Eagle Materials Inc. Stock

Good day, and welcome to the Eagle Materials First Quarter of Fiscal 2027 Earnings Conference Call. This call is being recorded. At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir.

Thanks, Chuck. Good morning. Welcome to Eagle Materials conference call for our first quarter of fiscal year 2027. This is Michael Haack. Joining me today are Craig Kesler, our Chief Financial Officer; and Alex Haddock, Senior Vice President of Investor Relations, Strategy and Corporate Development.

There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast. While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release. Thank you all for joining us today. Against the backdrop of macroeconomic uncertainty, we are pleased to report steady results for the first quarter of the fiscal year.

Our first quarter revenue was a record $651 million. We generated earnings per share of $3.29, and our gross margin was 24.8%. These results highlight how our low-cost producer position allows us to successfully navigate and execute in dynamic environments. Last month, we published our annual report, shareholder letter and an updated corporate sustainability report, highlighting our progress across Eagle for FY '26. These documents highlight how we strive to consistently make our operations safer and our assets more efficient to maintain our low-cost producer position.

It is our belief that a safe, efficient operation also yields better shareholder returns. Everything we do at Eagle starts with protecting our employees' health and well-being. Candidly, our safety results weren't where we want them to be. We are not at zero. We will continue to expand our use of technology, training and the sharing of best practices to further improve our safety culture at Eagle.

Environmentally, across our asset footprint, we have driven down our CO2 intensity and overall emissions levels while increasing the usage of alternative fuels at our facilities. Our drive for efficiency led us to explore alternative uses of previous waste streams across all of our businesses. Moving mine material multiple times is not efficient and is costly. Through testing and analysis, we have found new uses for a lot of the material that was once considered waste. Most of this material will be converted to revenue streams, while the remainder will help improve manufacturing processes. To this extent, I'm happy to report that we utilized over 550,000 tons of materials that were reclaimed or would have been placed back in the quarry in previous years during fiscal year '26.

Importantly, our safety and operational investments are not influenced by changing macroeconomic fluctuations. Our strategy is to execute through cycles on projects that have compelling paybacks. We seek to increase the long-term profitability potential of our core businesses with a multi-cycle approach focused on resilience peak to trough and compounding earnings potential peak to peak. This is especially valuable in the current demand environment when our end markets continue to be in different points of their respective cycles. On the heavy side, our cement and aggregates volumes continue to be supported by elevated infrastructure spending driven by federal IIJA bill and elevated state DOT budgets.

Even as questions remain about what comes next from the potential new federal infrastructure bill or the growth profile of state DOT budgets, our customers report a robust pipeline of multi-year infrastructure projects. Similarly, our customers across all of our regions are seeing growth in data center construction. We are still quantifying the impact on our volumes of rapid data center growth. What we do know is our customers are seeing an increased number of projects, building footprint sizes and visibility from project announcement to actual construction. They are also seeing this growth spill over into other categories such as utilities, warehousing and community build-outs.

The volume growth in the cement and aggregates was also supported by our pricing initiatives in these businesses, with the gross price of cement up about 1% year-over-year. The strength of our cement sales volumes was offset by an approximately $6 million earnings impact resulting from unexpected equipment failure at the Mountain Cement facility, some of which we expect to recover through our insurance coverage. The kilns at Mountain are 1960s vintage and they are showing their age, further underscoring the rationale and importance of the new modern kiln line we are installing. The fact that our sales volumes were not impacted shows how robust the cement network we've built is as we are able to bring in cement from across our footprint to meet customer demand without any disruption.

Here in late July, the equipment issues have been largely resolved. These additional movements and elevated freight rates broadly impacted our net cement prices. Cement volume growth, however, should set up nicely for better net price realization over the medium term, further benefiting from energy costs that should normalize. Infrastructure and nonresidential construction make up about 80% of our heavy side end market exposure. So growth in those markets has offset the softness in residential construction.

On the light side of our businesses, residential construction represents about 80% of our Wallboard end market exposure. While there has not been a near-term catalyst to help bring down mortgage rates and spur a rebound in home construction, we have seen relatively stable demand levels. Our Wallboard is priced on a delivered basis, so the increased freight rates we saw last quarter were the primary driver for our June 1 price increase in Wallboard, which would not be typical in this volume environment.

We believe Wallboard pricing additionally reflects the cost pressures that the rest of the industry other than Eagle are facing and that go beyond the elevated freight costs. Outside of freight, our costs were relatively benign this quarter, especially given our unique raw materials position with decades of low-cost gypsum across our wallboard footprint. Both the dynamic macroeconomic environment and the freight cost disruptions we've seen clearly demonstrate the benefits of our strategy to reinforce our position at the low end of the cost curve and to invest in high-return projects through the cycles, whether through our typical capital projects across our plants and quarries or larger modernizations that meet our strategic and financial criteria.

We are making excellent progress on 2 larger and unique high-return modernization projects currently underway. The project at our Laramie, Wyoming Cement plant will reduce the facility's operating cost by 25%, and the Duke, Oklahoma Wallboard plant modernization will reduce the operating cost of that facility by 20%. Construction for Laramie Cement plant is still on track to be completed late this year and commissioning planned for the first part of next year, and the Duke Wallboard plant should commission towards the later half of 2027.

Through the investments we make, larger modernizations or routine smaller capital projects, we remain well positioned despite cost spikes and challenged end market dynamics like we're seeing in housing today. With our capital expenditures from these 2 projects reaching a peak this year, we are still able to pursue additional high-return growth opportunities organically or through M&A and return capital to our shareholders.

With those comments, let me turn it over to you, Craig.

Thank you, Michael. As mentioned, we delivered record first quarter revenue of $651 million, up 3% year-over-year. The increase was driven primarily by higher cement sales volume, record recycled paperboard sales volume and increased aggregate sales. The revenue growth was offset by higher operating costs, primarily in Cement and Wallboard. Increased freight costs and unexpected downtime at our Mountain Cement plant were the primary drivers, contributing to a 13% decrease in first quarter earnings per share. This impact was partially offset by a 5% reduction in our fully diluted shares as a result of our share repurchase program.

Turning now to segment performance highlight on the next slide. In our Heavy Materials sector, which includes our Cement and Concrete and Aggregates segments, revenue was up 8%, driven primarily by increased cement and aggregate sales volume, underscoring healthy underlying demand. Sales volume growth in both business lines was supported by continued strength in public infrastructure spending as well as key areas of private nonresidential construction, such as data center development. Operating earnings in the sector were down 11%, primarily because of the impact of higher freight and raw material costs and the $6 million impact from the downtime at Mountain Cement.

Moving to Light Materials sector on the next slide. First quarter revenue in our Light Materials sector declined 5%, reflecting lower Wallboard sales volume and sales prices, which were partially offset by record recycled paperboard sales volume. Operating earnings in the sector were down 16% (sic) [ 15% ], reflecting lower Wallboard sales volume and higher freight costs.

Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined manner, consistent with our long-term strategic priorities. During the first quarter, operating cash flow increased 13% to $154 million, reflecting the strength of our businesses, the resilience of our operating model and the expected tax benefits from the capital spending program. Capital expenditures totaled $121 million during the quarter, driven primarily by investments in the modernization and expansion of our Mountain Cement plant in Laramie, Wyoming and the modernization of our Duke, Oklahoma Wallboard facility.

These projects will enhance operating efficiency, improve reliability and further strengthen our competitive position. We continue to expect fiscal 2027 capital expenditures to range between $490 million and $525 million to fund these strategic growth initiatives as well as ongoing sustaining capital investments across the company. Capital spending is expected to peak in fiscal 2027 with construction at Mountain Cement scheduled to be completed later this year and the Duke project anticipated to be completed in mid-fiscal 2028.

At the same time, we remain committed to returning capital to shareholders, a goal enabled by our strong balance sheet. During the first quarter, we returned a total of $92 million through our quarterly dividend and the repurchase of approximately 406,000 shares for $84 million. We ended the quarter with approximately 2.5 million shares remaining under our current repurchase authorization.

Let's look now at our capital structure. We remain committed to maintaining a prudent capital structure that gives us significant financial flexibility, which is especially important in uncertain economic conditions. At June 30, 2026, our net debt-to-cap ratio was 51%, and our net debt-to-EBITDA leverage ratio was 2.1x. We believe these levels are both prudent and supportive of our growth strategy. We ended the quarter with $234 million of cash on hand and nearly $1 billion of total committed liquidity. Importantly, we have no significant near-term debt maturities, positioning us well to continue investing in the businesses while returning cash to our shareholders and maintaining a strong and flexible balance sheet.

Thank you for joining today's call. Chuck will now open the line for questions.

[Operator Instructions] And our first question for today will come from Trey Grooms with Stephens.

Michael, great work in the quarter. Congrats on that. I wanted to touch on Wallboard volume. So it held in really well, especially given the tough comps and you saw the strong industry numbers as well. Just curious to maybe get your thoughts on what's going on there. The starts data has just kind of been bouncing around, still pretty subdued levels and Wallboard seem to really outperform in this most recent data and in your results. So anyway, just curious your take on the relative strength there.

Yes. Trey, we've talked a lot about where housing is today and has been now for quite some time. We're at what I would typically look at a trough level activities. And so again, with interest rates being a little bit higher over the last period of time, that's kept the activity level a little lower, but there's still good demand, and we're still structurally short supply of homes in the U.S. So there's a balance there. But the activity levels are hanging in there, as you say, better than anticipated. And -- but that's just given the environment and the low construction activity we've been at for many, many years now.

Yes. Okay. I didn't know if there was anything unique going on in the quarter, but it doesn't sound like that's the case. Okay. And then you mentioned on cement kind of better net pricing realization maybe over the medium term, which kind of brings up the question around maybe the Canadian tariffs on cement. I'd love to get your take on any potential impacts that this could have in your markets, maybe any impact to supply or potential pricing in any of your -- maybe your more Midwest markets?

Yes. When you look at that, Trey, in particular, you look at -- you got to take a step back and look at the U.S. as a whole first and then kind of drill into where those impacts would happen. And we are pretty balanced on cement supply-demand dynamics across the U.S. And you can see the volume movements that we've had this past quarter or 2 kind of reflect that with it. Any kind of pressure on that will have kind of a little bit of a waterfalling effect with it. We don't participate as much in the Northeast section where most of that cement comes in.

However, there probably would be a waterfall type impact to that. So any tightening of the supply chain is just -- it's already tight today with the supply-demand dynamics. So any tightening of that would be beneficial for a pricing environment or for a supply-demand environment.

