Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2017
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________.

Commission File Number: 001-34530
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11872514&doc=14
U.S. CONCRETE, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
76-0586680
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)

331 N. Main Street, Euless, Texas 76039
(Address of principal executive offices, including zip code)
(817) 835-4105
(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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ 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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
 
 
(Do not check if a smaller reporting company)
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
 
There were 16,649,356 shares of common stock, par value $.001 per share, of the registrant outstanding as of November 1, 2017.




U.S. CONCRETE, INC.

INDEX

 
 
Page
No.
Part I – Financial Information
 
Item 1.
Financial Statements (Unaudited)
 
 
 
 
 
 
 40
Item 2.
Item 3.
Item 4.
 
 
Part II – Other Information
 
Item 1.
Item 1A.
Item 2.
Item 4.
Item 6.
 
 
 







2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

September 30, 2017

December 31, 2016

(Unaudited)


ASSETS
 

 
Current assets:
 

 
Cash and cash equivalents
$
248,263


$
75,774

Trade accounts receivable, net of allowances of $6,284 and $5,960 as of September 30, 2017, and December 31, 2016, respectively
234,976


207,292

Inventories
45,429


41,979

Other receivables
14,080


8,691

Prepaid expenses
6,328


5,534

Other current assets
1,298


2,019

Total current assets
550,374


341,289

Property, plant and equipment, net of accumulated depreciation, depletion, and amortization of $167,874 and $137,629 as of September 30, 2017, and December 31, 2016, respectively
438,789


337,412

Goodwill
147,160


133,271

Intangible assets, net
121,385


130,973

Other assets
1,993


2,457

Total assets
$
1,259,701


$
945,402

LIABILITIES AND STOCKHOLDERS' EQUITY
 


 

Current liabilities:
 


 

Accounts payable
$
123,126


$
110,694

Accrued liabilities
90,563


85,243

Current maturities of long-term debt
24,938


16,654

Derivative liabilities

 
57,415

Total current liabilities
238,627


270,006

Long-term debt, net of current maturities
663,480


432,644

Other long-term obligations and deferred credits
60,833


46,267

Deferred income taxes
14,970


7,656

Total liabilities
977,910


756,573

Commitments and contingencies (Note 14)





Stockholders' equity:
 


 

Preferred stock



Common stock
18


17

Additional paid-in capital
317,254


249,832

Accumulated deficit
(10,711
)

(39,296
)
Treasury stock, at cost
(24,770
)

(21,724
)
Total stockholders' equity
281,791


188,829

Total liabilities and stockholders' equity
$
1,259,701


$
945,402


The accompanying notes are an integral part of these condensed consolidated financial statements.

3


U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
 
 
Three Months Ended
September 30,

Nine Months Ended
September 30,
 
2017

2016

2017

2016
Revenue
$
354,628


$
328,588


$
994,687


$
849,383

Cost of goods sold before depreciation, depletion and amortization
278,995


253,477


778,328


674,451

Selling, general and administrative expenses
30,056


25,104


86,073


71,447

Depreciation, depletion and amortization
16,593


14,139


48,802


38,795

Change in value of contingent consideration
719

 
714

 
2,047

 
2,325

Impairment of assets
648

 

 
648

 

Loss (gain) on disposal of assets, net
(106
)

(1,003
)

(496
)

(1,016
)
Operating income
27,723


36,157

 
79,285

 
63,381

Interest expense, net
10,552


7,635


31,062


19,933

Derivative loss (income)
(13,119
)
 
(21,772
)

791


(6,430
)
Loss on extinguishment of debt
60




60


12,003

Other income, net
(1,287
)

(405
)

(2,591
)

(1,412
)
Income from continuing operations before income taxes
31,517


50,699

 
49,963

 
39,287

Income tax expense
7,241


12,577


20,854


14,317

Income from continuing operations
24,276


38,122

 
29,109

 
24,970

Loss from discontinued operations, net of taxes
(222
)

(166
)

(524
)

(518
)
Net income
$
24,054


$
37,956

 
$
28,585

 
$
24,452













Basic income (loss) per share:
 


 


 


 

Income from continuing operations
$
1.51


$
2.50


$
1.85


$
1.67

Loss from discontinued operations, net of taxes
(0.01
)

(0.01
)

(0.03
)

(0.04
)
Net income per share – basic
$
1.50


$
2.49

 
$
1.82

 
$
1.63

 
 
 
 
 
 
 
 
Diluted income (loss) per share:
 

 
 

 
 

 
 

Income from continuing operations
$
1.46

 
$
2.35

 
$
1.75

 
$
1.54

Loss from discontinued operations, net of taxes
(0.01
)
 
(0.01
)
 
(0.03
)
 
(0.03
)
Net income per share – diluted
$
1.45


$
2.34

 
$
1.72

 
$
1.51

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 


 


 


 

Basic
16,028


15,222


15,745


14,978

Diluted
16,651

 
16,240

 
16,633

 
16,186


The accompanying notes are an integral part of these condensed consolidated financial statements.


4


U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(in thousands)
 
 
Common Stock
 
 
 
 
 
 
 
 
 
# of Shares
 
Par Value
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Treasury
Stock
 
Total
Equity
BALANCE, December 31, 2016
15,696

 
$
17

 
$
249,832

 
$
(39,296
)
 
$
(21,724
)
 
$
188,829

Stock-based compensation expense

 

 
6,523

 

 

 
6,523

Restricted stock vesting
13

 

 

 

 

 

Restricted stock grants, net of cancellations
139

 

 

 

 

 

Stock options exercised
6

 

 
132

 

 

 
132

Warrants exercised
834

 
1

 
60,767

 

 

 
60,768

Other treasury share purchases
(44
)
 

 

 

 
(3,046
)
 
(3,046
)
Net income

 

 

 
28,585

 

 
28,585

BALANCE, September 30, 2017
16,644

 
$
18

 
$
317,254

 
$
(10,711
)
 
$
(24,770
)
 
$
281,791


The accompanying notes are an integral part of these condensed consolidated financial statements.



5


U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
Nine Months Ended
September 30,
 
2017

2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
Net income
$
28,585


$
24,452

Adjustments to reconcile net income to net cash provided by operating activities:
 


 

Depreciation, depletion and amortization
48,802


38,795

Amortization of debt issuance costs
1,515


1,431

Amortization of discount on long-term incentive plan and other accrued interest
530


445

Amortization of premium on long-term debt
(1,163
)
 

Derivative loss (income)
791


(6,430
)
Change in value of contingent consideration
2,047


2,325

Net loss (gain) on disposal of assets
(496
)

(1,016
)
Loss on extinguishment of debt
60

 
12,003

Asset impairments
648

 

Deferred income taxes
6,863


9,772

Provision for doubtful accounts and customer disputes
3,518


1,421

Stock-based compensation
6,523


5,678

Changes in assets and liabilities, excluding effects of acquisitions:
 


 

Accounts receivable
(30,076
)

(24,969
)
Inventories
(2,946
)

(4,376
)
Prepaid expenses and other current assets
1,565


(1,906
)
Other assets and liabilities
201


2,168

Accounts payable and accrued liabilities
17,279


32,497

Net cash provided by operating activities
84,246


92,290

CASH FLOWS FROM INVESTING ACTIVITIES:
 


 

Purchases of property, plant and equipment
(33,984
)

(31,041
)
Payments for acquisitions, net of cash acquired
(56,796
)

(124,481
)
Advance for note receivable
(8,063
)
 

Proceeds from disposals of property, plant and equipment
1,003


1,920

Proceeds from disposal of businesses
1,305


375

Net cash used in investing activities
(96,535
)

(153,227
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 


 

Proceeds from revolver borrowings


128,904

Repayments of revolver borrowings


(173,904
)
Proceeds from issuance of debt
211,500

 
400,000

Repayments of debt


(200,000
)
Premium paid on early retirement of debt

 
(8,500
)
Proceeds from exercise of warrants and stock options
2,695


166

Payments of other long-term obligations
(7,722
)

(4,143
)
Payments for other financing
(14,317
)

(8,880
)
Debt issuance costs
(4,332
)

(7,786
)
Other treasury share purchases
(3,046
)

(2,825
)
Net cash provided by financing activities
184,778


123,032

NET INCREASE IN CASH AND CASH EQUIVALENTS
172,489


62,095

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
75,774


3,925

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
248,263


$
66,020


6


U.S. CONCRETE, INC. AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(in thousands)

 
Nine Months Ended
September 30,
 
2017
 
2016
Supplemental Disclosure of Cash Flow Information:
 

 
 

Cash paid for interest
$
20,870

 
$
11,389

Cash paid for income taxes
$
17,377

 
$
2,892

 
 
 
 
Supplemental Disclosure of Non-cash Investing and Financing Activities:
 
 
 
Capital expenditures funded by capital leases and promissory notes
$
45,517

 
$
29,171

Settlement of accounts receivable for acquisition of a business
$

 
$
1,000


The accompanying notes are an integral part of these condensed consolidated financial statements.

