Q4 2020 Earnings Call
[music].
Gentlemen, thank you for standing by welcome to the fourth quarter 2020 Eagles materials earnings Conference call. At this time, all participants' lines are in listen only mode. After the speakers presentation. There will be a question answer session to ask a question. During this session didn't need to press star one on your telephone.
Please be advised to today's conference is being recorded if you require any further assistance press star zero.
Now I turn the conference over to your Speaker, Dave Mr., Michael had president and CEO you may begin Sir.
Thank you.
Morning.
Welcome to Eagle materials conference call for full year and fourth fiscal quarter at 2020.
We are glad you could be with us today.
Let me today are quite cats.
Financial Officer, and Bob Stewart, Executive Vice President strategy, corporate development and communications.
There will be a slide presentation, maybe in connection with the call to access it well use CODI W.W.W. Eagle materials Dot com and quick on the weight 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 the call.
These statements are subject to risks and uncertainties that could cause results to differ from those discussions during the call.
Further information please refer to this disclosure, which is also included at the end of our press release.
This morning, let me start by remarking on two matters ever even more important than the earnings were reporting on today.
First is that health safety and well being of our employees.
The second is being responsible citizens and good neighbors in their communities in which we do business.
As it relates to covert 19, these two cannot be more closely related.
Regarding our safety responses to covert 19.
And proactive and establishing protocols and processes that protect the safety and health of our employees customers and business partners.
It's early action has enabled us.
Isn't that central business.
Remain open safely and all locations.
We are fortunate in that we operate in serve do you have to work with Sunbelt States.
Oh, no control, our local raw material inputs and have a fully domestic supply chain.
Most importantly in this situation virtually everywhere, we operate construction has been dean essential.
We have to make and solar products.
Which brings me to our earnings this quarter.
We answered the border with a strong momentum in terms of demand across our markets.
You did not experience much business interruption for fourth fiscal quarter in our markets.
Posting record quarterly revenue should be no surprise for this reason.
In the case and over 19 geography matters.
These are present in times, rather than trying to predict the unpredictable our emphasis is on deployment of rapid feedback loops.
That's involved being an intimate contact with our local operations as they navigate in this environment.
We are local business in many ways and can react quickly to any market changes as they occur.
We have successfully navigated severe cycles before and some would say we have an unrivaled track record in this regard.
We navigated through the longest underneath that instruction recession in U.S. history, and made money every year, which very few in our space can play.
We're well prepared to respond quickly as issues arise.
Right now part of our preparedness strategy is to conserve cash and strengthen our already strong balance sheet.
An abundance of caution.
We announced during the quarter that we suspended our dividend.
I went to emphasize it'd be very clear.
That's suspending the dividend was part of a comprehensive plan of managing cash through this environment.
This plan also entails internal control curtailing non essential capital expenditures share repurchases.
Controlling inventory levels.
And a host of other prudent measures.
It is timely and coincidental from a cash strategy standpoint.
We had made some progress in our program of portfolio shaping.
We announced this quarter the sale of a noncore ready mix and aggregates assets in California.
The sale would be that says is the result of a long term effort that emerge for alternative ownership value ceded operating value for us.
We also were able to sell our frac sand distribution business during the quarter and we continue to explore alternatives for the remaining frac sand business.
We fully expect that the uncertainties around 19.
And then second effects on the economy will be released overtime.
We're well prepared to capitalize on opportunities in construction materials that will rise in a way of these uncertain times.
We are three times larger on the summit that in the business and we were a decade ago.
We have built a strategic network.
Yes, and terminal in the U.S. Heartland.
The latest addition was I read the recently acquired possible cement plant.
We began operating as an Eagle plan in March.
Our wallboard business.
As a team I arrive, a prominent or low cost production and customer satisfaction.
In March we completed the equipment installation to expand the capacity of Republic paper.
We will finalize all aspects of the installation over the summer when travel reopens, but we're already seeing the benefits of this new equipment through adding capacity.
We are healthy our balance sheet is strong and we are poised to emerge from this uncertain time with the wins that are back in.
In this regard I think it is important that we not underestimate the power over in that already announced monetary and fiscal government stimulus will create for our businesses.
Construction has led the way to recovery so many prior cycles and may well lead the way again.
Are you it infrastructure needs.
