UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT

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

For the Fiscal Year Ended

March 31, 2023

Commission File No. 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)

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ NO ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ No ☒

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 (§232.405 of this chapter) 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, a smaller reporting company or emerging growth company. See definition 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

The aggregate market value of the voting stock held by nonaffiliates of the Company at September 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $3.9 billion.

As of May 17, 2023, the number of outstanding shares of common stock was:

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I

ITEM 1. Business

Overview

Eagle Materials Inc., through its subsidiaries, (the Company, which may be referred to as we, our, or us) is a leading manufacturer of heavy construction materials and light building materials in the United States. Our primary products, portland Cement and Gypsum Wallboard, are commodities that are essential in commercial and residential construction; public construction projects to build, expand, and repair roads and highways; and repair and remodel activities. Demand for our products is generally cyclical and seasonal, depending on economic and geographic conditions. We distribute our products across many United States markets, which provides us with regional economic diversification.

The Company was founded in 1963 as a building materials subsidiary of Centex Corporation (Centex). It operated as a public company under the name Centex Construction Products, Inc. from April 19, 1994 to January 30, 2004, at which time Centex completed a tax-free distribution of its shares to its shareholders, and the Company was renamed Eagle Materials Inc. (NYSE: EXP).

Competitive Strengths

We benefit from several competitive strengths that have enabled us to deliver consistently strong operating results and profitable growth.

Strategically located plant network

Our plants are located near both our raw material reserves and customers in high-growth U.S. markets. The proximity to raw materials and customers lowers our transportation costs and carbon footprint. The location of our plants across several high-growth regions within the United States provides geographic diversification, reducing our exposure to individual regional construction cycles, and enabling us to move product between different plants in our network as needed. The integrated nature of our plant network enables us to supply clients from more than one plant when necessary.

Low-cost producer position

Our modern production lines, consistent maintenance programs, access to low-cost raw materials, and our focus on continuous efficiency improvement help us minimize production costs across the network.

Production flexibility

We manage our production lines and work shifts to enable us to operate our plants at high utilization levels generally, while providing optimal production flexibility. Accordingly, we can quickly position for downturns, and quickly and efficiently ramp up when demand rebounds.

Substantial owned raw material reserves and resources

We own between 25 to 50 years of primary raw material reserves for each of our cement and wallboard facilities, providing certainty of supply and enhancing our ability to control the cost of our primary raw materials.

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Proven management

Our current management team has significant and valuable expertise, with an average industry experience of more than 20 years, spanning several business cycles. Management’s conservative balance sheet strategy focuses on maintaining prudent levels of leverage and liquidity through the business cycle to protect the balance sheet through downturns and enable us to take advantage of growth opportunities, whether organic or through acquisitions.

Strategy

We rigorously pursue the following overarching strategic objectives that we believe consistently differentiate us from our competitors and contribute to our margin performance and growth: maintaining our position as a low-cost producer in all our markets, maintaining a decentralized operating structure, operating solely in the United States in regionally diverse and attractive markets, achieving profitable growth through both strategic acquisitions and the organic development of our asset network, and operating in a socially and environmentally responsible manner.

Continuously innovate to advance our low-cost producer position

Our goal and the bedrock of our strategy is to be a low-cost producer in each of the markets in which we compete. We have right-sized capacity to service the markets we cover, and we focus diligently on reducing costs and making our operations more efficient to manage free cash flow through the economic cycle. Maintaining our low-cost position provides meaningful competitive, financial, and environmental benefits. The products we make are basic necessities, and competition is often based largely on price, with consistent quality and customer service also being important considerations. Thus, being a low-cost producer is a competitive advantage and can lead to higher margins, better returns and stronger free cash flow generation. Being a low-cost producer is not only key to our commercial success, it also aligns to a significant extent with our commitment to sustainable environmental practices. To maintain our low-cost producer position, we are always innovating our production processes with the aim of using fewer resources to make the same products. We regularly invest in technologies at our facilities to control emissions and to modify the fuels that we burn.

Maintain a decentralized operating structure

The Company operates through a decentralized structure: operations are managed separately, and products are branded and marketed by our individual companies. This regional-market strategy provides several benefits, including increased familiarity with our customers, higher brand recognition, and lower transportation costs, which is a meaningful advantage in the construction materials industry. We view our cement plant system and our wallboard plant system as integrated networks, allowing us to ship products, minimize freight costs, and serve customers from different plants when necessary. The impact of regional construction cycles on our businesses is mitigated to some degree by our geographic diversification and integrated network of plants.

Operate in regionally diverse and attractive markets

Demand for our products depends on construction activity, which tends to correlate with population growth. While the Company’s markets include most of the United States, approximately 70% of our total revenue is generated in ten states: Colorado, Illinois, Kansas, Kentucky, Missouri, Nebraska, Nevada, Ohio, Oklahoma, and Texas. Population growth is a major driver of construction products and building materials demand. Population is expected to increase approximately 10% between the 2020 census and

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2050 for these ten states, compared with 7% population growth for the United States as a whole, according to the latest update in April 2023 by Moody’s Analytics.

Achieve profitable growth through acquisition and organic development

We seek to grow the Company through acquisitions and the organic development of our asset network. Since 2012, we have invested approximately $2.2 billion to expand the Heavy Materials sector. These investments have more than doubled our U.S. cement capacity, making us the largest independent U.S. cement producer.

