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 September 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 x
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 x
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
x
As
of the
close of business on November 2, 2007, U.S. Concrete, Inc. had 39,224,577 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
|
18
|
Item
3. Quantitative
and Qualitative Disclosures About Market Risk
|
27
|
Item
4. Controls
and Procedures
|
27
|
|
|
Part
II – Other Information
|
|
Item
1. Legal
Proceedings
|
28
|
Item
6. Exhibits
|
29
|
|
|
SIGNATURE
|
30
|
INDEX
TO EXHIBITS
|
31
|
PART
I - FINANCIAL INFORMATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in
thousands)
|
|
September 30,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
6,532
|
|
$
|
8,804
|
|
Trade
accounts receivable, net
|
|
|
141,620
|
|
|
109,161
|
|
Inventories
|
|
|
34,772
|
|
|
33,777
|
|
Prepaid
expenses
|
|
|
4,485
|
|
|
2,984
|
|
Other
current assets
|
|
|
19,819
|
|
|
16,396
|
|
Total
current assets
|
|
|
207,228
|
|
|
171,122
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
281,416
|
|
|
281,021
|
|
Goodwill
|
|
|
264,082
|
|
|
251,499
|
|
Other
assets
|
|
|
11,924
|
|
|
13,004
|
|
Total
assets
|
|
$
|
764,650
|
|
$
|
716,646
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
3,309
|
|
$
|
3,764
|
|
Accounts
payable
|
|
|
53,201
|
|
|
49,785
|
|
Accrued
liabilities
|
|
|
57,291
|
|
|
52,886
|
|
Total
current liabilities
|
|
|
113,801
|
|
|
106,435
|
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current maturities
|
|
|
305,483
|
|
|
299,528
|
|
Other
long-term liabilities and deferred credits
|
|
|
8,581
|
|
|
7,594
|
|
Deferred
income taxes
|
|
|
37,268
|
|
|
33,512
|
|
Total
liabilities
|
|
|
465,133
|
|
|
447,069
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary (Note
3)
|
|
|
15,565
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
-
|
|
|
-
|
|
Common
stock
|
|
|
39
|
|
|
39
|
|
Additional
paid-in capital
|
|
|
266,465
|
|
|
262,856
|
|
Retained
earnings
|
|
|
20,022
|
|
|
8,541
|
|
Treasury
stock, at cost
|
|
|
(2,574
|
)
|
|
(1,859
|
)
|
Total
stockholders’ equity
|
|
|
283,952
|
|
|
269,577
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
764,650
|
|
$
|
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
September 30,
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Sales
|
|
$
|
250,290
|
|
$
|
250,618
|
|
$
|
642,912
|
|
$
|
578,975
|
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
203,303
|
|
|
202,686
|
|
|
531,798
|
|
|
477,769
|
|
Selling,
general and administrative expenses
|
|
|
18,154
|
|
|
16,685
|
|
|
53,006
|
|
|
46,824
|
|
Depreciation,
depletion and amortization
|
|
|
8,107
|
|
|
6,890
|
|
|
23,186
|
|
|
15,561
|
|
Income
from operations
|
|
|
20,726
|
|
|
24,357
|
|
|
34,922
|
|
|
38,821
|
|
Interest
expense, net
|
|
|
7,034
|
|
|
6,848
|
|
|
21,088
|
|
|
14,590
|
|
Other
income, net
|
|
|
575
|
|
|
543
|
|
|
2,979
|
|
|
1,304
|
|
Minority
interest in consolidated subsidiary
|
|
|
(286
|
)
|
|
-
|
|
|
72
|
|
|
-
|
|
Income
before income taxes
|
|
|
14,553
|
|
|
18,052
|
|
|
16,741
|
|
|
25,535
|
|
Income
tax provision
|
|
|
4,509
|
|
|
6,828
|
|
|
5,602
|
|
|
9,809
|
|
Net
income
|
|
$
|
10,044
|
|
$
|
11,224
|
|
$
|
11,139
|
|
$
|
15,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
|
|
$
|
0.26
|
|
$
|
0.30
|
|
$
|
0.29
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share
|
|
$
|
0.26
|
|
$
|
0.29
|
|
$
|
0.29
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
common shares outstanding
|
|
|
38,341
|
|
|
37,814
|
|
|
38,186
|
|
|
36,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
common shares outstanding
|
|
|
39,004
|
|
|
38,485
|
|
|
38,894
|
|
|
37,517
|
|
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
|
|
Retained
|
|
Treasury
|
|
Total Stockholders’
|
|
|
|
Shares
|
|
Par
Value
|
|
Capital
|
|
Earnings
|
|
Stock
|
|
Equity
|
|
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
|
|
|
-
|
|
|
1,000
|
|
|
-
|
|
|
-
|
|
|
1,000
|
|
Stock-based
compensation
|
|
|
302
|
|
|
-
|
|
|
2,116
|
|
|
-
|
|
|
-
|
|
|
2,116
|
|
Purchase
of treasury shares
|
|
|
(77
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(715
|
)
|
|
(715
|
)
|
Cancellation
of shares
|
|
|
(24
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,139
|
|
|
-
|
|
|
11,139
|
|
BALANCE,
September 30, 2007
|
|
|
39,216
|
|
$
|
39
|
|
$
|
266,465
|
|
$
|
20,022
|
|
$
|
(2,574
|
)
|
$
|
283,952
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in
thousands)
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
income
|
|
$
|
11,139
|
|
$
|
15,726
|
|
Adjustments
to reconcile net income to net cash provided by
operations:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
23,186
|
|
|
15,561
|
|
Debt
issuance cost amortization
|
|
|
1,151
|
|
|
1,023
|
|
Net
(gain) loss on sale of property, plant and equipment
|
|
|
49
|
|
|
(581
|
)
|
Deferred
income taxes
|
|
|
3,669
|
|
|
4,870
|
|
Provision
for doubtful accounts
|
|
|
1,716
|
|
|
987
|
|
Stock-based
compensation
|
|
|
2,116
|
|
|
2,092
|
|
Excess
tax benefits from stock-based compensation
|
|
|
(22
|
)
|
|
(1,205
|
)
|
Minority
interest in consolidated subsidiary
|
|
|
72
|
|
|
-
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
Trade
accounts receivable, net
|
|
|
(34,157
|
)
|
|
(29,729
|
)
|
Inventories
|
|
|
1,835
|
|
|
(2,665
|
)
|
Prepaid
expenses and other current assets
|
|
|
(3,196
|
)
|
|
(256
|
)
|
Other
assets
|
|
|
(70
|
)
|
|
(185
|
)
|
Accounts
payable and accrued liabilities
|
|
|
9,991
|
|
|
14,339
|
|
Net
cash provided by operations
|
|
|
17,479
|
|
|
19,977
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Property,
plant and equipment, net of disposals of $2,174 and $2,588
|
|
|
(17,113
|
)
|
|
(29,887
|
)
|
Payments
for acquisitions, net of cash acquired of $1,000 and $5,457
|
|
|
(8,265
|
)
|
|
(178,381
|
)
|
Other
investing activities
|
|
|
(227
|
)
|
|
425
|
|
Net
cash used in investing activities
|
|
|
(25,605
|
)
|
|
(207,843
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
13,122
|
|
|
92,821
|
|
Repayments