Our well chronicled in one way or another roads and bridges will be built and repair.
No interest rates make homes more affordable and we're not building at the pace that matches household formation and replacement needs.
There are many reasons to me remains constructive about the long term.
We still look forward to the separation of the two businesses. So currently have no updates on timing.
For that transaction.
That's all for me as far as introductory remarks.
Now, let me turn it over to Craig to go through the financial results for the quarter.
Thank you Michael.
Fiscal year 2020 revenue was a record one of them <unk> billion of 4% from the prior year.
Reflecting increased summit sales volume and pricing.
Improved wallboard and paperboard sales volume.
Yeah. The addition of two businesses acquired during the year.
We acquired businesses contributed approximately $32 million revenue during the year.
Revenue for the fourth quarter improved 11% to 350 million.
Reflecting a very strong into our fiscal year.
Annual diluted earnings per share improved 14% or $1.68.
As we highlighted the press release both years included the impact of several non routine items.
Most notably in asset impairment charge related to the oil and gas province business.
For fiscal 2020 diluted earnings per share includes the effect of a significant tax benefit related to the carrier. So.
This is development related expenses and the effect of an outage linked to the expansion of our paper mill.
Excluding these non routine items annual earnings per share improved 10%.
The carriers are enabled us to use the tax assets generated primarily by the Kosmos acquisition.
Carry back to recover taxes paid in prior years and higher tax rates and we pay for that.
The fourth quarter earnings per share comparison is also affected by many of these same nonroutine items.
Adjusting for them consistently each year Q4 earnings per share would have increased by 45%.
Turning now to where segment performance.
This next slide shows the results in our heavy materials sector, which includes our cement concrete and aggregates segments.
Annual revenue in the sector increased 17%.
Driven primarily by 11% improvement and submit sales going.
Improved pricing in both cement and concrete and the results of the concrete and aggregates business. We acquired in August 2019.
Operating earnings increased 12% again, reflecting the improvement in sales volume and pricing.
Moving to the light materials sector on the next slide.
Annual revenue whatever like material sector declined 4% has improved wallboard and paperboard sales volume was offset by an 8% decline in wallboard sales prices.
Annual operating earnings declined 12% to 190 million.
Reflecting lower net sales prices, partially offset by higher sales volume.
The life materials annual results also reflect the impact of two extended outages that our paper mill to tie in do equipment.
The impact to the average on the annual results was approximately four to <unk> million.
In the oil and gas proppant sector annual revenue was down 44% and we had an operating loss of 15 million.
This business has come under increasing pressure in recent months, a lower oil prices further reduce drilling and hydraulic fracturing activity and we continue to adjust our operations to minimize operating costs.
In late March we sold the distribution business of the proppant sector and we continue to explore alternatives for the remaining mining business.
Operating cash flow during fiscal 2020 increased 14% to 399 million.
Total capital spending declined 232 million.
In early March we completed the acquisition of the Cosmo Smith business bumping the purchase through a term loan syndicated through our existing bakery.
Very fiscal 2020 Eagle returned approximately 330 million to shareholders through share repurchases and dividends.
In fiscal 2021, we expect capital spending to declined nearly 50% to raise was 60 to 70 million.
As we previously announced that Michael highlighted we have suspended share repurchases and future dividends.
Finally, a look at our capital structure.
At March 30, Onest 2020, our net debt to cap ratio was 60% and we had $190 million with cash on hand.
Our net debt to EBITDA leverage ratio was 2.9 times.
Total liquidity the ended the quarter was nearly $300 million and we have no near term debt maturities.
In April we announced the sale of our concrete and aggregates business in Northern California were 93, and a half million.
These proceeds combined with the tax refunds stemming from our in a well carry back and operating cash flow further improves our liquidity position going forward.
Thank you for attending today's call will now move to the question and answer session Catherine.
Thank you as a reminder to ask a question you'll need to press star one on your telephone to withdraw your question press the pound key.
Your first question comes from Trey Grooms with Stephens. Your line is open.
Hey, good morning, Im thinking for taking my questions.
First off I guess on.
Organic cement volume very strong in the quarter also your wallboard volume was was also very solid, especially given the difficult comps you guys had.
Understandably this was prior to much impact from Cobot 19, but can you talk about what you're seeing since the ended the quarter demand trends on both sides of your business.