7


U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.
BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of U.S. Concrete, Inc. and its subsidiaries (collectively, "we," "us," "our," "U.S. Concrete," or the "Company") and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for reporting interim financial information. Some information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") 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 audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Form 10-K").  In the opinion of our management, all adjustments necessary to state fairly the information in our unaudited condensed consolidated financial statements and to make such financial statements not misleading have been included. All adjustments are of a normal or recurring nature. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements and accompanying notes in conformity with U.S. GAAP 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 revenue and expenses during the reporting period.  Actual results could differ from those estimates. Estimates and assumptions that we consider critical and that involve complex judgments in the preparation of our financial statements include those related to our business combinations, goodwill and goodwill impairment, impairment of long-lived assets, accruals for self-insurance programs, income taxes, derivative instruments, and contingent consideration.

Certain reclassifications have been made to prior year balances to conform with the current year presentation.

2.
RECENT ACCOUNTING PRONOUNCEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Standards/Updates Adopted This Year

In March 2016, the Financial Accounting Standards Board ("FASB") issued an amendment related to share-based payments to employees, which simplifies several aspects of the accounting for employee share-based payment transactions for public entities. In the first quarter of 2017, we adopted all applicable aspects of this standard on a prospective basis with the exception of the presentation of excess tax benefits on the statement of cash flows, which we adopted on a retrospective basis, and the election to account for forfeitures as they occur, which we adopted on a modified-retrospective basis. The new standard requires companies to recognize all excess tax benefits and tax deficiencies in the income statement when the awards vest or are settled, rather than recognized as additional paid-in capital in the equity section of the balance sheet. Upon adoption, we recognized $0.2 million in discrete tax benefits related to share-based payment accounting, resulting in a lower effective tax rate. This standard also affects the average shares outstanding used in the diluted earnings per share calculation, as we no longer increase or decrease the assumed proceeds from an employee vesting in, or exercising, a share-based payment award by the amount of excess tax benefits or deficiencies taken to additional paid-in capital.

The guidance also requires excess tax benefits to be classified as an operating activity in the statement of cash flows rather than a financing activity. Retrospective application of the cash flow presentation requirement resulted in an increase to net cash provided by operating activities of $3.8 million and a decrease to net cash provided by financing activities of $3.8 million for the nine months ended September 30, 2016. Further, this guidance permits an entity to make an accounting policy election to either estimate forfeitures on stock compensation awards, as previously required, or to recognize forfeitures as they occur. We elected to change our accounting policy from estimating forfeitures expected to occur to recognizing forfeitures as they occur. This change in policy did not have a material impact on our financial condition, results of operations, or cash flows.

In July 2015, the FASB issued guidance requiring inventory to be measured at the lower of cost or net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance is effective prospectively for annual reporting periods beginning after December 15, 2016, and interim reporting periods within those annual reporting periods. We adopted this guidance as of January 1, 2017, when it became effective for us. There was no impact on our consolidated financial statements or results of operations as a result of adopting this standard.


8



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Standards/Updates Not Yet Adopted

In January 2017, the FASB issued new guidance to simplify the accounting for goodwill impairment. The guidance removes the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. Upon adoption, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. This guidance is effective in 2020, but early adoption is permitted for any impairment tests performed after January 1, 2017. We are currently evaluating the impact that this guidance will have on our financial condition and results of operations.

In January 2017, the FASB issued an update under business combinations in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or as business combinations. The amendments in this update provide a screen to determine when a set of assets is not of a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted for transactions for which the acquisition (or disposal) date occurs before the effective date of the amendments, if the transaction has not been reported in financial statements that have been issued or made available for issuance. We do not expect the adoption of this standard to have a material impact on our financial condition and results of operations.

In August 2016, the FASB issued guidance to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new amendment is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those periods. Adoption of this standard will not result in any material changes to our statements of cash flows.

In February 2016, the FASB issued an amendment related to leases. The new guidance requires the recognition of lease assets and lease liabilities for all of our leases greater than one year in duration that are currently classified as operating leases. The adoption of this amendment will result in a significant increase to the Company's consolidated balance sheets for lease liabilities and right-of-use assets, and we are still evaluating the other effects the adoption on our financial condition and results of operations. The evaluation process will include reviewing all forms of leases, performing a completeness assessment over the lease population, analyzing the practical expedients, and assessing the need to make any changes to our lease accounting technology system in order to determine the best implementation strategy. The standard will be adopted when it becomes effective for us in the first quarter of 2019 using a modified retrospective transition beginning with the earliest comparative period presented.

In May 2014, the FASB issued guidance that outlines a single comprehensive model for accounting for revenue arising from contracts with customers, which supersedes most of the existing revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The guidance is effective for interim and annual reporting periods that begin after December 15, 2017. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We primarily earn our revenue by producing and delivering ready-mixed concrete, aggregates, and related building materials, as requested by our customers primarily through purchase orders. We generally do not have significant customer contracts and do not provide post-delivery services, such as paving or finishing. As such, adoption of the new guidance should not result in significant changes in the amount of revenue recognized or the timing of when such revenue is recognized. We will adopt the new guidance in the first quarter of 2018, when it becomes effective for us, using the modified retrospective transition method.

For a description of our significant accounting policies, see Note 1 of the consolidated financial statements in our 2016 Form 10-K.



9



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


3.
ACQUISITIONS

2017 Acquisitions

We completed four acquisitions that expanded our ready-mixed concrete and aggregate products operations during the first nine months of 2017. The total consideration was $53.7 million, along with contingent consideration for the Corbett acquisition, as defined below, of $23.0 million, which is based on the amount of reserves permitted and is not payable before a minimum two-year period following the acquisition date. The aggregate purchase price was comprised of $53.5 million in cash and the assumption of a $0.2 million working capital payable. We funded the cash portion of the acquisitions from cash on hand.

The acquisitions included the assets of the following:
Corbett Aggregate Companies, LLC. ("Corbett") located in Quinton, New Jersey on April 7, 2017;
Harbor Ready-Mix ("Harbor") located in Redwood City, California on September 29, 2017;
A-1 Materials, Inc. ("A-1”) and L.C. Frey Company, Inc. ("Frey") (collectively “A-1/Frey”) located in San Carlos, California on September 29, 2017; and
Action Supply Co., Inc. ("Action Supply") located in Philadelphia, Pennsylvania on September 29, 2017.

The combined assets acquired through these 2017 acquisitions included 401 acres of land with 35 million tons of proven aggregate reserves, 45 mixer trucks, 4 ready-mix concrete plants, a long-term lease with the South Jersey Port Corporation for an export dock as well as a licensing agreement with the exclusive right to move coarse and fine aggregates through the North Shore Terminal located on Staten Island, New York. See Note 11 for additional information related to contingent consideration obligations.

The recording of the Corbett, Harbor, A-1/Frey, and Action Supply business combinations is preliminary, and we expect to record adjustments as we accumulate information needed to estimate the fair value of assets acquired and liabilities assumed, including working capital balances, estimated fair value of identifiable intangible assets, property, plant, and equipment, and goodwill.

