Eagle Materials Inc (EXP) 2002 Q4 法說會逐字稿

Today's call is being recorded. At this time, for opening remarks and introduction, I will turn the call over to Mr. Richard Jones, Chief Executive Officer and President, CENTEX Construction and Products Inc. Please go ahead, sir.

Yes, thanks, Barbara (ph). This is Dick Jones, the CEO and President of CENTEX Construction Products, and part of call of today we will be covering some forward-looking information. So, I'd like to direct your attention to the release statement on forward-looking statements at the end of the earnings release, and following the company's current year's future events and financial performance will involve known and unknown risks and uncertainties that may cause the actual results to be different from planned or expected. And with risks that are described in our annual report on the Form 10K, that is, for the first fiscal year ended May 31, 2001 and that's filed with the SEC. With us today from the CENTEX Construction Products Management Group to discuss the fourth quarter results, are Steven R. Rawley, our Executive Vice-President Cement and Concrete Aggregates; Arthur R. Zunker, our CFO and Sr. Vice-President and from his office in Albuquerque, New Mexico, (indiscernible) our Executive Vice-President, Gypsum and Paperboards. After a brief review of CXP's overall results, Steve and Dave will discuss their business units' performance, and also give us some guidance on the outlook for earnings for FY--fiscal year 2003. Our fourth quarter was somewhat stronger than we had anticipated but (indiscernible) of approximately $10.8 million, or 58 cents a share versus 20 cents a share for the same quarter last year. There were several factors that contributed the increased range including stronger than anticipated operating earnings performance from Gypsum and Paperboard. We also had reduced interests expense during the year on a lower effective tax rate. For the fiscal year ended March 31, 2002, our net earnings are approximately $40 million or $2.15 per share compared to $3.22 a share last year. The depressed Gypsum Wallboard prices earlier in the year were a major contributor to the reduced earnings. There were several positives for the year. We have records of concrete production and record chilling-up time, which resulted in another record performance for operating earnings for the cement group. The new Duke, Oklahoma facility for us achieved a target of production rates while improving efficiencies. By the end of the year Duke, Oklahoma was operating at an annualized rate of $1.1 billions sq. ft. and they actually produced 210,000 tons of paperboard of (indiscernible). If you recall the capacity at that mill was listed in annexure of 220, and they are probably climbing on something towards 235,000-240,000 tons out by next year.

The capital improvements to achieve those results were less than $8 million with all we had full formed it over $25 million for bringing those facilities up to their targeted production rates. With the reduced capital projects and strict cash-management practices, we did reduce that by approximately $100 million last year. By the end of the year, we were down to about $180 million of debt on our balance sheet. Although, it is not our bad earnings year, we had position CXP to move to its next technical peak earnings potential. Now, I would like Dave House to review the Gypsum Wallboard and Recycle Paper results for the quarter. Dave?