of capital leases and notes payable
|
|
|
(7,829
|
)
|
|
(1,792
|
)
|
Proceeds
from issuance of common stock
|
|
|
-
|
|
|
84,812
|
|
Proceeds
from issuance of common stock under compensation plans
|
|
|
1,471
|
|
|
4,560
|
|
Excess
tax benefits from stock-based compensation
|
|
|
22
|
|
|
1,205
|
|
Purchase
of treasury shares
|
|
|
(715
|
)
|
|
(912
|
)
|
Other
financing activities
|
|
|
(217
|
)
|
|
(3,090
|
)
|
Net
cash provided by financing activities
|
|
|
5,854
|
|
|
177,604
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(2,272
|
)
|
|
(10,262
|
)
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
8,804
|
|
|
23,654
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
6,532
|
|
$
|
13,392
|
|
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 minority owner’s 40% 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 nine month periods ended
September 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, and 14 below.
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 cement terminal
and cash of $1.0 million for a 40% ownership interest in the new company.
Under the contribution agreement, the subsidiary also purchased at closing,
the
then carrying amount of Levy’s inventory and prepaid assets totaling
approximately $3.0 million, which is classified as cash used in investing
activities. 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 cement terminal and approximately 275 ready-mixed
concrete trucks.
The
following table presents our 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%
|
|
$
|
8,272
|
|
Acquisition
costs
|
|
|
649
|
|
Total
estimated purchase price
|
|
$
|
8,921
|
|
|
|
|
|
|
Purchase
Price Allocation
|
|
|
|
|
Cash
|
|
$
|
1,000
|
|
Property,
plant and equipment
|
|
|
17,158
|
|
Goodwill
|
|
|
1,303
|
|
Total
assets acquired
|
|
|
19,461
|
|
Capital
lease liability.
|
|
|
108
|
|
Deferred
tax liability
|
|
|
3,211
|
|
Total
liabilities assumed
|
|
|
3,319
|
|
Minority
interest
|
|
|
7,221
|
|
Net
assets acquired
|
|
$
|
8,921
|
|
For
financial reporting purposes, we are including Superior Materials Holdings,
LLC
in our consolidated accounts.
Superior
Materials Holdings, LLC has a separate credit agreement which provides for
a
revolving credit facility, under which borrowings of up to $25 million may
become available. For the quarter ending September 30, 2007, the
subsidiary was not in compliance with one of its quarterly financial covenant
under the facility which requires earnings before income taxes, interest and
depreciation (“EBITDA”) to be at least $4.75 million. The lender has agreed to
waive their default rights under the credit agreement with respect to this
covenant.
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
September 30,
|
|
Nine
Months
Ended
September 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Revenues
|
|
$
|
250,290
|
|
$
|
260,817
|
|
$
|
646,144
|
|
$
|
604,632
|
|
Net
income
|
|
|
10,044
|
|
|
10,960
|
|
|
11,548
|
|
|
12,126
|
|
Basic
earnings per share
|
|
$
|
0.26
|
|
$
|
0.29
|
|
$
|
0.30
|
|
$
|
0.33
|
|
Diluted
earnings per share
|
|
$
|
0.26
|
|
$
|
0.28
|
|
$
|
0.30
|
|
$
|
0.32
|
|
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 raw material
inventories, in our West Texas market for approximately $3.6 million in June
2007.
In
November 2006, we acquired a 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 a granite quarry and a natural sand pit located in
New
Jersey from Pinnacle Materials, Inc. for $12.5 million in cash.
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 and 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 produces 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 in cash.
5.
INVENTORIES
Inventories
consist of the following (in thousands):
|
|
September 30,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
17,306
|
|
$
|
16,490
|
|
Precast
products
|
|
|
7,552
|
|
|
7,959
|
|
Building
materials for resale
|
|
|
5,318
|
|
|
5,236
|
|
Repair
parts
|
|
|
4,596
|
|
|
4,092
|
|
|
|
$
|
34,772
|
|
$
|
33,777
|
|
6.
GOODWILL
The
change in the carrying amount of goodwill from December 31, 2006 to September
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
|
|
|
3,549
|
|
|
-
|
|
|
3,549
|
|
Adjustments
|
|
|
8,816
|
|
|
218
|
|
|
9,034
|
|
Balance
at September 30, 2007
|
|
$
|
228,963
|
|
$
|
35,119
|
|
$
|
264,082
|
|
The
adjustments made in the nine months ended September 30, 2007 related to
adjustments of our purchase price allocations in connection with recent business
acquisitions and the formation of our 60%-owned Michigan subsidiary (see Notes
3
and 4).
7.
DEBT
A
summary
of debt is as follows (in thousands):
|
|
September
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Senior
secured credit facility due 2011
|
|
$
|
4,500
|
|
$
|
9,100
|
|
8⅜%
senior subordinated notes due 2014
|
|
|
283,760
|
|
|
283,616
|
|
Notes
payable
|
|
|
6,739
|
|
|
9,043
|
|
Superior
Materials Holdings, LLC secured credit facility due 2010
|
|
|
12,870
|
|
|
-
|
|
Capital
leases
|
|
|
923
|
|
|
1,533
|
|
|
|
|
308,792
|
|
|
303,292
|
|
Less:
current maturities
|
|
|
3,309
|
|
|
3,764
|
|
|
|
$
|
305,483
|
|
$
|
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 September 30, 2007, borrowings under the
facility would have borne annual interest at the Eurodollar-based rate (“LIBOR”)
plus 1.75% or the domestic rate plus 0.25%. The outstanding borrowings under
the
facility as of September 30, 2007 bore interest at the rate of 8.0% per annum,
based on our election to borrow at the domestic 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%-owned
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%-owned
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%-owned
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
September 30, 2007, we had $4.5 million of revolving credit borrowings
outstanding under the Credit Agreement and the amount of the available credit
was approximately $120.3 million, net of outstanding letters of credit of $12.5
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%-owned 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 our total interest expense.
