Eagle Materials(EXP) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION (unaudited) This section presents the unaudited financial information, including consolidated statements, notes, and management's discussion and analysis Item 1. Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including statements of earnings, comprehensive earnings, balance sheets, cash flows, and stockholders' equity, along with detailed notes explaining accounting policies, acquisitions, debt, and segment performance for the periods ended September 30, 2022 Consolidated Statements of Earnings This statement details the company's revenues, gross profit, net earnings, and earnings per share for the specified periods Consolidated Statements of Earnings (Unaudited, thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $605,068 | $509,694 | $1,166,455 | $985,464 | | Gross Profit | $194,239 | $155,341 | $345,105 | $281,852 | | Net Earnings | $138,995 | $102,125 | $244,000 | $197,452 | | Basic EPS | $3.74 | $2.48 | $6.50 | $4.74 | | Diluted EPS | $3.72 | $2.46 | $6.46 | $4.70 | | Cash Dividends Per Share | $0.25 | $0.25 | $0.50 | $0.25 | Consolidated Statements of Comprehensive Earnings This statement presents net earnings and other comprehensive income components, such as actuarial changes in defined benefit plans Consolidated Statements of Comprehensive Earnings (Unaudited, thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net Earnings | $138,995 | $102,125 | $244,000 | $197,452 | | Net Actuarial Change in Defined Benefit Plans | | | | | | Amortization of Net Actuarial Loss | $30 | $36 | $60 | $72 | | Tax Expense | ($6) | ($9) | ($13) | ($18) | | Comprehensive Earnings | $139,019 | $102,152 | $244,047 | $197,506 | Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Balance Sheets (Unaudited, thousands) | Asset/Liability/Equity | September 30, 2022 | March 31, 2022 | | :----------------------------------- | :----------------- | :------------- | | ASSETS | | | | Cash and Cash Equivalents | $84,140 | $19,416 | | Total Current Assets | $552,874 | $442,727 | | Property, Plant, and Equipment, net | $1,655,616 | $1,616,539 | | Goodwill and Intangible Assets, net | $469,491 | $387,898 | | Total Assets | $2,809,149 | $2,579,652 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total Current Liabilities | $223,321 | $207,551 | | Long-term Debt | $1,126,398 | $938,265 | | Total Liabilities | $1,652,445 | $1,446,096 | | Total Stockholders' Equity | $1,156,704 | $1,133,556 | | Total Liabilities and Stockholders' Equity | $2,809,149 | $2,579,652 | Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities over the reporting periods Consolidated Statements of Cash Flows (Unaudited, thousands) | Cash Flow Activity | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :----------------------------------------------------------------------------------- | :---------------------------- | :---------------------------- | | Net Cash Provided by Operating Activities | $300,445 | $261,462 | | Net Cash Used in Investing Activities | ($201,700) | ($26,777) | | Net Cash Used in Financing Activities | ($34,021) | ($457,991) | | NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $64,724 | ($223,306) | | CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | $19,416 | $268,520 | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $84,140 | $45,214 | Consolidated Statements of Stockholders' Equity This statement details changes in stockholders' equity, including net earnings, stock repurchases, and dividends Consolidated Statements of Stockholders' Equity (Unaudited, thousands) | Metric | Balance at March 31, 2022 | Balance at September 30, 2022 | | :------------------------------------ | :------------------------ | :---------------------------- | | Total Stockholders' Equity | $1,133,556 | $1,156,704 | | Net Earnings | $244,000 (Six Months) | $138,995 (Three Months) | | Purchase and Retirement of Common Stock | ($109,612) (Six Months) | ($100,786) (Three Months) | | Dividends to Shareholders | ($19,149) (Six Months) | ($9,471) (Three Months) | Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations of the accounting policies, significant transactions, and financial statement line items Basis of Presentation This note outlines the preparation principles for the unaudited consolidated financial statements, including GAAP compliance and management estimates - The Unaudited Consolidated Financial Statements are prepared by the Company, without audit, pursuant to SEC rules and regulations[17] - Certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted[18] - Management makes estimates and assumptions that