U.S. CONCRETE, INC. The following discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements as well as our Annual Report on Form 10-K for the year endedDecember 31, 2020 ("2020 10-K"). Our 2020 10-K includes additional information about our significant and critical accounting policies, as well as a detailed discussion of the most significant risks associated with our financial condition and operating results. Unless noted otherwise, the discussions that follow refer to the three months endedMarch 31, 2021 as "the quarter" and compare the results to the three months endedMarch 31, 2020 .
Overview
We are a leading heavy building materials supplier of aggregates and ready-mixed concrete in select geographic markets inthe United States , theU.S. Virgin Islands andCanada . The geographic markets for our products are generally local, except for our Canadian aggregate products operation,Polaris Materials Corp. ("Polaris"), which primarily serves markets inCalifornia . 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. Our operating results are subject to fluctuations in the level and mix of construction activity that occur in our markets. The level of activity affects the demand for our products, while the product mix of activity among the various segments of the construction industry affects both our relative competitive strengths and our operating margins. Commercial and industrial projects generally provide more opportunities to sell value-added products that are designed to meet the high-performance requirements of these types of projects. We conduct our business primarily through two reportable segments: ready-mixed concrete and aggregate products.Ready-Mixed Concrete . Our ready-mixed concrete segment (which represented 84.5% of our revenue for the three months endedMarch 31, 2021 ) engages principally in the formulation, preparation and delivery of ready-mixed concrete to our customers' job sites. We provide ready-mixed concrete from our operations inTexas ,Northern California ,New York City ,New Jersey ,Washington, D.C. ,Philadelphia ,Oklahoma and theU.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 11.2% of our revenue for the three months endedMarch 31, 2021 , excluding$12.5 million of intersegment sales) produces crushed stone, sand and gravel from our aggregates facilities located inBritish Columbia, Canada ;Texas ;Oklahoma ;New Jersey ;New York ; and theU.S. Virgin Islands . We sell these 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 2.7 million tons of aggregates during the three months endedMarch 31, 2021 , withCanada representing 37%,Texas /Oklahoma representing 41%,New Jersey /New York representing 19%, and theU.S. Virgin Islands representing 3% of the total production. We believe our aggregate reserves provide us with additional raw materials sourcing flexibility and supply availability. 15 --------------------------------------------------------------------------------
Coronavirus Impact
The coronavirus ("COVID-19") pandemic began to impact our operations in March
2020 when residents throughout the U.S. began varying periods under
"stay-at-home" or "shelter-in-place" orders and has continued to impact numerous
aspects of our business since then. We continue to follow the enhanced safety
and health protocols established in 2020, while following evolving state and
local guidelines, and we have maintained our focus on cost containment efforts
to help minimize the resulting impact to our operating results. In addition, we
continue to monitor the impact of the pandemic on our customers and our
pipeline. The long-term impact to our business remains unknown because we are
unable to accurately predict the impact of COVID-19 due to various
uncertainties, including the severity of the virus, the duration of the
outbreak, the impact of variants of the virus, the availability and efficacy of
vaccines, the speed at which such vaccines are administered, the likelihood of a
resurgence of positive cases, actions that may be taken by governmental
authorities intended to minimize the spread of the pandemic or to stimulate the
economy and other unintended consequences. Accordingly, business disruption
related to the COVID-19 outbreak may continue to cause significant fluctuations
in our business, impact demand for our products and our workforce availability
and magnify risks associated with our business and operations.
