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EAGLE MATERIALS INC - 10-Q - Management's Discussion and Analysis of Results of Operations and Financial Condition

Edgar Online, Inc.

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 three and nine month periods ended December 31,
2012 and 2011, respectively, reflects the Company's four business segments,
consisting of Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and
Aggregates. Certain information for Concrete and Aggregates is broken out
separately in the segment discussions.

On November 30, 2012, the Company completed the previously announced acquisition
(the "Acquisition") of certain assets of Lafarge North America Inc. ("Lafarge
North America"), Lafarge Building Materials Inc., Quicksilver 2005, LLC and
Lafarge Midwest, Inc. (together with Lafarge North America, the "Sellers"). The
Acquisition was completed pursuant to an Asset Purchase Agreement (the "Asset
Purchase Agreement") dated September 26, 2012 by and among the Company and the
Sellers. The Purchase Price in the Acquisition is estimated to be approximately
$453.4 million in cash, subject to certain post-closing adjustments to working
capital.

The assets acquired by the Company in the Acquisition were used by the Sellers
in connection with producing, marketing and selling Portland cement and concrete
in Kansas, Missouri and Oklahoma, and include the following:



  •   two cement plants located in Sugar Creek, Missouri and Tulsa, Oklahoma;




     •   the related cement distribution terminals located in Sugar Creek and
         Springfield, Missouri; Omaha, Nebraska; Iola and Wichita, Kansas; and
         Oklahoma City, Oklahoma;




  •   two aggregates quarries near Sugar Creek, Missouri;




  •   eight ready-mix plants located in or near Kansas City, Missouri;



• certain fly ash operations conducted in the Kansas City, Missouri area; and

• certain related assets such as equipment, accounts receivable and inventory.



In most cases, we acquired ownership of these assets from the Sellers. However,
the cement plant located in Sugar Creek, Missouri was leased by Lafarge North
America pursuant to a long-term lease containing a purchase option exercisable
by payment of a nominal fee. This lease, including the purchase option, was
transferred to us at the closing of the Acquisition. In addition, we assumed
certain liabilities in the Acquisition, including accounts payable, contractual
obligations, reclamation obligations and other liabilities related to the
Lafarge Target Business.

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
subjects us to the economic conditions in such geographic market as well as the
national market. General economic downturns or localized downturns in the
regions where we have operations generally have a material adverse effect on our
business, financial condition and results of operations. Our Cement companies
are located in geographic areas west of the Mississippi river and the Chicago,
Illinois metropolitan area. Due to the low value-to-weight ratio of cement,
cement is usually shipped within a 150 mile radius of the plants by truck and up
to 400 miles by rail. Concrete and Aggregates are even more regional as those
operations serve the areas immediately surrounding Austin, Texas, north of
Sacramento, California and the Kansas City, Missouri area. Cement, concrete and
aggregates 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 the continental United States.



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We continue to pursue opportunities in businesses which are naturally adjacent
to our existing core businesses and would allow us to leverage our core
competencies and existing infrastructure and customer relationships. During
fiscal 2012, we purchased land with mineral reserves in the Midwest for the
purpose of developing a frac sand business to serve the oil services and other
industrial end markets. We have finalized permitting and plant design and are
now focused on plant construction. We anticipate additional capital expenditures
in the range of $25 million to $50 million during fiscal years 2013 and 2014 to
support development of our frac sand business. We are also continuing to
increase our production of specialty oil and gas well cement. This specialty
cement generates higher profit margins than other cement sales and we are among
the few companies that produce it.

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 Venture's 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                                      For the Nine Months
                                                       Ended December 31,                                        Ended December 31,
                                                  2012                   2011                               2012                   2011
                                                (In thousands except per share)          Change           (In thousands except per share)          Change
Revenues                                     $       164,743        $       123,596           33 %     $       483,444        $       378,222           28 %
Cost of Goods Sold                                  (133,482 )             (111,125 )         20 %            (396,797 )             (352,661 )         13 %

Gross Profit                                          31,261                 12,471          151 %              86,647                 25,561          239 %
Equity in Earnings of Unconsolidated Joint
Venture                                                8,852                  7,776           14 %              24,070                 21,160           14 %
Corporate General and Administrative                  (6,268 )               (4,928 )         27 %             (16,942 )              (13,518 )         25 %
Acquisition and Litigation Expense                    (2,485 )               (9,117 )        (73 %)             (8,859 )               (9,117 )         (3 %)
Other Income (Expense)                                  (223 )                  591         (138 %)               (427 )                  627         (169 %)
Interest Expense, net                                 (3,836 )               (4,210 )         (9 %)            (11,149 )              (13,352 )        (17 %)
Loss on Debt Retirement                                   -                  (2,094 )       (100 %)                 -                 (2,094)         (100 %)
Earnings Before Income Taxes                          27,301                    489         5483 %              73,340                  9,267          691 %
Income Tax (Expense) Benefit                         (9,321)                  2,408          409 %            (23,429)                    462         4971 %
Net Earnings                                 $        17,980        $         2,897          521 %     $        49,911        $         9,729          413 %
Diluted Earnings per Share                   $          0.37        $          0.07          429 %     $          1.07        $          0.22          386 %


Revenues. Revenues were $164.7 million and $123.6 million for the three month
periods ended December 31, 2012 and 2011, respectively. The $41.1 million
increase in revenues was due primarily to increased average sales prices in our
gypsum wallboard segment and increased sales volumes in all our segments.
Increased sales volumes in our cement and concrete and aggregates businesses
during the three months ended December 31, 2012, as compared to December 31,
2011, was positively impacted by the Acquisition, which contributed
approximately $7.9 million of revenues during the three month period ended
December 31, 2012. Including the businesses acquired in the Acquisition, the
impact of the increased net sales prices and sales volumes on revenues for the
quarter ended December 31, 2012, as compared to December 31, 2011, was
approximately $16.5 million and $24.6 million, respectively.



