Eagle Materials Inc: Form 10-Q for the period ended Sep 30, 2025

EXECUTIVE SUMMARY

We are a leading U.S. manufacturer of heavy construction products and light building materials. Our primary products, portland cement and gypsum wallboard, are essential for building, expanding, and repairing roads, highways, and residential, commercial, and industrial structures across America. Headquartered in Dallas, Texas, Eagle manufactures and sells its products through a network of more than 70 facilities spanning 21 states. Demand for our products is generally cyclical and seasonal, depending on economic and geographic conditions. 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 six months ended September 30, 2025, and 2024, are presented on a consolidated basis and by business segment.

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 financial information with respect to 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).

On August 9, 2024, we finalized the acquisition of an aggregates business in Northern Kentucky. The purchase price of the acquisition was approximately $24.9 million. This business is included in our Heavy Materials sector, and its results of operations are reported in the Concrete and Aggregates business segment from the date of purchase.

On January 7, 2025, we acquired Bullskin Stone & Lime LLC. The purchase price of this acquisition was approximately $149.9 million. This acquisition is included in our Heavy Materials sector, and its results of operations are reported in the Concrete and Aggregates business segment from the date of purchase. See Note (C) in the Notes to Unaudited Consolidated Financial Statements for more information regarding this acquisition.

The above acquisitions are collectively referred to as the Aggregates Acquisitions in the following discussion of our Results of Operations.

MARKET CONDITIONS AND OUTLOOK

In the first half of fiscal year 2026, our cement sales volume increased, driven primarily by federal, state and local support for public infrastructure projects and continued elevated spending across private non-residential end markets. In this improved environment, our Cement sales volume was up approximately 5% during the first half of our fiscal year. The outlook for cement demand continues to be favorable, as nearly 60% of the funds from the trillion-dollar Infrastructure Investment and Jobs Act (IIJA) remain to be spent, and state Department of Transportation (DOT) budgets remain strong.

The backdrop for residential construction activity remains challenging, primarily because of housing affordability concerns driven by persistently elevated mortgage interest rates, as well as other macroeconomic uncertainties. At the same time, the national supply of homes remains constrained by years of underbuilding. Recently, new home construction has slowed as builders have pulled back on production because of mixed demand signals and higher levels of new home inventory in certain markets. This recent pullback affected our wallboard sales volume, which was down approximately 5% in the first half of our fiscal year. The path ahead for mortgage rates, and the corresponding effect on residential construction activity, is unclear and thus the timing of a recovery in new-home construction remains uncertain.

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.

Paper is a significant cost component in our Recycled Paperboard and Gypsum Wallboard businesses. The primary raw material used to produce paperboard is old corrugated containers (OCC). Recently, OCC prices have been declining; however, recycled fiber prices are subject to change on 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.

Energy costs decreased slightly in the second quarter but are expected to remain relatively stable over the near future. Freight costs for our Gypsum Wallboard segment increased during the second quarter of fiscal 2026 and are expected to remain at similar levels for the rest of the calendar year. Freight costs for our Cement segment, which relies mostly on rail delivery, increased slightly in the second quarter, and are also expected to remain stable over the remainder of the calendar year. Additionally, labor constraints, primarily drivers, can adversely affect our Concrete business. If labor constraints were to worsen, it could cause delays and inefficiencies in this business.

Maintenance costs are a significant part of our total operating expenses, and we expect a low single-digit increase in inflation for maintenance in fiscal 2026, as equipment and contractor costs remain elevated.

RESULTS OF OPERATIONS

THREE MONTHS ENDED September 30, 2025, Compared WITH THREE MONTHS ENDED september 30, 2024

(in thousands, except per share)

REVENUE

Revenue increased by $15.3 million, or 2%, to $638.9 million for the three months ended September 30, 2025. Excluding the $11.6 million related to the Aggregates Acquisitions, Revenue increased $3.7 million. Higher Sales Volumes positively affected Revenue by $5.0 million, and were partially offset by lower gross sales prices, which adversely affected Revenue by approximately $1.3 million.

