Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2017
or
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=12099691&doc=47
 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) (Zip code)
Registrant’s telephone number, including area code: (817) 835-4105
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $.001
 
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ     No o
Indicate by check mark 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 o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
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 definition 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 Act.)     Yes o      No þ
Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the last reported sale price of $78.55 of the registrant’s common stock as of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter: $1,184,755,511. For purposes of this computation, all officers, directors and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.
There were 16,656,366 shares of common stock, par value $.001 per share, of the registrant outstanding as of February 26, 2018.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement related to the registrant's 2018 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, are incorporated by reference into Part III of this report.



U.S. CONCRETE, INC.
FORM 10-K
For the Year Ended December 31, 2017
TABLE OF CONTENTS

 
 
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Cautionary Statement Concerning Forward-Looking Statements
 
Certain statements and information in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance and underlying assumptions and other statements, which are not statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

general economic and business conditions, which will, among other things, affect demand for new residential and commercial construction;
our ability to successfully identify, manage, and integrate acquisitions;
the cyclical nature of, and changes in, the real estate and construction markets, including pricing changes by our competitors;
governmental requirements and initiatives, including those related to mortgage lending, financing or deductions, funding for public or infrastructure construction, land usage, and environmental, health and safety matters;
disruptions, uncertainties or volatility in the credit markets that may limit our, our suppliers' and our customers' access to capital;
our ability to successfully implement our operating strategy;
weather conditions;
our substantial indebtedness and the restrictions imposed on us by the terms of our indebtedness;
the effects of currency fluctuations on our results of operations and financial condition;
our ability to maintain favorable relationships with third parties who supply us with equipment and essential supplies;
our ability to retain key personnel and maintain satisfactory labor relations; and
product liability, property damage, results of litigation and other claims and insurance coverage issues.

Known material factors that could cause our actual results to differ from those in the forward-looking statements include those described in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.


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PART I
Item 1.  Business

U.S. Concrete, Inc. is a Delaware corporation founded and incorporated in 1997. We began operations in 1999, which is the year we completed our initial public offering.  In this report, we refer to U.S. Concrete, Inc. and its subsidiaries as "we," "us," "our," the "Company," or "U.S. Concrete," unless we specifically state otherwise, or the context or content indicates otherwise.

General

We are a leading producer of ready-mixed concrete in select geographic markets in the United States and the U.S. Virgin Islands. We operate our business through two primary segments: ready-mixed concrete and aggregate products. Ready-mixed concrete is a highly versatile and widely used material in construction. This important building material is used in the vast majority of commercial, residential and public works construction projects. Aggregate products are granular raw materials essential in the production of ready-mixed concrete.

We serve substantially all segments of the construction industry in our select geographic markets. Our customers include contractors for commercial and industrial, residential, street and highway and other public works construction. Ready-mixed concrete product revenue by type of construction activity for the year ended December 31, 2017 was approximately 56% commercial and industrial, 26% residential and 18% street, highway and other public works.

We operate principally in the Atlantic Region (which we define to include New York, New Jersey, Washington, D.C. and Pennsylvania); Texas / Oklahoma; and Northern California with those markets representing approximately 38%, 36% and 25%, respectively, of our consolidated revenue for the year ended December 31, 2017. We believe we are well positioned for strong growth in these attractive regions. According to estimates from the Portland Cement Association ("PCA"), the states in which we operate represented a total of approximately 29% of the 2017 consumption of ready-mixed concrete in the United States, which favorably positions us to capture additional market share in this fragmented industry. Total revenue for the year ended December 31, 2017 was $1.3 billion, of which we derived approximately 90.8% from our ready-mixed concrete segment, 3.7% from our aggregate products segment (excluding $40.9 million sold internally) and 5.5% from our other operations. For the year ended December 31, 2017, we had net income attributable to U.S. Concrete of $25.5 million and income from continuing operations attributable to U.S. Concrete of $26.1 million.

As of December 31, 2017, we operated 162 standard ready-mixed concrete plants, 17 volumetric ready-mixed concrete plants, 18 producing aggregates facilities, seven aggregates distribution terminals, two lime slurry facilities and one recycled aggregates facilities. During the year ended December 31, 2017, these plants and facilities produced approximately 9.0 million cubic yards of ready-mixed concrete and 6.3 million tons of aggregates. In addition, we leased two other aggregates facilities to third parties and retained a royalty on production from those facilities. As of December 31, 2017, we operated over 1,640 drum mixer trucks and 130 volumetric mixer trucks. For additional information related to our properties, see Item 2. Properties of this report.

2017 Key Acquisitions

Our revenue over the past five years has more than doubled, due in part to our acquisitions, which we have funded through existing cash balances, debt and equity. During 2017, we expanded our operations with the acquisitions of the assets of Corbett Aggregate Companies, LLC. ("Corbett") located in Quinton, New Jersey; Harbor Ready-Mix ("Harbor") located in Redwood City, California; A-1 Materials, Inc. ("A-1”) and L.C. Frey Company, Inc. ("Frey") (collectively “A-1/Frey”) located in San Carlos, California; and Action Supply Co., Inc. ("Action Supply") located in Philadelphia, Pennsylvania and the outstanding common stock of Polaris Materials Corporation ("Polaris") located in Vancouver, British Columbia, Canada. These acquisitions included approximately 130 million tons of proven aggregates reserves, seven ready-mix concrete plants and 51 mixer trucks, significantly enhancing our ability to serve construction projects in the Atlantic and West Coast markets.







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Competitive strengths

Large, high quality asset base in attractive markets with favorable construction environments. Our assets are primarily focused in our Atlantic Region, Texas / Oklahoma, Northern California, British Columbia (which primarily supplies California) and the U.S. Virgin Islands markets. Our high quality asset base is comprised of 49 ready-mixed concrete plants, five aggregates facilities, five aggregates distribution terminals and one recycled aggregates facility in the Atlantic Region; 84 ready-mixed concrete plants, 17 volumetric ready-mixed concrete plants and 10 aggregates facilities in Texas / Oklahoma; 25 ready-mixed concrete plants and two aggregates distribution terminals in California; one aggregates facility in British Columbia; four ready-mixed concrete plants and two aggregates facilities in the U.S. Virgin Islands; as well as over 1,640 drum mixer trucks and 130 volumetric mixer trucks. We believe the scale and quality of our asset base, in addition to our product differentiation, on-time deliveries, competitive all-in delivered cost, service and reliability differentiate us and allow us to meet the needs of both large and small jobs for a wide range of clients in multiple end-use markets.

Growth in our Atlantic Region markets is driven by the financial services and government sectors; growth in our Texas / Oklahoma markets is largely driven by construction demand in the transportation, financial and other professional services and manufacturing sectors; and growth in our Northern California market is driven largely by the technology sector. In addition, each of these markets currently exhibit healthy residential trends supported by a number of factors, including population growth, decreases in unemployment, low mortgage and other interest rates, rising home prices and increasing construction activity. We believe that our better-than-average growth is driven by key industry sectors within our markets, which generally benefit from year-round construction.

Favorable exposure to commercial projects with higher margins. We bid for and routinely win supply contracts for some of the largest, most prestigious commercial projects. Some of the larger commercial projects we have worked on include:

Facebook NA-4 Data Center in Fort Worth, Texas
LaGuardia Airport in Queens, New York
Interstate 35W in Fort Worth, Texas
Google Bayview Campus in Mountain View, California
Toyota North American Headquarters in Plano, Texas
The Union Tower in Dallas, Texas
World Trade Center Complex in Manhattan, New York
Tappan Zee Bridge, New York
San Antonio Village in Mountain View, California
Hudson Yards Complex in Manhattan, New York
Museum of Modern Art Expansion Tower in Manhattan, New York

These types of projects have higher margins due to rigorous specifications, increased complexity, high customization requirements and significant volume capacity needs.

We provide alternative solutions for designers and contractors by offering value-added concrete products such as color-conditioned, fiber-reinforced, steel-reinforced and high-performance concrete. We believe this enhances our ability to compete for and win supply contracts for large, complex commercial projects that are difficult to supply.

Long-term customer relationships. Our management and sales personnel develop and maintain successful long-term relationships with our key customers. Customer concentration in our key markets allows us to better serve our new and existing customers with expedited delivery, lower transportation costs and scale efficiencies. Key elements of our customer-focused approach include:

corporate-level marketing and sales expertise;
technical service expertise to develop innovative new branded products; and
training programs that emphasize successful marketing and sales techniques that focus on the sale of high-margin concrete mix designs.


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We estimate that the average length of our top 15 customer relationships is approximately 24 years, including periods prior to our ownership of acquired businesses. We further estimate that approximately 94% of our top 35 customers have relationships that extend past five years, with approximately 54% surpassing 20 years of loyalty. Our customer engagement model results in contractors returning year after year to us as a supplier they can trust. Despite our concentrated and loyal customer base, in 2017, no single customer or project accounted for more than 10% of our total revenue. Our broad, yet targeted, customer base enables us to develop an efficient, stable business model and tap into the market in a variety of ways. We believe that by providing high quality, reliable services and customized products and solutions, we are able to maintain important long-term relationships.

Focus on environmental sustainability. We are a leader in the sustainable concrete market, and we expect domestic and global sustainable demand to continue to grow at attractive rates. We have an environmentally friendly concrete ("EF Technology") initiative that promotes green building and construction. Our EF Technology ready-mixed concrete products replace a portion of the traditional cement components with reclaimed fly ash, slag and other materials that results in lower carbon dioxide, or CO2, emissions. We believe this leads to an environmentally superior and sustainable alternative to traditional ready-mixed concrete for our customers’ consumption. We believe EF Technology reduces greenhouse gases and landfill space consumption and produces a highly durable product. Customers can also receive Leadership in Energy and Environmental Design (LEED) credits for the use of this technology.

We believe our use of technology creates a competitive advantage over smaller concrete producers and larger vertically integrated aggregates and cement companies that do not focus on this as a first solution. We are positioned to take advantage of the growing demand for these products that could result in an increase in our revenue and profits and expansion of our operating margins, as these higher-priced value-added products are a lower cost alternative to cement. Today, we are a charter member of the Carbon Leadership Forum and the first ready-mixed concrete company in North America to adopt and receive verified Environmental Product Declarations for our concrete mixes, and we employ extensive sustainable operational practices across our enterprise. We are also a supporter of the National Ready Mixed Concrete Association ("NRMCA") Green-Star program, a plant-specific certification program that utilizes an environmental management system based on a model of continual improvement. Further, we participate in certain environmentally friendly governmental programs, as available. For instance, in the North Texas area, we participate in the Texas Emissions Reduction Program, in which we replace older engines of heavy-duty vehicles with newer models with more stringent federal emission standards.

Solid balance sheet and ample liquidity. We have successfully improved our financial performance by refocusing our financial objectives over the past several years. Our management team has extensive experience in the industry as does our board of directors. Our management team has focused on reducing our cost structure while expanding our existing and acquired businesses in our core operating regions to drive strong performance. As a result, we have grown revenue, improved profit margins and increased liquidity. We benefit from available liquidity through our revolving credit facility and cash flow from operations. We believe our solid balance sheet and ample liquidity will allow us to take advantage of strategic opportunities as well as provide ample cushion against general downturns in economic activity.

Experienced management team. Our senior management team consists of 13 executives with an average of 28 years of industry experience and is comprised of individuals with a proven track record in the construction materials industry. Our Chief Executive Officer, William J. Sandbrook, has over 25 years of construction materials industry experience. Our management team’s deep market knowledge enables us to effectively assess potential new opportunities to solidify our leading market presence. We will continue to focus on recruiting and retaining motivated and knowledgeable professional managers to continue to develop our business and maintain our leading market position.

Company strategy

Focus on core operations. We believe the best opportunities for future growth lie within our core ready-mixed concrete and aggregates businesses. We routinely evaluate our existing assets and business units to ensure we continue to maintain a best-in-class operation. We will continue to invest in our business, both in physical plants and new technologies, and we will continue to evaluate strategic acquisition opportunities. We believe our focus on optimizing the performance of our ready-mixed concrete business will continue to differentiate us from our larger, integrated competitors that focus principally on their aggregates or cement and treat ready-mixed concrete operations as a downstream outlet for their aggregates or cement products.


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Pursue growth. In addition to our general organic growth initiatives, we continuously evaluate both acquisition and partnership opportunities. We are focused on both strengthening our positions in existing markets as well as identifying attractive new markets. All of our acquisitions must meet our strict criteria, including fit with our strategic plan, investment return hurdles, capital requirements and attractive market attributes. During 2017, we completed eight acquisitions that expanded our footprint in the Atlantic and West Coast markets and facilitated vertical integration on the West Coast. We believe our significant experience, positive reputation and strong management team will allow us to continue our successful track record of identifying opportunities, integrating acquisitions, realizing synergies and enhancing asset value and cash flow.

Manage costs. We are continuously seeking opportunities to reduce costs and improve margins through our focus on existing operations and new technologies. Additionally, our regional acquisitions allow for synergies such as selling, general and administrative reductions, economies of scale, variable labor savings and increased purchasing power. We believe by aggressively managing our cost structure, we can best serve our clients with better pricing and continued best-in-class execution.

Business segments and products
    
We operate our business through two primary segments: ready-mixed concrete and aggregate products.  For financial information about our operating segments, refer to the information set forth in Note 17, "Segment Information," to our consolidated financial statements included in this report.  We derive our revenue from operations in the United States, its territories and Canada. All of our long-lived assets are located within the United States, its territories and Canada.

Ready-mixed concrete

General

Our ready-mixed concrete business engages principally in the formulation, preparation and delivery of ready-mixed concrete to our customers’ job sites. We provide our ready-mixed concrete from our operations in Texas, New York, New Jersey, Washington, D.C., Pennsylvania, California, Oklahoma and the U.S. Virgin Islands. Ready-mixed concrete is a highly versatile construction material that results from combining coarse and fine aggregates, such as gravel, crushed stone and sand, with water, various chemical admixtures and cement. We also provide services intended to reduce our customers’ overall construction costs by lowering the installed, or “in-place,” cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control and customized delivery programs to meet our customers’ needs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform.

Products and services

Our standard ready-mixed concrete products consist of proportioned mixes we produce and deliver in an unhardened plastic state for placement and shaping into designed forms at the job site. Selecting the optimum mix for a job entails determining not only the ingredients that will produce the desired permeability, strength, appearance and other properties of the concrete after it has hardened and cured, but also the ingredients necessary to achieve a workable consistency considering the weather and other conditions at the job site. We believe we can achieve product differentiation for the mixes we offer because of the variety of mixes we can produce, our volume production capacity and our scheduling, delivery and placement reliability. Additionally, we believe our EF Technology initiative, which utilizes alternative materials and mix designs that result in lower CO2 emissions, helps differentiate us from our competitors. We also believe we distinguish ourselves with our value-added service approach that emphasizes reducing our customers’ overall construction costs by reducing the in-place cost of concrete and the time required for construction.

Our volumetric concrete operations expand our ready-mixed concrete delivery and service offerings in Texas. Volumetric ready-mixed concrete trucks mix concrete to the customer's specification on the job site, better serving smaller jobs and specialized applications, and allowing flexibility for servicing remote job locations. Because of their versatility, these trucks offer the contractor multiple options for a single job without the inconvenience or added costs typically associated with standard ready-mixed trucks delivering special or short-loads to a job site. Because of their unique on-demand production capabilities, these trucks minimize the amount of wasted concrete, which improves margins and reduces environmental impact.


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From a contractor’s perspective, the in-place cost of concrete includes both the amount paid to the ready-mixed concrete manufacturer and the internal costs associated with the labor and equipment the contractor provides. A contractor’s unit cost of concrete is often only a small component of the total in-place cost that takes into account all the labor and equipment costs required to build the forms for the ready-mixed concrete and place and finish the ready-mixed concrete, including the cost of additional labor and time lost as a result of substandard products or delivery delays not covered by warranty or insurance. By carefully designing proper mixes and using advances in mixing technology, we can assist our customers in reducing the amount of reinforcing steel, time and labor they will require in various applications.

We provide a variety of services in connection with our sale of ready-mixed concrete that can help reduce our customers’ in-place cost of concrete. These services include:

production of formulations and alternative product recommendations that reduce labor and materials costs;
quality control, through automated production and laboratory testing, that ensures consistent results and minimizes the need to correct completed work; and
automated scheduling and tracking systems that ensure timely delivery and reduce the downtime incurred by the customer’s placing and finishing crews.

