UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended June 30, 2007
Commission
File Number 000-26025
U.S.
CONCRETE, INC.
A
Delaware Corporation
IRS
Employer Identification No. 76-0586680
2925
Briarpark, Suite 1050
Houston,
Texas 77042
(713)
499-6200
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes þ
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).
Large
accelerated filer ¨
Accelerated filer þ
Non-accelerated filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨
No þ
As
of the
close of business on August 3, 2007, U.S. Concrete, Inc. had 39,225,796 shares
of its common stock, $0.001 par value, outstanding (excluding treasury shares
of
307,839).
U.S.
CONCRETE, INC.
INDEX
|
Page
No.
|
Part
I –
Financial Information
|
|
Item
1. Financial
Statements
|
|
Condensed
Consolidated Balance Sheets
|
1
|
Condensed
Consolidated Statements of Operations
|
2
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity
|
3
|
Condensed
Consolidated Statements of Cash Flows
|
4
|
Notes
to Condensed Consolidated Financial Statements
|
5
|
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
Item
3. Quantitative
and Qualitative Disclosures About Market Risk
|
26
|
Item
4. Controls
and Procedures
|
26
|
|
|
Part
II – Other Information
|
|
Item
1. Legal
Proceedings
|
27
|
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
|
27
|
Item
3. Defaults Upon Senior Securities
|
27 |
Item
4. Submission of Matters to a Vote of Securities Holders
|
27 |
Item
6. Exhibits
|
28
|
|
|
SIGNATURE
|
29
|
INDEX
TO EXHIBITS
|
30
|
PART
I - FINANCIAL INFORMATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in
thousands)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
7,983
|
|
$
|
8,804
|
|
Trade
accounts receivable, net
|
|
|
134,770
|
|
|
109,161
|
|
Inventories,
net
|
|
|
36,135
|
|
|
33,777
|
|
Prepaid
expenses
|
|
|
5,178
|
|
|
2,984
|
|
Other
current assets
|
|
|
18,283
|
|
|
16,396
|
|
Total
current assets
|
|
|
202,349
|
|
|
171,122
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
281,882
|
|
|
281,021
|
|
Goodwill
|
|
|
264,078
|
|
|
251,499
|
|
Other
assets, net
|
|
|
12,190
|
|
|
13,004
|
|
Total
assets
|
|
$
|
760,499
|
|
$
|
716,646
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
3,538
|
|
$
|
3,764
|
|
Accounts
payable
|
|
|
63,323
|
|
|
49,785
|
|
Accrued
liabilities
|
|
|
40,876
|
|
|
52,886
|
|
Total
current liabilities
|
|
|
107,737
|
|
|
106,435
|
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current maturities
|
|
|
318,185
|
|
|
299,528
|
|
Other
long-term liabilities and deferred credits
|
|
|
11,039
|
|
|
7,594
|
|
Deferred
income taxes
|
|
|
34,446
|
|
|
33,512
|
|
Total
liabilities
|
|
|
471,407
|
|
|
447,069
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary (Note
3)
|
|
|
15,852
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
-
|
|
|
-
|
|
Common
stock
|
|
|
39
|
|
|
39
|
|
Additional
paid-in capital
|
|
|
265,797
|
|
|
262,856
|
|
Retained
earnings
|
|
|
9,978
|
|
|
8,541
|
|
Treasury
stock, at cost
|
|
|
(2,574
|
)
|
|
(1,859
|
)
|
Total
stockholders’ equity
|
|
|
273,240
|
|
|
269,577
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
760,499
|
|
$
|
716,646
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In
thousands, except per share amounts)
|
|
Three
Months
Ended
June 30,
|
|
Six
Months
Ended
June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Sales
|
|
$
|
223,233
|
|
$
|
188,763
|
|
$
|
392,622
|
|
$
|
328,357
|
|
Cost
of goods sold before depreciation, depletion and amortization
|
|
|
180,875
|
|
|
154,287
|
|
|
328,495
|
|
|
275,083
|
|
Selling,
general and administrative expenses
|
|
|
17,111
|
|
|
14,705
|
|
|
34,852
|
|
|
30,139
|
|
Depreciation,
depletion and amortization
|
|
|
7,861
|
|
|
4,495
|
|
|
15,079
|
|
|
8,671
|
|
Income
from operations
|
|
|
17,386
|
|
|
15,276
|
|
|
14,196
|
|
|
14,464
|
|
Interest
income
|
|
|
6
|
|
|
855
|
|
|
30
|
|
|
1,551
|
|
Interest
expense
|
|
|
7,192
|
|
|
4,661
|
|
|
14,083
|
|
|
9,293
|
|
Other
income, net
|
|
|
1,921
|
|
|
374
|
|
|
2,404
|
|
|
761
|
|
Minority
interest in consolidated subsidiary
|
|
|
359
|
|
|
-
|
|
|
359
|
|
|
-
|
|
Income
before income taxes
|
|
|
11,762
|
|
|
11,844
|
|
|
2,188
|
|
|
7,483
|
|
Income
tax provision
|
|
|
4,938
|
|
|
4,641
|
|
|
1,093
|
|
|
2,981
|
|
Net
income
|
|
$
|
6,824
|
|
$
|
7,203
|
|
$
|
1,095
|
|
$
|
4,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
|
|
$
|
0.18
|
|
$
|
0.19
|
|
$
|
0.03
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share
|
|
$
|
0.18
|
|
$
|
0.19
|
|
$
|
0.03
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
common shares outstanding
|
|
|
38,169
|
|
|
37,685
|
|
|
38,104
|
|
|
35,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
common shares outstanding
|
|
|
38,964
|
|
|
38,891
|
|
|
38,833
|
|
|
37,019
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATED STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(in
thousands)
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Total
Stockholders’ Equity
|
|
|
|
Shares
|
|
Par
Value
|
|
BALANCE,
December 31, 2006
|
|
|
38,795
|
|
$
|
39
|
|
$
|
262,856
|
|
$
|
8,541
|
|
$
|
(1,859
|
)
|
$
|
269,577
|
|
Change
in accounting principle for
FIN
No. 48
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
342
|
|
|
-
|
|
|
342
|
|
Employee
purchase of ESPP shares
|
|
|
67
|
|
|
-
|
|
|
493
|
|
|
-
|
|
|
-
|
|
|
493
|
|
Stock
options exercised
|
|
|
153
|
|
|
-
|
|
|
1,113
|
|
|
-
|
|
|
-
|
|
|
1,113
|
|
Stock-based
compensation
|
|
|
288
|
|
|
-
|
|
|
1,335
|
|
|
-
|
|
|
-
|
|
|
1,335
|
|
Purchase
of treasury shares
|
|
|
(77
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(715
|
)
|
|
(715
|
)
|
Cancellation
of shares
|
|
|
(15
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,095
|
|
|
-
|
|
|
1,095
|
|
BALANCE,
June 30, 2007
|
|
|
39,211
|
|
$
|
39
|
|
$
|
265,797
|
|
$
|
9,978
|
|
$
|
(2,574
|
)
|
$
|
273,240
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in
thousands)
|
|
Six
Months
Ended
June 30,
|
|
|
|
2007
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
1,095
|
|
$
|
4,502
|
|
Adjustments
to reconcile net
income to net cash provided by (used in) operations:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
15,079
|
|
|
8,671
|
|
Debt
issuance cost amortization
|
|
|
764
|
|
|
651
|
|
Net
(gain) loss on sale of property, plant and equipment
|
|
|
44
|
|
|
(462
|
)
|
Deferred
income taxes
|
|
|
209
|
|
|
3,432
|
|
Provision
for doubtful accounts
|
|
|
671
|
|
|
331
|
|
Stock-based
compensation
|
|
|
1,335
|
|
|
1,350
|
|
Excess
tax benefits from stock-based compensation
|
|
|
(139
|
)
|
|
(1,205
|
)
|
Minority
interest in consolidated subsidiary
|
|
|
359
|
|
|
-
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
Trade
accounts receivable, net
|
|
|
(24,110
|
)
|
|
(18,492
|
)
|
Inventories
|
|
|
472
|
|
|
(2,646
|
)
|
Prepaid
expenses and other current assets
|
|
|
(1,715
|
)
|
|
(910
|
)
|
Other
assets
|
|
|
247
|
|
|
(116
|
)
|
Accounts
payable and accrued liabilities
|
|
|
3,299
|
|
|
6,962
|
|
Net
cash provided by (used in) operations
|
|
|
(2,390
|
)
|
|
2,068
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Property,
plant and equipment, net of disposals of $2,164 and $1,978
|
|
|
(11,900
|
)
|
|
(18,027
|
)
|
Payments
for acquisitions, net of cash received of $1.0 million in 2007
|
|
|
(5,285
|
)
|
|
(23,289
|
)
|
Other
investing activities
|
|
|
(174
|
)
|
|
425
|
|
Net
cash used in investing activities
|
|
|
(17,359
|
)
|
|
(40,891
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
20,439
|
|
|
-
|
|
Repayments
of capital leases and notes payable
|
|
|
(2,215
|
)
|
|
(1,035
|
)
|
Proceeds
from issuance of common stock
|
|
|
-
|
|
|
84,812
|
|
Proceeds
from issuance of common stock under compensation plans
|
|
|
1,467
|
|
|
4,379
|
|
Excess
tax benefits from stock-based compensation
|
|
|
139
|
|
|
1,205
|
|
Purchase
of treasury shares
|
|
|
(715
|
)
|
|
(666
|
)
|
Other
financing activities
|
|
|
(187
|
)
|
|
(666
|
)
|
Net
cash provided by financing activities
|
|
|
18,928
|
|
|
88,029
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(821
|
)
|
|
49,206
|
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
8,804
|
|
|
23,654
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
7,983
|
|
$
|
72,860
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION
The
accompanying condensed consolidated financial statements include the accounts
of
U.S. Concrete, Inc. and its subsidiaries and have been prepared by us, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”). We include in our condensed consolidated financial
statements, the results of operations, balance sheet and cash flows of our
60%
owned Michigan subsidiary. We reflect the 40% minority owner’s interest in
income, net assets and cash flows of our Michigan subsidiary as minority
interest in consolidated subsidiary in our condensed consolidated financial
statements. Some information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the SEC’s rules and
regulations, although our management believes that the disclosures made are
adequate to make the information presented not misleading. These unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes in our annual report
on
Form 10-K for the year ended December 31, 2006 (the “2006 Form 10-K”). In the
opinion of our management, all adjustments necessary to state fairly the
information in our unaudited condensed consolidated financial statements have
been included. Operating results for the three- and six-month periods ended
June
30, 2007 are not necessarily indicative of our results expected for the year
ending December 31, 2007.
The
preparation of financial statements and accompanying notes in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported.
Actual results could differ from those estimates.
2.
SIGNIFICANT ACCOUNTING POLICIES
For
a
description of our accounting policies, see Note 1 of the consolidated financial
statements in the 2006 Form 10-K, as well as Notes 8, 12, 14 and 15 herein.
3.
BUSINESS COMBINATION
In
April,
2007, several of our subsidiaries entered into agreements with the Edw. C.
Levy
Co. relating to the formation of a ready-mixed concrete company that operates
in
Michigan. We contributed our Michigan ready-mixed concrete and related
concrete products assets, excluding our quarry assets and working capital,
in
exchange for an aggregate 60% ownership interest, and Levy contributed all
of
its ready-mixed concrete and related concrete products assets, a 24,000 ton
cement terminal and cash of $1.0 million for a 40% ownership interest in the
new
company. The newly formed company, Superior Materials Holdings, LLC, which
operates primarily under the trade name Superior Materials, owns and operates
28
ready-mixed concrete plants, a 24,000-ton cement terminal and approximately
300
ready-mixed concrete trucks.
