Eagle Materials Inc (EXP) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2015 Eagle Materials Incorporated earnings conference call.

My name is Kim, and I will be your operator for today.

A t this time, all participants are in a listen-only mode.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Steve Rowley, President and CEO of Eagle Materials.

Please proceed.

Thank you, and welcome to Eagle Materials conference call for the first quarter of FY15.

Joining me today are Craig Kesler, our Chief Financial Officer, and Bob Stewart, Executive Vice President, Strategy, Corporate Development and Communications.

There will be a slide presentation made in connection with this call.

T o access it, please go to www.EagleMaterials.com and click on the link to the webcast.

While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call.

These statements are subject to risk and uncertainties that could cause results to differ from those discussed during the call.

For further information, please refer to this disclosure which is also included at the end of our press release.

Eagle's first-quarter revenues of $266 million set an all-time high record for any quarterly period.

First-quarter operating earnings and earnings per share increased significantly as a result of improved pricing and strong volumes across all of our major business lines.

Our construction products and building materials businesses remain very well-positioned as we begin the next construction upcycle.

With receipt of our final permit necessary to operate our frac sand mine, we anticipate our frac sand business to become a material contributor to Eagle's cash flow by the end of this fiscal year.

A 4% increase in our cement sales volumes and a 5% increase in our cement sales price were the primary drivers of the increase in Eagle's quarterly comparative of cement, concrete, and aggregates revenues.

Major maintenance at five of our six cement plants impacted this quarter's earnings by about $5.2 million.

Cement shipments this quarter were impacted by rail congestion in the Midwest, the result of winter weather bunching up rail cars and slowing down rail line speeds.

Year-over-year, our first-quarter cement prices have increased $4.50 per ton as we successfully implemented price increases across all of our cement markets.

Additionally, cement price increases have been announced for later this summer and fall in the West, Mountain, and Texas regions.

Increased wallboard sales prices and increased sales volumes drove an 18% increase in our quarterly comparative of wallboard and paperboard revenues.

Operating earnings in our wallboard and paperboard business increased 27% to $45 million for the first quarter.

Our paper mill continues to perform exceptionally well and remains sold out.

It is my pleasure to begin reporting on a new segment for Eagle Materials.

Oil and gas proppants.

This segment will be increasing in importance in the coming years.

During our first quarter, we received the final permit necessary for us to begin shipping frac stand from our mine in Utica, Illinois.

First shipments of our own sand will occur this quarter, and because of the barge transit time, first sales of our own sand will occur during our fiscal third-quarter in Corpus Christi, Texas.

Now, let me turn it over to Craig for more details on the financials.

Thank you, Steve.

Cash flow from operations during the first quarter was $40.3 million, up 114% from the prior year.

Capital spending of approximately $23.2 million was used primarily towards the continued buildout of our frac sand business and maintenance capital.

Excess cash flow was used to pay dividends and reduce outstanding borrowings.

Interest expense was $18.3 million during the quarter, down 18% from the prior year.

The effective tax rate for the quarter was 32.4%.

As this last slide reflects, Eagle is generating meaningful cash flow from operations as we benefit from improvement in market conditions across a larger footprint of operations while improving on our low-cost competitive position.

We have primarily used this cash flow to reduce debt and improve our financial flexibility.

Our net debt-to-capital ratio was 29% at June 30, 2014.

Thank you for attending today's call.

We will now move to the question-and-answer session.

Kim?

(Operator Instructions)

Trey Grooms, Stephens Incorporated.

My first question is on frac stand.

Steve, you mentioned that it will be a material contributor to your cash flow by the end of this fiscal year.

I'm just wondering if you can give us a little more color on that?

And also, how we think about the rollout of that 1.5 million tons of capacity that I believe will be going into Eagle Ford.

How to think about the timing of that rollout?

How quickly you'll ramp into that market.

So, we received our permit mid-June, and we have now completed construction of the plant or have actually just really entering the commissioning phase of starting the wet plant up in Utica.

We anticipate the plant to be fully operational by the end of August.