Roland and maybe into May give us a sense of how things are trending a.
A little bit further into this.
Endemic.
Yeah trained as Michael.
You know mentioned a few things on that you know.
One of things that.
I wanted to highlight where do you know geography does matter in that situation, we're a U.S. heartland producer or the Heartland has not been impacted as much as a you know the east coast or are they a west coast.
So you know our demand volumes.
I have remained pretty stable.
Okay, and that's all that's on both sides of the business summit and wallboard.
That's correct.
Okay, great. Thank you for that and I'm, just kind of an update on the summit crisis I know it was slated for April.
Sounds like a lot of markets have delayed.
Until I think might be gene.
How are your markets looking from a cement pricing and the timing there.
Hi, Yes, what she is what you said is accurate you know where there's a you know a general delay of that cement pricing to that June timeframe or.
And then we'll reevaluate the market at that time and determine determined a if it's a bit at that time.
Right now you know that's that's our plan.
Okay and that would then all of your geographic markets you're in.
I'm not totally 100% of that you know a there was a market that we're able to give some that the price increases were enacted but for the majority of the markets that's correct.
Okay.
Last one for me and this is more kind of big picture.
During the last downturn wallboard pricing was hit pretty hard.
You know when we've got a lot of uncertainty on the outlook your in the near to medium term, but can you talk about what is trains for that business and how or why this if we were to enter a hub.
Downturn here, how it could be different for the wallboard business. There a firm up from a pricing standpoint, you any changes you've seen in the industry or with your business.
Yeah. It's Ray this is Craig so good question and we are challenging ourselves.
For the last two or three months and thinking through alternative scenarios, but one of the things we do come back to.
Think about where we were 2007 2008 first on the demand side I see the housing industry was pushing 2 million housing starts.
And Ah and so you had a long way to fall on the demand side, we haven't even approach those levels of house housing starts. So far this cycle, we started to see some good momentum January and February, but but we're certainly nowhere near peak levels of homebuilding were well below that.
The other thing I think people forget about this a lot is a they we all remember the demand side. You got also remember we added a significant amount of capacity in 2006 in 2007 or six to 7 billion square feet.
15% to 20% new capacity just as you were entering into the great recession.
With that that was it was a a one two punch with demand down and supply rising.
And we entered this this period of uncertainty with frankly that the opposite issue. We don't have any new capacity being added a and frankly some of the raw materials as we've talked over the years or are becoming harder and harder to find that if at least not more expensive defined so we are.
In a very different position than where we found ourselves 13 years ago and Ah and then there are other structural changes in the business consolidations cetera, a that have also position.
Our business better so we enter those and we were part of that capacity addition in terms of our towards down South Carolina plans. So a lot of things are different as as we enter and go forward here.
Alright, well thanks for the detail a best of luck and they say thank you.
Thank you and our next question comes from Brent Thielman with D.A. Davidson. Your line is open.
Hey, great. Thank you good morning.
Maybe just a follow up on Craig's question on the wallboard side, you mentioned it sounds like demands held up pretty well here in your end markets and I know, sometimes create some can be influenced at the national level and I think some other markets within it.
I mean relatively good pricing stability, so far this quarter.
Yeah, Brett I would tell you really are price and you can see their quarterly results have been flat since almost this time last year and you saw that in this most recent quarter, we exited the quarter about the same as the that's the average.
Okay. Okay. That's great and then a question on on Cosmos that relatively new to us.
No I heard from some others delays in Kentucky and new public.
Let's talk about that assets ability to kind of attitude that you can you ask them offset some of that are all that I should be medicine, another surrounded market.
Yeah.
You know that asset and so we've only owned the asset now or are you know since March that there's going to when we took over a that asset we went directly into an outage to make sure. You know we saw what we had as facility and then Weve and working if you remember.
Correctly to that asset came with a pretty substantial distribution network. So you know we do have facilities that are a span several different states for distribution.
You know our sales team has been pretty consistent with a pass team. We had put in you know a management from eagle or for.
<unk> Vice president of manufacturing and they are.
Finance side of the business.
To get some of Oh Eagles culture in there too with it but the team has done a fantastic job the existing sales team and everything I've really utilizing that network that we have out there and taking the product and moving it where where the sales are at this time.
