Eagle Materials Inc (EXP) Q4 2019 Earnings Call Transcript

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Eagle Materials Inc (NYSE: EXP)Q4 2019 Earnings CallMay 16, 2019, 8:30 a.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to Eagle Materials' Fiscal 2019 Earnings Conference Call. This call is being recorded.

At this time, I would like to turn the call over to Eagle's Chief Executive Officer, Mr. Dave Powers. Mr. Powers, please go ahead, sir.

David B. Powers -- Chief Executive Officer & Director

Thank you Brian. Good morning to all and welcome to Eagle Materials' Conference Call for our fourth quarter of fiscal 2019. We're glad that you could be with us today. Joining me today are Michael Haack, our President, Chief Financial Officer; Craig Kesler our Chief Financial Officer and Bob Stewart our Executive Vice President of Strategy, Corporate Development and communications. There will be a slide presentation made in connection with the call to access it please go to eaglematerials.com and click on the web link to the webcast.

While you're accessing these 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 discussed during the call, for further information please refer to this disclosure which is also included at the end of our press release. As you are aware, we preannounced our preliminary financial results for our fourth fiscal quarter. This preannouncement was part of a press release last month where we also announced the initiation of a strategic portfolio review undertaken with the support of our third party advisors and an additional share repurchase authorization among other developments.

This morning I'd like to offer some color on the quarter and to say a few words about the current market and business conditions. I also want to introduce Michael Haack to you more formally today as he will be taking the CEO reins in July. Michael will bring you up to date on some of our initiatives to improve our primary lines of business, to further extend our low cost producer positions and to enhance the resilience of our businesses. And then Craig will go over the financial specifics for the quarter and our fiscal year and then we'll move on to your questions.

As I'm sure you will understand, I will not be commenting on or answering questions today on the strategic portfolio review itself other than to say that management, our board and our advisors are taking the review very seriously and diligently and we are making progress on it.

Now to the quarter. All in all we had a quite respectable quarter in spite of the widely discussed weather and related flooding issues that created delays and interruptions. Business demand fundamentals remain solid and there are encouraging signs of improvement. We maintain our base case expectations for low single digit demand growth for our construction markets and for cement and wallboard specifically.

The potential prospect of our federal infrastructure bill even if it were a fraction of the levels being discussed now would be additive and would put demand higher for US cement markets. We did get meaningful price improvement in cement in April and our customers are reporting good backlogs. The same cannot be said for wallboard right now. Our volumes do remain strong but our first quarter price increase was not successful. We continue to generate significant cash and the go forward outlook for our cash generation is strong. Eagle remains dedicated to the use of that cash to preserve the company's financial flexibility and further enhance shareholder value. The company's three capital allocation priorities have been clear and remain clear. First, heavy side acquisitions that meet our strict return criteria are consistent with our strategic focus. Second and of equal importance, capital investments to organically grow and improve our low cost producer positions and third, also equally important is our balanced capital allocation strategy is to return of cash to shareholders through a combination of dividends and share repurchases.

In this regard, it's worth noting that the company has returned nearly $600 million to shareholders in the form of dividend payments and share repurchases since the announced share repurchase authorization in August of 2015. Last month, our board authorized the repurchase of an additional $10 million shares which increased the total authorization to $10.7 million shares which is nearly 25% of the company's shares outstanding.

At the same time, I would add the perspective that our acquisition and capital spending during the past three fiscal years has been roughly $800 million. With about three quarters of the spending allocated toward the heavy material side of our company. These investments include the acquisition of a cement plant in Ohio, a project to increase the finished mill capacity in our Kansas City Cement Plant and projects to extend our cement distribution facilities to support our growing and integrated cement plant system, as well as projects to reduce plant energy consumption.

This priority of improving our existing system of plants is an important one and one that has been sustained through the cycles. And quite frankly, the sustained focus has been a key reason for Eagle's long and distinguished track record of superior margins and returns performance. The operational and process improvement dimension arguably has been the most important part of Michael Haack's focus over the past four years as COO.

Michael has taken on sequentially greater responsibility each year and over an increasingly larger scope of operations and processes and has distinguished himself every step of the way. His success in leading these efforts has been a key factor in developing board conviction as well as the conviction across our operating organization that he is well-prepared and well suited to take on the CEO role at this time.

