Eagle Materials Inc. Reports Fiscal Year Results

DALLAS–(BUSINESS WIRE)–Eagle Materials Inc. (NYSE: EXP) today reported financial results for
fiscal year 2019 and the fiscal fourth quarter ended March 31, 2019.
Notable items for the fiscal year and quarter are highlighted below.
(Unless otherwise noted, all comparisons are with the prior fiscal year
or prior year’s fiscal fourth quarter.)

Full Year Fiscal 2019 Results

• Revenue of $1.4 billion, flat with the prior year
• Net earnings per diluted share of $1.47, down 72%
• Adjusted net earnings per share of $5.05
  • Adjusted earnings per share is a non-GAAP financial measure
    calculated by excluding non-routine items in the manner described
    in Attachment 6.
  • Total after-tax impact of non-routine items, consisting of costs
    related to an impairment in our Oil and Gas Proppants business,
    was $168.0 million, or $3.58 per diluted share. See Attachment 6.

Fourth Quarter Fiscal 2019 Results

• Revenue of $284.7 million, flat with prior year
• Net loss per diluted share of $2.82, down 471%
• Adjusted net earnings per share of $0.87
  • Adjusted earnings per share is a non-GAAP financial measure
    calculated by excluding non-routine items in the manner described
    in Attachment 6.
  • Total after-tax impact of non-routine items, consisting of costs
    related to an impairment in our Oil and Gas Proppants business,
    was $168.0 million, or $3.69 per diluted share. See Attachment 6.

Commenting on the financial results, Dave Powers, Chief Executive
Officer, said, “In fiscal 2019, our businesses continued to generate
strong earnings and cashflow, despite challenging weather trends that
depressed sales opportunities throughout much of our fiscal year.
Importantly, we continued to improve our already low-cost position
throughout the year, making meaningful investments to further improve
our operational efficiency, while continuing to repurchase shares in
line with our capital allocation strategy. In fiscal 2019, we purchased
more than 3.3 million shares, or 7% of our outstanding shares, and we
returned nearly $300 million to shareholders, through a combination of
share repurchases and dividends.”

Mr. Powers continued, “Looking ahead, a strong jobs market, coupled with
real wage growth and low interest rates, bodes well for our key
construction markets in calendar 2019. We are confident that we will
continue to produce industry-leading margins and generate significant
cash flow, and our ongoing strategic portfolio review will ensure that
Eagle’s inherent value is appropriately reflected in the marketplace.”

Segment Results

Heavy Materials: Cement, Concrete and Aggregates

Revenue in the Heavy Materials sector, which includes Cement, Concrete
and Aggregates, and joint venture and intersegment Cement revenue,
declined 1% to $795.5 million in fiscal year 2019. Heavy Materials
operating earnings for the fiscal year were $177.6 million, a decline of
10%. The decline in our Heavy Materials revenue and operating earnings
was driven primarily by unusually wet weather throughout the year, which
hampered sales volume, and by increased maintenance costs partially
offset by improved Cement and Concrete average net sales prices.

Revenue from Cement, including joint venture and intersegment revenue,
increased 1% to $656.8 million for the full fiscal year. Fiscal 2019
operating earnings from Cement were $164.8 million, a decline of 8%,
reflecting increased maintenance costs partially offset by improved
pricing.

Cement revenue for the quarter, including joint venture and intersegment
revenue, was down 2% to $113.1 million. Operating earnings from Cement
for the fourth quarter were $22.7 million, 8% below the same quarter a
year ago. The revenue and earnings decline was caused primarily by
reduced sales volume due to persistently wet weather in many of our
markets and was partially offset by improved average net cement sales
prices. Cement sales volume for the quarter was down 2% to 928,000 tons.
The average net sales price for the quarter improved slightly to $109.15
per ton.

Fiscal 2019 revenue from Concrete and Aggregates declined 11% to $138.8
million. Concrete and Aggregates reported fiscal 2019 operating earnings
of $12.9 million, down 28%. Persistently wet weather in our Austin
market was the primary driver of the revenue and earnings decline.