COST OF GOODS SOLD

Cost of Goods Sold increased by $19.4 million, or 5%, to $439.2 million for the three months ended September 30, 2025. Excluding the $8.3 million related to the Aggregates Acquisitions, Cost of Goods Sold increased $11.1 million, or 3%.The increase was due to higher Sales Volume of $6.2 million and higher operating costs of $4.9 million.

GROSS PROFIT

Gross Profit decreased 2% to $199.7 million during the three months ended September 30, 2025. Excluding the $3.3 million of Gross Profit related to the Aggregates Acquisitions, Gross Profit decreased $7.4 million, or 4%. The decrease was primarily related to lower gross sales prices of $1.3 million and increased operating costs of $4.9 million. The gross margin declined to 28%, primarily due to lower gross sales prices.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE

Equity in Earnings of our Unconsolidated Joint Venture decreased by $3.0 million, or 32%, for the three months ended September 30, 2025. The decrease was due to higher operating costs of $4.6 million, which were offset by higher gross sales prices of $1.6 million. Increased operating costs were primarily related to higher energy, freight, and raw materials costs, which reduced operating earnings by $1.0 million, $0.9 million, and $2.0 million respectively.

CORPORATE GENERAL AND ADMINISTRATIVE

Corporate General and Administrative expenses increased by approximately $3.4 million, or 19%, for the three months ended September 30, 2025. The increase was due primarily to higher salary and incentive compensation, professional fees, and information technology costs of $1.7 million, $0.7 million, and $0.8 million, respectively.

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 $1.3 million, or 13%, during the three months ended September 30, 2025. This decrease was mainly due to an increase of $1.4 million in capitalized interest during fiscal 2026 compared with fiscal 2025. The increase in capitalized interest is due primarily to capital spending for the expansion and modernization of our cement plant in Laramie, Wyoming and our gypsum wallboard plant in Oklahoma.

EARNINGS BEFORE INCOME TAXES

Earnings Before Income Taxes decreased to $176.5 million during the three months ended September 30, 2025, primarily as a result of lower Gross Profit and Equity in Earnings of Unconsolidated Joint Venture, and higher Corporate General and Administrative expense, partially offset by lower Interest Expense, net.

INCOME TAX EXPENSE

Income Tax Expense was $39.1 million for the three months ended September 30, 2025, compared with $41.7 million for the three months ended September 30, 2024. The effective tax rate declined to 22% from 23% in the prior-year period.

NET EARNINGS

Net Earnings decreased 4% to $137.4 million for the three months ended September 30, 2025.

RESULTS OF OPERATIONS

six MONTHS ENDED September 30, 2025, Compared WITH six MONTHS ENDED september 30, 2024

(in thousands, except per share)

REVENUE

Revenue increased by $41.3 million, or 3%, to $1,273.6 million for the six months ended September 30, 2025. Excluding the $23.0 million related to the Aggregates Acquisitions, Revenue increased $18.3 million, or 2%. Higher Sales Volumes positively affected Revenue by $24.0 million, and were partially offset by lower gross sales prices, which adversely affected Revenue by approximately $5.7 million.

COST OF GOODS SOLD

Cost of Goods Sold increased by $46.7 million, or 6%, to $888.3 million for the six months ended September 30, 2025. Excluding the $17.8 million related to the Aggregates Acquisitions, Cost of Goods Sold increased $28.9 million, or 3%.The increase was due to higher Sales Volume and operating costs of $17.7 million and $11.1 million, respectively. Higher operating costs were primarily related to our Cement and Gypsum Wallboard businesses and are discussed further in the segment analysis.

