The consolidated financial statements include the accounts of Eagle Materials Inc. and its majority-owned subsidiaries (the Company), which may be referred to as we, our, or us. All intercompany balances and transactions have been eliminated. The Company is a holding company whose assets consist of its investments in its subsidiaries, joint venture, intercompany balances, and holdings of cash and cash equivalents. The businesses of the consolidated group are conducted through the Company’s subsidiaries. The Company conducts one of its cement plant operations through a joint venture, Texas Lehigh Cement Company L.P., which is located in Buda, Texas (the Joint Venture). Our investment in the Joint Venture is accounted for using the equity method of accounting, and those results have been included for the same period as our March 31 fiscal year end.

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

We have been deemed an essential business with respect to the COVID-19 pandemic. While we have not yet experienced a material impact on our operations or financial position from this pandemic, there may be future effects on our business, both directly and indirectly, including with respect to customers, manufacturing operations, employees, suppliers, and the building materials and construction markets in general.

Cash Equivalents include short-term, highly liquid investments with original maturities of three months or less and are recorded at cost, which approximates market value.

Accounts and Notes Receivable have been shown net of the allowance for doubtful accounts of $12.4 million and $9.9 million at March 31, 2020 and 2019, respectively. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from our customers. The allowance for non-collection of receivables is based on analysis of economic trends in the construction and oil and gas industries, detailed analysis of the expected collectability of accounts receivable that are past due, and the expected collectability of overall receivables. We have no significant credit risk concentration among our diversified customer base.

We had Notes Receivable totaling approximately $9.8 million at March 31, 2020, of which approximately $0.7 million has been classified as current and presented with Accounts Receivable on the balance sheet. We lend funds to certain companies in the ordinary course of business, and the notes bear interest, on average, at 4.1%. Remaining unpaid amounts, plus accrued interest, mature in fiscal 2025 and 2026. The notes are collateralized by certain assets of the borrowers, namely property and equipment. We monitor the credit risk of each borrower by focusing on the timeliness of payments, review of credit history, and credit metrics and interaction with the borrowers.

Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or net realizable value. Raw Materials and Materials-in-Progress include clinker, which is an intermediary product before it is ground into cement powder. Quantities of Raw Materials and Materials-in-Progress, Aggregates and coal inventories, are based on measured volumes, subject to estimation based on the size and location of the inventory piles, and converted to tonnage using standard inventory density factors. Inventories consist of the following:

	March 31,
	2020		2019
	(dollars in thousands)
Raw Materials and Materials-in-Progress	$	110,558	$	125,828
Finished Cement		43,538		27,826
Aggregates		8,416		7,351
Gypsum Wallboard		4,211		7,124
Paperboard		5,715		15,660
Frac Sand		386		2,557
Repair Parts and Supplies		88,095		80,676
Fuel and Coal		11,589		8,172
	$	272,508	$	275,194

Property, Plant, and Equipment are stated at cost. Major renewals and improvements are capitalized and depreciated. Annual maintenance is expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of depreciable assets and totaled $109.5 million, $118.2 million, and $109.6 million, for the fiscal years ended March 31, 2020, 2019, and 2018, respectively. Raw material deposits are depleted as such deposits are extracted for production utilizing the units-of-production method. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time. The estimated useful lives of the related assets are as follows:

We periodically evaluate whether current events or circumstances indicate that the carrying value of our depreciable assets may not be recoverable. During fiscal years 2020 and 2019, we recorded impairments of approximately $187.6 million and $211.3 million, respectively, related to property and equipment in our Oil and Gas Proppants segment. See Impairment or Disposal of Long-lived and Intangible Assets below for more information about the impairments.

We annually assess Goodwill in the fourth quarter of our fiscal year, or more frequently when indicators of impairment exist. Impairment testing for Goodwill is done at the reporting unit, which is consistent with the reportable segment.

Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. Prior to performing the Step 1 quantitative analysis, we may, at our discretion, perform an optional qualitative analysis, or we may choose to proceed directly to the Step 1 quantitative analysis. The qualitative analysis considers the impact of the following events and circumstances on the reporting unit being tested: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant entity-specific events. If, as a result of this qualitative analysis, we conclude that it is more likely than not (a likelihood of greater than 50%) that the fair value of the reporting unit exceeds its carrying value, then an impairment does not exist and the quantitative Step 1 analysis is not required. If we are unable to conclude that it is more likely than not that the fair value of the reporting unit exceeds its carrying value, then we proceed to the quantitative Step 1 analysis.

