Document
false--12-31Q1202000010734292899000003066000004000000810000015000000.074630.037000.063830.049800.0656P3Y16.2411.4955.2143.23P1Y7MP1Y1MP12M 0001073429 2020-01-01 2020-03-31 0001073429 2020-04-23 0001073429 2020-03-31 0001073429 2019-12-31 0001073429 2019-01-01 2019-03-31 0001073429 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001073429 us-gaap:RetainedEarningsMember 2018-12-31 0001073429 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001073429 us-gaap:NoncontrollingInterestMember 2019-12-31 0001073429 us-gaap:CommonStockMember 2019-03-31 0001073429 us-gaap:ParentMember 2020-01-01 2020-03-31 0001073429 us-gaap:RetainedEarningsMember 2020-03-31 0001073429 us-gaap:ParentMember 2019-03-31 0001073429 us-gaap:ParentMember 2018-12-31 0001073429 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001073429 2019-03-31 0001073429 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001073429 us-gaap:CommonStockMember 2020-03-31 0001073429 us-gaap:CommonStockMember 2018-12-31 0001073429 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001073429 us-gaap:ParentMember 2019-01-01 2019-03-31 0001073429 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001073429 us-gaap:RetainedEarningsMember 2019-12-31 0001073429 us-gaap:CommonStockMember 2019-12-31 0001073429 us-gaap:ParentMember 2020-01-01 0001073429 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0001073429 us-gaap:RetainedEarningsMember 2019-03-31 0001073429 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0001073429 us-gaap:ParentMember 2020-03-31 0001073429 us-gaap:RetainedEarningsMember 2020-01-01 0001073429 us-gaap:NoncontrollingInterestMember 2018-12-31 0001073429 us-gaap:NoncontrollingInterestMember 2020-01-01 2020-03-31 0001073429 us-gaap:ParentMember 2019-12-31 0001073429 us-gaap:TreasuryStockMember 2019-12-31 0001073429 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0001073429 2018-12-31 0001073429 us-gaap:NoncontrollingInterestMember 2019-03-31 0001073429 us-gaap:TreasuryStockMember 2018-12-31 0001073429 2020-01-01 0001073429 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001073429 us-gaap:TreasuryStockMember 2019-03-31 0001073429 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001073429 us-gaap:TreasuryStockMember 2020-03-31 0001073429 us-gaap:NoncontrollingInterestMember 2020-03-31 0001073429 2019-01-01 2019-12-31 0001073429 uscr:CoramMaterialCorp.Member 2020-02-24 0001073429 us-gaap:AccountingStandardsUpdate201613Member 2020-01-01 0001073429 uscr:CoramMaterialCorp.Member 2020-02-24 2020-02-24 0001073429 uscr:CoramMaterialCorp.Member 2020-01-01 2020-03-31 0001073429 uscr:CoramMaterialCorp.Member us-gaap:FairValueAdjustmentToInventoryMember 2020-01-01 2020-03-31 0001073429 uscr:CoramMaterialCorp.Member us-gaap:FairValueAdjustmentToInventoryMember 2019-01-01 2019-03-31 0001073429 uscr:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-31 0001073429 uscr:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember 2019-12-31 0001073429 us-gaap:LeasesAcquiredInPlaceMarketAdjustmentMember 2020-03-31 0001073429 us-gaap:LeasesAcquiredInPlaceMarketAdjustmentMember 2020-01-01 2020-03-31 0001073429 us-gaap:LeasesAcquiredInPlaceMarketAdjustmentMember 2019-12-31 0001073429 us-gaap:AllOtherSegmentsMember 2020-03-31 0001073429 uscr:ReadyMixedConcreteMember 2020-03-31 0001073429 us-gaap:AllOtherSegmentsMember 2019-12-31 0001073429 uscr:AggregatesMember 2019-12-31 0001073429 uscr:AggregatesMember 2020-03-31 0001073429 uscr:ReadyMixedConcreteMember 2019-12-31 0001073429 uscr:LeaseholdInterestMember 2019-12-31 0001073429 us-gaap:CustomerRelationshipsMember 2019-12-31 0001073429 us-gaap:TradeNamesMember 2019-12-31 0001073429 us-gaap:TradeNamesMember 2019-01-01 2019-12-31 0001073429 uscr:EnvironmentalCreditsMember 2019-12-31 0001073429 us-gaap:NoncompeteAgreementsMember 2019-12-31 0001073429 uscr:CollectiveBargainingArrangementMember 2019-01-01 2019-12-31 0001073429 us-gaap:NoncompeteAgreementsMember 2019-01-01 2019-12-31 0001073429 us-gaap:UseRightsMember 2019-12-31 0001073429 uscr:EnvironmentalCreditsMember 2019-01-01 2019-12-31 0001073429 us-gaap:CustomerRelationshipsMember 2019-01-01 2019-12-31 0001073429 uscr:CollectiveBargainingArrangementMember 2019-12-31 0001073429 uscr:LeaseholdInterestMember 2019-01-01 2019-12-31 0001073429 us-gaap:NoncompeteAgreementsMember 2020-01-01 2020-03-31 0001073429 us-gaap:UseRightsMember 2020-03-31 0001073429 uscr:LeaseholdInterestMember 2020-03-31 0001073429 uscr:EnvironmentalCreditsMember 2020-03-31 0001073429 uscr:CollectiveBargainingArrangementMember 2020-01-01 2020-03-31 0001073429 us-gaap:TradeNamesMember 2020-03-31 0001073429 us-gaap:CustomerRelationshipsMember 2020-03-31 0001073429 uscr:CollectiveBargainingArrangementMember 2020-03-31 0001073429 uscr:LeaseholdInterestMember 2020-01-01 2020-03-31 0001073429 us-gaap:CustomerRelationshipsMember 2020-01-01 2020-03-31 0001073429 us-gaap:TradeNamesMember 2020-01-01 2020-03-31 0001073429 us-gaap:NoncompeteAgreementsMember 2020-03-31 0001073429 uscr:EnvironmentalCreditsMember 2020-01-01 2020-03-31 0001073429 us-gaap:LetterOfCreditMember uscr:SeniorSecuredCreditFacilityExpiring2022Member us-gaap:LineOfCreditMember 2020-03-31 0001073429 uscr:SeniorUnsecuredNotesDue2024Member us-gaap:UnsecuredDebtMember 2020-03-31 0001073429 us-gaap:RevolvingCreditFacilityMember uscr:SeniorSecuredCreditFacilityExpiring2022Member us-gaap:LineOfCreditMember 2020-01-01 2020-03-31 0001073429 us-gaap:RevolvingCreditFacilityMember uscr:SeniorSecuredCreditFacilityExpiring2022Member us-gaap:LineOfCreditMember 2020-03-31 0001073429 uscr:SeniorUnsecuredNotesDue2024Member us-gaap:UnsecuredDebtMember 2019-12-31 0001073429 uscr:AssetBasedRevolvingCreditFacilityMember 2019-12-31 0001073429 us-gaap:NotesPayableOtherPayablesMember 2020-03-31 0001073429 uscr:AssetBasedRevolvingCreditFacilityMember 2020-03-31 0001073429 us-gaap:NotesPayableOtherPayablesMember 2019-12-31 0001073429 uscr:EagleRockMaterialsLtd.Member 2020-01-01 2020-03-31 0001073429 uscr:EagleRockMaterialsLtd.Member 2019-12-31 0001073429 uscr:MeasurementInputPrepaymentCapMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-03-31 0001073429 uscr:MeasurementInputPrepaymentCapMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2019-12-31 0001073429 srt:WeightedAverageMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-03-31 