affect reported amounts; actual results could differ from these estimates[19] - No recent accounting pronouncements are expected to materially affect the Company[20] Supplemental Cash Flow Information This note provides additional details on cash payments for interest, income taxes, and operating leases Cash Payments (dollars in thousands) | Cash Payments | For the Six Months Ended September 30, 2022 | For the Six Months Ended September 30, 2021 | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Interest | $12,940 | $10,634 | | Income Taxes | $61,592 | $54,581 | | Operating Cash Flows Used for Operating Leases | $4,248 | $3,987 | Acquisitions This note details the ConAgg and Terminal acquisitions, including their purchase prices and preliminary fair value allocations - The ConAgg Acquisition was completed on April 22, 2022, for approximately $120.2 million, funded through borrowings under the revolving credit facility, with operations included in the Concrete and Aggregates business[23] ConAgg Acquisition Purchase Price Allocation (Fair Value in thousands) | Item | Fair Value | | :----------------------------- | :--------- | | Working Capital | $10,780 | | Property, Plant, and Equipment | $39,489 | | Intangible Assets | $30,750 | | Goodwill | $39,135 | | Total Estimated Purchase Price | $120,154 | - The Terminal Acquisition was completed on September 16, 2022, for approximately $39.5 million, funded through borrowings under the revolving credit facility, with operations included in the Cement business[27] Terminal Acquisition Preliminary Purchase Price Allocation (Estimated Fair Value in thousands as of Sep 30, 2022) | Item | Estimated Fair Value | | :----------------------------- | :------------------- | | Working Capital | $1,116 | | Property, Plant, and Equipment | $23,301 | | Intangible Assets | $5,050 | | Goodwill | $9,978 | | Total Estimated Purchase Price | $39,445 | Revenue Recognition This note describes the company's policies for recognizing revenue from product sales and long-term supply agreements - Revenue is primarily earned from the sale of cement, concrete, aggregates, gypsum wallboard, and recycled paperboard, mostly to third-party contractors and suppliers[30] - Revenue from long-term supply agreements is recognized upon transfer of control, generally at shipment, with market-based pricing subject to contractual adjustments[31] - Rebates and incentives offered to customers are treated as variable consideration and adjusted using the most likely amount method[32] Accounts and Notes Receivable This note provides details on accounts and notes receivable, including the allowance for doubtful accounts and collateral - Accounts Receivable are net of an allowance for doubtful accounts of $6.8 million at September 30, 2022, and $6.7 million at March 31, 2022, with no significant credit risk concentration[36] - Notes Receivable totaled approximately $8.5 million at September 30, 2022, bearing interest at LIBOR plus 3% (approx. 5.2%), maturing in fiscal 2025, and collateralized by borrower assets[37] Inventories This note outlines the valuation method for inventories and provides a breakdown of their composition - Inventories are stated at the lower of average cost or net realizable value, including raw materials, finished products, and repair parts[38] Inventory Composition (thousands) | Inventory Type | September 30, 2022 | March 31, 2022 | | :-------------------------------- | :----------------- | :------------- | | Raw Materials and Materials-in-Progress | $72,610 | $81,308 | | Finished Cement | $26,671 | $38,769 | | Aggregates | $6,753 | $3,558 | | Gypsum Wallboard | $3,357 | $3,452 | | Paperboard | $5,371 | $7,462 | | Repair Parts and Supplies | $98,547 | $91,593 | | Fuel and Coal | $12,526 | $10,519 | | Total | $225,835 | $236,661 | Accrued Expenses This note details the composition of accrued expenses, including payroll, benefits, dividends, and taxes Accrued Expenses Composition (thousands) | Accrued Expense Type | September 30, 2022 | March 31, 2022 | | :------------------------------------ | :----------------- | :------------- | | Payroll and Incentive Compensation | $32,289 | $37,262 | | Benefits | $15,832 | $14,894 | | Dividends | $9,482 | $9,756 | | Interest | $7,167 | $5,052 | | Property Taxes | $10,399 | $6,514 | | Power and Fuel | $4,633 | $2,877 | | Freight | $2,485 | $1,172 | | Legal and Professional | $1,608 | $989 | | Sales and Use Tax | $2,291 | $1,509 | | Other | $5,329 | $6,729 | | Total | $91,515 | $86,754 | Leases This note describes the company's lease arrangements, including lease costs, liabilities, and key terms - The