Acquisitions and Other Recent Developments
OnFebruary 24, 2020 , we acquired all of the equity ofCoram Materials Corp. and certain of its affiliates, a sand and gravel products provider located onLong Island inNew York . OnNovember 7, 2020 , we acquired a ready-mixed concrete business in ourWest Region . OnMarch 12, 2021 , we acquired property and the underlying royalty agreement associated with our aggregate products operation inBritish Columbia, Canada . OnApril 20, 2021 , we purchased a rail terminal and bulk storage facility for cementitious materials inStockton, California for$8.2 million that is currently leased to and operated by a third party. We made this investment to increase the control and stability over our raw material supply chain to support ourWest Region ready-mixed concrete business. 16 --------------------------------------------------------------------------------
Results of Operations
The discussions that follow reflect results for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , respectively, unless otherwise noted. Three Months Ended March 31, % ($ in millions except selling prices) 2021 2020 Change(1) Revenue$ 285.7 $ 334.4 (14.6)%
Cost of goods sold excluding depreciation, depletion and amortization
233.1 273.9 (14.9)
Selling, general and administrative expenses 29.3 33.7 (13.1)
Depreciation, depletion and amortization 24.4 23.4 4.3
Change in value of contingent consideration (0.1) 0.3 (133.3)
Gain on sale/disposal of assets and business, net (1.5) - NM
Operating income 0.5 3.1 (83.9)
Interest expense, net 10.4 11.4 (8.8)
Other income, net (0.4) (0.6) (33.3)
Income (loss) before income taxes (9.5) (7.7) (23.4)
Income tax expense (benefit) (4.7) (4.9) (4.1)
Net income (loss) (4.8) (2.8) (71.4)
Amounts attributable to non-controlling interest - 0.3 (100.0)
Net income (loss) attributable to
(54.8)%
Ready-Mixed Concrete Data:
Average selling price ("ASP") per cubic yard $ 141.49 $ 144.30 (1.9)%
Sales volume in thousand cubic yards 1,704 2,022 (15.7)%
Aggregate Products Data:
ASP per ton(2) $ 13.32 $ 12.23 8.9%
Sales volume in thousand tons 2,586 2,632 (1.7)%
(1) "NM" is defined as "not meaningful."
(2) Our calculation of ASP excludes freight and certain other ancillary revenue
and may differ from other companies in the construction materials industry.
Revenue. Revenue for the quarter decreased 14.6%, or $48.7 million , resulting
from lower sales of ready-mixed concrete, partially offset by higher revenue
from aggregate products sales. Impacted by both the regional effects of
inclement weather and the lingering effect of COVID-19 pandemic-related delays
on construction jobs, ready-mixed concrete sales decreased $50.7 million . The
revenue decline, resulting from lower ready-mixed concrete volumes in our East
and West regions, was generally consistent with what we have experienced since
the onset of the pandemic, but was further impacted by inclement weather during
the first quarter of 2021. Power disruptions associated with Winter Storm Uri
forced us to suspend operations in Texas temporarily in February 2021 . Our
overall ready-mixed concrete ASP decreased 1.9% during the quarter due to
product and geographic mix. While sales volume of aggregate products declined
1.7%, higher ASP resulted in a 2.1% increase in revenue for the aggregate
products segment. Higher sales volumes of aggregate products in our Texas and
New York operations were more than offset by sales declines in other markets.
Cost of goods sold excluding depreciation, depletion and amortization ("DD&A").
Cost of goods sold excluding DD&A decreased $40.8 million , or 14.9%, for the
quarter, with the majority of the decreases resulting from lower variable costs
(which include primarily raw material costs, labor and benefits costs, utilities
and delivery costs) due to lower sales volumes.
17
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Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $4.4 million , or 13.1%, for the quarter, with
the positive impact of cost-saving measures in response to the COVID-19 pandemic
and lower stock-based compensation expense being partially offset by certain
personnel-related expenses, including incentive compensation.
Gain on sale/disposal of assets and business, net. The quarter included gains
from sales of a non-core piece of real estate in Texas and certain ready-mixed
concrete plants in Oklahoma .
Income taxes. We recorded an income tax benefit of $4.7 million for the three
months ended March 31, 2021 . For the three months ended March 31, 2021 , our
effective tax rate differed substantially from the statutory tax rate primarily
due to (1) excess tax benefits recognized for stock-based compensation, (2)
anticipated Section 162(m) limitations on executive compensation and (3) losses
generated by certain of our Canadian subsidiaries for which no income tax
benefit is recognized due to a related full valuation allowance.
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 stock-based compensation.
Segment Operating Results
Our chief operating decision maker reviews operating results based on our two reportable segments, which are ready-mixed concrete and aggregate products, and evaluates segment performance and allocates resources based on Adjusted EBITDA. We define Adjusted EBITDA as our net income, excluding the impact of income taxes, 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, acquisition-related costs, officer transition expenses, purchase accounting adjustments for inventory and realignment initiative costs. Acquisition-related costs consist of fees and expenses for accountants, lawyers and other professionals incurred during the negotiation and closing of strategic acquisitions. 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 accounting principles generally accepted inthe United States of America ("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 agreements that govern our debt.