0001073429 srt:WeightedAverageMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2019-12-31 0001073429 uscr:ContingentConsiderationMember 2020-03-31 0001073429 uscr:ContingentConsiderationMember 2020-01-01 2020-03-31 0001073429 uscr:ContingentConsiderationMember 2019-12-31 0001073429 srt:MaximumMember uscr:MeasurementInputExpectedPaymentPeriodMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2019-12-31 0001073429 srt:MinimumMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2019-12-31 0001073429 srt:MaximumMember uscr:MeasurementInputExpectedPaymentPeriodMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-03-31 0001073429 srt:MinimumMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-03-31 0001073429 srt:MaximumMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-03-31 0001073429 srt:MaximumMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2019-12-31 0001073429 srt:MinimumMember uscr:MeasurementInputExpectedPaymentPeriodMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2019-12-31 0001073429 srt:MinimumMember uscr:MeasurementInputExpectedPaymentPeriodMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-03-31 0001073429 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-03-31 0001073429 us-gaap:RestrictedStockUnitsRSUMember 2020-03-01 0001073429 uscr:U.S.ConcreteInc.LongTermIncentivePlanMember us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001073429 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001073429 us-gaap:RestrictedStockUnitsRSUMember 2020-03-01 2020-03-01 0001073429 srt:MaximumMember us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001073429 srt:MinimumMember us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001073429 srt:MaximumMember us-gaap:RestrictedStockUnitsRSUMember 2020-03-31 0001073429 srt:MinimumMember us-gaap:RestrictedStockUnitsRSUMember 2020-03-31 0001073429 uscr:CoronavirusAidReliefandEconomicSecurityCARESActMember 2020-01-01 2020-03-31 0001073429 uscr:RestrictedStockAndRestrictedStockUnitsMember 2019-01-01 2019-03-31 0001073429 uscr:RestrictedStockAndRestrictedStockUnitsMember 2020-01-01 2020-03-31 0001073429 srt:MaximumMember uscr:AutomobileInsuranceMember 2020-03-31 0001073429 srt:MaximumMember uscr:WorkersCompensationInsuranceAndGeneralLiabilityMember 2020-03-31 0001073429 us-gaap:PerformanceGuaranteeMember 2020-03-31 0001073429 us-gaap:InsuranceClaimsMember 2020-03-31 0001073429 srt:MinimumMember uscr:AutomobileInsuranceMember 2020-03-31 0001073429 us-gaap:InsuranceClaimsMember 2019-12-31 0001073429 srt:MinimumMember uscr:WorkersCompensationInsuranceAndGeneralLiabilityMember 2020-03-31 0001073429 us-gaap:OperatingSegmentsMember 2019-01-01 2019-03-31 0001073429 uscr:CorporateAndEliminationsMember 2020-01-01 2020-03-31 0001073429 us-gaap:OperatingSegmentsMember uscr:AggregatesMember 2019-01-01 2019-03-31 0001073429 us-gaap:OperatingSegmentsMember 2020-01-01 2020-03-31 0001073429 us-gaap:OperatingSegmentsMember uscr:AggregatesMember 2020-01-01 2020-03-31 0001073429 uscr:CorporateAndEliminationsMember 2019-01-01 2019-03-31 0001073429 us-gaap:OperatingSegmentsMember uscr:ReadyMixedConcreteMember 2020-01-01 2020-03-31 0001073429 us-gaap:OperatingSegmentsMember uscr:ReadyMixedConcreteMember 2019-01-01 2019-03-31 0001073429 uscr:ReadyMixedConcreteMember 2020-01-01 2020-03-31 0001073429 uscr:AggregateDistributionMember 2020-01-01 2020-03-31 0001073429 uscr:ReadyMixedConcreteMember 2019-01-01 2019-03-31 0001073429 uscr:OtherProductsMember 2020-01-01 2020-03-31 0001073429 uscr:BuildingMaterialsMember 2019-01-01 2019-03-31 0001073429 uscr:OtherProductsMember 2019-01-01 2019-03-31 0001073429 uscr:BuildingMaterialsMember 2020-01-01 2020-03-31 0001073429 uscr:AggregateProductsMember 2019-01-01 2019-03-31 0001073429 uscr:AggregateProductsMember 2020-01-01 2020-03-31 0001073429 uscr:AggregateDistributionMember 2019-01-01 2019-03-31 0001073429 uscr:AggregatesMember 2019-01-01 2019-03-31 0001073429 us-gaap:FireMember 2020-01-01 2020-03-31 0001073429 us-gaap:IntersegmentEliminationMember uscr:AggregatesMember 2019-01-01 2019-03-31 0001073429 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-03-31 0001073429 us-gaap:CorporateNonSegmentMember 2020-01-01 2020-03-31 0001073429 uscr:AggregatesMember 2020-01-01 2020-03-31 0001073429 us-gaap:IntersegmentEliminationMember uscr:AggregatesMember 2020-01-01 2020-03-31 0001073429 uscr:ReadyMixedConcreteMember 2020-01-01 2020-03-31 0001073429 uscr:ReadyMixedConcreteMember 2019-01-01 2019-03-31 0001073429 us-gaap:FireMember 2019-01-01 2019-03-31 0001073429 us-gaap:OperatingSegmentsMember uscr:AggregateProductsMember 2019-12-31 0001073429 uscr:CorporateAndEliminationsMember 2019-12-31 0001073429 us-gaap:OperatingSegmentsMember uscr:ReadyMixedConcreteMember 2020-03-31 0001073429 uscr:CorporateAndEliminationsMember 2020-03-31 0001073429 us-gaap:OperatingSegmentsMember uscr:ReadyMixedConcreteMember 2019-12-31 0001073429 us-gaap:OperatingSegmentsMember uscr:AggregateProductsMember 2020-03-31 0001073429 uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember us-gaap:SubsequentEventMember uscr:FederalFundsEffectiveRateMember 2020-04-17 2020-04-17 0001073429 uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-04-17 2020-04-17 0001073429 uscr:DelayedDrawTermLoanAgreementMember us-gaap:SubsequentEventMember 2020-04-17 0001073429 srt:MinimumMember uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodOneMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-04-17 2020-04-17 0001073429 srt:MinimumMember uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember us-gaap:SubsequentEventMember 2020-04-17 2020-04-17 0001073429 srt:MaximumMember uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember us-gaap:SubsequentEventMember 2020-04-17 2020-04-17 0001073429 srt:MinimumMember uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodOneMember us-gaap:SubsequentEventMember 2020-04-17 2020-04-17 0001073429 srt:MaximumMember uscr:DelayedDrawTermLoanAgreementMember us-gaap:DebtInstrumentRedemptionPeriodOneMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-04-17 2020-04-17 iso4217:USD uscr:reporting_segment utreg:acre utreg:T iso4217:USD xbrli:shares uscr:year xbrli:pure xbrli:shares
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended March 31, 2020
 
