# Eagle Materials Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [Eagle Materials Inc](/companies/exp.md) (CIK 918646)
- Form: 10-Q
- Filed: 2023-07-27
- Accepted by EDGAR: Jul 27, 2023, 20:31 ET
- Period: 2023-06-30
- Accession: 0000950170-23-035181
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/918646/000095017023035181/exp-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/918646/000095017023035181/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $601.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $425.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $176.0m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $179.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $12.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $34.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $120.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $3.40 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $3.43 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 35,532,284 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-04-01 to 2023-06-30 | $140.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-04-01 to 2023-06-30 | $36.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-04-01 to 2023-06-30 | $9.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2023-04-01 to 2023-06-30 | $74.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $53.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $616.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $2.92bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $229.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $1.68bn | us-gaap:Liabilities |
| Long-term debt | at 2023-06-30 | $1.14bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $10.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-06-30 | $1.24bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,077 characters.

### EXECUTIVE SUMMARY

We are a leading manufacturer of heavy construction materials and light building materials in the United States. Our primary products, Portland Cement and Gypsum Wallboard, are commodities that are essential in commercial and residential construction; public construction projects; and projects to build, expand, and repair roads and highways. Demand for our products is generally cyclical and seasonal, depending on economic and geographic conditions. We distribute our products throughout most of the United States, except the Northeast, which provides us with regional economic diversification. However, general economic downturns or localized downturns in the regions where we have operations may have a material adverse effect on our business, financial condition, and results of operations.

Our business is organized into two sectors: Heavy Materials, which includes the Cement and Concrete and Aggregates segments; and Light Materials, which includes the Gypsum Wallboard and Recycled Paperboard segments. Financial results and other information for the three months ended June 30, 2023 and 2022, are presented on a consolidated basis and by these business segments – Cement, Concrete and Aggregates, Gypsum Wallboard, and Recycled Paperboard.

We conduct one of our cement operations through a joint venture, Texas Lehigh Cement Company LP, which is located in Buda, Texas (the Joint Venture). We own a 50% interest in the Joint Venture and account for our interest under the equity method of accounting. We proportionately consolidate our 50% share of the Joint Venture’s Revenue and Operating Earnings in the presentation of our Cement segment, which is the way management organizes the segments within the Company for making operating decisions and assessing performance.

All our business activities are conducted in the United States. These activities include the mining of limestone for the manufacture, production, distribution, and sale of portland cement, including portland limestone cement (a basic construction material that is the essential binding ingredient in concrete); the grinding and sale of slag; the mining of gypsum for the manufacture and sale of gypsum wallboard; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters; the sale of readymix concrete; and the mining and sale of aggregates (crushed stone, sand, and gravel).

In April 2023, we assumed operation of our quarry in Battletown, Kentucky (Battletown Aggregates). Our Battletown quarry is primarily used to supply our Kosmos Cement plant with limestone; however, beginning in April 2023 we also began selling a portion of the mined materials as aggregates. Battletown Aggregates is included in our Heavy Materials sector, in the Concrete and Aggregates business segment.

On May 3, 2023, we finalized the Stockton Terminal Acquisition. The purchase price of the Stockton Terminal Acquisition was approximately $55.1 million. The Stockton Terminal Acquisition is included in our Heavy Materials sector, in the Cement business segment. See Footnote (B) in the Unaudited Consolidated Financial Statements for more information regarding the Stockton Terminal Acquisition.

### MARKET CONDITIONS AND OUTLOOK

During the first quarter of fiscal 2024, our end markets generally remained resilient despite higher interest rates and persistent inflation. Construction activity in most of our regional markets continued to outpace the national average. Sales Volume in our Cement business increased 1%, and although Sales Volume in our Gypsum Wallboard business declined 4%, our overall sales volume remains historically strong.

#### Demand Outlook

The principal end-use market of Cement is public infrastructure (i.e. roads, bridges, and highways). Our Cement business remains in a near sold-out position. We expect demand for cement to remain strong with infrastructure investment increasing given increased federal funding from the Infrastructure Investments and Jobs Act for public construction and repair projects; continued high allocations from state budgets for additional infrastructure projects; and growth in heavy industrial projects. Despite underlying demand growth, our ability to achieve further Cement sales volume growth from our existing facilities is limited, because our integrated cement sales network, which stretches across the U.S. heartland, is operating at high utilization levels.

