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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended

June 30, 2021

Commission File Number 1-12984

 

EAGLE MATERIALS INC.

(Exact name of registrant as specified in its charter)

 

Delaware (State of Incorporation)

75-2520779 (I.R.S. Employer Identification No.)

5960 Berkshire Lane, Suite 900, Dallas, Texas 75225 (Address of principal executive offices)

(214) 432-2000 (Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock (par value $.01 per share)

 

EXP

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes      No  

As of July 26, 2021, the number of outstanding shares of common stock was:

 

Class

 

Outstanding Shares

Common Stock, $.01 Par Value

 

41,882,068

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION (unaudited)

 

 

 

 

 

Page

Item 1.

 

Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Statements of Earnings for the Three Months Ended June 30, 2021 and 2020

 

1

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Earnings for the Three Months Ended June 30, 2021 and 2020

 

2

 

 

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2021, and March 31, 2021

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2021 and 2020

 

4

 

 

 

 

 

 

 

Consolidated Statements of Stockholders' Equity for the Three Months Ended June 30, 2021 and 2020

 

5

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

6

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

34

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1a.

 

Risk Factors

 

35

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

Item 4.

 

Mine Safety Information

 

35

 

 

 

 

 

Item 6.

 

Exhibits

 

36

 

 

 

 

 

SIGNATURES

 

37

 

 

 

 


 

 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

 

 

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands, except share and per share data)

 

Revenue

 

$

475,770

 

 

$

426,989

 

Cost of Goods Sold

 

 

349,259

 

 

 

324,692

 

Gross Profit

 

 

126,511

 

 

 

102,297

 

Equity in Earnings of Unconsolidated Joint Venture

 

 

7,970

 

 

 

7,796

 

Corporate General and Administrative Expense

 

 

(9,468

)

 

 

(17,789

)

Gain on Sale of Businesses

 

 

 

 

 

51,973

 

Other Non-Operating Income (Loss)

 

 

3,678

 

 

 

(309

)

Interest Expense, net

 

 

(6,972

)

 

 

(14,041

)

Earnings from Continuing Operations Before Income Taxes

 

 

121,719

 

 

 

129,927

 

Income Taxes

 

 

(26,392

)

 

 

(32,836

)

Earnings from Continuing Operations

 

 

95,327

 

 

 

97,091

 

Loss from Discontinued Operations, net of Income Taxes

 

 

 

 

 

(885

)

Net Earnings

 

$

95,327

 

 

$

96,206

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS (LOSS) PER SHARE

 

 

 

 

 

 

 

 

Continuing Operations

 

$

2.27

 

 

$

2.34

 

Discontinued Operations

 

 

 

 

$

(0.02

)

Net Earnings

 

$

2.27

 

 

$

2.32

 

DILUTED EARNINGS PER SHARE

 

 

 

 

 

 

 

 

Continuing Operations

 

$

2.25

 

 

$

2.33

 

Discontinued Operations

 

 

 

 

$

(0.02

)

Net Earnings

 

$

2.25

 

 

$

2.31

 

AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

Basic

 

 

42,028,619

 

 

 

41,410,794

 

Diluted

 

 

42,437,366

 

 

 

41,563,268

 

CASH DIVIDENDS PER SHARE

 

$

 

 

$

0.10

 

 

See notes to unaudited consolidated financial statements.


 

1


 

 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (unaudited)

 

 

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

Net Earnings

 

$

95,327

 

 

$

96,206

 

Net Actuarial Change in Defined Benefit Plans

 

 

 

 

 

 

 

 

Amortization of Net Actuarial Loss

 

 

36

 

 

 

33

 

Tax Expense

 

 

(9

)

 

 

(8

)

Comprehensive Earnings

 

$

95,354

 

 

$

96,231

 

 

See notes to unaudited consolidated financial statements.