This expansion has been achieved mainly through acquisitions, which have expanded our geographic footprint so that we now have a contiguous and integrated cement system from northern California to western Pennsylvania and south to Texas. We have completed additional bolt-on acquisitions, which also contribute to our expanded geographic footprint.

The Company will continue to proactively pursue acquisition opportunities. Our free cash flow and balance sheet strength enable us to consider acquisitions and organic growth opportunities that align with our stringent return-on-investment objectives.

Operate in a socially and environmentally responsible manner

We aim to conduct all our operations in a way that enhances returns and maximizes positive social impact. We have defined our environmental and social responsibility priorities and developed a roadmap for pursuing them. Our initiatives encompass land use, water, human resources, emissions, and the reduction of the carbon impacts of our products, which are all areas that we view as essential to our success. Our roadmap includes specific targets and timeframes in each of these areas.

Management is responsible for implementing these initiatives, and our Board of Directors oversees progress. Management submits quarterly progress reports to the Board, and ESG is a regular topic of discussion at every quarterly Board meeting. Compensation for key executives is linked, in part, to the achievement of specific ESG goals. In 2022, over half of our Chief Executive Officer’s annual bonus was related to the advancement of the Company’s ESG priorities.

Our latest Environmental and Social Disclosure Report provides information related to our roadmap, targets, and progress in improving our efficiency and long-term sustainability of our resources, ensuring the safety of our employees (see also Human Capital below), protecting human rights, and delivering value to our shareholders and society. The above reference to our Environmental and Social Disclosure Report does not mean that such report is incorporated by reference herein.

Capital allocation priorities

Our capital allocation priorities are intended to enhance shareholder value and are as follows: 1. investing in growth opportunities that meet our strict financial return standards and are consistent with our strategic focus; 2. operating capital investments to maintain and strengthen our low-cost producer positions; and 3. returning excess cash to shareholders through our share repurchase program and dividends. In the past five years, we have invested nearly $857.8 million in acquisitions, $476.7 million in organic capital expenditures, and approximately $1.7 billion in share repurchases and dividends. Since becoming a public company in 1994, our share count is down nearly 48%, and we have returned approximately $3.2 billion to our shareholders through a combination of share repurchases and dividends.

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FISCAL 2023 EVENTS

Financial Highlights

Fiscal 2023 was a strong year for the Company, with increased earnings in both our Cement and Gypsum Wallboard segments. Financial highlights for fiscal 2023 compared with fiscal 2022 include:

Strategic Highlights

In addition to the above financial highlights, we closed on two acquisitions and amended our revolving credit facility (as amended, the Revolving Credit Facility) during fiscal 2023.

Acquisitions

On April 22, 2022, we acquired the assets of a readymix concrete and aggregates business in northern Colorado (the ConAgg Acquisition). The purchase price of the ConAgg Acquisition was approximately $120.2 million and is included in our Heavy Materials sector, in the Concrete and Aggregates segment.

On September 16, 2022, we acquired a cement distribution terminal located in Nashville, Tennessee (the Terminal Acquisition). The purchase price of the Terminal Acquisition was approximately $39.5 million and is included in our Heavy Materials sector, in the Cement segment.

Subsequent to year end, on May 3, 2023, we acquired a cement import distribution terminal located in Stockton, California (the Stockton Acquisition). This terminal will be included in our Heavy Materials sector, in the Cement segment, in fiscal 2024.

See Footnote (B) to the Audited Consolidated Financial Statements for more information regarding the above Acquisitions.

Progress on ESG Initiatives

Over the last two years we have made significant progress in reducing our carbon footprint with the introduction of our new Portland Limestone Cement (PLC) product, which has similar performance characteristics, and significantly lower carbon intensity than traditional portland cement. In fiscal 2023, approximately 30% of our cement sales volumes was PLC. We will continue to transition our construction-grade cement from traditional portland cement to PLC during fiscal 2024.

We are also participating in research and innovation in industry-wide carbon capture. In 2022, the U.S. Department of Energy awarded funding to design, build, and operate an engineering-scale Cryogenic Carbon Capture (CCC) process at our Sugar Creek, Missouri cement plant. CCC is an innovative carbon-capture and storage technology with the potential to reduce carbon emissions from fossil-fuel power plants and industrial facilities by 90-99%.

Amendment to the Revolving Credit Facility

On May 5, 2022, we amended our Revolving Credit Facility to, among other things, add a $200.0 million term loan facility (the Term Loan), which was subsequently drawn. We also extend the Revolving Credit Facility to May 2027, established the Term Loan maturity as May 2027, and established a SOFR-based

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reference rate in lieu of a LIBOR-based reference rate for the purpose of calculating interest on the loans outstanding under the Revolving Credit Facility (including the term loan).

HUMAN CAPITAL

As of March 31, 2023, the Company had approximately 2,400 employees, of which approximately 700 are salaried and approximately 1,700 are hourly. Approximately 700 of the hourly employees are employed under collective bargaining agreements and various supplemental agreements with local unions.

Recruiting, developing, and retaining qualified employees is essential to implement our strategy and maintain our low-cost position. The health and safety of our employees is the highest priority of management. We have comprehensive safety and wellness processes and policies, and all of our employees are provided with the training necessary to safely and effectively perform their responsibilities.

