Eagle Materials Inc: Form 10-Q for the period ended Dec 31, 2024

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 and nine months ended December 31, 2024, and 2023, 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 (portland cement and portland limestone cement are basic construction materials that are 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).

On August 9, 2024, we finalized the acquisition of an aggregates operation in Battletown, Kentucky. The purchase price of the Kentucky Acquisition was approximately $24.9 million. The Kentucky Acquisition is included in our Heavy Materials sector, and its results of operations are reported in the Concrete and Aggregates business segment. See Footnote (C) in the Unaudited Consolidated Financial Statements for more information regarding the Kentucky Acquisition.

On January 7, 2025, we purchased Bullskin Stone & Lime, LLC, a pure-play aggregates business located in Western Pennsylvania (the Pennsylvania Acquisition), which will be accounted for under the acquisition method. The purchase price of the Pennsylvania Acquisition was approximately $152.5 million, subject to customary post-closing adjustments. The Pennsylvania Acquisition will be included in our Heavy Materials sector, and its results of operations will be reported in the Concrete and Aggregates business segment beginning in the fourth quarter of fiscal 2025. See Footnote (C) in the Unaudited Consolidated Financial Statements for more information regarding the Pennsylvania Acquisition.

MARKET CONDITIONS AND OUTLOOK

Our end markets remained generally resilient despite adverse weather conditions, primarily in our Midwest and Great Plains markets, as well as the uncertainty around future monetary policy changes. The adverse weather resulted in lower Cement Sales Volume in the third quarter of fiscal 2025, while Gypsum Wallboard Sales Volume increased during the quarter.

Demand Outlook

The macroeconomic environment continues to be constructive for our products. We expect demand for cement to remain steady in the near term given federal, state and local support for public infrastructure projects and continued spending on heavy manufacturing and private-nonresidential construction. To date, only approximately 25% of federal funding from the trillion-dollar Infrastructure Investment and Jobs Act (IIJA) has been spent. We anticipate a pick-up in demand as the remaining IIJA funds get spent on public construction and repair projects.

In residential construction, activity has remained steady. While the higher interest rate environment has been a headwind for housing demand and affordability, several factors, including the chronic housing shortage caused by more than a decade of underproduction and exacerbated by the "rate lock-in", have supported housing construction activity. While the path ahead for US Federal Reserve monetary policy is less certain than a quarter ago, we believe that continued healthy consumer balance sheets should also support residential construction. We believe our geographic footprint across the U.S. heartland and fast-growing Sun Belt region positions us to capitalize on these market dynamics.

Cost Outlook

We believe we are well-positioned to manage our cost structure and meet our customers’ needs. 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 our business segments.

Energy costs decreased in all our businesses during the first nine months of fiscal 2025 compared with fiscal 2024; however, natural gas prices have recently increased and are expected to remain elevated during the winter months.

The primary raw material used to produce paperboard is old corrugated cardboard (OCC). Recycled fiber prices are subject to change upon short notice due to several factors, including supply of OCC and demand for OCC from both domestic and international companies. Our current customer contracts for gypsum liner include price adjustments that partially compensate for changes in the cost of raw materials, such as recycled fiber, natural gas, and electricity. However, because these price adjustments are not realized until future quarters, material costs in our Gypsum Wallboard segment are likely to fluctuate until the effects of these price adjustments are realized.

Maintenance costs increased during the first nine months of the fiscal year as equipment and contractor costs remain high, and we expect maintenance costs to remain elevated next fiscal year.

RESULTS OF OPERATIONS

THREE MONTHS ENDED December 31, 2024, Compared WITH THREE MONTHS ENDED december 31, 2023

(dollars in thousands, except per share)

REVENUE

Revenue decreased by $0.8 million to $558.0 million for the three months ended December 31, 2024. The Kentucky Acquisition contributed $3.1 million of Revenue during the three months ended December 31, 2024. Excluding the Kentucky Acquisition, Revenue decreased by $3.9 million. This decrease was due to lower Sales Volume, which adversely affected Revenue by approximately $18.1 million, and was partially offset by higher gross sales prices, which increased Revenue by $14.2 million.