You know and said when we took it you know a we do have distribution in Pennsylvania and that was a trying market at the beginning with it and they've been able to reallocate move that that product around a little bit I think they're doing a fantastic job a you know moral calm as we own it for more time you know we're just in a couple of months now so I could you.
To be more color you know in the next quarter or quarter. After that after we get some time within under our belts.
Okay. Okay I appreciate that and then the Wildcat trail within the proppant segment.
It looks like that helpful profitability. The profit this quarter do you have the value of that sale, what you're thinking kind of get enough apples to apples comparison.
Were there yeah, Brett I would tell you we sold Wildcat, it's a very ended the quarter. So that wasn't the improvement in profitability frankly, the improvement there was a January and February volumes were very strong in that business really lot of a catch up from a really slow times in the fall.
In early winter so.
And like I said earlier.
The business has changed again in March and April as oil prices fell dramatically. So the Wildcat sale proceeds were very minor as we said we want it to exit the and think about alternatives for the business and then a sale made the most sense there but.
That wasn't driving the the performance during the quarter.
Great. That's my last question just gone I'm sure the separation Parker timing.
You guys talk about Pittsburgh, No I know a lot going hard right now in the market can you talk about what you guys are going to be booking for the kind of advance that process from everything you've already done today.
Yeah, I think Brian you know as we as Mike pointed out and as we've said before.
We're in an uncertain time, right now and the visibility.
Over the next 12 18 months is not where you want to have confidence in that and a while certainly our volumes have remained very strong here in April early may.
We want to have a high degree of confidence in our markets long term.
And ER and the capital markets getting to where they're trading in a regular way manner. So.
Until those things can happen and and we can put these businesses in the right place because what we also would recognize the immediate term. These businesses do support each other they are stronger together during uncertain times and so until you have some certainty there or you know the best course of action is to keep them the.
Got it.
Okay. Appreciate it thank you Beth.
Thank you. Our next question comes from Anthony Pettinari with Citi. Your line is open.
Hi, good morning.
Why don't you will just following up on your.
He just following up on the comments on cement demand you know understanding that the heartland markets have held up better than other parts of the country. Just wondering if you seen any cancellations or push backs of public projects that could impact you and just wondering if you had any kind of general thoughts on the health of.
Budgets in the state you operate given obviously reduced gas tax revenues.
Yes.
Good question and you know times road to tell on that right now our demand has been strong a you know do we hear from projects here or there that may be delayed yes.
Hasn't been impactful to us at this time, though.
And really you know it's just.
Too hard to predict what's going to happen on that side you know a you know what I like to focus on wars is what we're experiencing right now right. Now you know demand is strong as a market, we don't see that being impacted in the near term and we'll see what happens over the longer term if anything.
Okay. That's helpful. And then maybe just shifting to the like side I mean, we've seen this a sharp spike in RCC costs with some collection looks like it's being discontinued or delayed maybe that's come back a little bit in the last few weeks just wondering if you had any thoughts on.
You know spike and recycled fiber costs and you know your strategy for passing those through to the extent that you're seeing it.
Yes, so you're right we've seen obviously see prices go up here in a in April and May I.
I think a lot of that stems from as the.
The economy shut down the generation of RCC is really decline so as we restart the economy you'd expect to see that generation improve and likely moderate pricing going forward and.
So it was just such as of UBS snap reaction to toward what we've been dealing with a you've also seen containerboard mills closing et cetera, so that should lessen some of the pressure on those cc and as you may recall, we have the ability within our paper mill.
To pass through those incremental costs, it's generally on a quarter lag the way the pricing mechanism works, but we do have the ability on the paper side too to pass those through all the wallboard side that would be something we would start to feel next quarter because again, it's a quarterly lag. So we are dealing.
With that this quarter, but as we look out into September in December we could see those higher ULCC prices.
But they may also moderate so it's something we'll be watching closely as things develop over the next weeks and months.
Okay. That's helpful I'll turn it over.
Thank you. Our next question comes from Jerry <unk> with Goldman Sachs. Your line is open.
Hi, good morning, everyone.
Morning.
[laughter] currently in the past you folks have been able to take advantage of the strong balance sheet at a time when others were de leveraging I'm wondering if you talk about what your M&A pipeline looks like now and.