We will start shipping sand by the end of August.

It takes about a month to get the sand down to Corpus Christi, and then it's constantly moving.

That is the timing of getting our sand down into the dry plant at Corpus Christi, and then we will steadily ramp it up.

The good news is the plant in Corpus has been fully commissioned, easy to ramp that up to full capacity.

So, we will work the kinks out of some of the transit as we already have.

We just finished also -- another milestone this quarter was completing the barge dock to receive it.

We had been bringing the sand in through a third-party dock and then trucking it to the plant in Corpus Christi.

We also completed that construction this last month and have successfully started offloading our own barges and save us a lot of money and be much faster in turning the barges back and forth from Illinois down to Corpus Christi.

We don't -- so far all of that stuff is going very smoothly, and we anticipate a steady ramp-up into this marketplace.

Perfect.

And then, looking at some of the other markets that you have identified or basins that you're targeting, is there any -- I think it was last quarter you mentioned 4 million to 5 million tons in two to three years.

But, how quickly can you ramp into some of the other basins that you are targeting here?

Yes.

So, some of that requires a little more detail than we want to give right now.

I can tell you we're making steady progress on acquiring and accumulating the properties required to do it, and then going through the entitlement process to make it all flow and happen the way that we want it to happen.

So, we are very pleased with the progress there and don't see any reason why we can't live up to those expectations.

That's fair enough.

If I could just slip one last one in.

On the congestion from the rails that you mentioned in the quarter, is there any way to give us a ballpark rough estimate on how to quantify that?

And, how much it really impacted cement shipments in the quarter?

And then also, do you expect this to be an ongoing issue?

And then, any commentary on the underlying demand?

Thank you.

Let's hope it is improving, but it was to the tune of let's say 60,000 tons to 70,000 tons of shipments that we missed because of the rail congestion.

So, it was significant.

While it is getting a little bit better, it is still not perfect.

We will see at the end of this quarter how close we are to meeting our scheduled shipments for going forward.

The rail did say that they thought for sure by the fall it would be uncongested, but that is as good as we could get out of the railroad as to when everything would be flowing smoothly again.

And then, just on the underlying demand that you're seeing?

Trends there?

So, all of our markets -- all of our cement markets -- the six markets that we have showed double-digit growth with the exception of the West through the first half of the year.

We are really seeing double-digit growth in demand and some even stronger.

The mountain region and Texas is still very, very strong, and cement very tight in both of those markets.

But, all the rest of our markets with the exception of the West Coast, which had single digit improvement and mid- to upper-single digit improvement even out West.

So, you're seeing very strong improvement for Cement demand which is for us the best proxy.

And then, the wallboard demand in our local markets is again, very, very strong.

We are very fortunate to have our wallboard plants located in markets that are exceptionally strong right now.

I will pass it on.

Thank s for the color.

Good luck.

Todd Vencil, Sterne Agee.

Steve, on the last call -- just following up on something Trey just asked.

You said that you were expecting upper single-digit growth in cement volumes for this year, and then April had been consistent.

You just gave some details that imply that the quarter would have been there if not for the rail congestion.

Given the rail congestion and the demand picture that you see, do you still think you can see upper single-digit growth in cement volumes for the year?

Or, is the rail congestion going to hold that back?

We're in a lot of markets.

That's really impacting one market.

But, in reality, the first half was -- even with the weather -- the first half was very, very strong.

It really is very, very close, if not double-digit growth in most of the markets with the exception of the West Coast.

Okay.

Go t it.

Thanks for that.

And, you mentioned price increases in three of your markets.

Can you talk about the magnitude of those?

Well, we got some price in all of the markets, and in some markets, we got all the price.

But, in most of the markets, we got a fair amount of price improvement.

So, if you think about it year-over-year on a quarterly basis to be up $4.50 -- that is a pretty nice change in [mill nets] and a very strong trend.

With some markets right now tight enough to require another price increase between now and the end of the year.

Sure.

I'm sorry -- I was referring to the prospective price increases that you have announced.