GROSS PROFIT

Gross Profit decreased 1% to $385.3 million during the six months ended September 30, 2025. Excluding the $5.2 million of Gross Profit related to the Aggregates Acquisitions, Gross Profit decreased $10.6 million, or 3%. The decrease was primarily related to lower gross sales prices and higher operating costs of $5.7 million and $11.1 million, respectively, partially offset by higher Sales Volume of $6.2 million. The gross margin declined to 26%, primarily due to higher operating costs and lower gross sales prices.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURE

Equity in Earnings of our Unconsolidated Joint Venture decreased by $6.9 million, or 40%, for the six months ended September 30, 2025. The decrease was due to lower Sales Volume and increased operating costs of $1.1 million and $9.0 million, respectively. This was partially offset by $3.2 million from increased gross sales prices. Increased operating costs were primarily related to higher energy, freight, raw materials, and fixed costs, which reduced operating earnings by $1.7 million, $1.4 million, $2.9 million, and $2.0 million, respectively.

CORPORATE GENERAL AND ADMINISTRATIVE

Corporate General and Administrative expenses increased by approximately $8.6 million, or 26%, for the six months ended September 30, 2025. The increase was due primarily to higher salary and incentive compensation, professional fees, and information technology costs of $3.9 million, $1.9 million, and $1.9 million, respectively.

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 $0.3 million, or 1%, during the six months ended September 30, 2025. This decrease was mainly due to an increase of $2.4 million in capitalized interest during fiscal 2026 compared with fiscal 2025. The increase in capitalized interest is due primarily to capital spending for the expansion and modernization of our cement plant in Laramie, Wyoming and our gypsum wallboard plant in Oklahoma. This was partially offset by $1.8 million of increased interest expense from our Revolving Credit Facility and Term Loan due to higher outstanding borrowings.

EARNINGS BEFORE INCOME TAXES

Earnings Before Income Taxes decreased to $334.3 million during the six months ended September 30, 2025, primarily as a result of lower Gross Profit and Equity in Earnings of Unconsolidated Joint Venture, and higher Corporate General and Administrative expense, partially offset by lower Interest Expense, net.

INCOME TAX EXPENSE

Income Tax Expense was $73.6 million for the six months ended September 30, 2025, compared with $78.8 million for the six months ended September 30, 2024. The effective tax rate remained at 22%, consistent with the prior-year period.

NET EARNINGS

Net Earnings decreased 6% to $260.7 million for the six months ended September 30, 2025.

Three and six MONTHS ENDED september 30, 2025, COMPARED WITH three and six MONTHS ENDED september 30, 2024, BY SEGMENT

The following presents results within our two business sectors for the three and six months ended September 30, 2025, and 2024. 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) This amount does not include the cost of freight from our plants to our distribution terminals.

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

Three months ended September 30, 2025

Cement Revenue was $384.9 million, a 9% increase, for the three months ended September 30, 2025. This increase was due to higher gross sales prices and Sales Volume, which increased Cement Revenue by $3.4 million and $28.7 million, respectively.

Cement Operating Earnings increased by $3.9 million to $119.8 million for the three months ended September 30, 2025. The increase was due to higher gross sales prices and Sales Volume of $3.4 million and $9.9 million, respectively, which were partially offset by higher operating costs of $9.4 million. The increase in operating costs was mainly due to higher freight, purchased raw materials, and labor and other fixed costs of approximately $1.9 million, $7.2 million, and $4.3 million, respectively. This was partially offset by lower maintenance costs of approximately $5.3 million. The Operating Margin decreased to 31% from 33% because of higher operating costs, partially offset by the increase in gross sales prices.

Six months ended September 30, 2025

Cement Revenue was $732.5 million, a 6% increase, for the six months ended September 30, 2025. This increase was due to higher gross sales prices and Sales Volume, which increased Cement Revenue by $4.2 million and $36.4 million, respectively.

Cement Operating Earnings decreased by $4.2 million to $200.9 million for the six months ended September 30, 2025. The decrease was due to higher operating costs of $19.8 million, which were partially offset by higher Sales Volume and higher gross sales prices of $11.4 million and $4.2 million, respectively. The increase in operating costs was mainly due to higher freight, purchased raw materials, and labor and other fixed costs of approximately $2.4 million, $10.0 million, and $12.8 million, respectively. This was partially offset by lower maintenance costs of approximately $5.6 million. The Operating Margin decreased to 27% from 30% because of higher operating costs, partially offset by the increase in gross sales prices.