The following table presents the total consideration for the 2017 acquisitions and the preliminary amounts related to the assets acquired and liabilities assumed based on the estimated fair values as of the respective acquisition dates (in thousands):

 
2017 Acquisitions
Accounts receivable (1)
$
1,126

Inventory
504

Other current assets
40

Property, plant and equipment
55,315

Definite-lived intangible assets
5,884

Total assets acquired
62,869

Current liabilities
674

Total liabilities assumed
674

Goodwill
12,164

Total consideration (fair value) (2)
$
74,359


(1)
The aggregate fair value of the acquired accounts receivable approximates the aggregate gross contractual amount as of the respective acquisition dates.
(2) Contingent consideration payments included at fair value as of the respective acquisition dates.

The accounting for business combinations requires the significant use of estimates and is based on information that was available to management at the time these condensed consolidated financial statements were prepared. We utilized recognized valuation techniques, including the income approach, sales approach, and cost approach to value the net assets acquired. Any changes to the provisional business combination accounting will be made as soon as practical, but no later than one year from the respective acquisition dates.


10



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


2016 Acquisitions

During 2016, we completed four acquisitions that expanded our ready-mixed concrete operations in the New York Metropolitan market for total consideration of $142.8 million. The acquisitions included the assets of the following ready-mixed concrete plants in New York:
Greco Brothers Concrete of L.I., Inc. ("Greco"), located in Brooklyn on February 26, 2016;
Nycon Supply Corp. ("Nycon"), located in Queens on June 24, 2016;
Jenna Concrete Corp. ("Jenna"), located in Bronx on August 10, 2016; and
Kings Ready Mix Inc. ("Kings"), located in Brooklyn on August 22, 2016.

The combined assets acquired through the New York acquisitions included land, 10 ready-mixed concrete plants, and a fleet of 189 mixer trucks. In addition, on March 31, 2016, and September 13, 2016, we acquired two individually immaterial ready-mixed concrete operations in our West Texas market for total consideration of $3.5 million.

The aggregate consideration for these six acquisitions included $131.7 million in cash, $6.1 million in payments deferred over a three-year period, the issuance of $1.0 million of credits applied against existing trade accounts receivable, plus 136,215 shares of our common stock, calculated in accordance with the terms of the purchase agreement, and valued at approximately $7.5 million on the date of issuance. We funded the cash portion of these acquisitions through a combination of cash on hand and borrowings under our asset-based revolving credit facility (the "Revolving Facility").

The following table presents the total consideration for the 2016 acquisitions and the final amounts related to the assets acquired and liabilities assumed based on the fair values as of the respective acquisition dates (in thousands):

 
2016 Acquisitions
Cash
$
9

Accounts receivable (1)
12,314

Inventory
1,249

Other current assets
68

Property, plant and equipment
34,918

Definite-lived intangible assets
47,144

Total assets acquired
95,702

Current liabilities
7,055

Other long-term liabilities
3,713

Total liabilities assumed
10,768

Goodwill
60,583

Total consideration (fair value) (2)
$
145,517


(1)
The aggregate fair value of the acquired accounts receivable approximates the aggregate gross contractual amount as of the respective acquisition dates.
(2)
Deferred payments included at fair value as of the respective acquisition dates.



11



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Acquired Intangibles

The major classes of intangible assets acquired in 2016 and 2017 were as follows (in thousands of dollars):
 
Weighted Average Amortization Period (In Years)
 
Fair Value At Acquisition Date
Customer relationships
6.00
 
$
37,764

Non-compete agreements
5.00
 
5,807

Leasehold interests
5.00
 
4,955

Trade names
4.95
 
4,118

Favorable Contract
3.67
 
384

Total
 
 
$
53,028


The amortization periods of these intangible assets range from seven months to ten years. As of September 30, 2017, the estimated future aggregate amortization expense of definite-lived intangible assets from the acquisitions was as follows (in thousands):
 
Year Ending December 31,
2017 (remainder of the year)
$
2,350

2018
9,398

2019
9,133

2020
8,604

2021
7,679

Thereafter
5,427

Total
$
42,591


Also included in other non-current liabilities in the accompanying condensed consolidated balance sheets is an unfavorable lease intangible with a gross carrying amount of $0.4 million and a net carrying amount of $0.3 million as of September 30, 2017. This unfavorable lease intangible will be amortized over its remaining lease term.

During the three and nine months ended September 30, 2017, we recorded $2.1 million and $6.5 million of net amortization expense and during both the three and nine months ended September 30, 2016, we recorded $1.0 million of net amortization expense related to these intangible assets and unfavorable lease intangibles.

The goodwill ascribed to each of the 2016 and 2017 acquisitions is related to the synergies we expect to achieve with expansion in the markets in which we already operate as well as entry into new metropolitan areas of our existing geographic markets. The goodwill for the 2016 and 2017 acquisitions relates primarily to our ready-mixed concrete reportable segment. See Note 6 for the allocation of goodwill to our segments. We expect the goodwill to generally be deductible for tax purposes. See Note 12 for additional information regarding income taxes.


12



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Actual and Pro Forma Impact of Acquisitions

During the three months ended September 30, 2017, we recorded approximately $39.9 million of revenue and $4.8 million of operating income in our condensed consolidated statements of operations related to the 2016 and 2017 acquisitions. During the three months ended September 30, 2016, we recorded approximately $31.8 million of revenue and $6.2 million of operating income in our condensed consolidated statements of operations related to the 2016 acquisitions.

During the nine months ended September 30, 2017, we recorded approximately $122.0 million of revenue and $17.4 million of operating income in our condensed consolidated statements of operations related to the 2016 and 2017 acquisitions. During the nine months ended September 30, 2016, we recorded approximately $34.9 million of revenue and $6.2 million of operating income in our condensed consolidated statements of operations related to the 2016 acquisitions.

The unaudited pro forma information presented below reflects the combined financial results for the 2016 and 2017 acquisitions, excluding the two 2016 individually immaterial acquisitions in West Texas described above, because historical financial results for these operations were not material and were impractical to obtain from the former owners. All other 2016 and 2017 acquisitions have been included and represent our estimate of the results of operations for the three and nine months ended September 30, 2017 and 2016, as if the 2017 acquisitions had been completed on January 1, 2016, and the 2016 acquisitions had been completed on January 1, 2015 (in thousands, except per share information):

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
361,262

 
$
349,431

 
$
1,026,865

 
$
972,564

Net income (loss)
$
24,813

 
$
40,128

 
$
31,869

 
$
31,397

 
 
 
 
 
 
 
 
Net income per share, basic
$
1.55

 
$
2.64

 
$
2.02

 
$
2.10

Net income per share, diluted
$
1.49

 
$
2.47

 
$
1.92

 
$
1.94


The above pro forma results are unaudited and were prepared based on the historical U.S. GAAP results of the Company and the historical results of the acquired companies for which financial information was available, based on data provided by the former owners. These results are not necessarily indicative of what the Company's actual results would have been had the 2017 acquisitions occurred on January 1, 2016, and the 2016 acquisitions occurred on January 1, 2015.

The unaudited pro forma net income (loss) and net income (loss) per share amounts above reflect the following adjustments (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Decrease (increase) in intangible amortization expense
$
(203
)
 
$
(1,655
)
 
$
(538
)
 
$
(6,254
)
Exclusion of buyer transaction costs
$
334

 
$
584

 
$
867

 
$
1,395

Decrease (increase) in interest expense
$
54

 
$
(9
)
 
$
224

 
$
(193
)
Decrease (increase) in income tax expense
$
279

 
$
969

 
$
(607
)
 
$
(4,725
)

The unaudited pro forma results do not reflect any operational efficiencies or potential cost savings that may occur as a result of consolidation of the operations.