The
following table presents our preliminary allocation, based on the fair values
at
the acquisition date (in thousands) of the consideration exchanged in the
transaction:
Estimated
Purchase Price
|
|
|
|
|
Net
assets of our Michigan operations reduced to 40%.
|
|
$
|
9,069
|
|
Acquisition
costs
|
|
|
245
|
|
Total
estimated purchase price
|
|
$
|
9,314
|
|
|
|
|
|
|
Preliminary
Purchase Price Allocation
|
|
|
|
|
Cash
|
|
$
|
1,000
|
|
Property,
plant and equipment
|
|
|
17,160
|
|
Goodwill
|
|
|
1,694
|
|
Total
assets acquired
|
|
|
19,854
|
|
Capital
lease liability
|
|
|
108
|
|
Deferred
tax liability
|
|
|
3,211
|
|
Total
liabilities assumed
|
|
|
3,319
|
|
Minority
interest
|
|
|
7,221
|
|
Net
assets acquired
|
|
$
|
9,314
|
|
For
financial reporting purposes, we are including Superior Materials Holdings,
LLC
in our consolidated accounts.
Superior
Materials Holdings, LLC has an outstanding credit agreement which provides
for a
revolving credit facility, under which borrowings of up to $25 million may
become available. At June 30, 2007, there were $3.4 million in borrowings under
the revolving credit facility and the amount of the available credit was
approximately $8.3 million (see
Note
7).
The
following unaudited pro forma financial information reflects our historical
results as adjusted on a pro forma basis to give effect to the disposition
of
40% of our Michigan operations (excluding quarry assets and working capital)
through our contribution of those operations to the newly formed Michigan
subsidiary, Superior Materials Holdings, LLC, in return for a 60% interest
in
that company, which includes the Michigan ready-mixed concrete operations
contributed by the Edw. C. Levy Co., as if it occurred on January 1, 2006 (in
thousands, except per share amounts):
|
|
Three
Months
Ended
June 30,
|
|
Six
Months
Ended
June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Revenues
|
|
$
|
223,233
|
|
$
|
199,514
|
|
$
|
395,854
|
|
$
|
343,815
|
|
Net
income (loss)
|
|
|
6,824
|
|
|
7,319
|
|
|
915
|
|
|
852
|
|
Basic
earnings per share
|
|
$
|
0.18
|
|
$
|
0.19
|
|
$
|
0.02
|
|
$
|
0.02
|
|
Diluted
earnings per share
|
|
$
|
0.18
|
|
$
|
0.19
|
|
$
|
0.02
|
|
$
|
0.02
|
|
The
pro
forma financial information does not purport to represent what the combined
financial results of operations of U.S. Concrete and Superior Materials
Holdings, LLC actually would have been if these transactions and events had
in
fact occurred when assumed and are not necessarily representative of our results
of operations for any future period.
4. OTHER
BUSINESS ACQUISITIONS
We
acquired two ready-mix concrete plants, including real property and certain
raw
material inventories, in our West Texas market for approximately $3.6 million
in
June 2007.
In
November 2006, we acquired a small ready-mixed concrete and sand and gravel
quarry operation in Breckenridge, Texas. The purchase price was $3.0 million
in
cash and the assumption of approximately $0.4 million in debt.
In
October 2006, we acquired certain aggregates assets located in New Jersey from
Pinnacle Materials, Inc. for $12.5 million in cash. The assets consist of a
granite quarry and a natural sand pit.
In
July
2006, we acquired all of the equity interests of Alberta Investments, Inc.
and
Alliance Haulers, Inc. for $165.0 million, subject to post-closing adjustments.
We funded the payment of the purchase price with net proceeds from the private
placement of $85.0 million in senior subordinated notes due 2014, issued in
July
2006; a borrowing under the revolving credit facility provided by our Amended
and Restated Senior Secured Credit Agreement (the “Credit Agreement”); and cash
on hand. We also effectively assumed, in connection with this acquisition,
equipment financing loans of approximately $10.6 million. In July 2007, we
resolved the post-closing adjustment, which resulted in an additional cash
payment by us of $0.3 million. Alberta Investments conducted the substantial
majority of its operations through two subsidiaries: Redi-Mix, L.P. and Ingram
Enterprises, L.P. At the time of the acquisition, Redi-Mix operated 13
ready-mixed concrete plants in the Dallas/Fort Worth Metroplex and in areas
north of the Metroplex. Ingram Enterprises operated 17 ready-mixed concrete
plants and three sand and gravel plants in West Texas. Redi-Mix and Ingram
operated a combined fleet of approximately 310 mixer trucks and produced
approximately 2.4 million cubic yards of ready-mixed concrete and 1.1 million
tons of aggregates in 2005. Alliance Haulers provides cement and aggregates
hauling services with a fleet of approximately 260 hauling trucks owned by
Redi-Mix and third-party haulers.
In
June
2006, we acquired the operating assets, including real property, of Olson
Precast Company used in the production of precast concrete products in northern
California, for $4.8 million in cash.
In
April
2006, we acquired Kurtz Gravel Company and the Phoenix, Arizona operating
assets of Pre-Cast Mfg., Inc. Kurtz produced ready-mixed concrete from six
plants and mines aggregates from a quarry, all located in or near U.S.
Concrete’s existing operations in the metropolitan Detroit area. We purchased
Kurtz for approximately $13.0 million in cash and assumed certain capital lease
liabilities with a net present value of approximately $1.5 million. We purchased
the Pre-Cast Mfg. assets for approximately $5.0 million using cash on
hand.
5.
INVENTORIES
Inventories
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
18,230
|
|
$
|
16,490
|
|
Precast
products
|
|
|
8,123
|
|
|
7,959
|
|
Building
materials for resale
|
|
|
5,561
|
|
|
5,236
|
|
Repair
parts
|
|
|
4,221
|
|
|
4,092
|
|
|
|
$
|
36,135
|
|
$
|
33,777
|
|
6.
GOODWILL
The
change in the carrying amount of goodwill from December 31, 2006 to June 30,
2007 was as follows (in thousands):
|
|
Ready-Mixed
Concrete
and
Concrete-Related
Products
|
|
Western
Precast Concrete
|
|
Total
|
|
Balance
at December 31, 2006
|
|
$
|
216,598
|
|
$
|
34,901
|
|
$
|
251,499
|
|
Acquisitions
|
|
|
3,515
|
|
|
-
|
|
|
3,515
|
|
Adjustments
|
|
|
8,846
|
|
|
218
|
|
|
9,064
|
|
Balance
at June 30, 2007
|
|
$
|
228,959
|
|
$
|
35,119
|
|
$
|
264,078
|
|
The
adjustments made in the six months ended June 30, 2007 related to adjustments
of
our preliminary purchase price allocations in connection with recent business
acquisitions and the formation of our 60% Michigan subsidiary (see Notes 3
and
4).
7.
DEBT
A
summary
of debt is as follows (in thousands):
|
|
|
|
|
|
Senior
secured credit facility due 2011
|
|
$
|
26,100
|
|
$
|
9,100
|
|
8⅜%
senior subordinated notes due 2014
|
|
|
283,712
|
|
|
283,616
|
|
Notes
payable
|
|
|
7,389
|
|
|
9,043
|
|
Superior
Materials Holdings, LLC secured credit facility due 2010
|
|
|
3,392
|
|
|
-
|
|
Capital
leases
|
|
|
1,130
|
|
|
1,533
|
|
|
|
|
321,723
|
|
|
303,292
|
|
Less:
current maturities
|
|
|
3,538
|
|
|
3,764
|
|
|
|
$
|
318,185
|
|
$
|
299,528
|
|
Senior
Secured Credit Facility
On
June
30, 2006, we entered into the Credit Agreement, which amended and restated
our
senior secured credit agreement dated as of March 12, 2004.
The
Credit Agreement, as amended to date, provides for a $150 million revolving
credit facility, with borrowings limited based on a portion of the net amounts
of eligible accounts receivable, inventory and mixer trucks. The facility
matures in March 2011. At June 30, 2007, borrowings under the facility
would have borne annual interest at the Eurodollar-based rate (“LIBOR”) plus
2.00% or the domestic rate plus 0.50%. The outstanding borrowings under the
facility as of June 30, 2007 bore interest at the rate of 7.5% per annum, based
on our election to borrow at the LIBOR rate plus the applicable margin. The
interest rate margins vary inversely with the amount of unused borrowing
capacity available under the facility. Commitment fees at an annual rate
of 0.25% are payable on the unused portion of the facility.
Our
subsidiaries, excluding our recently formed 60% Michigan subsidiary, have
guaranteed the repayment of all amounts owing under the Credit Agreement (see
Notes 3 and 15). In addition, we collateralized our obligations under the Credit
Agreement with the capital stock of our subsidiaries, excluding our recently
formed 60% Michigan subsidiary and minor subsidiaries without operations or
material assets; and substantially all the assets of those subsidiaries,
excluding most of the assets of the aggregates quarry in northern New Jersey,
other real estate owned by us or our subsidiaries, and the assets of our 60%
Michigan subsidiary. The Credit Agreement contains covenants restricting, among
other things, prepayment or redemption of subordinated notes, distributions,
dividends and repurchases of capital stock and other equity interests,
acquisitions and investments, mergers, asset sales other than in the ordinary
course of business, indebtedness, liens, changes in business, changes to charter
documents and affiliate transactions. It also limits capital expenditures
(excluding permitted acquisitions) to the greater of $45 million or 5% of
consolidated revenues in the prior 12 months and will require us to maintain
a
minimum fixed-charge coverage ratio of 1.0 to 1.0 on a rolling 12-month basis
if
the available credit under the facility falls below $25 million. The Credit
Agreement provides that specified change-of-control events would constitute
events of default.
The
Credit Agreement provides that the administrative agent may, on the bases
specified, reduce the amount of the available credit from time to time. At
June
30, 2007, there was $26.1 million of revolving credit borrowings outstanding
under the Credit Agreement and the amount of the available credit was
approximately $76.7 million, net of outstanding letters of credit of $12.9
million.
Senior
Subordinated Notes
On
March
31, 2004, we issued $200 million of 8⅜% senior subordinated notes due April 1,
2014. Interest on these notes is payable semi-annually
on April 1 and October 1 of each year. We
used the
net proceeds of this financing to redeem our prior 12% senior subordinated
notes
and prepay the outstanding debt under our credit facility. In July 2006, we
issued $85 million of additional 8⅜% senior subordinated notes due April 1, 2014
to fund a portion of the purchase price for the acquisition of Alberta
Investments and Alliance Haulers.
All
of
our subsidiaries, excluding our recently formed 60% Michigan subsidiary and
minor subsidiaries, have jointly and severally and fully and unconditionally
guaranteed the repayment of the 8⅜%
senior
subordinated notes (see Notes 3 and 15).
The
indenture governing the notes limits our ability and the ability of our
subsidiaries to pay dividends or repurchase common stock, make certain
investments, incur additional debt or sell preferred stock, create liens, merge
or transfer assets. After March 31, 2009, we may redeem all or a part of the
notes at a redemption price of 104.188% in 2009, 102.792% in 2010, 101.396%
in
2011 and 100% in 2012 and thereafter. The indenture requires us to offer to
repurchase (1) an aggregate principal amount of the subordinated notes equal
to
the proceeds of certain asset sales that are not reinvested in the business
or
used to pay senior debt, and (2) all the notes following the occurrence of
a
change of control. The Credit Agreement would prohibit these repurchases.
As
a
result of restrictions contained in the indenture relating to the 8⅜% senior
subordinated notes, our ability to incur additional debt is primarily limited
to
the greater of (1) borrowings available under our Credit Agreement, plus the
greater of $15 million or 7.5% of our tangible assets, or (2) additional debt
if, after giving effect to the incurrence of such additional debt, our earnings
before interest, taxes, depreciation, amortization and certain non cash items
equal or exceed two times its total interest expense.
Superior
Materials Holdings, LLC Credit Facility
At
June
30, 2007, Superior Materials Holdings, LLC had an outstanding credit agreement
which provides for a revolving credit facility, under which borrowings of up
to
$25 million may become available. The credit facility is collateralized by
substantially all the assets of Superior Materials Holdings, LLC and is
scheduled to mature on April 1, 2010. Availability of borrowings are
subject to a borrowing base of real property, net receivables and
inventory. The
credit agreement provides that the administrative agent may, on the bases
specified, reduce the amount of the available credit from time to time. At
June 30, 2007, there were $3.4 million in borrowings under the revolving credit
facility and the amount of the available credit was approximately $8.3
million.
