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Eagle Materials, Inc. (NYSE:EXP)
Q3 2019 Earnings Conference Call
Jan. 29, 2019, 8:30 a.m. ET

Contents:

Prepared Remarks:

Operator

Good day, everyone and welcome to Eagle Materials Third Quarter of 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 -- President and Chief Executive Officer 

Thank you, Lauren. Good morning to all, and welcome to Eagle Materials conference call for our third fiscal quarter of 2019. We're glad that you could be with us today. Joining me today are Craig Kesler, our Chief Financial Officer; and Bob Stewart, Executive Vice President of Strategy, Corporate Development, and Communications.

There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast. While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during 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.

I'd like to begin by saying that all in all, it was a fairly straightforward quarter, notwithstanding the year-over-year comparisons that are complicated by non-reoccurring items of a year ago. There are three observations about what the quarter's results represent, more broadly about our markets and market conditions that I'd like to touch on before we go into the details of the quarter.

The first is about demand resiliency in our markets. The overall market backdrop of our building materials, even with the much-discussed volatility in the housing market, has remained in positive territory, with growth rate trends in the low-single digits. Cement prices and volumes were both up modestly this quarter, and wallboard prices were up 5%. Volume comparisons for this segment were also affected by pre-buying activity that occurred the same quarter a year ago.

I appreciate that it's always difficult to distinguish between weather and macro-related demand weakness. What I can say is that in our cement markets that were most affected by rain, such as Texas in October, when it did stop raining, shipments in Texas recovered nicely. The basic fundamentals of low unemployment, low interest rates, and higher wages remain favorable and support our outlook for continued single-digit low growth in our cement for 2019. Although gypsum wallboard shipments for the calendar year were down a little, when you estimate what was actually installed on walls and ceilings, net of the pre-buy activity of a year ago, my calculations would suggest actual demand was up a little bit for the year.

The second comment that I'd like to make has to do with the implications of high-capacity utilization. Nearly all of our cement and wallboard plants are, in fact, operating at high-capacity utilization. This factor, along with sustained demand, low import threats create a favorable environment for our cement and wallboard products. It is against this backdrop that we've announced price increases in all of our cement and wallboard markets for early in calendar 2019.

My third comment is around input costs. Overall cost pressures for our imports are relatively restrained, as is the outlook for them over the next year. Labor is a very small component of our business. We own or control our key raw materials, and we have long life reserves across our system. Natural gas prices rose, but have now receded, as have OCC costs. All in all, we see fairly smooth sailing in our cost environment for the remainder of the calendar year.

Candidly, an area where we have not performed consistently with my expectations this quarter is with outages in cement. We had two maintenance outages that translated into higher operating costs for the quarter. While these outages represent opportunities for improvement, I would also make the observation that these are operating cost-related opportunities and not input-related cost issues.

We continue to invest in our manufacturing plants in several ways, including in predictive maintenance analytic technologies in an effort to improve upon our already low-cost position.

The stock market has also presented us with a compelling investment opportunity, and that is the purchase of our own shares. We are generating considerable cash flow and have expectations for continued strength in cash flow. This quarter, we actually invested about 20% more than our total net earnings in Eagle stock, for us the silver lining in the stock market downdraft that has affected our sector.

Our priorities going forward remain the same: To continue to grow our business in ways that meet our strict strategic and financial return criteria and continue to improve on our low competitive cost positions. As I said in the past, we've never lowered our standards nor loosened our criteria at times when we've had more money in our pockets.

Now, let me turn it over to Craig to go over the financial specifics.

  1. Craig Kesler -- Vice President and Chief Financial Officer

Thank you, Dave. Eagle's third quarter revenue declined 7% to $333 million, reflecting the unusual wet weather, timing of pre-buy activity in wallboard, and further weakness in the oil and gas business, partially offset by improved pricing in our two major businesses.

Eagle's quarterly earnings per share declined 40% to $1.24. However, excluding the nonrecurring items highlighted in the press release, earnings per share declined 11%.

This next slide highlights the results of our Heavy Materials sector, which includes our cement, concrete, and aggregate segments. Revenue was down 3% versus the prior year, with improved pricing offset by lower sales volume in concrete and aggregates. Operating earnings declined 14%. Maintenance costs are the primary factor for the earnings decline in cement.

Moving to the Light Materials sector, lower sales volume, associated with the shift in timing of our wallboard price increase and related buying activity drove a 5% decline in our quarterly comparative of wallboard and paperboard revenue. In contrast, quarterly operating earnings up slightly to $51 million, primarily reflecting lower raw material costs.