The principal end use for Gypsum Wallboard is residential housing, consisting of new construction (both single-family and multi-family homes) as well as repair and remodel. Our Gypsum Wallboard shipments and orders, while down 4% from the prior year, remain historically strong. Residential construction activity remains resilient as the market balances interest rate-related affordability challenges with chronic supply shortages and strong demand. Our Recycled Paperboard business sells paper primarily into the gypsum wallboard market, and demand for our paper generally follows the demand for gypsum wallboard.

#### Cost Outlook

We are well positioned to manage our cost structure and meet our customers’ needs during the fiscal year. Our substantial raw material reserves for our Cement, Aggregates, and Gypsum Wallboard businesses, and their proximity to our respective manufacturing facilities, support our low-cost producer position across all of our business segments.

Energy and freight costs increased in all of our businesses during fiscal 2023. While natural gas costs have recently declined and freight costs have stabilized, we expect solid fuel costs, which are the primary energy costs in manufacturing cement, to increase in fiscal 2024. We continue to see inflationary pressure in maintenance costs, and we expect this to continue into fiscal 2025.

The primary raw material used to produce paperboard is old corrugated containers (OCC). Prices for OCC stabilized toward the end of fiscal 2023. OCC prices increased slightly during the first quarter of fiscal 2024, and we anticipate OCC pricing to remain relatively flat in the near term. Our current customer contracts for gypsum liner include price adjustments that partially compensate for changes in raw material fiber prices. However, because these price adjustments are not realized until future quarters, costs in our Gypsum Wallboard segment are likely to be adjusted in the period that these price changes are realized.

### RESULTS OF OPERATIONS

### THREE MONTHS ENDED June 30, 2023 Compared WITH THREE MONTHS ENDED June 30, 2022

*(dollars in thousands, except per share)*

|  | For the Three Months Ended June 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $601,521 | $561,387 | 7% |
| Cost of Goods Sold | (425,526) | (410,521) | 4% |
| Gross Profit | 175,995 | 150,866 | 17% |
| Equity in Earnings of Unconsolidated Joint Venture | 3,159 | 5,098 | (38)% |
| Corporate General and Administrative | (11,679) | (11,820) | (1)% |
| Other Non-Operating Income | 213 | (635) | (134)% |
| Interest Expense, net | (12,239) | (7,330) | 67% |
| Earnings Before Income Taxes | 155,449 | 136,179 | 14% |
| Income Tax Expense | (34,600) | (31,174) | 11% |
| **Net Earnings** | **$120,849** | **$105,005** | **15%** |
| **Diluted Earnings per Share** | **$3.40** | **$2.75** | **24%** |

### REVENUE

Revenue increased by $40.1 million, or 7%, to $601.5 million for the three months ended June 30, 2023. Battletown Aggregates and the Stockton Terminal Acquisition contributed $1.8 million and $6.5 million of Revenue, respectively, during the three months ended June 30, 2023. Excluding Battletown Aggregates and the Stockton Terminal Acquisition, Revenue improved by $31.8 million, or 6%. This was due to increases in gross sales prices, which positively affected Revenue by $46.3 million, partially offset by lower Sales Volume, which adversely affected Revenue by approximately $14.5 million.

### COST OF GOODS SOLD

Cost of Goods Sold increased by $15.0 million, or 4%, to $425.5 million for the three months ended June 30, 2023. Battletown Aggregates and the Stockton Terminal Acquisition contributed $1.6 million and $8.4 million of Cost of Goods Sold, respectively, during the three months ended June 30, 2023. Excluding Battletown Aggregates and the Stockton Terminal Acquisition, Cost of Goods Sold increased by $5.0 million, or 1%. The increase was due to operating costs of $15.4 million, partially offset by lower Sale Volume of $10.4 million. Higher operating costs were primarily related to our Cement and Concrete and Aggregates businesses and are discussed further in the segment analysis.