 

2


 

 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

306,542

 

 

$

263,520

 

Restricted Cash

 

 

5,000

 

 

 

5,000

 

Accounts Receivable, net of allowances of $7.0 at June 30, 2021

and $8.1 at March 31, 2021

 

 

187,411

 

 

 

147,133

 

Inventories

 

 

217,052

 

 

 

235,749

 

Income Tax Receivable

 

 

 

 

 

2,838

 

Prepaid and Other Assets

 

 

15,298

 

 

 

7,449

 

Total Current Assets

 

 

731,303

 

 

 

661,689

 

Property, Plant, and Equipment, net

 

 

1,641,063

 

 

 

1,659,100

 

Notes Receivable

 

 

8,485

 

 

 

8,419

 

Investment in Joint Venture

 

 

76,369

 

 

 

75,399

 

Operating Lease Right-of-Use Assets

 

 

24,776

 

 

 

25,811

 

Goodwill and Intangible Assets, net

 

 

391,211

 

 

 

392,315

 

Other Assets

 

 

17,623

 

 

 

15,948

 

 

 

$

2,890,830

 

 

$

2,838,681

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts Payable

 

$

96,923

 

 

$

84,171

 

Accrued Liabilities

 

 

74,947

 

 

 

78,840

 

Income Taxes Payable

 

 

11,016

 

 

 

 

Operating Lease Liabilities

 

 

6,127

 

 

 

6,343

 

Total Current Liabilities

 

 

189,013

 

 

 

169,354

 

Long-term Debt

 

 

1,009,035

 

 

 

1,008,616

 

Noncurrent Operating Lease Liabilities

 

 

32,763

 

 

 

34,444

 

Other Long-term Liabilities

 

 

40,902

 

 

 

41,291

 

Deferred Income Taxes

 

 

227,785

 

 

 

225,986

 

Total Liabilities

 

 

1,499,498

 

 

 

1,479,691

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Preferred Stock, Par Value $0.01; Authorized 5,000,000 Shares; None Issued

 

 

 

 

 

 

Common Stock, Par Value $0.01; Authorized 100,000,000 Shares;

   Issued and Outstanding 42,101,619 and 42,370,878 Shares, respectively

 

 

421

 

 

 

424

 

Capital in Excess of Par Value

 

 

10,035

 

 

 

62,497

 

Accumulated Other Comprehensive Losses

 

 

(3,413

)

 

 

(3,440

)

Retained Earnings

 

 

1,384,289

 

 

 

1,299,509

 

Total Stockholders’ Equity

 

 

1,391,332

 

 

 

1,358,990

 

 

 

$

2,890,830

 

 

$

2,838,681

 

 

See notes to the unaudited consolidated financial statements.

 

3


 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net Earnings

 

$

95,327

 

 

$

96,206

 

Adjustments to Reconcile Net Earnings to Net Cash Provided

by Operating Activities, Net of Effect of Non-Cash Activity

 

 

 

 

 

 

 

 

Depreciation, Depletion and Amortization

 

 

31,944

 

 

 

31,937

 

Deferred Income Tax Provision

 

 

1,799

 

 

 

(3,736

)

Stock Compensation Expense

 

 

2,456

 

 

 

4,760

 

Gain on Sale of Subsidiaries

 

 

 

 

 

(51,973

)

Equity in Earnings of Unconsolidated Joint Venture

 

 

(7,970

)

 

 

(7,796

)

Distributions from Joint Venture

 

 

7,000

 

 

 

9,500

 

Changes in Operating Assets and Liabilities

 

 

 

 

 

 

 

 

Accounts and Notes Receivable

 

 

(40,344

)

 

 

(45,878

)

Inventories

 

 

18,697

 

 

 

23,091

 

Accounts Payable and Accrued Liabilities

 

 

(2,938

)

 

 

4,398

 

Other Assets

 

 

(8,704

)

 

 

(2,030

)

Income Taxes Payable (Receivable)

 

 

13,854

 

 

 

36,834

 

Net Cash Provided by Operating Activities

 

 

111,121

 

 

 

95,313

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Additions to Property, Plant, and Equipment

 

 

(11,935

)

 

 

(25,991

)

Proceeds from Sale of Businesses

 

 

 

 

 

93,482

 

Net Cash Provided by (Used in) Investing Activities

 

 

(11,935

)

 

 

67,491

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Decrease in Credit Facility

 

 

 

 

 

(75,000

)

Dividends Paid to Stockholders

 

 

 

 

 

(4,163

)

Purchase and Retirement of Common Stock

 

 

(61,929

)

 

 

 

Proceeds from Stock Option Exercises

 

 

8,222

 

 

 

 

Payment of Debt Issuance Costs

 

 

(1,243

)

 

 

(1,718

)

Shares Redeemed to Settle Employee Taxes on Stock Compensation

 

 

(1,214

)

 

 

(1,130

)

Net Cash Used in Financing Activities

 

 

(56,164

)

 

 

(82,011

)

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

 

43,022

 

 

 

80,793

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

 

268,520

 

 

 

118,648

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

 

$

311,542

 

 

$

199,441

 

 

See notes to the unaudited consolidated financial statements.


