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Form 10-Q EAGLE MATERIALS INC For: Dec 31

February 4, 2015 5:20 PM EST

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

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

For the Quarterly Period Ended

December 31, 2014

Commission File Number 1-12984

Eagle Materials Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

75-2520779

(I.R.S. Employer Identification No.)

3811 Turtle Creek Blvd., Suite 1100, Dallas, Texas 75219

(Address of principal executive offices)

(214) 432-2000

(Registrants telephone number, including area code)

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��x����No��

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES��x����NO��

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large�accelerated�filer

x

��

Accelerated�filer

Non-accelerated filer

��(Do not check if a smaller reporting company)

��

Smaller�reporting�company

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

Yes������No��x

As of January 30, 2015, the number of outstanding shares of common stock was:

Class

Outstanding Shares

Common Stock, $.01 Par Value

50,277,425


Eagle Materials Inc. and Subsidiaries

Form 10-Q

December 31, 2014

Table of Contents

PART I. FINANCIAL INFORMATION (unaudited)

Page

Item 1.

Consolidated Financial Statements

Consolidated Statements of Earnings for the Three and Nine Months Ended December 31, 2014 and 2013

1

Consolidated Statements of Comprehensive Earnings for the Three and Nine Months Ended December 31, 2014 and 2013

2

Consolidated Balance Sheets as of December 31, 2014 and March 31, 2014

3

Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2014 and 2013

4

Notes to Unaudited Consolidated Financial Statements

5

Item 2.

Managements Discussion and Analysis of Results of Operations and Financial Condition

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

37

Item 1a.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 4.

Mine Safety Information

47

Item 6.

Exhibits

47

SIGNATURES

48


Eagle Materials Inc. and Subsidiaries

Consolidated Statements of Earnings

(dollars in thousands, except share data)

(unaudited)

For�the�Three�Months
Ended December 31,

For�the�Nine Months
Ended December 31,

2014

2013

2014

2013

Revenues

$

291,529

$

228,812

$

842,588

$

708,502

Cost of Goods Sold

212,380

178,964

631,977

552,571

Gross Profit

79,149

49,848

210,611

155,931

Equity in Earnings of Unconsolidated Joint Venture

12,423

9,856

34,274

27,481

Corporate General and Administrative Expense

(9,371

)

(6,796

)

(23,827

)

(18,450

)

Acquisition and Litigation Expense

(722

)

-

(2,825

)

-

Other Income

488

400

2,050

1,300

Interest Expense, Net

(4,101

)

(4,475

)

(12,054

)

(14,225

)

Earnings Before Income Taxes

77,866

48,833

208,229

152,037

Income Tax Expense

(25,836

)

(17,212

)

(68,170

)

(50,412

)

Net Earnings

$

52,030

$

31,621

$

140,059

$

101,625

EARNINGS PER SHARE:

Basic

$

1.05

$

0.64

$

2.82

$

2.07

Diluted

$

1.03

$

0.63

$

2.78

$

2.03

AVERAGE SHARES OUTSTANDING:

Basic

49,655,405

49,294,010

49,583,210

49,091,476

Diluted

50,411,147

50,162,962

50,375,619

49,948,178

CASH DIVIDENDS PER SHARE:

$

0.10

$

0.10

$

0.30

$

0.30

See notes to unaudited consolidated financial statements.

1


Eagle Materials Inc. and Subsidiaries

Consolidated Statements of Comprehensive Earnings

(unaudited  dollars in thousands)

For�the�Three�Months
Ended�December 31,

For�the�Nine Months
Ended�December 31,

2014

2013

2014

2013

Net Earnings

$

52,030

$

31,621

$

140,059

$

101,625

Change in Funded Status of Defined Benefit Plans:

Amortization of Net Actuarial Loss

163

238

489

714

Tax Expense

(57

)

(83

)

(171

)

(249

)

Comprehensive Earnings

$

52,136

$

31,776

$

140,377

$

102,090

See notes to unaudited consolidated financial statements.

2


Eagle Materials Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

December 31,

March�31,

2014

2014

(unaudited)

ASSETS

Current Assets -

Cash and Cash Equivalents

$

13,697

$

6,482

Accounts and Notes Receivable

136,823

102,917

Inventories

207,043

187,096

Prepaid and Other Assets

4,995

10,465

Total Current Assets

362,558

306,960

Property, Plant and Equipment -

1,929,177

1,660,975

Less: Accumulated Depreciation

(724,351

)

(676,924

)

Property, Plant and Equipment, net

1,204,826

984,051

Notes Receivable

2,890

3,063

Investment in Joint Venture

47,167

43,008

Goodwill and Intangible Assets

206,208

160,690

Other Assets

34,402

13,757

$

1,858,051

$

1,511,529

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities -

Accounts Payable

$

68,466

$

57,098

Accrued Liabilities

45,269

41,520

Income Taxes Payable

1,508

702

Current Portion of Long-term Debt

57,045

9,500

Total Current Liabilities

172,288

108,820

Long-term Debt

460,714

371,759

Other Long-term Liabilities

84,911

53,678

Deferred Income Taxes

167,116

145,773

Total Liabilities

885,029

680,030

Stockholders Equity -

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





Common Stock, Par Value $0.01; Authorized 100,000,000 Shares; Issued and Outstanding 50,277,425 and 50,053,738 Shares, respectively

503

501

Capital in Excess of Par Value

269,736

253,524

Accumulated Other Comprehensive Losses

(5,165

)

(5,483

)

Retained Earnings

707,948

582,957

Total Stockholders Equity

973,022

831,499

$

1,858,051

$

1,511,529

See notes to the unaudited consolidated financial statements.

3


Eagle Materials Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited  dollars in thousands)

For the Nine Months Ended
December 31,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES

Net Earnings

$

140,059

$

101,625

Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities -

Depreciation, Depletion and Amortization

54,552

52,315

Deferred Income Tax Provision

1,172

3,939

Stock Compensation Expense

9,807

7,487

Excess Tax Benefits from Share Based Payment Arrangements

(3,493

)

(4,619

)

Equity in Earnings of Unconsolidated Joint Venture

(34,274

)

(27,481

)

Distributions from Joint Venture

30,125

29,250

Changes in Operating Assets and Liabilities:

Accounts and Notes Receivable

(19,093

)

(6,461

)

Inventories

(10,279

)

(19,489

)

Accounts Payable and Accrued Liabilities

6,352

(8,101

)

Other Assets

3,916

1,650

Income Taxes Payable

4,299

13,897

Net Cash Provided by Operating Activities

183,143

144,012

CASH FLOWS FROM INVESTING ACTIVITIES

Property, Plant and Equipment Additions

(64,959

)

(43,208

)

Acquisition

(237,171

)

-

Net Cash Used in Investing Activities

(302,130

)

(43,208

)

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (Decrease) in Credit Facility

146,000

(97,000

)

Repayment of Senior Notes

(9,500

)

-

Dividends Paid to Stockholders

(15,044

)

(14,903

)

Shares Redeemed to Settle Employee Taxes on Stock Compensation

(1,356

)

(489

)

Payment of Debt Acquisition Costs

(1,661

)

-

Proceeds from Stock Option Exercises

4,270

10,496

Excess Tax Benefits from Share Based Payment Arrangements

3,493

4,619

Net Cash Used in Financing Activities

126,202

(97,277

)

NET INCREASE IN CASH AND CASH EQUIVALENTS

7,215

3,527

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

6,482

3,897

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

13,697

$

7,424

See notes to the unaudited consolidated financial statements.

4


Eagle Materials Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

December 31, 2014

(A) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements as of and for the nine month period ended December 31, 2014 include the accounts of Eagle Materials Inc. and its majority-owned subsidiaries (the Company, us or we) and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May�23, 2014.

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

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

We have chosen to separately present certain costs on a single line item on our consolidated statement of earnings titled Acquisition and Litigation Expense.��These expenses consist of acquisition transaction costs of approximately $0.7 million and legal fees related to our lawsuit against the Internal Revenue Service (IRS) of approximately $2.8 million for the nine months ended December 31, 2014.��See Footnotes (B) and (O) to the Unaudited Consolidated Financial Statements for more information.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The standard will be effective for us in the first quarter of fiscal 2018, with early adoption not permitted. There are two transition methods available under the new standard, either cumulative effect or retrospective. We are currently evaluating the impact of this ASU and have not yet selected a transition method.

(B) ACQUISITION

On November 14, 2014, Northern White Sand LLC (NWS), a wholly owned subsidiary of the Company, acquired all of the outstanding equity interest in CRS Holdco LLC, CRS Proppants LLC and Great Northern Sand LLC and related entities (collectively CRS Proppants) (such acquisition, the Acquisition).��CRS Proppants is a supplier of frac sand to the energy industry, and its business currently consists of a frac sand mine in New Auburn, Wisconsin, and a transload network into Texas and southwest Oklahoma.��

Purchase Price: The purchase price (the Purchase Price) of the Acquisition was approximately $237.2 million, including approximately $8.9 million of in-process capital expenditures paid as of the closing date.. The

5


purchase price is subject to further adjustment to reflect actual working capital acquired at the closing. We funded the payment of the Purchase Price at closing and expenses incurred in connection with the Acquisition through borrowings under our bank credit facility, which was amended and restated on October 30, 2014.��See Footnote (L) to the Unaudited Consolidated Financial Statements for more information about the amended bank credit facility.��

Recording of assets acquired and liabilities assumed: The transaction has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company has engaged a third-party to perform appraisal valuation to support the Companys preliminary estimate of the fair value of certain assets acquired in the Acquisition.��The working capital amounts paid at the closing are subject to certain changes to reflect actual working capital.��Additionally, the amounts assigned to property, plant and equipment and intangible assets, are preliminary and subject to change, though it is possible other values may change as well.��Included in the assets acquired, and liabilities assumed, are two long-term sales agreements that included prepayments for future sales under the agreement, with such prepayments classified as liabilities.��Additionally, one of the agreements is with a customer that is currently in bankruptcy, and is not expected to fulfill its obligation under the contract.��We have been indemnified by the former owner against any loss related to this contract, and such indemnity has been valued at fair value and recorded as an asset at the date of the acquisition.

The preparation of the valuation of the assets acquired and liabilities assumed in the Acquisition requires the use of significant assumptions and estimates.��Critical estimates include, but are not limited to, future expected cash flows, including projected revenues and expenses, and applicable discount rates.��These estimates are based on assumptions that the Company believes to be reasonable.��However, actual results may differ from these estimates.

We will finalize the amounts recognized as the information necessary to complete the analyses is obtained. We expect to finalize these amounts during the fourth quarter of fiscal 2015. The following table summarizes the provisional allocation of the estimated Purchase Price to assets acquired and liabilities assumed as of the acquisition date:

Purchase price allocation at acquisition date (in thousands)

As of

November 14, 2014

Cash and cash equivalents

$����������������219

Accounts Receivable

14,640

Inventories

9,668

Prepaid and Other Assets

753

Property and Equipment

203,637

Intangible Assets

48,200

Indemnity under Sales Agreement

14,813

Other Assets

1,619

Accounts Payable

����������(4,206)

Accrued Liabilities

������������ (2,072)

Obligations under Long-term Sales Agreements

���������������� (30,100)

Deferred Taxes

���������������� (20,000)

���� Total Net Assets

237,171

Goodwill

-

������Total Estimated Purchase Price

$�������� 237,171��

Intangible Assets:��The following table is a summary of the preliminary fair value estimates of the identifiable intangible assets (in thousands) and their weighted-average useful lives:

Weighted Average Life

Estimated Fair Value

Customer Relationships

4

48,000

Permits

40

200

Total Intangible Assets

$��48,200

6


Actual and pro forma impact of the Acquisition:��The following table presents the net sales and operating income of CRS Proppants that have been included in our consolidated statement of earnings from November 14, 2014 through the end of the quarter:

Three Months Ended

December 31, 2014

(dollars in thousands)

Revenues

$��9,452

Operating Income

$ ����223

Operating income shown above has been impacted by approximately $1.9 million of depreciation and amortization and approximately $0.7 million related to the impact of recording acquired inventory at fair value.

The unaudited pro forma results presented below include the effects of the Acquisition of CRS Proppants as if it had been consummated as of April�1, 2013. The pro forma results include the amortization associated with an estimate for acquired intangible assets and interest expense associated with debt used to fund the Acquisition and depreciation from the fair value adjustments for property�and equipment. To better reflect the combined operating results, material nonrecurring charges directly related to the Acquisition of $0.4 million and $1.1 million have been excluded from pro forma net income for the three and nine month periods ended December 31, 2014.

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

2014

2013

2014

2013

(dollars in thousands)

(dollars in thousands)

Revenues

$����303,043

$���� 245,836

$����900,975

$���� 753,253

Net Income

$������53,142

$������ 26,326

$����145,010

$������ 88,505

Earnings per share  basis

$����������1.07

$���������� 0.53

$����������2.92

$����������1.80

Earnings per share - diluted

$����������1.05

$���������� 0.52

$����������2.88

$����������1.77

The pro forma results do not include any anticipated synergies or other expected benefits of the Acquisition. ��Accordingly, the unaudited pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the Acquisition been consummated as of April�1, 2013.

(C) CASH FLOW INFORMATIONSUPPLEMENTAL

Cash payments made for interest were $13.6 million and $16.1 million for the nine months ended December 31, 2014 and 2013, respectively. Net payments made for federal and state income taxes during the nine months ended December 31, 2014 and 2013, were $60.0 million and $32.6�million, respectively.

We have excluded approximately $4.1 million of non-cash investing activities from the statement of cash flows related to the purchase of capital equipment.��The $4.1 million accrued at December 31, 2014 was paid in January 2015.

(D) ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable have been shown net of the allowance for doubtful accounts of $6.9 million and $5.8 million at December 31, 2014 and March�31, 2014, respectively. We perform ongoing credit evaluations of our customers financial condition and generally require no collateral from our customers. The allowance for non-collection of receivables is based upon analysis of economic trends in the construction industry, detailed analysis of the expected collectability of accounts receivable that are past due and the expected collectability of overall receivables. We have no significant credit risk concentration among our diversified customer base.

7


We had notes receivable totaling approximately $3.4�million at December 31, 2014, of which approximately $0.5 million has been classified as current and presented with accounts receivable on the balance sheet. We lend funds to certain companies in the ordinary course of business, and the notes bear interest, on average, at LIBOR plus 3.5%. Remaining unpaid amounts, plus accrued interest, mature on various dates between 2014 and 2017. The notes are collateralized by certain assets of the borrowers, namely property and equipment, and are generally payable monthly. We monitor the credit risk of each borrower by focusing on the timeliness of payments, review of credit history and credit metrics and interaction with the borrowers.

(E) STOCKHOLDERS EQUITY

A summary of changes in stockholders equity follows:

For�the�Nine Months
Ended�December 31, 2014

(dollars in thousands)

Common Stock 

Balance at Beginning of Period

$

501

Stock Option Exercises

2

Balance at End of Period

503

Capital in Excess of Par Value 

Balance at Beginning of Period

253,524

Stock Compensation Expense

��

13,299

Shares Redeemed to Settle Employee Taxes

(1,356

)

Stock Option Exercises

4,269

Balance at End of Period

269,736

Retained Earnings 

Balance at Beginning of Period

582,957

Dividends Declared to Stockholders

(15,068

)

Net Earnings

140,059

Balance at End of Period

707,948

Accumulated Other Comprehensive Loss -

Balance at Beginning of Period

(5,483

)

Change in Funded Status of Pension Plan, net of tax

318

Balance at End of Period

(5,165

)

Total Stockholders Equity

$

973,022

There were no open market share repurchases during the three and nine month periods ended December 31, 2014. As of December 31, 2014, we have authorization to purchase an additional 717,300 shares.

8


(F) INVENTORIES

Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or market, and consist of the following:

As of

December 31,
2014

March�31,
2014

(dollars in thousands)

Raw Materials and Material-in-Progress

$

100,377

$

82,319

Finished Cement

16,546

19,173

Gypsum Wallboard

6,108

7,144

Frac Sand

3,497

275

Aggregates

10,821

11,815

Paperboard

3,996

4,102

Repair Parts and Supplies

60,103

56,119

Fuel and Coal

5,595

6,149

$

207,043

$

187,096

(G) ACCRUED EXPENSES

Accrued expenses consist of the following:

As of

December 31,
2014

March�31,
2014

(dollars in thousands)

Payroll and Incentive Compensation

$

20,324

$

12,855

Benefits

10,185

10,158

Interest

1,874

4,813

Property Taxes

1,538

2,801

Power and Fuel

2,179

2,132

Sales and Use Tax

694

658

Legal

847

1,831

Acquisition and Litigation

300

-

Other

7,328

6,272

$

45,269

$

41,520

(H) Share-BASED EMPLOYEE COMPENSATION

On August�7, 2013 our stockholders approved the Eagle Materials Inc. Amended and Restated Incentive Plan (the Plan), which increased the shares we are authorized to issue as awards by 3,000,000 (1,500,000 of which may be stock awards). Under the terms of the Plan, we can issue equity awards, including stock options, restricted stock units (RSUs), restricted stock and stock appreciation rights to employees of the Company and members of the Board of Directors. Awards that were already outstanding prior to the approval of the Plan on August�7, 2013 remain outstanding. The Compensation Committee of our Board of Directors specifies the terms for grants of equity awards under the Plan.

Long-Term Compensation Plans -

Options. In June 2014, the Compensation Committee approved an incentive equity award of an aggregate of 193,636 stock options pursuant to the Plan to certain officers and key employees (the Fiscal 2015 Employee Stock Option Grant) that will be earned if our ten year return on equity is at least 15% at March�31, 2015. If this criterion is not met, all of the options will be forfeited. If the criterion is met, the award may be reduced by the Compensation Committee based on individual performance goals. Following any such reduction, the earned options will vest ratably over three years, with the first third vesting promptly following the determination date,

9


and the remaining options vesting on March�31, 2016 and 2017. The stock options have a term of ten years from the date of grant. In August 2014, we granted 18,515 options to members of the Board of Directors (the Fiscal 2015 Board of Directors Grant). Options granted under the Fiscal 2015 Board of Directors Grant vest immediately and can be exercised from the date of grant until their expiration on the tenth anniversary of the date of grant.

The Fiscal 2015 Employee Stock Option Grant and Fiscal 2015 Board of Directors Grants were valued at the grant date using the Black-Scholes option pricing model. The weighted-average assumptions used in the Black-Scholes model to value the option awards in fiscal 2015 are as follows:

��

Fiscal�2015

Dividend Yield

��

2.0%

Expected Volatility

��

44.8%

Risk Free Interest Rate

��

1.8%

Expected Life

��

6.0�years

Stock option expense for all outstanding stock option awards totaled approximately $1.4�million and $4.8�million for the three and nine month periods ended December 31, 2014, respectively, and $1.3 million and $4.0 million for the three and nine month periods ended December 31, 2013, respectively. At December 31, 2014, there was approximately $13.0�million of unrecognized compensation cost related to outstanding stock options, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 3.4 years.

The following table represents stock option activity for the nine month period ended December 31, 2014:

Number
of
Shares

Weighted-
Average
Exercise�Price

Outstanding Options at Beginning of Period

2,788,999

$

41.83

Granted

297,151

$

86.41

Exercised

(149,585

)

$

32.43

Cancelled

(1,269,500

)

$

47.43

Outstanding Options at End of Period

1,667,065

$

46.35

Options Exercisable at End of Period

1,035,166

$

34.45

Weighted-Average Fair Value of Options Granted during the Period

$

32.31

During the quarter ended June�30, 2014, approximately 1,270,000 options expired without the performance criteria having been met.

The following table summarizes information about stock options outstanding at December 31, 2014:

Outstanding Options

Exercisable Options

Range of Exercise Prices

Number�of
Shares
Outstanding

Weighted�-
Average
Remaining
Contractual
Life

Weighted�-
Average
Exercise
Price

Number�of
Shares
Outstanding

Weighted�-
Average
Exercise
Price

$23.17  $ 30.74

593,710

4.45

$

26.50

590,710

$

26.48

$33.08  $ 40.78

487,968

7.16

$

33.95

308,352

$

34.00

$53.22  $ 74.10

283,236

8.07

$

66.58

117,589

$

66.57

$79.90  $ 93.56

302,151

9.56

$

86.42

18,515

$

91.95

1,667,065

6.78

$

46.35

1,035,166

$

34.45

At December 31, 2014, the aggregate intrinsic value for outstanding and exercisable options was approximately $49.5�million and $43.1�million, respectively. The total intrinsic value of options exercised during the nine month period ended December 31, 2014 was approximately $9.5�million.

10


Restricted Stock. In June 2014, the Compensation Committee approved the granting of an aggregate of 80,416 shares of restricted stock to certain officers and key employees (the Fiscal 2015 Employee Restricted Stock Award) that will be earned if our ten year return on equity is at least 15% at March�31, 2015. If this criterion is not met, all of the shares will be forfeited. If the criterion is met, the award may be reduced by the Compensation Committee based on individual performance goals. Following any such reduction, restrictions on the earned shares will lapse ratably over five years, with the first fifth lapsing promptly following the determination date, and the remaining restrictions lapsing on March�31, 2016 through 2019. The value of the Fiscal 2015 Employee Restricted Stock Award, net of estimated forfeitures, is being expensed over a five year period. In August 2014, we granted 7,457 shares of restricted stock to members of the Board of Directors (the Board of Directors Fiscal 2015 Restricted Stock Award). Awards issued under the Board of Directors Fiscal 2015 Restricted Stock Award do not fully vest until the retirement of each director, in accordance with the Companys director retirement policy.

Expense related to restricted shares was approximately $1.7�million and $5.0�million for the three and nine month periods ended December 31, 2014, respectively, and $1.3�million and $3.4�million for the three and nine month periods ended December 31, 2013, respectively. At December 31, 2014, there was approximately $18.7�million of unearned compensation from restricted stock, net of estimated forfeitures, which will be recognized over a weighted-average period of 2.7�years.

The number of shares available for future grants of stock options, restricted stock units, stock appreciation rights and restricted stock under the Plan was 4,873,975�at December 31, 2014.

(I) COMPUTATION OF EARNINGS PER SHARE

The calculation of basic and diluted common shares outstanding is as follows:

For�the�Three�Months
Ended December 31,

For�the�Nine Months
Ended�December 31,

2014

2013

2014

2013

Weighted-Average Shares of Common Stock Outstanding

49,655,405

49,294,010

49,583,210

49,091,476

Common Equivalent Shares:

Assumed Exercise of Outstanding Dilutive Options

1,349,997

1,559,885

1,418,957

1,648,483

Less: Shares Repurchased from Assumed Proceeds of Assumed Exercised Options

(893,874

)

(1,011,617

)

(920,113

)

(1,095,651

)

Restricted Shares

299,619

320,684

293,565

303,870

Weighted-Average Common and Common Equivalent Shares Outstanding

50,411,147

50,162,962

50,375,619

49,948,178

Shares Excluded Due to Anti-dilution Effects

279,651

216,914

206,702

124,970

(J) PENSION AND EMPLOYEE BENEFIT PLANS

We sponsor several defined benefit and defined contribution pension plans which together cover substantially all our employees. Benefits paid under the defined benefit plans covering certain hourly employees are based on years of service and the employees qualifying compensation over the last few years of employment.

11


The following table shows the components of net periodic cost for our plans:

For�the�Three�Months�Ended
December 31,

For�the�Nine Months�ended
December 31,

2014

2013

2014

2013

(dollars in thousands)

(dollars in thousands)

Service Cost  Benefits Earned During the Period

$

224

$

360

$

696

$

753

Interest Cost of Benefit Obligations

324

306

954

917

Expected Return on Plan Assets

(426

)

(410

)

(1,254

)

(1,096

)

Recognized Net Actuarial Loss

150

215

460

707

Amortization of Prior-Service Cost

3

1

9

9

Net Periodic Pension Cost

$

275

$

472

$

865

$

1,290

(K) INCOME TAXES

Income taxes for the interim period presented have been included in the accompanying financial statements on the basis of an estimated annual effective tax rate. In addition to the amount of tax resulting from applying the estimated annual effective tax rate to pre-tax income, we will, when appropriate, include certain items treated as discrete events to arrive at an estimated overall tax amount. The effective tax rate for both the three and nine months ended December 31, 2014 was approximately 33%, which increased from the prior year due to the reduction in the impact of our depletion deduction as a result of increased earnings in fiscal year 2015.

In September 2013, the Internal Revenue Service enacted final guidance regarding the deduction and capitalization of expenditures related to tangible property (tangible property regulations). The tangible property regulations clarify and expand sections 162(a) and 263(a) of the Internal Revenue Code which relate to amounts paid to acquire, produce, or improve tangible property. Additionally, the tangible property regulations provide final guidance under section 167 regarding accounting for and retirement of depreciable property and regulations under section 168 relating to the accounting for property under the Modified Accelerated Cost Recovery System. The tangible property regulations affect all taxpayers that acquire, produce, or improve tangible property, which includes the Company, and generally apply to taxable years beginning on or after January�1, 2014, which will impact us for the fiscal year ending March�31, 2015. We have evaluated the tangible property regulations and determined the regulations will not have a material impact on our financial condition, results of operations or cash flows.

(L) LONG-TERM DEBT

Long-term debt consists of the following:

As of

December 31,
2014

March�31,
2014

(dollars in thousands)

Credit Facility

$

335,000

$

189,000

Senior Notes

182,759

192,259

Total Debt

517,759

381,259

Less: Current Portion of Long-term Debt

(57,045

)

(9,500

)

Total Debt

$

460,714

$

371,759

Credit Facility 

Our Credit Facility was amended and restated on October 30, 2014 (the Amended Credit Facility).��The Amended Credit Facility increased available borrowings from $400.0 million to $500.0 million and extended the term from December 15, 2015 to October 30, 2019. Borrowings under the Amended Credit Facility are guaranteed by substantially all of the Companys subsidiaries. At the option of the Company, outstanding principal amounts on the Amended Credit Facility bear interest at a variable rate equal to (i)�LIBOR, plus an

12


agreed margin (ranging from 100 to 225 basis points), which is to be established quarterly based upon the Companys ratio of consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, to the Companys consolidated indebtedness (the Leverage Ratio), or (ii)�an alternative base rate which is the higher of (a)�the prime rate or (b)�the federal funds rate plus �1D2% per annum plus an agreed margin (ranging from 0 to 125 basis points). Interest payments are payable, in the case of loans bearing interest at a rate based on the federal funds rate, quarterly, or in the case of loans bearing interest at a rate based on LIBOR, at the end of the LIBOR advance periods, which can be a period of up to nine months at the option of the Company. The Company is also required to pay a commitment fee on unused available borrowings under the Amended Credit Facility ranging from 10 to 35 basis points depending upon the Leverage Ratio. The Amended Credit Facility contains customary covenants that restrict our ability to incur additional debt, encumber our assets, sell assets, make or enter into certain investments, loans or guaranties and enter into sale and leaseback arrangements. The Amended Credit Facility also requires us to maintain a consolidated indebtedness ratio (calculated as consolidated indebtedness to consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions) of 3.5:1.0 or less and an interest coverage ratio (consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions to consolidated interest expense) of at least 2.5:1.0.��We had $335.0 million of borrowings outstanding at December 31, 2014. Based on our Leverage Ratio, we had $155.8 million of available borrowings, net of the outstanding letters of credit, at December 31, 2014.

The Amended Credit Facility has a $50.0 million letter of credit facility. Under the letter of credit facility, the Company pays a fee at a per annum rate equal to the applicable margin for Eurodollar loans in effect from time to time plus a one-time letter of credit fee in an amount equal to 0.125% of the initial stated amount. At December 31, 2014, we had $9.2 million of letters of credit outstanding.

Senior Notes -

We entered into a Note Purchase Agreement on November�15, 2005 (the 2005 Note Purchase Agreement) related to our sale of $200 million of senior, unsecured notes, designated as Series 2005A Senior Notes (the Series 2005A Senior Notes) in a private placement transaction. The Series 2005A Senior Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in three tranches on November�15, 2005. Since entering into the 2005 Note Purchase Agreement, we have repurchased $81.1 million in principal of the Series 2005A Senior Notes (in periods prior to the fiscal year ended March�31, 2013). During November 2012, Tranche A of the Series 2005A Senior Notes matured and we retired the remaining $4.7 million in notes from this Tranche. Following these repurchases and maturities, the amounts outstanding for each of the remaining tranches are as follows:

Principal

Maturity�Date

Interest�Rate

Tranche B

$

57.0�million

November�15,�2015

5.38%

Tranche C

$

57.2�million

November�15,�2017

5.48%

Interest for each tranche of Notes is payable semi-annually on the 15th day of May and the 15th day of November of each year until all principal is paid for the respective tranche.

13


We also entered into an additional Note Purchase Agreement on October�2, 2007 (the 2007 Note Purchase Agreement) related to our sale of $200 million of senior, unsecured notes, designated as Series 2007A Senior Notes (the Series 2007A Senior Notes) in a private placement transaction. The Series 2007A Senior Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in four tranches on October�2, 2007. Since entering into the 2007 Note Purchase Agreement, we have repurchased $122.0 million in principal of the Series 2007A Senior Notes (in periods prior to the fiscal year ended March�31, 2013). During October 2014, Tranche A of the Series 2007A Senior Notes matured and we retired the remaining $9.5 million in notes from this Tranche. Following the repurchase, the amounts outstanding for each of the four tranches are as follows:

Principal

Maturity�Date

Interest�Rate

Tranche B

$

8.0�million

October�2,�2016

6.27%

Tranche C

$

24.0�million

October�2,�2017

6.36%

Tranche D

$

36.5�million

October�2,�2019

6.48%

Interest for each tranche of Notes is payable semi-annually on the second day of April and the second day of October of each year until all principal is paid for the respective tranche.

Our obligations under the 2005 Note Purchase Agreement and the 2007 Note Purchase Agreement (collectively referred to as the Note Purchase Agreements) and the Series 2005A Senior Notes and the Series 2007A Senior Notes (collectively referred to as the Senior Notes) are equal in right of payment with all other senior, unsecured debt of the Company, including our debt under the Amended Credit Facility. The Note Purchase Agreements contain customary restrictive covenants, including covenants that place limits on our ability to encumber our assets, to incur additional debt, to sell assets, or to merge or consolidate with third parties, as well as certain cross covenants with the Amended Credit Facility. We were in compliance with all financial ratios and tests at December 31, 2014 and throughout the fiscal year.

Pursuant to a Subsidiary Guaranty Agreement, substantially all of our subsidiaries have guaranteed the punctual payment of all principal, interest, and Make-Whole Amounts (as defined in the Note Purchase Agreements) on the Senior Notes and the other payment and performance obligations of the Company contained in the Senior Notes and in the Note Purchase Agreements. We are permitted, at our option and without penalty, to prepay from time to time at least 10% of the original aggregate principal amount of the Senior Notes at 100% of the principal amount to be prepaid, together with interest accrued on such amount to be prepaid to the date of payment, plus a Make-Whole Amount. The Make-Whole Amount is computed by discounting the remaining scheduled payments of interest and principal of the Senior Notes being prepaid at a discount rate equal to the sum of 50 basis points and the yield to maturity of U.S. treasury securities having a maturity equal to the remaining average life of the Senior Notes being prepaid.

We are leasing one of our cement plants from the city of Sugar Creek, Missouri. The city of Sugar Creek issued industrial revenue bonds to partly finance improvements to the cement plant. The lease payments due to the city of Sugar Creek under the cement plant lease, which was entered into upon the sale of the industrial revenue bonds, are equal in amount to the payments required to be made by the city of Sugar Creek to the holders of the industrial revenue bonds. Because we are the holder of all of the outstanding industrial revenue bonds, no debt is reflected on our financial statements in connection with our lease of the cement plant. At the conclusion of the lease in fiscal 2021, we have the option to purchase the cement plant for a nominal amount.

14


(M) SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that engage in business activities that earn revenues, incur expenses and prepare separate financial information that is evaluated regularly by our chief operating decision maker in order to allocate resources and assess performance. During the quarter ended June�30, 2014, we changed our segment presentation to reflect Oil and Gas Proppants, which had been included in Concrete and Aggregates, as a separate segment. We have adjusted the prior period segment presentation to reflect this change for comparative purposes.

We operate in five business segments: Cement, Gypsum Wallboard, Recycled Paperboard, Concrete and Aggregates and Oil and Gas Proppants, with Gypsum Wallboard and Cement currently being our principal lines of business. These operations are conducted in the U.S. and include the mining of limestone and the manufacture, production, distribution and sale of Portland cement (a basic construction material which is the essential binding ingredient in concrete), the mining of gypsum and the manufacture and sale of gypsum wallboard, the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters, the sale of readymix concrete and the mining and sale of aggregates (crushed stone, sand and gravel) and sand used in hydraulic fracturing (frac sand). These products are used primarily in commercial and residential construction, public construction projects and projects to build, expand and repair roads and highways and in oil and natural gas extraction.

We operate six cement plants, sixteen cement distribution terminals, five gypsum wallboard plants, including the plant temporarily idled in Bernalillo, N.M., a gypsum wallboard distribution center, a recycled paperboard mill, seventeen readymix concrete batch plant locations, four aggregates processing plant locations, two frac sand mines, two frac sand processing facilities and five frac sand transload locations. The principal markets for our cement products are Texas, northern Illinois (including Chicago), the central plains, the Rocky Mountains, northern Nevada, and northern California. Gypsum wallboard and recycled paperboard are distributed throughout the continental U.S, with the exception of the northeast. Concrete and aggregates are sold to local readymix producers and paving contractors in the Austin, Texas area, north of Sacramento, California and the greater Kansas City, Missouri area, while frac sand is currently sold into shale deposit zones across the United States.

We conduct one of our six cement plant operations, Texas Lehigh Cement Company LP in Buda, Texas, through a Joint Venture. For segment reporting purposes only, we proportionately consolidate our 50% share of the Joint Ventures revenues and operating earnings, which is consistent with the way management reports the segments within the Company for making operating decisions and assessing performance.

15


We account for intersegment sales at market prices. The following table sets forth certain financial information relating to our operations by segment:

For�the�Three�Months

For�the�Nine Months

Ended�December 31,

Ended�December 31,

2014

2013

2014

2013

(dollars�in�thousands)

(dollars�in�thousands)

Revenues -

Cement

$

124,048

$

105,578

$

397,845

$

356,482

Gypsum Wallboard

118,573

104,158

342,905

299,099

Paperboard

39,936

33,696

112,994

100,501

Oil and Gas Proppants

31,731

3,960

53,325

6,152

Concrete and Aggregates

27,116

24,376

85,239

77,487

Sub-total

341,404

271,768

992,308

839,721

Less: Intersegment Revenues

(16,968

)

(16,766

)

(51,096

)

(49,247

)

Net Revenues, including Joint Venture

324,436

255,002

941,212

790,474

Less: Joint Venture

(32,907

)

(26,190

)

(98,624

)

(81,972

)

Net Revenues

$

291,529

$

228,812

$

842,588

$

708,502

For�the�Three�Months

For�the�Nine Months

Ended�December 31,

Ended�December 31,

2014

2013

2014

2013

(dollars�in�thousands)

(dollars�in�thousands)

Intersegment Revenues -

Cement

$

2,489

$

2,556

$

7,760

$

7,503

Paperboard

14,305

13,993

42,645

40,855

Concrete and Aggregates

174

217

691

889

$

16,968

$

16,766

$

51,096

$

49,247

Cement Sales Volume (in thousands of tons) -

Wholly owned Operations

935

876

3,135

3,037

Joint Venture

270

239

837

753

1,205

1,115

3,972

3,790


16


For�the�Three�Months

For the Nine Months

Ended�December 31,

Ended�December 31,

2014

2013

2014

2013

(dollars in thousands)

(dollars�in�thousands)

Operating Earnings -

Cement

$

37,578

$

26,011

$

96,535

$

77,451

Gypsum Wallboard

40,013

30,730

114,443

90,234

Paperboard

9,102

6,661

24,633

19,277

Oil and Gas Proppants

3,241

(2,162

)

3,315

(3,968

)

Concrete and Aggregates

1,638

(1,536

)

5,959

418

Other, net

488

400

2,050

1,300

Sub-total

92,060

60,104

246,935

184,712

Corporate General and Administrative

(9,371

)

(6,796

)

(23,827

)

(18,450

)

Acquisition and Litigation Expense

(722

)

-

(2,825

)

-

Earnings Before Interest and Income Taxes

81,967

53,308

220,283

166,262

Interest Expense, net

(4,101

)

(4,475

)

(12,054

)

(14,225

)

Earnings Before Income Taxes

$

77,866

$

48,833

$

208,229

$

152,037

Cement Operating Earnings -

Whollyowned Operations

$

25,155

$

16,155

$

62,261

$

49,970

Joint Venture

12,423

9,856

34,274

27,481

$

37,578

$

26,011

$

96,535

$

77,451

Capital Expenditures -

Cement

$

3,890

$

2,657

$

16,886

$

8,493

Gypsum Wallboard

1,154

1,284

4,947

2,983

Paperboard

303

902

1,452

2,803

Oil and Gas Proppants

18,421

5,533

32,023

26,549

Concrete and Aggregates

1,128

1,135

9,477

2,266

Other

24

114

174

114

$

24,920

$

11,625

$

64,959

$

43,208

Depreciation, Depletion and Amortization -

Cement

$

8,089

$

8,036

$

23,959

$

23,684

Gypsum Wallboard

4,967

5,239

15,096

15,783

Paperboard

2,069

2,205

6,196

6,558

Oil and Gas Proppants

2,673

475

3,926

1,160

Concrete and Aggregates

1,465

1,300

4,058

4,001

Other, net

425

436

1,317

1,129

$

19,688

$

17,691

$

54,552

$

52,315

17


As of

December 31,
2014

March�31,
2014

(dollars in thousands)

Identifiable Assets -

Cement

$

759,143

$

762,578

Gypsum Wallboard

408,097

412,566

Paperboard

123,131

125,045

Oil and Gas Proppants

448,155

71,366

Concrete and Aggregates

95,303

108,197

Corporate and Other

24,222

31,777

$

1,858,051

$

1,511,529

Segment operating earnings, including the proportionately consolidated 50% interest in the revenues and expenses of the Joint Venture, represent revenues, less direct operating expenses, segment depreciation, and segment selling, general and administrative expenses. Corporate assets consist primarily of cash and cash equivalents, general office assets, miscellaneous other assets and unrecognized tax benefits. The segment breakdown of goodwill is as follows:

As of

December 31,

March�31,

2014

2014

(dollars in thousands)

Cement

$

8,359

$

8,359

Gypsum Wallboard

116,618

116,618

Paperboard

7,538

7,538

$

132,515

$

132,515

We perform our annual test of impairment on goodwill during the fourth quarter of our fiscal year. If business conditions in the operating units containing goodwill change substantially during the fiscal year, and we are unable to conclude that an impairment loss is not likely to occur, we will perform impairment tests for those business units during our quarterly periods. At December 31, 2014, we determined that impairment losses are not likely to occur; therefore, no impairment tests were performed during the quarter.

We temporarily idled our gypsum manufacturing facility in Bernalillo, N.M. beginning in December 2009, due to cyclical low gypsum wallboard demand. The carrying value of the Bernalillo plant was $2.8 million, and the carrying value of the equipment was $0.7 million at December 31, 2014, and we continue to depreciate the assets over their estimated useful life. We currently have a strong market position in New Mexico, and our Albuquerque gypsum wallboard facility is operating at close to capacity. We plan on resuming manufacturing at the Bernalillo facility in the future when demand for our products increases. Costs of maintaining the facility during the idling are not significant, and the facility was generating positive cash flow prior to being idled; therefore, we have determined that the value of the plant and equipment is not impaired. We are not currently considering the permanent closure of the Bernalillo facility. Any decision to permanently close Bernalillo would be the result of future changes in the building materials industry in the southwest United States and Rocky Mountain region, including changes in the production capacity or operations of our competitors, demand for gypsum wallboard or general macro-economic conditions, which we do not foresee at the present time. If we were to permanently close the Bernalillo facility, or if our expectations as to its use changed such that we project the future undiscounted cash flows from its operations would be insufficient to recover its carrying value due to the factors described above, or for any other reason, we would recognize impairment at that time. All of our other wallboard facilities are currently generating positive cash flow from operations.

18


Summarized financial information for the Joint Venture that is not consolidated is set out below (this summarized financial information includes the total amount for the Joint Venture and not our 50% interest in those amounts):

For�the�Three�Months
Ended December 31,

For the Nine Months
Ended December 31,

2014

2013

2014

2013

(dollars in thousands)

(dollars in thousands)

Revenues

$

65,815

$

52,380

$

197,249

$

163,944

Gross Margin

$

26,445

$

20,513

$

72,282

$

57,848

Earnings Before Income Taxes

$

24,846

$

19,712

$

68,548

$

54,962

As of

December 31,
2014

March�31,
2014

(dollars in thousands)

Current Assets

$

68,161

$

59,029

Non-Current Assets

$

43,281

$

42,826

Current Liabilities

$

20,961

$

17,901

(N) INTEREST EXPENSE

The following components are included in interest expense, net:

For�the�Three�Months
Ended�December 31,

For�the Nine Months
Ended�December 31,

2014

2013

2014

2013

(dollars�in�thousands)

(dollars�in�thousands)

Interest (Income)

$

(2

)

$

(1

)

$

(5

)

$

(3

)

Interest Expense

3,730

4,102

10,901

13,071

Interest Expense  Income Taxes

174

155

522

481

Other Expenses

199

219

636

676

Interest Expense, net

$

4,101

$

4,475

$

12,054

$

14,225

Interest income includes interest on investments of excess cash. Components of interest expense include interest associated with the Senior Notes, the Amended Credit Facility and commitment fees based on the unused portion of the Amended Credit Facility. Other expenses include amortization of debt issuance costs, and credit facility costs.

Interest Expense  Income Taxes relates to interest accrued on our unrecognized tax benefits, primarily related to the Republic Asset Acquisition.

(O) COMMITMENTS AND CONTINGENCIES

We have certain deductible limits under our workers compensation and liability insurance policies for which reserves are established based on the undiscounted estimated costs of known and anticipated claims. We have entered into standby letter of credit agreements relating to workers compensation and auto and general liability self-insurance. At December 31, 2014, we had contingent liabilities under these outstanding letters of credit of approximately $9.2 million.

In the ordinary course of business, we execute contracts involving indemnifications that are standard in the industry and indemnifications specific to a transaction such as sale of a business. These indemnifications may include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; construction contracts and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, it is the opinion of management that these

19


indemnifications are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. We currently have no outstanding guarantees.

We are currently contingently liable for performance under $14.3 million in performance bonds required by certain states and municipalities, and their related agencies. The bonds are principally for certain reclamation obligations and mining permits. We have indemnified the underwriting insurance company against any exposure under the performance bonds. In our past experience, no material claims have been made against these financial instruments.

Outstanding Lawsuit against the IRS

As previously reported, the IRS completed the examination of our federal income tax returns for all of the fiscal years ended March�31, 2001 through 2006. The IRS issued Exam Reports and Notices of Proposed Adjustment on November�9, 2007 for the examination of the 2001, 2002 and 2003 tax years, and on February�5, 2010 for the examination of the 2004, 2005 and 2006 fiscal years, in which it denied certain depreciation deductions claimed by us with respect to assets acquired by us from Republic Group LLC in November 2000. In response to the examination reports, we previously paid an aggregate amount to the IRS, net of certain refunds of interest, of $97.9 million of taxes, penalties and interest with respect to these fiscal years. On May�4, 2011, we filed a lawsuit in Federal District Court to recover the $97.9 million of taxes, penalties and interest paid. In March 2013, the IRS agreed to suspend the audit for tax years 2007 through 2011 pending the outcome of our case before the Federal District Court.��In September 2013, the judge heard arguments on each partys motion for summary judgment and in November 2013 the judge denied each such motion.��

In September 2014 the Company and the IRS reached a tentative agreement to settle this case, and this agreement was approved by the U.S Department of Justice in January 2015.��Under the terms of the agreement, we dismissed our lawsuit seeking to recover taxes, interest and penalties paid, as discussed above, in exchange for the IRS conceding 40% of the penalties, plus related interest, to date. We will recognize the recovery of 40% of the penalties, which total approximately $5.8 million, plus approximately $3.4 million of��related interest thereon, in our consolidated statement of earnings during the fourth quarter of fiscal 2015.

EPA Notice of Violation

On October�5, 2010, Region IX of the EPA issued a Notice of Violation and Finding of Violation (NOV) alleging violations by our subsidiary, Nevada Cement Company (NCC), of the Clean Air Act (CAA). The NOV alleges that NCC made certain physical changes to its facility in the 1990s without first obtaining permits required by the Prevention of Significant Deterioration requirements and Title V permit requirements of the CAA. The EPA also alleges that NCC has failed to submit to the EPA since 2002 certain reports required by the National Emissions Standard for Hazardous Air Pollutants General Provisions and the Portland Cement Manufacturing Industry Standards. On March�12, 2014, EPA Region IX issued a second NOV to NCC. The second NOV is materially similar to the 2010 NOV except that it alleges violations of the new source performance standards (NSPS) for Portland cement plants. The NOVs state that the EPA may seek penalties although it does not propose or assess any specific level of penalties or specify what relief the EPA will seek for the alleged violations. NCC believes it has meritorious defenses to the allegations in the NOVs. NCC met with the EPA in December 2010,�September 2012 and May 2014 to present its defenses and to discuss a resolution of the alleged violations. EPA and NCC remain in discussions regarding the alleged violations. If a negotiated settlement cannot be reached, NCC intends to vigorously defend these matters in any enforcement action that may be pursued by the EPA. As a part of a settlement, or should NCC fail in its defense in any enforcement action, NCC could be required to make substantial capital expenditures to modify its facility and incur increased operating costs. NCC could also be required to pay significant civil penalties. Additionally, an enforcement action could take many years to resolve the underlying issues alleged in the NOV. We are currently unable to determine the final outcome of this matter or the impact of an unfavorable determination upon our financial position or results of operations.

20


Domestic Wallboard Antitrust Litigation

Since late December 2012, several purported class action lawsuits were filed in various United States district courts, including the Eastern District of Pennsylvania, Western District of North Carolina and the Northern District of Illinois, against the Companys subsidiary, American Gypsum Company LLC (American Gypsum), alleging that American Gypsum conspired with other wallboard manufacturers to fix the price for drywall sold in the United States in violation of federal antitrust laws and, in some cases related provisions of state law.�The complaints allege that the defendant wallboard manufacturers conspired to increase prices through the announcement and implementation of coordinated price increases, output restrictions, and other restraints of trade, including the elimination of individual job quote pricing.�In addition to American Gypsum, the defendants in these lawsuits include CertainTeed Corp., USG Corporation and United States Gypsum (together USG), New NGC, Inc., Lafarge North America, Temple Inland Inc. and PABCO Building Products LLC.� On April�8, 2013, the Judicial Panel on Multidistrict Litigation transferred and consolidated all related cases to the Eastern District of Pennsylvania for coordinated pretrial proceedings.

On June�24, 2013, the direct and indirect purchaser plaintiffs filed consolidated amended class action complaints. The direct purchasers complaint added the Company as a defendant. The plaintiffs in the consolidated class action lawsuits bring claims on behalf of purported classes of direct or indirect purchasers of wallboard from January 1, 2012 to the present for unspecified monetary damages (including treble damages) and in some cases injunctive relief. On July�29, 2013, the Company and American Gypsum answered the complaints, denying all allegations that they conspired to increase the price of drywall and asserting affirmative defenses to the plaintiffs claims.

On November 3, 2014 USG announced that it had entered into a binding memorandum of understanding with counsel representing the direct and indirect purchasers classes pursuant to which it agreed to settle all claims against it. Discovery in this litigation is ongoing.��Due to the fact that the case is in the discovery phase, we are unable to estimate the amount of any reasonably possible loss or range of reasonably possible losses.�American Gypsum denies the allegations in these lawsuits and will vigorously defend itself against these claims.

(P) FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of our long-term debt has been estimated based upon our current incremental borrowing rates for similar types of borrowing arrangements. The fair value of our Senior Notes at December 31, 2014 is as follows:

Fair Value

(dollars�in�thousands)

Series 2005A Tranche B

$

58,528

Series 2005A Tranche C

60,304

Series 2007A Tranche B

8,440

Series 2007A Tranche C

�25,764

Series 2007A Tranche D

��

�39,895

The estimated fair value of our long-term debt was based on quoted prices of similar debt instruments with similar terms that are publicly traded (level 2 input). The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued liabilities approximate their fair values at December 31, 2014 due to the short-term maturities of these assets and liabilities. The fair value of our Amended Credit Facility also approximates its carrying value at December 31, 2014.


21


Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition

EXECUTIVE SUMMARY

Eagle Materials Inc. is a diversified producer of basic building products used in residential, industrial, commercial and infrastructure construction. Information presented for the nine months ended December 31, 2014 and 2013, respectively, reflects the Companys business segments, consisting of Cement, Gypsum Wallboard, Recycled Paperboard, Concrete and Aggregates and Oil and Gas Proppants. These operations are conducted in the U.S. and include the mining of limestone and the manufacture, production, distribution and sale of Portland cement (a basic construction material which is the essential binding ingredient in concrete) as well as specialty oil well cement; the mining of gypsum and the manufacture and sale of gypsum wallboard; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters; the sale of readymix concrete, the mining and sale of aggregates (crushed stone, sand and gravel) and the mining and sale of sand used in hydraulic fracturing (frac sand). These products are used primarily in commercial and residential construction, public construction projects, projects to build, expand and repair roads and highways and in natural gas extraction. Certain information for each of Concrete and Aggregates is broken out separately in the segment discussions. During the quarter ended June�30, 2014, we changed our segments presentation to reflect Oil and Gas Proppants, which had been included in Concrete and Aggregates, as a separate segment. We have adjusted the prior period segment presentation to reflect this change for comparative purposes for both the three and nine month periods ended December 31, 2014 and 2013.

On November�14, 2014, a wholly owned subsidiary of Eagle Materials Inc., a Delaware corporation (the Company), completed the previously announced acquisition (the Acquisition) of all of the outstanding equity interests of CRS Holdco LLC, CRS Proppants LLC, Great Northern Sand, LLC, and related entities (collectively, CRS Proppants). The Acquisition was completed pursuant to a Securities Purchase Agreement, dated October�16, 2014 (the Securities Purchase Agreement), by and among a wholly owned subsidiary of the Company and the Sellers named therein (EOS Partners, L.P., EOS Capital Partners IV, L.P., Original CRS LLC, Steve Cobb, Bon Accord Partners, L.P. and Stephen R. Horn).

CRS Proppants is a supplier of frac sand to the energy industry, and its business currently consists of a frac sand mine in New Auburn, Wisconsin, and a transload network into Texas and southwest Oklahoma. The purchase price (the Purchase Price) paid by the Company for CRS Proppants was approximately $237.2 million in cash, including approximately $9.0 million for in-process capital expenditures paid through the closing date, and estimated working capital and other estimated closing amounts. The Purchase Price is subject to customary post-closing adjustments as provided in the Securities Purchase Agreement. The Purchase Price was funded through borrowings under the Companys credit facility.��CRS Proppants was in the process of expanding its frac sand mine in New Auburn, Wisconsin at the time of purchase.��We expect to complete the expansion during the first quarter of fiscal 2016 at an additional cost of approximately $25.0 million.

During fiscal 2014, we began selling third-party purchased frac sand from our Corpus Christi plant into the Texas market.��During the third quarter of fiscal 2015 we began shipping sand from our mine in Utica, Illinois to Corpus Christi for sale in the Texas market.��We continue to pursue other locations that are geographically supportive of the oil and gas proppants business, and anticipate additional capital expenditures related to this business in the range of $60.0 million to $70.0 million in fiscal 2015, including the amounts related to the completion of the plant in New Auburn, Wisconsin. Additionally, we continue to focus on specialty oil well cement, in addition to regular construction cement sales.

We operate in cyclical commodity businesses that are affected by changes in market conditions and the overall construction environment. Our operations, depending on each business segment, range from local in nature to national businesses. We have operations in a variety of geographic markets, which subject us to the economic conditions in those geographic markets as well as economic conditions in the national market. General economic downturns or localized downturns in the regions where we have operations may have a material adverse effect on our business, financial condition and results of operations. Our Cement companies focus on the U.S.

22


heartland in Texas, Oklahoma, Missouri, Colorado, Wyoming and Nevada, as well as the Chicago, Illinois metropolitan area. Due to the low value-to-weight ratio of cement, it is usually shipped within a 150 mile radius of the plants by truck and up to 300 miles by rail. Concrete and Aggregates are even more regional as our operations serve the areas immediately surrounding Austin, Texas, north of Sacramento, California and the greater Kansas City, Missouri area, while frac sand is currently sold into shale deposit zones across the United States.. Cement, concrete and aggregates and frac sand demand may fluctuate more widely because local and regional markets and economies may be more sensitive to changes than the national markets. Our Wallboard and Paperboard operations are more national in scope and shipments are made throughout most of the continental United States, except for the northeast.

We conduct one of our cement operations through a joint venture, Texas Lehigh Cement Company LP, which is located in Buda, Texas (the Joint Venture). We own a 50% interest in the Joint Venture and account for our interest under the equity method of accounting. We proportionately consolidate our 50% share of the Joint Ventures revenues and operating earnings in the presentation of our cement segment, which is the way management organizes the segments within the Company for making operating decisions and assessing performance.

RESULTS OF OPERATIONS

Consolidated Results

For�the�Three�Months�Ended
December 31,

For�the�Nine Months�Ended
December 31,

2014

2013

Change

2014

2013

Change

(In�thousands�except�per�share)

(In�thousands�except�per�share)

Revenues

$

291,529

$

228,812

27%

$�� 842,588��

$

708,502

19%

Cost of Goods Sold

(212,380

)

(178,964

)

19%

(631,977

)

(552,571

)

14%

Gross Profit

79,149

49,848

59%

210,611

155,931

35%

Equity in Earnings of Unconsolidated Joint Venture

12,423

9,856

26%

34,274

27,481

25%

Corporate General and Administrative Expense

(9,371

)

(6,796

)

38%

(23,827

)

(18,450

)

29%

Acquisition and Litigation Expense

(722

)

-

-

(2,825

)

-

-

Other Income

488

400

22%

2,050

1,300

58%

Interest Expense, net

(4,101

)

(4,475

)

(8%)

(12,054

)

(14,225

)

(15%)

Earnings Before Income Taxes

77,866

48,833

59%

208,229

152,037

37%

Income Tax Expense

(25,836

)

(17,212

)

50%

(68,170

)

(50,412

)

35%

Net Earnings

$

52,030

$

31,621

65%

$�� 140,059

$

101,625

38%

Diluted Earnings per Share

$

1.03

$

0.63

63%

$�������� 2.78

$

2.03

37%

Revenues. Revenues were $291.5 million and $228.8 million for the three months ended December 31, 2014 and 2013, respectively. Approximately $9.5 million of the $62.7 million increase in revenues during the three months ended December 31, 2014, compared to December 31, 2013, was due to the Acquisition.��The remaining increase in revenues was primarily due to increased sales volumes for all of our businesses except aggregates, and increased average net sales prices for all businesses except recycled paperboard, which remained flat. The impact of the increased net sales prices and sales volumes on revenues for the quarter ended December 31, 2014, compared to December 31, 2013, was approximately $18.9 million and $34.3 million, respectively.

Revenues were $842.6 million and $708.5 million for the nine months ended December 31, 2014 and 2013, respectively. The $134.1 million increase in revenues during the nine months ended December 31, 2014, compared to December 31, 2013, was primarily due to the Acquisition, increased sales volumes for all of our businesses except aggregates, and increased average net sales prices for all of our businesses, except recycled paperboard, which was flat. Revenues from the Acquisition were approximately $9.5 million, while the impact of the increased net sales prices and sales volumes on revenues for the nine months ended December 31, 2014, compared to December 31, 2013, was approximately $53.4 million and $71.2 million, respectively.

23


Cost of Goods Sold. Cost of goods sold was $212.4 million and $179.0 million during the three months ended December 31, 2014 and 2013, respectively. The $33.4 million increase in cost of goods sold was related primarily to an increase in volumes, which increased cost of sales by approximately $35.4 million, partially offset by a decrease in operating costs of approximately $2.0 million. Approximately $9.2 million of the increase in cost of goods sold related to sales volumes attributable to the Acquisition, with the remaining increase due to increased sales volumes in all of our businesses except aggregates. The decrease in operating costs in the third quarter of fiscal 2015, compared to fiscal 2014, was primarily related to our cement, recycled paperboard and concrete businesses and was approximately $1.3 million, $0.7 million and $2.3 million, respectively, partially offset by increased costs in our gypsum wallboard and aggregates businesses or approximately $1.8 million and $0.5 million, respectively.

Cost of goods sold was $632.0 million and $552.6 million during the nine months ended December 31, 2014 and 2013, respectively. The $79.4 million increase in cost of goods sold was related primarily to an increase in volumes, which increased cost of sales by approximately $56.7 million, and an increase in operating costs of approximately $13.5 million. Approximately $9.2 million of the increase in cost of goods sold related to sales volumes was attributable to the Acquisition, with the remaining increase due to increased sales volumes in all of our businesses except aggregates.��The increase in operating costs in the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013, was primarily related to our cement, gypsum wallboard and concrete businesses and was approximately $5.2 million, $10.0 million and $0.9 million, respectively, partially offset by decreased costs in our recycled paperboard and aggregates businesses or approximately $1.9 million and $0.7 million, respectively.

Gross Profit. Gross profit was $79.1 million and $49.8 million during the three months ended December 31, 2014 and 2013, respectively. The 59% increase in gross profit was due primarily to increased average sales prices and increased sales volumes, partially offset by increased cost of goods sold related to the increased sales volumes, as noted above. The increase in the gross margin to 27% for the three months ended December 31, 2014, compared to 22% for the three months ended December 31, 2013, was primarily due to increased gross margin in our gypsum wallboard and cement divisions.

Gross profit was $210.6 million and $155.9 million during the nine months ended December 31, 2014 and 2013, respectively. The 35% increase was due primarily to increased average sales prices and increased sales volumes, partially offset by increased cost of goods sold related to the increased sales volumes and operating costs, as noted above. The increase in the gross margin to 25% for the nine months ended December 31, 2014, compared to 22% for the nine months ended December 31, 2013, was primarily due to increased gross margin in our cement and gypsum wallboard divisions.

Equity in Earnings of Joint Venture. Equity in earnings of our unconsolidated joint venture increased $2.6 million, or 26%, for the three months ended December 31, 2014, compared to the similar period in 2013. The increase is primarily due to a 13% increase in sales volumes and an 11% increase in average net sales price. The impact of the increases in sales volumes and average net sales price on equity in earnings of our unconsolidated joint venture during the three months ended December 31, 2014 was approximately $1.3 million and $3.3 million, respectively, partially offset by increased operating costs of approximately $2.0 million. The increase in operating costs was primarily due to an increase in the cost of purchased cement of approximately $1.0 million, and an increase in maintenance of approximately $0.3 million.

Equity in earnings of our unconsolidated joint venture increased $6.8 million, or 25%, for the nine months ended December 31, 2014, compared to the similar period in 2013. The increase is primarily due to an 11% increase in sales volumes and an 8% increase in average net sales price. The impact of the increases in sales volumes and average net sales price on equity in earnings of our unconsolidated joint venture during the three months ended December 31, 2014 was approximately $3.1 million and $7.5 million, respectively, partially offset by increased operating costs of approximately $3.1 million. The increase in operating costs was primarily due to an increase in the cost of purchased cement of approximately $2.5 million.

24


Corporate General and Administrative. Corporate general and administrative expenses increased 38% and 29% for the three and nine months ended December 31, 2014, respectively, compared to the similar periods in 2013. The approximately $2.6 million and $5.4 million increase in corporate general and administrative expenses for the three and nine month periods ended December 31, 2014, respectively, compared to 2013, is due primarily to increased long-term incentive compensation expenses. Long-term incentive compensation increased approximately $1.7 million and $3.9 million during the three and nine months ended December 31, 2014, respectively, compared to similar periods in 2013, primarily due to increased operating earnings.

Acquisition and Litigation Expense. Acquisition and litigation expense consists of litigation expenses related to our lawsuit against the IRS and expenses related to the Acquisition.��Legal fees related to our lawsuit against the IRS were approximately $0.1 million and $1.8 million for the three and nine months ended December 31, 2014.��As discussed in Footnote (O) to the Unaudited Consolidated Financial Statements, the U.S Department of Justice approved the proposed settlement of this case in January 2015 and the case was dismissed.��Expenses related to the Acquisition, which closed in November 2014, were $ 0.4 million and $1.1 million for the three and nine months ended December 31, 2014.

Other Income. Other income consists of a variety of items that are non-segment operating in nature and includes non-inventoried aggregates income, gypsum wallboard distribution center income, asset sales and other miscellaneous income and cost items.

Interest Expense, Net. Interest expense, net, decreased approximately $0.4 million and $2.2 million during the three and nine months ended December 31, 2014, respectively, compared to the three and nine months ended December 31, 2013. The 8% and 15% decrease in interest expense, net for the three and nine months ended December 31, 2014, respectively, compared to the similar three and nine months in the prior fiscal year, is due primarily to the decrease in interest expense from our Credit Facility, which decreased approximately $0.2 million and $2.0 million in the three and nine months ended December 31, 2014, compared to the three and nine months ended December 31, 2013. The decrease in interest expense from our Credit Facility is due to reduced outstanding balances during the three and nine month periods ended December 31, 2014, compared to the three and nine months ended December 31, 2013, as a result of repayments made during fiscal 2014 and during the first nine months of fiscal 2015. Because of borrowings to finance the Acquisition, we expect interest expense to increase during the fourth quarter of fiscal 2015 compared to the first nine months of the fiscal year.��Additionally, interest expense from our Senior Notes decreased $0.1 million during both the three and nine month periods ended December 31, 2014, compared to December 31, 2013, due to the maturity and repayment of $9.5 million during October 2014.��

Earnings Before Income Taxes. Earnings before income taxes were $77.9 million and $48.8 million during the three months ended December 31, 2014 and 2013, respectively. The $29.1 million increase was primarily due to a $29.3 million increase in gross profit, a $2.6 million increase in equity in earnings of unconsolidated joint venture and a decrease in interest expense, net of $0.3 million, partially offset by an increase of approximately $0.7 million in acquisition and litigation expense and $2.6 million in corporate general and administrative expenses, respectively.

Earnings before income taxes were $208.2 million and $152.0 million during the nine months ended December 31, 2014 and 2013, respectively. The $56.2 million increase was primarily due to a $54.7 million increase in gross profit, a $6.8 million increase in equity in earnings of unconsolidated joint venture and a decrease in interest expense, net of $2.1 million, partially offset by an increase of approximately $2.8 million in acquisition and litigation expense and $5.3 million in corporate general and administrative expenses, respectively.

Income Taxes. Income tax expense was $68.2 million and $50.4 million for the nine months ended December 31, 2014 and 2013, respectively. The estimated effective tax rate for fiscal 2015, compared to fiscal 2014, remained consistent at 33%.

25


Net Earnings and Diluted Earnings per Share. Net earnings for the quarter ended December 31, 2014 of $52.0 million increased 65% from last years net earnings of $31.6 million; while net earnings of $140.1 million for the nine months ended December 31, 2014 increased 38% from last years net earnings of $101.6 million. Diluted earnings per share for the three and nine month periods ended December 31, 2014 were $1.03 and $2.78, respectively, compared to $0.63 and $2.03 for the three and nine months ended December 31, 2013, respectively.

The following table highlights certain operating information related to our five business segments:

For the Three Months
Ended December 31,

For the Nine Months
Ended December 31,

2014

2013

Percentage

2014

2013

Percentage

(In�thousands�except�per�unit)

Change

(In�thousands�except�per�unit)

Change

Revenues (1)

Cement (2)

$

124,048

$

105,578

17%

$

397,845

$

356,482

12%

Gypsum Wallboard

118,573

104,158

14%

342,905

299,099

15%

Recycled Paperboard

39,936

33,696

19%

112,994

100,501

12%

Oil and Gas Proppants

31,731

3,960

701%

53,325

6,152

767%

Concrete and Aggregates

27,116

24,376

11%

85,239

77,487

10%

Gross Revenues

341,404

271,768

26%

992,308

839,721

18%

Less: Intersegment Revenues

(16,968

)

(16,766

)

1%

(51,096

)

(49,247

)

4%

Less: Joint Venture Revenues

(32,907

)

(26,190

)

26%

(98,624

)

(81,972

)

20%

$

291,529

$

228,812

27%

$

842,588

$

708,502

19%

Sales Volume

Cement (M Tons) (2)

1,205

1,115

8%

3,972

3,790

5%

Gypsum Wallboard (MMSF)

610

584

4%

1,746

1,670

5%

Recycled Paperboard (M Tons)

77

66

17%

219

197

11%

Concrete (M Yards)

246

231

6%

767

723

6%

Aggregates (M Tons)

682

709

(4%)

2,372

2,606

(9%)

Average Net Sales Prices (3)

Cement (2)

$

93.76

$

87.01

8%

$

91.43

$

86.10

6%

Gypsum Wallboard

158.95

143.40

11%

160.23

144.54

11%

Recycled Paperboard

504.30

504.08

-

505.09

504.64

-

Concrete

89.00

84.88

5%

86.77

82.02

6%

Aggregates

7.36

6.46

14%

7.54

6.70

13%

Operating Earnings

Cement (2)

$

37,578

$

26,011

44%

$

96,535

$

77,451

25%

Gypsum Wallboard

40,013

30,730

30%

114,443

90,234

27%

Recycled Paperboard

9,102

6,661

37%

24,633

19,277

28%

Oil and Gas Proppants

3,241

(2,162

)

250%

3,315

(3,968

)

184%

Concrete and Aggregates

1,638

(1,536

)

207%

5,959

418

1326%

Other, net

488

400

22%

2,050

1,300

58%

Net Operating Earnings

$

92,060

$

60,104

53%

$

246,935

$

184,712

34%

(1)

Gross revenue, before freight and delivery costs.

(2)

Includes proportionate share of our Joint Venture.

(3)

Net of freight and delivery costs.

Cement Operations. Cement revenues were $124.0 million for the three months ended December 31, 2014, which is a 17% increase over revenues of $105.6 million for the three months ended December 31, 2013. The increase in revenues during the three months ended December 31, 2014, compared to the similar period in 2013, is primarily due to an 8% increase in average net sales price, as well as an 8% increase in sales volume. The increase in average net sales price and sales volume positively impacted revenues by approximately $9.9 million and $8.5 million, respectively, for the three months ended December 31, 2014, compared to the three months ended December 31, 2013.

26


Operating earnings for the Cement business increased 44% to $37.6 million from $26.0 million for the third quarters of fiscal 2015 and 2014, respectively. The increase in operating earnings was due primarily to increased average sales prices and sales volumes, which positively impacted operating earnings by $9.9 million and $2.4 million, respectively, partially offset by increased operating costs of $0.7 million. The increase in operating costs in the third quarter of fiscal 2015, compared to the third quarter of fiscal 2014, is primarily related to increased purchased cement and other raw material costs, which adversely impacted operating earnings by approximately $1.4 million and $1.0 million, respectively, partially offset by decreased maintenance, fuel and power costs of approximately $0.4 million, $0.7 million and $0.2 million.��The operating margin increased to 30% for the third quarter of fiscal 2015, compared to 24% for the third quarter of fiscal 2014, primarily due to increased sales prices and lower operating costs.

Cement revenues were $397.8 million for the nine months ended December 31, 2014, which is a 12% increase over revenues of $356.5 million for the nine months ended December 31, 2013. The increase in revenues during the nine months ended December 31, 2014, compared to the similar period in 2013, is primarily due to a 5% increase in average net sales price, as well as a 6% increase in sales volume. The increases in average net sales price and sales volume positively impacted revenues by approximately $23.5 million and $17.8 million, respectively, for the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013.

Operating earnings for the Cement business increased 25% to $96.5 million from $77.5 million for the nine months ended December 31, 2014 and 2013, respectively. The increase in operating earnings was due primarily to increased average sales price and average sales volumes, which positively impacted operating earnings by $23.5 million and $4.7 million, respectively, partially offset by increased operating costs of $8.9 million. The increase in operating costs during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013, is primarily related to increased maintenance, purchased cement, power and other raw material costs, which adversely impacted operating earnings by approximately $2.7 million, $3.9 million, $1.0 million and $1.5 million, respectively, partially offset by lower fuel costs of approximately $2.3 million. The operating margin increased to 24% for the nine months ended December 31, 2014, compared to 22% for the nine months ended December 31, 2013, primarily due to increased sales prices, partially offset by increased operating costs.

Gypsum Wallboard Operations. Sales revenues increased 14% to $118.6 million in the third quarter of fiscal 2015, from $104.2 million in the third quarter of fiscal 2014, primarily due to an 11% increase in our average net sales price and a 4% increase in sales volumes. The increase in our average net sales price and sales volumes positively impacted revenues by approximately $9.8 million and $4.6 million, respectively. The increase in our average net sales price was due to the implementation of our price increase in January 2014. The increased sales volumes are primarily due to increased construction activity in fiscal 2015, compared to fiscal 2014. Our market share was essentially unchanged during the three months ended December 31, 2014, compared to the three months ended December 31, 2013.

Operating earnings increased to $40.0 million for the three months ended December 31, 2014, compared to $30.7 million for the three months ended December 31, 2013, primarily due to the increase in our average net sales price and sales volumes, which positively impacted operating earnings by approximately $9.8 million and $1.4 million, respectively, partially offset by increased operating costs of $1.9 million. The increase in operating costs during the three months ended December 31, 2014, compared to the three months ended December 31, 2013, was primarily due to increased freight, natural gas and other raw materials costs, which negatively impacted operating earnings by $0.3 million, $1.1 million and $0.6 million, respectively, partially offset by reduced maintenance costs of approximately $0.5 million. The increase in our average net sales price is the primary reason our operating margin increased to 34% for the three months ended December 31, 2014, compared to 29% for the three months ended December 31, 2013. Fixed costs are not a significant part of the overall cost of wallboard; therefore, changes in utilization have a relatively minor impact on our operating cost per unit.

Sales revenues increased 15% to $342.9 million for the nine months ended December 31, 2014, from $299.1 million for the nine months ended December 31, 2013, primarily due to an 11% increase in our average net sales price and a 5% increase in sales volumes. The increase in our average net sales price and sales volumes positively

27


impacted revenues by approximately $30.2 million and $13.6 million, respectively. The increase in our average net sales price was due to the implementation of our price increase in January 2014. The increased sales volumes are primarily due to increased construction activity in fiscal 2015, compared to fiscal 2014. Our market share was essentially unchanged during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013.

Operating earnings increased to $114.4 million for the nine months ended December 31, 2014, compared to $90.2 million for the nine months ended December 31, 2013, primarily due to the increase in average net sales price and sales volumes, which positively impacted operating earnings by approximately $30.2 million and $4.1 million, respectively, partially offset by increased operating costs of $10.1 million. The increase in operating costs during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013, was primarily due to increased freight, paper, labor, other raw materials and natural gas costs, which negatively impacted operating earnings by $2.8 million, $0.4 million, $1.7 million, $1.6 million and $1.7 million, respectively. The increase in our average net sales price is the primary reason our operating margin increased to 33% for the nine months ended December 31, 2014, compared to 30% for the nine months ended December 31, 2013. Fixed costs are not a significant part of the overall cost of wallboard; therefore, changes in utilization have a relatively minor impact on our operating cost per unit.

Recycled Paperboard Operations. Revenues increased 19% to $39.9 million during the three months ended December 31, 2014, compared to $33.7 million for the three months ended December 31, 2013. The increase in revenues during the quarter ended December 31, 2014, compared to December 31, 2013, is due primarily to the 17% increase in sales volumes, which positively impacted revenue by $5.7 million.

Operating earnings increased to $9.1 million for the third quarter of fiscal 2015, compared to $6.7 million for the third quarter of fiscal 2014. The increase in operating earnings is primarily due to increased sales volumes, average net sales price and decreased operating costs, which positively impacted operating earnings by approximately $1.1 million, $0.5 million and $0.7 million, respectively. The decrease in operating costs is primarily related to lower recycled fiber, chemical and natural gas costs, which positively impacted operating earnings by approximately $1.0 million, $0.1 million and $0.2 million, partially offset by increased maintenance costs of approximately $0.7 million. The decrease in operating costs was the primary reason operating margin increased to 23% during the third quarter of fiscal 2015, compared to 20% during the third quarter of fiscal 2014.

Revenues increased 12% to $113.0 million for the nine months ended December 31, 2014, from $100.5 million for nine months ended December 31, 2013. The increase in revenue during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013, is due to the increase in sales volumes, which positively impacted revenues by approximately $11.2 million.

Operating earnings increased to $24.6 million for the nine months ended December 31, 2014, compared to $19.3 million for the nine months ended December 31, 2013. The increase in operating earnings is primarily due to increased sales volumes, average net sales price and decreased operating costs, which positively impacted operating earnings by approximately $2.1 million, $1.3 million and $1.9 million, respectively. The decrease in operating costs is primarily related to lower recycled fiber and chemical costs, which positively impacted operating earnings by approximately $2.2 million and $0.8 million, partially offset by increased maintenance costs of approximately $1.1 million. The increase in sales volumes and average net sales price, together with reduced operating expenses were the primary reasons operating margin increased to 22% during the nine months ended December 31, 2014, compared to 19% during the nine months ended December 31, 2013.

Concrete and Aggregates Operations. Concrete and aggregates revenues increased 11% to $27.1 million for the three months ended December 31, 2014, compared to $24.4 million for the three months ended December 31, 2013. The primary reason for the increase in revenue for the third quarter of fiscal 2015, compared to the third quarter of fiscal 2014, was the 5% and 14% increase in average net sales prices for concrete and aggregates, respectively, and the 6% increase in sales volumes for concrete, which positively impacted revenues by approximately $1.6 million and $1.4 million, respectively.��These increases were partially offset by a decrease in

28


sales volumes for our aggregates business, which negatively impacted revenues by approximately $0.3 million during the three months ended December 31, 2014, compared to the three months ended December 31, 2013.

Operating earnings increased to approximately $1.6 million for the three months ended December 31, 2014, compared to an operating loss of $1.5 million for the three months ended December 31, 2013. Operating earnings were positively impacted by increased average net sales prices and reduced operating costs, which positively impacted operating earnings by approximately $1.6 million and $1.7 million, respectively, partially offset by reduced sales volumes in the aggregates business of approximately $0.2 million during the three months ended December 31, 2014, compared to the three months ended December 31, 2013. The decrease in operating costs during the three months ended December 31, 2014, compared to the three months ended December 31, 2013, were primarily related to maintenance, purchased materials, and delivery costs, which decreased operating costs by approximately $0.7 million, $0.2 million, and $0.2 million, respectively.

Concrete and aggregates revenues increased 10% to $85.2 million for the nine months ended December 31, 2014, compared to $77.4 million for the nine months ended December 31, 2013. The primary reason for the increase in revenue for the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013, was the 6% and 13% increase in average net sales prices for concrete and aggregates, respectively, and the 6% increase in sales volumes for concrete, which positively impacted revenues by approximately $5.8 million and $3.7 million, respectively.��These increases were partially offset by a decrease in sales volumes for our aggregates business, which negatively impacted revenues by approximately $1.6 million during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013.

Operating earnings increased to approximately $6.0 million for the nine months ended December 31, 2014, compared to $0.4 million for the nine months ended December 31, 2013. Operating earnings were positively impacted by increased average net sales prices and sales volumes, which positively impacted operating earnings by approximately $5.8 million and $0.3 million, respectively, partially offset by increased operating costs of approximately $0.5 million during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013. Increased operating costs during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013, were primarily related to purchased materials and royalties, which increased operating costs by approximately $1.2 million and $0.6 million, respectively, partially offset by reduced fuel and lease costs of approximately $0.3 million and $0.6 million, respectively.

Oil and Gas Proppants.��Revenues for our oil and gas proppants segment increased approximately $27.7 million to $31.7 million during the three months ended December 31, 2014, compared to $4.0 million during the three months ended December 31, 2013.��This segment is still in the start-up phase, and approximately $17.7 million of the increase in revenues during the three months ended December 31, 2014, compared to December 31, 2013, reflects sales volume growth at our Corpus Christi, Texas location, with the remaining $9.5 million increase related to the Acquisition.

Operating earnings for the three months ended December 31, 2014 were approximately $3.2 million, which improved from an operating loss of approximately $2.2 million during the three months ended December 31, 2013. Approximately $0.2 million of the increase was related to the Acquisition, with the remaining increase in operating earnings due primarily to the increase in sales volumes during the three months ended December 31, 2014, compared to the three months ended December 31, 2013.��Operating income related to the Acquisition was adversely impacted by approximately $0.7 million related to the step-up of inventory acquired on November 14, 2014 and sold prior to December 31, 2014.

Revenues for our oil and gas proppants segment increased approximately $47.2 million to $53.3 million during the nine months ended December 31, 2014, compared to $6.2 million during the nine months ended December 31, 2013.��This segment is still in the start-up phase, and approximately $37.7 million of the increase in revenues during the three months ended December 31, 2014, compared to December 31, 2013, reflects sales volume growth at our Corpus Christi, Texas location, with the remaining $9.5 million increase related to the Acquisition.

29


Operating earnings for the nine months ended December 31, 2014 were approximately $3.3 million, which improved from an operating loss of approximately $4.0 million during the nine months ended December 31, 2013. Approximately $0.2 million of the increase was related to the Acquisition, with the remaining increase in operating earnings due primarily to the increase in sales volumes during the nine months ended December 31, 2014, compared to the nine months ended December 31, 2013.��Operating income related to the Acquisition was adversely impacted by approximately $0.7 million related to the step-up of inventory acquired on November 14, 2014 and sold prior to December 31, 2014.

GENERAL OUTLOOK

The drivers of construction products demand continue to improve incrementally, reinforcing the notion that a cyclic recovery is underway.�The pace of recovery continues to hinge on the pace of growth in the U.S. economy. Our cement sales network stretches across the central U.S., both east to west and north to south.�While we anticipate cement consumption to continue to increase during calendar 2015, each region will increase at a different pace.�Cement markets are affected by infrastructure spending, industrial construction and residential building activity.�

Wallboard demand is heavily influenced by new residential housing construction as well as repair and remodeling.�Most forecasts point to a continued pick-up in demand in both of these areas into calendar 2015.�Industry shipments of gypsum wallboard exceeded 21.5 billion square feet in calendar 2014, and are expected to increase in calendar 2015.�No new plants are expected to be added during the first half of calendar 2015, but it is possible that previously idled plants or curtailed lines could be brought back into service.�American Gypsum implemented a wallboard price increase effective in January.

Increased demand for gypsum wallboard will positively impact our recycled paperboard business as sales of higher priced gypsum paper are expected to continue to increase during calendar 2015, compared to fiscal 2015, both in gross tons and as a percentage of total sales volumes.

We began operations in our new frac sand business during the first quarter of fiscal 2014. The long-term outlook for frac sand proppants in the oil and gas industry remains robust.��Between the opening of our mine in Illinois in July 2014, and the Acquisition in November 2014, we expect increased sales volumes during the remainder of fiscal 2015 and into fiscal 2016. The Acquisition will increase our mining and processing ability, add trans-load facilities expanding our market reach as well as contracted volume commitments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare our financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

Information regarding our Critical Accounting Policies and Estimates can be found in our Annual Report. The five critical accounting policies that we believe either require the use of the most judgment, or the selection or application of alternative accounting policies, and are material to our financial statements, are those relating to long-lived assets, goodwill, environmental liabilities, accounts receivable and income taxes. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors and with our independent registered public accounting firm. In addition, Note (A)�to the financial statements in our Annual Report contains a summary of our significant accounting policies.

30


Recent Accounting Pronouncements

Refer to Note (A)�in the Notes to Consolidated Financial Statements of the Form 10-Q for information regarding recently issued accounting pronouncements that may affect our financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow.

The following table provides a summary of our cash flows:

For�the�Nine Months
Ended�December 31,

2014

2013

(dollars�in�thousands)

Net Cash Provided by Operating Activities

$

183,143

$

144,012

Investing Activities:

Capital Expenditures

(64,959

)

(43,208

)

Acquisition

(237,171

)

-

Net Cash Used in Investing Activities

(302,130

)

(43,208

)

Financing Activities:

Increase (Decrease) in Long-Term Debt

136,500

(97,000

)

Dividends Paid

(15,044

)

(14,903

)

Shares Repurchased to Settle Employee Taxes on RSUs

(1,356

)

(489

)

Payment of Debt Acquisition Costs

(1,661

)

-

Proceeds from Stock Option Exercises

4,270

10,496

Excess Tax Benefits from Share Based Payment Arrangements

3,493

4,619

Net Cash Provided by Financing Activities

126,202

(97,277

)

Net Increase in Cash

$

7,215

$

3,527

Cash flows from operating activities increased $39.1 million to $183.1 million during the nine month period ended December 31, 2014, compared to $144.0 million during the similar period in 2013. This increase was largely attributable to increased net earnings of approximately $38.5 million and increased cash flows from changes in operating assets and liabilities��Excluding the impact of working capital purchased in the Acquisition, cash flows from operations were positively impacted during the nine months ended December 31, 2014 by increases in accounts payable and accrued liabilities and income taxes payable of approximately $6.4 million and $4.3 million, respectively, and a decrease in other assets of approximately $3.9 million, partially offset by increased accounts and notes receivable and inventories of approximately $19.1 million and $10.3 million, respectively. During the nine months ended December 31, 2013, cash flows from operations were negatively impacted by increases in accounts and notes receivable, and inventories of approximately $6.5 million and $19.5 million, respectively, and a decrease in accounts payable and accrued liabilities of approximately $8.1 million, partially offset by an increase of approximately $13.9 million in income taxes payable.

Working capital decreased to $190.2 million at December 31, 2014, compared to $198.1 million at March�31, 2014, primarily due to the increased current portion of long-term debt, accounts payable and accrued liabilities and a reduction of prepaid and other assets of approximately $47.5 million, $11.4 million, $3.7 million and $5.5 million, respectively, partially offset by increased cash, accounts and notes receivable and inventories of approximately $7.2 million, $33.9 million and $19.9 million, respectively.��The increase in current portion of long-term debt is related to the maturity of Tranche B of our Series 2005A Senior Notes, which is expected to be repaid in November 2015.��Increases in accounts and notes receivable, inventories, accounts payable and accrued liabilities are due primarily to working capital acquired in the Acquisition.��In connection with the Acquisition, working capital, primarily accounts receivable and inventory, partially offset by accounts payable and accrued liabilities, positively impacted working capital by approximately $19.0 million.

31


The increase in accounts and notes receivable at December 31, 2014, compared to March�31, 2014, is primarily due to accounts receivable obtained in the Acquisition.��Excluding the accounts receivable acquired in the Acquisition, accounts receivable increased slightly at December 31, 2014, compared to March�31, 2014. Excluding the impact of the Acquisition, as a percentage of quarterly sales generated in the quarter then ended, accounts receivable were approximately 44% at December 31, 2014 and 51% at March�31, 2014. Management measures the change in accounts receivable by monitoring the days sales outstanding on a monthly basis to determine if any deterioration has occurred in the collectability of the accounts receivable. No significant deterioration in the collectability of our accounts receivable was identified at December 31, 2014. Notes receivable are monitored on an individual basis, and no significant deterioration in the collectability of notes receivable was identified at December 31, 2014.

Our inventory balance at December 31, 2014 increased approximately 11% from the inventory balance at March�31, 2014. Excluding the impact of the inventory acquired in the Acquisition, inventory would have increased approximately 5%.��This increase is due primarily to an increase in raw materials and materials in progress, frac sand and repair parts of approximately $6.4 million, $3.2 million and $4.0 million, respectively, partially offset by declines in finished cement, gypsum wallboard and aggregates of approximately $2.6 million, $1.0 million and 1.0 million, respectively.��The increase in raw materials and materials in process is primarily due to the increase in sand inventory related to our oil and gas proppants business, which is due to the continued growth of the business.��The decline in finished cement is consistent with our business cycle as we generally build inventory over the winter to meet the demand in the spring and summer. The largest individual balance in our inventory is our repair parts. These parts are necessary given the size and complexity of our manufacturing plants, as well as the age of certain of our plants, which creates the need to stock a high level of repair parts inventory. We believe all of these repair parts are necessary and we perform semi-annual analyses to identify obsolete parts. We have less than one years sales of all product inventories, and our inventories have a low risk of obsolescence due to our products being basic construction materials.

In June 2010, we received a Notice of Deficiency (Notice) of $71.5 million of taxes and penalties for the fiscal years ended March�31, 2001 through 2006, inclusive, related to the IRS audit of the Republic Asset Acquisition. The final amount related to the Notice, including interest, was approximately $97.9 million, which we paid to the IRS. Refund claims were filed with the IRS in October 2010 to recover all $97.9 million paid to the IRS, plus interest thereon. The IRS denied our refund request and we filed a lawsuit in May 2011 in Federal District Court to recover the requested refunds.

In September 2014 the Company and the IRS reached a tentative agreement to settle the lawsuit, and this agreement was approved by the U.S. Department of Justice in January 2015.��Under the terms of the agreement, we dismissed our lawsuit seeking to recover taxes, interest and penalties paid, as discussed above, in exchange for the IRS conceding 40% of the penalties, plus interest, paid to date.��We will recognize the recovery of 40% of the penalties, which total approximately $5.8 million, plus approximately $3.4 million of related interest thereon, during the fourth quarter of fiscal 2015. See Note (O)�of the Notes to Unaudited Consolidated Financial Statements for more information.

Net cash used in investing activities during the nine months ended December 31, 2014 was approximately $302.1 million, compared to net cash used in investing activities of approximately $43.2 million during the similar period in 2013, an increase of $258.9 million. The vast majority of the increase in net cash used in investing activities, $237.2 million, related to the Acquisition, while the remaining amount primarily related to construction of our sand processing plant in Utica, Illinois.��The majority of the remaining expenditures are related to cost reduction projects and sustaining capital expenditures.��We anticipate spending between $20.0 million and $25.0 million on sustaining capital expenditures for all of our businesses during fiscal 2015, which is consistent with historic levels.

Net cash provided by financing activities was approximately $126.2 million during the nine months ended December 31, 2014, compared to net cash used of approximately $97.3 million during the similar period in 2013. This $223.5 million increase in net cash provided by financing activities is primarily due to the increase in net borrowings under our Amended Credit Facility necessary to fund the Acquisition, and to repay the $9.5 million

32


due upon the maturity of Tranche A of our Series 2007A Senior Notes. Our debt-to-capitalization ratio and net-debt-to-capitalization ratio improved to 34.7% and 34.1%, respectively, at December 31, 2014, compared to 31.4% and 31.1%, respectively, at March�31, 2014.

���� Debt Financing Activities.

Bank Credit Facility

The Credit Facility was amended and restated on October 30, 2014 (the Amended Credit Facility).��The Amended Credit Facility increased available borrowings from $400.0 million to $500.0 million and extended the term to October 30, 2019. Borrowings under the Amended Credit Facility are guaranteed by substantially all of the Companys subsidiaries.��At the option of the Company, outstanding principal amounts on the Amended Credit Facility bear interest at a variable rate equal to (i) LIBOR, plus an agreed margin (ranging from 100 to 225 basis points), which is to be established quarterly based upon the Companys ratio of consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, to the Companys consolidated indebtedness (the Leverage Ratio), or (ii) an alternative base rate which is the higher of (a) the prime rate or (b) the federal funds rate plus �% per annum plus an agreed margin (ranging from 0 to 125 basis points).��Interest payments are payable, in the case of loans bearing interest at a rate based on the federal funds rate, quarterly, or in the case of loans bearing interest at a rate based on LIBOR, at the end of the LIBOR advance periods, which can be up to a period of nine months at the option of the Company.��The Company is also required to pay a commitment fee on unused available borrowings under the Amended Credit Facility ranging from 10 to 35 basis points depending upon the Leverage Ratio.��The Amended Credit Facility contains customary covenants that restrict our ability to incur additional debt, encumber our assets, sell assets, make or enter into certain investments, loans or guaranties and enter into sale and leaseback arrangements.��The Amended Credit Facility also requires us to maintain a consolidated indebtedness ratio (calculated as consolidated indebtedness to consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions) of 3.5:1.0 or less and an interest coverage ratio (consolidated earnings before interest, taxes, depreciation, amortization, certain transaction-related deductions and other non-cash deductions to consolidated interest expense) of at least 2.5:1.0.��We had $335.0 million of borrowings outstanding at December 31, 2014.��Based on our Leverage Ratio, we had $155.8 million of available borrowings, net of the outstanding letters of credit, at December 31, 2014.

The Amended Credit Facility has a $50.0 million letter of credit facility. Under the letter of credit facility, the Company pays a fee at a per annum rate equal to the applicable margin for Eurodollar loans in effect from time to time plus a one-time letter of credit fee in an amount equal to 0.125% of the initial stated amount. At December 31, 2014, we had $9.2 million of letters of credit outstanding.

Senior Notes - We entered into a Note Purchase Agreement on November�15, 2005 (the 2005 Note Purchase Agreement) related to our sale of $200 million of senior, unsecured notes, designated as Series 2005A Senior Notes (the Series 2005A Senior Notes) in a private placement transaction. The Series 2005A Senior Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in three tranches on November�15, 2005. Since entering into the 2005 Note Purchase Agreement, we have repurchased $81.1 million in principal of the Series 2005A Senior Notes (in periods prior to the fiscal year ended March�31, 2013). During November 2012, Tranche A of the Series 2005A Senior Notes matured and we retired the remaining $4.7 million in notes from this Tranche. Following these repurchases and maturities, the amounts outstanding for each of the remaining tranches are as follows:

Principal

Maturity�Date

Interest�Rate

Tranche B

$

57.0�million

November�15,�2015

5.38

%

Tranche C

$

57.2�million

November�15,�2017

5.48

%

Interest for each tranche of Notes is payable semi-annually on the 15th day of May and the 15th day of November of each year until all principal is paid for the respective tranche.

33


We also entered into an additional Note Purchase Agreement on October�2, 2007 (the 2007 Note Purchase Agreement) related to our sale of $200 million of senior, unsecured notes, designated as Series 2007A Senior Notes (the Series 2007A Senior Notes) in a private placement transaction. The Series 2007A Senior Notes, which are guaranteed by substantially all of our subsidiaries, were sold at par and issued in four tranches on October�2, 2007. Since entering into the 2007 Note Purchase Agreement, we have repurchased $122.0 million in principal of the Series 2007A Senior Notes (in periods prior to the fiscal year ended March�31, 2013). During October 2014, Tranche A of the Series 2007A Senior Notes matured and we retired the remaining $9.5 million in notes from this Tranche. Following the repurchase, the amounts outstanding for each of the four tranches are as follows:

Principal

Maturity�Date

Interest�Rate

Tranche B

$

8.0�million

October�2,�2016

6.27

%

Tranche C

$

24.0�million

October�2,�2017

6.36

%

Tranche D

$

36.5�million

October�2,�2019

6.48

%

Interest for each tranche of Notes is payable semi-annually on the second day of April and the second day of October of each year until all principal is paid for the respective tranche.

Our obligations under the 2005 Note Purchase Agreement and the 2007 Note Purchase Agreement (collectively referred to as the Note Purchase Agreements) and the Series 2005A Senior Notes and the Series 2007A Senior Notes (collectively referred to as the Senior Notes) are equal in right of payment with all other senior, unsecured debt of the Company, including our debt under the Amended Credit Facility. The Note Purchase Agreements contain customary restrictive covenants, including covenants that place limits on our ability to encumber our assets, to incur additional debt, to sell assets, or to merge or consolidate with third parties, as well as certain cross covenants with the Amended Credit Facility. We were in compliance with all financial ratios and tests at December�31, 2014 and throughout the fiscal year.

Pursuant to a Subsidiary Guaranty Agreement, substantially all of our subsidiaries have guaranteed the punctual payment of all principal, interest, and Make-Whole Amounts (as defined in the Note Purchase Agreements) on the Senior Notes and the other payment and performance obligations of the Company contained in the Senior Notes and in the Note Purchase Agreements. We are permitted, at our option and without penalty, to prepay from time to time at least 10% of the original aggregate principal amount of the Senior Notes at 100% of the principal amount to be prepaid, together with interest accrued on such amount to be prepaid to the date of payment, plus a Make-Whole Amount. The Make-Whole Amount is computed by discounting the remaining scheduled payments of interest and principal of the Senior Notes being prepaid at a discount rate equal to the sum of 50 basis points and the yield to maturity of U.S. treasury securities having a maturity equal to the remaining average life of the Senior Notes being prepaid.

We are leasing one of our cement plants from the city of Sugar Creek, Missouri. The city of Sugar Creek issued industrial revenue bonds to partly finance improvements to the cement plant. The lease payments due to the city of Sugar Creek under the cement plant lease, which was entered into upon the sale of the industrial revenue bonds, are equal in amount to the payments required to be made by the city of Sugar Creek to the holders of the industrial revenue bonds. Because we are the holder of all of the outstanding industrial revenue bonds, no debt is reflected on our financial statements in connection with our lease of the cement plant. At the conclusion of the lease in fiscal 2021, we have the option to purchase the cement plant for a nominal amount.

Other than the Amended Credit Facility, we have no other source of committed external financing in place. In the event the Amended Credit Facility should be terminated, no assurance can be given as to our ability to secure a new source of financing. Consequently, if any balance were outstanding on the Amended Credit Facility at the time of termination, and an alternative source of financing could not be secured; it would have a material adverse impact on us. None of our debt is rated by the rating agencies.

34


We do not have any off balance sheet debt, except for approximately $15.0 million of operating leases, which have an average remaining term of approximately fifteen years. Also, we have no outstanding debt guarantees. We have available under the Amended Credit Facility a $50.0 million Letter of Credit Facility. At December 31, 2014, we had $9.2 million of letters of credit outstanding that renew annually. We are contingently liable for performance under $14.3 million in performance bonds relating primarily to our mining operations.

We believe that our cash flow from operations and available borrowings under our Credit Facility should be sufficient to meet our currently anticipated operating needs, capital expenditures and dividend and debt service requirements for at least the next twelve months. However, our future liquidity and capital requirements may vary depending on a number of factors, including market conditions in the construction industry, our ability to maintain compliance with covenants in our Credit Facility, the level of competition and general and economic factors beyond our control. These and other developments could reduce our cash flow or require that we seek additional sources of funding. We cannot predict what effect these factors will have on our future liquidity.

Share Repurchases.

We did not repurchase any of our shares on the open market during the nine month period ended December 31, 2014. As of December 31, 2014, we had a remaining authorization to purchase 717,300 shares. Share repurchases may be made from time-to-time in the open market or in privately negotiated transactions. The timing and amount of any repurchases of shares will be determined by management, based on its evaluation of market and economic conditions and other factors.

During the nine month period ended December 31, 2014, 20,771 shares of stock were withheld from employees upon the vesting of Restricted Shares that were granted under the Plan. These shares were withheld by us to satisfy the employees minimum statutory tax withholding, which is required once the Restricted Shares or Restricted Shares Units are vested.

Dividends.

Dividends paid were $15.0 million and $14.9 million for the nine month periods ended December 31, 2014 and 2013, respectively. Each quarterly dividend payment is subject to review and approval by our Board of Directors, who will continue to evaluate our dividend payment amount on a quarterly basis.

Capital Expenditures.

The following table compares capital expenditures:

For�the�Nine Months
Ended�December 31,

Acquisition

2014

2013

(dollars�in�thousands)

Land and Quarries

$

170,913

$

3,572

$

4,978

Plants

21,624

29,200

30,260

Buildings, Machinery and Equipment

11,100

32,187

7,970

Total Capital Expenditures

$

203,637

$

64,959

$

43,208

Historically, annual maintenance capital expenditures have been approximately $20.0 to $25.0 million, which we anticipate will be similar for fiscal 2015. Total capital expenditures for fiscal 2015, including sustaining capital expenditures, are expected to be approximately $85.0 million to $100.0 million, including the completion of the plant expansion in New Auburn, Wisconsin. Historically, we have financed such expenditures with cash from operations and borrowings under our revolving credit facility.

35


Item�3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks related to fluctuations in interest rates on our Credit Facility. From time-to-time we have utilized derivative instruments, including interest rate swaps, in conjunction with our overall strategy to manage the debt outstanding that is subject to changes in interest rates. We have a $500.0 million Credit Facility available at December 31, 2014, under which borrowings bear interest at a variable rate. A hypothetical 100 basis point increase in interest rates on the $335.0 million of borrowings at December 31, 2014 would increase our interest expense by approximately $3.4 million on an annual basis. At present, we do not utilize derivative financial instruments.

We are subject to commodity risk with respect to price changes principally in coal, coke, natural gas and power. We attempt to limit our exposure to changes in commodity prices by entering into contracts or increasing use of alternative fuels.

Item�4. Controls and Procedures

We have established a system of disclosure controls and procedures that are designed to ensure that information relating to the Company, which is required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (Exchange Act), is recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a timely fashion. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed as of the end of the period covered by this quarterly report. This evaluation was performed under the supervision and with the participation of management, including our CEO and CFO. Based upon that evaluation, our CEO and CFO have concluded that these disclosure controls and procedures were effective.

36


PART II. OTHER INFORMATION

Item�1. Legal Proceedings

Outstanding Lawsuit against the IRS

As previously reported, the Internal Revenue Service (the IRS) completed the examination of our federal income tax returns for all of the fiscal years ended March�31, 2001 through 2006. The IRS issued Exam Reports and Notices of Proposed Adjustment on November�9, 2007 for the examination of the 2001, 2002 and 2003 tax years, and on February�5, 2010 for the examination of the 2004, 2005 and 2006 fiscal years, in which it denied certain depreciation deductions claimed by us with respect to assets acquired by us from Republic Group LLC in November 2000. In response to the examination reports, we previously paid an aggregate amount to the IRS, net of certain refunds of interest, of $97.9 million of taxes, penalties and interest with respect to these fiscal years.��On May�4, 2011, we filed a lawsuit in Federal District Court to recover the $97.9 million of taxes, penalties and interest paid. In March 2013, the IRS agreed to suspend the audit for tax years 2007 through 2011 pending the outcome of our case before the Federal District Court.��In September 2013, the judge heard arguments on each partys motion for summary judgment and in November 2013 the judge denied each such motion.

In September 2014 the Company and the IRS reached a tentative agreement to settle this case, and this agreement was approved, by the U.S Department of Justice in January 2015.��Under the terms of the agreement we dismissed our lawsuit seeking to recover taxes, interest and penalties paid, as discussed above, in exchange for the IRS conceding 40% of the penalties, plus related interest, to date.��We will recognize the recovery of 40% of the penalties, which total approximately $5.8 million, plus approximately $3.4 million of related interest thereon, in our consolidated statement of earnings during the fourth quarter of fiscal 2015.

EPA Notice of Violation

On October�5, 2010, Region IX of the EPA issued a Notice of Violation and Finding of Violation (NOV) alleging violations by our subsidiary, Nevada Cement Company (NCC), of the Clean Air Act (CAA). The NOV alleges that NCC made certain physical changes to its facility in the 1990s without first obtaining permits required by the Prevention of Significant Deterioration requirements and Title V permit requirements of the CAA. The EPA also alleges that NCC has failed to submit to EPA since 2002 certain reports required by the National Emissions Standard for Hazardous Air Pollutants General Provisions and the Portland Cement Manufacturing Industry Standards. On March�12, 2014, EPA Region IX issued a second NOV to NCC. The second NOV is materially similar to the 2010 NOV except that it alleges violations of the new source performance standards (NSPS) for Portland cement plants. The NOVs state that the EPA may seek penalties although it does not propose or assess any specific level of penalties or specify what relief the EPA will seek for the alleged violations. NCC believes it has meritorious defenses to the allegations in the NOVs. NCC met with the EPA in December 2010,�September 2012 and May 2014 to present its defenses and to discuss a resolution of the alleged violations. EPA and NCC remain in discussions regarding the alleged violations. If a negotiated settlement cannot be reached, NCC intends to vigorously defend these matters in any enforcement action that may be pursued by the EPA. As a part of a settlement, or should NCC fail in its defense in any enforcement action, NCC could be required to make substantial capital expenditures to modify its facility and incur increased operating costs. NCC could also be required to pay significant civil penalties. Additionally, an enforcement action could take many years to resolve the underlying issues alleged in the NOV. We are currently unable to determine the final outcome of this matter or the impact of an unfavorable determination upon our financial position or results of operations.

Domestic Wallboard Antitrust Litigation

Since late December 2012, several purported class action lawsuits were filed in various United States district courts, including the Eastern District of Pennsylvania, Western District of North Carolina and the Northern District of Illinois, against the Companys subsidiary, American Gypsum Company LLC (American Gypsum), alleging that American Gypsum conspired with other wallboard manufacturers to fix the price for drywall sold in the United States in violation of federal antitrust laws and, in some cases related provisions of state law.�The complaints allege that the defendant wallboard manufacturers conspired to increase prices through the

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announcement and implementation of coordinated price increases, output restrictions, and other restraints of trade, including the elimination of individual job quote pricing.�In addition to American Gypsum, the defendants in these lawsuits include CertainTeed Corp., USG Corporation and United States Gypsum (together USG), New NGC, Inc., Lafarge North America, Temple Inland Inc. and PABCO Building Products LLC.� On April�8, 2013, the Judicial Panel on Multidistrict Litigation transferred and consolidated all related cases to the Eastern District of Pennsylvania for coordinated pretrial proceedings.

On June�24, 2013, the direct and indirect purchaser plaintiffs filed consolidated amended class action complaints. The direct purchasers complaint added the Company as a defendant. The plaintiffs in the consolidated class action lawsuits bring claims on behalf of purported classes of direct or indirect purchasers of wallboard from January 1, 2012 to the present for unspecified monetary damages (including treble damages) and in some cases injunctive relief.��On July�29, 2013, the Company and American Gypsum answered the complaints, denying all allegations that they conspired to increase the price of drywall and asserting affirmative defenses to the plaintiffs claims.

On November 3, 2014 USG announced that it had entered into a binding memorandum of understanding with counsel representing the direct and indirect purchaser classes pursuant to which it agreed to settle all claims against it. Discovery in this litigation is ongoing.��Due to the fact that the case is in the discovery phase, we are unable to estimate the amount of any reasonably possible loss or range of reasonably possible losses.�American Gypsum denies the allegations in these lawsuits and will vigorously defend itself against these claims.

Item�1A. Risk Factors

We are affected by the level of demand in the construction industry.

Demand for our products is directly related to the level of activity in the construction industry, which includes residential, commercial and infrastructure construction. While the most recent downturn in residential and commercial construction, which began in calendar 2007, materially impacted our business, certain economic fundamentals began improving in calendar 2012, and have continued to improve into calendar 2014; however, the rate and sustainability of such improvement remains uncertain. Furthermore, activity in the infrastructure construction business is directly related to the amount of government funding available for such projects. Despite the enactment of a new federal highway bill in July 2012, infrastructure spending continues to be adversely impacted by a number of factors, including the budget constraints currently being experienced by federal, state and local governments. Any decrease in the amount of government funds available for such projects or any decrease in construction activity in general (including any weakness in residential construction or commercial construction) could have a material adverse effect on our business, financial condition and results of operations.

Our business is seasonal in nature, and this causes our quarterly results to vary significantly.

A majority of our business is seasonal with peak revenues and profits occurring primarily in the months of April through November when the weather in our markets is more suitable for construction activity. Quarterly results have varied significantly in the past and are likely to vary significantly in the future. Such variations could have a negative impact on the price of our common stock.

We are subject to the risk of unfavorable weather conditions, particularly during peak construction periods, as well as other unexpected operational difficulties.

Unfavorable weather conditions, such as snow, hurricanes, tropical storms and heavy rainfall, can reduce construction activity and adversely affect demand for construction products. Such weather conditions can also increase our costs, reduce our production or impede our ability to transport our products in an efficient and cost-effective manner. Similarly, operational difficulties, such as business interruption due to required maintenance, capital improvement projects or loss of power, can increase our costs and reduce our production. In particular, the occurrence of unfavorable weather conditions and other unexpected operational difficulties during peak construction periods could adversely affect operating income and cash flow and could have a disproportionate impact on our results of operations for the full year.

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We and our customers participate in cyclical industries and regional markets, which are subject to industry downturns.

A majority of our revenues are from customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions. For example, many of our customers operate in the construction industry, which is affected by a variety of factors, such as general economic conditions, changes in interest rates, demographic and population shifts, levels of infrastructure spending and other factors beyond our control. In addition, since our operations are in a variety of geographic markets, our businesses are subject to differing economic conditions in each such geographic market. Economic downturns in the industries to which we sell our products or localized downturns in the regions where we have operations generally have an adverse effect on demand for our products and adversely affect the collectability of our receivables. In general, any downturns in these industries or regions could have a material adverse effect on our business, financial condition and results of operations.

Our products are commodities, which are subject to significant changes in supply and demand and price fluctuations.

The products sold by us are commodities and competition among manufacturers is based largely on price. Prices are often subject to material changes in response to relatively minor fluctuations in supply and demand, general economic conditions and other market conditions beyond our control. Increases in the production capacity of industry participants for products such as gypsum wallboard or cement or increases in cement imports tend to create an oversupply of such products leading to an imbalance between supply and demand, which can have a negative impact on product prices. Currently, there continues to be significant excess capacity in the gypsum wallboard industry in the United States. There can be no assurance that prices for products sold by us will not decline in the future or that such declines will not have a material adverse effect on our business, financial condition and results of operations.

Volatility and disruption of financial markets could affect access to credit.

Difficult economic conditions can cause a contraction in the availability, and increase the cost, of credit in the marketplace. A number of our customers or suppliers have been and may continue to be adversely affected by unsettled conditions in capital and credit markets, which in some cases have made it more difficult or costly for them to finance their business operations. These unsettled conditions have the potential to reduce the sources of liquidity for the Company and our customers.

Our and our customers operations are subject to extensive governmental regulation, including environmental laws, which can be costly and burdensome.

Our operations and those of our customers are subject to and affected by federal, state and local laws and regulations with respect to such matters as land usage, street and highway usage, noise level and health and safety and environmental matters. In many instances, various certificates, permits or licenses are required in order for us or our customers to conduct business or carry out construction and related operations. Although we believe that we are in compliance in all material respects with applicable regulatory requirements, there can be no assurance that we will not incur material costs or liabilities in connection with regulatory requirements or that demand for our products will not be adversely affected by regulatory issues affecting our customers. In addition, future developments, such as the discovery of new facts or conditions, the enactment or adoption of new or stricter laws or regulations or stricter interpretations of existing laws or regulations, may impose new liabilities on us, require additional investment by us or prevent us from opening, expanding or modifying plants or facilities, any of which could have a material adverse effect on our financial condition or results of operations.

For example, GHGs currently are regulated as pollutants under the CAA and subject to reporting and permitting requirements. Future consequences of GHG permitting requirements and potential emission reduction measures for our operations may be significant because (1)�the cement manufacturing process requires the combustion of large amounts of fuel, (2)�in our cement manufacturing process, the production of carbon dioxide is

39


a byproduct of the calcination process, whereby carbon dioxide is removed from calcium carbonate to produce calcium oxide, and (3)�our gypsum wallboard manufacturing process combusts a significant amount of fossil fuel, especially natural gas.

On September�9, 2010, the EPA finalized National Emissions Standards for Hazardous Air Pollutants, or NESHAP, for portland cement plants (PC NESHAP). The PC NESHAP will require a significant reduction in emissions of certain hazardous air pollutants from portland cement kilns. The PC NESHAP sets limits on mercury emissions from existing portland cement kilns and increases the stringency of emission limits for new kilns. The PC NESHAP also sets emission limits for total hydrocarbons, particulate matter (as a surrogate for metal pollutants) and acid gases from cement kilns of all sizes. The PC NESHAP was scheduled to take full effect in September 2013; however, as a result of a decision by the U.S. Court of Appeals for the District of Columbia Circuit in Portland Cement Assn. v. EPA, 655 F.3d 177 (D.C. Cir.) arising from industry challenges to the PC NESHAP, the EPA proposed a settlement agreement with industry petitioners in May 2012. In February 2013, the EPA published the final revised rule to the PC NESHAP which extended the compliance date until September�9, 2015 for existing cement kilns and made certain changes to the rules governing particulate matter monitoring methods and emissions limits, among other revisions. The PC NESHAP will materially increase capital costs and costs of production for the Company and the industry as a whole.

On March�21, 2011 EPA proposed revised Standards of Performance for New Sources and Emissions Guidelines for Existing Sources for Commercial/Industrial Solid Waste Incinerators (the CISWI Rule) per Section�129 of the Clean Air Act, which created emission standards for 4 subcategories of industrial facilities, one of which is Waste Burning Kilns. EPA simultaneously stayed the CISWI Rule for further reconsideration. On February�12, 2013, the EPA finalized revisions to the CISWI Rule. For those cement kilns that utilize non-hazardous secondary materials (NHSM) as defined in a rule first finalized on March�21, 2011 (and slightly revised on February�12, 2013), the CISWI Rule will require significant reductions in emissions of certain pollutants from applicable cement kilns. The CISWI Rule sets forth emission standards for mercury, carbon monoxide, acid gases, nitrogen oxides, sulfur dioxide, certain metals (lead and cadmium) and more stringent standards than PC NESHAP for particulate matter and dioxin/furans. The CISWI Rule as currently promulgated may materially increase capital costs and costs for production but only for those facilities that will be using applicable solid wastes as fuel. The compliance date for this rule is approximately early 2018 (either 3 years after State CISWI plan approval, or 5 years from the date of the final CISWI Rule, whichever is sooner). It is anticipated that the CISWI Rule may materially increase capital costs and costs of production for the Company and the industry as a whole.

On December 19, 2014, EPA released a prepublication copy of a final rule addressing the storage, reuse and disposal of coal combustion products, which include fly ash and flue gas desulfurization gypsum (synthetic gypsum). We use synthetic gypsum in wallboard manufactured at our Georgetown, South Carolina plant. 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 Resource Conservation and Recovery Act, or 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, recordkeeping and reporting obligations, and closure requirements.��Beneficial encapsulated uses of CCRs, including synthetic gypsum, are exempt from regulation.��The rule becomes effective six months after publication in the Federal Register, with many of the requirements phased in months or years after the effective date.��Given EPAs 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 cement plants located in Kansas City, Missouri and Tulsa, Oklahoma are subject to certain obligations under a consent decree with the United States requiring the establishment of facility-specific emissions limitations for certain air pollutants. Not all specific limitations have been finalized; however, upon determination, these limitations, along with specific emissions limitations that have already been finalized, will apply to our operation of these cement plants. It is difficult to predict with reasonable certainty the impact of these limitations on the operations or operating costs of the Kansas City, Missouri and Tulsa, Oklahoma cement plants. Limitations that

40


significantly restrict emissions levels beyond current operating levels may require additional investments by us or place limitations on operations, any of which could have a material adverse effect on our financial condition or results of operations.

The cement plant in Tulsa, Oklahoma is subject to NESHAP for hazardous waste combustors (the HWC MACT), which imposes emission limitations and operating limits on cement kilns that are fueled by hazardous wastes. Compliance with the HWC MACT could impose additional liabilities on us or require additional investment by us, which could have a material adverse effect on our financial condition or results of operations. In addition, new developments, such as new laws or regulations, may impose new liabilities on us, require additional investment by us or prevent us from operating or expanding plants or facilities, any of which could have a material adverse effect on our financial condition or results of operations. For example, revised HWC MACT regulations would apply to one of the cement kilns used at the cement plant in Tulsa, Oklahoma. This revision may require new control requirements and significant capital expenditure for compliance. The revised regulations have not been proposed. In 2013, the EPA adopted the final CISWI Rule (as discussed above) that likely will apply to one of the cement kilns used by the cement plant in Tulsa, Oklahoma and may impose new control requirements requiring significant capital expenditures for compliance. Existing CISWI units will need to comply with the CISWI Rule when it becomes effective, which is expected to occur in approximately early 2018.

We may incur significant costs in connection with pending and future litigation.

We are, or may become, party to various lawsuits, claims, investigations and proceedings, including but not limited to personal injury, environmental, antitrust, tax, asbestos, property entitlements and land use, intellectual property, commercial, contract, product liability, health and safety, and employment matters. The outcome of pending or future lawsuits, claims, investigations or proceedings is often difficult to predict, but could be adverse and material in amount. In addition, the defense of these lawsuits, claims, investigations and proceedings may divert our managements attention and we may incur significant costs in defending these matters. See Part II Item�1. Legal Proceedings of this report.

Our results of operations are subject to significant changes in the cost and availability of fuel, energy and other raw materials.

Major cost components in each of our businesses are the costs of fuel, energy and raw materials. Significant increases in the costs of fuel, energy or raw materials or substantial decreases in their availability could materially and adversely affect our sales and operating profits. Prices for fuel, energy or raw materials used in connection with our businesses could change significantly in a short period of time for reasons outside our control. Prices for fuel and electrical power, which are significant components of the costs associated with our gypsum wallboard and cement businesses, have fluctuated significantly in recent years and may increase in the future. In the event of large or rapid increases in prices, we may not be able to pass the increases through to our customers in full, which would reduce our operating margin.

We may become subject to significant clean-up, remediation and other liabilities under applicable environmental laws.

Our operations are subject to state, federal and local environmental laws and regulations, which impose liability for cleanup or remediation of environmental pollution and hazardous waste arising from past acts. These laws and regulations also require pollution control and prevention, site restoration and operating permits and/or approvals to conduct certain of our operations or expand or modify our facilities. Certain of our operations may from time-to-time involve the use of substances that are classified as toxic or hazardous substances within the meaning of these laws and regulations. Additionally, any future laws or regulations addressing GHG emissions would likely have a negative impact on our business or results of operations, whether through the imposition of raw material or production limitations, fuel-use or carbon taxes emission limitations or reductions or otherwise. We are unable to estimate accurately the impact on our business or results of operations of any such law or regulation at this time. Risk of environmental liability (including the incurrence of fines, penalties or other sanctions or litigation liability) is inherent in the operation of our businesses. As a result, it is possible that

41


environmental liabilities and compliance with environmental regulations could have a material adverse effect on our operations in the future.

Significant changes in the cost and availability of transportation could adversely affect our business, financial condition and results of operations.

Some of the raw materials used in our manufacturing processes, such as coal or coke, are transported to our facilities by truck or rail. In addition, transportation logistics play an important part in allowing us to supply products to our customers, whether by truck, rail or barge. For example, we deliver gypsum wallboard to many areas of the United States and the transportation costs associated with the delivery of our wallboard products represent a significant portion of the variable cost of our gypsum wallboard segment. Significant increases in the cost of fuel or energy can result in material increases in the cost of transportation, which could materially and adversely affect our operating profits. In addition, reductions in the availability of certain modes of transportation such as rail or trucking could limit our ability to deliver product and therefore materially and adversely affect our operating profits.

Our debt agreements contain restrictive covenants and require us to meet certain financial ratios and tests, which limit our flexibility and could give rise to a default if we are unable to remain in compliance.

Our Amended Credit Facility and the Note Purchase Agreements governing our Senior Notes contain, among other things, covenants that limit our ability to finance future operations or capital needs or to engage in other business activities, including but not limited to our ability to:

Incur additional indebtedness;

Sell assets or make other fundamental changes;

Engage in mergers and acquisitions;

Pay dividends and make other restricted payments;

Make investments, loans, advances or guarantees;

Encumber our assets or those of our restricted subsidiaries;

Enter into transactions with our affiliates.

In addition, these agreements require us to meet and maintain certain financial ratios and tests, which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. Events beyond our control, including the changes in general business and economic conditions, may impair our ability to comply with these covenants or meet those financial ratios and tests. A breach of any of these covenants or failure to maintain the required ratios and meet the required tests may result in an event of default under these agreements. This may allow the lenders under these agreements to declare all amounts outstanding to be immediately due and payable, terminate any commitments to extend further credit to us and pursue other remedies available to them under the applicable agreements. If this occurs, our indebtedness may be accelerated and we may not be able to refinance the accelerated indebtedness on favorable terms, or at all, or repay the accelerated indebtedness. In general, the occurrence of any event of default under these agreements could have a material adverse effect on our financial condition or results of operations.

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We have incurred substantial indebtedness, which could adversely affect our business, limit our ability to plan for or respond to changes in our business and reduce our profitability.

Our future ability to satisfy our debt obligations is subject, to some extent, to financial, market, competitive, legislative, regulatory and other factors that are beyond our control. Our substantial debt obligations could have negative consequences to our business, and in particular could impede, restrict or delay the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. For example:

we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flow for other purposes, including business development efforts, capital expenditures or strategic acquisitions;

we may not be able to generate sufficient cash flow to meet our substantial debt service obligations or to fund our other liquidity needs. If this occurs, we may have to take actions such as selling assets, selling equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures or restructuring our debt;

as a result of the amount of our outstanding indebtedness and the restrictive covenants to which we are subject, if we determine that we require additional financing to fund future working capital, capital investments or other business activities, we may not be able to obtain such financing on commercially reasonable terms, or at all; and

our flexibility in planning for, or reacting to, changes in our business and industry may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.

Our production facilities may experience unexpected equipment failures, catastrophic events and scheduled maintenance.

Interruptions in our production capabilities may cause our productivity and results of operations to decline significantly during the affected period. Our manufacturing processes are dependent upon critical pieces of equipment. Such equipment may, on occasion, be out of service as a result of unanticipated events such as fires, explosions, violent weather conditions or unexpected operational difficulties. We also have periodic scheduled shut-downs to perform maintenance on our facilities. Any significant interruption in production capability may require us to make significant capital expenditures to remedy problems or damage as well as cause us to lose revenue and profits due to lost production time, which could have a material adverse effect on our results of operations and financial condition.

Increases in interest rates and inflation could adversely affect our business and demand for our products, which would have an adverse effect on our results of operations.