We produce ready-mixed concrete by combining the desired type of cement, other cementitious materials (described below), sand, gravel and crushed stone with water and, typically, one or more admixtures. These admixtures, such as chemicals, minerals and fibers, determine the usefulness of the product for particular applications.

We use a variety of chemical admixtures to achieve one or more of the following five basic purposes:

relieve internal pressure and increase resistance to cracking;
retard the hardening process to make concrete more workable in hot weather;
strengthen concrete by reducing its water content;
accelerate the hardening process and reduce the time required for curing; and
facilitate the placement of concrete having low water content.

We frequently use various mineral admixtures as supplements to cement, which we refer to as supplemental cementitious materials, to alter the permeability, strength and other properties of concrete. These materials include fly ash, ground granulated blast-furnace slag, silica fume and other natural pozzolans. These materials also reduce the amount of cement content used, which results in a reduction in CO2 emissions.

We also use fibers, such as steel, glass, and synthetic and carbon filaments as additives in various formulations of concrete. Fibers help control shrinkage cracking, thus reducing permeability and improving abrasion resistance. In many applications, fibers can replace welded steel wire and reinforcing bars. Relative to the other components of ready-mixed concrete, these additives generate comparatively higher margins.

Marketing and sales

Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers, architects, engineers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs.

General contractors typically select their suppliers of ready-mixed concrete. In large, complex projects, an engineering firm or division within a state transportation or public works department may influence the purchasing decision, particularly if the concrete has complicated design specifications. In connection with large, complex projects and in government-funded projects generally, the general contractor or project engineer usually awards supply orders on the basis of either direct negotiation or a competitive bidding process. We believe the purchasing decision for many jobs is ultimately relationship and reputation-based.


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Our marketing and sales strategy emphasizes the sale of value-added products and solutions to customers more focused on reducing their in-place building material costs than on the price per cubic yard of ready-mixed concrete. Key elements of our customer-focused approach include:

corporate-level marketing and sales expertise;
technical service expertise to develop innovative, new branded products; and
training programs that emphasize successful marketing and sales techniques that focus on the sale of high-margin concrete mix designs.

Operations

Our standard ready-mixed concrete plants consist of fixed and portable facilities that produce ready-mixed concrete in wet or dry batches. Our fixed-plant facilities produce ready-mixed concrete that we transport to job sites by drum mixer trucks. Our portable plant operations deploy our portable plant facilities to produce ready-mixed concrete at the job site that we direct into place using a series of conveyor belts or drum mixer trucks. We use our portable plants to service high-volume projects or projects in remote locations. Our volumetric ready-mixed concrete plants consist of fixed and portable facilities that are used to load raw materials into our volumetric mixer trucks throughout the day. Batching occurs at the job site based on customer specifications. Several factors govern the choice of plant type, including:

production consistency requirements;
daily production capacity requirements;
job site proximity to fixed plants; and
capital and financing.

We construct both wet batch plants and dry batch plants. A wet batch plant generally has a higher initial cost and daily operating expenses, but (1) yields greater consistency with less time required for quality control in the concrete produced and (2) generally has greater daily production capacity than a dry batch plant. We believe that construction of a wet batch plant having an hourly capacity of 250 cubic yards currently would cost approximately $1.6 million, while a dry batch plant having an hourly capacity of 150 cubic yards currently would cost approximately $0.8 million. As of December 31, 2017, we operated 28 wet batch plants and 134 dry batch plants.

We maintain two types of load facilities for our volumetric ready-mixed concrete main load sites and reload facilities. Both types of facilities typically include blending silos, a load-out pit and a storm water system. A main load facility typically also includes a maintenance shop. We estimate that constructing a main load site would currently cost approximately $0.9 million, while constructing a reload facility would currently cost approximately $0.2 million.

Our batch operator at a dry batch plant simultaneously loads the dry components of stone, sand and cement with water and admixtures in a drum mixer truck that begins the mixing process during loading and continues that process en route to our customers' job sites. In a wet batch plant, the batch operator blends the dry components and water in a plant mixer from which an operator loads the mixed concrete into a drum mixer truck, which leaves for the job site promptly after loading. At a volumetric facility, our loader operator or mixer operator coordinates loading the dry components of sand, course aggregates and cement into the bins on the truck. Water and liquid admixtures are separately loaded into the tanks on the trucks before leaving the facility for the job site.

Any future decisions we make regarding the construction of additional plants will be impacted by market factors, including:

the expected production demand for the plant;
capital and financing;
the expected types of projects the plant will service; and
the desired location of the plant.

Drum mixer trucks continuously rotate their loads en route to job sites to produce concrete at the desired consistency. Our drum mixer trucks typically have load capacities of 10 cubic yards, or approximately 20 tons, and a typical operating life of between 10 and 15 years, depending on total truck hours and miles. A new truck of this size currently costs between $160,000 and $225,000, depending on the geographic location and design specifications. Depending on the type of batch plant from which the drum mixer trucks generally are loaded, some components of the drum mixer trucks may require refurbishment after three to five years. As of December 31, 2017, we operated a fleet of more than 1,640 owned and leased drum mixer trucks, which had an average age of approximately eight years.

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Volumetric mixer trucks include individual bins and tanks, which are used to mix the raw materials at the customer's job site based on the customer's specifications. The volumetric mixing method provides only the concrete needed for the job, eliminating wasted materials and short load charges. Our volumetric mixer trucks typically have load capacities of eight cubic yards, or approximately 16 tons, and a typical operating life of between eight to twelve years, depending on total truck hours and miles. A new truck of this size currently costs between $220,000 and $250,000, depending on the design specifications. Typically, the truck's mixer unit will be rebuilt after the initial truck life, extending the operating life of the truck an additional five years. As of December 31, 2017, we operated a fleet of 130 owned volumetric mixer trucks, which had an average age of approximately eight years.

In our ready-mixed concrete operations, we emphasize quality control, pre-job planning, customer service and coordination of supplies and delivery. We obtain orders for ready-mixed concrete in advance of actual delivery. A typical order contains a contractor's specifications for the concrete. After receiving the specifications for a particular job, we use computer modeling, industry information and information from previous similar jobs to formulate a variety of mixtures of cement, aggregates, water and admixtures that meet or exceed the contractor’s specifications. We perform testing to determine which mix design is most appropriate to meet the required specifications. The test results enable us to select the mixture that has the lowest cost and meets or exceeds the job specifications. The testing center creates and maintains a project file that details the mixture we will use when we produce the concrete for the job. For quality control purposes, the testing center is also responsible for maintaining batch samples of concrete we have delivered to a job site.

We use computer modeling to prepare bids for particular jobs based on the size of the job, location, desired margin, cost of raw materials and the design mixture identified in our testing process. If the job is large enough and has a projected duration beyond the supply arrangement in place at that time, we obtain quotes from our suppliers as to the cost of raw materials we use to prepare the bid. Once we obtain a quote from our suppliers, the price of the raw materials for the specified job is informally established. Several months may elapse from the time a contractor has accepted our bid until actual delivery of the ready-mixed concrete begins.

During this time, we maintain regular communication with the contractor concerning the status of the job and any changes in the job’s specifications to coordinate the multisourced purchases of cement and other materials we will need to fill the job order and meet the contractor’s delivery requirements. We confirm that our customers are ready to take delivery of manufactured products throughout the placement process. On any given day, one of our plants may have production orders for dozens of customers at various locations throughout its area of operation. To fill an order:

the customer service team coordinates the timing and delivery of the concrete to the job site;
a load operator supervises and coordinates the receipt of the necessary raw materials and operates the hopper that dispenses those materials into the appropriate storage bins;
a batch operator, using a computerized batch panel, prepares the specified mixture from the order and oversees loading the mixer truck with either dry ingredients and water in a dry batch plant or the premixed concrete in a wet batch plant; and
the driver of the mixer truck delivers the load to the job site, discharges the load and, after washing the truck, departs as directed by the dispatch office.

Our central dispatch system, where available, tracks the status of each mixer truck as to whether it is:

loading concrete;
en route to a particular job site;
on the job site;
discharging concrete;
being rinsed down; or
en route to a particular plant.

The system is updated continuously on the trucks’ status via signals received from sensors. In this manner, the dispatcher can determine the optimal routing and timing of subsequent deliveries by each mixer truck and monitor the performance of each driver.


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Our plant managers oversee the operations of each of our plants. Our operational employees also include:

maintenance personnel who perform routine maintenance work throughout our plants;
mechanics who perform the maintenance and repair work on our rolling stock;
testing center staff who prepare mixtures for particular job specifications and maintain quality control;
various clerical personnel who perform administrative tasks; and
sales personnel who are responsible for identifying potential customers, pricing mixes for projects and maintaining existing customer relationships.

We generally operate each of our plants on an extended single shift, with some overtime operation during the year. On occasion, however, we may have projects that require deliveries around the clock.

Aggregate products

Our aggregate products segment produces crushed stone, sand and gravel from 18 aggregates facilities located in New Jersey, Texas, Oklahoma, the U.S. Virgin Islands and British Columbia, Canada. This includes the November 2017 acquisition of Polaris, located in Vancouver, British Columbia, Canada with one active quarry that enhances our vertical integration and access to supply West Coast markets. We sell these aggregates for use in commercial, industrial and public works projects in the markets they serve, as well as consume them internally in the production of ready-mixed concrete in those markets. We produced approximately 6.3 million tons of aggregates during the year ended December 31, 2017, with Texas / Oklahoma representing 47%, New Jersey representing 41%, British Columbia, Canada representing 8% and the U.S. Virgin Islands representing 4% of the total production. We believe our aggregates reserves provide us with additional raw material sourcing flexibility and supply availability. In addition, we own sand pit operations in Michigan and one quarry in West Texas, which we lease to third parties and receive a royalty based on the volumes produced and sold during the terms of the leases.

Other

Other products not associated with a reportable segment include our building materials stores, hauling operations, aggregates distribution terminals, lime slurry, ARIDUS® Rapid Drying Concrete technology, a recycled aggregates operation and concrete blocks.

Industry overview

Concrete has many attributes that make it a highly versatile construction material. In recent years, industry participants have developed various uses for concrete products, including:

high-strength engineered concrete to compete with steel-frame construction;
concrete housing;
flowable fill for backfill applications;
continuous-slab rail-support systems for rapid transit and heavy-traffic rail lines; and
concrete bridges, tunnels and other structures for rapid transit systems.

Other examples of successful innovations that have opened new markets for concrete include:

sustainable construction;
concrete paving over asphalt, or “white topping”;
paved concrete shoulders to replace less permanent and increasingly costly asphalt shoulders;
pervious concrete parking lots for water drainage management, as well as providing a long-lasting and aesthetically pleasing urban environment;
colored pavements to mark entrance and exit ramps and lanes of expressways; and
colored, stamped concrete for decorative applications.

The U.S. ready-mixed concrete market is a large, highly competitive and fragmented market, with no one producer holding a dominant market position. The NRMCA currently estimates that the ready-mixed concrete industry generates total annual revenue of approximately $35 billion, with total volumes from the production and delivery of ready-mixed concrete of 358 million cubic yards in 2017, 343 million cubic yards in 2016 and 336 million cubic yards in 2015.


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Based on estimates from the NRMCA, in addition to vertically integrated manufacturers of cement and aggregates, ready-mixed concrete producers currently operate approximately 5,500 plants in the United States. Larger markets generally have several producers competing for business on the basis of product quality, service, on-time delivery and price.

According to FMI Corp. ("FMI"), spending on total residential, non-residential and non-building construction is projected to grow at a steady rate through 2019. FMI projects the following growth rates in 2018: residential construction of 5-7%, commercial and office construction of 7-9% and street and highway construction of 2%. According to the PCA, annual ready-mixed concrete usage is expected to strengthen in our key markets in California, Texas / Oklahoma and our Atlantic Region with 2018 to 2021 estimated compound annual growth rates of 4.4%, 3.3% and 3.1%, respectively. Moreover, the National Association of Home Builders and Fannie Mae predict U.S. residential construction will continue to make gains with a median estimate of approximately 900,000 and 400,000 single-family and multi-family housing starts in 2018, respectively.

During the past decade, public concerns about dust, process water runoff, noise, and heavy mixer and other truck traffic associated with the operation of ready-mixed concrete manufacturing operations and their general appearance have made obtaining the permits and licenses required for new plants more difficult. Delays in the regulatory process, coupled with the capital investment that start-up operations entail, create complexities for these start-up plants.

Cement and other raw materials

We obtain most of the materials necessary to manufacture ready-mixed concrete on a daily basis. These materials include cement, other cementitious materials (such as 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. Our inventory levels do not decline significantly or comparatively with declines in revenue during seasonally low periods. We generally maintain inventory at specified levels to maximize purchasing efficiencies and to be able to respond quickly to customer demand.

Typically, cement, other cementitious materials and aggregates represent the highest-cost materials used in manufacturing a cubic yard of ready-mixed concrete. We purchase cement from a few suppliers in each of our major geographic markets. Chemical admixtures are generally purchased from suppliers under national purchasing agreements.

Overall, prices for cement and aggregates increased in 2017, compared to 2016, in all of our major geographic markets. Generally, we negotiate with suppliers on a company-wide basis and at the local market level to obtain the most competitive pricing available for cement and aggregates. We believe the demand for cement is increasing and will warrant scrutiny as construction activity increases. Today, in most of our markets, we believe there is an adequate supply of cement and aggregates.

We recognize the value in advocating green building and construction as part of our strategy. We initiated EF Technology, our commitment to environmentally friendly concrete technologies that significantly reduce potential CO2 emissions. Our EF Technology ready-mixed concrete products replace a portion of cement with reclaimed fly ash, blast furnace slag and other materials. We believe this results in an environmentally superior and sustainable alternative to traditional ready-mixed concrete. EF Technology reduces greenhouse gases and landfill space consumption and produces a highly durable product. Customers can also obtain LEED credits through the use of this technology. We believe our use of this technology creates a competitive advantage over smaller concrete producers and larger vertically integrated aggregate and cement companies that may not focus on this as a first solution. We are positioned to take advantage of the growing demand for these products which could expand our operating margins as they are a lower cost alternative to cement.

Customers

Of our concrete product revenue for the year ended December 31, 2017, commercial and industrial construction represented approximately 56%, residential construction represented approximately 26% and street, highway construction and other public works represented approximately 18%. For the year ended December 31, 2017, no single customer or project accounted for more than 10% of our total revenue.

We rely heavily on repeat customers. Our management and sales personnel are responsible for developing and maintaining successful long-term relationships with our key customers.


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Competition

The ready-mixed concrete industry is highly competitive. Our leadership position in a market depends largely on the location and operating costs of our plants and prevailing prices in that market. Price is the primary competitive factor among suppliers for small or less complex jobs, such as residential construction. However, the ability to meet demanding specifications for strength or sustainability, timeliness of delivery and consistency of quality and service, in addition to price, are the principal competitive factors among suppliers for large or complex jobs. Our competitors range from small, owner-operated private companies to subsidiaries of operating units of large, vertically integrated manufacturers of cement and aggregates. Our vertically integrated competitors generally have greater financial and marketing resources than we have, providing them with a competitive advantage. Competitors having lower operating costs than we do or having the financial resources to enable them to accept lower margins than we do will have a competitive advantage over us for jobs that are particularly price-sensitive. Competitors having greater financial resources or less financial leverage than we do may be able to invest more in new mixer trucks, ready-mixed concrete plants and other production equipment or pay for acquisitions which could provide them a competitive advantage over us. See “Risk factors - We may lose business to competitors who underbid us, and we may be otherwise unable to compete favorably in our highly competitive and fragmented industry.”

We continue to focus on developing new competitive advantages that will differentiate us from our competitors, such as our high-performing, low-CO2 concrete and ARIDUS® Rapid Drying Concrete technology. For example, Central Concrete Supply Co., Inc. (“Central Concrete”), one of our subsidiaries, differentiated itself from its competitors to supply its high-performing, low-CO2 concrete for Levi's Stadium, home of the San Francisco 49ers. Central Concrete supplied an estimated 80,000 cubic yards of concrete for the auger cast piles and the overall stadium structure, sidewalks and architectural concrete.