For all your willingness or if an opportunity comes up to deploy capital given all the certainty that we.
We obviously spoke about on the call.
You know Jerry I would highlight we just completed the acquisition of $665 million cement plant and and so that's something that we are the process of integrating.
And ER and working through it I think it's Michael and and I've highlighted our focuses on improving our balance sheet.
And continue to de lever from here, we have some unique opportunities because of Eagle. So look the focus is certainly on on the balance sheet and the health of the company.
To your point, maybe there are some M&A opportunities that come out of this way too early.
To to project that ER, and again theres lot of requirements that need to be fit there in terms of value and quality of the asset, but but it's something we'll keep our eyes open but.
We are.
Very focused on de leveraging right now.
And you know you folks mentioned earlier on the call. Your summit footprint is substantially larger in this cycle, but it was a decade ago and there's been other consolidation place how do you expect cement pricing could play out.
In the current recession compared to.
The last recession any observations that you would make particularly in your markets.
You know you know when I look at our network, you know I'm really happy where where we sit and where our acquisitions have Ben you know were eight heartland U.S. summit.
Fire and that has served us well during this time and it served as well in the past you know Oh I look at the volatility of markets and everything else you know we're in a more stable footprint.
Hey from the water in many cases you know so are you know the increased capacity I just see as a benefit for us a we can share and maximize I know some of our synergies across a in maximize the output of some of our lower costs plants versus higher costs plants, if we have to.
Right now demand has been stable across the majority of our markets I mean, it's it's a so oh you know we're prepared if something were to happen it to respond locally or to those but right now.
So we're we're very comfortable where we stand we do recognize that there is uncertainty in the market. We're prepared for that uncertainty, but right now we just don't see it with where our network is located.
And in terms of you know the industry's focus on pushing pricing in June given the uncertainty there can you talk about what kind of feedback you're getting.
From a from your customers on that obviously, it's nice that we got pushed back for from a customer standpoint from April to June but.
What are those conversations with customers considering you know I'm certain environment.
Yeah, I mean, it's a good question you know into markets can determine what prices. We're in constant conversation with our customers and and you know there will be the first to to know the timing and the implementation of that.
And we got to see what the market.
It's going to determine that prices. So we'll have more color for that is coming months, Oh with that but you know our plan is as we stated was at June timeframe.
[laughter] and lastly, when you folks have made some acquisitions and pass there's been I think.
To a street in terms of application.
Best practices can you talk about based on the short time that you've owned Kosmos what you see as the opportunity set to implement the eagles practices and vice versa any any opportunities.
Core network baskets are or otherwise that you'd call out.
Sure and you know a first I'll start off you know with the people in the talent. We acquired you know we're very happy.
With the plant itself the people a you know ads as he said, we we've only owned it a couple of months. So you know.
Got some work to do on on on some of the synergy and qualification and realization of all those synergies, but but first and foremost people that came with the transaction we're extremely happy with.
We were able to as stated earlier, but in some top level management from the both side to get some of our culture.
And also learn from the plant side that we bought on what they have for best practices and everything else is fits directly into our network and we plan on exploring those opportunities of integrating across that network or you know it. It's a wonderful plan to second most.
Hi efficient plant in the U.S. from some of the reports where we're seeing any you know we know we have opportunities are out there or mining side.
And that and we're going to be exploring those opportunities over this coming timeframe.
So there's you know just overall when I look at the transaction I'm extremely happy about that transaction have an integrated into our network provides oh, just even more and more stability to the planting in support of crops with airborne and Illinois, cement and and Sugar Creek Albian.
Now able to connected athlete and everything so over the coming quarters, you'll see a lot more conversation about that from us, but you know we've only owned it since the beginning of March. So we just need a little time to get in there in dig in there and as you know travel spend a little more restrictive lately to take it in there and see some of these these items.
Yeah, it would be along drug.
[laughter].
Thank you. Our next question comes from Stanley Elliott with Stifel. Your line is open.
Hi, Good morning, everybody. Thank you all for taking the question.
Quick question you when you see kind of the big drop in economies and being shut down typically you that's the residential.
Market to get hit first right and we are starting to see some some of the data points looking like maybe the residential mortgage coming off the bottom a touch.