COST OF GOODS SOLD

Cost of Goods Sold increased by $2.0 million, or 1%, to $380.2 million for the three months ended December 31, 2024. The Kentucky Acquisition contributed $3.4 million of Cost of Goods Sold during the three months ended December 31, 2024. Excluding the Kentucky Acquisition, Cost of Goods Sold decreased by $1.4 million. The decrease was due to lower Sales Volume of $12.0 million, partially offset by higher operating costs of $10.6 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 decreased 2% to $177.8 million during the three months ended December 31, 2024. The decrease was primarily related to higher operating costs and lower Sales Volume, partially offset by higher gross sales prices. The gross margin remained consistent at 32%, with higher operating costs being offset by a rise in gross sales prices.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE

Equity in Earnings of our Unconsolidated Joint Venture decreased $4.3 million, or 46%, for the three months ended December 31, 2024. The decrease was primarily due to lower gross sales prices and higher operating costs, which reduced earnings by approximately $0.2 million and $4.1 million, respectively. The increase in operating costs was primarily due to higher maintenance costs of approximately $4.5 million.

CORPORATE GENERAL AND ADMINISTRATIVE

Corporate General and Administrative expenses increased by approximately $6.6 million, or 47%, for the three months ended December 31, 2024, primarily because of increases in information technology, compensation, and professional costs of $1.9 million, $1.7 million, and $1.3 million, respectively. The increase in professional costs includes costs associated with business development and transaction related activities.

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 decreased by approximately $1.0 million, or 11%, during the three months ended December 31, 2024. The decrease resulted from lower interest on our Revolving Credit Facility, which was due to both lower interest rates and lower average balances outstanding during the period.

EARNINGS BEFORE INCOME TAXES

Earnings Before Income Taxes decreased to $154.3 million during the three months ended December 31, 2024, primarily because of lower Gross Profit and Equity in Earnings of Unconsolidated Joint Venture and higher Corporate General and Administrative Expense.

INCOME TAX EXPENSE

Income Tax Expense was $34.7 million for the three months ended December 31, 2024, compared with $37.5 million for the three months ended December 31, 2023. The effective tax rate was consistent at 23%.

NET EARNINGS

Net Earnings decreased 7% to $119.6 million for the three months ended December 31, 2024, as discussed above.

RESULTS OF OPERATIONS

nine MONTHS ENDED december 31, 2024, Compared WITH nine MONTHS ENDED december 31, 2023

(dollars in thousands, except per share)

REVENUE

Revenue increased by $7.7 million to $1,790.3 million for the nine months ended December 31, 2024. The Kentucky Acquisition contributed $4.8 million of Revenue during the nine months ended December 31, 2024. Excluding the Kentucky Acquisition, Revenue increased by $2.9 million. The Revenue increase was due to higher gross sales prices, which positively affected Revenue by $54.0 million, partially offset by lower Sales Volume, which adversely affected Revenue by approximately $51.1 million.

COST OF GOODS SOLD

Cost of Goods Sold increased by $4.9 million to $1,221.8 million for the nine months ended December 31, 2024. The Kentucky Acquisition contributed $5.5 million of Cost of Goods Sold during the nine months ended December 31, 2024. Excluding the Kentucky Acquisition, Cost of Goods Sold decreased by $0.6 million. The decrease was due to lower Sales Volume of $37.4 million, partially offset by higher operating costs of $36.8 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 1% to $568.5 million during the nine months ended December 31, 2024. The increase was primarily related to higher gross sales prices, partially offset by lower Sales Volume and increased operating costs. The gross margin remained consistent at 32%, with higher gross sales prices being offset by a rise in operating costs.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE

Equity in Earnings of our Unconsolidated Joint Venture decreased $0.8 million, or 4%, for the nine months ended December 31, 2024. The decrease was primarily due to lower gross sales prices and Sales Volume, which negatively affected earnings by $1.5 million and $1.2 million, respectively. This was partially offset by lower operating costs, which positively affected earnings by approximately $1.9 million. The decrease in operating costs was primarily related to freight and distribution costs of approximately $2.1 million.