Thank you, Dick. Gypsum Wallboard revenues for the fourth quarter were $54 million, 17 percent above, $46 million for the same quarter a year ago. Wallboard reported $7.6 million operating profit versus -- for the fourth quarter versus $4.14 million loss for the same quarter a year ago. Earnings came for the quarter results from increased sales volume and higher operating margins. The average net sales price for this year's quarter was $82 per 1,000 sq. ft, 20 percent greater than the $68 premise for the same quarter last year. At quarter end we implemented a 15 percent price increase that amounts to another one for the mid part of May. Sales volume for the 518 million sq. ft. for this year's quarter was 7 percent greater than the 46 for the same quarter last year. Shipment rose too to increase penetration of core markets and purchases in advance of our price increase. Cost of sales was $67.71, or 12 percent lower than the prior year's quarter, mostly due to lower gas costs and some due to efficiencies. Gypsum Wallboards reported $4.6 million operating profit for the year 2000 -- 83 percent below the $27 million for the same period in 2001. Increased sales volume partially offset by lower operating margins accounted for the earnings decline. In fiscal year 2002, Gypsum Wallboard revenues were $183 million, a 2- percent decrease from the $187 million for the same period a year ago. For fiscal year 2002, Gypsum Wallboard sales volume increased 22 percent to 1.9 billion sq. ft. from 1.5 billion for the same period last year. The sales volume gain resulted on a full year's sales from the Duke, Oklahoma Wallboard plant acquired during the third quarter of the previous year. Some of that was offset by lower shipments from CXP's Wallboard plant. US Wallboard manufactures shipped an all-time high, 29 billion sq. ft. in calendar of 2001 - up 4 percent from the previous year. CXP's average net sales price for the year was $72.97 per MSF, 20 percent below $91.12 for the same period a year ago. The cost of sales $70.56 was 5 percent lower than the cost of sales in prior fiscal year. On the paperboard side, paperboard operation reported fourth quarter earnings of $23 -- fourth quarter revenues of $23.4 million versus 22.5 million for the same quarter last year; and operating earnings of 4.8 million this year compared to 1.6 million for the same quarter a year ago. The fourth quarter earnings increase resulted from a 199 percent increase in operating margins, paperboard sales were almost 58,000 tons, at an average net sales price of $398 per ton for the quarter issue was higher than the sales volume of 56,000 tons, at an average net sales price of $391 per ton for the fourth quarter last year. For fiscal year 2002, paperboard revenues were $84 million, at average net sales price of $398 per ton. Revenues for the same period last year were $31 million, at an average net sales price of $386 per ton. Paperboard sales volume for fiscal year 2002 was 210,000 tons, compared to 80,000 tons the previous year. Operating margins for fiscal year 2002 were 10 million versus 1.4 million in last year, due to higher sales volume from a full year production at the Lawton mill combined with improved operating margins. Operating earnings for fiscal year 2002 were negatively impacted by costs associated with idling of the Denver Mill in April 2001. Thank you, Dick.

Okay. All right, Dave. Steve, how about reviewing Cement and Concrete Aggregates for us.

Thank you, Dick. Reduced sales volume primarily in our mountain and western region, combined with lower operating margins, reduced this year's fourth quarter cement earnings by 19 percent to $9.3 million compared to the same quarter last year. Our sales volume of 446,000 tons was 8 percent was below last year's fourth quarter sales volume. And our net sales price of $65.46 per ton was one percent lower than last year's fourth quarter, apparently because of the change in the geographic mix over sale. Record sale volume continues in the state of Texas where pricing has now stabilized and the new added capacity has been absorbed into this continued very strong market. Record cement sales volume of 2,441,000 tons combined with record (indiscernible) production at each of CXPs four cement plants. Those (indiscernible) our earnings to all-time record high of $60.2 million for the fiscal year 2002. Purchase cement sales volume of 257,000 tons, 38 percent higher than last year's purchases was required to meet this strong demand in our local market. The average net sales price of $67.69 per ton is essentially flat compared with last year's price. Looking forward (indiscernible) of demand for our cement remains very strong near all of our manufacturing facilities and we anticipate another sober (ph) year, requiring us to purchase additional cement to meet the required demand. Presently, the pricing is generally stable and we anticipate modest price increasing during the year. Results for concrete and aggregates this quarter were not as good. The continued recession in the Austin area combined with high maintenance and operating costs, that are aggregate plans, resulted in a net operating loss for the quarter of $29,000. Our concrete sales volume was 132,000 cubic yards, was 29 percent below last year's fourth quarter sales volume or the average net sales price increased 4 percent to $56.07 per cu. yd. because of the greater percentage of higher price, lower than California sales in the mix. Our aggregate sales volume increased 12 percent to 909,000 tons for the fourth quarter. And the average net sales price also increased 6 percent to $4.37 per ton for the current quarter. However, high maintenance cost primarily on local equipment increased the cost of sales by 32 percent to $4.61 per ton. For the fiscal year 2002, operating earnings from Concrete and Aggregate declined 42 percent to $4.4 million, primarily because of lower concrete sales volume and operating margins at our Austin operation. Looking forward the Austin economy appears to have bottomed out and is starting to recover while our Northern California market remains strong. Dick?