Step 1 of the quantitative test for impairment compares the fair value of the reporting unit to its carrying value. If the carrying value exceeds the fair value, then an impairment is indicated. If facts and circumstances related to our business change in subsequent years, we may choose to perform a quantitative analysis in those future years. If we perform a Step 1 analysis, and the carrying value of the reporting unit exceeds its fair value, then an impairment charge equal to the difference, not to exceed the total amount of Goodwill, is recorded.

The fair values of the reporting units are estimated by using both the market and income approaches. The market approach considers market factors and certain multiples in comparison to similar companies, while the income approach uses discounted cash flows to determine the estimated fair values of the reporting units. We also perform an overall comparison of all reporting units to our market capitalization in order to test the reasonableness of our fair value calculations.

We performed qualitative assessments of our Cement, Gypsum Wallboard, and Recycled Paperboard reporting units in the fourth quarter of fiscal years 2020 and 2019. As a result of these qualitative assessments, we determined that it was not more likely than not that an impairment existed; therefore, we did not perform a Step 1 quantitative impairment test in either of these two fiscal years.

We performed a quantitative Step 1 impairment test on our Oil and Gas Proppants reporting unit during the fourth quarter of fiscal 2019. We estimated the reporting unit’s fair value using a discounted cash flow model. Key assumptions in the model were: estimated average net sales prices, sales volumes, and the estimated discount rate of 11%. Based on the results of the Step 1 impairment analysis, we concluded that the entire balance of Goodwill in the Oil and Gas Proppants reporting unit was impaired, and we recorded an impairment loss of approximately $6.8 million in the reporting unit in the fourth quarter of fiscal 2019.

Intangible Assets, including the impact of the impairment charges discussed above, at March 31, 2020 and 2019, consist of the following:

	March 31, 2020
	Amortization Period	Cost		Additions		Accumulated Amortization			Net
	(dollars in thousands)
Goodwill and Intangible Assets:
Customer Contracts and Relationships	15 years	$	72,260	$	33,550	$	(62,950	)	$	42,860
Permits	25-40 years		28,640		1,770		(9,889	)		20,521
Trade Name	15 years		—		1,500		(10	)		1,490
Goodwill			198,371		133,221		—			331,592
Total Goodwill and Intangible Assets		$	299,271	$	170,041	$	(72,849	)	$	396,463

	March 31, 2019
	Amortization Period	Cost		Accumulated Amortization			Impairment			Net
	(dollars in thousands)
Goodwill and Intangible Assets:
Customer Contracts and Relationships	15 years	$	72,260	$	(61,009	)	$	(178	)	$	11,073
Sales Contracts	4 years		2,500		(2,500	)		—			—
Permits	40 years		28,640		(8,968	)		—			19,672
Goodwill			205,211		—			(6,841	)		198,370
Total Goodwill and Intangible Assets		$	308,611	$	(72,477	)	$	(7,019	)	$	229,115

Amortization expense of intangibles was $2.5 million, $4.3 million, and $4.4 million for the years ended March 31, 2020, 2019, and 2018, respectively. Amortization expense is expected to be approximately $4.3 million for fiscal 2021 and $4.2 million for each of fiscal years 2022 through 2025.

We assess our long-lived assets, including mining and related assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or group of assets, may not be recoverable. Long-lived assets, or groups of assets, are evaluated for impairment at the lowest level for which cash flows are largely independent of the cash flows of other assts. We assess recoverability of assets, or group of assets, by comparing the carrying amount of an asset, or group of assets, to the future undiscounted net cash flows that we expect the asset, or group of assets, to generate. These impairment evaluations are significantly affected by estimates of future revenue, costs and expenses, and other factors. If the carrying value of the assets, or group of assets, exceeds the undiscounted cash flows, then an impairment is indicated. If such assets, or group of assets, are considered to be impaired, the impairment is recognized as the amount by which the carrying amount of the asset, or group of assets, exceeds the fair value of the asset, or group of assets. Any assets held for sale are reflected at the lower of their carrying amount or fair value less cost to sell.

During the latter part of fiscal 2019, continued declining sales prices, sales volume and operating results in our Oil and Gas Proppants business led management to conclude that impairment indictors were present. The decline in sales volume was primarily related to decreased demand from the Permian Basin. The decline in orders was due to several factors, including reduced completion budgets, limited pipeline take away capacity in the Permian Basin, and an increase in the usage of in-basin regional sand. The capacity for in-basin sand has increased in recent years, and certain of our customers have shifted their purchases from northern white sand to lower cost regional sand.

