UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended June 30, 2009
Commission
File Number 000-26025
U.S.
CONCRETE, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State or
other jurisdiction of incorporation or organization)
IRS
Employer Identification No. 76-0586680
2925
Briarpark, Suite 1050
Houston,
Texas 77042
(Address
of principal executive offices, including zip code)
(713)
499-6200
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web Site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ¨ No ¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company (as defined 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 Exchange Act).
Yes ¨ No þ
As of the
close of business on August 6, 2009, U.S. Concrete, Inc. had 37,332,883 shares
of its common stock, $0.001 par value, outstanding (excluding treasury shares of
548,112).
U.S.
CONCRETE, INC.
INDEX
|
|
Page
No.
|
Part
I – Financial Information
|
|
Item
1.
|
Financial
Statements
|
|
|
Condensed
Consolidated Balance Sheets
|
3
|
|
Condensed
Consolidated Statements of Operations
|
4
|
|
Condensed
Consolidated Statement of Changes in Equity
|
5
|
|
Condensed
Consolidated Statements of Cash Flows
|
6
|
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
22
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
32
|
Item
4.
|
Controls
and Procedures
|
32
|
|
|
|
Part
II – Other Information
|
|
Item
1.
|
Legal
Proceedings
|
33
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
33
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
33
|
Item
6.
|
Exhibits
|
34
|
|
|
|
SIGNATURE
|
35
|
INDEX
TO EXHIBITS
|
36
|
PART
I - FINANCIAL INFORMATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in
thousands)
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
4,468 |
|
|
$ |
5,323 |
|
Trade
accounts receivable, net
|
|
|
90,920 |
|
|
|
100,269 |
|
Inventories
|
|
|
31,311 |
|
|
|
32,768 |
|
Deferred
income taxes
|
|
|
14,679 |
|
|
|
11,576 |
|
Prepaid
expenses
|
|
|
5,276 |
|
|
|
3,519 |
|
Other
current assets
|
|
|
10,513 |
|
|
|
13,801 |
|
Total
current assets
|
|
|
157,167 |
|
|
|
167,256 |
|
Property,
plant and equipment, net
|
|
|
266,211 |
|
|
|
272,769 |
|
Goodwill
|
|
|
62,793 |
|
|
|
59,197 |
|
Other
assets
|
|
|
7,402 |
|
|
|
8,588 |
|
Total
assets
|
|
$ |
493,573 |
|
|
$ |
507,810 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$ |
10,994 |
|
|
$ |
3,371 |
|
Accounts
payable
|
|
|
37,756 |
|
|
|
45,920 |
|
Accrued
liabilities
|
|
|
56,113 |
|
|
|
54,481 |
|
Total
current liabilities
|
|
|
104,863 |
|
|
|
103,772 |
|
Long-term
debt, net of current maturities
|
|
|
300,071 |
|
|
|
302,617 |
|
Other
long-term obligations and deferred credits
|
|
|
8,565 |
|
|
|
8,522 |
|
Deferred
income taxes
|
|
|
14,201 |
|
|
|
12,536 |
|
Total
liabilities
|
|
|
427,700 |
|
|
|
427,447 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
– |
|
|
|
– |
|
Common
stock
|
|
|
38 |
|
|
|
37 |
|
Additional
paid-in capital
|
|
|
266,951 |
|
|
|
265,453 |
|
Retained
deficit
|
|
|
(206,012 |
) |
|
|
(192,564 |
) |
Treasury
stock, at cost
|
|
|
(3,277 |
) |
|
|
(3,130 |
) |
Total
stockholders’ equity
|
|
|
57,700 |
|
|
|
69,796 |
|
Non-controlling
interest (Note 1)
|
|
|
8,173 |
|
|
|
10,567 |
|
Total
equity
|
|
|
65,873 |
|
|
|
80,363 |
|
Total
liabilities and equity
|
|
$ |
493,573 |
|
|
$ |
507,810 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in
thousands, except per share amounts)
|
|
Three
Months
Ended
June 30,
|
|
|
Six
Months
Ended
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenue
|
|
$ |
143,726 |
|
|
$ |
206,047 |
|
|
$ |
261,026 |
|
|
$ |
368,154 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
120,589 |
|
|
|
170,410 |
|
|
|
224,111 |
|
|
|
311,701 |
|
Selling,
general and administrative expenses
|
|
|
17,607 |
|
|
|
17,642 |
|
|
|
33,685 |
|
|
|
35,773 |
|
Depreciation,
depletion and amortization
|
|
|
7,450 |
|
|
|
7,035 |
|
|
|
14,906 |
|
|
|
13,913 |
|
Income
(loss) from operations
|
|
|
(1,920 |
) |
|
|
10,960 |
|
|
|
(11,676 |
) |
|
|
6,767 |
|
Interest
expense, net
|
|
|
6,562 |
|
|
|
6,668 |
|
|
|
13,330 |
|
|
|
13,374 |
|
Gain
on purchases of senior subordinated notes
|
|
|
2,913 |
|
|
|
— |
|
|
|
7,406 |
|
|
|
— |
|
Other
income, net
|
|
|
341 |
|
|
|
428 |
|
|
|
690 |
|
|
|
1,050 |
|
Income
(loss) from continuing operations before
income taxes
|
|
|
(5,228 |
) |
|
|
4,720 |
|
|
|
(16,910 |
) |
|
|
(5,557 |
) |
Income
tax expense (benefit)
|
|
|
(431 |
) |
|
|
2,202 |
|
|
|
(1,068 |
) |
|
|
(902 |
) |
Income (loss) from continuing
operations
|
|
|
(4,797 |
) |
|
|
2,518 |
|
|
|
(15,842 |
) |
|
|
(4,655 |
) |
Loss
from discontinued operations (net of tax benefit
of $0 and $81in
2008)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(149 |
) |
Net income (loss)
|
|
|
(4,797 |
) |
|
|
2,518 |
|
|
|
(15,842 |
) |
|
|
(4,804 |
) |
Net
loss attributable to non-controlling interest
|
|
|
803 |
|
|
|
785 |
|
|
|
2,394 |
|
|
|
2,829 |
|
Net
income (loss) attributable to stockholders
|
|
$ |
(3,994 |
) |
|
$ |
3,303 |
|
|
$ |
(13,448 |
) |
|
$ |
(1,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share attributable to stockholders
– basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$ |
(0.11 |
) |
|
$ |
0.09 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.05 |
) |
Loss from discontinued
operations, net of income
tax benefit
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss)
|
|
$ |
(0.11 |
) |
|
$ |
0.09 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share attributable to stockholders
– diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$ |
(0.11 |
) |
|
$ |
0.08 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.05 |
) |
Loss from discontinued
operations, net of income
tax benefit
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss)
|
|
$ |
(0.11 |
) |
|
$ |
0.08 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,099 |
|
|
|
38,709 |
|
|
|
36,061 |
|
|
|
38,655 |
|
Diluted
|
|
|
36,099 |
|
|
|
39,340 |
|
|
|
36,061 |
|
|
|
38,655 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
U.S.
CONCRETE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
(Unaudited)
(in
thousands)
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
Paid-In
Capital
|
|
|
Retained
Deficit
|
|
|
Treasury
Stock
|
|
|
Controlling
Interest
|
|
|
Total
Equity
|
|
BALANCE,
December 31, 2008
|
|
|
36,793 |
|
|
$ |
37 |
|
|
$ |
265,453 |
|
|
$ |
(192,564 |
) |
|
$ |
(3,130 |
) |
|
$ |
10,567 |
|
|
$ |
80,363 |
|
Stock-based
compensation
|
|
|
497 |
|
|
|
1 |
|
|
|
1,210 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,211 |
|
Employee
purchase of ESPP shares
|
|
|
171 |
|
|
|
— |
|
|
|
288 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
288 |
|
Acquisition
of treasury shares
|
|
|
(89 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(147 |
) |
|
|
— |
|
|
|
(147 |
) |
Cancellation
of shares
|
|
|
(39 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13,448 |
) |
|
|
— |
|
|
|
(2,394 |
) |
|
|
(15,842 |
) |
BALANCE,
June 30, 2009
|
|
|
37,333 |
|
|
$ |
38 |
|
|
$ |
266,951 |
|
|
$ |
(206,012 |
) |
|
$ |
(3,277 |
) |
|
$ |
8,173 |
|
|
$ |
65,873 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
U.S.
CONCRETE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in
thousands)
|
|
Six
Months
Ended
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(15,842 |
) |
|
$ |
(4,804 |
) |
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
14,906 |
|
|
|
13,913 |
|
Debt
issuance cost amortization
|
|
|
812 |
|
|
|
821 |
|
Gain
on purchases of senior subordinated notes
|
|
|
(7,406 |
) |
|
|
– |
|
Net
gain on sale of assets
|
|
|
(836 |
) |
|
|
(586 |
) |
Deferred
income taxes
|
|
|
(1,438 |
) |
|
|
(1,584 |
) |
Provision
for doubtful accounts
|
|
|
1,767 |
|
|
|
698 |
|
Stock-based
compensation
|
|
|
1,211 |
|
|
|
1,457 |
|
Changes
in assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
7,582 |
|
|
|
(10,760 |
) |
Inventories
|
|
|
1,457 |
|
|
|
(1,913 |
) |
Prepaid
expenses and other current assets
|
|
|
1,531 |
|
|
|
2,443 |
|
Other
assets and liabilities
|
|
|
23 |
|
|
|
220 |
|
Accounts
payable and accrued liabilities
|
|
|
(5,739 |
) |
|
|
9,595 |
|
Net
cash provided by (used in) operating activities
|
|
|
(1,972 |
) |
|
|
9,500 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment, net of disposals
|
|
|
(6,510 |
) |
|
|
(9,441 |
) |
Payments
for acquisitions
|
|
|
(5,214 |
) |
|
|
(16,835 |
) |
Disposal
of business unit
|
|
|
– |
|
|
|
7,583 |
|
Other
investing activities
|
|
|
– |
|
|
|
170 |
|
Net
cash used in investing activities
|
|
|
(11,724 |
) |
|
|
(18,523 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
95,406 |
|
|
|
6,282 |
|
Repayments
of borrowings
|
|
|
(77,896 |
) |
|
|
(2,657 |
) |
Purchases
of senior subordinated notes
|
|
|
(4,810 |
) |
|
|
– |
|
Purchase
of treasury shares
|
|
|
(147 |
) |
|
|
(620 |
) |
Proceeds
from issuances of common stock under compensation plans
|
|
|
288 |
|
|
|
377 |
|
Other
financing activities
|
|
|
– |
|
|
|
(10 |
) |
Net
cash provided by financing activities
|
|
|
12,841 |
|
|
|
3,372 |
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(855 |
) |
|
|
(5,651 |
) |
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
5,323 |
|
|
|
14,850 |
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$ |
4,468 |
|
|
$ |
9,199 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
accompanying condensed consolidated financial statements include the accounts of
U.S. Concrete, Inc. and its subsidiaries and have been prepared by us, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”). We include in our condensed consolidated
financial statements the results of operations, balance sheets and cash flows of
our 60%-owned Michigan subsidiary, Superior Materials Holdings, LLC
(“Superior”). We reflect the minority owner’s 40% interest in income,
net assets and cash flows of that subsidiary as non-controlling interest in our
condensed consolidated financial statements. Some information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the SEC’s rules and regulations. These unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes in our annual report on
Form 10-K for the year ended December 31, 2008 (the “2008 Form
10-K”). In the opinion of our management, all adjustments necessary
to state fairly the information in our unaudited condensed consolidated
financial statements have been included. Operating results for the
three and six month periods ended June 30, 2009 are not necessarily indicative
of our results expected for the year ending December 31, 2009. We have made
certain reclassifications to prior period amounts to conform to the current
period presentation in accordance with Statement of Financial Accounting
Standard (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial
Statements.”
The
preparation of financial statements and accompanying notes in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions in determining the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of 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.
We
evaluated subsequent events through August 7, 2009, the date we filed our report
on Form 10-Q for the quarter ended June 30, 2009 with the SEC, and have no
material subsequent events to report.
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
For a
description of our accounting policies, see Note 1 of the consolidated financial
statements in the 2008 Form 10-K, as well as Note 12 below.
3.
|
DISCONTINUED
OPERATIONS
|
In the first quarter of 2008, we sold
our ready-mix concrete business unit headquartered in Memphis,
Tennessee. This unit was part of our ready-mixed concrete and
concrete-related products segment. We classified this business unit
as discontinued operations beginning in the fourth quarter of 2007, and we have
presented the results of operations, net of tax, as discontinued operations in
the accompanying condensed consolidated statements of operations. The
results of discontinued operations included in the accompanying condensed
consolidated statements of operations were as follows for the six month period
ended June 30, 2008 (in thousands):
|
|
Six
Months Ended June 30, 2008
|
|
Revenue
|
|
$ |
671 |
|
Operating
expenses
|
|
|
1,395 |
|
Gain
on disposal of assets
|
|
|
494 |
|
Loss
from discontinued operations, before income tax benefit
|
|
|
(230 |
) |
Income
tax benefits from discontinued operations
|
|
|
(81 |
) |
Loss
from discontinued operations, net of tax
|
|
$ |
(149 |
) |
4.
|
BUSINESS
COMBINATIONS AND GOODWILL
|
In May 2009, we acquired substantially
all of the assets of a concrete recycling business in Queens, New York. We used
borrowings under our revolving credit facility to fund the cash purchase price
of approximately $4.5 million. This acquisition resulted in an increase in
goodwill of approximately $3.6 million.
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.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
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.
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 mid-Atlantic region, for approximately $14.5 million plus a
$1.5 million contingency payment based on the future earnings of
API. For the twelve-month period ended September 30, 2008, API
attained 50% of its established earnings target, and we made a $750,000 payment,
reduced for certain uncollected pre-acquisition accounts receivable, to the
sellers in the first quarter of 2009 in partial satisfaction of our contingent
payment obligation.
The pro forma impacts of our 2009 and
2008 acquisitions have not been included due to the fact that they were
immaterial to our financial statements individually and in the
aggregate.
Inventories consist of the following
(in thousands):
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
17,672 |
|
|
$ |
18,100 |
|
Precast
products
|
|
|
7,475 |
|
|
|
8,353 |
|
Building
materials for resale
|
|
|
2,906 |
|
|
|
2,922 |
|
Repair
parts
|
|
|
3,258 |
|
|
|
3,393 |
|
|
|
$ |
31,311 |
|
|
$ |
32,768 |
|
A summary of debt is as follows (in
thousands):
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Senior
secured credit facility due 2011
|
|
$ |
26,000 |
|
|
$ |
11,000 |
|
8⅜%
senior subordinated notes due 2014
|
|
|
271,660 |
|
|
|
283,998 |
|
Notes
payable
|
|
|
3,191 |
|
|
|
5,411 |
|
Superior
Materials Holdings, LLC secured credit facility due 2010
|
|
|
8,329 |
|
|
|
5,149 |
|
Superior
Materials Holdings, LLC subordinated debt to minority
partner
|
|
|
1,608 |
|
|
|
– |
|
Capital
leases
|
|
|
277 |
|
|
|
430 |
|
|
|
|
311,065 |
|
|
|
305,988 |
|
Less: current
maturities
|
|
|
10,994 |
|
|
|
3,371 |
|
|
|
$ |
300,071 |
|
|
$ |
302,617 |
|
The
estimated fair value of our debt at June 30, 2009 and December 31, 2008 was
$217.9 million and $168.1 million, respectively.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Senior
Secured Credit Facility
On June
30, 2006, we entered into a credit agreement (the “Credit Agreement”), which
amended and restated our senior secured credit agreement dated as of March 12,
2004. The Credit Agreement, as amended to date, provides for a
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 June 30,
2009, we had borrowings of $26.0 million under this facility. We pay interest on
borrowings at either the Eurodollar-based rate (“LIBOR”) plus 1.75% to 2.25% or
the domestic rate (3.25% at June 30, 2009) plus 0.25% to 0.75% per annum. The
rate paid over either LIBOR or the domestic rate varies depending on the level
of borrowings. 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
Credit Agreement. 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 us and our Subsidiaries,
taken as a whole, (b) our ability and the ability of our guarantors, taken as a
whole, to perform the respective obligations under the Credit Agreement and
ancillary documents or (c) the rights and remedies of the administrative agent,
the lenders or the issuers to enforce the Credit Agreement and ancillary
documents. At June 30, 2009, the amount of available credit was
approximately $48.1 million, net of outstanding revolving credit borrowings of
$26.0 million and outstanding letters of credit of approximately $11.5
million.
Our
subsidiaries, excluding Superior 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
Superior and minor subsidiaries without operations or material assets, and
substantially all the assets of those subsidiaries, excluding most of the assets
of the aggregates quarry in northern New Jersey, other real estate owned by us
or our subsidiaries, and the assets of Superior. 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 also provides that specified
change-of-control events would constitute events of default. As of
June 30, 2009, we were in compliance with our covenants under the Credit
Agreement. The maintenance of a minimum fixed charge coverage ratio was not
applicable as the available credit under the facility did not fall below $25.0
million.
Senior
Subordinated Notes
On March
31, 2004, we issued $200 million of 8⅜% senior subordinated notes due April 1,
2014 (the “8⅜% Notes”). 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 outstanding debt under a prior credit facility. In
July 2006, we issued $85 million of additional 8⅜% Notes.
During
the first quarter of 2009, we purchased $7.4 million aggregate principal amount
of our 8⅜% Notes in open market transactions for approximately $2.8 million plus
accrued interest of approximately $0.3 million through the dates of
purchase. We recorded a gain of approximately $4.5 million as a
result of these open-market transactions after writing off $0.1 million of
previously deferred financing costs associated with the pro-rata amount of the
8⅜% Notes purchased. During the quarter ended June 30, 2009, we purchased an
additional $5.0 million principal amount of our 8⅜% Notes for approximately $2.0
million. This resulted in a gain of approximately $2.9 million in
April 2009, after writing off $0.1 million of previously deferred financing
costs associated with the pro-rata amount of the 8⅜% Notes
purchased.
All of
our subsidiaries, excluding Superior and minor subsidiaries, have jointly and
severally and fully and unconditionally guaranteed the repayment of the 8⅜%
Notes.
The
indenture governing the 8⅜% 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 or merge or transfer assets. We may redeem all or a part of the 8⅜% Notes at a redemption price
of 104.188% for the remainder of 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 8⅜% 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 8⅜% Notes following the
occurrence of a change of control. The Credit Agreement would
prohibit these repurchases.
As a
result of restrictions contained in the indenture relating to the 8⅜% 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.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Superior
Credit Facility and Subordinated Debt
Superior
has a separate credit agreement that provides for a revolving credit
facility. The credit agreement, as amended, allows for borrowings of
up to $17.5 million. Borrowings under this credit facility are
collateralized by substantially all the assets of Superior 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 June 30, 2009, there was $8.3
million in outstanding borrowings under the revolving credit facility, and the
amount of available credit was approximately $4.0 million. The
outstanding borrowings are included under current maturities of long-term debt
on the condensed consolidated balance sheet. Letters of credit outstanding at
June 30, 2009 were $2.8 million which reduces the amount available under the
credit facility.
Currently,
borrowings have an annual interest rate, at Superior’s option, of either LIBOR
plus 4.25% or prime rate (3.25% at June 30, 2009) 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’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’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 June 30, 2009, the credit agreement required a threshold
EBITDA of $(2.8) million. As of June 30, 2009, Superior 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 credit agreement. However, Superior’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 Co.’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. In the
first quarter of 2009, U.S. Concrete provided subordinated debt capital in the
amount of $2.4 million under this agreement in lieu of payment of related party
payables. Additionally, the minority partner, Edw. C. Levy Co., provided $1.6
million of subordinated debt capital to fund operations. The subordinated debt
with U.S. Concrete is eliminated in consolidation. There is no
interest due on each note, and each note matures on May 1, 2011.
We made
income tax payments of approximately $0.3 million during the three and six month
periods ended June 30, 2009. For the three and six month periods
ended June 30, 2008, our income tax payments were approximately $0.3 million and
$0.4 million, respectively.
In
accordance with generally accepted accounting principles (“GAAP”), we estimate
the effective tax rate expected to be applicable for the full
year. We use this estimate in providing for income taxes on a
year-to-date basis, which may vary in subsequent interim periods if our
estimates change. Our effective tax benefit rate for the six months
ended June 30, 2009 and 2008 was approximately 6.3%, and 16.2%,
respectively. For the six months ended June 30, 2009, we applied a
valuation allowance against certain of our deferred tax assets, including
operating loss carryforwards, which reduced our effective benefit rate from the
statutory rate. In accordance with GAAP, a valuation allowance is required
unless it is more likely than not that future taxable income or the reversal of
deferred tax liabilities will be sufficient to recover deferred tax assets. In
addition, certain state taxes are calculated on bases different than pre-tax
loss (such as gross receipts). This results in us recording income tax expense
for these states, which also lowered the effective benefit rate for the six
months ended June 30, 2009 compared to the statutory rate.
Common
Stock and Preferred Stock
The following table presents
information regarding U.S. Concrete’s common stock (in
thousands):
|
|
June
30, 2009
|
|
|
December
31, 2008
|
|
Shares
authorized
|
|
|
60,000 |
|
|
|
60,000 |
|
Shares
outstanding at end of period
|
|
|
37,333 |
|
|
|
36,793 |
|
Shares
held in treasury
|
|
|
548 |
|
|
|
459 |
|
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Under our
restated certificate of incorporation, we are authorized to issue 10,000,000
shares of preferred stock, $0.001 par value, none of which were issued or
outstanding as of June 30, 2009 and December 31, 2008.
Treasury
Stock
Employees
may elect to satisfy their tax obligations on the vesting of their restricted
stock by having us make the required tax payments and withhold a number of
vested shares having an aggregate value on the date of vesting equal to the tax
obligation. As a result of such employee elections, we withheld
approximately 13,000 shares during the three months ended June 30,
2009, at a total value of approximately $25,000. For the six months ended
June 30, 2009, we withheld approximately 89,000 shares with a total value of
$0.1 million. We accounted for the withholding of these shares as treasury
stock.
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. Based on restrictions contained in our indenture
governing our 8⅜% Notes, we are currently prohibited from making additional
share repurchases.
9.
|
SHARES
USED IN COMPUTING NET INCOME (LOSS) PER
SHARE
|
The following table summarizes the
number of shares (in thousands) of common stock we have used, on a
weighted-average basis, in calculating basic and diluted net income (loss) per
share attributable to stockholders:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Basic
weighted average common shares outstanding
|
|
|
36,099 |
|
|
|
38,709 |
|
|
|
36,061 |
|
|
|
38,655 |
|
Effect
of dilutive stock options and awards
|
|
|
— |
|
|
|
631 |
|
|
|
— |
|
|
|
— |
|
Diluted
weighted average common shares outstanding
|
|
|
36,099 |
|
|
|
39,340 |
|
|
|
36,061 |
|
|
|
38,655 |
|
For
the three and six month periods ended June 30, we excluded stock options and
awards covering 3.0 million shares in 2009 and 2.0 million shares in 2008 from
the computation of the net income (loss) per share because their effect would
have been antidilutive.
10.
|
COMMITMENTS
AND CONTINGENCIES
|
From time to time, and currently, we
are subject to various claims and litigation brought by employees, customers and
other third parties for, among other matters, personal injuries, property
damages, product defects and delay damages that have, or allegedly have,
resulted from the conduct of our operations. As a result of these
types of claims and litigation, we must periodically evaluate the probability of
damages being assessed against us and the range of possible
outcomes. In 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
June 30, 2009, we have accrued $3.5 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 Co., Inc.
(“Central”) ready-mixed concrete and transport drivers, alleging primarily that
Central, which is one of our subsidiaries, 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. The other three classes
have been consolidated and a single class was certified on July 24, 2009. Our
accrual is based on 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 June 30, 2009, 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
deficiency. 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.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 June 30, 2009.
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.
As
permitted under Delaware law, we have agreements that provide indemnification of
officers and directors for certain events or occurrences while the officer or
director is or was serving at our request in such capacity. The maximum
potential amount of future payments that we could be required to make under
these indemnification agreements is not limited; however, we have a director and
officer insurance policy that potentially limits our exposure and enables us to
recover a portion of future amounts that may be paid. As a result of
the insurance policy coverage, we believe the estimated fair value of these
indemnification agreements is minimal. Accordingly, we have not recorded any
liabilities for these agreements as of June 30, 2009.
We and
our subsidiaries are parties to agreements that require us to provide
indemnification in certain instances when we acquire businesses and real estate
and in the ordinary course of business with our customers, suppliers, lessors
and service providers.
Insurance
Programs
We
maintain third-party insurance coverage 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.
Performance
Bonds
In the
normal course of business, we and our subsidiaries are contingently liable for
performance under $40.1 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.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 revenue at market prices. Segment operating
profit (loss) 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
(loss).
The following table sets forth certain
financial information relating to our continuing operations by reportable
segment (in thousands):
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
131,737 |
|
|
$ |
192,964 |
|
|
$ |
238,734 |
|
|
$ |
341,790 |
|
Precast
concrete products
|
|
|
16,023 |
|
|
|
17,353 |
|
|
|
29,531 |
|
|
|
33,914 |
|
Inter-segment
revenue
|
|
|
(4,034 |
) |
|
|
(4,270 |
) |
|
|
(7,239 |
) |
|
|
(7,550 |
) |
Total
revenue
|
|
$ |
143,726 |
|
|
$ |
206,047 |
|
|
$ |
261,026 |
|
|
$ |
368,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Profit
(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
2,373 |
|
|
$ |
12,195 |
|
|
$ |
(2,872 |
) |
|
$ |
11,771 |
|
Precast
concrete products
|
|
|
635 |
|
|
|
1,706 |
|
|
|
626 |
|
|
|
3,515 |
|
Gain
on purchases of senior subordinated notes
|
|
|
2,913 |
|
|
|
— |
|
|
|
7,406 |
|
|
|
— |
|
Unallocated
overhead and other income
|
|
|
178 |
|
|
|
2,083 |
|
|
|
985 |
|
|
|
2,695 |
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
(4,765 |
) |
|
|
(4,596 |
) |
|
|
(9,725 |
) |
|
|
(10,164 |
) |
Interest
expense, net
|
|
|
(6,562 |
) |
|
|
(6,668 |
) |
|
|
(13,330 |
) |
|
|
(13,374 |
) |
Profit
(loss) from continuing operations before income taxes
and non-controlling interestinterest
|
|
$ |
(5,228 |
) |
|
$ |
4,720 |
|
|
$ |
(16,910 |
) |
|
$ |
(5,557 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
Depletion and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
6,251 |
|
|
$ |
6,382 |
|
|
$ |
12,474 |
|
|
$ |
12,611 |
|
Precast
concrete products
|
|
|
717 |
|
|
|
534 |
|
|
|
1,444 |
|
|
|
1,058 |
|
Corporate
|
|
|
482 |
|
|
|
119 |
|
|
|
988 |
|
|
|
244 |
|
Total
depreciation, depletion and amortization
|
|
$ |
7,450 |
|
|
$ |
7,035 |
|
|
$ |
14,906 |
|
|
$ |
13,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by
Product:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete
|
|
$ |
115,638 |
|
|
$ |
167,612 |
|
|
$ |
211,142 |
|
|
$ |
298,619 |
|
Precast
concrete products
|
|
|
16,179 |
|
|
|
17,732 |
|
|
|
29,738 |
|
|
|
34,496 |
|
Building
materials
|
|
|
2,650 |
|
|
|
5,272 |
|
|
|
4,464 |
|
|
|
8,531 |
|
Aggregates
|
|
|
5,796 |
|
|
|
7,309 |
|
|
|
9,223 |
|
|
|
11,406 |
|
Other
|
|
|
3,463 |
|
|
|
8,122 |
|
|
|
6,459 |
|
|
|
15,102 |
|
Total
revenue
|
|
$ |
143,726 |
|
|
$ |
206,047 |
|
|
$ |
261,026 |
|
|
$ |
368,154 |
|
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
Capital
Expenditures:
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
2,383 |
|
|
$ |
6,107 |
|
|
$ |
9,010 |
|
|
$ |
10,918 |
|
Precast
concrete products
|
|
|
87 |
|
|
|
509 |
|
|
|
126 |
|
|
|
1,444 |
|
Total
capital expenditures
|
|
$ |
2,470 |
|
|
$ |
6,616 |
|
|
$ |
9,136 |
|
|
$ |
12,362 |
|
Total
Assets:
|
|
As
of
June
30,
2009
|
|
|
As
of
December 31,
2008
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
375,698 |
|
|
$ |
390,843 |
|
Precast
concrete products
|
|
|
58,120 |
|
|
|
58,600 |
|
Corporate
|
|
|
59,755 |
|
|
|
58,367 |
|
Total
assets
|
|
$ |
493,573 |
|
|
$ |
507,810 |
|
12.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
In
June 2009, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 168, “The FASB
Accounting Standards Codification TM and the Hierarchy of Generally
Accepted Accounting Principles, a replacement of FASB Statement No. 162”.
As prescribed in SFAS No. 168, the codification becomes the single source of
authoritative nongovernmental U.S. GAAP, superseding existing FASB, American
Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force
(EITF) and related literature. The codification eliminates the GAAP hierarchy
contained in SFAS No. 162 and establishes one level of authoritative GAAP.
All other literature is considered non-authoritative. This Statement is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. This will have an impact on our financial
statement disclosures since all future references to authoritative accounting
literature will be referenced in accordance with the codification.
In
June 2009, the FASB issued SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R),” and SFAS No. 166, “Accounting for Transfers
of Financial Assets—an amendment of FASB Statement No. 140.” SFAS
No. 167 amends FASB Interpretation 46(R) to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity and requires ongoing qualitative reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity.
SFAS No. 166 amends SFAS No. 140 by removing the exemption from
consolidation for Qualifying Special Purpose Entities (QSPEs). This Statement
also limits the circumstances in which a financial asset, or portion of a
financial asset, should be derecognized when the transferor has not transferred
the entire original financial asset to an entity that is not consolidated with
the transferor in the financial statements being presented and/or when the
transferor has continuing involvement with the transferred financial asset. We
do not expect the adoption of these standards to have any material impact on our
consolidated financial statements.
In
May 2009, the FASB issued SFAS No. 165, “Subsequent Events.”
This Statement sets forth: 1) the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial
statements; 2) the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its financial
statements; and 3) the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. This Statement is
effective for interim and annual periods ending after June 15, 2009. We
adopted SFAS No. 165 during the quarter ended June 30, 2009 and this
statement did not have an impact on our consolidated financial statements. The
required disclosure under SFAS No. 165 is included in Note 1 to our consolidated
financial statements.
In
April 2009, the FASB issued FASB Staff Position (“FSP”) FAS 107-1 and
Accounting Principles Board (“APB”) 28-1, “Interim Disclosures about Fair Value
of Financial Instruments.” The FSP amends SFAS No. 107, “Disclosures about
Fair Value of Financial Instruments” to require an entity to provide disclosures
about fair value of financial instruments in interim financial information. This
FSP is to be applied prospectively and is effective for interim and annual
periods ending after June 15, 2009. We adopted this FSP in the quarter
ended June 30, 2009. There was no impact on our consolidated financial
statements as it relates only to additional disclosures. The required disclosure
is included in Note 6 to our consolidated financial statements.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
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
non-controlling interest in the entity acquired 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.
The adoption of SFAS No. 141(R) did not have a material impact on our
consolidated financial statements.
In
April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies.” This FSP requires that assets acquired and liabilities assumed
in a business combination that arise from contingencies be recognized at fair
value if fair value can be reasonably estimated. If fair value cannot be
reasonably estimated, the asset or liability would generally be recognized in
accordance with SFAS No. 5, “Accounting for Contingencies” and FASB
Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss.”
Further, the FASB removed the subsequent accounting guidance for assets and
liabilities arising from contingencies from SFAS No. 141(R). The
requirements of this FSP carry forward, without significant revision, the
guidance on contingencies of SFAS No. 141, “Business Combinations”, which
was superseded by SFAS No. 141(R). The FSP also eliminates the requirement
to disclose an estimate of the range of possible outcomes of recognized
contingencies at the acquisition date. For unrecognized contingencies, the FASB
requires that entities include only the disclosures required by SFAS No. 5.
This FSP was adopted effective January 1, 2009. There was no impact upon
adoption, and its effects on future periods will depend on the nature and
significance of business combinations subject to this statement.
In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities. 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 is applied retrospectively. The adoption of FSP
EITF 03-6-1 did not have a material impact on our financial
statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities.” The new standard was 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 was
effective for our first quarter 2009 financial statements. The
adoption of SFAS No. 161 did not 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 accordance with GAAP, 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 on our
consolidated financial statements 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. The application of FAS 157
did not have a material impact on our consolidated financial
statements.
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling 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 non-controlling
interest, changes in a parent’s ownership interest and the valuation of retained
non-controlling 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 non-controlling owners.
SFAS No. 160 is effective for fiscal years beginning after December 15,
2008. We adopted SFAS No. 160 in the first quarter of 2009 and have
included the non-controlling interest in our 60% owned Michigan subsidiary as a
component of equity on the condensed consolidated balance sheets and have
included net loss attributable to non-controlling interest in our consolidated
net loss.
13.
|
FINANCIAL STATEMENTS OF
SUBSIDIARY GUARANTORS
|
All of
our subsidiaries, excluding Superior 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), Superior and our total company, as of and for the three and
six months ended June 30, 2009 and 2008.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Condensed
Consolidating Balance Sheet
As
of June 30, 2009:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
(in
thousands)
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
– |
|
|
$ |
4,464 |
|
|
$ |
4 |
|
|
$ |
– |
|
|
$ |
4,468 |
|
Trade
accounts receivable, net.
|
|
|
– |
|
|
|
80,212 |
|
|
|
10,708 |
|
|
|
– |
|
|
|
90,920 |
|
Inventories
|
|
|
– |
|
|
|
27,370 |
|
|
|
3,941 |
|
|
|
– |
|
|
|
31,311 |
|
Deferred
income taxes
|
|
|
– |
|
|
|
14,679 |
|
|
|
– |
|
|
|
– |
|
|
|
14,679 |
|
Prepaid
expenses
|
|
|
– |
|
|
|
4,369 |
|
|
|
907 |
|
|
|
– |
|
|
|
5,276 |
|
Other
current assets
|
|
|
4,886 |
|
|
|
5,022 |
|
|
|
605 |
|
|
|
– |
|
|
|
10,513 |
|
Total
current assets
|
|
|
4,886 |
|
|
|
136,116 |
|
|
|
16,165 |
|
|
|
– |
|
|
|
157,167 |
|
Property,
plant and equipment, net
|
|
|
– |
|
|
|
237,645 |
|
|
|
28,566 |
|
|
|
– |
|
|
|
266,211 |
|
Goodwill
|
|
|
– |
|
|
|
62,793 |
|
|
|
– |
|
|
|
– |
|
|
|
62,793 |
|
Investment
in Subsidiaries
|
|
|
360,301 |
|
|
|
20,454 |
|
|
|
– |
|
|
|
(380,755 |
) |
|
|
– |
|
Other
assets
|
|
|
5,670 |
|
|
|
1,669 |
|
|
|
63 |
|
|
|
– |
|
|
|
7,402 |
|
Total
assets
|
|
$ |
370,857 |
|
|
$ |
458,677 |
|
|
$ |
44,794 |
|
|
$ |
(380,755 |
) |
|
$ |
493,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$ |
839 |
|
|
$ |
1,549 |
|
|
$ |
8,606 |
|
|
$ |
– |
|
|
$ |
10,994 |
|
Accounts
payable
|
|
|
– |
|
|
|
27,490 |
|
|
|
7,854 |
|
|
|
2,412 |
|
|
|
37,756 |
|
Accrued
liabilities
|
|
|
6,171 |
|
|
|
46,083 |
|
|
|
3,859 |
|
|
|
– |
|
|
|
56,113 |
|
Total
current liabilities
|
|
|
7,010 |
|
|
|
75,122 |
|
|
|
20,319 |
|
|
|
2,412 |
|
|
|
104,863 |
|
Long-term
debt, net of current maturities
|
|
|
298,169 |
|
|
|
293 |
|
|
|
4,021 |
|
|
|
(2,412 |
) |
|
|
300,071 |
|
Other
long-term obligations and deferred credits
|
|
|
7,978 |
|
|
|
587 |
|
|
|
– |
|
|
|
– |
|
|
|
8,565 |
|
Deferred
income taxes
|
|
|
– |
|
|
|
14,201 |
|
|
|
– |
|
|
|
– |
|
|
|
14,201 |
|
Total
liabilities
|
|
|
313,157 |
|
|
|
90,203 |
|
|
|
24,340 |
|
|
|
– |
|
|
|
427,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
38 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
38 |
|
Additional
paid-in capital
|
|
|
266,951 |
|
|
|
542,453 |
|
|
|
38,736 |
|
|
|
(581,189 |
) |
|
|
266,951 |
|
Retained
deficit
|
|
|
(206,012 |
) |
|
|
(182,152 |
) |
|
|
(18,282 |
) |
|
|
200,434 |
|
|
|
(206,012 |
) |
Treasury
stock, at cost
|
|
|
(3,277 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(3,277 |
) |
Total
stockholders’ equity
|
|
|
57,700 |
|
|
|
360,301 |
|
|
|
20,454 |
|
|
|
(380,755 |
) |
|
|
57,700 |
|
Non-controlling
interest
|
|
|
– |
|
|
|
8,173 |
|
|
|
– |
|
|
|
– |
|
|
|
8,173 |
|
Total
equity
|
|
|
57,700 |
|
|
|
368,474 |
|
|
|
20,454 |
|
|
|
(380,755 |
) |
|
|
65,873 |
|
Total
liabilities and equity
|
|
$ |
370,857 |
|
|
$ |
458,677 |
|
|
$ |
44,794 |
|
|
$ |
(380,755 |
) |
|
$ |
493,573 |
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued
(Unaudited)
Condensed
Consolidating Statement of Operations
Three
months ended June 30, 2009:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
– |
|
|
$ |
128,756 |
|
|
$ |
14,970 |
|
|
$ |
– |
|
|
$ |
143,726 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
– |
|
|
|
106,732 |
|
|
|
13,857 |
|
|
|
– |
|
|
|
120,589 |
|
Selling,
general and administrative expenses
|
|
|
– |
|
|
|
15,631 |
|
|
|
1,976 |
|
|
|
– |
|
|
|
17,607 |
|
Depreciation,
depletion and amortization
|
|
|
– |
|
|
|
6,577 |
|
|
|
873 |
|
|
|
– |
|
|
|
7,450 |
|
Loss
from operations
|
|
|
– |
|
|
|
(184 |
) |
|
|
(1,736 |
) |
|
|
– |
|
|
|
(1,920 |
) |
Interest
income
|
|
|
4 |
|
|
|
5 |
|
|
|
– |
|
|
|
– |
|
|
|
9 |
|
Interest
expense
|
|
|
6,414 |
|
|
|
32 |
|
|
|
125 |
|
|
|
– |
|
|
|
6,571 |
|
Gain
on purchase of senior subordinated notes
|
|
|
2,913 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,913 |
|
Other
income, net
|
|
|
– |
|
|
|
308 |
|
|
|
33 |
|
|
|
– |
|
|
|
341 |
|
Loss
before income tax provision (benefit)
|
|
|
(3,497 |
) |
|
|
97 |
|
|
|
(1,828 |
) |
|
|
– |
|
|
|
(5,228 |
) |
Income
tax provision (benefit)
|
|
|
(1,224 |
) |
|
|
718 |
|
|
|
75 |
|
|
|
– |
|
|
|
(431 |
) |
Equity
earnings in subsidiary
|
|
|
(1,721 |
) |
|
|
(1,903 |
) |
|
|
– |
|
|
|
3,624 |
|
|
|
– |
|
Loss
from continuing operations
|
|
|
(3,994 |
) |
|
|
(2,524 |
) |
|
|
(1,903 |
) |
|
|
3,624 |
|
|
|
(4,797 |
) |
Loss
from discontinued operations, net of tax
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(3,994 |
) |
|
|
(2,524 |
) |
|
|
(1,903 |
) |
|
|
3,624 |
|
|
|
(4,797 |
) |
Net
loss attributable to non-controlling interest
|
|
|
– |
|
|
|
803 |
|
|
|
– |
|
|
|
– |
|
|
|
803 |
|
Net
loss attributable to stockholders
|
|
$ |
(3,994 |
) |
|
$ |
(1,721 |
) |
|
$ |
(1,903 |
) |
|
$ |
3,624 |
|
|
$ |
(3,994 |
) |
1Including
minor subsidiaries without operations or material assets.
Condensed
Consolidating Statement of Operations
Six
months ended June 30, 2009:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
– |
|
|
$ |
240,733 |
|
|
$ |
20,293 |
|
|
$ |
– |
|
|
$ |
261,026 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
– |
|
|
|
203,249 |
|
|
|
20,862 |
|
|
|
– |
|
|
|
224,111 |
|
Selling,
general and administrative expenses
|
|
|
– |
|
|
|
30,539 |
|
|
|
3,146 |
|
|
|
– |
|
|
|
33,685 |
|
Depreciation,
depletion and amortization
|
|
|
– |
|
|
|
13,077 |
|
|
|
1,829 |
|
|
|
– |
|
|
|
14,906 |
|
Loss
from operations
|
|
|
– |
|
|
|
(6,132 |
) |
|
|
(5,544 |
) |
|
|
– |
|
|
|
(11,676 |
) |
Interest
income
|
|
|
6 |
|
|
|
9 |
|
|
|
– |
|
|
|
– |
|
|
|
15 |
|
Interest
expense
|
|
|
13,008 |
|
|
|
91 |
|
|
|
246 |
|
|
|
– |
|
|
|
13,345 |
|
Gain
on purchase of senior subordinated notes
|
|
|
7,406 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
7,406 |
|
Other
income, net
|
|
|
– |
|
|
|
630 |
|
|
|
60 |
|
|
|
– |
|
|
|
690 |
|
Loss
before income tax provision (benefit)
|
|
|
(5,596 |
) |
|
|
(5,584 |
) |
|
|
(5,730 |
) |
|
|
– |
|
|
|
(16,910 |
) |
Income
tax provision (benefit)
|
|
|
(1,959 |
) |
|
|
741 |
|
|
|
150 |
|
|
|
– |
|
|
|
(1,068 |
) |
Equity
earnings in subsidiary
|
|
|
(9,811 |
) |
|
|
(5,880 |
) |
|
|
– |
|
|
|
15,691 |
|
|
|
– |
|
Loss
from continuing operations
|
|
|
(13,448 |
) |
|
|
(12,205 |
) |
|
|
(5,880 |
) |
|
|
15,691 |
|
|
|
(15,842 |
) |
Loss
from discontinued operations, net of tax
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(13,448 |
) |
|
|
(12,205 |
) |
|
|
(5,880 |
) |
|
|
15,691 |
|
|
|
(15,842 |
) |
Net
loss attributable to non-controlling interest
|
|
|
– |
|
|
|
2,394 |
|
|
|
– |
|
|
|
– |
|
|
|
2,394 |
|
Net
loss attributable to stockholders
|
|
$ |
(13,448 |
) |
|
$ |
(9,811 |
) |
|
$ |
(5,880 |
) |
|
$ |
15,691 |
|
|
$ |
(13,448 |
) |
1Including
minor subsidiaries without operations or material assets.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued
(Unaudited)
Condensed
Consolidating Statement of Cash Flows
Six
months ended June 30, 2009:
|
|
U.S.
Concrete Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Net
cash provided by (used in) operating activities
|
|
$ |
(2,399 |
) |
|
$ |
8,209 |
|
|
$ |
(7,782 |
) |
|
$ |
– |
|
|
$ |
(1,972 |
) |
Net
cash provided by (used in) investing activities
|
|
|
– |
|
|
|
(11,823 |
) |
|
|
99 |
|
|
|
– |
|
|
|
(11,724 |
) |
Net
cash provided by (used in) financing activities
|
|
|
2,399 |
|
|
|
3,393 |
|
|
|
7,049 |
|
|
|
– |
|
|
|
12,841 |
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
– |
|
|
|
(221 |
) |
|
|
(634 |
) |
|
|
– |
|
|
|
(855 |
) |
Cash
and cash equivalents at the beginning of the period
|
|
|
– |
|
|
|
4,685 |
|
|
|
638 |
|
|
|
– |
|
|
|
5,323 |
|
Cash
and cash equivalents at the end of the period
|
|
$ |
– |
|
|
$ |
4,464 |
|
|
$ |
4 |
|
|
$ |
– |
|
|
$ |
4,468 |
|
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued
Condensed
Consolidating Balance Sheet
As
of December 31, 2008:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
(in
thousands)
|
|
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 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Non-controlling
interest
|
|
|
– |
|
|
|
10,567 |
|
|
|
– |
|
|
|
– |
|
|
|
10,567 |
|
Total
equity
|
|
|
69,796 |
|
|
|
380,420 |
|
|
|
26,334 |
|
|
|
(396,187 |
) |
|
|
80,363 |
|
Total
liabilities and equity
|
|
$ |
381,490 |
|
|
$ |
474,986 |
|
|
$ |
47,521 |
|
|
$ |
(396,187 |
) |
|
$ |
507,810 |
|
1
Including minor subsidiaries without operations or material assets.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued
(Unaudited)
Condensed
Consolidating Statement of Operations
Three
months ended June 30, 2008:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenue
|
|
$ |
– |
|
|
$ |
185,967 |
|
|
$ |
20,080 |
|
|
$ |
– |
|
|
$ |
206,047 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
– |
|
|
|
151,222 |
|
|
|
19,188 |
|
|
|
– |
|
|
|
170,410 |
|
Selling,
general and administrative expenses
|
|
|
– |
|
|
|
16,025 |
|
|
|
1,617 |
|
|
|
– |
|
|
|
17,642 |
|
Depreciation,
depletion and amortization
|
|
|
– |
|
|
|
5,976 |
|
|
|
1,059 |
|
|
|
– |
|
|
|
7,035 |
|
Loss
from operations
|
|
|
– |
|
|
|
12,744 |
|
|
|
(1,784 |
) |
|
|
– |
|
|
|
10,960 |
|
Interest
income
|
|
|
36 |
|
|
|
1 |
|
|
|
– |
|
|
|
– |
|
|
|
37 |
|
Interest
expense
|
|
|
6,510 |
|
|
|
47 |
|
|
|
148 |
|
|
|
– |
|
|
|
6,705 |
|
Other
income, net
|
|
|
– |
|
|
|
378 |
|
|
|
50 |
|
|
|
– |
|
|
|
428 |
|
Loss
before income tax provision (benefit)
|
|
|
(6,474 |
) |
|
|
13,076 |
|
|
|
(1,882 |
) |
|
|
– |
|
|
|
4,720 |
|
Income
tax provision (benefit)
|
|
|
(2,266 |
) |
|
|
4,388 |
|
|
|
80 |
|
|
|
– |
|
|
|
2,202 |
|
Equity
earnings in subsidiary
|
|
|
7,511 |
|
|
|
(1,962 |
) |
|
|
– |
|
|
|
(5,549 |
) |
|
|
– |
|
Loss
from continuing operations
|
|
|
3,303 |
|
|
|
6,726 |
|
|
|
(1,962 |
) |
|
|
(5,549 |
) |
|
|
2,518 |
|
Loss
from discontinued operations, net of tax
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
3,303 |
|
|
|
6,726 |
|
|
|
(1,962 |
) |
|
|
(5,549 |
) |
|
|
2,518 |
|
Net
loss attributable to non-controlling interest
|
|
|
– |
|
|
|
785 |
|
|
|
– |
|
|
|
– |
|
|
|
785 |
|
Net loss attributable to
stockholders
|
|
$ |
3,303 |
|
|
$ |
7,511 |
|
|
$ |
(1,962 |
) |
|
$ |
(5,549 |
) |
|
$ |
3,303 |
|
1
Including minor subsidiaries without operations or material
assets.
Condensed
Consolidating Statement of Operations
Six
months ended June 30, 2008:
|
|
U.S.
Concrete
Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenue
|
|
$ |
– |
|
|
$ |
341,616 |
|
|
$ |
26,538 |
|
|
$ |
– |
|
|
$ |
368,154 |
|
Cost
of goods sold before depreciation, depletion and
amortization
|
|
|
– |
|
|
|
283,628 |
|
|
|
28,073 |
|
|
|
– |
|
|
|
311,701 |
|
Selling,
general and administrative expenses
|
|
|
– |
|
|
|
32,761 |
|
|
|
3,012 |
|
|
|
– |
|
|
|
35,773 |
|
Depreciation,
depletion and amortization
|
|
|
– |
|
|
|
11,736 |
|
|
|
2,177 |
|
|
|
– |
|
|
|
13,913 |
|
Loss
from operations
|
|
|
– |
|
|
|
13,491 |
|
|
|
(6,724 |
) |
|
|
– |
|
|
|
6,767 |
|
Interest
income
|
|
|
108 |
|
|
|
3 |
|
|
|
– |
|
|
|
– |
|
|
|
111 |
|
Interest
expense
|
|
|
13,011 |
|
|
|
178 |
|
|
|
296 |
|
|
|
– |
|
|
|
13,485 |
|
Other
income, net
|
|
|
– |
|
|
|
948 |
|
|
|
102 |
|
|
|
– |
|
|
|
1,050 |
|
Loss
before income tax provision (benefit)
|
|
|
(12,903 |
) |
|
|
14,264 |
|
|
|
(6,918 |
) |
|
|
– |
|
|
|
(5,557 |
) |
Income
tax provision (benefit)
|
|
|
(4,516 |
) |
|
|
3,459 |
|
|
|
155 |
|
|
|
– |
|
|
|
(902 |
) |
Equity
earnings in subsidiary
|
|
|
6,412 |
|
|
|
(7,073 |
) |
|
|
– |
|
|
|
661 |
|
|
|
– |
|
Loss
from continuing operations
|
|
|
(1,975 |
) |
|
|
3,732 |
|
|
|
(7,073 |
) |
|
|
661 |
|
|
|
(4,655 |
) |
Loss
from discontinued operations, net of tax
|
|
|
– |
|
|
|
(149 |
) |
|
|
– |
|
|
|
– |
|
|
|
(149 |
) |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,975 |
) |
|
|
3,583 |
|
|
|
(7,073 |
) |
|
|
661 |
|
|
|
(4,804 |
) |
Net
loss attributable to non-controlling interest
|
|
|
– |
|
|
|
2,829 |
|
|
|
– |
|
|
|
– |
|
|
|
2,829 |
|
Net
loss attributable to stockholders
|
|
$ |
(1,975 |
) |
|
$ |
6,412 |
|
|
$ |
(7,073 |
) |
|
$ |
661 |
|
|
$ |
(1,975 |
) |
1
Including minor subsidiaries without operations or material
assets.
U.S.
CONCRETE, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued
(Unaudited)
Condensed
Consolidating Statement of Cash Flows
Six
months ended June 30, 2008:
|
|
U.S.
Concrete Parent
|
|
|
Subsidiary
Guarantors1
|
|
|
Superior
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Net
cash provided by (used in) operating activities
|
|
$ |
(5,700 |
) |
|
$ |
15,694 |
|
|
$ |
(494 |
) |
|
$ |
– |
|
|
$ |
9,500 |
|
Net
cash provided by (used in) investing activities
|
|
|
– |
|
|
|
(18,286 |
) |
|
|
(237 |
) |
|
|
– |
|
|
|
(18,523 |
) |
Net
cash provided by (used in) financing activities
|
|
|
5,700 |
|
|
|
(1,733 |
) |
|
|
(595 |
) |
|
|
– |
|
|
|
3,372 |
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
– |
|
|
|
(4,325 |
) |
|
|
(1,326 |
) |
|
|
– |
|
|
|
(5,651 |
) |
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
|
|
$ |
– |
|
|
$ |
9,043 |
|
|
$ |
156 |
|
|
$ |
– |
|
|
$ |
9,199 |
|
1
Including minor subsidiaries without operations or material
assets.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Statements
we make in the following discussion which express a belief, expectation or
intention, as well as those that are not historical fact, are forward-looking
statements that are subject to various risks, uncertainties and assumptions. Our
actual results, performance or achievements, or market conditions or industry
results, could differ materially from the forward-looking statements in the
following discussion as a result of a variety of factors, including the risks
and uncertainties we have referred to under the headings “Risk Factors” in Item
1A of Part I in the 2008 Form 10-K, and “—Risks and Uncertainties” below. For a
discussion of our commitments not discussed below, related-party transactions,
and our critical accounting policies, see “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in Item 7 of Part I in the
2008 Form 10-K. We assume no obligation to update these forward-looking
statements, except as required by applicable law.
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 our 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
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 general and more localized economic
conditions, including the 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 could cause the delay of construction
projects during other times of the year.
For the
first six months of 2009, our consolidated average sales price per cubic yard of
ready-mixed concrete increased approximately 1.3%, as compared to the first six
months of 2008. This increase was attributable to higher prices in
our Texas and Michigan markets, offset by lower prices in our northern New
Jersey and California markets. However, we began to see some downward pressure
on our product pricing in most of our markets during the second quarter of
2009.
We
continued to experience declines in the demand for our products during the first
half of 2009, primarily in our residential and commercial end-use
markets. Ready-mixed concrete sales volumes generally began to
decline during the early summer of 2006 and continued to decline throughout
2007, 2008, and the first half of 2009. 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, resulted in ready-mixed
concrete sales volumes being down on a same-plant-sales basis in our major
markets, as compared to the first quarter and first six months of
2008. For the full year, we expect ready-mixed concrete sales volumes
in 2009 to be significantly lower than sales volumes achieved in 2008 because of
continued sluggishness in the residential and commercial end-use construction
markets, which continues to be exacerbated by the financial crisis and U.S.
recession.
Demand
for our products in our precast concrete products segment also decreased in the
first six months of 2009, as compared to the first six months of
2008. This decline is reflective of the decrease 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. Additionally, lower commercial construction
spending in the mid-Atlantic market has affected this segment.
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 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. Due to the severe slowdown in residential housing starts and
decreased demand in other construction activity, combined with increased U.S.
cement capacity, we did not experience cement shortages during the first half of
2009, and we do not expect to experience cement shortages for the remainder of
the year. Cement costs have remained flat in certain markets, but we have
realized cement cost decreases in some of our major markets in the first half of
2009 and expect cement prices to remain stable to moderately down throughout the
remainder of 2009.
Overall,
and in certain markets in particular, aggregates pricing in the first six months
of 2009 were lower when compared with the first six months of 2008. However,
prices by market and for specific types of aggregates
varied. Currently, 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. On average, we expect our aggregates costs in 2009 to be
flat or slightly down over aggregates costs in 2008. Fuel charges have declined
substantially during the first six months of 2009, compared to the first half of
2008, due to lower diesel fuel prices and lower production volumes.
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 our historical rate
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
May 2009, we acquired substantially all of the assets of a concrete crushing and
recycling business in Queens, New York for approximately $4.5 million. In
November 2008, we paid $2.5 million to acquire a ready-mixed concrete operation
in Brooklyn, New York, and 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 these acquisitions. In
January 2008, we acquired a ready-mixed concrete operation in Staten Island, New
York. The purchase price was approximately $1.8 million in
cash.
West Texas Acquisition. 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 borrowings under
our existing credit facility to fund the payment of the purchase
price.
Precast
Concrete Products Segment
Pomeroy. 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 cash on
hand to fund 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 twelve-month period ended September 30, 2008, API
attained 50% of its established earnings target, and we made a $750,000 payment,
reduced for certain uncollected pre-acquisition accounts receivable, 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 in January 2008 (See Note 3 to our condensed consolidated financial
statements included in this report).
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 the 2008 Form 10-K 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 during
the course of 2008 and into early 2009. This implementation was substantially
completed during the first quarter of 2009.
Tax Liabilities. We are
subject to federal, state and local income taxes applicable to corporations
generally, as well as other taxes not based on income. 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
We have
outlined our critical accounting policies in Item 7 of Part II of the 2008 Form
10-K. Our critical accounting policies involve the use of estimates
in the recording of the allowance for doubtful accounts, realization of
goodwill, accruals for self-insurance, accruals for income taxes, inventory
obsolescence reserves and the valuation and useful lives of property, plant and
equipment. See Note 1 to our consolidated financial statements included in
Item 8 of Part II of the 2008 Form 10-K for a discussion of these accounting
policies. See Note 12 to the condensed consolidated financial
statements in Part I of this report for a discussion of recent accounting
pronouncements and accounting changes.
Results
of Operations
The
following table sets forth selected historical statement of operations
information (in thousands, except for selling prices) and that information as a
percentage of sales for each of the periods indicated.
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related products
|
|
$ |
131,737 |
|
|
|
91.7 |
% |
|
$ |
192,964 |
|
|
|
93.7 |
% |
|
$ |
238,734 |
|
|
|
91.5 |
% |
|
$ |
341,790 |
|
|
|
92.8 |
% |
Precast
concrete products
|
|
|
16,023 |
|
|
|
11.1 |
|
|
|
17,353 |
|
|
|
8.4 |
|
|
|
29,531 |
|
|
|
11.3 |
|
|
|
33,914 |
|
|
|
9.2 |
|
Inter-segment
revenue
|
|
|
(4,034 |
) |
|
|
(2.8 |
) |
|
|
(4,270 |
) |
|
|
(2.1 |
) |
|
|
(7,239 |
) |
|
|
(2.8 |
) |
|
|
(7,550 |
) |
|
|
(2.0 |
) |
Total
revenue
|
|
$ |
143,726 |
|
|
|
100.0 |
% |
|
$ |
206,047 |
|
|
|
100.0 |
% |
|
$ |
261,026 |
|
|
|
100.0 |
% |
|
$ |
368,154 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold before depreciation, depletion and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
concrete and concrete-related
products
|
|
$ |
107,900 |
|
|
|
75.1 |
% |
|
$ |
157,320 |
|
|
|
76.4 |
% |
|
$ |
200,752 |
|
|
|
76.9 |
% |
|
$ |
286,361 |
|
|
|
77.8 |
% |
Precast
concrete products
|
|
|
12,689 |
|
|
|
8.8 |
|
|
|
13,090 |
|
|
|
6.3 |
|
|
|
23,359 |
|
|
|
9.0 |
|
|
|
25,340 |
|
|
|
6.9 |
|
Selling,
general and administrative expenses
|
|
|
17,607 |
|
|
|
12.2 |
|
|
|
17,642 |
|
|
|
8.6 |
|
|
|
33,685 |
|
|
|
12.9 |
|
|
|
35,773 |
|
|
|
9.7 |
|
Depreciation,
depletion and amortization
|
|
|
7,450 |
|
|
|
5.2 |
|
|
|
7,035 |
|
|
|
3.4 |
|
|
|
14,906 |
|
|
|
5.7 |
|
|
|
13,913 |
|
|
|
3.8 |
|
Income
(loss) from operations
|
|
|
(1,920 |
) |
|
|
(1.3 |
) |
|
|
10,960 |
|
|
|
5.3 |
|
|
|
(11,676 |
) |
|
|
(4.5 |
) |
|
|
6,767 |
|
|
|
1.8 |
|
Interest
expense, net
|
|
|
6,562 |
|
|
|
4.6 |
|
|
|
6,668 |
|
|
|
3.2 |
|
|
|
13,330 |
|
|
|
5.1 |
|
|
|
13,374 |
|
|
|
3.6 |
|
Gain
on purchase of senior subordinated notes
|
|
|
2,913 |
|
|
|
2.0 |
|
|
|
— |
|
|
|
— |
|
|
|
7,406 |
|
|
|
2.8 |
|
|
|
— |
|
|
|
— |
|
Other
income, net
|
|
|
341 |
|
|
|
0.2 |
|
|
|
428 |
|
|
|
0.2 |
|
|
|
690 |
|
|
|
0.3 |
|
|
|
1,050 |
|
|
|
0.3 |
|
Income
(loss) from continuing operations before income taxes
|
|
|
(5,228 |
) |
|
|
(3.7 |
) |
|
|
4,720 |
|
|
|
2.3 |
|
|
|
(16,910 |
) |
|
|
(6.5 |
) |
|
|
(5,557 |
) |
|
|
(1.5 |
) |
Income
tax provision (benefit)
|
|
|
(431 |
) |
|
|
(0.3 |
) |
|
|
2,202 |
|
|
|
1.1 |
|
|
|
(1,068 |
) |
|
|
(0.4 |
) |
|
|
(902 |
) |
|
|
(0.2 |
) |
Income
(loss) from continuing operations
|
|
|
(4,797 |
) |
|
|
(3.4 |
) |
|
|
2,518 |
|
|
|
1.2 |
|
|
|
(15,842 |
) |
|
|
(6.1 |
) |
|
|
(4,655 |
) |
|
|
(1.3 |
) |
Loss
from discontinued operations,
net of tax
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(149 |
) |
|
|
(0.0 |
) |
Net
income (loss)
|
|
|
(4,797 |
) |
|
|
(3.4 |
) |
|
|
2,518 |
|
|
|
1.2 |
|
|
|
(15,842 |
) |
|
|
(6.1 |
) |
|
|
(4,804 |
) |
|
|
(1.3 |
) |
Net
loss attributable to non-controlling
interest
|
|
|
803 |
|
|
|
0.6 |
|
|
|
785 |
|
|
|
0.4 |
|
|
|
2,394 |
|
|
|
1.0 |
|
|
|
2,829 |
|
|
|
0.8 |
|
Net
loss attributable to stockholders
|
|
$ |
(3,994 |
) |
|
|
(2.8 |
)% |
|
$ |
3,303 |
|
|
|
1.6 |
% |
|
$ |
(13,448 |
) |
|
|
(5.1 |
)% |
|
$ |
(1,975 |
) |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-mixed
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic
yard
|
|
$ |
94.15 |
|
|
|
|
|
|
$ |
93.83 |
|
|
|
|
|
|
$ |
95.85 |
|
|
|
|
|
|
$ |
94.60 |
|
|
|
|
|
Sales
volume in cubic yards
|
|
|
1,228 |
|
|
|
|
|
|
|
1,786 |
|
|
|
|
|
|
|
2,203 |
|
|
|
|
|
|
|
3,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precast
Concrete Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling price per cubic
yard of concrete used in
production
|
|
$ |
1,052.78 |
|
|
|
|
|
|
$ |
512.96 |
|
|
|
|
|
|
$ |
958.06 |
|
|
|
|
|
|
$ |
692.91 |
|
|
|
|
|
Ready-mixed
concrete used in production
in cubic yards
|
|
|
15 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
49 |
|
|
|
|
|
Revenue
Ready-mixed
concrete and
concrete-related products. Revenue from our ready-mixed concrete
and concrete-related products segment decreased $61.3 million, or 31.7%, to
$131.7 million for the
three months ended June 30, 2009, from $193.0
million in the corresponding period
of 2008. Our ready-mixed sales
volumes for the second quarter of 2009 were approximately 1.23 million cubic
yards, down 31.2% from the 1.79 million cubic yards of ready-mixed concrete we
sold in the second quarter of 2008. Excluding the volumes associated with
acquired operations, on a same-plant-sales basis, our ready-mixed volumes in the
second quarter of 2009 were down approximately 35.3% compared to the second
quarter of 2008. For the six months ended June 30, 2009, ready-mixed concrete and
concrete-related products revenues were $238.7 million, a decrease of 30.2%
compared to the first half of 2008. Our ready-mixed concrete sales
volumes for the first half of 2009
were approximately 2.20 million cubic
yards, down 30.2% from approximately 3.16 million cubic yards of ready-mixed
concrete sold during the first half of 2008. Excluding ready-mixed concrete
volumes attributable to acquired business operations, first half 2009 volumes were down
approximately 34.5% on a same-plant-sales basis from the first half of
2008.
These
declines primarily reflect the 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. Less
favorable weather conditions in our north Texas markets in the first half
of 2009 also contributed to these decreases. Partially offsetting the effects of
lower sales volumes was the approximate 1.3% rise in the average sales price per
cubic yard of ready-mixed concrete during the six months ended June 30, 2009, as
compared to the corresponding period in 2008.
Precast concrete products.
Revenue from our precast concrete products segment was down $1.3 million,
or 7.7%, to $16.0 million for the second quarter of 2009 from $17.3 million
during the corresponding period of 2008. For the six months ended
June 30, 2009, revenues decreased $4.4 million, or 12.9%, to $29.5 million from
$33.9 million during the first half of 2008. These decreases reflect the
downturn primarily in residential construction in our northern California and
Phoenix, Arizona markets. The decrease in revenue was partially offset by higher
revenue in 2009 from the acquisition of the assets of Pomeroy in August 2008 and
higher commercial spending in our mid-Atlantic market during the second quarter
of 2009.
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 $49.4 million, or 31.4%, to $107.9 million for the
three months ended June 30, 2009 from $157.3 million for the three months ended
June 30, 2008. For the six months ended June 30, 2009, these costs
decreased $85.6 million, or 29.9%, to $200.8 million from $286.4 million for the
six months ended June 30, 2008. These decreases were primarily associated with
lower sales volumes in 2009.
As a percentage of ready-mixed concrete
and concrete-related product revenue, cost of goods sold before depreciation,
depletion and amortization was 81.9% for the three months ended June 30, 2009,
as compared to 81.5% for the same period of 2008. As a percentage of ready-mixed
concrete and concrete-related product revenue, cost of goods sold before
depreciation, depletion and amortization was 84.1% for the six months ended June
30, 2009, as compared to 83.8% for the corresponding period of 2008. The
increase in cost of goods sold as a percentage of ready-mixed concrete and
concrete-related products revenue was primarily attributable to higher
production costs and per unit delivery costs, as compared to the three and
six months ended June 30, 2008. Additionally, the effect of our fixed costs
being spread over lower volumes has increased this percentage.
Precast concrete
products. Cost
of goods sold before depreciation, depletion and amortization for our precast
concrete products segment declined $0.4 million, or 3.1%, to $12.7 million for
the quarter ended June 30, 2009 from $13.1 million for the corresponding period
of 2008. Cost of goods sold before depreciation, depletion and amortization
declined $1.9 million, or 7.8%, to $23.4 million for the six months ended June
30, 2009 from $25.3 million for the first half of 2008. This decrease was
primarily related to the declining residential construction market that has been
impacting our northern California and Phoenix, Arizona precast
markets.
As a percentage of precast concrete
products revenue, cost of goods sold before depreciation, depletion and
amortization for precast concrete products rose to 79.2% for three months ended
June 30, 2009 from 75.4% during the three months ended June 30, 2008. As a
percentage of precast concrete revenue, cost of goods sold before depreciation,
depletion and amortization rose to 79.1% for the six months ended June 30, 2009
from 74.7% during the corresponding period of 2008. This percentage increased in
part because of the decreased efficiency in our plant operations in northern
California and Phoenix, Arizona, resulting from lower demand for our primarily
residential product offerings in these markets.
Selling, general and administrative
expenses. Selling, general and administrative expenses for the three
months ended June 30, 2009 remained flat at $17.6 million compared to the
corresponding period of 2008. While these expenses were comparable quarter over
quarter we experienced lower costs during the second quarter of 2009 related
primarily to reduced compensation as a result of workforce reductions in 2008
and 2009, reduced incentive-based compensation accruals, and other
administrative reductions such as in travel and entertainment costs and office
expenses. These reductions were offset by an increase in our bad debt provision
and higher professional fees when compared to the second quarter of
2008.
Selling, general and administrative
expenses were $33.7 million in the first half of 2009, compared to $35.8 million
in the first half of 2008. This decrease was primarily due to lower
incentive compensation accruals, lower travel and entertainment expenses and
other cost reductions implemented in late 2008 and in 2009, partially offset by
higher professional fees and an increase in our bad debt provision.
Depreciation, depletion and
amortization. Depreciation, depletion and amortization expense increased
$0.4 million, or 5.9%, to $7.4 million for the three months ended June 30, 2009
from $7.0 million in the corresponding period of 2008. Depreciation, depletion
and amortization expense for the six months ended June 30, 2009 increased $1.0
million to $14.9 million, as compared to $13.9 million during the first half of
2008. These increases were attributable primarily to higher depreciation expense
related to our new information technology system and acquisitions in the second
half of 2008 and second quarter of 2009.
Gain on purchases of senior
subordinated notes. During the second quarter of 2009, we purchased $5.0
million principal amount of our 8⅜% Senior Subordinated Notes due April 1, 2014
(the “8⅜% Notes”) in open market transactions for $2.0 million. We
recorded a gain of $2.9 million as a result of these transactions after writing
off $0.1 million of previously deferred financing costs associated with the
pro-rata amount of the 8⅜% Notes purchased. For the six month period ended June
30, 2009, we purchased $12.4 million aggregate principal amount of the
8⅜% Notes in open market transactions for approximately $4.8
million. This resulted in a gain of approximately $7.4 million as a
result of these open market transactions after writing off a total of $0.2
million of previously deferred financing costs associated with the pro-rata
amount of the 8⅜% Notes purchased.
Interest expense,
net. Net interest expense decreased $0.1 million, or 1.6%, to
$6.6 million in the second quarter of 2009 from $6.7 million in the second
quarter of 2008. Net interest expense for the six months ended June 30, 2009 was
$13.3 million, compared to $13.4 million for the first half of
2008. We experienced interest savings from the repurchase of our 8⅜%
Notes and lower interest rates on borrowings under our Credit Facility when
compared to the corresponding periods of 2008. This reduction was mostly offset
by increased interest associated with higher amounts outstanding under our
Credit Facility.
Income tax
benefit. We recorded an income tax benefit from continuing
operations of $1.1 million for the six months ended June 30, 2009, as compared
to $0.9 million for the corresponding period in 2008. At the end of each interim
reporting period, we estimate the effective income tax rate expected to be
applicable for the full year. We use this estimate in providing for
income taxes on a year-to-date basis, and it may vary in subsequent interim
periods if our estimate of the full year income or loss
changes. Our effective tax benefit rate was 6.3% and 16.2%
for the six months ended June 30, 2009 and 2008, respectively. For the six
months ended June 30, 2009, we applied a valuation allowance against certain of
our deferred tax assets, including operating loss carryforwards, which reduced
our effective benefit rate from the statutory rate. In accordance with GAAP, a
valuation allowance is required unless it is more likely than not that future
taxable income or the reversal of deferred tax liabilities will be sufficient to
recover deferred tax assets. In addition, certain state taxes are calculated on
bases different than pre-tax loss (such as gross receipts). This results in us
recording income tax expense for these states, which also lowered the effective
benefit rate for the six months ended June 30, 2009 compared to the statutory
rate.
Non-controlling
interest. The net loss attributable to non-controlling
interest reflected in the three and six month periods ended June 30, 2009 and
2008 related to the allocable share of net loss from our Michigan joint venture,
Superior Materials Holdings, LLC (“Superior”) to the minority interest
owner.
Liquidity
and Capital Resources
Our primary short-term liquidity needs
consist of financing seasonal working capital requirements, purchasing property
and equipment, (not in short term) and paying cash interest expense under the
8⅜% Notes 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 $4.5 million at
June 30, 2009, our senior secured revolving credit facility provides us with a
significant source of liquidity. At June 30, 2009, we had $48.1
million of available credit, net of outstanding revolving credit borrowings of
$26.0 million and outstanding letters of credit of $11.5 million. Our working
capital needs are typically at their lowest level in the first quarter and
increase in the second and third quarters to fund the increases in accounts
receivable and inventories during those periods and the cash interest payment on
the 8⅜% 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 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.
|
Covenants
contained in the credit agreement governing our senior revolving credit facility
(the “Credit Agreement”) and the indenture governing the 8⅜% Notes could
adversely affect our ability to obtain cash from external sources. 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 the indenture
governing the 8⅜% Notes, there are restrictions on 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 June 30, 2009 balance sheet,
generally this restriction in the indenture limits our borrowing availability to
approximately $28.8 million, in addition to our borrowings available under our
existing Credit Agreement. Additionally, our ability to obtain cash from
external sources could be adversely affected by volatility in the markets for
corporate debt, fluctuations in the market price of our common stock or
8⅜% Notes 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 U.S. recession.
The
following key financial measurements reflect our financial position and capital
resources as of June 30, 2009 and December 31, 2008 (dollars in
thousands):
|
|
June
30, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
4,468 |
|
|
$ |
5,323 |
|
Working
capital
|
|
$ |
52,304 |
|
|
$ |
63,484 |
|
Total
debt
|
|
$ |
311,065 |
|
|
$ |
305,988 |
|
Available
credit
|
|
$ |
48,100 |
|
|
$ |
91,100 |
|
Debt
as a percent of capital employed
|
|
|
82.5 |
% |
|
|
79.2 |
% |
Our cash
and cash equivalents consist of highly liquid investments in deposits we hold at
major financial institutions.
Senior
Secured Credit Facility
On June
30, 2006, we entered into the Credit Agreement, which amended and restated our
senior secured credit agreement dated as of March 12, 2004. The
Credit Agreement, as amended to date, provides for a 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 June 30, 2009, we had
borrowings of $26.0 million under this facility. We pay interest on borrowings
at either the Eurodollar-based rate (“LIBOR”) plus 1.75% per annum to 2.25% or
the domestic rate (3.25% at June 30, 2009) plus 0.25% to 0.75% per annum. The
rate paid over either LIBOR or the domestic rate varies depending on the level
of borrowings. 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 us and
our Subsidiaries, taken as a whole, (b) our ability and the ability of our
guarantors, taken as a whole, to perform the respective obligations under the
Credit Agreement and ancillary documents or (c) the rights and remedies of the
administrative agent, the lenders or the issuers to enforce the Credit Agreement
and ancillary documents. At June 30, 2009, the amount of the
available credit was approximately $48.1 million, net of outstanding revolving
credit borrowings of $26.0 million and outstanding letters of credit of
approximately $11.5 million.
Our
subsidiaries, excluding Superior and minor subsidiaries without operations or
material assets, have guaranteed the repayment of all amounts owing under the
Credit Agreement. In addition, we have collateralized our obligations
under the Credit Agreement with the capital stock of our subsidiaries, excluding
Superior and minor subsidiaries without operations or material assets, and
substantially all the assets of those subsidiaries, excluding most of the assets
of the aggregates quarry in northern New Jersey, other real estate owned by us
or our subsidiaries, and the assets of Superior. 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
June 30, 2009, we were in compliance with our financial covenants under the
Credit Agreement.
Senior
Subordinated Notes
On March
31, 2004, we issued $200 million of 8⅜% Notes. 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 outstanding debt under a prior
credit facility. In July 2006, we issued $85 million of additional
8⅜% Notes.
During
the first quarter of 2009, we purchased $7.4 million aggregate principal amount
of the 8⅜% Notes in open market transactions for approximately $2.8 million
plus accrued interest of approximately $0.3 million through the dates of
purchase. We recorded a gain of approximately $4.5 million as a
result of these open market transactions after writing off $0.1 million of
previously deferred financing costs associated with the pro-rata amount of the
8⅜% Notes purchased. During the quarter ended June 30, 2009, we purchased an
additional $5.0 million principal amount of our 8⅜% Notes for approximately $2.0
million. This resulted in a gain of approximately $2.9 million in April 2009,
after writing off $0.1 million of previously deferred financing costs associated
with the pro-rata amount of the 8⅜% Notes purchased. We used cash on hand and
borrowings under our Credit Agreement to fund these transactions. These
purchases reduce the amount outstanding under the 8⅜% Notes by $12.4
million and will reduce our interest expense by approximately $0.7 million in
2009 and $0.9 million on an annual basis thereafter.
All of
our subsidiaries, excluding Superior and minor subsidiaries, have jointly and
severally and fully and unconditionally guaranteed the repayment of the 8⅜%
Notes.
The
indenture governing the 8⅜% 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. We may redeem all or a part of the
8⅜% 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 8⅜% 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 8⅜% Notes following the
occurrence of a change of control. The Credit Agreement would
prohibit these repurchases.
As a
result of restrictions contained in the indenture relating to the 8⅜% 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 June 30, 2009 balance sheet, generally
this restriction in the indenture limits our borrowing availability to
approximately $28.8 million, in addition to our borrowings available under our
existing Credit Agreement.
Superior
Credit Facility and Subordinated Debt
Superior
has a separate credit agreement that provides for a revolving credit
facility. The credit agreement, as amended, allows for borrowings of
up to $17.5 million. Borrowings under this credit facility are
collateralized by substantially all the assets of Superior 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 June 30, 2009, there was $8.3
million in outstanding borrowings under the revolving credit facility, and the
remaining amount of the available credit was approximately $4.0 million. Letters
of credit outstanding at June 30, 2009 were $2.8 million, which reduced the
amount available under the credit facility.
Currently, borrowings have an annual
interest rate at Superior’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’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’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 June 30, 2009, the credit agreement required a
threshold EBITDA of $(2.8) million. As of June 30, 2009, Superior 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 credit agreement.
However, Superior’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 Co.’s credit
agreement would constitute an event of default. Furthermore, U.S.
Concrete has 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. In the first quarter of 2009, U.S. Concrete
provided subordinated debt capital in the amount of $2.4 million under this
agreement in lieu of payment of related party payables. Additionally, the
minority partner, Edw. C. Levy Co., provided $1.6 million of subordinated debt
capital to fund operations during the first quarter of 2009. The
subordinated debt with U.S. Concrete is eliminated in
consolidation. There is no interest due on each note, and each note
matures on May 1, 2011.
Cash
Flow
Our net
cash provided by (used in) operating activities generally reflects the cash
effects of transactions and other events used in the determination of net income
or loss. Net cash used in operating activities was $2.0 million
for the six months ended June 30, 2009, compared to net cash provided by
operating activities of $9.5 million for the six months ended June 30,
2008. This change was principally a result of lower
profitability in the first half of 2009.
Our cash
flows from investing activities were an $11.7 million use of cash for the six
months ended June 30, 2009 and an $18.5 million use of cash for the six
months ended June 30, 2008. This change was primarily attributable to lower
payments related to acquisitions and lower net capital expenditures during the
first six months of 2009 compared to the first half of 2008, partially offset by
net proceeds received from our divestiture activities in 2008. During the first
six months of 2008, we received $7.6 million in proceeds from the sale of our
Memphis operations and spent approximately $1.8 million for a ready-mixed
concrete operation in New York and $13.5 million for certain ready-mixed
concrete operations in west Texas. We also paid $1.4 million of
contingent purchase considerations during the first half of 2008, related to
real estate acquired pursuant to the acquisition of a ready-mix operation in
2003. During the first six months of 2009 we paid approximately $4.5 million for
a concrete crushing and recycling operation in New York. Additionally, in the
first quarter of 2009, we made a $750,000 payment, reduced for certain
uncollected pre-acquisition accounts receivable, to the sellers of API in
partial satisfaction of a contingent payment obligation.
Our net
cash provided by financing activities was $12.8 million and $3.4 million for the
six months ended June 30, 2009 and 2008, respectively. This increase was
primarily the result of higher net borrowings under our Credit Agreement in 2009
compared to the same period in 2008, partially offset by the purchase of $12.4
million principal amount of our 8⅜% Notes for $4.8 million during the first six
months 2009. At June 30, 2009, we had $26.0 million outstanding under the Credit
Agreement compared to $3.7 million at June 30, 2008. The increase is primarily
due to borrowings to finance the purchase of the 8⅜% Notes and make our
semi-annual interest payment on the 8⅜% Notes.
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. Our working capital needs are typically greater in the
second and third quarters of each year. This is due to the cyclical nature of
our business which requires more working capital to fund increases in accounts
receivable and inventories. To the extent that we are unable to generate
positive free cash flow, we would be required to draw on other capital sources,
including our credit agreement and possibly delay acquisitions or other
strategic investments. 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.
A
reconciliation of our net cash provided by (used in) operations and free cash
flow is as follows (in thousands):
|
|
Six
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
Net
cash provided by (used in) operations
|
|
$ |
(1,972 |
) |
|
$ |
9,500 |
|
Less: purchases
of property, plant and equipment (net of disposals)
|
|
|
(6,510 |
) |
|
|
(9,441 |
) |
Free
cash flow (as defined)
|
|
$ |
(8,482 |
) |
|
$ |
59 |
|
Future
Capital Requirements
For the
remaining six months of 2009, we expect our capital expenditures will be in the
range of $5 million to $6 million, including maintenance capital, developmental
capital and rolling stock mixer/barrel replacement. We anticipate that our
existing cash balance of $4.5 million, our borrowing capacity of $48.1 million
at June 30, 2009 under our Credit Agreement and cash flow from operations will
provide adequate liquidity for 2009 to pay for all current obligations,
including anticipated 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 global 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 Agreement 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 they 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,
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.
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. At June 30, 2009, we and Superior had $14.3 million of undrawn
letters of credit outstanding. We are also contingently liable for
performance under $40.1 million in performance bonds relating primarily to our
ready-mixed concrete operations.
Share
Repurchase Plan
On
January 7, 2008, our Board of Directors approved a plan to repurchase up to an
aggregate of 3,000,000 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. Based on certain restrictions contained in our indenture
governing our 8⅜% Notes, we are currently prohibited from future share
repurchases.
Other
We
periodically evaluate our liquidity requirements, alternative uses of capital,
capital needs and availability of resources in view of, among other things, our
dividend policy, our debt service and capital expenditure requirements and
estimated future operating cash flows. As a result of this process,
in the past we have sought, and in the future we may seek, to reduce, refinance,
repurchase or restructure indebtedness; raise additional capital; issue
additional securities; repurchase shares of our common stock; modify our
dividend policy; restructure ownership interests; sell interests in subsidiaries
or other assets; or take a combination of such steps or other steps to manage
our liquidity and capital resources. In the normal course of our
business, we may review opportunities for the acquisition, divestiture, joint
venture or other business combinations in the ready-mixed concrete or related
businesses. In the event of any acquisition or other business
combination transaction, we may consider using available cash, issuing equity
securities or increasing our indebtedness to the extent permitted by the
agreements governing our existing debt.
Inflation
We
experienced negligible to no increases in operating costs during the second
quarter of 2009 related to inflation. However, cement prices and
certain other raw material prices, including aggregates and diesel fuel prices,
have generally risen faster than regional inflationary rates in recent years.
When these price increases have occurred, we have been able to partially
mitigate our cost increases with price increases we 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 the fourth
quarter of 2008, diesel fuel prices declined substantially from the historically
high levels reached in the third quarter of 2008. These prices have increased
slightly from the fourth quarter of 2008 but remain substantially lower than the
levels reached in the third quarter of 2008.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
We do not
enter into derivatives or other financial instruments for trading or speculative
purposes, but we may utilize them to manage our fixed-to-variable-rate debt
ratio. All derivatives, whether designated as hedging relationships
or not, are required to be recorded on the balance sheet at their fair
values. Because of the short duration of our investments, changes in
market interest rates would not have a significant impact on their fair
values. As of June 30, 2009 and December 31, 2008, we were not a
party to any derivative financial instruments.
The
indebtedness evidenced by the 8⅜% 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
$34.3 million outstanding under these facilities as of June 30, 2009, a one
percent change in the applicable rate would change annual interest expense by
$0.3 million.
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
4. Controls and Procedures
In
accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), we carried out an evaluation, under the
supervision and with the participation of management, including our chief
executive officer and chief financial officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of June 30, 2009. Based on that
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures were effective as of June 30, 2009
to provide reasonable assurance that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by
an issuer in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the issuer’s management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. During the three months ended June 30, 2009, there were
no changes in our internal control over financial reporting or in other factors
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART
II – OTHER INFORMATION
Item 1. Legal
Proceedings
For
information about litigation involving us, see Note 10 to the condensed
consolidated financial statements in Part I of this report, which we incorporate
by reference into this Item 1.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
The
following table provides information with respect to our acquisition of shares
of our common stock during the second quarter of 2009:
Calendar
Month
|
|
Total Number
of
Shares
Acquired(1)
|
|
|
Average Price Paid Per
Share
|
|
|
Total Number of Shares
Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Maximum Number (or
Approximate Dollar Value) of Shares That May Yet Be Purchased Under
the Plans or Programs
|
|
April
2009
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
May
2009
|
|
|
10,505 |
|
|
|
1.98 |
|
|
|
— |
|
|
|
— |
|
June
2009
|
|
|
2,102 |
|
|
|
1.92 |
|
|
|
— |
|
|
|
— |
|
|
(1)
|
Represents shares of our common
stock acquired from 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.
|
Item 4.
Submission of Matters to a Vote of Security Holders
1.
|
At
our annual meeting of stockholders held on May 6, 2009, our stockholders
elected John M. Piecuch, T. William Porter, III, Michael W. Harlan,
Vincent D. Foster, Mary P. Ricciardello, William T. Albanese, and Ray C.
Dillon as directors of U.S. Concrete with terms expiring in 2010.
Votes cast with respect to the election of each director were as
follows:
|
Votes
Cast to Elect:
|
|
For:
|
|
|
Withheld:
|
|
|
|
|
|
|
|
|
John
M. Piecuch
|
|
|
30,047,015 |
|
|
|
448,963 |
|
William
Porter, III
|
|
|
20,190,301 |
|
|
|
10,305,677 |
|
Michael
W. Harlan
|
|
|
30,034,027 |
|
|
|
461,951 |
|
Vincent
D. Foster
|
|
|
21,729,002 |
|
|
|
8,766,976 |
|
Mary
P. Ricciardello
|
|
|
30,033,305 |
|
|
|
462,673 |
|
William
T. Albanese
|
|
|
30,030,739 |
|
|
|
465,239 |
|
Ray
C. Dillon
|
|
|
30,055,291 |
|
|
|
440,686 |
|
2.
|
At
our annual meeting of stockholders held on May 6, 2009, our stockholders
ratified the appointment of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of U.S. Concrete for the year ending
December 31, 2009. Votes cast with respect to such ratification were
30,389,260 for and 39,718 against, with 66,999 abstentions and no broker
non-votes.
|
Item
6. Exhibits
|
|
|
3.1
|
* |
|
—Restated
Certificate of Incorporation of U.S. Concrete, Inc. (Form 8-K filed on May
9, 2006 (File No. 000-26025), Exhibit 3.1).
|
3.2
|
* |
|
—Amended
and Restated Bylaws of U.S. Concrete, Inc., as amended (Post Effective
Amendment No. 1 toForm S-3 (Reg. No. 333-42860), Exhibit
4.2).
|
3.3
|
* |
|
—Restated
Certificate of Designation of Junior Participating Preferred Stock (Form
10-Q for the quarterended June 30, 2000 (File No. 000-26025), Exhibit
3.3).
|
31.1
|
|
|
—Rule
13a-14(a)/15d-14(a) Certification of Michael W. Harlan.
|
31.2
|
|
|
—Rule
13a-14(a)/15d-14(a) Certification of Robert D. Hardy.
|
32.1
|
|
|
—Section
1350 Certification of Michael W. Harlan.
|
32.2
|
|
|
—Section
1350 Certification of Robert D.
Hardy.
|
*
Incorporated by reference to the filing indicated.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
U.S.
CONCRETE, INC.
|
|
|
|
|
|
Date:
August 7, 2009
|
By:
|
/s/ Robert D. Hardy
|
|
|
|
Robert
D. Hardy
|
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
(Principal
Financial and Accounting Officer)
|
|
INDEX
TO EXHIBITS
|
|
|
3.1
|
* |
|
—Restated
Certificate of Incorporation of U.S. Concrete, Inc. (Form 8-K filed on May
9, 2006 (File No. 000-26025), Exhibit 3.1).
|
3.2
|
* |
|
—Amended
and Restated Bylaws of U.S. Concrete, Inc., as amended (Post Effective
Amendment No. 1 toForm S-3 (Reg. No. 333-42860), Exhibit
4.2).
|
3.3
|
* |
|
—Restated
Certificate of Designation of Junior Participating Preferred Stock (Form
10-Q for the quarterended June 30, 2000 (File No. 000-26025), Exhibit
3.3).
|
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.