Eagle's Oil and Gas Proppants revenue declined 47% to $14 million, reflecting lower sales prices and sales volume. The quarterly operating loss increased primarily associated with lower sales prices. Sales volumes and prices are negatively affected by weakness in completions activity, which was greater than anticipated, and the typical seasonal slowdown.

Operating cash flow for the first nine months of the year improved 7% to $294 million. Capital spending increased to $124 million. This amount included investments to improve and replace existing equipment, complete our frac sand drying capacity, enhance our distribution capabilities, and to continue to improve our low-cost operations. For the first nine months of the year, Eagle has returned over $200 million, or 105% of our net earnings to shareholders through a combination of share repurchases and dividends.

This last slide reflects the cash flow generation results of our highly competitive low-cost position. Our debt-to-cap ratio was 31% at December 31st.

Thank you for attending today's call. We'll now move the question-and-answer session. Lauren?

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * then the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the # key. Again, that's * then 1 to ask a question. To prevent any background noise, we ask that you please place your line on mute once your question has been stated.

And the first question comes from Trey Grooms with Stephens, Inc. Your line is now open.

Trey Grooms -- Stephens, Inc. -- Analyst

Hey, good morning. So, first question is really around the wallboard volume. And just from the best you can tell at least, how much of the year-over-year decline in wallboard was due to the timing of the pre-buy being down 7 or 8 in the quarter, and I think you said demand up a little bit for the year? But just if you can help us kind of sort out how much of it was pre-buy in the quarter specifically?

David Powers -- President and Chief Executive Officer 

Trey, the majority of it was pre-buy. We estimate 50 million feet was purchased pre-buy December a year ago that affected this year's results for us.

Trey Grooms -- Stephens, Inc. -- Analyst

Okay. So, looking into the first quarter now, given the timing of the wallboard increase this year for February, are you guys seeing any or expecting any pre-buy activity in your fiscal 4Q?

David Powers -- President and Chief Executive Officer 

Actually, we are. We are experiencing it right now. The last couple weeks our order intake has been really pretty good, and our backlog is good at this time. So, the answer to that question was yes.

Trey Grooms -- Stephens, Inc. -- Analyst

Okay. And just for our benefit on just trying to estimate that, should we assume similar kind of levels to what we saw prior December as far as pre-buy activity?

David Powers -- President and Chief Executive Officer 

It will be in that same area. I would estimate it to be in that same area.

Trey Grooms -- Stephens, Inc. -- Analyst

Okay. And then on cement, the maintenance outages, it was two facilities? Can you quantify, Craig, maybe how much of an impact that had to operating profit in that segment? And then also, Dave, I think you mentioned that it was something unique about these outages; it wasn't cost related. Could you give us a little bit more color on what was behind those outages there?

Craig Kesler -- Vice President and Chief Financial Officer

Yeah, Trey. There wasn't anything extraordinary or unique about the outages, just the timing. It was about $3.5 million for the quarter, just making sure keeping the kilns at top level. As utilization rates are at this high of a level, you're having to plan ahead, and we had taken some incremental outages to make sure we could get through the winter season.

Trey Grooms -- Stephens, Inc. -- Analyst

Okay, thanks for clearing that up. And then, looking into the next quarter or two, are there any outages that are planned that we should be modeling?

Craig Kesler -- Vice President and Chief Financial Officer

Nothing unusual. The April/May timeframe is when we do the typical major annual outages, which is now pretty standard across the system, but we're not anticipating anything before then -- anything significant.

Trey Grooms -- Stephens, Inc. -- Analyst

Okay. And then last one for me. Dave, you mentioned -- again, kind of going back to the wallboard volume, you said demand up a little bit for the year, and I think you mentioned something around growth rate trends in the low-single digits. Is that kind of the outlook for wallboard demand and wallboard volume in your markets for calendar '19, kind of low-single digits range?

David Powers -- President and Chief Executive Officer 

Yes, that is our projection. Frankly, Trey, last week I looked at a report where 78 analysts projected housing starts over the next year. The consensus of all those economists were up a little bit this year and up a little bit more next year, and that's what we're planning on.

I will tell you that repair and remodel continues to be strong, somewhere in the area of mid-single digits by most people that project that. And in our markets, the commercial construction business appears to be very, very good.

Trey Grooms -- Stephens, Inc. -- Analyst

All right, well thanks a lot. I'll jump back in queue. Have a great day.