Yes. Okay. That makes sense. Last one for me, and this one is looking out a bit, a little bit higher level. But you guys continue to put up nice cash generation. You continue to buy back stock, your capital projects are going well, and they're going to be winding down, I guess, in the next 12 months or so, just roughly. And presumably, we would be in a better kind of demand environment at that point. And with the lower cost operations that you're going to have in those plants, it seems like you'd be in a position of very strong free cash flow generation when we get -- especially once we get past these capital projects.

So my question on that is longer-term thinking on -- are there other internal projects that you see where there's opportunities because it seems like it's a continuous kind of effort from you guys that you've seen over the last several decades. But any additional internal projects worth noting, thoughts on how you would approach the stock buyback, M&A, et cetera, because you're going to have a lot of cash flow generation once these projects are behind you.

Yes. Trey, when we look at it, we look at all of our operations continuously. Each of our operations, we do a set strategy for and look at where they reside, what the health of that facility is, what the investments of that facility need to be and kind of plan those out over multi years with it.

The main thing on the growth side with that with the unique projects we have with regards to Mountain and Duke still revolve around the permitting aspect of a lot of those facilities. It is very difficult to get a permit just to even expand the facility. So that's where we like I said, we continue to look at everything that would make sense to improve, but it still resides back down to a long permitting process if we could even get that permit and then what those investments are with it.

On the M&A front, we've always continuously looked at M&A. We are value buyers in a lot of ways. So we will look at M&A with our financial criteria that makes sense for us that determines -- the price really determines what we'll do on the M&A front and where it's located and it fits into our strategic footprint with it. We look at a lot of transactions every year. We will continue to look at a lot of transactions. And if they make sense from our financial perspectives, we will be definitely buyers. We have the financial balance sheet to do M&A transactions with it, but they have to meet those strict criteria we have.

And then I'll turn it over to Craig on the share buyback side and some of the other uses of capital that we have on that side.

Yes. No, Trey, I think you pointed out, we positioned ourselves with a good balance sheet, good free cash flow. We can continue to balance the approach of capital allocation, whether that's good growth projects, as Michael highlighted, whether that's organic or M&A. And then we've been a serial acquirer of our own shares for not just the last 5 or 10 years, but for 20 years. And we continue to see good value in the shares. And so it will be a continued balanced approach to how we deploy capital.

The next question will come from Brian Brophy with Stifel.

It looks like cement volumes were a little bit stronger than some of the other peers that have reported. Just any color that you're seeing on what's driving this and where the sources of strength have been?

It was pretty broad-based across our markets, Brian. And look, it's consistent with what we've been talking about in terms of the primary driver for demand in the U.S. for cement is public infrastructure. We have very supportive federal spending levels, state levels continue to be very supportive. So strength there. The private nonresidential construction activity, especially around data centers and the activities that follow along with that continue to be strong, probably in the early innings of some of that activity. So we've been very happy with our footprint and our footprint continues to perform very well.

Yes, that's helpful. And then just as a follow-up to that, are there any notable differences in cement pricing that you're seeing across your footprint? And I'm particularly curious as to what you're seeing in Texas at the moment.

Cement is a very regional business. The shipping radius is pretty limited. So you will see different regions have different dynamics, whether that's demand-oriented or supply-oriented. So we had definitely some markets where we were able to move pricing in the spring time, if you will, here in the early summer and then other markets weren't conducive to that. So it's really market by market as how we manage the business.

The next question will come from Anthony Pettinari with Citi.

Your net cement sales price was down 2%. And if I look at last year at fiscal 1Q, they were also, I guess, flat year-over-year. So we're kind of on 2 years of maybe flat to down prices. I'm just wondering from the big picture, if you could give any context in terms of what you think is sort of driving the sort of flattish pricing in the face of rising costs? Is it really just come down to the housing market? Are there changes to import dynamics? Are there really strong regional changes? I'm just wondering kind of stepping back, how you'd characterize the last 1.5 years in terms of pricing and what's driving that?

Yes, Anthony, good identification. I would say it's 2 separate issues. If you go back to a year ago with pricing being flattish, recall that we were coming off of 2 consecutive years with nationally cement consumption being down in the U.S. And so a much tougher environment to get a price increase. So that's a year ago. Now we've continued to see improvements in volume over the last 12 months. And so that's why we bifurcated in the earnings release gross prices versus net.

So the second issue, which is this year's issue. So we actually did have some markets that saw a gross price increase, but with elevated freight costs that more than offset those price increases. So that's why we tried to separate the 2. But we did see some gross price improvement, but on a net basis, net of freight, they were down slightly.

Okay. That's very helpful. And then that spread, that $3 a ton gross up 1%, net down 2%. Any kind of view on how that would be trending in July or thinking about fiscal 2Q, understanding it's just a very volatile situation on fuel and freight.

Yes. Look, I think probably a little early to call. I mean a lot of geopolitical issues across the globe right now that is really driving a lot of that. Certainly, oil still being elevated, diesel being elevated, that's driving some of that. And we've also seen underlying freight rates go up. So I don't want to say it was all diesel oriented, which in some ways is a good thing. The truckers are busy. But a little early to try to speculate if and when that comes down.

The next question will come from Timna Tanners with Wells Fargo.

I wanted to approach the question a little differently, perhaps, if I could, for some color on any market color from your Wallboard price hike you mentioned, and you mentioned it was abnormal. So how is that being received to the extent you can talk about that? And similarly, what's the latest on cement price increases as well?

Yes. Thanks, Timna. Yes, we did have a price increase that went through late in the quarter in June. We pushed it through. Given the elevated freight environment that we've experienced for the last 5 or 6 months, and you see it in our numbers, the freight moved meaningfully. And so we did push through a price increase in June. Michael highlighted in his comments that not typical in this demand environment, but given freight rate increases, it was necessary.

Wallboard (sic) [ Cement ] price increases were largely in the April time frame. As I mentioned earlier, we did see increases across a couple of our markets. There were some offset with higher freight costs. Too early to speculate the next round of increases at this point.

Okay. Appreciate it. And then I know there was a question about Canadian tariffs, but I guess it's also appropriate to ask about any thoughts on 301 tariffs and the chatter around those.

Yes. Look, longer term, and Michael highlighted this, the U.S. cement industry is structurally undersupplied. We haven't built a new cement plant in the U.S. for pushing 20 years, if not more than that. Modernizing and expanding existing facilities continues to be very difficult. And given that, we're over -- we have more demand than we do supply. So we require imports to meet that demand need.

Trying to gauge or guess where tariffs may go and what their exact input is, is hard to guess at this point. Those things can be changed. We've seen that over the last 18 to 24 months. So we're not all that fixated on that. And the long term, we continue to see an opportunity to push pricing and therefore, margin expansion, especially with the Mountain cement expansion coming online over the next year or so.

Okay. Fair enough. And if I could sneak in a last one, kind of also asking for your thoughts on maybe things that are tough to speculate on. But on the state budget side, some preliminary numbers have come in. Any thoughts about those as they seem to be trending down in some regions. So any thoughts about your experience with state budgets or the outlook for 2027?

Yes. Look, I don't know that -- you have some states that have actually passed higher budgets. You have an example here recently with Oklahoma having had a very significant increase, I think more than double the miles and more than double the funding levels. So we've seen in our markets continued very healthy state budgets.

The next question will come from Adam Thalhimer with Thompson, Davis.

Craig, I don't know if you mentioned this, but where was Wallboard pricing at the end of the June quarter?

Yes, we pretty much exited at the same level as the average for the quarter.

Okay. And are there -- do you have any cement price increases announced for fiscal Q2?

No. All of our increases were for April. We have not announced anything yet beyond that.

And then lastly, on data centers, how many of your cement plants do you feel like are well positioned for that?

It is across our network, Adam. We bid double the number of data centers in the first half of calendar '26 versus what we bid on in the first half of calendar '25. And some markets a little more or some a little less, but we're seeing it pretty broadly across our footprint.

Can you just unpack the mechanics there a little bit? Like I would figure it would be your ready-mix customers who are bidding on that and then coming -- they come back to you? Or how does that work?

Yes. Depending upon the job. But yes, we're not -- it's kind of like a highway job where it's going to be a multi-year engagement. So it's a little more than just your day-to-day activity. So you'll be looking at those projects specifically.

Essentially...

Yes. When you look at it, that has a couple of different things depending on where you are in the country. So when you look at it, it is like a highway job. If you have soil stabilization, then we work with soil stabilization groups. If you have tilt-up, then you have tilt-up. The foundation side, you work with ready-mix. So it's a broad mix of who we work with. The consumption trends for the soil stabilization in some of these is very beneficial for us and very high demand. So we're seeing it from multiple aspects of end users.

The next question will come from Garrett Greenblatt with JPMorgan.

Just a quick follow-up on the Wallboard pricing as we saw in 2Q. I think you got price increases as of June 1. So how did pricing trend as we move through the quarter month by month? And then on the cost side of Wallboard, it looks like there's much more pressure in 2Q -- 1Q as opposed to 4Q. In terms of those cost pressures on a go-forward basis, how should we think about those impacts?

And then last one on the recent announcement from the administration on the coal industry investments in that production -- increase in production in coal. How do we think about the long-term impact of those investments on the cost dynamics between synthetic versus natural gypsum?

Yes. I'll try to address all your questions as best as I can. So in Wallboard, we generally don't talk month by month in terms of pricing. I mentioned earlier that we exited the quarter around the -- at the end of June around the quarterly average. We also pointed out there, a lot of the sequential change on a net basis was driven by freight. Freight was up $5 a thousand as you'll see when we file the 10-Q.

So that had the most meaningful impact, if you will, for the entire quarter and really drove the majority of the change in net pricing in Wallboard this quarter, at least on a sequential basis. On your last question, we have not seen any significant change in synthetic gypsum availability. The freight cost issues that are being seen across the country, we no doubt have seen as you've had to move synthetic gypsum further and further around the country in order to satisfy some of these Wallboard plants. I don't see that changing dramatically.

Then I think you were asking about cement first quarter costs. This is our quarter when we do the vast majority of our maintenance programs across our cement footprint. So the June quarter always has an elevated operating cost because of those annual outages that happened in April and May. And then that abates into September and the December quarter.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Michael Haack for any closing remarks. Please go ahead, sir.

