter last year. Cement sales volumes for the quarter were 864,000 tons, 6 percent above the same quarter a year ago. The average net sales price this quarter was $82.77 per ton, 2 percent higher than the same quarter last year.
Concrete and Aggregates reported a $0.4 million operating loss for the second quarter, down from a slight operating profit for the same quarter a year ago, primarily due to lower concrete sales volumes and lower aggregates sales volumes in Northern California.
Gypsum Wallboard and Paperboard
Gypsum Wallboard and Paperboard's second quarter operating earnings of $24.2 million were up 1,513 percent compared to the same quarter last year. Higher wallboard average net sales prices, higher gypsum wallboard and gypsum paperboard sales volumes and lower recycled paper input costs were the primary driver of the quarterly earnings increase.
Gypsum Wallboard and Paperboard revenues for the second quarter totaled $96.5 million, a 33 percent increase from the same quarter a year ago. The revenue increase reflects primarily higher wallboard average net sales prices and sales volumes.
The average gypsum wallboard net sales price for the second quarter was $119.44 per MSF, 30 percent greater than the same quarter a year ago. Gypsum Wallboard sales volume for the quarter of 500 million square feet (MMSF) represents a 24 percent increase from the same quarter last year. The average Paperboard net sales price for this quarter was $512.12 per ton, 2 percent lower than the same quarter a year ago. Paperboard sales volumes for the quarter were 62,000 tons, 3 percent higher than the same quarter a year ago.
Details of Financial Results
Acquisition and Litigation Expense consists of direct costs related to its pending acquisition of the Lafarge Target Business and the write-off of deferred project costs associated with a Greenfield cement project that will no longer be pursued due to the pending acquisition and legal fees related to the lawsuit against the IRS. Direct acquisition costs were approximately $3.5 million (pre-tax), Greenfield write-off costs were approximately $1.0 million (pre-tax) and legal fees were approximately $1.2 million (pre-tax) during the quarter ended September 30.