In all our businesses we have implemented initiatives to improve safety in the workplace. We hold an annual safety conference during which we review our safety performance, assess the effectiveness of our programs, and determine improvement actions. Specific areas of review include training programs; best practices; and leading indicators, such as near-miss reporting and root cause analysis of all lost-time injuries. We also seek the assistance of outside parties in identifying potential safety trends and ways to mitigate identified risks.

Management reviews a variety of safety metrics, including leading and lagging indicators, and updates are provided to corporate management by the business units monthly throughout the year. During fiscal 2023, all of our business segments recorded lower total recordable incident rate (TRIR) averages than the applicable industry average. These results can be attributed to the continued focus on proactive safety initiatives described above.

Industry Segment Information

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. The primary end market for our Cement and Concrete and Aggregates segments is infrastructure. The primary end market for our Gypsum Wallboard and Recycled Paperboard segments is residential construction.

For information about the financial results of our business segments, including revenue, average net sales prices, sales volume and operating earnings, please see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Heavy Materials

Our Heavy Materials sector provides cement and concrete and aggregates for use in infrastructure, commercial, and residential construction. This sector comprises the Cement and Concrete and Aggregates segments. Demand has been strong for these construction products over the last several years. Cement consumption in the United States, as estimated by the United States Geological Survey (USGS), was up 3% to approximately 121.2 million short tons in calendar 2022, and imported cement consumption represented 21% of total sales in calendar 2022 compared with 18% in calendar 2021.

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Cement

Cement is the basic binding agent for concrete, a primary construction material. The principal sources of demand for cement are public infrastructure, commercial construction, and residential construction, with public infrastructure accounting for nearly 50% of cement demand. Because of its low value-to-weight ratio, the relative cost of transporting cement on land is high and limits the geographic area in which each producer can market its products profitably. Management believes shipments of cement by truck are generally limited to a 150-mile radius from each plant, with the shipping radius increasing to up to 300 miles by rail, and further by barge. Therefore, the U.S. cement industry comprises numerous regional markets rather than a single national market. Cement consumption is affected by the time of year and prevalent weather conditions. Cement sales are generally greatest from spring through the middle of autumn.

The manufacturing process for portland cement primarily involves four main steps, as shown in the graphic below:

We also produce and market other cementitious products, including slag cement and fly ash. Slag granules are obtained from a steel company and ground in our grinding facility. Slag is used in concrete mix designs to improve the durability of concrete and reduce future maintenance costs. Fly ash is a by-product of a coal-fired power plant and acts as an extender of cement in concrete.

Limestone Resources and Reserves

We mine primarily limestone at our quarry operations serving each of our cement plants. The limestone mined at our quarries is then converted to cement, as outlined above. Each of our cement plants has its own dedicated limestone quarries, all of which have adequate access to highways and/or waterways. All of our mines, with the exception of one, are surface mines, which are mined using open pit techniques. We have one underground mine serving our plant in Sugar Creek, Missouri. All of our limestone reserves are located on properties that are in the production stage.

Mineral resources are defined as a concentration or occurrence of material of economic interest in or on the earth's crust in such form, grade or quality, and quantity that there are reasonable prospects for its economic extraction. The amount of resources is a reasonable estimate, taking into account such factors as grade, location, and mining dimensions, while also considering the economic cost of extraction. Mineral resources are classified into three categories, discussed below in decreasing level of confidence. Measured mineral resources are based on conclusive geological evidence and sampling, meaning that evidence is sufficient to test and confirm geological and grade or quality continuity. After applying modifying factors (as noted below in the discussion of mineral reserves), measured resources may be converted to either proven or probable reserves. Indicated resources are based on adequate geological evidence and sampling, meaning that evidence is sufficient to establish geological and grade or quality continuity with reasonable certainty. After applying modifying factors, indicated resources may be converted to probable reserves. Inferred resources are based on limited geological evidence and sampling, meaning that evidence is sufficient only to establish that geological and grade or quality continuity is more likely than not. Inferred resources may not be converted to reserves.

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Mineral reserves are defined as an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of a qualified person (QP), can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted. Mineral reserves are classified into two categories, discussed below in decreasing level of confidence. Proven mineral reserves are the economically mineable part of a measured mineral resource and only result from conversion of a measured mineral resource. Probable mineral reserves are the economically mineable part of an indicated and, in some cases, a measured mineral resource.

As of March 31, 2023, we had 312.8 million tons of proven and probable limestone reserves, and 683.4 million tons of measured and indicated limestone resources, exclusive of limestone reserves. Approximately 84% of our total reserves are owned, with the rest leased. The point of reference for resources, other than the underground properties associated with the Sugar Creek location, is reported on an in situ basis. Sugar Creek underground resources are reported on a recoverable basis. The point of reference for reserves other than the Louisville and Buda locations are reported on a recoverable or "run-of-mine" basis. Louisville and Buda are reported on an in situ basis. We do not consider any of our individual quarries to be material for disclosure purposes. All of our individual locations have at least 25 years of reserves, with most of our locations having in excess of 50 years. We obtained technical reports from a third-party qualified person for each of our locations during fiscal 2022, except LaSalle, Illinois, which was as of January 31, 2023. The other locations were not updated during fiscal 2023 because we did not add any additional properties and did not do any additional exploration on sites during fiscal 2023. Additionally, the change in selling price did not materially increase, which further supports no material change on the estimated resource and reserve amounts calculated in fiscal 2022. The total reserves for fiscal 2023 for all locations with the exception of LaSalle, Illinois were calculated by taking the reserves as of March 31, 2022 and adjusting them for tons mined in fiscal 2023. These technical reports obtained in fiscal 2022 (fiscal 2023 for LaSalle, Illinois) were prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K.

