EAGLE MATERIALS INC

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 public infrastructure, private nonresidential, and residential construction. This sector comprises the Cement and Concrete and Aggregates segments. In calendar 2024, cement consumption in the United States, as estimated by the Portland Cement Association (PCA), was approximately 111.4 million short tons, which was approximately 6% lower than calendar 2023 consumption levels. While cement consumption was down in the U.S., the U.S. still consumes more cement than we can domestically produce. Imported cement consumption represented 25% of total sales in both calendar 2024 and 2023.

CEMENT

Cement is the basic binding agent for concrete, a primary construction material. The principal sources of demand for cement are public infrastructure, private nonresidential construction, and residential construction, with public infrastructure accounting for nearly 50% of cement demand. 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 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 steel companies and ground in our grinding facilities in Illinois and Texas. 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 coal-fired power plants and acts as an extender of cement in concrete.

Limestone Mining Operations

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. For more information about our limestone mining properties, including estimates of limestone resources and reserves, see Item 2. Properties.

Cement Plants

We operate eight modern cement plants, and two slag grinding facilities (one cement plant and one slag grinding facility are operated through a joint venture). 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 (see production process graphic above). 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.

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 tons of cement annually. Our slag facilities are located near Chicago, Illinois and Houston, Texas. Both slag facilities have 500,000 tons annual grinding capacity.

The following table sets forth information regarding our cement plants at March 31, 2025 (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 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 owned 50% by us, and 50% by HM Southeast Cement LLC, a subsidiary of Heidelberg Materials (our Joint Venture Partner).

On May 1, 2024, the Company and our Joint Venture Partner entered into a put option agreement (Put Option Agreement) that provides for the grant of reciprocal put options by the parties with respect to their 50% partnership interests in the Joint Venture. If the Company or our Joint Venture Partner exercises its put option under the Put Option Agreement, the other party is required to purchase the 50% partnership interest held by the exercising party for approximately $550.0 million, subject to certain customary adjustments. The put option can only be exercised in the event of a triggering event, which is defined as the entry by the exercising party into a binding and effective outside purchase agreement. An outside purchase agreement is a definitive agreement for the purchase of assets or operations to be used in the production or sale of grey cement products or slag in the Joint Venture market area for total consideration equal to or greater than $1 billion. The Put Option Agreement is effective for 15 months and expires on August 1, 2025.

Our cement production, including our 50% share of the cement Joint Venture production, totaled 6.0 million short tons and 6.6 million short tons for fiscal 2025 and fiscal 2024, respectively. Total net Cement sales, including our 50% share of cement sales from the Joint Venture, were 6.9 million short tons and 7.3 million short tons in fiscal 2025, and fiscal 2024, respectively. Total net Cement sales exceed production primarily because of imports through the Houston and Stockton import terminals.

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. decreased approximately 6% during calendar 2024, and the Portland Cement Association forecasts cement consumption will decrease approximately 2% in calendar 2025. Demand for cement is seasonal, particularly in northern states where inclement winter weather often affects construction activity. Cement sales are generally highest 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. No single cement company has a plant network 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 federal, state, and local government bodies will enact in the future, we anticipate that zoning and permitting of new capacity additions will remain 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 coasts 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 PCA estimates that imports represented approximately 25% of cement used in the U.S. during calendar 2024, similar to the amount used in calendar 2023. Based on the historical distribution of cement into the market, we believe that no less than approximately 5% to 10% of total U.S. consumption will consistently be served by imported cement.

The following table shows 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, which 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)

These facilities are being leased.

The terminal in Lexington, Kentucky was originally leased under an initial term of five years, and we are currently operating the terminal on a year-to-year lease. 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 Redwood City, California is being leased on a month-to-month basis, and the terminal in Stockton, California is leased through calendar 2035.