You are you seeing that in conversations with customers I'd be curious to see how that buckets been break it down for you.
Yeah, I think sale you you're going to see a lot of interesting macroeconomic data we've already seen it there's going to be loss of a lot more David would come and this has been such a quick reaction and so you're going to happen to us to look through and see this data over a number of.
Weeks and months before you can really started to put a trend to it you know look anecdotally I think we are the same a that things you know that have started to kind of.
Bottom out and improve a little bit you're starting to see these many states re over their economies.
People are going back to doing some of their normal routine activity. So look you still a very low interest rates.
That is an attractive thing.
Longer term fundamentally I do think single family construction will benefit from from this environment, where you want to social distance and you know so there may be that deals with some immediate reaction, but longer term I actually do think is probably good for both the businesses.
And then lastly from me just to point of clarification, you guys talked about capex being down at least 50%.
I'm, assuming that that is including.
Capital maintenance requirements for for Kosmos within those within that numbers.
Yeah, absolutely and I think Michael pointed out because of those facilities are very modern facility.
It's been maintained well, we see some opportunities for improvement.
But we certainly baked that into our estimates are for capital spending over the next year as we've talked in the past or our tower sustaining capital needs or Nonsignificant on annual basis. The real investment in these businesses is up front.
The sustaining annual needs is not signal.
Perfect. Thanks for the time.
Thank you. Our next question comes from Phil Ng with Jefferies. Your line is open.
Hey, guys. Good morning, congrats on a strong quarter or given the continuous manufacturing process of summit. How are you going to kind of managed the cost profile that business in a downturn and up is there good when thinking about decrementals on from a volume perspective.
Yeah, you know you know when we look at it Oh I want to get back to you know kind of the current Ah with it as you know our demand in the markets has been.
Strong you know we do have several but we are planning if self WARDA happen. How we respond into your question. You know it is a continuous manufacturing process. You know we've we've done several different capital investments over the past and that's what's enabled us some to Ah habiger in Alaska.
Colin this year, when we want to pull that lever back and kind of rain in the cash spend side and some of the capital investments have been really looking at the grinding capacity versus clinker production capacity.
We have several different facilities, where we have a storage of clinker that we can do so we can continue to run and then have extra grinding capacity to take that clinker, a you know in the future with it.
So that's an example, one thing we may look at a if that market, where deterrent you know and there's there's multiple others and several locations. We have multiple killed mindset, we run in front of one kilowatt instead to kill line right now we have those as as alternatives, but right now we're just not seeing any kind of demand.
Profile at file that Oh, hi, the snacking any of that.
Got it that's helpful and there's obviously been a lot of noise and price about some of these deal teased us naturally.
Underwater any perspective on how you think of your a key states from a funding perspective any states that are in better shape like a texas in any markets that are a little weaker free.
You know a and said you know when this near term right now demand has been stable across or all locations. You know there are some different micro or impacts with items like you know.
For example, gold prices are up so you know we provide into that market with it but overall I you know there's not a market out highlight out as a significantly we all we are watching you know some of the Oklahoma market with some of the oil and gas.
Movement, that's happened in it but that's such a small percentage of our our sales anymore that a you know it's not significant I think it's a less than 5% of what we sell as a as a product on the some inside a anymore. So it's just not a meaningful number anymore, but we are watching that market just to see what happens.
But overall you know we've been pretty consistent where we're in a.
Heartland area, that's been pretty stable.
Okay, Great and just one last one for me.
I appreciate once again your business is pretty stable across the board, whether it's your lighter heavy material side of things.
You are bringing on some capacity for paperboard can you remind us how much of that business is locked up by long term commitment and it sounds like just from a cost standpoint, you're seeing some savings right excellent.
Yes, so I'll do a quick comment and then I'll turn it over Craig to with the that's a follow up on a you know what we did with that for that project as you know a as I mentioned in the first side as you know that project was to expand.
The paper mill and give us more capacity.
You may notice in there that we were able to implement a all the equipment and we are seeing some additional capacity with in the early early stages of brining the equipment.
So that equipment, let us speed up the machine a little bit we've been able to run a little bit faster and that translate in some time and we also do have a secondary part of that that's going to be happening or that we need some debt, but mid and thats already in.
Stall, a but we need a person from a a company from overseas.