Below is a summary of our limestone resources, exclusive of limestone reserves, serving each of our cement plants at March 31, 2023:

(1) Measured, Indicated and Inferred resources are based on an initial assessment using average selling price assumptions ranging from $13.00 to $18.00 per ton depending on location and market.

(2) Reflects the Company's 50% ownership interest.

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Below is a summary of our limestone reserves serving each of our cement plants at March 31, 2023:

(1) The economic viability of our reserves was determined using average limestone prices ranging from $13.00 to $18.00 per ton, depending on location and market.

(2) Reflects the Company's 50% ownership interest.

Below is a summary the annual production volumes from our cement quarries:

(1) Reflects the Company's 50% ownership interest.

Our total measured and indicated limestone resources were 683.4 million tons at March 31, 2023, compared with 679.2 million tons at March 31, 2022. The 1% increase was due primarily to exploration at our LaSalle, Illinois mine. Our total proven and probable reserves were 312.9 million tons at March 31, 2023, compared with 321.0 million tons at March 31, 2022. The 3% decline was due to depletion during fiscal 2023.

All of our quarries are close to our operating facilities. See Item 2. Properties for the map showing the locations of all operating facilities for the Company.

Internal Controls

We have compiled reserve and resource estimates with the assistance of third-party QP. In general, the procedure for developing these estimates was a collaboration between site personnel and the QP for each individual site. Past exploration data was field verified and quality was verified by reviewing on-site lab certification or third-party testing. Third-party resource modeling was developed using verified past exploration data and field observations. Where applicable, site-specific ore density, recovery, and loss parameters were used in order to calculate reserves. Property ownership, permit status, and lease evaluations were performed by the third-party QP to evaluate the legal right to mine. When evaluating economic viability, past income statements and operating costs were reviewed, as well as future

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operating and capital cost estimates. Commodity pricing was either taken from published USGS reports or from reasonable expected pricing given site location and haulage rates.

Cement Plants

We operate eight modern cement plants (one of which is operated through a joint venture), and one slag grinding facility. Our clinker capacity is approximately 6.7 million tons, which is approximately 6% of total U.S. clinker capacity. Clinker is the intermediary product before it is ground into cement powder. All of our cement plants use dry-process technology, and approximately 80% of our clinker capacity is produced from preheater or preheater/pre-calciner kilns, which are generally more energy-efficient kiln types. In addition to production facilities, we also operate over 30 cement storage and distribution terminals, including the Stockton, California terminal purchased on May 3, 2023.

Our cement companies focus on the U.S. heartland and operate as an integrated network selling product mainly in Colorado, Illinois, Kansas, Kentucky, Indiana, Iowa, Missouri, Nebraska, Nevada, Ohio, Oklahoma, Tennessee, and Texas. Our Joint Venture (as defined below) includes a minority interest in an import terminal in Houston, Texas, from which we can purchase up to 495,000 short tons annually. Our slag facility is located near Chicago, Illinois and has 500,000 tons annual grinding capacity.

The following table sets forth information regarding our cement plants at March 31, 2023 (tons are in thousands of short tons):

(1) One short ton equals 2,000 pounds.

(2) The amount shown represents 100% of plant capacity. This plant is owned by the Joint Venture in which the Company has a 50% interest.

(3) Net of partner’s 50% interest in the Buda, Texas plant.

All of our cement subsidiaries are wholly owned except the Buda, Texas plant, which is owned by Texas Lehigh Cement Company LP, a limited partnership joint venture (the Joint Venture) owned 50% by us, and 50% by Lehigh Cement Company LLC, a subsidiary of Heidelberg Cement AG.

Our cement production, including our 50% share of the cement Joint Venture production, totaled 6.7 million short tons and 6.9 million short tons for fiscal 2023 and fiscal 2022, respectively. Total net Cement sales, including our 50% share of cement sales from the Joint Venture, were 7.1 million short tons and 7.5 million short tons in fiscal 2023 and fiscal 2022, respectively. Total net Cement sales exceed production primarily because of imports through the Houston import terminal.

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Demand, Sales, and Distribution

The principal sources of demand for cement and slag are public infrastructure, private nonresidential construction, and residential construction, with public infrastructure comprising nearly 50% of total demand. Cement consumption in the U.S. increased approximately 3% during calendar 2022, and the Portland Cement Association (PCA) forecasts cement consumption will modestly decline in calendar 2023. Demand for cement is seasonal, particularly in northern states where inclement winter weather often affects construction activity. Cement sales are generally greatest from spring through the middle of autumn. Demand for slag has increased as the availability of fly ash has decreased due to the reduction in the use of coal to generate power.