Employees

As of December 31, 2017, we had 675 salaried employees, including executive officers and management, sales, technical, administrative and clerical personnel and 2,395 hourly personnel. The number of employees fluctuates depending on the number and size of projects ongoing at any particular time, which may be impacted by variations in weather conditions throughout the year.

As of December 31, 2017, 1,121 of our employees were represented by labor unions having collective bargaining agreements with us. Generally, these agreements have multi-year terms and expire on a staggered basis between 2018 and 2022. Under these agreements, we pay specified wages to covered employees and in most cases make payments to multi-employer pension plans and employee benefit trusts rather than administering the funds on behalf of these employees. We have not experienced any strikes or significant work stoppages in the past seven years. We believe our relationships with our employees and union representatives are very good.

Training and safety

Our future success will depend, in part, on the extent to which we can attract, retain and motivate qualified employees. We believe that our ability to do so will depend, in part, on providing a work environment that allows employees the opportunity to develop and maximize their capabilities. We require all field employees to attend periodic safety training meetings and all drivers to participate in training seminars. We employ a national safety director whose responsibilities include managing and executing a unified, company-wide safety program. Employee development and safety are criteria used in evaluating performance in our annual incentive plan for certain salaried employees.

Governmental regulation and environmental matters

A wide range of federal, state and local laws, ordinances and regulations apply to our operations, including the following matters:

water usage;
land usage;
street and highway usage;
noise levels; and
health, safety and environmental matters.


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In many instances, we are required to have various certificates, permits, or licenses to conduct our business. Our failure to maintain these required authorizations or to comply with applicable laws or other governmental requirements could result in substantial fines or possible revocation of our authority to conduct some of our operations. Delays in obtaining approvals for the transfer or grant of authorizations, or failures to obtain new authorizations, could impede acquisition efforts.

Environmental laws that impact our operations include those relating to air quality, solid waste management and water quality. These laws are complex and subject to frequent change. They impose strict liability in some cases without regard to negligence or fault. Sanctions for noncompliance may include revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Some environmental laws provide for joint and several strict liability for remediation of spills and releases of hazardous substances. In addition, businesses may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, as well as damage to natural resources. These laws also may expose us to liability for the conduct of, or conditions caused by, others or for acts that complied with all applicable laws when performed.

We have conducted Phase I environmental site assessments, which are non-intrusive investigations conducted to evaluate the potential for significant on-site environmental impacts, on substantially all the real properties we own or lease and have engaged independent environmental consulting firms to complete those assessments. We have not identified any environmental concerns associated with those properties that we believe are likely to have a material adverse effect on our business, financial position, results of operations, or cash flows, but we can provide no assurance material liabilities will not occur. In addition, we can provide no assurance that our compliance with amended, new or more stringent laws, stricter interpretations of existing laws, or the future discovery of environmental conditions will not require additional, material expenditures.

We believe we have all material permits and licenses we need to conduct our operations and are in substantial compliance with applicable regulatory requirements relating to our operations. Our capital expenditures relating to environmental matters were not material in 2017.

Product warranties

Our operations involve providing ready-mixed concrete that must meet building codes or other regulatory requirements and contractual specifications for durability, stress-level capacity, weight-bearing capacity and other characteristics. If we fail or are unable to provide products meeting these requirements and specifications, material claims may arise against us and our reputation could be damaged. In the past, we have had significant claims of this kind asserted against us that we have resolved. There currently are, and we expect that in the future there may be, additional claims of this kind asserted against us. If a significant product-related claim is resolved against us in the future, that resolution may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Insurance

Our employees perform a significant portion of their work moving and storing large quantities of heavy raw materials, driving large mixer and other trucks in heavy traffic conditions and delivering concrete at construction sites or in other areas that may be hazardous. These operating hazards can cause personal injury and loss of life, damage to or destruction of properties and equipment, and environmental damage. We maintain insurance coverage in amounts and against the risks we believe are in accordance with industry practice, but this insurance may not be adequate to cover all losses or liabilities we may incur in our operations, and we may be unable to maintain insurance of the types or at levels we deem necessary or adequate or at rates we consider reasonable.

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 damage, product defects and delay damages that have, or allegedly have, resulted from the conduct of our operations as well as disputes related to prior acquisitions. 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.


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In the future, we may receive funding deficiency demands related to 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, 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 March 1, 2018, 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 unasserted claims in our business, we cannot estimate the amount of any future loss that may be attributable to unasserted product defect claims related to ready-mixed concrete we have delivered prior to December 31, 2017.

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 December 31, 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.

Available Information

Our website address is www.us-concrete.com. We make available on this website under the “Investor Relations” section, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file those materials with, or furnish them to, the SEC.  Alternatively, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.  The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.  The SEC’s website address is www.sec.gov.


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Item 1A.  Risk Factors

The following risk factors represent our current view of the known material risks facing our businesses and are important to understanding our business.  These important factors, among others, sometimes have affected, or in the future could affect, our actual results and could cause our actual consolidated results during 2018 and beyond, to differ materially from those expressed in any forward-looking statements made by us or on our behalf.  In addition, these risks and uncertainties could adversely impact our business, financial condition, results of operations, cash flows, common stock price and the price of our debt.  Further, the risk factors described below are not the only risks we face. Our business, financial condition and results of operations may also be affected by additional risks and uncertainties that are not currently known to us, that we currently consider immaterial, or that are not specific to us. This discussion includes a number of forward-looking statements.  Please see “Cautionary Statement Concerning Forward-Looking Statements” preceding Item 1 of this report.

Business Risks

Our business depends on activity within the construction industry and the economic strength of our principal markets.
We serve substantially all end markets of the construction industry, and our results of operations are directly affected by the level of activity in the construction industry in the geographic markets we serve. Demand for our products, particularly in the commercial and industrial and residential construction markets, could decline if companies and consumers cannot obtain credit for construction projects or if a slow down in economic activity results in delays or cancellations of projects. During 2017, commercial and industrial and residential construction accounted for 56% and 26% of our ready-mixed concrete revenue, respectively. In addition, federal and state budget issues may hurt the funding available for infrastructure spending, particularly street, highway and other public works projects, which accounted for 18% of our revenue in 2017.
We operate principally in the Atlantic Region (New York, New Jersey, Washington, D.C. and Pennsylvania); Texas / Oklahoma; and Northern California with those markets representing approximately 38%, 36% and 25%, respectively, of our consolidated revenue for 2017. Our earnings depend on the economic strength of these markets because of the high cost to transport our products relative to their price. If economic and construction activity diminishes in our principal markets, our results of operations and liquidity could be materially adversely affected.
There are risks related to our internal growth and operating strategy.

Our ability to generate internal growth will be affected by, among other factors, our ability to:

attract new customers;
differentiate ourselves in a competitive market by emphasizing new product development and value added services;
hire and retain employees; and
minimize operating and overhead expenses.

Our inability to achieve internal growth could materially and adversely affect our business, financial condition, results of operations, liquidity and cash flows.

One key component of our operating strategy is to operate our businesses on a decentralized basis, with local or regional management retaining responsibility for day-to-day operations, profitability and the internal growth of the individual business. If we do not implement and maintain proper overall business controls, this decentralized operating strategy could result in inconsistent operating and financial practices and our overall profitability could be adversely affected.


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Our failure to successfully identify, manage and integrate acquisitions could reduce our earnings and slow our growth.

In the past three years, we have completed more than 20 acquisitions. On an ongoing basis, as part of our strategy to pursue growth opportunities, we continue to evaluate strategic acquisition opportunities that have the potential to support and strengthen our business. There is intense competition for acquisition opportunities in our industry. Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions. Our ability to complete acquisitions is dependent upon, among other things, the willingness of acquisition candidates we identify to sell; our ability to obtain financing or capital, if needed, on satisfactory terms; and, in some cases, regulatory approvals. The investigation of acquisition candidates and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we fail to complete any acquisition for any reason, including events beyond our control, the costs incurred up to that point for the proposed acquisition likely would not be recoverable.

Potential acquisition targets may be in geographic regions in which we do not currently operate, which could result in unforeseen operating difficulties and difficulties in coordinating geographically dispersed operations, personnel and facilities. In addition, if we enter into new geographic markets, we may be subject to additional and unfamiliar legal and regulatory requirements. Compliance with regulatory requirements may impose substantial additional obligations on us and our management, cause us to expend additional time and resources in compliance activities and increase our exposure to penalties or fines for non-compliance with such additional legal requirements. Our recently completed acquisitions and any future acquisitions could cause us to become involved in labor, commercial, or regulatory disputes or litigation related to any new enterprises and could require us to invest further in operational, financial and management information systems and to attract, retain, motivate and effectively manage local or regional management and additional employees. Upon completion of an acquisition, key members of the acquired company management team may resign, which could require us to attract and retain new management and could make it difficult to maintain customer relationships. Our inability to effectively manage the integration of our completed and future acquisitions could prevent us from realizing expected rates of return on an acquired business and could have a material and adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

Tightening of mortgage lending or mortgage financing requirements or the recent limitation of the home mortgage interest deduction and the property tax deduction could adversely affect the residential construction market and reduce the demand for new home construction.
Approximately 26% of our revenue for the year ended December 31, 2017 was from residential construction contractors. While mortgage lending conditions have improved and lending volumes have increased since 2010, tightening of mortgage lending or mortgage financing requirements could adversely affect the ability to obtain credit for some borrowers, or reduce the demand for new home construction, which could have a material adverse effect on our business and results of operations. In addition, the recently enacted limitation of the home mortgage interest and property tax deductions could reduce the demand for new home construction, which could have a material adverse effect on our business and results of operations. Another downturn in new home construction could also adversely affect our customers focused in residential construction, possibly resulting in slower payments, higher default rates in our accounts receivable and an overall increase in working capital.
Our ready-mixed concrete segment's revenue attributable to street, highway and other public works projects could be negatively impacted by a decrease or delay in governmental spending.

During the year ended December 31, 2017, approximately 18% of our ready-mixed concrete revenue was from street, highway and other public works projects. Construction activity on streets, highways and other public works projects is directly related to the amount of government funding available for such projects, which is affected by budget constraints currently being experienced by federal, state and local governments. In addition, if the U.S. government budget process results in a prolonged shutdown or reductions in government spending, we may experience delayed orders, delayed payments and declines in revenue, profitability and cash flows. Reduced levels of governmental funding for public works projects or delays in that funding could adversely affect our business, financial condition, results of operations and cash flows.


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Our business is seasonal and subject to adverse weather.

Since our business is primarily conducted outdoors, erratic weather patterns, seasonal changes and other weather-related conditions affect our business. Adverse weather conditions, including hurricanes and tropical storms, cold weather, snow and heavy or sustained rainfall, reduce construction activity, restrict the demand for our products and impede our ability to efficiently deliver concrete. Adverse weather conditions could also increase our costs and reduce our production output as a result of power loss, needed plant and equipment repairs, delays in obtaining permits, time required to remove water from flooded operations and similar events. In addition, severe drought conditions can restrict available water supplies and restrict production. Consequently, these events could adversely affect our business, financial condition, results of operations, liquidity and cash flows.

Our operating results may vary significantly from one reporting period to another and may be adversely affected by the cyclical nature of the markets we serve.

The relative demand for our products is a function of the highly cyclical construction industry. As a result, our revenue may be adversely affected by declines in the construction industry generally and in our regional markets. Our results also may be materially affected by:

the level of commercial and residential construction in our regional markets, including reductions in the demand for new residential housing construction below current or historical levels;
the availability of funds for public or infrastructure construction from local, state and federal sources;
unexpected events that delay or adversely affect our ability to deliver concrete according to our customers’ requirements;
changes in interest rates and lending standards;
changes in the mix of our customers and business, which result in periodic variations in the margins on jobs performed during any particular quarter;
the timing and cost of acquisitions and difficulties or costs encountered when integrating acquisitions;
the budgetary spending patterns of customers;
increases in construction and design costs;
power outages and other unexpected delays;
our ability to control costs and maintain quality;
employment levels; and
regional or general economic conditions.

As a result, our operating results in any particular quarter may not be indicative of the results that you can expect for any other quarter or for the entire year. Furthermore, negative trends in the ready-mixed concrete industry or in our geographic markets could have material adverse effects on our business, financial condition, results of operations, liquidity and cash flows.

Significant downturn in the construction industry may result in an impairment of our goodwill.

We test goodwill for impairment on an annual basis or more frequently if events or circumstances change in a manner that would more likely than not reduce the fair value of a reporting unit below its carrying value. During our annual impairment test, we may identify events or changes in circumstances that could indicate the fair value of one or more of our reporting units is below its carrying value. For example, a significant downturn in the construction industry may have an adverse effect on the fair value of our reporting units. A decrease in the estimated fair value of one or more of our reporting units could result in the recognition of a material, noncash write-down of goodwill.


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We may lose business to competitors who underbid us, and we may be otherwise unable to compete favorably in our highly competitive industry.

Our competitive position in a given market depends largely on the location and operating costs of our plants and prevailing prices in that market. Price is the primary competitive factor among suppliers for small or less complex jobs, principally in residential construction. However, timeliness of delivery and consistency of quality and service, as well as price, are the principal competitive factors among suppliers for large or complex jobs. Concrete manufacturers like us generally obtain customer contracts through local sales and marketing efforts directed at general contractors, developers, governmental agencies and homebuilders. As a result, we depend on local relationships. We generally do not have long-term sales contracts with our customers.

Our competitors range from small, owner-operated private companies to subsidiaries or operating units of large, vertically integrated manufacturers of cement and aggregates. Our vertically integrated competitors generally have greater manufacturing, financial and marketing resources than we have, providing them with competitive advantages. Competitors having lower operating costs than we do or having the financial resources to enable them to accept lower margins than we do may have competitive advantages over us for jobs that are particularly price-sensitive. Competitors having greater financial resources or less financial leverage than we do to invest in new mixer trucks, build plants in new areas, or pay for acquisitions also may have competitive advantages over us.

We depend on third parties for concrete equipment and supplies essential to operate our business.

We rely on third parties to sell or lease property, plant and equipment to us and to provide us with supplies, including cement and other raw materials, necessary for our operations. We cannot assure you that our favorable working relationships with our suppliers will continue in the future. Also, there have historically been periods of supply shortages in the concrete industry, particularly in a strong economy.

If we are unable to purchase or lease necessary properties or equipment, our operations could be severely impacted. If we lose our supply contracts and receive insufficient supplies from third parties to meet our customers’ needs or if our suppliers experience price increases or disruptions to their business, such as labor disputes, supply shortages, or distribution problems, our business, financial condition, results of operations, liquidity and cash flows could be materially and adversely affected.

Residential construction and related demand for ready-mixed concrete has increased between 2012 and 2017. While cement prices increased as a result of this increased demand, cement supplies were at levels that indicated a very low risk of cement shortages in most of our markets. Should demand increase substantially beyond our current expectations, we could experience shortages of cement in future periods, which could adversely affect our operating results by decreasing sales of ready-mixed concrete and increasing our costs of raw materials.

We use large amounts of electricity and diesel fuel that are subject to potential reliability issues, supply constraints, and significant price fluctuation, which could affect our financial position, operating results and liquidity.
In our production and distribution processes, we consume significant amounts of electricity and diesel fuel. The availability and pricing of these resources are subject to market forces that are beyond our control. Furthermore, we are vulnerable to any reliability issues experienced by our suppliers, which also are beyond our control. Our suppliers contract separately for the purchase of such resources and our sources of supply could be interrupted should our suppliers not be able to obtain these materials due to higher demand or other factors that interrupt their availability. Variability in the supply and prices of these resources could materially affect our financial position, results of operations and liquidity from period to period.
We are dependent on information technology to support many facets of our business.
If our information systems are breached, shutdown, destroyed or fail due to cyberattack, unauthorized access, natural disaster or equipment breakdown, by employees, malicious third parties, or other unauthorized persons, our business could be interrupted, proprietary information could be lost, stolen or destroyed, and our reputation could be damaged. We take measures to protect our information systems and data from such occurrences, but as cyberattacks become increasingly sophisticated, there can be no guarantee that our actions, efforts, and security measures adopted will always prevent them. Our business could be negatively affected by any such occurrences.