 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
https://cdn.kscope.io/4797eb5de015b526f754383d83a09ffe-image0a80.jpg
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)

Address of principal executive offices, including zip code: 331 N. Main Street, Euless, Texas 76039
Registrant’s telephone number, including area code: (817) 835-4105

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Stock, par value $0.001
USCR
The Nasdaq Stock Market LLC


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 No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
 
There were 16,672,101 shares of common stock, par value $0.001 per share, of the registrant outstanding as of April 23, 2020.



INDEX

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



i


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)

March 31, 2020

December 31, 2019
ASSETS
(Unaudited)

 
Current assets:
 

 
Cash and cash equivalents
$
26.4


$
40.6

Trade accounts receivable, net of allowances of $8.1 as of March 31, 2020 and $4.0 as of December 31, 2019
215.2


233.1

Inventories
69.2


59.0

Other receivables, net
13.1


8.4

Prepaid expenses and other
8.7


7.9

Total current assets
332.6


349.0

Property, plant and equipment, net of accumulated depreciation, depletion and amortization of $306.6 as of March 31, 2020 and $289.9 as of December 31, 2019
804.0


673.5

Operating lease assets
71.7

 
69.8

Goodwill
239.5


239.5

Intangible assets, net
87.1


92.4

Other assets
8.2


9.1

Total assets
$
1,543.1


$
1,433.3

LIABILITIES AND EQUITY
 


 

Current liabilities:
 


 

Accounts payable
$
136.2


$
136.4

Accrued liabilities
71.0


63.5

Current maturities of long-term debt
27.3


32.5

Current operating lease liabilities
13.7

 
12.9

Total current liabilities
248.2


245.3

Long-term debt, net of current maturities
762.6


654.8

Long-term operating lease liabilities
61.0

 
59.7

Other long-term obligations and deferred credits
49.5


49.1

Deferred income taxes
55.7


54.8

Total liabilities
1,177.0


1,063.7

Commitments and contingencies (Note 14)





Equity:
 


 

Additional paid-in capital
355.9


348.9

Retained earnings
24.7


31.1

Treasury stock, at cost
(37.7
)

(36.6
)
Total shareholders' equity
342.9


343.4

Non-controlling interest
23.2

 
26.2

Total equity
366.1

 
369.6

Total liabilities and equity
$
1,543.1


$
1,433.3

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

1


U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions except per share amounts)
(Unaudited)
 

 
Three Months Ended
March 31,

 
2020

2019
Revenue
 
$
334.4


$
333.1

Cost of goods sold before depreciation, depletion and amortization
 
273.9


268.4

Selling, general and administrative expenses
 
33.7


32.1

Depreciation, depletion and amortization
 
23.4


22.8

Change in value of contingent consideration
 
0.3

 
1.0

Loss on sale/disposal of assets, net
 


0.9

Operating income
 
3.1


7.9

Interest expense, net
 
11.4


11.6

Other income, net
 
(0.6
)

(0.4
)
Income (loss) before income taxes
 
(7.7
)

(3.3
)
Income tax expense (benefit)
 
(4.9
)

(0.7
)
Net income (loss)
 
(2.8
)

(2.6
)
Less: Net income attributable to non-controlling interest
 
(0.3
)
 
(0.1
)
Net income (loss) attributable to U.S. Concrete
 
$
(3.1
)
 
$
(2.7
)

 





Earnings (loss) per share attributable to U.S. Concrete:
 
 


 

Basic
 
$
(0.19
)
 
$
(0.16
)
Diluted
 
$
(0.19
)
 
$
(0.16
)
 
 
 
 
 
Weighted average shares outstanding:
 
 


 

Basic
 
16.5


16.3

Diluted
 
16.5

 
16.3


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

2


U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF TOTAL EQUITY
(in millions)
(Unaudited)
 
 
# of Common Shares
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Treasury
Stock
 
Total
Shareholders'
Equity
 
Non-controlling Interest
 
Total Equity
December 31, 2018
16.6

 
$
329.6

 
$
16.2

 
$
(33.4
)
 
$
312.4

 
$
24.8

 
$
337.2

Stock-based compensation

 
1.7

 

 
(1.1
)
 
0.6

 

 
0.6

Stock options exercised

 
0.2

 

 

 
0.2

 

 
0.2

Net income (loss)

 

 
(2.7
)
 

 
(2.7
)
 
0.1

 
(2.6
)
March 31, 2019
16.6

 
$
331.5

 
$
13.5

 
$
(34.5
)
 
$
310.5

 
$
24.9

 
$
335.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
16.7

 
$
348.9

 
$
31.1

 
$
(36.6
)
 
$
343.4

 
$
26.2

 
$
369.6

Cumulative-effect adjustment upon adoption of ASC 326, net of taxes (Note 2)

 

 
(3.3
)
 

 
(3.3
)
 

 
(3.3
)
Transfer of non-controlling interest (Note 9)

 
3.3

 

 

 
3.3

 
(3.3
)
 

Stock-based compensation

 
3.7

 

 
(1.1
)
 
2.6

 

 
2.6

Net income (loss)

 

 
(3.1
)
 

 
(3.1
)
 