Currently, borrowings under the facility are subject to interest at a LIBOR
plus
1.75% or a domestic prime rate minus 0.50%. The interest rate margins vary
inversely with the ratio of funded debt to EBITDA. Commitment fees at an
annual rate of 0. 25% are payable on the unused portion of the
facility.
Superior Materials Holdings has guaranteed the repayment of all amounts owing
under the new credit facility. The credit agreement contains covenants
restricting, among other things, Superior Materials Holdings’ distributions,
dividends and repurchases of capital stock and other equity interests,
acquisitions and investments, mergers, asset sales other than in the ordinary
course of business, indebtedness, liens, changes in business, changes to charter
documents and affiliate transactions. It also generally limits Superior
Materials Holdings’ capital expenditures and will require them to maintain
compliance with specified financial covenants. The credit agreement
provides that specified change of control events would constitute events of
default.
For
the
six months ended June 30, we made interest payments of approximately $13.3
million in 2007 and $8.7 million in 2006.
8.
INCOME TAXES
For
the
six months ended June 30, our income tax payments were approximately $2.5
million in 2007 and $0.1million in 2006.
In
accordance with applicable generally accepted accounting principles,
we
estimate the effective income tax rate expected to be applicable for the full
year. We use this estimate in providing for income taxes on a year-to-date
basis, and it may change in subsequent interim periods. Our
effective tax rates for the three and six months ended June 30, 2007 were
approximately 42% and 50%, respectively, compared to 39% and 40% for the same
periods in 2006. The
effective income tax rates for 2007 and 2006 are higher than the federal
statutory rate of 35%, due primarily to state income taxes, and in 2007, lower
operating profit combined with interest accrued related to
unrecognized tax benefits.
We
adopted Financial Accounting Standards Board (FASB) Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of
FASB Statement No. 109” (“FIN 48”) on January 1, 2007, which requires us to
recognize a tax benefit associated with an uncertain tax position when, in
our
judgment, it is more likely than not that the position will be sustained upon
examination by a taxing authority. For additional information regarding FIN
48
refer to “Accounting Changes” in Note 14.
Our
income tax expense included interest related to
unrecognized tax benefits
in the
amounts of $0.1 million and $0.2 million for the three- and six-months ended
June 30, 2007, respectively.
9.
STOCKHOLDERS’ EQUITY
Common
Stock and Preferred Stock
The
following table presents information regarding U.S. Concrete’s common stock (in
thousands):
|
|
|
|
|
|
Shares
authorized
|
|
|
60,000
|
|
|
60,000
|
|
Shares
outstanding at end of period
|
|
|
39,211
|
|
|
38,795
|
|
Shares
held in treasury
|
|
|
308
|
|
|
231
|
|
We
are
authorized to issue 10,000,000 shares of preferred stock, $0.001 par value,
of
which none were outstanding as of June 30, 2007 and December 31,
2006.
Treasury
Stock
Employees
may elect to satisfy their tax obligations on the vesting of their restricted
stock by having us make the required tax payments and withhold a number of
vested shares having an aggregate value on the date of vesting equal to the
tax
obligation. As a result of such employee elections, we withheld approximately
77,000 shares during the six months ended June 30, 2007, at a total value of
$0.7 million,
and we
accounted for those shares as treasury stock.
Public
Offering of Common Stock
In
February 2006, we received $90.6 million in gross proceeds from an underwritten
public offering of 8,050,000 shares of our common stock. After deducting the
underwriters’ commission and offering expenses, we received net proceeds of
approximately $84.8 million.
10.
SHARES USED IN COMPUTING NET INCOME PER SHARE
The
following table summarizes the number of shares (in thousands) of common stock
U.S. Concrete has used on a weighted-average basis in calculating basic and
diluted net income per share:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Basic
weighted average common shares outstanding
|
|
|
38,169
|
|
|
37,685
|
|
|
38,104
|
|
|
35,820
|
|
Effect
of dilutive stock options and awards
|
|
|
795
|
|
|
1,206
|
|
|
729
|
|
|
1,199
|
|
Diluted
weighted average common shares outstanding
|
|
|
38,964
|
|
|
38,891
|
|
|
38,833
|
|
|
37,019
|
|
For
the
three- and six-month periods ended June 30, stock options and awards covering
2.1 million shares in 2007 and 1.8 million shares in 2006 were excluded from
the
computation of the net income per share because their effect would have been
antidilutive.
11.
COMMITMENTS AND CONTINGENCIES
From
time
to time, and currently, we are subject to various claims and litigation brought
by employees, customers and other third parties for, among other matters,
personal injuries, property damages, product defects and delay damages that
have, or allegedly have, resulted from the conduct of our
operations.
We
believe that the resolution of all litigation currently pending or threatened
against us or any of our subsidiaries should not have a material adverse effect
on our consolidated financial condition, results of operations or liquidity;
however, because of the inherent uncertainty of litigation, we cannot provide
assurance that the resolution of any particular claim or proceeding to which
we
or any of our subsidiaries is a party will not have a material adverse effect
on
our consolidated results of operations or liquidity for the fiscal period in
which that resolution occurs. We expect in the future that we and our operating
subsidiaries will from time to time be a party to litigation or administrative
proceedings that arise in the normal course of our business.
We
are
subject to federal, state and local environmental laws and regulations
concerning, among other matters, air emissions and wastewater discharge. Our
management believes we are in substantial compliance with applicable
environmental laws and regulations. From time to time, we receive claims from
federal and state environmental regulatory agencies and entities asserting
that
we may be in violation of environmental laws and regulations. Based on
experience and the information currently available, our management believes
that
these claims should not have a material impact on our consolidated financial
condition, results of operations or liquidity. Despite compliance and
experience, it is possible that we could be held liable for future charges,
which might be material, but are not currently known to us or cannot be
estimated by us. In addition, changes in federal or state laws, regulations
or
requirements, or discovery of currently unknown conditions, could require
additional expenditures.
As
permitted under Delaware law, we have agreements that provide indemnification
of
officers and directors for certain events or occurrences while the officer
or
director is or was serving at our request in such capacity. The maximum
potential amount of future payments that we could be required to make under
these indemnification agreements is not limited; however, we have a director
and
officer insurance policy that potentially limits our exposure and enables us
to
recover a portion of future amounts that may be paid. As a result of the
insurance policy coverage, we believe the estimated fair value of these
indemnification agreements is minimal. Accordingly, we have not recorded any
liabilities for these agreements as of June 30, 2007.
We
and
our subsidiaries are parties to agreements that require us to provide
indemnification in certain instances when we acquire businesses and real estate
and in the ordinary course of business with our customers, suppliers, lessors
and service providers.
Insurance
Programs
We
maintain third-party insurance coverage in amounts and against the risks we
believe are reasonable. Under certain components of our insurance program,
we
share the risk of loss with our insurance underwriters by maintaining high
deductibles subject to aggregate annual loss limitations. Generally, our
deductible retentions per occurrence for auto and general liability insurance
programs are $1.0 million for 2007 and $0.5 million for 2006, and our deductible
retentions per occurrence for our workers’ compensation insurance programs are
$1.0 million for 2007 and 2006, although certain of our operations are
self-insured for workers’ compensation. We fund these deductibles and record an
expense for expected losses under the programs. The expected losses are
determined using a combination of our historical loss experience and subjective
assessments of our future loss exposure. The estimated losses are subject to
uncertainty from various sources, including changes in claims reporting
patterns, claims settlement patterns, judicial decisions, legislation and
economic conditions. Although we believe that the estimated losses we have
recorded are reasonable, significant differences related to the items noted
above could materially affect our insurance obligations and future
expense.
In
March
2007, we settled a lawsuit with a third-party claims administrator responsible
for handling workers’ compensation claims related to 2002 and 2003. The
settlement relieves us of any future responsibility relating to certain workers’
compensation claims and required the payment of $225,000 in cash to us by the
third party administrator. As a result, we recorded additional income of
approximately $1.4 million resulting from the reversal of accrued liabilities
relating to workers’ compensation claims associated with 2002 and 2003 and the
cash settlement amount. The additional income is reported in our financial
statements primarily as an offset to cost of sales in the six months ended
June
30, 2007.
Performance
Bonds
In
the
normal course of business, we and our subsidiaries are contingently liable
for
performance under $23.4 million in performance bonds that various contractors,
states and municipalities have required. The bonds principally relate to
construction contracts, reclamation obligations and mining permits. We and
our
subsidiaries have indemnified the underwriting insurance company against any
exposure under the performance bonds. No material claims have been made against
these bonds.
12.
SEGMENT INFORMATION
Operating
segments are defined under the guidance of SFAS No. 131, “Disclosures about
Segments of an Enterprise and Related Information,” as components of an
enterprise that engage in business activities that earn revenue, incur expenses
and prepare financial information that is evaluated regularly by our chief
operating decision maker in order to allocate resources and assess performance.
We have six operating segments based upon our six geographic reporting units
that serve our principal markets in the United States and have historically
aggregated these operating segments into one reportable segment based upon
the
guidance in SFAS No. 131.
During
the third quarter of 2006, we re-assessed our application of SFAS No. 131 and
based on the expected variation in the long-term margins of our operating
segments, determined that it would be appropriate to present our previously
aggregated six geographic reporting units as two reportable segments primarily
along product lines: ready-mixed concrete and concrete-related products, and
western precast concrete. We have revised our prior-period presentation to
correspond with the revision.
Our
ready-mixed concrete and concrete-related products segment produces and sells
ready-mixed concrete, aggregates (crushed stone, sand and gravel), concrete
masonry and building materials as well as a limited amount of precast concrete.
This segment serves the following principal markets: north and west Texas,
northern California, New Jersey, Delaware, Washington, D.C., Michigan, Tennessee
and Mississippi. Our western precast concrete segment produces and sells precast
concrete products in the western United States.
We
account for inter-segment sales at market prices. Segment operating profit
consists of net sales less operating expense, including certain operating
overhead directly related to the operation of the specific segment. Corporate
includes administrative, financial, legal, human resources and risk management,
activities which are not allocated to operations and are excluded from segment
operating profit.