Cement and slag are distributed directly to our customers mostly through customer pickups and by common carriers from our plants or distribution terminals. We transport cement and slag 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 2025. We do not typically enter into long-term cement sales contracts or have a significant level of order backlog.

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 to acquire additional limestone reserves close to our plants. We believe we will be able to acquire more reserves in the future. Most of our existing properties have additional resources that have potential with further engineering and evaluation to be upgraded to reserves. Other raw materials used in significantly smaller quantities than limestone are sand, clay, iron ore, and gypsum. These materials are readily available and can be obtained from reserves owned or leased by the Company or purchased from outside suppliers.

We utilize coal, petroleum coke, natural gas, and alternative fuels to fuel our cement plants. The cost of fuel decreased throughout fiscal 2025, compared with fiscal 2024, primarily because of lower market prices and transportation costs for solid fuels such as coal and petroleum coke. We expect the cost of fuel to remain relatively stable in fiscal 2026. In keeping with our commitment to sustainability and cost management, we continue to expand the use of alternative fuels at our cement facilities.

Our slag facility in Illinois has 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 meeting certain specifications, which the steel manufacturer makes available 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, these interruptions, when they occur, have not had a significant effect on our operations.

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. 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 are listed as a CERCLA Superfund site.

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

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. In some cases, we are able to reuse CKD in our cement manufacturing process.

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. While at the federal level, the Trump Administration has indicated its intent to reduce requirements related to GHG emissions, the timing of these de-regulatory actions is uncertain. 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 regulations that may be adopted to address GHG emissions would affect 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. In December 2024, the Biden Administration began its review of the ozone NAAQS. The Trump Administration has not taken further action on this review.

In addition, in February 2023, the EPA published a final rule disapproving the State Implementation Plans (SIP) 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 Federal Implementation Plan (FIP), also known as the "Good Neighbor Plan," which addresses interstate transport obligations for the twenty-one states with disapproved SIPs as well as two additional states that had not submitted any revisions for their SIPs. 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 went into effect on August 4, 2023, but is currently subject to a nationwide stay.

States subject to the FIP relevant to our cement operations include Illinois, Kentucky, Missouri, Nevada, Ohio, Oklahoma, and Texas. Our facilities most directly affected by EPA’s State Implementation Plan (SIP) disapprovals and Good Neighbor FIP are our cement plants located in Nevada, Oklahoma and Texas. Various legal challenges have been filed against both the EPA’s disapproval of the SIPs for such states, including Nevada, Oklahoma, and Texas, and the Good Neighbor FIP itself. Petitioners in the SIP disapproval challenges, including Eagle, obtained a stay of the SIP disapprovals for Nevada, Oklahoma, and Texas, which also stayed the implementation of the Good Neighbor FIP in these states. Petitioners in the FIP challenges obtained a stay of the Good Neighbor FIP pending resolution of these challenges, which has halted implementation of the FIP across all states. EPA has also requested a voluntary remand of the Good Neighbor FIP in order to initiate reconsideration of the FIP requirements. EPA anticipates completing this reconsideration action by Fall 2026. The SIP disapproval 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. Only two courts have issued a final ruling on the validity of the SIP Disapprovals—in December 2024, the Sixth Circuit issued a favorable decision overturning EPA’s disapproval of Kentucky’s SIP, and in March 2025, the Fifth Circuit issued an adverse decision upholding EPA’s disapproval of Texas’s SIP. 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. However, even with an adverse outcome in the Fifth Circuit, our Texas facility will not be subject to the FIP’s more burdensome requirements while the FIP remains stayed. We reached an agreement with EPA to install additional NOx controls (low NOx burners) at our Nevada cement facility and are proceeding with installation, which requires certain capital expenditures which may impact operating costs. We are unable to predict the likely outcome of the remaining legal challenges to both the state disapprovals and the Good Neighbor Plan or EPA’s reconsideration action at this time.