Company leases real estate, buildings, and equipment, with some leases containing rent escalations and extension options ranging from one to 20 years[41] Total Lease Cost (thousands) | Lease Cost Type | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Operating Lease Cost | $1,671 | $1,566 | $3,398 | $3,080 | | Short-term Lease Cost | $126 | $309 | $275 | $811 | | Total Lease Cost | $1,797 | $1,875 | $3,673 | $3,891 | Operating Lease Liabilities (thousands) | Item | September 30, 2022 | March 31, 2022 | | :--------------------------------- | :----------------- | :------------- | | Operating Lease Right-of-Use Assets | $22,126 | $23,856 | | Current Operating Lease Liabilities | $6,736 | $7,118 | | Noncurrent Operating Lease Liabilities | $26,736 | $29,212 | | Total Operating Lease Liabilities | $33,472 | $36,330 | - The weighted-average remaining lease term is 10.2 years, with a weighted-average discount rate of 3.73%[42] Share-Based Employee Compensation This note details the company's equity award plans, including stock option and restricted stock activity and unrecognized compensation costs - The Company's Amended and Restated Incentive Plan allows for the issuance of equity awards, including stock options and restricted stock, to employees and Board members[43] Stock Option Activity (Six Months Ended September 30, 2022) | Metric | Number of Shares | Weighted-Average Exercise Price | | :--------------------------------------- | :--------------- | :------------------------------ | | Outstanding Options at March 31, 2022 | 456,849 | $83.81 | | Granted | 56,621 | $125.90 | | Exercised | (17,841) | $125.36 | | Cancelled | (3,178) | $109.15 | | Outstanding Options at September 30, 2022 | 492,451 | $89.09 | | Options Exercisable at September 30, 2022 | 301,348 | | | Weighted-Average Fair Value of Options Granted During the Year | | $48.36 | Nonvested Restricted Stock Activity (Three Months Ended September 30, 2022) | Metric | Number of Shares | Weighted-Average Grant Date Fair Value | | :--------------------------------------- | :--------------- | :------------------------------------- | | Nonvested Restricted Stock at March 31, 2022 | 258,779 | $85.34 | | Granted | 111,230 | $126.23 | | Vested | (55,467) | $127.05 | | Forfeited | (3,247) | $124.82 | | Nonvested Restricted Stock at September 30, 2022 | 311,295 | $98.31 | - At September 30, 2022, there was approximately $4.8 million of unrecognized compensation cost related to outstanding stock options, expected to be recognized over 2.4 years, and $23.7 million from restricted stock, expected over 2.5 years[48][54] Computation of Earnings Per Share This note provides the calculation of basic and diluted earnings per share, including the effect of dilutive securities Basic and Diluted Common Shares Outstanding | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Weighted-Average Shares of Common Stock Outstanding | 37,140,197 | 41,222,161 | 37,559,087 | 41,623,187 | | Effect of Dilutive Shares: | | | | | | Assumed Exercise of Outstanding Dilutive Options | 420,199 | 560,876 | 424,489 | 606,876 | | Less Shares Repurchased from Proceeds of Assumed Exercised Options | (310,956) | (365,887) | (311,373) | (395,516) | | Restricted Stock Units | 117,439 | 177,583 | 120,410 | 179,300 | | Weighted-Average Common Stock and Dilutive Securities Outstanding | 37,366,879 | 41,594,733 | 37,792,613 | 42,013,847 | | Shares Excluded Due to Anti-dilution Effects | 46,750 | 3,578 | 39,703 | 2,684 | Pension and Employee Benefit Plans This note describes the company's defined benefit and defined contribution plans and expected pension expenses - The Company sponsors fully funded single-employer defined benefit plans (frozen to new participants) and defined contribution plans, with expected pension expense for fiscal 2023 less than $0.1 million[57] Income Taxes This note details the effective tax rate and factors influencing it, such as state income taxes and depletion benefits - The effective tax rate for the six months ended September 30, 2022, was approximately 22%, consistent with the prior year, primarily due to state income taxes partially offset by percentage depletion benefits[59] Long-Term Debt This note outlines the composition of long-term debt, including credit facilities, senior unsecured notes, and compliance with covenants Long-term Debt Composition (thousands) | Debt Type | September 30, 2022 | March 31, 2022 | | :-------------------------------------- | :----------------- | :------------- | | Revolving Credit Facility | $200,000 | $200,000 | | 2.500% Senior Unsecured Notes Due 2031 | $750,000 | $750,000 | | Term Loan | $197,500 | — | | Total Debt | $1,147,500 | $950,000 | | Less: Current Portion of Long-term Debt | ($10,000) | — | | Less: Unamortized Discounts and Debt Issuance Costs | ($11,102) | ($11,735) | | Long-term Debt | $1,126,398 | $938,265 | - The Company has an unsecured $750.0 million revolving credit facility, amended on May 5, 2022, which includes a $200.0 million term loan facility and provides an option to increase revolving borrowing capacity by up to $375.0 million[61] - As of September 30, 2022, $200.0 million was outstanding under the Revolving Credit Facility, with $543.6 million of available borrowings, and the Company was in compliance with all financial covenants[67] - In July 2021, the Company repaid its $665.0 million term loan credit agreement and redeemed $350.0 million of 4.500% Senior Unsecured Notes, incurring an early termination premium of approximately $8.4 million and expensing $6.1 million in debt issuance costs[71] Segment Information This note provides financial data by business segment, including revenue, operating earnings, and joint venture performance - The business is organized into two sectors: Heavy Materials (Cement, Concrete and Aggregates) and Light Materials (Gypsum Wallboard, Recycled Paperboard), with products essential in various construction projects[73][74] Revenue by Segment (thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Cement | $319,460 | $288,324 | $603,976 | $558,579 | | Concrete and Aggregates | $69,613 | $52,750 | $131,231 | $97,504 | | Gypsum Wallboard | $224,638 | $172,985 | $440,965 | $339,252 | | Paperboard | $53,673 | $47,798 | $107,746 | $91,065 | | Consolidated Revenue | $605,068 | $509,694 | $1,166,455 | $985,464 | Operating Earnings by Segment (thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Cement | $98,779 | $88,750 | $161,127 | $151,297 | | Concrete and Aggregates | $7,276 | $7,539 | $13,008 | $12,883 | | Gypsum Wallboard | $89,761 | $66,331 | $173,829 | $129,584 | | Paperboard | $5,579 | $981 | $9,395 | $4,318 | | Earnings Before Interest and Income Taxes | $187,104 | $143,583 | $330,613 | $272,274 | Joint Venture Summarized Financial Information (Total Amount, thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $50,259 | $53,852 | $102,889 | $99,234 | | Gross Margin | $15,977 | $17,776 | $28,003 | $34,609 | | Earnings Before Income Taxes | $14,312 | $16,519 | $24,508 | $32,459 | | Metric | September 30, 2022 | March 31, 2022 | | :------------------------- | :----------------- | :------------- | | Current Assets | $84,701 | $69,492 | | Noncurrent Assets | $114,764 | $112,926 | | Current Liabilities | $23,152 | $18,276 | Interest Expense, Net This note details the components of net interest expense, including interest income, expense, and other related costs Interest Expense, Net Components (thousands) | Component | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Interest Income | ($70) | ($13) | ($82) | ($38) | | Interest Expense | $8,176 | $5,425 | $15,055 | $11,551 | | Other Expenses | $474 | $6,856 | $937 | $7,727 | | Interest Expense, net | $8,580 | $12,268 | $15,910 | $19,240 | - Other Expenses include amortization of debt issuance costs and Revolving Credit Facility costs[86] Commitments and Contingencies This note describes the company's contingent liabilities, including letters of credit, performance bonds, and legal proceedings - The Company has contingent liabilities of approximately $6.4 million under outstanding letters of credit at September 30, 2022, related to workers' compensation and liability self-insurance[90] - The Company is contingently liable for $26.8 million in performance bonds for reclamation obligations and mining permits[92] - Management believes that indemnifications and legal proceedings will not have a material adverse effect on the consolidated financial position, results of operations, or cash flows[91][195] Fair Value of Financial Instruments This note provides information on the fair value of financial instruments, including long-term debt and short-term assets/liabilities - The fair value of the 2.500% Senior Unsecured Notes was $550.2 million at September 30, 2022[89] - The fair value of long-term debt is estimated based on current incremental borrowing rates for similar arrangements[93] - Carrying values of cash, receivables, payables, and the Revolving Credit Facility approximate their fair values due to short-term maturities[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, market conditions, and liquidity for the three and six months ended September 30, 2022, highlighting revenue growth, operational challenges, and strategic acquisitions. It