0.3

 
(2.8
)
March 31, 2020
16.7

 
$
355.9

 
$
24.7

 
$
(37.7
)
 
$
342.9

 
$
23.2

 
$
366.1


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



3


U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)

Three Months Ended
March 31,
 
2020

2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
Net income (loss)
$
(2.8
)

$
(2.6
)
Adjustments to reconcile net income to net cash provided by operating activities:
 


 

Depreciation, depletion and amortization
23.4


22.8

Amortization of debt issuance costs
0.4


0.4

Change in value of contingent consideration
0.3


1.0

Loss on sale/disposal of assets, net


0.9

Deferred income taxes
2.2


2.2

Provision for doubtful accounts and customer disputes
0.3


0.4

Stock-based compensation
3.7


1.7

Other, net
(0.8
)
 
(0.5
)
Changes in assets and liabilities, excluding effects of acquisitions:
 


 

Accounts receivable
15.1


0.6

Inventories
(0.2
)

0.7

Prepaid expenses and other current assets
(5.2
)

(3.5
)
Other assets and liabilities
0.3


(1.0
)
Accounts payable and accrued liabilities
7.3


(1.2
)
Net cash provided by operating activities
44.0


21.9

CASH FLOWS FROM INVESTING ACTIVITIES:
 


 

Purchases of property, plant and equipment
(7.3
)

(7.2
)
Payments for acquisitions, net of cash acquired
(140.2
)


Proceeds from sale of businesses and property, plant and equipment
0.2


0.4

Net cash used in investing activities
(147.3
)

(6.8
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 


 

Proceeds from revolver borrowings
170.2


76.3

Repayments of revolver borrowings
(79.9
)

(74.8
)
Proceeds from stock option exercises


0.2

Payments of other long-term obligations
(2.9
)

(3.7
)
Payments for finance leases, promissory notes and other
(8.4
)

(8.1
)
Proceeds from finance lease
12.2

 

Debt issuance costs
(1.0
)
 

Shares redeemed for employee income tax obligations
(1.1
)

(1.1
)
Net cash provided by (used in) financing activities
89.1


(11.2
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(14.2
)

3.9

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
40.6


20.0

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
26.4


$
23.9


4


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

 
Three Months Ended
March 31,
 
2020
 
2019
Supplemental Disclosure of Cash Flow Information:
 

 
 

Net cash paid for interest
$
1.7

 
$
1.7

Net cash paid for income taxes
$
0.1

 
$

 
 
 
 
Supplemental Disclosure of Non-cash Investing and Financing Activities:
 
 
 
Capital expenditures funded by finance leases and promissory notes
$
9.7

 
$
1.3

Acquisitions funded by deferred consideration
$
1.7

 
$

Transfer of non-controlling interest
$
3.3

 
$


There were approximately $0.6 million of accounts payable owed by the Company that were effectively settled as part of the Coram Acquisition, as defined in Note 3 to these condensed consolidated financial statements, which were eliminated in consolidation in 2020.

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

5


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


1.
BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of U.S. Concrete, Inc. and its subsidiaries (collectively, "we," "us," "our," the "Company," or "U.S. Concrete") and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for reporting interim financial information. Some information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") have been condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 10-K").  In the opinion of our management, all material adjustments necessary to state fairly the information in our unaudited condensed consolidated financial statements have been included. All adjustments are of a normal or recurring nature. All amounts are presented in United States dollars, unless otherwise noted. Certain computations may be impacted by the effect of rounding in this report. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

The preparation of financial statements and accompanying notes in conformity with U.S. GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates. Estimates and assumptions that we consider significant in the preparation of our financial statements include those related to our business combinations, goodwill, intangibles, accruals for self-insurance, income taxes, valuation of contingent consideration, allowance of doubtful accounts, the valuation of inventory and the valuation and useful lives of property, plant and equipment.

2.
RECENT ACCOUNTING PRONOUNCEMENTS, SEC FINANCIAL DISCLOSURE REQUIREMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Credit Losses. As of January 1, 2020, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification 326, "Current Expected Credit Losses" ("ASC 326"). While the prior accounting rules used a model of incurred losses to estimate credit losses on certain types of financial instruments, including trade accounts receivable, ASC 326 requires entities to use a forward-looking approach based on expected losses, which when applied may result in the earlier recognition of allowances for losses. As required by the standard, upon adoption we applied the model on a prospective basis and recorded a cumulative-effect adjustment, net of taxes, of $3.3 million to opening retained earnings for the impact of the addition to the allowance for doubtful accounts.

Fair Value Measurements. As of January 1, 2020, we adopted a FASB update to disclosure requirements for fair value measurement, which removed, modified and added certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement." The adoption of this update did not have a material impact on the consolidated financial statements. See Note 10 for additional information.

Subsidiary Guarantees. In March 2020, the SEC adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements. The Company adopted these amendments as of March 31, 2020. Accordingly, combined summarized financial information has been presented only for the issuers and guarantors of our registered securities for the most recent fiscal year and the year-to-date interim period, and the location of the required disclosures has been removed from the Notes to Condensed Consolidated Financial Statements to Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Significant Accounting Policies Update--Accounts Receivable.  Accounts receivable consist primarily of receivables from contracts with customers for the sale of ready-mixed concrete, aggregates and other products.  Accounts receivable initially are recorded at the transaction amount.  We utilize liens or other legal remedies in our collection efforts of certain accounts receivable.  Each reporting period, we evaluate the collectability of the receivables and record an allowance for doubtful accounts and customer disputes for our estimated losses on balances that may not be collected in full, which reduces the accounts receivable balance.  Additions to the allowance result from a provision for bad debt expense that is recorded to selling, general and administrative

6


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

expenses.  A provision for customer disputes recorded as a reduction to revenue also increases the allowance.  Accounts receivable are written off if and when we determine the receivable will not be collected and are reflected as a reduction to the allowance.

We determine the amount of bad debt expense and customer dispute losses each reporting period and the resulting adequacy of the allowance at the end of each reporting period by using a combination of historical loss experience, customer-by-customer analysis, subjective assessments of our loss exposure. For accounts receivable balances as of and prior to December 31, 2019, our estimate of allowance for doubtful accounts was based on our estimated probable losses. Beginning January 1, 2020, upon our adoption of ASC 326, our allowance for doubtful accounts is based on our estimated expected losses, and the underlying evaluations include analysis of forward-looking information, including economic conditions.

Other Significant Accounting Policies. For our other significant accounting policies, including a description of our business combination valuation methodologies, see Note 1 to the consolidated financial statements in our 2019 10-K.