The second round in Texas and the mountain and the northern California or the Nevada.

What is the magnitude of the ones you have announced for the summer and fall there?

Again, in the same range.

Let's say $5 to $7 in those marketplaces.

Don't see why that shouldn't stick.

Very, very tight supply right now in those marketplaces.

That's great.

And, given that you said you had done maintenance on five out of your six cement plants in the quarter, is it safe to assume that we're not going to see a lot for a couple of quarters?

Or, is there something out there?

I sure hope so.

We did one in the last quarter, a pretty extensive one at Illinois, and then we got all the other cement plants done this quarter.

So, now we're into the busy shipment season, and you don't want a hiccup when the customers need the cement.

We want to make it all the way through until the end of the year -- or the end of our fiscal year.

Absolutely.

Switching to the frac sand.

Any update -- you mentioned some of the other areas, and you said you're working on getting the land and the entitlements there.

What about the annexation in Illinois?

Can you give us an update on how that is progressing?

We have had a couple meetings.

We are going to go back and have another one now to get all of the requirements that we need to put a drying plant up in Illinois as well as improve slightly the transportation down to Corpus Christi.

So, I think we had one of the two successful, and then we had to modify the request for a second entitlement zoning change there.

So, we're working on that, and I think that we've listened to the community.

And, I think we have come up with a solution that makes sense for everybody.

Okay.

So, what do you think -- timeframe to get an answer and get that squared away would be?

That's a good question.

I wish -- if I had that answer, I wouldn't be here working.

(laughter) Fair enough.

Okay.

That's it for me right now.

I'll jump back into the queue.

Kathryn Thompson, Thompson Research Group.

On the cement division, could you clarify what would be the new normal in terms of what we should expect for an annual cement maintenance cost?

And, how should we think about the general timing of this cost flow-through as we model going forward?

Thank you.

So, I think our maintenance costs really haven't changed other than the fact that we have two additional plants so you're going to have -- but on a per-ton basis, the maintenance costs are roughly about the same as they have always been.

And, the timing is generally going to have maintenance outages roughly once a year.

Sometimes they'll roll, especially if they're hitting at the end of our fiscal year, they might roll forward into one year or backwards into another year.

The timing is going to be roughly once a year, and generally our maintenance occurs when the demand is weakest which is going to be kind of in the winter period.

It's a good time for us to get the maintenance done when we're not worried about meeting the demands of our customers in that busy shipping season.

Typically, that is when maintenance is going to occur.

Sometimes, you will get one or a short outage that will occur in between time.

What is the estimated, just to clarify, so we are on the same page, on the per-ton basis for maintenance?

What is the cost -- ?

Let's just say $10 to $15 a ton.

If you could -- both for wallboard and for your cement business, just discuss how volumes progressed as weather improved and the quarter came to a close?

And also, if you could parse out how much you think is driven by weather versus just core demand?

So, as far as wallboard volumes -- wallboard has been very, very strong for us.

We are, again, just very, very fortunate to have our wallboard plants in markets where construction is strong.

Construction is strong in Texas and Colorado, and we have got two big facilities there.

The New Mexico facility produces a lot of specialty products so it's able to be sold at and move its product a little bit further.

And then, South Carolina isn't too far from Florida which is a little bit stronger market than some of the other markets right now.

We are fortunate to have our facilities close and also very fortunate to have a very low-cost facility which allows us to have good margins.

So, for us, demand remains strong.

We are very, very happy as we look forward.

If we look year-over-year, I think wallboard demand was up 7.5% in this second calendar quarter this year.

That's showing a pretty nice trend in improvements.

What is behind it?

We still have a very strong multi-family, and as you know, multi-family is not as steady as single-family so sometimes the statistics that come out are a little lumpy on multi-family.

But overall, if you look over a trailing-12, that has been a real strong contributor to the demand for wallboard.

And then, the rest of it is just a function that our price is good.