Further, on February 7, 2024, the EPA announced its final rule to change the NAAQS for fine particle pollution, also known as fine particulate matter (PM 2.5) or soot, and related monitoring requirements, last revised in 2012. The final rule lowers the level of the primary (health-based) annual PM 2.5 standard from 12 micrograms per cubic meter to 9 micrograms. The EPA retained all other existing PM standards. The final rule has been challenged by various parties and the cases have been consolidated in the United States Court of Appeals for the D.C. Circuit. The outcome of these legal challenges is unknown at this time. EPA has also indicated its intent to reconsider these standards, although the timing of this reconsideration action is unknown. The anticipated impacts of the new PM NAAQS are similar to those for the ozone NAAQS, discussed above, and include a potential increase in our capital expenditures and operating expenses and make permitting more difficult.

Hazardous Air Pollutants– Eagle’s cement kilns are subject to National Emissions Standards for Hazardous Air Pollutants (NESHAPs), codified at 40 CFR Part 63 Subparts EEE and LLL. The EPA is undergoing rulemakings that would revise Subparts EEE and LLL, such that kilns may be subject to additional emissions limitations, monitoring requirements and/or reporting obligations. EPA is required by a court order in Blue Ridge Environmental Defense League v. Regan, No. 22-cv-3134 (D.D.C.) to issue a final action on its Subpart EEE rulemaking by December 31, 2025. EPA has no such court-ordered deadline by which it must complete its rulemaking under Subpart LLL.

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 2025, we had $4.8 million of capital expenditures related to compliance with environmental regulations applicable to our Cement operations. We anticipate spending $1.2 million during fiscal 2026.

Concrete and Aggregates

The aggregates business consists of mining, extracting, producing, and selling crushed stone, sand, and gravel. Aggregates are a granular material consisting of crushed stone, sand, and gravel, manufactured to specific sizes, grades, and chemistry for use primarily in construction applications.

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.

During fiscal 2025, we acquired an aggregate operation in Northern Kentucky near our Battletown Materials plant, as well as an aggregate operation in Western Pennsylvania.

Aggregate Mining Operations

Aggregates are obtained principally by mining and extracting from quarries owned or leased by the Company. For more information about our aggregates mining properties, including estimates of resources and reserves, see Item 2. Properties.

The following table sets forth certain information regarding our aggregates facilities at March 31, 2025:

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

Our total net Aggregates sales (excluding intercompany tons sold) were 3.8 million tons in fiscal 2025, and 4.1 million tons in fiscal 2024. Total Aggregates production related to third party sales was 4.2 million tons in fiscal 2025, and 4.3 million tons in fiscal 2024. A portion of our total Aggregates production is used internally by our readymix Concrete operations in Texas, northern Colorado, and northern Nevada and by our Cement operations in Northern Kentucky.

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, 2025:

Demand for readymix concrete and aggregates largely depends on local levels of construction activity. Construction activity is 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 construction activities. Aggregates are distributed from our plants by common carriers and customer pickup. No single customer accounted for more than 10% of fiscal 2025 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 primarily from 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 and resources exceed 25 years based on normalized production levels.

Cost of materials and delivery expense are the two biggest expense items for readymix concrete, comprising approximately 60% and 15% of total costs, respectively. In fiscal 2025, cost of materials and delivery expenses increased by 1% and 2%, respectively, compared with fiscal 2024. We anticipate these costs will continue to increase in fiscal 2026.

The concrete and aggregates industry is subject to environmental regulations similar to those governing our Cement operations, which are 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 2025, and we do not anticipate any material spending related to compliance with environmental regulations during fiscal 2026.

Light Materials

Our Light Materials sector comprises the Gypsum Wallboard segment, which produces gypsum wallboard used in residential and private nonresidential 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 19% between 2020 and 2050, according to the latest update in July 2024 by University of Virginia, Weldon Cooper Center for Public Service. 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 and Gypsum Mining Operations

We own and operate five gypsum wallboard plants, shown 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 natural gypsum from our nearby gypsum quarries, while our wallboard plant in South Carolina is supplied with gypsum under a long-term supply contract with a third party. For more information about our gypsum mining properties, including estimates of gypsum resources and reserves, see Item 2. Properties.