3.
BUSINESS COMBINATION

On February 24, 2020, we acquired all of the equity of Coram Materials Corp. and certain of its affiliates (collectively, "Coram Materials"). Coram Materials is a sand and gravel products provider located on Long Island, New York. This acquisition increased the vertical integration of our New York City operations.

The acquisition of all of the equity of Coram Materials (the "Coram Acquisition") was accounted for as a business combination. We funded the initial cash purchase consideration through borrowings under our Revolving Facility (as defined in Note 7). The combined assets acquired through the Coram Acquisition included an aggregates facility and 330 acres of land, including 180 mining acres with approximately 41.9 million tons of in-place, proven and permitted aggregate reserves and approximately 7.5 million tons of in-place, proven, but unpermitted reserves. To effect this transaction, we incurred $0.5 million of transaction costs, which were included in selling and general administrative expenses in our condensed consolidated statements of operations for the three months ended March 31, 2020.

Our accounting for the Coram Acquisition is preliminary. We expect to record adjustments as we accumulate information needed to estimate the fair value of assets acquired and liabilities assumed, including working capital balances and estimated fair value of property, plant and equipment.

The following table presents the total consideration for the Coram Acquisition and the amounts related to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date:

($ in millions)
Coram Materials
Accounts receivable
$
2.0

Inventory
10.0

Other current assets
0.3

Property, plant and equipment
130.9

Total assets acquired
143.2

Current liabilities
0.1

Other long-term liabilities
0.2

Total liabilities assumed
0.3

Total consideration (fair value)(1)
$
142.9


(1) Includes $140.2 million in cash for the initial purchase consideration, fair value deferred consideration of $1.7 million, a trade working capital payable of $1.6 million, less a $0.6 million settlement of accounts payable owed by the Company to Coram Materials at the acquisition date. The maximum amount of deferred consideration is $2.0 million, payable over 2 years.

7


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


Impact of Coram Acquisition

Following the acquisition date and during the three months ended March 31, 2020, we recorded revenue of $1.6 million and an operating loss of $0.2 million in our condensed consolidated statement of operations for the operations associated with the Coram Acquisition. Included in the operating loss was $1.6 million of costs related to the fair value increase in inventory on hand acquired at the acquisition date.

The information presented below reflects the unaudited pro forma combined financial results for the Company, which include and represent our estimate of the first quarter 2020 results of operations as if the Coram Acquisition had been completed on January 1, 2019.

 
Three Months Ended
March 31,
($ in millions except per share)
2020
 
2019
Revenue
$
336.5

 
$
337.0

Net loss attributable to U.S. Concrete
$
(1.6
)
 
$
(2.6
)
 
 
 
 
Net loss per share attributable to U.S. Concrete - basic
$
(0.10
)
 
$
(0.16
)
Net loss per share attributable to U.S. Concrete - diluted
$
(0.10
)
 
$
(0.16
)


The above pro forma results are unaudited and were prepared based on the historical U.S. GAAP results of the Company and the historical results of Coram Materials, based on data provided by the former owners. These results are not necessarily indicative of what the Company's actual results would have been had the acquisition occurred on January 1, 2019 and do not reflect any operational efficiencies or potential cost savings that may occur as a result of consolidation of the operations.

The unaudited pro forma amounts above reflect the following adjustments:
 
Three Months Ended
March 31,
($ in millions)
2020
 
2019
Decrease (increase) in cost of goods sold related to fair value increase in inventory
$
1.6

 
$
(0.8
)
Increase in depreciation, depletion and amortization expense
(0.9
)
 
(0.9
)
Exclusion of buyer transaction costs
0.5

 

Exclusion of seller transaction costs
0.3

 

Increase in interest expense
(0.8
)
 
(1.0
)
Increase in income tax expense
(1.1
)
 
(0.2
)


4.
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND CUSTOMER DISPUTES
 
($ in millions)
 
 
Balance, December 31, 2019
 
$
4.0

Cumulative effect of the adoption of ASC 326
 
4.5

Balance, January 1, 2020
 
8.5

Provision for doubtful accounts and customer disputes
 
0.3

Uncollectible receivables written off, net of recoveries
 
(0.7
)
Balance, March 31, 2020
 
$
8.1




8


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

5.
INVENTORIES
 
($ in millions)
March 31, 2020
 
December 31, 2019
Raw materials
$
63.4

 
$
53.4

Building materials for resale
4.0

 
3.6

Other
1.8

 
2.0

Total
$
69.2

 
$
59.0



6.    GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill
    
We perform our annual goodwill impairment testing in the fourth quarter of each year. In addition to the annual impairment test, we are required to regularly assess whether a triggering event has occurred that would require interim impairment testing. We determined that the significant decline in the overall financial markets, including U.S. Concrete's market capitalization, as a result of the COVID-19 pandemic, qualified as a triggering event that warranted further analysis to determine if there was an impairment loss as of March 31, 2020. As allowed, we elected to perform a qualitative assessment for our reporting units to assess whether it was more likely than not that the goodwill was impaired as of March 31, 2020.  Considering the existing excess fair value identified in our 2019 impairment assessment, our qualitative assessment included a review of our previous forecasts, assumptions and analyses in light of more current information such as: (1) projected revenues, expenses and cash flows, including the expected duration and extent of impact to our business and our customers from the COVID-19 pandemic; (2) current discount rates; (3) the reduction in our market capitalization; and (4) changes to the regulatory environment. Based on the qualitative assessment, we determined that it was more likely than not that the goodwill was not impaired; therefore, no quantitative assessment was necessary.

The accumulated impairment was as follows:
($ in millions)
 
March 31, 2020
 
December 31, 2019
Goodwill, gross
 
$
245.3

 
$
245.3

Accumulated impairment
 
(5.8
)
 
(5.8
)
Goodwill, net
 
$
239.5

 
$
239.5


Goodwill by reportable segment was as follows:
($ in millions)
 
March 31, 2020
 
December 31, 2019
Ready-mixed concrete
 
$
150.0

 
$
150.0

Aggregate products
 
86.2

 
86.2

Other non-reportable segments
 
3.3

 
3.3

Goodwill, net
 
$
239.5

 
$
239.5



9


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


Other Intangible Assets

Our purchased intangible assets were as follows:
 
 
March 31, 2020
($ in millions)
 
Gross
 
Accumulated Amortization
 
Net
 
Weighted Average Remaining Life (In Years)
Definite-lived intangible assets
 
 
 
 
 
 
 
 
Customer relationships
 
$
108.5

 
$
(63.5
)
 
$
45.0

 
3.7
Trade names
 
44.5

 
(14.1
)
 