 

4


 

EAGLE MATERIALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

 

 

 

Common

Stock

 

 

Capital in

Excess of

Par Value

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Losses

 

 

Total

 

 

 

(dollars in thousands)

 

Balance at March 31, 2020

 

$

416

 

 

$

10,943

 

 

$

960,065

 

 

$

(3,581

)

 

$

967,843

 

Net Earnings

 

 

 

 

 

 

 

 

96,206

 

 

 

 

 

 

96,206

 

Stock Compensation Expense

 

 

2

 

 

 

4,758

 

 

 

 

 

 

 

 

 

4,760

 

Shares Redeemed to Settle Employee Taxes

 

 

 

 

 

(1,130

)

 

 

 

 

 

 

 

 

(1,130

)

Sale of Business with Unfunded Pension Liability

 

 

 

 

 

 

 

 

 

 

 

254

 

 

 

254

 

Unfunded Pension Liability, net of tax

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

25

 

Balance at June 30, 2020

 

$

418

 

 

$

14,571

 

 

$

1,056,271

 

 

$

(3,302

)

 

$

1,067,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

Stock

 

 

Capital in

Excess of

Par Value

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Losses

 

 

Total

 

 

 

(dollars in thousands)

 

Balance at March 31, 2021

 

$

424

 

 

$

62,497

 

 

$

1,299,509

 

 

$

(3,440

)

 

$

1,358,990

 

Net Earnings

 

 

 

 

 

 

 

 

95,327

 

 

 

 

 

 

95,327

 

Stock Compensation Expense

 

 

1

 

 

 

2,455

 

 

 

 

 

 

 

 

 

2,456

 

Stock Option Exercises and Restricted Share Issuance

 

 

 

 

 

8,222

 

 

 

 

 

 

 

 

 

8,222

 

Shares Redeemed to Settle Employee Taxes

 

 

 

 

 

(1,214

)

 

 

 

 

 

 

 

 

(1,214

)

Purchase and Retirement of Common Stock

 

 

(4

)

 

 

(61,925

)

 

 

 

 

 

 

 

 

(61,929

)

Dividends to Stockholders

 

 

 

 

 

 

 

 

(10,547

)

 

 

 

 

 

(10,547

)

Unfunded Pension Liability, net of tax

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

27

 

Balance at June 30, 2021

 

$

421

 

 

 

10,035

 

 

$

1,384,289

 

 

$

(3,413

)

 

$

1,391,332

 

 

See notes to the unaudited consolidated financial statements.


 

5


 

 

Eagle Materials Inc. and Subsidiaries
Notes to Consolidated Financial Statements

 

(A) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements as of and for the three-month period ended June 30, 2021 include the accounts of Eagle Materials Inc. and its majority-owned subsidiaries (collectively, the Company, us, or we) and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 21, 2021.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. In our opinion, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the information in the following unaudited consolidated financial statements of the Company have been included. The results of operations for interim periods are not necessarily indicative of the results for the full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes, eliminates certain exceptions within existing income tax guidance, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. We adopted this ASU on April 1, 2021 on a prospective basis. The adoption of this guidance did not have a material effect on our consolidated financial statements.

 

(B) SUPPLEMENTAL CASH FLOW INFORMATION  

Supplemental cash flow information is as follows:

 

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

Cash Payments

 

 

 

 

 

 

 

 

Interest

 

$

2,945

 

 

$

9,562

 

Income Taxes

 

 

10,010

 

 

 

 

Operating Cash Flows Used for Operating Leases

 

 

2,030

 

 

 

3,195

 

 

 


 

6


 

 

 

(C) Discontinued Operations and Other Dispositions

Discontinued Operations

On September 18, 2020, we sold our Oil and Gas Proppants business (the Proppants Business) to Smart Sand, Inc., a Delaware corporation (the Purchaser), pursuant to an Equity Purchase and Sale Agreement (the Purchase Agreement) between the Company and the Purchaser. The sale of this business excluded certain assets, namely real property and equipment in south Texas, real property in Illinois, and certain other assets. The purchase price (the Purchase Price) paid by the Purchaser for the acquisition of the Proppants Business was $2.0 million paid in shares of common stock of the Purchaser. Shares representing $0.3 million of the Purchase Price are being held in escrow as a source of recovery for any indemnification claims by the Purchaser. The sale resulted in a gain of approximately $9.2 million.