For
the
nine months ended September 30, we made interest payments of approximately
$14.2
million in 2007 and $9.0 million in 2006, primarily associated with our senior
subordinated notes.
Superior
Materials Holdings, LLC Credit Facility
Superior
Materials Holdings, LLC has a separate 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 is 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
September 30, 2007, there were $12.9 million in borrowings under the revolving
credit facility (see Note 3).
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.
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 LLC’s capital expenditures and
requires the subsidiary to maintain compliance with specified financial
covenants, including an affirmative covenant which requires earnings before
income taxes, interest and depreciation (“EBITDA”) to be at least $4.75 million
for the three months ended September 30, 2007. Superior Materials Holdings,
LLC
was not in compliance with the EBITDA financial covenant for the quarter ended
September 30, 2007. However, the lender has agreed to waive their default rights
under the credit facility with respect to this covenant.
8.
INCOME TAXES
For
the
nine months ended September 30, our income tax payments were approximately
$2.7
million in 2007 and $1.3 million in 2006.
In
accordance with applicable generally accepted accounting principles,
we
estimate the effective 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 nine months ended September 30, 2007
were
approximately 31.0% and 33.5%, respectively, compared to 37.8% for the three
months ended and 38.4% for the nine months ended September 30,
2006.
The
effective income tax rates for 2007 were lower than the federal statutory rate
of 35%, due primarily to the effect of a reduction of previously recorded tax
liabilities for uncertain tax positions partially offset by state income taxes.
In the 2006 periods, the effective income tax rates were higher than the federal
statutory rate, due primarily to state
income taxes.
Our
adoption of 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, 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,
see “Accounting Changes” in Note 14.
In
the
third quarter of 2007, the U.S. Congress Joint Committee on Taxation completed
its review of our tax years ranging from 2002 through 2004. The completion
of
this review resulted in a reduction in our income tax expense of approximately
$1.3 million in the third quarter of 2007.
At
September 30, 2007, we had approximately $6.1 million of unrecognized tax
benefits, of which $1.7 million, if recognized, would affect our effective
tax
rate. Over the next twelve months, we expect to decrease the
unrecognized tax benefits recorded as of September 30, 2007 by approximately
$0.4 million.
Our
income tax expense included interest and penalties related to
unrecognized tax benefits
in the
amounts of $0.1 million and $0.2 million for the three and nine months ended
September 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):
|
|
September 30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Shares
authorized
|
|
|
60,000
|
|
|
60,000
|
|
Shares
outstanding at end of period
|
|
|
39,216
|
|
|
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 September 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 nine months ended September 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 September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Basic
weighted average common shares outstanding
|
|
|
38,341
|
|
|
37,814
|
|
|
38,186
|
|
|
36,494
|
|
Effect
of dilutive stock options and awards
|
|
|
663
|
|
|
671
|
|
|
708
|
|
|
1,023
|
|
Diluted
weighted average common shares outstanding
|
|
|
39,004
|
|
|
38,485
|
|
|
38,894
|
|
|
37,517
|
|
For
the
three month period ended September 30, stock options and awards covering 2.7
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. For the nine month period ended September 30, stock options and
awards covering 2.3 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.
As
a
result of these types of claims and litigation, we must periodically evaluate
the probability of damages being assessed against us and the range of possible
outcomes. In the period, if we determine that the likelihood of damages
being assessed against us is probable, and, if we believe we can estimate a
range of possible outcomes, then we record a liability reflecting either the
low-end of our range or a specific estimate, if we believe a specific estimate
to be likely based on current information. During the quarter ended September
30, 2007, we recorded a $2.3 million liability associated with certain ongoing
litigation. Based on information available to us as of September 30, 2007,
we
believe our accruals for these matters to be reasonable.
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 September 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 nine months ended
September 30, 2007.