Craig Kesler -- Vice President and Chief Financial Officer

 Thanks.

Operator

Thank you. Our next question comes from Brent Thielman with D.A. Davidson. Your line is now open.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Thanks. Good morning. On the proppants business, the volumes actually weren't quite as bad as I thought they might be for the quarter, just given various dynamics going on out there. Is there any indication you're nearing a trough in that business, at least from a volume side? Or do things potentially get worse before they get better here?

David Powers -- President and Chief Executive Officer 

We actually hope that we're in a trough. Our customers have very little visibility in the business. They do expect not dramatic volume improvement in the first quarter. They expect a little bit more volume improvement in the second quarter.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Okay. Maybe on the cement side, just given volumes have been I guess stagnant for several quarters now, I guess what do you think the appetite in the market is for cement price increases right now? And is there anything different around what maybe some of your competitors are doing this year that could either help or hurt your ability to realize those announcements you have out there?

David Powers -- President and Chief Executive Officer 

I'm not going to comment on any competitor activity, but I will tell you our plants are running at near capacity. Price is always determined in the marketplace, and I'll have a lot better feel of it a couple weeks after the effective increase date.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Okay. And then I guess within the cement business, it sounds like utilization rates are high everywhere, but are there material differences in demand across the various assets you have?

David Powers -- President and Chief Executive Officer 

The majority of ours are up, but some markets are a little bit stronger than others. But we feel pretty good that most of our markets are trending up.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Okay. I'll turn it over. Thank you.

Operator

Thank you. Our next question comes from Scott Schrier with Citigroup. Your line is now open.

Scott Schrier -- Citigroup Global Markets, Inc. -- Analyst

Hi, good morning. Just a followup on that last question on the capacity utilization. I know in the past, I think about a year ago, you had said in order to really start to get that cement price you kind of need that strain across the whole network. It seems like you're getting better capacity utilization, but we're not ready to call the network or characterize it as strained. Is that a fair assessment?

Craig Kesler -- Vice President and Chief Financial Officer

You know, Scott, maybe the other way to talk about that is you look at some of our markets, and this has been well chronicled across many different platforms, but 2018 in many markets, if not the wettest year on record, you're certainly approaching a top two or top three. And so, you've had a lot of...You look at flat cement volumes, and I think a lot of that is associated with weather. And so, across many of the facilities, they're, if not oversold, near full utilization. I wouldn't say every market is strained at this point yet, but if you were to get normal weather patterns, I think you'll see utilization rates are higher than what we saw in 2018.

Scott Schrier -- Citigroup Global Markets, Inc. -- Analyst

Got it, thanks. And it seems that you had some constructive comments on some of the headwinds that you've had from some of the cost buckets, transportation and such, kind of alleviating a little bit. I know in the past you've called out some rail costs eating into your cement mill nets and similarly eating into the mill nets on the wallboard side. Is that something that you've seen that sort of normalize and you're not really seeing much in terms of those transportation costs eating into your prices in those segments?

  1. Craig Kesler -- Vice President and Chief Financial Officer

Yes, Scott. The second half of the year, we did see, and I think Dave commented last quarter that freight costs did kind of level out here versus what we'd seen earlier in the year. Certainly, there are...Going into calendar '19, the railroads and truckers are pushing for some freight increases, and then we'll do our best to offset that, but we haven't seen anything significant like we saw this time last year. That still did impact the cement mill net this quarter versus the prior year, about at the same level as we saw. It was about a $1.00 a ton, but those costs have seemed to level out here more recently.

Scott Schrier -- Citigroup Global Markets, Inc. -- Analyst

Got it. One last one on frac sand. I just want to reconcile some of the comments that you just made and maybe what was seen in the press release of how you're potentially taking steps to right side the business. If you could talk about maybe what are the potential avenues you're looking at? And how do you look at in terms of you said maybe you're at a trough, so you think about just waiting it out and seeing if demand really starts to pick up, or do you go ahead and make some adjustments in the business now?

David Powers -- President and Chief Executive Officer 

You know, we're actually -- we're looking at everything. We're looking at equipment. Maybe we've got a few extra rail cars and mobile equipment that we don't need. We're looking at staffing. We're looking at how we're running our operations. Should I run all of them? We're going to go slow, because we're also going to plan for the upside. So, we're not going to go too quickly, but we are looking at everything from a cost structure point of view.

Scott Schrier -- Citigroup Global Markets, Inc. -- Analyst

Great. Thanks for that. I appreciate it.