In connection with the execution of the Purchase Agreement, we also entered into a Loan and Security Agreement, dated September 18, 2020 (the Loan and Security Agreement), by and among the Company, as lender; the Purchaser, as borrower; and other parties thereto. Pursuant to the Loan and Security Agreement, the Company will loan the Purchaser up to $5.0 million for working capital and operating, maintenance, and administrative expenses of the Proppants Business during the one-year period following the closing. The Company has deposited the $5.0 million into an escrow account. Up to 50% of the amounts outstanding under the Loan and Security Agreement may be repaid by the Purchaser in shares of the Purchaser’s common stock. Borrowings under the Loan and Security Agreement will bear interest at a fixed rate of 6.00% per annum during the one-year period following the closing. Any amounts after the one-year period will bear interest at a fixed rate of 8.00% per annum and will mature on September 18, 2024. There were no outstanding borrowings at June 30, 2021. The $5.0 million in the escrow account at June 30, 2021 is classified as Restricted Cash on the Consolidated Balance Sheet.  

The sale of the Proppants Business, which was previously disclosed as a reportable segment, was determined to meet the discontinued operations accounting criteria. Certain expenses, which were previously included in the Oil and Gas Proppants operating segment, do not qualify for classification within discontinued operations and have been reclassified from the operating segment to continuing operations. These expenses primarily relate to lease agreements not included in the sale of the Proppants Business.

The following is a summary of operating results included in Earnings (Loss) from Discontinued Operations for the three months ended June 30, 2020.

 

 

For the Three Months Ended           June 30, 2020

 

 

 

(dollars in thousands)

 

Revenue

 

$

1,031

 

Cost of Goods Sold

 

 

2,349

 

Gross Profit

 

 

(1,318

)

Other Non-Operating Income

 

 

182

 

Loss from Discontinued Operations

 

 

(1,136

)

Income Tax Benefit

 

 

251

 

Net Loss from Discontinued Operations

 

$

(885

)

 

7


 

 

 

The significant components of our Consolidated Statements of Cash Flows for discontinued operations for the three months ended June 30, 2020 are as follows:

 

 

 

For the Three Months Ended          June 30, 2020

 

 

 

(dollars in thousands)

 

Depreciation and Amortization

 

$

121

 

Net Change in Inventory

 

 

 

Capital Expenditures

 

 

 

Other Dispositions

On April 17, 2020, we sold our Western Aggregates LLC (Western) and Mathews Readymix LLC (Mathews) businesses to Teichert, Inc. for an aggregate purchase price of approximately $93.5 million, subject to certain post-closing adjustments. This sale resulted in a gain of approximately $52.0 million. Western and Mathews were part of our Concrete and Aggregates operating segment, and their results of operations were included in our financial statements for the period from April 1, 2020 through April 17, 2020.  

Revenue and Operating Earnings from Western and Mathews, collectively, were approximately $1.7 million and $0.1 million, respectively, for the three months ended June 30, 2020.

(D) REVENUE

We earn Revenue primarily from the sale of products, which include cement, concrete, aggregates, gypsum wallboard and recycled paperboard. The vast majority of Revenue from the sale of cement, concrete, aggregates, and gypsum wallboard are originated by purchase orders from our customers, who are primarily third-party contractors and suppliers. Revenue from our Recycled Paperboard segment is generated primarily through long-term supply agreements that mature between 2023 and 2025. We invoice customers upon shipment, and our collection terms range from 30-75 days. Revenue from the sale of cement, concrete, aggregates, and gypsum wallboard that is not related to long-term supply agreements is recognized upon shipment of the related products to customers, which is when title and ownership are transferred, and the customer is obligated to pay.  

Revenue from sales under our long-term supply agreements is also recognized upon transfer of control to the customer, which generally occurs at the time the product is shipped from the production facility or terminal location. Our long-term supply agreements with customers define, among other commitments, the volume of product that we must provide and the volume that the customer must purchase by the end of the defined periods. Pricing structures under our agreements are generally market-based, but are subject to certain contractual adjustments. Shortfall amounts, if applicable under these arrangements, are constrained and not recognized as Revenue until an agreement is reached with the customer and, therefore, are not subject to the risk of reversal. 