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Revenues were $483.4 million and $378.2 million for the nine month periods ended
December 31, 2012 and 2011, respectively. The $105.2 million increase in
revenues was due primarily to increased average sales prices in our gypsum
wallboard segment and increased sales volumes in all our segments. Increased
sales volumes in our cement and concrete and aggregates businesses during the
nine months ended December 31, 2012, as compared to December 31, 2011, was
positively impacted by the Acquisition, which contributed approximately $7.9
million of revenues during the nine month period ended December 31, 2012.
Including the business acquired in the Acquisition, the impact of the increased
net sales prices and sales volumes on revenues for the quarter ended
December 31, 2012, as compared to December 31, 2011, was approximately $44.7
million and $60.6 million, respectively.

Cost of Goods Sold. Cost of goods sold was $133.5 million and $111.1 million
during the three month periods ended December 31, 2012 and 2011, respectively.
The $22.4 million increase in cost of goods sold was related primarily to an
increase in volumes, which increased cost of goods sold by approximately $23.6
million, partially offset by an approximate $1.2 million net decrease in
operating costs. The increase in cost related to increased volumes was primarily
related to our wallboard and cement businesses, which comprised approximately
$12.5 million and $6.2 million, respectively. The decrease in operating costs in
the third quarter of fiscal 2013, as compared to fiscal 2012, was primarily
related to our gypsum wallboard and paperboard businesses and was approximately
$2.5 million and $4.1 million, respectively, partially offset by an increase of
approximately $4.9 million in our cement business.

Cost of goods sold was $396.8 million and $352.7 million during the nine month
periods ended December 31, 2012 and 2011, respectively. The $44.1 million
increase in cost of goods sold was related primarily to an increase in volumes,
which increased cost of goods sold by approximately $57.6 million, partially
offset by an approximate $13.5 million decrease in net operating costs. The
increase in cost primarily related to volume increases in our wallboard and
cement businesses of approximately $31.1 million and $23.9 million,
respectively. Approximately $7.2 million of the increase in cost of sales
related to volumes is due to the Acquisition. The decrease in operating costs
for the nine months ended December 31, 2012, as compared to nine months ended
December 31, 2011, was primarily related to our gypsum wallboard and paperboard
businesses and was approximately $10.6 million and $10.5 million, respectively,
partially offset by an increase of approximately $8.3 million in our cement
business.

Gross Profit. Gross profit was $31.3 million and $12.5 million during the three
month periods ended December 31, 2012 and 2011, respectively. The 151% increase
was due primarily to increased average sales prices, increased sales volumes and
the addition of the Lafarge Target Business, partially offset by increased cost
of goods sold related to the increased sales volumes, as noted above.

Gross profit was $86.6 million and $25.6 million during the nine month periods
ended December 31, 2012 and 2011, respectively. The 239% increase was due
primarily to increased average sales prices, increased sales volumes and the
addition of the Lafarge Target Business, partially offset by increased cost of
goods sold related to the increased sales volumes, as noted above.

Equity in Earnings of Joint Venture. Equity in earnings of our unconsolidated
joint venture increased $1.1 million, or 14%, for the three months ended
December 31, 2012, as compared to the similar period in 2011. The increase is
primarily due to increases in both the average net sales price and sales volume
of cement. The impact of the increases in average net sales price and sales
volumes on equity in earnings of unconsolidated joint venture during the three
month period ended December 31, 2012 was approximately $1.0 million and $2.3
million, respectively, partially offset by increased cost of sales of
approximately $2.3 million. The increase in cost of sales was primarily due to
the increase in sales volumes, which increased cost of sales by approximately
$1.5 million, and increased operating costs, primarily purchased cement and
depreciation, which increased operating cost by approximately $0.2 million and
$0.3 million, respectively.



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Equity in earnings of our unconsolidated joint venture increased $2.9 million,
or 14%, for the nine months ended December 31, 2012, as compared to the similar
period in 2011. The increase is primarily due to increases in the average net
sales price and sales volume. The impact of the increases in average net sales
price and sales volumes on equity in earnings of unconsolidated joint venture
during the nine month period ended December 31, 2012 was approximately $5.1
million and $2.1 million, respectively, partially offset by increased cost of
sales of approximately $4.3 million. The increase in cost of sales was primarily
due to the increase in sales volumes, which increased cost of sales by
approximately $1.5 million and increased operating costs of $0.7 million in
maintenance and $0.8 million in purchased cement.

Corporate General and Administrative. Corporate general and administrative
expenses increased 27% and 25% for the three and nine month periods ended
December 31, 2012, respectively, compared to the similar periods in 2011. The
approximately $1.3 million and $3.4 million increase in corporate general and
administrative expenses for the three and nine month periods ended December 31,
2012, respectively, as compared to 2011, is due primarily to increased long-term
incentive compensation expenses. Long-term incentive compensation, which is
comprised primarily of stock compensation, increased approximately $1.0 million
and $2.9 million during the three and nine month periods ended December 31,
2012, respectively, as compared to similar periods in 2011. The increase in
stock compensation expense during the three and nine month periods ended
December 31, 2012, as compared to the similar period in 2011, is due our
issuance of additional equity awards in June 2012, which increased expense
during the second and third quarters of fiscal 2013, and our re-assessment of
future satisfaction of performance conditions associated with certain stock
option grants, which resulted in the reversing of approximately $1.3 million of
previously recognized expense during the nine month period ended December 31,
2011.