Because of cement’s low value-to-weight ratio, the relative cost of transporting cement on land is high and limits the geographic area in which each company can profitably market its products. The low value-to-weight ratio generally limits shipments by truck to a 150-mile radius from each plant, up to 300 miles by rail, and further by barge. Consequently, the U.S. cement industry is made up of regional markets rather than a single national selling market. No single cement company has a distribution of plants extensive enough to serve all geographic areas, so profitability is sensitive to shifts in the balance between regional supply and demand.

Environmental and zoning regulations have made it increasingly difficult for the U.S. cement industry to expand existing facilities and to build new cement facilities. Although we cannot predict which policies will be adopted in the future by federal, state, and local governmental bodies, we anticipate that future restrictions will likely continue to make zoning and permitting of new capacity additions difficult. This could potentially enhance the value of our existing facilities. Furthermore, cost-efficient alternatives to cement are currently limited, and the availability of some alternatives is diminishing. For example, the availability of fly ash, a cement replacement, has decreased because of the retirement of coal-fired power plants and the conversion of power plants from coal to natural gas and other forms of energy.

The difficulty in adding cement capacity, coupled with limited alternatives, leads to high U.S. cement manufacturing utilization rates, as well as the need for imported cement when demand levels are high. Cement imports into the U.S. occur mostly to supplement domestic cement production or to supply a particular region. Cement is typically imported into deep water ports along the coast or on the Great Lakes or transported on the Mississippi River system near major population centers. Our position in the U.S. heartland, away from most import terminals, provides a degree of insulation from coastal imports, given the expense of transporting cement from deep water ports into the heartland regions. This geographic position further enhances the value of our plant network.

The USGS estimates that imports represented approximately 21% of cement used in the U.S. during calendar 2022, compared with 18% in calendar 2021. Based on the normal distribution of cement into the market, we believe that no less than approximately 5% to 10% of the total U.S. consumption will consistently be served by imported cement.

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The following table sets forth information regarding the geographic areas served by each of our cement and slag plants and the location of our distribution terminals in each area. We have over 30 cement storage and distribution terminals, including the Stockton, California terminal that was purchased on May 3, 2023, that are strategically located to extend the sales areas of our plants.

(1) Each distribution terminal listed in this table is capable of handling cement and/or slag.

(2) As part of the Stockton Acquisition on May 3, 2023, we assumed the lease to this terminal.

(3) These facilities are being leased.

We are leasing the terminal in Fairfield, Ohio under an initial term of four years, with two one-year options, which expire in fiscal 2025. The terminal in Lexington, Kentucky is being leased under an initial term of five years and will be up for renewal in fiscal 2024. The terminal in Mt. Vernon, Indiana is leased through fiscal 2031, and contains options that will allow the renewal of this lease for an additional twenty years. The terminal in Stockton, California is leased through 2035.

Cement and slag are distributed directly to our customers mostly through customer pickups, and also by common carriers from our plants or distribution terminals. We transport cement, slag, and fly ash by truck, barge, and rail to our storage and distribution terminals.

No single customer accounted for more than 10% of our Cement segment sales during fiscal 2023. We do not typically enter into long-term cement sales contracts or have a significant level of order backlog.

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Raw Materials and Fuel Supplies

The principal raw material used in the production of portland cement is calcium carbonate in the form of limestone. Limestone is obtained mainly through mining and extraction operations conducted at mines and quarries that we own or lease, and that are located in close proximity to our plants. We believe the estimated recoverable limestone reserves and resources we own or lease will permit each of our plants to operate at our present production capacity for at least 25 years. We are actively seeking to upgrade our extensive high-quality resource base at existing properties to reserves, or acquire additional limestone reserves close to our plants, and believe we will be able to acquire more reserves in the future. All properties have additional resources that have potential with additional engineering and evaluation to be upgraded to reserves. Other raw materials used in substantially smaller quantities than limestone are sand, clay, iron ore, and gypsum. These materials are readily available and can be obtained either from Company-owned or leased reserves, or can be purchased from outside suppliers.

We utilize coal, petroleum coke, natural gas, and alternative fuels to fuel our cement plants. The cost of fuel and power increased throughout fiscal 2023, compared with fiscal 2022, due primarily to higher costs for solid fuels, such as coal and petroleum coke. Much of the increase in the price of these fuels was due to higher delivery costs. We expect the cost of fuel and power to continue to rise in fiscal 2024, especially the cost of solid fuels, in which the cost of both fuel and transportation is expected to increase. In keeping with our commitment to sustainability and cost management, we continue to expand the use of alternative fuels at our cement facilities.

We have an agreement with a steel manufacturer to supply granules necessary for grinding slag. This agreement requires us to purchase up to 550,000 tons of granules, which meet certain specifications, made available by the steel manufacturer each year. Electric power is also a major cost component in the manufacturing process for both cement and slag, and we have sought to diminish overall power costs by adopting interruptible power supply agreements at certain locations. These agreements may expose us to some production interruptions during periods of power curtailment. Historically, we have not had many production interruptions under these agreements.

Environmental Matters

Our cement operations are subject to numerous federal, state, and local laws and regulations pertaining to health, safety, and the environment. Some of these laws, such as the federal Clean Air Act (CAA) and the federal Clean Water Act (CWA) (and analogous state laws) impose environmental-permitting requirements and govern the nature and amount of emissions that may be generated when conducting particular operations. Other laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (and analogous state laws) impose obligations to clean up or remediate spills of hazardous materials into the environment. Still other laws require us to reclaim certain land upon completion of extraction and mining operations in our quarries. We believe that we have obtained all the material environmental permits that are necessary to conduct our operations. We further believe that we are conducting our operations in substantial compliance with these permits. In addition, none of our manufacturing sites is listed as a CERCLA Superfund site.