The Company offers certain of its customers, including those with long-term supply agreements, rebates and incentives, which we treat as variable consideration. We adjust the amount of Revenue recognized for the variable consideration using the most likely amount method based on past history and projected volumes in the rebate and incentive period. Any amounts billed to customers for taxes are excluded from Revenue.

The Company has elected to treat freight and delivery charges we pay for the delivery of goods to our customers as a fulfilment activity rather than a separate performance obligation. When we arrange for a third party to deliver products to customers, fees for shipping and handling that are billed to the customer are recorded as Revenue, while costs we incur for shipping and handling are recorded as expenses and included in Cost of Goods Sold.

Other Non-Operating Income includes lease and rental income, asset sale income, non-inventoried aggregates sales income, distribution center income, and trucking income, as well as other miscellaneous revenue items and costs that have not been allocated to a business segment.

 

8


 

See Footnote (N) to the Unaudited Consolidated Financial Statements for disaggregation of revenue by segment.

(E) ACCOUNTS AND NOTES RECEIVABLE

Accounts Receivable have been shown net of the allowance for doubtful accounts of $7.0 million and $8.1 million at June 30, 2021 and March 31, 2021, respectively. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from our customers. The allowance for non-collection of receivables is based upon analysis of economic trends in the construction industry, detailed analysis of the expected collectability of accounts receivable that are past due, and the expected collectability of overall receivables. We have no significant credit risk concentration among our diversified customer base.

We had Notes Receivable totaling approximately $8.5 million at June 30, 2021, none of which was classified as current. We lend funds to certain companies in the ordinary course of business, and the notes bear interest, on average, at 3.1%. Remaining unpaid amounts, plus accrued interest, mature in fiscal 2025. The notes are collateralized by certain assets of the borrowers, namely property and equipment, and are generally payable monthly. We monitor the credit risk of each borrower by assessing the timeliness of payments, credit history, credit metrics, and our ongoing interactions with each borrower.

 

(F) INVENTORIES

Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or net realizable value. Raw Materials and Materials-in-Progress include clinker, which is an intermediary product before it is ground into cement powder. Quantities of Raw Materials and Materials-in-Progress, Aggregates and Coal inventories, are based on measured volumes, subject to estimation based on the size and location of the inventory piles, and converted to tonnage using standard inventory density factors. Inventories consist of the following:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

 

 

(dollars in thousands)

 

Raw Materials and Materials-in-Progress

 

$

79,200

 

 

$

92,696

 

Finished Cement

 

 

31,815

 

 

 

34,362

 

Aggregates

 

 

3,211

 

 

 

2,933

 

Gypsum Wallboard

 

 

4,354

 

 

 

4,177

 

Paperboard

 

 

4,321

 

 

 

5,031

 

Repair Parts and Supplies

 

 

85,020

 

 

 

86,750

 

Fuel and Coal

 

 

9,131

 

 

 

9,800

 

 

 

$

217,052

 

 

$

235,749

 

 

(G) ACCRUED EXPENSES

Accrued Expenses consist of the following:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

 

 

(dollars in thousands)

 

Payroll and Incentive Compensation

 

$

23,023

 

 

$

32,336

 

Benefits

 

 

15,268

 

 

 

14,979

 

Interest

 

 

6,632

 

 

 

3,089

 

Property Taxes

 

 

8,145

 

 

 

6,683

 

Power and Fuel

 

 

2,089

 

 

 

2,350

 

Freight

 

 

2,280

 

 

 

1,575

 

Legal and Professional

 

 

7,274

 

 

 

9,511

 

Sales and Use Tax

 

 

1,816

 

 

 

1,265

 

Other

 

 

8,420

 

 

 

7,052

 

 

 

$

74,947

 

 

$

78,840

 

 

 

9


 

 

(H) LEASES

We lease certain real estate, buildings, and equipment. Certain of these leases contain escalations of rent over the term of the lease, as well as options for us to extend the term of the lease at the end of the original term. These extensions range from periods of one year to twenty years. Our lease agreements do not contain material residual value guarantees or material restrictive covenants. In calculating the present value of future minimum lease payments, we use the rate implicit in the lease if it can be determined. Otherwise we use our incremental borrowing rate in effect at the commencement of the lease to determine the present value of the future minimum lease payments. Additionally, we lease certain equipment under short-term leases with initial terms of less than twelve months, which are not recorded on the balance sheet.

Lease expense for our operating and short-term leases is as follows:

 

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

Operating Lease Cost

 

$

1,514

 

 

$

1,796