Acquisition and Litigation Expense. Acquisition and litigation expense consists
of expenses related to the Acquisition, the write-off of a greenfield cement
opportunity that will no longer be pursued due to the Acquisition, legal fees
related to our lawsuit against the IRS and a loss in an arbitration. Acquisition
related expenses incurred in the three and nine month periods ended December 31,
2012 were $1.7 million and $5.2 million, respectively. Expense related to the
write-off of the greenfield opportunity during the nine month period ended
December 31, 2012, was $1.0 million. Legal fees related to our lawsuit against
the Internal Revenue Service (the "IRS") were approximately $0.8 million and
$2.7 million during the three and nine month periods ended December 31, 2012,
respectively, while the loss in an arbitration (including legal expense) in the
nine month period ended December 31, 2011 was $9.1 million. This expense
represents the adverse ruling by an arbitration panel in January 2012 in a
contract dispute between one of our aggregate mining subsidiaries and another
mining company over the right to mine certain areas. The amounts owed under this
adverse ruling were paid in March 2012. See Footnote (O) to the Unaudited
Consolidated Financial Statements for more information regarding the lawsuit
against the IRS.

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 decreased approximately $0.4 million and
$2.2 million during the three and nine month periods ended December 31, 2012,
respectively, as compared to the three and nine month periods ended December 31,
2011. The 9% and 17% decrease in interest expense for the three and nine month
periods ended December 31, 2012, respectively, as compared to the similar three
and nine month periods in the prior fiscal year, is due primarily to the
repurchase of approximately $81.1 million in Senior Notes during December 2011,
funded principally by additional borrowings under our Credit Facility, which
resulted in both a lower outstanding debt balance, and lower average interest
rates on our outstanding debt for most of fiscal 2013, as the interest rate on
our Credit Facility is lower than the interest rate on the Senior Notes. As a
result of the Acquisition, outstanding debt increased in December 2012, which
likely will result in increased interest expense for the remainder of fiscal
2013 and fiscal 2014. The increase in interest expense related to our
unrecognized tax benefit of approximately $0.1 million and $0.7 million for the
three and nine month



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periods ended December 31, 2012, respectively, as compared to similar periods in
the prior year, is due primarily to our ability to participate in several state
amnesty programs. During the quarter ended December 31, 2011, we filed amended
returns with several states that offered amnesty for certain penalties and
interest. Due to the amnesty relief, we received credits of approximately $0.4
million for interest accrued in prior periods.

Loss on Debt Retirement. This premium is related to the repurchase of certain of
our Senior Notes during the quarter ended December 31, 2011. On December 16,
2011, we repurchased a total of approximately $88.1 million of our Series 2005A
and Series 2007A Notes. This expense consists of a 2% premium paid on the
repurchase, plus brokerage and miscellaneous fees related to the repurchase.

Earnings Before Income Taxes. Earnings before income taxes were $27.3 million
and $0.5 million during the three month periods ended December 31, 2012 and
2011, respectively. The $26.8 million increase was primarily due to a $18.8
million increase in gross profit, a $1.1 million increase in equity in earnings
of our unconsolidated joint venture, a decrease of $6.6 million in acquisition
and litigation expense, a decrease of $0.4 million in interest expense, a $2.1
million decrease in loss on debt retirement, partially offset by increases of
$1.4 million and $0.8 million in corporate general and administrative expenses
and other expense, respectively.

Earnings before income taxes were $73.3 million and $9.3 million during the nine
month periods ended December 31, 2012 and 2011, respectively. The $64.0 million
increase was primarily due to a $61.1 million increase in gross profit, a $2.9
million increase in equity in earnings of our unconsolidated joint venture, a
decrease of $2.2 million in interest expense, a decrease of $2.1 million in loss
on debt retirement, partially offset by increases of $3.4 million and $1.1
million in corporate general and administrative expenses and other expense,
respectively.

Income Taxes. The effective tax rate for the nine month period ended
December 31, 2012 was approximately 32% compared to approximately (5%) for nine
month period ended December 31, 2011. The effective tax rate during fiscal 2012
was positively impacted by our participation in state amnesty programs with the
states of Arizona, Colorado and California, as well as the expiration of the
statute of limitations for certain items related to the 2004 through 2006 tax
years. These events were treated as discrete items in the tax provision and a
benefit totaling approximately $2.5 million on an after-tax basis was
recognized. The effective tax rate for the full 2012 fiscal year, excluding the
discrete items, was approximately 22%. The expected tax rate for the full fiscal
year is expected to be 32% in fiscal 2013. The increase in the effective tax
rate during fiscal 2013 is primarily due to the reduction in the impact of our
depletion deduction associated with increased earnings.

Net Earnings and Diluted Earnings per Share. Net earnings for the quarter ended
December 31, 2012 of $18.0 million increased 521% from last year's net earnings
of $2.9 million; while net earnings of $49.9 million for the nine month period
ended December 31, 2012 increased 413% from last year's net earnings of $9.7
million. Diluted earnings per share for the three and nine month periods ended
December 31, 2012 were $0.37 and $1.07, respectively, compared to $0.07 and
$0.22 for the three and nine month periods ended December 31, 2011,
respectively.



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



                                                    For the Three Months                                       For the Nine Months Ended
                                                     Ended December 31,                                              December 31,                  Percentage
                                                2012                    2011            Percentage              2012                  2011           Change
                                               (In thousands except per unit)             Change            (In thousands except per unit)
Revenues (1)
Cement (2)                                $         74,935         $        61,510               22 %     $        229,492          $ 194,208               18 %
Gypsum Wallboard                                    80,737                  54,063               49 %              228,284            156,386               46 %
Recycled Paperboard                                 31,331                  30,001                4 %               93,390             90,414                3 %
Concrete and Aggregates                             14,201                  10,250               39 %               41,335             36,032               15 %

Gross Revenues                            $        201,204         $       155,824               29 %     $        592,501          $ 477,040               24 %

Sales Volume
Cement (M Tons) (2)                                    818                     700               17 %                2,530              2,191               15 %
Gypsum Wallboard (MMSF)                                519                     421               23 %                1,476              1,236               19 %
Recycled Paperboard (M Tons)                            65                      57               14 %                  187                174                7 %
Concrete (M Yards)                                     143                     112               28 %                  421                391                8 %
Aggregates (M Tons)                                    639                     463               38 %                2,101              1,846               14 %