Thanks, Chuck. In closing, I want to acknowledge the efforts and focus of the whole Eagle team during this extended period of changing macroeconomic conditions. It's their focus and commitment that enables us to execute our strategy and deliver results for our shareholders through cycles and over the long term. Thanks for joining our call today, and I look forward to updating you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, everyone, and welcome to Eagle Materials Fourth Quarter and Fiscal 2026 Earnings Conference Call. This call is being recorded.

At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead.

Thank you, Bailey, and welcome, everyone. Joining me today are Craig Kesler, our Chief Financial Officer; and Alex Haddock, Senior Vice President of Investor Relations, Strategy and Corporate Development. There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast.

While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release. Thanks for joining us today to discuss another year of solid execution at Eagle Materials.

In fiscal 2026, during unusually high uncertainty in the economic environment, the Eagle team delivered strong financial and operational results. For the fifth straight year, we generated record revenue, delivering $2.3 billion of annual revenue and strong earnings per share of $13.16. We also returned over $400 million of cash to our shareholders. Eagle has a long track record of consistently investing where it matters.

Let me start with the safety of our people. For the past 5 years, our combined businesses have, on average, maintained a total recordable incident rate below the industry average. In fiscal 2026, we also increased our near miss hazard observations, the best leading indicator to prevent safety incidents by 24%. With regards to ensuring the long-term sustainability of our operations, we have completed or started several very strategic investments. The most notable are over the next 18 months, Eagle will complete the modernization of one of our oldest cement plants, Mountain Cement and one of our oldest Wallboard plants in Oklahoma. These projects show our continued focus on investing in our assets to keep them in like new condition.

The Mountain Cement plant modernization is approximately 60% complete, and we expect commissioning of the new kiln line to begin in late calendar 2026. Construction on the Duke, Oklahoma Wallboard plant is approximately 30% complete, and we expect to commission the new Wallboard line in the second half of calendar 2027. These investments will lower our cost structure, improve reliability and expand the capacity of each plant, which will further increase production flexibility across our plant network and strengthen our already low-cost competitive position.

Another area of strategic investment has been in our quarries. The limestone, gypsum and rock that we have at each quarry in their proximity to their plants is crucial for Eagle's success across all of our business lines. Controlling decades of our primary raw materials gives us a critical competitive advantage in terms of cost and consistent high-quality supply. This is particularly important in periods of cost spikes and supply chain disruptions. It also enables us to maintain a consistent, high-quality product that is reliable for our customers through decades. We have over 50 years on average of quarried reserves at each plant, and we have maintained the 50-year average on a rolling basis through land investments.

Turning to the macro level view of our businesses. We could easily get distracted by headline noise and the near-term volatility and become overly focused on the potential knock-on effects for short-term product demand. However, we are disciplined in maintaining a through-the-cycle view. From that perspective, we are still fundamentally bullish on the structural tailwinds that will continue to support our industries for many cycles to come. Our products are essential for building in renewal of America's infrastructure, schools, hospitals and homes to name some applications.

Though demand for our core products is trending well below prior peak levels, the U.S. population has grown significantly and the U.S. infrastructure of existing homes are reaching record age levels. At the same time, there are no scalable or viable substitutes for our products and supply constraints across cement, wallboard and aggregates will constrain capacity additions in each industry over the medium to long run. We believe that when demand does strengthen we are well positioned given our low-cost production advantages and our ongoing investments to reinforce those advantages.

In fact, we are seeing this play out for Eagle even in the current choppy business environment. In the cement sector, infrastructure and cement-intensive nonresidential construction applications are tightening several of our regional markets. Given the federal infrastructure spending still ahead for IIJA, the strength of state-level infrastructure budgets and the data center projects positively affecting our entire footprint, the volume outlook for our heavy materials businesses remain favorable across our entire footprint.

On the cost side of our cement businesses, we are relatively well insulated from energy cost disruptions in the near term as we already locked in our fiscal 2027 primary fuel costs last winter. On the Wallboard side, as we've discussed, the near-term housing outlook is still facing several affordability headwinds. Most notably, we need mortgage rate relief to encourage home inventory turnover, which should translate into normalized view -- normalized new home construction activity. We have seen Wallboard sales volumes hold steady from a historical perspective. And most importantly, we have seen relative price stability that is not surprising to us given supply constraints and raw material challenges for the rest of the industry.

In both our cement and aggregates businesses, where volumes are inflecting positively currently and in our Wallboard business, where in the midterm, we believe the volume is poised to rebound as the homebuilding market normalizes, there is significant runway for earnings across our core business lines. We are well positioned to capitalize on that runway. We have continuously invested in our businesses throughout the cycle to capture upside opportunities as they materialize.

As Craig will discuss, we have strengthened our already healthy balance sheet, which, in combination with our excess free cash flow generation, enables prudent, disciplined investments that further strengthen our competitive position. Our rigorous strategic and financial criteria mean we will be patient and ensure our inorganic and organic investments will reinforce consistent through-the-cycle growth.

With that, I'll turn it over to Craig.

All right. Thank you, Michael. Fiscal year 2026 revenue was a record $2.3 billion, up 2% from the prior year. Fourth quarter revenue was also up 2% to a record $479 million. Both increases were driven by higher cement sales volume and contribution from the two acquired aggregates businesses, which were partially offset by lower Wallboard sales volume and prices. Annual earnings per share was $13.16, down 4%. The decrease reflects lower net earnings, which were mostly the result of lower Wallboard sales volume and prices offset by a 5% reduction in fully diluted shares due to our share buyback program.

Turning now to segment performance highlighted on the next slide. In our heavy materials sector, which includes our Cement and Concrete and Aggregates segments, revenue increased 10%, driven primarily by an 8% increase in cement sales volume and a 19% increase in concrete and aggregates revenue. Aggregate sales volume reached a record 6.6 million tons, up 70% year-over-year, reflecting contributions from our acquired aggregates operations.

Importantly, organic aggregate sales volume increased 24%, underscoring healthy underlying demand. Sales volume growth in both business lines was supported by continued strength and public infrastructure spending as well as key areas of private nonresidential construction activity, such as data center development. Operating earnings also increased 10% driven primarily by higher cement sales volume, partially offset by a 1% decline in net cement sales prices.

Moving to the Light Materials sector on the next slide. Annual revenue in the sector decreased 9% to $881 million, reflecting lower Wallboard and recycled paperboard sales volume and a 4% decline in Wallboard sales prices resulting from continued softness in residential construction. Operating earnings in the sector were down 15% to $331 million, primarily because of lower Wallboard sales volume and prices. Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined manner, consistent with our long-term strategic priorities.

During fiscal 2026, operating cash flow increased 12% to $614 million, reflecting the strength of our business and the resiliency of our operating model. Capital expenditures totaled $417 million in fiscal 2026 driven primarily by investments in the modernization and expansion of our Mountain Cement plant in Laramie, Wyoming and the modernization of our Duke, Oklahoma Wallboard facility. These projects represent important long-term investments that will enhance plant efficiency, improve reliability, and strengthen our competitive position.

Looking ahead to fiscal 2027, we expect capital expenditures to range between $490 million and $525 million reflecting continued progress on these strategic growth initiatives as well as ongoing sustaining capital investments across the company. Capital spending is expected to peak in fiscal 2027 with the Mountain Cement project scheduled for commissioning later this calendar year and the Duke project anticipated to conclude in mid-fiscal 2028. At the same time, we remain committed to returning capital to shareholders. During fiscal 2026, we returned a total of $414 million through quarterly dividends and the repurchase of approximately 1.7 million shares for $382 million. We ended the year with approximately 2.9 million shares remaining under our current repurchase authorization.

And finally, turning to our capital structure, which continues to provide us with significant financial strength and flexibility. During the fiscal year, we further strengthened our balance sheet through the issuance of $750 million of 10-year senior notes at an attractive 5% interest rate. This transaction improved our debt maturity profile, enhanced committed liquidity and better aligned our capital structure with the long-term strategic investments underway at our Mountain Cement plant and Duke Wallboard facility. We also used a portion of the proceeds to repay borrowings under our bank credit facility further enhancing our financial flexibility.

At March 31, 2026, our net debt-to-capital ratio was 50%, and our net debt-to-EBITDA leverage ratio was 1.9x. Levels we believe remain prudent and supportive of our growth strategy. We ended the quarter with $298 million of cash on hand and approximately $1 billion of total committed liquidity. Importantly, we have no significant near-term debt maturities, positioning us well to continue investing in the business while maintaining a strong and flexible balance sheet.

Thank you for joining today's call. Bailey, we will now open the line for questions.

[Operator Instructions] Our first question comes from Trey Grooms with Stephens.

And congrats on the strong finish to the fiscal year, particularly on the margin performance. Maybe starting there. Could you walk us through some of the key puts and takes on the margins across the segment this quarter?

Yes. No, thanks, Trey. Look, on the cement side, as you saw, we really good volume. Our regions continue to perform well. That volume -- the incremental volume was good this quarter as we saw a good flow-through. We -- as Michael mentioned, a lot of our solid fuels have been obligated through supply agreements through this year. So we continue to perform very well there.

The plants really good plant efficiencies this quarter versus a year ago. And then on the light side, the wallboard business continues to perform very well. The paper mill had another record year for us. That plant is running very, very well. Those plant efficiencies across the enterprise really, you see the benefit in the margin profile that's being generated.

Yes. Very good. And on that cement volume strength in the quarter. Could you talk a little bit about some of the drivers there and maybe what you're seeing from just kind of an underlying demand perspective as we move into the seasonally stronger part of the building season?

Yes. We mentioned in the release, some portion of it was last year's fourth quarter had a really tough comp or had a really tough weather environment. So there was a relatively easy comp. But as we've talked about, the underlying strength in public infrastructure remains positive with state budgets very healthy.

And then the areas of private nonresidential construction, we mentioned data centers. Those have been very strong, especially in the regions in which we operate. So those are the two big drivers for underlying demand. And then as you pointed out, really during what would generally be a pretty slow construction season. So we're excited about how the construction season has started here in April and carrying into May and shaping up for a good year in fiscal 2027.

Great. Last one for me. On cement, the pricing was down slightly although you've now implemented price increases across most of your markets, as you've talked about in prior calls, could you give us any color to the extent you could on how those increases are being received? How maybe we should think about that pricing here again as we're moving into the peak construction season. I know you did mention that regionally in some of your markets, you are seeing some tightening there. So just any color you might give us on the cement pricing front?

Yes. We have cement price increases in just about every market for April 1. Some of our Western markets and down south, we didn't have increases. But we're in the process of executing on those, we do have some higher freight costs that on a net basis will be impactful. We see that in cement when we transfer the terminals. We see that also in Wallboard as we pointed out in the release, but we're in the process of implementing those and having a good volume environment is certainly a positive and a support for that.