CORPORATE GENERAL AND ADMINISTRATIVE

Corporate General and Administrative expenses increased by approximately $11.8 million, or 28%, for the nine months ended December 31, 2024. The increase was primarily due to higher compensation of $2.6 million, information technology upgrades of $2.4 million, and legal costs, including those associated with business development and transaction related activities of $4.5 million.

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 decreased by approximately $2.1 million, or 6%, during the nine months ended December 31, 2024. This decrease was primarily due to approximately $1.6 million of lower interest on our Revolving Credit Facility, which was related to both lower interest rates and lower average outstanding borrowings, as well as increased interest income of $0.5 million on cash deposits.

EARNINGS BEFORE INCOME TAXES

Earnings Before Income Taxes decreased to $510.5 million during the nine months ended December 31, 2024, primarily because of higher Corporate General and Administrative Expense and lower Equity in Earnings of Unconsolidated Joint Venture, partially offset by higher Gross Profit and lower Interest Expense, net.

INCOME TAX EXPENSE

Income Tax Expense was $113.6 million for the nine months ended December 31, 2024, compared with $115.7 million for the nine months ended December 31, 2023. The effective tax rate of 22% remained consistent with the prior-year period.

NET EARNINGS

Net Earnings decreased 1% to $396.9 million for the nine months ended December 31, 2024, as discussed above.

Three AND nine MONTHS ENDED december 31, 2024, COMPARED WITH three AND nine MONTHS ENDED december 31, 2023, BY SEGMENT

The following presents results within our two business sectors for the three and nine months ended December 31, 2024, and 2023. Revenue and operating results are organized by sector and discussed by individual business segments.

Heavy Materials

CEMENT (1)

(in thousands, except per ton information)

(in thousands, except per ton information)

(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.

Three months ended December 31, 2024

Cement Revenue for the three months ended December 31, 2024 was $295.4 million, a 4% decrease from the prior-year period. The decrease was primarily due to lower Sales Volume, which reduced Cement Revenue by approximately $18.8 million, partially offset by higher gross sales prices of $5.6 million.

Cement Operating Earnings decreased by $18.8 million to $86.8 million for the three months ended December 31, 2024. The decrease was due to lower Sales Volume and higher operating costs of $7.1 million and $17.3 million, respectively, partially offset by higher average sales prices of $5.6 million. Higher operating costs were primarily due to increased maintenance of $7.8 million, as well as $8.1 million related to increased fixed costs per unit, including labor, resulting from lower production during the quarter. The Operating Margin decreased to 33% from 39%, as a result of higher operating costs, partially offset by the higher gross sales prices.

Nine months ended December 31, 2024

Cement Revenue for the nine months ended December 31, 2024 was $987.3 million, a 1% decrease from the prior-year period. The decrease was primarily due to lower Sales Volume, which reduced Cement Revenue by approximately $45.0 million, partially offset by higher gross sales prices of $33.9 million.

Cement Operating Earnings decreased by $9.3 million to $291.8 million for the nine months ended December 31, 2024. The decrease was due to lower Sales Volume and higher operating costs of $15.0 million and $28.2 million, respectively, which was partially offset by higher gross sales prices of $33.9 million. Higher operating costs consisted of $12.9 million of increased maintenance, $4.9 million of higher freight costs, $2.8 million increase in purchased raw materials, and $8.3 million related to increased fixed costs, including labor, resulting from lower production. These higher costs were partially offset by the impact of recording in the prior year $2.8 million of acquired inventories at fair value. Cement Operating Margin remained flat at 30%, as the higher operating costs were offset by higher gross sales prices.

CONCRETE AND AGGREGATES

(in thousands, except net sales prices)

(in thousands, except net sales prices)

Three months ended December 31, 2024

Concrete and Aggregates Revenue declined 1% to $60.7 million for the three months ended December 31, 2024. Excluding the Kentucky Acquisition, Revenue declined $3.6 million. The decline was due to lower Sales Volume, which reduced Revenue by $4.6 million, partially offset by higher gross sales prices of $1.0 million.