The table shows approximate annual production capacity at each of our gypsum wallboard plants at March 31, 2025.

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

Our Gypsum Wallboard production totaled 3,022 MMSF in fiscal 2025, and 3,030 MMSF in fiscal 2024. Total Gypsum Wallboard sales were 2,968 MMSF in fiscal 2025, and 2,965 MMSF in fiscal 2024.

The principal sources of demand for gypsum wallboard are (i) residential construction, (ii) repair and remodel activities, (iii) private nonresidential construction, and (iv) other markets such as manufactured housing. According to the Gypsum Association, industry shipments of gypsum wallboard increased approximately 1% to 27.2 billion square feet in calendar 2024. We estimate that residential construction and repair and remodel accounted for more than 80% of calendar 2024 industry sales.

Demand for gypsum wallboard closely follows construction industry cycles, particularly housing construction. Demand for wallboard can be seasonal and is generally highest from spring through the middle of autumn.

We sell gypsum wallboard to numerous building-materials dealers, gypsum wallboard specialty distributors, lumber yards, home-center chains, and other customers located throughout the United States, with the exception of the Northeast. Four customers collectively accounted for approximately 60% of our Gypsum Wallboard segment sales during fiscal 2025.

Gypsum wallboard is sold on a delivered basis and delivery is mostly by truck, with a small percentage delivered by rail. We generally use third-party common carriers for deliveries.

Although gypsum wallboard is distributed principally in local areas, certain industry producers (including the Company) have the ability to ship gypsum wallboard by rail outside their usual regional distribution areas to regions where demand is strong. Our rail distribution capabilities permit us to service customers in markets on both the east and west coasts, except for the Northeast. Less than 5% of our Wallboard volume sold during fiscal 2025 was delivered via rail.

There are currently six manufacturers of gypsum wallboard in the U.S., operating a total of 59 plants with a total of 69 lines, per the Gypsum Association. We estimate that the four largest producers ‒ Knauf, National Gypsum Company, CertainTeed, and Koch Industries ‒ account for approximately 85% of gypsum wallboard sales in the U.S. Total wallboard-rated production capacity in the United States is currently estimated by the Gypsum Association at approximately 33.3 billion square feet per year.

We mine and extract natural gypsum, the principal raw material used in the manufacture of gypsum wallboard, from quarries owned, leased, or subject to mining claims owned by the Company and located near our plants. Our New Mexico reserves are under lease with the Pueblo of Zia. Gypsum ore reserves at the Gypsum, Colorado plant are contained within a total of 115 placer claims encompassing 2,300 acres. Included in this are 94 unpatented mining claims, where mineral rights can be developed upon completion of permitting requirements. We entered into a long-term agreement in 2005 with a public utility in South Carolina for synthetic gypsum, which we use at our Georgetown, South Carolina plant. This agreement has an initial term through December 2029, and we have two 20-year extension options that would extend the term through December 2069 should we elect to exercise both of our extension options. If the utility is unable to generate the agreed-upon amount of gypsum, it is responsible for providing gypsum from a third party to fulfill its obligations.

Through our modern low-cost paperboard mill, we manufacture sufficient quantities of paper necessary for our gypsum wallboard production. Paper is a significant cost component in the manufacture of gypsum wallboard, currently representing approximately one-third of our total production cost. Paper costs are expected to be relatively consistent throughout fiscal 2026. See Raw Materials and Fuel Supplies in the Recycled Paperboard section for more information.