13



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


4.
DISCONTINUED OPERATIONS

Discontinued operations primarily relate to real estate leases and subleases of our former precast concrete operations disposed of in prior years. The lease obligations will expire by June 30, 2018.

The results of these discontinued operations were as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$

 
$
48

 
$

 
$
48

Operating expenses
363

 
316

 
858

 
887

Loss from discontinued operations, before income taxes
(363
)
 
(268
)
 
(858
)
 
(839
)
Income tax benefit
(141
)
 
(102
)
 
(334
)
 
(321
)
Loss from discontinued operations, net of taxes
$
(222
)
 
$
(166
)
 
$
(524
)
 
$
(518
)

Cash flows from operating activities included operating cash flows used in discontinued operations of $0.6 million and $0.4 million during the nine months ended September 30, 2017 and 2016, respectively. Cash flows from investing activities included investing cash flows provided by discontinued operations of $0.6 million and $0.4 million for the nine months ended September 30, 2017 and 2016, respectively.

5.
INVENTORIES
 
Inventories as of September 30, 2017, and December 31, 2016, consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
Raw materials
$
41,486

 
$
38,752

Building materials for resale
2,263

 
1,923

Other
1,680

 
1,304

Total inventories
$
45,429

 
$
41,979


6.     GOODWILL AND OTHER INTANGIBLES

Goodwill

The changes in goodwill by reportable segment from December 31, 2016, to September 30, 2017, were as follows (in thousands):
 
 
Ready-Mixed Concrete Segment
 
Aggregate Products Segment
 
Other Non-Reportable Segments
 
Total
Balance at December 31, 2016
 
$
127,515

 
$
2,494

 
$
3,262

 
$
133,271

2017 acquisitions (1)
 
12,164

 

 

 
12,164

Adjustment for prior period business combination(2)
 
549

 
1,176

 

 
1,725

Balance at September 30, 2017
 
$
140,228

 
$
3,670

 
$
3,262

 
$
147,160


(1)
The measurement period adjustments for the 2017 acquisitions recorded during the nine months ended September 30, 2017, primarily included the impact of recording a $0.9 million definite-lived intangible asset. (See Note 3)

(2)
Reflects a $1.2 million correction to the change in the acquisition accounting for a 2015 acquisition and a $0.5 million adjustment related to determination of the conclusion of tax attributes as of the acquisition date for a 2016 acquisition. The correction to the 2015 acquisition accounting was recorded in the current period as it was not material to the prior periods and had no impact on the Condensed Consolidated Statements of Operations of any period.


14



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Other Intangibles

Our purchased intangible assets were as follows (in thousands):
 
 
As of September 30, 2017
 
 
Gross
 
Accumulated Amortization
 
Net
 
Weighted Average Remaining Life (In Years)
Definite-lived intangible assets
 
 
 
 
 
 
 
 
Customer relationships
 
$
85,993

 
$
(25,041
)
 
$
60,952

 
5.30
Trade names
 
45,756

 
(7,353
)
 
38,403

 
19.62
Non-competes
 
17,375

 
(7,673
)
 
9,702

 
3.24
Leasehold interests
 
12,480

 
(2,956
)
 
9,524

 
6.85
Favorable contracts
 
4,034

 
(2,708
)
 
1,326

 
1.54
Total definite-lived intangible assets
 
165,638

 
(45,731
)
 
119,907

 
9.79
Indefinite-lived intangible assets
 
 
 
 
 
 
 
 
Land rights(1)
 
1,478

 

 
1,478

 
 
Total purchased intangible assets
 
$
167,116

 
$
(45,731
)
 
$
121,385

 
 

(1)
Land rights acquired in a prior year acquisition will be reclassified to property, plant, and equipment upon the division of certain shared properties and settlement of the associated deferred payment.

 
 
As of December 31, 2016
 
 
Gross
 
Accumulated Amortization
 
Net
 
Weighted Average Remaining Life (In Years)
Definite-lived intangible assets
 
 
 
 
 
 
 
 
Customer relationships
 
$
82,174

 
$
(16,414
)
 
$
65,760

 
5.97
Trade names
 
44,456

 
(4,948
)
 
39,508

 
20.20
Non-competes
 
16,862

 
(5,160
)
 
11,702

 
3.81
Leasehold interests
 
12,480

 
(1,693
)
 
10,787

 
7.46
Favorable contract
 
3,650

 
(1,912
)
 
1,738

 
1.67
Total definite-lived intangible assets
 
159,622

 
(30,127
)
 
129,495

 
10.19
Indefinite-lived intangible assets
 
 
 
 
 
 
 
 
Land rights(1)
 
1,478

 

 
1,478

 
 
Total purchased intangible assets
 
$
161,100

 
$
(30,127
)
 
$
130,973

 
 

(1)
Land rights acquired in a prior year acquisition will be reclassified to property, plant, and equipment upon the division of certain shared properties and settlement of the associated deferred payment.


15



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


As of September 30, 2017, the estimated remaining amortization of our definite-lived intangible assets was as follows (in thousands):
 
Year Ending December 31,
2017 (remainder of the year)
$
5,362

2018
21,018

2019
19,176

2020
16,985

2021
15,561

Thereafter
41,805

Total
$
119,907


Also included in other non-current liabilities in the accompanying condensed consolidated balance sheets are unfavorable lease intangibles with a gross carrying amount of $1.5 million and a net carrying amount of $1.1 million as of September 30, 2017, which have a weighted average remaining life of 5.14 years.

We recorded $5.1 million and $4.2 million of amortization expense on our definite-lived intangible assets and unfavorable lease intangibles for the three months ended September 30, 2017 and 2016, respectively. We recorded $15.4 million and $11.1 million of amortization expense on our definite-lived intangible assets and unfavorable lease liabilities for the nine months ended September 30, 2017 and 2016, respectively. This amortization expense is included in the accompanying condensed consolidated statements of operations.


7.
ACCRUED LIABILITIES

Our accrued liabilities were as follows (in thousands):

 
September 30, 2017
 
December 31, 2016
Accrued materials
$
17,827

 
$
20,349

Accrued compensation and benefits
16,724

 
16,553

Accrued insurance reserves
16,409

 
15,206

Accrued interest
12,871

 
2,217

Accrued property, sales and other taxes
8,811

 
11,829

Deferred consideration
6,448

 
9,227

Contingent consideration, current portion
2,322

 
2,418

Deferred rent
2,270

 
2,232

Other
6,881

 
5,212

Total accrued liabilities
$
90,563

 
$
85,243



16



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


8.
DEBT
 
Our debt and capital leases were as follows (in thousands):

 
September 30, 2017
 
December 31, 2016
Senior unsecured notes due 2024 and unamortized premium(1)
$
610,337

 
$
400,000

Senior secured credit facility

 

Capital leases
62,490

 
37,860

Other financing
26,817

 
20,248

Debt issuance costs
(11,226
)
 
(8,810
)
Total debt
688,418

 
449,298

Less: current maturities
(24,938
)
 
(16,654
)
Long-term debt, net of current maturities
$
663,480

 
$
432,644


(1)
The effective interest rates for these notes as of September 30, 2017, and December 31, 2016, were 6.56% and 6.62%, respectively.

Senior Unsecured Notes due 2024

In 2016, we issued $400.0 million aggregate principal amount of 6.375% senior unsecured notes due 2024 (the "2024 Notes"). On January 9, 2017, we completed an offering of $200.0 million aggregate principal amount of additional 2024 Notes (the "Additional Notes," and together with the 2024 Notes, the "Senior Unsecured Notes") at an issue price of 105.75%. The terms of the Additional Notes are identical to the terms of the 2024 Notes, other than the issue date, the issue price, the first interest payment date, and the provisions relating to transfer restrictions and registration rights. We used the net proceeds from the offering of the Additional Notes, which were approximately $208.4 million, to increase our liquidity.