Operator

Our next question comes from Jerry Revich with Goldman Sachs. Your line is now open.

Jerry Revich -- Goldman Sachs & Co. LLC -- Analyst

Yes, hi. Good morning, everyone. I wonder if you folks can talk about which markets you're most confident in terms of driving growth for your business in heavy materials in '19 versus '18? And by the same token, which markets are you monitoring that you expect flat to maybe a touch weaker? And if you can comment on what you're hearing on DOT projects, in particular, that would be helpful, because we're hearing angst from DOTs with high federal mix about potential reemergence of the shutdown. So, I'm wondering if that's translating into cadence of activity base in your discussions?

Craig Kesler -- Vice President and Chief Financial Officer

You know, Jerry, as we highlighted in the press release, at the end of the day, the basic underlying fundamentals of sustained job creation, low interest rates, higher wages, those things over time translate into improving demand for our basic construction products. Region to region, quarter to quarter, things might be slightly different, but on the average, we are expecting to see continued improvement in demand across our products. Again, the low-single digits. We try not to...You look at state leadings, they're improving. But as long as you have those basic underlying fundamentals where they are today, our businesses shape up to have a good calendar 2019.

Jerry Revich -- Goldman Sachs & Co. LLC -- Analyst

Sure, but can you give us a bit more context? And I appreciate the importance of looking at the picture as a whole, but can you share with us any markets that stand out, that you folks feel very good about based on booking trends or project cadence? Can you just give us a bit more regional flavor?

Craig Kesler -- Vice President and Chief Financial Officer

Clearly you have some regions -- for example, Texas continues to be a very strong economy. Again, if you look at the last four months of the calendar year '18, you had more rain in those four months than you had in the whole of the first eight months of the year. So, that's going to cause some trends to look a little bit unique, but when the sun shines, cement is moving. So, you have some regions like that that are very strong. But I tell, again, you across the board we're continuing to see improvement, albeit it's all growing in that low-single digit type of improvement.

Jerry Revich -- Goldman Sachs & Co. LLC -- Analyst

Okay. And in terms of any of your discussions point to potential for slower ramp-up to the construction season, is that factoring into project time and cadence as is being communicated to you by your customers because of the government shutdown?

Craig Kesler -- Vice President and Chief Financial Officer

It's a little too early to tell if there's any impact from that. This is obviously the winter season, especially in the northern part of the country. They've been demobilized for a while now, and they'll start up in the spring.

Jerry Revich -- Goldman Sachs & Co. LLC -- Analyst

Okay. And then, what really stands out cycle over cycle is the margin performance in your wallboard business where you folks have a really strong cost structure. I'm looking at the cement business now and the margins there are in the mid 20s. When you folks were at similar level of capacity utilization in the 2000s, margins were closer to 30%, and I know you've increased plant efficiency over time. Can you just talk about what needs to happen to margins to get back to the 30% range that you folks were able to get to a decade ago?

Craig Kesler -- Vice President and Chief Financial Officer

Yeah. So, Jerry, the way I look at margins for the cement business is on an EBITDA basis, so adding back the depreciation and amortization. As you know, we've made a number of acquisitions, more than doubled our cement capacity for the last five or six years. And so, when I actually go back and look at it on that level, margins are running much higher, as the facilities that we've added are very low-cost facilities, and so they fit very nicely into our network. But we think even with the network, with where utilization rates are, we can continue to potentially get incremental pricing, and that should move margins, as well.

Jerry Revich -- Goldman Sachs & Co. LLC -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Stanley Elliott with Stifel. Your line is now open.

Stanley Elliott -- Stifel Financial Corp -- Analyst

Hey, guys. Good morning. Thank you for taking the question. Quick question: Could you remind us again kind of the pricing discussions around the cement side? And then I'm curious to think if -- or get your perspective if the lower input costs that we're seeing on the natural gas and some of the other inputs, if that has any meaningful ability in your ability to realizing pricing in the coming year?

David Powers -- President and Chief Executive Officer 

I'll take the first question regarding cement prices. We've announced increases for $6.00 to $8.00 in most all of our markets for the April 1st timeframe. We're negotiating with our customers now. I feel pretty good about some market realization there.

Stanley Elliott -- Stifel Financial Corp -- Analyst

And how do we think about the cadence of repurchases going forward? Should we think about it as more of an opportunistic, or any sort of color there would be great?