See the prior discussion of revenue within this Item 2 as well as Note 9, "Segment Information" to our condensed consolidated financial statements in this report for additional information regarding our segments and the reconciliation of Adjusted EBITDA to net income.
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Three Months Ended
March 31, Increase/ (Decrease)
($ in millions except selling prices) 2021 2020 %
Ready-Mixed Concrete Segment:
Revenue $ 241.5 $ 292.2 (17.4)%
Segment revenue as a percentage of total revenue 84.5 %
87.4 % Adjusted EBITDA$ 24.9 $ 31.7 (21.5)%
Adjusted EBITDA as a percentage of segment revenue 10.3 %
10.8 %
Ready-Mixed Concrete Data: ASP per cubic yard(1)$ 141.49 $ 144.30 (1.9)% Sales volume in thousand cubic yards 1,704 2,022 (15.7)%
(1) Calculation excludes certain ancillary revenue that is reported within the segment.
Adjusted EBITDA. The impact of volume declines on ready-mixed concrete Adjusted EBITDA was partially mitigated by actions taken as part of our business contingency plans in the form of labor management and concrete mix optimization.
Aggregate Products
Three Months Ended
March 31, Increase/ (Decrease)
($ in millions except selling prices) 2021 2020 %
Aggregate Products Segment:
Sales to external customers $ 22.6 $ 21.1 7.1%
Freight revenue on sales to external customers 9.4 10.0 (6.0)%
Intersegment sales(1) 12.5 12.5
Total aggregate products revenue$ 44.5 $ 43.6 2.1% Segment revenue, excluding intersegment sales, as a percentage of total revenue 11.2 % 9.3 % Adjusted EBITDA$ 12.5 $ 11.3 10.6% Adjusted EBITDA as a percentage of total aggregate products revenue 28.1 % 25.9 % Aggregate Products Data: ASP per ton(2)$ 13.32 $ 12.23 8.9% Sales volume in thousand tons 2,586 2,632 (1.7)% (1) We sell aggregate products to our ready-mixed concrete segment at market price. (2) Our calculation excludes freight and certain other ancillary revenue. Our definition and calculation of ASP may differ from other companies in the construction materials industry. Adjusted EBITDA. Despite lower sales volumes, higher ASP resulted in a 2.1% increase in total aggregate products revenue for the quarter. In addition to higher revenue, lower plant and delivery costs contributed to the improvement in adjusted EBITDA for the segment. 19 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents, and access to our credit facilities, including our (1) asset-based revolving credit facility (the "Revolving Facility"), which provides for borrowings of up to$300.0 million , subject to a borrowing base, and (2) delayed draw term loan facility (the "Term Loan Facility"), which provides for borrowings of up to$178.7 million . As ofMarch 31, 2021 , we had$22.8 million of cash and cash equivalents,$154.7 million of available borrowing capacity under the Revolving Facility and$178.7 million of available borrowing capacity under the Term Loan Facility, providing total available liquidity of$356.2 million . Proceeds from the Term Loan Facility, if drawn, are expected to be used for working capital and general corporate purposes, including to repay outstanding borrowings under our Revolving Facility. The following key financial measurements reflect certain aspects of our financial condition: ($ in millions) March 31, 2021 December 31, 2020 Cash and cash equivalents $ 22.8 $ 11.1 Working capital $ 81.0 $ 56.3 Total debt(1)$ 743.7 (1) $ 702.4 (1) Total debt includes long-term debt, net of unamortized debt issuance costs, including current maturities, finance leases, notes payable and any borrowings under the Revolving Facility and Term Loan Facility.
Our primary liquidity needs over the next 12 months consist of (1) working capital requirements; (2) debt service obligations; (3) capital expenditures; and (4) payments related to strategic acquisitions. Our primary portfolio strategy includes acquisitions in various regions and markets.
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 Revolving Facility 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 winter 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. Based on our projected cash needs, we believe that cash on hand,
availability under the Revolving Facility and the Term Loan Facility, and cash
generated from operations will provide us with sufficient liquidity in the
ordinary course of business, not including potential acquisitions. To help
mitigate the impact of the COVID-19 pandemic on our cash needs, we initiated
business contingency planning and will continue to adjust those plans as needed.
If, however, availability under the Revolving Facility, the Term Loan 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.