details segment-specific results and discusses critical accounting policies, liquidity, and capital resources Executive Summary This summary provides an overview of the company's business, recent acquisitions, and strategic positioning in the construction materials market - Eagle Materials is a leading U.S. manufacturer of heavy construction materials (Cement, Concrete and Aggregates) and light building materials (Gypsum Wallboard, Recycled Paperboard)[95][96] - The Company completed the ConAgg Acquisition for approximately $120.2 million in April 2022, integrating it into the Concrete and Aggregates segment[99] - A cement distribution terminal was acquired in Nashville, Tennessee, for approximately $39.5 million in September 2022, included in the Cement business segment[100] Market Conditions and Outlook This section discusses the current market environment, demand trends for key products, and the impact of external factors like inflation and interest rates - End markets remained resilient in the first half of fiscal 2023 despite external challenges like transportation disruptions, supply chain constraints, and increasing interest rates and inflation[101] - Demand for cement is expected to remain strong due to the Infrastructure Investment and Jobs Act, with the Cement business operating at high utilization levels[103] - Gypsum Wallboard shipments were up 6%, with demand supported by home construction backlogs, though rising mortgage rates may adversely impact future residential construction[101][104] - Energy and freight costs increased in fiscal 2022 and the first half of fiscal 2023, with further increases anticipated into fiscal 2024; the Company has forward purchase contracts for approximately 50% of natural gas needs[106] Results of Operations: Three Months Ended September 30, 2022 vs. 2021 This section analyzes the company's financial performance for the three-month period, focusing on revenue, gross profit, and net earnings changes Key Financial Highlights (Three Months Ended Sep 30, thousands, except per share data) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | | Revenue | $605,068 | $509,694 | 19% | | Gross Profit | $194,239 | $155,341 | 25% | | Net Earnings | $138,995 | $102,125 | 36% | | Diluted Earnings per Share | $3.72 | $2.46 | 51% | - Revenue increased by $95.4 million (19%), with $13.9 million contributed by the ConAgg Acquisition; excluding the acquisition, revenue improved by 16% due to higher gross sales prices and sales volume[110] - Gross Profit increased 25% to $194.2 million, with the gross margin rising to 32% due to higher gross sales prices, partially offset by increased operating costs[112] - Interest Expense, net, decreased by 30% primarily due to the write-off of debt issue costs in the prior year, partially offset by higher interest rates and average outstanding balance under the Revolving Credit Facility[118] Results of Operations: Six Months Ended September 30, 2022 vs. 2021 This section analyzes the company's financial performance for the six-month period, detailing changes in revenue, gross profit, and net earnings Key Financial Highlights (Six Months Ended Sep 30, thousands, except per share data) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | | Revenue | $1,166,455 | $985,464 | 18% | | Gross Profit | $345,105 | $281,852 | 22% | | Net Earnings | $244,000 | $197,452 | 24% | | Diluted Earnings per Share | $6.46 | $4.70 | 37% | - Revenue increased by $181.0 million (18%), with $24.9 million from the ConAgg Acquisition; excluding the acquisition, revenue improved by 16% due to higher gross sales prices and sales volume[124] - Gross Profit increased 22% to $345.1 million, with the gross margin rising to 30% due to higher gross sales prices, partially offset by increased operating costs[126] - Interest Expense, net, decreased by 17% primarily due to the write-off of debt issue costs in the prior year, partially offset by higher interest rates and average outstanding balance under the Revolving Credit Facility[132] Segment Results: Three and Six Months Ended September 30, 2022 vs. 2021 This section provides a detailed breakdown of financial performance across the company's Heavy Materials and Light Materials segments Heavy Materials - Cement This subsection details the Cement segment's revenue, sales volume, average net sales price, and operating earnings performance Cement Segment Performance (Three Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :-------------------------------------- | :----------- | :----------- | :--------- | | Gross Revenue (incl. Intersegment & JV) | $319,460 | $288,324 | 11% | | Sales