Sometimes you have a little product mix so the price goes down a little bit based on some mix during a quarter-to-quarter comparison, but we feel very, very comfortable with both the volumes and pricing that we have right now.

And, still have a real issue with flatbed trucks so it's really hard to get wallboard moved to where it needs to go because we are still at 100% utilization of flatbed trucks in the US.

We talked about rail congestion associated with cement.

Rail congestion is a problem everywhere so it will impact the wallboard as well.

Logistically, it's a problem.

And then, the last thing that is an issue in all of our businesses is not only ourselves but our customers really continue to express a great concern for labor shortage.

The businesses we are in just don't seem to want to attract people to come out and go to work.

They don't want to hang wallboard or make wallboard or deliver ready-mix or work in a cement plant.

It is harder and harder to find qualified employees to come to work for us.

Maybe skinning the cat a little bit differently, could you give an estimate of capacity utilization for your wallboard plants?

And then, also the same for your cement plants?

So, our plant in New Mexico and our plant in Oklahoma, the B line -- they are sold out.

The plant in Colorado is 3/4-plus sold out.

The wallboard plant in Georgetown, 3/4-plus sold out.

Maybe a little bit more there right now.

And, to the point where our customers in the Texas area really require more wallboard.

So, during this quarter, we spent a lot of money -- mainly maintenance and some capital improvements to refurbish the A line and get the A line ready to deliver wallboard to the marketplace.

It's really simply because our customers just can't get wallboard anywhere else.

And, the transportation cost for us to try to deliver it from either Colorado or Georgetown are prohibitive.

It requires us to start the second line up in Duke, Oklahoma.

We're doing this to make sure that long-term customers and relationships are satisfied as the demand is strong.

And, cement capacity utilization?

Cement, again, our plant in Texas and Mountain remain sold out.

The plant in Nevada is not quite sold out.

In the 3/4 range.

The plant in Illinois is getting close to sold out.

It's not quite, but it is getting very close to being sold out.

The plant in Tulsa is sold out.

The plant in Sugar Creek is pushing 3/4 to 7/8 sold out.

On a seasonal basis when it comes to the finish grinding capacity, both the Illinois plant and the Kansas City plant are sold out.

Until we have the ability to produce more clinkers than we can [quite grind] during the heavy shipping season unless we level-load some of these sales throughout the winter.

Effectively, right now we are sold out at all of our cement plants.

Thank you so much.

Garik Shmois, Longbow Research.

Just a follow-up question to a point that you made, Steve, on the maintenance expenses in wallboard.

Bringing up the new vine.

Was it a material cost drag in the quarter?

And, have those expenses been fully realized so that we are not going to see it come through into the current quarter?

Certainly, there is a little bit.

Would I say material, no, but there is a little bit.

We still have some legal fees that were probably as material as that maintenance cost as I think about it.

And then, the only thing that I would say is ongoing is natural gas costs are up, and there's an impact to both paper and wallboard with natural gas being a little bit higher year-over-year.

But, everything else is pretty much a one-time cost.

The maintenance is done.

We're not quite done with some of the legal fees.

Okay.

And then, just on wallboard pricing.

It did tick down a little bit sequentially.

I think coming out of the last call, you said your April pricing was up from the March quarter levels.

Is this a function mostly of mix that you alluded to?

Or, are you seeing any change in the competitive landscape?

Again, we're very fortunate in our marketplace, it's really a mix issue.

But, we have seen or heard that there are some issues in some markets that are really too far for us to get into that there might be a little more competitiveness in some of those markets.

We're not in them -- really selling into those markets, it's really hard for us.

It would be pure speculation.

Okay.

Do you anticipate that as you bring on some extra line capacity and presumably to meet demand in Texas, may be fair to assume that some of your competitors will as well.

Is that a risk that you foresee for the next several quarters that some of the competitive behaviors that you've seen.

And, some outlying markets that you're not participating in could end up threatening your markets?

For us, there is no need to -- the only reason we're bringing the wallboard on is to take care of our customer.

For us, price remains more important the volume.

We don't need to move it.

We have added a few bodies, but not that many.