Okay, thanks, Steve. As a prelude to our guidance for this coming fiscal year, I'd like to point out several areas that should contribute to increased earnings for 2003, and as Steve just said, our cement business remains extremely strong. The US economy considering the 127 million short tons of Portland and masonry cement last year and required over 28 million tons of imports. All of our markets remained strong. There are some price increases and we plan to, as Steve mentioned, operate at full capacity, which gives us that leverage we need to optimize more consumer cement. Wallboard demand remained strong. March this year was up eight percent over last year. First quarter this year was up almost 10 percent over last year. Our March price was $10 per 1000 square feet higher than our average for the entire of last year. With the April 1st price increase implemented and looking forward to another one, on March 13, we should or shouldn't see very strong improved operating earnings out of Wallboard. The paperboard guys have done a tremendous job of bringing that well up, and we believe that they will exceed its design capacity this coming year. Costs have been driven down. We took our fourth quarter results to manualize. The capacity of the planet was 232,000 tons. We anticipate with November mill cost that we shut down last year, which is about $2 million and continued the 100 percent optimization of the mill. We have a very strong year out of paperboard. They've also developed some additional crack paper products, so that if we need to fill in and maintain full capacity, we've got some additional products that have been accepted by customers in the market that will allows us to continue to run the mill at 100 percent. Steve mentioned that currently negative portion had bottomed out should begin recovering in Austin. Westgate is strong. But with these improved results-- operating result next year -- which will result in accelerated reduction of our debt and will reduce interest expense for the coming year. indiscernible] with that general backdrop of positives for the coming year, would you please discuss our guidance?

Thank you, Dick.

I think I'll handle this and in three parts. The first part will be the easy part as you had mentioned and may have been relating to the first four units you established in the sense of CAPEX, BB&A, and then what we look forward in the forthcoming year --capital expenditure for fiscal 2005 for $19 million with depreciation and amortization of approximately $36 million. For 2003, the CAPEX are projected to be approximately 17 million with depreciation of $37 million. Also I'd like to mention that we have reduced debt approximately $180 million and once we go through the guidance for the forthcoming year, we could see that debt, certainly no major acquisitions or rather the CAPEX projects involved beyond those mentioned above, so it's between $75 million and $100 million at fiscal year end 2003. I'll start with fiscal year 2003. I'd like to give you a range of -- I'll have to say it's the bottom end but we'll go from a lower to a higher range with the three major segments that really contribute in driving our earnings in the cement, wallboard, and paper and those will show you a model you can throw your entire [indiscernible] at it [indiscernible] that also makes you approximately $4.5 million that we are going to prove this fiscal year. On cement, we ended up the year with loss inventories. At the end of the year we will get the entirely associated with partial loss from the forthcoming year to duplicate this drop of 2.4 million pounds of the slow shipments. We've arranged a 2.3 or 2.4 basically the term modules we have for cement and wallboard range of 1.9 billions 4-feet to 2.1 billions 4-feetWe're up the is post price increase on fraction of the second price increase thrown in and with paperboard with 220,000 tons to 240,000 tons for a pricing of $390 to $410 per net ton. We are met the year with something between $3.75 and $4.50 for fiscal 2003. On the quarter, we are looking at with the price increase in the [indiscernible] and April. So that should give us something in the range of 85 cents to 95 cents and then with approximate quarter with the price increase if it just takes up in between $1.05 and $1.1. That's it Rick.

All right Wardrup, could you please and go ahead and open up the call to questions?

Certainly. The question and answer session will be conducted electronically. If you would like to ask a question please do so by pressing the star key followed by the digit "1" in your touchtone telephone. We will proceed in the order of the [indiscernible]. We will take as many questions as time permits.

Thank you and good job guys. Looks like we really turned on the wallboard.