Because of the continuing shift in demand to regional sand, and the decline in our operating results, we concluded in the fourth quarter of fiscal 2019 that the reduction in sales volumes and operating losses were other than temporary and that long-lived asset impairment indicators were present in our Oil and Gas Proppants segment. Prior to performing tests to determine whether an impairment was present, we grouped the long-lived assets of the segment into the lowest level where cash flows are generated, which is considered the operating facility or distribution level. We then performed recoverability tests on each group of assets using probability-weighted estimates of forecasted undiscounted cash flows over the remaining estimated life of each asset group under a variety of scenarios. Based on these forecasts we concluded that the carrying values exceeded the undiscounted cash flows for our New Auburn, Wisconsin and Corpus Christi, Texas operating facilities and several distribution facilities related to these facilities, indicating impairment. Our operating facility in Utica, Illinois, which had a net book value of approximately $135.7 million, was not considered impaired at that time, as the undiscounted cash flows related to this facility exceeded its carrying value.

For those impaired asset groups, we calculated the estimated fair value of the New Auburn, Wisconsin facility and related distribution terminals, using a discounted cash flow model (Level 3) which utilized a weighted-average cost of capital determined from relevant market comparisons and adjusted for specific risks. We compared the results of the discounted cash flow analysis to other recent market information about the value of similar assets, and noted the amounts to be consistent. The analysis resulted in an impairment loss of approximately $174.1 million. For our Corpus Christi, Texas facility, we determined that the value of the real estate was the highest and best use of the property, resulting in an impairment loss of approximately $37.2 million. The above analyses resulted in an impairment loss of approximately $211.3 million.

The following is a summary of the impairment on the net book value of the long-lived assets:

	Net Book Value Before Impairment		Impairment			Net Book Value After Impairment
	(dollars in thousands)
Operating Facilities	$	331,520	$	(151,910	)	$	179,610
Transload Locations		86,741		(59,354	)		27,387
Real Estate		1,417		—			1,417
	$	419,678	$	(211,264	)	$	208,414

After recording these impairment losses, which totaled $211.3 million, the adjusted carrying value of the impaired assets and total long-lived assets was approximately $72.7 million and $208.4 million, respectively. In addition to the impairment of the operating facilities and transload facilities, we also assessed Goodwill and Intangible Assets and Inventory for impairment. As part of this analysis, we wrote down Goodwill (as noted above), and certain Intangible Assets and Inventories.

The following is a summary of Impairment Losses recognized during fiscal 2019, by line item:

	(dollars in thousands)
Property, Equipment, and Real Estate	$	211,264
Goodwill		6,841
Inventories		1,982
Intangible Assets		178
	$	220,265

During the second half of calendar year 2019, our Oil and Gas Proppants financial results were further negatively affected by a combination of low demand for our products and the increased use of in-basin sand instead of northern white frac sand. Faced with these dynamics, in connection with the preparation of our financial statements for the three and nine months ended December 31, 2019, we concluded that the reduction in sales volumes and operating losses were other than temporary and that long-lived asset impairment indicators were present in our Oil and Gas Proppants segment.

Prior to performing recoverability tests to determine whether an impairment was present, we grouped the long-lived assets of the segment into the lowest level at which cash flows are generated, which is considered the operating facility or distribution level. We included the value of our Operating Lease Right-of-Use Assets that support the operating facilities within the value of the operating facility prior to performing our recoverability tests. We then performed recoverability tests on each group of assets using probability-weighted estimates of forecasted undiscounted cash flows over the remaining estimated life of each asset group under a variety of scenarios. Based on these forecasts, we concluded that the carrying values exceeded the undiscounted cash flows for our New Auburn, Wisconsin and Utica, Illinois operating facilities and several distribution facilities related to these operating facilities, indicating impairment.

For the impaired asset groups, we calculated the estimated fair value of the operating facilities in New Auburn, Wisconsin, Utica, Illinois and related distribution terminals, using a discounted cash flow model (Level 3), which utilized a weighted-average cost of capital determined from relevant market comparisons and adjusted for specific risks. We compared the results of the discounted cash flow model to other recent market information about the value of similar assets, noting the amounts to be consistent. The analysis resulted in an impairment loss of approximately $216.8 million.