So let me turn it over to Michael to comment on his priorities. This last year.

Michael Haack -- President and Chief Operating Office

Thank you Dave, and thank you for the kind words. First I'd like to start by saying that Eagle Materials is an extremely healthy company with an exceedingly strong performance culture that permeates the entire organization. Eagle has a long and established track record of superior performance on virtually every dimension we measure. My point here is that, while I will come into the CEO position with a humble frame of mind and the greatest respect for the organization and those who have come before me. We can and will build on this track record. And I truly believe the best is yet to come for our shareholders, our employees and other constituents.

I certainly I'm committed to doing my part as a leader in this regard. Now, let's discuss a few of the projects we have been working on to illustrate the discipline investment back into the business. Let me give three examples, each representing a different aspect of our improvement agenda to lower cost, increase productive capacity, or realign system synergies.

First, let's start with cement. In an environment where it is extremely difficult to expand cement plant clinker capacity due to permit-related caps, you need to be creative. At our Sugar Creek facility, where we are seasonally sold out, the answer is to balance grinding capacity with clinker capacity. For less than a $20 million investment, we were able to increase the amount of salable product available to customers by about 125,000 tons per year.

Through diligent engineering, we were able to select an option that also yielded significant power cost savings. This is representative of the kind of projects we look for, relatively small capital, fast payback, high returning and low risk.

Second, let's discuss a larger scope project under way at our paperboard operation. The management of our paperwork plant has done a terrific job maximizing the amount of product that is produced. Through their creative, continuous drive for improvement, the plant is producing a substantially higher amount of product than the original designed capacity of the machine, but we continue to be sold out. We have a two-year, $70 million project under way that will add over 20% more productive capacity, reduce our dependence on certain fiber sources that are likely to become more scarce over time, lower production costs and volumetrically reduce the chemicals required for the process. It is a new technology proven in other areas but it will be the first in our industry. It is a very exciting project that demonstrates our focus on lowering costs increasing throughput and increasing sustainability.

The third example is about leveraging system benefits and synergies. We have doubled our cement capacity in recent years and have created a US heartland system of plants. To capture the system benefits we have invested in our cement distribution network, we are upgrading our own infrastructure, something I hope the federal government will get around to doing for roads and bridges sometime soon. The systems we are building are using the latest technology to speed load times and will provide optionality across multiple transportation modes, including barge, rail and truck.

These individual investments conform to the small capital. fast payback philosophy. Capital expenditures for fiscal 2020 are expected to range from $140 million to $155 million, depending on the improvement projects that we justified, and which includes the spend curve of the $70 million project to expand our paper mill, which we expect to be completed late next spring.

These examples are not intended to be comprehensive but rather illustrative of investments we have going on in the operational improvement arena that will keep Eagle at the forefront of the competitive performance.

Dave, unless you have any comments to add, let's turn it over to Craig to cover the financials.

David B. Powers -- Chief Executive Officer & Director

Please, just do that.

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Thank you Michael. Fiscal year 2019 revenue was $1.4 billion about flat with the prior year. During fiscal 2019, improved cement and wallboard pricing was offset by the unusually wet weather and further weakness in our Oil and Gas Proppants business.

Revenue for the fourth quarter was $285 million flat with Q4 fiscal '18. Annual earnings per share of $1.47, reflects the impact of a $220 million pre-tax impairment loss related to our Oil and Gas Proppants business.

Excluding this non-routine item, EPS would have been $5.05. Fourth quarter EPS also includes the impairment loss and excluding the issue Q4 earnings would have been $0.87 cents.

Let's turn now to segment performance. This next slide shows the results in our Heavy Materials sector, which includes our Cement, Concrete and Aggregates segments. Heavy Materials annual revenue was down 1%, and operating earnings were down 10%. Declines were driven again primarily by unusually wet weather throughout the year which hampered sales volume and by increased maintenance costs, which were partially offset by improved Cement and Concrete average net sales prices.

Moving to the Light Materials sector, a 4% improvement in sales volume and a 3% increase in net sales prices drove an improvement in Light Materials revenue of 5% year-on-year. Annual operating earnings in our Light Materials business increased 13% to $216 million, reflecting the improved sales volume and pricing as well as lower input cost, namely recycled paper.