Volume (M Tons) | 2,145 | 2,198 | (2)% | | Average Net Sales Price, per ton | $132.50 | $117.78 | 12% | | Operating Earnings | $98,779 | $88,750 | 11% | Cement Segment Performance (Six Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :-------------------------------------- | :----------- | :----------- | :--------- | | Gross Revenue (incl. Intersegment & JV) | $603,976 | $558,579 | 8% | | Sales Volume (M Tons) | 4,138 | 4,234 | (2)% | | Average Net Sales Price, per ton | $130.24 | $117.09 | 11% | | Operating Earnings | $161,127 | $151,297 | 6% | - Cement Revenue increased 11% (three months) and 8% (six months) primarily due to higher gross sales prices, partially offset by a 2% decrease in sales volume for both periods[137][139] - Operating Earnings increased 11% (three months) and 6% (six months), driven by higher gross sales prices but partially offset by increased energy and maintenance costs[138][140] Heavy Materials - Concrete and Aggregates This subsection analyzes the Concrete and Aggregates segment's revenue, sales volumes, pricing, and operating earnings, including acquisition impacts Concrete and Aggregates Segment Performance (Three Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | | Gross Revenue, as reported | $69,613 | $52,750 | 32% | | Sales Volume (M Cubic Yards Concrete) | 451 | 398 | 13% | | Sales Volume (M Tons Aggregate) | 912 | 481 | 90% | | Average Net Sales Price (Concrete - Per Cubic Yard) | $134.28 | $120.15 | 12% | | Average Net Sales Price (Aggregates - Per Ton) | $10.87 | $10.40 | 5% | | Operating Earnings | $7,276 | $7,539 | (3)% | Concrete and Aggregates Segment Performance (Six Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | | Gross Revenue, as reported | $131,231 | $97,504 | 35% | | Sales Volume (M Cubic Yards Concrete) | 857 | 746 | 15% | | Sales Volume (M Tons Aggregate) | 1,707 | 842 | 103% | | Average Net Sales Price (Concrete - Per Cubic Yard) | $131.65 | $119.23 | 10% | | Average Net Sales Price (Aggregates - Per Ton) | $11.05 | $10.20 | 8% | | Operating Earnings | $13,008 | $12,883 | 1% | - Revenue increased 32% (three months) and 35% (six months), significantly boosted by the ConAgg Acquisition, which contributed $13.9 million and $24.9 million, respectively[143][145] - Operating Earnings decreased 3% (three months) and increased 1% (six months), impacted by increased operating costs (materials and delivery) partially offset by higher gross sales prices[144][146] Light Materials - Gypsum Wallboard This subsection presents the Gypsum Wallboard segment's revenue, sales volume, average net sales price, and operating earnings performance Gypsum Wallboard Segment Performance (Three Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :------------------------------ | :----------- | :----------- | :--------- | | Gross Revenue, as reported | $224,638 | $172,985 | 30% | | Sales Volume (MMSF) | 783 | 736 | 6% | | Average Net Sales Price, per MSF | $233.70 | $190.93 | 22% | | Operating Earnings | $89,761 | $66,331 | 35% | Gypsum Wallboard Segment Performance (Six Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :------------------------------ | :----------- | :----------- | :--------- | | Gross Revenue, as reported | $440,965 | $339,252 | 30% | | Sales Volume (MMSF) | 1,581 | 1,499 | 5% | | Average Net Sales Price, per MSF | $226.07 | $183.73 | 23% | | Operating Earnings | $173,829 | $129,584 | 34% | - Revenue increased 30% for both the three and six months ended September 30, 2022, driven by higher gross sales prices and sales volume[149][151] - Operating Earnings increased 35% (three months) and 34% (six months), primarily due to higher gross sales prices and sales volume, partially offset by increased operating costs (freight, energy, and raw materials)[150][152] Light Materials - Recycled Paperboard This subsection details the Recycled Paperboard segment's revenue, sales volume, average net sales price, and operating earnings Recycled Paperboard Segment Performance (Three Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :-------------------------------------- | :----------- | :----------- | :--------- | | Gross Revenue (incl. intersegment) | $53,673 | $47,798 | 12% | | Sales Volume (M Tons) | 85 | 87 | (2)% | | Average Net Sales Price, per ton | $603.62 | $524.54 | 15% | | Operating Earnings | $5,579 | $981 | 469% | Recycled Paperboard Segment Performance (Six Months Ended Sep 30) | Metric | Sep 30, 2022 | Sep 30, 2021 | Change (%) | | :-------------------------------------- | :----------- | :----------- | :--------- | | Gross Revenue (incl. intersegment) | $107,746 | $91,065 | 18% | | Sales Volume (M Tons) | 