To come over and help us with the final.
Machine and everything and that'll be in the summer when they.
Travel bans open and everything.
But right now we are seeing improved production out there I think the.
We stated that it within the <unk>.
<unk> 70.
It's a thousand tonne edition and we are seeing you know or some of that currently today and we'll see more into the summer comps and were able to finally get that equipment up around into full capacity.
Yeah.
Thank you and our next question comes from Josh Wilson with Raymond James Your line is open.
Thanks, Good morning might Craig and Bob Hope you and your families are well.
You too.
First a housekeeping item could you quantify what the sales contribution was the ready mixed in aggregates acquisition in the quarter.
On the revenue side.
Yes.
Yeah. It was it was a pretty minimal number I think for the entire quarter. When you look at above Kosmos in the concrete acquisitions. It was around $14 million for the quarter no split almost evenly between the two.
Got it and then regarding the the Frac sand business a good to see some profits there, but could you walk us through what some of the building blocks, where given the volume was still down year on year in terms of contribution of cost cuts and.
Maybe what the six cost outlook is for that business going forward.
Yes, Josh obviously over the last 12 to 18 months, we've taken some significant impairment charges in that business, where we've written that down to next to nothing.
And so as you see in the earnings release, the depreciation and amortization as has gone down considerably.
And so then as I mentioned, we actually saw well, it's maybe down year over year, we did see volume improve.
In January and February and a little bit of volume on a on a fixed cost business like this goes a long ways. So that's what was driving the earnings improvement during the quarter.
But but it's also highlighted earlier, we obviously you've seen a other change in that business in March and into April.
Then the last one for me in terms of the organic summit. He end markets are states that particularly contributed.
Those trends for continuing.
So look I think as we saw during the quarter not even highlight for you go back to the September quarter. The December quarter, we've seen really good volume improvement and it was it was really across the entire network that we saw in the fourth quarter was no different we really saw very good momentum as we were coming out of the way.
Winter inventories are low and but it was very broad base.
Okay. Good luck with an export.
Thanks.
Thank you. Our next question comes from Robert Mueller with Berenberg. Your line is open.
Thanks, very much that's taking the question.
I see can you is there any update on 120 million tax benefit.
Associate with the Kosmos acquisition that you talked about righted the ship I think I saw the federal.
Income tax receivable balance sheet moved quite a bit.
I just wonder if there's any color around that thanks.
Yes that is absolutely. So when we acquired the Cosmo cement plant, we were able to accelerated depreciation for tax purposes for 65% of the purchase price was immediately expense and so we went from a taxable income position too.
Net operating loss a uniquely because of the cares act, we were able to carry that backwards.
And recover previously paid taxes.
And so that certainly is what's driving that income tax receivable. What I'd also highlight for you we mentioned in the press release.
What that also meant was we carry back that in a well two years that we were paying taxes at 35% versus the current rate of 21% that that generated another 30 plus million dollars, Oh receivable and benefit during this quarter. So we've actually.
File that tax return and have and are seeking a refund.
And that should be coming over the next couple of months.
Great and then the second question I had was just on the Chicago market.
You can you I mean, notwithstanding obscure the effects from the virus right.
Not market I think the the Illinois ship weights gonna be closed this year still for attack. How do you think that market is likely to evolve are you seeing any change in how it's being supplied by other players.
Normally access it maybe Fred.
Yeah, the Mississippi et cetera are you seeing any changed in the supply.
You know, we're well positioned in that market, we have our Illinois summit. We also have our skywaves back grinding facility there.
In that market. We do you know what type of waterways are gonna be shut down for some repairs and.
During the summer we've been in conversation with our customers I hope that will impact and everything.
We're comfortable with supplying them appropriately I haven't seen.
Anything notable on market share changes or anything like that you know that plant we run.
Pretty much at capacity and now.
[laughter] plant to satisfy our customers and everything.
I don't see anything significant right at this time.
Okay, Great and then the fun question was just.
Thank you mentioned Kosmos with second most efficient plant.
Is that in your portfolio or is that in the U.S. as a whole and then just want to one of the 50 8-K that you put out I.
I think EBITDA margin looks to be about 20%, but that could be wrong could you could you clarify that for me. Please.
