UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31,
2008
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Commission
file number 000-26025
U.S.
CONCRETE, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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76-0586680
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(State
or other jurisdiction of
Incorporation
or organization)
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(I.R.S.
Employer
Identification
Number)
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2925
Briarpark, Suite 1050, Houston, Texas 77042
(Address
of principal executive offices) (Zip code)
Registrant’s
telephone number, including area code: (713) 499-6200
Securities
registered pursuant to Section 12(b) of the Act:
Common
Stock, par value $.001
|
Nasdaq Global
Select Market
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(Title
of class)
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(Name of exchange on which registered)
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Rights
to Purchase Series A Junior
Participating
Preferred Stock
(Title
of class)
Securities registered pursuant to
Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past
90 days. Yes þ No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or non-accelerated filer, or a smaller reporting
company. See the definition of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ¨ Accelerated
filer þ Non-accelerated
filer ¨
Smaller reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act.) Yes o Noþ
Aggregate
market value of the voting stock held by nonaffiliates of the registrant
computed by reference to the last reported sale price of $4.76 of the
registrant’s common stock on the Nasdaq National Market as of June 30, 2008, the
last business day of the registrant’s most recently completed second
quarter: $163,666,969.
There
were 37,213,446 shares of common stock, par value $.001 per share, of the
registrant outstanding as of March 12, 2009.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Proxy Statement related to the registrant’s 2009 Annual Meeting of
Stockholders are incorporated by reference into Part III of this
report.
U.S.
CONCRETE, INC.
FORM
10-K
For
the Year Ended December 31, 2008
TABLE
OF CONTENTS
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Page
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PART
I
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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15
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Item
1B.
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Unresolved
Staff Comments
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22
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Item
2.
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Properties
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22
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Item
3.
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Legal
Proceedings
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23
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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23
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PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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24
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Item
6.
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Selected
Financial Data
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27
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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28
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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46
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Item
8.
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Financial
Statements and Supplementary Data
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48
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Item
9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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80
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Item
9A.
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Controls
and Procedures
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80
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Item
9B.
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Other
Information
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80
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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80
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Item
11.
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Executive
Compensation
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81
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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81
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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81
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Item
14.
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Principal
Accountant Fees and Services
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81
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PART
IV
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Item
15.
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Exhibits
and Financial Statement Schedules
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81
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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49
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CONSOLIDATED
BALANCE SHEETS
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50
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CONSOLIDATED
STATEMENTS OF OPERATIONS
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51
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CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
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52
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CONSOLIDATED
STATEMENTS OF CASH FLOWS
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53
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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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54
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SIGNATURES
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85
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INDEX
TO EXHIBITS
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86
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Cautionary
Statement Concerning Forward-Looking Statements
From
time to time, our management or persons acting on our behalf make
forward-looking statements to inform existing and potential security holders
about our company. These statements may include projections and estimates
concerning our business strategies, revenues, income, cash flows and capital
requirements. Forward-looking statements generally use words such as “estimate,”
“project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “forecast,”
“budget,” “goal” or other words that convey the uncertainty of future events or
outcomes. In addition, sometimes we will specifically describe a statement as
being a forward-looking statement and refer to this cautionary
statement.
This
report contains various statements, including those that express a belief,
expectation or intention and those that are not statements of historical fact,
that are forward-looking statements under the Private Securities Litigation
Reform Act of 1995. Those forward-looking statements appear in Item
1—“Business,” Item 2— “Properties,” Item 3—“Legal Proceedings,” Item
7—“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” Item 7A—“Quantitative and Qualitative Disclosures About Market
Risk,” Item 9A—“Controls and Procedures” and elsewhere in this report, including
in the notes to our Consolidated Financial Statements in Item 8 of this report.
Those forward-looking statements speak only as of the date of this report. We
disclaim any obligation to update those statements, except as applicable law may
require us to do so, and we caution you not to rely unduly on them. We have
based those forward-looking statements on our current expectations and
assumptions about future events, which may prove to be inaccurate. While our
management considers those expectations and assumptions to be reasonable, they
are inherently subject to significant business, economic, competitive,
regulatory and other risks, contingencies and uncertainties, most of which are
difficult to predict and many of which are beyond our control. Therefore, actual
results may differ materially and adversely from those expressed in any
forward-looking statements. Factors that might cause or contribute to
such differences include, but are not limited to, those we discuss in this
report under the section entitled “Risk Factors” in Item 1A and the section
entitled “Risks and Uncertainties” in Item 7— “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and in other reports
we file with the Securities and Exchange Commission (the “SEC”). The
factors we discuss in this report are not necessarily all the important factors
that could affect us. Unpredictable or unknown factors we have not discussed in
this report also could have material adverse effects on actual results of
matters that are the subject of our forward-looking statements. We do not intend
to update our description of important factors each time a potential important
factor arises. We advise our existing and potential security holders that they
should (1) be aware that important factors to which we do not refer in this
report could affect the accuracy of our forward-looking statements and (2) use
caution and common sense when considering our forward-looking
statements.
PART
I
Item
1. Business
General
We are a
major producer of ready-mixed concrete, precast concrete products and
concrete-related products in select markets in the United States. We
operate our business through our ready-mixed concrete and concrete-related
products segment and our precast products concrete segment. We are a
leading producer of ready-mixed concrete or precast concrete products in
substantially all the markets in which we have
operations. Ready-mixed and precast concrete products are important
building materials that are used in a vast majority of commercial, residential
and public works construction projects.
All of
our operations are in (and all of our sales are made within) the United
States. We operate principally in Texas, California, New Jersey/New
York and Michigan, with those states representing 38.6%, 30.8%, 14.3% and 9.1%,
respectively, of our consolidated revenues from continuing operations for the
year ended December 31, 2008. According to publicly available
industry information, those states represented an aggregate of 31.3% of the
consumption of ready-mixed concrete in the United States in 2008 (Texas, 14.8%,
California, 9.8%, New Jersey/New York, 4.8% and Michigan, 1.9%). We
believe that the size and the geographic scope of our operations enables us to
achieve cost savings through consolidated purchasing, reduction of our
administrative costs on both a national and regional level, and aids in
moderating the impact of regional economic cycles and weather
conditions. Our consolidated revenues from continuing operations for
the year ended December 31, 2008 were $754.3 million, of which we derived
approximately 91.0% from our ready-mixed concrete and concrete-related products
segment and 9.0% from our precast concrete products segment. For
more information on our consolidated revenues and income from
operations for the years ended December 31, 2008, 2007 and 2006 and our
consolidated total assets as of December 31, 2008 and 2007, see our Consolidated
Financial Statements included in this report.
As of
March 12, 2009, we had 132 fixed and 12 portable ready-mixed concrete plants,
seven precast concrete plants, one concrete block plant and seven producing
aggregates facilities (including 27 fixed ready-mixed concrete plants and one
masonry block plant operated by our 60%-owned Michigan
subsidiary). During 2008, these plants and facilities produced
approximately 6.5 million cubic yards of ready-mixed concrete, 0.9 million eight-inch
equivalent block units and 3.5 million tons of
aggregates. We also own two aggregates facilities that we lease to
third parties and retain a royalty on production from those
facilities.
Our
ready-mixed concrete and concrete-related products segment engages principally
in the formulation, preparation and delivery of ready-mixed concrete to the job
sites of our customers. We also provide services intended to reduce
our customers’ overall construction costs by lowering the installed, or
“in-place,” cost of concrete. These services include the formulation of mixtures
for specific design uses, on-site and lab-based product quality control, and
customized delivery programs to meet our customers’ needs. Our marketing efforts
primarily target concrete sub-contractors, general contractors, governmental
agencies, property owners and developers and home builders whose focus extends
beyond the price of ready-mixed concrete to product quality, on-time delivery
and reduction of in-place costs. To a lesser extent, this segment is
also engaged in the mining and sale of aggregates and the resale of building
materials, primarily to our ready-mixed concrete customers. These
businesses are generally complementary to our ready-mixed concrete operations
and provide us opportunities to cross-sell various products in markets where we
sell both ready-mixed concrete and concrete-related products. We
provide our ready-mixed concrete and concrete-related products from our
continuing operations in north and west Texas, northern California, New Jersey,
New York, Washington, D.C., Michigan and Oklahoma.
Our
precast concrete products segment produces precast concrete products at seven
plants in three states, with five plants in California, one in Arizona and one
in Pennsylvania. Our customers choose precast technology for a
variety of architectural applications, including free-standing walls used for
landscaping, soundproofing and security walls, panels used to clad a building
façade and storm water drainage. Our operations also specialize in a
variety of finished products, among which are utility vaults, manholes, catch
basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete
piles and custom-designed architectural products.
For
financial information regarding our reporting segments, including revenue and
operating income for the years ended December 31, 2008, 2007 and 2006, see Note
12 to our Consolidated Financial Statements included in this
report.
U.S.
Concrete, Inc. is a Delaware corporation which was incorporated in
1997. We began operations in 1999, which is the year we completed our
initial public offering. In this report, we refer to U.S. Concrete,
Inc. and its subsidiaries as “we,” “us” or “U.S. Concrete” unless we
specifically state otherwise or the context indicates otherwise.
Industry
Overview
General
Ready-mixed
concrete is a highly-versatile construction material that results from combining
coarse and fine aggregates, such as gravel, crushed stone and sand, with water,
various chemical admixtures and cement. We manufacture ready-mixed
concrete in thousands of variations, which in each instance may reflect a
specific design use. We generally maintain only a few days’ inventory
of raw materials and coordinate our daily materials purchases with the
time-sensitive delivery requirements of our customers.
The
quality of ready-mixed concrete is time-sensitive as it becomes difficult to
place within 90 minutes after mixing. Consequently, the market for a
permanently installed ready-mixed concrete plant is usually limited to an area
within a 25-mile radius of its plant location. We produce ready-mixed
concrete in batches at our plants and use mixer and other trucks to distribute
and deliver the concrete to the job sites of our customers. We
generally do not provide paving or other finishing services, which construction
contractors or subcontractors typically perform.
Ready-mixed
concrete is poured-in-place in forms at a construction site and cured on
site. In contrast, our precast concrete products are made with
ready-mixed concrete (its primary raw material), but are cast in reusable molds
or “forms” and cured in a controlled environment at our plant, then either
placed in inventory or transported to the construction site. The
advantages of using precast concrete products include the higher quality of the
material, when formed in controlled conditions, and the reduced cost of reusable
forms as compared to the cost of constructing large forms used with ready-mixed
concrete placed at the construction site.
We
generally obtain contracts through local sales and marketing efforts directed at
concrete sub-contractors, general contractors, property owners and developers,
governmental agencies and home builders. In many cases, local
relationships are very important.
Based on
information from the National Ready-Mixed Concrete Association (“NRMCA”) and the
National Precast Concrete Association (“NPCA”), we estimate that, in addition to
vertically integrated manufacturers of cements and aggregates, over 2,300
independent ready-mixed concrete producers currently operate approximately 6,000
plants in the United States and 3,500 precast concrete products manufacturers
operate in the United States and Canada. Larger markets generally
have several producers competing for business on the basis of product quality,
service, on-time delivery and price.
Annual
usage of ready-mixed concrete in the United States dropped significantly in 2007
and 2008 from its “near record” 2006 level. According to information
available from the NRMCA and McGraw-Hill Construction, total volume (measured in
cubic yards) from the production and delivery of ready-mixed concrete in the
United States over the past three years were as follows (in
millions):
2008
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349 |
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2007
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387 |
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2006
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421 |
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Ready-mixed
concrete and precast concrete products have historically benefited from
relatively stable demand and pricing. However, pricing of our
products is primarily driven by the cost of raw materials (cement, aggregates,
etc.), cost of labor and competition in our local markets. From 2006,
through most of 2007, raw materials cost and ready-mixed concrete products
average selling prices increased. For 2008, pricing of our raw
materials, particularly cement, and our ready-mixed pricing has been put under
competitive pressure due to product demand declines due to the slowdown in
construction activity in all of our markets, especially in the residential
construction sector.
According
to recently published McGraw-Hill Construction data, the four major segments of
the construction industry accounted for the following approximate percentages of
the total volume of ready-mixed concrete produced in the United States in 2006,
2007 and 2008:
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2008
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2007
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2006
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Commercial
and industrial construction
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25 |
% |
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24 |
% |
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20 |
% |
Residential
construction
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16 |
% |
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23 |
% |
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|
30 |
% |
Street
and highway construction and paving
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21 |
% |
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20 |
% |
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20 |
% |
Other
public works and infrastructure construction
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38 |
% |
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33 |
% |
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30 |
% |
Barriers
to the start-up of new ready-mixed concrete and precast concrete products
manufacturing operations have been increasing. During the past
decade, public concerns about dust, process water runoff, noise and heavy mixer
and other truck traffic associated with the operation of these types of plants
and their general appearance have made obtaining the permits and licenses
required for new plants more difficult. Delays in the regulatory process,
coupled with the substantial capital investment that start-up operations entail,
have raised the barriers to entry for those operations.
For a
discussion of the seasonality of the construction industry generally, see Item
1A — “Risk Factors – Our operating results may vary significantly from one
reporting period to another and may be adversely affected by the seasonal and
cyclical nature of the markets we serve” and Item 7 — “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of this
report.
Significant
Factors Impacting the Market for Ready-Mixed Concrete and Precast Concrete
Products
On the
basis of available industry information, we believe that ready-mixed concrete
revenue as a percentage of total construction expenditures in the United States
has increased over the last five years.
Industry-wide Promotional and
Marketing Activities. Since the 1990s, we believe industry
participants have increased their focus on and benefited from promotional
activities to increase the industry’s share of street and highway construction,
commercial and industrial construction and residential construction
expenditures. Many of these promotional efforts result from initiatives put
forth by industry trade organizations such as the NRMCA, the Portland Cement
Association and the NPCA. We believe these types of programs have
been a catalyst for increased investment in the promotion of concrete as a
construction material of choice.
Development of Concrete
Products. Concrete has many attributes that make it a highly versatile
construction material. In recent years, industry participants have developed
various uses for concrete products, including:
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§
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high-strength
engineered concrete to compete with steel-frame
construction;
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§
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precast
modular paving stones;
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§
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flowable
fill for backfill
applications;
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§
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continuous-slab
rail-support systems for rapid transit and heavy-traffic rail lines;
and
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§
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concrete
bridges, tunnels and other structures for rapid transit
systems.
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Other
examples of successful innovations that have opened new markets for concrete
include:
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overlaying
asphalt pavement with concrete, or “white
topping”;
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§
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highway
median barriers;
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§
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highway
sound barriers;
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§
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paved
shoulders to replace less permanent and increasingly costly asphalt
shoulders;
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§
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pervious
concrete parking lots for water drainage management, as well as providing
a long-lasting and aesthetically pleasing urban environment;
and
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§
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colored
pavements to mark entrance and exit ramps and lanes of
expressways.
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The American Recovery and
Reinvestment Act of 2009 (“the Act”). On February 17, 2009 the
Act was signed into law for the purpose of creating jobs and restoring economic
growth through, among other things, the modernization of America’s
infrastructure and the enhancement of its energy resources. The Act
is expected to generate significant construction spending, but the effects of
the Act will not be felt for several months because Congress will have to
appropriate funds for these programs and each state will have to take
appropriate measures to take advantage of such funding. We expect
that the Act will provide incremental demand for our products starting in the
second half of 2009. However, we cannot predict the impact of the
spending under the Act on our business, and the extent and timing of the
spending is uncertain at this time.
Our
Business Strategy
Our
objectives are to become the leading provider of ready-mixed concrete, precast
concrete and concrete-related products in each of our existing markets, on a
select basis, to integrate our operations vertically through acquisition of
aggregates supply sources that support our ready-mixed concrete operations, and
to further expand the geographic scope of our business. We plan to
achieve these objectives by continuing to execute our business strategy, which
includes the primary elements we discuss below.
Improving
Marketing and Sales Initiatives
Our
marketing and sales strategy emphasizes the sale of value-added products and
solutions to customers more focused on reducing their in-place building material
costs than on the price per cubic yard of ready-mixed concrete or unit price of
the concrete-related product they purchase. Key elements of our
customer-focused approach include:
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corporate-level
marketing and sales expertise;
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§
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technical
service expertise to develop innovative new branded products;
and
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§
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training
programs that emphasize successful marketing and sales techniques that
focus on the sale of high-margin concrete mix designs and
specialty-engineered precast concrete
products.
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We have
also formed a strategic alliance to provide alternative solutions for designers
and contractors by using value-added concrete products. Through this alliance,
we offer color-conditioned, fiber-reinforced, steel-reinforced and
high-performance concrete and utilize software technology that can be used to
design buildings constructed of reinforced concrete.
Promoting
a Green Environment
We recognize the value in advocating
green building and construction as part of our strategy. We initiated
Environmentally Friendly Concrete (“EF Technology”), our
commitment to environmentally friendly concrete technologies that significantly
reduce potential carbon dioxide (CO2)
emissions. Our EF
Technology ready-mixed concrete products replace a portion of traditional
raw materials with reclaimed fly ash, slag and other materials. This
results in an environmentally superior and sustainable alternative to
traditional ready-mixed concrete. We believe EF Technology reduces
greenhouse gases and landfill space consumption and produces a highly durable
product. Customers can also receive Leadership in Energy and
Environmental Design (“LEED”) credits for the use of this
technology. We are also a supporter of the NRMCA Green-Star program,
a plant-specific certification that utilizes an environmental management system
based on a model of continual improvement. Two plants in our Dallas/Ft. Worth
market were part of the first group of plants to be awarded with Green-Star
Certification.
Promoting
Operational Excellence and Achieving Cost Efficiencies
We strive
to be an operationally excellent organization by:
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investing
in safety training solutions and technologies which enhance the safety of
our work environments;
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implementing
and enhancing standard operating
procedures;
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§
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standardizing
plants and equipment;
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§
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investing
in software and communications
technology;
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§
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implementing
company-wide quality-control
initiatives;
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§
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providing
technical expertise to optimize ready-mixed concrete mix designs;
and
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§
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developing
strategic alliances with key suppliers of goods and services for new
product development.
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We also
strive to increase operating efficiencies. We believe that, if we continue to
increase in size on both a local and national level, we should continue to
experience future productivity and cost improvements in such areas
as:
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§
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purchases
of raw materials, through procurement and optimized ready-mixed concrete
mix designs;
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§
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purchases
of mixer trucks and other equipment, supplies, spare parts and
tools;
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§
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vehicle
and equipment maintenance;
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§
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insurance
and other risk management programs;
and
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§
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back-office
administrative functions through technology
enhancements.
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Pursuing
Disciplined Growth
Our
growth strategy targets a balance between internal growth opportunities and the
acquisition of existing businesses. We believe this balanced approach
provides us the opportunity to achieve above average growth rates.
Internal
Growth. We seek to grow in our existing markets by expanding
existing plants, green-fielding new plants, and identifying complementary
products or services we can provide to our customers on a cost-effective
basis. The benefits and challenges of expansion by internal growth
include:
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§
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the
initial capital investment for most internal growth projects is typically
less than the capital required to purchase a similarly situated existing
business;
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§
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internal
growth projects are designed and constructed with state-of-the-art
equipment, which usually results in greater productivity and lower
operating costs than existing businesses that have been in operation for
many years;
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§
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internal
growth projects often take more time to begin generating revenue and
profits due to the upfront permitting and design process;
and
|
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§
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generally,
internal growth projects eliminate the integration risks associated with
the acquisition of an existing
business.
|
Acquisition of Existing
Businesses. We also seek growth by targeting opportunities to
acquire businesses in our existing markets and entering new geographic markets
on a select basis in the United States. We typically pursue
acquisitions that we believe represent attractive opportunities to strengthen
local management teams, implement cost-saving initiatives, achieve
market-leading positions and establish best practices. We adhere to a
disciplined pricing methodology when acquiring businesses. Based on our
methodology for valuing, acquiring and integrating target businesses, we expect
our future acquisitions to be accretive to our earnings per share after a
reasonable period of integration. We cannot provide any assurance, however,
regarding the impact any future acquisition we may complete could have on our
future earnings per share.
Our
acquisition growth program targets the following:
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§
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vertical
integration of our existing ready-mixed concrete markets with the
acquisition of aggregate quarries;
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§
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acquisition
of precast concrete products manufacturing businesses with similar
operating strategies to ours, and complimentary product mixes and markets
to our own; and
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§
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selectively
acquire ready-mixed concrete operations, primarily in existing markets, as
well as evaluate potential new
markets.
|
Products
and Services
Ready-Mixed Concrete and
Concrete-Related Products Segment
Ready-Mixed
Concrete. Our
ready-mixed concrete products consist of proportioned mixes we prepare and
deliver in an unhardened plastic state for placement and shaping into designed
forms at the job site. Selecting the optimum mix for a job entails determining
not only the ingredients that will produce the desired permeability, strength,
appearance and other properties of the concrete after it has hardened and cured,
but also the ingredients necessary to achieve a workable consistency considering
the weather and other conditions at the job site. We believe we can achieve
product differentiation for the mixes we offer because of the variety of mixes
we can produce, our volume production capacity and our scheduling, delivery and
placement reliability. Additionally, we believe our EF Technology initiative,
which utilizes alternative materials and mix designs that result in lower
CO2
emissions, helps differentiate us from our competitors. We also
believe we distinguish ourselves with our value-added service approach that
emphasizes reducing our customers’ overall construction costs by reducing the
in-place cost of concrete and the time required for construction.
From a
contractor’s perspective, the in-place cost of concrete includes both the amount
paid to the ready-mixed concrete manufacturer and the internal costs associated
with the labor and equipment the contractor provides. A contractor’s unit cost
of concrete is often only a small component of the total in-place cost that
takes into account all the labor and equipment costs required to build the forms
for the ready-mixed concrete and place and finish the ready-mixed concrete,
including the cost of additional labor and time lost as a result of substandard
products or delivery delays not covered by warranty or insurance. By carefully
designing proper mixes and using advances in mixing technology, we can assist
our customers in reducing the amount of reinforcing steel, time and labor they
will require in various applications.
We
provide a variety of services in connection with our sale of ready-mixed
concrete that can help reduce our customers’ in-place cost of concrete. These
services include:
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production
of formulations and alternative product recommendations that reduce labor
and materials costs;
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quality
control, through automated production and laboratory testing, that ensures
consistent results and minimizes the need to correct completed work;
and
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automated
scheduling and tracking systems that ensure timely delivery and reduce the
downtime incurred by the customer’s placing and finishing
crews.
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We
produce ready-mixed concrete by combining the desired type of cement, other
cementitious materials (described below), sand, gravel and crushed stone with
water and, typically, one or more admixtures. These admixtures, such
as chemicals, minerals and fibers, determine the usefulness of the product for
particular applications.
We use a
variety of chemical admixtures to achieve one or more of five basic
purposes:
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relieve
internal pressure and increase resistance to cracking in subfreezing
weather;
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retard
the hardening process to make concrete more workable in hot
weather;
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strengthen
concrete by reducing its water
content;
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accelerate
the hardening process and reduce the time required for curing;
and
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facilitate
the placement of concrete having low water
content.
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We
frequently use various mineral admixtures as supplements to cement, which we
refer to as cementitious materials, to alter the permeability, strength and
other properties of concrete. These materials include fly ash, ground granulated
blast-furnace slag, silica fume and other natural pozzolans. These
materials also reduce the amount of cement content used which results in a
reduction in CO2
emissions.
We also
use fibers, such as steel, glass, synthetic and carbon filaments, as additives
in various formulations of concrete. Fibers help control shrinkage
cracking, thus reducing permeability and improving abrasion resistance. In many
applications, fibers can replace welded steel wire and reinforcing bars.
Relative to the other components of ready-mixed concrete, these additives
generate comparatively high-margins.
Aggregates. We
produce crushed stone aggregates, sand and gravel from seven aggregates
facilities located in New Jersey and Texas. We sell these aggregates
for use in commercial, industrial and public works projects in the markets they
serve, as well as consume them internally in the production of ready-mixed
concrete in those markets. We produced approximately 3.5 million tons of
aggregates in 2008 from these facilities with Texas producing 48% and New Jersey
52% of that total production. In April 2007, we entered into an
agreement to lease our sand pit operations in Michigan to the Edward C. Levy Co.
as a component of a ready-mixed concrete business combination, which we refer to
as the 60%-owned Michigan subsidiary. We now receive a royalty based
on the volume of product produced and sold from the Michigan quarry during the
term of the lease.
At December 31, 2008, our total
estimated aggregates reserves (excluding an aggregates property leased to a
third party) were 77 million tons, assuming
loss factors of approximately 20% for unusable material. We believe
these aggregates reserves provide us with additional raw materials sourcing
flexibility and supply availability, although they will provide us with supply
for less than 5% of our annual consumption of aggregates.
Building
Materials. Our building materials operations supply concrete
masonry, various resale materials, products and tools contractors use in the
concrete construction industry. These materials include rebar concrete block,
wire mesh, color additives, curing compounds, grouts, wooden forms and numerous
other items. Our building materials operations are located near several of our
ready-mixed concrete operations in northern California, Michigan and
Texas.
Precast
Concrete Products Segment
We
produce precast concrete products at seven plants in three states, with five in
California, one in Arizona and one in Pennsylvania. Our precast
concrete products consist of ready-mixed concrete we either produce on-site or
purchase from third parties, which is then poured into reusable molds at our
plant sites. After the concrete sets, we strip the molds from the
finished products and either place them in inventory or ship them to our
customers. Our precast technology produces a wide variety of finished
products, including a variety of architectural applications, such as
free-standing walls used for landscaping, soundproofing and security walls,
signage, utility vaults, manholes, panels to clad a building façade, highway
barriers, pre-stressed bridge girders, concrete piles, catch basins and curb
inlets.
Because
precast concrete products are not perishable, we can place these products into
inventory and stage them at plants or other distribution sites to serve a larger
geographic market area. The cost of transportation and storage usually limits
the market area for these types of products to within approximately 150 miles of
our plant sites and, therefore, sales are generally driven by the level of
construction activity within the market area served by our
plants. Our precast concrete products are marketed by our local sales
organizations and are sold to numerous customers.
Operations
Ready-Mixed
Concrete
Our
ready-mixed concrete plants consist of fixed and portable facilities that
produce ready-mixed concrete in wet or dry batches. Our fixed-plant facilities
produce ready-mixed concrete that we transport to job sites by mixer trucks. Our
portable plant operations deploy our twelve portable plant facilities to produce
ready-mixed concrete at the job site that we direct into place using a series of
conveyor belts or a mixer truck. We use our portable plants to
service high-volume projects or projects in remote locations. Several
factors govern the choice of plant type, including:
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production
consistency requirements;
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daily
production capacity requirements;
and
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job
site proximity to fixed plants.
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Generally,
we will construct wet batch plants to serve markets that we expect will have
consistently high demand, as opposed to dry batch plants that will serve those
markets that we expect will have a less consistent demand. A wet
batch plant generally has a higher initial cost and daily operating expenses,
but yields greater consistency with less time required for quality control in
the concrete produced and generally have greater daily production capacity than
a dry batch plant. We believe that construction of a wet batch plant
having an hourly capacity of 250 cubic yards currently would cost approximately
$1.5 million, while a dry batch plant having the same capacity currently would
cost approximately $0.7 million. As of March 12, 2009, our fixed
batch plants included 23 wet batch plants and
109 dry batch
plants.
Our batch
operator at a dry batch plant simultaneously loads the dry components of stone,
sand and cement with water and admixtures in a mixer truck that begins the
mixing process during loading and completes that process while driving to the
job site. In a wet batch plant, the batch operator blends the dry components and
water in a plant mixer from which an operator loads the already mixed concrete
into a mixer truck, which leaves for the job site promptly after
loading.
Any
future decisions we make regarding the construction of additional plants will be
impacted by market factors, including:
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the
expected production demand for the
plant;
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the
expected types of projects the plant will service;
and
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the
desired location of the plant.
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Mixer
trucks slowly rotate their loads en route to job sites in order to maintain
product consistency. Our mixer trucks typically have load capacities
of 10 cubic yards, or approximately 20 tons, and an estimated useful life of 12
years. A new truck of this size currently costs between $160,000 and
$190,000, depending on the geographic location and design
specifications. Depending on the type of batch plant from which the
mixer trucks generally are loaded, some components of the mixer trucks usually
require refurbishment after three to five years. As of December 31,
2008, we operated a fleet of approximately 1,077 owned and leased mixer trucks,
which had an average age of approximately 7.2 years.
In our
ready-mixed concrete operations, we emphasize quality control, pre-job planning,
customer service and coordination of supplies and delivery. We often obtain
purchase orders for ready-mixed concrete months in advance of actual delivery. A
typical order contains specifications the contractor requires the concrete to
meet. After receiving the specifications for a particular job, we use computer
modeling, industry information and information from previous similar jobs to
formulate a variety of mixtures of cement, aggregates, water and admixtures
which meet or exceed the contractor’s specifications. We perform testing to
determine which mix design is most appropriate to meet the required
specifications. The test results enable us to select the mixture that has the
lowest cost and meets or exceeds the job specifications. The testing center
creates and maintains a project file that details the mixture we will use when
we produce the concrete for the job. For quality control purposes, the testing
center also is responsible for maintaining batch samples of concrete we have
delivered to a job site.
We use
computer modeling to prepare bids for particular jobs based on the size of the
job, location, desired margin, cost of raw materials and the design mixture
identified in our testing process. If the job is large enough and has a
projected duration beyond the supply arrangement in place at that time, we
obtain quotes from our suppliers as to the cost of raw materials we use in
preparing the bid. Once we obtain a quotation from our suppliers, the price of
the raw materials for the specified job is informally established. Several
months may elapse from the time a contractor has accepted our bid until actual
delivery of the ready-mixed concrete begins. During this time, we maintain
regular communication with the contractor concerning the status of the job and
any changes in the job’s specifications in order to coordinate the multisourced
purchases of cement and other materials we will need to fill the job order and
meet the contractor’s delivery requirements. We confirm that our
customers are ready to take delivery of manufactured products throughout the
placement process. On any given day, one of our plants may have
production orders for dozens of customers at various locations throughout its
area of operation. To fill an order:
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the
customer service office coordinates the timing and delivery of the
concrete to the job site;
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a
load operator supervises and coordinates the receipt of the necessary raw
materials and operates the hopper that dispenses those materials into the
appropriate storage bins;
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a
batch operator, using a computerized batch panel, prepares the specified
mixture from the order and oversees the loading of the mixer truck with
either dry ingredients and water in a dry batch plant or the premixed
concrete in a wet batch plant; and
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the
driver of the mixer truck delivers the load to the job site, discharges
the load and, after washing the truck, departs at the direction of the
dispatch office.
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Our
central dispatch system tracks the status of each mixer truck as to whether a
particular truck is:
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en
route to a particular job
site;
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en
route to a particular plant.
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The
system is updated continuously on the trucks’ status via signals received from
sensors. In this manner, the dispatcher can determine the optimal
routing and timing of subsequent deliveries by each mixer truck and monitor the
performance of each driver.
Our plant
managers oversee the operations of each of our plants. Our
operational employees also include:
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maintenance
personnel who perform routine maintenance work throughout our
plants;
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mechanics
who perform substantially all the maintenance and repair work on our
rolling stock;
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testing
center staff who prepare mixtures for particular job specifications and
maintain quality control;
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various
clerical personnel who perform administrative tasks;
and
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sales
personnel who are responsible for identifying potential customers and
maintaining existing customer
relationships.
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We
generally operate each of our plants on an extended single shift, with some
overtime operation during the year. On occasion, however, we may have projects
that require deliveries around the clock.
Precast
Concrete Products
Our precast concrete products
operations consist of seven fixed plant sites where precast products are
produced, staged and shipped to our customers and distribution
yards. We stage precast products at distribution facilities to serve
markets beyond the normal reach of our existing manufacturing
sites. Each of our precast manufacturing sites has as its primary
components:
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either
a concrete batch plant or local ready-mixed concrete provider for the
concrete utilized in
production;
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precast
molds or “forms” for the array of products and product sizes we offer or a
custom design center to create precast forms;
and
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a
crane-way or other method to facilitate moving forms, finished product or
pouring ready-mixed concrete.
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Some of
the products we produce are designed by the customer for use in their own
systems, while other products are designed by our in-house engineers to meet the
needs of our customers through a more standardized product. Each of
our precast manufacturing sites produces a range of precast
products.
Generally, precast structures are
manufactured by placing pre-engineered ready-mixed concrete into molds, which
are then vibrated to facilitate consolidation of the concrete within the mold
and remove any voids created by air that may be trapped during the pouring
process. These molds generally utilize some form of reinforcing which
can include products ranging from (1) welded steel wire or re-bar placed inside
the mold in a pre-engineered design to support the integrity of the finished
precast product, to (2) steel fibers or other similar additives which are
blended into the ready-mixed concrete during mixing to serve a similar purpose,
or a combination of both. Once the pouring is complete, any exposed
surfaces are finished and the product is allowed to cure in a controlled
environment for a minimum of two to four hours and as long as 24 hours,
depending on the product and design specification. After the product
has cured, the mold is stripped and prepared for re-use in the manufacturing
process.
Precast concrete structures are not
perishable products. This contributes to our ability to maintain some
level of standardized products in inventory at all times, as well as service a
larger market area from a plant location than a ready-mixed concrete plant
site. Our precast concrete products can be shipped across the
country, but due to the weight of the products, shipping is generally limited to
within a 150-mile radius of a plant site. Depending on our overall
costs, shipments occur either through our existing fleet of crane-equipped
trucks or through contract haulers. In some markets, we also install
our precast products and provide our customers with the added benefit of
eliminating coordination with a third party.
Bidding and order fulfillment processes
for our precast business are similar to our ready-mixed concrete operations, as
previously described above. Cement and aggregates are the two primary
raw materials used in precast concrete manufacturing, similar to our ready-mixed
concrete operations, while labor costs are second only to our materials
cost.
Cement
and Other Raw Materials
We obtain
most of the materials necessary to manufacture ready-mixed concrete and precast
concrete products on a daily basis. These materials include cement, other
cementitious materials (fly ash, blast furnace slag) and aggregates (stone,
gravel and sand), in addition to certain chemical admixtures. With
the exception of chemical admixtures, each plant typically maintains an
inventory level of these materials sufficient to satisfy its operating needs for
a few days. Cement represents one of the highest cost material used
in manufacturing a cubic yard of ready-mixed concrete. During 2008,
based on raw materials pricing and mix design changes requiring less cement in
the manufacturing of ready-mixed concrete, aggregates represents the highest
materials cost used followed closely by cementitious
materials. Historically, we have purchased cement from several
suppliers in each of our major markets. Due to certain industry
consolidations and our decision to have a primary and secondary supplier, in
certain of our markets, we are now purchasing cement from fewer suppliers than
in past years. Based on current economic conditions, this decision
has not affected our ability to obtain an adequate supply of cement for our
operations. Chemical admixtures are generally purchased from
suppliers under national purchasing agreements.
Generally, cement and aggregates prices
remained relatively flat in most of our markets in 2008, as compared to
2007. In certain of our markets, where we did experience cement and
aggregates price increases, our ready-mixed concrete products pricing increased
in relative proportion to our raw material price
increases. Generally, we negotiate with suppliers on a company-wide
basis and at the local market level to obtain the most competitive pricing
available for cement, aggregates and chemical admixtures. The demand
for construction sector products was weak throughout 2008, with sales volumes
significantly below 2007 and 2006 levels. The slowdown in our end-use
markets has caused an oversupply of cement in most of our markets, with cement
producers slowing down domestic production and reducing imported cement to
respond to the weak demand. We do not expect to experience cement
shortages. Today, in most of our markets, we believe there is an
adequate supply of aggregates.
Marketing
and Sales
General
contractors typically select their suppliers of ready-mixed concrete and precast
concrete. In large, complex projects, an engineering firm or division within a
state transportation or public works department may influence the purchasing
decision, particularly if the concrete has complicated design specifications. In
those projects and in government-funded projects generally, the general
contractor or project engineer usually awards supply orders on the basis of
either direct negotiation or competitive bidding. We believe the purchasing
decision for many jobs ultimately is relationship-based. Our marketing efforts
target general contractors, developers, design engineers, architects and
homebuilders whose focus extends beyond the price of our product to quality,
consistency and reducing the in-place cost.