Average Net Sales Prices (3)
Cement (2)                                $          82.68         $         80.02                3 %     $          82.17          $   80.77                2 %
Gypsum Wallboard                                    120.55                   94.86               27 %               119.60              92.35               30 %
Recycled Paperboard                                 480.51                  527.42               (9 %)              498.16             519.20               (4 %)
Concrete                                             71.55                   67.11                7 %                67.94              63.98                6 %
Aggregates                                            6.13                    5.99                2 %                 6.04               5.95                2 %

Operating Earnings
Cement (2)                                $         16,615         $        15,493                7 %     $         43,923          $  39,392               10 %
Gypsum Wallboard                                    16,870                     228             7299 %               47,356             (4,074 )           1262 %
Recycled Paperboard                                  7,963                   5,146               55 %               20,934             12,214               71 %
Concrete and Aggregates                             (1,335 )                  (620 )           (115 %)              (1,496 )             (811 )            (84 %)
Other, net                                            (223 )                   591             (138 %)                (427 )              627             (168 %)

Net Operating Earnings                    $         39,890         $        20,838               91 %     $        110,290          $  47,348              133 %





(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 $74.9 million for the three months ended
December 31, 2012, which is a 22% increase over revenues of $61.5 million for
the three months ended December 31, 2011. The increase in revenues during three
months ended December 31, 2012, as compared to the similar quarter in 2011, is
primarily due to a 17% increase in sales volumes, as well as a 3% increase in
the average net sales price. The increase in sales volumes and average net sales
price positively impacted revenues by approximately $9.9 million and $3.5
million, respectively, in the third quarter of fiscal 2013, as compared to the
third quarter of fiscal 2012. The increase in sales volume was primarily due to
the Acquisition, which positively increased revenue by $6.2 million, as well as
increased construction activity in Texas and our Mountain region.

Operating earnings for the cement business increased to $16.6 million from $15.5
million for the third quarter of fiscal 2013 and 2012, respectively. The
increase in operating earnings of approximately $1.1 million is due primarily to
increased average net sales prices, which positively impacted operating earnings
by approximately $3.7 million, as well as an increase in sales volumes, which
positively impacted operating earnings by approximately $2.3 million. The
increase in average net sales price and sales volumes was partially offset by
increased operating costs during the three month period ended December 31, 2012,
as compared to the similar period in 2011, of approximately $4.9 million,
primarily related to increased maintenance, purchased raw materials and fixed
costs of approximately $2.6 million, $0.8 million and $1.5 million,
respectively, partially offset by decreased fuel and power costs of
approximately $0.9 million.



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Cement revenues were $229.5 million for the nine months ended December 31, 2012,
which is an 18% increase over revenues of $194.2 million for the nine months
ended December 31, 2011. The increase in revenues during nine months ended
December 31, 2012, as compared to the similar period in 2011, is primarily due
to a 15% increase in sales volumes, as well as a 2% increase in the average net
sales price. The increase in sales volumes and average net sales price
positively impacted revenues by approximately $26.9 million and $8.4 million,
respectively, in the nine month period ended December 31, 2012, as compared to
the similar period in 2011. The increase in sales volume was due to the
Acquisition of two cement plants on November 30, 2012 that positively increased
revenue by $6.2 million, as well as increased construction activity in Texas and
our Mountain region and increased participation in large construction projects
in Illinois.

Operating earnings for the cement business increased to $43.3 million from $39.4
million for the nine months ended December 31, 2012 and 2011, respectively. The
increase in operating earnings of approximately $3.9 million is due primarily to
increased average net sales price, and increased sales volumes, which positively
impacted operating earnings by approximately $8.4 million and $4.6 million,
respectively. The increase was partially offset by increased operating costs
during the nine month period ended December 31, 2012, as compared to the similar
period in 2011, primarily due to approximately $6.0 million and $3.9 million of
increased maintenance and raw materials costs, respectively, partially offset by
a $1.2 million decrease in fuel cost.

Gypsum Wallboard Operations. Sales revenues increased 49% to $80.7 million in
the third quarter of fiscal 2013, from $54.1 million in the third quarter of
fiscal 2012, primarily due to a 27% increase in the average net sales price and
a 23% increase in sales volumes. The increase in the average net sales price and
sales volumes positively impacted revenues by approximately $14.1 million and
$12.5 million, respectively. The increase in average net sales price was due to
the implementation of a price increase in January 2012. The increased sales
volumes are primarily due to increased construction activity in fiscal 2013, as
compared to fiscal 2012.

Operating earnings increased to $16.9 million in the third quarter of fiscal
2013, from $0.2 million in the third quarter of fiscal 2012, primarily due to
the increase in average net sales prices, which positively impacted operating
earnings by approximately $14.1 million, and lower operating expenses, primarily
related to an $0.8 million reduction in energy costs and a reduction in paper
costs of approximately $1.1 million. Fixed costs are not a significant part of
the overall cost of wallboard; therefore, changes in utilization have relatively
minor impact on our operating results.

Sales revenues increased 46% to $228.3 million for the nine months ended
December 31, 2012, from $156.4 million for the nine months ended December 31,
2011, primarily due to a 30% increase in the average net sales price and a 19%
increase in sales volumes. The increase in the average net sales price and sales
volumes positively impacted revenues by approximately $41.6 million and $30.3
million, respectively. The increase in average net sales price was due to the
implementation of a price increase in January 2012. The increased sales volumes
are primarily due to increased construction activity in fiscal 2013, as compared
to fiscal 2012.

Operating earnings increased to $47.4 million for the nine month period ended
December 31, 2012, from a loss of $4.1 million in the nine month period ended
December 31, 2011, primarily due to the increase in average net sales prices,
which positively impacted operating earnings by approximately $41.5 million, and
lower operating expenses primarily related to the $5.2 million reduction in
energy costs and the approximately $1.4 million decrease in paper cost. Fixed
costs are not a significant part of the overall cost of wallboard; therefore,
changes in utilization have relatively minor impact on our operating results.