Yes, when I said efficiently, we're looking at the thermal efficiency at that plant. So when we look at the plans to look at them thermally efficient I missed the second or yep.
I think they're related so on the AJ. Those results were a semex ran them and then I think it was 2018 in calendar 2019 is what is included.
Okay.
Okay, that's great.
Thank you very much like for questions.
Thank you on our next question comes from Keith Hughes Suntrust. Your line is something.
I think you still want a positive thinking more positive for April and may be more pause I've heard him personally any conference call. This earnings season, it's kind of bottom line or your volumes up year over year in April and many are down slightly or can you just give us any sort of gauge and what this looks like.
Yeah, Keith I think what we're trying to communicate is that we really haven't seen much of a change in the business or not trying to give any forward guidance on volumes being up or down just fall in you always have year over year comparisons as well to consider but ER volumes have remained strong.
Across the businesses illness that includes wallboard in cement here in April and May and what we fully understand the what's going on the economy and there's there's changes we just haven't seen impact as yet.
Okay and kind of on that note I'm, particularly in wallboard do you expect to run kind of normal production schedules till the time being unless you know that demand pattern changes.
Yeah look we we absolutely will run a the facilities to meet the demand levels that are in front of us and that's kind of what you always do you don't really have the ability to store inventory of wallboard.
We will deteriorate over time, you can stored outside so you're always matching supply with demand, but it's pretty tough for us.
Okay. Thank you.
Thank you. Our next question comes from Paul Roger with Exadata BNP Paribas. Your line is open.
Hi, This actually broke what was called unfold pull Roger.
Thanks for taking my question I.
Just wanted to talk when you do you all scenario planning are there any situations. When you would have liquidity concerns say or if that's what you were an l. shaped recovery I mean are you still confident about the state the balance sheet.
Yes, you know we made some modifications to the existing.
Facilities here in April and gave us some extension on the maturity dates among other things and as I mentioned earlier, we had to get a sale of the nonstrategic asset that wasn't driven by the current situation, but it was certainly timeline. So that was 93 and a half million dollars we have.
The and a well refund that we have filed for it and should receive and the general near term.
What we found in the last recession was what we know about these assets and they are significant cash flow generators, you know our capital spending needs as we said or are not significant roughly half of what our depreciation and amortization is on an annual basis at this point I'm. So you know these assets.
Do generate a lot of cash a wallboard plans can be moderated go very quickly to the extent necessary and and so we feel good about where we are from a liquidity position at this point than and ER and need be we can continue to trim term further.
[noise] pretty and thank you and just a follow up.
Obviously, you've already touched on then sort of pulling stay infrastructure spending already I'd just like Tonight.
What your expectation is around a stimulus from the federal government unless you sort of what your expectations all post the fall stacked expiring in September. Thank you.
Yeah, and you know any any kind of similar satcom not a you know it spending is going to get in the pipeline is going to take some time to materialize into anything so you know.
So as we look at it you know we're looking at what's in front of US right now and then we understand some of the uncertainties in the mid term or later terminal a year.
But you know right now I don't see any stimulus hitting us in this is short timeframe with it would be a mid or mid or longer term.
Back to it and it's going to take time to work through the system.
Okay. Thank you.
Thank you and we have a question from each reinforced with JP Morgan.
Your line is open.
Hi, Good morning, everyone. You mentioned that just from what is that we have seen already over the last out over the last three quarters and you said also that he was kind of across the markets.
Do you think you gained market share doing destock threeq waters and can we say that that that comes we'll start getting tougher now in the coming waters.
On the year on year makes its im talking about cement cement volumes.
Yeah, you know a the market share question, we've been pretty consistent on our market share for quite a while now on both sides are business. So I don't see.
Gaining market share with it really it's just more on the markets, we participate in and the customer base, we have on it.
As as said before you know I'm really focused more on we have plans for things happened in the future, but we're focused on running the business as it stands today with it.
You know and and so we have around cases, where what we would do if there is a downside potential on the feature but right now we're just seeing a stable market, we're going to run our plants as as the demand dictates at this time.
Excellent. Thank you.
Thank you.
That's all the questions we have for today I'd like to turn the call back from management for any closing remarks.
I know the only thing when I say, thank you very much for calling into our conference call and we will be talking to you again a in the summer. Thank you very much.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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