169 | 171 | (1)% | | Average Net Sales Price, per ton | $607.73 | $511.76 | 19% | | Operating Earnings | $9,395 | $4,318 | 118% | - Revenue increased 12% (three months) and 18% (six months) primarily due to higher gross sales prices from long-term sales agreements, despite a slight decrease in sales volume[155][157] - Operating Earnings increased significantly by 469% (three months) and 118% (six months), driven by higher gross sales prices, partially offset by increased input costs (energy, chemicals, freight, and fiber)[156][158] Critical Accounting Policies and Estimates This section highlights key accounting policies and estimates requiring significant management judgment, such as those for long-lived assets and business combinations - The Company's critical accounting policies requiring significant judgment include those related to long-lived assets, goodwill, and business combinations[161] - Management reviews the application of accounting policies and estimates with the Audit Committee and independent registered public accounting firm[161] Liquidity and Capital Resources This section assesses the company's ability to generate and manage cash, fund operations, and meet financial obligations, including debt and capital expenditures - The Company believes it has access to sufficient financial resources to fund its business, operations, contractual obligations, capital expenditures, and debt service for at least the next twelve months[163][178] Cash Flow This subsection analyzes the company's cash flows from operating, investing, and financing activities, and changes in cash and equivalents Summary of Cash Flows (Six Months Ended Sep 30, thousands) | Cash Flow Activity | Sep 30, 2022 | Sep 30, 2021 | | :----------------------------------------------- | :----------- | :----------- | | Net Cash Provided by Operating Activities | $300,445 | $261,462 | | Net Cash Used in Investing Activities | ($201,700) | ($26,777) | | Net Cash Used in Financing Activities | ($34,021) | ($457,991) | | Net Increase (Decrease) in Cash and Cash Equivalents | $64,724 | ($223,306) | - Net Cash Provided by Operating Activities increased by $38.9 million to $300.4 million, primarily due to higher Net Earnings[165] - Net Cash Used in Investing Activities increased by $174.9 million to $201.7 million, mainly due to $158.5 million for the ConAgg and Terminal Acquisitions[170] - Net Cash Used In Financing Activities decreased by $424.0 million to $34.0 million, primarily due to higher net borrowings and lower amounts paid for early debt termination, debt issuance costs, and share repurchases[171] - The debt-to-capitalization ratio and net-debt-to-capitalization ratio were 49.7% and 47.8%, respectively, at September 30, 2022, up from 45.6% and 45.1% at March 31, 2022[172] Debt Financing Activities This subsection details the company's revolving credit facility, available borrowings, and compliance with debt covenants - The Revolving Credit Facility has a borrowing capacity of $750.0 million, with $543.6 million available borrowings at September 30, 2022, net of outstanding letters of credit[174] - The Company has no off-balance sheet debt or outstanding debt guarantees[174] - Future liquidity and capital requirements may vary based on market conditions in the construction industry, compliance with debt covenants, competition, and general economic factors[178] Dividends This subsection provides information on dividends paid to stockholders and the company's dividend policy Dividends Paid to Stockholders (Six Months Ended Sep 30, thousands) | Metric | Sep 30, 2022 | Sep 30, 2021 | | :--------------- | :----------- | :----------- | | Dividends Paid | $19,149 | $10,547 | - The Company reinstated its quarterly dividend on May 19, 2021, with each payment subject to Board of Directors' review and approval[181] Share Repurchases This subsection details the company's share repurchase programs, including authorized amounts and shares purchased - On May 17, 2022, the Board authorized an additional 7.5 million share repurchases, bringing the cumulative total to 55.9 million shares since April 1994[182] - Through September 30, 2022, approximately 46.8 million shares have been repurchased[182] Share Repurchase Activity (Year-to-Date September 30, 2022) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | | :-------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | | Quarter 1 Totals | 884,000 | $124.00 | | | Quarter 2 Totals | 840,000 | $119.98 | | | Year-to-Date Totals | 1,724,000 | $122.04 | 9,098,992 | Capital Expenditures This subsection outlines capital expenditures by category and provides