The following is a summary of the impairment on the net book value of the long-lived assets:

	Net Book Value Before Impairment		Impairment			Net Book Value After Impairment
	(dollars in thousands)
Operating Facilities	$	170,324	$	(164,449	)	$	5,875
Transload Locations		23,264		(21,815	)		1,449
Real Estate		1,417		(1,367	)		50
Lease Right-of-Use Assets		32,834		(29,146	)		3,688
	$	227,839	$	(216,777	)	$	11,062

In addition to the impairment of the operating facilities and transload facilities, we also assessed other current and long-term assets for impairment. As part of this analysis, we wrote down certain Inventories, Accounts and Notes Receivable, and Prepaid and Other Assets. The Oil and Gas Proppants business has liabilities related to its capitalized operating leases and asset retirement obligation that total $17.9 million at March 31, 2020.

The following is a summary of Impairment Losses recognized during fiscal 2020, by line item:

	(dollars in thousands)
Property, Equipment, and Real Estate	$	187,631
Lease Right-of-Use Assets		29,146
Inventories		6,256
Accounts and Notes Receivable		617
Prepaid and Other Assets		617
	$	224,267

Our Oil and Gas Proppants business continues to be subject to commodity price volatility related to the price of oil. As previously disclosed, we are actively pursuing alternatives for our Oil and Gas Proppants business. If this process results in an alternative use or disposition of this business, additional impairment or other losses may be incurred.

Other Assets are primarily composed of financing costs related to our revolving credit facility, deferred expenses, and deposits.

We account for Income Taxes using the asset and liability method. The effect on deferred taxes of a change in tax rates is recognized in earnings in the period that includes the enactment date. We recognize deferred taxes for the differences between financial statement carrying amounts and the tax bases of existing assets and liabilities by applying enacted statutory tax rates for future years. In addition, we recognize future tax benefits to the extent that such benefits are more likely than not to be realized.

On April 18, 2019, the Board of Directors authorized the Company to repurchase up to an additional 10,000,000 shares, for a total outstanding authorization of 10,724,758 shares. During fiscal years 2020, 2019, and 2018, we repurchased 3,574,109; 3,309,670; and 627,722 shares, respectively, at average prices of $87.82, $82.18, and $97.30, respectively. At March 31, 2020, we have authorization to repurchase an additional 7,305,649 shares.

We earn Revenue primarily from the sale of products, which include cement, concrete, aggregates, gypsum wallboard, recycled paperboard, and frac sand. The majority of Revenue from the sale of cement, concrete, aggregates, and gypsum wallboard is originated by purchase orders from our customers, who are primarily third-party contractors and suppliers. Revenue from our Recycled Paperboard and Oil and Gas Proppants segments is generated primarily through long-term supply agreements that mature between calendar years 2020 and 2025. We also earn Revenue from transload services and storage; we recognize Revenue from these services when the product is transferred from the rail car to the truck or silo, or from the silo to the railcar or truck. We invoice customers upon shipment, and our collection terms range from 30-65 days. Revenue from the sale of cement, concrete, aggregates, and gypsum wallboard that is not related to long-term supply agreements is recognized upon shipment of the related products to customers, which is when title and ownership are transferred, and the customer is obligated to pay.

Revenue from sales under our long-term supply agreements is also recognized upon transfer of control to the customer, which generally occurs at the time the product is shipped from the production facility or transload location. Our long-term supply agreements with customers define, among other commitments, the volume of product that we must provide and the volume that the customer must purchase by the end of the defined periods. Pricing structures under our agreements are generally market-based but are subject to certain contractual adjustments. Historically, the pricing and volume requirements under certain of these contracts have been renegotiated during volatile market conditions. Shortfall amounts, if applicable under these arrangements, are constrained and not recognized as Revenue until agreement is reached with the customer and there is no risk of reversal.

The Company offers certain of its customers, including those with long-term supply agreements, rebates and incentives, which we treat as variable consideration. We adjust the amount of revenue recognized for the variable consideration using the most likely amount method based on past history and projected volumes in the rebate and incentive period. Any amounts billed to customers for taxes are excluded from Revenue.

The Company has elected to treat freight and delivery charges we pay for the delivery of goods to our customers as a fulfilment activity rather than a separate performance obligation. When we arrange for a third party to deliver products to customers, fees for shipping and handling that are billed to the customer are recorded as Revenue, while costs we incur for shipping and handling are recorded as expenses and included in Cost of Goods Sold.

Approximately $168.1 million, $169.6 million, and $158.3 million of freight for the years ended March 31, 2020, 2019 and 2018, respectively, were included in both Revenue and Cost of Goods Sold in our Consolidated Statement of Earnings.