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 or due to COVID-19 operating
restrictions;
•declines in gross margins due to shifts in our product mix, increases in fixed
or variable costs or the impact of COVID-19;
•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, including from COVID-19;
•any further COVID-19 impacts to our business; and
•inclement weather beyond normal patterns that could reduce our sales volumes.
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Cash Flows
Three Months Ended
March 31,
($ in millions) 2021 2020
Net cash provided by (used in):
Operating activities $ 12.5 $ 44.0
Investing activities (29.6) (147.3)
Financing activities 28.8 89.1
Net increase (decrease) in cash $ 11.7 $ (14.2)
Our net cash provided by operating activities generally reflects the cash
effects of transactions and other events used in the determination of net income
or loss, including non-controlling interest. Overall, the decline in cash
generated from operations was driven primarily by the impacts of inclement
weather and COVID-19 on our operations, interest payments for certain of our
senior unsecured notes and higher payments of incentive compensation.
In addition to purchases of machinery, equipment, mixer trucks and vehicles to
service our business in both periods, investing activities in the quarter
included the $28.7 million purchase of land and the underlying royalty agreement
associated with our Orca Quarry on Vancouver Island , British Columbia, Canada .
Investing activities in the three months ended March 31, 2020 included $140.2
million for the acquisition of a sand and gravel products producer on Long
Island in New York .
For the year ending December 31, 2021 , we expect to invest (excluding
acquisitions such as the cement terminal in Stockton and the Orca quarry land
and royalty agreement acquisition) between $40 million and $50 million in
capital expenditures, including expenditures financed through finance leases. We
continue to monitor the COVID-19 pandemic and related economic repercussions for
consideration of our capital expenditure levels. Through May 6, 2021 , we have
invested $37 million in current year acquisitions.
Financing activities during the three months ended March 31, 2021 included $48.5
million of net borrowings under our Revolving Facility to operate our business
and fund acquisitions and investments in plant, property and equipment. During
the quarter, we made payments of $8.8 million primarily related to our finance
leases and promissory notes and paid $1.2 million for contingent and deferred
consideration obligations. Financing activities during the first three months of
2020 included $90.3 million of net borrowings under our Revolving Facility and
$12.2 million of financing proceeds for our Texas greenfield aggregates
operation. In addition, during the first three months of 2020, we made payments
of $8.4 million primarily related to our finance leases and promissory notes and
paid $2.9 million for contingent and deferred consideration obligations.
The discussion that follows provides a description of our arrangements relating to our outstanding indebtedness.
Asset Based Revolving Credit Facility
We have a Revolving Facility with certain financial institutions named therein as lenders (the "Lenders") andBank of America, N.A ., as agent for the Lenders that provides for up to$300.0 million of revolving borrowings. The Revolving Facility also permits the incurrence of other secured indebtedness not to exceed certain amounts as specified therein. The Revolving Facility 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 the London Interbank Offered Rate ("LIBOR") loans denominated inU.S. dollars. 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, as specified in the Third Amended and Restated Loan and Security Agreement (the "Third Loan Agreement"), which maturesAugust 31, 2022 . Our availability under the Revolving Facility atMarch 31, 2021 was$154.7 million . 21 -------------------------------------------------------------------------------- The Third Loan Agreement contains usual and customary covenants including, but not limited to, restrictions on our and our guarantor subsidiaries' 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 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 ofMarch 31, 2021 , we were in compliance with all covenants under the Third Loan Agreement.