Customers
Of our
2008 revenue, we had approximately 55% from commercial and industrial
construction contractors, 26% from residential construction contractors and 19%
from street and highway construction contractors and other public works and
infrastructure contractors. In 2008, no single customer or project
accounted for more than 2.5% of our total revenue.
We rely
heavily on repeat customers. Our management and sales personnel are responsible
for developing and maintaining successful long-term relationships with key
customers.
Competition
The
ready-mixed concrete, precast concrete and concrete-related products industries
are highly competitive. Our competitive position in a market depends largely on
the location and operating costs of our plants and prevailing prices in that
market. Price is the primary competitive factor among suppliers for small or
simple jobs, principally in residential construction. However,
timeliness of delivery and consistency of quality and service, along with price,
are the principal competitive factors among suppliers for large or complex jobs.
Our competitors range from small, owner-operated private companies to
subsidiaries or operating units of large, vertically integrated manufacturers of
cement and aggregates. Our vertically integrated competitors
generally have greater manufacturing, financial and marketing resources than we
have, providing them with a competitive advantage. Competitors having
lower operating costs than we do or having the financial resources to enable
them to accept lower margins than we do will have a competitive advantage over
us for jobs that are particularly price-sensitive. Competitors having greater
financial resources or less financial leverage than we do may be able to invest
more in new mixer trucks, ready-mixed concrete plants and other production
equipment or pay for acquisitions which could provide them a competitive
advantage over us. See Item 1A – “Risk Factors – We may lose business
to competitors who underbid us, and we may be otherwise unable to compete
favorably in our highly competitive industry.”
Employees
As of
March 12, 2009, we had approximately 614 salaried employees, including executive
officers and management, sales, technical, administrative and clerical
personnel, and approximately 1,947 hourly personnel. The number of
employees fluctuates depending on the number and size of projects ongoing at any
particular time, which may be impacted by variations in weather conditions
throughout the year.
As of
March 12, 2009, approximately 925 of our employees were represented by labor
unions having collective bargaining agreements with us. Generally, these
agreements have multi-year terms and expire on a staggered basis between 2009
and 2013. Under these agreements, we pay specified wages to covered
employees and make payments to multi-employer pension plans and employee benefit
trusts rather than administering the funds on behalf of these
employees.
Other
than a two-day strike at certain operations within our Atlantic Region in 2004,
we have not experienced any strikes or significant work stoppages in the past
five years. We believe our relationships with our employees and union
representatives are satisfactory. See Note 14 to our Consolidated
Financial Statements included in this report for a discussion of class action
litigation involving various mixer truck and transport truck drivers
who have worked in our operations in California.
Training
and Safety
Our
future success will depend, in part, on the extent to which we can attract,
retain and motivate qualified employees. We believe that our ability to do so
will depend, in part, on providing a work environment that allows employees the
opportunity to develop and maximize their capabilities. We support
and fund continuing education and training programs for our employees. We intend
to continue and expand these programs. We require all field employees
to attend periodic safety training meetings and all drivers to participate in
training seminars. We employ a national safety director whose
responsibilities include managing and executing a unified, company-wide safety
program. Employee development and safety are criteria used in
evaluating performance in our annual incentive plan for salaried
employees.
Governmental
Regulation and Environmental Matters
A wide
range of federal, state and local laws, ordinances and regulations apply to our
operations, including the following matters:
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street
and highway usage;
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health,
safety and environmental
matters.
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In many
instances, we are required to have various certificates, permits or licenses to
conduct our business. Our failure to maintain these required
authorizations or to comply with applicable laws or other governmental
requirements could result in substantial fines or possible revocation of our
authority to conduct some of our operations. Delays in obtaining approvals for
the transfer or grant of authorizations, or failures to obtain new
authorizations, could impede acquisition efforts.
Environmental
laws that impact our operations include those relating to air quality, solid
waste management and water quality. These laws are complex and subject to
frequent change. They impose strict liability in some cases without regard to
negligence or fault. Sanctions for noncompliance may include revocation of
permits, corrective action orders, administrative or civil penalties and
criminal prosecution. Some environmental laws provide for joint and several
strict liability for remediation of spills and releases of hazardous substances.
In addition, businesses may be subject to claims alleging personal injury or
property damage as a result of alleged exposure to hazardous substances, as well
as damage to natural resources. These laws also may expose us to liability for
the conduct of or conditions caused by others, or for acts that complied with
all applicable laws when performed.
We have
conducted Phase I environmental site assessments, which are non-intrusive
investigations conducted to evaluate the potential for significant on-site
environmental impacts, on substantially all the real properties we own or lease
and have engaged independent environmental consulting firms to complete those
assessments. We have not identified any environmental concerns
associated with those properties that we believe are likely to have a material
adverse effect on our business, financial position, results of operations or
cash flows, but we can provide no assurance material liabilities will not occur.
In addition, we can provide no assurance our compliance with amended, new or
more stringent laws, stricter interpretations of existing laws or the future
discovery of environmental conditions will not require additional, material
expenditures.
We
believe we have all material permits and licenses we need to conduct our
operations and are in substantial compliance with applicable regulatory
requirements relating to our operations. Our capital expenditures
relating to environmental matters were not material in 2008. We
currently do not anticipate any material adverse effect on our business,
financial condition, results of operations or cash flows as a result of our
future compliance with existing environmental laws controlling the discharge of
materials into the environment.
In March
2005, the California Regional Water Quality Control Board for the Central Valley
Region (“CRWQCB”) issued a draft order to regulate discharges of concrete
wastewater and solid wastes associated with concrete manufacturing at
ready-mixed concrete plants located in and near Sacramento, California. This
order would affect four sites in which six of our ready-mixed concrete plants
operate in northern California. If approved in its current draft form, the order
would require all existing ready-mixed concrete plants in the area to retrofit
or reconstruct their waste management units to provide impermeable containment
of all concrete wastewater and install leak detection systems. It also would
require all new ready-mixed concrete plants in the area to be constructed with
similar waste management units. The draft order provides that operators of
existing ready-mixed concrete plants would have 180 days to apply for coverage
under the order, and then one year after coverage is obtained to complete all
required retrofitting. In June 2005, the CRWQCB delayed approval of the order to
provide the Construction Materials Association of California and various
concrete producers time to provide certain information to the CRWQCB for further
consideration. Although our actual capital expenditures may vary significantly
and will ultimately depend on final regulations, if the order is approved in its
current form, the cost of capital improvements to our plants at the four sites
in the affected area may be up to $1.0 million per site. Also, if the order is
considered and adopted by the California Water Quality Control Board for the San
Francisco Bay Region, we might incur similar costs to retrofit our existing
plants in that area. At December 31, 2008, we operated 20 ready-mixed
concrete plants in northern California which could be impacted by this order
should it be enacted.
Product
Warranties
Our
operations involve providing ready-mixed concrete, precast concrete products and
other concrete formulations or products that must meet building code or other
regulatory requirements and contractual specifications for durability,
stress-level capacity, weight-bearing capacity and other characteristics. If we
fail or are unable to provide products meeting these requirements and
specifications, material claims may arise against us and our reputation could be
damaged. In the past, we have had significant claims of this kind asserted
against us that we have resolved. There currently are, and we expect that in the
future there will be, additional claims of this kind asserted against us. If a
significant product-related claim is resolved against us in the future, that
resolution may have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Insurance
Our
employees perform a significant portion of their work moving and storing large
quantities of heavy raw materials, driving large mixer and other trucks in heavy
traffic conditions and delivering concrete at construction sites or in other
areas that may be hazardous. These operating hazards can cause personal injury
and loss of life, damage to or destruction of properties and equipment and
environmental damage. We maintain insurance coverage in amounts and against the
risks we believe are in accord with industry practice, but this insurance may
not be adequate to cover all losses or liabilities we may incur in our
operations, and we may be unable to maintain insurance of the types or at levels
we deem necessary or adequate or at rates we consider reasonable. For
additional discussion of our insurance programs, see Note 14 to our Consolidated
Financial Statements included in this report.
Available
Information
Our Web site address is www.us-concrete.com.
We make available on this Web site under the “investors” section,
free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, and amendments to those reports, as soon as
reasonably practicable after we electronically file those materials with, or
furnish them to, the SEC. Alternatively, the public may read and copy
any materials we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC also maintains a Web site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The SEC’s Web site
address is www.sec.gov.
Item
1A.Risk Factors
Set forth below and under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Risks
and Uncertainties” in Item 7 of Part II of this report are various risks and
uncertainties that could adversely impact our business, financial condition,
results of operations and cash flows.
There
are risks related to our internal growth and operating strategy.
Our
ability to generate internal growth will be affected by, among other factors,
our ability to:
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attract
new customers; and
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differentiate
ourselves in a competitive market by emphasizing new product development
and value-added sales and marketing; hiring and retaining employees; and
reducing operating and overhead
expenses.
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One key
component of our operating strategy is to operate our businesses on a
decentralized basis, with local or regional management retaining responsibility
for day-to-day operations, profitability and the internal growth of the
individual business. If we do not implement and maintain proper overall business
controls, this decentralized operating strategy could result in inconsistent
operating and financial practices and our overall profitability could be
adversely affected.
Our
resources, including management resources, are limited and may be strained if we
engage in a significant number of acquisitions. Also, acquisitions may divert
our management’s attention from initiating or carrying out programs to save
costs or enhance revenues.
Our
inability to achieve internal growth could materially and adversely affect our
business, financial condition, results of operations and cash
flows.
Our
results of operations could be adversely affected as a result of goodwill
impairments.
Goodwill
represents the amount by which the total purchase price we have paid for
acquisitions exceeds our estimated fair value of the net tangible assets
acquired. We test goodwill for impairment on an annual basis, or more
often if events or circumstances indicate that there may be
impairment. We generally test for goodwill impairment in the fourth
quarter of each year, because this period gives us the best visibility of the
reporting units’ operating performances for the current year (seasonally, April
through October are highest revenue and production months) and outlook for the
upcoming year, since much of our customer base is finalizing operating and
capital budgets. We will record such a charge to the extent that the book-equity
value of any one of our reporting units (including goodwill) exceeds the
estimated fair value of that reporting unit. The estimated fair values of our
reporting units were based on discounted cash flow models derived from internal
earnings forecasts and other market-based valuation techniques.
During the fourth quarters of 2008,
2007 and 2006, we performed our annual test of goodwill, which resulted in
impairments of $135.3 million, $81.9 million and $38.8 million, respectively. In
2008, our goodwill impairment included writedowns in the majority of our
reporting units, specifically in our South Central Region reporting unit, our
Atlantic Region reporting unit, our Southwest Precast reporting unit, our
Northern California Precast reporting unit and our Northern California reporting
unit. The underlying markets within these reporting units have been
significantly impacted by the depressed construction sector, weak macro-economic
conditions and tight or illiquid credit market conditions, which have
significantly reduced our valuation metrics, including higher cost of capital
assumptions used in determining our future discounted cash flow
streams. In 2007, our goodwill impairment included a write-off of the
remaining goodwill in our Michigan reporting unit and goodwill in our South
Central and Northern California Precast reporting units. Our South
Central and Northern California Precast reporting units were severely impacted
by the downward trend in residential construction, increased competition and the
economic impact of the change in the geographic mix of sales
volume. The 2006 writedown was related to our Michigan reporting unit
and was due to increased competition and a general economic downturn in
Michigan, driven by the decline in the U.S. automotive industry in that region,
lower operating profits and a downward trend in cash flows.
As of
December 31, 2008, goodwill represented approximately 12% of our total assets.
We can provide no assurance that future goodwill impairments will not occur. If
we determine that any of our remaining balance of goodwill is impaired, we will
be required to take an immediate noncash charge to earnings.
As
a result of capital constraints and other factors, we may not be able to grow as
rapidly as we may desire through acquiring additional businesses.
In
addition to our existing working capital and cash from operations, our senior
secured credit facility provides us with a significant source of
liquidity. Effective March 2, 2007, the facility was increased to
provide us a borrowing capacity of up to $150 million, as compared to $105
million of borrowing capacity at December 31, 2006. The credit
agreement relating to this facility provides that the administrative agent may,
on the bases specified, reduce the amount of the available credit from time to
time. At December 31, 2008, there was $11.0 million outstanding under the credit
facility and the amount of the available credit was approximately $91.1 million,
net of outstanding letters of credit of $11.6 million.
We cannot
readily predict the timing, size and success of our acquisition efforts or the
capital we will need for those efforts. We may use our common stock as a
component of the consideration we pay for future acquisitions. Issuances of
common stock as acquisition consideration could have a dilutive effect on our
stockholders. If our common stock does not maintain a sufficient market value or
potential acquisition candidates are unwilling to accept our common stock as
part of the consideration for the sale of their businesses, we may be required
to use more of our cash resources to pursue our acquisition
program.
Using
cash for acquisition consideration limits our financial flexibility and
increases the likelihood that we will need to seek additional capital through
future debt or equity financings. If we seek more debt financing, we may have to
agree to financial covenants that limit our operational and financial
flexibility. Additional equity financing may dilute the ownership interests of
our stockholders. There is no assurance that additional debt or equity financing
will be available on terms acceptable to us.
Our
substantial debt could adversely affect our financial condition.
We
currently have a significant amount of debt. As of December 31, 2008, we had
approximately $306.0 million of outstanding debt. Our
substantial debt and other financial obligations could:
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make
it difficult for us to satisfy our financial obligations, including making
scheduled principal and interest payments on our
indebtedness;
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require
us to dedicate a substantial portion of our cash flow from operations to
service payments on our indebtedness, thereby reducing funds available for
other purposes;
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increase
our vulnerability to a downturn in general economic conditions or the
industry in which we compete;
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limit
our ability to borrow additional funds for working capital, capital
expenditures, acquisitions, general corporate and other
purposes;
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place
us at a competitive disadvantage to our competitors;
and
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limit
our ability to plan for and react to changes in our business and the
ready-mixed concrete
industry.
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Our senior secured credit facility and
the indenture governing our outstanding 8⅜% senior subordinated notes permit us
to incur and to guarantee additional indebtedness. We anticipate that any future
acquisitions we pursue as part of our strategy, as well as any future
repurchases of our securities may be financed through a combination of cash on
hand, operating cash flow, availability under our existing credit facility and
new securities offerings. If new debt is added to current debt levels, the
related risks described above could increase.
We
will require a significant amount of cash to service all our debt.
Our
ability to pay or to refinance our indebtedness depends on our future operating
performance, which may be affected by general economic, financial, competitive,
legislative, regulatory, business and other factors, many of which are beyond
our control. Our business may not generate sufficient cash flow from operations
and future financings may not be available to us in amounts sufficient to enable
us to pay our debt or fund other liquidity needs. If we are unable to generate
sufficient cash flow to meet our debt service obligations, we may have to
renegotiate the terms of our debt or obtain additional financing, possibly on
less favorable terms than our current debt. If we are not able to renegotiate
the terms of our debt or obtain additional financing, we could be forced to sell
assets under unfavorable circumstances. The terms of our senior secured credit
facility and the indenture governing our senior subordinated notes limit our
ability to sell assets and generally restrict the use of proceeds from asset
sales.
Our
existing debt arrangements impose restrictions on us that may adversely affect
our ability to operate our business.
The
indenture governing our $285 million aggregate principal amount of senior
subordinated notes and our senior secured credit facility contain covenants that
restrict, among other things, our ability to:
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incur
additional indebtedness and issue preferred
stock;
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make
certain investments;
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enter
into transactions with
affiliates;
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incur
liens on assets to secure other
debt;
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engage
in specified business activities;
and
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engage
in certain mergers or consolidations and transfers of
assets.
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Additionally,
any “material adverse change” of the Company could restrict our ability to
borrow under the senior secured credit facility. A material adverse
change is defined as a material adverse change in any of (a) our condition
(financial or otherwise), business, performance, prospects, operations or
properties, taken as a whole, (b) our ability, taken as a whole, to perform our
respective obligations under the Loan Documents or (c) the rights and remedies
of the Administrative Agent, the Lenders or the issuers to enforce the Loan
Documents. Our indenture and senior secured credit facility contain
financial covenants and other limitations with which we must comply. Our ability
to comply with these covenants may be affected by events beyond our control, and
our future operating results may not be sufficient to comply with the covenants
or, in the event of a default under either our indenture or senior secured
credit facility, to remedy such a covenant default.
Our
failure to comply with any of our financial or other covenants under our
indenture or senior secured credit facility could result in an event of default.
On the occurrence of any such event of default, the trustee under the indenture
or our lenders could elect to declare all amounts outstanding under the
indenture or our senior secured credit facility, as applicable, to be
immediately due and payable, and our lenders could terminate all commitments to
extend further credit to us and foreclose on any collateral we have granted to
secure our obligations under our senior secured credit facility.
Further tightening of mortgage
lending or mortgage financing requirements could adversely affect the
residential construction market
and prolong the downturn in, or further reduce, the demand for new home
construction which began in 2006 and has had a negative effect on our sales volumes and
revenues.
During
2007 and 2008, the mortgage lending and mortgage finance industries experienced
significant instability due to, among other things, defaults on subprime loans
and adjustable-rate mortgages. In light of these developments, lenders,
investors, regulators and other third parties have questioned the adequacy of
lending standards and other credit requirements for several loan programs made
available to borrowers in recent years. This has led to reduced investor demand
for mortgage loans and mortgage-backed securities, reduced market values for
those securities,
tightened credit requirements, reduced liquidity, increased credit risk
premiums and regulatory actions. Deterioration in credit quality among subprime
and other loans has caused many lenders to eliminate
subprime mortgages and other loan products that do not conform to Fannie Mae,
Freddie Mac, FHA or VA standards. Fewer loan products and tighter loan
qualifications in turn make it more difficult for some categories of borrowers
to finance the purchase of new homes. In general, these developments have
been a significant factor in the downturn of, and have delayed any general
improvement in, the housing market.
Approximately
26% of our 2008 revenue was from residential construction contractors. Further
tightening of mortgage lending or mortgage financing requirements could
adversely affect the availability to obtain credit for some borrowers and
prolong the downturn in, or further reduce the demand for, new home
construction, which could have a material adverse effect on our business and
results of operations in 2009. A further downturn in new home
construction could also adversely affect our customers focused in this industry
segment, possibly resulting in slower payments, higher default rates in our
accounts receivable, and an overall increase in working capital.
The
global financial crisis may impact our business and financial condition in ways
that we currently cannot predict.
The
unprecedented and continuing credit crisis and related turmoil in the global
financial system may have an impact on our business and our financial condition.
In particular, the cost of capital has increased substantially while the
availability of funds from the capital markets has diminished significantly.
Accordingly, our ability to access the capital markets may be restricted or be
available only on unfavorable terms. Limited access to the capital
markets could adversely impact our ability to take advantage of business
opportunities or react to changing economic and business conditions and could
adversely impact our ability to execute our long-term growth
strategy. Ultimately we may be required to reduce our future capital
expenditures substantially. Such a reduction could have a material adverse
effect on our revenues, income from operations and cash flows.
If one or
more of the lenders under our senior secured credit facility were to become
unable or unwilling to perform their obligations under that facility, our
borrowing capacity could be reduced. Our inability to borrow additional amounts
under our senior secured credit facility could limit our ability to fund our
future operations and growth.
The
current economic situation could have an impact on our suppliers and our
customers, causing them to fail to meet their obligations to us, which could
have a material adverse effect on our revenues, income from operations and cash
flows. The uncertainty and volatility of the global financial crisis
may have further impacts on our business and financial condition that we
currently cannot predict or anticipate.
Our
operating results may vary significantly from one reporting period to another
and may be adversely affected by the seasonal and cyclical nature of the markets
we serve.
The
ready-mixed concrete and precast concrete businesses are seasonal. In
particular, demand for our products and services during the winter months are
typically lower than in other months because of inclement winter weather. In
addition, sustained periods of inclement weather or permitting delays could
postpone or delay projects over geographic regions of the United States, and
consequently, could adversely affect our business, financial condition, results
of operations and cash flows. The relative demand for our products is
a function of the highly cyclical construction industry. As a result,
our revenues may be adversely affected by declines in the construction industry
generally and in our local markets. Our results also may be
materially affected by:
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the
level of residential and commercial construction in our regional markets,
including reductions in the demand for new residential housing
construction below current or historical
levels;
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the
availability of funds for public or infrastructure construction from
local, state and federal
sources;
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unexpected
events that delay or adversely affect our ability to deliver concrete
according to our customers’
requirements;
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changes
in interest rates and lending
standards;
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the
changes in mix of our customers and business, which result in periodic
variations in the margins of jobs performed during any particular
quarter;
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the
timing and cost of acquisitions and difficulties or costs encountered when
integrating acquisitions;
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the
budgetary spending patterns of
customers;
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increases
in construction and design
costs;
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power
outages and other unexpected
delays;
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our
ability to control costs and maintain
quality;
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regional
or general economic
conditions.
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As a
result, our operating results in any particular quarter may not be indicative of
the results that you can expect for any other quarter or for the entire year.
Furthermore, negative trends in the ready-mixed concrete industry or in our
geographic markets could have material adverse effects on our business,
financial condition, results of operations and cash flows.
We
may be unsuccessful in continuing to carry out our strategy of growth through
acquisitions.
One of
our principal growth strategies is to increase our revenues and the markets we
serve and to continue selectively entering new geographic markets through the
acquisition of additional ready-mixed concrete, precast concrete products,
aggregates products and related businesses. We may not be able to acquire
suitable acquisition candidates at reasonable prices and on other reasonable
terms for a number of reasons, including the following:
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the
acquisition candidates we identify may be unwilling to
sell;
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we
may not have sufficient capital to pay for acquisitions;
and
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competitors
in our industry may outbid us.
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In
addition, there are risks associated with the acquisitions we complete. We may
face difficulties integrating the newly acquired businesses into our operations
efficiently and on a timely basis. We also may experience unforeseen
difficulties managing the increased scope, geographic diversity and complexity
of our operations or mitigating contingent or assumed liabilities, potentially
including liabilities we do not anticipate.
We
may lose business to competitors who underbid us, and we may be otherwise unable
to compete favorably in our highly competitive industry.
Our
competitive position in a given market depends largely on the location and
operating costs of our plants and prevailing prices in that
market. Generally, our products are price-sensitive. Our prices are
subject to changes in response to relatively minor fluctuations in supply and
demand, general economic conditions and market conditions, all of which are
beyond our control. Because of the fixed-cost nature of our business, our
overall profitability is sensitive to minor variations in sales volumes and
small shifts in the balance between supply and demand. Price is the primary
competitive factor among suppliers for small or simple jobs, principally in
residential construction. However, timeliness of delivery and consistency of
quality and service, as well as price, are the principal competitive factors
among suppliers for large or complex jobs. Concrete manufacturers like us
generally obtain customer contracts through local sales and marketing efforts
directed at general contractors, developers, governmental agencies and
homebuilders. As a result, we depend on local relationships. We
generally do not have any long-term sales contracts with our
customers.
Our
competitors range from small, owner-operated private companies to subsidiaries
or operating units of large, vertically integrated manufacturers of cement and
aggregates. Our vertically integrated competitors generally have greater
manufacturing, financial and marketing resources than we have, providing them
with competitive advantages. Competitors having lower operating costs
than we do or having the financial resources to enable them to accept lower
margins than we do will have competitive advantages over us for jobs that are
particularly price-sensitive. Competitors having greater financial resources or
less financial leverage than we do to invest in new mixer trucks, build plants
in new areas or pay for acquisitions also will have competitive advantages over
us.
We
depend on third parties for concrete equipment and supplies essential to operate
our business.
We rely
on third parties to sell or lease property, plant and equipment to us and to
provide supplies, including cement and other raw materials, necessary for our
operations. We cannot assure you that our favorable working relationships with
our suppliers will continue in the future. Also, there have historically been
periods of supply shortages in the concrete industry, particularly in a strong
economy.
If we are
unable to purchase or lease necessary properties or equipment, our operations
could be severely impacted. If we lose our supply contracts and receive
insufficient supplies from other third parties to meet our customers’ needs or
if our suppliers experience price increases or disruptions to their business,
such as labor disputes, supply shortages or distribution problems, our business,
financial condition, results of operations and cash flows could be materially
adversely affected.
In 2006,
cement prices rose at rates similar to those experienced in 2005 and 2004, as a
result of strong domestic consumption driven largely by historic levels of
residential construction that did not abate until the second half of
2006. During 2007 and 2008, residential construction slowed
significantly, which resulted in a decline in the demand for ready-mixed
concrete. Cement prices remained relatively flat in 2008, while
cement supplies were at levels that indicated a very low risk of cement
shortages in our markets. Should demand increase substantially beyond
our current expectations, we could experience shortages of cement in future
periods, which could adversely affect our operating results, through both
decreased sales and higher cost of raw materials.
From 2006
through 2008, our product pricing for ready-mixed concrete increased in most of
our markets. These price increases generally allowed us to absorb the increased
cost of raw materials (primarily cement, other cementitious materials and
aggregates) in 2007 and 2008. In 2006, the rising cost of raw
materials outpaced our ability to increase prices and, as a result, our margins
were adversely impacted. However, improvements in our product pricing
in 2007 and 2008 was offset, in part, by higher labor, freight and delivery
costs, including rising diesel fuel costs. Due to escalating diesel fuel prices,
we experienced both increased freight charges for our raw materials, in the form
of fuel surcharges, and increased fuel costs to deliver our products to our
customers. As these costs have become more significant over the last three
years, we instituted fuel surcharges in most of our markets in an attempt to
cover these rising costs. Diesel fuel prices decreased substantially in the
fourth quarter of 2008 and fuel surcharges we incurred from our suppliers, third
party freighters to us and fuel surcharges we charged to our customers have been
significantly reduced or eliminated. We do not have any long-term
fuel supply contracts that would protect us from rising fuel costs. Sustaining
or improving our margins in the future will depend on market conditions and our
ability to increase our product pricing or realize gains in productivity to
offset further increases in raw materials and other costs.
Governmental
regulations, including environmental regulations, may result in increases in our
operating costs and capital expenditures and decreases in our
earnings.
A
wide range of federal, state and local laws, ordinances and regulations apply to
our operations, including the following matters:
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street
and highway usage;
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health,
safety and environmental matters.
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In many
instances, we must have various certificates, permits or licenses in order to
conduct our business. Our failure to maintain required certificates, permits or
licenses or to comply with applicable governmental requirements could result in
substantial fines or possible revocation of our authority to conduct some of our
operations. Delays in obtaining approvals for the transfer or grant of
certificates, permits or licenses, or failure to obtain new certificates,
permits or licenses, could impede the implementation of our acquisition
program.
Governmental
requirements that impact our operations include those relating to air quality,
solid waste management and water quality. These requirements are complex and
subject to frequent change. They impose strict liability in some cases without
regard to negligence or fault and may expose us to liability for the conduct of
or conditions caused by others, or for our acts that complied with all
applicable requirements when we performed them. Our compliance with amended, new
or more stringent requirements, stricter interpretations of existing
requirements, or the future discovery of environmental conditions may require us
to make unanticipated material expenditures. In addition, we may fail to
identify or obtain indemnification from environmental liabilities of acquired
businesses. We generally do not maintain insurance to cover environmental
liabilities.
In March
2005, the California Regional Water Quality Control Board for the Central Valley
Region (“CRWQCB”) issued a draft order to regulate discharges of concrete
wastewater and solid wastes associated with concrete manufacturing at
ready-mixed concrete plants located in and near Sacramento, California. This
order would affect four sites in which six of our ready-mixed concrete plants
operate in northern California. If approved in its current draft form, the order
would require all existing ready-mixed concrete plants in the area to retrofit
or reconstruct their waste management units to provide impermeable containment
of all concrete wastewater and install leak detection systems. It also would
require all new ready-mixed concrete plants in the area to be constructed with
similar waste management units. The draft order provides that operators of
existing ready-mixed concrete plants would have 180 days to apply for coverage
under the order, and then one year after coverage is obtained to complete all
required retrofitting. In June 2005, the CRWQCB delayed approval of the order to
provide the Construction Materials Association of California and various
concrete producers time to provide certain information to the CRWQCB for further
consideration. Although our actual capital expenditures may vary significantly
and will ultimately depend on final regulations, if the order is approved in its
current form, the cost of capital improvements to our plants at the four sites
in the affected area may be up to $1.0 million per site. Also, if the order is
considered and adopted by the California Water Quality Control Board for the San
Francisco Bay Region, we might incur similar costs to retrofit our existing
plants in that area. At December 31, 2008, we operated a total of 20
ready-mixed concrete plants in northern California which could be impacted by
this order should it be enacted.
Our
operations are subject to various hazards that may cause personal injury or
property damage and increase our operating costs.
Operating
mixer trucks, particularly when loaded, exposes our drivers and others to
traffic hazards. Our drivers are subject to the usual hazards associated with
providing services on construction sites, while our plant personnel are subject
to the hazards associated with moving and storing large quantities of heavy raw
materials. Operating hazards can cause personal injury and loss of life, damage
to or destruction of property, plant and equipment and environmental damage.
Although we conduct training programs designed to reduce these risks, we cannot
eliminate these risks. We maintain insurance coverage in amounts we believe are
in accord with industry practice; however, this insurance may not be adequate to
cover all losses or liabilities we may incur in our operations, and we may not
be able to maintain insurance of the types or at levels we deem necessary or
adequate or at rates we consider reasonable. A partially or completely uninsured
claim, if successful and of sufficient magnitude, could have a material adverse
effect on us.
The
insurance policies we maintain are subject to varying levels of deductibles.
Losses up to the deductible amounts are accrued based on our estimates of the
ultimate liability for claims incurred and an estimate of claims incurred but
not reported. If we were to experience insurance claims or costs above our
estimates, our business, financial condition, results of operations and cash
flows might be materially and adversely affected.
The
departure of key personnel could disrupt our business.
We depend
on the efforts of our executive officers and, in many cases, on senior
management of our businesses. Our success will depend on retaining our
senior-level managers and officers. We need to insure that key
personnel are compensated fairly and competitively to reduce the risk of
departure of key personnel to our competitors or other industries. To
the extent we are unable to attract and retain qualified management personnel,
our business, financial condition, results of operations and cash flows could be
materially and adversely affected. We do not carry key personnel life
insurance on any of our employees.
We
may be unable to attract and retain qualified employees.
Our
ability to provide high-quality products and services on a timely basis depends
on our success in employing an adequate number of skilled plant managers,
technicians and drivers. Like many of our competitors, we experience shortages
of qualified personnel from time to time. We may not be able to maintain an
adequate skilled labor force necessary to operate efficiently and to support our
growth strategy, and our labor expenses may increase as a result of a shortage
in the supply of skilled personnel.
Collective
bargaining agreements, work stoppages and other labor relations matters may
result in increases in our operating costs, disruptions in our business and
decreases in our earnings.
As of
March 12, 2009, approximately 36%, or 925, of our employees were covered by
collective bargaining agreements, which expire between 2009 and
2013. Our inability to negotiate acceptable new contracts or
extensions of existing contracts with these unions could cause work stoppages by
the affected employees. In addition, any new contracts or extensions could
result in increased operating costs attributable to both union and nonunion
employees. If any such work stoppages were to occur, or if other of our
employees were to become represented by a union, we could experience a
significant disruption of our operations and higher ongoing labor costs, which
could materially adversely affect our business, financial condition, results of
operations and cash flows. In addition, the coexistence of union and nonunion
employees may impede our ability to integrate our operations
efficiently. Also, labor relations matters affecting our suppliers of
cement and aggregates could adversely impact our business from time to
time.
We
contribute to 13 multiemployer pension plans. During 2006, the
“Pension Protection Act of 2006” (the “PPA”) was signed into law. For
multiemployer defined benefit plans, the PPA establishes new funding
requirements or rehabilitation requirements, creates additional funding rules
for plans that are in endangered or critical status, and introduces enhanced
disclosure requirements to participants regarding a plan’s funding status. The
Worker, Retiree and Employer Recovery Act of 2008 (the “WRERA”) was enacted on
December 23, 2008 and provides some funding relief to defined benefit plan
sponsors affected by recent market conditions. The WRERA allows
multiemployer plan sponsors to elect to freeze their current fund status at the
same funding status as the preceding plan year (for example, a calendar year
plan that is not in critical or endangered status for 2008 may elect to retain
that status for 2009), and sponsors of multiemployer plans in endangered or
critical status in plan years beginning in 2008 or 2009 are allowed a three-year
extension of funding improvement or rehabilitation plans (extends timeline for
these plans to accomplish their goals from 10 years to 13 years, or from 15
years to 18 years for seriously endangered plans). Additionally, if
we were to withdraw partially or completely from any plan that is underfunded,
we would be liable for a proportionate share of that plan’s unfunded vested
benefits. Based on the information available from plan administrators, pursuant
to the Pension Plan Act of 2006, we believe that our portion of the contingent
liability in the case of a full or partial withdrawal from or termination of
several of these plans or the inability of plan sponsors to meet the funding or
rehabilitation requirements would be material to our business financial
condition, results of operations and cash flows.
Our
overall profitability is sensitive to price changes and minor variations in
sales volumes.
Generally,
our products are price-sensitive. Prices for our products are subject to changes
in response to relatively minor fluctuations in supply and demand, general
economic conditions and market conditions, all of which are beyond our control.
Because of the fixed-cost nature of our business, our overall profitability is
sensitive to price changes and minor variations in sales volumes.
We
may incur material costs and losses as a result of claims our products do not
meet regulatory requirements or contractual specifications.
Our
operations involve providing products that must meet building code or other
regulatory requirements and contractual specifications for durability,
stress-level capacity, weight-bearing capacity and other characteristics. If we
fail or are unable to provide products meeting these requirements and
specifications, material claims may arise against us and our reputation could be
damaged. In the past, we have had significant claims of this kind asserted
against us that we have resolved. There currently are, and we expect that in the
future there will be, additional claims of this kind asserted against us. If a
significant product-related claim or claims are resolved against us in the
future, that resolution may have a material adverse effect on our business,
financial condition, results of operations and cash flows.
Our
net revenue attributable to infrastructure projects could be negatively impacted
by a decrease or delay in governmental spending.
Our
business depends in part on the level of governmental spending on infrastructure
projects in our markets. Reduced levels of governmental funding for public works
projects or delays in that funding could adversely affect our business,
financial condition, results of operations and cash flows.
Some
of our plants are susceptible to damage from earthquakes, for which we have a
limited amount of insurance.
We
maintain only a limited amount of earthquake insurance, and, therefore, we are
not fully insured against earthquake risk. Any significant earthquake damage to
our plants could materially adversely affect our business, financial condition,
results of operations and cash flows.
Increasing
insurance claims and expenses could lower our profitability and increase our
business risk.
The
nature of our business subjects us to product liability, property damage and
personal injury claims. Over the last several years, insurance
carriers have raised premiums for many companies operating in our industry,
including us. Increased premiums may further increase our insurance
expense as coverage expires or otherwise cause us to raise our self-insured
retention. If the number or severity of claims within our
self-insured retention increases, we could suffer costs in excess of our
reserves. An unusually large liability claim or a string of claims
based on a failure repeated throughout our mass production process may exceed
our insurance coverage or result in direct damages if we were unable or elected
not to insure against certain hazards because of high premiums or other
reasons. In addition, the availability of, and our ability to collect
on, insurance coverage is often subject to factors beyond our
control.
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
Facilities
The table
below lists our concrete plants as of March 12, 2009. We believe
these plants are sufficient for our current needs. The ready-mixed concrete
volumes shown are the volumes from continuing operations each location produced
in 2008, except that production volumes related to plants we acquired during the
year reflect production from the date of acquisition through
year-end.
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Ready-Mixed Concrete Plants
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Precast
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Block
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Ready-Mixed
Concrete
Volume
(in thousands
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Locations
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Fixed
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Portable
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Total
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Plants
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Plants
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of cubic yards)
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Ready-Mixed
Concrete and Concrete-Related Products
Segment:
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Northern
California
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22 |
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3 |
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25 |
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— |
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— |
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1,472 |
|
Atlantic
Region
|
|
|
21 |
|
|
|
5 |
|
|
|
26 |
|
|
|
— |
|
|
|
— |
|
|
|
981 |
|
Texas
/ Southwest Oklahoma
|
|
|
62 |
|
|
|
4 |
|
|
|
66 |
|
|
|
— |
|
|
|
— |
|
|
|
3,221 |
|
Michigan
|
|
|
27 |
|
|
|
— |
|
|
|
27 |
|
|
|
— |
|
|
|
1 |
|
|
|
843 |
|
Precast
Concrete Products Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern
California
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
Southern
California/Arizona
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
Pennsylvania
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Total
Company
|
|
|
132 |
|
|
|
12 |
|
|
|
144 |
|
|
|
7 |
|
|
|
1 |
|
|
|
6,517 |
|
The fixed
plants listed above are located on approximately 73 sites we own and 67 sites we
lease. The lease terms extend to dates that vary from 2009 to
2019. We intend to renew most of the leases expiring in the near
term. Of those leases we do not renew, we expect to relocate most of
the related plant facilities to future leased or owned sites.
We produce crushed stone aggregates,
sand and gravel, from seven aggregates facilities located in Texas and New
Jersey. We sell these aggregates for use in commercial, industrial
and public works projects in the markets they serve, as well as consume them
internally in the production of ready-mixed concrete in those
markets. We produced approximately 3.5 million tons of
aggregates in 2008, with Texas producing 48% and New
Jersey 52% of that total production. In April 2007, we entered into
an agreement to lease our sand pit operations in Michigan to the Edward C. Levy
Co. as a part of the formation of our 60%-owned Michigan
subsidiary. We now receive a royalty based on the volume of product
produced and sold from the quarry during the term of the lease.
At December 31, 2008, our total
estimated aggregates reserves are 77 million tons, assuming loss factors of
approximately 20% for unusable material. We believe these aggregates
reserves provide us with additional raw materials sourcing flexibility and
supply availability, although they will provide us with supply for less than 5%
of our annual consumption of aggregates.
Equipment
As of
December 31, 2008, we operated a fleet of approximately 1,077 owned and leased mixer
trucks and 1,307 other vehicles. Our own
mechanics service most of the fleet. We believe these vehicles generally are
well maintained and are adequate for our operations. The average age of our
mixer trucks is approximately 7.2 years.
For
additional information related to our properties, see Item 1 of this
report.
Item
3. Legal
Proceedings
The information set forth under the
heading “Legal Proceedings” in Note 14, “Commitments and Contingencies ,” to our
Consolidated Financial Statements included in this report is incorporated by
reference into this Item 3.
Item
4. Submission of Matters to a Vote of
Security Holders
No matter
was submitted to a vote of our security holders during the fourth quarter of
2008.
PART
II
Item
5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our
common stock is traded on the Nasdaq Global Select Stock Market under the symbol
“RMIX.” As of March 12, 2009, shares of our common stock were held by
approximately 533 stockholders of record.
The number of record holders does not necessarily bear any relationship to the
number of beneficial owners of our common stock.
The
closing price for our common stock on the Nasdaq Global Select Market on March
12, 2009 was $1.75 per share. The following table sets forth, for the periods
indicated, the range of high and low sales prices for our common
stock:
|
|
2008
|
|
|
2007
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$ |
4.40 |
|
|
$ |
2.14 |
|
|
$ |
9.25 |
|
|
$ |
6.35 |
|
Second
Quarter
|
|
$ |
6.25 |
|
|
$ |
3.05 |
|
|
$ |
9.48 |
|
|
$ |
7.79 |
|
Third
Quarter
|
|
$ |
8.38 |
|
|
$ |
3.86 |
|
|
$ |
9.05 |
|
|
$ |
6.50 |
|
Fourth
Quarter
|
|
$ |
4.69 |
|
|
$ |
1.83 |
|
|
$ |
6.99 |
|
|
$ |
3.21 |
|
We have
not paid or declared any dividends since our formation and currently intend to
retain any earnings to fund our working capital and growth initiatives.
Additional information concerning restrictions on our payment of cash dividends
may be found in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources” in Item 7 of this report
and Note 9 to our Consolidated Financial Statements in this
report.
PERFORMANCE
GRAPH
The
following graph compares, for the period from December 31, 2003 to
December 31, 2008, the cumulative stockholder return on our common stock
with the cumulative total return on the Standard & Poor’s 500 Index and a
peer group index we selected that includes four public companies within our
industry. The comparison assumes that (1) $100 was invested on December 31,
2003 in our common stock, the S&P 500 Index and the peer group index and
(2) all dividends were reinvested.
The peer group companies at December
31, 2008 for this performance graph are Texas Industries, Inc., Eagle Materials
Inc., Martin Marietta Materials, Inc. and Vulcan Materials
Company. In addition to ready-mixed concrete and concrete-related
products, the members of the peer group also have material operations in other
segments of the building products industry in which we either do not currently
operate, or do not operate at a comparable level, such as cement, aggregates and
other building products. These other business segments of peer group
members have an affect on cumulative stockholder return over the covered
period.
Equity
Compensation Plan Information
The
following table summarizes, as of December 31, 2008, the indicated information
regarding equity compensation to our employees, officers, directors and other
persons under our equity compensation plans. These plans use or are based on
shares of our common stock.
Plan Category
|
|
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding Stock
Options
|
|
|
Weighted Average
Exercise Price of
Outstanding Stock
Options
|
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
(Excluding Securities
Reflected in first column)
|
|
Equity compensation
plans approved by security holders(1)
|
|
|
1,683,832 |
|
|
$ |
7.16 |
|
|
|
2,417,000 |
|
Equity compensation
plans not approved by security holders
(2)
|
|
|
323,880 |
|
|
|
6.48 |
|
|
|
227,727 |
|
Total
|
|
|
2,007,712 |
|
|
$ |
7.05 |
|
|
|
|
|
|
(1)
|
Pursuant
to the terms of the 2008 Incentive Plan, there were 2,417,000 shares of
our common stock remaining available for awards under the plan for future
issuance as of December 31, 2008, plus shares of common stock which are
the subject of awards under the 1999 Incentive Plan or the 2001 Employee
Incentive Plan (the “2001 Plan”) that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of common stock or in a manner
such that all or some of the shares covered thereby are not issued or are
exchanged for consideration that does not involve common
stock. The 1999 Incentive Plan terminated on December 31, 2008,
but there are still outstanding awards of stock options and restricted
stock under such plan.
|
|
(2)
|
Our
board adopted the 2001 Plan in February 2001. The purpose of
this plan is to attract,
retain and motivate our employees and consultants, to encourage a sense of
propriety of those persons in our company and
to stimulate an active interest of those persons in the development and
financial success of our company. Awards may be made to any of
our employees or consultants. The plan provides for grants of
incentive stock options, nonqualified stock options, stock appreciation
rights, restricted stock and other long-term incentive
awards. None of our officers or directors is eligible to
participate in the plan. Pursuant to the terms of the 2001 Plan, there
were 227,727 shares of our common stock remaining available for awards
under the plan for future issuance as of December 31,
2008. However, we do not anticipate making any new awards under
the 2001 Plan. Additionally, shares of our common stock which
were the subject of awards under the 2001 Plan when the 2008 Incentive
Plan was adopted that are subsequently forfeited or terminated, expire
unexercised, are settled in cash in lieu of common stock or in a manner
such that all or some of the shares covered thereby are not issued or are
exchanged for consideration that does not involve common stock are
included in the number of shares that may be issued under the 2008
Incentive Plan.
|
Issuer
Purchases of Equity Securities
The
following table provides information with respect to our repurchases of shares
of our common stock during the fourth quarter of 2008:
Calendar
Month
|
|
Total Number
of
Shares
Purchased(1),(2)
|
|
|
Average Price
Paid
Per
Share
|
|
|
Total Number
of
Shares
Purchased
as Part of
Publicly
Announced
Plans
or
Programs
|
|
|
Maximum Number
(or
Approximate
Dollar
Value) of Shares
That
May Yet Be
Purchased
Under the Plans
or
Programs(2)
|
|
October
2008
|
|
|
2,991,649 |
|
|
|
1.98 |
|
|
|
2,976,942 |
|
|
|
- |
|
November
2008
|
|
|
7,120 |
|
|
|
3.15 |
|
|
|
- |
|
|
|
- |
|
December
2008
|
|
|
16,036 |
|
|
|
3.09 |
|
|
|
- |
|
|
|
- |
|
|
(1)
|
Includes
37,863
shares of our common stock repurchased during the three-month period ended
December 31, 2008, from company employees who elected for us to make
their required tax payments
upon vesting of certain restricted shares by withholding a number of those
vested shares having a value on the date of vesting equal to their tax
obligations.
|
|
(2)
|
In January 2008, our
Board of Directors authorized repurchases of up to three million shares of
our common stock from time-to-time at prevailing prices as permitted by
securities laws and other requirements and subject to market conditions
and other factors. The Board modified the repurchase plan in
October 2008 to slightly increase the aggregate number of shares that
could be repurchased. The program was completed during the
fourth quarter of 2008, with a total of 3,148,405 shares being acquired
during 2008 for approximately $2.10 per
share.
|
Item
6. Selected Financial Data
The
information below was derived from the audited Consolidated Financial Statements
included in this report and in other reports we have previously filed with the
SEC, and this information should be read together with those financial
statements and the notes to those financial statements. The adoption of new
accounting pronouncements, changes in accounting policies and reclassifications
impact the comparability of the financial information presented below. These
historical results are not necessarily indicative of the results to be expected
in the future.
|
|
Year Ended December
31(5)
|
|
|
|
2008(1)
|
|
|
2007(2)
|
|
|
2006(3)
|
|
|
2005
|
|
|
2004(4)
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
754,298 |
|
|
$ |
803,803 |
|
|
$ |
728,510 |
|
|
$ |
525,637 |
|
|
$ |
455,876 |
|
Income
(loss) from continuing operations, net of tax
|
|
$ |
(132,297 |
) |
|
$ |
(63,760 |
) |
|
$ |
(7,303 |
) |
|
$ |
14,431 |
|
|
$ |
(10,360 |
) |
Loss
from discontinued operations, net of tax
|
|
$ |
(149 |
) |
|
$ |
(5,241 |
) |
|
$ |
(787 |
) |
|
$ |
(1,819 |
) |
|
$ |
(179 |
) |
Net
income (loss)
|
|
$ |
(132,446 |
) |
|
$ |
(69,001 |
) |
|
$ |
(8,090 |
) |
|
$ |
12,612 |
|
|
$ |
(10,539 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income (loss) per share from continuing
operations
|
|
$ |
(3.48 |
) |
|
$ |
(1.67 |
) |
|
$ |
(0.20 |
) |
|
$ |
0.50 |
|
|
$ |
(0.37 |
) |
Loss
from discontinued operations,
net of tax
|
|
$ |
— |
|
|
$ |
(0.14 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.06 |
) |
|
$ |
— |
|
Basic
net income (loss) per share
|
|
$ |
(3.48 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.22 |
) |
|
$ |
0.44 |
|
|
$ |
(0.37 |
) |
Diluted
income (loss) per share from
continuing operations
|
|
$ |
(3.48 |
) |
|
$ |
(1.67 |
) |
|
$ |
(0.20 |
) |
|
$ |
0.49 |
|
|
$ |
(0.37 |
) |
Loss
from discontinued operations,
net of tax
|
|
$ |
— |
|
|
$ |
(0.14 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.06 |
) |
|
$ |
— |
|
Diluted
net income (loss) per share
|
|
$ |
(3.48 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.22 |
) |
|
$ |
0.43 |
|
|
$ |
(0.37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of
period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
507,810 |
|
|
$ |
647,256 |
|
|
$ |
716,646 |
|
|
$ |
494,043 |
|
|
$ |
449,159 |
|
Total
debt (including current maturities)
|
|
$ |
305,988 |
|
|
$ |
298,500 |
|
|
$ |
303,292 |
|
|
$ |
201,571 |
|
|
$ |
200,777 |
|
Total
stockholders’ equity
|
|
$ |
69,796 |
|
|
$ |
205,105 |
|
|
$ |
269,577 |
|
|
$ |
184,921 |
|
|
$ |
168,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flow
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$ |
30,113 |
|
|
$ |
44,338 |
|
|
$ |
39,537 |
|
|
$ |
41,229 |
|
|
$ |
34,423 |
|
Net
cash used in investing activities
|
|
$ |
(40,593 |
) |
|
$ |
(34,084 |
) |
|
$ |
(230,679 |
) |
|
$ |
(58,563 |
) |
|
$ |
(11,597 |
) |
Net
cash provided by (used in) financing activities
|
|
$ |
953 |
|
|
$ |
(4,208 |
) |
|
$ |
176,292 |
|
|
$ |
1,281 |
|
|
$ |
9,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
Concrete Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic yard
|
|
$ |
94.22 |
|
|
$ |
91.70 |
|
|
$ |
88.23 |
|
|
$ |
86.42 |
|
|
$ |
77.43 |
|
Sales
volume in cubic yards from continuing
operations
|
|
|
6,517 |
|
|
|
7,176 |
|
|
|
6,679 |
|
|
|
4,734 |
|
|
|
4,519 |
|
(1)
|
The 2008 results
include an impairment charge of $119.8 million, net of income taxes, in
the fourth quarter pursuant to our annual review of goodwill in accordance
with Statement of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible
Assets.”
|
(2)
|
The
2007 results include an impairment charge of $76.4 million, net of income
taxes, in the fourth quarter pursuant to our annual review of goodwill in
accordance with SFAS No. 142. Also
in 2007, we discontinued the operations of three business units in certain
markets. The financial data for years prior to 2007 have been
restated to segregate the effects of the operations of those discontinued
units.
|
(3)
|
The 2006 results include an
impairment charge of $26.8 million, net of income taxes, primarily
pursuant to our annual review of goodwill in accordance with SFAS No.
142.
|
(4)
|
The
2004 results include a loss on early extinguishment of debt of $28.8
million ($18.0 million, net of income taxes), which consisted of $25.9
million in premium payments to holders of our prior subordinated notes and
a write-off of $2.9 million of debt issuance costs associated with our
debt repayments.
|
(5)
|
All
data presented in each year has been restated to reflect the effect of our
fourth quarter of 2007 decision to dispose of certain of our
operations.
|
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Statements we make in the following
discussion that express a belief, expectation or intention, as well as those
that are not historical facts, are forward-looking statements that are subject
to various 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 to which we refer under the headings
“Cautionary Statement Concerning Forward-Looking Statements” preceding Item 1 of
this report, “Risk Factors” in Item 1A of this report and “—Risks and
Uncertainties” below.
Our
Business
We
operate our business in two business segments: ready-mixed concrete
and concrete-related products; and precast concrete products.
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 customers’ job sites. To
a lesser extent, this segment is engaged in the mining and sale of aggregates;
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, New York, Washington,
D.C., Michigan and Oklahoma.
Precast Concrete
Products. Our precast concrete products segment engages
principally in the production, distribution and sale of precast concrete
products from its seven plants located in California, Arizona and
Pennsylvania. From these facilities, we produce precast concrete
structures such as utility vaults, manholes and other wastewater management
products, specialty engineered structures, pre-stressed bridge girders, concrete
piles, curb-inlets, catch basins, retaining and other wall systems, custom
designed architectural products and other precast concrete
products.
Our
Markets; Pricing and Demand Trends
We derive
substantially all our revenues from the sale of ready-mixed concrete, precast
concrete and concrete-related products to the construction industry in the
United States. We typically sell our products under purchase orders that require
us to formulate, prepare and deliver the product to our customers’ job sites. We
recognize revenue from these orders when we deliver the ordered products. The
principal states in which we operate are Texas (39% of 2008 revenue and 35% of
2007 revenue), California (31% of 2008 revenue and 32% of 2007 revenue), New
Jersey/New York (14% of 2008 revenue and 14% of 2007 revenue) and Michigan (9%
of 2008 revenue and 11% of 2007 revenue). We serve substantially all
segments of the construction industry in our markets. Our customers
include contractors for commercial and industrial, residential, street and
highway and other public works construction. The approximate percentages of our
concrete product revenue by construction type activity were as follows in 2008
and 2007:
|
|
2008
|
|
|
2007
|
|
Commercial
and industrial
|
|
|
55 |
% |
|
|
49 |
% |
Residential
|
|
|
26 |
% |
|
|
35 |
% |
Street,
highway and other public works
|
|
|
19 |
% |
|
|
16 |
% |
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 that 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 both general and more localized economic
conditions, including the ongoing credit and U.S. recessionary conditions
impacting all our markets. 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 is typically lower than in other months of the year because of
inclement weather. Also, sustained periods of inclement weather and
other adverse weather conditions could cause the delay of construction projects
during other times of the year.
For 2008, our overall average sales
prices were modestly higher than in 2007. However, pricing trends
varied by region in our ready-mixed concrete markets. We experienced
pricing improvements in our northern California and north and west Texas
markets, and pricing declines in our New Jersey, Michigan and Washington, D.C.
markets, as compared to 2007 We announced price increases in several
of our markets, generally effective October 1, 2008 and early
2009. The extent to which we realize benefits from these announced
price increases will depend on market conditions and whether such increases
exceed our raw material and other cost increases.
During
2008, we experienced marked declines in the demand for our products, primarily
in our residential end-use markets. We experienced weaker demand in
our commercial end-use markets in the latter half of
2008. Ready-mixed concrete sales volumes generally began to decline
during the early summer of 2006 and continued to decline throughout 2007 and
2008. This decline reflects a sustained downward trend in residential
construction activity and commercial projects in many of our
markets. The overall construction downturn, in both residential and
commercial end-use markets, was consistent throughout 2008, resulting in
ready-mixed concrete sales volumes being down on a same-plant-sales basis in
2008 in all of our markets as compared to 2007. Ready-mixed concrete
sales volumes related to public works construction were higher in 2008, as
compared to 2007. We expect ready-mixed concrete sales volumes in
2009 to be lower than sales volumes achieved in 2008 because of continued
sluggishness in the residential and commercial end-use construction markets,
which will be exacerbated by the financial crisis and U.S. recession, as
described further under “Item 1A. Risk Factors— Further tightening of
mortgage lending or mortgage financing requirements could adversely affect the
residential construction market and prolong the downturn in, or further reduce,
the demand for new home construction which began in 2006 and has had a negative
effect on our sales volumes and revenues” and “—The global financial crisis may
impact our business and financial condition in ways that we currently cannot
predict.”
Demand
for our products in our precast concrete products segment decreased in 2008, as
compared to 2007. This decline is reflective of the decline in
residential construction starts 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 continuing the
process of refocusing our product lines and streamlining our operations in these
markets to better serve existing demand and penetrate additional end-use
markets. This streamlining has resulted in the closure of one of our
facilities in northern California, resulting in a pre-tax charge of
approximately $0.7 million in the fourth quarter of 2008. We also closed a small
operating facility and consolidated the operations on one site in Phoenix,
Arizona during 2008.
Our
Michigan market remains subject to a prolonged economic downturn, which is
projected to continue throughout 2009. As a result, our 60%-owned
Michigan subsidiary, which was formed in April 2007, has experienced
same-plant-sales volume declines. We maintain a strong competitive position in
Michigan and believe we are well positioned for growth when the Michigan
economy, and related construction activity, begins to recover.
Sustaining
or improving our operating margins in the future will depend on market
conditions, including the impact of continued weakness in the residential and
commercial construction sectors and the uncertainty of public works projects in
light of state budgetary shortfalls and the U.S. economic
recession. The impact of the American Recovery and Reinvestment Act
passed by the U.S. government in early 2009 on our sales volumes, operating
margins and liquidity remains uncertain.
Cement
and Other Raw Materials
We obtain
most of the raw materials necessary to manufacture ready-mixed concrete and
precast concrete products on a daily basis. These materials include cement,
other cementitious materials (generally, fly ash and blast furnace slag) and
aggregates (stone, gravel and sand), in addition to certain chemical admixtures.
With the exception of chemical admixtures, each plant typically maintains an
inventory level of these materials sufficient to satisfy its operating needs for
a few days. Typically, cement, other cementitious materials and
aggregates represent the highest-cost materials used in manufacturing a cubic
yard of ready-mixed concrete. In each of our markets, we purchase
each of these materials from several suppliers. Admixtures are generally
purchased from suppliers under national purchasing agreements.
We
negotiate cement and aggregates pricing with suppliers both on a company-wide
basis and at the local market level, in an effort to obtain the most competitive
pricing available for cement and aggregates. We anticipate that the
residential construction downturn that began in the second half of 2006 and
continued throughout 2007 and 2008 will continue through 2009 and, therefore,
commercial construction and other building segments will comprise a larger
percentage of overall product demand. Due to the severe slowdown in
residential housing starts and decreased demand in other construction activity,
combined with increased U.S. cement capacity, we have not experienced cement
shortages during 2008 and we do not expect to experience cement shortages in
2009. We expect that demand for cement consumption nationally will be
down in 2009 as compared to 2008. Announced cement price increases in
2008 were delayed or withdrawn in many of our markets, and price increases in
certain markets realized by our cement suppliers have been significantly lower
than in 2007. Although several cement suppliers have announced price
increases effective in the first quarter of 2009 in several of our markets,
overall, we expect average 2009 cement prices to be flat or lower than cement
prices in 2008.
Aggregates
pricing in 2008 has increased moderately over 2007 levels. Today, in
most of our markets, we believe there is an adequate supply of
aggregates. Should demand for aggregates increase significantly, we
could experience escalating prices or shortages of aggregates. During
the first nine months of 2008, we experienced higher diesel fuel surcharges from
our cement and aggregates suppliers, including third-party haulers, due to
increases in costs of diesel fuel. The price of diesel fuel declined
significantly in the fourth quarter of 2008, and fuel surcharges have been
removed by the majority of our suppliers and third-party
haulers. Many of our aggregates suppliers have announced modest price
increases effective January 1, 2009. Certain aggregate suppliers have
reduced their pricing in exchange for non-binding volume commitments in
2009. However, on average we expect aggregate prices to be up
modestly over 2008 aggregate prices.
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. We expect the rate of our acquisitions in 2009 to be
significantly lower than prior years due to the global credit crisis, our
limited available capital and ongoing recessionary conditions in the United
States. Our recent acquisitions are discussed briefly
below.
Ready-Mixed
Concrete and Concrete-Related Products Segment
New York
Acquisitions. In November 2008, we paid $2.5 million to
acquire a ready-mixed concrete operation in Brooklyn, New York. We
used borrowings under our existing credit facility to fund the payment of the
purchase price. In August 2008, we paid $2.0 million to acquire a
ready-mixed concrete operation in Mount Vernon, New York. We used
borrowings under our existing credit facility to fund the purchase
price. In January 2008, we acquired a ready-mixed concrete operation
in Staten Island, New York. The purchase price was approximately $1.8
million.
West Texas
Acquisitions. In June 2008, we acquired nine ready-mixed
concrete plants, together with related real property, rolling stock and working
capital, in our west Texas market for approximately $13.5 million. In
June 2007, we acquired two ready-mixed concrete plants, including real property
and certain raw material inventories, in our west Texas market for approximately
$3.6 million.
Superior
Materials Joint Venture. In April 2007, we formed a jointly
owned company (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
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.
Precast
Concrete Products Segment
Pomeroy
Precast. In August 2008,
we paid $2.5 million to acquire a precast operation to augment our existing
precast operations in San Diego, California. We used borrowings under
our existing credit facility to fund the payment of the purchase
price.
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 approximately
$14.5 million plus a $1.5 million contingent payment based on the future
earnings of API. For the quarter ended September 30, 2008, API
attained 50% of its established earnings target, and we made an additional
$750,000 payment, reduced for certain uncollected pre-acquisition customer
receivables, to the sellers in the first quarter of 2009 in partial satisfaction
of our contingent payment obligation.
Divestitures
In the
fourth quarter of 2007, we began to implement our strategy of exiting markets
that do not meet our performance and return criteria or fit our long-term
strategic objectives. We sold our Knoxville, Tennessee and Wyoming,
Delaware operations in November 2007 for $16.5 million, plus certain adjustments
for working capital. In addition, we sold our Memphis, Tennessee
operations for $7.2 million, plus the payment for certain inventory on hand at
closing, on January 31, 2008 (see Note 3 to our Consolidated Financial
Statements included in this report). These operations have been
aggregated and presented in our accompanying Consolidated Financial Statements
as “discontinued operations.”
Risks
and Uncertainties
Numerous
factors could affect our future operating results, including those discussed
under the heading “Risk Factors” in Item 1A of Part I of this report and the
following factors:
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.
During
the second half of 2007, we began a process to select a new enterprise resource
planning solution to provide for enhanced control, business efficiency and
effectiveness, more timely and consistent reporting of both operational and
financial data, and provide a platform to more adequately support our long-term
growth plans. In the fourth quarter of 2007, a plan of implementation
was approved which included a phased implementation across our regions, which
has been substantially completed. Delays or system problems or
failures related to the finalization of this implementation could adversely
affect our financial reporting.
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. Our accounting policies that recently have
been or may be affected by changes in the accounting rules are as
follows:
• accounting
for income taxes; and
• accounting
for business combinations and related goodwill.
Tax Liabilities. We are
subject to federal, state and local income taxes applicable to corporations
generally, as well as nonincome-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 in 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 and Estimates
Preparation of our financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses. Note 1 to our Consolidated
Financial Statements included in this report describes the significant
accounting policies we use in preparing those statements. We believe the most
complex and sensitive judgments, because of their significance to our financial
statements, result primarily from the need to make estimates about the effects
of matters that are inherently uncertain. The most significant areas involving
our management’s judgments and estimates are described below. Actual results in
these areas could differ from our estimates.
Allowance
for Doubtful Accounts
We extend
credit to customers and other parties in the normal course of business. We
regularly review outstanding receivables and provide for estimated losses on
accounts receivable we believe we may not collect in full. A provision for bad
debt expense recorded to selling, general and administrative expenses increases
the allowance, and accounts receivable that we write off our books decrease the
allowance. We determine the amount of bad debt expense we record each period and
assess the resulting adequacy of the allowance at the end of each period by
using a combination of our historical loss experience, customer-by-customer
analyses of our accounts receivable balances each period and subjective
assessments of our bad debt exposure. Our allowance for doubtful accounts was
$3.3 million as of December 31, 2008 and $3.1 million as of December 31,
2007.
Goodwill
We record
as goodwill the amount by which the total purchase price we pay in our
acquisition transactions exceeds our estimated fair value of the identifiable
net assets we acquire. We test goodwill for impairment on an annual basis, or
more often if events or circumstances indicate that there may be
impairment. We generally test for goodwill impairment in the fourth
quarter of each year, because this period gives us the best visibility of the
reporting units’ operating performances for the current year (seasonally, April
through October are highest revenue and production months) and outlook for the
upcoming year, since much of our customer base is finalizing operating and
capital budgets. The impairment test we use consists of comparing our
estimates of the current fair values of our reporting units with their carrying
amounts. We currently have seven reporting units. Reporting units are
organized based on our two product segments ((1) ready-mix concrete and concrete
related products and (2) precast concrete products) and geographic
regions.
In 2008, macro economic factors
including the unprecedented and continuing credit crisis, the U.S. recession,
the escalating unemployment rate and the severe downturn in the U.S.
construction markets, had a significant impact on the valuation metrics used in
determining the long-term value of our reporting units. In
particular, the cost of capital has increased substantially, while the
availability of funds from capital markets has diminished
significantly. Lack of available capital also impacts our end-use
customers by causing project delays or cancellations, thereby impacting our
revenue and growth assumptions. The continued downturn in residential
construction has expanded into the commercial and public works sectors of our
revenue base. The higher cost of capital combined with a negative
outlook for product sales growth in all of our regions has resulted in lower
sales volumes and more competition for construction projects, thereby reducing
expected future cash flows. The October 2008 cement consumption
forecast for 2009 through 2013 indicated further deterioration in cement
consumption. In light of this, coupled with the slowdown in
construction activity, persistently challenging interest rates and credit
environments and our depressed stock price in October 2008, we recorded an
impairment charge in the fourth quarter of 2008. These specific
negative factors, combined with (i) lower enterprise values resulting from lower
multiples of sales and EBITDA comparables, and (ii) the lack of recent third
party transactions due to depressed macro economic conditions, resulted in a
goodwill impairment expense of $135.3 million for 2008.
In 2007, we recorded goodwill
impairments of $81.9 million relating to our Michigan, South Central and our
Northern California Precast reporting units. Our Michigan reporting
unit’s economic outlook continued to soften at greater levels throughout 2007,
resulting in lower projected cash flow. Our South Central reporting
unit’s outlook deteriorated, resulting in lower projected cash flow and
continued competitive pressures and limited our future profitability
expectations. Our Northern California Precast reporting unit was
significantly impacted by the continued slowdown in residential housing
construction, which impacted our projected future cash flows. These specific
negative factors in the above mentioned reporting units, combined with lower
enterprise values and sales transaction values for participants in our industry,
resulted in the goodwill impairment expense.
In 2006, we recorded a $38.8 million
goodwill impairment associated with our Michigan operations, which resulted from
the continued slowdown and negative economic outlook regarding construction
activities for the Michigan region throughout 2006. This negative
outlook resulted in lower selling volumes, lower product pricing and more
competition for construction projects, thereby reducing our outlook for expected
future cash flows. Specifically, the downturn in the U.S. automotive
manufacturing industry, primarily based in the greater Detroit market, combined
with the slowdown in residential, commercial and public works projects resulted
in lower sales volumes and product selling price pressures in an already highly
competitive ready-mixed concrete market. These changes resulted in a
significantly lower estimated fair value.
Our fair value analysis is supported by
a weighting of three generally accepted valuation approaches.
These valuation methods include the
following:
|
·
|
Income
Approach - discounted cash flows of future benefit
streams;
|
|
·
|
Market
Approach - public comparable company multiples of sales and earnings
before interest, taxes, depreciation, depletion and amortization
(“EBITDA”); and
|
|
·
|
Market
Approach - multiples generated from recent transactions comparable in
size, nature and industry.
|
These approaches include numerous
assumptions with respect to future circumstances, such as industry and/or local
market conditions that might directly impact each of the reporting units
operations in the future, and are, therefore uncertain. These
approaches are utilized to develop a range of fair values and a weighted average
of these approaches is utilized to determine the best fair value estimate within
that range.
Income Approach - Discounted Cash
Flows. This valuation approach derives a present value of the
reporting unit’s projected future annual cash flows over the next 15 years and
the present residual value of the reporting unit. We use a variety of
underlying assumptions to estimate these future cash flows, including
assumptions relating to future economic market conditions, product pricing,
sales volumes, costs and expenses and capital expenditures. These
assumptions vary by each reporting unit depending on regional market conditions,
including competitive position, degree of vertical integration, supply and
demand for raw materials and other industry conditions. The discount
rate used in the Income Approach, specifically, the weighted average cost of
capital, used in our analysis for 2008, 2007 and 2006 was 14.0%, 8.9% and 11.0%,
respectively. Our increased cost of capital assumption for 2008
reflects the current credit crisis which negatively affects the ability to
borrow cost effectively. The revenue compounded annual growth rates
used in the Income Approach for 2008, 2007 and 2006 varied from -0.1% to 3.6%,
depending on the reporting unit and the year. Our EBITDA margins
derived from these underlying assumptions varied between approximately 4% and
21% for 2006 and 3% to 20% for 2007, depending on the reporting
unit. For 2008, our EBITDA margins varied between approximately 3%
and 22%, depending on the reporting unit.
Market Approach - Multiples of Sales
and EBITDA. This valuation approach utilizes publicly traded
construction materials companies’ enterprise values, as compared to their recent
sales and EBITDA information. For 2008, we used an average sales
multiple of 0.48 times and an average EBITDA multiple of 5.29 times in
determining this market approach metric. For 2007, we used an average
sales multiple of 0.57 times and an average EBITDA multiple of 5.90
times. For 2006, we used an average sales multiple of 1.03 times and
an average EBITDA multiple of 6.90 times. These multiples are used as
a valuation metric to our most recent financial performance. We use
sales as an indicator of demand for our products/services and EBITDA because it
is a widely used key indicator of the cash generating capacity of construction
material companies.
Market Approach - Comparisons of
Recent Transactions. This valuation approach uses publicly
available information regarding recent third-party sales transactions in our
industry to derive a valuation metric of the target’s respective enterprise
values over their EBITDA amounts. For 2008, we did not weigh this
market approach because current economic conditions yielded no recent
transactions to derive an appropriate valuation metric. For 2007 and
2006, we utilized an average third-party sales transaction multiple of 6.60 and
7.54 times EBITDA, respectively, for this market-approach metric. We
utilize this valuation metric with each of our reporting units’ most recent
financial performance to derive a “what if” sales transaction comparable,
fair-value estimate.
We selected these valuation approaches
because we believe the combination of these approaches and our best judgment
regarding underlying assumptions and estimates provides us with the best
estimate of fair value for each of our reporting units. We believe these
valuation approaches are proven valuation techniques and methodologies for the
construction materials industry and widely accepted by investors. The
estimated fair value of each reporting unit would change if our weighting
assumptions under the three valuation approaches were materially
modified. For the year ended December 31, 2008, we weighted the
Income Approach 45% and the Market Approaches multiples of sales and EBITDA
55%. No weighting was used in 2008 for the Market Approach – Recent
Transactions as described above. In 2008, we placed a higher emphasis
and weighting on the Market Approach - Multiples of Sales and EBITDA approach
than used in the prior years to reflect fair value in current market
conditions. This change in weighting in our view is a better
representation of fair value and reflects our consideration of macro-economic
factors affecting our industry, uncertainty of future economic conditions and
their impact on expected cash flows in each of our reporting
units. For the year ended December 31, 2007, we weighted all three
valuation approaches equally to determine an estimated fair value of each
reporting unit. For the year ended December 31, 2006, we weighted the
Income Approach 60% and the two Market Approaches 20% each,
respectively.
Detailed below is a table of key
underlying assumptions for all reporting units utilized in the fair value
estimate calculation for the years ended December 31, 2008, December 31, 2007
and December 31, 2006.
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Income
Approach - Discounted Cash Flows
|
|
|
|
|
|
|
|
|
|
Revenue
Growth Rates
|
|
(0.1%)
to 3.0%
|
|
|
(0.1)%
to 2.2%
|
|
|
1.1%
to 3.6%
|
|
Weighted
Average Cost of Capital
|
|
|
14.0%
|
|
|
|
8.9%
|
|
|
|
11.0%
|
|
Terminal
Value Rate
|
|
|
3.0%
|
|
|
|
3.0%
|
|
|
|
7.7X
|
|
EBITDA
Margin Rate
|
|
3%
to 22%
|
|
|
3%
to 20%
|
|
|
4%
to 21%
|
|
Market
Approach - Multiples of Sales & EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Multiples Used
|
|
|
0.48
|
|
|
|
0.57
|
|
|
|
1.03
|
|
EBITDA
Multiples Used
|
|
|
5.29
|
|
|
|
5.90
|
|
|
|
6.90
|
|
Market
Approach - Comparison of Recent Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
Multiples Used
|
|
|
N/A
|
|
|
|
6.60
|
|
|
|
7.54
|
|
In our Income Approach calculations in
2008 and 2007, we used the Gordon Growth Model which takes into account the
value of the business as a going concern using a long-term sustainable growth
rate. In our Income Approach calculations for 2006, we used the
EBITDA Multiples Model to determine the terminal value. This is a
change from 2006 where we used exit multiples for our terminal value
calculations. Given the macro-economic changes and difficulty in
estimating exit multiples that might change over time, it is our view that a
Gordon Growth Model is a better indicator of the long-term value of each of our
reporting units.
Our valuation model utilizes
assumptions which represent our best estimate of future events, but would be
sensitive to positive or negative changes in each of the underlying assumptions
as well as to an alternative weighting of valuation methods which would result
in a potentially higher or lower goodwill impairment
expense. Specifically, a continued decline in our ready-mixed
concrete volumes and corresponding revenues and lower precast product revenues
declining at rates greater than our expectations may lead to additional goodwill
impairment charges, especially to the reporting units whose carrying values
closely approximate their estimated fair values. Furthermore, a
continued decline in publicly traded construction materials enterprise values,
including lower operating margins and lower multiples used in third-party sales
transactions and continued global-financial credit conditions may also lead to
additional goodwill impairment charges. The reporting units whose
estimated fair values closely approximate their carrying values are our South
Central Region, our Northern California Region, and our Atlantic Precast
Region. The remaining four reporting units do not have goodwill
reflected as an asset on their balance sheets, as we have fully impaired the
assets in 2008 and prior years.
The table below details the reporting
units whose estimated fair values approximate their carrying values, including
the amount of goodwill allocated to such reporting units as of December 31,
2008.
Reporting Unit
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
Goodwill
Allocated
|
|
|
|
(in
millions)
|
|
South
Central Region
|
|
$ |
137.1 |
|
|
$ |
137.1 |
|
|
$ |
4.0 |
|
Atlantic
Precast Region
|
|
|
16.4 |
|
|
|
18.9 |
|
|
|
10.1 |
|
Northern
California Region
|
|
|
97.9 |
|
|
|
97.9 |
|
|
|
45.1 |
|
We can
provide no assurance that future goodwill impairments will not occur. Our
goodwill balance was $59.2 million as of December 31, 2008, $185.0 million at
December 31, 2007 and $251.5 million at December 31, 2006. See Note 2
to our Consolidated Financial Statements included in this report for additional
information about our goodwill.
Insurance
Programs
We
maintain third-party insurance coverage in amounts and against the risks we
believe are reasonable. We share the risk of loss with our insurance
underwriters by maintaining high deductibles subject to aggregate annual loss
limitations. From 2005 forward, we believe our workers’ compensation,
automobile and general liability per occurrence retentions were consistent with
industry practices, although there are variations among our business
units. We fund these deductibles and record an expense for losses we
expect under the programs. We determine the expected losses 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 and settlement patterns, judicial
decisions, new legislation and economic conditions. Although we believe the
estimated losses are reasonable, significant differences related to the items we
have noted above could materially affect our insurance obligations and future
expense. The amount accrued for self-insurance claims was $12.6 million as of
December 31, 2008, compared to $12.3 million as of December 31, 2007, which is
currently classified in accrued liabilities.
Income
Taxes
We use
the liability method of accounting for income taxes. Under this method, we
record deferred income taxes based on temporary differences between the
financial reporting and tax bases of assets and liabilities and use enacted tax
rates and laws that we expect will be in effect when we recover those assets or
settle those liabilities, as the case may be, to measure those taxes. We believe
our earnings during the periods when the temporary differences become deductible
will be sufficient to realize the related future income tax
benefits. In cases where the expiration date of tax carryforwards or
the projected operating results indicate that realization is not likely, we
provide for a valuation allowance.
We have
deferred tax assets, resulting from deductible temporary differences that may
reduce taxable income in future periods. A valuation allowance is required
when it is more likely than not that all or a portion of a deferred tax asset
will not be realized. In assessing the need for a valuation allowance, we
estimate future taxable income, considering the feasibility of ongoing
tax-planning strategies and the realizability of tax loss carryforwards.
Valuation allowances related to deferred tax assets can be impacted by changes
in tax laws, changes in statutory tax rates and future taxable income levels. If
we were to determine that we would not be able to realize all or a portion of
our deferred tax assets in the future, we would reduce such amounts through a
charge to income in the period in which that determination is made. Conversely,
if we were to determine that we would be able to realize our deferred tax assets
in the future in excess of the net carrying amounts, we would decrease the
recorded valuation allowance through an increase to income in the period in
which that determination is made. Based on the assessment, we recorded a
valuation allowance of $0.2 million at December 31, 2008 and no valuation
allowance at December 31, 2007. In determining the valuation
allowance in 2008, we used such factors as (i) we generated federal taxable
income in 2006 and 2007, (ii) we have significant deferred tax liabilities that
we generally expect to reverse in the same period and jurisdiction and is on the
same character as the temporary differences, giving rise to our deferred tax
assets and (iii) we have certain tax contingencies under Financial Accounting
Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,
Accounting for Income Taxes,” which, should they materialize, would be offset by
our net operating loss generated in 2008. We provided a valuation
allowance in 2008 related to certain state income tax attributes we did not
believe we could utilize within the state tax carryforward periods.
In the
ordinary course of business there is inherent uncertainty in quantifying our
income tax positions. We assess our income tax positions and record
tax benefits for all years subject to examination based upon management’s
evaluation of the facts, circumstances and information available at the
reporting date. For those tax positions where it is more likely than
not that a tax benefit will be sustained, we have recorded the highest amount of
tax benefit with a greater than 50% likelihood of being realized upon ultimate
settlement with a taxing authority that has full knowledge of all relevant
information. For those income tax positions where it is not more
likely than not that a tax benefit will be sustained, no tax benefit has been
recognized in the financial statements. See Notes 1 and 11 to the
Consolidated Financial Statements for further discussion.
Inventory
Obsolescence
We
provide reserves for estimated obsolescence or unmarketable inventory equal to
the difference between the cost of inventory and the estimated net realizable
values using assumptions about future demand for those products and market
conditions. If actual market conditions are less favorable than those
projected by management, additional inventory reserves may be
required.
Property,
Plant and Equipment, Net
We state
our property, plant and equipment at cost and use the straight-line method to
compute depreciation of these assets over their estimated remaining useful
lives. Our estimates of those lives may be affected by such factors as changing
market conditions, technological advances in our industry or changes in
applicable regulations. In addition, we use estimates of salvage
values for certain plant and equipment to reduce the cost which is subject to
depreciation.
We
evaluate the recoverability of our property, plant and equipment when changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” We compare the carrying values of long-lived
assets to our projection of future undiscounted cash flows attributable to those
assets. If the carrying value of a long-lived asset exceeds the
future undiscounted cash flows we project to be derived from that asset, we
record an impairment loss equal to the excess of the carrying value over the
fair value. Actual useful lives and future cash flows could be different from
those we estimate. These differences could have a material effect on our future
operating results.
Other
We record accruals for legal and other
contingencies when estimated future expenditures associated with those
contingencies become probable and the amounts can be reasonably
estimated. However, new information may become available, or
circumstances (such as applicable laws and regulations) may change, thereby
resulting in an increase or decrease in the amount required to be accrued for
such matters (and, therefore, a decrease or increase in reported net income in
the period of such change).
Recent
Accounting Pronouncements
For a discussion of recently adopted
accounting standards, see Note 1 to our Consolidated Financial Statements
included in this report.
Results
of Operations
The
following table sets forth selected historical statement of operations
information and that information as a percentage of total revenue for the years
indicated.
|
|
Year
Ended December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(amounts
in thousands, except selling prices)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
702,525 |
|
|
|
93.1 |
|
|
$ |
745,384 |
|
|
|
92.7 |
|
|
$ |
655,724 |
|
|
|
90.0 |
|
Precast
concrete products
|
|
|
68,082 |
|
|
|
9.0 |
|
|
|
73,300 |
|
|
|
9.1 |
|
|
|
80,915 |
|
|
|
11.1 |
|
Inter-segment
revenue
|
|
|
(16,309 |
) |
|
|
(2.1 |
) |
|
|
(14,881 |
) |
|
|
(1.8 |
) |
|
|
(8,129 |
) |
|
|
(1.1 |
) |
Total
revenue
|
|
$ |
754,298 |
|
|
|
100 |
% |
|
$ |
803,803 |
|
|
|
100 |
% |
|
$ |
728,510 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold before depreciation, depletion and
amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
586,088 |
|
|
|
77.7 |
|
|
$ |
608,043 |
|
|
|
75.6 |
|
|
$ |
534,571 |
|
|
|
73.4 |
|
Precast
concrete products
|
|
|
53,360 |
|
|
|
7.1 |
|
|
|
55,589 |
|
|
|
6.9 |
|
|
|
59,589 |
|
|
|
8.2 |
|
Goodwill
and other asset impairments
|
|
|
135,631 |
|
|
|
18.0 |
|
|
|
82,242 |
|
|
|
10.2 |
|
|
|
38,948 |
|
|
|
5.3 |
|
Selling,
general and administrative expenses
|
|
|
79,768 |
|
|
|
10.6 |
|
|
|
69,669 |
|
|
|
8.7 |
|
|
|
61,397 |
|
|
|
8.4 |
|
Depreciation,
depletion and amortization
|
|
|
29,902 |
|
|
|
3.9 |
|
|
|
28,882 |
|
|
|
3.6 |
|
|
|
20,141 |
|
|
|
2.9 |
|
Income
(loss) from operations
|
|
|
(130,451 |
) |
|
|
(17.3 |
) |
|
|
(40,622 |
) |
|
|
(5.0 |
) |
|
|
13,864 |
|
|
|
1.9 |
|
Interest
expense, net
|
|
|
27,056 |
|
|
|
3.6 |
|
|
|
27,978 |
|
|
|
3.5 |
|
|
|
21,588 |
|
|
|
2.9 |
|
Other
income, net
|
|
|
1,984 |
|
|
|
0.3 |
|
|
|
3,587 |
|
|
|
0.4 |
|
|
|
1,769 |
|
|
|
0.2 |
|
Loss
before income tax provision (benefit) and minority
interest
|
|
|
(155,523 |
) |
|
|
(20.6 |
) |
|
|
(65,013 |
) |
|
|
(8.1 |
) |
|
|
(5,955 |
) |
|
|
(0.8 |
) |
Income
tax provision (benefit)
|
|
|
(19,601 |
) |
|
|
(2.6 |
) |
|
|
48 |
|
|
|
0.0 |
|
|
|
1,348 |
|
|
|
0.2 |
|
Minority
interest in consolidated subsidiary
|
|
|
(3,625 |
) |
|
|
(0.5 |
) |
|
|
(1,301 |
) |
|
|
(0.2 |
) |
|
|
— |
|
|
|
— |
|
Loss
from continuing operations
|
|
|
(132,297 |
) |
|
|
(17.5 |
) |
|
|
(63,760 |
) |
|
|
(7.9 |
) |
|
|
(7,303 |
) |
|
|
(1.0 |
) |
Loss
from discontinued operations, net of tax
|
|
|
(149 |
) |
|
|
(0.1 |
) |
|
|
(5,241 |
) |
|
|
(0.7 |
) |
|
|
(787 |
) |
|
|
(0.1 |
) |
Net
loss
|
|
$ |
(132,446 |
) |
|
|
(17.6 |
)% |
|
$ |
(69,001 |
) |
|
|
(8.6 |
)% |
|
$ |
(8,090 |
) |
|
|
(1.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic yard
|
|
$ |
94.22 |
|
|
|
|
|
|
$ |
91.70 |
|
|
|
|
|
|
$ |
88.23 |
|
|
|
|
|
Sales
volume in cubic yards
|
|
|
6,517 |
|
|
|
|
|
|
|
7,176 |
|
|
|
|
|
|
|
6,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precast
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic yard of concrete used in
production
|
|
$ |
842.0 |
|
|
|
|
|
|
$ |
605.8 |
|
|
|
|
|
|
$ |
594.9 |
|
|
|
|
|
Ready-mixed
concrete used in production in cubic yards
|
|
|
81 |
|
|
|
|
|
|
|
121 |
|
|
|
|
|
|
|
136 |
|
|
|
|
|
Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007
Revenue.
Ready-mixed concrete and
concrete-related products. Sales
of ready-mixed concrete and concrete-related products decreased $42.9 million,
or 5.8%, from $745.4 million in 2007 to $702.5 million in 2008. Our
ready-mixed sales volume for 2008 was approximately 6.5 million cubic yards,
down 9.2% from the 7.2 million cubic yards of concrete we sold in
2007. Excluding the volumes associated with acquired operations, on a
same-plant-sales basis, our 2008 ready-mixed volumes were down approximately
12.1% from 2007. The decline reflected the continuing downturn in
residential home construction activity that began in the second half of 2006 in
all our markets and the downturn in commercial construction and public works
spending due to the ongoing credit crisis and the economic recession in the
United States. Partially offsetting the effects of lower sales
volumes was the approximate 2.7% rise in the average sales price per cubic yard
of ready-mixed concrete during 2008, as compared to 2007.
Precast concrete
products. Sales in our precast concrete products segment were
down $5.2 million, or 7.1%, from $73.3 million in 2007 to $68.1 million in
2008. This decrease reflected a $20.0 million, or 36.0%, drop in
revenue resulting from the downturn in residential construction in our
northern California and Phoenix, Arizona markets. We continued the
process of refocusing our product lines and streamlining our operations in these
markets to better serve existing demand and penetrate additional end-use
markets. Such streamlining resulted in the closure of one northern
California facility at a cost of $.7 million. This decrease was partially offset
by higher revenue in 2008 from the acquisition of API completed in October 2007.
The mix of product sales from this unit resulted in a higher average selling
price for our precast group in 2008.
Cost of goods sold before
depreciation, depletion and amortization.
Ready-mixed concrete and
concrete-related products. Cost
of goods sold before depreciation, depletion and amortization for our
ready-mixed concrete and concrete-related products segment decreased $22.0
million, or 3.6%, from $608.0 million in 2007 to $586.1 million in
2008. The decrease was primarily associated with lower sales volume
and higher delivery costs primarily related to higher diesel fuel
prices. Cost of goods sold before depreciation, depletion and
amortization, as a percentage of ready-mixed concrete and concrete-related
product sales of 83.4% for 2008 was higher as compared to the 2007 periods,
reflecting higher raw material and fuel costs, higher per unit delivery costs,
partially offset by higher average selling prices.
Precast concrete products. The reduction in cost of
goods sold before depreciation, depletion and amortization for our precast
concrete products segment of $2.2 million, or 4.0%, from $55.6 million in 2007
to $53.4 million in 2008, was primarily related to a 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. As a percentage of precast
concrete revenue, cost of goods sold before depreciation, depletion and
amortization for precast concrete products rose from 75.8% in 2007 to 78.4% in
2008 reflecting decreased efficiency in our plant operations in California and
Phoenix, Arizona, resulting from lower demand for our primarily residential
product offerings in these markets.
Goodwill and other asset
impairments Goodwill impairment expense was $135.3 million in
2008 compared to $81.9 million in 2007. In 2008, macro-economic
factors including the unprecedented and continuing credit crisis, the U.S.
recession, the escalating unemployment rate and specifically the severe downturn
in the U.S. construction markets, had a significant impact on the valuation
metrics used in determining the long-term value of our reporting
units. In particular, the cost of capital increased substantially,
while the availability of funds from capital markets diminished
significantly. Lack of available capital also impacted our end-use
customers by creating project delays or cancellations, thereby impacting our
revenue and growth assumptions. The continued downturn in residential
construction expanded into the commercial sector and public works sector of our
revenue base. The higher cost of capital combined with a negative
outlook for product sales growth in all of our regions resulted in lower sales
volumes and more competition for construction projects, thereby reducing
expected future cash flows. These specific negative factors, combined
with (i) lower enterprise values resulting from lower multiples of sales and
EBITDA comparables, and (ii) the lack of recent third-party transactions due to
depressed macro economic conditions, resulted in the $135.3 million goodwill
impairment expense for 2008. Specifically, we recorded goodwill
impairment expense in five of our six reporting units that reflected goodwill as
an asset on their balance sheet, and fully wrote off goodwill in our Atlantic
Region reporting unit, our Northern California Precast reporting unit and our
Southwest Precast reporting units. We substantially impaired our
goodwill in our South Central reporting unit from $58.4 million at the end of
2007 to only $4.0 million of goodwill remaining as an asset at December 31,
2008. Our remaining goodwill as of December 31, 2008, primarily
relates to our Northern California ready-mixed concrete reporting unit and our
Atlantic Precast reporting unit. We have reduced our workforce, our
fleet size and our overhead costs and have temporarily idled certain plants in
each of our reporting units in light of these economic conditions.
In 2007, we recorded an aggregate
goodwill impairment expense of $81.9 million relating to our Michigan, South
Central and our Northern California Precast reporting
units. Specifically, we recorded a $4.9 million goodwill impairment
expense related to our Michigan reporting unit resulting in no remaining
goodwill allocated to this region on our balance sheet as of December 31,
2007. The Michigan reporting unit’s economic outlook continued to
soften at greater levels throughout 2007, resulting in lower projected cash
flows and a lower resulting estimated fair value. Our forecasted
annual revenue growth rate declined from 3.6% in 2006 to 2.2% in 2007 and our
forecasted EBITDA margin declined approximately 200 basis points per year in our
projected outlook period. We expect our Michigan reporting unit to
continue to operate at depressed operating levels due to these economic
conditions for the next several years. We have reduced our workforce,
our fleet size and our overhead costs in light of these economic
conditions.
Regarding our South Central reporting
unit, we recorded $67.7 million in goodwill impairment expense in
2007. Our South Central reporting unit’s outlook deteriorated
primarily in the Dallas / Fort Worth metroplex during 2007, resulting in lower
projected cash flow and continued competitive pressures and limiting our future
profitability expectations, primarily product pricing
improvements. Specifically, residential housing, our primary end-use
market in the Dallas / Ft. Worth market, declined at greater rates than
originally expected. The Dallas / Ft. Worth market is highly
competitive and with a declining sales volume environment, it was increasingly
difficult to improve product selling prices and operating margins
significantly. On a same-plant-sales basis, ready-mixed volumes
declined 21.9% in 2007 as compared to 2006, resulting in significantly lower
profitability and cash flow. The culmination of these factors,
including our outlook in other end-use markets (commercial and public works),
led to a significantly lower sales volumes, lower expected product pricing and
lower expected profits and, thus, a lower estimated fair value. The
events reduced our assumptions, with EBITDA margins declining to between 100 and
360 basis points over the outlook period. We expect our South Central
reporting unit to generate positive earnings and operating cash flow, albeit at
reduced operating levels than previously expected. We have reduced
our workforce, our fleet size and our overhead costs in light of these economic
conditions.
Regarding
our Northern California Precast reporting unit, we recorded a $9.1 million
goodwill impairment expense in 2007. Our Northern California Precast reporting
unit was significantly impacted by the continued slowdown in residential housing
construction, which impacted our projected future cash
flows. Specifically, the end-use market in this region is almost
exclusively tied to the residential housing market. Residential
housing declined steeply in northern California throughout 2007 and resulted in
a decrease in revenue of 16.4% compared to 2006 and a decrease in operating
profits of 70.2% in 2007 compared to 2006. The culmination of these
factors, including our current inability to penetrate other end-use markets,
primarily, the commercial sector, led to a significantly lower estimated fair
value. These events reduced our assumptions, with EBITDA margins
declining over 500 basis points annually over the outlook period.
Selling, general and administrative
expenses. Selling, general and administrative expenses
increased $10.1 million, or 14.5%, from $69.7 million in 2007 to $79.8 million
in 2008. As a percentage of revenue, selling, general and
administrative expenses increased from 8.7% in 2007 to 10.6% in
2008. Selling, general and administrative expenses were higher in
2008, as compared to 2007, primarily due to higher compensation costs, including
personnel costs and other administrative expenses from acquired
businesses, increased incentive compensation costs, higher
professional fees (primarily associated with the implementation of an enterprise
resource planning system) and higher litigation accruals.
Depreciation, depletion and
amortization. Depreciation, depletion and amortization expense
increased $1.0 million, or 3.5%, from $28.9 million in 2007 to $29.9 million in
2008. The increase was attributable primarily to acquisitions and
higher depreciation expense related to our new information system technology
system, which was placed in service during 2008.
Interest expense,
net. Interest expense decreased $1.0 million, or 3.7%, from
$28.1 million in 2007 to $27.1 million in 2008. The decrease was
attributable primarily to lower borrowings during 2008 under our senior secured
credit facility.
Minority interest in consolidated
subsidiary. Minority interest of $(3.6) million and $(1.3)
million recorded in 2008 and 2007, respectively, related to the allocable share
of net loss from our Michigan joint venture to our minority
partner. The Michigan joint venture was formed on April 1,
2007. The increase in minority interest losses in 2008, as compared
to 2007, related to increased losses from our Michigan operations due to the
continued slowdown in economic construction activity, resulting in lower sales
volumes and increased losses from that business unit.
Income tax provision
(benefit). We recorded a benefit
for income taxes of $19.6 million in 2008 and a provision for income taxes of
$0.1 million in 2007. Our estimated annualized effective tax rate was
12.6% for the full year ended December 31, 2008 and nil for the full year ended
December 31, 2007. The effective income tax rate for 2008 and 2007
was lower than the federal statutory rate, primarily due to nondeductible
goodwill associated with our goodwill impairments in the fourth quarters of 2008
and 2007, respectively, state income tax expense, the impact of minority
interest from our consolidated subsidiary and the recording of a valuation
allowance related to certain state tax attributes we did not believe met the
realization criteria.
Loss from discontinued
operations. In the fourth quarter of 2007, we decided to
dispose of three operations. We sold two of those operations prior to
December 31, 2007. In January 2008, we sold the remaining
operation. Our 2007 results of operations reflected the unit sold in
2008, along with the two operations which were sold prior to year-end 2007, as
discontinued operations in accordance with SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets.” In 2008, we reported a
loss of $0.1 million, net of income taxes, in discontinued
operations. In 2007, the discontinued operations generated a pretax
loss of approximately $9.1 million and a corresponding tax benefit of $3.9
million.
Year
Ended December 31, 2007 Compared to Year Ended December 31, 2006
Revenue.
Ready-mixed concrete and
concrete-related products. Sales
of ready-mixed concrete and concrete-related products increased $89.7 million,
or 13.7%, from $655.7 million in 2006 to $745.4 million in 2007. Our
ready-mixed sales volume for 2007 was approximately 7.2 million cubic yards, up
7.4% from the 6.7 million cubic yards of concrete we sold in
2006. Excluding the volumes associated with acquired operations, on a
same-plant-sales basis, our 2007 ready-mixed volumes were down approximately
14.9% from 2006. The decline reflects the continuing downturn in
residential home construction activity that began in the second half of 2006 in
all of our markets and the impact of adverse weather conditions during the
spring and summer seasons, especially in our north and west Texas
markets. Offsetting the effects of lower sales volumes was the
approximate 3.9% rise in the average sales price per cubic yard of ready-mixed
concrete during 2007, as compared to 2006, and increased sales of aggregates
(including those from the aggregate operations we acquired in the fourth quarter
of 2006).
Precast concrete
products. Sales in our precast concrete products segment were
down $7.6 million, or 9.4%, from $80.9 million in 2006 to $73.3 million in
2007. This decrease reflects an $11.6 million, or 14.4%, drop in
revenue resulting from the downturn in residential construction in our
California and Phoenix, Arizona markets. The overall lower performance of our
precast segment was tempered by sales of $4.0 million generated by the
acquisition made in October 2007 in our Atlantic region.
Cost of goods sold before
depreciation, depletion and amortization.
Ready-mixed concrete and
concrete-related products. Cost
of goods sold before depreciation, depletion and amortization for our
ready-mixed concrete and concrete-related products segment increased $73.4
million, or 13.7%, from $534.6 million in 2006 to $608.0 million in 2007. The
increase was primarily associated with higher sales volume, higher delivery
costs and moderately higher raw materials costs in 2007. Cost of
goods sold before depreciation, depletion and amortization, as a percentage of
ready-mixed concrete and concrete-related product revenue of 81.6% for 2007 was
flat as compared to the 2006 periods, reflecting our ability in 2007 to maintain
our margins in a period of rising raw materials, labor and fuel
costs.
Precast concrete products. The reduction in cost of
goods sold before depreciation, depletion and amortization for our precast
concrete products segment of $4.0 million, or 6.7%, from $59.6 million in 2006
to $55.6 million in 2007, was primarily related to the 12.0% reduction in the
volume of ready-mixed concrete used in production, which is reflective of the
declining residential construction arket that has been impacting our California
and Phoenix, Arizona precast markets since the second half of
2006. As a percentage of precast concrete revenue, cost of goods sold
before depreciation, depletion and amortization for precast concrete products
rose from 73.6% in 2006 to 75.8% in 2007, reflecting decreased
efficiency in our plant operations in California and Phoenix, Arizona, resulting
from lower demand for our primarily residential product offerings in these
markets.
Goodwill and other asset
impairments. As described above, in 2007, we recorded an
aggregate goodwill impairment expense of $81.9 million relating to our Michigan,
South Central and our Northern California Precast reporting units. In
2006, we recorded a $38.8 million goodwill impairment associated with our
Michigan reporting unit, which resulted from a slowdown and negative economic
outlook regarding construction activities for the Michigan reporting unit
throughout 2006. This negative outlook resulted in lower selling
volumes, lower product pricing and more competition for construction projects,
thereby reducing our outlook for expected future cash
flows. Specifically, the downturn in the U.S. automotive
manufacturing industry, primarily based in the greater Detroit market, combined
with the slowdown in residential, commercial and public works projects resulted
in lower sales volumes and product selling price pressures in an already highly
competitive ready-mixed concrete market. In 2006, our sales volumes
on a same-plant-sales basis declined 12%, as compared to 2005, and our EBITDA
margin declined 185 basis points. These events were factored into our
long-term outlook for the Michigan reporting unit within our valuation model,
reducing our assumptions for forecasted annual revenue growth rates from 4.1% in
2005 to 3.6% in 2006 and reducing our assumptions for EBITDA margins between
approximately 200 and 400 basis points over the outlook period. These
changes resulted in a significantly lower estimated fair value.
Selling, general and administrative
expenses. Selling, general and administrative expenses
increased $8.3 million, or 13.5%, from $61.4 million in 2006 to $69.7 million in
2007. As a percentage of revenue, selling, general and administrative
expenses increased from 8.4% in 2006 to 8.7% in 2007. Selling,
general and administrative expenses were higher in 2007, as compared to 2006,
primarily due to higher compensation costs, including personnel costs and other
administrative expenses from acquired businesses, professional fees and the
effect of an initiative in the fourth quarter to implement an enterprise
resource planning system.
Depreciation, depletion and
amortization. Depreciation, depletion and amortization expense
increased $8.8 million, or 43.4%, from $20.1 million in 2006 to $28.9 million in
2007. The increase was attributable primarily to the two
acquisitions, and the formation of our 60%-owned Michigan subsidiary completed
in 2007 and higher capital expenditures in 2006. Also contributing to
this increase has been the decision we made in late 2005 to discontinue our
practice of leasing a portion of our annual rolling stock
requirements. See “– Liquidity and Capital Resources – Future Capital
Requirements” for additional discussion of this leasing activity.
Interest expense,
net. Interest expense increased $4.9 million, or 21.1%, from
$23.2 million in 2006 to $28.1 million in 2007. The increase in
interest expense in 2007, as compared to 2006, was attributable primarily to our
additional senior subordinated notes offering in July 2006, and additional
borrowings during 2007 under our senior secured credit facility to fund our
acquisition program. Interest income (as a component of Interest
expense, net) decreased $1.5 million from $1.6 million in 2006 to $0.1 million
in 2007, due to higher average cash balances in 2006 as compared to 2007,
primarily in the first half of the year, resulting from our common stock
issuance in February 2006.
Income tax provision. We recorded a provision
for income taxes of less than $0.1 million in 2007 and a provision for income
taxes of $1.3 million in 2006. Our estimated annualized effective tax
rate was nil for the full year ended December 31, 2007 and a negative rate of
(22.6%) for the full year ended December 31, 2006. The effective
income tax rate for 2007 was lower than the federal statutory rate primarily due
to nondeductible goodwill associated with our goodwill impairment in the fourth
quarter of 2007, state income taxes, the impact of minority interest from our
consolidated subsidiary and settlement of certain tax
contingencies.
Liquidity
and Capital Resources
Our
primary short-term liquidity needs consist of financing seasonal working capital
requirements, purchasing property and equipment, acquiring new businesses under
our acquisition program 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 that is scheduled to expire
in March 2011. In addition to cash and cash equivalents of $5.3
million at December 31, 2008 and cash from operations, our senior secured
revolving credit facility provides us with a significant source of
liquidity. At December 31, 2008, we had $91.1 million of available
credit, net of outstanding revolving credit borrowings of $11.0 million and
outstanding letters of credit of $11.6 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 accounts receivable and inventories
during those periods and the cash interest payment on our senior subordinated
notes on April 1 and October 1 of each year. Generally, in the fourth quarter of
each year, our working capital borrowings decline and are at their lowest annual
levels in the first quarter of the following year. Current market conditions
have limited the availability of new sources of financing and capital which will
clearly have an impact on our ability to obtain financing for our acquisition
program and developmental capital.
The
principal factors that could adversely affect the amount of and availability of
our internally generated funds include:
|
§
|
any
deterioration of revenue because of weakness in the 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;
|
|
§
|
any
deterioration in our ability to collect our accounts receivable from
customers as a result of further weakening in residential and other
construction demand or as a result of payment difficulties experienced by
our customers relating to the global financial crisis;
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 governing our senior revolving credit
facility and the indenture governing our 8⅜% senior subordinated notes,
specifically the Credit Agreement 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. Under our indenture governing our 8⅜% Senior
Subordinated Notes, the restrictions include our ability to incur
additional debt 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. Based on
our December 31, 2008 balance sheet, generally this restriction limits our
borrowing availability to approximately $30.0 million, in addition to our
borrowings available under our existing Credit
Agreement;
|
|
·
|
volatility
in the markets for corporate debt and any additional market instability,
unavailability of credit or inability to access the capital markets which
may result from the effect of the global financial crisis;
and
|
|
|
|
|
|
fluctuations
in the market price of our common stock or 8⅜% senior subordinated
notes. |
The following key financial
measurements reflect our financial position and capital resources as of December
31, 2008, 2007 and 2006 (dollars in thousands):
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Cash
and cash equivalents
|
|
$ |
5,323 |
|
|
$ |
14,850 |
|
|
$ |
8,804 |
|
Working
capital
|
|
$ |
63,484 |
|
|
$ |
88,129 |
|
|
$ |
82,897 |
|
Total
debt
|
|
$ |
305,988 |
|
|
$ |
298,500 |
|
|
$ |
303,292 |
|
Available
credit 1
|
|
$ |
91,100 |
|
|
$ |
112,600 |
|
|
$ |
82,400 |
|
Debt
as a percent of capital employed
|
|
|
81.2 |
% |
|
|
59.3 |
% |
|
|
53.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
1) Based
on eligible borrowing base, net of outstanding letters of credit and
borrowings outstanding under our senior secured revolving credit
facility.
|
Our cash
and cash equivalents consist of highly liquid investments in deposits and money
market funds we hold at major financial institutions.
The allowance for doubtful accounts
in 2008 of $3.1 million was consistent with 2007. As a percentage of
total accounts receivable, the allowance was 2.9% in 2007 and 3.0% in
2008. We cannot predict the impact of the current credit crisis and
U.S. recession on the ability of our customers to pay in future
periods.
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 December 31, 2008,
we had borrowings of $11.0 million under this facility at the lower of an annual
interest at the Eurodollar-based rate (“LIBOR”) plus 1.75% or the domestic rate
of 3.25% plus 0.25%. Commitment fees at an annual rate of 0.25% are
payable on the unused portion of the facility. The Credit Agreement
provides that the administrative agent may, on the bases specified, reduce the
amount of the available credit from time to time. Additionally, any
“material adverse change” of the Company could restrict our ability to borrow
under the senior secured credit facility. A material adverse change
is defined as a material adverse change in any of (a) the condition (financial
or otherwise), business, performance, prospects, operations or properties of the
Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower
and the Guarantors, taken as a whole, to perform their respective obligations
under the Loan Documents or (c) the rights and remedies of the Administrative
Agent, the Lenders or the issuers to enforce the Loan Documents.. At
December 31, 2008, the amount of the available credit was approximately $91.1
million, net of outstanding revolving credit borrowings of $11.0 million and
outstanding letters of credit of approximately $11.6 million.
Our subsidiaries, excluding our
60%-owned Michigan subsidiary and minor subsidiaries, without operations or
material assets, have guaranteed the repayment of all amounts owing under the
Credit Agreement. In addition, we collateralized our obligations
under the Credit Agreement 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 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. As of December 31, 2008,
we were in compliance with our financial covenants under the Credit
Agreement.
Senior
Subordinated Notes
On March
31, 2004, we issued $200 million principal amount 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 principal amount 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 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
limits 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. Based on our
December 31, 2008 balance sheet, generally this restriction limits our borrowing
availability to approximately $30.0 million, in addition to our borrowings
available under our existing Credit Agreement
We made
interest payments of approximately $25.5 million in 2008 and $26.7 million in
2007, primarily associated with our senior subordinated notes.
Superior
Materials Holdings, LLC Credit Facility
Superior
Materials Holdings, LLC has a separate credit agreement that provides for a
revolving credit facility. The credit agreement, as amended to date,
allows for borrowings of up to $17.5 million. Borrowings under this credit
facility 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 that is determined
based on the values of net receivables, certain inventories, certain rolling
stock and letters of credit. The credit agreement
provides that the lender may, on the bases specified, reduce the amount of the
available credit from time to time. As of December 31, 2008, there were
$5.1 million in outstanding borrowings under the revolving credit facility, and
the remaining amount of the available credit was approximately $5.6
million. Letters of credit outstanding at December 31, 2008 were $1.8
million which reduces the amount available under the credit
facility.
Currently, borrowings have an annual
interest rate, at Superior Materials Holdings LLC’s option, of either, LIBOR
plus 4.25% or prime rate plus 2.00%. 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, 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 meet
certain minimum thresholds quarterly. During the trailing twelve
months ended December 31, 2008, the credit agreement required a threshold EBITDA
of $(3.3) million. Superior Materials Holdings, LLC reported $(2.8)
million of EBITDA, as defined. As of December 31, 2008, Superior Materials
Holdings, LLC was in compliance with its financial covenants under the credit
agreement.
U.S. Concrete and its 100%-owned
subsidiaries are not obligors under the terms of the Superior Materials
Holdings, LLC credit agreement. However, in connection with the recent amendment
of the revolving credit facility, Superior Materials Holdings, LLC’s credit
agreement provides that an event of default beyond a 30-day grace period under
either U.S. Concrete’s or Edw. C. Levy’s credit agreement would constitute an
event of default. Furthermore, U.S. Concrete agreed to provide or
obtain additional equity or subordinated debt capital not to exceed $6.75
million through the term of the revolving credit facility to fund any future
cash flow deficits, as defined in the credit agreement, of Superior Materials
Holdings, LLC. No additional capital contribution was required under
that agreement for the period ended December 31, 2008. Based on
Superior Materials Holding, LLC’s 2009 financial projections, U.S. Concrete and
Edw. C. Levy expect to make capital contributions to Superior Materials Holding,
LLC in 2009 pursuant to this credit agreement.
Fair
Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of their
short-term maturity and variable rates of interest. The estimated
aggregate fair value of our 8⅜% senior subordinated notes at year-end was
approximately $146.1 million in 2008 and $248.8 million in 2007.
Debt
Ratings
Our
ability to obtain external financing and the related cost of borrowing is
affected by our debt ratings, which are periodically reviewed by the major
credit rating agencies. Moody’s
is currently evaluating their rating and outlook. Debt ratings and
outlooks as of March 12, 2009 were as follows:
|
Rating
|
|
Outlook
|
Moody’s
|
|
|
|
Senior
subordinated notes
|
B3
|
|
Stable
|
LT
corporate family rating
|
B2
|
|
|
|
|
|
|
Standard
& Poor’s
|
|
|
|
Senior
subordinated notes
|
CCC+
|
|
Negative
|
Corporate
credit
|
B-
|
|
|
These
debt ratings are not recommendations to buy, sell or hold our securities, and
they may be subject to revision or withdrawal at any time by the assigning
rating agency. Each rating should be evaluated independently of any
other rating.
Future
Capital Requirements
For 2009,
our capital expenditures are expected to be in the range of $10 million to $15
million, including maintenance capital, developmental capital, rolling stock
mixer/barrel replacement, costs associated with our enterprise resource planning
systems implementation and certain plant relocation costs. In prior
years, we leased a higher percentage of our mixer trucks and other rolling stock
under operating leases due to lower long-term interest rates and our inability
to recover the associated tax benefits in those years. In 2007 and
2008, we purchased a greater percentage of this equipment, primarily as a result
of our ability to recover the associated tax benefits. Based on 2008
tax losses and expected 2009 tax losses, we may lease certain equipment in 2009,
depending on terms and credit availability.
We anticipate that our existing cash
balance of $5.3 million and our borrowing capacity of $91.1 million at December
31, 2008 under our credit arrangement and cash flow from operations will provide
adequate liquidity for fiscal year 2009 to pay for all current obligations,
including capital expenditures, debt service, lease obligations and working
capital requirements. There can be no assurance, however that we will
be successful in obtaining sources of capital that will be sufficient to support
our requirements over the long-term.
If the national and world-wide
financial crisis intensifies, potential disruptions in the capital and credit
markets may adversely affect us, including by adversely affecting the
availability and cost of short-term funds for our liquidity requirements and our
ability to meet long-term commitments, which in turn could adversely affect our
results of operations, cash flows and financial condition.
We rely on our credit facility to fund
short-term liquidity needs if internal funds are not available from our
operations. We also use letters of credit issued under our revolving
credit facility to support our insurance policies in certain business
units. Disruptions in the capital and credit markets could adversely
affect our ability to draw on our bank revolving credit
facilities. Our access to funds under our credit facilities is
dependent on the ability of the banks that are parties to the facilities to meet
their funding commitments. Our banks may not be able to meet their
funding commitments to us if such banks experience shortages of capital and
liquidity or if they experience excessive volumes of borrowing requests from us
and other borrowers within a short period of time.
Longer-term disruptions in the capital
and credit markets as a result of uncertainty, changing or increased regulation,
reduced alternatives or failures of significant financial institutions could
adversely affect our access to liquidity needed in our
operations. Any disruption could require us to take measures to
conserve cash until the markets stabilize or until alternative credit
arrangements or other funding for our business needs can be
arranged. Such measures could include deferring capital expenditures,
as well as reducing or eliminating future share repurchases, bond repurchases or
other discretionary uses of cash.
Many of our customers and suppliers
also have exposure to risks that their businesses are adversely affected by the
worldwide financial crisis and resulting potential disruptions in the capital
and credit markets. In the event that any of our significant
customers or suppliers, or a significant number of smaller customers and
suppliers, are adversely affected by these risks, we may face disruptions in
supply, significant reductions in demand for our products and services,
inability of our customers to pay invoices when due and other adverse effects
that could negatively affect our financial conditions, results of operations or
cash flows.
Cash
Flow
Our consolidated cash flows for each
of the past three years are presented below (in thousands):
|
|
Year Ended December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$ |
29,678 |
|
|
$ |
44,338 |
|
|
$ |
39,537 |
|
Investing
activities
|
|
|
(39,516 |
) |
|
|
(34,084 |
) |
|
|
(230,679 |
) |
Financing
activities
|
|
|
311 |
|
|
|
(4,208 |
) |
|
|
176,292 |
|
Net
cash provided by (used in) operating, investing and financing
activities
|
|
$ |
(9,527 |
) |
|
$ |
6,046 |
|
|
$ |
(14,850 |
) |
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 of $29.7 million in the year ended
December 31, 2008 decreased $14.7 million from the net cash provided in the year
ended December 31, 2007. The decrease was principally due to lower
profitability in 2008, partially offset by improvement in working
capital. Net cash provided by operating activities of $44.3 million
in the year ended December 31, 2007 increased $4.8 million from the net cash
provided in the year ended December 31, 2006. This increase was
principally a result of higher receivable collections in 2007, use of working
capital and certain liability payments associated with acquired businesses in
2006, which did not occur in 2007.
Our net
cash used in investing activities of $39.5 million in the year ended December
31, 2008 increased $5.4 million from the net cash used in investing activities
in the year ended December 31, 2007, primarily due to lower proceeds received
from our disposition of certain business units in 2008 as compared with 2007,
offset by $3.8 million lower capital expenditures, net of disposal proceeds in
2008. Our net cash used in investing activities of $34.1 million in
the year ended December 31, 2007 decreased $196.6 million from the net cash used
in investing activities in the year ended December 31, 2006, primarily due to
significantly fewer acquisitions and $11.2 million lower capital expenditures,
net of proceeds, in 2007, offset slightly by the proceeds we received from our
disposition of two business units near the end of 2007.
Our net
cash provided in financing activities of $0.3 million increased $4.5 million
from the net cash used by financing activities of $4.2 million in
2007. The change was primarily attributable to an increase in
borrowings under our revolving credit facility of $6.8 million in 2008 as
compared to a reduction of borrowings under our revolving credit facility in
2007 of $5.0 million, partially offset by our use of $6.6 million in our share
repurchase program. Our cash and cash equivalents, which totaled
$14.9 million at December 31, 2007, decreased to $5.3 million at December 31,
2008. Our net cash used in financing activities of $4.2 million
decreased $180.5 million from the net cash provided by financing activities of
$176.3 million in 2006. The change was primarily attributable to our
2006 issuances of common stock and senior subordinated notes. Our
cash and cash equivalents, which totaled $8.8 million at December 31, 2006,
increased to $14.9 million at December 31, 2007.
We define
free cash flow as net cash provided by operating activities less purchases of
property, plant and equipment (net of disposals). Free cash flow is a
liquidity measure not prepared in accordance with 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
historical net cash provided by operating activities and free cash flow is as
follows (in thousands):
|
|
Year Ended December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Net
cash provided by operating activities
|
|
$ |
29,678 |
|
|
$ |
44,338 |
|
|
$ |
39,537 |
|
Less:
Purchases of properties and equipment, net of disposals of $4,403, $2,574
and $3,699
|
|
|
(23,380 |
) |
|
|
(27,145 |
) |
|
|
(38,232 |
) |
Free cash flow
|
|
$ |
6,298 |
|
|
$ |
17,193 |
|
|
$ |
1,305 |
|
Acquisitions
In
November 2008, we paid $2.5 million to acquire a ready-mixed concrete operation
in Brooklyn, New York. We used borrowings under our existing credit
facility to fund the purchase price.
In August
2008, we paid $2.0 million to acquire a ready-mixed concrete operation in Mount
Vernon, New York. We used borrowings under our existing credit
facility to fund the purchase price.
In August
2008, we paid $2.5 million to acquire a precast operation to augment our
existing precast operations in San Diego, California. We used
borrowings under our existing credit facility to fund the purchase
price.
In June 2008, we acquired nine
ready-mixed concrete plants, together with related real property, rolling stock
and working capital, in our west Texas market for approximately $13.5
million. We used a combination of cash and borrowing under our
existing credit facility to fund the purchase price.
In January 2008, we acquired a single
plant ready-mixed concrete operation in Staten Island, New York. The
purchase price was approximately $1.8 million in cash.
In
October 2007, we acquired 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 Atlantic region, for $14.5 million plus a $1.5 million
contingency based on the future earnings of API.
In June
2007, we acquired two ready-mixed concrete plants, including real property and
certain raw material inventories, in our west Texas market for approximately
$3.6 million.
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 26 ready-mixed concrete plants, one portable plant, one concrete
block plant, a 24,000-ton cement terminal and approximately 303 ready-mixed
concrete trucks.
In
November 2006, we acquired a small ready-mixed concrete operation and sand and
gravel quarry in Breckenridge, Texas. We paid $3.0 million in cash
and effectively assumed approximately $0.4 million in interest-bearing
debt.
In
October 2006, we acquired certain aggregates assets located in New Jersey from
Pinnacle Materials, Inc. for $12.5 million in cash. The assets
consist of a granite quarry with approximately 15.6 million tons of reserves and
an estimated useful life of 20 years, and a natural sand pit with approximately
9.1 million tons of reserves and an estimated 10-year life.
In July 2006, we
acquired all of the outstanding equity interests in Alberta Investments, Inc.
and Alliance Haulers, Inc. for $165.0 million, subject to specified
adjustments. At the time of the acquisition, 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 Enterprises operated 17 ready-mixed
concrete plants and three sand and gravel plants in west
Texas. Alliance Haulers provided cement and aggregates hauling
services with a fleet of approximately 260 hauling trucks owned by Redi-Mix and
third-party haulers in the markets covered by Redi-Mix and Ingram.
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.
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.
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.
Since our
inception, cash has been the primary component in the consideration we have paid
to acquire businesses. We expect that cash will be a significant, if
not the principal, element in acquisitions we might make in the foreseeable
future.
Off-Balance
Sheet Arrangements
We do not
currently have any off-balance sheet arrangements that have or are reasonably
likely to have a material current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources. From time to time, we may enter into noncancelable operating
leases that would not be reflected on our balance sheet. For
additional discussion on our operating leases, see Note 14 to our Consolidated
Financial Statements in this report.
Commitments
The
following are our contractual commitments associated with our indebtedness and
our lease obligations as of December 31, 2008 (in millions):
Contractual obligations
|
|
Total
|
|
|
Less Than
1 year
|
|
|
1-3 years
|
|
|
4-5 years
|
|
|
After
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
on debt
|
|
$ |
305.6 |
|
|
$ |
3.1 |
|
|
$ |
18.5 |
|
|
$ |
— |
|
|
$ |
284.0 |
|
Interest
on debt (1)
|
|
|
131.2 |
|
|
|
23.9 |
|
|
|
47.7 |
|
|
|
47.7 |
|
|
|
11.9 |
|
Capital
leases
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
Operating
leases
|
|
|
37.4 |
|
|
|
9.0 |
|
|
|
12.7 |
|
|
|
9.3 |
|
|
|
6.4 |
|
Total
|
|
$ |
474.6 |
|
|
$ |
36.3 |
|
|
$ |
79.0 |
|
|
$ |
57.0 |
|
|
$ |
302.3 |
|
|
(1)
|
Interest
payments due under our 8⅜% senior subordinated
notes.
|
The
following are our commercial commitment expirations as of December 31, 2008 (in
millions):
Other commercial
commitments
|
|
Total
|
|
|
Less Than
1 year
|
|
|
1-3 years
|
|
|
4-5 years
|
|
|
After
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby
letters of credit
|
|
$ |
13.4 |
|
|
$ |
6.8 |
|
|
$ |
6.6 |
|
|
$ |
— |
|
|
$ |
— |
|
Purchase
obligations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Performance
bonds
|
|
|
32.3 |
|
|
|
31.5 |
|
|
|
0.8 |
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
45.7 |
|
|
$ |
38.3 |
|
|
$ |
7.4 |
|
|
$ |
— |
|
|
$ |
— |
|
The following long-term liabilities
included on the consolidated balance sheet are excluded from the table
above: accrued employment costs, income tax contingencies, minority
interest, insurance accruals and other accruals. Due to the nature of
these accruals, the estimated timing of such payments (or contributions in the
case of certain accrued employment costs) for these items is not
predictable. As of December 31, 2008, the total unrecognized tax
benefit related to uncertain tax positions was $6.8 million. We
estimate that none of this will be paid within the next twelve
months.
Share Repurchase Plan
On
January 7, 2008, our Board of Directors approved a plan to repurchase up to an
aggregate of three million shares of our common stock. The Board
modified the repurchase plan in October 2008 to slightly increase the aggregate
number of shares authorized for repurchase. The plan permitted the
stock repurchases to be made on the open market or in privately negotiated
transactions in compliance with applicable securities and other
laws. As of December 31, 2008, we had repurchased and subsequently
cancelled 3,148,405 shares with an aggregate value of $6.6 million and completed
the repurchase program.
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, business combinations or
joint venture 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. See Note 9 to our
Consolidated Financial Statements included in Item 8 of this
report.
Inflation
Cement,
aggregates and diesel fuel prices have generally risen faster than regional
inflationary rates over the past three years. The impact of these
price increases was partially mitigated by price increases we have obtained for
our products. In 2007 and 2008, prices for our products increased at
a rate similar to, or greater than, the rate of increase in our raw materials
costs. During 2007 and the first nine months of 2008, diesel fuel
prices increased at rates greater than the price increases we obtained for our
products which negatively impacted our profitability. During the
fourth quarter of 2008, diesel fuel prices declined substantially.
Item
7A. 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 December 31, 2008 and 2007, 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 Credit Agreement and our Superior Materials Holdings, LLC separate
credit agreement expose us to certain market risks. Interest on
amounts drawn under the credit facilities varies based on either, the prime rate
or one-, two-, three- or six-month Eurodollar rates. Based on the
$16.1 million outstanding under these facilities as of December 31, 2008, a one
percent change in the applicable rate would not materially change the amount of
interest expense for 2008.
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 overall strength of the U.S.
economy and economic conditions impacting financial institutions, including the
level of interest rates, availability of funds for construction, and the level
of general construction activity. A significant decrease in the level
of general construction activity in any of our market areas may have a material
adverse effect on our consolidated revenues and earnings.
Item
8. Financial
Statements and Supplementary Data
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
Report of Independent Registered
Public Accounting Firm
|
49
|
|
|
Consolidated Balance Sheets at
December 31, 2008 and 2007
|
50
|
|
|
Consolidated Statements of
Operations for the Years Ended December 31, 2008, 2007
and 2006
|
51
|
|
|
Consolidated Statements of
Changes in Stockholders’ Equity for the Years Ended December 31, 2008,
2007 and 2006
|
52
|
|
|
Consolidated Statements of Cash
Flows for the Years Ended December 31, 2008, 2007 and 2006
|
53
|
|
|
Notes to Consolidated Financial
Statements
|
54
|
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders of U.S. Concrete, Inc.:
In our
opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
U.S. Concrete, Inc. and its subsidiaries (the "Company") at December 31, 2008
and 2007, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2008, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible
for these financial statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in "Management's Report on Internal
Control over Financial Reporting" appearing under Item 9A of this Form
10-K. Our responsibility is to express opinions on these financial
statements and on the Company's internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
As
discussed in Note 1 to the consolidated financial statements, the Company
changed the manner in which it accounts for uncertainty in income taxes in 2007
and stripping costs and share-based compensation in 2006.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
Houston,
TX
March 12,
2009
U.S.
CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(in
thousands, including share amounts)
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
5,323 |
|
|
$ |
14,850 |
|
Trade
accounts receivable, net
|
|
|
100,269 |
|
|
|
102,612 |
|
Inventories
|
|
|
32,768 |
|
|
|
32,557 |
|
Deferred
income taxes
|
|
|
11,576 |
|
|
|
10,937 |
|
Prepaid
expenses
|
|
|
3,519 |
|
|
|
5,256 |
|
Other
current assets
|
|
|
13,801 |
|
|
|
11,387 |
|
Assets
held for sale
|
|
|
— |
|
|
|
7,273 |
|
Total
current assets
|
|
|
167,256 |
|
|
|
184,872 |
|
Property,
plant and equipment, net
|
|
|
272,769 |
|
|
|
267,010 |
|
Goodwill
|
|
|
59,197 |
|
|
|
184,999 |
|
Other
assets
|
|
|
8,588 |
|
|
|
10,375 |
|
Total
assets
|
|
$ |
507,810 |
|
|
$ |
647,256 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$ |
3,371 |
|
|
$ |
3,172 |
|
Accounts
payable
|
|
|
45,920 |
|
|
|
48,160 |
|
Accrued
liabilities
|
|
|
54,481 |
|
|
|
45,411 |
|
Total
current liabilities
|
|
|
103,772 |
|
|
|
96,743 |
|
Long-term
debt, net of current maturities
|
|
|
302,617 |
|
|
|
295,328 |
|
Other
long-term obligations and deferred credits
|
|
|
8,522 |
|
|
|
9,125 |
|
Deferred
income taxes
|
|
|
12,536 |
|
|
|
26,763 |
|
Total
liabilities
|
|
|
427,447 |
|
|
|
427,959 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary (Note 4)
|
|
|
10,567 |
|
|
|
14,192 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value per share (10,000 shares authorized; none
issued)
|
|
|
— |
|
|
|
— |
|
Common
stock, $0.001 par value per share (60,000 shares authorized; 36,793
and 39,361
shares issued and outstanding as of December 31, 2008 and
2007)
|
|
|
37 |
|
|
|
39 |
|
Additional
paid-in capital
|
|
|
265,453 |
|
|
|
267,817 |
|
Retained
deficit
|
|
|
(192,564 |
) |
|
|
(60,118 |
) |
Cost
of treasury stock, 459 common shares as of December 31, 2008 and 315
common shares as of December 31, 2007
|
|
|
(3,130 |
) |
|
|
(2,633 |
) |
Total
stockholders’ equity
|
|
|
69,796 |
|
|
|
205,105 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
507,810 |
|
|
$ |
647,256 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in
thousands, except per share amounts)
|
|
Year Ended December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
754,298 |
|
|
$ |
803,803 |
|
|
$ |
728,510 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
639,448 |
|
|
|
663,632 |
|
|
|
594,160 |
|
Goodwill
and other asset impairments
|
|
|
135,631 |
|
|
|
82,242 |
|
|
|
38,948 |
|
Selling,
general and administrative expenses
|
|
|
79,768 |
|
|
|
69,669 |
|
|
|
61,397 |
|
Depreciation,
depletion and amortization
|
|
|
29,902 |
|
|
|
28,882 |
|
|
|
20,141 |
|
Income
(loss) from operations
|
|
|
(130,451 |
) |
|
|
(40,622 |
) |
|
|
13,864 |
|
Interest
income
|
|
|
114 |
|
|
|
114 |
|
|
|
1,601 |
|
Interest
expense
|
|
|
27,170 |
|
|
|
28,092 |
|
|
|
23,189 |
|
Other
income, net
|
|
|
1,984 |
|
|
|
3,587 |
|
|
|
1,769 |
|
Loss
before income tax provision (benefit) and minority
interest
|
|
|
(155,523 |
) |
|
|
(65,013 |
) |
|
|
(5,955 |
) |
Income
tax provision (benefit)
|
|
|
(19,601 |
) |
|
|
48 |
|
|
|
1,348 |
|
Minority
interest in consolidated subsidiary
|
|
|
(3,625 |
) |
|
|
(1,301 |
) |
|
|
— |
|
Loss
from continuing operations
|
|
|
(132,297 |
) |
|
|
(63,760 |
) |
|
|
(7,303 |
) |
Loss
from discontinued operations (net of tax benefit of $81 in 2008, $3,911 in
2007 and $538 in 2006)
|
|
|
(149 |
) |
|
|
(5,241 |
) |
|
|
(787 |
) |
Net
loss
|
|
$ |
(132,446 |
) |
|
$ |
(69,001 |
) |
|
$ |
(8,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share – Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$ |
(3.48 |
) |
|
$ |
(1.67 |
) |
|
$ |
(0.20 |
) |
Loss
from discontinued operations, net of income tax benefit
|
|
|
— |
|
|
|
(0.14 |
) |
|
|
(0.02 |
) |
Net
loss
|
|
$ |
(3.48 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share – Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$ |
(3.48 |
) |
|
$ |
(1.67 |
) |
|
$ |
(0.20 |
) |
Loss
from discontinued operations, net of income tax benefit
|
|
|
— |
|
|
|
(0.14 |
) |
|
|
(0.02 |
) |
Net
loss
|
|
$ |
(3.48 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares used in calculating loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38,099 |
|
|
|
38,227 |
|
|
|
36,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38,099 |
|
|
|
38,227 |
|
|
|
36,847 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in
thousands)
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Retained
|
|
|
|
|
|
Total
|
|
|
|
# of Shares
|
|
|
Par
Value
|
|
|
Paid-In
Capital
|
|
|
Deferred
Compensation
|
|
|
Earnings
(Deficit)
|
|
|
Treasury
Stock
|
|
|
Stockholders’
Equity
|
|
BALANCE, December
31, 2005
|
|
|
29,809
|
|
|
$
|
30
|
|
|
$
|
172,857
|
|
|
$
|
(3,939
|
)
|
|
$
|
16,918
|
|
|
$
|
(945
|
)
|
|
$
|
184,921
|
|
Change
in accounting principle for stripping costs, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(287
|
)
|
|
|
—
|
|
|
|
(287
|
)
|
Change
in accounting principle for stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,939
|
)
|
|
|
3,939
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Employee
purchase of ESPP shares
|
|
|
135
|
|
|
|
—
|
|
|
|
995
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
995
|
|
Common
stock issuance
|
|
|
8,050
|
|
|
|
8
|
|
|
|
84,804
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,812
|
|
Stock
options exercised
|
|
|
607
|
|
|
|
1
|
|
|
|
5,327
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,328
|
|
Stock-based
compensation compensation plan
|
|
|
340
|
|
|
|
—
|
|
|
|
2,812
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,812
|
|
Cancellation
of shares
|
|
|
(54
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase
of treasury shares
|
|
|
(92
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(914
|
)
|
|
|
(914
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,090
|
)
|
|
|
—
|
|
|
|
(8,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
221
|
|
|
|
—
|
|
|
|
932
|
|
|
|
—
|
|
|
|
—
—
|
|
|
|
—
|
|
|
|
932
|
|
Stock
options exercised
|
|
|
153
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
Stock-based
compensation compensation plan
|
|
|
311
|
|
|
|
—
|
|
|
|
3,029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,029
|
|
Cancellation
of shares
|
|
|
(35
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Purchase
of treasury shares
|
|
|
(84
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(774
|
)
|
|
|
(774
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(69,001
|
)
|
|
|
—
|
|
|
|
(69,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2007
|
|
|
39,361
|
|
|
$
|
39
|
|
|
$
|
267,817
|
|
|
$
|
—
|
|
|
$
|
(60,118
|
)
|
|
$
|
(2,633
|
)
|
|
$
|
205,105
|
|
Employee
purchase of ESPP shares
|
|
|
213
|
|
|
|
—
|
|
|
|
717
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
717
|
|
Stock-based
compensation compensation plan
|
|
|
572
|
|
|
|
1
|
|
|
|
3,511
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,512
|
|
Cancellation
of shares
|
|
|
(61
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Repurchase
of shares
|
|
|
(3,148
|
)
|
|
|
(3
|
)
|
|
|
(6,592
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,595
|
)
|
Purchase
of treasury shares
|
|
|
(144
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(497
|
)
|
|
|
(497
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(132,446
|
)
|
|
|
—
|
|
|
|
(132,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2008
|
|
|
36,793
|
|
|
$
|
37
|
|
|
$
|
265,453
|
|
|
$
|
—
|
|
|
$
|
(192,564
|
)
|
|
$
|
(3,130
|
)
|
|
$
|
69,796
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
Year Ended December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(132,446 |
) |
|
$ |
(69,001 |
) |
|
$ |
(8,090 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
and other asset impairments
|
|
|
135,631 |
|
|
|
82,242 |
|
|
|
38,964 |
|
Depreciation,
depletion and amortization
|
|
|
29,902 |
|
|
|
30,857 |
|
|
|
22,322 |
|
Debt
issuance cost amortization
|
|
|
1,674 |
|
|
|
1,545 |
|
|
|
1,492 |
|
Net
(gain) loss on sale of assets
|
|
|
234 |
|
|
|
6,392 |
|
|
|
(316 |
) |
Deferred
income taxes
|
|
|
(14,866 |
) |
|
|
(6,636 |
) |
|
|
(7,419 |
) |
Provision
for doubtful accounts
|
|
|
1,923 |
|
|
|
2,253 |
|
|
|
1,721 |
|
Stock-based
compensation
|
|
|
3,512 |
|
|
|
3,029 |
|
|
|
2,812 |
|
Excess
tax benefits from stock-based compensation
|
|
|
— |
|
|
|
(22 |
) |
|
|
(1,205 |
) |
Minority
interest in consolidated subsidiary
|
|
|
(3,625 |
) |
|
|
(1,301 |
) |
|
|
— |
|
Changes
in assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
2,032 |
|
|
|
4,518 |
|
|
|
1,454 |
|
Inventories
|
|
|
287 |
|
|
|
2,436 |
|
|
|
(3,334 |
) |
Prepaid
expenses and other current assets
|
|
|
(830 |
) |
|
|
(6,151 |
) |
|
|
96 |
|
Other
assets and liabilities, net
|
|
|
265 |
|
|
|
98 |
|
|
|
(136 |
) |
Accounts
payable and accrued liabilities
|
|
|
5,985 |
|
|
|
(5,921 |
) |
|
|
(8,824 |
) |
Net
cash provided by operating activities
|
|
|
29,678 |
|
|
|
44,338 |
|
|
|
39,537 |
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(27,783 |
) |
|
|
(29,719 |
) |
|
|
(41,931 |
) |
Payments
for acquisitions, net of cash received of $0, $1,000 and
$5,829
|
|
|
(23,759 |
) |
|
|
(23,120 |
) |
|
|
(192,816 |
) |
Proceeds
from disposals of property, plant and equipment
|
|
|
4,403 |
|
|
|
2,574 |
|
|
|
3,699 |
|
Disposals
of business units
|
|
|
7,583 |
|
|
|
16,432 |
|
|
|
— |
|
Other
investing activities
|
|
|
40 |
|
|
|
(251 |
) |
|
|
369 |
|
Net
cash used in investing activities
|
|
|
(39,516 |
) |
|
|
(34,084 |
) |
|
|
(230,679 |
) |
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
151,897 |
|
|
|
34,227 |
|
|
|
92,621 |
|
Repayments
of borrowings
|
|
|
(145,051 |
) |
|
|
(39,226 |
) |
|
|
(3,373 |
) |
Proceeds
from issuances of common stock
|
|
|
717 |
|
|
|
1,910 |
|
|
|
89,930 |
|
Excess
tax benefits from stock-based compensation
|
|
|
— |
|
|
|
22 |
|
|
|
1,205 |
|
Shares
purchased under common stock buyback program
|
|
|
(6,595 |
) |
|
|
— |
|
|
|
— |
|
Purchase
of treasury shares
|
|
|
(497 |
) |
|
|
(774 |
) |
|
|
(914 |
) |
Debt
issuance costs
|
|
|
(160 |
) |
|
|
(367 |
) |
|
|
(3,177 |
) |
Net
cash provided by (used in) financing activities
|
|
|
311 |
|
|
|
(4,208 |
) |
|
|
176,292 |
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(9,527 |
) |
|
|
6,046 |
|
|
|
(14,850 |
) |
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
14,850 |
|
|
|
8,804 |
|
|
|
23,654 |
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$ |
5,323 |
|
|
$ |
14,850 |
|
|
$ |
8,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
25,587 |
|
|
$ |
26,665 |
|
|
$ |
19,655 |
|
Cash
(refund) paid for income taxes
|
|
$ |
(2,148 |
) |
|
$ |
6,884 |
|
|
$ |
2,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Noncash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumption
of notes payable and capital leases in acquisitions of
businesses
|
|
$ |
— |
|
|
$ |
108 |
|
|
$ |
12,378 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Operations
Our
Company, a Delaware corporation, provides ready-mixed concrete, precast concrete
products and concrete-related products and services to the construction industry
in several major markets in the United States. U.S. Concrete, Inc. is a holding
company and conducts its businesses through its consolidated
subsidiaries. In these Notes to Consolidated Financial Statements, we
refer to U.S. Concrete, Inc. and its Subsidiaries as “we,” “us” or “U.S.
Concrete” unless we specifically state otherwise or the context indicates
otherwise.
Basis
of Presentation
The consolidated financial statements
consist of the accounts of U.S. Concrete, Inc., its wholly owned subsidiaries
and its majority owned subsidiary in Michigan. All significant intercompany
account balances and transactions have been eliminated. We have made
certain reclassifications to prior period amounts to conform to the current
period presentation. These reclassifications did not have an impact on our
financial position, results of operations or cash flows.
Cash
and Cash Equivalents
We record
as cash equivalents all highly liquid investments having maturities of three
months or less at the date of purchase. Cash held as collateral or escrowed for
contingent liabilities is included in other current and noncurrent assets based
on the expected release date of the underlying obligation.
Inventories
Inventories
consist primarily of cement and other raw materials, precast concrete products,
building materials and repair parts that we hold for sale or use in the ordinary
course of business. We use the first-in, first-out method to value
inventories at the lower of cost or market.
We
provide reserves for estimated obsolescence or unmarketable inventory equal to
the difference between the cost of inventory and its estimated net realizable
value using assumptions about future demand for those products and market
conditions. If actual market conditions are less favorable than those
projected by our management, additional inventory reserves may be
required.
Prepaid
Expenses
Prepaid
expenses primarily include amounts we have paid for insurance, licenses, taxes,
rent and maintenance contracts. We expense or amortize all prepaid amounts as
used or over the period of benefit, as applicable.
Property,
Plant and Equipment, Net
We state
property, plant and equipment at cost and use the straight-line method to
compute depreciation of these assets other than mineral deposits over the
following estimated useful lives: buildings and land improvements, from 10 to 40
years; machinery and equipment, from 10 to 30 years; mixers, trucks and other
vehicles, from six to 12 years; and other, from three to 10
years. For some of our assets, we use an estimate of the asset’s
salvage value at the end of its useful life to reduce the cost of the asset
which is subject to depreciation. Salvage values generally
approximate 10% of the asset’s original cost. We capitalize leasehold
improvements on properties held under operating leases and amortize those costs
over the lesser of their estimated useful lives or the applicable lease
term. We compute depletion of mineral deposits as such deposits are
extracted utilizing the units-of-production method.We expense maintenance and
repair costs when incurred and capitalize and depreciate expenditures for major
renewals and betterments that extend the useful lives of our existing
assets. When we retire or dispose of property, plant or equipment, we
remove the related cost and accumulated depreciation from our accounts and
reflect any resulting gain or loss in our statements of operations.
We
evaluate the recoverability of our long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets is measured by comparing the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. Such
evaluations for impairment are significantly impacted by estimates of future
prices for our products, capital needs, economic trends in the applicable
construction sector and other factors. If we consider such assets to
be impaired, the impairment we recognize is measured by the amount by which the
carrying amount of the assets exceeds their fair value. Assets to be
disposed of by sale are reflected at the lower of their carrying amounts, or
fair values, less cost to sell.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Goodwill
and Other Intangible Assets
Intangible assets acquired in business
combinations consist primarily of goodwill and covenants
not-to-compete. Goodwill represents the amount by which the total
purchase price we have paid for acquisitions exceeds our estimated fair value of
the net tangible assets acquired. We test goodwill for impairment on
an annual basis, or more often if events or circumstances indicate that there
may be impairment. We generally test for goodwill impairment in the fourth
quarter of each year, because this period gives us the best visibility of the
reporting units’ operating performances for the current year (seasonally, April
through October are highest revenue and production months) and outlook for the
upcoming year, since much of our customer base is finalizing operating and
capital budgets. We test goodwill for impairment loss under a
two-step approach, as defined by SFAS 142. The first step of the
goodwill impairment test compares the fair value of the reporting unit with its
carrying amount, including goodwill. If the carrying amount of a
reporting unit exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of the impairment
loss. This is determined by comparison of the implied fair value of
the reporting units’ goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting units’ goodwill
exceeds the implied fair value of that goodwill, we recognize an impairment loss
as expense.
Intangible
assets with definite lives consist principally of covenants not-to-compete
established with former owners and other key management personnel in business
combinations and are amortized over the period that we believe best reflects the
period in which the economic benefits will be consumed. We evaluate
intangible assets with definite lives for recoverability when events or
circumstances indicate that these assets might be impaired. We test
those assets for impairment by comparing their respective carrying values to
estimates of the sum of the undiscounted future net cash flows expected to
result from the assets. If the carrying amount of an asset exceeds
the sum of the undiscounted net cash flows we expect from that asset, we
recognize an impairment loss based on the amount by which the carrying value
exceeds the fair value of the asset. See Note 2 for further discussion of
goodwill and other intangible assets.
Debt
Issue Costs
We
amortize debt issue costs related to our revolving credit facilities and 8⅜%
senior subordinated notes as interest expense over the scheduled maturity period
of the debt. Unamortized debt issuance costs were $6.8 million as of December
31, 2008 and $8.2 million as of December 31, 2007. We include those
unamortized costs in other assets.
Allowance
for Doubtful Accounts
We
provide an allowance for accounts receivable we believe may not be collected in
full. A provision for bad debt expense recorded to selling, general and
administrative expenses increases the allowance. Accounts receivable
are written off when we determine the receivable will not be
collected. Accounts receivable that we write off our books decrease
the allowance. We determine the amount of bad debt expense we record
each period and the resulting adequacy of the allowance at the end of each
period by using a combination of historical loss experience, a
customer-by-customer analysis of our accounts receivable balances each period
and subjective assessments of our bad debt exposure. The allowance
for doubtful accounts balance was $3.1 million as of December 31, 2008 and
2007.
Revenue
and Expenses
We derive
substantially all of our revenue from the production and delivery of ready-mixed
concrete, precast concrete products, onsite products and related building
materials. We recognize revenue when products are
delivered. Amounts billed to customers for delivery costs are
classified as a component of total revenues and the related delivery costs
(excluding depreciation) are classified as a component of total cost of goods
sold. Cost of goods sold consists primarily of product costs and operating
expenses (excluding depreciation, depletion and
amortization). Operating expenses consist primarily of wages,
benefits, insurance and other expenses attributable to plant operations, repairs
and maintenance, and delivery costs. Selling expenses consist
primarily of sales commissions, salaries of sales managers, travel and
entertainment expenses, and trade show expenses. General and administrative
expenses consist primarily of executive and administrative compensation and
benefits, office rent, utilities, communication and technology expenses,
provision for doubtful accounts and professional fees.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Insurance
Programs
We
maintain third-party insurance coverage against certain risks. Under our
insurance programs, we share the risk of loss with our insurance underwriters by
maintaining high deductibles subject to aggregate annual loss
limitations. In connection with these automobile, general liability
and workers’ compensation insurance programs, we have entered into standby
letters of credit agreements totaling $13.4 million at December 31,
2008. We fund our deductibles and record an expense for losses we
expect under the programs. We determine expected losses 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 claim reporting patterns, claim
settlement patterns, judicial decisions, legislation and economic
conditions. The amounts accrued for self-insured claims were $12.6
million as of December 31, 2008 and $12.3 million as of December 31,
2007. We include those accruals in accrued liabilities.
Asset
Retirement Obligations
Statement
of Financial Accounting Standards (“SFAS”) No. 143 requires that the fair value
of a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of the associated
asset, and this additional carrying amount is amortized over the life of the
asset. The liability is accreted at the end of each reporting period through
charges to operating expenses. If the obligation is settled for other than the
carrying amount of the liability, we will recognize a gain or loss on
settlement. Asset retirement obligations accrued at December 31, 2008
and 2007 were not material.
Income
Taxes
We use
the liability method of accounting for income taxes. Under this method, we
record deferred income taxes based on temporary differences between the
financial reporting and tax bases of assets and liabilities and use enacted tax
rates and laws that we expect will be in effect when we recover those assets or
settle those liabilities, as the case may be, to measure those
taxes. We record a valuation allowance to reduce the deferred tax
assets to the amount that is more likely than not to be realized. We
recorded a valuation allowance of $0.2 million as of December 31,
2008. There was no valuation allowance recorded as of December 31,
2007.
Effective
January 1, 2007, we adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes –
an interpretation of FASB Statement No. 109, Accounting for Income
Taxes.” FIN 48 requires that the financial statement effects of a tax
position taken or expected to be taken in a tax return be recognized in the
financial statements when it is more likely than not, based on the technical
merits, that the position will be sustained upon examination. The
cumulative effect of applying FIN 48 was $0.3 million and was recorded as an
adjustment to the January 1, 2007 balance of retained earnings.
Fair
Value of Financial Instruments
Our
financial instruments consist primarily of cash and cash equivalents, trade
receivables, trade payables and long-term debt. Our management
considers the carrying values of cash and cash equivalents, trade receivables
and trade payables to be representative of their respective fair values because
of their short-term maturities or expected settlement dates. The
carrying value of ourstanding amounts under our revolving credit facility
approximates fair value due to the floating interest rate. The fair
value of our 8⅜% senior subordinated notes at year end was estimated at $146.1
million at December 31, 2008 and $248.8 million at December 31,
2007.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the use of estimates
and assumptions by management in determining the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Estimates and assumptions that we consider significant in
the preparation of our financial statements include those related to our
allowance for doubtful accounts, goodwill, accruals for self-insurance, income
taxes, reserves for inventory obsolescence and the valuation and useful lives of
property, plant and equipment.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Stripping
Costs
Effective
January 1, 2006, we adopted Emerging Issues Task Force Issue No. 04-6,
“Accounting for Stripping Costs in the Mining Industry” (“EITF
04-6”). EITF 04-6 concludes that stripping costs incurred after the
first saleable minerals are extracted from the mine (i.e., post-production
stripping costs) are a component of mineral inventory cost. Under
EITF 04-6, all post-production stripping costs are considered variable
production costs that should be included in the costs of the inventory produced
during the period that the stripping costs are incurred. We
recognized all capitalized post-production stripping costs as an adjustment to
beginning retained earnings at January 1, 2006. Prior to the adoption
of EITF 04-6, we capitalized certain post-production stripping costs and
amortized those costs over the life of the uncovered reserves using a
units-of-production approach.
Loss
Per Share
We
computed basic loss per share using the weighted average number of common shares
outstanding during the year, excluding the nonvested portion of restricted
stock. We computed diluted earnings per share using the weighted
average number of common shares outstanding during the year, but also include
the dilutive effect of stock-based incentives and option plans (including stock
options and awards of restricted stock).
The
following table reconciles the numerator and denominator of the basic and
diluted loss per share during the years ended December 31, 2008, 2007 and 2006
(in thousands, except per share amounts).
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$ |
(132,297 |
) |
|
$ |
(63,760 |
) |
|
$ |
(7,303 |
) |
Loss
from discontinued operations, net of income tax benefit
|
|
|
(149 |
) |
|
|
(5,241 |
) |
|
|
(787 |
) |
Net
loss
|
|
$ |
(132,446 |
) |
|
$ |
(69,001 |
) |
|
$ |
(8,090 |
) |
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding-basic
|
|
|
38,099 |
|
|
|
38,227 |
|
|
|
36,847 |
|
Effect
of dilutive stock options and restricted stock
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Weighted
average common shares outstanding-diluted
|
|
|
38,099 |
|
|
|
38,227 |
|
|
|
36,847 |
|
Loss
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
$ |
(3.48 |
) |
|
$ |
(1.67 |
) |
|
$ |
(0.20 |
) |
From
discontinued operations
|
|
$ |
— |
|
|
$ |
(0.14 |
) |
|
$ |
(0.02 |
) |
Net
loss
|
|
$ |
(3.48 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.22 |
) |
For the
years ended December 31, stock options and awards covering 2.8 million shares in 2008,
2.8 million shares in 2007 and 2.9 million shares in 2006 were excluded from the
computation of diluted loss per share because their effect would have been
antidilutive.
Comprehensive
Income
Comprehensive
income represents all changes in equity of an entity during the reporting
period, except those resulting from investments by and distributions to
stockholders. For each of the three years in the period ended December 31, 2008,
no differences existed between our consolidated net income and our consolidated
comprehensive income.
Segment
Information
We have
adopted SFAS No. 131, “Disclosures About Segments of an Enterprise and Related
Information,” which establishes standards for the manner by which public
enterprises are to report information about operating segments in annual
financial statements and requires the reporting of selected information about
operating segments in interim financial reports issued to
stockholders. During the third quarter of 2006, we re-assessed our
application of SFAS No. 131, and, based on the expected variation in the
long-term margins of our operating segments, determined that it would be more
appropriate to present our previously aggregated six geographic reporting units
as two reportable segments, primarily along the following product
lines: ready-mixed concrete and concrete-related products; and
precast concrete products. In conjunction with this re-assessment, we
have revised our prior period presentation to correspond with this
revision. See Note 12 for additional segment
disclosures.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Stock-based
Compensation
Effective
January 1, 2006, we adopted SFAS No. 123-R, “Share-Based Payment”
(“SFAS 123R”), using the modified prospective method and, accordingly, we
have not restated prior period results. SFAS 123R establishes the
accounting for equity instruments exchanged for employee services. Under SFAS
123R, share-based compensation cost is measured at the grant date based on the
calculated fair value of the award. The expense that is recognized over the
employee’s requisite service period, generally the vesting period of the award.
SFAS 123R also requires that the related excess tax benefit received upon
exercise of stock options or vesting of restricted stock, if any, be reflected
in the statement of cash flows as a financing activity rather than an operating
activity.
For
additional discussion related to stock-based compensation, see Note
5.
Recent
Accounting Pronouncements
In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(“FSP EITF 03-6-1”). This FSP addresses whether instruments granted
in share-based payment transactions are participating securities prior to
vesting and, therefore need to be included in computing earnings per share under
the two-class method described in SFAS No. 128, “Earnings Per
Share.” This FSP is effective for fiscal years beginning after
December 15, 2008 and will be applied retrospectively. The adoption
of FSP EITF 03-6-1 is not expected to have a material effect on our financial
statements.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles
(“GAAP”). SFAS No. 162 directs the GAAP hierarchy to the entity, not the
independent auditors, as the entity is responsible for selecting accounting
principles for financial statements that are presented in conformity with
GAAP. SFAS No. 162 is effective 60 days following the Securities and
Exchange Commission approval of the Public Company Accounting Oversight Board
amendments to remove the GAAP hierarchy from the auditing standards. We do
not expect the adoption of SFAS No. 162 to have any effect on our
consolidated financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities.” The new standard is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity’s financial position, financial performance and cash flows. It is
effective for our first quarter 2009 financial statements, with early
application encouraged. We do not expect the adoption of SFAS No. 161
to have a material impact on our consolidated financial statements.
In September 2006, the FASB issued
Statement No. 157, Fair Value
Measurements (“FAS 157”). FAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurement. The initial application of FAS 157 is limited to
financial assets and liabilities and became effective on January 1,
2008. The impact of the initial application of FAS 157 was not
material. On January 1, 2009, we adopted FAS 157 on a prospective
basis for non-financial assets and liabilities that are not measured at fair
value on a recurring basis. The application of FAS 157 to our
non-financial assets and liabilities will primarily be limited to assets
acquired and liabilities assumed in a business combination, asset retirement
obligations and asset impairments, including goodwill and long-lived
assets. This application of FAS 157 is not expected to have a
material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS
No. 141(R), “Business Combinations,” which replaces SFAS No. 141. SFAS No.
141(R) establishes principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. SFAS No. 141(R) also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R) is effective for fiscal
years beginning after December 15, 2008. We do not expect the adoption of
SFAS 141(R) to have a material impact on our consolidated financial
statements.
In December 2007, the FASB issued SFAS
No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an
amendment of Accounting Research Bulletin No. 51,” which establishes accounting
and reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS No. 160 also establishes reporting
requirements that provide sufficient disclosures that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS No. 160 is effective for fiscal years
beginning after December 15, 2008. We do not expect the adoption of SFAS
No. 160 to have a material impact on our consolidated financial
statement.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2. GOODWILL
AND OTHER INTANGIBLE ASSETS
In
accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we record
as goodwill the amount by which the total purchase price we pay in our
acquisition transactions exceeds our estimated fair value of the identifiable
net assets we acquire. We test goodwill for impairment on an annual basis, or
more often if events or circumstances indicate that there may be
impairment. We generally test for goodwill impairment in the fourth
quarter of each year, because this period gives us the best visibility of the
reporting units’ operating performances for the current year (seasonally, April
through October are highest revenue and production months) and outlook for the
upcoming year, since much of our customer base is finalizing operating and
capital budgets. The impairment test we use consists of comparing our
estimates of the current fair values of our reporting units with their carrying
amounts. We currently have seven reporting units. Reporting units are
organized based on our two product segments ((1) ready-mix concrete and concrete
related products and (2) precast concrete products) and geographic
regions.
In 2008,
macro economic factors including the unprecedented and continuing credit crisis,
the U.S. recession, the escalating unemployment rate and specifically the severe
downturn in the U.S. construction markets, had a significant impact on the
valuation metrics used in determining the long-term value of our reporting
units. In particular, the cost of capital has increased substantially
while the availability of funds from capital markets has diminished
significantly. Lack of available capital also impacts our end-use
customers by creating project delays or cancellations, thereby impacting our
revenue and growth assumptions. The continued downturn in residential
construction has expanded into the commercial sector and public works sector of
our revenue base. The October 2008 cement consumption forecast for
the U.S. construction market for 2009 through 2013 indicated further
deterioration in cement consumption. In light of this, coupled with
the slowdown in construction activity, persistently challenging interest rates
and credit environments and our depressed stock price in October 2008, we
recorded an impairment charge of $135.3 million in the fourth quarter of 2008.
The higher cost of capital combined with a negative outlook for product sales
growth in all of our regions has resulted in lower sales volumes and more
competition for construction projects, thereby reducing expected future cash
flows. These specific negative factors, combined with (i) lower
enterprise values resulting from lower multiples of sales and EBITDA
comparables, and (ii) the lack of recent third party transactions due to
depressed macro economic conditions, resulted in the goodwill impairment expense
for 2008.
In 2007, we recorded goodwill
impairments of $81.9 million relating to our Michigan, South Central and our
Northern California Precast reporting units. Our Michigan reporting
unit’s economic outlook continued to soften at greater levels throughout 2007,
resulting in lower projected cash flow. Our South Central reporting
unit’s outlook deteriorated, resulting in lower projected cash flow and
continued competitive pressures and limiting our future profitability
expectations. Our Northern California Precast reporting unit was
significantly impacted by the continued slowdown in residential housing
construction, which impacted our projected future cash flows. These specific
negative factors in the above mentioned reporting units, combined with lower
enterprise values and sales transaction values for participants in our industry,
resulted in the goodwill impairment expense.
In
2006, we recorded a $38.8 million goodwill impairment associated with our
Michigan reporting unit, which resulted from the continued slowdown and negative
economic outlook regarding construction activities for the Michigan reporting
unit throughout 2006. This negative outlook resulted in lower selling
volumes, lower product pricing and more competition for construction projects,
thereby reducing our outlook for expected future cash
flows. Specifically, the downturn in the U.S. automotive
manufacturing industry, primarily based in the greater Detroit market, combined
with the slowdown in residential, commercial and public works projects resulted
in lower sales volumes and product selling price pressures in an already highly
competitive ready-mixed concrete market. These changes resulted in a
significantly lower estimated fair value.
In the
fourth quarter of 2007, we disposed of certain business units. In
connection with the impairment or sale of the units in the fourth quarter, we
wrote off associated goodwill of $7.2 million, which is reflected as a component
of loss from discontinued operations for the year ended December 31,
2007.
As of
December 31, 2008 and 2007, U.S. Concrete had no intangible assets with
indefinite lives other than goodwill.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The changes in the carrying amount of
goodwill for 2008 and 2007 were as follows (in thousands):
|
|
Ready-Mixed
Concrete and
Concrete-Related
Products
|
|
|
Precast Concrete
Products
|
|
|
Total
|
|
Balance
at December 31, 2006
|
|
$ |
216,598 |
|
|
$ |
34,901 |
|
|
$ |
251,499 |
|
Acquisitions
|
|
|
3,549 |
|
|
|
10,888 |
|
|
|
14,437 |
|
Impairments
|
|
|
(72,817 |
) |
|
|
(9,074 |
) |
|
|
(81,891 |
) |
Dispositions
|
|
|
(7,199 |
) |
|
|
— |
|
|
|
(7,199 |
) |
Adjustments
|
|
|
7,985 |
|
|
|
168 |
|
|
|
8,153 |
|
Balance
at December 31, 2007
|
|
$ |
148,116 |
|
|
$ |
36,883 |
|
|
$ |
184,999 |
|
Acquisitions
|
|
|
8,954 |
|
|
|
— |
|
|
|
8,954 |
|
Impairments
|
|
|
(109,331 |
) |
|
|
(25,994 |
) |
|
|
(135,325 |
) |
Adjustments
|
|
|
1,431 |
|
|
|
(862 |
) |
|
|
569 |
|
Balance
at December 31, 2008
|
|
$ |
49,170 |
|
|
$ |
10,027 |
|
|
$ |
59,197 |
|
Our
intangible assets with definite lives primarily consist of covenants
not-to-compete established in business combinations and are recorded in other
noncurrent assets. We amortize covenants not-to-compete ratably over
the life of the agreement, which is generally five years. Accumulated
amortization associated with covenants not-to-compete was $0.8 million for 2008,
$0.6 million for 2007 and $0.6 million for 2006. Amortization expense
associated with our covenants not-to-compete at December 31, 2008, is expected
to be $0.3 million in 2009, $0.2 million in 2010, less than $0.1 million in
2011 and zero thereafter.
The
changes in the carrying amount of the other intangible assets for 2008 and 2007
were as follows (in thousands):
Balance
at January 1, 2007
|
|
$ |
2,111 |
|
Write-off
of covenant not-to-compete related to disposed business
unit
|
|
|
(987 |
) |
Amortization
of covenants not-to-compete
|
|
|
(572 |
) |
Balance
at December 31, 2007
|
|
|
552 |
|
Addition
of covenant not-to-compete related to API acquisition
|
|
|
220 |
|
Amortization
of covenants not-to-compete
|
|
|
(280 |
) |
Balance
at December 31, 2008
|
|
$ |
492 |
|
3. DISCONTINUED
OPERATIONS
In the
fourth quarter of 2007, we entered into definitive agreements to dispose of
three of our ready-mixed concrete business units. On November 19,
2007, we sold our Knoxville, Tennessee and Wyoming, Delaware business units.
The sale of our
third unit, headquartered in Memphis, Tennessee, occurred on January 31,
2008. All three units were part of our ready-mixed concrete and
concrete-related products segment. We classified all three business
units sold or held for sale as discontinued operations as of December 31, 2007
and presented the results of operations, net of tax, as discontinued operations
in the accompanying consolidated statements of operations for all periods
presented. The assets and liabilities of the discontinued units which remained
unsold as of the balance sheet date were classified as “held for sale” in our
consolidated balance sheets at December 31, 2007 and 2006. The results of
discontinued operations included in the accompanying consolidated statements of
operations were as follows for the years ended December 31 (in
thousands):
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Revenue
|
|
$ |
671 |
|
|
$ |
43,606 |
|
|
$ |
61,012 |
|
Operating
expenses
|
|
|
1,395 |
|
|
|
47,241 |
|
|
|
62,337 |
|
(Gain)
loss on disposal of assets
|
|
|
(494 |
) |
|
|
5,517 |
|
|
|
— |
|
Loss
from discontinued operations, before income tax benefit
|
|
|
(230 |
) |
|
|
(9,152 |
) |
|
|
(1,325 |
) |
Income
tax benefits from discontinued operations
|
|
|
(81 |
) |
|
|
(3,911 |
) |
|
|
(538 |
) |
Loss
from discontinued operations, net of tax
|
|
$ |
(149 |
) |
|
$ |
(5,241 |
) |
|
$ |
(787 |
) |
U.S. CONCRETE, INC. AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The
following table summarizes the carrying amount as of December 31, 2007 of the
major classes of assets of the Memphis, Tennessee business unit we classified as
held for sale (in thousands):
|
|
December 31,
2007
|
|
Assets
held for sale:
|
|
|
|
Inventories
|
|
$ |
401 |
|
Property,
plant and equipment, net
|
|
|
6,872 |
|
Total
assets held for sale
|
|
$ |
7,273 |
|
In November 2008, we acquired a
ready-mixed concrete plant and related inventory in Brooklyn, New
York. We used borrowings under our revolving credit facility to fund
the cash purchase price of approximately $2.5 million.
In August 2008, we acquired a
ready-mixed concrete operation in Mount Vernon, New York and a precast concrete
product operation in San Diego, California. We used cash on hand to
fund the purchase prices of $2.0 million and $2.5 million,
respectively.
In June
2008, we acquired nine ready-mixed concrete plants, together with related real
property, rolling stock and working capital, in our west Texas market from
another ready-mixed concrete producer for approximately $13.5
million. We used cash on hand and borrowings under our existing
credit facility to fund the purchase price.
In May
2008, we paid $1.4 million of contingent purchase consideration related to real
estate acquired pursuant to the acquisition of Builders’ Redi-Mix, Inc. in
January 2003.
In
January 2008, we acquired a ready-mixed concrete operation in Staten Island, New
York. We used cash on hand to fund the purchase price of
approximately $1.8 million.
The pro
forma impacts of our 2008 acquisitions have not been included due to the fact
that they are immaterial to our financial statements individually and in the
aggregate.
In
October 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 Atlantic region. We
used borrowings under our revolving credit facility to fund the cash purchase
price of approximately $14.5 million. The purchase agreement provides
for up to $1.5 million in additional purchase consideration, which is contingent
on API attaining established earnings targets in each of 2008 and
2009. As of September 30, 2008, API attained its established earnings
target for the previous twelve month period as established in the asset purchase
agreement, and we paid out $750,000 in the first quarter of 2009, less certain
uncollected pre-acquisition accounts receivables.
In April
2007, several of our subsidiaries entered into agreements with the Edw. C. Levy
Co. relating to the formation of Superior Material Holdings, LLC, a ready-mixed
concrete company that operates in Michigan. We contributed our Michigan
ready-mixed concrete and concrete-related 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 concrete-related
products assets, a cement terminal and cash of $1.0 million for a 40% ownership
interest in the new company. Under the contribution agreement, Superior
Materials Holdings, LLC also purchased 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. Superior
Materials Holdings, LLC, which operates primarily under the trade name Superior
Materials, owns 27 ready-mixed concrete plants, a cement terminal and a fleet of
ready-mixed concrete trucks. Based on current economic conditions in
Michigan, many of these ready-mixed concrete plants have been temporarily
idled.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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.
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):
|
|
For the Years
Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Revenues
|
|
$ |
807,035 |
|
|
$ |
760,552 |
|
Net
income (loss)
|
|
|
(66,628 |
) |
|
|
5,549 |
|
Basic
earnings (loss) per share
|
|
$ |
(1.74 |
) |
|
$ |
0.15 |
|
Diluted
earnings (loss) per share
|
|
$ |
(1.74 |
) |
|
$ |
0.15 |
|
The pro
forma financial information does not purport to represent what the combined
financial results of operations of our company 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.
We
completed two other acquisitions, which are discussed in this footnote, during
the year ended December 31, 2007. The pro forma impact of the other
acquisitions have not been included due to the fact that they are immaterial to
our financial statements individually and in the aggregate.
In other
business acquisitions during the periods presented, we acquired two ready-mixed
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.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In July 2006, we acquired all of the
equity interests of Alberta Investments, Inc. and Alliance Haulers, Inc. for
$165.0 million and a post-closing payment of $0.3
million. 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. 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 provided cement and aggregates hauling services with a fleet of
approximately 260 hauling trucks owned by Redi-Mix and third-party
haulers.
In June 2006, we acquired the operating
assets, including real property, of Olson Precast Company used in the production
of precast concrete products in northern California, for $4.8 million in
cash.
In April
2006, we acquired Kurtz Gravel Company and the Phoenix, Arizona operating assets
of Pre-Cast Mfg., Inc. Kurtz produced ready-mixed concrete from six plants and
mined aggregates from a quarry, all located in or near our 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. STOCK-BASED
COMPENSATION
Under
SFAS 123R, share-based compensation cost is measured at the grant date based on
the calculated fair value of the award. The expense is recognized over the
employee’s requisite service period, generally the vesting period of the
award. We have elected to use the long-form method of determining our
pool of windfall tax benefits as prescribed under SFAS 123R.
For the
years ended December 31, we recognized stock-based compensation expense related
to restricted stock and stock options of approximately $3.5 million ($2.6
million, net of tax) in 2008, $3.0 million ($1.9 million, net of tax) in 2007,
and $2.8 million ($1.7 million, net of tax) in 2006. Stock-based
compensation expense is reflected in selling, general and administrative
expenses in our consolidated statements of operations.
As of
December 31, 2008 and 2007, there was approximately $4.2 million and $5.1
million, respectively, of unrecognized compensation cost related to unvested
restricted stock awards and stock options which we expect to recognize over a
weighted average period of 2.3 years and 1.8 years, respectively.
Restricted
Stock
We issue
restricted stock awards under our incentive compensation plans. These
awards vest over specified periods of time, generally four years. The
shares of restricted common stock are subject to restrictions on transfer and
certain conditions to vesting. During the restriction period, the
holders of restricted shares are entitled to vote and receive dividends, if any,
on those shares.
Restricted
stock activity for 2008 was as follows (shares in thousands):
|
|
Number
of
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Unvested
restricted shares outstanding at December 31, 2007
|
|
|
805 |
|
|
$ |
8.07 |
|
Granted
|
|
|
572 |
|
|
|
4.12 |
|
Vested
|
|
|
(494 |
) |
|
|
8.32 |
|
Canceled
|
|
|
(61 |
) |
|
|
6.68 |
|
Unvested
restricted shares outstanding at December 31, 2008
|
|
|
822 |
|
|
$ |
7.70 |
|
Compensation expense associated with
awards of restricted stock under our incentive compensation plans was $3.4
million in 2008, $2.7 million in 2007 and $2.4 million in 2006.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Our 1999
Incentive Plan, 2001 Employee Incentive Plan and 2008 Incentive Plan enable us
to grant nonqualified and incentive options, restricted stock, stock
appreciation rights and other long-term incentive awards to our employees and
nonemployee directors (except that none of our officers or directors are
eligible to participate in our 2001 Plan), and in the case of the 1999 Incentive
Plan and 2001 Employee Incentive Plans, also to nonemployee consultants and
other independent contractors who provide services to us. Option grants under
these plans generally vest either over a four-year period or, in the case of
option grants to non-employee directors, six months from the grant date and
expire if not exercised prior to the tenth anniversary of the applicable grant
date, or in the case of non-employee directors, the fifth anniversary of the
applicable grant date. Proceeds from the exercise of stock options
are credited to common stock at par value, and the excess is credited to
additional paid-in capital. The aggregate number of shares available under the
1999 Incentive Plan and 2001 Incentive Plan was approximately 1.2 million as of
December 31, 2007. Our 1999 Incentive Plan terminated on December 31, 2008.
While, as of December 31, 2008, there were 227,727 shares of our common stock
remaining available for awards under the 2001 Plan, we do not anticipate making
any new awards under this Plan. The aggregate number of shares available for
awards under the 2008 Incentive Plan was approximately 2.4 million as of
December 31, 2008.
We
estimated the fair value of each of our stock option awards on the date of grant
using a Black-Scholes option pricing model. We determined the
expected volatility using our common stock’s historic volatility. For
each option awarded, the risk-free interest rate was based on the U.S. Treasury
yield in effect at the time of grant for periods corresponding with the expected
life of the option. The expected life of an option represents the
weighted average period of time that an option grant is expected to be
outstanding, giving consideration to its vesting schedule and historical
exercise patterns. The significant weighted-average assumptions
relating to the valuation of our stock options were as follows:
|
|
2008
|
|
|
2007
|
|
Dividend
yield
|
|
|
0.0 |
% |
|
|
0.0 |
% |
Volatility
rate
|
|
|
39.8% - 48.9 |
% |
|
|
37.3 |
% |
Risk-free interest rate
|
|
|
1.6% - 3.3 |
% |
|
|
3.5 |
% |
Expected
option life (years)
|
|
|
5.0 |
|
|
|
5.0 |
|
We
granted 145,000 and 63,000 stock options in 2008 and 2007,
respectively. Compensation expense related to stock options was
approximately $137,000 ($103,490, net of tax) in 2008 and $185,000 ($116,920,
net of tax) in 2007. Stock option activity information for 2008 was
as follows (shares in thousands):
|
|
Number
of Shares
Underlying
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
Options outstanding at December 31, 2007
|
|
|
1,978 |
|
|
$ |
7.21 |
|
Granted
|
|
|
145 |
|
|
|
4.43 |
|
Exercised
|
|
|
— |
|
|
|
— |
|
Canceled
|
|
|
(115 |
) |
|
|
6.48 |
|
Options
outstanding at December 31, 2008
|
|
|
2,008 |
|
|
$ |
7.05 |
|
Options
exercisable at December 31, 2008
|
|
|
1,913 |
|
|
$ |
7.20 |
|
The
aggregate intrinsic value of outstanding options and exercisable options at
December 31, 2008 was $0.1 million. The weighted average remaining
contractual term for outstanding options and exercisable options at December 31,
2008 was 2.3 years. The total fair value of shares vested during 2008
and 2007 was $0.1 million and $0.6 million, respectively.
Stock
option information related to the nonvested options for the year ended December
31, 2008 was as follows (shares in thousands):
|
|
Number
of Shares
Underlying
Options
|
|
|
Weighted-
Average Grant
Date Fair
Value
|
|
Nonvested
options outstanding at December 31, 2007
|
|
|
— |
|
|
$ |
— |
|
Granted
|
|
|
145 |
|
|
|
1.76 |
|
Vested
|
|
|
(50 |
) |
|
|
(2.13 |
) |
Canceled
|
|
|
— |
|
|
|
— |
|
Nonvested
options outstanding at December 31, 2008
|
|
|
95 |
|
|
$ |
1.56 |
|
Share
Price Performance Units
In August
2005, the compensation committee of our board of directors awarded approximately
163,000 share price performance units to certain salaried employees, other than
executive officers and senior management. Those awards 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. During the period prior to vesting, holders of
share price performance units would be entitled to receive a cash amount equal
to dividends paid, if any, on shares of our common stock equal to the number of
then unvested share price performance units. The value of these
awards is accrued and charged to expense over the performance period of the
units. We recognized compensation expense of $0.1 million in
2008. We recognized a reversal of compensation expense of $0.1
million and $0.6 million in 2007 and 2006, respectively. This is
included in selling, general and administrative expenses on the Consolidated
Statements of Operations. No share price performance units were
granted in 2008, 2007 or 2006.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Inventory
available for sale at December 31 consists of the following (in
thousands):
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
Raw
materials
|
|
$ |
18,100 |
|
|
$ |
17,374 |
|
Precast
products
|
|
|
8,353 |
|
|
|
7,495 |
|
Building
materials for resale
|
|
|
2,922 |
|
|
|
3,520 |
|
Repair
parts
|
|
|
3,393 |
|
|
|
4,168 |
|
|
|
$ |
32,768 |
|
|
$ |
32,557 |
|
7. PROPERTY,
PLANT AND EQUIPMENT
A summary
of property, plant and equipment is as follows (in thousands):
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Land
and mineral deposits
|
|
$ |
84,432 |
|
|
$ |
82,075 |
|
Buildings
and improvements
|
|
|
34,461 |
|
|
|
28,204 |
|
Machinery
and equipment
|
|
|
133,923 |
|
|
|
124,992 |
|
Mixers,
trucks and other vehicles
|
|
|
102,403 |
|
|
|
101,486 |
|
Other,
including construction in progress
|
|
|
23,546 |
|
|
|
15,347 |
|
|
|
|
378,765 |
|
|
|
352,104 |
|
Less:
accumulated depreciation and depletion
|
|
|
(105,996 |
) |
|
|
(85,094 |
) |
|
|
$ |
272,769 |
|
|
$ |
267,010 |
|
As of December 31, the carrying amounts
of mineral deposits were $27.1 million in 2008 and $28.6 million in
2007.
8. DETAIL
OF CERTAIN BALANCE SHEET ACCOUNTS
Activity
in our allowance for doubtful accounts receivable consists of the following (in
thousands):
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Balance,
beginning of period
|
|
$ |
3,102 |
|
|
$ |
2,551 |
|
|
$ |
2,949 |
|
Provision for doubtful
accounts
|
|
|
1,923 |
|
|
|
2,057 |
|
|
|
2,143 |
|
Uncollectible receivables written
off, net of recoveries
|
|
|
(1,937 |
) |
|
|
(1,506 |
) |
|
|
(2,541 |
) |
Balance,
end of period
|
|
$ |
3,088 |
|
|
$ |
3,102 |
|
|
$ |
2,551 |
|
Accrued
liabilities consist of the following (in thousands):
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
Accrued
compensation and benefits
|
|
$ |
8,693 |
|
|
$ |
4,877 |
|
Accrued
interest
|
|
|
6,049 |
|
|
|
6,069 |
|
Accrued
income taxes
|
|
|
321 |
|
|
|
447 |
|
Accrued
insurance
|
|
|
13,611 |
|
|
|
14,102 |
|
Other
|
|
|
25,807 |
|
|
|
19,916 |
|
|
|
$ |
54,481 |
|
|
$ |
45,411 |
|
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9.
DEBT
A summary
of our debt and capital leases is as follows (in thousands):
|
|
December
31
|
|
|
|
2008
|
|
|
2007
|
|
Senior
secured credit facility due 2011
|
|
$ |
11,000 |
|
|
$ |
— |
|
8⅜%
senior subordinated notes due 2014
|
|
|
283,998 |
|
|
|
283,807 |
|
Capital
leases
|
|
|
430 |
|
|
|
763 |
|
Superior
Materials Holdings, LLC secured credit facility
due 2010
|
|
|
5,149 |
|
|
|
7,816 |
|
Notes
payable
|
|
|
5,411 |
|
|
|
6,114 |
|
|
|
|
305,988 |
|
|
|
298,500 |
|
Less: current
maturities
|
|
|
3,371 |
|
|
|
3,172 |
|
|
|
$ |
302,617 |
|
|
$ |
295,328 |
|
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 December 31, 2008,
we had borrowings of $11.0 million under this facility at the lower of an annual
interest at the Eurodollar-based rate (“LIBOR”) plus 1.75% or the domestic rate
of 3.25% plus 0.25%. Commitment fees at an annual rate of 0.25% are
payable on the unused portion of the facility. The Credit Agreement
provides that the administrative agent may, on the bases specified, reduce the
amount of the available credit from time to time. Additionally, any
“material adverse change” of the Company could restrict our ability to borrow
under the senior secured credit facility. A material adverse change
is defined as a material adverse change in any of (a) the condition (financial
or otherwise), business, performance, prospects, operations or properties of the
Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower
and the Guarantors, taken as a whole, to perform their respective obligations
under the Loan Documents or (c) the rights and remedies of the Administrative
Agent, the Lenders or the issuers to enforce the Loan Documents. At
December 31, 2008, the amount of the available credit was approximately $91.1
million, net of outstanding revolving credit borrowings of $11.0 million and
outstanding letters of credit of approximately $11.6 million.
Our subsidiaries, excluding our
60%-owned Michigan subsidiary and minor subsidiaries, without operations or
material assets, have guaranteed the repayment of all amounts owing under the
Credit Agreement. In addition, we collateralized our obligations
under the credit 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 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. As of December 31, 2008,
we were in compliance with our financial covenants under the Credit
Agreement.
Senior
Subordinated Notes
On March
31, 2004, we issued $200 million principal amount 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 principal amount 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.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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
limits 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.
Superior
Materials Holdings, LLC Credit Facility
Superior
Materials Holdings, LLC has a separate credit agreement that provides for a
revolving credit facility. The credit agreement, as amended to date,
currently allows for borrowings of up to $17.5 million. Borrowings under
this credit facility 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 that is
determined based on the values of net receivables, certain inventories, certain
rolling stock and letters of credit. The credit agreement
provides that the lender may, on the bases specified, reduce the amount of the
available credit from time to time. As of December 31, 2008, there was
$5.1 million in outstanding borrowings under the revolving credit facility, and
the remaining amount of the available credit was approximately $5.6
million. Letters of credit outstanding at December 31, 2008 were $1.8
million which reduces the amount available under the credit
facility.
Currently, borrowings have an annual
interest rate at Superior Materials Holdings, LLC’s option of either, LIBOR plus
4.25% or prime rate plus 2.00%. 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, 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 meet
certain minimum thresholds quarterly. During the trailing twelve months ended
December 31, 2008, the credit agreement required a threshold EBITDA of $(3.3)
million. Superior Materials Holdings, LLC reported $(2.8) million of
EBITDA, as defined. As of December 31, 2008, Superior Materials Holdings,
LLC was in compliance with its financial covenants under the credit
agreement.
U.S. Concrete and its 100%-owned
subsidiaries are not obligors under the terms of the Superior Materials
Holdings, LLC credit agreement. However, in connection with the recent amendment
of the revolving credit facility, Superior Materials Holdings, LLC’s credit
agreement provides that an event of default beyond a 30-day grace period under
either U.S. Concrete’s or Edw. C. Levy’s credit agreement would constitute an
event of default. Furthermore, U.S. Concrete agreed to provide or
obtain additional equity or subordinated debt capital not to exceed $6.75
million through the term of the revolving credit facility to fund any future
cash flow deficits, as defined in the credit agreement, of Superior Materials
Holdings, LLC. No capital contribution was required under that
agreement for the period ended December 31, 2008.
10. STOCKHOLDERS’
EQUITY
Common
Stock and Preferred Stock
The
following table presents information regarding our common stock (in
thousands):
|
|
December 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Shares
authorized
|
|
|
60,000 |
|
|
|
60,000 |
|
Shares
outstanding at end of period
|
|
|
36,793 |
|
|
|
39,361 |
|
Shares
held in treasury
|
|
|
459 |
|
|
|
315 |
|
Under our
restated certificate of incorporation, we are authorized to issue 10,000,000
shares of preferred stock, $0.001 par value, of which none were issued or
outstanding as of December 31, 2008 and 2007.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Restricted
Stock
Shares of
restricted common stock issued under our 1999 Incentive Plan, 2001 Employee
Incentive Plan and 2008 Incentive Plan are subject to restrictions on transfer
and certain other conditions. On issuance of the stock, an
unamortized compensation expense equivalent to the market value of the shares on
the date of grant is charged to stockholders’ equity and is amortized over the
restriction period. During the restriction period, the holders of
restricted shares are entitled to vote and receive dividends, if any, on those
shares.
During
the years ended December 31, we awarded approximately 572,000 shares in
2008, 311,000 shares in 2007 and 340,000 shares in 2006 of restricted stock
under those plans to employees and retired employees. The total value
of these awards was $2.4 million in 2008, $2.7 million in 2007 and $3.8 million
in 2006. The awards are subject to vesting
requirements. Under SFAS 123R, share-based compensation is measured
at the grant date based on the closing price of our stock. The
expense is recognized over the employee’s requisite service period, generally,
the vesting period of the award.
During
the years ended December 31, approximately 61,000 shares of restricted stock
were canceled in 2008, 35,000 shares of restricted stock were canceled in 2007
and 54,000 shares of restricted stock were canceled in 2006.
As of
December 31, the outstanding shares of restricted stock totaled approximately
822,000 in 2008, 805,000 in 2007 and approximately 730,000 in
2006. We recognized stock-based compensation expense related to
restricted stock and stock options of approximately $3.5 million ($2.6 million,
net of tax) in 2008, $3.0 million ($1.9 million, net of tax) in 2007 and $2.8
million ($1.7 million, net of tax) in 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 a value on
the date of vesting equal to the tax obligation. As a result of such employee
elections, during the years ended December 31, we withheld approximately 144,000
shares at a total value of $0.5 million in 2008, 84,000 shares at a total value
of $0.8 million in 2007 and approximately 92,000 shares at a total value of
$0.9 million in 2006, and those shares were accounted for as treasury
stock.
Employee
Stock Purchase Plan
In
January 2000, our board of directors adopted and our stockholders approved the
2000 Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended
to qualify as an “employee stock purchase plan” under Section 423 of the
Internal Revenue Code of 1986. All personnel employed by us for at
least 20 hours per week and five months per calendar year are eligible to
participate in the ESPP. For any offering period ending on or prior
to December 31, 2006, eligible employees electing to participate were granted
the right to purchase shares of our common stock at a price generally equal to
85% of the lower of the fair market value of a share of our common stock on the
first or last day of the offering period. For any offering period
beginning on or after January 1, 2007, eligible employees electing to
participate will be granted the right to purchase shares of our common stock at
a price equal to 85% of the fair market value of a share of our common stock on
the last day of the offering period. We issued approximately 213,000
shares in 2008, 221,000 shares in 2007 and 135,000 shares in 2006. We
recognized stock-based compensation expense of $0.1 million in 2008, and $0.2
million in 2007 and 2006, respectively, pursuant to the plan.
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 U.S. Concrete common
stock. After deducting the underwriters’ commission and offering
expenses, net proceeds were approximately $84.8 million.
Share
Repurchase Plan
On January 7, 2008, our Board of
Directors approved a plan to repurchase up to an aggregate of three million
shares of our common stock. The Board modified the repurchase plan in
October 2008 to slightly increase the aggregate number of shares authorized for
repurchase. The plan permitted the stock repurchases to be made on
the open market or in privately negotiated transactions in compliance with
applicable securities and other laws. As of December 31, 2008, we had
repurchased and subsequently cancelled 3,148,405 shares with an aggregate value
of $6.6 million and completed the repurchase program.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
11. INCOME
TAXES
Our consolidated federal and state
tax returns include the results of operations of acquired businesses from their
dates of acquisition.
A
reconciliation of our effective income tax rate to the amounts calculated by
applying the federal statutory corporate tax rate of 35% during the years ended
December 31, 2008, 2007 and 2006 is as follows (in thousands):
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Tax
benefit at statutory rate
|
|
$ |
(54,433 |
) |
|
$ |
(22,300 |
) |
|
$ |
(2,084 |
) |
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
State
income taxes
|
|
|
(1,467 |
) |
|
|
867 |
|
|
|
92 |
|
Manufacturing
deduction
|
|
|
563 |
|
|
|
(270 |
) |
|
|
(191 |
) |
Settlement
income
|
|
|
(83 |
) |
|
|
(291 |
) |
|
|
— |
|
Tax
audit settlement
|
|
|
— |
|
|
|
(1,611 |
) |
|
|
6 |
|
Goodwill
impairment
|
|
|
33,913 |
|
|
|
23,751 |
|
|
|
3,332 |
|
Other
|
|
|
1,906 |
|
|
|
(98 |
) |
|
|
193 |
|
Income
tax provision (benefit)
|
|
$ |
(19,601 |
) |
|
$ |
48 |
|
|
$ |
1,348 |
|
Effective income tax
rate
|
|
|
12.6 |
% |
|
|
(0.1 |
)% |
|
|
(22.6 |
)% |
The amounts of our consolidated
federal and state income tax provision (benefit) from continuing operations
during the years ended December 31, 2008, 2007 and 2006 are as follows (in
thousands):
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
(5,254 |
) |
|
$ |
4,446 |
|
|
$ |
8,398 |
|
State
|
|
|
439 |
|
|
|
1,042 |
|
|
|
907 |
|
|
|
|
(4,815 |
) |
|
|
5,488 |
|
|
|
9,305 |
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
(13,277 |
) |
|
$ |
(4,799 |
) |
|
$ |
(6,934 |
) |
State
|
|
|
(1,509 |
) |
|
|
(641 |
) |
|
|
(1,023 |
) |
|
|
|
(14,786 |
) |
|
|
(5,440 |
) |
|
|
(7,957 |
) |
Income
tax provision (benefit) from continuing operations
|
|
$ |
(19,601 |
) |
|
$ |
48 |
|
|
$ |
1,348 |
|
Deferred
income tax provisions result from temporary differences in the recognition of
expenses for financial reporting purposes and for tax reporting
purposes. We present the effects of those differences as deferred
income tax liabilities and assets, as follows (in thousands):
|
|
December
31
|
|
|
|
2008
|
|
|
2007
|
|
Deferred
income tax liabilities:
|
|
|
|
|
|
|
Property, plant and equipment,
net
|
|
$ |
46,940 |
|
|
$ |
45,226 |
|
Other
|
|
|
318 |
|
|
|
318 |
|
Total deferred tax
liabilities
|
|
$ |
47,258 |
|
|
$ |
45,544 |
|
Deferred
income tax assets:
|
|
|
|
|
|
|
|
|
Goodwill and other
intangibles
|
|
$ |
24,880 |
|
|
$ |
16,909 |
|
Receivables
|
|
|
1,120 |
|
|
|
1,129 |
|
Inventory
|
|
|
1,599 |
|
|
|
1,839 |
|
Accrued insurance
|
|
|
4,269 |
|
|
|
4,485 |
|
Other accrued
expenses
|
|
|
6,872 |
|
|
|
4,964 |
|
Net operating loss
carryforwards
|
|
|
6,710 |
|
|
|
113 |
|
Other
|
|
|
1,075 |
|
|
|
279 |
|
Total deferred tax
assets
|
|
$ |
46,525 |
|
|
$ |
29,718 |
|
Less: Valuation
allowance
|
|
|
(227 |
) |
|
|
— |
|
Net deferred tax
assets
|
|
|
46,298 |
|
|
|
29,718 |
|
Net deferred tax
liabilities
|
|
|
960 |
|
|
|
15,826 |
|
Current deferred tax
assets
|
|
|
11,576 |
|
|
|
10,937 |
|
Long-term deferred income tax
liabilities
|
|
$ |
12,536 |
|
|
$ |
26,763 |
|
U.S. CONCRETE, INC. AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In
assessing the value of deferred tax assets at December 31, 2008 and 2007,
we considered whether it was more likely than not that some or all of the
deferred tax assets would not be realized. The ultimate realization of deferred
tax assets depends on the generation of future taxable income during the periods
in which those temporary differences become deductible. We consider
the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Based on these
considerations, we have established a valuation allowance in the amount of $0.2
million for deferred tax assets relating to certain state net operating loss and
tax credit carryforwards because of uncertainty regarding their ultimate
realization.
As of
December 31, 2008, we had deferred tax assets related to federal NOL and tax
credit carryforwards of $17.3 million. We have federal NOLs of
approximately $16.5 million that are available to offset federal taxable income
and will expire in the years 2026 – 2028. In addition, we have
federal alternative minimum tax credit carryforwards of approximately $0.8
million that are available to reduce future regular federal income taxes over an
indefinite period.
As
disclosed in Note 1, we adopted the provisions of FIN 48 as of January 1,
2007. At December 31, 2008, we had unrecognized tax benefits of $6.8
million of which $2.5 million, if recognized, would impact the effective tax
rate. It is reasonably possible that a reduction of $1.8 million of unrecognized
tax benefits may occur within 12 months. The unrecognized tax benefits are
included as a component of other long-term obligations. During the years ended
December 31, 2008 and 2007, we recorded interest and penalties related to
unrecognized tax benefits of approximately $0.4 million in each
year. Total accrued penalties and interest at December 31, 2008
and 2007 was approximately $0.9 million and $0.5 million, respectively. A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows (in thousands):
|
|
2008
|
|
|
2007
|
|
Balance
as of January 1, 2008
|
|
$ |
6,421 |
|
|
$ |
8,090 |
|
Additions
for tax positions related to the current year
|
|
|
138 |
|
|
|
1,920 |
|
Additions
for tax positions related to prior years
|
|
|
284 |
|
|
|
680 |
|
Reductions
for tax positions of prior years
|
|
|
(7 |
) |
|
|
(426 |
) |
Settlements
|
|
|
— |
|
|
|
(3,843 |
) |
Balance
as of December 31, 2008
|
|
$ |
6,836 |
|
|
$ |
6,421 |
|
We
recognize interest and penalties related to uncertain tax positions in income
tax expense.
We
conduct business domestically and, as a result, U.S. Concrete, Inc. or one or
more of our subsidiaries file income tax returns in the U.S. federal
jurisdiction and various state and local jurisdictions. In the normal course of
business, we are subject to examination in U.S. federal jurisdiction, and
generally in state jurisdictions. With few exceptions, we are no longer
subject to U.S. federal, state and local tax examinations for years before
2004.
12. BUSINESS
SEGMENTS
We have
two segments that serve our principal markets in the United
States. 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. This segment serves
the following principal markets: north and west Texas, northern California, New
Jersey, New York, Washington, D.C., Michigan and Oklahoma. Our precast
concrete products segment produces and sells precast concrete products in select
markets in the western United States and the mid-Atlantic region.
We
account for inter-segment sales at market prices. Segment operating profit
consists of net revenue less operating expense, including certain operating
overhead directly related to the operation of the specific segment.
Corporate includes executive, administrative, financial, legal, human resources,
business development and risk management activities which are not allocated to
operations and are excluded from segment operating profit.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table sets forth certain
financial information relating to our continuing operations by reportable
segment (in thousands):
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Ready-mixed concrete and
concrete-related products
|
|
$ |
702,525 |
|
|
$ |
745,384 |
|
|
$ |
655,724 |
|
Precast concrete
products
|
|
|
68,082 |
|
|
|
73,300 |
|
|
|
80,915 |
|
Inter-segment
revenue
|
|
|
(16,309 |
) |
|
|
(14,881 |
) |
|
|
(8,129 |
) |
Total
revenue
|
|
$ |
754,298 |
|
|
$ |
803,803 |
|
|
$ |
728,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed concrete and
concrete-related products
|
|
$ |
(85,334 |
) |
|
$ |
(32,129 |
) |
|
$ |
11,910 |
|
Precast concrete
products
|
|
|
(22,629 |
) |
|
|
(1,454 |
) |
|
|
11,669 |
|
Unallocated overhead and other
income
|
|
|
2,820 |
|
|
|
12,503 |
|
|
|
8,763 |
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
|
|
23,324 |
|
|
|
15,955 |
|
|
|
16,709 |
|
Interest
income
|
|
|
114 |
|
|
|
114 |
|
|
|
1,601 |
|
Interest
expense
|
|
|
27,170 |
|
|
|
28,092 |
|
|
|
23,189 |
|
Loss
before income taxes and minority interest
|
|
$ |
(155,523 |
) |
|
$ |
(65,013 |
) |
|
$ |
(5,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
Depletion and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed concrete and
concrete-related products
|
|
$ |
26,138 |
|
|
$ |
26,539 |
|
|
$ |
18,445 |
|
Precast concrete
products
|
|
|
2,683 |
|
|
|
1,940 |
|
|
|
1,284 |
|
Corporate
|
|
|
1,081 |
|
|
|
403 |
|
|
|
412 |
|
Total depreciation,
depletion and amortization
|
|
$ |
29,902 |
|
|
$ |
28,882 |
|
|
$ |
20,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed concrete and
concrete-related products
|
|
$ |
26,178 |
|
|
$ |
21,060 |
|
|
$ |
34,738 |
|
Precast concrete
products
|
|
|
2,247 |
|
|
|
7,786 |
|
|
|
3,798 |
|
Total capital
expenditures
|
|
$ |
28,425 |
|
|
$ |
28,846 |
|
|
$ |
38,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
by Product:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete
|
|
$ |
614,070 |
|
|
$ |
658,128 |
|
|
$ |
589,285 |
|
Precast concrete
products
|
|
|
69,162 |
|
|
|
75,153 |
|
|
|
83,111 |
|
Building
materials
|
|
|
16,623 |
|
|
|
19,427 |
|
|
|
21,912 |
|
Aggregates
|
|
|
26,029 |
|
|
|
26,490 |
|
|
|
19,913 |
|
Other
|
|
|
28,414 |
|
|
|
24,605 |
|
|
|
14,289 |
|
Total
revenue
|
|
$ |
754,298 |
|
|
$ |
803,803 |
|
|
$ |
728,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
Assets (as of December 31):
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed concrete and
concrete-related products
|
|
$ |
390,843 |
|
|
$ |
506,999 |
|
|
$ |
598,328 |
|
Precast concrete
products
|
|
|
58,600 |
|
|
|
79,557 |
|
|
|
70,654 |
|
Corporate
|
|
|
58,367 |
|
|
|
60,700 |
|
|
|
47,664 |
|
Total assets
|
|
$ |
507,810 |
|
|
$ |
647,256 |
|
|
$ |
716,646 |
|
13. RISK
CONCENTRATION
We grant
credit, generally without collateral, to our customers, which include general
contractors, municipalities and commercial companies located primarily in Texas,
California, New Jersey, New York, Michigan and Oklahoma. Consequently, we are
subject to potential credit risk related to changes in business and economic
factors in those states. We generally have lien rights in the work we
perform, and concentrations of credit risk are limited because of the diversity
of our customer base. Further, our management believes that our contract
acceptance, billing and collection policies are adequate to limit any potential
credit risk.
Our cash
deposits are distributed among various banks in areas where we have operations
in various regions of the United States as of December 31, 2008. As a
result, we believe that credit risk in such instruments is
minimal.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
14. COMMITMENTS
AND CONTINGENCIES
Legal
Proceedings
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 each reporting 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. At
December 31, 2008, we have accrued $4.6 million for potential damages associated
with four separate class actions pending against us in Alameda Superior Court
(California). The class actions were filed between April 6, 2007 and September
27, 2007 on behalf of various Central Concrete Supply Company, Inc. (“Central”)
ready-mixed concrete and transport drivers, alleging primarily that Central
failed to provide meal and rest breaks as required under California law. We have
entered into settlements with one of the classes and a number of individual
drivers. Our accrual is based on those prior settlement values. While
there can be no assurance that we will be able to fully resolve the remaining
class actions without exceeding this existing accrual, based on information
available to us as of December 31, 2008, we believe our existing accrual for
these matters is reasonable.
We
received a letter from a multi-employer pension plan to which one of our
subsidiaries is a contributing employer, providing notice that the Internal
Revenue Service had denied applications by the plan for waivers of the minimum
funding deficiency from prior years, and requesting payment of approximately
$1.3 million in May 2008 as our allocable share of the minimum funding
deficiencies. We are evaluating several options to minimize our
exposure, including transferring our assets and liabilities into another
plan. We may receive future funding deficiency demands from this
particular multi-employer pension plan, or other multi-employer plans to which
we contribute. We are unable to estimate the amount of any potential future
funding deficiency demands, because the actions of each of the other
contributing employers in the plans has an effect on each of the other
contributing employers, the development of a rehabilitation plan by the
trustees, and subsequent submittal to and approval by the Internal Revenue
Service is not predictable, and the allocation of fund assets and return
assumptions by trustees, are variable, as are actual investment returns relative
to the plan assumptions.
Currently, there are no material
product defects claims pending against us. Accordingly, our existing
accruals for claims against us do not reflect any material amounts relating to
products defects claims. While our management is not aware of any
facts that would reasonably be expected to lead to material product defects
claims against us that would have a material adverse effect on our business,
financial condition or results of operations, it is possible that claims could
be asserted against us in the future. We do not maintain insurance
that would cover all damages resulting from product defects
claims. In particular, we generally do not maintain insurance
coverage for the cost of removing and rebuilding structures, or so-called “rip
and tear” coverage. In addition, our indemnification arrangements
with contractors or others, when obtained, generally provide only limited
protection against product defects claims. Due to inherent
uncertainties associated with estimating unasserted claims in our business, we
cannot estimate the amount of any future loss that may be attributable to
unasserted product defects claims related to ready-mixed concrete we have
delivered prior to December 31, 2008.
We
believe that the resolution of all litigation currently pending or threatened
against us or any of our subsidiaries will not materially exceed our existing
accruals for those matters. However, because of the inherent
uncertainty of litigation there is a risk that we may have to increase our
accruals for one or more claims or proceedings to which we or any of our
subsidiaries is a party as more information becomes available or proceedings
progress, and any such increase in accruals could have a material adverse effect
on our consolidated financial condition or results of operations. 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 the
possibility that these claims could materially exceed our related accrual is
remote. 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.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 December 31, 2008.
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.
Lease
Payments
We lease
certain mobile and other equipment, land, facilities, office space and other
items which, in the normal course of business, are renewed or replaced by
subsequent leases. Total expense for such operating leases amounted
to $14.7 million in 2008, $17.8
million in 2007, and $14.6 million in 2006.
Future
minimum rental payments with respect to our lease obligations as of December 31,
2008, were as follows:
|
|
Capital
Leases
|
|
|
Operating
Leases
|
|
|
|
(in
millions)
|
|
Year
ending December 31:
|
|
|
|
|
|
|
2009
|
|
$ |
0.3 |
|
|
$ |
9.0 |
|
2010
|
|
|
0.1 |
|
|
|
6.9 |
|
2011
|
|
|
— |
|
|
|
5.8 |
|
2012
|
|
|
— |
|
|
|
4.8 |
|
2013
|
|
|
— |
|
|
|
4.5 |
|
Later years
|
|
|
— |
|
|
|
6.4 |
|
|
|
$ |
0.4 |
|
|
$ |
37.4 |
|
|
|
|
|
|
|
|
|
|
Total
future minimum rental payments
|
|
$ |
0.5 |
|
|
|
|
|
Less
amounts representing imputed interest
|
|
|
0.1 |
|
|
|
|
|
Present
value of future minimum rental payments under capital
leases
|
|
|
0.4 |
|
|
|
|
|
Less
current portion
|
|
|
0.3 |
|
|
|
|
|
Long-term
capital lease obligations
|
|
$ |
0.1 |
|
|
|
|
|
Insurance Programs
We
maintain third-party insurance coverage against certain risks. 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, workers’ compensation and general liability insurance
programs are $1.0 million, 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 2007.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Performance Bonds
In the
normal course of business, we and our subsidiaries are contingently liable for
performance under $32.3 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.
15.
SIGNIFICANT CUSTOMERS AND SUPPLIERS
We did
not have any customers that accounted for more than 10% of our revenues or any
suppliers that accounted for more than 10% of our cost of goods sold in 2008,
2007 or 2006.
16.
EMPLOYEE BENEFIT PLANS
We
maintain a defined contribution 401(k) profit sharing plan for employees meeting
various employment requirements. Eligible employees may contribute amounts up to
the lesser of 15% of their annual compensation or the maximum amount IRS
regulations permit. We match 100% of employee contributions up to a
maximum of 5% of their compensation. We paid matching contributions
of $3.1 million in 2008, $3.5 million in 2007, and $2.6 million in
2006.
Several
of our subsidiaries are parties to various collective bargaining agreements with
labor unions having multi-year terms that expire on a staggered
basis. Under these agreements, our applicable subsidiaries pay
specified wages to covered employees, observe designated workplace rules and
make payments to multi-employer pension plans and employee benefit trusts rather
than administering the funds on behalf of these employees. During
2006, the “Pension Protection Act of 2006” (the “PPA”) was signed into
law. For multiemployer defined benefit plans, the PPA establishes new
funding requirements or rehabilitation requirements, creates additional funding
rules for plans that are in endangered or critical status, and introduces
enhanced disclosure requirements to participants regarding a plan’s funding
status. The Worker, Retiree and Employer Recovery Act of 2008 (the “WRERA”) was
enacted on December 23, 2008 and provides some funding relief to defined benefit
plan sponsors affected by recent market conditions. The WRERA allows
multiemployer plan sponsors to elect to freeze their current fund status at the
same funding status as the preceding plan year (for example, a calendar year
plan that is not in critical or endangered status for 2008 may elect to retain
that status for 2009), and sponsors of multiemployer plans in endangered or
critical status in plan years beginning in 2008 or 2009 are allowed a three-year
extension of funding improvement or rehabilitation plans (extends timeline for
these plans to accomplish their goals from 10 years to 13 years, or from 15
years to 18 years for seriously endangered plans).
In
connection with our collective bargaining agreements, we participate with other
companies in the unions’ multi-employer pension plans. These plans cover
substantially all of U.S. Concrete’s employees who are members of such unions.
The Employee Retirement Income Security Act of 1974, as amended by the
Multi-Employer Pension Plan Amendments Act of 1980, imposes liabilities on
employers who are contributors to a multi-employer plan in the event of the
employer’s withdrawal from, or on termination of, that plan. In 2001,
a subsidiary of one of our subsidiaries withdrew from the multi-employer pension
plan of the union that represented several of its employees. That union
disclaimed interest in representing those employees. There are no
plans to withdraw from any other multi-employer plans. Our
contributions to these plans were $15.3 million in 2008, $13.7 million in 2007,
and $15.1 million in 2006.
See Note
10 for discussions of U.S. Concrete’s incentive plans and employee stock
purchase plan.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17. FINANCIAL
STATEMENTS OF SUBSIDIARY GUARANTORS
All of
our subsidiaries, excluding our Michigan 60%-owned subsidiary, Superior
Materials Holdings, LLC (see Note 4) 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, Inc., the parent company and its subsidiary guarantors (including
minor subsidiaries), our 60%-owned Michigan non-guarantor subsidiary and our
total company as of and for the years ended December 31, 2008 and
2007.
Condensed Consolidating Balance Sheet
As of December 31, 2008:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
Material
Holdings,
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
— |
|
|
$ |
4,685 |
|
|
$ |
638 |
|
|
$ |
— |
|
|
$ |
5,323 |
|
Trade accounts receivable,
net
|
|
|
— |
|
|
|
89,483 |
|
|
|
10,786 |
|
|
|
— |
|
|
|
100,269 |
|
Inventories
|
|
|
— |
|
|
|
28,438 |
|
|
|
4,330 |
|
|
|
— |
|
|
|
32,768 |
|
Deferred income
taxes
|
|
|
— |
|
|
|
11,576 |
|
|
|
— |
|
|
|
— |
|
|
|
11,576 |
|
Prepaid expenses
|
|
|
— |
|
|
|
3,178 |
|
|
|
341 |
|
|
|
— |
|
|
|
3,519 |
|
Other current
assets
|
|
|
4,886 |
|
|
|
7,977 |
|
|
|
938 |
|
|
|
— |
|
|
|
13,801 |
|
Assets held for
sale
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total current
assets
|
|
|
4,886 |
|
|
|
145,337 |
|
|
|
17,033 |
|
|
|
— |
|
|
|
167,256 |
|
Property,
plant and equipment, net
|
|
|
— |
|
|
|
242,371 |
|
|
|
30,398 |
|
|
|
— |
|
|
|
272,769 |
|
Goodwill
|
|
|
— |
|
|
|
59,197 |
|
|
|
— |
|
|
|
— |
|
|
|
59,197 |
|
Investment
in Subsidiaries
|
|
|
369,853 |
|
|
|
26,334 |
|
|
|
— |
|
|
|
(396,187 |
) |
|
|
— |
|
Other
assets
|
|
|
6,751 |
|
|
|
1,747 |
|
|
|
90 |
|
|
|
— |
|
|
|
8,588 |
|
Total assets
|
|
$ |
381,490 |
|
|
$ |
474,986 |
|
|
$ |
47,521 |
|
|
$ |
(396,187 |
) |
|
$ |
507,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term
debt
|
|
$ |
819 |
|
|
$ |
2,291 |
|
|
$ |
261 |
|
|
$ |
— |
|
|
$ |
3,371 |
|
Accounts payable
|
|
|
— |
|
|
|
32,870 |
|
|
|
13,050 |
|
|
|
— |
|
|
|
45,920 |
|
Accrued
liabilities
|
|
|
7,000 |
|
|
|
44,922 |
|
|
|
2,559 |
|
|
|
— |
|
|
|
54,481 |
|
Total current
liabilities
|
|
|
7,819 |
|
|
|
80,083 |
|
|
|
15,870 |
|
|
|
— |
|
|
|
103,772 |
|
Long-term
debt, net of current maturities
|
|
|
295,931 |
|
|
|
1,369 |
|
|
|
5,317 |
|
|
|
— |
|
|
|
302,617 |
|
Other
long-term obligations and deferred credits
|
|
|
7,944 |
|
|
|
578 |
|
|
|
— |
|
|
|
— |
|
|
|
8,522 |
|
Deferred
income taxes
|
|
|
— |
|
|
|
12,536 |
|
|
|
— |
|
|
|
— |
|
|
|
12,536 |
|
Total
liabilities
|
|
|
311,694 |
|
|
|
94,566 |
|
|
|
21,187 |
|
|
|
— |
|
|
|
427,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
— |
|
|
|
10,567 |
|
|
|
— |
|
|
|
— |
|
|
|
10,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37 |
|
Additional paid-in
capital
|
|
|
265,453 |
|
|
|
542,194 |
|
|
|
38,736 |
|
|
|
(580,930 |
) |
|
|
265,453 |
|
Retained
deficit
|
|
|
(192,564 |
) |
|
|
(172,341 |
) |
|
|
(12,402 |
) |
|
|
184,743 |
|
|
|
(192,564 |
) |
Treasury stock, at
cost
|
|
|
(3,130 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,130 |
) |
Total stockholders'
equity
|
|
|
69,796 |
|
|
|
369,853 |
|
|
|
26,334 |
|
|
|
(396,187 |
) |
|
|
69,796 |
|
Total liabilities and
stockholders' equity
|
|
$ |
381,490 |
|
|
$ |
474,986 |
|
|
$ |
47,521 |
|
|
$ |
(396,187 |
) |
|
$ |
507,810 |
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statement of
Operations
Year ended December 31, 2008:
|
|
U.S. Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
Materials
Holdings,
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenue
|
|
$ |
— |
|
|
$ |
685,421 |
|
|
$ |
68,877 |
|
|
$ |
— |
|
|
$ |
754,298 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
— |
|
|
|
572,518 |
|
|
|
66,930 |
|
|
|
— |
|
|
|
639,448 |
|
Goodwill
and other asset impairments
|
|
|
— |
|
|
|
135,612 |
|
|
|
19 |
|
|
|
— |
|
|
|
135,631 |
|
Selling,
general and administrative expenses
|
|
|
— |
|
|
|
73,659 |
|
|
|
6,109 |
|
|
|
— |
|
|
|
79,768 |
|
Depreciation,
depletion and amortization
|
|
|
— |
|
|
|
25,447 |
|
|
|
4,455 |
|
|
|
— |
|
|
|
29,902 |
|
Loss
from operations
|
|
|
— |
|
|
|
(121,815 |
) |
|
|
(8,636 |
) |
|
|
— |
|
|
|
(130,451 |
) |
Interest
income
|
|
|
109 |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
114 |
|
Interest
expense
|
|
|
26,218 |
|
|
|
366 |
|
|
|
586 |
|
|
|
— |
|
|
|
27,170 |
|
Other
income, net
|
|
|
— |
|
|
|
1,836 |
|
|
|
148 |
|
|
|
— |
|
|
|
1,984 |
|
Loss
before income tax provision (benefit) and minority
interest
|
|
|
(26,109 |
) |
|
|
(120,340 |
) |
|
|
(9,074 |
) |
|
|
— |
|
|
|
(155,523 |
) |
Income
tax provision (benefit)
|
|
|
(9,138 |
) |
|
|
(10,539 |
) |
|
|
76 |
|
|
|
— |
|
|
|
(19,601 |
) |
Minority
interest in consolidated subsidiary
|
|
|
— |
|
|
|
(3,625 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3,625 |
) |
Equity
earnings in subsidiary
|
|
|
(115,475 |
) |
|
|
(9,150 |
) |
|
|
— |
|
|
|
124,625 |
|
|
|
— |
|
Loss
from continuing operations
|
|
|
(132,446 |
) |
|
|
(115,326 |
) |
|
|
(9,150 |
) |
|
|
124,625 |
|
|
|
(132,297 |
) |
Loss
from discontinued operations, net of tax benefit of $81
|
|
|
— |
|
|
|
(149 |
) |
|
|
— |
|
|
|
— |
|
|
|
(149 |
) |
Net
loss
|
|
$ |
(132,446 |
) |
|
$ |
(115,475 |
) |
|
$ |
(9,150 |
) |
|
$ |
124,625 |
|
|
$ |
(132,446 |
) |
Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2008:
|
|
U.S. Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
Materials
Holdings,
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Net
cash provided by (used in) operating activities
|
|
$ |
(10,080 |
) |
|
$ |
37,794 |
|
|
$ |
1,964 |
|
|
$ |
— |
|
|
$ |
29,678 |
|
Net
cash provided by (used in) investing activities
|
|
|
— |
|
|
|
(39,708 |
) |
|
|
192 |
|
|
|
— |
|
|
|
(39,516 |
) |
Net
cash provided by (used in) financing activities
|
|
|
10,080 |
|
|
|
(6,769 |
) |
|
|
(3,000 |
) |
|
|
— |
|
|
|
311 |
|
Net
decrease in cash and cash equivalents
|
|
|
— |
|
|
|
(8,683 |
) |
|
|
(844 |
) |
|
|
— |
|
|
|
(9,527 |
) |
Cash
and cash equivalents at the beginning of the period
|
|
|
— |
|
|
|
13,368 |
|
|
|
1,482 |
|
|
|
— |
|
|
|
14,850 |
|
Cash
and cash equivalents at the end of the period
|
|
$ |
— |
|
|
$ |
4,685 |
|
|
$ |
638 |
|
|
$ |
— |
|
|
$ |
5,323 |
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Balance Sheet
As of December 31, 2007:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
Material
Holdings,
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
— |
|
|
$ |
13,368 |
|
|
$ |
1,482 |
|
|
$ |
— |
|
|
$ |
14,850 |
|
Trade accounts receivable,
net
|
|
|
— |
|
|
|
90,763 |
|
|
|
11,849 |
|
|
|
— |
|
|
|
102,612 |
|
Inventories
|
|
|
— |
|
|
|
28,182 |
|
|
|
4,375 |
|
|
|
— |
|
|
|
32,557 |
|
Deferred income
taxes
|
|
|
— |
|
|
|
10,937 |
|
|
|
— |
|
|
|
— |
|
|
|
10,937 |
|
Prepaid
expenses
|
|
|
— |
|
|
|
4,625 |
|
|
|
631 |
|
|
|
— |
|
|
|
5,256 |
|
Other current
assets
|
|
|
31 |
|
|
|
10,584 |
|
|
|
772 |
|
|
|
— |
|
|
|
11,387 |
|
Assets held for
sale
|
|
|
— |
|
|
|
7,273 |
|
|
|
— |
|
|
|
— |
|
|
|
7,273 |
|
Total current
assets
|
|
|
31 |
|
|
|
165,732 |
|
|
|
19,109 |
|
|
|
— |
|
|
|
184,872 |
|
Property,
plant and equipment, net
|
|
|
— |
|
|
|
232,004 |
|
|
|
35,006 |
|
|
|
— |
|
|
|
267,010 |
|
Goodwill
|
|
|
— |
|
|
|
184,999 |
|
|
|
— |
|
|
|
— |
|
|
|
184,999 |
|
Investment
in subsidiaries
|
|
|
502,426 |
|
|
|
35,484 |
|
|
|
— |
|
|
|
(537,910 |
) |
|
|
— |
|
Other
assets
|
|
|
8,251 |
|
|
|
1,998 |
|
|
|
126 |
|
|
|
— |
|
|
|
10,375 |
|
Total assets
|
|
$ |
510,708 |
|
|
$ |
620,217 |
|
|
$ |
54,241 |
|
|
$ |
(537,910 |
) |
|
$ |
647,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term
debt
|
|
$ |
— |
|
|
$ |
2,816 |
|
|
$ |
356 |
|
|
$ |
— |
|
|
$ |
3,172 |
|
Accounts payable
|
|
|
— |
|
|
|
40,801 |
|
|
|
7,359 |
|
|
|
— |
|
|
|
48,160 |
|
Accrued
liabilities
|
|
|
13,932 |
|
|
|
28,659 |
|
|
|
2,820 |
|
|
|
— |
|
|
|
45,411 |
|
Total current
liabilities
|
|
|
13,932 |
|
|
|
72,276 |
|
|
|
10,535 |
|
|
|
— |
|
|
|
96,743 |
|
Long-term
debt, net of current
maturities
|
|
|
283,807 |
|
|
|
3,299 |
|
|
|
8,222 |
|
|
|
— |
|
|
|
295,328 |
|
Other
long-term obligations and deferred credits
|
|
|
7,864 |
|
|
|
1,261 |
|
|
|
— |
|
|
|
— |
|
|
|
9,125 |
|
Deferred
income
taxes
|
|
|
— |
|
|
|
26,763 |
|
|
|
— |
|
|
|
— |
|
|
|
26,763 |
|
Total
liabilities
|
|
|
305,603 |
|
|
|
103,599 |
|
|
|
18,757 |
|
|
|
— |
|
|
|
427,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
— |
|
|
|
14,192 |
|
|
|
— |
|
|
|
— |
|
|
|
14,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
39 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
39 |
|
Additional paid-in
capital
|
|
|
267,817 |
|
|
|
559,292 |
|
|
|
38,736 |
|
|
|
(598,028 |
) |
|
|
267,817 |
|
Retained
deficit
|
|
|
(60,118 |
) |
|
|
(56,866 |
) |
|
|
(3,252 |
) |
|
|
60,118 |
|
|
|
(60,118 |
) |
Treasury stock, at
cost
|
|
|
(2,633 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,633 |
) |
Total stockholders'
equity
|
|
|
205,105 |
|
|
|
502,426 |
|
|
|
35,484 |
|
|
|
(537,910 |
) |
|
|
205,105 |
|
Total liabilities and
stockholders' equity
|
|
$ |
510,708 |
|
|
$ |
620,217 |
|
|
$ |
54,241 |
|
|
$ |
(537,910 |
) |
|
$ |
647,256 |
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statement of Operations
Year ended December 31, 2007:
|
|
U.S. Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
Materials
Holdings,
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenue
|
|
$ |
— |
|
|
$ |
721,777 |
|
|
$ |
82,026 |
|
|
$ |
— |
|
|
$ |
803,803 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
— |
|
|
|
588,115 |
|
|
|
75,517 |
|
|
|
— |
|
|
|
663,632 |
|
Goodwill
and other asset impairments
|
|
|
— |
|
|
|
81,993 |
|
|
|
249 |
|
|
|
— |
|
|
|
82,242 |
|
Selling,
general and administrative expenses
|
|
|
— |
|
|
|
64,678 |
|
|
|
4,991 |
|
|
|
— |
|
|
|
69,669 |
|
Depreciation,
depletion and amortization
|
|
|
— |
|
|
|
25,123 |
|
|
|
3,759 |
|
|
|
— |
|
|
|
28,882 |
|
Loss
from operations
|
|
|
— |
|
|
|
(38,132 |
) |
|
|
(2,490 |
) |
|
|
— |
|
|
|
(40,622 |
) |
Interest
income
|
|
|
76 |
|
|
|
38 |
|
|
|
— |
|
|
|
— |
|
|
|
114 |
|
Interest
expense
|
|
|
27,117 |
|
|
|
499 |
|
|
|
476 |
|
|
|
— |
|
|
|
28,092 |
|
Other
income, net
|
|
|
— |
|
|
|
3,514 |
|
|
|
73 |
|
|
|
— |
|
|
|
3,587 |
|
Loss
before income tax provision (benefit) and minority
interest
|
|
|
(27,041 |
) |
|
|
(35,079 |
) |
|
|
(2,893 |
) |
|
|
— |
|
|
|
(65,013 |
) |
Income
tax provision (benefit)
|
|
|
(4,222 |
) |
|
|
3,911 |
|
|
|
359 |
|
|
|
— |
|
|
|
48 |
|
Minority
interest in consolidated subsidiary
|
|
|
— |
|
|
|
(1,301 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,301 |
) |
Equity
earnings in subsidiary
|
|
|
(46,182 |
) |
|
|
(3,252 |
) |
|
|
— |
|
|
|
49,434 |
|
|
|
— |
|
Loss
from continuing operations
|
|
|
(69,001 |
) |
|
|
(40,941 |
) |
|
|
(3,252 |
) |
|
|
49,434 |
|
|
|
(63,760 |
) |
Loss
from discontinued operations, net of tax benefit of $81
|
|
|
— |
|
|
|
(5,241 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5,241 |
) |
Net
loss
|
|
$ |
(69,001 |
) |
|
$ |
(46,182 |
) |
|
$ |
(3,252 |
) |
|
$ |
49,434 |
|
|
$ |
(69,001 |
) |
Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2007:
|
|
U.S. Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
Materials
Holdings,
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Net
cash provided by (used in) operating activities
|
|
$ |
11,534 |
|
|
$ |
40,811 |
|
|
$ |
(8,007 |
) |
|
$ |
— |
|
|
$ |
44,338 |
|
Net
cash provided by (used in) investing activities
|
|
|
— |
|
|
|
(34,232 |
) |
|
|
148 |
|
|
|
— |
|
|
|
(34,084 |
) |
Net
cash provided by (used in) financing activities
|
|
|
(11,534 |
) |
|
|
(1,015 |
) |
|
|
8,341 |
|
|
|
— |
|
|
|
(4,208 |
) |
Net
increase in cash and cash equivalents
|
|
|
— |
|
|
|
5,564 |
|
|
|
482 |
|
|
|
— |
|
|
|
6,046 |
|
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
|
|
$ |
— |
|
|
$ |
13,368 |
|
|
$ |
1,482 |
|
|
$ |
— |
|
|
$ |
14,850 |
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
18. QUARTERLY
SUMMARY (unaudited)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
|
(in thousands, except per share data)
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
162,107 |
|
|
$ |
206,047 |
|
|
$ |
212,819 |
|
|
$ |
173,325 |
|
Income (loss) from continuing
operations(1)
|
|
|
(5,129 |
) |
|
|
3,303 |
|
|
|
1,722 |
|
|
|
(132,193 |
) |
Loss from discontinued
operations(2)
|
|
|
(149 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss)
|
|
|
(5,278 |
) |
|
|
3,303 |
|
|
|
1,722 |
|
|
|
(132,193 |
) |
Basic earnings (loss) per
share(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
$ |
(0.13 |
) |
|
$ |
0.09 |
|
|
$ |
0.04 |
|
|
$ |
(3.63 |
) |
From
discontinued operations
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss)
|
|
$ |
(0.14 |
) |
|
$ |
0.09 |
|
|
$ |
0.04 |
|
|
$ |
(3.63 |
) |
Diluted earnings (loss) per share
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing
operations
|
|
$ |
(0.13 |
) |
|
$ |
0.08 |
|
|
$ |
0.04 |
|
|
$ |
(3.63 |
) |
From discontinued
operations
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss)
|
|
$ |
(0.14 |
) |
|
$ |
0.08 |
|
|
$ |
0.04 |
|
|
$ |
(3.63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
157,494 |
|
|
$ |
209,507 |
|
|
$ |
238,086 |
|
|
$ |
198,716 |
|
Income (loss) from continuing
operations(1)
|
|
|
(5,224 |
) |
|
|
7,044 |
|
|
|
10,127 |
|
|
|
(75,707 |
) |
Loss from discontinued
operations(2)
|
|
|
(505 |
) |
|
|
(220 |
) |
|
|
(83 |
) |
|
|
(4,433 |
) |
Net income (loss)
|
|
|
(5,729 |
) |
|
|
6,824 |
|
|
|
10,044 |
|
|
|
(80,140 |
) |
Basic and diluted earnings (loss)
per share(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
$ |
(0.14 |
) |
|
$ |
0.18 |
|
|
$ |
0.26 |
|
|
$ |
(1.97 |
) |
From
discontinued operations
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.12 |
) |
Net income (loss)
|
|
$ |
(0.15 |
) |
|
$ |
0.18 |
|
|
$ |
0.26 |
|
|
$ |
(2.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
124,920 |
|
|
$ |
171,692 |
|
|
$ |
234,700 |
|
|
$ |
197,198 |
|
Income (loss) from continuing
operations(1)
|
|
|
(2,290 |
) |
|
|
7,309 |
|
|
|
11,206 |
|
|
|
(23,528 |
) |
Income (loss) from discontinued
operations
|
|
|
(411 |
) |
|
|
(106 |
) |
|
|
18 |
|
|
|
(288 |
) |
Net income (loss)
|
|
|
(2,701 |
) |
|
|
7,203 |
|
|
|
11,224 |
|
|
|
(23,816 |
) |
Basic earnings (loss) per
share(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
$ |
(0.07 |
) |
|
$ |
0.19 |
|
|
$ |
0.30 |
|
|
$ |
(0.61 |
) |
From
discontinued operations
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
Net income (loss)
|
|
$ |
(0.08 |
) |
|
$ |
0.19 |
|
|
$ |
0.30 |
|
|
$ |
(0.62 |
) |
Diluted earnings (loss) per share
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing
operations
|
|
$ |
(0.07 |
) |
|
$ |
0.19 |
|
|
$ |
0.29 |
|
|
$ |
(0.61 |
) |
From discontinued
operations
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
Net income (loss)
|
|
$ |
(0.08 |
) |
|
$ |
0.19 |
|
|
$ |
0.29 |
|
|
$ |
(0.62 |
) |
|
(1)
|
The
fourth quarter results include an impairment charge of $119.8 million, net
of income taxes in 2008, $76.4 million, net of income taxes, in 2007 and
$26.8 million, net of income taxes, in 2006, pursuant to our annual review
of goodwill in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 142, “Goodwill and Other Intangible
Assets.”
|
|
(2)
|
In
the fourth quarter of 2007, we discontinued the operations of three
business units in certain markets. The financial data for prior
quarters of 2007 and 2006 have been restated to segregate the effects of
the operations of those discontinued
units.
|
|
(3)
|
We
computed earnings (loss) per share (“EPS”) for each quarter using the
weighted-average number of shares outstanding during the quarter, while
EPS for the fiscal year is computed using the weighted-average number of
shares outstanding during the year. Thus, the sum of the EPS
for each of the four quarters may not equal the EPS for the fiscal
year.
|
Item
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not
applicable.