Concrete and Aggregates revenue for the fourth quarter of 2019 was $28.5
million, a decrease of 7%. Fourth quarter operating earnings were $2.2
million, a 20% decline, reflecting lower sales volume partially offset
by improved concrete pricing. Our primary concrete and aggregates
markets experienced heavier rainfall than typical during the quarter,
which hampered our ability to move product.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard
and Paperboard, increased 5% to $633.6 million for fiscal 2019.
Operating earnings for the full fiscal year were $216.2 million, an
increase of 13%, reflecting improved average net wallboard prices and
sales volume as well as lower paper costs.

Gypsum Wallboard and Paperboard revenue for the fourth quarter totaled
$154.4 million, a 13% increase. The improvement reflects higher
Wallboard sales volume partially offset by lower average net sales
prices. The average Gypsum Wallboard net sales price for the fourth
quarter of fiscal 2019 was $156.29 per MSF, a 4% decline. Gypsum
Wallboard sales volume of 659 million square feet (MMSF) improved by
approximately 22%.

The average Paperboard net sales price for the fourth quarter was
$532.38 per ton, down 2%, consistent with the pricing provisions in our
long-term sales agreements. Paperboard sales volume for the quarter was
3% lower at 76,000 tons.

Gypsum Wallboard and Paperboard reported fourth quarter operating
earnings of $50.4 million, an improvement of 10%. The improvement
reflects increased Wallboard sales volume and lower operating costs,
which were partially offset by lower Wallboard average net sales prices.
The reduced operating costs reflect lower recycled paper fibers costs
during the quarter.

Oil and Gas Proppants

Eagle’s Oil and Gas Proppants segment reported fiscal 2019 revenue of
$83.0 million, a decrease of 16%, primarily reflecting lower average net
sales prices partially offset by a 6% increase in Frac Sand sales
volume. The fiscal 2019 operating loss was $28.7 million compared with
an operating loss of $6.1 million in the prior year.

Eagle’s Oil and Gas Proppants segment reported fourth quarter revenue of
$17.7 million, a decline of 43%, primarily reflecting a 41% decrease in
average Frac Sand sales prices. The fourth quarter’s operating loss of
$9.1 million includes depreciation, depletion and amortization of $6.9
million.

During the second half of the fiscal year, demand for our frac sand
product was increasingly affected by industry-wide reduced completion
budgets. In addition, pricing pressure resulted from a combination of
low demand and increased use of local in-basin sand with lower logistics
cost. Faced with these dynamics, which are not expected to recover in
the near term, we recorded long-lived asset and goodwill impairments
during the quarter of $213.4 million and $6.9 million, respectively.

Commitment to Enhance Long-Term Shareholder Value

Eagle remains committed to disciplined capital allocation that preserves
the Company’s financial flexibility and further enhances shareholder
value. The Company’s capital allocation priorities remain unchanged: (i)
acquisitions that meet our strict return standards and are consistent
with our strategic focus; (ii) capital investments to organically grow
and improve our low-cost producer positions and (iii) the return of cash
to shareholders, through a combination of dividends and share
repurchases.

During the past three fiscal years, acquisition and capital spending
investments have totaled approximately $795 million, with 72% of the
spending allocated towards the Heavy Materials sector of our Company.
These investments included the acquisition of a cement plant in Ohio,
increasing the finish grind capacity at our Kansas City facility by
125,000 tons, expanding our cement distribution footprint to support our
growing integrated plant network and reducing our energy consumption.

Capital expenditures for fiscal 2020 are expected to range from $140
million to $155 million and to be allocated across the Heavy and Light
sectors. Identified projects include a $70 million investment to expand
and enhance our papermill, which has been sold out for several years.
This project will enable the facility to increase line speeds, which in
turn increases output, and to replace high-cost raw materials with a
lower-cost, more sustainable alternative. We expect the project to be
completed by late spring of 2020 and to increase our paper capacity by
approximately 70,000 tons.

