Eagle Materials(US:EXP)2022-07-27 16:00PART I. FINANCIAL INFORMATION Consolidated Financial Statements Eagle Materials Inc. reported Q2 FY23 revenue of $561.4 million, an 18% increase, with net earnings up 10% to $105.0 million, driven by an acquisition and strong cash flow Consolidated Statements of Earnings (Three Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $561,387 | $475,770 | | Gross Profit | $150,866 | $126,511 | | Earnings before Income Taxes | $136,179 | $121,719 | | Net Earnings | $105,005 | $95,327 | | Diluted EPS | $2.75 | $2.25 | Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | March 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $547,139 | $442,727 | | Total Assets | $2,770,859 | $2,579,652 | | Long-term Debt | $1,119,582 | $938,265 | | Total Liabilities | $1,647,078 | $1,446,096 | | Total Stockholders' Equity | $1,123,781 | $1,133,556 | Consolidated Statements of Cash Flows (Three Months Ended June 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $124,802 | $111,121 | | Net Cash Used in Investing Activities | ($136,076) | ($11,935) | | Net Cash Provided by (Used in) Financing Activities | $60,139 | ($56,164) | | Net Increase in Cash | $48,865 | $43,022 | - On April 22, 2022, the company acquired a readymix concrete and aggregates business (ConAgg Acquisition) for approximately $121.2 million, funded through its revolving credit facility26 Segment Revenue (Three Months Ended June 30, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Cement | $284,516 | $270,255 | | Concrete and Aggregates | $61,618 | $44,754 | | Gypsum Wallboard | $216,327 | $166,267 | | Paperboard | $54,073 | $43,267 | Segment Operating Earnings (Three Months Ended June 30, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Cement | $62,348 | $62,547 | | Concrete and Aggregates | $5,732 | $5,344 | | Gypsum Wallboard | $84,068 | $63,253 | | Paperboard | $3,816 | $3,337 | Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 fiscal 2023 saw 18% revenue growth from higher prices and robust demand, particularly in Gypsum Wallboard, despite inflation and rising energy costs Market Conditions and Outlook Resilient end markets, strong demand for Cement and Gypsum Wallboard, but persistent cost headwinds from energy and freight are expected - The Cement business is in a near sold-out position, with demand expected to remain strong due to federal funding from the Infrastructure Investment and Jobs Act101 - Gypsum Wallboard demand is supported by record home construction backlogs, though management acknowledges that quantitative tightening may impact future residential construction102 - The company anticipates further increases in energy and freight costs in fiscal 2023, mitigating this by forward purchasing about 40% of its natural gas needs at $4.78 per mmbtu104 Results of Operations Q1 FY23 revenue grew 18% to $561.4 million, net earnings rose 10% to $105.0 million, driven by price increases across all segments - Overall revenue increased by $85.6 million (18%), driven by a $70.7 million positive impact from higher sales prices and a $3.9 million impact from increased sales volume, with the ConAgg acquisition contributing $11.0 million in revenue108 - Gross profit increased 19% to $150.9 million, with the gross margin remaining stable at 27% as higher sales prices were offset by increased operating costs110 Cement Segment Performance (Q1 FY23 vs Q1 FY22) | Metric | Q1 FY23 | Q1 FY22 | Change | | :--- | :--- | :--- | :--- | | Revenue | $284.5M | $270.3M | +5% | | Sales Volume (M Tons) | 1.993 | 2.036 | -2% | | Avg. Net Sales Price/ton | $127.82 | $116.34 | +10% | | Operating Earnings | $62.3M | $62.5M | 0% | Gypsum Wallboard Segment Performance (Q1 FY23 vs Q1 FY22) | Metric | Q1 FY23 | Q1 FY22 | Change | | :--- | :--- | :--- | :--- | | Revenue | $216.3M | $166.3M | +30% | | Sales Volume (MMSF) | 798 | 763 | +5% | | Avg. Net Sales Price/MSF | $218.57 | $176.79 | +24% | | Operating Earnings | $84.1M | $63.3M | +33% | Liquidity and Capital Resources Strong liquidity with $124.8 million operating cash flow, significant acquisition spending, and ongoing share repurchases - Net cash from operating activities increased by $13.7 million to $124.8 million, primarily due to higher net earnings141 - The company had $562.6 million of available borrowings under its Revolving Credit Facility as of June 30, 2022149 Share Repurchases (Three Months Ended June 30, 2022) | Metric | Value | | :--- | :--- | | Total Shares Purchased | 884,000 | | Average Price Paid Per Share | $124.00 | | Total Cost | ~$109.6 million | | Shares Remaining for Repurchase | 9,938,992 | - Capital expenditures for fiscal 2023 are expected to range from $110.0 million to $120.0 million159 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its variable-rate debt and commodity price volatility, with mitigation strategies in place - The company is exposed to interest rate risk on its $181.0 million of borrowings under the Revolving Credit Facility and $200.0 million under the Term Loan163 - A hypothetical 100 basis point increase in interest rates on variable-rate debt would increase annual interest expense by approximately $3.8 million163 Controls and Procedures Management, including CEO and CFO, confirmed the effectiveness of disclosure controls and procedures as of June 30, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022165 PART II. OTHER INFORMATION Legal Proceedings Ongoing legal proceedings are not expected to materially impact the company's financial condition, results of operations, or liquidity - Management believes that no currently pending legal proceedings will have a material effect on the company's consolidated financial condition167 Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year ended March 31, 2022 - The report refers to the Risk Factors section in the Form 10-K for the fiscal year ended March 31, 2022, for information on factors that could impact the company169 Unregistered Sales of Equity Securities and Use of Proceeds Details on share repurchases are incorporated by reference from the Management's Discussion and Analysis section of this report - This item incorporates by reference the 'Share Repurchases' section from the MD&A, which details the repurchase of 884,000 shares for approximately $109.6 million during the quarter170156 Mine Safety Information Mine safety disclosures, as required by the Dodd-Frank Act, are provided in Exhibit 95 of this Form 10-Q - Mine safety disclosures required by Section 1503(a) of the Dodd-Frank Act are provided in Exhibit 95 of this report171 Exhibits This section lists all exhibits filed with the Form 10-Q, including credit agreements, compensation plans, and certifications