Performance
Bonds
In
the
normal course of business, we and our subsidiaries are contingently liable
for
performance under $26.5 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
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
September
30,
|
|
Nine
months ended
September
30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
235,727
|
|
$
|
228,878
|
|
$
|
599,452
|
|
$
|
522,178
|
|
Western
precast concrete
|
|
|
18,547
|
|
|
25,168
|
|
|
54,492
|
|
|
61,456
|
|
Inter-segment
sales
|
|
|
(3,984
|
)
|
|
(3,428
|
)
|
|
(11,032
|
)
|
|
(4,659
|
)
|
Total
sales
|
|
$
|
250,290
|
|
$
|
250,618
|
|
$
|
642,912
|
|
$
|
578,975
|
|
Segment
operating income:
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
21,153
|
|
$
|
21,015
|
|
$
|
35,039
|
|
$
|
36,749
|
|
Western
precast concrete
|
|
|
2,108
|
|
|
4,435
|
|
|
6,259
|
|
|
9,244
|
|
Unallocated
overhead and other income
|
|
|
678
|
|
|
2,155
|
|
|
4,398
|
|
|
4,562
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expense
|
|
|
3,213
|
|
|
3,248
|
|
|
10,774
|
|
|
11,734
|
|
Interest
expense, net
|
|
|
7,034
|
|
|
6,848
|
|
|
21,088
|
|
|
14,590
|
|
Other
income, net
|
|
|
575
|
|
|
543
|
|
|
2,979
|
|
|
1,304
|
|
Minority
interest in consolidated subsidiaries
|
|
|
(286
|
)
|
|
-
|
|
|
72
|
|
|
-
|
|
Income
before income taxes
|
|
$
|
14,553
|
|
$
|
18,052
|
|
$
|
16,741
|
|
$
|
25,535
|
|
Depreciation,
Depletion and Amortization:
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
7,488
|
|
$
|
6,458
|
|
$
|
21,494
|
|
$
|
14,643
|
|
Western
precast concrete
|
|
|
519
|
|
|
332
|
|
|
1,396
|
|
|
805
|
|
Corporate
|
|
|
100
|
|
|
100
|
|
|
296
|
|
|
113
|
|
Total
depreciation, depletion and amortization
|
|
$
|
8,107
|
|
$
|
6,890
|
|
$
|
23,186
|
|
$
|
15,561
|
|
Sales
by Product:
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete
|
|
$
|
208,909
|
|
$
|
204,927
|
|
$
|
528,153
|
|
$
|
470,618
|
|
Precast
concrete
|
|
|
19,289
|
|
|
26,927
|
|
|
56,892
|
|
|
64,024
|
|
Building
materials
|
|
|
6,557
|
|
|
7,878
|
|
|
18,347
|
|
|
21,436
|
|
Aggregates
|
|
|
8,015
|
|
|
6,292
|
|
|
19,835
|
|
|
13,332
|
|
Other
|
|
|
7,520
|
|
|
4,594
|
|
|
19,685
|
|
|
9,565
|
|
Total
sales
|
|
$
|
250,290
|
|
$
|
250,618
|
|
$
|
642,912
|
|
$
|
578,975
|
|
Capital
Expenditures:
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
2,702
|
|
$
|
11,336
|
|
$
|
15,077
|
|
$
|
29,697
|
|
Western
precast concrete
|
|
|
3,262
|
|
|
1,134
|
|
|
4,951
|
|
|
2,778
|
|
Total
capital expenditures
|
|
$
|
5,964
|
|
$
|
12,470
|
|
$
|
20,028
|
|
$
|
32,475
|
|
|
|
As
of
September
30,
2007
|
|
As
of
December
31,
2006
|
|
Identifiable
Assets:
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
644,262
|
|
$
|
598,328
|
|
Western
precast concrete
|
|
|
73,344
|
|
|
70,654
|
|
Corporate
|
|
|
47,044
|
|
|
47,664
|
|
Total
assets
|
|
$
|
764,650
|
|
$
|
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 No. 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 SFAS 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 our 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 the third quarter of 2007,
the U.S. Congress Joint Committee on Taxation completed its review of such
determination. 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 consolidated
financial position, results of operations or cash flows in future
periods.
For
information regarding the impact of adopting FIN 48, see Note 8.
15.
FINANCIAL STATEMENTS OF SUBSIDIARY GUARANTORS
All
of
our subsidiaries, excluding our recently formed Michigan 60%-owned 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%-owned Michigan
non-guarantor subsidiary and our total company as of and for the three and
nine
months ended September 30, 2007.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATING BALANCE SHEET
(Unaudited)
(in
thousands)
As
of September 30, 2007:
|
|
U.S. Concrete
&
Subsidiary Guarantors¹
|
|
Superior
Material
Holdings,
LLC
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
5,012
|
|
$
|
1,520
|
|
$
|
-
|
|
$
|
6,532
|
|
Trade
accounts receivable, net.
|
|
|
121,762
|
|
|
19,858
|
|
|
-
|
|
|
141,620
|
|
Inventories
|
|
|
30,182
|
|
|
4,590
|
|
|
-
|
|
|
34,772
|
|
Prepaid
expenses
|
|
|
3,665
|
|
|
820
|
|
|
-
|
|
|
4,485
|
|
Other
current assets
|
|
|
19,065
|
|
|
754
|
|
|
-
|
|
|
19,819
|
|
Total
current assets
|
|
|
179,686
|
|
|
27,542
|
|
|
-
|
|
|
207,228
|
|
Properties,
plant and equipment, net
|
|
|
245,288
|
|
|
36,128
|
|
|
-
|
|
|
281,416
|
|
Goodwill
|
|
|
262,779
|
|
|
-
|
|
|
1,303
|
|
|
264,082
|
|
Other
assets
|
|
|
33,119
|
|
|
140
|
|
|
(21,335
|
)
|
|
11,924
|
|
Total
assets
|
|
$
|
720,872
|
|
$
|
63,810
|
|
$
|
(20,032
|
)
|
$
|
764,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
2,836
|
|
$
|
473
|
|
$
|
-
|
|
$
|
3,309
|
|
Accounts
payable
|
|
|
45,503
|
|
|
7,698
|
|
|
-
|
|
|
53,201
|
|
Accrued
liabilities
|
|
|
53,890
|
|
|
3,401
|
|
|
-
|
|
|
57,291
|
|
Total
current liabilities
|
|
|
102,229
|
|
|
11,572
|
|
|
-
|
|
|
113,801
|
|
Long-term
debt, net of current maturities
|
|
|
292,162
|
|
|
13,321
|
|
|
-
|
|
|
305,483
|
|
Other
long-term obligations and deferred credits
|
|
|
5,370
|
|
|
-
|
|
|
3,211
|
|
|
8,581
|
|
Deferred
income taxes
|
|
|
37,268
|
|
|
-
|
|
|
-
|
|
|
37,268
|
|
Total
liabilities
|
|
|
437,029
|
|
|
24,893
|
|
|
3,211
|
|
|
465,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
-
|
|
|
-
|
|
|
15,565
|
|
|
15,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
39
|
|
|
-
|
|
|
-
|
|
|
39
|
|
Additional
paid-in capital
|
|
|
266,465
|
|
|
38,736
|
|
|
(38,736
|
)
|
|
266,465
|
|
Retained
earnings
|
|
|
19,913
|
|
|
181
|
|
|
(72
|
)
|
|
20,022
|
|
Treasury
stock, at cost
|
|
|
(2,574
|
)
|
|
-
|
|
|
-
|
|
|
(2,574
|
)
|
Total
stockholders' equity
|
|
|
283,843
|
|
|
38,917
|
|
|
(38,808
|
)
|
|
283,952
|
|
Total
liabilities and stockholders' equity
|
|
$
|
720,872
|
|
$
|
63,810
|
|
$
|
(20,032
|
)
|
$
|
764,650
|
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)
(in
thousands)
Three
months ended September 30, 2007:
|
|
U.S. Concrete
&
Subsidiary Guarantors¹
|
|
Superior
Materials