Our cost structure is so low more of a variable cost incremental to produce that wallboard.

If a customer needs it, we will ship it.

But, we are not certainly going to try to ramp that line up and ship it halfway across the country and not make any money on it.

We just don't need the practice in making wallboard.

For us, it's really a function of taking care of our customers.

We're going to make sure that those relationships are solid.

When they need the wallboard, we will produce it for them.

Okay.

And then, just switching real quick -- just a follow-up question on cement.

With the 60,000 tons to 70,000 tons that were impacted by the rail constraints in the quarter, do you anticipate that that volume is going to come back as the rail congestion loosens up?

Or, is this volume lost to other competitors?

Let's say about half and half because of our finish grind, the issue.

We have some storage in the silos we can work off that, but once the finish mill hours are lost, they're lost.

So, some of that we probably will not make up.

Okay.

Lastly, off of that, as the cycle rebounds, presumably rail capacity will remain tight.

Is this changing at all how you're thinking about going to market?

Perhaps -- maybe walking away from some business that is rail-served and focusing more in markets closer that may be truck-served?

Is this issue that popped up in the quarter at all impacting how you're going to go to market?

I think you have as difficult an issue with the trucking as you do with the rail right now.

It's always our preference to sell, I like to say, within the umbrella of an operation.

You're going to get your highest margins.

Nobody wants to make transportation companies rich.

But, sometimes if you have a plant that's fairly large in a market then it requires going to some terminals just to move the product.

So, we do that, and we clearly look at the most cost-effective way to move materials from the plants to the terminals that are associated with each plant, whether it's one of the newly acquired plants or whether it's an existing plant.

So, you are always balancing that out.

But, I can say in general with the exception of this winter, we have been pleased with the rail service, and we think that that is an effective way to distribute cement from some of our larger facilities.

Okay.

Thanks for the help.

Jim Barrett, CL King and Associates.

Steve, could you talk about the third-party frac sand you're shipping into the Eagle Ford compared to the product that you were shipping a year ago?

Any change in pricing currently and any outlook for taking price increase as you ramp up the Utica sand mine?

So, the answer is yes, prices have gone up year-over-year for third-party sand.

And, the logistics have gone up for moving the third-party sand down.

But, we are still happy with it, and it makes sense to do it ahead of bringing up a business.

So, we are just with our head slightly bobbing above and below the water line with that third-party sand, but it really makes sense to both commission a plant and get to know the customers.

So, that is working very well for us.

Right now, cement -- demand for frac sand is extraordinarily tight here in Texas.

We don't see any problem moving the third-party sand and moving our sand once our sand gets down to the marketplace.

I'm very excited about it, and typically when you get in tight supply that allows for pricing power.

Actually what I really meant to ask was what is the current pricing environment in the Eagle Ford for sand on a go-forward basis?

Would you expect pricing year-over-year, whether it be for your third-party sand or competitive frac sand -- do you expect it to be up 5%, 10%?

Can you give any color on that?

We really haven't -- we're just barely getting going, and some of this also impacts logistics and how far you're going to ship the sand from your operation.

We have even had sand shipped from our operation at Corpus make it out West Texas.

Demand is so tight in the Texas market right now.

That all has some impact on prices.

It's a little hard to answer that question.

Okay.

Thank you, and good luck with the venture.

Brent Thielman, DA Davidson.

On the proppant business, I was wondering how much volume is embedded in that $11 million in sales that you broke out this quarter?

Brent, I think as Steve talked about, we're still in a start-up mode for that business.

But, we have been moving roughly 100,000 tons on a quarterly basis.

It's in there in that range for this quarter as well.

For us, if we can ramp that up, what happened is we didn't have the sand available in Corpus when the weather hit.

And, actually pricing last fall was lower so we were a little cautious about how much we brought down ahead of the winter.

And then, from Minnesota, it's a little hard to move sand down the river in the wintertime.

It's impossible.

Whereas in Illinois, it is a different scenario.