projections for future investment Capital Expenditures by Category (thousands) | Category | 2022 (Six Months) | 2021 (Six Months) | | :------------------------------------ | :---------------- | :---------------- | | Land and Quarries | $10,157 | $1,378 | | Plants | $21,944 | $22,480 | | Buildings, Machinery, and Equipment | $11,148 | $2,919 | | Total Capital Expenditures | $43,249 | $26,777 | - Capital expenditures for fiscal 2023 are expected to range from $110.0 million to $120.0 million, allocated across both Heavy Materials and Light Materials sectors[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily related to fluctuations in interest rates on its variable-rate debt and commodity price changes for key inputs, and its strategies to manage these risks - The Company is exposed to market risks from interest rate fluctuations on its Revolving Credit Facility and Term Loan; a hypothetical 100 basis point increase would raise annual interest expense by approximately $4.0 million[191] - The Company is subject to commodity risk from price changes in coal, coke, natural gas, and power, and attempts to limit exposure by entering into contracts or increasing the use of alternative fuels[192] - At present, the Company does not utilize derivative financial instruments[191] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, ensuring timely and accurate financial reporting - The Company has established a system of disclosure controls and procedures designed to ensure timely and accurate reporting of information required by the Securities Exchange Act of 1934[193] - Based on an evaluation, the CEO and CFO concluded that these disclosure controls and procedures were effective as of September 30, 2022[193] PART II. OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity sales, mine safety, and exhibits Item 1. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, but management believes the ultimate outcome of any currently pending legal proceeding will not have a material effect on its consolidated financial condition, results of operations, or liquidity - The Company may be involved in litigation or other legal proceedings related to worker safety, environmental matters, commercial contracts, and other business activities[195] - Management believes that the ultimate outcome of any currently pending legal proceeding will not have a material effect on the Company's consolidated financial condition, results of operations, or liquidity[195] Item 1A. Risk Factors This section refers readers to the comprehensive discussion of risk factors in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022, for factors that could impact its operations, financial condition, and liquidity - For information regarding factors that could impact the Company's results of operations, financial condition, and liquidity, refer to Part 1. Item 1A. Risk Factors in the Annual Report on Form 10-K for the fiscal year ended March 31, 2022[197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The required disclosure for unregistered sales of equity securities and use of proceeds is incorporated by reference from the "Share Repurchases" section within Management's Discussion and Analysis of Financial Condition and Results of Operations - The disclosure required under this Item is included in the "Share Repurchases" section of "Management's Discussion and Analysis of Results of Operations and Financial Condition" in this Quarterly Report on Form 10-Q[198] Item 4. Mine Safety Information Information concerning mine safety violations and other regulatory matters is provided in Exhibit 95 to this Form 10-Q, as required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act - Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-Q[199] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including director compensation documents, certifications from the Chief Executive Officer and Chief Financial Officer, mine safety disclosures, and XBRL-related documents - Exhibits include Director Compensation Summary, Form of Director Restricted Stock Agreement, Form of Director Stock Option Agreement, CEO and CFO certifications, Mine Safety Disclosure, and Inline XBRL documents[202][203][204] Signatures This section contains the official signatures of the company's principal executive, financial, and accounting officers, certifying the report on October 26, 2022 - The report is signed by Michael R. Haack (President and CEO), D. Craig Kesler (Executive Vice President – Finance and Administration and CFO), and William R. Devlin (Senior Vice President – Controller and Chief Accounting Officer) on October 26, 2022[210]