Craig Kesler -- Vice President and Chief Financial Officer

The program we put in place three or four years ago, we're continuing to put that into place. And as Dave mentioned in his earlier comments, sometimes the stock market gives you unique opportunities, and as you can see, we've been buying more as the price has gone down. We continue to see value in the shares, and I'll leave it at that.

Stanley Elliott -- Stifel Financial Corp -- Analyst

Perfect. And the last from me. You talked about the proppants business kind of troughing out, and I apologize if you mentioned it earlier. Does this business get back to kind of a break even cash flow by the end of this fiscal year, or is that something kind of we're looking at more for next year and hopefully some earnings growth out of that business?

Craig Kesler -- Vice President and Chief Financial Officer

Yes. So, in terms of the cash flow of that business, the nice thing is that business has hit a point where there's no more incremental capital being spent on the business. We've completed the network that we wanted to. So, from that perspective, no more incremental capital. At an operating level, we were slightly below breakeven on an EBITDA basis this quarter, but just slightly. With some of the actions and the discussion we've had today, we intend to continue to take costs out of that business, and like where we were four years ago or so, keeping that business at a cash breakeven level.

Stanley Elliott -- Stifel Financial Corp -- Analyst

Perfect. Thanks guys. Appreciate it.

Operator

Thank you. Our next question comes from Adam Thalhimer with Thompson Davis. Your line is now open.

Adam Thalhimer -- Thompson Davis & Co., Inc. -- Analyst

Hey. Good morning, guys. I wanted to follow up on that last question. Do you have a number in mind for what you want to get the operating losses in frac sand down to?

Craig Kesler -- Vice President and Chief Financial Officer

Right now, those operating losses are predominantly depreciation and amortization and depletion, and that will stay in this similar level for a while, until you have some volume improvement in that business.

Adam Thalhimer -- Thompson Davis & Co., Inc. -- Analyst

And then what's the... Remind us what the bull case in frac sand is again. I mean, what do you think the next upcycle looks like for you guys?

Craig Kesler -- Vice President and Chief Financial Officer

You know, Adam, we've now got a system that sits on all major Class I rails. So, we have a position in Illinois with Northern White Sand, and we have a position in northern Wisconsin, also on a major Class I. And so, as the basins across the U.S. start firing again, that's our opportunity, and we have distribution facilities in all of the major basins.

So, depending upon the price of oil and other factors that are going on, obviously we talked a lot in the fall about the Permian really declining in completion activity until they get their pipeline installed so they can start moving oil out. So, there are a lot of moving parts. But in terms of how we're positioned for the next upside, we can hit any of the major basins in the U.S. with high-quality Northern White Sand, and we think that's a strong position for that eventual recovery.

Adam Thalhimer -- Thompson Davis & Co., Inc. -- Analyst

How did wallboard prices trend during the quarter?

Craig Kesler -- Vice President and Chief Financial Officer

I think as we talked about last quarter, we exited the quarter...So, this goes back to September, our price was lower than the average, and prices were pretty much flat during this December quarter.

Adam Thalhimer -- Thompson Davis & Co., Inc. -- Analyst

Great. That's it for me. Thanks.

Operator

Thank you. And as a reminder, ladies and gentlemen, that's * then 1 to ask a question. The next question comes from Phil Ng with Jefferies. Your line is now open.

Philip Ng -- Jefferies LLC -- Analyst

Hey, guys. Weather hasn't really been ideal, last year as well as to start the year, and that put you kind of in a tough spot with cement pricing. With some of the maintenance you've taken late in the year, how does your inventory kind of stack up? I'm just curious to get your thoughts on supply/demand on that front?

Craig Kesler -- Vice President and Chief Financial Officer

Without getting into daily production activities or daily inventory levels, we're comfortable with where our inventory levels are across the cement system.

Philip Ng -- Jefferies LLC -- Analyst

Okay. And then maintenance expense obviously was a little higher than expected this quarter, and I think you called out something of a similar magnitude in 1Q. Is this a bigger year in terms of maintenance, and does that set you up a little more favorably for 2020? And how should we think about maintenance in general going forward from a modeling perspective?

Craig Kesler -- Vice President and Chief Financial Officer

So, the maintenance we highlighted in the first quarter was just associated with the new facility that we had acquired in Ohio and the cadence of how those maintenance outages work. So, that was just coincidence that the quantified number was similar, because that was just a timing issue. These outages here in the fall were separate and a little unique. So, again we'll get back onto a normal cadence in the June quarter like we had this year.