In the Oil and Gas Proppants sector, revenue was down 16% from the we had an operating loss of $29 million. These results reflect the impact of the industrywide slowdown during the second half of the year, and sales volume was under pressure from reduced completion budgets and limited pipeline take-away capacity in the Permian. In addition, pricing pressure resulted from the reduced demand and increased use of local sand during the year. And as we mentioned in the press release, these factors, which are not expected to improve in the near term, led us to record an impairment of long-lived assets and goodwill during the quarter. The effect was a non-cash charge of approximately $220 million. Operating cash flow during fiscal 2019 improved 4% to $350 million. Total capital spending increased to $266 million. And as Michael highlighted, this amount included investments to improve and replace existing equipment, complete our Frac sand investment, enhance Eagle's distribution capabilities, and to continue to improve our low-cost operations.

Also during the year, Eagle returned nearly $300 million to shareholders through our share repurchase program and dividends. And finally, at March 31, 2019 our debt-to-cap ratio was 37%.

Thank you for joining today's call. We'll now move to the question and answer session. Brian?

Questions and Answers:

Operator

Thank you, sir. (Operator Instructions) Our first question will come from the line of Trey Grooms with Stephens. Your line is now open.

Trey Grooms -- Stephens Inc -- Analyst

Morning. So, first off, welcome Michael to the call, and congrats on your appointment to CEO there.

Michael Haack -- President and Chief Operating Office

Thank you.

Trey Grooms -- Stephens Inc -- Analyst

I guess first off here for me, Wallboard volume up 22%, I mean, clearly stronger than the market. Understanding you guys had a fairly easy comp, but still that's pretty impressive. Can you talk about some of the drivers there? And then also, you mentioned that demand remains strong in April. Any additional color you could give us around that comment?

Michael Haack -- President and Chief Operating Office

Sure Trey. When I look back at December 17, we had quite a bit of pre-buy volume that went into that month of December, and as a result, the comp was relatively low versus prior year. We didn't have any pre-buy at all this year, and we went to some markets that for us were very strong during the quarter. So we're pleased with the volume. In terms of the volumes today, it is still strong. Our volumes have picked up a little bit and we like the pace we're at.

Trey Grooms -- Stephens Inc -- Analyst

So the -- in your outlook for low single-digit demand growth is that -- and I think you mentioned that was on both sides of the business, so that's kind of the outlook that you would have for the Wallboard business, even though you came out of the gate with a very strong 1Q -- calendar 1Q?

David B. Powers -- Chief Executive Officer & Director

Yes, I'd agree with that.

Trey Grooms -- Stephens Inc -- Analyst

Okay. And then secondly you mentioned meaningful price improvement in Cement, and I believe you guys -- you've been telling us throughout the year that last year was a little disappointing relative to your expectations going into calendar '18 with cement pricing and what was realized there in the market. But I guess it sounds like you're seeing a better traction there on the cement pricing side. And first off is that accurate? And then secondly, is that across the footprint or more specific to certain markets? And then in your opinion, what's driving that better pricing environment versus what you saw last year?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes, Trey, this is Craig. The construction scene has gotten off to a good start. And as Dave mentioned, volumes have picked up and as we've said utilization rates for the last couple of years have been high and they continue to improve. And so while we won't get into specifics on the actual realization, we'll do that for you in the July call. Again the market environment just continues to improve for our operations and our planned system of plants. So, we look forward to continued strength in the construction season and that's -- that's what's giving us a good outlook for that business.

Trey Grooms -- Stephens Inc -- Analyst

Okay, fair enough. And then last one for me, just a housekeeping and I'll turn it over. Craig with the impairment of the Frac sand business, what should we be thinking from a -- just a P&L standpoint, how that changes DD&A or anything else as we look going forward?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes, there'll be a rather significant step-down in the depreciation and amortization going forward. It might specifically quantifying, but it will be nearly significant. If you think about that business has been running DD&A in the $30 million range this past year. That will come down quite significantly maybe not quite half, but somewhere in that neck of the woods. And EBITDA-wise, it doesn't change the business, but that -- that will change the P&L.

Trey Grooms -- Stephens Inc -- Analyst

Got it. Okay. Thanks a lot. I'll turn it over.