CONCRETE AND AGGREGATES

(in thousands, except per ton information)

(in thousands, except per ton information)

Three months ended September 30, 2025

Concrete and Aggregates Revenue increased 23% to $85.8 million for the three months ended September 30, 2025. Excluding the Aggregates Acquisitions, Revenue increased $4.2 million, or 6%. The increase was due to higher Concrete gross sales prices of $1.4 million and higher Aggregates Sales Volume of $4.9 million, which was partially offset by lower Aggregates gross prices, which reduced Revenue by $2.1 million.

Operating Earnings were approximately $7.9 million, an 896% increase. Excluding the Aggregates Acquisitions, Operating Earnings increased $5.6 million, or 660%. The increase was due to higher Sales Volume and lower operating costs, which positively affected Operating Earnings by $1.1 million and $5.1 million, respectively, partially offset by lower gross sales prices of $0.6 million. Excluding the Aggregates Acquisitions, Sales Volume increased 35%, with most of the increase in our Northern Colorado and Northern Kentucky markets. The decrease in operating costs was primarily due to lower materials, delivery, and maintenance expenses of approximately $2.3 million, $2.2 million, and $0.3 million, respectively.

Six months ended September 30, 2025

Concrete and Aggregates Revenue increased 21% to $163.4 million for the six months ended September 30, 2025. Excluding the Aggregates Acquisitions, Revenue increased $5.6 million, or 4%. The increase was due to higher Concrete gross sales prices of $2.1 million and higher Aggregates Sales Volume of $7.9 million, which was partially offset by lower Concrete Sales Volume and Aggregates gross sales prices, which reduced Revenue by $3.1 million and $1.3 million.

Operating Earnings were approximately $14.1 million, a 610% increase. Excluding the Aggregates Acquisitions, Operating Earnings increased $6.9 million, or 345%. The increase was due to higher gross sales prices and higher Aggregates Sales Volume, which positively affected Operating Earnings by $0.8 million and $2.9 million, respectively, as well as lower operating costs of $3.2 million. Excluding the Aggregates Acquisitions, Sales Volume increased 33%, with most of the increase in our Northern Colorado and Northern Kentucky markets. The decrease in operating costs was primarily due to lower materials and maintenance expenses of approximately $1.1 million and $1.2 million, respectively.

Light Materials

GYPSUM WALLBOARD

(in thousands, except per ton information)

(in thousands, except per ton information)

(1) Net of freight per MSF.

Three months ended September 30, 2025

Gypsum Wallboard Revenue was $183.5 million, a 15% decrease for the three months ended September 30, 2025. Lower gross sales prices and Sales Volume reduced Revenue by approximately $1.8 million and $29.7, respectively. Our market share remained relatively consistent during the three months ended September 30, 2025.

Operating Earnings decreased 25% to $67.3 million, primarily because of lower gross sales prices and Sales Volume of $1.8 million and $12.5 million, as well as higher operating costs of $8.6 million. The higher operating costs were primarily related to freight, maintenance, energy, input costs (mainly fiber), and fixed costs, which reduced Operating Earnings by approximately $0.8 million, $0.6 million, $1.4 million, $0.9 million, and $1.8 million, respectively. Operating Margin decreased to 37% for the three months ended September 30, 2025, primarily because of lower gross sales prices and higher operating costs. Fixed costs are less than 20% of the overall cost of wallboard; therefore, changes in utilization generally have a relatively minor impact on our operating cost per unit.

Six months ended September 30, 2025

Gypsum Wallboard Revenue was $405.0 million, a 6% decrease for the six months ended September 30, 2025. Lower gross sales prices and Sales Volume negatively affected Revenue by approximately $5.7 million and $22.1 million, respectively. Our market share remained relatively consistent during the six months ended September 30, 2025.