The following environmental issues involving the cement manufacturing industry deserve special mention.

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Cement Kiln Dust – Our cement operations generate Cement Kiln Dust (CKD) as a byproduct. Because much of this CKD is unreacted raw materials, it is often returned to the production process. Substantially all CKD produced in connection with our ongoing operations is recycled. However, CKD was historically collected and is currently stored on-site at our Nevada, Missouri, Oklahoma and Wyoming cement plants and at a former plant site in Corpus Christi, Texas, which is no longer producing cement. Currently, CKD waste is generally excluded from the definition of hazardous waste under the federal regulations. The U.S. Environmental Protection Agency (EPA) has been evaluating the regulatory status of CKD under the Resource Conservation and Recovery Act (RCRA) since 2002, and thus far has not changed its approach. If either the EPA or the states decide to reclassify or impose new management standards on this CKD at some point in the future, we could incur additional costs to comply with those requirements with respect to our historically collected CKD. CKD that comes in contact with water might produce a leachate with an alkalinity high enough to be classified as hazardous and might also leach certain hazardous trace metals therein.

Potential Greenhouse Gas Regulation – The potential regulation of our emission of greenhouse gases (GHGs), including carbon dioxide, could affect our cement operations because (1) the cement manufacturing process requires the combustion of large amounts of fuel to generate very high kiln temperatures; and (2) the production of carbon dioxide is a byproduct of the calcination process, whereby carbon dioxide is removed from calcium carbonate to produce calcium oxide. Curbing GHG emissions is a clear priority for the Biden administration, and as part of rejoining the Paris Agreement, President Biden announced that the United States would commit to a 50 to 52 percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of reaching net-zero GHG emissions by 2050. Further, several states have individually implemented or are presently considering measures to reduce emissions of GHGs, primarily through the planned development of GHG inventories or registries, or regional GHG cap and trade programs. It is not possible at this time to predict how any future legislation that may be enacted or final EPA regulations that may be adopted to address GHG emissions would impact our business. However, any imposition of raw materials or production limitations, fuel-use or carbon taxes, or emission limitations or reductions could have a significant impact on the cement manufacturing industry and a material adverse effect on us and our results of operations.

Solid Waste Incineration Regulations – The EPA has promulgated revised regulations for Commercial and Industrial Solid Waste Incineration (CISWI) units, pursuant to Section 129 of the CAA. The EPA has approved several states’ implementation plans under this rule, and has proposed a federal plan that would apply in states that have not submitted and received approval for a state plan. Compared to the Portland Cement Manufacturing Industry National Emission Standards for Hazardous Air Pollutants (PC NESHAP), the CISWI regulations contain requirements across a broader range of pollutants, and the requirement that apply for dioxin/furans for existing and new sources are somewhat more stringent.

Air Quality Standards – The EPA is engaged in an ongoing review and implementation of the national ambient air quality standards (NAAQS) for ozone. The CAA requires the EPA to review, and if necessary, revise the NAAQS every five years. In December 2020, the Trump Administration announced its decision to retain the 2015 ozone NAAQS set by the Obama Administration without change. This December 2020 final action, however, is subject to legal challenge and is currently being reviewed by the EPA pursuant to President Biden’s executive order directing federal agencies to review certain environmental actions taken by the Trump Administration.

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In addition, in February 2023, the EPA published a final rule disapproving the State Implementation Plans (SIPs) for twenty-one states, which addressed each state’s obligations to eliminate significant contributions to nonattainment, or interference with maintenance, of the 2015 ozone NAAQS in other states (“interstate transport requirements”). States subject to a SIP Disapproval under this final action relevant to our cement operations include Illinois, Kentucky, Missouri, Nevada, Ohio, Oklahoma, and Texas.

In March 2023, the EPA finalized a proposed Federal Implementation Plan (FIP) addressing twenty-six states’ interstate transport obligations. States subject to the FIP relevant to our cement operations include Illinois, Kentucky, Missouri, Nevada, Ohio, Oklahoma, and Texas. The FIP establishes nitrogen oxide (NOx) emissions limitations beginning in 2026 during the ozone season for kilns used in cement and cement product manufacturing in 20 states, including all the above-listed states. The FIP will be effective 60 days after it is published in the Federal Register.

Our facilities most directly affected by the disapproval by the EPA of the SIPs and the FIP finalized in March 2023 are our cement plants located in Nevada, Oklahoma and Texas. Between February and April 2023, various legal challenges were filed against the EPA’s disapproval of the SIPs for such states including Nevada, Oklahoma and Texas. We also filed our own challenges to the disapproval of the SIPs in these three states. In each of these actions, the petitioners have challenged the failure on the part of the EPA to appropriately defer to the applicable state’s analysis and determinations regarding interstate transport obligations. An adverse outcome in these actions could require us to incur significant capital expenditures related to the installation of additional controls and additional operating costs at the affected facilities or, if the installation of controls proves impracticable, to modify or curtail our operations at such facilities, which could have a material adverse effect on their profitability. These legal proceedings are in their preliminary stages, and we are unable to predict the likely outcome thereof. At present, no legal challenges have been filed against the FIP finalized by the EPA as it has not yet been published in the Federal Register.