The Senior Unsecured Notes are governed by an indenture (the “Indenture”) dated as of June 7, 2016, by and among U.S. Concrete, Inc., as issuer, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee. The Senior Unsecured Notes accrue interest at a rate of 6.375% per annum. We pay interest on the Senior Unsecured Notes on June 1 and December 1 of each year. The Senior Unsecured Notes mature on June 1, 2024, and are redeemable at our option prior to maturity at prices specified in the Indenture. The Indenture contains negative covenants that restrict our ability and our restricted subsidiaries' ability to engage in certain transactions, as described below, and also contains customary events of default.

The Indenture contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

incur additional debt or issue disqualified stock or preferred stock;
pay dividends or make other distributions, repurchase or redeem our stock or subordinated indebtedness or make certain investments;
sell assets and issue capital stock of our restricted subsidiaries;
incur liens;
allow to exist certain restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
enter into certain transactions with affiliates;
consolidate, merge or sell all or substantially all of our assets; and
designate our subsidiaries as unrestricted subsidiaries.

17



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The Senior Unsecured Notes are issued by U.S. Concrete, Inc. (the "Parent"). Our obligations under the Senior Unsecured Notes are jointly and severally and fully and unconditionally guaranteed on a senior unsecured basis by each of our restricted subsidiaries that guarantees any obligations under the Revolving Facility or that guarantees certain of our other indebtedness or certain indebtedness of our restricted subsidiaries (other than foreign restricted subsidiaries that guarantee only indebtedness incurred by another foreign subsidiary).

U.S. Concrete, Inc. does not have any independent assets or operations, and none of its foreign subsidiaries guarantee the Senior Unsecured Notes. There are no significant restrictions on the ability of the Company or any guarantor to obtain funds from its subsidiaries by dividend or loan. For additional information regarding our guarantor and non-guarantor subsidiaries, see the information set forth in Note 16.

The Senior Unsecured Notes and the guarantees thereof are effectively subordinated to all of our and our guarantors' existing and future secured obligations, including obligations under the Revolving Facility, to the extent of the value of the collateral securing such obligations; senior in right of payment to any of our and our guarantors' future subordinated indebtedness; pari passu in right of payment with any of our and our guarantors' existing and future senior indebtedness, including our and our guarantors' obligations under the Revolving Facility; and structurally subordinated to all existing and future indebtedness and other liabilities, including preferred stock, of any non-guarantor subsidiaries.

Senior Secured Credit Facility

On August 31, 2017, we entered into the Third Amended and Restated Loan and Security Agreement (the “Third Loan Agreement”) with certain financial institutions named therein as lenders (the “Lenders”) and Bank of America, N.A., as agent for the Lenders, which amended and restated the Second Amended and Restated Loan and Security Agreement, dated as of November 18, 2015 (the “Second Loan Agreement”). Among other things, the Third Loan Agreement increased the revolving commitments from $250.0 million to $350.0 million and extended the maturity date to August 31, 2022. The Third Loan Agreement also amended certain terms of the Second Loan Agreement, including, without limitation, a provision to permit the incurrence of other secured indebtedness up to amounts specified in the Third Loan Agreement. As of September 30, 2017, we had no outstanding borrowings on the Third Loan Agreement, and we had $14.3 million of undrawn standby letters of credit under the Revolving Facility.

Our actual maximum credit availability under the Revolving Facility varies from time to time and is determined by calculating the value of our eligible accounts receivable, inventory, mixer trucks and machinery, minus reserves imposed by the Lenders and other adjustments, all as specified in the Third Loan Agreement. Our maximum availability under the Revolving Facility at September 30, 2017, was $245.8 million as compared to $221.3 million at December 31, 2016. The Third Loan Agreement also contains a provision for over-advances and protective advances by Lenders, in each case, of up to $25.0 million in excess of borrowing base levels and provides for swingline loans, up to a $15.0 million sublimit.

Up to $50.0 million of the Revolving Facility is available for the issuance of letters of credit, and any such issuance of letters of credit will reduce the amount available for loans under the Revolving Facility. Loans under the Revolving Facility may not exceed a borrowing base as defined in the Third Loan Agreement.

The Third Loan Agreement also requires that we, upon the occurrence of certain events, maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for each period of 12 calendar months, as determined in accordance with the Third Loan Agreement. As of September 30, 2017, we were in compliance with all covenants under the Third Loan Agreement.

The Third Loan Agreement is secured by a first priority lien on substantially all of the personal property of the Company and our guarantors, subject to permitted liens and certain exceptions.

Capital Leases and Other Financing

We have a series of promissory notes with various lenders for the purchase of mixer trucks and other machinery and equipment in an aggregate original principal amount of $44.4 million, with fixed annual interest rates ranging from 2.50% to 4.64%, payable monthly with terms ranging from one to five years.


18



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


We have leasing agreements with various other lenders for the purchase of mixer trucks and other machinery and equipment for a total original principal amount of $82.3 million, with fixed annual interest rates ranging from less than 0.01% to 5.24%, payable monthly for terms ranging from two to seven years. The lease agreements include bargain purchase options at the end of the lease terms; accordingly, these financings have been classified as capital leases. The current portion of capital leases included in current maturities of long-term debt was $16.2 million as of September 30, 2017, and $9.8 million as of December 31, 2016.

The weighted average interest rate of our capital leases and other financings was 3.30% as of September 30, 2017, and 3.11% as of December 31, 2016.

9.
WARRANTS

In 2010, we issued warrants to acquire common stock in two tranches: Class A Warrants to purchase an aggregate of approximately 1.5 million shares of common stock and Class B Warrants to purchase an aggregate of approximately 1.5 million shares of common stock (collectively, the "Warrants").  The Warrants were issued to holders of our predecessor common stock pro rata based on a holder’s stock ownership as of the issuance date and expired on August 31, 2017. The Warrants were included in derivative liabilities in the accompanying condensed consolidated balance sheet as of December 31, 2016, (see Note 10) and were recorded at their fair value (see Note 11). The Warrants were treated as potentially dilutive securities in the calculation of diluted earnings (loss) per share as shares of our common stock would have been issued if the Warrants had been exercised. A total of 112,638 Class A Warrants and 114,775 Class B Warrants expired unexercised on August 31, 2017.


19



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


10.
DERIVATIVES

Prior to their expiration on August 31, 2017, we were required to account for our warrants as derivative instruments, which were not used to manage business risk and were not executed for speculative purposes.

The following table presents the fair value of our derivative instruments as of September 30, 2017, and December 31, 2016 (in thousands):
 
 
 
 
Fair Value 
Derivative Instruments Not Designated As
Hedging Instruments Under ASC 815
 
Balance Sheet Classification
 
September 30, 2017
 
December 31, 2016
Warrants
 
Derivative liabilities
 
$

 
$
57,415


The following table presents the effect of derivative instruments on our condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016, respectively, excluding income tax effects (in thousands):



 
Three Months Ended
Derivative Instruments Not Designated As
Hedging Instruments Under ASC 815

Classification in Statement of Operations
 
September 30, 2017

September 30, 2016
Warrants

Derivative loss (income)
 
$
(13,119
)
 
$
(21,772
)

 
 
 
 
Nine Months Ended
Derivative Instruments Not Designated As
Hedging Instruments Under ASC 815
 
Classification in Statement of Operations
 
September 30, 2017
 
September 30, 2016
Warrants
 
Derivative loss (income)
 
$
791

 
$
(6,430
)

Warrant volume positions represent the number of shares of common stock underlying the instruments.  The table below presents our volume positions as of September 30, 2017, and December 31, 2016 (in thousands):
 
 
Number of Shares
Derivative Instruments Not Designated As
Hedging Instruments Under ASC 815
 
September 30, 2017
 
December 31, 2016
Warrants
 

 
1,395


We do not have any derivative instruments with credit features requiring the posting of collateral in the event of a credit downgrade or similar credit event.


20



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


11.
FAIR VALUE DISCLOSURES

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Accounting guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. We review the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain assets and liabilities within the fair value hierarchy.