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The departure of key personnel could disrupt our business.

We depend on the efforts of our officers and, in many cases, on senior management of our businesses. Our success will depend on retaining our officers and senior-level managers. We need to ensure that key personnel are compensated fairly and competitively to reduce the risk of departure of key personnel to our competitors or other industries. To the extent we are unable to attract or retain qualified management personnel, our business, financial condition, results of operations, liquidity and cash flows could be materially and adversely affected. We do not carry key personnel life insurance on any of our employees.

Shortages of qualified employees may harm our business.

Our ability to provide high-quality products and services on a timely basis depends on our success in employing an adequate number of skilled plant managers, technicians and drivers. Like many of our competitors, we experience shortages of qualified personnel from time to time. We may not be able to maintain an adequate skilled labor force necessary to operate efficiently and to support our growth strategy, and our labor expenses may increase as a result of a shortage in the supply of skilled personnel.

Collective bargaining agreements, work stoppages, and other labor relations matters may result in increases in our operating costs, disruptions in our business and decreases in our earnings.

As of December 31, 2017, approximately 36.5% of our employees were covered by collective bargaining agreements, which expire between 2018 and 2022. Our inability to negotiate acceptable new contracts or extensions of existing contracts with these unions could cause work stoppages by the affected employees. In addition, any new contracts or extensions could result in increased operating costs attributable to both union and nonunion employees. If any such work stoppages were to occur, or if other of our employees were to become represented by a union, we could experience a significant disruption of our operations and higher ongoing labor costs, which could materially and adversely affect our business, financial condition, results of operations, liquidity and cash flows. Also, labor relations matters affecting our suppliers of cement and aggregates could adversely impact our business from time to time.

Participation in multi-employer defined benefit plans may impact our financial condition, results of operations and cash flows.

We contribute to 16 multi-employer defined benefit plans, which are subject to the requirements of the Pension Protection Act of 2006 (the “PPA”). For multi-employer defined benefit plans, the PPA established new funding requirements or rehabilitation requirements, additional funding rules for plans that are in endangered or critical status and enhanced disclosure requirements to participants regarding a plan’s funding status. The Worker, Retiree and Employer Recovery Act of 2008 (the “WRERA”) provided some funding relief to defined benefit plan sponsors affected by the financial crisis. The WRERA allowed multi-employer plan sponsors to elect to freeze their funded status at the same funding status as the preceding plan year (for example, a calendar year plan that was not in critical or endangered status for 2008 was able to elect to retain that status for 2009) and sponsors of multi-employer plans in endangered or critical status in plan years beginning in 2008 or 2009 were allowed a three-year extension of funding improvement or rehabilitation plans (extending the timeline for these plans to achieve their goals from 10 years to 13 years, or from 15 years to 18 years for seriously endangered plans). A number of the multi-employer pension plans to which we contribute are underfunded and are currently subject to funding improvement or rehabilitation requirements. Additionally, if we were to withdraw partially or completely from any plan that is underfunded, we would be liable for a proportionate share of that plan’s unfunded vested benefits. Based on the information available from plan administrators, we believe that our portion of the contingent liability in the case of a full or partial withdrawal from or termination of several of these plans or the inability of plan sponsors to meet the funding or rehabilitation requirements would be material to our financial condition, results of operations and cash flows.

Our overall profitability is sensitive to price changes and minor variations in sales volumes.

Generally, our customers are price-sensitive. Prices for our products are subject to changes in response to relatively minor fluctuations in supply and demand, general economic conditions and market conditions, all of which are beyond our control. Because of the fixed-cost nature of our business, our overall profitability is sensitive to price changes and minor variations in sales volumes.


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Instability in the financial and credit sectors may impact our business and financial condition in ways that we currently cannot predict.

Adverse or worsening economic trends could have a negative impact on our suppliers and our customers and their financial condition and liquidity, which could cause them to fail to meet their obligations to us and could have a material adverse effect on our revenue, income from operations and cash flows. The uncertainty and volatility of the financial and credit sectors could have further impacts on our business and financial condition that we currently cannot predict or anticipate.

Turmoil in the global financial system could have an impact on our business and our financial condition. Accordingly, our ability to access the capital markets could be restricted or be available only on unfavorable terms. Limited access to the capital markets could adversely impact our ability to take advantage of business opportunities or react to changing economic and business conditions and could adversely impact our ability to execute our long-term growth strategy. Ultimately, we could be required to reduce our future capital expenditures substantially. Such a reduction could have a material adverse effect on our revenue, income from operations and cash flows.

If one or more of the lenders under our asset-based revolving credit facility (the "Revolving Facility"), which provides for aggregate borrowings of up to $350.0 million, subject to the borrowing base, were to become unable or unwilling to perform their obligations under that facility, our borrowing capacity could be reduced. Our inability to borrow additional amounts under our Revolving Facility could limit our ability to fund our future operations and growth.

Governmental regulations, including environmental regulations, may result in increases in our operating costs and capital expenditures and decreases in our earnings.

A wide range of federal, state and local laws, ordinances and regulations apply to our operations, including the following matters:

land usage;
street and highway usage;
noise levels; and
health, safety and environmental matters.

In many instances, we must have various certificates, permits, or licenses in order to conduct our business. Our failure to maintain required certificates, permits, or licenses or to comply with applicable governmental requirements could result in substantial fines or possible revocation of our authority to conduct some of our operations. Delays in obtaining approvals for the transfer or grant of certificates, permits or licenses, or failure to obtain new certificates, permits or licenses, could impede the implementation of any acquisitions.

Governmental requirements that impact our operations include those relating to air quality, solid and hazardous waste management and cleanup and water quality. These requirements are complex and subject to change. Certain laws, such as the Comprehensive Environmental Response, Compensation and Liability Act, can impose strict liability in some cases without regard to negligence or fault, including for the conduct of or conditions caused by others, or for our acts that complied with all applicable requirements when we performed them. Our compliance with amended, new or more stringent requirements, stricter interpretations of existing requirements, or the future discovery of environmental conditions may require us to make unanticipated material expenditures. In addition, we may fail to identify, or obtain indemnification for, environmental liabilities of acquired businesses. We generally do not maintain insurance to cover environmental liabilities.


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Our operations are subject to various hazards that may cause personal injury or property damage and increase our operating costs.

Operating mixer trucks, particularly when loaded, exposes our drivers and others to traffic hazards. Our drivers are subject to the usual hazards associated with providing services on construction sites, while our plant personnel are subject to the hazards associated with moving and storing large quantities of heavy raw materials. Operating hazards can cause personal injury and loss of life, damage to or destruction of property, plant and equipment and environmental damage. Although we conduct training programs designed to reduce these risks, we cannot eliminate these risks. We maintain insurance coverage in amounts we believe are consistent with industry practice; however, this insurance may not be adequate to cover all losses or liabilities we may incur in our operations, and we may not be able to maintain insurance of the types or at levels we deem necessary or adequate, or at rates we consider reasonable. A partially or completely uninsured claim, if successful and of sufficient magnitude, could have a material adverse effect on us.

The insurance policies we maintain are subject to varying levels of deductibles. Losses up to the deductible amounts are accrued based on our estimates of the ultimate liability for claims incurred and an estimate of claims incurred but not reported. If we were to experience insurance claims or costs above our estimates, our business, financial condition, results of operations, liquidity and cash flows might be materially and adversely affected.

There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
    
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002. These provisions provide for the identification of material weaknesses in internal control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls and disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such as growth of the Company or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

If, as a result of deficiencies in our internal controls, we cannot provide reliable financial statements, our business decision process may be adversely affected, our business and operating results could be harmed, investors could lose confidence in our reported financial information, the market price of our securities could decrease, and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected. In addition, failure to maintain effective internal control over our financial reporting could result in investigations or sanctions by regulatory authorities. In addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial statements. Such an occurrence could discourage certain customers or suppliers from doing business with us, result in higher borrowing costs and affect how our stock trades. This could in turn affect our ability to access public debt or equity markets for capital.

The adoption of new accounting standards may affect our financial results.

The accounting standards we apply in preparing our financial statements are reviewed by regulatory bodies and are changed from time to time. New or revised accounting standards could, either positively or negatively, affect results reported for periods after adoption of the standards as compared to the prior periods, or require retrospective application changing results reported for prior periods.


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The Sarbanes-Oxley Act of 2002 and other related rules and regulations, have increased the scope, complexity and cost of corporate governance. Reports from the Public Company Accounting Oversight Board’s (“PCAOB”) inspections of public accounting firms continue to outline findings and recommendations which could require these firms to perform additional work as part of their financial statement audits. The Company’s costs to respond to these additional requirements may increase.

Recently enacted U.S. tax legislation may adversely affect our business, results of operations, financial condition and cash flows.

On December 22, 2017, the President signed into law Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act, following its passage by the United States Congress. The Tax Cuts and Jobs Act makes significant changes to U.S. federal income tax laws, including changing the corporate tax rate to a flat 21% rate, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses, and making extensive changes to the U.S. international tax system. We are currently in the process of analyzing the effects of this new legislation on our business, results of operations, financial condition and cash flows. The impact of these new rules is uncertain and could be adverse.

We may incur material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications.

Our operations involve providing products that must meet building code or other regulatory requirements and contractual specifications for durability, stress-level capacity, weight-bearing capacity and other characteristics. If we fail or are unable to provide products meeting these requirements and specifications, material claims may arise against us, and our reputation could be damaged. In the past, we have had significant claims of this kind asserted against us that we have resolved. There currently are claims, and we expect that in the future there will be additional claims, of this kind asserted against us. If a significant product-related claim or claims are resolved against us in the future, that resolution may have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

Some of our plants are susceptible to damage from natural disasters, for which we have a limited amount of insurance; our business and profitability could be adversely affected if the operations of one or more of our facilities were interrupted or shut down as the result of a natural disaster.

We maintain only a limited amount of insurance for natural disasters. A natural disaster or other serious disruption to our facilities due to earthquake, hurricane, fire, flood, severe weather or any other cause could substantially disrupt our operations. In addition, we could incur significantly higher costs during the time it takes us to reopen or replace one or more of our facilities, which may or may not be reimbursed by insurance. The adverse effects of a natural disaster could materially and adversely affect our business, financial condition, results of operations, liquidity and cash flows.

In September 2017, Hurricanes Irma and Maria disrupted our U.S. Virgin Islands operations. Our plants were essentially shut down for several months following the storms and were not fully operational by the end of the year. This disruption negatively impacted our revenue and operating income. In addition, we recognized a $1.1 million non-cash impairment expense related to inventory and property, plant and equipment.


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Increasing insurance claims and expenses could lower our profitability and increase our business risk.

The nature of our business subjects us to product liability, property damage, business interruption, personal injury and workers’ compensation claims from time to time. Increased premiums charged by insurance carriers may further increase our insurance expense as coverage expires or otherwise cause us to raise our self-insured retention. If the number or severity of claims within our self-insured retention increases, we could suffer losses in excess of our reserves. An unusually large liability claim or a string of claims based on a failure repeated throughout our mass production process may exceed our insurance coverage or result in direct damages if we were unable or elected not to insure against certain hazards because of high premiums or other reasons. In addition, the availability of, and our ability to collect on, insurance coverage is often subject to factors beyond our control. Further, allegations relating to workers’ compensation violations may result in investigations by insurance regulatory or other governmental authorities, which investigations, if any, could have a direct or indirect material adverse effect on our ability to pursue certain types of business which, in turn, could have a material adverse effect on our business, financial position, results of operations, liquidity and cash flows.

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations.

As of January 31, 2017, we had $600.0 million aggregate principal amount of outstanding 6.375% Senior Notes due 2024 ("2024 Notes") issued as securities pursuant to the Indenture, dated as of June 7, 2016, among the Company, certain subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (the "Trustee") as supplemented to date (the "Indenture"). We and certain of our subsidiaries are also parties to a 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 and sole lead arranger, that is secured by certain assets of the Company and the guarantors. The Third Loan Agreement provides for aggregate borrowings of up to $350.0 million subject to a borrowing base under the Revolving Facility. As of December 31, 2017, we had $9.0 million of outstanding borrowings under the Revolving Facility.

The negative covenants in the Third Loan Agreement and the Indenture allow us to incur additional indebtedness from other sources in certain circumstances.

As a result of our existing indebtedness and our capacity to incur additional indebtedness, we are, and anticipate continuing to be, a highly leveraged company. A significant portion of our cash flow will be required to pay interest and principal on our outstanding indebtedness, and we may be unable to generate sufficient cash flow from operations, or have future borrowings available under our Revolving Facility, to enable us to repay our indebtedness, including the 2024 Notes, or to fund other liquidity needs. This level of indebtedness could have important consequences, including the following:

it requires us to use a significant percentage of our cash flow from operations for debt service and the repayment of our indebtedness, including indebtedness we may incur in the future, and such cash flow may not be available for other purposes;
it limits our ability to borrow money or sell stock to fund our working capital, capital expenditures, acquisitions and debt service requirements;
our interest expense could increase if interest rates in general increase, because a portion of our indebtedness bears interest at floating rates;
it may limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities;
we are more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;
it may make us more vulnerable to a downturn in our business or the economy;
it may increase our cost of borrowing;
it may restrict us from exploiting business opportunities;
debt service requirements could make it more difficult for us to make payments on the 2024 Notes and our other indebtedness; and
there would be a material adverse effect on our business and financial condition, if we were unable to service our indebtedness or obtain additional financing, as needed.


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We may not be able to generate sufficient cash flows to meet our debt service obligations and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash from our operations in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Our business may not generate sufficient cash flow from operations and future sources of capital under the Revolving Facility otherwise may not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. If we complete an acquisition, our debt service requirements could increase. We may need to refinance or restructure all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness, including the Revolving Facility and the 2024 Notes, on commercially reasonable terms, or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity, reducing or delaying capital expenditures, strategic acquisitions, investments and alliances or restructuring or refinancing our indebtedness. We may not be able to effect such actions, if necessary, on commercially reasonable terms, or at all.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. The Third Loan Agreement and the Indenture restrict our ability to conduct asset sales and to use the proceeds from asset sales. We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair, and any proceeds that we do receive may not be adequate to meet any debt service obligations then due. If we cannot meet our debt service obligations, the holders of our debt may accelerate our debt and, to the extent such debt is secured, foreclose on our assets. In such an event, we may not have sufficient assets to repay all of our debt.

We may still be able to incur significantly more debt, including secured debt. This could intensify already-existing risks related to our indebtedness.

The terms of the Indenture and the Third Loan Agreement contain restrictions on our and the guarantors’ ability to incur additional indebtedness. However, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Accordingly, we or the guarantors could incur significant additional indebtedness in the future, much of which could constitute secured, senior, or pari passu indebtedness. As of December 31, 2017, our Revolving Facility provided for unused borrowing capacity of up to $206.4 million (after taking into account $14.3 million of undrawn letters of credit, $5.2 million of other availability reserves and $9.0 million of outstanding borrowings under the Revolving Facility).

The Indenture permits us to incur certain additional secured debt, allows our non-guarantor subsidiaries to incur additional debt and does not prevent us from incurring other liabilities that do not constitute indebtedness as defined in the Indenture.

The Indenture also, under certain circumstances, allows us to designate some of our restricted subsidiaries as unrestricted subsidiaries. Those unrestricted subsidiaries will not be subject to many of the restrictive covenants in the Indenture, and, therefore will be able to incur indebtedness beyond the limitations specified in the Indenture and engage in other activities in which restricted subsidiaries may not engage. If new debt is added to our currently anticipated debt levels, the related risks that we and the guarantors now face could intensify.

We may also consider investments in joint ventures or acquisitions, which may increase our indebtedness. Moreover, although the Third Loan Agreement and the Indenture contain restrictions on our ability to make restricted payments, including the declaration and payment of dividends, we will be able to make substantial restricted payments under certain circumstances.


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The amount of borrowings permitted under our Revolving Facility may fluctuate significantly, which may adversely affect our liquidity, results of operations and financial position.