Other – We believe that our current procedures and practices in our operations, including those for handling and managing hazardous materials, are consistent with industry standards and are in substantial compliance with applicable environmental laws and regulations. Nevertheless, because of the complexity of our operations and the environmental laws to which we are subject, there can be no assurance that past or future operations will not result in violations, remediation costs, or other liabilities or claims. Moreover, we cannot predict what environmental laws will be enacted or adopted in the future or how such future environmental laws or regulations will be administered or interpreted. Compliance with more stringent environmental laws, or stricter interpretation of existing environmental laws, could necessitate significant capital outlays.

In fiscal 2023, we had $3.1 million of capital expenditures related to compliance with environmental regulations applicable to our Cement operations. We anticipate spending $7.5 million during fiscal 2024.

Concrete and Aggregates

Readymix concrete is a versatile, low-cost building material used in almost all construction. The production of readymix concrete involves mixing cement, sand, gravel or crushed stone, and water to form concrete, which is then sold and distributed to numerous construction contractors. Concrete is produced in batch plants and transported to customers’ job sites in mixer trucks.

The aggregates business consists of mining, extracting, producing, and selling crushed stone, sand, and gravel. Construction aggregates of suitable characteristics are employed in virtually all types of

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construction, including the production of readymix concrete, flexible base, and asphaltic mixes used in highway construction and maintenance.

On April 22, 2022, we closed the ConAgg Acquisition, for which we paid approximately $120.2 million. The ConAgg Acquisition included three concrete readymix locations, two aggregate mining operations, three aggregate recycling locations, and approximately 24 concrete trucks. See Footnote (B) to the Audited Consolidated Financial Statements for more information regarding the ConAgg Acquisition.

Aggregate Resources and Reserves

We conduct Aggregate operations near our concrete facilities. Aggregates are obtained principally by mining and extracting from quarries owned or leased by the Company.

Mineral resources and reserves for our aggregate plants consist of both sand and gravel, as well as limestone, and are defined similarly to how these reserves are defined for our Cement business. See the Limestone Resources and Reserves section in the Cement segment discussion for a more detailed description of how we define mineral resources and reserves.

As of March 31, 2023, we had 116.7 million tons of proven and probable aggregate reserves and 145.3 million tons of measured and indicated aggregate resources, exclusive of aggregate reserves. Approximately 39% of our reserves are owned, with the rest covered under leases expiring between 2040 and 2060. We do not consider any of our individual quarries to be material for disclosure purposes. All of our individual locations have at least 25 years of reserves.

The following table sets forth certain information regarding our aggregates facilities as well as aggregates resources, exclusive of aggregates reserves, at March 31, 2023:

(1) Aggregate resources are reported on an in situ basis.

(2) The Company currently is not operating its aggregate facility in the Kansas City area.

The following table sets forth certain information regarding our aggregate reserves at March 31, 2023:

(1) Aggregate reserves are reported on saleable product basis.

(2) The Company is currently not operating its aggregate facility in the Kansas City area.

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Below is a summary the annual production volumes from our aggregates quarries:

(1) The Company currently is not operating its aggregate facility in the Kansas City area.

Our total measured and indicated aggregates resources increased to 145.3 million tons at March 31, 2023, compared with 20.8 million tons at March 31, 2022 due to the ConAgg Acquisition in northern Colorado, the startup of an aggregates operation in northern Kentucky, and the purchase of land in northern Nevada. Our total proven and probable reserves increased to 117.0 million tons at March 31, 2023, compared with 90.9 million tons at March 31, 2022, due to the same factors responsible for the increase in measured and indicated resources.

The internal controls over our resource and reserve estimates have been compiled in a manner similar to those in our Cement business. See the Internal Controls section in the Cement segment discussion for a more detailed description of our internal controls over resource and reserve estimation.

Our total net Aggregates sales (excluding intercompany tons sold) were 2.9 million tons in fiscal 2023 and 1.5 million tons in fiscal 2022. Total Aggregates production was 4.0 million tons in fiscal 2023 and 2.5 million tons in fiscal 2022. The increase in Aggregates sales and production in fiscal 2023, compared with fiscal 2022 was due to the ConAgg Acquisition. A portion of our total Aggregates production is used internally by our readymix Concrete operations in Texas, northern Colorado, and northern Nevada.

Concrete Plants

We produce and distribute readymix concrete from company-owned sites in Central Texas; the greater Kansas City area; northern Colorado: and northern Nevada. The following table sets forth information regarding these operations as of March 31, 2023:

Demand, Sales, and Distribution

Demand for readymix concrete and aggregates largely depends on local levels of construction activity. Construction activity is also subject to weather conditions, the availability of financing at reasonable rates, and overall fluctuations in local economies, and therefore tends to be cyclical. We sell readymix concrete to numerous contractors and other customers in each plant’s marketing area. Our batch plants in Central Texas, the greater Kansas City area, northern Colorado, and northern Nevada are strategically located to serve each marketing area. Concrete is delivered from the batch plants primarily by company-owned trucks. We sell aggregates to building contractors and other customers engaged in a wide variety of

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construction activities. Aggregates are delivered from our plants by common carriers and customer pickup. No single customer accounted for more than 10% of fiscal 2023 segment revenue.