30.4

 
18.9
Non-competes
 
18.3

 
(15.8
)
 
2.5

 
2.3
Leasehold interests
 
12.5

 
(7.2
)
 
5.3

 
5.3
Favorable contracts
 
4.0

 
(3.9
)
 
0.1

 
0.7
Environmental credits
 
2.8

 
(0.2
)
 
2.6

 
15.8
Total definite-lived intangible assets
 
190.6


(104.7
)

85.9

 
9.5
Indefinite-lived intangible assets
 
 
 
 
 
 
 
 
Land rights(1)
 
1.2

 

 
1.2

 
 
Total purchased intangible assets
 
$
191.8

 
$
(104.7
)
 
$
87.1

 
 


 
 
December 31, 2019
($ in millions)
 
Gross
 
Accumulated Amortization
 
Net
 
Weighted Average Remaining Life (In Years)
Definite-lived intangible assets
 
 
 
 
 
 
 
 
Customer relationships
 
$
108.5

 
$
(59.7
)
 
$
48.8

 
3.9
Trade names
 
44.5

 
(13.6
)
 
30.9

 
19.1
Non-competes
 
18.3

 
(15.3
)
 
3.0

 
2.4
Leasehold interests
 
12.5

 
(6.7
)
 
5.8

 
5.4
Favorable contracts
 
4.0

 
(3.9
)
 
0.1

 
0.9
Environmental credits
 
2.8

 
(0.2
)
 
2.6

 
16.0
Total definite-lived intangible assets
 
190.6

 
(99.4
)
 
91.2

 
9.4
Indefinite-lived intangible assets
 
 
 
 
 
 
 
 
Land rights(1)
 
1.2

 

 
1.2

 
 
Total purchased intangible assets
 
$
191.8

 
$
(99.4
)
 
$
92.4

 
 


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


10


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

As of March 31, 2020, the estimated remaining amortization of our definite-lived intangible assets was as follows (in millions):
2020 (remainder of the year)
$
15.6

2021
18.6

2022
12.7

2023
6.3

2024
6.0

Thereafter
26.7

Total
$
85.9



Also included in other long-term obligations and deferred credits in the accompanying condensed consolidated balance sheets were unfavorable lease intangibles with a gross carrying amount of $1.5 million as of both March 31, 2020 and December 31, 2019, and a net carrying amount of $0.4 million and $0.5 million as of March 31, 2020 and December 31, 2019, respectively. These unfavorable lease intangibles had a weighted average remaining life of 4.1 years as of March 31, 2020.

We recorded amortization expense for our definite-lived intangible assets and unfavorable lease intangibles of $5.3 million and $6.0 million for the three months ended March 31, 2020 and 2019, respectively, in our condensed consolidated statements of operations.

7.
DEBT
 
($ in millions)
March 31, 2020
 
December 31, 2019
Senior unsecured notes due 2024 and unamortized premium(1)
$
606.5

 
$
606.8

Asset based revolving credit facility
90.3

 

Finance leases
82.8

 
67.3

Promissory notes
18.1

 
20.4

Debt issuance costs
(7.8
)
 
(7.2
)
Total debt
789.9


687.3

Less: current maturities
(27.3
)
 
(32.5
)
Long-term debt, net of current maturities
$
762.6

 
$
654.8



(1)
The effective interest rate for these notes was 6.56% as of both March 31, 2020 and December 31, 2019.

See Note 16 for a discussion of a Delayed Draw Term Loan Facility entered into on April 17, 2020.

Asset Based Revolving Credit Facility

As of March 31, 2020, we had $19.7 million of undrawn standby letters of credit under our senior secured credit facility ("Revolving Facility"). Loans under the Revolving Facility are in the form of either base rate loans or London Interbank Offered Rate ("LIBOR") loans denominated in U.S. dollars. The interest rate for the facility was 3.50% as of March 31, 2020.

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 certain other adjustments. Our availability under the Revolving Facility at March 31, 2020 was $126.2 million. We are required, upon the occurrence of certain events, to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for each period of 12 calendar months. As of March 31, 2020, we were in compliance with all covenants under the loan agreement that governs the Revolving Facility.


11


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

8.    LEASES

Supplemental balance sheet information related to leases was as follows:
($ in millions)
Balance Sheet Classification
 
March 31, 2020
 
December 31, 2019
 
Assets:
 
 
 
 
 
 
Operating
Operating lease assets
 
$
71.7

 
$
69.8

 
Finance
Property, plant and equipment, net
 
109.4

(1) 
91.5

(1) 
Total lease assets
 
 
$
181.1

 
$
161.3

 
Liabilities:
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Operating
Current operating lease liabilities
 
$
13.7

 
$
12.9

 
Finance
Current maturities of long-term debt
 
21.1

 
24.2

 
Long-term liabilities
 
 
 
 
 
 
Operating
Long-term operating lease liabilities
 
61.0

 
59.7

 
Finance
Long-term debt, net of current maturities
 
61.7

 
43.1

 
Total lease liabilities
 
 
$
157.5

 
$
139.9

 

(1) Net of accumulated amortization of $33.3 million and $29.4 million as of March 31, 2020 and December 31, 2019, respectively.

Supplemental statement of operations information related to leases was as follows:
 
 
Three Months Ended
March 31,
 
($ in millions)
 
2020
 
2019
 
Operating lease cost
 
 
 
 
 
Cost of goods sold before depreciation, depletion and amortization
 
$
5.5

 
$
5.9

 
Selling, general and administrative expenses
 
0.7

 
0.5

 
Total operating lease cost
 
6.2

(1) 
6.4

(1) 
 
 
 
 
 
 
Finance lease cost
 
 
 
 
 
Depreciation, depletion and amortization
 
3.7

 
2.7

 
Interest expense, net
 
0.8

 
0.6

 
Total finance lease cost
 
4.5

 
3.3

 
Total lease cost
 
$
10.7

 
$
9.7

 


(1) Includes short-term lease and variable lease costs of $1.7 million for the three months ended March 31, 2020 and $1.5 million for the three months ended March 31, 2019.