### GROSS PROFIT

Gross Profit increased 17% to $176.0 million during the three months ended June 30, 2023. The increase was primarily related to higher gross sales prices, partially offset by lower Sales Volume and increased operating costs. The gross margin expanded to 29%, with higher gross sales prices being partially offset by a rise in operating costs.

### EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE

Equity in Earnings of our Unconsolidated Joint Venture declined $1.9 million, or 38%, for the three months ended June 30, 2023. The decrease was primarily due to higher operating costs and lower Sales Volume, which adversely affected earnings by approximately $5.4 million and $0.7 million, respectively. This was partially offset by higher gross sales prices of $4.2 million. The rise in operating costs was primarily related to an extended maintenance outage during the quarter that reduced production and resulted in higher maintenance expenses of approximately $2.8 million, as well as higher energy and purchased cement costs reduced operating earnings by $0.5 million and $0.9 million, respectively. The extended outage addressed ongoing equipment issues at the facility over the past year.

### CORPORATE GENERAL AND ADMINISTRATIVE

Corporate General and Administrative expenses decreased by approximately $0.1 million, or 1%, for the three months ended June 30, 2023.

### OTHER NON-OPERATING INCOME

Other Non-Operating Income consists of a variety of items that are unrelated to segment operations and include non-inventoried Aggregates income, asset sales, and other miscellaneous income and cost items.

### INTEREST EXPENSE, NET

Interest Expense, net increased by approximately $4.9 million, or 67%, during the three months ended June 30, 2023. This was primarily due to approximately $5.0 million of higher interest on our revolving credit facility, which was related to increased average outstanding borrowings and higher interest rates.

### EARNINGS BEFORE INCOME TAXES

Earnings Before Income Taxes increased to $155.5 million during the three months ended June 30, 2023, primarily as a result of higher Gross Profit. This was partially offset by higher Interest Expense, as well as lower Equity in Earnings of Unconsolidated Joint Venture.

### INCOME TAX EXPENSE

Income Tax Expense was $34.6 million for the three months ended June 30, 2023, compared with $31.2 million for the three months ended June 30, 2022. The effective tax rate decreased to 22% from 23% in the prior-year period. The decrease was primarily due to the benefit received from the vesting and exercise of employee stock awards during the quarter in fiscal 2024.

### NET EARNINGS

Net Earnings increased 15% to $120.9 million for the three months ended June 30, 2023, as discussed above.

### Three MONTHS ENDED June 30, 2023 vs. three MONTHS ENDED June 30, 2022 BY SEGMENT

The following presents results within our two business sectors for the three months ended June 30, 2023, and 2022. Revenue and operating results are organized by sector and discussed by individual business segments.

### Heavy Materials

### CEMENT (1)

*(in thousands, except per ton information)*

|  | For the Three Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Revenue, including Intersegment and Joint Venture | $329,032 | $284,516 | 16% |
| Less Intersegment Revenue | (10,137) | (6,291) | 61% |
| Less Joint Venture Revenue | (27,123) | (26,315) | 3% |
| Revenue | $291,772 | $251,910 | 16% |
| Sales Volume (M Tons) | 2,013 | 1,993 | 1% |
| Freight and Delivery Costs billed to Customers | $(17,528) | $(15,970) | 10% |
| Average Net Sales Price, per ton (2) | $147.27 | $127.82 | 15% |
| Operating Margin, per ton | $36.79 | $31.28 | 18% |
| Operating Earnings | $74,061 | $62,348 | 19% |

(1) Total of wholly owned subsidiaries and proportionately consolidated 50% interest of the Joint Venture’s results.

(2) Net of freight per ton, including Joint Venture.

Cement Revenue was $329.0 million, a 16% increase, for the three months ended June 30, 2023. Excluding Intersegment Revenue and the Stockton Terminal Acquisition, Revenue increased $34.2 million, or 12%, for the three months ended June 30, 2023. The increase was primarily due to higher gross sales prices, which improved Cement Revenue by approximately $37.6 million, partially offset by lower Sales Volume from legacy cement plants of $3.4 million.