Operator

Thank you. Our next question will come from the line of Zane Karimi with D. A. Davidson. Your line is now open.

Zane Karimi -- D. A. Davidson -- Analyst

Hey, good morning guys.

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Hi, good morning.

Zane Karimi -- D. A. Davidson -- Analyst

So, first off a little bit more on the Wallboard business, can you talk about the regional demand and variations and what you're seeing, and how are you expecting and hoping for that?

David B. Powers -- Chief Executive Officer & Director

Well, the demand in -- we operate in the Sunbelt and it's very strong in the Sunbelt markets, and we expect it to continue to grow, as we mentioned low single-digits and that would be our estimate going forward.

Zane Karimi -- D. A. Davidson -- Analyst

Got you. And then, any outstanding impact from maintenance outages for this quarter? And what's the scheduled plan for the rest of the year look like?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. So, our fiscal year just ended, so I'll talk on a fiscal year basis. Our outages are typically in the June quarter, so the April-May timeframe, at the beginning of this past year, that cadence was a little different because of the cement plant we acquired in Ohio. But going forward, we'll be on a consistent maintenance schedule here in this June quarter.

Zane Karimi -- D. A. Davidson -- Analyst

Okay. Thank you. And one final one, a little bit more on the profits side of things. Do you have any updated thoughts on building more capabilities around brown sand to supplement your white sand capabilities within that business?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

As we've said before our investment in the Frac sand business is complete. And we are not anticipating any incremental capital going into that business.

Zane Karimi -- D. A. Davidson -- Analyst

Great . Thank you for your time.

Operator

Thank you. And our next question will come from the line of Scott Schrier with Citi. Your line is now open.

Scott Evan Schrier -- Citigroup Inc -- Analyst

Hi. Good morning. And I also want to say, hi Michael. Good to speak with you and congratulations. And Dave, I certainly enjoyed working with you over the past few years so best of luck.

David B. Powers -- Chief Executive Officer & Director

Thank you, Scott. Thank you.

Scott Evan Schrier -- Citigroup Inc -- Analyst

My -- my first question, a little bit more on the growth CapEx project, if you could talk about now why is now is the right time which seems to show that you have confidence at least in the next few years for Paperboard capacity and how you thought about return hurdles and how this project comes in relative to those hurdles and how you came up with 70,000 of capacity, is that due to engineering, or is that due to the -- how much you think is going to be used and how much more you're going to be needed? And then, sorry to throw a bunch in here, and then if you can clarify the $70 million of CapEx, is that spread out between fiscal '20 and '21 or that's just the component that's going to be in our '20?

Michael Haack -- President and Chief Operating Office

Yes. So when we look, this is Michael, and when we look at the project our Paperboard facility has been sold out for very many years. And our customers were actually coming to us asking us for more capacity. We feel pretty comfortable that bringing this on that those customers will consume that capacity. The 70,000 tons that you asked about for increase was just through a process efficiencies we get. We had some space in the machine to do some changes to the machine that will let us speed the machine up, and it will also let us use a -- different raw material product with less dependence on white fiber, which we currently today go across the United States to get the appropriate amount of fiber to run our operations. So this takes a lot of risk out of our operation.

So the timing we felt was right. Our customers were asking for the product and the investment conforms to our normal investment criteria of less than five-year payback.

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

And Scott to your last question, this is a project that has actually already been in place. So we began in this past year's -- in fiscal '19 capital spending. A little over $10 million spending has already occurred. So the majority of this spending will finish up here in fiscal '20.

Scott Evan Schrier -- Citigroup Inc -- Analyst

Got it. Thanks. And then on Wallboard obviously margins compressed because you had a 4% year-on-year decline. If my math is right, it looks like x shipping your production cost on a unit basis were down over 3%, and I'm assuming that's attributable to both OCC and also efficiencies on the large volumes that you had. I'm curious if you can bridge some of the other factors and magnitudes of each things like energy cost, and then, how should we think about overall production cost trends in the near term in Wallboard?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. Scott, it's a good question. You're right. Costs were down in that business year-over-year. Certainly paper is a piece of that although we started to see paper prices down a year ago as well. And look energy costs continue to remain low. You're talking about $2.60 of $1 million or so for Nat gas. And it looks like that will stay low. So as we look forward with the benign OCC environment with natural gas prices still low those input costs should not be significant or has not significantly changed.