So, then we had to wait until the river opened up just like the rail arteries were closed from the very cold winter.

It took us a while to start getting sand back down.

It is actually ramping up to a little higher pace than that right now.

Thinking about it in the next quarter, in Q2.

Should we think that business will be absorbing some larger losses since you won't stop moving third-party sand but won't really get the benefit of shipping your own sand until Q3?

I think it's going to be about where we are, maybe a little bit better.

We have improved the logistics with our barge operation coming online.

That will dramatically reduce some of the costs.

But, the cost up in Wisconsin is a little higher as well so there will be some pluses and minuses.

I think it's fair to assume that we're going to be about a breakeven level until we get our mine up and running.

Got it.

Great.

And then, on the cement side, you've talked about the price increases you are moving through.

Are you increasing prices on the oil well cement as well?

A lot of those things are three-year commitments, and they're not due for a change.

Typically, when you do a longer-term agreement, you will have some escalators in there so you will see some small increases associated.

But, we are just heading into another cycle of negotiations with that.

Typically, when the price of regular cement goes up, the price of oil well cement goes up accordingly.

Steve, could you maybe add some commentary on what you're seeing on the demand side there, year-to-date?

For oil well cement?

Again, very, very strong.

Extraordinarily strong here in Texas.

Okay.

That' s great.

Just one last one.

It looks like aggregates volume was under some pressure this quarter.

Just curious what happened there?

Some of the aggregates are in the Kansas City market, and if you just happen to follow the weather in Kansas City -- both concrete and aggregate sales were down.

It rained most of the quarter up in Kansas City.

It was very, very slow, and that just happened to be where the weather pattern was hitting and we still had a lot of rainy days in the Kansas City area this past quarter.

It's primarily there that was [a toss].

John Baugh, Stifel.

I wanted to, on the frac sand, if I did the math right that was about $110 per ton of price.

First of all, is that right?

Secondly, how much of that is freight and logistics costs which I assume are largely a pass-through?

And then, also on frac sand, any updated thoughts -- I know you don't want to get into details of what you're doing to utilize the $5 million.

But, any thoughts about CapEx totals and timing of CapEx to utilize that full $5 million?

Some of the pricing is mix because the various grades.

That is going to vary across the grades.

That is close to what is going on there.

As far as CapEx, we are going to continue -- we have effectively spent the CapEx for phase 1 now.

So, the Corpus Christi plant is nearly done, we're going to add -- we're going to refurbish a few of the old cement silos that we have down there.

So, we'll have a little bit of CapEx to spend over the next six months but not much.

And, the plant is all up and running now in Utica so the rest of the CapEx going forward is to buildout the system that we've talked about.

We continue to acquire properties.

We're going to build a drying plant up near the mine, and we'll add some drying plants in appropriate marketplaces as well.

Any thoughts -- you're not going to give out numbers or timing for all of that roughly?

Little early.

Okay.

Thank you.

John Kasprzak, BB&T.

Just on -- again, on the frac project.

Is 1.5 million tons the initial bogie?

Is that the run rate you think you can get to by the end of the fiscal year?

Or, will it take a little longer?

Is that phase 1 of the project?

Is that how to think about it?

Yes, that's the design.

Okay.

And, we're pretty comfortable that we can meet there, but it is a start-up so hopefully we can get there in six months.

Sometimes commissioning a new plant takes a little longer than that, but that would be our aspiration.

Okay.

And, ultimately to get to the 4 million tons to 5 million tons of capacity, do you have to do anything incremental beyond the moves you have already discussed in terms of the annexation and the capital spending?

Or, is there anything else that has to happen?

Long-term?

There are a few other things that we're working on.

It's just way too early for us to give any details.

That does it for me.

Thank you.

Jerry Revich, Goldman Sachs.

I'm wondering if you can talk about how the logistics is going down the river system?

How are you absorbing the volumes with existing barge capacity?

Any constraints coming up?

We are hearing from oil service companies just a real concern over physical sand shortages.

It sounds like it's rail logistics driven, at least in part.