Other Non-Operating Income includes lease and rental income, asset sale income, non-inventoried aggregates sales income, and trucking income, as well as other miscellaneous revenue items and costs which have not been allocated to a business segment.

As of March 31, 2020, we have an Accumulated Other Comprehensive Loss of $3.6 million, which is net of income taxes of $1.1 million, in connection with recognizing the difference between the fair value of the pension assets and the projected benefit obligation.

	For the Years Ended March 31,
	2020		2019		2018
	(dollars in thousands)
Cash Payments:
Interest	$	37,610	$	28,191	$	28,869
Income Taxes		20,046		39,974		69,481
Operating Cash Flows used for Operating Leases		14,926		—		—

Non-Cash Financing Activities:
Right-of-use Assets Obtained for Capitalized Operating Lease Liabilities	$	621	$	—	$	—

Maintenance and repair expenses are included in each segment’s costs and expenses. We incurred $127.0 million, $116.3 million, and $107.3 million of maintenance and repairs expense in the years ended March 31, 2020, 2019, and 2018, respectively, which is included in Cost of Goods Sold on the Consolidated Statement of Earnings.

Selling, General, and Administrative expenses of the operating units are included in Cost of Goods Sold on the Consolidated Statements of Earnings. Corporate General and Administrative (Corporate G&A) expenses include administration, financial, legal, employee benefits, and other corporate activities, and are shown separately in the Consolidated Statements of Earnings. Corporate G&A also includes stock compensation expense. See Footnote (L) for more information.

Total Selling, General, and Administrative expenses for each of the periods are summarized as follows:

	For the Years Ended March 31,
	2020		2019		2018
	(dollars in thousands)
Operating Units Selling, G&A	$	57,077	$	53,787	$	62,529
Corporate G&A		65,410		37,371		41,205
	$	122,487	$	91,158	$	103,734

The increase in Corporate General and Administrative Expenses during fiscal 2020 is primarily due to business development costs related to our pending separation, acquisitions, and the acceleration of stock compensation costs upon the retirement of our Chief Executive Officer during the year.

	For the Years Ended March 31,
	2020			2019			2018
Weighted-Average Shares of Common Stock Outstanding		42,021,892			46,620,894			48,141,226
Effect of Dilutive Shares:
Assumed Exercise of Outstanding Dilutive Options		623,779			539,135			1,013,764
Less Shares Repurchased from Proceeds of Assumed Exercised Options		(481,853	)		(374,380	)		(727,904	)
Restricted Stock Units		121,525			146,731			218,900
Weighted-Average Common Stock and Dilutive Securities Outstanding		42,285,343			46,932,380			48,645,986

The line Less Shares Repurchased from Proceeds of Assumed Exercised Options includes unearned compensation related to outstanding stock options.

There were 475,082; 461,575; and 98,362 stock options at an average exercise price of $95.46 per share, $90.32 per share, and $98.75 per share, respectively, that were excluded from the computation of diluted earnings per share for the fiscal years ended March 31, 2020, 2019, and 2018, because such inclusion would have been anti-dilutive.

All share-based compensation is valued at the grant date and expensed over the requisite service period, which is generally identical to the vesting period of the award. Forfeitures of share-based awards are recognized in the period in which they occur.

Certain assets and liabilities are required to be recorded or disclosed at fair value. The estimated fair values of those assets and liabilities have been determined using market information and valuation methodologies. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any such changes would have a material impact on our financial condition, results of operations, or cash flows. There are three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices for identical assets and liabilities in active markets;

Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which supersedes existing lease guidance to require lessees to recognize right-of-use assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. We also elected the package of practical expedients permitted under the transition guidance which, among other things, allowed us to maintain the historic lease classification for leases in effect at the date of adoption, and to not separate lease components from nonlease components for all leases in effect at the date of adoption. Upon adoption, we recorded a right-of-use asset of approximately $66.7 million, and operating lease liabilities of approximately $71.1 million. See Footnote (F) for more information.

In June 2016, the FASB issued an update on the measurement of credit losses on financial instruments, which requires entities to use a forward-looking approach based on expected losses rather than the current model of incurred losses to estimate credit losses on certain types of financial instruments, including Accounts and Notes Receivable. The application of the forward-looking model may result in earlier recognition of allowances for losses than the current method. This guidance became effective on April 1, 2020. We are currently assessing the impact of the new standard, but we do not expect the adoption will have a material effect on our consolidated financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12 which simplifies the accounting for income taxes, eliminates certain exceptions within existing income tax guidance, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We do not expect the adoption of this standard will have a material impact to our consolidated financial statements.