Freight cost continue to go up not and more modest than we were a year ago. If you recall on this call, a year ago we talked about double-digit increases in freight. That's not anticipated for this upcoming year. Volume and then you had some personnel inflation, but that's not significant. So as Mike pointed out, as we've said in the past, we continue to invest in our assets to reduce our consumption of energy and other raw materials. And again Scott, as we've talked about, we are largely a natural gypsum-oriented raw material base, which keeps our costs pretty consistent and so from that environment, we're pretty well positioned.

Scott Evan Schrier -- Citigroup Inc -- Analyst

Got it. And then one more, I think on the last question, you mentioned EBITDA in Frac sand should essentially be the same. So are you saying that where we are we're still going to really see that business run basically at a cash flow-neutral rate? And if there's any other plans for Frac sand whether you're looking at idling more assets or anything if you could speak to that?

David B. Powers -- Chief Executive Officer & Director

Yes. Scott, as we've talked about, a couple of times, from a cash flow perspective that -- business today is neutral on an operational basis. And from an investment perspective, there is no incremental investment into that business. So cash flow-wise it is neutral to Eagle today. And in terms of the go-forward look, I think I would just suggest to you visibility is very limited and not only for us, but I think for our customers as well.

Scott Evan Schrier -- Citigroup Inc -- Analyst

Great. Thanks a lot. And good luck.

Operator

Thank you. And our next question will come from line of Jerry Revich with Goldman Sachs. Your line is now open.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

Yes, hi, good morning everyone. And Michael and Dave congratulations.

David B. Powers -- Chief Executive Officer & Director

Thanks.

Michael Haack -- President and Chief Operating Office

Thanks Jerry.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

I'm wondering if you could offer your take on cement pricing cycle, we're very tight capacity utilization nationwide yet we're looking at pricing for the industry and we're seeing it here in your results too. But that's really not keeping up with -- inflation and pricing for other construction materials product line. So can you just talk about your view on why the cement pricing cycle is playing out differently from what we've seen in the past and what most of us would expect that in a couple of years ago at this point in the cycle?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes, Jerry. I guess that's a backward-looking statement about calendar 2018, and again, as we've talked about fairly much about a wash-out year across many parts of the country. As we look forward, as we talked about it in the beginning, we think the pricing opportunity for this business should continue to improve as utilization rates improve, at already fairly high levels, again for our markets, not talking about all the markets in the US, but the ones that we play in and where we are in terms of our utilization rates, it gives us confidence around the pricing cycle.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

And Craig, so -- your comment implies price realization improves to the call it's $5 to $6 per ton range, which is I think a bit better than what we've been hearing about a couple of dollars price increases that had been expected to be implemented across most markets. So I just want to clarify, when you mean more meaningful inflation in this fiscal year that we're on the same page that we're not talking about a 2%, 3% type price increase, we're talking about more substantial price realization like we've seen earlier in the cycle.

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. Jerry, with that -- I'm not trying to quantify the actual number for you, but -- and we'll do that in the July call. But in terms of looking forward over the remaining part of the cycle with these higher utilization rate and huge growth in demand that should look -- we should see continued improvement in cement prices on the forward look.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

And can you talk about across all of the markets that you folks serve? What proportion of the markets are achieving the price realizations in April or earlier this year? And what markets the price increases failed to go through?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. We have cement price increases across all of our markets that were being implemented in April.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

Successfully implemented in April?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. They were across all of our markets in April. And we've seen improvement across all of our markets in April.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

Okay. And then -- in terms of -- from a Wallboard pricing cycle standpoint can you just talk about how we should be thinking about Wallboard pricing for you folks from here, given the different cadence in the pricing schedule this year compared to last year?

David B. Powers -- Chief Executive Officer & Director

Jerry, I would just look at the housing stat numbers. They have been soft the last three or four quarters. And actually the permits have really outpaced the housing stats. So just keep an eye on that. That will be a good indication of what our intentions are.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

For pricing, Dave?

David B. Powers -- Chief Executive Officer & Director

Yes sir.

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

Okay. Perfect. Thank you everyone. Appreciate the discussion.