The
following table sets forth certain financial information relating to our
operations by reportable segment (in thousands):
|
|
Three
months ended June 30,
|
|
Six
months ended June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
208,856
|
|
$
|
168,809
|
|
$
|
363,724
|
|
$
|
293,301
|
|
Western
precast concrete
|
|
|
18,130
|
|
|
20,579
|
|
|
35,944
|
|
|
36,288
|
|
Inter-segment
sales
|
|
|
(3,753
|
)
|
|
(625
|
)
|
|
(7,046
|
)
|
|
(1,232
|
)
|
Total
sales
|
|
$
|
223,233
|
|
$
|
188,763
|
|
$
|
392,622
|
|
$
|
328,357
|
|
Segment
operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
15,571
|
|
$
|
14,093
|
|
$
|
13,886
|
|
$
|
15,735
|
|
Western
precast concrete
|
|
|
2,840
|
|
|
3,143
|
|
|
4,151
|
|
|
4,809
|
|
Unallocated
overhead and other income
|
|
|
2,007
|
|
|
1,438
|
|
|
3,720
|
|
|
2,406
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expense
|
|
|
3,032
|
|
|
3,398
|
|
|
7,561
|
|
|
8,486
|
|
Interest
income
|
|
|
6
|
|
|
855
|
|
|
30
|
|
|
1,551
|
|
Interest
expense
|
|
|
7,192
|
|
|
4,661
|
|
|
14,083
|
|
|
9,293
|
|
Other
income, net
|
|
|
1,921
|
|
|
374
|
|
|
2,404
|
|
|
761
|
|
Minority
interest in consolidated subsidiaries
|
|
|
359
|
|
|
-
|
|
|
359
|
|
|
-
|
|
Income
before income taxes
|
|
$
|
11,762
|
|
$
|
11,844
|
|
$
|
2,188
|
|
$
|
7,483
|
|
Depreciation,
Depletion and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
7,287
|
|
$
|
4,146
|
|
$
|
14,006
|
|
$
|
7,986
|
|
Western
precast concrete
|
|
|
473
|
|
|
252
|
|
|
877
|
|
|
473
|
|
Corporate
|
|
|
101
|
|
|
97
|
|
|
196
|
|
|
212
|
|
Total
depreciation, depletion and amortization
|
|
$
|
7,861
|
|
$
|
4,495
|
|
$
|
15,079
|
|
$
|
8,671
|
|
Sales
by Product:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete
|
|
$
|
182,248
|
|
$
|
151,405
|
|
$
|
319,244
|
|
$
|
265,691
|
|
Precast
concrete
|
|
|
19,062
|
|
|
21,517
|
|
|
37,604
|
|
|
37,727
|
|
Building
materials
|
|
|
6,907
|
|
|
8,556
|
|
|
11,789
|
|
|
13,558
|
|
Aggregates
|
|
|
7,013
|
|
|
4,658
|
|
|
11,820
|
|
|
7,039
|
|
Other
|
|
|
8,003
|
|
|
2,627
|
|
|
12,165
|
|
|
4,342
|
|
Total
sales
|
|
$
|
223,233
|
|
$
|
188,763
|
|
$
|
392,622
|
|
$
|
328,357
|
|
Capital
Expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
5,499
|
|
$
|
13,707
|
|
$
|
12,375
|
|
$
|
18,363
|
|
Western
precast concrete
|
|
|
941
|
|
|
902
|
|
|
1,689
|
|
|
1,642
|
|
Total
capital expenditures
|
|
$
|
6,440
|
|
$
|
14,609
|
|
$
|
14,064
|
|
$
|
20,005
|
|
|
|
As
of
June
30, 2007
|
|
As
of
December
31, 2006
|
|
Identifiable
Assets:
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
640,178
|
|
$
|
598,328
|
|
Western
precast concrete
|
|
|
72,209
|
|
|
70,654
|
|
Corporate
|
|
|
48,112
|
|
|
47,664
|
|
Total
assets
|
|
$
|
760,499
|
|
$
|
716,646
|
|
13.
RECENT ACCOUNTING PRONOUNCEMENTS
In
February 2007, the FASB issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial Liabilities – Including
an
Amendment of FASB Statement No. 115.” SFAS No. 159 amends SFAS No. 115,
“Accounting for Certain Investments in Debt and Equity Securities.” This
statement permits, but does not require, entities to measure many financial
instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected should be recognized
in earnings at each subsequent reporting date. SFAS 159 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years, and
cannot be adopted early unless SFAS No. 157, “Fair Value Measurements,” is
also adopted. We are currently evaluating the impact adoption of SFAS No. 159
may have on our consolidated financial statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, “Fair Value Measurements.” SFAS No. 157 clarifies
the principle that fair value should be based on the assumptions market
participants would use when pricing an asset or liability and establishes a
fair-value hierarchy that prioritizes the information used to develop those
assumptions. Under SFAS No. 157, fair-value measurements would be separately
disclosed by level within the fair-value hierarchy. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007. We do not believe the
adoption of SFAS No. 157 will have a material impact on our consolidated
financial position, results of operations or cash flows.
14.
ACCOUNTING CHANGES
We
adopted FIN 48 on January 1, 2007. FIN 48 establishes a single model to
address accounting for uncertain tax positions. FIN 48 clarifies the accounting
for income taxes by prescribing a minimum recognition threshold a tax position
is required to meet before being recognized in the financial statements. As
a
result of our adoption of FIN 48, we recognized an adjustment of
approximately $0.3 million to the beginning balance of retained
earnings on the balance sheet. At January 1, 2007, we
had approximately $7.3 million of unrecognized tax benefits, of which
approximately $2.2 million would reduce our effective tax rate, if
recognized.
We recognize
interest and penalties related to uncertain tax positions in income tax
expense. At January 1, 2007, we also had approximately $0.8
million accrued for interest and penalties.
U.S.
Concrete and its subsidiaries are subject to U.S. federal income tax as well
as
income tax of multiple state jurisdictions. We are open to examination
in U.S. federal jurisdiction, and generally in state
jurisdictions, for tax years subsequent to 2001. During
2006, the U.S. government began an administrative review of
our tax years ranging from 2002 through 2004. In addition, one of
our subsidiaries is currently under audit by New Jersey for its
tax years ranging from 2002 through 2005. We expect that the amount of
unrecognized tax benefits will change due to the settlement of audits and the
expiration of statute of limitations; however, we do not expect that change
to
have a significant impact on our results of operations or our financial
position.
Income
tax expense included interest related to
unrecognized tax benefits in the amounts of $0.1 million for three months and
$0.2 million for the six months ended June 30, 2007.
See
Note
12 for changes in our accounting for segments.
15.
FINANCIAL STATEMENTS OF SUBSIDIARY GUARANTORS
All
of
our subsidiaries, excluding our recently formed 60% Michigan subsidiary,
Superior Materials Holdings, LLC (see Note 3) and minor subsidiaries, have
jointly and severally and fully and unconditionally guaranteed the repayment
of
our long-term debt. We directly or indirectly own 100% of each subsidiary
guarantor. The following supplemental financial information sets forth, on
a
condensed consolidating basis, the financial statements for U.S. Concrete and
its subsidiary guarantors (including minor subsidiaries), our 60% Michigan
non-guarantor subsidiary and our total company as of and for the three and
six
months ended June 30, 2007.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)
(in
thousands)
|
|
U.S.
Concrete
&
Subsidiary Guarantors1
|
|
Michigan LLC
|
|
Eliminations
|
|
Consolidated
|
|
Three months
ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
192,648
|
|
$
|
30,585
|
|
$
|
-
|
|
$
|
223,233
|
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
153,931
|
|
|
26,944
|
|
|
-
|
|
|
180,875
|
|
Selling,
general and administrative expenses
|
|
|
15,509
|
|
|
1,602
|
|
|
-
|
|
|
17,111
|
|
Depreciation,
depletion and amortization
|
|
|
6,764
|
|
|
1,097
|
|
|
-
|
|
|
7,861
|
|
Income
from operations
|
|
|
16,444
|
|
|
942
|
|
|
-
|
|
|
17,386
|
|
Interest
income
|
|
|
6
|
|
|
-
|
|
|
-
|
|
|
6
|
|
Interest
expense
|
|
|
7,140
|
|
|
52
|
|
|
-
|
|
|
7,192
|
|
Other
income, net
|
|
|
1,913
|
|
|
8
|
|
|
-
|
|
|
1,921
|
|
Minority
interest in consolidated subsidiary
|
|
|
-
|
|
|
-
|
|
|
359
|
|
|
359
|
|
Income
before income taxes
|
|
|
11,223
|
|
|
898
|
|
|
(359
|
)
|
|
11,762
|
|
Income
tax provision
|
|
|
4,938
|
|
|
-
|
|
|
-
|
|
|
4,938
|
|
Net
income
|
|
$
|
6,285
|
|
$
|
898
|
|
$
|
(359
|
)
|
$
|
6,824
|
|
|
|
U.S.
Concrete
&
Subsidiary Guarantors1
|
|
Michigan LLC
|
|
Eliminations
|
|
Consolidated
|
|
Six
months ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
362,037
|
|
$
|
30,585
|
|
$
|
-
|
|
$
|
392,622
|
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
301,551
|
|
|
26,944
|
|
|
-
|
|
|
328,495
|
|
Selling,
general and administrative expenses
|
|
|
33,250
|
|
|
1,602
|
|
|
-
|
|
|
34,852
|
|
Depreciation,
depletion and amortization
|
|
|
13,982
|
|
|
1,097
|
|
|
|
|
|
15,079
|
|
Income
from operations
|
|
|
13,254
|
|
|
942
|
|
|
-
|
|
|
14,196
|
|
Interest
income
|
|
|
30
|
|
|
-
|
|
|
-
|
|
|
30
|
|
Interest
expense
|
|
|
14,031
|
|
|
52
|
|
|
-
|
|
|
14,083
|
|
Other
income, net
|
|
|
2,396
|
|
|
8
|
|
|
-
|
|
|
2,404
|
|
Minority
interest in consolidated subsidiary
|
|
|
-
|
|
|
-
|
|
|
359
|
|
|
359
|
|
Income
before income taxes
|
|
|
1,649
|
|
|
898
|
|
|
(359
|
)
|
|
2,188
|
|
Income
tax provision
|
|
|
1,093
|
|
|
-
|
|
|
-
|
|
|
1,093
|
|
Net
income
|
|
$
|
556
|
|
$
|
898
|
|
$
|
(359
|
)
|
$
|
1,095
|
|
¹Including
minor subsidiaries, without operations or material
assets.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATING BALANCE SHEET
(Unaudited)
(in
thousands)
As
of June 30, 2007:
|
|
US
Concrete
&
Subsidiary
Guarantors1
|
|
Michigan LLC
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
7,338
|
|
$
|
645
|
|
$
|
-
|
|
$
|
7,983
|
|
Trade
accounts receivable, net.
|
|
|
112,921
|
|
|
21,849
|
|
|
-
|
|
|
134,770
|
|
Inventories
|
|
|
31,095
|
|
|
5,040
|
|
|
-
|
|
|
36,135
|
|
Prepaid
expenses
|
|
|
4,526
|
|
|
652
|
|
|
-
|
|
|
5,178
|
|
Other
current assets
|
|
|
17,709
|
|
|
574
|
|
|
-
|
|
|
18,283
|
|
Total
current assets
|
|
|
173,589
|
|
|
28,760
|
|
|
-
|
|
|
202,349
|
|
Properties,
plant and equipment, net
|
|
|
244,223
|
|
|
37,659
|
|
|
-
|
|
|
281,882
|
|
Goodwill
|
|
|
266,633
|
|
|
-
|
|
|
(2,555
|
)
|
|
264,078
|
|
Other
assets, net
|
|
|
32,866
|
|
|
9
|
|
|
(20,685
|
)
|
|
12,190
|
|
Total
assets
|
|
$
|
717,311
|
|
$
|
66,428
|
|
$
|
(23,240
|
)
|
$
|
760,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
3,
065
|
|
$
|
473
|
|
$
|
-
|
|
$
|
3,538
|
|
Accounts
payable
|
|
|
41,977
|
|
|
21,346
|
|
|
-
|
|
|
63,323
|
|
Accrued
liabilities
|
|
|
39,838
|
|
|
1,038
|
|
|
-
|
|
|
40,876
|
|
Total
current liabilities
|
|
|
84,880
|
|
|
22,857
|
|
|
-
|
|
|
107,737
|
|
Long-term
debt, net of current maturities
|
|
|
314,245
|
|
|
3,940
|
|
|
-
|
|
|
318,185
|
|
Other
long-term obligations and deferred credits
|
|
|
11,039
|
|
|
-
|
|
|
-
|
|
|
11,039
|
|
Deferred
income taxes
|
|
|
34,446
|
|
|
-
|
|
|
-
|
|
|
34,446
|
|
Total
liabilities
|
|
|
444,610
|
|
|
26,797
|
|
|
-
|
|
|
471,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
-
|
|
|
-
|
|
|
15,852
|
|
|
15,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
39
|
|
|
-
|
|
|
-
|
|
|
39
|
|
Additional
paid in capital
|
|
|
265,797
|
|
|
38,733
|
|
|
(38,733
|
)
|
|
265,797
|
|
Retained
earnings
|
|
|
9,439
|
|
|
898
|
|
|
(359
|
)
|
|
9,978
|
|
Treasury
stock, at cost
|
|
|
(2,574
|
)
|
|
- |
|
|
-
|
|
|
(2,574
|
)
|
Total
stockholders' equity
|
|
|
272,701
|
|
|
39,631
|
|
|
(39,092
|
)
|
|
273,240
|
|
Total
liabilities and stockholders' equity
|
|
$
|
717,311
|
|
$
|
66,428
|
|
$
|
(23,240
|
)
|
$
|
760,499
|
|
¹Including
minor subsidiaries, without operations or
material assets.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
(Unaudited)
(in
thousands)
|
|
US
Concrete
&
Subsidiary
Guarantors1
|
|
Michigan LLC
|
|
Eliminations
|
|
Consolidated
|
|
Six
months ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
$
|
942
|
|
$
|
(3,332
|
)
|
$
|
-
|
|
$
|
(2,390
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
(17,514
|
)
|
|
155
|
|
|
-
|
|
|
(17,359
|
)
|
Net
cash provided by financing activities
|
|
|
16,106
|
|
|
2,822
|
|
|
-
|
|
|
18,928
|
|
Net decrease
in cash and cash equivalents
|
|
|
(466
|
)
|
|
(355
|
)
|
|
-
|
|
|
(821
|
)
|
Cash
and cash equivalents at the beginning of the period
|
|
|
7,804
|
|
|
1,000
|
|
|
-
|
|
|
8,804
|
|
Cash
and cash equivalents at the end of the period
|
|
$
|
7,338
|
|
$
|
645
|
|
$
|
-
|
|
$
|
7,983
|
|
¹Including
minor subsidiaries, without operations or material
assets.