Holdings, LLC
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
218,917
|
|
$
|
31,373
|
|
$
|
-
|
|
$
|
250,290
|
|
Cost
of goods sold before depreciation, depletion and amortization
|
|
|
174,706
|
|
|
28,597
|
|
|
-
|
|
|
203,303
|
|
Selling,
general and administrative expenses
|
|
|
16,481
|
|
|
1,673
|
|
|
-
|
|
|
18,154
|
|
Depreciation,
depletion and amortization
|
|
|
6,679
|
|
|
1,428
|
|
|
-
|
|
|
8,107
|
|
Income
(loss) from operations
|
|
|
21,051
|
|
|
(325
|
)
|
|
-
|
|
|
20,726
|
|
Interest
expense, net
|
|
|
6,819
|
|
|
215
|
|
|
-
|
|
|
7,034
|
|
Other
income, net
|
|
|
548
|
|
|
27
|
|
|
-
|
|
|
575
|
|
Minority
interest in consolidated subsidiary
|
|
|
-
|
|
|
-
|
|
|
(286
|
)
|
|
(286
|
)
|
Income
(loss) before income taxes
|
|
|
14,780
|
|
|
(513
|
)
|
|
286
|
|
|
14,553
|
|
Income
tax provision
|
|
|
4,369
|
|
|
140
|
|
|
-
|
|
|
4,509
|
|
Net
income (loss)
|
|
$
|
10,411
|
|
$
|
(653
|
)
|
$
|
286
|
|
$
|
10,044
|
|
Nine
months ended September 30, 2007:
|
|
U.S. Concrete
&
Subsidiary Guarantors¹
|
|
Superior
Materials Holdings, LLC
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
580,954
|
|
$
|
61,958
|
|
$
|
-
|
|
$
|
642,912
|
|
Cost
of goods sold before depreciation, depletion and amortization
|
|
|
476,256
|
|
|
55,542
|
|
|
-
|
|
|
531,798
|
|
Selling,
general and administrative expenses
|
|
|
49,731
|
|
|
3,275
|
|
|
-
|
|
|
53,006
|
|
Depreciation,
depletion and amortization
|
|
|
20,598
|
|
|
2,588
|
|
|
-
|
|
|
23,186
|
|
Income
from operations
|
|
|
34,369
|
|
|
553
|
|
|
-
|
|
|
34,922
|
|
Interest
expense, net
|
|
|
20,821
|
|
|
267
|
|
|
-
|
|
|
21,088
|
|
Other
income, net
|
|
|
2,944
|
|
|
35
|
|
|
-
|
|
|
2,979
|
|
Minority
interest in consolidated subsidiary
|
|
|
-
|
|
|
-
|
|
|
72
|
|
|
72
|
|
Income
before income taxes
|
|
|
16,492
|
|
|
321
|
|
|
(72
|
)
|
|
16,741
|
|
Income
tax provision
|
|
|
5,462
|
|
|
140
|
|
|
-
|
|
|
5,602
|
|
Net
income
|
|
$
|
11,030
|
|
$
|
181
|
|
$
|
(72
|
)
|
$
|
11,139
|
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
(Unaudited)
(in
thousands)
Nine
months ended September 30, 2007:
|
|
U.S. Concrete &
Subsidiary Guarantors1
|
|
Superior Materials
Holdings, LLC
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
$
|
29,830
|
|
$
|
(12,351
|
)
|
$
|
-
|
|
$
|
17,479
|
|
Net
cash provided by (used in) investing activities
|
|
|
(25,802
|
)
|
|
197
|
|
|
-
|
|
|
(25,605
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
(6,820
|
)
|
|
12,674
|
|
|
-
|
|
|
5,854
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(2,792
|
)
|
|
520
|
|
|
-
|
|
|
(2,272
|
)
|
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
|
|
$
|
5,012
|
|
$
|
1,520
|
|
$
|
-
|
|
$
|
6,532
|
|
1
Including minor subsidiaries without operations or material
assets.
16.
SUBSEQUENT EVENTS
On
October 1, 2007, we completed the acquisition of the operating assets, including
working capital and real property of Architectural Precast, LLC (“API”), a
leading designer and manufacturer of premium quality architectural and
structural precast concrete products serving the Mid-Atlantic region. Our
Company used borrowings under its revolving credit facility to fund the cash
purchase price of $14.5 million. The purchase agreement also provides for $1.5
million in contingent purchase consideration, which is dependent upon API
attaining established earnings targets in each of 2008 and 2009.
At
its
November 1, 2007 meeting our Board of Directors approved a plan to dispose
of
three of our ready-mixed concrete business units that are currently operating
in
non-core markets. There is no guarantee that these units will be sold and we
do
not intend to dispose of these units unless the terms and conditions fall within
the guidelines established in the approved plan. We believe the guidelines
established for the disposition of these business units are reasonable, given
current market conditions.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
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 nine months of 2007, we generally experienced 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
for further softening in 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 nine months of 2007, ready-mixed concrete sales volumes, excluding the
impact of our Alberta/Alliance Haulers acquisition in July 2006 and the
formation of our Michigan 60%-owned subsidiary in April 2007 have generally
declined in our markets as compared to the first nine months of 2006. The
decline in volume reflects a sustained downward trend in residential
construction activity in many of our markets and the impact of adverse weather
conditions, primarily in our north Texas markets early in the summer months
of
2007.
Our
Michigan market remains subject to a prolonged economic downturn, which is
projected to continue into 2008. As a result, our Michigan 60%-owned subsidiary
has started to experience same-plant-sales volume declines. At the same time,
pricing has improved in the first nine months of 2007, as compared to the
corresponding period in 2006 (including the results of the operations
contributed to the subsidiary by the Edw. C. Levy Co.).
Demand
for our products in our western precast concrete segment decreased in the first
nine months of 2007, as compared to the same period in 2006. This decline is
reflective of the decline in residential construction starts, primarily in
our
northern California and Phoenix, Arizona markets where our precast business
has
been heavily weighted toward products used in new residential construction
projects. We are in the process of refocusing our product lines and streamlining
our operations in these markets to better serve the existing
demand.
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 nine months 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 better availability
of
cement. 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 continue to moderate as a result of
improved availability of cement. 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 nine 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.