Our gypsum wallboard manufacturing operations use natural gas and electrical power. A significant portion of the Company’s natural gas requirements for our gypsum wallboard plants are currently provided by three gas producers under gas-supply agreements expiring in October 2025 for Colorado and South Carolina, and October 2026 for Oklahoma. If the agreements are not renewed, we anticipate being able to obtain our gas supplies from other suppliers at competitive prices. Electrical power is supplied to our New Mexico plants at standard industrial rates by a local utility. For our Albuquerque plant, we have an interruptible power supply agreement, which may expose it to some production interruptions during periods of power curtailment. Power for our Gypsum, Colorado facility is generated at the facility by a cogeneration power plant that we own and operate. Currently, the cogeneration power facility supplies power and waste hot gases for drying to the gypsum wallboard plant. We do not sell any power to third parties. Natural gas costs represented approximately 10% of our production costs in fiscal 2025.

The gypsum wallboard industry is 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 CAA and the federal 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. Some laws, such as CERCLA and analogous state laws, impose obligations to clean up or remediate spills of hazardous materials into the environment. Other laws require us to reclaim certain land upon completion of extraction and mining operations in our quarries. None of our Gypsum Wallboard operations are the subject of any pending local, state, or federal environmental proceedings. We do not, and have not, used asbestos in any of our gypsum wallboard products.

We use synthetic gypsum in wallboard manufactured at our Georgetown, South Carolina plant. On April 17, 2015, the EPA published its final rule addressing the storage, reuse, and disposal of coal combustion products, which include fly ash and flue gas desulfurization gypsum (synthetic gypsum). The rule, which applies only to electric utilities and independent power producers, establishes standards for the management of coal combustion residuals (CCRs) under Subtitle D of the RCRA, which is the Subtitle that regulates non-hazardous wastes. The rule imposes requirements addressing CCR surface impoundments and landfills, including location restrictions, design, and operating specifications; groundwater monitoring requirements; corrective action requirements; record keeping and reporting obligations; and closure requirements. Beneficial encapsulated uses of CCRs, including synthetic gypsum, are exempt from regulation. The rule became effective on October 19, 2015. Given the EPA’s decision to continue to allow CCR to be used in synthetic gypsum and to regulate CCR under the non-hazardous waste sections of RCRA, we do not expect the rule to materially affect our business, financial condition, and results of operations. The EPA proposed revisions to the final CCR rule in 2018, 2019, 2020, and 2023, none of which sought to overturn the management of CCR as non-hazardous waste or the regulatory exemption for beneficial encapsulated use of CCR. Accordingly, we do not believe that these proposed revisions are likely to have material effects on our business, financial condition, and results of operations.

As discussed in greater detail in the “Environmental Matters” section for Cement, the EPA in October 2015 strengthened the NAAQS for ozone, which lowered the primary and secondary standards from 75 parts per billion (ppb) to 70 ppb, and on February 7, 2024 the EPA announced its final rule to change the NAAQS for fine particle pollution, also known as fine particulate matter (PM 2.5) or soot, and related monitoring requirements. Either of these regulations could have a material impact on our gypsum wallboard business, if areas in or surrounding our operations obtain nonattainment designations, or if the EPA chooses to revise and lower the current ozone NAAQS.

Although our Gypsum Wallboard operations could be adversely affected by federal, regional, or state climate change initiatives, at this time, it is not possible to accurately estimate how future laws or regulations addressing 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 gypsum wallboard manufacturing industry and a material adverse effect on the financial results of our operations.

There were $1.0 million of capital expenditures related to compliance with environmental regulations applicable to our Gypsum Wallboard operations during fiscal 2025. We anticipate spending $0.5 million during fiscal 2026.

Recycled Paperboard

Our Recycled Paperboard manufacturing operation, which we refer to as Republic Paperboard Company, is located in Lawton, Oklahoma and has a technologically advanced paper machine designed primarily for gypsum liner production utilizing 100% recycled paper. The paper’s uniform cross-directional strength and finish characteristics facilitate the efficiencies of new high-speed wallboard manufacturing lines and improve the efficiencies of the slower wallboard manufacturing lines. Although the machine was designed primarily to manufacture gypsum liner products, we are also able to manufacture several alternative products, including containerboard grades and lightweight packaging grades. We currently estimate the annual capacity of our paper mill to be approximately 380,000 tons.