Statements
we make in the following discussion which express a belief, expectation or
intention, as well as those that are not historical fact, are forward-looking
statements that are subject to risks, uncertainties and assumptions. Our actual
results, performance or achievements, or industry results, could differ
materially from those we express in the following discussion as a result of
a
variety of factors, including the risks and uncertainties we have referred
to
under the headings “Risk Factors” in Item 1A of Part I in the 2006 Form 10-K,
and “—Risks and Uncertainties” below. For a discussion of our other commitments,
related-party transactions, and our critical accounting policies, see
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Item 7 in the 2006 Form 10-K. We assume no obligation to update
these forward-looking statements.
Our
Business
We
operate our business in two business segments: ready-mixed concrete and
concrete-related products; and western precast concrete.
Ready-Mixed
Concrete and Concrete-Related Products. Our
ready-mixed concrete and concrete-related products segment is engaged primarily
in the production, sale and delivery of ready-mixed concrete to our customer’s
job sites. To a lesser extent, this segment is engaged in the mining and sale
of
aggregates; the production, sale and distribution of precast concrete and
concrete masonry; and the resale of building materials, primarily to our
ready-mixed concrete customers. We provide these products and services from
our
operations in north and west Texas, northern California, New Jersey, Washington,
D.C., Michigan, Tennessee, Oklahoma and Mississippi.
Western
Precast Concrete. Our
western precast concrete segment engages principally in the production,
distribution and sale of precast concrete products from its eight plants located
in northern California, southern California and Arizona. Of these facilities,
we
have two sites in Phoenix, two sites in San Diego and four sites in northern
California. From these facilities, we produce precast concrete structures such
as utility vaults, manholes and other wastewater management products, specialty
engineered structures, curb-inlets, catch basins, retaining and other wall
systems and other precast concrete products.
Our
Markets
The
markets for our products are generally local, and our operating results are
subject to fluctuations in the level and mix of construction activity that
occur
in our markets. The level of activity affects the demand for our products,
while
the product mix of activity among the various segments of the construction
industry affects both our relative competitive strengths and our operating
margins. Commercial and industrial projects generally provide more opportunities
to sell value-added products which are designed to meet the high-performance
requirements of these types of projects.
Our
customers are generally involved in the construction industry, which is a
cyclical business and is subject to general and more localized economic
conditions. In addition, our business is impacted by seasonal variations in
weather conditions which vary by regional market. Accordingly, demand for our
products and services during the winter months are typically lower than other
months of the year because of inclement weather. Also, sustained periods of
inclement weather and other weather conditions could postpone or delay projects
in our markets during other times of the year.
For
the
first six months of 2007, we continued to experience improved pricing trends
in
many of our markets, including our northern California, north and west Texas
and
Michigan markets, as compared to 2006. Sustaining or improving our margins
in
the future will depend on market conditions, including the continued potential
softening of the residential sector and our ability to increase or maintain
our
product pricing or realize gains in productivity to offset further potential
increases in raw materials and other costs.
In
the
first six months of 2007, ready-mixed concrete sales volumes, excluding the
impact of our Alberta/Alliance Haulers acquisition in July of 2006 and the
Michigan joint venture in April of 2007, have generally declined in our markets
as compared to the first six months of 2006. The decline resulted from adverse
weather conditions in certain markets and a continued deterioration of the
residential construction sector in all of our markets.
Despite
weak regional economic conditions in our Michigan region, including the activity
of our new joint venture, demand for our products remained relatively flat.
Product pricing is currently stable in this market.
Demand
for our products in our western precast concrete segment decreased in the first
half of 2007, as compared to the same period of 2006. This decline is reflective
of the decline in residential construction starts, primarily in our northern
California and Phoenix, Arizona markets.
Cement
and Other Raw Materials
Our
cost
of goods sold consists principally of the costs we incur in obtaining the
cement, aggregates and admixtures we combine to produce ready-mixed concrete
for
delivery to customers or use in our precast concrete operations. We obtain
most
of these materials from third parties and generally only have a few days’ supply
at each of our plants. These costs vary with our levels of production. Our
cost
of goods sold also includes labor costs, primarily for delivery and plant
personnel, insurance costs and the operating, maintenance and rental expenses
and fuel costs we incur in operating our plants, mixer trucks and other
vehicles.
In
the
first half of 2007, cement and aggregates prices rose at a slower pace than
that
experienced in 2005 and 2006, primarily as a result of the continued downturn
in
residential construction in our markets and the availability of cement in our
markets. While we expect residential construction to continue at lower levels
going forward, we anticipate that commercial construction and other building
segments will comprise a
larger
component of domestic demand. As a result, we do not expect any significant
cement shortages in our markets and believe
the pace of cement price increases will moderate as a result of improved
availability of cement in our markets. The
price
and supply of aggregates are generally driven by local market supply and demand
characteristics. Today, in most of our markets, we believe there is an adequate
supply of aggregates.
Acquisitions
Since
our
inception in 1999, our growth strategy has contemplated acquisitions. The rate
and extent to which appropriate further acquisition opportunities are available,
and the extent to which acquired businesses are integrated and anticipated
synergies and cost savings are achieved, can affect our operations and
results.
During
the first six months of 2007, we entered into a joint venture in Michigan with
the Edw. C. Levy Company, and acquired two ready-mixed concrete plant sites
in
our west Texas market from a competitor. During 2006, we completed six
acquisitions. Four of these acquisitions were in our ready-mixed concrete and
concrete-related products segment and two were in our western precast segment.
Each of these acquisitions is discussed briefly below.
Ready-Mixed
Concrete and Concrete-Related Products Segment
West
Texas Acquisition.
We
acquired two ready-mix concrete plants, including real property and certain
raw
material inventories, in our west Texas market for approximately $3.6 million
in
June 2007.
Superior
Materials Joint Venture.
In
April
2007, we formed a joint venture (Superior materials Holdings, LLC), with the
Edw. C. Levy Co. which operates in Michigan. Under the contribution agreement,
we contributed substantially all of our ready-mixed concrete and
concrete-related products assets, except our quarry assets and working capital,
in Michigan in exchange for a 60% ownership interest, while the Edw. C. Levy
Co.
contributed all of its Michigan ready-mixed concrete and related concrete
products assets, its 24,000 ton cement terminal and $1.0 million for a 40%
ownership interest. The joint venture currently owns and operates 28 ready-mixed
concrete plants, a 24,000-ton cement terminal and approximately 300 ready-mixed
concrete trucks.
Breckenridge
Ready-Mix Acquisition. In
November 2006, we acquired the operating assets of Breckenridge Ready-Mix,
Inc.
for $3.0 million in cash and effectively assumed approximately $0.4 million
in
interest-bearing debt. The assets include two ready-mix plants and a sand and
gravel quarry operation in Breckenridge, Texas.
Pinnacle
Materials Acquisition. In
October 2006, we acquired certain aggregates assets located in New Jersey from
Pinnacle Materials, Inc. for $12.5 million in cash. The assets consist of a
granite quarry and a natural sand pit.
Alberta
Investments/Alliance Haulers Acquisition.
In
July
2006, we acquired all of the outstanding equity interests in Alberta Investments
and Alliance Haulers for $165.0 million, subject to specified adjustments.
Alberta Investments conducted the substantial majority of its business through
two subsidiaries: Redi-Mix, L.P. and Ingram Enterprises, L.P. Redi-Mix operated
13 ready-mixed concrete plants in the Dallas/Fort Worth Metroplex and in areas
north of the Metroplex. Ingram operated 17 ready-mixed concrete plants and
three
sand and gravel plants in west Texas. Alliance Haulers provides cement and
aggregates hauling services with a fleet of approximately 260 hauling trucks
in
the markets covered by Redi-Mix and Ingram.
Kurtz
Acquisition. In
April
2006, we acquired Kurtz Gravel Company, which produced ready-mixed concrete
from
six plants and mines aggregates from a quarry, all located in or near our
existing metropolitan Detroit market area, for approximately $13.0 million
in
cash. We also assumed certain capital lease liabilities with a net present
value
of $1.5 million.
Western
Precast Concrete Segment
Olson
Precast Acquisition.
In June
2006, we acquired the operating assets, including real property, of Olson
Precast Company used in the production of precast concrete products in northern
California for approximately $4.8 million in cash.
Pre-Cast
Mfg. Acquisition.
In April
2006, we acquired the operating assets of Pre-Cast Mfg., Inc. in our existing
Phoenix market area for approximately $5.0 million in cash. Pre-Cast Mfg.
produces pre-cast concrete products.
Risks
and Uncertainties
Numerous
factors could affect our future operating results, including the factors
discussed under the heading “Risk Factors” in Item 1A of Part I of the 2006 Form
10-K and:
Internal
Computer Network and Applications. We
rely
on our network infrastructure, enterprise applications and internal technology
systems for our operational, support and sales activities. The hardware and
software systems related to such activities are subject to damage from
earthquakes, floods, fires, power loss, telecommunication failures and other
similar events. They are also subject to computer viruses, physical or
electronic vandalism or other similar disruptions that could cause system
interruptions, delays and loss of critical data and could prevent us from
fulfilling our customers’ orders. We have developed disaster recovery plans and
backup systems to reduce the potentially adverse effects of such events. Any
event that causes failures or interruption in our hardware or software systems
could result in disruption in our business operations, loss of revenues or
damage to our reputation.
Accounting
Rules and Regulations. We
prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America (“GAAP”). A change
in these policies can have a significant effect on our reported results and
may
even retroactively affect previously reported transactions.
Tax
Liabilities.
We are
subject to federal, state and local income taxes, applicable to corporations
generally, as well as non-income-based taxes. Significant judgment is required
in determining our provision for income taxes and other tax liabilities. In
the
ordinary course of business, we make calculations for which the ultimate tax
determination is uncertain. We are also from time to time under audit by state
and local tax authorities. Although we can provide no assurance that the final
determination of our tax liabilities will not differ from what our historical
income tax provisions and accruals reflect, we believe our tax estimates are
reasonable.
Critical
Accounting Policies
We
have
outlined our critical accounting policies in Item 7 of Part II of the 2006
Form
10-K. Our critical accounting policies involve the use of estimates in the
recording of allowance for doubtful accounts, realization of goodwill, accruals
for self-insurance, accruals for income taxes and the valuation and useful
lives
of property, plant and equipment. During the six months ended June 30, 2007,
we
made no changes in the application of our critical accounting policies presented
in the 2006 Form 10-K. See Note 1 to our consolidated financial statements
included in Item 8 of Part II of the 2006 Form 10-K for a discussion of these
accounting policies. See Notes 13 and 14 to the condensed consolidated financial
statements in Part I of this report for a discussion of recent accounting
pronouncements and accounting changes.
Results
of Operations
The
following table sets forth selected historical statements of operations
information (in thousands, except for selling prices) and that information
as a
percentage of sales for the periods indicated.