The following tables present our fair value hierarchy for liabilities measured at fair value on a recurring basis as of September 30, 2017, and December 31, 2016 (in thousands):
 
September 30, 2017
 
Total
 
Level 1
 
Level 2
 
Level 3
Contingent consideration, including current portion (1) (2) (3) (4) (5)
$
52,554

 
$

 
$

 
$
52,554

 
$
52,554

 
$

 
$

 
$
52,554


 
December 31, 2016
 
Total
 
Level 1
 
Level 2
 
Level 3
Derivative – Warrants
$
57,415

 
$

 
$
57,415

 
$

Contingent consideration, including current portion (1) (2) (4) (5) (6)
32,212

 

 

 
32,212

 
$
89,627

 
$

 
$
57,415

 
$
32,212

 
(1)
The current portion of contingent consideration is included in accrued liabilities in our condensed consolidated balance sheets. The long-term portion of contingent consideration is included in other long-term obligations and deferred credits in our condensed consolidated balance sheets.
(2)
Includes the fair value of the contingent consideration associated with the 2015 acquisition of Ferrara Bros. Building Materials Corp. ("Ferrara Bros. Contingent Consideration"). The fair value was determined based on the expected vesting of incentive awards granted to the former owners at acquisition based on probability-weighted assumptions related to the achievement of certain annual EBITDA thresholds, using a discount rate of 8.75% as of both September 30, 2017, and December 31, 2016. The fair value of the Ferrara Bros. Contingent Consideration was $27.4 million and $26.3 million as of September 30, 2017, and December 31, 2016, respectively. The Ferrara Bros. Contingent Consideration payments were capped at $35.0 million over a four-year period beginning in 2017.
(3)
Includes the fair value of the contingent consideration associated with the 2017 acquisition of certain assets of Corbett Aggregates Company, LLC ("Corbett Contingent Consideration"). The fair value was determined based on the expected consideration that will be due to the former owner related to the achievement of obtaining permits for mining all available reserves and was based on the probability-weighted assumptions, using a discount rate of 5.0% as of September 30, 2017. The fair value of the Corbett Contingent Consideration was $20.8 million as of September 30, 2017. The Corbett Contingent Consideration payment is capped at $23.0 million and not payable before a two-year minimum period from the acquisition date.

21



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(4)
Includes the fair value of the earn-out payments associated with the 2015 acquisition of Right Away Redy Mix, Inc. (the "Right Away Earn-out"). The fair value was determined based on expected payouts that will be due to the former owners based on probability-weighted assumptions related to the achievement of annual sales volume milestones, using a discount rate of 8.25% and 8.50% as of September 30, 2017, and December 31, 2016, respectively. The fair value of the Right Away Earn-out was $3.9 million as of both September 30, 2017, and December 31, 2016. The remaining Right Away Earn-out payments were capped at $4.3 million over a four-year period and $5.0 million over a five-year period as of September 30, 2017, and December 31, 2016, respectively.
(5)
Includes the fair value of the earn-out payments associated with the 2015 acquisition of DuBrook Concrete, Inc. ("DuBrook Earn-out"). The fair value was determined based on the expected payouts that will be due to the former owners based on probability-weighted assumptions related to the achievement of sales volume milestones, using a discount rate of 15.75% as of both September 30, 2017, and December 31, 2016. The fair value of the DuBrook Earn-out was $0.5 million and $0.6 million as of September 30, 2017, and December 31, 2016, respectively. The DuBrook Earn-out payments are not capped; however, we do not expect total payments to be in excess of $0.5 million over a two-year period and $0.7 million over a three-year period as of September 30, 2017, and December 31, 2016, respectively.
(6)
Includes the fair value of the earn-out payments associated with the 2012 acquisition of Bode Gravel Co. and Bode Concrete LLC ("Bode Earn-out"). The fair value was determined based on expected payouts that will be due to the former owners based on the achievement of certain incremental sales volume milestones, using a contractual discount rate of 7.0%. These payments were capped at a fair value of $1.4 million as of December 31, 2016. The final Bode Earn-out payment was made in January 2017.

The liability for the Warrants was valued utilizing a Black-Scholes-Merton model. Inputs into the model were based upon observable market data.  The key inputs in determining our derivative liabilities include our stock price, stock price volatility, and risk free interest rates. As of December 31, 2016, observable market data existed for all of the key inputs in determining the fair value of our Warrants.

The liabilities for the Right Away Earn-out and the Ferrara Bros. Contingent Consideration were valued using Monte Carlo simulations, which incorporated probability-weighted assumptions related to the achievement of specific milestones mentioned above. The liabilities for the Corbett Contingent Consideration were valued using the income approach which incorporated probability-weighted assumptions related to the achievement of specific milestones mentioned above. The liabilities for the Bode Earn-out and the DuBrook Earn-out were valued using a discounted cash flow technique. Inputs into the models were based upon observable market data where possible. Where observable market data did not exist, we modeled inputs based upon similar observable inputs. The key inputs in determining the fair value of the contingent consideration as of September 30, 2017, and December 31, 2016, included discount rates ranging from 5.00% to 15.75% and management's estimates of future sales volumes, EBITDA and permitted reserves. Changes in these inputs will impact the valuation of our contingent consideration obligations and will result in gain or loss each quarterly period.

A reconciliation of the changes in Level 3 fair value measurements from December 31, 2016, to September 30, 2017, is provided below (in thousands):
 
Contingent Consideration
Balance at December 31, 2016
$
32,212

Acquisitions (1)
20,621

Total losses included in earnings (2)
2,047

Payment on contingent consideration
(2,326
)
Balance at September 30, 2017
$
52,554


(1)
Represents the fair value of the contingent consideration associated with the Corbett acquisition as of the acquisition date.
(2)
Represents the net loss on the change in valuation of contingent consideration, which is included in the line item of the same name in our condensed consolidated statements of operations.

Our other financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and long-term debt.  We consider the carrying values of cash and cash equivalents, accounts receivable, and accounts payable to be representative of their respective fair values because of their short-term maturities or expected settlement dates.  The fair value of our Senior Unsecured Notes, estimated based on quoted market prices (i.e., Level 2 inputs), was $645.7 million as of September 30, 2017. The carrying value of any outstanding amounts under our Third Loan Agreement approximates fair value due to the floating interest rate. There were no such amounts outstanding as of September 30, 2017, or December 31, 2016.


22



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


12.
INCOME TAXES

We recorded income tax expense allocated to continuing operations of $7.2 million and $20.9 million for the three and nine months ended September 30, 2017, respectively. We recorded income tax expense allocated to continuing operations of $12.6 million and $14.3 million for the three and nine months ended September 30, 2016, respectively. We recorded a tax benefit of $0.1 million and $0.3 million allocated to discontinued operations for the three and nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017, our effective tax rate differed from the federal statutory rate primarily due to other cumulative adjustments to deferred income taxes, which resulted in additional income tax expense. In addition, the adoption of ASU 2016-09 on January 1, 2017, (see Note 2) required the current period income tax benefit related to stock compensation to be reflected in the income statement instead of additional paid-in-capital, as previously required. For the nine months ended September 30, 2016, our effective tax rate differed from the federal statutory tax rate primarily due to the application of a valuation allowance that reduced the recognized benefit of certain of our deferred tax assets. In addition, certain state income taxes are calculated on a basis other than pre-tax income (loss). In addition, for both the three months ended September 30, 2017 and 2016, our effective tax rate differed from the federal statutory rate due to the tax impact of derivative income and losses related to our Warrants.  Derivative income and losses were excluded from the calculation of our income tax provision and were treated as an unrecognized tax position. For the nine months ended September 30, 2017, our tax provision excluded $0.3 million of tax benefit related to our $0.8 million derivative loss. For the nine months ended September 30, 2016, our tax provision excluded $2.5 million of tax expense related to our $6.4 million derivative income.