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Recycled Paperboard Operations. Revenues were $31.3 million for the three month
period ended December 31, 2012, as compared to $30.0 million for the three month
period ended December 31, 2011. The $1.3 million increase in revenues during the
three month period ended December 31, 2012, as compared to 2011, was primarily
due to the 14% increase in sales volumes, partially offset by the 9% decrease in
average sales price. The increase in sales volumes during the three month period
ended December 31, 2012, as compared to 2011, positively impacted revenues by
approximately $4.4 million, partially offset by the $3.1 million decrease in
revenue due to lower average net sales price. The decrease in average net sales
price is due to the pricing provisions in our long-term sales agreement.

Operating earnings increased to $8.0 million in the third quarter of fiscal
2013, as compared to $5.1 million in the third quarter of fiscal 2012, while
gross margin increased to 25% in the third quarter of fiscal 2013, as compared
to 17% in the third quarter of fiscal 2012. The increased operating earnings and
gross margin are largely the result of reduced operating costs, namely recycled
fiber costs and energy utilization. Earnings and margin were positively impacted
by the change in product sales mix as sales of higher margin gypsum liner
increased to 69% in the third quarter of fiscal 2013, from 53% in the third
quarter of fiscal 2012, which positively impacted operating earnings by
approximately $1.1 million. Operating earnings were also positively impacted by
the reduction of $3.4 million in recycled fiber costs (namely OCC) and $0.7
million in energy costs in the third quarter of fiscal 2013, relative to the
third quarter fiscal 2012, partially offset by a reduction in average sales
prices which negatively impacted operating earnings by approximately $2.1
million.

Revenues increased 3% to $93.4 million for the nine months ended December 31,
2012, from $90.4 million for nine months ended December 31, 2011. The increase
in revenue during the nine months ended December 31, 2012, as compared to the
similar period in 2011, is due to the increase in sales volumes, partially
offset by the decline in average net sales price. The increase in sales volume
during the nine months ended December 31, 2012, as compared to the similar
period in 2011, positively impacted revenues by approximately $6.7 million,
partially offset by approximately $3.7 million due to lower average net sales
price. The decrease in average net sales price is due to the pricing provisions
in our long-term sales agreement.

Operating earnings increased to $20.9 million for the nine month period ended
December 31, 2012, as compared to $12.2 million for the nine month period ended
December 31, 2011, while gross margin increased to 22% for the nine month period
ended December 31, 2012, as compared to 14% for the nine month period ended
December 31, 2011. The increased operating earnings and gross margin are largely
the result of reduced operating costs, namely recycled fiber costs and energy
utilization. Earnings and margin were positively impacted by the change in
product sales mix as sales of higher margin gypsum liner increased to 64% for
the nine month period ended December 31, 2012, from 49% in the nine month period
ended December 31, 2011, which positively impacted operating earnings by
approximately $2.4 million. Operating earnings were also positively impacted by
the reduction of $9.7 million in recycled fiber costs (namely OCC) and $2.4
million in energy costs in the nine month period ended December 31, 2012,
compared to the nine month period ended December 31, 2011, partially offset by
increased chemical expense of approximately $0.8 million and a reduction in
average sales prices which negatively impacted operating earnings by
approximately $4.3 million.

Concrete and Aggregates Operations. Concrete and aggregates revenues increased
39% to $14.2 million in the third quarter of fiscal 2013, as compared to $10.3
million in the third quarter of fiscal 2012. The primary reason for the increase
in revenue for the three months ended December 31, as compared to the similar
period in 2011, was the 38% increase in sales volumes, which positively impacted
revenues by approximately $3.1 million, while a 2% increase in average net sales
prices increased revenue by $0.7. The increase in sales volumes was due
primarily to the Acquisition, which increased revenues by $1.7 million during
the three month period ended December 31, 2012 as compared to the similar period
in 2011. The remaining increase in sales volumes was due to increased
construction activity in our Austin, Texas market.



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Operating loss for the three month period ended December 31, 2012 was
approximately $1.3 million, as compared an operating loss of approximately $0.6
million for the three month period ended December 31, 2011. Operating loss was
negatively impacted by increased costs during the third quarter of fiscal 2013,
as compared to fiscal 2012, which adversely impacted operating loss by
approximately $1.3 million, partially offset by increased average selling prices
of approximately $0.7 million. Increased operating costs during the third
quarter of fiscal 2013, as compared to the third quarter of fiscal 2012, were
primarily related to maintenance, which increased by approximately $0.4 million
and a $0.4 million loss from a litigation settlement.

Concrete and aggregates revenues increased 15% to $41.3 million for the nine
months ended December 31, 2012, as compared to $36.0 million for the nine months
ended December 31, 2011. The primary reason for the increase in revenue for the
three months ended December 31, as compared to the similar period in 2011, was
the 14% increase in sales volumes, which positively impacted revenues by
approximately $3.4 million. In addition to the increase in sales volumes,
average sales price increased 2% during the nine month period ended December 31,
2012, as compared to the similar period in 2011, which positively impacted
revenues by $1.7 million. The increase in sales volumes was due primarily to the
Acquisition, which increased revenues by $1.9 million during the three month
period ended December 31, 2012 as compared to the similar period in 2011. The
remaining increase in sales volumes was due to increased construction activity
in our Austin, Texas market.

Operating loss for the nine month period ended December 31, 2012 was
approximately $1.5 million, as compared to operating loss of approximately $0.8
million for the nine month period ended December 31, 2011. Operating loss was
negatively impacted by increased costs during the nine month period ended
December 31, 2012, as compared to the similar period in 2011, which adversely
impacted operating loss by approximately $2.5 million, partially offset by
increased average selling prices of approximately $1.7 million. Increased
operating costs during the nine month period ended December 31, 2012, as
compared to December 31, 2011, were primarily related to maintenance, hauling
expense and royalties, which increased by approximately $1.2 million, $0.7
million and $0.4 million, respectively.