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related
products
|
|
$
|
208,856
|
|
|
93.6
|
%
|
$
|
168,809
|
|
|
89.4
|
%
|
$
|
363,724
|
|
|
92.6
|
%
|
$
|
293,301
|
|
|
89.3
|
%
|
Western
precast concrete
|
|
|
18,130
|
|
|
8.1
|
|
|
20,579
|
|
|
10.9
|
|
|
35,944
|
|
|
9.2
|
|
|
36,288
|
|
|
11.0
|
|
Inter-segment
sales
|
|
|
(3,753
|
)
|
|
(1.7
|
)
|
|
(625
|
)
|
|
(0.3
|
)
|
|
(7,046
|
)
|
|
(1.8
|
)
|
|
(1,232
|
)
|
|
(0.3
|
)
|
Total
sales
|
|
|
223,233
|
|
|
100.0
|
|
|
188,763
|
|
|
100.0
|
|
|
392,622
|
|
|
100.0
|
|
|
328,357
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold before depreciation, depletion and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related
products
|
|
|
168,438
|
|
|
75.4
|
|
|
139,253
|
|
|
73.8
|
|
|
302,519
|
|
|
77.1
|
|
|
248,721
|
|
|
75.7
|
|
Western
precast concrete
|
|
|
12,437
|
|
|
5.6
|
|
|
15,034
|
|
|
8.0
|
|
|
25,976
|
|
|
6.6
|
|
|
26,362
|
|
|
8.0
|
|
Selling,
general and administrative expenses
|
|
|
17,111
|
|
|
7.7
|
|
|
14,705
|
|
|
7.8
|
|
|
34,852
|
|
|
8.9
|
|
|
30,139
|
|
|
9.2
|
|
Depreciation,
depletion and amortization
|
|
|
7,861
|
|
|
3.5
|
|
|
4,495
|
|
|
2.4
|
|
|
15,079
|
|
|
3.8
|
|
|
8,671
|
|
|
2.6
|
|
Income
from operations
|
|
|
17,386
|
|
|
7.8
|
|
|
15,276
|
|
|
8.1
|
|
|
14,196
|
|
|
3.6
|
|
|
14,464
|
|
|
4.4
|
|
Interest
income
|
|
|
6
|
|
|
0.0
|
|
|
855
|
|
|
0.5
|
|
|
30
|
|
|
0.0
|
|
|
1,551
|
|
|
0.5
|
|
Interest
expense
|
|
|
7,192
|
|
|
3.2
|
|
|
4,661
|
|
|
2.5
|
|
|
14,083
|
|
|
3.6
|
|
|
9,293
|
|
|
2.8
|
|
Other
income, net
|
|
|
1,921
|
|
|
0.9
|
|
|
374
|
|
|
0.2
|
|
|
2,404
|
|
|
0.6
|
|
|
761
|
|
|
0.2
|
|
Minority
interest in consolidated subsidiary
|
|
|
359
|
|
|
0.2
|
|
|
-
|
|
|
|
|
|
359
|
|
|
0.1
|
|
|
- |
|
|
|
|
Income
before income taxes
|
|
|
11,762
|
|
|
5.3
|
|
|
11,844
|
|
|
6.3
|
|
|
2,188
|
|
|
0.6
|
|
|
7,483
|
|
|
2.3
|
|
Income
tax provision
|
|
|
4,938
|
|
|
2.2
|
|
|
4,641
|
|
|
2.5
|
|
|
1,093
|
|
|
0.3
|
|
|
2,981
|
|
|
0.9
|
|
Net
income
|
|
$
|
6,824
|
|
|
3.1
|
%
|
$
|
7,203
|
|
|
3.8
|
%
|
$
|
1,095
|
|
|
0.3
|
%
|
$
|
4,502
|
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic
yard
|
|
$
|
90.89
|
|
|
|
|
$
|
87.52
|
|
|
|
|
$
|
90.72
|
|
|
|
|
$
|
88.50
|
|
|
|
|
Sales
volume in cubic yards
|
|
|
2,005
|
|
|
|
|
|
1,730
|
|
|
|
|
|
3,519
|
|
|
|
|
|
3,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precast
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic
yard of concrete used in
production
|
|
$
|
600.23
|
|
|
|
|
$
|
558.57
|
|
|
|
|
$
|
576.89
|
|
|
|
|
$
|
591.07
|
|
|
|
|
Ready-mixed
concrete used in production
in cubic yards
|
|
|
30
|
|
|
|
|
|
37
|
|
|
|
|
|
62
|
|
|
|
|
|
62
|
|
|
|
|
Sales.
Ready-mixed
concrete and concrete-related products. Sales
of
our ready-mix concrete and concrete-related products were $208.9 million, for
the three months ended June 30, 2007, up $40.0 million or 23.7% compared to
the
corresponding period in 2006. This increase was primarily attributable to a
15.9% increase in ready-mixed concrete sales volume and a 3.9% increase in
the
average sales price for ready-mixed concrete in the quarter ended June 30,
2007,
as compared to the same quarter in 2006. For the six months ending June 30,
2007, sales rose to $363.7 million, an increase of $70.4 million, or 24.0%,
over
the same period of 2006. The increase in the six months ending June 30, 2007
was
primarily related to a 17.2% increase in ready-mixed concrete sales volume
and a
2.5% increase in the average selling price of ready-mixed concrete in the six
months ended June 30, 2007, as compared to the same period in 2006. The increase
in sales volume in both the quarter and six month periods ended June 30, 2007
was primarily attributable to the Alberta/Alliance Haulers acquisition we
completed in the third quarter of 2006. The increase in average ready-mixed
concrete sales prices in 2007, as compared to 2006 is reflective of ready-mixed
concrete price increases in most of our markets during the first half of 2007,
offset somewhat by a shift in the geographic mix of our sales volumes as a
result of the Alberta/Alliance Haulers acquisition in the third quarter of
2006.
Western
precast concrete.
Sales of
$18.1 million in our western precast concrete segment decreased $2.4 million,
or
11.9%, for the three months ended June 30, 2007, as compared to the
corresponding period in 2006. This decrease was due to softening in the level
of
residential construction in our northern California and Phoenix, Arizona markets
as evidenced by the 18.9% decline in ready-mixed concrete used in production
in
the quarter ended June 30, 2007, as compared to the same period in 2006. Sales
for the six months ended June 30, 2007 were down slightly by $0.3 million,
or
1.0%, to $35.9 million, as compared to the same period of last year. This
decrease is primarily related to the 2.4% decline in the average sales price
per
cubic yard of concrete used in production in the six months ended June 30,
2007,
as compared to the same period in 2006. The decline in our average price per
cubic yard of concrete used in production primarily is attributable to the
downturn in residential construction in our Phoenix, Arizona and northern
California markets, which has resulted in price declines for precast products
sold into those markets.
Cost
of goods sold before depreciation, depletion and
amortization.
Ready-mixed
concrete and concrete-related products. Cost
of
goods sold before depreciation, depletion and amortization for our ready-mixed
concrete and concrete-related products segment increased $29.2 million, or
21.0%, to $168 million for the three months ended June 30, 2007, as compared
to
the corresponding period in 2006. As a percentage of ready-mixed concrete and
concrete-related products sales, cost of goods sold before depreciation,
depletion and amortization decreased from 82.5% for the three months ended
June
30, 2006 to 80.6% for the three months ended June 30, 2007. These same costs
rose to $302.5 million, up $53.8 million, or 21.6%, for the six months ended
June 30, 2007. As a percentage of ready-mixed concrete and concrete-related
products sales, these costs decreased from 84.8% to 83.2% for the six months
ended June 30, 2007, as compared to the same period in 2006. These increases
were primarily attributable to 15.9% and 17.2% increases in ready-mixed concrete
sales volume in the three- and six-month periods ended June 30, 2007, as
compared to the same periods in the 2006, and slightly higher ready-mixed
concrete materials costs (primarily cement and aggregates), as compared to
the
same periods of 2006. On a percentage of sales basis, the improvements in cost
of goods sold as a percentage of ready-mixed concrete and concrete-related
products sales are primarily attributable to improvements in our material spread
margins (sales less raw materials cost) which resulted from our ready-mixed
concrete selling prices increasing in the first half of 2007 at a higher rate
than the cost of our materials in 2007, offset somewhat by a decline in
operational efficiency resulting from volumes falling short of our plan as
a
result of weather events primarily in our Texas markets in the second quarter
of
2007.
Western
precast concrete. The
reduction in cost of goods sold before depreciation, depletion and amortization
for our western precast segment of $2.6 million, or 17.3%, for the three months
ended June 30, 2007, as compared to the same period in 2006, was primarily
related to the 18.9% reduction in the volume of ready-mixed concrete used in
production, which is indicative of the declining residential housing market
that
is impacting our northern California and Phoenix, Arizona precast markets.
Cost
of goods sold before depreciation, depletion and amortization for the six months
ended June 30, 2007 were $26.0 million, a decline of $0.4 million or 1.5%,
as compared to the same period in the prior year. The reduced costs were the
outcome of lower production primarily attributable to the downturn in
residential construction in our Phoenix, Arizona and northern California
markets. As a percentage of western precast concrete sales, cost of goods sold
before depreciation, depletion and amortization declined in the three months
ended June 30, 2007, as compared to the same period in 2006 from 73.0% to 68.5%.
For the six months ended June 30, 2007, as compared to the same period in 2006,
cost of goods sold before depreciation, depletion and amortization as a
percentage of western precast concrete sales declined slightly from 72.6% to
72.3%. The improvement in these comparative periods reflects our efforts to
reduce our input costs to offset the reductions in both volume of sales of
precast products and overall price declines, resulting from the downturn in
the
residential housing market in our northern California and Phoenix, Arizona
markets.
Selling,
general and administrative expenses.
Selling,
general and administrative expenses were $2.4 million, or 16.4%, higher for
the
three months ended June 30, 2007, as compared to the corresponding 2006 period.
For the six months ended June 30, 2007, these costs rose by $4.7 million, or
15.6%, when compared to the corresponding period in 2006. These increases were
directly related to the growth of our company through acquisitions, which drove
higher administrative compensation expenses resulting from the increase in
personnel. Selling, general and administrative expenses as a percentage of
sales
declined to 7.7% and 8.9% in the three- and six-month periods ended June 30,
2007, as compared to 7.8% and 9.2% in the three- and six-month periods ended
June 30, 2006.
Depreciation,
depletion and amortization.
Since
July 2006, our depreciable base for plant assets has increased over $106.0
million, or 59%, as a result of acquisitions we have completed. This increase
has resulted in additional depreciation, depletion and amortization expense
of
$3.4 million, or 74.9%, for the three months ended June 30, 2007, and $6.4
million, or 74.0%, for the six months ended June 30, 2007, when compared to
the
corresponding periods in 2006.
Interest
expense.
The
increase in interest expense of $2.5
million, or 54.3%, to $7.2 million for the three months ended June 30, 2007,
as
compared to the corresponding period of 2006, was the result of additional
borrowings through the issuance
of additional 8 3/8% Senior Subordinated Notes in July 2006 and the larger
outstanding balances borrowed under an amendment to the credit agreement signed
June 30, 2006. The additional interest expense of $4.8
million, an equivalent 51.5% increase for the six months ended June 30, 2007
over the corresponding 2006 period, also resulted from the additional borrowings
in 2006 and additional borrowings in the 2007 period under our credit
facility.
Other
income, net. Other
income,
net
increased $1.5 million for the quarter ended June 30, 2007 and $1.6 million
for
the six months ended June 30, 2007, as compared to the corresponding periods
in
the prior year. The increase in other income, net for the three- and six-month
periods ended June 30, 2007 over the corresponding periods in the prior year
was
primarily attributable to a contractual settlement reached in
2006 with a former owner of an acquired business.
Income
tax expense.
We
recorded an income tax provision of $4.9 million for the three months ended
June
30, 2007, as compared to $4.6 million for the corresponding period in 2006.
The
increase in the income tax provision resulted from an increase in the effective
tax rate, as compared to the corresponding period in 2006. We recorded an income
tax provision of $1.1 million for the six months ended June 30, 2006, as
compared to $3.0 million for the corresponding period in 2006. The decrease
in
the income tax provision for the six months ended June 30, 2007, as compared
to
the same period in 2006, was a result of lower pre-tax income, offset somewhat
by a higher effective tax rate. At
the
end of each interim reporting period, we estimate the effective income tax
rate
expected to be applicable for the full year. We use this estimate in providing
for income taxes on a year-to-date basis, and it may change in subsequent
interim periods. Our
estimated annualized effective tax rate was 50% and 40% for the six months
ended
June 30, 2007 and 2006, respectively.
