EAGLE MATERIALS INC

Eagle Materials Inc., through its subsidiaries (the Company, which may be referred to as we, our, or us), is a leading U.S. manufacturer of heavy construction products and light building materials. Our primary products, Cement and Gypsum Wallboard, are essential for building, expanding, and repairing roads, highways, and residential, commercial, and industrial structures across America. Headquartered in Dallas, Texas, Eagle manufactures and sells its products through a network of more than 70 facilities spanning 21 states. Demand for our products is generally cyclical and seasonal, depending on economic and geographic conditions.

The Company was founded in 1963 as a 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 through economic cycles.

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 helps us manage our transportation and input costs. Our presence in several U.S. markets with higher-than-average population growth enables us to take advantage of long-term demand growth for construction and building materials, while reducing our exposure to individual regional construction cycles. The integrated nature of our cement and wallboard plant network enables us to minimize freight costs, move product between different plants in our network as needed, and supply customers from more than one plant when desirable.

Decentralized operating structure with network-wide coordination

The Company operates a decentralized but coordinated plant network: day-to-day operations are managed by strong local operating teams, and products are separately 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. Across the plant network, corporate level managers coordinate strategy and other important facets of our operations, like finance, procurement, and safety, to ensure consistent application of best practices across all business lines and uninterrupted product supply for customers, even during planned and unplanned maintenance outages.

Substantial owned raw material reserves and resources

We own, or control, at least 25 years of primary raw material reserves and resources (and in many instances, more than 50 years) 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.

Production flexibility

We manage our production lines and work shifts both within each plant and across the entire plant network to enable us to operate our plants at high utilization levels generally, while providing optimal production flexibility. Accordingly, we can quickly adjust to changes in economic conditions.

Low-cost producer position

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

Proven management

Our current management team has significant and valuable expertise, with 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 business cycles to protect the balance sheet through downturns and enable us to take advantage of growth opportunities, whether organic or through acquisitions.

Strategy

We consistently pursue the following strategic objectives that we believe differentiate us from our competitors and contribute to our margin performance and growth: positioning our business for steady performance through economic cycles, maintaining our position as a low-cost producer in all our markets, operating primarily in the United States in regionally diverse and demographically 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.

Maintain rigorous cycle management

We aim to maintain profitability and create value consistently through shifting economic cycles. Our goal is to increase earnings through cycles and maintain peak-to-trough resiliency of our assets. The cornerstones of our effective cycle management include keeping our plants well-maintained, operating at standard-setting efficiency and safety levels, and maintaining a healthy balance sheet to enable us to capitalize on growth opportunities, continue enhancing our assets, and return excess capital to shareholders. Acquisition opportunities and ongoing investments in our businesses must meet rigorous financial and strategic return criteria and position our assets for peak performance in both favorable and challenging market conditions.

Continuously innovate to advance our low-cost position

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 participate in, and we focus diligently on reducing costs and making our operations more efficient to manage free cash flow through economic cycles. 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 key to our commercial success and also aligns 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.

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, except the Northeast, approximately 65% of our total revenue, including our proportional share from our joint venture, is generated in 10 states: Colorado, Illinois, Kansas, Kentucky, Missouri, Nevada, North Carolina, Ohio, Oklahoma, and Texas. Population growth is a major driver of demand for construction products and building materials. The population in these ten states is expected to increase approximately 16% between the 2020 census and 2050, compared with 12% for the United States as a whole, according to the latest update in July 2024 by the University of Virginia, Weldon Cooper Center for Public Service.

Achieve profitable growth through acquisition and organic development

We seek to grow the Company through prudent acquisitions and the organic development of our asset network. Since 2012, we have invested approximately $3.0 billion to expand the Heavy Materials business. These investments have more than doubled our U.S. cement capacity, and expanded our aggregates production capacity by more than 50%.

Growth in the Heavy Materials sector has been achieved mainly through acquisitions, which have expanded our geographic footprint, resulting in a contiguous and integrated cement system from northern California to western Pennsylvania and south to Texas. We have completed additional bolt-on acquisitions in aggregates, which also contribute to our expanded geographic footprint. We are currently investing over $400 million to modernize and expand our cement plant in Laramie, Wyoming, which will expand that plant's production capacity by 50% to 1.2 million tons and reduce its operating costs by 25%.

The Company has grown its Light Materials sector through organic growth investments. In fiscal 2020, we completed an expansion at our Recycled Paperboard plant that increased capacity by approximately 15% and provided cost savings. Our $330.0 million project to modernize and expand our Gypsum Wallboard facility in Oklahoma is currently under way. This project will increase capacity by 25% to 1.5 billion square feet (bsf) of production, lower the plant's operating costs, and take advantage of our nearby, low-cost natural gypsum reserves. We expect to complete the project in the second half of calendar 2027.

The Company will continue to proactively pursue acquisition opportunities and organic growth investments. 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 criteria and advance our strategic priorities.

Operate in a socially and environmentally responsible manner

We aim to conduct all our operations in a way that enhances the returns and the sustainability of our business, ensures the health and safety of our employees, and minimizes negative environmental effects. We have defined our environmental and social responsibility priorities and developed a roadmap for pursuing them. Our initiatives encompass land use, water, emissions, the reduction of the carbon impacts of our products, human resources, and governance practices, which are all areas we view as essential to our success.

Management is responsible for implementing these initiatives, and our Board of Directors, or Board, is committed to overseeing and ensuring progress across our sustainability initiatives. In particular, pursuant to its charter, the Board's Corporate Governance, Nominating and Sustainability Committee has formal responsibility for leading the Board's oversight of these matters in coordination with management and other Board committees as appropriate. Management submits quarterly progress reports to the Board, and sustainability is a topic of discussion at every quarterly Board meeting. Compensation for key executives is linked, in part, to the achievement of specific sustainability goals.

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. making operating capital investments to maintain and strengthen our low-cost producer position

3. returning excess cash to shareholders through our share repurchase program and dividends.

In the past five years, we have invested $388.4 million in acquisitions, $905.0 million in organic capital expenditures, and approximately $2.2 billion in share repurchases and dividends. Since becoming a public company in 1994, our share count is down approximately 55%, and we have returned approximately $4.3 billion to our shareholders through a combination of share repurchases and dividends.