12


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

Maturities of lease liabilities were as follows:
($ in millions)
 
Operating Leases
 
Finance Leases
2020 (remainder of year)
 
$
13.0

 
$
16.5

2021
 
16.7

 
25.3

2022
 
13.2

 
20.1

2023
 
11.6

 
14.5

2024
 
10.8

 
8.1

2025
 
8.0

 
4.1

Thereafter
 
18.6

 
0.5

Total lease payments
 
91.9

 
89.1

Less interest
 
17.2

 
6.3

Present value of lease liabilities
 
$
74.7

 
$
82.8



Lease term and discount rate were as follows:
 
 
March 31, 2020

 
December 31, 2019

Weighted-average remaining lease term:
 
 
 
 
Operating leases
 
6.6 years

 
6.6 years

Finance leases
 
3.8 years

 
3.4 years

Weighted-average discount rate:
 
 
 
 
Operating leases
 
5.8
%
 
6.2
%
Finance leases
 
3.7
%
 
3.8
%

Supplemental cash flow information related to leases was as follows:
 
 
Three Months Ended
March 31,
($ in millions)
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Operating cash flows for operating leases
 
$
0.8

 
$
4.8

Operating cash flows for finance leases
 
4.3

 
0.6

Financing cash flows for finance leases
 
6.0

 
5.1

Net assets obtained in exchange for finance lease liabilities
 
9.7

 
1.3

Net right-of-use assets obtained in exchange for operating lease liabilities
 
5.3

 
0.8



9.   NON-CONTROLLING INTEREST

Through its ownership of Polaris Materials Corp., the Company previously held a 70% interest in Eagle Rock Materials Ltd. ("Eagle Rock"), which was originally formed to develop the Eagle Rock quarry project in British Columbia, Canada. During the three months ended March 31, 2020, all ownership interest in Eagle Rock reverted back to the Company such that Eagle Rock is now a wholly-owned subsidiary. This resulted in the elimination of the previously recorded $3.3 million Eagle Rock non-controlling interest.


13


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

10.
FAIR VALUE MEASUREMENTS

The methodologies and the fair value measurement levels used to determine the fair value of our financial assets and liabilities at March 31, 2020 were the same as those used at December 31, 2019.

The following table provides a reconciliation of the changes in Level 3 fair value measurements:
($ in millions)
Contingent Consideration
Balance at December 31, 2019
$
27.2

Change in valuation
0.3

Payments
(2.0
)
Balance at March 31, 2020
$
25.5



Inputs for the discounted cash flow technique used to value our acquisition-related contingent consideration were as follows:
 
 
March 31, 2020
 
December 31, 2019
Range of discount rates
 
4.98% - 6.38%

 
3.70% - 7.46%

Weighted-average discount rate
 
4.94
%
 
4.99
%
Payment cap (in millions)
 
$
26.8

 
$
28.8

Expected payment period remaining (in years)
 
0-3

 
0-3

Management projections of the payout criteria
 
EBITDA/Volumes
 
EBITDA/Volumes


Other Financial Instruments

The fair value of our 6.375% senior unsecured notes due 2024 ("2024 Notes"), which was estimated based on quoted market prices (i.e., Level 2 inputs), was $538.5 million as of March 31, 2020. The carrying value of the outstanding amounts under our Revolving Facility and our operating and finance lease assets and liabilities approximate fair value due to the nature of the underlying collateral associated with the debt along with floating interest rates.

11.
STOCK-BASED COMPENSATION

We grant stock-based compensation awards to management, employees and non-employee directors under the U.S. Concrete, Inc. Long Term Incentive Plan (the "LTI Plan").  As of March 31, 2020, there were approximately 23,000 shares remaining for future issuance under the LTI Plan.  Stock-based compensation may include stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled equity awards and performance awards.

Stock-Based Compensation Cost

We recognized stock-based compensation expense of $3.7 million during the three months ended March 31, 2020 and $1.7 million during the three months ended March 31, 2019. Stock-based compensation expense is reflected in selling, general and administrative expenses in our consolidated statements of operations.

2020 Restricted Stock Unit Grant

On March 1, 2020, the Compensation Committee of the Board of Directors approved grants of 0.4 million restricted stock units (the "2020 RSU Grant"). The 2020 RSU Grant consisted of a 60% time-vested component that vests annually over a three-year period and a 40% stock performance hurdle component. The stock performance hurdle component triggers vesting upon our stock price reaching certain thresholds and may vest up to 200% of the target number of performance stock units granted.

The fair value of the 2020 RSU Grant subject only to time-based vesting restrictions was determined based upon the closing price of our common stock on the effective date of the grant. The fair value of the 2020 RSU Grant subject to market performance hurdles was determined utilizing a Monte Carlo financial valuation model. Compensation expense determined utilizing the Monte

14


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

Carlo simulation is recognized regardless of whether the common stock reaches the defined thresholds, provided that each grantee remains an employee at the end of the expected term. The assumptions used to estimate the fair value of performance-based restricted stock units granted in 2020 were as follows:
 
 
2020
Expected term (years)
 
1.1 to 1.6
Expected volatility
 
43.8%
Risk-free interest rate
 
0.9%
Vesting price(1)
 
$43.23 - $55.21
Grant date fair value per share
 
$11.49 - $16.24

(1)
The vesting price is the average of the daily volume-weighted average share price of U.S. Concrete's common stock over any period of 20 consecutive trading days within the three-year period beginning on the date of grant. These hurdles were established on March 1, 2020.

12.
INCOME TAXES

We recorded an income tax benefit of $4.9 million for the three months ended March 31, 2020. Our effective tax rate differed substantially from the statutory tax rate primarily due to additional tax benefits recognized related to the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") enacted on March 27, 2020. The CARES Act, among other things, modified the business interest deduction limitation for tax years beginning in 2019 and 2020 from 30% of adjusted taxable income ("ATI") to 50% of ATI. As a result, we recorded an additional tax benefit of $3.2 million in the three months ended March 31, 2020 to reflect the CARES Act change to our estimated interest limitation for the year ended December 31, 2019. This tax benefit was partially offset by a net tax shortfall for share-based compensation.

In addition to the interest limitation change, the CARES Act includes modifications for net operating loss carryovers and carrybacks, immediate refund of alternative minimum tax credit carryovers and a technical correction to the Tax Cuts and Jobs Act of 2017 (the "2017 Act") for qualified improvement property. Absent a change in the interpretation of the calculation of ATI for purposes of the business interest limitation as provided in the proposed regulations issued in November 2018, we do not anticipate these provisions will have a material impact on the Company. The CARES Act also includes non-income tax relief for which the Company currently expects to benefit, including the deferral of certain payroll tax payments and payroll tax credits for retaining certain employees.

For the three months ended March 31, 2019, we recorded an income tax benefit of $0.7 million. For the period ended March 31, 2019, our effective tax rate differed from the federal statutory rate primarily due to (i) losses generated by certain of our Canadian subsidiaries for which no income tax benefit was recognized due to a related full valuation allowance, (ii) adjustments related to the tax rate change enacted as part of the 2017 Act and (iii) state income taxes.