In October 2007, we acquired an architectural precast manufacturing company
that
services our Mid-Atlantic region. These acquisitions are 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 60%-owned Michigan subsidiary currently owns and
operates 28 ready-mixed concrete plants, a 24,000-ton cement terminal and
approximately 275 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 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 mined 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 precast concrete products.
Architectural
Precast, LLC (“API”).
In
October 2007, we acquired the operating assets, including working capital and
real property of API, a leading designer and manufacturer of premium quality
architectural and structural precast concrete products, serving the Mid-Atlantic
region for $14.5 million plus a $1.5 million contingency based on the future
earnings of API.
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 nine months ended September 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 September 30,
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$
|
235,727
|
|
|
94.2
|
%
|
$
|
228,878
|
|
|
91.3
|
%
|
$
|
599,452
|
|
|
93.2
|
%
|
$
|
522,178
|
|
|
90.2
|
%
|
Western
precast concrete
|
|
|
18,547
|
|
|
7.4
|
|
|
25,168
|
|
|
10.0
|
|
|
54,492
|
|
|
8.5
|
|
|
61,456
|
|
|
10.6
|
|
Inter-segment
sales
|
|
|
(3,984
|
)
|
|
(1.6
|
)
|
|
(3,428
|
)
|
|
(1.3
|
)
|
|
(11,032
|
)
|
|
(1.7
|
)
|
|
(4,659
|
)
|
|
(0.8
|
)
|
Total
sales
|
|
|
250,290
|
|
|
100.0
|
|
|
250,618
|
|
|
100.0
|
|
|
642,912
|
|
|
100.0
|
|
|
578,975
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold before depreciation, depletion and
amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
|
189,310
|
|
|
75.6
|
|
|
185,078
|
|
|
73.8
|
|
|
490,769
|
|
|
76.3
|
|
|
433,760
|
|
|
74.9
|
|
Western
precast concrete
|
|
|
13,993
|
|
|
5.6
|
|
|
17,608
|
|
|
7.0
|
|
|
41,029
|
|
|
6.4
|
|
|
44,009
|
|
|
7.6
|
|
Selling,
general and administrative expenses
|
|
|
18,154
|
|
|
7.3
|
|
|
16,685
|
|
|
6.7
|
|
|
53,006
|
|
|
8.2
|
|
|
46,824
|
|
|
8.1
|
|
Depreciation,
depletion and amortization
|
|
|
8,107
|
|
|
3.2
|
|
|
6,890
|
|
|
2.7
|
|
|
23,186
|
|
|
3.6
|
|
|
15,561
|
|
|
2.7
|
|
Income
from operations
|
|
|
20,726
|
|
|
8.3
|
|
|
24,357
|
|
|
9.7
|
|
|
34,922
|
|
|
5.4
|
|
|
38,821
|
|
|
6.7
|
|
Interest
expense, net
|
|
|
7,034
|
|
|
2.8
|
|
|
6,848
|
|
|
2.7
|
|
|
21,088
|
|
|
3.3
|
|
|
14,590
|
|
|
2.5
|
|
Other
income, net
|
|
|
575
|
|
|
0.2
|
|
|
543
|
|
|
0.2
|
|
|
2,979
|
|
|
0.5
|
|
|
1,304
|
|
|
0.2
|
|
Minority
interest in consolidated subsidiary
|
|
|
(286
|
)
|
|
(0.1
|
)
|
|
-
|
|
|
-
|
|
|
72
|
|
|
0.0
|
|
|
-
|
|
|
-
|
|
Income
before income taxes
|
|
|
14,553
|
|
|
5.8
|
|
|
18,052
|
|
|
7.2
|
|
|
16,741
|
|
|
2.6
|
|
|
25,535
|
|
|
4.4
|
|
Income
tax provision
|
|
|
4,509
|
|
|
1.8
|
|
|
6,828
|
|
|
2.7
|
|
|
5,602
|
|
|
0.9
|
|
|
9,809
|
|
|
1.7
|
|
Net
income
|
|
$
|
10,044
|
|
|
4.0
|
%
|
$
|
11,224
|
|
|
4.5
|
%
|
$
|
11,139
|
|
|
1.7
|
%
|
$
|
15,726
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic
yard
|
|
$
|
91.36
|
|
|
|
|
$
|
86.59
|
|
|
|
|
$
|
90.97
|
|
|
|
|
$
|
87.63
|
|
|
|
|
Sales
volume in cubic yards
|
|
|
2,287
|
|
|
|
|
|
2,367
|
|
|
|
|
|
5,806
|
|
|
|
|
|
5,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precast
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic
yard of concrete used in
production
|
|
$
|
652.11
|
|
|
|
|
$
|
582.41
|
|
|
|
|
$
|
600.52
|
|
|
|
|
$
|
587.53
|
|
|
|
|
Ready-mixed
concrete used in production
in cubic yards
|
|
|
29
|
|
|
|
|
|
43
|
|
|
|
|
|
91
|
|
|
|
|
|
105
|
|
|
|
|
Sales.
Ready-mixed
concrete and concrete-related products. Sales
of
our ready-mix concrete and concrete-related products were $235.7 million, for
the three months ended September 30, 2007, up $6.8 million or 3.0% compared
to
the corresponding period in 2006. Our ready-mixed sales volume for the third
quarter of 2007 was approximately 2.29 million cubic yards, down 3.4% from
the
2.37 million cubic yards of ready-mixed concrete we sold in the third quarter
of
2006. Considering the impact of acquired operations on a same plant sales basis,
third quarter 2007 ready mixed sales volumes were down approximately 9.7% from
the third quarter 2006. The decline reflects the continued downturn in
residential home construction activity in many of our markets and the impact
of
adverse weather conditions early in the quarter in our north and west Texas
markets. Offsetting the effects of lower sales volumes was the approximate
5.5%
rise in the average sales price per cubic yard of ready-mixed concrete during
the third quarter of 2007 as compared to the third quarter of 2006 and increased
sales of aggregates (including those from the quarries we purchased in the
fourth quarter of 2006).