Our next question comes from Anthony Pettinari with Citi.

Just following up on Trey's question and there's a little bit in the release about this, but could you maybe give any more color in terms of quantifying the impact of diesel and freight costs? And maybe just kind of remind us how much you're buying directly, how much is sort of like a pass-through versus having to raise prices in the open market? Just kind of -- if you could put any kind of finer point on how a higher diesel environment impacts both the cement and the Wallboard business?

Yes. We'll start on the Wallboard side, maybe it's a little easier to understand. So we price Wallboard on a delivered basis, meaning we're responsible for the freight bill. And sequentially, we saw at least about a $2, maybe pushing $3 increase in freight costs. So that impacts what we call our mill net, our net sales price. So that's how diesel from a delivery basis impacts the Wallboard business. on cement is a little more nuanced because there's more of a combination of customer pickup and then which the customers would cover versus being delivering to our terminals for them to pick up.

We cover the freight to the terminal. And then again, we saw some inflation there, a couple of dollars on a per ton basis. And so then if you think about operating costs, we certainly use diesel in the quarry operations. We're very fortunate, again, our quarries are near our facilities, meaning the limestone quarries that are feeding cement plants, the gypsum quarries that are feeding the wallboard plants close to the facilities. So we try to minimize what we can in terms of those freight costs, but we certainly saw an impact, but the delivery cost is a much more meaningful number for us today.

Okay. That's very helpful. And then maybe just one follow-up. I know you don't have as much exposure to imports from a cement perspective as some other companies. But given the rise in fuel costs and challenges in ocean freight, are you seeing cement imports come in at a higher cost or meaningful impact there?

Yes. So we do import into a couple of markets into South Texas and into Northern California. And yes, we've seen -- we track the Baltic Dry Index, and that has certainly ticked up here recently with all of the issues that are happening globally, not just the energy costs, but there's other factors that are impacting ocean freight rates. And yes, that has increased those costs, which, again, is upward pressure on a supply product into the U.S.

Our next question comes from Timna Tanners with Wells Fargo.

There are some views out there that the data center demand is the real reason why Q1 volumes have been so strong. And I'm just wondering what you think of that? I know you mentioned that on the cement side. I know you mentioned that there are easier comps and other factors, but can you drill down a little bit more on what you're seeing on the data center side and remind us how big it is for your end markets?

It's definitely very meaningful. We mentioned two things with public infrastructure. We continue to see good activity there in our markets. But data centers were certainly a large contributor to the improvement. And I might add, I mean, it's not like we're in the last innings of the data center development. We -- just in the beginning in many of our markets, more soil stabilization and those type of activities. So that's certainly -- it's funny.

You think about the components of the demand environment, we talk about private nonres. We traditionally thought about hotels, office buildings, schools, those types of things. You really have components of private nonresidential that didn't exist 10, 15 years ago, whether that's warehouses or these data centers. We've seen the fabrication facilities for a while now. So there's actual components of private nonres that I think are much more meaningful than what people were expecting and certainly than we've ever seen historically.

Our next question comes from Adam Thalhimer with Thompson Davis.

Craig, can you give a little bit more color on the April 1 cement price increases? And then on the wallboard side, what's the chance that wallboard pricing bottoms here in the near term?

Yes. So Adam, I'll start with the last part of your question first. We have a June 1 price increase in Wallboard. And a lot of that is stemming from some of these transportation costs that we've seen over the last several months that as I mentioned a few moments ago, we priced Wallboard on a delivered basis, and that freight bill is falling back to us. And so we do have a price increase letter out there.

More broadly speaking, Adam, you look at where the demand trends are for wallboard today in the United States. Michael mentioned it. They are dramatically below trend that you would have expected to see with the population growth we've seen here in the U.S., et cetera. So demand and pricing are going to be linked. But given where our business is performing at this demand level, very, very proud of how that business is operating and our folks are running our facilities. In terms of the cement price increase, as we mentioned a little while ago, also, we've got price increases in most markets for April 1. Those are underway. There are some nets against with freight bills that will offset that. But given the demand environment, we are pushing forward with those April 1 increases as well.

Okay. And Craig, you mentioned CapEx this year is around $500 million, plus or minus. I'm just curious, what would that be if you stripped out the two big capital projects and you just had maintenance CapEx? And then once the 2 big capital projects are done, what will the maintenance CapEx be in perpetuity?

Yes, Adam, that's a great question, something we really focus on. As I mentioned, fiscal '27 this $500 million number will really be the peak. As you start to look towards fiscal '28 as the Duke -- or sorry, the Mountain Cement project will have been completed, the Duke plant will start -- will be completed during that year. That number starts to come down significantly.

What I call sustaining capital needs are in the $150 million range. I don't think we're -- that exact run rate for fiscal '28, we're probably still in the $250 million range with the Duke plant finishing in the first half of the year. But as you get into the back half of fiscal '28, absent some other significant project coming up, we would be at that $150 million annual run rate.

Our next question comes from Philip Ng with Jefferies.

Congrats on the strong quarter. I think on the Wallboard side of things, the previous 2 quarters, your volumes lagged the industry considerably. So that trend reversed pretty nicely. Were there any one-offs that's driving that like were rebates and how contracts were set up? Or are you seeing a nice catch-up here, you're recapturing some share at this point?

No, Phil, I don't think anything we would call out. I think as we talked about a year ago, we outperformed the industry because of some regional benefits and things like that. But this was just -- in the last couple of quarters, we're just a normalization of that. So not surprised to see us performing in line with the industry.

Okay. Helpful. Craig, any early read on how trends are shaping up in April and May? I mean housing has still been pretty choppy, but any color in terms of order patterns on the wallboard side?

Look, as you said, housing, it's hard to -- the crystal ball there isn't real clear. It's clear over a broader time period, we need to build significantly more homes in the U.S. We're significantly underbuilt. How that trend happens over the next 6 to 9 months, I think, is still a little unclear. But certainly, over a broader time period, we see a lot of upside for that business, both for volume price and therefore, margins.

Okay. On the cement side, certainly, volumes were extremely strong in 2026. Admittedly, some of that is lapping easier comps. Can we -- when we look out to April, May and frankly, 2027, should we expect positive volume growth given some of the momentum you're seeing in infrastructure in some of these data center projects.

I asked just because the industry data, I think PCA or whatever new format it's called, is anticipating volumes down, call it, low single digits, but certainly, you're seeing that momentum. So just help us kind of tease out what you're seeing and how we should think about the demand backdrop this year.

Yes, Phil, it's interesting. We've seen the same data. And look, I think part of it is our regional footprint is -- certainly, we saw it in calendar '25 outperformed the national average. The national average was down in '25, and we are up slightly. But if you did went market by market, region by region, however you want to describe it, our markets outperformed the national average.

And so as we head into calendar '26, our fiscal '27, I think we remain optimistic about the underlying demand environment for the reasons we've discussed. So yes, we still look for a positive momentum in volume. Certainly, understanding the ACA has a different number. But again, it could be more of a national average type of issue. But as we look at our markets, we continue to see good momentum there. Do I think we continue to post double-digit type of increases? I'm not suggesting that. But I do think we continue to see improvement in our markets.

Our next question will come from Timna Tanners with Wells Fargo.

I just wanted to also ask if you could kind of share some thoughts on some of the chatter recently about gas tax holidays on the federal and state level and also the proposed replacement for IIJA and how you think that will impact Eagle and the industry?

Yes. The last part of your question is pretty fresh. Some of that text coming out in the last, call it, 24 hours or so. I think what it points to is there's obviously a desire and a need to continue to extend the IIJA and its new version. I think that will be supportive of public infrastructure for a long period of time. It's a little early to speculate on the exact dollar amounts and exactly how and when, but it's certainly supportive.

In terms of the first part around gasoline tax holidays, things like that, those have traditionally been pretty temporary in terms of -- you see some energy spikes like this and try to compensate for that. But the projects that we've seen in the funnel are already supported and don't see that impacting those projects moving forward.

Okay. Appreciate it. And if I could, if you think past the current heavy CapEx cycle, could you remind us about how you're thinking about capital allocation? Anything do you see in terms of the pipeline for acquisitions? Or if you could give us a high-level characterization of the M&A outlook?

Yes. I appreciate the question on that. We always look for M&A acquisitions as long as they make sense and meet our financial return criteria. So I think we've been clear and will remain clear on our capital allocation is always for growth, primarily as long as it comes at a good value. Maintaining our assets and like new condition and then returning cash to shareholders. That's been our hallmark for the last decade and will continue to be our hallmark of how we deploy our capital.

Our next question comes from Tyler Brown with Raymond James.

Craig, I think between Mountain Cement and Duke, you're going to spend maybe $760 million on those projects. And I know that those projects are kind of both growth and kind of maintenance in nature. But by the time we get to think about maybe fiscal '29, is there a return on that capital that we should think about conceptually? I mean, is there a way to think about -- we deploy $760 million at some EBITDA multiple? Or is there just any way to think about that into the future?

Yes, Tyler, great question. Look, I want to go back to the projects. I mean these are long-term strategic investments that will give us some incremental output, but also dramatically reduce the operating cost structure of both of those facilities.

As we pointed out, the Mountain cement plant in Laramie, Wyoming is one of our oldest cement plants will lower the cost structure predominantly through more energy savings, a much more fuel-efficient facility, Duke, the same way or very similar. So I don't want to dismiss the improvements of those projects. But when we make investments like those projects, and we've made similar investments historically, we're targeting a double-digit type of return on those investments.

And so yes, you're pointing out the right time frame as we get into fiscal '29. That's when you've got both of those projects will have been completed and available to run. And those cost savings will be very, very meaningful part of that improvement.

Okay. Excellent. That's helpful. And then this is a bit more of a minutia question, I suppose. But you mentioned earlier that the paperboard plant is running very well. And it's no doubt if you look at the EBIT contribution of that plant. But big picture, is that $40 million of EBIT a good run rate? Or was there a favorable setup this last year with revenue and cost mismatching? Or just any color there, just think about the longer-term model?

That profitability is sustainable. Part of that is because we have some pass-throughs. So call it, 60% of their sales volume is sold through long-term supply agreements, and those agreements have inflators and deflators. So yes, OCC was down this year, but we have the ability -- if it goes up, you pass that along. Sometimes there's a quarter lag to that. But that is about a team there at the paper mill really performing well, a plant -- high plant efficiencies. That drove a lot of it and -- but very, very sustainable earnings.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Haack for any closing remarks.