Operating Earnings decreased 13% to $159.9 million, primarily because of lower gross sales prices and Sales Volume of $5.7 million and $9.4 million, respectively, as well as higher operating costs of $9.1 million. The higher operating costs were primarily related to freight, maintenance and energy, which reduced Operating Earnings by approximately $2.4 million, $1.8 million, and $2.2 million, respectively. Operating Margin decreased to 39% for the six months ended September 30, 2025, primarily because of lower gross sales prices and higher operating costs. Fixed costs are less than 20% of the overall cost of wallboard; therefore, changes in utilization generally 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 September 30, 2025

Recycled Paperboard Revenue decreased 4% to $48.6 million during the three months ended September 30, 2025. Lower Sales Volume reduced Revenue by $2.5 million, partially offset by higher gross sales prices of $0.3 million. Higher gross sales prices were related to the pricing provision changes in our long-term sales agreements.

Operating Earnings increased 37% to $11.0 million, primarily because of higher gross sales prices and lower operating costs, which increased Operating Earnings by $0.3 million and $3.1 million, respectively. This was partially offset by lower Sales Volume, which reduced Operating Earnings by approximately $0.4 million. The decrease in operating costs was primarily related to lower input costs, namely fiber, of approximately $5.5 million, which were partially offset by higher energy, maintenance and supplies, and fixed costs of $0.8 million, $0.9 million, and $0.3 million, respectively. Operating Margin increased to 23%, largely due to the decrease in operating costs. Although the Company has certain pricing provisions in its long-term sales agreements, 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.

Six months ended September 30, 2025

Recycled Paperboard Revenue decreased 5% to $99.7 million during the three months ended September 30, 2025. Lower gross sales prices and Sales Volume reduced Revenue by $2.5 million and $2.8 million, respectively. Lower gross sales prices were related to the pricing provisions in our long-term sales agreements.

Operating Earnings increased 24% to $20.5 million, primarily because of lower operating costs, which increased Operating Earnings by $6.6 million. This was partially offset by lower gross sales prices and Sales Volume, which reduced Operating Earnings by approximately $2.5 million and $0.4 million, respectively. The decrease in operating costs was primarily related to lower input costs, namely fiber, of approximately $9.0 million, which were partially offset by higher energy and fixed costs of $1.2 million and $0.5 million, respectively. Operating Margin increased to 21%, with the decrease in operating costs offsetting the lower gross sales prices. Although the Company has certain pricing provisions in its long-term sales agreements, 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.

Information regarding our Critical Accounting Policies can be found in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the Annual Report). The three Critical Accounting Policies that we believe are material to our financial statements, and 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. In addition, Note (A) in the Notes to Consolidated Financial Statements in our Annual Report contains a summary of our significant accounting policies.

Recent Accounting Pronouncements

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

LIQUIDITY AND CAPITAL RESOURCES

At this time, we believe 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)

Net Cash Provided by Operating Activities decreased by $24.7 million to $341.2 million during the six months ended September 30, 2025. This decrease was primarily attributable to lower cash flows from changes in Working Capital and Operating Earnings of $33.2 million and $16.7 million, respectively, partially offset by higher non cash activity of $25.2 million. The decrease in cash from Working Capital is due to a $65.7 million increase in cash flows from Income Taxes Payable at September 30, 2024, which resulted from our deferring tax payments for the three and six months ended September 30, 2024. The Internal Revenue Service granted this deferral to individuals and businesses in Texas that were affected by severe storms, straight-line winds, tornados, and flooding that occurred in April 2024. These deferred tax payments were made in December 2024.

Working Capital increased by $0.5 million to $424.1 million at September 30, 2025, compared with March 31, 2025. The increase was primarily due to higher Cash, Accounts Receivable, net, and Prepaid and Other Assets of $14.6 million, $38.5 million, and $2.9 million, respectively. This was partially offset by $10.2 million of lower Income Tax Receivable, net and $45.0 million of lower Inventories.