GENERAL OUTLOOK


Construction activity for calendar 2013 is expected to continue to improve over
calendar 2012 levels. Commercial and residential construction activity increased
during calendar 2012, while state budget constraints continue to adversely
impact infrastructure spending. Although we do not expect a significant increase
in spending for infrastructure in calendar 2013, we do expect spending in 2013
will exceed that of 2012.

While cement demand continues to be impacted by softness in the commercial
construction market and state government budget deficits, the severity of the
impact is uneven among the different regions. We have seen more signs of
recovery in our Texas and Mountain markets, primarily due to the strength of the
energy business, than we have in our Nevada and Illinois markets. It also
appears that the residential housing market is recovering, which should
positively impact the cement markets during the remainder of the fiscal year.
The acquisition of the Lafarge Target Business provides us with opportunities in
two new cement markets, and now gives us a presence from Chicago to northern
California, and down to Texas. Cement consumption increased in calendar 2012
over calendar 2011, however this increase was regional rather than throughout
the entire country. We expect cement consumption to increase again in calendar
2013; however, these increases are also expected to be regional rather than
throughout the country as a whole.

We do not anticipate significant increases in concrete and aggregate sales
prices and sales volumes in our northern California market, as demand for
residential and infrastructure projects in this region are expected to remain
soft. We are starting to see a recovery of volume and price in our Austin, Texas
market. We do not expect the concrete and aggregate assets that are part of the
Lafarge Target Business to materially impact our revenues or operating earnings
during the remainder of fiscal 2013.



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There are some indications that the residential and commercial construction
markets are improving. Industry shipments of gypsum wallboard during calendar
2012 increased 10% to 18.9 billion square feet from gypsum wallboard shipments
in calendar 2011, and we expect industry shipments to improve in calendar 2013.
We implemented a wallboard price increase effective January 2013.

Our recycled paperboard segment continues to identify sales opportunities in
each of its markets to enable our paper operation to maximize its operating
earnings. Fiber prices, which are our largest operating cost, have declined in
fiscal 2013, as compared to fiscal 2012, which have positively impacted
operating earnings. Prices are expected to remain stable for the rest of the
fiscal year; however, any increases in fiber prices in future periods would
adversely impact our cost of manufacturing and profit margins. We anticipate the
cost of electricity and natural gas will remain consistent throughout the
remainder of fiscal 2013.

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 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.

Recent Accounting Pronouncements


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



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LIQUIDITY AND CAPITAL RESOURCES

Cash Flow.

The following table provides a summary of our cash flows:



                                                                 For the Nine Months Ended
                                                                       December 31,
                                                                  2012                2011
                                                                  (dollars in thousands)
Net Cash Provided by Operating Activities                     $     106,953         $  43,742
Investing Activities:
Capital Expenditures                                                (28,832 )              -
Acquisition                                                        (448,420 )         (22,944 )

Net Cash Used in Investing Activities                              (477,252 

) (22,944 )


Financing Activities:
Excess Tax Benefits from Share Based Payment Arrangements             3,461               156
Increase in Credit Facility                                         221,000            82,000
Decrease in Long-Term Debt                                           (4,677 )         (88,064 )
Dividends Paid                                                      (13,601 )         (13,424 )
Net Proceeds from Offering of Common Stock                          154,832                -
Payment of Debt Acquisition Costs                                    (1,751 )              -
Shares Repurchased to Settle Employee Taxes on RSUs                    (921 )            (393 )
Proceeds from Stock Option Exercises                                 14,722               732

Net Cash Provided by (Used in) Financing Activities                 373,065           (18,993 )

Net Increase in Cash                                          $       2,766         $   1,805



Cash flows from operating activities increased $63.2 million to $107.0 million
during the nine month period ended December 31, 2012, as compared to $43.7
million during the similar period in 2011. This increase was largely
attributable to increased net earnings of approximately $40.2 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,
2012 by a decrease in inventory of approximately $7.7 million and increases of
approximately $12.5 million and $10.3 million in accounts payable and accrued
expenses and income taxes payable, partially offset by increases in accounts and
notes receivable of approximately $5.0 million and an increase in other assets
of approximately $9.2 million. During the nine months ended December 31, 2011,
cash flows from operating activities were negatively impacted by an increase in
accounts and notes receivable of approximately $8.8 million partially offset by
a decrease in inventories of approximately $1.6 million, an increase in accounts
payable and accrued expenses of approximately $3.1 million and an increase in
income taxes payable of approximately $3.4 million.

Working capital increased to $132.9 million at December 31, 2012, compared to
$114.8 million at March 31, 2012, primarily due to increased accounts and notes
receivable, inventories and prepaid and other assets, partially offset by
increased accounts payable and accrued liabilities. Increases in both current
assets and current liabilities during the nine month period ended December 31,
2012 are primarily related to working capital acquired in the Acquisition. In
connection with the Acquisition, working capital, primarily inventory and
accounts receivable, partially offset by accounts payable and accrued
liabilities increased $34.8 million. In addition to liabilities assumed in the
Acquisition, accrued liabilities increased due to the accrual of certain
expenses related to the Acquisition that were not paid at December 31, 2012. The
remaining amounts accrued are expected to be paid during January 2012. The
increase in income tax payable is primarily due to the increase in our projected
annual tax rate and our increased earnings for the nine month period ended
December 31, 2012 as compared to the nine month period ended December 31, 2011.



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The increase in accounts and notes receivable at December 31, 2012 as compared
to March 31, 2012 is primarily due to accounts receivable obtained in the
Acquisition. Excluding the accounts receivable purchased in the Acquisition,
accounts receivable increased slightly at December 31, 2012 as compared to
accounts receivable at March 31, 2012. This increase is primarily due more
favorable weather in the late fall than in the winter, which contributed to
increased construction activity, particularly infrastructure projects in all of
our markets. The increase in accounts receivable at December 31, 2012, as
compared to March 31, 2012, was consistent with the increase in revenues during
the same periods. As a percentage of quarterly sales generated in the quarter
then ended, accounts receivable were 41% at December 31, 2012 and 48% at
March 31, 2012. 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, 2012. Notes receivable are monitored on an individual
basis, and no significant deterioration in the collectability of notes
receivable was identified at December 31, 2012.