Item
9A. Controls and
Procedures
Disclosure
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 December 31, 2008. Based on that evaluation,
our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures were effective as of December 31, 2008 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 December 31, 2008,
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.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as that term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal
control over financial reporting is a process designed to provide reasonable,
but not absolute, assurance regarding the reliability of financial reporting and
the preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements or acts of fraud. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies and procedures may
deteriorate.
Under the
supervision and with the participation of our management, including our
principal executive, financial and accounting officers, we have conducted an
evaluation of the effectiveness of our internal control over financial reporting
based on the framework in “Internal Control – Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. This
evaluation included a review of the documentation surrounding our internal
control over financial reporting, an evaluation of the design effectiveness of
those controls and testing of the operating effectiveness of those controls.
Based on that evaluation, our management has concluded that our internal control
over financial reporting was effective at a reasonable assurance level as of
December 31, 2008.
The
effectiveness of our control over financial reporting as of December 31, 2008
has been audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included
herein.
Item
9B. Other
Information
Not
applicable.
PART
III
In Items
10, 11, 12, 13 and 14 below, we are incorporating by reference the information
we refer to in those Items from the definitive proxy statement for our 2009
Annual Meeting of Stockholders (the “2009 Annual Proxy Statement”). We intend to
file that definitive proxy statement with the SEC by April 30,
2009.
Item
10. Directors, Executive Officers and
Corporate Governance
For the
information this Item requires, please see the information under the headings
“Proposal No. 1—Election of Directors,” “Executive Officers,” “Information
Concerning the Board of Directors and Committees” and “Section 16(a) Beneficial
Ownership Reporting Compliance” in the 2009 Annual Proxy Statement, which is
incorporated in this Item by this reference.
We have a
code of ethics applicable to all our employees and directors. In addition, our
principal executive, financial and accounting officers are subject to the
provisions of the Code of Ethics of U.S. Concrete, Inc. for chief executive
officer and senior financial officers, a copy of which is available on our Web
site at www.us-concrete.com.
In the event that we amend or waive any of the provisions of these codes of
ethics applicable to our principal executive, financial and accounting officers,
we intend to disclose that action on our website.
Item
11. Executive
Compensation
For the information this Item requires,
please see the information under the headings “Compensation Discussion and
Analysis,” “Compensation of Directors,” “Compensation of Executive Officers,”
“Compensation Committee Interlocks and Insider Participation” and “Compensation
Committee Report” in the 2009 Annual Proxy Statement, which is incorporated in
this Item by this reference.
Item
12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
For the
information this Item requires, please see the information (1) under the heading
“Equity Compensation Plan Information” in Item 5 of this report and (2) under
the heading “Security Ownership of Certain Beneficial Owners and Management” in
the 2009 Annual Proxy Statement, which is incorporated in this Item by this
reference.
All
shares of common stock issuable under our compensation plans are subject to
adjustment to reflect any increase or decrease in the number of shares
outstanding as a result of stock splits, combination of shares,
recapitalizations, mergers or consolidations.
Item
13. Certain
Relationships and Related Transactions, and Director
Independence
For the
information this Item requires, please see the information under the heading
“Certain Relationships and Related Transactions” in the 2009 Annual Proxy
Statement, which is incorporated in this Item by this reference.
Item
14. Principal Accountant Fees and
Services
For the
information this Item requires, please see the information appearing under the
heading “Fees Incurred by U.S. Concrete to Independent Registered Public
Accounting Firm” in the 2009 Annual Proxy Statement, which is incorporated in
this Item by this reference.
PART
IV
Item
15. Exhibits and Financial Statement
Schedules
(a)(1)
Financial Statements.
For the
information this item requires, please see Index to Consolidated Financial
Statements on page 48 of this report.
(2)
Financial Statement Schedules.
All
financial statement schedules are omitted because they are not required or the
required information is shown in our Consolidated Financial Statements or the
notes thereto.
(3)
Exhibits.
Exhibit
Number
|
|
Description
|
|
|
|
2.1
*
|
|
—Asset
Purchase Agreement dated as of December 5, 2005 by and among U.S.
Concrete, Inc., Beall Concrete Enterprises, Ltd., Go-Crete, South Loop
Development Corporation and John D. Yowell, Jr. (Form 10-K for year ended
December 31, 2005 (File No. 000-26025), Exhibit 2.1).
|
|
|
|
2.2
*
|
|
—Stock
Purchase Agreement dated as of June 27, 2006 by and among U.S. Concrete,
Alliance Haulers, Inc., Alberta Investments, Inc., Atlas
Concrete Inc. and Wild Rose Holdings Ltd. (Form 8-K dated June 28, 2006
(File No. 000- 26025), Exhibit 2.1).
|
|
|
|
3.1
*
|
|
—Restated
Certificate of Incorporation of U.S. Concrete dated May 9, 2006 (Form 8-K
dated May 9, 2006 (File No. 000-26025), Exhibit 3.1).
|
|
|
|
3.2
*
|
|
—Amended
and Restated Bylaws of U.S. Concrete, as amended (Post Effective Amendment
No. 1 to Form S-3 (Reg. No. 333-42860), Exhibit 4.2).
|
|
|
|
4.1
*
|
|
—Certificate
of Designation of Junior Participating Preferred Stock (Form 10-Q for the
quarter ended June 30, 2000 (File No. 000-26025), Exhibit
3.3).
|
|
|
|
4.2
*
|
|
—Form
of certificate representing common stock (Form S-1 (Reg. No. 333-74855),
Exhibit 4.3).
|
|
|
|
4.3
*
|
|
—Rights
Agreement by and between U.S. Concrete and American Stock Transfer &
Trust Company, including form of Rights Certificate attached as Exhibit B
thereto (Form S-1 (Reg. No. 333-74855), Exhibit 4.4).
|
|
|
|
4.4
*
|
|
—Indenture
among U.S. Concrete, the Subsidiary Guarantors party thereto and Wells
Fargo Bank, National Association, as Trustee, dated as of March 31, 2004,
for the 8⅜% Senior Subordinated Notes due 2014 (Form 10-Q for the quarter
ended March 31, 2004 (File No. 000-26025), Exhibit
4.5).
|
|
|
|
4.5
*
|
|
—Form
of Note (Form 10-Q for the quarter ended March 31, 2004 (File No.
000-26025), included as Exhibit A to Exhibit
4.7).
|
|
|
|
4.6
*
|
|
—Notation
of Guarantee by the Subsidiary Guarantors dated March 31, 2004 (Form 10-Q
for the quarter ended March 31, 2004 (File No.
000-26025), Exhibit 4.7).
|
|
|
|
4.7
*
|
|
—First
Supplemental Indenture among U.S. Concrete, the Existing Guarantors party
thereto, the Additional Guarantors party thereto and Wells Fargo Bank,
National Association, as Trustee, dated as of July 5, 2006, for the 8⅜%
Senior Subordinated Notes due 2014 (Form 8-K dated June 29, 2006 (File No.
000-26025), Exhibit 4.1).
|
|
|
|
4.8
*
|
|
—Amended
and Restated Credit Agreement dated as of June 30, 2006 among U.S.
Concrete, the Lenders and Issuers named therein and Citicorp North
America, Inc. as administrative agent (Form 8-K dated June 29, 2006 (File
No. 000-26025), Exhibit 4.3).
|
|
|
|
4.9
*
|
|
—Amendment
No. 1 to Amended and Restated Credit Agreement, effective as of March 2,
2007, among U.S. Concrete, Inc., Citicorp North America, Inc.,
Bank of America, N.A., JP Morgan Chase Bank and the Lenders and Issuers
named therein (Form 10-Q for the quarter ended March 31, 2007 (file
No. 000-20025), Exhibit 4.1).
|
|
|
|
4.10
*
|
|
—Amendment
No. 2 to Amended and Restated Credit Agreement, effective as of November
9, 2007, among U.S. Concrete, Inc., Citicorp North America Inc., Bank of
America, N.A., JP Morgan Chase Bank and the Lenders and Issuers named
therein (Form 8-K dated November 9, 2007 (File No. 000-26025), Exhibit
4.1).
|
|
|
|
4.11
*
|
|
—Amendment
No. 3 to Amended and Restated Credit Agreement, dated as of July 11, 2008,
among U.S. Concrete, Inc., Citicorp North America Inc., Bank of America,
N.A., JP Morgan Chase Bank and the Lenders and Issuers named therein (Form
8-K dated July 11, 2008 (File No. 000-26025), Exhibit
4.1).
|
|
|
|
4.12
*
|
|
—Credit
Agreement, dated as of April 6, 2007, by and between Superior Materials,
LLC, BWB, LLC and Comerica Bank (Form 10-Q for the quarter ended
March 31, 2007 (File No. 000-26025),
Exhibit 4.2).
|
|
|
|
4.13
*
|
|
—First
Amendment to Credit Agreement, dated as of February 29, 2008, by and
between Superior Materials, LLC, BWB, LLC and
Comerica Bank.
|
|
|
|
4.14
*
|
|
—Second
Amendment to Credit Agreement, dated as of March 3, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank (Form 10-Q
for the quarter ended March 31, 2008 (File No. 000-26025), Exhibit
4.1).
|
|
|
|
4.15
*
|
|
—Third
Amendment to Credit Agreement, dated as of March 31, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank (Form 10-Q for the
quarter ended March 31, 2008 (File No. 000-26025), Exhibit
4.2).
|
Exhibit
Number
|
|
Description
|
|
|
|
4.16
*
|
|
—Fourth
Amendment to Credit Agreement, dated as of May 31, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank (Form 10-Q for the
quarter ended June 30, 2008 (File No. 000-26025), Exhibit
4.2).
|
|
|
|
4.17
*
|
|
—Fifth
Amendment to Credit Agreement, dated as of August 6, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank, and Comfort Letter in
support of Superior Materials, LLC and BWB, LLC (Form 10-Q for the quarter
ended June 30, 2008 (File No. 000-26025), Exhibit 4.3).
|
|
|
|
10.1
*†
|
|
—1999
Incentive Plan of U.S. Concrete (Form S-1 (Reg. No. 333-74855), Exhibit
10.1).
|
|
|
|
10.2
*†
|
|
—Amendment
No. 1 to 1999 Incentive Plan of U.S. Concrete, Inc. dated January 9, 2003
(Form S-8 dated December 20, 2004 (Reg. No. 333-121458), Exhibit
10.2).
|
|
|
|
10.3
*†
|
|
—Amendment
No. 2 to 1999 Incentive Plan of U.S. Concrete, Inc. dated December 17,
2004 (Form S-8 dated December 20, 2004 (Reg. No. 333-121458), Exhibit
10.3).
|
|
|
|
10.4
*†
|
|
—Amendment
No. 3 to 1999 Incentive Plan of U.S. Concrete, Inc. effective May 17, 2005
(Proxy Statement relating to 2005 annual meeting of stockholders, Appendix
B).
|
|
|
|
10.5
*†
|
|
—Amendment
No. 4 to 1999 Incentive Plan of U.S. Concrete, Inc. dated February 13,
2006 (Form 10-K dated March 16, 2006 (File No. 000-26025), Exhibit
10.5).
|
|
|
|
10.6
*†
|
|
—Amendment
No. 5 to 1999 Incentive Plan of U.S. Concrete, Inc. dated March 7, 2007;
effective January 1, 1999 (Form 10-K dated March 13, 2007 (File No.
000-26025), Exhibit 10.8)).
|
|
|
|
10.7
*†
|
|
—Amendment
No. 6 to 1999 Incentive Plan of U.S. Concrete, Inc. dated as of April 11,
2008 (Form 8-K dated April 11, 2008 (File No. 000-26025), Exhibit
10.1).
|
|
|
|
10.8
*
|
|
—U.S.
Concrete 2000 Employee Stock Purchase Plan effective May 16, 2000 (Proxy
Statement relating to 2000 annual meeting of stockholders, Appendix
A).
|
|
|
|
10.9
*
|
|
—Amendment
No. 1 to 2000 Employee Stock Purchase Plan of U.S. Concrete, Inc.
effective December 16, 2005 (Form 8-K dated December 16, 2005 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.10
*
|
|
—2001
Employee Incentive Plan of U.S. Concrete, Inc. (Form S-8 dated May 11,
2001 (Reg. No. 333-60710), Exhibit 4.6).
|
|
|
|
10.11
*
|
|
—Amendment
No. 1 to 2001 Employee Incentive Plan of U.S. Concrete, Inc. dated
December 17, 2004 (Form S-8 dated December 20, 2004 (Reg. No. 333-121458),
Exhibit 10.6).
|
|
|
|
10.12
*†
|
|
—Consulting
Agreement dated February 23, 2007 by and between U.S. Concrete and Eugene
P. Martineau (Form 8-K dated February 23, 2007 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.13
*
|
|
—Contribution
Agreement, dated as of March 26, 2007, by and among, BWB, Inc. of Michigan
Builders’, Redi-Mix, LLC, Kurtz Gravel Company, Superior Materials, Inc.
USC Michigan, Inc., Edw. C. Levy Co. and Superior Joint Venture LLC (Form
8-K dated March 26, 2007 (File No. 000-26025), Exhibit
10.1).
|
|
|
|
10.14
*
|
|
—Operating
Agreement of Superior Materials, LLC dated effective as of April 1, 2007,
by and between Kurtz Gravel Company, Superior Materials, Inc. and Edw. C.
Levy Co., together with related Joinder Agreement dated effective April 2,
2007 by BWB, Inc. of Michigan Builders’, Redi-Mix, LLC, USC Michigan, Inc.
and Superior Material Holdings LLC (Form 8-K dated April 1, 2007 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.15
*
|
|
—Guaranty
dated as of April 1, 2007 by U.S. Concrete, Inc. in favor of Edw. C. Levy
Co. and Superior Materials Holdings, LLC (Form 8-K dated April 1, 2007
(File No. 000-26025), Exhibit 10.2).
|
|
|
|
10.16
*†
|
|
—Form
of Indemnification Agreement between U.S. Concrete and each of its
directors and officers (Form 10K dated March 16, 2006 (File No. 000-26025)
Exhibit 10.22).
|
|
|
|
10.17
*†
|
|
—Form
of U.S. Concrete, Inc. Restricted Stock Award Agreement for employees
(Form 10-K for the year ended December 31, 2004 (File No. 000-26025),
Exhibit 10.21).
|
|
|
|
10.18
*†
|
|
—Form
of U.S. Concrete, Inc. Non-Qualified Stock Option Award Agreement for
nonemployee directors (Form 10-K for the year ended December 31, 2004
(File No. 000-26025), Exhibit 10.22).
|
|
|
|
10.19
*†
|
|
—Form
of U.S. Concrete, Inc. Non-Qualified Stock Option Award Agreement for
employees (Form 10-K for the year ended December 31, 2004 (File No.
000-26025), Exhibit
10.23).
|
Exhibit
Number
|
|
Description
|
|
|
|
10.20
*†
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2005 Annual Salaried Team Member Incentive
Plan, effective April 8, 2005 (Form 8-K dated April 8, 2005 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.21
†
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2008 Annual Salaried Team Member Incentive
Plan.
|
|
|
|
10.22
†
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2009 Annual Team Member Incentive
Plan.
|
|
|
|
10.23
*†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Michael W. Harlan (Form 8-K dated July 31, 2007 (File No. 000-26025),
Exhibit 10.1).
|
|
|
|
10.24
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Michael W. Harlan.
|
|
|
|
10.25
*†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Robert D. Hardy (Form 8-K dated July 31, 2007 (File No. 000-26025),
Exhibit 10.2).
|
|
|
|
10.26
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Robert D. Hardy.
|
|
|
|
10.27
*†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Thomas J. Albanese (Form 8-K dated July 31, 2007 (File No. 000-26025),
Exhibit 10.3).
|
|
|
|
10.28
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Thomas J. Albanese.
|
|
|
|
10.29
*†
|
|
—Severance
Agreement, dated as of January 18, 2008, by and between U.S. Concrete,
Inc. and William T. Albanese (Form 8-K dated January 18, 2008 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.30
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and William T.
Albanese.
|
|
|
|
10.31
†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Terry Green.
|
|
|
|
10.32
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Terry Green.
|
|
|
|
10.33
†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Scott Evans.
|
|
|
|
10.34
*†
|
|
—U.S.
Concrete, Inc. 2008 Stock Incentive Plan (Form S-8 dated May 22, 2008
(Reg. No. 333-151338), Exhibit 4.6).
|
|
|
|
10.35
*†
|
|
—Form
of Non-qualified Stock Option Award Agreement for Employees (Form S-8
(Reg. No. 333-151338), Exhibit 4.7).
|
|
|
|
10.36
*†
|
|
—Form
of Non-Qualified Stock Option Award Agreement for Directors (Form S-8
(Reg. No. 333-151338), Exhibit 4.8).
|
|
|
|
10.37
*†
|
|
—Form
of Restricted Stock Award Agreement for Officers and Key Employees (Form
S-8 (Reg. No. 333- 151338), Exhibit 4.9).
|
|
|
|
10.38
*†
|
|
—Form
of Restricted Stock Award Agreement for Employess (Form S-8 (Reg.
333-151338), Exhibit 4.10).
|
|
|
|
12 *
|
|
—Statement
regarding computation of ratios (Form 10-K dated March 13, 2007 (File No.
000-26025), Exhibit 10.8).
|
|
|
|
14 *
|
|
—U.S.
Concrete, Inc. Code of Ethics for Chief Executive and Senior Financial
Officers (Form 10-K for the year ended December 31, 2003 (File No.
000-26025), Exhibit 14).
|
|
|
|
21
|
|
—Subsidiaries.
|
|
|
|
23
|
|
—Consent
of independent registered public accounting firm.
|
|
|
|
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.
|
†
|
Management
contract or compensatory plan or
arrangement.
|
Pursuant
to the requirements of Section 13 or 15(d) 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:
March 13, 2009
|
By:
|
/s/
Michael W. Harlan
|
|
|
Michael
W. Harlan
President
and Chief Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on March 13, 2009.
Signature
|
|
Title
|
|
|
|
/s/ Michael W. Harlan
|
|
President
and Chief Executive Officer and Director (Principal
|
Michael
W. Harlan
|
|
Executive
Officer)
|
|
|
|
/s/ Robert D. Hardy
|
|
Executive
Vice President and Chief Financial Officer (Principal
|
Robert
D. Hardy
|
|
Financial
and Accounting Officer)
|
|
|
|
/s/ William T. Albanese
|
|
Regional
Vice President – Northern California Region and
|
William
T. Albanese
|
|
Director
|
|
|
|
/s/ John M. Piecuch
|
|
Director
|
John
M. Piecuch
|
|
|
|
|
|
/s/ Vincent D. Foster
|
|
Director
|
Vincent
D. Foster
|
|
|
|
|
|
/s/ T. William Porter
|
|
Director
|
T.
William Porter
|
|
|
|
|
|
/s/ Mary P. Ricciardello
|
|
Director
|
Mary
P. Ricciardello
|
|
|
|
|
|
/s/ Murray S. Simpson
|
|
Director
|
Murray
S. Simpson
|
|
|
INDEX
TO EXHIBITS
Exhibit
Number
|
|
Description
|
|
|
|
2.1
*
|
|
—Asset
Purchase Agreement dated as of December 5, 2005 by and among U.S.
Concrete, Inc., Beall Concrete Enterprises, Ltd., Go-Crete, South Loop
Development Corporation and John D. Yowell, Jr. (Form 10-K for year ended
December 31, 2005 (File No. 000-26025), Exhibit 2.1).
|
|
|
|
2.2
*
|
|
—Stock
Purchase Agreement dated as of June 27, 2006 by and among U.S. Concrete,
Alliance Haulers, Inc., Alberta Investments, Inc., Atlas Concrete Inc. and
Wild Rose Holdings Ltd. (Form 8-K dated June 28, 2006 (File No. 000-
26025), Exhibit 2.1).
|
|
|
|
3.1
*
|
|
—Restated
Certificate of Incorporation of U.S. Concrete dated May 9, 2006 (Form 8-K
dated May 9, 2006 (File No. 000-26025), Exhibit
3.1).
|
|
|
|
3.2
*
|
|
—Amended
and Restated Bylaws of U.S. Concrete, as amended (Post Effective Amendment
No. 1 to Form S-3 (Reg. No. 333-42860), Exhibit 4.2).
|
|
|
|
4.1
*
|
|
—Certificate
of Designation of Junior Participating Preferred Stock (Form 10-Q for the
quarter ended June 30, 2000 (File No. 000-26025), Exhibit
3.3).
|
|
|
|
4.2
*
|
|
—Form
of certificate representing common stock (Form S-1 (Reg. No. 333-74855),
Exhibit 4.3).
|
|
|
|
4.3
*
|
|
—Rights
Agreement by and between U.S. Concrete and American Stock Transfer &
Trust Company, including form of Rights Certificate attached as Exhibit B
thereto (Form S-1 (Reg. No. 333-74855), Exhibit 4.4).
|
|
|
|
4.4
*
|
|
—Indenture
among U.S. Concrete, the Subsidiary Guarantors party thereto and Wells
Fargo Bank, National Association,
as Trustee, dated as of March 31, 2004, for the 8⅜% Senior Subordinated
Notes due 2014 (Form 10-Q for the quarter ended March 31, 2004 (File No.
000-26025), Exhibit 4.5).
|
|
|
|
4.5
*
|
|
—Form
of Note (Form 10-Q for the quarter ended March 31, 2004 (File No.
000-26025), included as Exhibit A to Exhibit
4.7).
|
|
|
|
4.6
*
|
|
—Notation
of Guarantee by the Subsidiary Guarantors dated March 31, 2004 (Form 10-Q
for the quarter ended March 31, 2004 (File No. 000-26025),
Exhibit 4.7).
|
|
|
|
4.7
*
|
|
—First
Supplemental Indenture among U.S. Concrete, the Existing Guarantors party
thereto, the Additional Guarantors party thereto and Wells Fargo Bank,
National Association, as Trustee, dated as of July 5, 2006, for the 8⅜%
Senior Subordinated Notes due 2014 (Form 8-K dated June 29, 2006 (File No.
000-26025), Exhibit 4.1).
|
|
|
|
4.8
*
|
|
—Amended
and Restated Credit Agreement dated as of June 30, 2006 among U.S.
Concrete, the Lenders and Issuers named therein and Citicorp North
America, Inc. as administrative agent (Form 8-K dated June 29, 2006 (File
No. 000-26025), Exhibit 4.3).
|
|
|
|
4.9
*
|
|
—Amendment
No. 1 to Amended and Restated Credit Agreement, effective as of March 2,
2007, among U.S. Concrete, Inc., Citicorp North America, Inc., Bank of
America, N.A., JP Morgan Chase Bank and the Lenders and Issuers named
therein (Form 10-Q for the quarter ended March 31, 2007 (file No.
000-20025), Exhibit 4.1).
|
|
|
|
4.10
*
|
|
—Amendment
No. 2 to Amended and Restated Credit Agreement, effective as of November
9, 2007, among U.S. Concrete, Inc., Citicorp North America Inc., Bank of
America, N.A., JP Morgan Chase Bank and the Lenders and Issuers named
therein (Form 8-K dated November 9, 2007 (File No. 000-26025), Exhibit
4.1).
|
|
|
|
4.11
*
|
|
—Amendment
No. 3 to Amended and Restated Credit Agreement, dated as of July 11, 2008,
among U.S. Concrete, Inc., Citicorp North America Inc., Bank of America,
N.A., JP Morgan Chase Bank and the Lenders and Issuers named therein (Form
8-K dated July 11, 2008 (File No. 000-26025), Exhibit
4.1).
|
|
|
|
4.12
*
|
|
—Credit
Agreement, dated as of April 6, 2007, by and between Superior Materials,
LLC, BWB, LLC and Comerica Bank (Form 10-Q for the quarter ended
March 31, 2007 (File No. 000-26025),
Exhibit 4.2).
|
|
|
|
4.13
*
|
|
—First
Amendment to Credit Agreement, dated as of February 29, 2008, by and
between Superior Materials,
LLC, BWB, LLC and Comerica
Bank.
|
|
|
|
4.14
*
|
|
—Second
Amendment to Credit Agreement, dated as of March 3, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank (Form 10-Q for the
quarter ended March 31, 2008 (File No. 000-26025), Exhibit
4.1).
|
|
|
|
4.15
*
|
|
—Third
Amendment to Credit Agreement, dated as of March 31, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank (Form 10-Q for the
quarter ended March 31, 2008 (File No. 000-26025), Exhibit
4.2).
|
|
|
|
4.16
*
|
|
—Fourth
Amendment to Credit Agreement, dated as of May 31, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank (Form 10-Q for the
quarter ended June 30, 2008 (File No. 000-26025), Exhibit
4.2).
|
Exhibit
Number
|
|
Description
|
|
|
|
4.17
*
|
|
—Fifth
Amendment to Credit Agreement, dated as of August 6, 2008, by and among
Superior Materials, LLC, BWB, LLC and Comerica Bank, and Comfort Letter in
support of Superior Materials, LLC and BWB, LLC (Form 10-Q for the quarter
ended June 30, 2008 (File No. 000-26025), Exhibit 4.3).
|
|
|
|
10.1
*†
|
|
—1999
Incentive Plan of U.S. Concrete (Form S-1 (Reg. No. 333-74855), Exhibit
10.1).
|
|
|
|
10.2
*†
|
|
—Amendment
No. 1 to 1999 Incentive Plan of U.S. Concrete, Inc. dated January 9, 2003
(Form S-8 dated December 20, 2004 (Reg. No. 333-121458), Exhibit
10.2).
|
|
|
|
10.3
*†
|
|
—Amendment
No. 2 to 1999 Incentive Plan of U.S. Concrete, Inc. dated December 17,
2004 (Form S-8 dated December 20, 2004 (Reg. No. 333-121458), Exhibit
10.3).
|
|
|
|
10.4
*†
|
|
—Amendment
No. 3 to 1999 Incentive Plan of U.S. Concrete, Inc. effective May 17, 2005
(Proxy Statement relating to 2005 annual meeting of stockholders, Appendix
B).
|
|
|
|
10.5
*†
|
|
—Amendment
No. 4 to 1999 Incentive Plan of U.S. Concrete, Inc. dated February 13,
2006 (Form 10-K dated March 16, 2006 (File No. 000-26025), Exhibit
10.5).
|
|
|
|
10.6
*†
|
|
—Amendment
No. 5 to 1999 Incentive Plan of U.S. Concrete, Inc. dated March 7, 2007;
effective January 1, 1999 (Form 10-K dated March 13, 2007 (File No.
000-26025), Exhibit 10.8)).
|
|
|
|
10.7
*†
|
|
—Amendment
No. 6 to 1999 Incentive Plan of U.S. Concrete, Inc. dated as of April 11,
2008 (Form 8-K dated April 11, 2008 (File No. 000-26025), Exhibit
10.1).
|
|
|
|
10.8
*
|
|
—U.S.
Concrete 2000 Employee Stock Purchase Plan effective May 16, 2000 (Proxy
Statement relating to 2000 annual meeting of stockholders, Appendix
A).
|
|
|
|
10.9
*
|
|
—Amendment
No. 1 to 2000 Employee Stock Purchase Plan of U.S. Concrete, Inc.
effective December 16, 2005 (Form 8-K dated December 16, 2005 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.10
*
|
|
—2001
Employee Incentive Plan of U.S. Concrete, Inc. (Form S-8 dated May 11,
2001 (Reg. No. 333-60710), Exhibit 4.6).
|
|
|
|
10.11
*
|
|
—Amendment
No. 1 to 2001 Employee Incentive Plan of U.S. Concrete, Inc. dated
December 17, 2004 (Form S-8 dated December 20, 2004 (Reg. No. 333-121458),
Exhibit 10.6).
|
|
|
|
10.12
*†
|
|
—Consulting
Agreement dated February 23, 2007 by and between U.S. Concrete and Eugene
P. Martineau (Form 8-K dated February 23, 2007 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.13
*
|
|
—Contribution
Agreement, dated as of March 26, 2007, by and among, BWB, Inc. of Michigan
Builders’, Redi-Mix, LLC, Kurtz Gravel Company, Superior Materials, Inc.
USC Michigan, Inc., Edw. C. Levy Co. and Superior Joint Venture LLC (Form
8-K dated March 26, 2007 (File No. 000-26025), Exhibit
10.1).
|
|
|
|
10.14
*
|
|
—Operating
Agreement of Superior Materials, LLC dated effective as of April 1, 2007,
by and between Kurtz Gravel Company, Superior Materials, Inc. and Edw. C.
Levy Co., together with related Joinder Agreement dated effective April 2,
2007 by BWB, Inc. of Michigan Builders’, Redi-Mix, LLC, USC Michigan, Inc.
and Superior Material Holdings LLC (Form 8-K dated April 1, 2007 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.15
*
|
|
—Guaranty
dated as of April 1, 2007 by U.S. Concrete, Inc. in favor of Edw. C. Levy
Co. and Superior Materials Holdings, LLC (Form 8-K dated April 1, 2007
(File No. 000-26025), Exhibit 10.2).
|
|
|
|
10.16
*†
|
|
—Form
of Indemnification Agreement between U.S. Concrete and each of its
directors and officers (Form 10K dated March 16, 2006 (File No. 000-26025)
Exhibit 10.22).
|
|
|
|
10.17
*†
|
|
—Form
of U.S. Concrete, Inc. Restricted Stock Award Agreement for employees
(Form 10-K for the year ended December 31, 2004 (File No. 000-26025),
Exhibit 10.21).
|
|
|
|
10.18
*†
|
|
—Form
of U.S. Concrete, Inc. Non-Qualified Stock Option Award Agreement for
nonemployee directors (Form 10-K for the year ended December 31, 2004
(File No. 000-26025), Exhibit 10.22).
|
|
|
|
10.19
*†
|
|
—Form
of U.S. Concrete, Inc. Non-Qualified Stock Option Award Agreement for
employees (Form 10-K for the year ended December 31, 2004 (File No.
000-26025), Exhibit 10.23).
|
|
|
|
10.20
*†
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2005 Annual Salaried Team Member Incentive
Plan, effective April 8, 2005 (Form 8-K dated April 8, 2005 (File No.
000-26025), Exhibit
10.1).
|
Exhibit
Number
|
|
Description
|
|
|
|
10.21
†
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2008 Annual Salaried Team Member Incentive
Plan.
|
|
|
|
10.22
†
|
|
—U.S.
Concrete, Inc. and Subsidiaries 2009 Annual Team Member Incentive
Plan.
|
|
|
|
10.23
*†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Michael W. Harlan (Form 8-K dated July 31, 2007 (File No. 000-26025),
Exhibit 10.1).
|
|
|
|
10.24
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Michael W. Harlan.
|
|
|
|
10.25
*†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Robert D. Hardy (Form 8-K dated July 31, 2007 (File No. 000-26025),
Exhibit 10.2).
|
|
|
|
10.26
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Robert D. Hardy.
|
|
|
|
10.27
*†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Thomas J. Albanese (Form 8-K dated July 31, 2007 (File No. 000-26025),
Exhibit 10.3).
|
|
|
|
10.28
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Thomas J. Albanese.
|
|
|
|
10.29
*†
|
|
—Severance
Agreement, dated as of January 18, 2008, by and between U.S. Concrete,
Inc. and William T. Albanese (Form 8-K dated January 18, 2008 (File No.
000-26025), Exhibit 10.1).
|
|
|
|
10.30
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and William T.
Albanese.
|
|
|
|
10.31
†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Terry Green.
|
|
|
|
10.32
†
|
|
—First
Amendment to Severance Agreement, effective as of December 31, 2008, by
and between U.S. Concrete, Inc. and Terry Green.
|
|
|
|
10.33
†
|
|
—Severance
Agreement, dated as of July 31, 2007, by and between U.S. Concrete, Inc.
and Scott Evans.
|
|
|
|
10.34
*†
|
|
—U.S.
Concrete, Inc. 2008 Stock Incentive Plan (Form S-8 dated May 22, 2008
(Reg. No. 333-151338), Exhibit 4.6).
|
|
|
|
10.35
*†
|
|
—Form
of Non-qualified Stock Option Award Agreement for Employees (Form S-8
(Reg. No. 333-151338), Exhibit 4.7).
|
|
|
|
10.36
*†
|
|
—Form
of Non-Qualified Stock Option Award Agreement for Directors (Form S-8
(Reg. No. 333-151338), Exhibit 4.8).
|
|
|
|
10.37
*†
|
|
—Form
of Restricted Stock Award Agreement for Officers and Key Employees (Form
S-8 (Reg. No. 333- 151338), Exhibit 4.9).
|
|
|
|
10.38
*†
|
|
—Form
of Restricted Stock Award Agreement for Employess (Form S-8 (Reg.
333-151338), Exhibit 4.10).
|
|
|
|
12 *
|
|
—Statement
regarding computation of ratios (Form 10-K dated March 13, 2007 (File No.
000-26025), Exhibit 10.8).
|
|
|
|
14 *
|
|
—U.S.
Concrete, Inc. Code of Ethics for Chief Executive and Senior Financial
Officers (Form 10-K for the year ended December 31, 2003 (File No.
000-26025), Exhibit 14).
|
|
|
|
21
|
|
—Subsidiaries.
|
|
|
|
23
|
|
—Consent
of independent registered public accounting firm.
|
|
|
|
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.
|
†
|
Management
contract or compensatory plan or
arrangement.
|