Operator

Thank you. And our next question will come from the line of Adam Thalhimer with Thompson Davis. Your line is now open.

Adam Thalhimer -- Thompson Davis -- Analyst

Hey, good morning guys. Dave, I wanted to ask first on the Wallboard volumes, your comment about up low single-digits, do you see that as a comment kind of consistently across the rest of the calendar year, or is that for the full year including the 22% increase in Q1?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. Adam it's a good question, because we've had some variation because of pre-buy activity and timing of price increases, and I'll remind you that a year ago we also had a price increase that went into effect in mid-July, which impacted -- we had pre-buy activity in May and June. So the comparability for even the past quarter or this upcoming quarter will be a little wonky. I think what we're trying to communicate is if you think about what's hole in a wall, right? So trying to parse out pre-buy activity and actually look to the underlying economic and the improvement in sales volume that's the low single-digit improvement that we're expecting that when our customers are moving product will be that type of improvement.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. Understood. And then I wanted to ask about on the -- so if I look at your Cement business, Craig last year the operating margin was down 300 basis points year-over-year for the full year. How much of that was the maintenance that you talked about?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

It was the big piece of it. Again, the other costs were pretty on par. Certainly, volume impacts that, when you have a fixed cost business with slightly lower volume that will impact your cost structure as well. But maintenance -- and some of that maintenance if you recall as -- as I mentioned earlier, was oriented around the timing of the Fairborn acquisition and that will start to be more consistent, and then there were some outages in the fall timeframe that were not expected and shouldn't continue.

Adam Thalhimer -- Thompson Davis -- Analyst

Great. Okay. Thank you.

Operator

Thank you. And our next question will come from the line of Phil Ng with Jefferies. Your line is now open.

Phil Ng -- Jefferies -- Analyst

Hey guys. In Cement it was clearly impacted by weather in the quarter, but curious if you've seen a pickup in activity in April and May. And then some of the other Heavy Materials producers that have reported thus far have talked about, seeing a little catch-up from, sort of projects that were pushed out from last year due to weather, and maybe some of the bottlenecks whether it's labor, or some other elements improving. So I'm just curious to get your thoughts in the markets you're in.

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes, as I said earlier, Phil, the construction season have gotten off to a very good start for us.

Phil Ng -- Jefferies -- Analyst

Okay. And then from a competitive standpoint for Wallboard, pricing was actually -- it did stay a bit. Curious, what you're seeing on that front. Have things kind of leveled off? Any color on where, Wallboard prices kind of exited last quarter? And where are things settling out in May?

David B. Powers -- Chief Executive Officer & Director

What I can tell you is we did have some competitive pressures the first 3.5 months of this year. And our exit price at the end of March was probably a couple of bucks lower than the average that we reported for the quarter.

Phil Ng -- Jefferies -- Analyst

Okay. And has that stabilized in May?

David B. Powers -- Chief Executive Officer & Director

Yes, sir.

Phil Ng -- Jefferies -- Analyst

Okay, great. And then from a buyback standpoint, you guys have obviously announced a pretty big authorization, and then bought back your stock pretty consistently last year, so just curious, how you're thinking about the pace and sizing this year, just given your stock obviously bouncing the bottom a bit? And any color on the M&A pipeline would be very helpful. Thanks.

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes, Phil, its good question. So, in terms of the share buybacks, if you look at what we've done the last several quarters, we've actually picked the pace up pretty significantly from where we began last year. And, I'd tell you we've continued to see good value in the shares. And have continued to pick up the pace on the share repurchases and we'll be in the market.

On the M&A environment, as we've pointed out in the beginning, again and again our emphasis has been predominantly on the heavy side of the company, the Cement and the Aggregates businesses. And right there there's criteria that has to be met, quality of the asset, the location of that asset, and then frankly the valuation of those assets. And if those opportunities, those three criteria are met, there's a reason to invest and we'll look hard at it. But to the extent, those criteria aren't met, we'll continue to return cash to shareholders, as we've done in the past. So, it's a constant balance between those items.

Phil Ng -- Jefferies -- Analyst

Okay, great. Thanks a lot.

Operator

Thank you. And our next question will come from the line of Josh Wilson with Raymond James. Your line is now open.

