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Eagle's Proppant Business Down in Third Quarter


Eagle Materials Inc. reported financial results for the third quarter of fiscal 2017 ended Dec. 31, 2016. The company is reporting:

• Record revenues of $302.4 million, up 9 percent.
• Record Net Earnings of $56.4 million, up 23 percent.
• Record Net Earnings per diluted share of $1.17, up 27 percent.

Oil and Gas Proppants reported third quarter revenues of $7.1 million, a 16 percent decrease from the prior year’s third quarter primarily reflecting lower average net sales prices partially offset by a 7 percent increase in frac sand sales volumes from the prior year.

The third quarter’s operating loss of $1.7 million includes depreciation, depletion and amortization of $5.0 million. During the third quarter, the company also recognized a $4.1 million pre-tax gain on settlement associated with the termination of one of its long-term frac sand customer contracts.

Eagle’s construction products and building materials businesses performed exceptionally well during the quarter, with Eagle’s Cement, Paper, and Concrete and Aggregates businesses all reporting record third quarter operating earnings. Third quarter cash flow from operations improved 18 percent and was used to fund capital improvements, pay dividends and reduce debt.

Concrete and Aggregates reported revenues for the third quarter of $40.6 million, an increase of 29 percent. Third quarter operating earnings were $4.6 million, a 202 percent improvement from the same quarter a year ago, reflecting record quarterly concrete sales volumes and record third quarter concrete and aggregates sales prices.

As previously announced, on Sept. 11, 2016, Eagle entered into a definitive agreement with a subsidiary of Cemex S.A.B. de C.V. to purchase Cemex’s Fairborn, Ohio, cement plant and related assets. The purchase price is $400 million, subject to customary post-closing adjustments.

Eagle expects that the acquisition will increase its U.S. annual cement capacity by approximately 20 percent to nearly 6 million tons. The transaction is expected to close in Eagle’s fiscal fourth quarter.

During the third quarter, Eagle incurred nearly $1 million of integration and related costs associated with the transaction. Eagle intends to finance the acquisition through a combination of cash on hand and borrowings under its existing bank credit facility.

Cement revenues for the third quarter, including joint venture and intersegment revenues, totaled $138.0 million, which was 2 percent higher than the same quarter last year. The average net sales price for this quarter was $100.88 per ton, 4 percent higher than the same quarter last year.

Wholly-owned average net sales prices improved 6 percent from the third quarter last year. The average net cement sales price at its Joint Venture declined year-over-year reflecting the shift from oil-well cement to construction-grade cement over the past year; however, operating earnings improved 7 percent at the Joint Venture. Total Cement sales volumes for the quarter were 1.2 million tons, 1 percent lower than the same quarter a year ago, reflecting early winter conditions in our northern markets.

Operating earnings from Cement for the third quarter were a record $45.3 million and 8 percent greater than the same quarter a year ago. The earnings improvement was driven primarily by improved average net cement sales prices and lower raw material and energy costs.