Our inventory balance at December 31, 2012 increased approximately 9% from the
inventory balance at March 31, 2012. Excluding the impact of the inventory
acquired in the Acquisition, inventory would have declined approximately 8%.
This decline was expected as we generally build cement inventories over the
winter to meet our demand during the spring, summer and early fall. 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 greater
level of repair parts inventory. We believe all of these repair parts are
necessary and we perform semi-annual analysis to identify obsolete parts. We
have less than one year's sales of all product inventories, and our inventory
has a low risk of obsolescence due to our products being basic construction
materials.

As described in more detail below, the IRS has challenged certain depreciation
deductions claimed by us with respect to assets (the "Republic Assets") acquired
by us from Republic Group LLC in a transaction completed in November 2000 (the
"Republic Asset Acquisition"). We are engaged in administrative and judicial
proceedings seeking to establish our right to claim these deductions.

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
Notice was in substantial agreement with our financial accruals, including
interest. The final amount related to the Notice, including interest, was
approximately $97.9 million, of which $75 million had previously been deposited
with the IRS. We deposited the remaining amounts with the IRS in July 2010 and
asked the IRS to apply all $97.9 million of deposits to the payment of the tax,
penalties and interest. Refund claims were filed with the IRS in October 2010 to
recover all $97.9 million, plus interest. The IRS has denied our refund request
and we filed a lawsuit in May 2011 in Federal District Court to recover the
requested refunds.

With respect to the tax returns for the fiscal years ended March 31, 2007
through March 31, 2010, the IRS has issued an assessment of approximately $8.1
million of income tax and approximately $1.9 million in penalties. In addition,
we estimate that interest of approximately $1.9 million has accrued on these
amounts as of December 31, 2012. These amounts have been fully accrued in our
financial statements at December 31, 2012. The amounts accrued have been treated
as unrecognized tax liabilities and are included in Other Long Term Liabilities
on our Consolidated Balance Sheet at December 31, 2012 and March 31, 2012. On
October 31, 2012, we appealed the findings of the examiner to the IRS Appeals
Office, contesting the assessment of tax, penalties and interest for fiscal
years ended March 31, 2007 through March 31, 2010. We have not yet received
notification from the Appeals Office regarding a date to discuss our appeal. See
Note (O) of the Notes to Unaudited Consolidated Financial Statements.

Net cash used in investing activities during the nine month period ended
December 31, 2012 was approximately $477.3 million, as compared to net cash used
in investing activities of $22.9 million during the similar period in 2011, an
increase of approximately $454.4 million. A substantial majority of the
increase, $448.4 million, related to the Acquisition, while the remaining amount
is due to the construction of our new sand processing plant, which began during
the quarter ended December 31, 2012. The majority of the remaining expenditures
in the first nine months of fiscal 2013 relate to cost reduction projects and
sustaining capital expenditures. We anticipate spending between $15 million and
$20 million during fiscal year 2013, which is consistent with the amount spent
in fiscal 2012. We anticipate increased expenditures for property, plant and
equipment in the fourth quarter of fiscal 2013, as compared to fiscal 2012,
related to our new sand mining and processing business.



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Net cash provided by financing activities increased to approximately $373.1
million during the nine month period ended December 31, 2012, as compared to net
cash used in investing activities of approximately $19.0 million during the
similar period in 2011. This $392.1 million increase in net cash provided by
financing activities is primarily due to the issuance of common stock and
increased borrowings related to the Acquisition. In October 2012, we completed
the issuance of common stock in an underwritten public offering that generated
net proceeds of approximately $154.8 million. We also increased our outstanding
borrowings under our Credit Facility by $221.0 million during the nine month
ended December 31, 2012. Net cash provided by financing activities was also
positively impacted during the nine month period ended December 31, 2012, as
compared to the nine months ended December 31, 2011, by an increase in stock
option exercises and the related tax benefits of such exercises. Net cash
provided from stock option exercises and their related tax benefit was
approximately $18.2 million during the nine month period ended December 31, 2012
as compared to approximately $0.9 million during the similar period in 2011. Our
debt-to-capitalization ratio and net-debt-to-capitalization ratio was 41.3% and
40.8%, respectively, at December 31, 2012, as compared to 36.1% and 35.5%,
respectively, at March 31, 2012.

Debt Financing Activities.

Credit Facility -


On December 16, 2010, we entered into a $300.0 million credit agreement that
expires on December 16, 2015. The Credit Facility was amended on September 26,
2012 (the "Credit Facility"). The amendment to the Credit Facility increased
available borrowings from $300.0 million to $400.0 million and changed certain
provisions in our debt covenants to allow for the purchase of the Lafarge Target
Business. These changes primarily related to amending the definition of
Consolidated EBITDA to allow the add back of certain transaction and other
allocated overhead costs that are not expected to be incurred in the future.
Borrowings under the Credit Facility are guaranteed by all major operating
subsidiaries of the Company. At the option of the Company, outstanding principal
amounts on the 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 Company's ratio of consolidated
EBITDA, which is defined as earnings before interest, taxes, depreciation and
amortization, to its consolidated indebtedness, or (ii) an alternative base rate
which is the higher of (a) the prime rate or (b) the federal funds rate plus
 1/2%, per annum plus an agreed margin (ranging from 0 to 125 basis points).
Interest payments are payable monthly or at the end of the LIBOR advance
periods, which can be up to a period of six months at the option of the Company.
The 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 Credit Facility also requires us to maintain a consolidated
funded indebtedness ratio (consolidated indebtedness to consolidated earnings
before interest, taxes, depreciation, amortization and other non-cash
deductions) of 3.5 or less and an interest coverage ratio (consolidated earnings
before interest, taxes, depreciation, amortization and other non-cash deductions
to interest expense) of at least 2.5. The Credit Facility also limits our
ability to make certain restricted payments, such as paying cash dividends;
however, there are several exceptions to this restriction, including: (i) the
Company may pay cash dividends in an aggregate amount of up to $50.0 million
each fiscal year; and (ii) the Company may make restricted payments not
otherwise permitted so long as no default would result therefrom and our
consolidated funded indebtedness ratio does not exceed 3.0. We had $291.0
million of borrowings outstanding under the Credit Facility at December 31,
2012, and had $102.0 million of available borrowings, net of the outstanding
letters of credit, under the Credit Facility at December 31, 2012.