Cement Operating Earnings increased by $11.8 million to $74.1 million for the three months ended June 30, 2023. Excluding the Stockton Terminal Acquisition, Operating Earnings increased by $13.7 million, or 22%. The increase was due to higher gross sales prices of $37.6 million. This was partially offset by lower Sales Volume and higher operating costs $0.7 million and $23.2 million, respectively. Higher operating costs were primarily due to higher maintenance and energy costs of approximately $18.1 million and $4.2 million, respectively. The Operating Margin increased to 23% from 22%, as a result of higher gross sales prices, partially offset by the increase in operating expenses.

### CONCRETE AND AGGREGATES

*(in thousands, except net sales prices)*

|  | For the Three Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Revenue, including Intersegment | $70,453 | $61,618 | 14% |
| Less Intersegment Revenue | $(3,038) | $— | — |
| Revenue | $67,415 | $61,618 | 9% |
| Sales Volume |  |  |  |
| M Cubic Yards of Concrete | 385 | 406 | (5)% |
| M Tons of Aggregate | 1,157 | 795 | 46% |
| Average Net Sales Price |  |  |  |
| Concrete - Per Cubic Yard | $141.80 | $128.73 | 10% |
| Aggregates - Per Ton | $11.30 | $11.22 | 1% |
| Operating Earnings | $7,034 | $5,732 | 23% |

Concrete and Aggregates Revenue increased 14% to $70.5 million for the three months ended June 30, 2023. Excluding Intersegment Revenue and Battletown Aggregates, Revenue increased $4.0 million. The increase was due to higher gross sales price and Aggregates Sales Volume, which improved Revenue by $5.6 million and $1.1 million, respectively. This was offset by lower Concrete Sales Volume of $2.7 million.

Operating Earnings were approximately $7.0 million, a 23% increase. Excluding Battletown Aggregates, Operating Earnings increased to $6.8 million. The increase in Operating Earnings was due to higher gross sales prices of $5.6 million. This was partially offset by higher operating costs of $4.5 million. The increase in operating costs was primarily due to higher materials, maintenance and batch plant expenses of approximately $3.6 million, $1.5 million, and $1.3 million, respectively. This was partially offset by lower delivery expense of approximately $0.9 million, and the impact of the recording acquired inventories at fair value in the first quarter of fiscal 2022 of $1.2 million.

### Light Materials

### GYPSUM WALLBOARD

*(in thousands, except per MSF information)*

|  | For the Three Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Gross Revenue | $219,097 | $216,327 | 1% |
| Sales Volume (MMSF) | 763 | 798 | (4)% |
| Freight and Delivery Costs billed to Customers | $(38,608) | $(42,006) | (8)% |
| Average Net Sales Price, per MSF (1) | $236.66 | $218.57 | 8% |
| Freight, per MSF | $50.60 | $52.64 | (4)% |
| Operating Margin, per MSF | $119.08 | $105.35 | 13% |
| Operating Earnings | $90,857 | $84,068 | 8% |

(1) Net of freight per MSF.

Gypsum Wallboard Revenue was $219.1 million, a 1% increase for the three months ended June 30, 2023. Higher gross sales prices increased Revenue by approximately $12.3 million, partially offset by lower Sales Volume of $9.5 million. Our market share remained relatively consistent during the three months ended June 30, 2023.

Operating Earnings increased 8% to $90.9 million, primarily because of higher gross sales prices. The increase in gross sales prices positively affected Operating Earnings by approximately $12.3 million. This was partially offset by lower Sales Volume and higher operating costs, which adversely affected Operating Earnings by approximately $3.7 million and $1.8 million, respectively. Higher operating costs were primarily related to maintenance and fixed costs, which reduced Operating Earnings by approximately $1.6 million and $2.2 million, respectively, partially offset by lower freight costs of $1.6 million. Operating Margin increased to 41% for the three months ended June 30, 2023, primarily because of higher gross sales prices, partly offset by increased operating costs. Fixed costs are not a significant portion of the overall cost of wallboard; therefore, changes in utilization have a relatively minor impact on our operating cost per unit.

