Rock Products

AUG 2019

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

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www.rockproducts.com ROCK products • August 2019 • 61 Aggregates Industry Almanac Publicly Traded Companies • Net loss per diluted share of $2.82, down 471%. • Adjusted net earnings per share of $0.87. Commenting on the financial results, Dave Powers, chief exec- utive officer, said, "In fiscal 2019, our businesses continued to generate strong earnings and cashflow, despite challenging weather trends that depressed sales opportunities through- out 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 oper- ational 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 out- standing shares, and we returned nearly $300 million to shareholders, through a combination of share repurchases and dividends." Eagle Materials Inc. announced that its board of directors has approved a plan to separate its Heavy Materials and Light Materials businesses into two independent, publicly traded corporations by means of a tax-free spin-off to Eagle share- holders. The separation is expected to be completed in the first half of calendar year 2020. The company also announced that it is actively pursuing alternatives for its Oil and Gas Proppants business with the support of an independent financial advisor. Additionally, the company's board will continue to evaluate any oppor- tunity to create value that may arise prior to completion of the separation. The announcement follows a thorough review of strategic, operational and financial alternatives to enhance share- holder value by the company's board and management team, with the support of independent financial and legal advisors and input from the company's largest shareholders, including Sachem Head Capital Management. Mike Nicolais, Eagle's chairman stated, "The Eagle board and management team has maintained a regular evaluation of the strategic and financial options to best position the company to drive value for shareholders. Historically, our Light and Heavy businesses have provided Eagle with bal- ance and financial strength; however, the board recognized that our industry-leading performance is not adequately reflected in the market value of the combined company. We engaged with shareholders and took their input into account in coming to this conclusion. Based upon our recent compre- hensive review of various strategic, operational and financial alternatives, the Eagle board and management team believe this separation will provide each of the businesses with the financial flexibility to pursue its own growth strategies and operating priorities, and will develop the appropriate capi- tal structure and allocation priorities to generate long-term growth for all shareholders. Accordingly, we have determined that now is the optimal time to pursue this separation." "We believe that by pursuing the actions announced today the Eagle board is taking significant steps to unlock the compa- ny's inherent value," said Scott Ferguson, managing partner of Sachem Head. "Given these developments and the substan- tial value creation potential, Sachem Head is withdrawing our director nominations and proposals, and we will fully sup- port the board's recommendations at Eagle's 2019 Annual Meeting. We are pleased with the constructive work of the Eagle board and look forward to seeing significant value cre- ation for all shareholders in the months ahead." Following completion of the separation, each company is expected to be well capitalized, generate strong free cash flows, be well positioned for future growth and be best-in- class in its respective industry. Eagle believes that as two separate companies, each business will be able to: • Focus on its distinct strategic priorities that best position the business for profitability and growth, with targets and goals that fit its own markets and unique opportunities. • Implement a capital structure that is tailored to the needs of the businesses it operates. • Allocate resources and deploy capital in a manner consis- tent with its strategic priorities. •  Allow new and existing investors to value the two com- panies based on their particular operational and financial characteristics. After the separation, the company's existing Heavy Materials business, a U.S.-heartland cement-plant system with com- plementary concrete and aggregates operations, is expected to continue to produce strong margins and significant cash flows. Eagle will remain focused on low-cost produc- tion, operate in key U.S. geographies with favorable market dynamics and drive profitable growth through both strategic acquisitions and the organic development of its asset net - work. The business enjoys long-lived, owned raw material reserves that will sustain its operations over the long term. This business will operate as a distinct pure-play, U.S.-only cement company with excellent future prospects as the larg- est U.S.-owned producer. Upon separation, Eagle's existing Light Materials business is expected to continue to be a benchmark producer of gypsum wallboard and recycled paperboard. This business has a long track-record of superior margin performance, driven by its sustainable low-cost producer positions in U.S. sunbelt mar- kets, and has uniquely distinguished itself through industry business cycles. The business includes an integrated paper- board mill that utilizes advanced technologies to supply the wallboard plants with high-performing, low-cost facing paper. The business enjoys long-lived raw material reserves as well as industry leading levels of customer satisfaction. In connection with the separation, Eagle is actively pursuing alternatives for its Oil and Gas Proppants business with the support of an independent financial advisor. There can be no assurance that this process will result in any particular action being taken, nor can there be any assurance regarding the timing of any such action.

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