Yup, Thanks Barbara.

Art, you talk too fast for me. Can I just -- can you go over again on the cement -- of 2.3-2.4 million tons and what was the pricing?

Well, we used the same pricing we have for this each.

Essentially flat?

Right.

Okay, wallboard 1.9 to 2.1 billion square feet with pricing assuming an increase you put in of 15 percent plus you proposed another?

Well, actually it was [indiscernible]. We are using a process to somewhat drive on a higher [indiscernible] on the same state as the price increase, the second price increase. That probably won't be fully realized during the course of the whole year.

Okay, paperboard volumes got to 220,000-240,000?

Correct.

And I didn't get the low-end of the price?

390 to 410 range.

390 to 410. What was your -- I calculated an equity balance of approximately 427million. Is that close?

That's pretty close.

Okay. And debt, we had at 182. How about cash balances? Have you just applied it all to debt?

That was all applied to debt that is essentially [indiscernible] or something on to it.

Okay and what are the signs that you see that Austin has bottomed and may be recovering?

Residential is starting to pick back up. We see that whereas most of our customers were talking about their business being up in the 50 percent range, two or three months ago, now they are talking about their business is only up 65 to75 percent. So we are starting to see residential pick up in the Austin area.

It is up 25-35 percent.

I was considering that. So, it's now, instead of being down 50 percent, we are talking 25 percent.

Yeah, and we are down in the 25 percentage range.

Okay, so its not as bad as it was. Okay thanks a lot, as I look at this I may come back with more.

Okay.

And there's one reminder. Please press star "1", if you have a question.

Hi. Good Afternoon. Congratulations, Mike and I think I should seek congratulations on - and that's for switching out Anders the last minute.

It's probably -- I am very much impressed, as well. Can you talk about -- you know -- so you have very impressive cost on the Wallboard side. You get the benefits from gas prices, which are probably not going the other way? You can talk about what you are averaging, if you have this, and the average cost for per gas in the quarter and what do you think that might be turning up to? And let the chief add to that a little bit.

We'll add a little ways [indiscernible] pass.

We are averaging around $3 at the moment, okay.

Was that the average in the quarters?

Yes, it was -- but it might have been little lower but not much if you use around $3 for pre-cost.

And the year full contracts are based on that price. Which way -- I mean -- Do I -- they going up?

They are growing up some. But it shouldn't be too much. We look forward enough now for the large enough percentage. We are not going to get two bucks on impact there.

Okay. So, how much less are you hedged up?

Well, they may -- well we've got about 40 percent hedged up throughout this year.

Throughout this year.

Yeah.

Okay. Any other relative issues on -as far as coal price or anything else that would turn in outputs?

Coal price essentially was flat except for in the Texas area we discussed during the last conference call? In Texas they are up 10-15percent, including the freight.

And that's still true?

That's still true.

Okay. To back where we were. Tax utilization, you might have mentioned if they are going to correlate in terms of what that was in the quarter?

We were around 75 to80 percent.

Has that increased recently or are you planning to increase that?

It was up a little bit in the March share we had surge on buying for the price increase.

But not -- but we won't -- we've recovered or increased that greatly. No.

We would rather receive the price increase trip?

Right, Right. Have you seen increased buying for such orders for may be later this month and could be get in -- fitting in before the May increase?

Not yet. No. We have not seen it. I think they've got about all they can hold at the moment.

Right, right. But at this point, it appears you are pretty optimistic of that 15 percent in holding?

We hope so. Yes.

Okay. That's all I have now. I may come back later on , as well. Thanks.

And there's one final reminder. Please press star "1" if you do have a question or pause for just a moment. You missed your chance. It appears to have no further questions at this time. I'll turn the conference back over to you.

All right. Well, thank you very much. That will conclude the conference call. I'd asked Dave House to stay on the line after you've disconnected all the other parties. Can you do that Obrah?

I am sure I can.

Thank you very much.

And that does conclude today's conference.