### RECYCLED PAPERBOARD

*(in thousands, except per ton information)*

|  | For the Three Months Ended June 30, 2023 | 2022 | Percentage Change |
| --- | ---: | ---: | ---: |
| Revenue, including Intersegment | $45,328 | $54,073 | (16)% |
| Less Intersegment Revenue | (22,091) | (22,541) | (2)% |
| Revenue | $23,237 | $31,532 | (26)% |
| Sales Volume (M Tons) | 83 | 84 | (1)% |
| Freight and Delivery Costs billed to Customers | $(599) | $(2,549) | (77)% |
| Average Net Sales Price, per ton (1) | $536.56 | $611.87 | (12)% |
| Freight, per ton | $7.22 | $30.35 | (76)% |
| Operating Margin, per ton | $86.77 | $45.43 | 91% |
| Operating Earnings | $7,202 | $3,816 | 89% |

(1) Net of freight per ton.

Recycled Paperboard Revenue decreased 16% to $45.3 million during the three months ended June 30, 2023. The decrease was primarily due to lower gross sales prices and Sales Volume, which reduced Revenue by $8.2 million and $0.6 million, respectively. Lower gross sales prices were related to the pricing provisions in our long-term sales agreements.

Operating Earnings increased 89% to $7.2 million, primarily because of lower operating expenses, which increased Operating Earnings by $11.6 million. This was partially offset by lower gross sales prices, which reduced Operating Earnings by approximately $8.2 million. The decrease in operating costs was primarily related to lower input costs, namely fiber and freight, which lowered Operating Earnings by approximately $9.5 million, and $3.2 million, respectively. This was partially offset by higher energy and fixed costs of $0.6 million and $0.5 million, respectively. The Operating Margin increased to 16% because of lower operating costs, partially offset by lower gross sales prices. Although the Company has certain pricing provisions in its long-term sales agreements, prices are only adjusted at certain times throughout the year, so price adjustments are not always reflected in the same period as the change in costs.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to adopt accounting policies and make significant judgments and estimates to develop amounts disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare our financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

Information regarding our Critical Accounting Policies can be found in our Annual Report. The three Critical Accounting Policies that we believe either require the use of the most judgment, or the selection or application of alternative accounting policies, and are material to our financial statements, are those related to long-lived assets, goodwill, and business combinations. Management has discussed the development and selection of these Critical Accounting Policies and estimates with the Audit Committee of our Board of Directors and with our independent registered public accounting firm. In addition, Note (A) to the financial statements in our Annual Report contains a summary of our significant accounting policies.

### Recent Accounting Pronouncements

Refer to Footnote (A) in the Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for information regarding recently issued accounting pronouncements that may affect our financial statements.

### LIQUIDITY AND CAPITAL RESOURCES

We believe at this time that we have access to sufficient financial resources from our liquidity sources to fund our business and operations, including contractual obligations, capital expenditures, and debt service obligations for at least the next twelve months. We regularly monitor any potential disruptions to the economy, and to our operations, particularly changing fiscal policy or economic conditions affecting our industries. Please see the Debt Financing Activities section below for a discussion of our revolving credit facility and the amount of borrowings available to us in the next twelve-month period.

### Cash Flow

The following table provides a summary of our cash flows:

*(dollars in thousands)*

|  | For the Three Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| **Net Cash Provided by Operating Activities** | **$140,487** | **$124,802** |
| **Investing Activities** |  |  |
| Additions to Property, Plant, and Equipment | (35,999) | (14,914) |
| Acquisition Spending | (55,053) | (121,162) |
| **Net Cash Used in Investing Activities** | **(91,052)** | **(136,076)** |
| **Financing Activities** |  |  |
| Increase (Decrease) in Credit Facility | 65,000 | (19,000) |
| Proceeds from Term Loan | — | 200,000 |
| Repayment of Term Loan | (2,500) | — |
| Dividends Paid to Stockholders | (8,995) | (9,642) |
| Purchase and Retirement of Common Stock | (74,058) | (109,612) |
| Proceeds from Stock Option Exercises | 10,385 | 667 |
| Payment of Debt Issuance Costs | — | (777) |
| Shares Redeemed to Settle Employee Taxes on Stock Compensation | (1,360) | (1,497) |
| **Net Cash Provided by (Used in) Financing Activities** | **(11,528)** | **60,139** |
| **Net Increase in Cash and Cash Equivalents** | **$37,907** | **$48,865** |

28

Net Cash Provided by Operating Activities increased by $15.7 million to $140.5 million during the three months ended June 30, 2023. This increase was primarily attributable to higher Net Earnings, adjusted for non-cash charges of approximately $21.3 million. This was partially offset by changes in working capital of $3.6 million and lower dividends from our Unconsolidated Joint Venture of $2.5 million.