Operating Loss was approximately $1.4 million for the three months ended December 31, 2024. Excluding the Kentucky Acquisition, Operating Loss was $1.1 million. The decrease in Operating Earnings was due to lower Sales Volume and higher operating costs of $1.6 million and $2.3 million, respectively, partially offset by higher gross selling prices of $1.0 million. The increase in operating costs was primarily due to higher cost of materials, maintenance, and labor costs of approximately $0.2 million, $0.7 million, and $0.6 million, respectively.

Nine months ended December 31, 2024

Concrete and Aggregates Revenue declined 3% to $195.5 million for the nine months ended December 31, 2024. Excluding the Kentucky Acquisition, Revenue declined $10.8 million. The decrease was due to lower Sales Volume, which reduced Revenue by $19.5 million. This was partially offset by higher gross sales prices of $8.7 million.

Operating Earnings were approximately $0.6 million for the nine months ended December 31, 2024. Excluding the Kentucky Acquisition, Operating Earnings decreased to $1.2 million. The decline in Operating Earnings was due to lower Sales Volume and higher operating costs of $4.9 million and $16.0 million, respectively. This was partially offset by higher gross selling prices of $8.7 million. The increase in operating costs was primarily due to higher cost of materials, maintenance, delivery, and labor expenses of approximately $4.5 million, $5.5 million, $1.8 million, and $1.7 million, respectively.

Light Materials

GYPSUM WALLBOARD

(in thousands, except per MSF information)

(in thousands, except per MSF information)

(1) Net of freight per MSF.

Three months ended December 31, 2024

Gypsum Wallboard Revenue for the three months ended December 31, 2024 was $209.5 million, a 4% increase from the prior-year period. The increase was primarily due to higher gross sales prices and Sales Volume, which increased Revenue by $4.3 million and $4.2 million, respectively. Our market share remained relatively consistent during the three months ended December 31, 2024.

Operating Earnings increased 15% to $86.4 million, due to $4.3 million of higher gross sales prices, a $1.6 million increase in Sales Volume, and a $5.4 million decrease in operating costs. Lower operating costs were primarily related to freight, energy, and maintenance, which increased Operating Earnings by approximately $1.8 million, $1.4 million, and $1.2 million, respectively. Operating Margin increased to 41% for the three months ended December 31, 2024, primarily because of lower operating costs and higher gross sales prices. 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.

Nine months ended December 31, 2024

Gypsum Wallboard Revenue for the nine months ended December 31, 2024 was $642.3 million, a 2% increase from the prior-year period. The increase was primarily due to higher gross sales prices and Sales Volume, which positively affected Revenue by $5.1 million and $7.9 million, respectively. Our market share remained relatively consistent during the nine months ended December 31, 2024.

Operating Earnings increased 8% to $270.5 million, primarily because of $5.1 million higher gross sales prices, a $3.2 million increase in Sales Volume, and a $10.7 million decrease in operating costs. Lower operating costs were primarily related to freight and energy, which increased Operating Earnings by approximately $5.6 million and $3.9 million, respectively. Operating Margin increased to 42% for the nine months ended December 31, 2024, primarily because of higher gross sales prices and lower operating expenses. 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)

(in thousands, except per ton information)

(1) Net of freight per ton.

Three months ended December 31, 2024

Recycled Paperboard Revenue increased 19% to $56.2 million during the three months ended December 31, 2024. The increase was due to higher gross sales prices and Sales Volume, which increased Revenue by $6.1 million and $3.0 million, respectively. Higher gross sales prices were related to the pricing provisions in our long-term sales agreements.