For the three and nine months ended September 30, 2017, we reduced to zero our unrecognized tax benefits and deferred tax asset balances associated with derivative income or losses related to our Warrants. The amount of the reduction for both was $43.6 million; therefore, the aggregate reductions did not have an impact to either total income tax expense or our effective tax rate. These reductions followed a decision to no longer pursue a future tax return deduction associated with our cumulative derivative losses related to our Warrants, given our inability, after multiple attempts, to obtain the necessary documentation to support the deduction and complete the related informational reporting requirements.

In accordance with U.S. GAAP, we reduce the value of deferred tax assets to the amount that is more likely than not to be realized in future periods. The ultimate realization of the benefit of deferred tax assets from deductible temporary differences or tax carryovers depends on generating sufficient taxable income during the periods in which those temporary differences become deductible. We considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these considerations, we relied upon the reversal of certain deferred tax liabilities to realize a portion of our deferred tax assets and established valuation allowances as of September 30, 2017, and December 31, 2016, for other deferred tax assets because of uncertainty regarding their ultimate realization. Our total net deferred tax liability was approximately $15.0 million as of September 30, 2017, and approximately $7.7 million as of December 31, 2016.

We record changes in our unrecognized tax benefits based on anticipated federal and state tax filing positions on a quarterly basis. For the nine months ended September 30, 2017 and 2016, we recorded unrecognized tax benefits of $0.1 million and $4.1 million, respectively.




23



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


13.
NET EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period after giving effect to all potentially dilutive securities outstanding during the period.

The following is a reconciliation of the components of the basic and diluted earnings (loss) per share calculations for the three and nine months ended September 30, 2017 and 2016 (in thousands):

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 
 
 
 
 
 
Income from continuing operations
$
24,276

 
$
38,122

 
$
29,109

 
$
24,970

Loss from discontinued operations, net of taxes
(222
)
 
(166
)
 
(524
)
 
(518
)
Numerator for diluted earnings per share
$
24,054

 
$
37,956

 
$
28,585

 
$
24,452

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
16,028

 
15,222

 
15,745

 
14,978

Restricted stock awards and restricted stock units
84

 
67

 
112

 
84

Warrants
524

 
939

 
760

 
1,111

Stock options
15

 
12

 
16

 
13

Denominator for diluted earnings per share
16,651

 
16,240

 
16,633

 
16,186


For the three and nine months ended September 30, 2017 and 2016, our potentially dilutive shares include the shares underlying our restricted stock awards, restricted stock units, stock options and Warrants. The following table shows the type and number (in thousands) of potentially dilutive shares excluded from the diluted earnings (loss) per share calculations for the periods presented as their effect would have been anti-dilutive or they have not met their performance target:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Potentially dilutive shares:
 
 
 
 
 
 
 
Unvested restricted stock awards and restricted stock units
60

 
35

 
62

 
35

Total potentially dilutive shares
60

 
35

 
62

 
35


14.
COMMITMENTS AND CONTINGENCIES
 
Legal Proceedings
 
From time to time, and currently, we are subject to various claims and litigation brought by employees, customers and other third-parties for, among other matters, personal injuries, property damages, product defects and delay damages that have, or allegedly have, resulted from the conduct of our operations.  As a result of these types of claims and litigation, we must periodically evaluate the probability of damages being assessed against us and the range of possible outcomes.  In each reporting period, if we determine that the likelihood of damages being assessed against us is probable, and if we believe we can estimate a range of possible outcomes, then we will record a liability. The amount of the liability will be based upon a specific estimate, if we believe a specific estimate to be likely, or it will reflect the low end of our range. Currently, there are no material legal proceedings pending against us.
 

24



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


In the future, we may receive funding deficiency demands from multi-employer pension 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 contributing employers in the plans has an effect on each of the other contributing employers and the development of a rehabilitation plan by the trustees and subsequent submittal to and approval by the Internal Revenue Service is not predictable. Further, the allocation of fund assets and return assumptions by trustees are variable, as are actual investment returns relative to the plan assumptions.

As of September 30, 2017, there are no material product defect claims pending against us.  Accordingly, our existing accruals for claims against us do not reflect any material amounts relating to product defect claims.  While our management is not aware of any facts that would reasonably be expected to lead to material product defect 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 defect claims.  In particular, we generally do not maintain insurance coverage for the cost of removing and rebuilding structures.  In addition, our indemnification arrangements with contractors or others, when obtained, generally provide only limited protection against product defect claims.  Due to inherent uncertainties associated with estimating claims in our business, we cannot estimate the amount of any future loss that may be attributable to product defect claims related to ready-mixed concrete we have delivered prior to September 30, 2017.

On March 28, 2017, Hans Ruedelstein, individually and on behalf of all others similarly situated, filed a purported class action lawsuit in the United States District Court of Northern Texas, Fort Worth Division, against the Company, William J. Sandbrook, William M. Brown and Joseph C. Tusa, Jr. alleging violations of certain federal securities laws.  The case was filed purportedly on behalf of purchasers of the Company's stock between March 6, 2015 and March 23, 2017. On June 22, 2017, Robert Abric and Donald Bellafiore were appointed as co-lead plaintiffs. On August 24, 2017, co-lead plaintiffs voluntarily dismissed the complaint and on September 8, 2017, the case was terminated by the Court.

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 does not believe that these claims will materially exceed our related accruals.  Despite compliance and experience, it is possible that we could be held liable for future charges, which might be material, but are not currently known to us or cannot be estimated by us.  In addition, changes in federal or state laws, regulations or requirements, or discovery of currently unknown conditions, could require additional expenditures.

As permitted under Delaware law, we have agreements that provide indemnification of officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The maximum potential amount of future payments that we could be required to make under these indemnification agreements is not limited; however, we have a director and officer insurance policy that potentially limits our exposure and enables us to recover a portion of future amounts that may be paid.  As a result of the insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities for these agreements as of September 30, 2017.

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.


25



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Insurance Programs

We maintain third-party insurance coverage against certain risks in amounts we believe are reasonable.  Under certain components of our insurance program, we share the risk of loss with our insurance underwriters by maintaining high deductibles subject to aggregate annual loss limitations.  Generally, our deductible retentions per occurrence for auto, 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.  We determine the expected losses using a combination of our historical loss experience and subjective assessments of our future loss exposure. The estimated losses are subject to uncertainty from various sources, including changes in claims reporting patterns, claims settlement patterns, judicial decisions, legislation and economic conditions.  Although we believe the estimated losses we have recorded are reasonable, significant differences related to the items we have noted above could materially affect our insurance obligations and future expense. The amount recorded in accrued liabilities in our condensed consolidated balance sheet for estimated losses was $15.5 million as of September 30, 2017, compared to $13.5 million as of December 31, 2016.

Performance Bonds
 
In the normal course of business, we are contingently liable for performance under $36.2 million in performance bonds that various contractors, states and municipalities have required as of September 30, 2017. The bonds principally relate to construction contracts, reclamation obligations, licensing and permitting. 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 as of September 30, 2017.

Employment Agreements

We have employment agreements with executive officers and certain key members of management under which severance payments would become payable in the event of specified terminations without cause or after a change of control. 



26



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


15.
SEGMENT INFORMATION

Our two reportable segments consist of ready-mixed concrete and aggregate products as described below.

Our ready-mixed concrete segment produces and sells ready-mixed concrete. This segment serves the following markets: Texas, Northern California, New York, New Jersey, Washington, D.C., Oklahoma, and the U.S. Virgin Islands. Our aggregate products segment includes crushed stone, sand and gravel products and serves the North Texas, West Texas, New York, New Jersey, Oklahoma, and U.S. Virgin Islands markets in which our ready-mixed concrete segment operates. Other products not associated with a reportable segment include our building materials stores, hauling operations, lime slurry, ARIDUS® Rapid Drying Concrete technology, brokered product sales, a recycled aggregates operation, an aggregate distribution operation, and an industrial waterfront marine terminal and sales yard. The financial results of the acquisitions have been included in their respective reportable segment or in other products as of their respective acquisition dates.