The
effective income tax rates for the 2007 and 2006 periods were higher than the
federal statutory rate, due primarily to state income taxes and interest accrued
related to unrecognized tax benefits.
Liquidity
and Capital Resources
Our
primary short-term liquidity needs consist of financing seasonal increases
in
working capital requirements, purchasing properties and equipment and paying
cash interest expense under our 8⅜% senior subordinated notes due in April 2014
and cash interest expense on borrowings under our senior secured revolving
credit facility due in March 2011. In addition to cash and cash equivalents
of
$8.0 million at June 30, 2007 and cash from operations, our senior secured
revolving credit facility provides us with a significant source of liquidity.
That facility provides us a borrowing capacity of up to $150 million. The Credit
Agreement relating to this facility provides that the administrative agent
may,
on the bases specified, reduce the amount of available credit from time to
time.
At June 30, 2007, $26.1
million
was outstanding under the revolving credit facility, and the amount of available
credit was approximately $76.7
million,
net of outstanding letters of credit of $12.9
million.
Our working capital needs are typically at their lowest level in the first
quarter and increase in the second and third quarters to fund the increases
in
working capital requirements during those periods and the cash interest payment
on our senior subordinated notes on April 1 and October 1 of each
year.
The
principal factors that could adversely affect the amount and availability of
our
internally generated funds include:
|
•
|
any
deterioration of sales, because of weakness in markets in which we
operate;
|
|
•
|
any
decline in gross margins due to shifts in our project mix or increases
in
the cost of our raw materials; and
|
|
•
|
the
extent to which we are unable to generate internal growth through
integration of additional businesses or capital expansions of our
existing
business.
|
The
principal factors that could adversely affect our ability to obtain cash from
external sources include:
|
• |
covenants
contained in the Credit Agreement and the indenture governing our
8⅜%
senior subordinated notes;
|
|
• |
volatility
in the markets for corporate debt;
and
|
|
• |
fluctuations
in the market price of our common stock or 8 ⅜%
senior subordinated notes.
|
The
following key financial measurements reflect our financial position and capital
resources as of June 30, 2007 and December 31, 2006 (dollars in
thousands):
|
|
June
30,
2007
|
|
December
31,
2006
|
|
Cash
and cash equivalents
|
|
$
|
7,983
|
|
$
|
8,804
|
|
Working
capital
|
|
|
94,612
|
|
|
64,687
|
|
Total
debt
|
|
|
321,723
|
|
|
303,292
|
|
Debt
to debt and equity
|
|
|
54.1
|
%
|
|
52.9
|
%
|
Our
cash
and cash equivalents consist of highly liquid investments in deposits we hold
at
major banks.
Senior
Secured Credit Facility
On
June
30, 2006, we entered into the Credit Agreement, which amended and restated
our
senior secured credit agreement dated as of March 12, 2004.
The
Credit Agreement, as amended to date, provides us with a $150 million revolving
credit facility, with borrowings limited based on a portion of the net amounts
of eligible accounts receivable, inventory and mixer trucks. The facility
matures in March 2011. At June 30, 2007, new borrowings under the facility
would
have borne annual interest at the Eurodollar-based rate (“LIBOR”) plus 2.00% or
the domestic rate plus 0.50%. The outstanding borrowings under the facility
as
of June 30, 2007 bore interest at the rate of 7.5% per annum, based on our
election to borrow at the LIBOR rate plus the applicable margin. The interest
rate margins will vary inversely with the amount of unused borrowing capacity
available under the facility. Commitment fees at an annual rate of 0.25%
are payable on the unused portion of the facility.
Our
subsidiaries, excluding our recently formed 60% Michigan subsidiary and minor
subsidiaries, have guaranteed the repayment of all amounts owing under the
Credit Agreement. In addition, we collateralized the facility with the capital
stock of our subsidiaries, excluding our Michigan joint venture company and
minor subsidiaries without operations or material assets, and substantially
all
the assets of those subsidiaries, excluding our 60% Michigan subsidiary, most
of
the assets of the aggregates quarry in northern New Jersey and other real estate
owned by us or our subsidiaries. The Credit Agreement contains covenants
restricting, among other things, prepayment or redemption of subordinated notes,
distributions, dividends and repurchases of capital stock and other equity
interests, acquisitions and investments, mergers, asset sales other than in
the
ordinary course of business, indebtedness, liens, changes in business, changes
to charter documents and affiliate transactions. It also limits capital
expenditures (excluding permitted acquisitions) to $45 million for 2006,
and the greater of $45 million or 5% of consolidated revenues in the prior
12 months, and will require us to maintain a minimum fixed-charge coverage
ratio
of 1.0 to 1.0 on a rolling 12-month basis if the available credit under the
facility falls below $25 million. The Credit Agreement provides that specified
change of control events would constitute events of default.
The
Credit Agreement provides that the administrative agent may, on the bases
specified, reduce the amount of the available credit from time to time. At
June
30, 2007, there was $26.1 million of revolving credit borrowings outstanding
under the Credit Agreement and the amount of the available credit was
approximately $76.7 million, net of outstanding letters of credit of $12.9
million.
Senior
Subordinated Notes
On
March
31, 2004, we issued $200 million of 8⅜% senior subordinated notes due April 1,
2014. Interest on these notes is payable semi-annually
on April 1 and October 1 of each year. We
used the
net proceeds of this financing to redeem our prior 12% senior subordinated
notes
and prepay the outstanding debt under our credit facility. In July 2006, we
issued $85 million of additional 8⅜% senior subordinated notes due April 1, 2014
to fund a portion of the purchase price for the acquisition of Alberta
Investments and Alliance Haulers.
All
of
our subsidiaries, excluding our
recently formed 60% Michigan subsidiary and minor subsidiaries, have jointly
and
severally and fully and unconditionally guaranteed the repayment of the
8⅜%
senior
subordinated notes.
The
indenture governing the notes limits our ability and the ability of our
subsidiaries to pay dividends or repurchase common stock, make certain
investments, incur additional debt or sell preferred stock, create liens, merge
or transfer assets. After March 31, 2009, we may redeem all or a part of the
notes at a redemption price of 104.188% in 2009, 102.792% in 2010, 101.396%
in
2011 and 100% in 2012 and thereafter. The indenture requires us to offer to
repurchase (1) an aggregate principal amount of the subordinated notes equal
to
the proceeds of certain asset sales that are not reinvested in the business
or
used to pay senior debt and (2) all the notes following the occurrence of a
change of control. Our senior secured credit agreement prohibits these
repurchases.
As
a
result of restrictions contained in the indenture relating to the 8⅜% senior
subordinated notes, our ability to incur additional debt is primarily limited
to
the greater of (1) borrowings available under our senior secured credit
facility, plus the greater of $15 million or 7.5% of our tangible assets, or
(2)
additional debt if, after giving effect to the incurrence of such additional
debt, our earnings before interest, taxes, depreciation, amortization and
certain noncash items equal or exceed two times our total interest
expense.
Superior
Materials Holdings, LLC Credit Facility
At
June
30, 2007, Superior Materials Holdings, LLC had an outstanding credit agreement
which provides for a revolving credit facility, under which borrowings of up
to
$25 million may become available. The credit facility is collateralized by
substantially all the assets of Superior Materials Holdings, LLC and is
scheduled to mature on April 1, 2010. Availability of borrowings are
subject to a borrowing base of real property, net receivables and
inventory. The
credit agreement provides that the administrative agent may, on the bases
specified, reduce the amount of the available credit from time to time. At
June 30, 2007, there were $3.4 million in borrowings under the revolving credit
facility and the amount of the available credit was approximately $8.3
million.
Currently,
borrowings under the facility are subject to interest at a LIBOR plus 1.75%
or a
domestic prime rate minus 0.50%. The interest rate margins vary inversely
with the ratio of funded debt to EBITDA. Commitment fees at an annual rate
of 0. 25% are payable on the unused portion of the facility.
Superior
Materials Holdings has guaranteed the repayment of all amounts owing under
the
new credit facility. The credit agreement contains covenants restricting,
among other things, Superior Materials Holdings’ distributions, dividends and
repurchases of capital stock and other equity interests, acquisitions and
investments, mergers, asset sales other than in the ordinary course of business,
indebtedness, liens, changes in business, changes to charter documents and
affiliate transactions. It also generally limits Superior Materials
Holdings’ capital expenditures and will require them to maintain compliance with
specified financial covenants. The credit agreement provides that
specified change of control events would constitute events of
default.
For
the
six months ended June 30, we made interest payments of approximately $13.3
million in 2007 and $8.7 million in 2006.
Cash
Flow
Our
net
cash provided by (used in) operating activities generally reflects the cash
effects of transactions and other events used in the determination of net income
or loss. Net cash used in operating activities was $2.4 million in the six
months ended June 30, 2007, compared to $2.1 million of net cash provided by
operating activities in the six months ended June 30, 2006. This change was
principally a result of higher working capital requirements.
Our
net
cash used in investing activities of $17.4 million decreased $23.5 million
for
the six months ended June 30, 2007, as compared to $40.9 million used in
investing activities in the six months ended June 30, 2006, primarily because
of
lower purchases of property and equipment and less capital spent on
acquisitions.
Our
net
cash provided by financing activities of $18.9 million for the six months ended
June 30, 2007 decreased $69.1 million from the $88.0 million net cash provided
by financing activities for the six months ended June 30 2006. This decrease
was
attributable to our February 2006 common stock issuance, partially offset by
our
increased 2007 borrowings under our revolving credit facility as of June 30,
2007.
We
define free cash flow as net cash provided by operating activities less
purchases of property, plant and equipment (net of disposals). Free cash flow
is
a performance measure not prepared in accordance with generally accepted
accounting principles (“GAAP”). Our management uses free cash flow in managing
our business because we consider it to be an important indicator of our ability
to service our debt and generate cash for acquisitions and other strategic
investments. We believe free cash flow may provide users of our financial
information additional meaningful comparisons between current results and
results in prior operating periods. As a non-GAAP financial measure, free cash
flow should be viewed in addition to, and not as an alternative for, our
reported operating results or cash flow from operations or any other measure
of
performance prepared in accordance with GAAP.
Our
net
cash provided by (used in) operations and free cash flow is as follows (in
thousands):
|
|
Six
Months Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
Net
cash provided by (used in) operations
|
|
$
|
(2,390
|
)
|
$
|
2,068
|
|
Less:
purchases of property and equipment (net of disposals)
|
|
|
(11,900
|
)
|
|
(18,027
|
)
|
Free
cash flow (as defined)
|
|
$ |
(14,290
|
)
|
$
|
(15,959
|
)
|
Future
Capital Requirements
For
the
last six months of 2007, our capital requirements are expected to be in the
range of $18.0 million to $23.0 million of planned capital expenditures, most
of
which we expect to be related to the purchase of mixer drums, loaders, routine
plant improvements, plant relocations and other rolling stock. In addition,
in
the normal course of business, we lease certain equipment used in our operations
under operating leases.
We
believe, on the basis of current expectations, that our cash on hand, internally
generated cash flow and available borrowings under our revolving credit facility
will be sufficient to provide the liquidity necessary to fund our operations
and
meet our capital and debt service requirements for at least the next 12
months.
Off-Balance
Sheet Arrangements
We
do not
currently have any off-balance sheet arrangements. From time to time, we may
enter into noncancellable operating leases that would not be reflected on our
balance sheet.