Philip Ng -- Jefferies LLC -- Analyst

Okay. I know you guys have a relatively small ag business located in a few markets, but surprisingly the price is down about 10% year over year. What's driving that, and was there any noise in the quarter that stood out?

Craig Kesler -- Vice President and Chief Financial Officer

If you think about, Phil, where we're located in our concrete and aggregate business, it's central Texas, Kansas City, and then Northern California. And as I mentioned earlier, if you look at the rainfall totals for the first eight months of the year in Austin and you compare those to only the last four months, it was an extraordinarily unique fall for almost all of Texas, but very in Austin. And that's such a concentrated area when you're shipping concrete and aggregates that that type of rainfall could really impact the business. So, you look at the earnings this quarter, you almost lost October in the state of Texas.

Philip Ng -- Jefferies LLC -- Analyst

Got it. That's helpful. And just one last one for me. As you kind of highlighted in the call, multiples across the sector have come in. How do you think about M&A, especially at this point of the cycle, and how is the pipeline looking? Thanks.

Craig Kesler -- Vice President and Chief Financial Officer

We continue to be opportunistic. There are opportunities out there, but as Dave has highlighted many times, we have a strict financial return criteria, and we look at those and compare to other opportunities that we might have. There's a desire to grow, and the balance sheet and the capital structure are certainly well positioned to continue to grow, but we're going to be pretty picky.

Philip Ng -- Jefferies LLC -- Analyst

And is the focus still primarily on the heavy side of things?

Craig Kesler -- Vice President and Chief Financial Officer

Yes

Philip Ng -- Jefferies LLC -- Analyst

Okay. Thanks a lot.

Operator

Thank you. Our next question comes from Josh Wilson with Raymond James. Your line is now open.

Joshua Wilson -- Raymond James & Associates, Inc. -- Analyst

Thanks. Good morning, and thanks for taking my questions. Just a clarification question for me. You said the size of the pre-buy you think now was 50 million square feet?

Craig Kesler -- Vice President and Chief Financial Officer

Yes, for us in this...Well, that would have been the December 2017, correct.

Joshua Wilson -- Raymond James & Associates, Inc. -- Analyst

Okay. And then regarding the sort of trying to get a hand on the underlying tone of demand in wallboard, how did the monthly volumes evolve as the quarter progressed?

Craig Kesler -- Vice President and Chief Financial Officer

Yeah, we wouldn't try to track something useable on a monthly basis. This business is best kind of managed on an annual basis, especially as you head into the winter months, so I'm not sure that trend would make a lot of sense.

Joshua Wilson -- Raymond James & Associates, Inc. -- Analyst

Okay. And any weather impacts to call out in January?

Craig Kesler -- Vice President and Chief Financial Officer

If you live in the northern half of the country, I think this week's going to be pretty cold and snowy. But again, we try not to get into the month-to-month type of changes. We're trying to run the business over a much longer period of time.

Joshua Wilson -- Raymond James & Associates, Inc. -- Analyst

Good luck with the next quarter.

Craig Kesler -- Vice President and Chief Financial Officer

Thanks.

Operator

Thank you. Our next question is a followup from Stanley Elliott. Your line is reopened.

Stanley Elliott -- Stifel Financial Corp -- Analyst

Thanks. Yeah, I couldn't get out of the queue. But the 3.5 million on the cost, that was wholly owned, right, in Ohio and not JV?

Craig Kesler -- Vice President and Chief Financial Officer

Mostly. There was a little bit in the joint venture, but a significant majority of that would be in the wholly owned business.

Stanley Elliott -- Stifel Financial Corp -- Analyst

Perfect. Thank you. Appreciate it.

Operator

Thank you. And this does conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Powers for any closing remarks

David Powers -- President and Chief Executive Officer 

I want to thank all of you for participating in the call, and we look forward to talking with you in the spring. Thank you much.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.

Duration: 35 minutes

Call participants:

David Powers -- President and Chief Executive Officer 

Craig Kesler -- Vice President and Chief Financial Officer

Trey Grooms -- Stephens, Inc. -- Analyst

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Scott Schrier -- Citigroup Global Markets, Inc. -- Analyst

Jerry Revich -- Goldman Sachs & Co. LLC -- Analyst

Stanley Elliott -- Stanley Financial Corp -- Analyst

Adam Thalhimer -- Thompson Davis & Co., Inc. -- Analyst

Philip Ng -- Jefferies LLC -- Analyst

Joshua Wilson -- Raymond James & Associates, Inc. -- Analyst

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