The amount of borrowings permitted at any time under our Revolving Facility is limited to a periodic borrowing base valuation of, among other things, our eligible accounts receivable, inventory and mixer trucks and, under certain circumstances, our machinery. As a result, our access to credit under our Revolving Facility is potentially subject to significant fluctuations depending on the value of the borrowing base eligible assets as of any measurement date, as well as certain discretionary rights of the administrative agent of our Revolving Facility in respect of the calculation of such borrowing base value. Our inability to borrow at current advance rates or at all under, or the early termination of, our Revolving Facility may adversely affect our liquidity, results of operations and financial position.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our Revolving Facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness could increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

Repayment of our debt is dependent on cash flow generated by our subsidiaries.

We are a holding company and substantially all of our tangible assets are owned by our subsidiaries. As such, repayment of our indebtedness, to a certain degree, is dependent on the generation of cash flows by our subsidiaries (including any subsidiaries that are not guarantors) and their ability to make such cash available to us, by dividend, loan, debt repayment, or otherwise. Our subsidiaries may not be able to, or be permitted to, make distributions or other payments to enable us to make payments in respect of our indebtedness. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the terms of the Indenture and the Third Loan Agreement limit the ability of certain of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments, these limitations are subject to important qualifications and exceptions. In the event that we do not receive distributions or other payments from our subsidiaries, we may be unable to make required payments on our indebtedness.

We may be unable to refinance our indebtedness.

We may need to refinance all or a portion of our indebtedness, including the Revolving Facility and the 2024 Notes, before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all or that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the 2024 Notes. Credit ratings are not recommendations to purchase, hold or sell the 2024 Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure of the 2024 Notes.


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Our debt agreements may restrict our ability to operate our business and to pursue our business strategies.

The Third Loan Agreement and the Indenture impose, and future financing agreements are likely to impose, operating and financial restrictions on our activities. These restrictions require us to comply with or maintain certain financial tests and limit or prohibit our ability to, among other things:

incur additional indebtedness 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;
prepay, redeem, or repurchase certain debt;
sell assets and issue capital stock of our restricted subsidiaries;
incur liens;
enter into agreements restricting our restricted subsidiaries’ ability to pay dividends, make loans to other U.S. Concrete entities or restrict the ability to provide liens;
enter into transactions with affiliates;
consolidate, merge, or sell all or substantially all of our assets; and
with respect to the Indenture, designate our subsidiaries as unrestricted subsidiaries.

The restrictive covenants in the Third Loan Agreement also require us to maintain specified financial ratios and satisfy other financial condition tests in certain circumstances.

These restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities.

Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing. We cannot assure you that we will be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements or that we will be able to refinance our debt on terms acceptable to us, or at all. In addition, an event of default under the Third Loan Agreement would permit the Lenders to terminate all commitments to extend further credit under the Revolving Facility. Furthermore, if we were unable to repay the amounts due and payable under our Revolving Facility, those lenders could proceed against the collateral granted to them to secure that indebtedness.

As a result of these restrictions, we may be:

limited in how we conduct our business;
unable to raise additional debt or equity financing to operate during general economic or business downturns; or
unable to compete effectively or to take advantage of new business opportunities.

These restrictions, along with restrictions that may be contained in agreements evidencing or governing future indebtedness, may affect our ability to grow in accordance with our growth strategy.


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Our failure to comply with the covenants contained in the Third Loan Agreement, the Indenture or any agreement under which we have incurred other indebtedness, including as a result of events beyond our control, could result in an event of default which could materially and adversely affect our operating results and our financial condition.

The Third Loan Agreement contains certain covenants, including compliance with a fixed charge coverage ratio if our Availability (as defined in the Third Loan Agreement) falls below a certain threshold. In addition, the Revolving Facility requires us to comply with various operational and other covenants. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operationsunder the heading “Liquidity and Capital Resources for a discussion of the financial covenants contained in the Third Loan Agreement. Agreements governing our other indebtedness may also contain various covenants. If there were an event of default under any of our debt instruments that was not cured or waived, the holders of the defaulted debt could cause all amounts outstanding with respect to the debt to be due and payable immediately. Our assets and cash flow may not be sufficient to fully repay all obligations under our outstanding debt instruments, either upon maturity or if accelerated upon an event of default. If we were required to repurchase any of our debt securities upon a change of control, we may not be able to refinance or restructure the payments on those debt securities. If, as or when required, we are unable to repay, refinance or restructure our indebtedness under, or amend the covenants contained in, the Third Loan Agreement, the Lenders could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against the assets securing their borrowings. Any such actions could force us into bankruptcy or liquidation.

The Third Loan Agreement provides the Lenders considerable discretion to impose reserves or availability blocks or reduce the advance rates used to calculate the value of our borrowing base, which could materially impair the amount of borrowings that would otherwise be available to us. There can be no assurance that the Lenders will not take such actions during the term of that facility and, further, were they to do so, the resulting impact of such actions could materially and adversely impair our ability to make interest payments on the 2024 Notes, among other matters.

Our November 2017 acquisition of Polaris Materials Corporation exposes us to legal, political and economic risks in Canada as well as currency exchange rate fluctuations that could negatively impact our business and financial results.

International business is subject to a variety of risks, including:

imposition of governmental controls and changes in laws, regulations or policies;
currency exchange rate fluctuations, devaluations and other conversion restrictions;
uncertain and changing tax rules, regulations and rates;
logistical challenges;
changes in regulatory practices, including tariffs and taxes;
changes in labor conditions;
general economic, political and financial conditions in foreign markets; and
exposure to civil or criminal liability under the U.S. Foreign Corrupt Practices Act (“FCPA”), the Canadian Corruption of Foreign Public Officials Act, anti-boycott rules, trade and export control regulations, as well as other international regulations.

U.S. international trade policy is uncertain under the new administration, including, for example, the government’s decision to renegotiate the North American Free Trade Agreement, which could cause an increase in customs duties that, in turn, could adversely affect intercompany transactions among operating subsidiaries in Canada and the U.S. and increase transaction costs with third-party suppliers and customers.


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Common Stock Investment Risks

We do not intend to pay dividends on our common stock.

We have not declared or paid any dividends on our common stock to date, and we do not anticipate paying any dividends on our common stock in the foreseeable future. We intend to reinvest all future earnings in the development and growth of our business. In addition, our Third Loan Agreement and the Indenture limit our ability to pay dividends, and future loan agreements may also prohibit the payment of dividends. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements, business opportunities, contractual restrictions and other factors deemed relevant. To the extent we do not pay dividends on our common stock, investors must look solely to stock appreciation for a return on their investment in our common stock.

Our stock price may be volatile.

In recent years, the stock market has experienced significant price and volume fluctuations that are often unrelated to the operating performance of specific companies. The market price of our common stock may fluctuate based on a number of factors, including:

our operating performance and the performance of other similar companies;
news announcements relating to us or our competitors, the job market in general and unemployment data;
changes in earnings estimates or recommendations by research analysts;
changes in general economic conditions;
changes in interest rates and inflation;
the arrival or departure of key personnel;
acquisitions or other transactions involving us or our competitors; and
other developments affecting us, our industry or our competitors.

Our amended and restated certificate of incorporation, third amended and restated bylaws and Delaware law contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock.

Provisions in our amended and restated certificate of incorporation, our third amended and restated bylaws and applicable provisions of the General Corporation Law of the State of Delaware may make it more difficult or expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our stockholders. These provisions could discourage potential takeover attempts and could adversely affect the market price of our common stock.  In addition, Delaware law prohibits us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our common stock cannot acquire us for a period of three years from the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by our board of directors.
    
Item 1B. Unresolved Staff Comments

None.


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Item 2.  Properties

Facilities

Ready-mixed concrete

The table below lists our concrete plant facilities as of December 31, 2017.  We believe these plants are sufficient for our current needs. The volumes shown are the volumes each location produced in 2017.

 
 
Owned
 
Leased
 
 
 
 Volume
(in thousands
of cubic yards)
Locations
 
Fixed Standard
 
Volumetric
 
Portable
 
Fixed Standard
 
Portable
 
Total
 
Northern California
 
20

 

 
3

 
2

 

 
25

 
2,068

New Jersey / New York / Washington, D.C./ Pennsylvania
 
45

 

 
1

 
3

 

 
49

 
3,021

Texas / Oklahoma
 
76

 
17

 
7

 

 
1

 
101

 
3,838

U.S. Virgin Islands
 
3

 

 

 
1

 

 
4

 
57

Total Ready-Mixed Concrete Segment(1)
 
144

 
17

 
11

 
6

 
1

 
179

 
8,984


(1) During the fourth quarter of 2017, we took six idle ready-mixed concrete plants out of service and removed them from the count.
 
Aggregate products

The table below lists our aggregate facilities as of December 31, 2017.  The volumes shown are the tons we produced in 2017.

Locations
 
Owned
 
Leased
 
Total
 
Volume
(in thousands of tons)
New Jersey
 
4

 
1

 
5

 
2,604

Texas / Oklahoma
 
3

 
7

 
10

 
2,974

British Columbia, Canada
 

 
1

 
1

 
485

U.S. Virgin Islands
 
2

 

 
2

 
229

Total Aggregate Products Segment
 
9

 
9

 
18

 
6,292


We produce crushed stone aggregates, sand and gravel, from 18 aggregates facilities located in New Jersey, Texas, Oklahoma, Canada and the U.S. Virgin Islands. Not included in the above table are two owned quarries that are leased to third parties who remit a royalty to us based on the volume of product they produce and sell from the quarry during the term of the lease. We sell our aggregates for use in commercial, industrial and public works projects or consume them internally in the production of ready-mixed concrete in the markets they serve.  We produced approximately 6.3 million tons of aggregates in 2017, with Texas / Oklahoma representing 47%, New Jersey representing 41%, British Columbia, Canada representing 8% and the U.S. Virgin Islands representing 4% of that total production. The amount shown for the Canadian quarry represents the amount produced beginning November 17, 2017, when we acquired Polaris Materials Corporation. We believe our aggregates reserves provide us with additional raw materials sourcing flexibility and supply availability.


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Other

The table below lists our other facilities as of December 31, 2017

Function
 
Location
 
Owned
 
Leased
Lime slurry facility
 
Texas
 
2

 

Concrete block plant
 
U.S. Virgin Islands
 
1

 

Aggregates distribution terminal
 
New York
 

 
5

Aggregates distribution terminal
 
California
 

 
2

Recycled aggregates facility
 
New York
 

 
1

Marine terminal/sales yard
 
U.S. Virgin Islands
 

 
1


Equipment

As of December 31, 2017, we had a fleet of more than 1,640 owned and leased drum mixer trucks, 130 owned volumetric mixer trucks and more than 1,450 other rolling stock and vehicles. Our own mechanics service most of the fleet. We believe these vehicles generally are well maintained and are adequate for our operations. The average age of our owned drum mixer trucks is approximately eight years. The average age of our volumetric mixer trucks is approximately eight years.

For additional information related to our properties, see Item 1. "Business" of this report.

Item 3.  Legal Proceedings
 
The information set forth under the heading “Legal Proceedings” in Note 21, “Commitments and Contingencies,” to our consolidated financial statements included in this report is incorporated by reference into this Item 3. 


Item 4.  Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95.1 to this annual report.



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Table of Contents

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the Nasdaq Capital Market under the ticker symbol “USCR.”

As of February 22, 2018, we had 131 holders of record of our common stock and approximately 29,300 beneficial holders of our common stock. 

The following table sets forth, for the periods indicated, the range of high and low intraday sales prices for our common stock:

 
 
2017
 
2016
 
 
High
 
Low
 
High
 
Low
First Quarter
 
$
71.35

 
$
57.95

 
$
63.67

 
$
40.42

Second Quarter
 
$
80.45

 
$
60.25

 
$
69.66

 
$
54.08

Third Quarter
 
$
83.85

 
$
69.05

 
$
67.61

 
$
45.60

Fourth Quarter
 
$
86.35

 
$
71.00

 
$
68.05

 
$
42.82


We have not declared or paid any dividends since our formation and currently do not intend to pay dividends for the foreseeable future. Additional information concerning restrictions on our payment of cash dividends may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in Item 7 of this report and Note 9, "Debt," to our consolidated financial statements included in this report, under the sub-headings "Senior Secured Credit Facility" and "Senior Unsecured Notes due 2024."

Issuer Purchases of Equity Securities

The following table provides information with respect to our purchases of shares of our common stock during the three month period ended December 31, 2017:

 
 
Total number of shares purchased(1)
 
Average price paid per share
 
Total number of shares purchased as part of publicly announced plans or programs(2)
 
Approximate dollar value of shares that may yet be purchased under the plans or programs
(in thousands)(2)
October 1, 2017 to October 31, 2017
 
318

 
$
78.76

 

 
$
50,000

November 1, 2017 to November 30, 2017
 

 

 

 
50,000

December 1, 2017 to December 31, 2017
 
55

 
81.15

 

 
50,000

Total
 
373

 
$
79.11

 

 
$
50,000


(1)
The total number of shares purchased includes 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.
(2)
On March 1, 2017, our Board approved a share repurchase program that allows us to repurchase up to $50.0 million of our common stock until the earlier of March 31, 2020, or a determination by the Board to discontinue the program. The program does not obligate us to acquire any specific number of shares.

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Performance Graph
    
The following performance graph compares the cumulative total return to holders of our common stock since the last trading day of 2012 with the cumulative total returns of the Russell 2000 index and a peer group selected by us (the "Peer Group"). The companies included in the Peer Group are Cemex, S.A.B. de C.V., Eagle Materials Inc., Martin Marietta Materials Inc., Summit Materials, Inc. and Vulcan Materials Company. The graph assumes that the value of the investment in our common stock, the Russell 2000 index and each peer group was $100 on December 31, 2012 and is calculated assuming the quarterly reinvestment of dividends, as applicable.

Comparison of 5 Year Cumulative Total Return
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12099691&doc=20
 
12/31/12
 
12/31/13
 
12/31/14
 
12/31/15
 
12/31/16
 
12/31/17
U.S. Concrete, Inc.
$
100.00

 
$
250.06

 
$
314.36

 
$
581.88

 
$
723.76

 
$
924.31

Russell 2000
$
100.00

 
$
138.82

 
$
145.62

 
$
139.19

 
$
168.85

 
$
193.58

Peer Group
$
100.00

 
$
119.80

 
$
119.59

 
$
117.93

 
$
172.61

 
$
179.40


The stock price performance included in this graph is not necessarily indicative of future stock price performance.

The above performance graph and related information shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.


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Table of Contents

Item 6.  Selected Financial Data

The following table provides selected consolidated financial data for the periods shown. The data has been derived from our audited consolidated financial statements. Our historical results are not necessarily indicative of future performance or results of operations. Our results include the impacts of business combinations in each of the five years shown below. All of the data in the table should be read in conjunction with Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included in this Annual Report on Form 10-K.

 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
(in thousands, except per share data)
FOR THE YEAR
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
1,336,039

 
$
1,168,160

 
$
974,717

 
$
703,714

 
$
598,155

Income (loss) from continuing operations attributable to U.S. Concrete
 
$
26,142

 
$
9,578

 
$
(5,094
)
 
$
21,575

 
$
(18,273
)
Loss from discontinued operations, net of taxes
 
$
(630
)
 
$
(717
)
 
$
(320
)
 
$
(993
)
 
$
(1,856
)
Net income (loss) attributable to U.S. Concrete
 
$
25,512

 
$
8,861

 
$
(5,414
)
 
$
20,582

 
$
(20,129
)
 
 
 
 
 
 
 
 
 
 
 
PER SHARE INFORMATION
 
 
 
 
 
 
 
 
 
 
Basic income (loss) per share attributable to U.S. Concrete:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
1.64

 
$
0.63

 
$
(0.36
)
 
$
1.59

 
$
(1.42
)
Loss from discontinued operations, net of taxes
 
(0.04
)
 
(0.04
)
 
(0.02
)
 
(0.07
)
 
(0.14
)
Net income (loss) per share attributable to U.S. Concrete - basic
 
$
1.60

 
$
0.59

 
$
(0.38
)
 
$
(1.52
)
 
$
(1.56
)
 
 
 
 
 
 
 
 
 
 
 
Diluted income (loss) per share attributable to U.S. Concrete:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
1.57

 
$
0.59

 
$
(0.36
)
 
$
1.55

 
$
(1.42
)
Loss from discontinued operations, net of taxes
 
(0.04
)
 
(0.04
)
 
(0.02
)
 
(0.07
)
 
(0.14
)
Net income (loss) per share attributable to U.S. Concrete - diluted
 
$
1.53

 
$
0.55

 
$
(0.38
)
 
$
1.48

 
$
(1.56
)
 
 
 
 
 
 
 
 
 
 
 
AS OF END OF YEAR
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,276,134

 
$
945,402

 
$
681,697

 
$
453,746

 
$
406,156

Total debt
 
$
693,336

 
$
449,298

 
$
275,600

 
$
213,655

 
$
206,466





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Table of Contents

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion, which presents our results, should be read in conjunction with the accompanying consolidated financial statements and notes thereto, along with Item 1A. Risk Factors and "Cautionary Statement Concerning Forward-Looking Statements" preceding Item 1 of this report. Unless otherwise indicated, all references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations related to earnings (loss) per share ("EPS") are on a diluted basis.