The concrete and aggregates industry is highly fragmented, with numerous participants operating in each local area. Because the cost of transporting concrete and aggregates is very high relative to product values, producers of concrete and aggregates typically can profitably sell their products only in areas within 50 miles of their production facilities. Barriers to entry in each industry are low, except with respect to environmental permitting requirements for new aggregates production facilities and zoning of land to permit mining and extraction of aggregates.

Raw Materials

We obtain cement and aggregates for our Concrete businesses from primarily related companies, as outlined below:

We obtain the balance of our cement and aggregates requirements from multiple outside sources in each of these areas.

We mine and extract limestone, sand, and gravel, the principal raw materials used in the production of aggregates, from quarries owned or leased by us and located near our plants. On average, our aggregate reserves exceed 25 years based on normalized production levels, excluding northern Kentucky. We just began mining aggregates from this site and we anticipate, after doing more drilling and analysis, that we will likely reclassify most of the measured and indicated resources to reserves in the next year or two, at which time we will have over 25 years of reserves for this location.

Cost of materials and diesel fuel are the two biggest expense items for readymix concrete, and they increased by 14% and 13%, respectively, in fiscal 2023 compared with fiscal 2022. We anticipate these costs will increase again in fiscal 2024.

Environmental Matters

The concrete and aggregates industry is subject to environmental regulations similar to those governing our Cement operations, which is included in the Environmental Matters section in the Cement segment discussion.

We did not have any capital expenditures related to compliance with environmental regulations applicable to our Concrete and Aggregates operations in fiscal 2023, and we do not anticipate any material spending related to compliance with environmental regulations during fiscal 2024.

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Light Materials

Our Light Materials sector comprises the Gypsum Wallboard segment, which produces gypsum wallboard used in residential and commercial construction and repair and remodel activities, and the Recycled Paperboard segment, which produces paper primarily used in the manufacture of gypsum wallboard. Operations in this sector are concentrated in the Sun Belt of the United States, which we define as the lower half of the United States, but not California. Population in the Sun Belt is projected to grow approximately 17% between 2020 and 2050, according to the latest update in April 2023 by Moody’s Analytics. Population growth is a key long-term driver of demand for gypsum wallboard and recycled paperboard.

Gypsum Wallboard

Gypsum wallboard is used to finish the interior walls and ceilings in residential, commercial, and industrial structures. Our gypsum wallboard products are marketed under the name American Gypsum.

The gypsum wallboard manufacturing process involves four main steps, as shown in the graphic below:

Gypsum Wallboard Plants, Resources and Reserves

We own and operate five gypsum wallboard plants, outlined in the table below. We anticipate running all our facilities at the level required to meet customer demand, up to maximum capacity. Our gypsum wallboard is distributed in the geographic markets nearest to our production facilities.

Four of our five gypsum wallboard plants are supplied with gypsum from our nearby gypsum quarries, while our wallboard plant in South Carolina is supplied with synthetic gypsum under a long-term supply contract with a third party. We have adequate access to all of our quarries.

Mineral resources and mineral reserves for our Gypsum Wallboard business are defined similarly to how they are defined for our Cement business. See the Limestone Resources and Reserves section in the Cement segment discussion for a more detailed description of how we define mineral resources and reserves.

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As of March 31, 2023, we had 68.5 million tons of proven and probable gypsum reserves, and 151.9 million tons of measured and indicated gypsum resources, exclusive of gypsum reserves. Approximately 45% of our reserves are owned, with the rest leased. We do not consider any of our individual quarries to be material for disclosure purposes. We obtained technical reports from a third-party QP for each of our locations during fiscal 2022 except Gypsum, Colorado, which was as of March 31, 2023. The other locations were not updated during fiscal 2023 because we did not add any additional properties, or do any additional exploration on sites during fiscal 2023. Additionally, the change in selling price did not materially increase, which further supports no material change on the estimated resource and reserve amounts calculated in fiscal 2022. The total reserves for fiscal 2023 for all locations with the exception of Gypsum, Colorado, were calculated by taking the reserves as of March 31, 2022 and adjusting them for tons mined in fiscal 2023. These technical reports obtained in fiscal 2022 (fiscal 2023 for Gypsum, Colorado) were prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K.

The following table sets forth certain information regarding our gypsum wallboard plants and gypsum resources, exclusive of gypsum reserves, at March 31, 2023:

(1) Gypsum resources are shown on an in situ basis.

(2) Measured, Indicated and Inferred resources are based on an initial assessment using average selling price assumptions ranging from $13.50 to $16.50 per ton, depending on location and market.

(3) Million Square Feet (MMSF) based on anticipated product mix.

(4) The same resources serve both New Mexico plants.

(5) In 2006, we signed a 60-year supply agreement for synthetic gypsum with Santee Cooper that expires in 2068.

The following table sets forth our gypsum reserves at March 31, 2023:

(1) Gypsum reserves are shown on a recoverable basis.

(2) The economic viability of our reserves were determined using average gypsum prices ranging from $13.50 to $16.50 per ton, depending on location and market.

(3) The same reserves serve both New Mexico plants.

(4) In 2006, we signed a 60-year supply agreement for synthetic gypsum with Santee Cooper that expires in 2068.

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Below is a summary the annual production volumes from our gypsum quarries: