EAGLE MATERIALS INC (EXP) Risk Factors

ITEM 1A. Risk Factors

The foregoing discussion of our business and operations should be read together with the risk factors set forth below. They describe various risks and uncertainties to which we are or may become subject, many of which are outside of our control. These risks and uncertainties have affected, or may in the future affect, our business, operations, financial condition, and results of operations in a material and adverse manner. Some statements in the following risk factors constitute forward-looking statements. For more information, please see “Forward-Looking Statements” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

INDUSTRY RISK FACTORS

We are affected by the level of demand in the construction industry and are dependent on funding by federal, state and local governments.

Demand for our construction products and building materials is directly related to the level of activity in the construction industry, which includes residential, commercial, and infrastructure construction. Our products are used in a variety of public infrastructure projects that are funded and financed by federal, state, and local governments, including public construction projects to build, expand and repair roads and highways. Our products are also essential to commercial and residential construction.

A significant portion of our revenue is generated from publicly‑funded construction projects. Under U.S. law, annual funding levels for highways is subject to yearly appropriation reviews. The uncertainties associated with these reviews or other factors could result in states being reluctant to undertake large multi-year highway projects. In general, there can be no assurance as to the amount and timing of appropriations for spending on federal, state, or local projects. A government shutdown, and other similar budgetary impasses or reductions, may contribute to uncertainty regarding government spending and may have adverse effects on the economy. Any decrease in the amount of government funds available for such projects could have a material adverse effect on our business, financial condition, and results of operations.

The strength of the construction industry is also substantially affected by macroeconomic and other factors beyond our control. For example, previous rises in inflation and interest rates have negatively affected the construction industry by, among other things, increasing material costs and decreasing demand for some construction products. While we cannot predict the extent to which inflation or interest rates will fluctuate, any increases could result in a reduction in residential or commercial activity, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, demand for our products sold to the residential and commercial construction industries could decline if our customers cannot obtain funding for construction projects or if the costs of obtaining such funding increase, or due to other market factors such as labor shortages and supply chain issues.

Our business is seasonal and subject to the risk of unfavorable weather conditions, as well as other unexpected operational difficulties, which could have a material adverse effect on us.

Unfavorable weather conditions, such as snow, cold weather, tornadoes, hurricanes, tropical storms, and heavy or sustained rainfall or flooding, can reduce construction activity and adversely affect demand for construction products. In addition, severe weather conditions can impair our ability to continue our operations, and even require the closure of certain of our facilities on a temporary or extended basis. Weather conditions also have the potential to increase our costs (including the cost of natural gas and electric power), reduce our production, or impede our ability to transport our products in an efficient and cost-effective manner.

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Similarly, operational difficulties, such as those resulting from required maintenance, capital improvement projects, loss of power, or pandemics, epidemics, or other public health emergencies can interrupt our business activities, increase our costs and reduce our production.

A majority of our business is seasonal with peak revenue and profits occurring primarily in the months of April through November when the weather in our markets tends to be more favorable for construction activity. Therefore, the effect of these risks can be more pronounced during these months, during which any reduction in demand or production could have a disproportionately large effect on our sales and operating profits. 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 our results of operations and the price of our common stock.

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

A majority of our revenue is 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, the availability of credit, changes in interest rates, demographic and population shifts, levels of infrastructure spending, consumer confidence, demands, and preferences, 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 negatively 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.

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

Many of 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 (including in connection with the increased use of Limestone 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 nameplate 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.

Our businesses operate in highly competitive industries, which contain many competitors and competition from alternative products.

Our businesses have many domestic and international competitors, some of which are bigger and have more resources than we do. Our results of operations in a particular market are affected by the number of competitors in a market, the production capacity that such market can accommodate, the pricing practices of other competitors, and the entry of new competitors in a market. We also face competition for some of our products from alternative products, new product technologies, modified production and distribution processes, and alternative business models. For example, in the case of alternative products and new product technologies, efforts are underway by our existing competitors and new entrants to, among other

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things, increase the usage of cement substitutes (including silicate minerals and calcinated clay) in the production of cement. Our Concrete and Aggregates segment competes with recycled concrete products that can be used in certain applications instead of new products, and our cement operations compete with competitors who import products into the United States from jurisdictions with lower production and regulatory costs. In general, we operate in a competitive market and any significant increase in competition or unfavorable change in competitive circumstances could lead to lower prices or lower sales volumes, which could adversely affect our business, financial condition, or results of operations.

ECONOMIC, POLITICAL, AND LEGAL RISK FACTORS

Our and our customers’ operations are subject to extensive governmental regulation, including environmental, health, and safety 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 a wide range of matters, including land usage, street and highway usage, noise level, as well as environmental, health and safety matters. In many instances, various certificates, permits, or licenses are required for us or our customers to conduct business or carry out construction and related operations. Although we believe 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 seeking to comply with existing or new laws or regulations, or that demand for our products will not be adversely affected by regulatory issues affecting our customers.

Our operations are subject to certain federal environmental regulations, including those discussed above in “Environmental Matters” in the Cement and Gypsum Wallboard sections. These regulations include the CISWI Rule which applies to one of our facilities' kilns; certain permitting and control requirements for operations in states that contain at least one “area” that was designated as being in nonattainment for the 2015 ozone NAAQS; interstate transport requirements for the 2015 ozone NAAQS under the Good Neighbor Plan; and potential additional permitting and control requirements to address more stringent standards under the revised PM2.5 NAAQS. Requirements under the Good Neighbor Plan are currently stayed, and the EPA has indicated its intent to reconsider requirements in both the Good Neighbor plan and underlying SIP disapprovals for certain states in which we operate. Nevertheless, we may ultimately be required to meet new control requirements in our facilities in these states, which may require significant capital expenditures for compliance and may cause us to incur additional operating costs or to modify or curtail the nature and scope of our operations at such facilities to meet our regulatory obligations. The EPA has also indicated its intent to reconsider requirements in the revised PM2.5 NAAQS; however, the timing for any reconsideration action is uncertain, and we may ultimately be similarly impacted by these requirements. For further information regarding these matters, please refer to Item 1. Business - Industry Segment Information. We have incurred, and in the future expect to incur, significant capital and operating expenditures to comply with such laws and regulations. The cost of complying with such laws and regulations could significantly affect our businesses.

Manufacturing and construction sites are inherently dangerous workplaces. Our manufacturing sites often put our employees and others in proximity to kilns and other large pieces of mechanized equipment, moving vehicles, chemical, and manufacturing processes and expose them to other potential safety hazards. We endeavor to maintain a safe work environment at all our facilities and take steps to preserve the health and safety of our workforce. There can be no assurance, however, that these measures will be successful in preventing injuries or violations of health and safety laws and regulations. Any failure to maintain safe work sites or violations of applicable health and safety standards and laws could have a material adverse effect on our business.

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In addition to the existing regulatory risks we face, 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 business, financial condition or results of operations.

Climate change and climate change legislation or regulations may adversely affect our business, including potential physical and financial impacts.

The effects of climate change and legislation and regulation concerning GHGs could have a material adverse effect on our financial condition, results of operations, and liquidity.

A number of governmental bodies have finalized, proposed, or are contemplating legislative and regulatory changes in response to the potential effects of climate change. Such legislation or regulation has and potentially could include provisions for a “cap and trade” system of allowances and credits or a carbon tax, among other provisions. Any future laws or regulations restricting GHG emissions would likely affect our cement plants and wallboard plants and negatively impact on our business and results of operations, whether through the imposition of raw material or production limitations, fuel-use, or carbon taxes, emission limitations or reductions, or otherwise. In addition, we may not be able to recover any increased operating costs, taxes or capital investments relating to GHG emission limitations at those plants from our customers while still maintaining pricing that is competitive in the relevant markets. There is also a potential for climate change legislation and regulation to adversely affect the cost of purchased energy and electricity.

The effects of future climate change legislation and regulation concerning GHGs are highly uncertain and difficult to estimate. However, because a chemical reaction inherent to the manufacture of cement releases carbon dioxide, a GHG, cement kiln operations may be disproportionately affected by future regulation of GHGs. Accordingly, we continue to closely monitor GHG regulations and legislation for potential impact on our Cement business.

Climate change may impact our operations, including through physical effects such as disruption in production and product distribution as a result of major storm events and shifts in regional weather patterns and intensities. Production and shipment levels for our businesses correlate with general construction activity, most of which occurs outdoors and, as a result, is affected by erratic weather patterns, seasonal changes, and other unusual or unexpected weather-related conditions, which can significantly affect our business, financial condition and results of operations.

We may communicate certain initiatives and goals regarding GHGs and related matters in our SEC filings or in other public disclosures. Our initiatives and goals regarding GHGs and potential related disclosure requirements, together with the associated controls and procedures that we will need to implement, may be difficult and expensive and a source of future claims against us. Further, to the extent we elect to make statements about our GHG-related initiatives and goals, and progress towards these goals, these statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. If our GHG-related data, processes and reporting are inaccurate or incomplete, or if we fail to achieve progress with respect to these goals or initiatives on a timely basis or at all, we could be subject to liability for inaccurate, incomplete, or misleading statements, and our operations and financial performance could be adversely affected.

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Regulatory, stakeholder, and sustainability matters and our response to these matters could negatively affect our business.

We are subject to governmental, stakeholder, and societal attention regarding climate change, air emissions, waste management, water management, community engagement, human rights, labor conditions, sustainability and efficiency, health and safety, and information disclosure. Such attention may result in our business facing adverse reputational risks, may alter the environment in which we do business, may increase our ongoing costs of operations, compliance, assessment, and reporting and may adversely affect our business, financial condition, results of operations, and liquidity. We communicate certain initiatives and goals regarding sustainability matters in our SEC filings and in other public disclosures. Statements about these initiatives and goals, and progress against these goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change, and we may revise such initiatives and goals in the future. Non-compliance with, or a failure to address, the regulatory, stakeholder, and societal expectations regarding these matters (and accompanying emerging regulation and policy requirements (and related interpretations)) may result in potential cost increases, fines, penalties, production restrictions, brand or reputational damage, loss of customers, failure to retain and attract talent, and investor activism.

Changes in U.S. Trade Policy, including tariffs and other trade restrictions, could have a material adverse effect on our business, financial position, or results of operations.

The United States government has made and may continue to make changes in trade policy. These changes include renegotiating and terminating certain existing bilateral or multi-lateral trade agreements, and initiating substantial new or increased tariffs on foreign imports into the United States from a variety of countries and regions. These changes in trade policy (and any countermeasures adopted in response by foreign governments) could impact demand for our products, our costs, our customers, our suppliers, our ability to source materials and equipment economically and the U.S. economy, which in turn could have a material adverse effect on our business, financial condition, liquidity, and results of operations.

We may become subject to significant cleanup, remediation, reclamation, and other liabilities under applicable environmental laws.

Our operations are subject to state, federal, and local environmental laws and regulations, which, in some cases, impose strict liability for cleanup or remediation of environmental pollution and hazardous waste regardless of negligence or fault and expose us to liability for the conduct of others or for our actions, even if such actions complied with all applicable laws at the time these actions were taken. These laws and regulations also require pollution control and prevention, site restoration, reclamation, and operating permits, and/or approvals to conduct certain of our operations or expand or modify our facilities. These laws and regulations may also expose us to liability for claims of personal injury or property or natural resources damage related to alleged exposure to, or releases of, regulated or hazardous materials. 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. 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, other sanctions, or litigation liability) is inherent in the operation of our businesses. As a result, it is possible that environmental liabilities and compliance with environmental regulations could have a material adverse effect on our operations in the future.

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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 parties 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 or utilize water 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.

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 such access or easement, and any such action could be materially adverse to our results of operations or financial conditions.

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 and could be adverse and require the payment of damages that are material in amount or require changes to the nature and scope of our operations. Developments in these proceedings can lead to changes in management’s estimates of liabilities associated with these proceedings, including as a result of rulings or judgments by a judge, agency, or arbitrator, settlements, or changes in applicable law. A future adverse ruling, settlement, or unfavorable development could have a material adverse effect on our results of operations and cash flows in a particular period. In addition, the defense of these lawsuits, claims, investigations, and proceedings may divert our management’s attention from operating and managing our businesses, and we may incur significant costs in defending these matters.

Although we maintain insurance coverage against various risk, this coverage may not be adequate or protect us against the relevant risks.

We maintain insurance coverage in amounts and against insurable risks that we believe are consistent with industry practice, but this insurance may not be adequate to cover all losses or liabilities we may incur in our operations. Our insurance policies are subject to a number of exclusions and varying levels of deductibles and coverage limits. In general, liabilities subject to insurance are difficult to estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of incidents not reported, and the effectiveness of our safety programs. If we were to experience insurance claims or costs above our estimates, our financial condition, results of operations and liquidity could be materially and adversely affected.

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CYBER RISK FACTORS

We are dependent on information technology. A disruption, cyber attack or data security breach affecting our information technology systems may negatively affect our businesses, financial condition, and operating results.

Our operations rely on information technology systems and the secure processing, storage, and transmission of confidential, sensitive, proprietary, and other types of information relating to our business operations. We also rely on confidential and sensitive information about our customers and employees, which is maintained both in our computer systems and networks, and in the computer systems and networks of our third-party vendors. Any significant breakdown, invasion, destruction, outage, disruption or interruption of our systems could negatively affect operations. Cyber threats are rapidly evolving as data thieves and hackers have become increasingly sophisticated, including an increasing use of artificial intelligence, and carry out direct large-scale, complex automated attacks against a company or through vendor software supply chain compromises. We are not able to anticipate or prevent all such breakdowns, invasions, destructions, outages, disruptions, interruptions, and attacks and could be held liable for any resulting material security breach or data loss. Additionally, it is not always possible to foresee or prevent internal issues, such as human error, or malicious acts or misconduct by employees or third-party vendors. There are also significant risks related to the use of remote networking services and technologies that enable remote work.

Any breaches of our technology systems, or those of our vendors and customers, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware or malware, employee or insider error, malfeasance, social engineering, vendor software supply chain compromises, physical breaches or other actions, may result in manipulation or corruption of sensitive data, material interruptions, or malfunctions in our or such vendors’ and customers’ websites, applications, data processing and certain products and services, or disruption of other business operations. Furthermore, any such breaches could compromise the confidentiality and integrity of material information held by us (including information about our business, employees, or customers), as well as sensitive personally identifiable information, the disclosure of which could lead to identity theft. Any measures that we take to avoid, detect, mitigate, or recover from material incidents, may be insufficient, circumvented, or may become ineffective.

We have invested and continue to invest in risk management and information security and data privacy measures in order to protect our systems and data, including employee training, organizational investments, incident response plans, tabletop exercises, and technical defenses. The cost and operational consequences of implementing, maintaining, and enhancing further data or system safeguards could increase significantly to keep pace with increasingly frequent, complex, and sophisticated global cyber threats. Although we have disaster recovery plans in case of incidents that could cause major disruptions to our business and believe we have taken adequate measures to protect against data breaches and system disruptions, these measures may not be sufficient, and we are not able to anticipate or prevent all such risks. Any material breaches of cybersecurity, including the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential data, or media reports of perceived security vulnerabilities to our systems, products, and services or those of our third parties could cause us to experience reputational harm, loss of customers and revenue, fines, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard our customers’ information, or financial losses that are either not insured against or not fully covered through any insurance maintained by us. The report, rumor, or assumption regarding a potential breach may have similar results, even if no breach has been attempted or occurred. Any of the foregoing may have a material adverse effect on our business, operating results, and financial condition. In addition, laws and regulations governing cybersecurity, data privacy and

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protection, and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.

FINANCIAL AND OPERATIONAL RISK FACTORS

Our Cement business is capital-intensive, resulting in significant fixed and semi-fixed costs. Therefore, our earnings are sensitive to changes in volume.

Due to the high levels of fixed capital required to produce cement, the ability of our Cement segment to remain profitable is dependent on achieving and maintaining strong volumes of cement production and sales. Any decreases in volume could have an adverse effect on our financial condition and results of operations. In addition, our cement plants require significant capital expenditures to support the maintenance, growth, and expansion of our business. We believe that our current cash balance, along with our projected internal cash flows and our available financing resources will provide sufficient cash to support our currently anticipated operating and capital needs. However, if we are unable to generate sufficient cash to purchase and maintain the property and machinery necessary to operate our Cement business, we may be required to reduce or delay planned capital expenditures or incur additional debt.

Any material nonpayment or nonperformance by any of our key customers could have a material adverse effect on our business and results of operations.

Any material nonpayment or nonperformance by any of our key customers could have a material adverse effect on our revenue and cash flows. Although our contracts with our customers provide for certain remedies in the event a customer fails to purchase the minimum contracted amount of product in a given period, we may be unable to enforce payment or performance obligations in a timely manner or at all or recover the entire amount we anticipated receiving under such contract. If we were to pursue legal remedies against a customer that failed to purchase the minimum contracted amount of product under a fixed-volume contract or failed to satisfy the take-or-pay commitment under a take-or-pay contract, we may receive significantly less in a judgment or settlement of any claimed breach than we would have received had the customer fully performed under the contract. In the event of any customer’s breach, we may also choose to renegotiate any disputed contract on less favorable terms (including with respect to price and volume) to allow us to preserve the relationship with that customer.

Consolidation of our customers could adversely affect our results of operations.

Over the past few years, many of our customers have undergone consolidation due to being acquired by, or acquiring, another company with similar operations. Consolidation of our customers could result in the loss of a customer or a portion of their business, in addition to an increased reliance on certain key customers. Future consolidation of our customers and their increased purchasing power could result in our customers seeking more favorable terms, including pricing, which may limit our ability to maintain pricing or raise pricing in the future. Any future consolidation of our customers could negatively affect our operating margin, results of operations, and cash flow.

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

We own and operate facilities of various ages and levels of automated controls and rely on a number of third parties as part of our supply chain. Our manufacturing processes are complex and dependent upon critical pieces of equipment and effective maintenance programs. Such equipment may, on occasion, be out of service as a result of unanticipated events such as fires, explosions, violent weather conditions, unexpected operational difficulties, or disruptions within our supply chain. While we maintain backups for

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certain critical pieces of equipment to use during the time it may take to repair or replace inoperable equipment, any unplanned downtime at our facilities could negatively affect our business, financial condition, and results of operations.

We also have periodically scheduled shut-downs to perform maintenance on our facilities. We consume significant amounts of energy in our production process, and the availability and pricing of these resources are subject to market forces. 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. In general, any interruptions in our production processes or limitation in our production capabilities may cause our productivity and results of operations to decline significantly during the affected period.

Mining for raw materials involves risks such as pit wall failures, pillar or ceiling collapse, flooding and seismic events related to geologic conditions and our mining activities. Any ground control event could lead to serious injuries, loss of life, equipment damage, production delays or cessation, and increased operating costs which could have a material adverse effect on our results of operations and financial condition.

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

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 have in some cases been subject to significant changes in a short period of time for reasons outside our control. For example, 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 further in the future. The prices we pay for fuel and electric power are often determined in whole or in part by market-based pricing mechanisms (including spot market pricing mechanisms). In the past, we have experienced significant and unanticipated price increases due to, among other things, unfavorable weather conditions and governmental responses from the resulting shortages in fuel and power. Significant price fluctuations also have the potential to give rise to disputes with contractual counterparties, which can be complex and difficult to resolve. 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 generally maintain our own reserves of limestone, gypsum, aggregates, and other materials that we use to manufacture our products. Our ability to find and develop quality reserves and accurately calculate and report our reserve estimates depend upon geological interpretation and statistical inferences or assumptions drawn from drilling and sampling analysis, which are subject to inherent uncertainties. If any of these estimates proved to be inaccurate, our operations and financial condition could be adversely affected. In certain circumstances we also obtain certain raw materials used to manufacture our products from a single supplier and some of those materials, such as synthetic gypsum and slag granules, are produced as by-products of industrial processes. While we try to secure our needed supply of such materials through long-term contracts, those contracts may not be sufficient to meet our needs, or we may be unable to renew or replace existing contracts when they expire or are terminated in the future. Should our existing suppliers have disruptions in their operations, cease operations, or otherwise reduce or eliminate production of these materials, our costs to procure these materials may increase significantly, or we may be obliged to procure alternatives to replace these materials, which may not be available on

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commercially reasonable terms or at all. Any such developments may adversely affect our operations and financial condition.

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. On the other hand, cement is more difficult and costly to transport over long distances, which limits the areas typically served by our cement plants. 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 outstanding debt agreements 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:

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permit our consolidated subsidiaries to incur indebtedness;

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sell, transfer, lease, or otherwise dispose of all or substantially all of the assets of the Company and its consolidated subsidiaries;

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create liens;

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consolidate or merge with or into another person;

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enter into transactions with our affiliates; and

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enter into sale/leaseback transactions.

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 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 or may incur 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.

In the past, we have incurred significant indebtedness in connection with acquisition transactions or otherwise to fund the growth and development of our business. As of March 31, 2026, we had $1.8 billion of debt outstanding. We may also incur significant indebtedness from time to time in the future for these or other reasons. 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. 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:

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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;

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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;

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As a result of the amount of our outstanding indebtedness and the restrictive covenants to which we are or may become 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

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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 with our competitors that have less indebtedness.

The base rate of our debt is determined by our credit rating. If our credit rating were to decline, interest charges on this debt would increase, which would raise the cost of borrowing and lower cash flows from operations.

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

Instability in the global economy or negative conditions in the credit markets that limit or impair our access to credit may adversely affect our business. In general, we often rely upon banks and, in some cases, the capital markets to fund our growth strategy. Any downgrades in our credit ratings may make raising capital more difficult, increase the cost and affect the terms of future borrowings and limit our ability to take advantage of potential business opportunities. If we are unable to secure financing on acceptable terms, our other sources of funds, including available cash and cash flow from operations, may not be adequate to fund our operations and contractual commitments and refinance existing debt.

We are also exposed to risks associated with the creditworthiness of our customers and suppliers. 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 and our suppliers, which could negatively affect our business.

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

Our business is significantly affected by the movement of interest rates. As a result, in recent periods we have experienced higher interest expense related to borrowings under our borrowing facilities. Inflation has caused our cost of capital to increase, and the purchasing power of our cash resources to 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. Interest rates also have a direct impact on the level of residential, commercial, and infrastructure construction activity by affecting the cost of borrowed funds to builders. Rising interest rates or the continuation of high levels of interest rates could result in decreased demand for our products, which could have a material adverse effect on our business and results of operations.

Increases in our effective income tax rate may harm our results of operations.

A number of factors may increase our future effective income tax rate, including:

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governmental authorities increasing taxes or eliminating deductions, particularly the depletion deduction;

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the mix of earnings from depletable versus non-depletable businesses;

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the jurisdictions in which earnings are taxed;

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the resolution of issues arising from tax audits with various tax authorities;

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changes in the valuation of our deferred tax assets and liabilities;

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adjustments to estimated taxes upon finalization of various tax returns;

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changes in available tax credits;

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changes in stock-based compensation;

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other changes in tax laws; and

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the interpretation of tax laws and/or administrative practices.

Any significant increase in our future effective income tax rate could reduce net earnings and free cash flow for future periods.

We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could adversely affect our businesses.

Our success depends to a significant degree upon the continued services of, and on our ability to attract and retain, our key personnel and executive officers, including qualified management, operations, technical, marketing and sales, and support personnel. Competition for such personnel is intense, and we may not be successful in attracting or retaining such qualified personnel, which could negatively affect our businesses. In addition, because we rely on our senior management team to set and implement business strategy, the unanticipated departure of any key member could have an adverse effect on our business. Our future success depends, in part, on our ability to identify and develop or recruit talent to succeed our senior management and other key positions throughout the organization. If we fail to identify and develop or recruit successors, we are at risk of being harmed by the departures of these key employees. Effective succession planning is also important to our long-term success. Failure to manage effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution.

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We could experience disruption to our business operations due to disputes with organized labor.

Approximately half of our hourly employees are covered by collective bargaining agreements. Labor is a meaningful component in our ability to operate our business and can have a significant impact on the cost of operating our business. Labor shortages could restrict our ability to operate our business and increase costs to operate our business. Additionally, disputes with trade unions or the inability to renew our labor agreements may lead to work stoppages or strikes that could disrupt our business operations and lead to higher costs and/or reduced revenue and operating earnings. Labor issues affecting our suppliers, service providers, customers and other third parties may similarly have a material adverse effect on our business operations.

GROWTH RISK FACTORS

We may pursue acquisitions, joint ventures, and other transactions that are intended to complement or expand our businesses. We may not be able to complete proposed transactions, and even if completed, the transactions may involve a number of risks that may result in a material adverse effect on our business, financial condition, operating results, and cash flows.

As business conditions warrant and our financial resources permit, we may pursue opportunities to acquire businesses or technologies and to form joint ventures that we believe could complement, enhance, or expand our current businesses or product lines or that might otherwise offer us growth opportunities. We may have difficulty identifying appropriate opportunities, or if we do identify opportunities, we may not be successful in completing transactions for a number of reasons. Any transactions that we are able to identify and complete may involve one or more of a number of risks, including:

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the diversion of management’s attention from our existing businesses to the integration of the operations and personnel of the acquired business or joint venture;

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possible adverse effects on our operating results during the integration process;

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failure of the acquired business or joint venture to achieve expected operational, profitability, and investment return objectives;

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the incurrence of significant charges, such as impairment of goodwill or intangible assets, asset devaluation, or restructuring charges;

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the assumption of unanticipated liabilities and costs for which indemnification is unavailable or inadequate;

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unforeseen difficulties encountered in operating in new geographic areas; and

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the inability to achieve other intended objectives of the transaction.

In addition, we may not be able to successfully or profitably integrate, operate, maintain, and manage our newly acquired operations or their employees. We may not be able to maintain uniform standards, controls, procedures, and policies, which may lead to operational inefficiencies. In addition, future acquisitions may result in dilutive issuances of equity securities or the incurrence of additional indebtedness.

Our Cement business has grown largely through acquisitions, and there is no assurance that we will be able to continue to acquire cement plans to support future growth.

In prior years, we have been able to increase the size and scope of our Cement business in large part through acquisitions of cement plants from third parties. There are a limited number of companies operating cement plants in the United States, and plants typically become available for purchase only

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infrequently, such as in connection with a merger, acquisition, or corporate reorganization, or refinancing. When cement plants become available for purchase, the purchase process is often highly competitive, which tends to result in relatively high valuations for the plants offered for sale. There can be no assurance that we will be able to continue to identify appropriate acquisition candidates or acquire cement plants at values that we regard as reasonable.

We may experience delays in completing capital improvement projects, and there is no assurance that we will achieve the anticipated benefits of such projects.

From time to time, we may make significant investments to increase the capacity and efficiency of certain of our facilities. However, there is no assurance that such investments will result in increased capacity and efficiency at our facilities at the expected levels, within the expected budget and timeline, or at all. In addition, newly commissioned facilities and equipment are also subject to unforeseen breakdowns or failures related to mistakes in engineering and equipment selection, poor workmanship during fabrication and/or installation, accidents during the construction and/or commissioning phases, mistakes during initial operation, and other related issues that can cause significant delays in project implementation and facility start up. If our investments do not achieve the expected increased capacity or efficiency at the levels or timeline that is expected, or at all, or are otherwise impacted by budget overruns, or mistakes or defects in materials or workmanship, we could incur additional costs or expenses, which may harm our business, prospects, financial condition, results of operations, and cash flows.

RISK FACTORS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Certain provisions in our restated certificate of incorporation and bylaws may prevent or delay an acquisition of our company, which could decrease the trading price of the common stock.

Our certificate of incorporation and bylaws contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. For example, under our certificate of incorporation, our Board are divided into three classes based on their term of office, with directors in each class holding office for staggered three-year terms. In addition, our certificate of incorporation or bylaws prohibit stockholder action by written consent, limit the ability of our stockholders to call special meetings, establish advance notice procedures for stockholder proposals and nominations for election of directors, and allow our Board to issue blank-check preferred stock with voting or conversion rights without stockholder approval. In general, we believe that these provisions will help protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board determines is not in the best interests of our company and its stockholders.

Our bylaws include a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any internal corporate claims within the meaning of the Delaware General Corporation Law (DGCL), (ii) any derivative action or proceeding brought on our behalf, (iii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to our stockholders, (iv) any action asserting a claim arising pursuant to any provision of the DGCL, or (v) any action asserting a claim governed by the internal affairs doctrine, will be a state or federal court located within the State of Delaware in all cases subject to the court’s having personal jurisdiction over

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the indispensable parties named as defendants. In addition, our bylaws provide that, unless we consent in writing to selection of an alternative forum, the sole and exclusive forum for any action asserting a claim arising under the Securities Act of 1933, as amended (the Securities Act), will be a federal district court. This forum selection provision in our bylaws may limit our stockholders’ ability to pursue claims in a judicial forum of their choosing for disputes with us or our directors, officers, or employees. It is also possible that, notwithstanding the forum selection clause included in our bylaws, a court could rule in specific circumstances that such a provision is inapplicable or unenforceable, which could require that we defend claims in other forums.

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