Josh Wilson -- Raymond James -- Analyst

Good morning, Dave, Michael, Craig and Bob. Congratulations on a good quarter. And Michael, add my congratulations as well on the new position. I look forward to working with you.

Michael Haack -- President and Chief Operating Office

Thanks.

Josh Wilson -- Raymond James -- Analyst

Regarding the paper pricing, I was surprised to see that move up sequentially, as much as it did in light of the broader trends in OCC. Can you talk about what your outlook is for that going forward?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes, Josh, that paper pricing is a contractual arrangement -- and a formula if you will. So, as paper sales go sold at that price, it's going to follow and stay pretty much in this range, as OCC doing something unusual.

Josh Wilson -- Raymond James -- Analyst

Got it. And then in light of the impairment charge, can you give us a sense of what the tax basis might be at the Proppants business now?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

It's -- the tax basis continues, if you think about its part of tax reform. The other things -- well let me say, first, the impairment didn't have an impact on the tax basis, that's a GAAP accounting entry not affecting your tax books. But in addition with tax reform there were other changes that were made, so that investments were immediately deductible. You've heard the accelerated depreciation monitor. So -- and our tax and those assets are depreciated over a fairly short period of time. So it's not -- a tax basis that's consistent with our investment over time. It's lower than that.

Josh Wilson -- Raymond James -- Analyst

Got it. And then to the extent you're comfortable, Dave, can you give us a sense of what past portfolio reviews the Board has done have -- looks like or entails or what ways? Is this current one might be different?

David B. Powers -- Chief Executive Officer & Director

We're not going to comment on that. The board is fully engaged on the project and we will report back to you when the time is appropriate.

Josh Wilson -- Raymond James -- Analyst

I understand. Good luck with the next quarter.

David B. Powers -- Chief Executive Officer & Director

Thank you.

Operator

Thank you. And our next question will come from the line of Keith Hughes with SunTrust. Your line is now open.

Keith Hughes -- SunTrust -- Analyst

Thank you. My question is on Wallboard. What is your view on distributor inventories, or said another way, in the second quarter, do you expect to be producing at the rate of end-use demand or will there have to be some kind of a take-down?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Keith in reality there's not a lot of inventory storage capability at either the distributor level and/or frankly at the manufacturer level at least at our facilities. It's a product that can't be stored outside. As you know it will go bad over time. So it's pretty limited. And we always match our supply with demand as a result because you can't store it outside.

Keith Hughes -- SunTrust -- Analyst

Okay. We did -- we do have pre-buys periodically as you discussed just earlier, that can affect demand. But, I think what I hear you saying is that you expect to go wherever demand goes in the quarter, is that fair?

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Yes. I mean -- and pre-buy will be cleared in weeks not months of sales opportunity. So it gets a lot of attention because of the quarterly variation, but if you really got to look to this business over a 12-month view and in reality it doesn't move the needle a lot.

David B. Powers -- Chief Executive Officer & Director

Keith, a distributor will normally carry about a month's supply of drywall. And if he surges he might get two or three extra weeks. There are accounts like mass merchandisers that have no ability to surge.

Keith Hughes -- SunTrust -- Analyst

Okay. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session for today. So now it is my pleasure to hand the conference back over to Mr. Michael Haack, President and Chief Operating Officer for any closing comments or remarks. Please proceed sir.

Michael Haack -- President and Chief Operating Office

Yes. Just wanted to say thank you for participating in today's conference call webcast and we look forward to talking to you later this summer.

Operator

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program and we may all disconnect. Everybody have a wonderful day.

Duration: 40 minutes

Call participants:

David B. Powers -- Chief Executive Officer & Director

Michael Haack -- President and Chief Operating Office

D. Craig Kesler -- Executive VP of Finance & Administration and Chief Financial Officer

Trey Grooms -- Stephens Inc -- Analyst

Zane Karimi -- D. A. Davidson -- Analyst

Scott Evan Schrier -- Citigroup Inc -- Analyst

Jerry David Revich -- Goldman Sachs Group Inc -- Analyst

Adam Thalhimer -- Thompson Davis -- Analyst

Phil Ng -- Jefferies -- Analyst

Josh Wilson -- Raymond James -- Analyst

Keith Hughes -- SunTrust -- Analyst

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