For
the
nine months ending September 30, 2007, sales rose to $599.5 million, an increase
of $77.3 million, or 14.8%, over the same
period of 2006. The increase in the nine months ending September 30, 2007 was
primarily related to an 8.1% increase in ready-mixed concrete sales volume
and a
3.8% increase in the average selling price of ready-mixed concrete in the nine
months ended September 30, 2007, as compared to the same period in 2006. The
increase in sales volume in the nine month period ended September 30, 2007
was
primarily attributable to the Alberta and Alliance Haulers acquisition we
completed in the third quarter of 2006 and the April 2007 business combination
we completed with the Edw. C. Levy Co. that resulted in the formation of our
60%-owned Michigan subsidiary. 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 2007 period, offset somewhat
by a shift in the geographic mix of our sales volumes as result of the
Alberta/Alliance Haulers acquisition in the third quarter of 2006, where prices
are lower on average than in our other markets.
Western
precast concrete. Sales
in
our western precast segments were $18.5 million and $54.5 million, respectively,
for the three and nine months ended September 30, 2007. The decrease of $6.6
million, or 26.3%, and $7.0 million, or 11.3%, from the corresponding periods
in
2006 resulted from the downturn in residential construction in our northern
California and Phoenix, Arizona markets.
Cost
of goods sold before depreciation, depletion and
amortization.
Ready-mixed
concrete and concrete-related products.The
increase in cost of goods sold before depreciation, depletion and amortization
of $4.2 million, or 2.3%, to $189.3 million for the three-month period ended
September 30, 2007, was primarily associated with higher raw materials cost
and
reduced operational efficiency resulting from lower-than-expected ready mixed
sales volumes as compared to the three months ended September 30, 2006. For
the
nine months ended September 30, 2007, these same costs rose $57.0 million,
or
13.1%, to $490.8 million when compared to the corresponding period of 2006.
A
8.1% rise in ready-mixed concrete sales volumes and higher raw materials
costs contributed to the change. Also
included in the 2007 amounts is a $2.3 million accrual for pending lawsuit
settlements. As a percentage of ready-mixed concrete and concrete-related
products sales, cost of goods sold before depreciation, depletion and
amortization decreased from 80.9% for the three months ended September 30,
2006
to 80.3% for the three months ended September 30, 2007. As a percentage of
ready-mixed concrete and concrete-related products sales, these costs decreased
from 83.1% to 81.9% for the nine months ended September 30, 2007, as compared
to
the same period in 2006. The improvements in cost of goods sold as a percentage
of ready-mixed concrete and concrete-related product sales were primarily
attributable to increases in our material spread margins (sales less raw
materials cost). These increases resulted from our ready-mixed concrete selling
prices increasing at a higher rate than the cost of our materials in the
period.
Western
precast concrete. The
reduction in cost of goods sold before depreciation, depletion and amortization
for our western precast segment of $3.6 million, or 20.5%, for the three months
ended September 30, 2007, as compared to the corresponding period in 2006,
was
primarily related to the 32.6% reduction in the volume of ready-mixed concrete
used in production, which is reflective of the declining residential
construction market that has been impacting our northern California and Phoenix,
Arizona precast markets. Cost of goods sold before depreciation, depletion
and
amortization for the nine months ended September 30, 2007 was $41.0 million,
a
decline of $3.0 million, or 6.8%, as compared to the corresponding period in
the
prior year. The reduced costs resulted from 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 rose
in the three months ended September 30, 2007, as compared to the corresponding
period in 2006, from 70.0% to 75.4%. For the nine months ended September 30,
2007, as compared to the corresponding period in 2006, cost of goods sold before
depreciation, depletion and amortization as a percentage of western precast
concrete sales increased from 71.6% to 75.3%. The increases in cost of goods
sold as a percentage of western precast sales for the three months and nine
months ended September 30, 2007 reflect decreased efficiency in our plant
operations in northern California and Phoenix, Arizona resulting from the lower
demand for our products in these markets associated with the residential
construction decline.
Selling,
general and administrative expenses.
Selling,
general and administrative expenses for the three months ended September 30,
2007were $18.2 million, or 8.8% higher, than in the corresponding 2006 period,
due to an increase in professional fees. For the nine months ended September
30,
2007, these costs rose by $6.2 million, or 13.2%, when compared to the
corresponding period in 2006. These costs rose due to our growth through
acquisitions, which drove up administrative compensation expenses resulting
from
the increase in personnel.
Depreciation,
depletion and amortization.
Since
October 2006, our depreciable base for plant assets has increased over $26.5
million, or 10.2%, as a result of the our capital expenditures program and
assets we acquired in connection with the formation of our 60%-owned Michigan
subsidiary. This increase resulted in depreciation, depletion and amortization
expense increases of $1.2 million, or 17.7%, for the three months ended
September 30, 2007, and $7.6 million, or 49.0%, for the nine months ended
September 30, 2007, when compared to the corresponding periods in
2006.
Interest
expense, net.
The
increase in interest expense, net, of $0.2
million, or 2.7%, to $7.0 million for the three months ended September 30,
2007,
as compared to the corresponding period of 2006, was the result of additional
borrowings and the assumption of indebtedness related to our acquisitions in
2006. The
additional interest expense, net, of $6.5
million, an equivalent 44.5% increase for the nine months ended September 30,
2007 over the corresponding 2006 period, also resulted primarily from additional
2006 borrowings and greater borrowings under our credit facility to fund our
acquisition program.
Income
tax provision.
We
recorded an income tax provision of $4.5 million for the three months ended
September 30, 2007 and an income tax provision of $5.6 million for the nine
months ended September 30, 2007, as compared to $6.8 million and $9.8 million
for the corresponding periods in 2006. The decreases in the income tax provision
for the periods ended September 30, 2007 occurred due to lower profits and
the
reduction in previously recorded tax liabilities for uncertain tax
positions as a result of an administrative review determination. 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 33.5% and 38.4% for the nine months
ended September 30, 2007 and 2006, respectively.
The
effective income tax rate for the 2007 period was lower than the federal
statutory rate due to the reduction of previously recorded tax liabilities
for
uncertain tax positions, while the effective income tax rate for 2006 was higher
due to state taxes.
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
$6.5 million at September 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 September 30, 2007, $4.5
million
was outstanding under the revolving credit facility, and the amount of available
credit was approximately $120.3
million,
net of outstanding letters of credit of $12.5
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 September 30, 2007 and December 31, 2006 (dollars in
thousands):
|
|
September 30, 2007
|
|
December 31, 2006
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
6,532
|
|
$
|
8,804
|
|
Working
capital
|
|
|
93,427
|
|
|
64,687
|
|
Total
debt
|
|
|
308,792
|
|
|
303,292
|
|
Debt
to debt and equity
|
|
|
52.1
|
%
|
|
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 revolving credit
facility of up to $150 million, with borrowings limited based on a portion
of
the net amounts of eligible accounts receivable, inventory and mixer trucks.