Operating Earnings increased 47% to $11.0 million, primarily because of higher gross sales prices and Sales Volume, which increased Operating Earnings by $6.1 million and $0.5 million, respectively. This was partially offset by higher operating costs, which reduced Operating Earnings by approximately $3.1 million. The increase in operating costs was primarily related to higher input costs, namely recycled fiber, which reduced Operating Earnings by approximately $2.9 million. The Operating Margin increased to 20% because of higher gross selling prices, partially offset by higher operating costs. Although the Company has certain provisions in its long-term sales agreements related to adjustments for the cost of raw materials, namely recycled fiber, natural gas, and electricity, prices are adjusted only at certain times throughout the year, so price adjustments are not always reflected in the same period as the change in costs.

Nine months ended December 31, 2024

Recycled Paperboard Revenue increased 19% to $161.2 million during the nine months ended December 31, 2024. The increase was due to higher gross sales prices and Sales Volume, which positively affected Revenue by $15.5 million and $10.3 million, respectively. Higher gross sales prices were related to the pricing provisions in our long-term sales agreements.

Operating Earnings increased 24% to $27.6 million, primarily because of higher gross sales prices and Sales Volume, which increased Operating Earnings by $15.5 million and $1.7 million, respectively. This was partially offset by higher operating costs, which reduced Operating Earnings by approximately $11.9 million. The increase in operating costs was primarily related to higher input costs, namely recycled fiber, which lowered Operating Earnings by approximately $15.4 million. This was partially offset by lower energy, chemicals, and freight costs of $2.8 million, $0.5 million, and $0.5 million, respectively. The Operating Margin remained consistent at 16% as higher operating costs were offset by higher gross sales prices. Although the Company has certain provisions in its long-term sales agreements related to adjustments for the cost of raw materials, namely recycled fiber, natural gas, and electricity, prices are adjusted only 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, alternative policies or estimation techniques 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.

The three Critical Accounting Policies that are material to our financial statements and that we believe require either the most judgment, or the selection or application of alternative accounting policies, 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.

Information regarding our Critical Accounting Policies and a summary of our significant account policies can be found in our Annual Report, in Note (A) to the Consolidated Financial Statements.

Recent Accounting Pronouncements

Refer to Note (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 we currently 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 assess 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)

30

Net Cash Provided by Operating Activities decreased by $14.7 million to $485.8 million during the nine months ended December 31, 2024. This decrease was attributable to lower cash flows from Net Earnings, adjusted for non-cash charges of $6.4 million, lower cash dividends from our Unconsolidated Joint Venture of $7.0 million, and lower cash flow from changes in working capital of $1.3 million.

Working capital increased by $6.3 million to $394.6 million at December 31, 2024, compared with March 31, 2024. The increase was due to higher Inventories and Prepaid and Other Assets of $18.4 million and $4.9 million, respectively, and lower Accounts Payable and Accrued Liabilities of $15.8 million. This was partially offset by lower Cash and Accounts Receivable, net, of $3.7 million and $20.6 million, respectively. The August 2024 Acquisition increased working capital by approximately $0.3 million at December 31, 2024.

The decrease in Accounts Receivable at December 31, 2024, was primarily related to increased collections during the three months ended December 31, 2024, compared with the three months ended March 31, 2024. As a percentage of quarterly sales generated for the respective quarter, Accounts Receivable was approximately 33% at December 31, 2024, and 43% at March 31, 2024. 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 December 31, 2024.

Our Inventory balance at December 31, 2024, increased by approximately $18.4 million from our balance at March 31, 2024. Excluding the Kentucky Acquisition, our Inventory balance increased by $18.0 million. Within Inventory, Raw Materials and Materials-in-Progress, Aggregates, Gypsum Wallboard, Repair Parts, and Fuel and Coal increased by approximately $17.8 million, $4.2 million, $1.5 million, $1.1 million, and $3.9 million, respectively. This was partially offset by Finished Cement and Recycled Paperboard, which declined $5.6 million and $4.9 million, respectively. The 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 largest individual balance in our Inventory is our Repair Parts. The size and complexity of our manufacturing plants, as well as the age of certain of our plants, makes it necessary 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 nine months ended December 31, 2024, was approximately $171.9 million, compared with $142.9 million during the same period in fiscal 2024. The $29.0 million increase was primarily related to higher capital expenditures, most of which were related to the expansion of our Mountain Cement facility. This was partially offset by the lower purchase price for the Kentucky Acquisition in fiscal 2025, compared with the acquisition completed in fiscal 2024.