Delayed Draw Term Loan Facility
OnApril 17, 2020 , we entered into a secured delayed draw term loan agreement (the "Agreement") with certain subsidiaries as guarantors thereto,Bank of America, N.A . as administrative agent and collateral agent, and the lenders and other parties named therein. The Agreement provided for an initial$180.0 million Term Loan Facility that was reduced to$178.7 million as ofMarch 31, 2021 , as permitted borrowings are reduced by approximately$0.4 million each quarter throughSeptember 30, 2021 . The Agreement permits borrowings untilDecember 15, 2021 . Any such borrowings outstanding will matureMay 1, 2025 (subject to a springing maturity onMarch 1, 2024 to the extent any of our 2024 Notes, as defined below, remain outstanding on such date). We entered into the Agreement to enhance our liquidity and financial flexibility. Proceeds of the Term Loan Facility, if drawn, will be used for working capital and general corporate purposes, including to repay outstanding borrowings under our Revolving Facility. Borrowings under the Agreement bear interest at our option of either: (1) LIBOR (subject to a floor of 0.75%) plus a margin ranging from 2.75% to 3.75% or (2) a base rate (which is equal to the greatest of the prime rate, the Federal Funds effective rate plus 0.50% and LIBOR plus 1.00% and is subject to a floor of 1.75%) plus a margin ranging from 1.75% to 2.75%. The applicable margin depends on the aggregate amount of the loans borrowed. Additionally, each draw on the Term Loan Facility will be issued at a price of 99.0% of the amount drawn. The Agreement is secured by a first priority lien and security interest on certain real property of the subsidiary guarantors and substantially all of the personal property ofU.S. Concrete, Inc. and its subsidiary guarantors that is not secured by a first priority security interest under the Revolving Facility (the "Revolving Facility Collateral") and a second priority security interest on the Revolving Facility Collateral. The Agreement contains usual and customary covenants including, but not limited to, restrictions on our and our guarantor subsidiaries' 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, but it does not contain any financial maintenance covenants. Senior Unsecured Notes AtMarch 31, 2021 , we had outstanding$200.0 million aggregate principal amount of senior unsecured notes due 2024 ("2024 Notes") and$400.0 million aggregate principal amount of senior unsecured notes due 2029 ("2029 Notes," and together with the 2024 Notes, "Senior Unsecured Notes"). The Senior Unsecured Notes are governed by similar indentures that contain customary covenants, including negative covenants that restrict our ability and our restricted subsidiaries ability to engage in certain transactions. The 2024 Notes are governed by the Indenture, dated as ofJune 7, 2016 , by and amongU.S. Concrete, Inc. , as issuer (the "Issuer"), the subsidiary guarantors party thereto, andU.S. Bank National Association , as trustee (the "2024 Indenture"). The 2024 Notes accrue interest at a rate of 6.375% per annum, which is payable onJune 1 andDecember 1 of each year. The 2024 Notes mature onJune 1, 2024 and are redeemable at our option prior to maturity at prices specified in the 2024 Indenture. The 2029 Notes are governed by the Indenture dated as ofSeptember 23, 2020 , among the Issuer, the subsidiary guarantors party thereto andU.S. Bank National Association , as trustee (the "2029 Indenture"). The 2029 Notes accrue interest at a rate of 5.125% per annum, which is payable onMarch 1 andSeptember 1 of each year. The 2029 Notes mature onMarch 1, 2029 and are redeemable at our option prior to maturity at prices specified in the 2029 Indenture. 22 -------------------------------------------------------------------------------- The Senior Unsecured Notes are guaranteed on a full and unconditional senior unsecured basis by each of the Issuer's restricted subsidiaries (each, a "Guarantor Subsidiary," and collectively, the "Guarantor Subsidiaries") that guarantee any obligations under the Revolving Facility and certain of the Issuer's other indebtedness or certain indebtedness of the Issuer's restricted subsidiaries (other than a foreign subsidiary or domestic subsidiary thereof that guarantees only indebtedness incurred by a foreign subsidiary or a domestic subsidiary thereof). Each Guarantor Subsidiary is directly or indirectly 100% owned by the Issuer. The guarantees are joint and several. The Issuer does not have any independent assets or operations. There are no significant restrictions in the 2024 Indenture or the 2029 Indenture on the ability of the Guarantor Subsidiaries to make distributions to the Issuer. The Senior Unsecured Notes are not guaranteed by any of the Issuer's direct or indirect foreign subsidiaries (or any domestic subsidiaries of any such foreign subsidiaries),U.S. Virgin Islands subsidiaries or domestic subsidiaries that are not wholly owned (collectively, the "Non-Guarantor Subsidiaries"). The Senior Unsecured Notes and the guarantees thereof are effectively subordinated to all of the Issuer's and the Guarantor Subsidiaries' existing and future secured obligations, including obligations under the Revolving Facility, the Term Loan Facility, our finance leases and our promissory notes, to the extent of the value of the collateral securing such obligations; senior in right of payment to any of our and the Guarantor Subsidiaries' future subordinated indebtedness; pari passu in right of payment with any of our and the Guarantor Subsidiaries' existing and future senior indebtedness, including the Issuer's and the Guarantor Subsidiaries' obligations under the Revolving Facility, the Term Loan Facility and our finance leases; and structurally subordinated to all existing and future indebtedness and other claims and liabilities, including trade payables and preferred stock, of any Non-Guarantor Subsidiaries.