Working capital increased by $77.7 million to $386.3 million at June 30, 2023, compared with March 31, 2023. The increase was due to higher Cash, Accounts and Notes Receivable, net, Inventories, Prepaid and Other Assets of $37.9 million, $53.5 million, $10.6 million, and $7.2 million, respectively. This was partially offset by lower Income Tax Receivable of $14.9 million and higher Income Tax Payable of $18.3 million. The increase in inventory was due primarily to the Stockton Terminal Acquisition. The Stockton Terminal Acquisition in May 2023 increased working capital by approximately $7.2 million at June 30, 2023.

The increase in Accounts Receivable at June 30, 2023, was primarily related to higher Revenue during the three months ended June 30, 2023, compared with the three months ended March 31, 2023. As a percentage of quarterly sales generated for the respective quarter, Accounts Receivable was approximately 41% at both June 30, 2023 and March 31, 2023. Management measures the change in Accounts Receivable by monitoring the days sales outstanding on a monthly basis to determine if any deterioration has occurred in the collectability of the Accounts Receivable. No significant deterioration in the collectability of our Accounts Receivable was identified at June 30, 2023.

Our Inventory balance at June 30, 2023, increased by approximately $10.6 million from our balance at March 31, 2023. Excluding the Stockton Terminal Acquisition, our Inventory balance increased by $1.9 million. Within Inventory, raw materials and materials-in-progress and finished cement increased by approximately $2.1 million and $4.7 million, respectively. However, excluding the Stockton Terminal Acquisition, finished cement declined by $3.7 million. The relatively flat balance in raw materials and materials-in-progress and decline in finished cement is consistent with our business cycle; we generally build up clinker inventory over the winter months to meet the demand for cement in the spring and summer. The decrease in repair parts inventory was primarily due to the completion of most of our scheduled outages during the quarter. The largest individual balance in our Inventory is our repair parts. These parts are necessary given the size and complexity of our manufacturing plants, as well as the age of certain of our plants, which creates the need to stock a high level of repair parts inventory. We believe all of these repair parts are necessary, and we perform semi-annual analyses to identify obsolete parts. We have less than one year’s sales of all product inventories, and our inventories have a low risk of obsolescence because our products are basic construction materials.

Net Cash Used in Investing Activities during the three months ended June 30, 2023, was approximately $91.1 million, compared with $136.1 million during the same period in 2022. The $45.0 million decrease was primarily related to the lower purchase price for the Stockton Terminal Acquisition in May 2023, compared with the acquisition completed in the three months ended June 30, 2022.

Net Cash Used in Financing Activities was approximately $11.5 million during the three months ended June 30, 2023, compared with Net Cash Provided by Financing Activities of $60.1 million during the three months ended June 30, 2022. The $71.6 million decrease was primarily related to reduced borrowings of $118.5 million, partially offset by lower Purchase and Retirement of Common Stock of $35.5 million and increased Proceeds from Stock Option Exercises of $9.7 million.

Our debt-to-capitalization ratio and net-debt-to-capitalization ratio were 48.4% and 47.2%, respectively, at June 30, 2023, compared with 48.1% and 47.8%, respectively, at March 31, 2023.

### Debt Financing Activities

Below is a summary of the Company’s outstanding debt facilities at June 30, 2023:

|  | Maturity |
| --- | --- |
| Revolving Credit Facility | May 2027 |
| Term Loan | May 2027 |
| 2.500% Senior Unsecured Notes | July 2031 |

See Footnote (M) to the Unaudited Consolidated Financial Statements for further details on the Company’s debt facilities, including interest rate, and financial and other covenants and restrictions.