Commitments
The
following are our contractual commitments associated with our indebtedness
and
lease obligations as of June 30, 2007 (in millions):
Contractual
obligations
|
|
Total
|
|
Less
Than
1
year
|
|
1-3
years
|
|
4-5
years
|
|
After
5
years
|
|
Principal
on debt
|
|
$
|
320.6
|
|
$
|
3.0
|
|
$
|
7.8
|
|
$
|
-
|
|
$
|
309.8
|
|
Interest
on debt (1)
|
|
|
167.9
|
|
|
24.3
|
|
|
48.1
|
|
|
47.8
|
|
|
47.7
|
|
Capital
leases
|
|
|
1.1
|
|
|
0.6
|
|
|
0.5
|
|
|
-
|
|
|
-
|
|
Operating
leases
|
|
|
39.7
|
|
|
5.1
|
|
|
18.2
|
|
|
8.1
|
|
|
8.3
|
|
Total
|
|
$
|
529.3
|
|
$
|
33.0
|
|
$
|
74.6
|
|
$
|
55.9
|
|
$
|
365.8
|
|
(1) Interest
payments due under our 8 ⅜%
senior
subordinated notes, notes payable and capital leases.
The
following are our commercial commitment expirations as of June 30, 2007 (in
millions):
Other
commercial commitments
|
|
Total
|
|
Less
Than
1
year
|
|
1-3
years
|
|
4-5
years
|
|
After
5
years
|
|
Standby
letters of credit
|
|
$
|
12.9
|
|
$
|
12.9
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Purchase
obligations
|
|
|
2.6
|
|
|
2.6
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Performance
bonds
|
|
|
23.4
|
|
|
23.4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
38.9
|
|
$
|
38.9
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Other
We
periodically evaluate our liquidity requirements, alternative uses of capital,
capital needs and availability of resources in view of, among other things,
our
dividend policy, our debt service and capital expenditure requirements and
estimated future operating cash flows. As a result of this process, in the
past
we have sought, and in the future we may seek, to: reduce, refinance, repurchase
or restructure indebtedness; raise additional capital; issue additional
securities; repurchase shares of our common stock; modify our dividend policy;
restructure ownership interests; sell interests in subsidiaries or other assets;
or take a combination of such steps or other steps to manage our liquidity
and
capital resources. In the normal course of our business, we may review
opportunities for the acquisition, divestiture, joint venture or other business
combinations in the ready-mixed concrete or related businesses. In the event
of
any acquisition or other business combination transaction, we may consider
using
available cash, issuing equity securities or increasing our indebtedness to
the
extent permitted by the agreements governing our existing debt.
Inflation
As
a
result of the relatively low levels of inflation in recent years, inflation
did
not significantly affect our results of operations in 2006 or to date in 2007.
However, cement prices and certain other raw material prices, including
aggregates and diesel fuel prices, have generally risen faster than regional
inflationary rates. The impact of these price increases has been partially
mitigated by price increases in our products, which were generally higher than
regional inflationary rates.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
We
do not
enter into derivatives or other financial instruments for trading or speculative
purposes, but we may utilize them to manage our fixed to variable-rate debt
ratio. All derivatives, whether designated as hedging relationships or not,
are
required to be recorded on the balance sheet at fair value. Because of the
short
duration of our investments, changes in market interest rates would not have
a
significant impact on their fair values. At June 30, 2007 and 2006, we were
not
a party to any derivative financial instruments.
The
indebtedness evidenced by our 8⅜% senior subordinated notes is fixed-rate debt,
so we are not exposed to cash-flow risk from market interest rate changes on
these notes. The fair value of that debt will vary as interest rates change.
Borrowings
under our revolving credit facility expose us to certain market risks. Interest
on amounts drawn under the credit facility varies based on prime rate or one-,
two-, three- or six-month LIBOR rates. Based on the $26.1 million outstanding
balance as of June 30, 2007, a one-percent change in the applicable rate would
not materially change the amount of interest expense for 2007.
We
purchase commodities, such as cement, aggregates and diesel fuel, at market
prices and do not currently use financial instruments to hedge commodity
prices.
Our
operations are subject to factors affecting the level of general construction
activity, including the level of interest rates and availability of funds for
construction. A significant decrease in the level of general construction
activity in any of our market areas may have a material adverse effect on our
sales and earnings.
In
August
2005, the compensation committee of our board of directors awarded approximately
163,000 share price performance units which vest in four equal annual
installments beginning in May 2006. Each share price performance unit is equal
in value to one share of our common stock. Upon vesting, a holder of share
price
performance units will receive a cash payment from us equal to the number of
vested share price performance units multiplied by the closing price of a share
of our common stock on the vesting date. A change of one dollar in the price
of
our common stock would cause a pretax change in selling, general and
administrative expense of approximately one dollar for each share price
performance unit outstanding. At June 30, 2007, there were 64,000 share price
performance units outstanding.
Item
4. Controls and Procedures
In
accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), we carried out an evaluation, under the
supervision and with the participation of management, including our chief
executive officer and chief financial officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of June 30, 2007. Based on that evaluation, our
chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures were effective as of June 30, 2007 to provide reasonable
assurance that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in
the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. During
the
three months ended June 30, 2007, there were no changes in our internal control
over financial reporting or in other factors that have materially affected,
or
are reasonably likely to materially affect, our internal control over financial
reporting.
PART
II – OTHER
INFORMATION
Item
1. Legal Proceedings
For
information about litigation involving us, see Note 11 to the condensed
consolidated financial statements in Part I of this report, which we incorporate
by reference into this Item 1.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
In
the second quarter of 2007, we purchased 57,419 shares of restricted stock
from
employees who elected to have us make their required tax payments upon vesting
of certain restricted shares by withholding a number of those vested shares
having an aggregate value on the date of vesting equal to their tax obligations.
The
following table provides information regarding those repurchases:
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average Price Paid
Per
Share
|
|
Total
Number of
Shares
Purchased
as
Part of Publicly
Announced
Plans
or
Programs
|
|
Maximum Number (or
Approximate Dollar
Value) of Shares That
May Yet Be Purchased
Under
the Plans or
Programs
|
|
April
1 - 30
|
|
|
735
|
|
|
7.82
|
|
|
None
|
|
|
N/A
|
|
May
1 –
31
|
|
|
48,273
|
|
|
8.54
|
|
|
None
|
|
|
N/A
|
|
June
1 – 30
|
|
|
8,411
|
|
|
8.69
|
|
|
None
|
|
|
N/A
|
|
Total
|
|
|
57,419
|
|
|
8.55
|
|
|
None
|
|
|
N/A
|
|
Item
3. Defaults Upon Senior Securities
None
Item
4. Submission of Matters to a Vote of Security Holders
1.
At our
annual meeting of stockholders held on May 24, 2007, our stockholders elected
John M. Piecuch, T. William Porter, III, Michael W. Harlan, Vincent D. Foster,
Mary P. Ricciardello, Murray S. Simpson and Robert S. Walker as directors of
U.S. Concrete with terms expiring in 2008. Votes cast with respect to the
election of each director were as follows:
Votes
Cast to Elect:
|
|
For:
|
|
Withheld:
|
|
|
|
|
|
|
|
John
M. Piecuch
|
|
|
33,727,892
|
|
|
56,242
|
|
|
|
|
|
|
|
|
|
William
Porter, III
|
|
|
31,285,649
|
|
|
2,498,485
|
|
|
|
|
|
|
|
|
|
Michael
W. Harlan
|
|
|
33,709,727
|
|
|
74,407
|
|
|
|
|
|
|
|
|
|
Vincent
D. Foster
|
|
|
33,676,493
|
|
|
107,641
|
|
|
|
|
|
|
|
|
|
Mary
P. Ricciardello
|
|
|
33,704,747
|
|
|
79,387
|
|
|
|
|
|
|
|
|
|
Murray
S. Simpson
|
|
|
33,469,591
|
|
|
314,543
|
|
|
|
|
|
|
|
|
|
Robert
S. Walker
|
|
|
33,684,463
|
|
|
99,671
|
|
2.
At our
annual meeting of stockholders held on May 24, 2007, our stockholders ratified
the appointment of PricewaterhouseCoopers LLP as the independent registered
public accounting firm of U.S. Concrete for the year ending December 31,
2007. Votes cast with respect to such ratifications were 32,423,304 for
and 100,470 against, with 1,260,360 abstentions and no
broker
non-votes.
Item
6. Exhibits
Exhibit
Number
|
|
Description
|
2.1*
|
|
—Stock
Purchase Agreement dated June 27, 2006, among U.S. Concrete, Inc.,
Alliance Haulers, Inc., Alberta Investments, Inc., Atlas Concrete
Inc. and
Wild Rose Holding, Ltd. (Form 8-K filed on June 28, 2006 (File No.
000-26025), Exhibit 2.1).
|
3.1*
|
|
—Restated
Certificate of Incorporation of U.S. Concrete, Inc. (Form 8-K filed
on May
9, 2006 (File No. 000- 26025),
Exhibit 3.1).
|
3.2*
|
|
—Amended
and Restated Bylaws of U.S. Concrete, Inc., as amended (Post Effective
Amendment No. 1 to Form
S-3 (Reg. No. 333-42860), Exhibit 4.2).
|
3.3*
|
|
—Restated
Certificate of Designation of Junior Participating Preferred Stock
(Form
10-Q for the quarter ended
June 30, 2000 (File No. 000-26025), Exhibit 3.3).
|
4.7*
|
|
—Credit
Agreement, dated as of April 6, 2007, by and between Superior Materials,
LLC, BWB, LLC and Comerica Bank (Form 8-K
filed
on April 12, 2007 (File No. 000-26025), Exhibit
4.1).
|
10.1*
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2007 Annual Salaried Team Member
Incentive
Plan (Form 8-K filed on June 8, 2007 (File No. 000-26025), Exhibit
10.1).
|
31.1
|
|
—Rule
13a-14(a)/15d-14(a) Certification of Michael W. Harlan.
|
31.2
|
|
—Rule
13a-14(a)/15d-14(a) Certification of Robert D. Hardy.
|
32.1
|
|
—Section
1350 Certification of Michael W. Harlan.
|
32.2
|
|
—Section
1350 Certification of Robert D.
Hardy.
|
* Incorporated
by reference to the filing indicated.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
U.S.
CONCRETE, INC.
|
|
|
|
|
|
Date:
August 9, 2007
|
By:
|
/s/
Robert D. Hardy
|
|
|
|
|
Robert
D. Hardy
|
|
|
|
Executive Vice
President and Chief Financial Officer
|
|
|
|
(Principal
Financial and Accounting
Officer)
|
INDEX
TO EXHIBITS
Exhibit
Number
|
|
Description
|
2.1*
|
|
—Stock
Purchase Agreement dated June 27, 2006, among U.S. Concrete, Inc.,
Alliance Haulers, Inc., Alberta Investments, Inc., Atlas Concrete
Inc. and
Wild Rose Holding, Ltd. (Form 8-K filed on June 28, 2006 (File No.
000-26025), Exhibit 2.1).
|
3.1*
|
|
—Restated
Certificate of Incorporation of U.S. Concrete, Inc. (Form 8-K filed
on May
9, 2006 (File No. 000- 26025),
Exhibit 3.1).
|
3.2*
|
|
—Amended
and Restated Bylaws of U.S. Concrete, Inc., as amended (Post Effective
Amendment No. 1 to Form
S-3 (Reg. No. 333-42860), Exhibit 4.2).
|
3.3*
|
|
—Restated
Certificate of Designation of Junior Participating Preferred Stock
(Form
10-Q for the quarter ended
June 30, 2000 (File No. 000-26025), Exhibit 3.3).
|
4.7*
|
|
—Credit
Agreement, dated as of April 6, 2007, by and between Superior Materials,
LLC, BWB, LLC and Comerica Bank (Form 8-K
filed
on April 12, 2007 (File No. 000-26025), Exhibit
4.1).
|
10.1*
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2007 Annual Salaried Team Member
Incentive
Plan (Form 8-K filed on June 8, 2007 (File No. 000-26025), Exhibit
10.1).
|
31.1
|
|
—Rule
13a-14(a)/15d-14(a) Certification of Michael W. Harlan.
|
31.2
|
|
—Rule
13a-14(a)/15d-14(a) Certification of Robert D. Hardy.
|
32.1
|
|
—Section
1350 Certification of Michael W. Harlan.
|
32.2
|
|
—Section
1350 Certification of Robert D.
Hardy.
|
*Incorporated
by reference to the filing indicated.