Thank you, Bailey. Before we end the call, I want to acknowledge and thank all of my Eagle colleagues for their focus and commitment through the turbulence of the last couple of years. The focus has enabled us to deliver strong financial results while making great progress on our two-plant modernizations in fiscal 2026.

As we move into our fiscal year 2027, even as uncertainty persists we'll keep steadily focused on safety, operational excellence and high-return, value-enhancing investment opportunities. Thanks for joining our call today. I look forward to keeping you updated on our progress through fiscal 2027.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, everyone, and welcome to Eagle Materials' Third Quarter of Fiscal 2026 Earnings Conference Call. The call is being recorded. At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir.

Thank you, Jerry. Good morning. Welcome to Eagle Materials conference call for our third quarter of fiscal year 2026. This is Michael Haack. Joining me today are Craig Kesler, our Chief Financial Officer; and Alex Haddock, Senior Vice President of Investor Relations, Strategy and Corporate Development. A slide presentation accompanies this call. To access it, please go to eaglematerials.com and click on the link to the webcast.

While you're accessing the slides, note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release.

In our third quarter of fiscal 2026, despite the mixed construction environment, our businesses continue to perform well. We generated $556 million in revenue. Our earnings per share were $3.22, and we delivered a gross profit margin of 28.9%. In these choppy times, Eagle continued to operate as it always has. We will control what is in our control, and adjust to current market conditions to maximize profitability in both the short and long term.

Our strategy is consistent. We will invest in the health and safety of our largest differentiating asset, our people, our plans to control costs and support our customers through increased reliability, efficiency and capacity, our short- and long-term strategy with focused projects or acquisitions. All of this while ensuring our balance sheet remains in pristine condition. Foundational to everything we do is maintaining the highest standards of health and safety. Our annual safety conference was held in December, it is always a great opportunity to interact with the leaders of the organization to review our safety and environmental performance, pass along some important messages and set our path for continued improvement.

Our journey to 0 incidence is ongoing, but every employee at Eagle understands that the safety of our people always comes first. If we cannot perform a job safely, we will not perform the job. These meetings with the best practice sharing and commitment from the team have allowed Eagle to maintain an industry-leading safety record. To say the least, I'm proud of all Eagle's employees and the safety culture we have built.

Regarding our plans, we work to maintain the reliability of our assets, increase efficiency and capacity which gives us operational flexibility to execute efficiently through economic cycles. This past quarter, we advanced several initiatives that convert our waste streams into revenue streams to help further improve our low-cost producer position. Let me give a few examples. In cement, we have been able to reclaim decades old waste streams that can be used as a source of raw materials in our production process.

In our aggregates operations, we have begun using fines and overburden to support our raw materials or extend our reserves at our cement plants and aggregate facilities. In the light side of our business, we are expanding the capabilities of our Republic paper mill to repurpose non-wallboard grade paper and trim roles in the higher value-add products. At American Gypsum, we are recycling 100% of our waste wallboard back into the production process, except at our Duke facility which will also be at 100% following the completion of our modernization there.

Importantly, many of these projects require minimal or no capital investment while having an outsized positive benefit on our operations. These initiatives complement some larger strategic projects we have underway that benefit our overall system reliability, capacity and profitability, namely the modernization of our Mountain cement plant and the Duke Wallboard facility. We made good progress on both projects during the quarter which means that our Laramie, Wyoming cement plant should be going through its commissioning late this calendar year, followed by our Duke, Oklahoma commissioning in the second half of calendar 2027.

Each investment will lower the cost structure of the respective plant, strengthen our already low-cost competitive position and deliver a strong return on investment. I'm incredibly excited for what's ahead as we are experiencing some downtime at the Mountain cement kilns recently, increasing the justification for the modernization project. In the meantime, we can use our network of cement plants to meet our customer needs, albeit at an increased cost. We'll continue to report on progress as we approach the end of each plant's construction time line. With both plants coming online over the next 18 months, let me pivot now to where we think we are in the economic cycle. At Eagle, we don't operate in a way that is overly focused on short-term demand cycles.

Our primary products are essential commodities, meaning demand will fluctuate. That being said, heavy materials and wallboard appear to be at different inflection points today. Our cement and aggregate sales volumes grew last quarter, and we believe the support from federal, state and local infrastructure spending with solid growth on key nonresidential end markets will continue support for our heavy materials business.

As discussed last quarter, we have announced price increases for the first quarter of calendar 2026 in most of our markets further reflecting our volume expectations for our heavy materials business. At the same time, residential construction, which drives wallboard volumes was challenged last quarter. Current housing data reflects the affordability issues that have been plaguing the homebuilding industry for quite some time. Recent housing policy announcements combined with more accommodative monetary and fiscal policy recognize the fundamental need for new home construction in the U.S., so we are monitoring these developments closely.

Nonetheless, as I said, our focus is on our operations, not on predicting demand. Over decades, we've demonstrated that we can operate equally well in strong economic environments and in mixed construction environments. Our low-cost producer position gives us opportunities and advantages for managing costs. In wallboard, our sustaining maintenance costs are already low, and we benefit from the ability to flex production to match sales.

Finally, as I mentioned earlier, our focus on financial discipline and balance sheet strength remains. During the quarter, we strengthened our already solid financial position issuing $750 million in 10-year senior notes, aligning our capital structure with our ongoing investments at the Laramie, Wyoming cement plant and Duke, Oklahoma Wallboard plant. While making significant progress on our major capital projects, we increased our return of capital to shareholders.

During our fiscal third quarter, we returned nearly $150 million to shareholders through our dividend and share repurchases. Our leverage ratio of 1.8x allows us to navigate cycles and stay in growth mode even as our end markets have endured choppiness. Craig, with those comments, I will now turn it over to you.

Thank you, Michael. Third quarter revenue was $556 million, down slightly from the prior year. The decrease reflects lower wallboard and paperboard sales volume, partially offset by higher cement sales volume and the contribution from the recently acquired aggregates business. Third quarter earnings per share was $3.22, down 10% from the third quarter of fiscal 2025. The decrease reflects lower net earnings, mostly the result of lower wallboard sales volume offset by a 5% reduction in fully diluted shares due to our share buyback program.

Turning now to segment performance. In our Heavy Materials sector, which includes our Cement and Concrete and Aggregate segments. Revenue was up 11%, driven primarily by a 9% increase in cement sales volume and a 22% increase in concrete and aggregates revenue. Aggregate sales volume was up 81% to a record 1.6 million tons, reflecting a 34% increase in organic aggregate sales volume and the contribution from the recently acquired aggregates business.

Operating earnings were up 9%, driven primarily by the 9% increase in cement sales volume. As Michael mentioned, cement price increases have been announced in most of our markets to take effect in the first part of calendar 2026. Moving to the Light Materials sector on the next slide. Revenue in the sector decreased 16% to $203 million, reflecting lower wallboard and recycled paperboard sales volume and a 5% decline in Wallboard sales prices. Operating earnings in the sector were down 25% to $73 million, primarily because of lower Wallboard sales volume and prices.

Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined way, in line with our strategic priorities. During the first 9 months of the fiscal year, Operating cash flow increased 5% to $512 million. Capital spending increased to $295 million. Most of this increase was associated with the modernization and expansion of our Mountain Cement plant in Laramie, Wyoming and the modernization of our Duke, Oklahoma Wallboard plant. Considering these 2 projects as well as our sustaining capital spending, we expect total capital spending in fiscal 2026 to be in the range of $430 million to $450 million.

During our fiscal third quarter, while investing in these growth projects, we also significantly increased our shareholder distribution. We returned nearly $150 million to shareholders through our quarterly dividend payment and the repurchase of approximately 648,000 shares of our common stock. Through the first 9 months of fiscal '26, we have repurchased approximately 1.4 million shares or 4% of our outstanding. We have approximately 3.3 million shares remaining under our current repurchase authorization.

Finally, a look at our capital structure, which continues to give us significant financial flexibility. As Michael mentioned, during the quarter, we further strengthened our financial position by issuing $750 million of 10-year senior notes with an interest rate of 5%. This issuance enhances our debt maturity scale, increases committed liquidity and aligns our capital structure with the long-term investments we're making at our Mountain cement plant and Duke Wallboard facility. We also used a portion of the proceeds to repay our bank credit facility.

At December 31, 2025, our net debt-to-cap ratio was 48% and our net debt-to-EBITDA leverage ratio was 1.8x. We ended the quarter with $419 million of cash on hand. Total committed liquidity at the end of the quarter was approximately $1.2 billion, and we have no meaningful near-term debt maturities, giving us substantial financial flexibility. Thank you for attending today's call. We'll now move to the question-and-answer session. Drew, I'll throw it back to you.

[Operator Instructions] The first question comes from Trey Grooms with Stephens Inc.

Craig and Michael. So Cement, if we could start there, the cement volume up nicely again in the quarter, also organic aggregates volume as well. Can you -- you touched on a few things there in the press release or in the slide deck rather that were -- where we were seeing some strength, maybe infrastructure, data centers, those types of things. Can you talk about -- is that demand pretty well wide spread across your markets? Or is it more isolated to some specific geographies? And then has that strength kind of continued as we've started off here into calendar '26?

Yes. Trey, Look, I would tell you, it's pretty broad-based across our markets. I think we came into calendar '25. If you think about a year ago, we were optimistic around infrastructure, some of the nonresidential key markets, and that played out as we had expected. And in many parts of our markets. And we're a broad national footprint. And so as we head into calendar '26, we have some -- continue to have that optimism around infrastructure and some of the nonresidential markets. So always hard to generate a trend in January and February given winter weather. And certainly, we've all lived through that in the last week or so, optimism coming into '26.

Good deal. Okay. And kind of sticking with cement, the margins impacted a bit here down a little bit here. I understand there was maybe a slight decline in pricing. But volume again here was strong like we discussed. Can you talk about what's driving the margins there? I didn't see anything kind of unusual called out in the press release as far as maintenance or anything, but just if you can maybe touch on the margins in cement.

Yes. I mean, look, costs were largely in line. We did have some raw material costs, purchased raw materials costs that were up this quarter, but maintenance was largely in check. Fuel costs, as we've talked about, have been largely in line. So nothing stands out significant.