Our Business

We are a leading producer of ready-mixed concrete in select geographic markets in the United States. We operate our business through two primary segments, which are ready-mixed concrete and aggregate products. The results of operations for our Pennsylvania, California and Arizona precast operations, which were sold in prior years, have been included in discontinued operations for the periods presented.

Ready-mixed concrete. Our ready-mixed concrete segment (which represented 90.8% of our revenue for the year ended December 31, 2017) engages principally in the formulation, production and delivery of ready-mixed concrete to our customers’ job sites. We provide our ready-mixed concrete from our operations in Texas, New Jersey, New York, Washington, D.C., Pennsylvania, Northern California, Oklahoma and the U.S. Virgin Islands. Ready-mixed concrete is a highly versatile construction material that results from combining coarse and fine aggregates, such as gravel, crushed stone and sand, with water, various chemical admixtures and cement. We also provide services intended to reduce our customers’ overall construction costs by lowering the installed, or “in-place,” cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control and customized delivery programs to meet our customers’ needs.

Aggregate products. Our aggregate products segment (which represented 3.7% of our revenue for the year ended December 31, 2017, excluding $40.9 million of intersegment sales) produces crushed stone, sand and gravel from 18 aggregates facilities located in New Jersey, Texas, Oklahoma, the U.S. Virgin Islands, and British Columbia, Canada. This includes the November 2017, acquisition of Polaris Materials Corporation ("Polaris"), located in Vancouver, British Columbia, Canada, which enhances our vertical integration and access to aggregates in our West Coast markets. We sell aggregates for use in commercial, industrial and public works projects, as well as consume them internally in the production of ready-mixed concrete. We produced approximately 6.3 million tons of aggregates during the year ended December 31, 2017, with Texas / Oklahoma representing 47%, New Jersey representing 41%, British Columbia, Canada representing 8% and the U.S. Virgin Islands representing 4% of the total production. We consumed 54% of our aggregate production internally and sold 46% to third-party customers in 2017. We believe our aggregates reserves provide us with additional raw materials sourcing flexibility and supply availability. In addition, we own sand pit operations in Michigan and one quarry in west Texas, which we lease to third parties and receive a royalty based on the volumes produced and sold during the terms of the leases.

Overview

The geographic markets for our products are generally local, except for our newly acquired Canadian aggregate products operation that primarily serves markets in California. 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 those types of projects.

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

For the year ended December 31, 2017, our ready-mixed concrete sales volume increased 10.6% to 9.0 million cubic yards from 8.1 million cubic yards for the year ended December 31, 2016. Sales volume for the year ended December 31, 2017 was up in all of our major metropolitan markets as compared to the year ended December 31, 2016, primarily due to increased construction activity and acquisitions completed in 2017 and 2016.

Benefiting from increased volume both organically and through our recent acquisitions and increased average selling price, total ready-mixed concrete revenue in 2017 rose year-over-year in all of our major markets. Our consolidated average ready-mixed concrete sales price rose 3.5% from 2016 to 2017, resulting in the 7th consecutive year of increased average selling prices.

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Table of Contents


We were able to leverage efficiencies to drive incremental margins on higher volume. However, we also experienced higher cement and aggregate costs during 2017, which partially offset these improvements. We continue to closely monitor our operating costs and capital expenditures.

In September 2017, Hurricanes Irma and Maria made landfall in the U.S. Virgin Islands. These storms resulted in extensive damage, flooding and power outages throughout the islands. The islands had limited power through the end of the year. There continues to be uncertainty as to the magnitude of the ongoing impact to the business associated with these storms, including the potential, if any, for insurance recoveries. We recorded impairments related to inventory and property, plant and equipment of approximately $1.1 million in 2017. In addition, during the fourth quarter of 2017, based on the uncertainty of the timing of the business recovery and its impact on our projected cash flows, we recorded a non-cash goodwill impairment charge of $5.8 million, representing a full impairment of the goodwill related to our U.S. Virgin Island operations.

Basis of Presentation
 
Our chief operating decision maker reviews operating results based on our two reportable segments, which are ready-mixed concrete and aggregates products, and 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), depreciation, depletion and amortization, net interest expense, loss on extinguishment of debt, derivative income (loss), the non-cash change in value of contingent consideration, impairment of goodwill and other assets, hurricane-related losses, quarry dredge costs for a specific event, purchase accounting adjustments for inventory, and foreign currency losses resulting from the Polaris acquisition. Additionally, we adjust Adjusted EBITDA for items similar to certain of those used in calculating the Company's compliance with debt covenants. The additional items that are adjusted to determine our Adjusted EBITDA are non-cash stock compensation expense, corporate officer transition expenses and acquisition-related professional fees.

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 accounting principles generally accepted in the United States of America ("U.S. GAAP"), and is not a measure of our cash flows or ability to fund our cash needs. Our measurement 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.  See Note 17, "Segment Information," to our consolidated financial statements included in this report for additional information regarding our segments and the reconciliation of Adjusted EBITDA to income (loss) from continuing operations.


Acquisitions

We completed eight acquisitions in 2017, which expanded our ready-mixed concrete operations and facilitated vertical integration in our West Coast market. For additional information on our acquisitions see Note 2, "Business Combinations" to our consolidated financial statements included in this report.


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Table of Contents

Results of Operations

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

The following table sets forth selected statement of operations information and that information as a percentage of revenue for each of the periods indicated, as well as the increase or decrease from the prior year in dollars and percent.
 
 
 
(amounts in thousands, except selling prices and percentages)
 
 
Year Ended December 31,
 
Increase / (Decrease)
 
 
2017
 
2016
 
$
 
%(1)
Revenue
 
$
1,336,039

 
100.0
 %
 
$
1,168,160

 
100.0
 %
 
$
167,879

 
14.4
 %
Cost of goods sold before depreciation, depletion and amortization
 
1,056,605

 
79.1

 
922,338

 
79.0

 
134,267

 
14.6

Selling, general and administrative expenses
 
119,234

 
8.9

 
100,019

 
8.6

 
19,215

 
19.2

Depreciation, depletion and amortization
 
67,798

 
5.1

 
54,852

 
4.7

 
12,946

 
23.6

Change in value of contingent consideration
 
7,910

 
0.6

 
5,225

 
0.4

 
2,685

 
51.4

Impairment of goodwill and other assets
 
6,238

 
0.5

 

 

 
6,238

 
NM

Gain on sale of assets, net
 
(694
)
 
(0.1
)
 
(1,416
)
 
(0.1
)
 
(722
)
 
(51.0
)
Operating income
 
78,948

 
5.9

 
87,142

 
7.5

 
(8,194
)
 
(9.4
)
Interest expense, net
 
41,957

 
3.1

 
27,709

 
2.4

 
14,248

 
51.4

Derivative loss
 
791

 
0.1

 
19,938

 
1.7

 
(19,147
)
 
(96.0
)
Loss on extinguishment of debt
 
60

 

 
12,003

 
1.0

 
(11,943
)
 
NM
Other income, net
 
(2,562
)
 
(0.2
)
 
(3,237
)
 
(0.3
)
 
(675
)
 
(20.9
)
Income from continuing operations before income taxes
 
38,702

 
2.9

 
30,729

 
2.6

 
7,973

 
25.9

Income tax expense
 
12,436

 
0.9

 
21,151

 
1.8

 
(8,715
)
 
(41.2
)
Income from continuing operations
 
26,266

 
2.0

 
9,578

 
0.8

 
16,688

 
174.2
Loss from discontinued operations, net of taxes
 
(630
)
 

 
(717
)
 
(0.1
)
 
(87
)
 
(12.1
)
Net income
 
25,636

 
1.9

 
8,861

 
0.8

 
16,775

 
189.3

Less: Net income attributable to non-controlling interest
 
(124
)
 

 

 

 
(124
)
 
NM

Net income attributable to U.S. Concrete
 
$
25,512

 
1.9
 %
 
$
8,861

 
0.8
 %
 
$
16,651

 
187.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Ready-mixed Concrete Data:
 
 

 
 

 
 

 
 

 
 
 
 

Average selling price per cubic yard
 
$
134.86

 
 
 
$
130.35

 
 

 
$
4.51

 
3.5
 %
Sales volume in cubic yards
 
8,984

 
 
 
8,122

 
 

 
862

 
10.6
 %
Aggregate Products Data:
 
 

 
 
 
 

 
 

 
 
 
 

       Average selling price per ton
 
$
12.92

 
 
 
$
11.97

 
 

 
$
0.95

 
7.9
 %
       Sales volume in tons
 
6,197

 
 

 
5,563

 
 

 
634

 
11.4
 %

(1) "NM" is defined as "not meaningful."


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Revenue. Our 2017 total revenue grew by $167.9 million, or 14.4%, primarily due to increased ready-mixed concrete sales both organically and through recent acquisitions. We estimate that acquisitions completed after January 1, 2016 accounted for approximately $101.8 million, or 60.6%, of our 2017 revenue increase. All of our major markets experienced higher total revenue for the year ended December 31, 2017, compared to the prior year period. Our business is seasonal and subject to adverse weather; our 2017 results were negatively impacted by inclement weather in various regions and during various periods of the year, including Hurricanes Irma and Maria, which hit our U.S. Virgin Islands ("USVI") operations in September 2017. Because of these hurricanes, our USVI operations were essentially shut down for several months following the storms and were not fully operational by the end of the year.

Ready-mixed concrete sales grew by $152.0 million, or 14.3%, driven by a 10.6% increase in sales volume and a 3.5% increase in our average selling price. Sales of aggregate products rose to $90.7 million in 2017 from $76.3 million in 2016, an increase of $14.4 million, or 18.8%, due to an 11.4% increase in volume and 7.9% increase in average selling price. Other product revenues and eliminations, which includes aggregates distribution, building materials, lime slurry, hauling business, aggregate recycling, concrete block and eliminations of our intersegment sales, increased by $1.5 million, or 4.9%, from $30.8 million in 2016, to $32.3 million in 2017, primarily due to increased aggregates distribution sales.

Cost of goods sold before depreciation, depletion and amortization ("DD&A"). Cost of goods sold before DD&A increased $134.3 million, or 14.6%, in 2017 primarily attributable to the increase in revenues. The volume growth in our ready-mixed concrete segment resulted in higher material costs, delivery costs and plant variable costs, which includes primarily labor and benefits, utilities and repairs and maintenance. Our fixed costs increased over the comparable prior year period primarily due to higher costs to operate our facilities, as well as additional locations and trucks than in the previous year. Cost of goods sold before DD&A also increased in 2017 due to higher self-insurance reserves for certain workers’ compensation and automobile liability losses, the margin impact of certain purchase accounting adjustments related to inventory and quarry dredge costs for a specific event. Cost of goods sold before DD&A includes the impact of costs in our USVI operations for September through December of 2017, including an impairment of inventory, with significantly lower corresponding revenues due to Hurricanes Irma and Maria. As a percentage of revenue, cost of goods sold before DD&A increased slightly.

Selling, general and administrative ("SG&A") expenses.  SG&A expenses for 2017 increased $19.2 million, or 19.2%, in 2017.  The increase resulted from various factors, including: acquisition related professional fees, which increased $7.9 million; non-cash stock compensation expense, which increased $1.2 million due to the fair value of awards granted in 2017; higher personnel expenses, including certain officer transition expenses; and other general and administrative expenses by our corporate and regional offices to support our growth initiatives and acquisition strategy. As a percentage of total revenue, SG&A expenses increased from 8.6% in 2016 to 8.9% in 2017.

Depreciation, depletion and amortization.  DD&A expense for 2017 increased $12.9 million, or 23.6%, primarily related to depreciation on additional plants, equipment and mixer trucks purchased to service increased demand or acquired through recent acquisitions as well as incremental intangible amortization expense of $4.2 million related to our acquisitions.

Change in value of contingent consideration. We recorded non-cash expense of $7.9 million for the revaluation of contingent consideration in 2017 compared to $5.2 million in 2016. These non-cash expenses were related to the fair value changes in contingent consideration associated with certain acquisitions. The key inputs in determining the fair value of our contingent consideration of $61.8 million at December 31, 2017 included discount rates ranging from 3.70% to 15.75% and management's estimates of future sales volumes, amount of reserves permitted and EBITDA. Changes in these inputs impact the valuation of our contingent consideration and result in gain or loss in each reporting period. The non-cash expense from fair value changes in contingent consideration in 2017 was primarily due to the changes in the probability-weighted assumptions related to the achievement of sales volumes and EBITDA thresholds. The non-cash expense from fair value changes in contingent consideration in 2016 was primarily due to the passage of time as well as changes in the probability-weighted assumptions related to the achievement of sales volumes.

Impairment of goodwill and other assets. We recorded a non-cash impairment of assets of $6.2 million in 2017, of which $5.8 million related to an impairment of goodwill for our USVI operations as a result of the fourth quarter annual goodwill impairment evaluation. The remainder of the amount was related to destroyed property, plant and equipment also in our USVI operations.

Gain on sale of assets, net. We recorded a net gain on disposal of assets of $0.7 million in 2017 versus $1.4 million in 2016. Our gain on sale of assets in 2017 and 2016 included sales of excess vehicles and equipment. Our gain on sale of assets in 2016 was primarily related to land sales in Texas.


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Table of Contents

Operating income. Operating income decreased $8.2 million to $78.9 million in 2017 from $87.1 million in 2016. Operating income as a percentage of revenue, which we refer to as operating margin, decreased to 5.9% in 2017 as compared to 7.5% in 2016, primarily reflecting higher SG&A and DD&A expenses, as well as higher self-insurance reserves for certain workers’ compensation and automobile liability losses and the impact of hurricane losses. These higher costs were partially offset by an increase in 2017 over 2016 of approximately $7.9 million that was attributable to our 2017 and 2016 acquisitions.

Interest expense, net.  Net interest expense increased by $14.3 million, or 51.4%, to $42.0 million in 2017 from $27.7 million in 2016, primarily related to higher debt levels, partially offset by lower effective interest rates in 2017 as compared to 2016.

Derivative loss. We recorded a non-cash loss on derivatives of $0.8 million in 2017 and $19.9 million in 2016 related to the fair value changes in the Class A and B Warrants we issued on August 31, 2010 to acquire common stock (collectively, the "Warrants"), which expired on August 31, 2017. The non-cash loss from fair value changes in the Warrants for 2017 and 2016 was primarily due to increases in the price of our common stock.

Loss on extinguishment of debt. For the year ended December 31, 2016, we recorded a $12.0 million pre-tax loss on early extinguishment of debt. The loss consisted of a redemption premium of $8.5 million and a $3.5 million non-cash loss for the write-off of unamortized deferred financing costs.

Income tax expense.  We recorded income tax expense allocated to continuing operations of approximately $12.4 million and $21.2 million for the years ended December 31, 2017 and 2016, respectively. For 2017, our effective tax rate differed substantially from the federal statutory rate primarily due to the adjustment to our net deferred income tax liability due to the change to the federal statutory tax rate from 35% to 21%, for which we recorded a non-cash $7.6 million deferred income tax benefit. For 2016, our effective tax rate differs substantially from the federal statutory rate primarily due to the tax impact of our Warrants, for which we recorded a $19.9 million non-cash derivative loss. The derivative loss is excluded from the calculation of our income tax provision, thus increasing our tax expense in periods when we record a derivative loss. In addition, certain state income taxes were calculated on bases different from pre-tax income (loss), which resulted in recording income tax expense in certain states that experienced a pre-tax loss.