Supplemental Guarantor Financial Information
The following tables present summarized financial information for the Issuer and
the Guarantor Subsidiaries on a combined basis after intercompany transactions
have been eliminated, including adjustments to eliminate intercompany
transactions between the Issuer and the Guarantor Subsidiaries. All assets and
liabilities have been allocated to the Issuer and the Guarantor Subsidiaries
generally based on legal entity ownership. Issuer investments in, and earnings
of, Non-Guarantor Subsidiaries are excluded from the summarized financial
information presented below.
Balance Sheets ($ in millions) March 31, 2021 December 31, 2020
Assets:
Due from Non-Guarantor Subsidiaries, current $ 0.8 $ 0.6
Other current assets 281.7 285.8
Property, plant and equipment, net 586.1 598.1
Amount due from Non-Guarantor Subsidiaries, long-term 131.8 110.9
Other long-term assets 290.8 299.2
Liabilities:
Current liabilities $ 219.1 $ 258.6
Long-term debt 708.3 667.2
Other long-term liabilities 136.5 134.5
Three Months Ended Year Ended December
Statements of Operations ($ in millions) March 31, 2021 31, 2020
Revenue $ 261.1 $ 1,259.6
Cost of goods sold excluding depreciation, depletion and
amortization 216.0 1,001.6
Operating income (loss) (1.8) 64.1
Net income (loss) (6.1) 16.6
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Other Debt
We have financing agreements with various lenders primarily for the purchase of mixer trucks and other machinery and equipment with$94.4 million of remaining principal as ofMarch 31, 2021 .
For additional information regarding our arrangements relating to outstanding indebtedness, see the information set forth in Note 5, "Debt" to our condensed consolidated financial statements included in this report.
Inflation
We experienced minimal increases in operating costs during the first quarter of 2021 related to inflation. However, in non-recessionary conditions, cement prices and certain other raw material prices, including aggregates, have generally risen faster than regional inflationary rates. When these price increases have occurred, we have generally been able to mitigate the cost increases with price increases we obtain for selling our products. Cement supply inTexas has been disrupted by temporary closures of certain cement producers' plants. As a result, our cement supply has been constrained, and cement prices began to rise inMarch 2021 . We implemented price increases inApril 2021 and will continue to do so as needed to mitigate the impact of these increases.
Critical Accounting Policies
We prepared the preceding discussion based on the accompanying interim unaudited condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. Such preparation of financial statements 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. Estimates are based on historical experience, currently available information and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. We described our critical accounting policies in Item 7 of Part II of our 2020 10-K. Our critical accounting policies involve the use of estimates in the recording of business combinations, goodwill and intangible assets and any related impairment, accruals for self-insurance, accruals for income taxes, and assessing impairment of long-lived assets. See Note 1, "Organization and Summary of Significant Accounting Policies" to our condensed consolidated financial statements included in Item 8 of Part II of the 2020 10-K for a discussion of our critical and significant accounting policies. 24 -------------------------------------------------------------------------------- CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS Certain statements and information in this report 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," "intend," "should," "expect," "plan," "target," "anticipate," "believe," "estimate," "outlook," "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 discussions concerning our expectations for future 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 commercial and residential construction;
•our ability to successfully implement our operating strategy;
•our ability to successfully identify, manage, and integrate acquisitions;
•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;
•seasonal and inclement weather conditions, which impede the placement of
ready-mixed concrete;
•the cyclical nature of, and changes in, the real estate and construction
markets, including pricing changes by our competitors;
•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;
•disruptions, uncertainties or volatility in the credit markets that may limit
our, our suppliers' and our customers' access to capital;
•product liability, property damage, results of litigation and other claims and
insurance coverage issues;
•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;
•the length and severity of the COVID-19 pandemic;
•the pace of recovery following the COVID-19 pandemic;
•our ability to implement cost containment strategies; and
•the adverse effects of the COVID-19 pandemic on our business, the economy and
the markets we serve.
For additional information regarding known material factors that could cause our
actual results to differ from our projected results, please see "Risk Factors"
in Item 1A of Part I of our 2020 10-K and "Risk Factors" in Item 1A of Part II
of our subsequent quarterly reports on Form 10-Q.
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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