I'm wondering, is that giving at least better visibility on your ability to break into that market without impacting the supply-demand balance?

It is really difficult to get rail from the north down to Texas right now.

Part of what even occurred in the Kansas City area had some impact on that.

So, yes, we have seen that, and that is one of the reasons why frac sand is very hard to come by in the Texas market.

One of the other reasons is the demand in the Texas market is growing substantially as the need out in West Texas has grown very, very quickly.

Much quicker than we anticipated.

So, you have demand coming on.

You have some constraints with the rail from the north to the south, and then our barge systems were confined, and we don't see any issues with bringing barges down.

And, of course for us, the thought was while there may be issues from time to time on a waterway system, the way you resolve that is by building up a big inventory.

And, we have a very large piece of property in Corpus Christi that we can store up to 500,000 tons of raw sand.

That way if there are any issues in the logistics, once we build that inventory, we just carry a little extra working capital.

Then, we don't have to worry about any problems as far as the barges moving from north to south.

In terms of just the timing to ramp up to the full capacity utilization, I guess in the past when we have seen you add capacity in cement, you pre-built demand with third-party shipments.

Are you ramping up the third-party shipments ahead of your August shipment dates out of your own sand?

Or, are you just keeping it at that steady run rate that Craig mentioned until then?

As best we can.

We started trying to buy sand -- very, very hard -- third-party sand this spring.

There is just only so much that is available.

So, we're doing our best to increase it.

We will see how successful we are by the end of this next quarter.

In terms of the grades of sand, or the quantities that you are selling now, is that any different from when you start to ship your own?

The $110 per ton, the shipment number that Craig mentioned, gets you to -- I guess is below some of the grades that we have been hearing about in Texas.

I'm wondering if you could just flesh that out for us.

I think part of the issue is there is some price increases that occurred in the middle of this quarter.

That pricing is an average of some lower pricing that we had at the beginning of the quarter to where we are at the end of the quarter.

We have seen some pretty strong price increases in the middle of this quarter.

And, I anticipate that the next quarter you will see a higher price.

In terms of the cement logistics constraints that you saw the quarter, have they completely eased?

We're hearing from the rails that they're still working to get back to prior service levels.

I'm wondering if that applies to what you're seeing as well?

It does, particularly in the Kansas City area.

Lastly, in wallboard.

Can you just talk about the net price was down.

Is that due to higher logistics costs or mix of business?

Can you just provide some context there, please?

Primarily mix.

Logistics, again, year-over-year up $2, I think.

But, if you sequentially -- that was mainly mix.

But, the pricing on an apples-to-apples basis was flattish sequentially on a market-by-market basis?

That's correct.

Glenn Wortman, Sidoti & Co.

The sequential decline in cement pricing, was that just a typical geographic mix shift there?

That's correct.

You've been doing a good job on paperboard margins.

Is this a good level to model going forward?

Or, do you see some more upside there?

There is still more upside, and of course, what you see is I think we actually had a 35% increase this -- if you compare this first quarterly comparison of gypsum paperboard sales.

This plant was designed to tram and make gypsum liner board, and the more gypsum liner board you make, the higher the profits.

The greater contribution per machine hour that you get when you are producing gypsum liner.

As our gypsum liner board sales go up, we make more profit.

As long as the trend continues to higher volumes in gypsum, both internal and external sales, the profit of the paper mill goes up.

Thanks for taking my questions.

Kevin Money, Cleveland Research.

Just one question.

You quantified the impact to cement shipments on this rail congestion issue.

Was there any impact in your fiscal fourth quarter?

I don't think so.

That's a winter quarter where sales are slow anyway.

And, if you'll remember, that was all that polar vortex.

You really had cold weather being more of an impact there than the rail.

Great.

Thanks.

You're welcome.

Ladies and gentlemen,, that concludes our question-and-answer session.

I will now turn the conference back to Steve for closing remarks.

Thank you everyone.

We look forward to the upcoming call at the end of the next quarter.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation, and you may now disconnect.

Have a great day.