The Company has returned nearly $600 million to shareholders in the form
of dividend payments and share repurchases since announcing an increase
in the share repurchase authorization in August 2015. As previously
disclosed, on April 18, 2019, the Board authorized the repurchase of an
additional 10 million outstanding share of common stock, which increased
the total authorization to 10.7 million shares, or nearly 25% of Company
shares outstanding.

Details of Financial Results

We conduct one of our cement plant operations through a 50/50 joint
venture, Texas Lehigh Cement Company LP (the Joint Venture). We use the
equity method of accounting for our 50% interest in the Joint Venture.
For segment reporting purposes only, we proportionately consolidate our
50% share of the Joint Venture’s revenue and operating earnings, which
is consistent with the way management organizes the segments within
Eagle for making operating decisions and assessing performance.

In addition, for segment reporting purposes, we report intersegment
revenue as a part of a segment’s total revenue. Intersegment sales are
eliminated on the income statement. Refer to Attachment 3 for a
reconciliation of these amounts.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Portland Cement,
Gypsum Wallboard and Recycled Gypsum Paperboard, and Concrete, Sand and
Aggregates from more than 75 facilities across the US. Eagle’s corporate
headquarters is in Dallas, Texas.

EXP’s senior management will conduct a conference call to discuss
the financial results, forward looking information and other matters at
8:30 a.m. Eastern Time (7:30 a.m. Central Time) on Thursday, May 16,
2019. The conference call will be webcast simultaneously
on the EXP Web site eaglematerials.com.
A replay of the webcast and the presentation will be archived on
the site for one year.

Forward-Looking Statements. This press release contains
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 business; 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
energy costs including, without limitation, natural gas, coal and oil;
changes in the cost and availability of transportation; unexpected
operational difficulties, including unexpected maintenance costs,
equipment downtime and interruption of production; material nonpayment
or non-performance by any of our key customers; fluctuations in activity
in the oil and gas industry, including the level of fracturing
activities and the demand for frac sand; 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 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; competition; a
cyber-attack or data security breach; announced increases in capacity in
the gypsum wallboard, cement and frac sand industries; changes in the
demand for residential housing construction or commercial construction;
risks related to pursuit of acquisitions, joint ventures and other
transactions; general economic conditions; and interest rates. For
example, increases in interest rates, decreases in demand for
construction materials or increases in the cost of energy (including,
without limitation, natural gas, coal and oil) 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. These and other factors are described in the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
2018, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 2018 and subsequent quarterly and annual reports upon
filing. These reports are filed with the Securities and Exchange
Commission. 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.

Adjusted earnings per diluted share (Adjusted EPS) is a non-GAAP
financial measure and represents earnings per diluted share excluding
the impacts from non-routine items, such as impairment losses
(Non-routine Items). Management uses measures of earnings excluding the
impact of Non-routine Items as a basis for comparing operating results
of the Company from period to period and for purposes of its budgeting
and planning processes. Although management believes that Adjusted EPS
is useful in evaluating the Company’s business, this information should
be considered as supplemental in nature and is not meant to be
considered in isolation, or as a substitute for earnings per diluted
share and the related financial information prepared in accordance with
GAAP. In addition, our presentation of Adjusted EPS may not be the same
as similarly titled measures reported by other companies, limiting its
usefulness as a comparative measure.

The following shows the calculation of Adjusted EPS and reconciles
Adjusted EPS to earnings per diluted share in accordance with GAAP for
the three months and fiscal year ended March 31, 2019. The amounts below
are presented after-tax and were determined using a tax rate of 24% for
the three months and fiscal year ended March 31, 2019:

Contacts

For additional information, contact at 214/432-2000.
David
B. Powers
Chief Executive Officer
D. Craig Kesler
Executive
Vice President and Chief Financial Officer
Robert S. Stewart
Executive
Vice President, Strategy, Corporate Development and Communications

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