Our customers are generally involved in the construction industry, which is a cyclical business and is subject to general and more localized economic conditions.  In addition, our business is impacted by seasonal variations in weather conditions, which vary by regional market.  Accordingly, demand for our products and services during the winter months is typically lower than in other months of the year because of inclement weather.  Also, sustained periods of inclement weather and other adverse weather conditions could cause the delay of construction projects during other times of the year.

Our chief operating decision maker evaluates segment performance and allocates resources based on Adjusted EBITDA. We define Adjusted EBITDA as income (loss) from continuing operations excluding the impact of income tax expense (benefit), net interest expense, depreciation, depletion and amortization, derivative income (loss), the non-cash change in value of contingent consideration, hurricane-related losses, quarry dredge costs for a specific event, and loss on extinguishment of debt.

We consider Adjusted EBITDA to be an indicator of the operational strength and performance of our business. We have included Adjusted EBITDA because it is a key financial measure used by our management to (1) internally measure our operating performance and (2) assess our ability to service our debt, incur additional debt, and meet our capital expenditure requirements.

Adjusted EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on U.S. GAAP, and is not a measure of our cash flows or ability to fund our cash needs. Our measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies, and may not be comparable to similarly titled measures used in our various agreements, including the Third Loan Agreement and the Indenture.

We generally account for inter-segment sales at market prices. Corporate includes executive, administrative, financial, legal, human resources, business development and risk management activities that are not allocated to reportable segments and are excluded from segment Adjusted EBITDA. Eliminations include transactions to account for intercompany activity.


27



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following tables set forth certain financial information relating to our continuing operations by reportable segment (in thousands):



Three Months Ended
September 30,

Nine Months Ended
September 30,
 

2017

2016

2017

2016
Revenue:

 

 




Ready-mixed concrete








Sales to external customers

$
323,567


$
297,858


$
909,145


$
770,479

Aggregate products








Sales to external customers

10,972


12,289


32,305


30,756

Intersegment sales

9,987


9,839


29,244


25,641

Total aggregate products
 
20,959

 
22,128

 
61,549

 
56,397

Total reportable segment revenue

344,526


319,986


970,694


826,876

Other products and eliminations

10,102


8,602


23,993


22,507

Total revenue

$
354,628


$
328,588

 
$
994,687

 
$
849,383










Reportable Segment Adjusted EBITDA:

 

 

 

 
Ready-mixed concrete

$
53,627


$
51,394


$
144,777


$
111,809

Aggregate products

6,218


7,005


18,889


15,080

Total reportable segment Adjusted EBITDA

$
59,845

 
$
58,399

 
$
163,666

 
$
126,889










Reconciliation of Total Reportable Segment Adjusted EBITDA to Income (Loss) From Continuing Operations:











Total reportable segment Adjusted EBITDA
 
$
59,845

 
$
58,399

 
$
163,666

 
$
126,889

Other products and eliminations from operations
 
3,315

 
2,472

 
9,338

 
6,704

Corporate overhead
 
(14,051
)
 
(10,628
)
 
(39,757
)
 
(31,150
)
Depreciation, depletion and amortization for reportable segments
 
(15,441
)
 
(13,036
)
 
(45,586
)
 
(35,630
)
Hurricane-related losses for reportable segments
 
(1,854
)
 

 
(1,854
)
 

Quarry dredge costs for specific event for reportable segment
 
(2,175
)
 

 
(2,175
)
 

Interest expense, net
 
(10,552
)
 
(7,635
)
 
(31,062
)
 
(19,933
)
Corporate loss on early extinguishment of debt
 
(60
)
 

 
(60
)
 
(12,003
)
Corporate derivative income (loss)
 
13,119

 
21,772

 
(791
)
 
6,430

Change in value of contingent consideration for reportable segments
 
(719
)
 
(714
)
 
(2,047
)
 
(2,325
)
Corporate, other products and eliminations other income, net
 
90

 
69

 
291

 
305

Income from continuing operations before income taxes
 
31,517

 
50,699

 
49,963

 
39,287

Income tax expense
 
(7,241
)
 
(12,577
)
 
(20,854
)
 
(14,317
)
Income from continuing operations
 
$
24,276

 
$
38,122

 
$
29,109

 
$
24,970






 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
Ready-mixed concrete
 
$
5,006

 
$
5,807

 
$
17,329

 
$
17,978

Aggregate products
 
10,092

 
1,676

 
15,769

 
9,689

Other products and corporate
 
194

 
625

 
886

 
3,374

Total capital expenditures
 
$
15,292

 
$
8,108

 
$
33,984

 
$
31,041


28



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenue by Product:
 
 
 
 
 
 
 
 
Ready-mixed concrete
 
$
323,567

 
$
297,858

 
$
909,145

 
$
770,479

Aggregate products
 
10,972

 
12,289

 
32,305

 
30,756

Aggregates distribution
 
8,423

 
7,381

 
21,376

 
18,662

Building materials
 
7,263

 
5,577

 
18,007

 
14,823

Lime
 
2,240

 
3,479

 
7,380

 
7,828

Hauling
 
1,465

 
1,320

 
4,066

 
4,301

Other
 
698

 
684

 
2,408

 
2,534

Total revenue
 
$
354,628

 
$
328,588

 
$
994,687

 
$
849,383


 
 
 
As of
September 30, 2017
 
As of
December 31, 2016
Identifiable Property, Plant And Equipment Assets:
 
 
 
 
Ready-mixed concrete
 
$
268,174

 
$
229,077

Aggregate products
 
146,259

 
87,064

Other products and corporate
 
24,356

 
21,271

Total identifiable assets
 
$
438,789

 
$
337,412



16.
SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Senior Unsecured Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by each direct and indirect domestic subsidiary of the Company, each a guarantor subsidiary. Each guarantor subsidiary is directly or indirectly 100% owned by the Company. The Senior Unsecured Notes are not guaranteed by any direct or indirect foreign subsidiaries of the Company, each a non-guarantor subsidiary. Consequently, we are required to provide condensed consolidating financial information in accordance with Rule 3-10 of Regulation S-X.

The following condensed consolidating financial statements present, in separate columns, financial information for (1) the Parent on a parent only basis, (2) the guarantor subsidiaries on a combined basis, (3) the non-guarantor subsidiaries on a combined basis, (4) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis, and (5) the Company on a consolidated basis.

The following condensed consolidating financial statements of U.S. Concrete, Inc. and its subsidiaries present investments in consolidated subsidiaries using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.


29



U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2017
(in thousands)
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
U.S. Concrete Consolidated
ASSETS
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
247,873

 
$
390

 
$

 
$
248,263

Trade accounts receivable, net
 

 
234,671

 
305

 

 
234,976

Inventories
 

 
42,084

 
3,345

 

 
45,429

Other receivables
 
8,063

 
5,946

 
71

 

 
14,080

Prepaid expenses
 

 
6,301

 
27

 

 
6,328

Other current assets
 
11,397

 
1,282

 
16

 
(11,397
)
 
1,298

Total current assets
 
19,460

 
538,157

 
4,154

 
(11,397
)
 
550,374

Property, plant and equipment, net
 

 
414,760

 
24,029

 

 
438,789

Goodwill
 

 
141,407

 
5,753

 

 
147,160

Intangible assets, net
 

 
118,676

 
2,709

 

 
121,385

Deferred income taxes
 

 

 
558

 
(558
)
 

Investment in subsidiaries
 
417,747

 

 

 
(417,747
)
 

Intercompany receivables
 
463,096

 

 

 
(463,096
)
 

Other assets
 

 
1,946

 
47

 

 
1,993

Total assets
 
$
900,303

 
$
1,214,946

 
$
37,250

 
$
(892,798
)
 
$
1,259,701

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
116

 
$
122,260

 
$
750

 
$

 
$
123,126

Accrued liabilities
 
17,447

 
82,624

 
1,889

 
(11,397
)
 
90,563

Current maturities of long-term debt
 

 
24,841

 
97

 

 
24,938

Total current liabilities
 
17,563

 
229,725

 
2,736

 
(11,397
)
 
238,627