Okay. Okay. Fair enough. And then last one for me is on wallboard pricing, you saw a little bit of a decline there sequentially. I think it was about 3% or so and not overly surprising, but have you -- has this kind of pricing trend maybe continued into January? Or how should we be thinking maybe about the kind of directionally at least with wallboard -- around wallboard pricing here in the near term as we kind of bump along at these lower demand levels with nothing looking to change dratically on that front, at least in the near term. Any color you can give us on how we should be thinking about that.

Well, you hit on it, Trey. The annual shipments for calendar '25 for wallboard came in at about 25.4 billion square feet. That's back to a 2018 pace. So in this type of residential market, not at all surprised to see pricing have some downward trend. But again, very range-bound relative to what we've seen and certainly relative to the demand environment that we're in. So I'm not surprised by that at all.

Yes. But I assume it's still your take that -- there's been a lot of changes in the industry and with the cost structure that we've talked about for years that have, I think, maybe changed -- made some changes with pricing over the long term of being somewhat structurally higher just given the backdrop of some of those things. So is it still your take that modest declines could be expected, but these changes are still in place such that we shouldn't be expecting any kind of replay of some of the more drastic price swings that we saw maybe go back 10-plus years ago?

Yes. No, exactly. Given all the changes that have happened with raw material costs, this is what you would have expected to see happen a pretty range-bound pricing environment even in light of a very difficult residential environment. So I don't see anything changing from that perspective. I do think there's upside on pricing as we get housing to recover and back to a reasonable level of construction activity, I think you'd see that fairly quickly. But in the current environment, yes, I still think prices are relatively range bound.

The next question comes from Brent Thielman with D.A. Davidson.

Just had a follow-up on the wallboard side, just the down 14% in terms of shipments. Just thoughts in terms of whether that's consistent across the footprint or you've got some -- potentially some regions outperforming that?

No. That was pretty consistent across our regions. And if you look at the total GA numbers, they were down 8%, and our regions underperformed that. So our business was pretty much in line with the regional performance.

Okay. And then on the Lehi JV, Craig, I guess I've been anticipating some improvement in terms of the profit contribution. Just wanted to get a sense of what we're seeing here in the December quarter sort of indicative of the market trends? Or is there still some operational noise under the hood there?

Yes. So with the JV itself, we're -- the plant itself is performing better. Texas was probably our most challenged market both from a pricing standpoint and some on demand and its competitive nature with it. So I know Trey asked the previous question about across the U.S. where we see kind of our demand and our pricing and everything with it. And we've been very stable in every location except Texas had the most pressure. So you could really look at this as more of -- we had to adjust our pricing more in that area, which offset some of the benefits you'd see from our plant to operating better on the profit side.

Okay. Appreciate that. Maybe just last quick one. Just in terms of the proposed price increases in cement here to start the year, I think typically, you do some in January and some in spring. I mean just from past experience, obviously, terrible weather across the country. Does that potentially push some of this more into the spring? Any thoughts around that?

Brent, I would say we have terrible spring every January and February. So yes, look, the volume improvement we saw here in calendar '25 is really good to see in terms of the incremental pricing opportunity as we head into calendar '26. We do have increases out there. As we talked about they're spread throughout here the first couple of months of calendar '26. Exact realization, we'll certainly update everybody on. But we have the volume momentum, and that's a good sign and expect that to continue here into calendar '26. .

Next question comes from Anthony Pettinari with Citigroup.

Yes. This is Asher Sohnen on for Anthony. I was just wondering how we should think about maybe natural gas costs for wallboard and cement in the fiscal fourth quarter. I think natural gas prices have risen pretty meaningfully in recent weeks. So I'm just wondering how you guys are looking at that?

Yes. It's really more of a wallboard thing in cement, you're going to burn typically more solid fuels than natural gas. In wallboard, and we do have a hedging program in place, so we're a little more than 50% hedged here through the winter, which is where we like to be because you will see the spike when you get these winter storms that pop up. And I think that's what's driven natural gas here in the last week or so with the colder temps. I fully expect that to come back down more in line. There's not something that's structurally changed in the natural gas markets. So just a short period here during the winter, and we've got a good hedge position from that.

Okay. Great. And then one more for me. I mean, with the pressure in Wallboard, it seems like it's coming a lot from new build. But I was wondering if you could talk about roughly what portion of the business is repair and remodel. I know it's a little bit smaller, maybe harder to estimate. And then what trends you might be seeing in that end market if you're able to get that visibility?

Yes. No, it's a good question. We talk about a lot of the new residential construction activity, but repair and remodel is, call it, 1/3 of the demand profile for wallboard. And it's certainly meaningful and has been growing over the last many, many years. And it's a much steadier market, harder to get forecast data exactly. But at least the forward look there continues to see low single-digit type of growth and a very meaningful market for us. So it's a good question.

The next question comes from Timna Tanners with Wells Fargo.

I was hoping to follow up on the comments or questions about the upcoming quarter. If you had any specific observations on any impact to your operations from these storms. Anything you can comment on there?

As it relates specifically to the winter storms, our folks have done a really, really good job of preparing the facilities for very extreme cold temps, weather-proofing lines, raw material lines and things like that. So from a winter storm perspective, our folks and our plants are ready for it.

Okay. I appreciate that. And then I was wondering if you can get into some more specific about what you're seeing about cement imports. I think that's what you're alluding to in terms of Texas and California, but any updated observations there?

Yes, really, how you look at it is any of the markets that could be served by imports, of course, it all depends on the freight rates and everything come in. Texas is not just impacted by imports though, with my comments there with there's been any structural change in the market in Texas a little bit with the ownership. And every time there is changes in it, people operate their plants a little bit differently and look at markets a little bit differently.

So I think there has been some to structural changes on how those plants that changed ownership, which is a significant portion of the production in the Texas market between the 2 facilities, have different owners that they look at different. So we've just had different competitive pressures in Texas. As you get closer to the coast, imports definitely do have an impact, but it's kind of -- it's not just 1 thing that's affecting Texas, it's more. And that led us to respond to some competitive pressures.

Got it. Helpful. And then just finally from us on the CapEx comments, it seems like it was lowered from prior numbers. I'm just wondering if there's any basis [indiscernible] explanation for that.

No. Thanks, Timna, for bringing that up. We have been forecasting closer to $500 million. It's just timing. When you get these very, very large projects like in Cement and the Duke plant, it's hard to exactly forecast when spending will occur nothing to change there. And then sustaining capital, we look very hard at what spending needs to occur there. And in light of the elevated capital spending, we've done a good job of prioritizing more of the sustaining capital, which ends up with a slightly lower number.

The next question comes from Adam Thalhimer with Thompson, Davis.

I wanted to start on capital allocation. How are you guys thinking about share repurchases and acquisitions after the November bond deal?

Yes. Look, that's where we spend a lot of our time. We've positioned the assets -- we've got a good group of operators. And so how we continue to allocate capital to generate value is where we spend the majority of our time. As we've said, and this really hasn't changed over decades, and that is -- the priority is to continue to grow the organization. But with a high bar for that growth, both strategically and financially and whether that's M&A or organic. So we have the 2 large organic projects underway. Very excited about those and the returns they will generate, but we've also got a balance sheet that we can continue to pursue M&A activity, but remaining very disciplined on valuation there. And then you'll have our capital return strategy and we certainly repurchased more shares this quarter than we had in quite some time. And some of that's also relative to the stock price. And so we still see value in the shares. But we're fortunate we can continue to kind of have a balanced offense across all 3 of those.

Great. And then I want to ask about wallboard margins. Can you talk a little bit about the puts and takes there? I guess what I'm really getting after is if margins could stabilize at that Q3 level?

Yes. Look, I think we talked about we saw some sequential price declines there. I still think they're moderated given the structure and the changes that have occurred cost-wise, OCC continues to be at a pretty low level. Natural gas, again, it fluctuates a little bit during the winter, but I don't see that as a long-term change. We own our primary raw materials, so nothing significant on the cost side that we're looking at today. But in a volume environment, we'll see where that goes. But we've positioned the business to continue to perform at this high level even in this difficult environment for residential construction. So I think we'll continue to see good performance. .

Okay. And last one for me, the wallboard comps get a lot easier starting in late calendar '26. I'm just curious if there's any reason for optimism on volume stabilization or maybe even a little bit of growth as we get to the back half of the year?

Yes. Look, there's a lot of moving parts when it comes to home building right now. So I would say our optimism is around how well our assets are positioned, the cash flow that we're generating even in this environment and our ability to continue to make good return investments. So we'll deal with the choppiness. When it does recover, I think it recovers meaningfully, and you'll see a significant upward inflection there. But maybe a little early to call that.

Next question comes from Philip Ng with Jefferies.

Michael, great color on the Texas market for Cement. Are you seeing any other regions where you're seeing price competition be a little more elevated perhaps in the West? I know the last earnings call, you guys announced $8 per ton cement price increase in all the markets in Texas and the West, have you announced price increases in those markets? And any early read on how the Gen increase is progressing? Are you seeing any traction? Or are you seeing some pushback there?

It's a great question. When we look across the U.S., we're very happy with the remainder of our markets. I mean, some markets -- each market is independent of each other when you look at the supply-demand dynamics with it. But for the most part, we've announced price increases across the majority of our network with it. I highlighted Texas is the one that's the most challenged. Every other market structurally is in very good position we feel. So there's nothing I would point out there. What's really going to -- we're really going to determine over this next months is which ones as we talk with our customers, what that number is and if it's a January increase or an April increase, and that will be determined by individual markets.

That's helpful. And then, I guess, a question for you, Craig. Wallboard prices bled a little bit, right? No surprise there, just given dynamic on the homebuilding side. Are you expecting prices to kind of stabilize here and some of the weakness, is that destocking related? Or it's just kind of normal trends in terms of underlying demand? How should we think about the wallboards out of things?

Yes. Not really destocking in my view. Just it's a perishable product. So you don't -- can't store it outside. So you're subject to indoor storage at our manufacturing facilities and the distributors. Look, as we said in the beginning, I'm not surprised by some of the pricing weakness, but it's all relative. It's down but not down anything like what we would have seen in prior cycles, especially at this demand level. Utilization rates are higher, just given some of the raw material issues. So again, I think pricing stays range bound. I wouldn't be surprised to see some further decline here, but I think it's all relative and certainly versus where we are with the demand side.

Got you. And just kind of one final question on the Wallboard side. Two of I believe your larger customers on the Pro distribution side now are owned by big box. I'm just curious, as you kind of looking to 2026, have that relationship dynamic change any way in terms of how you're talking about procurement conversations? Is it the same people or it's kind of merge where you have the retail side versus the Pro side, having one conversation and then any movement from a placement standpoint, we should be mindful of this year?