Net Cash Used in Financing Activities was approximately $317.7 million during the nine months ended December 31, 2024, compared with $324.0 million during the nine months ended December 31, 2023. The $6.3 million decrease was primarily related to lower Purchase and Retirement of Common Stock and Dividends Paid to Stockholders of $47.6 million and $1.3 million, respectively. This was partially offset by higher net Repayments of Borrowings Under Revolving Credit Facility and Excise Tax on Purchase and Retirement of Common Stock of $35.0 million and $3.3 million, respectively, as well as lower Proceeds from Stock Option Exercises of $5.3 million.

Our debt-to-capitalization ratio and net-debt-to-capitalization ratio were 40.3% and 39.5%, respectively, at December 31, 2024, compared with 45.7% and 44.9%, respectively, at March 31, 2024.

Debt Financing Activities

Below is a summary of the Company’s outstanding debt facilities at December 31, 2024:

See Note (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 December 31, 2024, we had $85.0 million outstanding of Revolving Loans under the Revolving Credit Facility and $10.0 million of outstanding letters of credit. Subsequent to December 31, 2024, we borrowed approximately $152.5 million to fund the New Acquisition. After this borrowing we have $502.5 million of available borrowings under the Revolving Credit Facility, net of the outstanding letters of credit. We are contingently liable for performance under $30.0 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 $40.0 million of lease liabilities at December 31, 2024, that have an average remaining life of approximately 11.2 years.

Dividends

Dividends paid were $25.4 million and $26.7 million for the nine months ended December 31, 2024 and 2023, 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 nine months ended December 31, 2024, our share repurchases were as follows:

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 December 31, 2024, we have repurchased approximately 50.8 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 nine months ended December 31, 2024, the Company withheld from employees 5,636 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)

Capital expenditures for fiscal 2025 are expected to range from $215.0 million to $235.0 million and will be allocated across both Heavy Materials and Light Materials sectors. The increase from the prior year reflects our beginning construction of the previously announced modernization and expansion of our Mountain Cement facility. The Mountain Cement construction project will continue through fiscal 2027, with expected completion in late fiscal 2027. 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 statements and generally arise when the Company is discussing its beliefs, estimates or expectations as to future events. 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; fluctuations in public infrastructure expenditures; the effects of adverse weather conditions on infrastructure and other construction projects as well as our facilities and operations; 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; the availability of and fluctuations in the cost of raw materials; changes in the costs of energy, including, without limitation, natural gas, coal, and oil (including diesel), and the nature of our obligations to counterparties under energy supply contracts, such as those related to market conditions (for example, 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; consolidation of our customers; 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 losses or other adverse outcomes from pending or future litigation or arbitration proceedings; changes in economic conditions or the nature or level of activity in any one or more of the markets or industries in which the Company or its customers are engaged; competition; cyber-attacks or data security breaches, together with the costs of protecting our systems against such incidents and the possible effects thereof on our operations; 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; the availability of acquisitions or other growth opportunities that meet our financial return standards and fit our strategic focus; 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, including inflation and recessionary conditions; and changes in interest rates and the resulting effects on the Company and demand for our products. 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) or the cost of our raw materials can be expected to adversely 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 results 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 and 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, 2024, and subsequent quarterly and annual reports upon filing. These reports are filed with the Securities and Exchange Commission. 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.

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 December 31, 2024, under which borrowings bear interest at a variable rate. A hypothetical 100 basis point increase in interest rates on the $85.0 million of borrowings under the Revolving Credit Facility and the $175.0 million of borrowings under the Term Loan at December 31, 2024, would increase interest expense by approximately $2.6 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.

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.

For information regarding factors that could affect 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, 2024, filed with the Securities and Exchange Commission on May 22, 2024.