The increase in Accounts Receivable at September 30, 2025, was primarily related to higher Revenue during the three months ended September 30, 2025, compared with the three months ended March 31, 2025. As a percentage of quarterly sales generated for the respective quarter, Accounts Receivable was approximately 40% and 45% at September 30, 2025, and March 31, 2025, respectively. 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 September 30, 2025.

Our Inventory balance at September 30, 2025, decreased by approximately $45.0 million from our balance at March 31, 2025. Within Inventory, Raw Materials and Materials-in-Progress, Finished Cement, and Aggregates declined $23.7 million, $19.4 million, and $2.5 million, respectively. The decline in Raw Materials and Materials-in-Progress and 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 Repair Parts. These parts are necessary given the size and complexity of our manufacturing plants, and 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 six months ended September 30, 2025, was approximately $184.6 million, compared with $124.5 million during the same period in 2024. The $60.1 million increase was primarily related to the modernization and expansion of our Mountain Cement facility.

Net Cash Used in Financing Activities was $142.0 million during the six months ended September 30, 2025 compared with $182.4 million during the same period in 2024. The $40.4 million decrease was mainly related to higher borrowings, net of repayments of $67.5 million, partially offset by higher Purchase and Retirement of Common Stock and Shares Redeemed to Settle Employee Taxes of $21.5 million and $4.1 million, respectively.

Our debt-to-capitalization ratio and net-debt-to-capitalization ratio were 45.7% and 45.0%, respectively, at September 30, 2025, compared with 46.1% and 45.7%, respectively, at March 31, 2025.

Debt Financing Activities

Below is a summary of the Company’s outstanding debt facilities at September 30, 2025:

See Note (M) in the Notes to 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 September 30, 2025, we had $255.0 million outstanding of Revolving Loans under the Revolving Credit Facility and $9.9 million of outstanding letters of credit, leaving us with $485.1 million of available borrowings under the Revolving Credit Facility, net of the outstanding letters of credit. We are contingently liable for performance under $47.9 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 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 several 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 the 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 using 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 had approximately $38.8 million of lease liabilities at September 30, 2025, with an average remaining life of approximately 11.8 years.

Dividends

Dividends paid were $16.6 million and $17.0 million for the six months ended September 30, 2025, and 2024, 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 six months ended September 30, 2025, 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 September 30, 2025, we have repurchased approximately 52.0 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 six months ended September 30, 2025, the Company withheld from employees 23,968 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 2026 are expected to range from $475.0 million to $500.0 million and will be allocated across both Heavy Materials and Light Materials sectors. These estimated capital expenditures will include the expansion and modernization of our Mountain Cement facility in Wyoming, the modernization of our gypsum wallboard plant in Oklahoma, and 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 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; interruptions in our supply chain; inability to timely execute or realize capacity expansions or efficiency gains from capital improvement projects; 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); changes in trade policy, including tariffs and the effects of any increases in tariffs on our business, including increases in inputs used in our facility expansion and modernization projects; 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, 2025, on file 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 and Term Loan. 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 interest rate changes. We had a $750.0 million Revolving Credit Facility at September 30, 2025, under which borrowings bear interest at a variable rate. A hypothetical 100 basis point increase in interest rates on the $255.0 million of borrowings under the Revolving Credit Facility and the $288.8 million of borrowings under the Term Loan at September 30, 2025, would increase interest expense by approximately $5.4 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.

We are currently undertaking a significant multi-year ERP implementation to upgrade our information technology platforms and business processes. The ERP implementation is occurring in phases over several years, which began in fiscal 2025 with the implementation at Corporate. During the three months ended September 30, 2025, we implemented the ERP at our Gypsum Wallboard and Recycled Paperboard segments.

As a result of this multi-year implementation, we expect certain changes to our processes and procedures, which, in turn, will result in changes to our internal control over financial reporting. While we expect this implementation to strengthen our internal control over financial reporting by automating certain manual processes and standardizing business processes and reporting across our organization, we will continue to evaluate and monitor our internal control over financial reporting as processes and procedures in the affected areas evolve.

With the exception of the implementations described above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2025, filed with the Securities and Exchange Commission on May 20, 2025.