Our business is significantly affected by the movement of interest rates. Interest rates have a direct impact on the level of residential, commercial and infrastructure construction activity by impacting the cost of borrowed funds to builders. Higher interest rates could result in decreased demand for our products, which would have a material adverse effect on our business and results of operations. In addition, increases in interest rates could result in higher interest expense related to borrowings under our Credit Facility. Inflation can result in higher interest rates. With inflation, the costs of capital increase, and the purchasing power of our cash resources can decline. Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation, which could have a direct and indirect adverse impact on our business and results of operations.

Any new business opportunities we may elect to pursue will be subject to the risks typically associated with the early stages of business development or product line expansion.

We are continuing to pursue opportunities, including our frac sand business, which are natural extensions of our existing core businesses and which allow us to leverage our core competencies, existing infrastructure and customer relationships. See Managements Discussion and Analysis of Financial Conditions and Results of

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Operations  Executive Summary. Our likelihood of success in pursuing and realizing these opportunities must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the early phases of business development or product line expansion, including the difficulties involved in obtaining permits; planning and constructing new facilities; transporting and storing products; establishing, maintaining or expanding customer relationships; as well navigating the regulatory environment in which we operate. There can be no assurance that we will be successful in the pursuit and realization of these opportunities.

Certain of our businesses depend on the level of activity in the oil and natural gas industries.

Our frac sand and oil well cement sales are materially dependent on the levels of activity in natural gas and oil exploration, development and production. More specifically, the demand for the frac sand and oil well cement we produce is closely related to the number of natural gas and oil wells completed in geological formations where our products are sold. These activity levels are affected by both short- and long-term trends in natural gas and oil prices. In recent years, natural gas and oil prices and, therefore, the level of exploration, development and production activity, have experienced significant fluctuations. Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by the Organization of the Petroleum Exporting Countries (OPEC), have contributed, and are likely to continue to contribute, to price volatility. Additionally, warmer than normal winters in North America and other weather patterns may adversely impact the short-term demand for natural gas and, therefore, demand for our products. Reduction in demand for natural gas to generate electricity could also adversely impact the demand for frac sand and oil well cement. A prolonged reduction in natural gas and oil prices would generally depress the level of natural gas and oil exploration, development, production and well completion activity and result in a corresponding decline in the demand for the frac sand we produce. In addition, any future decreases in the rate at which oil and natural gas reserves are discovered or developed, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could have material adverse effect on these businesses, even in a stronger natural gas and oil price environment.

We may be adversely affected by decreased demand for frac sand or the development of either effective alternative proppants or new processes to replace hydraulic fracturing.

Frac sand is a proppant used in the completion and re-completion of natural gas and oil wells through hydraulic fracturing. Frac sand is the most commonly used proppant and is less expensive than ceramic proppant, which is also used in hydraulic fracturing to stimulate and maintain oil and natural gas production. A significant shift in demand from frac sand to other proppants, such as ceramic proppants, could have a material adverse effect on our oil and gas proppants business. The development and use of other effective alternative proppants, or the development of new processes to replace hydraulic fracturing altogether, could also cause a decline in demand for the frac sand we produce and could have a material adverse effect on our oil and gas proppants business.

Our operations are dependent on our rights and ability to mine our properties and on our having renewed or received the required permits and approvals from governmental authorities and other third parties.

We hold numerous governmental, environmental, mining and other permits, water rights and approvals authorizing operations at many of our facilities. A decision by a governmental agency or other third party to deny or delay issuing a new or renewed permit or approval, or to revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue operations at the affected facility. Expansion of our existing operations is also predicated on securing the necessary environmental or other permits, water rights or approvals, which we may not receive in a timely manner or at all.

Title to, and the area of, mineral properties and water rights may also be disputed. Mineral properties sometimes contain claims or transfer histories that examiners cannot verify. A successful claim that we do not have title to one or more of our properties or lack appropriate water rights could cause us to lose any rights to explore, develop and extract any minerals on that property, without compensation for our prior expenditures relating to such property. Our business may suffer a material adverse effect in the event one or more of our properties are determined to have title deficiencies.

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In some instances, we have received access rights or easements from third parties, which allow for a more efficient operation than would exist without the access or easement. A third party could take action to suspend the access or easement, and any such action could be materially adverse to or results of operations or financial conditions.

A cyber-attack or data security breach affecting our information technology systems may negatively affect our businesses, financial condition and operating results.

We use information technology systems to collect, store and transmit the data needed to operate our businesses, including our confidential and proprietary information.�Although we have implemented industry-standard security safeguards and policies to prevent unauthorized access or disclosure of such information, we cannot prevent all cyber-attacks or data security breaches.�If such an attack or breach occurs, our businesses could be negatively affected, and we could incur additional costs in remediating the attack or breach and suffer reputational harm due to the theft or disclosure of our confidential information.

Risks Related to the Acquisition

We may not realize any or all of the anticipated benefits of the Acquisition and the Acquisition may adversely impact our existing operations.

We may not be able to achieve the anticipated benefits of the Acquisition and we will need to integrate CRS Proppants with our existing operations. We may not be able to accomplish the integration of CRS Proppants smoothly, successfully or within the anticipated costs or timeframe. In general, we cannot assure you that we will be able to timely achieve the anticipated incremental revenues, cost savings, operational synergies and other expected benefits of the Acquisition.

The diversion of our managements attention from our current operations to integration efforts and any difficulties encountered in combining operations could prevent us from realizing the full benefits anticipated to result from the Acquisition and could adversely affect our business and the price of our common stock. The integration process may be complex, costly and time-consuming. The difficulties of integrating CRS Proppants with our business include, among others:

"

failure to implement our business plan for the combined business;

"

unanticipated issues in integrating logistics, information, communications and other systems;

"

unanticipated changes in applicable laws and regulations;

��

"

the impact of the Acquisition on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and

"

unanticipated issues, expenses and liabilities.

We incurred significant liabilities and costs as a result of or in connection with the Acquisition.

Upon consummation of the Acquisition we became responsible for all liabilities and obligations that arose in connection with the operation of CRS Proppants.

In addition, we incurred significant costs in connection with the Acquisition. The substantial majority of these costs are non-recurring transaction expenses and costs. Furthermore, substantial time and resources have been and may continue to be devoted to the Acquisition and related matters, which could otherwise have been devoted to other opportunities that may have been beneficial to us.

We incurred substantial indebtedness financing the Acquisition, which could adversely affect our business, limit our ability to plan for or respond to changes in our business and reduce our profitability.

In order to finance the Acquisition, incurred additional borrowings of approximately $225.0 million under our Amended Credit Facility. We expect to use cash flow generated from our future operations to make payments on our debt obligations and to fund planned capital expenditures. Our future ability to satisfy these obligations and make these expenditures is subject, to some extent, to financial, market, competitive, legislative,

45


regulatory and other factors that are beyond our control. Our substantial debt obligations could have negative consequences to our business, which could impede, restrict or delay the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. For example:

"

we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flow for other purposes, including business development efforts, capital expenditures or strategic acquisitions;

"

we may not be able to generate sufficient cash flow to meet our substantial debt service obligations or to fund our other liquidity needs. If we cannot service our indebtedness, we may have to take actions such as selling assets, selling equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures or restructure our debt;

"

we may not be able to obtain additional financing on commercially reasonable terms or at all to fund future working capital, capital investments and other business activities; and

"

our flexibility in planning for, or reacting to, changes in our business and industry may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.

As of December 31, 2014, on a pro forma basis giving effect to the Acquisition, the aggregate principal amount of our debt instruments with exposure to interest rate risk was approximately $335.0 million. As of the same date, on a pro forma basis, each change in interest rates of 100 basis points would result in an approximate $3.4 million change in our annual cash interest expense before any principal payment on our financial instruments with exposure to interest rate risk. As a result, increases in interest rates will increase the cost of servicing our financial instruments with exposure to interest rate risk and could materially reduce our profitability and cash flows.

This report includes various forward-looking statements, which are not facts or guarantees of future performance and which are subject to significant risks and uncertainties.

This report and other materials we have filed or will file with the SEC, as well as information included in oral statements or other written statements made or to be made by us, contain or may contain forward-looking statements within the meaning of Section�27A of the Securities Act of 1933, Section�21E of the Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words believe, expect, intend, estimate, anticipate, project, may, can, could, might, will and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, plans and objectives of management, future developments or conditions in the industries in which we participate, including future prices for our products, audits and legal proceedings to which we are a party and other trends, developments and uncertainties that may affect our business in the future.

Forward-looking statements are not historical facts or guarantees of future performance but instead represent only our beliefs at the time the statements were made regarding future events, which are subject to significant risks, uncertainties, and other factors, many of which are outside of our control. Any or all of the forward-looking statements made by us may turn out to be materially inaccurate. This can occur as a result of incorrect assumptions, changes in facts and circumstances or the effects of known risks and uncertainties. Many of the risks and uncertainties mentioned in this report or other reports filed by us with the SEC, including those discussed in the risk factor section of this report, will be important in determining whether these forward-looking statements prove to be accurate. Consequently, neither our stockholders nor any other person should place undue reliance on our forward-looking statements and should recognize that actual results may differ materially from those that may be anticipated by us.

46


All forward-looking statements made in this report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise.

Item�2. Unregistered Sales of Equity Securities and Use of Proceeds

The disclosure required under this Item is included in Managements Discussion and Analysis of Results of Operations and Financial Condition of this Quarterly Report on Form 10-Q under the heading Share Repurchases and is incorporated herein by reference.

Item�4. Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section�1503 (a)�of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item�104 of Regulation S-K is included in Exhibit 95 to this Form 10-Q.

Item�6. Exhibits

12.1*

��

Computation of Ratio of Earnings to Fixed Charges.

31.1*

��

Certification of the Chief Executive Officer of Eagle Materials Inc. pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.

31.2*

��

Certification of the Chief Financial Officer of Eagle Materials Inc. pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.

32.1*

��

Certification of the Chief Executive Officer of Eagle Materials Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

��

Certification of the Chief Financial Officer of Eagle Materials Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95*

��

Mine Safety Disclosure

101.INS*

��

XBRL Instance Document.

101.SCH*

��

XBRL Taxonomy Extension Schema Document.

101.CAL*

��

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

��

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

��

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

��

XBRL Taxonomy Extension Presentation Linkbase Document.

*

Filed herewith.

**

Pursuant to Item 601(b)(2) of Regulation S-K, the Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

(1)

Management contract or compensatory plan or arrangement.

47


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

��

EAGLE MATERIALS INC.

��

Registrant

February 4, 2015

��

/s/ STEVEN R. ROWLEY

��

Steven R. Rowley

President and Chief Executive Officer

(principal executive officer)

February 4, 2015

��

/s/ D. CRAIG KESLER

��

D. Craig Kesler

Executive Vice President  Finance and

Administration and Chief Financial Officer

(principal financial officer)

February 4, 2015

��

/s/ WILLIAM R. DEVLIN

��

William R. Devlin

Senior Vice President  Controller and

Chief Accounting Officer

(principal accounting officer)

48

EXHIBIT 12.1

Nine Months

Ended December 31,

Fiscal Year Ended March 31,

2014

2014

2013

2012

2011

Earnings: (1)

Earnings before income taxes

208,229

181,804

84,096

21,912

16,762

Add: Fixed charges

11,930

18,171

15,791

17,769

18,291

Add: Amortization of capitalized interest and FIN 48 Interest

924

1,177

945

(367

)

(932

)

Add: Cash distributions from equity method investments

30,125

37,750

28,500

23,250

24,500

Subtract: Income from equity method investments

(34,274

)

(37,811

)

(32,507

)

(28,528

)

(24,233

)

Total Earnings

216,934

201,091

96,825

34,036

34,388

Fixed Charges: (2)

Interest expense

11,537

17,646

15,467

17,530

17,995

Interest component of rent expense

393

525

324

239

296

Total Fixed Charges

11,930

18,171

15,791

17,769

18,291

Ratio of Earnings to Fixed Charges

18.2x

11.1x

6.1x

1.9x

1.9x

(1)

Earnings represent earnings before income taxes and before income from equity method investments plus: (a) fixed charges;��and (b) cash distributions from equity method investments.

(2)

Fixed charges include: (a) interest expense, whether expensed or capitalized, less interest accrued for uncertain tax positions; and (b) the portion of operating rental expense which management believes is representative of the interest component of rent expense.

Exhibit 31.1

Certification of Periodic Report Pursuant to Section�302 of the Sarbanes-Oxley Act of 2002

I, Steven R. Rowley, certify that:

1. I have reviewed this report on Form 10-Q of Eagle Materials Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Dated: February 4, 2015

By:

/s/ Steven R. Rowley�

Steven R. Rowley

President and Chief Executive Officer

Exhibit 31.2

Certification of Periodic Report Pursuant to Section�302 of the Sarbanes-Oxley Act of 2002

I, D. Craig Kesler, certify that:

1. I have reviewed this report on Form 10-Q of Eagle Materials Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Dated: February 4, 2015

By:

/s/ D. Craig Kesler

D. Craig Kesler

Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

Certification of Periodic Report Pursuant to Section�906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Eagle Materials Inc. and subsidiaries (the Company) on Form 10-Q for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Steven R. Rowley, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(i)

the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 4, 2015

By:

/s/ Steven R. Rowley

Steven R. Rowley

President and Chief Executive Officer

Exhibit 32.2

Certification of Periodic Report Pursuant to Section�906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Eagle Materials Inc. and subsidiaries (the Company) on Form 10-Q for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, D. Craig Kesler, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(i)

the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 4, 2015

By:

/s/ D. Craig Kesler

D. Craig Kesler

Chief Financial Officer

(Principal Financial Officer)

EXHIBIT 95

MINE SAFETY DISCLOSURE

Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act contains reporting requirements regarding mine safety.��The operation of our quarries is subject to regulation by the federal Mine Safety and Health Administration, or MSHA, under the Federal Mine Safety and Health Act of 1977, or the Mine Act.��Set forth below is the required information regarding certain mining safety and health matters for the three month period ending December 31, 2014 for our facilities.��In evaluating this information, consideration should be given to factors such as:��(i) the number of citations and orders will vary depending on the size of the quarry, (ii) the number of citations issued will vary from inspector-to-inspector and mine-to-mine, and (iii) citations and orders can be contested and appealed, and in that process, may be reduced in severity and amount, and are sometimes dismissed.

Mine or Operating Name/MSHA Identification Number(3)

Section 104 S&S Citations

Section 104(b) Orders

Section 104(d) Citations and Orders

Section 110(b)(2) Violations

Section 107(a) Orders

Total Dollar Value of MSHA Assessments Proposed

Total Number of Mining Related Fatalities

Received Notice of Pattern of Vio-lations��Under Section 104(e)

(yes/no)

Received Notice of Potential to Have Pattern Under Section 104(e)

(yes/no)

Legal Actions Pending as of Last Day of Period

Legal Actions Initiated During Period

Legal Actions Resolved During Period

American Gypsum Company

Albuquerque, NM (2900181)

0

0

0

0

0

$

0

0

no

no

0

0

0

American Gypsum Company

Duke, OK (3400256)

1

0

0

0

0

$

138

0

no

no

0

0

0

American Gypsum Company

Eagle, CO (0503997)

0

0

0

0

0

$

0

0

no

no

0

0

0

Centex Materials

Buda, TX (4102241)

0

0

0

0

0

$

0

0

no

no

0

0

0

Central Plains Cement Company

Sugar Creek, MO (2302171)

3

0

0

0

0

$

4,515

0

no

no

0

0

0

Central Plains Cement Company

Tulsa, OK (3400026)

0

0

0

0

0

$

0

0

no

no

1(1)

0

0

Great Northern Sand

Barron Co., WI (4703646)

0

0

0

0

0

$

0

0

no

no

0

0

0

Illinois Cement Company

LaSalle, IL (1100003)

0

0

0

0

0

$

0

0

no

no

1(1)

1(1)

0

Mountain Cement Company

Laramie, WY (4800007)

0

0

0

0

0

$

0

0

no

no

5(2)

0

0

Mountain Cement Company

Laramie, WY (4800529)

0

0

0

0

0

$

0

0

no

no

0

0

0

Nevada Cement Company

Fernley, NV (2600015)

0

0

0

0

0

$

0

0

no

no

1(1)

1(1)

1(1)

Northern White Sand LLC

Utica, IL��(1103253)

0

0

0

0

0

$

0

0

no

no

0

0

0

Northern White Sand LLC

Corpus Christi, TX��(4105013)

0

0

0

0

0

$

0

0

no

no

0

0

0

Talon Concrete and Aggregates

Sugar Creek, MO (2302211)

2

0

1

0

0

$

2,134

0

no

no

0

0

0

Western Aggregates

Yuba, CA��(0404950)

2

0

0

0

0

$

0

0

no

no

0

0

0)

(1) The legal action is a penalty contest.

(2) Of the 5 legal actions pending as of the last day of the period, 2 are penalty contests and 3 are pre-penalty contests.

(3) Our Texas Lehigh Cement Company LP joint venture is not a subsidiary of the registrant for purposes of this disclosure.



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