In accordance with U.S. GAAP, intra-period tax allocation provisions require allocation of a tax expense or benefit to continuing operations due to current income (loss) from discontinued operations. We recorded a tax benefit of $0.5 million and tax expense of $0.4 million, allocated to discontinued operations for the years ended December 31, 2017 and 2016, respectively. The income tax amounts for continuing operations referred to above include the offsetting intra-period allocations. The intra-period tax allocation between the results from continuing operations and discontinued operations in the years ended December 31, 2017 and 2016 nets to $0.

Under U.S. tax law, we have elected to treat our U.S. Virgin Island subsidiaries as controlled foreign corporations. As such, we would normally consider our undistributed earnings of our U.S. Virgin Island subsidiaries, if any, to be indefinitely reinvested and, accordingly, we would normally not record incremental U.S. income taxes thereon. As of December 31, 2017, our U.S. Virgin Islands subsidiaries had no undistributed earnings, which is due to recent losses.

On December 22, 2017, the President signed into law “H.R.1” for U.S. tax reform legislation (“Tax Act”). Among other items, the law decreases the U.S. federal statutory tax rate from 35% to 21%. As a result, we estimate a decrease to our tax expense primarily due to the lower blended effective U.S. federal tax rate for 2018.
 
The Tax Act also enacts new tax laws that will impact our taxable income beginning in tax year 2018, including, but are not limited to (1) creating a Base Erosion Anti-abuse Tax ("BEAT"), which is a new minimum tax; (2) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (3) a new provision designed to tax currently global intangible low-taxed income ("GILTI"), which allows for the possibility of utilizing foreign tax credits and a deduction equal to 50% to offset the income tax liability (subject to some limitations); (4) electing treatment of the GILTI as a period cost or in deferred taxes; (5) a provision that could limit the amount of deductible interest expense; (6) the repeal of the domestic production activity deduction; (7) limitations on the deductibility of certain executive compensation; and (8) limitations on the utilization of foreign tax credits to reduce the U.S. income tax liability.


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Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, (“SAB 118”) Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with SAB 118, we must reflect the income tax effects of the Tax Act in the reporting period in which we complete our accounting under ASC Topic 740. The Company has recorded provisional amounts related to the impact of the Tax Act on its deferred tax balances related to the change in U.S. federal statutory tax rate and executive compensation in future years. SAB 118 allows a company to refrain from making a decision on certain provisions in the new tax law for its 2017 Form 10-K. As such we have delayed making a decision on the following until we are able to make a reasonable estimate of the accounting: deemed repatriation, BEAT, choosing “BEAT” as a period cost or deferred tax issue, and GILTI. As a result, we will continue to review and assess the potential impact of the legislation on our consolidated financial statements.

Loss from discontinued operations, net of taxes.  The results of operations for our sold precast units located in Pennsylvania, California and Arizona have been included in discontinued operations for all periods presented. We recorded a pre-tax loss of $1.1 million and $1.2 million in 2017 and 2016, respectively, primarily related to real estate leases and subleases that will expire by June 30, 2018.

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Segment information

For a discussion of our segments and segment Adjusted EBITDA, see "Basis of Presentation" under this Item 7, earlier in this report. For a discussion and reconciliation of our segment Adjusted EBITDA, see Note 17, "Segment Information," to our consolidated financial statements in this report.

Ready-mixed concrete

The following table sets forth key financial information for our ready-mixed concrete segment for the periods indicated:
 
(amounts in thousands, except selling prices and percentages)
 
Year Ended
December 31,
 
Increase / (Decrease)
 
2017
 
2016
 
$ or cubic yards, as applicable
 
%
Ready-mixed Concrete Segment:
 
 
 
 
 
 
 
      Revenue
$
1,213,027

 
$
1,060,991

 
$
152,036

 
14.3
%
      Segment revenue as a percentage of total revenue
90.8
%
 
90.8
%
 
 
 
 
      Adjusted EBITDA
$
185,785

 
$
157,534

 
$
28,251

 
17.9
%
      Adjusted EBITDA as a percentage of segment revenue
15.3
%
 
14.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Ready-mixed Concrete Data:
 

 
 

 
 
 
 

Average selling price per cubic yard
$
134.86

 
$
130.35

 
$
4.51

 
3.5
%
Sales volume in cubic yards
8,984

 
8,122

 
862

 
10.6
%

Revenue.  Our ready-mixed concrete sales provided 90.8% of our total revenue in both 2017 and 2016. Segment revenue for 2017 increased $152.0 million, or 14.3%, over 2016 levels. We estimate that approximately $90.1 million of this increase, or 59.3%, was due to acquisitions completed after January 1, 2016. The 2017 revenue increase was driven primarily by a 10.6% increase in sales volume, or 0.9 million cubic yards. Increased volume provided $112.4 million, or 73.9%, of our ready-mixed concrete revenue growth, and a 3.5% increase in average selling price provided $39.6 million, or 26.1%, of our ready-mixed concrete revenue growth. Our sales volume in 2017 was higher in all of our major metropolitan markets due to increased construction activity and acquisitions despite more adverse weather days. In addition, the average selling price increased in all of our major metropolitan markets in which we operate. Hurricanes Irma and Maria hit our USVI operations in September 2017 and had a negative impact on our ready-mixed concrete revenue, as our USVI operations were essentially shut down for several months following the storms and were not fully operational by the end of the year.
 
Adjusted EBITDA.  Adjusted EBITDA for our ready-mixed concrete segment increased by $28.3 million, or 17.9%. We estimate that approximately $17.3 million, or 61.1%, of our 2017 Adjusted EBITDA increase resulted from acquisitions completed after January 1, 2016. Driving the growth in Adjusted EBITDA was a 10.6% increase in sales volume and a 3.5% increase in our average selling price, which resulted in $152.0 million in higher revenue. Partially offsetting the growth in revenue was the increased cost of goods sold associated with the higher volume of sales. Our variable costs, which include primarily raw material costs, labor and benefits costs, utilities and delivery costs, were all higher primarily due to the increased volume. Our fixed costs, which consist primarily of property taxes, equipment rental, quality control, dispatch and plant management costs, increased during 2017 due to higher personnel and equipment costs needed to operate our facilities, as well as higher overall fixed costs to operate more locations and trucks than in the previous year. Segment Adjusted EBITDA as a percentage of segment revenues increased to 15.3% in 2017. We were able to leverage increased efficiencies to drive incremental margins on higher volume. 


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Aggregate products

The following table sets forth key financial information for our aggregate products segment for the periods indicated:

 
(amounts in thousands, except selling prices and percentages)
 
Year Ended
December 31,
 
Increase / (Decrease)
 
2017
 
2016
 
$ or tons, as applicable
 
%
Aggregate Products Segment:
 
 
 
 
 
 
 
Revenue
$
90,665

 
$
76,334

 
$
14,331

 
18.8
%
Segment revenue, excluding intersegment sales, as a percentage of total revenue
3.7
%
 
3.6
%
 
 
 
 
Adjusted EBITDA
$
27,162

 
$
21,731

 
$
5,431

 
25.0
%
Adjusted EBITDA as a percentage of segment revenue
30.0
%
 
28.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate Products Data:
 

 
 

 
 
 
 

Average selling price per ton
$
12.92

 
$
11.97

 
$
0.95

 
7.9
%
Sales volume in tons
6,197

 
5,563

 
634

 
11.4
%

Revenue.  Sales of our aggregate products provided 3.7% and 3.6% of our total revenue for 2017 and 2016, respectively, excluding intersegment sales of $40.9 million and $34.7 million, respectively. Segment revenue increased $14.3 million, or 18.8%, over prior year levels. We estimate that $13.6 million, or 95.1%, of the revenue increase was due to recent acquisitions. Hurricanes Irma and Maria hit our USVI operations in September 2017 and had a negative impact on our aggregate products revenue, as our USVI operations were essentially shut down for several months following the storms and were not fully operational by the end of the year.

We sell our aggregate products to external customers and internally to our ready-mixed concrete segment at a market price. Approximately 45.1% of our 2017 aggregate products sales, or $40.9 million, were to our ready-mixed concrete segment, versus 45.4%, or $34.7 million, in 2016. Our sales volume increased 0.6 million tons, which provided approximately $7.6 million, or 53.1%, of our aggregate products revenue increase. Contributing to our overall aggregate products revenue was an increase in our average selling price of 7.9%, which resulted in approximately $5.9 million, or 41.3%, of our increase in aggregate products revenue. Freight charges to deliver aggregate products to external customers, as well as other charges, all of which are included in revenue, increased approximately $0.8 million providing 5.6% of our increase in aggregate products revenue.

Adjusted EBITDA.  Adjusted EBITDA for our aggregate products segment increased to $27.2 million in 2017 from $21.7 million in 2016, primarily reflecting the higher sales volume and higher average selling price, partially offset by the related higher cost of goods sold associated with the increased volume. Our variable costs associated with cost of goods sold, which includes quarry labor and benefits, utilities, repairs and maintenance, pit costs to prepare the stone and gravel for use and delivery costs, all rose due to the higher sales volumes. Our quarry fixed costs, which include primarily property taxes, equipment rental and plant management costs, were higher compared to the previous year. Overall, our segment Adjusted EBITDA as a percentage of segment revenue was 30.0% in 2017 and 28.5% in 2016.

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Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

The following table sets forth selected historical statement of operations information and that information as a percentage of revenue for each of the periods indicated, as well as the increase or decrease from the prior year in dollars and percent.   

 
 
(amounts in thousands, except selling prices and percentages)
 
 
Year Ended December 31,
 
Increase / (Decrease)
 
 
2016
 
2015(1)
 
$
 
%
Revenue
 
$
1,168,160

 
100.0
 %
 
$
974,717

 
100.0
 %
 
$
193,443

 
19.8%
Cost of goods sold before depreciation, depletion and amortization
 
922,338

 
79.0

 
768,439

 
78.8

 
153,899

 
20.0
Selling, general and administrative expenses
 
100,019

 
8.6

 
86,873

 
8.9

 
13,146

 
15.1
Depreciation, depletion and amortization
 
54,852

 
4.7

 
43,570

 
4.5

 
11,282

 
25.9
Change in value of contingent consideration
 
5,225

 
0.4

 
932

 
0.1

 
4,293

 
NM
Gain on sale of assets, net
 
(1,416
)
 
(0.1
)
 
(468
)
 

 
948

 
NM
Operating income
 
87,142

 
7.5

 
75,371

 
7.7

 
11,771

 
15.6
Interest expense, net
 
27,709

 
2.4

 
21,734

 
2.2

 
5,975

 
27.5
Derivative loss
 
19,938

 
1.7

 
60,016

 
6.2

 
(40,078
)
 
(66.8)
Loss on extinguishment of debt
 
12,003

 
1.0

 

 

 
12,003

 
NM
Other income, net
 
(3,237
)
 
(0.3
)
 
(2,064
)
 
(0.2
)
 
1,173

 
56.8
Income (loss) from continuing operations before income taxes
 
30,729

 
2.6

 
(4,315
)
 
(0.4
)
 
35,044

 
NM
Income tax expense
 
21,151

 
1.8

 
779

 
0.1

 
20,372

 
NM
Income (loss) from continuing operations
 
9,578

 
0.8

 
(5,094
)
 
(0.5
)
 
14,672

 
NM
Loss from discontinued operations, net of taxes
 
(717
)
 
(0.1
)
 
(320
)
 

 
397

 
NM
Net income (loss)
 
$
8,861

 
0.8
 %
 
$
(5,414
)
 
(0.6
)%
 
$
14,275

 
263.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Ready-mixed Concrete Data:
 
 

 
 

 
 

 
 

 
 
 
 

Average selling price per cubic yard
 
$
130.35

 
 
 
$
123.98

 
 

 
$
6.37

 
5.1
%
Sales volume in cubic yards
 
8,122

 
 
 
7,038

 
 

 
1,084

 
15.4
%
Aggregate Products Data:
 
 

 
 
 
 

 
 

 
 
 
 

       Average selling price per ton
 
$
11.97

 
 
 
$
10.54

 
 

 
$
1.43

 
13.6
%
       Sales volume in tons
 
5,563

 
 

 
4,919

 
 

 
644

 
13.1
%

Revenue. Our 2016 total revenue grew by $193.4 million, or 19.8%, from $974.7 million in 2015 to $1.2 billion in 2016, primarily due to increased sales of ready-mixed concrete. We estimate that acquisitions completed after January 1, 2015 accounted for approximately $142.4 million, or 73.6%, of our 2016 revenue increase. Ready-mixed concrete sales rose $184.4 million, or 21.0%, from $876.6 million in 2015 to $1.1 billion in 2016, driven by a 15.4% increase in sales volume and a 5.1% increase in our average selling price. Sales of aggregate products rose to $76.3 million in 2016 from $60.4 million in 2015, an increase of $15.9 million, or 26.3%, due to a 13.6% increase in average selling price and a 13.1% increase in volume. Other product revenues and eliminations, which includes our building materials, aggregates distribution, aggregate recycling, lime slurry, hauling business, concrete block and eliminations of our intersegment sales, decreased by $6.8 million, or 18.1%, to $30.8 million in 2016 from $37.6 million in 2015, primarily due to decreased sales from our recycled aggregates business and an increase in eliminations of intercompany sales.


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Cost of goods sold before DD&A. Cost of goods sold before DD&A, increased $153.9 million, or 20.0%, from $768.4 million in 2015 to $922.3 million in 2016. Our costs increased primarily due to volume growth resulting from acquisitions in our ready-mixed concrete segment, resulting in higher material costs, delivery costs and plant variable costs. Our costs in our aggregate products segment increased primarily due to the costs from four quarries acquired in the second half of 2015 plus higher variable costs related to increased production at our existing quarries. Our fixed costs increased from the prior year due to higher personnel and equipment costs needed to operate our facilities, as well as higher overall fixed costs to operate more locations and trucks than in 2015. As a percentage of revenue, cost of goods sold before DD&A increased marginally to 79.0% in 2016 from 78.8% in 2015.

Selling, general and administrative expenses.  SG&A expenses increased $13.1 million, or 15.1%, in 2016 from $86.9 million in 2015 to $100.0 million in 2016. Approximately $8.4 million of this increase was attributable to personnel and other general administrative costs incurred by our regional operations to support growth and acquisition infrastructure. In addition, we incurred $1.3 million in higher non-cash stock compensation expense primarily due to the increase in the fair value of awards granted in 2016. The remainder of the increase was primarily attributable to corporate-related personnel and other general expenses to support our growth initiatives. As a percentage of total revenue, SG&A expenses decreased to 8.6% in 2016 from 8.9% in 2015

Depreciation, depletion and amortization.  DD&A expense for 2016 increased $11.3 million, or 25.9%, to $54.9 million from $43.6 million in 2015, primarily reflecting depreciation on additional plants, equipment and mixer trucks purchased to service demand and acquired through recent acquisitions as well as incremental intangible amortization expense of $5.4 million related to our acquisitions.

Change in value of contingent consideration. We recorded a non-cash expense for the revaluation of contingent consideration of $5.2 million in 2016 and $0.9 million in 2015. These non-cash expenses were related to the fair value changes in contingent consideration associated with certain of our acquisitions. The key inputs in determining the fair value of our contingent consideration of $32.2 million at December 31, 2016 included discount rates ranging from 3.50% to 15.75% and management's estimates of future sales volumes and EBITDA. The non-cash expense from fair value changes in contingent consideration in 2016 and 2015 were primarily due to the passage of time, changes in discount rates and changes in the probability-weighted assumptions related to the achievement of sales volumes. The 2015 non-cash expense was partially offset by the decline in West Texas Intermediate crude prices, which reduced the amount payable under one of our arrangements.

Gain on sale of assets, net. We recorded a gain on sale of assets of $1.4 million in 2016 versus $0.5 million in 2015. Our gain on sale of assets in 2016 was primarily related to land sales in Texas. Our gain on sale of assets in both years included sales of excess vehicles and equipment.

Operating income. Operating income rose $11.8 million to $87.1 million in 2016 from $75.4 million in 2015. We estimate that approximately $4.0 million, or 33.9%, the increase was attributable to 2016 and 2015 acquisitions. Operating income as a percentage of revenue decreased to 7.5% for 2016 compared to 7.7% for 2015.