Yes, Phil, I think it's probably a little early to have a definitive see how the -- again, you mentioned it, it's an important point, very different business models, the traditional retail versus the mass distribution how they run those is, I think, to be determined if they run them together or keep them independent because they are so different. So it's something that we'll continue to monitor, but maybe a little early to talk about that.

The next question comes from Keith Hughes with Truist.

A couple of questions on Wallboard. Given the volume, do you have to take extra downtime in the December quarter, you kind of were expecting something on the March quarter, we have some of that just given where housing is and where the trends are.

Keith, like we've always done, you match the production with the sales opportunity. It's more of a variable cost business. very different than cement. You can run a wallboard plant 7 days a week, you can run it 4 days a week. So you'll certainly modulate shifts depending upon the opportunity.

Okay. And the -- switching back over to Cement. On the cement side, I know you got price increases out when will you kind of be able to definitively tell what pricing is going to be like for the year? Is that something that becomes evident in March? Or does it take well into the second quarter before the price settles in?

Keith, really, it's going to be dependent on our conversations we have with our customers and what those individual markets are. You'll see -- we'll update you on each quarter on -- and you'll see it in the financial results with where we did the price increases and when. Our -- really, our conversations right now are on timing. We've announced them in those markets, and it's just on what timing we implement that makes sense for us and our customers.

The next question comes from Garrett Greenblatt with JPMorgan.

I was wondering you just touch on cement pricing once again in terms of what have you announced in your current letters that you've already sent? And then maybe something like a low single-digit volume growth year for cement. What has been the historical realization rate?

Yes. In terms of the price increases that have been announced, they've been around $8 a ton for most of our markets across the U.S., excluding Texas and the Far West markets. And timing ranges somewhere between January and April, kind of the first part of your calendar '26. And Michael said it earlier, but these markets are very regional. So they'll have very different -- the price will be determined regionally rather than a national average. So that's what we're going through right now. Look, we're coming off of calendar '25 for us is really the first year where we -- in the first 3 years -- the last 3 years where we've seen volume improve. And so that has certainly improved utilization rates. And so that's been good to see. And as we head into calendar '20, again, optimism around volume continuing to grow and should push utilization rates higher.

And then just a follow-up on Wallboard. How did those demand trends, I guess, progressed through the fourth quarter? Was there any momentum coming into calendar 1Q?

Look, it's been pretty consistent here in the second half of the year, which I think is pretty consistent with the homebuilders have been reporting and others within kind of this light building materials sector where the second half of the year was at a meaningful drop in demand profile. So I think as we head into calendar '26, again, you've got some winter issues here. but expect to continue to see a similar trend.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Haack for any closing remarks.

Thank you, Drew. As we enter the final quarter of our fiscal year, we continue to prioritize health and safety, operational excellence and financial discipline while seeking growth opportunities that meet our strategic and financial criteria. I look forward to elaborating more on our strategic priorities next quarter as we wrap up our fiscal year 2026. Thanks to everyone for joining our call today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, everyone, and welcome to the Eagle Materials Second Quarter of Fiscal 2026 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir.

Thank you, Chris. Good morning. Welcome to Eagle Materials conference call for our second quarter of fiscal year 2026. This is Michael Haack. Joining me today are Craig Kesler, our Chief Financial Officer; and Alex Haddock, Senior Vice President of Investor Relations, Strategy and Corporate Development.

There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast. While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call.

For further information, please refer to this disclosure, which is also included at the end of our press release. Thanks for joining us on today's call. I'm looking forward to discussing the details of our first half of fiscal 2026. I'll start by saying how proud I am of the Eagle team having achieved financial, operational and safety performance we did this quarter, even as we felt the headwinds from the residential construction pullback.

Financially, we were able to achieve record revenue of $639 million, gross margin of 31.3% and deliver an EPS of $4.23. Strategically, we made significant progress on our Laramie, Wyoming plant modernization and expansion and commenced construction of our Duke, Oklahoma Wallboard plant upgrade. I'll talk about both strategic capital investments more in a few minutes as they tie directly to our capital allocation principles and value generation for our shareholders.

Turning to safety performance. The halfway point of our fiscal year is also a time when we reflect on our safety performance and prepare for our upcoming Annual Health Safety Environment, or HSE conference. Eagle Materials has a fantastic safety track record, consistently performing below the industry average for total recordable incident rates across all of our businesses. While we are proud of the safety history, our goal is 0 incidents.

At this year's HSC conference, we will focus on how we could capitalize on our momentum by being proactive and continuing our emphasis on leading indicators to drive further improvement. I'm excited to welcome our employees to our HSE conference later this quarter. Thank you for -- to each and every one of you for everything you do to keep our people safe.

Next, let me comment on the business outlook for the remainder of our fiscal year and beyond, starting with the heavy side of the business. We entered this calendar and fiscal year cautiously optimistic about potential volume recovery in cement and aggregates. In line with our expectations, our cement and aggregates volume increased for the second consecutive quarter and were up for the first half of the year. The backdrop for cement and aggregates volumes remains favorable for the remainder of our fiscal year for several factors.

About 60% of the investment in the Infrastructure and Jobs Act or IIJA funds have yet to be spent, and all signs point to those IIJA dollars flowing into construction projects. We also continue to believe private nonresidential construction dynamics should support cement consumption. Against the improving volume outlook for cement and aggregates, we have announced price increases across most of our markets effective January 1, 2026.

Our views regarding residential construction activity, the primary driver for wallboard consumption remains more reserved in the near term. Volumes this quarter are affected by reduced demand due to high interest rates and affordability challenges. As the builders pulled back over the summer, our Wallboard volumes were impacted. The stability in Wallboard pricing, however, is the clearest evidence to date of the structural changes benefiting our business.

The capacity reduction and steepening of the cost curve brought about by the decline in synthetic gypsum availability has kept capacity utilization rates reasonable even in the challenging homebuilding environment that has persisted in the United States. The decades of underbuilding of homes should lead to mid- and long-term growth in wallboard demand. The obvious question that follows is often when will housing turn.

At Eagle, we do not obsess over near-term demand drivers. We run our businesses and invest in their long-term growth. Even in this more challenging market, we continue to generate meaningful excess free cash flow. And thus, we do obsess over how we best invest the cash to generate shareholder value. I'm excited about 2 organic growth investment projects we have underway, both of which currently are on budget and on schedule. Both projects are unique and compelling, albeit for different reasons.

At our Laramie, Wyoming cement plant, we are on track to complete our $430 million modernization and expansion project by the end of calendar 2026. This project provides us with several unique advantages. Federal and state environmental regulations make it increasingly difficult to permit greenfield or brownfield cement capacity additions, and we have not seen any loosening of restrictions. The Laramie, Wyoming plant is also one of the oldest and therefore, a higher cost cement plant in our network.

Modern cement kiln technology is much more efficient than the 1960s vintage kilns currently used at our Laramie facility. This allows us to reduce our manufacturing cost by 25%. The new preheater pre-calciner tower and single kiln system will replace the current long dry 2-kiln system. This will result in lower energy usage in the form of fuel and electricity and allow us to use a significantly higher proportion of alternative fuels and natural gas while having meaningful savings on annual planned maintenance.

We are undertaking a similar modernization project at our Southern Oklahoma Wallboard facility. Again, much of the return is driven by the fact that our Duke, Oklahoma Wallboard plant is one of the oldest, highest cost wallboard plants in our network. Upon completion, we will lower the per unit cost of the wallboard production by about 20% by reducing electricity consumption, automating the production process and lowering our annual maintenance needs. Importantly, when volume does recover, Laramie and Duke will be well positioned to capitalize on long-term growth drivers.

In tandem with these projects, we continue to look for other high-growth, high-return and high-impact projects. This includes M&A opportunities that meet our return criteria. We also continue to return capital prudently in the form of share repurchases while maintaining flexibility on our balance sheet.

With that, Craig, I'll turn it over to you.

Thank you, Michael. Second quarter revenue was a record $639 million, up 2% from the prior year. The increase was driven by higher cement sales volume and the contribution from the recently acquired aggregates businesses. Excluding the acquired businesses, consolidated revenue was up 1% from the prior year. Second quarter earnings per share was $4.23, down 1% from the second quarter of fiscal 2025. The quarterly EPS reflects lower net earnings, mostly the result of lower Wallboard sales volume, offset by a 4% reduction in fully diluted shares due to our share buyback program.

Turning now to segment performance highlighted on the next slide. In our Heavy Materials sector, which includes our Cement and Concrete and Aggregates segments, revenue was up 11%, driven primarily by increased sales -- cement sales volume and a 24% increase in concrete and aggregates revenue. Record aggregate sales volume was up 103%, including the contribution from the recently acquired aggregates businesses. Organic aggregate sales volume was up 35%. Operating earnings were also up 11%, primarily because of the 8% increase in cement sales volume, which was partially offset by a 1% decline in net sales prices. We also have recently announced cement price increases in most of our markets effective January 1, 2026.

Moving to the Light Materials sector on the next slide. Second quarter revenue in our Light Materials sector decreased 13% to $213 million, reflecting lower Wallboard sales volume and a 2% decrease in Wallboard sales prices. Operating earnings in the sector were down 20% to $78 million, primarily because of lower Wallboard sales volume.

Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined way. During the second quarter, operating cash flow decreased 12% to $205 million, primarily reflecting working capital changes on tax payment timing. Capital spending increased to $109 million. Most of this increase was associated with the modernization and expansion of our Mountain Cement plant and the project to modernize our Duke, Oklahoma Wallboard plant.

Considering these 2 projects as well as our sustaining capital spending, we expect total company capital spending in fiscal '26 to be in the range of $475 million to $500 million. During the quarter, we continued to distribute cash to shareholders while investing in the 2 growth projects. We repurchased approximately 396,000 shares for $89 million in addition to paying our quarterly dividends, returning a total of $97 million to shareholders in the second quarter. We have approximately 3.9 million shares remaining under our current repurchase authorization.

Finally, a look at our capital structure, which continues to give us significant financial flexibility. At September 30, 2025, our net debt-to-cap ratio was 45%, and our net debt-to-EBITDA leverage ratio was 1.6x. We ended the quarter with $35 million of cash on hand. Total committed liquidity at the end of the quarter was approximately $520 million, and we have no meaningful near-term debt maturities, giving us substantial flexibility.

Thank you for attending today's call. Chris, we'll now move to the question-and-answer session.

[Operator Instructions]

And today's first question comes from Trey Grooms with Stephens.