The
facility is scheduled to mature in March 2011. At September 30, 2007, new
borrowings under the facility would have borne annual interest at the
Eurodollar-based rate (“LIBOR”) plus 1.75% or the domestic rate plus 0.25%. The
outstanding borrowings under the facility as of September 30, 2007 bore interest
at the rate of 8.0% per annum, based on our election to borrow at
the domestic 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 60%-owned Michigan subsidiary and
minor
subsidiaries without operations or material assets, and substantially all the
assets of those subsidiaries, excluding our 60%-owned 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
September 30, 2007, there was $4.5 million of revolving credit borrowings
outstanding under the Credit Agreement and the amount of the available credit
was approximately $120.3 million, net of outstanding letters of credit of $12.5
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%-owned 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. The 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 the 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 noncash items
equal or exceed two times our total interest expense.
For
the
nine months ended September 30, we made interest payments of approximately
$14.2
million in 2007 and $9.0 million in 2006, primarily associated with our senior
subordinated notes.
Superior
Materials Holdings, LLC Credit Facility
Superior
Materials Holdings, LLC has a separate credit agreement which provides for
a
revolving credit facility, under which borrowings of up to $25 million may
become available. Borrowings under this credit agreement are
collateralized by substantially all the assets of Superior Materials Holdings,
LLC and are scheduled to mature on April 1, 2010. Availability of
borrowings is 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. As
of September 30, 2007, there were $12.9 million in outstanding borrowings under
the revolving credit facility and the remaining amount of the available credit
was approximately $5.8 million.
Currently,
borrowings under the facility are subject to interest at LIBOR plus 1.75% or
a
domestic prime rate minus 0.50%. The interest rate margins vary inversely with
a
ratio of funded debt to EBITDA. Commitment fees at an annual rate of 0.
25% are payable on the unused portion of the facility.
The
credit agreement contains covenants restricting, among other things, Superior
Materials Holdings LLC’s 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 it to maintain compliance with specified
financial covenants, including an affirmative covenant which required earnings
before income taxes, interest and depreciation (“EBITDA”) to be a least $4.75
million for the quarter ended September 30, 2007. The
subsidiary was not in compliance with the EBITDA financial covenant for the
quarter ended September 30, 2007. However, the lender has agreed to waive their
default rights under the credit facility with respect to this
covenant.
Cash
Flow
Our
net
cash provided by operating activities generally reflects the cash effects of
transactions and other events used in the determination of net income or loss.
Net cash provided by operating activities was $17.5 million in the nine months
ended September 30, 2007, compared to $20.0 million of net cash provided by
operating activities in the nine months ended September 30, 2006. This change
was principally a result of higher working capital requirements, offset by
higher depreciation.
Our
net
cash used in investing activities of $25.6 million decreased $182.2 million
for
the nine months ended September 30, 2007, as compared to $207.8 million used
in
investing activities in the nine months ended September 30, 2006, primarily
due
to the impact of the July 2006 Alberta Investments and Alliance Haulers
acquisitions.
Our
net
cash provided by financing activities of $5.9 million for the nine months ended
September 30, 2007 decreased $171.7 million from the $177.6 million net cash
provided by financing activities for the nine months ended September 30, 2006.
This decrease was attributable to our February 2006 common stock issuance and
July 2006 $85 million senior subordinated notes issuance, partially offset
by
additional borrowings in the 2007 period under our credit facility, primarily
to
fund acquisitions.
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 operations and free cash flow is as follows (in
thousands):
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
Net
cash provided by operations
|
|
$
|
17,479
|
|
$
|
19,977
|
|
Less:
purchases of property and equipment (net of disposals)
|
|
|
(17,113
|
)
|
|
(29,887
|
)
|
Free
cash flow (as defined)
|
|
$
|
366
|
|
$
|
(9,910
|
)
|
Future
Capital Requirements
For
the
last three months of 2007, our capital requirements for planned capital
expenditures are expected to be in the range of $4.0 million to $8.0 million,
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
and Contingencies
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 establishes a single model to address accounting for uncertain tax
positions and clarifies the accounting for income taxes by prescribing a minimum
recognition threshold that a tax position is required to meet before being
recognized in the financial statements. Due to our adoption of FIN 48, at
September 30, 2007, we have approximately $6.1 million of unrecognized tax
benefits including interest and penalties. We expect that the amount of
unrecognized tax benefits will change due to the settlement of audits and the
expiration of statue of limitations; however, we cannot reasonably estimate
the
timing or amounts of cash payments, if any, at this time.
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
Our
company has experienced modest increases in operating costs during 2006 and
2007
related to inflation. However, cement prices and certain other raw material
prices, including aggregates and diesel fuel prices, have generally risen faster
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 September 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 $4.5 million outstanding
balance as of September 30, 2007, a one-percent change in the applicable rate
would not materially change the amount of our 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 September 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 September 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 September 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 September 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
6. Exhibits
Exhibit Number
|
|
|
Description
|
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).
|
10.1*
|
|
— |
Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete,
Inc.
and Michael W. Harlan
(Form 8-K filed on August 6, 2007 (Files No. 000-26025), Exhibit
10.1).
|
10.2*
|
|
— |
Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete,
Inc.
and Robert D. Hardy (Form
8-K filed on August 6, 2007 (Files No. 000-26025), Exhibit
10.1).
|
10.3*
|
|
— |
Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete,
Inc.
and Thomas J. Albanese
(Form 8-K filed on August 6, 2007 (Files 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:
November 8, 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
|
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).
|
10.1*
|
|
— |
Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete,
Inc.
and Michael W. Harlan
(Form 8-K filed on August 6, 2007 (Files No. 000-26025), Exhibit
10.1).
|
10.2*
|
|
— |
Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete,
Inc.
and Robert D. Hardy (Form
8-K filed on August 6, 2007 (Files No. 000-26025), Exhibit
10.1).
|
10.3*
|
|
— |
Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete,
Inc.
and Thomas J. Albanese
(Form 8-K filed on August 6, 2007 (Files 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.