The revolving borrowing capacity of our Revolving Credit Facility is $750.0 million (any revolving loans borrowed under the Revolving Credit Facility, as applicable, the Revolving Loans). The Revolving Credit Facility also includes a swingline loan sublimit of $25.0 million, and a $40.0 million letter of credit facility. At June 30, 2023 we had $222.0 million outstanding of Revolving Loans under the Revolving Credit Facility and $8.3 million of outstanding letters of credit, leaving us with $519.7 million of available borrowings under the Revolving Credit Facility, net of the outstanding letters of credit. We are contingently liable for performance under $28.2 million in performance bonds relating primarily to our mining operations. We do not have any off-balance sheet debt, or any outstanding debt guarantees.

Other than the Revolving Credit Facility, we have no additional source of committed external financing in place. Should the Revolving Credit Facility be terminated, no assurance can be given as to our ability to secure a new source of financing. Consequently, if any balance were outstanding on the Revolving Credit Facility at the time of termination, and an alternative source of financing could not be secured, it would have a material adverse impact on our business.

We believe that our cash flow from operations and available borrowings under our Revolving Credit Facility, as well as cash on hand, should be sufficient to meet our currently anticipated operating needs, capital expenditures, and dividend and debt service requirements for at least the next 12 months. However, our future liquidity and capital requirements may vary depending on a number of factors, including market conditions in the construction industry, our ability to maintain compliance with covenants in our Revolving Credit Facility, the level of competition, and general and economic factors beyond our control, such as supply chain constraints and inflation. These and other developments could reduce our cash flow or require that we seek additional sources of funding. We cannot predict what effect these factors will have on our future liquidity. See Market Conditions and Outlook section above for further discussion of the possible effects on our business.

As market conditions warrant, the Company may from time to time seek to purchase or repay its outstanding debt securities or loans, including the 2.500% Senior Unsecured Notes, Term Loan, and borrowings under the Revolving Credit Facility, in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any purchases made by us may be funded by the use of cash on our balance sheet or the incurrence of new debt. The amounts involved in any such purchase transactions, individually or in aggregate, may be material.

We have approximately $34.7 million of lease liabilities at June 30, 2023, that have an average remaining life of approximately 9.5 years.

### Dividends

Dividends paid were $9.0 million and $9.6 million for the three months ended June 30, 2023 and 2022, respectively. Each quarterly dividend payment is subject to review and approval by our Board of Directors, who will continue to evaluate our dividend payment amount on a quarterly basis.

### Share Repurchases

During the three months ended June 30, 2023, our share repurchases were as follows:

| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs |
| --- | ---: | ---: | ---: | ---: |
| April 1 through April 30, 2023 | 234,000 | $143.73 | 234,000 |  |
| May 1 through May 31, 2023 | 145,000 | 155.99 | 145,000 |  |
| June 1 through June 30, 2023 | 105,000 | 161.65 | 105,000 |  |
| **Quarter 1 Totals** | **484,000** | **$153.01** | **484,000** |  |
| **Year-to-Date Totals** | **484,000** | **$153.01** | **484,000** | **7,263,204** |

On May 17, 2022, the Board of Directors authorized us to repurchase an additional 7.5 million shares. This authorization brought the cumulative total of Common Stock our Board has approved for repurchase in the open market to 55.9 million shares since we became publicly held in April 1994. Through June 30, 2023, we have repurchased approximately 48.6 million shares.

Share repurchases may be made from time to time in the open market or in privately negotiated transactions. The timing and amount of any share repurchases are determined by management, based on its evaluation of market and economic conditions and other factors. In some cases, repurchases may be made pursuant to plans, programs, or directions established from time to time by the Company’s management, including plans intended to comply with the safe-harbor provided by Rule 10b5-1.

During the three months ended June 30, 2023, the Company withheld from employees 8,469 shares of stock upon the vesting of Restricted Shares that were granted under the Plan. We withheld these shares to satisfy the employees’ statutory tax withholding requirements, which is necessary once the Restricted Shares or Restricted Share Units are vested.