I guess, first off, on Wallboard volume, down almost 14% in the quarter after seeing some outperformance over the last few quarters. And I understand you guys are facing tougher comps now, and you had some easier comps earlier this year. But if you could maybe talk about the Wallboard performance and a little more color within the quarter? And then kind of what drives the big swings that we've seen from one quarter to the next? And any color on maybe directionally how we should be thinking about the demand drivers here?

Yes. Thanks, Trey. Look, I think the first point is, there's no doubt we saw the production from the builders pullback during the July, August time frame. I think that was pretty well chronicled across the housing space. And so that obviously is the biggest driver of wallboard demand. So we saw that during the quarter. And as you pointed out, quarter-to-quarter, we've -- you can have various reasons for outperformance, which we outperformed the first half of the year.

So as I've always looked at these businesses on a trailing 12-month basis, we're in line, if not slightly ahead of the industry. Quarter-to-quarter shifts happen that can be more noise than anything. My point and interest as you look at where the demand is today for Wallboard across the United States is just shy on a trailing 12-month basis of 26 billion square feet. That is akin to the level of consumption in the U.S. to the late 90s.

So -- and we have 25% more people in this country than we did back then. And so as we think about the very near term, of course, the headlines around affordability, interest rates grab a lot of attention. But as we think a little broader than that, we like our position. We're improving that position, and we are woefully under consuming wallboard and underbuilt homes here in the U.S.

And -- yes, that all makes a lot of sense. And kind of looking at the longer-term picture definitely looks bright. As we think about more kind of medium term, there's -- it can continue to be choppy possibly. And in that environment, so far, you guys have put up very, very stable wallboard pricing even in the face of some pretty challenging operating environment with as far as demand goes. And this quarter being an example of the resilience there, is that kind of still the same or your expectation still the same for wallboard pricing being relatively stable as we look through this kind of near-term choppiness with what's going on with the demand environment?

Yes. Look, it's always a balance. I think you've heard us say for years, we're more oriented to price than we are volume. And look, there's lots of factors that have affected this industry over the last 15 years around raw material shortages and things like that, which I think have contributed to a much more stable environment. But it's a balance, and we've taken the approach of value over volume.

Okay. And if I can sneak one more in there. Just with the cement volume, I mean, clearly very, very strong, if you could maybe talk about some of the drivers there. And you mentioned it remains favorable for the rest of the year. And is that kind of to say that you expect positive demand here to continue maybe through your fiscal year as we look at the Cement and Aggregates business?

Yes. Look, Trey, we came -- I think Michael mentioned it, we came into the year cautiously optimistic around cement volume. It's driven by infrastructure spending and private nonres, and those have continued to be strong demand drivers. We saw that here in the last quarter, in the June quarter, continue to see it in the September quarter as those infrastructure dollars actually start to benefit the business. It's delayed from what we would have anticipated, but nice to see, and volumes have continued to trend positive.

So cautiously optimistic going forward that we would expect to see something similar. I mean, obviously, we're going to hit the winter months here shortly. But this construction season turned to be as good, if not better than what we had hoped for.

And the next question comes from Brian Brophy with Stifel.

This is Andrew on for Brian. I just had one on the organic aggregates volume up 35% in the quarter. Are there any particular drivers or sort of onetime projects to call out there? And then also, is that a good run rate for how you're thinking about the next couple of quarters?

Yes. So when we look at our aggregate volumes, we've been consistently talking about kind of how we do our capital allocation and aggregates has always been something that's been an interest to us. During this last year, we've looked at both how we increase the capacity out of our current greenfield -- or our current operations and then also look at where we did the acquisitions.

A lot of that growth, as Craig commented on, was from the acquisitions we made. However, 35% growth on our existing operations was also in there from some of the capital improvements we made. We're -- we'll continue to focus on that segment of the business. It's one that interested in growing over time if the right acquisitions come available. And if not, we will continue to look internally as we're doing in our cement and wallboard facilities with our upgrade projects to maximize what we could do out of our existing reserves we have.

And then sort of along the same lines, but very strong profitability in that -- in concrete and aggregates in the quarter as well. Just wondering how you're thinking about margins there over the next couple of quarters?

Yes, Andrew, I think if you recall, we had had some, I'm going to call them onetime things a year ago that we talked at length about, for example, a work stoppage and some other items. So this is -- and we had 2 acquisitions that completed in the prior year, and you've got a lot of onetime costs associated with those assets coming online for us. So that contributed to the prior year being down.

This is a much more normal run rate. As Michael said, the acquisition we completed in January in Western Pennsylvania, very happy with that investment and the return on that investment. And so again, there'll be seasonality associated with this business as the 2 businesses we acquired, one near Pittsburgh and the other in Northern Kentucky, but very happy with how that business has performed coming into this year.

And our next question is from Brent Thielman with D.A. Davidson.

I had a question on just cement and the reported ASP and any sort of factors to consider there. I've heard from some others about competitive pressures here and there. Also was just curious if there was any impact from oil well on the reported ASP. Obviously, that's been a softer market. Just hoping you could bridge that out.

Yes, Brent, the -- today, given the footprint of Eagle Cement business, oil well cement has become a much smaller percentage of our business as we've diversified across the country. And I think as we pointed out in the press release, pricing within the wholly owned business, so the vast majority of our business is actually pretty stable. Texas, we saw some price degradation, but the rest of the market hung in there pretty well.

And a lot of that, again, is driven off of 2 years, the calendar '23, calendar '24 having had down volume. So as I said earlier, it's been nice to see calendar '25 for us start to see year-over-year improvements. And as Michael mentioned, we also do have price increase announcements out for the early part of calendar '26. A little early to speculate on the expected realization of those. But certainly, the volume improvement is the first step in that direction.

Yes. And then maybe just on the demand side of the equation, you mentioned the strength in infrastructure, clear factor here. What are your backlogs at your facilities and/or sort of customer discussions tell you about, call it, next 6 months, if you're able to see out that far? I'm just trying to get a feel beyond kind of this next quarter where the climate sits.

Yes. We don't carry a backlog like an E&C company would necessarily. But certainly, the conversations with customers gives you a good insight as best that you can about the look forward. And as we said, coming into this year, bidding activity was better for our customers. Look, they're continuing to see private nonres starts, especially around data centers and those type of activities improve. And so you never know when winter hits. So as you talk about the next 6 months, all -- you got to take that with the grain of salt as you get into the December, January, February time frame. But certainly, I think customers have seen improved bidding activity this year and going into next year than they've seen in quite some time.

And the next question is from Anthony Pettinari with Citigroup.

With Duke and Laramie, I was just wondering if there were updated thoughts on CapEx in fiscal '26. And understanding you don't give multiyear guidance, if there's any way to think about kind of step up in '27 and maybe what it could look like in '28? And also just on One Big Beautiful Bill, if you can remind us sort of how that impacts Eagle as a cash taxpayer with the 2 big projects?

Yes. Great questions, Anthony. Capital spending for fiscal '26, which we're halfway through, still expect to be $475 million to $500 million, which obviously a step up from the last several years. Most of that's driven by the Mountain Cement and the Duke Wallboard plant modernization. The Wallboard -- I'm sorry, the cement plant in Mountain is scheduled to be completed in late calendar '26. So call that our fiscal '27. So you'll have a full -- almost a full year spend there.

The Duke Wallboard plant will also have a full year of spend in fiscal '27. But I would expect to see the total spending come down somewhat closer to the $400 million to $425 million in that range for fiscal '27. Then the following year, fiscal '28, you'd see a pretty significant step down as Mountain Cement would have finished. The Duke Wallboard plant project is nearing completion. So that comes online the second half of calendar '27. So I'd expect to see that stair step down as we get into fiscal '28. And look, balance sheet is in a great spot. We keep it in this 1.5x debt-to-EBITDA ratio for a reason. It allows us to continue to make these good long-term investments, but also manage for M&A and other investments that may come around.

Okay. That's very helpful. That's...

And then, Anthony, sorry, on your -- yes, the last part of your question. So what's really meaningful about the new tax bill is that you get to accelerate depreciation, meaning you take the full depreciation of those investments when they're placed in service. So for us, the Mountain Cement plant goes in service in fiscal '27, which would significantly reduce cash taxes paid in fiscal '27. And then similarly, the following year, as Duke comes online, that will also have an immediate deduction. So on a cash taxes paid basis, a very good benefit for us.

[Operator Instructions]

And the next question comes from Phil Ng with Jefferies.

It's Jesse on for Phil. Just on cement, I wonder if you guys have like a view on what actual underlying demand is there. It's obviously probably not up 9%, but it's probably not down mid-singles last year with a lot of cross currents with weather. Just curious if you kind of had a view on what underlying demand actually looks like.

Yes. It's interesting, Jesse. I mean to your point, we've seen significant weather in the prior year that had an impact on volumes. What I would tell you is cement demand typically grows in the 2% to 4% range, kind of a low single digit. That can be influenced by weather that those jobs don't get eliminated. They just get delayed. So that's about as -- if I look at it over a 20-, 25-year time period, that's about the range that I'd expect to see cement demand grow. Part of that is seasonality. You have a finite construction season.

There's only so many hours in the day and logistically, some of those challenges. But similarly to what we talked about with Wallboard earlier, cement demand is in a very similar place. It's well below prior peaks and with a significant increase in the population in this country. So that's what gives us a lot of optimism in both of these businesses that we see upside on volumes over the next several years.

That's helpful. And then just a quick follow-up on kind of cement mostly, but also in Wallboard. Any kind of big maintenance projects to call out over the next kind of -- next 12 months? I know you pulled forward quite a bit in cement last year, but just anything else to call out that we should be aware of?

No, I would expect to see the cadence of the big maintenance programs pretty similar to what we saw last year.

The next question comes from Jonathan Bettenhausen with Truist.

I'm on for Keith. Just one quick housekeeping item for me. The price increases, is that wallboard as well? Or is that just cement?

Just in cement.

[Operator Instructions] And at this time, there are no further questioners in the queue. I'd like to turn the call back over to Michael Haack for any closing remarks.

Thank you, Chris. Our performance in the second quarter of fiscal 2026 was a result of consistent financial, operational and safety discipline. We entered the second half of our fiscal year in a position of strength, focused on operational excellence and committed to continuing to invest in our assets, in our network and most importantly, in our people. Thanks for joining the call today. We look forward to discussing results and progress on our modernization projects again next quarter.

Thank you. The conference has now concluded. You may now disconnect your lines, and have a pleasant day.