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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 during prior periods. During the quarter ended December 31,
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 May 15 and November 15 of each year until all principal is paid for the respective tranche.


We 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. Following the repurchase, the amounts outstanding
for each of the four tranches are as follows:



                         Principal          Maturity Date        Interest Rate
          Tranche A   $   9.5 million       October 2, 2014                6.08 %
          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 April 2 and October 2 of each year until all principal is paid for the respective tranche.


We amended both the Series 2005A Senior Notes and Series 2007 A Senior Notes on
September 26, 2012. The amendment to each Note Purchase Agreement, among other
things, provided for changes to the calculation used to determine compliance
with the financial covenants contained in each agreement with regard to
transaction costs, expenses and other amounts in connection with the pending
Acquisition. These changes primarily related to amending the definition of
Consolidated EBITDA to allow the add back of certain transaction and other
allocated overhead costs that are not expected to be incurred in the future.

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 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 Credit Facility.

Other than the Credit Facility, we have no other source of committed external
financing in place. In the event the Credit Facility was 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 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.



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On August 31, 2011, we entered into an Uncommitted Master Shelf Agreement (the
"Shelf Agreement") with John Hancock Life Insurance Company (U.S.A.)
("Hancock"). The Shelf Agreement provides the terms under which the Company may
offer up to $75 million of its senior unsecured notes for purchase by Hancock or
Hancock's affiliates that become bound by the Shelf Agreement (collectively,
"Purchasers"). The Shelf Agreement does not obligate the Company to sell, or the
Purchasers to buy, any such notes, and has a term of two years. We had not sold
any notes pursuant to the Shelf Agreement as of December 31, 2011.

As a result of the Acquisition, we succeeded to the leasehold interest held by
Lafarge North America with respect to the cement plant located in Sugar Creek,
Missouri, as well as obligations under certain related industrial revenue bonds.
In 1998, Lafarge North America entered into a series of agreements, which were
later amended in 2003, with the City of Sugar Creek, Missouri in connection with
the construction of improvements at the Sugar Creek cement plant. Under these
agreements, Lafarge North America leased the Sugar Creek cement plant from the
City of Sugar Creek, Missouri, which issued $150.0 million of tax-exempt and
taxable industrial revenue bonds to partly finance the construction of such
improvements.

Upon the closing of the Acquisition, funds for the retirement of $47.0 million
of the industrial revenue bonds were placed into an escrow account by Lafarge
North America, leaving $103.0 million of industrial revenue bonds outstanding.
These remaining $103.0 million of industrial revenue bonds held by Lafarge North
America were transferred to us in the Acquisition. The lease payments due to the
City of Sugar Creek under the Sugar Creek cement plant lease are equal in amount
to payments required to be made by the City of Sugar Creek to the holders of the
industrial revenue bonds. As we are now the holder of all of the outstanding
industrial revenue bonds, all lease payments made in respect of the remaining
industrial revenue bonds are returned to us, and no debt is reflected on our
financial statements in connection with our lease of the Sugar Creek cement
plant.

We do not have any off balance sheet debt, except for approximately $12.0 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 Credit Facility a $50.0 million Letter of Credit Facility. At December 31, 2012, we had $7.0 million of letters of credit outstanding that renew annually. We are contingently liable for performance under $13.4 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, including the impact of the pending Acquisition.
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.

Cash Used for Share Repurchases.


We did not repurchase any of our shares on the open market during the nine month
period ended December 31, 2012. As of December 31, 2012, 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, 2012, 16,640 shares of stock
were withheld from employees upon the vesting of Restricted Shares or Restricted
Shares Units 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.



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Dividends.


Dividends paid were $13.6 million and $13.4 million for the nine month periods
ended December 31, 2012 and 2011, 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           2012            2011
                                                             (dollars in thousands)
    Land and Quarries                    $      35,200     $        7,901     $ 11,635
    Plants                                     251,500             14,830        8,506
    Buildings, Machinery and Equipment         119,900              6,101        2,803

    Total Capital Expenditures           $     406,600     $       28,832     $ 22,944



During fiscal 2012, we purchased land with mineral reserves in the Midwest for
the purpose of developing a frac sand business to serve the oil services and
other industrial end markets. We have finalized permitting and plant design and
are now focused on plant construction. We anticipate additional capital
expenditures in the range of $25.0 million to $50.0 million during fiscal years
2013 and 2014 to support the development of our frac sand business. See
Management's Discussion and Analysis of Results of Operations and Financial
Condition - Executive Summary on page 23 for more information. See Footnote
(B) of the Unaudited Consolidated Financial Statements for more information
related to the capital expenditures related to the Acquisition.

Included in the above table is the estimated fair value of property, plant and
equipment acquired in the Acquisition. The fair value allocated above is
preliminary, and subject to change. The total amount paid by the Company at
closing was $448.4 million.
See Note (B) in the Notes to Unaudited Consolidated Financial Statements for
more information on the provisional allocation of estimated Purchase Price to
the assets acquired and liabilities assumed in the Acquisition.

Historically, annual maintenance capital expenditures have been approximately
$15.0 to $20.0 million, which we anticipate will be similar for fiscal 2013.
Total capital expenditures for fiscal 2013, including both the new business and
maintenance capital expenditures, are expected to be approximately $40.0 to
$70.0 million. Historically, we have financed such expenditures with cash from
operations and borrowings under our Credit Facility.
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