Our paper machine allows the Recycled Paperboard operation to manufacture high-strength gypsum liner that is approximately 10% to 15% lighter in basis weight than what is generally available in the U.S. The low-basis weight product utilizes less recycled fiber to produce paper that, in turn, requires less energy (natural gas) to evaporate moisture from the board during the gypsum wallboard manufacturing process. The low-basis weight paper also reduces the overall finished board weight, providing our Gypsum Wallboard operations with more competitive transportation costs for both the inbound and outbound segments.

Our manufactured recycled paperboard products are sold to gypsum wallboard manufacturers and other industrial users. During fiscal 2025, approximately 40% of the recycled paperboard sold by our paper mill was consumed by the Company’s Gypsum Wallboard manufacturing operations. We have contracts with two other gypsum wallboard manufacturers that expire in the next two to three years. These two contracts represent approximately 50% of our total segment revenue, with most of the remaining 10% of volume shipped to other gypsum wallboard manufacturers. The loss of any of these contracts or the termination or reduction of their current production of gypsum wallboard, unless replaced by a commercially similar arrangement, could have a material adverse effect on the Company.

The principal raw materials in recycled paperboard are recycled paper fiber (recovered wastepaper), water, and specialty paper chemicals. The largest wastepaper source used by the operation is old corrugated containers (known as OCC). A blend of high grades (white paper grades consisting of both printed and unprinted papers such as news blank, manifold white ledger, and other paper grades) is also used in the production of gypsum liner facing paper.

We believe that an adequate supply of recycled paper fiber will continue to be available from sources located in reasonable proximity to the paper mill. Although we have the capability to receive rail shipments, the vast majority of the recycled fiber we purchase is delivered via truck. Prices are subject to market fluctuations based on generation of material (supply), demand, and the presence of the export market. Fiber pricing, on average, was higher in fiscal 2025 than in fiscal 2024; however, fiber pricing was lower during the fourth quarter of fiscal 2025, compared with the fourth quarter of fiscal 2024. Fiber prices are subject to change upon short notice due to factors outside of our control. Current gypsum liner customer contracts include price escalators that partially offset and compensate for changes in raw material fiber prices. The chemicals used in the paper-making operation, including size, retention aids, biocides, and sheet strength additives, are available from several manufacturers at competitive prices.

The production of recycled paperboard involves the use of a large volume of water. We have an agreement with the City of Lawton municipal services to supply water to our manufacturing facility for the next 15 years, and we are improving our ability to recirculate our used water which should significantly reduce our consumption of fresh water. Electricity, natural gas, and other utilities are available to us at either contracted rates or standard industrial rates in adequate supplies. These utilities are subject to standard industrial curtailment provisions.

Paperboard operations are generally large consumers of energy, mostly natural gas and electricity. Electricity is supplied to the paper mill by Public Service of Oklahoma (PSO), and they have requested an increase in rates for fiscal 2026. Oklahoma is a regulated state for electricity services, and all rate change requests must be presented to the Oklahoma Corporation Commission for review and approval before implementation. At this time, we are unable to estimate how much of the increase will be granted by the Oklahoma Corporation Commission. This power company has been moving its fuel source dependency to natural gas, and investing in wind energy, which could affect our electricity rates in future years. Natural gas costs in fiscal 2025 were lower than those in fiscal 2024, and they are subject to change upon short notice due to factors beyond our control. We use forward purchase contracts to manage our exposure to future price changes.

There were $12.2 million of capital expenditures related to compliance with environmental regulations applicable to our Recycled Paperboard operations during fiscal 2025. We anticipate spending $1.2 million on a water treatment project during fiscal 2026.