13.
EARNINGS (LOSS) PER SHARE

Potentially dilutive shares totaling 0.9 million for the three months ended March 31, 2020 and 0.2 million for the three months ended March 31, 2019 were excluded from the diluted earnings per share calculations due to the net loss or their associated performance targets had not been met. They related to unvested restricted stock awards and restricted stock units.

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

15


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

In the future, we may receive funding deficiency demands related to multi-employer pension plans to which we contribute.  We are unable to estimate the amount of any potential future funding deficiency demands because the actions of each of the 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 May 5, 2020, there were 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 such unasserted product defect claims related to ready-mixed concrete we have delivered prior to March 31, 2020.

We believe that the resolution of any 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 potential liability of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities for these agreements as of March 31, 2020.

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. As of May 5, 2020, there were no material pending claims related to such indemnification.


16


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

Insurance Programs

We maintain third-party insurance coverage against certain workers’ compensation, automobile and general liability risks.  Under certain components of our insurance program, we share the risk of loss with our insurance underwriters by maintaining high deductibles subject to aggregate annual loss limitations.  Generally, our insurance program deductible retentions per occurrence are $1.0 million to $2.0 million for workers’ compensation and general liability and $2.0 million to $10.0 million for automobile, although certain of our operations are self-insured for workers’ compensation.  We record an expense for expected losses under the programs.  The expected losses are determined using a combination of our historical loss experience and subjective assessments of our future loss exposure. The estimated losses are subject to uncertainty, including changes in claims reporting patterns, claims settlement patterns, judicial decisions, legislation and economic conditions.  Although we believe that the estimated losses we have recorded are reasonable, significant differences related to the items noted above could materially affect our insurance obligations and future expense. The amount accrued for self-insurance claims, which was recorded in accrued liabilities and other long-term obligations and deferred credits, was $24.3 million as of March 31, 2020 and $23.3 million as of December 31, 2019.

Performance Bonds
 
In the normal course of business, we and our subsidiaries were contingently liable under $16.4 million in performance bonds that various contractors, states and municipalities have required as of March 31, 2020. The bonds principally relate to construction contracts, reclamation obligations, licensing and permitting. We and our subsidiaries have indemnified the underwriting insurance company against any exposure under the performance bonds. No material claims have been made against these bonds.


17


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

15.
SEGMENT INFORMATION

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

Our ready-mixed concrete segment produces and sells ready-mixed concrete. This segment serves the following markets: Texas, California, New York City, New Jersey, Washington, D.C., Philadelphia, Oklahoma and the U.S. Virgin Islands. Our aggregate products segment produces crushed stone, sand and gravel and serves the markets in which our ready-mixed concrete segment operates as well as the West Coast and Hawaii. Other operations and products not associated with a reportable segment include our aggregates distribution operations, building materials stores, hauling operations, ARIDUS® Rapid Drying Concrete technology, brokered product sales and recycled aggregates.

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

Our chief operating decision maker evaluates segment performance and allocates resources based on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss), excluding the impact of income tax expense (benefit), depreciation, depletion and amortization, net interest expense and certain other non-cash, non-recurring and/or unusual, non-operating items including, but not limited to: non-cash stock compensation expense, non-cash change in value of contingent consideration, impairment of assets, acquisition-related costs, officer transition expenses and purchase accounting adjustments for inventory. Acquisition-related costs consist of fees and expenses for accountants, lawyers and other professionals incurred during the negotiation and closing of strategic acquisitions and certain acquired entities' management severance costs. Acquisition-related costs do not include fees or expenses associated with post-closing integration of strategic acquisitions. Many of the impacts excluded to derive Adjusted EBITDA are similar to those excluded in calculating our compliance with our debt covenants.

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

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

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



18


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

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



Three Months Ended
March 31,


2020

2019
Revenue by Segment:

 

 
Ready-mixed concrete




Sales to external customers

$
292.2


$
290.4

Aggregate products




Sales to external customers

31.1


31.8

Intersegment sales

12.5


11.1

Total aggregate products
 
43.6

 
42.9

Total reportable segment revenue

335.8

 
333.3

Other products and eliminations

(1.4
)

(0.2
)
Total revenue

$
334.4


$
333.1






Reportable Segment Adjusted EBITDA:

 

 
Ready-mixed concrete

$
31.7


$
34.5

Aggregate products

11.3


10.4

Total reportable segment Adjusted EBITDA

$
43.0

 
$
44.9






Reconciliation of Total Reportable Segment Adjusted EBITDA to Net Income:




Total reportable segment Adjusted EBITDA
 
$
43.0

 
$
44.9

Other products and eliminations from operations
 
0.1

 
(0.1
)
Corporate overhead
 
(15.6
)
 
(14.5
)
Depreciation, depletion and amortization for reportable segments
 
(21.8
)
 
(20.8
)
Interest expense, net
 
(11.4
)
 
(11.6
)
Change in value of contingent consideration for reportable segments
 
(0.3
)
 
(1.0
)
Purchase accounting adjustments for inventory
 
(1.6
)
 

Loss on mixer truck fire
 

 
(0.6
)
Corporate, other products and eliminations other income (loss), net
 
(0.1
)
 
0.4

Income (loss) from operations before income taxes
 
(7.7
)
 
(3.3
)
Income tax benefit (expense)
 
4.9

 
0.7

Net income (loss)
 
$
(2.8
)
 
$
(2.6
)



19


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

 
 
Three Months Ended
March 31,
 
 
2020
 
2019
Capital Expenditures:
 
 
 
 
Ready-mixed concrete
 
$
4.4

 
$
5.8

Aggregate products
 
2.8

 
1.2

Other products and corporate
 
0.1

 
0.2

Total capital expenditures
 
$
7.3

 
$
7.2


 
 
Three Months Ended
March 31,
 
 
2020
 
2019
Revenue by Product:
 
 
 
 
Ready-mixed concrete
 
$
292.2

 
$
290.4

Aggregate products
 
31.1

 
31.8

Aggregates distribution
 
3.7

 
5.3

Building materials
 
6.3

 
4.6

Other
 
1.1

 
1.0

Total revenue
 
$
334.4

 
$
333.1

 
 
 
March 31, 2020
 
December 31, 2019
Identifiable Property, Plant and Equipment Assets:
 
 
 
 
Ready-mixed concrete
 
$
290.8

 
$
286.4

Aggregate products
 
487.1

 
359.6

Other products and corporate
 
26.1

 
27.5

Total identifiable assets
 
$
804.0

 
$
673.5