Interest expense, net.  Net interest expense increased by $6.0 million, or 27.5%, to $27.7 million in 2016 from $21.7 million in 2015, primarily related to higher debt levels.  

Derivative loss. We recorded a non-cash derivatives loss of $19.9 million in 2016 and $60.0 million in 2015 related to fair value changes in our Warrants. Each reporting period, we determined the fair value of our derivative liabilities, and changes resulted in income or loss. The key inputs in determining the fair value of our derivative liabilities included our stock price, stock price volatility and risk-free interest rates. Changes in these inputs impacted the fair value of our derivative liability and resulted in income or loss each reporting period. The non-cash loss from fair value changes in the Warrants for 2016 and 2015 was primarily due to an increase in the price of our common stock.

Loss on extinguishment of debt. For the year ended December 31, 2016, we recorded a $12.0 million pre-tax loss on early extinguishment of debt related to the redemption of our 2018 notes. The loss consisted of a redemption premium of $8.5 million and a $3.5 million non-cash loss for the write-off of unamortized deferred financing costs.


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Income tax expense.  We recorded income tax expense allocated to continuing operations of approximately $21.2 million and $0.8 million for the years ended December 31, 2016 and 2015, respectively. For 2016, our effective tax rate differed substantially from the federal statutory rate primarily due to the tax impact of our Warrants, for which we recorded a non-cash $19.9 million derivative loss. The derivative loss is excluded from the calculation of our income tax provision, thus increasing our tax expense in periods when we record a derivative loss. For 2015, our effective tax rate differs substantially from the federal statutory rate primarily due to the reduction of the valuation allowance that reduced the recognized expense. Substantially offsetting our 2015 tax expense was the impact of the reversal of the Company's valuation allowance on its deferred tax assets during the fourth quarter of 2015. In addition, certain state income taxes were calculated on bases different from pre-tax income (loss), which resulted in recording income tax expense in certain states that experienced a pre-tax loss.

As of each reporting date, management considers all new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. As of December 31, 2015, we achieved a history of positive pre-tax income and anticipated significant additional future pre-tax income to be generated in part from our acquired businesses, which would result in higher U.S. Federal taxable income. For these reasons, management determined that sufficient positive evidence existed, as of December 31, 2015, to conclude that it was more likely than not that the additional deferred taxes of $21.2 million were realizable, and therefore, reversed a majority of the valuation allowance.

In accordance with U.S. GAAP, the recognized value of deferred tax assets must be reduced 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 the generation of 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 a valuation allowance as of December 31, 2016 and 2015 for other deferred tax assets because of uncertainty regarding their ultimate realization.  

In accordance with U.S. GAAP, intra-period tax allocation provisions require allocation of a tax expense or benefit to continuing operations due to current income (loss) from discontinued operations. We recorded income tax expense of approximately $21.2 million and $0.8 million in income from continuing operations for the years ended December 31, 2016 and 2015, respectively. We recorded a tax benefit of $0.4 million and tax expense of $0.2 million, allocated to discontinued operations for the years ended December 31, 2016 and 2015, respectively. The income tax amounts for continuing operations referred to above include the offsetting intra-period allocations. The intra-period tax allocation between the results from continuing operations and discontinued operations in the years ended December 31, 2016 and 2015 nets to $0.

Under U.S. tax law, we have elected to treat our U.S. Virgin Island subsidiaries as controlled foreign corporations. As such, we would normally consider our undistributed earnings of our U.S. Virgin Island subsidiaries, if any, to be indefinitely reinvested and, accordingly, we would normally not record incremental U.S. income taxes thereon. As of December 31, 2016, our U.S. Virgin Islands subsidiaries had no undistributed earnings, which is due to recent losses.

Loss from discontinued operations, net of taxes.  The results of operations for our sold precast units located in Pennsylvania, California and Arizona, have been included in discontinued operations for all periods presented. During 2016, we recorded a pre-tax loss of $1.2 million primarily related to real estate leases and subleases that will expire by June 30, 2018. During 2015, we recorded a pre-tax loss of $0.5 million primarily related to real estate leases and subleases and a $0.2 million loss on the sale of our Pennsylvania precast operation.

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Segment information

For a discussion of our segments and segment Adjusted EBITDA, see "Basis of Presentation", under this Item 7, earlier in this report. For a discussion and reconciliation of our segment Adjusted EBITDA, see Note 17, "Segment Information," to our consolidated financial statements in this report.

Ready-mixed concrete

The following table sets forth key financial information for our ready-mixed concrete segment for the periods indicated:
 
(amounts in thousands, except selling prices and percentages)
 
Year Ended
December 31,
 
Increase / (Decrease)
 
2016
 
2015
 
$ or cubic yards, as applicable
 
%
Ready-mixed Concrete Segment:
 
 
 
 
 
 
 
      Revenue
$
1,060,991

 
$
876,633

 
$
184,358

 
21.0
%
      Segment revenue as a percentage of total revenue
90.8
%
 
89.9
%
 
 
 
 
      Adjusted EBITDA
$
157,534

 
$
131,940

 
$
25,594

 
19.4
%
      Adjusted EBITDA as a percentage of segment revenue
14.8
%
 
15.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Ready-mixed Concrete Data:
 

 
 

 
 
 
 

Average selling price per cubic yard
$
130.35

 
$
123.98

 
$
6.37

 
5.1
%
Sales volume in cubic yards
8,122

 
7,038

 
1,084

 
15.4
%

Revenue. Our ready-mixed concrete sales provided 90.8% and 89.9% of our total revenue in 2016 and 2015, respectively. Segment revenue for 2016 rose $184.4 million, or 21.0%, over 2015 levels. We estimate that approximately $133.7 million of this increase, or 72.5%, was due to segment acquisitions completed after January 1, 2015. The 2016 revenue increase was driven primarily by a 15.4% increase in sales volume, or 1.1 million cubic yards. Increased volume provided $134.4 million, or 72.9%, of our ready-mixed concrete revenue growth. Our sales volume was higher in our north Texas, New York / New Jersey and Washington, D.C. markets due to increased construction activity, generally more favorable weather and recent acquisitions. While total revenue in our northern California market increased, sales volumes decreased slightly due to an increase in adverse weather days, delays in a limited number of project starts and some competitive pricing pressure. Our average selling price increased in all our major metropolitan markets. Total revenue was higher in all our major metropolitan markets, primarily due to higher average selling price and the impact of recent acquisitions. Sales volume and average selling price decreased in our west Texas market due to the mix of commercial and residential projects and a one-time project that was ongoing in the region in 2015.

Adjusted EBITDA.  Adjusted EBITDA for our ready-mixed concrete segment rose from $131.9 million in 2015 to $157.5 million in 2016, an increase of $25.6 million, or 19.4%. We estimate that approximately $16.4 million, or 64.1%, of our 2016 Adjusted EBITDA increase resulted from acquisitions completed after January 1, 2015. Driving the growth in Adjusted EBITDA was a 15.4% increase in sales volume and a 5.1% increase in our average selling price, which resulted in $184.4 million in higher revenue. Partially offsetting the growth in revenue was the increased cost of goods sold associated with the higher volume of sales. Our variable costs, which include primarily raw material costs, labor and benefits costs, utilities and delivery costs, were all higher primarily due to the increased volume. We also saw higher raw materials prices from our vendors during 2016, which increased our cost of goods sold for 2016. However, we were generally able to pass these price increases along to our customers. Our fixed costs, which consist primarily of property taxes, equipment rental, quality control, dispatch and plant management costs, increased during 2016 due to higher personnel and equipment costs needed to operate our facilities, as well as higher overall fixed costs to operate more locations and trucks than in the previous year. Segment Adjusted EBITDA as a percentage of segment revenues declined slightly to 14.8% in 2016 from 15.1% in the 2015 period, primarily reflecting the geographic and project mix of our revenue and costs. Segment Adjusted EBITDA for the 2015 period was also favorably impacted by a one-time, high margin project in our west Texas market.
  

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Aggregate products

The following table sets forth key financial information for our aggregate products segment for the periods indicated:

 
(amounts in thousands, except selling prices and percentages)
 
Year Ended
December 31,
 
Increase / (Decrease)
 
2016
 
2015
 
$ or tons, as applicable
 
%
Aggregate Products Segment:
 
 
 
 
 
 
 
Revenue
$
76,334

 
$
60,439

 
$
15,895

 
26.3
%
Segment revenue, excluding intersegment sales, as a percentage of total revenue
3.6
%
 
3.5
%
 
 
 
 
Adjusted EBITDA
$
21,731

 
$
14,996

 
$
6,735

 
44.9
%
Adjusted EBITDA as a percentage of segment revenue
28.5
%
 
24.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate Products Data:
 

 
 

 
 
 
 

Average selling price per ton
$
11.97

 
$
10.54

 
$
1.43

 
13.6
%
Sales volume in tons
5,563

 
4,919

 
644

 
13.1
%

Revenue.  Sales of our aggregate products, excluding intersegment sales of $34.7 million, provided 3.6% of our total revenue in 2016, compared to 3.5%, excluding intersegment sales of $26.2 million, in 2015. Segment revenue rose $15.9 million, or 26.3%, over prior year levels. We estimate that $10.2 million, or 64.2%, of the increase was due to acquisitions. We sell our aggregate products to external customers and also sell them internally to our ready-mixed concrete segment at a market price. Approximately 45.4% of our 2016 aggregates sales, or $34.7 million, were to our ready-mixed concrete segment, versus 43.4%, or $26.2 million, in 2015. Contributing to our overall aggregate products revenue growth was an increase in our average selling price of 13.6%, which provided approximately $8.0 million, or 50.0%, of our increase in aggregate products revenue. Our volume rose 0.6 million tons, which provided approximately $6.8 million, or 42.7%, of our aggregates products revenue increase. Freight charges to deliver the aggregate products to the external customer, as well as other charges, all of which are included in revenue, increased approximately $0.8 million providing 5.0% of our increase in aggregate products revenue.

Adjusted EBITDA.  Adjusted EBITDA for our aggregate products segment increased to $21.7 million in 2016 from $15.0 million in 2015, primarily reflecting the higher sales volume and higher average selling price, partially offset by the related higher cost of goods sold associated with the increased volume. Our variable costs associated with cost of goods sold, which includes quarry labor and benefits, utilities, repairs and maintenance, pit costs to prepare the stone and gravel for use and delivery costs, all rose due to the higher sales volumes. Our quarry fixed costs, which include primarily property taxes, equipment rental and plant management costs, were higher compared to the previous year, primarily due to operating costs associated with the additional quarries acquired in the second half of 2015. Overall, our segment Adjusted EBITDA as a percentage of segment revenue increased to 28.5% in 2016 from 24.8% in 2015, primarily due to the increase in revenue and increased efficiencies.



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Liquidity and Capital Resources

Overview
Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our asset-based revolving credit facility (the "Revolving Facility"), which provides for aggregate borrowings of up to $350 million, subject to the borrowing base. During 2017, we executed the following key transactions to enhance our liquidity:

issued $200.0 million aggregate principal amount of 6.375% senior unsecured notes due 2024;
increased the commitments in the Revolving Facility by $100.0 million; and
extended the maturity date of the Revolving Facility to August 31, 2022.

We ended 2017 with $22.6 million of cash and cash equivalents, a decrease of $53.2 million from the end of 2016 primarily due to funding acquisitions. As of the end of 2017, we had $206.4 million available for future borrowings under the Revolving Facility, providing total available liquidity of $229.0 million. The available capacity under our Revolving Facility at year end 2017 decreased as compared to year end 2016 primarily due to the $9.0 million of outstanding borrowings under the Revolving Facility and lower eligible accounts receivable.

The following key financial measurements (dollars in thousands) reflect our financial condition, total capital and liquidity as of December 31, 2017 and 2016:
 
 
2017
 
2016
Cash and cash equivalents
 
$
22,581

 
$
75,774

Working capital
 
$
103,244

 
$
80,012

Total debt(1)
 
$
693,336

 
$
449,298

Equity
 
302,142

 
188,829

  Total capital
 
$
995,478

 
$
638,127

 
 
 
 
 
Available capacity under our Revolving Facility
 
$
206,400

 
$
221,300

    
(1) Total debt includes long-term debt, net of unamortized debt issuance costs, including current maturities, capital leases, notes payable and borrowings under the Revolving Facility.

Our primary liquidity needs over the next 12 months consist of (1) financing working capital requirements; (2) servicing our indebtedness; (3) purchasing property, plant and equipment; and (4) payments related to strategic acquisitions. Our primary portfolio strategy includes acquisitions in various regions and markets. We may seek financing for acquisitions, including additional debt or equity capital.

Our working capital needs are typically at their lowest level in the first quarter, increase in the second and third quarters to fund increases in accounts receivable and inventories during those periods, and then decrease in the fourth quarter. Availability under the Third Loan Agreement is governed by a borrowing base primarily determined by our eligible accounts receivable, inventory, mixer trucks and machinery. Our borrowing base also typically declines during the first quarter due to lower accounts receivable balances as a result of normal seasonality of our business caused by weather.

The projection of our cash needs is based upon many factors, including without limitation, our expected volume, pricing, cost of materials and capital expenditures. We anticipate that our federal and state income tax payments will decline in 2018 as compared to 2017, following the impact of recent tax reform legislation that reduced the corporate statutory rate from 35% to 21%. Based on our projected cash needs, we believe that cash on hand, availability under the Revolving Facility and cash generated from operations will provide us with sufficient liquidity in the ordinary course of business, not including potential acquisitions. If, however, availability under the Revolving Facility, cash on hand and our operating cash flows are not adequate to fund our operations, we would need to obtain other equity or debt financing or sell assets to provide additional liquidity.


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The principal factors that could adversely affect the amount of our internally generated funds include:

deterioration of revenue, due to lower volume and/or pricing, because of weakness in the markets in which we operate;
declines in gross margins due to shifts in our product mix or increases in the cost of our raw materials and fuel;
any deterioration in our ability to collect our accounts receivable from customers as a result of weakening in construction demand or payment difficulties experienced by our customers; and
inclement weather beyond normal patterns that could adversely affect our sales volumes.

The discussion that follows provides a description of our arrangements relating to our outstanding indebtedness.

Senior Secured Credit Facility

On August 31, 2017, we entered into 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 Third Loan Agreement matures August 31, 2022 and provides for up to $350.0 million of revolving borrowings. The Third Loan Agreement also permits the incurrence of other secured indebtedness not to exceed certain amounts as specified therein.

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.  The Third Loan Agreement provides for swingline loans up to a $15.0 million sublimit and letters of credit up to a $50.0 million sublimit. Loans under the Revolving Facility are in the form of either base rate loans or “LIBOR loans” denominated in U.S. dollars.

The Third Loan Agreement contains usual and customary negative covenants including, but not limited to, restrictions on our ability to consolidate or merge; substantially change the nature of our business; sell, lease or otherwise transfer any of our assets; create or incur indebtedness; create liens; pay dividends or make other distributions; make loans; prepay certain indebtedness; and make investments or acquisitions. The negative covenants are subject to certain exceptions as specified 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 December 31, 2017, we were in compliance with all covenants under the Third Loan Agreement.

Senior Unsecured Notes due 2024

During 2016 and 2017, we issued $600.0 million aggregate principal amount of 6.375% senior unsecured notes due 2024 (the "2024 Notes"). The 2024 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 2024 Notes accrue interest at a rate of 6.375% per annum. We pay interest on the 2024 Notes on June 1 and December 1 of each year. The 2024 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 2024 Notes are issued by U.S. Concrete, Inc., the parent company, and are guaranteed on a full and unconditional 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). The guarantees are joint and several. U.S. Concrete, Inc. does not have any independent assets or operations, and none of its foreign subsidiaries guarantee the 2024 Notes.

The 2024 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.


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For additional information regarding our guarantor and non-guarantor subsidiaries, see the information set forth in Note 23, “Supplemental Condensed Consolidating Financial Information,” to our consolidated financial statements included in this report.

Other Debt

We have financing agreements with various lenders for the purchase of mixer trucks and other machinery and equipment with $85.0 million remaining principal as of December 31, 2017.

For additional information regarding our arrangements relating to outstanding indebtedness, see the information set forth in Note 9, "Debt," to our consolidated financial statements included in this report.
Cash Flows

Net cash flows are presented below (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016 (1)
 
2015
Net cash provided by (used in):