### Capital Expenditures

The following table details capital expenditures by category:

*(dollars in thousands)*

|  | For the Three Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Land and Quarries | $548 | $1,352 |
| Plants | 16,272 | 8,814 |
| Buildings, Machinery, and Equipment | 19,179 | 4,748 |
| **Total Capital Expenditures** | **$35,999** | **$14,914** |

Capital expenditures for fiscal 2024 are expected to range from $145.0 million to $165.0 million and will be allocated across both Heavy Materials and Light Materials sectors. These estimated capital expenditures will include maintenance capital expenditures and improvements, as well as other safety and regulatory projects.

### FORWARD LOOKING STATEMENTS

Certain matters discussed in this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not historical facts or guarantees of future performance but instead represent only the Company’s belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside the Company’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company’s actual performance include the following: the cyclical and seasonal nature of the Company’s businesses; public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; availability of raw materials; changes in the costs of energy, including, without limitation, natural gas, coal and oil, and the nature of our obligations to counterparties under energy supply contracts, such as those related to market conditions (such as fluctuations in spot market prices), governmental orders and other matters; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; material nonpayment or non-performance by any of our key customers; fluctuations in or changes in the nature of activity in the oil and gas industry; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change and other environmental regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions specific to any one or more of the Company’s markets; adverse impact of severe weather conditions (such as winter storms, tornados and hurricanes) and their effects on our facilities, operations and contractual arrangements with third parties; competition; cyber-attacks or data security breaches; announced increases in capacity in the gypsum wallboard and cement industries; changes in the demand for residential housing construction or commercial construction or construction projects undertaken by state or local governments; risks related to pursuit of acquisitions, joint ventures and other transactions or the execution or implementation of such transactions, including the integration of operations acquired by the Company; general economic conditions; and interest rates. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) and the cost of our raw materials could affect the revenue and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company’s result of operations. Finally, any forward-looking statements made by the Company are subject to the risks and impacts associated with natural disasters, the outbreak, escalation, or resurgence of health emergencies, pandemics or other unforeseen events, including, without limitation, the COVID-19 pandemic and responses thereto designed to contain its spread and mitigate its public health effects, as well as their impact on our operations or on economic conditions, capital and financial markets. These and other factors are described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023. All forward-looking statements made herein are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. The Company undertakes no duty to update any forward-looking statement to reflect future events or changes in the Company’s expectations.

## Market risk

As filed, 1,035 characters.

We are exposed to market risks related to fluctuations in interest rates on our Revolving Credit Facility. We have occasionally utilized derivative instruments, including interest rate swaps, in conjunction with our overall strategy to manage the debt outstanding that is subject to changes in interest rates. We had a $750.0 million Revolving Credit Facility at June 30, 2023, under which borrowings bear interest at a variable rate. A hypothetical 100 basis point increase in interest rates on the $222.0 million of borrowings under the Revolving Credit Facility and the $190.0 million of borrowings under the Term Loan at June 30, 2023, would increase interest expense by approximately $4.1 million on an annual basis. At present, we do not utilize derivative financial instruments.

We are subject to commodity risk with respect to price changes principally in coal, coke, natural gas, and power. We attempt to limit our exposure to changes in commodity prices by entering into contracts or increasing our use of alternative fuels.

## Controls and procedures

As filed, 1,035 characters.

We have established a system of disclosure controls and procedures that are designed to ensure that information relating to the Company, which is required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (Exchange Act), is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), in a timely fashion. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed as of the end of the period covered by this quarterly report. This evaluation was performed under the supervision and with the participation of management, including our CEO and CFO. Based upon that evaluation, our CEO and CFO have concluded that these disclosure controls and procedures were effective.

## Risk factors

As filed, 274 characters.

For information regarding factors that could impact our results of operations, financial condition, and liquidity, see Part 1. Item 1A. Risk Factors in our Form 10-K for the fiscal year ended March 31, 2023, filed with the Securities and Exchange Commission on May 19, 2023.

Filed Jul 27, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-035181. Last ingested by Listed: Oct 24, 2026, 15:00 ET. No prices; not investment advice.